4272 Federal Register / Vol. 74, No. 14 / Friday, January 23, 2009 / Notices 

7See Letter from Philip Shaikun, Associate Vice 

President and Associate General Counsel, FINRA, 

January 2, 2008. 

8See, FINRA NTM 08–55, October 2008. 9 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition and capital formation. See 

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

10 15 U.S.C. 78o–3(b)(6). 

11See supra note 4. 

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. 

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

4 17 CFR 240.19b–4(f)(2). 

commentaries on economic, political or 

market conditions. 

FINRA responded that the term 

‘‘research report’’ in the proposed rule 

change is intended to be much broader 

than that in NASD Rule 2711(a)(9) and 

is meant to cover adjustments to 

inventory positions based on non-public 

knowledge of the content or timing of 

both debt and equity research.7 The 

proposed rule change differs in 

objective from NASD Rule 2711(a)(9) 

and is intended to ‘‘enhance investor 

protection and market integrity by 

deterring member firms from 

improperly accumulating or otherwise 

altering investor positions in securities’’ 

based on non-public advance 

knowledge of the content or timing of a 

research report in those securities. 

FINRA interprets the term research 

report in proposed FINRA Rule 5280 to 

cover any written information from the 

research department that a reasonable 

person would expect to result in a 

transaction based on that information. 

Thus, to the extent a reasonable person 

would expect that a communication 

containing market commentary would 

result in a transaction in a particular 

security or securities, a member could 

not establish or adjust its inventory in 

those securities based on non-public 

advance knowledge of that 

communication or the timing of its 

public release. Based on these reasons, 

FINRA declined the commenter’s 

additional request that the proposal be 

narrowed to cover only those actions 

taken by a member firm to adjust its 

inventory based upon advance nonpublic knowledge of material 

investment conclusions, such as ratings 

or price targets. 

Second, the commenter requested that 

FINRA confirm that the requirement in 

subparagraph (b) of the proposal to 

establish, maintain and enforce certain 

policies and procedures is not meant to 

(1) limit or restrict communications 

between sales and trading personnel 

and research personnel concerning an 

analyst’s published views or (2) to 

require that such communications must 

be pre-cleared or monitored. 

FINRA responded that the proposed 

rule sets forth an unambiguous 

supervision standard that ‘‘a member 

must establish, maintain and enforce 

policies and procedures reasonably 

designed to restrict or limit the 

information flow between research 

department personnel, or others with 

knowledge of the content or timing of a 

research report, and trading department 

personnel, so as to prevent trading 

department personnel from utilizing 

non-public advance knowledge of the 

issuance or content of a research report 

for the benefit of the member or any 

other person.’’ FINRA views the 

supervisory standard in the proposal as 

purposefully flexible, to allow firms to 

tailor their policies and procedures to 

their size, structure, business model and 

compliance system. As such any 

number of specific policies and 

procedures may be appropriate to satisfy 

the standard. Thus, absent ambiguity in 

the standard, FINRA believes it 

inappropriate to opine on the adequacy 

of one or more elements of potentially 

many approaches that could satisfy the 

rule’s supervision requirement. 

The second comment letter expressed 

concern that while the proposed rule 

addresses that a broker-dealer cannot 

trade ahead of its own research report, 

the broker-dealer’s customers and 

potential customers should also be so 

prohibited and that all customers and 

potential customers should get the 

research report at the same time. 

Further, the commenter indicated that 

the issue of whether the public should 

simultaneously get such reports should 

be explored and addressed. Per 

discussion, FINRA noted that the 

commenter’s concerns are more 

appropriate to and are addressed in 

FINRA’s proposed ‘‘Research 

Registration and Conflict of Interest 

Rules.’’ 8

IV. Discussion and Findings 

After careful review of the proposed 

rule change, the comments and FINRA’s 

response to the comments, 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 

association.9 In particular, the 

Commission believes the proposed rule 

change is consistent with the provisions 

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

requires, among other things that FINRA 

rules must be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and 

questionable principles of trade, and, in 

general, to protect investors and the 

public interest. The Commission 

believes that the proposed rule change 

will protect the investing public by 

preventing firms from utilizing nonpublic advance knowledge of the timing 

or content of a research report to benefit 

its own trading to the detriment of its 

customers. Moreover, the Commission 

believes the proposed rule change 

further would clarify and streamline 

NASD IM–2110–4 for adoption as a 

FINRA Rule in the Consolidated FINRA 

Rulebook.11 NASD IM–2110–4 has 

previously been found to meet the 

statutory requirements, and FINRA 

believes the rule has since proven 

effective in achieving statutory 

mandates. 

V. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–FINRA– 

2008–054) 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. E9–1298 Filed 1–22–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59243; File No. SR–Phlx– 

2008–86] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change Relating to 

Amending the Phlx Fee Schedule 

January 13, 2009. 

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 December 

30, 2008, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ 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 

substantially prepared by the Exchange. 

