Document ID: SEC-2012-0786-0001
Agency: sec
Document Type: Notice
Title: Program for Allocation of Regulatory Responsibilities, etc.: NYSE Amex LLC; BATS Exchange, Inc.; BOX Options Exchange LLC; C2 Options Exchange, Inc., etc.
Posted Date: 2012-05-18T04:00Z

[Federal Register Volume 77, Number 97 (Friday, May 18, 2012)]
[Notices]
[Pages 29712-29718]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12019]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66975; File No. 4-551]

Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amendment to the Plan for the Allocation of Regulatory 
Responsibilities Among NYSE Amex LLC, BATS Exchange, Inc., BOX Options 
Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board 
Options Exchange, Incorporated, the International Securities Exchange 
LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., 
The NASDAQ Stock Market LLC, the BOX Options Exchange LLC, NASDAQ OMX 
BX, Inc. and the NASDAQ OMX PHLX, Inc. Concerning Options-Related 
Market Surveillance

May 11, 2012.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed on May 2, 2012, pursuant to Rule 17d-2 
of the Act,\2\ by NYSE Amex LLC (``Amex''), BATS Exchange, Inc., 
(``BATS''), the BOX Options Exchange LLC (``BOX''), C2 Options 
Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, 
Incorporated (``CBOE''), the International Securities Exchange LLC 
(``ISE''), Financial Industry Regulatory Authority, Inc. (``FINRA''), 
NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), 
NASDAQ OMX BX, Inc. (``BX'') and the NASDAQ OMX PHLX, Inc. (``PHLX'') 
(collectively, ``Participating Organizations'' or ``parties'').
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-

[[Page 29713]]

regulatory organization (``SRO'') registered as either a national 
securities exchange or national securities association to examine for, 
and enforce compliance by, its members and persons associated with its 
members with the Act, the rules and regulations thereunder, and the 
SRO's own rules, unless the SRO is relieved of this responsibility 
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. 
Without this relief, the statutory obligation of each individual SRO 
could result in a pattern of multiple examinations of broker-dealers 
that maintain memberships in more than one SRO (``common members''). 
Such regulatory duplication would add unnecessary expenses for common 
members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\7\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for notice and comment, it determines that the plan is 
necessary or appropriate in the public interest and for the protection 
of investors, to foster cooperation and coordination among the SROs, to 
remove impediments to, and foster the development of, a national market 
system and a national clearance and settlement system, and is in 
conformity with the factors set forth in Section 17(d) of the Act. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On December 11, 2007, the Commission declared effective the 
Participating Organizations' Plan for allocating regulatory 
responsibilities pursuant to Rule 17d-2.\11\ On April 11, 2008, the 
Commission approved an amendment to the Plan to include NASDAQ as a 
participant.\12\ On October 9, 2008, the Commission approved an 
amendment to the Plan to clarify that the term Regulatory 
Responsibility for options position limits includes the examination 
responsibilities for the delta hedging exemption.\13\ On February 25, 
2010, the Commission approved an amendment to the Plan to add BATS 
Exchange, Inc. and C2 Options Exchange, Incorporated as SRO 
participants and to reflect the name changes of the American Stock 
Exchange LLC to the NYSE Amex LLC, and the Boston Stock Exchange, Inc. 
to the NASDAQ OMX BX, Inc.\14\
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    \11\ See Securities Exchange Act Release No. 56941 (December 11, 
2007), 72 FR 71723 (December 18, 2007) (File No. 4-551).
    \12\ See Securities Exchange Act Release No. 57649 (April 11, 
2008), 73 FR 20976 (April 17, 2008) (File No. 4-551).
    \13\ See Securities Exchange Act Release No. 58765 (October 9, 
2008), 73 FR 62344 (October 20, 2008) (File No. 4-551).
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    The Plan is designed to reduce regulatory duplication for common 
members by allocating regulatory responsibility for certain options-
related market surveillance matters among the Participating 
Organizations.\14\ Generally, under the Plan, a Participating 
Organization will serve as the Designated Options Surveillance 
Regulator (``DOSR'') for each common member assigned to it and will 
assume regulatory responsibility with respect to that common member's 
compliance with applicable common rules for certain accounts. When an 
SRO has been named as a common member's DOSR, all other SROs to which 
the common member belongs will be relieved of regulatory responsibility 
for that common member, pursuant to the terms of the Plan, with respect 
to the applicable common rules specified in Exhibit A to the Plan.
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    \14\ See Securities Exchange Act Release No. 61588 (February 25, 
2010), 75 FR 9970 (March 4, 2010) (File No. 4-551).
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III. Proposed Amendment to the Plan

