
[Federal Register: April 22, 2010 (Volume 75, Number 77)]
[Notices]               
[Page 21051-21061]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ap10-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61919; File No. 4-566]

 
Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amendment to the Plan for the Allocation of Regulatory 
Responsibilities Among the American Stock Exchange LLC, BATS Exchange, 
Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock 
Exchange, Inc., EDGA Exchange, Inc., EDGX 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., NASDAQ 
OMX BX, Inc., and NASDAQ OMX PHLX, Inc. Relating to the Surveillance, 
Investigation, and Enforcement of Insider Trading Rules

April 15, 2010.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed pursuant to Rule 17d-2 of the Act,\2\ 
by the American Stock Exchange LLC (``Amex''), BATS Exchange, Inc. 
(``BATS''), Boston Stock Exchange, Inc. (n/k/a NASDAQ OMX BX, Inc.) 
(``BSE'' or ``BX''), Chicago Board Options Exchange, Incorporated 
(``CBOE''), Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange, Inc. 
(``EDGA''), EDGX Exchange, Inc. (``EDGX''), the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), International Securities 
Exchange, LLC (``ISE''), The NASDAQ Stock Market LLC (``Nasdaq''), 
National Stock Exchange, Inc. (``NSX''), New York Stock Exchange LLC 
(``NYSE''), NYSE Arca, Inc. (``NYSE Arca''), NYSE Regulation, Inc. 
(acting pursuant to authority delegated to it by NYSE) (``NYSE 
Regulation''), and the Philadelphia Stock Exchagne, Inc. (n/k/a NASDAQ 
OMX PHLX, Inc.) (``Phlx'') (collectively, ``Participating 
Organizations'' or ``parties'').
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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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.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    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.
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    \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).
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    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.
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    \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).
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    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.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On September 12, 2008, the Commission declared effective the 
Participating Organizations' Plan for allocating regulatory 
responsibilities pursuant to Rule 17d-2.\11\ The Plan is designed to 
eliminate regulatory duplication by allocating regulatory 
responsibility over Common NYSE Members \12\ or Common FINRA 
Members,\13\ as applicable, (collectively ``Common Members'') for the 
surveillance, investigation, and enforcement of common insider trading 
rules (``Common Rules'').\14\ The Plan assigns regulatory 
responsibility over Common NYSE Members to NYSE Regulation for 
surveillance, investigation, and enforcement of insider trading by 
broker-dealers, and

[[Page 21052]]

their associated persons, with respect to NYSE-listed stocks and NYSE 
Arca-listed stocks, irrespective of the marketplace(s) maintained by 
the Participating Organizations on which the relevant trading may 
occur. The Plan assigns regulatory responsibility over Common FINRA 
Members to FINRA for surveillance, investigation, and enforcement of 
insider trading by broker-dealers, and their associated persons, with 
respect to NASDAQ-listed stocks and Amex-listed stocks, as well as any 
CHX solely-listed stock, irrespective of the marketplace(s) maintained 
by the Participating Organizations on which the relevant trading may 
occur.
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    \11\ See Securities Exchange Act Release No. 58536 (September 
12, 2008), 73 FR 54646 (September 22, 2008) (File No. 4-566).
    \12\ Common NYSE Members include members of the NYSE and at 
least one of the Participating Organizations.
    \13\ Common FINRA Members include members of FINRA and at least 
one of the Participating Organizations.
    \14\ Common rules are defined as: (i) Federal securities laws 
and rules promulgated by the Commission pertaining to insider 
trading, and (ii) the rules of the Participating Organizations that 
are related to insider trading. See Exhibit A to the Plan.
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III. Proposed Amendment to the Plan

    On April 7, 2010, the parties submitted a proposed amendment to the 
Plan. The purpose of the amendment is to add EDGA and EDGX as 
participants to the Plan. The parties have followed the requisite 
procedure as set forth in Paragraph 27 to the Plan regarding the 
addition of new SROs to the Plan. The amended agreement replaces the 
previous agreement in its entirety. The text of the proposed amended 
17d-2 plan is as follows (additions are underlined; deletions are 
[bracketed]):
* * * * *

Agreement for the Allocation of Regulatory Responsibility of 
Surveillance, Investigation and Enforcement for Insider Trading 
pursuant to Sec.  17(d) of the Securities Exchange Act of 1934, 15 
U.S.C. Sec.  78q (d), and Rule 17d-2 Thereunder

    This agreement (the ``Agreement'') by and among the American Stock 
Exchange LLC (``Amex''), BATS Exchange, Inc. (``BATS''), Boston Stock 
Exchange, Inc., Chicago Board Options Exchange, Inc. (``CBOE'')\*\, 
Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange, Inc. (``EDGA''), 
EDGX Exchange, Inc. (``EDGX''), Financial Industry Regulatory 
Authority, Inc. (``FINRA''), International Securities Exchange, LLC 
(``ISE'')[dagger], The NASDAQ Stock Market LLC (``NASDAQ''), 
National Stock Exchange, Inc., New York Stock Exchange, LLC (``NYSE''), 
NYSE Arca Inc. (``NYSE Arca''), NYSE Regulation, Inc. (pursuant to 
delegated authority) (``NYSE Regulation''), and Philadelphia Stock 
Exchange, Inc. (together, the ``Participating Organizations''), is made 
pursuant to Sec.  17(d) of the Securities Exchange Act of 1934 (the 
``Act''), 15 U.S.C. Sec.  78q(d), and Securities and Exchange 
Commission (``SEC'') Rule 17d-2, which allow for plans to allocate 
regulatory responsibility among self-regulatory organizations 
(``SROs''). Upon approval by the SEC, this Agreement shall amend and 
restate the agreement among the Participating Organizations (except 
[BATS and CBOE, the latter of which replaces CBOE] EDGA and EDGX) 
approved by the SEC on [September 12] October 17, 2008.
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    \*\ CBOE's allocation of certain regulatory responsibilities to 
NYSE/FINRA under this Agreement is limited to the activities of the 
CBOE Stock Exchange, LLC, a facility of CBOE.
    \[dagger]\ ISE's allocation of certain regulatory 
responsibilities to NYSE/FINRA under this Agreement is limited to 
the activities of the ISE Stock Exchange, LLC, a facility of ISE.
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    Whereas, NYSE delegates to NYSE Regulation the regulation of 
trading by members in its market, and NYSE Regulation is a subsidiary 
of NYSE, all references to NYSE Regulation in this Agreement shall be 
read as references to both entities;
    Whereas, the Participating Organizations desire to: (a) Foster 
cooperation and coordination among the SROs; (b) remove impediments to, 
and foster the development of, a national market system; (c) strive to 
protect the interest of investors; and (d) eliminate duplication in 
their regulatory surveillance, investigation and enforcement of insider 
trading;
    Whereas, the Participating Organizations are interested in 
allocating to NYSE Regulation, Inc. (``NYSE Regulation'') regulatory 
responsibility for Common NYSE Members for surveillance, investigation 
and enforcement of Insider Trading (as defined below) in NYSE Listed 
Stocks (as defined below) irrespective of the marketplace(s) maintained 
by the Participating Organizations on which the relevant trading may 
occur in violation of Common Insider Trading Rules;
    Whereas, the Participating Organizations are interested in 
allocating to FINRA regulatory responsibility for Common FINRA Members 
for surveillance, investigation and enforcement of Insider Trading in 
NASDAQ Listed Stocks, Amex Listed Stocks, and CHX Solely Listed Stocks 
irrespective of the marketplace(s) maintained by the Participating 
Organizations on which the relevant trading may occur in violation of 
Common Insider Trading Rules;
    Whereas, the Participating Organizations will request regulatory 
allocation of these regulatory responsibilities by executing and filing 
with the SEC a plan for the above stated purposes (this Agreement, also 
known herein as the ``Plan'') pursuant to the provisions of Sec.  17(d) 
of the Act, and SEC Rule 17d-2 thereunder, as described below; and
    Whereas, the Participating Organizations will also enter into 
certain Regulatory Services Agreements (the ``Insider Trading RSAs''), 
of even date herewith, to provide for the investigation and enforcement 
of suspected Insider Trading against broker-dealers, and their 
associated persons, that (i) are not Common NYSE Members (as defined 
below) in the case of Insider Trading in NYSE Listed Stocks, and (ii) 
are not Common FINRA Members (as defined below) in the case of Insider 
Trading in NASDAQ Listed Stocks, Amex Listed Stocks, and CHX Solely 
Listed Stocks.
    Now, therefore, in consideration of the mutual covenants contained 
hereafter, and other valuable consideration to be mutually exchanged, 
the Participating Organizations hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement, or the 
context otherwise requires, the terms used in this Agreement will have 
the same meaning they have under the Act, and the rules and regulations 
thereunder. As used in this Agreement, the following terms will have 
the following meanings:
    a. ``Rule'' of an ``exchange'' or an ``association'' shall have the 
meaning defined in Section 3(a)(27) of the Act.
    b. ``Common NYSE Members'' shall mean members of the NYSE and at 
least one of the Participating Organizations.
    c. ``Common FINRA Members'' shall mean members of FINRA and at 
least one of the Participating Organizations.
    d. ``Common Insider Trading Rules'' shall mean (i) the federal 
securities laws and rules thereunder promulgated by the SEC pertaining 
to insider trading, and (ii) the rules of the Participating 
Organizations that are related to insider trading, as provided on 
Exhibit A to this Agreement.
    e. ``Effective Date'' shall have the meaning set forth in paragraph 
28.
    f. ``Insider Trading'' shall mean any conduct or action taken by a 
natural person or entity related in any way to the trading of 
securities by an insider or a related party based on or on the basis of 
material non-public information obtained during the performance of the 
insider's duties at the corporation, or otherwise misappropriated, that 
could be deemed a violation of the Common Insider Trading Rules.
    g. ``Intellectual Property'' will mean any: (1) processes, 
methodologies, procedures, or technology, whether or not patentable; 
(2) trademarks, copyrights, literary works or other works of 
authorship, service marks and

