50858 Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 

13See 74 FR 25589. 

14 15 U.S.C. 78s(b)(3)(A). 

15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) 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. FINRA has satisfied this requirement. 

16For the purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 

17See supra note 6 and accompanying text. 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

why FINRA Rule 4240 addresses in 

particular CDS transactions that are 

cleared using the central counterparty 

clearing facilities of the CME. In 

response, FINRA notes that, as 

explained in the Approval Order, the 

CME requested that FINRA adopt 

customer margin rules for CDS and 

suggested a specific customer margin 

methodology that could be employed.13

FINRA performed an analysis of the 

margin methodology suggested by CME, 

as well as the alternative methodology 

set forth in Rule 4240(c)(2), prior to 

proposing Rule 4240. The Approval 

Order further noted that FINRA will 

consider proposals it receives from CDS 

central clearing counterparties in 

addition to the CME to amend the 

customer margin rules for CDS and, if 

appropriate, will propose changes to 

such rules. 

SIFMA suggested certain changes to 

the margin requirements set forth in 

FINRA Rule 4240. FINRA believes these 

suggestions are premature and that 

additional time is needed to make a 

meaningful determination about 

whether Rule 4240 should be made 

permanent and whether certain 

provisions should be modified and, if 

so, to what extent. Consequently, at this 

time, FINRA is only seeking to extend 

the Interim Pilot Program and make 

minor technical changes. Lastly, SIFMA 

requested clarification as to certain net 

capital requirements and 

implementation issues, as well as 

documentation issues discussed in 

Regulatory Notice 09–30. FINRA notes 

that it will provide further guidance 

working with the SEC regarding 

implementation of Rule 4240, as 

appropriate. 

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 from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 14 and Rule 19b– 

(f)(6) thereunder.15

Normally, a proposed rule change 

filed under 19b–4(f)(6) may not become 

operative prior to 30 days after the date 

of filing. However, Rule 19b–4(f)(6)(iii) 

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. FINRA requested that 

the Commission waive the 30-day 

operative delay, so that the proposed 

rule change may become operative upon 

filing. The Commission believes that the 

earlier operative date is consistent with 

the protection of investors and the 

public interest because the proposed 

rule change permits the Exchange to 

implement without further delay the 

extension of its pilot program.16 This 

will prevent FINRA Rule 4240 from 

lapsing. Additionally, the Commission 

extended the temporary exemptions for 

eligible credit default swaps and 

therefore agrees with FINRA that it is 

appropriate to extend the 

implementation of the Interim Pilot 

Program to November 30, 2010.17

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

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

Number SR–FINRA–2009–063 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Florence E. Harmon, Deputy 

Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2009–063. 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 FINRA. 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–FINRA–2009–063 and 

should be submitted on or before 

October 22, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23699 Filed 9–30–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60721; File No. SR– 

NYSEArca–2009–85] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Arca, Inc. Amending Commentary .04 

to Rule 6.4 Series of Options Open for 

Trading 

September 25, 2009. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on 

September 23, 2009, NYSE Arca, Inc. 

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

with the Securities and Exchange 


PWALKER on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 50859 

3See Exchange Act Release No. 60466 (August 10, 

2009), 74 FR 41475 (August 17, 2009) (SR–Phlx– 

2009–65). Approved in Exchange Act Release No. 

60694 (September 18, 2009). 

4The Exchange may not list long-term option 

series (‘‘LEAPS’’) at $1 strike price intervals for any 

class selected for the Program. 

5The Exchange recently amended NYSE Arca 

Rule 5.4, Withdrawal of Approval of Underlying 

Securities or Options, to eliminate the $3 market 

price per share requirement for continued approval 

for an underlying security. The amendment 

eliminated the prohibition against listing additional 

series or options on an underlying security at any 

time when the price per share of such underlying 

security is less than $3. The Exchange explained in 

that proposed rule change that the market price for 

a large number of securities has fallen below $3 in 

the current volatile market environment. See 

Securities Exchange Act Release No. 59349, SR– 

NYSEArca–2009–07 (February 3, 2009), 74 FR 6939 

(February 11, 2009). 

6Additionally, market participants may be able to 

trade $2.50 strikes on the same option at another 

exchange, if that exchange has elected not to select 

the stock for participation in its own similar $1 

Strike Program. 7Again, market participants may also be able to 

trade the option at $1 strike price intervals on other 

exchanges, if those exchanges have selected the 

stock for participation in their own similar $1 Strike 

Program. 

8The option on the qualifying stock could also 

have strike prices set at $5, $7.50, and so forth at 

$2.50 intervals or, if it has been selected for the $1 

Strike Program, at $4, $5, $6, $7, and $8. 

