Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Expand the Exception to NYSE Arca Equities Rule 3.10 To Allow Archipelago Securities to Route Orders to NYSE Arca, 73373-73376 [E8-28530]

Download as PDF Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Notices between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NYSEArca–2008–131 and should be submitted on or before December 23, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Jill M. Peterson, Assistant Secretary. [FR Doc. E8–28498 Filed 12–1–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Expand the Exception to NYSE Arca Equities Rule 3.10 To Allow Archipelago Securities to Route Orders to NYSE Arca November 24, 2008. jlentini on PROD1PC65 with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 19, 2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’), through its wholly-owned subsidiary, NYSE Arca Equities, Inc., filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons, and is approving the proposal on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to expand the exception to NYSE Arca Equities Rule 3.10 to allow Archipelago Securities LLC (‘‘Arca Securities’’), an NYSE Arca affiliated member, to route orders to NYSE Arca, in its capacity as an order CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Aug<31>2005 20:52 Dec 01, 2008 Jkt 217001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [Release No. 34–59010; File No. SR– NYSEArca–2008–130] 8 17 routing facility of NYSE Alternext U.S., L.L.C. (‘‘NYSE Alternext’’). A copy of this filing is available on the Exchange’s Web site at www.nyse.com, at the Exchange’s principal office and at the Commission’s Public Reference Room. 1. Purpose On September 29, 2008, the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) approved the routing of orders by Arca Securities to NYSE Arca and certain revisions to Exchange Rule 14.3.3 In that filing, the Exchange discussed Arca Securities’ status as an order routing facility of the New York Stock Exchange, LLC (‘‘NYSE’’).4 In its capacity as an order routing facility, Arca Securities receives routing instructions from the NYSE and routes orders to various away market centers, including NYSE Arca, for execution. The Exchange notes that Arca Securities is subject to independent oversight and enforcement by the Financial Industry Regulatory Authority (‘‘FINRA’’), an unaffiliated self-regulatory organization (‘‘SRO’’) that is Arca Securities’ designated examining authority. In this capacity, FINRA is responsible for examining Arca Securities with respect to its books and records and capital obligations, and shares with NYSE Regulation, Inc. (‘‘NYSE Regulation’’) the responsibility for reviewing Arca Securities’ compliance with intermarket 3 See Securities Exchange Act Release No. 58681 (September 29, 2008), 73 FR 58285 (October 6, 2008) (order approving NYSEArca–2008–90). 4 See Securities Exchange Act Release No. 55590 (April 5, 2007), 72 FR 18707 (April 13, 2007) (notice of immediate effectiveness of SR–NYSE–2007–29). Arca Securities also currently acts as the outbound order routing facility of NYSE Arca. See, Securities Exchange Act Release No. 52497 (September 22, 2005), 70 FR 56949 (September 29, 2005) (SR–PCX– 2005–90); see also, Securities Exchange Act Release No. 44983 (October 25, 2001), 66 FR 55225 (November 1, 2001) (SR–PCX–00–25). PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 73373 trading rules such as SEC Regulation NMS. In addition, through an agreement between FINRA and NYSE Arca pursuant to the provisions of SEC Rule 17d–2 under the Securities Exchange Act of 1934, FINRA’s staff reviews for Arca Securities’ compliance with certain other NYSE Arca rules through FINRA’s examination program. NYSE Regulation monitors Arca Securities for compliance with NYSE Arca trading rules, subject, of course, to SEC oversight of NYSE Regulation’s regulatory program. In addition, the Exchange has established certain mechanisms designed to address the Commission’s concerns regarding affiliated members. Pursuant to NYSE Arca Equities Rule 14.3, the Exchange has established and implemented procedures and internal controls reasonably designed to ensure that Arca Securities does not develop or implement changes to its system on the basis of non-public information regarding planned changes to Exchange systems, obtained as a result of its affiliation with the Exchange, until such information is available generally to similarly situated members of the Exchange in connection with the provision of inbound order routing to the Exchange. In addition, NYSE Regulation has agreed to collect and maintain certain surveillance related information concerning Arca Securities. NYSE Regulation has further agreed to provide a report to the Exchange’s Chief Regulatory Officer, on at least a quarterly basis, utilizing a quantitative approach in assessing Arca Securities’ compliance with applicable NYSE Arca or SEC rules. By this filing, the Exchange proposes to expand the exception to NYSE Arca Equities Rules 3.10 to allow Arca Securities to route orders to NYSE Arca, in its capacity as an order routing facility of NYSE Alternext. Recently, NYSE Alternext filed with the Commission a proposal to use Arca Securities as its approved outbound order routing facility.5 Pursuant to that proposal and NYSE Alternext rules governing its Routing Broker,6 Arca 5 See SR–NYSEALTR–2008–07 (filing seeking approval for Arca Securities to operate as the outbound order routing facility of NYSE Alternext). Arca Securities will perform only the functions described in SR–NYSEALTR–2008–07 and the functionality approved in SR–AMEX–2008–62. See Securities Exchange Act Release No. 34–58673 (September 29, 2008), 73 FR 57707 (October 3, 2008) (order approving SR–AMEX–2008–62). 