requirements.\922\ We recognize that implementation of Rule 201 will
impose surveillance and reprogramming costs for enforcing, monitoring,
and updating trading, order management, execution management,
surveillance, and reporting systems under Rule 201, systems changes to
computer software, adjustments to data retention capabilities, as well
as staff time and technology resources. These costs are included in our
estimates of the costs of implementing Rule 201.\923\
---------------------------------------------------------------------------

    \921\ As discussed above, implementation of Rule 201 will not
require modifications to how data feeds are currently received. See
supra notes 404 to 411 and accompanying text (discussing the use of
various data feeds in determining the current national best bid).
    \922\ See, e.g., letter from NSCP; letter from STANY (June
2009); letter from RBC (June 2009); letter from Wolverine; letter
from EWT (Sept. 2009).
    \923\ See infra note 960 and accompanying text (discussing our
estimates of the implementation costs of Rule 201 by trading
centers).
---------------------------------------------------------------------------

    In addition, commenters expressed concerns that the costs of on-
going monitoring and surveillance of a short sale price test
restriction would be significant.\924\ Only one commenter specifically
discussed concerns about the on-going monitoring and surveillance costs
of the alternative uptick rule, and this commenter did not provide
specific cost estimates.\925\ One commenter stated that the alternative
uptick rule would be easier to surveil and monitor than the proposed
modified uptick rule or the proposed uptick rule, and thus would
present lower on-going costs to the industry.\926\ The alternative
uptick rule references only the current national best bid, unlike the
proposed modified uptick rule and the proposed uptick rule, which would
have required sequencing of the national best bid or last sale price.
Thus, we believe that the alternative uptick rule will be easier and
less costly to implement and monitor than the proposed modified uptick
rule or the proposed uptick rule.\927\
---------------------------------------------------------------------------

    \924\ See, e.g., letter from NSCP; letter from RBC (June 2009);
letter from SIFMA (June 2009); letter from Wolverine; letter from
RBC (Sept. 2009).
    \925\ See letter from RBC (Sept. 2009).
    \926\ See letter from STA (Sept. 2009).
    \927\ See supra notes 661 to 669 and accompanying text
(discussing comments on the impact of the alternative uptick rule on
implementation and on-going monitoring and compliance costs).
---------------------------------------------------------------------------

    Another commenter estimated that on-going system maintenance would
cost $20,000 annually per firm.\928\ This estimate is lower than our
estimated total cost of, on average, $121,356 annually per trading
center for on-going monitoring and surveillance.\929\ This commenter
stated that this estimate covers the cost ``annually to maintain the
system.'' It is not clear what specific on-going monitoring and
surveillance functions are included in the commenter's estimate but we
believe that our estimate is more inclusive, in that it specifically
takes into account costs for the commitment of resources associated
with compliance administration and oversight, response to regulatory
inquiries and examinations, response to internal inquiries, market
surveillance, data retention, testing, training, and enforcement, with
attendant opportunity costs.\930\
---------------------------------------------------------------------------

    \928\ See letter from Wolverine. Wolverine does not apply this
estimate to exchanges and ATSs, but only to other non-SRO trading
centers (such as market makers), noting that on-going costs for
exchanges and ATSs ``should be minimal because they would be limited
to system testing and maintenance, not the regulation of hundreds of
members' systems, procedures and trading activity.'' Id.
    \929\ See infra notes 961 to 962 and accompanying text
(discussing our estimates of the on-going monitoring and
surveillance costs of Rule 201 by trading centers).
    \930\ See infra notes 934 and 935 and accompanying text
(discussing the scope of our on-going monitoring and compliance cost
estimates).
---------------------------------------------------------------------------

    One commenter conducted a survey of fifty firms with respect to on-
going monitoring cost estimates. Cost estimates in response to the
survey indicated that a circuit breaker triggering a short sale price
test based on the national best bid would have on-going monitoring
costs that averaged between $45,000 and $175,000 per firm.\931\
Although our estimated cost of, on average, $121,356 per trading center
for on-going monitoring and surveillance,\932\ falls within this
commenter's estimated range of on-going monitoring cost, we note that
the survey results covered fifty firms,

categorized as large firms, regional firms, and clearing firms, rather
than SRO trading centers, non-SRO trading centers and broker-dealers.
Thus, it is difficult to determine the implementation costs to trading
centers, including non-SRO trading centers, from these survey results.
In addition, these cost estimates were not specific to the alternative
uptick rule. Because the alternative uptick rule references only the
current national best bid, unlike the proposed modified uptick rule and
the proposed uptick rule, which would have required sequencing of the
national best bid or last sale price, we believe that the alternative
uptick rule will be easier and less costly to implement and monitor
than the proposed modified uptick rule or the proposed uptick
rule.\933\
---------------------------------------------------------------------------

    \931\ See letter from SIFMA (June 2009). SIFMA did not
categorize estimates of the on-going monitoring costs of a circuit
breaker triggering a short sale price test based on the national
best bid by SRO trading centers, non-SRO trading centers, and other
broker-dealers, but categorized responses by larger firms, with on-
going monitoring cost estimates that averaged $130,000 per firm,
with the highest estimate at $1,500,000 per firm, regional firms,
with estimates that averaged $45,000 per firm, with the highest
estimate at $350,000 per firm, and clearing firms, with estimates
that averaged $175,000 per firm, with the highest estimate at
$250,000 per firm. SIFMA only provided the average and highest cost
estimates per category. See id.
    \932\ See infra notes 961 to 962 and accompanying text
(discussing our estimated on-going monitoring and surveillance costs
for trading centers).
    \933\ See supra notes 661 to 669 and accompanying text
(discussing comments on the impact of the alternative uptick rule on
implementation and on-going monitoring and compliance costs).
---------------------------------------------------------------------------

    Commenters indicated that the on-going costs to trading centers of
a short sale price test restriction would include surveillance,
testing, training, administration and supervision, data retention,
response to regulatory inquiries and examinations, and response to
internal inquiries.\934\ We agree with these comments and believe that
Rule 201 will require the commitment of resources associated with
compliance administration and oversight, response to regulatory
inquiries and examinations, response to internal inquiries, market
surveillance, data retention, testing, training, and enforcement, with
attendant opportunity costs. These costs are included in our estimates
of the costs of on-going monitoring and surveillance of Rule 201.\935\
---------------------------------------------------------------------------

    \934\ See, e.g., letter from NSCP; letter from RBC (June 2009);
letter from SIFMA (June 2009); letter from Wolverine; letter from
RBC (Sept. 2009).
    \935\ See infra notes 961 to 962 and accompanying text
(discussing our estimates of the on-going monitoring and
surveillance costs of Rule 201 to trading centers).
---------------------------------------------------------------------------

    In estimating the costs to trading centers of implementing Rule
201, we considered that the policies and procedures required to be
implemented for purposes of Rule 201 are similar to those that are
required under Regulation NMS.\936\ In accordance with Regulation NMS,
trading centers must have in place written policies and procedures in
connection with that Regulation's Order Protection Rule, which could
help form the basis for implementing the policies and procedures for
Rule 201.\937\ Thus, we believe trading centers may already be familiar
with establishing, maintaining, and enforcing trading-related policies
and procedures, including programming their trading systems in
accordance with such policies and procedures. We believe this
familiarity will reduce the implementation costs of Rule 201 on trading
centers and will make Rule 201 less burdensome to implement. Moreover,
because trading centers have already developed or modified their
surveillance mechanisms in order to comply with Regulation NMS's
policies and procedures requirement, trading centers may already have
retained and trained the necessary personnel to ensure compliance with
that Regulation's policies and procedures requirements and, therefore,
may already have in place most of the infrastructure and potential
policies and procedures necessary to comply with Rule 201.\938\
Further, we believe that the implementation and on-going monitoring and
surveillance costs of the alternative uptick rule are justified by the
benefits provided in preventing short selling, including potentially
manipulative or abusive short selling, from being used as a tool to
exacerbate a declining market in a security.
---------------------------------------------------------------------------

    \936\ See Regulation NMS Adopting Release, 70 FR 37496; see also
Proposal, 74 FR at 18087; 17 CFR 242.611.
    \937\ See Regulation NMS Adopting Release, 70 FR 37496; see also
17 CFR 242.611.
    \938\ We also believe some trading centers may have retained
personnel familiar with the former SRO bid tests, which may make
Rule 201 even less burdensome to implement. See, Proposal, 74 FR at
18095, n.393 and 18053, n.125.
---------------------------------------------------------------------------

    Several commenters indicated that the Commission overstated the
benefit of previous implementation of Regulation NMS in mitigating the
costs of implementing a short sale price test restriction,\939\
because, for example, ``systems re-written and architected for Reg NMS
* * * did not include any short sale restrictions,'' \940\ or because
such systems will require modifications in order to be used in the
context of a short sale price test restriction.\941\ However, we took
into account that Regulation NMS was implemented after elimination of
the prior short sale price tests when considering the impact of
previous experience with the policies and procedures requirement of
Regulation NMS's Order Protection Rule. And, although we recognize that
systems and processes will have to be modified for implementation of
Rule 201, we continue to believe that because most trading centers
already have in place systems and written policies and procedures in
order to comply with Regulation NMS's Order Protection Rule, most
trading centers will already be familiar with establishing,
maintaining, and enforcing trading-related policies and procedures,
which will mitigate the burden of implementation of the policies and
procedures requirement under Rule 201.
---------------------------------------------------------------------------

    \939\ See, e.g., letter from FIF (June 2009); letter from NSCP;
letter from RBC (June 2009).
    \940\ Letter from FIF (June 2009); see also letter from RBC
(June 2009).
    \941\ See letter from NSCP; letter from RBC (June 2009).
---------------------------------------------------------------------------

    Several commenters agreed, stating that previous experience with
the policies and procedures required under Regulation NMS might reduce
the implementation and on-going monitoring and compliance burdens on
trading centers.\942\ One commenter stated that implementation of a
circuit breaker approach combined with the alternative uptick rule
would be easier to implement than the other proposed short sale price
tests or proposed circuit breaker rules, ``provided that the Commission
permits firms to leverage the numerous systems changes made to
facilitate compliance with Regulation NMS (including the use of
internal market data rather than consolidated data supplied by the
industry plans).'' \943\ And one commenter stated that prior
implementation of Regulation NMS could ease implementation of a short
sale price test restriction, ``provided that broker-dealers'
implementations of Regulation NMS was sufficiently modular and
extensible.'' \944\ We believe that Rule 201 is structured so that
trading centers will be able to leverage their existing systems and
experience with implementing the policies and procedures required by
Regulation NMS's Order Protection Rule. For example, Rule 201 does not
mandate that the receipt of the current national best bid must be from
any one particular data feed; thus, trading centers will be able to use
internal market data if they choose.\945\ Thus, as stated above, we
believe that familiarity with trading-related policies and procedures
under Regulation NMS will mitigate the burden of implementation of the
policies and procedures requirement under Rule 201.
---------------------------------------------------------------------------

    \942\ See, e.g., letter from EWT (Sept. 2009); letter from
Goldman Sachs (Sept. 2009); letter from MFA (Oct. 2009).
    \943\ Letter from Goldman Sachs (Sept. 2009); see also letter
from MFA (Oct. 2009).
    \944\ Letter from EWT (Sept. 2009).
    \945\ See supra notes 404 to 411 and accompanying text
(discussing the use of various data feeds in determining the current
national best bid).
---------------------------------------------------------------------------

    Moreover, the written policies and procedures requirement of Rule
201 is designed to provide trading centers with significant flexibility
in determining how to comply with the requirements of

the Rule. For example, Rule 201 is designed to provide trading centers
and their customers with flexibility in determining how to handle
orders that are not immediately executable or displayable by the
trading center because the order is impermissibly priced. Thus, if an
order were impermissibly priced, the trading center could, in
accordance with policies and procedures reasonably designed to prevent
the execution or display of a short sale at a price that is less than
or equal to the current national best bid, re-price the order upwards
to the lowest permissible price and hold it for later execution at its
new price or better.\946\ As quoted prices change, Rule 201 allows a
trading center to repeatedly re-price and display an order at the
lowest permissible price down to the order's original limit order price
(or, if a market order, until the order is filled). Because a trading
center could re-price and display a previously impermissibly priced
short sale order, Rule 201 may allow for the more efficient functioning
of the markets because trading centers do not have to reject or cancel
impermissibly priced orders unless instructed to do so by the trading
center's customer submitting the short sale order. We note that a
number of commenters expressed support for a policies and procedures
approach to any short sale price test restriction, in part, because it
would add flexibility to the Rule's requirements.\947\
---------------------------------------------------------------------------

