61920 Federal Register / Vol. 79, No. 199 / Wednesday, October 15, 2014 / Notices 

108 In approving this proposed rule change, the 

Commission has considered the proposed rule 

change’s impact on efficiency, competition, and 

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

109 15 U.S.C. 78o–3(b)(6). 

110 15 U.S.C. 78s(b)(2). 

111 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

a national securities association.108 In 

particular, the Commission finds that 

the Amended Current Proposal is 

consistent with Section 15A(b)(6) of the 

Act,109 which requires, among other 

things, that FINRA rules be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. 

The rule will permit arbitrators to 

refer to FINRA any matter or conduct 

that an arbitrator has reason to believe 

poses a serious threat, whether ongoing 

or imminent, that is likely to harm 

investors unless immediate action is 

taken. The Commission believes that 

allowing arbitrators to voice a serious 

concern under extremely limited 

circumstances provides a necessary 

means of alerting FINRA senior staff 

should an arbitrator have reason to 

believe during the pendency of an 

arbitration that there is a threat of 

serious ongoing or imminent harm. This 

notification would provide FINRA with 

earlier warning of potentially harmful 

conduct than might otherwise occur, 

and allow FINRA to better protect 

investors by intervening more quickly 

under the appropriate circumstances. 

As FINRA acknowledges, the rule 

may cause delays and increase costs for 

a claimant in some instances. However, 

the rule is designed in a way that should 

make its invocation rare, limiting such 

negative effects. First, the standard for 

reporting is high. Because the rule limits 

mid-case referrals to situations where 

the arbitrator has reason to believe that 

a matter or conduct poses a serious 

threat likely to harm investors unless 

immediate action is taken, it should be 

rarely invoked. Second, permitting midcase referrals only for matters or 

conduct unearthed during the 

proceedings—and not on the basis of 

allegations in the pleadings—means that 

an arbitrator will need to make a midcase referral decision only in cases 

when FINRA might not otherwise know 

about the potentially harmful conduct. 

Third, the proposal allows an arbitrator 

to delay making a mid-case referral 

when, in the arbitrator’s judgment, 

investor protection would not be 

materially compromised, further 

reducing the number of times the rule 

is invoked. Fourth, as amended, the rule 

limits recusal requests based on the 

referral itself to three days after the 

parties are notified of the recusal, 

limiting the opportunity for recusal 

requests and the potential strategic 

delay of a recusal request. 

Even in those rare instances where the 

rule is invoked and there is potential 

harm to an investor whose case involves 

a referral, such as a delay or additional 

costs, FINRA has identified ways that 

such harm can be limited. First, 

allocation of costs by an arbitrator or 

panel can take into account relative 

fault of the parties. Second, FINRA will 

bear certain costs itself, such as paying 

a replacement arbitrator to review the 

hearing record and to learn about the 

arbitration up to the point where the 

case was interrupted. Third, FINRA has 

identified ways in which the parties 

themselves can help minimize costs and 

delays, such as by agreeing to rehear 

only key witnesses, or stipulating to 

summaries of prior testimony. 

While this would not eliminate every 

potential cost or dilatory burden on an 

investor whose case may be adversely 

affected by a referral, we believe FINRA 

has identified ways those harms to 

parties in arbitration can be mitigated or 

minimized while better protecting 

investors and the public interest. 

Moreover, notifying parties of the fact 

of a referral can help to safeguard the 

fairness of the arbitration forum by 

keeping the parties equally informed, 

consistent with current arbitration 

practices. Also, having the Director or 

President serve as an intake point for 

any referrals would result in an efficient 

review and assignment process, and 

could help direct appropriate resources 

toward potentially harmful conduct as 

quickly as possible. In addition, by 

requiring requests for recusal to be made 

within three days of being notified, the 

rule will limit the uncertainty 

associated with whether a mid-case 

referral will result in an eventual 

recusal request. The Commission notes 

also that a recusal request can still be 

made for any reason at any time for 

reasons other than the referral request 

itself. 

In light of the potential gravity of the 

misconduct that may be reported, and 

because we believe the potential 

negative effects will be relatively 

limited and partially mitigated by the 

operation of other FINRA rules, we 

believe the Amended Current Proposal 

is consistent with the Act in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. 

We appreciate the concerns of some 

commenters that mid-case referrals may 

disrupt or delay some arbitration 

proceedings. Therefore, as some 

commenters have suggested, and FINRA 

has agreed, FINRA will gather statistics 

and report to the Commission, for the 

period of one year from the effective 

date of this rule change and for later 

periods upon request, on the number of 

cases in which an arbitrator made a 

mid-case referral. FINRA will also 

monitor the effects of the Amended 

Current Proposal to determine whether 

further action is necessary. 

