Document ID: SEC-2010-0553-0001
Agency: sec
Document Type: Notice
Title: Proposed Plan for Allocation of Regulatory Responsibilities Between EDGX Exchange, Inc. and Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-04-13T04:00Z

[Federal Register: April 13, 2010 (Volume 75, Number 70)]
[Notices]               
[Page 18920-18925]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap10-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61861; File No. 4-598]

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

April 7, 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 April 2, 2010, EDGX Exchange, Inc. (``EDGX'') and the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') (together with EDGX, 
the ``Parties'') filed with the Securities and Exchange Commission 
(``Commission'') a plan for the allocation of regulatory 
responsibilities, dated March 31, 2010 (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 registered 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

[[Page 18921]]

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 appropriate 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).
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II. Proposed 17d-2 Plan

    The proposed 17d-2 Plan is intended to reduce regulatory 
duplication for firms that are common members of both EDGX and 
FINRA.\11\ Pursuant to the proposed 17d-2 Plan, FINRA would assume 
certain examination and enforcement responsibilities for common members 
with respect to certain applicable laws, rules, and regulations.
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    \11\ The proposed 17d-2 Plan refers to these common members as 
``Dual Members.'' See Paragraph 1(c) of the proposed 17d-2 Plan.
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    The text of the 17d-2 Plan delineates the proposed regulatory 
responsibilities between the Parties. Included in the 17d-2 Plan is an 
attachment (``EDGX Certification for 17d-2 Agreement with FINRA'' 
referred to herein as the ``Certification'') that lists every EDGX rule 
and select Federal securities laws, rules and regulations for which 
FINRA would bear responsibility under the 17d-2 Plan for overseeing and 
enforcing with respect to EDGX members that are also members of FINRA 
and the associated persons therewith (``Dual Members'').
    Specifically, under the 17d-2 Plan, FINRA would assume examination 
and enforcement responsibility relating to compliance by Dual Members 
with the rules of EDGX that are substantially similar to the applicable 
rules of FINRA, as well as any provisions of the Federal securities 
laws and the rules and regulations thereunder delineated in the 
Certification (``Common Rules'').\12\ Common Rules would not include 
the application of any EDGX Rule or FINRA rule, or any rule or 
regulation under the Act, to the extent that it pertains to violations 
of insider trading activities, because such matters are covered by a 
separate multiparty agreement under Rule 17d-2.\13\ In the event that a 
Dual Member is the subject of an investigation relating to a 
transaction on EDGX, the 17d-2 Plan acknowledges that EDGX may, in its 
discretion, exercise concurrent jurisdiction and responsibility for 
such matter.\14\
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    \12\ See paragraph 1(b) of the 17d-2 plan (defining Common 
Rules). See also paragraph 1(f) of the proposed 17d-2 Plan (defining 
Regulatory Responsibilities). Paragraph 2 of the 17d-2 Plan provides 
that annually, or more frequently as required by changes in either 
EDGX rules or FINRA rules, the parties shall review and update, if 
necessary, the list of Common Rules. Further, paragraph 3 of the 
Plan provides that EDGX shall furnish FINRA with a list of Dual 
Members, and shall update the list no less frequently than once each 
calendar quarter.
    \13\ See Securities Exchange Act Release No. 58350 (August 13, 
2008), 73 FR 48247 (August 18, 2008) (File No. 4-566) (notice of 
filing of proposed plan). See also Securities Exchange Act Release 
Nos. 58536 (September 12, 2008) (File No. 4-566) (order approving 
and declaring effective the plan) and 58806 (October 17, 2008) (File 
No. 4-566) (order approving and declaring effective an amendment to 
the plan). The Certification identifies several Common Rules that 
may also be addressed in the context of regulating insider trading 
activities pursuant to the proposed separate multiparty agreement.
    \14\ See paragraph 6 of the proposed 17d-2 Plan.
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    Under the 17d-2 Plan, EDGX would retain full responsibility for 
surveillance, examination, investigation, and enforcement with respect 
to trading activities or practices involving EDGX's own marketplace, 
including, without limitation, registration pursuant to its unique 
rules (i.e., non-common rules); its duties as a DEA pursuant to Rule 
17d-1 under the Act; and any rules that are not Common Rules, except 
for EDGX rules for any broker-dealer subsidiary of Direct Edge Holdings 
LLC.\15\
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    \15\ Apparent violations of such EDGX rules by any broker-dealer 
subsidiary of Direct Edge Holdings LLC will be processed by, and 
enforcement proceedings will be conducted by, FINRA. See paragraphs 
2(d) and 6 of the 17d-2 Plan. As of the date of this Agreement, 
Direct Edge ECN LLC is the only broker-dealer susbsidiary of Direct 
Edge Holdings LLC.
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    The text of the proposed 17d-2 Plan is as follows:

