Document ID: SEC-2017-1274-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-07-28T04:00Z

[Federal Register Volume 82, Number 144 (Friday, July 28, 2017)]
[Notices]
[Pages 35244-35245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15910]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81197; File No. SR-NYSEArca-2017-46]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To Amend NYSE Arca Equities Rule 13.2, Liability 
of Corporation

July 24, 2017.

I. Introduction

    On May 23, 2017, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend NYSE Arca Equities Rule 13.2, Liability of Corporation. The 
proposed rule change was published for comment in the Federal Register 
on June 12, 2017.\3\ The Commission received no comments on the 
proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80866 (June 6, 
2017), 82 FR 26967 (``Notice'').
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II. Description of the Proposed Rule Change \4\
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    \4\ For a more detailed description of the proposed rule change, 
see Notice, supra note 3.
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    NYSE Arca Equities Rule 13.2 (``Rule 13.2'') currently provides a 
mechanism for ETP Holders to receive compensation for certain types of 
losses. The Exchange proposes to amend Rule 13.2 in several respects.
    First, the Exchange proposes to amend Rule 13.2(a) to specify that 
the limitation of liability set forth in that paragraph would apply to 
ETP Holders' successors, representatives, and customers. Pursuant to 
proposed Rule 13.2(a), except as otherwise expressly provided in the 
Exchange's rules, neither the Corporation nor its Directors, officers, 
committee members, employees, or agents shall be liable to ETP Holders 
of the Corporation, or successors, representatives, or customers 
thereof, or to persons associated therewith, for the specified types of 
losses, expenses, damages, or claims.
    Second, the Exchange proposes to amend Rule 13.2(b), which 
describes certain prerequisites for qualifying for compensation. 
Specifically, Rule 13.2(b) currently requires, among other things, that 
``the Corporation has acknowledged receipt of'' the order. As proposed, 
Rule 13.2(b) would require, among other things, that ``the Corporation 
has received'' the order.
    Third, the Exchange proposes to amend Rule 13.2(b) to eliminate the 
daily liability caps. Rule 13.2(b)(1) currently provides that, as to 
any one or more claims made by a single ETP Holder growing out of the 
use or enjoyment of the facilities afforded by the Corporation on a 
single trading day, the Corporation will not be liable in excess of the 
larger of $100,000, or the amount of any recovery obtained by the 
Corporation under any applicable insurance maintained by the 
Corporation. Rule 13.2(b)(2) currently provides that, as to the 
aggregate of all claims made by all ETP Holders growing out of the use 
or enjoyment of the facilities afforded by the Corporation on a single 
trading day, the Corporation will not be liable in excess of the larger 
of $250,000, or the amount of the recovery obtained by the Corporation 
under any applicable insurance maintained by the Corporation. Rule 
13.2(b)(3) currently provides that, as to the aggregate of all claims 
made by all ETP Holders growing out of the use or enjoyment of the 
facilities afforded by the Corporation during a single calendar month, 
the Corporation will not be liable in excess of the larger of $500,000, 
or the amount of the recovery obtained by the Corporation under any 
applicable insurance maintained by the Corporation.\5\ The Exchange 
proposes to eliminate the daily liability caps in Rules 13.2(b)(1) and 
(2), and retain the monthly liability cap in Rule 13.2(b)(3).\6\ The 
Exchange also proposes to apply the elimination of the daily liability 
caps retroactively to March 1, 2017, so that ETP Holders may be fully 
compensated for losses incurred in connection with a system issue that 
occurred on March 20, 2017.\7\
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    \5\ Rule 13.2(c) currently provides that, if all of the claims 
arising out of the use or enjoyment of the facilities afforded by 
the Corporation cannot be fully satisfied because in the aggregate 
they exceed the applicable maximum amount of liability provided for 
in Rule 13.2(b), then the maximum amount shall be allocated among 
all such claims arising on a single trading day or during a single 
calendar month, as applicable, based on the proportion that each 
such claim bears to the sum of all such claims.
    \6\ In connection with this change, the Exchange also proposes 
conforming changes in Rule 13.2(c) to eliminate the reference to 
allocation among claims arising ``on a single trading day.''
    \7\ See Notice, supra note 3, at 26968.
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    Fourth, the Exchange proposes to amend the time frame and clarify 
the manner in which ETP Holders are required to submit notice of claims 
for compensation. Rule 13.2(c) currently requires ETP Holders to 
provide written notice of claims no later than the opening of trading 
on the next business day following the day on which the use or 
enjoyment of the Corporation's facilities giving rise to the claims 
occurred. The Exchange proposes to require ETP Holders to submit 
written notice of claims for compensation pursuant to Rule 13.2(b) no 
later than noon Eastern Time on the next business day following the day 
on which the use or enjoyment of the Corporation's facilities gave rise 
to such claims.\8\
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    \8\ See proposed Rule 13.2(d).
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\10\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged

[[Page 35245]]

in regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in securities and, in general, to 
protect investors and the public interest, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \9\ 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).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal to eliminate the daily 
liability caps in Rules 13.2(b)(1) and (2) could result in more ETP 
Holders receiving fuller compensations on their claims.\11\ The 
proposal could also reduce the risk that losses suffered by an ETP 
Holder would be treated differently depending on whether other ETP 
Holders suffered losses on the same day.\12\ In addition, the 
Commission notes that, under the proposal, the maximum amount of 
compensation would continue to be proportionally allocated if claims 
arising during a single calendar month exceed the monthly liability 
cap.\13\
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    \11\ The Commission notes that the rules of certain other 
national securities exchanges also only include monthly liability 
caps, and no daily liability caps. See, e.g., Nasdaq Stock Market 
LLC (``Nasdaq'') Rule 4626.
    \12\ See Notice, supra note 3, at 26968.
    \13\ See proposed changes to Rule 13.2(c). As described above, 
the Exchange also proposes to make conforming changes in Rule 
13.2(c) to eliminate the reference to allocation among claims 
arising ``on a single trading day.'' See supra notes 5-6.
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    With respect to the Exchange's proposal to retroactively apply the 
elimination of the daily liability caps, the Commission notes that 
approval of the proposal would make additional funds available to 
compensate ETP Holders affected by the system issue on March 20, 2017. 
Also, as the Exchange notes, the proposal would promote equal treatment 
between ETP Holders who suffered a loss on March 20, 2017 and ETP 
Holders who suffered a loss on a different day.\14\ Specifically, 
according to the Exchange, the proposal would enable it to fully 
compensate ETP Holders for claims arising from the system issue on 
March 20, 2017.\15\ Moreover, according to the Exchange, prior to March 
20, 2017, it has never received a claim that exceeded the liability 
limits, and thus it was never prevented from fully compensating an ETP 
Holder.\16\
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    \14\ See Notice, supra note 3, at 26968.
    \15\ See id. at 26969.
    \16\ See id.
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    The Commission further believes that the other proposed changes are 
consistent with the Act. Specifically, the Commission believes that the 
addition of the text ``successors, representatives or customers 
thereof'' to Rule 13.2(a) would clarify the scope of the limitation of 
liability in that provision.\17\ As the Exchange notes, Rule 13.2 
currently does not authorize the compensation of successors, 
representatives, or customers of ETP Holders because the rule does not 
currently reference them.\18\ The Commission also believes that the 
replacement of the words ``acknowledged receipt of'' with the word 
``received'' in Rule 13.2(b) would provide transparency regarding the 
scope of the rule.\19\ Finally, the Commission believes that the 
addition of paragraph (d) to Rule 13.2 would clarify that all claims 
for compensation must be submitted in writing, and would provide ETP 
Holders additional time to evaluate losses that may have occurred on 
the prior trading day, particularly if an issue occurred later in the 
day.\20\
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    \17\ The Commission notes that this change is consistent with 
the rules of certain other national securities exchanges. See, e.g., 
Bats BZX Exchange, Inc. Rule 11.16(a).
    \18\ See Notice, supra note 3, at 26967.
    \19\ The Commission notes that this change is consistent with 
the rules of certain other national securities exchanges. See, e.g., 
New York Stock Exchange LLC Rule 18(b).
    \20\ The Commission notes that this change is consistent with 
the rules of certain other national securities exchanges. See, e.g., 
Nasdaq Rule 4626(b)(6).
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    Based on the foregoing, the Commission believes that the proposed 
rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NYSEArca-2017-46), be, and 
hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15910 Filed 7-27-17; 8:45 am]
 BILLING CODE 8011-01-P