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Notice

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

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Start Preamble 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.

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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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]

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]

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.

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.

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.

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 Start Printed Page 64041regulatory 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.

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.

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]

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

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.

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For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[17]

Kevin M. O'Neill,

Deputy Secretary.

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Footnotes

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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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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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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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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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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9.  15 U.S.C. 78s(b)(3)(A)(iii).

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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.

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15.  17 CFR 240.19b-4(f)(6)(iii).

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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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[FR Doc. 2013-24913 Filed 10-24-13; 8:45 am]

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