[Federal Register: February 7, 2007 (Volume 72, Number 25)]
[Notices]
[Page 5783-5786]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07fe07-165]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55215; File No. SR-NYSEArca-2006-51]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change and Amendment No. 1 Thereto Relating to
Amendments to Registration Rules of NYSE Arca, Inc.
January 31, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 14, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been substantially prepared by the Exchange. The Exchange
filed Amendment No. 1 to the proposed rule change on January 12, 2007.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 certain NYSE Arca Rules governing
registration of OTP Holders \3\ and employees of Option Trading Permit
(``OTP'') Firms \4\ in order to: (i) Clarify registration procedures
and make them consistent with the procedures of other self-regulatory
organizations (``SROs''), and (ii) include an additional registration
category in connection with the Exchange's new options trading
platform, OX.\5\ The text of the proposed rule change is available at
NYSE Arca, the Commission's Public Reference Room, and
http://www.nysearca.com/regulation/filings.asp.
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\3\ See NYSE Arca Rule 1.1(q).
\4\ See NYSE Arca Rule 1.1(r).
\5\ See Securities Exchange Act Release No. 54238 (July 28,
2006), 71 FR 44758 (August 7, 2006) (SR-NYSEArca-2006-13).
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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 Exchange 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 these statements may be examined at the
[[Page 5784]]
places specified in Item IV below. The Exchange has prepared summaries,
set forth in Sections A, B, and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend NYSE Arca Rules 2.5, 2.23, 6.33,
6.34A and 9.27 (referred to herein as Rules 2.5, 2.23, 6.33, 6.34A and
9.27) in order to clarify registration procedures and ongoing
compliance obligations for OTP Holders and OTP Firms and their
registered persons. Further, the Exchange proposes to amend these rules
so that they are consistent with industry practices and with the
operation of the Central Registration Depository (``CRD'') system
maintained by the National Association of Securities Dealers, Inc.
(``NASD''). The proposed rule changes are similar to the rules of other
SROs.\6\
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\6\ See NASD Rules 1070(d) and 1120(a) and (b) and New York
Stock Exchange LLC (``NYSE'') Rule 345A and Supplementary Material
.15(1)(b) to NYSE Rule 345.
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Registration Category
The Exchange proposes to amend Rule 2.5(b)(10)(A) to include the
registration category, Market Maker Authorized Trader,\7\ for
individuals who perform market making activity on behalf of an OTP Firm
on the OX trading facility. This registration category is new at this
time because Market Maker Authorized Traders did not exist at NYSE Arca
until the adoption of the OX trading rules in July 2006.\8\ These
individuals will be required to maintain registration requirements
similar to existing Market Makers on the Exchange.
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\7\ See NYSE Arca Rule 6.1A(9).
\8\ See note 5, supra.
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Exceptions to Required Registration Examinations
The Exchange proposes to further amend Rule 2.5(b)(10)(A) to
include certain exceptions to the registration examination
requirements. Currently, similar, but not identical, exceptions are
included as circumstances under which the Exchange will consider a
waiver of the registration examination requirements under Rule 2.5(c),
as described below. The Exchange believes that the added exceptions are
clear cases when registration requirements need not apply, and does not
believe that it is necessary to consider similar circumstances on a
case-by-case basis as required under the waiver provisions in Rule
2.5(c).
Consideration of Requests for Waivers of Examination Requirements
The Exchange proposes to amend Rule 2.5(c), which governs requests
from OTP Firm applicants to waive applicable examinations requirements
prescribed by the Exchange. Specifically, the Exchange proposes to add
new waiver standards under which the Exchange has discretion to grant
waivers so that the Exchange's practices are generally consistent with
the criterion set forth in NASD Rule 1070(d) and Supplementary Material
.15(1)(b) to NYSE Rule 345 and to make other clarifications.
In connection with changing the waiver standards, the Exchange also
proposes to delete the remainder of Rule 2.5(c), which sets forth
specific listed instances when the Exchange will waive required
examinations. The purpose for deleting this language is because the
Exchange proposes: (i) Waiver standards under which the Exchange has
discretion to grant waivers rather than specific listed circumstances,
which is consistent with the other SROs as noted above, and (ii) to
make certain of these specific instances actual exceptions to the
registration examination requirements in Rule 2.5(b)(10)(A), rather
than circumstances under which the Exchange will consider a waiver. As
explained above, the Exchange believes that such circumstances are
clear cases when registration requirements need not apply, and does not
believe that it is necessary to consider such circumstances on a case-
by-case basis as required under the waiver provisions in Rule 2.5(c).
Filing of Registration Documentation With the Exchange
The Exchange proposes to amend Rule 2.23, which governs
registration procedures for employees of OTP Firms. Specifically, the
Exchange proposes to amend the rule to provide manual registration
procedures for registration categories (e.g., floor clerk) for which
CRD does not provide electronic registration.\9\
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\9\ In 2005, NYSE Arca (formerly Pacific Exchange, Inc.) became
a participant of the CRD system for maintenance of certain
registration categories with the Exchange. As part of this
implementation, applicable rules of the Exchange were amended to
address filing appropriate registration documentation electronically
with the CRD system for employees of ETP Holders. These amended
rules, however, inadvertently omitted certain registration
procedures for positions not available on the CRD system.
