Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 64765 

15 15 U.S.C. 78q(d). 

16 17 CFR 240.17d–2 

17See supra note 11. 

18 15 U.S.C. 78q(d). 

19 17 CFR 200.30–3(a)(34). 

1 15 U.S.C. 78q(d). 

2 17 CFR 240.17d–2. 

3See Securities Exchange Act Release No. 62935 

(September 17, 2010), 75 FR 57998. 

4 15 U.S.C. 78s(g)(1). 

5 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), 

respectively. 

6 15 U.S.C. 78q(d)(1). 

7See Securities Act Amendments of 1975, Report 

of the Senate Committee on Banking, Housing, and 

Urban Affairs to Accompany S. 249, S. Rep. No. 94– 

75, 94th Cong., 1st Session 32 (1975). 

8 17 CFR 240.17d–1 and 17 CFR 240.17d–2, 

respectively. 

9See Securities Exchange Act Release No. 12352 

(April 20, 1976), 41 FR 18808 (May 7, 1976). 

consistent with the factors set forth in 

Section 17(d) of the Act 15 and Rule 

17d–216 thereunder in that it is 

necessary or appropriate in the public 

interest and for the protection of 

investors, fosters cooperation and 

coordination among SROs, and removes 

impediments to and fosters the 

development of the national market 

system. The Commission continues to 

believe that the Plan, as proposed to be 

amended, should reduce unnecessary 

regulatory duplication by allocating 

regulatory responsibility for the 

surveillance, investigation, and 

enforcement of Common Rules over 

Common NYSE Members, with respect 

to NYSE-listed stocks and NYSE Arca 

listed stocks, to NYSE and over 

Common FINRA Members, with respect 

to NASDAQ-listed stocks, Amex-listed 

stocks, and any CHX solely-listed stock, 

to FINRA. Accordingly, the proposed 

amendment to the Plan promotes 

efficiency by consolidating these 

regulatory functions in a single SRO 

based on the listing market for a stock, 

with regard to Common NYSE Members 

and Common FINRA Members. 

Under paragraph (c) of Rule 17d–2, 

the Commission may, after appropriate 

notice and comment, declare a plan, or 

any part of a plan, effective. In this 

instance, the Commission believes that 

appropriate notice and comment can 

take place after the proposed 

amendment is effective. The purpose of 

the amendment is to add BYX as an 

SRO participant to the Plan. By 

declaring effective the amended Plan 

today, BYX can be included in the Plan 

prior to beginning operations as a 

national securities exchange and the 

amended Plan can become effective and 

be implemented without undue delay. 

In addition, the Commission believes it 

is appropriate to remove references to 

ISE from the Plan as ISE is no longer a 

Participating Organization. Finally, the 

Commission believes that the technical 

corrections to update the names of 

certain Participating Organizations is 

appropriate and consistent with the Act. 

In addition, the Commission notes that 

the prior version of this Plan was 

published for comment, and the 

Commission did not receive any 

comments thereon.17 Finally, the 

Commission does not believe that the 

amendment to the Plan raises any new 

regulatory issues that the Commission 

has not previously considered. 

VI. Conclusion 

This order gives effect to the amended 

Plan submitted to the Commission that 

is contained in File No. 4–566. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act,18 that the Plan, 

as amended, is hereby approved and 

declared effective. 

It is further ordered that the 

Participating Organizations are relieved 

of those regulatory responsibilities 

allocated to NYSE and FINRA under the 

amended Plan to the extent of such 

allocation. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–26338 Filed 10–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63102; File No. 4–613] 

Program for Allocation of Regulatory 

Responsibilities Pursuant to Rule 17d– 

2; Order Approving and Declaring 

Effective a Plan for the Allocation of 

Regulatory Responsibilities Between 

the Financial Industry Regulatory 

Authority, Inc. and BATS–Y Exchange, 

Inc. 

October 14, 2010. 

