58004 Federal Register / Vol. 75, No. 184 / Thursday, September 23, 2010 / Notices 

8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See FINRA By-Laws, Schedule A, § 1(b). In 

addition to the TAF, the other member regulatory 

fees are the Gross Income Assessment and the 

Personnel Assessment. See id. §§ 1(c), (d). 4See Securities Exchange Act Release No. 46416 

(August 23, 2002), 67 FR 55901 (August 30, 2002) 

(Notice of Filing and Immediate Effectiveness of 

Proposed Rule Change and Amendment No. 1 by 

the National Association of Securities Dealers, Inc. 

to Eliminate the Regulatory Fee and Institute a New 

Transaction-Based Trading Activity Fee); see also 

NASD Notice to Members 02–63 (September 2002); 

NASD Notice to Members 02–41 (July 2002). The 

TAF was originally approved on a pilot basis; the 

SEC approved the TAF on a permanent basis in 

2003. See Securities Exchange Act Release No. 

47946 (May 30, 2003), 68 FR 34021 (June 6, 2003); 

see also NASD Notice to Members 03–30 (June 

2003). 

5See Securities Exchange Act Release No. 50485 

(October 1, 2004), 69 FR 60445 (October 8, 2004). 

6See FINRA By-Laws, Schedule A, § 1(b)(1). 

7See FINRA By-Laws, Schedule A, § 1(b)(2). 

8See FINRA By-Laws, Schedule A, § 1(b)(2)(K). 

9FINRA By-Laws, Schedule A, § 1(b)(2)(K). See 

Securities Exchange Act Release No. 47946 (May 

30, 2003), 68 FR 34021 (June 6, 2003). 

6(b)(4) of the Act,8 which requires that 

the rules of a national securities 

exchange provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

issuers and other persons using its 

facilities, and with Section 6(b)(5) of the 

Act,9 which requires, among other 

things, that that the rules of a national 

securities exchange be designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest, and 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

Pursuant to the arrangement, EDGX 

makes the RaceTeam product uniformly 

available to all customers who 

voluntarily request it and pay the fees 

as detailed in the proposal, pursuant to 

a standard non-discriminatory pricing 

schedule. In addition, the Commission 

believes that the proposal will further 

the protection of investors and the 

public interest because: (1) Correlix will 

only be able to view data related to 

latency for Correlix RaceTeam 

subscriber firms; (2) Correlix will not 

see a subscriber’s individual order detail 

such as security, price or size; (3) 

individual RaceTeam subscribers’ logins 

will restrict access to only their own 

latency data; and (4) Correlix will not 

see specific information regarding the 

trading activity of non-subscribers. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–EDGX–2010– 

09) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–23755 Filed 9–22–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62927; File No. SR–FINRA– 

2010–046] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Exemptions from the Trading Activity 

Fee 

September 17, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on 

September 7, 2010, Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by FINRA. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to [sic] amend 

Section 1(b) of Schedule A to the FINRA 

By-Laws to remove the exemption from 

the trading activity fee (‘‘TAF’’) for 

transactions in exchange-listed options 

effected by a member when FINRA is 

not the designated options examining 

authority (‘‘DOEA’’) for that member. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The TAF is one of three member 

regulatory fees FINRA uses to fund its 

member regulation activities, which 

include examinations, financial 

monitoring, and FINRA’s policymaking, 

rulemaking, and enforcement activities.3

FINRA initially adopted the TAF in 

2002 as a replacement for an earlier 

regulatory fee based on trades reported 

to Nasdaq’s Automated Confirmation 

Transaction system then in place.4

Because the TAF funds FINRA’s 

member regulation functions, it is 

intended to apply to transactions in a 

way that corresponds with FINRA’s 

regulatory responsibilities.5 In general, 

the TAF is assessed for the sale of all 

exchange registered securities wherever 

executed (except debt securities that are 

not TRACE-eligible), over-the-counter 

equity securities, security futures, 

TRACE–Eligible Securities (provided 

that the transaction is a Reportable 

TRACE Transaction), and all municipal 

securities subject to the reporting 

requirements of the Municipal 

Securities Rulemaking Board.6 The TAF 

rules also include numerous exemptions 

for certain types of transactions.7 The 

proposed rule change would eliminate 

the exemption from the TAF for 

transactions in exchange-listed options 

when FINRA is not the DOEA for that 

member.8

In 2003, FINRA exempted from the 

TAF ‘‘[t]ransactions in exchange listed 

options effected by a member when 

FINRA is not the designated options 

examining authority for that member.’’ 9

The exemption was added to reflect the 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 184 / Thursday, September 23, 2010 / Notices 58005 

10 17 CFR 240.17d–2. 