6 NYSE Alternext recently received approval to implement Rules 13 and 17, which define the term Routing Broker and establish the conditions under which its Routing Broker shall operate. See, Securities Exchange Act Release No. 34–58705 E:\FR\FM\02DEN1.SGM Continued 02DEN1 73374 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Notices jlentini on PROD1PC65 with NOTICES Securities will receive its routing instructions from NYSE Alternext and report any such executions back to NYSE Alternext. Arca Securities has no discretion and cannot change the terms of an order or the routing instructions. Moreover, each type of order is subject to the same principles governing the Exchange’s authority to route orders to away market centers, namely: Use of Arca Securities for outbound routing is only available to—and is optional for— NYSE Alternext members, the primary regulatory responsibility for Arca Securities lies with an unaffiliated SRO, and appropriate procedures are in place to manage any conflicts of interest or potential information advantages. In the capacity as a facility of NYSE Alternext, Arca Securities will receive routing instructions from NYSE Alternext and will route orders to various away market centers, including NYSE Arca, for execution. The Exchange is submitting this filing in order to expand the exception to NYSE Arca Equities Rules 3.10 to allow Arca Securities to route orders to NYSE Arca, in its capacity as an order routing facility of NYSE Alternext. Specifically, NYSE Regulation has agreed with the Exchange that it will collect and maintain the following information of which NYSE Regulation staff becomes aware—namely, all alerts, complaints, investigations and enforcement actions where Arca Securities (in its capacity as a facility of both the NYSE and NYSE Alternext, routing orders to NYSE Arca) is identified as a participant that has potentially violated NYSE Arca or applicable SEC rules—in an easily accessible manner, so as to facilitate any review conducted by the SEC’s Office of Compliance Inspections and Examinations. NYSE Regulation has further agreed with the Exchange that it will provide a report to the Exchange’s Chief Regulatory Officer, on at least a quarterly basis, which: (i) Quantifies all alerts (of which NYSE Regulation is aware in its tracking system) that identify Arca Securities as a participant that has potentially violated NYSE Arca or SEC rules and (ii) quantifies the number of all investigations that identify Arca Securities as a participant that has potentially violated NYSE Arca or SEC rules.7 In addition, the agreement between FINRA and NYSE Arca pursuant to the provisions of Rule 17d–2 under the Act, as well as the provisions of NYSE Arca Equities Rule (October 1, 2008), 73 FR 58995 (October 8, 2008) (order approving SR–AMEX–2008–63). 7 The Exchange, NYSE Regulation, and SEC staff may agree going forward to reduce the number of applicable or relevant surveillances that form the scope of the agreed upon report. VerDate Aug<31>2005 20:52 Dec 01, 2008 Jkt 217001 14.3(e) will apply to routing by Arca Securities to NYSE Arca in its capacity as a facility of NYSE Alternext. The Exchange proposes that the Commission authorize NYSE Arca to receive inbound routes from Arca Securities (in its capacity as a facility of NYSE Alternext, routing orders to NYSE Arca) on a pilot basis. The Exchange requests that this pilot period run concurrently with a twelve month pilot period for NYSE Arca’s receipt of inbound routes from Arca Securities, which commenced on September 29, 2008.8 The Exchange believes that this pilot period is of sufficient length to permit both the Exchange and the Commission to assess the impact of the rule change described herein. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) 9 of the Act, in general, and furthers the objectives of Section 6(b)(5),10 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system. Specifically, the Exchange is submitting this filing in order to expand the exception to NYSE Arca Equities Rules 3.10 to allow Arca Securities to route orders to NYSE Arca, in its capacity as an order routing facility of NYSE Alternext. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. supra note 3. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). Frm 00135 Fmt 4703 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2008–130 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2008–130. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2008–130 and should be submitted on or before December 23, 2008. IV. Commission’s Findings and Order Granting Accelerated Approval of a Proposed Rule Change The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.11 In particular, the 11 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 8 See PO 00000 Comments may be submitted by any of the following methods: Sfmt 4703 E:\FR\FM\02DEN1.SGM 02DEN1 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Notices Commission finds that the proposed rule change consistent with Section 6(b)(5) of the Act,12 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices; to promote just and equitable principles of trade; to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities; to remove impediments to and perfect the mechanism of a free and open market and a national market system; and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In the past, the Commission has expressed concern that the affiliation of an exchange with one of its members raises potential conflicts of interest, and the potential for unfair competitive advantage.13 The proposed use of Arca Securities as the outbound routing facility of NYSE Alternext, which the Commission approved today, will expand the activities of Arca Securities in routing orders to NYSE Arca.14 Although the Commission continues to be concerned about potential unfair competition and conflicts of interest between an exchange’s self-regulatory obligations and its commercial interests when the exchange is affiliated with one of its members, the Commission believes that it is consistent with the Act to permit Arca Securities to provide inbound routing to NYSE Arca from NYSE Alternext on a pilot basis, subject to the conditions described above. NYSE Euronext, a Delaware Corporation (‘‘NYSE Euronext’’) currently indirectly owns Arca Securities, a broker-dealer that is a member of NYSE Arca. In addition, NYSE Euronext indirectly owns three registered securities exchanges—NYSE Arca, the NYSE, and NYSE Alternext. Thus, Arca Securities is an affiliate of each of these exchanges. NYSE Arca Equities Rule 3.10 prohibits: (1) An NYSE Arca member 12 15 U.S.C. 78f(b)(5). e.g., Securities Exchange Act Release Nos. 54170 (July 18, 2006), 71 FR 42149 (July 25, 2006) (SR–NASDAQ–2006–006) (order approving Nasdaq’s proposal to adopt Nasdaq Rule 2140, restricting affiliations between Nasdaq and its members); and 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR–NYSE–2005–77) (order approving the combination of the New York Stock Exchange, Inc. and Archipelago Holdings) at 11255; see also Securities Exchange Act Release No. 58681, supra note 3. 