    On May 2, 2012, the parties submitted a proposed amendment to the 
Plan. The primary purpose of the amendment is to add BOX as a 
Participant to the Plan. The text of the proposed amended 17d-2 plan is 
as follows (additions are italicized; deletions are [bracketed]):
* * * * *

AGREEMENT BY AND AMONG

NYSE AMEX LLC, BATS EXCHANGE, INC., BOX OPTIONS EXCHANGE LLC, NASDAQ 
OMX BX, INC., C2 OPTIONS EXCHANGE, INCORPORATED, THE CHICAGO BOARD 
OPTIONS EXCHANGE, INCORPORATED, THE INTERNATIONAL SECURITIES EXCHANGE 
LLC, FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., NYSE ARCA, INC., 
THE NASDAQ STOCK MARKET LLC, AND NASDAQ OMX PHLX, INC., PURSUANT TO 
RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

    This agreement (this ``Agreement''), by and among the NYSE Amex 
LLC (``Amex''), BATS Exchange, Inc., (``BATS''), the [,] C2 Options 
Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, 
Incorporated (``CBOE''), the International Securities Exchange LLC 
(``ISE''), Financial Industry Regulatory Authority, Inc. 
(``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC 
(``Nasdaq''), the BOX Options Exchange LLC (``BOX''), NASDAQ OMX BX, 
Inc. (``BX'') and the NASDAQ OMX PHLX, Inc. (``PHLX''), is made this 
10th day of October 2007, and as amended the 31st day of March 2008, 
the 1st day of October 2008, [and this] the 3rd day of February 
2010, and the 25th day of April 2012, pursuant to Section 17(d) of 
the Securities Exchange Act of 1934, as amended (the ``Exchange 
Act''), and Rule 17d-2 thereunder (``Rule 17d-2''), which allows for 
a joint plan among self-regulatory organizations (``SROs'') to 
allocate regulatory obligations with respect to brokers or dealers 
that are members of two or more of the parties to this Agreement 
(``Common Members''). The Amex, BATS, C2, CBOE,

[[Page 29714]]

