[Federal Register Volume 73, Number 155 (Monday, August 11, 2008)]
[Notices]
[Pages 46676-46679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18374]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58290; File No. SR-NYSE-2008-70]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending Rules Governing
Membership in Order To Waive-In Members in Good Standing of the
American Stock Exchange LLC as Members and Member Organizations of the
Exchange
August 1, 2008.
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 July 30, 2008, the New York Stock Exchange LLC (the ``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III 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 rules governing membership in order
to waive-in members in good standing of the American Stock Exchange LLC
as members and member organizations of the Exchange. The text of the
proposed rule change is available at the NYSE's principal office, the
Commission's Public Reference Room, and http://www.nyse.com.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
In connection with the acquisition by NYSE Euronext of The Amex
Membership Corporation, including the relocation of all equities
trading conducted on or through the existing systems and facilities of
the American Stock Exchange LLC (``Amex'') to the trading systems and
facilities operated by the NYSE (the ``Equities Relocation''), the NYSE
proposes to amend Rules 2, 300, and 304A in order to provide that all
NYSE Alternext U.S. LLC (``NYSE Alternext'') member organizations and
members in good standing are deemed qualified and approved as NYSE
member organizations or members.
Background
NYSE Alternext Transaction
On January 17, 2008, the Amex Membership Corporation and NYSE
Euronext entered into an Agreement and Plan of Merger (``Merger
Agreement'') whereby, through a series of mergers, NYSE Euronext will
acquire Amex, and, as a result of these mergers, Amex will become one
of the U.S. wholly-owned subsidiaries of NYSE Group and will be renamed
NYSE Alternext U.S. LLC (the ``Mergers'').\3\
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\3\ See SR-Amex-2008-62 (the ``Merger Transaction filing'').
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As described more fully in the Merger Transaction filing, in
connection with the Mergers, Amex proposes to demutualize by separating
all trading rights from equity ownership in Amex. As part of the
demutualization, those persons who were previously Amex Regular Members
or Options Principal Members (``OPMs'') will receive a certain amount
of NYSE Euronext stock. Once the Mergers close, all trading rights
appurtenant to the Amex Regular Members' memberships or OPMs'
memberships will be cancelled.
As proposed in the Merger Transaction filing, immediately following
the closing of the Mergers, those persons and entities who were
authorized to trade on the Amex before the closing of the Mergers,
including Amex (i) owners, lessees, or nominees of Regular Members or
OPMs, (ii) limited trading permit holders, and (iii) associate members,
will be deemed to have satisfied applicable qualification requirements
necessary to trade in NYSE Alternext's demutualized marketplace and
will be issued trading permits (referred to as ``86 Trinity Permits'')
at no cost. The 86 Trinity Permit will authorize owners, lessees, or
nominees of Amex Regular Members or OPMs, Amex limited trading permit
holders, and Amex associate members who were authorized to trade on the
Amex immediately before the Mergers to continue to trade at NYSE
Alternext's systems and facilities at 86 Trinity Place, New York, New
York (the ``86 Trinity Trading Systems''). NYSE Alternext will
recognize the former Amex (i) owners, lessees, or nominees of Regular
Members or OPMs, (ii) limited trading permit holders, and (iii)
associate members as either NYSE Alternext member organizations or
members, as applicable.
In connection with the Mergers, NYSE Euronext intends to relocate
all equities trading previously conducted on the 86 Trinity Trading
Systems to the NYSE's trading systems and facilities located at 11 Wall
Street, New York, New York (the ``NYSE Alternext Trading Systems'').
The NYSE Alternext Trading Systems will be operated by the NYSE on
behalf of NYSE Alternext. NYSE Alternext will also adopt a version of
the NYSE's rules for trading equities on NYSE Alternext after the
Equities Relocation.\4\
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\4\ See SR-Amex-2008-63 (the ``NYSE Alternext Equities
filing'').
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[[Page 46677]]
As described more fully in the NYSE Alternext Equities filing, the
Equities Relocation will take place as soon as practicable after the
closing of the Mergers. Similarly, NYSE Alternext will relocate all
options trading conducted on the 86 Trinity Trading Systems to new
facilities of NYSE Alternext to be located at 11 Wall Street, which
facilities will utilize a trading system based on the options trading
system used by NYSE Arca, Inc. (``NYSE Arca'') (``Options Relocation,''
and, together with the Equities Relocation, the ``Relocations'').
Holders of the 86 Trinity Permits will be able to apply for an NYSE
Alternext equities trading license or options trading permit upon the
Equities or Options Relocations, as applicable. After the Equities
Relocation, a holder of an 86 Trinity Permit will only be able to trade
products other than those that have relocated to NYSE Alternext Trading
Systems. After the Options Relocation, the 86 Trinity Permits will be
canceled.\5\
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\5\ See SR-Amex-2008-62.