14 See Securities Exchange Act Release No. 59009 (November 24, 2008) (notice of filing and order approving SR–NYSEALTR–2008–07 on an accelerated basis). See also supra note 5. jlentini on PROD1PC65 with NOTICES 13 See, VerDate Aug<31>2005 20:52 Dec 01, 2008 Jkt 217001 from being affiliated with NYSE Group, Inc. (‘‘NYSE Group’’); 15 and (2) NYSE Group, or any entity with which it is affiliated, from maintaining an ownership interest in a member. Thus, Arca Securities’s affiliation with NYSE Arca would violate NYSE Arca rules, absent Commission approval. The Commission has approved Arca Securities affiliation with, and operation as a facility of, NYSE Arca for the provision of outbound routing from NYSE Arca to other market centers, subject to certain conditions.16 Arca Securities’s operation as a facility providing outbound routing for NYSE Arca was (and continues to be) subject to the conditions that: (1) Arca Securities continue to operate and be regulated as a facility of NYSE Arca; (2) Arca Securities only provide outbound routing services; (3) the primary regulatory responsibility for Arca Securities would lie with an unaffiliated SRO; and (4) the use of Arca Securities for outbound routing is available only to NYSE Arca members and use of Arca Securities’s routing function remains optional.17 Arca Securities also operates as a facility of the NYSE and similarly provides outbound routing from the NYSE to other market centers, subject to conditions similar to those listed above; 18 and today the Commission also approved Arca Securities operation as a facility of the NYSE Alternext to provide outbound routing from NYSE Alternext under similar terms.19 The operation of Arca Securities as a facility of NYSE Alternext providing outbound routing services from that exchange will be subject to NYSE Alternext oversight, as well as Commission oversight. NYSE Alternext will be responsible for ensuring that Arca Securities’s outbound routing function is operated consistent with Section 6 of the Act and NYSE Alternext rules. In addition, NYSE Alternext must file with the Commission rule changes 15 NYSE Arca is indirectly wholly owned by NYSE Group, which is in turn wholly owned by NYSE Euronext. 16 See Securities Exchange Act Release No. 52497 (September 22, 2005), 70 FR 56949 (September 29, 2005) (SR–PCX–2005–90) (order approving proposed rule changes in connection with the acquisition of the Pacific Exchange, Inc. (‘‘PCX,’’ n/ k/a NYSE Arca) by Archipelago Holdings, Inc.). See also Securities Exchange Act Release No. 58681, supra note 3. 17 Id. 18 See Securities Exchange Act Release No. 58680 (September 29, 2008), 73 FR 58283 (October 6, 2008) (SR–NYSE–2008–76). See also Securities Exchange Act Release Nos. 55590, supra note 4 (order filed for immediate effectiveness to among other things, establish a mechanism to route orders from NYSE to away market centers). 19 See Securities Exchange Act Release No. 59009, supra note 14. See also supra note 5. PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 73375 and fees relating to Arca Securities’s outbound routing function. Recognizing that the Commission has previously expressed concern regarding the potential for conflicts of interest in instances where a member firm is affiliated with an exchange to which it is routing orders, NYSE Arca previously proposed, and the Commission approved, limitations and conditions on its acceptance of orders routed from its affiliate, Arca Securities, in its capacity as a facility of the NYSE.20 The Exchange now proposes to accept inbound orders that Arca Securities routes in its capacity as a facility of NYSE Alternext, subject to the same limitations and conditions: • First, NYSE Arca states that the agreement between FINRA and NYSE Arca pursuant to Rule 17d–2 under the Act will apply to routing by Arca Securities to NYSE Arca in its capacity as a facility of NYSE Alternext. Pursuant to this agreement, FINRA is allocated regulatory responsibilities to review Arca Securities’ compliance with certain NYSE Arca rules.21 • Second, NYSE Regulation 22 will monitor Arca Securities for compliance with NYSE Arca’s trading rules, and will collect and maintain certain related information.23 • Third, NYSE Arca states that NYSE Regulation has agreed with NYSE Arca that it will provide a report to NYSE Arca’s CRO, on a quarterly basis, that: (i) Quantifies all alerts (of which NYSE Regulation is aware) that identify Arca Securities as a participant that has potentially violated NYSE Arca or Commission rules, and (ii) quantifies the number of all investigations that identify Arca Securities as a participant 20 See Securities Exchange Act Release No. 58681, supra note 3. 21 NYSE Arca also states that Arca Securities is subject to independent oversight by FINRA, its Designated Examining Authority, for compliance with financial responsibility requirements. See supra section II.A.1. 22 NYSE Regulation is a wholly owned subsidiary of the NYSE that performs the regulatory functions of the NYSE pursuant to a delegation agreement. NYSE Regulation also performs many of the regulatory functions of NYSE Arca pursuant to a regulatory services agreement. See Securities Exchange Act Release No. 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR–NYSE– 2005–77) (‘‘NYSE/Arca Order’’) at 11255. 