Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Retail Price Improvement Program, 1238-1240 [2016-253]
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Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices
Dated at Lisle, Illinois this 21st day of
December, 2015.
For the Nuclear Regulatory Commission.
Cynthia D. Pederson
Regional Administrator.
filed in this docket for the protection of
information that it has filed under seal.
Id. at 1–2.
II. Notice of Filings
[FR Doc. 2016–322 Filed 1–8–16; 8:45 am]
BILLING CODE 7590–01–P
POSTAL REGULATORY COMMISSION
[Docket No. CP2015–75; Order No. 2979]
New Postal Product
Postal Regulatory Commission.
Notice.
AGENCY:
ACTION:
The Commission is noticing a
recent Postal Service filing concerning a
modification to a Global Expedited
Package Services 3 negotiated service
agreement. This notice informs the
public of the filing, invites public
comment, and takes other
administrative steps.
DATES: Comments are due: January 12,
2016.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
SUMMARY:
mstockstill on DSK4VPTVN1PROD with NOTICES
It is ordered:
1. The Commission reopens Docket
No. CP2015–75 for consideration of
matters raised by the Postal Service’s
Notice.
2. Pursuant to 39 U.S.C. 505, the
Commission appoints Kenneth R.
Moeller to serve as an officer of the
Commission (Public Representative) to
represent the interests of the general
public in this proceeding.
3. Comments are due no later than
January 12, 2016.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
BILLING CODE 7710–FW–P
I. Introduction
II. Notice of Filings
III. Ordering Paragraphs
SECURITIES AND EXCHANGE
COMMISSION
I. Introduction
On January 4, 2016, the Postal Service
filed notice that it has agreed to a
modification to the existing Global
Expedited Package Services 3 negotiated
service agreement approved in this
docket.1 In support of its Notice, the
Postal Service includes a redacted copy
of the modification and a certification of
compliance with 39 U.S.C. 3633(a), as
required by 39 CFR 3015.5.
The Postal Service asserts that the
modification revises a few articles and
replaces Annex 1 to the agreement. Id.
at 1. The Postal Service also seeks to
incorporate by reference the Application
for Non-Public Treatment originally
1 Notice of the United States Postal Service of
Filing Modification to Global Expedited Package
Services 3 Negotiated Service Agreement, January 4,
2016 (Notice).
18:17 Jan 08, 2016
III. Ordering Paragraphs
[FR Doc. 2016–243 Filed 1–8–16; 8:45 am]
Table of Contents
VerDate Sep<11>2014
The Commission invites comments on
whether the changes presented in the
Postal Service’s Notice are consistent
with the policies of 39 U.S.C. 3632,
3633, or 3642, 39 CFR 3015.5, and 39
CFR part 3020, subpart B. Comments are
due no later than January 12, 2016. The
public portions of these filings can be
accessed via the Commission’s Web site
(https://www.prc.gov).
The Commission appoints Kenneth R.
Moeller to represent the interests of the
general public (Public Representative)
in this docket.
Jkt 238001
[Release No. 34–76829; File No. SR–BX–
2015–086]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Retail Price Improvement Program
January 5, 2016.
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 December
22, 2015, NASDAQ OMX BX, Inc. (‘‘BX’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00076
Fmt 4703
Sfmt 4703
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
BX is proposing change to amend BX
Rule 4780, which governs the
Exchange’s Retail Price Improvement
Program (‘‘Retail Program’’), to
distinguish between retail orders routed
on behalf of other broker-dealers and
retail orders that are routed on behalf of
introduced retail accounts that are
carried on a fully disclosed basis, as
further described below.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxbx.cchwallstreet.com, at the
principal office of the Exchange, 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, 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
1. Purpose
The Exchange proposes to amend BX
Rule 4780, which governs the
Exchange’s Retail Program,3 to
distinguish between orders routed on
behalf of other broker-dealers and orders
routed on behalf of introduced retail
accounts that are carried on a fully
disclosed basis, as further described
below.
The Exchange established the Retail
Program in an attempt to attract retail
order flow to the Exchange, primarily by
offering pricing incentives. Under the
Retail Program, Retail Member
3 The Exchange adopted the Retail Program as BX
Rule 4780 in 2014. See Securities Exchange Act
Release No. 73702 (November 28, 2014), 79 FR
72049 (December 4, 2014) (SR–BX–2014–048).
