
[Federal Register Volume 81, Number 153 (Tuesday, August 9, 2016)]
[Notices]
[Pages 52722-52730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18793]



[[Page 52722]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78473; 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 Bats BZX Exchange, Inc., Bats BYX Exchange, 
Inc., Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX 
Exchange, Inc., Financial Industry Regulatory Authority, Inc., NASDAQ 
BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, 
Inc., and Investors Exchange LLC Relating to the Surveillance, 
Investigation, and Enforcement of Insider Trading Rules

August 3, 2016.
    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 on July 21, 2016, pursuant to Rule 17d-
2 of the Act,\2\ by Bats BZX Exchange, Inc. (``BZX''), Bats BYX 
Exchange, Inc. (``BYX''), Chicago Stock Exchange, Inc. (``CHX''), Bats 
EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), 
Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ BX, 
Inc. (``NASDAQ BX''), NASDAQ PHLX LLC (``NASDAQ PHLX''), The NASDAQ 
Stock Market LLC (``NASDAQ''), National Stock Exchange, Inc. (``NSX''), 
New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), 
NYSE Arca, Inc. (``NYSE Arca''), and Investors Exchange LLC (``IEX'') 
(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 FINRA Members \12\ (collectively ``Common 
Members'') for the surveillance, investigation, and enforcement of 
common insider trading rules (``Common Rules'').\13\ 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 Listed 
Stocks (as defined in the Plan), 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). See also Securities 
Exchange Act Release Nos. 58806 (October 17, 2008), 73 FR 63216 
(October 23, 2008); 61919 (April 15, 2010), 75 FR 21051 (April 22, 
2010); 63103 (October 14, 2010), 75 FR 64755 (October 20, 2010); 
63750 (January 21, 2011), 76 FR 4948 (January 27, 2011); and 65991 
(December 16, 2011), 76 FR 79714 (December 22, 2011).
    \12\ Common FINRA Members include members of FINRA and at least 
one of the Participating Organizations.
    \13\ 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 July 21, 2016, the Parties submitted a proposed amendment to the 
Plan. The proposed amendment was submitted to reflect the addition of 
IEX as a Listing Market (as defined in the

[[Page 52723]]

