Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rules 5210 (Publication of Transactions and Quotations) and 5220 (Offers at Stated Prices) Into the Consolidated Rulebook, 46814-46816 [E9-21883]

Download as PDF 46814 Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60620; File No. SR–CHX– 2009–10] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Approving Proposed Rule Change To Add the Quote@CHX and Reprice@CHX Order Types to the Brokerplex System cprice-sewell on DSKGBLS3C1PROD with NOTICES September 3, 2009. On July 23, 2009, Chicago Stock Exchange, Inc. (‘‘CHX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt the Quote@CHX and Reprice@CHX order types for the Brokerplex order entry system. The proposed rule change was published for comment in the Federal Register on August 4, 2009.3 The Commission received no comments regarding the proposal. This order approves the proposed rule change. The Quote@CHX order type is designed to provide CHX Institutional Brokers with an additional method to enter displayable orders into the CHX Matching System. A Quote@CHX order will be priced within Brokerplex at a defined limit price, which is one minimum price increment from the relevant side of the National Best Bid and Offer (‘‘NBBO’’) at the time of order submission, before it is entered into the CHX Matching System as a limit order. The Reprice@CHX order type will enable an Institutional Broker to cancel an existing limit order residing in the CHX Matching System and replace it with an order generated in the same manner as a Quote@CHX order. The Quote@CHX and Reprice@CHX functionality will only be available to Institutional Brokers entering orders into the Brokerplex system for submission to the CHX Matching System for display and execution. The CHX Matching System itself will not be eligible to receive these order types, but instead Brokerplex would convert the Quote@CHX and Reprice@CHX order types into limit orders for submission to the CHX Matching System. In addition, the use of Quote@CHX and Reprice@CHX will be optional, and entries for both order types will be rejected if the systematically generated price would be outside the customer’s 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 60395 (July 28, 2008), 74 FR 38678 (‘‘Notice’’). 2 17 VerDate Nov<24>2008 15:23 Sep 10, 2009 Jkt 217001 specified limit price. The Exchange’s standard validations for locked and crossed markets will apply. The Commission has carefully reviewed the proposed rule change and finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 4 and, in particular, Section 6(b)(5) of the Act,5 which requires that an exchange have rules designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest. These Brokerplex order types are designed to help Institutional Brokers submit limit orders that they wish to display on the CHX Matching System, rather than execute against displayed bids or offers.6 Institutional Brokers currently manually enter orders into the CHX Matching System through Brokerplex.7 Under the proposed rule change, an Institutional Broker using the Quote@CHX or Reprice@CHX order types would have such orders automatically priced and entered into the CHX Matching System by Brokerplex. The Commission believes that the Quote@CHX and Reprice@CHX order types provide an additional method for Institutional Brokers to submit customer orders to the CHX Matching System for display, and to seek price improvement for those orders. Therefore, the Commission believes that the proposal is consistent with the Act. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–CHX–2009– 10) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–21882 Filed 9–10–09; 8:45 am] BILLING CODE 8010–01–P 4 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 5 15 U.S.C. 78f(b)(5). 6 According to CHX, rapidly changing quotes in today’s market environment often make it difficult to successfully post a bid or offer. See Notice, supra note 3, at 38678. 7 Id. at 38678 n.3. 8 17 CFR 200.30–3(a)(12). PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60613; File No. SR–FINRA– 2009–055] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rules 5210 (Publication of Transactions and Quotations) and 5220 (Offers at Stated Prices) Into the Consolidated Rulebook September 2, 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 August 18, 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, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to adopt NASD Rule 3310 (Publication of Transactions and Quotations), NASD Rule 3320 (Offers at Stated Prices), IM–3310 (Manipulative and Deceptive Quotations) and IM–3320 (firmness of Quotations) as FINRA rules in the consolidated FINRA rulebook without material changes. The proposed rule change would combine NASD Rule 3310 and IM–3310 into FINRA Rule 5210 and would combine NASD Rule 3320 and IM–3320 into FINRA Rule 5220 in the consolidated FINRA rulebook. 