
[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Notices]
[Pages 24805-24807]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09918]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72018; File No. SR-NYSEArca-2014-40]


Self-Regulatory Organizations; NYSE Arca Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Exchange 
Rules Governing Letters of Guarantee and Letters of Authorization

April 25, 2014.
    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 April 21, 2014, 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 to amend Exchange rules governing Letters of 
Guarantee and Letters of Authorization. The text of 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
    As further described below, each OTP Holder acting as either a 
Market Maker or Floor Broker on NYSE Arca currently is required to 
submit to the Exchange a Letter of Guarantee or Letter of Authorization 
for its trading activities from a Clearing Member.\4\ Typically, by a 
Letter of Guarantee, the Clearing Member accepts financial 
responsibility for all Exchange transactions of a Market Maker \5\ and, 
by a Letter of Authorization, a Clearing Member is responsible for the 
clearance of the Exchange transactions of a Floor Broker.\6\
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    \4\ A Clearing Member is an Exchange OTP Firm or OTP Holder 
which has been admitted to membership in the Options Clearing 
Corporation pursuant to the provisions of the Rules of the Options 
Clearing Corporation. See Rule 6.1(b)(3).
    \5\ See Rule 6.36(a).
    \6\ See Rule 6.45(a).
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    The purpose of the proposal is to amend various Exchange rules 
governing Letters of Guarantee and Authorization to:
     Provide that any written notice of revocation of a Letter 
of Guarantee or Letter of Authorization will become effective upon 
processing by the Exchange.
     give the Exchange the ability to prevent access and 
connectivity if a Market Maker or Floor Broker is subject to written 
notice of revocation.
Changes to Rule 6.36--Letters of Guarantee
    Rule 6.36(c) states that a Letter of Guarantee filed with the 
Exchange shall remain in effect until a final written notice of 
revocation has been filed with the Exchange. The current rule sets 
forth a time period for the effectiveness of a revocation to take 
place. However the Exchange does not believe that a

[[Page 24806]]

