[Federal Register Volume 75, Number 47 (Thursday, March 11, 2010)]
[Notices]
[Pages 11604-11605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5214]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61646; File No. SR-NYSE-2010-03]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving Proposed Rule Change Amending the Rule Governing the Issuance
of Trading Licenses
March 4, 2010.
I. Introduction
On January 13, 2010, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ a
proposal to amend its Rule 300 (Trading Licenses) and Rule 309 (Failure
to Pay Exchange Fees). The proposed rule change was published for
comment in the Federal Register on February 2, 2010.\4\ The Commission
received no comments regarding 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. 61424 (January 26,
2010), 75 FR 5367.
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II. Description of the Proposal
NYSE Rule 300 provides that member organizations may buy trading
licenses in the annual offering and may buy licenses at any other time
in the year, provided that the maximum number of 1,366 licenses has not
been issued and subject to limitations on the number of licenses a
single member organization may hold. Member organizations must pay for
their trading licenses in 12 monthly installments, with the first
installment due prior to the commencement of the applicable year. The
Exchange represents that it relies in part on the revenues from trading
license fees to pay for the maintenance of the trading floor and to
fund its trading floor regulatory activities. According to the
Exchange, if some member organizations consistently fail to pay their
trading license fee bills, the Exchange would be forced to impose
higher fees on those member organizations which do pay their bills.
The Exchange therefore proposes to amend Rule 300 to provide that a
member organization shall be ineligible to purchase a trading license,
either in the annual offering or subsequently, if, at the time of such
proposed purchase, such member organization remains three months in
arrears in paying monthly installments of the trading license fee
payable in respect of any previously purchased trading license.\5\ Any
trading license purchased by a member organization in the annual
auction for the calendar year commencing January 1, 2010, will be
subject to automatic revocation at the close of business on March 31,
2010, if the member organization that holds such license remains three
months in arrears in making such payments at that time.
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\5\ The Exchange also proposes to amend Rule 309 to explicitly
provide that failure to pay trading license fee installments will be
governed by proposed Rule 300(h).
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The Exchange also proposes to adopt appeal procedures for the
denial or revocation of a member organization's trading license. One
calendar month prior to the effective date of any potential denial of
renewal or revocation of a trading license (the ``Expiration Date'')
pursuant to Rule 300(h), the Exchange would notify each applicable
member organization that is currently two months or more in arrears in
paying monthly installments of the trading license fee payable in
respect of any previously purchased trading license of the amount of
then overdue trading license installment payments and the possibility
of denial of renewal or revocation of the trading license on the
Expiration Date. The notice must include a description of the appeal
process. If the member organization believes the Exchange's records are
incorrect, the member organization must submit a written appeal within
five business days of receipt of the Exchange's notice to the officer
of the Exchange identified for that purpose in such notice, providing
an explanation as to why it believes the Exchange's records are
incorrect, and providing copies of any relevant documentation. The
Exchange would be required to provide a final determination in writing
in response to any such appeal no later than 15 calendar days prior to
the effective date of the potential denial of renewal or revocation of
the applicable trading license.\6\ If the Exchange denies the appeal,
its written final determination must specifically address the arguments
made by the member organization in its submission. The Exchange's
written determination would be final and conclusive action by the
Exchange.
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\6\ The Exchange represents that, if it denies a member
organization's appeal under Rule 300(h), the Exchange will notify
the Commission in the manner required by Exchange Act Rule 19d-1.
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A written record would be required to be kept of any proceedings
under Rule 300(h). As the appeal procedures under proposed Rule 300(h)
would not include any provision for an oral hearing, the Exchange
expects that the written record would generally consist of (i) the
written appeal and supporting documents (if any) submitted by the
member organization and (ii) the Exchange's written determination.
Finally, the Exchange states that any member organization which
forfeits its trading licenses as of March 31, 2010 would only owe the
pro rata license fee for 2010 through that date. Any member
organization which forfeits its trading
[[Page 11605]]
licenses in 2010 or is ineligible to purchase trading licenses
thereafter may purchase trading licenses (to the extent there are
available unsold licenses) at such time as it is no longer three months
in arrears in its payments.
