[Federal Register Volume 75, Number 147 (Monday, August 2, 2010)]
[Notices]
[Pages 45188-45190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18893]
[[Page 45188]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62569; File No. SR-NYSE-2010-54]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Deleting NYSE Rule 123G and Adopting New Rule 5290 To Correspond With
Rule Changes Filed by the Financial Industry Regulatory Authority, Inc.
July 26, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on July 19, 2010, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to delete NYSE Rule 123G and adopt new Rule
5290 to correspond with rule changes filed by the Financial Industry
Regulatory Authority, Inc. (``FINRA'') and approved by the
Commission.\4\ The text of the proposed rule change is available at the
Exchange, at the Commission's Public Reference Room, on the
Commission's Web site at http://www.sec.gov, and at http://www.nyse.com.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 61071 (November 30,
2009), 74 FR 64109 (December 7, 2009) (order approving SR-FINRA-
2009-067).
---------------------------------------------------------------------------
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 purpose of the proposed rule changes is to delete NYSE Rule
123G (Order Entry Practices) and adopt new Rule 5290 (Order Entry and
Execution Practices) to correspond with rule changes filed by FINRA and
approved by the Commission.
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.\5\
---------------------------------------------------------------------------
\5\ 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.
---------------------------------------------------------------------------
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.\6\
---------------------------------------------------------------------------
\6\ 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.
---------------------------------------------------------------------------
Current NYSE Rule 123G
NYSE Rule 123G provides that a member, member organization, allied
member (principal executive),\7\ approved person, or registered or non-
registered employee thereof, may not engage in conduct that has the
intent or effect of unbundling or splitting orders for execution in
order to maximize a monetary or in-kind payment received as a result of
the execution of such orders. For purposes of the Rule, ``monetary or
in-kind amounts'' include commissions, gratuities, payments for or
rebate of fees, or any similar payments of value resulting from the
entry of such orders.
---------------------------------------------------------------------------
\7\ In 2008, as part of the FINRA rulebook consolidation and
harmonization process, the Exchange replaced the term ``allied
member'' in certain NYSE Rules with the newly defined term of
``principal executive'', which has substantially the same meaning.
See Securities Exchange Act Release No. 58549 (September 15, 2008),
73 FR 54444 (September 19, 2008) (SR-NYSE-2008-80). Rule 123G should
have been updated at that time to include ``principal executives''
but was not.
---------------------------------------------------------------------------
Current FINRA Rule 5290
In December 2009, FINRA adopted NASD Rule 3380 (Order Entry and
Execution Practices), which governs certain order entry and/or
execution practices, as consolidated FINRA Rule 5290, subject to
certain modifications.\8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 61071 (November 30,
2009), 74 FR 64109 (December 7, 2009). In this filing FINRA also
adopted NASD Rule 3120 (Use of Information Obtained in Fiduciary
Capacity) as consolidated FINRA Rule 2060. The Exchange does not
intend to adopt a corresponding rule at this time.
---------------------------------------------------------------------------
Consolidated FINRA Rule 5290 is substantially the same as NYSE Rule
123G; however, consolidated FINRA Rule 5290 applies to the unbundling
or splitting of both orders and executions, whereas NYSE Rule 123G
applies only to order entry and not execution.
Proposed Conforming Amendments to NYSE Rules
Even though NYSE Rule 123G is not part of the Common Rules subject
to the rulebook consolidation and harmonization process governed by the
Agreement, the Exchange hereby proposes to delete Rule 123G and replace
it with proposed NYSE Rule 5290, which is substantially similar to the
new FINRA Rule.\9\
---------------------------------------------------------------------------
\9\ NYSE Amex has submitted a companion rule filing amending its
rules in accordance with FINRA's rule changes. See SR-NYSEAmex-2010-
72.
---------------------------------------------------------------------------
As proposed, NYSE Rule 5290 adopts the same language as FINRA Rule
5290, except for substituting for or adding to, as needed, the term
``member organization'' for the term ``member'', and making
corresponding technical changes. In addition, in order to ensure that
both proposed NYSE Rule 5290 and FINRA Rule 5290 are fully harmonized,
the Exchange also proposes to add Supplementary Material .01 to NYSE
Rule 5290 to provide that, for the
[[Page 45189]]
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 also notes that, upon adoption of proposed Rule 5290,
it intends to add the Rule to the Agreement as a Common Rule for dual
NYSE/FINRA members.
2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with Section 6(b) of the Act,\10\ in general, and further the
objectives of Section 6(b)(5) of the Act,\11\ in particular, in that
they are 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule changes support the
objectives of the Act by providing greater harmonization between NYSE
Rules and FINRA Rules (including Common Rules) of similar purpose,
resulting in less burdensome and more efficient regulatory compliance
for Dual Members. To the extent the Exchange has proposed changes that
differ from the FINRA version of the Rules, such changes are technical
in nature and do not change the substance of the proposed NYSE Rules.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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.\14\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ See id. In addition, Rule 19b-4(f)(6) requires a self-
regulatory organization to give the Commission written notice of its
intent to file 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ 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 proposal
may become operative immediately upon filing. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because such waiver
will enable the Exchange to immediately implement new NYSE Rule 5290 to
prevent any regulatory gaps between the NYSE and FINRA rules. In
addition, as noted by the Exchange, NYSE Rule 5290 is consistent with
FINRA Rule 5290, which was previously approved by the Commission.\17\
---------------------------------------------------------------------------
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ See supra note 4. 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).
---------------------------------------------------------------------------
Accordingly, the Commission waives the 30-day operative delay
requirement and designates the proposed rule change as operative upon
filing with the Commission. At any time within 60 days of the filing of
the proposed rule change, the Commission may summarily abrogate 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.
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 e-mail to [email protected]. Please include
File Number SR-NYSE-2010-54 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2010-54. 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 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
a.m. and 3 p.m. Copies of such 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 publicly available. All
submissions should refer to File Number SR-NYSE-2010-54 and should be
submitted on or before August 23, 2010.
[[Page 45190]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18893 Filed 7-30-10; 8:45 am]
BILLING CODE 8010-01-P