[Federal Register Volume 75, Number 115 (Wednesday, June 16, 2010)]
[Notices]
[Pages 34192-34194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14444]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62259; File No. SR-NYSEArca-2010-47]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Establish New
Rule 6.89
June 10, 2010.
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 June 2, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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 establish new procedures to account for
erroneous trades occurring from disruptions and/or malfunctions of
Exchange systems. The changes described in this proposal would
establish new NYSE Arca Rule 6.89. The text of the proposed rule change
is available at the Commission's Web site at http://www.sec.gov. A copy
of this filing is available on the Exchange's Web site at http://www.nyse.com, at the Exchange's principal office 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.
[[Page 34193]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to establish NYSE Arca Rule 6.89, in
order to adopt new procedures regarding system disruptions and
malfunctions. Specifically, the Exchange proposes to include
``verifiable systems disruptions and malfunctions which the
nullification or modification of transactions may be necessary'' as a
condition in which a designated Trading Official \4\ may act, on its
own motion, to review erroneous transactions. The Exchange believes
that it is appropriate to provide this flexibility and authority so as
not to limit the Exchange's ability to plan for and respond to
unforeseen system's problems. Proposed Rule 6.89 is similar to rules in
effect at other options exchanges that allow for the nullification or
modification of transactions that resulted from verifiable disruptions
and/or malfunctions of Exchanges systems.\5\
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\4\ See NYSE Arca Rule 6.1(b)(34). Trading Officials are
employees or officers of the Exchange and are not affiliated with
OTP Holders or OTP Firms.
\5\ Proposed Rule 6.89 is based in part on NASDAQ OMX PHLX Rule
1092(c)(ii)(A), and in addition is substantially similar to Chicago
Board Options Exchange Rule 6.25(a)(3).
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According to the proposal, in the event of any verifiable
disruption or malfunction in the use or operation of any electronic
communications and trading facilities of the Exchange, in which the
nullification or modification of transactions may be necessary for the
maintenance of a fair and orderly market or the protection of investors
and the public interest exist, a Trading Official, on his or her own
motion, may review such transactions and declare such transactions
arising out of the use or operation of such facilities during such
period null and void or modify the terms of these transactions, in
accordance with the guidelines contained in sections (a)(3)(C)(i)(aa)-
(bb) of Rule 6.87. Pursuant to the proposal, the Trading Official,
absent extraordinary circumstances, must initiate action under this
authority within sixty (60) minutes of the occurrence of the erroneous
transaction that was a result of the verifiable disruption or
malfunction. Each OTP Holder involved in the transaction shall be
notified as soon as practicable, and any OTP Holder aggrieved by the
action may appeal such action in accordance with the provisions of
subsection (b) of Rule 6.89.
Appeal Process
If a Trading Official determines that a transaction(s) is erroneous
pursuant to Rule 6.89(a) as described above, any OTP Holder aggrieved
by the action may appeal such action in accordance with the provisions
provided in Rule 6.89(b).
The Exchange plans to utilize a Review Panel (``Panel'') to review
decisions made by the Exchange Officer, under this Rule.
Once an OTP Holder has properly notified the Exchange that it
wishes to appeal the decision of the Exchange Officer, a three person
Panel will review and make a determination as to the appeal. The Panel
as described in proposed Rule 6.89(b)(1)(A) will be comprised of the
NYSE Arca Chief Regulatory Officer (``CRO''), or a designee of the CRO,
and a representative from two (2) different OTP Firms. One
representative on the Panel will always be from an OTP Firm directly
engaged in market making activities and one representative on the Panel
will always be from an OTP Firm directly engaged in the handling of
options orders for public customers.\6\ The Exchange feels that by
having a three person panel, of which the majority is made up of
individuals from member firms, will help to ensure that determinations
regarding erroneous transactions resulting from system malfunctions or
extraordinary market conditions are made by a diverse representative
group in a manner that will help to ensure fairness and impartiality.
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\6\ The composition of the Review Panel, is similar to that of
the NYSE Arca Obvious Error Panel, as defined in Rule
6.87(a)(4)(A)(i). [sic]
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The Exchange shall designate at least ten (10) OTP Firm
representatives to be called upon to serve on the Panel as needed. In
no case shall a Panel include a person related to a party to the trade
in question. To the extent reasonably possible, the Exchange shall call
upon the designated representatives to participate in a Panel on an
equally frequent basis.
2. Statutory Basis
The Exchange believes that the proposed rule change will allow the
Exchange, in extraordinary market conditions, to maintain a fair and
orderly market. The Exchange believes the proposed rule change is
consistent with the Act and the rules and regulations thereunder and,
in particular, the requirements of section 6(b) of the Act.
Specifically, the Exchange believes the proposed rule change is
consistent with the section 6(b)(5) \7\ requirements that the rules of
an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and perfect the mechanism for a free and open market and
a national market system, and, in general, to protect investors and the
public interest.
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\7\ 15 U.S.C. 78(f)(b)(5).
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Allowing for the nullification or modification of transactions that
result from verifiable disruptions and/or malfunctions of Exchanges
systems will offer market participants on NYSE Arca a level of relief
presently not available. The rule changes proposed in this filing are
consistent with the rules governing verifiable systems disruptions
malfunctions at other options exchanges and are designed to protect
investors and the public interest.
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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
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 \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied the pre-filing requirement.
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[[Page 34194]]
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.
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 [email protected]. Please include
File No. SR-NYSEArca-2010-47 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 20549-1090.
All submissions should refer to File No. SR-NYSEArca-2010-47. 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 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 No. SR-NYSEArca-2010-47 and should be
submitted on or before July 7, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14444 Filed 6-15-10; 8:45 am]
BILLING CODE 8010-01-P