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As described more fully in the NYSE Alternext Equities Rule filing,
NYSE Alternext is proposing to adopt rules governing member
organizations that are closely modeled on existing NYSE Rules 2 and
300-313. These rules are substantially similar to current Amex rules
concerning membership.\6\ Nonetheless, the Exchange recognizes that,
after the closing of the Mergers, there may be NYSE Alternext members
or member organizations holding an 86 Trinity Permit that may not
immediately qualify for membership under the NYSE Alternext Equities
Rules. NYSE Alternext is proposing to continue to approve such members
and member organizations as NYSE Alternext members and member
organizations notwithstanding whether they meet the proposed new
standards. Such approval would be conditioned upon the NYSE Alternext
member or member organization meeting the requirements of the adopted
rules within a grace period of six months from the date that the member
organization receives its NYSE Alternext equities trading license in
exchange for a valid 86 Trinity Permit. NYSE Alternext would revoke a
member organization's approval to trade if it fails to meet the new
membership qualifications by the close of the grace period. NYSE
Alternext would also reserve the right to commence proceedings to
terminate such a member organization's membership, if applicable.
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\6\ See NYSE Rules 300-313 and Amex Rules 300, 301, 310, 311,
312, 341, 353, 356, and 359 and Article IV of the Amex Constitution.
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In the NYSE Alternext Equities Rule filing, NYSE Alternext is also
proposing to provide NYSE Alternext members with a grace period of six
months within which to meet NYSE Alternext Equities proposed Rule 304A
requirements to pass an examination required by the Exchange. This
grace period would begin to run from the date that the individual
member transfers to the NYSE Alternext Trading Systems, which may be a
later date than the Equities Relocation.
NYSE and NYSE Alternext Membership Rules
After the Equities Relocation, 86 Trinity Permit holders who apply
to receive an NYSE Alternext equities trading license will also receive
an NYSE Market trading license. In order to effectuate the issuance of
these licenses, several changes are necessary to both the NYSE's and
NYSE Alternext's rules regarding membership so that both SROs will have
consistent standards for membership. The changes to Amex/NYSE Alternext
rules are addressed in the NYSE Alternext Equities Rule Filing; \7\
this filing addresses the necessary changes to NYSE rules.
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\7\ See SR-Amex-2008-63.
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NYSE Rule 2 defines the terms ``member'' and ``member
organization.'' Under NYSE Rule 2(b), a ``member organization'' means a
registered broker or dealer (unless exempt pursuant to the Act) that is
also a member of FINRA and has been approved by the Exchange to
designate an associated natural person to effect transactions on the
Floor of the Exchange. The term also includes any natural person so
registered and approved and who directly effects transactions on the
Floor of the Exchange.\8\ NYSE Rule 2(a) provides that a ``member''
includes any person associated with and designated by a member
organization to effect transactions on the Floor of the Exchange.
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\8\ The term ``member organization'' also includes ``member
firm'' and ``member corporation.'' See NYSE Rule 2(b)(iii).
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NYSE Rule 300 requires members and member organizations to have a
trading license in order to effect transactions on the Floor of the
Exchange or through any facility thereof. Only qualified and approved
NYSE member organizations may acquire and hold a trading license. An
NYSE member organization that holds a trading license may designate an
NYSE member to effect transactions on its behalf on the Floor of the
Exchange.
Proposed Amendments to Exchange Rules
The Exchange proposes to add supplementary material to NYSE Rule 2
to provide that an NYSE Alternext member organization is deemed
qualified and approved as an NYSE member organization and thus eligible
to hold an NYSE trading license. The Exchange further proposes that
Exchange membership would be automatic for NYSE Alternext member
organizations and that such NYSE Alternext member organizations would
be exempt from the Exchange's new member organization application fee,
as required by NYSE Rule 311(a) and set forth on the NYSE Price List.
In addition, the Exchange proposes that any natural persons associated
with an NYSE Alternext member organization and who has been approved by
NYSE Alternext as a member and has been designated by an NYSE Alternext
member organization to effect transactions on the Floor of NYSE
Alternext would be deemed approved as an NYSE member.
As proposed, NYSE Alternext member organizations and members that
have been approved as member organizations and members by NYSE
Alternext and that seek an NYSE Alternext equities trading license
would be automatically waived in as NYSE member organizations and
members. In this regard, the NYSE notes that NYSE Alternext will have
the same standard for membership as the NYSE, so that if NYSE Alternext
determines that an applicant is qualified to be an NYSE Alternext
member organization, the NYSE will accept NYSE Alternext's
determination as conclusive evidence that the applicant is eligible for
NYSE membership. In accordance with the Mergers, NYSE Alternext will
certify to the Exchange that all such transferring members met the
Amex's minimum membership standards at the time that they were approved
for membership and that nothing has come to the attention of NYSE
Alternext that would disqualify any of these members. If an 86 Trinity
Permit is revoked for any reason, such NYSE Alternext member
organization would not be deemed eligible to be approved as an NYSE
member organization.