[[Page 21053]]

trade secrets; or (3) software, systems, machine-readable texts and 
files and related documentation.
    h. ``Plan'' shall mean this Agreement, which is submitted as a Plan 
for the allocation of regulatory responsibilities of surveillance for 
insider trading pursuant to Sec.  17(d) of the Securities and Exchange 
Act of 1934, 15 U.S.C. Sec.  78q(d), and SEC Rule 17d-2.
    i. ``NYSE Listed Stock'' shall mean an equity security that is 
listed on the NYSE, or NYSE Arca.
    j. ``NASDAQ Listed Stock'' shall mean an equity security that is 
listed on the NASDAQ.
    k. ``Amex Listed Stock'' shall mean an equity security that is 
listed on the Amex.
    l. ``CHX Solely Listed Stock'' shall mean an equity security that 
is listed only in the Chicago Stock Exchange.
    m. ``Listing Market'' shall mean Amex, Nasdaq, NYSE, or NYSE Arca, 
but not CHX.
    2. Assumption of Regulatory Responsibilities.
    a. NYSE Regulation: Assumption of Regulatory Responsibilities. On 
the Effective Date of the Plan, NYSE Regulation will assume regulatory 
responsibilities for surveillance, investigation and enforcement of 
Insider Trading by broker-dealers, and their associated persons, for 
Common NYSE Members with respect to NYSE Listed Stocks irrespective of 
the marketplace(s) maintained by the Participant Organizations on which 
the relevant trading may occur in violation of the Common Insider 
Trading Rules (``NYSE's Regulatory Responsibility'').
    b. FINRA: Assumption of Regulatory Responsibilities. On the 
Effective Date of the Plan, FINRA will assume regulatory 
responsibilities for surveillance, investigation and enforcement of 
Insider Trading by broker-dealers, and their associated persons, for 
Common FINRA Members with respect to NASDAQ and Amex Listed Stocks, as 
well as any CHX Solely Listed equity security, irrespective of the 
marketplace(s) maintained by the Participant Organizations on which the 
relevant trading may occur in violation of the Common Insider Trading 
Rules (``FINRA's Regulatory Responsibility'').
    c. Change in Control. In the event of a change of control of a 
Listing Market, the Listing Market will have the discretion to transfer 
the regulatory responsibility for its listed stocks from NYSE 
Regulation to FINRA or from FINRA to NYSE Regulation, provided the SRO 
assuming regulatory responsibility consents to such transfer.
    3. Certification of Insider Trading Rules.
    a. Initial Certification. By signing this Agreement, the 
Participating Organizations, other than NYSE Regulation and FINRA, 
hereby certify to NYSE Regulation and FINRA that their respective lists 
of Common Insider Trading Rules contained in Attachment A hereto are 
correct, and NYSE Regulation and FINRA hereby confirm that such rules 
are Common Insider Trading Rules as defined in this Agreement.
    b. Yearly Certification. Each year following the commencement of 
operation of this Agreement, or more frequently if required by changes 
in the rules of the Participating Organizations, each Participating 
Organization shall submit a certified and updated list of Common 
Insider Trading Rules to NYSE Regulation and FINRA for review, which 
shall (i) add Participating Organization rules not included in the 
then-current list of Common Insider Trading Rules that qualify as 
Common Rules as defined in this Agreement; (ii) delete Participating 
Organization rules included in the current list of Common Insider 
Trading Rules that no longer qualify as Common Insider Trading Rules as 
defined in this Agreement; and (iii) confirm that the remaining rules 
on the current list of Common Insider Trading Rules continue to be 
Participating Organization rules that qualify as Common Insider Trading 
Rules as defined in this Agreement. NYSE Regulation and FINRA shall 
review each Participating Organization's annual certification and 
confirm whether NYSE Regulation and FINRA agree with the submitted 
certified and updated list of Common Insider Rules by each of the 
Participating Organizations.
    4. No Retention of Regulatory Responsibility. The Participating 
Organizations do not contemplate the retention of any responsibilities 
with respect to the regulatory activities being assumed by NYSE 
Regulation and FINRA, respectively, under the terms of this Agreement. 
Nothing in this Agreement will be interpreted to prevent NYSE 
Regulation or FINRA from entering into Regulatory Services Agreement(s) 
to perform their Regulatory Responsibilities.
    5. Dually Listed Stocks. Stocks that are listed on more than one 
Participating Organization shall be designated as a NYSE Listed Stock, 
a NASDAQ Listed Stock, or an Amex Listed Stock based on the applicable 
transaction reporting plan for the equity security as set forth in 
paragraph 1.b. of Exhibit B.
    6. Fees. NYSE Regulation and FINRA shall charge Participating 
Organizations for performing their respective Regulatory 
Responsibilities, as set forth in the Schedule of Fees, attached as 
Exhibit B.
    7. Applicability of Certain Laws, Rules, Regulations or Orders. 
Notwithstanding any provision hereof, this Agreement shall be subject 
to any statute, or any rule or order of the SEC. To the extent such 
statute, rule, or order is inconsistent with one or more provisions of 
this Agreement, the statute, rule, or order shall supersede the 
provision(s) hereof to the extent necessary to be properly effectuated 
and the provision(s) hereof in that respect shall be null and void.
    8. Exchange Committee; Reports.
    a. Exchange Committee. The Participating Organizations shall form a 
committee (the ``Exchange Committee''), which shall act on behalf of 
all of Participating Organizations in receiving copies of the reports 
described below and in reviewing issues that arise under this 
Agreement. Each Participating Organization shall appoint a 
representative to the Exchange Committee. The Exchange Committee 
representatives shall report to their respective executive management 
bodies regarding status or issues under the Agreement. The 
Participating Organizations agree that the Exchange Committee will meet 
regularly up to four (4) times a year, with no more than one meeting 
per calendar quarter. At these meetings, the Exchange Committee will 
discuss the conduct of the Regulatory Responsibilities and identify 
issues or concerns with respect to this Agreement, including matters 
related to the calculation of the cost formula and accuracy of fees 
charged and provision of information related to the same. The SEC shall 
be permitted to attend the meetings as an observer.
    b. Reports. NYSE Regulation and FINRA shall provide the reports set 
forth in Exhibit C hereto and any additional reports related to the 
Agreement reasonably requested by a majority vote of all 
representatives to the Exchange Committee at each Exchange Committee 
meeting, or more often as the Participating Organizations deem 
appropriate, but no more often than once every quarterly billing 
period.
    9. Customer Complaints.
    a. If a Participating Organization receives a copy of a customer 
complaint relating to Insider Trading or other activity or conduct that 
is within the NYSE's Regulatory Responsibilities as set forth in this 
Agreement, the Participating Organization shall promptly forward to 
NYSE Regulation, as applicable, a copy of such customer complaint.

