Document ID: SEC-2010-0258-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-02-19T05:00Z

[Federal Register: February 19, 2010 (Volume 75, Number 33)]
[Notices]               
[Page 7528-7530]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19fe10-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61495; File No. SR-BX-2010-006]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rules 2848, 3330, and 9810 To Reflect Changes to Corresponding FINRA 
Rules

February 4, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 14, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'' or ``BX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been substantially prepared by the Exchange. The Exchange 
has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing this proposed rule change to amend BX Rules 
2848 (Communications with the Public and Customers Concerning Index 
Warrants, Currency Index Warrants, and Currency Warrants); 3330 
(Payment Designed to Influence Market Prices, Other than Paid 
Advertising); and 9810 (Initiation of Proceeding) to reflect recent 
changes to corresponding rules of the Financial Industry Regulatory 
Authority (``FINRA''). The text of the proposed rule change is 
available at http://nasdaqomxbx.cchwallstreet.com, the Exchange's 
principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    BX based much of its rules on those of The NASDAQ Stock Market LLC 
(``NASDAQ''). Similarly, many of NASDAQ's rules are based on rules of 
FINRA (formerly the National Association of Securities Dealers 
(``NASD'')). As a consequence, many of BX's rules closely mirror those 
of FINRA. During 2008, FINRA embarked on an extended process of moving 
rules formerly designated as ``NASD Rules'' into a consolidated FINRA 
rulebook. In most cases, FINRA has renumbered these rules, and in some 
cases has substantively amended them. Accordingly, BX also proposes to 
initiate a process of modifying its rulebook to ensure that BX rules 
corresponding to FINRA/NASD rules continue to mirror them as closely as 
practicable. In some cases, it will not be possible for the rule 
numbers of BX rules to mirror corresponding FINRA rules, because 
existing or planned BX rules make use of those numbers. However, 
wherever possible, BX plans to update its rules to reflect changes to 
corresponding FINRA rules.
    This filing addresses BX Rules 2848 (Communications with the Public 
and Customers Concerning Index Warrants, Currency Index Warrants, and 
Currency Warrants); 3330 (Payment Designed to Influence Market Prices, 
Other than Paid Advertising); and 9810 (Initiation of Proceeding) to 
update cross-references to corresponding rules of FINRA.
    In SR-FINRA-2009-078,\4\ FINRA made changes that reflected, among 
other things, incorporation into the consolidated FINRA rulebook of 
NASD Rule 3330 as FINRA Rule 5230 (Payments Involving Publications that 
Influence the Market Price of a Security); \5\ NASD Rule 2330 as FINRA 
Rule 2150 (Improper Use of Customers' Securities or Funds; Prohibition 
Against Guarantees and Sharing in Accounts); \6\ and NASD Rule 2220 as 
FINRA Rule 2220 (Options Communications).\7\
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    \4\ See Securities Exchange Act Release No. 61087 (December 1, 
2009), 74 FR 65190 (December 9, 2009) (SR-FINRA-2009-078) (notice of 
filing and immediate effectiveness).
    \5\ See Securities Exchange Act Release No. 60648 (September 10, 
2009), 74 FR 47837 (September 17, 2009) (SR-FINRA-2009-048) (order 
approving adoption of FINRA Rule 5230).
    \6\ See Securities Exchange Act Release No. 60701 (September 21, 
2009); 74 FR 49425 (September 28, 2009) (SR-FINRA-2009-014) (order 
approving adoption of FINRA Rule 2150).
    \7\ See Securities Exchange Act Release No. 60534 (August 19, 
2009), 74 FR 44410 (August 28, 2009) (SR-FINRA-2009-036) (order 
approving adoption of FINRA Rules 2124, 2220, 4370, and 5250).
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    FINRA Rule 2220, like former NASD Rule 2220, sets forth a member's 
obligations with respect to its options communications with the public 
and: (a) uses, to the extent appropriate, the same terminology and 
definitions as in FINRA's general rules on communications with the 
public; (b) makes the requirements for principal review of 
correspondence concerning options the same as for correspondence 
generally; and (c) updates the standards on the content of 
communications that precede the delivery of the options disclosure 
document (ODD).
    BX is, by this filing, updating references in its Rule 2848 from 
NASD Rule 2220 to FINRA Rule 2220.

