[Federal Register Volume 78, Number 223 (Tuesday, November 19, 2013)]
[Notices]
[Pages 69499-69501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-27630]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70864; File No. SR-NYSEMKT-2013-89]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 957NY To
Provide That a Pattern or Practice of Late Reporting of Option
Transactions to the Exchange for Dissemination to the Options Price
Reporting Authority Is Subject to Disciplinary Action
November 13, 2013.
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 October 31, 2013, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') 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 amend Rule 957NY to provide that a pattern
or practice of late reporting of option transactions to the Exchange
for dissemination to the Options Price Reporting Authority is subject
to disciplinary action. 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, at the Commission's Public Reference Room, and
on the Commission's Web site at http://www.sec.gov.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 957NY to provide that a pattern
or practice of late reporting of option transactions to the Exchange
for dissemination to the Options Price Reporting Authority (``OPRA'')
is subject to disciplinary action, including fines. Current Rule 957NY
requires an ATP Holder to immediately report option transactions to the
Exchange. The rule further provides that transactions not reported to
OPRA within 90 seconds after execution will be designated ``late,'' and
that an ATP Holder who is responsible for late reporting of an option
transaction, without reasonable justification or excuse, will be
subject to a fine under Section 9A. Thus, under current rule 957NY, a
single late-reported transaction is subject to a fine.
To have more flexibility in evaluating whether late reporting of
option transactions should be subject to a fine, the Exchange proposes
to amend the rule to provide that ``a pattern or practice'' of late
reporting of option transactions to the Exchange would constitute a
violation of the 90-second reporting requirement. While the Exchange's
proposal does not expressly define what a ``pattern or practice'' of
late reporting is, the Exchange will apply its existing Sanctions
Guidelines, which are contained in Rule 476, Supplementary Material
.10. Rule 476, Supplementary Material .10 contains both general
guidelines for considering and determining the applicability of
[[Page 69500]]
sanctions under various Exchange rules, and guidelines specific to
violations of particular Exchange rules, including ``Trade Reporting--
Late Reporting,'' among other rules.\4\ Moreover, in determining
appropriate disciplinary action for late reporting of option
transactions, the Exchange may apply, at its discretion, the Minor Rule
Plan contained in Rule 476A, Imposition of Fines for Minor Rule(s)
Violations for minor violations of Rule 957NY,\5\ which would result in
a fine from $1,500 up to $5,000, or Rule 476 in the case of more
serious late reporting violations. Rule 476 lists suggested monetary
sanctions for violations of Rule 957NY that range from $1,000 to
$50,000.
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\4\ Rule 476, Supplementary Material .10 Sanctions Guidelines
includes an aggregation provision under subparagraph (B.) General
Principles Applicable to All Sanction Determinations (4) to guide
the Exchange in determining whether to aggregate, or ``batch''
violations together, thereby treating them as one ``violation'' for
purposes of determining sanctions if the misconduct meets certain
objective parameters, such as ``(B) Whether the violations involved
unintentional or negligent misconduct or manipulative, fraudulent,
or deceptive intent. (If aggregated, the violations should not have
involved manipulative, fraudulent, or deceptive intent).'' Rule 476,
Supplementary Material .10(C.) Principal Considerations in
Determining Sanctions includes ``(6) whether the named party engaged
in numerous acts and/or a pattern of misconduct.'' Additionally,
Rule 476, Supplementary Material .10(C) also provides that ``(14)
The number, size, and character of the transactions at issue'' are
to be considered among principal considerations in determining
sanctions.
\5\ Failure to comply with the reporting duties of Rule 957NY is
listed as subject to fine under the Minor Rule Plan contained in
Rule 476A, Supplementary Material Part 1C.(i)(27), according to the
Minor Rule Plan Fine Schedule provided in Rule 476A, Supplementary
Material Part 1C.(iii)(i)(27).
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The Exchange notes that the proposed rule change is substantially
similar to current rules of the Chicago Board Options Exchange
(``CBOE'') Rule 6.51(a) and NASDAQ OMX PHLX LLC (``PHLX'') Rule
1051(a).\6\ Both CBOE and PHLX rules utilize the ``pattern or
practice'' standard for evaluating late trade reporting violations.
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\6\ See CBOE Rule 6.51(a); PHLX Rule 1051(a). PHLX rules also
permit, but do not require the exchange, in evaluating whether a
pattern or practice of rules violations exists, to aggregate or
``batch'' individual order handling violations as a single
occurrence of a violation of a specific order handling rule by a
member or member organization over a specific time period. See PHLX
Rule 970.01.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5),\8\ in particular, in that it is designed to prevent fraudulent
and manipulative acts and practices, promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and 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. Specifically, the Exchange believes
that the proposed amendment providing the Exchange with flexibility in
determining whether an ATP Holder's late reporting of option
transactions to the Exchange constitutes a pattern or practice that
should subject the late reporter to disciplinary action addresses an
inconsistency between in [sic] the processes for adjudication of late-
trade reporting on NYSE MKT and those of other self-regulatory
organizations. Eliminating this inconsistency will help foster
cooperation and coordination with persons engaged in facilitating
transactions in securities. Moreover, the proposed rule change would
not result in any material diminution of the Exchange's overall
enforcement authority or any material change in surveillance of late-
trade reporting. As such, the proposed rule change is consistent with
the Act because it would continue to protect investors and the public
interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(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 not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the Exchange's
proposal allows the Exchange to compete more effectively with other
options exchanges that currently have rules in effect substantially
similar to what the Exchange now proposes.
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) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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 this requirement.
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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.
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-NYSEMKT-2013-89 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 Number SR-NYSEMKT-2013-89. 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
[[Page 69501]]
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 Section, 100 F Street NE., Washington, DC 20549-1090, on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
Copies of the filing will also be available for inspection and copying
at the Exchange's principal office and on its Internet Web site at
www.nyse.com. 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-
NYSEMKT-2013-89 and should be submitted on or before December 10, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27630 Filed 11-18-13; 8:45 am]
BILLING CODE 8011-01-P