V. Conclusion 

It is therefore ordered pursuant to 

Section 19(b)(2) of the Act 110 that the 

proposed rule change (SR–FINRA– 

2014–0005), as modified by Partial 

Amendment No. 1, be and hereby is 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.111

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24420 Filed 10–14–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73318; File No. SR–ISE– 

2014–49] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Rule 723 to Add a 

New PIM ISO Order Type 

October 8, 2014. 

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 October 

3, 2014 the International Securities 

Exchange, LLC (‘‘Exchange’’ or ‘‘ISE’’) 

filed with the Securities and Exchange 

Commission the proposed rule change, 

as described in Items I and II below, 

which items have been prepared by the 

self-regulatory organization. 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 amend its rules 

to add a new PIM ISO order type. The 

text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.ise.com), at the principal 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 199 / Wednesday, October 15, 2014 / Notices 61921 

3Under Rule 1900, a ‘‘Protected Quotation’’ 

includes a Protected Bid or Protected Offer. A 

‘‘Protected Bid’’ or ‘‘Protected Offer’’ means a Bid 

or Offer in an options series, respectively, that: (i) 

Is disseminated pursuant to the OPRA Plan; and (ii) 

is the Best Bid or Best Offer, respectively, displayed 

by an Eligible Exchange. ‘‘Bid’’ or ‘‘Offer’’ means 

the bid price or the offer price communicated by a 

member of an Eligible Exchange to any broker or 

dealer, or to any customer, at which it is willing to 

buy or sell, as either principal or agent, but shall 

not include indications of interest. The ‘‘OPRA 

Plan’’ means the plan filed with the SEC pursuant 

to Section 11Aa(1)(C)(iii) of the Act, approved by 

the SEC and declared effective as of January 22, 

1976, as from time to time amended. ‘‘Best Bid’’ and 

‘‘Best Offer’’ mean the highest priced Bid and the 

lowest priced Offer. Finally, ‘‘Eligible Exchange’’ 

means a national securities exchange registered 

with the SEC in accordance with Section 6(a) of the 

Act that: (i) Is a Participant Exchange in The 

Options Clearing Corporation (‘‘OCC’’) (as that term 

is defined in Section VII of the OCC by-laws); (ii) 

is a party to the OPRA Plan; and (iii) if the national 

securities exchange is not a party to the OPRA Plan, 

is a participant in another plan approved by the 

Commission providing for comparable tradethrough and locked and crossed market protection. 

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

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

6See NASDAQ OMX PHLX LLC (‘‘PHLX’’) Rule 

1080, Commentary .09. 

7 Id. 

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. 

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 purpose of this proposed rule 

change is to amend the Exchange’s rules 

to add a new PIM ISO order type. 

The Price Improvement Mechanism 

(‘‘PIM’’) is a process that allows 

Electronic Access Members (‘‘EAM’’) to 

provide price improvement 

opportunities for a transaction wherein 

the Member seeks to execute an agency 

order as principal or execute an agency 

order against a solicited order (a 

‘‘Crossing Transaction’’). A Crossing 

Transaction is comprised of the order 

the EAM represents as agent (the 

‘‘Agency Order’’) and a counter-side 

order for the full size of the Agency 

Order (the ‘‘Counter-Side Order’’). The 

Counter-Side Order may represent 

interest for the Member’s own account, 

or interest the Member has solicited 

from one or more other parties, or a 

combination of both. A Crossing 

Transaction must be entered only at a 

price that is equal to or better than the 

national best bid or offer (‘‘NBBO’’) and 

better than the limit order or quote on 

the ISE orderbook on the same side of 

the Agency Order. 

An intermarket sweep order (‘‘ISO’’) 

is defined in Rule 1900(h) as a limit 

order that is designated as an ISO in the 

manner prescribed by the Exchange and 

is executed within the system by 

Members at multiple price levels 

without respect to Protected Quotations 

of other Eligible Exchanges as defined in 

Rule 1900.3 ISOs are immediately 

executable within the Exchange’s 

options trading system or cancelled, and 

shall not be eligible for routing as set 

out in Rule 1900. Simultaneously with 

the routing of an ISO to the Exchange’s 

options trading system, one or more 

additional limit orders, as necessary, are 

routed by the entering party to execute 

against the full displayed size of any 

Protected Bid or Protected Offer in the 

case of a limit order to sell or buy with 

a price that is superior to the limit price 

of the limit order identified as an ISO. 