23 Specifically, NYSE Regulation ‘‘will collect and maintain the following information of which NYSE Regulation staff becomes aware—namely, all alerts, complaints, investigations and enforcement actions where Arca Securities (in its capacity as a facility of both the NYSE and NYSE Alternext, routing orders to NYSE Arca) is identified as a participant that has potentially violated NYSE Arca or applicable SEC rules—in an easily accessible manner so as to facilitate any review conducted by the SEC’s Office of Compliance Inspections and Examination.’’ See supra section II.A.1. E:\FR\FM\02DEN1.SGM 02DEN1 73376 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Notices jlentini on PROD1PC65 with NOTICES that has potentially violated NYSE Arca or Commission rules.24 • Fourth, NYSE Arca Equities Rule 14.3(e), which requires NYSE Euronext, as the holding company owning both NYSE Arca and Arca Securities, to establish and maintain procedures and internal controls reasonably designed to ensure that Arca Securities does not develop or implement changes to its system, based on non-public information obtained regarding planned changes to the NYSE Arca systems as a result of its affiliation with NYSE Arca, until such information is available generally to similarly situated members of NYSE Arca, in connection with the provision of inbound order routing to NYSE Arca, will apply.25 • Fifth, NYSE Arca proposes that routing from Arca Securities to NYSE Arca, in Arca Securities’s capacity as a facility of NYSE Alternext, be authorized for a pilot period to run concurrently with a twelve month pilot period for NYSE Arca’s receipt of inbound routes from Arca Securities, which commenced on September 29, 2008.26 The Commission believes that these conditions mitigate its concerns about potential conflicts of interest and unfair competitive advantage. In particular, the Commission believes that FINRA’s oversight of Arca Securities,27 combined with NYSE Regulation’s monitoring of Arca Securities’ compliance with NYSE Arca’s trading rules and quarterly reporting to NYSE Arca’s CRO, will help to protect the independence of NYSE Arca’s regulatory responsibilities with respect to Arca Securities. Furthermore, the Commission believes that NYSE Arca’s proposal to allow Arca Securities to route orders inbound to NYSE Arca from NYSE Alternext, on a pilot basis, will provide NYSE Arca and the Commission an opportunity to assess the impact of any conflicts of interest of allowing an affiliated member of NYSE Arca to route orders inbound to NYSE Arca and whether such affiliation provides an unfair competitive advantage. NYSE Arca has asked the Commission to accelerate approval of the proposed rule change. NYSE Arca states in part that the proposed changes are ‘‘required due to NYSE Alternext’s planned implementation of a new trading system and the use of Arca Securities as its 24 See supra section II.A.1. 25 See id. See also NYSE Arca Equities Rule 14.3(e). 26 See supra note 8 and accompanying text. 27 This oversight will be accomplished through the 17d–2 agreement between FINRA and NYSE Arca. VerDate Aug<31>2005 20:52 Dec 01, 2008 Jkt 217001 outbound routing facility.’’ 28 NYSE Arca also states that accelerated approval ‘‘will permit the Exchange to amend its mechanisms that are designed to address the Commission’s concerns regarding affiliated members in time to provide these protections at the time of NYSE Alternext’s implementation of its new trading system, which is targeted for December 1, 2008.’’ 29 The Commission finds good cause for approving the proposed rule change before the thirtieth day after the date of publication of notice of filing thereof in the Federal Register. The Commission notes that the protections proposed by NYSE Arca, which are designed to address conflicts of interest concerns identified by the Commission in connection with the inbound routing of orders to an exchange when the routing broker-dealer is an affiliate of that exchange, are substantially the same as the conditions the Exchange currently has in place to address inbound routing from NYSE, which were previously approved by the Commission.30 The Commission also notes that no comments were received in connection with SR–NYSEArca–2008–90. Accordingly, the Commission finds good cause, consistent with Section 19(b)(2) of the Act,31 to approve the proposed rule change on an accelerated basis for a pilot period expiring September 29, 2009. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–NYSEArca– 2008–130) is hereby approved on an accelerated basis for a pilot period to expire on September 29, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Jill M. Peterson, Assistant Secretary. [FR Doc. E8–28530 Filed 12–1–08; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11469 and # 11470] Illinois Disaster Number IL–00019 U.S. Small Business Administration. ACTION: Amendment 4. AGENCY: SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Illinois (FEMA– 1800–DR), dated 10/03/2008. Incident: Severe Storms and Flooding. Incident Period: 09/13/2008 through 10/05/2008. Effective Date: 11/19/2008. Physical Loan Application Deadline Date: 12/16/2008. EIDL Loan Application Deadline Date: 07/03/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President’s major disaster declaration for the State of Illinois, dated 10/03/2008 is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 12/16/2008. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8–28485 Filed 12–1–08; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11488] Texas Disaster Number TX–00312 U.S. Small Business Administration. ACTION: Amendment 3. AGENCY: 28 See SR–NYSEArca–2008–130, Item 7. 29 Id. 30 See Securities Exchange Act Release No. 58681, supra note 3. See also Securities Exchange Act Release Nos. 58673, supra note 5, and 58680, supra note 18 (establishing similar protections for inbound routing from Arca Securities to Alternext and the NYSE, respectively). 31 15 U.S.C. 78s(b)(2). 32 17 CFR 200.30–3(a)(12). PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Texas (FEMA–1791–DR), dated 09/13/2008. Incident: Hurricane Ike. Incident Period: 09/07/2008 through 10/02/2008. EFFECTIVE DATE: 11/21/2008. E:\FR\FM\02DEN1.SGM 02DEN1

