Document ID: SEC-2010-1660-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX
Posted Date: 2010-10-29T04:00Z

[Federal Register: October 29, 2010 (Volume 75, Number 209)]
[Notices]               
[Page 66820-66822]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29oc10-142]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63171; File No. SR-BX-2010-071]

 
Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend BX Rules 
2270 and 2910 To Reflect Changes to Corresponding FINRA Rule 2261

October 25, 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 October 20, 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 and II below, which Items 
have been prepared primarily 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 Substance 
of the Proposed Rule Change

    The Exchange is filing this proposed rule change to amend BX Rules 
2270 and 2910 to reflect recent changes to a corresponding rule of the 
Financial Industry Regulatory Authority (``FINRA''), which will result 
in consolidating BX Rules 2270 and 2910 into BX Rule 2261. The Exchange 
proposes to implement the proposed rule change immediately. The text of 
the proposed rule change is below. Proposed new language is underlined; 
proposed deletions are in [brackets].
* * * * *

2261. Disclosure of Financial Condition

    Exchange Members shall comply with FINRA Rule 2261 as if such Rule 
were part of the Rules of the Exchange.
* * * * *

[2270. Disclosure of Financial Condition to Customers]

    Exchange Members shall comply with NASD Rule 2270 as if such Rule 
were part of the Rules of the Exchange.
    FINRA is in the process of consolidating certain NASD rules into a 
new FINRA rulebook. If the provisions of NASD Rule 2270 are transferred 
into the FINRA rulebook, then Equity Rule 2270 shall be construed to 
require Exchange members to comply with the FINRA rule corresponding to 
NASD Rule 2270 (regardless of whether such rule is renumbered or 
amended) as if such rule were part of the Rules of the Exchange.]
* * * * *

[2910. Disclosure of Financial Condition to Other Members]

    Any Exchange member who is a party to an open transaction or who 
has on deposit cash or securities of another member shall furnish upon 
written request of the other member a statement of its financial 
condition as disclosed in its most recently prepared balance sheet.]
* * * * *

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.

[[Page 66821]]

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

1. Purpose
    Many of Exchange's rules are based on rules of FINRA (formerly the 
National Association of Securities Dealers (``NASD'')). 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, the Exchange initiated a 
process of modifying its rulebook to ensure that the Exchange rules 
corresponding to FINRA/NASD rules continue to mirror them as closely as 
practicable. The Exchange proposes to update its rules to reflect 
changes BX Rules 2270 and 2910 which corresponds to FINRA Rule 2261.
    BX Rule 2270 (Disclosure of Financial Condition to Customers) and 
BX Rule 2910 (Disclosure of Financial Condition to Other Members) 
formerly corresponded to NASD Rule 2270 (Disclosure of Financial 
Condition to Customers) and NASD Rule 2910 (Disclosure of Financial 
Condition to Other Members). In SR-FINRA-2009-081,\4\ FINRA re-
designated NASD Rules 2270 and 2910 as FINRA Rule 2261 and made 
substantive amendments to strengthen and simplify the rules.
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    \4\ Securities Exchange Act Release No. 61540 (February 18, 
2010), 75 FR 8771 (February 25, 2010) (SR-FINRA-2009-081).
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    More specifically, the current BX Rule 2270, which incorporates 
NASD Rule 2270 by reference, requires that the members make information 
relative to a member's financial condition, as disclosed in its most 
recent balance sheet, available for inspection by any bona fide regular 
customer upon request. In FINRA SR-2009-081, FINRA provided members the 
option of delivering their balance sheet, in paper or electronic form, 
to customers who request it. Additionally, if the delivery is 
electronic, the requesting customer must provide consent to receive the 
balance sheet in electronic form to ensure that such information is 
accessible to the customer.
    This proposed filing also addresses BX Rule 2910, which compares to 
the former NASD Rule 2910. BX Rule 2910 requires that any member that 
is a party to an open transaction or who has on deposit cash or 
securities of another member to furnish, upon the written request of 
the other member, a statement of its financial condition as disclosed 
in its most recently prepared balance sheet. In SR-FINRA-2009-081,\5\ 
FINRA amended NASD Rule 2910 and consolidated it within FINRA Rule 2261 
to require that members provide to other members the balance sheet that 
was prepared in accordance with the member's usual practice or as 
required by state or federal securities laws or any corresponding rule 
or regulation. Also, FINRA amended the provision to require that 
members be permitted to provide their balance sheet to other members in 
paper or electronic form; however, this does not require obtaining 
consent of the other members for delivery.
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    \5\ See supra note 4.
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    The Exchange believes that BX Rule 2270 and 2910 should be 
consolidated and amended to reflect the provisions in the new FINRA 
2261. For clarification, this results in deleting BX Rules 2270 and 
2910. This will allow customers and other members to continue to have 
access to a copy of the member's most recent balance sheet at any time 
upon request while simplifying the provisions. The Exchange is adopting 
the new FINRA rule in full by incorporating by reference FINRA Rule 
2261 into the proposed BX Rule 2261.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\6\ in general, and with 
Sections 6(b)(5) of the Act,\7\ 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 2270 and 2910 to recent changes made to 
corresponding FINRA Rule 2261 to promote application of consistent 
regulatory standards.
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    \6\ 15 U.S.C. 78f.
    \7\ 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ thereunder in that 
it effects a change that: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, BX 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 on which the 
Exchange filed the proposed rule change.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\10\ 
However, Rule 19b-4(f)(6) \11\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay so that the proposal may 
become operative upon filing. The Exchange notes that the changes are 
identical to changes made by FINRA approved by the Commission, because 
the Exchange is incorporating those changes.\12\ BX proposes to 
incorporate the FINRA rule by reference. For these reasons, the 
Commission believes it is consistent with the protection of investors 
and the public interest to waive the 30-day operative delay, and hereby 
grants such waiver.\13\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ Id.
    \12\ See supra note 4.
    \13\ For the purposes only of waiving the operative date 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 such 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

[[Page 66822]]

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, as amended, 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-2010-071 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-2010-071. 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 website 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 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-2010-071 
and should be submitted on or before November 19, 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. 2010-27339 Filed 10-28-10; 8:45 am]
BILLING CODE 8011-01-P