Self-Regulatory Organizations; NYSE Arca, Inc; Order Approving a Proposed Rule Change Amending NYSE Arca Equities Rule 7.45(c)(2) To Make Permanent the Pilot Program That Permits the Exchange To Accept Inbound Orders Routed by Archipelago Securities LLC in Its Capacity as a Facility of Affiliated Exchanges and To Clarify the Text of NYSE Arca Equities Rule 7.45(c)(1)(B) to More Accurately Reflect the Regulatory Services Agreement Between the Exchange and the Financial Industry Regulatory Authority, 62119-62120 [2011-25827]
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<![CDATA[
Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Arca Securities from receiving any
benefit, taking any action or engaging in
any activity based on non-public
information regarding planned changes
to Exchange systems, obtained as a
result of its affiliation with the
Exchange, until such information is
available generally to similarly situated
OTP Holders of the Exchange in
connection with the provision of
inbound order routing to the Exchange;
and
• Fourth, the Exchange may furnish
to Arca Securities the same information
on the same terms that the Exchange
makes available in the normal course of
business to any other OTP Holder.14
The Exchange believes that by meeting
the above-listed conditions it has set up
mechanisms that protect the
independence of the Exchange’s
regulatory responsibility with respect to
Arca Securities, and has demonstrated
that Arca Securities cannot use any
information it may have because of its
affiliation with the Exchange to its
advantage.15
In the past, the Commission has
expressed concern that the affiliation of
an exchange with one of its members
raises potential conflicts of interest, and
the potential for unfair competitive
advantage.16 Although the Commission
continues to be concerned about
potential unfair competition and
conflicts of interest between an
exchange’s self-regulatory obligations
and its commercial interest when the
exchange is affiliated with one of its
members, for the reasons discussed
below, the Commission believes that it
is consistent with the Act to permit Arca
Securities to provide inbound routing to
the Exchange on a permanent basis
instead of a pilot basis, subject to the
other conditions described above.
The Exchange has proposed four
ongoing conditions applicable to Arca
Securities’s routing activities, which are
14 See NYSE Arca Options Rule 6.96(b). See also
Notice, 76 FR at 53515.
15 See Notice, 76 FR at 53515.
16 See, e.g., Securities Exchange Act Release Nos.
54170 (July 18, 2006), 71 FR 42149 (July 25, 2006)
(SR–NASDAQ–2006–006) (order approving
Nasdaq’s proposal to adopt Nasdaq Rule 2140,
restricting affiliations between Nasdaq and its
members); 53382 (February 27, 2006), 71 FR 11251
(March 6, 2006) (SR–NYSE–2005–77) (order
approving the combination of the New York Stock
Exchange, Inc. and Archipelago Holdings, Inc.);
58673 (September 29, 2008), 73 FR 57707 (October
8, 2008) (SR–Amex–2008–62) (order approving the
combination of NYSE Euronext and the American
Stock Exchange LLC); 59135 (December 22, 2008),
73 FR 79954 (December 30, 2008) (SR–ISE–2009–
85) (order approving the purchase by ISE Holdings
of an ownership interest in DirectEdge Holdings
LLC); and 59281 (January 22, 2009), 74 FR 5014
(January 28, 2009) (SR–NYSE–2008–120) (order
approving a joint venture between NYSE and BIDS
Holdings L.P.).
VerDate Mar<15>2010
16:07 Oct 05, 2011
Jkt 226001
enumerated above. The Commission
believes that these conditions mitigate
its concerns about potential conflicts of
interest and unfair competitive
advantage. In particular, the
Commission believes that FINRA’s
oversight of Arca Securities,17 combined
with FINRA’s monitoring of Arca
Securities’s compliance with the
Exchange’s rules and quarterly reporting
to NYSE Arca’s CRO, will help to
protect the independence of the
Exchange’s regulatory responsibilities
with respect to Arca Securities.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–NYSEArca–
2011–62) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–25828 Filed 10–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65455; File No. SR–
NYSEArca–2011–61]
Self-Regulatory Organizations; NYSE
Arca, Inc; Order Approving a Proposed
Rule Change Amending NYSE Arca
Equities Rule 7.45(c)(2) To Make
Permanent the Pilot Program That
Permits the Exchange To Accept
Inbound Orders Routed by
Archipelago Securities LLC in Its
Capacity as a Facility of Affiliated
Exchanges and To Clarify the Text of
NYSE Arca Equities Rule 7.45(c)(1)(B)
to More Accurately Reflect the
Regulatory Services Agreement
Between the Exchange and the
Financial Industry Regulatory
Authority
September 30, 2011.
