23298 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange’s affiliate, the New York Stock 

Exchange LLC, has filed a substantially similar rule 

filing. See SR–NYSE–2012–09 filed April 2, 2012. 

4See Securities Exchange Act Release No. 66021 

(December 21, 2011), 76 FR 81551 (December 28, 

2011) (SR–FINRA–2011–63) [sic]. 

5See Securities Exchange Act Release No. 65524 

(October 7, 2011), 76 FR 64151 (October 17, 2011) 

(SR–NYSEAmex–2011–74). 

6The Exchange notes that the approved changes 

to FINRA Rules 7440 and 7450 that the Exchange 

proposes to adopt would be applicable only to 

Exchange member organization [sic] that are also 

FINRA members. In particular, the changes relate to 

cross-references to FINRA Rule 5320, and for the 

Exchange, to NYSE Amex Equities Rule 5320, 

which is not applicable to Proprietary Trading 

Firms, as defined in NYSE Amex Equities Rule 

7410(p), because they do not have customers and 

therefore do not need to maintain information 

barriers. 

7See Securities Exchange Act Release No. 65165 

(August 18, 2011), 76 FR 53009 (August 24, 2011) 

(SR–NYSEAmex–2011–59). 

8For consistency with Exchange rules, the 

Exchange proposes to change references from 

‘‘members’’ in Supplementary Material .02(c) to 

FINRA Rule 5320 to ‘‘member organizations’’ in 

proposed Supplementary Material .02(b) to NYSE 

Amex Equities Rule 5320. The Exchange also 

proposes to designate the existing text of 

Supplementary Material .02 to NYSE Amex Equities 

Rule 5320 as paragraph (a) thereto. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9282 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66795; File No. SR– 

NYSEAmex-2012–21] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Adopt Recent 

Changes to FINRA Rules 7440 and 

7450, and To Adopt Recent Changes to 

FINRA Rule 5320 by Amending 

Supplementary Material .02 to NYSE 

Amex Equities Rule 5320 To Require 

that Member Organizations Report to 

the Order Audit Trail System 

Information Barriers Put Into Place by 

the Member Organization in Reliance 

on Supplementary Material .02 to NYSE 

Amex Equities Rule 5320 

April 12, 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 2, 

2012, NYSE Amex LLC (‘‘Exchange’’ or 

‘‘NYSE Amex’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes (i) to adopt 

recent changes to Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

Rules 7440 and 7450, which the 

Exchange has incorporated by reference 

in its own rules, and (ii) adopt recent 

changes to FINRA Rule 5320 by 

amending Supplementary Material .02 

to NYSE Amex Equities Rule 5320 to 

require that member organizations 

report to the Order Audit Trail System 

(‘‘OATS’’) information barriers put into 

place by the member organization in 

reliance on Supplementary Material .02 

to NYSE Amex Equities Rule 5320. The 

text of the proposed rule change is 

available at the Exchange, the 

Commission’s Public Reference Room, 

the Commission’s Web site at 

www.sec.gov, and www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to (i) adopt 

recent changes to FINRA Rules 7440 

and 7450, which the Exchange has 

incorporated by reference in its own 

rules, and (ii) adopt recent changes to 

FINRA Rule 5320 by amending 

Supplementary Material .02 to NYSE 

Amex Equities Rule 5320 to require that 

member organizations report to OATS 

information barriers put into place by 

the member organizations in reliance on 

Supplementary Material .02 to NYSE 

Amex Equities Rule 5320.3

FINRA recently received Commission 

approval of changes to the order 

recording and transmission 

requirements of the OATS rules in 

FINRA Rules 7440 and 7450.4 First, 

FINRA amended FINRA Rule 7440 to 

require FINRA members relying on the 

no-knowledge exception in 

Supplementary Material .02 to FINRA 

Rule 5320 (Prohibition Against Trading 

Ahead of Customer Orders) to report 

information to OATS regarding the 

information barriers adopted by the 

member in reliance on the exception— 

FINRA also added this requirement 

under Supplementary Material .02 to 

FINRA Rule 5320. Second, FINRA 

amended FINRA Rule 7440 to extend, to 

all OATS-eligible securities, the existing 

requirement to reflect on OATS reports 

a customer’s instruction regarding 

display of the customer’s limit orders— 

the requirement previously applied only 

to limit orders involving NMS stocks. 

Finally, FINRA amended FINRA Rule 

7450 to codify the specific time by 

which OATS reports must be 

transmitted to FINRA. 