Plan). Other similar conforming amendments were made to reflect this 
addition. The Participating Organizations also amended the Plan, among 
other things, to: (i) Reflect name changes of certain Participating 
Organizations; (ii) remove Chicago Board Options Exchange, Inc. as a 
Participating Organization; (iii) replace the defined term ``Listed 
Stock(s)'' with ``NMS Stock(s)'' and revise the definition of the term; 
and (iv) update the SRO rules that are covered by the Agreement. In 
addition, the Participating Organizations entered into a regulatory 
services agreement that addresses investigation and enforcement in 
situations involving Insider Trading by non-Common FINRA Members. The 
text of the proposed amended 17d-2 plan is as follows (additions are 
italicized; 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 [BATS]Bats BZX 
Exchange, Inc. (``[BATS]BZX''), [BATS Y-]Bats BYX Exchange, Inc. 
(``BYX''), [Chicago Board Options Exchange, Inc. (``CBOE'') \1\,] 
Chicago Stock Exchange, Inc. (``CHX''), Bats EDGA Exchange, Inc. 
(``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), Financial Industry 
Regulatory Authority, Inc. (``FINRA''), NASDAQ [OMX] BX, Inc. (``NASDAQ 
[OMX] BX''), NASDAQ [OMX] PHLX LLC (``NASDAQ [OMX] PHLX''), The NASDAQ 
Stock Market LLC (``NASDAQ''), National Stock Exchange, Inc. (``NSX''), 
New York Stock Exchange LLC (``NYSE''), NYSE [Amex]MKT LLC (``NYSE 
[Amex]MKT''), [and] NYSE Arca, Inc. (``NYSE Arca'') and Investors' 
Exchange LLC (``IEX'') (each a ``Participating Organization'' and 
together, the ``Participating Organizations''), is made pursuant to 
Sec.  17(d) of the Securities Exchange Act of 1934 (the ``Act''), 15 
U.S.C. 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 approved by the SEC on [January 21, 
2011]December 16, 2011.
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    \1\ [CBOE's allocation of certain regulatory responsibilities to 
FINRA under this Agreement is limited to the activities of the CBOE 
Stock Exchange, LLC, a facility of CBOE.]
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    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 FINRA regulatory responsibility for Common FINRA Members 
(as defined below) for surveillance, investigation and enforcement of 
Insider Trading (as defined below) in [Listed] NMS 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 (as defined below);
    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 a 
Regulatory Services Agreement (the ``Insider Trading RSA''), of even 
date herewith, to provide for the investigation and enforcement of 
suspected Insider Trading against broker-dealers, and their associated 
persons, that are not Common FINRA Members in the case of Insider 
Trading in [Listed] NMS 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 FINRA Members'' shall mean members of FINRA and at 
least one of the Participating Organizations.
    c. ``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.
    d. ``Effective Date'' shall have the meaning set forth in paragraph 
[28]27.
    e. ``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.
    f. ``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 trade secrets; or (3) software, systems, 
machine-readable texts and files and related documentation.
    g. ``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 Act, 15 U.S.C. 78q(d), 
and SEC Rule 17d-2.
    h. ``[Listed]NMS Stock(s)'' shall [mean NYSE Listed Stock(s), 
NASDAQ Listed Stock(s), NYSE Amex Listed Stock(s), NYSE Arca Listed 
Stock(s), BATS Listed Stock(s) or CHX Solely Listed Stock(s)]have the 
meaning set forth in Rule 600(b)(47) of SEC Regulation NMS.
    [i. ``NYSE Listed Stock'' shall mean an equity security that is 
listed on the NYSE.]
    [j. ``NASDAQ Listed Stock'' shall mean an equity security that is 
listed on NASDAQ.]
    [k. ``NYSE Amex Listed Stock'' shall mean an equity security that 
is listed on NYSE Amex.]
    [l. ``NYSE Arca Listed Stock'' shall mean an equity security that 
is listed on NYSE Arca.]
    [m. ``BATS Listed Stock'' shall mean an equity security that is 
listed on BATS.]
    [n. ``CHX Solely Listed Stock'' shall mean an equity security that 
is listed only on the CHX.]
    [o.]i. ``Listing Market'' shall mean [NYSE Amex, NASDAQ, NYSE, NYSE 
Arca or BATS, but not CHX] an exchange that lists NMS stocks.
    2. Assumption of Regulatory Responsibilities. On the Effective Date 
of the Plan, FINRA will assume regulatory responsibilities for 
surveillance,

[[Page 52724]]

investigation and enforcement of Insider Trading by broker-dealers, and 
their associated persons, for Common FINRA Members with respect to 
[Listed]NMS 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 (``Regulatory 
Responsibilities'').
    3. Certification of Insider Trading Rules.
    a. Initial Certification. By signing this Agreement, the 
Participating Organizations, other than FINRA, hereby certify to FINRA 
that their respective lists of Common Insider Trading Rules contained 
in Exhibit A hereto are correct, and FINRA hereby confirms 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 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 Insider Trading 
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. FINRA shall review each 
Participating Organization's annual certification and confirm whether 
FINRA agrees with the submitted certified and updated list of Common 
Insider Trading 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 FINRA under 
the terms of this Agreement.
    [5. Dually Listed Stocks. Stocks that are listed on more than one 
Participating Organization shall be designated as an NYSE Listed Stock, 
a NASDAQ Listed Stock, an NYSE Arca Listed Stock or an NYSE 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]5. Fees. FINRA shall charge Participating Organizations for 
performing the Regulatory Responsibilities, as set forth in the 
Schedule of Fees, attached as Exhibit B.
    [7]6. 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]7. 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 this 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. FINRA shall provide the reports set forth in Exhibit C 
hereto and any additional reports related to this 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]8. Customer Complaints. 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]9. Parties to Make Personnel Available as Witnesses. Each 
Participating Organization shall make its personnel available to FINRA 
to serve as testimonial or non-testimonial witnesses as necessary to 
assist FINRA in fulfilling the Regulatory Responsibilities allocated 
under this Agreement. FINRA 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 entity with ultimate regulatory responsibility. The 
Participating Organization shall pay all reasonable travel and other 
expenses incurred by its employees to the extent that FINRA requires 
such employees to serve as witnesses, and provide information or other 
assistance pursuant to this Agreement.
    [11]10. Market Data; Sharing of Work-Papers, Data and Related 
Information.
    a. Market Data. FINRA 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 Stocks, NYSE Amex 
Listed Stocks, NYSE Arca Listed Stocks, BATS Listed Stocks and CHX 
Solely Listed Stocks] and (b) the NASDAQ Unlisted Trading Privileges 
Plan [as the exclusive SIP for all NASDAQ Listed Stocks].
    b. Sharing. A Participating Organization shall make available to 
FINRA information necessary to assist FINRA in fulfilling the 
Regulatory Responsibilities assumed under the terms of this Agreement. 
Such information shall include any information collected by a 
Participating Organization 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 FINRA solely for the purposes of fulfilling its 
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.

