Federal Register / Vol. 74, No. 100 / Wednesday, May 27, 2009 / Notices 25293 

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

9 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). 

10See supra note 4. 

11 Id. 

12 15 U.S.C. 78s(b)(2). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of two sets 

of rules: (1) NASD Rules and (2) rules incorporated 

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

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

Incorporated NYSE Rules apply only to those 

members of FINRA that are also members of the 

NYSE (‘‘Dual Members’’). Dual members must also 

comply with NASD Rules. For more information 

about the rulebook consolidation process, see 

FINRA Information Notice, March 12, 2008 

(‘‘Rulebook Consolidation Process’’). 

4See Exchange Act Release No. 59745 (April 10, 

2009), 74 FR 17705 (April 16, 2009) (‘‘notice’’ or 

‘‘proposal’’). 

5See supra note 3. 

6Members are subject to additional requirements 

regarding customer accounts. See, e.g., Rule 17a– 

3(a)(9) under the Act (requiring records indicating 

the name and address of the beneficial owner of 

each cash and margin customer account). 17 CFR 

240.17a–3(a)(9). 

7See, e.g., Robert S. Bartek, Exchange Hearing 

Panel Decision 73–60 (August 28, 1973); Jeffrey 

Alan Schultz, Exchange Hearing Panel Decision 82– 

23 (March 18, 1982); Kery Shane Hutner, Exchange 

Hearing Panel Decision 02–27 (January 31, 2002). 

See also NYSE Information Memo 78–80, Members’ 

Accounts and Initiating Orders on the NYSE Floor 

(November 10, 1978) (addressing, among other 

things, NYSE Rule 406(1), now Rule 406). 

8FINRA also stated that it will announce the 

implementation date of the proposed rule change in 

a Regulatory Notice to be published no later than 

90 days following Commission approval. 

9 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

Continued 

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

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of, a free and 

open market and a national market 

system, to protect investors and the 

public interest, and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers.9

The Commission believes that the 

Exchange’s proposal to append an 

Aberrant Report Indicator to certain 

trade reports is a reasonable means to 

alert investors and others that the 

Exchange believes that the trade price 

for a trade executed in its market does 

not accurately reflect the prevailing 

market for the security. In addition, the 

Commission notes that the Exchange 

will use objective numerical thresholds 

in determining whether a trade report is 

eligible to have an Aberrant Trade 

Indicator appended to it. The 

Commission further notes that the 

Exchange’s appending the Aberrant 

Trade Indicator to a trade report has no 

effect on the validity of the underlying 

trade. The Commission previously 

found a similar proposal by the NYSE 

to be consistent with the Act.10 Finally, 

the Commission notes that the 

retroactive application of this proposal 

to January 1, 2008 is similar to the 

retroactive period approved for the 

NYSE.11

For the reasons set forth above, the 

Commission finds that the proposed 

rule change is consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,12 that the 

proposed rule change (SR–NYSEArca2009–24) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12215 Filed 5–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 59947; File No. SR–FINRA– 

2009–017] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

Incorporated NYSE Rule 406 

(Designation of Accounts) as a FINRA 

Rule in the Consolidated FINRA 

Rulebook 

May 20, 2009. 

I. Introduction 

On March 26, 2009, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. (‘‘NASD’’)), 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘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 adopt 

Incorporated NYSE Rule 406 

(Designation of Accounts) as a FINRA 

rule in the consolidated FINRA 

rulebook (‘‘Consolidated FINRA 

Rulebook’’) 3 with the minor changes 

discussed below. The proposed rule 

change was published in the Federal 

Register on April 16, 2009.4 The 

Commission received no comments on 

the proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

As part of the process of developing 

the Consolidated FINRA Rulebook,5

FINRA proposed to adopt Incorporated 

NYSE Rule 406, with minor changes, as 

renumbered FINRA Rule 3250 in the 

Consolidated FINRA Rulebook. 

Incorporated NYSE Rule 406 provides 

that no member organization shall carry 

an account on its books in the name of 

a person other than that of the customer, 

except that an account may be 

designated by a number or symbol, 

provided that the member has on file a 

written statement signed by the 

customer attesting to the ownership of 

such account. In effect, this rule 

establishes a general requirement that a 

member must hold each customer 

account in the customer’s name, except 

that a member may identify a customer’s 

account with a number or symbol, as 

long as the member maintains 

documentation identifying the 

customer.6 Currently, Incorporated 

NYSE Rule 406 applies only to Dual 

Members. 

NYSE’s enforcement of the rule has 

addressed, among other things, sales 

practice abuses such as co-mingling of 

funds, the failure to disclose ownership 

interests in accounts and unauthorized 

trading.7 In the notice, FINRA proposed 

to adopt Incorporated NYSE Rule 406 as 

FINRA Rule 3250, stating it believes that 

the rule will continue to be an 

important enforcement tool and should 

be expanded to apply to the entire 

FINRA membership. In the notice, 

FINRA stated that Incorporated NYSE 

Rule 406 could provide members’ 

customers with a level of anonymity 

within the member and with certain 

external relationships that they find 

useful, while still allowing customers’ 

identities to be clearly known to 

members and available to regulators. In 

the proposal, FINRA indicated that 

Incorporated NYSE Rule 406 would be 

renumbered as FINRA Rule 3250 with 

minor changes to replace references to 

‘‘member organization’’ or 

‘‘organization’’ with the term 

‘‘member.’’ 8

III. Discussion and Findings 

After careful review of the proposal, 

the Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, and the rules 

and regulations thereunder that are 

applicable to a national securities 

associations,9 and in particular, with 


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25294 Federal Register / Vol. 74, No. 100 / Wednesday, May 27, 2009 / Notices 

efficiency, competition, and capital formation. See 

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

10 15 U.S.C. 78o–3(b)(6). 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19–4. 

