Document ID: SEC-2011-0118-0001
Agency: sec
Document Type: Notice
Title: Amendment to the Plan for the Allocation of Regulatory Responsibilities: BATS Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange, Inc.,et al.
Posted Date: 2011-01-27T05:00Z

[Federal Register Volume 76, Number 18 (Thursday, January 27, 2011)]
[Notices]
[Pages 4948-4958]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1764]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63750; File No. 4-566]

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 BATS Exchange, Inc., BATS Y-Exchange, Inc., 
Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, 
Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, 
The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York 
Stock Exchange LLC, NYSE Amex LLC, and NYSE Arca, Inc. Relating to the 
Surveillance, Investigation, and Enforcement of Insider Trading Rules

January 21, 2011.
    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 pursuant to Rule 17d-2 of the Act,\2\ 
by and among BATS Exchange, Inc. (``BATS''), BATS Y-Exchange, Inc. 
(``BYX''), Chicago Board Options Exchange, Incorporated (``CBOE''), 
Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange, Inc. (``EDGA''), 
EDGX Exchange, Inc. (``EDGX''), the Financial Industry Regulatory 
Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., (``NASDAQ OMX BX''), 
NASDAQ OMX PHLX, LLC, (``NASDAQ OMX PHLX''), The NASDAQ Stock Market 
LLC (``Nasdaq''), National Stock Exchange, Inc. (``NSX''), New York 
Stock Exchange LLC (``NYSE''), NYSE Amex, LLC (``NYSE Amex''), and NYSE 
Arca, Inc. (``NYSE Arca'') (each a ``Participating Organization'' and 
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-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

[[Page 4949]]

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 September 12, 2008, the Commission declared effective the 
Participating Organizations' Plan for allocating regulatory 
responsibilities pursuant to Rule 17d-2.\11\ The Plan is designed to 
eliminate regulatory duplication by allocating regulatory 
responsibility over Common NYSE Members \12\ or Common FINRA 
Members,\13\ as applicable (collectively ``Common Members''), for the 
surveillance, investigation, and enforcement of common insider trading 
rules (``Common Rules'').\14\ The Plan assigns regulatory 
responsibility over Common NYSE Members to NYSE Regulation for 
surveillance, investigation, and enforcement of insider trading by 
broker-dealers, and their associated persons, with respect to NYSE-
listed stocks and NYSE Arca-listed stocks, irrespective of the 
marketplace(s) maintained by the Participating Organizations on which 
the relevant trading may occur. The Plan assigns regulatory 
responsibility over Common FINRA Members to FINRA for surveillance, 
investigation, and enforcement of insider trading by broker-dealers, 
and their associated persons, with respect to NASDAQ-listed stocks and 
Amex-listed stocks, as well as any CHX solely-listed stock, 
irrespective of the marketplace(s) maintained by the Participating 
Organizations on which the relevant trading may occur.
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    \11\ See Securities Exchange Act Release No. 58536 (September 
12, 2008), 73 FR 54646 (September 22, 2008). See also Securities 
Exchange Act Release Nos. 58806 (October 17, 2008), 73 FR 63216 
(October 23, 2008); 61919 (April 15, 2010), 75 FR 21051 (April 22, 
2010); and 63103 (October 14, 2010), 75 FR 64755 (October 20, 2010).
    \12\ Common NYSE Members include members of the NYSE and at 
least one of the Participating Organizations.
    \13\ Common FINRA Members include members of FINRA and at least 
one of the Participating Organizations.
    \14\ Common rules are defined as: (i) Federal securities laws 
and rules promulgated by the Commission pertaining to insider 
trading, and (ii) the rules of the Participating Organizations that 
are related to insider trading. See Exhibit A to the Plan.
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III. Proposed Amendment to the Plan

    On November 23, 2010, the Participating Organizations submitted an 
amendment to the Plan. The proposed amendment was submitted as a result 
of a recently completed agreement under which FINRA would assume 
responsibility for performing the market surveillance and enforcement 
functions previously conducted by NYSE Regulation for its U.S. equities 
and options markets (NYSE, NYSE Arca and NYSE Amex). As part of this 
acquisition agreement, most of the NYSE personnel performing these 
responsibilities under the Plan have been transferred to FINRA. The 
Participating Organizations believe that consolidating surveillance, 
investigation, and enforcement for insider trading within FINRA will 
lead to a more unified and effective system of regulation.
    Accordingly, the proposed amendment would modify the Plan to 
reflect that NYSE Regulation, Inc. would no longer perform any 
regulatory responsibilities under the Plan. Under the amended Plan, 
FINRA would perform surveillance, investigation, and enforcement of the 
common insider trading rules listed in the Plan with respect to equity 
securities listed on the NYSE, NASDAQ, NYSE Amex, NYSE Arca, or Chicago 
Stock Exchange, irrespective of the marketplaces maintained by the 
parties to the Plan. As with the current version of the Plan, FINRA 
will have regulatory responsibility for members of FINRA that are also 
members of at least one of the Participating Organizations. Separately, 
FINRA performs investigations and enforcement with respect to non-
Common FINRA Members pursuant to a regulatory services agreement 
between FINRA and the other Participating Organizations. The amended 
Plan replaces the previous agreement in its entirety. The text of the 
proposed amended 17d-2 plan is as follows (additions are italicized; 
deletions are [bracketed]):
* * * * *

Agreement for the Allocation of Regulatory Responsibility of 
Surveillance, Investigation and Enforcement for Insider Trading 
Pursuant to Sec.  17(d) of the Securities Exchange Act of 1934, 15 
U.S.C. Sec.  78q(d), and Rule 17d-2 Thereunder

    This agreement (the ``Agreement'') by and among BATS Exchange, Inc. 
(``BATS''), BATS Y-Exchange, Inc. (``BYX''), Chicago Board Options 
Exchange, Inc. (``CBOE'') *, Chicago Stock Exchange, Inc. (``CHX''), 
EDGA Exchange, Inc. (``EDGA''), EDGX Exchange, Inc. (``EDGX''), 
Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ 
OMX[,] BX, Inc. (``NASDAQ OMX BX''), NASDAQ OMX PHLX LLC (``NASDAQ OMX 
PHLX''), The NASDAQ Stock Market LLC (``NASDAQ''), National Stock 
Exchange, Inc. (``NSX''), New York Stock Exchange[,] LLC (``NYSE''), 
NYSE Amex LLC (``NYSE Amex''), and NYSE Arca, Inc. (``NYSE Arca'')[, 
and NYSE Regulation, Inc. (pursuant to delegated authority) (``NYSE 
Regulation'')] (each a ``Participating Organization'' and together, the 
``Participating Organizations''), is made pursuant to Sec.  17(d) of 
the Securities Exchange Act of 1934 (the ``Act''), 15 U.S.C. Sec.  
78q(d), and Securities and Exchange Commission (``SEC'') Rule 17d-2, 
which allow for plans to allocate regulatory responsibility among self-
regulatory organizations (``SROs''). Upon approval by the SEC, this 
Agreement shall amend and restate the agreement among the Participating 
Organizations [(except BYX)] approved by the SEC on [April 15]October 
14, 2010.
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    * CBOE's allocation of certain regulatory responsibilities to 
[NYSE/]FINRA under this Agreement is limited to the activities of 
the CBOE Stock Exchange, LLC, a facility of CBOE.
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    [WHEREAS, NYSE delegates to NYSE Regulation the regulation of 
trading by members in its market, and NYSE Regulation is a subsidiary 
of NYSE, all references to NYSE Regulation in this Agreement shall be 
read as references to both entities;]
    WHEREAS, the Participating Organizations desire to: (a) Foster 
cooperation and coordination among the SROs; (b) remove impediments to, 
and foster the development of, a national market system; (c) strive to 
protect the

