Document ID: SEC-2020-0533-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE National, Inc.
Posted Date: 2020-04-07T04:00Z

[Federal Register Volume 85, Number 67 (Tuesday, April 7, 2020)]
[Notices]
[Pages 19549-19551]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07234]

[[Page 19549]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88541; File No. SR-NYSENAT-2020-12]

Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Order Granting Accelerated Approval of a Proposed Rule 
Change, as Modified by Amendment No. 1, To Add the Exchange's 
Supervision Rules to the List of Minor Rule Violations in Rule 10.9217

April 1, 2020.
    On March 18, 2020, NYSE National, Inc. (``NYSE National'' or the 
``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 to add the Exchange's supervision rules to the 
list of minor rule violations in Rule 10.9217. On March 30, 2020, the 
Exchange filed Amendment No. 1 to the proposed rule change, which 
superseded and replaced the proposed rule change in its entirety, and 
is described in Items I and II below, which Items have been prepared by 
the self-regulatory organization.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, from interested persons, and is approving the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified the relationship 
between its supervisory rules and those of its affiliate.
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I. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 1

    The Exchange proposes to add the Exchange's supervision rules to 
the list of minor rule violations in Rule 10.9217. This Amendment No. 1 
to SR-NYSENat-2020-12 replaces SR-NYSENat-2020-12 as originally filed 
and supersedes such filing in its entirety. The proposed rule change is 
available on the Exchange's website 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add the Exchange's supervision rules to 
the list of minor rule violations in Rule 10.9217. Rule 10.9217 sets 
forth the list of rules under which an ETP Holder or Associated Person 
may be subject to a fine under a minor rule violation plan as described 
in Rule 10.9216(b).
Proposed Rule Change
    First, the Exchange proposes to add the following new paragraph (d) 
to Rule 10.9217:

    Nothing in this Rule shall require the Exchange to impose a fine 
for a violation of any rule under this Minor Rule Plan. If the 
Exchange determines that any violation is not minor in nature, the 
Exchange may, at its discretion, proceed under the Rule 10.9000 
Series rather than under this Rule.

    The language is based on NYSE Arca, Inc. (``NYSE Arca'') Rule 
10.9217(d). Existing paragraphs (d) through (f) of Rule 9217 would 
become paragraphs (e), (f) and (g).
    Second, the Exchange proposes to add Rules 11.3.2 (Violations 
Prohibited), 11.5.1 (Written Procedures) and 11.5.2 (Responsibility of 
ETP Holders) to the list of rules in Rule 10.9217 eligible for 
disposition pursuant to a fine under Rule 10.9216(b). Rules 11.3.2, 
11.5.1 and 11.5.2 are the Exchange's supervision rules for equities 
trading.
    Rule 11.3.2 provides that no ETP Holder shall engage in conduct in 
violation of the Exchange Act, the rules or regulations thereunder, the 
By-Laws, or Exchange Rules, and that every ETP Holder shall supervise 
persons associated with the ETP Holder as to assure compliance with 
those requirements.
    Rule 11.5.1 governs written procedures and requires ETP Holders to 
establish, maintain, and enforce written procedures to supervise 
properly the activities of its Associated Persons and to assure their 
compliance with applicable securities laws, rules, regulations and 
statements of policy promulgated thereunder, with the rules of the 
designated self-regulatory organization, where appropriate, and with 
Exchange rules.
    Rule 11.5.2 provides that final responsibility for proper 
supervision rests with the ETP Holder, and that the ETP Holder shall 
designate a partner, officer or manager in each office of supervisory 
jurisdiction, including the main office, to carry out the written 
supervisory procedures.
    Rules 11.3.2, 11.5.1 and 11.5.2 are substantially similar to 
certain provisions of the New York Stock Exchange LLC's (``NYSE'') 
supervision Rule 3110. Specifically, NYSE Rule 3110(a) requires, in 
part, that NYSE member organizations establish and maintain a system to 
supervise the activities of each associated person that is reasonably 
designed to achieve compliance with applicable securities laws and 
regulations, and with applicable NYSE rules and that final 
responsibility for proper supervision rests with the member 
organization. NYSE Rule 3110(b)(1) requires NYSE member organizations 
to establish, maintain, and enforce written procedures to supervise the 
types of business in which it engages and the activities of its 
associated persons that are reasonably designed to achieve compliance 
with applicable securities laws and regulations, and with applicable 
NYSE rules. Both NYSE Rules 3110(a) and (b)(1) are separately eligible 
for a minor rule fine under the NYSE's version of Rule 9217.\4\
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    \4\ See NYSE Rules 3110 (Supervision) & 9217.
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    To effectuate this change, the Exchange proposes to add ``Failure 
to comply with the supervision requirements of Rules 11.3.2 and 
11.5.1'' and ``Failure to comply with the supervision requirements of 
Rules 11.3.2 and Rule 11.5.2'' to the list of rule violations in 
current subparagraph (e) of Rule 9217 titled ``Record Keeping and Other 
Minor Rule Violations.'' As noted above, subparagraph (e) of Rule 9217 
would become new subparagraph (f).
    Similarly, the Exchange would add two new entries to the Fine 
Schedule in current Rule 9217(f)(2), which would become subparagraph 
(g)(2). First, the Exchange would add a new number 4 to the chart in 
subparagraph (f)(2) titled ``Failure to comply with the supervision 
requirements as set forth in Rules 11.3.2 and 11.5.1'' and 
corresponding proposed fine levels of $2,000 for a first level fine, 
$4,000 for a second level fine, and $5,000 for a third level fine. 
Second, the Exchange would add a new number 5 to the chart in 
subparagraph (f)(2) titled ``Failure to comply with the supervision 
requirements as set forth in

