Document ID: SEC-2010-0551-0001
Agency: sec
Document Type: Notice
Title: Proposed Plan for Allocation of Regulatory Responsibilities Between International Securities Exchange, LLC and Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-04-13T04:00Z

[Federal Register: April 13, 2010 (Volume 75, Number 70)]
[Notices]               
[Page 18925-18929]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap10-100]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61853; File No. 4-596]

 
Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of 
Regulatory Responsibilities Between the International Securities 
Exchange, LLC and the Financial Industry Regulatory Authority, Inc. 
Concerning Ballista Securities LLC

April 6, 2010.
    Pursuant to Section 17(d) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that 
on March 19, 2010, the International Securities Exchange, LLC (``ISE'') 
and the Financial Industry Regulatory Authority, Inc. (``FINRA'') 
(together with the ISE, the ``Parties'') filed with the Securities and 
Exchange Commission (``Commission'') a plan for the allocation of 
regulatory responsibilities (the ``17d-2 Plan''). The Commission is 
publishing this notice to solicit comments on the 17d-2 Plan from 
interested persons.
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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 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) (``Rule 17d-2 Adopting 
Release'').

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[[Page 18926]]

II. Proposed Plan

    On June 5, 2009, ISE Holdings, Inc. (``ISE Holdings''), the parent 
of ISE, entered into a Membership Purchase Agreement (``Purchase 
Agreement'') with Optifreeze LLC, a Delaware Limited Liability Company 
(``Optifreeze''). ISE Holdings acquired membership interests in 
Optifreeze by contributing cash to the capital of Optifreeze. As a 
result of the purchase, ISE Holdings has an 8.57% membership interest 
in Optifreeze, which wholly owns and operates an Electronic Access 
Member of the ISE, Ballista Securities LLC (``Ballista''). The 
ownership interest of ISE Holdings in Ballista is subject to the 
conditions set forth in the Commission's approval order relating to ISE 
Holdings' purchase of Optifreeze.\11\
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    \11\ See Securities Exchange Act Release No. 60598 (September 1, 
2009), 74 FR 46280 (September 8, 2009).
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    Recognizing that the Commission has previously expressed concern 
regarding (1) the potential for conflicts of interest in instances 
where an exchange is affiliated with one of its members, and (2) the 
potential for informational advantages that could place an affiliated 
member of an exchange at a competitive advantage vis-[agrave]-vis the 
other non-affiliated members, the ISE submitted a proposed rule change 
to amend ISE Rule 312 to permit the proposed affiliation subject to 
several conditions and limitations, including that a condition that the 
Exchange shall enter into a plan with a non-affiliated self-regulatory 
organization to regulate and oversee the activities of Ballista, 
pursuant to Rule 17d-2 under the Act.\12\
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    \12\ See Securities Exchange Act Release No. 60382 (July 24, 
2009), 74 FR 38068 (July 30, 2009).
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    On March 19, 2010, the Parties submitted the proposed 17d-2 Plan to 
the Commission. The text of the 17d-2 Plan delineates regulatory 
responsibilities between the Parties, including responsibility for ISE 
rules, with respect to Ballista, which is a common member. In 
particular, under the 17d-2 Plan, FINRA would assume examination and 
enforcement responsibility relating to compliance by Ballista and 
persons associated therewith, with the rules of ISE that are 
substantially similar to the rules of FINRA, as well as any provisions 
of the Federal securities laws and the rules and regulations thereunder 
delineated in the Exhibit 1 to the 17d-2 Plan (``Common Rules'').\13\ 
In addition, FINRA would assume regulatory responsibility, with respect 
to Ballista, for other ISE rules that do not qualify as Common Rules. 
Under the 17d-2 Plan, ISE would retain full responsibility for 
surveillance, examination, investigation, and enforcement with respect 
to trading activities or practices involving ISE's own marketplace; 
registration pursuant to its unique rules (i.e., registration rules 
that are not Common Rules); its duties as a Designated Examining 
Authority pursuant to Rule 17d-1 under the Act; and any rules that are 
not substantially similar to the rules of FINRA, except for ISE rules 
for any ISE member that acts as an inbound router for the ISE and is a 
member of the ISE and FINRA (``Inbound Router Member'').\14\ For 
purposes of the proposed 17d-2 Plan, Ballista would qualify as an 
Inbound Router Member. Accordingly, FINRA would be allocated regulatory 
responsibility for Ballista.
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    \13\ See paragraph 2 of the 17d-2 plan.
    \14\ Apparent violations of such ISE rules by any Inbound Router 
Member will be processed by, and enforcement proceedings will be 
conducted by, FINRA. See paragraphs 2(d) and 5 of the 17d-2 Plan.
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    The text of the 17d-2 Plan is as follows:

