Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change Amending Rule 10.12 (Minor Rule Plan), 50861-50862 [E9-23625]
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Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2009–85 and
should be submitted on or before
October 22, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–23698 Filed 9–30–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60716; File No. SR–
NYSEArca–2009–70]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving Proposed
Rule Change Amending Rule 10.12
(Minor Rule Plan)
PWALKER on DSK8KYBLC1PROD with NOTICES
September 24, 2009.
On July 29, 2009, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘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 amending NYSE Arca Rule 10.12
(Minor Rule Plan) (‘‘MRP’’) to
incorporate additional violations into
the MRP, and to increase the fine levels
for certain MRP violations. The
proposed rule change was published for
comment in the Federal Register on
August 24, 2009.3 The Commission
received no comments regarding the
proposal. This order approves the
proposed rule change.
The Exchange proposes to amend its
MRP to incorporate violations for
trading in restricted classes, and failure
to report position and account
information. Specifically, the Exchange
proposes to implement a fine schedule
for Options Trading Permit (‘‘OTP’’)
Holders that affect opening transactions
in restricted series of options,
inconsistent with the terms of any such
restriction, in violation of Rule 5.4(a).
This fine will consist of $1,000 for the
first violation during a rolling 24-month
period, $2,500 for a second violation
within the same period, and $5,000 for
a third violation during the same period.
The Exchange also proposes to
incorporate violations for failing to
16 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. 60518
(August 18, 2009), 74 FR 42725 (‘‘Notice’’).
1 15
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19:32 Sep 30, 2009
Jkt 217001
accurately report position and account
information to the Exchange on a Large
Option Position Report (‘‘LOPR’’)
pursuant to Rule 6.6(a). This fine will
consist of $1,000 for the first violation
in a rolling 24-month period, $2,500 for
a second violation within the same
period, and $5,000 for a third violation
within the same period. The Exchange
believes that, in most cases, violations
of trading in restricted classes and
violations of LOPR reporting may be
handled efficiently through the MRP.
However, any egregious activity or
activity that is believed to be
manipulative will continue to be subject
to formal disciplinary proceedings.4
The Exchange also proposes to
increase fines for violations of NYSE
Arca Rules 6.46(a),5 6.47A,6 and 6.75 7
to $1,000 for the first violation in a
rolling 24-month period, $2,500 for a
second violation within the same
period, and $5,000 for a third violation
within the same period. The MRP
currently provides for fines of $1,000 for
the first violation of Rule 6.46(a) in a
rolling 24-month period, $2,500 for a
second violation within the same
period, and $3,500 for a third violation
within the same period. The MRP
currently provides for fines of $500 for
the first violation of Rule 6.47A in a
rolling 24-month period, $1,000 for a
second violation within the same
period, and $2,500 for a third violation
within the same period. The MRP
currently provides for a fine of $500 for
the first violation of Rule 6.75 in a
rolling 24-month period, $1,000 for a
second violation within the same
period, and $2,000 for a third violation
within the same period. The Exchange
believes that, given the nature of these
violations, the current fine levels are
inadequate, and that increased fines for
4 See
Notice, supra note 3, 74 FR at 42725–26.
Arca Rule 6.46(a) requires that a Floor
Broker handling an order use due diligence to
execute the order at the best price or prices
available to him, in accordance with the Rules of
the Exchange.
6 NYSE Arca Rule 6.47A states that users may not
execute as principal orders they represent as agent
unless (i) agency orders are first exposed on the
Exchange for at least one second or (ii) the user has
been bidding or offering on the Exchange for at least
one second prior to receiving an agency order that
is executable against such bid or offer.
7 NYSE Arca Rule 6.75 states that the highest bid/
lowest offer shall have priority over all other orders.
In the event there are two or more bids/offers for
the same option contract representing the best price
and one such bid/offer is displayed in the
Consolidated Book, such bid shall have priority
over any other bid at the post. In addition, if two
or more bids/offers represent the best price and a
bid/offer displayed in the Consolidated Book is not
involved, priority shall be afforded to such bids in
the sequence in which they are made. Rule 6.75
also contains certain provisions related to splitprice priority and priority of complex orders.
