[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Notices]
[Pages 24805-24807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-09918]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72018; File No. SR-NYSEArca-2014-40]
Self-Regulatory Organizations; NYSE Arca Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Exchange
Rules Governing Letters of Guarantee and Letters of Authorization
April 25, 2014.
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 April 21, 2014, 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 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend Exchange rules governing Letters of
Guarantee and Letters of Authorization. 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, the Proposed Rule Change
1. Purpose
As further described below, each OTP Holder acting as either a
Market Maker or Floor Broker on NYSE Arca currently is required to
submit to the Exchange a Letter of Guarantee or Letter of Authorization
for its trading activities from a Clearing Member.\4\ Typically, by a
Letter of Guarantee, the Clearing Member accepts financial
responsibility for all Exchange transactions of a Market Maker \5\ and,
by a Letter of Authorization, a Clearing Member is responsible for the
clearance of the Exchange transactions of a Floor Broker.\6\
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\4\ A Clearing Member is an Exchange OTP Firm or OTP Holder
which has been admitted to membership in the Options Clearing
Corporation pursuant to the provisions of the Rules of the Options
Clearing Corporation. See Rule 6.1(b)(3).
\5\ See Rule 6.36(a).
\6\ See Rule 6.45(a).
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The purpose of the proposal is to amend various Exchange rules
governing Letters of Guarantee and Authorization to:
Provide that any written notice of revocation of a Letter
of Guarantee or Letter of Authorization will become effective upon
processing by the Exchange.
give the Exchange the ability to prevent access and
connectivity if a Market Maker or Floor Broker is subject to written
notice of revocation.
Changes to Rule 6.36--Letters of Guarantee
Rule 6.36(c) states that a Letter of Guarantee filed with the
Exchange shall remain in effect until a final written notice of
revocation has been filed with the Exchange. The current rule sets
forth a time period for the effectiveness of a revocation to take
place. However the Exchange does not believe that a
[[Page 24806]]
specified timeframe is necessary. Because the Exchange can process such
revocations at any time after receipt, the Exchange proposes to amend
Rule 6.36(c) to provide that notices of revocation shall become
effective as soon as the Exchange is able to process the revocation.
The Exchange notes that the proposed rule change is consistent with the
rules governing the processing of the revocation of a Letter of
Guarantee on the Chicago Board Options Exchange (``CBOE'').\7\
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\7\ See CBOE Rule 8.5(c).
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Once a notice of revocation has been processed, a Market Maker no
longer has in effect a Letter of Guarantee, as required by Rule
6.36(a). If a Market Maker no longer has a valid Letter of Guarantee,
that Market Maker presents risk to the marketplace and the Exchange
believes it is appropriate to terminate access and connectivity to the
Exchange in these situations. Accordingly, the Exchange proposes to
further amend Rule 6.36(c) by stating that upon the effectiveness of a
notice of revocation, the Exchange will be permitted to prevent access
and connectivity to the Exchange by that Market Maker. Preventing
access and connectivity by a Market Maker who does not have a valid
Letter of Guarantee is consistent with similar procedures of the
CBOE.\8\
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\8\ See CBOE Rule 3.28(b).
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Changes to Rule 6.45--Letters of Authorization
Rule 6.45(c) states that a Letter of Authorization filed with the
Exchange shall remain in effect until a written notice of revocation
has been filed with the Exchange. The current rule sets forth a time
period for the effectiveness of a revocation to take place. However the
Exchange does not believe that a specified timeframe is necessary.
Because the Exchange can process such revocations at any time after
receipt, the Exchange proposes to amend Rule 6.45(c) to provide that a
notice of revocation shall become effective as soon as the Exchange is
able to process the revocation. The Exchange notes that the proposed
rules change is consistent with the rules governing the processing of
the revocation of a Letter of Authorization on the CBOE.\9\
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\9\ See CBOE Rule 6.72(c).
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Once a notice of revocation has been processed, a Floor Broker no
longer has in effect a Letter of Authorization, as required by Rule
6.45(a). If a Floor Broker no longer has a valid Letter of
Authorization, that Floor Broker presents risk to the marketplace and
the Exchange believes it is appropriate to terminate access and
connectivity to the Exchange in these situations. Accordingly, the
Exchange proposes to further amend Rule 6.45(c) by stating that upon
the effectiveness of a notice of revocation, the Exchange will be
permitted to prevent access and connectivity to the Exchange by that
Floor Broker. Preventing access and connectivity to a Floor Broker who
does not have on file an effective Letter of Authorization is
consistent with similar procedures of the CBOE.\10\
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\10\ Supra note 8.
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The Exchange also proposes to adopt an additional provision to Rule
6.45(c) stating that final revocation shall in no way relieve a
Clearing OTP Holder or OTP Firm of responsibility for clearing
transactions effected by a Floor Broker prior to the effectiveness of
such final revocation. The Exchange believes that this provision, which
currently applies when a Market Maker is subject to a notice of
revocation, is equally appropriate in instances when a Floor Broker is
subject to a notice of revocation. The Exchange notes that the proposed
rule change is consistent with the rules governing the processing of
the revocation of a Letter of Authorization on the CBOE.\11\
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\11\ Supra note 9.
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The Exchange notes that nothing in existing or proposed rules would
prohibit a Market Maker or Floor Broker from seeking to gain access and
connectivity to the Exchange once that individual is able to again
acquire the required Letter of Guarantee or Letter of Authorization.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\12\ in general, and furthers the objectives of Section
6(b)(5),\13\ 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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Preventing access and connectivity to the Exchange by a Market
Maker or Floor Broker subject to a notice of revocation will promote
just and equitable principles of trade and serves to protect investors
and the public because it prevents trading by a Market Maker or Floor
Broker without financial or clearing guarantees for its trading. A
Market Maker or Floor Broker who no longer has a valid Letter of
Guarantee or Authorization presents risk to the marketplace and the
Exchange believes it is appropriate to prevent access and connectivity
to the Exchange in these situations. In addition, making a notice of
revocation effective upon processing by the Exchange, instead of being
encumbered by a specified time frame, will permit the Exchange to act
swiftly to take measures aimed at market integrity and investor
protection.
The Exchange believes the proposed rule change is also consistent
with the requirements that the rules of an exchange provide a fair
procedure for the denial or limitation by an exchange of any person
with respect to access to services offered by the Exchange because the
Exchange would not prohibit or limit a Floor Broker or Market Maker
from seeking to gain access and connectivity to the Exchange once that
individual is able to again acquire the required Letter of Guarantee or
Letter of Authorization.
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. The proposed rule changes
will apply equally to all Floor Brokers and Market Makers and is
designed to protect all OTP Holders, OTP Firms and public investors
effecting transactions on the Exchange. In addition, the proposed
changes will not impose any unnecessary burden on the operation of the
Exchange because the changes will allow the Exchange to adopt more
efficient procedures for the processing notices of revocation.
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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii)
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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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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing, noting that a waiver of the operative delay will allow the
Exchange to promptly adopt and implement new procedures aimed at market
integrity and investor protection. For this reason, the Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. As such, the
Commission waives the operative delay and designates the proposed rule
change to be operative upon filing.\16\
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\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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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-2014-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-40. 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 at 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 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-2014-40, and should be submitted on or before May 22, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09918 Filed 4-30-14; 8:45 am]
BILLING CODE 8011-01-P