9As of July 31, 2009, stocks trading at or below 

$3 include E*Trade Financial Corporation, Ambac 

Financial Group, Inc., Alcatel-Lucent, Federal 

Home Loan Mortgage Corporation (Freddie Mac) 

and Federal National Mortgage Association (Fannie 

Mae). A number of these stocks are widely held and 

actively traded equities, and the options overlying 

these stocks also trade actively on NYSE Arca. 

Commission (the ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Commentary .04 to Rule 6.4 Series of 

Options Open for Trading in order to 

establish strike price intervals of $0.50, 

beginning at $1, for certain options 

classes whose underlying security 

closed at or below $3 in its primary 

market on the previous trading day. 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 IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The proposed rule change is based on 

a filing submitted by NASDAQ OMX 

PHLX Inc (‘‘Phlx’’) that was recently 

noticed for comment and approved by 

the Commission.3

The purpose of the proposed rule 

change is to expand the ability of 

investors to hedge risks associated with 

stocks trading at or under $3. Currently, 

the interval of strike prices of series of 

options on individual stocks is $2.50 

where the strike price is $25 or less. 

Commentary .04 to NYSE Arca Rule 6.4 

allows the Exchange to establish $1 

strike price intervals (the ‘‘$1 Strike 

Program’’) on options classes overlying 

no more than fifty-five individual stocks 

designated by the Exchange. In order to 

be eligible for selection into the $1 

Strike Program, the underlying stock 

must close below $50 in its primary 

market on the previous trading day. If 

selected for the $1 Strike Program, the 

Exchange may list strike prices at $1 

intervals from $1 to $50, but no $1 strike 

price may be listed that is greater than 

$5 from the underlying stock’s closing 

price in its primary market on the 

previous day. The Exchange may also 

list $1 strikes on any other option class 

designated by another securities 

exchange that employs a similar $1 

Strike Program its own rules.4 The 

Exchange is restricted from listing any 

series that would result in strike prices 

being within $0.50 of a strike price set 

pursuant to Rule 6.4, Commentary .04. 

The Exchange is now proposing to 

establish strike prices of $1, $1.50, $ 2, 

$2.50, $3, and $3.50 for certain stocks 

that trade at or under $3.00.5 The listing 

of these strike prices will be limited to 

options classes whose underlying 

security closed at or below $3 in its 

primary market on the previous trading 

day, and which have national average 

daily volume that equals or exceeds 

1000 contracts per day as determined by 

The Options Clearing Corporation 

during the preceding three calendar 

months. The listing of $0.50 strike 

prices would be limited to options 

classes overlying no more than 5 

individual stocks (the ‘‘$0.50 Strike 

Program’’) as specifically designated by 

the Exchange. The Exchange would also 

be able to list $0.50 strike prices on any 

other option classes if those classes 

were specifically designated by other 

securities exchanges that employed a 

similar $0.50 Strike Program under their 

respective rules. 

Currently, the Exchange may list 

options on stocks trading at $3 at strike 

prices of $1, $2, $3, $4, $5, $6, $7, and 

$8 if they are designated to participate 

in the $1 Strike Program.6 If these stocks 

have not been selected for the 

Exchange’s $1 Strike Program, the 

Exchange may list strike prices of $2.50, 

$5, $7.50, and so forth, but not strike 

prices of $1, $2, $3, $4, $6, $7, and $8.7

The Exchange is now proposing to 

amend Commentary .04 to Rule 6.4 by 

adding new sub-paragraph (b) to list 

strike prices on options on a number of 

qualifying stocks that trade at or under 

$3.00, not simply those stocks also 

participating in the $1 Strike Program, 

in finer intervals of $0.50, beginning at 

$1 up to $3.50. Thus, a qualifying stock 

trading at $3 would have option strike 

prices established not just at $2.50, 

$5.00, $7.50, and so forth (for stocks not 

in the Exchange’s $1 Strike Program) or 

just at $1, $2, $3, $4, $5, $6, $7, and $8 

(for stocks designated to participate in 

the $1 Strike Program), but rather at 

strike prices established at $1, $1.50, $2, 

$2.50, $3, and $3.50.8

The Exchange believes that current 

market conditions demonstrate the 

appropriateness of the new strike prices. 

Recently the number of securities 

trading below $3.00 has increased 

dramatically.9 Unless the underlying 

stock has been selected for the $1 Strike 

Program, there is only one possible inthe-money call (at $2.50) to be traded if 

an underlying stock trades at $3.00. 

Similarly, unless the underlying stock 

has been selected for the $1 Strike 

Program, only one out-of-the-money 

strike price choice within 100% of a 

stock price of $3 is available if an 

investor wants to purchase out-of-themoney calls. Stated otherwise, a 

purchaser would need over a 100% 

move in the underlying stock price in 

order to have a call option at any strike 

price other than the $5 strike price 

become in-the-money. If the stock is 

selected for the $1 Strike Program, the 

available strike price choices are 

somewhat broader, but are still greatly 

limited by the proximity of the $3 stock 


PWALKER on DSK8KYBLC1PROD with NOTICES
50860 Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78s(b)(3)(A). 

