Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to FINRA's Rules Governing Clearly Erroneous Executions, 55606-55610 [E9-25873]

Download as PDF 55606 Federal Register / Vol. 74, No. 207 / Wednesday, October 28, 2009 / Notices Finally, FINRA proposes minor technical, stylistic, or conforming changes to Rule 7730, including changes to conform the fee chart to the changes in the rule text. FINRA will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following Commission approval. The effective date will be no later than 270 days following publication of the Regulatory Notice announcing 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,26 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 and Section 15A(b)(5) of the Act,27 which requires, among other things, that FINRA rules provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system that FINRA operates or controls in that: (i) the proposed rule change will enhance FINRA’s surveillance of the debt market in connection with Asset-Backed Securities transactions generally; and (ii) the proposed fee proposal provides for reporting fees that mirror the fees currently in effect for corporate bonds, and are reasonable and equitably allocated among members. 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. erowe on DSK5CLS3C1PROD 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 26 15 U.S.C. 78o–3(b)(6). 27 15 U.S.C. 78o–3(b)(5). VerDate Nov<24>2008 15:34 Oct 27, 2009 Jkt 220001 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 rulecomments@sec.gov. Please include File Number SR–FINRA–2009–065 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–2009–065. 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 will also 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 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 available publicly. All submissions should refer to File No. SR–FINRA– 2009–065 and should be submitted on or before November 18, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Elizabeth M. Murphy, Secretary. [FR Doc. E9–25875 Filed 10–27–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60851; File No. SR–FINRA– 2009–068] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to FINRA’s Rules Governing Clearly Erroneous Executions October 21, 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 October 19, 2009, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘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 11890, IM–11890–1, and IM– 11890–2 into the Consolidated FINRA Rulebook as part of a new FINRA Rule 11890 Series governing clearly erroneous transactions and to amend these rules as part of a market-wide effort designed to provide transparency and finality with respect to clearly erroneous executions. 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. 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\28OCN1.SGM 28OCN1 Federal Register / Vol. 74, No. 207 / Wednesday, October 28, 2009 / Notices 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 erowe on DSK5CLS3C1PROD with NOTICES 1. Purpose As part of the process of developing a new consolidated rulebook (‘‘Consolidated FINRA Rulebook’’),3 FINRA is proposing that NASD Rule 11890, IM–11890–1, and IM–11890–2 be moved into the Consolidated FINRA Rulebook as part of a new FINRA Rule 11890 Series governing clearly erroneous transactions.4 FINRA is also proposing to amend these rules as part of a market-wide effort designed to provide transparency and finality with respect to clearly erroneous executions.5 This effort seeks to achieve consistent results for participants across U.S. equities exchanges while maintaining a fair and orderly market, protecting investors, and protecting the public interest. Unlike the rules of the U.S. equities exchanges, FINRA’s rules also address clearly erroneous executions in OTC Equity Securities.6 NASD Rule 11890 currently provides that, in the event of a disruption or malfunction related to the use or operation of any 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 FINRA will transfer the remaining rules in the Uniform Practice Code into the Consolidated FINRA Rulebook in a separate filing. 5 See Securities Exchange Act Release No. 60706 (September 22, 2009), 74 FR 49416 (September 28, 2009) (approving SR–NYSEArca–2009–36). 6 For purposes of the proposed rule change, the term ‘‘OTC Equity Security’’ has the same meaning as defined in FINRA Rule 6420, except that the term does not include any equity security that is traded on any national securities exchange. VerDate Nov<24>2008 15:34 Oct 27, 2009 Jkt 220001 quotation, communication, or trade reporting system owned or operated by FINRA, or under extraordinary market conditions, designated officers of FINRA can review an over-the-counter (‘‘OTC’’) transaction arising out of or reported through any such quotation, communication, or trade reporting system, and may declare the transaction null and void or modify the terms if any such officer determines that the transaction is clearly erroneous or that such action is necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest. IM–11890–1 and IM–11890–2 address rulings made by FINRA and the UPC Committee pursuant to NASD Rule 11890 and the review of those rulings. NASD Rule 11890 provides important safeguards against market disruptions caused by trader errors, system malfunctions, or other extraordinary events that result in erroneous executions affecting multiple market participants and/or securities. NASD Rule 11890 has been used both with respect to events affecting a single stock, such as an extraordinary erroneous order causing a large number of trades involving multiple market participants in a single stock (single stock events), and events affecting multiple stocks, such as a system malfunction resulting in a more widespread problem (multistock events). In addition to the