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    b. If a Participating Organization receives a copy of a customer 
complaint relating to Insider Trading or other activity or conduct that 
is within FINRA's Regulatory Responsibilities as set forth in this 
Agreement, the Participating Organization shall promptly forward to 
FINRA, as applicable, a copy of such customer complaint.
    10. Parties to Make Personnel Available as Witnesses. Each 
Participating Organization shall make its personnel available to NYSE 
Regulation or FINRA to serve as testimonial or non-testimonial 
witnesses as necessary to assist NYSE Regulation and FINRA in 
fulfilling the Regulatory Responsibilities allocated under this 
Agreement. FINRA and NYSE Regulation shall provide reasonable advance 
notice when practicable and shall work with a Participating 
Organization to accommodate reasonable scheduling conflicts within the 
context and demands as the entities with ultimate regulatory 
responsibility. The Participating Organization shall pay all reasonable 
travel and other expenses incurred by its employees to the extent that 
NYSE Regulation or FINRA require such employees to serve as witnesses, 
and provide information or other assistance pursuant to this Agreement.
    11. Market Data; Sharing of Work-Papers, Data and Related 
Information.
    a. Market Data. FINRA and NYSE Regulation shall obtain raw market 
data necessary to the performance of regulation under this Agreement 
from (a) the Consolidated Tape Association (``CTA'') as the exclusive 
securities information processor (``SIP'') for all NYSE-listed, AMEX-
listed securities, and CHX solely listed securities and (b) the NASDAQ 
Unlisted Trading Privileges Plan as the exclusive SIP for NASDAQ-listed 
securities.
    b. Sharing. A Participating Organization shall make available to 
each of NYSE Regulation and FINRA information necessary to assist NYSE 
Regulation or FINRA in fulfilling the regulatory responsibilities 
assumed under the terms of this Agreement. Such information shall 
include any information collected by an exchange or association in the 
course of performing its regulatory obligations under the Act, 
including information relating to an on-going disciplinary 
investigation or action against a member, the amount of a fine imposed 
on a member, financial information, or information regarding 
proprietary trading systems gained in the course of examining a member 
(``Regulatory Information''). This Regulatory Information shall be used 
by NYSE Regulation and FINRA solely for the purposes of fulfilling 
their respective regulatory responsibilities.
    c. No Waiver of Privilege. 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.
    d. Intellectual Property.
    (i) Existing Intellectual Property. Each of NYSE Regulation and 
FINRA, respectively, is and will remain the owner of all right, title 
and interest in and to the proprietary Intellectual Property it employs 
in the provision of regulation hereunder (including the SONAR and Stock 
Watch systems), and any derivative works thereof. To the extent certain 
elements of either of these parties' systems, or portions thereof, may 
be licensed or leased from third parties, all such third party elements 
shall remain the property of such third parties, as applicable. 
Likewise, any other Participating Organization is and will remain the 
owner of all right, title and interest in and to its own existing 
proprietary Intellectual Property.
    (ii) Enhancements to Existing Intellectual Property or New 
Developments of NYSE Regulation or FINRA. In the event NYSE Regulation 
or FINRA (a) makes any changes, modifications or enhancements to its 
respective Intellectual Property for any reason, or (b) creates any 
newly developed Intellectual Property for any reason, including as a 
result of requested enhancements or new development by the Exchange 
Committee (collectively, the ``New IP''), the Participating 
Organizations acknowledge and agree that each of NYSE Regulation and 
FINRA shall be deemed the owner of the New IP created by each of them, 
respectively (and any derivative works thereof), and shall retain all 
right, title and interest therein and thereto, and each other 
Participating Organization hereby irrevocably assigns, transfers and 
conveys to each of NYSE Regulation and FINRA, as applicable, without 
further consideration all of its right, title and interest in or to all 
such New IP (and any derivative works thereof).
    (iii) NYSE Regulation and FINRA will not charge the Participating 
Organizations any fees for any New IP created and used by NYSE 
Regulation or FINRA, respectively; provided, however, that NYSE 
Regulation and FINRA will each be permitted to charge fees for software 
maintenance work performed on systems used in the discharge of their 
respective duties hereunder.
    12. Special or Cause Examinations. Nothing in this Agreement shall 
restrict or in any way encumber the right of a party to conduct special 
or cause examinations of Common NYSE Members or Common FINRA Members as 
any party, in its sole discretion, shall deem appropriate or necessary.
    13. Dispute Resolution Under this Agreement.
    a. Negotiation. The Parties will attempt to resolve any disputes 
through good faith negotiation and discussion, escalating such 
discussion up through the appropriate management levels until reaching 
the executive management level. In the event a dispute cannot be 
settled through these means, the Parties shall refer the dispute to 
binding arbitration.
    b. Binding Arbitration. All claims, disputes, controversies, and 
other matters in question between the Parties to this Agreement arising 
out of or relating to this Agreement or the breach thereof that cannot 
be resolved by the Parties will be resolved through binding 
arbitration. Unless otherwise agreed by the Parties, a dispute 
submitted to binding arbitration pursuant to this paragraph shall be 
resolved using the following procedures:
    (i) The arbitration shall be conducted in the city of New York in 
accordance with the Commercial Arbitration Rules of the American 
Arbitration Association and judgment upon the award rendered by the 
arbitrator may be entered in any court having jurisdiction thereof; and
    (ii) There shall be three arbitrators, and the chairperson of the 
arbitration panel shall be an attorney.
    14. Limitation of Liability. As between the Participating 
Organizations, no Participating Organization, including its respective 
directors, governors, officers, employees and agents, will be liable to 
any other Participating Organization, or its directors, governors, 
officers, employees and agents, for any liability, loss or damage 
resulting from any delays, inaccuracies, errors or omissions with 
respect to its performing or failing to perform regulatory 
responsibilities, obligations, or functions, except (a) as otherwise 
provided for under the Act, (b) in instances of a Participating 
Organization's gross negligence, willful misconduct or reckless 
disregard with respect to another Participating Organization, (c) in 
instances of a breach of confidentiality obligations owed to another 
Participating Organization, or (d) in the case of any Participating 
Organization paying fees hereunder, for any payments due. The 
Participating Organizations understand and agree that the regulatory

