Federal Register / Vol. 74, No. 115 / Wednesday, June 17, 2009 / Notices 28741 

by the other market. The Router ABC would send 

an execution report back to the Exchange (for 

routing to the original order-sending participant). 

Under this proposal, if the participant and Router 

ABC had requested, the Exchange would take the 

execution report and create a clearing-only record, 

flipping the execution from Router ABC’s account 

to the account of the order-sending participant 

(ABC selling to the order-sending participant). 

11 15 U.S.C. 78f(b)(4). 

12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78f(b). 

14 15 U.S.C. 78f(b)(5). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

The Exchange will provide its Routing 

Services pursuant to the proposed rule 

and three separate agreements, to the 

extent that they are applicable to a 

specific routing decision and deemed 

necessary by the Exchange and/or a 

third-party broker-dealer providing 

connectivity to other markets: (a) An 

agreement between the Exchange and 

each Participant on whose behalf orders 

will be routed (‘‘Participant-Exchange 

Agreement’’); (b) an agreement between 

each Participant and a specified thirdparty broker-dealer that will use its 

routing connectivity to other markets 

and, if necessary, serve as a ‘‘give-up’’ 

in those markets (‘‘Give-Up 

Agreement’’); and (c) an agreement 

between the Exchange and the specified 

third-party broker-dealer (‘‘Routing 

Connectivity Agreement’’) pursuant to 

which the third-party broker-dealer 

agrees to provide routing connectivity to 

other markets and serve as a ‘‘give-up’’ 

for the Exchange’s Participants in other 

markets. The Routing Connectivity 

Agreement will include terms and 

conditions that enable the Exchange to 

comply with this rule. 

The Exchange will provide such 

Routing Services in compliance with its 

rules and with the provisions of the Act 

and the rules thereunder, including, but 

not limited to, the requirements of 

Sections 6(b)(4) 11 and (5) 12 of the Act 

that the rules of a national securities 

exchange provide for the equitable 

allocation of dues, fees and other 

charges among its members and issues 

and other persons using its facilities, 

and not be designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act in general,13 and 

furthers the objectives of Section 6(b)(5) 

in particular,14 in that it is designed to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transaction in securities, to 

remove impediments and perfect the 

mechanisms of a free and open market, 

and, in general, to protect investors and 

the public interest. In this case, 

providing Participants the ability to 

have their undisplayed orders rejected 

from the Exchange’s Matching System, 

to be cancelled or routed elsewhere for 

execution, protects investors and 

removes an impediment to a free and 

open market in that it improves the 

certainty of order execution. 

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 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 

No written comments were either 

solicited or 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 such 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–CHX–2009–02 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–CHX–2009–02. 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, 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–CHX– 

2009–02 and should be submitted on or 

before July 8, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14146 Filed 6–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60085; File No. SR–FINRA– 

2009–030] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Amend Rule 

6440 To Require Members To Create a 

Contemporaneous Record of Certain 

Customer and Order Information 

June 10, 2009. 

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

Securities Exchange Act of 1934 (‘‘SEA’’ 

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

notice is hereby given that on May 22, 

2009 Financial Industry Regulatory 


dwashington3 on PROD1PC60 with NOTICES
28742 Federal Register / Vol. 74, No. 115 / Wednesday, June 17, 2009 / Notices 

3SEA Rule 15c2–11 defines ‘‘quotation’’ as any 

bid or offer at a specified price with respect to a 

security, or any indication of interest by a broker 

or dealer in receiving bids or offers from others for 

a security, or any indication by a broker or dealer 

that advertises its general interest in buying or 

selling a particular security. 

4 ‘‘Quotation medium’’ means any ‘‘inter-dealer 

quotation system’’ or any publication or electronic 

communications network or other device that is 

used by brokers or dealers to make known to others 

their interest in transactions in any security, 

including offers to buy or sell at a stated price or 

otherwise, or invitations of offers to buy or sell. 