ISE, FINRA, Arca, Nasdaq, BOX, BX, and PHLX are collectively 
referred to herein as the ``Participants'' and individually, each a 
``Participant.'' This Agreement shall be administered by a committee 
known as the Options Surveillance Group (the ``OSG'' or ``Group''), 
as described in Section V hereof. Unless defined in this Agreement 
or the context otherwise requires, the terms used herein shall have 
the meanings assigned thereto by the Exchange Act and the rules and 
regulations thereunder.
    Whereas, the Participants desire to eliminate regulatory 
duplication with respect to SRO market surveillance of Common Member 
\1\ activities with regard to certain common rules relating to 
listed options (``Options''); and
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    \1\ In the case of the BX and BOX, members are those persons who 
are Options Participants (as defined in the [Boston Options Exchange 
LLC Rules] BOX Options Exchange LLC Rules and NASDAQ OMX BX, Inc. 
Rules).
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    Whereas, for this purpose, the Participants desire to execute 
and file this Agreement with the Securities and Exchange Commission 
(the ``SEC'' or ``Commission'') pursuant to Rule 17d-2.
    Now, therefore, in consideration of the mutual covenants 
contained in this Agreement, the Participants agree as follows:
    I. Except as otherwise provided in this Agreement, each 
Participant shall assume Regulatory Responsibility (as defined 
below) for the Common Members that are allocated or assigned to such 
Participant in accordance with the terms of this Agreement and shall 
be relieved of its Regulatory Responsibility as to the remaining 
Common Members. For purposes of this Agreement, a Participant shall 
be considered to be the Designated Options Surveillance Regulator 
(``DOSR'') for each Common Member that is allocated to it in 
accordance with Section VII.
    II. As used in this Agreement, the term ``Regulatory 
Responsibility'' shall mean surveillance, investigation and 
enforcement responsibilities relating to compliance by the Common 
Members with such Options rules of the Participants as the 
Participants shall determine are substantially similar and shall 
approve from time to time, insofar as such rules relate to market 
surveillance (collectively, the ``Common Rules''). For the purposes 
of this Agreement the list of Common Rules is attached as Exhibit A 
hereto, which may only be amended upon unanimous written agreement 
by the Participants. The DOSR assigned to each Common Member shall 
assume Regulatory Responsibility with regard to that Common Member's 
compliance with the applicable Common Rules for certain accounts.\2\ 
A DOSR may perform its Regulatory Responsibility or enter an 
agreement to transfer or assign such responsibilities to a national 
securities exchange registered with the SEC under Section 6(a) of 
the Exchange Act or a national securities association registered 
with the SEC under Section 15A of the Exchange Act. A DOSR may not 
transfer or assign its Regulatory Responsibility to an association 
registered for the limited purpose of regulating the activities of 
members who are registered as brokers or dealers in security futures 
products.
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    \2\ Certain accounts shall include customer (``C'' as classified 
by the Options Clearing Corporation (``OCC'')) and firm (``F'' as 
classified by OCC) accounts, as well as other accounts, such as 
market maker accounts as the Participants shall, from time to time, 
identify as appropriate to review.
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    The term ``Regulatory Responsibility'' does not include, and 
each Participant shall retain full responsibility with respect to:
    (a) Surveillance, investigative and enforcement responsibilities 
other than those included in the definition of Regulatory 
Responsibility;
    (b) Any aspects of the rules of a Participant that are not 
substantially similar to the Common Rules or that are allocated for 
a separate surveillance purpose under any other agreement made 
pursuant to Rule 17d-2. Any such aspects of a Common Rule will be 
noted as excluded on Exhibit A.
    With respect to options position limits, the term Regulatory 
Responsibility shall include examination responsibilities for the 
delta hedging exemption. Specifically, the Participants intend that 
FINRA will conduct examinations for delta hedging for all Common 
Members that are members of FINRA notwithstanding the fact that 
FINRA's position limit rule is, in some cases, limited to only firms 
that are not members of an options exchange (i.e., access members). 
In such cases, FINRA's examinations for delta hedging options 
position limit violations will be for the identical or substantively 
similar position limit rule(s) of the other Participant(s). 