[[Page 21055]]

responsibilities are being performed on a good faith and best effort 
basis and no warranties, express or implied, are made by any 
Participating Organization to any other Participating Organization with 
respect to any of the responsibilities to be performed hereunder. This 
paragraph is not intended to create liability of any Participating 
Organization to any third party.
    15. SEC Approval.
    a. The parties agree to file promptly this Agreement with the SEC 
for its review and approval. NYSE Regulation and FINRA shall jointly 
file this Agreement on behalf, and with the explicit consent, of all 
Participating Organizations.
    b. If approved by the SEC, the Participating Organizations will 
notify their members of the general terms of the Agreement and of its 
impact on their members.
    16. Subsequent Parties; Limited Relationship. This Agreement shall 
inure to the benefit of and shall be binding upon the Participating 
Organizations hereto and their respective legal representatives, 
successors, and assigns. Nothing in this Agreement, expressed or 
implied, is intended or shall: (a) confer on any person other than the 
Participating Organizations hereto, or their respective legal 
representatives, successors, and assigns, any rights, remedies, 
obligations or liabilities under or by reason of this Agreement, (b) 
constitute the Participating Organizations hereto partners or 
participants in a joint venture, or (c) appoint one Participating 
Organization the agent of the other.
    17. Assignment. No Participating Organization may assign this 
Agreement without the prior written consent of all the other 
Participating Organizations, which consent shall not be unreasonably 
withheld, conditioned or delayed; provided, however, that any 
Participating Organization may assign the Agreement to a corporation 
controlling, controlled by or under common control with the 
Participating Organization without the prior written consent of any 
other party.
    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. Termination.
    a. Any Participating Organization may cancel its participation in 
the Agreement at any time, provided that it has given 180 days written 
notice to the other Participating Organizations (or in the case of a 
change of control in ownership of a Participating Organization, such 
other notice time period as that Participating Organization may 
choose), and provided that such termination has been approved by the 
SEC. The cancellation of its participation in this Agreement by any 
Participating Organization shall not terminate this Agreement as to the 
remaining Participating Organizations.
    b. The Regulatory Responsibilities assumed under this Agreement by 
NYSE Regulation or FINRA (either, an ``Invoicing Party'') may be 
terminated by the Invoicing Party against any Participating 
Organization as follows. The Participating Organization will have 
thirty (30) days from receipt to satisfy the invoice. If the 
Participating Organization fails to satisfy the invoice within thirty 
(30) days of receipt (``Default''), the Invoicing Party will notify the 
Participating Organization of the Default. The Participating 
Organization will have thirty (30) days from receipt of the Default 
notice to satisfy the invoice.
    c. The Invoicing Party will have the right to terminate the 
Regulatory Responsibilities assumed under this Agreement if a 
Participating Organization has Defaulted in its obligation to pay the 
invoice on more than three (3) occasions in any rolling twenty-four 
(24) month period.
    20. Intermarket Surveillance Group (``ISG''). In order to 
participate in this Agreement, all Participating Organizations to this 
Agreement must be members of the ISG.
    21. General. The Participating Organizations agree to perform all 
acts and execute all supplementary instruments or documents that may be 
reasonably necessary or desirable to carry out the provisions of this 
Agreement.
    22. Liaison and Notices. All questions regarding the implementation 
of this Agreement shall be directed to the persons identified below, as 
applicable. All notices and other communications required or permitted 
to be given under this Agreement shall be in writing and shall be 
deemed to have been duly given upon (i) actual receipt by the notified 
party or (ii) constructive receipt (as of the date marked on the return 
receipt) if sent by certified or registered mail, return receipt 
requested, to the following addresses:
* * * * *
    23. Confidentiality. 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 under 
this Agreement. No party shall assert regulatory or other privileges as 
against the other with respect to Regulatory Information that is 
required to be shared pursuant to this Agreement, as defined by 
paragraph 11, above.
    24. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) of 
the Act, and Rule 17d-2 thereunder, the Participating Organizations 
jointly and severally request the SEC, upon its approval of this 
Agreement, to relieve the Participating Organizations, jointly and 
severally, of any and all responsibilities with respect to the matters 
allocated to NYSE Regulation and FINRA pursuant to this Agreement for 
purposes of Sec. Sec.  17(d) and 19(g) of the Act.
    25. Governing Law. This Agreement shall be deemed to have been made 
in the State of New York, and shall be construed and enforced in 
accordance with the law of the State of New York, without reference to 
principles of conflicts of laws thereof. Each of the parties hereby 
consents to submit to the jurisdiction of the courts of the State of 
New York in connection with any action or proceeding relating to this 
Agreement.
    26. Survival of Provisions. Provisions intended by their terms or 
context to survive and continue notwithstanding delivery of the 
regulatory services by NYSE Regulation or FINRA, as applicable, the 
payment of the Fees by the Participating Organizations, and any 
expiration of this Agreement shall survive and continue.
    27. Amendment.
    a. This Agreement may be amended to add a new Participating 
Organization, provided that such Participating Organization does not 
assume regulatory responsibility, solely by an amendment executed by 
NYSE Regulation, FINRA and such new Participating Organization. All 
other Participating Organizations expressly consent to allow NYSE 
Regulation and FINRA to jointly add new Participating Organizations to 
the Agreement as provided above. NYSE Regulation and FINRA will 
promptly notify all Participating Organizations of any such amendments 
to add a new Participating Organization.
    b. All other amendments must be made approved by each Participating 
Organization. All amendments, including adding a new Participating 
Organization, must be filed with and

[[Page 21056]]

approved by the Commission before they become effective.
    28. Effective Date. The Effective Date of this Agreement will be 
the date the SEC declares this Agreement to be effective pursuant to 
authority conferred by Sec.  17(d) of the Act, and SEC Rule 17d-2 
thereunder.
    29. Counterparts. This Agreement may be executed in any number of 
counterparts, including facsimile, each of which will be deemed an 
original, but all of which taken together shall constitute one single 
agreement between the Parties.
    In Witness Whereof, the Parties hereto have each caused this 
Agreement for the Allocation of Regulatory Responsibility of 
Surveillance, Investigation and Enforcement for Insider Trading 
Agreement to be signed and delivered by its duly authorized 
representative.

