Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Amending NYSE Rule 476A To Update Its “List of Exchange Rule Violations and Fines Applicable Thereto Pursuant to Rule 476A”, 11181-11184 [2012-4282]
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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Notices
these issuers. As it relates to other
issuers, the ability of the Exchange to
attract well-known, recognizable
companies to list on the Exchange will
help the Exchange to establish its status
and reputation as a primary listing
market. The Exchange’s reputation as a
primary listing market, in turn, will
positively impact all issuers that are
listed on the Exchange. Further, the
Exchange believes that additional
revenue generated from the Exchange’s
auction processes for actively traded
Exchange-listed securities will offset the
cost of operating a program for listed
companies on the Exchange. Because
issuers with higher CADV are likely to
generate additional revenue for the
Exchange, the Exchange believes it is
reasonable to waive annual listing fees
for such issuers. Based on the foregoing,
the Exchange believes that waiver of
annual listing fees to companies with
certain CADV is a fair and equitable
allocation of fees to issuers.
Finally, the Exchange believes it is
reasonable and equitable to assess
annual fees as of a security’s initial
listing date, rather than pro-rating
annual fees and billing on a calendar
basis. In particular, the Exchange
believes that this annual billing will
provide for more certainty to issuers
than a billing model that requires
proration.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change imposes any
burden on competition.
srobinson on DSK4SPTVN1PROD with NOTICES
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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(ii) of
the Act 9 and Rule 19b–4(f)(2)
thereunder,10 the Exchange has
designated this proposal as establishing
or changing a due, fee, or other charge
applicable to the Exchange’s Members
and non-members, which renders the
proposed rule change effective upon
filing.
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
9 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
10 17
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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
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–BATS–2012–010 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–BATS–2012–010. 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
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–BATS–
2012–010 and should be submitted on
or before March 16, 2012.
Frm 00119
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–4283 Filed 2–23–12; 8:45 am]
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:
PO 00000
11181
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66421; File No. SR–NYSE–
2012–05]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Amending NYSE Rule 476A To Update
Its ‘‘List of Exchange Rule Violations
and Fines Applicable Thereto Pursuant
to Rule 476A’’
February 17, 2012.
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, on February
7, 2012, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Rule 476A to update its ‘‘List of
Exchange Rule Violations and Fines
Applicable Thereto Pursuant to Rule
476ARule XX [sic]. The text of the
proposed rule change is available at the
Exchange, the Commission’s Public
Reference Room, and www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Notices
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 amend
NYSE Rule 476A to update its ‘‘List of
Exchange Rule Violations and Fines
Applicable Thereto Pursuant to Rule
476A’’ (‘‘Rule 476A List’’) to (i) make
technical, non-substantive changes to
conform the list to previously-approved
changes in Exchange rules, (ii) update
the rules relating to conduct by
Designated Market Makers (‘‘DMM’’),
and (iii) add rules relating to conduct by
DMMs.
Background
Under the Exchange’s Minor Rule
Violation Plan, NYSE Rule 476A, the
Exchange may impose a fine, not to
exceed $5,000, on any member, member
organization, approved person or
registered or non-registered employee 4
of a member or member organization for
a minor violation of certain specified
Exchange rules (a ‘‘summary fine’’).
Summary fines provide a meaningful
sanction for rule violations when the
violation calls for stronger discipline
than an admonition or cautionary letter,
but the facts and circumstances of the
violation do not warrant initiation of a
formal disciplinary proceeding under
Rule 476.5
Proposed Non-Substantive Changes to
Rule 476A List
srobinson on DSK4SPTVN1PROD with NOTICES
The Exchange proposes the following
non-substantive changes to update the
Rule 476A List to conform it to
approved changes to Exchange rules, as
follows:
• Update the titles of Rules 15, 15A,
and 105
• Update rule references that have
been renumbered or harmonized with a
FINRA rule: Rule 72(b) to 72(d); 79A.30
to 79A.20; 103.12 to 103.11; and 346(b)
to 3270
4 Rule 476A(a) includes a reference to ‘‘allied
member’’. The Exchange proposes to replace that
term with ‘‘principal executive,’’ which is
consistent with a prior rule change eliminating the
category of ‘‘allied member’’ on the Exchange. See
Securities Exchange Act Release No. 58549
(September 15, 2008), 73 FR 54444 (September 19,
2008) (SR–NYSE–2008–80).
