Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 64755 

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

2 17 CFR 240.17d–2. 

3 15 U.S.C. 78s(g)(1). 

4 15 U.S.C. 78q(d). 

5 15 U.S.C. 78s(g)(2). 

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). 

10See Securities Exchange Act Release No. 12935 

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

1976). 

11See Securities Exchange Act Release No. 58536 

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

2008) (File No. 4–566). 

12Common NYSE Members include members of 

the NYSE and at least one of the Participating 

Organizations. 

13Common FINRA Members include members of 

FINRA and at least one of the Participating 

Organizations. 

14Common rules are defined as: (i) Federal 

securities laws and rules promulgated by the 

Commission pertaining to insider trading, and (ii) 

the rules of the Participating Organizations that are 

related to insider trading. See Exhibit A to the Plan. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63103; File No. 4–566] 

Program for Allocation of Regulatory 

Responsibilities Pursuant to Rule 17d– 

2; Notice of Filing and Order 

Approving and Declaring Effective an 

Amendment to the Plan for the 

Allocation of Regulatory 

Responsibilities Among American 

Stock Exchange LLC, BATS Exchange, 

Inc., BATS Y-Exchange, Inc., Chicago 

Board Options Exchange, 

Incorporated, Chicago Stock 

Exchange, Inc., EDGA Exchange, Inc., 

EDGX Exchange, Inc., Financial 

Industry Regulatory Authority, Inc., 

International Securities Exchange, 

LLC, The NASDAQ Stock Market LLC, 

National Stock Exchange, Inc., New 

York Stock Exchange LLC, NYSE Arca, 

Inc., NYSE Regulation, Inc., NASDAQ 

OMX BX, Inc., and NASDAQ OMX PHLX 

LLC Relating to the Surveillance, 

Investigation, and Enforcement of 

Insider Trading Rules 

October 14, 2010. 

Notice is hereby given that the 

Securities and Exchange Commission 

(‘‘Commission’’) has issued an Order, 

pursuant to Section 17(d) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 approving and declaring 

effective an amendment to the plan for 

allocating regulatory responsibility 

(‘‘Plan’’) filed pursuant to Rule 17d–2 of 

the Act,2 by the American Stock 

Exchange LLC (‘‘Amex’’), BATS 

Exchange, Inc. (‘‘BATS’’), BATS YExchange, Inc. (‘‘BYX’’), Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’), Chicago Stock Exchange, Inc. 

(‘‘CHX’’), EDGA Exchange, Inc. 

(‘‘EDGA’’), EDGX Exchange, Inc. 

(‘‘EDGX’’), the Financial Industry 

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

International Securities Exchange, LLC 

(‘‘ISE’’), The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’), National Stock Exchange, 

Inc. (‘‘NSX’’), New York Stock Exchange 

LLC (‘‘NYSE’’), NYSE Arca, Inc. (‘‘NYSE 

Arca’’), NYSE Regulation, Inc. (acting 

pursuant to authority delegated to it by 

NYSE) (‘‘NYSE Regulation’’), NASDAQ 

OMX BX, Inc. (‘‘BX’’), and NASDAQ 

OMX PHLX, Inc. (‘‘Phlx’’) (collectively, 

‘‘Participating Organizations’’ or 

‘‘parties’’). 

I. Introduction 

Section 19(g)(1) of the Act,3 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) 4 or Section 19(g)(2) 5 of the Act. 

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 

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 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. The Plan 

On September 12, 2008, the 

Commission declared effective the 

Participating Organizations’ Plan for 

allocating regulatory responsibilities 

pursuant to Rule 17d–2.11 The Plan is 

designed to eliminate regulatory 

duplication by allocating regulatory 

responsibility over Common NYSE 

Members 12 or Common FINRA 

Members,13 as applicable (collectively 

‘‘Common Members’’), for the 

surveillance, investigation, and 

enforcement of common insider trading 

rules (‘‘Common Rules’’).14 The Plan 

assigns regulatory responsibility over 

Common NYSE Members to NYSE 

Regulation for surveillance, 

investigation, and enforcement of 

insider trading by broker-dealers, and 

their associated persons, with respect to 

NYSE-listed stocks and NYSE Arcalisted stocks, irrespective of the 

marketplace(s) maintained by the 

Participating Organizations on which 

the relevant trading may occur. The 


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*CBOE’s allocation of certain regulatory 

responsibilities to NYSE/FINRA under this 

Agreement is limited to the activities of the CBOE 

Stock Exchange, LLC, a facility of CBOE. 

+ [ ISE’s allocation of certain regulatory 

responsibilities to NYSE/FINRA under this 

Agreement is limited to the activities of the ISE 

Stock Exchange, LLC, a facility of ISE.] 

Plan assigns regulatory responsibility 

over Common FINRA Members to 

FINRA for surveillance, investigation, 

and enforcement of insider trading by 

broker-dealers, and their associated 

persons, with respect to NASDAQ-listed 

stocks and Amex-listed stocks, as well 

as any CHX solely-listed stock, 

irrespective of the marketplace(s) 

maintained by the Participating 

Organizations on which the relevant 

trading may occur. 

III. Proposed Amendment to the Plan 

On October 13, 2010, FINRA, the 

NYSE Regulation, and BYX submitted a 

proposed amendment to the Plan. The 

amended Plan contains three changes. 

First, the amended Plan adds BYX as a 

‘‘Participating Organization.’’ Second, 

the amended Plan removes ISE as a 

Participating Organization. ISE ceased 

operating as an equities market on July 

19, 2010, and has provided written 

notice to all Participating Organizations 

of its intent to terminate its 

participation in the Agreement. Third, 

the amended Plan makes several 

technical corrections to update the 

names of certain Participating 

Organizations, including the 

Philadelphia Stock Exchange, Inc. to be 

NASDAQ OMX PHLX LLC; Boston 

Stock Exchange, Inc. to be NASDAQ 

OMX BX, Inc.; and American Stock 

Exchange LLC to be NYSE Amex LLC as 

well as updating contact information 

and the related rules of NASDAQ OMX 

BX. 

The parties have followed the 

requisite procedure as set forth in 

Paragraph 27 to the Plan regarding the 

addition of new SROs to the Plan. The 

amended Plan replaces the previous 

agreement in its entirety. The text of the 

proposed amended 17d–2 plan is as 

follows (additions are in italic; deletions 

are [bracketed]): 

* * * * * 

Agreement for the Allocation of 

Regulatory Responsibility of 

Surveillance, Investigation and 

Enforcement for Insider Trading 

Pursuant to § 17(d) of the Securities 

Exchange Act of 1934, 15 U.S.C. 

§ 78q(d), and Rule 17d–2 Thereunder 

This agreement (the ‘‘Agreement’’) by 

and among [the American Stock 

Exchange LLC (‘‘Amex’’),] BATS 

Exchange, Inc. (‘‘BATS’’), BATS YExchange, Inc. (‘‘BYX’’) [Boston Stock 

Exchange, Inc.], Chicago Board Options 

Exchange, Inc. (‘‘CBOE’’),* Chicago Stock 

Exchange, Inc. (‘‘CHX’’), EDGA 

Exchange, Inc. (‘‘EDGA’’), EDGX 

Exchange, Inc. (‘‘EDGX’’), Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’), [International Securities 

Exchange, LLC (‘‘ISE’’),+] NASDAQ 

OMX, BX, Inc. (‘‘BX’’), NASDAQ OMX 

PHLX LLC (‘‘PHLX’’), The NASDAQ 

Stock Market LLC (‘‘NASDAQ’’), 

National Stock Exchange, Inc. (‘‘NSX’’), 

New York Stock Exchange, LLC 

(‘‘NYSE’’), NYSE Amex LLC (‘‘Amex’’), 

NYSE Arca, Inc. (‘‘NYSE Arca’’), and 

NYSE Regulation, Inc. (pursuant to 

delegated authority) (‘‘NYSE 

Regulation’’)[, and Philadelphia Stock 

Exchange, Inc.] (together, the 

‘‘Participating Organizations’’), is made 

pursuant to § 17(d) of the Securities 

Exchange Act of 1934 (the ‘‘Act’’), 15 

U.S.C. § 78q(d), and Securities and 

Exchange Commission (‘‘SEC’’) Rule 

17d–2, which allow for plans to allocate 

regulatory responsibility among selfregulatory organizations (‘‘SROs’’). Upon 

approval by the SEC, this Agreement 

shall amend and restate the agreement 

among the Participating Organizations 

(except [EDGA and EDGX]BYX) 

approved by the SEC on [October 17, 

2008]April 15, 2010. 

