Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Rule 17 To Make Changes Necessary To Allow Its Routing Broker To Operate Consistent With the Requirements of Rule 15c3-5 Under the Securities Exchange Act of 1934, 44073-44075 [2011-18496]
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Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://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 Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street, NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the NYSE
Arca’s principal office and on its
Internet Web site at https://
www.nyse.com. 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–2011–50 and should be
submitted on or before August 12, 2011.
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Rule 17 to make changes
necessary to allow its Routing Broker to
operate consistent with the
requirements of Rule 15c3–5 under the
Securities Exchange Act of 1934
(‘‘Act’’).4 The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
BILLING CODE 8011–01–P
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 IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–18498 Filed 7–21–11; 8:45 am]
[Release No. 34–64904; File No. SR–NYSE–
2011–34]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending
NYSE Rule 17 To Make Changes
Necessary To Allow Its Routing Broker
To Operate Consistent With the
Requirements of Rule 15c3–5 Under
the Securities Exchange Act of 1934
mstockstill on DSK4VPTVN1PROD with NOTICES
July 18, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that July 13, 2011,
New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
17:59 Jul 21, 2011
Jkt 223001
1. Purpose
The Exchange proposes to amend
NYSE Rule 17 to permit its Routing
Broker to operate consistent with the
requirements of SEC Rule 15c3–5.5
Specifically, the proposed rule change
would allow the Routing Broker, in its
sole discretion, to reject orders pursuant
to risk management controls and
supervisory procedures maintained by
the Routing Broker pursuant to SEC
Rule 15c3–5. The Exchange’s affiliates,
NYSE Amex LLC (‘‘NYSE Amex’’) and
NYSE Arca, Inc. (‘‘NYSE Arca’’), are
CFR 240.15c3–5.
Rule 13 defines ‘‘Routing Broker’’ as ‘‘the
broker-dealer affiliate of the Exchange and/or any
other non-affiliate third-party broker-dealer that
acts as a facility of the Exchange for routing orders
entered into Exchange systems to other market
centers for execution whenever such routing is
required by Exchange Rules and federal securities
laws. The Routing Brokers will operate as described
in Exchange Rule 17.’’
PO 00000
4 17
5 NYSE
Frm 00093
Fmt 4703
Sfmt 4703
44073
proposing substantially similar rule
changes.6
Archipelago Securities LLC (‘‘Arca
Securities’’) currently is the primary
outbound Routing Broker for the
Exchange. The outbound routing
function for the Exchange is governed
by NYSE Rules 13 and 17. NYSE Rule
17(c)(1) currently provides that the
Routing Broker cannot change the terms
of an order or the routing instructions,
nor can it exercise any discretion about
where to route an order.
On November 3, 2010, the
Commission adopted SEC Rule 15c3–5,7
pursuant to which, among other things,
broker-dealers providing market access
are required to implement certain preorder entry checks in order to manage
the financial, regulatory, and other risks
associated with providing their
customers with market access. In
anticipation of the upcoming July 14,
2011 compliance date for SEC Rule
15c3–5, the Exchange is proposing to
amend NYSE Rule 17 to describe the
manner in which the Routing Broker
will handle routable orders consistent
with SEC Rule 15c3–5.8
Specifically, the Exchange proposes to
adopt NYSE Rule 17(c)(1)(A)(ii) to
provide that, in the Routing Broker’s
sole discretion, pursuant to risk
management controls and supervisory
procedures maintained by the Routing
Broker pursuant to SEC Rule 15c3–5,
the Routing Broker may reject any order
or series of orders as necessary to
manage the financial, regulatory, and
other risks of the Routing Brokers(s)
providing ‘‘market access,’’ as that term
is defined in SEC Rule 15c3–5(a)(1).9
The Routing Broker’s policies and
procedures for compliance with SEC
Rule 15c3–5 will address two
circumstances: (1) When the Routing
Broker routes orders on behalf of the
Exchange for the purpose of accessing
other trading centers with protected
quotations in compliance with Rule 611
of Regulation NMS under the Act 10 for
‘‘NMS stocks’’ (as that term is defined
6 See SR–NYSEAmex–2011–52 (equities), SR–
NYSEAmex–2011–53 (options), SR–NYSEArca–
2011–49 (equities), and SR–NYSEArca–2011–50
(options).