Agreement Between FINRA and EDGX Exchange, Inc. Pursuant to Rule 17d-2 
Under the Securities Exchange Act of 1934

    This Agreement, by and between the Financial Industry Regulatory 
Authority (``FINRA'') and EDGX Exchange, Inc. (``EDGX''), is made this 
31st day of March, 2010 (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 EDGX may be referred to individually 
as a ``party'' and together as the ``parties.''
    Whereas, FINRA and EDGX desire to reduce duplication in the 
examination of their Dual Members (as defined herein) and in the filing 
and processing of certain registration and membership records; and
    Whereas, FINRA and EDGX 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 EDGX 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) ``EDGX Rules'' or ``FINRA Rules'' shall mean: (i) The rules of 
EDGX, or (ii) the rules of 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 EDGX 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 provisions and 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 such provisions or 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, EDGX 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, Boston Stock Exchange, Inc., Chicago Board Options Exchange, Inc., 
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.

[[Page 18922]]

effective October 17, 2008, as may be amended from time to time.
    (c) ``Dual Members'' shall mean those EDGX members that are also 
members of FINRA and the associated persons therewith.
    (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 FINRA's Code of Procedure 
(the Rule 9000 Series) and other applicable FINRA procedural rules, to 
determine whether violations of Common Rules have occurred, and if such 
violations are deemed to have occurred, the imposition of appropriate 
sanctions as specified under FINRA's Code of Procedure and sanctions 
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 Dual 
Members. Attached as Exhibit 1 to this Agreement and made part hereof, 
EDGX 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 EDGX or 
FINRA, EDGX shall submit an updated list of Common Rules to FINRA for 
review which shall add EDGX Rules not included in the current list of 
Common Rules that qualify as Common Rules as defined in this Agreement; 
delete EDGX 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 EDGX 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 EDGX shall retain 
full responsibility for (unless otherwise addressed by separate 
agreement or rule) the following:
    (a) Surveillance, examination, investigation and enforcement with 
respect to trading activities or practices involving EDGX's own 
marketplace;
    (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, if 
applicable; and
    (d) Any EDGX Rules that are not Common Rules, except for EDGX Rules 
for any broker-dealer subsidiary of Direct Edge Holdings LLC, as 
provided in paragraph 6.
    3. Dual Members. Prior to the Effective Date, EDGX shall furnish 
FINRA with a current list of Dual Members, which shall be updated no 
less frequently than once each quarter.
    4. No Charge. There shall be no charge to EDGX by FINRA for 
performing the Regulatory Responsibilities and Enforcement 
Responsibilities under this Agreement except as hereinafter provided. 
FINRA shall provide EDGX with ninety (90) days advance written notice 
in the event FINRA decides to impose any charges to EDGX for performing 
the Regulatory Responsibilities under this Agreement. If FINRA 
determines to impose a charge, EDGX 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.
    5. Applicability of Certain Laws, Rules, Regulations or Orders. 
Notwithstanding any provision hereof, this Agreement shall be subject 
to any statute, or any rule or order of the SEC. To the extent such 
statute, rule, or order is inconsistent with one or more provisions of 
this Agreement, the statute, rule, or order shall supersede the 
provision(s) hereof to the extent necessary to be properly effectuated 
and the provision(s) hereof in that respect shall be null and void.
    6. Notification of Violations.
    (a) In the event that FINRA becomes aware of apparent violations of 
any EDGX Rules, which are not listed as Common Rules, discovered 
pursuant to the performance of the Regulatory Responsibilities assumed 
hereunder, FINRA shall notify EDGX of those apparent violations for 
such response as EDGX deems appropriate.
    (b) In the event that EDGX becomes aware of apparent violations of 
any Common Rules, discovered pursuant to the performance of the 
Retained Responsibilities, EDGX shall notify FINRA of those apparent 
violations and such matters shall be handled by FINRA as provided in 
this Agreement.
    (c) With respect to apparent violations of any EDGX Rules by any 
broker-dealer subsidiary of EDGX's holding company, Direct Edge 
Holdings LLC, FINRA shall not make referrals to EDGX pursuant to this 
paragraph 6. Such apparent violations shall be processed by, and 
enforcement proceedings in respect thereto will be conducted by, FINRA 
as provided in this Agreement.
    (d) Apparent violations of Common Rules and FINRA rules 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 EDGX, EDGX may in its discretion assume concurrent 
jurisdiction and responsibility.
    (e) Each party agrees to make available promptly all files, records 
and witnesses necessary to assist the other in its investigation or 
proceedings.
    7. Continued Assistance.
    (a) FINRA shall make available to EDGX all information obtained by 
FINRA in the performance by it of the Regulatory Responsibilities 
hereunder in respect to the Dual Members subject to this Agreement. In 
particular, and not in limitation of the foregoing, FINRA shall furnish 
EDGX any information it obtains about Dual Members which reflects 
adversely on their financial condition. EDGX shall make available to 
FINRA any information coming to its attention that reflects adversely 
on the financial condition of Dual 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 against third 
parties of regulatory or other privileges relating to the discovery of 
documents or information.

