Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Notices 58283 

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. 58430 

(August 27, 2008), 73 FR 51678 (‘‘Notice’’). 

4 In Amendment No. 1, NYSE requested that the 

Commission accelerate approval of the proposed 

rule change. Because Amendment No. 1 is technical 

in nature, the Commission is not publishing it for 

comment. 

5See Securities Exchange Act Release No. 58431 

(August 27, 2008), 73 FR 51681 (September 4, 

2008). The Commission today is approving NYSE 

Arca’s proposed rule change. See Securities 

Exchange Act Release No. 58681 (September 29, 

2008) (SR–NYSEArca–2008–90) (‘‘PO Plus 

Approval Order’’). 

On February 13, 2008, NYSE Arca filed a 

proposal to modify its PO Order pursuant to 

19(b)(3)(A), making it effective upon filing with the 

Commission. See Securities Exchange Act Release 

No. 57377 (February 25, 2008), 73 FR 11177 

(February 29, 2008) (SR–NYSEArca–2008–19). The 

Commission abrogated the proposal on April 11, 

2008, noting that it has, in the past, expressed 

concern about the potential for unfair competition 

and conflicts of interest between an exchange’s selfregulatory obligations and its commercial interests 

if an exchange were affiliated with one of its 

members, as well as the potential for unfair 

competitive advantage that the affiliated member 

could have by virtues of informational or 

operational advantages, or the ability to receive 

preferential treatment. See Securities Exchange Act 

Release No. 57648 (April 11, 2008), 73 FR 20981 

(April 17, 2008) at note 9 and accompanying text. 

The Commission noted that NYSE Arca’s filing 

raised this issue by expanding the activities of Arca 

Securities in sending orders to its affiliate, the 

NYSE, and therefore should be subject to notice and 

comment and review pursuant to Sections 19(b)(1) 

and 19(b)(2) of the Act. See id. at note 10 and 

accompanying text. Further, the Commission stated 

that the issue of whether the routing of PO Orders 

by Arca Securities to the NYSE is consistent with 

existing NYSE and NYSE Arca rules should be 

subject to notice and comment pursuant to Sections 

19(b)(1) and 19(b)(2) of the Act. See id. at note 11 

and accompanying text. 

6Amex will change its name to NYSE Alternext 

US in connection with the acquisition of Amex by 

NYSE Euronext. See Securities Exchange Act 

Release No. 58673 (September 29, 2008) (order 

approving a proposed rule change related to the 

acquisition of the Amex by NYSE Euronext) (SR– 

Amex–2008–62; SR–NYSE–2008–60) (‘‘NYSE 

Alternext US Order’’). The transaction is expected 

to close shortly. 

7See NYSE Arca Equities Rule 7.31(x). Currently, 

a PO Order entered for participation in the primary 

market opening must be entered before 6:28 a.m. 

(Pacific Time), and a PO Order entered for 

participation in the primary market re-opening after 

a trading halt must be entered after trading was 

halted on NYSE Arca and before the re-opening 

time. See id. 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml ); or 

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

Number SR–NASDAQ–2008–075 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2008–075. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml ). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of 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–NASDAQ–2008–075 and 

should be submitted on or before 

October 27, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23488 Filed 10–3–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58680; File No. SR–NYSE– 

2008–76] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Granting Accelerated Approval of 

Proposed Rule Change, as Modified by 

Amendment No. 1 Thereto, Amending 

NYSE Rule 2B To Establish 

Procedures Designed To Manage 

Potential Informational Advantages 

Resulting From the Affiliation Between 

the Exchange and Archipelago 

Securities L.L.C. 

September 29, 2008. 