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 1 15 2 17 E:\FR\FM\11SEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 11SEN1 Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices 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 As part of the process of developing a new consolidated rulebook (‘‘Consolidated FINRA Rulebook’’),3 FINRA is proposing to adopt NASD Rule 3310 (Publication of Transactions and Quotations), NASD Rule 3320 (Offers at Stated Prices), IM–3310 (Manipulative and Deceptive Quotations) and IM–3320 (firmness of Quotations) with minor changes as FINRA rules in the Consolidated FINRA Rulebook. cprice-sewell on DSKGBLS3C1PROD with NOTICES Proposed FINRA Rule 5210 NASD Rule 3310 prohibits members from publishing or circulating, or causing to be published or circulated, any communication that purports to report any transaction as a purchase or sale of any security unless such member believes that such transaction was a bona fide purchase or sale of such security. The rule also prohibits members from publishing or circulating, or causing to be published or circulated, any communication that purports to quote the bid price or asked price for any security, unless such member believes that such quotation represents a bona fide bid for, or offer of, such security. IM–3310 provides that it would be inconsistent with NASD Rules 2110 (Standards of Commercial Honor and Principles of Trade),4 3310 (Publications of Transactions and Quotations), and 2120 (Use of Manipulative, Deceptive or Other Fraudulent Devices) 5 for a member to: (1) Publish or circulate or cause to be published or circulated, by any means whatsoever, any report of 3 The current FINRA rulebook consists of (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from NYSE (‘‘Incorporated NYSE Rules’’) (together, the NASD Rules and Incorporated NYSE Rules are referred to as the ‘‘Transitional Rulebook’’). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’). The FINRA Rules apply to all FINRA members, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see Information Notice, March 12, 2008 (Rulebook Consolidation Process). 4 NASD Rule 2110 has been transferred into the Consolidated FINRA Rulebook as FINRA Rule 2010. 5 NASD Rule 2120 has been transferred into the Consolidated FINRA Rulebook as FINRA Rule 2020. VerDate Nov<24>2008 15:23 Sep 10, 2009 Jkt 217001 any securities transaction or of any purchase or sale of any security unless such member knows or has reason to believe that such transaction was a bona fide transaction, purchase or sale, or (2) to publish or circulate or to cause to be published or circulated, by any means whatsoever, any quotation for any security without having reasonable cause to believe that such quotation is a bona fide quotation, is not fictitious and is not published or circulated or caused to be published or circulated for any fraudulent, deceptive or manipulative purpose. NASD Rule 3310 was adopted on June 6, 1939, and there have been no subsequent amendments to the rule. IM–3310 was adopted in 1960 and also has not been amended since adoption. More recently, FINRA reminded members that directly enter (or that permit customers or non-members to enter) orders into trading systems that they are required to take steps to ensure that such orders are free of errors and are representative of bona fide transaction and quotation activity consistent with their obligations under NASD Rule 3310 and IM–3310.6 Therefore, members have been reminded that they must have in place a supervisory system and written supervisory procedures reasonably designed to ensure that orders are not entered in error or in a manner inconsistent with FINRA rules, including NASD Rule 3310 and IM– 3310. FINRA is proposing to adopt the requirements set forth in NASD Rule 3310 and IM–3310 as FINRA Rule 5210 with minor changes to update the content and cross-references. Specifically, FINRA is proposing minor changes to delete the exception for nominal quotations that are clearly identified as such because, under current practice, nominal quotations are not published and a modifier does not exist to identify nominal quotations. In addition, FINRA is proposing to incorporate the substance of IM–3310 as Supplementary Material to FINRA Rule 5210 with minor changes to simplify and update the cross-references within the rule.7 6 See Notice to Members 04–66 (NASD Reminds Member Firms of Their Obligations to Ensure the Accuracy and Integrity of Information Entered into Order-Routing and Execution Systems) (September 2004). 7 As stated in SR–FINRA–2008–021, with the exception of the Arbitration Code, the Consolidated FINRA Rulebook will no longer contain Interpretive Materials (‘‘IMs’’); rather, the IMs either will become stand alone rules or will be integrated into existing rule text or moved to a ‘‘Supplementary Material’’ section at the end of a rule. (In some instances, an IM also may be eliminated as outdated PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 46815 Proposed FINRA Rule 5220 NASD Rule 3320 provides that no member shall make an offer to buy from or sell to any person any security at a stated price unless such member is prepared to purchase or sell, as the case may be, at such price and under such conditions as are stated at the time of such offer to buy or sell. NASD Rule 3320 was adopted on June 6, 1939. There have been no subsequent amendments to the rule. As adopted in 1965, related IM–3320 restricts ‘‘backing away’’ from quotations, which disrupts the normal operation of the over-the-counter market. IM–3320 provides that it shall be deemed conduct inconsistent with high standards of commercial honor and just and equitable principles of trade if a member ‘‘backs away’’ from its quotation. In addition, the interpretive material provides that, in order to ensure the integrity of quotations, every member has an obligation to correctly identify the nature of its quotations when they are supplied to others. Further, each member furnishing quotations must ensure that it is adequately staffed to respond to inquiries during the normal business hours of such member. IM– 3320 recognizes that members change inter-dealer quotations constantly in the course of trading, but further states that, under normal circumstances where the member is making a firm trading market in any security, it is expected at least to buy or sell a normal unit of trading in the quoted stock at its then prevailing quotations unless clearly designated as ‘‘not firm’’ or ‘‘firm for less than a normal unit of trading’’ when supplied by the member. In addition, IM–3320 recognizes that