[[Page 19550]]

Rules 11.3.2 and 11.5.2'' and corresponding proposed fine levels of 
$2,000 for a first level fine, $4,000 for a second level fine, and 
$5,000 for a third level fine.
    The proposed fine levels are consistent with current Exchange fine 
levels and comparable to those in the NYSE fine schedule.\5\
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    \5\ See NYSE 9217. The Exchange notes that it must provide the 
Commission prompt notice of any violation with sanction over $2,500, 
in accordance with Securities Exchange Act Rule 19d-1(c). See 17 CFR 
240.19d-1(c).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\6\ in general, and furthers the objectives of Section 6(b)(5),\7\ 
in particular, because 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, 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    Minor rule fines provide a meaningful sanction for minor or 
technical violations of rules. The Exchange believes that the proposed 
rule change will strengthen the Exchange's ability to carry out its 
oversight and enforcement responsibilities in cases where full 
disciplinary proceedings are unwarranted in view of the minor nature of 
the particular violation. Specifically, the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices 
because it will provide the Exchange the ability to issue a minor rule 
fine for violations of its rules governing supervision requirements in 
situations where either a cautionary action letter or a more formal 
disciplinary action may not be warranted or appropriate.
    In addition, the Exchange believes that adding rules based on the 
rules of its affiliate to the Exchange's minor rule plan would promote 
fairness and consistency in the marketplace by permitting the Exchange 
to issue a minor rule fine for violations of substantially similar 
rules that are eligible for minor rule treatment on the Exchange's 
affiliate, thereby harmonizing minor rule plan fines across affiliated 
exchanges for the same conduct. As noted above, Rules 11.3.2, 11.5.1 
and 11.5.2 are substantially similar to certain provisions of NYSE Rule 
3110. NYSE Rule 3110(a) and (b)(1) are each separately eligible for a 
minor rule fine under NYSE Rule 9217.\8\
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    \8\ See note 4, supra.
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    The Exchange further believes that the proposed amendments to Rule 
10.9217 are consistent with Section 6(b)(6) of the Act,\9\ which 
provides that members and persons associated with members shall be 
appropriately disciplined for violation of the provisions of the rules 
of the exchange, by expulsion, suspension, limitation of activities, 
functions, and operations, fine, censure, being suspended or barred 
from being associated with a member, or any other fitting sanction. As 
noted, the proposed rule change would provide the Exchange ability to 
sanction minor or technical violations pursuant to the Exchange's 
rules.
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    \9\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather to update the 
Exchange's rules to strengthen the Exchange's ability to carry out its 
oversight and enforcement functions and deter potential violative 
conduct.

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. Solicitation of Comments on the Proposed Rule Change, as Modified 
by Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, 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-NYSENAT-2020-12 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-NYSENAT-2020-12. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSENAT-2020-12 and should be submitted 
on or before April 28, 2020.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change, as Modified by Amendment No. 1

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act,\11\ which requires that the rules of an exchange be 
designed to promote just and equitable principles of trade, to remove 
impediments and to perfect the mechanism of a free and

[[Page 19551]]

open market and a national market system, and, in general, to protect 
investors and the public interest. The Commission also believes that 
the proposed rule change, as modified by Amendment No. 1, is consistent 
with Sections 6(b)(1) and 6(b)(6) of the Act \12\ which require that 
the rules of an exchange enforce compliance with, and provide 
appropriate discipline for, violations of Commission and Exchange 
rules. Finally, the Commission finds that the proposal, as modified by 
Amendment 1, 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,\13\ which governs minor 
rule violation plans.
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    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \13\ 17 CFR 240.19d-1(c)(2).
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    As stated above, the Exchange proposes to add the Exchange's 
supervision rules to the list of Minor Rule violations. Similar 
supervision rules are eligible for a minor rule fine under an 
affiliated exchange. The Commission believes that the proposed rule, as 
modified by Amendment No. 1, provides a reasonable means of addressing 
violations that do not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. However, the Commission expects, as 
suggested by the Exchange's proposed introduction to its Rule 10.9217, 
that the Exchange will continue to conduct surveillance with due 
diligence and make determinations based on its findings, on a case-by-
case basis, regarding whether a sanction under the rule is appropriate, 
or whether a violation requires formal disciplinary action. The 
Commission further notes that, as before, the Exchange must give the 
Commission prompt notice of any violation with sanction over $2,500, in 
accordance with Securities Exchange Act Rule 19d-1(c).\14\ Accordingly, 
the Commission believes the proposal, as modified by Amendment No. 1 
raises no novel or significant issues.
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    \14\ See 17 CFR 240.19d-1(c).
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    For the same reasons discussed above, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\15\ for approving the 
proposed rule change, as modified by Amendment No. 1, prior to the 
thirtieth day after the date of publication of the notice of the filing 
thereof in the Federal Register. The proposal merely adds rules and 
language already in use at affiliated exchanges. Accordingly, the 
Commission believes that a full notice-and-comment period is not 
necessary before approving the proposal.
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    \15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\16\ and Rule 19d-1(c)(2) thereunder,\17\ that the proposed rule change 
(SR-NYSENAT-2020-12), as modified by Amendment No. 1 be, and hereby is, 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).
    \17\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07234 Filed 4-6-20; 8:45 am]
BILLING CODE 8011-01-P