Exhibit A: Common Insider Trading Rules

    1. Securities Exchange Act of 1934 Section 10(b), and rules and 
regulations promulgated there under in connection with insider trading, 
including SEC Rule 10b-5 (as it pertains to insider trading), which 
states that:

Rule 10b-5--Employment of Manipulative and Deceptive Devices

    It shall be unlawful for any person, directly or indirectly, by the 
use of any means or instrumentality of interstate commerce, or of the 
mails or of any facility of any national securities exchange,
    a. To employ any device, scheme, or artifice to defraud,
    b. To make any untrue statement of a material fact or to omit to 
state a material fact necessary in order to make the statements made, 
in the light of the circumstances under which they were made, not 
misleading, or
    c. To engage in any act, practice, or course of business which 
operates or would operate as a fraud or deceit upon any person, in 
connection with the purchase or sale of any security.
    2. Securities Exchange Act of 1934 Section 17(a), and rules and 
regulations promulgated there under in connection with insider trading, 
including SEC Rule 17a-3 (as it pertains to insider trading).
    3. The following SRO Rules as they pertain to violations of insider 
trading:

FINRA NASD Rule 2110 (Standards of Commercial Honor and Principles of 
Trade)
FINRA NASD Rule 2120 (Use of Manipulative, Deceptive or Other 
Fraudulent Devices)
FINRA NASD Rule 3010 (Supervision)
FINRA NASD Rule 3110 (a) and (c) (Books and Records; Financial 
Condition)

NYSE Rule 401(a) (Business Conduct)
NYSE Rule 476(a) (Disciplinary Proceedings Involving Charges Against 
Members, Member Organizations, Allied Members, Approved Persons, 
Employees, or Others)
NYSE Rule 440 (Books and Records)
NYSE Rule 342 (Offices--Approval, Supervision and Control)

AMEX Cons. Art. II Sec. 3, Confidential Information
AMEX Cons. Art. V Sec. 4 Suspension or Expulsion (b), (h), (i), (j) and 
(r)
AMEX Cons. Art. XI Sec. 4 Controlled Corporations and Associations--
Responsibility for Corporate Subsidiary; Duty to Produce Books
AMEX Rule 3 General Prohibitions and Duty to Report (d), (h) (j) and 
(l)
AMEX Rule 3-AEMI General Prohibitions and Duty to Report (d) and (h)
AMEX Rule 16 Business Conduct
AMEX Rule 320 Offices--Approval, Supervision and Control
AMEX Rule 324 Books and Records

NASDAQ Rule 2110 (Standards of Commercial Honor and Principles of 
Trade)
NASDAQ Rule 2120 (Use of Manipulative, Deceptive or Other Fraudulent 
Devices)
NASDAQ Rule 3010 (Supervision)
NASDAQ Rule 3110 (a) and (c) (Books and Records; Financial Condition)

CHX Article 8, Rule 3 (Fraudulent Acts)
CHX Article 9, Rule 2 (Just & Equitable Trade Principles)
CHX Article 11, Rule 2 (Maintenance of Books and Records)
CHX Article 6, Rule 5 (Supervision of Registered Persons and Branch and 
Resident Offices)

ISE RULE 400 (Just and Equitable Principles of Trade)
ISE RULE 405 (Manipulation)
ISE RULE 408 (Prevention of Misuse of Material Nonpublic Information)

CBOE RULE 4.1 (Practices inconsistent with just and equitable 
principles)
CBOE RULE 4.2 (adherence to law)
CBOE RULE 4.7 (Manipulation)
CBOE RULE 4.18 (Prevention of the misuse of material non public 
information)

PHLX RULE 707 (Conduct Inconsistent with Just and Equitable Principles 
of Trade)
PHLX RULE 748 (Supervision)
PHLX RULE 760 (Maintenance, Retention and Furnishing of Books, Records 
and Other Information)
PHLX RULE 761 (Supervisory Procedures Relating to ITSFEA and to 
Prevention of Misuse or Material Nonpublic Information)
PHLX RULE 782 (Manipulative Operations)

NYSE Arca Rule 6.3 (Prevention of the Misuse of Material, Nonpublic 
Information)
NYSE Arca Rule 6.2(b) Prohibited Acts (J&E)
NYSE Arca Rule 6.1 Adherence to Law
NYSE Arca Rule 6.18 Supervision
NYSE Arca Rule 9.1(c) Office Supervision
NYSE Arca Rule 9.2(b) Account Supervision
NYSE Arca Rule 9.2(c) Customer Records
NYSE Arca Rule 9.17 Books and Records

NSX Rule 3.1 Business Conduct of ETP Holders
NSX Rule 3.2. Violations Prohibited
NSX Rule 3.3. Use of Fraudulent Devices
NSX Rule 4.1 Requirements
NSX Rule 5.1. Written Procedures
NSX Rule 5.3 Records
NSX Rule 5.5 Chinese Wall Procedures

BSE Chapter II, Sections 26-28 (Anti-Manipulative Provisions)
BSE Chapter II, Section 37 (ITSFEA Procedures)
BSE Chapter XXIV-C, Section 2 (Securities Accounts and Orders of 
Specialists)
BSE Chapter XXXVII, Section 11 (Limitations on Dealings)

BATS Rule 3.1 Business Conduct of ETP Holders
BATS Rule 3.2. Violations Prohibited
BATS Rule 3.3. Use of Fraudulent Devices
BATS Rule 4.1 Requirements
BATS Rule 5.1. Written Procedures
BATS Rule 5.3 Records
BATS Rule 5.5 Chinese Wall Procedures
BATS Rule 12.4 Manipulative Transactions

EDGA 3.1 Business Conduct of Members
EDGA 3.2 Violations Prohibited
EDGA 3.3 Use of Fraudulent Devices
EDGA 4.1 Requirements
EDGA 5.1 Written Procedures
EDGA 5.3 Records
EDGA 5.5 Prevention of misuse of material, nonpublic information
EDGA 12.4 Manipulative Transactions

EDGX 3.1 Business Conduct of Members
EDGX 3.2 Violations Prohibited
EDGX 3.3 Use of Fraudulent Devices
EDGX 4.1 Requirements
EDGX 5.1 Written Procedures
EDGX 5.3 Records
EDGX 5.5 Prevention of misuse of material, nonpublic information
EDGX 12.4 Manipulative Transactions

Exhibit B: Fee Schedule

    1. Fees. NYSE Regulation and, separately, FINRA shall charge each

[[Page 21057]]