5 The Exchange’s Minor Rule Violation Plan, Rule
476A, was originally adopted by the Exchange and
approved by the Commission in 1985. See Exchange
Act Release No. 34–21688 (January 25, 1985), 50 FR
5025 (February 5, 1985). It has been amended
numerous times since its adoption.
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• Delete references to rules that have
been deleted: Rules 97.40 (reporting rule
violation); 104.12 (DMM investment
account rule); 107A.30 (reporting rule
violation); 112A.10 (reporting rule
violation); 123A.30 (percentage orders);
304(h)(2) (reporting rule violation);
346(c), (e), and (f) (Limitations on
member organization employment and
failure to obtain Exchange approval rule
violations); 421 (reporting rule
violation); 440F (reporting rule
violation); and 440G (reporting rule
violation) 6
• Update the description to rules that
have been amended: Rules 123C 7
(deleting references to expiration
Fridays and quarterly expiration days);
411(b) (replacing the description to
reflect the amended rule); and 345(a)
(deleting the reference to Securities
Trader Supervisor)
Proposed Updates to Rule 476A List for
DMM Conduct Rules
The current Rule 476A List includes
rules that govern DMM conduct, e.g.,
Rules 104(a)(1)(A), 104.10, and
Exchange policies regarding procedures
to be followed in delayed opening
situations. The Exchange proposes to
update the Rule 476A List with current
rules governing DMM conduct, and in
particular, to include Rules 104 and
123D in the Rule 476A List. The
Exchange further proposes to expand
the references to Rules 104 and 123D to
add new elements to the Rule 476A List
[sic]
The Exchange believes that the
updates proposed below will provide
the Exchange with sufficient flexibility
to address DMM failure to meet their
obligations. The Exchange recognizes
that DMMs may, for many reasons, fail
to meet their affirmative obligations as
prescribed under Rules [sic] 104 or
duties under Rule 123D. In some
circumstances, formal disciplinary
measures in accordance with Rule 476
are warranted. However, in other
instances, formal discipline may be
unwarranted, and the Exchange believes
that the addition of these Rules to Rule
476A List will provide a more flexible
and appropriate tool to enforce potential
failure by DMMs to adhere to the
requirements set forth in those rules,
while preserving the Exchange’s
discretion to seek formal discipline
under the appropriate circumstances.
The Exchange believes that the
proposed updated rule references cover
6 The Exchange also proposes to fix a
typographical error in the entry concerning Rule
343 and replace the term ‘‘officer’’ with ‘‘office.’’
7 The Exchange also proposes to add a reference
to ‘‘Rule 123C’’ to the amended description, and
move it up on the Rule 476A List.
PO 00000
Frm 00120
Fmt 4703
Sfmt 4703
the same subject matter as are already
addressed in the Rule 476A List, albeit
in outdated references. In addition, the
Exchange believes it is also appropriate
to add new elements relating to Rule
[sic] 104 and 123D to the Rule 476A
List.
Rule 104
NYSE Rule 104 requires, inter alia,
DMMs registered in one or more
securities traded on the Exchange to
engage in a course of dealings for their
own account to assist in the
maintenance of a fair and orderly
market, insofar as reasonably
practicable, by contributing liquidity
when lack of price continuity and
depth, or disparity between supply and
demand exists or is reasonably to be
anticipated.8
The Rule 476A List currently includes
Rule 104(a)(1)(A), which requires DMMs
to maintain a bid or an offer at the
National Best Bid and National Best
Offer (‘‘inside’’) at least 15% of the
trading day for securities in which the
DMM unit is registered with a
consolidated average daily volume of
less than one million shares, and at least
10% for securities in which the DMM
unit is registered with a consolidated
average daily volume equal to or greater
than one million shares.
