80 FR 76595 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rules 7.44 and 7.44P To Distinguish Between Retail Orders Routed on Behalf of Other Broker-Dealers and Retail Orders That are Routed on Behalf of Introduced Retail Accounts That are Carried on a Fully Disclosed Basis
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 236 (December 9, 2015)
Federal Register Volume 80, Issue 236 (December 9, 2015)
| Page Range | 76595-76598 | |
| FR Document | 2015-30940 |
[Federal Register Volume 80, Number 236 (Wednesday, December 9, 2015)] [Notices] [Pages 76595-76598] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-30940] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76549; File No. SR-NYSEArca-2015-115] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rules 7.44 and 7.44P To Distinguish Between Retail Orders Routed on Behalf of Other Broker-Dealers and Retail Orders That are Routed on Behalf of Introduced Retail Accounts That are Carried on a Fully Disclosed Basis December 3, 2015. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on November 19, 2015, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- [[Page 76596]] I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rules 7.44 and 7.44P (``Retail Liquidity Program'') to distinguish between retail orders routed on behalf of other broker-dealers and retail orders that are routed on behalf of introduced retail accounts that are carried on a fully disclosed basis. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend NYSE Arca Equities Rules 7.44 and 7.44P,\4\ which govern the Exchange's Retail Liquidity Program (the ``Program''), to distinguish between orders routed on behalf of other broker-dealers and orders routed on behalf of introduced retail accounts that are carried on a fully disclosed basis, as further described below. --------------------------------------------------------------------------- \4\ The relevant portions of Rules 7.44 and 7.44P proposed to be amended have identical rule text and will be referred to collectively as ``Rule 7.44.'' --------------------------------------------------------------------------- The Exchange established the Program in an attempt to attract retail order flow to the Exchange, primarily by offering pricing incentives. Under the Program, Retail Member Organizations \5\ (``RMOs'') are permitted to submit Retail Orders,\6\ and receive rebates for added liquidity that are higher than the exchanges [sic] standard rebates for added liquidity.\7\ --------------------------------------------------------------------------- \5\ As defined in Rule 7.44(a)(2), a Retail Member Organization is an ETP Holder that has been approved by the Exchange under Rule 7.44 to submit Retail Orders. \6\ As defined in Rule 7.44(a)(3), a Retail Order is an agency order or a riskless principal order that meets the criteria of FINRA Rule 5320.03 that originates from a natural person and is submitted to the Exchange by an RMO, provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. \7\ See the Exchange's Price List, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf. --------------------------------------------------------------------------- Rule 7.44(b)(1) currently states that ``[t]o qualify as an RMO, an ETP Holder must conduct a retail business or handle retail orders on behalf of another broker-dealer.'' Rather than stating that one way to qualify as an RMO is to ``handle'' retail orders on behalf of another broker-dealer, the Exchange proposes to state that an ETP Holder may qualify as an RMO if it ``routes'' retail orders on behalf of another broker-dealer. The Exchange believes that providing routing services on behalf of other broker-dealers with retail order flow better represents the function that ETP Holders would be performing on behalf of other broker-dealers. Thus, the Exchange believes that the description would be more transparent if it referred to routing services provided to another broker-dealer with retail customers. The Exchange also proposes to distinguish such routing services on behalf of another broker-dealer from services provided by broker-dealers that carry retail customer accounts on a fully disclosed basis, as described below. As background with respect to the proposed change, the Exchange first would like to describe the terms ``introducing broker'', ``carrying firm'' or ``carrying broker-dealer'', and ``fully disclosed,'' as such terms are commonly used in the securities industry. An ``introducing'' broker-dealer is ``one that has a contractual arrangement with another firm, known as the carrying or clearing firm, under which the carrying firm agrees to perform certain services for the introducing firm. Usually, the introducing firm submits its customer accounts and customer orders to the carrying firm, which executes the orders and carries the account. The carrying firm's duties include the proper disposition of the customer funds and securities after the trade date, the custody of customer securities and funds, and the recordkeeping associated with carrying customer accounts.'' \8\ --------------------------------------------------------------------------- \8\ See Securities Exchange Act Release No. 31511 (Nov. 24, 1992), 57 FR 56973 (December 2, 1992). --------------------------------------------------------------------------- Further, a ``fully disclosed'' introducing arrangement is ``distinguished from an omnibus clearing arrangement where the clearing firm maintains one account for all the customer transactions of the introducing firm. In an omnibus relationship, the clearing firm does not know the identity of the customers of the introducing firm. In a fully disclosed clearing arrangement, the clearing firm knows the names, addresses, securities positions and other relevant data as to each customer.'' \9\ --------------------------------------------------------------------------- \9\ Id. --------------------------------------------------------------------------- With respect to a broker-dealer that is routing on behalf of another broker-dealer, the Exchange does not believe that the routing broker-dealer has sufficient information to assess whether orders are truly retail in nature, and thus, requires an RMO routing on behalf of other broker-dealers to maintain additional supervisory procedures and obtain annual attestations, as described below, in order to submit Retail Orders to the Exchange. In contrast, however, if an ETP Holder is carrying a customer account on a fully disclosed basis, then such carrying broker-dealer is required to perform certain diligence regarding such account that the Exchange believes is sufficient to assess whether a customer is a retail customer in order to submit orders on behalf of such a customer to the Exchange as a Retail Order. The carrying broker of an account typically handles orders from its retail customers that are ``introduced'' by an introducing broker. However, as noted above, in contrast to a typical routing relationship on behalf of another broker-dealer, a carrying broker obtains a significant level of information regarding each customer introduced by the introducing broker. Accordingly, the Exchange proposes to state in Rule 7.44(b)(1) that for purposes of Rule 7.44, ``conducting a retail business includes carrying retail customer accounts on a fully disclosed basis.'' Rule 7.44(b)(6) currently states, in part, that ``[i]f an RMO represents Retail Orders from another broker-dealer customer, the RMO's supervisory procedures must be reasonably designed to assure that the orders it receives from such broker-dealer customer that it designates as Retail Orders meet the definition of a Retail Order.'' This includes obtaining attestations from the other broker-dealers for whom the RMO routes. In addition to the proposed changes to Rule 7.44(b)(1) described above, the Exchange proposes to modify the language of Rule 7.44(b)(6) to again distinguish between an RMO that conducts a retail business because it carries accounts on a fully disclosed basis from an RMO that routes orders on behalf of another broker-dealer. As proposed, the additional annual written representation requirements of Rule 7.44(b)(6) would apply to an RMO that does not itself conduct a retail business [[Page 76597]] but routes Retail Orders on behalf of other broker-dealers. In turn, such additional annual written representation requirements of Rule 7.44(b)(6) would not apply to an RMO that carries retail customer accounts on a fully disclosed basis. In connection with this change, the Exchange is proposing various edits to the existing rule text so that the reference is consistently to ``other broker-dealers'' rather than ``broker-dealer customers.'' The Exchange believes that allowing an RMO that carries retail customer accounts on a fully disclosed basis to submit Retail Orders to the Exchange without obtaining attestations from broker-dealers that might introduce such accounts will encourage participation in the Program. As noted above, the Exchange believes that the carrying broker has sufficient information to itself confirm that orders are Retail Orders without such attestations. The Exchange still believes it is necessary to require the attestation by broker-dealers that route Retail Orders on behalf of other broker-dealers, because, in contrast, such broker-dealers typically do not have a relationship with the retail customer and would not be in position to confirm that such customers are in fact retail customers. 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, 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. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b). \11\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because it highlights the parties for whom additional procedures are required because they do not maintain relationships with the end customer (i.e., routing brokers) and still requires the RMO to follow such procedures to ensure that such orders qualify as Retail Orders. As proposed, however, an RMO would not be required to follow such procedures, including obtaining annual attestations, to the extent such RMO actually knows the end customer and carries the account of such customer and thus can itself confirm that the orders qualify as Retail Orders. The Exchange believes that the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system because it will allow RMOs that carry retail customer accounts to participate in the Program without imposing additional attestation requirements that the Exchange did not initially intend to impose upon them. By removing impediments to participation in the Program, the proposed change would permit expanded access of retail customers to the Program. 