Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23303 

13 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. 66021 

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

2011) (SR–FINRA–2011–63) [sic]. 

4See Securities Exchange Act Release No. 65544 

(October 12, 2011), 76 FR 64406 (October 18, 2011) 

(SR–NYSEArca–2011–69). 

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–Phlx–2012–38. 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, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

All submissions should refer to File 

Number SR–Phlx–2012–38 and should 

be submitted on or before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9290 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66798; File No. SR– 

NYSEArca–2012–27] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; 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 

Commentary .02 to NYSE Arca Equities 

Rule 5320 To Require That ETP 

Holders Report to the Order Audit Trail 

System Information Barriers Put Into 

Place by the ETP Holder in Reliance on 

Commentary .02 to NYSE Arca 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 Arca, Inc. (‘‘Exchange’’ or 

‘‘NYSE Arca’’) 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 to (i) 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 Commentary .02 to NYSE 

Arca Equities Rule 5320 to require that 

ETP Holders report to the Order Audit 

Trail System (‘‘OATS’’) information 

barriers put into place by the ETP 

Holder in reliance on Commentary .02 

to NYSE Arca Equities Rule 5320. The 

text of the proposed rule change is 

available at the Exchange, www.nyse.

com, the Commission’s Public Reference 

Room, and the Commission’s Web site 

at www.sec.gov. 

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 

Commentary .02 to NYSE Arca Equities 

Rule 5320 to require that ETP Holders 

report to OATS information barriers put 

into place by the ETP Holders in 

reliance on Commentary .02 to NYSE 

Arca Equities Rule 5320. 

FINRA recently received Commission 

approval of changes to the order 

recording and transmission 

requirements of the OATS rules in 

FINRA Rules 7440 and 7450.3 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 Arca Equities Rule 7400 Series, 

which consists of NYSE Arca Equities 

Rules 7410 through 7470 and is based 

substantially on the FINRA Rule 7400 

Series.4 In this regard, NYSE Arca 

Equities Rules 7440 and 7450 

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23304 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

5The Exchange notes that the approved changes 

to FINRA Rules 7440 and 7450 that the Exchange 

proposes to adopt would be applicable only to ETP 

Holders that are also FINRA members. In particular, 

the changes relate to cross-references to FINRA Rule 

5320, and for the Exchange, to NYSE Arca Equities 

Rule 5320, which is not applicable to Proprietary 

Trading Firms, as defined in NYSE Arca Equities 

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

and therefore do not need to maintain information 

barriers. 

6See Securities Exchange Act Release No. 65166 

(August 18, 2011), 76 FR 53013 [sic] (August 24, 

2011) (SR–NYSEArca–2011–57). 

7For consistency with Exchange rules, the 

Exchange proposes to change references from 

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

FINRA Rule 5320 to ‘‘ETP Holders’’ in proposed 

Commentary .02(b) to NYSE Arca Equities Rule 

5320. The Exchange also proposes the designate the 

existing text of Commentary.02 to NYSE Arca 

Equities Rule 5320 as paragraph (a) thereto. 

8All Exchange ETP Holders that are subject to 

NYSE Arca 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. 9FINRA has announced that it will implement 

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

finra.org/Industry/Compliance/

MarketTransparency/OATS/OATSReport/P125612. 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 has satisfied this 

requirement. 

14 17 CFR 240.19b–4(f)(6). 

incorporate by reference the order data 

recording and transmission 

requirements of FINRA Rules 7440 and 

7450, respectively, by requiring ETP 

Holders 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–2011–063.5

The Exchange also recently adopted 

NYSE Arca 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.6

The Exchange hereby proposes to adopt 

as Commentary .02(b) to NYSE Arca 

Equities Rule 5320 the same language 

that was approved pursuant to SR– 

FINRA–2011–063 as Supplementary 

Material .02(c) to FINRA Rule 5320.7

Specifically, if an ETP Holder 

implements and utilizes appropriate 

information barriers in reliance on the 

no-knowledge exception provided 

under Commentary .02 to NYSE Arca 

Equities Rule 5320, the ETP Holder 

must uniquely identify such 

information barriers as prescribed in 

FINRA Rule 7440(b)(19). 

The no-knowledge exception in 

Commentary .02 to NYSE Arca Equities 

Rule 5320 provides that if an ETP 

Holder 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 ETP Holders 

claiming the no-knowledge exception.8

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.9

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),10 in general, and furthers the 

objectives of Section 6(b)(5),11 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 

between NYSE Arca 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 Arca Equities 

Rules and rules that are common to both 

NYSE Arca 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 12 and Rule 19b–4(f)(6) 

thereunder.13

A proposed rule change filed 

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

Act 14 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 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23305 

15FINRA has announced that it will implement 

the changes on April 16, 2012. See supra note 9. 

16For 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). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

5320.15 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.16 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 rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2012–27 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–2012–27. 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 SR– 

NYSEArca–2012–27, and should be 

submitted on or before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9289 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66797; File No. SR–NYSE– 

2012–09] 

Self-Regulatory Organizations; New 

York Stock Exchange 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 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 

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, the New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to (i) 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 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 

Rule 5320. The text of the proposed rule 

change is available at the Exchange, 

www.nyse.com, the Commission’s 

Public Reference Room, and the 

Commission’s Web site at www.sec.gov. 

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 

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 

Rule 5320. 

FINRA recently received Commission 

approval of changes to the order 

recording and transmission 

requirements of the OATS rules in 

mstockstill on DSK4VPTVN1PROD with NOTICES