[[Page 52725]]

    d. Intellectual Property.
    (i) Existing Intellectual Property. FINRA 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] system[s]), and any 
derivative works thereof. To the extent certain elements of FINRA's 
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. In the event FINRA (a) makes any changes, modifications 
or enhancements to its 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 FINRA shall be 
deemed the owner of the New IP created by it (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 FINRA without further consideration 
all of its right, title and interest in or to all such New IP (and any 
derivative works thereof).
    (iii) Fees for New IP. FINRA will not charge the Participating 
Organizations any fees for any New IP created and used by FINRA; 
provided, however, that FINRA will be permitted to charge fees for 
software maintenance work performed on systems used in the discharge of 
its duties hereunder.
    [12]11. 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 FINRA Members as any party, in 
its sole discretion, shall deem appropriate or necessary.
    [13]12. Dispute Resolution Under this Agreement.
    a. Negotiation. The parties to this Agreement 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]13. 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 
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]14. SEC Approval.
    a. The parties agree to file promptly this Agreement with the SEC 
for its review and approval. FINRA shall 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 this Agreement and of its 
impact on their members.
    [16]15. 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]16. 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 this 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]17. 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]18. Termination.
    a. Any Participating Organization may cancel its participation in 
this 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 
FINRA may be terminated by FINRA

[[Page 52726]]

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''), FINRA 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. FINRA 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]19. Intermarket Surveillance Group (``ISG''). In order to 
participate in this Agreement, all Participating Organizations to this 
Agreement must be members of the ISG.
    [21]20. 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]21. 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]22. 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]10, above.
    [24]23. 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 FINRA pursuant to this Agreement for purposes of 
Sec. Sec.  17(d) and 19(g) of the Act.
    [25]24. 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]25. Survival of Provisions. Provisions intended by their terms 
or context to survive and continue notwithstanding delivery of the 
regulatory services by FINRA, the payment of the Fees by the 
Participating Organizations, and any expiration of this Agreement shall 
survive and continue.
    [27]26. 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 
FINRA and such new Participating Organization. All other Participating 
Organizations expressly consent to allow FINRA to add new Participating 
Organizations to this Agreement as provided above. FINRA will promptly 
notify all Participating Organizations of any such amendments to add a 
new Participating Organization.
    b. All other amendments must be approved by each Participating 
Organization. All amendments, including adding a new Participating 
Organization, must be filed with and approved by the SEC before they 
become effective.
    [28]27. 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]28. 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.
* * * * *

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 Rule 2010 (Standards of Commercial Honor and Principles of Trade)
FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent 
Devices)
FINRA [NASD] Rule [3010]3110 (Supervision)
[FINRA NASD Rule 3110(a) and (c) (Books and Records; Financial 
Condition)]
FINRA Rule 4511 (General Requirements)
FINRA Rule 4512 (Customer Account Information)
[NYSE Rule 342 (Offices--Approval, Supervision and Control)]
NYSE Rule 440 (Books and Records)
NYSE Rule 476(a) (Disciplinary Proceedings Involving Charges Against 
Members, Member Organizations, Principal Executives, Approved Persons, 
Employees, or Others)
NYSE Rule 2010 (Standards of Commercial Honor and Principles of Trade)
NYSE Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent 
Devices)
NYSE Rule 3110 (Supervision)
NYSE MKT General and Floor Rule 3(j) (General Prohibitions and Duty to 
Report)
[NYSE Amex Equities Rule 342 (Offices--Approval, Supervision and 
Control)]

