Document ID: SEC-2009-0205-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-02-11T05:00Z

[Federal Register: February 11, 2009 (Volume 74, Number 27)]
[Notices]
[Page 6931-6933]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11fe09-98]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59362; File No. SR-Phlx-2009-10]

Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
to Sponsored Access

 February 5, 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 January 29, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to adopt a sponsored access rule for a pilot
period ending on July 29, 2009. The text of the proposed rule change is
available on the Exchange's Website 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 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 aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to attract additional
business by adopting a sponsored access rule

[[Page 6932]]

similar to that of other exchanges. A Sponsored Participant is a non-
member of the Exchange, such as an institutional investor, that gains
access to the Exchange and trades under a Sponsoring Member's execution
and clearing identity pursuant to a sponsorship arrangement between
such non-member and a member organization. Specifically, the Exchange
proposes to permit Sponsored Participants to be sponsored by Sponsoring
Member Organizations, and thereby access the Exchange, subject to
certain requirements. These requirements are intended to confirm that
the Sponsored Participant is required to and had procedures in place to
comply with Exchange rules, and that the Sponsoring Member Organization
takes responsibility for the Sponsored Participant's activity on the
Exchange.
    First, the Sponsored Participant and its Sponsoring Member
Organization must have entered into and maintained an Access Agreement
with the Exchange. The Sponsoring Member Organization must designate
the Sponsored Participant by name in an addendum to the Access
Agreement.
    Second, there must be a Sponsored Participant Agreement between the
Sponsoring Member Organization and the Sponsored Participant that
contains the following sponsorship provisions, enumerated in full in
Rule 1094(b)(ii):
    (i) The orders of the Sponsored Participant are binding in all
respects on the Sponsoring Member Organization;
    (ii) The Sponsoring Member Organization is responsible for the
actions of the Sponsored Participant;
    (iii) In addition to the Sponsoring Member Organization being
required to comply with the Exchange Certificate of Incorporation, By-
laws, Rules and procedures of the Exchange, the Sponsored Participant
shall do so as if such Sponsored Participant were an Exchange member
organization;
    (iv) The Sponsored Participant shall maintain, keep current and
provide to the Sponsoring Member Organization a list of individuals
authorized to obtain access to the Exchange on behalf of the Sponsored
Participant;
    (v) The Sponsored Participant shall familiarize its authorized
individuals with all of the Sponsored Participant's obligations under
this Rule and will assure that they receive appropriate training prior
to any use or access to the Exchange;
    (vi) The Sponsored Participant may not permit anyone other than
authorized individuals to use or obtain access to the Exchange; \3\
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    \3\ If the Exchange determines that an authorized individual has
caused a Member Organization to violate the Exchange's Rules, the
Exchange could direct the Member Organization to suspend or withdraw
the person's status as an authorized individual.
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    (vii) The Sponsored Participant shall take reasonable security
precautions to prevent unauthorized use or access to the Exchange,
including unauthorized entry of information into the Exchange, and
agrees that it is responsible for any and all orders, trades and other
messages and instructions entered, transmitted or received under
identifiers, passwords and security codes of authorized individuals,
and for the trading and other consequences thereof;
    (viii) The Sponsored Participant acknowledges its responsibility to
establish adequate procedures and controls that permit it to
effectively monitor its employees', agents' and Participants' use and
access to the Exchange for compliance with the terms of this agreement;
    (ix) The Sponsored Participant shall pay when due all amounts, if
any, payable to Sponsoring Member Organization, the Exchange, or any
other third parties that arise from the Sponsored Participant's access
to and use of the Exchange. Such amounts include, but are not limited
to applicable exchange and regulatory fees.
    Third, the Sponsoring Member Organization must provide the Exchange
with a Sponsored Participant Addendum to its Access Agreement
acknowledging its responsibility for the orders, executions and actions
of its Sponsored Participant at issue.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the objectives of Section
6(b)(5) of the Act \5\ in particular, in that it is designed 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 by
helping market participants seeking access to a marketplace.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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

    Because the foregoing rule change does not: (1) Significantly
affect the protection of investors or the public interest; (2) impose
any significant burden on competition; and (3) become operative for 30
days after the date of this filing, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\8\ However,
Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange has requested that the Commission
waive the 30-day operative delay so that the proposal may become
operative upon filing. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because such waiver would permit the Exchange to
immediately begin to accommodate requests from its members regarding
sponsored access. The Commission notes that the proposal is
substantially similar to the rules of other national securities
exchanges.\10\ Accordingly, the Commission hereby grants the Exchange's
request and designates the proposal operative upon filing.\11\
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    \8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the date of filing
of the proposed rule change, or such shorter time as designated by
the Commission. The Exchange has satisfied the five-day pre-filing
notice requirement.
    \9\ Id.
    \10\ See, e.g., International Securities Exchange, LLC Rule 706
and NYSE Arca, Inc. Rule 7.29.
    \11\ For the purposes only of waiving the 30-day operative
delay, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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    At any time within 60 days of the filing of such proposed rule
change the

[[Page 6933]]

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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2009-10 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-Phlx-2009-10. 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-
Phlx-2009-10 and should be submitted on or before March 4, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-2858 Filed 2-10-09; 8:45 am]

BILLING CODE 8011-01-P