The Rule 476A List also includes an
outdated reference to Rule 104.10.
When the Exchange adopted the New
Market Model, it adopted current Rule
104 (on a pilot basis), which does not
include a rule reference of 104.10 that
is the same as the former Rule 104.10.9
However, the subject matter formerly
covered in Rule 104.10 continues in the
current Rule 104. For example, the text
of former Rules 104.10(5) and (6) has
been moved in substantially similar
form to current Rules 104(g), (h), and (i).
More generally, although the
Exchange has deleted former Rule
104.10(1)–(3), the subject matter of those
rules has been carried forward in
various sections of current Rule 104. For
example, former Rule 104.10 specified
the functions of DMMs, including the
maintenance, in so far as reasonably
practicable, of a fair and orderly market.
This topic is now covered by Rules
104(a) and (f).
More specifically, former Rule
104.10(1) stated that the maintenance of
a fair and orderly market implies the
8 Rule 104 currently operates on a pilot basis, set
to end on July 31, 2012. The Exchange believes that
the Rule 476A List should reference those rules that
are currently operational, even if operating on a
pilot basis.
9 See Exchange Act Release No. 58845 (October
24, 2008), 73 FR 64379 (October 29, 2008) (SR–
NYSE–2008–46).
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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Notices
maintenance of price continuity with
reasonable depth and the minimizing of
the effects of temporary disparity
between supply and demand. This
subject matter is now covered in Rule
104(f)(ii). Former Rule 104.10(2)
concerned a DMM trading for his or her
own account when there is [sic] lack of
price continuity, lack of depth, or
disparity between supply and demand
exists or is reasonably to be anticipated.
This subject matter is similarly covered
in Rule 104(f)(ii). Finally, former Rule
104.10(3) provided that DMM dealings
for his own account must constitute a
course of dealings reasonably calculated
to contribute to the maintenance of
price continuity with reasonable depth,
and to minimizing the effects of
temporary disparity between supply and
demand. This is similarly covered in
Rule 104(f)(ii). The Exchange further
believes that Rule 104(f)(iii), which
provides more details about Depth
Guidelines, is also related to former
Rule 104.10(3). In particular, the
Exchange was publishing Depth
Guidelines when Rule 104.10 was in
effect and the only change in the New
Market Model’s version of the rule is to
codify this aspect of DMM obligations.
The Exchange also believes that the
subject matter of former Rules
104.10(1)–(3) is now covered in current
Rules 104(a)(2)–(5). Current Rules
104(a)(2)–(5) describe with specificity
how a DMM can meet his or her
responsibilities and duties to maintain a
fair and orderly market, including
facilitating openings and re-openings,
the close of trading, trading when a
liquidity replenishment point is
reached, and trading when a ‘‘gap’’
quote procedure is being used. These
rule provisions simply provide detail of
how a DMM is to meet its fair and
orderly obligation. These were functions
that specialists formerly performed
when they were subject to former Rule
104.10(1)–(3), the difference now being
that these functions have been codified
in the rule text.
The Exchange further proposes to add
to the Rule 476A list Rules 104(b), (c),
(d), and (e). The Exchange believes that,
similar to Rule 104(a), (f), (g), (h), and
(i), the requirements applicable to
DMMs in Rules 104(b), (c), (d), and (e)
relate to the functions of the DMMs.
Because these are DMM obligations for
which potential violations can range in
severity, including these elements of
Rule 104 in the Rule 476A List is
consistent with the current inclusion of
other aspects of Rule 104.
In addition, the Exchange believes it
is appropriate to add Rule 104(a)(1)(B)
to the Rule 476A List. Rule 104(a)(1)(B)
governs the DMM’s new pricing
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18:34 Feb 23, 2012
Jkt 226001
obligations, which were implemented
by all equities markets on December 6,
2010.10 Accordingly, this provision was
not previously included in the Minor
Rule Violation Plan. The Exchange
believes it is appropriate to add this
element of Rule 104 to the Minor Rule
Violation Plan to provide greater
flexibility with respect to the type of
disciplinary measures that may be
invoked if there were a violation of this
rule. For example, a potential situation
that may warrant a summary fine rather
than formal disciplinary action could be
if a DMM fails to maintain a quote
consistent with Rule 104(a)(1)(B), but
which does not result in any harm to the
market.
