Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Among the American Stock Exchange LLC, Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC, 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., 48248-48258 [E8-19068]

Download as PDF 48248 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices Annual responses Form #(s) Time (min) Burden (hrs) G–238a 150 ................................................................................................................................. 10 25 Total ...................................................................................................................................... 1,100 ........................ Additional Information or Comments: To request more information or to obtain a copy of the information collection justification, forms, and/or supporting material, please call the RRB Clearance Officer at (312) 751–3363 or send an e-mail request to Charles.Mierzwa@RRB.GOV. Comments regarding the information collection should be addressed to Ronald J. Hodapp, Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois 60611–2092 or send an e-mail to Ronald.Hodapp@RRB.GOV. Written comments should be received within 60 days of this notice. Charles Mierzwa Clearance Officer. [FR Doc. E8–18987 Filed 8–15–08; 8:45 am] BILLING CODE 7905–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58350; File No. 4–566] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d– 2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Among the American Stock Exchange LLC, Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC, 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. sroberts on PROD1PC70 with NOTICES August 13, 2008. 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 August 12, 2008, the American Stock Exchange LLC (‘‘Amex’’), Boston Stock Exchange, Inc. (‘‘BSE’’), CBOE Stock Exchange, LLC (‘‘CBOE’’), Chicago Stock Exchange, Inc. (‘‘CHX’’), Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), International Securities Exchange, LLC (‘‘ISE’’), The NASDAQ Stock Market, LLC (‘‘NASDAQ’’), National Stock 1 15 2 17 U.S.C. 78q(d). CFR 240.17d–2. VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 Exchange, Inc. (‘‘NSX’’), New York Stock Exchange, LLC (‘‘NYSE’’), NYSE Arca Inc. (‘‘NYSE Arca’’), NYSE Regulation, Inc. (acting under authority delegated to it by NYSE) (‘‘NYSE Regulation’’), and Philadelphia Stock Exchange, Inc. (‘‘Phlx’’), (collectively, ‘‘Participating Organizations’’ or ‘‘Parties’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a plan for the allocation of regulatory responsibilities (‘‘17d–2 plan’’ or ‘‘Plan’’). The Commission is publishing this notice to solicit comments on the 17d–2 plan from interested persons. I. Introduction Section 19(g)(1) of the Act,3 among other things, requires every selfregulatory organization (‘‘SRO’’) registered as either a national securities exchange or 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. 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. To implement Section 17(d)(1), the Commission adopted two rules: Rule U.S.C. 78s(g)(1). U.S.C. 78q(d). 5 15 U.S.C. 78s(g)(2). 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). 196 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. To address regulatory duplication in these and other areas, the Commission 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 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. 3 15 4 15 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 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). 10 See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). E:\FR\FM\18AUN1.SGM 18AUN1 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices sroberts on PROD1PC70 with NOTICES II. The Plan The proposed Plan is designed to eliminate regulatory duplication by allocating regulatory responsibility over Common NYSE Members 11 or Common FINRA Members,12 as applicable, (collectively, ‘‘Common Members’’) for the surveillance, investigation, and enforcement of common insider trading rules (‘‘Common Rules’’).13 The Plan assigns regulatory responsibility over Common NYSE Members to NYSE Regulation for surveillance, investigation, and enforcement of insider trading by broker-dealers, and their associated persons, with respect to NYSE-listed stocks and NYSE Arca-listed stocks, irrespective of the marketplace(s) maintained by the Participating Organizations on which the relevant trading may occur. The Plan assigns regulatory responsibility over Common FINRA Members to FINRA for surveillance, investigation, and enforcement of insider trading by broker-dealers, and their associated persons, with respect to NASDAQ-listed stocks and Amex-listed stocks, as well as any CHX solely-listed equity security, irrespective of the marketplace(s) maintained by the Participating Organizations on which the relevant trading may occur. An exchange committee composed of a representative from each of the Participating Organizations to the Plan would meet up to four times a year, but no more often than once per calendar quarter, to discuss the conduct of regulatory responsibilities, identify issues or concerns, and receive and review reports. Costs for insider trading surveillance are shared among Participating Organizations based on their relative trade volume, subject to certain minimum payment amounts for smaller markets. The Plan permits any Participating Organization to cancel its participation in the Plan at any time, provided it gives 180 days written notice to the other Participating Organizations, and provided that such termination is approved by the Commission. In addition, while the Plan permits the Participating Organizations to terminate the Plan, the Parties cannot by 11 Common NYSE Members include members of the NYSE and at least one of the Participating Organizations. 12 Common FINRA Members are members of FINRA and at least one of the Participating Organizations. 13 Common Rules is defined as: (i) Federal securities laws and rules promulgated by the Commission pertaining to insider trading, and (ii) the rules of the Participating Organizations that are related to insider trading. See Exhibit A to the plan. VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 themselves reallocate the regulatory responsibilities set forth in the Plan, since Rule 17d–2 under the Act requires that any allocation or re-allocation of regulatory responsibilities be filed with, and approved by, the Commission. In addition to the Plan, Participating Organizations have entered into two regulatory services agreements that address investigation and enforcement in situations that involve trading in equity securities by non-Common Members, as Rule 17d–2 covers only situations involving Common Members. The first agreement is between NYSE Regulation (acting as the regulatory services provider), FINRA, and each of the Exchanges (‘‘NYSE Regulation Agreement’’). The second agreement is between FINRA (acting as the regulatory services provider), NYSE Regulation, and each of the Exchanges (‘‘FINRA Agreement’’). The agreements provide for the investigation and enforcement of suspected insider trading against brokerdealers and their associated persons that (i) are not Common Members of NYSE in the case of insider trading in NYSElisted stocks and NYSE-Arca listed stocks; or (ii) are not Common Members of FINRA in the case of insider trading in NASDAQ-listed stocks, Amex-listed stocks, and any CHX solely-listed equity security. Under the agreements, NYSE Regulation and FINRA, respectively, will provide to the Exchanges ‘‘Core Services’’ related and limited to the investigation and enforcement activities for non-Common Members where these activities relate to insider trading of equity securities listed on the NYSE or NYSE Arca in the case of the NYSE Regulation Agreement, and to the insider trading of equity securities listed on the Nasdaq or Amex, and any CHX solely listed security in the case of the FINRA Agreement. The Core Services provided under the agreements are rendered (a) only upon completion of a surveillance review under the 17d–2 Plan, and (b) at the request of the relevant exchange. Pursuant to the Plan, NYSE Regulation and FINRA will conduct surveillance, investigation, and enforcement for insider trading for Common NYSE Members and Common FINRA Members, respectively. Surveillance for non-Common Members is excluded from the Plan and remains the responsibility of the SROs in which such non-Common Members maintain membership. However, due to the nature of insider trading surveillance technology and processes, the surveillance conducted by NYSE Regulation and FINRA will encompass non-Common Members as the surveillance function does not PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 48249 differentiate between Common and nonCommon Members. Accordingly, the investigation and enforcement services performed under the agreements will arise from surveillance undertaken by NYSE Regulation and FINRA. The full text of the proposed 17d–2 plan is as follows: * * * * * Agreement for the Allocation of Regulatory Responsibility of Surveillance, Investigation and Enforcement for Insider Trading Pursuant to § 17(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78q(d), and Rule 17d–2 Thereunder This agreement (the ‘‘Agreement’’) by and among the American Stock Exchange LLC (‘‘Amex’’), Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC, Chicago Stock Exchange, Inc. (‘‘CHX’’), Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), International Securities Exchange, LLC, The NASDAQ Stock Market LLC (‘‘NASDAQ’’), National Stock Exchange, Inc., New York Stock Exchange, LLC (‘‘NYSE’’), NYSE Arca Inc. (‘‘NYSE Arca’’), NYSE Regulation, Inc. (pursuant to delegated authority) (‘‘NYSE Regulation’’), and Philadelphia Stock Exchange, Inc. (together, the ‘‘Participating Organizations’’), is made pursuant to § 17(d) of the Securities Exchange Act of 1934 (the ‘‘Act’’), 15 U.S.C. § 78q(d), and Securities and Exchange Commission (‘‘SEC’’) Rule 17d–2, which allow for plans to allocate regulatory responsibility among selfregulatory organizations (‘‘SROs’’). Whereas, NYSE delegates to NYSE Regulation the regulation of trading by members in its market, and NYSE Regulation is a subsidiary of NYSE, all references to NYSE Regulation in this Agreement shall be read as references to both entities; Whereas, the Participating Organizations desire to: (a) Foster cooperation and coordination among the SROs; (b) remove impediments to, and foster the development of, a national market system; (c) strive to protect the interest of investors; and (d) eliminate duplication in their regulatory surveillance, investigation and enforcement of insider trading; Whereas, the Participating Organizations are interested in allocating to NYSE Regulation, Inc. (‘‘NYSE Regulation’’) regulatory responsibility for Common NYSE Members for surveillance, investigation and enforcement of Insider Trading (as defined below) in NYSE Listed Stocks (as defined below) irrespective of the marketplace(s) maintained by the Participating Organizations on which E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES 48250 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices the relevant trading may occur in violation of Common Insider Trading Rules; Whereas, the Participating Organizations are interested in allocating to FINRA regulatory responsibility for Common FINRA Members for surveillance, investigation and enforcement of Insider Trading in NASDAQ Listed Stocks, Amex Listed Stocks, and CHX Solely Listed Stocks irrespective of the marketplace(s) maintained by the Participating Organizations on which the relevant trading may occur in violation of Common Insider Trading Rules; Whereas, the Participating Organizations will request regulatory allocation of these regulatory responsibilities by executing and filing with the SEC a plan for the above stated purposes (this Agreement, also known herein as the ‘‘Plan’’) pursuant to the provisions of section 17(d) of the Act, and SEC Rule 17d–2 thereunder, as described below; and Whereas, the Participating Organizations will also enter into certain Regulatory Services Agreements (the ‘‘Insider Trading RSAs’’), of even date herewith, to provide for the investigation and enforcement of suspected Insider Trading against broker-dealers, and their associated persons, that (i) are not Common NYSE Members (as defined below) in the case of Insider Trading in NYSE Listed Stocks, and (ii) are not Common FINRA Members (as defined below) in the case of Insider Trading in NASDAQ Listed Stocks, Amex Listed Stocks, and CHX Solely Listed Stocks. Now, therefore, in consideration of the mutual covenants contained hereafter, and other valuable consideration to be mutually exchanged, the Participating Organizations hereby agree as follows: 1. Definitions. Unless otherwise defined in this Agreement, or the context otherwise requires, the terms used in this Agreement will have the same meaning they have under the Act, and the rules and regulations thereunder. As used in this Agreement, the following terms will have the following meanings: a. ‘‘Rule’’ of an ‘‘exchange’’ or an ‘‘association’’ shall have the meaning defined in Section 3(a)(27) of the Act. b. ‘‘Common NYSE Members’’ shall mean members of the NYSE and at least one of the Participating Organizations. c. ‘‘Common FINRA Members’’ shall mean members of FINRA and at least one of the Participating Organizations. d. ‘‘Common Insider Trading Rules’’ shall mean (i) the federal securities laws and rules thereunder promulgated by VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 the SEC pertaining to insider trading, and (ii) the rules of the Participating Organizations that are related to insider trading, as provided on Exhibit A to this Agreement. e. ‘‘Effective Date’’ shall have the meaning set forth in paragraph 28. f. ‘‘Insider Trading’’ shall mean any conduct or action taken by a natural person or entity related in any way to the trading of securities by an insider or a related party based on or on the basis of material non-public information obtained during the performance of the insider’s duties at the corporation, or otherwise misappropriated, that could be deemed a violation of the Common Insider Trading Rules. g. ‘‘Intellectual Property’’ will mean any: (1) Processes, methodologies, procedures, or technology, whether or not patentable; (2) trademarks, copyrights, literary works or other works of authorship, service marks and trade secrets; or (3) software, systems, machine-readable texts and files and related documentation. h. ‘‘Plan’’ shall mean this Agreement, which is submitted as a Plan for the allocation of regulatory responsibilities of surveillance for insider trading pursuant to section 17(d) of the Securities and Exchange Act of 1934, 15 U.S.C. 78q(d), and SEC Rule 17d–2. i. ‘‘NYSE Listed Stock’’ shall mean an equity security that is listed on the NYSE, or NYSE Arca. j. ‘‘NASDAQ Listed Stock’’ shall mean an equity security that is listed on the NASDAQ. k. ‘‘Amex Listed Stock’’ shall mean an equity security that is listed on the Amex. l. ‘‘CHX Solely Listed Stock’’ shall mean an equity security that is listed only in the Chicago Stock Exchange. m. ‘‘Listing Market’’ shall mean Amex, Nasdaq, NYSE, or NYSE Arca, but not CHX. 2. Assumption of Regulatory Responsibilities. a. NYSE Regulation: Assumption of Regulatory Responsibilities. On the Effective Date of the Plan, NYSE Regulation will assume regulatory responsibilities for surveillance, investigation and enforcement of Insider Trading by broker-dealers, and their associated persons, for Common NYSE Members with respect to NYSE Listed Stocks irrespective of the marketplace(s) maintained by the Participant Organizations on which the relevant trading may occur in violation of the Common Insider Trading Rules (‘‘NYSE’s Regulatory Responsibility’’). b. FINRA: Assumption of Regulatory Responsibilities. On the Effective Date of the Plan, FINRA will assume regulatory PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 responsibilities for surveillance, investigation and enforcement of Insider Trading by broker-dealers, and their associated persons, for Common FINRA Members with respect to NASDAQ and Amex Listed Stocks, as well as any CHX Solely Listed equity security, irrespective of the marketplace(s) maintained by the Participant Organizations on which the relevant trading may occur in violation of the Common Insider Trading Rules (‘‘FINRA’s Regulatory Responsibility’’). c. Change in Control. In the event of a change of control of a Listing Market, the Listing Market will have the discretion to transfer the regulatory responsibility for its listed stocks from NYSE Regulation to FINRA or from FINRA to NYSE Regulation, provided the SRO assuming regulatory responsibility consents to such transfer. 