Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Codify the Extended Hours Trading Risk Disclosure Obligation as New FINRA Rule 2265, 17243-17245 [E9-8420]
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Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices
Act,5 in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees, and other charges
among its members and other persons
using its facilities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change is
effective upon filing pursuant to Section
19(b)(3)(A)(ii) of the Act 6 and Rule 19b–
4(f)(2) thereunder.7
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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 (https://www.sec.gov/
rules/sro/shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of such filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–
NYSEAmex–2009–08 and should be
submitted on or before May 5, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–8418 Filed 4–13–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–59717; File No. SR–FINRA–
2009–021]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEAmex–2009–08 on
the subject line.
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Codify the Extended
Hours Trading Risk Disclosure
Obligation as New FINRA Rule 2265
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEAmex-2009–08. This
U.S.C. 78f(b)(4).
U.S.C. 78s(b)(3)(A)(ii).
7 17 CFR 240.19b–4(f)(2).
April 7, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 27,
2009, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) (f/k/a
National Association of Securities
5 15
8 17
6 15
1 15
VerDate Nov<24>2008
16:39 Apr 13, 2009
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Jkt 217001
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Frm 00101
Fmt 4703
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17243
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II [sic], which Items have been prepared
by FINRA. FINRA has designated the
proposed rule change as ‘‘constituting a
stated policy, practice, or interpretation
with respect to the meaning,
administration, or enforcement of an
existing rule’’ under Section
19(b)(3)(A)(i) of the Act 3 and Rule 19b–
4(f)(1) thereunder,4 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt new
FINRA Rule 2265 (Extended Hours
Trading Risk Disclosure) to codify the
existing obligation to disclose to
customers the risks of extended hours
trading. The text of the proposed rule
change is available on FINRA’s Web site
at https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On January 10, 2000, FINRA, then
NASD, filed with the SEC a Notice to
Members reminding members of their
obligation under just and equitable
principles of trade 5 and the advertising
rule 6 to disclose to all customers the
material risks of extended hours trading
(i.e., trading outside regular trading
3 15
U.S.C. 78s(b)(3)(A)(i).
CFR 240.19b–4(f)(1).
5 Rule 2010 (Standards of Commercial Honor and
Principles of Trade).
6 NASD Rule 2210 (Communications with the
Public).
4 17
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14APN1
17244
Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices
hours of 9:30 a.m. to 4 p.m. Eastern
Standard Time).7 In its filing with the
Commission, FINRA noted that, while
the growth of extended hours trading
provides customers with greater
opportunities to trade securities and
manage their portfolios, it also involves
material risks that are specific to
extended hours trading.
NTM 00–07 provided a model
extended hours risk disclosure
statement for retail and institutional
customers that addressed six primary
trading risks: (1) Lower liquidity; (2)
higher volatility; (3) changing prices; (4)
unlinked markets; (5) an exaggerated
effect from news announcements; and
(6) wider spreads. This disclosure
statement defined certain essential
terminology (e.g., ‘‘liquidity,’’
‘‘volatility,’’ and ‘‘spread’’) and
explained the risks that are present
during extended hours trading,
specifically:
• Risk of Lower Liquidity. Liquidity
refers to the ability of market
participants to buy and sell securities.
Generally, the more orders that are
available in a market, the greater the
liquidity. Liquidity is important because
with greater liquidity it is easier for
investors to buy or sell securities, and
as a result, investors are more likely to
pay or receive a competitive price for
securities purchased or sold. There may
be lower liquidity in extended hours
trading as compared to regular market
hours. As a result, your order may only
be partially executed, or not at all.
• Risk of Higher Volatility. Volatility
refers to the changes in price that
securities undergo when trading.
Generally, the higher the volatility of a
security, the greater its price swings.
There may be greater volatility in
extended hours trading than in regular
market hours. As a result, your order
may only be partially executed, or not
at all, or you may receive an inferior
price in extended hours trading than
you would during regular market hours.
• Risk of Changing Prices. The prices
of securities traded in extended hours
trading may not reflect the prices either
at the end of regular market hours, or
upon the opening the next morning. As
a result, you may receive an inferior
price in extended hours trading than
you would during regular market hours.
• Risk of Unlinked Markets.
Depending on the extended hours
trading system or the time of day, the
prices displayed on a particular
7 See Securities Exchange Act Release No. 42363
(January 28, 2000), 65 FR 5715 (February 4, 2000)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change Relating to a Notice to
Members on Extended Hours Trading) (SR–NASD
00–01) (‘‘NTM 00–07’’).
