Document ID: SEC-2012-1451-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-09-04T04:00Z

[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53955-53957]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21635]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67737; File No. SR-NYSEArca-2012-93]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Deleting NYSE Arca 
Equities Rule 4.3(c) and Adopting New Rules 2262 and 2269 To Harmonize 
With the Rules of New York Stock Exchange LLC, NYSE MKT LLC, and 
Financial Industry Regulatory Authority, Inc.

August 28, 2012.
    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 16, 2012, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to delete NYSE Arca Equities Rule 4.3(c) and 
adopt new Rules 2262 and 2269 to harmonize with the rules of New York 
Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), and 
Financial Industry Regulatory Authority, Inc. (``FINRA''). The text of 
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, Proposed Rule Change

1. Purpose
    The Exchange proposes to delete NYSE Arca Equities Rule 4.3(c) and 
to adopt new Rules 2262 and 2269 to harmonize with the rules of New 
York Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), and 
Financial Industry Regulatory Authority, Inc. (``FINRA'').\4\ To 
harmonize the Exchange Rules with the rules of NYSE, NYSE MKT, and 
FINRA, the Exchange correspondingly proposes to delete NYSE Arca 
Equities Rule 4.3(c) and replace it with proposed NYSE Arca Equities 
Rules 2262 and 2269. As proposed, NYSE Arca Equities Rules 2262 and 
2269 adopt the same language as FINRA Rules 2262 and 2269, except for 
substituting for or adding to, as needed, the term ``ETP Holder'' for 
the term ``member'', and making corresponding technical changes.\5\
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    \4\ See NYSE Rules 2262, 2269; NYSE MKT Rules 2262--Equities, 
2269--Equities; and FINRA Rules 2262, 2269. See also Securities 
Exchange Act Release Nos. 60659 (September 11, 2009), 74 FR 48117 
(September 21, 2009) (order approving SR-FINRA-2009-44); 61176 
(December 16, 2009), 74 FR 68442 (December 24, 2009) (SR-NYSE-2009-
125); and 61179 (December 16, 2009), 74 FR 68440 (December 24, 2009) 
(SR-NYSEAmex-2009-89).
    \5\ These changes to FINRA Rules 2262, 2269 are consistent with 
the changes done by NYSE and NYSE MKT. See supra note 4.
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    Current NYSE Arca Equities Rule 4.3(c) states that an ETP Holder 
shall not trade in (except on an unsolicited basis) or make 
recommendations with respect to its own securities or those of its 
parents or affiliates (other than registered investment companies) and 
any parents or affiliates of an ETP Holder shall not trade in (except 
on an unsolicited basis) or make recommendations with respect to its 
own securities or those of its affiliates, or those of the ETP Holder 
(other than registered investment companies). While the current NYSE 
Arca Equities Rule 4.3(c) restricts the trading and recommendation 
activities of the ETP Holder with respect to its own securities or 
those of its parents or affiliates, the rule does not cover 
transactions beyond those involving securities of parent or affiliate 
and does not contain a written disclosure requirement that is 
consistent with Rules 15c1-5 and 15c1-6 of the Act.\6\
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    \6\ See 17 CFR 240.15c1-5 and 17 CFR 240.15c1-6.
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    In 2009, FINRA adopted NASD Rules 2240 (Disclosure of Control 
Relationship

[[Page 53956]]