3. Certification of Insider Trading Rules. a. Initial Certification. By signing this Agreement, the Participating Organizations, other than NYSE Regulation and FINRA, hereby certify to NYSE Regulation and FINRA that their respective lists of Common Insider Trading Rules contained in Attachment A hereto are correct, and NYSE Regulation and FINRA hereby confirm that such rules are Common Insider Trading Rules as defined in this Agreement. b. Yearly Certification. Each year following the commencement of operation of this Agreement, or more frequently if required by changes in the rules of the Participating Organizations, each Participating Organization shall submit a certified and updated list of Common Insider Trading Rules to NYSE Regulation and FINRA for review, which shall (i) add Participating Organization rules not included in the then-current list of Common Insider Trading Rules that qualify as Common Rules as defined in this Agreement; (ii) delete Participating Organization rules included in the current list of Common Insider Trading Rules that no longer qualify as Common Insider Trading Rules as defined in this Agreement; and (iii) confirm that the remaining rules on the current list of Common Insider Trading Rules continue to be Participating Organization rules that qualify as Common Insider Trading Rules as defined in this Agreement. NYSE Regulation and FINRA shall review each Participating Organization’s annual certification and confirm whether NYSE Regulation and FINRA agree with the submitted certified and updated list of Common Insider Rules by each of the Participating Organizations. E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices 4. No Retention of Regulatory Responsibility. The Participating Organizations do not contemplate the retention of any responsibilities with respect to the regulatory activities being assumed by NYSE Regulation and FINRA, respectively, under the terms of this Agreement. Nothing in this Agreement will be interpreted to prevent NYSE Regulation or FINRA from entering into Regulatory Services Agreement(s) to perform their Regulatory Responsibilities. 5. Dually Listed Stocks. Stocks that are listed on more than one Participating Organization shall be designated as a NYSE Listed Stock, a NASDAQ Listed Stock, or an Amex Listed Stock based on the applicable transaction reporting plan for the equity security as set forth in paragraph 1.b. of Exhibit B. 6. Fees. NYSE Regulation and FINRA shall charge Participating Organizations for performing their respective Regulatory Responsibilities, as set forth in the Schedule of Fees, attached as Exhibit B. 7. 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. 8. Exchange Committee; Reports. a. Exchange Committee. The Participating Organizations shall form a committee (the ‘‘Exchange Committee’’), which shall act on behalf of all of Participating Organizations in receiving copies of the reports described below and in reviewing issues that arise under this Agreement. Each Participating Organization shall appoint a representative to the Exchange Committee. The Exchange Committee representatives shall report to their respective executive management bodies regarding status or issues under the Agreement. The Participating Organizations agree that the Exchange Committee will meet regularly up to four (4) times a year, with no more than one meeting per calendar quarter. At these meetings, the Exchange Committee will discuss the conduct of the Regulatory Responsibilities and identify issues or concerns with respect to this Agreement, including matters related to the calculation of the cost formula and accuracy of fees charged and provision of information related to VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 the same. The SEC shall be permitted to attend the meetings as an observer. b. Reports. NYSE Regulation and FINRA shall provide the reports set forth in Exhibit C hereto and any additional reports related to the Agreement reasonably requested by a majority vote of all representatives to the Exchange Committee at each Exchange Committee meeting, or more often as the Participating Organizations deem appropriate, but no more often than once every quarterly billing period. 9. Customer Complaints. a. If a Participating Organization receives a copy of a customer complaint relating to Insider Trading or other activity or conduct that is within the NYSE’s Regulatory Responsibilities as set forth in this Agreement, the Participating Organization shall promptly forward to NYSE Regulation, as applicable, a copy of such customer complaint. b. If a Participating Organization receives a copy of a customer complaint relating to Insider Trading or other activity or conduct that is within FINRA’s Regulatory Responsibilities as set forth in this Agreement, the Participating Organization shall promptly forward to FINRA, as applicable, a copy of such customer complaint. 10. Parties to Make Personnel Available as Witnesses. Each Participating Organization shall make its personnel available to NYSE Regulation or FINRA to serve as testimonial or non-testimonial witnesses as necessary to assist NYSE Regulation and FINRA in fulfilling the Regulatory Responsibilities allocated under this Agreement. FINRA and NYSE Regulation shall provide reasonable advance notice when practicable and shall work with a Participating Organization to accommodate reasonable scheduling conflicts within the context and demands as the entities with ultimate regulatory responsibility. The Participating Organization shall pay all reasonable travel and other expenses incurred by its employees to the extent that NYSE Regulation or FINRA require such employees to serve as witnesses, and provide information or other assistance pursuant to this Agreement. 11. Market Data; Sharing of WorkPapers, Data and Related Information. a. Market Data. FINRA and NYSE Regulation shall obtain raw market data necessary to the performance of regulation under this Agreement from (a) the Consolidated Tape Association (‘‘CTA’’) as the exclusive securities information processor (‘‘SIP’’) for all NYSE-listed, AMEX-listed securities, and CHX solely listed securities and (b) PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 48251 the NASDAQ Unlisted Trading Privileges Plan as the exclusive SIP for NASDAQ-listed securities. b. Sharing. A Participating Organization shall make available to each of NYSE Regulation and FINRA information necessary to assist NYSE Regulation or FINRA in fulfilling the regulatory responsibilities assumed under the terms of this Agreement. Such information shall include any information collected by an exchange or association in the course of performing its regulatory obligations under the Act, including information relating to an ongoing disciplinary investigation or action against a member, the amount of a fine imposed on a member, financial information, or information regarding proprietary trading systems gained in the course of examining a member (‘‘Regulatory Information’’). This Regulatory Information shall be used by NYSE Regulation and FINRA solely for the purposes of fulfilling their respective regulatory responsibilities. c. No Waiver of Privilege. The sharing of documents or information between the parties pursuant to this Agreement shall not be deemed a waiver as against third parties of regulatory or other privileges relating to the discovery of documents or information. d. Intellectual Property. (i) Existing Intellectual Property. Each of NYSE Regulation and FINRA, respectively, is and will remain the owner of all right, title and interest in and to the proprietary Intellectual Property it employs in the provision of regulation hereunder (including the SONAR and Stock Watch systems), and any derivative works thereof. To the extent certain elements of either of these parties’ systems, or portions thereof, may be licensed or leased from third parties, all such third party elements shall remain the property of such third parties, as applicable. Likewise, any other Participating Organization is and will remain the owner of all right, title and interest in and to its own existing proprietary Intellectual Property. (ii) Enhancements to Existing Intellectual Property or New Developments of NYSE Regulation or FINRA. In the event NYSE Regulation or FINRA (a) makes any changes, modifications or enhancements to its respective Intellectual Property for any reason, or (b) creates any newly developed Intellectual Property for any reason, including as a result of requested enhancements or new development by the Exchange Committee (collectively, the ‘‘New IP’’), the Participating Organizations acknowledge and agree that each of NYSE Regulation and FINRA shall be E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES 48252 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices deemed the owner of the New IP created by each of them, respectively (and any derivative works thereof), and shall retain all right, title and interest therein and thereto, and each other Participating Organization hereby irrevocably assigns, transfers and conveys to each of NYSE Regulation and FINRA, as applicable, without further consideration all of its right, title and interest in or to all such New IP (and any derivative works thereof). (iii) NYSE Regulation and FINRA will not charge the Participating Organizations any fees for any New IP created and used by NYSE Regulation or FINRA, respectively; provided, however, that NYSE Regulation and FINRA will each be permitted to charge fees for software maintenance work performed on systems used in the discharge of their respective duties hereunder. 12. Special or Cause Examinations. Nothing in this Agreement shall restrict or in any way encumber the right of a party to conduct special or cause examinations of Common NYSE Members or Common FINRA Members as any party, in its sole discretion, shall deem appropriate or necessary. 13. Dispute Resolution Under this Agreement. a. Negotiation. The Parties will attempt to resolve any disputes through good faith negotiation and discussion, escalating such discussion up through the appropriate management levels until reaching the executive management level. In the event a dispute cannot be settled through these means, the Parties shall refer the dispute to binding arbitration. b. Binding Arbitration. All claims, disputes, controversies, and other matters in question between the Parties to this Agreement arising out of or relating to this Agreement or the breach thereof that cannot be resolved by the Parties will be resolved through binding arbitration. Unless otherwise agreed by the Parties, a dispute submitted to binding arbitration pursuant to this paragraph shall be resolved using the following procedures: (i) The arbitration shall be conducted in the city of New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof; and (ii) There shall be three arbitrators, and the chairperson of the arbitration panel shall be an attorney. 14. Limitation of Liability. As between the Participating Organizations, no Participating Organization, including its respective directors, governors, officers, VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 employees and agents, will be liable to any other Participating Organization, or its directors, governors, officers, employees and agents, for any liability, loss or damage resulting from any delays, inaccuracies, errors or omissions with respect to its performing or failing to perform regulatory responsibilities, obligations, or functions, except (a) as otherwise provided for under the Act, (b) in instances of a Participating Organization’s gross negligence, willful misconduct or reckless disregard with respect to another Participating Organization, (c) in instances of a breach of confidentiality obligations owed to another Participating Organization, or (d) in the case of any Participating Organization paying fees hereunder, for any payments due. The Participating Organizations understand and agree that the regulatory responsibilities are being performed on a good faith and best effort basis and no warranties, express or implied, are made by any Participating Organization to any other Participating Organization with respect to any of the responsibilities to be performed hereunder. This paragraph is not intended to create liability of any Participating Organization to any third party. 15. SEC Approval. a. The parties agree to file promptly this Agreement with the SEC for its review and approval. NYSE Regulation and FINRA shall jointly file this Agreement on behalf, and with the explicit consent, of all Participating Organizations. b. If approved by the SEC, the Participating Organizations will notify their members of the general terms of the Agreement and of its impact on their members. 16. Subsequent Parties; Limited Relationship. This Agreement shall inure to the benefit of and shall be binding upon the Participating Organizations hereto and their respective legal representatives, successors, and assigns. Nothing in this Agreement, expressed or implied, is intended or shall: (a) Confer on any person other than the Participating Organizations hereto, or their respective legal representatives, successors, and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, (b) constitute the Participating Organizations hereto partners or participants in a joint venture, or (c) appoint one Participating Organization the agent of the other. 17. Assignment. No Participating Organization may assign this Agreement without the prior written consent of all the other Participating Organizations, which consent shall not be PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 unreasonably withheld, conditioned or delayed; provided, however, that any Participating Organization may assign the Agreement to a corporation controlling, controlled by or under common control with the Participating Organization without the prior written consent of any other party. 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. Termination. a. Any Participating Organization may cancel its participation in the Agreement at any time, provided that it has given 180 days written notice to the other Participating Organizations (or in the case of a change of control in ownership of a Participating Organization, such other notice time period as that Participating Organization may choose), and provided that such termination has been approved by the SEC. The cancellation of its participation in this Agreement by any Participating Organization shall not terminate this Agreement as to the remaining Participating Organizations. b. The Regulatory Responsibilities assumed under this Agreement by NYSE Regulation or FINRA (either, an ‘‘Invoicing Party’’) may be terminated by the Invoicing Party against any Participating Organization as follows. The Participating Organization will have thirty (30) days from receipt to satisfy the invoice. If the Participating Organization fails to satisfy the invoice within thirty (30) days of receipt (‘‘Default’’), the Invoicing Party will notify the Participating Organization of the Default. The Participating Organization will have thirty (30) days from receipt of the Default notice to satisfy the invoice. c. The Invoicing Party will have the right to terminate the Regulatory Responsibilities assumed under this Agreement if a Participating Organization has Defaulted in its obligation to pay the invoice on more than three (3) occasions. in any rolling twenty-four (24) month period. 20. Intermarket Surveillance Group (‘‘ISG’’). In order to participate in this Agreement, all Participating Organizations to this Agreement must be members of the ISG. 21. General. The Participating Organizations agree to perform all acts E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices and execute all supplementary instruments or documents that may be reasonably necessary or desirable to carry out the provisions of this Agreement. 22. Liaison and Notices. All questions regarding the implementation of this Agreement shall be directed to the persons identified below, as applicable. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon (i) actual receipt by the notified party or (ii) constructive receipt (as of the date marked on the return receipt) if sent by certified or registered mail, return receipt requested, to the following addresses: For American Stock Exchange LLC: Claudia Crowley, SVP and Chief Regulatory Officer, American Stock Exchange LLC, 86 Trinity Place, New York, NY 10006, Telephone: (212) 306– 2432, Facsimile: (212) 306–1219, E-mail: Claudia.Crowley@amex.com. For Boston Stock Exchange, Inc.: Bruce Goodhue, Chief Regulatory Officer, Boston Stock Exchange, 100 Franklin Street, Boston, MA 02110, Phone: (617) 235–2022, Fax: (617) 235– 2355, E-mail: Bruce.Goodhue@bostonstock.com. For CBOE Stock Exchange, LLC: Timothy Thompson, Chief Regulatory Officer, CBOE Stock Exchange, LLC, 400 S. LaSalle St., Chicago, IL 60605, Telephone: (312) 786–5600, Facsimile: (312) 786–7982, E-mail: Thompson@cboe.com. For Chicago Stock Exchange, Inc.: David C. Whitcomb, Jr., EVP and Chief Regulatory Officer, Chicago Stock Exchange, Inc., 440 S. LaSalle Street, Chicago, IL 60605, Telephone: (312) 663–2628, Facsimile: (213) 663–2231, Email: dwhitcomb@chx.com. For Financial Industry Regulatory Authority, Inc.: Thomas Gira, Executive Vice President, Market Regulation, FINRA, 1735 K Street, NW., Washington, DC 20006, Telephone: (212) 858–4404, Facsimile: (212) 858– 4450, E-mail: Tom.Gira@finra.org. For International Securities Exchange, LLC: Katherine A. Simmons, Deputy General Counsel, Legal Officer and Assistant Secretary, International Securities Exchange, 60 Broad Street, New York, NY 10004, Telephone: (212) 897–0233, Facsimile: (212) 635–0210, Email: ksimmons@ise.com. For The NASDAQ Stock Market LLC: John A. Zecca, VP and Associate General Counsel, The NASDAQ Stock Market LLC, 9600 Blackwell Road, Rockville, MD 20850, Telephone: (301) 978–8498, Facsimile: (301) 978–8472, Email: John.Zecca@nasdaq.com. VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 For National Stock Exchange, Inc.: James C. Yong, Esq., Chief Regulatory Officer, National Stock Exchange, Inc., 440 S. LaSalle Street, Suite 2600, Chicago, IL 60605, Telephone: 312.786.8893, Facsimile: 312.939.7239, E-mail: James.Yong@nsx.com. For NYSE Arca, Inc.: Jim Draddy, Chief Regulatory Officer, NYSE Arca, Inc., 100 South Wacker Drive, Suite 1500, Chicago, Illinois 60606, Phone— 312 442 7930, Fax—312 442 7778, jdraddy@nyx.com. For New York Stock Exchange, LLC: William Freeman, Secretary, New York Stock Exchange, LLC, 11 Wall Street, New York, NY 10005, Telephone: (212) 656–6096, Facsimile: (212) 656–8101, Email: wfreeman@nyx.com. For NYSE Regulation, Inc.: John Malitzis, Executive Vice President, Division of Market Surveillance, NYSE Regulation, Inc., 11 Wall Street, 10th Floor, New York, NY 10005, Telephone: (212) 656–2250, Facsimile: (212) 656– 4219, E-mail: John.Malitzis@nyx.com. For Philadelphia Stock Exchange, Inc.: Charles Rogers, Chief Regulatory Officer, Philadelphia Stock Exchange, Inc., 1900 Market Street, Philadelphia, PA 19103, Telephone: (215) 496–1615, Facsimile: (215) 496–1519, E-mail: Charles.Rogers@phlx.com. 23. Confidentiality. 