[Federal Register Volume 81, Number 148 (Tuesday, August 2, 2016)]
[Notices]
[Pages 50750-50757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18201]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78422; File No. SR-NYSEARCA-2016-102]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change for a New NYSE Arca 
Rule 13.9 and a New NYSE Arca Equities Rule 11.9 and To Make Conforming 
Changes to NYSE Arca Rule 3.2 and NYSE Arca Equities Rule 3.2

July 27, 2016.
    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 July 14, 2016, 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 a new NYSE Arca Rule 13.9 and a new NYSE Arca 
Equities Rule 11.9 governing the failure to meet eligibility or 
qualification standards or prerequisites for access to services based 
on rules of the Exchange's affiliates New York Stock Exchange, LLC and 
NYSE MKT LLC, and (2) to make conforming changes to NYSE Arca Rule 3.2 
and NYSE Arca Equities Rule 3.2. 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
    The Exchange proposes a new NYSE Arca Rule 13.9 (``Rule 13.9'') and 
a new NYSE Arca Equities Rule 11.9 (``Rule 11.9'') governing the 
failure to meet the eligibility or qualification standards or 
prerequisites for access to services based on Rules 9555 (Failure to 
Meet the Eligibility or Qualification Standards or Prerequisites for 
Access to Services) and 9559 (Hearing Procedures for Expedited 
Proceedings Under the Rule 9550 Series) of the Exchange's affiliates 
New York Stock Exchange, LLC (``NYSE'') and NYSE MKT LLC (``NYSE 
MKT'').
    The Exchange also proposes conforming changes to NYSE Arca Rule 3.2 
(Options Committees) and NYSE Arca Equities Rule 3.2 (Equity 
Committees), which set forth the authority and jurisdiction of the NYSE 
Arca Ethics and Business Conduct Committee (``EBCC'') and the NYSE Arca 
Equities Business Conduct Committee (``BCC''), respectively.
Background
    In 2013, the NYSE adopted disciplinary rules that are, with certain 
exceptions, substantially the same as the

[[Page 50751]]