a member’s quote may not be firm at times where contemporaneous transactions or substantial changes in inventory might require dealers to quote a ‘‘subject market’’ temporarily. FINRA proposes to adopt NASD Rule 3320, without change, into the Consolidated FINRA Rulebook as FINRA Rule 5220 and to incorporate the substance of IM–3320, with minor changes, as Supplementary Material to FINRA Rule 5220. The minor changes to IM–3320 will: (1) Update terminology (e.g., references to ‘‘wire quotations’’ and the ‘‘National Quotation Bureau Sheets’’) to reflect technological advancements and current practice or otherwise unnecessary.) The ‘‘Supplementary Material’’ will set forth the same type of legally binding guidance and additional information that IMs provide today and will be filed with the SEC. See Securities Exchange Act Release No. 58176 (July 16, 2008); 73 FR 42845 (July 23, 2008). E:\FR\FM\11SEN1.SGM 11SEN1 46816 Federal Register / Vol. 74, No. 175 / Friday, September 11, 2009 / Notices since the rule’s enactment, and (2) update the ‘‘subject market’’ language to make it consistent with the language used in the SEC’s Firm Quote Rule (Rule 602 of Regulation NMS), specifically that, if at the time an order for the purchase or sale of the quoted security is presented the member is in the process of effecting a transaction and immediately after the completion of such transaction communicates a revised quotation size, such member shall not be obligated to purchase or sell the quoted security in an amount greater than such revised quotation size. FINRA will announce the implementation date of the proposed rule change in a Regulatory Notice to be published no later than 90 days following Commission approval. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,8 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and, in general, to protect investors and the public interest. FINRA believes that adopting the proposed rules as part of the Consolidated FINRA Rulebook will continue to enhance market quality by providing for increased reliability and usefulness of quotation information. FINRA notes that the proposed rules have been in operation for numerous decades and believes that they have since proven effective in achieving the statutory mandates. 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. cprice-sewell on DSKGBLS3C1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and 8 15 U.S.C. 78o–3(b)(6). VerDate Nov<24>2008 15:23 Sep 10, 2009 Jkt 217001 publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–FINRA–2009–055 on the subject line. should refer to File Number SR–FINRA– 2009–055 and should be submitted on or before October 2, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–21883 Filed 9–10–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60614; File No. SR–NYSE– 2009–90] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To Modify Rebates Payable to Designated Market Makers September 2, 2009. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’),2 and Rule 19b–4 thereunder,3 Paper Comments notice is hereby given that on August • Send paper comments in triplicate 31, 2009, New York Stock Exchange to Elizabeth M. Murphy, Secretary, LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with Securities and Exchange Commission, the Securities and Exchange 100 F Street, NE., Washington, DC Commission (‘‘Commission’’) the 20549–1090. proposed rule changes as described in All submissions should refer to File Number SR–FINRA–2009–055. This file Items I, II and III below, which items have been prepared by the Exchange. number should be included on the subject line if e-mail is used. To help the The Commission is publishing this notice to solicit comments on the Commission process and review your proposed rule changes from interested comments more efficiently, please use only one method. The Commission will persons. post all comments on the Commission’s I. Self-Regulatory Organization’s Internet Web site (https://www.sec.gov/ Statement of the Terms of Substance of rules/sro.shtml). Copies of the the Proposed Rule Change submission, all subsequent The Exchange proposes to amend its amendments, all written statements schedule of rebates payable to with respect to the proposed rule Designated Market Makers (‘‘DMMs’’), change that are filed with the with effect from September 1, 2009. The Commission, and all written text of the proposed rule change is communications relating to the available on the Exchange’s Web site proposed rule change between the (https://www.nyse.com), at the Commission and any person, other than Exchange’s Office of the Secretary, and those that may be withheld from the at the Commission’s Public Reference public in accordance with the Room. provisions of 5 U.S.C. 552, will be available for inspection and copying in II. Self-Regulatory Organization’s the Commission’s Public Reference Statement of the Purpose of, and Room, 100 F Street, NE., Washington, Statutory Basis for, the Proposed Rule DC 20549, on official business days Change between the hours of 10 a.m. and 3 p.m. In its filing with the Commission, the Copies of the filing also will be available self-regulatory organization included for inspection and copying at the statements concerning the purpose of principal office of FINRA. All comments and basis for the proposed rule change received will be posted without change; and discussed any comments it received the Commission does not edit personal identifying information from 9 17 CFR 200.30–3(a)(12). submissions. You should submit only 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a et seq. information that you wish to make 3 17 CFR 240.19b–4. available publicly. All submissions PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\11SEN1.SGM 11SEN1

