Document ID: SEC-2009-1203-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-08-24T04:00Z

[Federal Register: August 24, 2009 (Volume 74, Number 162)]
[Notices]               
[Page 42717-42719]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24au09-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60512; File No. SR-NYSE-2009-75]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
by New York Stock Exchange LLC Adopting NYSE Rule 406 as New Rule 3250 
To Correspond With a Rule Change Recently Filed by the Financial 
Industry Regulatory Authority, Inc.

August 17, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 28, 2009, 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 substantially prepared by the self-
regulatory organization. The Exchange has designated this proposal 
eligible for immediate effectiveness pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt NYSE Rule 406 (Designation of 
Accounts) as new Rule 3250 to

[[Page 42718]]

correspond with a rule change recently filed by the Financial Industry 
Regulatory Authority, Inc. (``FINRA'') and approved by the 
Commission.\5\ The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://
www.nyse.com.
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    \5\ See Securities Exchange Act Release No. 59947 (May 20, 
2009), 74 FR 25293 (May 27, 2009) (order approving FINRA 2009-017).
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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 change is to adopt NYSE Rule 406 
(Designation of Accounts) as new Rule 3250 to correspond with a rule 
change recently filed by FINRA and approved by the Commission.\6\
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    \6\ Id.
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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,\7\ 
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'').\8\ As part of its 
effort to reduce regulatory duplication and relieve firms that are 
members of both FINRA and the Exchange 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.\9\
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    \7\ 17 CFR 240.17d-2.
    \8\ See Securities Exchange Act Release No. 56148 (July 26, 
2007), 72 FR 42146 (August 1, 2007) (order approving the Agreement) 
and Securities Exchange Act Release No. 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''). Paragraph 
2(b) of the 17d-2 Agreement sets forth procedures regarding proposed 
changes by either NYSE or FINRA to the substance of any of the 
Common Rules.
    \9\ 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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Proposed Conforming Amendment to NYSE Rules
    As discussed in more detail below, FINRA adopted FINRA Incorporated 
NYSE Rule 406 (Designation of Accounts) as consolidated FINRA Rule 
3250, subject to some minor technical changes. The NYSE hereby proposes 
to adopt NYSE Rule 406 as new Rule 3250 to conform to the rule change 
adopted by FINRA.\10\
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    \10\ NYSE Amex LLC has submitted a companion rule filing to 
conform its corresponding NYSE Amex Equities Rules to the changes 
proposed in this filing. See SR-NYSE-Amex-2009-51, formally 
submitted July 28, 2009.
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    Specifically, FINRA Incorporated NYSE Rule 406 provides that no 
NYSE member organization shall carry an account on its books in the 
name of a person other than that of the customer. However, an account 
may be designated by a number or symbol, provided the member 
organization has a written statement of ownership signed by the 
customer. This Rule has been used to address, inter alia, sales 
practice abuses, including commingling of funds, failure to disclose 
ownership interests in accounts and unauthorized trading.\11\
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    \11\ See Securities Exchange Act Release No. 59947 (May 20, 
2009), 74 FR 25293 (May 27, 2009).
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    FINRA adopted FINRA Incorporated NYSE Rule 406 as consolidated 
FINRA Rule 3250 because it believes the Rule is an important 
enforcement tool and should be applied to all FINRA members and not 
just Dual Members. In addition, the Rule provides customers and their 
accounts with a level of anonymity that may be useful while still 
permitting identification to the member organization carrying the 
account as well as regulators. Upon adoption of Rule 3250, FINRA made 
minor technical changes to apply the Rule to all FINRA members, 
replacing the terms ``member organization'' or ``organization'' with 
the term ``member.'' \12\
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    \12\ Id.
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    To harmonize the NYSE Rules with the approved FINRA Rules, the 
Exchange correspondingly proposes to adopt NYSE Rule 406 as new Rule 
3250, which is substantially similar to the new FINRA Rule. As 
proposed, NYSE Rule 3250 adopts the same language as FINRA Rule 3250, 
except for retaining or adding, as needed, the term ``member 
organization'' and making corresponding technical changes. As with the 
consolidated FINRA Rule, under proposed NYSE Rule 3250 Exchange member 
organizations will be required to carry customer accounts in the name 
of the customer, except that an account may be designated by a number 
or symbol, as long as the member maintains documentation identifying 
the customer.\13\
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    \13\ Id. As noted by FINRA, member organizations are subject to 
additional requirements regarding customer accounts under the Act. 
See, e.g., 17 CFR 240.17a-3(a)(9) (requiring records indicating the 
name and address of the beneficial owner of cash and margin customer 
accounts).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\15\ in particular, in that it 
is 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 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

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if

[[Page 42719]]

consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \16\ 
and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). 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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    The Exchange has requested that the Commission waive the 30-day 
operative delay so that the proposal may become operative immediately 
upon filing. The Commission has determined that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because such waiver will allow the Exchange to promptly 
conform its rule with the approved FINRA Rule, and will ensure the 
elimination of any potential regulatory gap and that the NYSE Rules 
maintain their status as Common Rules under the Agreement. Therefore, 
the Commission designates the proposal operative upon filing.\18\
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    \18\ 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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    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-2009-75 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-2009-75. 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 inspection and 
copying 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 the filing will also be available for 
inspection and copying at the principal office of the Exchange and on 
its Web site at http://www.nyse.com. 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-2009-75 and should be submitted on 
or before September 14, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-20196 Filed 8-21-09; 8:45 am]

BILLING CODE 8010-01-P