Document ID: SEC-2013-1508-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2013-08-23T04:00Z

[Federal Register Volume 78, Number 164 (Friday, August 23, 2013)]
[Notices]
[Pages 52589-52591]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-20612]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70230; File No. SR-EDGX-2013-32]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate 
EDGX Rule 13.4

August 19, 2013.
    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 August 7, 2013, EDGX Exchange, Inc. (``Exchange'' or ``EDGX'') 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 prepared by the self-regulatory organization. EDGX 
filed the proposal pursuant to Section 19(b)(3)(A) \3\ of the Act and 
Rule 19b-4(f)(6) \4\ thereunder so that the proposal was 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\ 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

    The Exchange proposes to eliminate Rule 13.4, ``Assigning of 
Registered Securities in the Name of a Member or Member Organization,'' 
which permits the Exchange to establish a signature guarantee program. 
All of the changes described herein are applicable to Members.\5\ The 
text of the proposed rule change is available on the Exchange's 
Internet Web site at www.directedge.com, at the Exchange's principal 
office, and at the Public Reference Room of the Commission.
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    \5\ A Member is any registered broker or dealer, or any person 
associated with a registered broker or dealer that has been admitted 
to membership in the Exchange.
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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 self-regulatory organization 
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 self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to eliminate Rule 13.4, ``Assigning of 
Registered Securities in the Name of a Member or Member Organization,'' 
which permits the Exchange to establish a signature guarantee program. 
In sum, a signature guarantee program allows an investor who seeks to 
transfer or sell securities held in physical certificate form to have 
their signature on the certificate ``guaranteed.'' Rule 13.4 permits 
Members to guarantee their signatures by authorizing one or more of 
their employees to assign registered securities in the Member's name 
and to guarantee assignments of registered securities on behalf of the 
Member where the security had been signed by one of the partners of the 
Member or by one of the authorized officers of the Member by executing 
and filing with the Exchange a separate Power of Attorney, also known 
as a traditional signature card program. Transfer agents often insist 
that a signature be guaranteed before they accept the transaction 
because it limits their liability and losses if a signature turns out 
to be forged.
    Rule 17Ad-15 under the Act permits transfer agents to reject 
signature guarantees from eligible guarantor institutions that are not 
part of a signature guarantee program.\6\ The rule encouraged a 
movement away from the traditional signature card programs administered 
by the exchanges towards signature guarantee programs that use a 
medallion imprint or stamp which evidences their participation in the 
program and is an acceptable signature guarantee (``Medallion Signature 
Guarantee Program'').\7\ The Commission has also noted that:

    \6\ See 17 CFR 240.17Ad-15; Securities Exchange Act Release No. 
30146 (January 10, 1992), 57 FR 1082 (February 24, 1992) (adopting 
Rule 17Ad-15).
    \7\ See, e.g., Securities Exchange Act Release No. 33669 
(February 23, 1994), 59 FR 10189 (March 3, 1994) (SR-MSTC-93-13) 
(``[t]his newly adopted Rule 17Ad-15 rule rendered [Midwest 
Securities Trust Company's (``MSTC'')] Signature Distribution 
Program and Signature Guarantee Program obsolete. Therefore, to 
avoid costs that produce no benefits, MSTC eliminated its Signature 
Distribution and Signature Guarantee Programs and deleted MSTC Rule 
5, Sections 1 and 2 which govern these programs'').

[a]n investor can obtain a signature guarantee from a financial 
institution--such as a commercial bank, savings bank, credit union, 
or broker dealer--that participates in one of the Medallion 
signature guarantee programs. * * * If a financial institution is 
not a member of a recognized Medallion Signature Guarantee Program, 
it would not be able to provide signature guarantees. Also, if [an 
investor is] not a customer of a participating financial 
institution, it is likely the financial institution will not 
guarantee [the investor's] signature. Therefore, the best source of 
a Medallion Guarantee would be a bank, savings and loan association, 
brokerage firm, or credit union with which [the investor does] 
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business.\8\

    \8\ See ``Signature Guarantees: Preventing the Unauthorized 
Transfer of Securities,'' http://www.sec.gov/answers/sigguar.htm 
(last modified May 20, 2009).
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    In response to Rule 17Ad-15, certain exchanges have decommissioned 
or amended their rules to no longer provide for traditional signature 
card program.\9\ While the Exchange adopted

[[Page 52590]]

