Document ID: SEC-2006-0725-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-06-06T04:00Z

[Federal Register: June 6, 2006 (Volume 71, Number 108)]
[Notices]               
[Page 32619-32622]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jn06-76]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53879; File No. SR-NYSEArca-2006-03]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change and 
Amendment Nos. 1 and 2 Thereto To Establish a Public Disclosure Program

May 26, 2006.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 6, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. On May 9, 2006, NYSE Arca filed 
Amendment No. 1 to the proposed rule change. On May 17, 2006, NYSE Arca 
filed Amendment No. 2 to the proposed rule change. The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons and is approving the proposal on an 
accelerated basis.
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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

    NYSE Arca proposes to implement a new rule, NYSE Arca Rule 10.17, 
that would institute and govern a program (``Public Disclosure 
Program'') in which certain disciplinary actions involving Option 
Trading Permit Holders (``OTP Holders''), Option Trading Permit Firms 
(``OTP Firms''), and associated persons thereof would be publicized. 
The text of the proposed rule change is below. Proposed new language is 
in italics.

Rules of the NYSE Arca, Inc.

* * * * *

Rule 10 Disciplinary Proceedings and Appeals

* * * * *

Release of Disciplinary Information Through the Public Disclosure 
Program

    Rule 10.17(a) The Exchange shall, in response to a request, release 
a copy of any identified disciplinary decision issued by the Exchange 
or any Committee thereof; provided, however, that each copy of:
    (1) A decision that is released prior to the expiration of the time 
period provided under NYSE Arca Rule 10.8 for appeal or while such an 
appeal is pending shall be accompanied by a statement that the findings 
and sanctions imposed in the decision may be increased, decreased, 
modified, or reversed by the Exchange;
    (2) A final decision of the Exchange that is released prior to the 
time period provided under the Securities Exchange Act of 1934 for 
appeal to the Securities and Exchange Commission or while such an 
appeal is pending shall be accompanied by a statement that the findings 
and sanctions of the Exchange are subject to review and modification by 
the Securities and Exchange Commission; and
    (3) A final decision of the Exchange that is released after the 
decision is appealed to the Securities and Exchange Commission shall be 
accompanied by a statement as to whether the effectiveness of the 
sanctions has been stayed pending the outcome of proceedings before the 
Securities and Exchange Commission.
    (b)(1) The Exchange shall release to the public information with 
respect to any disciplinary decision issued pursuant to NYSE Arca Rule 
10 imposing: (i) A suspension, cancellation or expulsion upon an OTP 
Holder or OTP Firm; or (ii) suspension or revocation of the 
registration of an associated person of an OTP Holder or OTP Firm; or 
(iii) suspension or barring of an OTP Holder or OTP Firm or associated 
person from association with all OTP Holders or OTP Firms; or (iv) 
imposition of monetary sanctions of $10,000 or more upon an OTP Holder 
or OTP Firm or associated person; or (v) containing an allegation of a 
violation of a Designated Rule; and may also release to the public such 
information with respect to any disciplinary decision or group of 
decisions that involve a significant policy or enforcement 
determination where the release of information is deemed by the 
President of the Exchange to be in the public interest. The Exchange 
may, in its discretion, determine to waive the requirement to release 
information with respect to a disciplinary decision under those 
extraordinary circumstances where the release of such information

[[Page 32620]]