Whereas, NYSE delegates to NYSE 

Regulation the regulation of trading by 

members in its market, and NYSE 

Regulation is a subsidiary of NYSE, all 

references to NYSE Regulation in this 

Agreement shall be read as references to 

both entities; 

Whereas, the Participating 

Organizations desire to: (a) Foster 

cooperation and coordination among the 

SROs; (b) remove impediments to, and 

foster the development of, a national 

market system; (c) strive to protect the 

interest of investors; and (d) eliminate 

duplication in their regulatory 

surveillance, investigation and 

enforcement of insider trading; 

Whereas, the Participating 

Organizations are interested in 

allocating to NYSE Regulation[, Inc. 

(‘‘NYSE Regulation’’)] regulatory 

responsibility for Common NYSE 

Members for surveillance, investigation 

and enforcement of Insider Trading (as 

defined below) in NYSE Listed Stocks 

(as defined below) irrespective of the 

marketplace(s) maintained by the 

Participating Organizations on which 

the relevant trading may occur in 

violation of Common Insider Trading 

Rules; 

Whereas, the Participating 

Organizations are interested in 

allocating to FINRA regulatory 

responsibility for Common FINRA 

Members for surveillance, investigation 

and enforcement of Insider Trading in 

NASDAQ Listed Stocks, Amex Listed 

Stocks, and CHX Solely Listed Stocks 

irrespective of the marketplace(s) 

maintained by the Participating 

Organizations on which the relevant 

trading may occur in violation of 

Common Insider Trading Rules; 

Whereas, the Participating 

Organizations will request regulatory 

allocation of these regulatory 

responsibilities by executing and filing 

with the SEC a plan for the above stated 

purposes (this Agreement, also known 

herein as the ‘‘Plan’’) pursuant to the 

provisions of § 17(d) of the Act, and SEC 

Rule 17d–2 thereunder, as described 

below; and 

Whereas, the Participating 

Organizations will also enter into 

certain Regulatory Services Agreements 

(the ‘‘Insider Trading RSAs’’), of even 

date herewith, to provide for the 

investigation and enforcement of 

suspected Insider Trading against 

broker-dealers, and their associated 

persons, that (i) are not Common NYSE 

Members (as defined below) in the case 

of Insider Trading in NYSE Listed 

Stocks, and (ii) are not Common FINRA 

Members (as defined below) in the case 

of Insider Trading in NASDAQ Listed 

Stocks, Amex Listed Stocks, and CHX 

Solely Listed Stocks. 

Now, therefore, in consideration of 

the mutual covenants contained 

hereafter, and other valuable 

consideration to be mutually exchanged, 

the Participating Organizations hereby 

agree as follows: 

1. Definitions. Unless otherwise 

defined in this Agreement, or the 

context otherwise requires, the terms 

used in this Agreement will have the 

same meaning they have under the Act, 

and the rules and regulations 

thereunder. As used in this Agreement, 

the following terms will have the 

following meanings: 

a. ‘‘Rule’’ of an ‘‘exchange’’ or an 

‘‘association’’ shall have the meaning 

defined in Section 3(a)(27) of the Act. 

b. ‘‘Common NYSE Members’’ shall 

mean members of the NYSE and at least 

one of the Participating Organizations. 

c. ‘‘Common FINRA Members’’ shall 

mean members of FINRA and at least 

one of the Participating Organizations. 

d. ‘‘Common Insider Trading Rules’’ 

shall mean (i) the federal securities laws 

and rules thereunder promulgated by 

the SEC pertaining to insider trading, 

and (ii) the rules of the Participating 

Organizations that are related to insider 

trading, as provided on Exhibit A to this 

Agreement. 


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e. ‘‘Effective Date’’ shall have the 

meaning set forth in paragraph 28. 

f. ‘‘Insider Trading’’ shall mean any 

conduct or action taken by a natural 

person or entity related in any way to 

the trading of securities by an insider or 

a related party based on or on the basis 

of material non-public information 

obtained during the performance of the 

insider’s duties at the corporation, or 

otherwise misappropriated, that could 

be deemed a violation of the Common 

Insider Trading Rules. 

g. ‘‘Intellectual Property’’ will mean 

any: (1) Processes, methodologies, 

procedures, or technology, whether or 

not patentable; (2) trademarks, 

copyrights, literary works or other 

works of authorship, service marks and 

trade secrets; or (3) software, systems, 

machine-readable texts and files and 

related documentation. 

h. ‘‘Plan’’ shall mean this Agreement, 

which is submitted as a Plan for the 

allocation of regulatory responsibilities 

of surveillance for insider trading 

pursuant to § 17(d) of the Securities and 

Exchange Act of 1934, 15 U.S.C. 78q(d), 

and SEC Rule 17d–2. 

i. ‘‘NYSE Listed Stock’’ shall mean an 

equity security that is listed on the 

NYSE, or NYSE Arca. 

j. ‘‘NASDAQ Listed Stock’’ shall mean 

an equity security that is listed on the 

NASDAQ. 

k. ‘‘Amex Listed Stock’’ shall mean an 

equity security that is listed on the 

Amex. 

l. ‘‘CHX Solely Listed Stock’’ shall 

mean an equity security that is listed 

only in the Chicago Stock Exchange. 

m. ‘‘Listing Market’’ shall mean Amex, 

Nasdaq, NYSE, or NYSE Arca, but not 

CHX. 

2. Assumption of Regulatory 

Responsibilities. 

a. NYSE Regulation: Assumption of 

Regulatory Responsibilities. On the 

Effective Date of the Plan, NYSE 

Regulation will assume regulatory 

responsibilities for surveillance, 

investigation and enforcement of Insider 

Trading by broker-dealers, and their 

associated persons, for Common NYSE 

Members with respect to NYSE Listed 

Stocks irrespective of the marketplace(s) 

maintained by the Participant 

Organizations on which the relevant 

trading may occur in violation of the 

Common Insider Trading Rules 

(‘‘NYSE’s Regulatory Responsibility’’). 

b. FINRA: Assumption of Regulatory 

Responsibilities. On the Effective Date of 

the Plan, FINRA will assume regulatory 

responsibilities for surveillance, 

investigation and enforcement of Insider 

Trading by broker-dealers, and their 

associated persons, for Common FINRA 

Members with respect to NASDAQ and 

Amex Listed Stocks, as well as any CHX 

Solely Listed equity security, 

irrespective of the marketplace(s) 

maintained by the Participant 

Organizations on which the relevant 

trading may occur in violation of the 

Common Insider Trading Rules 

(‘‘FINRA’s Regulatory Responsibility’’). 

c. Change in Control. In the event of 

a change of control of a Listing Market, 

the Listing Market will have the 

discretion to transfer the regulatory 

responsibility for its listed stocks from 

NYSE Regulation to FINRA or from 

FINRA to NYSE Regulation, provided 

the SRO assuming regulatory 

responsibility consents to such transfer. 