[[Page 4950]]

interest of investors; and (d) eliminate duplication in their 
regulatory surveillance, investigation and enforcement of insider 
trading;
    [WHEREAS, the Participating Organizations are interested in 
allocating to NYSE Regulation regulatory responsibility for Common NYSE 
Members for surveillance, investigation and enforcement of Insider 
Trading (as defined below) in NYSE Listed Stocks (as defined below) 
irrespective of the marketplace(s) maintained by the Participating 
Organizations on which the relevant trading may occur in violation of 
Common Insider Trading Rules;]
    WHEREAS, the Participating Organizations are interested in 
allocating to FINRA regulatory responsibility for Common FINRA Members 
(as defined below) for surveillance, investigation and enforcement of 
Insider Trading (as defined below) in [NASDAQ] Listed Stocks (as 
defined below) [, Amex Listed Stocks, and CHX Solely Listed Stocks] 
irrespective of the marketplace(s) maintained by the Participating 
Organizations on which the relevant trading may occur in violation of 
Common Insider Trading Rules (as defined below);
    WHEREAS, the Participating Organizations will request regulatory 
allocation of these regulatory responsibilities by executing and filing 
with the SEC a plan for the above stated purposes (this Agreement, also 
known herein as the ``Plan'') pursuant to the provisions of Sec.  17(d) 
of the Act, and SEC Rule 17d-2 thereunder, as described below; and
    WHEREAS, the Participating Organizations will also enter into 
[certain]a Regulatory Services Agreement[s] (the ``Insider Trading 
RSA[s]''), of even date herewith, to provide for the investigation and 
enforcement of suspected Insider Trading against broker-dealers, and 
their associated persons, that [(i) are not Common NYSE Members (as 
defined below) in the case of Insider Trading in NYSE Listed Stocks, 
and (ii)] are not Common FINRA Members [(as defined below)] in the case 
of Insider Trading in [NASDAQ] Listed Stocks[, Amex Listed Stocks, and 
CHX Solely Listed Stocks].
    NOW, THEREFORE, in consideration of the mutual covenants contained 
hereafter, and other valuable consideration to be mutually exchanged, 
the Participating Organizations hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement, or the 
context otherwise requires, the terms used in this Agreement will have 
the same meaning they have under the Act, and the rules and regulations 
thereunder. As used in this Agreement, the following terms will have 
the following meanings:
    a. ``Rule'' of an ``exchange'' or an ``association'' shall have the 
meaning defined in Section 3(a)(27) of the Act.
    b. ``Common [NYSE Members'' shall mean members of the NYSE and at 
least one of the Participating Organizations.
    c. ``Common] FINRA Members'' shall mean members of FINRA and at 
least one of the Participating Organizations.
    [d]c. ``Common Insider Trading Rules'' shall mean (i) the federal 
securities laws and rules thereunder promulgated by the SEC pertaining 
to insider trading, and (ii) the rules of the Participating 
Organizations that are related to insider trading, as provided on 
Exhibit A to this Agreement.
    [e]d. ``Effective Date'' shall have the meaning set forth in 
paragraph 28.
    [f]e. ``Insider Trading'' shall mean any conduct or action taken by 
a natural person or entity related in any way to the trading of 
securities by an insider or a related party based on or on the basis of 
material non-public information obtained during the performance of the 
insider's duties at the corporation, or otherwise misappropriated, that 
could be deemed a violation of the Common Insider Trading Rules.
    [g]f. ``Intellectual Property'' will mean any: (1) processes, 
methodologies, procedures, or technology, whether or not patentable; 
(2) trademarks, copyrights, literary works or other works of 
authorship, service marks and trade secrets; or (3) software, systems, 
machine-readable texts and files and related documentation.
    [h]g. ``Plan'' shall mean this Agreement, which is submitted as a 
Plan for the allocation of regulatory responsibilities of surveillance 
for insider trading pursuant to Sec.  17(d) of the [Securities and 
Exchange] Act [of 1934], 15 U.S.C. Sec.  78q(d), and SEC Rule 17d-2.
    h. ``Listed Stock(s)'' shall mean NYSE Listed Stock(s), NASDAQ 
Listed Stock(s), NYSE Amex Listed Stock(s), NYSE Arca Listed Stock(s) 
or CHX Solely Listed Stock(s).
    i. ``NYSE Listed Stock'' shall mean an equity security that is 
listed on the NYSE[, or NYSE Arca].
    j. ``NASDAQ Listed Stock'' shall mean an equity security that is 
listed on [the] NASDAQ.
    k. ``NYSE Amex Listed Stock'' shall mean an equity security that is 
listed on [the]NYSE Amex.
    l. ``NYSE Arca Listed Stock'' shall mean an equity security that is 
listed on NYSE Arca.
    [l]m. ``CHX Solely Listed Stock'' shall mean an equity security 
that is listed only [in]on the [Chicago Stock Exchange]CHX.
    [m]n. ``Listing Market'' shall mean NYSE Amex, [Nasdaq]NASDAQ, 
NYSE, or NYSE Arca, but not CHX.
    2. Assumption of Regulatory Responsibilities.
    [a. NYSE Regulation: Assumption of Regulatory Responsibilities. On 
the Effective Date of the Plan, NYSE Regulation will assume regulatory 
responsibilities for surveillance, investigation and enforcement of 
Insider Trading by broker-dealers, and their associated persons, for 
Common NYSE Members with respect to NYSE Listed Stocks irrespective of 
the marketplace(s) maintained by the Participant Organizations on which 
the relevant trading may occur in violation of the Common Insider 
Trading Rules (``NYSE's Regulatory Responsibility'').]
    [b. FINRA: Assumption of Regulatory Responsibilities.] On the 
Effective Date of the Plan, FINRA will assume regulatory 
responsibilities for surveillance, investigation and enforcement of 
Insider Trading by broker-dealers, and their associated persons, for 
Common FINRA Members with respect to [NASDAQ and Amex] Listed Stocks, 
[as well as any CHX Solely Listed equity security,] irrespective of the 
marketplace(s) maintained by the Participant Organizations on which the 
relevant trading may occur in violation of the Common Insider Trading 
Rules (``[FINRA's] Regulatory Responsibilit[y]ies'').
    [c. Change in Control. In the event of a change of control of a 
Listing Market, the Listing Market will have the discretion to transfer 
the regulatory responsibility for its listed stocks from NYSE 
Regulation to FINRA or from FINRA to NYSE Regulation, provided the SRO 
assuming regulatory responsibility consents to such transfer.]
    3. Certification of Insider Trading Rules.
    a. Initial Certification. By signing this Agreement, the 
Participating Organizations, other than [NYSE Regulation and] FINRA, 
hereby certify to [NYSE Regulation and] FINRA that their respective 
lists of Common Insider Trading Rules contained in [Attachment]Exhibit 
A hereto are correct, and [NYSE Regulation and] FINRA hereby confirms 
that such rules are Common Insider Trading Rules as defined in this 
Agreement.
    b. Yearly Certification. Each year following the commencement of 
operation of this Agreement, or more frequently if required by changes 
in the