On September 3, 2010, BATS–Y 

Exchange, Inc. (‘‘BYX’’) and the 

Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (together with 

BYX, the ‘‘Parties’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’), pursuant to 

Section 17(d) of the Securities Exchange 

Act of 1934 (‘‘Act’’),1 and Rule 17d–2 

thereunder,2 a plan for the allocation of 

regulatory responsibilities, dated 

September 3, 2010 (‘‘17d–2 Plan’’ or the 

‘‘Plan’’). The Plan was published for 

comment on September 23, 2010.3 The 

Commission received no comments on 

the Plan. This order approves and 

declares effective the Plan. 

I. Introduction 

Section 19(g)(1) of the Act,4 among 

other things, requires every selfregulatory organization (‘‘SRO’’) 

registered as either a national securities 

exchange or national securities 

association to examine for, and enforce 

compliance by, its members and persons 

associated with its members with the 

Act, the rules and regulations 

thereunder, and the SRO’s own rules, 

unless the SRO is relieved of this 

responsibility pursuant to Section 17(d) 

or Section 19(g)(2) of the Act.5 Without 

this relief, the statutory obligation of 

each individual SRO could result in a 

pattern of multiple examinations of 

broker-dealers that maintain 

memberships in more than one SRO 

(‘‘common members’’). Such regulatory 

duplication would add unnecessary 

expenses for common members and 

their SROs. 

Section 17(d)(1) of the Act 6 was 

intended, in part, to eliminate 

unnecessary multiple examinations and 

regulatory duplication.7 With respect to 

a common member, Section 17(d)(1) 

authorizes the Commission, by rule or 

order, to relieve an SRO of the 

responsibility to receive regulatory 

reports, to examine for and enforce 

compliance with applicable statutes, 

rules, and regulations, or to perform 

other specified regulatory functions. 

To implement Section 17(d)(1), the 

Commission adopted two rules: Rule 

17d–1 and Rule 17d–2 under the Act.8

Rule 17d–1 authorizes the Commission 

to name a single SRO as the designated 

examining authority (‘‘DEA’’) to examine 

common members for compliance with 

the financial responsibility 

requirements imposed by the Act, or by 

Commission or SRO rules.9 When an 

SRO has been named as a common 

member’s DEA, all other SROs to which 

the common member belongs are 

relieved of the responsibility to examine 

the firm for compliance with the 

applicable financial responsibility rules. 

On its face, Rule 17d–1 deals only with 

an SRO’s obligations to enforce member 

compliance with financial responsibility 

requirements. Rule 17d–1 does not 

relieve an SRO from its obligation to 

examine a common member for 

compliance with its own rules and 

provisions of the federal securities laws 

governing matters other than financial 

responsibility, including sales practices 

and trading activities and practices. 

To address regulatory duplication in 

these and other areas, the Commission 


emcdonald on DSK2BSOYB1PROD with NOTICES
64766 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 

10See Securities Exchange Act Release No. 12935 

(October 28, 1976), 41 FR 49091 (November 8, 

1976). 

11The proposed 17d–2 Plan refers to these 

common members as ‘‘Dual Members.’’ See 

Paragraph 1(c) of the proposed 17d–2 Plan. 

12See paragraph 1(b) of the proposed 17d–2 Plan 

(defining Common Rules). See also paragraph 1(f) 

of the proposed 17d–2 Plan (defining Regulatory 

Responsibilities). Paragraph 2 of the Plan provides 

that annually, or more frequently as required by 

changes in either BYX rules or FINRA rules, the 

parties shall review and update, if necessary, the 

list of Common Rules. Further, paragraph 3 of the 

Plan provides that BYX shall furnish FINRA with 

a list of Dual Members, and shall update the list no 

less frequently than once each calendar quarter. 

13See Securities Exchange Act Release No. 58350 

(August 13, 2008), 73 FR 48247 (August 18, 2008) 

(File No. 4–566) (notice of filing of proposed plan). 

