82 FR 27732 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Exchange's Authority To Grant Exemptions From the OATS Requirements

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 115 (June 16, 2017)

[Federal Register Volume 82, Number 115 (Friday, June 16, 2017)]
[Notices]
[Pages 27732-27734]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-12455]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80903; File No. SR-NYSEArca-2017-66]


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

June 12, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on June 2, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I 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 NYSE Arca Equities Rule 7470 
(Exemption to the Order Recording and Data Transmission Requirements) 
to extend until November 15, 2019 the ability to exempt certain members 
from the recording and order data transmission requirements of NYSE 
Arca Equities Rules 7440 and 7450, respectively, for manual orders. The 
proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The NYSE Arca Equities Rule 7400 Series consists of NYSE Arca 
Equities Rules 7410 through 7470 and sets forth the recording and 
reporting requirements of the Order Audit Trail System (``OATS'') 
Rules. The OATS Rules require all Exchange permit holders and 
associated persons to record in electronic form and report to the 
Financial Industry Regulatory Authority, Inc. (``FINRA''), on a daily 
basis, certain information with respect to orders originated, received, 
transmitted, modified, canceled, or executed by permit holders in all 
NMS stocks, as that term is defined in Rule 600(b)(47) of Regulation 
NMS,\3\ traded on the Exchange. NYSE Arca Equities Rule 7470 provides 
the Exchange with the authority to exempt certain members from the 
recording and reporting requirements and from the recording and order 
data transmission requirements of NYSE Arca Equities Rules 7440 and 
7450, respectively, for manual orders, if such exemption is consistent 
with the protection of investors and the public interest, and the ETP 
Holder meets the criteria set forth in paragraph (a) of the Rule.\4\
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    \3\ 17 CFR 242.600(b)(47).
    \4\ The criteria are as follows: (1) The ETP Holder and current 
control affiliates and associated persons have not been subject 
within the last five years to any final disciplinary action, and 
within the last ten years to any disciplinary action involving 
fraud; (2) the ETP Holder has annual revenues of less than $2 
million; (3) the ETP Holder does not conduct any market making 
activities in NMS stocks: (4) the ETP Holder does not execute 
principal transactions with its customers (with limited exception 
for principal transactions executed pursuant to error corrections); 
and (5) the ETP Holder does not conduct clearing or carrying 
activities for other firms.
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    NYSE Arca Equities Rule 7470 contains a sunset provision, which was 
July 10, 2015. In June 2015, FINRA filed a proposed rule change to 
extend the sunset provision until July 10, 2019.\5\ The Exchange 
proposes to amend NYSE Arca Equities Rule 7470 to extend the provision 
until November 15, 2019. The proposed change would correct an oversight 
in not filing when the sunset provision expired in 2015.
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    \5\ See Securities Exchange Act Release No. 75160 (June 11, 
2015), 80 FR 34727 (June 17, 2015) (SR-FINRA-2015-016).
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    The Exchange believes it would be appropriate to extend the sunset 
provision in NYSE Arca Equities Rule 7470 to November 15, 2019 rather 
than the July 10, 2019 date in the FINRA Rule. At the time FINRA filed 
its proposed rule change, the National

[[Page 27733]]

Market System Plan Governing the Consolidated Audit Trail (the ``CAT 
NMS Plan'') \6\ had not been approved by the Commission. The CAT NMS 
Plan was approved by the Commission, as modified, on November 15, 
2016.\7\ On March 21, 2017, the Commission approved the NYSE Arca 
Equities Rule 6.6800 Series to implement the provisions of the CAT NMS 
Plan applicable to ETP Holders.\8\ NYSE Arca Equities Rule 6.6895(c)(2) 
requires each Industry Member that is a Small Industry Member to record 
and report the Industry Member Data to the Central Repository by 
November 15, 2019.
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    \6\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
    \7\ Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (Order Approving the National 
Market System Plan Governing the Consolidated Audit Trail).
    \8\ See Securities Exchange Act Release No. 80256 (March 15, 
2017), 82 FR 14526 (March 21, 2017) (SR-NYSEArca-2017-03; SR-
NYSEArca-2017-04) (Order Approving Proposed Rule Changes to Adopt 
Consolidated Audit Trail Compliance Rules).
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    The Exchange believes that extending the sunset provision in NYSE 
Arca Equities Rule 7470 to the same date that all Small Industry 
Members must report to the CAT is appropriate and would permit such 
firms relying on the exemption to continue to do so provided they meet 
the criteria to qualify until that time. The Exchange is not proposing 
any substantive changes to the criteria necessary for firms to qualify 
for an exemption and notes that all of those member organizations 
currently reporting to OATS or relying on an exemption from OATS 
reporting will be reporting to the CAT by November 15, 2019.\9\
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    \9\ Rule 6.6895(c)(1) requires each Industry Member (other than 
a Small Industry Member) to record and report the Industry Member 
Data to the Central Repository by November 15, 2018.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general to protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that amending NYSE Arca 
Equities Rule 7470 to extend until November 15, 2019 the ability to 
exempt certain members from the recording and order data transmission 
requirements of NYSE Arca Equities Rules 7440 and 7450, respectively, 
for manual orders, is consistent with Section 6(b)(5) of the Act \12\ 
because it would enable the Exchange to exempt manual orders received 
by certain small firms from the OATS Rules and avoid imposing 
potentially unnecessary expense or hardship on those firms that qualify 
for the exemption as they transition to reporting order information to 
the CAT Central Repository. As noted, the proposed sunset provision is 
the same date that all Small Industry Members must report to the CAT. 
Further, the Exchange is not proposing any substantive changes to the 
criteria necessary for firms to qualify for an exemption, which will 
continue to ensure that only those firms with limited revenue, no 
recent final disciplinary actions, and limited business models will 
remain eligible for the exemption. The Exchange accordingly believes 
that the proposed rule change is consistent with the protection of 
investors and the public interest.
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    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather, as noted above, 
would enable the Exchange to exempt manual orders received by certain 
small firms from the OATS reporting requirements through November 15, 
2019, the same date that all Small Industry Members must report to the 
CAT, and thereby avoid imposing potentially unnecessary expense or 
hardship on those firms that qualify for the exemption as they 
transition to reporting order information to the CAT Central 
Repository.

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

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

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
provide the Commission with written notice of its intent to file the 
proposed rule change, along with a brief description and the text of 
the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Exchange has complied with this 
requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposed rule change will become operative 
immediately upon filing. In support of its request, the Exchange stated 
that waiver of the operative delay would continue to enable the 
Exchange to grant small firms exemptions from the OATS requirements as 
those firms are preparing to report information to the CAT Central 
Repository, thereby avoiding potentially unnecessary expense or 
hardship on firms that qualify for the exemption.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Absent such action, a small firm that otherwise would qualify for an 
exemption would have to comply with the Exchange requirements to record 
and report manual orders to OATS because the Exchange would not have 
the authority to grant an exemption during the 30-day pre-operative 
period. The Commission agrees with the Exchange that waiving the 30-day 
operative delay would enable the Exchange, in appropriate cases, to 
prevent unnecessary expense being imposed on small firms. Therefore, 
the Commission hereby waives the operative delay and designates the

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proposed rule change operative upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) of the Act \17\ to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2017-66 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-2017-66. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-66 and should 
be submitted on or before July 7, 2017.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12455 Filed 6-15-17; 8:45 am]
BILLING CODE 8011-01-P