3. Certification of Insider Trading 

Rules. 

a. Initial Certification. By signing this 

Agreement, the Participating 

Organizations, other than NYSE 

Regulation and FINRA, hereby certify to 

NYSE Regulation and FINRA that their 

respective lists of Common Insider 

Trading Rules contained in Attachment 

A hereto are correct, and NYSE 

Regulation and FINRA hereby confirm 

that such rules are Common Insider 

Trading Rules as defined in this 

Agreement. 

b. Yearly Certification. Each year 

following the commencement of 

operation of this Agreement, or more 

frequently if required by changes in the 

rules of the Participating Organizations, 

each Participating Organization shall 

submit a certified and updated list of 

Common Insider Trading Rules to NYSE 

Regulation and FINRA for review, 

which shall (i) add Participating 

Organization rules not included in the 

then-current list of Common Insider 

Trading Rules that qualify as Common 

Rules as defined in this Agreement; (ii) 

delete Participating Organization rules 

included in the current list of Common 

Insider Trading Rules that no longer 

qualify as Common Insider Trading 

Rules as defined in this Agreement; and 

(iii) confirm that the remaining rules on 

the current list of Common Insider 

Trading Rules continue to be 

Participating Organization rules that 

qualify as Common Insider Trading 

Rules as defined in this Agreement. 

NYSE Regulation and FINRA shall 

review each Participating Organization’s 

annual certification and confirm 

whether NYSE Regulation and FINRA 

agree with the submitted certified and 

updated list of Common Insider Rules 

by each of the Participating 

Organizations. 

4. No Retention of Regulatory 

Responsibility. The Participating 

Organizations do not contemplate the 

retention of any responsibilities with 

respect to the regulatory activities being 

assumed by NYSE Regulation and 

FINRA, respectively, under the terms of 

this Agreement. Nothing in this 

Agreement will be interpreted to 

prevent NYSE Regulation or FINRA 

from entering into Regulatory Services 

Agreement(s) to perform their 

Regulatory Responsibilities. 

5. Dually Listed Stocks. Stocks that 

are listed on more than one 

Participating Organization shall be 

designated as a NYSE Listed Stock, a 

NASDAQ Listed Stock, or an Amex 

Listed Stock based on the applicable 

transaction reporting plan for the equity 

security as set forth in paragraph 1.b. of 

Exhibit B. 

6. Fees. NYSE Regulation and FINRA 

shall charge Participating Organizations 

for performing their respective 

Regulatory Responsibilities, as set forth 

in the Schedule of Fees, attached as 

Exhibit B. 

7. Applicability of Certain Laws, 

Rules, Regulations or Orders. 

Notwithstanding any provision hereof, 

this Agreement shall be subject to any 

statute, or any rule or order of the SEC. 

To the extent such statute, rule, or order 

is inconsistent with one or more 

provisions of this Agreement, the 

statute, rule, or order shall supersede 

the provision(s) hereof to the extent 

necessary to be properly effectuated and 

the provision(s) hereof in that respect 

shall be null and void. 

8. Exchange Committee; Reports. 

a. Exchange Committee. The 

Participating Organizations shall form a 

committee (the ‘‘Exchange Committee’’), 

which shall act on behalf of all of 

Participating Organizations in receiving 

copies of the reports described below 

and in reviewing issues that arise under 

this Agreement. Each Participating 

Organization shall appoint a 

representative to the Exchange 

Committee. The Exchange Committee 

representatives shall report to their 

respective executive management 

bodies regarding status or issues under 

the Agreement. The Participating 

Organizations agree that the Exchange 

Committee will meet regularly up to 

four (4) times a year, with no more than 

one meeting per calendar quarter. At 

these meetings, the Exchange 

Committee will discuss the conduct of 

the Regulatory Responsibilities and 

identify issues or concerns with respect 

to this Agreement, including matters 

related to the calculation of the cost 

formula and accuracy of fees charged 

and provision of information related to 

the same. The SEC shall be permitted to 

attend the meetings as an observer. 

b. Reports. NYSE Regulation and 

FINRA shall provide the reports set 

forth in Exhibit C hereto and any 


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64758 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 

additional reports related to the 

Agreement reasonably requested by a 

majority vote of all representatives to 

the Exchange Committee at each 

Exchange Committee meeting, or more 

often as the Participating Organizations 

deem appropriate, but no more often 

than once every quarterly billing period. 

9. Customer Complaints. 

a. If a Participating Organization 

receives a copy of a customer complaint 

relating to Insider Trading or other 

activity or conduct that is within the 

NYSE’s Regulatory Responsibilities as 

set forth in this Agreement, the 

Participating Organization shall 

promptly forward to NYSE Regulation, 

as applicable, a copy of such customer 

complaint. 

b. If a Participating Organization 

receives a copy of a customer complaint 

relating to Insider Trading or other 

activity or conduct that is within 

FINRA’s Regulatory Responsibilities as 

set forth in this Agreement, the 

Participating Organization shall 

promptly forward to FINRA, as 

applicable, a copy of such customer 

complaint. 

10. Parties to Make Personnel 

Available as Witnesses. Each 

Participating Organization shall make 

its personnel available to NYSE 

Regulation or FINRA to serve as 

testimonial or non-testimonial witnesses 

as necessary to assist NYSE Regulation 

and FINRA in fulfilling the Regulatory 

Responsibilities allocated under this 

Agreement. FINRA and NYSE 

Regulation shall provide reasonable 

advance notice when practicable and 

shall work with a Participating 

Organization to accommodate 

reasonable scheduling conflicts within 

the context and demands as the entities 

with ultimate regulatory responsibility. 

The Participating Organization shall pay 

all reasonable travel and other expenses 

incurred by its employees to the extent 

that NYSE Regulation or FINRA require 

such employees to serve as witnesses, 

and provide information or other 

assistance pursuant to this Agreement. 

11. Market Data; Sharing of WorkPapers, Data and Related Information. 

a. Market Data. FINRA and NYSE 

Regulation shall obtain raw market data 

necessary to the performance of 

regulation under this Agreement from 

(a) the Consolidated Tape Association 

(‘‘CTA’’) as the exclusive securities 

information processor (‘‘SIP’’) for all 

NYSE-listed, AMEX-listed securities, 

and CHX solely listed securities and (b) 

the NASDAQ Unlisted Trading 

Privileges Plan as the exclusive SIP for 

NASDAQ-listed securities. 

b. Sharing. A Participating 

Organization shall make available to 

each of NYSE Regulation and FINRA 

information necessary to assist NYSE 

Regulation or FINRA in fulfilling the 

regulatory responsibilities assumed 

under the terms of this Agreement. Such 

information shall include any 

information collected by an exchange or 

association in the course of performing 

its regulatory obligations under the Act, 

including information relating to an ongoing disciplinary investigation or 

action against a member, the amount of 

a fine imposed on a member, financial 

information, or information regarding 

proprietary trading systems gained in 

the course of examining a member 

(‘‘Regulatory Information’’). This 

Regulatory Information shall be used by 

NYSE Regulation and FINRA solely for 

the purposes of fulfilling their 

respective regulatory responsibilities. 

c. No Waiver of Privilege. The sharing 

of documents or information between 

the parties pursuant to this Agreement 

shall not be deemed a waiver as against 

third parties of regulatory or other 

privileges relating to the discovery of 

documents or information. 

d. Intellectual Property. 

(i) Existing Intellectual Property. Each 

of NYSE Regulation and FINRA, 

respectively, is and will remain the 

owner of all right, title and interest in 

and to the proprietary Intellectual 

Property it employs in the provision of 

regulation hereunder (including the 

SONAR and Stock Watch systems), and 

any derivative works thereof. To the 

extent certain elements of either of these 

parties’ systems, or portions thereof, 

may be licensed or leased from third 

parties, all such third party elements 

shall remain the property of such third 

parties, as applicable. Likewise, any 

other Participating Organization is and 

will remain the owner of all right, title 

and interest in and to its own existing 

proprietary Intellectual Property. 