VerDate Nov<24>2008
16:39 Apr 13, 2009
Jkt 217001
extended hours trading system may not
reflect the prices in other concurrently
operating extended hours trading
systems dealing in the same securities.
Accordingly, you may receive an
inferior price in one extended hours
trading system than you would in
another extended hours trading system.
• Risk of News Announcements.
Normally, issuers make news
announcements that may affect the price
of their securities after regular market
hours. Similarly, important financial
information is frequently announced
outside of regular market hours. In
extended hours trading, these
announcements may occur during
trading, and if combined with lower
liquidity and higher volatility, may
cause an exaggerated and unsustainable
effect on the price of a security.
• Risk of Wider Spreads. The spread
refers to the difference in price between
what you can buy a security for and
what you can sell it for. Lower liquidity
and higher volatility in extended hours
trading may result in wider than normal
spreads for a particular security.
In addition, FINRA notes that certain
regulatory protections are not in effect
after the end of ‘‘regular trading hours’’
on any trading day. For example, the
SEC’s Regulation NMS’s ‘‘tradethrough’’ rules do not apply to
executions after 4 p.m. EST.8
FINRA is proposing to transfer this
existing disclosure obligation into new
FINRA Rule 2265 (Extended Hours
Trading Risk Disclosure) for
administrative and ease of reference
purposes. As is currently the case,
members would retain a measure of
flexibility in the wording of the risk
disclosure (so long as, at a minimum,
the above six areas are addressed). In
addition to the above specific
disclosures, members must include any
additional disclosures as are relevant
and appropriate to the member’s
business consistent with their
obligations under just and equitable
principles of trade.
As noted in Item 2 of this filing,
FINRA has filed the proposed rule
change for immediate effectiveness. The
effective date and the implementation
date will be the date of filing, March 27,
2009.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,9 which
requires, among other things, that
8 A trade-through occurs when one trading center
executes an order at a price that is inferior to the
price of a protected quotation. See 17 CFR
242.600(77).
9 15 U.S.C. 78o–3(b)(6).
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
FINRA rules be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public interest.
FINRA continues to believe that
members that permit customers to
engage in extended hours trading have
an obligation to disclose to such
customers the risks specific to extended
hours trading. Similarly, members that
advertise the opportunities and benefits
of extended hours trading must also
disclose the material risks. FINRA
believes that this disclosure requirement
is an important element in protecting
investors and informing investors of the
risks specific to extended hours trading.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 10 and paragraph (f)(1) of Rule
19b–4 thereunder.11 At any time within
60 days of the filing of the proposed rule
change, the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–FINRA–2009–021 on the
subject line.
10 15
11 17
E:\FR\FM\14APN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(x).
14APN1
Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
Release No. 34–59721; File No. SR–Phlx–
2009–32
Self-Regulatory Organizations;
NASDAQ OMX PHLX, Inc.; Notice of
All submissions should refer to File
Number SR–FINRA–2009–021. This file Filing of Proposed Rule Change
Relating to the Exchange’s Enhanced
number should be included on the
Electronic Trading Platform for
subject line if e-mail is used. To help the
Options, Phlx XL II
Commission process and review your
comments more efficiently, please use
April 7, 2009.
only one method. The Commission will
Pursuant to Section 19(b)(1) of the
post all comments on the Commission’s Securities Exchange Act of 1934
Internet Web site (https://www.sec.gov/
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
rules/sro.shtml). Copies of the
notice is hereby given that on April 3,
submission, all subsequent
2009, NASDAQ OMX PHLX, Inc.
amendments, all written statements
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
with respect to the proposed rule
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
change that are filed with the
rule change as described in Items I, II,
Commission, and all written
and III below, which Items have been
communications relating to the
prepared by the Exchange. The
proposed rule change between the
Commission and any person, other than Commission is publishing this notice to
solicit comments on the proposed rule
those that may be withheld from the
change from interested persons.
public in accordance with the
provisions of 5 U.S.C. 552, will be
I. Self-Regulatory Organization’s
available for inspection and copying in
Statement of the Terms of Substance of
the Commission’s Public Reference
the Proposed Rule Change
Room, 100 F Street, NE., Washington,
The Exchange proposes to implement
DC 20549, on official business days
several enhancements to its electronic
between the hours of 10 a.m. and 3 p.m.
options trading system, Phlx XL. The
Copies of such filing also will be
enhanced system will be known as Phlx
available for inspection and copying at
XL II and will reflect enhancements to
the principal office of FINRA. All
the opening, linkage and routing,
comments received will be posted
quoting, and order management
without change; the Commission does
processes.
not edit personal identifying
The text of the proposed rule change
information from submissions. You
is available on the Exchange’s Web site
should submit only information that
at https://
you wish to make available publicly. All nasdaqomxphlx.cchwallstreet.com/
submissions should refer to File
NASDAQOMXPHLX/Filings/, at the
Number SR–FINRA–2009–021 and
principal office of the Exchange, and at
should be submitted on or before May
the Commission’s Public Reference
5, 2009.
Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–8420 Filed 4–13–09; 8:45 am]
BILLING CODE 8010–01–P
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
12 17
CFR 200.30–3(a)(12).
VerDate Nov<24>2008
16:39 Apr 13, 2009
2 17
Jkt 217001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00103
Fmt 4703
Sfmt 4703
17245
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to implement several
enhancements to the Phlx electronic
options trading platform, Phlx XL.3 The
system that includes these
enhancements will be referred to as
Phlx XL II. These enhancements should
improve the execution quality for its
Phlx users by improving a number of
processes, including the opening
process, the order handling process and
the execution of orders process. The
changes to the opening process should
provide better executions to users, more
consistent prices on executions and a
smoother transition from the opening to
the regular trading day. The changes to
the order handling process will improve
routing to liquidity available at other
exchanges while preventing non-exempt
trade-throughs of other markets, and
will provide users with increased
flexibility and control in how their
orders are handled. Execution of order
processing will become more consistent,
with greater continuity in prices as a
result of these changes, because several
of the changes are intended to introduce
a price check to limit executions at far
away prices (which are known as
outliers). The Exchange believes that
these changes benefit investors and
users through better and more
consistent system behavior and
resulting prices. These modifications
and enhancements are outlined below.4
New Opening Process
The Exchange proposes to improve its
opening process for options in several
ways. Currently, Exchange Rule 1017
provides that the system will open an
option series for trading once certain
conditions have been met. Specifically,
Rule 1017(a) currently states that the
system will automatically open a series
in equity options when a quote or trade
has been disseminated by the market for
the underlying security, and there is a
specialist quote or a defined number of
Phlx XL participants 5 quoting after a
certain time period has elapsed.
Provided there is no order imbalance,
3 See Securities Exchange Act Release No. 50100
(July 27, 2004), 69 FR 44612 [sic] (August 3, 2004)
(SR–Phlx–2003–59).
4 The Exchange acknowledges that the proposed
Options Order Protection and Locked/Crossed
Market Plan may necessitate modifications.
5 Phlx XL and Phlx XL II participants are
specialists, Streaming Quote Traders (‘‘SQTs’’) and
Remote Streaming Quote Traders (‘‘RSQTs’’), as
defined in Phlx Rule 1014(b), assigned to an option.
E:\FR\FM\14APN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 70 (Tuesday, April 14, 2009)]
[Notices]
[Pages 17243-17245]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-8420]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59717; File No. SR-FINRA-2009-021]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Codify the Extended Hours Trading Risk
Disclosure Obligation as New FINRA Rule 2265
April 7, 2009.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 27, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II [sic], which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as ``constituting a stated policy, practice,
or interpretation with respect to the meaning, administration, or
enforcement of an existing rule'' under Section 19(b)(3)(A)(i) of the
Act \3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(i).
\4\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to adopt new FINRA Rule 2265 (Extended Hours
Trading Risk Disclosure) to codify the existing obligation to disclose
to customers the risks of extended hours trading. The text of the
proposed rule change is available on FINRA's Web site at https://www.finra.org, at the principal office of FINRA and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On January 10, 2000, FINRA, then NASD, filed with the SEC a Notice
to Members reminding members of their obligation under just and
equitable principles of trade \5\ and the advertising rule \6\ to
disclose to all customers the material risks of extended hours trading
(i.e., trading outside regular trading
[[Page 17244]]
hours of 9:30 a.m. to 4 p.m. Eastern Standard Time).\7\ In its filing
with the Commission, FINRA noted that, while the growth of extended
hours trading provides customers with greater opportunities to trade
securities and manage their portfolios, it also involves material risks
that are specific to extended hours trading.
---------------------------------------------------------------------------
\5\ Rule 2010 (Standards of Commercial Honor and Principles of
Trade).
\6\ NASD Rule 2210 (Communications with the Public).