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 Exchange believes that the amendment, by increasing the level of participation in the Program, will increase the level of competition around retail executions. The Exchange believes that the transparency and competitiveness of operating a program such as the Program on an exchange market would result in better prices for retail investors and benefits retail investors by expanding the capabilities of Exchanges to encompass practices currently allowed on non-exchange venues. 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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 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 for 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 \14\ and Rule 19b- 4(f)(6) thereunder.\15\ --------------------------------------------------------------------------- \12\ 15 U.S.C. 78s(b)(3)(A)(iii). \13\ 17 CFR 240.19b-4(f)(6). \14\ 15 U.S.C. 78s(b)(3)(A). \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange's intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately.\18\ In requesting the waiver, the Exchange stated its belief that having harmonized requirements for RMOs across multiple exchanges with a retail program would promote competition by enabling ETP Holders to operate as RMOs on multiple exchanges in the same manner. The Commission notes that, to become an RMO, an ETP Holder would still be required under Exchange Rules 7.44(b)(2)(C) and 7.44P(b)(2)(C) to submit an attestation to the Exchange that substantially all orders submitted as Retail Orders would qualify as such under Exchange Rules 7.44 and 7.44P. Rather, the proposal would change when an RMO must obtain the annual written representation from other broker-dealers that send Retail Orders to the RMO. The Commission finds that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.\19\ --------------------------------------------------------------------------- \16\ 17 CFR 240.19b-4(f)(6). \17\ 17 CFR 240.19b-4(f)(6)(iii). \18\ The Commission notes that another national securities exchange has a similar rule for its Retail Member Organizations and that the proposal does not raise any novel regulatory issues. See Securities Exchange Act Release No. 76207 (October 21, 2015), 80 FR 65824 (October 27, 2015) (SR-BYX-2015-45). \19\ 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). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of [[Page 76598]] investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEArca-2015-115 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-2015-115. 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-2015-115 and should be submitted on or before December 30, 2015December 30, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-30940 Filed 12-8-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 236 / Wednesday, December 9, 2015 / Notices 76595
potential difficulty in the routing and (C) Self-Regulatory Organization’s printing in the Commission’s Public
executing of fractional shares.35 Statement on Comments on the Reference Room, 100 F Street NE.,
If the Commission approves the Proposed Rule Change Received From Washington, DC 20549, on official
proposed rule change, the proposed rule Members, Participants or Others business days between the hours of
change will be effective upon Written comments were neither 10:00 a.m. and 3:00 p.m. Copies of such
Commission approval and shall become solicited nor received. filing will also be available for
operative upon the commencement of inspection and copying at the principal
the Pilot Period. III. Date of Effectiveness of the office of the Exchange. All comments
Proposed Rule Change and Timing for received will be posted without change;
2. Statutory Basis Commission Action
the Commission does not edit personal
The Exchange believes that its
Within 45 days of the date of identifying information from
proposal is consistent with Section 6(b)
publication of this notice in the Federal submissions. You should submit only
of the Act 36 in general, and furthers the
Register or within such longer period (i) information that you wish to make
objectives of Section 6(b)(5) of the Act 37
as the Commission may designate up to available publicly. All submissions
in particular, in that it is designed to
90 days of such date if it finds such should refer to File No. SR–BATS–
promote just and equitable principles of
longer period to be appropriate and 2015–108 and should be submitted on
trade, to foster cooperation and
publishes its reasons for so finding or or before December 30, 2015.
coordination with persons engaged in
(ii) as to which the Exchange consents,
facilitating transactions in securities, to For the Commission, by the Division of
the Commission will: (a) By order
remove impediments to and perfect the Trading and Markets, pursuant to delegated
approve or disapprove such proposed
mechanism of a free and open market authority.38
rule change, or (b) institute proceedings
and a national market system and, in Robert W. Errett,
to determine whether the proposed rule
general, to protect investors and the
change should be disapproved. Deputy Secretary.
public interest.