Examinations for delta hedging for Common Members that are non-FINRA 
members will be conducted by the same Participant conducting 
position limit surveillance. The allocation of Common Members to 
DOSRs for surveillance of compliance with options position limits 
and other agreed to Common Rules is provided in Exhibit B. The 
allocation of Common Members to DOSRs for examinations of the delta 
hedging exemption under the options position limits rules is 
provided in Exhibit C.
    III. Each year within 30 days of the anniversary date of the 
commencement of operation of this Agreement, or more frequently if 
required by changes in the rules of a Participant, each Participant 
shall submit to the other Participants, through the Chair of the 
OSG, an updated list of Common Rules for review. This updated list 
may add Common Rules to Exhibit A, shall delete from Exhibit A rules 
of that Participant that are no longer identical or substantially 
similar to the Common Rules, and shall confirm that the remaining 
rules of the Participant included on Exhibit A continue to be 
identically or substantially similar to the Common Rules. Within 30 
days from the date that each Participant has received revisions to 
Exhibit A from the Chair of the OSG, each Participant shall confirm 
in writing to the Chair of the OSG whether that Participant's rules 
listed in Exhibit A are Common Rules.
    IV. Apparent violation of another Participant's rules discovered 
by a DOSR, but which rules are not within the scope of the 
discovering DOSR's Regulatory Responsibility, shall be referred to 
the relevant Participant for such action as is deemed appropriate by 
that Participant. Notwithstanding the foregoing, nothing contained 
herein shall preclude a DOSR in its discretion from requesting that 
another Participant conduct an investigative or enforcement 
proceeding (``Proceeding'') on a matter for which the requesting 
DOSR has Regulatory Responsibility. If such other Participant 
agrees, the Regulatory Responsibility in such case shall be deemed 
transferred to the accepting Participant and confirmed in writing by 
the Participants involved. Additionally, nothing in this Agreement 
shall prevent another Participant on whose market potential 
violative activity took place from conducting its own Proceeding on 
a matter. The Participant conducting the Proceeding shall advise the 
assigned DOSR. Each Participant agrees, upon request, to make 
available promptly all relevant files, records and/or witnesses 
necessary to assist another Participant in a Proceeding.
    V. The OSG shall be composed of one representative designated by 
each of the Participants (a ``Representative''). Each Participant 
shall also designate one or more persons as its alternate 
representative(s) (an ``Alternate Representative''). In the absence 
of the Representative, the Alternate Representative shall assume the 
powers, duties and responsibilities of the Representative. Each 
Participant may at any time replace its Representative and/or its 
Alternate Representative to the Group.\3\ A majority of the OSG 
shall constitute a quorum and, unless otherwise required, the 
affirmative vote of a majority of the Representatives present (in 
person, by telephone or by written consent) shall be necessary to 
constitute action by the Group.
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    \3\ A Participant must give notice to the Chair of the Group of 
such a change.
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    The Group will have a Chair, Vice Chair and Secretary. A 
different Participant will assume each position on a rotating basis 
for a one-year term. In the event that a Participant replaces a 
Representative who is acting as Chair, Vice Chair or Secretary, the 
newly appointed Representative shall assume the position of Chair, 
Vice Chair, or Secretary (as applicable) vacated by the 
Participant's former Representative. In the event a Participant 
cannot fulfill its duties as Chair, the Participant serving as Vice 
Chair shall substitute for the Chair and complete the subject 
unfulfilled term. All notices and other communications for the OSG 
are to be sent in care of the Chair and, as appropriate, to each 
Representative.
    VI. The OSG shall determine the times and locations of Group 
meetings, provided that the Chair, acting alone, may also call a 
meeting of the Group in the event the Chair determines that there is 
good cause to do so. To the extent reasonably possible, notice of 
any meeting shall be given at least ten business days prior to the 
meeting date. Representatives shall always be given the option of 
participating in any meeting telephonically at their own expense 
rather than in person.
    VII. No less frequently than every two years, in such manner as 
the Group deems appropriate, the OSG shall allocate Common Members 
that conduct an Options business

