Notice2022-24892
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add Violations of Rule 2.1210 to the Exchange's Minor Rule Violation Plan for the Equities and Options Markets
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Published
November 16, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 220 (Wednesday, November 16, 2022)</title>
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[Federal Register Volume 87, Number 220 (Wednesday, November 16, 2022)]
[Notices]
[Pages 68771-68774]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24892]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96289; File No. SR-NYSEArca-2022-72]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of a Proposed Rule Change To
Add Violations of Rule 2.1210 to the Exchange's Minor Rule Violation
Plan for the Equities and Options Markets
November 9, 2022.
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 October 26, 2022, NYSE Arca, Inc. (``NYSE Arca'' 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 Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons and approving the proposal on an
accelerated basis.
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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 (1) add Rule 2.1210 to the list of minor
rule violations in Rule 10.9217 for both the equities and options
markets, and (2) make certain non-substantive clarifying changes to
Rule 10.9217. The proposed change is available on the Exchange's
website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 III 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 (1) add Rule 2.1210 (Registration
Requirements) to the list of minor rule violations in Rule 10.9217 for
both the equities and options markets, and (2) make certain non-
substantive clarifying changes to Rule 10.9217.
Addition of Rule 2.1210 to the List of Rules Eligible for a Minor Fine
Rule 10.9217 sets forth the list of rules under which a ETP Holder,
OTP Holder or OTP Firm or covered person may be subject to a fine under
a minor rule violation plan as described in Rule 10.9216(b) for both
its equities and options markets.
Rule 2.1210, which was adopted in 2018,\4\ sets forth the
requirements for persons engaged in the investment banking or
securities business of an ETP Holder, OTP Holder or OTP Firm to be
registered with the Exchange as a representative or principal in each
category of registration appropriate to his or her functions and
responsibilities as specified in Rule 2.1220.
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\4\ See Securities Exchange Act Release No. 84389 (October 10,
2018), 83 FR 52272 (October 16, 2018) (SR-NYSEArca-2018-71) (Notice
of Filing and Immediate Effectiveness of Amendments to Rules
Regarding Qualification, Registration and Continuing Education
Applicable to Equity Trading Permit Holders, Options Trading Permit
Holders or OTP Firms).
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The Exchange proposes to add Rule 2.1210 to the list of rules in
Rule 10.9217 eligible for disposition pursuant to a minor fine under
Rule 10.9216(b). Specifically, the Exchange proposes to add Rule 2.1210
to Rule 10.9217(g) as new item 13 applicable to both equities and
options permit holders. NYSE Arca Rule 2.1210 is substantially similar
to Rule 1210 adopted by the Exchange's affiliate New York Stock
Exchange LLC (``NYSE'') in 2018 \5\ which is currently eligible for
minor rule fines under the NYSE's version of Rule 10.9217.\6\ The
Exchange believes that having the ability to issue a minor rule fine
for failing to comply with the registration requirements of Rule 2.1210
would be consistent with and complement the Exchange's current ability
to issue minor rule fines for other registration violations (e.g., Rule
2.24 (Registration--Employees of ETP Holders)). The Exchange further
believes that the violations of the registration requirements are
particularly suited to minor rule fines because minor fines provide a
reasonable means of addressing violations that do not rise to the level
of requiring formal disciplinary proceedings, while providing greater
flexibility in handling certain violations.
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\5\ See Securities Exchange Act Release No. 84336 (October 2,
2018), 83 FR 50727 (October 9, 2018) (SR-NYSE-2018-44) (Notice of
Filing and Immediate Effectiveness of Amendments To Rules Regarding
Qualification, Registration and Continuing Education Applicable to
Members and Member Organizations).