‘‘Inter-dealer quotation system’’ means any system 

of general circulation to brokers or dealers that 

regularly disseminates the quotations of identified 

brokers or dealers. 5 In cases where a member is displaying a quote 

representing an unsolicited customer order or IOI 

that was received electronically, it is understood 

that there may not be a ‘‘person’’ associated with 

the receipt or submission of such unsolicited 

customer order or IOI. Thus, with respect to the 

requirement that members record (1) the identity of 

the associated person who received the unsolicited 

customer order or IOI; or (2) the identity of the 

person from whom information regarding the 

unsolicited customer order or IOI was received 

where the order or IOI is received from another 

broker-dealer, members are only required to record 

such information if applicable. 

6 It is critical that the member receiving an order 

be advised of and understand the terms of the order 

that are relevant to the exception so that the 

receiving member may reasonably and accurately 

rely on the unsolicited customer order exception. 

For example, if the customer order is a ‘‘day’’ order, 

the receiving member must be advised of that fact 

so that it can withdraw the quote upon the 

expiration of the order. Similarly, to the extent that 

the terms of the order change or other significant 

information is received by the firm routing the 

order (e.g., a ‘‘good-till-cancelled’’ order is 

cancelled or there is a change in the terms of the 

order), the firm routing such order must promptly 

update the member displaying the quote as to the 

change in the terms of the order. To the extent the 

firm routing the order is not a member, the member 

should make periodic inquiry as to whether the 

terms of the order have changed. Members may not 

rely on the unsolicited customer order exception 

where a displayed quote no longer accurately 

represents current unsolicited customer interest. 

7SEA Rule 15c2–11(h) sets forth the SEC’s 

exemptive authority with respect to the 

requirements of SEA Rule 15c2–11 and provides 

that SEA Rule 15c2–11 shall not prohibit any 

publication or submission of any quotation if the 

SEC, upon written request or upon its own motion, 

exempts such quotation either unconditionally or 

on specified terms and conditions, as not 

constituting a fraudulent, manipulative or deceptive 

practice comprehended within the purpose of the 

rule. 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 amend Rules 

6440 and 6540 to, among other things, 

require members to create a 

contemporaneous record of certain 

customer and order information 

demonstrating eligibility for the 

unsolicited customer order exception of 

SEA Rule 15c2–11 when the member is 

relying on such exception. 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

SEA Rule 15c2–11 sets forth the 

information review and maintenance 

requirements for broker-dealers that 

publish quotations 3 in a quotation 

medium 4 for certain over-the-counter 

equity securities (e.g., OTC Bulletin 

Board and Pink Sheets securities). 

Specifically, SEA Rule 15c2–11 

prohibits a broker-dealer from 

publishing (or submitting for 

publication) a quotation for a covered 

OTC equity security unless it has 

obtained and reviewed current 

information about the issuer whose 

security is the subject of the quotation 

that the broker-dealer believes is 

accurate and obtained from a reliable 

source. There are several exceptions to 

SEA Rule 15c2–11, including paragraph 

(f)(2) of the Rule, which excepts 

quotations that represent a customer’s 

unsolicited order or indication of 

interest (unsolicited customer order 

exception). 

Rule 6440 sets forth the standards 

applicable to member firms for 

demonstrating compliance with SEA 

Rule 15c2–11, unless an exception 

applies. FINRA has found that member 

firms maintain varying levels of 

documentation for demonstrating 

eligibility for the unsolicited customer 

order exception and, in some cases, are 

unable to produce any proof that a quote 

in fact represented a customer’s 

unsolicited order or indication of 

interest (‘‘IOI’’). While a member relying 

on this or any exception should be able 

to proffer evidence of its eligibility for 

and compliance with the exception, 

FINRA believes that providing specific 

recordkeeping requirements for 

demonstrating eligibility for the SEA 

Rule 15c2–11(f)(2) exception is 

appropriate and will promote more 

uniform recordkeeping and compliance 

with this exception. 