5 NYSE
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
50861
these violations are needed to deter
future violations.8
The Commission finds that the
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.9 In
particular, the Commission believes that
the proposal is consistent with Section
6(b)(5) of the Act,10 which requires that
the rules of an exchange be designed to,
among other things, protect investors
and the public interest. The
Commission also believes that the
proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act,11 which
require that the rules of an exchange
enforce compliance with, and provide
appropriate discipline for, violations of
Commission and exchange rules.
Furthermore, the Commission believes
that the proposed changes to the MRP
should strengthen the Exchange’s ability
to carry out its oversight and
enforcement responsibilities as a selfregulatory organization in cases where
full disciplinary proceedings are
unsuitable in view of the minor nature
of the particular violation. Therefore,
the Commission finds that the proposal
is consistent with the public interest,
the protection of investors, or otherwise
in furtherance of the purposes of the
Act, as required by Rule 19d–1(c)(2)
under the Act,12 which governs minor
rule violation plans.
In approving this proposed rule
change, the Commission in no way
minimizes the importance of
compliance with NYSE Arca rules and
all other rules subject to the imposition
of fines under the MRP. The
Commission believes that the violation
of any self-regulatory organization’s
rules, as well as Commission rules, is a
serious matter. However, the MRP
provides a reasonable means of
addressing rule violations that do not
rise to the level of requiring formal
disciplinary proceedings, while
providing greater flexibility in handling
certain violations. The Commission
expects that NYSE Arca will continue to
conduct surveillance with due diligence
and make a determination based on its
findings, on a case-by-case basis,
whether a fine of more or less than the
recommended amount is appropriate for
a violation under the MRP or whether
a violation requires formal disciplinary
8 See
Notice, supra note 3, 74 FR at 42726.
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).
10 15 U.S.C. 78f(b)(5).
11 15 U.S.C. 78f(b)(1) and 78f(b)(6).
12 17 CFR 240.19d–1(c)(2).
9 In
E:\FR\FM\01OCN1.SGM
01OCN1
50862
Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices
action under NYSE Arca Rules 10.4–
10.11.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 13 and Rule
19d–1(c)(2) under the Act,14 that the
proposed rule change (SR–NYSEArca–
2009–70) be, and it hereby is, approved
and declared effective.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–23625 Filed 9–30–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60718; File No. S7–35–08]
Order Pursuant to Section 36 of the
Securities Exchange Act of 1934
Extending Temporary Exemptions
from Sections 5 and 6 of the Exchange
Act for Broker-Dealers and Exchanges
Effecting Transactions in Credit
Default Swaps
September 25, 2009.
On December 24, 2008, in connection
with its efforts to facilitate the
establishment of one or more central
counterparties for clearing credit default
swap (‘‘CDS’’) transactions,1 the
Securities and Exchange Commission
(‘‘Commission’’) granted temporary,
conditional exemptions from the
registration requirements under
Sections 5 and 6 of the Securities
Exchange Act of 1934 (‘‘Exchange Act’’)
to certain exchanges and broker-dealers
(‘‘December Order’’).2 Subject to
conditions specified in the December
13 15
U.S.C. 78s(b)(2).
CFR 240.19d–1(c)(2).
15 17 CFR 200.30–3(a)(12); 17 CFR 200.30–
3(a)(44).
1 A CDS is a bilateral contract between two
parties, known as counterparties. The value of this
financial contract is based on underlying
obligations (‘‘reference obligations’’) of a single
entity (a ‘‘reference entity’’) or on a particular
security or other debt obligation (‘‘reference
security’’), or an index of several such entities,
securities, or obligations. The obligation of a seller
under a CDS to make payments under a CDS
contract is triggered by a default or other credit
event as to such entity or entities or such security
or securities. Investors may use CDS for a variety
of reasons, including to offset or insure against risk
in their fixed-income portfolios, to take positions in
bonds or in segments of the debt market as
represented by an index, or to capitalize on the
volatility in credit spreads during times of
economic uncertainty. The over-the-counter
(‘‘OTC’’) market for CDS poses systemic risk to the
financial system as well as operational risks, risks
relating to manipulation and fraud, and regulatory
arbitrage risks.
