Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of Regulatory Responsibilities Between the International Securities Exchange, LLC and the Financial Industry Regulatory Authority, Inc. Concerning Ballista Securities LLC, 18925-18929 [2010-8350]
Download as PDF
<![CDATA[
Federal Register / Vol. 75, No. 70 / Tuesday, April 13, 2010 / 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 4–598 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number 4–598. 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/
other.shtml). Copies of the submission,
all subsequent amendments, all written
statements with respect to the proposed
17d–2 Plan that are filed with the
Commission, and all written
communications relating to the
proposed 17d–2 Plan between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing 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 proposed
17d–2 Plan also will be available for
inspection and copying at the principal
office of the EDGX and FINRA. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number 4–598 and should be submitted
on or before April 28, 2010.
sroberts on DSKD5P82C1PROD with NOTICES
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–8368 Filed 4–12–10; 8:45 am]
BILLING CODE 8011–01–P
19 17
CFR 200.30–3(a)(34).
VerDate Nov<24>2008
17:33 Apr 12, 2010
Jkt 220001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61853; File No. 4–596]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Notice of Filing of Proposed Plan for
the Allocation of Regulatory
Responsibilities Between the
International Securities Exchange, LLC
and the Financial Industry Regulatory
Authority, Inc. Concerning Ballista
Securities LLC
April 6, 2010.
Pursuant to Section 17(d) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 17d–2 thereunder,2
notice is hereby given that on March 19,
2010, the International Securities
Exchange, LLC (‘‘ISE’’) and the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) (together with the ISE, the
‘‘Parties’’) filed with the Securities and
Exchange Commission (‘‘Commission’’) a
plan for the allocation of regulatory
responsibilities (the ‘‘17d–2 Plan’’). The
Commission is publishing this notice to
solicit comments on the 17d–2 Plan
from interested persons.
I. Introduction
Section 19(g)(1) of the Act,3 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section
17(d) 4 or Section 19(g)(2) 5 of the Act.
Without this relief, the statutory
obligation of each individual SRO could
result in a pattern of multiple
examinations of broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’). Such
regulatory duplication would add
unnecessary expenses for common
members and their SROs.
Section 17(d)(1) of the Act 6 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication.7 With respect to
a common member, Section 17(d)(1)
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 15 U.S.C. 78s(g)(1).
4 15 U.S.C. 78q(d).
5 15 U.S.C. 78s(g)(2).
6 15 U.S.C. 78q(d)(1).
7 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
2 17
PO 00000
Frm 00143
Fmt 4703
Sfmt 4703
18925
authorizes the Commission, by rule or
order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 and Rule 17d–2 under the Act.8
Rule 17d–1 authorizes the Commission
to name a single SRO as the designated
examining authority (‘‘DEA’’) to examine
common members for compliance with
the financial responsibility
requirements imposed by the Act, or by
Commission or SRO rules.9 When an
SRO has been named as a common
member’s DEA, all other SROs to which
the common member belongs are
relieved of the responsibility to examine
the firm for compliance with the
applicable financial responsibility rules.
On its face, Rule 17d–1 deals only with
an SRO’s obligations to enforce member
compliance with financial responsibility
requirements. Rule 17d–1 does not
relieve an SRO from its obligation to
examine a common member for
compliance with its own rules and
provisions of the Federal securities laws
governing matters other than financial
responsibility, including sales practices
and trading activities and practices.
To address regulatory duplication in
these and other areas, the Commission
adopted Rule 17d–2 under the Act.10
Rule 17d–2 permits SROs to propose
joint plans for the allocation of
regulatory responsibilities with respect
to their common members. Under
paragraph (c) of Rule 17d–2, the
Commission may declare such a plan
effective if, after providing for notice
and comment, it determines that the
plan is necessary or appropriate in the
public interest and for the protection of
investors, to foster cooperation and
coordination among the SROs, to
remove impediments to, and foster the
development of, a national market
system and a national clearance and
settlement system, and is in conformity
with the factors set forth in Section
17(d) of the Act. Commission approval
of a plan filed pursuant to Rule 17d–2
relieves an SRO of those regulatory
responsibilities allocated by the plan to
another SRO.
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
respectively.
9 See Securities Exchange Act Release No. 12352
(April 20, 1976), 41 FR 18808 (May 7, 1976).
10 See Securities Exchange Act Release No. 12935
(October 28, 1976), 41 FR 49091 (November 8, 1976)
(‘‘Rule 17d–2 Adopting Release’’).
E:\FR\FM\13APN1.SGM
13APN1
sroberts on DSKD5P82C1PROD with NOTICES
18926
Federal Register / Vol. 75, No. 70 / Tuesday, April 13, 2010 / Notices
II. Proposed Plan
On June 5, 2009, ISE Holdings, Inc.
(‘‘ISE Holdings’’), the parent of ISE,
entered into a Membership Purchase
Agreement (‘‘Purchase Agreement’’) with
Optifreeze LLC, a Delaware Limited
Liability Company (‘‘Optifreeze’’). ISE
Holdings acquired membership interests
in Optifreeze by contributing cash to the
capital of Optifreeze. As a result of the
purchase, ISE Holdings has an 8.57%
membership interest in Optifreeze,
which wholly owns and operates an
Electronic Access Member of the ISE,
Ballista Securities LLC (‘‘Ballista’’). The
ownership interest of ISE Holdings in
Ballista is subject to the conditions set
forth in the Commission’s approval
order relating to ISE Holdings’ purchase
of Optifreeze.11
Recognizing that the Commission has
previously expressed concern regarding
(1) the potential for conflicts of interest
in instances where an exchange is
affiliated with one of its members, and
(2) the potential for informational
advantages that could place an affiliated
member of an exchange at a competitive
`
advantage vis-a-vis the other nonaffiliated members, the ISE submitted a
proposed rule change to amend ISE Rule
312 to permit the proposed affiliation
subject to several conditions and
limitations, including that a condition
that the Exchange shall enter into a plan
with a non-affiliated self-regulatory
organization to regulate and oversee the
activities of Ballista, pursuant to Rule
17d–2 under the Act.12
On March 19, 2010, the Parties
submitted the proposed 17d–2 Plan to
the Commission. The text of the 17d–2
Plan delineates regulatory
responsibilities between the Parties,
including responsibility for ISE rules,
with respect to Ballista, which is a
common member. In particular, under
the 17d–2 Plan, FINRA would assume
examination and enforcement
responsibility relating to compliance by
Ballista and persons associated
therewith, with the rules of ISE that are
substantially similar to the rules of
FINRA, as well as any provisions of the
Federal securities laws and the rules
and regulations thereunder delineated
in the Exhibit 1 to the 17d–2 Plan
(‘‘Common Rules’’).13 In addition,
FINRA would assume regulatory
responsibility, with respect to Ballista,
for other ISE rules that do not qualify as
Common Rules. Under the 17d–2 Plan,
11 See Securities Exchange Act Release No. 60598
(September 1, 2009), 74 FR 46280 (September 8,
2009).