Financial Industry Regulatory Authority, Inc. (``FINRA'') Rule 8000 
Series and Rule 9000 Series, and which set forth rules for conducting 
investigations and enforcement actions.\4\ The NYSE disciplinary rules 
were implemented on July 1, 2013.\5\ In 2016, NYSE MKT also adopted the 
Rule 8000 Series and Rule 9000 Series, which rules are, with certain 
exceptions, substantially the same as those of NYSE and FINRA.\6\ The 
NYSE MKT disciplinary rules were implemented on April 15, 2016.\7\
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    \4\ See Securities Exchange Act Release Nos. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02) (``2013 
Notice''), 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (SR-
NYSE-2013-02) (``2013 NYSE Approval Order''), and 69963 (July 10, 
2013), 78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49).
    \5\ See NYSE Information Memorandum 13-8 (May 24, 2013).
    \6\ See Securities Exchange Act Release Nos. 77241 (February 26, 
2016), 81 FR 11311 (March 3, 2016) (SR-NYSEMKT-2016-30) (``2016 MKT 
Notice'').
    \7\ See NYSE MKT Information Memorandum 16-02 (March 14, 2016).
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    NYSE and NYSE MKT Rule 9555 (``Rule 9555''), which NYSE Arca and 
NYSE Arca Equities propose to adopt in substantially the same form as 
approved by the Commission for NYSE and as published for immediate 
effectiveness by NYSE MKT, govern the failure to meet the eligibility 
or qualification standards, or prerequisites for access to services 
offered by the Exchange.
    Under Rule 9555, if a member organization or covered person \8\ 
does not meet the eligibility or qualification standards set forth in 
the NYSE and NYSE MKT's rules,\9\ staff may provide written notice to 
such covered person or member organization stating that the failure to 
become eligible or qualified will result in a suspension or 
cancellation of membership or a suspension or bar from associating with 
any member organization.
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    \8\ Under NYSE and NYSE MKT Rules, a member organization means a 
registered broker or dealer (unless exempt pursuant to the Act) that 
is a member of FINRA or another registered securities exchange. See 
NYSE Rule 2(b)(i) & NYSE MKT Rule 2(b)(i)--Equities. A covered 
person under the NYSE and NYSE MKT disciplinary rules means a 
member, principal executive, approved person, registered or non-
registered employee of a member organization (and, in the case of 
NYSE MKT, an ATP Holder), or other person (excluding a member 
organization) subject to the jurisdiction of the NYSE and NYSE MKT, 
respectively. See NYSE Rule 9120(g); NYSE MKT Rule 9120(g).
     In order to refer to the same individuals encompassed by the 
definitions of member organization and covered person under the NYSE 
and NYSE MKT Rules, NYSE Arca proposes to use the phrase ``OTP Firm, 
OTP Holder or an Associated Person of an OTP Firm or OTP Holder'' in 
proposed Rule 13.9. NYSE Arca Rule 1.1(d) defines an ``Associated 
Person'' as a person who is a partner, officer, director, member of 
a limited liability company, trustee of a business trust, employee 
of an OTP Firm or any person directly or indirectly controlling, 
controlled by or under common control with an OTP Firm. Similarly, 
NYSE Arca Equities would use the phrase ``ETP Holder or Associated 
Person of an ETP Holder'' in proposed Rule 11.9. Under NYSE Arca 
Equities Rule 1.1(f), ``Associated Person'' refers to a person who 
is a partner, officer, director, member of a limited liability 
company, trustee of a business trust, employee of an ETP Holder or 
any person directly or indirectly controlling, controlled by or 
under common control with an ETP Holder.
    \9\ See, e.g., NYSE Rules 300-324 (Admission of Members); NYSE 
MKT Rules 300--Equities-324--Equities (Admission of Members); NYSE 
MKT Office Rules, Section 4 (Employees and Admission of Members and 
Member Organizations).
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    In addition, under Rule 9555, if a member organization or covered 
person does not meet the prerequisites for access to services offered 
by the NYSE and NYSE MKT or a member organization thereof or cannot be 
permitted to continue to have access to services offered by NYSE and 
NYSE MKT or a member organization thereof with safety to investors, 
