Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Options Rule 6.96 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, 44071-44073 [2011-18498]
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Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices
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
Amex’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–
NYSEAmex–2011–53 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. 2011–18501 Filed 7–21–11; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–64905; File No. SR–
NYSEArca–2011–50]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending NYSE Arca
Options Rule 6.96 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,
NYSE Arca, Inc. (‘‘NYSE Arca’’ 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
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
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Options Rule 6.96 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.
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
SECURITIES AND EXCHANGE
COMMISSION
23 17
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange proposes to amend
NYSE Arca Options Rule 6.96 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 is proposing
substantially similar rule changes for its
equities market, and the Exchange’s
affiliates, New York Stock Exchange
LLC (‘‘NYSE’’) and NYSE Amex LLC
(‘‘NYSE Amex’’), also are proposing
substantially similar rule changes.6
Archipelago Securities LLC (‘‘Arca
Securities’’) currently is the primary
CFR 240.15c3–5.
Arca Options Rule 6.1A(a)(15) defines
‘‘Routing Broker’’ as ‘‘the broker-dealer affiliate of
NYSE Arca, Inc. and/or any other non-affiliate that
acts as a facility of NYSE Arca, Inc. for routing
orders entered into OX of OTP Holders, OTP Firms
and OTP Firms’ Sponsored Participants to other
Market Centers for execution whenever such
routing is required by NYSE Arca Rules.’’
6 See SR–NYSEArca–2011–49, SR–NYSE–2011–
34, SR–NYSEAmex–2011–52 (equities), and SR–
NYSEAmex–2011–53 (options).
PO 00000
4 17
5 NYSE
Frm 00091
Fmt 4703
Sfmt 4703
44071
outbound Routing Broker for the
Exchange. The outbound routing
function for the Exchange is governed
by NYSE Arca Options Rule 6.96. NYSE
Arca Options Rule 6.96(a)(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 Arca Options Rule 6.96 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 Arca Options Rule
6.96(a)(1)(B) 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 Broker(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 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
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 Arca Options Rule
6.96(a)(1) would be renumbered as NYSE Arca
Options Rule 6.96(a)(1)(A).
10 17 CFR 242.611.
11 17 CFR 242.600(47).
E:\FR\FM\22JYN1.SGM
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mstockstill on DSK4VPTVN1PROD with NOTICES
44072
Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices
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 (‘‘nonexempt 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
12 17
CFR 242.600(58).
17 CFR 240.15c3–5(c)(1)(i).
14 See 17 CFR 240.15c3–5(c)(2).
13 See
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17:59 Jul 21, 2011
Jkt 223001
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 ETP
Holders 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
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
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–
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
17 15 U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(6).
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
PO 00000
15 15
16 15
Frm 00092
Fmt 4703
Sfmt 4703
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.
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 rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2011–50 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.
All submissions should refer to File
Number SR–NYSEArca–2011–50. 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
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
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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
]]>Agencies
[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]
[Notices]
[Pages 44071-44073]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18498]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64905; File No. SR-NYSEArca-2011-50]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Options Rule 6.96 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, NYSE Arca, Inc. (``NYSE Arca'' 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 Arca Options Rule 6.96 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 Arca Options Rule 6.96 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 is proposing substantially similar rule changes for its
equities market, and the Exchange's affiliates, New York Stock Exchange
LLC (``NYSE'') and NYSE Amex LLC (``NYSE Amex''), also are proposing
substantially similar rule changes.\6\
---------------------------------------------------------------------------
\5\ NYSE Arca Options Rule 6.1A(a)(15) defines ``Routing
Broker'' as ``the broker-dealer affiliate of NYSE Arca, Inc. and/or
any other non-affiliate that acts as a facility of NYSE Arca, Inc.
for routing orders entered into OX of OTP Holders, OTP Firms and OTP
Firms' Sponsored Participants to other Market Centers for execution
whenever such routing is required by NYSE Arca Rules.''
\6\ See SR-NYSEArca-2011-49, SR-NYSE-2011-34, SR-NYSEAmex-2011-
52 (equities), and SR-NYSEAmex-2011-53 (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 Arca Options Rule 6.96.
NYSE Arca Options Rule 6.96(a)(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 Arca Options Rule 6.96 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).
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Specifically, the Exchange proposes to adopt NYSE Arca Options Rule
6.96(a)(1)(B) 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
Broker(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 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
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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 Arca Options Rule 6.96(a)(1) would
be renumbered as NYSE Arca Options Rule 6.96(a)(1)(A).
\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 ETP Holders 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-NYSEArca-2011-50 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.
All submissions should refer to File Number SR-NYSEArca-2011-50. 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
[[Page 44073]]
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.
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. 2011-18498 Filed 7-21-11; 8:45 am]
BILLING CODE 8011-01-P
