
[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]
[Notices]
[Pages 44065-44067]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18500]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64908; File No. SR-NYSEAmex-2011-52]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rule 17--
NYSE Amex Equities to Make Changes Necessary to Allow Its Routing 
Broker to Operate Consistent With the Requirements of Rule 15c3-5 Under 
the Securities Exchange Act of 1934

July 18, 2011.
    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 July 13, 2011, NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange'') 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 17--NYSE Amex Equities to make 
changes necessary to allow its Routing Broker to operate consistent 
with the requirements of Rule 15c3-5 under the Securities Exchange Act 
of 1934 (``Act'').\4\ The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
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    \4\ 17 CFR 240.15c3-5.
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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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 17--NYSE Amex Equities to 
permit its Routing Broker to operate consistent with the requirements 
of SEC Rule 15c3-5.\5\ Specifically, the proposed rule change would 
allow the Routing Broker, in its sole discretion, to reject orders 
pursuant to risk management

[[Page 44066]]

controls and supervisory procedures maintained by the Routing Broker 
pursuant to SEC Rule 15c3-5. The Exchange is proposing substantially 
similar rule changes for its options market, and the Exchange's 
affiliates, New York Stock Exchange LLC (``NYSE'') and NYSE Arca, Inc. 
(``NYSE Arca''), also are proposing substantially similar rule 
changes.\6\
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    \5\ Rule 13--NYSE Amex Equities defines ``Routing Broker'' as 
``the broker-dealer affiliate of the Exchange and/or any other non-
affiliate third-party broker-dealer that acts as a facility of the 
Exchange for routing orders entered into Exchange systems to other 
market centers for execution whenever such routing is required by 
Exchange Rules and Federal securities laws. The Routing Broker(s) 
will operate as described in Exchange Rule 17--NYSE Amex Equities.''
    \6\ See SR-NYSEAmex-2011-53 (options), SR-NYSE-2011-34, SR-
NYSEArca-2011-49 (equities), and SR-NYSEArca-2011-50 (options).
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    Archipelago Securities LLC (``Arca Securities'') currently is the 
primary outbound Routing Broker for the Exchange. The outbound routing 
function for the Exchange is governed by Rules 13 and 17--NYSE Amex 
Equities. Rule 17(c)(1)(A)--NYSE Amex Equities currently provides that 
the Routing Broker cannot change the terms of an order or the routing 
instructions, nor can it exercise any discretion about where to route 
an order.
    On November 3, 2010, the Commission adopted SEC Rule 15c3-5,\7\ 
pursuant to which, among other things, broker-dealers providing market 
access are required to implement certain pre-order entry checks in 
order to manage the financial, regulatory, and other risks associated 
with providing their customers with market access. In anticipation of 
the upcoming July 14, 2011 compliance date for SEC Rule 15c3-5, the 
Exchange is proposing to amend Rule 17--NYSE Amex Equities to describe 
the manner in which the Routing Broker will handle routable orders 
consistent with SEC Rule 15c3-5.\8\
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    \7\ See Securities Exchange Act Release No. 63241 (November 3, 
2010), 75 FR 69792 (November 15, 2010) (File No. S7-03-10).
    \8\ The Commission extended the compliance date to November 30, 
2011 for all of the requirements for fixed income securities and the 
requirements of SEC Rule 15c3-5(c)(1)(i) for all securities. See 
Securities Exchange Act Release No. 64748 (June 27, 2011), 76 FR 
38293 (June 30, 2011) (File No. S7-03-10).
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    Specifically, the Exchange proposes to adopt Rule 17(c)(1)(A)(ii)--
NYSE Amex Equities to provide that, in the Routing Broker's sole 
discretion, pursuant to risk management controls and supervisory 
procedures maintained by the Routing Broker pursuant to SEC Rule 15c3-
5, the Routing Broker may reject any order or series of orders as 
necessary to manage the financial, regulatory, and other risks of the 
Routing Brokers(s) providing ``market access,'' as that term is defined 
in SEC Rule 15c3-5(a)(1).\9\ The Routing Broker's policies and 
procedures for compliance with SEC Rule 15c3-5 will address two 
circumstances: (1) When the Routing Broker routes orders on behalf of 
the Exchange for the purpose of accessing other trading centers with 
protected quotations in compliance with Rule 611 of Regulation NMS 
under the Act \10\ for ``NMS stocks'' (as that term is defined in Rule 
600 of Regulation NMS),\11\ or in compliance with a national market 
system plan for listed options (``exempt orders''); and (2) when the 
Routing Broker routes orders on behalf of the Exchange for any other 