(ii) Enhancements to Existing 

Intellectual Property or New 

Developments of NYSE Regulation or 

FINRA. In the event NYSE Regulation or 

FINRA (a) makes any changes, 

modifications or enhancements to its 

respective Intellectual Property for any 

reason, or (b) creates any newly 

developed Intellectual Property for any 

reason, including as a result of 

requested enhancements or new 

development by the Exchange 

Committee (collectively, the ‘‘New IP’’), 

the Participating Organizations 

acknowledge and agree that each of 

NYSE Regulation and FINRA shall be 

deemed the owner of the New IP created 

by each of them, respectively (and any 

derivative works thereof), and shall 

retain all right, title and interest therein 

and thereto, and each other 

Participating Organization hereby 

irrevocably assigns, transfers and 

conveys to each of NYSE Regulation and 

FINRA, as applicable, without further 

consideration all of its right, title and 

interest in or to all such New IP (and 

any derivative works thereof). 

(iii) NYSE Regulation and FINRA will 

not charge the Participating 

Organizations any fees for any New IP 

created and used by NYSE Regulation or 

FINRA, respectively; provided, 

however, that NYSE Regulation and 

FINRA will each be permitted to charge 

fees for software maintenance work 

performed on systems used in the 

discharge of their respective duties 

hereunder. 

12. Special or Cause Examinations. 

Nothing in this Agreement shall restrict 

or in any way encumber the right of a 

party to conduct special or cause 

examinations of Common NYSE 

Members or Common FINRA Members 

as any party, in its sole discretion, shall 

deem appropriate or necessary. 

13. Dispute Resolution Under this 

Agreement. 

a. Negotiation. The Parties will 

attempt to resolve any disputes through 

good faith negotiation and discussion, 

escalating such discussion up through 

the appropriate management levels until 

reaching the executive management 

level. In the event a dispute cannot be 

settled through these means, the Parties 

shall refer the dispute to binding 

arbitration. 

b. Binding Arbitration. All claims, 

disputes, controversies, and other 

matters in question between the Parties 

to this Agreement arising out of or 

relating to this Agreement or the breach 

thereof that cannot be resolved by the 

Parties will be resolved through binding 

arbitration. Unless otherwise agreed by 

the Parties, a dispute submitted to 

binding arbitration pursuant to this 

paragraph shall be resolved using the 

following procedures: 

(i) The arbitration shall be conducted 

in the city of New York in accordance 

with the Commercial Arbitration Rules 

of the American Arbitration Association 

and judgment upon the award rendered 

by the arbitrator may be entered in any 

court having jurisdiction thereof; and 

(ii) There shall be three arbitrators, 

and the chairperson of the arbitration 

panel shall be an attorney. 

14. Limitation of Liability. As between 

the Participating Organizations, no 

Participating Organization, including its 

respective directors, governors, officers, 

employees and agents, will be liable to 

any other Participating Organization, or 

its directors, governors, officers, 

employees and agents, for any liability, 

loss or damage resulting from any 


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delays, inaccuracies, errors or omissions 

with respect to its performing or failing 

to perform regulatory responsibilities, 

obligations, or functions, except (a) as 

otherwise provided for under the Act, 

(b) in instances of a Participating 

Organization’s gross negligence, willful 

misconduct or reckless disregard with 

respect to another Participating 

Organization, (c) in instances of a 

breach of confidentiality obligations 

owed to another Participating 

Organization, or (d) in the case of any 

Participating Organization paying fees 

hereunder, for any payments due. The 

Participating Organizations understand 

and agree that the regulatory 

responsibilities are being performed on 

a good faith and best effort basis and no 

warranties, express or implied, are made 

by any Participating Organization to any 

other Participating Organization with 

respect to any of the responsibilities to 

be performed hereunder. This paragraph 

is not intended to create liability of any 

Participating Organization to any third 

party. 

15. SEC Approval. 

a. The parties agree to file promptly 

this Agreement with the SEC for its 

review and approval. NYSE Regulation 

and FINRA shall jointly file this 

Agreement on behalf, and with the 

explicit consent, of all Participating 

Organizations. 

b. If approved by the SEC, the 

Participating Organizations will notify 

their members of the general terms of 

the Agreement and of its impact on their 

members. 

16. Subsequent Parties; Limited 

Relationship. This Agreement shall 

inure to the benefit of and shall be 

binding upon the Participating 

Organizations hereto and their 

respective legal representatives, 

successors, and assigns. Nothing in this 

Agreement, expressed or implied, is 

intended or shall: (a) confer on any 

person other than the Participating 

Organizations hereto, or their respective 

legal representatives, successors, and 

assigns, any rights, remedies, 

obligations or liabilities under or by 

reason of this Agreement, (b) constitute 

the Participating Organizations hereto 

partners or participants in a joint 

venture, or (c) appoint one Participating 

Organization the agent of the other. 

17. Assignment. No Participating 

Organization may assign this Agreement 

without the prior written consent of all 

the other Participating Organizations, 

which consent shall not be 

unreasonably withheld, conditioned or 

delayed; provided, however, that any 

Participating Organization may assign 

the Agreement to a corporation 

controlling, controlled by or under 

common control with the Participating 

Organization without the prior written 

consent of any other party. 

18. Severability. Any term or 

provision of this Agreement that is 

invalid or unenforceable in any 

jurisdiction shall, as to such 

jurisdiction, be ineffective to the extent 

of such invalidity or unenforceability 

without rendering invalid or 

unenforceable the remaining terms and 

provisions of this Agreement or 

affecting the validity or enforceability of 

any of the terms or provisions of this 

Agreement in any other jurisdiction. 

19. Termination. 

a. Any Participating Organization may 

cancel its participation in the 

Agreement at any time, provided that it 

has given 180 days written notice to the 

other Participating Organizations (or in 

the case of a change of control in 

ownership of a Participating 

Organization, such other notice time 

period as that Participating Organization 

may choose), and provided that such 

termination has been approved by the 

SEC. The cancellation of its 

participation in this Agreement by any 

Participating Organization shall not 

terminate this Agreement as to the 

remaining Participating Organizations. 

b. The Regulatory Responsibilities 

assumed under this Agreement by NYSE 

Regulation or FINRA (either, an 

‘‘Invoicing Party’’) may be terminated by 

the Invoicing Party against any 

Participating Organization as follows. 

The Participating Organization will 

have thirty (30) days from receipt to 

satisfy the invoice. If the Participating 

Organization fails to satisfy the invoice 

within thirty (30) days of receipt 

(‘‘Default’’), the Invoicing Party will 

notify the Participating Organization of 

the Default. The Participating 

Organization will have thirty (30) days 

from receipt of the Default notice to 

satisfy the invoice. 

c. The Invoicing Party will have the 

right to terminate the Regulatory 

Responsibilities assumed under this 

Agreement if a Participating 

Organization has Defaulted in its 

obligation to pay the invoice on more 

than three (3) occasions[.] in any rolling 

twenty-four (24) month period. 

20. Intermarket Surveillance Group 

(‘‘ISG’’). In order to participate in this 

Agreement, all Participating 

Organizations to this Agreement must 

be members of the ISG. 

21. General. The Participating 

Organizations agree to perform all acts 

and execute all supplementary 

instruments or documents that may be 

reasonably necessary or desirable to 

carry out the provisions of this 

Agreement. 

22. Liaison and Notices. All questions 

regarding the implementation of this 

Agreement shall be directed to the 

persons identified below, as applicable. 

All notices and other communications 

required or permitted to be given under 

this Agreement shall be in writing and 

shall be deemed to have been duly given 

upon (i) actual receipt by the notified 

party or (ii) constructive receipt (as of 

date marked on the return receipt) if 

sent by certified or registered mail, 

return receipt requested, to the 

following addresses: 

* * * * * 

23. Confidentiality. The parties agree 

that documents or information shared 

shall be held in confidence, and used 

only for the purposes of carrying out 

their respective regulatory obligations 

under this Agreement. No party shall 

assert regulatory or other privileges as 

against the other with respect to 

Regulatory Information that is required 

to be shared pursuant to this Agreement, 

as defined by paragraph 11, above. 