12 See Securities Exchange Act Release No. 60382
(July 24, 2009), 74 FR 38068 (July 30, 2009).
13 See paragraph 2 of the 17d–2 plan.
VerDate Nov<24>2008
17:33 Apr 12, 2010
Jkt 220001
ISE would retain full responsibility for
surveillance, examination, investigation,
and enforcement with respect to trading
activities or practices involving ISE’s
own marketplace; registration pursuant
to its unique rules (i.e., registration rules
that are not Common Rules); its duties
as a Designated Examining Authority
pursuant to Rule 17d–1 under the Act;
and any rules that are not substantially
similar to the rules of FINRA, except for
ISE rules for any ISE member that acts
as an inbound router for the ISE and is
a member of the ISE and FINRA
(‘‘Inbound Router Member’’).14 For
purposes of the proposed 17d–2 Plan,
Ballista would qualify as an Inbound
Router Member. Accordingly, FINRA
would be allocated regulatory
responsibility for Ballista.
The text of the 17d–2 Plan is as
follows:
Agreement Between Financial Industry
Regulatory Authority, Inc. and
International Securities Exchange, LLC
Pursuant to Rule 17d–2 Under the
Securities Exchange Act of 1934
This Agreement, by and between the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and the
International Securities Exchange, LLC
(‘‘ISE’’), is made this 8th day of
September, 2009 (the ‘‘Agreement’’),
pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’) and Rule 17d–2
thereunder which permits agreements
between self-regulatory organizations to
allocate regulatory responsibility to
eliminate regulatory duplication. FINRA
and ISE may be referred to individually
as a ‘‘party’’ and together as the ‘‘parties.’’
Whereas, International Securities
Exchange Holdings, Inc. (‘‘ISE
Holdings’’), the parent company of ISE,
maintains an ownership interest in
Optifreeze LLC (‘‘Optifreeze’’), the
parent company of Ballista Securities
LLC (‘‘Ballista’’).
Whereas, ISE desires to eliminate
conflicts of interest that would exist if
ISE were to regulate Ballista, a member
of ISE, which operates a broker-dealer,
which among other things, routes
inbound orders to ISE.
Whereas, ISE and FINRA desire to
reduce duplication in the examination
of their Dual Members (as defined
herein); and
Whereas, FINRA and ISE desire to
execute an agreement covering such
subjects pursuant to the provisions of
Rule 17d–2 under the Exchange Act and
14 Apparent violations of such ISE rules by any
Inbound Router Member will be processed by, and
enforcement proceedings will be conducted by,
FINRA. See paragraphs 2(d) and 5 of the 17d–2
Plan.
PO 00000
Frm 00144
Fmt 4703
Sfmt 4703
to file such agreement with the
Securities and Exchange Commission
(the ‘‘SEC’’ or ‘‘Commission’’) for its
approval.
Now, therefore, in consideration of
the mutual covenants contained
hereinafter, FINRA and ISE hereby agree
as follows:
1. Definitions. Unless otherwise
defined in this Agreement or the context
otherwise requires, the terms used in
this Agreement shall have the same
meaning as they have under the
Exchange Act and the rules and
regulations thereunder. As used in this
Agreement, the following terms shall
have the following meanings:
(a) ‘‘ISE Rules’’ or ‘‘FINRA Rules’’ shall
mean the rules of the ISE or FINRA,
respectively, as the rules of an exchange
or association are defined in Exchange
Act Section 3(a)(27).
(b) ‘‘Common Rules’’ shall mean the
ISE Rules that are substantially similar
to the applicable FINRA Rules and
certain provisions of the Exchange Act
and SEC rules set forth on Exhibit 1 in
that examination for compliance with
such rules would not require FINRA to
develop one or more new examination
standards, modules, procedures, or
criteria in order to analyze the
application of the rule, or a Dual
Member’s activity, conduct, or output in
relation to such rule; provided,
however, Common Rules shall not
include the application of the SEC, ISE
or FINRA rules as they pertain to
violations of insider trading activities,
which is covered by a separate 17d–2
Agreement by and among the American
Stock Exchange, LLC, BATS Exchange,
Inc., Boston Stock Exchange, Inc., CBOE
Stock Exchange, LLC, Chicago Stock
Exchange, Inc., Financial Industry
Regulatory Authority, Inc., International
Securities Exchange, LLC, The
NASDAQ Stock Market LLC, National
Stock Exchange, Inc., New York Stock
Exchange, LLC, NYSE Arca Inc., NYSE
Regulation, Inc., and Philadelphia Stock
Exchange, Inc. approved by the
Commission on October 17, 2008, as
may be amended from time to time.
(c) ‘‘Dual Members’’ shall mean those
ISE members that are also members of
FINRA and the associated persons
therewith, but for purposes of this
Agreement is limited to Ballista and its
associated persons.
(d) ‘‘Effective Date’’ shall be the date
this Agreement is approved by the
Commission.
(e) ‘‘Enforcement Responsibilities’’
shall mean the conduct of appropriate
proceedings, in accordance with the
FINRA Code of Procedure (the Rule
9000 Series) and other applicable
FINRA procedural rules, to determine
E:\FR\FM\13APN1.SGM
13APN1
sroberts on DSKD5P82C1PROD with NOTICES
Federal Register / Vol. 75, No. 70 / Tuesday, April 13, 2010 / Notices
whether violations of pertinent laws,
rules or regulations have occurred, and
if such violations are deemed to have
occurred, the imposition of appropriate
sanctions as specified under the
FINRA’s Code of Procedure and
sanction guidelines.