2 Securities Exchange Act Release No. 59165
(December 24, 2008), 74 FR 133 (January 2, 2009).
PWALKER on DSK8KYBLC1PROD with NOTICES
14 17
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19:32 Sep 30, 2009
Jkt 217001
Order, any exchange that effects or
reports transactions in CDS that are not
swap agreements (‘‘non-excluded
CDS’’) 3 and is not otherwise subject to
the requirements under Sections 5 and
6 of the Exchange Act,4 and the rules
and regulations thereunder, is exempt
from the requirement to register as a
national securities exchange.5 In
addition, any broker or dealer that
effects or reports transactions in nonexcluded CDS on such an exchange is
exempt from the prohibition on trading
activity in Section 5 of the Exchange
Act. The December Order expires on
September 25, 2009. Pursuant to its
authority under Section 36 of the
Exchange Act,6 for the reasons
described herein, the Commission is
today extending the exemption granted
in the December Order until March 24,
2010.
Section 5 of the Exchange Act states
that ‘‘[i]t shall be unlawful for any
broker, dealer, or exchange, directly or
indirectly, to make use of the mails or
any means or instrumentality of
interstate commerce for the purpose of
using any facility of an exchange * * *
to effect any transaction in a security, or
to report any such transactions, unless
such exchange (1) is registered as a
national securities exchange under
section 6 of [the Exchange Act], or (2)
is exempted from such registration
* * * by reason of the limited volume
of transactions effected on such
exchange * * * .’’ Section 6 of the
Exchange Act sets forth a procedure
3 Section 3A of the Exchange Act limits the
Commission’s authority over swap agreements, as
defined in Section 206A of the Gramm-Leach-Bliley
Act. 15 U.S.C. 78c–1. Section 3A excludes both a
non-security-based and a security-based swap
agreement from the definition of ‘‘security’’ under
Section 3(a)(10) of the Exchange Act, 15 U.S.C.
78c(a)(10). Section 206A of the Gramm-Leach-Bliley
Act defines a ‘‘swap agreement’’ as ‘‘any agreement,
contract, or transaction between eligible contract
participants (as defined in section 1a(12) of the
Commodity Exchange Act * * *) * * * the
material terms of which (other than price and
quantity) are subject to individual negotiation.’’ 15
U.S.C. 78c note.
4 15 U.S.C. 78e and 78f.
5 A national securities exchange that effects
transactions in CDS would continue to be required
to comply with all requirements under the
Exchange Act applicable to such transactions. A
national securities exchange could form
subsidiaries or affiliates that operate exchanges
exempt under this order. Any subsidiary or affiliate
of a registered exchange could not integrate, or
otherwise link, the exempt CDS exchange with the
registered exchange, including the premises or
property of such exchange for effecting or reporting
a transaction, without being considered a ‘‘facility
of the exchange.’’ See Section 3(a)(2) of the
Exchange Act, 15 U.S.C. 78c(a)(2).
6 15 U.S.C. 78mm.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
whereby an exchange 7 may register as
a national securities exchange.8
Section 36 of the Exchange Act
provides that the Commission, ‘‘by rule,
regulation, or order, may conditionally
or unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
transactions, from any provision or
provisions of [the Exchange Act] or of
any rule or regulation thereunder, to the
extent that such exemption is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors.’’ 9 To facilitate the
establishment of one or more exchanges
for non-excluded CDS, the Commission
in the December Order exercised its
authority under Section 36 to
temporarily exempt any exchange,
broker, or dealer that effects transactions
in non-excluded CDS from the
prohibition in Section 5 of the Exchange
Act and (in the case of exchanges) the
requirements in Section 6 of the
Exchange Act and the rules and
regulations thereunder.