The Exchange believes that this [FR Doc. 2015–30943 Filed 12–8–15; 8:45 am]
IV. Solicitation of Comments
proposal is consistent with the Act Interested persons are invited to
BILLING CODE 8011–01–P
because it implements, interprets, and submit written data, views and
clarifies the provisions of the Plan, and arguments concerning the foregoing,
is designed to assist the Exchange and SECURITIES AND EXCHANGE
including whether the proposal is COMMISSION
Members in meeting regulatory consistent with the Act. Comments may
obligations pursuant to the Plan. In be submitted by any of the following
approving the Plan, the SEC noted that methods: [Release No. 34–76549; File No. SR–
the Pilot was an appropriate, data- NYSEArca–2015–115]
driven test that was designed to evaluate Electronic Comments
the impact of a wider tick size on • Use the Commission’s Internet Self-Regulatory Organizations; NYSE
trading, liquidity, and the market comment form (http://www.sec.gov/ Arca, Inc.; Notice of Filing and
quality of securities of smaller rules/sro.shtml); or Immediate Effectiveness of Proposed
capitalization companies, and was • Send an email to rule-comments@ Rule Change Amending NYSE Arca
therefore in furtherance of the purposes sec.gov. Please include File No. SR– Equities Rules 7.44 and 7.44P To
of the Act. To the extent that this BATS–2015–108 on the subject line. Distinguish Between Retail Orders
proposal implements, interprets, and Routed on Behalf of Other Broker-
clarifies the Plan and applies specific Paper Comments Dealers and Retail Orders That are
requirements to Members, the Exchange • Send paper comments in triplicate Routed on Behalf of Introduced Retail
believes that this proposal is in to Secretary, Securities and Exchange Accounts That are Carried on a Fully
furtherance of the objectives of the Plan, Commission, 100 F Street NE., Disclosed Basis
as identified by the SEC, and is Washington, DC 20549–1090.
therefore consistent with the Act. All submissions should refer to File No. December 3, 2015.
(B) Self-Regulatory Organization’s SR–BATS–2015–108. This file number Pursuant to Section 19(b)(1) 1 of the
Statement on Burden on Competition should be included on the subject line Securities Exchange Act of 1934
if email is used. To help the (‘‘Act’’) 2 and Rule 19b–4 thereunder,3
The Exchange does not believe that
Commission process and review your notice is hereby given that, on
the proposed rule change will result in
comments more efficiently, please use November 19, 2015, NYSE Arca, Inc.
any burden on competition that is not
only one method. The Commission will (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
necessary or appropriate in furtherance
post all comments on the Commission’s with the Securities and Exchange
of the purposes of the Act. The
Internet Web site (http://www.sec.gov/ Commission (‘‘Commission’’) the
Exchange notes that the proposed rule
rules/sro.shtml). Copies of the proposed rule change as described in
change implements the provisions of the
submission, all subsequent Items I and II below, which Items have
Plan, and is designed to assist the
amendments, all written statements been prepared by the self-regulatory
Exchange in meeting its regulatory
with respect to the proposed rule organization. The Commission is
obligations pursuant to the Plan. The
change that are filed with the
Exchange also notes that the quoting publishing this notice to solicit
mstockstill on DSK4VPTVN1PROD with NOTICES
Commission, and all written
and trading requirements of the Plan comments on the proposed rule change
communications relating to the
will apply equally to all Members that from interested persons.
proposed rule change between the
trade Pilot Securities.
Commission and any person, other than
35 See Approval Order, supra note 7, 80 FR at
those that may be withheld from the 38 17 CFR 200.30–3(a)(12).
27541. public in accordance with the 1 15 U.S.C. 78s(b)(1).
36 15 U.S.C. 78f(b). provisions of 5 U.S.C. 552, will be 2 15 U.S.C. 78a.
37 15 U.S.C. 78f(b)(5). available for Web site viewing and 3 17 CFR 240.19b–4.
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I. Self-Regulatory Organization’s liquidity that are higher than the of the customers of the introducing firm.