These additional routed orders must be 

identified as ISOs. 

The Exchange proposes to implement 

a PIM ISO order type (‘‘PIM ISO’’) that 

will allow the submission of an ISO into 

the PIM. Specifically, a PIM ISO is the 

transmission of two orders for crossing 

pursuant to Rule 723 without regard for 

better priced Protected Bids or Protected 

Offers because the Member transmitting 

the PIM ISO to the Exchange has, 

simultaneously with the routing of the 

PIM ISO, routed one or more ISOs, as 

necessary, to execute against the full 

displayed size of any Protected Bid or 

Protected Offer that is superior to the 

starting PIM auction price and has 

swept all interest in the Exchange’s 

book priced better than the proposed 

auction starting price. Any execution(s) 

resulting from such sweeps shall accrue 

to the PIM order, meaning that any 

execution(s) obtained from the away 

side will be given to the agency side of 

the order. 

The Exchange will accept a PIM ISO 

provided the order adheres to the 

current PIM order acceptance 

requirements outlined above, but 

without regard to the NBBO. The 

Exchange will execute the PIM ISO in 

the same manner that it currently 

executes PIM orders, except that it will 

not protect prices away. Instead, order 

flow providers will bear the 

responsibility to clear all better priced 

interest away simultaneously with 

submitting the PIM ISO order. There is 

no other impact to PIM functionality. 

Specifically, liquidity present at the end 

of the PIM auction will continue to be 

included in the PIM auction as it is with 

PIM orders not marked as ISOs. 

The Exchange will announce the 

implementation of this order type in an 

information circular. 

2. Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Securities Exchange Act of 1934 

(the ‘‘Act’’) 4 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 5

in particular, in that it is designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism for a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. The 

proposed rule change promotes just and 

equitable principles or trade and 

removes impediments to a free and open 

market in that it promotes competition, 

as described below. Specifically, the 

proposal allows the Exchange to offer its 

members an order type that is already 

offered by another exchange.6 In 

addition, the proposal benefits traders 

and investors because it adds a new 

order type for seeking price 

improvement through the PIM. Finally, 

the proposal does not unfairly 

discriminate among members because 

all Members are eligible to submit a PIM 

ISO order. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange’s proposal to adopt a PIM ISO 

order type is pro-competitive because it 

will enable the Exchange to provide 

market participants with an additional 

method of seeking price improvement 

through the PIM. The proposed rule 

change will also allow the Exchange to 

compete with other markets that already 

allow an ISO order type in their price 

improvement mechanisms.7

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 


tkelley on DSK3SPTVN1PROD with NOTICES
61922 Federal Register / Vol. 79, No. 199 / Wednesday, October 15, 2014 / Notices 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). 

10 In addition, Rule 19b–4(f)(6)(iii) requires the 

Exchange to give the Commission written notice of 

the Exchange’s intent to file the proposed rule 

change, along with a brief description and text of 

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. 

11 17 CFR 240.19b–4(f)(6)(iii). 

12 15 U.S.C. 78s(b)(3)(C). 13 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

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) 

of the Act 8 and Rule 19b–4(f)(6) 9

thereunder because the proposal does 

not: (i) Significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) by its 

terms, become operative for 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.10

A proposed rule change filed under 

Rule 19b–4(f)(6) normally may not 

become operative prior to 30 days after 

the date of filing. However, Rule 19b– 

4(f)(6)(iii) 11 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. 

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.12

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– 

ISE–2014–49 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–ISE–2014–49. 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 

10:00 a.m. and 3:00 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–ISE– 

2014–49 and should be submitted on or 

before November 5, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24419 Filed 10–14–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73321; File No. SR– 

NYSEArca–2014–113] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Reflecting Changes in the 

Concentration Policies of ARK 

Innovation ETF and ARK Genomic 

Revolution ETF as Well as a Change in 

the Name of the ARK Genomic 

Revolution ETF to the ARK Genomic 

Revolution Multi-Sector ETF 

October 8, 2014. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on 

September 25, 2014, 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 reflect 

changes in the concentration policies of 

ARK Innovation ETF and ARK Genomic 

Revolution ETF, as well as a change in 

the name of the ARK Genomic 

Revolution ETF to the ARK Genomic 

Revolution Multi-Sector ETF. The text 

of the proposed rule change is available 

on the Exchange’s Web site at 

www.nyse.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 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. 


tkelley on DSK3SPTVN1PROD with NOTICES