Document ID: SEC-2007-1056-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-08-02T04:00Z

[Federal Register: August 2, 2007 (Volume 72, Number 148)]
[Notices]               
[Page 42453-42455]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au07-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56143; File No. SR-NYSE-2007-59]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend NYSE Rules 342(c) (``Offices--Approval, Supervision and 
Control'') and 343 (``Offices--Sole Tenancy, Hours, Display of 
Membership Certificates'')

July 26, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 29, 2007, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by NYSE. On July 
26, 2007, the Exchange submitted Amendment No. 1 to the proposed rule 
change. The Exchange filed the proposal as a ``non-controversial'' rule 
change pursuant to section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposal effective upon 
receipt of this filing by the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
amended, 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)(iii).
    \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 NYSE is filing with the Commission (``SEC'' or ``Commission'') 
proposed amendments to NYSE Rules 342(c) (``Offices--Approval, 
Supervision and Control'') to replace the prior consent requirement for 
branch office approval with a notice requirement and 343 (``Offices--
Sole Tenancy, Hours, Display of Membership Certificates'') to eliminate 
the requirement under Rule 343 that member organizations display an 
Exchange-provided ``certificate of membership'' at all branch office 
locations. The text of the proposal is available on the Exchange's Web 
site (http://www.nyse.com), at the principal office of the NYSE, and at 

the Commission's Public Reference Room.

[[Page 42454]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE 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 these statements may be examined at the places specified in 
Item IV below. NYSE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend NYSE Rule 342(c) and delete 
paragraph (d) of Rule 343 as part of its continuing Self Regulatory 
Organization (``SRO'') Rule Harmonization initiative.\5\ The proposed 
amendment to Rule 342(c) will replace the prior consent requirement for 
branch office approval with a notice requirement and make the provision 
consistent with the definition of ``branch office'' set forth in Rule 
342.10. The proposed amendment to Rule 343 will delete the Rule 343(d) 
requirement that member organizations display an Exchange-provided 
``certificate of membership'' at all branch offices.
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    \5\ See SR-NYSE-2007-22 for additional information.
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a. Rule 342(c) (``Offices--Approval, Supervision and Control'') 
Background
    NYSE Rule 342.10 defines ``branch office'' as ``any location where 
one or more associated persons of a member or member organization 
regularly conduct the business of effecting any transactions in, or 
inducing or attempting to induce the purchase or sale of any security, 
or is held out as such * * *'' Rule 342(c) requires that member 
organizations obtain the Exchange's prior consent or approval 
(hereinafter referred to as the ``prior consent'' requirement) for each 
office to be established, other than a main office.
    Currently, member organizations are required to submit requests for 
approval of branch office locations via Form BR (Uniform Branch Office 
Registration Form),\6\ filed with the Central Registration Depository 
(``CRD''). All filings made with CRD, whether Exchange member 
organizations or not, are subjected to numerous system completeness 
checks.\7\
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    \6\ See NYSE Information Memo 05-75 (Approval of Form BR 
(Uniform Branch Office Registration Form)).
    \7\ Completeness checks conducted on Form BR filings include, 
for example, a review for proper registration, pursuant to National 
Association of Securities Dealers, Inc. (``NASD'') Rules, of 
supervisory individuals. A Form BR would not be processed by CRD if 
any completeness checks were not satisfied.
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    Once filed with CRD, a branch office application is routed to the 
NYSE via four daily feeds from the NASD, for review through the NYSE's 
Branch Office System (``BOS'') application. BOS conducts a series of 
data validation reviews in addition to the CRD completeness checks on 
the filings received to determine whether to ``auto-approve'' the 
application when a filing does not have any validation issues, or route 
the filing to designated NYSE personnel for further review of the 
application.

