Document ID: SEC-2009-0274-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-03-03T05:00Z

[Federal Register: March 3, 2009 (Volume 74, Number 40)]
[Notices]               
[Page 9325-9327]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr09-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59440; File No. SR-NYSEArca-2009-11]

 
Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by NYSE Arca, Inc. Amending Rule 6.69--Reporting Duties

February 24, 2009.
    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 February 13, 2009, 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, II, 
and III 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 amend Exchange Rule 6.69--Reporting 
Duties. The text of the proposed rule change is attached as Exhibit 
5.\4\ 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.
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    \4\ The Commission notes that while provided in Exhibit 5 to the 
filing, the text of the proposed rule change is not attached to this 
notice but is available at the Exchange, the Commission's Public 
Reference Room, and at http://www.nyse.com.
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to revise the procedures 
for reporting open outcry trades that occur on the options trading 
floor.
    All option transactions that occur on the options trading floor 
must be immediately reported to the Exchange, in a form and manner 
prescribed by the Exchange, for dissemination to the Options Price 
Reporting Authority (``OPRA'').\5\ This requirement applies to all OTP 
Holders who are required to report trades either directly to OPRA or to 
another party who is responsible for reporting trades to OPRA.
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    \5\ For transactions executed on the Exchange's electronic 
trading platform, NYSE Arca will report the trade directly to OPRA.
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    All option transactions have two parties to a trade, a buyer and a 
seller. Pursuant to Rule 6.69(b), the responsible party for reporting a 
transaction is the party that participates on the transaction as the 
seller. The Exchange now proposes to revise this rule so that whenever 
a Floor Broker is participating on one side of a transaction, they 
become the responsible party for reporting the trade, regardless of 
whether they are the buyer or seller. The Exchange is proposing this 
change in order to provide a more efficient mechanism for reporting 
transactions.
    All orders on the Exchange are required to be in an electronic 
format prior to representation on the trading

[[Page 9326]]

floor. Typically, an order is sent via a wire or phone line to a Floor 
Broker's booth located on the trading floor, and a representative of 
the brokerage firm will enter the terms of the order into the 
Electronic Order Capture System (``EOC'').\6\ It is at this time that 
the Floor Broker is able to represent the order in the trading crowd. 
This procedure applies regardless of whether the Floor Broker is the 
buyer or seller on the trade. Upon execution of the order, the Broker 
is able to complete the requisite trade information, including the 
contra side of the trade, and electronically report the transaction to 
the Exchange for processing and dissemination to OPRA. In most cases, 
the contra-side to a trade that has been represented by a Floor Broker 
will be an NYSE Arca Market Maker. Market Makers trade for their own 
proprietary accounts, are not required to electronically systemize 
their orders prior to responding to a call from a Floor Broker. Once a 
trade is consummated, in order for a Market Maker acting as a seller, 
to report the transaction, he has to re-enter all the order information 
that the Floor Broker already has in their EOC system and then send the 
information to the Exchange for processing. In the event there are 
multiple Market Makers acting as seller and comprising the contra-side 
to a transaction, each Market Maker would have to re-enter all the 
trade information individually. The Exchange believes that requiring a 
Market Maker to report a transaction, when trading with a Floor Broker, 
is a practice that may serve to delay the reporting of transactions 
that occur on the options floor.
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    \6\ The EOC system is the Exchange's electronic audit trail and 
order tracking system that provides an accurate time-sequenced 
record of all orders and transactions on the Exchange.
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    The Exchange does not feel that requiring a Floor Broker to report 
every transaction that they are a party to will create any undue 
hardship or unnecessary burden of the Floor Broker. In the vast 
majority of situations, the Floor Broker already possesses the order 
information in an electronic format,\7\ it is actually more efficient 
for the Floor Broker to send the trade information directly to the 
Exchange after executing the order, than it is to re-enter the same 
information and have the Market Maker report the trade.
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    \7\ Certain order types, such as FLEX Orders and Cabinet Orders 
are exempt from the EOC electronic order format requirements.
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    In the event that there is a Floor Broker participating on both 
sides of a transaction, the Floor Broker participating as the seller 
must report the transaction to the Exchange. For transactions occurring 
on the Exchange between two Market Makers, the Market Maker 
participating as the seller must report the transaction to the 
Exchange. These reporting obligations are consistent with the terms of 
Rule 6.69, as it reads presently.
    In order to offer further clarity to the rules regarding reporting 
duties, the Exchange proposes a new provision regarding Complex Orders. 
A Complex Order is any order involving the simultaneous purchase and/or 
sale of two or more different option series in the same underlying 
security, for the same account. Since each party to the transaction 
could be both buying and selling different series that make up order, 
there may be no clearly defined seller. The Exchange now proposes that 
for Complex Order transactions between two Floor Brokers or two Market 
Makers, the party responsible for reporting the transaction shall be 
the OTP Holder that first initiated the transaction. This provision 
does not affect the obligation that a Floor Broker has to report 
transactions pursuant to proposed Rule 6.69(b)(i), but will have 
bearing when a Complex Order is executed between two Floor Brokers or 
between two Market Makers.
    The Exchange also proposes to eliminate Rule 6.69 Commentary .04 
which relates to an obsolete and outdate practice. ``Hard cards'', 
which refer to the cardboard backing of a paper trade ticket, are no 
longer in use on the trading floor.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \9\ 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, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
The Exchange believes that the proposed rule change can lead to faster 
and more efficient reporting of transactions that occur on the options 
trading floor.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 SR-NYSEArca-2009-11 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 Number SR-NYSEArca-2009-11. 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

[[Page 9327]]

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 inspection and copying in the Commission's Public 
Reference Room 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 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 SR-NYSEArca-2009-11 and should 
be submitted on or before March 24, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-4378 Filed 3-2-09; 8:45 am]

BILLING CODE 8011-01-P