    \946\ For example, if a trading center receives a short sale
order priced at $47.00 when the current national best bid in the
security is $47.00, the trading center could re-price the order at
the permissible offer price of $47.01, and display the order for
execution at this new limit price.
    \947\ See, e.g., letter from T. Rowe Price (June 2009); letter
from AIMA; letter from RBC (June 2009); letter from Citadel et al.
(Sept. 2009).
---------------------------------------------------------------------------

    Moreover, while latencies in obtaining data regarding the national
best bid from consolidated market data feeds, as discussed in detail
above, may impact implementation costs associated with Rule 201, a
trading center could have policies and procedures that would provide
for a snapshot of the applicable national best bid of the security. We
note that some commenters expressed concerns regarding latencies in
obtaining data regarding the national best bid disseminated by
proprietary data feeds and/or by SIPs.\948\ We believe that a policies
and procedures approach that provides for a snapshot of the applicable
current national best bid will aid trading centers in dealing with time
lags in receiving data regarding the national best bid from different
data sources, as well as lead to reduced initial and on-going costs
associated with Rule 201 for trading centers by facilitating
verification of whether a short sale order was executed or displayed at
a permissible price.
---------------------------------------------------------------------------

    \948\ See, e.g., letter from Glen Shipway (Sept. 2009); see also
letter from Credit Suisse (June 2009); letter from FIF (June 2009);
letter from Lime Brokerage (June 2009); letter from RBC (June 2009);
letter from SIFMA (June 2009); letter from Direct Edge (June 2009);
letter from BATS (Sept. 2009); letter from Credit Suisse (Sept.
2009); letter from Lime Brokerage (Sept. 2009).
---------------------------------------------------------------------------

    We considered whether our estimates of the costs to trading centers
for implementation and on-going monitoring and surveillance of the
proposed modified uptick rule included in the Proposal \949\ would
change under the circuit breaker approach of Rule 201, but concluded,
as discussed below, that these estimates continue to represent
reasonable estimates under the circuit breaker approach.
---------------------------------------------------------------------------

    \949\ See Proposal, 74 FR at 18093.
---------------------------------------------------------------------------

    Despite some commenters' concerns regarding the implementation
costs of a circuit breaker rule,\950\ we believe that the circuit
breaker approach will result in largely the same implementation costs
as we estimated would be incurred if we adopted a permanent, market-
wide short sale price test restriction.\951\ As one commenter stated,
``[o]nce the price test is in place, there is minimal incremental
effort required to add a Circuit Breaker that controls the application
of the price test.'' \952\ Similarly, another commenter stated that
``[t]he additional coding required to implement a circuit breaker is
minimal * * *'' \953\ We believe that there will be only minimal, if
any, implementation costs for a circuit breaker approach in addition to
the costs that we estimated previously for the implementation of a
permanent, market-wide short sale price test rule because trading
centers will need to establish written policies and procedures to
implement the short sale price test restriction regardless of whether
the short sale price test restriction is adopted on a permanent,
market-wide basis or, in the case of Rule 201, adopted in conjunction
with a circuit breaker. Several other commenters agreed, stating that
the costs of the circuit breaker approach would be similar to, or only
incrementally higher than, the costs of a permanent, market-wide
approach.\954\
---------------------------------------------------------------------------

    \950\ See supra note 676.
    \951\ See Proposal, 74 FR at 18093.
    \952\ Letter from Nasdaq OMX Group (Oct. 2009).
    \953\ Letter from Credit Suisse (Sept. 2009).
    \954\ See, e.g., letter from STA (June 2009).
---------------------------------------------------------------------------

    In addition, with respect to on-going monitoring and surveillance
costs of the circuit breaker approach, we recognize, as noted by one
commenter,\955\ that trading centers will need to continuously monitor
whether a security is subject to the provisions of Rule 201 and that
there will be costs associated with such monitoring. However, we
believe that these costs will be offset because, under the circuit
breaker approach, the alternative uptick rule will be time limited and
will only apply on a stock-by-stock basis, which will reduce our
previously estimated costs for on-going monitoring and surveillance.
This is because trading centers will only need to monitor and surveil
for compliance with the alternative uptick rule during the limited
period of time that the circuit breaker is in effect with respect to a
specific security. As such, the circuit breaker approach will allow
regulatory, supervisory and compliance resources to focus on, and to
address, those situations where a specific security is experiencing
significant downward price pressure.\956\ Further, although, under the
circuit breaker approach, market participants will need to monitor
whether a stock is subject to Rule 201 or not, we believe that
familiarity with a circuit breaker approach may help mitigate such
compliance costs.\957\
---------------------------------------------------------------------------

    \955\ See letter from Glen Shipway (June 2009).
    \956\ See, e.g., letter from Nasdaq OMX Group (Oct. 2009);
letter from SIFMA (Sept. 2009).
    \957\ See supra notes 292 and 684 and accompanying text
(discussing stock exchanges' and FINRA's rules or policies to
implement coordinated circuit breaker halts and SRO rules or polices
to coordinate individual security trading halts corresponding to
significant news events).
---------------------------------------------------------------------------

    On balance, we believe that the estimates of the costs to trading
centers for implementation and on-going monitoring and surveillance of
the proposed modified uptick rule included in the Proposal \958\ are
appropriate with respect to Rule 201. Thus, our estimates have not
changed from the Proposal, except to the extent that total burden
estimates have changed because we have updated the estimated number of
trading centers.\959\ As detailed in PRA Section IX.E.1., above, we
realize that the exact nature and extent of the policies and procedures
that a trading center is required to establish likely will vary
depending upon the type, size, and nature of the trading center (e.g.,
SRO vs. non-SRO, full service broker-dealer vs. market maker). Thus,
our estimates take into account different types of trading centers and
we realize that these estimates may be on the low-end for some trading
centers while they may be on the high-end for other trading centers.
---------------------------------------------------------------------------

    \958\ See Proposal, 74 FR at 18093.
    \959\ See supra note 686 (discussing the change in the estimated
number of trading centers).

---------------------------------------------------------------------------

    As detailed in PRA Section IX.E.1., above, we estimate a total one-
time initial cost of $28,699,867 \960\ for all trading centers subject
to Rule 201 to establish the written policies and procedures reasonably
designed to prevent the execution or display of short sale orders at a
price that is less than or equal to the current national best bid.
---------------------------------------------------------------------------

    \960\ This figure was calculated by adding $20,359,867 and
$8,340,000 (for outsourced legal work). The $20,359,867 figure was
calculated as follows: (70 legal hours x $305) + (105 compliance
hours x $313) + (20 information technology hours x $292) + (25
business operation hours x $273) = $66,880 per SRO x 10 SROs =
$668,800 total cost for SROs; (37 legal hours x $305) + (77
compliance hours x $313) + (23 information technology hours x $292)
+ (23 business operation hours x $273) = $48,381 per broker-dealer x
407 broker-dealers = $19,691,067 total cost for broker-dealers;
$668,800 + $19,691,067 = $20,359,867. The $8,340,000 figure for
outsourced legal work was calculated as follows: (50 legal hours x
$400 x 10 SROs) + (50 legal hours x $400 x 407 broker-dealers) =
$8,340,000.
    Based on industry sources, we estimate that the average hourly
rate for outsourced legal services in the securities industry is
$400. For in-house legal services, we estimate that the average
hourly rate for an attorney in the securities industry is
approximately $305 per hour. The $305/hour figure for an attorney is
from SIFMA's Management & Professional Earnings in the Securities
Industry 2008, modified to account for an 1800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits and overhead. In addition, we estimate that the average
hourly rate for an assistant compliance director, a senior computer
programmer, and a senior operations manager in the securities
industry is approximately $313, $292, and $273 per hour,
respectively. These figures are from SIFMA's Management &
Professional Earnings in the Securities Industry 2008, modified to
account for an 1800-hour work-year and multiplied by 5.35 to account
for bonuses, firm size, employee benefits and overhead.
---------------------------------------------------------------------------

    Once a trading center has established written policies and
procedures reasonably designed to prevent the execution or display of a
short sale order at a price that is less than or equal to the current
national best bid, we estimate a total annual on-going cost of
$7,751,196 \961\ for all trading centers subject to Rule 201 to ensure
that their written policies and procedures are up-to-date and remain in
compliance with Rule 201. In addition, with regard to on-going
monitoring for and enforcement of trading in compliance with Rule 201,
as detailed in PRA Section IX.E.1., above, we believe that, once the
tools necessary to carry out on-going monitoring have been put in
place, a trading center will be able to incorporate on-going monitoring
and enforcement within the scope of its existing surveillance and
enforcement policies and procedures without a substantial additional
burden. We recognize, however, that this on-going compliance will not
be cost-free, and that trading centers will incur some additional
annual costs associated with on-going compliance, including compliance
costs of reviewing transactions. We estimate that each trading center
will incur an average annual on-going compliance cost of $102,768, for
a total annual cost of $42,854,256 for all trading centers.\962\
---------------------------------------------------------------------------

    \961\ This figure was calculated as follows: (2 legal hours x 12
months x $305) x (10 + 407) + (3 compliance hours x 12 months x
$313) x (10 + 407) = $7,751,196.
    \962\ We estimate that each trading center will incur an average
annual on-going compliance cost of $102,768 for a total annual cost
of $42,854,256 for all trading centers. This figure was calculated
as follows: (16 compliance hours x $313) + (8 information technology
hours x $292) + (4 legal hours x $305) x 12 months = $102,768 per
trading center x 417 trading centers = $42,854,256. As discussed
above, we base our burden hour estimates on the estimates used for
Regulation NMS because it requires similar on-going monitoring and
surveillance for and enforcement of trading in compliance with that
regulation's policies and procedures requirement.
    For in-house legal services, we estimate that the average hourly
rate for an attorney in the securities industry is approximately
$305 per hour. The $305/hour figure for an attorney is from SIFMA's
Management & Professional Earnings in the Securities Industry 2008,
modified to account for an 1800-hour work-year and multiplied by
5.35 to account for bonuses, firm size, employee benefits and
overhead. In addition, we estimate that the average hourly rate for
an assistant compliance director, a senior computer programmer, and
a senior operations manager in the securities industry is
approximately $313, $292, and $273 per hour, respectively. These
figures are from SIFMA's Management & Professional Earnings in the
Securities Industry 2008, modified to account for an 1800-hour work-
year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead.
---------------------------------------------------------------------------

    To summarize, we estimate an average one-time initial cost of
$86,880 per SRO trading center and $68,381 per non-SRO trading center
for a total one-time initial cost of $28,699,867 \963\ for all trading
centers subject to Rule 201 to establish the written policies and
procedures reasonably designed to prevent the execution or display of
short sale orders at a price that is less than or equal to the current
national best bid. We estimate an average annual on-going cost of
$18,588 per trading center for a total annual on-going cost of
$7,751,196 \964\ for all trading centers subject to Rule 201 to ensure
that their written policies and procedures are up-to-date and remain in
compliance with Rule 201. In addition, we estimate an average annual
cost of $102,768 per trading center for a total annual cost of
$42,854,256 for all trading centers for on-going monitoring for and
enforcement of trading in compliance with Rule 201.\965\
---------------------------------------------------------------------------

    \963\ See supra note 960.
    \964\ See supra note 961.
    \965\ See supra note 962.
---------------------------------------------------------------------------

ii. Policies and Procedures Requirement Under the Broker-Dealer and
Riskless Principal Provisions
    A broker-dealer marking an order ``short exempt'' under Rule 201(c)
must identify the order as being at a price above the current national
best bid at the time of submission to the trading center \966\ and must
establish, maintain, and enforce written policies and procedures
reasonably designed to prevent the incorrect identification of orders
as being priced in accordance with the requirements of Rule
201(c).\967\
---------------------------------------------------------------------------

    \966\ See Rule 201(c). As a result, a trading center's policies
and procedures will need to be reasonably designed to permit the
execution or display of such orders without regard to whether the
order is at a price that is less than or equal to the current
national best bid. See Rule 201(b)(1)(iii).
    \967\ See Rule 201(c)(1). As part of its written policies and
procedures, a broker-dealer also is required to regularly surveil to
ascertain the effectiveness of its policies and procedures and take
prompt remedial steps. See Rule 201(c)(2). This provision is
intended to reinforce the on-going maintenance and enforcement
requirements of the provision contained in Rule 201(c)(1) by
explicitly assigning an affirmative responsibility to broker-dealers
to surveil to ascertain the effectiveness of their policies and
procedures. See id.
---------------------------------------------------------------------------