I. Introduction
On August 18, 2011, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to make permanent the existing
17 This oversight will be accomplished through
the Regulatory Contract between the Exchange and
FINRA and a 17d–2 Agreement.
18 15 U.S.C. 78s(b)(2).
19 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
62119
pilot program that permits the Exchange
to accept inbound orders routed by
Archipelago Securities LLC (‘‘Arca
Securities’’) in its capacity as a facility
of an affiliated exchange (with the
attendant obligations and conditions),
and to clarify the text of NYSE Arca
Equities Rule 7.45(c)(1)(B) to more
accurately reflect the regulatory services
agreement (‘‘RSA’’) between the
Exchange and the Financial Industry
Regulatory Authority (‘‘FINRA’’). The
proposed rule change was published for
comment in the Federal Register on
August 26, 2011.3 The Commission
received no comment letters regarding
the proposed rule change. This order
approves the proposed rule change.
II. Background
Arca Securities is a broker-dealer that
is an NYSE Arca equity trading permit
holder (‘‘ETP Holder’’),4 and, among
other things, is permitted to provide to
members of NYSE and NYSE Amex
optional routing services to other market
centers.5 On June 16, 2011, the
Exchange filed an immediately effective
proposed rule change to, among other
things, permit the Exchange to receive
inbound routes of equity orders that
Arca Securities routes in its capacity as
a facility of NYSE and NYSE Amex on
a pilot basis ending September 30,
2011.6 The Exchange now seeks
permanent approval of this inbound
routing pilot.7
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.8 Specifically, the
3 See Securities Exchange Act Release No. 65185
(August 22, 2011), 76 FR 53509 (‘‘Notice’’).
4 ‘‘ETP Holder’’ is defined in NYSE Arca Equities
Rule 1.1(n). Arca Securities is owned indirectly by
NYSE Euronext (‘‘NYSE Euronext’’), which also
indirectly owns three registered securities
exchanges—NYSE Amex LLC (‘‘NYSE Amex’’), the
Exchange, and New York Stock Exchange LLC
(‘‘NYSE’’). Thus, Arca Securities is an affiliate of
each of these exchanges.
5 Arca Securities operates as a facility of NYSE
and NYSE Amex that provides outbound routing
from NYSE and NYSE Amex to other market
centers, subject to certain conditions. See Securities
Exchange Act Release Nos. 58705 (October 1, 2008)
73 FR 58995 (October 8, 2008) (SR–Amex–2008–
63); and 55590 (April 5, 2007) 72 FR 18707 (April
13, 2007) (SR–NYSE–2007–29).
6 See Securities Exchange Act Release No. 64730
(June 23, 2011), 76 FR 38235 (June 29, 2011) (SR–
NYSEArca–2011–38) (‘‘Routing Pilot Release’’). See
also Notice, 76 FR at 53510, n.5 and accompanying
text.
7 See Notice.
8 In approving this proposed rule change, the
Commission has considered the proposed rule’s
E:\FR\FM\06OCN1.SGM
Continued
06OCN1
mstockstill on DSK4VPTVN1PROD with NOTICES
62120
Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
Commission finds that the proposed
rule change is consistent with Section
6(b)(1) of the Act,9 which requires,
among other things, that a national
securities exchange be so organized and
have the capacity to carry out the
purposes of the Act, and to comply and
enforce compliance by its members and
persons associated with its members,
with the provisions of the Act, the rules
and regulation thereunder, and the rules
of the Exchange. Further, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,10 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices; to
promote just and equitable principles of
trade; to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, and
processing information with respect to,
and facilitating transactions in
securities; to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system; and, in general, to protect
investors and the public interest.
