Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Specifying in Its Rules an Existing Policy Related to the Application of NYSE Arca Options Rule 6.47A, 77044-77046 [2011-31605]
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77044
Federal Register / Vol. 76, No. 237 / Friday, December 9, 2011 / Notices
srobinson on DSK4SPTVN1PROD with NOTICES
In its response to the comment,
FINRA notes that the Supplementary
Material as currently drafted already
provides that written policies and
procedures regarding orders in foreign
securities with no U.S. market be
‘‘reasonably designed to obtain the most
favorable terms available for the
customer’’ and also requires that
members ‘‘regularly review these
policies and procedures to assess the
quality of executions received and
update or revise the policies and
procedures as necessary.’’ 24 FINRA
contends that the commenter’s request
for a requirement to provide reasonable
notice to customers of a member’s
policies and procedures regarding
foreign securities with no U.S. market
would inappropriately differentiate
among a member’s best execution
policies and procedures by specifically
requiring notification in the context of
foreign securities and would be
irrelevant to those retail customers that
do not trade in foreign securities with
no U.S. market.25 FINRA also argues
that a requirement requiring periodic
review for compliance with the policies
at issue is redundant since, under
existing FINRA rules, a member is
already responsible for reviewing the
conduct of its associated persons for
compliance with both its policies and
procedures and applicable laws and
rules in all aspects of its business.26 The
Commission believes that the proposed
rule, and FINRA’s response, respond to
the concerns raised by the commenter.
With respect to the proposed deletion
of the Three Quote Rule, FINRA has
represented that replacing the Three
Quote Rule with the proposed
Supplementary Material will improve
the handling of customer orders
involving securities with limited
quotation or pricing information by
decreasing the likelihood that execution
of these orders will be unnecessarily
delayed while still ensuring that
members recognize that their best
execution obligations apply to these
orders.27 The Commission believes that
this proposed change will help promote
just and equitable principles of trade
with no U.S. market: (1) Are reasonably designed
to obtain favorable terms; (2) provide reasonable
notice to customers of the policies and procedures;
(3) require periodic review for compliance with
policies; and (4) require periodic review of the
policies themselves to ensure that they meet the
requirements of the rule. See id.
24 See FINRA Response to Comment, supra note
5, at 2, 3 (citing Supplementary Material .07 to
FINRA Rule 5310).
25 See id. at 2.
26 See id. at 3 (citing NASD Rule 3010(b)(1)).
27 See Notice at 65551.
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and will protect investors and the
public interest.
Commission’s Public Reference Room,
and at https://www.sec.gov.
IV. Conclusion
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.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,28 that the
proposed rule change (SR–FINRA–
2011–052) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–31606 Filed 12–8–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65894; File No. SR–
NYSEArca–2011–89]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Specifying in Its Rules an
Existing Policy Related to the
Application of NYSE Arca Options Rule
6.47A
December 5, 2011.
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
November 23, 2011, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 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 specify in
its rules an existing policy related to the
application of NYSE Arca Options Rule
6.47A. The text of the proposed rule
change is available at the Exchange, at
https://www.nyse.com, at the
28 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
29 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to specify in
its rules an existing policy related to the
application of NYSE Arca Options Rule
6.47A.
NYSE Arca Options Rule 6.47A
provides, in part, that Users 5 may not
execute as principal orders they
represent as agent unless agency orders
are first exposed on the Exchange for at
least one second. This requirement gives
other market participants an
opportunity to participate in the
execution of orders before the entering
User executes them. The Exchange
recognizes, however, that because the
Exchange does not identify the User that
entered an order to the NYSE Arca
system, orders from the same OTP
Holder or OTP Firm may inadvertently
execute against each other as a result of
being entered by different persons and/
or systems at the same OTP Holder or
OTP Firm. Therefore, when enforcing
NYSE Arca Options Rule 6.47A, the
Exchange does not consider the
inadvertent interaction of orders from
the same OTP Holder or OTP Firm
within one second to be a violation of
the exposure requirement.
When investigating potential
violations of NYSE Arca Options Rule
6.47A, the Exchange takes into
consideration whether orders that
executed against each other within one
second in the NYSE Arca system were
entered by persons, business units and/
or systems at the same OTP Holder or
OTP Firm that did not have knowledge
5 The term ‘‘User’’ means any OTP Holder, OTP
Firm or Sponsored Participant that is authorized to
obtain access to the NYSE Arca system pursuant to
NYSE Arca Options Rule 6.2A. See NYSE Arca
Options 6.1A(a)(19).