    Rule 201(d)(6) allows a broker-dealer to mark short sale orders of
a covered security ``short exempt'' where a broker-dealer is
facilitating customer buy orders or sell orders where the customer is
net long, and the broker-dealer is net short but is effecting the sale
as riskless principal, provided certain conditions are satisfied.\968\
A broker-dealer marking an order ``short exempt'' under this provision
is required to have written policies and procedures in place to assure
that, at a minimum: (i) The customer order was received prior to the
offsetting transaction; (ii) the offsetting transaction is allocated to
a riskless principal or customer account within 60 seconds of
execution; and (iii) that it has supervisory systems in place to
produce records that enable the broker-dealer to accurately and readily
reconstruct, in a time-sequenced manner, all orders on which the
broker-dealer relies pursuant to this provision.\969\
---------------------------------------------------------------------------

    \968\ See Rule 201(d)(6). As a result, a trading center's
policies and procedures must be reasonably designed to permit the
execution or display of such orders without regard to whether the
order is at a price that is less than or equal to the current
national best bid. See Rule 201(b)(1)(iii).
    \969\ See Rule 201(d)(6).
---------------------------------------------------------------------------

    As stated previously, we discussed in the Proposal the anticipated
costs of the proposed short sale price test restrictions and we
requested comment, in the Proposal and Re-Opening Release, on the costs
associated with the proposed amendments.\970\ In particular, we
requested comment on the potential costs for any modification to both
computer systems and surveillance mechanisms and for information
gathering, management, and recordkeeping systems or procedures.\971\

In response to our request for comment, commenters that specifically
addressed the riskless principal provision of Rule 201(d)(6) supported
its inclusion.\972\
---------------------------------------------------------------------------

    \970\ See Proposal, 74 FR at 18090, 18092-18103; Re-Opening
Release, 74 FR at 42037.
    \971\ See Proposal, 74 FR at 18090.
    \972\ See, e.g., letter from BATS (May 2009); letter from SIFMA
(June 2009); letter from Credit Suisse (June 2009); letter from NYSE
Euronext (Sept. 2009).
---------------------------------------------------------------------------

    Several commenters expressed concerns with respect to the costs of
the broker-dealer provision of Rule 201(c), but did not provide a
specific estimate of such costs.\973\ Several commenters stated that
the broker-dealer provision would place responsibility for ensuring
order compliance with Rule 201 on broker-dealers, rather than
exchanges, and noted that this is a significant difference from former
Rule 10a-1 and NASD's former bid test.\974\ Similarly, one commenter
stated that the broker-dealer provision would significantly expand the
implementation cost of Rule 201, without providing a specific estimate
of such cost.\975\ Although we agree that implementation of the broker-
dealer provision of Rule 201(c) will impose costs on broker-dealers who
choose to rely on this provision, we note that Rule 201(c) is not a
requirement of the Rule, but rather provides that a broker-dealer may
mark a sell order for a security that has triggered the circuit breaker
as ``short exempt,'' provided that the broker-dealer identifies the
order as being at a price above the current national best bid at the
time of submission to the trading center and otherwise complies with
the requirements of the provision.
---------------------------------------------------------------------------

    \973\ See, e.g., letter from Credit Suisse (June 2009); letter
from STANY (June 2009); letter from FIF (June 2009); letter from
Lime Brokerage (June 2009); letter from NSCP; letter from Direct
Edge (June 2009).
    \974\ See, e.g., letter from Credit Suisse (June 2009); letter
from STANY (June 2009).
    \975\ See letter from Lime Brokerage (June 2009).
---------------------------------------------------------------------------

    In addition, as discussed throughout this adopting release, the
alternative uptick rule references only the current national best bid,
unlike the proposed modified uptick rule and the proposed uptick rule,
which would have required sequencing of the national best bid or last
sale price. In order to rely on the broker-dealer provision, a broker-
dealer must establish, maintain, and enforce written policies and
procedures reasonably designed to prevent the incorrect identification
of orders as being at a price above the current national best bid at
the time of submission of the order to the trading center. Because the
alternative uptick rule does not require sequencing of the national
best bid, we believe that the policies and procedures required in order
to rely on the broker-dealer provision under the alternative uptick
rule will be easier and less costly to implement and monitor than would
be the case under the proposed modified uptick rule or the proposed
uptick rule.\976\ We note that one of the commenters that expressed
concerns about the implementation cost of the broker-dealer provision
also acknowledged that a rule ``that would not require data
centralization and sequencing would be significantly less complex and
faster to implement.'' \977\
---------------------------------------------------------------------------

    \976\ See supra notes 709 to 715 and accompanying text
(discussing comments on the impact of the alternative uptick rule on
implementation and on-going monitoring and compliance costs).
    \977\ Letter from Credit Suisse (June 2009).
---------------------------------------------------------------------------

    We disagree with several commenters who stated that, although
implementation and on-going monitoring and surveillance of the
alternative uptick rule might be easier and/or less costly for trading
centers, this would not hold true for broker-dealers.\978\ One of these
commenters stated that ``in order to avoid rejection of short sale
orders under an alternative uptick rule, programming would need to be
implemented to anticipate changes in the national best bid between the
time a short sale order is entered and the time it reaches the relevant
market center.'' \979\ However, the broker-dealer provision of Rule
201(c) is designed specifically to help avoid this result. Under the
broker-dealer provision, a broker-dealer may, in accordance with the
policies and procedures required by the provision, identify the order
as not being at a price that is less than or equal to the current
national best bid at the time the order is submitted to the trading
center and mark the order ``short exempt.'' Trading centers are
required to have written policies and procedures in place to permit the
execution or display of a short sale order of a covered security marked
``short exempt'' without regard to whether the order is at a price that
is less than or equal to the current national best bid.\980\
---------------------------------------------------------------------------

    \978\ See, e.g., letter from Citadel et al. (Sept. 2009); letter
from EWT (Sept. 2009); letter Lime Brokerage (Sept. 2009).
    \979\ Letter from Citadel et al. (Sept. 2009).
    \980\ See Rule 201(b)(1)(iii).
---------------------------------------------------------------------------

    Commenters also expressed concerns about the competitive pressure
of the broker-dealer provision, stating either that broker-dealers
would feel compelled to undertake implementation of the provision,
despite the high cost,\981\ which would be particularly burdensome for
smaller firms,\982\ or that smaller firms would find the costs
prohibitive, placing them at a competitive disadvantage.\983\ We
recognize that broker-dealers are faced with competitive concerns and
that such concerns may influence their decision whether or not to rely
on the broker-dealer provision of Rule 201(c). With respect to the
cost, as stated above, although we recognize that the broker-dealer
provision will impose implementation costs on broker-dealers who choose
to rely on this provision, we believe that this cost will not be as
great as stated by some commenters because the alternative uptick rule
does not require sequencing of the national best bid, unlike the
proposed modified uptick rule and the proposed uptick rule, which would
have required sequencing of the national best bid or last sale
price.\984\ We believe that, without a sequencing requirement, the
policies and procedures required in order to rely on the broker-dealer
provision under the alternative uptick rule will be easier and less
costly to implement and monitor, for all broker-dealers including
smaller broker-dealers, than would be the case under the proposed
modified uptick rule or the proposed uptick rule.\985\
---------------------------------------------------------------------------

    \981\ See, e.g., letter from STANY (June 2009); letter from FIF
(June 2009); letter from Lime Brokerage (June 2009).
    \982\ See, e.g., letter from T.D. Pro Ex; letter from Taurus
Compliance; letter from Credit Suisse (June 2009).
    \983\ See, e.g., letter from Credit Suisse (June 2009); letter
from NSCP.
    \984\ We also note that it is possible that some smaller broker-
dealers that determine to rely on the broker-dealer provision may
determine that it is cost-effective for them to outsource certain
functions necessary to comply with Rule 201(c) to larger broker-
dealers, rather than performing such functions in house, to remain
competitive in the market. This may help mitigate costs associated
with implementing and complying with Rule 201(c). Additionally, they
may decide to purchase order management software from technology
firms. Order management software providers may integrate changes
imposed by Rules 200(g) and 201 into their products, thereby
providing another cost-effective way for smaller broker-dealers to
comply with the requirement of Rule 201(c).
    \985\ See supra notes 709 to 715 and accompanying text
(discussing comments on the impact of the alternative uptick rule on
implementation and on-going monitoring and compliance costs to
broker-dealers).
---------------------------------------------------------------------------

    Further, we believe that the implementation and on-going monitoring
and compliance costs for broker-dealers who choose to rely on the
broker-dealer provision are justified by the benefits of providing
broker-dealers with the option to manage their order flow, rather than
having to always rely on their trading centers to manage their order
flow on their behalf.
    One commenter stated that the broker-dealer provision would impose
significant on-going costs in the form of data storage, surveillance,
and review, but did not provide a specific estimate

of such cost.\986\ We agree that broker-dealers who choose to rely on
the broker-dealer provision of Rule 201(c) will face on-going costs for
data storage, surveillance and review. However, we believe that broker-
dealers' on-going monitoring and surveillance costs under Rule 201(c)
will be mitigated by the alternative uptick rule, as compared to the
proposed modified uptick rule or the proposed uptick rule, because the
alternative uptick rule will reference only the current national best
bid in determining permissible short sales.\987\ In order to rely on
the broker-dealer provision, a broker-dealer must establish, maintain,
and enforce written policies and procedures reasonably designed to
prevent the incorrect identification of orders as being at a price
above the current national best bid at the time of submission of the
order to the trading center. Under the alternative uptick rule, broker-
dealers who choose to rely on Rule 201(c) will need to monitor the
current national best bid, but will not be required to monitor the
sequence of bids or last sale prices, as would have been required under
the proposed modified uptick rule or the proposed uptick rule,
respectively. Several commenters noted that the lack of a sequencing
requirement would make the alternative uptick rule, in comparison to
the other proposed short sale price tests, less costly \988\ or easier
to monitor on an on-going basis.\989\ One commenter stated that the
alternative uptick rule would reduce the data retention requirements of
a new short sale price test restriction.\990\
---------------------------------------------------------------------------

    \986\ See letter from NSCP; see also letter from Credit Suisse
(June 2009).
    \987\ See supra notes 709 to 715 and accompanying text
(discussing comments on the impact of the alternative uptick rule on
implementation and on-going monitoring and compliance costs to
broker-dealers).
    \988\ See supra note 661.
    \989\ See, e.g., letter from Glen Shipway (Sept. 2009); letter
from SIFMA (Sept. 2009); letter from STA (Sept. 2009); see also
letter from Credit Suisse (June 2009). In addition, one commenter
acknowledged that monitoring of the alternative uptick rule will
likely be easier, without referencing the sequencing issue. See
letter from Allston Trading (Sept. 2009).
    \990\ See letter from STA (Sept. 2009).
---------------------------------------------------------------------------

    Another commenter stated that the ``Commission's cost estimates
seem to underestimate the cost to large, full service broker-dealers,
since the volume of orders handled by these firms are likely to lead to
significantly greater technology and storage costs alone as well as
more frequent reviews'' but did not provide a specific cost
estimate.\991\ As we stated in the Proposal,\992\ we recognize that the
exact nature and extent of the required policies and procedures, and
thus the costs associated with such policies and procedures, that a
broker-dealer is required to establish under the broker-dealer
provision in Rule 201(c) likely will vary depending upon the nature of
the broker-dealer, and we have taken this into account in our cost
estimates.\993\
---------------------------------------------------------------------------

    \991\ Letter from NSCP.
    \992\ See Proposal, 74 FR at 18093.
    \993\ See infra notes 1022 to 1024 and accompanying text
(discussing our estimates of implementation and on-going monitoring
and surveillance costs to broker-dealers).
---------------------------------------------------------------------------

    The following discussion of comments on the costs to broker-dealers
includes comments that were discussed above with respect to the costs
to trading centers \994\ because, in some cases, commenters provided
comments and estimates on the costs of establishing and monitoring
policies and procedures under the proposed short sale price tests
without distinguishing between costs that would be applicable to
trading centers as opposed to broker-dealers. One commenter provided a
dollar estimate of broker-dealer implementation costs at approximately
$500,000 per broker-dealer, for a total of $2,780,500,000 for all
broker-dealers subject to Rule 201,\995\ including costs for ``the
purchase of additional costly data feeds'' but not including ``costs
associated with developing appropriate internal supervisory procedures
and compliance programs.'' \996\ However, we note that this
implementation cost estimate for the broker-dealer provision, which is
significantly higher than our estimate of, on average, $68,381 per
broker-dealer,\997\ was not specific to the alternative uptick rule. As
discussed above, we believe that the alternative uptick rule will be
easier and less costly to monitor than the proposed modified uptick
rule or the proposed uptick rule because under the alternative uptick
rule, broker-dealers who choose to rely on Rule 201(c) will need to
monitor the current national best bid, but will not be required to
monitor the sequence of bids or last sale prices, as would have been
required under the proposed modified uptick rule or the proposed uptick
rule, respectively.\998\ In addition, we note that implementation of
Rule 201 will not require modifications to how data feeds are currently
received. As discussed above, Rule 201 does not mandate that the
receipt of the current national best bid must be from any one
particular data feed; thus, broker-dealers will be able to continue
using the data feed they currently use and for which they currently
pay.\999\
---------------------------------------------------------------------------

