Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change To Amend Rule 6.69-Reporting Duties, 17270-17271 [E9-8419]

Download as PDF 17270 Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 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 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 Number SR–NYSEAmex–2009–09 and should be submitted on or before May 5, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–8421 Filed 4–13–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59716; File No. SR– NYSEArca–2009–11] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change To Amend Rule 6.69—Reporting Duties April 6, 2009. I. Introduction On February 13, 2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’), filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Rule 6.69 to revise the procedures for reporting open outcry trades that occur on the options trading floor. The proposed rule change was published for comment in the Federal Register on March 3, 2009.3 The Commission received no comment letters on the proposal. This order approves the proposed rule change. 6 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 59440 (February 24, 2009), 74 FR 9325 (‘‘Notice’’). II. Description NYSE Arca’s proposal revises the procedures for reporting open outcry trades that occur on the options trading floor. Under existing NYSE Arca rules, all option transactions that occur on the options trading floor must immediately be reported to the Exchange, in a form and manner prescribed by the Exchange, for dissemination to the Options Price Reporting Authority (‘‘OPRA’’).4 This requirement applies to all OTP Holders who are required to report trades either directly to OPRA or to another party who is responsible for reporting trades to OPRA. Currently, pursuant to existing Rule 6.69(b), the responsible party for reporting a transaction is the party that participates on the transaction as the seller. The proposed rule change makes several clarifying changes to these reporting obligations. First, the revised rule provides that whenever a Floor Broker is participating on one side of a transaction, the Floor Broker becomes the responsible party for reporting the trade, regardless of whether the Floor Broker is the buyer or seller. Second, in the event that there is a Floor Broker participating on both sides of a transaction, the Floor Broker participating as the seller must report the transaction to the Exchange. Third, for transactions occurring on the Exchange between two Market Makers, the Market Maker participating as the seller must report the transaction to the Exchange. Finally, in order to further clarify the rules regarding reporting duties, the Exchange proposes a new provision regarding Complex Orders. Since each party to a Complex Order transaction (which involves the simultaneous purchase and/or sale of two or more option series in the same underlying security) could be both buying and selling different series that make up an order, there may be no clearly defined seller, as is required by the existing rule. Consequently, pursuant to the proposed rule change, for Complex Order transactions between two Floor Brokers or two Market Makers, the party responsible for reporting the transaction will be the OTP Holder that first initiated the transaction. This provision does not affect the obligation that a Floor Broker has to report transactions pursuant to proposed Rule 6.69(b)(i), but will have bearing when a Complex 1 15 VerDate Nov<24>2008 16:39 Apr 13, 2009 Jkt 217001 4 For transactions executed on the Exchange’s electronic trading platform, NYSE Arca will report the trade directly to OPRA. PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 Order is executed between two Floor Brokers or between two Market Makers.5 Presently, almost all orders on the Exchange are required to be in electronic format prior to representation on the trading floor.6 The Exchange represents that, typically, Floor Brokers enter the terms of orders they receive into the Electronic Order Capture System (‘‘EOC’’) 7, and upon consummating a trade, the Floor Broker is able to electronically report the transaction to the Exchange for processing and dissemination to OPRA. In contrast, the Exchange notes that Market Makers trading for their own proprietary account are not required to electronically systematize their orders prior to responding to a call from a Floor Broker. Consequently, a Market Maker acting as a ‘‘seller’’ (who would be the responsible reporting party under the current rules) would be required to re-enter all the order information already contained in the Floor Broker’s EOC system and then send the information to the Exchange for processing. The Exchange believes that it will be more efficient for the Floor Broker to be the responsible party for reporting a transaction. The Exchange further does not believe that requiring a Floor Broker to report every transaction to which they are a party will create any undue hardship or unnecessary burden on the Floor Broker, given the existing requirement that orders be put in electronic format prior to representation on the floor. III. Discussion and Commission’s Findings After careful review, 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.8 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,9 which requires, among other things, that that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to remove 5 The proposal also eliminates Rule 6.69 Commentary .04, which relates to an obsolete and outdated practice. ‘‘Hard cards,’’ which refer to the cardboard backing of a paper trade ticket, are no longer in use on the trading floor. 6 See Rule 6.67(c). 7 The EOC system is the Exchange’s electronic audit trail and order tracking system that provides an accurate time-sequenced record of all orders and transactions on the Exchange. 