4The Commission notes that while provided in 

Exhibit 5 to the filing, the text of the proposed rule 

change is not attached to this notice, but is available 

at the Commission’s Public Reference Room and at 

http://www.nyse.com. 

5See Securities Exchange Act Release No. 34– 

55156 (January 23, 2007), 72 FR 4759 (February 21, 

2007); Securities Exchange Act Release No. 34– 

56568 (September 27, 2007), 72 FR 56422 (October 

3, 2007); Securities Exchange Act Release No.34– 

59628 (March 26, 2009), 74 FR 15025 (April 2, 

2009). 

6The Exchange will not include options classes 

in which the issuer of the underlying security is 

subject to an announced merger or is in the process 

of being acquired by another company, or if the 

issuer is in bankruptcy. For purposes of assessing 

national average daily volume, the Exchange will 

use data compiled and disseminated by the Options 

Clearing Corporation. 

7The Exchange shall also identify the classes to 

be added to the Pilot Program, per each phase, in 

a filing with the Commission. 

8For purposes of identifying the issues to be 

added per quarter, the Exchange shall use data from 

the prior six calendar months immediately 

preceding the implementation month. For example, 

the quarterly additions to be added on July 27, 2009 

shall be determined using data from the sixth 

month period ending June 30, 2009. 

Section 15A(b)(6) of the Act,10 which 

requires, among other things, that 

FINRA’s rules be designed to prevent 

fraudulent and manipulative practices, 

to promote just and equitable principles 

of trade, and in general, to protect 

investors and the public interest. 

FINRA’s adoption of Incorporated NYSE 

Rule 406 as FINRA Rule 3250 in the 

Consolidated FINRA Rulebook, with the 

minor changes discussed above, will 

extend to all FINRA members the 

applicability of a rule that serves as an 

important tool to guard against behavior 

that may be manipulative and 

fraudulent and that may violate just and 

equitable principles of trade. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

proposed rule change (SR–FINRA– 

2009–017) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12218 Filed 5–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59944; File No. SR– 

NYSEArca–2009–44] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Amending Rule 6.72 

Governing Trading Differentials and 

Proposing To Expand the Penny Pilot 

May 20, 2009. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on May 15, 

2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. 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 amend its 

option trading rules to (i) extend the 

Penny Pilot in options classes in certain 

issues (‘‘Pilot Program’’) previously 

approved by the Securities and 

Exchange Commission (‘‘Commission’’) 

through December 31, 2010, (ii) provide 

for additional classes to quote and trade 

all contracts in one cent ($0.01) 

increments, and (iii) expand the number 

of issues included in the Pilot. The text 

of the proposed rule change is attached 

as Exhibit 5.4 A copy of this filing is 

available on the Exchange’s Web site at 

http://www.nyse.com, at the Exchange’s 

principal office and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange hereby proposes to 

extend the time period of the Pilot 

Program 5 which is currently scheduled 

to expire on July 3, 2009, through 

December 31, 2010. 

Top 300 

The Exchange also proposes to 

expand the number of issues included 

in the Pilot Program. Specifically, NYSE 

Arca proposes to add the top 300 most 

actively traded multiply listed options 

classes that are not yet included in the 

Pilot Program (‘‘Top 300’’). The 

Exchange proposes to determine the 

identity of the Top 300 based on 

national average daily volume in the 

prior six calendar months immediately 

preceding their addition to the Pilot 

Program.6 In determining the identity of 

the Top 300, the Exchange will exclude 

options classes with high premiums. 

Pursuant to Commentary .02 to NYSE 

Arca Rule 6.72, the Pilot Program issues 

will be announced to the Exchange’s 

membership via Regulatory Bulletin and 

published by the Exchange on its 

website.7 This will bring the total 

number of options classes traded 

pursuant to the Pilot Program to 363. 

NYSE Arca represents that the Exchange 

has the necessary system capacity to 

support any additional series listed as 

part of the Pilot Program. 

Phased Implementation 

The Exchange proposes to phase-in 

the additional classes to the Pilot 

Program over four successive quarters. 

Specifically, the Exchange proposes to 

add 75 classes in July 2009, October 

2009, January 2010, and April 2010. In 

order to reduce operational confusion 

and provide for appropriate time to 

update databases, the Exchange 

proposes to add the eligible issues to the 

Pilot Program effective for trading on 

the Monday ten days after Expiration 

Friday. Thus, the quarterly additions 

would be effective on July 27, 2009; 

October 26, 2009; January 25, 2010; and 

April 26, 2010.8

Exchange Designations 

The Exchange further proposes to 

designate two Pilot Program issues as 

eligible to quote and trade all options 

contracts in one cent increments, 

regardless of premium value. 

Specifically, the Exchange proposes to 

so designate SPY (SPDR S&P 500 ETF) 

and IWM (iShares Russell 2000 Index 

Fund). In selecting these issues, the 

Exchange considered, among other 

things, that these symbols are (a) among 

the most actively traded issues 

nationally, with a wide array of investor 


erowe on PROD1PC63 with NOTICES