24. Regulatory Responsibility. 

Pursuant to Section 17(d)(1)(A) of the 

Act, and Rule 17d–2 thereunder, the 

Participating Organizations jointly and 

severally request the SEC, upon its 

approval of this Agreement, to relieve 

the Participating Organizations, jointly 

and severally, of any and all 

responsibilities with respect to the 

matters allocated to NYSE Regulation 

and FINRA pursuant to this Agreement 

for purposes of §§ 17(d) and 19(g) of the 

Act. 

25. Governing Law. This Agreement 

shall be deemed to have been made in 

the State of New York, and shall be 

construed and enforced in accordance 

with the law of the State of New York, 

without reference to principles of 

conflicts of laws thereof. Each of the 

parties hereby consents to submit to the 

jurisdiction of the courts of the State of 

New York in connection with any action 

or proceeding relating to this 

Agreement. 

26. Survival of Provisions. Provisions 

intended by their terms or context to 

survive and continue notwithstanding 

delivery of the regulatory services by 

NYSE Regulation or FINRA, as 

applicable, the payment of the Fees by 

the Participating Organizations, and any 

expiration of this Agreement shall 

survive and continue. 

27. Amendment. 

a. This Agreement may be amended to 

add a new Participating Organization, 

provided that such Participating 

Organization does not assume 

regulatory responsibility, solely by an 

amendment executed by NYSE 

Regulation, FINRA and such new 


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Participating Organization. All other 

Participating Organizations expressly 

consent to allow NYSE Regulation and 

FINRA to jointly add new Participating 

Organizations to the Agreement as 

provided above. NYSE Regulation and 

FINRA will promptly notify all 

Participating Organizations of any such 

amendments to add a new Participating 

Organization. 

b. All other amendments must be 

made approved by each Participating 

Organization. All amendments, 

including adding a new Participating 

Organization, must be filed with and 

approved by the Commission before 

they become effective. 

28. Effective Date. The Effective Date 

of this Agreement will be the date the 

SEC declares this Agreement to be 

effective pursuant to authority conferred 

by § 17(d) of the Act, and SEC Rule 17d– 

2 thereunder. 

29. Counterparts. This Agreement 

may be executed in any number of 

counterparts, including facsimile, each 

of which will be deemed an original, but 

all of which taken together shall 

constitute one single agreement between 

the Parties. 

Exhibit A: Common Insider Trading 

Rules 

1. Securities Exchange Act of 1934 

Section 10(b), and rules and regulations 

promulgated there under in connection 

with insider trading, including SEC 

Rule 10b–5 (as it pertains to insider 

trading), which states that: 

Rule 10b–5—Employment of 

Manipulative and Deceptive Devices 

It shall be unlawful for any person, 

directly or indirectly, by the use of any 

means or instrumentality of interstate 

commerce, or of the mails or of any 

facility of any national securities 

exchange, 

a. To employ any device, scheme, or 

artifice to defraud, 

b. To make any untrue statement of a 

material fact or to omit to state a 

material fact necessary in order to make 

the statements made, in the light of the 

circumstances under which they were 

made, not misleading, or 

c. To engage in any act, practice, or 

course of business which operates or 

would operate as a fraud or deceit upon 

any person, in connection with the 

purchase or sale of any security. 

2. Securities Exchange Act of 1934 

Section 17(a), and rules and regulations 

promulgated there under in connection 

with insider trading, including SEC 

Rule 17a–3 (as it pertains to insider 

trading). 

3. The following SRO Rules as they 

pertain to violations of insider trading: 

FINRA [NASD] Rule [2110]2010 

(Standards of Commercial Honor and 

Principles of Trade) 

FINRA [NASD] Rule [2120]2020 (Use of 

Manipulative, Deceptive or Other 

Fraudulent Devices) 

FINRA NASD Rule 3010 (Supervision) 

FINRA NASD Rule 3110 (a) and (c) 

(Books and Records; Financial 

Condition) 

NYSE Rule 401(a) (Business Conduct) 

NYSE Rule 476(a) (Disciplinary 

Proceedings Involving Charges 

Against Members, Member 

Organizations, Allied Members, 

Approved Persons, Employees, or 

Others) 

NYSE Rule 440 (Books and Records) 

NYSE Rule 342 (Offices—Approval, 

Supervision and Control) 

AMEX Cons. Art. II Sec. 3, Confidential 

Information 

AMEX Cons. Art. V Sec. 4 Suspension 

or Expulsion (b), (h), (i), (j) and (r) 

AMEX Cons. Art. XI Sec. 4 Controlled 

Corporations and Associations— 

Responsibility for Corporate 

Subsidiary; Duty to Produce Books 

AMEX Rule 3 General Prohibitions and 

Duty to Report (d), (h), (j) and (l) 

AMEX Rule 3–AEMI General 

Prohibitions and Duty to Report (d) 

and (h) 

AMEX Rule 16 Business Conduct 

AMEX Rule 320 Offices-Approval, 

Supervision and Control 

AMEX Rule 324 Books and Records 

NASDAQ Rule 2110 (Standards of 

Commercial Honor and Principles of 

Trade) 

NASDAQ Rule 2120 (Use of 

Manipulative, Deceptive or Other 

Fraudulent Devices) 

NASDAQ Rule 3010 (Supervision) 

NASDAQ Rule 3110 (a) and (c) (Books 

and Records; Financial Condition) 

CHX Article 8, Rule 3 (Fraudulent Acts) 

CHX Article 9, Rule 2 (Just & Equitable 

Trade Principles) 

CHX Article 11, Rule 2 (Maintenance of 

Books and Records) 

CHX Article 6, Rule 5 (Supervision of 

Registered Persons and Branch and 

Resident Offices) 

[ISE RULE 400 (Just and Equitable 

Principles of Trade)] 

[ISE RULE 405 (Manipulation)] 

[ISE RULE 408 (Prevention of Misuse of 

Material Nonpublic Information)] 

CBOE RULE 4.1 (Practices inconsistent 

with just and equitable principles) 

CBOE RULE 4.2 (adherence to law) 

CBOE RULE 4.7 (Manipulation) 

CBOE RULE 4.18 (Prevention of the 

misuse of material non public 

information) 

PHLX RULE 707 (Conduct Inconsistent 

with Just and Equitable Principles of 

Trade) 

PHLX RULE 748 (Supervision) 

PHLX RULE 760 (Maintenance, 

Retention and Furnishing of Books, 

Records and Other Information) 

PHLX RULE 761 (Supervisory 

Procedures Relating to ITSFEA and to 

Prevention of Misuse or Material 

Nonpublic Information) 

PHLX RULE 782 (Manipulative 

Operations) 

NYSE Arca Rule 6.3 (Prevention of the 

Misuse of Material, Nonpublic 

Information) 

NYSE Arca Rule 6.2(b) Prohibited Acts 

(J&E) 

NYSE Arca Rule 6.1 Adherence to Law 

NYSE Arca Rule 6.18 Supervision 

NYSE Arca Rule 9.1(c) Office 

Supervision 

NYSE Arca Rule 9.2(b) Account 

Supervision 

NYSE Arca Rule 9.2(c) Customer 

Records 

NYSE Arca Rule 9.17 Books and 

Records 

NSX Rule 3.1 Business Conduct of ETP 

Holders 

NSX Rule 3.2. Violations Prohibited 

NSX Rule 3.3. Use of Fraudulent 

Devices 

NSX Rule 4.1 Requirements 

NSX Rule 5.1. Written Procedures 

NSX Rule 5.3 Records 

NSX Rule 5.5 Chinese Wall Procedures 

[BSE Chapter II, Sections 26–28 (AntiManipulative Provisions)] 

[BSE Chapter II, Section 37 (ITSFEA 

Procedures)] 

[BSE Chapter XXIV–C, Section 2 

(Securities Accounts and Orders of 

Specialists)] 

[BSE Chapter XXXVII, Section 11 

(Limitations on Dealings)] 

BX Rule 2110 (Standards of Commercial 

Honor and Principles of Trade) 

