Document ID: SEC-2017-0932-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-06-05T04:00Z

[Federal Register Volume 82, Number 106 (Monday, June 5, 2017)]
[Notices]
[Pages 25879-25887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11501]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80806; File No. SR-NYSEArca-2017-53]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Adopting New NYSE 
Arca Rule 11.21 and NYSE Arca Equities Rule 5220, NYSE Arca Rule 10.18 
and NYSE Arca Equities Rule 10.16, and Amending NYSE Arca Rule 10.17 
and NYSE Arca Equities 10.15

May 30, 2017.
    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 May 17, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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 propose (1) a new NYSE Arca Rule 11.21 and a new NYSE 
Arca Equities Rule 5220 that define and prohibit two types of 
disruptive quoting and trading activity on the Exchange; (2) a new NYSE 
Arca Rule 10.18 and a new NYSE Arca Equities Rule 10.16 governing 
supplemental expedited suspension proceedings; and (3) amendments to 
NYSE Arca Rule 10.17 and NYSE Arca Equities 10.15 to permit release to 
the public of suspension notices and orders issued pursuant to proposed 
NYSE Arca Rule 10.18 and NYSE Arca Equities Rule 10.16, respectively. 
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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes (1) a new NYSE Arca Rule 11.21 and NYSE Arca 
Equities Rule 5220 that define and prohibit two types of disruptive 
quoting and trading activity on the Exchange; (2) a new NYSE Arca Rule 
10.18 and NYSE Arca Equities Rule 10.16 governing supplemental 
expedited suspension proceedings; and (3) amendments to NYSE Arca Rule 
10.17 and NYSE Arca Equities 10.15 to permit release to the public of 
suspension notices and orders issued pursuant to proposed NYSE Arca 
Rule 10.18 and NYSE Arca Equities Rule 10.16, respectively.
    The proposed rule change is based on rules recently adopted by Bats 
BZX Exchange, Inc., formerly known as BATS Exchange, Inc. (``BATS''), 
and The Nasdaq Stock Market LLC (``NASDAQ'').\3\ The proposed rules are 
the same as those adopted by BATS and NASDAQ, with the following 
exceptions discussed below: (1) Conforming references to reflect the 
Exchange's equities and options membership and disciplinary process; 
and (2) the call for review process in proposed Rule NYSE Arca Rule 
10.18(f) and NYSE Arca Equities Rule 10.16(f). The Exchange believes 
that having consistent rules for issuing a cease and desist order on an 
expedited basis as other self-regulatory organizations (``SROs'') to 
halt certain disruptive and manipulative quoting and trading activity 
would enhance the Exchange's ability to protect investors and market 
integrity.
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    \3\ On February 18, 2016, the SEC approved a proposed rule 
change filed by BATS to adopt new BATS Rule 12.15, which prohibits 
certain types of disruptive quoting and trading activities, and BATS 
Rule 8.17, which permits BATS to conduct a new expedited suspension 
proceeding when it believes BATS Rule 12.15 has been violated. See 
Securities Exchange Act Release No. 77171 (February 18, 2016), 81 FR 
9017 (February 23, 2016) (SR-BATS-2015-101) (``BATS Approval 
Order''); see also Securities Exchange Act Release No. 77606 (April 
13, 2016), 81 FR 23026 (April 19, 2016) (SR-BatsEDGA-2016-03) 
(adopting identical rules for Bats EDGA Exchange, Inc.); Securities 
Exchange Act Release No. 77602 (April 13, 2016), 81 FR 23046 (April 
19, 2016) (SR-BatsBYX-2016-03) (adopting identical rules for Bats 
BYX Exchange, Inc.); Securities Exchange Act Release No. 77589 
(April 12, 2016), 81 FR 22691 (April 18, 2016) (SR-BatsEDGX-2016-04) 
(adopting identical rules for Bats EDGX Exchange, Inc.). On May 19, 
2016, NASDAQ filed a substantially similar proposed rule change with 
the SEC for immediate effectiveness. See Securities Exchange Act 
Release No. 77913 (May 25, 2016), 81 FR 35081 (June 1, 2016) (SR-
NASDAQ-2016-074). NASDAQ has also extended the rule to other 
exchanges. See, e.g., Securities Exchange Act Release No. 78208 
(June 30, 2016), 81 FR 44366 (July 7, 2016) (SR-NASDAQ-2016-092). 
Similarly, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') also recently prohibited disruptive quoting and trading 
and amended its procedural rules. See Securities Exchange Act 
Release No. 76361 (November 21, 2016), 81 FR 85650 (November 28, 
2016) (SR-FINRA-2016-043). See also Securities Exchange Act Release 
No. 79182 (October 28, 2016), 81 FR 76639 (November 3, 2016) (SR-
MIAX-2016-40) (adopting identical rules for Miami International 
Securities Exchange LLC); Securities Exchange Act Release No. 79646 
(December 21, 2016), 81 FR 95713 (December 28, 2016) (SR-BOX-2016-
59) (adopting identical rules for BOX Options Exchange LLC).>
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Background
    As a national securities exchange registered pursuant to Section 6 
of the Act, the Exchange is required to be organized and to have the 
capacity to enforce compliance by its member organizations and persons 
associated with its member organizations, with the Act, the rules and 
regulations thereunder, and the Exchange's Rules.\4\ Further, the 
Exchange's Rules are required to 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.'' \5\
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    \4\ 15 U.S.C. 78f(b)(1).
    \5\ 15 U.S.C. 78f(b)(1).
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    In fulfilling these requirements, the Exchange has developed a 
comprehensive regulatory program that