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 under this Agreement. No party shall assert regulatory or other privileges as against the other with respect to Regulatory Information that is required to be shared pursuant to this Agreement, as defined by paragraph 11, above. 24. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) of the Act, and Rule 17d–2 thereunder, the Participating Organizations jointly and severally request the SEC, upon its approval of this Agreement, to relieve the Participating Organizations, jointly and severally, of any and all responsibilities with respect to the matters allocated to NYSE Regulation and FINRA pursuant to this Agreement for purposes of sections 17(d) and 19(g) of the Act. 25. Governing Law. This Agreement shall be deemed to have been made in the State of New York, and shall be construed and enforced in accordance with the law of the State of New York, without reference to principles of conflicts of laws thereof. Each of the parties hereby consents to submit to the jurisdiction of the courts of the State of New York in connection with any action or proceeding relating to this Agreement. PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 48253 26. Survival of Provisions. Provisions intended by their terms or context to survive and continue notwithstanding delivery of the regulatory services by NYSE Regulation or FINRA, as applicable, the payment of the Fees by the Participating Organizations, and any expiration of this Agreement shall survive and continue. 27. Amendment. This Agreement may be amended by any writing duly approved by each Participating Organization. The addition of a new Participating Organization to the Agreement will require an amendment. All such amendments must be filed with and approved by the Commission before they become effective. 28. Effective Date. The Effective Date of this Agreement will be the date the SEC declares this Agreement to be effective pursuant to authority conferred by section 17(d) of the Act, and SEC Rule 17d–2 thereunder. 29. Counterparts. This Agreement may be executed in any number of counterparts, including facsimile, each of which will be deemed an original, but all of which taken together shall constitute one single agreement between the Parties. In witness whereof, the Parties hereto have each caused this Agreement for the Allocation of Regulatory Responsibility of Surveillance, Investigation and Enforcement for Insider Trading Agreement to be signed and delivered by its duly authorized representative. Exhibit A: Common Insider Trading Rules 1. Securities Exchange Act of 1934 Section 10(b), and rules and regulations promulgated there under in connection with insider trading, including SEC Rule 10b–5 (as it pertains to insider trading), which states that: Rule 10b–5—Employment of Manipulative and Deceptive Devices It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, a. To employ any device, scheme, or artifice to defraud, b. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or c. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES 48254 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices 2. Securities Exchange Act of 1934 Section 17(a), and rules and regulations promulgated there under in connection with insider trading, including SEC Rule 17a–3 (as it pertains to insider trading). 3. The following SRO Rules as they pertain to violations of insider trading: FINRA NASD Rule 2110 (Standards of Commercial Honor and Principles of Trade) FINRA NASD Rule 2120 (Use of Manipulative, Deceptive or Other Fraudulent Devices) FINRA NASD Rule 3010 (Supervision) FINRA NASD Rule 3110 (a) and (c) (Books and Records; Financial Condition) NYSE Rule 401(a) (Business Conduct) NYSE Rule 476(a) (Disciplinary Proceedings Involving Charges Against Members, Member Organizations, Allied Members, Approved Persons, Employees, or Others) NYSE Rule 440 (Books and Records) NYSE Rule 342 (Offices—Approval, Supervision and Control) AMEX Cons. Art. II Sec. 3, Confidential Information AMEX Cons. Art. V Sec. 4 Suspension or Expulsion (b), (h), (i), (j) and (r) AMEX Cons. Art. XI Sec. 4 Controlled Corporations and Associations— Responsibility for Corporate Subsidiary; Duty to Produce Books AMEX Rule 3 General Prohibitions and Duty to Report (d), (h) (j) and (l) AMEX Rule 3–AEMI General Prohibitions and Duty to Report (d) and (h) AMEX Rule 16 Business Conduct AMEX Rule 320 Offices-Approval, Supervision and Control AMEX Rule 324 Books and Records NASDAQ Rule 2110 (Standards of Commercial Honor and Principles of Trade) NASDAQ Rule 2120 (Use of Manipulative, Deceptive or Other Fraudulent Devices) NASDAQ Rule 3010 (Supervision) NASDAQ Rule 3110 (a) and (c) (Books and Records; Financial Condition) CHX Article 8, Rule 3 (Fraudulent Acts) CHX Article 9, Rule 2 (Just & Equitable Trade Principles) CHX Article 11, Rule 2 (Maintenance of Books and Records) CHX Article 6, Rule 5 (Supervision of Registered Persons and Branch and Resident Offices) ISE RULE 400 (Just and Equitable Principles of Trade) ISE RULE 405 (Manipulation) ISE RULE 408 (Prevention of Misuse of Material Nonpublic Information) CBOE RULE 4.1 (Practices inconsistent with just and equitable principles) VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 CBOE RULE 4.2 (adherence to law) CBOE RULE 4.7 (Manipulation) CBOE RULE 4.18 (Prevention of the misuse of material nonpublic information) PHLX RULE 707 (Conduct Inconsistent with Just and Equitable Principles of Trade) PHLX RULE 748 (Supervision) PHLX RULE 760 (Maintenance, Retention and Furnishing of Books, Records and Other Information) PHLX RULE 761 (Supervisory Procedures Relating to ITSFEA and to Prevention of Misuse or Material Nonpublic Information) PHLX RULE 782 (Manipulative Operations) NYSE Arca Rule 6.3 (Prevention of the Misuse of Material, Nonpublic Information) NYSE Arca Rule 6.2(b) Prohibited Acts (J&E) NYSE Arca Rule 6.1 Adherence to Law NYSE Arca Rule 6.18 Supervision NYSE Arca Rule 9.1(c) Office Supervision NYSE Arca Rule 9.2(b) Account Supervision NYSE Arca Rule 9.2(c) Customer Records NYSE Arca Rule 9.17 Books and Records NSX Rule 3.1 Business Conduct of ETP Holders NSX Rule 3.2. Violations Prohibited NSX Rule 3.3. Use of Fraudulent Devices NSX Rule 4.1 Requirements NSX Rule 5.1. Written Procedures NSX Rule 5.3 Records NSX Rule 5.5 Chinese Wall Procedures BSE Chapter II, Sections 26–28 (AntiManipulative Provisions) BSE Chapter II, Section 37 (ITSFEA Procedures) BSE Chapter XXIV–C, Section 2 (Securities Accounts and Orders of Specialists) BSE Chapter XXXVII, Section 11 (Limitations on Dealings) Exhibit B: Fee Schedule 1. Fees. NYSE Regulation and, separately, FINRA shall charge each Participating Organization a Quarterly Fee in arrears for the performance of NYSE Regulation’s and FINRA’s respective regulatory responsibilities under the Plan (each, a ‘‘Quarterly Fee,’’ and together, the ‘‘Fees’’). a. Quarterly Fees. (1) Quarterly Fees for each Participating Organization will be charged by NYSE Regulation and FINRA, respectively, according to the Participating Organization’s ‘‘Percentage of Publicly Reported Trades’’ occurring PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 over three-month billing periods. The ‘‘Percentage of Publicly Reported Trades’’ shall equal a Participating Organization’s number of reported NYSE-listed trades (when billing originates from NYSE Regulation) and combined AMEX-listed, NASDAQlisted, and CHX solely-listed trades (when billing originates from FINRA) during the relevant period (the ‘‘Numerator’’), divided by the total number of either all NYSE-listed trades or all combined AMEX-listed, NASDAQ-listed, and CHX solely-listed trades, respectively, for the same period (the ‘‘Denominator’’). For purposes of clarification, ADF and Trade Reporting Facility (TRF) activity will be included in the Denominator. Additionally, with regard to TRFs, TRF trade volume will be charged to FINRA. Consequently, for purposes of calculating the Quarterly Fees, the volume for each Participant Organization’s TRF will be calculated separately (that is, TRF volume will be broken out from the Participating Organization’s overall Percentage of Publicly Reported Trades) and the fees for such will be billed to FINRA in accordance with paragraph 1(a)(2), rather than to the applicable Participating Organization. (2) The Quarterly Fees shall be determined by each of NYSE Regulation and FINRA, as applicable, in the following manner for each Participating Organization: (a) Less than 1.0%: If the Participating Organization’s Percentage of Publicly Reported Trades for NYSE-listed trades (in the case of NYSE Regulation) or for combined AMEX-listed, NASDAQlisted, and CHX solely-listed trades (in the case of FINRA) for the relevant three-month billing period is less than 1.0%, the Quarterly Fee shall be $3,125, per quarter (‘‘Static Fee’’); (b) Less than 2.0% but No Less than 1.0%: If the Participating Organization’s Percentage of Publicly Reported Trades for NYSE-listed trades (in the case of NYSE Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX solely-listed trades (in the case of FINRA) for the relevant three-month billing period is less than 2.0% but no less than 1.0%, the Quarterly Fee shall be $9,375, per quarter (‘‘Static Fee’’); (c) 2.0% or Greater: If the Participating Organization’s Percentage of Publicly Reported Trades for NYSElisted trades (in the case of NYSE Regulation) or for combined AMEXlisted, NASDAQ-listed, and CHX solelylisted trades (in the case of FINRA) for the relevant three-month billing period is 2.0% or greater, the Quarterly Fee shall be the amount equal to the Participating Organization’s Percentage E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices of Publicly Reported Trades multiplied by NYSE Regulation’s or FINRA’s total charge (‘‘Total Charge’’), respectively, for its performance of Insider Trading regulatory responsibilities for the relevant three-month billing period. (3) Increases in Static Fees. NYSE Regulation and FINRA will re-evaluate the Quarterly Fees on an annual basis during the annual budget process outlined in paragraph 1.c. below. During each annual re-evaluation, NYSE Regulation and FINRA will have the discretion to increase the Static Fees by a percentage no greater than the percentage increase in the Final Budget over the preceding year’s Final Budget. Any changes to the Static Fees shall not require an amendment to this Agreement, but rather shall be memorialized through the Budget Process. (4) Increases in Total Charges. Any change in the Total Charges (whether a Final Budget increase or any mid year change) shall not require an amendment to this Agreement, but rather shall be memorialized through the budget process. b. Source of Data. For purposes of calculation of the Percentage of Publicly Reported Trades for each Participating Organization, NYSE Regulation and FINRA shall use (a) the Consolidated Tape Association (‘‘CTA’’) as the exclusive securities information processor (‘‘SIP’’) for all NYSE Listed Stocks, AMEX Listed Stocks, and CHX Solely Listed Stocks, and (b) the Unlisted Trading Privileges Plan as the exclusive SIP for NASDAQ-listed Stocks. c. Annual Budget Forecast. NYSE Regulation and FINRA will notify the Participating Organizations of the forecasted costs of their respective insider trading programs for the following calendar year by close of business on October 15 of the thencurrent year (the ‘‘Forecasted Budget’’). NYSE Regulation and FINRA shall use best efforts to provide as accurate a forecast as possible. NYSE Regulation and FINRA shall then provide a final submission of the costs following approval of such costs by their respective governing Boards (the ‘‘Final Budget’’). Subject to paragraph 1(d) below, in the event of a difference between the Forecasted Budget and the Final Budget, the Final Budget will govern. d. Increases in Fees over Twenty Percent. (1) In the event that any proposed increase to Fees by NYSE Regulation or by FINRA for a given calendar year (which increase may arise either during the annual budgetary forecasting VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 process or through any mid-year increase) will result in a cumulative increase in such calendar year’s Fees of more than twenty percent (20%) above the preceding calendar year’s Final Budget (a ‘‘Major Increase’’), then senior management of any Participating Organization (a) that is a Listing Market or (b) for which the Percentage of Publicly Reported Trades is then currently twenty percent (20%) or greater, shall have the right to call a meeting with the senior management of NYSE Regulation or FINRA, respectively, in order to discuss any disagreement over such proposed Major Increase. By way of example, if NYSE Regulation provides a Final Budget for 2009 that represents an 8% increase above the Final Budget for 2008, the terms of this paragraph 1.d.(1) shall not apply; if, however, in April of 2009, NYSE Regulation notifies the Exchange Committee of an increase in Fees that represents an additional 14% increase above the Final Budget for 2008, then the increase shall be deemed a Major Increase, and the terms of this paragraph 1.d.(1) shall become applicable (i.e., 8% + 14% = a cumulative increase of 22% above 2008 Final Budget). (2) In the event that senior management members of the involved parties are unable to reach an agreement regarding the proposed Major Increase, then the matter shall be referred back to the Exchange Committee for final resolution. Prior to the matter being referred back to the Exchange Committee, nothing shall prohibit the parties from conferring with the SEC. Resolution shall be reached through a vote of no fewer than all Participating Organizations seated on the Exchange Committee, and a simple majority shall be required in order to reject the proposed Major Increase. e. Time Tracking. NYSER and FINRA shall track the time spent by staff on insider trading responsibilities under this Agreement; however, time tracking will not be used to allocate costs. 2. Invoicing and Payment. a. NYSE Regulation shall invoice each Participating Organization for the Quarterly Fee associated with the regulatory activities performed pursuant to this Agreement during the previous three-month billing period within forty five (45) days of the end of such previous 3-month billing period. A Participating Organization shall have thirty (30) days from date of invoice to make payment to NYSE Regulation on such invoice. The invoice will reflect the Participating Organization’s Percentage of Publicly Reported Trades for that billing period. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 48255 b. FINRA shall invoice each Participating Organization for the Quarterly Fee associated with the regulatory activities performed pursuant to this Agreement during the previous three-month billing period within forty five (45) days of the end of such previous 3-month billing period. A Participating Organization shall have thirty (30) days from date of invoice to make payment to FINRA on such invoice. The invoice will reflect the Participating Organization’s Percentage of Publicly Reported Trades for that billing period. 