I. Introduction 

On August 20, 2008, the New York 

Stock Exchange LLC (‘‘NYSE’’ or 

‘‘Exchange’’), filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change amending NYSE Rule 2B to 

establish procedures designed to 

manage potential informational 

advantages resulting from the affiliation 

between the Exchange and Archipelago 

Securities L.L.C. (‘‘Arca Securities’’), an 

NYSE affiliated member. On September 

4, 2008, the proposed rule change was 

published for comment in the Federal 

Register.3 The Commission received no 

comments on the proposed rule change. 

On September 25, 2008, NYSE filed 

Amendment No. 1.4 This order approves 

the proposed rule change, as modified 

by Amendment No. 1, on an accelerated 

basis. 

II. Background 

A. NYSE Arca’s PO Plus Proposal 

On August 20, 2008, NYSE Arca, Inc. 

(‘‘NYSE Arca’’) filed with the 

Commission a proposed rule change to 

expand the availability of its PO Order 

type (‘‘PO Plus Proposal’’).5 NYSE 

Arca’s PO Order is a market or limit 

order that is to be routed to the primary 

market in that security without first 

attempting to access liquidity on the 

NYSE Arca book. The PO Orders are 

routed to the primary market through 

NYSE Arca’s routing broker-dealer, Arca 

Securities, which is an affiliate of NYSE 

Arca as described more fully below. The 

‘‘primary market’’ may be the New York 

Stock Exchange LLC (‘‘NYSE’’) or the 

American Stock Exchange LLC 

(‘‘Amex’’),6 each of which, as described 

more fully below, also is (or will be) an 

affiliate of NYSE Arca and Arca 

Securities. 

Such orders, currently, may only be 

entered until a cut-off time established 

from time to time by the Exchange.7 In 

its PO Plus Proposal, NYSE Arca 


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58284 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Notices 

8A PO Order would have to be a day or 

immediate-or-cancel (‘‘IOC’’) order. If the PO Order 

is not an IOC order it would remain at the venue 

to which it was routed, until executed, cancelled, 

or the end of day. Further, under the proposal, PO 

Orders entered for participation in the primary 

market, other than for participation in the primary 

market opening or primary market re-opening, must 

be marked with the modifier PO+. Such orders 

would be eligible for entry and execution 

throughout the trading day. 

9 17 CFR 240.600(b). In addition, in its filing 

NYSE Arca proposes that: (1) The use of certain 

non-public information by Arca Securities be 

restricted; (2) NYSE Regulation, Inc. (‘‘NYSE 

Regulation’’) would collect and maintain certain 

information with respect to Arca Securities; and (3) 

routing by Arca Securities in its capacity as a 

facility of NYSE, to NYSE Arca, be authorized for 

a pilot period of 12 months. 

10See PO Plus Approval Order, supra note 5. 

11See NYSE Alternext US Order, supra note 6. 

12Such outbound routing includes the routing of 

PO Orders to the primary market. 

13See Securities Exchange Act Release No. 52497 

(September 22, 2005), 70 FR 56949 (September 29, 

2005) (SR–PCX–2005–90) (order approving a 

proposed rule change in connection with the 

acquisition of the Pacific Exchange, Inc. (‘‘PCX’’, n/ 

k/a NYSE Arca) by Archipelago Holdings, Inc.). 

Arca Securities’ operation as a facility providing 

outbound routing for NYSE Arca was (and 

continues to be) subject to the conditions that: (1) 

Arca Securities continue to operate and be 

regulated as a facility of NYSE Arca; (2) Arca 

Securities only provide outbound routing services; 

(3) the primary regulatory responsibility for Arca 

Securities would lie with an unaffiliated SRO; and 

(4) the use of Arca Securities for outbound routing 

is available only to NYSE Arca members and use 

of Arca Securities routing functions remains 

optional. Id. 

14See Securities Exchange Act Release No. 55590 

(April 5, 2007), 72 FR 18707 (April 13, 2007) (SR– 

NYSE–2007–29) (order filed for immediate 

effectiveness to, among other things, establish a 

mechanism to route orders from NYSE to away 

market centers). See also Notice, supra note 3, at 

notes 14 to 16 and accompanying text. 