[[Page 25880]]

includes automated surveillance of trading activity operated directly 
by Exchange staff. When disruptive and potentially manipulative or 
improper quoting and trading activity is identified, the Exchange 
conducts an investigation into the activity and requests documents and 
information. To the extent violations of the Act, the rules and 
regulations thereunder, or Exchange Rules are identified, the Exchange 
will commence disciplinary proceedings, which could result in, among 
other things, a censure, a requirement to take certain remedial 
actions, one or more restrictions on future business activities, a 
monetary fine, or a temporary or permanent ban from the securities 
industry.
    The process described above, from the identification of disruptive 
and potentially manipulative or improper quoting and trading activity 
to a final resolution of the matter, can often take several years. The 
Exchange believes that this time period sometimes is necessary and 
appropriate to afford adequate due process, particularly in complex 
cases. However, as described below, the Exchange believes that there 
are certain obvious and uncomplicated cases of disruptive and 
manipulative behavior or cases where the potential harm to investors is 
so large that the Exchange should have the authority to initiate an 
expedited suspension proceeding in order to stop the behavior from 
continuing on the Exchange. In recent years, several cases have been 
brought and resolved by the Exchange and other SROs involving 
allegations of wide-spread market manipulation, much of which was 
ultimately being conducted by foreign persons and entities using 
relatively rudimentary technology to access the markets and over which 
the Exchange and other SROs had no direct jurisdiction. In each case, 
the conduct involved a pattern of disruptive quoting and trading 
activity indicative of manipulative layering \6\ or spoofing.\7\
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    \6\ ``Layering'' can include a form of market manipulation in 
which multiple, non-bona fide limit orders are entered on one side 
of the market at various price levels in order to create the 
appearance of a change in the levels of supply and demand, thereby 
artificially moving the price of the security. An order is then 
executed on the opposite side of the market at the artificially 
created price, and the non-bona fide orders are cancelled.
    \7\ ``Spoofing'' can include a form of market manipulation that 
involves the market manipulator placing non-bona fide orders that 
are intended to trigger some type of market movement and/or response 
from other market participants, from which the market manipulator 
might benefit by trading bona fide orders.
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    The Exchange and other SROs were able to identify the disruptive 
quoting and trading activity in real-time or near real-time; 
nonetheless, the parties responsible for such conduct or responsible 
for their customers' conduct continued the disruptive quoting and 
trading activity on the Exchange and other exchanges during the 
entirety of the subsequent lengthy investigation and enforcement 
process. To supplement other Exchange Rules on which it may already 
rely to stop such activity from continuing, the Exchange believes that 
it should have additional authority to initiate expedited suspension 
proceedings in order to stop behavior from continuing on the Exchange 
if a member organization or a person associated with its member 
organization is engaging in or facilitating disruptive quoting and 
trading activity and the member organization or associated person has 
received sufficient notice with an opportunity to respond, but such 
activity has not ceased. The following examples involving the Exchange 
and its affiliate the New York Stock Exchange LLC (``NYSE'') are 
instructive regarding the rationale for the proposed rule change.
    In July 2012, Biremis Corp. (formerly Swift Trade Securities USA, 
Inc.) (``Biremis'') and its CEO were barred from the securities 
industry for, among other things, supervisory violations related to a 
failure by Biremis to detect and prevent disruptive and allegedly 
manipulative trading activities, including layering, short sale 
violations, and anti-money laundering violations.\8\ Biremis' sole 
business was providing trade execution services via a proprietary day 
trading platform and order management system to day traders located in 
foreign jurisdictions. Thus, the disruptive and allegedly manipulative 
trading activity introduced by Biremis to U.S. markets originated 
directly or indirectly from its foreign clients. The pattern of 
disruptive and allegedly manipulative quoting and trading activity was 
widespread across multiple exchanges, and the NYSE, FINRA, and other 
SROs identified clear patterns of the behavior in 2007 and 2008. 
Although Biremis and its principals were on notice of the disruptive 
and allegedly manipulative quoting and trading activity that was 
occurring, Biremis took little to no action to attempt to supervise or 
prevent such quoting and trading activity until at least 2009. Even 
when it put some controls in place, they were deficient and the pattern 
of disruptive and allegedly manipulative trading activity continued to 
occur. As noted above, the final resolution of the enforcement action 
to bar the firm and its CEO from the industry was not concluded until 
2012, four years after the disruptive and allegedly manipulative 
trading activity was first identified.
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    \8\ See Biremis Corp. and Peter Beck, FINRA Letter of 
Acceptance, Waiver and Consent No. 2010021162202, July 30, 2012.
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    In September of 2012, Hold Brothers On-Line Investment Services, 
Inc. (``Hold Brothers'') settled a regulatory action in connection with 
its provision of a trading platform, trade software and trade 
execution, support and clearing services for day traders.\9\ Many 
traders using the firm's services were located in foreign 
jurisdictions. Hold Brothers ultimately settled the action with FINRA 
and several exchanges, including NYSE Arca, for a total monetary fine 
of $3.4 million. In a separate action, the Firm settled with the 
Commission for a monetary fine of $2.5 million.\10\ Among the alleged 
violations in the case were disruptive and allegedly manipulative 
quoting and trading activity, including spoofing, layering, wash 
trading, and pre-arranged trading. Through its conduct and insufficient 
procedures and controls, Hold Brothers also allegedly committed anti-
money laundering violations by failing to detect and report 
manipulative and suspicious trading activity. Hold Brothers was alleged 
to have not only provided foreign traders with access to the U.S. 
markets to engage in such activities, but that its principals also 
owned and funded foreign subsidiaries that engaged in the disruptive 
and allegedly manipulative quoting and trading activity. Although the 
pattern of disruptive and allegedly manipulative quoting and trading 
activity was identified in 2009, as noted above, the enforcement action 
was not concluded until 2012. Thus, although disruptive and allegedly 
manipulative quoting and trading was promptly detected, it continued 
for several years. The Exchange also notes that criminal proceedings 
were initiated against Navinder Singh Sarao for manipulative trading 
activity, including forms of layering and spoofing in the futures 
markets, that were identified as a contributing factor to the ``Flash 
Crash'' of 2010, and yet continued through 2015. In November 2016, Mr. 
Sarao pled guilty to one count each of wire fraud and spoofing.\11\
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    \9\ See Hold Brothers On-Line Investment Services, LLC, FINRA 
Letter of Acceptance, Waiver and Consent No. 20100237710001, 
September 25, 2012.
    \10\ In the Matter of Hold Brothers On-Line Investment Services, 
LLC, Exchange Act Release No. 67924, September 25, 2012.
    \11\ The plea agreement in United States v. Navinder Singh 
Sarao, Docket Number: 1:15-CR-00075-1 (N.D. Ill.), is available at 
https://www.justice.gov/criminal-fraud/file/910196/download.

