Document ID: SEC-2009-0526-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change To Amend Rule 6.69-Reporting Duties
Posted Date: 2009-04-14T04:00Z

[Federal Register: April 14, 2009 (Volume 74, Number 70)]
[Notices]               
[Page 17270-17271]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap09-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59716; File No. SR-NYSEArca-2009-11]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To Amend Rule 6.69--Reporting Duties

April 6, 2009.

I. Introduction

    On February 13, 2009, NYSE Arca, Inc. (``NYSE Arca'' 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 amend Rule 6.69 to revise the procedures for 
reporting open outcry trades that occur on the options trading floor. 
The proposed rule change was published for comment in the Federal 
Register on March 3, 2009.\3\ The Commission received no comment 
letters on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59440 (February 24, 
2009), 74 FR 9325 (``Notice'').
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II. Description

    NYSE Arca's proposal revises the procedures for reporting open 
outcry trades that occur on the options trading floor. Under existing 
NYSE Arca rules, all option transactions that occur on the options 
trading floor must immediately be reported to the Exchange, in a form 
and manner prescribed by the Exchange, for dissemination to the Options 
Price Reporting Authority (``OPRA'').\4\ 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. Currently, pursuant to existing Rule 6.69(b), the responsible 
party for reporting a transaction is the party that participates on the 
transaction as the seller.
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    \4\ For transactions executed on the Exchange's electronic 
trading platform, NYSE Arca will report the trade directly to OPRA.
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    The proposed rule change makes several clarifying changes to these 
reporting obligations. First, the revised rule provides that whenever a 
Floor Broker is participating on one side of a transaction, the Floor 
Broker becomes the responsible party for reporting the trade, 
regardless of whether the Floor Broker is the buyer or seller. Second, 
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. Third, for transactions 
occurring on the Exchange between two Market Makers, the Market Maker 
participating as the seller must report the transaction to the 
Exchange.
    Finally, in order to further clarify the rules regarding reporting 
duties, the Exchange proposes a new provision regarding Complex Orders. 
Since each party to a Complex Order transaction (which involves the 
simultaneous purchase and/or sale of two or more option series in the 
same underlying security) could be both buying and selling different 
series that make up an order, there may be no clearly defined seller, 
as is required by the existing rule. Consequently, pursuant to the 
proposed rule change, for Complex Order transactions between two Floor 
Brokers or two Market Makers, the party responsible for reporting the 
transaction will 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.\5\
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    \5\ The proposal also eliminates Rule 6.69 Commentary .04, which 
relates to an obsolete and outdated practice. ``Hard cards,'' which 
refer to the cardboard backing of a paper trade ticket, are no 
longer in use on the trading floor.
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    Presently, almost all orders on the Exchange are required to be in 
electronic format prior to representation on the trading floor.\6\ The 
Exchange represents that, typically, Floor Brokers enter the terms of 
orders they receive into the Electronic Order Capture System (``EOC'') 
\7\, and upon consummating a trade, the Floor Broker is able to 
electronically report the transaction to the Exchange for processing 
and dissemination to OPRA. In contrast, the Exchange notes that Market 
Makers trading for their own proprietary account are not required to 
electronically systematize their orders prior to responding to a call 
from a Floor Broker. Consequently, a Market Maker acting as a 
``seller'' (who would be the responsible reporting party under the 
current rules) would be required to re-enter all the order information 
already contained in the Floor Broker's EOC system and then send the 
information to the Exchange for processing. The Exchange believes that 
it will be more efficient for the Floor Broker to be the responsible 
party for reporting a transaction. The Exchange further does not 
believe that requiring a Floor Broker to report every transaction to 
which they are a party will create any undue hardship or unnecessary 
burden on the Floor Broker, given the existing requirement that orders 
be put in electronic format prior to representation on the floor.
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    \6\ See Rule 6.67(c).
    \7\ 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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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\9\ which requires, among 
other things, that that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to remove

[[Page 17271]]

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, and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers. The Commission 
believes that the proposed rule change will increase efficiency in 
trade reporting and remove potential confusion about which party to a 
transaction is responsible for reporting such information.
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    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSEArca-2009-11) be, and 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8419 Filed 4-13-09; 8:45 am]

BILLING CODE 8010-01-P