As noted above, summary fines
provide the Exchange with flexibility to
impose an appropriate level of
discipline for violations that are more
serious than an admonition letter, but
for which the facts and circumstances
do not warrant formal discipline. The
Exchange believes that providing
flexibility for violations related to the
DMM’s new pricing obligations and
Rules 104(b), (c), (d), and (e) is in
keeping with the spirit of the existing
Rule 476A List, which already includes
DMM conduct rules.
To reflect these changes, the Exchange
proposes to include a single reference to
‘‘Rule 104 requirements for the dealings
and responsibilities of DMMs’’ to the
Rule 476A List, which would include
all of the subsections of Rule 104 as
described above.11 The Exchange
further notes that these summary fines
may be imposed, as applicable, on
either an individual DMM, or the DMM
unit, as specified in the subsections to
Rule 104.
Rule 123D
The Exchange also proposes to update
the reference relating to delayed
openings in the Rule 476A list to
instead reference a specific rule, i.e.,
Rule 123D, and to add all elements of
Rule 123D as they relate to DMM
conduct as being eligible under the
Minor Rule Violation Plan.
The Rule 476A List currently provides
that ‘‘violations of Exchange policies
regarding procedures to be followed in
delayed opening situations’’ are eligible
for summary fines under the Minor Rule
10 See Exchange Act Release No. 63255 (Nov. 5,
2010), 75 FR 69484 (Nov. 12, 2010) (SR–NYSE–
2010–69).
11 The Exchange notes that it has separately
proposed to delete NYSE Rule 104(a)(6). See
Securities Exchange Act Release No. 65736 (Nov.
10, 2011) (SR–NYSE–2011–56). The Exchange
further notes that other elements of Rule 104, i.e.,
Rule 104(j) and supplementary material .05 and .10,
are not related to DMM obligations, but rather
reflect operational aspects of the Exchange.
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
11183
Violation Plan. Such Exchange policies
are codified in Rule 123D. Accordingly,
the Exchange proposes to delete the
general statement of ‘‘violations of
Exchange policies regarding procedures
to be followed in delayed opening
situations’’ and replace it with a
reference to Rule 123D. In so doing, the
Exchange further proposes to add the
other requirements of DMMs that are set
forth in Rule 123D relating to openings,
re-openings, trading halts, and tape
indications. The Exchange believes that
the additional flexibility of determining
the appropriate level of discipline for
DMM violations of Rule 123D conforms
to the purpose of the existing Rule 476A
List. In particular, the Exchange notes
that adding Rule 123D in its entirety as
it relates to DMM conduct is consistent
with the existing inclusion of Rule 15 in
the Rule 476A List, which similarly
governs DMM’s conduct with respect to
pre-opening indications.
2. Statutory Basis
The Exchange believes that the
proposed rule changes are consistent
with, and further the objectives of,
Section 6(b)(5) of the Securities
Exchange Act of 1934, as amended,12
(the ‘‘Act’’), in that they are 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. The proposed rule
changes also further the objectives of
Section 6(b)(6),13 in that they provide
for appropriate discipline for violations
of provisions of the Act, the rules and
regulations thereunder, and Exchange
rules and regulations.
The Exchange believes that the
proposed rule changes are designed to
prevent fraudulent and manipulative
acts and practices because they will
provide the Exchange with greater
regulatory flexibility to enforce the
DMM requirements set forth in NYSE
Rules 104 and 123D in a more informal
manner while also preserving the
Exchange’s discretion to seek formal
discipline for more serious
transgressions as warranted. In addition,
the proposed rule change removes
impediments to and perfects the
mechanism of a free and open market by
updating the Minor Rule Violation Plan
by updating rule cite references,
deleting references to obsolete rules,
and for DMM-related rules, both
updating the rule references to reflect
12 15
13 15
E:\FR\FM\24FEN1.SGM
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(6).