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[[Page 25881]]

    The Exchange believes that the activities described in the cases 
above provide justification for the proposed rule change, which is 
described below.

Proposed Rule Change

Disruptive Quoting and Trading Activity Rules

Proposed NYSE Arca Rule 11.21
    The Exchange proposes to adopt new NYSE Arca Rule 11.21 to define 
and prohibit disruptive quoting and trading activity on the Exchange. 
Proposed NYSE Arca Rule 11.21(a) would prohibit OTP Holders, OTP Firms 
or any participant \12\ from engaging in or facilitating disruptive 
quoting and trading activity on the Exchange, as described in proposed 
NYSE Arca Rule 11.21(b)(1) and (2), including acting in concert with 
other persons to effect such activity. The Exchange believes that it is 
necessary to extend the prohibition to situations when persons are 
acting in concert to avoid a potential loophole where disruptive 
quoting and trading activity is simply split between several brokers or 
customers. The Exchange also believes, that with respect to persons 
acting in concert perpetrating an abusive scheme, it is important that 
the Exchange have authority to act against the parties perpetrating the 
abusive scheme, whether it is one person or multiple persons.
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    \12\ The term ``OTP'' refers to an Options Trading Permit issued 
by the Exchange for effecting approved securities transactions on 
the Exchange's Trading Facilities. See NYSE Arca Rule 1(p). NYSE 
Arca Rule 1(t) defines ``participant'' to mean any ``OTP Holder, 
Allied Person, partner, approved person, stockholder associate, 
registered employee or other full-time employee of an OTP Firm.'' 
NYSE Arca Equities Rule 1(q) defines ``OTP Holder'' as a ``natural 
person, in good standing, who has been issued an OTP, or has been 
named as a Nominee.'' An OTP Holder must be a registered broker or 
dealer or a nominee or an associated person of a registered broker 
or dealer approved by the Exchange to conduct business on the 
Exchange's Trading Facilities, which is defined as the Exchange's 
``facilities for the trading of options, office space provided by 
the Exchange to OTP Holders and OTP Firms in connection with their 
floor trading activities, and any and all electronic or automated 
order execution systems and reporting services provided by the 
Exchange to OTP Holders and OTP Firms.'' See Rule 1(aa). An ``OTP 
Firm'' means a proprietorship, partnership, corporation, limited 
liability company or other organization in good standing who holds 
an OTP or upon whom an individual OTP Holder has conferred trading 
privileges on the Exchange's Trading Facilities. An OTP Firm must 
also be a registered broker or dealer.
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    The Exchange proposes to adopt NYSE Arca Rule 11.21(b)(1) and (2) 
providing additional details regarding disruptive quoting and trading 
activity. Proposed NYSE Arca Rule 11.21(b)(1) would describe disruptive 
quoting and trading activity containing many of the elements indicative 
of layering. For purposes of the proposed Rule, disruptive quoting and 
trading activity would include a frequent pattern in which the 
following facts are present:
     A party enters multiple limit orders on one side of the 
market at various price levels (the ``Displayed Orders'') (proposed 
NYSE Arca Rule 11.21(b)(1)(A)); and
     following the entry of the Displayed Orders, the level of 
supply and demand for the security changes (proposed NYSE Arca Rule 
11.21(b)(1)(B)); and
     the party enters one or more orders on the opposite side 
of the market of the Displayed Orders (the ``Contra-Side Orders'') that 
are subsequently executed (proposed NYSE Arca Rule 11.21(b)(1)(C)); and
     following the execution of the Contra-Side Orders, the 
party cancels the Displayed Orders (proposed NYSE Arca Rule 
11.21(b)(1)(D)).
    Proposed NYSE Arca Rule 11.21(b)(2) would describe disruptive 
quoting and trading activity containing many of the elements indicative 
of spoofing and would describe disruptive quoting and trading activity 
as a frequent pattern in which the following facts are present:
     A party narrows the spread for a security by placing an 
order inside the national best bid or offer (proposed NYSE Arca Rule 
11.21(b)(2)(A)); and
     the party then submits an order on the opposite side of 
the market that executes against another market participant that joined 
the new inside market established by the order described in proposed 
(b)(2)(A) that narrowed the spread (proposed NYSE Arca Rule 
11.21(b)(2)(B)).
    The Exchange believes that the proposed descriptions of disruptive 
quoting and trading activity articulated in the rule are consistent 
with the activities that have been identified and described in the 
client access cases described above and with the rules of other 
SROs.\13\
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    \13\ See, e.g., BATS Rule 12.15; NASDAQ Rule 2170. See generally 
note 4, supra.
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    Proposed NYSE Arca Rule 11.21(c) would provide that, unless 
otherwise indicated, the descriptions of disruptive quoting and trading 
activity do not require the facts to occur in a specific order in order 
for the Rule to apply. For instance, with respect to the pattern 
defined in proposed Rule 11.21(b)(1)(A)-(D), it is of no consequence 
whether a party first enters Displayed Orders and then Contra-side 
Orders or vice-versa. However, as proposed, it is required for supply 
and demand to change following the entry of the Displayed Orders.
    The Exchange also proposes to make clear that disruptive quoting 
and trading activity includes a pattern or practice in which some 
portion of the disruptive quoting and trading activity is conducted on 
the Exchange and the other portions of the disruptive quoting and 
trading activity are conducted on one or more other exchanges. The 
Exchange believes that this authority is necessary to address market 
participants who would otherwise seek to avoid the prohibitions of the 
proposed Rule by spreading their activity amongst various execution 
venues.
Proposed NYSE Arca Equities Rule 5220
    The Exchange proposes to adopt a new NYSE Arca Equities Rule 5220 
that would be substantially the same as proposed NYSE Arca Rule 11.21.
    Like its NYSE Arca counterpart, proposed NYSE Arca Equities Rule 
5220 would define and prohibit disruptive quoting and trading activity 
on the Exchange. Proposed NYSE Arca Equities Rule 5220(a) would 
prohibit ETP Holders or associated persons of ETP Holders \14\ from 
engaging in or facilitating disruptive quoting and trading activity on 
the Exchange, as described in proposed NYSE Arca Equities Rule 
5220(b)(1) and (2), including acting in concert with other persons to 
effect such activity. Proposed NYSE Arca Equities Rule 5220(b)(1) would 
describe disruptive quoting and trading activity containing many of the 
elements indicative of layering. For purposes of the proposed Rule, 
disruptive quoting and trading activity would include a frequent 
pattern in which the following facts are present:
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    \14\ The term ``ETP'' refers to an Equity Trading Permit issued 
by the Exchange for effecting approved securities transactions on 
NYSE Arca Equities' Trading Facilities. See NYSE Arca Equities Rule 
1(m). NYSE Arca Equities Rule 1(n) defines ``ETP Holder'' as a sole 
proprietorship, partnership, corporation, limited liability company 
or other organization in good standing that has been issued an ETP. 
An ETP Holder must also be a registered broker or dealer.
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     A party enters multiple limit orders on one side of the 
market at various price levels (the ``Displayed Orders'') (proposed 
NYSE Arca Equities Rule 5220(b)(1)(A)); and
     following the entry of the Displayed Orders, the level of 
supply and demand for the security changes (proposed NYSE Arca Equities 
Rule 5220(b)(1)(B)); and
     the party enters one or more orders on the opposite side 
of the market of the Displayed Orders (the ``Contra-Side Orders'') that 
are subsequently executed (proposed NYSE Arca Equities Rule 
5220(b)(1)(C)); and