3. Disputed Invoices; Interest. In the event that a Participating Organization disputes an invoice or a portion of an invoice, the Participating Organization shall notify in writing either FINRA or NYSE Regulation (each, an ‘‘Invoicing Party’’), as applicable, of the disputed item(s) within fifteen (15) days of receipt of the invoice. In its notification to the Invoicing Party of the disputed invoice, the Participating Organization shall identify the disputed item(s) and provide a brief explanation of why the Participating Organization disputes the charges. An Invoicing Party may charge a Participating Organization interest on any undisputed invoice or the undisputed portions of a disputed invoice that a Participating Organization fails to pay within thirty (30) days of its receipt of such invoice. Such interest shall be assessed monthly. Interest will mean one and one half percent per month, or the maximum allowable under applicable Law, whichever is less. 4. Taxes. In the event any governmental authority deems the regulatory activities allocated to NYSE Regulation or FINRA to be taxable activities similar to the provision of services in a commercial context, the other Participating Organizations agree that they shall bear full responsibility, on a joint and several basis, for the payment of any such taxes levied on NYSE Regulation or FINRA, or, if such taxes are paid by NYSE Regulation or FINRA directly to the governmental authority, the other Participating Organizations agree that they shall reimburse NYSE Regulation and/or FINRA, as applicable, for the amount of any such taxes paid. 5. Audit Right; Record Keeping. a. Audit Right. (i) Audit of NYSE Regulation. (a) Once every rolling twelve (12) month period, NYSE Regulation shall permit no more than one audit (to be performed by one or more Participating Organizations) of the Fees charged by NYSE Regulation to the Participating Organizations hereunder and a detailed E:\FR\FM\18AUN1.SGM 18AUN1 sroberts on PROD1PC70 with NOTICES 48256 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices cost analysis supporting such Fees (the ‘‘Audit’’). The Participating Organization or Organizations that conduct this Audit will select a nationally-recognized independent auditing firm (or may use its regular independent auditor, providing it is a nationally-recognized auditing firm) (‘‘Auditing Firm’’) to act on its, or their behalf, and will provide reasonable notice to other Participating Organizations of the Audit and invite the other Participating Organizations to participate in the Audit. NYSE Regulation will permit the Auditing Firm reasonable access during NYSE Regulation’s normal business hours, with reasonable advance notice, to such financial records and supporting documentation as are necessary to permit review of the accuracy of the calculation of the Fees charged to the Participating Organizations. The Participating Organization, or Organizations, as applicable, other than NYSE Regulation, shall be responsible for the costs of performing any such audit. (b) If, through an Audit, the Exchange Committee determines that NYSE Regulation has inaccurately calculated the Fees for any Participating Organization, the Exchange Committee will promptly notify NYSE Regulation in writing of the amount of such difference in the Fees, and, if applicable, NYSE Regulation shall issue a reimbursement of the overage amount to the relevant Participating Organization(s), less any amount owed by the Participating Organization under any outstanding, undisputed invoice(s). If such an Audit reveals that any Participating Organization paid less than what was required pursuant to the Agreement, then that Participating Organization shall promptly pay NYSE Regulation the difference between what the Participating Organization owed pursuant to the Agreement and what that Participating Organization originally paid NYSE Regulation. If NYSE Regulation disputes the results of an audit regarding the accuracy of the Fees, it will submit the dispute for resolution pursuant to the dispute resolution procedures in paragraph 13 hereof. (c) In the event that through the review of any supporting documentation provided during the Audit, any one or more Participating Organizations desire to discuss with NYSE Regulation the supporting documentation and any questions arising therefrom with regard to the manner in which regulation was conducted, the Participating Organization(s) shall call a meeting with VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 NYSE Regulation. NYSE Regulation shall in turn notify the Exchange Committee of this meeting in advance, and all Participating Organizations shall be welcome to attend (the ‘‘Fee Analysis Meeting’’). The parties to this Agreement acknowledge and agree that while NYSE Regulation commits to discuss the supporting documentation at the Fee Analysis Meeting, NYSE Regulation shall not be subject, by virtue of the above Audit rights or any discussions during the Fee Analysis Meeting or otherwise, to any limitation whatsoever, other than the Increase in Fee provisions set forth in paragraph 1.d. of this Exhibit, on its discretion as to the manner and means by which it conducts its regulatory efforts in its role as the SRO primarily liable for regulatory decisions under this Agreement. To that end, no disagreement among the Participating Organizations as to the manner or means by which NYSE Regulation conducts its regulatory efforts hereunder shall be subject to the dispute resolution procedures hereunder, and no Participating Organization shall have the right to compel NYSE Regulation to alter the manner or means by which it conducts its regulatory efforts. Further, a Participating Organization shall not have the right to compel a rebate or reassessment of fees for services rendered, on the basis that the Participating Organization would have conducted regulatory efforts in a different manner than NYSE Regulation in its professional judgment chose to conduct its regulatory efforts. ii. Audit of FINRA. (a) Once every rolling twelve (12) month period, FINRA shall permit no more than one audit (to be performed by one or more Participating Organizations) of the Fees charged by FINRA to the Participating Organizations hereunder and a detailed cost analysis supporting such Fees (the ‘‘Audit’’). The Participating Organization or Organizations that conduct this Audit will select a nationally-recognized independent auditing firm (or may use its regular independent auditor, providing it is a nationally-recognized auditing firm) (‘‘Auditing Firm’’) to act on its, or their behalf, and will provide reasonable notice to other Participating Organizations of the Audit. FINRA will permit the Auditing Firm reasonable access during FINRA’s normal business hours, with reasonable advance notice, to such financial records and supporting documentation as are necessary to permit review of the accuracy of the calculation of the Fees charged to the Participating Organizations. The Participating Organization, or PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 Organizations, as applicable, other than FINRA, shall be responsible for the costs of performing any such audit. (b) If, through an Audit, the Exchange Committee determines that FINRA has inaccurately calculated the Fees for any Participating Organization, the Exchange Committee will promptly notify FINRA in writing of the amount of such difference in the Fees, and, if applicable, FINRA shall issue a reimbursement of the overage amount to the relevant Participating Organization(s), less any amount owed by the Participating Organization under any outstanding, undisputed invoice(s). If such an Audit reveals that any Participating Organization paid less than what was required pursuant to the Agreement, then that Participating Organization shall promptly pay FINRA the difference between what the Participating Organization owed pursuant to the Agreement and what that Participating Organization originally paid FINRA. If FINRA disputes the results of an audit regarding the accuracy of the Fees, it will submit the dispute for resolution pursuant to the dispute resolution procedures in paragraph 13 hereof. (c) In the event that through the review of any supporting documentation provided during the Audit, any one or more Participating Organizations desire to discuss with FINRA the supporting documentation and any questions arising therefrom with regard to the manner in which regulation was conducted, the Participating Organization(s) shall call a meeting with FINRA. FINRA shall in turn notify the Exchange Committee of this meeting in advance, and all Participating Organizations shall be welcome to attend (the ‘‘Fee Analysis Meeting’’). The parties to this Agreement acknowledge and agree that while FINRA commits to discuss the supporting documentation at the Fee Analysis Meeting, FINRA shall not be subject, by virtue of the above Audit rights or any discussions during the Fee Analysis Meeting or otherwise, to any limitation whatsoever, other than the Increase in Fee provisions set forth in paragraph 1.d. of this Exhibit, on its discretion as to the manner and means by which it conducts its regulatory efforts in its role as the SRO primarily liable for regulatory decisions under this Agreement. To that end, no disagreement among the Participating Organizations as to the manner or means by which FINRA conducts its regulatory efforts hereunder shall be subject to the dispute resolution procedures hereunder, and no Participating Organization shall have E:\FR\FM\18AUN1.SGM 18AUN1 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices the right to compel FINRA to alter the manner or means by which it conducts its regulatory efforts. Further, a Participating Organization shall not have the right to compel a rebate or reassessment of fees for services rendered, on the basis that the Participating Organization would have conducted regulatory efforts in a different manner than FINRA in its professional judgment chose to conduct its regulatory efforts. b. Record Keeping. In anticipation of any audit that may be performed by the Exchange Committee under paragraph 5.a. above, NYSE and FINRA shall each keep accurate financial records and documentation relating to the Fees charged by each, respectively, under this Agreement. reported. NYSE and FINRA will provide total referrals to the SEC. Example: Surveillance alerts Investigations 0–6 months 6–9 months 9–12 months 12+ months Total 4. Disposition of Closed Matters: Would reflect the disposition of those matters that were completed or closed during the quarterly period being reported. A separate table would be presented for Amex Listed, Nasdaq Listed, and CHX Solely Listed equity trading activity. Example: Exhibit C: Reports NYSE Regulation and FINRA shall provide the following information in reports to the Exchange Committee, which information covers activity occurring under this Agreement: 1. Alert Summary Statistics: Total number of surveillance system alerts generated by quarter along with associated number of reviews and investigations. In addition, this paragraph shall also reflect the number of reviews and investigations originated from a source other than an alert. A separate table would be presented for Amex Listed, Nasdaq Listed, and CHX Solely Listed equity trading activity. 2008 Surveillance alerts Investigations 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2008 Total 2. Aging of Open Matters: Would reflect the aging for all currently open matters for the quarterly period being reported. A separate table would be presented for Amex Listed, Nasdaq Listed, and CHX Solely Listed equity trading activity. Example: sroberts on PROD1PC70 with NOTICES Surveillance alerts Investigations 0–6 months 6–9 months 9–12 months 12+ months Total 3. Timeliness of Completed Matters: Would reflect the total age of those matters that were completed or closed during the quarterly period being VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 Surveillance YTD Investigations YTD No Further Review Letter of Caution/ Admonition/Fine Referred to Legal/Enforcement Referred to SEC/SRO Merged Other Total III. Date of Effectiveness of the Proposed Plan and Timing for Commission Action Pursuant to Section 17(d)(1) of the Act 14 and Rule 17d–2 thereunder,15 15 17 PO 00000 U.S.C. 78q(d)(1). CFR 240.17d–2. Frm 00071 after September 8, 2008, the Commission may, by written notice, declare the plan submitted by the Amex, BSE, CBOE, CHX, FINRA, ISE, NASDAQ, NSX, NYSE, NYSE Arca, NYSE Regulation, and Phlx, File No. 4– 566, to be effective if the Commission finds that the plan, or any part thereof, 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. IV. Solicitation of Comments In order to assist the Commission in determining whether to approve the 17d–2 plan, interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number 4–566 on the subject line. 5. Pending Reviews. In addition to the above reports, the Chief Regulatory Officer (CRO) (or his or her designee) of any Participating Organization that is also a listing market (including CHX) may inquire about pending reviews involving stocks listed on that Participating Organization’s market. NYSE Regulation and FINRA, respectively, will respond to such inquiries from a CRO; provided, however, that (a) the CRO must hold any information provided by NYSE Regulation and FINRA in confidence and (b) NYSE Regulation and FINRA will not be compelled to provide information in contradiction of any mandate, directive or order from the SEC, U.S. Attorney’s Office, the Office of any State Attorney General or court of competent jurisdiction. * * * * * 14 15 48257 Fmt 4703 Sfmt 4703 Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number 4–566. 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 plan that are filed with the Commission, and all written communications relating to the proposed 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 inspection and copying in the Commission’s Public Reference Room, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of Amex, BSE, CBOE, CHX, E:\FR\FM\18AUN1.SGM 18AUN1 48258 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices FINRA, ISE, NASDAQ, NSX, NYSE, NYSE Arca, NYSE Regulation, and Phlx. 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 4–566 and should be submitted on or before September 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Florence E. Harmon, Acting Secretary. [FR Doc. E8–19068 Filed 8–15–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58341; File No. SR–Amex– 2008–60] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change Relating to Margin Requirements for Fixed Return Options August 11, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 21, 2008, the American Stock Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 462(d)10 to clarify the margin requirements applicable to Fixed Return Options (‘‘FROs’’ or ‘‘Fixed Return Options’’).3 sroberts on PROD1PC70 with NOTICES 16 17 CFR 200.30–3(a)(34). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240. 19b–4. 3 The Exchange commenced the trading of FROs on May 8, 2008. In August 2007, the Commission approved the Exchange proposal to list and trade FROs based on individual stocks and exchangetraded funds (‘‘ETFs’’). See Exchange Act Release No. 56251 (August 14, 2007), 72 FR 46523 (August 20, 2007). In connection with the ability to trade FROs, the Options Clearing Corporation (‘‘OCC’’) also filed proposed rule changes as well as a revision to the Options Disclosure Document (‘‘ODD’’). The Commission recently approved the VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 The text of the proposed rule change is available on the Amex’s Web site at http://www.amex.com, the Office of the Secretary, the Amex 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, the Amex 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 Amex 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 purpose of this proposal is to add clarity regarding the application of FRO margin requirements in connection with ‘‘spreads’’ and ‘‘straddle/combination’’ strategies. In addition, the proposal also seeks to clarify the use of ‘‘cover’’ and a ‘‘cash account’’ in connection with FROs. Currently, Rule 462(d)10 is silent regarding the use of ‘‘spread’’ and ‘‘straddle/combination’’ positions. With respect to a ‘‘spread’’ position in FROs, the Amex proposes that no margin be required on a Finish High 4 FRO (Finish Low 5 FRO) carried short in a customer’s account that is offset by a long Finish High FRO (Finish Low FRO) for the same underlying security or instrument that expires at the same time and has an exercise or strike price that is less than (greater than) the exercise or strike price of the short Finish High (Finish Low). As set forth in Rule 462(d)10(B), the long Finish High (Finish Low) must be paid for in full. In connection with a straddle/ combination, when a Finish High FRO ODD revisions so that FROs may commence trading on the Exchange. See Exchange Act Release No. 57744 (April 30, 2008), 73 FR 25072 (May 6, 2008) (SR–ODD–2008–01). The Commission previously approved proposed OCC rule changes in December 2007. See Exchange Act Release No. 56875 (November 30, 2007), 72 FR 69274 (December 7, 2007). 4 A ‘‘Finish High’’ FRO is defined in Rule 900 FRO(b)(2) as an option contract which returns $100 if the underlying security closes above the strike price at expiration. 5 A ‘‘Finish Low’’ FRO is defined in Rule 900 FRO(b)(3) as an option contract which returns $100 if the underlying security closes below the strike price at expiration. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 is carried short in a customer’s account and there is also carried a short Finish Low FRO that expires at the same time and has an exercise price or strike price that is less than or equal to the exercise or strike price of the short Finish High, the initial and maintenance margin required would be the exercise settlement amount applicable to one contract. With respect to the concept of ‘‘cover’’ the Exchange proposes a clarification that ‘‘cover’’ is applicable only to ‘‘cash accounts.’’ In such a case, a FRO carried short in a customer’s account will be deemed a covered position, and eligible for the cash account, if either one of the following is held in the account at the time the FRO is written or is received into the account promptly thereafter: • Cash or cash equivalents equal to 100% of the exercise settlement amount; • A long FRO of the same type (Finish High or Finish Low) for the same underlying security or instrument that is paid for in full and expires at the same time, and has an exercise or strike price that is less than the exercise or strike price of the short in the case of a Finish High or greater than the exercise or strike price of the short in the case of a Finish Low; or • An escrow agreement. The escrow agreement must certify that the bank holds for the account of the customer as security for the agreement (A) cash, (B) cash equivalents, (C) one or more qualified equity securities, or (D) a combination thereof having an aggregate market value of not less than 100% of the exercise settlement amount and that the bank will promptly pay the member organization the cash settlement amount in the event the account is assigned an exercise notice. The Exchange believes that the proposed revision reducing the customer margin applicable to ‘‘spread’’ and ‘‘straddle/combination’’ positions in FROs is appropriate because risk exposure is significantly reduced under these strategies. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Exchange Act 6 in general and furthers the objectives of Section 6(b)(5) 7 in particular in that it 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 facilitating transactions in securities, 6 15 7 15 E:\FR\FM\18AUN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 18AUN1

