Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify the Definition of Material Changes in Business Operations Found in the Membership Rules and To Make a Technical Correction, 64110-64112 [E9-29039]

Download as PDF 64110 Federal Register / Vol. 74, No. 233 / Monday, December 7, 2009 / Notices the capacity of a paying agent, transfer agent, trustee, or in any other similar capacity, have received information as to the ownership of securities, from using such information for the purpose of soliciting purchases, sales or exchanges except at the request and on behalf of the issuer. The Commission also believes that the proposed rule change is appropriate to continue to prohibit conduct that has the intent or effect of splitting orders into multiple smaller orders for execution or any execution into multiple smaller executions for transaction reporting for the primary purpose of maximizing a monetary or in-kind amount to be received by the member or associated person as a result of the execution of such orders or the transaction reporting of such executions. In approving the proposed rule change, the Commission notes that FINRA is adopting NASD Rules 3120 and 3380 as FINRA rules in the consolidated FINRA rulebook without material changes. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,6 that the proposed rule change (SR–FINRA– 2009–067) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–29038 Filed 12–4–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61073; File No. SR–BX– 2009–075] Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify the Definition of Material Changes in Business Operations Found in the Membership Rules and To Make a Technical Correction erowe on DSK5CLS3C1PROD with NOTICES November 30, 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 November 23, 2009, NASDAQ OMX BX, Inc. (‘‘BX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items 6 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 7 17 VerDate Nov<24>2008 14:05 Dec 04, 2009 have been prepared by BX. BX has designated the proposed rule change as constituting a non-controversial rule change under Rule 19b–4(f)(6) under the Act,3 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change BX proposes to amend Rule 1011(g)(2) to clarify the definition of what BX considers a ‘‘material change in business operations,’’ and to delete a superfluous ‘‘and’’ from the rule text. The text of the proposed rule change is below. Proposed new language is in italics and proposed deletions are in brackets. 1011. Definitions Unless otherwise provided, terms used in the Rule 1000 Series shall have the meaning as defined in Rule 0120. (a)–(f) No change. (g) ‘‘material change in business operations’’ The term ‘‘material change in business operations’’ includes, but is not limited to: (1) removing or modifying a membership agreement restriction; (2)(A) [market making, underwriting, or ] acting as a dealer for the first time; or (B) market making for the first time on NASDAQ OMX BX; provided, however, that market making for the first time on NASADQ OMX BX will not be considered a material change in business operations if the member’s market making has previously been approved by FINRA under NASD Rule 1017 or NASDAQ under NASDAQ Rule 1017; [and] (3) adding business activities that require a higher minimum net capital under SEC Rule 15c3–1; and (4) adding business activities that would cause a proprietary trading firm no longer to meet the definition of that term contained in this rule. (h)–(o) No change. * * * * * II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, BX included statements concerning the purpose of and basis for the proposed rule change and discussed any 3 17 Jkt 220001 PO 00000 CFR 240.19b–4(f)(6). Frm 00066 Fmt 4703 Sfmt 4703 comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. BX 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 BX is proposing to amend Rule 1011(g)(2) to clarify its applicability. Rule 1011(g) defines what BX considers a ‘‘material change in business operations.’’ Pursuant to Rule 1017(a)(5), a member must file an application for approval of any material change in its business operations with BX. Rule 1011(g)(2) includes ‘‘market making, underwriting, or acting as a dealer for the first time’’ within the definition of ‘‘material change in business operations.’’ Rule 1011(g)(2) is intended to require BX members to undergo an assessment and obtain approval pursuant to Rule 1017 if they intend to expand their business operations to include market making, underwriting, or acting as a dealer. The definition found in Rule 1011(g)(2) could, however, also be interpreted to include engaging in market making for the first time on a market other than BX, notwithstanding that BX has no regulatory responsibility with respect to that business activity. BX’s Rule 1011(g)(2) is based on NASD Rule 1011(k)(2), and as such, was drafted by NASD 4 (now known as ‘‘FINRA’’) to be broad in application given its broad, cross-market regulatory responsibilities.5 In adopting Rule 1011(g)(2), however, BX did not contemplate that the rule would extend to business operations engaged in on other markets. Under such an interpretation of the rule, BX would be required to approve a member’s planned change in business operations that would be conducted solely on another market. For example, a BX member that is not a market maker, yet determines to make markets on a market other than BX would, under this interpretation, 4 In late July 2007, NASD changed its name to the Financial Industry Regulatory Authority (‘‘FINRA’’). Accordingly, we use the term NASD in this filing only (i) when referring to period of time before the name change, and (ii) with respect to rules that are still officially designated by FINRA as ‘‘NASD rules.’’ 