
[Federal Register Volume 81, Number 70 (Tuesday, April 12, 2016)]
[Notices]
[Pages 21615-21620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08299]



[[Page 21615]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77535; File No. SR-NYSEArca-2016-11]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
Amending Section 4.01(a) of the NYSE Arca's Bylaws and NYSE Arca Rule 
3.3 To Establish a Committee for Review as a Sub-Committee of the ROC 
and Making Conforming Changes to NYSE Arca Rules

April 6, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ notice is hereby given that, on March 24, 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, II, and III below, which Items 
have been prepared by the self-regulatory organization. On April 4, 
2016, the Exchange filed Amendment No. 1 to the proposal.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1, 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.
    \4\ Amendment No. 1 amends and replaces the original filing in 
its entirety. In Amendment No. 1, the Exchange, among other things, 
deleted language in the description of the proposed rule change that 
was not relevant to the proposed rule change.
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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 (1) amending Section 4.01(a) of the NYSE 
Arca's Bylaws and NYSE Arca Rule 3.3 to establish a Committee for 
Review as a sub-committee of the Regulatory Oversight Committee 
(``ROC''), deleting NYSE Arca Rule 3.2(b)(3) governing the OTP Advisory 
Committee and NYSE Arca Equities Rule 3.2(b)(3) governing the Member 
Advisory Committee, both of whose functions will be assumed by the 
Committee for Review, and making conforming changes to NYSE Arca Rules 
2.4, 10.3, 10.6, 10.8, 10.11, 10.12, 10.14 and NYSE Arca Equities Rules 
2.3, 3.3, 5.5, 10.3, 10.6, 10.8, 10.11, 10.12, and 10.13; and (2) 
deleting references to ``NYSE Regulation, Inc.'' and ``NYSE 
Regulation'' in NYSE Arca and NYSE Arca Equities Rule 0 and NYSE Arca 
Equities Rule 5.3(i)(1) and replacing a reference to the ``NYSE 
Regulation, Inc. Chief Executive Officer'' in NYSE Arca Equities Rules 
2.100. This Amendment No. 1 to SR-NYSEArca-2016-11 amends and replaces 
the original filing in its entirety. 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 the following changes to the Rules of NYSE 
Arca and NYSE Arca Equities:
     Amending Section 4.01(a) of the NYSE Arca's Bylaws and 
NYSE Arca Rule 3.3 to establish a Committee for Review (``CFR'') as a 
sub-committee of the ROC, deleting NYSE Arca Rule 3.2(b)(3) governing 
the OTP Advisory Committee and NYSE Arca Equities Rule 3.2(b)(3) 
governing the Member Advisory Committee, both of whose functions will 
be assumed by the CFR, and making conforming changes to NYSE Arca Rules 
2.4, 10.3, 10.6, 10.8, 10.11, 10.12, 10.14 and NYSE Arca Equities Rules 
2.3, 3.3, 5.5, 10.3, 10.6, 10.8, 10.11, 10.12, and 10.13;
     Deleting references to ``NYSE Regulation, Inc.'' and 
``NYSE Regulation'' \5\ in NYSE Arca and NYSE Arca Equities Rule 0 and 
NYSE Arca Equities Rule 5.3(i)(1); and
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    \5\ NYSE regulation, a not-for-profit subsidiary of the 
Exchange's affiliate New York Stock Exchange LLC (``NYSE''), 
performed regulatory functions for the Exchange pursuant to an 
intercompany Regulatory Services Agreement (``RSA'') that gave the 
Exchange the contractual right to review NYSE Regulation's 
performance. See Securities Exchange Act Release No. 75991 
(September 28, 2015), 80 FR 59837 (October 2, 2015) (SR-NYSE-2015-
27) (``NYSE Approval Order''). The RSA terminated on February 16, 
2016. The proposed changes relating to references to NYSE Regulation 
and the NYSE Regulation Chief Executive Officer are therefore 
appropriate because NYSE Regulation has ceased providing regulatory 
services to the Exchange, which has re-integrated its regulatory 
functions.
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     Replacing a reference to the ``NYSE Regulation, Inc. Chief 
Executive Officer'' in NYSE Arca Equities Rule 2.100.\6\
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    \6\ The Exchange would effect the proposed changes described 
herein no later than June 30, 2016, on a date determined by its 
Board.
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Background
    NYSE Arca, a registered securities exchange, operates a marketplace 
for trading options and, through its wholly-owned subsidiary NYSE Arca 
Equities, a marketplace for trading equities.\7\ NYSE Arca administers 
the disciplinary program for the options marketplace, which encompasses 
investigations, adjudication of cases, and the imposition of fines and 
other sanctions, and has delegated disciplinary and adjudicatory 
functions for the equities marketplace to NYSE Arca Equities.\8\ As 
summarized below, NYSE Arca and NYSE Arca Equities each utilizes its 
own committee structure for appeals of disciplinary decisions or 
summary determinations.\9\ The Exchange proposes to amend the current 
appellate structure to establish a single CFR to hear appeals for both 
marketplaces.
