28302 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 

15 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 (1) 

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

incorporated from 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 FINRA 

Information Notice, March 12, 2008 (Rulebook 

Consolidation Process). 

4 In addition to being subject to SEC and FINRA 

rules, Dual Members also remain subject to the 

NYSE’s rulebook. FINRA notes that the NYSE may 

determine to retain NYSE Rule 134 for its own 

purposes. 

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 NYSE. 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–NYSEAmex–2009–24 and 

should be submitted on or before July 6, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13966 Filed 6–12–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60070; File No. SR–FINRA– 

2009–038] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Repeal 

Incorporated NYSE Rule 134 

(Differences and Omissions—Cleared 

Transactions) and NYSE Rule 440I 

(Records of Compensation 

Arrangements—Floor Brokerage) as 

Part of the Process To Develop the 

Consolidated FINRA Rulebook 

June 8, 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 June 1, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) 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 FINRA. 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 repeal 

Incorporated NYSE Rule 134 

(Differences and Omissions—Cleared 

Transactions) and Incorporated NYSE 

Rule 440I (Records of Compensation 

Arrangements—Floor Brokerage), as part 

of the process of developing the 

consolidated FINRA rulebook. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to repeal NYSE 

Incorporated Rule 134 (Differences and 

Omissions—Cleared Transactions) and 

NYSE Incorporated Rule 440I (Records 

of Compensation Arrangements—Floor 

Brokerage), to remove rules that are 

specific to the New York Stock 

Exchange, LLC (‘‘NYSE’’) marketplace 

and relate primarily to activities by floor 

brokers. 

Incorporated NYSE Rule 134 

(Differences and Omissions—Cleared 

Transactions) 

The proposed rule change would 

repeal Incorporated NYSE Rule 134, 

which sets forth procedures for clearing 

member firms to identify uncompared 

transactions and resolve them by 

making any necessary additions, 

deletions or changes to their data on the 

facility system. The rule provides 

guidelines for the review of uncompared 

transactions by clearing member firms 

and details the manner and timing of 

notifications that must be provided and 

the types of records that must be 

maintained. 

Further, NYSE Rule 134(d) requires 

floor brokers to maintain or participate 

in an error account in which all bona 

fide error transactions are processed and 

recorded. The rule defines an ‘‘error’’ to 

include an execution outside of an 

order’s written instructions (e.g., wrong 

security, wrong side of the market, 

outside the limit price, over buying or 

selling, duplicate execution, etc.) or 

missing the market on a ‘‘held’’ order. 

In such cases, floor brokers use their 

error account to assume or acquire a 

position as a result of a legitimate error. 

Floor brokers are required pursuant to 

the rule to maintain a signed, timestamped record, including supporting 

documentation of such error. The rule 

further requires every member not 

associated with a member organization, 

and every member associated with a 

member organization that derives at 

least 75% of its revenue from floor 

brokerage based on execution of orders 

on the floor to report to the NYSE error 

transactions in such member’s or his or 

her member organization’s account 

which result in a profit of more than 

$500 for any transaction, or for more 

than $3,000 in any calendar week. Such 

reports must contain a detailed record of 

the errors and liquidating transactions. 

FINRA is proposing to delete 

Incorporated NYSE Rule 134 from the 

Transitional Rulebook and not adopt the 

rule into the Consolidated FINRA 

Rulebook because the rule is narrowly 

directed to the trading activities of 

NYSE floor brokers. FINRA believes that 

it is not necessary to transfer NYSE Rule 

134 into the Consolidated FINRA 

Rulebook because the resolution of 

trading errors on the NYSE and 

recordkeeping of error accounts is 

specific to the NYSE.4

Incorporated NYSE Rule 440I (Records 

of Compensation Arrangements—Floor 

Brokerage) 

The proposed rule change would also 

repeal Incorporated NYSE Rule 440I, 

which requires each member and 

member organization that is ‘‘primarily 

engaged as an agent in executing 

transactions on the Floor of the 

Exchange’’ (e.g., $2 brokers or 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 28303 

5 15 U.S.C. 78k(a). 

