Document ID: SEC-2010-1619-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2010-10-22T04:00Z

[Federal Register: October 22, 2010 (Volume 75, Number 204)]
[Notices]               
[Page 65392-65393]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22oc10-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63121; File No. SR-Phlx-2010-119]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order 
Approving Proposed Rule Change To Amend Exchange Rule 652 (``Limitation 
of Exchange Liability and Reimbursement of Certain Expenses'') To 
Require Member Organizations on the Exchange's Trading Floor To Procure 
and Maintain Liability Insurance

October 18, 2010.

I. Introduction

    On September 1, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or 
``Exchange'') 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

[[Page 65393]]

19b-4 thereunder,\2\ a proposed rule change to amend Exchange Rule 652 
(``Limitation of Exchange Liability and Reimbursement of Certain 
Expenses'') to require member organizations on the Exchange's trading 
floor to procure and maintain liability insurance. The proposed rule 
change was published for comment in the Federal Register on September 
17, 2010.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62892 (September 10, 
2010), 75 FR 57090.
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II. Description of the Proposal

    The Exchange proposes to require that member organizations located 
on the Exchange's trading floor procure and maintain liability 
insurance by December 31, 2010. The insurance would provide defense and 
indemnity coverage for the member organization, any person associated 
with the member organization and the Exchange for any action or 
proceeding brought, or claim made, to impose liability upon the member 
organization, associated person or the Exchange which results from the 
member organization's or associated person's conduct.
    According to the Exchange, it does not intend this amendment to 
provide relief associated with financial loss related to buying and 
selling securities; the insurance coverage is intended to provide 
coverage to the Exchange for its sole, concurrent, or contributory 
negligence or other wrongdoing connected to a claim arising from the 
member organization's or associated person's conduct. The member 
organization would be required to maintain insurance with a limit that 
is not less than $1,000,000 without erosion by defense costs. Each 
member organization located on the trading floor would be required to 
provide a certificate of insurance to be issued directly to the 
Exchange demonstrating the insurance was procured and is maintained. 
The Exchange also proposes to expand the language in Rule 652 to apply 
the rule to individuals of the Exchange, specifically officers, 
directors and employees. The Exchange believes that this change will 
clarify that individuals serving as officers, directors or employees 
are also the subject of Rule 652.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\4\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\5\ which requires, among 
other things, that the proposed rule change be 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. The 
Commission believes that the proposed rule change is a reasonable means 
of protecting the Exchange's financial resources that are normally used 
to support the Exchange's surveillance and self-regulatory 
responsibilities, rather than having this capital diverted to defending 
litigation claims.
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    \4\ In approving this 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).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that requiring member organizations to 
obtain insurance coverage to protect the Exchange from claims resulting 
from their own conduct is not an undue burden. Furthermore, the 
Commission believes that the proposed rule change may conserve Exchange 
capital resources, and will provide additional coverage for member 
organizations since the member organizations are within the scope of 
the required insurance's coverage.
    Finally, the Commission believes that amending Exchange Rule 652 to 
add officers, directors and employees in addition to the Exchange will 
remove any ambiguity or confusion by explicitly stating that the word 
``Exchange'' as used in Rule 652 includes such individuals.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
\6\ that the proposed rule change (SR-Phlx-2010-119) be, and it hereby 
is, approved.
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    \6\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26676 Filed 10-21-10; 8:45 am]
BILLING CODE 8011-01-P