Agencies

[Federal Register Volume 73, Number 160 (Monday, August 18, 2008)]
[Notices]
[Pages 48248-48258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-19068]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58350; File No. 4-566]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of 
Regulatory Responsibilities Among the American Stock Exchange LLC, 
Boston Stock Exchange, Inc., CBOE Stock Exchange, LLC, 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.

August 13, 2008.
    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 August 12, 2008, the American Stock Exchange LLC (``Amex''), Boston 
Stock Exchange, Inc. (``BSE''), CBOE Stock Exchange, LLC (``CBOE''), 
Chicago Stock Exchange, Inc. (``CHX''), Financial Industry Regulatory 
Authority, Inc. (``FINRA''), International Securities Exchange, LLC 
(``ISE''), The NASDAQ Stock Market, LLC (``NASDAQ''), National Stock 
Exchange, Inc. (``NSX''), New York Stock Exchange, LLC (``NYSE''), NYSE 
Arca Inc. (``NYSE Arca''), NYSE Regulation, Inc. (acting under 
authority delegated to it by NYSE) (``NYSE Regulation''), and 
Philadelphia Stock Exchange, Inc. (``Phlx''), (collectively, 
``Participating Organizations'' or ``Parties'') filed with the 
Securities and Exchange Commission (``Commission'') a plan for the 
allocation of regulatory responsibilities (``17d-2 plan'' or ``Plan''). 
The Commission is publishing this notice to solicit comments on the 
17d-2 plan from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

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 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.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    To address regulatory duplication in these and other areas, the 
Commission 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 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.
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).

---------------------------------------------------------------------------

[[Page 48249]]

II. The Plan

    The proposed Plan is designed to eliminate regulatory duplication 
by allocating regulatory responsibility over Common NYSE Members \11\ 
or Common FINRA Members,\12\ as applicable, (collectively, ``Common 
Members'') for the surveillance, investigation, and enforcement of 
common insider trading rules (``Common Rules'').\13\
---------------------------------------------------------------------------

    \11\ Common NYSE Members include members of the NYSE and at 
least one of the Participating Organizations.
    \12\ Common FINRA Members are members of FINRA and at least one 
of the Participating Organizations.
    \13\ Common Rules is defined as: (i) Federal securities laws and 
rules promulgated by the Commission pertaining to insider trading, 
and (ii) the rules of the Participating Organizations that are 
related to insider trading. See Exhibit A to the plan.
---------------------------------------------------------------------------

    The Plan assigns regulatory responsibility over Common NYSE Members 
to NYSE Regulation for surveillance, investigation, and enforcement of 
insider trading by broker-dealers, and their associated persons, with 
respect to NYSE-listed stocks and NYSE Arca-listed stocks, irrespective 
of the marketplace(s) maintained by the Participating Organizations on 
which the relevant trading may occur. The Plan assigns regulatory 
responsibility over Common FINRA Members to FINRA for surveillance, 
investigation, and enforcement of insider trading by broker-dealers, 
and their associated persons, with respect to NASDAQ-listed stocks and 
Amex-listed stocks, as well as any CHX solely-listed equity security, 
irrespective of the marketplace(s) maintained by the Participating 
Organizations on which the relevant trading may occur.
    An exchange committee composed of a representative from each of the 
Participating Organizations to the Plan would meet up to four times a 
year, but no more often than once per calendar quarter, to discuss the 
conduct of regulatory responsibilities, identify issues or concerns, 
and receive and review reports. Costs for insider trading surveillance 
are shared among Participating Organizations based on their relative 
trade volume, subject to certain minimum payment amounts for smaller 
markets.
    The Plan permits any Participating Organization to cancel its 
participation in the Plan at any time, provided it gives 180 days 
written notice to the other Participating Organizations, and provided 
that such termination is approved by the Commission. In addition, while 
the Plan permits the Participating Organizations to terminate the Plan, 
the Parties cannot by themselves reallocate the regulatory 
responsibilities set forth in the Plan, since Rule 17d-2 under the Act 
requires that any allocation or re-allocation of regulatory 
responsibilities be filed with, and approved by, the Commission.
    In addition to the Plan, Participating Organizations have entered 
into two regulatory services agreements that address investigation and 
enforcement in situations that involve trading in equity securities by 
non-Common Members, as Rule 17d-2 covers only situations involving 
Common Members. The first agreement is between NYSE Regulation (acting 
as the regulatory services provider), FINRA, and each of the Exchanges 
(``NYSE Regulation Agreement''). The second agreement is between FINRA 
(acting as the regulatory services provider), NYSE Regulation, and each 
of the Exchanges (``FINRA Agreement''). The agreements provide for the 
investigation and enforcement of suspected insider trading against 
broker-dealers and their associated persons that (i) are not Common 
Members of NYSE in the case of insider trading in NYSE-listed stocks 
and NYSE-Arca listed stocks; or (ii) are not Common Members of FINRA in 
the case of insider trading in NASDAQ-listed stocks, Amex-listed 
stocks, and any CHX solely-listed equity security.
    Under the agreements, NYSE Regulation and FINRA, respectively, will 
provide to the Exchanges ``Core Services'' related and limited to the 
investigation and enforcement activities for non-Common Members where 
these activities relate to insider trading of equity securities listed 
on the NYSE or NYSE Arca in the case of the NYSE Regulation Agreement, 
and to the insider trading of equity securities listed on the Nasdaq or 
Amex, and any CHX solely listed security in the case of the FINRA 
Agreement. The Core Services provided under the agreements are rendered 
(a) only upon completion of a surveillance review under the 17d-2 Plan, 
and (b) at the request of the relevant exchange. Pursuant to the Plan, 
NYSE Regulation and FINRA will conduct surveillance, investigation, and 
enforcement for insider trading for Common NYSE Members and Common 
FINRA Members, respectively. Surveillance for non-Common Members is 
excluded from the Plan and remains the responsibility of the SROs in 
which such non-Common Members maintain membership. However, due to the 
nature of insider trading surveillance technology and processes, the 
surveillance conducted by NYSE Regulation and FINRA will encompass non-
Common Members as the surveillance function does not differentiate 
between Common and non-Common Members. Accordingly, the investigation 
and enforcement services performed under the agreements will arise from 
surveillance undertaken by NYSE Regulation and FINRA.
    The full text of the proposed 17d-2 plan is as follows:
* * * * *
Agreement for the Allocation of Regulatory Responsibility of 
Surveillance, Investigation and Enforcement for Insider Trading 
Pursuant to Sec.  17(d) of the Securities Exchange Act of 1934, 15 
U.S.C. Sec.  78q(d), and Rule 17d-2 Thereunder
    This agreement (the ``Agreement'') by and among the American Stock 
Exchange LLC (``Amex''), Boston Stock Exchange, Inc., CBOE Stock 
Exchange, LLC, Chicago Stock Exchange, Inc. (``CHX''), Financial 
Industry Regulatory Authority, Inc. (``FINRA''), International 
Securities Exchange, LLC, The NASDAQ Stock Market LLC (``NASDAQ''), 
National Stock Exchange, Inc., New York Stock Exchange, LLC (``NYSE''), 
NYSE Arca Inc. (``NYSE Arca''), NYSE Regulation, Inc. (pursuant to 
delegated authority) (``NYSE Regulation''), and Philadelphia Stock 
Exchange, Inc. (together, the ``Participating Organizations''), is made 
pursuant to Sec.  17(d) of the Securities Exchange Act of 1934 (the 
``Act''), 15 U.S.C. Sec.  78q(d), and Securities and Exchange 
Commission (``SEC'') Rule 17d-2, which allow for plans to allocate 
regulatory responsibility among self-regulatory organizations 
(``SROs'').
    Whereas, NYSE delegates to NYSE Regulation the regulation of 
trading by members in its market, and NYSE Regulation is a subsidiary 
of NYSE, all references to NYSE Regulation in this Agreement shall be 
read as references to both entities;
    Whereas, the Participating Organizations desire to: (a) Foster 
cooperation and coordination among the SROs; (b) remove impediments to, 
and foster the development of, a national market system; (c) strive to 
protect the interest of investors; and (d) eliminate duplication in 
their regulatory surveillance, investigation and enforcement of insider 
trading;
    Whereas, the Participating Organizations are interested in 
allocating to NYSE Regulation, Inc. (``NYSE Regulation'') regulatory 
responsibility for Common NYSE Members for surveillance, investigation 
and enforcement of Insider Trading (as defined below) in NYSE Listed 
Stocks (as defined below) irrespective of the marketplace(s) maintained 
by the Participating Organizations on which

[[Page 48250]]