[[Page 4951]]

rules of the Participating Organizations, each Participating 
Organization shall submit a certified and updated list of Common 
Insider Trading Rules to [NYSE Regulation and] FINRA for review, which 
shall (i) add Participating Organization rules not included in the 
then-current list of Common Insider Trading Rules that qualify as 
Common Insider Trading Rules as defined in this Agreement; (ii) delete 
Participating Organization rules included in the current list of Common 
Insider Trading Rules that no longer qualify as Common Insider Trading 
Rules as defined in this Agreement; and (iii) confirm that the 
remaining rules on the current list of Common Insider Trading Rules 
continue to be Participating Organization rules that qualify as Common 
Insider Trading Rules as defined in this Agreement. [NYSE Regulation 
and] FINRA shall review each Participating Organization's annual 
certification and confirm whether [NYSE Regulation and] FINRA agrees 
with the submitted certified and updated list of Common Insider Trading 
Rules by each of the Participating Organizations.
    4. No Retention of Regulatory Responsibility. The Participating 
Organizations do not contemplate the retention of any responsibilities 
with respect to the regulatory activities being assumed by [NYSE 
Regulation and] FINRA[, respectively,] under the terms of this 
Agreement. [Nothing in this Agreement will be interpreted to prevent 
NYSE Regulation or FINRA from entering into Regulatory Services 
Agreement(s) to perform their Regulatory Responsibilities.]
    5. Dually Listed Stocks. Stocks that are listed on more than one 
Participating Organization shall be designated as an NYSE Listed Stock, 
a NASDAQ Listed Stock, an NYSE Arca Listed Stock or an NYSE Amex Listed 
Stock based on the applicable transaction reporting plan for the equity 
security as set forth in paragraph 1.b. of Exhibit B.
    6. Fees. [NYSE Regulation and] FINRA shall charge Participating 
Organizations for performing [their respective]the Regulatory 
Responsibilities, as set forth in the Schedule of Fees, attached as 
Exhibit B.
    7. Applicability of Certain Laws, Rules, Regulations or Orders. 
Notwithstanding any provision hereof, this Agreement shall be subject 
to any statute, or any rule or order of the SEC. To the extent such 
statute, rule, or order is inconsistent with one or more provisions of 
this Agreement, the statute, rule, or order shall supersede the 
provision(s) hereof to the extent necessary to be properly effectuated 
and the provision(s) hereof in that respect shall be null and void.
    8. Exchange Committee; Reports.
    a. Exchange Committee. The Participating Organizations shall form a 
committee (the ``Exchange Committee''), which shall act on behalf of 
all of Participating Organizations in receiving copies of the reports 
described below and in reviewing issues that arise under this 
Agreement. Each Participating Organization shall appoint a 
representative to the Exchange Committee. The Exchange Committee 
representatives shall report to their respective executive management 
bodies regarding status or issues under [the]this Agreement. The 
Participating Organizations agree that the Exchange Committee will meet 
regularly up to four (4) times a year, with no more than one meeting 
per calendar quarter. At these meetings, the Exchange Committee will 
discuss the conduct of the Regulatory Responsibilities and identify 
issues or concerns with respect to this Agreement, including matters 
related to the calculation of the cost formula and accuracy of fees 
charged and provision of information related to the same. The SEC shall 
be permitted to attend the meetings as an observer.
    b. Reports. [NYSE Regulation and] FINRA shall provide the reports 
set forth in Exhibit C hereto and any additional reports related to 
[the]this Agreement reasonably requested by a majority vote of all 
representatives to the Exchange Committee at each Exchange Committee 
meeting, or more often as the Participating Organizations deem 
appropriate, but no more often than once every quarterly billing 
period.
    9. Customer Complaints.
    [a. If a Participating Organization receives a copy of a customer 
complaint relating to Insider Trading or other activity or conduct that 
is within the NYSE's Regulatory Responsibilities as set forth in this 
Agreement, the Participating Organization shall promptly forward to 
NYSE Regulation, as applicable, a copy of such customer complaint.
    b. ]If a Participating Organization receives a copy of a customer 
complaint relating to Insider Trading or other activity or conduct that 
is within FINRA's Regulatory Responsibilities as set forth in this 
Agreement, the Participating Organization shall promptly forward to 
FINRA, as applicable, a copy of such customer complaint.
    10. Parties to Make Personnel Available as Witnesses. Each 
Participating Organization shall make its personnel available to [NYSE 
Regulation or] FINRA to serve as testimonial or non-testimonial 
witnesses as necessary to assist [NYSE Regulation and] FINRA in 
fulfilling the Regulatory Responsibilities allocated under this 
Agreement. FINRA [and NYSE Regulation] shall provide reasonable advance 
notice when practicable and shall work with a Participating 
Organization to accommodate reasonable scheduling conflicts within the 
context and demands as the entit[ies]y with ultimate regulatory 
responsibility. The Participating Organization shall pay all reasonable 
travel and other expenses incurred by its employees to the extent that 
[NYSE Regulation or] FINRA requires such employees to serve as 
witnesses, and provide information or other assistance pursuant to this 
Agreement.
    11. Market Data; Sharing of Work-Papers, Data and Related 
Information.
    a. Market Data. FINRA [and NYSE Regulation] shall obtain raw market 
data necessary to the performance of regulation under this Agreement 
from (a) the Consolidated Tape Association (``CTA'') as the exclusive 
securities information processor (``SIP'') for all NYSE[-listed, AMEX-
listed securities,]Listed Stocks, NYSE Amex Listed Stocks, NYSE Arca 
Listed Stocks and CHX [solely listed securities]Solely Listed Stocks 
and (b) the NASDAQ Unlisted Trading Privileges Plan as the exclusive 
SIP for all NASDAQ[-listed securities] Listed Stocks.
    b. Sharing. A Participating Organization shall make available to 
[each of NYSE Regulation and] FINRA information necessary to assist 
[NYSE Regulation or] FINRA in fulfilling the [regulatory 
responsibilities]Regulatory Responsibilities assumed under the terms of 
this Agreement. Such information shall include any information 
collected by [an exchange or association]a Participating Organization 
in the course of performing its regulatory obligations under the Act, 
including information relating to an on-going disciplinary 
investigation or action against a member, the amount of a fine imposed 
on a member, financial information, or information regarding 
proprietary trading systems gained in the course of examining a member 
(``Regulatory Information''). This Regulatory Information shall be used 
by [NYSE Regulation and] FINRA solely for the purposes of fulfilling 
[their respective regulatory responsibilities]its Regulatory 
Responsibilities.
    c. No Waiver of Privilege. The sharing of documents or information 
between the parties pursuant to this Agreement shall not be deemed a 
waiver as against

[[Page 4952]]