creditors, members, or the Exchange, staff may provide written notice 
to such member organization or covered person limiting or prohibiting 
access to services offered by the NYSE and NYSE MKT or a member 
organization thereof.
    The limitation, prohibition, suspension, cancellation, or bar 
referenced in the notice becomes effective 14 days after service of the 
notice unless the member organization or covered person requests a 
hearing during that time, except that the effective date for a notice 
of a limitation or prohibition on access to services shall be upon 
service of the notice. The text of NYSE and NYSE MKT Rule 9555 is 
substantially the same as FINRA's counterpart rule, except for certain 
conforming and technical changes.\10\
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    \10\ See 2013 NYSE Approval Order, 78 FR at 15394; 2016 MKT 
Notice, 81 FR at 11333.
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    NYSE and NYSE MKT Rule 9559 (``Rule 9559'') set forth hearing 
procedures for expedited proceedings under the NYSE and NYSE MKT Rule 
9550 Series, including for proceedings under Rule 9555, and is 
substantially similar to FINRA's counterpart rule. Currently, NYSE Arca 
and NYSE Arca Equities do not have a comparable procedural rule. As 
described below, the Exchange proposes to include procedural aspects of 
Rule 9559 that are applicable to expedited proceedings under Rule 9555 
within the proposed rules for NYSE Arca and NYSE Arca Equities.
Proposed Rule Change
    NYSE Arca and NYSE Arca Equities propose to adopt a new Rule 13.9 
and 11.9, respectively, that would be substantially the same as Rule 
9555 and that would incorporate certain procedural requirements for 
expedited hearings under Rule 9555 drawn from Rule 9559. NYSE Arca and 
NYSE Arca Equities are not proposing to adopt Rule 9559 in its 
entirety. Rule 9559 contains a number of provisions that do not relate 
to hearing procedures under Rule 9555.
NYSE Arca Rule 13.9
    Proposed Rule 13.9 would govern when an OTP Firm, OTP Holder or 
Associated Person of an OTP Firm or OTP Holder does not meet the 
eligibility or qualification standards set forth in the Exchange's 
rules;\11\ does not meet the prerequisites for access to services 
offered by the Exchange or an OTP Firm or OTP Holder thereof; or cannot 
be permitted to continue to have access to services offered by the 
Exchange or an OTP Firm or OTP Holder thereof with safety to investors, 
creditors, OTP Firms, OTP Holders, or the Exchange. Like Rule 9555, the 
proposed Rule would be divided into separate subsections describing the 
notice; service of the notice; the contents of the notice; the 
effective date of the limitation, prohibition, suspension, cancellation 
or bar; requests for a hearing; failure to request a hearing; and a 
request for termination of the limitation, prohibition or suspension. 
Proposed Rule 13.9 would have a section describing certain procedures, 
based on Rule 9559, to be followed when a party requests a hearing.
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    \11\ See, e.g., NYSE Arca Rule 2 (Options Trading Permits); NYSE 
Arca Equities Rule 2 (Equity Trading Permits).
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    Proposed Rule 13.9(a) (Notice to OTP Firms, OTP Holders or 
Associated Persons of an OTP Firm or OTP Holder of Suspension, 
Cancellation, Bar, or Limitation or Prohibition on Access to Services) 
would provide that if an OTP Firm, OTP Holder or Associated Person of 
an OTP Firm or OTP Holder does not meet the eligibility or 
qualification standards set forth in the Exchange's Rules, Exchange 
staff may provide written notice to such OTP Firm, OTP Holder or 
Associated Person of an OTP Firm or OTP Holder stating that the failure 
to become eligible or qualified will result in a suspension or 
cancellation of trading privileges or a suspension or bar from 
associating with an OTP Firm or OTP Holder.\12\
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    \12\ See Proposed Rule 13.9(a)(1).
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    Further, the proposed rule would provide that if an OTP Firm, OTP 
Holder or an Associated Person of an OTP Firm or OTP Holder does not 
meet the prerequisites for access to services offered by the Exchange 
or an OTP Firm or OTP Holder thereof or cannot be