7 See Securities Exchange Act Release No. 63241
(November 3, 2010), 75 FR 69792 (November 15,
2010) (File No. S7–03–10).
8 The Commission extended the compliance date
to November 30, 2011 for all of the requirements
for fixed income securities and the requirements of
SEC Rule 15c3–5(c)(1)(i) for all securities. See
Securities Exchange Act Release No. 64748 (June
27, 2011), 76 FR 38293 (June 30, 2011) (File No. S7–
03–10).
9 The existing text of NYSE Rule 17(c)(1)(A)
would be renumbered as NYSE Rule 17(c)(1)(A)(i).
10 17 CFR 242.611.
E:\FR\FM\22JYN1.SGM
22JYN1
mstockstill on DSK4VPTVN1PROD with NOTICES
44074
Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices
in Rule 600 of Regulation NMS),11 or in
compliance with a national market
system plan for listed options (‘‘exempt
orders’’); and (2) when the Routing
Broker routes orders on behalf of the
Exchange for any other purpose,
including pursuant to the terms of an
order type adopted by the Exchange or
pursuant to a routing strategy through
which the Routing Broker routes orders
to market centers that are not posting
‘‘protected quotations’’ (as that term is
defined in Rule 600 of Regulation
NMS) 12 (‘‘non-exempt orders’’).
With respect to exempt orders, SEC
Rule 15c3–5(b) provides that a brokerdealer that routes orders on behalf of an
exchange for the purpose of accessing
other trading centers with protected
quotations in compliance with Rule 611
of Regulation NMS for NMS stocks, or
in compliance with a national market
system plan for listed options, is subject
only to the requirements of paragraph
(c)(1)(ii) of the Rule. SEC Rule 15c3–
5(c)(1)(ii) provides that the risk
management controls and supervisory
procedures required by the Rule must
include elements reasonably designed to
prevent the entry of erroneous orders,
by rejecting orders that exceed
appropriate price or size parameters, on
an order-by-order basis or over a short
period of time, or that indicate
duplicative orders. Accordingly, for
exempt orders, the Routing Broker will
reject any order or series of orders that
it determines, in its sole discretion, to
be erroneous or duplicative. Currently,
the only orders that the Routing Broker
routes on behalf of the Exchange are
exempt orders.
With respect to non-exempt orders, all
of the requirements of SEC Rule 15c3–
5 would apply to orders that the Routing
Broker routes on behalf of the Exchange,
and the proposed rule change is
intended to provide the Routing Broker
with authority to reject such orders as
necessary to comply with SEC Rule
15c3–5, as may be necessary in the
future. In this regard, the risk
management controls and supervisory
procedures of the Routing Broker would
include, as applicable, controls to
prevent the entry of orders that exceed
appropriate pre-set credit or capital
thresholds in the aggregate for each
customer and the broker-dealer and,
where appropriate, more finely-tuned by
sector, security, or otherwise by
rejecting orders if such orders would
exceed the applicable credit or capital
thresholds.13 In addition, the risk
management controls and supervisory
procedures of the Routing Broker would
be reasonably designed to ensure
compliance with applicable regulatory
requirements.14
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the
Act.15 In particular, the proposed
change is consistent with Section 6(b)(5)
of the Act,16 because it would promote
just and equitable principles of trade,
and, in general, protect investors and
the public interest. The proposed rule is
consistent with the requirements of the
Act because the change is necessary for
the Exchange’s Routing Broker to
comply with SEC Rule 15c3–5. The
Exchange also believes that the
proposed changes will benefit member
organizations of the Exchange because it
provides clarity on the procedures
employed by the Routing Broker
consistent with SEC Rule 15c3–5.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 17 and Rule 19b–
4(f)(6) thereunder.18
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
11 17
CFR 242.600(47).
CFR 242.600(58).
13 See 17 CFR 240.15c3–5(c)(1)(i).
12 17
17:59 Jul 21, 2011
Jkt 223001
IV. Solicitation of Comments
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.
