Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 67421 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 62927 

(September 17, 2010), 75 FR 58004. 

4See FINRA By-Laws, Schedule A, § 1(b). In 

addition to the TAF, the other member regulatory 

fees are the Gross Income Assessment and the 

Personnel Assessment. See id. §§ 1(c), (d). 

5See Securities Exchange Act Release No. 50485 

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

(SR–NASD–2003–201). 

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

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

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

Securities Exchange Act Release No. 47946 (May 

30, 2003), 68 FR 34021 (June 6, 2003) (SR–NASD– 

2002–148). 

9 17 CFR 240.17d–2. 

10See Securities Exchange Act Release No. 46800 

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

2002). 

11Transactions in over-the-counter 

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

TAF with respect to all FINRA members. See 

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

12See, e.g., Securities Exchange Act Release No. 

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

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

establishing a DOEA fee). 

13See Securities Exchange Act Release No. 57987 

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

14Following the consolidation of National 

Association of Securities Dealers (‘‘NASD’’) and 

NYSE member regulation operations in 2007, 

FINRA announced that it serves as the DOEA for 

all FINRA member firms. See Regulatory Notice 08– 

37 (July 2008). 

15At the time FINRA (then NASD) proposed the 

exemption in Amendment No. 4 to SR–NASD– 

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

is precluded from seeking further amendments to 

the TAF with respect to the reduction or 

elimination of the proposed exemption * * * in the 

event of a change of factors surrounding its sales 

practice and other regulatory responsibilities.’’ 

Letter from Barbara Z. Sweeney, SVP and Corporate 

Secretary, NASD, to Katherine A. England, 

Assistant Director, Division of Trading and Markets, 

Commission, dated May 19, 2003. 

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 filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. 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 SR–CBOE– 

2010–097 and should be submitted on 

or before November 23, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27586 Filed 11–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63196; File No. SR–FINRA– 

2010–046] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Remove the 

Exemption From the Trading Activity 

Fee for Transactions in Exchange 

Listed Options Effected by a Member 

When FINRA Is Not the Designated 

Options Examining Authority for That 

Member 

October 27, 2010. 

I. Introduction 

On September 7, 2010, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposed rule change to amend its ByLaws to remove the exemption from the 

trading activity fee (‘‘TAF’’) for 

transactions in exchange listed options 

effected by a member when FINRA is 

not the designated options examining 

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

The proposed rule change was 

published for comment in the Federal 

Register on September 23, 2010.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

In its proposal, FINRA sought to 

amend Section 1(b) of Schedule A to the 

FINRA By-Laws to remove the 

exemption from the TAF for 

transactions in exchange listed options 

effected by a member for whom FINRA 

is not the DOEA. The TAF is one of 

three member regulatory fees FINRA 

uses to fund its member regulation 

activities.4 Because the TAF funds 

FINRA’s member regulation functions, it 

is intended to apply to transactions in 

a way that corresponds to FINRA’s 

regulatory responsibilities.5 In general, 

the TAF is assessed for the sale of all 

exchange registered securities wherever 

executed (except debt securities that are 

not TRACE-eligible), over-the-counter 

equity securities, security futures, 

TRACE–Eligible Securities (provided 

that the transaction is a Reportable 

TRACE Transaction), and all municipal 

securities subject to the reporting 

requirements of the Municipal 

Securities Rulemaking Board.6 The TAF 

rules also include numerous exemptions 

for certain types of transactions.7

In 2003, FINRA exempted from the 

TAF ‘‘[t]ransactions in exchange listed 

options effected by a member when 

FINRA is not the designated options 

examining authority for that member.’’ 8

FINRA represented that the exemption 

was added to reflect the fact that 

FINRA’s regulatory responsibilities with 

respect to such activities were 

somewhat alleviated by its participation 

in a plan filed with the Commission 

under Rule 17d–2 of the Act 9 (‘‘17d–2 

Agreement’’) in which regulatory 

responsibilities for certain FINRA 

members that conducted a public 

options business were assumed by other 

self regulatory organizations (‘‘SROs’’) 

that would act as the members’ DOEA.10

In view of the fact that another SRO 

performed certain regulatory 

responsibilities with respect to the 

options activities of some of its 

members, FINRA decided to exempt 

transactions in exchange listed options 

by such members from the TAF.11 The 

exemption was also based on the fact 

that certain other SROs were assessing 

or preparing to assess specific regulatory 

fees for acting as DOEA,12 which FINRA 

believed made its TAF on options 

transactions appear redundant. 

However, subsequent amendments to 

the 17d–2 Agreement have consolidated 

within FINRA sole regulatory 

responsibility for the public options 

activities of all of its members 13 and 

FINRA assumed all regulatory 

responsibility for FINRA members 

under the 17d–2 Agreement.14 As a 

result of this increase in regulatory 

responsibility, FINRA filed the instant 

proposed rule change to delete the 

exemption from the TAF.15

FINRA represented that deleting this 

exemption would also remove any 

ambiguities over whether FINRA should 

collect the TAF from sole-FINRA 

members or from FINRA members that 

conduct only a proprietary options 

business. FINRA stated its belief that the 

existing language exempting a member’s 

transactions in exchange listed options 

from the TAF when FINRA is not the 

DOEA for the member does not properly 

align with those situations where 

FINRA has regulatory responsibility 

over the member firm. First, the DOEA 

designation is established only under 

the 17d–2 Agreement, which by its own 

terms applies only with respect to firms 

that are members of more than one SRO. 

