Self-Regulatory Organizations; NYSE Amex LLC; Order Granting Approval of a Proposed Rule Change Amending NYSE Amex Rule 476A To Update Its “List of Equities Rule Violations and Fines Applicable Thereto”, 23532-23534 [2012-9408]
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23532
Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices
of the Act 8 in general, and furthers the
objectives of Section 6(b)(5) of the Act 9
in particular, in that it is designed 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 change would permit the
Exchange to set a minimum quotation
size requirement on a class by class
basis, provided the minimum size is at
least one contract. Phlx believes that
this flexibility will enable the Exchange
to take into consideration market
conditions and the trading and liquidity
in a particular option class and its
underlying security.
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 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 either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 10 and Rule 19b–4(f)(6) 11
thereunder.
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. If the
Commission takes such action, the
mstockstill on DSK4VPTVN1PROD with NOTICES
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15 U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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. 17 CFR 240.19b-4(f)(6).
9 15
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Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–9407 Filed 4–18–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66809; File No. SR–
NYSEAmex–2012–10]
• 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–Phlx–2012–49 on the
subject line.
Self-Regulatory Organizations; NYSE
Amex LLC; Order Granting Approval of
a Proposed Rule Change Amending
NYSE Amex Rule 476A To Update Its
‘‘List of Equities Rule Violations and
Fines Applicable Thereto’’
Paper Comments
I. Introduction
On February 16, 2012, NYSE Amex
LLC (‘‘Exchange’’ or ‘‘NYSE Amex’’)
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 amend NYSE Amex Rule
476A to update its ‘‘List of Equities Rule
Violations and Fines Applicable
Thereto.’’ The proposed rule change was
published for comment in the Federal
Register on March 5, 2012.3 The
Commission received no comment
letters on the proposed rule change.
This order approves the proposed rule
change.
• 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–Phlx–2012–49. 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–Phlx–
2012–49 and should be submitted on or
before May 10, 2012.
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April 13, 2012.
II. Description
By way of background, NYSE Amex
Rule 476 governs disciplinary
proceedings involving charges against
members, member organizations,
principal executives, approved persons,
employees, or others for violations of
the federal securities laws, Exchange
rules and agreements with the
Exchange, and other offenses listed in
the rule.
NYSE Amex Rule 476A, ‘‘Imposition
of Fines for Minor Violation(s) of
Rules,’’ provides that, in lieu of
commencing a disciplinary proceeding
under Rule 476, the Exchange may
(subject to specified requirements)
‘‘impose a fine, not to exceed $5,000, on
any member, member organization,
principal executive, approved person, or
registered or non-registered employee of
a member or member organization, for
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4 .
3 See Securities Exchange Act Release No. 66481
(February 28, 2012), 77 FR 13159 (‘‘Notice’’).
1 15
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Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices
any violation of a rule of the Exchange,
which violation the Exchange shall have
determined is minor in nature.’’ 4 The
provisions of Rule 476A are known as
the Exchange’s Minor Rule Violation
Plan.
According to the Exchange, the
‘‘summary fines’’ under Rule 476A
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.
A ‘‘List of Equities Rule Violations and
Fines Applicable Thereto’’ (‘‘Rule 476A
List’’) is appended as Part 1A of the
Supplementary Material to the rule.
In the instant proposal, NYSE Amex
proposes to amend the 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 (‘‘DMMs’’), and (iii) add
rules relating to conduct by DMMs, as
follows:
mstockstill on DSK4VPTVN1PROD with NOTICES
Proposed Non-Substantive Changes to
Rule 476A List
The Exchange proposes to update the
Rule 476A List by updating the title of
a rule, updating references to rules that
have been renumbered or harmonized
with a Financial Industry Regulatory
Authority (‘‘FINRA’’) rule, deleting
references to rules that have been
deleted, updating the descriptions of
rules that have been amended,
harmonizing the Rule 476A List with
the list in the New York Stock Exchange
(‘‘NYSE’’) Minor Rule Violation Plan,
and fixing a typographical error.5
Proposed Updates to Rule 476A List for
DMM Conduct Rules
The current Rule 476A List includes
certain rules that govern DMM conduct
(e.g., NYSE Amex Equities Rules
104(a)(1)(A) and 104.10). The Exchange
proposes to update the Rule 476A List
with current rules governing DMM
conduct. In particular, under the
proposed rule change, the list would be
amended to include, more expansively,
‘‘Rule 104—NYSE Amex Equities
requirements for the dealings and
responsibilities of DMMs,’’ as well as
‘‘Rule 123D—NYSE Amex Equities
requirements for DMMs relating to
openings, re-openings, delayed
openings, trading halts, and tape
indications.’’ Thus, additional elements
4 NYSE
Amex Rule 476A(a).
a more detailed description of these
changes, see Notice, supra note 3.