(f) ‘‘Regulatory Responsibilities’’ shall
mean the examination responsibilities
and Enforcement Responsibilities
relating to compliance by the Dual
Members with the Common Rules and
the provisions of the Exchange Act and
the rules and regulations thereunder,
and other applicable laws, rules and
regulations, each as set forth on Exhibit
1 attached hereto.
2. Regulatory and Enforcement
Responsibilities. FINRA shall assume
Regulatory Responsibilities and
Enforcement Responsibilities for
Ballista, which is a Dual Member.
Attached as Exhibit 1 to this Agreement
and made part hereof, ISE furnished
FINRA with a current list of Common
Rules and certified to FINRA that such
rules are substantially similar to the
corresponding FINRA rule (the
‘‘Certification’’). FINRA hereby agrees
that the rules listed in the Certification
are Common Rules as defined in this
Agreement. Each year following the
Effective Date of this Agreement, or
more frequently if required by changes
in either the rules of ISE or FINRA, ISE
shall submit an updated list of Common
Rules to FINRA for review which shall
add ISE Rules not included in the
current list of Common Rules that
qualify as Common Rules as defined in
this Agreement; delete ISE Rules
included in the current list of Common
Rules that no longer qualify as Common
Rules as defined in this Agreement; and
confirm that the remaining rules on the
current list of Common Rules continue
to be ISE Rules that qualify as Common
Rules as defined in this Agreement.
Within 30 days of receipt of such
updated list, FINRA shall confirm in
writing whether the rules listed in any
updated list are Common Rules as
defined in this Agreement.
Notwithstanding anything herein to
the contrary, it is explicitly understood
that the term ‘‘Regulatory
Responsibilities’’ does not include, and
ISE shall retain full responsibility for
(unless otherwise addressed by separate
agreement or rule) (collectively, the
‘‘Retained Responsibilities’’) the
following:
(a) Surveillance, examination,
investigation and enforcement with
respect to trading activities or practices
involving ISE’s own marketplace,
including without limitation ISE’s rules
relating to the rights and obligations of
market makers;
VerDate Nov<24>2008
17:33 Apr 12, 2010
Jkt 220001
(b) Registration pursuant to its
applicable rules of associated persons
(i.e., registration rules that are not
Common Rules);
(c) Discharge of its duties and
obligations as a Designated Examining
Authority pursuant to Rule 17d–1 under
the Exchange Act; and
(d) Any ISE Rules that are not
Common Rules, except for ISE Rules for
any ISE member that acts as an inbound
router for the ISE and is a member of the
ISE and FINRA (‘‘Inbound Router
Member’’) as provided in paragraph 5.
As of the date of this Agreement, Direct
Edge ECN LLC and Ballista are the only
Inbound Router Members.
3. No Charge. There shall be no
charge to ISE by FINRA for performing
the Regulatory Responsibilities and
Enforcement Responsibilities under this
Agreement except as hereinafter
provided. FINRA shall provide ISE with
ninety (90) days advance written notice
in the event FINRA decides to impose
any charges to ISE for performing the
Regulatory Responsibilities under this
Agreement. If FINRA determines to
impose a charge, ISE shall have the right
at the time of the imposition of such
charge to terminate this Agreement;
provided, however, that FINRA’s
Regulatory Responsibilities under this
Agreement shall continue until the
Commission approves the termination
of this Agreement.
4. Reassignment of Regulatory
Responsibilities. Notwithstanding any
provision hereof, this Agreement shall
be subject to any statute, or any rule or
order of the Commission, or industry
agreement, restructuring the regulatory
framework of the securities industry or
reassigning Regulatory Responsibilities
between self-regulatory organizations.
To the extent such action is inconsistent
with this Agreement, such action shall
supersede the provisions hereof to the
extent necessary for them to be properly
effectuated and the provisions hereof in
that respect shall be null and void.
5. Notification of Violations.
(a) In the event that FINRA becomes
aware of apparent violations of any ISE
Rules, which are not listed as Common
Rules, discovered pursuant to the
performance of the Regulatory
Responsibilities assumed hereunder,
FINRA shall notify ISE of those
apparent violations for such response as
ISE deems appropriate. With respect to
apparent violations of any ISE Rules by
any Inbound Router Members, FINRA
shall not make referrals to ISE pursuant
to this paragraph 5. Such apparent
violations shall be processed by, and
enforcement proceedings in respect
thereto will be conducted by, FINRA as
provided in this Agreement.
PO 00000
Frm 00145
Fmt 4703
Sfmt 4703
18927
(b) In the event that ISE becomes
aware of apparent violations of any
Common Rules, discovered pursuant to
the performance of the Retained
Responsibilities, ISE shall notify FINRA
of those apparent violations and such
matters shall be handled by FINRA as
provided in this Agreement.
(c) Apparent violations of Common
Rules, FINRA Rules, Federal securities
laws, and rules and regulations
thereunder, shall be processed by, and
enforcement proceedings in respect
thereto shall be conducted by FINRA as
provided hereinbefore; provided,
however, that in the event a Dual
Member is the subject of an
investigation relating to a transaction on
ISE, ISE may in its discretion assume
concurrent jurisdiction and
responsibility.
(d) Each party agrees to make
available promptly all files, records and
witnesses necessary to assist the other
in its investigation or proceedings.
6. Continued Assistance.
(a) FINRA shall make available to ISE
all information obtained by FINRA in
the performance by it of the Regulatory
Responsibilities hereunder in respect to
the Inbound Router Members subject to
this Agreement. In particular, and not in
limitation of the foregoing, FINRA shall
furnish ISE any information it obtains
about Inbound Router Members which
reflects adversely on their financial
condition. ISE shall make available to
FINRA any information coming to its
attention that reflects adversely on the
financial condition of Inbound Router
Members or indicates possible
violations of applicable laws, rules or
regulations by such firms.
(b) The parties agree that documents
or information shared shall be held in
confidence, and used only for the
purposes of carrying out their respective
regulatory obligations. Neither party
shall assert regulatory or other
privileges as against the other with
respect to documents or information
that is required to be shared pursuant to
this Agreement.
(c) The sharing of documents or
information between the parties
pursuant to this Agreement shall not be
deemed a waiver as against third parties
of regulatory or other privileges relating
to the discovery of documents or
information.