[[Page 29715]]

among the Participants (``Allocation''), and the Participant to 
which a Common Member is allocated will serve as the DOSR for that 
Common Member. Any Allocation shall be based on the following 
principles, except to the extent all affected Participants consent 
to one or more different principles:
    (a) The OSG may not allocate a Common Member to a Participant 
unless the Common Member is a member of that Participant.
    (b) To the extent practicable, Common Members that conduct an 
Options business shall be allocated among the Participants of which 
they are members in such manner as to equalize as nearly as possible 
the allocation among such Participants, provided that no Common 
Members shall be allocated to FINRA. For example, if sixteen Common 
Members that conduct an Options business are members only of three 
Participants, none of which is FINRA, those Common Members shall be 
allocated among the three Participants such that no Participant is 
allocated more than six such members and no Participant is allocated 
less than five such members. If, in the previous example, one of the 
three Participants is FINRA, the sixteen Common Members would be 
allocated evenly between the remaining Participants, so that the two 
non-FINRA Participants would be allocated eight Common Members each.
    (c) To the extent practicable, Allocation shall take into 
account the amount of Options activity conducted by each Common 
Member in order to most evenly divide the Common Members with the 
largest amount of activity among the Participants of which they are 
members. Allocation will also take into account similar allocations 
pursuant to other plans or agreements to which the Common Members 
are party to maintain consistency in oversight of the Common 
Members.\4\
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    \4\ For example, if one Participant was allocated a Common 
Member by another regulatory group that Participant would be 
assigned to be the DOSR of that Common Member, unless there is good 
cause not to make that assignment.
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    (d) To the extent practicable, Allocation of Common Members to 
Participants will be rotated among the applicable Participants such 
that a Common Member shall not be allocated to a Participant to 
which that Common Member was allocated within the previous two 
years. The assignment of DOSRs pursuant to the Allocation is 
attached as Exhibit B hereto, and will be updated from time to time 
to reflect Common Member Allocation changes.
    (e) The Group may reallocate Common Members from time-to-time, 
as it deems appropriate.
    (f) Whenever a Common Member ceases to be a member of its DOSR, 
the DOSR shall promptly inform the Group, which shall review the 
matter and allocate the Common Member to another Participant.
    (g) A DOSR may request that a Common Member to which it is 
assigned be reallocated to another Participant by giving 30 days 
written notice to the Chair of the OSG. The Group, in its 
discretion, may approve such request and reallocate the Common 
Member to another Participant.
    (h) All determinations by the Group with respect to Allocation 
shall be made by the affirmative vote of a majority of the 
Participants that, at the time of such determination, share the 
applicable Common Member being allocated; a Participant shall not be 
entitled to vote on any Allocation relating to a Common Member 
unless the Common Member is a member of such Participant.
    VIII. Each DOSR shall conduct routine surveillance reviews to 
detect violations of the applicable Common Rules by each Common 
Member allocated to it with a frequency (daily, weekly, monthly, 
quarterly, semi-annually or annually as noted on Exhibit A) not less 
than that determined by the Group. The other Participants agree 
that, upon request, relevant information in their respective files 
relative to a Common Member will be made available to the applicable 
DOSR. In addition, each Participant shall provide, to the extent not 
otherwise already provided, information pertaining to its 
surveillance program that would be relevant to FINRA or the 
Participant(s) conducting routine examinations for the delta hedging 
exemption.
    At each meeting of the OSG, each Participant shall be prepared 
to report on the status of its surveillance program for the previous 
quarter and any period prior thereto that has not previously been 
reported to the Group. In the event a DOSR believes it will not be 
able to complete its Regulatory Responsibility for its allocated 
Common Members, it will so advise the Group in writing promptly. The 
Group will undertake to remedy this situation by reallocating the 
subject Common Members among the remaining Participants. In such 
instance, the Group may determine to impose a regulatory fee for 
services provided to the DOSR that was unable to fulfill its 
Regulatory Responsibility.
    IX. Each Participant will, upon request, promptly furnish a copy 
of the report or applicable portions thereof relating to any 
investigation made pursuant to the provisions of this Agreement to 
each other Participant of which the Common Member under 
investigation is a member.
    X. Each Participant will routinely populate a common database, 
to be accessed by the Group relating to any formal regulatory action 
taken during the course of a Proceeding with respect to the Common 
Rules concerning a Common Member.
    XI. Any written notice required or permitted to be given under 
this Agreement shall be deemed given if sent by certified mail, 
return receipt requested, to any Participant to the attention of 
that Participant's Representative, to the Participant's principal 
place of business or by email at such address as the Representative 
shall have filed in writing with the Chair.
    XII. The costs incurred by each Participant in discharging its 
Regulatory Responsibility under this Agreement are not reimbursable. 
However, any of the Participants may agree that one or more will 
compensate the other(s) for costs incurred.
    XIII. The Participants shall notify the Common Members of this 
Agreement by means of a uniform joint notice approved by the Group. 
Each Participant will notify the Common Members that have been 
allocated to it that such Participant will serve as DOSR for that 
Common Member.
    XIV. This Agreement shall be effective upon approval of the 
Commission. This Agreement may only be amended in writing duly 
approved by each Participant. All amendments to this Agreement, 
excluding changes to Exhibits A, B and C, must be filed with and 
approved by the Commission.
    XV. Any Participant may manifest its intention to cancel its 
participation in this Agreement at any time upon providing written 
notice to (i) the Group six months prior to the date of such 
cancellation, or such other period as all the Participants may 
agree, and (ii) the Commission. Upon receipt of the notice the Group 
shall allocate, in accordance with the provisions of this Agreement, 
those Common Members for which the canceling Participant was the 
DOSR. The canceling Participant shall retain its Regulatory 
Responsibility and other rights, privileges and duties pursuant to 
this Agreement until the Group has completed the reallocation as 
described above, and the Commission has approved the cancellation.
    XVI. The cancellation of its participation in this Agreement by 
any Participant shall not terminate this Agreement as to the 
remaining Participants. This Agreement will only terminate following 
notice to the Commission, in writing, by the then Participants that 
they intend to terminate the Agreement and the expiration of the 
applicable notice period. Such notice shall be given at least six 
months prior to the intended date of termination, or such other 
period as all the Participants may agree. Such termination will 
become effective upon Commission approval.
    XVII. Participation in the Group shall be strictly limited to 
the Participants and no other party shall have any right to attend 
or otherwise participate in the Group except with the unanimous 
approval of all Participants. Notwithstanding the foregoing, any 
national securities exchange registered with the SEC under Section 
6(a) of the Act or any national securities association registered 
with the SEC under section 15A of the Act may become a Participant 
to this Agreement provided that: (i) Such applicant has adopted 
rules substantially similar to the Common Rules, and received 
approval thereof from the SEC; (ii) such applicant has provided each 
Participant with a signed statement whereby the applicant agrees to 
be bound by the terms of this Agreement to the same effect as though 
it had originally signed this Agreement and (iii) an amended 
agreement reflecting the addition of such applicant as a Participant 
has been filed with and approved by the Commission.
    XVIII. This Agreement is wholly separate from the multiparty 
Agreement made pursuant to Rule 17d-2 by and among the American 
Stock Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago 
Board Options Exchange, Inc., the International Securities Exchange, 
LLC, Financial Industry Regulatory Authority, The NASDAQ Stock 
Market LLC, Inc., the New York Stock Exchange, LLC, the NYSE Arca, 
Inc., and the Philadelphia Stock Exchange, Inc. involving the 
allocation of regulatory responsibilities with respect to common 
members for

