80_FR_76843 80 FR 76607 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 107C 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

80 FR 76607 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 107C 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)

Page Range76607-76609
FR Document2015-30944

Federal Register, Volume 80 Issue 236 (Wednesday, December 9, 2015) 
[Federal Register Volume 80, Number 236 (Wednesday, December 9, 2015)]
[Notices]
[Pages 76607-76609]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-30944]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76553; File No. SR-NYSE-2015-59]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 107C 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) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 19, 2015, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 107C (``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 Rule 107C, which governs 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.
    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 \3\ 
(``RMOs'') are permitted to submit Retail Orders,\4\ and receive 
rebates for added liquidity that are higher than the exchanges [sic] 
standard rebates for added liquidity.\5\
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    \3\ As defined in Rule 107C(a)(2), a Retail Member Organization 
is a member organization (or division thereof) that has been 
approved by the Exchange under Rule 107C to submit Retail Orders.
    \4\ As defined in Rule 107C(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 a Retail Member Organization, 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.
    \5\ See the Exchange's Price List, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf.
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    Rule 107C(b)(1) currently states that ``[t]o qualify as a Retail 
Member Organization, a member organization 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 a member organization 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 member organizations 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.

[[Page 76608]]

    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.'' \6\
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    \6\ See Securities Exchange Act Release No. 31511 (Nov. 24, 
1992), 57 FR 56973 (December 2, 1992).
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    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.'' \7\
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    \7\ Id.
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    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 a member 
organization 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 107C(b)(1) that for purposes of Rule 
107C, ``conducting a retail business includes carrying retail customer 
accounts on a fully disclosed basis.''
    Rule 107C(b)(6) currently states, in part, that ``[i]f a Retail 
Member Organization represents Retail Orders from another broker-dealer 
customer, the Retail Member Organization'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 107C(b)(1) described above, the Exchange 
proposes to modify the language of Rule 107C(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 representations requirements of Rule 107C(b)(6) would apply to 
an RMO that does not itself conduct a retail business but routes Retail 
Orders on behalf of other broker-dealers. In turn, such additional 
written representation requirements of Rule 107C(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,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    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

[[Page 76609]]

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 \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ 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.\16\ 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 member organizations to operate 
as RMOs on multiple exchanges in the same manner. The Commission notes 
that, to become an RMO, a member organization would still be required 
under Exchange Rule 107C(b)(2)(C) to submit an attestation to the 
Exchange that substantially all orders submitted as Retail Orders would 
qualify as such under Exchange Rule 107C. 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.\17\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ 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).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of 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 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 Comments

