[Federal Register Volume 74, Number 30 (Tuesday, February 17, 2009)]
[Notices]
[Page 7505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-3230]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59376; File No. SR-NYSEArca-2008-139]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change Amending the Minor Rule Plan To Increase Certain 
Sanctions

February 10, 2009.
    On December 17, 2008, NYSE Arca, Inc. (``NYSE Arca'' or 
``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 amending NYSE Arca Rule 10.12 (Minor Rule Plan) 
(``MRP'') to increase the sanctions for certain market maker quoting 
and trading rule violations and to make other minor changes. The 
proposed rule change was published for comment in the Federal Register 
on January 7, 2009.\3\ The Commission received no comments regarding 
the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59191 (December 31, 
2008), 74 FR 757.
---------------------------------------------------------------------------

    The Exchange has proposed to increase the fine levels for certain 
market maker quoting and trading rules violations.\4\ The fine levels 
for such violations are currently $500 (1st offense), $1,000 (2nd 
offense), and $1,500-$2,500 (3rd offense). The proposed rule change 
would increase the fine levels to $1,000 (1st offense), $2,500 (2nd 
offense), and $3,500 (3rd offense). The Exchange believes that the 
current fine levels for such violations are too low, given the serious 
nature of such offenses, and that the proposed increases are necessary 
to be an effective deterrent against future violations and a just 
penalty for such violations. The Exchange also proposed a few other 
minor changes to correct an erroneous rule reference and to include an 
inadvertent omission \5\ in its MRP.
---------------------------------------------------------------------------

    \4\ The proposed increased fines would apply to violations of 
the following requirements: (i) At least 75% of the trading activity 
of a market maker be in classes within the market maker's 
appointment (Rules 6.35, Commentary .03 and 6.37(h)(5)); (ii) at 
least 60% of a market maker's transactions be executed by the market 
maker in person or through an approved facility of the Exchange 
(Rule 6.37(d)); (iii) market makers on NYSE Arca apply for an 
appointment in one or more classes of options contracts (Rule 6.35); 
(iv) market makers, including lead market makers, must comply with 
certain quoting obligations (Rule 6.37B); and (v) market makers 
provide accurate quotations and quote markets within the prescribed 
maximum quote spread differentials (Rules 6.37(b)(1), 6.82(c)(1), 
and 6.37A(b)).
    \5\ The Exchange has proposed to add violations of Rule 6.37A(b) 
to the MRP, stating that the reference to this rule was 
inadvertently left off the MRP.
---------------------------------------------------------------------------

    The Commission finds that the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\6\ In particular, the 
Commission believes that the proposal is consistent with Section 
6(b)(5) of the Act,\7\ which requires that the rules of an exchange be 
designed to, among other things, protect investors and the public 
interest. The Commission also believes that the proposal is consistent 
with Sections 6(b)(1) and 6(b)(6) of the Act,\8\ which require that the 
rules of an exchange enforce compliance with, and provide appropriate 
discipline for, violations of Commission and Exchange rules. 
Furthermore, the Commission believes that the proposed changes to the 
MRP should 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. Therefore, 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,\9\ which 
governs minor rule violation plans.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \9\ 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 MRP 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 NYSE Arca will 
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 a 
violation under the MRP or whether a violation requires formal 
disciplinary action under NYSE Arca Rules 10.4-10.11.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\10\ and Rule 19d-1(c)(2) under the Act,\11\ that the proposed rule 
change (SR-NYSEArca-2008-139), as amended, be, and hereby is, approved 
and declared effective.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 240.19d-1(c)(2).
    \12\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3230 Filed 2-13-09; 8:45 am]
BILLING CODE 8011-01-P