[[Page 25882]]

     following the execution of the Contra-Side Orders, the 
party cancels the Displayed Orders (proposed NYSE Arca Equities Rule 
5220(b)(1)(D)).
    Proposed Rule 996NY(b)(2) would describe disruptive quoting and 
trading activity containing many of the elements indicative of spoofing 
and would describe disruptive quoting and trading activity as a 
frequent pattern in which the following facts are present:
     A party narrows the spread for a security by placing an 
order inside the national best bid or offer (proposed NYSE Arca 
Equities Rule 5220(b)(2)(A)); and
     the party then submits an order on the opposite side of 
the market that executes against another market participant that joined 
the new inside market established by the order described in proposed 
(b)(2)(A) that narrowed the spread (proposed NYSE Arca Equities Rule 
5220(b)(2)(B)).
    As with proposed NYSE Arca Rule 11.21, the Exchange believes that 
the proposed descriptions of disruptive quoting and trading activity 
articulated in the proposed NYSE Arca Equities Rule are consistent with 
the activities that have been identified and described in the client 
access cases described above and with the rules of other SROs.\15\
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    \15\ See, e.g., BATS Rule 12.15; NASDAQ Rule 2170; BOX Options 
Exchange LLC Rule 3220. See generally note 3, supra.
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    Proposed NYSE Arca Equities Rule 5220(c) would provide that, unless 
otherwise indicated, the descriptions of disruptive quoting and trading 
activity do not require the facts to occur in a specific order in order 
for the Rule to apply. The proposed Rule would also make clear that 
disruptive quoting and trading activity includes a pattern or practice 
in which some portion of the disruptive quoting and trading activity is 
conducted on the Exchange and the other portions of the disruptive 
quoting and trading activity are conducted on one or more other 
exchanges.

Procedural Rules

Proposed NYSE Arca Rule 10.18
    The Exchange proposes a new NYSE Arca Rule 10.18 that would set 
forth procedures for issuing suspension orders, immediately prohibiting 
a member organization or covered person from conducting continued 
disruptive quoting and trading activity on the Exchange. Importantly, 
these procedures would also provide the Exchange the authority to order 
a member organization or covered person to cease and desist from 
providing access to the Exchange to a client that is conducting 
disruptive quoting and trading activity.
    Under proposed paragraph (a)(1) of NYSE Arca Rule 10.18, with the 
prior written authorization of the Chief Regulatory Officer (``CRO'') 
or such other senior officers as the CRO may designate, the Exchange's 
Enforcement department may initiate an expedited suspension proceeding 
with respect to alleged violations of NYSE Arca Rule 11.21 (Disruptive 
Quoting and Trading Activity Prohibited). Proposed paragraph (a) would 
also set forth the requirements for notice ((a)(2)) and service of such 
notice ((a)(3)) pursuant to the Rule, including the required method of 
service and the content of notice.
    Proposed paragraph (b) of NYSE Arca Rule 10.18 would govern the 
appointment of a Conduct Panel, and would provide that a Conduct Panel 
shall be assigned in accordance with paragraph (a) of NYSE Arca Rule 
10.5.\16\
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    \16\ NYSE Arca Rule 10.5 governs hearings and provides that the 
Ethics and Business Conduct Committee (``EBCC'') shall appoint three 
or more members to hear a matter once a hearing is requested. See 
NYSE Arca Rule 10.5(a). NYSE Arca Rule 10.5 also provides for a 
Hearing Administrator to oversee the Conduct Panel rather than a 
hearing officer. There is also no process under NYSE Arca Rules for 
the recusal or disqualification of Hearing Administrators. 
Accordingly, the Exchange does not propose to adopt those provisions 
from the BATS procedural rules governing the recusal and 
disqualification of hearing officer in connection with a suspension 
proceeding. See BAT Rule 8.17(b)(2).
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    Under paragraph (c)(1) of the proposed Rule, the hearing would be 
held not later than 15 days after service of the notice initiating the 
suspension proceeding, unless otherwise extended by the Hearing 
Administrator with the consent of the Parties for good cause shown.
    Under paragraph (c)(2) of the proposed Rule, a notice of date, 
time, and place of the hearing shall be served on the Parties not later 
than seven days before the hearing, unless otherwise ordered by the 
Hearing Administrator. Under the proposed Rule, service shall be made 
by personal service or overnight commercial courier and shall be 
effective upon service.
    Proposed paragraph (c) would also govern how the hearing is 
conducted, including the authority of Hearing Administrators ((c)(3), 
witnesses ((c)(4)), additional information that may be required by the 
Conduct Panel ((c)(5)), the requirement that a transcript of the 
proceeding be created and details related to such transcript ((c)(6)), 
and details regarding the creation and maintenance of the record of the 
proceeding ((c)(7)). Proposed paragraph (c)(8) would also provide that 
if a Respondent fails to appear at a hearing for which it has notice, 
the allegations in the notice and accompanying declaration may be 
deemed admitted, and the Conduct Panel may issue a suspension order 
without further proceedings. Finally, as proposed, if the Exchange 
fails to appear at a hearing for which it has notice, the Conduct Panel 
may order that the suspension proceeding be dismissed.
    Under paragraph (d)(1) of the proposed Rule, the Conduct Panel 
would be required to issue a written decision stating whether a 
suspension order would be imposed. The Conduct Panel would be required 
to issue the decision not later than 10 days after receipt of the 
hearing transcript, unless otherwise extended by the Chairman of the 
Conduct Panel with the consent of the Parties for good cause shown. The 
proposed Rule would state that a suspension order shall be imposed if 
the Conduct Panel finds by a preponderance of the evidence that the 
alleged violation specified in the notice has occurred and that the 
violative conduct or continuation thereof is likely to result in 
significant market disruption or other significant harm to investors.
    Proposed paragraph (d)(2) would also describe the content, scope 
and form of a suspension order. As proposed, a suspension order shall 
be limited to ordering a Respondent to cease and desist from violating 
NYSE Arca Rule 11.21 and/or ordering a Respondent to cease and desist 
from providing access to the Exchange to a client of Respondent that is 
causing violations of NYSE Arca Rule 11.21 ((d)(2)(A)). Under the 
proposed rule, a suspension order shall also set forth the alleged 
violation and the significant market disruption or other significant 
harm to investors that is likely to result without the issuance of an 
order ((d)(2)(B)). The order shall describe in reasonable detail the 
act or acts the Respondent is to take or refrain from taking, and 
suspend such Respondent unless and until such action is taken or 
refrained from ((d)(2)(C)). Finally, the order shall include the date 
and hour of its issuance ((d)(2)(D)).
    As proposed, under proposed paragraph (d)(3), a suspension order 
would remain effective and enforceable unless modified, set aside, 
limited, or revoked pursuant to proposed paragraph (e), as described 
below.
    Finally, paragraph (d)(4) would require service of the Conduct 
Panel's decision and any suspension order consistent with other 
portions of the proposed rule related to service.
    Proposed paragraph (e) of NYSE Arca Rule 10.18 would provide that 
at any