[[Page 18923]]

    8. Statutory Disqualifications. When FINRA becomes aware of a 
statutory disqualification as defined in the Exchange Act with respect 
to a Dual 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 disqualification applies and 
keep EDGX advised of its actions in this regard for such subsequent 
proceedings as EDGX may initiate.
    9. Customer Complaints. EDGX shall forward to FINRA copies of all 
customer complaints involving Dual Members received by EDGX 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 Dual 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.
    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 Dual Members, as 
either party, in its sole discretion, shall deem appropriate or 
necessary.
    12. Termination. This Agreement may be terminated by EDGX or FINRA 
at any time upon the approval of the Commission after one (1) year's 
written notice to the other party, except as provided in paragraph 4.
    13. Arbitration. In the event of a dispute between the parties as 
to the operation of this Agreement, EDGX 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 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 
Section 13 shall interfere with a party's right to terminate this 
Agreement as set forth herein.
    14. Notification of Members. EDGX and FINRA shall notify Dual 
Members of this Agreement after the Effective Date by means of a 
uniform joint notice.
    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 EDGX 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 EDGX 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 EDGX 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 EDGX 
join in requesting the Commission, upon its approval of this Agreement 
or any part thereof, to relieve EDGX 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.
    In witness whereof, each party has executed or caused this 
Agreement to be executed on its behalf by a duly authorized officer as 
of the date first written above.

EDGX EXCHANGE, INC.