Agencies

[Federal Register Volume 74, Number 175 (Friday, September 11, 2009)]
[Notices]
[Pages 46814-46816]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21883]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60613; File No. SR-FINRA-2009-055]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt 
FINRA Rules 5210 (Publication of Transactions and Quotations) and 5220 
(Offers at Stated Prices) Into the Consolidated Rulebook

September 2, 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 August 18, 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, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to adopt NASD Rule 3310 (Publication of 
Transactions and Quotations), NASD Rule 3320 (Offers at Stated Prices), 
IM-3310 (Manipulative and Deceptive Quotations) and IM-3320 (firmness 
of Quotations) as FINRA rules in the consolidated FINRA rulebook 
without material changes. The proposed rule change would combine NASD 
Rule 3310 and IM-3310 into FINRA Rule 5210 and would combine NASD Rule 
3320 and IM-3320 into FINRA Rule 5220 in the consolidated FINRA 
rulebook.
    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

[[Page 46815]]

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
    As part of the process of developing a new consolidated rulebook 
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt NASD 
Rule 3310 (Publication of Transactions and Quotations), NASD Rule 3320 
(Offers at Stated Prices), IM-3310 (Manipulative and Deceptive 
Quotations) and IM-3320 (firmness of Quotations) with minor changes as 
FINRA rules in the Consolidated FINRA Rulebook.
---------------------------------------------------------------------------