Statement of the Terms of Substance of exchanges [sic] standard rebates for In a fully disclosed clearing
the Proposed Rule Change added liquidity.7 arrangement, the clearing firm knows
Rule 7.44(b)(1) currently states that the names, addresses, securities
The Exchange proposes to amend
‘‘[t]o qualify as an RMO, an ETP Holder positions and other relevant data as to
NYSE Arca Equities Rules 7.44 and
must conduct a retail business or handle each customer.’’ 9
7.44P (‘‘Retail Liquidity Program’’) to
retail orders on behalf of another broker- With respect to a broker-dealer that is
distinguish between retail orders routed
dealer.’’ Rather than stating that one routing on behalf of another broker-
on behalf of other broker-dealers and
way to qualify as an RMO is to ‘‘handle’’ dealer, the Exchange does not believe
retail orders that are routed on behalf of
retail orders on behalf of another broker- that the routing broker-dealer has
introduced retail accounts that are
dealer, the Exchange proposes to state sufficient information to assess whether
carried on a fully disclosed basis. The
that an ETP Holder may qualify as an orders are truly retail in nature, and
proposed rule change is available on the
RMO if it ‘‘routes’’ retail orders on thus, requires an RMO routing on behalf
Exchange’s Web site at www.nyse.com,
behalf of another broker-dealer. The of other broker-dealers to maintain
at the principal office of the Exchange, Exchange believes that providing additional supervisory procedures and
and at the Commission’s Public routing services on behalf of other obtain annual attestations, as described
Reference Room. broker-dealers with retail order flow below, in order to submit Retail Orders
II. Self-Regulatory Organization’s better represents the function that ETP to the Exchange. In contrast, however, if
Statement of the Purpose of, and Holders would be performing on behalf an ETP Holder is carrying a customer
Statutory Basis for, the Proposed Rule of other broker-dealers. Thus, the account on a fully disclosed basis, then
Change Exchange believes that the description such carrying broker-dealer is required
would be more transparent if it referred to perform certain diligence regarding
In its filing with the Commission, the
to routing services provided to another such account that the Exchange believes
self-regulatory organization included
broker-dealer with retail customers. The is sufficient to assess whether a
statements concerning the purpose of,
Exchange also proposes to distinguish customer is a retail customer in order to
and basis for, the proposed rule change
such routing services on behalf of submit orders on behalf of such a
and discussed any comments it received
another broker-dealer from services customer to the Exchange as a Retail
on the proposed rule change. The text
provided by broker-dealers that carry Order. The carrying broker of an
of those statements may be examined at
retail customer accounts on a fully account typically handles orders from
the places specified in Item IV below. disclosed basis, as described below. its retail customers that are
The Exchange has prepared summaries, As background with respect to the ‘‘introduced’’ by an introducing broker.
set forth in sections A, B, and C below, proposed change, the Exchange first However, as noted above, in contrast to
of the most significant parts of such would like to describe the terms a typical routing relationship on behalf
statements. ‘‘introducing broker’’, ‘‘carrying firm’’ or of another broker-dealer, a carrying
A. Self-Regulatory Organization’s ‘‘carrying broker-dealer’’, and ‘‘fully broker obtains a significant level of
Statement of the Purpose of, and the disclosed,’’ as such terms are commonly information regarding each customer
Statutory Basis for, the Proposed Rule used in the securities industry. An introduced by the introducing broker.
Change ‘‘introducing’’ broker-dealer is ‘‘one that Accordingly, the Exchange proposes to
has a contractual arrangement with state in Rule 7.44(b)(1) that for purposes
1. Purpose another firm, known as the carrying or of Rule 7.44, ‘‘conducting a retail
The Exchange proposes to amend clearing firm, under which the carrying business includes carrying retail
NYSE Arca Equities Rules 7.44 and firm agrees to perform certain services customer accounts on a fully disclosed
7.44P,4 which govern the Exchange’s for the introducing firm. Usually, the basis.’’
