[Federal Register Volume 74, Number 164 (Wednesday, August 26, 2009)]
[Notices]
[Pages 43176-43178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-20533]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60520; File No. SR-NYSEAmex-2009-45]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
a Proposed Rule Change Amending Rule 476A--Imposition of Fines for 
Minor Violations of Rules

August 18, 2009.
    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 July 29, 2009, NYSE Amex LLC (``NYSE Amex'' or the ``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 prepared by the Exchange. 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\ 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 476A--Imposition of Fines for 
Minor Violations of Rules. The text of the proposed rule change is 
attached as Exhibit 5 to the 19b-4 form. A copy of this filing is 
available on the Exchange's Web site at http://www.nyse.com, at the 
Exchange's principal office 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
    The NYSE Amex Minor Rule Plan (``MRP'') fosters compliance with 
applicable rules and also helps to reduce the number and extent of rule 
violations committed by Amex Options Trading Permit (``ATP'') Holders 
and associated persons. The prompt imposition of a financial penalty 
helps to quickly educate and improve the conduct of ATP Holders and 
associated persons that have engaged in inadvertent or otherwise minor 
violations of the Exchange's rules. By promptly imposing a meaningful 
financial penalty for such violations, the MRP focuses on correcting 
conduct before it gives rise to more serious enforcement action.
    The Exchange is now proposing to incorporate additional violations 
into the MRP, these violations include (i) trading in restricted 
classes, (ii) failure to report position and account information and 
(iii) failure to complete mandatory annual training. The Exchange is 
also proposing to increase fine levels for certain violations presently 
included in the MRP. The increases fine levels will be applicable for 
violations of due diligence, priority rules and order exposure rules. A 
brief description of each proposed changes is shown below.
Proposed Rules 476A Part 1C(i)(37) and 476A Part 1C(iii)(i)(37)
    NYSE Amex Rules 916 and 916C provide, in part, that the Exchange 
may prohibit any opening purchase transactions in a series of options 
to the extent it deems such action necessary or appropriate. 
Accordingly, ATP Holders effecting opening transactions in restricted 
series, inconsistent with the terms of any such restriction, will be 
considered to be in violation of Rule 916 or 916C. The Exchange is 
proposing to incorporate violations related to trading in restricted 
series into the MRP under Rules 476A Part 1C(i)(37).
    The Exchange is proposing to implement a fine of $1,000 for the 
first violation in a rolling twenty-four month period. A second 
violation within the same period would be allocated a

[[Page 43177]]