[[Page 50752]]

permitted to continue to have access to services offered by the 
Exchange or an OTP Firm or OTP Holder thereof with safety to investors, 
creditors, member organizations, or the Exchange, Exchange staff may 
provide written notice to such OTP Firm, OTP Holder or Associated 
Person of an OTP Firm or OTP Holder limiting or prohibiting access to 
services offered by the Exchange or an OTP Firm or OTP Holder 
thereof.\13\ Proposed Rule 13.9(a) is substantially the same as NYSE 
and NYSE MKT Rule 9555(a), except that it substitutes references to 
``member organization or covered person'' with ``OTP Firm, OTP Holder 
or Associated Person of an OTP Firm or OTP Holder.''
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    \13\ See Proposed Rule 13.9(a)(2).
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    Proposed Rule 13.9(b) (Service of Notice) would provide that 
Exchange staff shall serve the OTP Firm, OTP Holder or an Associated 
Person of an OTP Firm or OTP Holder with the notice described in 
subsection (a) and that a copy of the notice served on an Associated 
Person of an OTP Firm or OTP Holder also shall be served on such OTP 
Firm or OTP Holder. Further, the proposed Rule would provide that when 
counsel for the OTP Firm, OTP Holder or an Associated Person of an OTP 
Firm or OTP Holder agrees to accept service of such notice, Exchange 
staff shall \14\ serve notice on counsel. Proposed Rule 13.9(b) is 
substantially the same as NYSE and NYSE MKT Rule 9555(b), except that 
it substitutes references to ``member organization or covered person'' 
with ``OTP Firm, OTP Holder or an Associated Person of an OTP Firm or 
OTP Holder.''
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    \14\ Rule 9555 provides that Exchange staff ``may'' serve notice 
on counsel or other person authorized to represent others under NYSE 
or NYSE MKT Rule 9141 (Appearance and Practice; Notice of 
Appearance) as specified in NYSE or NYSE MKT Rule 9134 (Methods of, 
Procedures for Service). As adopted by NYSE and NYSE MKT, Rule 
9134(b)(1) and (2) provides that when a natural person or entity, 
respectively, is represented by counsel or a representative, papers 
served on such person or entity, excluding a complaint or document 
initiating a proceeding, ``shall'' be served on such counsel or 
representative. The Exchange has not adopted Rule 9134 and does not 
have a similar requirement. Accordingly, the Exchange proposes to 
utilize ``shall'' in the proposed Rule rather than ``may,'' to 
reflect the requirement in the NYSE and NYSE MKT rules that papers 
served on a person or entity represented by counsel or 
representative be served on the counsel or representative.
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    Proposed Rule 13.9(c) (Contents of Notice) would provide that a 
notice issued under Rule 13.9 shall state the specific grounds and 
include the factual basis for Exchange action. Further, the Rule would 
require that the notice state when the Exchange action will take effect 
and explain what the respondent must do to avoid such action as well as 
that the respondent may file a written request for a hearing.
    The proposed Rule would also provide that the notice also shall 
inform the respondent of the applicable deadline for filing a request 
for a hearing and shall state that a request for a hearing must set 
forth with specificity any and all defenses to the Exchange action. In 
addition, the proposed Rule would require the notice to explain that 
the EBCC may approve, modify or withdraw any and all sanctions or 
limitations imposed by the notice, and may impose any other fitting 
sanction. Proposed Rule 13.9(c) is substantially the same as NYSE and 
NYSE MKT Rule 9555(c), except that it (1) substitutes references to 
``member organization or covered person'' with ``OTP Firm, OTP Holder 
or an Associated Person of an OTP Firm or OTP Holder,'' and (2) 
eliminates the reference to the Office of Hearing Officers and replaces 
``Hearing Officer, or, if applicable, Hearing Panel'' with ``EBCC.''
    Proposed Rule 13.9(d) (Effective Date of Limitation, Prohibition, 
Suspension, Cancellation or Bar) would provide that the limitation, 
prohibition, suspension, cancellation or bar referenced in a notice 
issued under the proposed Rule shall become effective 14 days after 
service of the notice, except that the effective date for a notice of a 
limitation or prohibition on access to services offered by the Exchange 
or an OTP Firm or OTP Holder thereof with respect to services to which 
the OTP Firm, OTP Holder or an Associated Person of an OTP Firm or OTP 
Holder does not have access shall be upon service of the notice. 
Proposed Rule 13.9(d) would also provide that a request for a hearing 
shall stay the effectiveness of the notice, except that the 
effectiveness of a notice of a limitation or prohibition on access to 
services offered by the Exchange or an OTP Firm or OTP Holder thereof 
with respect to services to which the OTP Firm, OTP Holder or an 
Associated Person of an OTP Firm or OTP Holder does not have access 
shall not be stayed by a request for a hearing. Proposed Rule 13.9(d) 
is substantially the same as NYSE and NYSE MKT Rule 9555(d), except 
that it substitutes references to ``member organization or covered 
person'' with ``OTP Firm, OTP Holder or an Associated Person of an OTP 
Firm or OTP Holder.''
    Proposed Rule 13.9(e) (Request for Hearing) would provide that an 
OTP Firm, OTP Holder or an Associated Person of an OTP Firm or OTP 
Holder served with a notice under the proposed Rule may file with EBCC 
a written request for a hearing. The proposed Rule would require that a 
request for a hearing shall be made within 14 days after service of the 
notice and must set forth with specificity any and all defenses to the 
Exchange action. Proposed Rule 13.9(e) is substantially the same as 
NYSE and NYSE MKT Rule 9555(e), except that it substitutes references 
to ``member organization or covered person'' with ``OTP Firm, OTP 
Holder or an Associated Person of an OTP Firm or OTP Holder.''
    Proposed Rule 13.9(f) (Failure to Request Hearing) would provide 
that if an OTP Firm, OTP Holder or an Associated Person of an OTP Firm 
or OTP Holder does not timely request a hearing, the limitation, 
prohibition, suspension, cancellation or bar specified in the notice 
shall become effective 14 days after service of the notice, except that 
the effective date for a notice of a limitation or prohibition on 
access to services offered by the Exchange or an OTP Firm or OTP Holder 
with respect to services to which the OTP Firm, OTP Holder or an 
Associated Person of an OTP Firm or OTP Holder does not have access 
shall be upon service of the notice. The proposed Rule would further 
provide that notice shall constitute final Exchange action if the OTP 
Firm, OTP Holder or an Associated Person of an OTP Firm or OTP Holder 
does not request a hearing within 14 days after service of the notice. 
Proposed Rule 13.9(f) is substantially the same as NYSE and NYSE MKT 
Rule 9555(f), except that it substitutes references to ``member 
organization or covered person'' with ``OTP Firm, OTP Holder or an 
Associated Person of an OTP Firm or OTP Holder.''
    Proposed Rule 13.9(g) (Request for Termination of the Limitation, 
Prohibition or Suspension) would provide that an OTP Firm, OTP Holder 
or an Associated Person of an OTP Firm or OTP Holder subject to a 
limitation, prohibition or suspension under the proposed Rule may file 
a written request for termination of the limitation, prohibition or 
suspension on the ground of full compliance with the notice or 
decision. Further, the proposed Rule would specify that such a request 
shall be filed with the head of the Exchange department or office that 
issued the notice or, if another department or office is named as the 
party handling the matter on behalf of the issuing department or 
office, with the head of the department or office that is so 
designated. Finally, the proposed Rule would provide that the 
appropriate head of the department or office may grant relief for good 
cause shown. Proposed Rule 13.9(g) is substantially the same as NYSE 
and NYSE MKT Rule 9555(g),