Participating Organization a Quarterly Fee in arrears for the 
performance of NYSE Regulation's and FINRA's respective regulatory 
responsibilities under the Plan (each, a ``Quarterly Fee,'', and 
together, the ``Fees'').
    a. Quarterly Fees.
    (1) Quarterly Fees for each Participating Organization will be 
charged by NYSE Regulation and FINRA, respectively, according to the 
Participating Organization's ``Percentage of Publicly Reported Trades'' 
occurring over three-month billing periods. The ``Percentage of 
Publicly Reported Trades'' shall equal a Participating Organization's 
number of reported NYSE-listed trades (when billing originates from 
NYSE Regulation) and combined AMEX-listed, NASDAQ-listed, and CHX 
solely-listed trades (when billing originates from FINRA) during the 
relevant period (the ``Numerator''), divided by the total number of 
either all NYSE-listed trades or all combined AMEX-listed, NASDAQ-
listed, and CHX solelylisted trades, respectively, for the same period 
(the ``Denominator''). For purposes of clarification, ADF and Trade 
Reporting Facility (TRF) activity will be included in the Denominator. 
Additionally, with regard to TRFs, TRF trade volume will be charged to 
FINRA. Consequently, for purposes of calculating the Quarterly Fees, 
the volume for each Participant Organization's TRF will be calculated 
separately (that is, TRF volume will be broken out from the 
Participating Organization's overall Percentage of Publicly Reported 
Trades) and the fees for such will be billed to FINRA in accordance 
with paragraph 1(a)(2), rather than to the applicable Participating 
Organization.
    (2) The Quarterly Fees shall be determined by each of NYSE 
Regulation and FINRA, as applicable, in the following manner for each 
Participating Organization:
    (a) Less than 1.0%: If the Participating Organization's Percentage 
of Publicly Reported Trades for NYSE-listed trades (in the case of NYSE 
Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX 
solelylisted trades (in the case of FINRA) for the relevant three-month 
billing period is less than 1.0%, the Quarterly Fee shall be $3,125, 
per quarter (``Static Fee'');
    (b) Less than 2.0% but No Less than 1.0%: If the Participating 
Organization's Percentage of Publicly Reported Trades for NYSE-listed 
trades (in the case of NYSE Regulation) or for combined AMEX-listed, 
NASDAQ-listed, and CHX solely-listed trades (in the case of FINRA) for 
the relevant three-month billing period is less than 2.0% but no less 
than 1.0%, the Quarterly Fee shall be $9,375, per quarter (``Static 
Fee'');
    (c) 2.0% or Greater: If the Participating Organization's Percentage 
of Publicly Reported Trades for NYSE-listed trades (in the case of NYSE 
Regulation) or for combined AMEX-listed, NASDAQ-listed, and CHX solely 
listed trades (in the case of FINRA) for the relevant three-month 
billing period is 2.0% or greater, the Quarterly Fee shall be the 
amount equal to the Participating Organization's Percentage of Publicly 
Reported Trades multiplied by NYSE Regulation's or FINRA's total charge 
(``Total Charge''), respectively, for its performance of Insider 
Trading regulatory responsibilities for the relevant three-month 
billing period.
    (3) Increases in Static Fees. NYSE Regulation and FINRA will re-
evaluate the Quarterly Fees on an annual basis during the annual budget 
process outlined in paragraph 1.c. below. During each annual re-
evaluation, NYSE Regulation and FINRA will have the discretion to 
increase the Static Fees by a percentage no greater than the percentage 
increase in the Final Budget over the preceding year's Final Budget. 
Any changes to the Static Fees shall not require an amendment to this 
Agreement, but rather shall be memorialized through the Budget Process.
    (4) Increases in Total Charges. Any change in the Total Charges 
(whether a Final Budget increase or any mid year change) shall not 
require an amendment to this Agreement, but rather shall be 
memorialized through the budget process.
    b. Source of Data. For purposes of calculation of the Percentage of 
Publicly Reported Trades for each Participating Organization, NYSE 
Regulation and FINRA shall use (a) the Consolidated Tape Association 
(``CTA'') as the exclusive securities information processor (``SIP'') 
for all NYSE Listed Stocks, AMEX Listed Stocks, and CHXSolely Listed 
Stocks, and (b) the Unlisted Trading Privileges Plan as the exclusive 
SIP for NASDAQ-listed Stocks.
    c. Annual Budget Forecast. NYSE Regulation and FINRA will notify 
the Participating Organizations of the forecasted costs of their 
respective insider trading programs for the following calendar year by 
close of business on October 15 of the then-current year (the 
``Forecasted Budget''). NYSE Regulation and FINRA shall use best 
efforts to provide as accurate a forecast as possible. NYSE Regulation 
and FINRA shall then provide a final submission of the costs following 
approval of such costs by their respective governing Boards (the 
``Final Budget''). Subject to paragraph 1(d) below, in the event of a 
difference between the Forecasted Budget and the Final Budget, the 
Final Budget will govern.
    d. Increases in Fees over Twenty Percent.
    (1) In the event that any proposed increase to Fees by NYSE 
Regulation or by FINRA for a given calendar year (which increase may 
arise either during the annual budgetary forecasting process or through 
any mid-year increase) will result in a cumulative increase in such 
calendar year's Fees of more than twenty percent (20%) above the 
preceding calendar year's Final Budget (a ``Major Increase''), then 
senior management of any Participating Organization (a) that is a 
Listing Market or (b) for which the Percentage of Publicly Reported 
Trades is then currently twenty percent (20%) or greater, shall have 
the right to call a meeting with the senior management of NYSE 
Regulation or FINRA, respectively, in order to discuss any disagreement 
over such proposed Major Increase. By way of example, if NYSE 
Regulation provides a Final Budget for 2009 that represents an 8% 
increase above the Final Budget for 2008, the terms of this paragraph 
1.d.(1) shall not apply; if, however, in April of 2009, NYSE Regulation 
notifies the Exchange Committee of an increase in Fees that represents 
an additional 14% increase above the Final Budget for 2008, then the 
increase shall be deemed a Major Increase, and the terms of this 
paragraph 1.d.(1) shall become applicable (i.e., 8% + 14% = a 
cumulative increase of 22% above 2008 Final Budget).
    (2) In the event that senior management members of the involved 
parties are unable to reach an agreement regarding the proposed Major 
Increase, then the matter shall be referred back to the Exchange 
Committee for final resolution. Prior to the matter being referred back 
to the Exchange Committee, nothing shall prohibit the parties from 
conferring with the SEC. Resolution shall be reached through a vote of 
no fewer than all Participating Organizations seated on the Exchange 
Committee, and a simple majority shall be required in order to reject 
the proposed Major Increase.
    e. Time Tracking. NYSER and FINRA shall track the time spent by 
staff on insider trading responsibilities under this Agreement; 
however, time tracking will not be used to allocate costs.
    2. Invoicing and Payment.
    a. NYSE Regulation shall invoice each Participating Organization 
for the Quarterly Fee associated with the

[[Page 21058]]

