Document ID: SEC-2006-0726-0001
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 32622-32626]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jn06-77]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53878; File No. SR-NYSEArca-2006-02]

 
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''), 
through its subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca 
Equities''), 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, through its subsidiary, NYSE Arca Equities, proposes to 
implement a new rule, NYSE Arca Equities Rule 10.15, that would 
institute and govern a program (``Public Disclosure Program'') in which 
certain disciplinary actions involving Equity Trading Permit Holders 
(``ETP Holders'') and associated persons thereof would be publicized. 
The text of the proposed rule change is below. Proposed new language is 
in italics.
NYSE Arca Equities Rules
* * * * *

[[Page 32623]]

RULE 10 DISCIPLINARY PROCEEDINGS, OTHER HEARINGS, AND APPEALS
* * * * *

Release of Disciplinary Information Through the Public Disclosure 
Program

    Rule 10.15(a) The Corporation shall, in response to a request, 
release a copy of any identified disciplinary decision issued by the 
Corporation 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 Equities 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 Corporation;
    (2) a final decision of the Corporation 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 Corporation are subject to review and modification 
by the Securities and Exchange Commission; and
    (3) a final decision of the Corporation 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 Corporation shall release to the public information with 
respect to any disciplinary decision issued pursuant to NYSE Arca 
Equities Rule 10 imposing: (i) a suspension, cancellation or expulsion 
upon an ETP Holder; or (ii) suspension or revocation of the 
registration of an associated person of an ETP Holder; or (iii) 
suspension or barring of an ETP Holder or associated person from 
association with all ETP Holders; or (iv) imposition of monetary 
sanctions of $10,000 or more upon an ETP Holder 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 Corporation to be in the public 
interest. The Corporation 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 would violate fundamental notions of fairness or work 
as an injustice. The Corporation may release to the public information 
on any disciplinary or other decision issued pursuant to NYSE Arca 
Equities 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 
Equities Rule 6.5, or (iii) NYSE Arca Equities Rule 6.2.
    (A) The Corporation shall release to the public, in unredacted 
form, information with respect to any disciplinary decision issued 
pursuant to NYSE Arca Equities 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 Equities 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 Equities 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 Corporation 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 Corporation shall release 
to the public, in unredacted form, information with respect to any 
respondent in a disciplinary decision issued pursuant to NYSE Arca 
Equities Rule 10.8 if the sanctions imposed on such respondent in the 
underlying decision issued pursuant to NYSE Arca Equities 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 Equities Rule 10.6 shall be released to the public pursuant to 
paragraph (b) immediately upon such approval.
    (d) If a decision of the Corporation imposing monetary sanctions of 
$10,000 or more or a penalty of expulsion, revocation, suspension and/
or barring of an ETP Holder from being associated with all ETP Holders 
is appealed to the Securities and Exchange Commission, notice thereof 
shall be given to all ETP Holders and to the press as soon as possible 
after receipt by the Corporation of notice from the Securities and 
Exchange Commission of such appeal and the Corporation's notice shall 
state whether the effectiveness of the Corporation'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 Corporation, involving the 
imposition of monetary sanctions of $10,000 or more or a penalty of 
expulsion, revocation, suspension and/or barring of an ETP Holder from 
being associated with all ETP Holders, notice thereof shall be given to 
the ETP Holders as soon as possible after receipt by the Corporation 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 ETP Holder's broker/dealer 
registration with the Securities and Exchange Commission; or (ii) the 
suspension or expulsion of an ETP Holder from the Corporation; or (iii) 
the suspension or barring of an ETP Holder or an associated person from 
association with all broker/dealers or ETP Holders; 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 Corporation of the order 
of the Securities and Exchange Commission.
    (g) Cancellations of Equity Trading Permits or registration 
pursuant to the Corporation'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 Corporation's Rule(s) or the SEC Rule(s) violated, and 
shall describe the conduct constituting such violation. Releases may 
also identify the ETP Holder with which an individual was associated at