third parties of regulatory or other privileges relating to the 
discovery of documents or information.
    d. Intellectual Property.
    (i) Existing Intellectual Property. [Each of NYSE Regulation and] 
FINRA[, respectively,] is and will remain the owner of all right, title 
and interest in and to the proprietary Intellectual Property it employs 
in the provision of regulation hereunder (including the SONAR and Stock 
Watch systems), and any derivative works thereof. To the extent certain 
elements of [either of these parties']FINRA's systems, or portions 
thereof, may be licensed or leased from third parties, all such third 
party elements shall remain the property of such third parties, as 
applicable. Likewise, any other Participating Organization is and will 
remain the owner of all right, title and interest in and to its own 
existing proprietary Intellectual Property.
    (ii) Enhancements to Existing Intellectual Property or New 
Developments[ of NYSE Regulation or FINRA]. In the event [NYSE 
Regulation or] FINRA (a) makes any changes, modifications or 
enhancements to its [respective] Intellectual Property for any reason, 
or (b) creates any newly developed Intellectual Property for any 
reason, including as a result of requested enhancements or new 
development by the Exchange Committee (collectively, the ``New IP''), 
the Participating Organizations acknowledge and agree that [each of 
NYSE Regulation and] FINRA shall be deemed the owner of the New IP 
created by [each of them, respectively]it (and any derivative works 
thereof), and shall retain all right, title and interest therein and 
thereto, and each other Participating Organization hereby irrevocably 
assigns, transfers and conveys to [each of NYSE Regulation and] FINRA[, 
as applicable,] without further consideration all of its right, title 
and interest in or to all such New IP (and any derivative works 
thereof).
    (iii) Fees for New IP. [NYSE Regulation and] FINRA will not charge 
the Participating Organizations any fees for any New IP created and 
used by [NYSE Regulation or] FINRA[, respectively]; provided, however, 
that [NYSE Regulation and] FINRA will [each] be permitted to charge 
fees for software maintenance work performed on systems used in the 
discharge of [their respective]its duties hereunder.
    12. Special or Cause Examinations. Nothing in this Agreement shall 
restrict or in any way encumber the right of a party to conduct special 
or cause examinations of [Common NYSE Members or] Common FINRA Members 
as any party, in its sole discretion, shall deem appropriate or 
necessary.
    13. Dispute Resolution Under this Agreement.
    a. Negotiation. The [P]parties to this Agreement will attempt to 
resolve any disputes through good faith negotiation and discussion, 
escalating such discussion up through the appropriate management levels 
until reaching the executive management level. In the event a dispute 
cannot be settled through these means, the [P]parties shall refer the 
dispute to binding arbitration.
    b. Binding Arbitration. All claims, disputes, controversies, and 
other matters in question between the [P]parties to this Agreement 
arising out of or relating to this Agreement or the breach thereof that 
cannot be resolved by the [P]parties will be resolved through binding 
arbitration. Unless otherwise agreed by the [P]parties, a dispute 
submitted to binding arbitration pursuant to this paragraph shall be 
resolved using the following procedures:
    (i) The arbitration shall be conducted in the city of New York in 
accordance with the Commercial Arbitration Rules of the American 
Arbitration Association and judgment upon the award rendered by the 
arbitrator may be entered in any court having jurisdiction thereof; and
    (ii) There shall be three arbitrators, and the chairperson of the 
arbitration panel shall be an attorney.
    14. Limitation of Liability. As between the Participating 
Organizations, no Participating Organization, including its respective 
directors, governors, officers, employees and agents, will be liable to 
any other Participating Organization, or its directors, governors, 
officers, employees and agents, for any liability, loss or damage 
resulting from any delays, inaccuracies, errors or omissions with 
respect to its performing or failing to perform regulatory 
responsibilities, obligations, or functions, except (a) as otherwise 
provided for under the Act, (b) in instances of a Participating 
Organization's gross negligence, willful misconduct or reckless 
disregard with respect to another Participating Organization, (c) in 
instances of a breach of confidentiality obligations owed to another 
Participating Organization, or (d) in the case of any Participating 
Organization paying fees hereunder, for any payments due. The 
Participating Organizations understand and agree that the [regulatory 
responsibilities]Regulatory Responsibilities are being performed on a 
good faith and best effort basis and no warranties, express or implied, 
are made by any Participating Organization to any other Participating 
Organization with respect to any of the responsibilities to be 
performed hereunder. This paragraph is not intended to create liability 
of any Participating Organization to any third party.
    15. SEC Approval.
    a. The parties agree to file promptly this Agreement with the SEC 
for its review and approval. [NYSE Regulation and] FINRA shall 
[jointly] file this Agreement on behalf, and with the explicit consent, 
of all Participating Organizations.
    b. If approved by the SEC, the Participating Organizations will 
notify their members of the general terms of [the]this Agreement and of 
its impact on their members.
    16. Subsequent Parties; Limited Relationship. This Agreement shall 
inure to the benefit of and shall be binding upon the Participating 
Organizations hereto and their respective legal representatives, 
successors, and assigns. Nothing in this Agreement, expressed or 
implied, is intended or shall: (a) confer on any person other than the 
Participating Organizations hereto, or their respective legal 
representatives, successors, and assigns, any rights, remedies, 
obligations or liabilities under or by reason of this Agreement, (b) 
constitute the Participating Organizations hereto partners or 
participants in a joint venture, or (c) appoint one Participating 
Organization the agent of the other.
    17. Assignment. No Participating Organization may assign this 
Agreement without the prior written consent of all the other 
Participating Organizations, which consent shall not be unreasonably 
withheld, conditioned or delayed; provided, however, that any 
Participating Organization may assign [the]this Agreement to a 
corporation controlling, controlled by or under common control with the 
Participating Organization without the prior written consent of any 
other party.
    18. Severability. Any term or provision of this Agreement that is 
invalid or unenforceable in any jurisdiction shall, as to such 
jurisdiction, be ineffective to the extent of such invalidity or 
unenforceability without rendering invalid or unenforceable the 
remaining terms and provisions of this Agreement or affecting the 
validity or enforceability of any of the terms or provisions of this 
Agreement in any other jurisdiction.
    19. Termination.
    a. Any Participating Organization may cancel its participation in 
[the]this Agreement at any time, provided that it has given 180 days 
written notice to the other Participating Organizations (or in the case 
of a change of control in

[[Page 4953]]

ownership of a Participating Organization, such other notice time 
period as that Participating Organization may choose), and provided 
that such termination has been approved by the SEC. The cancellation of 
its participation in this Agreement by any Participating Organization 
shall not terminate this Agreement as to the remaining Participating 
Organizations.
    b. The Regulatory Responsibilities assumed under this Agreement by 
[NYSE Regulation or] FINRA [(either, an ``Invoicing Party'')] may be 
terminated by [the Invoicing Party]FINRA against any Participating 
Organization as follows. The Participating Organization will have 
thirty (30) days from receipt to satisfy the invoice. If the 
Participating Organization fails to satisfy the invoice within thirty 
(30) days of receipt (``Default''), [the Invoicing Party]FINRA will 
notify the Participating Organization of the Default. The Participating 
Organization will have thirty (30) days from receipt of the Default 
notice to satisfy the invoice.
    c. [The Invoicing Party] FINRA will have the right to terminate the 
Regulatory Responsibilities assumed under this Agreement if a 
Participating Organization has Defaulted in its obligation to pay the 
invoice on more than three (3) occasions in any rolling twenty-four 
(24) month period.
    20. Intermarket Surveillance Group (``ISG''). In order to 
participate in this Agreement, all Participating Organizations to this 
Agreement must be members of the ISG.
    21. General. The Participating Organizations agree to perform all 
acts and execute all supplementary instruments or documents that may be 
reasonably necessary or desirable to carry out the provisions of this 
Agreement.
    22. Liaison and Notices. All questions regarding the implementation 
of this Agreement shall be directed to the persons identified below, as 
applicable. All notices and other communications required or permitted 
to be given under this Agreement shall be in writing and shall be 
deemed to have been duly given upon (i) actual receipt by the notified 
party or (ii) constructive receipt (as of the date marked on the return 
receipt) if sent by certified or registered mail, return receipt 
requested, to the following addresses:
* * * * *
    23. Confidentiality. The parties agree that documents or 
information shared shall be held in confidence, and used only for the 
purposes of carrying out their respective regulatory obligations under 
this Agreement. No party shall assert regulatory or other privileges as 
against the other with respect to Regulatory Information that is 
required to be shared pursuant to this Agreement, as defined by 
paragraph 11, above.
    24. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) of 
the Act, and Rule 17d-2 thereunder, the Participating Organizations 
jointly and severally request the SEC, upon its approval of this 
Agreement, to relieve the Participating Organizations, jointly and 
severally, of any and all responsibilities with respect to the matters 
allocated to [NYSE Regulation and] FINRA pursuant to this Agreement for 
purposes of Sec. Sec.  17(d) and 19(g) of the Act.
    25. Governing Law. This Agreement shall be deemed to have been made 
in the State of New York, and shall be construed and enforced in 
accordance with the law of the State of New York, without reference to 
principles of conflicts of laws thereof. Each of the parties hereby 
consents to submit to the jurisdiction of the courts of the State of 
New York in connection with any action or proceeding relating to this 
Agreement.
    26. Survival of Provisions. Provisions intended by their terms or 
context to survive and continue notwithstanding delivery of the 
regulatory services by [NYSE Regulation or] FINRA[, as applicable,] the 
payment of the Fees by the Participating Organizations, and any 
expiration of this Agreement shall survive and continue.
    27. Amendment.
    a. This Agreement may be amended to add a new Participating 
Organization, provided that such Participating Organization does not 
assume regulatory responsibility, solely by an amendment executed by 
[NYSE Regulation,] FINRA and such new Participating Organization. All 
other Participating Organizations expressly consent to allow [NYSE 
Regulation and] FINRA to [jointly] add new Participating Organizations 
to [the]this Agreement as provided above. [NYSE Regulation and] FINRA 
will promptly notify all Participating Organizations of any such 
amendments to add a new Participating Organization.
    b. All other amendments must be [made] approved by each 
Participating Organization. All amendments, including adding a new 
Participating Organization, must be filed with and approved by the 
[Commission]SEC before they become effective.
    28. Effective Date. The Effective Date of this Agreement will be 
the date the SEC declares this Agreement to be effective pursuant to 
authority conferred by Sec.  17(d) of the Act, and SEC Rule 17d-2 
thereunder.
    29. Counterparts. This Agreement may be executed in any number of 
counterparts, including facsimile, each of which will be deemed an 
original, but all of which taken together shall constitute one single 
agreement between the [P]parties.
* * * * *