$2,500 fine and a third violation would be allocated a $5,000 fine. The 
schedule of fines will be included under Rules 476A Part 
1C(iii)(i)(37). Any subsequent violations within a rolling twenty-four 
month period would be subject to formal disciplinary proceedings by the 
Exchange. NYSE Amex believes that establishing a rolling twenty-four 
month period for cumulative violations will serve as an effective 
deterrent to future violative conduct.
    NYSE Amex believes that in most cases these violations may be 
handled efficiently through the MRP, however, as with other violations, 
any egregious activity or activity that is believed to be manipulative 
will continue to be subject to formal disciplinary proceedings.
Proposed Rules 476A Part 1C(i)(38) and 476A Part 1C(iii)(i)(38)
    Among other things, Rule 906(a) and Rule 906C(a) requires each ATP 
Holder to report to the Exchange the account and position information 
of any customer who, acting alone, or in concert with others, on the 
previous business day maintained aggregate long or short positions on 
the same side of the market of 200 or more contracts of any single 
class of option contracts dealt in on the Exchange. ATP Holders report 
this information on the Large Option Position Report (``LOPR'').
    NYSE Amex is proposing to incorporate violations for failing to 
accurately report position and account information in accordance with 
Rules 906(a) and 906C(a) into the MRP. The Exchange believes most of 
these violations are inadvertent and technical in nature. Not having 
reporting violations necessarily subject to formal discpenary [sic] 
proceedings will allow the Exchange to more expeditiously process 
routine violations under the MRP Plan.
    In addition, NYSE Amex, as a member of the Intermarket Surveillance 
Group (``ISG''), as well as certain other self-regulatory 
organizations, have entered into agreement [sic] pursuant to Section 
17(d) of the Securities Exchange Act of 1934 (as amended) (``17d-2 
Agreement''), which incorporates the surveillance and sanctions of LOPR 
reporting violations. As such, the SROs have agreed that their 
respective rules concerning the reporting of large option positions are 
common rules. As a result, adding LOPR reporting violations to the MRP 
will further result in the consistency of rules among SROs who are 
parties to the 17d-2 Agreement with respect to LOPR reporting 
surveillance.
    The Exchange is proposing to implement a fine of $1,000 for the 
first violation in a rolling twenty-four month period. A second 
violation within the same period would be allocated a $2,500 fine and a 
third violation would be allocated a $5,000 fine. The schedule of fines 
will be included under Rules 476A Part 1C(iii)(i)(38). Any subsequent 
violations within a rolling twenty-four month period would be subject 
to formal disciplinary proceedings by the Exchange. NYSE Amex believes 
that establishing a rolling twenty-four month period for cumulative 
violations will serve as an effective deterrent to future violative 
conduct.
    NYSE Amex believes that in most cases reporting violations may be 
handled efficiently through the MRP, however, as with other violations, 
any egregious activity or activity that is believed to be manipulative 
will continue to be subject to formal disciplinary proceedings.
Proposed Rules 476A Part 1C(i)(39) and 476A Part 1C(iii)(i)(39)
    NYSE Amex Rule 50--Training and Examination Requirements, 
Commentary .03-.04 requires all ATP Holders (f/n/a 86 Trinity Permit 
Holders \3\) and clerks active in the business of the Exchange trading 
floor to participate in one or more Exchange sponsored mandatory annual 
regulatory training programs, including participation in any Exchange 
testing programs in connection with such programs. The Rule goes on to 
say that any individual who fails to satisfactorily complete a 
mandatory regulatory training program will be subject to disciplinary 
action under the Exchange's Minor Rule Violation Fine System.
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    \3\ See NYSE Amex Rule 900.2NY(5). The term ``ATP Holder'' shall 
refer to a natural person, sole proprietorship, partnership, 
corporation, limited liability company or other organization, in 
good standing, that has been issued an ATP, and references to 
``member,'' ``member organization'' and ``86 Trinity Permit Holder'' 
as those terms are used in the Rules of NYSE Amex LLC should be 
deemed to be references to ATP Holders.
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    The Exchange now proposes to establish Rule 476A Part 1C(i)(39), in 
order to include violations of Rule 50, Commentary .03-.04 in the MRP.
    The Exchange is proposing to implement a fine of $1,000 for the 
first violation in a rolling twenty-four month period. A second 
violation within the same period would be allocated a $2,500 fine and a 
third violation would be allocated a $5,000 fine. The schedule of fines 
will be included under Rules 476A Part 1C(iii)(i)(39). Any subsequent 
violations within a rolling twenty-four month period would be subject 
to formal disciplinary proceedings by the Exchange. NYSE Amex believes 
that establishing a rolling twenty-four month period for cumulative 
violations will serve as an effective deterrent to future violative 
conduct.
Changes to Rule 476A Part 1C(iii)(i)1., Rule 476A Part 1C(iii)(i)23. 
and Rule 476A Part 1C(iii)(i)29.
    NYSE Amex Rule 933NY(a) requires that a Floor Broker handling an 
order is to use due diligence to execute the order at the best price or 
prices available to him, in accordance with the Rules of the Exchange. 
Violators of Rule 933NY(a) are subject to a sanction pursuant to the 
MRP, specifically, Rule 476A Part 1C(iii)(i)1. Suggested fines for 
violations of Rule 933NY(a) are presently $1,000 for the first 
violation in a rolling twenty-four month period, $2,500 for a second 
violation within the same period fine and a third violation is subject 
to a $3,500 fine.
    NYSE Amex Rule 935NY is designed to ensure that orders are properly 
exposed on the NYSE Amex electronic trading system prior to interaction 
by the initiating firm. The rule states that users may not execute as 
principal orders they represent as agent unless (i) agency orders are 
first exposed on the Exchange for at least one (1) second or (ii) the 
User has been bidding or offering on the Exchange for at least one (1) 
second prior to receiving an agency order that is executable against 
such bid or offer. This rule prevents a user from executing agency 
orders to increase its economic gain from trading against the order 
without first giving other trading interest on the Exchange an 
opportunity to either trade with the agency order or to trade at the 
execution price when the User was already bidding or offering on the 
book. Violators of Rule 935NY are subject to a sanction pursuant to the 
MRP, specifically, Rule 476A Part 1C(iii)(i)23. Suggested fines for 
violations of Rule 935NY are presently $500 for the first violation in 
a rolling twenty-four month period, $1,000 for a second violation 
within the same period fine and a third violation is subject to a 
$2,500 fine.
    NYSE Amex Rule 963NY governs the priority of bids and offers in 
open outcry trading. In general, Rule 963NY states that the highest 
bid/lowest offer shall have priority over all other orders. In the 
event there are two or more bids/offers for the same option contract 
representing the best price and one such bid/offer is displayed in the 
Consolidated Book, such bid shall have priority over any other bid at 
the post. In addition, if two or more bids/offers represent the best 
price and a bid/offer displayed in the Consolidated Book is not 
involved, priority shall be afforded

[[Page 43178]]

to such bids in the sequence in which they are made. Rule 963NY also 
contains certain provisions for related to split-price priority and 
priority of complex orders. Violators of any part of Rule 6.63NY are 
subject to a sanction pursuant to the MRP, specifically Rule 476A Part 
1C(iii)(i)29. Suggested fines for violations of Rule 963NY are 
presently $500 for the first violation in a rolling twenty-four month 
period, $1,000 for a second violation within the same period fine and a 
third violation is subject to a $2,000 fine.
    At this time the Exchange believes the current monetary fine levels 
contained in the MRP, for the three above mentioned violations, are 
inadequate, given the serious nature of these rules. In order to act as 
an effective deterrent against future violations, while also serving as 
a just penalty for those who commit these violations, the Exchange 
feels an increase in the fine levels for these three violations is 
warranted. NYSE Amex now proposes fine levels of $1,000 for the first 
violation in a rolling twenty-four month period, $2,500 for a second 
violation within the same period fine and $5,000 for a third violation 
within the same period fine. These fine levels will apply to all three 
types of violations mentioned above.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \4\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5) \5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The proposal is also consistent with Section 6(b)(6) \6\ and 
6(b)(7),\7\ which requires that members and persons associated with 
members are appropriately disciplined for violations of Exchange rules 
and are provided a fair procedure for disciplinary procedures.
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    \6\ 15 U.S.C. 78f(b)(6).
    \7\ 15 U.S.C. 78f(b)(7).
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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

    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

    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 self-regulatory organization 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 [email protected]. Please include 
File Number SR-NYSEAmex-2009-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2009-45. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 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 publicly available. All 
submissions should refer to File Number SR-NYSEAmex-2009-45 and should 
be submitted on or before September 16, 2009.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20533 Filed 8-25-09; 8:45 am]
BILLING CODE 8010-01-P