6 17 CFR 240.11a–1. 

7See Securities Exchange Act Release No. 41996 

(October 8, 1999), 64 FR 56560 (October 20, 1999). 

Subject to certain exceptions, these provisions 

generally prohibit exchange members from effecting 

transactions on the floor of an exchange for their 

own accounts, the accounts of associated persons, 

or an account over which they or their associated 

persons have investment discretion. See also 

Securities Exchange Act Release No. 41574, Admin. 

Proceeding File No. 3–9925 (June 29, 1999). 

8See Securities Exchange Act Release No. 41441 

(May 24, 1999), 64 FR 29723 (June 2, 1999). 

9NYSE Rules 90, 95, and 111 were not 

incorporated into the Transitional FINRA Rulebook. 

Those rules, however, remain part of the NYSE’s 

rulebook. 

10 In addition to being subject to SEC rules 

(including SEA Rule 17a–4(b)(7) (requiring every 

member, broker, or dealer to retain all written 

agreements (or copies thereof) entered into by such 

member, broker, or dealer relating to its business as 

such, including agreements with respect to any 

account) and FINRA rules, Dual Members also 

remain subject to the NYSE’s rulebook. FINRA 

notes that the NYSE may determine to retain NYSE 

Rule 440I for its own purposes. 

11 15 U.S.C. 78o–3(b)(6). 

independent brokers) to maintain 

certain records of compensation 

arrangements in excess of $5,000 per 

year. The records must include a 

description of each type of arrangement 

and identify, by name, the parties to 

each type of arrangement in effect. The 

rule applies only if the member or 

member organization derives at least 75 

percent of its revenue from floor 

brokerage. The rule also excludes any 

compensation arrangement involving 

the transmission of orders solely 

through the NYSE’s electronic order 

routing system. 

NYSE Rule 440I was adopted in 1999 

following an SEC order relating to the 

settlement of an enforcement action 

against the NYSE for failure to enforce 

compliance with Section 11(a) of the 

Act,5 Rule 11a–1 thereunder,6 and 

NYSE Rules 90, 95, and 111, which 

relate to conduct by floor brokers.7

NYSE Rule 440I was adopted to 

enhance the NYSE’s oversight of floor 

brokerage compensation arrangements 

while also fulfilling some of the 

requirements imposed by the SEC’s 

order. Thus, the NYSE determined to 

limit the rule to floor brokers and 

exclude other members in part because 

‘‘the requirements would be unduly 

burdensome on and impractical for 

those members and member 

organizations, based on the diverse 

nature and size of their business 

activities and customer base.’’ 8

The proposed rule change would 

delete Incorporated NYSE Rule 440I 

from the Transitional Rulebook and 

would not adopt the rule into the 

Consolidated FINRA Rulebook. NYSE 

Rule 440I was adopted following the 

issuance of an SEC order to enhance the 

NYSE’s ability to surveil the activity 

and compensation arrangements of floor 

brokers and to examine for their 

compliance with Section 11(a) of the 

Act, Rule 11a–1 thereunder, and NYSE 

Rules 90, 95, and 111.9 FINRA does not 

believe it is necessary to incorporate 

NYSE Rule 440I into the Consolidated 

FINRA Rulebook.10

FINRA 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. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,11 which 

requires, among other things, that 

FINRA rules must 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. FINRA believes that the 

proposed rule change would remove 

rules that are specific to the NYSE 

marketplace and relate primarily to 

activities by floor brokers. The proposed 

rule change would also advance the 

development of a more efficient and 

effective Consolidated FINRA Rulebook. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA 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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) by order approve the proposed 

rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

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

Number SR–FINRA–2009–038 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 SR–FINRA–2009–038. 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 the filing also will be available 

for inspection and copying at the 

principal office of FINRA. 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–FINRA– 

2009–038 and should be submitted on 

or before July 6, 2009. 


pwalker on PROD1PC71 with NOTICES
28304 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3For further details on the processing of Flash 

routing strategies, refer to Securities Exchange Act 

Release 59875 (May 6, 2009); 74 FR 22874 (May 14, 

2009) (SR–NASDAQ–2009–043). 