5 For
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of Rule 104, as well as Rule 123D,
would be included in the Minor Rule
Violation Plan, as further detailed
below.
Rule 104
NYSE Amex Equities Rule 104
requires 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.6
The Rule 476A List currently includes
the following elements of Rule 104:
• 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 10% of the trading day for securities
in which the DMM unit is registered that
have a consolidated average daily volume of
less than one million shares, and at least 5%
for securities in which the DMM unit is
registered that have a consolidated average
daily volume equal to or greater than one
million shares; and
• Rule 104.10, which is described in the
Rule 476A List as relating to ‘‘Functions of
DMM.’’ Rule 104.10 refers to a former rule
relating to certain subject matters that,
according to the Exchange, continue to be
covered in the current Rule 104. NYSE Amex
currently does not have a Rule 104.10.
The proposed rule change would,
instead, include a single reference in the
Rule 476A List identifying ‘‘Rule 104—
NYSE Amex Equities requirements for
the dealings and responsibilities of
DMMs’’ as subject to the Minor Rule
Violation Plan. The proposed rule
change would have the effect of adding
to the Rule 476A List Rules 104(b), (c),
(d), and (e),7 as well as Rule
104(a)(1)(B), the rule that governs the
DMM’s new pricing obligations, which
6 NYSE
Amex Equities Rule 104 currently
operates on a pilot basis, set to end on July 31,
2012. The Exchange stated its belief that the Rule
476A List should reference those rules that are
currently operational, even if operating on a pilot
basis.
7 See Notice, supra note 3 at 13160–61 for a full
description of the elements of Rule 104 that, under
the proposal, would be included in the Minor Rule
Violation Plan. The Exchange states that other
elements of Rule 104 (i.e., Rule 104(j) and
supplementary material .05) are not related to DMM
obligations, but rather reflect operational aspects of
the Exchange. See id. at note 8. The Exchange notes
that, in a separate filing, it has proposed to delete
NYSE Amex Equities Rule 104(a)(6). See Securities
Exchange Act Release No. 65735 (November 10,
2011), 76 FR 71405 (November 17, 2011) (SR–
NYSEAmex–2011–86). The Commission instituted
proceedings to determine whether to disapprove
SR–NYSEAmex–2011–86. See Securities Exchange
Act Release No. 66397 (February 15, 2012), 77 FR
10586 (February 22, 2012).
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Fmt 4703
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23533
were implemented by all equities
markets on December 6, 2010.8
Rule 123D
The Exchange also proposes to
include a reference to delayed openings,
which is addressed in NYSE Amex
Equities Rule 123D, in the Rule 476A
List to harmonize the Rule 476A List
with the list in the NYSE Minor Rule
Violation Plan as existed at the time the
Notice was filed with the Commission.9
Further, consistent with a recent NYSE
filing, the Exchange proposes to expand
the reference to Rule 123D to include
other elements of that rule (e.g.,
openings, re-openings, trading halts,
and tape indications) as being eligible
under the Exchange’s Minor Rule
Violation Plan.10 The effect of the
change would be to include additional
requirements of DMMs set forth in Rule
123D—relating to openings, reopenings, trading halts, and tape
indications—in the Minor Rule
Violation Plan.
III. Discussion and Commission
Findings
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.11 In particular, the
Commission believes that the proposed
rule change is consistent with Section
6(b)(5) of the Act 12 because expanding
the list of DMM obligations that are
subject to the Minor Rule Violation Plan
should afford the Exchange increased
flexibility in carrying out its supervisory
responsibilities, and, in doing so, help
to meet the aim of protecting investors
and the public interest.
The Commission also believes that the
proposed rule change is consistent with
8 See Securities Exchange Act Release No. 63255
(November 5, 2010), 75 FR 69484 (November 12,
2010) (SR–NYSEAmex–2010–96).