[[Page 50753]]

except that it substitutes references to ``member organization or 
covered person'' with ``OTP Firm, OTP Holder or an Associated Person of 
an OTP Firm or OTP Holder.''
    Finally, proposed Rule 13.9(h) would set forth the specific 
procedures that would apply to hearings under the proposed Rule. As 
noted, proposed subsection (h) is modeled on NYSE and NYSE MKT Rule 
9559, which provides uniform hearing procedures for expedited 
proceedings under the NYSE and NYSE MKT Rule 9550 Series, including 
proceedings under Rule 9555. NYSE Arca does not currently have a 
procedural rule comparable to Rule 9559 and therefore proposes to adopt 
aspects of Rule 9559 that are applicable to hearings under Rule 9555.
    Proposed Rule 13.9(h)(1) would provide that a hearing shall be held 
within 30 days after a Respondent subject to a notice files a written 
request under proposed Rule 13.9(e). This requirement is the same as 
Rule 9559(f)(3) (Time of Hearing).
    Proposed Rule 13.9(h)(2) would provide that the EBCC shall issue a 
notice stating the date, time, and place of the hearing at least 21 
days prior to the hearing. This requirement is the same as that 
contained in Rule 9559(g)(3) (Notice of Hearing). Further, proposed 
subsection (h)(2) would provide that not less than 14 days before the 
hearing, Exchange staff shall provide to the respondent who requested 
the hearing, all documents that were considered in issuing the notice. 
This requirement is the same as that contained in Rule 9559(h)(1) 
(Transmission of Documents) for Rule 9555 proceedings.
    Proposed Rule 13.9(h)(3) would provide that, not less than seven 
days before the hearing, the parties shall exchange proposed exhibit 
and witness lists. The proposed Rule would require exhibit and witness 
lists to be served by overnight courier. These requirements are the 
same as those contained in Rule 9559(h)(2) (Transmission of Documents).
    Proposed Rule 13.9(h)(4) would provide that the EBCC may approve, 
modify or withdraw any and all sanctions, requirements, restrictions or 
limitations imposed by the notice and may impose any fitting sanction. 
These requirements are the same as those contained in Rule 9559(n)(1) 
(Sanctions, Costs and Remands).
    Proposed Rule 13.9(h)(5) would provide that the EBCC shall prepare 
a written decision within 60 days of the date of the close of the 
hearing and provide it to the Board of Directors. This is the same as 
the requirement in Rule 9559(o)(3) (Timing of Decision). Proposed 
subsection (h)(5) would further specify that the decision include the 
following elements:
     A statement describing the investigative or other origin 
of the notice issued under this Rule;\15\
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    \15\ See Proposed Rule 13.9(h)(5)(A).
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     the specific statutory or rule provision alleged to have 
been violated or providing the authority for the Exchange action;\16\
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    \16\ See Proposed Rule 13.9(h)(5)(B).
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     a statement setting forth the findings of fact with 
respect to any act or practice the respondent was alleged to have 
committed or omitted or any condition specified in the notice; \17\
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    \17\ See Proposed Rule 13.9(h)(5)(C).
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     the conclusions of the EBCC regarding the alleged 
violation or condition specified in the notice; \18\
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    \18\ See Proposed Rule 13.9(h)(5)(D).
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     a statement of the EBCC in support of the disposition of 
the principal issues raised in the proceeding; \19\ and
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    \19\ See Proposed Rule 13.9(h)(5)(E).
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     a statement describing any sanction, requirement, 
restriction or limitation imposed, the reasons therefore, and the date 
upon which such sanction, requirement, restriction or limitation shall 
become effective.\20\
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    \20\ See Proposed Rule 13.9(h)(5)(F).
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    These requirements are the same as those contained in Rule 
9559(p)(1)-(6) (Contents of Decision).
    Proposed Rule 13.9(h)(6) would provide that the Board of Directors 
may, on its own initiative, order review of a decision prepared by the 
EBCC pursuant to Rule 13.9 within 30 days after notice of the decision 
has been served on the OTP Firm, OTP Holder or an Associated Person of 
an OTP Firm or OTP Holder. The proposed Rule utilizes the same language 
and time period as current NYSE Arca Rule 10.8(d), which provides that 
the Board of Directors may, on its own initiative, order a review of a 
decision on appeal made under Rule 10.8(b) within 30 days after notice 
of the decision is served on a respondent. By incorporating those Board 
review requirements, proposed Rule 13.9(h)(6) parallels Rule 9559(q)'s 
provision for a call for review by the NYSE and NYSE MKT Board of 
Directors.
    Finally, proposed Rule 13.9(h)(7) would provide that the right to 
have any action pursuant to this Rule reviewed by the SEC is governed 
by Section 19 of the Exchange Act. The filing of an application for 
review by the SEC shall not stay the effectiveness of final Exchange 
action, unless the SEC otherwise orders. This is the same as Rule 
9559(r) (Application for SEC Review).
    The Exchange is not adopting the remaining subsections of Rule 9559 
in whole or in part because they are either inapplicable to Rule 9555 
proceedings,\21\ are already addressed in the NYSE Arca and NYSE Arca 
Equities Rules,\22\ or find no analogue in the NYSE Arca and NYSE Arca 
Equities Rules relating to disciplinary proceedings.\23\
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    \21\ See Rule 9559 (f)(1) & (3) (Time of Hearing); (g)(1) & (2) 
(Notice of Hearing); (o)(1) & (2) (Timing of Decision).
    \22\ See Rule 9559(a) (Applicability); (b) (Computation of 
Time); (c) (Stays); (d) (Appointment and Authority of Hearing 
Officer and/or Hearing Panel); (i) (Evidence); (j) (Additional 
Information); (k) (Record of Hearing); (l) (Record of Proceeding); 
(m) (Failure to Appear at a Pre-Hearing Conference or Hearing or to 
Comply with a Hearing Officer Order Requiring the Production of 
Information); (n) (Sanctions, Costs and Remands).
    \23\ See Rule 9559(e) (Consolidation or Severance of 
Proceedings).
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NYSE Arca Equities Rule 11.9
    The Exchange proposes to make parallel changes to the NYSE Arca 
Equities Rules. Proposed Rule 11.9 would govern when an ETP Holder or 
Associated Person of an ETP Holder does not meet eligibility or 
qualification standards; does not meet prerequisites for access to 
services; or cannot be permitted to continue to have access to services 
with safety to investors, creditors, ETP Holders, or the Exchange. Like 
Rule 9555 and proposed NYSE Arca Rule 13.9, the proposed Rule would be 
divided into separate subsections describing the notice; service of the 
notice; the contents of the notice; the effective date of the 
limitation, prohibition, suspension, cancellation or bar; requests for 
a hearing; failure to request a hearing; and a request for termination 
of the limitation, prohibition or suspension. Like proposed NYSE Arca 
Rule 13.9, proposed Rule 11.9 would have a section describing 
procedures, based on Rule 9559, that apply if a party requests a 
hearing.
    Proposed Rule 11.9(a) (Notice to ETP Holder or Associated Person of 
ETP Holder of Suspension, Cancellation, Bar, or Limitation or 
Prohibition on Access to Services) would provide that if an ETP Holder 
or an Associated Person of an ETP Holder does not meet the eligibility 
or qualification standards set forth in the Exchange's Rules, Exchange 
staff may provide written notice to such ETP Holder or Associated 
Person of an ETP Holder stating that the failure to become eligible or 
qualified will result in a suspension or cancellation of