Section 6(b)(5) also requires that the
rules of an exchange not be designed to
permit unfair discrimination among
customers, issuers, brokers, or dealers.
Recognizing that the Commission has
expressed concern regarding the
potential for conflicts of interest in
instances where a member firm is
affiliated with an exchange to which it
is routing orders, the Exchange
previously implemented limitations and
conditions to Arca Securities’s
affiliation with the Exchange to permit
the Exchange to accept orders routed
inbound to NYSE Arca by Arca
Securities from its affiliates, NYSE and
NYSE Amex, on a pilot basis.11 The
Exchange now seeks to make this pilot
permanent, and to more accurately
reflect in its rule text its RSA with
FINRA. Specifically, the Exchange states
it is in compliance with the following
obligations and conditions:12
• First, the Exchange will maintain an
agreement pursuant to Rule 17d–2
under the Exchange Act with FINRA to
relieve the Exchange of regulatory
responsibilities for Arca Securities with
respect to rules that are common rules
between the Exchange and FINRA, and
maintain an RSA with FINRA to
perform regulatory responsibilities for
impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
9 15 U.S.C. 78f(b)(1).
10 15 U.S.C. 78f(b)(5).
11 See Routing Pilot Release. See also supra note
6 and accompanying text.
12 See Notice, 76 FR at 53510.
VerDate Mar<15>2010
16:07 Oct 05, 2011
Jkt 226001
Arca Securities for unique Exchange
rules.
• Second, the RSA will require the
Exchange to provide FINRA with
information, in an easily accessible
manner, regarding all exception reports,
alerts, complaints, trading errors,
cancellations, investigations, and
enforcement matters (collectively
‘‘Exceptions’’) in which Arca Securities
is identified as a participant that has
potentially violated Exchange or
Commission Rules and of which the
Exchange becomes aware, and shall
require that FINRA provide a report, at
least quarterly, to the Exchange
quantifying all Exceptions in which
Arca Securities is identified as a
participant that has potentially violated
Exchange or Commission Rules; 13
• Third, the Exchange, on behalf of its
parent, NYSE Euronext, will establish
and maintain procedures and internal
controls reasonably designed to prevent
Arca Securities from receiving any
benefit, taking any action or engaging in
any activity based on non-public
information regarding planned changes
to Exchange systems, obtained as a
result of its affiliation with the
Exchange, until such information is
available generally to similarly situated
ETP Holders of the Exchange in
connection with the provision of
inbound order routing to the Exchange;
and
• Fourth, the Exchange may furnish
to Arca Securities the same information
on the same terms that the Exchange
makes available in the normal course of
business to any other ETP Holder.14
The Exchange believes that by meeting
the above-listed conditions it has set up
mechanisms that protect the
independence of the Exchange’s
regulatory responsibility with respect to
Arca Securities, and has demonstrated
that Arca Securities cannot use any
information it may have because of its
affiliation with the Exchange to its
advantage.15
In the past, the Commission has
expressed concern that the affiliation of
an exchange with one of its members
raises potential conflicts of interest, and
the potential for unfair competitive
13 See Notice, 76 FR at 53510, n.8 and
accompanying text. The Exchange proposed to
modify this provision, as set forth in NYSE Arca
Equities Rule 7.45(c)(1)(B) to more accurately reflect
its RSA with FINRA and specify that the quarterly
report of Exceptions shall be provided to the
Exchange’s Chief Regulatory Officer (‘‘CRO’’). The
Exchange states that upon approval of this change,
it will continue to comply with the obligations and
conditions as set forth in NYSE Arca Equities Rule
7.45(c). See Notice, 76 FR at 53510.
14 See NYSE Arca Equities Rule 7.45(c). See also
Notice, 76 FR at 53510.
15 See Notice, 76 FR at 53510.
PO 00000
Frm 00086
Fmt 4703
Sfmt 9990
advantage.16 Although the Commission
continues to be concerned about
potential unfair competition and
conflicts of interest between an
exchange’s self-regulatory obligations
and its commercial interest when the
exchange is affiliated with one of its
members, for the reasons discussed
below, the Commission believes that it
is consistent with the Act to permit Arca
Securities to provide inbound routing to
the Exchange on a permanent basis
instead of a pilot basis, subject to the
other conditions described above.
