Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices 60843 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(1). 

5See FINRA Rule 6121 and Regulatory Notice 10– 

30 (June 2010). 

6 15 U.S.C. 78o–3(b)(6). 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(1). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62995; File No. SR–FINRA– 

2010–048] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to FINRA Trade 

Reporting Notice on Price Validation 

and Price-Override Protocol 

September 27, 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 17, 2010, Financial Industry 

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

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 FINRA. FINRA has 

designated the proposed rule change as 

‘‘constituting a stated policy, practice, or 

interpretation with respect to the 

meaning, administration, or 

enforcement of an existing rule’’ under 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(1) thereunder,4 which renders 

the proposal effective upon receipt of 

this filing by the Commission. 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 filing a FINRA Trade 

Reporting Notice (‘‘Notice’’) that 

explains the price validation protocol of 

the FINRA trade reporting facilities and 

sets forth guidance on the use of the 

price-override indicator in trade reports. 

Members are required to make systems 

changes necessary to trade report in 

accordance with the Notice no later than 

November 16, 2010. 

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 FINRA trade reporting facilities 

(i.e., the Alternative Display Facility, 

Trade Reporting Facilities and OTC 

Reporting Facility) (collectively referred 

to herein as the ‘‘FINRA Facilities’’) 

price validate over-the-counter trades by 

comparing the submitted price against 

price validation parameters established 

by FINRA, generally based on a price 

deviation against the national best bid 

or offer. The attached Trade Reporting 

Notice explains the price validation 

protocol of the FINRA Facilities. 

Additionally, the Notice advises 

members that the price-override 

indicator should not be appended 

automatically to all trade reports 

submitted to a FINRA Facility. Rather, 

this special indicator should be 

appended only after a trade has been 

rejected by a FINRA Facility, pursuant 

to the established price validation 

protocol, as described more fully in the 

Notice. 

Proper trade reporting has become 

increasingly important because of the 

single-stock trading pause pilot.5

Specifically, a firm that reports a trade 

with an incorrect price could trigger a 

trading pause in certain NMS stocks, as 

defined in Rule 600(b) of SEC 

Regulation NMS, and trading in the 

stock may be unnecessarily halted, 

which is inconsistent with the intent 

and purpose of the trading pause rules. 

Any member that has programmed its 

systems to append the price-override 

indicator to its trade reports prior to 

rejection of the trade must make the 

technological changes necessary to 

cease this practice as soon as possible, 

and no later than November 16, 2010 

(60 days from the date of the Notice). 

After November 16, 2010, a pattern and 

practice of reporting trades with the 

price-override indicator not in 

accordance with the established 

protocol and the Notice may be 

considered conduct inconsistent with 

high standards of commercial honor and 

just and equitable principles of trade in 

violation of FINRA Rule 2010. 

FINRA has filed the proposed rule 

change for immediate effectiveness, and 

it is operative on the date of filing. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act, 6 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change will enhance 

market transparency and further the 

goal of investor protection by helping to 

ensure that the trade prices that are 

publicly disseminated are correct and 

by reducing the potential for 

unnecessary trading pauses in certain 

NMS stocks. 

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 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 7 and paragraph (f)(1) of Rule 

19b–4 thereunder.8 At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

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: 


emcdonald on DSK2BSOYB1PROD with NOTICES
60844 Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Changes are marked to the rule text that appears 

in the electronic manual of Nasdaq found at 

http://nasdaqomx.cchwallstreet.com. 

4 15 U.S.C. 78f(b)(10). 

5The Commission notes that the FINRA rule, and 

by reference Nasdaq’s rule, only allows a member 

to follow the rules of another SRO of which it is 

a member, provided that the records of the member 

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–2010–048 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, Station Place, 100 F Street, 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2010–048. 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 Web site 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–2010–048 and 

should be submitted on or before 

October 22, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24675 Filed 9–30–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62992; File No. SR– 

NASDAQ–2010–114] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Order Granting Accelerated 

Approval of Proposed Rule Change To 

Prohibit Members From Voting 

Uninstructed Shares on Certain 

Matters 

September 24, 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 14, 2010, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’ or 

‘‘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 

substantially prepared by Nasdaq. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons and is 

approving the proposed rule change on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

Nasdaq proposes to modify Rule 2251 

to prohibit members from voting on the 

election of a member of the board of 

directors of an issuer (except for a vote 

with respect to the uncontested election 

of a member of the board of directors of 

any investment company registered 

under the Investment Company Act of 

1940), executive compensation, or any 

other significant matter, as determined 

by the Commission, unless instructed by 

the beneficial owner of the shares. The 

text of the proposed rule change is 

below. Proposed new language is in 

italics; proposed deletions are in 

brackets.3

2251. Forwarding of Proxy and Other 

Issuer-Related Materials 

(a)–(c) No change. 

(d) Notwithstanding the foregoing, a 

Nasdaq Member that is not the 

beneficial owner of a security registered 

under Section 12 of the Act is prohibited 

from granting a proxy to vote the 

security in connection with a 

shareholder vote on the election of a 

member of the board of directors of an 

issuer (except for a vote with respect to 

the uncontested election of a member of 

the board of directors of any investment 

company registered under the 

Investment Company Act of 1940), 

executive compensation, or any other 

significant matter, as determined by the 

Commission, by rule, unless the 

beneficial owner of the security has 

instructed the member to vote the proxy 

in accordance with the voting 

instructions of the beneficial owner. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq 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 III below. Nasdaq 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 

Section 957 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (the ‘‘Dodd-Frank Act’’) adopted 

new Section 6(b)(10) of the Securities 

Exchange Act.4 This new provision 

requires all national securities 

exchanges to adopt rules that prohibit 

their members from voting on the 

election of a member of the board of 

directors of an issuer (except for a vote 

with respect to the uncontested election 

of a member of the board of directors of 

any investment company registered 

under the Investment Company Act of 

1940), executive compensation, or any 

other significant matter, as determined 

by the Commission, unless the member 

receives voting instructions from the 

beneficial owner of the shares. 

NASDAQ Rule 2251 governs when 

NASDAQ members may vote shares 

held for customers by adopting the 

FINRA rule on this point. The FINRA 

rule, in turn, prohibits members from 

voting any uninstructed shares, but also 

permits the member to follow the rules 

of another SRO instead.5 In order to 


emcdonald on DSK2BSOYB1PROD with NOTICES