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]

Download as PDF 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 (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 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 http:// 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 http://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 (http://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 (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 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 http://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 http://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]


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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 http://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'').
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \13\ See 17 CFR 240.15c3-5(c)(1)(i).
    \14\ See 17 CFR 240.15c3-5(c)(2).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 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. 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\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 (http://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 (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 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 http://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