By:--------------------------------------------------------------------

Name:

Title:

FINANCIAL INDUSTRY REGULATORY AUTHORITY

By:--------------------------------------------------------------------

Name:

Title:

EDGX Exchange, Inc. Certification

EDGX Certification for 17d-2 Agreement With FINRA

    EDGX Exchange, Inc. hereby certifies that the requirements 
contained in the 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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------------------------------------------------------------------------
Rule 2.5, Interpretation and Policy      NASD Rule 1120(a)(1)-(4)
 .04, The Regulatory Element of           Continuing Education
 Continuing Education Requirement for     Requirements.
 Authorized Traders of Members.
Rule 3.1 Business Conduct of Members...  FINRA Rule 2010 Standards of
                                          Commercial Honor and
                                          Principles of Trade.*
Rule 3.2 Violations Prohibited \16\....  FINRA Rule 2010 Standards of
                                          Commercial Honor and
                                          Principles of Trade and 3010
                                          Supervision.*
Rule 3.3 Use of Fraudulent Devices.....  FINRA Rule 2020 Use of
                                          Manipulative, Deceptive or
                                          Other Fraudulent Device.
Rule 3.5(a) Advertising Practices......  NASD Rule 2210(d)(1)(B)
                                          Communications with the
                                          Public.
Rule 3.5(b) Advertising Practices......  NASD Rule 2210(d)(2)(C)
                                          Communications with the
                                          Public.
Rule 3.5(c) Advertising Practices......  NASD Rule 2210(d)(1)
                                          Communications with the
                                          Public.
Rule 3.5(d) Advertising Practices......  NASD Rule 2210(b)(1)
                                          Communications with the
                                          Public.

[[Page 18924]]

Rule 3.5(e) Advertising Practices......  NASD Rule 2210(b)(2)(A) and
                                          2210(c) Communications with
                                          the Public.
Rule 3.5(f) Advertising Practices......  NASD Rule 2210(d)(2)(A) and
                                          2210(d)(1)(E)
                                         Communications with the Public.
Rule 3.5(g) Advertising Practices......  NASD Rule 2210(d)(1)
                                          Communications with the
                                          Public.
Rule 3.5(h) Advertising Practices......  NASD Rule 2210(d)(1)
                                          Communications with the
                                          Public.
Rule 3.6 Fair Dealing with Customers...  NASD Rule IM-2310-2(b)(1), (2),
                                          (4)(A)(i), (4)(A)(iii),
                                          (4)(A)(iv), and (5) Fair
                                          Dealing with Customers.
Rule 3.7(a) Recommendations to           NASD Rule 2310(a)
 Customers.                               Recommendations to Customers
                                          (Suitability).
Rule 3.8(a) The Prompt Receipt and       NASD Rule 3370 Purchases.
 Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and       SEC Regulation SHO.
 Delivery of Securities.
Rule 3.9 Charges for Services Performed  NASD Rule 2430 Charges for
                                          Services Performed.
Rule 3.10 Use of Information...........  FINRA Rule 2060 Use of
                                          Information Obtained in
                                          Fiduciary Capacity.
Rule 3.11 Publication of Transactions    FINRA Rule 5210 Publication of
 and Quotations.                          Transactions and Quotations.
Rule 3.12 Offers at Stated Prices......  FINRA Rule 5220 Offers at
                                          Stated Prices.
Rule 3.14 Disclosure on Confirmations..  NASD Rule 2230 Confirmations
                                          and SEA Rule 10b-10
                                          Confirmation of Transactions.
Rule 3.15 Disclosure of Control........  FINRA Rule 2262 Disclosure of
                                          Control Relationship with
                                          Issuer.
Rule 3.16 Discretionary Accounts.......  NASD Rule 2510 Discretionary
                                          Accounts.
Rule 3.17 Customer's Securities or       FINRA Rule 2150(a) Improper Use
 Funds.                                   of Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
Rule 3.18 Prohibition Against            FINRA Rule 2150(b) Improper Use
 Guarantees.                              of Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
Rule 3.19 Sharing in Accounts; Extent    FINRA Rule 2150(c)(1) Improper
 Permissible.                             Use of Customers' Securities
                                          or Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts.
Rule 4.1 Requirements..................  Section 17 of the Exchange Act
                                          and the Rules Thereunder.
Rule 4.3 Record of Written Complaints..  NASD Rule 3110(d) and (e) Books
                                          and Records.**
Rule 4.4 Disclosure of Financial         NASD Rule 2270 Disclosure of
 Condition.                               Financial Condition to
                                          Customers & SEA Rule 17a-5(c).
Rule 5.1 Written Procedures............  NASD Rule 3010(b)(1)
                                          Supervision--Written
                                          Procedures.*
Rule 5.2 Responsibility of Members.....  NASD Rule 3010(a)(4) and (b)(4)
                                          Supervision.*
Rule 5.3 Records.......................  NASD Rule 3010(a)(1), (b) and
                                          (c) Supervision.*
Rule 5.4 Review of Activities..........  NASD Rule 3010(c)(1)
                                          Supervision--Internal
                                          Inspections.*
Rule 5.5 Information Barrier Procedures  Section 15(f) of Exchange Act.
Rule 5.6 Anti-Money Laundering           FINRA Rule 3310 Anti-Money
 Compliance Program.                      Laundering Compliance Program.
Rule 9.3 Predispute Arbitration          NASD Rule 3110(f) Books and
 Agreements.                              Records (Requirements When
                                          Using Predispute Arbitration
                                          Agreements for Customer
                                          Accounts).
Rule 12.3 Excessive Sales by a Member..  FINRA Rule 6140(c) Other
                                          Trading Practices.***
Rule 12.5 Dissemination of False         FINRA Rule 6140(e) Other
 Information.                             Trading Practices.***
Rule 12.11 Best Execution..............  NASD Rule 2320 Best Execution
                                          and Interpositioning.
Rule 12.13 Trading Ahead of Research     FINRA Rule 5280 Trading Ahead
 Reports.                                 of Research Reports.
Rule 13.3 Forwarding of Issuer           FINRA Rule 2251 Forwarding of
 Materials.                               Proxy and Other Issuer-Related
                                          Materials.
------------------------------------------------------------------------
\16\ FINRA shall only have Regulatory Responsibility regarding the first
  phrase of the EDGX rule regarding prohibitions from violating the
  Securities Exchange Act of 1934 and the rules and regulations
  thereunder; responsibility for the remainder of the Rule shall remain
  with EDGX.