the relevant trading may occur in violation of Common Insider Trading 
Rules;
    Whereas, the Participating Organizations are interested in 
allocating to FINRA regulatory responsibility for Common FINRA Members 
for surveillance, investigation and enforcement of Insider Trading in 
NASDAQ Listed Stocks, Amex Listed Stocks, and CHX Solely Listed Stocks 
irrespective of the marketplace(s) maintained by the Participating 
Organizations on which the relevant trading may occur in violation of 
Common Insider Trading Rules;
    Whereas, the Participating Organizations will request regulatory 
allocation of these regulatory responsibilities by executing and filing 
with the SEC a plan for the above stated purposes (this Agreement, also 
known herein as the ``Plan'') pursuant to the provisions of section 
17(d) of the Act, and SEC Rule 17d-2 thereunder, as described below; 
and
    Whereas, the Participating Organizations will also enter into 
certain Regulatory Services Agreements (the ``Insider Trading RSAs''), 
of even date herewith, to provide for the investigation and enforcement 
of suspected Insider Trading against broker-dealers, and their 
associated persons, that (i) are not Common NYSE Members (as defined 
below) in the case of Insider Trading in NYSE Listed Stocks, and (ii) 
are not Common FINRA Members (as defined below) in the case of Insider 
Trading in NASDAQ Listed Stocks, Amex Listed Stocks, and CHX Solely 
Listed Stocks.
    Now, therefore, in consideration of the mutual covenants contained 
hereafter, and other valuable consideration to be mutually exchanged, 
the Participating Organizations hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement, or the 
context otherwise requires, the terms used in this Agreement will have 
the same meaning they have under the Act, and the rules and regulations 
thereunder. As used in this Agreement, the following terms will have 
the following meanings:
    a. ``Rule'' of an ``exchange'' or an ``association'' shall have the 
meaning defined in Section 3(a)(27) of the Act.
    b. ``Common NYSE Members'' shall mean members of the NYSE and at 
least one of the Participating Organizations.
    c. ``Common FINRA Members'' shall mean members of FINRA and at 
least one of the Participating Organizations.
    d. ``Common Insider Trading Rules'' shall mean (i) the federal 
securities laws and rules thereunder promulgated by the SEC pertaining 
to insider trading, and (ii) the rules of the Participating 
Organizations that are related to insider trading, as provided on 
Exhibit A to this Agreement.
    e. ``Effective Date'' shall have the meaning set forth in paragraph 
28.
    f. ``Insider Trading'' shall mean any conduct or action taken by a 
natural person or entity related in any way to the trading of 
securities by an insider or a related party based on or on the basis of 
material non-public information obtained during the performance of the 
insider's duties at the corporation, or otherwise misappropriated, that 
could be deemed a violation of the Common Insider Trading Rules.
    g. ``Intellectual Property'' will mean any: (1) Processes, 
methodologies, procedures, or technology, whether or not patentable; 
(2) trademarks, copyrights, literary works or other works of 
authorship, service marks and trade secrets; or (3) software, systems, 
machine-readable texts and files and related documentation.
    h. ``Plan'' shall mean this Agreement, which is submitted as a Plan 
for the allocation of regulatory responsibilities of surveillance for 
insider trading pursuant to section 17(d) of the Securities and 
Exchange Act of 1934, 15 U.S.C. 78q(d), and SEC Rule 17d-2.
    i. ``NYSE Listed Stock'' shall mean an equity security that is 
listed on the NYSE, or NYSE Arca.
    j. ``NASDAQ Listed Stock'' shall mean an equity security that is 
listed on the NASDAQ.
    k. ``Amex Listed Stock'' shall mean an equity security that is 
listed on the Amex.
    l. ``CHX Solely Listed Stock'' shall mean an equity security that 
is listed only in the Chicago Stock Exchange.
    m. ``Listing Market'' shall mean Amex, Nasdaq, NYSE, or NYSE Arca, 
but not CHX.
    2. Assumption of Regulatory Responsibilities.
    a. NYSE Regulation: Assumption of Regulatory Responsibilities. On 
the Effective Date of the Plan, NYSE Regulation will assume regulatory 
responsibilities for surveillance, investigation and enforcement of 
Insider Trading by broker-dealers, and their associated persons, for 
Common NYSE Members with respect to NYSE Listed Stocks irrespective of 
the marketplace(s) maintained by the Participant Organizations on which 
the relevant trading may occur in violation of the Common Insider 
Trading Rules (``NYSE's Regulatory Responsibility'').
    b. FINRA: Assumption of Regulatory Responsibilities. On the 
Effective Date of the Plan, FINRA will assume regulatory 
responsibilities for surveillance, investigation and enforcement of 
Insider Trading by broker-dealers, and their associated persons, for 
Common FINRA Members with respect to NASDAQ and Amex Listed Stocks, as 
well as any CHX Solely Listed equity security, irrespective of the 
marketplace(s) maintained by the Participant Organizations on which the 
relevant trading may occur in violation of the Common Insider Trading 
Rules (``FINRA's Regulatory Responsibility'').
    c. Change in Control. In the event of a change of control of a 
Listing Market, the Listing Market will have the discretion to transfer 
the regulatory responsibility for its listed stocks from NYSE 
Regulation to FINRA or from FINRA to NYSE Regulation, provided the SRO 
assuming regulatory responsibility consents to such transfer.
    3. Certification of Insider Trading Rules.
    a. Initial Certification. By signing this Agreement, the 
Participating Organizations, other than NYSE Regulation and FINRA, 
hereby certify to NYSE Regulation and FINRA that their respective lists 
of Common Insider Trading Rules contained in Attachment A hereto are 
correct, and NYSE Regulation and FINRA hereby confirm that such rules 
are Common Insider Trading Rules as defined in this Agreement.
    b. Yearly Certification. Each year following the commencement of 
operation of this Agreement, or more frequently if required by changes 
in the rules of the Participating Organizations, each Participating 
Organization shall submit a certified and updated list of Common 
Insider Trading Rules to NYSE Regulation and FINRA for review, which 
shall (i) add Participating Organization rules not included in the 
then-current list of Common Insider Trading Rules that qualify as 
Common Rules as defined in this Agreement; (ii) delete Participating 
Organization rules included in the current list of Common Insider 
Trading Rules that no longer qualify as Common Insider Trading Rules as 
defined in this Agreement; and (iii) confirm that the remaining rules 
on the current list of Common Insider Trading Rules continue to be 
Participating Organization rules that qualify as Common Insider Trading 
Rules as defined in this Agreement. NYSE Regulation and FINRA shall 
review each Participating Organization's annual certification and 
confirm whether NYSE Regulation and FINRA agree with the submitted 
certified and updated list of Common Insider Rules by each of the 
Participating Organizations.

[[Page 48251]]

    4. No Retention of Regulatory Responsibility. The Participating 
Organizations do not contemplate the retention of any responsibilities 
with respect to the regulatory activities being assumed by NYSE 
Regulation and FINRA, respectively, under the terms of this Agreement. 
Nothing in this Agreement will be interpreted to prevent NYSE 
Regulation or FINRA from entering into Regulatory Services Agreement(s) 
to perform their Regulatory Responsibilities.
    5. Dually Listed Stocks. Stocks that are listed on more than one 
Participating Organization shall be designated as a NYSE Listed Stock, 
a NASDAQ Listed Stock, or an Amex Listed Stock based on the applicable 
transaction reporting plan for the equity security as set forth in 
paragraph 1.b. of Exhibit B.
    6. Fees. NYSE Regulation and FINRA shall charge Participating 
Organizations for performing their respective Regulatory 
Responsibilities, as set forth in the Schedule of Fees, attached as 
Exhibit B.
    7. 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.
    8. Exchange Committee; Reports.
    a. Exchange Committee. The Participating Organizations shall form a 
committee (the ``Exchange Committee''), which shall act on behalf of 
all of Participating Organizations in receiving copies of the reports 
described below and in reviewing issues that arise under this 
Agreement. Each Participating Organization shall appoint a 
representative to the Exchange Committee. The Exchange Committee 
representatives shall report to their respective executive management 
bodies regarding status or issues under the Agreement. The 
Participating Organizations agree that the Exchange Committee will meet 
regularly up to four (4) times a year, with no more than one meeting 
per calendar quarter. At these meetings, the Exchange Committee will 
discuss the conduct of the Regulatory Responsibilities and identify 
issues or concerns with respect to this Agreement, including matters 
related to the calculation of the cost formula and accuracy of fees 
charged and provision of information related to the same. The SEC shall 
be permitted to attend the meetings as an observer.
    b. Reports. NYSE Regulation and FINRA shall provide the reports set 
forth in Exhibit C hereto and any additional reports related to the 
Agreement reasonably requested by a majority vote of all 
representatives to the Exchange Committee at each Exchange Committee 
meeting, or more often as the Participating Organizations deem 
appropriate, but no more often than once every quarterly billing 
period.
    9. Customer Complaints.
    a. If a Participating Organization receives a copy of a customer 
complaint relating to Insider Trading or other activity or conduct that 
is within the NYSE's Regulatory Responsibilities as set forth in this 
Agreement, the Participating Organization shall promptly forward to 
NYSE Regulation, as applicable, a copy of such customer complaint.
    b. If a Participating Organization receives a copy of a customer 
complaint relating to Insider Trading or other activity or conduct that 
is within FINRA's Regulatory Responsibilities as set forth in this 
Agreement, the Participating Organization shall promptly forward to 
FINRA, as applicable, a copy of such customer complaint.
    10. Parties to Make Personnel Available as Witnesses. Each 
Participating Organization shall make its personnel available to NYSE 
Regulation or FINRA to serve as testimonial or non-testimonial 
witnesses as necessary to assist NYSE Regulation and FINRA in 
fulfilling the Regulatory Responsibilities allocated under this 
Agreement. FINRA and NYSE Regulation shall provide reasonable advance 
notice when practicable and shall work with a Participating 
Organization to accommodate reasonable scheduling conflicts within the 
context and demands as the entities with ultimate regulatory 
responsibility. The Participating Organization shall pay all reasonable 
travel and other expenses incurred by its employees to the extent that 
NYSE Regulation or FINRA require such employees to serve as witnesses, 
and provide information or other assistance pursuant to this Agreement.
    11. Market Data; Sharing of Work-Papers, Data and Related 
Information.
    a. Market Data. FINRA and NYSE Regulation shall obtain raw market 
data necessary to the performance of regulation under this Agreement 
from (a) the Consolidated Tape Association (``CTA'') as the exclusive 
securities information processor (``SIP'') for all NYSE-listed, AMEX-
listed securities, and CHX solely listed securities and (b) the NASDAQ 
Unlisted Trading Privileges Plan as the exclusive SIP for NASDAQ-listed 
securities.
    b. Sharing. A Participating Organization shall make available to 
each of NYSE Regulation and FINRA information necessary to assist NYSE 
Regulation or FINRA in fulfilling the regulatory responsibilities 
assumed under the terms of this Agreement. Such information shall 
include any information collected by an exchange or association in the 
course of performing its regulatory obligations under the Act, 
including information relating to an on-going disciplinary 
investigation or action against a member, the amount of a fine imposed 
on a member, financial information, or information regarding 
proprietary trading systems gained in the course of examining a member 
(``Regulatory Information''). This Regulatory Information shall be used 
by NYSE Regulation and FINRA solely for the purposes of fulfilling 
their respective regulatory responsibilities.
    c. No Waiver of Privilege. The sharing of documents or information 
between the parties pursuant to this Agreement shall not be deemed a 
waiver as against third parties of regulatory or other privileges 
relating to the discovery of documents or information.
    d. Intellectual Property.
    (i) Existing Intellectual Property. Each of NYSE Regulation and 
FINRA, respectively, is and will remain the owner of all right, title 
and interest in and to the proprietary Intellectual Property it employs 
in the provision of regulation hereunder (including the SONAR and Stock 
Watch systems), and any derivative works thereof. To the extent certain 
elements of either of these parties' systems, or portions thereof, may 
be licensed or leased from third parties, all such third party elements 
shall remain the property of such third parties, as applicable. 
Likewise, any other Participating Organization is and will remain the 
owner of all right, title and interest in and to its own existing 
proprietary Intellectual Property.
    (ii) Enhancements to Existing Intellectual Property or New 
Developments of NYSE Regulation or FINRA. In the event NYSE Regulation 
or FINRA (a) makes any changes, modifications or enhancements to its 
respective Intellectual Property for any reason, or (b) creates any 
newly developed Intellectual Property for any reason, including as a 
result of requested enhancements or new development by the Exchange 
Committee (collectively, the ``New IP''), the Participating 
Organizations acknowledge and agree that each of NYSE Regulation and 
FINRA shall be

[[Page 48252]]

deemed the owner of the New IP created by each of them, respectively 
(and any derivative works thereof), and shall retain all right, title 
and interest therein and thereto, and each other Participating 
Organization hereby irrevocably assigns, transfers and conveys to each 
of NYSE Regulation and FINRA, as applicable, without further 
consideration all of its right, title and interest in or to all such 
New IP (and any derivative works thereof).
    (iii) NYSE Regulation and FINRA will not charge the Participating 
Organizations any fees for any New IP created and used by NYSE 
Regulation or FINRA, respectively; provided, however, that NYSE 
Regulation and FINRA will each be permitted to charge fees for software 
maintenance work performed on systems used in the discharge of their 
respective duties hereunder.
    12. Special or Cause Examinations. Nothing in this Agreement shall 
restrict or in any way encumber the right of a party to conduct special 
or cause examinations of Common NYSE Members or Common FINRA Members as 
any party, in its sole discretion, shall deem appropriate or necessary.
    13. Dispute Resolution Under this Agreement.
    a. Negotiation. The Parties will attempt to resolve any disputes 
through good faith negotiation and discussion, escalating such 
discussion up through the appropriate management levels until reaching 
the executive management level. In the event a dispute cannot be 
settled through these means, the Parties shall refer the dispute to 
binding arbitration.
    b. Binding Arbitration. All claims, disputes, controversies, and 
other matters in question between the Parties to this Agreement arising 
out of or relating to this Agreement or the breach thereof that cannot 
be resolved by the Parties will be resolved through binding 
arbitration. Unless otherwise agreed by the Parties, a dispute 
submitted to binding arbitration pursuant to this paragraph shall be 
resolved using the following procedures:
    (i) The arbitration shall be conducted in the city of New York in 
accordance with the Commercial Arbitration Rules of the American 
Arbitration Association and judgment upon the award rendered by the 
arbitrator may be entered in any court having jurisdiction thereof; and
    (ii) There shall be three arbitrators, and the chairperson of the 
arbitration panel shall be an attorney.
    14. Limitation of Liability. As between the Participating 
Organizations, no Participating Organization, including its respective 
directors, governors, officers, employees and agents, will be liable to 
any other Participating Organization, or its directors, governors, 
officers, employees and agents, for any liability, loss or damage 
resulting from any delays, inaccuracies, errors or omissions with 
respect to its performing or failing to perform regulatory 
responsibilities, obligations, or functions, except (a) as otherwise 
provided for under the Act, (b) in instances of a Participating 
Organization's gross negligence, willful misconduct or reckless 
disregard with respect to another Participating Organization, (c) in 
instances of a breach of confidentiality obligations owed to another 
Participating Organization, or (d) in the case of any Participating 
Organization paying fees hereunder, for any payments due. The 
Participating Organizations understand and agree that the regulatory 
responsibilities are being performed on a good faith and best effort 
basis and no warranties, express or implied, are made by any 
Participating Organization to any other Participating Organization with 
respect to any of the responsibilities to be performed hereunder. This 
paragraph is not intended to create liability of any Participating 
Organization to any third party.
    15. SEC Approval.
    a. The parties agree to file promptly this Agreement with the SEC 
for its review and approval. NYSE Regulation and FINRA shall jointly 
file this Agreement on behalf, and with the explicit consent, of all 
Participating Organizations.
    b. If approved by the SEC, the Participating Organizations will 
notify their members of the general terms of the Agreement and of its 
impact on their members.
    16. Subsequent Parties; Limited Relationship. This Agreement shall 
inure to the benefit of and shall be binding upon the Participating 
Organizations hereto and their respective legal representatives, 
successors, and assigns. Nothing in this Agreement, expressed or 
implied, is intended or shall: (a) Confer on any person other than the 
Participating Organizations hereto, or their respective legal 
representatives, successors, and assigns, any rights, remedies, 
obligations or liabilities under or by reason of this Agreement, (b) 
constitute the Participating Organizations hereto partners or 
participants in a joint venture, or (c) appoint one Participating 
Organization the agent of the other.
    17. Assignment. No Participating Organization may assign this 
Agreement without the prior written consent of all the other 
Participating Organizations, which consent shall not be unreasonably 
withheld, conditioned or delayed; provided, however, that any 
Participating Organization may assign the Agreement to a corporation 
controlling, controlled by or under common control with the 
Participating Organization without the prior written consent of any 
other party.
    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. Termination.
    a. Any Participating Organization may cancel its participation in 
the Agreement at any time, provided that it has given 180 days written 
notice to the other Participating Organizations (or in the case of a 
change of control in ownership of a Participating Organization, such 
other notice time period as that Participating Organization may 
choose), and provided that such termination has been approved by the 
SEC. The cancellation of its participation in this Agreement by any 
Participating Organization shall not terminate this Agreement as to the 
remaining Participating Organizations.
    b. The Regulatory Responsibilities assumed under this Agreement by 
NYSE Regulation or FINRA (either, an ``Invoicing Party'') may be 
terminated by the Invoicing Party against any Participating 
Organization as follows. The Participating Organization will have 
thirty (30) days from receipt to satisfy the invoice. If the 
Participating Organization fails to satisfy the invoice within thirty 
(30) days of receipt (``Default''), the Invoicing Party will notify the 
Participating Organization of the Default. The Participating 
Organization will have thirty (30) days from receipt of the Default 
notice to satisfy the invoice.
    c. The Invoicing Party will have the right to terminate the 
Regulatory Responsibilities assumed under this Agreement if a 
Participating Organization has Defaulted in its obligation to pay the 
invoice on more than three (3) occasions. in any rolling twenty-four 
(24) month period.
    20. Intermarket Surveillance Group (``ISG''). In order to 
participate in this Agreement, all Participating Organizations to this 
Agreement must be members of the ISG.
    21. General. The Participating Organizations agree to perform all 
acts