See also Securities Exchange Act Release No. 58536 

(September 12, 2008), 73 FR 54646 (September 22, 

2008) (File No. 4–566) (order approving and 

declaring effective the plan). The Certification 

identifies several Common Rules that may also be 

addressed in the context of regulating insider 

trading activities pursuant to the proposed separate 

multiparty agreement. 

14See paragraph 6 of the proposed 17d–2 Plan. 

15See paragraph 2 of the proposed 17d–2 Plan. 

16See paragraph 6 of the proposed 17d–2 Plan. 

17 15 U.S.C. 78q(d). 

18 17 CFR 240.17d–2(c). 

19See Securities Exchange Act Release No. 62716 

(August 13, 2010), 75 FR 51295 (August 19, 2010) 

(File No. 10–198). 

20See Securities Exchange Act Release No. 62716 

(August 13, 2010), 75 FR 51295, 51300 (August 19, 

2010) (File No. 10–198). 

adopted Rule 17d–2 under the Act.10

Rule 17d–2 permits SROs to propose 

joint plans for the allocation of 

regulatory responsibilities with respect 

to their common members. Under 

paragraph (c) of Rule 17d–2, the 

Commission may declare such a plan 

effective if, after providing for 

appropriate notice and comment, it 

determines that the plan is necessary or 

appropriate in the public interest and 

for the protection of investors; to foster 

cooperation and coordination among the 

SROs; to remove impediments to, and 

foster the development of, a national 

market system and a national clearance 

and settlement system; and is in 

conformity with the factors set forth in 

Section 17(d) of the Act. Commission 

approval of a plan filed pursuant to Rule 

17d–2 relieves an SRO of those 

regulatory responsibilities allocated by 

the plan to another SRO. 

II. Proposed Plan 

The proposed 17d–2 Plan is intended 

to reduce regulatory duplication for 

firms that are common members of both 

BYX and FINRA.11 Pursuant to the 

proposed 17d–2 Plan, FINRA would 

assume certain examination and 

enforcement responsibilities for 

common members with respect to 

certain applicable laws, rules, and 

regulations. 

The text of the Plan delineates the 

proposed regulatory responsibilities 

with respect to the Parties. Included in 

the proposed Plan is an exhibit (the 

‘‘BATS–Y Exchange Rules Certification 

for 17d–2 Agreement with FINRA,’’ 

referred to herein as the ‘‘Certification’’) 

that lists every BYX rule, and select 

federal securities laws, rules, and 

regulations, for which FINRA would 

bear responsibility under the Plan for 

overseeing and enforcing with respect to 

BYX members that are also members of 

FINRA and the associated persons 

therewith (‘‘Dual Members’’). 

Specifically, under the 17d–2 Plan, 

FINRA would assume examination and 

enforcement responsibility relating to 

compliance by Dual Members with the 

rules of BYX that are substantially 

similar to the applicable rules of 

FINRA,12 as well as any provisions of 

the federal securities laws and the rules 

and regulations thereunder delineated 

in the Certification (‘‘Common Rules’’). 

Common Rules would not include the 

application of any BYX rule or FINRA 

rule, or any rule or regulation under the 

Act, to the extent that it pertains to 

violations of insider trading activities, 

because such matters are covered by a 

separate multiparty agreement under 

Rule 17d–2.13 In the event that a Dual 

Member is the subject of an 

investigation relating to a transaction on 

BYX, the plan acknowledges that BYX 

may, in its discretion, exercise 

concurrent jurisdiction and 

responsibility for such matter.14

Under the Plan, BYX would retain full 

responsibility for surveillance and 

enforcement with respect to trading 

activities or practices involving BYX’s 

own marketplace, including, without 

limitation, registration pursuant to its 

applicable rules of associated persons 

(i.e., registration rules that are not 

Common Rules); its duties as a DEA 

pursuant to Rule 17d–1 under the Act; 

