
[Federal Register: November 12, 2009 (Volume 74, Number 217)]
[Notices]               
[Page 58350-58351]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12no09-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60942; File No. SR-Phlx-2009-93]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Extension of Sponsored Access Pilot Program

November 4, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 26, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend its sponsored access rule for a 
pilot period ending on January 31, 2010.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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 purpose of the proposed rule change is to attract additional 
business by extending its sponsored access rule, which is similar to 
that of other exchanges. During the previous pilot program, very few 
member organizations availed themselves of the program, but the 
Exchange seeks to make it available for an additional pilot period 
expiring January 31, 2010.
    A Sponsored Participant is a non-member of the Exchange, such as an 
institutional investor, that gains access to the Exchange and trades 
under a Sponsoring Member's execution and clearing identity pursuant to 
a sponsorship arrangement between such non-member and a member 
organization. Specifically, the Exchange proposes to permit Sponsored 
Participants to be sponsored by Sponsoring Member Organizations, and 
thereby access the Exchange, subject to certain requirements. These 
requirements are intended to confirm that the Sponsored Participant is 
required to and had procedures in place to comply with Exchange rules, 
and that the Sponsoring Member Organization takes responsibility for 
the Sponsored Participant's activity on the Exchange.
    First, the Sponsored Participant and its Sponsoring Member 
Organization must have entered into and maintained an Access Agreement 
with the Exchange. The Sponsoring Member Organization must designate 
the Sponsored Participant by name in an addendum to the Access 
Agreement.
    Second, there must be a Sponsored Participant Agreement between the 
Sponsoring Member Organization and the Sponsored Participant that 
contains the following sponsorship provisions, enumerated in full in 
Rule 1094(b)(ii):
    (i) The orders of the Sponsored Participant are binding in all 
respects on the Sponsoring Member Organization;
    (ii) the Sponsoring Member Organization is responsible for the 
actions of the Sponsored Participant;
    (iii) in addition to the Sponsoring Member Organization being 
required to comply with the Exchange Certificate of Incorporation, By-
laws, Rules and procedures of the Exchange, the Sponsored Participant 
shall do so as if such Sponsored Participant were an Exchange member 
organization;
    (iv) the Sponsored Participant shall maintain, keep current and 
provide to the Sponsoring Member Organization a list of individuals 
authorized to obtain access to the Exchange on behalf of the Sponsored 
Participant;
    (v) the Sponsored Participant shall familiarize its authorized 
individuals with all of the Sponsored Participant's obligations under 
this Rule and will assure that they receive appropriate training prior 
to any use or access to the Exchange;
    (vi) the Sponsored Participant may not permit anyone other than 
authorized individuals to use or obtain access to the Exchange; \3\
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    \3\ If the Exchange determines that an authorized individual has 
caused a Member Organization to violate the Exchange's Rules, the 
Exchange could direct the Member Organization to suspend or withdraw 
the person's status as an authorized individual.
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    (vii) the Sponsored Participant shall take reasonable security 
precautions to prevent unauthorized use or access to the Exchange, 
including unauthorized entry of information into the Exchange, and 
agrees that it is responsible for any and all orders, trades and other 
messages and instructions entered, transmitted or received under 
identifiers, passwords and security codes of authorized individuals, 
and for the trading and other consequences thereof;
    (viii) the Sponsored Participant acknowledges its responsibility to 
establish adequate procedures and controls that permit it to 
effectively monitor its employees', agents' and Participants' use and 
access to the Exchange for compliance with the terms of this agreement;
    (ix) the Sponsored Participant shall pay when due all amounts, if 
any, payable to Sponsoring Member

[[Page 58351]]

Organization, the Exchange, or any other third parties that arise from 
the Sponsored Participant's access to and use of the Exchange. Such 
amounts include, but are not limited to applicable exchange and 
regulatory fees.
    Third, the Sponsoring Member Organization must provide the Exchange 
with a Sponsored Participant Addendum to its Access Agreement 
acknowledging its responsibility for the orders, executions and actions 
of its Sponsored Participant at issue.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \5\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest by 
helping market participants seeking access to a marketplace.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) \7\ 
thereunder.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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. 
Phlx has satisfied this requirement.
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\8\ However, 
Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has requested that the Commission 
waive the 30-day operative delay so that the proposal may become 
operative upon filing. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because such waiver would allow the pilot program to 
continue uninterrupted. The Commission notes that the proposal is 
substantially similar to the rules of other national securities 
exchanges.\10\ Accordingly, the Commission hereby grants the Exchange's 
request and designates the proposal operative upon filing.\11\
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    \8\ 17 CFR 240.19b-4(f)(6)(iii).
    \9\ Id.
    \10\ See, e.g., International Securities Exchange, LLC Rule 706 
and NYSE Arca, Inc. Rule 7.29.
    \11\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2009-93 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-Phlx-2009-93. 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 (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing 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-Phlx-2009-93 and should be 
submitted on or before December 3, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27092 Filed 11-10-09; 8:45 am]

BILLING CODE 8011-01-P
