[Federal Register Volume 73, Number 130 (Monday, July 7, 2008)]
[Notices]
[Pages 38481-38482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-15197]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58034; File No. SR-NYSEArca-2008-49]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change To Amend Minor Rule Plan and Certain Underlying 
Rules

June 26, 2008.

I. Introduction

    On May 14, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Arca Rule 10.12 (Minor Rule Plan) 
(``MRP'') and related rules that underlie the MRP. The proposed rule 
change was published for comment in the Federal Register on May 23, 
2008.\3\ The Commission received no comments on the proposal. This 
order approves the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57827 (May 15, 
2008), 73 FR 30179 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposed to amend its Minor Rule Plan and related 
rules that underlie the MRP, including Rules 9.2(c) (Customer Records), 
11.1 (Adherence to Law), and 11.18 (Supervision).

Rule 9.2(c)--Customer Records

    The Exchange proposed to change Rule 9.2(c) by adding the word 
``current,'' to clarify and reiterate the obligation that firms with 
customer accounts must not only keep records of their customer 
accounts, but also keep them current.

Rule 11.1--Adherence to Law and Good Business Practices

    The Exchange designated existing Rule 11.1 as Rule 11.1(a) and 
substituted the word ``fair'' in the rule's requirement that certain 
actions of ``any OTP Holder or OTP firm shall at all times comply with 
fair and equitable principles of trade'' by the word ``just.'' The 
Exchange also proposed new Rule 11.1(b), which would require all OTP 
Holders and firms, their associated persons, and other participants to 
adhere to the principles of good business practice in the conduct of 
their business operations.\4\ Violations of Rule

[[Page 38482]]

11.1(b) would be eligible for MRP disposition.
---------------------------------------------------------------------------

    \4\ This rule is based on the current NYSE Rule 401(a).
---------------------------------------------------------------------------

Rule 11.18--Supervision

    The current language of Rule 11.18(b) provides that only OTP 
Holders and firms for whom the Exchange is the Designated Examining 
Authority (``DEA'') are subject to its supervisory requirements. The 
Exchange proposed to amend Rule 11.18 to provide that all OTP Holders 
and firms, regardless of DEA, are subject to the Exchange's supervisory 
requirements. The Exchange also proposed to make violations of Rule 
11.18 eligible for MRP disposition.

Rule 10.12--Minor Rule Plan

    The Exchange proposed to make several modifications to its MRP, 
including to:
     Make several trading and recordkeeping rules eligible for 
MRP disposition.\5\
---------------------------------------------------------------------------

    \5\ See Notice, 73 FR at 30180, for a detailed description of 
these additions.
---------------------------------------------------------------------------

     Modify the Recommended Fine Schedule in Rule 10.12(k) so 
that MRP fines are based not on the number of violations but on the 
number of times the Exchange has imposed one or more MRP fines upon an 
OTP Holder or firm for the violation of a particular rule.
     Enable the Exchange to require that violators of Rules 
6.94(a) and (c) \6\ not only pay the MRP fines for their violations, 
but also disgorge any quantifiable monetary gains attributable to these 
violations;
---------------------------------------------------------------------------

    \6\ Rules 6.94(a) and (c) require OTP Holders to avoid 
violations of its trade-through rules and, where such violation is 
unavoidable, to provide satisfaction orders.
---------------------------------------------------------------------------

     Allow Exchange enforcement staff, as part of an MRP 
disposition of certain supervisory-related offenses, not only to impose 
a monetary fine, but also to require the violator to make specified 
changes to its supervisory or other compliance procedures; and
     Enable the Exchange to require violators of Rule 2.23 
(Registration) to remit all the fees that they should have paid in 
connection with registration, in addition to any MRP fines.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\7\ In 
particular, the Commission believes that the proposed rule change 
relating to both the MRP and the related underlying rules is consistent 
with Section 6(b)(5) of the Act,\8\ which requires that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to remove impediments to and to perfect the mechanism of a free and 
open market and a national market system, and, in general, to protect 
investors and the public interest.
---------------------------------------------------------------------------

    \7\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission further believes that the proposed changes to the 
Exchange's MRP are consistent with Sections 6(b)(1) and 6(b)(6) of the 
Act,\9\ which require that the rules of an exchange enforce compliance 
with, and provide appropriate discipline for, violations of Commission 
and Exchange rules. In addition, because the MRP provides procedural 
rights to contest the fine and permits disciplinary proceedings on the 
matter, the Commission believes that the MRP, as amended by this 
proposal, provides a fair procedure for the disciplining of members and 
persons associated with members, consistent with Sections 6(b)(7) and 
6(d)(1) of the Act.\10\ Finally, the Commission finds that the proposal 
is consistent with the public interest, the protection of investors, or 
otherwise in furtherance of the purposes of the Act, as required by 
Rule 19d-1(c)(2) under the Act,\11\ which governs minor rule violation 
plans. The Commission believes that the proposed rule change would 
strengthen the Exchange's ability to carry out its oversight and 
enforcement responsibilities as a self-regulatory organization in cases 
where full disciplinary proceedings are unsuitable in view of the minor 
nature of the particular violation.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \10\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
    \11\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    In approving this proposed rule change, the Commission in no way 
minimizes the importance of compliance with NYSE Arca rules and all 
other rules subject to the imposition of fines under the MRP. The 
Commission believes that the violation of any self-regulatory 
organization's rules, as well as Commission rules, is a serious matter. 
However, the Exchange provides a reasonable means of addressing rule 
violations that do not rise to the level of requiring formal 
disciplinary proceedings, while providing greater flexibility in 
handling certain violations. The Commission expects that the Exchange 
would continue to conduct surveillance with due diligence and make a 
determination based on its findings, on a case-by-case basis, whether a 
fine of more or less than the recommended amount is appropriate for MRP 
disposition or whether a violation requires formal disciplinary action.

III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\12\ and Rule 19d-1(c)(2) under the Act \13\ that the proposed rule 
change (SR-NYSEArca-2008-49) be, and it hereby is, approved and 
declared effective.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12) and 17 CFR 200.30-3(a)(44).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15197 Filed 7-3-08; 8:45 am]
BILLING CODE 8010-01-P