E:\FR\FM\11JAN1.SGM
11JAN1
Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Organizations 4 are permitted to submit
Retail Orders,5 and receive rebates for
added liquidity that are higher than the
exchanges [sic] standard rebates for
added liquidity.6 In addition, RMOs
may optionally designate Retail Orders
to be identified as Retail on the
Exchange’s proprietary data feeds.7
Exchange Rule 4780(b)(1) currently
states that ‘‘[t]o qualify as a Retail
Member Organization, a Member must
conduct a retail business or handle
retail orders on behalf of another brokerdealer.’’ 8 Rather than stating that one
way to qualify as an RMO is to handle
retail orders on behalf of another brokerdealer, the Exchange proposes to state
that a Member may qualify as an RMO
if it ‘‘routes’’ retail orders on behalf of
another broker-dealer. The Exchange
believes that providing routing services
on behalf of other broker-dealers with
retail order flow was the intended
meaning of the provision and that the
term ‘‘handle’’ is vague. Thus, the
Exchange believes that the description
would be better if it referred to routing
services provided to another brokerdealer with retail customers. The
Exchange also proposes to distinguish
such routing services on behalf of
another broker-dealer from services
provided by broker-dealers that carry
retail customer accounts on a fully
disclosed basis, as described below.
As background with respect to the
proposed change, the Exchange first
would like to describe the terms
‘‘introducing broker’’, ‘‘carrying firm’’ or
‘‘carrying broker-dealer’’, and ‘‘fully
disclosed,’’ as such terms are commonly
used in the securities industry. An
‘‘introducing’’ broker-dealer is ‘‘one that
has a contractual arrangement with
another firm, known as the carrying or
clearing firm, under which the carrying
firm agrees to perform certain services
for the introducing firm. Usually, the
introducing firm submits its customer
accounts and customer orders to the
carrying firm, which executes the orders
and carries the account. The carrying
firm’s duties include the proper
disposition of the customer funds and
4 A Retail Member Organization is a Member (or
a division thereof) that has been approved by the
Exchange under BX Rule 4780 to submit Retail
Orders.
5 A Retail Order is an agency order, or riskless
principal order that satisfies the criteria of FINRA
Rule 5320.03. The Retail Order must reflect trading
interest of a natural person with no change made
to the terms of the underlying order of the natural
person with respect to price (except in the case of
a market order that is changed to a marketable limit
order) or side of market and that does not originate
from a trading algorithm or any other computerized
methodology.
6 See BX Rule 7018.
7 See BX Rule 4780(f).
8 Emphasis added.
VerDate Sep<11>2014
18:17 Jan 08, 2016
Jkt 238001
securities after the trade date, the
custody of customer securities and
funds, and the recordkeeping associated
with carrying customer accounts.’’ 9
Further, a ‘‘fully disclosed’’
introducing arrangement is
‘‘distinguished from an omnibus
clearing arrangement where the clearing
firm maintains one account for all the
customer transactions of the introducing
firm. In an omnibus relationship, the
clearing firm does not know the identity
of the customers of the introducing firm.
In a fully disclosed clearing
arrangement, the clearing firm knows
the names, addresses, securities
positions and other relevant data as to
each customer.’’ 10
With respect to a broker-dealer that is
routing on behalf of another brokerdealer, the Exchange does not believe
that the routing broker-dealer has
sufficient information to assess whether
orders are truly retail in nature, and
thus, requires an RMO routing on behalf
of other broker-dealers to maintain
additional supervisory procedures and
obtain annual attestations, as described
below, in order to submit Retail Orders
to the Exchange. In contrast, however, if
a broker-dealer is carrying a customer
account on a fully disclosed basis, then
such carrying broker-dealer is required
to perform certain diligence regarding
such account that the Exchange believes
is sufficient to assess whether a
customer is a retail customer in order to
submit orders on behalf of such a
customer to the Exchange as a Retail
Order. The carrying broker of an
account typically handles orders from
its retail customers that are
‘‘introduced’’ by an introducing broker.
However, as noted above, in contrast to
a typical routing relationship on behalf
of another broker- dealer, a carrying
broker does obtain a significant level of
information regarding each customer
introduced by the introducing broker.
Accordingly, the Exchange proposes to
state in BX Rule 4780(b)(1) that for
purposes of BX Rule 4780, ‘‘conducting
a retail business shall include carrying
retail customer accounts on a fully
disclosed basis.’’
BX Rule 4780(b)(6) currently states, in
part, that ‘‘[i]f a Retail Member
Organization represents Retail Orders
from another broker-dealer customer,
the Retail Member Organization’s
supervisory procedures must be
reasonably designed to assure that the
orders it receives from such brokerdealer customer that it designates as
Retail Orders meet the definition of a
9 See Securities Exchange Act Release No. 31511
(Nov. 24, 1992), 57 FR 56973 (December 2, 1992).