    \994\ See supra Section X.B.1.b.i. (discussing costs to trading
centers).
    \995\ See letter from Wolverine. Wolverine provided an estimate
of $500,000 per firm for implementation costs, which it applied to
both non-SRO trading centers and other registered broker-dealers. In
its letter, Wolverine multiplied its implementation cost estimate of
$500,000 by 5,561 for a total of $2,780,500,000. See id. As
indicated above, the Commission now estimates the number of broker-
dealers at 5,178 based on a review of 2008 FOCUS Report filings
reflecting registered broker-dealers, including introducing broker-
dealers. This number does not include broker-dealers that are
delinquent on FOCUS Report filings. See supra note 652.
    \996\ Letter from Wolverine.
    \997\ See infra note 1022 and accompanying text (discussing our
estimated implementation costs for broker-dealers).
    \998\ See supra notes 709 to 715 and accompanying text and notes
978 to 980 and accompanying text (discussing comments on the impact
of the alternative uptick rule on implementation and on-going
monitoring and compliance costs).
    \999\ See supra notes 404 to 411 and accompanying text
(discussing the use of various data feeds in determining the current
national best bid).
---------------------------------------------------------------------------

    Another commenter conducted a survey of fifty firms with respect to
implementation and on-going monitoring cost estimates. Cost estimates
in response to the survey indicated that a circuit breaker triggering a
short sale price test based on the national best bid would have
implementation costs that averaged between $235,000 and $2,000,000 per
firm.\1000\ This estimated implementation cost range is significantly
higher than our cost estimate of, on average, $68,381 per broker-dealer
for implementation.\1001\ In addition, cost estimates in response to
the survey indicated that a circuit breaker triggering a short sale
price test based on the national best bid would have on-going
monitoring costs that averaged between $45,000 and $175,000 per
firm.\1002\ Our estimated cost of $121,356 per broker-dealer for on-
going monitoring and surveillance \1003\ falls within this commenter's
estimated range of on-going monitoring cost. We note that the estimated
costs were categorized by large firms, regional firms, and clearing
firms, rather than by SRO trading centers, non-SRO trading centers and
broker-dealers. As a result, it is difficult to determine the
applicability of these cost estimates to the expected implementation
and on-

going monitoring and compliance costs of Rule 201 to broker-dealers. In
addition, this commenter's cost estimates were not specific to the
alternative uptick rule. As discussed above, because the alternative
uptick rule references only the current national best bid, unlike the
proposed modified uptick rule and the proposed uptick rule, which would
have required sequencing of the national best bid or last sale price,
we believe that the alternative uptick rule will be easier and less
costly to implement and monitor than the proposed modified uptick rule
or the proposed uptick rule.\1004\
---------------------------------------------------------------------------

    \1000\ See supra note 918 (discussing the results of SIFMA's
cost estimate survey with respect to the costs of implementing a
circuit breaker triggering a short sale price test based on the
national best bid); see also letter from Wolverine.
    \1001\ See infra note 1022 and accompanying text (discussing our
estimated implementation costs for broker-dealers).
    \1002\ See supra note 931 (discussing the results of SIFMA's
cost estimate survey with respect to the on-going monitoring costs
of a circuit breaker triggering a short sale price test based on the
national best bid).
    \1003\ See infra note 1022 and accompanying text (discussing our
estimated implementation costs for broker-dealers).
    \1004\ See supra notes 709 to 715 and accompanying text and
notes 978 to 980 and accompanying text (discussing comments on the
impact of the alternative uptick rule on implementation and on-going
monitoring and compliance costs).
---------------------------------------------------------------------------

    We considered these comments in evaluating the costs of
implementation and on-going monitoring and surveillance of the broker-
dealer provision of Rule 201(c) and the riskless principal provision of
Rule 201(d)(6). We note that the policies and procedures that must be
implemented under the broker-dealer provision are similar to those that
are required under the Order Protection Rule of Regulation NMS.\1005\
Thus, we believe broker-dealers will already be familiar with
establishing, maintaining, and enforcing trading-related policies and
procedures, including programming their trading systems in accordance
with such policies and procedures.
---------------------------------------------------------------------------

    \1005\ See Regulation NMS Adopting Release, 70 FR 37496; see
also 17 CFR 242.611.
---------------------------------------------------------------------------

    Although, as discussed above with respect to trading centers,
several commenters stated that previous implementation of Regulation
NMS would not mitigate the costs to broker-dealers of implementing a
short sale price test restriction,\1006\ we considered these comments,
as well as comments stating that previous implementation of Regulation
NMS could ease implementation provided that broker-dealers could
leverage existing systems in implementing Rule 201,\1007\ and continue
to believe that familiarity with Regulation NMS policies and procedures
will reduce the implementation costs of the broker-dealer provision
under Rule 201(c) on broker-dealers. Moreover, because broker-dealers
may have already developed or modified their surveillance mechanisms in
order to comply with the policies and procedures requirement of the
Order Protection Rule under Regulation NMS, broker-dealers may already
have retained and trained the necessary personnel to ensure compliance
with that Regulation's policies and procedures requirements and,
therefore, may already have in place most of the infrastructure and
potential policies and procedures necessary to comply with the broker-
dealer provision of Rule 201(c). In addition, one commenter supported
using a policies and procedures approach to any short sale price test
restriction because it would ease implementation for broker-
dealers.\1008\
---------------------------------------------------------------------------

    \1006\ See, e.g., letter from FIF (June 2009); letter from RBC
(June 2009).
    \1007\ See, e.g., letter from MFA (Oct. 2009).
    \1008\ See, e.g., letter from GE.
---------------------------------------------------------------------------

    Moreover, while latencies in obtaining data regarding the national
best bid from consolidated market data feeds, as discussed in detail
above, may impact implementation costs associated with Rule 201, a
broker-dealer could have policies and procedures that would provide for
a snapshot of the applicable national best bid of the security. Several
commenters expressed concerns that implementing ``snapshot'' capability
to preserve an auditable record of the current national best bid would
be difficult and costly for broker-dealers,\1009\ particularly because
this is not a capability currently supported by many broker-
dealers.\1010\ Commenters also noted that ``snapshot'' capability would
require increased data storage.\1011\
---------------------------------------------------------------------------

    \1009\ See, e.g., letter from Credit Suisse (June 2009); letter
from STANY (June 2009); letter from FIF (June 2009); letter from
Lime Brokerage (June 2009); letter from NSCP.
    \1010\ See, e.g., letter from STANY (June 2009); letter from FIF
(June 2009).
    \1011\ See, e.g., letter from STANY (June 2009); letter from FIF
(June 2009); letter from NSCP; letter from Direct Edge (June 2009).
---------------------------------------------------------------------------

    Although we recognize commenters' concerns that implementing
``snapshot'' capability could be costly for some broker-dealers, we
note that most broker-dealers may already have developed ``snapshot''
capability in connection with Regulation NMS's Order Protection Rule.
We also agree that ``snapshot'' capability will require data storage by
broker-dealers; however, as noted by one commenter,\1012\ because the
alternative uptick rule does not require sequencing of the national
best bid, the data storage requirements under the alternative uptick
rule are lower than they would be under the proposed modified uptick
rule or the proposed uptick rule. In addition, we believe that the
costs of a policies and procedures approach that provides for a
snapshot of the applicable current national best bid of the security
are justified because snapshot capability will aid broker-dealers in
dealing with time lags in receiving data regarding the national best
bid from different data sources and facilitate verification of whether
a short sale order was executed or displayed at a permissible price.
---------------------------------------------------------------------------

    \1012\ See letter from STA (Sept. 2009).
---------------------------------------------------------------------------

    We considered whether our estimates of the costs to broker-dealers
for implementation and on-going monitoring and surveillance of the
proposed modified uptick rule included in the Proposal \1013\ would
change under the circuit breaker approach of Rule 201, but, as
discussed below, concluded that these estimates continue to represent
reasonable estimates under the circuit breaker approach combined with
the alternative uptick rule.
---------------------------------------------------------------------------

    \1013\ See Proposal, 74 FR at 18093-18094.
---------------------------------------------------------------------------

    As discussed previously,\1014\ despite some commenters' concerns
regarding the implementation costs of a circuit breaker rule,\1015\ we
believe that the circuit breaker approach will result in largely the
same implementation costs as we estimated would be incurred if we
adopted a permanent, market-wide short sale price test
restriction.\1016\ We believe that that there will be only minimal, if
any, implementation costs for a circuit breaker approach in addition to
the costs we estimated previously for the implementation of a
permanent, market-wide short sale price test rule because broker-
dealers relying on Rule 201(c) or Rule 201(d)(6) are required to
establish written policies and procedures required to comply with those
provisions regardless of whether the short sale price test restriction
is adopted on a permanent, market-wide basis or, in the case of Rule
201, adopted in conjunction with a circuit breaker. Several other
commenters agreed, stating that the costs of the circuit breaker
approach would be similar to, or only incrementally higher than, the
costs of a permanent, market-wide approach.\1017\
---------------------------------------------------------------------------

    \1014\ See supra Section IX.E.1. (discussing estimated burdens
of the collection of information requirements applicable to trading
centers under Rule 201).
    \1015\ See supra note 676.
    \1016\ See Proposal, 74 FR at 18093-18094.
    \1017\ See, e.g., letter from Nasdaq OMX Group (Oct. 2009);
letter from Credit Suisse (Sept. 2009); letter from STA (June 2009).
---------------------------------------------------------------------------

    In addition, with respect to on-going monitoring and surveillance
costs of the circuit breaker approach, we recognize, as noted by one
commenter,\1018\ that broker-dealers relying on Rule 201(c) or Rule
201(d)(6) will need to continuously monitor whether a security is
subject to the provisions of Rule 201 and that there will be costs
associated with such

monitoring. However, we believe that these costs will be offset
because, under the circuit breaker approach, the alternative uptick
rule will be time limited and will only apply on a stock by stock
basis, which will reduce our previously estimated costs for on-going
monitoring and surveillance. This is because broker-dealers relying on
Rule 201(c) will only need to monitor and surveil for compliance with
the alternative uptick rule, and broker-dealers relying on Rule
201(d)(6) will only need to monitor for compliance with the
requirements of that provision, during the limited period of time that
the circuit breaker is in effect with respect to a specific security.
As such, the circuit breaker approach will allow regulatory,
supervisory and compliance resources to focus on, and to address, those
situations where a specific security is experiencing significant
downward price pressure.\1019\
---------------------------------------------------------------------------

    \1018\ See letter from Glen Shipway (June 2009).
    \1019\ See, e.g., letter from Nasdaq OMX Group (Oct. 2009);
letter from SIFMA (Sept. 2009).
---------------------------------------------------------------------------

    On balance, we believe that the estimates of the costs to broker-
dealers for implementation and on-going monitoring and surveillance of
the proposed modified uptick rule included in the Proposal \1020\ are
appropriate with respect to the broker-dealer provision of Rule 201(c)
and the riskless principal provision of Rule 201(d)(6). Thus, our
estimates have not changed from the Proposal, except to the extent that
total cost estimates have changed because we have updated the estimated
number of broker-dealers.\1021\ Our estimates of the implementation
costs to broker-dealers include the costs of surveillance and
reprogramming costs for enforcing, monitoring, and updating trading,
execution management, and surveillance systems under Rule 201, systems
changes to computer software, as well as staff time and technology
resources. Our estimates of the on-going monitoring and surveillance
costs include the commitment of resources associated with compliance
oversight, market surveillance, data storage and enforcement, with
attendant opportunity costs.
---------------------------------------------------------------------------

    \1020\ See Proposal, 74 FR at 18093-18094.
    \1021\ See supra note 729 (discussing the change in the
estimated number of broker-dealers).
---------------------------------------------------------------------------