9 At the time of filing of this proposed rule
change, ‘‘violations of Exchange policies regarding
procedures to be followed in delayed opening
situations’’ were eligible for summary fines under
the NYSE Minor Rule Violation Plan. According to
the Exchange, such policies are codified in NYSE
Rule 123D, as well as in NYSE Amex Equities Rule
123D.
10 The Commission recently approved a proposed
rule change by NYSE to, among other things,
include ‘‘Rule 123D requirements for DMMs
relating to openings, re-openings, delayed openings,
trading halts, and tape indications’’ in its Minor
Rule Violation Plan. See Securities Exchange Act
Release No. 66758 (April 6, 2012), 77 FR 22032
(April 12, 2012).
11 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
12 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices
Sections 6(b)(1) and 6(b)(6) of the Act,13
which require that an exchange enforce
compliance with, and have rules that
provide appropriate discipline for
violations of, the Act, the rules and
regulations thereunder, and Exchange
rules. As an initial matter, the proposed
rule change will further these objectives
through its clarification of the list of
Exchange rule violations that are subject
to NYSE Amex Rule 476A by updating
rule titles and rule references, deleting
references to rules that have been
deleted, updating descriptions of rules
that have been amended, and fixing a
typographical error.
Further, the Commission recognizes
that the proposed rule change will
render violations of DMM obligations
under Rule 104 that were not previously
on the Rule 476A List,14 as well as
violations of DMM obligations under
Rule 123D, as eligible for treatment as
minor violations.15 However, the
Commission notes that designating a
rule as subject to the Minor Rule
Violation Plan does not signify that
violation of the rule will always be
deemed a minor violation. As noted by
the Exchange, Rule 476A preserves the
Exchange’s discretion to seek formal
discipline, as warranted, when
transgressions of rules designated as
eligible for the Minor Rule Violation
Plan are found to be more serious. Thus,
the Exchange will remain able to
require, on a case-by-case basis, formal
disciplinary action for any particular
violation. Therefore, the Commission
believes that the proposed rule change
will not compromise the Exchange’s
ability to seek more stringent sanctions
for the more serious violations of Rules
104 and 123D.
In addition, because NYSE Amex Rule
476A provides procedural rights to a
person fined under the rule, entitling
the person to contest the fine and
receive a full disciplinary proceeding,16
the Commission believes that NYSE
Amex Rule 476A, as amended by this
proposed rule change, will provide a
fair procedure for the disciplining of
Exchange members and persons
associated with members, consistent
with Sections 6(b)(7) and 6(d)(1) of the
Act.17
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–NYSEAmex–
2012–10) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–9408 Filed 4–18–12; 8:45 am]
BILLING CODE 8011–01–P
13 15
mstockstill on DSK4VPTVN1PROD with NOTICES
U.S.C. 78f(b)(1) and 15 U.S.C. 78f(b)(6).
Commission believes that it is appropriate
to include in NYSE Amex Rule 476A references to
rules that are currently operating on a pilot basis.
15 The Commission also recognizes that the
Exchange proposes to harmonize its Rule 476A List
with the NYSE Minor Rule Violation Plan by
adding violations not currently included in the Rule
476A List.
16 See NYSE Amex Rule 476A(d).
17 15 U.S.C. 78f(b)(7) and 15 U.S.C. 78f(d)(1).
Finally, the Commission finds that the
proposed rule change is consistent with
the public interest, the protection of
investors, or is otherwise in furtherance
of the purposes of the Act, as required
by Rule 19d–1(c)(2) under the Act,18
which governs minor rule violation
plans. The Commission believes that the
proposed changes to NYSE Amex Rule
476A will strengthen the Exchange’s
ability to carry out its oversight and
enforcement responsibilities as a selfregulatory organization, in cases where
full disciplinary proceedings are
unsuitable in view of the nature of a
particular violation.
In approving this proposed rule
change, the Commission emphasizes
that in no way should the amendment
of the rule be seen as minimizing the
importance of compliance with
Exchange rules and all other rules
subject to the imposition of fines under
NYSE Amex Rule 476A. The
Commission believes that the violation
of any self-regulatory organization’s
rules, as well as Commission rules, is a
serious matter. However, NYSE Amex
Rule 476A provides a reasonable means
of addressing rule violations that do not
rise to the level of requiring formal
disciplinary proceedings, while
providing greater flexibility in handling
certain violations. The Commission
expects that the Exchange will continue
to conduct surveillance with due
diligence and make a determination
based on its findings, on a case by-case
basis, of whether a violation requires
formal disciplinary action under NYSE
Amex Rule 476.
