Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23295 

15See id. 

16See, e.g., Securities Exchange Act Release Nos. 

54170 (July 18, 2006), 71 FR 42149 (July 25, 2006) 

(SR–NASDAQ–2006–006) (order approving 

Nasdaq’s proposal to adopt Nasdaq Rule 2140, 

restricting affiliations between Nasdaq and its 

members); 53382 (February 27, 2006), 71 FR 11251 

(March 6, 2006) (SR–NYSE–2005–77) (order 

approving the combination of the New York Stock 

Exchange, Inc. and Archipelago Holdings, Inc.); 

58673 (September 29, 2008), 73 FR 57707 (October 

8, 2008) (SR–Amex–2008–62) (order approving the 

combination of NYSE Euronext and the American 

Stock Exchange LLC); 59135 (December 22, 2008), 

73 FR 79954 (December 30, 2008) (SR–ISE–2009– 

85) (order approving the purchase by ISE Holdings 

of an ownership interest in DirectEdge Holdings 

LLC); and 59281 (January 22, 2009), 74 FR 5014 

(January 28, 2009) (SR–NYSE–2008–120) (order 

approving a joint venture between NYSE and BIDS 

Holdings L.P.). 

17This oversight will be accomplished through a 

17d–2 Agreement. See Inbound Router Notice, 75 

FR at 57097. 

18 15 U.S.C. 78s(b)(2). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

• The Exchange shall enter into a 

plan pursuant to Rule 17d–2 under the 

Exchange Act with a non-affiliated selfregulatory organization (‘‘SRO’’) to 

relieve the Exchange of regulatory 

responsibilities for BATS Trading with 

respect to rules that are common rules 

between the Exchange and the nonaffiliated SRO, and enter into a 

regulatory contract (‘‘Regulatory 

Contract’’) with a non-affiliated SRO to 

perform regulatory responsibilities for 

BATS Trading for unique Exchange 

rules. 

• The Regulatory Contract shall 

require the Exchange to provide the 

non-affiliated SRO with information, in 

an easily accessible manner, regarding 

all exception reports, alerts, complaints, 

trading errors, cancellations, 

investigations, and enforcement matters 

(collectively ‘‘Exceptions’’) in which 

BATS Trading is identified as a 

participant that has potentially violated 

Exchange or Commission Rules, and 

shall require that the non-affiliated SRO 

provide a report, at least quarterly, to 

the Exchange quantifying all Exceptions 

in which BATS Trading is identified as 

a participant that has potentially 

violated Exchange or Commission 

Rules. 

• The Exchange, on behalf of the 

Corporation, shall establish and 

maintain procedures and internal 

controls reasonably designed to ensure 

that BATS Trading does not develop or 

implement changes to its system on the 

basis of non-public information 

regarding planned changes to Exchange 

systems, obtained as a result of its 

affiliation with the Exchange, until such 

information is available generally to 

similarly situated member organizations 

of the Exchange in connection with the 

provision of inbound order routing to 

the Exchange. 

• The Exchange may furnish to BATS 

Trading the same information on the 

same terms that the Exchange makes 

available in the normal course of 

business to any other member 

organization. 

The Exchange believes that by meeting 

the above-listed conditions it has set up 

mechanisms that protect the 

independence of the Exchange’s 

regulatory responsibility with respect to 

BATS Trading, and has demonstrated 

that BATS Trading cannot use any 

information that it may have because of 

its affiliation with the Exchange to its 

advantage.15

In the past, the Commission has 

expressed concern that the affiliation of 

an exchange with one of its members 

raises potential conflicts of interest, and 

the potential for unfair competitive 

advantage.16 Although the Commission 

continues to be concerned about 

potential unfair competition and 

conflicts of interest between an 

exchange’s self-regulatory obligations 

and its commercial interest when the 

exchange is affiliated with one of its 

members, for the reasons discussed 

below, the Commission believes that it 

is consistent with the Act to permit 

BATS Trading, in its capacity as a 

facility of BATS-Y, to provide inbound 

routing to the Exchange on a permanent 

basis instead of a pilot basis, subject to 

the other conditions described above. 

