43178 Federal Register / Vol. 74, No. 164 / Wednesday, August 26, 2009 / Notices 

4 15 U.S.C. 78f(b). 

5 15 U.S.C. 78f(b)(5). 

6 15 U.S.C. 78f(b)(6). 

7 15 U.S.C. 78f(b)(7). 

8 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60054 

(June 5, 2009), 74 FR 28078 (‘‘Notice’’). 

to such bids in the sequence in which 

they are made. Rule 963NY also 

contains certain provisions for related to 

split-price priority and priority of 

complex orders. Violators of any part of 

Rule 6.63NY are subject to a sanction 

pursuant to the MRP, specifically Rule 

476A Part 1C(iii)(i)29. Suggested fines 

for violations of Rule 963NY are 

presently $500 for the first violation in 

a rolling twenty-four month period, 

$1,000 for a second violation within the 

same period fine and a third violation 

is subject to a $2,000 fine. 

At this time the Exchange believes the 

current monetary fine levels contained 

in the MRP, for the three above 

mentioned violations, are inadequate, 

given the serious nature of these rules. 

In order to act as an effective deterrent 

against future violations, while also 

serving as a just penalty for those who 

commit these violations, the Exchange 

feels an increase in the fine levels for 

these three violations is warranted. 

NYSE Amex now proposes fine levels of 

$1,000 for the first violation in a rolling 

twenty-four month period, $2,500 for a 

second violation within the same period 

fine and $5,000 for a third violation 

within the same period fine. These fine 

levels will apply to all three types of 

violations mentioned above. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) 4 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’), in general, and furthers the 

objectives of Section 6(b)(5) 5 in 

particular in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. 

The proposal is also consistent with 

Section 6(b)(6) 6 and 6(b)(7),7 which 

requires that members and persons 

associated with members are 

appropriately disciplined for violations 

of Exchange rules and are provided a 

fair procedure for disciplinary 

procedures. 

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 35 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 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2009–45 on 

the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEAmex–2009–45. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying 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 such 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 publicly available. All 

submissions should refer to File 

Number SR–NYSEAmex–2009–45 and 

should be submitted on or before 

September 16, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20533 Filed 8–25–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60527; File No. SR– 

NYSEArca–2009–45] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

a Proposed Rule Change as Modified 

by Amendment No. 1 Thereto To Adopt 

Rules Implementing the Options Order 

Protection and Locked/Crossed Market 

Plan 

August 18, 2009. 

I. Introduction 

On May 20, 2009, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend and adopt rules to 

implement the Options Order Protection 

and Locked/Crossed Market Plan. The 

proposed rule change was published for 

comment in the Federal Register on 

June 12, 2009.3 On July 12, 2009, the 

Exchange filed Amendment No. 1 to the 


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4Amendment No. 1 clarified that this proposed 

rule change will become effective upon the 

Exchange’s withdrawal from the Plan for the 

Purpose of Creating and Operating an Intermarket 

Option Linkage and the effectiveness of the Options 

Order Protection and Locked/Crossed Market Plan. 

In addition, Amendment No. 1 revised Proposed 

NYSE Arca Rule 6.95(b) to delete the last sentence 

which stated, in reference to the proposed locked/ 

crossed market exception for non-customer quotes, 

that the ‘‘exemption is operative as long as the 

Exchange identifies the presence of Customer 

orders in its disseminated bid or offer’’ because the 

sentence was not included in similar rules of other 

exchanges. Because the amendment provided 

clarification and revised the Exchange’s proposed 

locked and crossed market rule in a non-substantive 

manner to conform with similar proposed rules of 

other exchanges, the amendment did not require 

notice and comment. 