    \3\ The current FINRA rulebook consists of (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated 
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules 
are referred to as the ``Transitional Rulebook''). While the NASD 
Rules generally apply to all FINRA members, the Incorporated NYSE 
Rules apply only to those members of FINRA that are also members of 
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA 
members, unless such rules have a more limited application by their 
terms. For more information about the rulebook consolidation 
process, see Information Notice, March 12, 2008 (Rulebook 
Consolidation Process).
---------------------------------------------------------------------------

Proposed FINRA Rule 5210

    NASD Rule 3310 prohibits members from publishing or circulating, or 
causing to be published or circulated, any communication that purports 
to report any transaction as a purchase or sale of any security unless 
such member believes that such transaction was a bona fide purchase or 
sale of such security. The rule also prohibits members from publishing 
or circulating, or causing to be published or circulated, any 
communication that purports to quote the bid price or asked price for 
any security, unless such member believes that such quotation 
represents a bona fide bid for, or offer of, such security.
    IM-3310 provides that it would be inconsistent with NASD Rules 2110 
(Standards of Commercial Honor and Principles of Trade),\4\ 3310 
(Publications of Transactions and Quotations), and 2120 (Use of 
Manipulative, Deceptive or Other Fraudulent Devices) \5\ for a member 
to: (1) Publish or circulate or cause to be published or circulated, by 
any means whatsoever, any report of any securities transaction or of 
any purchase or sale of any security unless such member knows or has 
reason to believe that such transaction was a bona fide transaction, 
purchase or sale, or (2) to publish or circulate or to cause to be 
published or circulated, by any means whatsoever, any quotation for any 
security without having reasonable cause to believe that such quotation 
is a bona fide quotation, is not fictitious and is not published or 
circulated or caused to be published or circulated for any fraudulent, 
deceptive or manipulative purpose.
---------------------------------------------------------------------------

    \4\ NASD Rule 2110 has been transferred into the Consolidated 
FINRA Rulebook as FINRA Rule 2010.
    \5\ NASD Rule 2120 has been transferred into the Consolidated 
FINRA Rulebook as FINRA Rule 2020.
---------------------------------------------------------------------------

    NASD Rule 3310 was adopted on June 6, 1939, and there have been no 
subsequent amendments to the rule. IM-3310 was adopted in 1960 and also 
has not been amended since adoption. More recently, FINRA reminded 
members that directly enter (or that permit customers or non-members to 
enter) orders into trading systems that they are required to take steps 
to ensure that such orders are free of errors and are representative of 
bona fide transaction and quotation activity consistent with their 
obligations under NASD Rule 3310 and IM-3310.\6\ Therefore, members 
have been reminded that they must have in place a supervisory system 
and written supervisory procedures reasonably designed to ensure that 
orders are not entered in error or in a manner inconsistent with FINRA 
rules, including NASD Rule 3310 and IM-3310.
---------------------------------------------------------------------------

    \6\ See Notice to Members 04-66 (NASD Reminds Member Firms of 
Their Obligations to Ensure the Accuracy and Integrity of 
Information Entered into Order-Routing and Execution Systems) 
(September 2004).
---------------------------------------------------------------------------

    FINRA is proposing to adopt the requirements set forth in NASD Rule 
3310 and IM-3310 as FINRA Rule 5210 with minor changes to update the 
content and cross-references. Specifically, FINRA is proposing minor 
changes to delete the exception for nominal quotations that are clearly 
identified as such because, under current practice, nominal quotations 
are not published and a modifier does not exist to identify nominal 
quotations. In addition, FINRA is proposing to incorporate the 
substance of IM-3310 as Supplementary Material to FINRA Rule 5210 with 
minor changes to simplify and update the cross-references within the 
rule.\7\
---------------------------------------------------------------------------