5 BX’s membership rules mirror, in most respects, those of Nasdaq, which were derived from NASD’s rules. BX notes that Nasdaq is seeking to amend its Rule 1011(g)(2) consistent with the changes to the BX rules proposed herein. E:\FR\FM\07DEN1.SGM 07DEN1 erowe on DSK5CLS3C1PROD with NOTICES Federal Register / Vol. 74, No. 233 / Monday, December 7, 2009 / Notices technically be required to file an application for approval of the market making pursuant to BX Rule 1017, in addition to satisfying the other market’s market making application and approval process. Under this scenario, even though the business activity is not associated with BX, and BX has no responsibility to oversee the business activity, BX would be required to duplicate the efforts of another market and make an independent determination whether the member could conduct such business operations on that market. BX believes that this would be an erroneous outcome, and would represent unnecessary duplication of regulatory efforts among self-regulatory organizations. BX is proposing to separate market making from the other business activities currently found under Rule 1011(g)(2) by creating two new subparts to the rule. Proposed new Rule 1011(g)(2)(B) will address market making and adds new language to make clear that the rule applies only to engaging in market making for the first time on BX, and as a consequence, a BX member seeking to be designated as a market maker for the first time on another market would not be required to follow the Rule 1017 process. BX believes that the proposed rule change would not lessen the regulatory oversight of members, since market making on another market would fall within the jurisdiction and oversight of that market together with the member’s designated examining authority.6 In making it clear that market making under Rule 1011(g)(2)(B) applies only to such activity ‘‘on BX,’’ BX is concerned that common members of BX and FINRA, or of BX and The NASDAQ Stock Market LLC (‘‘Nasdaq’’), may misinterpret Rule 1011(g)(2)(B) to require approval pursuant to BX Rule 1017 of market making on BX for the first time when the same business operation had been previously approved by FINRA or Nasdaq pursuant to their respective Rules 1017. BX based much of its membership rules on those of Nasdaq, which had based much of its membership rules on those of NASD, with minor modifications in some instances resulting from Nasdaq’s exchange status. As noted above, BX Rule 1011(g) is virtually identical to NASD Rule 1011(k), except for the addition of a fourth material change to business operations to reflect a change 2. Statutory Basis BX believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,8 in general and with Section 6(b)(5) of the Act,9 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster 6 17 CFR 240.17d–1. Rule 17d–1 authorizes the Commission to name a single SRO as the designated examining authority to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission and SRO rules. 7 When conducting a review on behalf of BX or Nasdaq pursuant to their respective Rules 1017, FINRA provides a recommendation on whether to approve the change in business operations or not. 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(5). VerDate Nov<24>2008 14:05 Dec 04, 2009 Jkt 220001 that results in a loss of proprietary trading firm status. BX Rule 1017 is also substantially similar to NASD Rule 1017. In a similar regard, the membership rules of BX mirror those of Nasdaq in most respects. BX notes that the underlying review pursuant to either BX Rule 1017 or Nasdaq Rule 1017, upon which BX or Nasdaq would reference in making a determination, is conducted by FINRA.7 As such, the process leading to a prior approval of market making by either FINRA or Nasdaq pursuant to their Rules 1017 would follow the same process as if the BX Rule 1017 review were conducted. BX is proposing to add language to Rule 1011(g)(2)(B) that will make it clear that BX does not consider market making under the rule for the first time on BX to be a material change, if the market making has already been approved by either FINRA pursuant to NASD Rule 1017, or alternatively by Nasdaq pursuant to Nasdaq Rule 1017. BX believes that the proposed clarifying language under BX Rule 1011(g)(2)(B) recognizing prior approvals of market making under the rules of FINRA and Nasdaq will serve to avoid confusion over the application of the rule in regards to common members. BX believes the proposed changes are consistent BX’s current practice and will avoid unnecessary regulatory duplication. BX is also proposing to delete references to underwriting from Rule 1011(g)(2). Underwriting is not conducted on BX and there is no circumstance in which a BX member could act as an underwriter unless that member was also a