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    \7\ See NYSE Arca Rule 10.
    \8\ See NYSE Arca Equities Rule 3.4, 3.5. 14.1 & 14.2.
    \9\ A summary determination is a determination without a hearing 
where a penalty is imposed as to such charges that a respondent has 
admitted or failed to answer or which otherwise does not appear to 
be in dispute. See NYSE Arca Rule 10.4(c); NYSE Arca Equities Rule 
10.4(c).
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NYSE Arca
    The Exchange's disciplinary jurisdiction extends to Options Trading 
Permit (``OTP'') Holders, OTP Firms and associated persons of an OTP 
Firm or OTP Holder alleged to have violated or aided and abetted a 
violation of any provision of the Exchange Act or the rules and 
regulations thereunder, any provision of the Exchange's Bylaws or Rules 
or any commentary thereof, any resolution of the Board of Directors of 
the Exchange regulating the conduct of business on the Exchange, or 
Exchange policy or procedure.\10\ Disciplinary proceedings are heard by 
a ``Conduct Panel'' appointed by the NYSE Arca Ethics and Business 
Conduct Committee (``EBCC'').\11\
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    \10\ See Rule 10.1.
    \11\ See NYSE Arca Rule 10.5(a).
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    Under current NYSE Arca Rules 3.3 and 10.8, an appeal of matters 
subject to the applicable provisions of NYSE Arca Rules 3.2(b)(1)(C) or 
10, including a Conduct Panel decision pursuant to Rule 10.7 or summary 
determination pursuant to Rule 10.4(c), may be

[[Page 21616]]

reviewed by the NYSE Arca Board Appeals Committee (``NYSE Arca BAC'') 
or an ``Appeals Panel'' appointed by the NYSE Arca BAC.\12\ The NYSE 
Arca BAC is a committee of the NYSE Arca board of directors (the ``SRO 
Board'') made up of the OTP Director(s), the ETP Director(s) and all of 
the Public Directors of the NYSE Arca Board of Directors.\13\ Under 
current NYSE Arca Rule 3.3(a)(1)(B), if an Appeals Panel is appointed, 
it must include at least one Public Director and at least one Director 
that is an OTP Holder or Allied Person of an OTP Firm.\14\
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    \12\ See NYSE Arca Rule 10.8. In addition, NYSE Arca Rule 
3.2(b)(1)(C) provides that the NYSE Arca EBCC has the authority, 
whenever it appears that an OTP Firm or OTP Holder is in violation 
of NYSE Arca Rule 4 (Capital Requirements, Financial Reports, 
Margin), to direct a representative of such OTP Firm or OTP Holder 
to appear before the committee for examination upon 48 hours' 
notice, following which the EBCC can suspend such OTP Firm or OTP 
Holder until the requirements of NYSE Arca Rule 4 are fully met. 
NYSE Arca Rule 10 governs disciplinary proceedings and appeals. 
Under NYSE Arca Rule 10.8, the NYSE Arca BAC has the option of 
appointing an Appeals Panel to review disciplinary appeals or 
conduct review proceedings on its own. See also note 17, infra.
    \13\ See Article III, Section 3.02 of the bylaws of the 
Exchange. An ``ETP Director'' is a director nominated by the 
Equities Trading Permit (``ETP'') Holders of NYSE Arca Equities, 
Inc. and an ``OTP Director'' is a director nominated by the OTP 
Holders of the Exchange. ``Public Directors'' of the Exchange are 
directors that are ``persons from the public and will not be, or be 
affiliated with, a broker-dealer in securities or employed by, or 
involved in any material business relationship with, the Exchange or 
its affiliates''. Id.
    \14\ See NYSE Arca Rule 3.3(a)(1)(B). See also NYSE Arca Rule 
3.2.
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NYSE Arca Equities
    NYSE Arca Equities' disciplinary jurisdiction extends to any ETP 
Holder or associated person of an ETP Holder alleged to have violated 
or aided and abetted a violation of any provision of the Exchange Act 
or the rules and regulations thereunder, any provision of NYSE Arca 
Equities' Bylaws or Rules or any commentary thereof, any resolution of 
the Board of Directors of NYSE Arca Equities regulating the conduct of 
NYSE Arca Equities, or NYSE Arca Equities policy or procedure.\15\ 
Similar to NYSE Arca, disciplinary proceedings of NYSE Arca Equities 
are heard by a ``Conduct Panel'' appointed by the NYSE Arca Equities 
Business Conduct Committee (``BCC'').\16\
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    \15\ See NYSE Arca Equities Rule 10.1.
    \16\ See NYSE Arca Equities Rule 10.5(a).