     Use 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-NYSE-2015-59 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-NYSE-2015-59. 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 offices 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-NYSE-2015-59, 
and should be submitted on or before December 30, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12), (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30944 Filed 12-8-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 236 / Wednesday, December 9, 2015 / Notices 76607 Electronic Comments SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s COMMISSION Statement of the Purpose of, and the • Use the Commission’s Internet Statutory Basis for, the Proposed Rule comment form (http://www.sec.gov/ [Release No. 34–76553; File No. SR–NYSE– Change rules/sro.shtml); or 2015–59] 1. Purpose • Send an email to rule-comments@ Self-Regulatory Organizations; New The Exchange proposes to amend sec.gov. Please include File Number SR– York Stock Exchange LLC; Notice of Rule 107C, which governs the NASDAQ–2015–146 on the subject line. Filing and Immediate Effectiveness of Exchange’s Retail Liquidity Program Paper Comments Proposed Rule Change Amending Rule (the ‘‘Program’’), to distinguish between 107C To Distinguish Between Retail orders routed on behalf of other broker- • Send paper comments in triplicate Orders Routed on Behalf of Other dealers and orders routed on behalf of to Secretary, Securities and Exchange Broker-Dealers and Retail Orders That introduced retail accounts that are Commission, 100 F Street NE., Are Routed on Behalf of Introduced carried on a fully disclosed basis, as Washington, DC 20549–1090. Retail Accounts That Are Carried on a further described below. All submissions should refer to File Fully Disclosed Basis The Exchange established the Number SR–NASDAQ–2015–146. This December 3, 2015. Program in an attempt to attract retail file number should be included on the order flow to the Exchange, primarily by Pursuant to Section 19(b)(1) of the subject line if email is used. To help the offering pricing incentives. Under the Securities Exchange Act of 1934 Commission process and review your Program, Retail Member Organizations 3 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 comments more efficiently, please use (‘‘RMOs’’) are permitted to submit Retail notice is hereby given that on November Orders,4 and receive rebates for added only one method. The Commission will 19, 2015, New York Stock Exchange liquidity that are higher than the post all comments on the Commission’s LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed exchanges [sic] standard rebates for Internet Web site (http://www.sec.gov/ with the Securities and Exchange added liquidity.5 rules/sro.shtml). Copies of the Commission (‘‘SEC’’ or ‘‘Commission’’) Rule 107C(b)(1) currently states that submission, all subsequent the proposed rule change as described ‘‘[t]o qualify as a Retail Member amendments, all written statements in Items I and II below, which Items Organization, a member organization with respect to the proposed rule have been prepared by the Exchange. must conduct a retail business or handle change that are filed with the The Commission is publishing this retail orders on behalf of another broker- Commission, and all written notice to solicit comments on the dealer.’’ Rather than stating that one communications relating to the proposed rule change from interested way to qualify as an RMO is to ‘‘handle’’ proposed rule change between the persons. retail orders on behalf of another broker- Commission and any person, other than I. Self-Regulatory Organization’s dealer, the Exchange proposes to state those that may be withheld from the Statement of the Terms of Substance of that a member organization may qualify public in accordance with the the Proposed Rule Change as an RMO if it ‘‘routes’’ retail orders on provisions of 5 U.S.C. 552, will be The Exchange proposes to amend behalf of another broker-dealer. The available for Web site viewing and Rule 107C (‘‘Retail Liquidity Program’’) Exchange believes that providing printing in the Commission’s Public to distinguish between retail orders routing services on behalf of other Reference Room, 100 F Street NE., routed on behalf of other broker-dealers broker-dealers with retail order flow Washington, DC 20549, on official and retail orders that are routed on better represents the function that business days between the hours of behalf of introduced retail accounts that member organizations would be 10:00 a.m. and 3:00 p.m. Copies of the are carried on a fully disclosed basis. performing on behalf of other broker- filing also will be available for The proposed rule change is available dealers. Thus, the Exchange believes inspection and copying at the principal on the Exchange’s Web site at that the description would be more office of the Exchange. All comments www.nyse.com, at the principal office of transparent if it referred to routing the Exchange, and at the Commission’s services provided to another broker- received will be posted without change; Public Reference Room. dealer with retail customers. The the Commission does not edit personal Exchange also proposes to distinguish identifying information from II. Self-Regulatory Organization’s such routing services on behalf of submissions. You should submit only Statement of the Purpose of, and another broker-dealer from services information that you wish to make Statutory Basis for, the Proposed Rule provided by broker-dealers that carry available publicly. All submissions Change retail customer accounts on a fully should refer to File Number SR– disclosed basis, as described below. NASDAQ–2015–146 and should be In its filing with the Commission, the self-regulatory organization included submitted on or before December 30, 3 As defined in Rule 107C(a)(2), a Retail Member statements concerning the purpose of, 2015. Organization is a member organization (or division and basis for, the proposed rule change thereof) that has been approved by the Exchange For the Commission, by the Division of and discussed any comments it received under Rule 107C to submit Retail Orders. Trading and Markets, pursuant to delegated on the proposed rule change. The text 4 As defined in Rule 107C(a)(3), a Retail Order is authority.13 of those statements may be examined at an agency order or a riskless principal order that meets the criteria of FINRA Rule 5320.03 that mstockstill on DSK4VPTVN1PROD with NOTICES Robert W. Errett, the places specified in Item IV below. originates from a natural person and is submitted Deputy Secretary. The Exchange has prepared summaries, to the Exchange by a Retail Member Organization, [FR Doc. 2015–30941 Filed 12–8–15; 8:45 am] set forth in sections A, B, and C below, provided that no change is made to the terms of the of the most significant parts of such order with respect to price or side of market and BILLING CODE 8011–01–P the order does not originate from a trading statements. algorithm or any other computerized methodology. 5 See the Exchange’s Price List, available at 1 15 U.S.C. 78s(b)(1). https://www.nyse.com/publicdocs/nyse/markets/ 13 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. nyse/NYSE_Price_List.pdf. VerDate Sep<11>2014 18:21 Dec 08, 2015 Jkt 238001 PO 00000 Frm 00165 Fmt 4703 Sfmt 4703 E:\FR\FM\09DEN1.SGM 09DEN1

