72740 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 

42 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing will also 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– 

NYSEArca–2014–126 and should be 

submitted on or before December 29, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.42

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28644 Filed 12–5–14; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73719; File No. SR–Phlx– 

2014–76] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Adopt AntiInternalization Functionality for 

Registered Market Makers on the PHLX 

Options Market 

December 2, 2014. 

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 November 

28, 2014, NASDAQ OMX PHLX LLC 

(‘‘Phlx,’’ ‘‘PHLX,’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt antiinternalization functionality for 

registered market makers on the PHLX 

Options Market. 

While these amendments are effective 

upon filing, the Exchange has 

designated the proposed amendments to 

be operative on or before January 15, 

2015. 

The text of the proposed rule change 

is below; proposed new language is 

italicized; proposed deletions are in 

brackets. 

* * * * * 

Rule 1080. Phlx XL and Phlx XL II 

(a)–(o) No Change. 

(p) Execution Protections 

(1) Acceptable Trade Range. 

(A) After the opening, the System will 

calculate an Acceptable Trade Range to 

limit the range of prices at which an 

order or quote (except an All-or-none 

order) will be allowed to execute. The 

Acceptable Trade Range is calculated by 

taking the Reference Price, plus or 

minus a value to be determined by the 

Exchange. (i.e., the Reference Price ¥ 

(x) for sell orders/quotes and the 

Reference Price + (x) for buy orders/

quotes). Upon receipt of a new order/

quote, the Reference Price is the 

National Best Bid (‘‘NBB’’) for sell 

orders and the National Best Offer 

(‘‘NBO’’) for buy orders/quotes or the 

last price at which the order/quote is 

posted whichever is higher for a buy 

order/quote or lower for a sell order/

quote. 

(B) If an order/quote reaches the outer 

limit of the Acceptable Trade Range (the 

‘‘Threshold Price’’) without being fully 

executed, it will be posted at the 

Threshold Price for a brief period, not 

to exceed one second (‘‘Posting 

Period’’), to allow more liquidity to be 

collected, unless a Quote Exhaust has 

occurred, in which case the Quote 

Exhaust process in Rule 1082(a)(ii)(B)(3) 

will ensue, triggering a new Reference 

Price. Upon posting, either the current 

Threshold Price of the order or an 

updated NBB for buy orders or the NBO 

for sell orders (whichever is higher for 

a buy order/lower for a sell order) then 

becomes the Reference Price for 

calculating a new Acceptable Trade 

Range. If the order/quote remains 

unexecuted, a New Acceptable Trade 

Range will be calculated and the order/ 

quote will execute, route, or post up to 

the new Acceptable Trade Range 

Threshold Price, unless a member 

organization has requested that their 

orders be returned if posted at the outer 

limit of the Acceptable Trade Range (in 

which case, the order will be returned). 

This process will repeat until either (i) 

the order/quote is executed, cancelled, 

or posted at its limit price or (ii) the 

order has been subject to a configurable 

number of instances of the Acceptable 

Trade Range as determined by the 

Exchange (in which case it will be 

returned). 

(C) During the Posting Period, the 

Exchange will disseminate as a 

quotation: (i) The Threshold Price for 

the remaining size of the order 

triggering the Acceptable Trade Range 

and (ii) on the opposite side of the 

market, the best price will be displayed 

using the ‘‘non-firm’’ indicator message 

in accordance with the specifications of 

the network processor. Following the 

Posting Period, the Exchange will return 

to a normal trading state and 

disseminate its best bid and offer. 

(2) Anti-Internalization—Quotes and 

orders entered by Specialists and 

Registered Options Traders (as defined 

in Rule 1014) using the same Phlx badge 

will not be executed against quotes and 

orders entered on the opposite side of 

the market using the same badge. In 

such a case, the System will cancel the 

resting quote or order back to the 

entering party prior to execution. This 

functionality shall not apply in any 

auction or with respect to complex 

transactions. 

(3) Order Price Protection (‘‘OPP’’). 

OPP is a feature of Phlx XL that 

prevents certain day limit, good til 

cancelled, immediate or cancel, and allor-none orders at prices outside of preset standard limits from being accepted 

by the system. OPP applies to all 

options but does not apply to market 

orders, stop limit orders, Intermarket 

Sweep Orders or complex orders. 

(A) OPP is operational each trading 

day after the opening until the close of 

trading, except during trading halts. The 

Exchange may also temporarily 

deactivate OPP from time to time on an 

intraday basis at its discretion if it 

determines that volatility warrants 

deactivation. Members will be notified 

of intraday OPP deactivation due to 

volatility and any subsequent intraday 

reactivation by the Exchange through 

the issuance of system status messages. 