[[Page 29716]]

compliance with common rules relating to the conduct by broker-
dealers of accounts for listed options or index warrants entered 
into on June 5, 2008, and as may be amended from time to time.

Limitation of Liability

    No Participant nor the Group nor any of their respective 
directors, governors, officers, employees or representatives shall 
be liable to any other Participant in this Agreement for any 
liability, loss or damage resulting from or claimed to have resulted 
from any delays, inaccuracies, errors or omissions with respect to 
the provision of Regulatory Responsibility as provided hereby or for 
the failure to provide any such Regulatory Responsibility, except 
with respect to such liability, loss or damages as shall have been 
suffered by one or more of the Participants and caused by the 
willful misconduct of one or more of the other Participants or its 
respective directors, governors, officers, employees or 
representatives. No warranties, express or implied, are made by the 
Participants, individually or as a group, or by the OSG with respect 
to any Regulatory Responsibility to be performed hereunder.

Relief From Responsibility

    Pursuant to Section 17(d)(1)(A) of the Exchange Act and Rule 
17d-2, the Participants join in requesting the Commission, upon its 
approval of this Agreement or any part thereof, to relieve the 
Participants that are party to this Agreement and are not the DOSR 
as to a Common Member of any and all Regulatory Responsibility with 
respect to the matters allocated to the DOSR.

EXHIBIT A: COMMON RULES

    Violation I--Expiring Exercise Declarations (EED)--For Listed Equity Options Expiring: The Third Saturday
                  Following the Third Friday of a Month, Quarterly, and for Listed FLEX Options
----------------------------------------------------------------------------------------------------------------
                SRO                     Description of rule      Exchange rule No.       Frequency of  review
----------------------------------------------------------------------------------------------------------------
NYSE Amex..........................  Exercise of Options       Rule 980.............  At Expiration.
                                      Contracts.
BATS...............................  Exercise of Options       Rule 23.1............  At Expiration.
                                      Contracts.
BOX................................  Exercise of Options       Rule 9000............  At Expiration.
                                      Contracts.
Nasdaq OMX B[O]X...................  Exercise of Options       Chapter VII, Section   At Expiration.
                                      Contracts.                1.
C2.................................  Exercise of Options       Rule 11.1............  At Expiration.
                                      Contracts.
CBOE...............................  Exercise of Options       Rule 11.1............  At Expiration.
                                      Contracts.
FINRA..............................  Exercise of Options       Rule 2360(b)(23).....  At Expiration.
                                      Contracts.
ISE................................  Exercise of Options       Rule 1100............  At Expiration.
                                      Contracts.
Nasdaq.............................  Exercise of Options       Nasdaq Chapter VIII,   At Expiration.
                                      Contracts.                Sec. 1.
NYSE Arca..........................  Exercise of Options       Rule 6.24............  At Expiration.
                                      Contracts.
NASDAQ OMX PHLX....................  Exercise of Equity        Rule 1042............  At Expiration.
                                      Options Contracts.
----------------------------------------------------------------------------------------------------------------

