Document ID: SEC-2007-1607-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca,  Inc.
Posted Date: 2007-11-27T05:00Z

[Federal Register: November 27, 2007 (Volume 72, Number 227)]
[Notices]               
[Page 66214-66216]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27no07-127]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56819; File No. SR-NYSEArca-2007-115]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of a Proposed Rule Change Relating to Rule 6.87--Obvious Error

November 19, 2007.
    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 November 8, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``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 NYSE Arca Rule 6.87 governing 
obvious errors. Specifically, the Exchange proposes a revised review 
procedure for contesting decisions made pursuant to the options obvious 
error rule. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://www.nyse.com
.

[[Page 66215]]

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 proposes to amend NYSE Arca Rule 6.87 governing 
options obvious errors. Specifically, the Exchange proposes a revised 
review procedure for contesting decisions made pursuant to the obvious 
error rule. Currently, NYSE Arca Rule 6.87 provides that the Exchange 
will determine whether an ``Obvious Error'' \3\ has occurred after a 
market maker believes and notifies the Exchange that it participated in 
a transaction that was the result of an Obvious Error. If the Exchange 
believes that an Obvious Error has occurred, the Exchange will take one 
of the following actions depending on the parties to the trade: (1) 
Adjust the price with an adjustment; (2) bust the trade; or (3) adjust 
the trade without an adjustment penalty. Currently, if a party does not 
agree with the action taken by the Exchange, the party may appeal the 
decision to the Exchange's Board of Directors (``Board'') pursuant to 
NYSE Arca Rule 10.14.
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    \3\ ``Obvious Error'' is defined in NYSE Arca Rule 6.87(a)(1).
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    The Exchange proposes to amend Rule 6.87 by removing the Board 
appeal process pursuant to Rule 10.14 and replacing it with a revised 
appeal process. Proposed NYSE Arca Rule 6.87 would permit a party 
affected by the determination of an Obvious Error to request an appeal 
to the Obvious Error Panel (``OE Panel'') to review the determination 
made by the Exchange's representative pursuant to Rule 6.87(a)(3). The 
OE Panel would be comprised of the NYSE Arca Chief Regulatory Officer 
(``CRO''), or a designee of the CRO,\4\ and representatives from two 
options and trading permit firms (``OTP Firms'').\5\ One representative 
on the OE Panel will be from an OTP Firm directly engaged in market 
making activities and one representative on the OE Panel will be from 
an OTP Firm directly engaged in the handling of options orders for 
public customers.
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    \4\ The Exchange represents that a designee of the CRO would be 
an employee of the Exchange, working closely with and reporting 
directly to, the CRO, such as one of the Directors of Options 
Regulation. The Exchange notes that the International Securities 
Exchange, LLC (``ISE'') designates an obvious error panel to 
independently make appeals decisions and also to overturn or modify 
actions taken by the ISE. See ISE Rule 720.
    \5\ The Exchange proposes to designate at least ten (10) OTP 
Firm representatives to be called upon to serve on the OE Panel. In 
no case would the OE Panel include a person related to a party to 
the trade in question. To the extent reasonably possible, the 
Exchange proposes to call upon the designated representatives to 
participate on an OE Panel on an equally frequent basis.
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    In addition, requests for an appeal would have to be made via 
facsimile or e-mail within thirty minutes after the party requesting 
the appeal is given notification of the initial determination. 
Thereafter, the OE Panel would review the information and may overturn 
or modify the action taken by the Officer. Such determination by the OE 
Panel would be considered a final action by the Exchange on the matter 
at issue. All final determinations made by the OE Panel would be 
rendered, without prejudice, as to the rights of the parties to the 
transaction to submit their dispute to arbitration. The Exchange states 
that the revised process is intended to provide a timely appeal for OTP 
Firms and options and trading permit holders (``OTP Holders'') in place 
of the lengthy Board appeals process currently provided in Rule 10.14.
    Finally, if the OE Panel upholds the Exchange's decision made 
pursuant to Rule 6.87(a)(4) to bust or adjust a trade, the Exchange 
would assess a $500.00 fee against the OTP Holder or OTP Firm that 
initiated the request for appeal. The Exchange believes that assessing 
a $500.00 fee would discourage frivolous and abusive practices of the 
appeal process.
    The Exchange is also proposing amendments to Rule 10.14 to remove 
the Board appeals process for Rule 6.87, and remove the appeals process 
from Commentary .02 of Rule 6.87.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act,\6\ in general, and furthers the objectives of 
section 6(b)(5) of the Act,\7\ in particular, because it is designed 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 and perfect the mechanisms of a 
free and open market and to protect investors and the public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 by the Exchange 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 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.

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-2007-115 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-2007-115. This 
file number should be included on the

[[Page 66216]]

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 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-2007-115 and should be submitted on or before 
December 18, 2007.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22979 Filed 11-26-07; 8:45 am]

BILLING CODE 8011-01-P