Agreement Between Financial Industry Regulatory Authority, Inc. and 
International Securities Exchange, LLC Pursuant to Rule 17d-2 Under the 
Securities Exchange Act of 1934

    This Agreement, by and between the Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and the International Securities Exchange, 
LLC (``ISE''), is made this 8th day of September, 2009 (the 
``Agreement''), pursuant to Section 17(d) of the Securities Exchange 
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which 
permits agreements between self-regulatory organizations to allocate 
regulatory responsibility to eliminate regulatory duplication. FINRA 
and ISE may be referred to individually as a ``party'' and together as 
the ``parties.''
    Whereas, International Securities Exchange Holdings, Inc. (``ISE 
Holdings''), the parent company of ISE, maintains an ownership interest 
in Optifreeze LLC (``Optifreeze''), the parent company of Ballista 
Securities LLC (``Ballista'').
    Whereas, ISE desires to eliminate conflicts of interest that would 
exist if ISE were to regulate Ballista, a member of ISE, which operates 
a broker-dealer, which among other things, routes inbound orders to 
ISE.
    Whereas, ISE and FINRA desire to reduce duplication in the 
examination of their Dual Members (as defined herein); and
    Whereas, FINRA and ISE desire to execute an agreement covering such 
subjects pursuant to the provisions of Rule 17d-2 under the Exchange 
Act and to file such agreement with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission'') for its approval.
    Now, therefore, in consideration of the mutual covenants contained 
hereinafter, FINRA and ISE hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement or the 
context otherwise requires, the terms used in this Agreement shall have 
the same meaning as they have under the Exchange Act and the rules and 
regulations thereunder. As used in this Agreement, the following terms 
shall have the following meanings:
    (a) ``ISE Rules'' or ``FINRA Rules'' shall mean the rules of the 
ISE or FINRA, respectively, as the rules of an exchange or association 
are defined in Exchange Act Section 3(a)(27).
    (b) ``Common Rules'' shall mean the ISE Rules that are 
substantially similar to the applicable FINRA Rules and certain 
provisions of the Exchange Act and SEC rules set forth on Exhibit 1 in 
that examination for compliance with such rules would not require FINRA 
to develop one or more new examination standards, modules, procedures, 
or criteria in order to analyze the application of the rule, or a Dual 
Member's activity, conduct, or output in relation to such rule; 
provided, however, Common Rules shall not include the application of 
the SEC, ISE or FINRA rules as they pertain to violations of insider 
trading activities, which is covered by a separate 17d-2 Agreement by 
and among the American Stock Exchange, LLC, BATS Exchange, Inc., Boston 
Stock Exchange, Inc., CBOE Stock Exchange, LLC, Chicago Stock Exchange, 
Inc., Financial Industry Regulatory Authority, Inc., International 
Securities Exchange, LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange, LLC, NYSE Arca Inc., NYSE 
Regulation, Inc., and Philadelphia Stock Exchange, Inc. approved by the 
Commission on October 17, 2008, as may be amended from time to time.
    (c) ``Dual Members'' shall mean those ISE members that are also 
members of FINRA and the associated persons therewith, but for purposes 
of this Agreement is limited to Ballista and its associated persons.
    (d) ``Effective Date'' shall be the date this Agreement is approved 
by the Commission.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with the FINRA Code of Procedure 
(the Rule 9000 Series) and other applicable FINRA procedural rules, to 
determine

[[Page 18927]]