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    Under current NYSE Arca Equities Rules 3.3 and 10.8, an appeal of 
matters subject to the applicable provisions of NYSE Arca Equities 
Rules 3.2(b)(1)(C), 5 or 10 may be reviewed by the NYSE Arca Equities 
Board Appeals Committee (``NYSE Arca Equities BAC'').\17\ The NYSE Arca 
Equities BAC is an equity committee of the NYSE Arca Equities board of 
directors, and is made up of, in addition to any members of the public 
on the committee, at least one director that is an ETP Holder or Allied 
Person of an ETP Holder.\18\
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    \17\ NYSE Arca Equities Rule 3.2(b)(1)(C), like NYSE Arca Rule 
3.2(b)(1)(C), provides that the NYSE Arca Equities BCC has the 
authority, whenever it appears that an ETP Holder is in violation of 
NYSE Arca Equities Rule 4 (Capital Requirements, Financial Reports, 
Margin), to direct a representative of such ETP Holder to appear 
before the committee for examination upon 48 hours' notice, 
following which the BCC can suspend such ETP Holder until the 
requirements of NYSE Arca Equities Rule 4 are fully met. NYSE Arca 
Equities Rule 5 governs listing and continued listing requirements 
and delisting procedures (see NYSE Arca Equities Rule 5.5(m)). NYSE 
Arca does not have a comparable rule. NYSE Arca Equities Rule 10 
governs disciplinary proceedings and appeals. Under NYSE Arca 
Equities Rule 10.8, the Board Appeals Committee has the option of 
appointing an Appeals Panel to review disciplinary appeals or 
conduct review proceedings on its own.
    \18\ See NYSE Arca Equities Rule 3.3(a)(1)(A). See also NYSE 
Arca Rule 3.1 & Rule 3.2.
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Proposal To Establish CFR as a Sub-Committee of the ROC
    In 2015, the Board established a ROC as a committee of the SRO 
Board.\19\ As discussed below, the Exchange proposes to create a CFR as 
a sub-committee of the ROC to replace the current structure of separate 
NYSE Arca and NYSE Arca Equities BACs for the options and equities 
markets. The proposed CFR would incorporate the salient requirements of 
both markets' current BAC process.
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    \19\ See Securities Exchange Act Release No. 75155 (June 11, 
2015), 80 FR 34744 (June 17, 2015) (SR-NYSEArca-2015-29) (``Release 
No. 75155''). The Exchange does not propose to amend the provisions 
relating to the EBCC or BCC, which will remain separate.
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    By establishing a single CFR, the Exchange proposes to make its 
appellate process consistent with that of its affiliates NYSE and NYSE 
MKT LLC (``NYSE MKT''), both of which recently established a CFR as a 
subcommittee of the respective affiliate's ROC.\20\ In particular, the 
Exchange proposes to incorporate the salient requirements of the NYSE 
and NYSE MKT CFRs.\21\
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    \20\ See NYSE Approval Order, 80 FR at 59840; Securities 
Exchange Act Release No. 77008 (February 1, 2016), 81 FR 6311, 6312 
(February 5, 2016) (NYSEMKT 2015-106) (``NYSE MKT Approval Order''). 
The NYSE and NYSE MKT CFRs became operative on February 16, 2016 
following the NYSE's termination of the agreement delegating the 
NYSE's regulatory functions to NYSE Regulation and NYSE MKT's 
termination of the related RSA pursuant to which NYSE Regulation 
performed regulatory functions for NYSE MKT.
    \21\ The NYSE and NYSE MKT CFRs were modeled on the former 
committee for review of the NYSE Regulation board of directors (the 
``NYSE Regulation CFR''). The salient requirements of the NYSE 
Regulation CFR were set forth in Article III, Section 5 of the NYSE 
Regulation Bylaws. See Securities Exchange Act Release No. 53382, 71 
FR 11251, 11259 & 11266 (February 27, 2006) (SR-NYSE-2005-77). See 
NYSE Approval Order, 80 FR at 59840 & NYSE MKT Approval Order, 81 FR 
at 6313 & n. 27.
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    As proposed, the CFR would be composed of OTP Director(s) of NYSE 
Arca, ETP Director(s) of NYSE Arca Equities and the Public Directors of 
both markets \22\ and would have the authority to appoint ``CFR Appeals 
Panels'' to conduct reviews of matters decided by the EBCC and BCC for 
the options and equities marketplaces, respectively. CFR Appeals Panels 
would also have the authority to conduct reviews of BCC determinations 
to limit or prohibit the continued listing of an issuer's 
securities.\23\
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    \22\ Article III, Section 3.02 of the NYSE Arca Bylaws and the 
NYSE Arca Equities Bylaws require that at least 50% of the directors 
be ``Public Directors'', defined as persons from the public that are 
not affiliated with a broker-dealer in securities. The NYSE Arca 
Bylaws further require that a Public Director not be employed by, or 
involved in any material business relationship with, the Exchange or 
its affiliates. See note 13, supra.
    \23\ The NYSE Arca Equities BAC currently has the same mandate. 
