[Federal Register Volume 78, Number 207 (Friday, October 25, 2013)]
[Notices]
[Pages 64039-64041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24913]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70714; File No. SR-EDGX-2013-39]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
EDGX Rule 4.3, Record of Written Complaints, To Conform to Financial
Industry Regulatory Authority, Inc. Rule 4513
October 18, 2013.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on October 15, 2013, EDGX Exchange, Inc. (the
``Exchange'' or ``EDGX'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which items have been substantially prepared by
the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend EDGX Rule 4.3, Record of Written
Complaints, to conform to the rules of the Financial Industry
Regulatory Authority, Inc. (``FINRA'') for purposes of an agreement
between the Exchange and FINRA pursuant to Rule 17d-2 under the
Exchange Act.\3\ The text of the proposed rule change is available on
the Exchange's Internet Web site at www.directedge.com, at the
Exchange's principal office, and at the Public Reference Room of the
Commission.
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\3\ 17 CFR 240.17d-2. Pursuant to Rule 17d-2 under the Exchange
Act, the Exchange and FINRA entered into an agreement to allocate
regulatory responsibility for common rules (the ``17d-2
Agreement''). Id.
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[[Page 64040]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The 17d-2 Agreement between the Exchange and FINRA covers common
members of both self-regulatory organizations and allocates to FINRA
regulatory responsibility, with respect to common members, for the
following: (1) Examination of common members of the Exchange and FINRA
for compliance with federal securities laws, rules, and regulations,
and rules of the Exchange that the Exchange has certified as identical
or substantially similar to FINRA rules; (2) investigation of common
members of EDGX and FINRA for violations of federal securities laws,
rules, or regulations, or Exchange rules that the Exchange has
certified as identical or substantially identical to a FINRA rule; and
(3) enforcement of compliance by common members with the federal
securities laws, rules, and regulations, and the rules of the Exchange
that the Exchange has certified as identical or substantially similar
to FINRA rules.\4\
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\4\ See Securities and Exchange Release No. 61698 (Mar. 12,
2010), 75 FR 13151 (Mar. 18, 2010) (Order Approving File No. 10-196)
(Findings, Opinion, and Order of the Commission).
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The 17d-2 Agreement included a certification by the Exchange that
states that the requirements contained in certain Exchange rules are
identical to, or substantially similar to, certain FINRA rules that
have been identified as comparable. To conform to the comparable FINRA
rule for purposes of the 17d-2 Agreement, the Exchange proposes to
amend EDGX Rule 4.3, Record of Written Complaints, to align with FINRA
Rule 4513.\5\
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\5\ See also Securities Exchange Act Release No. 63784 (Jan. 27,
2011), 76 FR 5850 (Feb. 2, 2011) (Order Approving Proposed Rule
Change; File No. SR-FINRA-2010-052) (Approval Order).
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EDGX Rule 4.3 currently requires that members keep and preserve
written customer complaints \6\ for a period of not less than five
years, the first two of which must be in a readily accessible place. To
take into account FINRA's four-year routine examination cycle for
certain members, FINRA Rule 4513 requires that members preserve the
customer complaint records for a period of at least four years. Under
the 17d-2 Agreement, FINRA examines common members of the Exchange and
FINRA for compliance with EDGX Rule 4.3. However, because of the
differing retention periods of EDGX Rule 4.3 and FINRA Rule 4513, the
17d-2 Agreement specifically states that FINRA has the regulatory
responsibilities for the first four years of EDGX Rule 4.3's five-year
record keeping requirement.
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\6\ EDGX Rule 4.3(b) defines a ``complaint'' as ``any written
statement of a customer or any person acting on behalf of a customer
alleging a grievance involving the activities of a Member or persons
under the control of the Member in connection with (1) the
solicitation or execution of any transaction conducted or
contemplated to be conducted through the facilities of the Exchange
or (2) the disposition of securities or funds of that customer which
activities are related to such a transaction.''
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The Exchange, therefore, proposes to decrease the record retention
requirements under EDGX Rule 4.3 from five to four years.\7\ The
Exchange believes that amending the record retention requirements for
customer complaints to align with FINRA Rule 4513 would help to avoid
confusion among members of the Exchange that are also members of FINRA.
The Exchange further believes that aligning the Exchange's rules with
FINRA Rule 4513 would account for FINRA's four-year routine examination
cycle for certain members, which FINRA conducts on the Exchange's
behalf under the 17d-2 Agreement, ensuring consistent regulation of
members that are also members of FINRA.
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\7\ Under Exchange Act Rules 17a-3(a)(18) and 17a-4(b)(4),
members are required to preserve customer complaint records for a
period of at least three years. See 17 CFR 240.17a-3(a)(18); 17 CFR
240.17a-4(b)(4).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b)(5) of the Exchange Act,\8\ which requires, among
other things, that the Exchange's rules be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The proposed rule change would
provide greater harmonization between similar Exchange and FINRA rules,
resulting in greater uniformity and less burdensome and more efficient
regulatory compliance. As such, the proposed rule change would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national market system.
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\8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The proposed rule
change is not designed to address any competitive issues but rather is
designed to provide greater harmonization among similar Exchange and
FINRA rules, resulting in less burdensome and more efficient regulatory
compliance for common members and facilitating FINRA's performance of
its regulatory functions under the 17d-2 Agreement.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Exchange Act \9\ and Rule 19b-4(f)(6)
thereunder.\10\ The Exchange believes that the proposed rule change
meets the criteria of subparagraph (f)(6) of Rule 19b-4 \11\ because
the proposed rule change will not adversely affect investors or the
public interest; rather, the proposed rule change will promote greater
harmonization between the Exchange and FINRA rules of similar purpose,
resulting in greater uniformity and less burdensome and more efficient
[[Page 64041]]
regulatory compliance. Additionally, the Exchange believes the proposed
rule change does not raise any new policy issues not previously
considered by the Commission nor impose any significant burden on
competition because it will: (1) Result in less burdensome and more
efficient regulatory compliance for common members; and (2) facilitate
FINRA's performance of its regulatory functions under the 17d-2
Agreement.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
\11\ 17 CFR 240.19b-4(f)(6).
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Accordingly, the Exchange has designated this rule filing as non-
controversial under section 19(b)(3)(A) of the Exchange Act \12\ and
paragraph (f)(6) of Rule 19b-4 thereunder.\13\ Because the proposed
rule change does not: (1) Significantly affect the protection of
investors or the public interest; (2) impose any significant burden on
competition; and (3) become operative prior to 30 days from the date on
which it was filed, or such shorter time as the Commission may
designate, if consistent with the protection of investors and the
public interest, the proposed rule change has become effective pursuant
to section 19(b)(3)(A) of the Exchange Act and Rule 19b-4(f)(6)(iii)
thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange stated its
belief that this proposal is non-controversial and will not
significantly affect the protection of investors because the Exchange
is not proposing any substantive changes and is merely amending its
rule text to mirror FINRA's rules. Based on the Exchange's statements
and the non-controversial nature of the proposed rule change, the
Commission believes that waiving the operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby grants the Exchange's request and waives the 30-day
operative delay.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Exchange Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Exchange Act. Comments may be submitted
by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-EDGX-2013-39 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 No. SR-EDGX-2013-39. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies
of the submission, all subsequent amendments, all written statements
with respect to the proposed rule change that are filed with the
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for 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 such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File No. SR-EDGX-2013-39 and should
be submitted on or before November 15, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24913 Filed 10-24-13; 8:45 am]
BILLING CODE 8011-01-P