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Continuing Education Requirements
Currently, employees of OTP Firms who wish to initiate and maintain
registration with the Exchange must follow two separate rules--Rules
2.23 and 9.27. Rule 2.23 sets forth initial registration requirements,
whereas Rule 9.27 sets forth the continuing education requirements that
must be satisfied to maintain registration with the Exchange.
In order to simplify compliance for employees of OTP Firms, the
Exchange proposes to provide continuing registration requirements in
the same rule as initial registration requirements. Specifically, the
Exchange proposes to add continuing education requirements to new Rule
2.23(d) and certain definitions and clarifications with respect thereto
to new Commentary .01-.06 to Rule 2.23.
The continuing education requirements in proposed new Rule 2.23(d)
and related Commentary .01-.06 to Rule 2.23 are substantially similar
to those contained in current Rule 9.27(c) and (d) and related
Commentary .01-.06 to Rule 9.27(c) and (d), except that the Exchange
has made certain clarifications so that the continuing education
requirements and related definitions and clarifications are more
closely aligned with NASD Rule 1120 and NYSE Rule 345A and other clean-
up changes, as set forth in detail below.
Specifically, the Exchange proposes in Rule 2.23(d)(1) that the
content of the Regulatory Element of the program shall be consistent
with the standards set forth by the Exchange and other SROs, rather
than just determined by the Exchange as is set forth in the current
Rule 9.27(c). In addition, the Exchange proposes to add language in
Rule 2.23(d)(2)(B)(i) providing that if an OTP Firm's or an OTP
Holder's analysis establishes the need for supervisory training for
persons with supervisory responsibilities, such training must be
included in the OTP Firm's or OTP Holder's training plan. Such language
is not included in the current Rule 9.27(d)(2)(A).
The Exchange has not proposed for inclusion NASD's continuing
education requirements applicable to research analysts because the
Exchange does not provide for research analyst registration.
Additionally, unlike current NASD Rule 1120(a)(6), the Exchange is not
proposing to permit OTP Firms or OTP Holders to self-administer the
Regulatory Element of continuing education, as the Exchange does not
have the resources or capability to offer an approval process or
monitoring of such self-administered programs. OTP Firms and OTP
Holders will be
[[Page 5785]]
responsible for ensuring continuing education information related to
their associated persons is received by the firm in a timely manner
and, as such, shall designate a person or persons to receive applicable
information via electronic mail directly from the CRD system. OTP Firms
and OTP Holders will not be required to submit to the Exchange the
names of such designated persons, as is required by the current NASD
rule. This is based on the fact that the Exchange does not have a
contact management system comparable to that of NASD.
With respect to the proposed new Commentary to Rule 2.23, the
Exchange proposes to add a definition of ``registered person'' to
Commentary .01 to Rule 2.23 as is currently set forth in Commentary .01
to Rule 9.27(c) and (d), except that the definition that the Exchange
is proposing does not include the carve-out for ``any such person whose
activities are limited solely to the transaction of business on the
facilities of the Exchange,'' but rather includes a carve-out for
``such persons who are not subject to the registration requirements for
traders as set forth in Rule 2.5(b)(10)(A).'' In addition, the Exchange
proposes in Commentary .03 to Rule 2.23 to correct a mistake in the
language in Commentary .03 to Rule 9.27(c) and (d) to provide that
reassociated registered persons shall participate in the Regulatory
Element at intervals based on their initial base date, rather than
their new base date. Lastly, the Exchange proposes in Commentary .06 to
Rule 2.23 to change the reference of ``any registered member who is an
OTP Holder,'' which is currently in Commentary .06 to Rule 9.27(c) and
(d), to ``any registered person who is associated with an OTP Firm or
OTP Holder'' in order to be consistent with the language of other SROs.
In connection with the addition of proposed new Rule 2.23(d) and
Commentary .01-.06 to Rule 2.23 as set forth above, the Exchange
proposes to delete the specific continuing education requirements in
Rule 9.27(c) and (d) and the related Commentary .01-.06 to Rule 9.27(c)
and (d). The purpose for deleting the continuing education requirements
in Rule 9.27(c) and (d) is to avoid needless repetition and risk of
inconsistencies. The Exchange proposes to include cross-reference
language in Rule 9.27(c) that provides that registered persons shall
follow the continuing education requirements set forth in Rule 2.23(d).
In addition, the Exchange proposes to delete current Rule 2.23(i)
with respect to transition to the CRD system because registration with
CRD is already provided for in Rule 2.23(a).
Orientation Program for Certain Market Makers and Market Maker
Authorized Traders
The Exchange proposes to amend Rules 6.33 and 6.34A(b)(2) to
provide that Market Maker and Market Maker Authorized Trader applicants
to the Exchange who have previously successfully completed the required
examination and have been absent from registration with the Exchange in
such capacity for six months or more will be required to complete an
orientation program prescribed by the Exchange.
The Exchange proposes these rule changes because it believes that
Market Makers and Market Maker Authorized Traders that have been absent
from the Exchange for six months or more should be required to take a
program to reacquaint them with the requirements of the Exchange due to
the length of time that they have been absent from the Exchange.
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) \11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 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 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
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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 rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2006-51 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2006-51.
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 inspection
and copying in the Commission's Public Reference Room. 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
[[Page 5786]]
Number SR-NYSEArca-2006-51 and should be submitted on or before
February 28, 2007.
For the Commission, by the Division of Market Regulation,
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. E7-1999 Filed 2-6-07; 8:45 am]
BILLING CODE 8010-01-P