[[Page 52727]]

NYSE [Amex]MKT Equities Rule 440 (Books and Records)
NYSE [Amex]MKT Equities Rule 476(a) (Disciplinary Proceedings Involving 
Charges Against Members, Member Organizations, Principal Executives, 
Approved Persons, Employees, or Others)
NYSE [Amex]MKT Equities Rule 2010 (Standards of Commercial Honor and 
Principles of Trade)
NYSE [Amex]MKT Equities Rule 2020 (Use of Manipulative, Deceptive or 
Other Fraudulent Devices)
NYSE MKT Equities Rule 3110 (Supervision)
NASDAQ [OMX] Rule 2110A (Standards of Commercial Honor and Principles 
of Trade)
NASDAQ [OMX] Rule 2120 (Use of Manipulative, Deceptive or Other 
Fraudulent Devices)
NASDAQ [OMX] Rule 3010 (Supervision)
[NASDAQ [OMX] Rule 3110(a) and (c) (Books and Records; Financial 
Condition)]
NASDAQ Rule 4511A (General Requirements
NASDAQ Rule 4512A (Customer Account Information)
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)
[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)]
NASDAQ [OMX] PHLX Rule 707 (Conduct Inconsistent with Just and 
Equitable Principles of Trade)
NASDAQ [OMX] PHLX Rule 748 (Supervision)
NASDAQ [OMX] PHLX Rule 760 (Maintenance, Retention and Furnishing of 
Books, Records and Other Information)
NASDAQ [OMX] PHLX Rule 761 (Supervisory Procedures Relating to ITSFEA 
and to Prevention of Misuse or Material Nonpublic Information)
NASDAQ [OMX] PHLX Rule 782 (Manipulative Operations)
NYSE Arca Equities Rule 2.24 (ETP Books and Records)
NYSE Arca Equities Rule 5.1(a)(2)(v)(D) (General Provisions and 
Unlisted Trading Privileges)
NYSE Arca Equities Rule 6.3 (Prevention of the Misuse of Material, 
Nonpublic Information)
NYSE Arca Equities Rule 6.2(b) (Prohibited Acts (J&E))
NYSE Arca Equities Rule 6.1 (Adherence to Law)
NYSE Arca Equities Rule 6.18 (Supervision)
NYSE Arca Equities Rule 9.1(c) (Office Supervision)
NYSE Arca Equities Rule 9.2(b) (Account Supervision)
NYSE Arca Equities Rule 9.2(c) (Customer Records)
NYSE Arca Equities Rule 2010 (Standards of Commercial Honor and 
Principles of Trade)
NYSE Arca Equities Rule 2020 (Use of Manipulative, Deceptive or Other 
Fraudulent Devices)
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)
NSX Rule 12.4 (Manipulative Transactions)
NASDAQ [OMX] BX Rule 2110 (Standards of Commercial Honor and Principles 
of Trade)
NASDAQ [OMX] BX Rule 2120 (Use of Manipulative, Deceptive or Other 
Fraudulent Devices)
NASDAQ [OMX] BX Rule 3010 (Supervision)
NASDAQ [OMX] BX Rule 3110(a) and (c) (Books and Records; Financial 
Condition)
[BATS]BZX Rule 3.1 (Business Conduct of Members)
[BATS]BZX Rule 3.2 (Violations Prohibited)
[BATS]BZX Rule 3.3 (Use of Fraudulent Devices)
[BATS]BZX Rule 4.1 (Requirements)
[BATS]BZX Rule 5.1 (Written Procedures)
[BATS]BZX Rule 5.3 (Records)
[BATS]BZX Rule 5.5 (Prevention of the Misuse of Material, Non-Public 
Information)
[BATS]BZX Rule 12.4 (Manipulative Transactions)
BYX Rule 3.1 (Business Conduct of ETP Holders)
BYX Rule 3.2 (Violations Prohibited)
BYX Rule 3.3 (Use of Fraudulent Devices)
BYX Rule 4.1 (Requirements)
BYX Rule 5.1 (Written Procedures)
BYX Rule 5.3 (Records)
BYX Rule 5.5 (Prevention of the Misuse of Material, Non-Public 
Information)
BYX Rule 12.4 (Manipulative Transactions)
EDGA Rule 3.1 (Business Conduct of Members)
EDGA Rule 3.2 (Violations Prohibited)
EDGA Rule 3.3 (Use of Fraudulent Devices)
EDGA Rule 4.1 (Requirements)
EDGA Rule 5.1 (Written Procedures)
EDGA Rule 5.3 (Records)
EDGA Rule 5.5 (Prevention of Misuse of Material, Nonpublic Information)
EDGA Rule 12.4 (Manipulative Transactions)
EDGX Rule 3.1 (Business Conduct of Members)
EDGX Rule 3.2 (Violations Prohibited)
EDGX Rule 3.3 (Use of Fraudulent Devices)
EDGX Rule 4.1 (Requirements)
EDGX Rule 5.1 (Written Procedures)
EDGX Rule 5.3 (Records)
EDGX Rule 5.5 (Prevention of Misuse of Material, Nonpublic Information)
EDGX Rule 12.4 (Manipulative Transactions)
IEX Rule 3.110 (Business Conduct of Members)
IEX Rule 3.120 (Violations Prohibited)
IEX Rule 3.130 (Use of Fraudulent Devices)
IEX Rule 4.511 (General Requirements)
IEX Rule 4.512 (Customer Account Information)
IEX Rule 5.110 (Supervision)
IEX Rule 5.150 (Prevention of Misuse of Material, Non-Public 
Information)
IEX Rule 10.140 (Manipulative Transactions)