8 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 9 15 U.S.C. 78f(b)(5). E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 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 not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission believes that the proposed rule change will increase efficiency in trade reporting and remove potential confusion about which party to a transaction is responsible for reporting such information. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,10 that the proposed rule change (SR–NYSEArca– 2009–11) be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–8419 Filed 4–13–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59713; File No. SR–FINRA– 2009–024] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Trade Reporting Transfers of Proprietary Securities Positions in Connection With Certain Corporate Control Transactions April 6, 2009. 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 April 3, 2009, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under Section 19(b)(3)(A) of the Act 3 and paragraph (f)(6) thereunder,4 which renders the proposal effective U.S.C. 78s(b)(2). 11 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 16:39 Apr 13, 2009 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA trade reporting rules to codify the reporting requirements applicable to over-the-counter (‘‘OTC’’) transfers of proprietary positions in debt and equity securities between a member and another member or non-member brokerdealer effected in connection with certain corporate control transactions. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA 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, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FINRA trade reporting rules require that OTC transactions in debt and equity securities be reported to FINRA unless they qualify for an express exception under the rules.5 For purposes of the trade reporting rules, a ‘‘trade’’ or ‘‘transaction’’ entails a beneficial change of ownership of securities between parties (e.g., a purchase or sale of securities) in which a FINRA member participates.6 As a general matter, when members report trades to a FINRA trade reporting facility, FINRA facilitates the public dissemination of the trade information and/or assesses regulatory transaction fees.7 5 See Rules 6282, 6380A, 6380B, 6622 and 6730. Trade Reporting Frequently Asked Questions, FAQ 100.4, available at https:// www.finra.org/Industry/Regulation/Guidance/ P038942. 7 Certain trades are reported to FINRA, but not for publication purposes (referred to as ‘‘non-tape reports’’). For example, FINRA rules require 6 See 10 15 VerDate Nov<24>2008 upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. Jkt 217001 PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 17271 Occasionally, broker-dealers may transfer proprietary securities positions, along with other assets, in connection with corporate control transactions such as mergers and acquisitions. Such transfers are ‘‘trades’’ or ‘‘transactions’’ because they result in a change of beneficial ownership, but unlike the typical securities transaction, they are not driven by a trading or investment strategy (e.g., a desire to exit a position or lock in a profit) relating to a particular security position. Rather, the transfers are in furtherance of the consolidation of the broker-dealers’ separate sales and proprietary trading businesses. Additionally, the securities that are transferred typically are assigned a value, such as the closing price of the security on a date certain, solely for purposes of effectuating the transfer. As such, FINRA believes that public dissemination of such transfers would not provide meaningful price discovery information to the market. To the contrary, dissemination could confuse investors and other market participants, particularly where the positions being transferred are substantial. Public dissemination of significant and perhaps unusual trading activity could give the false impression of investor interest, market participant transactions and significant price discovery activities, and the volume reports could skew a variety of trading activity indicators.8 Accordingly, FINRA is proposing to amend its trade reporting rules to clarify members to submit non-tape reports for transactions that are effected upon the exercise of an OTC option or for ‘‘away from the market sales’’ (e.g., a gift between two parties). The non-tape reports are used for audit trail and regulatory fee assessment purposes only and are not reported to the appropriate exclusive Securities Information Processor (‘‘SIP’’) for public dissemination. See Rules 6282(i)(2) and 7130(c) (relating to the Alternative Display Facility); 6380A(e)(2) and 7230A(g) (relating to the FINRA/Nasdaq Trade Reporting Facility); 6380B(e)(2) and 7230B(f) (relating to the FINRA/NYSE Trade Reporting Facility); and 6622(e)(2) and 7330(g) (relating to the OTC Reporting Facility). 8 Similarly, FINRA amended its trade reporting rules to clarify that in the limited circumstance where securities are transferred pursuant to an asset purchase agreement (‘‘APA’’), such transfer does not have to be reported if (1) the APA is subject to the jurisdiction and approval of a court of competent jurisdiction in insolvency matters; and (2) the purchase price under the APA is not based on, and cannot be adjusted to reflect, the current market prices of the securities on or following the effective date of the APA. FINRA believes that transfers effected pursuant to an APA under these circumstances are not trade reportable events and that reporting and dissemination of these transfers would not provide meaningful price discovery information to the market. See Securities Exchange Act Release No. 59126 (December 19, 2008), 73 FR 79948 (December 30, 2008) (notice of filing and immediate effectiveness of SR–FINRA–2008–060). E:\FR\FM\14APN1.SGM 14APN1

