Exemption for Certain Exchange Members

The Securities and Exchange Commission (``Commission'') is proposing to amend Rule 15b9-1 (``Rule'') under the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act''), which exempts certain brokers or dealers from membership in a registered national securities association (``Association''). The proposed amendments would replace the current gross income allowance in the Rule with a narrower exemption from Association membership for a broker or dealer that carries no customer accounts and effects transactions on a national securities exchange. The proposed amendments would create an exemption for a dealer that effects transactions off the exchange of which it is a member solely for the purpose of hedging the risks of its floor-based activity, or a broker or dealer that effects transactions off the exchange resulting from orders that are routed by a national securities exchange of which it is a member, to prevent trade-throughs consistent with the provisions of Rule 611 of Regulation NMS.