\6\ See NYSE Rule 9217. See generally Securities Exchange Act
Release No. 87212 (October 3, 2019), 84 FR 54193 (October 9, 2019)
(SR-NYSE-2019-44) (Order Granting Approval of a Proposed Rule
Change, as Modified by Amendment No. 1, To Add Certain Rules to the
List of Minor Rule Violations in Rule 9217, Delete Obsolete Rules,
and Increase the Maximum Fine for Minor Rule Violations).
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The Exchange further proposes to add fine levels for violations of
Rule 2.1210 to both the equities and the options fine schedules. First,
the Exchange would add proposed first, second and third level fines for
violations of Rule 2.1210 to the options fine schedule as proposed Rule
10.9217(h)(iii)(12) of $1,000 for the first violation, $2,500 for the
second violation and $3,500 for the third and subsequent violations.
The proposed fine levels would be the same as those in the Exchange's
current Rule 10.9217(h)(iii)(11) for violations of Rule 2.23. Second,
the Exchange would add proposed first, second and third level fines for
violations of Rule 2.1210 to the equities fine schedule as proposed
Rule 10.9217(i)(2)(12) of $1,000 for the first violation, $2,500 for
the second violation and $3,500 for the third and subsequent
violations. The proposed fine levels would be the same as those in the
Exchange's current Rule 10.9217(i)(2)(11) for violations of Rule 2.24.
The Exchange believes that the proposed change would strengthen the
[[Page 68772]]
Exchange's ability to carry out its oversight and enforcement
responsibilities in cases where full disciplinary proceedings are
unwarranted in view of the minor nature of the particular violation.
Non-Substantive Clarifying Changes to Rule 10.9217
The Exchange proposes the following non-substantive clarifying
changes to Rule 10.9217.
First, the Exchange proposes to correct a typographical error in
Rule 10.9217(h)(i)(23). Rule 10.9217(h)(i)(23) sets forth the proposed
fine levels for violations of the rule governing reporting of options
positions. Rule 10.9217(h)(i)(23), however, refers to Rule 6.4-O(a)
(Series of Options Open for Trading) and not Rule 6.6-O(a), which
governs reporting of options positions, which is correctly referred to
in Rule 10.9217(e)(23). The Exchange accordingly proposes to correct
the error.
Second, the Exchange proposes to add clarifying language regarding
the disposition of minor rule fines for violations of the CAT
Compliance Rules in the Rule 11.6800 Series based on language adopted
by the Exchange's affiliates. Specifically, the Exchange would add a
new footnote 4 to current Rule 10.9217(h)(iii)(13) and a new footnote 3
to current Rule 10.9217(i)(2)(14) (governing minor rule fine levels of
the options and equities markets, respectively) that would provide as
follows:
For failures to comply with the Consolidated Audit Trail
Compliance Rule requirements of the Rule 11.6800 Series, the
Exchange may impose a minor rule violation fine of up to $2,500. For
more serious violations, other disciplinary action may be sought.
The language is identical to that adopted by the Exchange's
affiliates NYSE and NYSE Chicago, Inc.\7\ In addition, ``Up to
$2,500.00'' would be deleted from current Rule 10.9217(i)(2)(14) and
10.9217(h)(iii)(13) as redundant of proposed footnote 3. The proposed
change is not intended to make a substantive change. Violations of the
CAT Compliance Rules are currently eligible for minor rule fines and
$2,500 is currently the maximum eligible fine.
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\7\ See NYSE Rule 9217(d) (``For failures to comply with the
Consolidated Audit Trail Compliance Rule requirements of the Rule
6800 Series, the Exchange may impose a minor rule violation fine of
up to $2,500. For more serious violations, other disciplinary action
may be sought.''); NYSE Chicago Rule 10.9217(f), n. ** (same).
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Third, the Exchange would add a missing footnote number ``2'' to
the end of Rule 10.9217(i)(2)(11), governing failure to comply with the
employee registration or other requirements of Rule 2.24. The numbered
footnote text appears in the rule, but the footnote number was
inadvertently omitted from Rule 10.9217(i)(2)(11).