10 Id.
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
1239
Retail Order.’’ This includes obtaining
attestations from the other brokerdealers for whom the RMO routes. In
addition to the proposed changes to BX
Rule 4780(b)(1) described above, the
Exchange proposes to modify the
language of BX Rule 4780(b)(6) to again
distinguish between an RMO that
conducts a retail business because it
carries accounts on a fully disclosed
basis from an RMO that routes orders on
behalf of another broker-dealer. As
proposed, the additional attestation
requirements of BX Rule 4780(b)(6)
would apply to an RMO that does not
itself conduct a retail business but
routes Retail Orders on behalf of other
broker-dealers. In turn, such attestation
requirements would not apply to an
RMO that carries retail customer
accounts on a fully disclosed basis. In
connection with this change, the
Exchange is proposing various edits to
the existing rule text so that the
reference is consistently to ‘‘other
broker-dealers’’ rather than ‘‘brokerdealer customers.’’
The Exchange believes that allowing
an RMO that carries retail customer
accounts on a fully disclosed basis to
submit Retail Orders to the Exchange
without obtaining attestations from
broker-dealers that might introduce
such accounts will encourage
participation in the Retail Program. As
noted above, the Exchange believes that
the carrying broker has sufficient
information to itself confirm that orders
are Retail Orders without such
attestations. The Exchange still believes
it is necessary to require the attestation
by broker-dealers that route Retail
Orders on behalf of other brokerdealers, because, in contrast, such
broker-dealers typically do not have a
relationship with the retail customer
and would not be in position to confirm
that such customers are in fact retail
customers.
2. Statutory Basis
BX believes that the proposed rule
change is consistent with the provisions
of Section 6 of the Act,11 in general, and
with Section 6(b)(5) of the Act,12 in
particular, in that the proposal is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
11 15
12 15
E:\FR\FM\11JAN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(5).
11JAN1
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Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices
acts and practices because it highlights
the parties for whom additional
procedures are required because they do
not maintain relationships with the end
customer (i.e., routing brokers) and still
requires the RMO to follow such
procedures to ensure that such orders
qualify as Retail Orders. As proposed,
however, an RMO would not be
required to follow such procedures,
including obtaining annual attestations,
to the extent such RMO actually knows
the end customer and carries the
account of such customer and thus can
itself confirm that the orders qualify as
Retail Orders.
The Exchange believes that the
proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
will allow RMOs that carry retail
customer accounts to participate in the
Program without imposing additional
attestation requirements that the
Exchange did not initially intend to
impose upon them. By removing
impediments to participation in the
Program, the proposed change would
permit expanded access of retail
customers to the Program.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
BX 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, as amended. The
Exchange believes that the amendment,
by increasing the level of participation
in the Program, will increase the level
of competition around retail executions.
The Exchange believes that the
transparency and competitiveness of
operating a program such as the
Program on an exchange market would
result in better prices for retail investors
and benefits retail investors by
expanding the capabilities of Exchanges
to encompass practices currently
allowed on non-exchange venues.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
mstockstill on DSK4VPTVN1PROD with NOTICES
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) 13 of the Act and Rule
19b–4(f)(6) thereunder.14 Because the
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 after its filing date, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest, the proposed rule change has
become effective pursuant to
19(b)(3)(A) 15 of the Act and Rule 19b–
4(f)(6) thereunder.16
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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–
BX–2015–086 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 SR–BX–2015–086. 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
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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BX–
2015–086, and should be submitted on
or before February 1, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–253 Filed 1–8–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76833; File No. SR–
NASDAQ–2015–159]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Implement Additional Price Protections
in the Opening Process
January 5, 2016.
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 December
23, 2015, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II, 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.
U.S.C. 78s(b)(3)(A)(iii).
VerDate Sep<11>2014
18:17 Jan 08, 2016
Jkt 238001
17 17
15 15
13 15
14 17
1 15
CFR 240.19b–4(f)(6).
U.S.C. 78s(b)(3)(A).
16 17 CFR 240.19b–4(f)(6).
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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11JAN1
]]>Agencies
[Federal Register Volume 81, Number 6 (Monday, January 11, 2016)]
[Notices]
[Pages 1238-1240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-253]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76829; File No. SR-BX-2015-086]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Retail Price Improvement Program
January 5, 2016.