The Exchange has proposed four
ongoing conditions applicable to Arca
Securities’s routing activities, which are
enumerated above. The Commission
believes that these conditions mitigate
its concerns about potential conflicts of
interest and unfair competitive
advantage. In particular, the
Commission believes that FINRA’s
oversight of Arca Securities,17 combined
with FINRA’s monitoring of Arca
Securities’s compliance with the
Exchange’s rules and quarterly reporting
to NYSE Arca’s CRO, will help to
protect the independence of the
Exchange’s regulatory responsibilities
with respect to Arca Securities.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–NYSEArca–
2011–61) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Elizabeth M. Murphy.
Secretary.
[FR Doc. 2011–25827 Filed 10–5–11; 8:45 am]
BILLING CODE 8011–01–P
16 See, e.g., Securities Exchange Act Release Nos.
54170 (July 18, 2006), 71 FR 42149 (July 25, 2006)
(SR–NASDAQ–2006–006) (order approving
Nasdaq’s proposal to adopt Nasdaq Rule 2140,
restricting affiliations between Nasdaq and its
members); 53382 (February 27, 2006), 71 FR 11251
(March 6, 2006) (SR–NYSE–2005–77) (order
approving the combination of the New York Stock
Exchange, Inc. and Archipelago Holdings, Inc.);
58673 (September 29, 2008), 73 FR 57707 (October
8, 2008) (SR–Amex–2008–62) (order approving the
combination of NYSE Euronext and the American
Stock Exchange LLC); 59135 (December 22, 2008),
73 FR 79954 (December 30, 2008) (SR–ISE–2009–
85) (order approving the purchase by ISE Holdings
of an ownership interest in DirectEdge Holdings
LLC); and 59281 (January 22, 2009), 74 FR 5014
(January 28, 2009) (SR–NYSE–2008–120) (order
approving a joint venture between NYSE and BIDS
Holdings L.P.).
17 This oversight will be accomplished through
the Regulatory Contract between the Exchange and
FINRA and a 17d–2 Agreement.
18 15 U.S.C. 78s(b)(2).
19 17 CFR 200.30–3(a)(12).
E:\FR\FM\06OCN1.SGM
06OCN1
]]>Agencies
[Federal Register Volume 76, Number 194 (Thursday, October 6, 2011)]
[Notices]
[Pages 62119-62120]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25827]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65455; File No. SR-NYSEArca-2011-61]
Self-Regulatory Organizations; NYSE Arca, Inc; Order Approving a
Proposed Rule Change Amending NYSE Arca Equities Rule 7.45(c)(2) To
Make Permanent the Pilot Program That Permits the Exchange To Accept
Inbound Orders Routed by Archipelago Securities LLC in Its Capacity as
a Facility of Affiliated Exchanges and To Clarify the Text of NYSE Arca
Equities Rule 7.45(c)(1)(B) to More Accurately Reflect the Regulatory
Services Agreement Between the Exchange and the Financial Industry
Regulatory Authority
September 30, 2011.
I. Introduction
On August 18, 2011, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
make permanent the existing pilot program that permits the Exchange to
accept inbound orders routed by Archipelago Securities LLC (``Arca
Securities'') in its capacity as a facility of an affiliated exchange
(with the attendant obligations and conditions), and to clarify the
text of NYSE Arca Equities Rule 7.45(c)(1)(B) to more accurately
reflect the regulatory services agreement (``RSA'') between the
Exchange and the Financial Industry Regulatory Authority (``FINRA'').
The proposed rule change was published for comment in the Federal
Register on August 26, 2011.\3\ The Commission received no comment
letters regarding the proposed rule change. This order approves the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 65185 (August 22,
2011), 76 FR 53509 (``Notice'').