Agencies

[Federal Register Volume 73, Number 232 (Tuesday, December 2, 2008)]
[Notices]
[Pages 73373-73376]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-28530]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59010; File No. SR-NYSEArca-2008-130]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To 
Expand the Exception to NYSE Arca Equities Rule 3.10 To Allow 
Archipelago Securities to Route Orders to NYSE Arca

November 24, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 19, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly-owned subsidiary, NYSE Arca Equities, Inc., filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons, and is approving the proposal on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to expand the exception to NYSE Arca Equities 
Rule 3.10 to allow Archipelago Securities LLC (``Arca Securities''), an 
NYSE Arca affiliated member, to route orders to NYSE Arca, in its 
capacity as an order routing facility of NYSE Alternext U.S., L.L.C. 
(``NYSE Alternext''). A copy of this filing is available on the 
Exchange's Web site at www.nyse.com, at the Exchange's principal office 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item III below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On September 29, 2008, the Securities and Exchange Commission 
(``SEC'' or ``Commission'') approved the routing of orders by Arca 
Securities to NYSE Arca and certain revisions to Exchange Rule 14.3.\3\ 
In that filing, the Exchange discussed Arca Securities' status as an 
order routing facility of the New York Stock Exchange, LLC 
(``NYSE'').\4\ In its capacity as an order routing facility, Arca 
Securities receives routing instructions from the NYSE and routes 
orders to various away market centers, including NYSE Arca, for 
execution. The Exchange notes that Arca Securities is subject to 
independent oversight and enforcement by the Financial Industry 
Regulatory Authority (``FINRA''), an unaffiliated self-regulatory 
organization (``SRO'') that is Arca Securities' designated examining 
authority. In this capacity, FINRA is responsible for examining Arca 
Securities with respect to its books and records and capital 
obligations, and shares with NYSE Regulation, Inc. (``NYSE 
Regulation'') the responsibility for reviewing Arca Securities' 
compliance with intermarket trading rules such as SEC Regulation NMS. 
In addition, through an agreement between FINRA and NYSE Arca pursuant 
to the provisions of SEC Rule 17d-2 under the Securities Exchange Act 
of 1934, FINRA's staff reviews for Arca Securities' compliance with 
certain other NYSE Arca rules through FINRA's examination program. NYSE 
Regulation monitors Arca Securities for compliance with NYSE Arca 
trading rules, subject, of course, to SEC oversight of NYSE 
Regulation's regulatory program.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 58681 (September 29, 
2008), 73 FR 58285 (October 6, 2008) (order approving NYSEArca-2008-
90).
    \4\ See Securities Exchange Act Release No. 55590 (April 5, 
2007), 72 FR 18707 (April 13, 2007) (notice of immediate 
effectiveness of SR-NYSE-2007-29). Arca Securities also currently 
acts as the outbound order routing facility of NYSE Arca. See, 
Securities Exchange Act Release No. 52497 (September 22, 2005), 70 
FR 56949 (September 29, 2005) (SR-PCX-2005-90); see also, Securities 
Exchange Act Release No. 44983 (October 25, 2001), 66 FR 55225 
(November 1, 2001) (SR-PCX-00-25).
---------------------------------------------------------------------------

    In addition, the Exchange has established certain mechanisms 
designed to address the Commission's concerns regarding affiliated 
members. Pursuant to NYSE Arca Equities Rule 14.3, the Exchange has 
established and implemented procedures and internal controls reasonably 
designed to ensure that Arca Securities does not develop or implement 
changes to its system on the basis of non-public information regarding 
planned changes to Exchange systems, obtained as a result of its 
affiliation with the Exchange, until such information is available 
generally to similarly situated members of the Exchange in connection 
with the provision of inbound order routing to the Exchange. In 
addition, NYSE Regulation has agreed to collect and maintain certain 
surveillance related information concerning Arca Securities. NYSE 
Regulation has further agreed to provide a report to the Exchange's 
Chief Regulatory Officer, on at least a quarterly basis, utilizing a 
quantitative approach in assessing Arca Securities' compliance with 
applicable NYSE Arca or SEC rules. By this filing, the Exchange 
proposes to expand the exception to NYSE Arca Equities Rules 3.10 to 
allow Arca Securities to route orders to NYSE Arca, in its capacity as 
an order routing facility of NYSE Alternext.
    Recently, NYSE Alternext filed with the Commission a proposal to 
use Arca Securities as its approved outbound order routing facility.\5\ 
Pursuant to that proposal and NYSE Alternext rules governing its 
Routing Broker,\6\ Arca

[[Page 73374]]

Securities will receive its routing instructions from NYSE Alternext 
and report any such executions back to NYSE Alternext. Arca Securities 
has no discretion and cannot change the terms of an order or the 
routing instructions. Moreover, each type of order is subject to the 
same principles governing the Exchange's authority to route orders to 
away market centers, namely: Use of Arca Securities for outbound 
routing is only available to--and is optional for--NYSE Alternext 
members, the primary regulatory responsibility for Arca Securities lies 
with an unaffiliated SRO, and appropriate procedures are in place to 
manage any conflicts of interest or potential information advantages. 
In the capacity as a facility of NYSE Alternext, Arca Securities will 
receive routing instructions from NYSE Alternext and will route orders 
to various away market centers, including NYSE Arca, for execution.
---------------------------------------------------------------------------