member of FINRA, and hence subject to FINRA’s rules and oversight. BX believes that the keeping the term in Rule 1011(g)(2) serves no purpose and could be misleading. Accordingly, BX is proposing to delete the term from the rule. BX is also proposing to make a minor technical correction to the rule by deleting a superfluous ‘‘and’’ from the rule text. PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 64111 cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The proposed rule change is designed to clarify the application of BX Rule 1011(g)(2) to ensure its consistent interpretation, and to avoid extending the Rule 1017 approval process to nonBX business operations conducted on other exchanges of which the BX member is also a member. Further, the proposed rule change makes clear that BX recognizes FINRA and Nasdaq approvals of material changes in business operations, which is based upon the similarity of their rules and processes to those of BX. Such recognition will serve to avoid unnecessary regulatory duplication among self-regulatory organizations. The proposed rule change also makes a minor technical correction to the rule. B. Self-Regulatory Organization’s Statement on Burden on Competition Nasdaq [sic] does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) 10 of the Act and Rule 19b– 4(f)(6) thereunder.11 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, 10 15 11 17 E:\FR\FM\07DEN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 07DEN1 64112 Federal Register / Vol. 74, No. 233 / Monday, December 7, 2009 / Notices or otherwise in furtherance of the purposes of the Act. BX believes that the proposed rule change does not significantly affect the protection of investors or the public interest because it merely clarifies the application of an existing rule to avoid erroneous interpretation of its applicability, prevents unnecessary regulatory duplication among selfregulatory organizations, and makes a minor technical correction to the rule. BX has asked that the Commission waive the 30-day pre-operative waiting period contained in Rule 19b– 4(f)(6)(iii).12 BX requests this waiver so that these corrections can be immediately operative, eliminating any potential confusion caused by the currently unclear rule. The Commission notes the proposal presents no novel issues and is designed to provide clarity regarding the application of an existing rule. For these reasons, the Commission believes it is consistent with the protection of investors and the public interest to waive the 30-day operative delay, and hereby grants such waiver.13 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–BX–2009–075 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2009–075. 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 12 17 CFR 240.19b–4(f)(6)(iii). purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule change’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 For VerDate Nov<24>2008 14:05 Dec 04, 2009 Jkt 220001 submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of BX. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX– 2009–075 and should be submitted on or before December 28, 2009. Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to extend the operation of its Supplemental Liquidity Providers Pilot (‘‘SLP Pilot’’ or ‘‘Pilot’’) (see Rule 107B), until the earlier of the Securities and Exchange Commission’s approval to make such pilot permanent or March 30, 2010. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and www.nyse.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [Release No. 34–61075; File No. SR–NYSE– 2009–119] 1. Purpose For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–29039 Filed 12–4–09; 8:45 am] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange LLC Extending the Operation of its Supplemental Liquidity Providers Pilot, Until the Earlier of the Securities and Exchange Commission’s Approval To Make Such Pilot Permanent or March 30, 2010 November 30, 2009. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 25, 2009, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The 14 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 The Exchange proposes to extend the operation of its Supplemental Liquidity Providers Pilot 4 approved by the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) to operate until November 30, 2009, until the earlier of the SEC’s approval to make such pilot permanent or March 30, 2010. Background 5 In October 2008, the NYSE implemented significant changes to its market rules, execution technology and the rights and obligations of its market 4 See Securities Exchange Act Release No. 58877 (October 29, 2008), 73 FR 65904 (November 5, 2008) (SR–NYSE–2008–108) (establishing the SLP Pilot). See also Securities Exchange Act Release No. 59869 (May 6, 2009), 74 FR 22796 (May 14, 2009) (SR– NYSE–2009–46) (extending the operation of the SLP Pilot to October 1, 2009). See also Securities Exchange Act Release No. 60756 (October 1, 2009), 74 FR 51628 (October 7, 2009) (SR–NYSE–2009– 100) (extending the operation of the New Market Model and the SLP Pilots to November 30, 2009). 5 The information contained herein is a summary of the NMM Pilot and the SLP Pilot, for a fuller description of those pilots see supra notes 1 and 2 [sic]. E:\FR\FM\07DEN1.SGM 07DEN1