EXHIBIT A: COMMON INSIDER TRADING RULES

    1. Securities Exchange Act of 1934 Section 10(b), and rules and 
regulations promulgated there under in connection with insider trading, 
including SEC Rule 10b-5 (as it pertains to insider trading), which 
states that:

Rule 10b-5--Employment of Manipulative and Deceptive Devices

    It shall be unlawful for any person, directly or indirectly, by the 
use of any means or instrumentality of interstate commerce, or of the 
mails or of any facility of any national securities exchange,
    a. To employ any device, scheme, or artifice to defraud,
    b. To make any untrue statement of a material fact or to omit to 
state a material fact necessary in order to make the statements made, 
in the light of the circumstances under which they were made, not 
misleading, or
    c. To engage in any act, practice, or course of business which 
operates or would operate as a fraud or deceit upon any person, in 
connection with the purchase or sale of any security.
    2. Securities Exchange Act of 1934 Section 17(a), and rules and 
regulations promulgated thereunder in connection with insider trading, 
including SEC Rule 17a-3 (as it pertains to insider trading).
    3. The following SRO Rules as they pertain to violations of insider 
trading:

FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade)
FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent 
Devices)
FINRA NASD Rule 3010 (Supervision)
FINRA NASD Rule 3110 (a) and (c) (Books and Records; Financial 
Condition)
NYSE Rule 401(a) (Business Conduct)
NYSE Rule 476(a) (Disciplinary Proceedings Involving Charges Against 
Members, Member Organizations, Allied Members, Approved Persons, 
Employees, or Others)
NYSE Rule 440 (Books and Records)
NYSE Rule 342 (Offices--Approval, Supervision and Control)

[[Page 4954]]

NYSE AMEX Cons. Art. II Sec. 3, Confidential Information
NYSE AMEX Cons. Art. V Sec. 4 Suspension or Expulsion (b), (h), (i), 
(j) and (r)
NYSE AMEX Cons. Art. XI Sec. 4 Controlled Corporations and 
Associations--Responsibility for Corporate Subsidiary; Duty to Produce 
Books
NYSE AMEX Rule 3 General Prohibitions and Duty to Report (d), (h) (j) 
and (l)
NYSE AMEX Rule 3-AEMI General Prohibitions and Duty to Report (d) and 
(h)
NYSE AMEX Rule 16 Business Conduct
NYSE AMEX Rule 320 Offices--Approval, Supervision and Control
NYSE AMEX Rule 324 Books and Records
NASDAQ OMX Rule 2110 (Standards of Commercial Honor and Principles of 
Trade)
NASDAQ OMX Rule 2120 (Use of Manipulative, Deceptive or Other 
Fraudulent Devices)
NASDAQ OMX Rule 3010 (Supervision)
NASDAQ OMX Rule 3110 (a) and (c) (Books and Records; Financial 
Condition)
CHX Article 8, Rule 3 (Fraudulent Acts)
CHX Article 9, Rule 2 (Just & Equitable Trade Principles)
CHX Article 11, Rule 2 (Maintenance of Books and Records)
CHX Article 6, Rule 5 (Supervision of Registered Persons and Branch and 
Resident Offices)
CBOE [RULE]Rule 4.1 (Practices inconsistent with just and equitable 
principles)
CBOE [RULE]Rule 4.2 (adherence to law)
CBOE [RULE]Rule 4.7 (Manipulation)
CBOE [RULE]Rule 4.18 (Prevention of the misuse of material nonpublic 
information)
NASDAQ OMX PHLX [RULE]Rule 707 (Conduct Inconsistent with Just and 
Equitable Principles of Trade)
NASDAQ OMX PHLX [RULE]Rule 748 (Supervision)
NASDAQ OMX PHLX [RULE]Rule 760 (Maintenance, Retention and Furnishing 
of Books, Records and Other Information)
NASDAQ OMX PHLX [RULE]Rule 761 (Supervisory Procedures Relating to 
ITSFEA and to Prevention of Misuse or Material Nonpublic Information)
NASDAQ OMX PHLX [RULE]Rule 782 (Manipulative Operations)
NYSE Arca Rule 6.3 (Prevention of the Misuse of Material, Nonpublic 
Information)
NYSE Arca Rule 6.2(b) Prohibited Acts (J&E)
NYSE Arca Rule 6.1 Adherence to Law
NYSE Arca Rule 6.18 Supervision
NYSE Arca Rule 9.1(c) Office Supervision
NYSE Arca Rule 9.2(b) Account Supervision
NYSE Arca Rule 9.2(c) Customer Records
NYSE Arca Rule 9.17 Books and Records
NSX Rule 3.1 Business Conduct of ETP Holders
NSX Rule 3.2[.] Violations Prohibited
NSX Rule 3.3[.] Use of Fraudulent Devices
NSX Rule 4.1 Requirements
NSX Rule 5.1[.] Written Procedures
NSX Rule 5.3 Records
NSX Rule 5.5 Chinese Wall Procedures
NASDAQ OMX BX Rule 2110 (Standards of Commercial Honor and Principles 
of Trade)
NASDAQ OMX BX Rule 2120 (Use of Manipulative, Deceptive or Other 
Fraudulent
Devices)
NASDAQ OMX BX Rule 3010 (Supervision)
NASDAQ OMX BX Rule 3110 (a) and (c) (Books and Records; Financial 
Condition)
BATS Rule 3.1 Business Conduct of [ETP Holders]Members
BATS Rule 3.2[.] Violations Prohibited
BATS Rule 3.3[.] Use of Fraudulent Devices
BATS Rule 4.1 Requirements
BATS Rule 5.1[.] Written Procedures
BATS Rule 5.3 Records
BATS Rule 5.5 Prevention of the Misuse of Material, Non-Public 
Information
BATS Rule 12.4 Manipulative Transactions
BYX Rule 3.1 Business Conduct of ETP Holders
BYX Rule 3.2[.] Violations Prohibited
BYX Rule 3.3[.] Use of Fraudulent Devices
BYX Rule 4.1 Requirements
BYX Rule 5.1[.] Written Procedures
BYX Rule 5.3 Records
BYX Rule 5.5 Prevention of the Misuse of Material, Non-Public 
Information
BYX Rule 12.4 Manipulative Transactions
EDGA 3.1 Business Conduct of Members
EDGA 3.2 Violations Prohibited
EDGA 3.3 Use of Fraudulent Devices
EDGA 4.1 Requirements
EDGA 5.1 Written Procedures
EDGA 5.3 Records
EDGA 5.5 Prevention of misuse of material, nonpublic information
EDGA 12.4 Manipulative Transactions
EDGX 3.1 Business Conduct of Members
EDGX 3.2 Violations Prohibited
EDGX 3.3 Use of Fraudulent Devices
EDGX 4.1 Requirements
EDGX 5.1 Written Procedures
EDGX 5.3 Records
EDGX 5.5 Prevention of misuse of material, nonpublic information
EDGX 12.4 Manipulative Transactions