5The Plan is a national market system plan 

proposed by the seven existing options exchanges 

and approved by the Commission. See Securities 

Exchange Act Release No. 59647 (March 30, 2009), 

74 FR 15010 (April 2, 2009) (File No. 4–546) (‘‘Plan 

Notice’’) and 60405 (July 30, 2009), 74 FR 39362 

(August 6, 2009) (File No. 4–546) (‘‘Plan 

Approval’’). The seven options exchanges are: 

Chicago Board Options Exchange, Incorporated 

(‘‘CBOE’’); International Securities Exchange, LLC 

(‘‘ISE’’); The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’); NASDAQ OMX BX, Inc. (‘‘BOX’’); 

NASDAQ OMX PHLX, Inc. (‘‘Phlx’’); NYSE Amex 

LLC (‘‘NYSE Amex’’); and NYSE Arca (each 

exchange individually a ‘‘Participant’’ and, 

together, the ‘‘Participating Options Exchanges’’). 

6On July 28, 2000, the Commission approved the 

Old Plan as a national market system plan for the 

purpose of creating and operating an intermarket 

options market linkage proposed by the American 

Stock Exchange LLC (n/k/a NYSE Amex), CBOE, 

and ISE. See Securities Exchange Act Release No. 

43086 (July 28, 2000), 65 FR 48023 (August 4, 

2000). Subsequently, Philadelphia Stock Exchange, 

Inc. (n/k/a Phlx), Pacific Exchange, Inc. (n/k/a 

NYSE Arca), Boston Stock Exchange, Inc. (n/k/a 

BOX), and Nasdaq joined the Linkage Plan. See 

Securities Exchange Act Release Nos. 43573 

(November 16, 2000), 65 FR 70851 (November 28, 

2000); 43574 (November 16, 2000), 65 FR 70850 

(November 28, 2000); 49198 (February 5, 2004), 69 

FR 7029 (February 12, 2004); and 57545 (March 21, 

2008), 73 FR 16394 (March 27, 2008). 

7Section 8(c) of the Old Plan. 

8The Linkage Hub is a centralized data 

communications network that electronically links 

the Participating Options Exchanges to one another. 

The Options Clearing Corporation (‘‘OCC’’) operates 

the Linkage Hub. 

9Section 2(16) of the Old Plan. 

10Section 7(a)(i)(C) of the Old Plan. 

11See Securities Exchange Act Release No. 60360 

(July 21, 2009) 74 FR 37265 (July 28, 2009) (File No. 

4–429). 

12 17 CFR 242.608. 

13See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005) (File 

No. S7–10–04); 17 CFR 242.600 et seq. For 

discussions of the similarities between the 

provisions of Regulation NMS and the provisions in 

the Plan, see the Plan Notice and Plan Approval, 

supra note 5. 

14Under the Plan, a ‘‘Trade-Through’’ is generally 

defined as a transaction in an option series, either 

as principal or agent, at a price that is lower than 

a Protected Bid or higher than a Protected Offer.’’ 

See Section 2(21) of the Plan. A ‘‘Protected Bid’’ 

and ‘‘Protected Offer’’ generally means a bid or offer 

in an option series, respectively, that is displayed 

by a Participant, is disseminated pursuant to the 

Options Price Reporting Authority (‘‘OPRA’’) Plan, 

and is the Best Bid or Best Offer. See Section 2(17) 

of the Plan. A ‘‘Best Bid’’ or ‘‘Best Offer’’ means the 

highest bid price and the lowest offer price. Section 

(2)(1) of the Plan. ‘‘Protected Bid’’ and ‘‘Protected 

Offer,’’ together are referred to herein as ‘‘Protected 

Quotation.’’ See Section 2(18) of the Plan. 

15Section 5(a)(ii) of the Plan. 

16Section 5(b) of the Plan. 

17Subparagraphs (ii), (vii), and (viii), 

respectively, of Section 5(b) of the Plan. 

18Subparagraphs (i), (iii), (vi), (ix), (xi), and (iv)– 

(v), respectively, of Section 5(b) of the Plan. 

19Subparagraph (x) of Section 5(b) of the Plan. 