[[Page 32624]]

the time the violations occurred if such identification is determined 
by the Corporation 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, NYSE Arca Equities 
would release to the public certain information concerning the 
disciplinary history of ETP Holders and associated persons. NYSE Arca 
Equities is instituting such procedures in order to provide investors 
with information regarding final disciplinary decisions related to ETP 
Holders 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, NYSE Arca Equities does not have rules related to the 
release of disciplinary decisions to members of the public. Proposed 
NYSE Arca Equities Rule 10.15 would allow NYSE Arca Equities 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 NYSE Arca Equities or 
any committee thereof, a copy of the decision will be provided to the 
requesting member of the public. NYSE Arca Equities' practice will be 
to provide such information on a per-ETP Holder or associated person 
basis. NYSE Arca Equities will not charge the public for this service.
    NYSE Arca Equities will also release information to the public with 
respect to disciplinary decisions that: (i) Impose a suspension, 
cancellation, or expulsion of an ETP Holder; (ii) impose the suspension 
or revocation of the registration of an associated person of an ETP 
Holder; (iii) impose the suspension or barring of an ETP Holder or 
associated person from association with all ETP Holders; (iv) impose 
monetary sanctions of $10,000 or more upon an ETP Holder or associated 
person; or (v) contain an allegation of a violation of a Designated 
Rule.\3\ NYSE Arca Equities 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 Equities Rule 
10.15(b)(1), provided that the underlying decision meets one or more of 
the criteria in proposed NYSE Arca Equities Rule 10.15(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 Equities Rule 6.5 (Manipulation), or (iii) 
NYSE Arca Equities Rule 6.2 (Prohibited Acts). See proposed NYSE 
Arca Equities Rule 10.15(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 Equities Rule 10.15(b)(1) for the 
release of information, NYSE Arca Equities will release to the public 
unredacted information with respect to the respondents who meet such 
criteria. In addition, NYSE Arca Equities may release redacted 
information to the public with respect to the respondents who do not 
meet the criteria in proposed NYSE Arca Equities Rule 10.15(b)(1).
    NYSE Arca Equities 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 NYSE Arca Equities to be in the public interest. In 
addition, NYSE Arca Equities 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, NYSE Arca Equities may release public information 
concerning any disciplinary or other decision issued pursuant to NYSE 
Arca Equities Rule 10 that is not specifically enumerated in proposed 
NYSE Arca Equities Rule 10.15(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 Equities 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 NYSE 
Arca Equities. In addition, a final decision by NYSE Arca Equities 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 NYSE Arca Equities are subject to 
review and modification by the Commission. Lastly, a final decision of 
NYSE Arca Equities 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 NYSE Arca Equities' decisions are 
appealed to the Commission or the federal courts, NYSE Arca Equities 
will notify all ETP Holders and the press. This includes all NYSE Arca 
Equities decisions imposing monetary sanctions of $10,000 or more or a 
penalty of expulsion, revocation, suspension, and/or barring of an ETP 
Holder from being associated with all ETP Holders.
    Commission Orders. NYSE Arca Equities will release through a notice 
to the public information with respect to any order issued by the 
Commission: (i) Revoking or suspending an ETP Holder's broker-dealer 
registration; (ii) suspending or expelling an ETP Holder from NYSE Arca 
Equities; (iii) suspending or barring an ETP Holder or an associated 
person from associating with all broker-dealers or ETP Holders; or (iv) 
imposing monetary sanctions of $10,000 or more.
    Offers of Settlement. NYSE Arca Equities will release information 
regarding sanctions imposed pursuant to NYSE Arca Equities Rule 10.6 
(Offers of Settlement) upon the approval of offers of settlement.
    Cancellation of Equity Trading Permits. In cases where NYSE Arca 
Equities cancels an Equity Trading Permit or registration, NYSE Arca 
Equities will notify the public as soon after the effective date of the 
cancellation as possible.
    While proposed NYSE Arca Equities Rule 10.15 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

[[Page 32625]]

Equities Rule 10.15 excludes public disclosure of disciplinary 
complaints and arbitrations. NYSE Arca Equities's intention is for 
public disclosure not to apply to disciplinary complaints that involve 
undecided issues or arbitrations between parties. NYSE Arca Equities 
plans to notify ETP Holders and associated persons of the effectiveness 
of this proposed rule change through NYSE Arca Equities' 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-2006-02 on the subject line.

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-2006-02. 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-2006-02 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 Equities 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 ETP Holder 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 Equities disciplinary 
information sooner. The Public Disclosure Program should foster 
compliance with NYSE Arca Equities 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-

[[Page 32626]]

2006-02), 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. E6-8716 Filed 6-5-06; 8:45 am]

BILLING CODE 8010-01-P