The exemptions were conditioned on
an exchange providing notice to the
Commission of its reliance on the
December Order, and certain other
requirements that generally mirror those
applicable to alternative trading systems
under Regulation ATS.10 As we noted at
the time, the temporary exemptions
from Sections 5 and 6 of the Exchange
Act in the December Order were
designed to allow brokers, dealers, and
exchanges to effect transactions in nonexcluded CDS on exchanges, while
providing an opportunity for the
Commission to gain experience with the
7 Section 3(a)(1) of the Exchange Act, 15 U.S.C.
78c(a)(1), defines ‘‘exchange.’’ Rule 3b–16 under the
Exchange Act, 17 CFR 240.3b–16, defines certain
terms used in the statutory definition of exchange.
See Securities Exchange Act Release No. 40760
(December 8, 1998), 63 FR 70844 (December 22,
1998) (‘‘Regulation ATS Adopting Release’’)
(adopting Rule 3b–16 in addition to Regulation
ATS).
8 15 U.S.C. 78f. Section 6 of the Exchange Act also
sets forth various requirements to which a national
securities exchange is subject.
9 15 U.S.C. 78mm(a)(1).
10 See Regulation ATS, 17 CFR 242.300 et seq. In
1998, the Commission exercised its exemptive
authority under Section 36 of the Exchange Act and
its general authority under Section 11A of the
Exchange Act, 15 U.S.C. 78k–1, to establish a
regulatory framework for ‘‘alternative trading
systems,’’ which perform many of the same
functions as exchanges. Under this framework, an
entity that, like an exchange, matches the orders in
securities of multiple buyers and sellers according
to established, non-discretionary methods is exempt
from the definition of ‘‘exchange’’ if it instead
registers as a broker-dealer and complies with
Regulation ATS. Regulation ATS is designed,
among other things, ‘‘to adopt a regulatory
framework that addresses [the Commission’s]
concerns without jeopardizing the commercial
viability of these markets.’’ Regulation ATS
Adopting Release, supra note 7, 63 FR at 70846.
E:\FR\FM\01OCN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 189 (Thursday, October 1, 2009)]
[Notices]
[Pages 50861-50862]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-23625]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60716; File No. SR-NYSEArca-2009-70]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
Proposed Rule Change Amending Rule 10.12 (Minor Rule Plan)
September 24, 2009.
On July 29, 2009, NYSE Arca, Inc. (``NYSE Arca'' or ``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
amending NYSE Arca Rule 10.12 (Minor Rule Plan) (``MRP'') to
incorporate additional violations into the MRP, and to increase the
fine levels for certain MRP violations. The proposed rule change was
published for comment in the Federal Register on August 24, 2009.\3\
The Commission received no comments regarding 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. 60518 (August 18,
2009), 74 FR 42725 (``Notice'').
---------------------------------------------------------------------------
The Exchange proposes to amend its MRP to incorporate violations
for trading in restricted classes, and failure to report position and
account information. Specifically, the Exchange proposes to implement a
fine schedule for Options Trading Permit (``OTP'') Holders that affect
opening transactions in restricted series of options, inconsistent with
the terms of any such restriction, in violation of Rule 5.4(a). This
fine will consist of $1,000 for the first violation during a rolling
24-month period, $2,500 for a second violation within the same period,
and $5,000 for a third violation during the same period. The Exchange
also proposes to incorporate violations for failing to accurately
report position and account information to the Exchange on a Large
Option Position Report (``LOPR'') pursuant to Rule 6.6(a). This fine
will consist of $1,000 for the first violation in a rolling 24-month
period, $2,500 for a second violation within the same period, and
$5,000 for a third violation within the same period. The Exchange
believes that, in most cases, violations of trading in restricted
classes and violations of LOPR reporting may be handled efficiently
through the MRP. However, any egregious activity or activity that is
believed to be manipulative will continue to be subject to formal
disciplinary proceedings.\4\
---------------------------------------------------------------------------
\4\ See Notice, supra note 3, 74 FR at 42725-26.