whether violations of pertinent laws, rules or regulations have 
occurred, and if such violations are deemed to have occurred, the 
imposition of appropriate sanctions as specified under the FINRA's Code 
of Procedure and sanction guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
responsibilities and Enforcement Responsibilities relating to 
compliance by the Dual Members with the Common Rules and the provisions 
of the Exchange Act and the rules and regulations thereunder, and other 
applicable laws, rules and regulations, each as set forth on Exhibit 1 
attached hereto.
    2. Regulatory and Enforcement Responsibilities. FINRA shall assume 
Regulatory Responsibilities and Enforcement Responsibilities for 
Ballista, which is a Dual Member. Attached as Exhibit 1 to this 
Agreement and made part hereof, ISE furnished FINRA with a current list 
of Common Rules and certified to FINRA that such rules are 
substantially similar to the corresponding FINRA rule (the 
``Certification''). FINRA hereby agrees that the rules listed in the 
Certification are Common Rules as defined in this Agreement. Each year 
following the Effective Date of this Agreement, or more frequently if 
required by changes in either the rules of ISE or FINRA, ISE shall 
submit an updated list of Common Rules to FINRA for review which shall 
add ISE Rules not included in the current list of Common Rules that 
qualify as Common Rules as defined in this Agreement; delete ISE Rules 
included in the current list of Common Rules that no longer qualify as 
Common Rules as defined in this Agreement; and confirm that the 
remaining rules on the current list of Common Rules continue to be ISE 
Rules that qualify as Common Rules as defined in this Agreement. Within 
30 days of receipt of such updated list, FINRA shall confirm in writing 
whether the rules listed in any updated list are Common Rules as 
defined in this Agreement.
    Notwithstanding anything herein to the contrary, it is explicitly 
understood that the term ``Regulatory Responsibilities'' does not 
include, and ISE shall retain full responsibility for (unless otherwise 
addressed by separate agreement or rule) (collectively, the ``Retained 
Responsibilities'') the following:
    (a) Surveillance, examination, investigation and enforcement with 
respect to trading activities or practices involving ISE's own 
marketplace, including without limitation ISE's rules relating to the 
rights and obligations of market makers;
    (b) Registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) Discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) Any ISE Rules that are not Common Rules, except for ISE Rules 
for any ISE member that acts as an inbound router for the ISE and is a 
member of the ISE and FINRA (``Inbound Router Member'') as provided in 
paragraph 5. As of the date of this Agreement, Direct Edge ECN LLC and 
Ballista are the only Inbound Router Members.
    3. No Charge. There shall be no charge to ISE by FINRA for 
performing the Regulatory Responsibilities and Enforcement 
Responsibilities under this Agreement except as hereinafter provided. 
FINRA shall provide ISE with ninety (90) days advance written notice in 
the event FINRA decides to impose any charges to ISE for performing the 
Regulatory Responsibilities under this Agreement. If FINRA determines 
to impose a charge, ISE shall have the right at the time of the 
imposition of such charge to terminate this Agreement; provided, 
however, that FINRA's Regulatory Responsibilities under this Agreement 
shall continue until the Commission approves the termination of this 
Agreement.
    4. Reassignment of Regulatory Responsibilities. Notwithstanding any 
provision hereof, this Agreement shall be subject to any statute, or 
any rule or order of the Commission, or industry agreement, 
restructuring the regulatory framework of the securities industry or 
reassigning Regulatory Responsibilities between self-regulatory 
organizations. To the extent such action is inconsistent with this 
Agreement, such action shall supersede the provisions hereof to the 
extent necessary for them to be properly effectuated and the provisions 
hereof in that respect shall be null and void.
    5. Notification of Violations.
    (a) In the event that FINRA becomes aware of apparent violations of 
any ISE Rules, which are not listed as Common Rules, discovered 
pursuant to the performance of the Regulatory Responsibilities assumed 
hereunder, FINRA shall notify ISE of those apparent violations for such 
response as ISE deems appropriate. With respect to apparent violations 
of any ISE Rules by any Inbound Router Members, FINRA shall not make 
referrals to ISE pursuant to this paragraph 5. Such apparent violations 
shall be processed by, and enforcement proceedings in respect thereto 
will be conducted by, FINRA as provided in this Agreement.
    (b) In the event that ISE becomes aware of apparent violations of 
any Common Rules, discovered pursuant to the performance of the 
Retained Responsibilities, ISE shall notify FINRA of those apparent 
violations and such matters shall be handled by FINRA as provided in 
this Agreement.
    (c) Apparent violations of Common Rules, FINRA Rules, Federal 
securities laws, and rules and regulations thereunder, shall be 
processed by, and enforcement proceedings in respect thereto shall be 
conducted by FINRA as provided hereinbefore; provided, however, that in 
the event a Dual Member is the subject of an investigation relating to 
a transaction on ISE, ISE may in its discretion assume concurrent 
jurisdiction and responsibility.
    (d) Each party agrees to make available promptly all files, records 
and witnesses necessary to assist the other in its investigation or 
proceedings.
    6. Continued Assistance.
    (a) FINRA shall make available to ISE all information obtained by 
FINRA in the performance by it of the Regulatory Responsibilities 
hereunder in respect to the Inbound Router Members subject to this 
Agreement. In particular, and not in limitation of the foregoing, FINRA 
shall furnish ISE any information it obtains about Inbound Router 
Members which reflects adversely on their financial condition. ISE 
shall make available to FINRA any information coming to its attention 
that reflects adversely on the financial condition of Inbound Router 
Members or indicates possible violations of applicable laws, rules or 
regulations by such firms.
    (b) 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. Neither party shall assert 
regulatory or other privileges as against the other with respect to 
documents or information that is required to be shared pursuant to this 
Agreement.
    (c) The sharing of documents or information between the parties 
pursuant to this Agreement shall not be deemed a waiver as against 
third parties of regulatory or other privileges relating to the 
discovery of documents or information.
    7. Statutory Disqualifications. When FINRA becomes aware of a 
statutory disqualification as defined in the Exchange Act with respect 
to a Inbound Router Member, FINRA shall determine pursuant to Sections 
15A(g) and/or Section 6(c) of the Exchange Act the acceptability or 
continued applicability of the person to whom such

