Document ID: SEC-2009-0033-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-01-07T05:00Z

[Federal Register: January 7, 2009 (Volume 74, Number 4)]
[Notices]               
[Page 757-759]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ja09-70]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59191; File No. SR-NYSEArca-2008-139]

 
Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by NYSE Arca, Inc. Amending the Minor Rule Plan To Increase 
Certain Sanctions

December 31, 2008.
    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 December 17, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 10.12 Minor Rule Plan by 
increasing certain sanctions contained in the fine schedule. The 
Exchange also proposes to make minor technical changes at this time. A 
copy of this filing is available on the Exchange's Web site at http://
www.nyse.com, at the Exchange's principal office, 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 Exchange 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 Exchange 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 Minor Rule Plan (``MRP'') fosters compliance with applicable 
rules and also helps to reduce the number and extent of rule violations 
committed by Options Trading Permit (``OTP'') Holders, OTP Firms and 
associated persons. The prompt imposition of a financial penalty helps 
to quickly educate and improve the conduct of OTP Holders, OTP Firms 
and associated persons that have engaged in inadvertent or otherwise 
minor violations of the Exchange's rules, particularly those who may 
not pay attention to mere warnings that they are violating Exchange 
rules. By promptly imposing a meaningful financial penalty for such 
violations, the MRP focuses on correcting conduct before it gives rise 
to more serious enforcement action.
    Market Makers on NYSE Arca receive certain rights and privileges in 
return for meeting certain obligations. These obligations include 
adhering to certain rules regarding quoting, in-person trading 
requirements, and fulfilling the terms of a Market Maker 
Appointment.\3\ Failure to comply with rules these governing Market 
Maker obligations may result in a fine pursuant to the MRP. At this 
time the Exchange feels the current monetary fine levels contained in 
the MRP, for violations of certain rules pertaining to Market Makers, 
are too low, given the serious nature of these rules. In order to act 
as an effective deterrent against future violations, while also serving 
as a just penalty for those who commit these violations, the Exchange 
proposes to raise the fine levels for violations related to certain 
rules governing Market Maker obligations. A brief description of each 
proposed change is shown below.
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    \3\ See NYSE Arca Rule 6.35--Appointment of Market Makers.
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    Rule 10.12(k)(i)25.
    At least 75% of the trading activity of a Market Maker (measured in 
terms of contract volume per quarter) must be in classes within the 
Market Maker's Appointment. A failure to comply with the 75% contract 
volume requirement may result in a fine of $500.00 for a first offense, 
$1,000.00 for a second offense and $2,500.00 for a third offense. The 
Exchange proposes to raise these suggested fines to $1,000.00 for a 
first offense, $2,500.00 for a second offense and $3,500.00 for a third 
offense.
    Rule 10.12(k)(i)26.
    At least 60% of a Market Maker's transactions must be executed by 
the Market Maker in person or through an approved facility of the 
Exchange. A failure to comply with this 60% in-person trading 
requirement may result in a fine of $500.00 for a first offense, 
$1,000.00 for a second offense and $2,500.00 for a third offense. The 
Exchange proposes to raise these

[[Page 758]]

suggested fines to $1,000.00 for a first offense, $2,500.00 for a 
second offense and $3,500.00 for a third offense.
    Rule 10.12(k)(i)37.
    Market Makers on NYSE Arca must apply for an appointment in one or 
more classes of option contracts. A Market Maker who fails to apply for 
an Appointment may be subject to a fine of $500.00 for a first offense, 
$1,000.00 for a second offense and $1,500.00 for a third offense. The 
Exchange proposes to raise these suggested fines to $1,000.00 for a 
first offense, $2,500.00 for a second offense and $3,500.00 for a third 
offense.
    Rule 10.12(k)(i)39.
    Market Makers, including Lead Market Makers, have certain 
obligations pertaining to quotes and quoting, which are governed by 
Rule 6.37B. Market Makers or Lead Market Makers who fail to comply with 
the Quotation Requirements of Rule 6.37B may be subject to a fine of 
$500.00 for a first offense, $1,000.00 for a second offense and 
$2,500.00 for a third offense. The Exchange proposes to raise these 
suggested fines to $1,000.00 for a first offense, $2,500.00 for a 
second offense and $3,500.00 for a third offense.
    Rule 10.12(k)(i)41.
    Market Makers are required to provide accurate quotes, and quote 
markets within the maximum quote spread differentials prescribed in 
Rule 6.37. Market Makers who fail to provide accurate quotes within the 
maximum quote spread differentials may be subject to a fine of $500.00 
for a first offense, $1,000.00 for a second offense and $2,000.00 for a 
third offense. The Exchange proposes to raise these suggested fines to 
$1000.00 for a first offense, $2,500.00 for a second offense and 
$3,500.00 for a third offense.
Other Minor Changes
    Rule 10.12(h)(25) deals with a failure to meet a 75% Primary 
Appointment requirement for Market Makers and cites Rules 6.35 
Commentary .03 and 6.37(h)(5). The 75 percent Appointment requirement 
is actually governed by Rule 6.35(i). The Exchange proposes to make a 
change so that the correct rule number is properly referenced. A 
similar change is proposed for the corresponding fine schedule in Rule 
10.12(k)(i)25.
    Rule 10.12(h)(41) deals with Market Makers who fail to quote 
markets within the maximum quote spread differentials or who fail to 
disseminate quotes accurately and cites only Rules 6.37(b)(1) and 
6.82(c)(1). However, Rule 6.37A(b) also deals with maximum quote spread 
differentials, and was inadvertently left out of the MRP. It has always 
been the intent of the Exchange to have violations of Market Maker 
quoting obligations eligible for disposition under the MRP. This rule 
change simply serves to add the previously omitted rule citation at 
this time. A similar change is proposed for the corresponding fine 
schedule in Rule 10.12(k)(i)41.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \4\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5) \5\ in particular in that 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, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The proposal is also consistent with Section 6(b)(6) \6\ and 
6(b)(7),\7\ which requires that members and persons associated with 
members are appropriately disciplined for violations of Exchange rules 
and are provided a fair procedure for disciplinary procedures.
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    \6\ 15 U.S.C. 78f(b)(6).
    \7\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which Amex consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2008-139 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-NYSEArca-2008-139. 
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, 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-NYSEArca-2008-139 and should be submitted on or before 
January 28, 2009.

[[Page 759]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E9-16 Filed 1-6-09; 8:45 am]

BILLING CODE 8011-01-P