BX Rule 2120 (Use of Manipulative, 

Deceptive or Other Fraudulent 

Devices) 

BX Rule 3010 (Supervision) 

BX Rule 3110 (a) and (c) (Books and 

Records; Financial Condition) 

BATS Rule 3.1 Business Conduct of ETP 

Holders 

BATS Rule 3.2. Violations Prohibited 

BATS Rule 3.3. Use of Fraudulent 

Devices 

BATS Rule 4.1 Requirements 

BATS Rule 5.1. Written Procedures 

BATS Rule 5.3 Records 

BATS Rule 5.5 [Chinese Wall 

Procedures]Prevention of the Misuse 

of Material, Non-Public Information 

BATS Rule 12.4 Manipulative 

Transactions 

BYX Rule 3.1 Business Conduct of ETP 

Holders 

BYX Rule 3.2. Violations Prohibited 

BYX Rule 3.3. Use of Fraudulent 

Devices 


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BYX Rule 4.1 Requirements 

BYX Rule 5.1. Written Procedures 

BYX Rule 5.3 Records 

BYX Rule 5.5 Prevention of the Misuse 

of Material, Non-Public Information 

BYX Rule 12.4 Manipulative 

Transactions 

EDGA 3.1 Business Conduct of Members 

EDGA 3.2 Violations Prohibited 

EDGA 3.3 Use of Fraudulent Devices 

EDGA 4.1 Requirements 

EDGA 5.1 Written Procedures 

EDGA 5.3 Records 

EDGA 5.5 Prevention of misuse of 

material, nonpublic information 

EDGA 12.4 Manipulative Transactions 

EDGX 3.1 Business Conduct of Members 

EDGX 3.2 Violations Prohibited 

EDGX 3.3 Use of Fraudulent Devices 

EDGX 4.1 Requirements 

EDGX 5.1 Written Procedures 

EDGX 5.3 Records 

EDGX 5.5 Prevention of misuse of 

material, nonpublic information 

EDGX 12.4 Manipulative Transactions 

Exhibit B: Fee Schedule 

1. Fees. NYSE Regulation and, 

separately, FINRA shall charge each 

Participating Organization a Quarterly 

Fee in arrears for the performance of 

NYSE Regulation’s and FINRA’s 

respective regulatory responsibilities 

under the Plan (each, a ‘‘Quarterly Fee,’’ 

and together, the ‘‘Fees’’). 

a. Quarterly Fees. 

(1) Quarterly Fees for each 

Participating Organization will be 

charged by NYSE Regulation and 

FINRA, respectively, according to the 

Participating Organization’s ‘‘Percentage 

of Publicly Reported Trades’’ occurring 

over three-month billing periods. The 

‘‘Percentage of Publicly Reported 

Trades’’ shall equal a Participating 

Organization’s number of reported 

NYSE-listed trades (when billing 

originates from NYSE Regulation) and 

combined AMEX-listed, NASDAQlisted, and CHX solely-listed trades 

(when billing originates from FINRA) 

during the relevant period (the 

‘‘Numerator’’), divided by the total 

number of either all NYSE-listed trades 

or all combined AMEX-listed, 

NASDAQ-listed, and CHX solelylisted 

trades, respectively, for the same period 

(the ‘‘Denominator’’). For purposes of 

clarification, ADF and Trade Reporting 

Facility (TRF) activity will be included 

in the Denominator. Additionally, with 

regard to TRFs, TRF trade volume will 

be charged to FINRA. Consequently, for 

purposes of calculating the Quarterly 

Fees, the volume for each Participant 

Organization’s TRF will be calculated 

separately (that is, TRF volume will be 

broken out from the Participating 

Organization’s overall Percentage of 

Publicly Reported Trades) and the fees 

for such will be billed to FINRA in 

accordance with paragraph 1(a)(2), 

rather than to the applicable 

Participating Organization. 

(2) The Quarterly Fees shall be 

determined by each of NYSE Regulation 

and FINRA, as applicable, in the 

following manner for each Participating 

Organization: 

(a) Less than 1.0%: If the Participating 

Organization’s Percentage of Publicly 

Reported Trades for NYSE-listed trades 

(in the case of NYSE Regulation) or for 

combined AMEX-listed, NASDAQlisted, and CHX solelylisted trades (in 

the case of FINRA) for the relevant 

three-month billing period is less than 

1.0%, the Quarterly Fee shall be $3,125, 

per quarter (‘‘Static Fee’’); 

(b) Less than 2.0% but No Less than 

1.0%: If the Participating Organization’s 

Percentage of Publicly Reported Trades 

for NYSE-listed trades (in the case of 

NYSE Regulation) or for combined 

AMEX-listed, NASDAQ-listed, and CHX 

solely-listed trades (in the case of 

FINRA) for the relevant three-month 

billing period is less than 2.0% but no 

less than 1.0%, the Quarterly Fee shall 

be $9,375, per quarter (‘‘Static Fee’’); 

(c) 2.0% or Greater: If the 

Participating Organization’s Percentage 

of Publicly Reported Trades for NYSElisted trades (in the case of NYSE 

Regulation) or for combined AMEXlisted, NASDAQ-listed, and CHX solely 

listed trades (in the case of FINRA) for 

the relevant three-month billing period 

is 2.0% or greater, the Quarterly Fee 

shall be the amount equal to the 

Participating Organization’s Percentage 

of Publicly Reported Trades multiplied 

by NYSE Regulation’s or FINRA’s total 

charge (‘‘Total Charge’’), respectively, for 

its performance of Insider Trading 

regulatory responsibilities for the 

relevant three-month billing period. 

(3) Increases in Static Fees. NYSE 

Regulation and FINRA will re-evaluate 

the Quarterly Fees on an annual basis 

during the annual budget process 

outlined in paragraph 1.c. below. During 

each annual re-evaluation, NYSE 

Regulation and FINRA will have the 

discretion to increase the Static Fees by 

a percentage no greater than the 

percentage increase in the Final Budget 

over the preceding year’s Final Budget. 

Any changes to the Static Fees shall not 

require an amendment to this 

Agreement, but rather shall be 

memorialized through the Budget 

Process. 

(4) Increases in Total Charges. Any 

change in the Total Charges (whether a 

Final Budget increase or any mid year 

change) shall not require an amendment 

to this Agreement, but rather shall be 

memorialized through the budget 

process. 

b. Source of Data. For purposes of 

calculation of the Percentage of Publicly 

Reported Trades for each Participating 

Organization, NYSE Regulation and 

FINRA shall use (a) the Consolidated 

Tape Association (‘‘CTA’’) as the 

exclusive securities information 

processor (‘‘SIP’’) for all NYSE Listed 

Stocks, AMEX Listed Stocks, and 

CHXSolely Listed Stocks, and (b) the 

Unlisted Trading Privileges Plan as the 

exclusive SIP for NASDAQ-listed 

Stocks. 

c. Annual Budget Forecast. NYSE 

Regulation and FINRA will notify the 

Participating Organizations of the 

forecasted costs of their respective 

insider trading programs for the 

following calendar year by close of 

business on October 15 of the thencurrent year (the ‘‘Forecasted Budget’’). 

NYSE Regulation and FINRA shall use 

best efforts to provide as accurate a 

forecast as possible. NYSE Regulation 

and FINRA shall then provide a final 

submission of the costs following 

approval of such costs by their 

respective governing Boards (the ‘‘Final 

Budget’’). Subject to paragraph 1(d) 

below, in the event of a difference 

between the Forecasted Budget and the 

Final Budget, the Final Budget will 

govern. 

d. Increases in Fees Over Twenty 

Percent. 