    \5\ See SR-NYSEALTR-2008-07 (filing seeking approval for Arca 
Securities to operate as the outbound order routing facility of NYSE 
Alternext). Arca Securities will perform only the functions 
described in SR-NYSEALTR-2008-07 and the functionality approved in 
SR-AMEX-2008-62. See Securities Exchange Act Release No. 34-58673 
(September 29, 2008), 73 FR 57707 (October 3, 2008) (order approving 
SR-AMEX-2008-62).
    \6\ NYSE Alternext recently received approval to implement Rules 
13 and 17, which define the term Routing Broker and establish the 
conditions under which its Routing Broker shall operate. See, 
Securities Exchange Act Release No. 34-58705 (October 1, 2008), 73 
FR 58995 (October 8, 2008) (order approving SR-AMEX-2008-63).
---------------------------------------------------------------------------

    The Exchange is submitting this filing in order to expand the 
exception to NYSE Arca Equities Rules 3.10 to allow Arca Securities to 
route orders to NYSE Arca, in its capacity as an order routing facility 
of NYSE Alternext. Specifically, NYSE Regulation has agreed with the 
Exchange that it will collect and maintain the following information of 
which NYSE Regulation staff becomes aware--namely, all alerts, 
complaints, investigations and enforcement actions where Arca 
Securities (in its capacity as a facility of both the NYSE and NYSE 
Alternext, routing orders to NYSE Arca) is identified as a participant 
that has potentially violated NYSE Arca or applicable SEC rules--in an 
easily accessible manner, so as to facilitate any review conducted by 
the SEC's Office of Compliance Inspections and Examinations. NYSE 
Regulation has further agreed with the Exchange that it will provide a 
report to the Exchange's Chief Regulatory Officer, on at least a 
quarterly basis, which: (i) Quantifies all alerts (of which NYSE 
Regulation is aware in its tracking system) that identify Arca 
Securities as a participant that has potentially violated NYSE Arca or 
SEC rules and (ii) quantifies the number of all investigations that 
identify Arca Securities as a participant that has potentially violated 
NYSE Arca or SEC rules.\7\ In addition, the agreement between FINRA and 
NYSE Arca pursuant to the provisions of Rule 17d-2 under the Act, as 
well as the provisions of NYSE Arca Equities Rule 14.3(e) will apply to 
routing by Arca Securities to NYSE Arca in its capacity as a facility 
of NYSE Alternext.
---------------------------------------------------------------------------

    \7\ The Exchange, NYSE Regulation, and SEC staff may agree going 
forward to reduce the number of applicable or relevant surveillances 
that form the scope of the agreed upon report.
---------------------------------------------------------------------------

    The Exchange proposes that the Commission authorize NYSE Arca to 
receive inbound routes from Arca Securities (in its capacity as a 
facility of NYSE Alternext, routing orders to NYSE Arca) on a pilot 
basis. The Exchange requests that this pilot period run concurrently 
with a twelve month pilot period for NYSE Arca's receipt of inbound 
routes from Arca Securities, which commenced on September 29, 2008.\8\ 
The Exchange believes that this pilot period is of sufficient length to 
permit both the Exchange and the Commission to assess the impact of the 
rule change described herein.
---------------------------------------------------------------------------

    \8\ See supra note 3.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \9\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5),\10\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system. Specifically, the Exchange is 
submitting this filing in order to expand the exception to NYSE Arca 
Equities Rules 3.10 to allow Arca Securities to route orders to NYSE 
Arca, in its capacity as an order routing facility of NYSE Alternext.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2008-130 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2008-130. 
This file number should be included on the subject line if e-mail is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2008-130 and should be submitted on or before 
December 23, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of a 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\11\ In 
particular, the

[[Page 73375]]

Commission finds that the proposed rule change consistent with Section 
6(b)(5) of the Act,\12\ which requires, among other things, that the 
rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices; to promote just and 
equitable principles of trade; to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities; to remove impediments to and perfect the mechanism of a 
free and open market and a national market system; and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \11\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In the past, the Commission has expressed concern that the 
affiliation of an exchange with one of its members raises potential 
conflicts of interest, and the potential for unfair competitive 
advantage.\13\ The proposed use of Arca Securities as the outbound 
routing facility of NYSE Alternext, which the Commission approved 
today, will expand the activities of Arca Securities in routing orders 
to NYSE Arca.\14\ Although the Commission continues to be concerned 
about potential unfair competition and conflicts of interest between an 
exchange's self-regulatory obligations and its commercial interests 
when the exchange is affiliated with one of its members, the Commission 
believes that it is consistent with the Act to permit Arca Securities 
to provide inbound routing to NYSE Arca from NYSE Alternext on a pilot 
basis, subject to the conditions described above.
---------------------------------------------------------------------------

    \13\ See, e.g., Securities Exchange Act Release Nos. 54170 (July 
18, 2006), 71 FR 42149 (July 25, 2006) (SR-NASDAQ-2006-006) (order 
approving Nasdaq's proposal to adopt Nasdaq Rule 2140, restricting 
affiliations between Nasdaq and its members); and 53382 (February 
27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order 
approving the combination of the New York Stock Exchange, Inc. and 
Archipelago Holdings) at 11255; see also Securities Exchange Act 
Release No. 58681, supra note 3.
    \14\ See Securities Exchange Act Release No. 59009 (November 24, 
2008) (notice of filing and order approving SR-NYSEALTR-2008-07 on 
an accelerated basis). See also supra note 5.
---------------------------------------------------------------------------

