Document ID: SEC-2009-0213-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-02-17T05:00Z

[Federal Register: February 17, 2009 (Volume 74, Number 30)]
[Notices]
[Page 7505]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17fe09-165]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59376; File No. SR-NYSEArca-2008-139]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
Proposed Rule Change Amending the Minor Rule Plan To Increase Certain
Sanctions

February 10, 2009.
    On December 17, 2008, 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 increase the sanctions for certain market maker quoting
and trading rule violations and to make other minor changes. The
proposed rule change was published for comment in the Federal Register
on January 7, 2009.\3\ The Commission received no comments regarding
the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59191 (December 31,
2008), 74 FR 757.
---------------------------------------------------------------------------

    The Exchange has proposed to increase the fine levels for certain
market maker quoting and trading rules violations.\4\ The fine levels
for such violations are currently $500 (1st offense), $1,000 (2nd
offense), and $1,500-$2,500 (3rd offense). The proposed rule change
would increase the fine levels to $1,000 (1st offense), $2,500 (2nd
offense), and $3,500 (3rd offense). The Exchange believes that the
current fine levels for such violations are too low, given the serious
nature of such offenses, and that the proposed increases are necessary
to be an effective deterrent against future violations and a just
penalty for such violations. The Exchange also proposed a few other
minor changes to correct an erroneous rule reference and to include an
inadvertent omission \5\ in its MRP.
---------------------------------------------------------------------------

    \4\ The proposed increased fines would apply to violations of
the following requirements: (i) At least 75% of the trading activity
of a market maker be in classes within the market maker's
appointment (Rules 6.35, Commentary .03 and 6.37(h)(5)); (ii) at
least 60% of a market maker's transactions be executed by the market
maker in person or through an approved facility of the Exchange
(Rule 6.37(d)); (iii) market makers on NYSE Arca apply for an
appointment in one or more classes of options contracts (Rule 6.35);
(iv) market makers, including lead market makers, must comply with
certain quoting obligations (Rule 6.37B); and (v) market makers
provide accurate quotations and quote markets within the prescribed
maximum quote spread differentials (Rules 6.37(b)(1), 6.82(c)(1),
and 6.37A(b)).
    \5\ The Exchange has proposed to add violations of Rule 6.37A(b)
to the MRP, stating that the reference to this rule was
inadvertently left off the MRP.
---------------------------------------------------------------------------

    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.\6\ In particular, the
Commission believes that the proposal is consistent with Section
6(b)(5) of the Act,\7\ 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,\8\ 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,\9\ which
governs minor rule violation plans.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \9\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    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 action under NYSE Arca Rules 10.4-10.11.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\10\ and Rule 19d-1(c)(2) under the Act,\11\ that the proposed rule
change (SR-NYSEArca-2008-139), as amended, be, and hereby is, approved
and declared effective.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 240.19d-1(c)(2).
    \12\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3230 Filed 2-13-09; 8:45 am]

BILLING CODE 8011-01-P