(1) In the event that any proposed 

increase to Fees by NYSE Regulation or 

by FINRA for a given calendar year 

(which increase may arise either during 

the annual budgetary forecasting 

process or through any mid-year 

increase) will result in a cumulative 

increase in such calendar year’s Fees of 

more than twenty percent (20%) above 

the preceding calendar year’s Final 

Budget (a ‘‘Major Increase’’), then senior 

management of any Participating 

Organization (a) that is a Listing Market 

or (b) for which the Percentage of 

Publicly Reported Trades is then 

currently twenty percent (20%) or 

greater, shall have the right to call a 

meeting with the senior management of 

NYSE Regulation or FINRA, 

respectively, in order to discuss any 

disagreement over such proposed Major 

Increase. By way of example, if NYSE 

Regulation provides a Final Budget for 

2009 that represents an 8% increase 

above the Final Budget for 2008, the 

terms of this paragraph 1.d.(1) shall not 

apply; if, however, in April of 2009, 

NYSE Regulation notifies the Exchange 

Committee of an increase in Fees that 

represents an additional 14% increase 

above the Final Budget for 2008, then 


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the increase shall be deemed a Major 

Increase, and the terms of this paragraph 

1.d.(1) shall become applicable (i.e., 8% 

+ 14% = a cumulative increase of 22% 

above 2008 Final Budget). 

(2) In the event that senior 

management members of the involved 

parties are unable to reach an agreement 

regarding the proposed Major Increase, 

then the matter shall be referred back to 

the Exchange Committee for final 

resolution. Prior to the matter being 

referred back to the Exchange 

Committee, nothing shall prohibit the 

parties from conferring with the SEC. 

Resolution shall be reached through a 

vote of no fewer than all Participating 

Organizations seated on the Exchange 

Committee, and a simple majority shall 

be required in order to reject the 

proposed Major Increase. 

e. Time Tracking. NYSER and FINRA 

shall track the time spent by staff on 

insider trading responsibilities under 

this Agreement; however, time tracking 

will not be used to allocate costs. 

2. Invoicing and Payment. 

a. NYSE Regulation shall invoice each 

Participating Organization for the 

Quarterly Fee associated with the 

regulatory activities performed pursuant 

to this Agreement during the previous 

three-month billing period within fortyfive (45) days of the end of such 

previous 3-month billing period. A 

Participating Organization shall have 

thirty (30) days from date of invoice to 

make payment to NYSE Regulation on 

such invoice. The invoice will reflect 

the Participating Organization’s 

Percentage of Publicly Reported Trades 

for that billing period. 

b. FINRA shall invoice each 

Participating Organization for the 

Quarterly Fee associated with the 

regulatory activities performed pursuant 

to this Agreement during the previous 

three-month billing period within fortyfive (45) days of the end of such 

previous 3-month billing period. A 

Participating Organization shall have 

thirty (30) days from date of invoice to 

make payment to FINRA on such 

invoice. The invoice will reflect the 

Participating Organization’s Percentage 

of Publicly Reported Trades for that 

billing period. 

3. Disputed Invoices; Interest. In the 

event that a Participating Organization 

disputes an invoice or a portion of an 

invoice, the Participating Organization 

shall notify in writing either FINRA or 

NYSE Regulation (each, an ‘‘Invoicing 

Party’’), as applicable, of the disputed 

item(s) within fifteen (15) days of 

receipt of the invoice. In its notification 

to the Invoicing Party of the disputed 

invoice, the Participating Organization 

shall identify the disputed item(s) and 

provide a brief explanation of why the 

Participating Organization disputes the 

charges. An Invoicing Party may charge 

a Participating Organization interest on 

any undisputed invoice or the 

undisputed portions of a disputed 

invoice that a Participating Organization 

fails to pay within thirty (30) days of its 

receipt of such invoice. Such interest 

shall be assessed monthly. Interest will 

mean one and one half percent per 

month, or the maximum allowable 

under applicable Law, whichever is 

less. 

4. Taxes. In the event any 

governmental authority deems the 

regulatory activities allocated to NYSE 

Regulation or FINRA to be taxable 

activities similar to the provision of 

services in a commercial context, the 

other Participating Organizations agree 

that they shall bear full responsibility, 

on a joint and several basis, for the 

payment of any such taxes levied on 

NYSE Regulation or FINRA, or, if such 

taxes are paid by NYSE Regulation or 

FINRA directly to the governmental 

authority, the other Participating 

Organizations agree that they shall 

reimburse NYSE Regulation and/or 

FINRA, as applicable, for the amount of 

any such taxes paid. 

5. Audit Right; Recordkeeping. 

a. Audit Right. 

(i) Audit of NYSE Regulation. 

(a) Once every rolling twelve (12) 

month period, NYSE Regulation shall 

permit no more than one audit (to be 

performed by one or more Participating 

Organizations) of the Fees charged by 

NYSE Regulation to the Participating 

Organizations hereunder and a detailed 

cost analysis supporting such Fees (the 

‘‘Audit’’). The Participating Organization 

or Organizations that conduct this Audit 

will select a nationally recognized 

independent auditing firm (or may use 

its regular independent auditor, 

providing it is a nationally recognized 

auditing firm) (‘‘Auditing Firm’’) to act 

on its, or their behalf, and will provide 

reasonable notice to other Participating 

Organizations of the Audit and invite 

the other Participating Organizations to 

participate in the Audit. NYSE 

Regulation will permit the Auditing 

Firm reasonable access during NYSE 

Regulation’s normal business hours— 

with reasonable advance notice, to such 

financial records and supporting 

documentation as are necessary to 

permit review of the accuracy of the 

calculation of the Fees charged to the 

Participating Organizations. The 

Participating Organization, or 

Organizations, as applicable, other than 

NYSE Regulation, shall be responsible 

for the costs of performing any such 

audit. 

(b) If, through an Audit, the Exchange 

Committee determines that NYSE 

Regulation has inaccurately calculated 

the Fees for any Participating 

Organization, the Exchange Committee 

will promptly notify NYSE Regulation 

in writing of the amount of such 

difference in the Fees, and, if 

applicable, NYSE Regulation shall issue 

a reimbursement of the overage amount 

to the relevant Participating 

Organization(s), less any amount owed 

by the Participating Organization under 

any outstanding, undisputed invoice(s). 

If such an Audit reveals that any 

Participating Organization paid less 

than what was required pursuant to the 

Agreement, then that Participating 

Organization shall promptly pay NYSE 

Regulation the difference between what 

the Participating Organization owed 

pursuant to the Agreement and what 

that Participating Organization 

originally paid NYSE Regulation. If 

NYSE Regulation disputes the results of 

an audit regarding the accuracy of the 

Fees, it will submit the dispute for 

resolution pursuant to the dispute 

resolution procedures in paragraph 13 

hereof. 

(c) In the event that through the 

review of any supporting 

documentation provided during the 

Audit, any one or more Participating 

Organizations desire to discuss with 

NYSE Regulation the supporting 

documentation and any questions 

arising therefrom with regard to the 

manner in which regulation was 

conducted, the Participating 

Organization(s) shall call a meeting with 

NYSE Regulation. NYSE Regulation 

shall in turn notify the Exchange 

Committee of this meeting in advance, 

and all Participating Organizations shall 

be welcome to attend (the ‘‘Fee Analysis 

Meeting’’). The parties to this Agreement 

acknowledge and agree that while NYSE 

Regulation commits to discuss the 

supporting documentation at the Fee 

Analysis Meeting, NYSE Regulation 

shall not be subject, by virtue of the 

above Audit rights or any discussions 

during the Fee Analysis Meeting or 

otherwise, to any limitation whatsoever, 

other than the Increase in Fee 

provisions set forth in paragraph 1.d. of 

this Exhibit, on its discretion as to the 

manner and means by which it conducts 

its regulatory efforts in its role as the 

SRO primarily liable for regulatory 

decisions under this Agreement. To that 

end, no disagreement among the 

Participating Organizations as to the 

manner or means by which NYSE 

Regulation conducts its regulatory 

efforts hereunder shall be subject to the 

dispute resolution procedures 


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Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 64763 

hereunder, and no Participating 

Organization shall have the right to 

compel NYSE Regulation to alter the 

manner or means by which it conducts 

its regulatory efforts. Further, a 

Participating Organization shall not 

have the right to compel a rebate or 

reassessment of fees for services 

rendered, on the basis that the 

Participating Organization would have 

conducted regulatory efforts in a 

different manner than NYSE Regulation 

in its professional judgment chose to 

conduct its regulatory efforts. 

ii. Audit of FINRA. 