15 Id. 

16NYSE also states that Arca Securities is subject 

to independent oversight by FINRA, its Designated 

Examining Authority, for compliance with financial 

responsibility requirements. See Notice, supra note 

3, at section II.A.1.c. 

17NYSE Regulation is a wholly owned subsidiary 

of the NYSE that performs the regulatory functions 

of the NYSE pursuant to a delegation agreement. 

NYSE Regulation also performs many of the 

regulatory functions of NYSE Arca pursuant to a 

regulatory services agreement. See Securities 

Exchange Act Release Nos. 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) (‘‘NYSE/Arca Order) at 11255. 

18Specifically, NYSE Regulation ‘‘will collect and 

maintain the following information of which NYSE 

Regulation staff becomes aware—namely, all alerts, 

complaints, investigations and enforcement actions 

where Arca Securities (in its capacity as a facility 

of NYSE Arca, routing orders to NYSE) is identified 

as a participant that has potentially violated NYSE 

or applicable SEC rules—in an easily accessible 

manner so as to facilitate any review conducted by 

the SEC’s Office of Compliance Inspections and 

Examination.’’ See Notice, supra note 3, at section 

II.A.1.c. 

19See id. 

20See proposed NYSE Rule 2B. 

21See Notice, supra note 3, at section II.A.1.(e). 

22 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

proposes to modify the PO Order type 

so that such orders may be entered at 

any time throughout the trading day and 

be immediately routed to the primary, 

listing market for execution.8 Further, 

the proposal permits an entering party 

to designate a PO Order as an 

Intermarket Sweep Order (as defined in 

Rule 600(b) of Regulation NMS under 

the Act).9 The expanded PO order is 

referred to as a PO Plus order.10

B. Arca Securities Routing Function 

NYSE Euronext, a Delaware 

Corporation (‘‘NYSE Euronext’’) 

currently indirectly owns Arca 

Securities, a broker-dealer that is a 

member of the NYSE. In addition, NYSE 

Euronext indirectly owns two registered 

securities exchanges—NYSE Arca and 

NYSE—and has entered into an 

agreement to acquire a third exchange, 

Amex.11 Thus, Arca Securities is (or 

will be) an affiliate of each of these 

exchanges. 

NYSE Rule 2B prohibits NYSE, or any 

entity with which it is affiliated, from 

acquiring or maintaining an ownership 

interest in a member, absent prior 

Commission approval. Thus, Arca 

Securities’ affiliation with NYSE would 

violate NYSE rules, absent Commission 

approval. 

The Commission has approved Arca 

Securities’s affiliation with, and 

operation as a facility of, NYSE Arca for 

the provision of outbound routing from 

NYSE Arca to other market centers,12

subject to certain conditions.13 Arca 

Securities also operates as a facility of 

NYSE and similarly provides outbound 

routing from NYSE to other market 

centers,14 subject to the conditions that: 

(1) Arca Securities is operated and 

regulated as a facility of the NYSE; (2) 

the primary regulatory responsibility for 

Arca Securities lies with an unaffiliated 

SRO; and (3) the use of Arca Securities’s 

for outbound routing is available only to 

NYSE members and the use of Arca 

Securities’s routing functions remains 

optional.15

Currently, the operation of Arca 

Securities as a facility of NYSE and 

NYSE Arca providing outbound routing 

services from those exchanges is subject, 

respectively, to NYSE and NYSE Arca 

oversight, as well as Commission 

oversight. NYSE and NYSE Arca are 

each responsible for ensuring that Arca 

Securities is operated consistent with 

Section 6 of the Act and their respective 

rules. In addition, NYSE and NYSE 

Arca, respectively, must file with the 

Commission rule changes and fees 

relating to Arca Securities. 