7. Statutory Disqualifications. When
FINRA becomes aware of a statutory
disqualification as defined in the
Exchange Act with respect to a Inbound
Router Member, FINRA shall determine
pursuant to Sections 15A(g) and/or
Section 6(c) of the Exchange Act the
acceptability or continued applicability
of the person to whom such
E:\FR\FM\13APN1.SGM
13APN1
18928
Federal Register / Vol. 75, No. 70 / Tuesday, April 13, 2010 / Notices
disqualification applies and keep ISE
advised of its actions in this regard for
such subsequent proceedings as ISE
may initiate.
8. Branch Office Information. FINRA
shall also be responsible for processing
and, if required, acting upon all requests
for the opening, address changes, and
terminations of branch offices by
Inbound Router Members and any other
applications required of Inbound Router
Members with respect to the Common
Rules as they may be amended from
time to time. Upon request, FINRA shall
advise ISE of the opening, address
change and termination of branch and
main offices of Inbound Router
Members and the names of such branch
office managers.
9. Customer Complaints. ISE shall
forward to FINRA copies of all customer
complaints involving Inbound Router
Members received by ISE relating to
FINRA’s Regulatory Responsibilities
under this Agreement. It shall be
FINRA’s responsibility to review and
take appropriate action in respect to
such complaints.
10. Advertising. FINRA shall assume
responsibility to review the advertising
of Inbound Router Members subject to
the Agreement, provided that such
material is filed with FINRA in
accordance with FINRA’s filing
procedures and is accompanied with
any applicable filing fees set forth in
FINRA Rules. Such review shall be
made in accordance with then
applicable FINRA Rules and
interpretations. The advertising of
Inbound Router Members shall be
subject only to compliance with
appropriate FINRA Rules and
interpretations.
11. No Restrictions on Regulatory
Action. Nothing contained in this
Agreement shall restrict or in any way
encumber the right of either party to
conduct its own independent or
concurrent investigation, examination
or enforcement proceeding of or against
Inbound Router Members, as either
party, in its sole discretion, shall deem
appropriate or necessary.
12. Termination. This Agreement
shall terminate on the earlier of (a) the
date on which ISE Holdings, the parent
company of ISE, ceases to maintain an
ownership interest in Optifreeze, or (b)
the date on which the Commission
approves termination of this Agreement
after one (1) year’s written notice by ISE
or FINRA to the other party or such
shorter period as may be agreed to by
the parties, except as provided in
paragraph 3.
13. Arbitration. In the event of a
dispute between the parties as to the
operation of this Agreement, ISE and
FINRA hereby agree that any such
dispute shall be settled by arbitration in
Washington, DC in accordance with the
rules of the American Arbitration
Association then in effect, or such other
procedures as the parties may mutually
agree upon. Judgment on the award
rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
Each party acknowledges that the timely
and complete performance of its
obligations pursuant to this Agreement
is critical to the business and operations
of the other party. In the event of a
dispute between the parties, the parties
shall continue to perform their
respective obligations under this
Agreement in good faith during the
resolution of such dispute unless and
until this Agreement is terminated in
accordance with its provisions. Nothing
in this Section 14 shall interfere with a
party’s right to terminate this Agreement
as set forth herein.
14. Separate Agreement. This
Agreement is wholly separate from the
Agreements made pursuant to Rule
17d–2 of the Securities Exchange Act of
1934 between Financial Industry
Regulatory Authority, Inc. and the
International Securities Exchange LLC
entered into on December 20, 2006 and
on November 21, 2008, and as may be
amended from time to time.
15. Amendment. This Agreement may
be amended in writing duly approved
by each party. All such amendments
must be filed with and approved by the
Commission before they become
effective.
16. Limitation of Liability. Neither
FINRA nor ISE nor any of their
respective directors, governors, officers
or employees shall be liable to the other
party to this Agreement for any liability,
loss or damage resulting from or
claimed to have resulted from any
sroberts on DSKD5P82C1PROD with NOTICES
ISE rule(s)
17:33 Apr 12, 2010
Jkt 220001
Exhibit 1
ISE Rules Certification for 17d–2
Agreement with FINRA
ISE hereby certifies that the
requirements contained in the ISE Rules
listed below are identical to, or
substantially similar to, the comparable
FINRA (NASD) Rule, Exchange Act
provision or SEC rule identified
(‘‘Common Rules’’).
FINRA (NASD) or SEC section
408(a)(1). Prevention of the Misuse of Material, Nonpublic Information
409. Disciplinary Action ............................................................................
604. Continuing Education for Registered Persons .................................
622. Transfer of Accounts ........................................................................
624. Broker’s Blanket Bonds ....................................................................
626. Telephone Solicitation ......................................................................
1400. Maintenance, Retention, and Furnishing of Books, Records and
Other Information.
VerDate Nov<24>2008
delays, inaccuracies, errors or omissions
with respect to the provision of
Regulatory Responsibilities as provided
hereby or for the failure to provide any
such responsibility, except with respect
to such liability, loss or damages as
shall have been suffered by one or the
other of FINRA or ISE and caused by the
willful misconduct of the other party or
their respective directors, governors,
officers or employees. No warranties,
express or implied, are made by FINRA
or ISE with respect to any of the
responsibilities to be performed by each
of them hereunder.
17. Relief From Responsibility.
Pursuant to Sections 17(d)(1)(A) and
19(g) of the Exchange Act and Rule 17d–
2 thereunder, FINRA and ISE join in
requesting the Commission, upon its
approval of this Agreement or any part
thereof, to relieve ISE of any and all
responsibilities with respect to matters
allocated to FINRA pursuant to this
Agreement; provided, however, that this
Agreement shall not be effective until
the Effective Date.
18. Severability. Any term or
provision of this Agreement that is
invalid or unenforceable in any
jurisdiction shall, as to such
jurisdiction, be ineffective to the extent
of such invalidity or unenforceability
without rendering invalid or
unenforceable the remaining terms and
provisions of this Agreement or
affecting the validity or enforceability of
any of the terms or provisions of this
Agreement in any other jurisdiction.
19. Counterparts. This Agreement
may be executed in one or more
counterparts, each of which shall be
deemed an original, and such
counterparts together shall constitute
one and the same instrument.
PO 00000
Frm 00146
Fmt 4703
Section 15(f) of the Securities Exchange Act of 1934.
NASD Rule 3070(a)(1) and (10) Reporting Requirements.
NASD Rule 1120 Continuing Education Requirements.