and any BYX rules that are not Common 

Rules, except for BYX rules for any 

broker-dealer subsidiary of BYX’s parent 

company, BATS Global Markets, Inc.15

Apparent violations of any BYX rules by 

any broker-dealer subsidiary of BATS 

Global Markets will be processed by, 

and enforcement proceedings in respect 

thereto will be conducted by, FINRA.16

III. Discussion 

The Commission finds that the 

proposed Plan is consistent with the 

factors set forth in Section 17(d) of the 

Act 17 and Rule 17d–2(c) thereunder 18

in that the proposed Plan is necessary 

or appropriate in the public interest and 

for the protection of investors, fosters 

cooperation and coordination among 

SROs, and removes impediments to and 

fosters the development of the national 

market system. In particular, the 

Commission believes that the proposed 

Plan should reduce unnecessary 

regulatory duplication by allocating to 

FINRA certain examination and 

enforcement responsibilities for Dual 

Members that would otherwise be 

performed by both BYX and FINRA. 

Accordingly, the proposed Plan 

promotes efficiency by reducing costs to 

Dual Members. Furthermore, because 

BYX and FINRA will coordinate their 

regulatory functions in accordance with 

the Plan, the Plan should promote 

investor protection. 

The Commission notes that when it 

granted the application of BYX for 

registration as a national securities 

exchange, the Commission conditioned 

the operation of the BYX exchange on 

the satisfaction of several 

requirements.19 One of those 

requirements was the effectiveness of an 

agreement pursuant to Rule 17d–2 

between FINRA and BYX that allocates 

to FINRA regulatory responsibility for 

certain specified matters.20 The 

proposed 17d–2 Plan represents BYX’s 

effort to satisfy that prerequisite. 

The Commission notes that, under the 

Plan, BYX and FINRA have allocated 

regulatory responsibility for those BYX 

rules, set forth on the Certification, that 

are substantially similar to the 

applicable FINRA rules in that 

examination for compliance with such 

provisions and rules would not require 

FINRA to develop one or more new 

examination standards, modules, 

procedures, or criteria in order to 

analyze the application of the rule, or a 

Dual Member’s activity, conduct, or 

output in relation to such rule. In 

addition, under the Plan, FINRA would 

assume regulatory responsibility for 

certain provisions of the Federal 

securities laws and the rules and 

regulations thereunder that are set forth 

in the Certification. The Common Rules 

covered by the Plan are specifically 

listed in the Certification, as may be 

amended by the Parties from time to 

time. 

Under the Plan, BYX would retain full 

responsibility for surveillance and 

enforcement with respect to trading 

activities or practices involving BYX’s 

own marketplace, including, without 

limitation, registration pursuant to its 

applicable rules of associated persons 

(i.e., registration rules that are not 

Common Rules); its duties as a DEA 

pursuant to Rule 17d–1 under the Act; 

and any BYX rules that are not Common 

Rules, except for BYX rules for any 

broker-dealer subsidiary of BATS Global 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 64767 

21See paragraph 2 of the proposed 17d–2 Plan. 

22See paragraph 6 of the proposed 17d–2 Plan. 

23See paragraph 2 of the proposed 17d–2 Plan. 

24See paragraph 3 of the proposed 17d–2 Plan. 

25The Commission also notes that the addition to 

or deletion from the Certification of any federal 

securities laws, rules, and regulations for which 

FINRA would bear responsibility under the Plan for 

examining, and enforcing compliance by, Dual 

Members, also would constitute an amendment to 

the Plan. 

26See paragraph 12 of the proposed 17d–2 Plan. 

27The Commission notes that paragraph 12 of the 

Plan reflects the fact that FINRA’s responsibilities 

under the Plan will continue in effect until the 

Commission approves any termination of the Plan. 

28 17 CFR 200.30–3(a)(34). 

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)(6)(iii). 