---------------------------------------------------------------------------
II. Background
Arca Securities is a broker-dealer that is an NYSE Arca equity
trading permit holder (``ETP Holder''),\4\ and, among other things, is
permitted to provide to members of NYSE and NYSE Amex optional routing
services to other market centers.\5\ On June 16, 2011, the Exchange
filed an immediately effective proposed rule change to, among other
things, permit the Exchange to receive inbound routes of equity orders
that Arca Securities routes in its capacity as a facility of NYSE and
NYSE Amex on a pilot basis ending September 30, 2011.\6\ The Exchange
now seeks permanent approval of this inbound routing pilot.\7\
---------------------------------------------------------------------------
\4\ ``ETP Holder'' is defined in NYSE Arca Equities Rule 1.1(n).
Arca Securities is owned indirectly by NYSE Euronext (``NYSE
Euronext''), which also indirectly owns three registered securities
exchanges--NYSE Amex LLC (``NYSE Amex''), the Exchange, and New York
Stock Exchange LLC (``NYSE''). Thus, Arca Securities is an affiliate
of each of these exchanges.
\5\ Arca Securities operates as a facility of NYSE and NYSE Amex
that provides outbound routing from NYSE and NYSE Amex to other
market centers, subject to certain conditions. See Securities
Exchange Act Release Nos. 58705 (October 1, 2008) 73 FR 58995
(October 8, 2008) (SR-Amex-2008-63); and 55590 (April 5, 2007) 72 FR
18707 (April 13, 2007) (SR-NYSE-2007-29).
\6\ See Securities Exchange Act Release No. 64730 (June 23,
2011), 76 FR 38235 (June 29, 2011) (SR-NYSEArca-2011-38) (``Routing
Pilot Release''). See also Notice, 76 FR at 53510, n.5 and
accompanying text.
\7\ See Notice.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\8\
Specifically, the
[[Page 62120]]
Commission finds that the proposed rule change is consistent with
Section 6(b)(1) of the Act,\9\ which requires, among other things, that
a national securities exchange be so organized and have the capacity to
carry out the purposes of the Act, and to comply and enforce compliance
by its members and persons associated with its members, with the
provisions of the Act, the rules and regulation thereunder, and the
rules of the Exchange. Further, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\10\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices; to promote just and equitable principles of trade; to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, and processing information with respect to, and
facilitating transactions in securities; to remove impediments to and
perfect the mechanism of a free and open market and a national market
system; and, in general, to protect investors and the public interest.
Section 6(b)(5) also requires that the rules of an exchange not be
designed to permit unfair discrimination among customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\8\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(1).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Recognizing that the Commission has expressed concern regarding the
potential for conflicts of interest in instances where a member firm is
affiliated with an exchange to which it is routing orders, the Exchange
previously implemented limitations and conditions to Arca Securities's
affiliation with the Exchange to permit the Exchange to accept orders
routed inbound to NYSE Arca by Arca Securities from its affiliates,
NYSE and NYSE Amex, on a pilot basis.\11\ The Exchange now seeks to
make this pilot permanent, and to more accurately reflect in its rule
text its RSA with FINRA. Specifically, the Exchange states it is in
compliance with the following obligations and conditions:\12\
---------------------------------------------------------------------------
\11\ See Routing Pilot Release. See also supra note 6 and
accompanying text.
\12\ See Notice, 76 FR at 53510.
---------------------------------------------------------------------------
First, the Exchange will maintain an agreement pursuant to
Rule 17d-2 under the Exchange Act with FINRA to relieve the Exchange of
regulatory responsibilities for Arca Securities with respect to rules
that are common rules between the Exchange and FINRA, and maintain an
RSA with FINRA to perform regulatory responsibilities for Arca
Securities for unique Exchange rules.
Second, the RSA will require the Exchange to provide FINRA
with information, in an easily accessible manner, regarding all
exception reports, alerts, complaints, trading errors, cancellations,
investigations, and enforcement matters (collectively ``Exceptions'')
in which Arca Securities is identified as a participant that has
potentially violated Exchange or Commission Rules and of which the
Exchange becomes aware, and shall require that FINRA provide a report,
at least quarterly, to the Exchange quantifying all Exceptions in which
Arca Securities is identified as a participant that has potentially
violated Exchange or Commission Rules; \13\
---------------------------------------------------------------------------
\13\ See Notice, 76 FR at 53510, n.8 and accompanying text. The
Exchange proposed to modify this provision, as set forth in NYSE
Arca Equities Rule 7.45(c)(1)(B) to more accurately reflect its RSA
with FINRA and specify that the quarterly report of Exceptions shall
be provided to the Exchange's Chief Regulatory Officer (``CRO'').