[[Page 50754]]

trading privileges or a suspension or bar from associating with any ETP 
Holder.\24\
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    \24\ See Proposed Rule 11.9(a)(1).
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    Further, the proposed rule would provide that if an ETP Holder or 
Associated Person of an ETP Holder does not meet the prerequisites for 
access to services offered by the Exchange or an ETP Holder thereof or 
cannot be permitted to continue to have access to services offered by 
the Exchange or an ETP Holder thereof with safety to investors, 
creditors, member organizations, or the Exchange, Exchange staff may 
provide written notice to such ETP Holder or an Associated Person of an 
ETP Holder limiting or prohibiting access to services offered by the 
Exchange or an ETP Holder thereof.\25\ Proposed Rule 11.9(a) is 
substantially the same as NYSE and NYSE MKT Rule 9555(a), except that 
it substitutes references to ``member organization or covered person'' 
with ``ETP Holder or Associated Person of an ETP Holder.''
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    \25\ See Proposed Rule 11.9(a)(2).
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    Proposed Rule 11.9(b) (Service of Notice) would provide that 
Exchange staff shall serve the ETP Holder or an Associated Person of an 
ETP Holder with the notice described in subsection (a) and that a copy 
of the notice served on an Associated Person of an ETP Holder also 
shall be served on such ETP Holder. Further, the proposed Rule would 
provide that Exchange staff shall \26\ serve notice on counsel when 
counsel for the ETP Holder or an Associated Person of an ETP Holder 
agrees to accept service of such notice. Proposed Rule 11.9(b) is 
substantially the same as NYSE and NYSE MKT Rule 9555(b), except that 
it substitutes references to ``member organization or covered person'' 
with ``ETP Holder or an Associated Person of an ETP Holder.''
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    \26\ See note 14, supra.
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    Proposed Rule 11.9(c) (Contents of Notice) would provide that a 
notice issued under Rule 11.9 shall state the specific grounds and 
include the factual basis for Exchange action. Further, the Rule would 
require that the notice state when the Exchange action will take effect 
and explain what the respondent must do to avoid such action as well as 
that the respondent may file a written request for a hearing.
    The proposed Rule would also provide that the notice also shall 
inform the respondent of the applicable deadline for filing a request 
for a hearing and shall state that a request for a hearing must set 
forth with specificity any and all defenses to the Exchange action. In 
addition, the proposed Rule would require the notice to explain that 
the BCC may approve, modify or withdraw any and all sanctions or 
limitations imposed by the notice, and may impose any other fitting 
sanction. Proposed Rule 11.9(c) is substantially the same as NYSE and 
NYSE MKT Rule 9555(c), except that it (1) substitutes references to 
``member organization or covered person'' with ``ETP Holder or an 
Associated Person of an ETP Holder,'' and (2) eliminates the reference 
to the Office of Hearing Officers and replaces ``Hearing Officer, or, 
if applicable, Hearing Panel'' with ``BCC.''
    Proposed Rule 11.9(d) (Effective Date of Limitation, Prohibition, 
Suspension, Cancellation or Bar) would provide that the limitation, 
prohibition, suspension, cancellation or bar referenced in a notice 
issued under the proposed Rule shall become effective 14 days after 
service of the notice, except that the effective date for a notice of a 
limitation or prohibition on access to services offered by the Exchange 
or an ETP Holder thereof with respect to services to which the ETP 
Holder or an Associated Person of an ETP Holder does not have access 
shall be upon service of the notice. Proposed Rule 11.9(d) would also 
provide that a request for a hearing shall stay the effectiveness of 
the notice, except that the effectiveness of a notice of a limitation 
or prohibition on access to services offered by the Exchange or an ETP 
Holder thereof with respect to services to which the ETP Holder or an 
Associated Person of an ETP Holder does not have access shall not be 
stayed by a request for a hearing. Proposed Rule 11.9(d) is 
substantially the same as NYSE and NYSE MKT Rule 9555(d), except that 
it substitutes references to ``member organization or covered person'' 
with ``ETP Holder or an Associated Person of an ETP Holder.''
    Proposed Rule 11.9(e) (Request for Hearing) would provide that an 
ETP Holder or an Associated Person of an ETP Holder served with a 
notice under the proposed Rule may file with the BCC a written request 
for a hearing. The proposed Rule would require that a request for a 
hearing shall be made within 14 days after service of the notice and 
must set forth with specificity any and all defenses to the Exchange 
action. Proposed Rule 11.9(e) is substantially the same as NYSE and 
NYSE MKT Rule 9555(e), except that it substitutes references to 
``member organization or covered person'' with ``ETP Holder or an 
Associated Person of an ETP Holder.''
    Proposed Rule 11.9(f) (Failure to Request Hearing) would provide 
that if an ETP Holder or an Associated Person of an ETP Holder does not 
timely request a hearing, the limitation, prohibition, suspension, 
cancellation or bar specified in the notice shall become effective 14 
days after service of the notice, except that the effective date for a 
notice of a limitation or prohibition on access to services offered by 
the Exchange or an ETP Holder with respect to services to which the ETP 
Holder or an Associated Person of an ETP Holder does not have access 
shall be upon service of the notice. The proposed Rule would further 
provide that notice shall constitute final Exchange action if the ETP 
Holder or an Associated Person of an ETP Holder does not request a 
hearing within 14 days after service of the notice. Proposed Rule 
11.9(f) is substantially the same as NYSE and NYSE MKT Rule 9555(f), 
except that it substitutes references to ``member organization or 
covered person'' with ``ETP Holder or an Associated Person of an ETP 
Holder.''
    Proposed Rule 11.9(g) (Request for Termination of the Limitation, 
Prohibition or Suspension) would provide that an ETP Holder or an 
Associated Person of an ETP Holder subject to a limitation, prohibition 
or suspension under the proposed Rule may file a written request for 
termination of the limitation, prohibition or suspension on the ground 
of full compliance with the notice or decision. Further, the proposed 
Rule would specify that such a request shall be filed with the head of 
the Exchange department or office that issued the notice or, if another 
department or office is named as the party handling the matter on 
behalf of the issuing department or office, with the head of the 
department or office that is so designated. Finally, the proposed Rule 
would provide that the appropriate head of the department or office may 
grant relief for good cause shown. Proposed Rule 11.9(g) is 
substantially the same as NYSE and NYSE MKT Rule 9555(g), except that 
it substitutes references to ``member organization or covered person'' 
with ``ETP Holder or an Associated Person of an ETP Holder.''
    Finally, proposed Rule 11.9(h) would set forth specific procedures 
that would apply to hearings under the proposed Rule. As noted, 
proposed subsection (h) is modeled on NYSE and NYSE MKT Rule 9559, 
which provides uniform hearing procedures for expedited proceedings 
under the NYSE and NYSE MKT Rule 9550 Series, including proceedings 
under Rule 9555. NYSE Arca Equities does not currently have a 
procedural rule comparable to Rule 9559 and therefore proposes to adopt

