Document ID: SEC-2010-0872-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-06-16T04:00Z

[Federal Register: June 16, 2010 (Volume 75, Number 115)]
[Notices]               
[Page 34192-34194]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jn10-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62259; File No. SR-NYSEArca-2010-47]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Establish New 
Rule 6.89

June 10, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on June 2, 2010, 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 and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 establish new procedures to account for 
erroneous trades occurring from disruptions and/or malfunctions of 
Exchange systems. The changes described in this proposal would 
establish new NYSE Arca Rule 6.89. The text of the proposed rule change 
is available at the Commission's Web site at http://www.sec.gov. 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 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.

[[Page 34193]]

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

1. Purpose
    The Exchange is proposing to establish NYSE Arca Rule 6.89, in 
order to adopt new procedures regarding system disruptions and 
malfunctions. Specifically, the Exchange proposes to include 
``verifiable systems disruptions and malfunctions which the 
nullification or modification of transactions may be necessary'' as a 
condition in which a designated Trading Official \4\ may act, on its 
own motion, to review erroneous transactions. The Exchange believes 
that it is appropriate to provide this flexibility and authority so as 
not to limit the Exchange's ability to plan for and respond to 
unforeseen system's problems. Proposed Rule 6.89 is similar to rules in 
effect at other options exchanges that allow for the nullification or 
modification of transactions that resulted from verifiable disruptions 
and/or malfunctions of Exchanges systems.\5\
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    \4\ See NYSE Arca Rule 6.1(b)(34). Trading Officials are 
employees or officers of the Exchange and are not affiliated with 
OTP Holders or OTP Firms.
    \5\ Proposed Rule 6.89 is based in part on NASDAQ OMX PHLX Rule 
1092(c)(ii)(A), and in addition is substantially similar to Chicago 
Board Options Exchange Rule 6.25(a)(3).
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    According to the proposal, in the event of any verifiable 
disruption or malfunction in the use or operation of any electronic 
communications and trading facilities of the Exchange, in which the 
nullification or modification of transactions may be necessary for the 
maintenance of a fair and orderly market or the protection of investors 
and the public interest exist, a Trading Official, on his or her own 
motion, may review such transactions and declare such transactions 
arising out of the use or operation of such facilities during such 
period null and void or modify the terms of these transactions, in 
accordance with the guidelines contained in sections (a)(3)(C)(i)(aa)-
(bb) of Rule 6.87. Pursuant to the proposal, the Trading Official, 
absent extraordinary circumstances, must initiate action under this 
authority within sixty (60) minutes of the occurrence of the erroneous 
transaction that was a result of the verifiable disruption or 
malfunction. Each OTP Holder involved in the transaction shall be 
notified as soon as practicable, and any OTP Holder aggrieved by the 
action may appeal such action in accordance with the provisions of 
subsection (b) of Rule 6.89.
Appeal Process
    If a Trading Official determines that a transaction(s) is erroneous 
pursuant to Rule 6.89(a) as described above, any OTP Holder aggrieved 
by the action may appeal such action in accordance with the provisions 
provided in Rule 6.89(b).
    The Exchange plans to utilize a Review Panel (``Panel'') to review 
decisions made by the Exchange Officer, under this Rule.
    Once an OTP Holder has properly notified the Exchange that it 
wishes to appeal the decision of the Exchange Officer, a three person 
Panel will review and make a determination as to the appeal. The Panel 
as described in proposed Rule 6.89(b)(1)(A) will be comprised of the 
NYSE Arca Chief Regulatory Officer (``CRO''), or a designee of the CRO, 
and a representative from two (2) different OTP Firms. One 
representative on the Panel will always be from an OTP Firm directly 
engaged in market making activities and one representative on the Panel 
will always be from an OTP Firm directly engaged in the handling of 
options orders for public customers.\6\ The Exchange feels that by 
having a three person panel, of which the majority is made up of 
individuals from member firms, will help to ensure that determinations 
regarding erroneous transactions resulting from system malfunctions or 
extraordinary market conditions are made by a diverse representative 
group in a manner that will help to ensure fairness and impartiality.
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    \6\ The composition of the Review Panel, is similar to that of 
the NYSE Arca Obvious Error Panel, as defined in Rule 
6.87(a)(4)(A)(i). [sic]
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    The Exchange shall designate at least ten (10) OTP Firm 
representatives to be called upon to serve on the Panel as needed. In 
no case shall a Panel include a person related to a party to the trade 
in question. To the extent reasonably possible, the Exchange shall call 
upon the designated representatives to participate in a Panel on an 
equally frequent basis.
2. Statutory Basis
    The Exchange believes that the proposed rule change will allow the 
Exchange, in extraordinary market conditions, to maintain a fair and 
orderly market. The Exchange believes the proposed rule change is 
consistent with the Act and the rules and regulations thereunder and, 
in particular, the requirements of section 6(b) of the Act. 
Specifically, the Exchange believes the proposed rule change is 
consistent with the section 6(b)(5) \7\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, to remove 
impediments to and perfect the mechanism for a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
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    \7\ 15 U.S.C. 78(f)(b)(5).
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    Allowing for the nullification or modification of transactions that 
result from verifiable disruptions and/or malfunctions of Exchanges 
systems will offer market participants on NYSE Arca a level of relief 
presently not available. The rule changes proposed in this filing are 
consistent with the rules governing verifiable systems disruptions 
malfunctions at other options exchanges and are designed to protect 
investors and the public interest.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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 \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied the pre-filing requirement.

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[[Page 34194]]

    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 No. SR-NYSEArca-2010-47 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 No. SR-NYSEArca-2010-47. 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 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 
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 No. SR-NYSEArca-2010-47 and should be 
submitted on or before July 7, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14444 Filed 6-15-10; 8:45 am]
BILLING CODE 8010-01-P