20Section 6 of the Plan. The Plan also contains 

provisions relating to the operation of the Plan 

including, for example, provisions relating to the 

entry of new parties to the Plan; withdrawal from 

the Plan; and amendments to the Plan. 

21A more detailed description of the Exchange’s 

proposed rule change may be found in the Notice, 

supra, note 3. 

22Proposed NYSE Arca Rule 6.92. 

23Proposed NYSE Arca Rule 6.94(a). 

proposed rule change.4 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change, as modified by Amendment No. 

1. 

II. Description of the Proposal 

The Exchange proposes to amend and 

adopt new NYSE Arca rules to 

implement the Options Order Protection 

and Locked/Crossed Market Plan 

(‘‘Plan’’).5 Specifically, the Exchange 

proposes to amend and/or replace NYSE 

Arca Rules 6.92 through 6.96 with new 

rules implementing the Plan, amend 

other Exchange rules to reflect the Plan, 

and delete rules rendered unnecessary 

by the Plan. 

The Old Plan 

Each of the Participating Options 

Exchanges are signatories to the Plan for 

the Purpose of Creating and Operating 

an Intermarket Option Linkage (‘‘Old 

Plan’’).6 In pertinent part, the Old Plan 

generally requires its participants to 

avoid trading at a price inferior to the 

national best bid or offer (‘‘tradethrough’’), although it provides for a 

number of exceptions to trade-through 

liability.7 The Participating Options 

Exchanges comply with this 

requirement of the Old Plan by utilizing 

a stand alone system (‘‘Linkage Hub’’) to 

send and receive specific order types,8

namely Principal Acting as Agent 

Orders (‘‘P/A Orders’’), Principal 

Orders, and Satisfaction Orders.9 The 

Old Plan also provided that 

dissemination of ‘‘locked’’ or ‘‘crossed’’ 

markets should be avoided, and 

remedial actions that should be taken to 

unlock or uncross such market.10 Each 

of the Participating Options Exchanges, 

including the Exchange, has submitted 

an amendment to the Old Plan to 

withdraw from such Plan.11 The 

withdrawals will be effective upon 

approval by the Commission of such 

amendments pursuant to Rule 608 of 

Regulation NMS under the Act 

(‘‘Regulation NMS’’).12

The Plan 

The Plan does not require a central 

linkage mechanism akin to the Old 

Plan’s Linkage Hub. Instead, the Plan 

includes the framework for routing 

orders via private linkages that exist for 

NMS stocks under Regulation NMS.13

The Plan requires the Participating 

Options Exchanges to adopt rules 

‘‘reasonably designed to prevent TradeThroughs.’’ 14 Participating Options 

Exchanges are also required to conduct 

surveillance of their respective markets 

on a regular basis to ascertain the 

effectiveness of the policies and 

procedures to prevent Trade-Throughs 

and to take prompt action to remedy 

deficiencies in such policies and 

procedures.15 As further described 

below, the Plan incorporates a number 

of exceptions to trade-through 

liability.16 Some of these exceptions are 

carried over from the Old Plan, 

including exceptions for trading 

rotations, non-firm quotes, and complex 

trades.17 Others are substantially similar 

to exceptions available for NMS stocks 

under Regulation NMS, such as 

exceptions for systems issues, crossed 

markets, quote flickering, customer 

stopped orders, benchmark trades and, 

notably, intermarket sweep orders 

(‘‘ISOs’’).18 In addition, the Plan 

contains a new exception for stopped 

orders and price improvement.19

The Plan also requires each 

Participant to establish, maintain, and 

enforce written rules that: require its 

members reasonably to avoid displaying 

locked and crossed markets; assure the 

reconciliation of locked and crossed 

markets; and prohibit its members from 

engaging in a pattern or practice of 

displaying locked and crossed markets; 