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Federal Register / Vol. 76, No. 237 / Friday, December 9, 2011 / Notices
of the order in the NYSE Arca system.6
Commonly, OTP Holders and OTP
Firms are able to demonstrate that
orders were entered by individuals or
systems that did not have the ability to
know of the preexisting order in the
NYSE Arca system due to information
barriers in place at the time the orders
were entered.
The Exchange proposes to codify this
policy in Commentary .05 to NYSE Arca
Options Rule 6.47A. Proposed
Commentary .05 would specify that
OTP Holders and OTP Firms may
demonstrate that orders were entered
without knowledge of a preexisting
order in the NYSE Arca system
represented by the same OTP Holder or
OTP Firm by providing evidence that
effective information barriers between
the persons, business units and/or
systems entering the orders on the
Exchange were in existence at the time
the orders were entered. Commentary
.05 would require that such information
barriers be fully documented and
provided to the Exchange upon
request.7
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Securities Exchange
Act of 1934 (the ‘‘Act’’),8 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,9 in particular, because it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, 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. In
particular, the Exchange believes that
codifying the Exchange’s policy that
appropriate information barriers may be
used to demonstrate that the execution
of two orders within one second was
inadvertent because the orders were
entered without knowledge of each
other, would clarify the intent and
srobinson on DSK4SPTVN1PROD with NOTICES
6 The
Financial Industry Regulatory Authority,
Inc. (‘‘FINRA’’), on behalf of the Exchange and
pursuant to a Regulatory Services Agreement
(‘‘RSA’’), conducts routine surveillance to identify
instances when an order in the NYSE Arca system
is executed against an order entered by the same
OTP Holder or OTP Firm within one second.
7 Information barrier documentation is reviewed
by FINRA on the Exchange’s behalf to evaluate
whether an OTP Holder or OTP Firm has
implemented processes that are reasonably
designed to prevent the flow of pre-trade order
information given the particular structure of the
OTP Holder or OTP Firm. Additionally, information
barriers are reviewed as part of the Exchange’s
examination program, which is also administered
by FINRA pursuant to the RSA.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
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application of NYSE Arca Options Rule
6.47A for OTP Holders and OTP Firms.
The Exchange also believes that the
proposed rule change is consistent with
Section 6(b)(7) of the Act,10 which
requires the rules of an exchange to
provide a fair procedure for the
disciplining of members and persons
associated with members. In particular,
by specifying that the information
barriers must be fully documented for
the purpose of demonstrating that
orders were entered without knowledge
that there was a pre-existing unexecuted
agency or proprietary order on the
Exchange, OTP Holders and OTP Firms
would be better prepared to properly
respond to requests for information by
the Exchange in the course of a
regulatory investigation. Moreover,
while OTP Holders and OTP Firms are
generally required to provide
information to the Exchange as
requested, specifying that OTP Holders
and OTP Firms must provide written
documentation regarding information
barriers within the context of NYSE
Arca Options Rule 6.47A would require
that all OTP Holders and OTP Firms
adhere to the same standard for
demonstrating compliance with NYSE
Arca Options Rule 6.47A.
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 significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not 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 11 and Rule 19b–
4(f)(6) thereunder.12
10 15
U.S.C. 78f(b)(7).
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
11 15
PO 00000
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Fmt 4703
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77045
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 email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2011–89 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–2011–89. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
Commission written notice of the Exchange’s 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.
E:\FR\FM\09DEN1.SGM
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Federal Register / Vol. 76, No. 237 / Friday, December 9, 2011 / Notices
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–
NYSEArca–2011–89 and should be
submitted on or before December 30,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–31605 Filed 12–8–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65888; File No. SR–Phlx–
2011–160]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Firm Related Equity Option Cap
December 5, 2011.
srobinson on DSK4SPTVN1PROD 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 November
22, 2011, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘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
Section II of the Fee Schedule entitled
‘‘Equity Options Fees’’ to apply the Firm
Related Equity Option Cap to certain
proprietary orders of affiliated member
organizations.
While fee changes pursuant to this
proposal are effective upon filing, the
Exchange has designated these changes
to be operative on December 1, 2011.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqtrader.com/
micro.aspx?id=PHLXfilings, at the
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Jkt 226001
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
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 aspects 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 purpose of this proposed rule
change is to apply the Firm Related
Equity Option Cap to proprietary orders
of certain affiliates of member
organizations. Currently, Firms are
subject to a maximum fee of $75,000
(’’Firm Related Equity Option Cap’’).
