Document ID: SEC-2010-1465-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-09-27T04:00Z

[Federal Register: September 27, 2010 (Volume 75, Number 186)]
[Notices]               
[Page 59300-59301]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27se10-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62953; File No. SR-FINRA-2010-049]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to 
Quotation Requirements on the Alternative Display Facility

September 20, 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 September 17, 2010, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. 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.
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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 FINRA Rule 6272 to enhance quotation 
requirements on the Alternative Display Facility (``ADF'').
    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, the Proposed Rule Change

1. Purpose
    In 2002, FINRA created the ADF to ensure that any FINRA member, 
including alternative trading systems, seeking to display quotations 
for NMS stocks in the over-the-counter (``OTC'') market, rather than 
through an exchange platform, has an alternative venue through which to 
post its OTC quotations and report trades.\3\
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    \3\ Initially, the ADF was limited to quotations and trade 
reports in Nasdaq securities. See Securities Exchange Act Release 
No. 46249 (July 24, 2002), 67 FR 49822 (July 31, 2002). In 2006, the 
ADF was expanded to include all NMS stocks. See Securities Exchange 
Act Release No. 54537 (September 28, 2006), 71 FR 59173 (October 6, 
2006).
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    FINRA and numerous exchanges are filing proposed rule changes to 
enhance the minimum quotation requirements for market makers by 
requiring market makers for each stock in which they are registered to 
continuously maintain two-sided quotations within a designated 
percentage of the National Best Bid and National Best Offer (or if 
there is not a National Best Bid or Offer, the last reported sale). 
These proposed rule changes are intended to eliminate trade executions 
against market maker ``placeholder'' quotations that are priced far 
away from the inside market, commonly known as ``stub quotes.'' Under 
these proposed rules, limitations on permissible quotations are 
determined by the individual character of the security, the time of day 
in which the quote is entered, and any applicable stock trading pause 
triggers.
    In order to ensure consistency in quotation requirements across 
markets, FINRA is proposing to amend Rule 6272 to impose the same 
limitations on a Registered Reporting ADF Market Maker's quotations on 
the ADF that will apply to market makers on national securities 
exchanges. The proposed rule change would thus require all Registered 
Reporting ADF Market Makers to have systems in place to ensure that any 
quotations displayed on the ADF met the requirements of Rule 6272.
    FINRA will announce the implementation date on its Web site.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\4\ 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 that the proposed rule change will 
ensure consistent treatment of quotations across markets and could 
prevent the execution of numerous transactions at

[[Page 59301]]

stub quote prices, such as those on May 6, 2010.
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    \4\ 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-FINRA-2010-049 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2010-049. 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 inspection 
and copying 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 publicly available. All 
submissions should refer to File Number SR-FINRA-2010-049 and should be 
submitted on or before October 18, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24057 Filed 9-24-10; 8:45 am]
BILLING CODE 8010-01-P