37268 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 60085 

(June 10, 2009), 74 FR 28741 (June 17, 2009). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17883 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Tuesday, July 28, 2009 at 3 p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(10) and 17 CFR 

200.402(a)(10), permit consideration of 

the scheduled matters at the Closed 

Meeting. 

Commissioner Walter, as duty officer, 

voted to consider the items listed for the 

Closed Meeting in a closed session, and 

determined that no earlier notice thereof 

was possible. 

The subject matter of the Closed 

Meeting scheduled for Tuesday, July 28, 

2009 will be: 

A litigation matter; and 

Consideration of amicus participation. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: July 24, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–18070 Filed 7–24–09; 4:15 pm] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission Investor Advisory 

Committee will hold an Open Meeting 

on Monday, July 27, 2009, in the 

Auditorium, Room L–002. The meeting 

will begin at 10 a.m. and will be open 

to the public, with seating on a firstcome, first-served basis. Doors will open 

at 9:30 a.m. Visitors will be subject to 

security checks. 

On July 8, 2009, the Commission 

published notice of the Committee 

meeting (Release No. 33–9049), 

indicating that the meeting is open to 

the public and inviting the public to 

submit written comments to the 

Committee. This Sunshine Act notice is 

being issued because a majority of the 

Commission plans to attend the 

meeting. Commissioner Walter, as duty 

officer, determined that no earlier 

Sunshine Act notice was possible. 

The agenda for the meeting includes 

opening remarks, introduction of 

Committee members, discussion of 

Committee agenda and organization, 

and discussion of investor views of 

possible refinements to the disclosure 

regime. 

For further information, please 

contact the Office of the Secretary at 

(202) 551–5400. 

Dated: July 22, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–17861 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, July 30, 2009 at 2 p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Commissioner Walter, as duty officer, 

voted to consider the items listed for the 

Closed Meeting in a closed session. 

The subject matter of the Closed 

Meeting scheduled for Thursday, July 

30, 2009 will be: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of 

administrative proceedings; 

Other matters relating to enforcement 

proceedings; and an adjudicatory 

matter. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: July 22, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–17860 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60366; File No. SR–FINRA– 

2009–030] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change To Amend 

Rules 6440 and 6540 To Require 

Members To Create a 

Contemporaneous Record of Certain 

Customer and Order Information 

July 22, 2009. 

On May 22, 2009, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’ 

or ‘‘SEC’’), pursuant to Section 19(b)(1) 

of the Securities Exchange Act of 1934 

(‘‘SEA’’ or ‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend Rules 6440 and 6540 to require 

members to create a contemporaneous 

record of certain customer and order 

information. The proposed rule change 

was published for comment in the 

Federal Register on June 17, 2009.3 The 

Commission received no comments on 

the proposal. This order approves the 

proposed rule change. 

I. Description of the Proposed Rule 

Change 

FINRA has proposed to amend Rules 

6440 and 6540 to, among other things, 

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Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 37269 

4SEA 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. 

5 ‘‘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. 

6FINRA stated that 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. 

7See supra note 6. 

8FINRA stated that 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. 

9SEA 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. 

10 In approving the 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). 

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

12 17 CFR 200.30–3(a)(12). 

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. SEA Rule 

15c2–11 sets forth the information 

review and maintenance requirements 

for broker-dealers that publish 

quotations 4 in a quotation medium 5 for 

certain over-the-counter equity 

securities (e.g., those quoted on the OTC 

Bulletin Board and Pink Sheets). 

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). 

FINRA Rule 6440 sets forth the 

standards applicable to member firms 

for demonstrating compliance with SEA 

Rule 15c2–11. FINRA has indicated that 

it 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 record-keeping and compliance 

with this exception. 

Specifically, FINRA has proposed that 

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; 6 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 brokerdealer, 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; 7 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.8 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 proposed to 

amend Rule 6540 (Requirements 

Applicable to Market Makers). The 

proposed amendment would delete 

footnote #1 under Rule 6540. 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). FINRA 

noted that because the Commission has 

granted additional exemptive requests 

from the requirements of SEA Rule 

15c2–11 that are not included in 

footnote #1, and believes the 

Commission may continue to grant such 

requests in the future, FINRA has 

proposed 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, SEA Rule 15c2–11.9

II. Discussion and Findings 

After careful review, 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.10 In 

particular, the Commission believes that 

the proposed rule change is consistent 

with the provisions of Section 15A(b)(6) 

of the Act, in that it is 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, and, in 

general, to protect investors and the 

public interest. The Commission 

believes that the proposed amendments 

to Rules 6440 and 6540 will protect the 

public interest by promoting more 

uniform record-keeping and compliance 

with SEA Rule 15c2–11. 

III. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 

FINRA–2009–030) be and hereby is 

approved. 

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37270 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17858 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60363; File No. SR–Phlx– 

2009–61] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing of Proposed Rule Change 

Relating to Exchange Rules for the 

Options Order Protection and Locked/ 

Crossed Market Plan 

July 22, 2009. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on July 20, 

2009, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ 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 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, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 

thereunder,4 proposes to modify the 

Exchange’s rules to reflect its 

participation in the Options Order 

Protection and Locked/Crossed Market 

Plan (‘‘Plan’’). The proposed rules 

implement the Exchange’s participation 

in the Plan, and will be substantially 

similar to the rules of other exchanges 

that are also implementing the Plan 

with minor variations to account for 

differences between the exchanges’ 

market structures. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, 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 

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 

On June 17, 2008, the Exchange filed 

an executed copy of the Options Order 

Protection and Locked/Crossed Market 

Plan (‘‘Plan’’), joining all other approved 

options markets in adopting [sic] the 

Plan. The Plan requires each options 

exchange to adopt rules implementing 

various requirements specified in the 

Plan. This proposal is designed to fulfill 

that obligation. 

Background 

The Plan will replace the current Plan 

for the Purpose of Creating and 

Operating an Intermarket Option 

Linkage (‘‘Linkage Plan’’). That plan 

requires its participant exchanges to 

operate a stand-alone system or 

‘‘Linkage’’ for sending order-flow 

between exchanges to limit tradethroughs. The Options Clearing 

Corporation (‘‘OCC’’) operates the 

Linkage system (the ‘‘System’’). The 

Linkage rules provide for unique types 

of Linkage orders, with a complicated 

set of requirements as to who may send 

such orders and under what conditions. 

Before a market maker can trade through 

another exchange’s quote, it first must 

send a Linkage order and then wait 

three seconds for a response. 

While the Linkage largely has 

operated satisfactorily, it is under 

significant strain. When the 

Commission approved the Linkage Plan 

in 2000, average daily volume (‘‘ADV’’) 

in the options market was 

approximately 2.6 million contracts 

across all exchanges. By 2007, the ADV 

had increased four-fold to more than 

10.8 million contracts, putting added 

strain on the ability of market makers to 

comply with the complex Linkage rules. 

At the same time, the options markets 

have been moving towards quoting in 

pennies. This greatly increases the 

number of price changes in an option, 

giving rise to greater chances of tradethroughs and missing markets as market 

makers send Linkage orders and have to 

wait three seconds for a response. 

Based upon experience in the equities 

markets following the adoption of 

Regulation NMS in 2005, the options 

exchanges have determined to replace 

the System with the Plan providing for 

a set of rules and procedures designed 

to avoid trade-throughs and locked 

markets. The key to Regulation NMS’s 

price-protection provisions is the 

Intermarket Sweep Order (‘‘ISO’’). Each 

equity exchange must adopt rules 

‘‘reasonably designed to prevent tradethroughs.’’ Exempted from tradethrough liability is an ISO, which is an 

order a member sends to an exchange 

displaying a price inferior to the 

national best bid and offer (‘‘NBBO’’), 

while simultaneously sending orders to 

trade against the full size of any other 

exchange that is displaying the NBBO. 

A simple prohibition against most tradethroughs, coupled with the ISO 

mechanism, has given the equities 

markets a straight-forward system to 

provide customers with price protection 

in a fast-moving, high-volume market 

that is quoted in pennies. 

Proposed Temporary Linkage Rule. 

The Exchange proposes to adopt Rule 

1088 which provides that the Exchange 

will continue to accept Principal Acting 

as Agent (‘‘P/A’’) and Principal Orders 

from options exchanges that continue to 

use such orders to address 

trade-throughs via the existing linkage 

for a temporary period. 

Deletion of References to Linkage 

Orders. The Exchange proposes to 

delete references to Linkage P and P/A 

orders from its rules. Specifically, the 

Exchange proposes to delete current 

Rules 1081 and 1083 through 1087, 

which currently make up the 

Exchange’s rules that track the Linkage 

Plan. Additionally, for consistency, the 

Exchange proposes to delete references 

to Linkage P and P/A Orders from Rule 

1080. 

The Proposed New Definitions. The 

proposed Plan incorporates a number of 

defined terms, some identical to 

definitions from the existing Linkage 

Plan and others that have been 

developed along with the proposed Plan 

itself. Accordingly, Phlx is proposing to 

adopt new Rule 1083, which sets forth 

the defined terms for use under the 

proposed Plan. 

The Proposed Trade Through Rule. 

The Plan essentially would apply the 

Regulation NMS price-protection 

provisions to the options markets. 

Similar to Regulation NMS, the Plan 

would require participants to adopt 

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