See note 17, supra. The NYSE Arca BAC's mandate does not include 
reviews of delisting determinations. See notes 12 & 17, supra.
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    To effect these changes, the Exchange proposes amending Section 
4.01(a) of the NYSE Arca's Bylaws and NYSE Arca Rule 3.3, deleting NYSE 
Arca Rule 3.2(b)(3) and NYSE Arca Equities Rule 3.2(b)(3), and make 
conforming changes to NYSE Arca Rules 2.4, 10.3, 10.6, 10.8, 10.11, 
10.12, 10.14 and NYSE Arca Equities Rules 2.3, 3.3, 5.5, 10.3, 10.6, 
10.8, 10.11, 10.12, and 10.13.
    NYSE Arca Rule 3.1(a) provides the Board with authority to 
establish one or more committees consisting partly or entirely of 
directors of NYSE Arca. The Exchange proposes to amend NYSE Arca Rule 
3.3 to provide for a CFR and delineate its composition and functions.
    Proposed NYSE Arca Rule 3.3(a)(2)(A) would provide that the Board 
shall annually appoint a CFR as a sub-committee of the ROC.\24\ 
Proposed NYSE Arca Rule 3.3(a)(2)(A) would provide that the CFR would 
be responsible for reviewing disciplinary decisions; reviewing 
determinations to limit or prohibit the continued listing of an 
issuer's securities on NYSE Arca Equities; and acting in an advisory 
capacity to the Board with respect to disciplinary matters, the listing 
and delisting of securities, regulatory programs, rulemaking, and 
regulatory rules, including trading rules. As is currently the case for 
the NYSE Arca

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BAC, proposed Rule 3.3(a)(2) would provide that the CFR would be 
comprised of the OTP Director(s), the ETP Director(s) and all of the 
Public Directors.
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    \24\ The Exchange proposes to delete current Rule 3.3(a)(1) 
which describes the Board Appeals Committee and move the text, with 
modifications, to proposed Rule 3.3(a)(2), following the provision 
regarding the ROC.
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NYSE Arca
    Proposed NYSE Arca Rule 3.3(a)(2)(B) would provide that the CFR may 
appoint a CFR Appeals Panel made up of members of the CFR. Like the 
current requirements for the Appeals Panels of the NYSE Arca BAC, the 
proposed Rule would provide that the CFR Appeals Panel would be made up 
of no less than three but no more than five individuals. Proposed NYSE 
Arca Rule 3.3(a)(2)(B) would provide that a CFR Appeals Panel for NYSE 
Arca would, like current NYSE Arca BAC Appeals Panels provided for in 
NYSE Arca Rule 3.3(a)(1)(B), conduct reviews of matters subject to the 
applicable provisions of NYSE Arca Rule 3.2(b)(1)(C) or 10.\25\
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    \25\ Under current NYSE Arca and NYSE Arca Equities Rules, 
decisions by an Appeals Panels appointed by the Board Appeals 
Committee of both markets are final unless appealed to the Board of 
Directors or called for review by the Board of Directors. See, e.g., 
NYSE Arca Rule 10.8(b) & (d); NYSE Arca Equities Rule 10.8(d). The 
Exchange proposes that CFR Appeals Panels retain this ability to 
resolve appeals and therefore does not propose that appellate panels 
appointed by the CFR would make recommendations to the CFR, as is 
the case with appellate panels for the Exchange's affiliate NYSE 
MKT, which did not previously have appellate panels. See NYSE MKT 
Approval Order, 81 FR at 6312.
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    Proposed NYSE Arca Rule 3.3(a)(2)(B) would further provide that 
each CFR Appeals Panel would contain at least one Public Director and 
at least one Director that is an OTP Holder or Allied Person or 
Associated Person of an OTP Firm.\26\ This is the same as the current 
requirement for Appeals Panels of the NYSE Arca BAC.
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    \26\ Section 6(b)(3) of the Exchange Act requires that the rules 
of an exchange ``assure a fair representation of its members in the 
selection of its directors and administration of its affairs and 
provide that one or more directors shall be representative of 
issuers and investors and not be associated with a member of the 
exchange, broker, or dealer.'' 15 U.S.C. 78f(b)(3). Exchange members 
who serve on exchange boards thus are sometimes referred to as 
``fair representation directors.'' In 2012, the Exchange expanded 
the eligibility for fair representation directors to include 
Associated Persons of OTP Firms and Associated Persons of ETP 
Holders, and amended NYSE Arca Rule 3.3 and NYSE Arca Equities Rule 
3.3 so that Associated Persons of OTP Firms and ETP Holders were 
eligible for membership on the Board Appeals Committee. See 
Securities Exchange Act Release No. 68233 (November 14, 2012), 77 FR 
69677, 69677 (November 20, 2012) (SR-NYSEArca-2012-103). The 
Exchange proposes to carry these categories forward into proposed 
NYSE Arca and NYSE Arca Equities Rule 3.3.