[[Page 48253]]

and execute all supplementary instruments or documents that may be 
reasonably necessary or desirable to carry out the provisions of this 
Agreement.
    22. Liaison and Notices. All questions regarding the implementation 
of this Agreement shall be directed to the persons identified below, as 
applicable. All notices and other communications required or permitted 
to be given under this Agreement shall be in writing and shall be 
deemed to have been duly given upon (i) actual receipt by the notified 
party or (ii) constructive receipt (as of the date marked on the return 
receipt) if sent by certified or registered mail, return receipt 
requested, to the following addresses:
    For American Stock Exchange LLC: Claudia Crowley, SVP and Chief 
Regulatory Officer, American Stock Exchange LLC, 86 Trinity Place, New 
York, NY 10006, Telephone: (212) 306-2432, Facsimile: (212) 306-1219, 
E-mail: Claudia.Crowley@amex.com.
    For Boston Stock Exchange, Inc.: Bruce Goodhue, Chief Regulatory 
Officer, Boston Stock Exchange, 100 Franklin Street, Boston, MA 02110, 
Phone: (617) 235-2022, Fax: (617) 235-2355, E-mail: 
Bruce.Goodhue@bostonstock.com.
    For CBOE Stock Exchange, LLC: Timothy Thompson, Chief Regulatory 
Officer, CBOE Stock Exchange, LLC, 400 S. LaSalle St., Chicago, IL 
60605, Telephone: (312) 786-5600, Facsimile: (312) 786-7982, E-mail: 
Thompson@cboe.com.
    For Chicago Stock Exchange, Inc.: David C. Whitcomb, Jr., EVP and 
Chief Regulatory Officer, Chicago Stock Exchange, Inc., 440 S. LaSalle 
Street, Chicago, IL 60605, Telephone: (312) 663-2628, Facsimile: (213) 
663-2231, E-mail: dwhitcomb@chx.com.
    For Financial Industry Regulatory Authority, Inc.: Thomas Gira, 
Executive Vice President, Market Regulation, FINRA, 1735 K Street, NW., 
Washington, DC 20006, Telephone: (212) 858-4404, Facsimile: (212) 858-
4450, E-mail: Tom.Gira@finra.org.
    For International Securities Exchange, LLC: Katherine A. Simmons, 
Deputy General Counsel, Legal Officer and Assistant Secretary, 
International Securities Exchange, 60 Broad Street, New York, NY 10004, 
Telephone: (212) 897-0233, Facsimile: (212) 635-0210, E-mail: 
ksimmons@ise.com.
    For The NASDAQ Stock Market LLC: John A. Zecca, VP and Associate 
General Counsel, The NASDAQ Stock Market LLC, 9600 Blackwell Road, 
Rockville, MD 20850, Telephone: (301) 978-8498, Facsimile: (301) 978-
8472, E-mail: John.Zecca@nasdaq.com.
    For National Stock Exchange, Inc.: James C. Yong, Esq., Chief 
Regulatory Officer, National Stock Exchange, Inc., 440 S. LaSalle 
Street, Suite 2600, Chicago, IL 60605, Telephone: 312.786.8893, 
Facsimile: 312.939.7239, E-mail: James.Yong@nsx.com.
    For NYSE Arca, Inc.: Jim Draddy, Chief Regulatory Officer, NYSE 
Arca, Inc., 100 South Wacker Drive, Suite 1500, Chicago, Illinois 
60606, Phone--312 442 7930, Fax--312 442 7778, jdraddy@nyx.com.
    For New York Stock Exchange, LLC: William Freeman, Secretary, New 
York Stock Exchange, LLC, 11 Wall Street, New York, NY 10005, 
Telephone: (212) 656-6096, Facsimile: (212) 656-8101, E-mail: 
wfreeman@nyx.com.
    For NYSE Regulation, Inc.: John Malitzis, Executive Vice President, 
Division of Market Surveillance, NYSE Regulation, Inc., 11 Wall Street, 
10th Floor, New York, NY 10005, Telephone: (212) 656-2250, Facsimile: 
(212) 656-4219, E-mail: John.Malitzis@nyx.com.
    For Philadelphia Stock Exchange, Inc.: Charles Rogers, Chief 
Regulatory Officer, Philadelphia Stock Exchange, Inc., 1900 Market 
Street, Philadelphia, PA 19103, Telephone: (215) 496-1615, Facsimile: 
(215) 496-1519, E-mail: Charles.Rogers@phlx.com.
    23. Confidentiality. 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 under 
this Agreement. No party shall assert regulatory or other privileges as 
against the other with respect to Regulatory Information that is 
required to be shared pursuant to this Agreement, as defined by 
paragraph 11, above.
    24. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) of 
the Act, and Rule 17d-2 thereunder, the Participating Organizations 
jointly and severally request the SEC, upon its approval of this 
Agreement, to relieve the Participating Organizations, jointly and 
severally, of any and all responsibilities with respect to the matters 
allocated to NYSE Regulation and FINRA pursuant to this Agreement for 
purposes of sections 17(d) and 19(g) of the Act.
    25. Governing Law. This Agreement shall be deemed to have been made 
in the State of New York, and shall be construed and enforced in 
accordance with the law of the State of New York, without reference to 
principles of conflicts of laws thereof. Each of the parties hereby 
consents to submit to the jurisdiction of the courts of the State of 
New York in connection with any action or proceeding relating to this 
Agreement.
    26. Survival of Provisions. Provisions intended by their terms or 
context to survive and continue notwithstanding delivery of the 
regulatory services by NYSE Regulation or FINRA, as applicable, the 
payment of the Fees by the Participating Organizations, and any 
expiration of this Agreement shall survive and continue.
    27. Amendment. This Agreement may be amended by any writing duly 
approved by each Participating Organization. The addition of a new 
Participating Organization to the Agreement will require an amendment. 
All such amendments must be filed with and approved by the Commission 
before they become effective.
    28. Effective Date. The Effective Date of this Agreement will be 
the date the SEC declares this Agreement to be effective pursuant to 
authority conferred by section 17(d) of the Act, and SEC Rule 17d-2 
thereunder.
    29. Counterparts. This Agreement may be executed in any number of 
counterparts, including facsimile, each of which will be deemed an 
original, but all of which taken together shall constitute one single 
agreement between the Parties.
    In witness whereof, the Parties hereto have each caused this 
Agreement for the Allocation of Regulatory Responsibility of 
Surveillance, Investigation and Enforcement for Insider Trading 
Agreement to be signed and delivered by its duly authorized 
representative.

Exhibit A: Common Insider Trading Rules

    1. Securities Exchange Act of 1934 Section 10(b), and rules and 
regulations promulgated there under in connection with insider trading, 
including SEC Rule 10b-5 (as it pertains to insider trading), which 
states that:
Rule 10b-5--Employment of Manipulative and Deceptive Devices
    It shall be unlawful for any person, directly or indirectly, by the 
use of any means or instrumentality of interstate commerce, or of the 
mails or of any facility of any national securities exchange,
    a. To employ any device, scheme, or artifice to defraud,
    b. To make any untrue statement of a material fact or to omit to 
state a material fact necessary in order to make the statements made, 
in the light of the circumstances under which they were made, not 
misleading, or
    c. To engage in any act, practice, or course of business which 
operates or would operate as a fraud or deceit upon any person, in 
connection with the purchase or sale of any security.

[[Page 48254]]

    2. Securities Exchange Act of 1934 Section 17(a), and rules and 
regulations promulgated there under in connection with insider trading, 
including SEC Rule 17a-3 (as it pertains to insider trading).
    3. The following SRO Rules as they pertain to violations of insider 
trading:
FINRA NASD Rule 2110 (Standards of Commercial Honor and Principles of 
Trade)
FINRA NASD Rule 2120 (Use of Manipulative, Deceptive or Other 
Fraudulent Devices)
FINRA NASD Rule 3010 (Supervision)
FINRA NASD Rule 3110 (a) and (c) (Books and Records; Financial 
Condition)

NYSE Rule 401(a) (Business Conduct)
NYSE Rule 476(a) (Disciplinary Proceedings Involving Charges Against 
Members, Member Organizations, Allied Members, Approved Persons, 
Employees, or Others)
NYSE Rule 440 (Books and Records)
NYSE Rule 342 (Offices--Approval, Supervision and Control)

AMEX Cons. Art. II Sec. 3, Confidential Information
AMEX Cons. Art. V Sec. 4 Suspension or Expulsion (b), (h), (i), (j) and 
(r)
AMEX Cons. Art. XI Sec. 4 Controlled Corporations and Associations--
Responsibility for Corporate Subsidiary; Duty to Produce Books
AMEX Rule 3 General Prohibitions and Duty to Report (d), (h) (j) and 
(l)
AMEX Rule 3-AEMI General Prohibitions and Duty to Report (d) and (h)
AMEX Rule 16 Business Conduct
AMEX Rule 320 Offices-Approval, Supervision and Control
AMEX Rule 324 Books and Records

NASDAQ Rule 2110 (Standards of Commercial Honor and Principles of 
Trade)
NASDAQ Rule 2120 (Use of Manipulative, Deceptive or Other Fraudulent 
Devices)
NASDAQ Rule 3010 (Supervision)
NASDAQ Rule 3110 (a) and (c) (Books and Records; Financial Condition)

CHX Article 8, Rule 3 (Fraudulent Acts)
CHX Article 9, Rule 2 (Just & Equitable Trade Principles)
CHX Article 11, Rule 2 (Maintenance of Books and Records)
CHX Article 6, Rule 5 (Supervision of Registered Persons and Branch and 
Resident Offices)

ISE RULE 400 (Just and Equitable Principles of Trade)
ISE RULE 405 (Manipulation)
ISE RULE 408 (Prevention of Misuse of Material Nonpublic Information)

CBOE RULE 4.1 (Practices inconsistent with just and equitable 
principles)
CBOE RULE 4.2 (adherence to law)
CBOE RULE 4.7 (Manipulation)
CBOE RULE 4.18 (Prevention of the misuse of material nonpublic 
information)

PHLX RULE 707 (Conduct Inconsistent with Just and Equitable Principles 
of Trade)
PHLX RULE 748 (Supervision)
PHLX RULE 760 (Maintenance, Retention and Furnishing of Books, Records 
and Other Information)
PHLX RULE 761 (Supervisory Procedures Relating to ITSFEA and to 
Prevention of Misuse or Material Nonpublic Information)
PHLX RULE 782 (Manipulative Operations)

NYSE Arca Rule 6.3 (Prevention of the Misuse of Material, Nonpublic 
Information)
NYSE Arca Rule 6.2(b) Prohibited Acts (J&E)
NYSE Arca Rule 6.1 Adherence to Law
NYSE Arca Rule 6.18 Supervision
NYSE Arca Rule 9.1(c) Office Supervision
NYSE Arca Rule 9.2(b) Account Supervision
NYSE Arca Rule 9.2(c) Customer Records
NYSE Arca Rule 9.17 Books and Records

NSX Rule 3.1 Business Conduct of ETP Holders
NSX Rule 3.2. Violations Prohibited
NSX Rule 3.3. Use of Fraudulent Devices
NSX Rule 4.1 Requirements
NSX Rule 5.1. Written Procedures
NSX Rule 5.3 Records
NSX Rule 5.5 Chinese Wall Procedures

BSE Chapter II, Sections 26-28 (Anti-Manipulative Provisions)
BSE Chapter II, Section 37 (ITSFEA Procedures)
BSE Chapter XXIV-C, Section 2 (Securities Accounts and Orders of 
Specialists)
BSE Chapter XXXVII, Section 11 (Limitations on Dealings)