[[Page 25883]]

time after the Hearing Administrator served the Respondent with a 
suspension order, a Party could apply to the Conduct Panel to have the 
order modified, set aside, limited, or revoked. If any part of a 
suspension order is modified, set aside, limited, or revoked, proposed 
paragraph (e) provides the Conduct Panel discretion to leave the cease 
and desist part of the order in place. For example, if a suspension 
order suspends Respondent unless and until Respondent ceases and 
desists providing access to the Exchange to a client of Respondent, and 
after the order is entered the Respondent complies, the Conduct Panel 
is permitted to modify the order to lift the suspension portion of the 
order while keeping in place the cease and desist portion of the order. 
With its broad modification powers, the Conduct Panel also maintains 
the discretion to impose conditions upon the removal of a suspension--
for example, the Conduct Panel could modify an order to lift the 
suspension portion of the order in the event a Respondent complies with 
the cease and desist portion of the order but additionally order that 
the suspension will be re-imposed if Respondent violates the cease and 
desist provisions modified order in the future. The Conduct Panel 
generally would be required to respond to the request in writing within 
10 days after receipt of the request. An application to modify, set 
aside, limit or revoke a suspension order would not stay the 
effectiveness of the suspension order.
    Proposed paragraph (f) would describe the call for review process 
by the Exchange Board of Directors. Specifically, the proposed Rule 
would provide that if there is no pending application to the Conduct 
Panel to have a suspension order modified, set aside, limited, or 
revoked, the Exchange Board of Directors, in accordance with NYSE Arca 
Rule 10.8 (Review), may call for review the Conduct Panel decision on 
whether to issue a suspension order. Further, the proposed Rule would 
provide that a call for review by the Exchange Board of Directors shall 
not stay the effectiveness of a suspension order.
    Finally, proposed paragraph (g) would provide that sanctions issued 
under the proposed Rule 10.18 would constitute final and immediately 
effective disciplinary sanctions imposed by the Exchange, and that the 
right to have any action under the Rule reviewed by the Commission 
would be governed by Section 19 of the Act. The filing of an 
application for review would not stay the effectiveness of a suspension 
order unless the Commission otherwise ordered.
Proposed NYSE Arca Equities Rule 10.16
    The Exchange proposes a new NYSE Arca Equities Rule 10.16 that 
would set forth procedures for issuing suspension orders, immediately 
prohibiting a member organization or covered person from conducting 
continued disruptive quoting and trading activity on the Exchange. 
Importantly, these procedures would also provide the Exchange the 
authority to order a member organization or covered person to cease and 
desist from providing access to the Exchange to a client that is 
conducting disruptive quoting and trading activity.
    Under proposed paragraph (a)(1) of NYSE Arca Equities Rule 10.16, 
with the prior written authorization of the Chief Regulatory Officer 
(``CRO'') or such other senior officers as the CRO may designate, the 
Exchange's Enforcement department may initiate an expedited suspension 
proceeding with respect to alleged violations of NYSE Arca Equities 
Rule 5220 (Disruptive Quoting and Trading Activity Prohibited). 
Proposed paragraph (a) would also set forth the requirements for notice 
((a)(2)) and service of such notice ((a)(3)) pursuant to the Rule, 
including the required method of service and the content of notice.
    Proposed paragraph (b) of NYSE Arca Equities Rule 10.16 would 
govern the appointment of a Conduct Panel, and would provide that a 
Conduct Panel shall be assigned in accordance with paragraph (a) of 
NYSE Arca Rule 10.5.\17\
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    \17\ NYSE Arca Equities Rule 10.5 governs hearings and provides 
that the Business Conduct Committee (``BCC'') shall appoint one or 
more members to hear a matter once a hearing is requested. See NYSE 
Arca Equities Rule 10.5(a). NYSE Arca Equities Rule 10.5 also 
provides for a Hearing Administrator to oversee the Conduct Panel 
rather than a hearing officer. There is also no process under NYSE 
Arca Equities Rules for the recusal or disqualification of Hearing 
Administrators. Accordingly, the Exchange does not propose to adopt 
those provisions from the BATS procedural rules governing the 
recusal and disqualification of hearing officer in connection with a 
suspension proceeding on NYSE Arca Equities. See BAT Rule 
8.17(b)(2).
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    Under paragraph (c)(1) of the proposed Rule, the hearing would be 
held not later than 15 days after service of the notice initiating the 
suspension proceeding, unless otherwise extended by the Hearing 
Administrator with the consent of the Parties for good cause shown.
    Under paragraph (c)(2) of the proposed Rule, a notice of date, 
time, and place of the hearing shall be served on the Parties not later 
than seven days before the hearing, unless otherwise ordered by the 
Hearing Administrator. Under the proposed Rule, service shall be made 
by personal service or overnight commercial courier and shall be 
effective upon service.
    Proposed paragraph (c) would also govern how the hearing is 
conducted, including the authority of Hearing Administrator ((c)(3), 
witnesses ((c)(4)), additional information that may be required by the 
Conduct Panel ((c)(5)), the requirement that a transcript of the 
proceeding be created and details related to such transcript ((c)(6)), 
and details regarding the creation and maintenance of the record of the 
proceeding ((c)(7)). Proposed paragraph (c)(8) would also provide that 
if a Respondent fails to appear at a hearing for which it has notice, 
the allegations in the notice and accompanying declaration may be 
deemed admitted, and the Conduct Panel may issue a suspension order 
without further proceedings. Finally, as proposed, if the Exchange 
fails to appear at a hearing for which it has notice, the Conduct Panel 
may order that the suspension proceeding be dismissed.
    Under paragraph (d)(1) of the proposed Rule, the Conduct Panel 
would be required to issue a written decision stating whether a 
suspension order would be imposed. The Conduct Panel would be required 
to issue the decision not later than 10 days after receipt of the 
hearing transcript, unless otherwise extended by the Hearing 
Administrator with the consent of the Parties for good cause shown. The 
proposed Rule would state that a suspension order shall be imposed if 
the Conduct Panel finds by a preponderance of the evidence that the 
alleged violation specified in the notice has occurred and that the 
violative conduct or continuation thereof is likely to result in 
significant market disruption or other significant harm to investors.
    Proposed paragraph (d)(2) would also describe the content, scope 
and form of a suspension order. As proposed, a suspension order shall 
be limited to ordering a Respondent to cease and desist from violating 
proposed NYSE Arca Equities Rule 5220, and/or to ordering a Respondent 
to cease and desist from providing access to the Exchange to a client 
of Respondent that is causing violations of proposed NYSE Arca Equities 
Rule 5220 ((d)(2)(A)). Under the proposed rule, a suspension order 
shall also set forth the alleged violation and the significant market 
disruption or other significant harm to investors that is likely to 
result without the issuance of an order ((d)(2)(B)). The order shall 
describe in reasonable detail the act or acts the Respondent is to take