Recognizing that the Commission has 

previously expressed concern regarding 

the potential for conflicts of interest in 

instances where a member firm is 

affiliated with an exchange to which it 

is routing orders, NYSE proposes to 

accept inbound orders that its affiliate 

Arca Securities routes in its capacity as 

a facility of NYSE Arca, subject to the 

following limitations and conditions: 

• First, NYSE states that NYSE and 

FINRA have entered into an agreement 

pursuant to Rule 17d–2 under the Act. 

Pursuant to this agreement, FINRA is 

allocated regulatory responsibilities to 

review Arca Securities’ compliance with 

certain NYSE rules.16 NYSE, however, 

retains ultimate responsibility for 

enforcing its rules with respect to Arca 

Securities. 

• Second, NYSE Regulation 17 will 

monitor Arca Securities for compliance 

with NYSE’s trading rules, and will 

collect and maintain certain related 

information.18

• Third, NYSE states that NYSE 

Regulation has agreed with NYSE that it 

will provide a report to NYSE’s CRO, on 

a quarterly basis, that: (i) Quantifies all 

alerts (of which NYSE Regulation is 

aware) that identify Arca Securities as a 

participant that has potentially violated 

NYSE or Commission rules, and (ii) 

quantifies the number of all 

investigations that identify Arca 

Securities as a participant that has 

potentially violated NYSE or 

Commission rules.19

• Fourth, NYSE proposes an 

amendment to Rule 2B that will require 

NYSE Euronext, as the holding 

company owning both NYSE and Arca 

Securities, to establish and maintain 

procedures and internal controls 

reasonably designed to ensure that Arca 

Securities does not develop or 

implement changes to its system, based 

on non-public information obtained 

regarding planned changes to the NYSE 

systems as a result of its affiliation with 

NYSE, until such information is 

available generally to similarly situated 

members of NYSE, in connection with 

the provision of inbound order routing 

to NYSE.20

• Fifth, NYSE proposes that routing 

of PO Plus Orders from Arca Securities 

to NYSE, in Arca Securities’ capacity as 

a facility of NYSE Arca, be authorized 

for a pilot period of twelve months.21

III. Discussion 

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.22 In particular, the 


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23 15 U.S.C. 78f(b)(5). 

24See, e.g., Securities Exchange Act Release No. 

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), and NYSE/Arca Order, supra note 15. 

25See PO Plus Approval Order, supra note 5. 

26See supra notes 16–21 and accompanying text. 

See also PO Plus Approval Order, supra note 5 

(approving the routing of orders by Arca Securities, 

in its capacity as a facility of NYSE, to NYSE Arca) 

and NYSE Alternext US Order, supra note 6 

(including approval of NYSE Alternext US’s 

affiliation with Arca Securities for purposes of 

routing orders, in its capacity as a facility of NYSE 

Arca and NYSE, to NYSE Alternext US). 

This order approves only the routing of orders by 

Arca Securities, in its capacity as a facility of NYSE 

Arca, to NYSE, subject to the conditions discussed 

herein. This approval does not include Arca 

Securities providing routing of orders from Amex, 

which will be affiliated with NYSE Arca following 

Amex’s acquisition by NYSE Euronext, to NYSE. 

Amex does not currently use Arca Securities to 

route orders to other markets and has not requested 

approval of such in its filing related to its 

acquisition by NYSE Euronext. See NYSE Alternext 

U.S. Order, supra note 6). 

27This oversight will be accomplished through 

the 17d–2 agreement between FINRA and NYSE. 

See supra note 16 and accompanying text. 

28See supra note 20 and accompanying text. 

29See Amendment No. 1, supra note 4. 

30 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2) 

of the Act, the Commission may not approve any 

proposed rule change, or amendment thereto, prior 

to the thirtieth day after the date of publication of 

notice thereof, unless the Commission finds good 

cause for so doing. 

31See NYSE Alternext US Order, supra note 6, at 

section III.D.2. 

