[Federal Register Volume 76, Number 47 (Thursday, March 10, 2011)]
[Notices]
[Pages 13251-13252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5516]
[[Page 13251]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64039; File No. SR-NYSE-2011-09]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending Exchange Rule 103B To
Modify the Application of the Exchange's Designated Market Maker
(``DMM'') Allocation Policy in the Event of a Merger Involving One or
More Listed Companies
March 4, 2011.
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 February 24, 2011, 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.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 Exchange Rule 103B to modify the
application of the Exchange's Designated Market Maker (``DMM'')
allocation policy in the event of a merger involving one or more listed
companies. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, on the Commission's
Web site at http://www.sec.gov, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Policy Note VI(D)(1) to Exchange Rule 103B provides that when two
NYSE listed companies merge, the post-merger listed company is assigned
to the DMM in the company that is determined to be the survivor-in-fact
(dominant company). Under Exchange policy, the determination of which
company is the survivor-in-fact is based on which of the merging
companies provides the chief executive officer and a majority of the
board of directors of the post-merger listed company. The policy
focuses on the CEO and the make-up of the board of the post-merger
listed company rather than on any criteria based on the relative sizes
of the pre-merger companies because the Exchange believes that the
post-merger listed company's CEO and board will have the relationship
with the DMM going forward and should therefore be comfortable with the
DMM allocated to the post-merger listed company. Under the Exchange
policy, no survivor-in-fact will be found if one of the merging
companies provides the CEO and the other merging company provides a
majority or half of the board of the post-merger listed company. Where
no survivor-in-fact can be identified, the post-merger listed company
may select one of the units trading the merging companies without the
security being referred for reallocation, or it may request that the
matter be referred for allocation through the allocation process
pursuant to Exchange Rule 103B, Section III. In addition, Policy Note
VI(D)(3) provides that in situations involving the merger of a listed
company and an unlisted company, where the unlisted company is
determined to be the survivor-in-fact, the post-merger listed company
may choose to remain registered with the DMM unit that had traded the
listed company entity in the merger, or it may request that the matter
be referred for allocation through the allocation process pursuant to
Exchange Rule 103B.\4\
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\4\ A company seeking to choose a DMM through the allocation
process must select a minimum of three DMM units to interview from
the pool of DMM units eligible to participate in the allocation
process and must notify the Exchange of its choice of DMM within two
business days of the interviews. Alternatively, the company can
delegate to the Exchange the authority to select its DMM. In that
case, the selection is made by an Exchange Selection Panel (``ESP'')
comprised of senior management of the Exchange, Exchange floor
operations staff and non-DMM Executive Floor Governors or Floor
Governors.
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The Exchange believes that the decision as to how the stock of a
post-merger listed company is allocated should be made solely by the
post-merger listed company itself, rather than on the basis of which
company is determined to be the survivor-in-fact in the merger. The
Exchange believes that it is important that the CEO and board of the
post-merger listed company are comfortable with its assigned DMM and
that it therefore makes sense to give the post-merger listed company as
much control as possible over the allocation decision. Consequently,
the Exchange proposes to amend Policy Note VI(D)(1) and (3) to provide
that in all listed company mergers, either between two listed companies
or a listed company and an unlisted company, the management of the
post-merger listed company will be able to choose to retain either of
the incumbent DMMs (in the case of a merger between two listed
companies) or the incumbent DMM (in the case of a merger between a
listed company and an unlisted company) or request to have the security
referred for reallocation. In no case will the policy dictate that a
post-merger listed company must retain an incumbent DMM unless it
chooses to do so. The Exchange notes that Section 806.01 of the NYSE
Listed Company Manual provides that a listed company can request a
change of DMM at any time and that giving post-merger listed companies
control over the allocation decision in connection with a merger is
consistent with that approach. The Exchange also notes that the
proposed rule change would only affect a very small number of companies
and their DMMs, as it would be applicable only in the case of a merger
transaction where one of the two merging companies would otherwise be
deemed the ``survivor-in-fact'' under Exchange policies.
The Exchange notes that Policy Note VI(D)(1) and (3) both provide
that DMM units that are ineligible to receive a new allocation due to
their failure to meet the requirements of Exchange Rule 103B, Section
II(D) and (E) will remain eligible to be selected pursuant to Policy
Note VI(D)(1) or (3), as applicable. The Exchange proposes to amend the
language in each section to clarify that its intent is that in such
cases the applicable DMM unit will be eligible to be selected in its
capacity as the DMM for one of the two pre-merger listed companies (in
the case of a merger between two listed companies) or in its capacity
as DMM of the pre-merger
[[Page 13252]]
listed company (in the case of a merger between a listed company and an
unlisted company), but will not be eligible to participate in the
allocation process if the post-merger company requests that the matter
be referred for allocation through the allocation process pursuant to
NYSE Rule 103B, Section III. In the event that such a situation were to
arise, the Exchange would inform the listed company of such DMM unit's
ineligibility under Exchange Rule 103B, Section II(D) or (E).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \5\ of the Securities Exchange Act of 1934 (the
``Act''),\6\ in general, and furthers the objectives of Section 6(b)(5)
of the Act,\7\ in particular in that it is designed to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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 Exchange believes that
the proposed amendments are consistent with Section 6(b)(5) of the Act
in that their sole purpose is to provide more control over the DMM
allocation process to companies involved in mergers, all DMMs are
subject to the same Exchange rules and oversight when conducting their
DMM activities, and the proposed amendments are consistent with Section
806.01 of the Listed Company Manual as previously approved by the
Commission.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78a.
\7\ 15 U.S.C. 78f(b)(5).
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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 45 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 self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the 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
Send an e-mail to [email protected]. Please include
File Number SR-NYSE-2011-09 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-2011-09. 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 website 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 available publicly. All
submissions should refer to File Number SR-NYSE-2011-09 and should be
submitted on or before March 31, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5516 Filed 3-9-11; 8:45 am]
BILLING CODE 8011-01-P