Document ID: SEC-2010-1156-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-08-02T04:00Z

[Federal Register: August 2, 2010 (Volume 75, Number 147)]
[Notices]               
[Page 45188-45190]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au10-140]                         

[[Page 45188]]

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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.
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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 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.
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    \4\ See Securities Exchange Act Release No. 61071 (November 30, 
2009), 74 FR 64109 (December 7, 2009) (order approving SR-FINRA-
2009-067).
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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\
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    \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.
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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.\6\
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    \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.
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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.
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    \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.
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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\
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    \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.
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    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\
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    \9\ NYSE Amex has submitted a companion rule filing amending its 
rules in accordance with FINRA's rule changes. See SR-NYSEAmex-2010-
72.
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    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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    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\
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    \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.
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    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\
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    \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).
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    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 rule-comments@sec.gov. 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.

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    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. 2010-18893 Filed 7-30-10; 8:45 am]
BILLING CODE 8010-01-P