substantive changes to the clearly erroneous provisions described below, the proposed rule change structurally alters the provisions as well. FINRA is proposing to create a new clearly erroneous series of rules: FINRA Rule Series 11890. Under this umbrella would be (1) a general provision (Rule 11891) with accompanying Supplementary Material; (2) a rule governing clearly erroneous determinations for transactions in exchange-listed securities (Rule 11892) with accompanying Supplementary Material; (3) a rule governing clearly erroneous determinations for transactions in OTC Equity Securities (Rule 11893) with accompanying Supplementary Material; and (4) a rule governing review of FINRA staff determinations by the UPC Committee (Rule 11894). Definition and General Guidelines The proposed rule change creates Rule 11891, which defines the term ‘‘clearly erroneous’’ for purposes of the new FINRA Rule 11890 Series. The proposed rule specifies that ‘‘the terms of a transaction are ‘clearly erroneous’ when there is an obvious error in any term, such as price, number of shares, PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 55607 or other unit of trading, or identification of the security.’’ The language in the rule is based on the definition in the recently approved amendments to NYSE Arca Rule 7.10.7 The proposed rule change also includes four proposed paragraphs of Supplementary Material to Rule 11891. Proposed Supplementary Material .01 renumbers current NASD IM–11890–1 regarding a member’s failure to abide by FINRA or UPC Committee rulings. Proposed Supplementary Material .02 and .03 set forth the general standards applicable to clearly erroneous determinations and clarify that FINRA generally considers a transaction to be clearly erroneous when there is a systemic problem that involves large numbers of parties or trades, or conditions where it would be in the best interests of the market. Further, extraordinary market conditions may include situations where an extraordinary event has occurred or is ongoing that has had a material effect on the market for a security traded overthe-counter or has caused major disruption to the marketplace. Supplementary Material .02 also emphasizes that members are responsible for ensuring that the appropriate price and type of order are entered into FINRA systems. Finally, proposed Supplementary Material .04 specifically addresses suspicious trading activities such as unauthorized trading activity or attempts to manipulate stock prices by illegally gaining access to legitimate accounts or opening new accounts using false information (often referred to as ‘‘account intrusion’’). Although FINRA continues to be concerned about protecting markets from unauthorized or illegal activity like account intrusion that could disrupt a fair and orderly market, FINRA believes that its clearly erroneous authority does not extend to such suspicious trading activities. Rather, FINRA believes such activities relate to allegations of fraud and fall outside the scope of the clearly erroneous rules.8 Consequently, FINRA is proposing the Supplementary Material to clarify this position while 7 See Securities Exchange Act Release No. 60706 (September 22, 2009), 74 FR 49416 (September 28, 2009) (approving SR–NYSEArca–2009–36). 8 In approving recent amendments to Nasdaq’s clearly erroneous rule, the Commission noted that, ‘‘[g]iven the fact that the Clearly Erroneous Rule is designed to address trades made in error and the more difficult factual analysis presented by expanding the rule’s application beyond obvious errors,’’ it was appropriate for Nasdaq to ‘‘retain the original scope of the [clearly erroneous] rule’’ rather than extend the rule to address account intrusion. See Securities Exchange Act Release No. 57826 (May 15, 2008), 73 FR 29802 (May 22, 2008). E:\FR\FM\28OCN1.SGM 28OCN1 55608 Federal Register / Vol. 74, No. 207 / Wednesday, October 28, 2009 / Notices also noting that members should routinely review the adequacy of their internal controls and ensure that appropriate system safeguards are in place to minimize or eliminate the potential for account intrusion. Review of Transactions in ExchangeListed Securities Proposed Rule 11892 and its Supplementary Material set forth the standards FINRA uses to determine whether a transaction in an exchangelisted security is clearly erroneous. FINRA believes that coordinating with other self-regulatory organizations with the goal of having consistency and transparency regarding the clearly erroneous process is important to the marketplace and to investors. Consequently, for OTC transactions in exchange-listed securities that are reported to a FINRA system, such as a FINRA Trade Reporting Facility (‘‘TRF’’) or Alternative Display Facility (‘‘ADF’’), FINRA will generally follow the determination of a national securities exchange to break a trade (or multiple trades) when that national securities exchange has broken one or more trades at or near the price range in question at or near the time in question (in FINRA staff’s sole discretion) such that FINRA breaking such trade(s) would be consistent with market integrity and investor protection. When multiple national securities exchanges have related trades, FINRA will leave a trade(s) unbroken when any of those national securities exchanges has left a trade(s) unbroken at or near the price range in question at or near the time in question (in FINRA staff’s sole discretion) such that FINRA breaking such trade(s) would be inconsistent with market integrity and investor protection.9 With respect to OTC transactions in exchange-listed securities for which there is no corresponding or related onexchange trading activity, FINRA believes that the best approach in determining whether to declare transactions clearly erroneous is to follow the exchanges’ criteria when making a clearly