11See Securities Exchange Act Release No. 46800 

(November 8, 2002), 67 FR 69774 (November 19, 

2002). 

12Transactions in over-the-counter 

(‘‘conventional’’) options are exempted from the 

TAF with respect to all FINRA members. See 

FINRA By-Laws, Schedule A, § 1(b)(2)(H). 

13See, e.g., Securities Exchange Act Release No. 

47577 (March 26, 2003), 68 FR 16109 (April 2, 

2003) (SR–PCX–2003–03) (PCX rule filing 

establishing a DOEA fee). 

14See Securities Exchange Act Release No. 57987 

(June 18, 2008), 73 FR 36156 (June 25, 2008) (Notice 

of Filing and Order Approving and Declaring 

Effective an Amendment to the Plan for the 

Allocation of Regulatory Responsibilities Among 

the American Stock Exchange LLC, the Boston 

Stock Exchange, Inc., the Chicago Board Options 

Exchange, Inc., the International Securities 

Exchange, LLC, Financial Industry Regulatory 

Authority, Inc., The New York Stock Exchange, 

LLC, the NYSE Arca, Inc., The NASDAQ Stock 

Market LLC, and the Philadelphia Stock Exchange, 

Inc.). 

15Following the consolidation of NASD and 

NYSE member regulation operations in 2007, 

FINRA announced that it serves as the DOEA for 

all FINRA member firms. See Regulatory Notice 08– 

37 (July 2008). FINRA had previously published a 

list of firms that had a DOEA other than FINRA and, 

consequently, were exempt from the TAF for 

transactions in exchange listed options. See NASD 

Notice to Members 05–03 (January 2005). 

16At the time FINRA (then NASD) proposed the 

exemption in Amendment No. 4 to SR–NASD– 

2002–148, it noted that ‘‘NASD does not believe it 

is precluded from seeking further amendments to 

the TAF with respect to the reduction or 

elimination of the proposed exemption * * * in the 

event of a change of factors surrounding its sales 

practice and other regulatory responsibilities.’’ 

17 15 U.S.C. 78o–3(b)(5). 

fact that FINRA’s regulatory 

responsibilities with respect to such 

activity were alleviated somewhat by its 

participation in a plan filed with the 

SEC under Rule 17d–2 of the Act 10

(‘‘17d–2 Agreement’’) in which 

regulatory responsibilities for certain 

FINRA members that conducted a 

public options business were assumed 

by other self regulatory organizations 

(‘‘SROs’’) that would act as the member’s 

DOEA.11 At that time, of the 

approximately 450 member firms 

covered by the 17d–2 Agreement, 

FINRA assumed regulatory 

responsibilities (i.e., was the DOEA) for 

about 300 firms, and the remaining 

firms were divided among six other 

SROs. Thus, in view of the fact that 

another SRO performed certain 

regulatory responsibilities with respect 

to the options activities of these 

members, FINRA decided to exempt 

transactions in exchange listed options 

by such firms from the TAF.12

The exemption was also based on the 

fact that certain other SROs were 

assessing or preparing to assess specific 

regulatory fees for acting as DOEA.13 To 

the extent that other SROs assessed 

specific fees on firms to fund the SRO’s 

DOEA responsibilities with respect to 

those firms, FINRA’s TAF on options 

transactions appeared redundant. 

Subsequent amendments to the 17d– 

2 Agreement have consolidated within 

FINRA sole regulatory responsibility for 

the public options activities of all of its 

members.14 Consequently, FINRA 

assumes all regulatory responsibility for 

FINRA members under the 17d–2 

Agreement.15 Based on the foregoing, 

FINRA is proposing to delete the 

exemption from the TAF.16

Deleting this exemption also will 

remove any ambiguities over whether 

FINRA should collect the TAF on soleFINRA members or with respect to 

FINRA members that conduct only a 

proprietary options business. The 

existing language exempting 

transactions in exchange listed options 

from the TAF when FINRA is not the 

DOEA for the member does not properly 

align with those situations where 

FINRA has regulatory responsibility 

over the member firm. First, the DOEA 

designation is established only under 

the 17d–2 Agreement, which by its own 

terms applies only with respect to firms 

that are members of more than one SRO. 

Thus, while FINRA has regulatory 

responsibility for the options business 

of its sole members, FINRA is not 

technically the DOEA for such firms. 

Second, the 17d–2 Agreement addresses 

only a firm’s public options business. 

As such, a firm that conducts only a 

proprietary options business, 

irrespective of whether such firm is a 

member of FINRA and another SRO, 

would not be covered by the 17d–2 

Agreement, and FINRA would not 

technically be the DOEA. Although 

FINRA’s regulatory responsibilities are 

more limited for a firm that does not 

conduct a public options business, 

FINRA still retains regulatory 

responsibilities over the firm’s options 

activities. 