NASD Rule 11870 Customer Account Transfer Contracts.
NASD Rule 3020 Fidelity Bonds 1.
NASD Rule 2212 Telemarketing.
NASD Rule 3110(a) Books and Records—Requirements.
Sfmt 4703
E:\FR\FM\13APN1.SGM
13APN1
Federal Register / Vol. 75, No. 70 / Tuesday, April 13, 2010 / Notices
18929
ISE rule(s)
FINRA (NASD) or SEC section
2114. Doing Business with the Public 2 ...................................................
NASD Rules 2310 Recommendations to Customers (Suitability); 2320
Best Execution and Interpositioning; 2330 Customers’ Securities or
Funds; 2340 Customer Account Statements; 2341 Margin Disclosure
Statement; 2350 Broker/Dealer Conduct on the Premises of Financial Institutions; 2360 Approval Procedures for Day-Trading Accounts; 2361 Day-Trading Risk Disclosure Statement; 2370 Borrowing From or Lending to Customers.
1 FINRA
shall have Regulatory Responsibilities for Dual Members to the extent that a Dual Member is, and remains, a member of SIPC.
connection with the approval of ISE Rule 2114, the Commission noted that since ISE is requiring Equity EAMs that do business with the
public to become members of NASD (n/k/a FINRA), those ISE members are required to comply with FINRA (NASD) rules that govern the practice of members when doing business with the public. The Commission noted that, among other things, these members would be obligated to
comply with these listed FINRA (NASD) Rules. See Exchange Act Release No. 54401 (September 1, 2006), 71 FR 53483 (September 11, 2006)
(Order Granting Accelerated Approval of SR–ISE–2006–53).
2 In
*
*
*
*
Paper Comments
*
III. Date of Effectiveness of the
Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the
Act 15 and Rule 17d–2 thereunder,16
after April 28, 2010, the Commission
may, by written notice, declare the plan
submitted by ISE and FINRA, File No.
4–596, to be effective if the Commission
finds that the plan is necessary or
appropriate in the public interest and
for the protection of investors, to foster
cooperation and coordination among
self-regulatory organizations, or to
remove impediments to and foster the
development of the national market
system and a national system for the
clearance and settlement of securities
transactions and in conformity with the
factors set forth in Section 17(d) of the
Act.
IV. Solicitation of Comments
In order to assist the Commission in
determining whether to approve the
17d–2 Plan and to relieve ISE of the
responsibilities which would be
assigned to FINRA, interested persons
are invited to submit written data,
views, and arguments concerning the
foregoing. Comments may be submitted
by any of the following methods:
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:
sroberts on DSKD5P82C1PROD 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
No. 4–596 on the subject line.
15 15
U.S.C. 78q(d)(1).
16 17 CFR 240.17d–2.
VerDate Nov<24>2008
17:33 Apr 12, 2010
Jkt 220001
• 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 No.
4–596. 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,17 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 Web site viewing and
printing 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 plan also
will be available for inspection and
copying at the principal offices of ISE
and FINRA. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. 4–596 and
should be submitted on or before April
28, 2010.
17 The text of the proposed rule change is
available on the Commission’s Web site at https://
www.sec.gov.
18 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00147
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–8350 Filed 4–12–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61848; File No. SR–NYSE–
2010–31]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by New York
Stock Exchange LLC Amending Rule
70 in Order To Update Functionality
Relating to the Entry of D-Quotes and
Pegging E-Quotes
April 6, 2010.
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 April 1,
2010, 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 Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 70 in order to update functionality
relating to the entry of d-Quotes and
pegging e-Quotes. The text of the
proposed rule change is available at the
Exchange, on the Commission’s Web
site at https://www.sec.gov, the
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
E:\FR\FM\13APN1.SGM
13APN1
]]>Agencies
[Federal Register Volume 75, Number 70 (Tuesday, April 13, 2010)]
[Notices]
[Pages 18925-18929]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-8350]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61853; File No. 4-596]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of
Regulatory Responsibilities Between the International Securities
Exchange, LLC and the Financial Industry Regulatory Authority, Inc.
Concerning Ballista Securities LLC
April 6, 2010.
Pursuant to Section 17(d) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that
on March 19, 2010, the International Securities Exchange, LLC (``ISE'')
and the Financial Industry Regulatory Authority, Inc. (``FINRA'')
(together with the ISE, the ``Parties'') filed with the Securities and
Exchange Commission (``Commission'') a plan for the allocation of
regulatory responsibilities (the ``17d-2 Plan''). The Commission is
publishing this notice to solicit comments on the 17d-2 Plan from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act.
Without this relief, the statutory obligation of each individual SRO
could result in a pattern of multiple examinations of broker-dealers
that maintain memberships in more than one SRO (``common members'').
Such regulatory duplication would add unnecessary expenses for common
members and their SROs.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------
Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\9\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the Federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
---------------------------------------------------------------------------
\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
---------------------------------------------------------------------------
To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for notice and comment, it determines that the plan is
necessary or appropriate in the public interest and for the protection
of investors, to foster cooperation and coordination among the SROs, to
remove impediments to, and foster the development of, a national market
system and a national clearance and settlement system, and is in
conformity with the factors set forth in Section 17(d) of the Act.
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an
SRO of those regulatory responsibilities allocated by the plan to
another SRO.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976) (``Rule 17d-2 Adopting
Release'').
---------------------------------------------------------------------------
[[Page 18926]]
II. Proposed Plan
On June 5, 2009, ISE Holdings, Inc. (``ISE Holdings''), the parent
of ISE, entered into a Membership Purchase Agreement (``Purchase
Agreement'') with Optifreeze LLC, a Delaware Limited Liability Company
(``Optifreeze''). ISE Holdings acquired membership interests in
Optifreeze by contributing cash to the capital of Optifreeze. As a
result of the purchase, ISE Holdings has an 8.57% membership interest
in Optifreeze, which wholly owns and operates an Electronic Access
Member of the ISE, Ballista Securities LLC (``Ballista''). The
ownership interest of ISE Holdings in Ballista is subject to the
conditions set forth in the Commission's approval order relating to ISE
Holdings' purchase of Optifreeze.\11\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 60598 (September 1,
2009), 74 FR 46280 (September 8, 2009).