(a) Once every rolling twelve (12) 

month period, FINRA shall permit no 

more than one audit (to be performed by 

one or more Participating Organizations) 

of the Fees charged by FINRA to the 

Participating Organizations hereunder 

and a detailed cost analysis supporting 

such Fees (the ‘‘Audit’’). The 

Participating Organization or 

Organizations that conduct this Audit 

will select a nationally recognized 

independent auditing firm (or may use 

its regular independent auditor, 

providing it is a nationally recognized 

auditing firm) (‘‘Auditing Firm’’) to act 

on its, or their behalf, and will provide 

reasonable notice to other Participating 

Organizations of the Audit. FINRA will 

permit the Auditing Firm reasonable 

access during FINRA’’s normal business 

hours, with reasonable advance notice, 

to such financial records and supporting 

documentation as are necessary to 

permit review of the accuracy of the 

calculation of the Fees charged to the 

Participating Organizations. The 

Participating Organization, or 

Organizations, as applicable, other than 

FINRA, shall be responsible for the costs 

of performing any such audit. 

(b) If, through an Audit, the Exchange 

Committee determines that FINRA has 

inaccurately calculated the Fees for any 

Participating Organization, the 

Exchange Committee will promptly 

notify FINRA in writing of the amount 

of such difference in the Fees, and, if 

applicable, FINRA shall issue a 

reimbursement of the overage amount to 

the relevant Participating 

Organization(s), less any amount owed 

by the Participating Organization under 

any outstanding, undisputed invoice(s). 

If such an Audit reveals that any 

Participating Organization paid less 

than what was required pursuant to the 

Agreement, then that Participating 

Organization shall promptly pay FINRA 

the difference between what the 

Participating Organization owed 

pursuant to the Agreement and what 

that Participating Organization 

originally paid FINRA. If FINRA 

disputes the results of an audit 

regarding the accuracy of the Fees, it 

will submit the dispute for resolution 

pursuant to the dispute resolution 

procedures in paragraph 13 hereof. 

(c) In the event that through the 

review of any supporting 

documentation provided during the 

Audit, any one or more Participating 

Organizations desire to discuss with 

FINRA the supporting documentation 

and any questions arising therefrom 

with regard to the manner in which 

regulation was conducted, the 

Participating Organization(s) shall call a 

meeting with FINRA. FINRA shall in 

turn notify the Exchange Committee of 

this meeting in advance, and all 

Participating Organizations shall be 

welcome to attend (the ‘‘Fee Analysis 

Meeting’’). The parties to this Agreement 

acknowledge and agree that while 

FINRA commits to discuss the 

supporting documentation at the Fee 

Analysis Meeting, FINRA shall not be 

subject, by virtue of the above Audit 

rights or any discussions during the Fee 

Analysis Meeting or otherwise, to any 

limitation whatsoever, other than the 

Increase in Fee provisions set forth in 

paragraph 1.d. of this Exhibit, on its 

discretion as to the manner and means 

by which it conducts its regulatory 

efforts in its role as the SRO primarily 

liable for regulatory decisions under this 

Agreement. To that end, no 

disagreement among the Participating 

Organizations as to the manner or 

means by which FINRA conducts its 

regulatory efforts hereunder shall be 

subject to the dispute resolution 

procedures hereunder, and no 

Participating Organization shall have 

the right to compel FINRA to alter the 

manner or means by which it conducts 

its regulatory efforts. Further, a 

Participating Organization shall not 

have the right to compel a rebate or 

reassessment of fees for services 

rendered, on the basis that the 

Participating Organization would have 

conducted regulatory efforts in a 

different manner than FINRA in its 

professional judgment chose to conduct 

its regulatory efforts. 

b. Recordkeeping. In anticipation of 

any audit that may be performed by the 

Exchange Committee under paragraph 

5.a. above, NYSE and FINRA shall each 

keep accurate financial records and 

documentation relating to the Fees 

charged by each, respectively, under 

this Agreement. 

Exhibit C: Reports 

NYSE Regulation and FINRA shall 

provide the following information in 

reports to the Exchange Committee, 

which information covers activity 

occurring under this Agreement: 

1. Alert Summary Statistics: Total 

number of surveillance system alerts 

generated by quarter along with 

associated number of reviews and 

investigations. In addition, this 

paragraph shall also reflect the number 

of reviews and investigations originated 

from a source other than an alert. A 

separate table would be presented for 

Amex Listed, Nasdaq Listed, and CHX 

Solely Listed equity trading activity. 

2008 Surveillance alerts Investigations 

1st Quarter ....................................................................................................

2nd Quarter ....................................................................................................

3rd Quarter ....................................................................................................

4th Quarter ....................................................................................................

2008 Total ....................................................................................................

2. Aging of Open Matters: Would 

reflect the aging for all currently open 

matters for the quarterly period being 

reported. A separate table would be 

presented for Amex Listed, Nasdaq 

Listed, and CHX Solely Listed equity 

trading activity. 

Example: 


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64764 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Notices 

Surveillance alerts Investigations 

0–6 months ....................................................................................................

6–9 months ....................................................................................................

9–12 months ....................................................................................................

12+ months ....................................................................................................

Total ....................................................................................................

3. Timeliness of Completed Matters: 

Would reflect the total age of those 

matters that were completed or closed 

during the quarterly period being 

reported. NYSE and FINRA will provide 

total referrals to the SEC. 

Example: 

Surveillance alerts Investigations 

0–6 months ....................................................................................................

6–9 months ....................................................................................................

9–12 months ....................................................................................................

12+months ....................................................................................................

Total ....................................................................................................

4. Disposition of Closed Matters: 

Would reflect the disposition of those 

matters that were completed or closed 

during the quarterly period being 

reported. A separate table would be 

presented for Amex Listed, Nasdaq 

Listed, and CHX Solely Listed equity 

trading activity. 

Example: 

Surveillance YTD Investigations 

YTD 

No Further Review ....................................................................................................

Letter of Caution/Admonition/Fine ....................................................................................................

Referred to Legal/Enforcement ....................................................................................................

Referred to SEC/SRO ....................................................................................................

Merged ....................................................................................................

Other ....................................................................................................

Total ....................................................................................................

5. Pending Reviews: In addition to the 

above reports, the Chief Regulatory 

Officer (CRO) (or his or her designee) of 

any Participating Organization that is 

also a listing market (including CHX) 

may inquire about pending reviews 

involving stocks listed on that 

Participating Organization’s market. 

NYSE Regulation and FINRA, 

respectively, will respond to such 

inquiries from a CRO; provided, 

however, that (a) the CRO must hold 

any information provided by NYSE 

Regulation and FINRA in confidence 

and (b) NYSE Regulation and FINRA 

will not be compelled to provide 

information in contradiction of any 

mandate, directive or order from the 

SEC, US Attorney’s Office, the Office of 

any State Attorney General or court of 

competent jurisdiction. 

* * * * * 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing. 

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 4–566 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. 

All submissions should refer to File 

Number 4–566. 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 

plan that are filed with the Commission, 

and all written communications relating 

to the proposed plan 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 the plan also 

will be available for inspection and 

copying at the principal offices of 

Amex, BATS, BYX, BX, CBOE, CHX, 

EDGA, EDGX, FINRA, ISE, NASDAQ, 

NSX, NYSE, NYSE Arca, NYSE 

Regulation, and Phlx. 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 

available publicly. All submissions 

should refer to File Number 4–566 and 

should be submitted on or before 

November 10, 2010. 

V. Discussion 

The Commission finds that the Plan, 

as proposed to be amended, is 


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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 


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