[[Page 50755]]

aspects of Rule 9559 that are applicable to hearings under Rule 9555.
    Proposed Rule 11.9(h)(1) would provide that a hearing shall be held 
within 30 days after a Respondent subject to a notice files a written 
request under proposed Rule 11.9(e). This requirement is the same as 
Rule 9559(f)(3) (Time of Hearing).
    Proposed Rule 11.9(h)(2) would provide that the BCC shall issue a 
notice stating the date, time, and place of the hearing at least 21 
days prior to the hearing. This requirement is the same as that 
contained in Rule 9559(g)(3) (Notice of Hearing). Further, proposed 
subsection (h)(2) would provide that not less than 14 days before the 
hearing, Exchange staff shall provide to the respondent who requested 
the hearing, all documents that were considered in issuing the notice. 
This requirement is the same as that contained in Rule 9559(h)(1) 
(Transmission of Documents) for Rule 9555 proceedings.
    Proposed Rule 11.9(h)(3) would provide that not less than seven 
days before the hearing, the parties shall exchange proposed exhibit 
and witness lists. The proposed Rule would require exhibit and witness 
lists to be served by overnight courier. These requirements are the 
same as those contained in Rule 9559(h) (Transmission of Documents).
    Proposed Rule 11.9(h)(4) would provide that the BCC may approve, 
modify or withdraw any and all sanctions, requirements, restrictions or 
limitations imposed by the notice and may impose any fitting sanction. 
These requirements are the same as those contained in Rule 9559(n)(1) 
(Sanctions, Costs and Remands).
    Proposed Rule 11.9(h)(5) would provide that that the BCC prepare a 
written decision within 60 days of the date of the close of the hearing 
and provide it to the Board of Directors. This is the same as the 
requirement in Rule 9559(o)(3) (Timing of Decision). Proposed 
subsection (h)(5) would further specify that the decision include the 
following elements:
     A statement describing the investigative or other origin 
of the notice issued under this Rule; \27\
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    \27\ See Proposed Rule 11.9(h)(5)(A).
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     the specific statutory or rule provision alleged to have 
been violated or providing the authority for the Exchange action; \28\
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    \28\ See Proposed Rule 11.9(h)(5)(B).
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     a statement setting forth the findings of fact with 
respect to any act or practice the respondent was alleged to have 
committed or omitted or any condition specified in the notice; \29\
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    \29\ See Proposed Rule 11.9(h)(5)(C).
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     the conclusions of the BCC regarding the alleged violation 
or condition specified in the notice; \30\
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    \30\ See Proposed Rule 11.9(h)(5)(D).
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     a statement of the BCC in support of the disposition of 
the principal issues raised in the proceeding; \31\ and
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    \31\ See Proposed Rule 11.9(h)(5)(E).
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     a statement describing any sanction, requirement, 
restriction or limitation imposed, the reasons therefore, and the date 
upon which such sanction, requirement, restriction or limitation shall 
become effective.\32\
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    \32\ See Proposed Rule 11.9(h)(5)(F).
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    These requirements are the same as those contained in Rule 
9559(p)(1)-(6) (Contents of Decision).
    Proposed Rule 11.9(h)(6) would provide that the Board of Directors 
may, on its own initiative, order review of a decision prepared by the 
BCC pursuant to Rule 11.9 within 30 days after notice of the decision 
has been served on the ETP Holder or Associated Person of an ETP 
Holder. The proposed Rule utilizes the same language and time period as 
current NYSE Arca Equities Rule 10.8(d), which provides that the NYSE 
Arca Board of Directors \33\ may, on its own initiative, order a review 
of a decision on appeal within 30 days after notice of the decision is 
served on a respondent. Proposed Rule 11.9(h)(6) parallels the 
requirement in Rule 9559(q) setting forth a call for review by the NYSE 
and NYSE MKT Board of Directors.
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    \33\ NYSE Arca Equities Rule 10.8(d) refers to the ``NYSE Arca 
Board of Governors.'' The reference is outdated, and means the NYSE 
Arca Board of Directors. See Securities Exchange Act Release No. 
77898 (May 24, 2016), 81 FR 34404, 34406 (May 31, 2016) (SR-
NYSEArca-2016-11).
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    Finally, proposed Rule 11.9(h)(7) would provide that the right to 
have any action pursuant to this Rule reviewed by the SEC is governed 
by Section 19 of the Exchange Act. The filing of an application for 
review by the SEC shall not stay the effectiveness of final Exchange 
action, unless the SEC otherwise orders. This is the same as Rule 
9559(r)(Application for SEC Review).
    NYSE Arca Equities is not adopting the remaining subsections of 
Rule 9559 in whole or in part because they are either inapplicable to 
Rule 9555 proceedings,\34\ are already addressed in the NYSE Arca and 
NYSE Arca Equities Rules,\35\ or find no analogue in the NYSE Arca and 
NYSE Arca Equities Rules relating to disciplinary proceedings.\36\
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    \34\ See Rule 9559 (f)(1) & (3) (Time of Hearing); (g)(1) & (2) 
(Notice of Hearing); (o)(1) & (2) (Timing of Decision).
    \35\ See Rule 9559(a) (Applicability); (b) (Computation of 
Time); (c) (Stays); (d) (Appointment and Authority of Hearing 
Officer and/or Hearing Panel); (i) (Evidence); (j) (Additional 
Information); (k) (Record of Hearing); (l) (Record of Proceeding); 
(m) (Failure to Appear at a Pre-Hearing Conference or Hearing or to 
Comply with a Hearing Officer Order Requiring the Production of 
Information); (n) (Sanctions, Costs and Remands).
    \36\ See Rule 9559(e) (Consolidation or Severance of 
Proceedings).
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Conforming Changes
    NYSE Arca Rule 3.2(b)(1)(B) describes the functions and authority 
of the NYSE Arca EBCC. Under subsection (b)(1)(B)(ii), this includes 
the authority to conduct hearings and render decisions in summary 
disciplinary actions and proceedings pursuant to Rule 10.5 (Hearing). 
The Exchange proposes to amend NYSE Arca Rule 3.2(b)(1)(B)(ii) to add a 
clause specifying that the EBCC can also conduct hearings and render 
decisions in expedited proceedings pursuant to Rule 13.9.
    NYSE Arca Equities Rule 3.2(b)(1)(B), like NYSE Arca Rule 
3.2(b)(1)(B), describes the functions and authority of the NYSE Arca 
Equities BCC that, under subsection (b)(1)(B)(ii) includes the 
authority to conduct hearings and render decisions in summary 
disciplinary actions and proceedings. The Exchange proposes to amend 
NYSE Arca Equities Rule 3.2(b)(1)(B)(ii) to specify that the NYSE Arca 
Equities BCC can also conduct hearings and render decisions in 
expedited proceedings pursuant to Rule 11.9.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\37\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\38\ in particular, because it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, to prevent fraudulent and manipulative acts and practices, and 
to protect investors and the public interest. In addition, the Exchange 
believes that the proposed rule change furthers the objectives of 
Section 6(b)(7) of the Act,\39\ in particular, in that it provides fair 
procedures for the denial of membership to any person seeking 
membership therein, the barring of any person from becoming associated 
with a member thereof, and the prohibition or limitation by the 
Exchange of any person with respect to access to services

