Document ID: SEC-2009-1518-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending Obligations of Lead Market Makers
Posted Date: 2009-10-28T04:00Z

[Federal Register: October 28, 2009 (Volume 74, Number 207)]
[Notices]               
[Page 55596-55597]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28oc09-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60855; File No. SR-NYSEArca-2009-92]

 
 Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Amending 
Obligations of Lead Market Makers

October 21, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on October 14, 2009, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III, 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.
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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 make changes to NYSE Arca Rule 6.82(c)--
Obligations of Lead Market Makers. The text of the proposed rule change 
is available at the Exchange, the Commission's Public Reference Room, 
and www.nyse.com.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Arca Options Rule 6.82(c)(5) to 
remove the requirement that an LMM designate a back-up LMM and add a 
provision obligating an LMM to notify a Trading Official in the event 
the LMM is not accessible. In addition, the Exchange proposes that if 
such LMM is not accessible, the Exchange may designate a back-up LMM.
    The requirement that each LMM designates a back-up LMM was 
initially established to help ensure that there would be adequate 
liquidity in a given issue in the event the appointed LMM was 
unavailable. At the time, the NYSE Arca options market was strictly 
floor-based, many Lead Market Makers were individuals, and there may 
have only been a few Market Makers in any given issue. Therefore, it 
was necessary to have a designated back-up LMM ready to take over as 
LMM, should the appointed LMM be unable to fulfill its obligations. In 
return for fulfilling the obligations of the LMM, the back-up LMM (when 
acting in that capacity) would also be entitled to all rights afforded 
to the assigned LMM.
    The rationale underlying this rule has since become antiquated 
because today's electronic-based trading results in fewer absences and 
there are a sufficient number of Market Maker firms assigned to each 
issue that are able to provide liquidity in the event of a LMM's 
temporary absence. Also, since nearly all option issues traded on NYSE 
Arca are traded on multiple exchanges, the historical risk to be 
managed by the current rule (namely, the ability of the Exchange to 
foster the provision of liquidity for investors) is no longer present.
    Pursuant to the changes proposed to Rule 6.82(c)(5), an LMM must 
promptly notify a Trading Official if it is not accessible during the 
trading day. In the event an LMM is not accessible, it will not be 
eligible to receive any of the rights afforded to LMMs as contained in 
Rule 6.82(d). In those instances, the Exchange may designate an 
approved LMM \3\ to act as a back-up LMM. In selecting an approved LMM 
to act in a back-up capacity, the Exchange will select an LMM that 
appears best able to perform the functions of the LMM. In designating a 
back-up LMM, the Exchange will use criteria consistent with LMM 
allocation procedures contained in Rule 6.82(e). The Exchange believes 
that this process is more beneficial to all market participants because 
the Exchange is in the best position to identify an appropriate back-up 
LMM.
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    \3\ An ``approved LMM'' is an individual or entity that has been 
deemed qualified to be an LMM pursuant to Rule 6.82.
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    It should be noted that the Exchange intends to designate a back-up 
LMM only in situations where the incumbent LMM is temporarily not 
accessible. In the event of a long-term absence, or permanent vacancy, 
the Exchange may either designate an Interim LMM pursuant to Rule 
6.82(b)(4) or reallocate the issue to another LMM pursuant to Rule 
6.82(f).
    Upon the operative date of this rule change, all previously 
executed agreements between LMMs and back-up LMMs will be considered 
null and void. In addition, OTP Holders will no longer be required to 
designate a back-up LMM when applying to become an LMM. This rule 
change does not in any way revise or amend any other Exchange rules, 
including those rules pertaining to qualifications, obligations, and 
rights of LMMs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \4\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5),\5\ in particular, in that it is designed 
to facilitate transactions in securities, to promote just and equitable 
principles of trade, to enhance competition, and to protect investors 
and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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.

[[Page 55597]]

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

    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 \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) of the Act \8\ 
normally does not become operative prior to 30 days after the date of 
the filing. However, Rule 19b-4(f)(6) \9\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ Id.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2009-92 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-2009-92. 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 Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing will also 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-2009-92 and should 
be submitted on or before November 18, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-25829 Filed 10-27-09; 8:45 am]

BILLING CODE 8011-01-P