    As detailed in PRA Section IX.E.2., above, we realize that the
exact nature and extent of the required policies and procedures that a
broker-dealer is required to establish under the broker-dealer
provision in Rule 201(c), as well as under the riskless principal
provision in Rule 201(d)(6), likely will vary depending upon the type,
size and nature of the broker-dealer (e.g., full service broker-dealer
vs. market maker). Thus, our estimates take into account different
types of broker-dealers and we realize that these estimates may be on
the low-end for some broker-dealers while they may be on the high-end
for other broker-dealers.
    As detailed in PRA Section IX.E.2., above, we estimate a total one-
time initial cost of $354,076,818 for all broker-dealers relying on the
broker-dealer provision in Rule 201(c) and the riskless principal
provision in Rule 201(d)(6) to establish written policies and
procedures reasonably designed to prevent the incorrect identification
of orders as being priced in accordance with the broker-dealer
provision or, in the case of the riskless principal provision, to
assure that, at a minimum: (i) The customer order was received prior to
the offsetting transaction; (ii) the offsetting transaction is
allocated to a riskless principal or customer account within 60 seconds
of execution; and (iii) that it has supervisory systems in place to
produce records that enable the broker-dealer to accurately and readily
reconstruct, in a time-sequenced manner, all orders on which the
broker-dealer relies pursuant to this provision.\1022\
---------------------------------------------------------------------------

    \1022\ This figure was calculated by adding $250,516,818 and
$103,560,000 (for outsourced legal work). The $250,516,818 figure
was calculated as follows: (37 legal hours x $305) + (77 compliance
hours x $313) + (23 information technology hours x $292) + (23
business operation hours x $273) = $48,381 per broker-dealer x 5,178
broker-dealers = $250,516,818 total cost for broker-dealers. The
$103,560,000 figure was calculated as follows: (50 legal hours x
$400 x 5,178) = $103,560,000.
     Based on industry sources, we estimate that the average hourly
rate for outsourced legal services in the securities industry is
$400. For in-house legal services, we estimate that the average
hourly rate for an attorney in the securities industry is
approximately $305 per hour. In addition, we estimate that the
average hourly rate for an assistant compliance director, a senior
computer programmer, and a senior operations manager in the
securities industry is approximately $313, $292, and $273 per hour,
respectively. The estimates for in-house legal services, assistant
compliance director, senior computer programmer, and senior
operations manager are from SIFMA's Management & Professional
Earnings in the Securities Industry 2008, modified to account for an
1800-hour work-year and multiplied by 5.35 to account for bonuses,
firm size, employee benefits and overhead.
---------------------------------------------------------------------------

    Once a broker-dealer has established written policies and
procedures so that it may rely on the broker-dealer provision in Rule
201(c) and the riskless principal provision in Rule 201(d)(6), we
estimate a total annual on-going cost of $96,248,664 for all broker-
dealers relying on either of these provisions to ensure that their
written policies and procedures are up-to-date and remain in compliance
with Rule 201.\1023\ In addition, with regard to on-going monitoring
for and enforcement of trading in compliance with the broker-dealer
provision in Rule 201(c) and the riskless principal provision in Rule
201(d)(6), as detailed in PRA Section IX.E.2., above, we believe that,
once the tools necessary to carry out on-going monitoring have been put
in place, a broker-dealer will be able to incorporate on-going
monitoring and enforcement within the scope of its existing
surveillance and enforcement policies and procedures without a
substantial additional burden. We recognize, however, that this on-
going compliance will not be cost-free, and that broker-dealers will
incur some additional annual costs associated with on-going compliance,
including compliance costs of reviewing transactions. We estimate that
each broker-dealer will incur an average annual on-going compliance
cost of $102,768, for a total annual cost of $532,132,704 for all
broker-dealers.\1024\
---------------------------------------------------------------------------

    \1023\ This figure was calculated as follows: (2 legal hours x
12 months x $305) x 5,178 + (3 compliance hours x 12 months x $313)
x 5,178 = $96,248,664.
    \1024\ This figure was calculated as follows: (16 compliance
hours x $313) + (8 information technology hours x $292) + (4 legal
hours x $305) x 12 months = $102,768 per broker-dealer x 5,178
broker-dealers = $532,132,704. As discussed above, we base our
estimate of burden hours on the estimates used for Regulation NMS
because it requires similar on-going monitoring and surveillance for
and enforcement of trading in compliance with that regulation's
policies and procedures requirement.
     For in-house legal services, we estimate that the average
hourly rate for an attorney in the securities industry is
approximately $305 per hour. In addition, we estimate that the
average hourly rate for an assistant compliance director and a
senior computer programmer in the securities industry is
approximately $313 and $292 per hour, respectively. These figures
are from SIFMA's Management & Professional Earnings in the
Securities Industry 2008, modified to account for an 1800-hour work-
year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead.
---------------------------------------------------------------------------

    To summarize, we estimate an average one-time initial cost of
$68,381 per broker-dealer for a total one-time initial cost of
$354,076,818 for all broker-dealers relying on the broker-dealer
provision in Rule 201(c) and the riskless principal provision in Rule
201(d)(6) to establish the written policies and procedures required to
rely on the broker-dealer provision or the riskless principal
provision.\1025\ We estimate an average annual on-going cost of $18,588
per broker-dealer for a total annual on-going cost of $96,248,664 for
all broker-dealers relying on either of these provisions to ensure that
their written policies and procedures are up-to-date and remain in
compliance with Rule 201.\1026\ In addition, we estimate an average
annual cost of $102,768 per

broker-dealer for a total annual cost of $532,132,704 for all broker-
dealers for on-going monitoring for and enforcement of trading in
compliance with the broker-dealer provision in Rule 201(c) and the
riskless principal provision in Rule 201(d)(6).\1027\
---------------------------------------------------------------------------

    \1025\ See supra note 1022.
    \1026\ See supra note 1023.
    \1027\ See supra note 1024.
---------------------------------------------------------------------------

2. Circuit Breaker Approach
    Under the circuit breaker approach, the alterative uptick rule will
apply only if the price of a covered security has declined by 10% or
more from the covered security's closing price as determined by the
listing market for the covered security as of the end of regular
trading hours on the prior day.\1028\ In addition, this short sale
price test restriction will apply for the remainder of the day and the
following day when a national best bid for the covered security is
calculated and disseminated on a current and continuing basis by a plan
processor pursuant to an effective national market system plan.\1029\
---------------------------------------------------------------------------

    \1028\ See Rule 201(b)(i).
    \1029\ See Rule 201(b)(ii).
---------------------------------------------------------------------------

a. Impact on Market Quality
    As stated above, in the Proposal and Re-Opening Release, we
requested comment on the costs of a circuit breaker rule,\1030\ and
specifically on the extent to which the proposed amendments to
Regulation SHO, including the proposed circuit breaker rules, could
impact or lessen some of the benefits of legitimate short selling or
could lead to a decrease in market efficiency, price discovery, or
liquidity.\1031\
---------------------------------------------------------------------------

    \1030\ See Proposal, 74 FR at 18090, 18100; Re-Opening Release,
74 FR at 42037.
    \1031\ See Proposal, 74 FR at 18090.
---------------------------------------------------------------------------

    As we stated in the Proposal, we understand that there are concerns
about a potential ``magnet effect'' that could arise as an unintended
consequence of a circuit breaker that imposes a short selling price
test restriction.\1032\ This ``magnet effect'' could result in short
sellers driving down the price of an equity security in a rush to
execute short sales before the circuit breaker is triggered. We are
also concerned about short selling demand building until the circuit
breaker is lifted.
---------------------------------------------------------------------------

    \1032\ See Proposal, 74 FR at 18067.
---------------------------------------------------------------------------

    In response to our requests for comments, several commenters stated
that a short sale circuit breaker could exacerbate downward pressure on
stocks as their value reached the threshold level.\1033\ Commenters
also discussed the possibility that short selling demand could be built
up until the short selling restriction is lifted.\1034\ Other
commenters, however, discounted the possibility or impact of a ``magnet
effect,'' \1035\ including some commenters who cited empirical studies
that question whether a circuit breaker would result in artificial
pressure on the price of individual securities.\1036\
---------------------------------------------------------------------------

    \1033\ See, e.g., letter from Matlock Capital (May 2009); letter
from Schwab; letter from Lime Brokerage (June 2009); letter from STA
(June 2009); letter from Glen Shipway (June 2009); letter NYSE
Euronext (June 2009); letter from Wolverine; letter from Direct Edge
(June 2009); letter from Amer. Bankers Assoc.; letter from NYSE
Euronext (Sept. 2009); see also letter from SIFMA (June 2009)
(indicating that an ``on/off'' circuit breaker trigger could dampen
any magnet effect); letter from Direct Edge (Mar. 2009).
    \1034\ See letter from STA (June 2009); letter from Wolverine.
    \1035\ See letter from BATS (May 2009); letter from Credit
Suisse (June 2009); letter from Credit Suisse (Sept. 2009); letter
from Hudson River Trading; letter from Virtu Financial; see also
letter from Credit Suisse (Mar. 2009).
    \1036\ See letter from Credit Suisse (June 2009); letter from
Credit Suisse (Sept. 2009); see also letter from Credit Suisse (Mar.
2009); letter from Nasdaq OMX Group (Oct. 2009).
---------------------------------------------------------------------------

    After considering the comments, including studies cited by
commenters, we do not believe that the evidence is clear regarding a
``magnet effect.'' \1037\ In fact, many academic studies that have
analyzed circuit breakers in other contexts found no evidence of such
trading patterns.\1038\ We recognize, however, that some of these
studies were conducted in markets dissimilar from the highly automated
markets currently existing in the United States and, therefore, that
limits their utility in this context. Overall, however, the most
relevant studies fail to demonstrate a magnet effect and we believe
that adopting the circuit breaker approach best serves our goals.
---------------------------------------------------------------------------

    \1037\ See supra notes 280 to 285 and accompanying text
(discussing comments on the ``magnet effect'' and our response).
    \1038\ See supra note 285.
---------------------------------------------------------------------------

    Commenters also stated that a circuit breaker could have a
stigmatizing effect on affected securities by creating the impression
that a stock is ``down so significantly that the trading rules must
change.'' \1039\ Other commenters expressed concerns that the circuit
breaker could have a negative effect on affected securities because
``if a security has suffered a significant decline, additional
constraints that affect the ability of market makers to provide high-
quality markets may actually hasten the decline, as decreased size and
wider spreads will further undermine the already battered investor
confidence in the security.'' \1040\ Another commenter noted that a
circuit breaker ``may exacerbate market dislocations by suddenly and
unexpectedly altering the regulatory regime and liquidity
characteristics of a particular security, precisely when it is under
duress.'' \1041\
---------------------------------------------------------------------------

    \1039\ Letter from Schwab; see also letter from Amer. Bankers
Assoc.
    \1040\ Letter from EWT (June 2009).
    \1041\ Letter from EWT (June 2009); see also letter from Matlock
Capital (May 2009).
---------------------------------------------------------------------------

    We recognize that the circuit breaker approach of Rule 201 could
result in some perception of stigmatization of stocks that trigger the
short sale price test restriction of Rule 201. As discussed above in
Section X.B.1.a., we also recognize that imposing a short sale price
test restriction may negatively impact market quality with respect to a
covered security that has triggered the circuit breaker. In addition,
although we agree that a circuit breaker combined with a halt on short
selling could cause or exacerbate market dislocations, we do not
believe that the circuit breaker approach of Rule 201 will have the
same impact because it will continue to allow short selling at a price
above the national best bid, even when the short sale price test
restriction is in effect. Further, to the extent that the circuit
breaker approach results in stigmatization, market dislocations, or
other negative impacts on market quality, we believe any such costs are
justified by the benefits provided by the Rule.
    As discussed in detail in Section III.A.5., above, commenters'
estimates and the Staff's analysis show that a 10% circuit breaker
threshold generally should affect only a limited percentage of covered
securities, thus will not interfere with the smooth functioning of the
markets for the majority of covered securities most of the time. And,
although a permanent market-wide approach that would apply to all
covered securities all the time may, as one commenter stated, provide
an element of predictability,\1042\ we believe that the circuit breaker
approach of Rule 201 is appropriate because it provides a balance
between achieving our goals for adopting a short sale price test
restriction and limiting impediments to the normal operations of the
market. As discussed above, due to the changes in market conditions and
erosion of investor confidence that occurred recently, investors have
become increasingly concerned about sudden and excessive declines in
prices that appear to be unrelated to issuer fundamentals.\1043\ We
believe that a time-limited circuit breaker that is triggered by a
significant intra-day decline in price of an individual

security is a targeted response to address these concerns.
---------------------------------------------------------------------------