EXHIBIT B: FEE SCHEDULE

    1. Fees. [NYSE Regulation and, separately,] FINRA shall charge each 
Participating Organization a Quarterly Fee in arrears for the 
performance of [NYSE Regulation's and] FINRA's [respective regulatory 
responsibilities]Regulatory Responsibilities under the Plan (each, a 
``Quarterly Fee,''[,] and together, the ``Fees'').
    a. Quarterly Fees.
    (1) Quarterly Fees for each Participating Organization will be 
charged by [NYSE Regulation and] FINRA[, respectively,] according to 
the Participating Organization's ``Percentage of Publicly Reported 
Trades'' occurring over three-month billing periods. The ``Percentage 
of Publicly Reported Trades'' shall equal a Participating 
Organization's number of reported [NYSE-listed]Listed Stock trades 
[(when billing originates from NYSE Regulation) and combined AMEX-
listed, NASDAQ-listed, and CHX solely-listed trades (when billing 
originates from FINRA)] during the relevant period (the ``Numerator''), 
divided by the total number of [either all NYSE-listed trades or all 
combined AMEX-listed, NASDAQ-listed, and CHX solelylisted trades, 
respectively,]all Listed Stock trades for the same period (the 
``Denominator''). For purposes of clarification, ADF and Trade 
Reporting Facility (``TRF'') activity will be included in the 
Denominator. Additionally, with regard to TRFs, TRF trade volume will 
be charged to FINRA. Consequently, for purposes of calculating the 
Quarterly Fees, the volume for each Participant Organization's TRF will 
be calculated separately (that is, TRF volume will be broken out from 
the Participating Organization's overall Percentage of Publicly 
Reported Trades) and the fees for such will be billed to FINRA in 
accordance with paragraph 1[(]a[)].(2), rather than to the applicable 
Participating Organization.
    (2) The Quarterly Fees shall be determined by [each of NYSE 
Regulation and] FINRA[, as applicable,] in the following manner for 
each Participating Organization:
    (a) Less than 1.0%: If the Participating Organization's Percentage 
of Publicly Reported Trades for [NYSE-listed trades (in the case of 
NYSE Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX 
solelylisted trades (in the case of FINRA) for] the relevant three-
month billing period is less than

[[Page 4955]]

1.0%, the Quarterly Fee shall be $[3,125]6,250, per quarter (``Static 
Fee'');
    (b) Less than 2.0% but No Less than 1.0%: If the Participating 
Organization's Percentage of Publicly Reported Trades for [NYSE-listed 
trades (in the case of NYSE Regulation) or for combined AMEX-listed, 
NASDAQ-listed, and CHX solely-listed trades (in the case of FINRA) for] 
the relevant three-month billing period is less than 2.0% but no less 
than 1.0%, the Quarterly Fee shall be $[9,375]18,750, per quarter 
(``Static Fee'');
    (c) 2.0% or Greater: If the Participating Organization's Percentage 
of Publicly Reported Trades for [NYSE-listed trades (in the case of 
NYSE Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX 
solely listed trades (in the case of FINRA) for] the relevant three-
month billing period is 2.0% or greater, the Quarterly Fee shall be the 
amount equal to the Participating Organization's Percentage of Publicly 
Reported Trades multiplied by [NYSE Regulation's or] FINRA's total 
charge (``Total Charge'')[, respectively,] for its performance of 
[Insider Trading regulatory responsibilities]Regulatory 
Responsibilities for the relevant three-month billing period.
    (3) Increases in Static Fees. [NYSE Regulation and] FINRA will re-
evaluate the Quarterly Fees on an annual basis during the annual budget 
process outlined in paragraph 1.c. below. During each annual re-
evaluation, [NYSE Regulation and] FINRA will have the discretion to 
increase the Static Fees by a percentage no greater than the percentage 
increase in the Final Budget over the preceding year's Final Budget. 
Any changes to the Static Fees shall not require an amendment to this 
Agreement, but rather shall be memorialized through the [B]budget 
[P]process.
    (4) Increases in Total Charges. Any change in the Total Charges 
(whether a Final Budget increase or any mid year change) shall not 
require an amendment to this Agreement, but rather shall be 
memorialized through the budget process.
    b. Source of Data. For purposes of calculation of the Percentage of 
Publicly Reported Trades for each Participating Organization, [NYSE 
Regulation and] FINRA shall use (a) the Consolidated Tape Association 
(``CTA'') as the exclusive securities information processor (``SIP'') 
for all NYSE Listed Stocks, [AMEX]NYSE Amex Listed Stocks, NYSE Arca 
Listed Stocks and CHX Solely Listed Stocks, and (b) the Unlisted 
Trading Privileges Plan as the exclusive SIP for NASDAQ[-l] Listed 
Stocks.
    c. Annual Budget Forecast. [NYSE Regulation and] FINRA will notify 
the Participating Organizations of the forecasted costs of [their 
respective]its insider trading program[s] for the following calendar 
year by close of business on October 15 of the then-current year (the 
``Forecasted Budget''). [NYSE Regulation and] FINRA shall use best 
efforts to provide as accurate a forecast as possible. [NYSE Regulation 
and] FINRA shall then provide a final submission of the costs following 
approval of such costs by [their respective governing Boards]its Board 
of Governors (the ``Final Budget''). Subject to paragraph 1[(]d[)]. 
below, in the event of a difference between the Forecasted Budget and 
the Final Budget, the Final Budget will govern.
    d. Increases in Fees over [Twenty]Five Percent.
    (1) In the event that any proposed increase to Fees [by NYSE 
Regulation or] by FINRA for a given calendar year (which increase may 
arise either during the annual budgetary forecasting process or through 
any mid-year increase) will result in a cumulative increase in such 
calendar year's Fees of more than [twenty]five percent ([20]5%) above 
the preceding calendar year's Final Budget (a ``Major Increase''), then 
senior management of any Participating Organization (a) that is a 
Listing Market or (b) for which the Percentage of Publicly Reported 
Trades is then currently twenty percent (20%) or greater, shall have 
the right to call a meeting with the senior management of [NYSE 
Regulation or] FINRA[, respectively,] in order to discuss any 
disagreement over such proposed Major Increase. By way of example, if 
[NYSE Regulation]FINRA provides a Final Budget for [2009]2011 that 
represents an [8]4% increase above the Final Budget for [2008]2010, the 
terms of this paragraph 1.d.(1) shall not apply; if, however, in April 
of [2009, NYSE Regulation]2011, FINRA notifies the Exchange Committee 
of an increase in Fees that represents an additional [14]3% increase 
above the Final Budget for [2008]2010, then the increase shall be 
deemed a Major Increase, and the terms of this paragraph 1.d.(1) shall 
become applicable (i.e., [8% + 14% =]4% and 3% represents a cumulative 
increase of [22]7% above [2008]the 2010 Final Budget).
    (2) In the event that senior management members of the involved 
parties are unable to reach an agreement regarding the proposed Major 
Increase, then the matter shall be referred back to the Exchange 
Committee for final resolution. Prior to the matter being referred back 
to the Exchange Committee, nothing shall prohibit the parties from 
conferring with the SEC. Resolution shall be reached through a vote of 
no fewer than all Participating Organizations seated on the Exchange 
Committee, and a simple majority shall be required in order to reject 
the proposed Major Increase.
    e. Time Tracking. [NYSER and] FINRA shall track the time spent by 
staff on insider trading responsibilities under this Agreement; 
however, time tracking will not be used to allocate costs.
    2. Invoicing and Payment.[
    a. NYSE Regulation shall invoice each Participating Organization 
for the Quarterly Fee associated with the regulatory activities 
performed pursuant to this Agreement during the previous three-month 
billing period within forty five (45) days of the end of such previous 
3-month billing period. A Participating Organization shall have thirty 
(30) days from date of invoice to make payment to NYSE Regulation on 
such invoice. The invoice will reflect the Participating Organization's 
Percentage of Publicly Reported Trades for that billing period.
    b. ]FINRA shall invoice each Participating Organization for the 
Quarterly Fee associated with the regulatory activities performed 
pursuant to this Agreement during the previous three-month billing 
period within forty five (45) days of the end of such previous 3-month 
billing period. A Participating Organization shall have thirty (30) 
days from date of invoice to make payment to FINRA on such invoice. The 
invoice will reflect the Participating Organization's Percentage of 
Publicly Reported Trades for that billing period.
    3. Disputed Invoices; Interest. In the event that a Participating 
Organization disputes an invoice or a portion of an invoice, the 
Participating Organization shall notify [in writing either FINRA or 
NYSE Regulation (each, an ``Invoicing Party''), as applicable,] FINRA 
in writing of the disputed item(s) within fifteen (15) days of receipt 
of the invoice. In its notification to [the Invoicing Party]FINRA of 
the disputed invoice, the Participating Organization shall identify the 
disputed item(s) and provide a brief explanation of why the 
Participating Organization disputes the charges. [An Invoicing 
Party]FINRA may charge a Participating Organization interest on any 
undisputed invoice or the undisputed portions of a disputed invoice 
that a Participating Organization fails to pay within thirty (30) days 
of its receipt of such invoice. Such interest shall be assessed 
monthly. Interest will mean one and one half percent per month, or the 
maximum allowable