The Exchange has proposed four 

ongoing conditions applicable to BATS 

Trading’s inbound routing activities in 

its capacity as a facility of BATS-Y, 

which are enumerated above. The 

Commission believes that these 

conditions mitigate its concerns about 

potential conflicts of interest and unfair 

competitive advantage. In particular, the 

Commission believes that a nonaffiliated SRO’s oversight of BATS 

Trading,17 combined with a nonaffiliated SRO’s monitoring of BATS 

Trading’s compliance with the 

Exchange’s rules and quarterly reporting 

to the Exchange, will help to protect the 

independence of the Exchange’s 

regulatory responsibilities with respect 

to BATS Trading. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,18 that the 

proposed rule change (SR–BATS–2012– 

013) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9342 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66789; File No. SR–ISE– 

2012–30] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Increasing Certain 

Rebates and Taker Fees for Complex 

Orders in Options on the SPDR®

S&P500® ETF Trust 

April 12, 2012. 

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 April 10, 

2012, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The 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 ISE proposes to increase certain 

rebates and taker fees for complex 

orders in options on the SPDR®

S&P500® ETF Trust (‘‘SPY’’). The text of 

the proposed rule change is available on 

the Exchange’s Web site (http:// 

www.ise.com), at the principal office of 

the Exchange, 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 these statements may be examined at 

the places specified in Item IV below. 

mstockstill on DSK4VPTVN1PROD with NOTICES

23296 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

3Options classes subject to maker/taker fees are 

identified by their ticker symbol on the Exchange’s 

Schedule of Fees. 

4See Exchange Act Release Nos. 65021 (August 

3, 2011), 76 FR 48933 (August 9, 2011) (SR–ISE– 

2011–45); and 65550 (October 13, 2011), 76 FR 

64984 (October 19, 2011) (SR–ISE–2011–65). 

5See Exchange Act Release No. 65724 (November 

10, 2011), 76 FR 71413 (November 17, 2011) (SR– 

ISE–2011–72). 

6See Exchange Act Release Nos. 66084 (January 

3, 2012), 77 FR 1103 (January 9, 2012) (SR–ISE– 

2011–84); and 66392 (February 14, 2012), 77 FR 

10016 (February 21, 2012) (SR–ISE–2012–06). 

7The term ‘‘Market Makers’’ refers to 

‘‘Competitive Market Makers’’ and ‘‘Primary Market 

Makers’’ collectively. See ISE Rule 100(a)(25). 

8A Market Maker Plus is an ISE Market Maker 

who is on the National Best Bid or National Best 

Offer 80% of the time for series trading between 

$0.03 and $5.00 (for options whose underlying 

stock’s previous trading day’s last sale price was 

less than or equal to $100) and between $0.10 and 

$5.00 (for options whose underlying stock’s 

previous trading day’s last sale price was greater 

than $100) in premium in each of the front two 

expiration months and 80% of the time for series 

trading between $0.03 and $5.00 (for options whose 

underlying stock’s previous trading day’s last sale 

price was less than or equal to $100) and between 

$0.10 and $5.00 (for options whose underlying 

stock’s previous trading day’s last sale price was 

greater than $100) in premium across all expiration 

months in order to receive the rebate. The Exchange 

determines whether a Market Maker qualifies as a 

Market Maker Plus at the end of each month by 

looking back at each Market Maker’s quoting 

statistics during that month. If at the end of the 

month, a Market Maker meets the Exchange’s stated 

criteria, the Exchange rebates $0.10 per contract for 

transactions executed by that Market Maker during 

that month. The Exchange provides Market Makers 

a report on a daily basis with quoting statistics so 

that Market Makers can determine whether or not 

they are meeting the Exchange’s stated criteria. 

9A Customer (Professional) is a person who is not 

a broker/dealer and is not a Priority Customer. 

10A Non-ISE Market Maker, or Far Away Market 

Maker (‘‘FARMM’’), is a market maker as defined 

in Section 3(a)(38) of the Act, registered in the same 

options class on another options exchange. 

11A Priority Customer is defined in ISE Rule 

100(a)(37A) as a person or entity that is not a 

broker/dealer in securities, and does not place more 

than 390 orders in listed options per day on average 

during a calendar month for its own beneficial 

account(s). 

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

13 15 U.S.C. 78f(b)(4). 

The self-regulatory organization has 

prepared summaries, set forth in 

sections A, B and C below, of the most 

significant aspects 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 currently assesses per 

contract transaction charges and credits 

to market participants that add or 

remove liquidity from the Exchange 

(‘‘maker/taker fees’’) in a number of 

options classes (the ‘‘Select Symbols’’).3

The Exchange’s maker/taker fees are 

applicable to regular and complex 

orders executed in the Select Symbols. 