subject to exceptions as may be 

contained in the rules of the Participant, 

as approved by the Commission.20

The Exchange’s Proposal 

To implement the Plan, the Exchange 

proposes to replace its current rules 

relating to the Old Plan with new rules 

relating to the Plan, and makes 

amendments to other rules as necessary 

to conform to the requirements of the 

Plan.21 As such, the Exchange proposes 

to adopt all applicable definitions from 

the Plan into the Exchange’s rules.22

In addition, the Exchange proposes to 

prohibit its members from effecting 

Trade-Throughs, unless an exception 

applies.23 Consistent with the Plan, the 

Exchange also proposes exceptions to 

the prohibition on trade throughs 

relating to: System issues; trading 


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24Proposed NYSE Arca Rule 6.94(b)(1)–(10). In 

addition, the Exchange proposes to add ISOs as a 

new type of order under proposed NYSE Arca Rule 

6.62(z). 

25A ‘‘locked market’’ is defined as a quoted 

market in which a Protected Bid is equal to a 

Protected Offer. Proposed NYSE Arca Rule 

6.92(a)(9). A ‘‘crossed market’’ is defined as a 

quoted market in which a Protected Bid is higher 

than a Protected Offer. Proposed NYSE Arca Rule 

6.92(a)(5). 

26Proposed NYSE Arca Rule 6.95(a). 

27Proposed NYSE Arca Rule 6.95(b)(1)–(4). 

28NYSE Arca noted that it can envision a 

customer authorizing a lock when the fees 

associating with trading against the locked market 

make the execution price uneconomical to the 

customer. See Notice, supra note 3 at 28080. 

29Proposed NYSE Arca Temporary Rule 6.96. 

30See Notice, supra note 3 at 28080–81, 

discussing proposed changes to NYSE Arca Rule 

6.33, Commentaries .02–.04 to NYSE Arca Rule 

6.35, and NYSE Arca Rule 6.76A. 

31 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

32 15 U.S.C. 78f(b)(5). 

33 17 CFR 242.608(c). Section 1 of the Plan 

provides in pertinent part that, ‘‘The Participants 

will submit to the [Commission] for approval their 

respective rules that will implement the framework 

of the Plan.’’ 

34See supra note 5. 

35Proposed NYSE Arca Rule 6.94(b)(1)–(10). 

rotations; crossed markets; intermarket 

sweep orders; quote flickering; non-firm 

quotes; complex trades; customer 

stopped orders; stopped orders and 

price improvement; and benchmark 

trades.24

The Exchange also proposes a rule to 

address locked and crossed markets, as 

required by the Plan.25 Specifically, the 

Exchange proposes that, except for 

quotations that fall within a stated 

exception, members shall reasonably 

avoid displaying, and shall not engage 

in a pattern or practice of displaying, 

any quotations that lock or cross a 

Protected Quote.26

The Exchange proposes four 

exceptions to the prohibition against 

locked and crossed markets: When the 

Exchange is experiencing a failure, 

material delay, or malfunction of its 

systems or equipment; when the locking 

or crossing quotation was displayed at 

a time where there is a crossed market; 

when an Exchange member 

simultaneously routes an ISO to execute 

against the full displayed size of any 

locked or crossed Protected Bid or 

Protected Offer; and, with respect to a 

locking quotation, when the order 

entered on the Exchange that will lock 

a Protected Bid or Protected Offer, is (i) 

not a customer order, and the Exchange 

can determine via identification 

available pursuant to the OPRA Plan 

that such Protected Bid or Protected 

Offer does not represent, in whole or in 

part, a customer order; or (ii) a customer 

order, and the Exchange can determine 

via identification available pursuant to 

the OPRA Plan that such Protected Bid 

or Protected Offer does not represent, in 

whole or in part, a customer order, and, 

on a case-by-case basis, the customer 

specifically authorizes the member to 

lock such Protected Bid or Protected 

Offer.27 The Exchange believes that, in 

most cases, locked market maker quotes 

are good for the investing public, but 

recognizes that the benefits of a locked 

market become more complicated when 

one or both of the locking quotations 

represent a customer order. Where there 

is market interest willing to trade with 

a customer, the Exchange believes that 

the customer order should be filled. 