[[Page 4956]]

under applicable [L]law, whichever is less.
    4. Taxes. In the event any governmental authority deems the 
regulatory activities allocated to [NYSE Regulation or] FINRA to be 
taxable activities similar to the provision of services in a commercial 
context, the other Participating Organizations agree that they shall 
bear full responsibility, on a joint and several basis, for the payment 
of any such taxes levied on [NYSE Regulation or] FINRA, or, if such 
taxes are paid by [NYSE Regulation or] FINRA directly to the 
governmental authority, the other Participating Organizations agree 
that they shall reimburse [NYSE Regulation and/or] FINRA[, as 
applicable,] for the amount of any such taxes paid.
    5. Audit Right; Record Keeping.
    a. Audit Right.
    [(i) Audit of NYSE Regulation. ]
    [(a) Once every rolling twelve (12) month period, NYSE Regulation 
shall permit no more than one audit (to be performed by one or more 
Participating Organizations) of the Fees charged by NYSE Regulation to 
the Participating Organizations hereunder and a detailed cost analysis 
supporting such Fees (the ``Audit''). The Participating Organization or 
Organizations that conduct this Audit will select a nationally-
recognized independent auditing firm (or may use its regular 
independent auditor, providing it is a nationally-recognized auditing 
firm) (``Auditing Firm'') to act on its, or their behalf, and will 
provide reasonable notice to other Participating Organizations of the 
Audit and invite the other Participating Organizations to participate 
in the Audit. NYSE Regulation will permit the Auditing Firm reasonable 
access during NYSE Regulation's normal business hours, with reasonable 
advance notice, to such financial records and supporting documentation 
as are necessary to permit review of the accuracy of the calculation of 
the Fees charged to the Participating Organizations. The Participating 
Organization, or Organizations, as applicable, other than NYSE 
Regulation, shall be responsible for the costs of performing any such 
audit.]
    [(b) If, through an Audit, the Exchange Committee determines that 
NYSE Regulation has inaccurately calculated the Fees for any 
Participating Organization, the Exchange Committee will promptly notify 
NYSE Regulation in writing of the amount of such difference in the 
Fees, and, if applicable, NYSE Regulation shall issue a reimbursement 
of the overage amount to the relevant Participating Organization(s), 
less any amount owed by the Participating Organization under any 
outstanding, undisputed invoice(s). If such an Audit reveals that any 
Participating Organization paid less than what was required pursuant to 
the Agreement, then that Participating Organization shall promptly pay 
NYSE Regulation the difference between what the Participating 
Organization owed pursuant to the Agreement and what that Participating 
Organization originally paid NYSE Regulation. If NYSE Regulation 
disputes the results of an audit regarding the accuracy of the Fees, it 
will submit the dispute for resolution pursuant to the dispute 
resolution procedures in paragraph 13 hereof.]
    [(c) In the event that through the review of any supporting 
documentation provided during the Audit, any one or more Participating 
Organizations desire to discuss with NYSE Regulation the supporting 
documentation and any questions arising therefrom with regard to the 
manner in which regulation was conducted, the Participating 
Organization(s) shall call a meeting with NYSE Regulation. NYSE 
Regulation shall in turn notify the Exchange Committee of this meeting 
in advance, and all Participating Organizations shall be welcome to 
attend (the ``Fee Analysis Meeting''). The parties to this Agreement 
acknowledge and agree that while NYSE Regulation commits to discuss the 
supporting documentation at the Fee Analysis Meeting, NYSE Regulation 
shall not be subject, by virtue of the above Audit rights or any 
discussions during the Fee Analysis Meeting or otherwise, to any 
limitation whatsoever, other than the Increase in Fee provisions set 
forth in paragraph 1.d. of this Exhibit, on its discretion as to the 
manner and means by which it conducts its regulatory efforts in its 
role as the SRO primarily liable for regulatory decisions under this 
Agreement. To that end, no disagreement among the Participating 
Organizations as to the manner or means by which NYSE Regulation 
conducts its regulatory efforts hereunder shall be subject to the 
dispute resolution procedures hereunder, and no Participating 
Organization shall have the right to compel NYSE Regulation to alter 
the manner or means by which it conducts its regulatory efforts. 
Further, a Participating Organization shall not have the right to 
compel a rebate or reassessment of fees for services rendered, on the 
basis that the Participating Organization would have conducted 
regulatory efforts in a different manner than NYSE Regulation in its 
professional judgment chose to conduct its regulatory efforts.]
    [ii. Audit of FINRA.]
    [(a)](i) Once every rolling twelve (12) month period, FINRA shall 
permit no more than one audit (to be performed by one or more 
Participating Organizations) of the Fees charged by FINRA to the 
Participating Organizations hereunder and a detailed cost analysis 
supporting such Fees (the ``Audit''). The Participating Organization or 
Organizations that conduct this Audit will select a nationally-
recognized independent auditing firm (or may use its regular 
independent auditor, providing it is a nationally-recognized auditing 
firm) (``Auditing Firm'') to act on its, or their behalf, and will 
provide reasonable notice to other Participating Organizations of the 
Audit. FINRA will permit the Auditing Firm reasonable access during 
FINRA's normal business hours, with reasonable advance notice, to such 
financial records and supporting documentation as are necessary to 
permit review of the accuracy of the calculation of the Fees charged to 
the Participating Organizations. The Participating Organization, or 
Organizations, as applicable, other than FINRA, shall be responsible 
for the costs of performing any such audit.
    [(b)](ii) If, through an Audit, the Exchange Committee determines 
that FINRA has inaccurately calculated the Fees for any Participating 
Organization, the Exchange Committee will promptly notify FINRA in 
writing of the amount of such difference in the Fees, and, if 
applicable, FINRA shall issue a reimbursement of the overage amount to 
the relevant Participating Organization(s), less any amount owed by the 
Participating Organization under any outstanding, undisputed 
invoice(s). If such an Audit reveals that any Participating 
Organization paid less than what was required pursuant to the 
Agreement, then that Participating Organization shall promptly pay 
FINRA the difference between what the Participating Organization owed 
pursuant to the Agreement and what that Participating Organization 
originally paid FINRA. If FINRA disputes the results of an [a]Audit 
regarding the accuracy of the Fees, it will submit the dispute for 
resolution pursuant to the dispute resolution procedures in paragraph 
13 [hereof]of the Agreement.
    [(c)](iii) In the event that through the review of any supporting 
documentation provided during the Audit, any one or more Participating 
Organizations desire to discuss with FINRA the supporting documentation 
and any questions arising therefrom