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    Finally, proposed NYSE Arca Rule 3.3(a)(2)(C) would retain the 
current provision governing the NYSE Arca BAC that, subject to Rule 10, 
decisions of the CFR would be subject to SRO Board review. Proposed 
subsection (a)(2)(C) would also provide, like the current provision 
governing the NYSE Arca BAC, that the decision of the Board shall 
constitute the final action of NYSE Arca, unless the Board remands the 
proceedings.\27\
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    \27\ In this respect, the Exchange practice would differ from 
that of its affiliates NYSE and NYSE MKT, where a decision by the 
CFR would be a final action of the board of directors.
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    NYSE Arca also proposes to amend Article IV, Section 4.01(a) of its 
Bylaws governing board committees. Specifically, NYSE Arca proposes to 
replace references to the ``Board Appeals Committee'' with references 
to the ``Committee for Review as a subcommittee of the Regulatory 
Oversight Committee'' and ``its subcommittee, the CFR.''
    NYSE Arca proposes conforming amendments to NYSE Arca Rules 2.4, 
10.3, 10.6, 10.8, 10.11, 10.12, 10.14 to replace references to the 
Board Appeals Committee with references to the ``Committee for Review'' 
or ``CFR'' and references to the Appeals Panel with references to the 
``CFR Appeals Panel.'' \28\
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    \28\ NYSE Arca Rule 10.11(e)(1) currently provides that 
appellate review of Floor citations and minor rule plan sanctions 
shall be referred directly to an appropriate Board Appeals Committee 
Panel (defined as an ``Appeals Panel'') appointed by the NYSE Arca 
Board of Directors. Current NYSE Arca Rule 10.11(e)(2) governs 
decisions by such Appeals Panels. The Exchange proposes to replace 
``an appropriate Board Appeals Committee Panel (`Appeals Panel') 
appointed by the Board'' in NYSE Arca Rule 10.11(e)(1) with ``CFR.'' 
The Exchange believes that it would be more appropriate for such 
matters to be directly referred to the CFR, which can then determine 
whether to appoint a CFR Appeals Panel as is currently proposed for 
disciplinary appeals under NYSE Arca Rule 10.8(b). Accordingly, the 
Exchange proposes to add text to NYSE Arca Rule 10.11(e)(2) 
providing that the CFR may appoint a CFR Appeals Panel to conduct 
reviews under this subsection or may decide to conduct review 
proceedings on its own. References to the ``Appeals Panel'' would be 
replaced with ``CFR or CFR Appeals Panel.''
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NYSE Arca Equities
    Similar conforming changes are proposed for NYSE Arca Equities. In 
particular, NYSE Arca Equities Rules 3.3, which mirrors NYSE Arca Rule 
3.3, would be retitled ``Committee for Review'' and amended to provide 
that the SRO Board shall, on an annual basis, appoint the CFR as a sub-
committee of the ROC. Proposed Rule 3.3(a)(1)(A) would provide that the 
CFR may, in turn, appoint a CFR Appeals Panel for NYSE Arca Equities 
market. Like the proposed CFR Appeals Panel for NYSE Arca, any CFR 
Appeals Panel appointed for NYSE Arca Equities would be made up of no 
less than three but no more than five individuals.\29\
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    \29\ NYSE Arca Equities Rule 3.3(a)(1) currently provides that 
the Board of Directors will determine the size of any Appeals 
Committee that it appoints.
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    A CFR Appeals Panel reviewing matters related to the equities 
market would conduct reviews of matters subject to the applicable 
provisions of Rules 3.2(b)(1)(C), 5 or 10.\30\ As proposed, CFR Appeals 
Panels for NYSE Arca Equities would have no other role in the appellate 
process. Each CFR Appeals Panel would contain at least one Public 
Director and at least one director that is an ETP Holder or Allied 
Person or Associated Person of an ETP Holder.
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    \30\ See note 17, supra.
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    Outdated references to the NYSE Arca Board of Governors in NYSE 
Arca Equities Rules 3.3(a)(1)(B) would be replaced with references to 
the ``NYSE Arca Board of Directors.'' The current Rule would otherwise 
remain unchanged. The revised provision would thus provide that, 
subject to Rule 10, decisions of the CFR shall be subject to the review 
of the SRO Board and that the decision of the SRO Board would 
constitute the final action of NYSE Arca Equities, unless such SRO 
Board remands the proceedings.
    Conforming amendments to NYSE Arca Equities Rules 2.3, 5.5, 10.3, 
10.6, 10.8, 10.11,\31\ 10.12, and 10.13 \32\ to replace references to 
the NYSE Arca Equities BAC with references to the ``Committee for 
Review'' or ``CFR'' and to replace references to the ``Appeals Panel'' 
with the ``CFR Appeals Panel'' are also proposed. Outdated references

[[Page 21618]]

to the NYSE Arca Board of Governors in NYSE Arca Equities Rules 10.3, 
10.12, and 10.13 would also be replaced with references to the ``NYSE 
Arca Board of Directors.''