24FEN1
11184
Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Notices
the current rules that govern the topics
currently identified in outdated rule
references in the Minor Rule Violation
Plan as well as adding additional
elements of the rules governing DMM
conduct.
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
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
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–NYSE–
2012–05 and should be submitted on or
before March 16, 2012.
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
such proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
IV. Solicitation of Comments
[FR Doc. 2012–4282 Filed 2–23–12; 8:45 am]
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:
BILLING CODE 8011–01–P
Electronic Comments
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change to BX Rule
7021
• 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–NYSE–2012–05 on the
subject line.
srobinson on DSK4SPTVN1PROD with NOTICES
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–NYSE–2012–05. This file
number should be included on the
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18:34 Feb 23, 2012
Jkt 226001
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to [sic] a rule
change to BX Rule 7021 to make
available at no cost and on a voluntary
basis certain market data about market
participants’ own trading on BX.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxbx.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s public reference
room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
self-regulatory organization 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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66414; File No. SR–BX–
2012–009]
February 16, 2012.
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 February
8, 2012, NASDAQ OMX BX, Inc. (‘‘BX’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
BX is proposing to make available to
members the Trading and Compliance
Data Package under BX Rule 7021
(‘‘Data Package’’). The Data Package
allows member firms to obtain via
NasdaqTrader.com information
regarding their own historical quoting
and trading activity on BX. The Data
Package will provide BX Participants
with historical data reports containing
trade reporting information about the
Participant’s own trades in BX, for
delivery on an end-of-day or T+1 basis.
The Exchange may modify the contents
of the BX Trading and Compliance Data
Package from time to time based on
subscriber interest.
The Data Package also provides
member firms with information
concerning their compliance with BX
and FINRA rules. In this regard, member
firms that subscribe to the Data Package
can obtain the following reports: (1)
E:\FR\FM\24FEN1.SGM
24FEN1
]]>Agencies
[Federal Register Volume 77, Number 37 (Friday, February 24, 2012)]
[Notices]
[Pages 11181-11184]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4282]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66421; File No. SR-NYSE-2012-05]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending NYSE Rule 476A To
Update Its ``List of Exchange Rule Violations and Fines Applicable
Thereto Pursuant to Rule 476A''
February 17, 2012.
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, on February 7, 2012, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Rule 476A to update its ``List
of Exchange Rule Violations and Fines Applicable Thereto Pursuant to
Rule 476ARule XX [sic]. The text of the proposed rule change is
available at the Exchange, the Commission's Public Reference Room, and
www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries,
[[Page 11182]]
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 amend NYSE Rule 476A to update its ``List
of Exchange Rule Violations and Fines Applicable Thereto Pursuant to
Rule 476A'' (``Rule 476A List'') to (i) make technical, non-substantive
changes to conform the list to previously-approved changes in Exchange
rules, (ii) update the rules relating to conduct by Designated Market
Makers (``DMM''), and (iii) add rules relating to conduct by DMMs.
Background
Under the Exchange's Minor Rule Violation Plan, NYSE Rule 476A, the
Exchange may impose a fine, not to exceed $5,000, on any member, member
organization, approved person or registered or non-registered employee
\4\ of a member or member organization for a minor violation of certain
specified Exchange rules (a ``summary fine''). Summary fines provide a
meaningful sanction for rule violations when the violation calls for
stronger discipline than an admonition or cautionary letter, but the
facts and circumstances of the violation do not warrant initiation of a
formal disciplinary proceeding under Rule 476.\5\
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\4\ Rule 476A(a) includes a reference to ``allied member''. The
Exchange proposes to replace that term with ``principal executive,''
which is consistent with a prior rule change eliminating the
category of ``allied member'' on the Exchange. See Securities
Exchange Act Release No. 58549 (September 15, 2008), 73 FR 54444
(September 19, 2008) (SR-NYSE-2008-80).