 Violation II--Position Limits (PL)--For Listed Equity Options Expiring: The Third Saturday Following the Third
                                          Friday of a Month, Quarterly
----------------------------------------------------------------------------------------------------------------
                                     Description of rule (for
                SRO                   review as they apply to    Exchange rule No.       Frequency of  review
                                                PL)
----------------------------------------------------------------------------------------------------------------
NYSE Amex..........................  Position Limits           Rule 904.............  Daily.
                                      (includes exemptions).
                                     Liquidating Positions...  Rule 907.............  As Needed.
BATS...............................  Position Limits.........  Rule 18.7............  Daily.
                                     Exemptions from Position  Rule 18.8............  As Needed.
                                     Liquidation Positions...  Rule 18.11...........  As Needed.
BOX................................  Position Limits.........  Rule 3120............  Daily.
                                     Exemptions from Position  Rule 3130............  As Needed.
                                     Liquidation Positions...  Rule 3160............  As Needed.
Nasdaq OMX B[O]X...................  Position Limits.........  Chapter III, Section   Daily.
                                                                7.
                                     Exemptions from Position  Chapter III, Section   As Needed.
                                      Limits.                   8.
                                     Liquidation Positions...  Chapter III, Section   As Needed.
                                                                11.
C2.................................  Position Limits.........  Rule 4.11............  Daily.
                                     Liquidation of Positions  Rule 4.14............  As Needed.
CBOE...............................  Position Limits.........  Rule 4.11............  Daily.
                                     Liquidation of Positions  Rule 4.14............  As Needed.
FINRA..............................  Position Limits.........  Rule 2360(b)(3)......  Daily.
                                     Liquidation of Positions  Rule 2360(b)(6)......  As Needed.
                                      and Restrictions on
                                      Access.
ISE................................  Position Limits.........  Rule 412.............  Daily.
                                     Exemptions from Position  Rule 413.............  As Needed.
                                      Limits.
                                     Liquidating Positions...  Rule 416.............  As Needed.
Nasdaq.............................  Position Limits.........  Nasdaq Rule Chapter    Daily.
                                                                III Section 7.
                                     Exemptions from Position  Nasdaq Rule Chapter    As Needed.
                                      Limits.                   III Section 8.
                                     Liquidating Positions...  Nasdaq Rule Chapter    As Needed.
                                                                III Section 11.
NYSE Arca..........................  Position Limits           Rule 6.8.............  Daily.
                                      (includes exemptions).
                                     Liquidation of Position.  Rule 6.7.............  As Needed.
NASDAQ OMX PHLX....................  Position Limits.........  Rule 1001............  Daily.
                                     Liquidation of Positions  Rule 1004............  As Needed
----------------------------------------------------------------------------------------------------------------

             Violation III--Large Options Position Report (LOPR)--For Listed Equity and ETF Options
----------------------------------------------------------------------------------------------------------------
                                     Description of rule (for
                SRO                   review as they apply to    Exchange rule No.       Frequency of  review
                                               LOPR)
----------------------------------------------------------------------------------------------------------------
NYSE Amex..........................  Reporting of Options      Rule 906.............  Yearly.
                                      Positions.
BATS...............................  Reports Related to        Rule 18.10...........  Yearly.
                                      Position Limits.

[[Page 29717]]

 
BOX................................  Reports Related to        Rule 3150............  Yearly.
                                      Position Limits.
Nasdaq OMX B[O]X...................  Reports Related to        Chapter III, Section   Yearly.
                                      Position Limits.          10.
C2.................................  Reports Related to        Rule 4.13(a),........  Yearly.
                                      Position Limits.
                                     Reports Related to        Rule 4.13(b).........  Yearly.
                                      Position Limits.
                                     Reports Related to        Rule 4.13(d).........  Yearly.
                                      Position Limits.
CBOE...............................  Reports Related to        Rule 4.13(a),........  Yearly.
                                      Position Limits.
                                     Reports Related to        Rule 4.13(b).........  Yearly.
                                      Position Limits.
                                     Reports Related to        Rule 4.13(d).........  Yearly.
                                      Position Limits.
FINRA..............................  Options.................  Rule 2360(b)(5)......  Yearly.
ISE................................  Reports Related to        Rule 415.............  Yearly.
                                      Position Limits.
Nasdaq.............................  Reports Related to        Chapter III Section    Yearly.
                                      Position Limits.          10.
NYSE Arca..........................  Reporting of Options      Rule 6.6.............  Yearly.
                                      Positions.
NASDAQ OMX PHLX....................  Reporting of Options      Rule 1003............  Yearly.
                                      Positions.
----------------------------------------------------------------------------------------------------------------