Markets, Inc.21 Apparent violations of 

any BYX rules by any broker-dealer 

subsidiary of BATS Global Markets, Inc. 

will be processed by, and enforcement 

proceedings in respect thereto will be 

conducted by, FINRA.22 The effect of 

these provisions is that regulatory 

oversight and enforcement 

responsibilities for any broker-dealer 

subsidiary of BATS Global Markets, 

Inc., which is the parent company of 

BYX, will be vested with FINRA. These 

provisions should help avoid any 

potential conflicts of interest that could 

arise if BYX was primarily responsible 

for regulating any affiliated brokerdealer. 

According to the Plan, BYX will 

review the Certification at least 

annually, or more frequently if required 

by changes in either the rules of BYX or 

FINRA, and, if necessary, submit to 

FINRA an updated list of Common 

Rules to add BYX rules not included on 

the then-current list of Common Rules 

that are substantially similar to FINRA 

rules; delete BYX rules included in the 

then-current list of Common Rules that 

are no longer substantially similar to 

FINRA rules; and confirm that the 

remaining rules on the list of Common 

Rules continue to be BYX rules that are 

substantially similar to FINRA rules.23

FINRA will then confirm in writing 

whether the rules listed in any updated 

list are Common Rules as defined in the 

Plan. Under the Plan, BYX will also 

provide FINRA with a current list of 

Dual Members and shall update the list 

no less frequently than once each 

quarter.24

The Commission is hereby declaring 

effective a plan that, among other 

things, allocates regulatory 

responsibility to FINRA for the 

oversight and enforcement of all BYX 

rules that are substantially similar to the 

rules of FINRA for Dual Members of 

BYX and FINRA. Therefore, 

modifications to the Certification need 

not be filed with the Commission as an 

amendment to the Plan, provided that 

the Parties are only adding to, deleting 

from, or confirming changes to BYX 

rules in the Certification in conformance 

with the definition of Common Rules 

provided in the Plan. However, should 

the Parties decide to add a BYX rule to 

the Certification that is not substantially 

similar to a FINRA rule; delete a BYX 

rule from the Certification that is 

substantially similar to a FINRA rule; or 

leave on the Certification a BYX rule 

that is no longer substantially similar to 

a FINRA rule, then such a change would 

constitute an amendment to the Plan, 

which must be filed with the 

Commission pursuant to Rule 17d–2 

under the Act and noticed for public 

comment.25

The Plan also permits BYX and 

FINRA to terminate the Plan, subject to 

notice.26 The Commission notes, 

however, that while the Plan permits 

the Parties to terminate the Plan, the 

Parties cannot by themselves reallocate 

the regulatory responsibilities set forth 

in the Plan, since Rule 17d–2 under the 

Act requires that any allocation or reallocation of regulatory responsibilities 

be filed with the Commission.27

IV. Conclusion 

This Order gives effect to the Plan 

filed with the Commission in File No. 

4–613. The Parties shall notify all 

members affected by the Plan of their 

rights and obligations under the Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act, that the Plan 

in File No. 4–613, between FINRA and 

BYX, filed pursuant to Rule 17d–2 

under the Act, is approved and declared 

effective. 

It is therefore ordered that BYX is 

relieved of those responsibilities 

allocated to FINRA under the Plan in 

File No. 4–613. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–26337 Filed 10–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63097; File No. SR–BYX– 

2010–002] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Notice of Filing of 

Proposed Rule Change To Amend 

BATS Y-Exchange Rules To Conform 

to the Current Rules of BATS 

Exchange 

October 13, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on October 

4, 2010, BATS Y-Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) 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 the Exchange. The Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with 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 

The Exchange is proposing to amend 

BYX Rules 11.9, 11.13, 11.17, and 11.18 

in order to bring BYX Rules up to date 

with recent changes that have been 

made to the rules of the Exchange’s 

affiliate, BATS Exchange, Inc. (‘‘BATS 

Exchange’’). The text of the proposed 

rule change is available at the 

Exchange’s Web site at http:// 

www.batstrading.com, at the principal 

office of the Exchange, 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, the 

Exchange 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. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 


emcdonald on DSK2BSOYB1PROD with NOTICES