Document ID: SEC-2011-1771-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-11-17T05:00Z

[Federal Register Volume 76, Number 222 (Thursday, November 17, 2011)]
[Notices]
[Pages 71404-71405]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29723]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65737; File No. SR-FINRA-2011-066]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to the Order Audit Trail System 
Definitions of Index Arbitrage Trade and Program Trade

November 10, 2011.
    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 November 4, 2011, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder. 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend the definitions of ``Index Arbitrage 
Trade'' and ``Program Trade'' in FINRA Rule 7410 (Definitions) to 
reflect the deletion of NYSE Rule 132B and the adoption of NYSE Rule 
7410.\5\
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    \5\ See Securities Exchange Act Release No. 65523 (October 7, 
2011); 76 FR 64154 (October 17, 2011).
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    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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, Proposed Rule Change

1. Purpose
    FINRA is filing the proposed rule change to update the definitions 
of ``Index Arbitrage Trade'' and ``Program Trade'' found in FINRA Rule 
7410.
    The definitions of ``Index Arbitrage Trade'' and ``Program Trade'' 
in FINRA Rule 7410(f) and (m), respectively, incorporate by reference 
the definitions of ``index arbitrage'' and ``program trading'' in NYSE 
Rule 132B. In connection with the extension of FINRA's Order Audit 
Trail System (``OATS'') rules (``OATS Rules'') to all NMS stocks, the 
NYSE filed with the SEC a proposed rule change to delete NYSE Rules 
132A, 132B, and 132C (the NYSE's Order Tracking System, or OTS, Rules) 
and to adopt, with minor conforming changes, the text of the FINRA Rule 
7400 Series, the OATS Rules.\6\ As part of that rule change, the NYSE 
relocated its definitions of ``index arbitrage'' and ``program 
trading'' from NYSE Rule 132B.10 to NYSE Rule 7410(g) and (m). Because 
the OTS Rules, including NYSE Rule 132B, will no longer be in the NYSE 
Rulebook after the OATS Rules are extended to all NMS stocks on 
November 28, 2011,\7\ FINRA is amending the definitions of ``Index 
Arbitrage Trade'' and ``Program Trade'' in paragraphs (f) and (m) of 
FINRA Rule 7410 to refer to new NYSE Rule 7410 rather than NYSE Rule 
132B.
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    \6\ See Securities Exchange Act Release No. 65523 (October 7, 
2011); 76 FR 64154 (October 17, 2011).
    \7\ FINRA began phasing in the extension of the OATS Rules to 
all NMS stocks on October 17, 2011. See Securities Exchange Act 
Release No. 65442 (September 29, 2011); 76 FR 61773 (October 5, 
2011). The phase-in will be completed on November 28, 2011. See OATS 
Reporting Technical Specifications, at ii (ed. May 3, 2011). The 
NYSE is phasing out the OTS requirements on the same timetable as 
FINRA is phasing in the OATS requirements. See Securities Exchange 
Act Release No. 65523, n.16 (October 7, 2011); 76 FR 64154, 64156 
n.16 (October 17, 2011).
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    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, such that FINRA can implement the proposed rule 
change immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes the proposed rule change will provide 
greater clarity to members and the public regarding FINRA's rules by 
updating the cross-references to the new NYSE rule. FINRA also believes 
that the proposed rule change will promote the harmonization of 
industry rules by ensuring that the definitions of ``Program Trade'' 
and ``Index Arbitrage Trade'' in the OATS Rules will remain consistent 
with the analogous definitions in the NYSE rules.
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    \8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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.

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, if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires a 
self-regulatory organization to give the Commission written notice 
of its intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time, as designated by the Commission. FINRA 
has satisfied this requirement.

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[[Page 71405]]

    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing. The Commission is waiving the 
30-day operative period.\13\ The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest as the waiver will allow FINRA to cross-
reference the appropriate NYSE rule and thereby reduce confusion 
regarding the applicable NYSE rule definition. The Commission, 
therefore, designates the proposed rule change to be operative upon 
filing with the Commission.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the operative delay of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-066 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-FINRA-2011-066. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed 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 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 Number SR-FINRA-2011-066 and should be 
submitted on or before December 8, 2011.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-29723 Filed 11-16-11; 8:45 am]
BILLING CODE 8011-01-P