erroneous determination. In this sector of the market, FINRA believes that consistency in application of clearly erroneous authority across markets is critical to ensure that one investor does not receive disparate treatment based solely on the ultimate execution or reporting venue of his or her order. Consequently, for OTC transactions in exchange-listed securities that are reported to a FINRA system, such as a FINRA TRF or the ADF, but for which there is no corresponding or related on-exchange trading activity, FINRA will generally make its own clearly erroneous determination.10 However, to ensure that transactions in exchange-listed securities are treated consistently regardless of where the trade is executed (i.e., on an exchange or OTC), proposed Rule 11892 replicates the numerical thresholds used by the exchanges to determine whether a transaction is eligible for consideration as clearly erroneous. The proposed rule also establishes provisions for the use of alternative reference prices in unusual circumstances, additional factors that FINRA may consider when making a clearly erroneous determination, and numerical guidelines applicable to volatile market opens. Each of these provisions is modeled on similar provisions in the recently approved amendments to NYSE Arca Rule 7.10.11 Review of Transactions in OTC Equity Securities Currently, NASD Rule 11890 governs FINRA’s clearly erroneous process for both exchange-listed securities and OTC Equity Securities. The core purpose of the clearly erroneous rules is to grant FINRA authority to determine that a transaction is clearly erroneous with a goal of maintaining market integrity by declaring a transaction (or multiple transactions, if necessary) to be null and void if the terms of the trade are clearly out of line with objective market conditions for the security.12 FINRA is proposing to apply its clearly erroneous Numerical guidelines (Subject transaction’s percentage difference from the reference price) erowe on DSK5CLS3C1PROD with NOTICES Reference price $0.9999 and under ................................................................................... $1.0000 and up to and including $4.9999 ............................................... $5.0000 and up to and including $74.9999 ............................................. $75.0000 and up to and including $199.9999 ......................................... 9 See proposed Rule 11892, Supplementary Material .01. 10 Unlike the NYSE Arca rule regarding clearly erroneous determinations, the FINRA rules do not allow members to initiate reviews of transactions. All reviews conducted by FINRA are conducted on FINRA’s own motion. VerDate Nov<24>2008 15:34 Oct 27, 2009 Jkt 220001 authority somewhat differently depending on whether the security is listed on a national securities exchange or is an OTC Equity Security. For that reason, FINRA is proposing to create separate rules for the treatment of exchange-listed securities, which would be governed by Rule 11892, and OTC Equity Securities, which would be governed by Rule 11893. Proposed Rule 11893 is structured similarly to the provisions for transactions in exchange-listed securities under proposed Rule 11892, including numerical guidelines, the use of alternative reference prices in unusual circumstances, and additional factors FINRA officers may consider when making a clearly erroneous determination. However, as is the case today, the proposed numerical guidelines for transactions in OTC Equity Securities are not the same as the guidelines used for exchange-listed securities. The proposed rule change would codify the numerical guidelines currently used by FINRA to determine whether a transaction is eligible for clearly erroneous consideration. In some instances, for example, the percentage deviations set forth in the numerical guidelines are based on a sliding scale where the maximum percentage deviation applies to the lower execution price in the range and the minimum percentage deviation applies to the higher execution price in the range. The sliding scale is applied in a generally linear fashion (i.e., prices at the lower end of the reference price range are generally assessed at the higher percentage range) and is intended to smooth the percentage changes from tier to tier and allow for more gradual deviations. Because the sliding scale is not applied on a strictly linear basis, FINRA has more discretion in applying the guidelines for executions within the reference price range rather than being strictly a calculation of percentages. The following chart summarizes the proposed Numerical Guidelines for clearly erroneous determinations for OTC Equity Securities: 20%. Low end of range minimum 20%—High end of range minimum 10%. 10%. Low end of range minimum 10%—High end of range minimum 5%. 11 See Securities Exchange Act Release No. 60706 (September 22, 2009), 74 FR 49416 (September 28, 2009) (approving SR–NYSEArca–2009–36). 12 NASD Rule 11890 currently gives FINRA officers the authority to modify the terms of a transaction, in addition to declaring the transaction null and void. To conform FINRA’s authority to the PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 other exchanges’ in the context of clearly erroneous determinations, FINRA is proposing to eliminate its ability to modify a clearly erroneous execution. See id. E:\FR\FM\28OCN1.SGM 28OCN1 Federal Register / Vol. 74, No. 207 / Wednesday, October 28, 2009 / Notices Numerical guidelines (Subject transaction’s percentage difference from the reference price) Reference price $200.0000 and up to and including $499.9999 ....................................... $500.0000 and up to and including $999.9999 ....................................... $1,000.0000 and over .............................................................................. For example, a transaction executed at $1.5000 that deviates by more than $0.30 (or 20%) from the prevailing market price may be eligible for cancellation as ‘‘clearly erroneous’’; whereas a transaction executed at $4.5000 that deviates by more than $0.45 (or 10%) from the prevailing market price may be eligible for cancellation as ‘‘clearly erroneous.’’ The provisions in proposed Rule 11893 regarding alternative reference prices and additional factors are substantially similar to those set forth in Rule 11892 for exchange-listed securities. FINRA is also proposing to adopt Supplementary Material to Rule 11893 to emphasize that FINRA has historically exercised its clearly erroneous authority in very limited circumstances, in particular with respect to OTC Equity Securities. This more narrow approach for OTC Equity Securities is due to the differences in the OTC equity and exchange-listed markets, including the lack of compulsory information flows in the OTC equity market that come as a result of the listing process and the fact that aberrant trading in the OTC market is often due to issues other than systems problems or extraordinary events. The Supplementary Material explains that FINRA does not expect to use its clearly erroneous authority in most situations; rather, FINRA expects the parties to settle any dispute privately. Review Procedures erowe on DSK5CLS3C1PROD with NOTICES Initial Determinations As noted above, FINRA is proposing to remove language that currently allows a FINRA officer to modify one or more of the terms of a transaction under review. Under the proposed rules, the FINRA officer will only have the authority to break the trades. This proposed change is intended to conform with the rules of other exchanges and attempts to remove the subjectivity from the rule that is necessitated by an adjustment. The proposed rule governing initial determinations remains substantially similar to that in current NASD Rule 11890. An Executive Vice President of FINRA’s Market Regulation Department or Transparency Services Department, or any officer designated by such Executive Vice President, may, on his or her own VerDate Nov<24>2008 15:34 Oct 27, 2009 Jkt 220001 55609 5%. Low end of range minimum 5%—High end of range minimum 3%. 3%. motion, review any transaction arising out of or reported through any FINRA facility. With respect to determinations involving transactions in exchangelisted securities, absent extraordinary circumstances, the officer shall take action generally within 30 minutes after becoming aware of the transaction. When extraordinary circumstances exist, any such action of the officer must be taken no later than the start of trading on the day following the date of execution(s) under review. With respect to determinations involving transactions in OTC Equity Securities, a FINRA officer must make a determination as soon as possible after becoming aware of the transaction, but in all cases by 3:00 p.m., Eastern Time, on the next trading day following the date of the transaction at issue. If a FINRA officer declares any transaction null and void, FINRA will notify each party involved in the transaction as soon as practicable, and any party aggrieved by the action may appeal such action in accordance with Rule 11894, unless the officer making the determination also determines that the number of the affected transactions is such that immediate finality is necessary to maintain a fair and orderly market and to protect investors and the public interest. Appeals FINRA is proposing to codify in a separate rule (Rule 11894) the provisions governing the appeal to the UPC Committee of a FINRA officer’s determination to declare an execution clearly erroneous.13 IM–11890–2, which concerns review by panels of the UPC Committee, will be incorporated into the text of the new rule. Under the rule, an appeal must be made in writing and must be received by FINRA within thirty minutes after the person making the appeal is given the notification of the determination being appealed. With respect to appeals regarding exchangelisted securities, determinations by the UPC Committee will be rendered as soon as practicable, but generally, on the same trading day as the execution(s) under review. On requests for appeal received after 3:00 p.m., Eastern Time, a determination will be rendered as soon as practicable, but in no case later 13 As the rule makes clear, a FINRA officer’s determination not to break a trade is not appealable. PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 than the trading day following the date of the execution(s) under review. With respect to appeals regarding OTC Equity Securities, determinations by the UPC Committee will be rendered as soon as practicable, but in no case later than two trading days following the date of the execution(s) under review. FINRA will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following Commission approval. The effective date will be 30 days following publication of the Regulatory Notice announcing 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,14 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 guidelines to explain the application of the clearly erroneous process will provide clarity and consistency to the marketplace. In addition, FINRA believes if consistent standards are applied to this process across markets, then greater efficiency can be reached. 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 14 15 E:\FR\FM\28OCN1.SGM U.S.C. 78o–3(b)(6). 