\5\ The Exchange's Minor Rule Violation Plan, Rule 476A, was
originally adopted by the Exchange and approved by the Commission in
1985. See Exchange Act Release No. 34-21688 (January 25, 1985), 50
FR 5025 (February 5, 1985). It has been amended numerous times since
its adoption.
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Proposed Non-Substantive Changes to Rule 476A List
The Exchange proposes the following non-substantive changes to
update the Rule 476A List to conform it to approved changes to Exchange
rules, as follows:
Update the titles of Rules 15, 15A, and 105
Update rule references that have been renumbered or
harmonized with a FINRA rule: Rule 72(b) to 72(d); 79A.30 to 79A.20;
103.12 to 103.11; and 346(b) to 3270
Delete references to rules that have been deleted: Rules
97.40 (reporting rule violation); 104.12 (DMM investment account rule);
107A.30 (reporting rule violation); 112A.10 (reporting rule violation);
123A.30 (percentage orders); 304(h)(2) (reporting rule violation);
346(c), (e), and (f) (Limitations on member organization employment and
failure to obtain Exchange approval rule violations); 421 (reporting
rule violation); 440F (reporting rule violation); and 440G (reporting
rule violation) \6\
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\6\ The Exchange also proposes to fix a typographical error in
the entry concerning Rule 343 and replace the term ``officer'' with
``office.''
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Update the description to rules that have been amended:
Rules 123C \7\ (deleting references to expiration Fridays and quarterly
expiration days); 411(b) (replacing the description to reflect the
amended rule); and 345(a) (deleting the reference to Securities Trader
Supervisor)
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\7\ The Exchange also proposes to add a reference to ``Rule
123C'' to the amended description, and move it up on the Rule 476A
List.
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Proposed Updates to Rule 476A List for DMM Conduct Rules
The current Rule 476A List includes rules that govern DMM conduct,
e.g., Rules 104(a)(1)(A), 104.10, and Exchange policies regarding
procedures to be followed in delayed opening situations. The Exchange
proposes to update the Rule 476A List with current rules governing DMM
conduct, and in particular, to include Rules 104 and 123D in the Rule
476A List. The Exchange further proposes to expand the references to
Rules 104 and 123D to add new elements to the Rule 476A List [sic]
The Exchange believes that the updates proposed below will provide
the Exchange with sufficient flexibility to address DMM failure to meet
their obligations. The Exchange recognizes that DMMs may, for many
reasons, fail to meet their affirmative obligations as prescribed under
Rules [sic] 104 or duties under Rule 123D. In some circumstances,
formal disciplinary measures in accordance with Rule 476 are warranted.
However, in other instances, formal discipline may be unwarranted, and
the Exchange believes that the addition of these Rules to Rule 476A
List will provide a more flexible and appropriate tool to enforce
potential failure by DMMs to adhere to the requirements set forth in
those rules, while preserving the Exchange's discretion to seek formal
discipline under the appropriate circumstances. The Exchange believes
that the proposed updated rule references cover the same subject matter
as are already addressed in the Rule 476A List, albeit in outdated
references. In addition, the Exchange believes it is also appropriate
to add new elements relating to Rule [sic] 104 and 123D to the Rule
476A List.
Rule 104
NYSE Rule 104 requires, inter alia, DMMs registered in one or more
securities traded on the Exchange to engage in a course of dealings for
their own account to assist in the maintenance of a fair and orderly
market, insofar as reasonably practicable, by contributing liquidity
when lack of price continuity and depth, or disparity between supply
and demand exists or is reasonably to be anticipated.\8\
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\8\ Rule 104 currently operates on a pilot basis, set to end on
July 31, 2012. The Exchange believes that the Rule 476A List should
reference those rules that are currently operational, even if
operating on a pilot basis.
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The Rule 476A List currently includes Rule 104(a)(1)(A), which
requires DMMs to maintain a bid or an offer at the National Best Bid
and National Best Offer (``inside'') at least 15% of the trading day
for securities in which the DMM unit is registered with a consolidated
average daily volume of less than one million shares, and at least 10%
for securities in which the DMM unit is registered with a consolidated
average daily volume equal to or greater than one million shares.