Thus, the Exchange proposes that it 

would not exempt from the locked 

market prohibition situations involving 

customer orders unless the customer 

entering the locking order specifically 

authorizes the lock on a case-by-case 

basis.28 As a result, its members would 

not be permitted to lock another 

Participant’s quotation unless the 

Exchange can establish that the 

quotation on the other Participant’s 

market is not for the account of a 

customer. 

The Exchange also proposes rules to 

permit it to continue to accept P/A 

Orders and Principal Orders from 

Participating Options Exchanges that are 

not able to send ISOs in order to avoid 

Trade-Throughs.29 The Exchange noted 

that, even upon the approvals of the 

Plan and the implementing rules of the 

various Participating Options 

Exchanges, it is possible that not all the 

Participants will be functionally able to 

operate pursuant to the Plan. Thus, the 

Exchange has proposed to retain certain 

rules governing the receipt of P/A 

Orders and Principal Orders until such 

time that all Participating Options 

Exchanges are operating pursuant to the 

Plan. 

The Exchange also proposes to delete 

certain provisions of NYSE Arca rules to 

reflect the Exchange’s withdrawal from 

the Old Plan.30 Finally, the Exchange 

proposes to amend NYSE Arca Rule 

10.12, the Exchange’s Minor Rule Plan, 

to replace references to the Old Plan 

with references to the Plan. 

II. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

amended, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.31 In 

particular, the Commission finds that 

the proposal is consistent with Section 

6(b)(5) of the Act 32 which requires, 

among other things, that the rules of a 

national securities exchange be 

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 Commission also 

finds that the proposal is consistent 

with Rule 608(c) of Regulation NMS 

under the Act, which requires that each 

exchange comply with the terms of any 

effective national market system plan of 

which it is a participant.33 Finally, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Plan.34

Proposed NYSE Arca Rule 6.92 would 

define applicable terms in a manner that 

are substantively identical to the 

defined terms of the Plan. As such, the 

Commission finds that proposed 

amendments to NYSE Arca Rule 6.92 

are consistent with the Act and the Plan. 

Proposed NYSE Arca Rule 6.94(a) 

would prohibit members from effecting 

Trade-Throughs unless an exception 

applies. Proposed NYSE Arca Rule 

6.94(b) would provide for ten 

exceptions to the general Trade-Through 

prohibition, relating to systems issues, 

trading rotations, crossed markets, ISOs, 

quote flickering, non-firm quotes, 

complex trades, customer stopped 

orders, stopped orders and price 

improvement, and benchmark trades.35

Aside from the proposed exception 

relating to systems issues, each 

proposed exception would be 

substantively identical to the parallel 

exception under Section 5(b) of the 

Plan. 

The systems issues exception under 

proposed NYSE Arca Rule 6.94(b)(1) 

would implement the parallel exception 

available under Section 5(b)(i) of the 

Plan and would permit the Exchange to 

bypass the Protected Quotation of 

another Participant if such other 

Participant repeatedly fails to respond 

within one second to incoming orders 

attempting to access its Protected 

Quotations. The Exchange’s rule would 

require the Exchange to notify such nonresponding Participant immediately 

after (or at the same time as) electing 

self-help, and assess whether the cause 

of the problem lies with the Exchange’s 

own systems and, if so, take immediate 

steps to resolve the problem. Finally, 

the Exchange would be required to 

promptly document its reasons 

supporting any such determination to 

bypass a Protected Quotation. The 

Commission believes that this exception 

should provide the Exchange with the 


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36Proposed NYSE Arca Rule 6.94(b)(4). 

37 15 U.S.C. 78f(b)(5). 