28OCN1 55610 Federal Register / Vol. 74, No. 207 / Wednesday, October 28, 2009 / Notices 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: erowe on DSK5CLS3C1PROD with NOTICES 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–2009–068 on the subject line. available publicly. All submissions should refer to File Number SR–FINRA– 2009–068 and should be submitted on or before November 18, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Elizabeth M. Murphy, Secretary. [FR Doc. E9–25873 Filed 10–27–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60859; File No. SR–ISE– 2009–64] Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change Relating to Historical ISE Open/Close Trade Profile Fees October 21, 2009. On August 25, 2009, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission Paper Comments (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act • Send paper comments in triplicate of 1934 (‘‘Act’’) 1 and Rule 19b–4 to Elizabeth M. Murphy, Secretary, thereunder,2 a proposed rule change to Securities and Exchange Commission, amend its Schedule of Fees to adopt 100 F Street, NE., Washington, DC reduced subscription fees for academic 20549–1090. institutions for the sale of historical All submissions should refer to File open and close volume data on ISE Number SR–FINRA–2009–068. This file listed options. Notice of the proposed number should be included on the rule change was published for comment subject line if e-mail is used. To help the in the Federal Register on September Commission process and review your 17, 2009.3 The Commission received no comments more efficiently, please use comments on the proposal. This order only one method. The Commission will approves the proposed rule change. post all comments on the Commission’s ISE currently sells a market data Internet Web site (https://www.sec.gov/ offering comprised of the entire opening rules/sro.shtml). Copies of the and closing trade data of ISE listed submission, all subsequent options of both customers and firms amendments, all written statements (‘‘ISE Open/Close Trade Profile’’).4 The with respect to the proposed rule ISE Open/Close Trade Profile enables change that are filed with the subscribers to create their own Commission, and all written proprietary put/call calculations. The communications relating to the data is compiled and formatted by ISE proposed rule change between the as an end of day file. This market data Commission and any person, other than offering is currently available to both those that may be withheld from the members and non-members on annual public in accordance with the subscription basis.5 provisions of 5 U.S.C. 552, will be ISE also sells to both members and available for inspection and copying in non-members historical ISE Open/Close the Commission’s Public Reference Trade Profile, a market data offering Room, on official business days between the hours of 10 a.m. and 3 p.m. Copies 15 17 CFR 200.30–3(a)(12). of the filing also will be available for 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. inspection and copying at the principal 3 See Securities Exchange Act Release No. 60654 office of the Exchange. All comments received will be posted without change; (September 17, 2009), 74 FR 47848 (‘‘Notice’’). 4 See Securities Exchange Act Release No. 56254 the Commission does not edit personal (August 15, 2007), 72 FR 47104 (August 22, 2007) identifying information from (approving SR–ISE–2007–70). submissions. You should submit only 5 The current subscription rate for both members and non-members is $600 per month. information that you wish to make VerDate Nov<24>2008 15:34 Oct 27, 2009 Jkt 220001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 comprised of the entire opening and closing trade data of both customers and firms that dates back to May 2005 (on an ad-hoc basis or as a complete set that dates back to May 2005). Ad-hoc subscribers can purchase this data for any number of months, beginning from May 2005 through the current month. Alternatively, subscribers can purchase the entire set of this data, beginning from May 2005 through the current month. The historical ISE Open/Close Trade Profile is compiled and formatted by ISE and sold as a zipped file. ISE charges ad-hoc subscribers $600 per request for each month of data and a discounted fee of $500 per request per month for subscribers that want the complete set, i.e., from May 2005 to the present month. The Exchange now proposes to adopt reduced fees for subscriptions to historical ISE Open/Close Trade Profile by academic institutions for their research purposes.6 In order to encourage and promote academic studies of its market data, ISE proposes to charge a flat rate of $500 for up to 12 months of data or $1,000 for the complete data set. Academic institutions may not use the data in support of actual securities trading. The proposed discount applies only to the market data fees and does not cover any access or telecommunication charges that may be incurred by an academic institution. In addition, with the adoption of reduced fees for academic institutions, ISE is not waiving any of its contractual rights and all academic institutions that subscribe to this data will be required to execute the appropriate subscriber agreement. After careful review, the Commission 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.7 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(4) of the Act,8 which requires that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using its facilities, and Section 6(b)(5) of 6 The Exchange stated that occasionally, academic institutions inquire with the Exchange about subscribing to the historical ISE Open/Close Trade Profile for research purposes but are not inclined to pay the full price. 7 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). 8 15 U.S.C. 78f(b)(4). E:\FR\FM\28OCN1.SGM 28OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 207 (Wednesday, October 28, 2009)]
[Notices]
[Pages 55606-55610]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-25873]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60851; File No. SR-FINRA-2009-068]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
FINRA's Rules Governing Clearly Erroneous Executions