The Rule 476A List also includes an outdated reference to Rule
104.10. When the Exchange adopted the New Market Model, it adopted
current Rule 104 (on a pilot basis), which does not include a rule
reference of 104.10 that is the same as the former Rule 104.10.\9\
However, the subject matter formerly covered in Rule 104.10 continues
in the current Rule 104. For example, the text of former Rules
104.10(5) and (6) has been moved in substantially similar form to
current Rules 104(g), (h), and (i).
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\9\ See Exchange Act Release No. 58845 (October 24, 2008), 73 FR
64379 (October 29, 2008) (SR-NYSE-2008-46).
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More generally, although the Exchange has deleted former Rule
104.10(1)-(3), the subject matter of those rules has been carried
forward in various sections of current Rule 104. For example, former
Rule 104.10 specified the functions of DMMs, including the maintenance,
in so far as reasonably practicable, of a fair and orderly market. This
topic is now covered by Rules 104(a) and (f).
More specifically, former Rule 104.10(1) stated that the
maintenance of a fair and orderly market implies the
[[Page 11183]]
maintenance of price continuity with reasonable depth and the
minimizing of the effects of temporary disparity between supply and
demand. This subject matter is now covered in Rule 104(f)(ii). Former
Rule 104.10(2) concerned a DMM trading for his or her own account when
there is [sic] lack of price continuity, lack of depth, or disparity
between supply and demand exists or is reasonably to be anticipated.
This subject matter is similarly covered in Rule 104(f)(ii). Finally,
former Rule 104.10(3) provided that DMM dealings for his own account
must constitute a course of dealings reasonably calculated to
contribute to the maintenance of price continuity with reasonable
depth, and to minimizing the effects of temporary disparity between
supply and demand. This is similarly covered in Rule 104(f)(ii). The
Exchange further believes that Rule 104(f)(iii), which provides more
details about Depth Guidelines, is also related to former Rule
104.10(3). In particular, the Exchange was publishing Depth Guidelines
when Rule 104.10 was in effect and the only change in the New Market
Model's version of the rule is to codify this aspect of DMM
obligations.
The Exchange also believes that the subject matter of former Rules
104.10(1)-(3) is now covered in current Rules 104(a)(2)-(5). Current
Rules 104(a)(2)-(5) describe with specificity how a DMM can meet his or
her responsibilities and duties to maintain a fair and orderly market,
including facilitating openings and re-openings, the close of trading,
trading when a liquidity replenishment point is reached, and trading
when a ``gap'' quote procedure is being used. These rule provisions
simply provide detail of how a DMM is to meet its fair and orderly
obligation. These were functions that specialists formerly performed
when they were subject to former Rule 104.10(1)-(3), the difference now
being that these functions have been codified in the rule text.
The Exchange further proposes to add to the Rule 476A list Rules
104(b), (c), (d), and (e). The Exchange believes that, similar to Rule
104(a), (f), (g), (h), and (i), the requirements applicable to DMMs in
Rules 104(b), (c), (d), and (e) relate to the functions of the DMMs.
Because these are DMM obligations for which potential violations can
range in severity, including these elements of Rule 104 in the Rule
476A List is consistent with the current inclusion of other aspects of
Rule 104.
In addition, the Exchange believes it is appropriate to add Rule
104(a)(1)(B) to the Rule 476A List. Rule 104(a)(1)(B) governs the DMM's
new pricing obligations, which were implemented by all equities markets
on December 6, 2010.\10\ Accordingly, this provision was not previously
included in the Minor Rule Violation Plan. The Exchange believes it is
appropriate to add this element of Rule 104 to the Minor Rule Violation
Plan to provide greater flexibility with respect to the type of
disciplinary measures that may be invoked if there were a violation of
this rule. For example, a potential situation that may warrant a
summary fine rather than formal disciplinary action could be if a DMM
fails to maintain a quote consistent with Rule 104(a)(1)(B), but which
does not result in any harm to the market.