38Section 6 of the Plan permits exceptions to the 

Plan’s locked and crossed market rules as may be 

contained in the rules of a Participant approved by 

the Commission. 

necessary flexibility for dealing with 

problems that occur on an away market 

during the trading day. At the same 

time, the exception’s requirements to 

immediately notify such away market of 

its determination and also assess its 

own system should help prevent the use 

of this exception when there in fact is 

a problem with the Exchange’s own 

systems, rather than those of an away 

market. 

The Commission notes that included 

among the exception in proposed NYSE 

Arca Rule 6.94(b) would be an 

exception for certain transactions 

involving ISOs.36 An order identified as 

an ISO would be immediately 

executable by the Exchange (or any 

other Plan Participant that received 

such an order) based on the premise that 

the market participant sending the ISO 

has already attempted to access all 

better-priced Protected Quotations up to 

their displayed size. The Commission 

believes that this exception should help 

ensure more efficient and faster 

executions in the options markets. 

The Commission notes that, in 

addition to these rules regarding TradeThroughs, the Plan requires that each 

Participant establish, maintain and 

enforce written policies and procedures 

that are reasonably designed to prevent 

Trade-Throughs in that Participant’s 

market that do not fall within an 

applicable exception and, if relying on 

such exception, that are reasonably 

designed to assure compliance with the 

terms of the exception. In addition, the 

Commission notes that the Plan requires 

each Participant to conduct surveillance 

of its market on a regular basis to 

ascertain the effectiveness of such 

policies and procedures and to take 

prompt action to remedy any 

deficiencies in such policies and 

procedures. 

Accordingly, the Commission finds 

that proposed NYSE Arca Rule 6.94 is 

consistent with Section 5 of the Plan 

and Section 6(b)(5) of the Act 37 which 

requires, among other things, that the 

rules of a national securities exchange 

be 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. 

Proposed NYSE Arca Rule 6.95(a) 

would require Exchange members to 

reasonably avoid displaying, and not 

engage in a pattern or practice of 

displaying, any quotation that locks or 

crosses a Protected Quotation, subject to 

certain exceptions delineated in 

proposed NYSE Arca Rule 6.95(b). The 

Commission recognizes that locked and 

crossed markets may occur accidentally 

and cannot always be avoided. 

However, the Commission believes that 

giving priority to the first-displayed 

Protected Bid or Protected Offer, 

particularly when it includes a public 

customer’s order, will encourage price 

discovery and contribute to fair and 

orderly markets. Therefore, the 

Commission believes that the proposed 

rule, which corresponds to the Plan’s 

language, to require members to 

reasonably avoid displaying, and not 

engaging in a pattern or practice of, 

locks and crosses is appropriate. 

Proposed NYSE Arca Rule 6.95(b) 

would permit four exceptions to the 

Exchange’s general rule relating to 

locked and crossed markets.38 The first 

three would be similar to analogous 

certain trade-through exceptions under 

proposed NYSE Arca Rule 6.94(b), and 

relate to when the Exchange is 

experiencing systems issues, when there 

is exists a crossed market, and when a 

member simultaneously routes ISOs 

against the full displayed size of any 

locked or crossed Protected Bid or 

Protected Offer. 

The fourth exception would permit an 

order entered onto the Exchange to lock 

a Protected Bid or Protected Offer when 

such order is: (1) not a customer order, 

and the Exchange can determine that 

such Protected Bid or Protected Offer 

does not represent, in whole or in part, 

a customer order; or (2) a customer 

order, and the Exchange can determine 

that such Protected Bid or Protected 

Offer does not represent, in whole or in 

part, a customer order and, on a caseby-case basis, the customer specifically 

authorizes the Exchange’s member to 

lock such Protected Bid or Protected 

Offer. This exception would not protect 

a market maker quote or broker-dealer 

order from being locked. 