Exhibit B: Fee Schedule

    1. Fees. FINRA shall charge each Participating Organization a 
Quarterly Fee in arrears for the performance of FINRA's 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 FINRA 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 [Listed]NMS 
Stock trades during the relevant period (the ``Numerator''), divided by 
the total number of all [Listed]NMS Stock trades 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

[[Page 52728]]

Organization's overall Percentage of Publicly Reported Trades) and the 
fees for such will be billed to FINRA in accordance with paragraph 
1a.(2), rather than to the applicable Participating Organization.
    (2) The Quarterly Fees shall be determined by FINRA in the 
following manner for each Participating Organization:
    (a) Less than 1.0%: If the Participating Organization's Percentage 
of Publicly Reported Trades for the relevant three-month billing period 
is less than 1.0%, the Quarterly Fee shall be $6,250, 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 the relevant 
three-month billing period is less than 2.0% but no less than 1.0%, the 
Quarterly Fee shall be $18,750, per quarter (``Static Fee'');
    (c) 2.0% or Greater: If the Participating Organization's Percentage 
of Publicly Reported Trades 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 FINRA's total charge (``Total Charge'') for its 
performance of Regulatory Responsibilities for the relevant three-month 
billing period.
    (3) Increases in Static Fees. 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, 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, FINRA 
shall use (a) the Consolidated Tape Association (``CTA'') [as the 
exclusive securities information processor (``SIP'') for all NYSE 
Listed Stocks, NYSE Amex Listed Stocks, NYSE Arca Listed Stocks, BATS 
Listed Stocks and CHX Solely Listed Stocks], and (b) the Unlisted 
Trading Privileges Plan [as the exclusive SIP for NASDAQ Listed 
Stocks].
    c. Annual Budget Forecast. FINRA will notify the Participating 
Organizations of the forecasted costs of its insider trading program 
for the following calendar year by close of business on October 15 of 
the then-current year (the ``Forecasted Budget''). FINRA shall use best 
efforts to provide as accurate a forecast as possible. FINRA shall then 
provide a final submission of the costs following approval of such 
costs by its Board of Governors (the ``Final Budget''). Subject to 
paragraph 1d. 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 Five Percent.
    (1) In the event that any proposed increase to Fees 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 five percent (5%) 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 FINRA in order to discuss any disagreement over 
such proposed Major Increase. By way of example, if FINRA provides a 
Final Budget for 2011 that represents an 4% increase above the Final 
Budget for 2010, the terms of this paragraph 1.d.(1) shall not apply; 
if, however, in April of 2011, FINRA notifies the Exchange Committee of 
an increase in Fees that represents an additional 3% increase above the 
Final Budget for 2010, then the increase shall be deemed a Major 
Increase, and the terms of this paragraph 1.d.(1) shall become 
applicable (i.e., 4% and 3% represents a cumulative increase of 7% 
above the 2010 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. 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. 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 FINRA in writing of the 
disputed item(s) within fifteen (15) days of receipt of the invoice. In 
its notification to FINRA 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. 
FINRA 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 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 FINRA, or, if such taxes are paid by FINRA 
directly to the governmental authority, the other Participating 
Organizations agree that they shall reimburse FINRA for the amount of 
any such taxes paid.
    5. Audit Right; Record Keeping.
    a. Audit Right.
    (i) 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

