Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FINRA Rule 5250 (Payments for Market Making), 24261-24263 [2013-09631]

Download as PDF Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices number should be included on the subject line if email 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 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 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR–CBOE– 2013–039 and should be submitted on or before May 15, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–09627 Filed 4–23–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69398; File No. SR–FINRA– 2013–020] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FINRA Rule 5250 (Payments for Market Making) tkelley on DSK3SPTVN1PROD with NOTICES April 18, 2013. 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 April 15, 2013, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rule 5250 (Payments for Market Making) to create an exception for payments to members that are expressly provided for under the rules of a national securities exchange. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FINRA Rule 5250 (Payments for Market Making or ‘‘Rule’’) explicitly prohibits any payment by issuers or issuers’ affiliates and promoters, directly or indirectly, to a member for publishing a quotation, acting as a market maker, or submitting an application in connection therewith. The Rule is intended, among other things, to prohibit members from receiving compensation or other payments from an issuer for quoting or making a market in the issuer’s securities and to assure that members act in an independent capacity when 1 15 VerDate Mar<15>2010 18:05 Apr 23, 2013 3 17 Jkt 229001 PO 00000 CFR 240.19b–4(f)(6). Frm 00112 Fmt 4703 Sfmt 4703 24261 publishing a quotation or making a market in an issuer’s securities. FINRA’s policy concerning payments for market making was first set forth in Notice to Members 75–16 and then codified as NASD Rule 2460 (now FINRA Rule 5250) in 1997.4 Among other things, FINRA recognized that members generally have considerable latitude and freedom to make or terminate market making activities and was concerned that payments by an issuer to a market maker could influence a firm’s decision to make a market. In particular, the existence of undisclosed, private arrangements between market makers and an issuer and/or its promoters may make it difficult for investors to ascertain the true market for the securities, such that what might appear to be independent trading activity may well be illusory.5 FINRA staff has received inquiries regarding the application of the Rule to various types of arrangements provided for by the rules of a national securities exchange (an ‘‘exchange’’). For example, the Commission has approved a rule change by NASDAQ Stock Market implementing a voluntary program for market makers that would be funded through fees by the issuer or an affiliate of the issuer (‘‘NASDAQ MQP’’).6 The Commission also currently is considering a proposed rule change by NYSE Arca to adopt a voluntary market maker program for certain exchangetraded products that would be funded through fees by the issuer.7 FINRA believes certain exchange program structures, such as the one adopted by NASDAQ, could be deemed an indirect payment under Rule 5250; 4 See Notice to Members 75–16 (February 20, 1975) and Securities Exchange Act Release No. 38812 (July 3, 1997), 62 FR 37105 (July 10, 1997) (‘‘Order Approving File No. SR–NASD–97–29’’). 5 ‘‘If payments * * * were permitted, investors would not be able to ascertain which quotations in the marketplace are based on actual interest and which quotations are supported by issuers or promoters. This structure would harm investor confidence in the overall integrity of the marketplace.’’ See Order Approving File No. SR– NASD–97–29 at 37107. 6 See Securities Exchange Act Release No. 69195 (March 20, 2013), 78 FR 18393 (March 26, 2013) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 3 Thereto, To Establish the Market Quality Program) (File No. SR–NASDAQ–2012–137) (‘‘SEC Approval Order’’). 7 See Securities Exchange Act Release No. 69335 (April 5, 2013), 78 FR 21681 (April 11, 2013) (Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To Implement a OneYear Pilot Program for Issuers of Certain ExchangeTraded Products Listed on the Exchange) (File No. SR–NYSEArca–2013–34). This proposal has not been acted upon by the Commission. The Commission has solicited comment on the proposed rule change, which are due by May 2, 2013. E:\FR\FM\24APN1.SGM 24APN1 24262 Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices tkelley on DSK3SPTVN1PROD with NOTICES however, FINRA does not believe that such arrangements should be prohibited under the Rule because those payments would be made as part of a transparent structure put in place by another selfregulatory organization pursuant to a rule change, which generally must be approved by the SEC following publication for public comment in the Federal Register.8 Accordingly, where a market maker payment is provided for under the rules of an exchange that are effective after being filed with, or filed with and approved by, the SEC pursuant to the requirements of the Act, it is FINRA’s view that comity should be afforded to such exchange rulemaking and the payment should not be prohibited under Rule 5250. FINRA also believes the NASDAQ MQP contains several features that mitigate the concerns the Commission discussed when approving the predecessor rule to FINRA Rule 5250.9 For example, the terms of the NASDAQ MQP generally are ‘‘objective, clear, and transparent’’ 10 and includes [sic] disclosure requirements to help alert and educate potential and existing investors about the program.11 Specifically, and among other things, the NASDAQ program provides for Web site disclosure of certain information, including the identities of the companies, securities and market makers participating in the NASDAQ MQP, as well as the amount of the supplemental fee, if any, per security that would be in addition to the fixed basic fee. FINRA believes the level of transparency available regarding the structure of the program, participation of the parties and possible payments to market makers, provides important disclosure to investors in NASDAQ MQP securities, enabling them to identify which exchange-traded funds are and are not subject to the NASDAQ MQP. FINRA, therefore, believes it is appropriate to create an exception to Rule 5250 for payments to members expressly provided for under the rules of an exchange where the Commission has analyzed the payments and determined that the concerns Rule 5250 was designed to addressed have been sufficiently mitigated. FINRA has filed the proposed rule change for immediate effectiveness. The 8 See, e.g., Securities Exchange Act Release No. 68515 (December 21, 2012), 77 FR 77141 (December 31, 2012) (Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto to Establish the Market Quality Program) (File No. SR– NASDAQ–2012–137). 