14 See
17 CFR 240.15c3–5(c)(2).
U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
17 15 U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(6).
15 15
VerDate Mar<15>2010
of filing.19 However, Rule 19b–
4(f)(6)(iii) 20 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The Exchange
notes that waiving the 30-day operative
delay will allow Arca Securities to
comply with Rule 15c3–5 under the Act
by July 14, 2011; 21 the compliance date
for Rule 15c3–5. For this reason, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest, and designates the
proposed rule change to be operative
upon filing with the Commission.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2011–34 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
19 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6)(iii) requires that a self-regulatory
organization submit to the Commission written
notice of its intent to file the proposed rule change,
along with a brief description and text of the
proposed rule change, at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
20 Id.
21 17 CFR 240.15c3–5.
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
E:\FR\FM\22JYN1.SGM
22JYN1
Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices
All submissions should refer to File
Number SR–NYSE–2011–34. 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 (https://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 Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street, NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at https://www.nyse.com. 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–NYSE–2011–34 and should
be submitted on or before August 12,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–18496 Filed 7–21–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64900; File No. SR–Phlx–
2011–99]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to Amend Phlx
Options Rule 1080(m)
mstockstill on DSK4VPTVN1PROD with NOTICES
July 18, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on July 13,
2011, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes a rule change
to amend PHLX Options Rule 1080(m)
to make certain changes consistent with
the upcoming implementation of Rule
15c3–5 under the Act (the ‘‘Market
Access Rule’’).3
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqomxphlx.
cchwallstreet.com/NASDAQOMXPHLX/
Filings/, at the principal office of the
Exchange, 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
Exchange 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 IV 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 November 3, 2010, the
Commission adopted the Market Access
Rule,4 pursuant to which, among other
things, broker-dealers providing market
access are required to implement certain
pre-order entry checks in order to
manage the financial, regulatory, and
other risks associated with providing its
customers with market access. In
anticipation of the upcoming July 14,
2011 compliance date for the Market
Access Rule, the Exchange is proposing
to amend PHLX Options Rule 1080(m)
to describe the manner in which the
Exchange’s affiliated routing brokerCFR 240.15c3–5.
Securities Exchange Act Release No. 63241
(November 3, 2010), 75 FR 69792 (November 15,
2010).
dealer, NASDAQ Options Services
(‘‘NOS’’) will handle routable orders
consistent with the Market Access Rule.
In order to comply with the Market
Access Rule, NOS proposes to
implement, as part of the procedures of
NOS, certain tests, on both an order-byorder basis and over a short period of
time, that are designed to limit the
financial exposure that could arise as a
result of market access and to ensure
compliance with all regulatory
requirements that are applicable in
connection with market access.
Consistent with the requirements of the
Market Access Rule, these tests are
designed to reject orders that NOS deem
to be erroneous or duplicative, would
cause the entering Member’s credit
exposure to exceed a preset credit
threshold, or are non-compliant with
pre-trade regulatory requirements (as
defined in the Market Access Rule). To
the extent NOS determine, based on its
procedures, that an order should be
rejected, NOS may also seek to cancel
orders that have already been routed
away.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the Act.5
In particular, the proposed change is
consistent with Section 6(b)(5) of the
Act,6 because it would promote just and
equitable principles of trade, and, in
general, protect investors and the public
interest. The proposed rule is consistent
with the requirements of the Act
because the change is necessary for the
Exchange’s affiliated broker-dealer,
NOS, to comply with the Market Access
Rule. The Exchange also believes that
the proposed changes will benefit
Members of the Exchange because it
provides clarity on the procedures
employed by NOS consistent with the
Market Access Rule.
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 not
necessary or appropriate in furtherance
of the purposes of the Act.