---------------------------------------------------------------------------
The Exchange also proposes to increase fines for violations of NYSE
Arca Rules 6.46(a),\5\ 6.47A,\6\ and 6.75 \7\ to $1,000 for the first
violation in a rolling 24-month period, $2,500 for a second violation
within the same period, and $5,000 for a third violation within the
same period. The MRP currently provides for fines of $1,000 for the
first violation of Rule 6.46(a) in a rolling 24-month period, $2,500
for a second violation within the same period, and $3,500 for a third
violation within the same period. The MRP currently provides for fines
of $500 for the first violation of Rule 6.47A in a rolling 24-month
period, $1,000 for a second violation within the same period, and
$2,500 for a third violation within the same period. The MRP currently
provides for a fine of $500 for the first violation of Rule 6.75 in a
rolling 24-month period, $1,000 for a second violation within the same
period, and $2,000 for a third violation within the same period. The
Exchange believes that, given the nature of these violations, the
current fine levels are inadequate, and that increased fines for these
violations are needed to deter future violations.\8\
---------------------------------------------------------------------------
\5\ NYSE Arca Rule 6.46(a) requires that a Floor Broker handling
an order use due diligence to execute the order at the best price or
prices available to him, in accordance with the Rules of the
Exchange.
\6\ NYSE Arca Rule 6.47A states that users may not execute as
principal orders they represent as agent unless (i) agency orders
are first exposed on the Exchange for at least one second or (ii)
the user has been bidding or offering on the Exchange for at least
one second prior to receiving an agency order that is executable
against such bid or offer.
\7\ NYSE Arca Rule 6.75 states that the highest bid/lowest offer
shall have priority over all other orders. In the event there are
two or more bids/offers for the same option contract representing
the best price and one such bid/offer is displayed in the
Consolidated Book, such bid shall have priority over any other bid
at the post. In addition, if two or more bids/offers represent the
best price and a bid/offer displayed in the Consolidated Book is not
involved, priority shall be afforded to such bids in the sequence in
which they are made. Rule 6.75 also contains certain provisions
related to split-price priority and priority of complex orders.
\8\ See Notice, supra note 3, 74 FR at 42726.
---------------------------------------------------------------------------
The Commission finds that the proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\9\ In particular, the
Commission believes that the proposal is consistent with Section
6(b)(5) of the Act,\10\ which requires that the rules of an exchange be
designed to, among other things, protect investors and the public
interest. The Commission also believes that the proposal is consistent
with Sections 6(b)(1) and 6(b)(6) of the Act,\11\ which require that
the rules of an exchange enforce compliance with, and provide
appropriate discipline for, violations of Commission and exchange
rules. Furthermore, the Commission believes that the proposed changes
to the MRP should strengthen the Exchange's ability to carry out its
oversight and enforcement responsibilities as a self-regulatory
organization in cases where full disciplinary proceedings are
unsuitable in view of the minor nature of the particular violation.
Therefore, the Commission finds that the proposal is consistent with
the public interest, the protection of investors, or otherwise in
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2)
under the Act,\12\ which governs minor rule violation plans.
---------------------------------------------------------------------------
\9\ 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).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\12\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------
In approving this proposed rule change, the Commission in no way
minimizes the importance of compliance with NYSE Arca rules and all
other rules subject to the imposition of fines under the MRP. The
Commission believes that the violation of any self-regulatory
organization's rules, as well as Commission rules, is a serious matter.
However, the MRP provides a reasonable means of addressing rule
violations that do not rise to the level of requiring formal
disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission expects that NYSE Arca will
continue to conduct surveillance with due diligence and make a
determination based on its findings, on a case-by-case basis, whether a
fine of more or less than the recommended amount is appropriate for a
violation under the MRP or whether a violation requires formal
disciplinary
[[Page 50862]]
action under NYSE Arca Rules 10.4-10.11.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\13\ and Rule 19d-1(c)(2) under the Act,\14\ that the proposed rule
change (SR-NYSEArca-2009-70) be, and it hereby is, approved and
declared effective.
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\13\ 15 U.S.C. 78s(b)(2).
\14\ 17 CFR 240.19d-1(c)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-23625 Filed 9-30-09; 8:45 am]
BILLING CODE 8011-01-P