9 See supra text accompanying note 5. 10 See SEC Approval Order at 18401. 11 See SEC Approval Order. VerDate Mar<15>2010 18:05 Apr 23, 2013 Jkt 229001 implementation date of the proposed rule change will be May 15, 2013. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,12 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change meets these requirements in that it excepts payments to market makers that are provided for under the rules of a national securities exchange, which are adopted pursuant to the Act’s Section 19(b) rule filing process. In addition, these payments and related activity would be governed by the established market surveillance and oversight procedures of a national securities exchange. FINRA believes that the proposed rule change also maintains the protections the rule was designed to provide, while refining the proper scope of the Rule to exclude payments made pursuant to objective, clear and transparent programs that are established by a national securities exchange to improve the market quality, depth and/or liquidity of securities traded on such exchange. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act in that it treats all national securities exchanges equally by uniformly excepting payments made to market makers pursuant to the rules of an exchange that are effective after being filed with, or filed with and approved by, the SEC pursuant to the requirements of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant 12 15 PO 00000 U.S.C. 78o–3(b)(6). Frm 00113 Fmt 4703 Sfmt 4703 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) of the Act 13 and Rule 19b– 4(f)(6) thereunder.14 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–FINRA–2013–020 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2013–020. This file number should be included on the subject line if email 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 13 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. FINRA has satisfied this requirement. 14 17 E:\FR\FM\24APN1.SGM 24APN1 Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices 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 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA– 2013–020 and should be submitted on or before May 15, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–09631 Filed 4–23–13; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69401; File No. SR–Phlx– 2013–38] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Routing Fees April 18, 2013. tkelley on DSK3SPTVN1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1, and Rule 19b–4 2 thereunder, notice is hereby given that on April 8, 2013, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. 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 Section V of the Pricing Schedule entitled ‘‘Routing Fees.’’ CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 18:05 Apr 23, 2013 Jkt 229001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P 15 17 While changes to the Pricing Schedule pursuant to this proposal are effective upon filing, the Exchange has designated the proposed amendment to be operative on May 1, 2013. The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 1. Purpose The purpose of this filing is to amend Routing Fees in Section V of the Pricing Schedule in order to recoup costs that the Exchange incurs for routing and executing orders in equity options to various away markets. Today, the Exchange assesses NonCustomers a flat rate of $0.95 per contract on all Non-Customer orders routed to any away market and the Exchange assesses Customer orders a fixed fee plus the actual transaction fee dependent on the away market. Specifically, the Exchange assesses Customer orders routed to NASDAQ Options Market LLC (‘‘NOM’’) a fixed fee of $0.05 per contract in addition to the actual transaction fee assessed by the away market. With respect to Customer orders that are routed to NASDAQ OMX BX, Inc. (‘‘BX Options’’), the Exchange does not assess a Routing Fee and does not pass rebates paid by the away market.3 The Exchange does not assess a Routing Fee when routing orders to BX Options because that exchange pays a rebate. 3 BX Options pays a Customer Rebate to Remove Liquidity as follows: Customers are paid $0.12 per contract in IWM, SPY and QQQ, $0.32 per contract in All Other Penny Pilot Options and $0.70 per contract in Non-Penny Pilot Options. See BX Options Rules at Chapter XV, Section 2(1). PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 24263 Instead of netting the customer rebate paid by BX Options against the fixed fee,4 the Exchange simply does not assess a fee. The Exchange assesses Customer orders routed to all other away markets, except NOM and BX Options, a fixed fee of $0.11 per contract in addition to the actual transaction fee assessed by the away market, unless the away market pays a rebate, then the Routing Fee is $0.00. The fixed fees are based on costs that are incurred by the Exchange when routing to an away market in addition to the away market’s transaction fee. For example, the Exchange incurs a fee when it utilizes Nasdaq Options Services LLC (‘‘NOS’’), a member of the Exchange and the Exchange’s exclusive order router,5 to route orders in options listed and open for trading on the PHLX XL system to destination markets. Each time NOS routes to away markets NOS incurs a clearing-related cost 6 and, in the case of certain exchanges, a transaction fee is also charged in certain symbols, which fees are passed through to the Exchange. The Exchange also incurs administrative and technical costs associated with operating NOS, membership fees at away markets, Options Regulatory Fees (‘‘ORFs’’) and technical costs associated with routing options. For Customer orders, the transaction fee assessed by the Exchange is based on the away market’s actual transaction fee or rebate for a particular market participant at the time that the order was entered into the Exchange’s trading system. This transaction fee is calculated on an order-by-order basis for Customer orders, since different away markets charge different amounts. In the event that there is no transaction fee or rebate assessed by the away market, the only fee assessed is the fixed Routing Fee. The Exchange is proposing to amend the Routing Fees to all other options exchanges, except NOM and BX Options, to increase the fixed fee of 4 BX Options does not assess a Customer a Fee to Remove Liquidity in any symbols today. See Chapter V, Section 2(1) of the BX Options Rules. 5 In May 2009, the Exchange adopted Rule 1080(m)(iii)(A) to establish Nasdaq Options Services LLC (‘‘NOS’’), a member of the Exchange, as the Exchange’s exclusive order router. See Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR-Phlx– 2009–32). NOS is utilized by the Exchange’s fully automated options trading system, PHLX XL®. 6 The Options Clearing Corporation (‘‘OCC’’) assesses a clearing fee of $0.01 per contract side. See Securities Exchange Act Release No. 68025 (October 10, 2012), 77 FR 63398 (October 16, 2012) (SR–OCC–2012–18). E:\FR\FM\24APN1.SGM 24APN1