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    \31\ NYSE Arca Equities Rule 10.11(e)(1) currently provides that 
appellate review of Floor citations and minor rule plan sanctions 
shall be referred directly to an appropriate Board Appeals Committee 
Panel (defined as an ``Appeals Panel'') appointed by the Board 
Appeals Committee. Current NYSE Arca Equities Rule 10.11(e)(2) 
governs decisions by such Appeals Panels. The Exchange proposes to 
replace ``an appropriate Board Appeals Committee Panel (`Appeals 
Panel') appointed by the Board Appeals Committee'' in NYSE Arca 
Equities Rule 10.11(e)(1) with ``CFR.'' The Exchange believes that 
it would be more appropriate for such matters to be directly 
referred to the CFR, which can then determine whether to appoint a 
CFR Appeals Panel as is currently proposed for disciplinary appeals 
under NYSE Arca Equities Rule 10.8(b). Accordingly, the Exchange 
proposes to add text to NYSE Arca Equities Rule 10.11(e)(2) 
providing that the CFR may appoint a CFR Appeals Panel to conduct 
reviews under this subsection or may decide to conduct review 
proceedings on its own. A reference to ``Appeals Panel'' and two 
references to ``Appeals Board'' would be replaced with ``CFR or CFR 
Appeals Panel.'' See also note 28, supra.
    \32\ The Exchange also proposes to amend the heading of NYSE 
Arca Equities Rule 10.13 to delete the references to ``the 
Corporation,'' which refers to NYSE Arca Equities, since the 
hearings and review of decisions referred to therein would be 
conducted by the CFR, a subcommittee of the SRO Board.
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Committees
    The Exchange does not propose to retain the OTP Advisory Committee 
of NYSE Arca or the Member Advisory Committee of NYSE Arca Equities to 
act in an advisory capacity regarding disciplinary matters and trading 
rules for their respective marketplaces. Under NYSE Arca Rule 
3.2(b)(3), which the Exchange proposes to delete, the OTP Advisory 
Committee is made up of OTP Holders and acts in an advisory capacity 
regarding rule changes related to disciplinary matters and trading 
rules. Under NYSE Arca Equities Rule 3.2(b)(3), which the Exchange also 
proposes to delete, the Member Advisory Committee is made up of ETP 
Holders and acts in an advisory capacity regarding rule changes related 
to disciplinary matters and off-board trading rules.
    The Exchange proposes that the CFR would serve in the same advisory 
capacity as the current OTP Advisory and Member Advisory Committees. 
The Exchange notes that the same categories of permit holders as the 
advisory committees would be represented on the proposed CFR, whose 
mandate as set forth in proposed Rule 3.3(a)(2)(A) would include acting 
in an advisory capacity to the Board with respect to disciplinary 
matters, the listing and delisting of securities, regulatory programs, 
rulemaking and regulatory rules, including trading rules. The proposed 
CFR would therefore serve in the same advisory capacity as the OTP 
Advisory and Member Advisory Committees. The Exchange accordingly 
believes that retaining the OTP Advisory Committee or Member Advisory 
Committee would be redundant and unnecessary. The Exchange notes that 
the proposal is consistent with the structure recently approved for the 
NYSE, which abolished its advisory committees and transferred the 
functions to the newly created NYSE CFR, whose mandate includes acting 
in an advisory capacity to the Board with respect to disciplinary 
matters, the listing and delisting of securities, regulatory programs, 
rulemaking and regulatory rules, including trading rules. The 
Exchange's affiliate NYSE MKT has a similar structure in place.\33\ The 
proposal would therefore align the functions and responsibilities of 
the Exchange's CFR with those of its affiliates. Finally, the Exchange 
believes that member participation on the proposed CFR would be 
sufficient to provide for the fair representation of members in the 
administration of the affairs of the Exchange, including rulemaking and 
the disciplinary process, consistent with Section 6(b)(3) of the 
Exchange Act.\34\
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    \33\ See NYSE Approval Order, 80 FR at 59840 & NYSE MKT Approval 
Order, 81 FR at 6312.
    \34\ See 15 U.S.C. 78f(b)(3). See also note 26, supra.
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Deletion of References to NYSE Regulation and NYSE Regulation Chief 
Executive Officer
    In connection with the Exchange's termination of the intercompany 
RSA pursuant to which NYSE Regulation provided regulatory services to 
the Exchange,\35\ the Exchange proposes to amend NYSE Arca and NYSE 
Arca Equities Rule 0 and NYSE Arca Equities Rule 5.3(i)(1) to remove 
references to ``NYSE Regulation, Inc.'' and ``NYSE Regulation.'' The 
Exchange also proposes to amend NYSE Arca Equities Rule 2.100 to 
replace a reference to ``NYSE Regulation, Inc. Chief Executive 
Officer'' with ``Chief Regulatory Officer.''