regulatory activities performed pursuant to this Agreement during the 
previous three-month billing period within forty five (45) days of the 
end of such previous 3-month billing period. A Participating 
Organization shall have thirty (30) days from date of invoice to make 
payment to NYSE Regulation on such invoice. The invoice will reflect 
the Participating Organization's Percentage of Publicly Reported Trades 
for that billing period.
    b. FINRA shall invoice each Participating Organization for the 
Quarterly Fee associated with the regulatory activities performed 
pursuant to this Agreement during the previous three-month billing 
period within forty five (45) days of the end of such previous 3-month 
billing period. A Participating Organization shall have thirty (30) 
days from date of invoice to make payment to FINRA on such invoice. The 
invoice will reflect the Participating Organization's Percentage of 
Publicly Reported Trades for that billing period.
    3. Disputed Invoices; Interest. In the event that a Participating 
Organization disputes an invoice or a portion of an invoice, the 
Participating Organization shall notify in writing either FINRA or NYSE 
Regulation (each, an ``Invoicing Party''), as applicable, of the 
disputed item(s) within fifteen (15) days of receipt of the invoice. In 
its notification to the Invoicing Party of the disputed invoice, the 
Participating Organization shall identify the disputed item(s) and 
provide a brief explanation of why the Participating Organization 
disputes the charges. An Invoicing Party may charge a Participating 
Organization interest on any undisputed invoice or the undisputed 
portions of a disputed invoice that a Participating Organization fails 
to pay within thirty (30) days of its receipt of such invoice. Such 
interest shall be assessed monthly. Interest will mean one and one half 
percent per month, or the maximum allowable under applicable Law, 
whichever is less.
    4. Taxes. In the event any governmental authority deems the 
regulatory activities allocated to NYSE Regulation or FINRA to be 
taxable activities similar to the provision of services in a commercial 
context, the other Participating Organizations agree that they shall 
bear full responsibility, on a joint and several basis, for the payment 
of any such taxes levied on NYSE Regulation or FINRA, or, if such taxes 
are paid by NYSE Regulation or FINRA directly to the governmental 
authority, the other Participating Organizations agree that they shall 
reimburse NYSE Regulation and/or FINRA, as applicable, for the amount 
of any such taxes paid.
    5. Audit Right; Record Keeping.
    a. Audit Right.
    (i) Audit of NYSE Regulation.
    (a) Once every rolling twelve (12) month period, NYSE Regulation 
shall permit no more than one audit (to be performed by one or more 
Participating Organizations) of the Fees charged by NYSE Regulation to 
the Participating Organizations hereunder and a detailed cost analysis 
supporting such Fees (the ``Audit''). The Participating Organization or 
Organizations that conduct this Audit will select a nationally-
recognized independent auditing firm (or may use its regular 
independent auditor, providing it is a nationally-recognized auditing 
firm) (``Auditing Firm'') to act on its, or their behalf, and will 
provide reasonable notice to other Participating Organizations of the 
Audit and invite the other Participating Organizations to participate 
in the Audit. NYSE Regulation will permit the Auditing Firm reasonable 
access during NYSE Regulation's normal business hours, with reasonable 
advance notice, to such financial records and supporting documentation 
as are necessary to permit review of the accuracy of the calculation of 
the Fees charged to the Participating Organizations. The Participating 
Organization, or Organizations, as applicable, other than NYSE 
Regulation, shall be responsible for the costs of performing any such 
audit.
    (b) If, through an Audit, the Exchange Committee determines that 
NYSE Regulation has inaccurately calculated the Fees for any 
Participating Organization, the Exchange Committee will promptly notify 
NYSE Regulation in writing of the amount of such difference in the 
Fees, and, if applicable, NYSE Regulation shall issue a reimbursement 
of the overage amount to the relevant Participating Organization(s), 
less any amount owed by the Participating Organization under any 
outstanding, undisputed invoice(s). If such an Audit reveals that any 
Participating Organization paid less than what was required pursuant to 
the Agreement, then that Participating Organization shall promptly pay 
NYSE Regulation the difference between what the Participating 
Organization owed pursuant to the Agreement and what that Participating 
Organization originally paid NYSE Regulation. If NYSE Regulation 
disputes the results of an audit regarding the accuracy of the Fees, it 
will submit the dispute for resolution pursuant to the dispute 
resolution procedures in paragraph 13 hereof.
    (c) In the event that through the review of any supporting 
documentation provided during the Audit, any one or more Participating 
Organizations desire to discuss with NYSE Regulation the supporting 
documentation and any questions arising therefrom with regard to the 
manner in which regulation was conducted, the Participating 
Organization(s) shall call a meeting with NYSE Regulation. NYSE 
Regulation shall in turn notify the Exchange Committee of this meeting 
in advance, and all Participating Organizations shall be welcome to 
attend (the ``Fee Analysis Meeting''). The parties to this Agreement 
acknowledge and agree that while NYSE Regulation commits to discuss the 
supporting documentation at the Fee Analysis Meeting, NYSE Regulation 
shall not be subject, by virtue of the above Audit rights or any 
discussions during the Fee Analysis Meeting or otherwise, to any 
limitation whatsoever, other than the Increase in Fee provisions set 
forth in paragraph 1.d. of this Exhibit, on its discretion as to the 
manner and means by which it conducts its regulatory efforts in its 
role as the SRO primarily liable for regulatory decisions under this 
Agreement. To that end, no disagreement among the Participating 
Organizations as to the manner or means by which NYSE Regulation 
conducts its regulatory efforts hereunder shall be subject to the 
dispute resolution procedures hereunder, and no Participating 
Organization shall have the right to compel NYSE Regulation to alter 
the manner or means by which it conducts its regulatory efforts. 
Further, a Participating Organization shall not have the right to 
compel a rebate or reassessment of fees for services rendered, on the 
basis that the Participating Organization would have conducted 
regulatory efforts in a different manner than NYSE Regulation in its 
professional judgment chose to conduct its regulatory efforts.
    ii. Audit of FINRA.
    (a) Once every rolling twelve (12) month period, FINRA shall permit 
no more than one audit (to be performed by one or more Participating 
Organizations) of the Fees charged by FINRA to the Participating 
Organizations hereunder and a detailed cost analysis supporting such 
Fees (the ``Audit''). The Participating Organization or Organizations 
that conduct this Audit will select a nationally-recognized independent 
auditing firm (or may use its regular independent auditor, providing it 
is a nationally-recognized auditing firm) (``Auditing Firm'') to act on 
its, or their behalf, and will provide

[[Page 21059]]

reasonable notice to other Participating Organizations of the Audit. 
FINRA will permit the Auditing Firm reasonable access during FINRA's 
normal business hours, with reasonable advance notice, to such 
financial records and supporting documentation as are necessary to 
permit review of the accuracy of the calculation of the Fees charged to 
the Participating Organizations. The Participating Organization, or 
Organizations, as applicable, other than FINRA, shall be responsible 
for the costs of performing any such audit.
    (b) If, through an Audit, the Exchange Committee determines that 
FINRA has inaccurately calculated the Fees for any Participating 
Organization, the Exchange Committee will promptly notify FINRA in 
writing of the amount of such difference in the Fees, and, if 
applicable, FINRA shall issue a reimbursement of the overage amount to 
the relevant Participating Organization(s), less any amount owed by the 
Participating Organization under any outstanding, undisputed 
invoice(s). If such an Audit reveals that any Participating 
Organization paid less than what was required pursuant to the 
Agreement, then that Participating Organization shall promptly pay 
FINRA the difference between what the Participating Organization owed 
pursuant to the Agreement and what that Participating Organization 
originally paid FINRA. If FINRA disputes the results of an audit 
regarding the accuracy of the Fees, it will submit the dispute for 
resolution pursuant to the dispute resolution procedures in paragraph 
13 hereof.
    (c) In the event that through the review of any supporting 
documentation provided during the Audit, any one or more Participating 
Organizations desire to discuss with FINRA the supporting documentation 
and any questions arising therefrom with regard to the manner in which 
regulation was conducted, the Participating Organization(s) shall call 
a meeting with FINRA. FINRA shall in turn notify the Exchange Committee 
of this meeting in advance, and all Participating Organizations shall 
be welcome to attend (the ``Fee Analysis Meeting''). The parties to 
this Agreement acknowledge and agree that while FINRA commits to 
discuss the supporting documentation at the Fee Analysis Meeting, FINRA 
shall not be subject, by virtue of the above Audit rights or any 
discussions during the Fee Analysis Meeting or otherwise, to any 
limitation whatsoever, other than the Increase in Fee provisions set 
forth in paragraph 1.d. of this Exhibit, on its discretion as to the 
manner and means by which it conducts its regulatory efforts in its 
role as the SRO primarily liable for regulatory decisions under this 
Agreement. To that end, no disagreement among the Participating 
Organizations as to the manner or means by which FINRA conducts its 
regulatory efforts hereunder shall be subject to the dispute resolution 
procedures hereunder, and no Participating Organization shall have the 
right to compel FINRA to alter the manner or means by which it conducts 
its regulatory efforts. Further, a Participating Organization shall not 
have the right to compel a rebate or reassessment of fees for services 
rendered, on the basis that the Participating Organization would have 
conducted regulatory efforts in a different manner than FINRA in its 
professional judgment chose to conduct its regulatory efforts.
    b. Record Keeping. In anticipation of any audit that may be 
performed by the Exchange Committee under paragraph 5.a. above, NYSE 
and FINRA shall each keep accurate financial records and documentation 
relating to the Fees charged by each, respectively, under this 
Agreement.