Agencies

[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24261-24263]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09631]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69398; File No. SR-FINRA-2013-020]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to FINRA Rule 5250 (Payments for Market 
Making)

April 18, 2013.
    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 April 15, 2013, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. FINRA has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by 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).
---------------------------------------------------------------------------

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

    FINRA is proposing to amend FINRA Rule 5250 (Payments for Market 
Making) to create an exception for payments to members that are 
expressly provided for under the rules of a national securities 
exchange.
    The text of the proposed rule change is available on FINRA's Web 
site at https://www.finra.org, at the principal office of FINRA and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    FINRA Rule 5250 (Payments for Market Making or ``Rule'') explicitly 
prohibits any payment by issuers or issuers' affiliates and promoters, 
directly or indirectly, to a member for publishing a quotation, acting 
as a market maker, or submitting an application in connection 
therewith. The Rule is intended, among other things, to prohibit 
members from receiving compensation or other payments from an issuer 
for quoting or making a market in the issuer's securities and to assure 
that members act in an independent capacity when publishing a quotation 
or making a market in an issuer's securities.
    FINRA's policy concerning payments for market making was first set 
forth in Notice to Members 75-16 and then codified as NASD Rule 2460 
(now FINRA Rule 5250) in 1997.\4\ Among other things, FINRA recognized 
that members generally have considerable latitude and freedom to make 
or terminate market making activities and was concerned that payments 
by an issuer to a market maker could influence a firm's decision to 
make a market. In particular, the existence of undisclosed, private 
arrangements between market makers and an issuer and/or its promoters 
may make it difficult for investors to ascertain the true market for 
the securities, such that what might appear to be independent trading 
activity may well be illusory.\5\
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    \4\ See Notice to Members 75-16 (February 20, 1975) and 
Securities Exchange Act Release No. 38812 (July 3, 1997), 62 FR 
37105 (July 10, 1997) (``Order Approving File No. SR-NASD-97-29'').
    \5\ ``If payments * * * were permitted, investors would not be 
able to ascertain which quotations in the marketplace are based on 
actual interest and which quotations are supported by issuers or 
promoters. This structure would harm investor confidence in the 
overall integrity of the marketplace.'' See Order Approving File No. 
SR-NASD-97-29 at 37107.
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    FINRA staff has received inquiries regarding the application of the 
Rule to various types of arrangements provided for by the rules of a 
national securities exchange (an ``exchange''). For example, the 
Commission has approved a rule change by NASDAQ Stock Market 
implementing a voluntary program for market makers that would be funded 
through fees by the issuer or an affiliate of the issuer (``NASDAQ 
MQP'').\6\ The Commission also currently is considering a proposed rule 
change by NYSE Arca to adopt a voluntary market maker program for 
certain exchange-traded products that would be funded through fees by 
the issuer.\7\
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    \6\ See Securities Exchange Act Release No. 69195 (March 20, 
2013), 78 FR 18393 (March 26, 2013) (Order Granting Approval of a 
Proposed Rule Change, as Modified by Amendment Nos. 1 and 3 Thereto, 
To Establish the Market Quality Program) (File No. SR-NASDAQ-2012-
137) (``SEC Approval Order'').
    \7\ See Securities Exchange Act Release No. 69335 (April 5, 
2013), 78 FR 21681 (April 11, 2013) (Notice of Filing of Proposed 
Rule Change and Amendment No. 1 Thereto To Implement a One-Year 
Pilot Program for Issuers of Certain Exchange-Traded Products Listed 
on the Exchange) (File No. SR-NYSEArca-2013-34). This proposal has 
not been acted upon by the Commission. The Commission has solicited 
comment on the proposed rule change, which are due by May 2, 2013.
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    FINRA believes certain exchange program structures, such as the one 
adopted by NASDAQ, could be deemed an indirect payment under Rule 5250;