Specifically, contemporaneous with 

the receipt of any unsolicited customer 

order or IOI, members would be 

required to record the following details: 

the identity of the associated person 

who receives the order or IOI directly 

from the customer, if applicable; 5 the 

identity of the customer; the date and 

time the order or IOI was received; and 

the terms of the order or IOI that is the 

subject of the quotation (e.g., security 

name and symbol, size, side of the 

market, the duration (if specified) and, 

if priced, the price). To the extent a 

member is displaying a quote 

representing an unsolicited customer 

order or IOI that was received from 

another broker-dealer, the member is 

still required to create a 

contemporaneous record of the identity 

of the person from whom information 

regarding the unsolicited customer 

order or IOI was received, if applicable; 

the date and time the unsolicited 

customer order or IOI was received by 

the member displaying the quotation; 

and the terms of the order that is the 

subject of the quotation.6 The member 

displaying the quotation may rely on the 

information provided by the routing 

firm if the member has a reasonable 

basis for believing that the information 

is valid. 

In addition, FINRA is amending Rule 

6540 (Requirements Applicable to 

Market Makers) to delete footnote #1. 

Footnote #1 sets forth a summary of 

exemptive relief granted by the SEC 

from the requirements of SEA Rule 

15c2–11 (subject to certain conditions). 

However, given that the SEC has since 

granted additional exemptive requests 

from the requirements of SEA Rule 

15c2–11 that are not included in 

footnote #1 (and may continue to grant 

further requests in the future), FINRA is 

proposing to delete footnote #1 in its 

entirety and specify in Rule 6540 that 

members must demonstrate compliance 

with (or qualify for an exception or 

exemption from) SEC Rule 15c2–11.7

FINRA will announce the effective 

date of the proposed rule change in a 

Regulatory Notice to be published no 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 115 / Wednesday, June 17, 2009 / Notices 28743 

8 15 U.S.C. 78o–3(b)(6). 9 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). 

4See Securities Exchange Act Release No. 59762 

(April 14, 2009), 74 FR 18269 (‘‘Notice’’). 

5See letter from Clifford E. Kirsch and Eric A. 

Arnold for the Committee of Annuity Insurers, 

Sutherland Asbill & Brennan LLP, to Elizabeth M. 

Murphy, Secretary, Commission, dated May 12, 

2009 (‘‘CAI Comment Letter’’). 

6See letter from Stan Macel, Assistant General 

Counsel, FINRA, to Elizabeth M. Murphy, 

Secretary, Commission, dated June 1, 2009. 

later than 60 days following 

Commission approval. The effective 

date will be 30 days following 

publication of the Regulatory Notice 

announcing 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,8 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 will promote 

more uniform recordkeeping and 

compliance with SEA Rule 15c2–11’s 

unsolicited customer order exception. 

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 such 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–2009–030 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–2009–030. 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 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–2009–030 and 

should be submitted on or before July 8, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14147 Filed 6–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60086; File No. SR–FINRA– 

2009–023] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Adopt 

FINRA Rule 2320 in the Consolidated 

FINRA Rulebook 

June 10, 2009. 

I. Introduction 

On March 31, 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 (‘‘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 NASD Rule 2820 as 

FINRA Rule 2320 in the consolidated 

FINRA rulebook (‘‘Consolidated FINRA 

Rulebook) 3 with minor changes. The 

proposal was published in the Federal 

Register on April 21, 2009.4 The 

Commission received one comment 

letter on the proposal.5 On June 1, 2009, 

FINRA responded to the comment 

letter.6 This order approves the 

proposed rule change. 

II. Description of the Proposal 

NASD Rule 2820 prohibits members 

from participating in the offer or sale of 

variable life insurance and variable 

annuity contracts unless certain 

conditions are met (collectively, 

‘‘variable contract’’). Specifically, 

members: (i) May not participate in the 

offering or sale of a variable contract on 

any basis other than at a value to be 


dwashington3 on PROD1PC60 with NOTICES