Agencies

[Federal Register Volume 74, Number 70 (Tuesday, April 14, 2009)]
[Notices]
[Pages 17270-17271]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-8419]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59716; File No. SR-NYSEArca-2009-11]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To Amend Rule 6.69--Reporting Duties

April 6, 2009.

I. Introduction

    On February 13, 2009, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Rule 6.69 to revise the procedures for 
reporting open outcry trades that occur on the options trading floor. 
The proposed rule change was published for comment in the Federal 
Register on March 3, 2009.\3\ The Commission received no comment 
letters on the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59440 (February 24, 
2009), 74 FR 9325 (``Notice'').
---------------------------------------------------------------------------

II. Description

    NYSE Arca's proposal revises the procedures for reporting open 
outcry trades that occur on the options trading floor. Under existing 
NYSE Arca rules, all option transactions that occur on the options 
trading floor must immediately be reported to the Exchange, in a form 
and manner prescribed by the Exchange, for dissemination to the Options 
Price Reporting Authority (``OPRA'').\4\ This requirement applies to 
all OTP Holders who are required to report trades either directly to 
OPRA or to another party who is responsible for reporting trades to 
OPRA. Currently, pursuant to existing Rule 6.69(b), the responsible 
party for reporting a transaction is the party that participates on the 
transaction as the seller.
---------------------------------------------------------------------------

    \4\ For transactions executed on the Exchange's electronic 
trading platform, NYSE Arca will report the trade directly to OPRA.
---------------------------------------------------------------------------

    The proposed rule change makes several clarifying changes to these 
reporting obligations. First, the revised rule provides that whenever a 
Floor Broker is participating on one side of a transaction, the Floor 
Broker becomes the responsible party for reporting the trade, 
regardless of whether the Floor Broker is the buyer or seller. Second, 
in the event that there is a Floor Broker participating on both sides 
of a transaction, the Floor Broker participating as the seller must 
report the transaction to the Exchange. Third, for transactions 
occurring on the Exchange between two Market Makers, the Market Maker 
participating as the seller must report the transaction to the 
Exchange.
    Finally, in order to further clarify the rules regarding reporting 
duties, the Exchange proposes a new provision regarding Complex Orders. 
Since each party to a Complex Order transaction (which involves the 
simultaneous purchase and/or sale of two or more option series in the 
same underlying security) could be both buying and selling different 
series that make up an order, there may be no clearly defined seller, 
as is required by the existing rule. Consequently, pursuant to the 
proposed rule change, for Complex Order transactions between two Floor 
Brokers or two Market Makers, the party responsible for reporting the 
transaction will be the OTP Holder that first initiated the 
transaction. This provision does not affect the obligation that a Floor 
Broker has to report transactions pursuant to proposed Rule 6.69(b)(i), 
but will have bearing when a Complex Order is executed between two 
Floor Brokers or between two Market Makers.\5\
---------------------------------------------------------------------------

    \5\ The proposal also eliminates Rule 6.69 Commentary .04, which 
relates to an obsolete and outdated practice. ``Hard cards,'' which 
refer to the cardboard backing of a paper trade ticket, are no 
longer in use on the trading floor.
---------------------------------------------------------------------------

    Presently, almost all orders on the Exchange are required to be in 
electronic format prior to representation on the trading floor.\6\ The 
Exchange represents that, typically, Floor Brokers enter the terms of 
orders they receive into the Electronic Order Capture System (``EOC'') 
\7\, and upon consummating a trade, the Floor Broker is able to 
electronically report the transaction to the Exchange for processing 
and dissemination to OPRA. In contrast, the Exchange notes that Market 
Makers trading for their own proprietary account are not required to 
electronically systematize their orders prior to responding to a call 
from a Floor Broker. Consequently, a Market Maker acting as a 
``seller'' (who would be the responsible reporting party under the 
current rules) would be required to re-enter all the order information 
already contained in the Floor Broker's EOC system and then send the 
information to the Exchange for processing. The Exchange believes that 
it will be more efficient for the Floor Broker to be the responsible 
party for reporting a transaction. The Exchange further does not 
believe that requiring a Floor Broker to report every transaction to 
which they are a party will create any undue hardship or unnecessary 
burden on the Floor Broker, given the existing requirement that orders 
be put in electronic format prior to representation on the floor.
---------------------------------------------------------------------------

    \6\ See Rule 6.67(c).
    \7\ The EOC system is the Exchange's electronic audit trail and 
order tracking system that provides an accurate time-sequenced 
record of all orders and transactions on the Exchange.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, 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.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\9\ which requires, among 
other things, that that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to remove

[[Page 17271]]

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 not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers. The Commission 
believes that the proposed rule change will increase efficiency in 
trade reporting and remove potential confusion about which party to a 
transaction is responsible for reporting such information.
---------------------------------------------------------------------------

    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSEArca-2009-11) be, and 
hereby is, approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8419 Filed 4-13-09; 8:45 am]
BILLING CODE 8010-01-P
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