    \1042\ See letter from NYSE Euronext (Sept. 2009).
    \1043\ See supra Section II.C. (discussing investor confidence);
see also Proposal, 74 FR at 18046-18049.
---------------------------------------------------------------------------

    Commenters also expressed concerns that, during periods of
volatility, ``circuit breakers could potentially impact far too many
stocks on any given day and damage the benefits of short
selling.''\1044\ Similarly, a number of commenters expressed concerns
that, if the trigger level for a circuit breaker were set too low, the
circuit breaker would impose a short sale price test restriction that
would impair trading in a stock not only due to a price decline that
might indicate abusive or abnormal trading activity, but also during
normal market conditions, thus impairing normal trading activity,
further limiting the provision of market benefits such as liquidity and
price efficiency, and causing disruptions to investors and
markets.\1045\
---------------------------------------------------------------------------

    \1044\ Letter from Atherton Lane; see also letter from Citadel
et al. (June 2009); letter from Goldman Sachs (June 2009); letter
from ISE (June 2009); letter from MFA (June 2009); letter from SIFMA
(June 2009); letter from Wells Fargo (June 2009); letter from SIFMA
(Sept. 2009).
    \1045\ See, e.g., letter from Citadel et al. (June 2009); letter
from Goldman Sachs (June 2009); letter from MFA (June 2009); letter
from SIFMA (June 2009); letter from SIFMA (Sept. 2009).
---------------------------------------------------------------------------

    When the markets experience periods of extreme volatility, we
expect that the circuit breaker will be triggered for more securities
than during periods of low volatility. We believe this is an
appropriate result of Rule 201 because it is designed to impose
restrictions on short selling when individual securities are undergoing
significant intra-day price declines. In addition, we recognize that a
10% trigger level may capture some ``normal'' trading activity.
However, as discussed in detail in Section III.A.5., above, commenters'
estimates and the Staff's analysis show that a 10% circuit breaker
threshold generally should affect only a limited percentage of covered
securities. This supports the conclusion that Rule 201 provides a
tailored approach that reaches a limited subset of covered securities
that are experiencing a significant intra-day price decline, while
generally not restricting short selling in the majority of covered
securities. To the extent that Rule 201 impairs normal trading
activity, we believe that such costs are justified by the benefits
provided by the Rule in preventing short selling, including potentially
manipulative or abusive short selling, from being used as a tool to
exacerbate a declining market in a security.
    Several commenters expressed concerns that a circuit breaker
approach ``does not adequately address the negative implications of
unregulated short selling'' because it would permit relatively
unrestricted, and potentially manipulative, short selling up to the
trigger point.\1046\ One commenter stated that a circuit breaker would
not be effective to address manipulative short selling because
``predatory short selling is not a one-day event, but the culmination
of a series of events.'' \1047\
---------------------------------------------------------------------------

    \1046\ Letter from T. Rowe Price (June 2009); see also letter
from Atherton Lane; letter from Chlebina (Apr. 2009); letter from
Equity Insight; letter from Wells Fargo (June 2009); letter from
Glen Shipway (Sept. 2009).
    \1047\ Letter from Equity Insight.
---------------------------------------------------------------------------

    While it is true that, under a circuit breaker approach, the short
sale price test restriction of Rule 201 will not apply to short selling
in a security before the 10% intra-day decline trigger is reached, or
after the duration of the restriction has passed, we believe that the
circuit breaker approach is designed to strike the appropriate balance
between our goal of preventing potential short sale abuse and the need
to limit impediments to the normal operations of the market. As we
stated in the Proposal, in discussing a short selling circuit breaker,
one commenter noted that such a measure could address the issue of
``bear raids'' while limiting the market impact that may arise from
other forms of short sale price test restrictions.\1048\ As discussed
above, short selling is an important tool in price discovery and the
provision of liquidity to the market, and we recognize that imposition
of a short selling circuit breaker that when triggered imposes the
alternative uptick rule could restrict otherwise legitimate short
selling activity during periods of significant volatility. To the
extent that Rule 201 permits relatively unrestricted, and potentially
manipulative, short selling during times when the circuit breaker has
not been triggered for a particular security, we believe that such
costs are justified by the benefits provided by the circuit breaker
approach in not interfering with the provision of market benefits such
as liquidity and price efficiency for the majority of covered
securities most of the time.
---------------------------------------------------------------------------

    \1048\ See Proposal, 74 FR at 18067, n.252 (noting a letter from
Peter Brown, dated Dec. 12, 2008).
---------------------------------------------------------------------------

    After considering the comments, as discussed above, that we
received with respect to the potential market impacts of a circuit
breaker approach, we believe that such potential market impacts do not
undermine our goals of preventing potential short sale abuse and
addressing investor confidence, while balancing these goals with the
need to limit impediments to the normal operations of the market. The
Commission has long held the view that circuit breakers may help
restore investor confidence during times of substantial
uncertainty.\1049\ We believe that the requirements of Rule 201 will
produce such benefits. By imposing the alternative uptick rule once a
security's price is experiencing a significant price decline, the short
selling circuit breaker rule in Rule 201(b) is designed to target only
those securities that experience significant intra-day price declines
and, therefore, will help to prevent short selling from being used as a
tool to exacerbate the decline in the price of those securities. This
approach establishes a narrowly-tailored Rule that will target only
those securities experiencing such a decline. We believe that
addressing short selling in connection with such declines in individual
securities will help restore investor confidence in the markets
generally.
---------------------------------------------------------------------------

    \1049\ See, e.g., 1998 Release, 63 FR 18477; see also Proposal,
74 FR at 18067.
---------------------------------------------------------------------------

    Further, as discussed above, short selling is an important tool in
price discovery and the provision of liquidity to the market, and we
recognize that imposition of a short selling circuit breaker that when
triggered imposes the alternative uptick rule could restrict otherwise
legitimate short selling activity during periods of significant
volatility. Under the circuit breaker approach, the alternative uptick
rule will only be imposed when a covered security has experienced an
intra-day price decline of 10% or more and will only apply for the
remainder of the day and the following day. We believe that the
negative impact of Rule 201, if any, on the market will be limited
because of the limited scope and duration of Rule 201. Further, to the
extent that Rule 201 negatively impacts market quality, we believe that
such costs are justified by the benefits provided by the Rule in
preventing short selling, including potentially manipulative or abusive
short selling, from being used as a tool to exacerbate a declining
market in a security.
b. Implementation and On-Going Monitoring and Surveillance Costs
    We discussed in the Proposal and the Re-Opening Release the
anticipated costs of the proposed circuit breaker rules \1050\ and we
requested comment on the costs associated with the proposed circuit
breaker rules.\1051\ In particular, we requested comment on the
potential

costs for any modification to both computer systems and surveillance
mechanisms and for information gathering, management, and recordkeeping
systems or procedures.\1052\
---------------------------------------------------------------------------

    \1050\ See Proposal, 74 FR at 18097-18100; Re-Opening Release,
74 FR at 42035.
    \1051\ See Proposal, 74 FR at 18101-18103; Re-Opening Release,
74 FR at 42037.
    \1052\ See Proposal, 74 FR at 18090.
---------------------------------------------------------------------------

    Several commenters expressed concerns regarding the implementation
costs of a circuit breaker approach in comparison to the costs of
implementing a permanent, market-wide test, but did not provide
specific cost estimates.\1053\ One commenter stated that ``the circuit
breaker proposal would be the least cost effective'' but did not
provide a specific cost estimate with respect to a circuit breaker
rule.\1054\
---------------------------------------------------------------------------

    \1053\ See supra note 676.
    \1054\ Letter from T. Rowe Price (June 2009).
---------------------------------------------------------------------------

    One commenter conducted a survey of fifty firms with respect to
implementation cost and on-going monitoring costs estimates of a new
short sale price test restriction.\1055\ Cost estimates in response to
the survey indicated that a permanent, market-wide short sale price
test based on the national best bid would have implementation costs
that averaged between $200,000 and $1,100,000 per firm,\1056\ while a
circuit breaker triggering a short sale price test based on the
national best bid would have implementation costs that averaged between
$235,000 and $2,000,000 per firm.\1057\ This represents an estimated
increase in implementation costs for a circuit breaker approach, as
compared to a permanent, market-wide approach, of $35,000 to $900,000
per firm. However, we note that these cost estimates were based on a
circuit breaker triggering the proposed modified uptick rule and, as
such, were not specific to the alternative uptick rule.\1058\ As
discussed throughout this adopting release, because the alternative
uptick rule does not require sequencing of the national best bid,
unlike the proposed modified uptick rule and the proposed uptick rule,
which would have required sequencing of the national best bid or last
sale price, we believe that the policies and procedures required under
the alternative uptick rule will be easier and less costly to implement
and monitor than would be the case under the proposed modified uptick
rule or the proposed uptick rule.
---------------------------------------------------------------------------

    \1055\ See letter from SIFMA (June 2009).
    \1056\ See letter from SIFMA (June 2009). SIFMA did not
categorize estimates of the implementation costs of a permanent,
market-wide short sale price test based on the national best bid by
SRO trading centers, non-SRO trading centers, and other broker-
dealers, but categorized responses by larger firms, with
implementation cost estimates that averaged $1,000,000 per firm,
with the highest estimate at $7,000,000 per firm, regional firms
with estimates that averaged $200,000 per firm, with the highest
estimate at $500,000 per firm, and clearing firms, with estimates
that averaged $1,100,000 per firm, with the highest estimate at
$1,900,000 per firm. SIFMA provided cost estimates in terms of the
average estimated cost and the highest estimated cost. See id.
    \1057\ See supra note 918 (discussing SIFMA's survey of cost
estimates with respect to the implementation costs of a circuit
breaker triggering a short sale price test based on the national
best bid).
    \1058\ We also note that the commenter's survey results covered
fifty firms, categorized as large firms, regional firms, and
clearing firms, rather than SRO trading centers, non-SRO trading
centers and broker-dealers. Thus, it is difficult to determine costs
of a circuit breaker approach to trading centers as opposed to
broker-dealers from the survey results.
---------------------------------------------------------------------------

    We recognize that imposing a short sale-related circuit breaker
rule when, currently, there is an absence of a short sale-related
circuit breaker may result in costs in terms of modifications to
systems and surveillance mechanisms, as well as changes to processes
and procedures.\1059\ Such costs will include implementation costs for
market participants associated with reprogramming trading and
surveillance systems to account for the requirements of the short sale
related circuit breaker. We also recognize that the circuit breaker
approach may impose costs on market participants related to systems
changes to computer software, reprogramming costs, and surveillance and
compliance costs, as well as staff time and technology resources,
associated with monitoring compliance with the short sale related
circuit breaker. Moreover, imposing a short sale related circuit
breaker rule when there are currently no short sale related circuit
breakers in place also may mean that staff (compliance personnel,
associated persons, etc.) may need to be trained or re-trained
regarding rules related to the circuit breaker requirements.
---------------------------------------------------------------------------

    \1059\ Although under the circuit breaker approach, a price test
will not be in place all the time or for all securities, trading
centers, and broker-dealers relying on Rule 201(c) or Rule
201(d)(6), will need to establish reasonable policies and procedures
in advance to ensure compliance whenever the circuit breaker is
triggered. We note that it would not be reasonable for a trading
center, or a broker-dealer relying on Rule 201(c) or Rule 201(d)(6)
to wait until the circuit breaker is triggered to begin establishing
reasonable policies and procedures to prevent the execution or
display of the particular covered security at a price that is less
than or equal to the current national best bid. Thus, we recognize
that the circuit breaker approach will result in immediate upfront
costs to trading centers and to broker-dealers intending to rely on
Rule 201(c) or Rule 201(d)(6). See supra Section X.B.1. (discussing
costs of the alternative uptick rule).
---------------------------------------------------------------------------

    As discussed previously,\1060\ despite some commenters' concerns
regarding the implementation costs of a circuit breaker rule, we
believe that the circuit breaker approach will result in largely the
same implementation costs as we estimated would be incurred if we
adopted a permanent, market-wide short sale price test
restriction.\1061\ We believe that there will be only minimal, if any,
implementation costs for a circuit breaker approach in addition to the
costs we estimated previously for the implementation of a permanent,
market-wide short sale price test rule.\1062\
---------------------------------------------------------------------------

