Document ID: SEC-2006-1458-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-11-13T05:00Z

[Federal Register: November 13, 2006 (Volume 71, Number 218)]
[Notices]               
[Page 66211-66213]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13no06-83]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54690; File No. SR-NYSEArca-2006-79]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Extending the Time Period by Which the Exchange Will Amend the NASD-
NYSE Arca Options Agreement Pursuant to Rule 17d-2

November 2, 2006.
    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 October 25, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission.\5\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange has asked the Commission to waive the 5-day 
pre-filing notice requirement and the 30-day operative delay. See 15 
U.S.C. 78s(b)(3)(A), 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its undertaking \6\ to extend 
for 90 days from the date of this filing the time period by which the 
Exchange will enter into an agreement with the National Association of 
Securities Dealers, Inc. (``NASD'') pursuant to Rule 17d-2 under the 
Act \7\ (the ``NASD / NYSE Arca Options Agreement'' or ``Agreement''). 
The Agreement would expand the allocation to NASD of regulatory 
responsibility to encompass all the regulatory oversight and 
enforcement responsibilities with respect to the options activities of 
Archipelago Securities, L.L.C. (``Archipelago Securities''),\8\ except 
for ``real-time market surveillance.''
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 54238 (July 28, 
2006), 71 FR 44758 (August 7, 2006) (SR-NYSEArca-2006-13) (OX 
Approval Order).
    \7\ 17 CFR 240.17d-2.
    \8\ Archipelago Securities, a wholly-owned subsidiary of 
Archipelago Holdings, Inc. and a registered broker-dealer, acts as 
the outbound order router for the NYSE Arca Marketplace (formerly 
known as the Archipelago Exchange) and, as such, is regulated as an 
exchange ``facility'' of NYSE Arca and NYSE Arca Equities, Inc. See 
15 U.S.C. 78c(a)(2). As such, any proposed rule change relating to 
Archipelago Securities' order-routing function must be filed with 
the Commission, and must operate in a manner that is consistent with 
the provisions of the Act applicable to exchanges and with NYSE Arca 
rules.
---------------------------------------------------------------------------

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 Exchange 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 these 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 aspects of such 
statements.

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

1. Purpose
    In connection with the Commission's approval of the Exchange's new 
electronic options trading platform, OX, Archipelago Securities became 
a routing broker for OX options orders on the Exchange.\9\ In Amendment 
No. 3 to its filing seeking approval of the OX platform,\10\ the 
Exchange proposed to clarify that NASD, a self-regulatory organization 
unaffiliated with the Exchange or any of its affiliates, would continue 
to carry out oversight and enforcement responsibilities as the 
Designated Examining Authority designated by the Commission pursuant to 
Rule 17d-1 under the Act \11\ with the

[[Page 66212]]

responsibility for examining Archipelago Securities for compliance with 
the applicable financial responsibility rules. Furthermore, the 
Exchange represented that it would enter into the NASD/NYSE Arca 
Options Agreement pursuant to Rule 17d-2 under the Act,\12\ to expand 
the allocation to NASD of regulatory responsibility to encompass all 
the regulatory oversight and enforcement responsibilities with respect 
to the options activities of Archipelago Securities, except for ``real-
time market surveillance.'' \13\ The Exchange agreed to submit the NASD 
/ NYSE Arca Options Agreement to the Commission under Rule 17d-2 within 
90 days of the date of the Commission's approval of the OX trading 
platform.\14\ The 90 day period elapsed on October 26, 2006.
---------------------------------------------------------------------------

    \9\ See OX Approval Order, supra note 6. Pursuant to NYSE Arca 
Rule 6.1A(a)(15), which was adopted in connection with the 
establishment of the new OX trading platform, the term ``OX Routing 
Broker'' refers to the broker-dealer affiliate of the Exchange that 
acts as agent for routing orders entered into OX of OTP Holders, OTP 
Firms and OTP Firms' Sponsored Participants to other Market Centers 
for execution whenever such routing is permitted by Exchange Rules. 
Archipelago Securities is the Exchange's only OX Routing Broker.
    \10\ See OX Approval Order, supra note 6.
    \11\ 17 CFR 240.17d-1.
    \12\ 17 CFR 240.17d-2.
    \13\ See OX Approval Order, supra note 6.
    \14\ Id.
---------------------------------------------------------------------------

    On October 20, 2006, the Exchange submitted to the Commission a 
draft NASD/NYSE Arca Options Agreement, but has not yet received 
Commission approval. The Exchange believes that an extension of time 
for an additional 90 days from the date of this filing to enter into 
the NASD/NYSE Arca Options Agreement will give the Commission staff 
sufficient time to publish and take action on the proposal.
    The Exchange believes that the requested extension of time is 
consistent with the Act and the rules and regulations thereunder, will 
not significantly affect the protection of investors or the public 
interest, and does not impose any significant burden on competition. 
The Exchange notes that NASD already carries out oversight and 
enforcement responsibilities as the Designated Examining Authority 
designated by the Commission pursuant to Rule 17d-1 under the Act \15\ 
with the responsibility for examining Archipelago Securities for 
compliance with the applicable financial responsibility rules.
---------------------------------------------------------------------------

    \15\ 17 CFR 240.17d-1.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\17\ 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 regulating 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 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 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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 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,\18\ the proposed 
rule change has become effective pursuant to Section 19(b)(3)(A) of the 
Act \19\ and Rule 19b-4(f)(6) thereunder.\20\
---------------------------------------------------------------------------

    \18\ Pursuant to Rule 19b-4(f)(6)(iii) under the Act, the 
Exchange is required to give the Commission written notice of its 
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 requested that the Commission waive the 5-day pre-
filing notice requirement. The Commission has determined to waive 
this requirement for this filing.
    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay, which would make the rule change effective and 
operative upon filing. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Such waiver will allow the Exchange to comply with its 
undertaking made in connection with the OX Approval Order to submit the 
NASD/NYSE Arca Options Agreement to the Commission. The Exchange 
requests a waiver of the 30-day period on the basis that the current 
deadline for entering into the NASD/NYSE Arca Options Agreement was 
October 26, 2006, and a delay of 30 days would place the Exchange out 
of compliance with its undertaking. Extending the compliance date for 
the Exchange's undertaking by an additional 90 days will provide time 
for the Exchange to finalize and file the Agreement. For these reasons, 
the Commission designates the proposal to be effective and operative 
upon filing with the Commission.\21\
---------------------------------------------------------------------------

    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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 NYSEArca-2006-79 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number NYSEArca-2006-79. 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

[[Page 66213]]

those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. 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 
NYSEArca-2006-79 and should be submitted on or before December 4, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-19063 Filed 11-9-06; 8:45 am]

BILLING CODE 8011-01-P