Phlx has designated this proposal as one 

establishing or changing a member due, 

fee, or other charge imposed under 

Section 19(b)(3)(A)(ii) of the Act 3 and 

Rule 19b–4(f)(2) thereunder,4 which 

renders the proposal effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 74, No. 14 / Friday, January 23, 2009 / Notices 4273 

5 15 U.S.C. 78s(b)(1). 

6 17 CFR 240.19b–4. 

7Russell 2000® is a trademark and service mark 

of the Frank Russell Company, used under license. 

Neither Frank Russell Company’s publication of the 

Russell Indexes nor its licensing of its trademarks 

for use in connection with securities or other 

financial products derived from a Russell Index in 

any way suggests or implies a representation or 

opinion by Frank Russell Company as to the 

attractiveness of investment in any securities or 

other financial products based upon or derived 

from any Russell Index. Frank Russell Company is 

not the issuer of any such securities or other 

financial products and makes no express or implied 

warranties of merchantability or fitness for any 

particular purpose with respect to any Russell 

Index or any data included or reflected therein, nor 

as to results to be obtained by any person or any 

entity from the use of the Russell Index or any data 

included or reflected therein. 

8The Commission also notes that the remaining 

footnotes have been re-numbered. 

9See, e.g., Securities Exchange Act Release Nos. 

54981 (December 20, 2006), 71 FR 78251 (December 

28, 2006) (SR–Phlx–2006–86); 53287 (February 14, 

2006), 71 FR 9186 (February 22, 2006) (SR–Phlx– 

2006–10) and 56437 (September 13, 2007), 72 FR 

53616 (September 19, 2007) (SR–Phlx–2007–65). 

10This filing was inadvertently filed as a Stock 

Clearing Corporation of Philadelphia filing instead 

of a NASDAQ OMX PHLX filing. As a result of 

refiling, Exhibit 5 now reflects amendments that 

were made in SR–Phlx–2008–85. The Commission 

notes that SR–Phlx–2008–85 has since been 

withdrawn and re-filed as SR–Phlx–2008–87. 

11This proposal is similar to a proposal filed by 

the International Securities Exchange, LLC (‘‘ISE’’) 

whereby ISE eliminated its comparison fee as a 

separate line item and imbedded the fee into the 

execution fee. See Securities Exchange Act Release 

No. 58139 (July 10, 2008), 73 FR 41142 (July 17, 

2008) (SR–ISE–2008–54). 

12See e-mail from Angela S. Dunn, Counsel, Phlx, 

to Richard Holley III, Senior Special Counsel, 

Commission, dated January 8, 2009. 

13The Exchange currently assesses an equity 

option transaction charge of $0.12 per contract for 

customer executions options on the one-tenth of the 

value of the Nasdaq 100 Index (the ‘‘Mini Nasdaq 

100 Index’’ or ‘‘MNX’’) and options on the full 

value of the Nasdaq 100 Index (the ‘‘Full-size 

Nasdaq 100 Index’’ or ‘‘NDX’’). See Securities 

Exchange Act Release No. 58049 (June 27, 2008), 73 

FR 38286 (July 3, 2008) (SR–Phlx–2008–46). 

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, pursuant to Section 

19(b)(1) of the Act 5 and Rule 19b–4 

thereunder,6 proposes to amend its 

Summary of Equity Option, and MNX, 

NDX, RUT and RMN Charges 

(‘‘Summary of Equity Option’’), 

Summary of Index Option Charges, 

$60,000 ‘‘Firm Related’’ Equity Option 

and Index Option Cap, and Summary of 

U.S. Dollar-Settled Foreign Currency 

Option Charges fee schedules. 

Specifically, the Exchange proposes to: 

(1) Consolidate the comparison and 

transaction charges on its fee schedules 

into one charge, (2) assess a customer 

execution charge of $0.12 per contract 

side on options on the Russell 2000 ® 

Index (the ‘‘Full Value Russell Index’’ or 

‘‘RUT’’), and options on the one-tenth 

value Russell 2000® Index 7 (the 

‘‘Reduced Value Russell Index’’ or 

‘‘RMN’’) on the Summary of Equity 

Option fee schedule; and (3) create a 

Broker-Dealer transaction charge on the 

Summary of Index Option Charges and 

Summary of U.S. Dollar-Settled Foreign 

Currency Option Charges fee schedules. 

The Exchange also proposes to delete 

from the Summary of Equity Option fee 

schedule the Specialist Deficit 

(Shortfall) fee and the 14,000 contract 

cap that is applied to Registered Options 

Traders (‘‘ROTs’’) transaction and 

comparison charges and Specialist 

transaction charges when contra-party 

to a non-AUTOM delivered customer 

order. 

The Exchange also proposes to delete 

from its Summary of Equity Option fee 

schedule unnecessary footnotes 8 and to 

delete from its Summary of Index 

Option Charges and Summary of U.S. 

Dollar-Settled Foreign Currency Option 

Charges fee schedules unnecessary text 

(marked with ‘‘**’’) relating to rebate 

request forms for Firm/Proprietary 

transaction charges. 