14 The
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Jkt 226001
CFR 240.19d–1(c)(2).
U.S.C. 78s(b)(2).
20 17 CFR 200.30–3(a)(12); 17 CFR 200.30–
3(a)(44).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66810; File No. SR–
NYSEArca–2012–30]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending NYSE Arca
Equities Rule 7.31(h)(4) To Make
Passive Liquidity Orders in ExchangeListed Securities Available to All
Users, Regardless of Whether a Lead
Market Maker Is Assigned to the
Security
April 13, 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 April 3,
2012, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) 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 Exchange. The Exchange has
designated the proposed rule change as
constituting a rule change under Rule
19b–4(f)(6) under the Act,3 which
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Equities Rule 7.31(h)(4) to
make Passive Liquidity Orders (‘‘PL
Orders’’) in Exchange-listed securities
available to all Users, regardless of
whether a Lead Market Maker (‘‘LMM’’)
is assigned to the security. The text of
the proposed rule change is available at
the Exchange, www.nyse.com, and 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
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,
18 17
19 15
PO 00000
Frm 00085
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1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
2 17
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]]>Agencies
[Federal Register Volume 77, Number 76 (Thursday, April 19, 2012)]
[Notices]
[Pages 23532-23534]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-9408]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66809; File No. SR-NYSEAmex-2012-10]
Self-Regulatory Organizations; NYSE Amex LLC; Order Granting
Approval of a Proposed Rule Change Amending NYSE Amex Rule 476A To
Update Its ``List of Equities Rule Violations and Fines Applicable
Thereto''
April 13, 2012.
I. Introduction
On February 16, 2012, NYSE Amex LLC (``Exchange'' or ``NYSE Amex'')
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
amend NYSE Amex Rule 476A to update its ``List of Equities Rule
Violations and Fines Applicable Thereto.'' The proposed rule change was
published for comment in the Federal Register on March 5, 2012.\3\ The
Commission received no comment letters on 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. 66481 (February 28,
2012), 77 FR 13159 (``Notice'').
---------------------------------------------------------------------------
II. Description
By way of background, NYSE Amex Rule 476 governs disciplinary
proceedings involving charges against members, member organizations,
principal executives, approved persons, employees, or others for
violations of the federal securities laws, Exchange rules and
agreements with the Exchange, and other offenses listed in the rule.
NYSE Amex Rule 476A, ``Imposition of Fines for Minor Violation(s)
of Rules,'' provides that, in lieu of commencing a disciplinary
proceeding under Rule 476, the Exchange may (subject to specified
requirements) ``impose a fine, not to exceed $5,000, on any member,
member organization, principal executive, approved person, or
registered or non-registered employee of a member or member
organization, for
[[Page 23533]]
any violation of a rule of the Exchange, which violation the Exchange
shall have determined is minor in nature.'' \4\ The provisions of Rule
476A are known as the Exchange's Minor Rule Violation Plan.
---------------------------------------------------------------------------
\4\ NYSE Amex Rule 476A(a).
---------------------------------------------------------------------------
According to the Exchange, the ``summary fines'' under Rule 476A
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. A ``List
of Equities Rule Violations and Fines Applicable Thereto'' (``Rule 476A
List'') is appended as Part 1A of the Supplementary Material to the
rule.
In the instant proposal, NYSE Amex proposes to amend the 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 (``DMMs''), and
(iii) add rules relating to conduct by DMMs, as follows:
Proposed Non-Substantive Changes to Rule 476A List
The Exchange proposes to update the Rule 476A List by updating the
title of a rule, updating references to rules that have been renumbered
or harmonized with a Financial Industry Regulatory Authority
(``FINRA'') rule, deleting references to rules that have been deleted,
updating the descriptions of rules that have been amended, harmonizing
the Rule 476A List with the list in the New York Stock Exchange
(``NYSE'') Minor Rule Violation Plan, and fixing a typographical
error.\5\
---------------------------------------------------------------------------
\5\ For a more detailed description of these changes, see
Notice, supra note 3.
