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 

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23306 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

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. 65523 

(October 7, 2011), 76 FR 64154 (October 17, 2011) 

(SR–NYSE–2011–49). 

5The 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 Rule 5320, which is not 

applicable to Proprietary Trading Firms, as defined 

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

customers and therefore do not need to maintain 

information barriers. 

6See Securities Exchange Act Release No. 65164 

(August 18, 2011), 76 FR 53015 (August 24, 2011) 

(SR–NYSE–2011–43). 

7For 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 

Rule 5320. The Exchange also proposes to designate 

the existing text of Supplementary Material .02 to 

NYSE Rule 5320 as paragraph (a) thereto. 

8All Exchange member organizations that are 

subject to NYSE 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). 

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 Rule 7400 Series, which consists 

of NYSE Rules 7410 through 7470 and 

is based substantially on the FINRA 

Rule 7400 Series.4 In this regard, NYSE 

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– 

063.5

The Exchange also recently adopted 

NYSE 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 no-knowledge 

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 

Supplementary Material .02(b) to NYSE 

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 a 

member organization implements and 

utilizes appropriate information barriers 

in reliance on the no-knowledge 

exception provided under 

Supplementary Material .02 to NYSE 

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 

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.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 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 Rules and 

rules that are common to both NYSE 

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. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23307 

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). 

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. 

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

4 17 CFR 240.19b–4(f)(2). 

5A Member is any registered broker or dealer that 

has been admitted to membership in the Exchange. 

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 

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 rulecomments@sec.gov. Please include File 

Number SR–NYSE–2012–09 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–NYSE–2012–09. 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 

NYSE’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–NYSE–2012–09, 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. 2012–9288 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66794; File No. SR–BATS– 

2012–015] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to Fees for Use 

of BATS Exchange, Inc. 

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, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Exchange has designated the proposed 

rule change as one establishing or 

changing a member due, fee, or other 

charge imposed by the Exchange under 

Section 19(b)(3)(A)(ii) of the Act 3 and 

Rule 19b–4(f)(2) thereunder,4 which 

renders the proposed rule change 

effective upon filing with the 

Commission. 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 the 

fee schedule applicable to Members 5

and non-members of the Exchange 

pursuant to BATS Rules 15.1(a) and (c). 

Changes to the fee schedule pursuant to 

this proposal will be effective upon 

filing. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

mstockstill on DSK4VPTVN1PROD with NOTICES