3 17
23 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Mar<15>2010
17:59 Jul 21, 2011
4 See
Jkt 223001
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
44075
5 15
6 15
E:\FR\FM\22JYN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
22JYN1
]]>Agencies
[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]
[Notices]
[Pages 44073-44075]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18496]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64904; File No. SR-NYSE-2011-34]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 17 To Make Changes Necessary To Allow Its Routing
Broker To Operate Consistent With the Requirements of Rule 15c3-5 Under
the Securities Exchange Act of 1934
July 18, 2011.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that July 13, 2011, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 amend NYSE Rule 17 to make changes
necessary to allow its Routing Broker to operate consistent with the
requirements of Rule 15c3-5 under the Securities Exchange Act of 1934
(``Act'').\4\ The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and https://www.nyse.com.
---------------------------------------------------------------------------
\4\ 17 CFR 240.15c3-5.
---------------------------------------------------------------------------
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 IV 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend NYSE Rule 17 to permit its Routing
Broker to operate consistent with the requirements of SEC Rule 15c3-
5.\5\ Specifically, the proposed rule change would allow the Routing
Broker, in its sole discretion, to reject orders pursuant to risk
management controls and supervisory procedures maintained by the
Routing Broker pursuant to SEC Rule 15c3-5. The Exchange's affiliates,
NYSE Amex LLC (``NYSE Amex'') and NYSE Arca, Inc. (``NYSE Arca''), are
proposing substantially similar rule changes.\6\
---------------------------------------------------------------------------
\5\ NYSE Rule 13 defines ``Routing Broker'' as ``the broker-
dealer affiliate of the Exchange and/or any other non-affiliate
third-party broker-dealer that acts as a facility of the Exchange
for routing orders entered into Exchange systems to other market
centers for execution whenever such routing is required by Exchange
Rules and federal securities laws. The Routing Brokers will operate
as described in Exchange Rule 17.''
\6\ See SR-NYSEAmex-2011-52 (equities), SR-NYSEAmex-2011-53
(options), SR-NYSEArca-2011-49 (equities), and SR-NYSEArca-2011-50
(options).
---------------------------------------------------------------------------
Archipelago Securities LLC (``Arca Securities'') currently is the
primary outbound Routing Broker for the Exchange. The outbound routing
function for the Exchange is governed by NYSE Rules 13 and 17. NYSE
Rule 17(c)(1) currently provides that the Routing Broker cannot change
the terms of an order or the routing instructions, nor can it exercise
any discretion about where to route an order.
On November 3, 2010, the Commission adopted SEC Rule 15c3-5,\7\
pursuant to which, among other things, broker-dealers providing market
access are required to implement certain pre-order entry checks in
order to manage the financial, regulatory, and other risks associated
with providing their customers with market access. In anticipation of
the upcoming July 14, 2011 compliance date for SEC Rule 15c3-5, the
Exchange is proposing to amend NYSE Rule 17 to describe the manner in
which the Routing Broker will handle routable orders consistent with
SEC Rule 15c3-5.\8\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 63241 (November 3,
2010), 75 FR 69792 (November 15, 2010) (File No. S7-03-10).
\8\ The Commission extended the compliance date to November 30,
2011 for all of the requirements for fixed income securities and the
requirements of SEC Rule 15c3-5(c)(1)(i) for all securities. See
Securities Exchange Act Release No. 64748 (June 27, 2011), 76 FR
38293 (June 30, 2011) (File No. S7-03-10).
---------------------------------------------------------------------------
Specifically, the Exchange proposes to adopt NYSE Rule
17(c)(1)(A)(ii) to provide that, in the Routing Broker's sole
discretion, pursuant to risk management controls and supervisory
procedures maintained by the Routing Broker pursuant to SEC Rule 15c3-
5, the Routing Broker may reject any order or series of orders as
necessary to manage the financial, regulatory, and other risks of the
Routing Brokers(s) providing ``market access,'' as that term is defined
in SEC Rule 15c3-5(a)(1).\9\ The Routing Broker's policies and
procedures for compliance with SEC Rule 15c3-5 will address two
circumstances: (1) When the Routing Broker routes orders on behalf of
the Exchange for the purpose of accessing other trading centers with
protected quotations in compliance with Rule 611 of Regulation NMS
under the Act \10\ for ``NMS stocks'' (as that term is defined
[[Page 44074]]
in Rule 600 of Regulation NMS),\11\ or in compliance with a national
market system plan for listed options (``exempt orders''); and (2) when
the Routing Broker routes orders on behalf of the Exchange for any
other purpose, including pursuant to the terms of an order type adopted
by the Exchange or pursuant to a routing strategy through which the
Routing Broker routes orders to market centers that are not posting
``protected quotations'' (as that term is defined in Rule 600 of
Regulation NMS) \12\ (``non-exempt orders'').