would violate fundamental notions of fairness or work as an injustice. 
The Exchange may release to the public information on any disciplinary 
or other decision issued pursuant to NYSE Arca Rule 10 not specifically 
enumerated in this paragraph, regardless of sanctions imposed, so long 
as the names of the parties and other identifying information is 
redacted.
    A ``Designated Rule'' means (i) SEC Rule 10b-5, (ii) NYSE Arca Rule 
11.5, or (iii) NYSE Arca Rule 11.2.
    (A) The Exchange shall release to the public, in unredacted form, 
information with respect to any disciplinary decision issued pursuant 
to NYSE Arca Rule 10.8 that does not meet one or more of the criteria 
in section (b)(1) for the release of information to the public, 
provided that the underlying decision issued pursuant to NYSE Arca Rule 
10.7 meets one or more of the criteria in section (b)(1) for the 
release of information to the public, and information regarding such 
decision has been released to the public in unredacted form.
    (B) In the event there is more than one respondent in a 
disciplinary decision issued pursuant to NYSE Arca Rule 10 and 
sanctions imposed on one or more, but not all, of the respondents meets 
one or more of the criteria in section (b)(1) for the release of 
information to the public, the Exchange shall release to the public, in 
unredacted form, information with respect to the respondent(s) who meet 
such criteria, and may release to the public, in redacted form, 
information with respect to the respondent(s) who do not meet such 
criteria. Notwithstanding the foregoing, the Exchange shall release to 
the public, in unredacted form, information with respect to any 
respondent in a disciplinary decision issued pursuant to NYSE Arca Rule 
10.8 if the sanctions imposed on such respondent in the underlying 
decision issued pursuant to NYSE Arca Rule 10.7 meet one or more of the 
criteria for release of information to the public, and information with 
respect to that respondent has been released in unredacted form.
    (2) Information released to the public pursuant to subparagraph 
(b)(1) shall be accompanied by a statement to the extent required for 
that type of information under subparagraphs (a)(1)-(3).
    (c) Information regarding any sanctions imposed pursuant to NYSE 
Arca Rule 10.6 shall be released to the public pursuant to paragraph 
(b) immediately upon such approval.
    (d) If a decision of the Exchange imposing monetary sanctions of 
$10,000 or more or a penalty of expulsion, revocation, suspension and/
or barring of an OTP Holder or OTP Firm from being associated with all 
OTP Holders or OTP Firms is appealed to the Securities and Exchange 
Commission, notice thereof shall be given to all OTP Holders and OTP 
Firms and to the press as soon as possible after receipt by the 
Exchange of notice from the Securities and Exchange Commission of such 
appeal and the Exchange's notice shall state whether the effectiveness 
of the Exchange's decision has been stayed pending the outcome of 
proceedings before the Securities and Exchange Commission.
    (e) In the event an appeal to the Federal courts is filed from a 
decision by the Securities and Exchange Commission in a case previously 
appealed to it from a decision of the Exchange, involving the 
imposition of monetary sanctions of $10,000 or more or a penalty of 
expulsion, revocation, suspension and/or barring of an OTP Holder or 
OTP Firm from being associated with all OTP Holders or OTP Firms, 
notice thereof shall be given to the OTP Holders or OTP Firms as soon 
as possible after receipt by the Exchange of a formal notice of appeal. 
Such notice shall include a statement whether the order of the 
Securities and Exchange Commission has been stayed.
    (f) Any order issued by the Securities and Exchange Commission of 
(i) revocation or suspension of an OTP Holder's or OTP Firm's broker/
dealer registration with the Securities and Exchange Commission; or 
(ii) the suspension or expulsion of an OTP Holder or OTP Firm from the 
Exchange; or (iii) the suspension or barring of an OTP Holder or OTP 
Firm or an associated person from association with all broker/dealers 
or OTP Holders or OTP Firms; or (iv) the imposition of monetary 
sanctions of $10,000 or more shall be released to the public through a 
notice containing the effective date thereof sent as soon as possible 
after receipt by the Exchange of the order of the Securities and 
Exchange Commission.
    (g) Cancellations of Option Trading Permits or registration 
pursuant to the Exchange's Rules and interpretative material shall be 
released to the public as soon after the effective date of the 
cancellation as possible.
    (h) Releases to the public referred to in paragraph (b) above shall 
identify the Exchange Rule(s) or the SEC Rule(s) violated, and shall 
describe the conduct constituting such violation. Releases may also 
identify the OTP Holder or OTP Firm with which an individual was 
associated at the time the violations occurred if such identification 
is determined by the Exchange to be in the public interest.
* * * * *

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

    In its filing with the Commission, NYSE Arca included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

