[Federal Register Volume 75, Number 89 (Monday, May 10, 2010)]
[Notices]
[Pages 25902-25904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10953]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62015; File No. SR-NYSE-2010-23]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving Proposed Rule Change Deleting NYSE Rule 446 and Adopting New
Rule 4370 To Correspond With Rule Changes Filed by the Financial
Industry Regulatory Authority, Inc.
April 30, 2010.
I. Introduction
On March 11, 2010, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act
[[Page 25903]]
of 1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ a proposed rule
change to delete NYSE Rule 446 and adopt new Rule 4370 to correspond
with rule changes filed by the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and approved by the Commission.\4\ The proposed rule
change was published for comment in the Federal Register on March 26,
2010.\5\ The Commission received no comments on the proposal. This
order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 60534 (August 19,
2009), 74 FR 44410 (August 28, 2009) (order approving SR-FINRA-2009-
036) (``Release No. 34-60534'').
\5\ See Securities Exchange Act Release No. 61743 (March 19,
2010), 75 FR 14650.
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II. Description of the Proposal
The Exchange proposes to delete NYSE Rule 446 and adopt new Rule
4370 to correspond with rule changes filed by FINRA and approved by the
Commission.\6\
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\6\ See Release No. 34-60534, supra note 4.
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Background
On July 30, 2007, FINRA's predecessor, the National Association of
Securities Dealers, Inc. (``NASD''), and NYSE Regulation, Inc.
(``NYSER'') consolidated their member firm regulation operations into a
combined organization, FINRA. Pursuant to Rule 17d-2 under the Act,
NYSE, NYSER and FINRA entered into an agreement (the ``Agreement'') to
reduce regulatory duplication for their members by allocating to FINRA
certain regulatory responsibilities for certain NYSE rules and rule
interpretations (``FINRA Incorporated NYSE Rules''). NYSE Amex LLC
(``NYSE Amex'') became a party to the Agreement effective December 15,
2008.\7\
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\7\ See Securities Exchange Act Release Nos. 56148 (July 26,
2007), 72 FR 42146 (August 1, 2007) (order approving the Agreement);
56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) (SR-NASD-2007-
054) (order approving the incorporation of certain NYSE Rules as
``Common Rules''); and 60409 (July 30, 2009), 74 FR 39353 (August 6,
2009) (order approving the amended and restated Agreement, adding
NYSE Amex LLC as a party). Paragraph 2(b) of the Agreement sets
forth procedures regarding proposed changes by FINRA, NYSE or NYSE
Amex to the substance of any of the Common Rules.
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As part of its effort to reduce regulatory duplication and relieve
firms that are members of FINRA, NYSE and NYSE Amex of conflicting or
unnecessary regulatory burdens, FINRA is now engaged in the process of
reviewing and amending the NASD and FINRA Incorporated NYSE Rules in
order to create a consolidated FINRA rulebook.\8\
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\8\ FINRA's rulebook currently has three sets of rules: (1) NASD
Rules, (2) FINRA Incorporated NYSE Rules, and (3) consolidated FINRA
Rules. The FINRA Incorporated NYSE Rules apply only to those members
of FINRA that are also members of the NYSE (``Dual Members''), while
the consolidated FINRA Rules apply to all FINRA members. For more
information about the FINRA rulebook consolidation process, see
FINRA Information Notice, March 12, 2008.
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In 2008, FINRA deleted FINRA Incorporated NYSE Rule 446 (Business
Continuity and Contingency Plans) as substantively duplicative of NASD
Rules 3510 (Business Continuity Plans) and 3520 (Emergency Contact
Information).\9\ Correspondingly, the Exchange amended NYSE Rule 446
(Business Continuity and Contingency Plans) to remove the existing text
and incorporate NASD Rules 3510 and 3520 by reference.\10\
Subsequently, FINRA adopted, subject to certain amendments, NASD Rules
3510 and 3520 as consolidated FINRA Rule 4370 (Business Continuity
Plans and Emergency Contact Information).\11\
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\9\ See Securities Exchange Act Release No. 58533 (September 12,
2008), 73 FR 54652 (September 22, 2008) (order approving SR-FINRA-
2008-036).
\10\ See Securities Exchange Act Release No. 58549 (September
15, 2008), 73 FR 54444 (September 19, 2008) (order approving SR-
NYSE-2008-080).
\11\ See Release No. 34-60534, supra note 4.
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The Exchange correspondingly proposes to delete NYSE Rule 446 and
replace it with proposed NYSE Rule 4370, which is substantially similar
to the new FINRA Rule.\12\ The Exchange states that the purpose of this
proposed rule change is to harmonize the NYSE Rules with the
consolidated FINRA Rules. The Exchange states that, as proposed, NYSE
Rule 4370 adopts the same language as FINRA Rule 4370, except for
substituting for or adding to, as needed, the term ``member
organization'' for the term ``member,'' and making corresponding
technical changes that reflect the difference between NYSE's and
FINRA's membership structures. The Exchange also states that, in
paragraph (f)(2) to proposed NYSE Rule 4370, the Exchange has added a
cross-reference to NYSE Rule 416A to ensure that those Exchange members
and member organizations that are not FINRA members are required to
update the contact information for emergency personnel in accordance
with NYSE Rules.
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\12\ NYSE Amex submitted a companion rule filing amending its
rules in accordance with FINRA's rule changes, which the Commission
has approved. See Securities Exchange Act Release No. 62014 (April
30, 2010) (SR-NYSE-Amex-2010-26).
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The Exchange also proposes to add Supplementary Material .01 to
NYSE Rule 4370 to provide that, for the purposes of the rule, the term
``associated person'' shall have the same meaning as the terms ``person
associated with a member'' or ``associated person of a member'' as
defined in Article I (rr) of the FINRA By-Laws. The Exchange states
that this change is necessary to ensure that both proposed NYSE Rule
4370 and FINRA Rule 4370 are fully harmonized.
Finally, the Exchange proposes that the effective date for the
proposed rule changes be retroactive to December 14, 2009, the same
effective date for the corresponding FINRA rule changes.\13\ As a
result, there should be no regulatory gaps between the FINRA and NYSE
Rules and that, as applicable, the NYSE Rules would maintain their
status as Common Rules under the Agreement.\14\
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\13\ See FINRA Regulatory Notice 09-60 (October 15, 2009).
\14\ As provided in paragraph 2(b) of the Agreement, FINRA and
NYSE will amend the list of Common Rules to conform to the rule
changes proposed herein.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange. In
particular, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\15\ which requires, among other things,
that the rules of a national securities exchange be 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.\16\
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\15\ 15 U.S.C. 78f(b)(5).
\16\ In approving the proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
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The Commission believes that the proposed rule change provides
greater harmonization between NYSE Rules and FINRA Rules (including
Common Rules) of similar purpose, resulting in less burdensome and more
efficient regulatory compliance for NYSE members, including Dual
Members. In addition, the Commission believes that retroactive
application of the proposed rule change to December 14, 2009 is
appropriate to assure that there are no regulatory gaps between FINRA
and NYSE Rules, and that, as applicable, the NYSE Rules would maintain
their status as Common Rules under the Agreement.
[[Page 25904]]
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-NYSE-2010-23) be, and hereby
is, approved.
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\17\ 15 U.S.C. 78s(b)(2).
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).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10953 Filed 5-7-10; 8:45 am]
BILLING CODE 8010-01-P