III. Discussion and Commission Findings
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 \7\ and, in
particular, the requirements of Sections 6(b)(4), 6(b)(5) and 6(b)(7)
of the Act.\8\ Section 6(b)(4) of the Act \9\ requires that the rules
of the exchange provide for the equitable allocation of reasonable
dues, fees, and other charges among its members and issuers and other
persons using its facilities. Section 6(b)(5) of the Act \10\ requires,
among other things, that the rules of a national securities exchange
are not designed to permit unfair discrimination between customers,
issuers, brokers or dealers. Section 6(b)(7) of the Act \11\ requires,
among other things, that the exchange's rules provide fair procedures
for prohibiting or limiting any person with respect to access to
services offered by the exchange or member thereof.
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\7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(4); 15 U.S.C. 78f(b)(5); 15 U.S.C.
78f(b)(7).
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(7).
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The Commission believes that the proposal is consistent with
Section 6(b)(4) of the Act \12\ in that it provides for an equitable
allocation of fees among member organizations. The Exchange represents
that it relies in part on the revenues from trading license fees to pay
for the maintenance of the trading floor and to fund its trading floor
regulatory activities. The trading license fees and rules limiting the
number of trading licenses that may be initially applied for are the
same for all member organizations, and member organizations would be
denied trading floor privileges only if they have not paid the trading
license fee for several months. The Commission notes that the proposal
may encourage member organizations to pay their bills more promptly and
thereby enable the Exchange to avoid imposing the cost of the
nonpayment by a small number of member organizations on the majority of
other member organizations that routinely pay on time.
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\12\ 15 U.S.C. 78f(b)(4).
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The Commission also believes that the proposal is consistent with
Sections 6(b)(5) and 6(b)(7) of the Act. The Commission notes that the
new procedures specify procedures to provide notice to member
organizations of a pending denial or revocation. In addition, member
organizations receive monthly trading license bills that reflect unpaid
balances from previous periods. The Exchange has also represented that
it would distribute an Information Memorandum to its member
organizations to inform them of the proposed rule change.\13\
Thereafter, the procedures provide that, one calendar month prior to
the Expiration Date, the Exchange will notify each applicable member
organization that is currently two months or more in arrears in paying
monthly installments of the trading license fee payable in respect of
any previously purchased trading license of the amount of then overdue
trading license installment payments and the possibility of denial of
renewal or revocation of the trading license on the Expiration Date.
The notice must include a description of the appeal process.
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\13\ The first such notice will be sent to member organizations
that are two months or more in
arrears as of the end of February 2010. See e-mail from John
Carey, Chief Counsel--U.S. Equities, NYSE Euronext LLC, to David
Liu, Assistant Director, and Leigh W. Duffy, Attorney-Adviser,
Division of Trading and Markets, Commission, dated January 25, 2010.
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The Commission also notes that the proposal clarifies the scope of
the Exchange's review on appeal and sets forth specific time frames for
scheduling and conducting an appeal of a pending denial or revocation.
If the member organization believes the Exchange's records are
incorrect, the member organization must submit a written appeal within
five business days of receipt of the Exchange's notice, providing an
explanation as to why it believes the Exchange's records are incorrect,
and providing copies of any relevant documentation. In addition, the
Exchange must provide a final determination in writing in response to
any such appeal no later than 15 calendar days prior to the effective
date of the potential denial of renewal or revocation of the applicable
trading license. If the Exchange denies the appeal, its written final
determination must specifically address the arguments made by the
member organization in its submission. The written determination shall
be final and conclusive action by the Exchange. In addition, the
Exchange has required a written record of any proceedings.
For these reasons, the Commission finds that the proposed rule
change is consistent with the requirements of the Act.\14\
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\14\ 15 U.S.C. 78f.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NYSE-2010-03) is hereby
approved.
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\15\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5214 Filed 3-10-10; 8:45 am]
BILLING CODE 8011-01-P