Agencies

[Federal Register Volume 74, Number 233 (Monday, December 7, 2009)]
[Notices]
[Pages 64110-64112]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-29039]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61073; File No. SR-BX-2009-075]


Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Clarify the 
Definition of Material Changes in Business Operations Found in the 
Membership Rules and To Make a Technical Correction

November 30, 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 November 23, 2009, NASDAQ OMX BX, Inc. (``BX'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by BX. BX has designated the proposed rule change as 
constituting a non-controversial rule change under Rule 19b-4(f)(6) 
under the Act,\3\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    BX proposes to amend Rule 1011(g)(2) to clarify the definition of 
what BX considers a ``material change in business operations,'' and to 
delete a superfluous ``and'' from the rule text.
    The text of the proposed rule change is below. Proposed new 
language is in italics and proposed deletions are in brackets.

1011. Definitions

    Unless otherwise provided, terms used in the Rule 1000 Series shall 
have the meaning as defined in Rule 0120.
    (a)-(f) No change.
    (g) ``material change in business operations''
    The term ``material change in business operations'' includes, but 
is not limited to:
    (1) removing or modifying a membership agreement restriction;
    (2)(A) [market making, underwriting, or ] acting as a dealer for 
the first time; or
    (B) market making for the first time on NASDAQ OMX BX; provided, 
however, that market making for the first time on NASADQ OMX BX will 
not be considered a material change in business operations if the 
member's market making has previously been approved by FINRA under NASD 
Rule 1017 or NASDAQ under NASDAQ Rule 1017; [and]
    (3) adding business activities that require a higher minimum net 
capital under SEC Rule 15c3-1; and
    (4) adding business activities that would cause a proprietary 
trading firm no longer to meet the definition of that term contained in 
this rule.
    (h)-(o) No change.
* * * * *

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

    In its filing with the Commission, BX 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. BX 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
    BX is proposing to amend Rule 1011(g)(2) to clarify its 
applicability. Rule 1011(g) defines what BX considers a ``material 
change in business operations.'' Pursuant to Rule 1017(a)(5), a member 
must file an application for approval of any material change in its 
business operations with BX. Rule 1011(g)(2) includes ``market making, 
underwriting, or acting as a dealer for the first time'' within the 
definition of ``material change in business operations.'' Rule 
1011(g)(2) is intended to require BX members to undergo an assessment 
and obtain approval pursuant to Rule 1017 if they intend to expand 
their business operations to include market making, underwriting, or 
acting as a dealer. The definition found in Rule 1011(g)(2) could, 
however, also be interpreted to include engaging in market making for 
the first time on a market other than BX, notwithstanding that BX has 
no regulatory responsibility with respect to that business activity.
    BX's Rule 1011(g)(2) is based on NASD Rule 1011(k)(2), and as such, 
was drafted by NASD \4\ (now known as ``FINRA'') to be broad in 
application given its broad, cross-market regulatory 
responsibilities.\5\ In adopting Rule 1011(g)(2), however, BX did not 
contemplate that the rule would extend to business operations engaged 
in on other markets. Under such an interpretation of the rule, BX would 
be required to approve a member's planned change in business operations 
that would be conducted solely on another market. For example, a BX 
member that is not a market maker, yet determines to make markets on a 
market other than BX would, under this interpretation,

[[Page 64111]]

technically be required to file an application for approval of the 
market making pursuant to BX Rule 1017, in addition to satisfying the 
other market's market making application and approval process. Under 
this scenario, even though the business activity is not associated with 
BX, and BX has no responsibility to oversee the business activity, BX 
would be required to duplicate the efforts of another market and make 
an independent determination whether the member could conduct such 
business operations on that market. BX believes that this would be an 
erroneous outcome, and would represent unnecessary duplication of 
regulatory efforts among self-regulatory organizations.
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    \4\ In late July 2007, NASD changed its name to the Financial 
Industry Regulatory Authority (``FINRA''). Accordingly, we use the 
term NASD in this filing only (i) when referring to period of time 
before the name change, and (ii) with respect to rules that are 
still officially designated by FINRA as ``NASD rules.''
    \5\ BX's membership rules mirror, in most respects, those of 
Nasdaq, which were derived from NASD's rules. BX notes that Nasdaq 
is seeking to amend its Rule 1011(g)(2) consistent with the changes 
to the BX rules proposed herein.
---------------------------------------------------------------------------

    BX is proposing to separate market making from the other business 
activities currently found under Rule 1011(g)(2) by creating two new 
subparts to the rule. Proposed new Rule 1011(g)(2)(B) will address 
market making and adds new language to make clear that the rule applies 
only to engaging in market making for the first time on BX, and as a 
consequence, a BX member seeking to be designated as a market maker for 
the first time on another market would not be required to follow the 
Rule 1017 process. BX believes that the proposed rule change would not 
lessen the regulatory oversight of members, since market making on 
another market would fall within the jurisdiction and oversight of that 
market together with the member's designated examining authority.\6\
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    \6\ 17 CFR 240.17d-1. Rule 17d-1 authorizes the Commission to 
name a single SRO as the designated examining authority to examine 
common members for compliance with the financial responsibility 
requirements imposed by the Act, or by Commission and SRO rules.
---------------------------------------------------------------------------

