The NYSE plans to amend its list of Exchange Rule Violations and Fines applicable to Designated Market Makers, or DMMs.  As proposed, the amendments would:  (i) update the rules for technical, non-substantive changes in conformity with previously-approved changes in Exchange rules;  (ii) update the rules relating to conduct by DMMs;  and, (iii) add rules relating to conduct by DMMs. Discussion. Under the NYSE Rule 476A, Exchange’s Minor Rule Violation Plan, the Exchange may impose a fine up to $5,000 on any member, member organization, approved person or registered or non-registered employee of a member or member organization for a minor violation of certain specified Exchange rules (a “summary fine”). Summary fines provide a meaningful sanction for rule violations when the violation calls for stronger discipline than an admonition or cautionary letter, but the facts and circumstances of the violation do not warrant initiation of a formal disciplinary proceeding under Rule 476. Proposed Non-Substantive Changes to Rule 476A List. The Rule 476A List would be updated to conform to approved changes to Exchange rules, namely:

• Change titles of Rules 15, 15A, and 105 ;
• Revise rule references that have been renumbered or harmonized with a FINRA rule - i.e., Rule 72(b) to 72(d);  79A.30 to 79A.20;  103.12 to 103.11; and 346(b) to 3270;
• Delete references to rules that have been deleted: Rules 97.40 (reporting rule violation); 104.12 (DMM investment account rule);107A.30 (reporting rule violation); 112A.10 (reporting rule violation); 123A.30 (percentage orders);  304(h)(2) (reporting rule violation); 346(c), (e), and (f) (Limitations on member organization employment and failure to obtain Exchange approval rule violations); 421 (reporting rule violation); 440F (reporting rule violation); and 440G (reporting rule violation);  and,
• Update the description to rules that have been amended:  Rules 123C5; 411(b); and, 345(a).

Proposed Updates to Rule 476A List for DMM Conduct Rules. The current Rule 476A List includes rules that govern DMM conduct - e.g., Rules 104(a)(1)(A), 104.10, and Exchange policies regarding procedures to be followed in delayed opening situations.  The Exchange proposes to update the Rule 476A List with current rules governing DMM conduct, and in particular, to include Rules 104 and 123D in the Rule 476A List.  The Exchange further proposes to expand the references to Rules 104 and 123D to add new elements to the Rule 476A List The Exchange believes that the proposed updates will provide the Exchange with sufficient flexibility to address DMM failure to meet their obligations.  It recognizes that DMMs may, for many reasons, fail to meet their affirmative obligations as prescribed under Rules 104 or duties under Rule 123D.  In some circumstances, formal disciplinary measures in accordance with Rule 476 are warranted. However, in other instances, formal discipline may be unwarranted, and the Exchange believes that the addition of these Rules to Rule 476A List will provide a more flexible and appropriate tool to enforce potential failure by DMMs to adhere to the requirements set forth in those rules, while preserving the Exchange’s discretion to seek formal discipline under the appropriate circumstances. The Exchange believes that the proposed updated rule references cover the same subject matter as are already addressed in the Rule 476A List, albeit in outdated references. In addition, the Exchange believes it is also appropriate to add new elements relating to Rule 104 and 123D to the Rule 476A List. Rule 104. NYSE Rule 104 requires, inter alia, DMMs registered in one or more securities traded on the Exchange to engage in a course of dealings for their own account to assist in the maintenance of a fair and orderly market, insofar as reasonably practicable, by contributing liquidity when lack of price continuity and depth, or disparity between supply and demand exists or is reasonably to be anticipated. The Rule 476A List currently includes Rule 104(a)(1)(A), which requires DMMs to maintain a bid or an offer at the NBBO (National Best Bid and Offer, or “inside” prices) at least 15% of the trading day for securities in which the DMM unit is registered with a consolidated average daily volume of less than one million shares, and at least 10% for securities in which the DMM unit is registered with a consolidated average daily volume equal to or greater than one million shares. The Rule 476A List also includes an outdated reference to Rule 104.10. When the Exchange adopted the New Market Model, it adopted current Rule 104 (on a pilot basis), which does not include a rule reference of 104.10 that is the same as the former Rule 104.10. However, the subject matter formerly covered in Rule 104.10 continues in the current Rule 104. For example, the text of former Rules 104.10(5) and (6) has been moved in substantially similar form to current Rules 104(g), (h), and (i). The Rule Filing continues the detailed discussion at a level beyond our expertise.  So, it's best if our readers take it from here.  For further details:  [NYSE Rule Filing 12-05,  2/7/12].