Rule 13.4 as part of its Form 1 exchange application,\10\ it has never 
offered, and does not now intend to offer, a signature guarantee 
service. The move towards Medallion Signature Guarantee Programs has 
also rendered traditional card programs as provided for under Exchange 
Rule 13.4 obsolete. Therefore, the Exchange proposes to eliminate Rule 
13.4.
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    \9\ See Securities Exchange Act Release No. 34188 (June 9, 
1994), 59 FR 30820 (June 15, 1994) (SR-MSTC-93-13) (order approving 
the elimination of MSTC's signature guarantee program stating that 
Rule 17Ad-15 rendered it obsolete); Securities Exchange Act Release 
No. 32590 (July 7, 1993), 58 FR 37978 (July 14, 1993) (order 
approving SR-PHLX-92-39 eliminating the PHLX's signature guarantee 
program in light of Rule 17Ad-15) (noting that ``[b]y eliminating 
its signature guarantee program, PHLX will streamline the signature 
guarantee process. In place of the cumbersome signature card system, 
PHLX will require participation in a Rule 17Ad-15 Signature 
Guarantee Program''). In 2006, the Philadelphia Stock Exchange, Inc. 
(currently Nasdaq OMX PHLX LLC) (``PHLX'') eliminated Rules 327--340 
regarding signature guarantees in their entirety from its rulebook, 
noting that they are ``being deleted as obsolete because they refer 
to the delivery and settlement of securities, which is not done by 
the Exchange, but by registered clearing agencies.'' Securities 
Exchange Act Release No. 54329 (August 17, 2006), 71 FR 504538 
(August 25, 2006) (SR-PHLX-2006-43); Securities Exchange Act Release 
No. 54538 (September 28, 2006), 71 FR 59184 (October 6, 2006 (order 
approving SR-PHLX-2006-43).
    \10\ See Securities Exchange Act Release No. 60651 (September 
11, 2009), 74 FR 47827 (September 17, 2009) (File Nos. 10.193 and 
10-194) (Notice of Filing of Exchange Applications for EDGX and EDGA 
Exchange, Inc. (``EDGA'')); Securities Exchange Act Release No. 
61698 (March 12, 2010), 75 FR 13151 (March 18, 2010) (File Nos. 10-
193 and 10-194) (Order Approving Exchange Applications for EDGX and 
EDGA).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \11\ and furthers the objectives of 
Section 6(b)(5) of the Act,\12\ in that it is designed promote just and 
equitable principles of trade, remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system, and, 
in general, protect investors and the public interest by eliminating 
unnecessary confusion with respect to the Exchange's rules. Rule 17Ad-
15 encouraged a movement away from the traditional signature card 
programs administered by the exchanges towards certain Medallion 
Signature Guarantee Programs. In response, certain exchanges have 
decommissioned or amended their rules to no longer provide for a 
traditional signature card program.\13\ The Exchange has never offered, 
and does not now intend to offer, a signature guarantee service. Also, 
the move towards Medallion Signature Guarantee Programs has rendered 
traditional card programs as provided for under Exchange Rule 13.4 
obsolete. Therefore, the Exchange believes eliminating Rule 13.4 would 
clarify the Exchange's rules by eliminating rules that account for 
services the Exchange does not provide. The Exchange also believes the 
elimination of unnecessary and obsolete rules removes impediments to 
the perfection of the mechanisms for a free and open market system 
consistent with the requirements of Section 6(b)(5) of the Act.\14\
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ See Securities Exchange Act Release No. 34188 (June 9, 
1994), 59 FR 30820 (June 15, 1994) (SR-MSTC-93-13) (order approving 
the elimination of MSTC's signature guarantee program stating that 
Rule 17Ad-15 rendered it obsolete); Securities Exchange Act Release 
No. 32590 (July 7, 1993), 58 FR 37978 (July 14, 1993) (SR-PHLX-92-
39) (order approving SR-PHLX-92-39 eliminating the PHLX's signature 
guarantee program in light of Rule 17Ad-15).
    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition. 
Rule 17Ad-15 encouraged a movement away from the traditional signature 
card programs administered by the exchanges towards certain Medallion 
Signature Guarantee Programs. In response, certain exchanges have 
decommissioned or amended their rules to no longer provide for a 
traditional signature card program.\15\ An investor may still obtain a 
signature guarantee from a financial institution that participates in 
one of the Medallion Signature Guarantee Programs. The Exchange has 
never offered, and does not intend to offer, a signature guarantee 
service. Also, the move towards Medallion Signature Guarantee Programs 
has rendered traditional card programs as provided for under Exchange 
Rule 13.4 obsolete. Therefore, the Exchange believes eliminating Rule 
13.4 would not impose any burden on competition.
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    \15\ See Securities Exchange Act Release No. 34188 (June 9, 
1994), 59 FR 30820 (June 15, 1994) (SR-MSTC-93-13) (order approving 
the elimination of MSTC's signature guarantee program stating that 
Rule 17Ad-15 rendered it obsolete); Securities Exchange Act Release 
No. 32590 (July 7, 1993), 58 FR 37978 (July 14, 1993) (SR-PHLX-92-
39) (order approving SR-PHLX-92-39 eliminating the PHLX's signature 
guarantee program in light of Rule 17Ad-15).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) \16\ of the Act and Rule 19b-4(f)(6) \17\ thereunder. The 
proposed rule change effects a change that (A) Does not significantly 
affect the protection of investors or the public interest; (B) does not 
impose any significant burden on competition; and (C) by its terms, 
does not become operative for 30 days after the date of the filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
self-regulatory organization has given 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.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    The Exchange provided the Commission with 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 (5) business days 
prior to the date of filing.\18\
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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange believes that the proposed rule change meets the 
criteria of subparagraph (f)(6) of Rule 19b-4 \19\ because it would 
clarify the Exchange's rules by eliminating rules that account for 
services the Exchange does not provide. The Exchange has never offered, 
and does not intend to offer, a signature guarantee service. Rule 17Ad-
15 encouraged a movement away from the traditional signature card 
programs administered by the exchanges towards certain Medallion 
Signature Guarantee Programs. This move towards Medallion Signature 
Guarantee Programs has rendered traditional card programs as provided 
for under Exchange Rule 13.4 obsolete. Today, an investor can obtain a 
signature guarantee from a financial institution that participates in 
one of the Medallion Signature Guarantee Programs. Therefore, the 
Exchange believes eliminating Rule 13.4 is non-controversial because it 
would clarify the Exchange's rules by eliminating rules that account 
for services the Exchange does not provide. Accordingly, the Exchange 
has designated this rule filing as non-controversial under Section 
19(b)(3)(A) of the Act \20\ and paragraph (f)(6) of Rule 19b-4 
thereunder.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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 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,

[[Page 52591]]

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-EDGX-2013-32 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-EDGX-2013-32. 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange.
    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-EDGX-2013-32 
and should be submitted on or before September 13, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20612 Filed 8-22-13; 8:45 am]
BILLING CODE 8011-01-P