(B) OPP will reject incoming orders 

that exceed certain parameters 

according to the following algorithm. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 72741 

3See PHLX Rule 1014. The category of Specialist 

and Registered Options Traders (‘‘ROTs’’) as 

defined in Rule 1014 are all considered market 

makers on the Exchange. This category includes the 

subcategories of Streaming Quote Traders (‘‘SQTs’’), 

Remote Streaming Quote Traders (‘‘RSQTs’’), and 

Non-SQT ROTs, all of which have market making 

obligations also defined in Rule 1014. 

4See, e.g., NASDAQ Rule 4757(a)(4), NASDAQ 

Options Market Rule Chapter VI, Section 10(6), 

NYSE Arca Equities Rule 7.31(qq)(2), and BATS 

Rule 11.9(f)(2). PSX Rule 3307(c) governing trading 

on the PHLX equity facility provides similar selfmatch prevention for equities trading. 5See NYSE Arca Equities Rule 7.31(qq). 

(i) If the NBBO on the contra-side of 

an incoming order is greater than $1.00, 

orders with a limit more than 50% 

through such contra-side NBBO will be 

rejected by Phlx XL upon receipt. For 

example, if the NBBO on the offer side 

is $1.10, an order to buy options for 

more than $1.65 would be rejected. 

Similarly, if the NBBO on the bid side 

is $1.10, an order to sell options for less 

than $0.55 will be rejected. 

(ii) If the NBBO on the contra-side of 

an incoming order is less than or equal 

to $1.00, orders with a limit more than 

100% through such contra-side NBBO 

will be rejected by Phlx XL upon receipt. 

For example, if the NBBO on the offer 

side is $1.00, an order to buy options for 

more than $2.00 would be rejected. 

However, if the NBBO of the bid side of 

an incoming order to sell is less than or 

equal to $1.00, the OPP limits set forth 

above will result in all incoming sell 

orders being accepted regardless of their 

limit. To illustrate, if the NBBO on the 

bid side is equal to $1.00, the OPP limits 

provide protection such that all orders 

to sell with a limit less than $0.00 would 

be rejected. 

(iii) For purposes of this rule, the 

NBBO is defined as the PBBO for singlylisted issues. 

Commentary .01–.06 No Change. 

[Commentary .07—Order Price 

Protection (‘‘OPP’’). OPP is a feature of 

Phlx XL that prevents certain day limit, 

good til cancelled, immediate or cancel, 

and all-or-none orders at prices outside 

of pre-set standard limits from being 

accepted by the system. OPP applies to 

all options but does not apply to market 

orders, stop limit orders, Intermarket 

Sweep Orders or complex orders. 

(a) OPP is operational each trading 

day after the opening until the close of 

trading, except during trading halts. The 

Exchange may also temporarily 

deactivate OPP from time to time on an 

intraday basis at its discretion if it 

determines that volatility warrants 

deactivation. Members will be notified 

of intraday OPP deactivation due to 

volatility and any subsequent intraday 

reactivation by the Exchange through 

the issuance of system status messages. 

(b) OPP will reject incoming orders 

that exceed certain parameters 

according to the following algorithm. 

(i) If the NBBO on the contra-side of 

an incoming order is greater than $1.00, 

orders with a limit more than 50% 

through such contra-side NBBO will be 

rejected by Phlx XL upon receipt. For 

example, if the NBBO on the offer side 

is $1.10, an order to buy options for 

more than $1.65 would be rejected. 

Similarly, if the NBBO on the bid side 

is $1.10, an order to sell options for less 

than $0.55 will be rejected. 

(ii) If the NBBO on the contra-side of 

an incoming order is less than or equal 

to $1.00, orders with a limit more than 

100% through such contra-side NBBO 

will be rejected by Phlx XL upon 

receipt. For example, if the NBBO on 

the offer side is $1.00, an order to buy 

options for more than $2.00 would be 

rejected. However, if the NBBO of the 

bid side of an incoming order to sell is 

less than or equal to $1.00, the OPP 

limits set forth above will result in all 

incoming sell orders being accepted 

regardless of their limit. To illustrate, if 

the NBBO on the bid side is equal to 

$1.00, the OPP limits provide protection 

such that all orders to sell with a limit 

less than $0.00 would be rejected. 

(iii) For purposes of this rule, the 

NBBO is defined as the PBBO for singlylisted issues.] 

Commentary .08—Renumbered as 

Commentary .07. 

Commentary .09—Renumbered as 

Commentary .08. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

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 

PHLX is proposing to provide antiinternalization (‘‘AIQ’’) functionality to 

Specialists and Registered Options 

Traders on the PHLX Options Market.3

Anti-internalization functionality is 

widely available and has been for many 

years.4 It is designed to assist market 

participants in complying with certain 

rules and regulations of the Employee 

Retirement Income Security Act 

(‘‘ERISA’’) that preclude and/or limit 

managing broker-dealers of such 

accounts from trading as principal with 

orders generated for those accounts. It 

can also assist market makers in 

reducing trading costs from unwanted 

executions potentially resulting from 

the interaction of executable buy and 

sell trading interest from the same firm 

when performing the same market 

making function. 