\7\ See Securities Exchange Act Release No. 42363 (January 28,
2000), 65 FR 5715 (February 4, 2000) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change Relating to a Notice to
Members on Extended Hours Trading) (SR-NASD 00-01) (``NTM 00-07'').
---------------------------------------------------------------------------
NTM 00-07 provided a model extended hours risk disclosure statement
for retail and institutional customers that addressed six primary
trading risks: (1) Lower liquidity; (2) higher volatility; (3) changing
prices; (4) unlinked markets; (5) an exaggerated effect from news
announcements; and (6) wider spreads. This disclosure statement defined
certain essential terminology (e.g., ``liquidity,'' ``volatility,'' and
``spread'') and explained the risks that are present during extended
hours trading, specifically:
Risk of Lower Liquidity. Liquidity refers to the ability
of market participants to buy and sell securities. Generally, the more
orders that are available in a market, the greater the liquidity.
Liquidity is important because with greater liquidity it is easier for
investors to buy or sell securities, and as a result, investors are
more likely to pay or receive a competitive price for securities
purchased or sold. There may be lower liquidity in extended hours
trading as compared to regular market hours. As a result, your order
may only be partially executed, or not at all.
Risk of Higher Volatility. Volatility refers to the
changes in price that securities undergo when trading. Generally, the
higher the volatility of a security, the greater its price swings.
There may be greater volatility in extended hours trading than in
regular market hours. As a result, your order may only be partially
executed, or not at all, or you may receive an inferior price in
extended hours trading than you would during regular market hours.
Risk of Changing Prices. The prices of securities traded
in extended hours trading may not reflect the prices either at the end
of regular market hours, or upon the opening the next morning. As a
result, you may receive an inferior price in extended hours trading
than you would during regular market hours.
Risk of Unlinked Markets. Depending on the extended hours
trading system or the time of day, the prices displayed on a particular
extended hours trading system may not reflect the prices in other
concurrently operating extended hours trading systems dealing in the
same securities. Accordingly, you may receive an inferior price in one
extended hours trading system than you would in another extended hours
trading system.
Risk of News Announcements. Normally, issuers make news
announcements that may affect the price of their securities after
regular market hours. Similarly, important financial information is
frequently announced outside of regular market hours. In extended hours
trading, these announcements may occur during trading, and if combined
with lower liquidity and higher volatility, may cause an exaggerated
and unsustainable effect on the price of a security.
Risk of Wider Spreads. The spread refers to the difference
in price between what you can buy a security for and what you can sell
it for. Lower liquidity and higher volatility in extended hours trading
may result in wider than normal spreads for a particular security.
In addition, FINRA notes that certain regulatory protections are
not in effect after the end of ``regular trading hours'' on any trading
day. For example, the SEC's Regulation NMS's ``trade-through'' rules do
not apply to executions after 4 p.m. EST.\8\
---------------------------------------------------------------------------
\8\ A trade-through occurs when one trading center executes an
order at a price that is inferior to the price of a protected
quotation. See 17 CFR 242.600(77).
---------------------------------------------------------------------------
FINRA is proposing to transfer this existing disclosure obligation
into new FINRA Rule 2265 (Extended Hours Trading Risk Disclosure) for
administrative and ease of reference purposes. As is currently the
case, members would retain a measure of flexibility in the wording of
the risk disclosure (so long as, at a minimum, the above six areas are
addressed). In addition to the above specific disclosures, members must
include any additional disclosures as are relevant and appropriate to
the member's business consistent with their obligations under just and
equitable principles of trade.
As noted in Item 2 of this filing, FINRA has filed the proposed
rule change for immediate effectiveness. The effective date and the
implementation date will be the date of filing, March 27, 2009.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\9\ which requires, among
other things, that FINRA rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
FINRA continues to believe that members that permit customers to
engage in extended hours trading have an obligation to disclose to such
customers the risks specific to extended hours trading. Similarly,
members that advertise the opportunities and benefits of extended hours
trading must also disclose the material risks. FINRA believes that this
disclosure requirement is an important element in protecting investors
and informing investors of the risks specific to extended hours
trading.
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \10\ and paragraph (f)(1) of Rule 19b-4
thereunder.\11\ At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(x).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FINRA-2009-021 on the subject line.
[[Page 17245]]
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2009-021. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2009-021 and should be
submitted on or before May 5, 2009.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8420 Filed 4-13-09; 8:45 am]
BILLING CODE 8010-01-P