Exhibit B: Fee Schedule

    1. Fees. NYSE Regulation and, separately, FINRA shall charge each 
Participating Organization a Quarterly Fee in arrears for the 
performance of NYSE Regulation's and FINRA's respective regulatory 
responsibilities under the Plan (each, a ``Quarterly Fee,'' and 
together, the ``Fees'').
    a. Quarterly Fees.
    (1) Quarterly Fees for each Participating Organization will be 
charged by NYSE Regulation and FINRA, respectively, according to the 
Participating Organization's ``Percentage of Publicly Reported Trades'' 
occurring over three-month billing periods. The ``Percentage of 
Publicly Reported Trades'' shall equal a Participating Organization's 
number of reported NYSE-listed trades (when billing originates from 
NYSE Regulation) and combined AMEX-listed, NASDAQ-listed, and CHX 
solely-listed trades (when billing originates from FINRA) during the 
relevant period (the ``Numerator''), divided by the total number of 
either all NYSE-listed trades or all combined AMEX-listed, NASDAQ-
listed, and CHX solely-listed trades, respectively, for the same period 
(the ``Denominator''). For purposes of clarification, ADF and Trade 
Reporting Facility (TRF) activity will be included in the Denominator. 
Additionally, with regard to TRFs, TRF trade volume will be charged to 
FINRA. Consequently, for purposes of calculating the Quarterly Fees, 
the volume for each Participant Organization's TRF will be calculated 
separately (that is, TRF volume will be broken out from the 
Participating Organization's overall Percentage of Publicly Reported 
Trades) and the fees for such will be billed to FINRA in accordance 
with paragraph 1(a)(2), rather than to the applicable Participating 
Organization.
    (2) The Quarterly Fees shall be determined by each of NYSE 
Regulation and FINRA, as applicable, in the following manner for each 
Participating Organization:
    (a) Less than 1.0%: If the Participating Organization's Percentage 
of Publicly Reported Trades for NYSE-listed trades (in the case of NYSE 
Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX solely-
listed trades (in the case of FINRA) for the relevant three-month 
billing period is less than 1.0%, the Quarterly Fee shall be $3,125, 
per quarter (``Static Fee'');
    (b) Less than 2.0% but No Less than 1.0%: If the Participating 
Organization's Percentage of Publicly Reported Trades for NYSE-listed 
trades (in the case of NYSE Regulation) or for combined AMEX-listed, 
NASDAQ-listed, and CHX solely-listed trades (in the case of FINRA) for 
the relevant three-month billing period is less than 2.0% but no less 
than 1.0%, the Quarterly Fee shall be $9,375, per quarter (``Static 
Fee'');
    (c) 2.0% or Greater: If the Participating Organization's Percentage 
of Publicly Reported Trades for NYSE-listed trades (in the case of NYSE 
Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX solely-
listed trades (in the case of FINRA) for the relevant three-month 
billing period is 2.0% or greater, the Quarterly Fee shall be the 
amount equal to the Participating Organization's Percentage

[[Page 48255]]

of Publicly Reported Trades multiplied by NYSE Regulation's or FINRA's 
total charge (``Total Charge''), respectively, for its performance of 
Insider Trading regulatory responsibilities for the relevant three-
month billing period.
    (3) Increases in Static Fees. NYSE Regulation and FINRA will re-
evaluate the Quarterly Fees on an annual basis during the annual budget 
process outlined in paragraph 1.c. below. During each annual re-
evaluation, NYSE Regulation and FINRA will have the discretion to 
increase the Static Fees by a percentage no greater than the percentage 
increase in the Final Budget over the preceding year's Final Budget. 
Any changes to the Static Fees shall not require an amendment to this 
Agreement, but rather shall be memorialized through the Budget Process.
    (4) Increases in Total Charges. Any change in the Total Charges 
(whether a Final Budget increase or any mid year change) shall not 
require an amendment to this Agreement, but rather shall be 
memorialized through the budget process.
    b. Source of Data. For purposes of calculation of the Percentage of 
Publicly Reported Trades for each Participating Organization, NYSE 
Regulation and FINRA shall use (a) the Consolidated Tape Association 
(``CTA'') as the exclusive securities information processor (``SIP'') 
for all NYSE Listed Stocks, AMEX Listed Stocks, and CHX Solely Listed 
Stocks, and (b) the Unlisted Trading Privileges Plan as the exclusive 
SIP for NASDAQ-listed Stocks.
    c. Annual Budget Forecast. NYSE Regulation and FINRA will notify 
the Participating Organizations of the forecasted costs of their 
respective insider trading programs for the following calendar year by 
close of business on October 15 of the then-current year (the 
``Forecasted Budget''). NYSE Regulation and FINRA shall use best 
efforts to provide as accurate a forecast as possible. NYSE Regulation 
and FINRA shall then provide a final submission of the costs following 
approval of such costs by their respective governing Boards (the 
``Final Budget''). Subject to paragraph 1(d) below, in the event of a 
difference between the Forecasted Budget and the Final Budget, the 
Final Budget will govern.
    d. Increases in Fees over Twenty Percent.
    (1) In the event that any proposed increase to Fees by NYSE 
Regulation or by FINRA for a given calendar year (which increase may 
arise either during the annual budgetary forecasting process or through 
any mid-year increase) will result in a cumulative increase in such 
calendar year's Fees of more than twenty percent (20%) above the 
preceding calendar year's Final Budget (a ``Major Increase''), then 
senior management of any Participating Organization (a) that is a 
Listing Market or (b) for which the Percentage of Publicly Reported 
Trades is then currently twenty percent (20%) or greater, shall have 
the right to call a meeting with the senior management of NYSE 
Regulation or FINRA, respectively, in order to discuss any disagreement 
over such proposed Major Increase. By way of example, if NYSE 
Regulation provides a Final Budget for 2009 that represents an 8% 
increase above the Final Budget for 2008, the terms of this paragraph 
1.d.(1) shall not apply; if, however, in April of 2009, NYSE Regulation 
notifies the Exchange Committee of an increase in Fees that represents 
an additional 14% increase above the Final Budget for 2008, then the 
increase shall be deemed a Major Increase, and the terms of this 
paragraph 1.d.(1) shall become applicable (i.e., 8% + 14% = a 
cumulative increase of 22% above 2008 Final Budget).
    (2) In the event that senior management members of the involved 
parties are unable to reach an agreement regarding the proposed Major 
Increase, then the matter shall be referred back to the Exchange 
Committee for final resolution. Prior to the matter being referred back 
to the Exchange Committee, nothing shall prohibit the parties from 
conferring with the SEC. Resolution shall be reached through a vote of 
no fewer than all Participating Organizations seated on the Exchange 
Committee, and a simple majority shall be required in order to reject 
the proposed Major Increase.
    e. Time Tracking. NYSER and FINRA shall track the time spent by 
staff on insider trading responsibilities under this Agreement; 
however, time tracking will not be used to allocate costs.
    2. Invoicing and Payment.
    a. NYSE Regulation shall invoice each Participating Organization 
for the Quarterly Fee associated with the regulatory activities 
performed pursuant to this Agreement during the previous three-month 
billing period within forty five (45) days of the end of such previous 
3-month billing period. A Participating Organization shall have thirty 
(30) days from date of invoice to make payment to NYSE Regulation on 
such invoice. The invoice will reflect the Participating Organization's 
Percentage of Publicly Reported Trades for that billing period.
    b. FINRA shall invoice each Participating Organization for the 
Quarterly Fee associated with the regulatory activities performed 
pursuant to this Agreement during the previous three-month billing 
period within forty five (45) days of the end of such previous 3-month 
billing period. A Participating Organization shall have thirty (30) 
days from date of invoice to make payment to FINRA on such invoice. The 
invoice will reflect the Participating Organization's Percentage of 
Publicly Reported Trades for that billing period.
    3. Disputed Invoices; Interest. In the event that a Participating 
Organization disputes an invoice or a portion of an invoice, the 
Participating Organization shall notify in writing either FINRA or NYSE 
Regulation (each, an ``Invoicing Party''), as applicable, of the 
disputed item(s) within fifteen (15) days of receipt of the invoice. In 
its notification to the Invoicing Party of the disputed invoice, the 
Participating Organization shall identify the disputed item(s) and 
provide a brief explanation of why the Participating Organization 
disputes the charges. An Invoicing Party may charge a Participating 
Organization interest on any undisputed invoice or the undisputed 
portions of a disputed invoice that a Participating Organization fails 
to pay within thirty (30) days of its receipt of such invoice. Such 
interest shall be assessed monthly. Interest will mean one and one half 
percent per month, or the maximum allowable under applicable Law, 
whichever is less.
    4. Taxes. In the event any governmental authority deems the 
regulatory activities allocated to NYSE Regulation or FINRA to be 
taxable activities similar to the provision of services in a commercial 
context, the other Participating Organizations agree that they shall 
bear full responsibility, on a joint and several basis, for the payment 
of any such taxes levied on NYSE Regulation or FINRA, or, if such taxes 
are paid by NYSE Regulation or FINRA directly to the governmental 
authority, the other Participating Organizations agree that they shall 
reimburse NYSE Regulation and/or FINRA, as applicable, for the amount 
of any such taxes paid.
    5. Audit Right; Record Keeping.
    a. Audit Right.
    (i) Audit of NYSE Regulation.
    (a) Once every rolling twelve (12) month period, NYSE Regulation 
shall permit no more than one audit (to be performed by one or more 
Participating Organizations) of the Fees charged by NYSE Regulation to 
the Participating Organizations hereunder and a detailed

[[Page 48256]]

cost analysis supporting such Fees (the ``Audit''). The Participating 
Organization or Organizations that conduct this Audit will select a 
nationally-recognized independent auditing firm (or may use its regular 
independent auditor, providing it is a nationally-recognized auditing 
firm) (``Auditing Firm'') to act on its, or their behalf, and will 
provide reasonable notice to other Participating Organizations of the 
Audit and invite the other Participating Organizations to participate 
in the Audit. NYSE Regulation will permit the Auditing Firm reasonable 
access during NYSE Regulation's normal business hours, with reasonable 
advance notice, to such financial records and supporting documentation 
as are necessary to permit review of the accuracy of the calculation of 
the Fees charged to the Participating Organizations. The Participating 
Organization, or Organizations, as applicable, other than NYSE 
Regulation, shall be responsible for the costs of performing any such 
audit.
    (b) If, through an Audit, the Exchange Committee determines that 
NYSE Regulation has inaccurately calculated the Fees for any 
Participating Organization, the Exchange Committee will promptly notify 
NYSE Regulation in writing of the amount of such difference in the 
Fees, and, if applicable, NYSE Regulation shall issue a reimbursement 
of the overage amount to the relevant Participating Organization(s), 
less any amount owed by the Participating Organization under any 
outstanding, undisputed invoice(s). If such an Audit reveals that any 
Participating Organization paid less than what was required pursuant to 
the Agreement, then that Participating Organization shall promptly pay 
NYSE Regulation the difference between what the Participating 
Organization owed pursuant to the Agreement and what that Participating 
Organization originally paid NYSE Regulation. If NYSE Regulation 
disputes the results of an audit regarding the accuracy of the Fees, it 
will submit the dispute for resolution pursuant to the dispute 
resolution procedures in paragraph 13 hereof.
    (c) In the event that through the review of any supporting 
documentation provided during the Audit, any one or more Participating 
Organizations desire to discuss with NYSE Regulation the supporting 
documentation and any questions arising therefrom with regard to the 
manner in which regulation was conducted, the Participating 
Organization(s) shall call a meeting with NYSE Regulation. NYSE 
Regulation shall in turn notify the Exchange Committee of this meeting 
in advance, and all Participating Organizations shall be welcome to 
attend (the ``Fee Analysis Meeting''). The parties to this Agreement 
acknowledge and agree that while NYSE Regulation commits to discuss the 
supporting documentation at the Fee Analysis Meeting, NYSE Regulation 
shall not be subject, by virtue of the above Audit rights or any 
discussions during the Fee Analysis Meeting or otherwise, to any 
limitation whatsoever, other than the Increase in Fee provisions set 
forth in paragraph 1.d. of this Exhibit, on its discretion as to the 
manner and means by which it conducts its regulatory efforts in its 
role as the SRO primarily liable for regulatory decisions under this 
Agreement. To that end, no disagreement among the Participating 
Organizations as to the manner or means by which NYSE Regulation 
conducts its regulatory efforts hereunder shall be subject to the 
dispute resolution procedures hereunder, and no Participating 
Organization shall have the right to compel NYSE Regulation to alter 
the manner or means by which it conducts its regulatory efforts. 
Further, a Participating Organization shall not have the right to 
compel a rebate or reassessment of fees for services rendered, on the 
basis that the Participating Organization would have conducted 
regulatory efforts in a different manner than NYSE Regulation in its 
professional judgment chose to conduct its regulatory efforts.
    ii. Audit of FINRA.
    (a) Once every rolling twelve (12) month period, FINRA shall permit 
no more than one audit (to be performed by one or more Participating 
Organizations) of the Fees charged by FINRA to the Participating 
Organizations hereunder and a detailed cost analysis supporting such 
Fees (the ``Audit''). The Participating Organization or Organizations 
that conduct this Audit will select a nationally-recognized independent 
auditing firm (or may use its regular independent auditor, providing it 
is a nationally-recognized auditing firm) (``Auditing Firm'') to act on 
its, or their behalf, and will provide reasonable notice to other 
Participating Organizations of the Audit. FINRA will permit the 
Auditing Firm reasonable access during FINRA's normal business hours, 
with reasonable advance notice, to such financial records and 
supporting documentation as are necessary to permit review of the 
accuracy of the calculation of the Fees charged to the Participating 
Organizations. The Participating Organization, or Organizations, as 
applicable, other than FINRA, shall be responsible for the costs of 
performing any such audit.
    (b) If, through an Audit, the Exchange Committee determines that 
FINRA has inaccurately calculated the Fees for any Participating 
Organization, the Exchange Committee will promptly notify FINRA in 
writing of the amount of such difference in the Fees, and, if 
applicable, FINRA shall issue a reimbursement of the overage amount to 
the relevant Participating Organization(s), less any amount owed by the 
Participating Organization under any outstanding, undisputed 
invoice(s). If such an Audit reveals that any Participating 
Organization paid less than what was required pursuant to the 
Agreement, then that Participating Organization shall promptly pay 
FINRA the difference between what the Participating Organization owed 
pursuant to the Agreement and what that Participating Organization 
originally paid FINRA. If FINRA disputes the results of an audit 
regarding the accuracy of the Fees, it will submit the dispute for 
resolution pursuant to the dispute resolution procedures in paragraph 
13 hereof.
    (c) In the event that through the review of any supporting 
documentation provided during the Audit, any one or more Participating 
Organizations desire to discuss with FINRA the supporting documentation 
and any questions arising therefrom with regard to the manner in which 
regulation was conducted, the Participating Organization(s) shall call 
a meeting with FINRA. FINRA shall in turn notify the Exchange Commit