Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.45 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, 44059-44061 [2011-18499]

Download as PDF Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. eastern time. Copies of such filings will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NSX– 2011–07 and should be submitted by August 12, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–18502 Filed 7–21–11; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64906; File No. SR– NYSEArca–2011–49] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.45 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 7.45 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 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 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 BILLING CODE 8011–01–P 12 17 (‘‘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. 1. Purpose The Exchange proposes to amend NYSE Arca Equities Rule 7.45 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 options 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 outbound Routing Broker for the Exchange. The outbound routing function for the Exchange is governed by NYSE Arca Equities Rule 7.45. NYSE Arca Equities Rule 7.45(b)(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. CFR 240.15c3–5. 5 NYSE Arca Equities Rule 7.45(a) defines ‘‘Routing Broker’’ as ‘‘the broker-dealer affiliate of NYSE Arca, LLC and/or any other non-affiliate third-party broker-dealer that acts as a facility of NYSE Arca, LLC for routing orders entered into Exchange systems to other market centers for execution whenever such routing is required by the Rules of the Corporation and federal securities laws. The Routing Brokers will operate as described in this Rule 7.45.’’ 6 See SR–NYSEArca–2011–50 (options), SR– NYSE–2011–34, SR–NYSEAmex–2011–52 (equities), and SR–NYSEAmex–2011–53 (options). PO 00000 4 17 Frm 00079 Fmt 4703 Sfmt 4703 44059 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 Equities Rule 7.45 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 Equities Rule 7.45(b)(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 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 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 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 Equities Rule 7.45(b)(1) would be renumbered as NYSE Arca Equities Rule 7.45(b)(1)(A). 10 17 CFR 242.611. 11 17 CFR 242.600(47). E:\FR\FM\22JYN1.SGM 22JYN1 44060 Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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. 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. 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) 12 17 CFR 242.600(58). 17 CFR 240.15c3–5(c)(1)(i). 14 See 17 CFR 240.15c3–5(c)(2). 15 15 U.S.C. 78f(b). 13 See VerDate Mar<15>2010 17:59 Jul 21, 2011 Jkt 223001 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– 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 U.S.C. 78f(b)(5). 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 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. PO 00000 16 15 17 15 Frm 00080 Fmt 4703 Sfmt 4703 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2011–49 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–2011–49. 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 21 17 CFR 240.15c3–5. 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). 22 For E:\FR\FM\22JYN1.SGM 22JYN1 Federal Register / Vol. 76, No. 141 / Friday, July 22, 2011 / Notices 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–2011–49 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. 2011–18499 Filed 7–21–11; 8:45 am] BILLING CODE 8011–01–P transaction fee caps. The text of the proposed rule change is available at the Exchange, at http://www.nyse.com, at the Commission’s Public Reference Room, and at the Commission’s Web site at http://www.sec.gov. 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 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64902; File No. SR– NYSEAmex–2011–49] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Implementing Proposal To Amend the Fee Schedule by Adding Definitions for the Strategy Executions That Qualify for Transaction Fee Caps July 18, 2011. mstockstill on DSK4VPTVN1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on July 5, 2011, NYSE Amex LLC (the ‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III 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 to amend its Fee Schedule by adding definitions for the Strategy Executions that qualify for 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 17:59 Jul 21, 2011 Jkt 223001 NYSE Amex proposes to amend its Fee Schedule by adding definitions for the Strategy Executions that qualify for transaction fee caps. The Exchange does not propose to change any fees in the Fee Schedule. In 2004, the Exchange amended its Fee Schedule to cap transaction fees for Strategy Executions involving reversals and conversions, dividend spreads, and box spreads.3 The Exchange subsequently expanded the Strategy Executions eligible for the transaction fee cap to include short stock interest spreads, merger spreads and jelly rolls.4 In its previous rule filings, the Exchange described the requirements that Strategy Executions must meet to qualify for the transaction fee cap; however these Strategy Executions were not defined in the Fee Schedule. The Exchange is now proposing to define the Strategy Executions in order to provide additional clarity and transparency in the Fee Schedule.5 3 See Exchange Act Release No. 49358 (March 3, 2004), 69 FR 11469 (March 10, 2004) (SR–Amex– 2004–09) (the ‘‘2004 Release’’). 4 See Exchange Act Release No. 52297 (August 18, 2005), 70 FR 49687 (August 24, 2005) (SR–Amex– 2005–080) (the ‘‘2005 Release’’) and Exchange Act Release No. 60077 (June 9, 2009), 74 FR 28737 (June 17, 2009) (SR–NYSEAmex–2009–22) (the ‘‘2009 Release’’). 5 The Commission notes that the definitions proposed by the Exchange in the instant filing slightly differ from the definitions set forth in the 2003 Release, the 2005 Release, and the 2009 Release. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 44061 The Exchange proposes to define each of the six Strategy Executions that qualify for the cap in new endnote 9: 6 • A ‘‘reversal’’ is established by combining a short security position with a short put and a long call position that shares the same strike and expiration. A ‘‘conversion’’ is established by combining a long position in the underlying security with a long put and a short call position that shares the same strike and expiration. • A ‘‘dividend spread’’ is defined as transactions done to achieve a dividend arbitrage involving the purchase, sale and exercise of in-the-money options of the same class, executed prior to the date on which the underlying stock goes ex-dividend. • A ‘‘box spread’’ is defined as transactions involving a long call option and a short put option at one strike, combined with a short call option and long put at a different strike, to create synthetic long and synthetic short stock positions, respectively. • A ‘‘short stock interest spread’’ is defined as transactions done to achieve a short stock interest arbitrage involving the purchase, sale and exercise of inthe-money options of the same class. • A ‘‘merger spread’’ is defined as transactions done to achieve a merger arbitrage involving the purchase, sale and exercise of options of the same class and expiration date, each executed prior to the date on which shareholders of record are required to elect their respective form of consideration, i.e., cash or stock. • A ‘‘jelly roll’’ is created by entering into two separate positions simultaneously. One position involves buying a put and selling a call with the same strike price and expiration. The second position involves selling a put and buying a call, with the same strike price, but with a different expiration from the first position. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Securities Exchange Act of 1934 (the ‘‘Act’’),7 in general, and Section 6(b)(5) of the Act,8 in particular, in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in 6 The Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) already has these strategies, with the exception of the box spread, defined in its fee schedule. See (http://www.cboe.com/publish/ feeschedule/CBOEFeeSchedule.pdf). 7 15 U.S.C. 78f. 8 15 U.S.C. 78f(b)(5). E:\FR\FM\22JYN1.SGM 22JYN1