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\8\ in general, and furthers the objectives of Section 6(b)(5),\9\
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, 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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Minor rule fines provide a meaningful sanction for minor or
technical violations of rules when the conduct at issue does not
warrant stronger, immediately reportable disciplinary sanctions. The
inclusion of a rule in Rule 10.9217 does not minimize the importance of
compliance with the rule, nor does it preclude the Exchange from
choosing to pursue violations of eligible rules through formal
disciplinary action if the nature of the violations or prior
disciplinary history warrants more significant sanctions. Rather, the
Exchange believes that the proposed rule change will strengthen the
Exchange's ability to carry out its oversight and enforcement
responsibilities in cases where full disciplinary proceedings are
unwarranted in view of the minor nature of the particular violation.
The option to impose a minor rule sanction gives the Exchange
additional flexibility to administer its enforcement program in the
most effective and efficient manner while still fully meeting the
Exchange's remedial objectives in addressing violative conduct. The
proposed rule change is thus designed to prevent fraudulent and
manipulative acts and practices because it will provide the Exchange
the ability to issue a minor rule fine for violations of the
registration requirements set forth in Rule 2.1210 where a more formal
disciplinary action may not be warranted or appropriate. In addition,
the Exchange believes that adding rules based on the rules of its
affiliate to the Exchange's minor rule plan, and adding associated fine
levels based on current treatment of violations of its registration
rules, would promote fairness and consistency in the marketplace by
permitting the Exchange to issue a minor rule fine for violations of
substantially similar rules that are already eligible for minor rule
treatment, thereby harmonizing minor rule plan fines across affiliated
exchanges for the same conduct.
The Exchange further believes that the proposed amendments to Rule
10.9217 are consistent with Section 6(b)(6) of the Act,\10\ which
provides that members and persons associated with members shall be
appropriately disciplined for violation of the provisions of the Act,
the rules and regulations thereunder and the rules of the exchange, by
expulsion, suspension, limitation of activities, functions, and
operations, fine, censure, being suspended or barred from being
associated with a member, or any other fitting sanction. As noted, the
proposed rule change would provide the Exchange ability to sanction
minor or technical violations of proposed Rule 2.1210 pursuant to the
Exchange's rules. Finally, the Exchange also believes that the proposed
changes are designed to provide a fair procedure for the disciplining
of members and persons associated with members, consistent with
Sections 6(b)(7) and 6(d) of the Act.\11\ Rule 10.9217 does not
preclude an ETP Holder, OTP Holder or OTP Firm or covered person from
contesting an alleged violation and receiving a hearing on the matter
with procedural rights through a litigated disciplinary proceeding.
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\10\ 15 U.S.C. 78f(b)(6).
\11\ 15 U.S.C. 78f(b)(7) and 78f(d).
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In addition, the Exchange believes that the proposed non-
substantive clarifying changes described above to correct a
typographical error, add clarifying language regarding the disposition
of minor rule fines for violations of the CAT Compliance Rules in the
Rule 11.6800 Series based on language adopted by the Exchange's
affiliates, and to insert a missing footnote number would add clarity
and consistency to the Exchange's rules. The Exchange believes that
adding such clarity would also be consistent with the public interest
and the protection of investors because investors will not be harmed
and in fact would benefit from increased clarity, thereby reducing
potential confusion. In addition, the Exchange believes that
incorporating language relating to violations of the CAT Compliance
Rules adopted by the Exchange's affiliates would promote fairness and
consistency in the marketplace by eliminating differences and
harmonizing language related to
[[Page 68773]]
minor rule treatment of similar rule violations across affiliates. The
proposed change is not intended to make any substantive change to the
applicability of minor rule fines to violations of the CAT Compliance
Rules or the amount of those fines.
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 to update the
Exchange's rules to strengthen the Exchange's ability to carry out its
oversight and enforcement functions and deter potential violative
conduct.
