
[Federal Register Volume 76, Number 237 (Friday, December 9, 2011)]
[Notices]
[Pages 77030-77032]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31633]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65893; File No. SR-NYSEAmex-2011-92]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Specifying in Its 
Rules an Existing Policy Related to the Application of NYSE Amex 
Options Rule 935NY

December 5, 2011.
    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 November 23, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit

[[Page 77031]]

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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to specify in its rules an existing policy 
related to the application of NYSE Amex Options Rule 935NY. The text of 
the proposed rule change is available at the Exchange, at http://www.nyse.com, the Commission's Public Reference Room, and at http://www.sec.gov.

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 to specify in its rules an existing policy 
related to the application of NYSE Amex Options Rule 935NY.
    NYSE Amex Options Rule 935NY provides, in part, that Users \5\ may 
not execute as principal orders they represent as agent unless agency 
orders are first exposed on the Exchange for at least one second. This 
requirement gives other market participants an opportunity to 
participate in the execution of orders before the entering User 
executes them. The Exchange recognizes, however, that because the 
Exchange does not identify the User that entered an order to the NYSE 
Amex System, orders from the same ATP Holder may inadvertently execute 
against each other as a result of being entered by different persons 
and/or systems at the same ATP Holder. Therefore, when enforcing NYSE 
Amex Options Rule 935NY, the Exchange does not consider the inadvertent 
interaction of orders from the same ATP Holder within one second to be 
a violation of the exposure requirement.
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    \5\ The term ``User'' means any ATP Holder that is authorized to 
obtain access to the NYSE Amex System pursuant to NYSE Amex Options 
Rule 902.1NY. See NYSE Amex Options Rule 900.2NY(87).
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    When investigating potential violations of NYSE Amex Options Rule 
935NY, the Exchange takes into consideration whether orders that 
executed against each other within one second in the NYSE Amex System 
were entered by persons, business units and/or systems at the same ATP 
Holder that did not have knowledge of the order in the NYSE Amex 
System.\6\ Commonly, ATP Holders are able to demonstrate that orders 
were entered by individuals or systems that did not have the ability to 
know of the preexisting order in the NYSE Amex System due to 
information barriers in place at the time the orders were entered.
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    \6\ The Financial Industry Regulatory Authority, Inc. 
(``FINRA''), on behalf of the Exchange and pursuant to a Regulatory 
Services Agreement (``RSA''), conducts routine surveillance to 
identify instances when an order in the NYSE Amex System is executed 
against an order entered by the same ATP Holder within one second.
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    The Exchange proposes to codify this policy in Commentary .07 to 
NYSE Amex Options Rule 935NY. Proposed Commentary .07 would specify 
that ATP Holders may demonstrate that orders were entered without 
knowledge of a preexisting order in the NYSE Amex System represented by 
the same ATP Holder by providing evidence that effective information 
barriers between the persons, business units and/or systems entering 
the orders on the Exchange were in existence at the time the orders 
were entered. Commentary .07 would require that such information 
barriers be fully documented and provided to the Exchange upon 
request.\7\
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    \7\ Information barrier documentation is reviewed by FINRA on 
the Exchange's behalf to evaluate whether an ATP Holder has 
implemented processes that are reasonably designed to prevent the 
flow of pre-trade order information given the particular structure 
of the ATP Holder. Additionally, information barriers are reviewed 
as part of the Exchange's examination program, which is also 
administered by FINRA pursuant to the RSA.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\8\ in general, and furthers the objectives of Section 6(b)(5) 
of the Act,\9\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest. In 
particular, the Exchange believes that codifying the Exchange's policy 
that appropriate information barriers may be used to demonstrate that 
the execution of two orders within one second was inadvertent because 
the orders were entered without knowledge of each other, would clarify 
the intent and application of NYSE Amex Options Rule 935NY for ATP 
Holders.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(7) of the Act,\10\ which requires the 
rules of an exchange to provide a fair procedure for the disciplining 
of members and persons associated with members. In particular, by 
specifying that the information barriers must be fully documented for 
the purpose of demonstrating that orders were entered without knowledge 
that there was a pre-existing unexecuted agency or proprietary order on 
the Exchange, ATP Holders would be better prepared to properly respond 
to requests for information by the Exchange in the course of a 
regulatory investigation. Moreover, while ATP Holders are generally 
required to provide information to the Exchange as requested, 
specifying that ATP Holders must provide written documentation 
regarding information barriers within the context of NYSE Amex Options 
Rule 935NY would require that all ATP Holders adhere to the same 
standard for demonstrating compliance with NYSE Amex Options Rule 
935NY.
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    \10\ 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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has

[[Page 77032]]

become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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.
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-92 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-2011-92. 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 
a.m. and 3 p.m. Copies of the 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 should refer to File Number SR-NYSEAmex-2011-92 and should 
be submitted on or before December 30, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31633 Filed 12-8-11; 8:45 am]
BILLING CODE 8011-01-P