Agencies

[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]
[Notices]
[Pages 44059-44061]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18499]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64906; File No. SR-NYSEArca-2011-49]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.45 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 Equities Rule 7.45 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 Arca Equities Rule 7.45 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 
options 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 Equities Rule 7.45(a) defines ``Routing Broker'' 
as ``the broker-dealer affiliate of NYSE Arca, LLC and/or any other 
non-affiliate third-party broker-dealer that acts as a facility of 
NYSE Arca, LLC for routing orders entered into Exchange systems to 
other market centers for execution whenever such routing is required 
by the Rules of the Corporation and federal securities laws. The 
Routing Brokers will operate as described in this Rule 7.45.''
    \6\ See SR-NYSEArca-2011-50 (options), 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 Equities Rule 7.45. 
NYSE Arca Equities Rule 7.45(b)(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 Equities Rule 7.45 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 Arca Equities 
Rule 7.45(b)(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 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 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

[[Page 44060]]

Rule 600 of Regulation NMS) \12\ (``non-exempt orders'').
---------------------------------------------------------------------------

    \9\ The existing text of NYSE Arca Equities Rule 7.45(b)(1) 
would be renumbered as NYSE Arca Equities Rule 7.45(b)(1)(A).
    \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.
    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. 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 ETP Holders 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\
---------------------------------------------------------------------------

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

    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-NYSEArca-2011-49 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-2011-49. 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

[[Page 44061]]

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-2011-49 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\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18499 Filed 7-21-11; 8:45 am]
BILLING CODE 8011-01-P