Document ID: SEC-2007-1680-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-12-11T05:00Z

[Federal Register: December 11, 2007 (Volume 72, Number 237)]
[Notices]               
[Page 70367-70369]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11de07-87]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56899; File No. SR-NYSEArca-2007-120]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of a Proposed Rule Change Relating to Restrictions on Acting as Market 
Makers and Floor Broker

December 5, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 27, 2007, the NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. 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\ 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 certain Exchange rules to restrict 
an OTP Holder from concurrently registering as both a Market Maker and 
a Floor Broker. The text of the proposed rule change is available at 
the Exchange, at the Commission's Public Reference Room, and http://www.nyse.com
.

[[Page 70368]]

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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange states that the purpose of this proposal is to amend 
NYSE Arca Rules 6.33 and 6.44, in order to restrict an OTP Holder from 
concurrently registering as both a Market Maker and as a Floor Broker, 
on NYSE Arca. The Exchange also proposes to revise Rule 6.82(h) to 
restrict a Lead Market Maker from performing the functions of a Floor 
Broker. Further, the Exchange proposes to eliminate, in its entirety, 
Rule 6.38, which deals with restrictions when acting as a Market Maker 
and Floor Broker.
    Presently, OTP Holders may be registered as either a Market Maker 
or a Floor Broker, or in certain situations, both. An OTP Holder that 
wished to act in both capacities must apply for and receive approval 
from the Exchange.\3\ The Exchange noted that presently there are no 
OTP Holders registered in the dual capacity of Market Maker and Floor 
Broker, nor does the Exchange have any pending applications from 
existing OTP Holders.
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    \3\ See NYSE Arca Rule 6.38(b)(4).
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    The practice of dual registration dates back to the early days of 
floor-based, open outcry trading. Open outcry trading was for the most 
part a manual process, necessitating the need for a large number of 
Floor Brokers. On occasion, often in periods of unusually active market 
conditions, there might have been a shortage of brokers on the floor, 
and in the interest of maintaining a fair and orderly market, Market 
Makers could be called upon to act as Floor Brokers. Automation has led 
to a dramatic decrease in open outcry trading and has greatly reduced 
the reliance on Floor Brokers to execute orders. Because the vast 
majority of trades on NYSE Arca now occur electronically, the Exchange 
does not feel there would ever be a shortage of Floor Brokers such that 
it could be detrimental to efficient order handling, even in times of 
unusual market activity.
    The Exchange proposes establishing new Rule 6.33(b) stating that an 
OTP Holder registered as a Market Maker on NYSE Arca may not be 
concurrently registered as a Floor Broker on NYSE Arca. Accordingly, 
the Exchange also proposes establishing new Rule 6.44(b), stating that 
an OTP Holder presently registered as a Floor Broker on NYSE Arca 
cannot be concurrently registered as a Market Maker on NYSE Arca. The 
Exchange also proposes making non-substantive changes regarding the 
numbering of existing rules in order to accommodate the new rules.
    Pursuant to NYSE Arca Rule 6.82(h)(3), Lead Market Makers (``LMM'') 
may perform the functions of a Floor Broker. Historically, LMMs might 
perform the duties of a Floor Broker and represent public customer 
orders when there was a shortage of Floor Brokers available. As stated 
above, due to increased automation in the marketplace, the Exchange 
does not anticipate a shortage of Floor Brokers such that it would 
necessitate an LMM to have to act as a Floor Broker. As such, the 
Exchange proposes deleting Rule 6.82(h)(3) in its entirety. The 
Exchange also proposes deleting Commentary .02 to Rule 6.82 relating to 
a LMM's handling of public customer orders.
    Presently, OTP Holders acting as both Floor Broker and Market Maker 
are subject to certain restrictions under NYSE Arca Rule 6.38. Upon 
approval of the above-mentioned rule changes, these restrictions will 
become obsolete. Since Market Makers will be prohibited from acting as 
Floor Brokers, and vice-versa, there is no need to have specific 
restrictions governing their trading activity. Therefore, the Exchange 
proposes eliminating Rule 6.38 in its entirety.
    The Exchange noted that LMMs and InterMarket Linkage Maker Makers 
(``IMM'') are exempt from certain provisions contained in NYSE Arca 
Rule 6.38. Currently, LMMs and IMMs may be called upon to send 
Principal Acting as Agent (``P/A'') Orders through the InterMarket 
Linkage System (``Linkage'') pursuant to NYSE Arca Rules 6.92 and 6.93. 
Linkage is a fully automated process on NYSE Arca, and while the IMM or 
LMM may be acting in an agency capacity, as the responsible party for 
sending the order, they are not acting in the capacity of a Floor 
Broker. The Exchange's electronic system automatically routes orders 
through Linkage, on behalf of the IMM or LMM. Neither the IMM nor LMM 
has any manual interaction with the system, nor the individual Linkage 
orders. Eliminating NYSE Arca Rule 6.38 will not affect their ability 
to carry out any Linkage obligations. Thus, the Exchange proposes to 
add language to Rule 6.33(b) stating that a prohibition on concurrent 
registration as both a Market Maker and Floor Broker will not prevent 
an IMM or LMM from acting in an agency capacity for Linkage purposes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \4\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \5\ 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 to protect investors and 
the public interest.

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

    The Exchange has neither solicited nor received written comments on 
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 Exchange 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.

[[Page 70369]]

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 e-mail to rule-comments@sec.gov. Please include File 

Number SR-NYSEArca-2007-120 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NYSEArca-2007-120. 
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 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing will also 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-2007-120 and should 
be submitted by January 2, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
Florence E. Harmon,
Deputy Secretary.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E7-23924 Filed 12-10-07; 8:45 am]

BILLING CODE 8011-01-P