Document ID: SEC-2008-0918-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-07-08T04:00Z

[Federal Register: July 8, 2008 (Volume 73, Number 131)]
[Notices]               
[Page 39065-39066]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy08-120]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58066; File No. SR-NYSEArca-2008-32]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 to Proposed Rule Change Relating to the Minor Rule 
Plan and Order Granting Accelerated Approval to the Proposed Rule 
Change as Modified by Amendment No. 2

June 30, 2008.

I. Introduction

    On March 18, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Arca Equities, Inc. (``NYSE Arca 
Equities'') Rule 10.12 (Minor Rule Plan) (``MRP'') and related rules 
that underlie the MRP. On April 17, 2008, the Exchange submitted 
Amendment No. 1 to the proposed rule change. The proposed rule change, 
as amended, was published for comment in the Federal Register on April 
29, 2008.\3\ The Commission received no comments on the proposal. On 
June 11, 2008, the Exchange filed Amendment No. 2 to the proposed rule 
change.\4\ This notice and order solicits comments from interested 
persons on Amendment No. 2 and approves the proposal, as modified by 
Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 56733 (April 22, 
2008), 73 FR 23287 (``Notice'').
    \4\ See partial Amendment dated June 11, 2008 (``Amendment No. 
2''). The text of Amendment No. 2 is available on the Commission's 
Web site (http://www.sec.gov/rules/sro/nysearca.shtml ), at the 
Commission's Public Reference Room, at NYSE Arca's principal office, 
and on NYSE Arca's Web site (http://www.nyse.com).
---------------------------------------------------------------------------

II. Description of the Amended Proposal

    The Exchange proposed to amend its Minor Rule Plan and related 
rules that underlie the MRP, including Rules 5.2(b)(1) (Notification 
Requirements for Offering of Securities), 6.1 (Adherence to Law), 6.18 
(Supervision), 7.38(c) (Odd and Mixed Lots--Prohibitions), and 9.2(c) 
(Customer Records).

Rule 5.2(b)(1)--Notification Requirements for Offering of Securities

    The Exchange proposed to correct an error that was inadvertently 
created when the NYSE Arca Rules were updated to replace the obsolete 
term ``Member'' with the term ``ETP Holder.'' The Exchange stated that 
the intended reference in this rule is to all members of a syndicate 
and proposed, therefore, to reinsert the correct term ``members.''

Rule 6.1--Adherence to Law and Good Business Practices

    The Exchange designated existing Rule 6.1 as Rule 6.1(a) and 
substituted the word ``fair'' in the rule's requirement that certain 
actions of ``any ETP Holder shall at all times comply with fair and 
equitable principles of trade'' with the word ``just.'' The Exchange 
also proposed to adopt Rule 6.1(b), which would require all ETP 
Holders, their associated persons, and other participants to adhere to 
the principles of good business practice in the conduct of their 
business affairs.\5\ Violations of Rule 6.1(b) would be eligible for 
MRP disposition.
---------------------------------------------------------------------------

    \5\ This rule is based on the current NYSE Rule 401(a).
---------------------------------------------------------------------------

Rule 6.18--Supervision

    The current language of Rule 6.18(b) provides that only ETP Holders 
for whom the Exchange is the Designated Examining Authority (``DEA'') 
are subject to its supervisory requirements. The Exchange proposed to 
amend Rule 6.18 to provide that all ETP Holders, regardless of DEA, are 
subject to Exchange's supervisory requirements. The Exchange also 
proposed to make violations of Rule 6.18 eligible for MRP disposition.

Rule 7.38(c)--Odd and Mixed Lots--Prohibitions

    The Exchange proposed to replace the language in the current 
paragraph (c) of Rule 7.38 that presently states that all odd-lot 
violations shall be considered conduct inconsistent with just and 
equitable principles of trade and to provide instead that it shall be 
prohibited for ETP Holders, any associated persons thereof, and any 
other participants to engage in these violations. The Exchange stated 
that many violations of Exchange odd-lot rules do not necessarily 
involve the bad faith or unethical conduct.

Rule 9.2(c)--Customer Records

    The Exchange proposed to change Rule 9.2(c) by adding the word 
``current,'' to clarify and reiterate the obligation that firms with 
customer accounts must not only keep records of their customer 
accounts, but also must keep them current.