76608 Federal Register / Vol. 80, No. 236 / Wednesday, December 9, 2015 / Notices As background with respect to the broker obtains a significant level of 2. Statutory Basis proposed change, the Exchange first information regarding each customer The Exchange believes that the would like to describe the terms introduced by the introducing broker. proposed rule change is consistent with ‘‘introducing broker’’, ‘‘carrying firm’’ or Accordingly, the Exchange proposes to Section 6(b) of the Act,8 in general, and ‘‘carrying broker-dealer’’, and ‘‘fully state in Rule 107C(b)(1) that for furthers the objectives of Section 6(b)(5) disclosed,’’ as such terms are commonly purposes of Rule 107C, ‘‘conducting a of the Act,9 in particular, in that it is used in the securities industry. An retail business includes carrying retail designed to prevent fraudulent and ‘‘introducing’’ broker-dealer is ‘‘one that customer accounts on a fully disclosed manipulative acts and practices, to has a contractual arrangement with basis.’’ promote just and equitable principles of another firm, known as the carrying or Rule 107C(b)(6) currently states, in trade, to foster cooperation and clearing firm, under which the carrying part, that ‘‘[i]f a Retail Member coordination with persons engaged in firm agrees to perform certain services Organization represents Retail Orders facilitating transactions in securities, for the introducing firm. Usually, the from another broker-dealer customer, and to remove impediments to and introducing firm submits its customer the Retail Member Organization’s perfect the mechanism of a free and accounts and customer orders to the supervisory procedures must be open market and a national market carrying firm, which executes the orders reasonably designed to assure that the system. and carries the account. The carrying orders it receives from such broker- The Exchange believes that the firm’s duties include the proper dealer customer that it designates as proposed rule change is designed to disposition of the customer funds and Retail Orders meet the definition of a prevent fraudulent and manipulative securities after the trade date, the Retail Order.’’ This includes obtaining acts and practices because it highlights custody of customer securities and attestations from the other broker- the parties for whom additional funds, and the recordkeeping associated dealers for whom the RMO routes. In procedures are required because they do with carrying customer accounts.’’ 6 addition to the proposed changes to not maintain relationships with the end Further, a ‘‘fully disclosed’’ Rule 107C(b)(1) described above, the customer (i.e., routing brokers) and still introducing arrangement is Exchange proposes to modify the requires the RMO to follow such ‘‘distinguished from an omnibus language of Rule 107C(b)(6) to again procedures to ensure that such orders clearing arrangement where the clearing distinguish between an RMO that qualify as Retail Orders. As proposed, firm maintains one account for all the conducts a retail business because it however, an RMO would not be customer transactions of the introducing carries accounts on a fully disclosed required to follow such procedures, firm. In an omnibus relationship, the including obtaining annual attestations, basis from an RMO that routes orders on clearing firm does not know the identity to the extent such RMO actually knows behalf of another broker-dealer. As of the customers of the introducing firm. the end customer and carries the proposed, the additional annual written In a fully disclosed clearing account of such customer and thus can representations requirements of Rule arrangement, the clearing firm knows itself confirm that the orders qualify as 107C(b)(6) would apply to an RMO that the names, addresses, securities Retail Orders. does not itself conduct a retail business positions and other relevant data as to The Exchange believes that the but routes Retail Orders on behalf of each customer.’’ 7 proposed rule change will remove other broker-dealers. In turn, such With respect to a broker-dealer that is impediments to and perfect the additional written representation routing on behalf of another broker- mechanism of a free and open market requirements of Rule 107C(b)(6) would dealer, the Exchange does not believe and a national market system because it not apply to an RMO that carries retail that the routing broker-dealer has will allow RMOs that carry retail customer accounts on a fully disclosed sufficient information to assess whether customer accounts to participate in the basis. In connection with this change, orders are truly retail in nature, and Program without imposing additional the Exchange is proposing various edits thus, requires an RMO routing on behalf attestation requirements that the to the existing rule text so that the of other broker-dealers to maintain Exchange did not initially intend to reference is consistently to ‘‘other additional supervisory procedures and impose upon them. By removing broker-dealers’’ rather than ‘‘broker- obtain annual attestations, as described impediments to participation in the dealer customers.’’ below, in order to submit Retail Orders Program, the proposed change would to the Exchange. In contrast, however, if The Exchange believes that allowing permit expanded access of retail a member organization is carrying a an RMO that carries retail customer customers to the Program. customer account on a fully disclosed accounts on a fully disclosed basis to basis, then such carrying broker-dealer submit Retail Orders to the Exchange B. Self-Regulatory Organization’s is required to perform certain diligence without obtaining attestations from Statement on Burden on Competition regarding such account that the broker-dealers that might introduce The Exchange does not believe that Exchange believes is sufficient to assess such accounts will encourage the proposed rule change will impose whether a customer is a retail customer participation in the Program. As noted any burden on competition that is not in order to submit orders on behalf of above, the Exchange believes that the necessary or appropriate in furtherance such a customer to the Exchange as a carrying broker has sufficient of the purposes of the Act. The Retail Order. The carrying broker of an information to itself confirm that orders Exchange believes that the amendment, account typically handles orders from are Retail Orders without such by increasing the level of participation its retail customers that are attestations. The Exchange still believes in the Program, will increase the level mstockstill on DSK4VPTVN1PROD with NOTICES ‘‘introduced’’ by an introducing broker. it is necessary to require the attestation of competition around retail executions. However, as noted above, in contrast to by broker-dealers that route Retail The Exchange believes that the a typical routing relationship on behalf Orders on behalf of other broker-dealers, transparency and competitiveness of of another broker-dealer, a carrying because, in contrast, such broker-dealers operating a program such as the typically do not have a relationship Program on an exchange market would 6 See Securities Exchange Act Release No. 31511 with the retail customer and would not (Nov. 24, 1992), 57 FR 56973 (December 2, 1992). be in position to confirm that such 8 15 U.S.C. 78f(b). 7 Id. customers are in fact retail customers. 9 15 U.S.C. 78f(b)(5). 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Federal Register / Vol. 80, No. 236 / Wednesday, December 9, 2015 / Notices 76609 result in better prices for retail investors RMOs across multiple exchanges with a subject line if email is used. To help the and benefits retail investors by retail program would promote Commission process and review your expanding the capabilities of Exchanges competition by enabling member comments more efficiently, please use to encompass practices currently organizations to operate as RMOs on only one method. The Commission will allowed on non-exchange venues. multiple exchanges in the same manner. post all comments on the Commission’s The Commission notes that, to become Internet Web site (http://www.sec.gov/ C. Self-Regulatory Organization’s rules/sro.shtml). Copies of the an RMO, a member organization would Statement on Comments on the submission, all subsequent still be required under Exchange Rule Proposed Rule Change Received From amendments, all written statements 107C(b)(2)(C) to submit an attestation to Members, Participants, or Others with respect to the proposed rule the Exchange that substantially all No written comments were solicited orders submitted as Retail Orders would change that are filed with the or received with respect to the proposed qualify as such under Exchange Rule Commission, and all written rule change. 107C. Rather, the proposal would communications relating to the change when an RMO must obtain the proposed rule change between the III. Date of Effectiveness of the annual written representation from Commission and any person, other than Proposed Rule Change and Timing for other broker-dealers that send Retail those that may be withheld from the Commission Action Orders to the RMO. The Commission public in accordance with the The Exchange has filed the proposed finds that waiving the 30-day operative provisions of 5 U.S.C. 552, will be rule change pursuant to Section delay is consistent with the protection available for Web site viewing and 19(b)(3)(A)(iii) of the Act 10 and Rule of investors and the public interest. printing in the Commission’s Public 19b–4(f)(6) thereunder.11 Because the Accordingly, the Commission hereby Reference Room, 100 F Street NE., proposed rule change does not: (i) waives the 30-day operative delay and Washington, DC 20549 on official Significantly affect the protection of designates the