[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53955-53957]
From the Federal Register Online via the Government Publishing 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 [email protected]. 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