[[Page 18928]]

disqualification applies and keep ISE advised of its actions in this 
regard for such subsequent proceedings as ISE may initiate.
    8. Branch Office Information. FINRA shall also be responsible for 
processing and, if required, acting upon all requests for the opening, 
address changes, and terminations of branch offices by Inbound Router 
Members and any other applications required of Inbound Router Members 
with respect to the Common Rules as they may be amended from time to 
time. Upon request, FINRA shall advise ISE of the opening, address 
change and termination of branch and main offices of Inbound Router 
Members and the names of such branch office managers.
    9. Customer Complaints. ISE shall forward to FINRA copies of all 
customer complaints involving Inbound Router Members received by ISE 
relating to FINRA's Regulatory Responsibilities under this Agreement. 
It shall be FINRA's responsibility to review and take appropriate 
action in respect to such complaints.
    10. Advertising. FINRA shall assume responsibility to review the 
advertising of Inbound Router Members subject to the Agreement, 
provided that such material is filed with FINRA in accordance with 
FINRA's filing procedures and is accompanied with any applicable filing 
fees set forth in FINRA Rules. Such review shall be made in accordance 
with then applicable FINRA Rules and interpretations. The advertising 
of Inbound Router Members shall be subject only to compliance with 
appropriate FINRA Rules and interpretations.
    11. No Restrictions on Regulatory Action. Nothing contained in this 
Agreement shall restrict or in any way encumber the right of either 
party to conduct its own independent or concurrent investigation, 
examination or enforcement proceeding of or against Inbound Router 
Members, as either party, in its sole discretion, shall deem 
appropriate or necessary.
    12. Termination. This Agreement shall terminate on the earlier of 
(a) the date on which ISE Holdings, the parent company of ISE, ceases 
to maintain an ownership interest in Optifreeze, or (b) the date on 
which the Commission approves termination of this Agreement after one 
(1) year's written notice by ISE or FINRA to the other party or such 
shorter period as may be agreed to by the parties, except as provided 
in paragraph 3.
    13. Arbitration. In the event of a dispute between the parties as 
to the operation of this Agreement, ISE and FINRA hereby agree that any 
such dispute shall be settled by arbitration in Washington, DC in 
accordance with the rules of the American Arbitration Association then 
in effect, or such other procedures as the parties may mutually agree 
upon. Judgment on the award rendered by the arbitrator(s) may be 
entered in any court having jurisdiction. Each party acknowledges that 
the timely and complete performance of its obligations pursuant to this 
Agreement is critical to the business and operations of the other 
party. In the event of a dispute between the parties, the parties shall 
continue to perform their respective obligations under this Agreement 
in good faith during the resolution of such dispute unless and until 
this Agreement is terminated in accordance with its provisions. Nothing 
in this Section 14 shall interfere with a party's right to terminate 
this Agreement as set forth herein.
    14. Separate Agreement. This Agreement is wholly separate from the 
Agreements made pursuant to Rule 17d-2 of the Securities Exchange Act 
of 1934 between Financial Industry Regulatory Authority, Inc. and the 
International Securities Exchange LLC entered into on December 20, 2006 
and on November 21, 2008, and as may be amended from time to time.
    15. Amendment. This Agreement may be amended in writing duly 
approved by each party. All such amendments must be filed with and 
approved by the Commission before they become effective.
    16. Limitation of Liability. Neither FINRA nor ISE nor any of their 
respective directors, governors, officers or employees shall be liable 
to the other party to 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 Responsibilities as provided hereby or for the failure to 
provide any such responsibility, except with respect to such liability, 
loss or damages as shall have been suffered by one or the other of 
FINRA or ISE and caused by the willful misconduct of the other party or 
their respective directors, governors, officers or employees. No 
warranties, express or implied, are made by FINRA or ISE with respect 
to any of the responsibilities to be performed by each of them 
hereunder.
    17. Relief From Responsibility. Pursuant to Sections 17(d)(1)(A) 
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and ISE 
join in requesting the Commission, upon its approval of this Agreement 
or any part thereof, to relieve ISE of any and all responsibilities 
with respect to matters allocated to FINRA pursuant to this Agreement; 
provided, however, that this Agreement shall not be effective until the 
Effective Date.
    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. Counterparts. This Agreement may be executed in one or more 
counterparts, each of which shall be deemed an original, and such 
counterparts together shall constitute one and the same instrument.