---------------------------------------------------------------------------
Recognizing that the Commission has previously expressed concern
regarding (1) the potential for conflicts of interest in instances
where an exchange is affiliated with one of its members, and (2) the
potential for informational advantages that could place an affiliated
member of an exchange at a competitive advantage vis-[agrave]-vis the
other non-affiliated members, the ISE submitted a proposed rule change
to amend ISE Rule 312 to permit the proposed affiliation subject to
several conditions and limitations, including that a condition that the
Exchange shall enter into a plan with a non-affiliated self-regulatory
organization to regulate and oversee the activities of Ballista,
pursuant to Rule 17d-2 under the Act.\12\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 60382 (July 24,
2009), 74 FR 38068 (July 30, 2009).
---------------------------------------------------------------------------
On March 19, 2010, the Parties submitted the proposed 17d-2 Plan to
the Commission. The text of the 17d-2 Plan delineates regulatory
responsibilities between the Parties, including responsibility for ISE
rules, with respect to Ballista, which is a common member. In
particular, under the 17d-2 Plan, FINRA would assume examination and
enforcement responsibility relating to compliance by Ballista and
persons associated therewith, with the rules of ISE that are
substantially similar to the rules of FINRA, as well as any provisions
of the Federal securities laws and the rules and regulations thereunder
delineated in the Exhibit 1 to the 17d-2 Plan (``Common Rules'').\13\
In addition, FINRA would assume regulatory responsibility, with respect
to Ballista, for other ISE rules that do not qualify as Common Rules.
Under the 17d-2 Plan, ISE would retain full responsibility for
surveillance, examination, investigation, and enforcement with respect
to trading activities or practices involving ISE's own marketplace;
registration pursuant to its unique rules (i.e., registration rules
that are not Common Rules); its duties as a Designated Examining
Authority pursuant to Rule 17d-1 under the Act; and any rules that are
not substantially similar to the rules of FINRA, except for ISE rules
for any ISE member that acts as an inbound router for the ISE and is a
member of the ISE and FINRA (``Inbound Router Member'').\14\ For
purposes of the proposed 17d-2 Plan, Ballista would qualify as an
Inbound Router Member. Accordingly, FINRA would be allocated regulatory
responsibility for Ballista.
---------------------------------------------------------------------------
\13\ See paragraph 2 of the 17d-2 plan.
\14\ Apparent violations of such ISE rules by any Inbound Router
Member will be processed by, and enforcement proceedings will be
conducted by, FINRA. See paragraphs 2(d) and 5 of the 17d-2 Plan.
---------------------------------------------------------------------------
The text of the 17d-2 Plan is as follows:
Agreement Between Financial Industry Regulatory Authority, Inc. and
International Securities Exchange, LLC Pursuant to Rule 17d-2 Under the
Securities Exchange Act of 1934
This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and the International Securities Exchange,
LLC (``ISE''), is made this 8th day of September, 2009 (the
``Agreement''), pursuant to Section 17(d) of the Securities Exchange
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication. FINRA
and ISE may be referred to individually as a ``party'' and together as
the ``parties.''
Whereas, International Securities Exchange Holdings, Inc. (``ISE
Holdings''), the parent company of ISE, maintains an ownership interest
in Optifreeze LLC (``Optifreeze''), the parent company of Ballista
Securities LLC (``Ballista'').
Whereas, ISE desires to eliminate conflicts of interest that would
exist if ISE were to regulate Ballista, a member of ISE, which operates
a broker-dealer, which among other things, routes inbound orders to
ISE.
Whereas, ISE and FINRA desire to reduce duplication in the
examination of their Dual Members (as defined herein); and
Whereas, FINRA and ISE desire to execute an agreement covering such
subjects pursuant to the provisions of Rule 17d-2 under the Exchange
Act and to file such agreement with the Securities and Exchange
Commission (the ``SEC'' or ``Commission'') for its approval.
Now, therefore, in consideration of the mutual covenants contained
hereinafter, FINRA and ISE hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement or the
context otherwise requires, the terms used in this Agreement shall have
the same meaning as they have under the Exchange Act and the rules and
regulations thereunder. As used in this Agreement, the following terms
shall have the following meanings:
(a) ``ISE Rules'' or ``FINRA Rules'' shall mean the rules of the
ISE or FINRA, respectively, as the rules of an exchange or association
are defined in Exchange Act Section 3(a)(27).
(b) ``Common Rules'' shall mean the ISE Rules that are
substantially similar to the applicable FINRA Rules and certain
provisions of the Exchange Act and SEC rules set forth on Exhibit 1 in
that examination for compliance with such rules would not require FINRA
to develop one or more new examination standards, modules, procedures,
or criteria in order to analyze the application of the rule, or a Dual
Member's activity, conduct, or output in relation to such rule;
provided, however, Common Rules shall not include the application of
the SEC, ISE or FINRA rules as they pertain to violations of insider
trading activities, which is covered by a separate 17d-2 Agreement by
and among the American Stock Exchange, LLC, BATS Exchange, Inc., Boston
Stock Exchange, Inc., CBOE Stock Exchange, LLC, Chicago Stock Exchange,
Inc., Financial Industry Regulatory Authority, Inc., International
Securities Exchange, LLC, The NASDAQ Stock Market LLC, National Stock
Exchange, Inc., New York Stock Exchange, LLC, NYSE Arca Inc., NYSE
Regulation, Inc., and Philadelphia Stock Exchange, Inc. approved by the
Commission on October 17, 2008, as may be amended from time to time.
(c) ``Dual Members'' shall mean those ISE members that are also
members of FINRA and the associated persons therewith, but for purposes
of this Agreement is limited to Ballista and its associated persons.
(d) ``Effective Date'' shall be the date this Agreement is approved
by the Commission.
(e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with the FINRA Code of Procedure
(the Rule 9000 Series) and other applicable FINRA procedural rules, to
determine
[[Page 18927]]
whether violations of pertinent laws, rules or regulations have
occurred, and if such violations are deemed to have occurred, the
imposition of appropriate sanctions as specified under the FINRA's Code
of Procedure and sanction guidelines.
(f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities and Enforcement Responsibilities relating to
compliance by the Dual Members with the Common Rules and the provisions
of the Exchange Act and the rules and regulations thereunder, and other
applicable laws, rules and regulations, each as set forth on Exhibit 1
attached hereto.