Under the proposal, quotes and orders 

entered by Specialists and Registered 

Options Traders using the same PHLX 

badge will automatically be prevented 

from interacting with each other in the 

System. Rather than executing quotes or 

orders from the same badge, the System 

will instead cancel the resting quotes 

and orders back to the entering party. 

PHLX uses ‘‘badges’’ to identify the 

party or parties entering trades into the 

System, similar to Market Participant 

Identifiers (MPIDs) and other mnemonic 

devices used at other exchanges. 

Because firms have multiple badges 

associated with multiple functions, 

linking AIQ to specific badges ensures 

that the functionality will be limited to 

the appropriate function, as explained 

in more detail below. Tying AIQ to 

specific PHLX badges will also enable 

market participants to carefully and 

systematically target the orders that 

should be prevented from interacting. 

AIQ will apply in the PHLX XL 

system with respect to simple orders 

only; it will not apply in any auction or 

with respect to complex transactions. 

AIQ is difficult to apply during 

auctions, and there is limited benefit in 

doing so. The difficulty stems from the 

need to freeze the order book and 

quickly arrange and match large 

quantities of orders based upon simple 

instructions. Even if that could be 

accomplished, there is limited benefit 

because, generally speaking, auctions do 

not raise the same policy concerns for 

wash sales and ERISA due to the semirandom manner in which trades are 

matched.5 AIQ is unnecessary with 

respect to complex orders due to the 

highly specialized nature of such orders 

and the high level of control that market 

participants exercise over complex 

orders. In addition, owing to the number 

of different legs involved in complex 

orders, applying AIQ to complex orders 

would also require freezing the book, 

which market participants and PHLX 

view as detrimental to the market. 

Anti-internalization functionality was 

requested by Specialists and Registered 

mstockstill on DSK4VPTVN1PROD with NOTICES

72742 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 

6 If demand should arise from other participants, 

PHLX will reconsider providing this functionality 

to all participants at that time. 

7 15 U.S.C. 78f. 

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(a)(ii) [sic]. 

10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

Options Traders on PHLX. Antiinternalization processing is available 

only to market makers and only on an 

individual badge basis. Specialists and 

Registered Options Traders that conduct 

order entry business via alternative 

badges will not be afforded the 

protection of AIQ functionality with 

respect to such alternative badges. 

PHLX considered making AIQ 

functionality available to other 

participants, but rejected that approach. 

Limiting AIQ to Specialists and 

Registered Options Traders also helps to 

maintain simplicity of System 

processing.6

PHLX notes that use of the 

functionality does not relieve or 

otherwise modify the duty of best 

execution owed to orders received from 

public customers. Options market 

makers generally do not display 

customer orders in market making 

quotations, opting instead to enter 

customer orders using separate 

identifiers. In the event that an options 

market maker opts to include a 

customer order within a market making 

quotation, the market maker must take 

appropriate steps to ensure that public 

customer orders that do not execute due 

to anti-internalization functionality 

ultimately receive the same execution 

price (or better) they would have 

originally obtained if execution of the 

order was not inhibited by the 

functionality. 

Finally, the Exchange is proposing to 

combine several existing price 

protection mechanisms in Rule 1080(p) 

and to rename that subsection as 

‘‘Execution Protections, [sic] PHLX 

believes the rules will become clearer by 

adding AIQ and moving current 

Commentary .07 governing Order Price 

Protection to existing Rule 1080(p) 

governing the Acceptable Trade Range. 

As a result, PHLX will renumber 

existing Commentaries .08 and .09 as 

Commentaries .07 and .08. The 

proposed changes will not impact the 

substance and operation of the existing 

functionality of the Acceptable Trade 

Range, Order Price Protection or 

Commentaries .08 and .09. 

2. Statutory Basis 

PHLX believes that the proposed rule 

change is consistent with the provisions 

of Section 6 of the Act,7 in general, and 

with Section 6(b)(5) of the Act 8 in 

particular, in that the proposal is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. Specifically, PHLX 

believes that the change, which is 

responsive to member input, will 

facilitate transactions in securities and 

perfect the mechanism of a free and 

open market by providing Specialists 

and Registered Options Traders with 

additional functionality that will assist 

them with managing the book of orders 

that they submit to PHLX and the 

associated execution costs. 

PHLX believes the proposal is 

consistent with the Act because it 

provides tools for Specialists and 

Registered Options Traders to comply 

with existing rules against 

internalization in certain circumstances. 