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    \35\ See note 5, supra.
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    In particular, NYSE Arca Rule 0 (Regulation of the Exchange, OTP 
Holders and OTP Firms) and NYSE Arca Equities Rule 0 (Regulation of the 
Exchange and Exchange Trading Permit Holders), which describes the 
regulatory services agreement between the NYSE and FINRA, would be 
amended to remove references to ``NYSE Regulation, Inc., NYSE 
Regulation staff or departments'', retaining the existing reference in 
Rule 0 to Exchange staff, which reference would encompass the 
Exchange's regulatory staff.\36\
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    \36\ The Exchange also proposes to delete the semi-colon at the 
end of the heading of Rule 0 as unnecessary.
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    Similarly, subdivision (i)(1) of NYSE Arca Equities Rule 5.3 
(Financial Reports and Related Notices) would be amended to replace the 
reference to ``NYSE Regulation'' with ``regulatory staff'' to more 
particularly describe who an issuer should consult with under the Rule.
    Finally, the Exchange proposes to amend NYSE Arca Equities Rule 
2.100 to replace ``NYSE Regulation, Inc. Chief Executive Officer'' with 
``Chief Regulatory Officer.'' NYSE Arca Equities Rule 2.100 currently 
provides that, for purposes of the rule,\37\ a ``qualified Corporation 
officer'' means the Chief Executive Officer of Intercontinental 
Exchange, Inc., or his or her designee, or the NYSE Regulation, Inc. 
Chief Executive Officer or his or her designee. ``NYSE Regulation, Inc. 
Chief Executive Officer'' is used in this Rule but CRO or Chief 
Regulatory Officer is used elsewhere in the Exchange's rules to 
designate the same position.\38\ In particular, Chief Regulatory 
Officer is used to designate the individual who can participate or 
designate participants to various panels, including panels adjudicating 
clearly erroneous transactions (NYSE Arca Equities 7.10) and ETP 
Holders disputing an NYSE Arca Equities decision to disapprove or 
disqualify it from the participating in the Retail Liquidity Program 
(NYSE Arca Equities Rule 7.44). Chief Regulatory Officer is also used 
in NYSE Arca's Rules to designate the individual who can participate or 
designate participants to panels adjudicating erroneous trades due to 
system disruptions or malfunctions (NYSE Arca Rule 6.89) and 
nullification and adjustment of options transactions, including obvious 
errors (NYSE Arca Rule 6.87). Accordingly, the Exchange proposes to 
replace references to ``NYSE Regulation, Inc. Chief Executive Officer'' 
with ``Chief Regulatory Officer'' in Rule 2.100.
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    \37\ NYSE Arca Equities Rule 2.100 provides that if a qualified 
Affiliated Exchange (as defined therein) officer declares an 
emergency condition under that market's rules, a qualified NYSE Arca 
Equities officer may authorize NYSE Arca Equities to perform certain 
functions on behalf of the Affiliated Exchange.
    \38\ See, e.g., NYSE Arca Rules 6.89 & 6.87 and NYSE Arca 
Equities Rules 7.10 & 7.44.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act \39\ in general, and with Section 
6(b)(1) \40\ in particular, in that it enables the Exchange to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Exchange Act and to comply, and to enforce compliance by its 
exchange members and persons associated with its exchange members, with 
the provisions of the Exchange Act, the rules and regulations 
thereunder, and the rules of the Exchange.
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    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(1).
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    The proposal to amend Section 4.01(a) of the NYSE Arca Bylaws and 
NYSE Arca and NYSE Arca Equities Rules 3.3 to establish a Committee for 
Review as a sub-committee of the recently approved ROC, and to delete 
NYSE Arca Rule 3.2(b)(3) governing the OTP Advisory Committee and NYSE 
Arca Equities Rule 3.2(b)(3) governing the Member Advisory Committee, 
both of whose functions will be assumed by the Committee for Review, 
complies with Section 6(b)(7) of the Exchange

[[Page 21619]]

Act,\41\ which requires that the rules of a national securities 
exchange provide a fair procedure for the disciplining of members and 
persons associated with members. The members of the Exchange's ROC are 
all Public Directors of the Exchange Board, thereby ensuring that the 
ROC is comprised of independent members.\42\ The Exchange proposes to 
retain in the CFR the requirement currently applicable to the Board 
Appeals Committee that the committee be made up of the OTP Director(s), 
the ETP Director(s) and the Public Directors of both markets.
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    \41\ See 15 U.S.C. 78f(b)(7).
    \42\ See Release No. 75155, 80 FR at 34744.