4 15 U.S.C. 78f. 

5 15 U.S.C. 78f(b)(4). 

6 15 U.S.C. 78s(b)(3)(a)(ii). 

7 17 CFR 240.19b–4(f)(2). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13975 Filed 6–12–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60069; File No. SR– 

NASDAQ–2009–051] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Modify 

Pricing for NASDAQ ‘‘Flash’’ 

Functionality for Routable Orders 

June 8, 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 June 4, 

2009, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’ or the ‘‘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 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 

NASDAQ proposes a rule change to 

modify pricing for NASDAQ members 

that trade equities in the NASDAQ 

Market Center using the ‘‘Flash’’ 

functionality set forth in NASDAQ Rule 

4758(a)(1)(A). This proposed rule 

change, which is effective upon filing, 

will become operative when the Flash 

functionality becomes available, 

currently scheduled for June 8, 2009. 

The text of the proposed rule change is 

available at http:// 

nasdaqomx.cchwallstreet.com/, at 

NASDAQ’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, 

NASDAQ 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. 

NASDAQ 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 

NASDAQ is establishing the price for 

members trading equities in the 

NASDAQ Market Center using 

NASDAQ’s new pre-routing display or 

‘‘Flash’’ functionality described in 

NASDAQ Rule 4758(a)(1)(A). The Flash 

functionality provides an optional prerouting display period for orders using 

NASDAQ’s DOT, SCAN or STGY 

routing strategies. When voluntarily 

employed by a member, the Flashenabled routing strategies will first 

execute to the maximum extent possible 

in NASDAQ’s book, before displaying 

the remaining share amounts and prices 

to NASDAQ market participants and 

market data vendors for a period of time 

not to exceed one-half of one second. If 

at the end of the Flash period the order 

is not executed or is partially executed, 

NASDAQ will route the order 

automatically to the appropriate venue 

selected by the chosen routing strategy.3

When Flash routing functionality 

becomes available for use it will be 

assessed the following fees: $0.0015 per 

share executed during the Flash period 

for firms that add more than 35 million 

shares of liquidity daily on average for 

the month, and $0.0010 per share 

executed during the Flash period for all 

other firms. 

An order that is designated as Flash 

for routing can execute in a variety of 

ways. The following example will 

illustrate how an execution occurs and 

how NASDAQ will assess fees. An order 

that is designated as Flash for routing 

and that takes liquidity from the 

NASDAQ book prior to the Flash period 

will be assessed the standard fee of 

$0.0030 per share executed prior to the 

Flash period. If the unexecuted portion 

of that order provides liquidity on 

NASDAQ during the Flash period, it 

will be provided a liquidity rebate of 

either $0.0010 or $0.0015 per share 

executed during the Flash period based 

upon the member’s average daily 

volume of liquidity provided. If the still 

unexecuted portion of the order is then 

routed to an away market, NASDAQ 

will assess the standard rate for routing 

(generally $0.0026). The remaining 

unexecuted shares are posted on the 

NASDAQ book and provided the 

standard rebate based on the firms’ 

average daily liquidity provided based 

on the existing pricing tiers. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,4 in 

general, and with Section 6(b)(4) of the 

Act,5 in particular, in that it provides for 

the equitable allocation of reasonable 

dues, fees and other charges among 

members and issuers and other persons 

using any facility or system which 

NASDAQ operates or controls. The 

proposed fee is consistent with that 

standard in that it applies equally to all 

members using the Flash functionality. 

It also recognizes the benefits of 

additional liquidity delivered to the 

NASDAQ market place when NASDAQ 

members utilize the Flash functionality. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ 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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor 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 6 and 

subparagraph (f)(2) of Rule 19b–4 

thereunder.7 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, 


pwalker on PROD1PC71 with NOTICES