The Exchange recently adopted the 

NYSE Amex Equities Rule 7400 Series, 

which consists of NYSE Amex Equities 

Rules 7410 through 7470 and is based 

substantially on the FINRA Rule 7400 

Series.5 In this regard, NYSE Amex 

Equities Rules 7440 and 7450 

incorporate by reference the order data 

recording and transmission 

requirements of FINRA Rules 7440 and 

7450, respectively, by requiring member 

organizations and associated persons to 

comply with FINRA Rules 7440 and 

7450 as if those rules were part of the 

Exchange’s rules. Accordingly, the 

Exchange hereby proposes to adopt the 

changes to FINRA Rules 7440 and 7450 

that were approved pursuant to SR– 

FINRA–2011–063. 6

The Exchange also recently adopted 

NYSE Amex Equities Rule 5320, which 

is substantially the same as FINRA Rule 

5320 and prohibits trading ahead of 

customer orders with certain 

exceptions, including large order and 

institutional account exceptions, a noknowledge exception, a riskless 

principal exception, an intermarket 

sweep order exception, and odd lot and 

bona fide error transaction exceptions.7

The Exchange hereby proposes to adopt 

as Supplementary Material .02(b) to 

NYSE Amex Equities Rule 5320 the 

same language that was approved 

pursuant to SR–FINRA–2011–063 as 

Supplementary Material .02(c) to FINRA 

Rule 5320.8 Specifically, if a member 

organization implements and utilizes 

appropriate information barriers in 

reliance on the no-knowledge exception 

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Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23299 

9All Exchange member organizations that are 

subject to NYSE Amex Equities Rule 5320 are also 

FINRA members, and FINRA reviews compliance 

with that rule pursuant to an allocation plan under 

Rule 17d–2 of the Securities Exchange Act of 1934. 10FINRA has announced that it will implement 

the changes on April 16, 2012. See http:// 

www.finra.org/Industry/Compliance/ 

MarketTransparency/OATS/OATSReport/P125612. 

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

12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78s(b)(3)(A). 

14 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. 

15 17 CFR 240.19b–4(f)(6). 

16FINRA has announced that it will implement 

the changes on April 16, 2012. See supra note 10. 

17For 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). 

provided under Supplementary Material 

.02 to NYSE Amex Equities Rule 5320, 

the member organization must uniquely 

identify such information barriers as 

prescribed in FINRA Rule 7440(b)(19). 

The no-knowledge exception in 

Supplementary Material .02 to NYSE 

Amex Equities Rule 5320 provides that 

if a member organization implements 

and uses an effective system of internal 

controls—such as appropriate 

information barriers—that operate to 

prevent one trading unit from obtaining 

knowledge of customer orders held by a 

separate trading unit, that other trading 

unit may trade in a proprietary capacity 

at prices that would satisfy the customer 

orders held by the separate, walled-off 

trading unit. Through the use of OATS, 

FINRA will be able to ascertain, on an 

automated basis, those member 

organizations claiming the noknowledge exception.9 This will reduce 

the potential for ‘‘false positive’’ alerts 

by allowing FINRA to account for the 

existence of information barriers when 

running automated surveillance patterns 

designed to identify inappropriate 

trading ahead of customer orders. These 

new requirements should substantially 

reduce the number of ‘‘false positives’’ 

that are identified through automated 

surveillance patterns by permitting 

FINRA to account for information 

barriers when trading ahead may 

otherwise be indicated. 

The Exchange proposes to implement 

the changes proposed herein on the 

same date that FINRA implements the 

changes approved pursuant to SR– 

FINRA–2011–063, thereby eliminating 

the potential for different regulatory 

requirements between common 

members.10

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),11 in general, and furthers the 

objectives of Section 6(b)(5),12 in 

particular, because 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, 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. Specifically, the 

proposed rule change would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

providing greater harmonization among 

NYSE Rules, NYSE Amex Equities rules, 

and FINRA Rules of similar substance 

and purpose. This would result in less 

burdensome and more efficient 

regulatory compliance, which would 

foster cooperation and coordination 

with persons engaged in facilitating 

transactions in securities and promote 

the protection of investors and the 

public interest. The changes proposed 

herein are also designed to prevent 

fraudulent and manipulative acts and 

practices and to promote just and 

equitable principles of trade by ensuring 

that FINRA Rules incorporated by 

reference in the NYSE Amex Equities 

Rules and rules that are common among 

NYSE, NYSE Amex Equities, and 

FINRA remain consistent after 

amendments to the particular FINRA 

Rules. 