[[Page 24262]]

however, FINRA does not believe that such arrangements should be 
prohibited under the Rule because those payments would be made as part 
of a transparent structure put in place by another self-regulatory 
organization pursuant to a rule change, which generally must be 
approved by the SEC following publication for public comment in the 
Federal Register.\8\ Accordingly, where a market maker payment is 
provided for under the rules of an exchange that are effective after 
being filed with, or filed with and approved by, the SEC pursuant to 
the requirements of the Act, it is FINRA's view that comity should be 
afforded to such exchange rulemaking and the payment should not be 
prohibited under Rule 5250.
---------------------------------------------------------------------------

    \8\ See, e.g., Securities Exchange Act Release No. 68515 
(December 21, 2012), 77 FR 77141 (December 31, 2012) (Notice of 
Filing of a Proposed Rule Change and Amendment No. 1 Thereto to 
Establish the Market Quality Program) (File No. SR-NASDAQ-2012-137).
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    FINRA also believes the NASDAQ MQP contains several features that 
mitigate the concerns the Commission discussed when approving the 
predecessor rule to FINRA Rule 5250.\9\ For example, the terms of the 
NASDAQ MQP generally are ``objective, clear, and transparent'' \10\ and 
includes [sic] disclosure requirements to help alert and educate 
potential and existing investors about the program.\11\ Specifically, 
and among other things, the NASDAQ program provides for Web site 
disclosure of certain information, including the identities of the 
companies, securities and market makers participating in the NASDAQ 
MQP, as well as the amount of the supplemental fee, if any, per 
security that would be in addition to the fixed basic fee. FINRA 
believes the level of transparency available regarding the structure of 
the program, participation of the parties and possible payments to 
market makers, provides important disclosure to investors in NASDAQ MQP 
securities, enabling them to identify which exchange-traded funds are 
and are not subject to the NASDAQ MQP. FINRA, therefore, believes it is 
appropriate to create an exception to Rule 5250 for payments to members 
expressly provided for under the rules of an exchange where the 
Commission has analyzed the payments and determined that the concerns 
Rule 5250 was designed to addressed have been sufficiently mitigated.
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    \9\ See supra text accompanying note 5.
    \10\ See SEC Approval Order at 18401.
    \11\ See SEC Approval Order.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date of the proposed rule change will 
be May 15, 2013.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\12\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change meets 
these requirements in that it excepts payments to market makers that 
are provided for under the rules of a national securities exchange, 
which are adopted pursuant to the Act's Section 19(b) rule filing 
process. In addition, these payments and related activity would be 
governed by the established market surveillance and oversight 
procedures of a national securities exchange.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    FINRA believes that the proposed rule change also maintains the 
protections the rule was designed to provide, while refining the proper 
scope of the Rule to exclude payments made pursuant to objective, clear 
and transparent programs that are established by a national securities 
exchange to improve the market quality, depth and/or liquidity of 
securities traded on such exchange.

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

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act in that it treats all national 
securities exchanges equally by uniformly excepting payments made to 
market makers pursuant to the rules of an exchange that are effective 
after being filed with, or filed with and approved by, the SEC pursuant 
to the requirements of the Act.

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

    Written comments were neither solicited nor received.

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

    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) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
FINRA has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2013-020 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2013-020. This 
file number should be included on the subject line if email 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

[[Page 24263]]

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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of FINRA. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FINRA-2013-020 and should be 
submitted on or before May 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-09631 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P
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