Exhibit 1

ISE Rules Certification for 17d-2 Agreement with FINRA

    ISE hereby certifies that the requirements contained in the ISE 
Rules listed below are identical to, or substantially similar to, the 
comparable FINRA (NASD) Rule, Exchange Act provision or SEC rule 
identified (``Common Rules'').

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              ISE rule(s)                  FINRA (NASD) or SEC section
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408(a)(1). Prevention of the Misuse of   Section 15(f) of the Securities
 Material, Nonpublic Information.         Exchange Act of 1934.
409. Disciplinary Action...............  NASD Rule 3070(a)(1) and (10)
                                          Reporting Requirements.
604. Continuing Education for            NASD Rule 1120 Continuing
 Registered Persons.                      Education Requirements.
622. Transfer of Accounts..............  NASD Rule 11870 Customer
                                          Account Transfer Contracts.
624. Broker's Blanket Bonds............  NASD Rule 3020 Fidelity Bonds
                                          \1\.
626. Telephone Solicitation............  NASD Rule 2212 Telemarketing.
1400. Maintenance, Retention, and        NASD Rule 3110(a) Books and
 Furnishing of Books, Records and Other   Records--Requirements.
 Information.

[[Page 18929]]

2114. Doing Business with the Public     NASD Rules 2310 Recommendations
 \2\.                                     to Customers (Suitability);
                                          2320 Best Execution and
                                          Interpositioning; 2330
                                          Customers' Securities or
                                          Funds; 2340 Customer Account
                                          Statements; 2341 Margin
                                          Disclosure Statement; 2350
                                          Broker/Dealer Conduct on the
                                          Premises of Financial
                                          Institutions; 2360 Approval
                                          Procedures for Day-Trading
                                          Accounts; 2361 Day-Trading
                                          Risk Disclosure Statement;
                                          2370 Borrowing From or Lending
                                          to Customers.
------------------------------------------------------------------------
\1\ FINRA shall have Regulatory Responsibilities for Dual Members to the
  extent that a Dual Member is, and remains, a member of SIPC.
\2\ In connection with the approval of ISE Rule 2114, the Commission
  noted that since ISE is requiring Equity EAMs that do business with
  the public to become members of NASD (n/k/a FINRA), those ISE members
  are required to comply with FINRA (NASD) rules that govern the
  practice of members when doing business with the public. The
  Commission noted that, among other things, these members would be
  obligated to comply with these listed FINRA (NASD) Rules. See Exchange
  Act Release No. 54401 (September 1, 2006), 71 FR 53483 (September 11,
  2006) (Order Granting Accelerated Approval of SR-ISE-2006-53).

* * * * *

III. Date of Effectiveness of the Proposed Plan and Timing for 
Commission Action

    Pursuant to Section 17(d)(1) of the Act \15\ and Rule 17d-2 
thereunder,\16\ after April 28, 2010, the Commission may, by written 
notice, declare the plan submitted by ISE and FINRA, File No. 4-596, to 
be effective if the Commission finds that the plan is necessary or 
appropriate in the public interest and for the protection of investors, 
to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the development 
of the national market system and a national system for the clearance 
and settlement of securities transactions and in conformity with the 
factors set forth in Section 17(d) of the Act.
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    \15\ 15 U.S.C. 78q(d)(1).
    \16\ 17 CFR 240.17d-2.
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IV. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the 17d-2 Plan and to relieve ISE of the responsibilities which would 
be assigned to FINRA, interested persons are invited to submit written 
data, views, and arguments concerning the foregoing. Comments may be 
submitted by any of the following methods:
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. 4-596 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 No. 4-596. 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,\17\ all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for 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 ISE and FINRA. 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 No. 4-596 and should be submitted on 
or before April 28, 2010.
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    \17\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8350 Filed 4-12-10; 8:45 am]
BILLING CODE 8011-01-P