Document ID: SEC-2016-1584-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2016-09-06T04:00Z

[Federal Register Volume 81, Number 172 (Tuesday, September 6, 2016)]
[Notices]
[Pages 61266-61268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21256]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78721; File No. SR-NYSEMKT-2016-75]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 9217 To 
Add a Provision and Related Fines Addressing Trade-Through Violations

August 30, 2016.
    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 August 17, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is

[[Page 61267]]

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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 9217 to add a provision and 
related fines addressing trade-through violations. The proposed rule 
change is available on the Exchange's Web site 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the filing is to amend Rule 9217 (Violations 
Appropriate for Disposition Under Rule 9216(b)) to add a provision and 
related fines addressing trade-throughs. The proposed amendment would 
correct an oversight in not including trade-throughs when the Exchange 
adopted Rule 9217 in connection with the Options Order Protection and 
Locked/Crossed Market Plan (the ``Linkage Plan'').
    When the Linkage Plan was adopted in 2009, the Exchange filed and 
received approval for conforming rules,\4\ including modifications to 
Rule 476A (Imposition of Fines for Minor Violation(s) of Rules) to 
provide for certain violations of Rule 990NY, Rule 991NY, and Rule 
992NY to be enforced under the Minor Rule Plan (``MRP'').\5\ However, 
the Exchange did not adopt a provision as part of the MRP regarding the 
avoidance of trade-throughs as required by Rule 991NY(a). Thus, when 
the Exchange adopted Rule 9217, it did not include violations of trade-
throughs, which was likely an oversight because the Exchange simply 
``retain[ed] its currently applicable list of minor rule violations and 
accompanying fine levels.'' \6\ The Exchange notes that the rules of 
other options exchanges, including the BOX Options Exchange LLC 
(``BOX'') and Chicago Board Options Exchange (``CBOE''), include as 
part of their minor rule plans provisions and related fines for trade-
through violations.\7\
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    \4\ See Securities Exchange Act Release No. 60520 (August 18, 
2009), 74 FR 43176 (August 26, 2009) (SR-NYSEAmex-2009-19).
    \5\ The Exchange's MRP fosters compliance with applicable rules 
and also helps to reduce the number and extent of rule violations 
committed by ATP Holders and associated persons. The prompt 
imposition of a financial penalty helps to quickly educate and 
improve the conduct of ATP Holders and associated persons that have 
engaged in inadvertent or otherwise minor violations of the 
Exchange's rules. By promptly imposing a meaningful financial 
penalty for such violations, the MRP focuses on correcting conduct 
before it gives rise to more serious enforcement action.
    \6\ See Securities Exchange Act Release No. 77241 (February 26, 
2016), 81 FR 11311 (March 3, 2016) (SR-NYSEMKT-2016-30). The 
Exchange is not proposing to amend Rule 476A, which is part of 
Section 9A, Legacy Disciplinary Rules, because that rule applies 
``only to a proceeding for which a Charge Memorandum has been filed 
with the hearing board under Rule 476(d) prior to April 15, 2016, 
until such proceeding is final; otherwise, the Rule 9000 Series 
shall apply.'' See Rule 476A (emphasis added).
    \7\ See, e.g., Securities Exchange Act Release Nos. 69259 (March 
29, 2013), 78 FR 20706 (April 5, 2013) (SR-BOX-2013-17); 62602 (July 
29, 2010) (regarding BOX Rule 12140(13); [sic] 75 FR 47672 (August 
6, 2010) (SR-CBOE-2010-69) (regarding [sic] and CBOE Rule 
17.50(g)(12)).
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    To address this oversight, and to align with the rules of other 
options exchanges, the Exchange proposes to amend Rule 9217 to adopt 
``[f]ailure to comply with the requirements for avoidance of trade-
throughs set forth in Rule 991NY(a)'' as MRP Violation 35 and to add 
provision 35 to the Recommended Fine Schedule. As proposed, when an ATP 
Holder engages in a pattern or practice of trading through better 
prices available on other exchanges, the Exchange would recommend a 1st 
Level Fine of $500; a 2nd Level Fine of $1,000; and a 3rd Level Fine of 
$2,500. The Exchange notes that these fines are consistent with those 
adopted by competing options exchanges.\8\
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    \8\ See supra note 7.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \9\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\10\ 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 facilitating transactions in 
securities, and to remove impediments to and perfect the mechanisms of 
a free and open market and a national market system. The proposed rule 
change is also consistent with Sections 6(b)(6) and 6(b)(7) of the Act 
because it would promote the Exchange's ability to appropriately 
discipline its market participants and provide fair procedures when 
addressing violations of Exchange rules that are deemed by the Exchange 
to be minor in nature.\11\
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(6) and (7).
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    The proposed change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities because 
addressing violations of trade-throughs in Rule 9217 would align 
Exchange rules with rules of other options exchanges that likewise have 
trade-throughs as part of their minor rule plans.\12\ In addition, the 
Exchange believes that the proposed rule change would promote the 
efficient use and reasonable allocation of Exchange resources such that 
trade-through violations could be dealt with via the MRP allowing the 
Exchange to devote more time and effort to more serious violations. The 
proposed change would also strengthen the Exchange's ability to carry 
out its oversight responsibilities as a self-regulatory organization 
and reinforce its enforcement functions. Further, the Exchange believes 
the proposal would provide notice to, and fair procedures for the 
disciplining of, ATP Holders and persons associated with ATP Holders 
for violations of trade-throughs and would, in turn, protect investors 
and the investing public. The proposed changes are non-discriminatory 
in that they would be applied equally to all ATP Holders in a similar 
situation. The proposed changes also permit the Exchange to levy 
progressively larger fines against a repeat offender, in a manner and 
an amount consistent with those applied for violations on other 
markets.\13\
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    \12\ See supra note 7.
    \13\ See supra note 7.
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    In addition, the proposed changes would promote consistency in 
minor rule violations and respective SRO reporting obligations, 
resulting in less burdensome and more efficient regulatory compliance 
for common permit holders.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose

[[Page 61268]]

any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed change would align 
Exchange rules with rules of other options exchanges and would 
therefore promote consistency in minor rule violations and respective 
SRO reporting obligations, resulting in less burdensome and more 
efficient regulatory compliance and facilitating performance of 
regulatory functions.\14\ The proposed rule change is not intended to 
address competitive issues, but rather it is designed to provide notice 
to, and fair procedures for the disciplining of, ATP Holders and 
persons associated with ATP Holders for violations of trade-throughs.
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    \14\ See supra note 7.
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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

    Because the foregoing proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \15\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of its filing. However, 
Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay so that the proposed rule 
change will become operative on filing. The Exchange stated that the 
proposed rule change would allow the Exchange to align its rules with 
those of competing options exchanges, without delay, and would also 
strengthen the Exchange's ability to carry out its oversight 
responsibilities as a self-regulatory organization and reinforce its 
enforcement functions. The Exchange also stated that waiver of the 
operative delay would promote regulatory clarity and consistency, 
thereby reducing burdens on the marketplace and facilitating investor 
protection. For these reasons, the Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission designates 
the proposed rule change to be operative upon filing.\18\
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    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2016-75 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-NYSEMKT-2016-75. 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 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 those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site 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 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-NYSEMKT-2016-75, and should 
be submitted on or before September 27, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-21256 Filed 9-2-16; 8:45 am]
BILLING CODE 8011-01-P