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

1. Purpose
    Under the proposed Public Disclosure Program, the Exchange would 
release to the public certain information concerning the disciplinary 
history of OTP Holders, OTP Firms, and associated persons. The Exchange 
is instituting such procedures in order to provide investors with 
information regarding final disciplinary decisions related to such OTP 
Holders, OTP Firms, and associated persons. The primary purpose of the 
Public Disclosure Program is to help investors make informed choices 
about the individuals and firms with whom they may wish to do business. 
Currently, the Exchange does not have rules related to the release of 
disciplinary decisions to members of the public. Proposed NYSE Arca 
Rule 10.17 would allow the Exchange to release such information upon 
request and when certain other circumstances exist, as explained in 
greater detail below.
    Disciplinary Decisions. If a member of the public requests a copy 
of an identified disciplinary decision issued by the Exchange or any 
committee thereof, a copy of the decision will be provided to the 
requesting member of the public. The Exchange's practice will be to 
provide such information on a per-OTP Holder, OTP Firm, or associated 
person basis. The Exchange will not charge the public for this service.
    The Exchange will also release information to the public with 
respect to disciplinary decisions that: (i) Impose a suspension, 
cancellation, or expulsion of an OTP Holder or OTP Firm; (ii) impose 
the suspension or revocation of the registration of an associated 
person of an OTP Holder or OTP Firm; (iii) impose the suspension or 
barring of an OTP Holder, OTP Firm, or associated person from 
association with all OTP

[[Page 32621]]

Holders or OTP Firms; (iv) impose monetary sanctions of $10,000 or more 
upon an OTP Holder, OTP Firm, or associated person; or (v) contain an 
allegation of a violation of a Designated Rule.\3\ The Exchange will 
release unredacted information concerning decisions issued by the Board 
Appeals Committee that do not meet one or more of the criteria in 
proposed NYSE Arca Rule 10.17(b)(1), provided that the underlying 
decision meets one or more of the criteria in proposed NYSE Arca Rule 
10.17(b)(1), and the information regarding the underlying decision was 
released to the public in unredacted form.
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    \3\ A ``Designated Rule'' means (i) Commission Rule 10b-5 under 
the Act, (ii) NYSE Arca Rule 11.5 (Manipulation), or (iii) NYSE Arca 
Rule 11.2 (Prohibited Acts). See proposed NYSE Arca Rule 
10.17(b)(1).
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    In the event that there is more than one respondent in a 
disciplinary decision and sanctions are imposed on one or more of the 
respondents, but not all of the respondents meet one or more of the 
criteria in proposed NYSE Arca Rule 10.17(b)(1) for the release of 
information, the Exchange will release to the public unredacted 
information with respect to the respondents who meet such criteria. In 
addition, the Exchange may release redacted information to the public 
with respect to the respondents who do not meet the criteria in 
proposed NYSE Arca Rule 10.17(b)(1).
    The Exchange may release information to the public concerning 
disciplinary decisions that involve significant policy or enforcement 
determinations where the release of such information is deemed by the 
President of the Exchange to be in the public interest. In addition, 
the Exchange may exercise its discretion and waive the requirement to 
release information with respect to a disciplinary decision under 
extraordinary circumstances where the release of the information would 
violate fundamental notions of fairness or work as an injustice. 
Finally, the Exchange may release public information concerning any 
disciplinary or other decision issued pursuant to NYSE Arca Rule 10 
that is not specifically enumerated in proposed NYSE Arca Rule 
10.17(b)(1), regardless of the sanctions imposed, so long as the names 
of the parties and other identifying information are redacted.
    Notices. Decisions that are released to a member of the public must 
include certain notices. Decisions that are released prior to the 
period in which a respondent may request an appeal pursuant to NYSE 
Arca Rule 10.8 (Review) or while an appeal is pending must include a 
statement that the findings and sanctions imposed in the decision may 
be increased, decreased, modified, or reversed by the Exchange. In 
addition, a final decision by the Exchange that is released prior to 
the period in which a respondent may appeal to the Commission or while 
such appeal is pending will include a statement that the findings and 
sanctions of the Exchange are subject to review and modification by the 
Commission. Lastly, a final decision of the Exchange that is released 
after the decision is appealed to the Commission will include a 
statement as to whether the effectiveness of the sanctions has been 
stayed pending the outcome of proceedings before the Commission.
    Appeals. In the instance that the Exchange's decisions are appealed 
to the Commission or the federal courts, the Exchange will notify all 
OTP Holders, OTP Firms, and the press. This includes all Exchange 
decisions imposing monetary sanctions of $10,000 or more or a penalty 
of expulsion, revocation, suspension, and/or barring of an OTP Holder 
or OTP Firm from being associated with all OTP Holders or OTP Firms.
    Commission Orders. The Exchange will release through a notice to 
the public information with respect to any order issued by the 
Commission: (i) Revoking or suspending an OTP Firm's or OTP Holder's 
broker-dealer registration; (ii) suspending or expelling an OTP Firm or 
OTP Holder from the Exchange; (iii) suspending or barring an OTP 
Holder, OTP Firm, or an associated person from associating with all 
broker-dealers, OTP Holders, or OTP Firms; or (iv) imposing monetary 
sanctions of $10,000 or more.
    Offers of Settlement. The Exchange will release information 
regarding sanctions imposed pursuant to NYSE Arca Rule 10.6 (Offers of 
Settlement) upon the approval of offers of settlement.
    Cancellation of Option Trading Permits. In cases where the Exchange 
cancels an Options Trading Permit or registration, the Exchange will 
notify the public as soon after the effective date of the cancellation 
as possible.
    While proposed NYSE Arca Rule 10.17 is based substantially on NASD 
Rule 8310 (Sanctions for Violation of the Rules) and IM-8310-2 (Release 
of Disciplinary and Other Information Through the Public Disclosure 
Program), it does not incorporate all aspects of such NASD Rule. For 
example, proposed NYSE Arca Rule 10.17 excludes public disclosure of 
disciplinary complaints and arbitrations. The Exchange's intention is 
for public disclosure not to apply to disciplinary complaints that 
involve undecided issues or arbitrations between parties. The Exchange 
plans to notify OTP Holders, OTP Firms, and associated persons of the 
effectiveness of this proposed rule change through the Exchange's 
Internet Web site and a regulatory bulletin.
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) \5\ 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 regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove 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.
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    \4\ 15 U.S.C. 78s(b).
    \5\ 15 U.S.C. 78s(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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2006-03 on the subject line.