The Commission believes that the 

Exchange’s proposed rules relating to 

locked and crossed markets are 

consistent with the Plan and the Act 

and should help ensure that the display 

of locked or crossed markets will be 

limited and that any such display will 

be promptly reconciled. The 

Commission also believes that each of 

the proposed exceptions to locked and 

crossed markets relate to circumstances 

when it is appropriate to permit a 

limited, narrow exception to the general 

locked and crossed market rule. 

In particular, the Commission 

believes that the fourth exception is 

appropriate because it would protect 

customer orders that are Protected Bids 

or Protected Offers from being locked, 

and would only permit a customer order 

entered on to the Exchange to lock a 

Protected Bid or Protected Offer when a 

customer specifically authorizes an 

Exchange member, and only when such 

Protected Bid or Protected Offer itself 

does not represent, in whole or in part, 

a customer order. Because of the 

rapidity with which options quotes are 

often updated today, particularly in 

response to changes in the underlying, 

there is an increasing likelihood that 

market maker quotations will lock each 

other. The proposed exception accounts 

for this dynamic by not prohibiting such 

locking instances. Importantly, the 

proposed exception in the Exchange’s 

rules that the Commission is approving 

would allow non-customer orders to 

lock an away market’s Protected 

Quotation only if the Exchange is able 

to affirmatively determine that the 

Protected Quotation on the away market 

is not, in whole or in part, for the 

account of a customer. If any portion of 

such away market’s Protected Quotation 

is for the account of a customer, such 

Protected Quotation may not be locked. 

In addition, the Commission notes that 

the rule requires that such 

determination be made via 

identification available pursuant to the 

OPRA Plan, which is working with the 

participating options exchanges on a 

method to so identify customer 

quotations through OPRA. The 

Exchange has represented that, absent 

the ability to identify a customer quote 

as part of an exchange’s BBO, the 

Exchange would assume that the quote 

represents, in whole or in part, a 

customer order. As such, the Exchange 

has represented that it would not permit 

its members to avail themselves of this 

exemption unless the away market has 

informed the Exchange that it would 

designate all customer orders as such in 

OPRA and such exchange’s quotation 

does not contain such designation. 

Finally, the Exchange has represented 

that if an exchange chooses not to 

identify its customer quotations, the 

Exchange would treat all of such 

exchange’s quotations as customer 

orders and, absent application of 

another exception, would not permit 

locks of such quotations. 

Therefore, the Commission finds that 

Exchange’s rule regarding locked and 

crossed markets appropriately 

implements Section 6 of the Plan, and 

is consistent with Section 6(b)(5) of the 


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43182 Federal Register / Vol. 74, No. 164 / Wednesday, August 26, 2009 / Notices 

39 15 U.S.C. 78f(b)(5). 

40See Plan Approval, supra, note 5. 

41The Commission notes that any Participating 

Options Exchange that wishes to utilize such order 

types in a manner that would result in a TradeThrough would need to separately request an 

exemption from the Plan for such use. 

42The Commission notes that the rules contained 

in NYSE Arca Temporary Rule 6.96 are not required 

by the Plan, but rather are rules proposed by the 

Exchange in order to facilitate the participation in 

the Plan of certain exchanges during an initial 

transition period. 

43 15 U.S.C. 78f(b)(5). 

44 15 U.S.C. 78s(b)(2). 

45 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(e). 

4 17 U.S.C. 78a. 

5 17 CFR 240.19b–4(c)(1). 

6 15 U.S.C. 78s(b). 

7E-mail from Timothy Malinowski, Director, 

NYSE Euronext, to Edward Cho, Special Counsel, 

Division of Trading and Markets, Commission, 

dated August 11, 2009 (‘‘Exchange Confirmation’’). 

8See Securities Exchange Act Release No. 40761 

(December 8, 1998), 63 FR 70952 (December 22, 

1998) [sic]. 

9See Securities Exchange Act Release No. 34– 

58968 (November 17, 2008), 73 FR 64647 [sic] (SR– 

NYSEArca–2008–111). 