    NYSE Euronext, a Delaware Corporation (``NYSE Euronext'') currently 
indirectly owns Arca Securities, a broker-dealer that is a member of 
NYSE Arca. In addition, NYSE Euronext indirectly owns three registered 
securities exchanges--NYSE Arca, the NYSE, and NYSE Alternext. Thus, 
Arca Securities is an affiliate of each of these exchanges.
    NYSE Arca Equities Rule 3.10 prohibits: (1) An NYSE Arca member 
from being affiliated with NYSE Group, Inc. (``NYSE Group''); \15\ and 
(2) NYSE Group, or any entity with which it is affiliated, from 
maintaining an ownership interest in a member. Thus, Arca Securities's 
affiliation with NYSE Arca would violate NYSE Arca rules, absent 
Commission approval.
---------------------------------------------------------------------------

    \15\ NYSE Arca is indirectly wholly owned by NYSE Group, which 
is in turn wholly owned by NYSE Euronext.
---------------------------------------------------------------------------

    The Commission has approved Arca Securities affiliation with, and 
operation as a facility of, NYSE Arca for the provision of outbound 
routing from NYSE Arca to other market centers, subject to certain 
conditions.\16\ Arca Securities's operation as a facility providing 
outbound routing for NYSE Arca was (and continues to be) subject to the 
conditions that: (1) Arca Securities continue to operate and be 
regulated as a facility of NYSE Arca; (2) Arca Securities only provide 
outbound routing services; (3) the primary regulatory responsibility 
for Arca Securities would lie with an unaffiliated SRO; and (4) the use 
of Arca Securities for outbound routing is available only to NYSE Arca 
members and use of Arca Securities's routing function remains 
optional.\17\ Arca Securities also operates as a facility of the NYSE 
and similarly provides outbound routing from the NYSE to other market 
centers, subject to conditions similar to those listed above; \18\ and 
today the Commission also approved Arca Securities operation as a 
facility of the NYSE Alternext to provide outbound routing from NYSE 
Alternext under similar terms.\19\
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 52497 (September 
22, 2005), 70 FR 56949 (September 29, 2005) (SR-PCX-2005-90) (order 
approving proposed rule changes in connection with the acquisition 
of the Pacific Exchange, Inc. (``PCX,'' n/k/a NYSE Arca) by 
Archipelago Holdings, Inc.). See also Securities Exchange Act 
Release No. 58681, supra note 3.
    \17\ Id.
    \18\ See Securities Exchange Act Release No. 58680 (September 
29, 2008), 73 FR 58283 (October 6, 2008) (SR-NYSE-2008-76). See also 
Securities Exchange Act Release Nos. 55590, supra note 4 (order 
filed for immediate effectiveness to among other things, establish a 
mechanism to route orders from NYSE to away market centers).
    \19\ See Securities Exchange Act Release No. 59009, supra note 
14. See also supra note 5.
---------------------------------------------------------------------------

    The operation of Arca Securities as a facility of NYSE Alternext 
providing outbound routing services from that exchange will be subject 
to NYSE Alternext oversight, as well as Commission oversight. NYSE 
Alternext will be responsible for ensuring that Arca Securities's 
outbound routing function is operated consistent with Section 6 of the 
Act and NYSE Alternext rules. In addition, NYSE Alternext must file 
with the Commission rule changes and fees relating to Arca Securities's 
outbound routing function.
    Recognizing that the Commission has previously expressed concern 
regarding the potential for conflicts of interest in instances where a 
member firm is affiliated with an exchange to which it is routing 
orders, NYSE Arca previously proposed, and the Commission approved, 
limitations and conditions on its acceptance of orders routed from its 
affiliate, Arca Securities, in its capacity as a facility of the 
NYSE.\20\ The Exchange now proposes to accept inbound orders that Arca 
Securities routes in its capacity as a facility of NYSE Alternext, 
subject to the same limitations and conditions:
---------------------------------------------------------------------------

    \20\ See Securities Exchange Act Release No. 58681, supra note 
3.
---------------------------------------------------------------------------

     First, NYSE Arca states that the agreement between FINRA 
and NYSE Arca pursuant to Rule 17d-2 under the Act will apply to 
routing by Arca Securities to NYSE Arca in its capacity as a facility 
of NYSE Alternext. Pursuant to this agreement, FINRA is allocated 
regulatory responsibilities to review Arca Securities' compliance with 
certain NYSE Arca rules.\21\
---------------------------------------------------------------------------

    \21\ NYSE Arca also states that Arca Securities is subject to 
independent oversight by FINRA, its Designated Examining Authority, 
for compliance with financial responsibility requirements. See supra 
section II.A.1.
---------------------------------------------------------------------------

     Second, NYSE Regulation \22\ will monitor Arca Securities 
for compliance with NYSE Arca's trading rules, and will collect and 
maintain certain related information.\23\
---------------------------------------------------------------------------