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 December 22, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'')
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 the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
BX is proposing change to amend BX Rule 4780, which governs the
Exchange's Retail Price Improvement Program (``Retail Program''), to
distinguish between retail orders routed on behalf of other broker-
dealers and retail orders that are routed on behalf of introduced
retail accounts that are carried on a fully disclosed basis, as further
described below.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxbx.cchwallstreet.com, at the principal
office of the Exchange, 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, 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
1. Purpose
The Exchange proposes to amend BX Rule 4780, which governs the
Exchange's Retail Program,\3\ to distinguish between orders routed on
behalf of other broker-dealers and orders routed on behalf of
introduced retail accounts that are carried on a fully disclosed basis,
as further described below.
---------------------------------------------------------------------------
\3\ The Exchange adopted the Retail Program as BX Rule 4780 in
2014. See Securities Exchange Act Release No. 73702 (November 28,
2014), 79 FR 72049 (December 4, 2014) (SR-BX-2014-048).
---------------------------------------------------------------------------
The Exchange established the Retail Program in an attempt to
attract retail order flow to the Exchange, primarily by offering
pricing incentives. Under the Retail Program, Retail Member
[[Page 1239]]
Organizations \4\ are permitted to submit Retail Orders,\5\ and receive
rebates for added liquidity that are higher than the exchanges [sic]
standard rebates for added liquidity.\6\ In addition, RMOs may
optionally designate Retail Orders to be identified as Retail on the
Exchange's proprietary data feeds.\7\
---------------------------------------------------------------------------
\4\ A Retail Member Organization is a Member (or a division
thereof) that has been approved by the Exchange under BX Rule 4780
to submit Retail Orders.
\5\ A Retail Order is an agency order, or riskless principal
order that satisfies the criteria of FINRA Rule 5320.03. The Retail
Order must reflect trading interest of a natural person with no
change made to the terms of the underlying order of the natural
person with respect to price (except in the case of a market order
that is changed to a marketable limit order) or side of market and
that does not originate from a trading algorithm or any other
computerized methodology.
\6\ See BX Rule 7018.
\7\ See BX Rule 4780(f).
---------------------------------------------------------------------------
Exchange Rule 4780(b)(1) currently states that ``[t]o qualify as a
Retail Member Organization, a Member must conduct a retail business or
handle retail orders on behalf of another broker-dealer.'' \8\ Rather
than stating that one way to qualify as an RMO is to handle retail
orders on behalf of another broker-dealer, the Exchange proposes to
state that a Member may qualify as an RMO if it ``routes'' retail
orders on behalf of another broker-dealer. The Exchange believes that
providing routing services on behalf of other broker-dealers with
retail order flow was the intended meaning of the provision and that
the term ``handle'' is vague. Thus, the Exchange believes that the
description would be better if it referred to routing services provided
to another broker-dealer with retail customers. The Exchange also
proposes to distinguish such routing services on behalf of another
broker-dealer from services provided by broker-dealers that carry
retail customer accounts on a fully disclosed basis, as described
below.
---------------------------------------------------------------------------
\8\ Emphasis added.
---------------------------------------------------------------------------
As background with respect to the proposed change, the Exchange
first would like to describe the terms ``introducing broker'',
``carrying firm'' or ``carrying broker-dealer'', and ``fully
disclosed,'' as such terms are commonly used in the securities
industry. An ``introducing'' broker-dealer is ``one that has a
contractual arrangement with another firm, known as the carrying or
clearing firm, under which the carrying firm agrees to perform certain
services for the introducing firm. Usually, the introducing firm
submits its customer accounts and customer orders to the carrying firm,
which executes the orders and carries the account. The carrying firm's
duties include the proper disposition of the customer funds and
securities after the trade date, the custody of customer securities and
funds, and the recordkeeping associated with carrying customer
accounts.'' \9\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 31511 (Nov. 24,
1992), 57 FR 56973 (December 2, 1992).
---------------------------------------------------------------------------
Further, a ``fully disclosed'' introducing arrangement is
``distinguished from an omnibus clearing arrangement where the clearing
firm maintains one account for all the customer transactions of the
introducing firm. In an omnibus relationship, the clearing firm does
not know the identity of the customers of the introducing firm. In a
fully disclosed clearing arrangement, the clearing firm knows the
names, addresses, securities positions and other relevant data as to
each customer.'' \10\
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
With respect to a broker-dealer that is routing on behalf of
another broker-dealer, the Exchange does not believe that the routing
broker-dealer has sufficient information to assess whether orders are
truly retail in nature, and thus, requires an RMO routing on behalf of
other broker-dealers to maintain additional supervisory procedures and
obtain annual attestations, as described below, in order to submit
Retail Orders to the Exchange. In contrast, however, if a broker-dealer
is carrying a customer account on a fully disclosed basis, then such
carrying broker-dealer is required to perform certain diligence
regarding such account that the Exchange believes is sufficient to
assess whether a customer is a retail customer in order to submit
orders on behalf of such a customer to the Exchange as a Retail Order.