10See Securities Exchange Act Release No. 34– 

57739 (April 30, 2008), 73 FR 25061 [sic] (SR– 

Amex–2008–17). 

11See Exchange Confirmation, supra note 7. 

Act 39 which requires, among other 

things, that the rules of a national 

securities exchange be 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 Commission also finds that 

proposed NYSE Arca Temporary Rule 

6.96, which facilitates the participation 

of certain Participating Options 

Exchanges who may require the use of 

P/A Orders and Principal Orders after 

implementation of the Plan, is 

consistent with the Act. Although the 

Commission has already approved the 

Plan,40 the Commission also recognizes 

that there may be one or more 

Participating Options Exchanges that 

may require a temporary transition 

period during which they may want to 

continue to utilize these order types that 

exist currently under the Old Plan.41

The Exchange and each of the other 

Participating Options Exchanges have 

proposed substantially identical 

temporary provisions to accommodate 

this possibility.42 Thus, the Commission 

finds that the proposed rule relating to 

the Exchange’s receipt and handling of 

P/A Orders and Principal Orders, and 

imposing certain obligations on the 

Exchange with respect to such orders 

that are similar to those that exist under 

the Old Plan, is appropriate and 

consistent with Section 6(b)(5) of the 

Act 43 which requires, among other 

things, that the rules of a national 

securities exchange be 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. 

Finally, the Commission finds that 

NYSE Arca’s other proposed changes, 

including the proposed modifications to 

NYSE Arca Rule 6.33, Commentary .02– 

.04 to NYSE Arca Rule 6.35, NYSE Arca 

Rule 6.76.A, and NYSE Arca Rule 10.12 

are appropriate and consistent with the 

Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,44 that the 

proposed rule change (SR–NYSEArca– 

2009–45), as modified by Amendment 

No. 1, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.45

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20537 Filed 8–25–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60535; File No. SR– 

NYSEAmex–2009–55] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and Order 

Granting Accelerated Approval of 

Proposed Rule Change Amending 

Section 107(H) of the NYSE Amex 

Company Guide 

August 19, 2009. 

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 August 

10, 2009, NYSE Amex LLC (‘‘NYSE 

Amex’’ or the ‘‘Exchange’’) 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 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons and is 

approving the proposed rule change on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Section 107(H) of the NYSE Amex 

Company Guide in order to add the 

CBOE Volatility Index® (VIX®) Futures 

(‘‘VIX Futures’’) to the definition of 

Futures Reference Asset. The text of the 

proposed rule change is attached as 

Exhibit 5 to the 19b–4 form. A copy of 

this filing is available on the Exchange’s 

Web site at http://www.nyse.com, at the 

Exchange’s principal office 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 

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 III 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 

Rule 19b–4(e) 3 under the Securities 

Exchange Act of 1934 (‘‘Act’’) 4 provides 

that the listing and trading of a new 

derivative securities product by a selfregulatory organization (‘‘SRO’’) shall 

not be deemed a proposed rule change, 

pursuant to section (c)(1) of Rule 19b– 

4,5 if the Commission has approved, 

pursuant to Section 19(b) of the Act,6

the SRO’s trading rules, procedures, and 

listing standards for the product class 

that would include the new derivative 

securities product,7 and the SRO has a 

surveillance program for the product 

class.8 This proposal is substantially 

similar to the previously approved 

NYSE Arca Equities Rule 5.2(j)(6)(v).9

The Commission has approved the 

listing pursuant to Section 107(H) of the 

Amex Company Guide, including listing 

pursuant to Rule 19b–4(e), of FuturesLinked Securities.10

The Exchange is proposing to amend 

its generic listing standards under 

Section 107(H) of the NYSE Amex 

Company Guide 11 for Futures-Linked 

Securities pursuant to which it will be 

able to trade securities linked to VIX 

Futures without Commission approval 

of each individual product pursuant to 


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