[[Page 25884]]

or refrain from taking, and suspend such Respondent unless and until 
such action is taken or refrained from ((d)(2)(C)). Finally, the order 
shall include the date and hour of its issuance ((d)(2)(D)).
    As proposed, under proposed paragraph (d)(3), a suspension order 
would remain effective and enforceable unless modified, set aside, 
limited, or revoked pursuant to proposed paragraph (e), as described 
below.
    Finally, paragraph (d)(4) would require service of the Conduct 
Panel's decision and any suspension order consistent with other 
portions of the proposed rule related to service.
    Proposed paragraph (e) of NYSE Arca Equities Rule 10.16 would 
provide that at any time after the Hearing Administrator serves the 
Respondent with a suspension order, a Party could apply to the Conduct 
Panel to have the order modified, set aside, limited, or revoked. If 
any part of a suspension order is modified, set aside, limited, or 
revoked, proposed paragraph (e) of NYSE Arca Equities Rule 10.16 
provides the Conduct Panel discretion to leave the cease and desist 
part of the order in place. For example, if a suspension order suspends 
Respondent unless and until Respondent ceases and desists providing 
access to the Exchange to a client of Respondent, and after the order 
is entered the Respondent complies, the Conduct Panel is permitted to 
modify the order to lift the suspension portion of the order while 
keeping in place the cease and desist portion of the order. With its 
broad modification powers, the Conduct Panel also maintains the 
discretion to impose conditions upon the removal of a suspension--for 
example, the Conduct Panel could modify an order to lift the suspension 
portion of the order in the event a Respondent complies with the cease 
and desist portion of the order but additionally order that the 
suspension will be re-imposed if Respondent violates the cease and 
desist provisions modified order in the future. The Conduct Panel 
generally would be required to respond to the request in writing within 
10 days after receipt of the request. An application to modify, set 
aside, limit or revoke a suspension order would not stay the 
effectiveness of the suspension order.
    Proposed paragraph (f) would describe the call for review process 
by the Exchange Board of Directors. Specifically, the proposed Rule 
would provide that if there is no pending application to the Conduct 
Panel to have a suspension order modified, set aside, limited, or 
revoked, the Exchange Board of Directors, in accordance with NYSE Arca 
Equities Rule 10.8 (Review), may call for review the Conduct Panel 
decision on whether to issue a suspension order. Further, the proposed 
Rule would provide that a call for review by the Exchange Board of 
Directors shall not stay the effectiveness of a suspension order.
    Finally, proposed paragraph (g) would provide that sanctions issued 
under the proposed NYSE Arca Equities Rule 10.16 would constitute final 
and immediately effective disciplinary sanctions imposed by the 
Exchange, and that the right to have any action under the Rule reviewed 
by the Commission would be governed by Section 19 of the Act. The 
filing of an application for review would not stay the effectiveness of 
a suspension order unless the Commission otherwise ordered.