13 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 is deemed to have 

satisfied this requirement. 

14See Securities Exchange Act Release No. 60694 

(September 18, 2009) (SR–Phlx–2009–65) (order 

approving a $0.50 strike program substantially the 

same as the $0.50 Strike Program proposed by 

NYSEArca). 

15For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

price to zero, and the very large percent 

gain or loss in the underlying stock 

price, relative to a higher priced stock, 

that would be required in order for 

strikes set at $1 or away from the stock 

price to become in-the-money and serve 

their intended hedging purpose. 

As a practical matter, a low-priced 

stock by its very nature requires narrow 

strike price intervals in order for 

investors to have any real ability to 

hedge the risks associated with such a 

security or execute other related options 

trading strategies. The current 

restriction on strike price intervals, 

which prohibits intervals of less than 

$2.50 (or $1 for stocks in the $1 Strike 

Program) for options on stocks trading at 

or below $3, could have a negative affect 

on investors. The Exchange believes that 

the proposed $0.50 strike price intervals 

would provide investors with greater 

flexibility in the trading of equity 

options that overlie lower priced stocks 

by allowing investors to establish equity 

option positions that are better tailored 

to meet their investment objectives. The 

proposed new strike prices would 

enable investors to more closely tailor 

their investment strategies and 

decisions to the movement of the 

underlying security. As the price of 

stocks decline below $3 or even $2, the 

availability of options with strike prices 

at intervals of $0.50 could provide 

investors with opportunities and 

strategies to minimize losses associated 

with owning a stock declining in price. 

With regard to the impact on system 

capacity, NYSE Arca has analyzed its 

capacity and represents that it and the 

Options Price Reporting Authority have 

the necessary systems capacity to 

handle the additional traffic associated 

with the listing and trading of an 

expanded number of series as proposed 

by this filing. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) 10 of the Securities Exchange Act of 

1934 (the ‘‘Act’’), in general, and 

furthers the objectives of Section 

6(b)(5) 11 in particular in that it is 

designed to promote just and equitable 

principles of trade, to prevent 

fraudulent and manipulative acts, to 

remove impediments to and to perfect 

the mechanism for a free and open 

market and a national market system 

and, in general, to protect investors and 

the public interest, by expanding the 

ability of investors to hedge risks 

associated with stocks trading at or 

below $3. The proposal should create 

greater trading and hedging 

opportunities and flexibility, and 

provide customers with the ability to 

more closely tailor investment strategies 

to the price movement of the underlying 

stocks, trading in many of which is 

highly liquid. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (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, if 

consistent with the protection of 

investors and the public interest, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act 12 and Rule 19b–4(f)(6) 

thereunder.13

The Exchange has requested that the 

Commission waive the 30-day operative 

delay to permit the Exchange to 

compete effectively with Phlx by being 

able to list the same strike prices as 

Phlx. The Commission recently 

approved SR–Phlx–2009–65,14 and 

therefore finds that waiver of the 

operative delay is consistent with the 

protection of investors and the public 

interest because such waiver will 

encourage fair competition among the 

exchanges. Therefore, the Commission 

designates the proposal operative upon 

filing.15

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

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

Number SR–NYSEArca–2009–85 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2009–85. 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 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 


PWALKER on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 50861 

16 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. 60518 

(August 18, 2009), 74 FR 42725 (‘‘Notice’’). 

4See Notice, supra note 3, 74 FR at 42725–26. 

5NYSE Arca Rule 6.46(a) requires that a Floor 

Broker handling an order use due diligence to 

execute the order at the best price or prices 

available to him, in accordance with the Rules of 

the Exchange. 

6NYSE Arca Rule 6.47A states that users may not 

execute as principal orders they represent as agent 

unless (i) agency orders are first exposed on the 

Exchange for at least one second or (ii) the user has 

been bidding or offering on the Exchange for at least 

one second prior to receiving an agency order that 

is executable against such bid or offer. 

7NYSE Arca Rule 6.75 states that the highest bid/ 

lowest offer shall have priority over all other orders. 

In the event there are two or more bids/offers for 

the same option contract representing the best price 

and one such bid/offer is displayed in the 

Consolidated Book, such bid shall have priority 

over any other bid at the post. In addition, if two 

or more bids/offers represent the best price and a 

bid/offer displayed in the Consolidated Book is not 

involved, priority shall be afforded to such bids in 

the sequence in which they are made. Rule 6.75 

also contains certain provisions related to splitprice priority and priority of complex orders. 