The Exchange states that upon approval of this change, it will
continue to comply with the obligations and conditions as set forth
in NYSE Arca Equities Rule 7.45(c). See Notice, 76 FR at 53510.
---------------------------------------------------------------------------
Third, the Exchange, on behalf of its parent, NYSE
Euronext, will establish and maintain procedures and internal controls
reasonably designed to prevent Arca Securities from receiving any
benefit, taking any action or engaging in any activity based on non-
public information regarding planned changes to Exchange systems,
obtained as a result of its affiliation with the Exchange, until such
information is available generally to similarly situated ETP Holders of
the Exchange in connection with the provision of inbound order routing
to the Exchange; and
Fourth, the Exchange may furnish to Arca Securities the
same information on the same terms that the Exchange makes available in
the normal course of business to any other ETP Holder.\14\
---------------------------------------------------------------------------
\14\ See NYSE Arca Equities Rule 7.45(c). See also Notice, 76 FR
at 53510.
The Exchange believes that by meeting the above-listed conditions it
has set up mechanisms that protect the independence of the Exchange's
regulatory responsibility with respect to Arca Securities, and has
demonstrated that Arca Securities cannot use any information it may
have because of its affiliation with the Exchange to its advantage.\15\
---------------------------------------------------------------------------
\15\ See Notice, 76 FR at 53510.
---------------------------------------------------------------------------
In the past, the Commission has expressed concern that the
affiliation of an exchange with one of its members raises potential
conflicts of interest, and the potential for unfair competitive
advantage.\16\ Although the Commission continues to be concerned about
potential unfair competition and conflicts of interest between an
exchange's self-regulatory obligations and its commercial interest when
the exchange is affiliated with one of its members, for the reasons
discussed below, the Commission believes that it is consistent with the
Act to permit Arca Securities to provide inbound routing to the
Exchange on a permanent basis instead of a pilot basis, subject to the
other conditions described above.
---------------------------------------------------------------------------
\16\ See, e.g., Securities Exchange Act Release Nos. 54170 (July
18, 2006), 71 FR 42149 (July 25, 2006) (SR-NASDAQ-2006-006) (order
approving Nasdaq's proposal to adopt Nasdaq Rule 2140, restricting
affiliations between Nasdaq and its members); 53382 (February 27,
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order
approving the combination of the New York Stock Exchange, Inc. and
Archipelago Holdings, Inc.); 58673 (September 29, 2008), 73 FR 57707
(October 8, 2008) (SR-Amex-2008-62) (order approving the combination
of NYSE Euronext and the American Stock Exchange LLC); 59135
(December 22, 2008), 73 FR 79954 (December 30, 2008) (SR-ISE-2009-
85) (order approving the purchase by ISE Holdings of an ownership
interest in DirectEdge Holdings LLC); and 59281 (January 22, 2009),
74 FR 5014 (January 28, 2009) (SR-NYSE-2008-120) (order approving a
joint venture between NYSE and BIDS Holdings L.P.).
---------------------------------------------------------------------------
The Exchange has proposed four ongoing conditions applicable to
Arca Securities's routing activities, which are enumerated above. The
Commission believes that these conditions mitigate its concerns about
potential conflicts of interest and unfair competitive advantage. In
particular, the Commission believes that FINRA's oversight of Arca
Securities,\17\ combined with FINRA's monitoring of Arca Securities's
compliance with the Exchange's rules and quarterly reporting to NYSE
Arca's CRO, will help to protect the independence of the Exchange's
regulatory responsibilities with respect to Arca Securities.
---------------------------------------------------------------------------
\17\ This oversight will be accomplished through the Regulatory
Contract between the Exchange and FINRA and a 17d-2 Agreement.
---------------------------------------------------------------------------
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-NYSEArca-2011-61) be, and
hereby is, approved.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(2).
\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Elizabeth M. Murphy.
Secretary.
[FR Doc. 2011-25827 Filed 10-5-11; 8:45 am]
BILLING CODE 8011-01-P