purpose, including pursuant to the terms of an order type adopted by 
the Exchange or pursuant to a routing strategy through which the 
Routing Broker routes orders to market centers that are not posting 
``protected quotations'' (as that term is defined in Rule 600 of 
Regulation NMS) \12\ (``non-exempt orders'').
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    \9\ The existing text of Rule 17(c)(1)(A)--NYSE Amex Equities 
would be renumbered as Rule 17(c)(1)(A)(i)--NYSE Amex Equities.
    \10\ 17 CFR 242.611.
    \11\ 17 CFR 242.600(47).
    \12\ 17 CFR 242.600(58).
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    With respect to exempt orders, SEC Rule 15c3-5(b) provides that a 
broker-dealer that routes orders on behalf of an exchange for the 
purpose of accessing other trading centers with protected quotations in 
compliance with Rule 611 of Regulation NMS for NMS stocks, or in 
compliance with a national market system plan for listed options, is 
subject only to the requirements of paragraph (c)(1)(ii) of the Rule. 
SEC Rule 15c3-5(c)(1)(ii) provides that the risk management controls 
and supervisory procedures required by the Rule must include elements 
reasonably designed to prevent the entry of erroneous orders, by 
rejecting orders that exceed appropriate price or size parameters, on 
an order-by-order basis or over a short period of time, or that 
indicate duplicative orders. Accordingly, for exempt orders, the 
Routing Broker will reject any order or series of orders that it 
determines, in its sole discretion, to be erroneous or duplicative. 
Currently, the only orders that the Routing Broker routes on behalf of 
the Exchange are exempt orders.
    With respect to non-exempt orders, all of the requirements of SEC 
Rule 15c3-5 would apply to orders that the Routing Broker routes on 
behalf of the Exchange, and the proposed rule change is intended to 
provide the Routing Broker with authority to reject such orders as 
necessary to comply with SEC Rule 15c3-5, as may be necessary in the 
future. In this regard, the risk management controls and supervisory 
procedures of the Routing Broker would include, as applicable, controls 
to prevent the entry of orders that exceed appropriate pre-set credit 
or capital thresholds in the aggregate for each customer and the 
broker-dealer and, where appropriate, more finely-tuned by sector, 
security, or otherwise by rejecting orders if such orders would exceed 
the applicable credit or capital thresholds.\13\ In addition, the risk 
management controls and supervisory procedures of the Routing Broker 
would be reasonably designed to ensure compliance with applicable 
regulatory requirements.\14\
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    \13\ See 17 CFR 240.15c3-5(c)(1)(i).
    \14\ See 17 CFR 240.15c3-5(c)(2).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\15\ In particular, 
the proposed change is consistent with Section 6(b)(5) of the Act,\16\ 
because it would promote just and equitable principles of trade, and, 
in general, protect investors and the public interest. The proposed 
rule is consistent with the requirements of the Act because the change 
is necessary for the Exchange's Routing Broker to comply with SEC Rule 
15c3-5. The Exchange also believes that the proposed changes will 
benefit member organizations of the Exchange because it provides 
clarity on the procedures employed by the Routing Broker consistent 
with SEC Rule 15c3-5.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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

    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

[[Page 44067]]

as the Commission may designate, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) 
thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\19\ 
However, Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing. The Exchange notes that 
waiving the 30-day operative delay will allow Arca Securities to comply 
with Rule 15c3-5 under the Act by July 14, 2011; \21\ the compliance 
date for Rule 15c3-5. For this reason, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest, and designates the proposed rule 
change to be operative upon filing with the Commission.\22\
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    \19\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and 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.
    \20\ Id.
    \21\ 17 CFR 240.15c3-5.
    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-NYSEAmex-2011-52 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEAmex-2011-52. 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 Web site 
viewing and printing in the Commission's Public Reference Section, 100 
F Street, NE., Washington, DC 20549-1090. Copies of the filing will 
also be available for inspection and copying at the NYSE Amex's 
principal office and on its Internet Web site at http://www.nyse.com. 
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 Number SR-NYSEAmex-2011-
52 and should be submitted on or before August 12, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18500 Filed 7-21-11; 8:45 am]
BILLING CODE 8011-01-P