Firm equity option transaction fees and
QCC Transaction Fees 3, in the
aggregate, for one billing month will not
exceed the Firm Related Equity Option
Cap per member organization when
such members are trading in their own
proprietary account.4 The Firm equity
options transaction fees 5 will be waived
for members executing facilitation
orders 6 pursuant to Exchange Rule 1064
3 QCC Transaction Fees apply to QCC Orders as
defined in Exchange Rule 1080(o) and 1064(e). For
QCC Orders as defined in Exchange Rule 1080(o),
and Floor QCC Orders, as defined in 1064(e), a
Service Fee of $0.05 per side will apply once a Firm
has reached the Firm Related Equity Option Cap.
This $0.05 Service Fee will apply to every contract
side after a Firm has reached the Firm Related
Equity Option Cap.
4 Once Firms reach the Firm Related Equity
Option Cap by incurring qualifying fees, they will
not incur additional transaction fees beyond the
$75,000 Firm Related Equity Option Cap for that
month as long as those transactions occurred in
their own proprietary account. Member
organizations must notify the Exchange in writing
of all accounts in which the member is not trading
in its own proprietary account. The Exchange will
not make adjustments to billing invoices where
transactions are commingled in accounts which are
not subject to the Firm Related Equity Option Cap.
5 See Section II of the Exchange’s Fee Schedule
for equity option transaction fees.
6 A facilitation occurs when a floor broker holds
an options order for a public customer and a contraside order for the same option series and, after
providing an opportunity for all persons in the
trading crowd to participate in the transaction,
executes both orders as a facilitation cross. See
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Frm 00113
Fmt 4703
Sfmt 4703
when such members are trading in their
own proprietary account.7
The Exchange proposes to apply the
Firm Related Equity Option Cap to
proprietary orders effected for the
purpose of hedging the proprietary overthe-counter trading of an affiliate of a
member organization that qualifies for
the Firm Related Equity Option Cap
(‘‘Qualifying Member Organization’’). A
Qualifying Member Organization would
be a 100% wholly-owned affiliate or
subsidiary of a member organization
that is not a Phlx member organization
and is registered as a United States or
foreign broker-dealer. In other words, a
Qualifying Member Organization must
be either a wholly-owned subsidiary of
a Phlx member organization or a
wholly-owned subsidiary of the parent
company of a Phlx member
organization. These orders must clear in
the customer range at The Options
Clearing Corporation and be subject to
the fees assessed to Broker-Dealers in
order for the trade to be eligible for the
Firm Related Equity Option Cap. The
Exchange would aggregate the
Qualifying Member Organization’s fees
in Multiply-Listed options 8 on the
Exchange with the transaction fees of
affiliated member organizations in
Multiply-Listed options on the
Exchange for purposes of determining
whether the Qualifying Member
Organization has reached the Firm
Related Equity Option Cap.
A member organization would be
required to certify the affiliate status of
any Qualifying Member Organization
whose trading activity it seeks to
aggregate and to certify that the trades
identified as eligible for the Firm
Related Equity Option Cap were made
for the purposes of hedging proprietary
over-the county [sic] trading of the
member organization or its affiliates.
The member organization would be
required to inform the Exchange
immediately of any event that causes an
entity to cease to be an affiliate. In
addition, member organizations must
notify the Exchange in writing of the
account(s) designated for purposes of
hedging the proprietary over-thecounter trading of the Qualifying
Member Organization or its affiliates.9
Exchange Rule 1064 entitled ‘‘Crossing, Facilitation
and Solicited Orders.’’
7 The waiver would not apply to orders where a
member is acting as agent on behalf of a nonmember.
8 Multiply Listed Securities include those
symbols which are subject to rebates and fees in
Section I, Rebates and Fees For Adding and
Removing Liquidity in Select Symbols, and Section
II, Equity Options Fees.
9 The Exchange assesses a $50 Account Fee for
each account beyond the number of permits billed
to the member organization.
E:\FR\FM\09DEN1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 237 (Friday, December 9, 2011)]
[Notices]
[Pages 77044-77046]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31605]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65894; File No. SR-NYSEArca-2011-89]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Specifying in Its
Rules an Existing Policy Related to the Application of NYSE Arca
Options Rule 6.47A
December 5, 2011.
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 November 23, 2011, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to specify in its rules an existing policy
related to the application of NYSE Arca Options Rule 6.47A. The text of
the proposed rule change is available at the Exchange, at https://www.nyse.com, at the Commission's Public Reference Room, and at https://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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to specify in its rules an existing policy
related to the application of NYSE Arca Options Rule 6.47A.