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. 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#98eaedf4fdb5fbf7f5f5fdf6ecebd8ebfdfbb6fff7ee"><span class="__cf_email__" data-cfemail="6614130a034b05090b0b030812152615030548010910">[email protected]</span></a>. Please include
File Number SR-NYSEArca-2022-72 on the subject line.
Paper Comments
<bullet> 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-2022-72. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2022-72 and should be submitted
on or before December 8, 2022.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\12\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\13\ which requires that the
rules of an exchange be designed to promote just and equitable
principles of trade, to remove impediments and to perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. The Commission
also believes that the proposal is consistent with Sections 6(b)(1) and
6(b)(6) of the Act \14\ which require that the rules of an exchange
enforce compliance with, and provide appropriate discipline for,
violations of Commission and Exchange rules. Finally, the Commission
finds that the proposal is consistent with the public interest, the
protection of investors, or otherwise in furtherance of the purposes of
the Act, as required by Rule 19d-1(c)(2) under the Act,\15\ which
governs minor rule violation plans.
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\12\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\15\ 17 CFR 240.19d-1(c)(2).
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As stated above, the Exchange proposes to amend Rule 10.9217 by:
(1) adding Rule 2.1210 (Registration Requirements) to the list of minor
rule violations, including in the fine schedules, for both the equities
and options markets; and (2) making other clarifying and non-
substantive changes.
The Commission believes that Rules 10.9216(b) and 10.9217 are an
effective way to discipline a member for a minor violation of a rule.
More specifically, the Commission believes that the proposed addition
of Rule 2.1210 (Registration Requirements) to the Exchange's list of
current minor rule violations provides a reasonable means of addressing
violations that do not rise to the level of requiring formal
disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission also believes that amending
the associated fine schedule is consistent with the Act because it may
help the Exchange's ability to better carry out its oversight and
enforcement responsibilities by levying appropriate fines for minor
violations of the rules included in Rule 10.9217, including minor
violations of Rule 2.1210. Finally, the Commission believes that the
Exchange's proposal to make certain non-substantive changes to Rule
10.9217 are consistent with the Act because these changes will add
clarity to the Exchange's rules.
In approving the proposed rule change, the Commission in no way
minimizes the importance of compliance with the Exchange's rules and
all other rules subject to fines under Rules 10.9216(b) and 10.9217.
The Commission believes that a violation of any self-regulatory
organization's rules, as well as Commission rules, is a serious matter.
However, Rules 10.9216(b) and 10.9217 provide a reasonable means of
addressing rule violations that may not rise to the level of requiring
formal disciplinary proceedings, while providing greater flexibility in
handling certain violations. The Commission expects that the Exchange
will continue to conduct surveillance with due diligence and make a
determination based on its findings, on a case-by-case basis, whether a
fine of more or less than the recommended amount is appropriate for a
violation under Rules 10.9216(b) and 10.9217 or whether a violation
requires formal disciplinary action.
For the same reasons as discussed above, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\16\ for approving the
proposed rule change prior to the thirtieth day after the date of
publication of the notice of the filing thereof in the Federal
Register. The proposal will
[[Page 68774]]
assist the Exchange in preventing fraudulent and manipulative practices
by allowing the Exchange to adequately enforce compliance with, and
provide appropriate discipline for, violations of Exchange rules.
Moreover, the proposed changes raise no new or novel issues.
Accordingly, the Commission believes that a full notice-and-comment
period is not necessary before approving the proposal.
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\16\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\17\ and Rule 19d-1(c)(2) thereunder,\18\ that the proposed rule change
(SR-NYSEArca-2022-72) be, and hereby is, approved on an accelerated
basis.
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\17\ 15 U.S.C. 78s(b)(2).
\18\ 17 CFR 240.19d-1(c)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-24892 Filed 11-15-22; 8:45 am]
BILLING CODE 8011-01-P
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