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    Further, the Exchange believes that permitting the CFR to appoint 
CFR Appeals Panels composed of at least three and no more than five 
individuals to conduct reviews of matters decided by the EBCC and BCC 
for the options and equities marketplaces is consistent with Section 
6(b)(7) of the Exchange Act. CFR Appeals Panels for NYSE Arca would 
contain at least one Public Director and at least one Director that is 
an OTP Holder or Allied Person or Associated Person of an OTP Firm, and 
CFR Appeals Panels for NYSE Arca Equities would contain at least one 
Public Director and at least one director that is an ETP Holder or 
Allied Person or Associated Person of an ETP Holder. The Exchange 
believes that the role of the CFR Appeals Panels, including that the 
CFR would retain authority to determine the disposition of appeals, 
would ensure that the Exchange's rules provide a fair procedure for the 
disciplining of members and persons associated with members. In 
addition, for the reasons stated below, the Exchange believes that 
participation on the proposed CFR and CFR Appeals Panels of permit 
holders and persons allied or associated with permit holders would be 
sufficient to provide for the fair representation of members in the 
administration of the affairs of the Exchange, including rulemaking and 
the disciplinary process, consistent with Section 6(b)(3) of the 
Exchange Act.
    The Exchange believes that having the Exchange Board, rather than 
the board of directors of its subsidiary NYSE Arca Equities, appoint 
the members of the appeals panel for the equities marketplace complies 
with Section 6(b)(7) of the Exchange Act. The Exchange is the entity 
with ultimate legal responsibility for the regulation of its permit 
holders and markets. As noted, under the proposal, the CFR would 
consist of the OTP Director(s), the ETP Director(s) and the Public 
Directors, thereby ensuring that CFR Appeals Panels named for the 
equities marketplace would consist of at least one Public Director and 
at least one director that is an ETP Holder or Allied Person or 
Associated Person of an ETP Holder.
    The Exchange believes that having the CFR serve in the advisory 
capacity of the OTP Advisory Committee and Member Advisory Committee 
for the Exchange's options and equities marketplaces, respectively, is 
consistent with and facilitates a governance and regulatory structure 
that furthers the objectives of Section 6(b)(5) of the Exchange 
Act.\43\ The Exchange believes that permit holder participation on the 
proposed CFR would be sufficient to provide for the fair representation 
of members in the administration of the affairs of the Exchange, 
including rulemaking and the disciplinary process, consistent with 
Section 6(b)(3) of the Exchange Act.
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    \43\ 15 U.S.C. 78f(b)(5). Section 6(b)(5) of the Exchange Act 
requires the proposed rules to be consistent with and facilitate a 
governance and regulatory structure that 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 regulating, clearing, settling, 
processing information with respect to, and facilitating 
transactions in securities, 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.
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    The Exchange believes that deleting the reference to the ``NYSE 
Regulation, Inc. Chief Executive Officer'' in NYSE Arca Equities Rule 
2.100 and replacing it with Chief Regulatory Officer, which is used 
throughout the Exchange's rules, removes impediments to and perfects a 
national market system because it would reduce potential confusion that 
may result from retaining different designations for the same 
individual in the Exchange's rulebook. Removing potentially confusing 
conflicting designations would also further the goal of transparency 
and add consistency to the Exchange's rules.
    Finally, making conforming amendments to NYSE Arca Rules 2.4, 10.3, 
10.6, 10.8, 10.11, 10.12, 10.14 and NYSE Arca Equities Rules 2.3, 5.5, 
10.3, 10.6, 10.8, 10.11, 10.12, and 10.13 in connection with creation 
of the proposed CFR removes impediments to and perfects the mechanism 
of a free and open market by removing confusion that may result from 
having obsolete references in the Exchange's rulebook. Deleting 
references to ``NYSE Regulation, Inc.'' and ``NYSE Regulation'' in NYSE 
Arca and NYSE Arca Equities Rule 0 and NYSE Arca Equities Rule 
5.3(i)(1) and references to the ``NYSE Arca Board of Governors'' in 
NYSE Arca Equities Rules 3.3, 10.3, 10.12 and 10.13 removes impediments 
to and perfects the mechanism of a free and open market by removing 
confusion that may result from having obsolete references in the 
Exchange's rulebook. The Exchange further believes that the proposal 
removes impediments to and perfects the mechanism of a free and open 
market by ensuring that persons subject to the Exchange's jurisdiction, 
regulators, and the investing public can more easily navigate and 
understand the Exchange's rulebook. The Exchange believes that 
eliminating obsolete references would not be inconsistent with the 
public interest and the protection of investors because investors will 
not be harmed and in fact would benefit from increased transparency, 
thereby reducing potential confusion. Removing such obsolete references 
will also further the goal of transparency and add clarity to the 
Exchange's rules.

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 Exchange Act. The proposed rule 
change is not intended to address competitive issues but rather is 
concerned solely with the administration and functioning of the 
Exchange and its board of directors.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 21620]]

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-2016-11 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-2016-11. 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 should refer to File Number SR-NYSEArca-2016-11, and should 
be submitted on or before May 3, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
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    \44\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08299 Filed 4-11-16; 8:45 am]
BILLING CODE 8011-01-P