The maker/taker fees for complex orders 

in the Select Symbols also apply to all 

symbols that are in the Penny Pilot 

program.4 The Exchange also currently 

assesses maker/taker fees for complex 

orders in symbols that are in the Penny 

Pilot program but are not a Select 

Symbol (‘‘Non-Select Penny Pilot 

Symbols’’) 5 and for complex orders in 

all symbols that are not in the Penny 

Pilot Program (‘‘Non-Penny Pilot 

Symbols’’).6 Maker/taker fees (and 

rebates) for complex orders are assessed 

on the following order-type categories: 

ISE Market Maker,7 Market Maker Plus,8

Firm Proprietary, Customer 

(Professional) 9, Non-ISE Market 

Maker10, and Priority Customer.11 The 

Exchange is proposing to increase 

certain rebate amounts and taker fees for 

complex orders in options on only one 

Select Symbol—SPY—as follows. 

In the Select Symbols, the Exchange 

currently provides a base rebate of $0.32 

per contract, per leg, for Priority 

Customer complex orders when these 

orders trade with non-Priority Customer 

complex orders in the complex 

orderbook. Additionally, Members can 

earn a higher rebate amount by 

achieving certain average daily volume 

(ADV) thresholds on a month-to-month 

basis. In order to enhance the 

Exchange’s competitive position and to 

incentivize Members to increase the 

amount of Priority Customer complex 

orders for options on SPY that they send 

to the Exchange, the Exchange is 

proposing to increase the base amount 

of the rebate for options on SPY to $0.33 

per contract. Additionally, the Exchange 

is proposing to increase the amount of 

that rebate even further, on a month-bymonth and Member-by-Member basis, if 

such Member achieves a certain ADV of 

Priority Customer complex order 

contracts executed during the calendar 

month, as follows: If the Member 

achieves an ADV of 75,000 Priority 

Customer complex order contracts, the 

rebate amount for such SPY option 

contracts shall be $0.34 (currently 

$0.33) per contract per leg; if the 

Member achieves an ADV of 125,000 

Priority Customer complex order 

contracts, the rebate amount for such 

SPY option contracts shall be $0.35 

(currently $0.34) per contract per leg. 

The highest SPY rebate amount 

achieved by the Member for the current 

calendar month shall apply retroactively 

to all Priority Customer complex order 

SPY contracts that trade with nonPriority Customer complex orders in the 

complex orderbook executed by the 

Member during such calendar month. 

Further, the Exchange currently 

provides a rebate of $0.06 per contract, 

per leg, for Priority Customer complex 

orders when these orders trade against 

quotes or orders in the regular 

orderbook. In order to enhance the 

Exchange’s competitive position and to 

incentivize Members to increase the 

amount of Priority Customer complex 

orders for options on SPY that they send 

to the Exchange, the Exchange is 

proposing to increase the rebate to $0.07 

per contract, per leg, for Priority 

Customer complex orders for options on 

SPY, regardless of size, when these 

orders trade against quotes or orders in 

the regular orderbook. 

Finally, for complex orders in the 

Select Symbols (including SPY), the 

Exchange currently charges a ‘‘taker’’ fee 

of: (i) $0.34 Per contract for ISE Market 

Maker, Market Maker Plus, Firm 

Proprietary and Customer (Professional) 

orders; and (ii) $0.38 per contract for 

Non-ISE Market Maker orders. Priority 

Customer orders are not charged a 

‘‘taker’’ fee for complex orders in the 

Select Symbols. The Exchange now 

proposes to increase the ‘‘taker’’ fee for 

complex orders in SPY to (i) $0.35 per 

contract for ISE Market Maker, Market 

Maker Plus, Firm Proprietary and 

Customer (Professional) orders; and (ii) 

$0.39 for Non-ISE Market Maker orders. 

The Exchange is not proposing to 

change the ‘‘maker’’ fees in SPY. 

Additionally, ISE Market Makers who 

remove liquidity in SPY from the 

complex order book by trading with 

Priority Customer orders that are 

preferenced to them are currently 

charged $0.32 per contract. The 

Exchange now proposes to increase to 

$0.33 per contract the amount charged 

to ISE Market Makers who remove 

liquidity in SPY from the complex order 

book by trading with Priority Customer 

orders that are preferenced to them. 