    \1060\ See supra notes 676 to 684 and 723 to 727 and
accompanying text (discussing the impact of the circuit breaker
approach on implementation and on-going monitoring and surveillance
costs to trading centers and broker-dealers).
    \1061\ See Proposal, 74 FR 18093-18094.
    \1062\ Several commenters agreed, stating that the costs of the
circuit breaker approach would be similar to, or only incrementally
higher than, the costs of a permanent, market-wide approach. See,
e.g., letter from Nasdaq OMX Group (Oct. 2009); letter from Credit
Suisse (Sept. 2009); letter from STA (June 2009).
---------------------------------------------------------------------------

    In addition, with respect to on-going monitoring and surveillance
costs of the circuit breaker approach, we recognize, as noted by one
commenter,\1063\ that market participants will need to continuously
monitor whether a security is subject to the provisions of Rule 201 and
that there will be costs associated with such monitoring. However, we
believe that these costs will be offset because, under the limited
scope and duration of the circuit breaker approach, market participants
will only need to monitor and surveil for compliance with the
alternative uptick rule during the limited period of time that the
circuit breaker is in effect with respect to a specific security. This
will reduce our previously estimated costs for on-going monitoring and
surveillance.\1064\
---------------------------------------------------------------------------

    \1063\ See letter from Glen Shipway (June 2009).
    \1064\ Commenters noted that the circuit breaker approach will
allow regulatory, supervisory and compliance resources to focus on,
and to address, those situations where a specific security is
experiencing significant downward price pressure. See, e.g., letter
from Nasdaq OMX Group (Oct. 2009); letter from SIFMA (Sept. 2009).
---------------------------------------------------------------------------

    In addition, although, under the circuit breaker approach, market
participants will need to monitor whether a stock is subject to Rule
201 or not, we believe that familiarity with a circuit breaker approach
may help mitigate such compliance costs. As discussed in the Proposal,
currently, all stock exchanges and FINRA have rules or policies to
implement coordinated circuit breaker halts.\1065\ Moreover, SROs have
rules or policies in place to coordinate individual security trading
halts corresponding to significant news events.\1066\
---------------------------------------------------------------------------

    \1065\ See supra note 292.
    \1066\ See, e.g., FINRA Rule 6120; see also Proposal, 74 FR at
18065-18066 (discussing the background on circuit breakers).

---------------------------------------------------------------------------

    We also note that one commenter conducted a survey of firms with
respect to on-going monitoring costs estimates of a new short sale
price test restriction.\1067\ Cost estimates in response to the survey
indicated that a permanent, market-wide short sale price test based on
the national best bid would have on-going monitoring costs that
averaged between $50,000 and $175,000 per firm,\1068\ while a circuit
breaker triggering a short sale price test based on the national best
bid would have on-going monitoring costs that averaged between $45,000
and $175,000 per firm.\1069\ This seems to support our view that the
on-going monitoring costs of a circuit breaker approach, as compared to
a permanent, market-wide approach, would be largely the same.
---------------------------------------------------------------------------

    \1067\ See letter from SIFMA (June 2009).
    \1068\ See letter from SIFMA (June 2009). SIFMA did not
categorize estimates of the on-going costs of a permanent, market-
wide short sale price test based on the national best bid by SRO
trading centers, non-SRO trading centers, and other broker-dealers,
but categorized responses by larger firms, with on-going monitoring
cost estimates that averaged $100,000 per firm, with the highest
estimate at $1,500,000 per firm, regional firms with estimates that
averaged $50,000 per firm, with the highest estimate at $450,000 per
firm, and clearing firms, with estimates that averaged $175,000 per
firm, with the highest estimate at $250,000 per firm. SIFMA only
provided the average and highest cost estimates per category. See
id.
    \1069\ See supra note 931 (discussing SIFMA's survey of cost
estimates with respect to the on-going monitoring costs of a circuit
breaker triggering a short sale price test based on the national
best bid).
---------------------------------------------------------------------------

    After considering the comments, we believe that the implementation,
on-going monitoring and surveillance costs of a circuit breaker
triggering a short sale price test restriction will be similar to the
implementation, on-going monitoring and surveillance costs of the same
short sale price test restriction on a permanent, market-wide basis.
Thus, we believe that our estimates of the implementation and on-going
monitoring and surveillance costs of Rule 201 for trading centers and
broker-dealers, as reflected in Sections X.B.1.b.i and X.B.1.b.ii.,
discussing the implementation and on-going monitoring and compliance
costs of the alternative uptick rule, are appropriate after taking into
consideration the circuit breaker approach of Rule 201. Further, we
believe that such costs are justified by the benefits provided by the
Rule in preventing short selling, including potentially manipulative or
abusive short selling, from being used as a tool to exacerbate a
declining market in a security.
    Under the circuit breaker approach of Rule 201, the listing market
for each covered security must determine whether that covered security
is subject to Rule 201.\1070\ Once the listing market has determined
that a security has become subject to the requirements of Rule 201, the
listing market shall immediately notify the single plan processor
responsible for consolidation of information for the covered security
in accordance with Rule 603(b) of Regulation NMS \1071\ of this fact.
The plan processor must then disseminate this information.\1072\ We
recognize that these requirements will require changes by the listing
markets and single plan processors to systems currently supported by
each.\1073\ We note that, because listing markets and single plan
processors will require time in which to reprogram and test their
systems and procedures to comply with Rule 201, the systems and
programming costs associated with Rule 201 might be higher without a
sufficient implementation period.\1074\ We believe that the six month
implementation period will provide listing markets and single plan
processors with time to make required changes in a measured fashion,
which will help alleviate some of the potential disruptions that may be
associated with implementing Rule 201.\1075\
---------------------------------------------------------------------------

    \1070\ See Rule 201(b)(3).
    \1071\ See supra note 368 (discussing the single plan processors
for NMS stocks).
    \1072\ See Rule 201(b)(3); 17 CFR 242.603(b).
    \1073\ See letter from FIF (June 2009); see also supra Section
III.A.6. (discussing the determination regarding securities subject
to Rule 201 and dissemination of such information).
    \1074\ For example, commenters indicated that a circuit breaker
rule triggering the alternative uptick rule would require an
implementation period of between three and twelve months. See letter
from NSCP; letter from NYSE Euronext (June 2009); letter from RBC
(June 2009); letter from STA (June 2009); letter from FIF (Sept.
2009); letter from Citadel et al. (Sept. 2009); letter from Credit
Suisse (Sept. 2009); letter from Direct Edge (Sept. 2009); letter
from EWT (Sept. 2009); letter from RBC (Sept. 2009); letter from
SIFMA (Sept. 2009); letter from MFA (Oct. 2009); see also letter
from Amer. Bankers Assoc.; letter from NYSE Euronext (Sept. 2009);
letter from Goldman Sachs (Sept. 2009).
    \1075\ See supra Section VII. (discussing the implementation
period for Rule 201); see also supra Section III.A.6.
---------------------------------------------------------------------------

    While we recognize that listing markets will incur initial up-front
costs associated with having to update their systems, including systems
changes to computer software, as well as staff time and technology
resources to update their systems and surveillance mechanisms to ensure
compliance with the Rule's requirements,\1076\ familiarity with a
circuit breaker approach may help mitigate the implementation and
compliance costs. In addition, we believe that listing markets may be
able to leverage some of their existing procedures to ease the
implementation of Rule 201's requirements. For example, as discussed in
the Proposal, currently, all stock exchanges and FINRA have rules or
policies to implement coordinated circuit breaker halts \1077\ and
listing markets also already send information to single plan processors
regarding Regulatory Halts as defined in those plans. Moreover, SROs
have rules or policies in place to coordinate individual security
trading halts corresponding to significant news events.\1078\ In
addition, we note that listing markets are familiar with making
determinations regarding, and imposing trading restrictions on,
individual NMS stocks.\1079\ Similarly, in connection with such
activities, listing markets currently monitor price changes in covered
securities relative to the closing price as of the end of regular
trading hours on the prior day.
---------------------------------------------------------------------------

    \1076\ See supra Section X.B.1. (discussing costs of the
alternative uptick rule).
    \1077\ See supra note 292.
    \1078\ See supra note 684.
    \1079\ For example, listing markets already have rules or
policies in place to coordinate trading suspensions or halts in
individual NMS stocks. See, e.g., Nasdaq Rule 4120 (relating to
trading halts in Nasdaq-listed securities); NYSE Rule 123D (relating
to delayed openings and trading halts in NYSE-listed securities).
---------------------------------------------------------------------------

    Further, we note that listing markets are also trading centers, as
defined by Rule 201,\1080\ and as such, will have costs in connection
with systems changes to implement the policies and procedures
requirements of Rule 201 applicable to trading centers.\1081\ We
believe that the costs to listing markets associated with having to
update their systems to ensure compliance with the Rule's requirements
applicable to listing markets will be an incremental addition to the
costs associated with the implementation of the policies and procedures
requirements applicable to trading centers.\1082\ We believe that the
implementation and compliance costs for listing markets are justified
by the benefits provided by requiring the listing market for a covered
security to determine whether the security has become subject to the
short sale price test restrictions of Rule 201 because this will help
to ensure consistency for each covered security with respect to such
determinations.
---------------------------------------------------------------------------

    \1080\ See Rule 201(a)(9).
    \1081\ See supra Section IX.E.1. (discussing implementation
costs to trading centers).
    \1082\ See id.
---------------------------------------------------------------------------

    We recognize that single plan processors will also incur initial
up-front costs associated with having to update their systems,
including systems changes to computer software, as well as staff time
and technology resources to update their systems and surveillance
mechanisms in order to ensure

compliance with the circuit breaker requirements.\1083\ We believe,
however, that the single plan processors' current familiarity with
receiving and disseminating information regarding individual NMS stocks
will help mitigate these implementation and compliance costs. For
example, the single plan processors currently receive information from
listing markets regarding trading restrictions, such as Regulatory
Halts as defined in those plans, on individual securities and
disseminate such information. As a result, the requirements of Rule
201(b)(3) are similar to existing obligations on plan processors
pursuant to the requirements of Regulation NMS, the CTA and CQ Plans
and the Nasdaq UTP Plan. Two commenters agreed that dissemination of
information regarding the triggering of Rule 201 would be a function
similar to other functions currently performed by the plan
processors.\1084\ Further, we believe that the implementation and
compliance costs for single plan processors are justified by the
benefits provided by requiring the single plan processors to
disseminate information on whether a security has become subject to the
short sale price test restrictions of Rule 201 because the similarity
of this function to current functions performed by the single plan
processors will help to ensure the workability and smooth functioning
of the Rule.
---------------------------------------------------------------------------

    \1083\ See supra Section X.B.1. (discussing costs of the
alternative uptick rule).
    \1084\ See letter from NYSE Euronext (Sept. 2009); letter from
Virtu Financial.
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3. Implementation Period
    We believe that a six month implementation period will provide
trading centers, broker-dealers, listing markets, the single plan
processors and other market participants with a sufficient amount of
time in which to modify their systems and procedures in order to comply
with the requirements of Rule 201.\1085\ The six month implementation
period will provide market participants with time to make required
changes in a measured fashion, which will help alleviate some of the
potential disruptions that may be associated with implementing Rule
201. Because trading centers, listing markets, the single plan
processors and other market participants will require time in which to
reprogram and test their systems and procedures to comply with Rule
201, the systems and programming costs associated with Rule 201 might
be higher without a sufficient implementation period. For example,
commenters indicated that a circuit breaker rule triggering the
alternative uptick rule would require an implementation period of
between three and twelve months.\1086\
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    \1085\ See supra Section VII. (discussing the implementation
period).
    \1086\ See letter from NSCP; letter from NYSE Euronext (June
2009); letter from RBC (June 2009); letter from STA (June 2009);
letter from FIF (Sept. 2009); letter from Citadel et al. (Sept.
2009); letter from Credit Suisse (Sept. 2009); letter from Direct
Edge (Sept. 2009); letter from EWT (Sept. 2009); letter from RBC
(Sept. 2009); letter from SIFMA (Sept. 2009); letter from MFA (Oct.
2009); see also letter from Amer. Bankers Assoc.; letter from NYSE
Euronext (Sept. 2009); letter from Goldman Sachs (Sept. 2009).
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    The six month implementation period, which is longer than the
implementation periods proposed in the Proposal and the Re-Opening
Release, takes into consideration commenters' concerns that
implementation of a short sale price test could be complex.\1087\ We do
not believe that an implementation period longer than 6 months is
warranted because Rule 201 does not require monitoring of the sequence
of bids or last sale prices, unlike other proposed short sale price
tests,\1088\ and because Rule 201 requires the implementation of
policies and procedures similar to those required for trading centers
under Regulation NMS.\1089\ In addition, as discussed above, market
participants will be able to leverage the numerous systems changes made
and current architecture developed to facilitate compliance with
Regulation NMS. These factors should reduce implementation time.
---------------------------------------------------------------------------