Exhibit C: Reports

    NYSE Regulation and FINRA shall provide the following information 
in reports to the Exchange Committee, which information covers activity 
occurring under this Agreement:
    1. Alert Summary Statistics: Total number of surveillance system 
alerts generated by quarter along with associated number of reviews and 
investigations. In addition, this paragraph shall also reflect the 
number of reviews and investigations originated from a source other 
than an alert. A separate table would be presented for Amex Listed, 
Nasdaq Listed, and CHX Solely Listed equity trading activity.

------------------------------------------------------------------------
          2008             Surveillance alerts        Investigations
------------------------------------------------------------------------
1st Quarter              .......................  ......................
2nd Quarter              .......................  ......................
3rd Quarter              .......................  ......................
4th Quarter              .......................  ......................
                        ------------------------------------------------
    2008 Total           .......................  ......................
------------------------------------------------------------------------

    2. Aging of Open Matters: Would reflect the aging for all currently 
open matters for the quarterly period being reported. A separate table 
would be presented for Amex Listed, Nasdaq Listed, and CHX Solely 
Listed equity trading activity. Example:

------------------------------------------------------------------------
                           Surveillance alerts        Investigations
------------------------------------------------------------------------
0-6 months               .......................  ......................
6-9 months               .......................  ......................
9-12 months              .......................  ......................
12+ months               .......................  ......................
                        ------------------------------------------------
    Total                .......................  ......................
------------------------------------------------------------------------

    3. Timeliness of Completed Matters: Would reflect the total age of 
those matters that were completed or closed during the quarterly period 
being reported. NYSE and FINRA will provide total referrals to the SEC.
    Example:

[[Page 21060]]



------------------------------------------------------------------------
                           Surveillance alerts        Investigations
------------------------------------------------------------------------
0-6 months               .......................  ......................
6-9 months               .......................  ......................
9-12 months              .......................  ......................
12+ months               .......................  ......................
                        ------------------------------------------------
    Total                .......................  ......................
------------------------------------------------------------------------

    4. Disposition of Closed Matters: Would reflect the disposition of 
those matters that were completed or closed during the quarterly period 
being reported. A separate table would be presented for Amex Listed, 
Nasdaq Listed, and CHX Solely Listed equity trading activity.
    Example:

------------------------------------------------------------------------
                             Surveillance YTD       Investigations YTD
------------------------------------------------------------------------
No Further Review        .......................  ......................
Letter of Caution/       .......................  ......................
 Admonition/Fine
Referred to Legal/       .......................  ......................
 Enforcement
Referred to SEC/SRO      .......................  ......................
Merged                   .......................  ......................
Other                    .......................  ......................
                        ------------------------------------------------
    Total                .......................  ......................
------------------------------------------------------------------------

    5. Pending Reviews. In addition to the above reports, the Chief 
Regulatory Officer (CRO) (or his or her designee) of any Participating 
Organization that is also a listing market (including CHX) may inquire 
about pending reviews involving stocks listed on that Participating 
Organization's market. NYSE Regulation and FINRA, respectively, will 
respond to such inquiries from a CRO; provided, however, that (a) the 
CRO must hold any information provided by NYSE Regulation and FINRA in 
confidence and (b) NYSE Regulation and FINRA will not be compelled to 
provide information in contradiction of any mandate, directive or order 
from the SEC, U.S. Attorney's Office, the Office of any State Attorney 
General or court of competent jurisdiction.
* * * * *

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. 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 4-566 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 4-566. 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 plan that are filed with the 
Commission, and all written communications relating to the proposed 
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 plan also will be available for inspection and 
copying at the principal offices of Amex, BATS, BX, CBOE, CHX, EDGA, 
EDGX, FINRA, ISE, NASDAQ, NSX, NYSE, NYSE Arca, NYSE Regulation, and 
Phlx. 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 4-566 
and should be submitted on or before May 13, 2010.

V. Discussion

    The Commission finds that the Plan, as proposed to be amended, is 
consistent with the factors set forth in Section 17(d) of the Act \15\ 
and Rule 17d-2 \16\ thereunder in that it is necessary or appropriate 
in the public interest and for the protection of investors, fosters 
cooperation and coordination among SROs, and removes impediments to and 
fosters the development of the national market system. The Commission 
continues to believe that the Plan, as proposed to be amended, should 
reduce unnecessary regulatory duplication by allocating regulatory 
responsibility for the surveillance, investigation, and enforcement of 
Common Rules over Common NYSE Members, with respect to NYSE-listed 
stocks and NYSE Arca listed stocks, to NYSE and over Common FINRA 
Members, with respect to NASDAQ-listed stocks, Amex-listed stocks, and 
any CHX solely-listed stock, to FINRA. Accordingly, the proposed 
amendment to the Plan promotes efficiency by consolidating these 
regulatory functions in a single SRO based on the listing market for a 
stock, with regard to Common NYSE Members and Common FINRA Members. 
Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed

[[Page 21061]]

amendment is effective. The purpose of the amendment is to add EDGA and 
EDGX as SRO participants to the Plan. By declaring effective the 
amended Plan today, EDGA and EDGX can be included in the Plan prior to 
beginning operations as a national securities exchange and the amended 
Plan can become effective and be implemented without undue delay. In 
addition, the Commission notes that the prior version of this Plan was 
published for comment, and the Commission did not receive any comments 
thereon.\17\ Finally, the Commission does not believe that the 
amendment to the Plan raises any new regulatory issues that the 
Commission has not previously considered.
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    \15\ 15 U.S.C. 78q(d).
    \16\ 17 CFR 240.17d-2.
    \17\ See supra note 11.
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VI. Conclusion

    This order gives effect to the amended Plan submitted to the 
Commission that is contained in File No. 4-566.
    It is therefore ordered, pursuant to Section 17(d) of the Act,\18\ 
that the Plan, as amended, is hereby approved and declared effective.
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    \18\ 15 U.S.C. 78q(d).
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    It is further ordered that the Participating Organizations are 
relieved of those regulatory responsibilities allocated to NYSE and 
FINRA under the amended Plan to the extent of such allocation.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(34).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9277 Filed 4-21-10; 8:45 am]
BILLING CODE 8011-01-P