Since the rate changes to the Schedule 

of Fees pursuant to this proposal will be 

effective upon filing, for the transactions 

occurring in April 2012 prior to the 

effective date of this filing members will 

be assessed the rates in effect 

immediately prior to those proposed by 

this filing. For transactions occurring in 

April 2012 on and after the effective 

date of this filing, members will be 

assessed the rates proposed by this 

filing. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Schedule of Fees 

is consistent with Section 6(b) of the 

Act 12 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 13

in particular, in that it is an equitable 

allocation of reasonable dues, fees and 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23297 

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

other charges among Exchange members 

and other persons using its facilities. 

The impact of the proposal upon the net 

fees paid by a particular market 

participant will depend on a number of 

variables, most important of which will 

be its propensity to interact with and 

respond to certain types of orders. 

The Exchange believes that it is 

reasonable and equitable to provide 

rebates for Priority Customer complex 

orders when these orders trade with 

Non-Priority Customer complex orders 

in the complex order book because 

paying a rebate would continue to 

attract additional order flow to the 

Exchange and create liquidity in the 

symbols that are subject to the rebate, 

which the Exchange believes ultimately 

will benefit all market participants who 

trade on ISE. The Exchange already 

provides these types of rebates, and is 

now merely proposing to increase the 

rebate amount with respect to the SPY 

product only. The Exchange believes 

that the proposed rebates are 

competitive with rebates provided by 

other exchanges and are therefore 

reasonable and equitably allocated to 

those members that direct orders to the 

Exchange rather than to a competing 

exchange. 

The Exchange also believes that it is 

reasonable and equitable to provide 

rebates for Priority Customer complex 

orders when these orders trade against 

quotes or orders in the regular 

orderbook because paying a rebate, in 

those instances, would also attract 

additional order flow to the Exchange. 

The Exchange believes that its 

proposal to increase to $0.35 per 

contract (from $0.34 per contract) the 

‘‘taker’’ fee for ISE Market Maker, 

Market Maker Plus, Firm Proprietary 

and Customer (Professional) orders, and 

to increase to $0.39 per contract (from 

$0.38 per contract) for Non-ISE Market 

Maker orders, in SPY is reasonable 

because the fee is within the range of 

fees assessed by other exchanges 

employing similar pricing schemes and 

in some cases, is lower than the fees 

assessed by other exchanges. In 

addition, the Exchange believes that 

charging Non-ISE Market Maker orders 

a higher rate than the fee charged to ISE 

Market Maker, Market Maker Plus, Firm 

Proprietary and Customer (Professional) 

orders is appropriate and not unfairly 

discriminatory because Non-ISE Market 

Makers are not subject to many of the 

non-transaction based fees that these 

other categories of membership are 

subject to, e.g., membership fees, access 

fees, API/Session fees, market data fees, 

etc. Therefore, it is appropriate and not 

unfairly discriminatory to assess a 

higher transaction fee on Non-ISE 

Market Makers because the Exchange 

incurs costs associated with these types 

of orders that are not recovered by nontransaction based fees paid by members. 

The complex order pricing employed 

by the Exchange has proven to be an 

effective pricing mechanism and 

attractive to Exchange participants and 

their customers. The Exchange believes 

that increasing its complex order rebates 

will attract additional complex order 

business. 

The Exchange further believes that the 

Exchange’s complex order rebates and 

its maker/taker fees are not unfairly 

discriminatory because those structures 

are consistent with fee structures that 

exist today at other options exchanges. 

Additionally, the Exchange believes that 

the proposed fees and rebates are fair, 

equitable and not unfairly 

discriminatory because the proposed 

fees and rebates are consistent with 

price differentiation that exists today at 

other option exchanges. The Exchange 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to another 

exchange if they deem fee levels at a 

particular exchange to be excessive. 

With this proposed rebate change, the 

Exchange believes it remains an 

attractive venue for market participants 

to trade complex orders. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.14 At any time 

within 60 days of the filing of such 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• 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–ISE–2012–30 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–ISE–2012–30. 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–ISE– 

2012–30 and should be submitted on or 

before May 9, 2012. 

mstockstill on DSK4VPTVN1PROD with NOTICES

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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