October 21, 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 October 19, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission
(``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

FINRA is proposing to adopt NASD Rule 11890, IM-11890-1, and IM-
11890-2 into the Consolidated FINRA Rulebook as part of a new FINRA
Rule 11890 Series governing clearly erroneous transactions and to amend
these rules as part of a market-wide effort designed to provide
transparency and finality with respect to clearly erroneous executions.
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.

[[Page 55607]]

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
As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing that NASD Rule
11890, IM-11890-1, and IM-11890-2 be moved into the Consolidated FINRA
Rulebook as part of a new FINRA Rule 11890 Series governing clearly
erroneous transactions.\4\ FINRA is also proposing to amend these rules
as part of a market-wide effort designed to provide transparency and
finality with respect to clearly erroneous executions.\5\ This effort
seeks to achieve consistent results for participants across U.S.
equities exchanges while maintaining a fair and orderly market,
protecting investors, and protecting the public interest. Unlike the
rules of the U.S. equities exchanges, FINRA's rules also address
clearly erroneous executions in OTC Equity Securities.\6\ NASD Rule
11890 currently provides that, in the event of a disruption or
malfunction related to the use or operation of any quotation,
communication, or trade reporting system owned or operated by FINRA, or
under extraordinary market conditions, designated officers of FINRA can
review an over-the-counter (``OTC'') transaction arising out of or
reported through any such quotation, communication, or trade reporting
system, and may declare the transaction null and void or modify the
terms if any such officer determines that the transaction is clearly
erroneous or that such action is necessary for the maintenance of a
fair and orderly market or the protection of investors and the public
interest. IM-11890-1 and IM-11890-2 address rulings made by FINRA and
the UPC Committee pursuant to NASD Rule 11890 and the review of those
rulings.
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\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\ FINRA will transfer the remaining rules in the Uniform
Practice Code into the Consolidated FINRA Rulebook in a separate
filing.
\5\ See Securities Exchange Act Release No. 60706 (September 22,
2009), 74 FR 49416 (September 28, 2009) (approving SR-NYSEArca-2009-
36).
\6\ For purposes of the proposed rule change, the term ``OTC
Equity Security'' has the same meaning as defined in FINRA Rule
6420, except that the term does not include any equity security that
is traded on any national securities exchange.
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NASD Rule 11890 provides important safeguards against market
disruptions caused by trader errors, system malfunctions, or other
extraordinary events that result in erroneous executions affecting
multiple market participants and/or securities. NASD Rule 11890 has
been used both with respect to events affecting a single stock, such as
an extraordinary erroneous order causing a large number of trades
involving multiple market participants in a single stock (single stock
events), and events affecting multiple stocks, such as a system
malfunction resulting in a more widespread problem (multi-stock
events).
In addition to the substantive changes to the clearly erroneous
provisions described below, the proposed rule change structurally
alters the provisions as well. FINRA is proposing to create a new
clearly erroneous series of rules: FINRA Rule Series 11890. Under this
umbrella would be (1) a general provision (Rule 11891) with
accompanying Supplementary Material; (2) a rule governing clearly
erroneous determinations for transactions in exchange-listed securities
(Rule 11892) with accompanying Supplementary Material; (3) a rule
governing clearly erroneous determinations for transactions in OTC
Equity Securities (Rule 11893) with accompanying Supplementary
Material; and (4) a rule governing review of FINRA staff determinations
by the UPC Committee (Rule 11894).
Definition and General Guidelines
The proposed rule change creates Rule 11891, which defines the term
``clearly erroneous'' for purposes of the new FINRA Rule 11890 Series.
The proposed rule specifies that ``the terms of a transaction are
`clearly erroneous' when there is an obvious error in any term, such as
price, number of shares, or other unit of trading, or identification of
the security.'' The language in the rule is based on the definition in
the recently approved amendments to NYSE Arca Rule 7.10.\7\
---------------------------------------------------------------------------

\7\ See Securities Exchange Act Release No. 60706 (September 22,
2009), 74 FR 49416 (September 28, 2009) (approving SR-NYSEArca-2009-
36).
---------------------------------------------------------------------------

The proposed rule change also includes four proposed paragraphs of
Supplementary Material to Rule 11891. Proposed Supplementary Material
.01 renumbers current NASD IM-11890-1 regarding a member's failure to
abide by FINRA or UPC Committee rulings. Proposed Supplementary
Material .02 and .03 set forth the general standards applicable to
clearly erroneous determinations and clarify that FINRA generally
considers a transaction to be clearly erroneous when there is a
systemic problem that involves large numbers of parties or trades, or
conditions where it would be in the best interests of the market.
Further, extraordinary market conditions may include situations where
an extraordinary event has occurred or is ongoing that has had a
material effect on the market for a security traded over-the-counter or
has caused major disruption to the marketplace. Supplementary Material
.02 also emphasizes that members are responsible for ensuring that the
appropriate price and type of order are entered into FINRA systems.
Finally, proposed Supplementary Material .04 specifically addresses
suspicious trading activities such as unauthorized trading activity or
attempts to manipulate stock prices by illegally gaining access to
legitimate accounts or opening new accounts using false information
(often referred to as ``account intrusion''). Although FINRA continues
to be concerned about protecting markets from unauthorized or illegal
activity like account intrusion that could disrupt a fair and orderly
market, FINRA believes that its clearly erroneous authority does not
extend to such suspicious trading activities. Rather, FINRA believes
such activities relate to allegations of fraud and fall outside the
scope of the clearly erroneous rules.\8\ Consequently, FINRA is
proposing the Supplementary Material to clarify this position while

[[Page 55608]]

also noting that members should routinely review the adequacy of their
internal controls and ensure that appropriate system safeguards are in
place to minimize or eliminate the potential for account intrusion.
---------------------------------------------------------------------------

\8\ In approving recent amendments to Nasdaq's clearly erroneous
rule, the Commission noted that, ``[g]iven the fact that the Clearly
Erroneous Rule is designed to address trades made in error and the
more difficult factual analysis presented by expanding the rule's
application beyond obvious errors,'' it was appropriate for Nasdaq
to ``retain the original scope of the [clearly erroneous] rule''
rather than extend the rule to address account intrusion. See
Securities Exchange Act Release No. 57826 (May 15, 2008), 73 FR
29802 (May 22, 2008).
---------------------------------------------------------------------------

Review of Transactions in Exchange-Listed Securities
Proposed Rule 11892 and its Supplementary Material set forth the
standards FINRA uses to determine whether a transaction in an exchange-
listed security is clearly erroneous. FINRA believes that coordinating
with other self-regulatory organizations with the goal of having
consistency and transparency regarding the clearly erroneous process is
important to the marketplace and to investors. Consequently, for OTC
transactions in exchange-listed securities that are reported to a FINRA
system, such as a FINRA Trade Reporting Facility (``TRF'') or
Alternative Display Facility (``ADF''), FINRA will generally follow the
determination of a national securities exchange to break a trade (or
multiple trades) when that national securities exchange has broken one
or more trades at or near the price range in question at or near the
time in question (in FINRA staff's sole discretion) such that FINRA
breaking such trade(s) would be consistent with market integrity and
investor protection. When multiple national securities exchanges have
related trades, FINRA will leave a trade(s) unbroken when any of those
national securities exchanges has left a trade(s) unbroken at or near
the price range in question at or near the time in question (in FINRA
staff's sole discretion) such that FINRA breaking such trade(s) would
be inconsistent with market integrity and investor protection.\9\
---------------------------------------------------------------------------