                       Violation IV--Options Clearing Corporation (OCC) Adjustment Process
----------------------------------------------------------------------------------------------------------------
                                      Description of rule (as
                                         they apply to OCC
                SRO                     Adjustments/By-laws      Exchange rule No.       Frequency of  review
                                        Article VI, Section
                                         1.01(a) and .02))
----------------------------------------------------------------------------------------------------------------
NYSE Amex..........................  Business Conduct........  Rule 16..............  Yearly.
BATS...............................  Adherence to Law........  Rule 18.1............  Yearly.
BOX................................  Adherence to Law........  Rule 3010............  Yearly.
Nasdaq OMX B[O]X...................  Adherence to Law........  Chapter III, Section   Yearly.
                                                                1.
C2.................................  Adherence to Law........  Rule 4.2.............  Yearly.
CBOE...............................  Adherence to Law........  Rule 4.2.............  Yearly.
FINRA..............................  Violation of By-Laws and  Rule 2360(b)(21).....  Yearly.
                                      Rules of FINRA or the
                                      OCC.
ISE................................  Adherence to Law........  Rule 401.............  Yearly.
Nasdaq.............................  Adherence to Law........  Chapter III, Section   Yearly.
                                                                1.
NYSE Arca..........................  Adherence to Law and      Rule 11.1............  Yearly.
                                      Good Business Practice.
NASDAQ OMX PHLX....................  Violation of By-Laws and  Rule 1050............  Yearly.
                                      Rules of OCC.
----------------------------------------------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. 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 email to rule-comments@sec.gov. Please include 
File Number 4-551 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 4-551. This file number 
should be included on the subject line if email 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 plan that are filed with the 
Commission, and all written communications relating to the proposed 
plan 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 Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the plan also will be available for inspection and 
copying at the principal offices of Amex, BATS, C2, CBOE, ISE, FINRA, 
Arca, NASDAQ, BOX, BX and Phlx. 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 4-551 and should be submitted on or before June 8, 2012.

V. Discussion

    The Commission continues to believe that the Plan, as proposed to 
be amended, is an achievement in cooperation among the SRO 
participants. The Plan, as amended, will reduce unnecessary regulatory 
duplication by allocating to the designated SRO the responsibility for 
certain options-related market surveillance matters that would 
otherwise be performed by multiple SROs. The Plan promotes efficiency 
by reducing costs to firms that are members of more than one of the SRO 
participants. In addition, because the SRO participants coordinate 
their regulatory functions in accordance with the Plan, the Plan 
promotes, and will continue to promote, investor protection. Under 
paragraph (c) of Rule 17d-2, the Commission may, after appropriate 
notice and comment, declare a plan, or any part of a plan, effective. 
In this instance, the Commission believes that appropriate notice and 
comment can take place after the proposed amendment is effective. The 
purpose of the amendment is to add BOX as a Participant to the Plan. By 
declaring it effective today, the amended Plan can become effective and 
be implemented without undue delay.\15\ In addition, the Commission 
notes that the prior version of this Plan was

[[Page 29718]]

published for comment, and the Commission did not receive any comments 
thereon.\16\ Finally, the Commission does not believe that the 
amendment to the Plan raises any new regulatory issues that the 
Commission has not previously considered.
---------------------------------------------------------------------------

    \15\ On April 27, 2012, the Commission granted BOX's application 
for registration as a national securities exchange. See Securities 
Exchange Act Release No. 66871 (April 27, 2012), 77 FR 26323 (May 3, 
2012).
    \16\ See supra note 14 (citing to Securities Exchange Act 
Release No. 61588).
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VI. Conclusion

    This order gives effect to the amended Plan submitted to the 
Commission that is contained in File No. 4-551.
    It is therefore ordered, pursuant to Section 17(d) of the Act, 16 
that the Plan, as amended by and between the Amex, BATS, C2, CBOE, ISE, 
FINRA, Arca, NASDAQ, BOX, BX and Phlx filed with the Commission 
pursuant to Rule 17d-2 on May 2, 2012 is hereby approved and declared 
effective.
    It is further ordered that those SRO participants that are not the 
DOSR as to a particular common member are relieved of those regulatory 
responsibilities allocated to the common member's DOSR under the 
amended Plan to the extent of such allocation.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12019 Filed 5-17-12; 8:45 am]
BILLING CODE 8011-01-P