Release of Disciplinary Complaints, Decisions and Other Information

Proposed Amendments to NYSE Arca Rule 10.17
    The Exchange proposes amendments to NYSE Arca Rule 10.17 to permit 
release to the public of suspension notices and orders issued pursuant 
to proposed NYSE Arca Rule 10.16. Specifically, the Exchange proposes 
to include a notice of the initiation of a suspension proceeding served 
pursuant to proposed NYSE Arca Rule 10.18 in the definition of 
``disciplinary complaint'' under NYSE Arca Rule 10.17(e)(1). Similarly, 
the Exchange would include suspension orders issued pursuant to 
proposed NYSE Arca Rule 10.18 in the definition of ``disciplinary 
decision'' under NYSE Arca Rule 10.17(e)(2).
Proposed Amendments to NYSE Arca Equities Rule 10.15
    The Exchange proposes amendments to NYSE Arca Equities Rule 10.15 
to permit release to the public of suspension notices and orders issued 
pursuant to proposed NYSE Arca Equities Rule 10.16. Specifically, the 
Exchange proposes to include a notice of the initiation of a suspension 
proceeding served pursuant to proposed NYSE Arca Equities Rule 10.16 in 
the definition of ``disciplinary complaint'' under NYSE Arca Equities 
Rule 10.15(e)(1). Similarly, the Exchange would include suspension 
orders issued pursuant to proposed NYSE Arca Equities Rule 10.16 in the 
definition of ``disciplinary decision'' under NYSE Arca Equities Rule 
10.15(e)(2).
    The proposed amendments to NYSE Arca Rule 10.17 and NYSE Arca 
Equities Rule 10.15 are consistent with the FINRA Rule 8313 and the 
rules of the other SROs modeled on FINRA Rule 8313.\18\
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    \18\ See FINRA Rule 8313; BATS Rule 8.18.
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* * * * *
    In summary, proposed NYSE Arca Rule 11.21 and NYSE Arca Equities 
Rule 5220 and Rule 996NY, coupled with proposed procedural rule NYSE 
Arca Rule 10.18 and NYSE Arca Equities Rule 10.16, respectively, would 
provide the Exchange with another form and means of authority to 
promptly act to prevent disruptive quoting and trading activity from 
continuing on the Exchange. The following example illustrates how the 
proposed rule would operate.
    Assume that through its surveillance program, Exchange staff 
identifies a pattern of potentially disruptive quoting and trading 
activity. After an initial investigation, the Exchange would contact 
the member organization or covered person responsible for the orders 
that caused the activity to request an explanation of the activity as 
well as any additional relevant information, including the source of 
the activity. If the Exchange were to continue to see the same pattern 
from the same member organization or covered person and the source of 
the activity is the same or has been previously identified as a 
frequent source of disruptive quoting and trading activity then the 
Exchange could initiate an expedited suspension proceeding by serving 
notice on the member organization or covered person that would include 
details regarding the alleged violations as well as the proposed 
sanction.
    In such a case the proposed sanction would likely be to order the 
member organization or covered person to cease and desist providing 
access to the Exchange to the client that is responsible for the 
disruptive quoting and trading activity and to suspend such member 
organization or covered person unless and until such action is taken. 
The member organization or covered person would have the opportunity to 
be heard in front of a Conduct Panel at a hearing to be conducted 
within 15 days of the notice. If the Conduct Panel determined that the 
violation alleged in the notice did not occur or that the conduct or 
its continuation would not have the potential to result in significant 
market disruption or other significant harm to investors, then the 
Conduct Panel would dismiss the suspension order proceeding. If the 
Conduct Panel determined that the violation alleged in the notice did 
occur and that the conduct or its continuation is likely to result in 
significant market disruption

[[Page 25885]]

or other significant harm to investors, then the Conduct Panel would 
issue the order including the proposed sanction, ordering the member 
organization or covered person to cease providing access to the client 
at issue and suspending such Member unless and until such action is 
taken.
    If such member organization or covered person wished for the 
suspension to be lifted because the client ultimately responsible for 
the activity no longer would be provided access to the Exchange, then 
such member organization or covered person could apply to the Conduct 
Panel to have the order modified, set aside, limited or revoked. The 
Exchange notes that the issuance of a suspension order would not alter 
the Exchange's ability to further investigate the matter and/or later 
sanction the member or member organization pursuant to the Exchange's 
standard disciplinary process for supervisory violations or other 
violations of Exchange rules or the Act.
    The Exchange reiterates that it already has broad authority to take 
action against a member organization or covered person in the event 
that such member organization or covered person is engaging in or 
facilitating disruptive or manipulative trading activity on the 
Exchange. For the reasons described above, and in light of recent 
matters such as the client access cases described above, as well as 
other cases currently under investigation, the Exchange believes that 
it is equally important for the Exchange to have this supplemental 
authority to promptly initiate expedited suspension proceedings against 
any member organization or covered person who has demonstrated a clear 
pattern or practice of disruptive quoting and trading activity, as 
described above, and to take action including ordering such member 
organization or covered person to terminate access to the Exchange to 
one or more clients that are [sic] responsible for the violative 
activity.
    The Exchange recognizes that its proposed authority to issue a 
suspension order is a powerful measure that should be used very 
cautiously. Consequently, the proposed rules have been designed to 
ensure that the proceedings are used to address only the most clear and 
serious types of disruptive quoting and trading activity and that the 
interests of respondents are protected. For example, to ensure that 
proceedings are used appropriately and that the decision to initiate a 
proceeding is made only at the highest staff levels, the proposed rules 
require the CRO or another senior officer of the Exchange to issue 
written authorization before the Exchange can institute an expedited 
suspension proceeding. In addition, NYSE Arca Rule 10.18 and NYSE Arca 
Equities Rule 10.16 are, by their terms, limited to violations of NYSE 
Arca Rule 11.21 and NYSE Arca Equities Rule 5220, respectively, when 
necessary to protect investors, other member organizations or covered 
persons, and the Exchange.
    Further, the Exchange believes that the proposed expedited 
suspension provisions described above that provide the opportunity to 
respond as well as a Conduct Panel determination prior to taking action 
will ensure that the Exchange would not utilize its authority in the 
absence of a clear pattern or practice of disruptive quoting and 
trading activity. Notwithstanding the adoption of the proposed rules 
along with existing disciplinary rules in NYSE Arca Rule and NYSE Arca 
Equities Rule 10, the Exchange also notes that that pursuant to NYSE 
Arca Rule 13.9 (Failure to Meet the Eligibility or Qualification 
Standards or Prerequisites for Access to Services) and NYSE Arca 
Equities Rule 11.9 (Failure to Meet the Eligibility or Qualification 
Standards or Prerequisites for Access to Services), if a OTP Firms, OTP 
Holders or Associated Persons of an OTP Firm or OTP Holder or ETP 
Holder or Associated Person of ETP Holder, respectively, cannot 
continue to have access to services offered by the Exchange or a member 
thereof with safety to investors, creditors, members, or the Exchange, 
the Exchange may provide written notice to such member or person 
limiting or prohibiting access to services offered by the Exchange or a 
member thereof. This ability to impose a temporary restriction upon 
Members assists the Exchange in maintaining the integrity of the market 
and protecting investors and the public interest.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\19\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\20\ 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, 
and, in general to protect investors and the public interest. Pursuant 
to the proposal, the Exchange will have a mechanism to promptly 
initiate expedited suspension proceedings in the event the Exchange 
believes that it has sufficient proof that a violation of proposed NYSE 
Arca Rule 11.21 or proposed NYSE Arca Equities Rule 5220 has occurred 
and is ongoing.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Further, the Exchange believes that the proposal is consistent with 
Sections 6(b)(1) and 6(b)(6) of the Act,\21\ which require that the 
rules of an exchange enforce compliance with, and provide appropriate 
discipline for, violations of the Commission and Exchange rules. The 
Exchange believes that the proposal is consistent with the public 
interest, the protection of investors, or otherwise in furtherance of 
the purposes of the Act because the proposal helps to strengthen the 
Exchange's ability to carry out its oversight and enforcement 
responsibilities as a self-regulatory organization in cases where 
awaiting the conclusion of a full disciplinary proceeding is unsuitable 
in view of the potential harm to other member organization and their 
customers. The Exchange notes that if this type of conduct is allowed 
to continue on the Exchange, the Exchange's reputation could be harmed 
because it may appear to the public that the Exchange is not acting to 
address the behavior. The proposed expedited process would enable the 
Exchange to address the behavior with greater speed.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As noted throughout this filing, the Exchange believes that these 
rule proposals are necessary for the protection of investors rather 
than allowing disruptive quoting and trading activity to occur for 
several years. The Exchange believes that the pattern of disruptive and 
allegedly manipulative quoting and trading activity was widespread 
across multiple exchanges, and the Exchange, FINRA, and other SROs 
identified clear patterns of the behavior in 2007 and 2008 in the 
equities markets.\22\ The Exchange believes that this proposal will 
provide the Exchange with additional means to enforce against such 
behavior in an expedited manner while providing member organizations or 
covered person with the necessary due process. The Exchange believes 
that its proposal is consistent with the Act because it provides the 
Exchange with the ability 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