\9\ See proposed Rule 11892, Supplementary Material .01.
---------------------------------------------------------------------------

With respect to OTC transactions in exchange-listed securities for
which there is no corresponding or related on-exchange trading
activity, FINRA believes that the best approach in determining whether
to declare transactions clearly erroneous is to follow the exchanges'
criteria when making a clearly erroneous determination. In this sector
of the market, FINRA believes that consistency in application of
clearly erroneous authority across markets is critical to ensure that
one investor does not receive disparate treatment based solely on the
ultimate execution or reporting venue of his or her order.
Consequently, for OTC transactions in exchange-listed securities that
are reported to a FINRA system, such as a FINRA TRF or the ADF, but for
which there is no corresponding or related on-exchange trading
activity, FINRA will generally make its own clearly erroneous
determination.\10\ However, to ensure that transactions in exchange-
listed securities are treated consistently regardless of where the
trade is executed (i.e., on an exchange or OTC), proposed Rule 11892
replicates the numerical thresholds used by the exchanges to determine
whether a transaction is eligible for consideration as clearly
erroneous. The proposed rule also establishes provisions for the use of
alternative reference prices in unusual circumstances, additional
factors that FINRA may consider when making a clearly erroneous
determination, and numerical guidelines applicable to volatile market
opens. Each of these provisions is modeled on similar provisions in the
recently approved amendments to NYSE Arca Rule 7.10.\11\
---------------------------------------------------------------------------

\10\ Unlike the NYSE Arca rule regarding clearly erroneous
determinations, the FINRA rules do not allow members to initiate
reviews of transactions. All reviews conducted by FINRA are
conducted on FINRA's own motion.
\11\ See Securities Exchange Act Release No. 60706 (September
22, 2009), 74 FR 49416 (September 28, 2009) (approving SR-NYSEArca-
2009-36).
---------------------------------------------------------------------------

Review of Transactions in OTC Equity Securities
Currently, NASD Rule 11890 governs FINRA's clearly erroneous
process for both exchange-listed securities and OTC Equity Securities.
The core purpose of the clearly erroneous rules is to grant FINRA
authority to determine that a transaction is clearly erroneous with a
goal of maintaining market integrity by declaring a transaction (or
multiple transactions, if necessary) to be null and void if the terms
of the trade are clearly out of line with objective market conditions
for the security.\12\ FINRA is proposing to apply its clearly erroneous
authority somewhat differently depending on whether the security is
listed on a national securities exchange or is an OTC Equity Security.
For that reason, FINRA is proposing to create separate rules for the
treatment of exchange-listed securities, which would be governed by
Rule 11892, and OTC Equity Securities, which would be governed by Rule
11893.
---------------------------------------------------------------------------

\12\ NASD Rule 11890 currently gives FINRA officers the
authority to modify the terms of a transaction, in addition to
declaring the transaction null and void. To conform FINRA's
authority to the other exchanges' in the context of clearly
erroneous determinations, FINRA is proposing to eliminate its
ability to modify a clearly erroneous execution. See id.
---------------------------------------------------------------------------

Proposed Rule 11893 is structured similarly to the provisions for
transactions in exchange-listed securities under proposed Rule 11892,
including numerical guidelines, the use of alternative reference prices
in unusual circumstances, and additional factors FINRA officers may
consider when making a clearly erroneous determination. However, as is
the case today, the proposed numerical guidelines for transactions in
OTC Equity Securities are not the same as the guidelines used for
exchange-listed securities. The proposed rule change would codify the
numerical guidelines currently used by FINRA to determine whether a
transaction is eligible for clearly erroneous consideration. In some
instances, for example, the percentage deviations set forth in the
numerical guidelines are based on a sliding scale where the maximum
percentage deviation applies to the lower execution price in the range
and the minimum percentage deviation applies to the higher execution
price in the range. The sliding scale is applied in a generally linear
fashion (i.e., prices at the lower end of the reference price range are
generally assessed at the higher percentage range) and is intended to
smooth the percentage changes from tier to tier and allow for more
gradual deviations. Because the sliding scale is not applied on a
strictly linear basis, FINRA has more discretion in applying the
guidelines for executions within the reference price range rather than
being strictly a calculation of percentages.
The following chart summarizes the proposed Numerical Guidelines
for clearly erroneous determinations for OTC Equity Securities:

------------------------------------------------------------------------
Numerical guidelines (Subject
transaction's percentage
Reference price difference from the reference
price)
------------------------------------------------------------------------
$0.9999 and under...................... 20%.
$1.0000 and up to and including $4.9999 Low end of range minimum 20%--
High end of range minimum 10%.
$5.0000 and up to and including 10%.
$74.9999.
$75.0000 and up to and including Low end of range minimum 10%--
$199.9999. High end of range minimum 5%.