proposal operative upon business days between the hours of investors or the public interest; (ii) filing.17 10:00 a.m. and 3:00 p.m. Copies of the impose any significant burden on At any time within 60 days of the filing also will be available for competition; and (iii) become operative filing of the proposed rule change, the inspection and copying at the principal for 30 days from the date on which it Commission summarily may offices of the Exchange. All comments was filed, or such shorter time as the temporarily suspend such rule change if received will be posted without change; Commission may designate, if it appears to the Commission that such the Commission does not edit personal consistent with the protection of action is necessary or appropriate in the identifying information from investors and the public interest, the public interest, for the protection of submissions. You should submit only proposed rule change has become investors, or otherwise in furtherance of information that you wish to make effective pursuant to Section 19(b)(3)(A) the purposes of the Act. If the available publicly. All submissions of the Act 12 and Rule 19b–4(f)(6) Commission takes such action, the should refer to File Number SR–NYSE– thereunder.13 Commission shall institute proceedings 2015–59, and should be submitted on or A proposed rule change filed under to determine whether the proposed rule before December 30, 2015. Rule 19b–4(f)(6) 14 normally does not change should be approved or For the Commission, by the Division of become operative prior to 30 days after disapproved. Trading and Markets, pursuant to delegated the date of the filing. However, pursuant authority.18 to Rule 19b–4(f)(6)(iii),15 the IV. Solicitation of Comments Robert W. Errett, Commission may designate a shorter Interested persons are invited to Deputy Secretary. time if such action is consistent with the submit written data, views, and [FR Doc. 2015–30944 Filed 12–8–15; 8:45 am] protection of investors and the public arguments concerning the foregoing, BILLING CODE 8011–01–P interest. The Exchange has asked the including whether the proposed rule Commission to waive the 30-day change is consistent with the Act. operative delay so that the proposed Comments may be submitted by any of SECURITIES AND EXCHANGE rule change may become operative the following methods: COMMISSION immediately.16 In requesting the waiver, the Exchange stated its belief that Electronic Comments [Release No. 34–76547; File No. SR–BOX– 2015–37] having harmonized requirements for • Use the Commission’s Internet comment form (http://www.sec.gov/ Self-Regulatory Organizations; BOX 10 15 U.S.C. 78s(b)(3)(A)(iii). rules/sro.shtml); or Options Exchange LLC; Notice of • Send an email to rule-comments@ 11 17 CFR 240.19b–4(f)(6). 12 15 U.S.C. 78s(b)(3)(A). Filing and Immediate Effectiveness of 13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– sec.gov. Please include File Number SR– a Proposed Rule Change To amend 4(f)(6)(iii) requires the Exchange to give the NYSE–2015–59 on the subject line. IM–5050–10 to BOX Rule 5050 (Mini Commission written notice of the Exchange’s intent Paper Comments Option Contracts) to file the proposed rule change, along with a brief description and text of the proposed rule change, • Send paper comments in triplicate December 3, 2015. at least five business days prior to the date of filing Pursuant to Section 19(b)(1) of the of the proposed rule change, or such shorter time to Secretary, Securities and Exchange as designated by the Commission. The Exchange Commission, 100 F Street NE., Securities Exchange Act of 1934 has satisfied this requirement. Washington, DC 20549–1090. (‘‘Act’’),1 and Rule 19b–4 thereunder,2 mstockstill on DSK4VPTVN1PROD with NOTICES 14 17 CFR 240.19b–4(f)(6). All submissions should refer to File notice is hereby given that on November 15 17 CFR 240.19b–4(f)(6)(iii). Number SR–NYSE–2015–59. This file 20, 2015, BOX Options Exchange LLC 16 The Commission notes that another national number should be included on the (the ‘‘Exchange’’) filed with the securities exchange has a similar rule for its Retail Securities and Exchange Commission Member Organizations and that the proposal does not raise any novel regulatory issues. See Securities 17 For purposes only of waiving the 30-day 18 17 CFR 200.30–3(a)(12), (59). Exchange Act Release No. 76207 (October 21, 2015), operative delay, the Commission has considered the 1 15 U.S.C. 78s(b)(1). 80 FR 65824 (October 27, 2015) (SR–BYX–2015– proposed rule’s impact on efficiency, competition, 45). and capital formation. See 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 18:21 Dec 08, 2015 Jkt 238001 PO 00000 Frm 00167 Fmt 4703 Sfmt 4703 E:\FR\FM\09DEN1.SGM 09DEN1


Document Created: 2015-12-14 13:32:32
Document Modified: 2015-12-14 13:32:32
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 76607 
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