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\10\ See Exchange Act Release No. 63255 (Nov. 5, 2010), 75 FR
69484 (Nov. 12, 2010) (SR-NYSE-2010-69).
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As noted above, summary fines provide the Exchange with flexibility
to impose an appropriate level of discipline for violations that are
more serious than an admonition letter, but for which the facts and
circumstances do not warrant formal discipline. The Exchange believes
that providing flexibility for violations related to the DMM's new
pricing obligations and Rules 104(b), (c), (d), and (e) is in keeping
with the spirit of the existing Rule 476A List, which already includes
DMM conduct rules.
To reflect these changes, the Exchange proposes to include a single
reference to ``Rule 104 requirements for the dealings and
responsibilities of DMMs'' to the Rule 476A List, which would include
all of the subsections of Rule 104 as described above.\11\ The Exchange
further notes that these summary fines may be imposed, as applicable,
on either an individual DMM, or the DMM unit, as specified in the
subsections to Rule 104.
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\11\ The Exchange notes that it has separately proposed to
delete NYSE Rule 104(a)(6). See Securities Exchange Act Release No.
65736 (Nov. 10, 2011) (SR-NYSE-2011-56). The Exchange further notes
that other elements of Rule 104, i.e., Rule 104(j) and supplementary
material .05 and .10, are not related to DMM obligations, but rather
reflect operational aspects of the Exchange.
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Rule 123D
The Exchange also proposes to update the reference relating to
delayed openings in the Rule 476A list to instead reference a specific
rule, i.e., Rule 123D, and to add all elements of Rule 123D as they
relate to DMM conduct as being eligible under the Minor Rule Violation
Plan.
The Rule 476A List currently provides that ``violations of Exchange
policies regarding procedures to be followed in delayed opening
situations'' are eligible for summary fines under the Minor Rule
Violation Plan. Such Exchange policies are codified in Rule 123D.
Accordingly, the Exchange proposes to delete the general statement of
``violations of Exchange policies regarding procedures to be followed
in delayed opening situations'' and replace it with a reference to Rule
123D. In so doing, the Exchange further proposes to add the other
requirements of DMMs that are set forth in Rule 123D relating to
openings, re-openings, trading halts, and tape indications. The
Exchange believes that the additional flexibility of determining the
appropriate level of discipline for DMM violations of Rule 123D
conforms to the purpose of the existing Rule 476A List. In particular,
the Exchange notes that adding Rule 123D in its entirety as it relates
to DMM conduct is consistent with the existing inclusion of Rule 15 in
the Rule 476A List, which similarly governs DMM's conduct with respect
to pre-opening indications.
2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with, and further the objectives of, Section 6(b)(5) of the Securities
Exchange Act of 1934, as amended,\12\ (the ``Act''), in that they are
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. The proposed rule changes also further the objectives of
Section 6(b)(6),\13\ in that they provide for appropriate discipline
for violations of provisions of the Act, the rules and regulations
thereunder, and Exchange rules and regulations.
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\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78f(b)(6).
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The Exchange believes that the proposed rule changes are designed
to prevent fraudulent and manipulative acts and practices because they
will provide the Exchange with greater regulatory flexibility to
enforce the DMM requirements set forth in NYSE Rules 104 and 123D in a
more informal manner while also preserving the Exchange's discretion to
seek formal discipline for more serious transgressions as warranted. In
addition, the proposed rule change removes impediments to and perfects
the mechanism of a free and open market by updating the Minor Rule
Violation Plan by updating rule cite references, deleting references to
obsolete rules, and for DMM-related rules, both updating the rule
references to reflect
[[Page 11184]]
the current rules that govern the topics currently identified in
outdated rule references in the Minor Rule Violation Plan as well as
adding additional elements of the rules governing DMM conduct.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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-NYSE-2012-05 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-NYSE-2012-05. 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 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-NYSE-2012-05 and should be
submitted on or before March 16, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4282 Filed 2-23-12; 8:45 am]
BILLING CODE 8011-01-P