[[Page 55609]]

$200.0000 and up to and including 5%.
$499.9999.
$500.0000 and up to and including Low end of range minimum 5%--
$999.9999. High end of range minimum 3%.
$1,000.0000 and over................... 3%.
------------------------------------------------------------------------

For example, a transaction executed at $1.5000 that deviates by
more than $0.30 (or 20%) from the prevailing market price may be
eligible for cancellation as ``clearly erroneous''; whereas a
transaction executed at $4.5000 that deviates by more than $0.45 (or
10%) from the prevailing market price may be eligible for cancellation
as ``clearly erroneous.'' The provisions in proposed Rule 11893
regarding alternative reference prices and additional factors are
substantially similar to those set forth in Rule 11892 for exchange-
listed securities.
FINRA is also proposing to adopt Supplementary Material to Rule
11893 to emphasize that FINRA has historically exercised its clearly
erroneous authority in very limited circumstances, in particular with
respect to OTC Equity Securities. This more narrow approach for OTC
Equity Securities is due to the differences in the OTC equity and
exchange-listed markets, including the lack of compulsory information
flows in the OTC equity market that come as a result of the listing
process and the fact that aberrant trading in the OTC market is often
due to issues other than systems problems or extraordinary events. The
Supplementary Material explains that FINRA does not expect to use its
clearly erroneous authority in most situations; rather, FINRA expects
the parties to settle any dispute privately.
Review Procedures
Initial Determinations
As noted above, FINRA is proposing to remove language that
currently allows a FINRA officer to modify one or more of the terms of
a transaction under review. Under the proposed rules, the FINRA officer
will only have the authority to break the trades. This proposed change
is intended to conform with the rules of other exchanges and attempts
to remove the subjectivity from the rule that is necessitated by an
adjustment. The proposed rule governing initial determinations remains
substantially similar to that in current NASD Rule 11890. An Executive
Vice President of FINRA's Market Regulation Department or Transparency
Services Department, or any officer designated by such Executive Vice
President, may, on his or her own motion, review any transaction
arising out of or reported through any FINRA facility. With respect to
determinations involving transactions in exchange-listed securities,
absent extraordinary circumstances, the officer shall take action
generally within 30 minutes after becoming aware of the transaction.
When extraordinary circumstances exist, any such action of the officer
must be taken no later than the start of trading on the day following
the date of execution(s) under review. With respect to determinations
involving transactions in OTC Equity Securities, a FINRA officer must
make a determination as soon as possible after becoming aware of the
transaction, but in all cases by 3:00 p.m., Eastern Time, on the next
trading day following the date of the transaction at issue. If a FINRA
officer declares any transaction null and void, FINRA will notify each
party involved in the transaction as soon as practicable, and any party
aggrieved by the action may appeal such action in accordance with Rule
11894, unless the officer making the determination also determines that
the number of the affected transactions is such that immediate finality
is necessary to maintain a fair and orderly market and to protect
investors and the public interest.
Appeals
FINRA is proposing to codify in a separate rule (Rule 11894) the
provisions governing the appeal to the UPC Committee of a FINRA
officer's determination to declare an execution clearly erroneous.\13\
IM-11890-2, which concerns review by panels of the UPC Committee, will
be incorporated into the text of the new rule. Under the rule, an
appeal must be made in writing and must be received by FINRA within
thirty minutes after the person making the appeal is given the
notification of the determination being appealed. With respect to
appeals regarding exchange-listed securities, determinations by the UPC
Committee will be rendered as soon as practicable, but generally, on
the same trading day as the execution(s) under review. On requests for
appeal received after 3:00 p.m., Eastern Time, a determination will be
rendered as soon as practicable, but in no case later than the trading
day following the date of the execution(s) under review. With respect
to appeals regarding OTC Equity Securities, determinations by the UPC
Committee will be rendered as soon as practicable, but in no case later
than two trading days following the date of the execution(s) under
review.
---------------------------------------------------------------------------

\13\ As the rule makes clear, a FINRA officer's determination
not to break a trade is not appealable.
---------------------------------------------------------------------------

FINRA will announce the effective date of the proposed rule change
in a Regulatory Notice to be published no later than 60 days following
Commission approval. The effective date will be 30 days following
publication of the Regulatory Notice announcing 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,\14\ 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 guidelines to explain the
application of the clearly erroneous process will provide clarity and
consistency to the marketplace. In addition, FINRA believes if
consistent standards are applied to this process across markets, then
greater efficiency can be reached.
---------------------------------------------------------------------------

\14\ 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

[[Page 55610]]

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-2009-068 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-2009-068. 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, 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 the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-FINRA-2009-068 and should be submitted on or before
November 18, 2009.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-25873 Filed 10-27-09; 8:45 am]
BILLING CODE 8011-01-P

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