Document ID: SEC-2009-1394-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-10-01T04:00Z

[Federal Register: October 1, 2009 (Volume 74, Number 189)]
[Notices]               
[Page 50861-50862]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc09-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60716; File No. SR-NYSEArca-2009-70]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change Amending Rule 10.12 (Minor Rule Plan)

September 24, 2009.

    On July 29, 2009, NYSE Arca, Inc. (``NYSE Arca'' or ``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 
amending NYSE Arca Rule 10.12 (Minor Rule Plan) (``MRP'') to 
incorporate additional violations into the MRP, and to increase the 
fine levels for certain MRP violations. The proposed rule change was 
published for comment in the Federal Register on August 24, 2009.\3\ 
The Commission received no comments regarding the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60518 (August 18, 
2009), 74 FR 42725 (``Notice'').
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    The Exchange proposes to amend its MRP to incorporate violations 
for trading in restricted classes, and failure to report position and 
account information. Specifically, the Exchange proposes to implement a 
fine schedule for Options Trading Permit (``OTP'') Holders that affect 
opening transactions in restricted series of options, inconsistent with 
the terms of any such restriction, in violation of Rule 5.4(a). This 
fine will consist of $1,000 for the first violation during a rolling 
24-month period, $2,500 for a second violation within the same period, 
and $5,000 for a third violation during the same period. The Exchange 
also proposes to incorporate violations for failing to accurately 
report position and account information to the Exchange on a Large 
Option Position Report (``LOPR'') pursuant to Rule 6.6(a). This fine 
will consist of $1,000 for the first violation in a rolling 24-month 
period, $2,500 for a second violation within the same period, and 
$5,000 for a third violation within the same period. The Exchange 
believes that, in most cases, violations of trading in restricted 
classes and violations of LOPR reporting may be handled efficiently 
through the MRP. However, any egregious activity or activity that is 
believed to be manipulative will continue to be subject to formal 
disciplinary proceedings.\4\
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    \4\ See Notice, supra note 3, 74 FR at 42725-26.
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    The Exchange also proposes to increase fines for violations of NYSE 
Arca Rules 6.46(a),\5\ 6.47A,\6\ and 6.75 \7\ to $1,000 for the first 
violation in a rolling 24-month period, $2,500 for a second violation 
within the same period, and $5,000 for a third violation within the 
same period. The MRP currently provides for fines of $1,000 for the 
first violation of Rule 6.46(a) in a rolling 24-month period, $2,500 
for a second violation within the same period, and $3,500 for a third 
violation within the same period. The MRP currently provides for fines 
of $500 for the first violation of Rule 6.47A in a rolling 24-month 
period, $1,000 for a second violation within the same period, and 
$2,500 for a third violation within the same period. The MRP currently 
provides for a fine of $500 for the first violation of Rule 6.75 in a 
rolling 24-month period, $1,000 for a second violation within the same 
period, and $2,000 for a third violation within the same period. The 
Exchange believes that, given the nature of these violations, the 
current fine levels are inadequate, and that increased fines for these 
violations are needed to deter future violations.\8\
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    \5\ NYSE Arca Rule 6.46(a) requires that a Floor Broker handling 
an order use due diligence to execute the order at the best price or 
prices available to him, in accordance with the Rules of the 
Exchange.
    \6\ NYSE Arca Rule 6.47A states that users may not execute as 
principal orders they represent as agent unless (i) agency orders 
are first exposed on the Exchange for at least one second or (ii) 
the user has been bidding or offering on the Exchange for at least 
one second prior to receiving an agency order that is executable 
against such bid or offer.
    \7\ NYSE Arca Rule 6.75 states that the highest bid/lowest offer 
shall have priority over all other orders. In the event there are 
two or more bids/offers for the same option contract representing 
the best price and one such bid/offer is displayed in the 
Consolidated Book, such bid shall have priority over any other bid 
at the post. In addition, if two or more bids/offers represent the 
best price and a bid/offer displayed in the Consolidated Book is not 
involved, priority shall be afforded to such bids in the sequence in 
which they are made. Rule 6.75 also contains certain provisions 
related to split-price priority and priority of complex orders.
    \8\ See Notice, supra note 3, 74 FR at 42726.
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    The Commission finds that the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\9\ In particular, the 
Commission believes that the proposal is consistent with Section 
6(b)(5) of the Act,\10\ which requires that the rules of an exchange be 
designed to, among other things, protect investors and the public 
interest. The Commission also believes that the proposal is consistent 
with Sections 6(b)(1) and 6(b)(6) of the Act,\11\ which require that 
the rules of an exchange enforce compliance with, and provide 
appropriate discipline for, violations of Commission and exchange 
rules. Furthermore, the Commission believes that the proposed changes 
to the MRP should 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. 
Therefore, 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,\12\ which governs minor rule violation plans.
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    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \12\ 17 CFR 240.19d-1(c)(2).
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    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 MRP 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 NYSE Arca will 
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 a 
violation under the MRP or whether a violation requires formal 
disciplinary

[[Page 50862]]

action under NYSE Arca Rules 10.4-10.11.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\13\ and Rule 19d-1(c)(2) under the Act,\14\ that the proposed rule 
change (SR-NYSEArca-2009-70) be, and it hereby is, approved and 
declared effective.
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-23625 Filed 9-30-09; 8:45 am]

BILLING CODE 8011-01-P