[[Page 25886]]

the public interest from such ongoing behavior.
---------------------------------------------------------------------------

    \22\ See Section 3 herein, the Purpose section, for examples of 
conduct referred to herein.
---------------------------------------------------------------------------

    The Exchange believes that the proposal is also consistent with 
Section 6(b)(7) of the Act,\23\ which requires that the rules of an 
exchange ``provide a fair procedure for the disciplining of members and 
persons associated with members . . . and the prohibition or limitation 
by the exchange of any person with respect to access to services 
offered by the exchange or a member thereof.'' Finally, the Exchange 
also believes the proposal is consistent with Sections 6(d)(1) and 
6(d)(2) of the Act,\24\ which require that the rules of an exchange 
with respect to a disciplinary proceeding or proceeding that would 
limit or prohibit access to or membership in the exchange require the 
exchange to: Provide adequate and specific notice of the charges 
brought against a member or person associated with a member, provide an 
opportunity to defend against such charges, keep a record, and provide 
details regarding the findings and applicable sanctions in the event a 
determination to impose a disciplinary sanction is made. The Exchange 
believes that each of these requirements is addressed by the notice and 
due process provisions included within proposed NYSE Arca Rule 10.18 
and proposed NYSE Arca Equities Rule 10.16. Importantly, as noted 
above, the Exchange will use the authority proposed in this filing only 
in clear and egregious cases when necessary to protect investors, other 
member organizations or covered persons and the Exchange, and even in 
such cases, respondents will be afforded due process in connection with 
the suspension proceedings.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b)(7).
    \24\ 15 U.S.C. 78f(d)(1).
---------------------------------------------------------------------------

    Finally, the Exchange believes that amending NYSE Arca Rule 10.17 
and NYSE Arca Equities Rule 10.15 to permit release to the public of 
suspension notices and orders issued pursuant to proposed NYSE Arca 
Rule 10.18 and proposed NYSE Arca Equities Rule 10.16, respectively, 
furthers the objectives of Section 6(b)(5) of the Act \25\ by providing 
greater clarity, consistency, and transparency regarding the release of 
disciplinary complaints, decisions and other information to the public. 
The Exchange also believes that the proposed rule change promotes 
greater transparency to the Exchange's disciplinary process by 
providing greater access to information regarding its disciplinary 
actions and valuable guidance and information to persons subject to the 
Exchange's jurisdiction, regulators, and the investing public.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. To the contrary, the Exchange 
believes that each self-regulatory organization should be empowered to 
regulate trading occurring on their [sic] market consistent with the 
Act and without regard to competitive issues. The Exchange is 
requesting authority to take appropriate action if necessary for the 
protection of investors, other member organizations or covered persons, 
and the Exchange. The Exchange also believes that it is important for 
all exchanges to be able to take similar action to enforce its [sic] 
rules against manipulative conduct thereby leaving no exchange prey to 
such conduct. The Exchange does not believe that the proposed rule 
change imposes an undue burden on competition, rather this process will 
provide the Exchange with necessary means to enforce against violations 
of manipulative quoting and trading activity in an expedited manner, 
while providing member organizations or covered persons with the 
necessary due process. Finally, the proposed rule change is designed to 
enhance the Exchange's rules governing the release of disciplinary 
complaints, decisions and other information to the public, thereby 
providing greater clarity and consistency and resulting in less 
burdensome and more efficient regulatory compliance and facilitating 
performance of regulatory functions.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \26\ and Rule 19b-4(f)(6) thereunder.\27\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \27\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \28\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\29\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \28\ 17 CFR 240.19b-4(f)(6).
    \29\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \30\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \30\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEArca-2017-53 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-2017-53. 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/

[[Page 25887]]

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 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-2017-53 and should be submitted on or before June 26, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11501 Filed 6-2-17; 8:45 am]
 BILLING CODE 8011-01-P