specified timeframe is necessary. Because the Exchange can process such 
revocations at any time after receipt, the Exchange proposes to amend 
Rule 6.36(c) to provide that notices of revocation shall become 
effective as soon as the Exchange is able to process the revocation. 
The Exchange notes that the proposed rule change is consistent with the 
rules governing the processing of the revocation of a Letter of 
Guarantee on the Chicago Board Options Exchange (``CBOE'').\7\
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    \7\ See CBOE Rule 8.5(c).
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    Once a notice of revocation has been processed, a Market Maker no 
longer has in effect a Letter of Guarantee, as required by Rule 
6.36(a). If a Market Maker no longer has a valid Letter of Guarantee, 
that Market Maker presents risk to the marketplace and the Exchange 
believes it is appropriate to terminate access and connectivity to the 
Exchange in these situations. Accordingly, the Exchange proposes to 
further amend Rule 6.36(c) by stating that upon the effectiveness of a 
notice of revocation, the Exchange will be permitted to prevent access 
and connectivity to the Exchange by that Market Maker. Preventing 
access and connectivity by a Market Maker who does not have a valid 
Letter of Guarantee is consistent with similar procedures of the 
CBOE.\8\
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    \8\ See CBOE Rule 3.28(b).
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Changes to Rule 6.45--Letters of Authorization
    Rule 6.45(c) states that a Letter of Authorization filed with the 
Exchange shall remain in effect until a written notice of revocation 
has been filed with the Exchange. The current rule sets forth a time 
period for the effectiveness of a revocation to take place. However the 
Exchange does not believe that a specified timeframe is necessary. 
Because the Exchange can process such revocations at any time after 
receipt, the Exchange proposes to amend Rule 6.45(c) to provide that a 
notice of revocation shall become effective as soon as the Exchange is 
able to process the revocation. The Exchange notes that the proposed 
rules change is consistent with the rules governing the processing of 
the revocation of a Letter of Authorization on the CBOE.\9\
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    \9\ See CBOE Rule 6.72(c).
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    Once a notice of revocation has been processed, a Floor Broker no 
longer has in effect a Letter of Authorization, as required by Rule 
6.45(a). If a Floor Broker no longer has a valid Letter of 
Authorization, that Floor Broker presents risk to the marketplace and 
the Exchange believes it is appropriate to terminate access and 
connectivity to the Exchange in these situations. Accordingly, the 
Exchange proposes to further amend Rule 6.45(c) by stating that upon 
the effectiveness of a notice of revocation, the Exchange will be 
permitted to prevent access and connectivity to the Exchange by that 
Floor Broker. Preventing access and connectivity to a Floor Broker who 
does not have on file an effective Letter of Authorization is 
consistent with similar procedures of the CBOE.\10\
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    \10\ Supra note 8.
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    The Exchange also proposes to adopt an additional provision to Rule 
6.45(c) stating that final revocation shall in no way relieve a 
Clearing OTP Holder or OTP Firm of responsibility for clearing 
transactions effected by a Floor Broker prior to the effectiveness of 
such final revocation. The Exchange believes that this provision, which 
currently applies when a Market Maker is subject to a notice of 
revocation, is equally appropriate in instances when a Floor Broker is 
subject to a notice of revocation. The Exchange notes that the proposed 
rule change is consistent with the rules governing the processing of 
the revocation of a Letter of Authorization on the CBOE.\11\
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    \11\ Supra note 9.
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    The Exchange notes that nothing in existing or proposed rules would 
prohibit a Market Maker or Floor Broker from seeking to gain access and 
connectivity to the Exchange once that individual is able to again 
acquire the required Letter of Guarantee or Letter of Authorization.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\12\ in general, and furthers the objectives of Section 
6(b)(5),\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    Preventing access and connectivity to the Exchange by a Market 
Maker or Floor Broker subject to a notice of revocation will promote 
just and equitable principles of trade and serves to protect investors 
and the public because it prevents trading by a Market Maker or Floor 
Broker without financial or clearing guarantees for its trading. A 
Market Maker or Floor Broker who no longer has a valid Letter of 
Guarantee or Authorization presents risk to the marketplace and the 
Exchange believes it is appropriate to prevent access and connectivity 
to the Exchange in these situations. In addition, making a notice of 
revocation effective upon processing by the Exchange, instead of being 
encumbered by a specified time frame, will permit the Exchange to act 
swiftly to take measures aimed at market integrity and investor 
protection.
    The Exchange believes the proposed rule change is also consistent 
with the requirements that the rules of an exchange provide a fair 
procedure for the denial or limitation by an exchange of any person 
with respect to access to services offered by the Exchange because the 
Exchange would not prohibit or limit a Floor Broker or Market Maker 
from seeking to gain access and connectivity to the Exchange once that 
individual is able to again acquire the required Letter of Guarantee or 
Letter of Authorization.

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. The proposed rule changes 
will apply equally to all Floor Brokers and Market Makers and is 
designed to protect all OTP Holders, OTP Firms and public investors 
effecting transactions on the Exchange. In addition, the proposed 
changes will not impose any unnecessary burden on the operation of the 
Exchange because the changes will allow the Exchange to adopt more 
efficient procedures for the processing notices of revocation.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii)

[[Page 24807]]

impose any significant burden on competition; and (iii) become 
operative prior to 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6)(iii) thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing, noting that a waiver of the operative delay will allow the 
Exchange to promptly adopt and implement new procedures aimed at market 
integrity and investor protection. For this reason, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. As such, the 
Commission waives the operative delay and designates the proposed rule 
change to be operative upon filing.\16\
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    \16\ 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 such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEArca-2014-40 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-2014-40. 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 at 100 F Street NE., 
Washington, DC 20549-1090 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 should refer to File Number SR-
NYSEArca-2014-40, and should be submitted on or before May 22, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09918 Filed 4-30-14; 8:45 am]
BILLING CODE 8011-01-P