with Issuer) and 2250 (Disclosure of Participation or Interest in 
Primary or Secondary Distribution) as consolidated FINRA Rules 2262 and 
2269, respectively.\7\ FINRA Rule 2262 requires that a FINRA member 
with a control relationship with the issuer of any security provide 
disclosure of such control before entering into any contract with or 
for a customer for the purchase or sale of a security of the issuer. 
FINRA Rule 2269 requires that a FINRA member that is participating in a 
primary or secondary distribution or otherwise is financially 
interested, provide notification to a customer for which it is acting 
as a broker or dealer with respect to such securities of the existence 
of such participation or interest. In its filing, FINRA noted that the 
requirements of FINRA Rules 2262 and 2269 are almost identical to Rules 
15c1-5 and 15c1-6 under the Act, respectively. FINRA further noted that 
FINRA Rules 2262 and 2269 would operate to protect customers without 
regard as to whether or not a member makes a recommendation on a 
security to a customer. In addition, FINRA noted that FINRA Rules 2262 
and 2269 require disclosure in transactions involving securities beyond 
those issued by a subsidiary of the member.
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    \7\ See Securities Exchange Act Release No. 60659 (September 11, 
2009), 74 FR 48117 (September 21, 2009) (SR-FINRA-2009-044).
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    As proposed, because NYSE Arca Equities Rule 4.3(c) covers the same 
topic as FINRA Rules 2262 and 2269, the Exchange would delete NYSE Arca 
Equities Rule 4.3(c) and replace it with new Rules 2262 and 2269.\8\ As 
such, the Exchange would replace the existing restrictions with a 
written disclosure requirement applicable to a broader range of 
transactions that allows customers to make informed decisions on 
whether to trade the securities. By adopting new Rules 2262 and 2269, 
the proposal would also extend the written disclosure requirement to 
securities transactions currently not covered by NYSE Arca Equities 
Rule 4.3(c). In contrast to NYSE Arca Equities Rule 4.3(c), the 
proposed changes will impose disclosure requirements in situations 
where there is either a control relationship or where the ETP Holder 
has an interest or participation in a distribution.\9\ Thus, the new 
language will broaden the protection of the Exchange Rules through both 
additional written disclosure requirements and extension to securities 
transactions not currently covered by current Rule 4.3(c).
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    \8\ Neither FINRA, NYSE, NYSE MKT or any other exchange has a 
rule based on the language of NYSE Arca Equities Rule 4.3(c).
    \9\ The proposal has no impact on the other requirements in 
Exchange Rules that apply to ETP Holders, including NYSE Arca 
Equities Rule 6.3. See NYSE Arca Equities Rule 6.3.
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    The Exchange believes that proposed NYSE Arca Equities Rules 2262 
and 2269 would broaden protection of its Rules in a manner that will 
better protect customers through the additional disclosure requirements 
that the new proposed rules prescribe. In addition, by harmonizing the 
rules with FINRA, ETP Holders that are also members of FINRA will be 
subject to a single standard with respect to disclosure of trading or 
recommending securities in which an ETP Holder has an interest.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \10\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\11\ in that it is designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanisms of a free and open market and a national market system 
and, in general, to protect investors and the public interest. The 
proposed rule changes also support the principles of Section 11A(a)(1) 
\12\ of the Act in that they seek to ensure the economically efficient 
execution of securities transactions and fair competition among brokers 
and dealers and among exchange markets.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78k-1(a)(1).
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    The proposed changes are designed to protect investors and the 
public interest by broadening the protection of its Rules in a manner 
that will better protect customers whether or not a member or member 
organization makes a recommendation on a security for a customer and 
providing additional disclosures of potential conflicts of interest in 
transactions on the Exchange. With the additional disclosures of 
potential conflicts of interest in transactions where an ETP Holder is 
involved, the Exchange believes that investors will be better protected 
by being able to make more informed investment decisions and thus 
promote just and equitable principles of trade on the Exchange.
    In addition, the Exchange believes that the proposed rule change 
supports the objectives of the Act by providing greater harmonization 
among Exchange Rules and the rules of NYSE, NYSE MKT, and FINRA of 
similar purpose, resulting in less burdensome and more efficient 
regulatory compliance for Dual Members. To the extent the Exchange has 
proposed changes that differ from the FINRA version of the Rules, such 
changes are technical in nature and do not change the substance of the 
proposed NYSE Rules.

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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\16\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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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.

[[Page 53957]]

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-NYSEArca-2012-93 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-NYSEArca-2012-93. 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of NYSE Arca. 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-2012-93 and should 
be submitted on or before September 25, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21635 Filed 8-31-12; 8:45 am]
BILLING CODE 8011-01-P