Limiting AIQ to Specialists and 

Registered Options Traders is consistent 

with the Act because inadvertent 

internalization is much more likely to 

impact market makers than other 

participants and offering AIQ more 

broadly would burden the System and 

provide little or no offsetting regulatory 

benefit. Finally, PHLX believes that it is 

reasonable to limit AIQ to simple 

options orders, as opposed to complex 

options and auctions, because the 

execution risk is much lower with 

respect to complex options and auctions 

and because those functions operate 

quite differently than individual orders 

in simple options. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

PHLX does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

Specifically, by providing market 

participants additional tools to prevent 

inadvertent internalization of orders 

submitted to PHLX, the change has the 

potential to improve the trading 

environment on the Exchange, which 

will enhance PHLX’s competitiveness 

with respect to other trading venues, 

thereby promoting greater competition. 

Moreover, the change does not burden 

competition in that it will be provided 

at no additional cost to members. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(ii) [sic] of the Act 9 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.10

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2014–76 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2014–76. This file 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 72743 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 

4The current FINRA rulebook consists of: (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from New York Stock Exchange LLC 

(‘‘NYSE’’) (‘‘Incorporated NYSE Rules’’) (together, 

the NASD Rules and Incorporated NYSE Rules are 

referred to as the ‘‘Transitional Rulebook’’). While 

the NASD Rules generally apply to all FINRA 

members, the Incorporated NYSE Rules apply only 

to those members of FINRA that are also members 

of the NYSE (‘‘Dual Members’’). The FINRA Rules 

apply to all FINRA members, unless such rules 

have a more limited application by their terms. For 

more information about the rulebook consolidation 

process, see Information Notice, March 12, 2008 

(Rulebook Consolidation Process). 

5FINRA previously solicited comment on a 

proposal to move NASD Rule 2430 to the 

Consolidated FINRA Rulebook with substantive 

changes. See Regulatory Notice 11–08 (February 

2011); see also Regulatory Notice 13–07 (January 

2013). Given that FINRA would like to proceed 

Continued 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

offices 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–Phlx– 

2014–76, and should be submitted on or 

before December 29, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28646 Filed 12–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73714; File No. SR–FINRA– 

2014–049] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adopt FINRA Rule 

2122 (Charges for Services Performed) 

in the Consolidated FINRA Rulebook 

December 2, 2014. 

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 November 

21, 2014, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by FINRA. FINRA has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under paragraph (f)(6) of Rule 

19b–4 under the Act,3 which renders 

the proposal effective upon receipt of 

this filing by the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to adopt NASD 

Rule 2430 (Charges for Services 

Performed) as FINRA Rule 2122 

(Charges for Services Performed) 

without any substantive changes. 

FINRA also proposes to update a crossreference within FINRA Rule 0150 

accordingly. 

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

FINRA Rules 

* * * * * 

0150. Application of Rules to Exempted 

Securities Except Municipal Securities 

(a) through (b) No Change. 

(c) Unless otherwise indicated within 

a particular Rule, the following FINRA 

and NASD rules are applicable to 

transactions in, and business activities 

relating to, exempted securities, except 

municipal securities, conducted by 

members and associated persons: 

FINRA Rules 2010, 2020, 2060, 2111, 

2122, 2150, 2210, 2212, 2261, 2268, 

2269, 2320(g), 3110, 3220, 3270, 4120, 

4130, 4210, 4311, 4330, 4360, 4510 

Series, 4530, 5160, 5210, 5220, 5230, 

5310, 5340, 8110, 8120, 8210, 8310, 

8311, 8312, 8320, 8330 and 9552; NASD 

Rules IM–2210–2, 2340, [2430,] 2510, 

3040, 3050 and 3140. 

* * * * * 

[2430] 2122. Charges for Services 

Performed 

Charges, if any, for services 

performed, including, but not limited to, 

miscellaneous services such as 

collection of monie[y]s due for 

principal, dividends, or interest; 

exchange or transfer of securities; 

appraisals, safe-keeping or custody of 

securities, and other services[,] shall be 

reasonable and not unfairly 

discriminatory [between] among 

customers. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),4

FINRA is proposing to transfer NASD 

Rule 2430 (Charges for Services 

Performed) into the Consolidated 

FINRA Rulebook as FINRA Rule 2122 

(Charges for Services Performed) 

without any substantive changes. 

Proposed FINRA Rule 2122 states that 

charges, if any, for services performed, 

including, but not limited to, 

miscellaneous services such as 

collection of monies due for principal, 

dividends, or interest; exchange or 

transfer of securities; appraisals, safekeeping or custody of securities, and 

other services shall be reasonable and 

not unfairly discriminatory among 

customers. Proposed FINRA Rule 2122 

closely tracks the language of NASD 

Rule 2430 but makes non-substantive 

changes to the text of the NASD rule.5

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