---------------------------------------------------------------------------
Proposed Updates to Rule 476A List for DMM Conduct Rules
The current Rule 476A List includes certain rules that govern DMM
conduct (e.g., NYSE Amex Equities Rules 104(a)(1)(A) and 104.10). The
Exchange proposes to update the Rule 476A List with current rules
governing DMM conduct. In particular, under the proposed rule change,
the list would be amended to include, more expansively, ``Rule 104--
NYSE Amex Equities requirements for the dealings and responsibilities
of DMMs,'' as well as ``Rule 123D--NYSE Amex Equities requirements for
DMMs relating to openings, re-openings, delayed openings, trading
halts, and tape indications.'' Thus, additional elements of Rule 104,
as well as Rule 123D, would be included in the Minor Rule Violation
Plan, as further detailed below.
Rule 104
NYSE Amex Equities Rule 104 requires 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.\6\
---------------------------------------------------------------------------
\6\ NYSE Amex Equities Rule 104 currently operates on a pilot
basis, set to end on July 31, 2012. The Exchange stated its belief
that the Rule 476A List should reference those rules that are
currently operational, even if operating on a pilot basis.
---------------------------------------------------------------------------
The Rule 476A List currently includes the following elements of
Rule 104:
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 10% of the trading day for securities in which
the DMM unit is registered that have a consolidated average daily
volume of less than one million shares, and at least 5% for
securities in which the DMM unit is registered that have a
consolidated average daily volume equal to or greater than one
million shares; and
Rule 104.10, which is described in the Rule 476A List
as relating to ``Functions of DMM.'' Rule 104.10 refers to a former
rule relating to certain subject matters that, according to the
Exchange, continue to be covered in the current Rule 104. NYSE Amex
currently does not have a Rule 104.10.
The proposed rule change would, instead, include a single reference
in the Rule 476A List identifying ``Rule 104--NYSE Amex Equities
requirements for the dealings and responsibilities of DMMs'' as subject
to the Minor Rule Violation Plan. The proposed rule change would have
the effect of adding to the Rule 476A List Rules 104(b), (c), (d), and
(e),\7\ as well as Rule 104(a)(1)(B), the rule that governs the DMM's
new pricing obligations, which were implemented by all equities markets
on December 6, 2010.\8\
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\7\ See Notice, supra note 3 at 13160-61 for a full description
of the elements of Rule 104 that, under the proposal, would be
included in the Minor Rule Violation Plan. The Exchange states that
other elements of Rule 104 (i.e., Rule 104(j) and supplementary
material .05) are not related to DMM obligations, but rather reflect
operational aspects of the Exchange. See id. at note 8. The Exchange
notes that, in a separate filing, it has proposed to delete NYSE
Amex Equities Rule 104(a)(6). See Securities Exchange Act Release
No. 65735 (November 10, 2011), 76 FR 71405 (November 17, 2011) (SR-
NYSEAmex-2011-86). The Commission instituted proceedings to
determine whether to disapprove SR-NYSEAmex-2011-86. See Securities
Exchange Act Release No. 66397 (February 15, 2012), 77 FR 10586
(February 22, 2012).
\8\ See Securities Exchange Act Release No. 63255 (November 5,
2010), 75 FR 69484 (November 12, 2010) (SR-NYSEAmex-2010-96).
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Rule 123D
The Exchange also proposes to include a reference to delayed
openings, which is addressed in NYSE Amex Equities Rule 123D, in the
Rule 476A List to harmonize the Rule 476A List with the list in the
NYSE Minor Rule Violation Plan as existed at the time the Notice was
filed with the Commission.\9\ Further, consistent with a recent NYSE
filing, the Exchange proposes to expand the reference to Rule 123D to
include other elements of that rule (e.g., openings, re-openings,
trading halts, and tape indications) as being eligible under the
Exchange's Minor Rule Violation Plan.\10\ The effect of the change
would be to include additional requirements of DMMs set forth in Rule
123D--relating to openings, re-openings, trading halts, and tape
indications--in the Minor Rule Violation Plan.
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\9\ At the time of filing of this proposed rule change,
``violations of Exchange policies regarding procedures to be
followed in delayed opening situations'' were eligible for summary
fines under the NYSE Minor Rule Violation Plan. According to the
Exchange, such policies are codified in NYSE Rule 123D, as well as
in NYSE Amex Equities Rule 123D.
\10\ The Commission recently approved a proposed rule change by
NYSE to, among other things, include ``Rule 123D requirements for
DMMs relating to openings, re-openings, delayed openings, trading
halts, and tape indications'' in its Minor Rule Violation Plan. See
Securities Exchange Act Release No. 66758 (April 6, 2012), 77 FR
22032 (April 12, 2012).