32See supra note 3 and accompanying text. 

33 15 U.S.C. 78s(b)(2). 

34 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,23 which requires, 

among other things, that the rules of an 

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, 

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; and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

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.24 The proposed expansion of 

NYSE Arca’s PO Order type, which the 

Commission approved today,25 will 

expand the activities of Arca Securities 

in routing orders to the NYSE. 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 Arca Securities to provide 

inbound routing to NYSE, subject to the 

conditions described above.26

NYSE has proposed five conditions 

applicable to Arca Securities routing 

activities, 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 FINRA’s 

oversight of Arca Securities,27 combined 

with NYSE Regulation’s monitoring of 

Arca Securities’ compliance with 

NYSE’s trading rules and quarterly 

reporting to NYSE’s CRO, will help to 

protect the independence of NYSE’s 

regulatory responsibilities with respect 

to Arca Securities. The Commission also 

believes that the proposed amendment 

to NYSE Rule 2B28 is designed to 

ensure that Arca Securities cannot use 

any information advantage it may have 

because of its affiliation with NYSE. 

Furthermore, the Commission believes 

that NYSE’s proposal to allow Arca 

Securities to route PO Plus orders 

inbound to NYSE from NYSE Arca, on 

a pilot basis, will provide NYSE and the 

Commission an opportunity to assess 

the impact of any conflicts of interest of 

allowing an affiliated member of NYSE 

to route orders inbound to NYSE and 

whether such affiliation provides an 

unfair competitive advantage. 

IV. Accelerated Approval 

NYSE has asked the Commission to 

accelerate approval of the proposed rule 

change. NYSE notes that the proposed 

rule change reflects the Exchange’s 

efforts to address concerns identified by 

the Commission regarding informational 

advantages favoring Arca Securities and 

states in part that ‘‘accelerated approval 

* * * will permit the Exchange to 

immediately address this issue.’’ 29 The 

Commission finds good cause for 

approving the proposed rule change 

prior to the thirtieth day after the date 

of publication of notice of filing in the 

Federal Register.30 The Commission 

notes that the protections proposed by 

NYSE, which are designed to address 

conflict of interest concerns identified 

by the Commission in connection with 

the inbound routing of orders to an 

exchange when the routing brokerdealer is an affiliate of that exchange, 

are consistent with those approved by 

the Commission in another rule filing.31

The Commission also notes that the 

proposed rule change was published for 

the full 21-day comment period,32 and 

the comment period ended on 

September 25, 2008. No comments were 

received on the proposal. 

Accordingly, the Commission finds 

good cause for approving the proposed 

rule change on an accelerated basis, 

pursuant to Section 19(b)(2) of the Act. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,33 that the 

proposed rule change (SR–NYSE–2008– 

76), as modified by Amendment No. 1 

thereto, be, and hereby is, approved on 

an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.34

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23486 Filed 10–3–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58681; File No. SR– 

NYSEArca–2008–90] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Accelerated 

Approval of Proposed Rule Change, as 

Modified by Amendment No. 1 Thereto, 

Amending NYSE Arca Equities Rule 

7.31(x) to Change the Permissible 

Order Entry Time and Eligibility of Its 

Primary Only Order and Amending 

NYSE Arca Equities Rule 14.3 to 

Establish Procedures Designed To 

Manage Potential Informational 

Advantages Resulting From the 

Affiliation Between the Exchange and 

Archipelago Securities L.L.C. 

September 29, 2008. 

I. Introduction 

On August 20, 2008, NYSE Arca, Inc., 

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

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Exchange 

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

proposed rule change to (i) amend 

NYSE Arca Equities Rule 7.31(x) to 

change the permissible order entry time 

and eligibility of its Primary Only Order 

type (‘‘PO Order’’) and (ii) amend NYSE 

Arca Equities Rule 14.3 to establish 

procedures designed to manage 


jlentini on PROD1PC65 with NOTICES