[[Page 7529]]

    NASD Rule 3330 prohibits a member from giving, or offering to give, 
anything of value to any person for the purpose of influencing or 
rewarding the action of such person in connection with the publication 
or circulation in any newspaper, investment service, or similar 
publication, of any matter that has, or is intended to have, an effect 
upon the market price of any security; and provides an exception for 
any matter that is clearly distinguishable as paid advertising. As part 
of transferring NASD Rule 3330 into the consolidated FINRA rulebook as 
FINRA Rule 5230, FINRA proposed two changes to the rule to modernize 
its terms and clarify its scope by: (a) Updating the list of media to 
which the rule refers to include electronic and other types of media, 
including magazines, Web sites, and television programs; and (b) 
expanding the exceptions in the rule beyond paid advertising to also 
include compensation paid in connection with research reports and 
communications published in reliance on Section 17(b) of the Securities 
Act of 1933 (the ``1933 Act'').
    BX is, by this filing, re-numbering its Rule 3330 to Rule 5230 and 
amending the text to conform to the changes reflected in FINRA Rule 
5230.
    NASD Rule 2330 prohibits members and associated persons from: (a) 
Making improper use of a customer's securities or funds; (b) 
guaranteeing a customer against loss in connection with any securities 
transaction or in any securities account of the customer; and (c) 
sharing in the profits or losses in the customer's account except under 
certain limited conditions specified in the Rule. As part of 
transferring NASD Rule 2330 into the consolidated FINRA rulebook as 
FINRA Rule 2150, FINRA proposed minor changes to Rule 2150(c) and added 
Supplementary Information to the rule that codified existing staff 
guidance concerning the inapplicability of the rule to certain 
guarantees, permissible reimbursement by a member of certain losses, 
correction of bona fide errors, and preservation of written 
authorizations.\8\
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    \8\ Supplementary Material to FINRA Rule 2150 generally provides 
that (i) a ``guarantee'' extended to all holders of a security by an 
issuer as part of that security generally would not be subject to 
the prohibition against guarantees; (ii) the rule does not preclude 
a member from determining on an after-the-fact basis to reimburse a 
customer for transaction losses, provided however that the member 
shall comply with all reporting requirements that may be applicable 
to such payment; (iii) the rule does not preclude a member from 
correcting a bona fide error; and (iv) a member must preserve the 
required written authorization(s) for a period of at least six years 
after the date the account is closed.
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    BX has proposed, in a recent immediately effective filing,\9\ to 
re-number its Rule 2330 and IM-2330 to Rule 2150 and IM-2150, 
respectively; clarify cross-references in its rule and IM; and reflect 
the changes to FINRA Rule 2150. BX is, by this filing, clarifying the 
cross-reference in its Rule 9810 to BX Equity Rule 2150.
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    \9\ See Securities Exchange Act Release No. 61129 (December 8, 
2009), 74 FR 66188 (December 14, 2009) (SR-BX-2009-080) (notice of 
filing and immediate effectiveness).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\10\ in general, and with 
Sections 6(b)(5) of the Act,\11\ in particular, in that the proposal is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The proposed 
changes will conform BX Rules 2848, 3330 and 9810 to recent changes 
made to several corresponding FINRA rules, to promote application of 
consistent regulatory standards.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-006 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2010-006. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for 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 such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will

[[Page 7530]]

be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BX-2010-006, and should be submitted on 
or before March 12, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3140 Filed 2-18-10; 8:45 am]
BILLING CODE 8011-01-P