
[Federal Register Volume 82, Number 115 (Friday, June 16, 2017)]
[Notices]
[Pages 27736-27738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12454]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80902; File No. SR-NYSEMKT-2017-35]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Extend the 
Exchange's Authority To Grant Exemptions From the OATS Requirements

June 12, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 2, 2017, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 
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 Exchange. 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\ 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 7470--Equities (Exemption to 
the Order Recording and Data Transmission Requirements) to extend until 
November 15, 2019 the ability to exempt certain members from the 
recording and order data transmission requirements of Rules 7440--
Equities and 7450--Equities, respectively, for manual orders. 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.

[[Page 27737]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange's Rule 7400 Series consists of Rules 7410--Equities 
through 7470--Equities and sets forth the recording and reporting 
requirements of the Order Audit Trail System (``OATS'') Rules. The OATS 
Rules require all Exchange member organizations and associated persons 
to record in electronic form and report to the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), on a daily basis, certain 
information with respect to orders originated, received, transmitted, 
modified, canceled, or executed by members in all NMS stocks, as that 
term is defined in Rule 600(b)(47) of Regulation NMS,\3\ traded on the 
Exchange. This information is used by FINRA staff to conduct 
surveillance and investigations of member firms for violations of FINRA 
rules and federal securities laws. Rule 7470--Equities provide the 
Exchange with the authority to exempt certain members from the 
recording and reporting requirements and from the recording and order 
data transmission requirements of Rules 7440--Equities and 7450--
Equities, respectively, for manual orders, if such exemption is 
consistent with the protection of investors and the public interest, 
and the member organization meets the criteria set forth in paragraph 
(a) of the Rule.\4\
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    \3\ 17 CFR 242.600(b)(47).
    \4\ The criteria are as follows: (1) The member organization and 
current control affiliates and associated persons have not been 
subject within the last five years to any final disciplinary action, 
and within the last ten years to any disciplinary action involving 
fraud; (2) the member organization has annual revenues of less than 
$2 million; (3) the member organization does not conduct any market 
making activities in NMS stocks; (4) the member organization does 
not execute principal transactions with its customers (with limited 
exception for principal transactions executed pursuant to error 
corrections); and (5) the member organization does not conduct 
clearing or carrying activities for other firms.
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    Rule 7470--Equities contains a sunset provision, which was July 10, 
2015. In June 2015, FINRA filed a proposed rule change to extend the 
sunset provision until July 10, 2019.\5\ The Exchange proposes to amend 
Rule 7470 to extend the provision until November 15, 2019. The proposed 
change would correct an oversight in not filing when the sunset 
provision [sic] in 2015.
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    \5\ See Securities Exchange Act Release No. 75160 (June 11, 
2015), 80 FR 34727 (June 17, 2015) (SR-FINRA-2015-016).
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    The Exchange believes it would be appropriate to extend the sunset 
provision in Rule 7470--Equities to November 15, 2019 rather than the 
July 10, 2019 date in the FINRA Rule. At the time FINRA filed its 
proposed rule change, the National Market System Plan Governing the 
Consolidated Audit Trail (the ``CAT NMS Plan'') \6\ had not been 
approved by the Commission. The CAT NMS Plan was approved by the 
Commission, as modified, on November 15, 2016.\7\ On March 21, 2017, 
the Commission approved the Exchange's new Rule 6800 Series to 
implement provisions of the CAT NMS Plan that are applicable to 
Exchange member organizations.\8\ Rule 6895(c)(2) requires each 
Industry Member that is a Small Industry Member to record and report 
the Industry Member Data to the Central Repository by November 15, 
2019.
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    \6\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
    \7\ Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (Order Approving the National 
Market System Plan Governing the Consolidated Audit Trail).
    \8\ See Securities Exchange Act Release No. 80256 (March 15, 
2017), 82 FR 14526 (March 21, 2017) (SR-NYSEMKT-2017-02) (Order 
Approving Proposed Rule Changes to Adopt Consolidated Audit Trail 
Compliance Rules).
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    The Exchange believes that extending the sunset provision in Rule 
7470 to the same date that all Small Industry Members must report to 
the CAT is appropriate and would permit such firms relying on the 
exemption to continue to do so provided they meet the criteria to 
qualify until that time. The Exchange is not proposing any substantive 
changes to the criteria necessary for firms to qualify for an exemption 
and notes that all of those member organizations currently reporting to 
OATS or relying on an exemption from OATS reporting will be reporting 
to the CAT by November 15, 2019.\9\
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    \9\ Rule 6895(c)(1) requires each Industry Member (other than a 
Small Industry Member) to record and report the Industry Member Data 
to the Central Repository by November 15, 2018.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, because 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, 
and, in general to protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that amending Rule 7470--
Equities to extend until November 15, 2019 the ability to exempt 
certain members from the recording and order data transmission 
requirements of Rules 7440--Equities and 7450--Equities, respectively, 
for manual orders, is consistent with Section 6(b)(5) of the Act \12\ 
because it would enable the Exchange to exempt manual orders received 
by certain small firms from the OATS Rules and avoid imposing 
potentially unnecessary expense or hardship on those firms that qualify 
for the exemption as they transition to reporting order information to 
the CAT Central Repository. As noted, the proposed sunset provision is 
the same date that all Small Industry Members must report to the CAT. 
Further, the Exchange is not proposing any substantive changes to the 
criteria necessary for firms to qualify for an exemption, which will 
continue to ensure that only those firms with limited revenue, no 
recent final disciplinary actions, and limited business models will 
remain eligible for the exemption. The Exchange accordingly believes 
that the proposed rule change is consistent with the protection of 
investors and the public interest.
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    \12\ 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. The proposed change is not 
designed to address any competitive issue but rather, as noted above, 
would enable the Exchange to exempt manual orders received by certain 
small firms from the OATS reporting requirements through November 15, 
2019, the same date that all Small Industry Members must report to the 
CAT, and thereby avoid imposing potentially unnecessary expense or 
hardship on those firms that qualify for the exemption as they 
transition to reporting order information to the CAT Central 
Repository.

[[Page 27738]]

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 \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the 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 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
provide the Commission with 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 complied with this 
requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposed rule change will become operative 
immediately upon filing. In support of its request, the Exchange stated 
that waiver of the operative delay would continue to enable the 
Exchange to grant small firms exemptions from the OATS requirements as 
those firms are preparing to report information to the CAT Central 
Repository, thereby avoiding potentially unnecessary expense or 
hardship on firms that qualify for the exemption.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Absent such action, a small firm that otherwise would qualify for an 
exemption would have to comply with the Exchange requirements to record 
and report manual orders to OATS because the Exchange would not have 
the authority to grant an exemption during the 30-day pre-operative 
period. The Commission agrees with the Exchange that waiving the 30-day 
operative delay would enable the Exchange, in appropriate cases, to 
prevent unnecessary expense being imposed on small firms. Therefore, 
the Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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) of the Act \17\ 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-NYSEMKT-2017-35 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-NYSEMKT-2017-35. 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 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-NYSEMKT-2017-35 and should 
be submitted on or before July 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-12454 Filed 6-15-17; 8:45 am]
 BILLING CODE 8011-01-P