Rule 10.12--Minor Rule Plan

    The Exchange proposed several modifications to the MRP, including 
to:
     Make several trading rules and record keeping rules 
eligible for MRP disposition; \6\
---------------------------------------------------------------------------

    \6\ See Notice, 73 FR at 23288, for a detailed description of 
these additions.
---------------------------------------------------------------------------

     Modify the Recommended Fine Schedule in Rule 10.12(i) so 
that MRP fines are escalated based not on the number of violations but 
on the number of times the Exchange has imposed one or more MRP fines 
upon an ETP Holder for the violation of a particular rule;
     Allow Exchange enforcement staff, as part of an MRP 
disposition of certain supervisory-related offenses, not only to impose 
a monetary fine, but also to require the violator to make specified 
changes to its supervisory or other compliance procedures;
     Enable the Exchange to require violators of Rule 2.21 
(Employees of ETP Holders Registration) to remit all

[[Page 39066]]

the fees that they should have paid in connection with the registration 
pursuant to Rule 2.21, in addition to any MRP fines; and
     Remove from Rule 10.12(f) the provision requiring the 
Business Conduct Committee to review the issuance of ``each citation'' 
as the concept of ``floor citations'' does not exist under the equity 
rules and was inadvertently inserted into the MRP.

II. Discussion

    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.\7\ In 
particular, the Commission believes that the proposed rule change 
relating to both the MRP and the related underlying rules is consistent 
with Section 6(b)(5) of the Act,\8\ which requires that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to remove impediments to and to perfect the mechanism of a free and 
open market and a national market system, and, in general, to protect 
investors and the public interest.
---------------------------------------------------------------------------

    \7\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission further believes that the proposed changes to the 
Exchange's MRP are consistent with Sections 6(b)(1) and 6(b)(6) of the 
Act,\9\ which require that the rules of an exchange enforce compliance 
with, and provide appropriate discipline for, violations of Commission 
and Exchange rules. In addition, because the MRP provides procedural 
rights to contest the fine and permits disciplinary proceedings on the 
matter, the Commission believes that the MRP, as amended by this 
proposal, provides a fair procedure for the disciplining of members and 
persons associated with members, consistent with Sections 6(b)(7) and 
6(d)(1) of the Act.\10\ Finally, the Commission finds that the proposal 
is consistent with the public interest, the protection of investors, or 
otherwise in furtherance of the purposes of the Act, as required by 
Rule 19d-1(c)(2) under the Act,\11\ which governs minor rule violation 
plans. The Commission believes that the proposed rule change would 
strengthen the Exchange's ability to carry out its oversight and 
enforcement responsibilities as a self-regulatory organization in cases 
where full disciplinary proceedings are unsuitable in view of the minor 
nature of the particular violation.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \10\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
    \11\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    In approving this proposed rule change, the Commission in no way 
minimizes the importance of compliance with NYSE Arca rules and all 
other rules subject to the imposition of fines under the MRP. The 
Commission believes that the violation of any self-regulatory 
organization's rules, as well as Commission rules, is a serious matter. 
However, the Exchange provides a reasonable means of addressing rule 
violations that do not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission expects that the Exchange 
would continue to conduct surveillance with due diligence and make a 
determination based on its findings, on a case-by-case basis, whether a 
fine of more or less than the recommended amount is appropriate for MRP 
disposition or whether a violation requires formal disciplinary action.
    The Commission also finds good cause for approving the proposed 
rule change, as modified by Amendment No. 2, prior to the thirtieth day 
after publishing notice of Amendment No. 2 in the Federal Register. In 
Amendment No. 2, the Exchange eliminated references to Rule 6.15 
(Miscellaneous Prohibitions), which it originally planned to include in 
this proposed rule change but will instead handle in a separate rule 
filing. In addition, in Amendment No. 2, the Exchange proposed certain 
technical and non-substantive changes to the proposal. These changes do 
not raise any new or substantial issues. Accordingly, the Commission 
believes good cause exists to approve the proposal, as modified by 
Amendment No. 2, on an accelerated basis.

B. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2, including whether Amendment No. 2 
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-2008-32 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-2008-32. 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 NYSE Arca. 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-2008-32 and should 
be submitted on or before July 29, 2008.

III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\12\ and Rule 19d-1(c)(2) under the Act \13\ that the proposed rule 
change (SR-NYSEArca-2008-32), as modified by Amendment No. 2 be, and it 
hereby is, approved on an accelerated basis and declared effective.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Acting Secretary.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12) and 17 CFR 200.30-3(a)(44).
---------------------------------------------------------------------------

 [FR Doc. E8-15355 Filed 7-7-08; 8:45 am]

BILLING CODE 8010-01-P