Retail Liquidity Program (the introducing firm submits its customer Rule 7.44(b)(6) currently states, in
‘‘Program’’), to distinguish between accounts and customer orders to the part, that ‘‘[i]f an RMO represents Retail
orders routed on behalf of other broker- carrying firm, which executes the orders Orders from another broker-dealer
dealers and orders routed on behalf of and carries the account. The carrying customer, the RMO’s supervisory
introduced retail accounts that are firm’s duties include the proper procedures must be reasonably designed
carried on a fully disclosed basis, as disposition of the customer funds and to assure that the orders it receives from
further described below. securities after the trade date, the such broker-dealer customer that it
The Exchange established the custody of customer securities and designates as Retail Orders meet the
Program in an attempt to attract retail funds, and the recordkeeping associated definition of a Retail Order.’’ This
order flow to the Exchange, primarily by with carrying customer accounts.’’ 8 includes obtaining attestations from the
offering pricing incentives. Under the Further, a ‘‘fully disclosed’’ other broker-dealers for whom the RMO
Program, Retail Member Organizations 5 introducing arrangement is routes. In addition to the proposed
(‘‘RMOs’’) are permitted to submit Retail ‘‘distinguished from an omnibus changes to Rule 7.44(b)(1) described
Orders,6 and receive rebates for added clearing arrangement where the clearing above, the Exchange proposes to modify
firm maintains one account for all the the language of Rule 7.44(b)(6) to again
4 The relevant portions of Rules 7.44 and 7.44P
customer transactions of the introducing distinguish between an RMO that
proposed to be amended have identical rule text firm. In an omnibus relationship, the conducts a retail business because it
and will be referred to collectively as ‘‘Rule 7.44.’’ carries accounts on a fully disclosed
5 As defined in Rule 7.44(a)(2), a Retail Member
clearing firm does not know the identity
mstockstill on DSK4VPTVN1PROD with NOTICES
Organization is an ETP Holder that has been
basis from an RMO that routes orders on
approved by the Exchange under Rule 7.44 to respect to price or side of market and the order does behalf of another broker-dealer. As
submit Retail Orders. not originate from a trading algorithm or any other proposed, the additional annual written
6 As defined in Rule 7.44(a)(3), a Retail Order is computerized methodology. representation requirements of Rule
7 See the Exchange’s Price List, available at
an agency order or a riskless principal order that 7.44(b)(6) would apply to an RMO that
meets the criteria of FINRA Rule 5320.03 that https://www.nyse.com/publicdocs/nyse/markets/
originates from a natural person and is submitted nyse-arca/NYSE_Arca_Marketplace_Fees.pdf. does not itself conduct a retail business
to the Exchange by an RMO, provided that no 8 See Securities Exchange Act Release No. 31511
change is made to the terms of the order with (Nov. 24, 1992), 57 FR 56973 (December 2, 1992). 9 Id.
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![76598 Federal Register / Vol. 80, No. 236 / Wednesday, December 9, 2015 / Notices
investors, or otherwise in furtherance of submitted on or before December 30, SECURITIES AND EXCHANGE
the purposes of the Act. If the 2015December 30, 2015. COMMISSION
Commission takes such action, the For the Commission, by the Division of
Commission shall institute proceedings Trading and Markets, pursuant to delegated
[Release No. 34–76554; File No. SR–
to determine whether the proposed rule authority.20
NYSEMKT–2015–96]
change should be approved or
disapproved. Robert W. Errett, Self-Regulatory Organizations; NYSE
Deputy Secretary. MKT LLC; Notice of Filing and
IV. Solicitation of Comments [FR Doc. 2015–30940 Filed 12–8–15; 8:45 am] Immediate Effectiveness of Proposed
Interested persons are invited to BILLING CODE 8011–01–P
Rule Change Amending Rule 107C—
submit written data, views, and Equities To Distinguish Between Retail
arguments concerning the foregoing, Orders Routed on Behalf of Other
including whether the proposed rule SECURITIES AND EXCHANGE Broker-Dealers and Retail Orders That
change is consistent with the Act. COMMISSION Are Routed on Behalf of Introduced
Comments may be submitted by any of Retail Accounts That Are Carried on a
the following methods: Sunshine Act Meeting Fully Disclosed Basis
Electronic Comments December 3, 2015.