    \1087\ See, e.g., letter from NSCP; letter from RBC (June 2009);
letter from SIFMA (June 2009); letter from RBC (Sept. 2009); see
also letter from Direct Edge (Sept. 2009) (stating that adoption of
a circuit breaker approach will add approximately four to six weeks
to the implementation time of the alternative uptick rule); letter
from NYSE Euronext (Sept. 2009) (stating that ``a circuit breaker
approach raises significant implementation complexities''). But cf.
letter from Credit Suisse (Sept. 2009) (stating that a circuit
breaker approach will not significantly increase implementation
time); letter from Nasdaq OMX Group (Oct. 2009) (stating that
``[o]nce the price test is in place, there is minimal incremental
effort required to add a Circuit Breaker that controls the
application of the price test'').
    \1088\ Several commenters noted that because the alternative
uptick rule, unlike the other proposed price tests, does not require
sequencing of bids or last sale prices, the alternative uptick rule
could be implemented more quickly than the other proposed price
tests, in three to six months. See, e.g., letter from Credit Suisse
(June 2009); letter from STA (June 2009); letter from Credit Suisse
(Sept. 2009); letter from FIF (Sept. 2009). But cf. letter from
Citadel et al. (Sept. 2009); letter from NYSE Euronext (Sept. 2009);
letter from RBC (Sept. 2009); letter from SIFMA (Sept. 2009).
    \1089\ One commenter stated that implementation concerns with
respect to a short sale price test restriction could be mitigated,
provided that trading centers ``could leverage existing architecture
developed to comply with the order protection rule in Reg NMS (Rule
611).'' Letter from MFA (Oct. 2009). Another commenter stated that
implementation of a circuit breaker triggering the alternative
uptick rule would be easier to implement, ``provided that the
Commission permits firms to leverage the numerous systems changes
made to facilitate compliance with Regulation NMS (including the use
of internal market data rather than consolidated data supplied by
the industry plans).'' Letter from Goldman Sachs (Sept. 2009). But
cf. letter from FIF (June 2009); letter from NSCP; letter from RBC
(June 2009).
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4. Marking Requirements
    While the current marking requirements in Rule 200(g) of Regulation
SHO, which require broker-dealers to mark all sell orders of any equity
security as either ``long'' or ``short,'' \1090\ will remain in effect,
the amendments to Rule 200(g) will add a new marking requirement of
``short exempt.'' \1091\ In particular, if the broker-dealer chooses to
rely on its own determination that it is submitting the short sale
order to the trading center at a price that is above the current
national best bid at the time of submission or to rely on an exception
specified in the Rule, it must mark the order as ``short exempt.''
\1092\ We discussed in the Proposal the anticipated costs of the
proposed amendments \1093\ and, in the Proposal and Re-Opening Release,
we requested comment on the costs associated with the proposed
amendments.\1094\
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    \1090\ 17 CFR 242.200(g).
    \1091\ See Rule 200(g); see also supra Section IV. (discussing
the amendments to Rule 200(g)).
    \1092\ See Rule 200(g)(2).
    \1093\ See Proposal, 74 FR at 18100.
    \1094\ See Proposal, 74 FR at 18103; Re-Opening Release, 74 FR
at 42037.
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    Several commenters expressed concerns regarding the implementation
costs of the ``short exempt'' marking requirements.\1095\ Several
commenters noted that the ``short exempt'' marking requirements would
require modifications to multiple systems, including modifications to
blue sheet, OATS and OTS reporting systems.\1096\ One commenter noted
that such modifications would be in addition to changes to order entry
and routing applications.\1097\ Another commenter noted that one of its
primary implementation concerns was related to ``re-implementation of
`Short Sale Exempt' order types in interfaces between [the commenter]
and [its] Customers as well as the venues that support such exempt
order types.'' \1098\ In contrast, one commenter, in supporting
adoption of the ``short

exempt'' marking requirements (in the event that the Commission decided
to adopt a short sale price test restriction), stated that ``[t]he
costs of marking the orders appropriately will be worth the benefits
gained.'' \1099\
---------------------------------------------------------------------------

    \1095\ See, e.g., letter from FIF (June 2009); letter from NSCP;
letter from RBC (June 2009); letter from Lime Brokerage (Sept.
2009); letter from FIF (Sept. 2009).
    \1096\ See, e.g., letter from NSCP; letter from RBC (June 2009);
letter from FIF (June 2009); letter from FIF (Sept. 2009).
    \1097\ See letter from FIF (June 2009); letter from FIF (Sept.
2009).
    \1098\ Letter from Lime Brokerage (Sept. 2009).
    \1099\ Letter from STA (June 2009).
---------------------------------------------------------------------------

    We recognize commenters' concerns with respect to the costs of the
``short exempt'' marking requirement and we considered these comments
in evaluating the costs of the ``short exempt'' marking requirement.
Such costs will include one-time costs for broker-dealers for
reprogramming and systems changes, including modifications to reporting
systems, order entry and routing applications. In addition, the costs
of the ``short exempt'' marking requirement will include on-going
monitoring and surveillance costs for broker-dealers. However, we
believe that such costs will be limited because broker-dealers already
have established systems, processes, and procedures in place to comply
with the current marking requirements of Rule 200(g) of Regulation SHO
with respect to marking a sell order either ``long'' or ``short'' and,
therefore, will likely leverage such systems, processes and procedures
to comply with the ``short exempt'' marking requirements in Rules
200(g) and 200(g)(2). Further, we believe that the implementation and
compliance costs of the ``short exempt'' marking requirements are
justified by the benefits provided by the requirements in aiding
surveillance by SROs and the Commission for compliance with the
provisions of Rule 201 and providing an indication to a trading center
regarding when it must execute or display a short sale order without
regard to whether the order is at a price that is less than or equal to
the current national best bid.
    We also considered whether our estimates of the implementation and
on-going monitoring and compliance costs associated with the ``short
exempt'' marking requirements under the amendments to Rule 200(g), as
proposed in conjunction with the proposed modified uptick rule \1100\
would change under the circuit breaker approach of Rule 201, but
concluded, as discussed below, that these estimates continue to
represent reasonable estimates under the circuit breaker approach.
---------------------------------------------------------------------------

    \1100\ See Proposal, 74 FR at 18089.
---------------------------------------------------------------------------

    We believe that the ``short exempt'' marking requirements of Rule
200(g), in conjunction with a circuit breaker approach, will result in
largely the same implementation costs as we estimated would be incurred
if the ``short exempt'' marking requirements were combined with a
market-wide short sale price test restriction.\1101\ This is because
broker-dealers relying on the provisions of Rule 201(c) or Rule 201(d)
will need to make systems changes to implement the ``short exempt''
marking requirements regardless of whether the short sale price test
restriction is adopted on a permanent, market-wide basis or, in the
case of Rule 201, adopted in conjunction with a circuit breaker.
---------------------------------------------------------------------------

    \1101\ See Proposal, 74 FR at 18100.
---------------------------------------------------------------------------

    In addition, with respect to on-going monitoring and surveillance
costs of the ``short exempt'' marking requirements in conjunction with
a circuit breaker approach, we recognize, as noted by one
commenter,\1102\ that market participants will need to continuously
monitor whether a security is subject to the provisions of Rule 201 and
that there will be costs associated with such monitoring. However, we
believe that these costs will be offset because, under the circuit
breaker approach, use of the ``short exempt'' provisions of Rule 201(c)
and Rule 201(d) and the related marking requirements will be time
limited and will only apply on a stock by stock basis. As a result,
broker-dealers who choose to rely on Rule 201(c) or Rule 201(d) will
only need to monitor and surveil for compliance with the requirements
of those provisions and will only need to mark qualifying orders
``short exempt'' during the limited period of time that the circuit
breaker is in effect with respect to a specific security. The circuit
breaker approach will allow regulatory, supervisory and compliance
resources to focus on, and to address, those situations where a
specific security is experiencing significant downward price
pressure.\1103\
---------------------------------------------------------------------------

    \1102\ See letter from Glen Shipway (June 2009).
    \1103\ See, e.g., letter from Nasdaq OMX Group (Oct. 2009);
letter from SIFMA (Sept. 2009).
---------------------------------------------------------------------------

    On balance, we believe our proposed estimates of the costs
associated with the ``short exempt'' marking requirement \1104\ are
appropriate with respect to Rule 200(g) as adopted. Thus, our estimates
have not changed from the Proposal, except to the extent that total
burden estimates have changed because we have updated the estimated
number of broker-dealers.\1105\
---------------------------------------------------------------------------

    \1104\ See Proposal, 74 FR at 18089.
    \1105\ See supra note 729.
---------------------------------------------------------------------------

    We believe that the implementation cost of the ``short exempt''
marking requirement will likely be similar to the implementation cost
of the order marking requirements of Rule 200(g) of Regulation SHO,
which had originally included the category of ``short exempt.''
Industry sources at that time estimated initial implementation costs
for the former ``short exempt'' marking requirement to be approximately
$100,000 to $125,000.\1106\ Based on these estimates, as adjusted for
inflation, we estimate that the initial implementation cost of the
``short exempt'' marking requirement will be approximately $115,000 to
$145,000 per broker-dealer \1107\ for a total initial implementation
cost of approximately $595,470,000 to $750,810,000 for all broker-
dealers.\1108\
---------------------------------------------------------------------------

    \1106\ See 2004 Regulation SHO Adopting Release, 69 FR at 48023.
    \1107\ The adjustment for inflation was calculated using
information in the Consumer Price Index, U.S. Department of Labor,
Bureau of Labor Statistics.
    \1108\ These figures were calculated as follows: ($115,000 x
5,178) = $595,470,000 and ($145,000 x 5,178) = $750,810,000.
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    We recognize that there will be an on-going paperwork burden cost
associated with adding the ``short exempt'' marking requirements. For
example, as detailed in PRA Section IX.E.3., above, we estimate that
the total annual cost for each broker-dealer subject to the ``short
exempt'' marking requirements will be $93,420 \1109\ for a total annual
on-going cost of $483,728,760 for all broker-dealers subject to the
``short exempt'' marking requirements.\1110\
---------------------------------------------------------------------------

    \1109\ This figure was calculated as follows: (346 hours x $270)
= $93,420 per broker-dealer. The 346 hour estimate was calculated as
follows: 12.9 billion ``short exempt'' orders/5,178 broker-dealers =
2,491,309 annual responses by each broker-dealer. Each response of
marking sell orders ``short exempt'' will take approximately .000139
hours (.5 seconds) to complete. (2,491,309 responses x 0.000139
hours) = 346 burden hours.
     Based on industry sources, we estimate that the average hourly
rate for compliance attorneys is $270. The $270/hour figure for
compliance attorneys is from SIFMA's Management & Professional
Earnings in the Securities Industry 2008, modified to account for an
1800-hour work-year and multiplied by 5.35 to account for bonuses,
firm size, employee benefits and overhead.
    \1110\ This figure was calculated as follows: ($93,420 x 5,178)
= $483,728,760.
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    To provide market participants with the time needed to make the
changes required to comply with Rule 200(g), we are adopting an
implementation period under which market participants will have to
comply with these requirements six months following the effective date
of the adoption of these amendments. In the Proposal, we proposed a
three month implementation period for the ``short exempt'' marking
requirements under Rule 200(g). In response to our request for comment,
several commenters stated that the ``short exempt'' marking requirement
would require systems changes.\1111\ Another commenter stated that the
``short exempt'' marking requirement would require coding for new
fields in order

records, which should be accomplished in approximately three
months.\1112\
---------------------------------------------------------------------------

    \1111\ See, e.g., letter from RBC (June 2009); letter from NSCP;
letter from FIF (June 2009).
    \1112\ See letter from STA (June 2009).
---------------------------------------------------------------------------

    We are sensitive to commenters' concerns that implementation of the
``short exempt'' marking requirement could be complex, and believe that
a six month implementation period, which is longer than the 3 month
implementation period proposed in the Proposal, will afford market
participants sufficient time to make the necessary modifications to
their systems and procedures. In addition, we believe that because it
will provide broker-dealers with time to make required changes in a
measured fashion, the six month implementation period will help
alleviate some of the potential disruptions that may be associated with
implementing the ``short exempt'' marking requirements.

XI. Consideration of Burden on Competition and Promotion of Efficiency,
Competition, and Capital Formation

    Section 3(f) of the Exchange Act requires the Commission, whenever
it engages in rulemaking and is required to consider or determine
whether an action is necessary or appropriate in the public interest,
to consider, in addition to the protection of investors, whether the