The Exchange is also proposing to adopt a temporary rule to apply
to any NYSE Alternext member organizations that were approved as NYSE
Alternext member organizations because they were a holder of an 86
Trinity Permit. Pursuant to proposed Rule 300.10T, which is closely
modeled on the version of a similar rule in the NYSE Alternext
[[Page 46678]]
Equities filing, the Exchange would provide NYSE Alternext member
organizations with a six-month grace period within which to meet the
requirements of Exchange rules governing membership. Such grace period
would begin to run from the date that the NYSE Alternext member
organization transfers its equities operations to the NYSE Alternext
Trading Systems pursuant to a valid 86 Trinity Permit. If a member
organization fails to meet the requirements of Exchange rules governing
membership by the close of the grace period, the Exchange would revoke
a member organization's approval to trade. The Exchange would also
reserve the right to commence proceedings to terminate such a member
organization, if applicable.
The Exchange notes that the current Amex rules governing membership
are substantially similar to Exchange rules governing membership.\9\ An
Exchange requirement that the Amex currently does not have is that a
member organization must submit an opinion of counsel that a member
corporation's stock is validly issued and outstanding and that the
restrictions and provisions required by the Exchange on the transfer,
issuance, conversion and redemption of its stock have been made legally
effective.\10\ Accordingly, if a NYSE Alternext member organization has
not previously provided such an opinion of counsel to Amex, it must be
provided to NYSE Alternext within six months of the member organization
transferring its equities operations to the NYSE Alternext Trading
Systems pursuant to a valid 86 Trinity Permit.\11\
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\9\ Compare NYSE Rules 311-313 with Amex Rules 300, 301, 310,
311, 312, 341, 353, 356, and 359 and Article IV of the Amex
Constitution.
\10\ See NYSE Rule 313.20.
\11\ The Exchange rules governing membership impose certain
ongoing obligations on member organizations that are not contained
in the Amex membership rules and which NYSE Alternext member
organizations would need to meet. See NYSE Rules 311(b)(7),
312(f)(2), 313.10, 313.21, and 313.23.
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Similar to the NYSE Alternext Equities Rule filing, the Exchange
proposes that NYSE Alternext members be provided a grace period of six
months within which to meet NYSE Rule 304A requirements to pass an
examination required by the Exchange. The Exchange believes that this
grace period should begin to run from the date that the individual
member transfers to the NYSE Alternext Trading Systems, which may be a
later date than the Equities Relocation. In addition, the Exchange
proposes adding temporary Rule 304A.90T to address any changes that an
approved person may have to make in connection with being associated
with an Exchange member organization.
Finally, the Exchange proposes providing a temporary exemption from
the Rule 2 requirement that all member organizations be a FINRA member
for those NYSE Alternext member organizations that: (i) Hold a valid 86
Trinity Permit as of the date that the NYSE Alternext member
organization transfers its equities operations to NYSE Alternext
Trading Systems; (ii) are not currently a FINRA member; and (iii) are
eligible for FINRA's waive-in membership process under FINRA's proposed
Interpretive Material 1013-2.\12\ The Exchange proposes a 60-day grace
period for such NYSE Alternext member organizations to apply for and be
approved as FINRA members. Such grace period would run from the date
that the NYSE Alternext member organization transfers its equities
operation to NYSE Alternext Trading Systems pursuant to a valid 86
Trinity Permit, which may be a later date than the Equities Relocation.
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\12\ See SR-FINRA-2008-043.
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The proposed changes to Exchange rules are contingent on the
approval of the Merger Transaction filing, the closing of the Mergers,
and the approval of the NYSE Alternext Equities Rule filing.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
and furthers the objectives of Section 6(b)(5) \13\ of the Act, in that
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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. The proposed rule change also is designed to
support the principles of Section 11A(a)(1) \14\ of the Act in that it
seeks to assure fair competition among brokers and dealers and among
exchange markets and the practicability of brokers executing investors'
orders in the best market.
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\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78k-1(a)(1).
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Specifically, because NYSE and NYSE Alternext intend to have
identical membership standards, the NYSE believes that amending NYSE
Rule 2 to permit the cross-licensing of members and member
organizations based on approval from only one of the two self-
regulatory organizations will remove an impediment to free and open
markets by eliminating unnecessary regulatory duplication in the
membership process. Through this regulatory streamlining, the NYSE and
NYSE Alternext will enable broker-dealers to more efficiently enter
both the NYSE and NYSE Alternext market centers to begin providing
services on behalf of their customers. At the same time, the NYSE notes
that this proposal will not in any way lessen the regulatory scrutiny
that new NYSE members receive (and therefore does not adversely affect
the public interest or investor protection), since, prior to the NYSE
deeming their applications approved, applicants will have been reviewed
and approved by a self-regulatory organization that is applying the
same standard as the NYSE itself would apply.
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.
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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the NYSE consents, the Commission will:
(A) By order approve such proposed rule change; or
(B) Institute proceedings to determine whether the proposed rule
change should be 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
[[Page 46679]]
Send an e-mail to [email protected]. Please include
File Number SR-NYSE-2008-70 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-2008-70. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room, on official business
days between the hours of 10 a.m. and 3 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-
NYSE-2008-70 and should be submitted on or before September 2, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-18374 Filed 8-8-08; 8:45 am]
BILLING CODE 8010-01-P