[[Page 52729]]

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. 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.
    (ii) 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]12 of the Agreement.
    (iii) 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, FINRA 
shall keep accurate financial records and documentation relating to the 
Fees charged by it under this Agreement.

Exhibit C: Reports

    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 the trading 
activity of the NMS Stocks listed on each Participating Organization's 
exchange. [NYSE Listed Stock, NYSE Amex Listed Stock, NYSE Arca Listed 
Stock, NASDAQ Listed Stock, BATS Listed Stock and CHX Solely Listed 
Stock trading activity.]

------------------------------------------------------------------------
                                     Surveillance
              2008                      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 the trading activity of the NMS Stocks listed on 
each Participating Organization's exchange. [NYSE Listed Stock, NYSE 
Amex Listed Stock, NYSE Arca Listed Stock, NASDAQ Listed Stock, BATS 
Listed Stock and CHX Solely Listed Stock 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. FINRA will provide total referrals to the SEC.
    Example:

------------------------------------------------------------------------
                                     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 the trading 
activity of the NMS Stocks listed on each Participating Organization's 
exchange. [NYSE Listed Stock, NYSE Amex Listed Stock, NYSE Arca Listed 
Stock, NASDAQ Listed Stock, BATS Listed Stock and CHX Solely Listed 
Stock 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.........................
------------------------------------------------------------------------


[[Page 52730]]

    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. FINRA will respond to such 
inquiries from a CRO; provided, however, that (a) the CRO must hold any 
information provided by FINRA in confidence and (b) FINRA will not be 
compelled to provide information in contradiction of any mandate, 
directive or order from the SEC, US 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 email to rule-comments@sec.gov. Please include 
File Number 4-566 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 4-566. 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 (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 10:00 a.m. and 
3:00 p.m. Copies of the plan also will be available for inspection and 
copying at the principal offices of the Participating Organizations. 
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 August 30, 2016.

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 \14\ 
and Rule 17d-2 thereunder \15\ 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 amended, should reduce 
unnecessary regulatory duplication by allocating regulatory 
responsibility for the surveillance, investigation, and enforcement of 
Common Rules to FINRA. Accordingly, the proposed amendment to the Plan 
promotes efficiency by consolidating these regulatory functions in a 
single SRO.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78q(d).
    \15\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------

    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 amendment is 
effective. In particular, the purpose of the amendment is to add IEX as 
a Participating Organization and reflect that IEX will be a Listing 
Market (which will expand the Plan's coverage of NMS Stocks to include 
equity securities listed on IEX), remove CBOE as a Participating 
Organization and update the names of certain other Participating 
Organizations, update defined terms, and reflect updates to the list of 
Common Rules. The Commission notes that the most recent prior amendment 
to the Plan, which, among other things, reflected the addition of BATS 
as a Listing Market, was published for comment and the Commission did 
not receive any comments thereon.\16\ The Commission believes that the 
current amendment to the Plan does not raise any new regulatory issues 
that the Commission has not previously considered, and therefore 
believes that the amended Plan should become effective without any 
undue delay.
---------------------------------------------------------------------------

    \16\ See supra note 11.
---------------------------------------------------------------------------

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,\17\ 
that the Plan, as amended, filed with the Commission pursuant to Rule 
17d-2 on July 21, 2016, is hereby approved and declared effective.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q(d).
---------------------------------------------------------------------------

    It is further ordered that the Participating Organizations are 
relieved of those regulatory responsibilities allocated to 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.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18793 Filed 8-8-16; 8:45 am]
 BILLING CODE 8011-01-P