[[Page 32622]]

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2006-03. 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. 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-2006-03 and should be submitted on or before 
June 27, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, 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 finds that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\7\ which requires that an 
exchange have rules designed, among other things, to promote just and 
equitable principles of trade, to remove 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.
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    \6\ In approving this proposed rule change, the Commission 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).
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    The Commission believes that the proposal to institute the Public 
Disclosure Program, which is substantially based on NASD Rule 8310 and 
IM-8310-2,\8\ serves the interest of investor protection because it 
allows NYSE Arca members and the general public to promptly learn of 
final disciplinary decisions involving its broker-dealer members or 
associated persons of such members. By notifying the public of a final 
decision issued by the Exchange or any committee of the Exchange that 
results in the suspension, cancellation, expulsion, and/or barring of 
an OTP Holder or OTP Firm or the imposition of monetary sanctions of 
$10,000 or more, for example, the Commission believes that the Public 
Disclosure Program should provide important information to the public, 
create additional incentives for members of the Exchange to comply with 
its rules, and help investors make informed choices and decisions about 
the individuals and firms with whom they may wish to conduct business. 
As such, the Commission finds that the proposed program promotes just 
and equitable principles of trade, encourages the prevention of 
fraudulent and manipulative acts and practices, and seeks to perfect 
the mechanism of a free and open market.
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    \8\ See Securities Exchange Act Release No. 35138 (December 22, 
1994), 59 FR 67362 (December 29, 1994) (approving the NASD program 
to publish final disciplinary decisions involving its members).
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    The Commission finds good cause for approving this proposed rule 
change, as amended, before the thirtieth day after the publication of 
notice thereof in the Federal Register. As noted earlier, prompt 
disclosure of final disciplinary decisions serves the interest of 
protecting investors and the general public.\9\ Therefore, accelerating 
approval of the proposed rule change should benefit investors because 
they will have access to the NYSE Arca disciplinary information sooner. 
The Public Disclosure Program should foster compliance with NYSE Arca 
rules, heighten awareness of the public investor with respect to the 
conduct of business on the Exchange, and, in general, improve the 
overall integrity of the market center.
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    \9\ See id.
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSEArca-2006-03), as amended, is 
hereby approved on an accelerated basis.\10\
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-8700 Filed 6-5-06; 8:45 am]

BILLING CODE 8010-01-P