FEDERAL REGISTER CITATION OF PREVIOUS
• Use the Commission’s Internet Pursuant to Section 19(b)(1) of the
ANNOUNCEMENT: [To Be Published].
comment form (http://www.sec.gov/ Securities Exchange Act of 1934
rules/sro.shtml); or STATUS: Closed Meeting. (‘‘Act’’),1 and Rule 19b–4 thereunder,2
• Send an email to rule-comments@ notice is hereby given that on November
sec.gov. Please include File Number SR– PLACE: 100 F Street NE., Washington, 19, 2015, NYSE MKT LLC (the
NYSEArca–2015–115 on the subject DC. ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
line. DATE AND TIME OF PREVIOUSLY ANNOUNCED the Securities and Exchange
Paper Comments MEETING: December 10, 2015 at 2:00 p.m. Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
• Send paper comments in triplicate CHANGE IN THE MEETING: Additional Item. in Items I and II below, which Items
to Secretary, Securities and Exchange The following matter will also be have been prepared by the Exchange.
Commission, 100 F Street NE., considered during the 2:00 p.m. Closed The Commission is publishing this
Washington, DC 20549–1090. notice to solicit comments on the
Meeting scheduled for Thursday,
All submissions should refer to File December 10, 2015: Litigation matter. proposed rule change from interested
Number SR–NYSEArca–2015–115. This persons.
file number should be included on the The General Counsel of the
subject line if email is used. To help the Commission, or her designee, has I. Self-Regulatory Organization’s
Commission process and review your certified that, in her opinion, one or Statement of the Terms of Substance of
comments more efficiently, please use more of the exemptions as set forth in the Proposed Rule Change
only one method. The Commission will 5 U.S.C. 552b(c)(3), (5), (7), (9)(B) and The Exchange proposes to amend
post all comments on the Commission’s and (10) and 17 CFR 200.402(a)(3), (5), Rule 107C—Equities (Retail Liquidity
Internet Web site (http://www.sec.gov/ (7), (9)(ii) and (10), permit consideration Program) to distinguish between retail
rules/sro.shtml). Copies of the of the scheduled matter at the Closed orders routed on behalf of other broker-
submission, all subsequent Meeting. dealers and retail orders that are routed
amendments, all written statements Commissioner Stein, as duty officer, on behalf of introduced retail accounts
with respect to the proposed rule voted to consider the items listed for the that are carried on a fully disclosed
change that are filed with the basis. The proposed rule change is
Closed Meeting in closed session, and
Commission, and all written available on the Exchange’s Web site at
determined that Commission business
communications relating to the www.nyse.com, at the principal office of
required consideration earlier than one
proposed rule change between the the Exchange, and at the Commission’s
Commission and any person, other than week from today. No earlier notice of
Public Reference Room.
those that may be withheld from the this meeting was practicable.
public in accordance with the At times, changes in Commission II. Self-Regulatory Organization’s
provisions of 5 U.S.C. 552, will be priorities require alterations in the Statement of the Purpose of, and
available for Web site viewing and scheduling of meeting items. For further Statutory Basis for, the Proposed Rule
printing in the Commission’s Public Change
information and to ascertain what, if
Reference Room, 100 F Street NE., any, matters have been added, deleted In its filing with the Commission, the
Washington, DC 20549, on official or postponed, please contact the Office self-regulatory organization included
business days between the hours of of the Secretary at (202) 551–5400. statements concerning the purpose of,
10:00 a.m. and 3:00 p.m. Copies of such and basis for, the proposed rule change
Dated: December 4, 2015.
filing also will be available for and discussed any comments it received
inspection and copying at the principal Brent J. Fields, on the proposed rule change. The text
office of the Exchange. All comments Secretary. of those statements may be examined at
mstockstill on DSK4VPTVN1PROD with NOTICES
received will be posted without change; [FR Doc. 2015–31106 Filed 12–7–15; 11:15 am] the places specified in Item IV below.
the Commission does not edit personal BILLING CODE 8011–01–P The Exchange has prepared summaries,
identifying information from set forth in sections A, B, and C below,
submissions. You should submit only of the most significant parts of such
information that you wish to make statements.
available publicly. All submissions
should refer to File Number SR– 1 15 U.S.C. 78s(b)(1).
NYSEArca–2015–115 and should be 20 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.
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Document Created: 2015-12-14 13:32:15
Document Modified: 2015-12-14 13:32:15
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 76595 |
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