Additionally, the Exchange proposes 

to increase the Firm Related 9 equity 

option and index option cap from 

$60,000 per month to $65,000 per 

month and to exclude the current U.S. 

dollar-settled foreign currency option 

transaction and comparison charges 

from this cap. 

While changes to the fee schedule 

pursuant to this proposal are effective 

upon filing, the Exchange has 

designated these changes to be operative 

for transactions settling on or after 

January 2, 2009.10

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings. 

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 

Generally, the purpose of the 

proposed rule change is to update the 

Exchange’s fee schedules by adopting 

new fees and deleting fees and text that 

are no longer deemed necessary. 

Currently, the Exchange separately 

itemizes comparison and transaction 

charges. The Exchange proposes to 

eliminate the comparison fee as a 

separate line item and instead imbed the 

fee in the existing transaction charge. 

This change will not change the actual 

amount being charged to Exchange 

members, but should simplify the fee 

schedules so that total transaction costs 

are more easily understood.11

The purpose of creating a separate 

Broker-Dealer transaction charge on the 

Summary of Index Option Charges and 

Summary of U.S. Dollar-Settled Foreign 

Currency Option Charges fee schedules 

is to raise revenue and to specifically set 

forth the Broker-Dealer transaction 

charges, which are currently included in 

the customer transaction charges. 

Previously, Broker-Dealers and 

customers were each charged a $.40 

transaction fee and a $.04 comparison 

fee for a combined charge of $.44. The 

Exchange proposes to raise revenue by 

increasing the total fee charged to 

Broker-Dealers by $.01. This new rate of 

$.45 for Broker-Dealers is the same 

charge that Broker-Dealer incur with 

respect to equity options.12 The 

Exchange believes that separating the 

Broker-Dealer transaction charges from 

the customer transaction charges should 

help to more readily identify the 

applicable transaction charges. 

The purpose of assessing a customer 

an equity option transaction charge of 

$0.12 per contract side for customer 

executions in RUT and RMN is to raise 

revenue, while remaining competitive 

in the marketplace.13

The Exchange proposes to delete the 

language that is marked with ‘‘**’’ on 

both the Summary of Index Option 

Charges and the Summary of U.S. 

Dollar-Settled Foreign Currency Option 

Charges in order to delete obsolete 

language. The Exchange is able to 

identify Firm/Proprietary Orders 

electronically and therefore submitting a 

rebate request form is no longer 

necessary. 

The purpose of deleting language, 

which relates to identifying certain 

trademarks, from footnotes that appear 

in the Summary of Equity Option fee 

schedule is to remove unnecessary and/ 

or outdated language from the fee 

schedule. Although the Exchange 

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4274 Federal Register / Vol. 74, No. 14 / Friday, January 23, 2009 / Notices 

1415 U.S.C. 78f(b). 

1515 U.S.C. 78f(b)(4). 

16 15 U.S.C. 78s(b)(3)(A)(ii). 

17 17 CFR 240.19b–4(f)(2). 

18 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). 

4 17 CFR 240.19b–4(f)(6). 

intends to continue trading the MNX, 

NDX, RUT and RMN products, it does 

not believe that, at this time, the 

language in the related footnotes should 

be included on the Summary of Equity 

Option fee schedule. 

The Exchange has decided for 

business purposes to exclude the 

current U. S. dollar-settled foreign 

currency option transaction and 

comparison charges from the $60,000 

Firm-Related Equity Option and Index 

Option Cap calculation. The Exchange 

believes that it can continue to attract 

this business without offering the cap, 

which should also help to raise revenue. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its schedule of fees 

is consistent with Section 6(b) of the 

Act 14 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 15

in particular, in that it is an equitable 

allocation of reasonable fees and other 

charges among Exchange members. By 

amending the Exchange’s fee schedule 

and adding nominal fees and deleting 

fees and text the Exchange no longer 

deems necessary, the Exchange believes 

that members and member organizations 

should benefit from the proposals 

described herein. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

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 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act 16 and 

paragraph (f)(2) of Rule 19b–4 17

thereunder. At any time within 60 days 

of the filing of the proposed rule change, 

the Commission may summarily 

abrogate such rule change if it appears 

to the Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2008–86 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2008–86. 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 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 inspection and copying 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 such 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 publicly available. All 

submissions should refer to File 

Number SR–Phlx-2008–86 and should 

be submitted on or before February 13, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–1297 Filed 1–22–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59234; File No. SR– 

NYSEArca–2008–140] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending the Adding 

Liquidity Only Order 

January 12, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on December 

29, 2008, NYSE Arca, Inc. (‘‘NYSE 

Arca’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NYSE Arca. NYSE Arca filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

it effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 7.31(nn), the Adding Liquidity 

Only Order (‘‘ALO Order’’). The text of 

the proposed rule is attached as Exhibit 

5. 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, 

NYSE Arca included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

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