2. Regulatory and Enforcement Responsibilities. FINRA shall assume
Regulatory Responsibilities and Enforcement Responsibilities for
Ballista, which is a Dual Member. Attached as Exhibit 1 to this
Agreement and made part hereof, ISE furnished FINRA with a current list
of Common Rules and certified to FINRA that such rules are
substantially similar to the corresponding FINRA rule (the
``Certification''). FINRA hereby agrees that the rules listed in the
Certification are Common Rules as defined in this Agreement. Each year
following the Effective Date of this Agreement, or more frequently if
required by changes in either the rules of ISE or FINRA, ISE shall
submit an updated list of Common Rules to FINRA for review which shall
add ISE Rules not included in the current list of Common Rules that
qualify as Common Rules as defined in this Agreement; delete ISE Rules
included in the current list of Common Rules that no longer qualify as
Common Rules as defined in this Agreement; and confirm that the
remaining rules on the current list of Common Rules continue to be ISE
Rules that qualify as Common Rules as defined in this Agreement. Within
30 days of receipt of such updated list, FINRA shall confirm in writing
whether the rules listed in any updated list are Common Rules as
defined in this Agreement.
Notwithstanding anything herein to the contrary, it is explicitly
understood that the term ``Regulatory Responsibilities'' does not
include, and ISE shall retain full responsibility for (unless otherwise
addressed by separate agreement or rule) (collectively, the ``Retained
Responsibilities'') the following:
(a) Surveillance, examination, investigation and enforcement with
respect to trading activities or practices involving ISE's own
marketplace, including without limitation ISE's rules relating to the
rights and obligations of market makers;
(b) Registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
(c) Discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
(d) Any ISE Rules that are not Common Rules, except for ISE Rules
for any ISE member that acts as an inbound router for the ISE and is a
member of the ISE and FINRA (``Inbound Router Member'') as provided in
paragraph 5. As of the date of this Agreement, Direct Edge ECN LLC and
Ballista are the only Inbound Router Members.
3. No Charge. There shall be no charge to ISE by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as hereinafter provided.
FINRA shall provide ISE with ninety (90) days advance written notice in
the event FINRA decides to impose any charges to ISE for performing the
Regulatory Responsibilities under this Agreement. If FINRA determines
to impose a charge, ISE shall have the right at the time of the
imposition of such charge to terminate this Agreement; provided,
however, that FINRA's Regulatory Responsibilities under this Agreement
shall continue until the Commission approves the termination of this
Agreement.
4. Reassignment of Regulatory Responsibilities. Notwithstanding any
provision hereof, this Agreement shall be subject to any statute, or
any rule or order of the Commission, or industry agreement,
restructuring the regulatory framework of the securities industry or
reassigning Regulatory Responsibilities between self-regulatory
organizations. To the extent such action is inconsistent with this
Agreement, such action shall supersede the provisions hereof to the
extent necessary for them to be properly effectuated and the provisions
hereof in that respect shall be null and void.
5. Notification of Violations.
(a) In the event that FINRA becomes aware of apparent violations of
any ISE Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities assumed
hereunder, FINRA shall notify ISE of those apparent violations for such
response as ISE deems appropriate. With respect to apparent violations
of any ISE Rules by any Inbound Router Members, FINRA shall not make
referrals to ISE pursuant to this paragraph 5. Such apparent violations
shall be processed by, and enforcement proceedings in respect thereto
will be conducted by, FINRA as provided in this Agreement.
(b) In the event that ISE becomes aware of apparent violations of
any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, ISE shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement.
(c) Apparent violations of Common Rules, FINRA Rules, Federal
securities laws, and rules and regulations thereunder, shall be
processed by, and enforcement proceedings in respect thereto shall be
conducted by FINRA as provided hereinbefore; provided, however, that in
the event a Dual Member is the subject of an investigation relating to
a transaction on ISE, ISE may in its discretion assume concurrent
jurisdiction and responsibility.
(d) Each party agrees to make available promptly all files, records
and witnesses necessary to assist the other in its investigation or
proceedings.
6. Continued Assistance.
(a) FINRA shall make available to ISE all information obtained by
FINRA in the performance by it of the Regulatory Responsibilities
hereunder in respect to the Inbound Router Members subject to this
Agreement. In particular, and not in limitation of the foregoing, FINRA
shall furnish ISE any information it obtains about Inbound Router
Members which reflects adversely on their financial condition. ISE
shall make available to FINRA any information coming to its attention
that reflects adversely on the financial condition of Inbound Router
Members or indicates possible violations of applicable laws, rules or
regulations by such firms.
(b) The parties agree that documents or information shared shall be
held in confidence, and used only for the purposes of carrying out
their respective regulatory obligations. Neither party shall assert
regulatory or other privileges as against the other with respect to
documents or information that is required to be shared pursuant to this
Agreement.
(c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
7. Statutory Disqualifications. When FINRA becomes aware of a
statutory disqualification as defined in the Exchange Act with respect
to a Inbound Router Member, FINRA shall determine pursuant to Sections
15A(g) and/or Section 6(c) of the Exchange Act the acceptability or
continued applicability of the person to whom such
[[Page 18928]]
disqualification applies and keep ISE advised of its actions in this
regard for such subsequent proceedings as ISE may initiate.
8. Branch Office Information. FINRA shall also be responsible for
processing and, if required, acting upon all requests for the opening,
address changes, and terminations of branch offices by Inbound Router
Members and any other applications required of Inbound Router Members
with respect to the Common Rules as they may be amended from time to
time. Upon request, FINRA shall advise ISE of the opening, address
change and termination of branch and main offices of Inbound Router
Members and the names of such branch office managers.
9. Customer Complaints. ISE shall forward to FINRA copies of all
customer complaints involving Inbound Router Members received by ISE
relating to FINRA's Regulatory Responsibilities under this Agreement.
It shall be FINRA's responsibility to review and take appropriate
action in respect to such complaints.
10. Advertising. FINRA shall assume responsibility to review the
advertising of Inbound Router Members subject to the Agreement,
provided that such material is filed with FINRA in accordance with
FINRA's filing procedures and is accompanied with any applicable filing
fees set forth in FINRA Rules. Such review shall be made in accordance
with then applicable FINRA Rules and interpretations. The advertising
of Inbound Router Members shall be subject only to compliance with
appropriate FINRA Rules and interpretations.