    In addition, the following provisions shall be part of this 17d-
2 Agreement:

SEC Rules

    Rule 200 of Regulation SHO--Definition of ``Short Sale'' and 
Marking Requirements.
    Rule 203 of Regulation SHO--Borrowing and Delivery Requirements.
    Rule 606 of Regulation NMS--Disclosure of Order Routing 
Information.
    Rule 607 of Regulation NMS--Customer Account Statements.

    * FINRA shall not have any Regulatory Responsibilities for these 
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, Boston Stock Exchange, Inc., Chicago 
Board Options Exchange, Inc., 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. 
effective October 17, 2008, as may be amended from time to time.
    ** FINRA shall only have any Regulatory Responsibilities for the 
first three years regarding EDGX's five year requirement of keeping 
and preserving a file of all written complaints of customers and 
action taken by the Member in respect thereof.
    *** FINRA shall not have any Regulatory Responsibilities for 
these rules as they pertain to trading practices involving 
securities that do not meet the definition of NMS stock as defined 
in Rule 600(b)(47) of SEC Regulation NMS.
* * * * *

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

    Pursuant to Section 17(d)(1) of the Act \17\ and Rule 17d-2 
thereunder,\18\ after April 28, 2010, the Commission may, by written 
notice, declare the plan submitted by EDGX and FINRA, File No. 4-598, 
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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    \17\ 15 U.S.C. 78q(d)(1).
    \18\ 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 proposed 17d-2 Plan and to relieve EDGX 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:

[[Page 18925]]

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 4-598 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-598. 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/other.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed 17d-2 Plan that are filed with 
the Commission, and all written communications relating to the proposed 
17d-2 Plan 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 proposed 17d-2 Plan also will be available for 
inspection and copying at the principal office of the EDGX 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 Number 4-598 and should 
be submitted on or before April 28, 2010.
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    \19\ 17 CFR 200.30-3(a)(34).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8368 Filed 4-12-10; 8:45 am]
BILLING CODE 8011-01-P