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\9\ The existing text of NYSE Rule 17(c)(1)(A) would be
renumbered as NYSE Rule 17(c)(1)(A)(i).
\10\ 17 CFR 242.611.
\11\ 17 CFR 242.600(47).
\12\ 17 CFR 242.600(58).
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With respect to exempt orders, SEC Rule 15c3-5(b) provides that a
broker-dealer that routes orders on behalf of an exchange for the
purpose of accessing other trading centers with protected quotations in
compliance with Rule 611 of Regulation NMS for NMS stocks, or in
compliance with a national market system plan for listed options, is
subject only to the requirements of paragraph (c)(1)(ii) of the Rule.
SEC Rule 15c3-5(c)(1)(ii) provides that the risk management controls
and supervisory procedures required by the Rule must include elements
reasonably designed to prevent the entry of erroneous orders, by
rejecting orders that exceed appropriate price or size parameters, on
an order-by-order basis or over a short period of time, or that
indicate duplicative orders. Accordingly, for exempt orders, the
Routing Broker will reject any order or series of orders that it
determines, in its sole discretion, to be erroneous or duplicative.
Currently, the only orders that the Routing Broker routes on behalf of
the Exchange are exempt orders.
With respect to non-exempt orders, all of the requirements of SEC
Rule 15c3-5 would apply to orders that the Routing Broker routes on
behalf of the Exchange, and the proposed rule change is intended to
provide the Routing Broker with authority to reject such orders as
necessary to comply with SEC Rule 15c3-5, as may be necessary in the
future. In this regard, the risk management controls and supervisory
procedures of the Routing Broker would include, as applicable, controls
to prevent the entry of orders that exceed appropriate pre-set credit
or capital thresholds in the aggregate for each customer and the
broker-dealer and, where appropriate, more finely-tuned by sector,
security, or otherwise by rejecting orders if such orders would exceed
the applicable credit or capital thresholds.\13\ In addition, the risk
management controls and supervisory procedures of the Routing Broker
would be reasonably designed to ensure compliance with applicable
regulatory requirements.\14\
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\13\ See 17 CFR 240.15c3-5(c)(1)(i).
\14\ See 17 CFR 240.15c3-5(c)(2).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\15\ In particular,
the proposed change is consistent with Section 6(b)(5) of the Act,\16\
because it would promote just and equitable principles of trade, and,
in general, protect investors and the public interest. The proposed
rule is consistent with the requirements of the Act because the change
is necessary for the Exchange's Routing Broker to comply with SEC Rule
15c3-5. The Exchange also believes that the proposed changes will
benefit member organizations of the Exchange because it provides
clarity on the procedures employed by the Routing Broker consistent
with SEC Rule 15c3-5.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\19\
However, Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has asked the
Commission to waive the 30-day operative delay so that the proposal may
become operative immediately upon filing. The Exchange notes that
waiving the 30-day operative delay will allow Arca Securities to comply
with Rule 15c3-5 under the Act by July 14, 2011; \21\ the compliance
date for Rule 15c3-5. For this reason, the Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest, and designates the proposed rule
change to be operative upon filing with the Commission.\22\
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\19\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the date of filing
of the proposed rule change, or such shorter time as designated by
the Commission. The Exchange has satisfied this requirement.
\20\ Id.
\21\ 17 CFR 240.15c3-5.
\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. 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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2011-34 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
[[Page 44075]]
All submissions should refer to File Number SR-NYSE-2011-34. 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 (https://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 Web site viewing and
printing in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549-1090. Copies of the filing will also be
available for inspection and copying at the NYSE's principal office and
on its Internet Web site at https://www.nyse.com. 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-NYSE-2011-34 and should be submitted on
or before August 12, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18496 Filed 7-21-11; 8:45 am]
BILLING CODE 8011-01-P