[[Page 4957]]

with regard to the manner in which regulation was conducted, the 
Participating Organization(s) shall call a meeting with FINRA. FINRA 
shall in turn notify the Exchange Committee of this meeting in advance, 
and all Participating Organizations shall be welcome to attend (the 
``Fee Analysis Meeting''). The parties to this Agreement acknowledge 
and agree that while FINRA commits to discuss the supporting 
documentation at the Fee Analysis Meeting, FINRA shall not be subject, 
by virtue of the above Audit rights or any discussions during the Fee 
Analysis Meeting or otherwise, to any limitation whatsoever, other than 
the Increase in Fee provisions set forth in paragraph 1.d. of this 
Exhibit, on its discretion as to the manner and means by which it 
conducts its regulatory efforts in its role as the SRO primarily liable 
for regulatory decisions under this Agreement. To that end, no 
disagreement among the Participating Organizations as to the manner or 
means by which FINRA conducts its regulatory efforts hereunder shall be 
subject to the dispute resolution procedures hereunder, and no 
Participating Organization shall have the right to compel FINRA to 
alter the manner or means by which it conducts its regulatory efforts. 
Further, a Participating Organization shall not have the right to 
compel a rebate or reassessment of fees for services rendered, on the 
basis that the Participating Organization would have conducted 
regulatory efforts in a different manner than FINRA in its professional 
judgment chose to conduct its regulatory efforts.
    b. Record Keeping. In anticipation of any audit that may be 
performed by the Exchange Committee under paragraph 5.a. above, [NYSE 
and] FINRA shall [each] keep accurate financial records and 
documentation relating to the Fees charged by [each, respectively,]it 
under this Agreement.

EXHIBIT C: REPORTS

    [NYSE Regulation and] FINRA shall provide the following information 
in reports to the Exchange Committee, which information covers activity 
occurring under this Agreement:
    1. Alert Summary Statistics: Total number of surveillance system 
alerts generated by quarter along with associated number of reviews and 
investigations. In addition, this paragraph shall also reflect the 
number of reviews and investigations originated from a source other 
than an alert. A separate table would be presented for NYSE Listed 
Stock, NYSE Amex Listed[, Nasdaq] Stock, NYSE Arca Listed Stock, NASDAQ 
Listed Stock, and CHX Solely Listed [equity]Stock trading activity.

------------------------------------------------------------------------
                                       Surveillance
               2008                       alerts         Investigations
------------------------------------------------------------------------
1st Quarter.......................
2nd Quarter.......................
3rd Quarter.......................
4th Quarter.......................
                                   -------------------------------------
    2008 Total....................
------------------------------------------------------------------------

    2. Aging of Open Matters: Would reflect the aging for all currently 
open matters for the quarterly period being reported. A separate table 
would be presented for NYSE Listed Stock, NYSE Amex Listed[, Nasdaq] 
Stock, NYSE Arca Listed Stock, NASDAQ Listed Stock, and CHX Solely 
Listed [equity]Stock trading activity.
    Example:

------------------------------------------------------------------------
                                       Surveillance
                                          alerts         Investigations
------------------------------------------------------------------------
0-6 months........................
6-9 months........................
9-12 months.......................
12+ months........................
                                   -------------------------------------
    Total.........................
------------------------------------------------------------------------

    3. Timeliness of Completed Matters: Would reflect the total age of 
those matters that were completed or closed during the quarterly period 
being reported. [NYSE and] FINRA will provide total referrals to the 
SEC.
    Example:

------------------------------------------------------------------------
                                       Surveillance
                                          alerts         Investigations
------------------------------------------------------------------------
0-6 months........................
6-9 months........................
9-12 months.......................
12+ months........................
                                   -------------------------------------
    Total.........................
------------------------------------------------------------------------

    4. Disposition of Closed Matters: Would reflect the disposition of 
those matters that were completed or closed during the quarterly period 
being reported. A separate table would be presented for NYSE Listed 
Stock, NYSE Amex Listed[, Nasdaq] Stock, NYSE Arca Listed Stock, NASDAQ 
Listed Stock, and CHX Solely Listed [equity]Stock trading activity.
    Example:

[[Page 4958]]

------------------------------------------------------------------------
                                                         Investigations
                                    Surveillance  YTD         YTD
------------------------------------------------------------------------
No Further Review.................
Letter of Caution/Admonition/Fine.
Referred to Legal/Enforcement.....
Referred to SEC/SRO...............
Merged............................
Other.............................
                                   -------------------------------------
    Total.........................
------------------------------------------------------------------------

    5. Pending Reviews. In addition to the above reports, the Chief 
Regulatory Officer (CRO) (or his or her designee) of any Participating 
Organization that is also a [l]Listing [m]Market (including CHX) may 
inquire about pending reviews involving stocks listed on that 
Participating Organization's market. [NYSE Regulation and] FINRA[, 
respectively,] will respond to such inquiries from a CRO; provided, 
however, that (a) the CRO must hold any information provided by [NYSE 
Regulation and] FINRA in confidence and (b) [NYSE Regulation and] FINRA 
will not be compelled to provide information in contradiction of any 
mandate, directive or order from the SEC, US Attorney's Office, the 
Office of any State Attorney General or court of competent 
jurisdiction.
* * * * *

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 e-mail to rule-comments@sec.gov. Please include 
File Number 4-566 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 4-566. 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 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 a.m. and 3 
p.m. Copies of the plan also will be available for inspection and 
copying at the principal offices of BATS, BYX, CBOE, CHX, EDGA, EDGX, 
FINRA, NASDAQ OMX BX, NASDAQ OMX Phlx, NASDAQ, NSX, NYSE, NYSE Amex, 
and NYSE Arca. 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 4-566 
and should be submitted on or before February 17, 2011.

V. Discussion

    The Commission finds that the Plan, as proposed to be amended, is 
consistent with the factors set forth in Section 17(d) of the Act \15\ 
and Rule 17d-2 \16\ thereunder in that it is necessary or appropriate 
in the public interest and for the protection of investors, fosters 
cooperation and coordination among SROs, and removes impediments to and 
fosters the development of the national market system. The Commission 
continues to believe that the Plan, as amended, should reduce 
unnecessary regulatory duplication by allocating regulatory 
responsibility for the surveillance, investigation, and enforcement of 
Common Rules to FINRA. Accordingly, the proposed amendment to the Plan 
promotes efficiency by consolidating these regulatory functions in a 
single SRO.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78q(d).
    \16\ 17 CFR 240.17d-2
---------------------------------------------------------------------------

    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 amend the Plan to reflect 
that FINRA has assumed responsibility for performing the market 
surveillance and enforcement functions previously conducted by NYSE 
Regulation for its U.S. equities and options markets. The Commission 
believes that the amended Plan should become effective and be 
implemented without undue delay in order to conform the terms of the 
Plan to reflect that new arrangement. In addition, the Commission notes 
that the prior version of this Plan was published for comment, and the 
Commission did not receive any comments thereon.\17\ Finally, the 
Commission does not believe that the amendment to the Plan raises any 
new regulatory issues that the Commission has not previously 
considered.
---------------------------------------------------------------------------

    \17\ See supra note 11.
---------------------------------------------------------------------------

VI. Conclusion

    This order gives effect to the amended Plan submitted to the 
Commission that is contained in File No. 4-566.
    It is therefore ordered, pursuant to Section 17(d) of the Act,\18\ 
that the Plan, as amended, is hereby approved and declared effective.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78q(d).
---------------------------------------------------------------------------

    It is further ordered that the Participating Organizations are 
relieved of those regulatory responsibilities allocated to FINRA under 
the amended Plan to the extent of such allocation.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(24).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1764 Filed 1-26-11; 8:45 am]
BILLING CODE 8011-01-P