8See Notice, supra note 3, 74 FR at 42726. 

9 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). 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78f(b)(1) and 78f(b)(6). 

12 17 CFR 240.19d–1(c)(2). 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2009–85 and 

should be submitted on or before 

October 22, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23698 Filed 9–30–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60716; File No. SR– 

NYSEArca–2009–70] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Approving Proposed 

Rule Change Amending Rule 10.12 

(Minor Rule Plan) 

September 24, 2009. 

On July 29, 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 amending NYSE Arca Rule 10.12 

(Minor Rule Plan) (‘‘MRP’’) to 

incorporate additional violations into 

the MRP, and to increase the fine levels 

for certain MRP violations. The 

proposed rule change was published for 

comment in the Federal Register on 

August 24, 2009.3 The Commission 

received no comments regarding the 

proposal. This order approves the 

proposed rule change. 

The Exchange proposes to amend its 

MRP to incorporate violations for 

trading in restricted classes, and failure 

to report position and account 

information. Specifically, the Exchange 

proposes to implement a fine schedule 

for Options Trading Permit (‘‘OTP’’) 

Holders that affect opening transactions 

in restricted series of options, 

inconsistent with the terms of any such 

restriction, in violation of Rule 5.4(a). 

This fine will consist of $1,000 for the 

first violation during a rolling 24-month 

period, $2,500 for a second violation 

within the same period, and $5,000 for 

a third violation during the same period. 

The Exchange also proposes to 

incorporate violations for failing to 

accurately report position and account 

information to the Exchange on a Large 

Option Position Report (‘‘LOPR’’) 

pursuant to Rule 6.6(a). This fine will 

consist of $1,000 for the first violation 

in a rolling 24-month period, $2,500 for 

a second violation within the same 

period, and $5,000 for a third violation 

within the same period. The Exchange 

believes that, in most cases, violations 

of trading in restricted classes and 

violations of LOPR reporting may be 

handled efficiently through the MRP. 

However, any egregious activity or 

activity that is believed to be 

manipulative will continue to be subject 

to formal disciplinary proceedings.4

The Exchange also proposes to 

increase fines for violations of NYSE 

Arca Rules 6.46(a),5 6.47A,6 and 6.75 7

to $1,000 for the first violation in a 

rolling 24-month period, $2,500 for a 

second violation within the same 

period, and $5,000 for a third violation 

within the same period. The MRP 

currently provides for fines of $1,000 for 

the first violation of Rule 6.46(a) in a 

rolling 24-month period, $2,500 for a 

second violation within the same 

period, and $3,500 for a third violation 

within the same period. The MRP 

currently provides for fines of $500 for 

the first violation of Rule 6.47A in a 

rolling 24-month period, $1,000 for a 

second violation within the same 

period, and $2,500 for a third violation 

within the same period. The MRP 

currently provides for a fine of $500 for 

the first violation of Rule 6.75 in a 

rolling 24-month period, $1,000 for a 

second violation within the same 

period, and $2,000 for a third violation 

within the same period. The Exchange 

believes that, given the nature of these 

violations, the current fine levels are 

inadequate, and that increased fines for 

these violations are needed to deter 

future violations.8

The Commission finds that the 

proposal is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.9 In 

particular, the Commission believes that 

the proposal is consistent with Section 

6(b)(5) of the Act,10 which requires that 

the rules of an exchange be designed to, 

among other things, protect investors 

and the public interest. The 

Commission also believes that the 

proposal is consistent with Sections 

6(b)(1) and 6(b)(6) of the Act,11 which 

require that the rules of an exchange 

enforce compliance with, and provide 

appropriate discipline for, violations of 

Commission and exchange rules. 

Furthermore, the Commission believes 

that the proposed changes to the MRP 

should 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 minor nature 

of the particular violation. Therefore, 

the Commission finds that the proposal 

is consistent with the public interest, 

the protection of investors, or otherwise 

in furtherance of the purposes of the 

Act, as required by Rule 19d–1(c)(2) 

under the Act,12 which governs minor 

rule violation plans. 

In approving this proposed rule 

change, the Commission in no way 

minimizes the importance of 

compliance with NYSE Arca rules and 

all other rules subject to the imposition 

of fines under the MRP. The 

Commission believes that the violation 

of any self-regulatory organization’s 

rules, as well as Commission rules, is a 

serious matter. However, the MRP 

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 NYSE Arca will continue to 

conduct surveillance with due diligence 

and make a determination based on its 

findings, on a case-by-case basis, 

whether a fine of more or less than the 

recommended amount is appropriate for 

a violation under the MRP or whether 

a violation requires formal disciplinary 


PWALKER on DSK8KYBLC1PROD with NOTICES