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 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 prior to 30 days from the date 

on which it was filed, or such shorter 

time as the Commission may designate, 

if consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

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

of the Act 13 and Rule 19b–4(f)(6) 

thereunder.14

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 15 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6) 

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange requests 

that the Commission waive the 30-day 

operative delay so that the proposed 

rule change may become effective on the 

same date that FINRA implements the 

changes to FINRA Rules 7440, 7450, and 

5320.16 The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest and, 

therefore, designates the proposal 

operative upon filing.17 Waiving the 30- 

day operative delay will enable the 

Exchange to implement the proposed 

rule change on the same day that FINRA 

implements the changes to its rules on 

which the proposed rule change is 

based, thereby eliminating the potential 

for different regulatory requirements for 

members of both FINRA and the 

Exchange. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2012–21 on 

the subject line. 

mstockstill on DSK4VPTVN1PROD with NOTICES

23300 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

18 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. 66572 

(March 12, 2012), 77 FR 15152 (‘‘Notice’’). 

4BATS Trading operates as a facility of BATS 

that provides outbound routing from BATS to other 

market centers, subject to certain conditions. See 

Securities Exchange Act Release No. 62901 

(September 13, 2010), 75 FR 57097 (September 17, 

2010) (SR–BATS–2010–024). 

5See Securities Exchange Act Release No. 62716 

(August 13, 2010), 75 FR 51295 (August 19, 2010) 

(File No. 10–198) (order granting the exchange 

registration of BATS Y–Exchange, Inc.) (‘‘BYX 

Approval Order’’). 

6See Securities Exchange Act Release No. 58375 

(August 18, 2008), 73 FR 49498 (August 21, 2008) 

(File No. 10–182) (order granting the exchange 

registration of BATS Exchange, Inc.). 

7See generally BYX Approval Order, supra note 

5. 8See BYX Approval Order, 75 FR at 51304. 9See Securities Exchange Act Release No. 65515 

(October 7, 2011), 76 FR 63979 (October 14, 2011) 

(SR–BYX–2011–026). 

10See Notice, supra note 3. 

11 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition and capital 

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

12 15 U.S.C. 78f(b)(1). 

13 15 U.S.C. 78f(b)(5). 

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- NYSEAmex–2012–21. 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 (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 Web site viewing and 

printing in the Commission’s Public 

Reference Room 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 New York Stock Exchange LLC’s 

principal office and on its Internet Web 

site at www.nyse.com. 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 SRNYSEAmex–2012–21, and should be 

submitted on or before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9287 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66807; File No. SR–BYX– 

2012–006] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Order Approving a 

Proposed Rule Change To Amend 

BATS Y-Exchange, Inc. Rule 2.12 to 

Make Permanent the Pilot Program 

That Permits BATS Y-Exchange, Inc. 

To Receive Inbound Routes of Equities 

Orders Through BATS Trading, Inc., 

BATS Y-Exchange’s Routing BrokerDealer, From BATS Exchange, Inc. 

April 13, 2012. 

I. Introduction 

On March 8, 2012, BATS Y-Exchange, 

Inc. (‘‘BYX’’ 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 requesting permanent approval 

of the Exchange’s pilot program that 

permits the Exchange to receive 

inbound routes of equities orders 

through BATS Trading, Inc. (‘‘BATS 

Trading’’), the Exchange’s routing 

broker-dealer, from BATS Exchange, 

Inc. (‘‘BATS’’). The proposed rule 

change was published for comment in 

the Federal Register on March 14, 

2012.3 The Commission received no 

comment letters regarding the proposed 

rule change. This order approves the 

proposed rule change. 

II. Background 

BATS Trading is a broker-dealer that 

is a member of the Exchange and is 

permitted to provide members of BATS 

optional routing services to other market 

centers.4 BATS Trading is owned by 

BATS Global Markets (‘‘Corporation’’). 

The Corporation also owns two 

registered securities exchanges—the 

Exchange5 and BATS.6 Thus, BATS 

Trading is an affiliate of the Exchange 

and BATS. 

On August 13, 2010, the Commission 

approved the Exchange’s application for 

registration as a national securities 

exchange.7 As part of that approval, the 

Exchange was approved to receive 

inbound routes of orders by BATS 

Trading in its capacity as an order 

routing facility of BATS on a pilot 

period of twelve months.8 On 

September 29, 2011, the Exchange filed 

an immediately effective proposed rule 

change to extend the pilot period six 

months ending April 15, 2012.9 The 

Exchange now seeks permanent 

approval of this inbound routing pilot.10

III. Discussion and Commission 

Findings 

After careful review, 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 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(1) of the Act,12 which requires, 

among other things, that a national 

securities exchange be so organized and 

have the capacity to carry out the 

purposes of the Act, and to comply and 

enforce compliance by its members and 

persons associated with its members, 

with the provisions of the Act, the rules 

and regulation thereunder, and the rules 

of the Exchange. Further, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,13 which requires, 

among other things, that the rules of a 

national securities exchange be 

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 

regulating, clearing, settling, and 

processing information with respect to, 

and facilitating transactions in 

securities; 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. 

Section 6(b)(5) also requires that the 

mstockstill on DSK4VPTVN1PROD with NOTICES