NYSE Arca Options Rule 6.47A provides, in part, that Users \5\ may
not execute as principal orders they represent as agent unless agency
orders are first exposed on the Exchange for at least one second. This
requirement gives other market participants an opportunity to
participate in the execution of orders before the entering User
executes them. The Exchange recognizes, however, that because the
Exchange does not identify the User that entered an order to the NYSE
Arca system, orders from the same OTP Holder or OTP Firm may
inadvertently execute against each other as a result of being entered
by different persons and/or systems at the same OTP Holder or OTP Firm.
Therefore, when enforcing NYSE Arca Options Rule 6.47A, the Exchange
does not consider the inadvertent interaction of orders from the same
OTP Holder or OTP Firm within one second to be a violation of the
exposure requirement.
---------------------------------------------------------------------------
\5\ The term ``User'' means any OTP Holder, OTP Firm or
Sponsored Participant that is authorized to obtain access to the
NYSE Arca system pursuant to NYSE Arca Options Rule 6.2A. See NYSE
Arca Options 6.1A(a)(19).
---------------------------------------------------------------------------
When investigating potential violations of NYSE Arca Options Rule
6.47A, the Exchange takes into consideration whether orders that
executed against each other within one second in the NYSE Arca system
were entered by persons, business units and/or systems at the same OTP
Holder or OTP Firm that did not have knowledge
[[Page 77045]]
of the order in the NYSE Arca system.\6\ Commonly, OTP Holders and OTP
Firms are able to demonstrate that orders were entered by individuals
or systems that did not have the ability to know of the preexisting
order in the NYSE Arca system due to information barriers in place at
the time the orders were entered.
---------------------------------------------------------------------------
\6\ The Financial Industry Regulatory Authority, Inc.
(``FINRA''), on behalf of the Exchange and pursuant to a Regulatory
Services Agreement (``RSA''), conducts routine surveillance to
identify instances when an order in the NYSE Arca system is executed
against an order entered by the same OTP Holder or OTP Firm within
one second.
---------------------------------------------------------------------------
The Exchange proposes to codify this policy in Commentary .05 to
NYSE Arca Options Rule 6.47A. Proposed Commentary .05 would specify
that OTP Holders and OTP Firms may demonstrate that orders were entered
without knowledge of a preexisting order in the NYSE Arca system
represented by the same OTP Holder or OTP Firm by providing evidence
that effective information barriers between the persons, business units
and/or systems entering the orders on the Exchange were in existence at
the time the orders were entered. Commentary .05 would require that
such information barriers be fully documented and provided to the
Exchange upon request.\7\
---------------------------------------------------------------------------
\7\ Information barrier documentation is reviewed by FINRA on
the Exchange's behalf to evaluate whether an OTP Holder or OTP Firm
has implemented processes that are reasonably designed to prevent
the flow of pre-trade order information given the particular
structure of the OTP Holder or OTP Firm. Additionally, information
barriers are reviewed as part of the Exchange's examination program,
which is also administered by FINRA pursuant to the RSA.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 (the
``Act''),\8\ in general, and furthers the objectives of Section 6(b)(5)
of the Act,\9\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, 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. In
particular, the Exchange believes that codifying the Exchange's policy
that appropriate information barriers may be used to demonstrate that
the execution of two orders within one second was inadvertent because
the orders were entered without knowledge of each other, would clarify
the intent and application of NYSE Arca Options Rule 6.47A for OTP
Holders and OTP Firms.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(7) of the Act,\10\ which requires the
rules of an exchange to provide a fair procedure for the disciplining
of members and persons associated with members. In particular, by
specifying that the information barriers must be fully documented for
the purpose of demonstrating that orders were entered without knowledge
that there was a pre-existing unexecuted agency or proprietary order on
the Exchange, OTP Holders and OTP Firms would be better prepared to
properly respond to requests for information by the Exchange in the
course of a regulatory investigation. Moreover, while OTP Holders and
OTP Firms are generally required to provide information to the Exchange
as requested, specifying that OTP Holders and OTP Firms must provide
written documentation regarding information barriers within the context
of NYSE Arca Options Rule 6.47A would require that all OTP Holders and
OTP Firms adhere to the same standard for demonstrating compliance with
NYSE Arca Options Rule 6.47A.
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\10\ 15 U.S.C. 78f(b)(7).
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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 significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not 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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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.
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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 email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2011-89 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-2011-89. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and
[[Page 77046]]
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-NYSEArca-2011-89 and should be submitted
on or before December 30, 2011.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31605 Filed 12-8-11; 8:45 am]
BILLING CODE 8011-01-P