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III. Discussion and Commission Findings
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.\11\ In
particular, the Commission believes that the proposed rule change is
consistent with Section 6(b)(5) of the Act \12\ because expanding the
list of DMM obligations that are subject to the Minor Rule Violation
Plan should afford the Exchange increased flexibility in carrying out
its supervisory responsibilities, and, in doing so, help to meet the
aim of protecting investors and the public interest.
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\11\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\12\ 15 U.S.C. 78f(b)(5).
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The Commission also believes that the proposed rule change is
consistent with
[[Page 23534]]
Sections 6(b)(1) and 6(b)(6) of the Act,\13\ which require that an
exchange enforce compliance with, and have rules that provide
appropriate discipline for violations of, the Act, the rules and
regulations thereunder, and Exchange rules. As an initial matter, the
proposed rule change will further these objectives through its
clarification of the list of Exchange rule violations that are subject
to NYSE Amex Rule 476A by updating rule titles and rule references,
deleting references to rules that have been deleted, updating
descriptions of rules that have been amended, and fixing a
typographical error.
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\13\ 15 U.S.C. 78f(b)(1) and 15 U.S.C. 78f(b)(6).
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Further, the Commission recognizes that the proposed rule change
will render violations of DMM obligations under Rule 104 that were not
previously on the Rule 476A List,\14\ as well as violations of DMM
obligations under Rule 123D, as eligible for treatment as minor
violations.\15\ However, the Commission notes that designating a rule
as subject to the Minor Rule Violation Plan does not signify that
violation of the rule will always be deemed a minor violation. As noted
by the Exchange, Rule 476A preserves the Exchange's discretion to seek
formal discipline, as warranted, when transgressions of rules
designated as eligible for the Minor Rule Violation Plan are found to
be more serious. Thus, the Exchange will remain able to require, on a
case-by-case basis, formal disciplinary action for any particular
violation. Therefore, the Commission believes that the proposed rule
change will not compromise the Exchange's ability to seek more
stringent sanctions for the more serious violations of Rules 104 and
123D.
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\14\ The Commission believes that it is appropriate to include
in NYSE Amex Rule 476A references to rules that are currently
operating on a pilot basis.
\15\ The Commission also recognizes that the Exchange proposes
to harmonize its Rule 476A List with the NYSE Minor Rule Violation
Plan by adding violations not currently included in the Rule 476A
List.
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In addition, because NYSE Amex Rule 476A provides procedural rights
to a person fined under the rule, entitling the person to contest the
fine and receive a full disciplinary proceeding,\16\ the Commission
believes that NYSE Amex Rule 476A, as amended by this proposed rule
change, will provide a fair procedure for the disciplining of Exchange
members and persons associated with members, consistent with Sections
6(b)(7) and 6(d)(1) of the Act.\17\
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\16\ See NYSE Amex Rule 476A(d).
\17\ 15 U.S.C. 78f(b)(7) and 15 U.S.C. 78f(d)(1).
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Finally, the Commission finds that the proposed rule change is
consistent with the public interest, the protection of investors, or is
otherwise in furtherance of the purposes of the Act, as required by
Rule 19d-1(c)(2) under the Act,\18\ which governs minor rule violation
plans. The Commission believes that the proposed changes to NYSE Amex
Rule 476A will strengthen the Exchange's ability to carry out its
oversight and enforcement responsibilities as a self-regulatory
organization, in cases where full disciplinary proceedings are
unsuitable in view of the nature of a particular violation.
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\18\ 17 CFR 240.19d-1(c)(2).
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In approving this proposed rule change, the Commission emphasizes
that in no way should the amendment of the rule be seen as minimizing
the importance of compliance with Exchange rules and all other rules
subject to the imposition of fines under NYSE Amex Rule 476A. The
Commission believes that the violation of any self-regulatory
organization's rules, as well as Commission rules, is a serious matter.
However, NYSE Amex Rule 476A provides a reasonable means of addressing
rule violations that do not rise to the level of requiring formal
disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission expects that the Exchange
will continue to conduct surveillance with due diligence and make a
determination based on its findings, on a case by-case basis, of
whether a violation requires formal disciplinary action under NYSE Amex
Rule 476.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-NYSEAmex-2012-10) be, and
hereby is, approved.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9408 Filed 4-18-12; 8:45 am]
BILLING CODE 8011-01-P