Thus, according to FINRA, while it has 

regulatory responsibilities for the 


hsrobinson on DSK69SOYB1PROD with NOTICES
67422 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 

16 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

17 15 U.S.C. 78o–3(b)(5). 

18 15 U.S.C. 78o–3(b)(6). 

19 15 U.S.C. 78s(b)(2). 

20FINRA states it will implement the proposed 

rule change on the first day of the month following 

Commission approval. FINRA will announce the 

implementation of the proposed rule change in a 

Regulatory Notice to be published no later than 30 

days following Commission approval. 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

5This schedule includes modifications made by 

SR–BX–2010–068, filed with the Commission on 

October 14, 2010. 

6Co-location services are a suite of hardware, 

power, telecommunication and other ancillary 

products and services that allow users to place their 

trading and communications equipment in close 

physical proximity to the quoting and execution 

facilities of the Exchange. 

7The Exchange is also removing from the fee 

schedule an incorrect duplicate $1000 installation 

fee for CME market data connectivity. 

8Separate fees for market data are charged 

independently by individual markets. 

options business of its sole members, it 

is not technically the DOEA for such 

firms. Second, the 17d–2 Agreement 

addresses only a firm’s public options 

business. As such, a firm that conducts 

only a proprietary options business, 

irrespective of whether such firm is a 

member of FINRA and another SRO, 

would not be covered by the 17d–2 

Agreement, and FINRA would not 

technically be the DOEA. FINRA stated 

that although its regulatory 

responsibilities are more limited for a 

firm that does not conduct a public 

options business, it still retains 

regulatory responsibilities over the 

firm’s options activities. 

III. Discussion and Commission 

Findings 

After carefully reviewing the 

proposed rule change, the Commission 

finds that the proposal is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

association.16 In particular, the 

Commission finds that the proposal is 

consistent with Section 15A(b)(5) of the 

Act,17 which requires that a national 

securities association have rules that 

provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and other persons 

using its facilities. Further, the 

Commission finds that the proposal is 

consistent with Section 15A(b)(6) of the 

Act,18 which requires, among other 

things, that FINRA rules be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. 

The Commission believes that 

removal of the TAF exemption for 

transactions in exchange listed options 

effected by members for whom FINRA 

is not the DOEA is consistent with the 

Act because it more properly aligns the 

imposition of the TAF with those 

situations where FINRA has regulatory 

responsibility over the member firm. 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–FINRA– 

2010–046) be, and hereby is, 

approved.20

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27671 Filed 11–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63190; File No. SR–BX– 

2010–069] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change To Modify 

Pricing for Co-Location Services 

October 27, 2010. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on October 

25, 2010, NASDAQ OMX BX, Inc. (‘‘BX’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by BX. Pursuant to Section 

19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 

4(f)(2) thereunder,4 BX has designated 

this proposal as establishing or changing 

a due, fee, or other charge, which 

renders the proposed rule change 

effective upon filing. 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 the Substance 

of the Proposed Rule Change 

BX proposes to codify [sic] pricing for 

co-location services. BX will implement 

the proposed change immediately. The 

text of the proposed rule change is 

available at http:// 

nasdaqomxbx.cchwallstreet.com, at 

BX’s principal office, on the 

Commission’s Web site at http:// 

www.sec.gov, 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, BX 

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. BX has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to modify 

its fee schedule 5 for co-location 

services.6 These modifications are 

summarized below: 

First, as a result of the entry of the 

Direct Edge and BATS Y exchanges into 

the public market and the availability of 

other data feeds, the Exchange is 

implementing and modifying its 

telecommunications installation and 

connectivity fees to accommodate these 

data linkages for co-located customers. 

The new fees are: (1) $125 per-month 

fee for connectivity to the Arca Best Bid 

and Offer feed; (2) a $1,500 per-month 

fee for connectivity to the new BATS Y 

exchange; and (3) a one-time fee of 

$1000 for the installation of 

telecommunications connectivity for the 

Direct Edge exchange, along with a permonth fee of $2500 for each of its two 

markets, EDGA and EDGX. In 

connection with foregoing, the 

Exchange notes that its installation fee 

for Direct Edge is equal to that currently 

charged for installation of SIAC, CME,7

and BATS connectivity, and that the 

monthly rates proposed are based on the 

anticipated bandwidth needed to 

accommodate a particular fee and are 

similar to connectivity fees imposed by 

other vendors.8

Next, to provide additional flexibility 

for customers to select only the 

equipment they need, the Exchange 

proposes to separate its current 

combined $1750 installation fee for 

cooling fans and perforated tiles into 

separate fees of $1,500 for the fans and 

$250 for the tiles. 


hsrobinson on DSK69SOYB1PROD with NOTICES