    \7\ As stated in SR-FINRA-2008-021, with the exception of the 
Arbitration Code, the Consolidated FINRA Rulebook will no longer 
contain Interpretive Materials (``IMs''); rather, the IMs either 
will become stand alone rules or will be integrated into existing 
rule text or moved to a ``Supplementary Material'' section at the 
end of a rule. (In some instances, an IM also may be eliminated as 
outdated or otherwise unnecessary.) The ``Supplementary Material'' 
will set forth the same type of legally binding guidance and 
additional information that IMs provide today and will be filed with 
the SEC. See Securities Exchange Act Release No. 58176 (July 16, 
2008); 73 FR 42845 (July 23, 2008).
---------------------------------------------------------------------------

Proposed FINRA Rule 5220

    NASD Rule 3320 provides that no member shall make an offer to buy 
from or sell to any person any security at a stated price unless such 
member is prepared to purchase or sell, as the case may be, at such 
price and under such conditions as are stated at the time of such offer 
to buy or sell. NASD Rule 3320 was adopted on June 6, 1939. There have 
been no subsequent amendments to the rule.
    As adopted in 1965, related IM-3320 restricts ``backing away'' from 
quotations, which disrupts the normal operation of the over-the-counter 
market. IM-3320 provides that it shall be deemed conduct inconsistent 
with high standards of commercial honor and just and equitable 
principles of trade if a member ``backs away'' from its quotation.
    In addition, the interpretive material provides that, in order to 
ensure the integrity of quotations, every member has an obligation to 
correctly identify the nature of its quotations when they are supplied 
to others. Further, each member furnishing quotations must ensure that 
it is adequately staffed to respond to inquiries during the normal 
business hours of such member. IM-3320 recognizes that members change 
inter-dealer quotations constantly in the course of trading, but 
further states that, under normal circumstances where the member is 
making a firm trading market in any security, it is expected at least 
to buy or sell a normal unit of trading in the quoted stock at its then 
prevailing quotations unless clearly designated as ``not firm'' or 
``firm for less than a normal unit of trading'' when supplied by the 
member. In addition, IM-3320 recognizes that a member's quote may not 
be firm at times where contemporaneous transactions or substantial 
changes in inventory might require dealers to quote a ``subject 
market'' temporarily.
    FINRA proposes to adopt NASD Rule 3320, without change, into the 
Consolidated FINRA Rulebook as FINRA Rule 5220 and to incorporate the 
substance of IM-3320, with minor changes, as Supplementary Material to 
FINRA Rule 5220. The minor changes to IM-3320 will: (1) Update 
terminology (e.g., references to ``wire quotations'' and the ``National 
Quotation Bureau Sheets'') to reflect technological advancements and 
current practice

[[Page 46816]]

since the rule's enactment, and (2) update the ``subject market'' 
language to make it consistent with the language used in the SEC's Firm 
Quote Rule (Rule 602 of Regulation NMS), specifically that, if at the 
time an order for the purchase or sale of the quoted security is 
presented the member is in the process of effecting a transaction and 
immediately after the completion of such transaction communicates a 
revised quotation size, such member shall not be obligated to purchase 
or sell the quoted security in an amount greater than such revised 
quotation size.
    FINRA will announce the implementation date of the proposed rule 
change in a Regulatory Notice to be published no later than 90 days 
following Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade and, in general, to protect investors and the 
public interest. FINRA believes that adopting the proposed rules as 
part of the Consolidated FINRA Rulebook will continue to enhance market 
quality by providing for increased reliability and usefulness of 
quotation information. FINRA notes that the proposed rules have been in 
operation for numerous decades and believes that they have since proven 
effective in achieving the statutory mandates.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2009-055 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2009-055. 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 the 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-2009-055 and should be 
submitted on or before October 2, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21883 Filed 9-10-09; 8:45 am]
BILLING CODE 8010-01-P
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