[[Page 50756]]

offered by the Exchange or a member thereof, including on a non-
summary, but expedited, proceeding basis.\40\
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    \37\ 15 U.S.C. 78f(b).
    \38\ 15 U.S.C. 78f(b)(5).
    \39\ 15 U.S.C. 78f(b)(7).
    \40\ See 15 U.S.C. 78f(d)(1)-(3).
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    The proposed changes will provide greater harmonization between 
NYSE Arca, NYSE Arca Equities, NYSE, and NYSE MKT rules of similar 
purpose, resulting in less burdensome and more efficient regulatory 
compliance for common members. As previously noted, the proposed rule 
text is substantially the same as the rule text in effect for NYSE and 
NYSE MKT. The proposed rule change would enhance the ability of NYSE 
Arca and NYSE Arca Equities to have a direct and meaningful impact on 
its regulatory program for enforcing the eligibility or qualification 
standards as set forth in their respective rules by providing a 
mechanism and procedure for suspending or cancelling trading privileges 
or suspending or barring a person from associating with a trading 
privileges holder or firm, as appropriate. As such, the proposed rule 
change would foster cooperation and coordination with persons engaged 
in facilitating transactions in securities and would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system.
    The Exchange further believes that the proposed hearing procedures 
in subsection (h) of proposed Rules 11.9 and 13.9 are fair. The 
proposed procedural requirements are based on timeframes and 
requirements in Rule 9559, which governs expedited proceedings, 
including proceedings under Rule 9555, on the NYSE and NYSE MKT. The 
proposed Rules would provide the same time periods as Rule 9559 for 
when a hearing shall be held (30 days after a respondent subject to a 
notice files a written request for hearing); for when the date, time, 
and place of the hearing need to be announced (at least 21 days prior 
to the hearing); for producing to the respondent all documents 
considered in issuing the notice (not less than 14 days before the 
hearing); and for exchanging proposed exhibit and witness lists (not 
less than seven days before the hearing). In addition to these 
safeguards, the proposed Rules, like Rule 9559, would empower the body 
hearing the appeal to approve, modify or withdraw any and all 
sanctions, requirements, restrictions or limitations imposed by the 
notice and impose any fitting sanction, and would also require a 
written decision within a specific timeframe (60 days) from the close 
of the hearing. The Exchange believes that these incorporated 
procedural requirements would, similar to Rule 9559, provide adequate 
procedural protections to all parties and promote efficiency. The 
Exchange also believes that not adopting aspects of Rule 9559 that are 
not relevant to expedited proceedings under Rule 9555 also promotes a 
fair procedure for the denial of membership to any person seeking to 
become an Exchange permit holder, the barring of any person from 
becoming associated with an Exchange permit holder, and the prohibition 
or limitation by the Exchange of any person with respect to access to 
services offered by the Exchange or a permit holder thereof.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change is not intended to address competitive 
issues, but rather it is designed to (i) provide greater harmonization 
among NYSE Arca, NYSE Arca Equities, NYSE, and NYSE MKT rules of 
similar purpose; and (ii) enhance the quality of the regulatory program 
for enforcing eligibility or qualification standards on the Exchange, 
resulting in less burdensome and more efficient regulatory compliance 
and facilitating performance of regulatory functions.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \41\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\42\
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    \41\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \42\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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 email to [email protected]. Please include 
File Number SR-NYSEARCA-2016-102 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-2016-102. 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, 100 F Street, NE., 
Washington, DC 20549 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

[[Page 50757]]

should refer to File Number SR-NYSEARCA-2016-102, and should be 
submitted on or before August 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18201 Filed 8-1-16; 8:45 am]
 BILLING CODE 8011-01-P