
[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62884-62885]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24542]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70568; File No. SR-BX-2013-047]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order 
Approving a Proposed Rule Change To Assume Operational Responsibility 
for Certain Surveillance Activity Currently Performed by FINRA Under 
the Exchange's Authority and Supervision

September 30, 2013.
    On July 31, 2013, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
assume operational responsibility for certain surveillance activity 
currently performed by the Financial Industry Regulatory Authority 
(``FINRA'') under the Exchange's authority and supervision. The 
proposed rule change was published for comment in the Federal Register 
on August 16, 2013.\3\ The Commission received no comments on the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 70158 (August 12, 
2013), 78 FR 50126 (August 16, 2013) (``Notice'').
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    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \4\ 
and, in particular, the requirements of Section 6(b)(5) of the Act.\5\ 
Since its acquisition by The NASDAQ OMX Group, Inc., BX has contracted 
with FINRA through various regulatory services agreements to perform 
certain surveillance and other regulatory functions on its behalf. BX 
Rule 0150 requires that, unless the Exchange obtains prior Commission 
approval, the regulatory functions subject to the regulatory services 
agreement in effect at the time of its

[[Page 62885]]

acquisition must continue to be performed by FINRA or an affiliate 
thereof or by another independent self-regulatory organization. BX now 
proposes to reallocate operational responsibility from FINRA to BX 
Regulation for a limited number of equities surveillance patterns and 
related review functions focused on: (1) Manipulation patterns that 
monitor solely BX activity, including patterns that monitor the opening 
and closing crosses on The NASDAQ Stock Market LLC (``NASDAQ'') and 
compliance with minimum bid listing requirements; and (2) monitoring of 
compliance by NASDAQ member firms with elements of the Commission's 
Regulation M \6\ and NASDAQ Rule 4619 compliance, which will include 
data from BX.
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 17 CFR 242.100 et seq.
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    In the Notice, the Exchange represents that it has the ability to 
conduct the surveillances and regulatory functions that it will assume. 
The Commission also notes that the Exchange represents that its 
expertise in its own market structure, along with its existing real-
time monitoring of these activities, may enable the Exchange to better 
detect improper activities on its market. Moreover, these patterns, 
underlying rules, and analytical requirements are similar to patterns 
that BX regulatory personnel already monitor for affiliated options 
markets. The Exchange represents that NASDAQ's MarketWatch group, which 
already handles other real-time surveillance of the BX market, should 
be able to adequately and effectively handle the surveillances related 
to the instant proposed rule change.
    In the Notice, the Exchange further represents that it will 
continue to refer potentially violative conduct to FINRA for further 
review and that FINRA will continue to perform most of the surveillance 
activity for BX's equity market. The Exchange also represents that 
FINRA will continue to perform examination and enforcement work, 
subject to BX's supervision and ultimate responsibility.
    For the foregoing reasons, the Commission believes that the 
proposed rule change is consistent with the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-BX-2013-047) be, and it 
hereby is, approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24542 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P