    In making it clear that market making under Rule 1011(g)(2)(B) 
applies only to such activity ``on BX,'' BX is concerned that common 
members of BX and FINRA, or of BX and The NASDAQ Stock Market LLC 
(``Nasdaq''), may misinterpret Rule 1011(g)(2)(B) to require approval 
pursuant to BX Rule 1017 of market making on BX for the first time when 
the same business operation had been previously approved by FINRA or 
Nasdaq pursuant to their respective Rules 1017. BX based much of its 
membership rules on those of Nasdaq, which had based much of its 
membership rules on those of NASD, with minor modifications in some 
instances resulting from Nasdaq's exchange status. As noted above, BX 
Rule 1011(g) is virtually identical to NASD Rule 1011(k), except for 
the addition of a fourth material change to business operations to 
reflect a change that results in a loss of proprietary trading firm 
status. BX Rule 1017 is also substantially similar to NASD Rule 1017. 
In a similar regard, the membership rules of BX mirror those of Nasdaq 
in most respects. BX notes that the underlying review pursuant to 
either BX Rule 1017 or Nasdaq Rule 1017, upon which BX or Nasdaq would 
reference in making a determination, is conducted by FINRA.\7\ As such, 
the process leading to a prior approval of market making by either 
FINRA or Nasdaq pursuant to their Rules 1017 would follow the same 
process as if the BX Rule 1017 review were conducted.
---------------------------------------------------------------------------

    \7\ When conducting a review on behalf of BX or Nasdaq pursuant 
to their respective Rules 1017, FINRA provides a recommendation on 
whether to approve the change in business operations or not.
---------------------------------------------------------------------------

    BX is proposing to add language to Rule 1011(g)(2)(B) that will 
make it clear that BX does not consider market making under the rule 
for the first time on BX to be a material change, if the market making 
has already been approved by either FINRA pursuant to NASD Rule 1017, 
or alternatively by Nasdaq pursuant to Nasdaq Rule 1017. BX believes 
that the proposed clarifying language under BX Rule 1011(g)(2)(B) 
recognizing prior approvals of market making under the rules of FINRA 
and Nasdaq will serve to avoid confusion over the application of the 
rule in regards to common members. BX believes the proposed changes are 
consistent BX's current practice and will avoid unnecessary regulatory 
duplication.
    BX is also proposing to delete references to underwriting from Rule 
1011(g)(2). Underwriting is not conducted on BX and there is no 
circumstance in which a BX member could act as an underwriter unless 
that member was also a member of FINRA, and hence subject to FINRA's 
rules and oversight. BX believes that the keeping the term in Rule 
1011(g)(2) serves no purpose and could be misleading. Accordingly, BX 
is proposing to delete the term from the rule.
    BX is also proposing to make a minor technical correction to the 
rule by deleting a superfluous ``and'' from the rule text.
2. Statutory Basis
    BX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\8\ in general and with Section 
6(b)(5) of the Act,\9\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The proposed rule change is 
designed to clarify the application of BX Rule 1011(g)(2) to ensure its 
consistent interpretation, and to avoid extending the Rule 1017 
approval process to non-BX business operations conducted on other 
exchanges of which the BX member is also a member. Further, the 
proposed rule change makes clear that BX recognizes FINRA and Nasdaq 
approvals of material changes in business operations, which is based 
upon the similarity of their rules and processes to those of BX. Such 
recognition will serve to avoid unnecessary regulatory duplication 
among self-regulatory organizations. The proposed rule change also 
makes a minor technical correction to the rule.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    Nasdaq [sic] does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \10\ of the Act and Rule 19b-
4(f)(6) thereunder.\11\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors,

[[Page 64112]]

or otherwise in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    BX believes that the proposed rule change does not significantly 
affect the protection of investors or the public interest because it 
merely clarifies the application of an existing rule to avoid erroneous 
interpretation of its applicability, prevents unnecessary regulatory 
duplication among self-regulatory organizations, and makes a minor 
technical correction to the rule.
    BX has asked that the Commission waive the 30-day pre-operative 
waiting period contained in Rule 19b-4(f)(6)(iii).\12\ BX requests this 
waiver so that these corrections can be immediately operative, 
eliminating any potential confusion caused by the currently unclear 
rule.
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission notes the proposal presents no novel issues and is 
designed to provide clarity regarding the application of an existing 
rule. For these reasons, the Commission believes it is consistent with 
the protection of investors and the public interest to waive the 30-day 
operative delay, and hereby grants such waiver.\13\
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    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2009-075 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2009-075. 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 such filing also 
will be available for inspection and copying at the principal office of 
BX. All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-BX-2009-075 
and should be submitted on or before December 28, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29039 Filed 12-4-09; 8:45 am]
BILLING CODE 8011-01-P
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