The carrying broker of an account typically handles orders from its
retail customers that are ``introduced'' by an introducing broker.
However, as noted above, in contrast to a typical routing relationship
on behalf of another broker- dealer, a carrying broker does obtain a
significant level of information regarding each customer introduced by
the introducing broker. Accordingly, the Exchange proposes to state in
BX Rule 4780(b)(1) that for purposes of BX Rule 4780, ``conducting a
retail business shall include carrying retail customer accounts on a
fully disclosed basis.''
BX Rule 4780(b)(6) currently states, in part, that ``[i]f a Retail
Member Organization represents Retail Orders from another broker-dealer
customer, the Retail Member Organization's supervisory procedures must
be reasonably designed to assure that the orders it receives from such
broker-dealer customer that it designates as Retail Orders meet the
definition of a Retail Order.'' This includes obtaining attestations
from the other broker-dealers for whom the RMO routes. In addition to
the proposed changes to BX Rule 4780(b)(1) described above, the
Exchange proposes to modify the language of BX Rule 4780(b)(6) to again
distinguish between an RMO that conducts a retail business because it
carries accounts on a fully disclosed basis from an RMO that routes
orders on behalf of another broker-dealer. As proposed, the additional
attestation requirements of BX Rule 4780(b)(6) would apply to an RMO
that does not itself conduct a retail business but routes Retail Orders
on behalf of other broker-dealers. In turn, such attestation
requirements would not apply to an RMO that carries retail customer
accounts on a fully disclosed basis. In connection with this change,
the Exchange is proposing various edits to the existing rule text so
that the reference is consistently to ``other broker-dealers'' rather
than ``broker-dealer customers.''
The Exchange believes that allowing an RMO that carries retail
customer accounts on a fully disclosed basis to submit Retail Orders to
the Exchange without obtaining attestations from broker-dealers that
might introduce such accounts will encourage participation in the
Retail Program. As noted above, the Exchange believes that the carrying
broker has sufficient information to itself confirm that orders are
Retail Orders without such attestations. The Exchange still believes it
is necessary to require the attestation by broker-dealers that route
Retail Orders on behalf of other broker- dealers, because, in contrast,
such broker-dealers typically do not have a relationship with the
retail customer and would not be in position to confirm that such
customers are in fact retail customers.
2. Statutory Basis
BX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\11\ in general, and with Section
6(b)(5) of the Act,\12\ in particular, in that the proposal is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and to remove impediments to
and perfect the mechanism of a free and open market and a national
market system.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative
[[Page 1240]]
acts and practices because it highlights the parties for whom
additional procedures are required because they do not maintain
relationships with the end customer (i.e., routing brokers) and still
requires the RMO to follow such procedures to ensure that such orders
qualify as Retail Orders. As proposed, however, an RMO would not be
required to follow such procedures, including obtaining annual
attestations, to the extent such RMO actually knows the end customer
and carries the account of such customer and thus can itself confirm
that the orders qualify as Retail Orders.
The Exchange believes that the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it will allow RMOs that carry retail
customer accounts to participate in the Program without imposing
additional attestation requirements that the Exchange did not initially
intend to impose upon them. By removing impediments to participation in
the Program, the proposed change would permit expanded access of retail
customers to the Program.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX 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, as amended. The Exchange
believes that the amendment, by increasing the level of participation
in the Program, will increase the level of competition around retail
executions. The Exchange believes that the transparency and
competitiveness of operating a program such as the Program on an
exchange market would result in better prices for retail investors and
benefits retail investors by expanding the capabilities of Exchanges to
encompass practices currently allowed on non-exchange venues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) \13\ of the Act and Rule 19b-4(f)(6) thereunder.\14\
Because the 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 after its filing date, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
19(b)(3)(A) \15\ of the Act and Rule 19b-4(f)(6) thereunder.\16\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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-BX-2015-086 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 SR-BX-2015-086. 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 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 the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BX-2015-086, and should be
submitted on or before February 1, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-253 Filed 1-8-16; 8:45 am]
BILLING CODE 8011-01-P