    \22\ NYSE Regulation is a wholly owned subsidiary of the NYSE 
that performs the regulatory functions of the NYSE pursuant to a 
delegation agreement. NYSE Regulation also performs many of the 
regulatory functions of NYSE Arca pursuant to a regulatory services 
agreement. See Securities Exchange Act Release No. 53382 (February 
27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (``NYSE/
Arca Order'') at 11255.
    \23\ Specifically, NYSE Regulation ``will collect and maintain 
the following information of which NYSE Regulation staff becomes 
aware--namely, all alerts, complaints, investigations and 
enforcement actions where Arca Securities (in its capacity as a 
facility of both the NYSE and NYSE Alternext, routing orders to NYSE 
Arca) is identified as a participant that has potentially violated 
NYSE Arca or applicable SEC rules--in an easily accessible manner so 
as to facilitate any review conducted by the SEC's Office of 
Compliance Inspections and Examination.'' See supra section II.A.1.
---------------------------------------------------------------------------

     Third, NYSE Arca states that NYSE Regulation has agreed 
with NYSE Arca that it will provide a report to NYSE Arca's CRO, on a 
quarterly basis, that: (i) Quantifies all alerts (of which NYSE 
Regulation is aware) that identify Arca Securities as a participant 
that has potentially violated NYSE Arca or Commission rules, and (ii) 
quantifies the number of all investigations that identify Arca 
Securities as a participant

[[Page 73376]]

that has potentially violated NYSE Arca or Commission rules.\24\
---------------------------------------------------------------------------

    \24\ See supra section II.A.1.
---------------------------------------------------------------------------

     Fourth, NYSE Arca Equities Rule 14.3(e), which requires 
NYSE Euronext, as the holding company owning both NYSE Arca and Arca 
Securities, to establish and maintain procedures and internal controls 
reasonably designed to ensure that Arca Securities does not develop or 
implement changes to its system, based on non-public information 
obtained regarding planned changes to the NYSE Arca systems as a result 
of its affiliation with NYSE Arca, until such information is available 
generally to similarly situated members of NYSE Arca, in connection 
with the provision of inbound order routing to NYSE Arca, will 
apply.\25\
---------------------------------------------------------------------------

    \25\ See id. See also NYSE Arca Equities Rule 14.3(e).
---------------------------------------------------------------------------

     Fifth, NYSE Arca proposes that routing from Arca 
Securities to NYSE Arca, in Arca Securities's capacity as a facility of 
NYSE Alternext, be authorized for a pilot period to run concurrently 
with a twelve month pilot period for NYSE Arca's receipt of inbound 
routes from Arca Securities, which commenced on September 29, 2008.\26\
---------------------------------------------------------------------------

    \26\ See supra note 8 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that these conditions mitigate its concerns 
about potential conflicts of interest and unfair competitive advantage. 
In particular, the Commission believes that FINRA's oversight of Arca 
Securities,\27\ combined with NYSE Regulation's monitoring of Arca 
Securities' compliance with NYSE Arca's trading rules and quarterly 
reporting to NYSE Arca's CRO, will help to protect the independence of 
NYSE Arca's regulatory responsibilities with respect to Arca 
Securities. Furthermore, the Commission believes that NYSE Arca's 
proposal to allow Arca Securities to route orders inbound to NYSE Arca 
from NYSE Alternext, on a pilot basis, will provide NYSE Arca and the 
Commission an opportunity to assess the impact of any conflicts of 
interest of allowing an affiliated member of NYSE Arca to route orders 
inbound to NYSE Arca and whether such affiliation provides an unfair 
competitive advantage.
---------------------------------------------------------------------------

    \27\ This oversight will be accomplished through the 17d-2 
agreement between FINRA and NYSE Arca.
---------------------------------------------------------------------------

    NYSE Arca has asked the Commission to accelerate approval of the 
proposed rule change. NYSE Arca states in part that the proposed 
changes are ``required due to NYSE Alternext's planned implementation 
of a new trading system and the use of Arca Securities as its outbound 
routing facility.'' \28\ NYSE Arca also states that accelerated 
approval ``will permit the Exchange to amend its mechanisms that are 
designed to address the Commission's concerns regarding affiliated 
members in time to provide these protections at the time of NYSE 
Alternext's implementation of its new trading system, which is targeted 
for December 1, 2008.'' \29\ The Commission finds good cause for 
approving the proposed rule change before the thirtieth day after the 
date of publication of notice of filing thereof in the Federal 
Register. The Commission notes that the protections proposed by NYSE 
Arca, which are designed to address conflicts of interest concerns 
identified by the Commission in connection with the inbound routing of 
orders to an exchange when the routing broker-dealer is an affiliate of 
that exchange, are substantially the same as the conditions the 
Exchange currently has in place to address inbound routing from NYSE, 
which were previously approved by the Commission.\30\ The Commission 
also notes that no comments were received in connection with SR-
NYSEArca-2008-90. Accordingly, the Commission finds good cause, 
consistent with Section 19(b)(2) of the Act,\31\ to approve the 
proposed rule change on an accelerated basis for a pilot period 
expiring September 29, 2009.
---------------------------------------------------------------------------

    \28\ See SR-NYSEArca-2008-130, Item 7.
    \29\ Id.
    \30\ See Securities Exchange Act Release No. 58681, supra note 
3. See also Securities Exchange Act Release Nos. 58673, supra note 
5, and 58680, supra note 18 (establishing similar protections for 
inbound routing from Arca Securities to Alternext and the NYSE, 
respectively).
    \31\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSEArca-2008-130) is hereby approved 
on an accelerated basis for a pilot period to expire on September 29, 
2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-28530 Filed 12-1-08; 8:45 am]
BILLING CODE 8011-01-P