11. No Restrictions on Regulatory Action. Nothing contained in this
Agreement shall restrict or in any way encumber the right of either
party to conduct its own independent or concurrent investigation,
examination or enforcement proceeding of or against Inbound Router
Members, as either party, in its sole discretion, shall deem
appropriate or necessary.
12. Termination. This Agreement shall terminate on the earlier of
(a) the date on which ISE Holdings, the parent company of ISE, ceases
to maintain an ownership interest in Optifreeze, or (b) the date on
which the Commission approves termination of this Agreement after one
(1) year's written notice by ISE or FINRA to the other party or such
shorter period as may be agreed to by the parties, except as provided
in paragraph 3.
13. Arbitration. In the event of a dispute between the parties as
to the operation of this Agreement, ISE and FINRA hereby agree that any
such dispute shall be settled by arbitration in Washington, DC in
accordance with the rules of the American Arbitration Association then
in effect, or such other procedures as the parties may mutually agree
upon. Judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. Each party acknowledges that
the timely and complete performance of its obligations pursuant to this
Agreement is critical to the business and operations of the other
party. In the event of a dispute between the parties, the parties shall
continue to perform their respective obligations under this Agreement
in good faith during the resolution of such dispute unless and until
this Agreement is terminated in accordance with its provisions. Nothing
in this Section 14 shall interfere with a party's right to terminate
this Agreement as set forth herein.
14. Separate Agreement. This Agreement is wholly separate from the
Agreements made pursuant to Rule 17d-2 of the Securities Exchange Act
of 1934 between Financial Industry Regulatory Authority, Inc. and the
International Securities Exchange LLC entered into on December 20, 2006
and on November 21, 2008, and as may be amended from time to time.
15. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
16. Limitation of Liability. Neither FINRA nor ISE nor any of their
respective directors, governors, officers or employees shall be liable
to the other party to this Agreement for any liability, loss or damage
resulting from or claimed to have resulted from any delays,
inaccuracies, errors or omissions with respect to the provision of
Regulatory Responsibilities as provided hereby or for the failure to
provide any such responsibility, except with respect to such liability,
loss or damages as shall have been suffered by one or the other of
FINRA or ISE and caused by the willful misconduct of the other party or
their respective directors, governors, officers or employees. No
warranties, express or implied, are made by FINRA or ISE with respect
to any of the responsibilities to be performed by each of them
hereunder.
17. Relief From Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and ISE
join in requesting the Commission, upon its approval of this Agreement
or any part thereof, to relieve ISE of any and all responsibilities
with respect to matters allocated to FINRA pursuant to this Agreement;
provided, however, that this Agreement shall not be effective until the
Effective Date.
18. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
Exhibit 1
ISE Rules Certification for 17d-2 Agreement with FINRA
ISE hereby certifies that the requirements contained in the ISE
Rules listed below are identical to, or substantially similar to, the
comparable FINRA (NASD) Rule, Exchange Act provision or SEC rule
identified (``Common Rules'').
------------------------------------------------------------------------
ISE rule(s) FINRA (NASD) or SEC section
------------------------------------------------------------------------
408(a)(1). Prevention of the Misuse of Section 15(f) of the Securities
Material, Nonpublic Information. Exchange Act of 1934.
409. Disciplinary Action............... NASD Rule 3070(a)(1) and (10)
Reporting Requirements.
604. Continuing Education for NASD Rule 1120 Continuing
Registered Persons. Education Requirements.
622. Transfer of Accounts.............. NASD Rule 11870 Customer
Account Transfer Contracts.
624. Broker's Blanket Bonds............ NASD Rule 3020 Fidelity Bonds
\1\.
626. Telephone Solicitation............ NASD Rule 2212 Telemarketing.
1400. Maintenance, Retention, and NASD Rule 3110(a) Books and
Furnishing of Books, Records and Other Records--Requirements.
Information.
[[Page 18929]]
2114. Doing Business with the Public NASD Rules 2310 Recommendations
\2\. to Customers (Suitability);
2320 Best Execution and
Interpositioning; 2330
Customers' Securities or
Funds; 2340 Customer Account
Statements; 2341 Margin
Disclosure Statement; 2350
Broker/Dealer Conduct on the
Premises of Financial
Institutions; 2360 Approval
Procedures for Day-Trading
Accounts; 2361 Day-Trading
Risk Disclosure Statement;
2370 Borrowing From or Lending
to Customers.
------------------------------------------------------------------------
\1\ FINRA shall have Regulatory Responsibilities for Dual Members to the
extent that a Dual Member is, and remains, a member of SIPC.
\2\ In connection with the approval of ISE Rule 2114, the Commission
noted that since ISE is requiring Equity EAMs that do business with
the public to become members of NASD (n/k/a FINRA), those ISE members
are required to comply with FINRA (NASD) rules that govern the
practice of members when doing business with the public. The
Commission noted that, among other things, these members would be
obligated to comply with these listed FINRA (NASD) Rules. See Exchange
Act Release No. 54401 (September 1, 2006), 71 FR 53483 (September 11,
2006) (Order Granting Accelerated Approval of SR-ISE-2006-53).
* * * * *
III. Date of Effectiveness of the Proposed Plan and Timing for
Commission Action
Pursuant to Section 17(d)(1) of the Act \15\ and Rule 17d-2
thereunder,\16\ after April 28, 2010, the Commission may, by written
notice, declare the plan submitted by ISE and FINRA, File No. 4-596, to
be effective if the Commission finds that the plan is necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among self-regulatory
organizations, or to remove impediments to and foster the development
of the national market system and a national system for the clearance
and settlement of securities transactions and in conformity with the
factors set forth in Section 17(d) of the Act.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78q(d)(1).
\16\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
IV. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the 17d-2 Plan and to relieve ISE of the responsibilities which would
be assigned to FINRA, interested persons are invited to submit written
data, views, and arguments concerning the foregoing. Comments may be
submitted by any of the following methods:
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 No. 4-596 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 No. 4-596. 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,\17\ 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 Web site viewing and printing 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 plan also will be available for inspection and
copying at the principal offices of ISE and FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. 4-596 and should be submitted on
or before April 28, 2010.
---------------------------------------------------------------------------
\17\ The text of the proposed rule change is available on the
Commission's Web site at https://www.sec.gov.
\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8350 Filed 4-12-10; 8:45 am]
BILLING CODE 8011-01-P