The effective date of the proposed 

rule change will be the first day of the 

month following Commission approval. 

FINRA will announce the effective date 

of the proposed rule change in a 

Regulatory Notice to be published no 

later than 30 days following 

Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(5) of the Act,17 which 

requires, among other things, that 

FINRA rules provide for the equitable 

allocation of reasonable dues, fees and 

other charges among members and 

issuers and other persons using any 

facility or system that FINRA operates 

or controls. FINRA believes that because 

it maintains regulatory responsibility 

over its members’ transactions in 

exchange listed options, the exemption 

from the TAF for transactions in 

exchange listed options when FINRA is 

not the DOEA for that member is no 

longer necessary. Eliminating the 

exemption will also ensure that the TAF 

more accurately reflects the current 

allocation of regulatory responsibilities 

to FINRA of its members’ transactions in 

exchange listed options. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2010–046 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 


srobinson on DSKHWCL6B1PROD with NOTICES
58006 Federal Register / Vol. 75, No. 184 / Thursday, September 23, 2010 / Notices 

18 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–44152 

(April 5, 2001), 66 FR 19262 (April 13, 2001) (SR– 

CBOE–2000–13). 4Securities Exchange Act Release No. 34–43984 

(February 20, 2001), 66 FR 12574 (February 27, 

2001) (SR–CBOE–2000–13). 

5 15 U.S.C. 78i. 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(5). 

All submissions should refer to File 

Number SR–FINRA–2010–046. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. All comments received will be 

posted without change; the Commission 

does not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make publicly available. All 

submissions should refer to File 

Number SR–FINRA–2010–046 and 

should be submitted on or before 

October 14, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–23773 Filed 9–22–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62933; File No. SR–CBOE– 

2010–082] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated: Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change to Withdraw Regulatory 

Circular RG01–61 

September 17, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

noitce is hereby given that on 

September 9, 2010, Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’ or the ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by CBOE. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

CBOE is proposing to withdraw 

Regulator Circular RG01–61 regarding 

transactions between related entities. 

The text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/legal), at the 

Exchange’s Office of the Secretary and 

at the Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

CBOE included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. CBOE has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, Proposed Rule 

Change 

1. Purpose 

In 2001, the Securities and Exchange 

Commission (the ‘‘Commission’’) 

approved SR–CBOE–2000–13 regarding 

transactions between related entities.3

In connection with the approval of that 

filing, the Exchange promulgated CBOE 

Regulatory Circular RG01–61 (‘‘RG01– 

61’’) to act as guidance for such trading. 

At the time the Exchange adopted SR– 

CBOE–2000–13 and RG01–61, CBOE’s 

restrictions on transactions between 

related entities were more restrictive 

than the rules in place at other national 

securities exchanges and under the 

Securities Exchange Act of 1934, as 

amended (the ‘‘Act’’).4

CBOE is proposing to eliminate 

RG01–61 and defer to the requirements 

set forth in Section 9(a)(1) of the Act,5

which provides, in relevant part: 

It shall be unlawful for any person, directly 

or indirectly * * * for the purpose of 

creating a false or misleading appearance of 

active trading in any security registered on a 

national securities exchange, or a false or 

misleading appearance with respect to the 

market for any such security, (A) to effect any 

transaction in such security which involves 

no change in the beneficial ownership 

thereof, or (B) to enter an order or orders for 

the purchase of such security with the 

knowledge that an order or orders of 

substantially the same size, at substantially 

the same time, and at substantially the same 

price, for the sale of any such security, has 

been or will be entered by or for the same 

or different parties, or (C) to enter any order 

or orders for the sale of any such security 

with the knowledge that an order or orders 

of substantially the same size, at substantially 

the same time, and at substantially the same 

price, for the purchase of such security, has 

been or will be entered by or for the same 

or different parties. 

This is consistent with the 

requirements in place at other national 

securities exchanges and this proposal 

eliminates distinctions between the 

Exchange’s rules regarding transactions 

between related entities and similar 

requirements in place at other national 

securities exchanges, as well as the 

Commission. Notwithstanding the 

withdrawal of Regulatory Circular 

RG01–61, CBOE will continue to 

conduct surveillance for pre-arranged 

trading between related entities that 

violates Section 9(a) of the Exchange 

Act. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Section 6(b) of the Act,6 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act,7 which requires, among other 

things, that the Exchange’s rules be 

designed to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. The Exchange believes 

that the proposed rule change is 

designed to promote just and equitable 

principles of trade and to protect 

investors and the public interest by 

eliminating differences between the 

Exchange’s rules regarding transactions 

between related entities and similar 

requirements in place at other national 

securities exchanges, as well as the 

Commission. 


srobinson on DSKHWCL6B1PROD with NOTICES