Current Rule 342(c) Standard

    Under the current prior consent requirement set forth by NYSE Rule 
342(c), a vast majority of member organization branch offices are 
approved. In the limited situations where such consent is not initially 
given by the Exchange, a member organization may be required to amend 
its request for branch office approval. Even in these situations, 
however, such consent is nearly always granted by the Exchange, 
rendering the prior consent requirement unnecessary.\8\
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    \8\ From November 1, 2005 through December 31, 2006, NYSE 
received 3,831 branch office applications, of which, slightly under 
half, that is 1,913, were ``auto'' or ``managed'' approved 
applications, requiring intervention only on a technical support 
level in some instances. Of the remaining applications received, 
1,918, the vast majority were manually reviewed and approved by NYSE 
personnel. The 3,831 office applications received and reviewed 
resulted in only 76 rejections, or roughly 2% of the total received. 
These office applications were rejected for reasons such as 
individuals designated as supervisors not being properly qualified 
under NYSE requirements or incorrect designation of office type 
(e.g., ``Small'' instead of ``Regular'' branch office).
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Current NASD Standard

    The NASD requires that any office other than the main office be 
properly designated and registered, if required, with the NASD\9\ 
(hereinafter referred to as the ``notice'' requirement). The NASD rule 
and a vast majority of the states'' laws and regulations do not require 
prior consent to open a branch office. Since there is no corresponding 
requirement for NASD members, the NYSE's prior consent requirement 
results in disparate regulatory standards for dual NYSE/NASD member 
organizations, and the utility of the NASD registration requirement is 
limited, as dual members have to comply with the more stringent NYSE 
requirement.
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    \9\ See NASD Rule 3010(g)(2)(A) and NASD IM-1000-4.
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Proposed Rule Change

    The Exchange proposes to replace the Rule 342(c) prior consent 
requirement for branch office approval with a notice requirement 
consistent with the NASD notice requirement. Specifically, the Exchange 
proposes to amend Rule 342(c) to state that a ``member organization 
shall provide, in a manner prescribed by the Exchange, notice to the 
Exchange of each branch office established by such member 
organization.'' Under the proposed notice requirement, the Exchange 
will continue to receive the same information it currently receives 
under the prior consent requirement, which will still allow the 
Exchange to monitor branch office applications. Thus the front-end 
completeness checks in CRD, coupled with the continued receipt of 
branch office profile information contained on Form BR, will afford the 
Exchange the opportunity to thoroughly monitor branch office filings 
submitted and take action where appropriate without unduly delaying the 
initiation of business activities at such offices.
    The Exchange also proposes to conform Rule 342(c) with the 
definition of ``branch office'' set forth in Rule 342.10. As noted 
above, Rule 342(c) currently applies to ``each office * * * other than 
a main office.'' The Exchange proposes to delete the phrase ``other 
than a main office'' from Rule 342(c) because, based on the definition 
of branch office in Rule 342.10, a branch office may include a main 
office location, depending on the functions performed at that location.
    In addition, the Exchange proposes to delete the term ``member'' 
from Rule 342(c) as part of an ongoing process to eliminate, where 
appropriate, this designation from its rules. The proposed deletion of 
the term reflects the fact that the Rule has been redefined in the 
context of the NYSE/ARCA business model \10\ and no longer has 
regulatory relevance in the context of Rule 342(c).
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    \10\ See Securities Exchange Act Release No. 53382 (February 27, 
2006), 71 FR 11251 (March 6, 2006) (order approving SR-NYSE-2005-77) 
and SR-NYSE-2007-22.
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    Also, the Exchange proposes deleting the requirement under Rule 
343(d) that member organizations display an Exchange-provided 
``certificate of membership'' at all branch office locations. The 
Exchange believes this practice has become outdated.
    The Exchange requests that the rule change be effective 
immediately.

[[Page 42455]]

2. Statutory Basis
    The statutory basis for the proposed rule change is section 6(b)(5) 
of the Act \11\ which requires, among other things, that the rules of 
the Exchange be designed to prevent fraudulent and manipulative acts 
and practices, 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 national market 
system, and in general, to protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed amendment to Rule 342(c) will 
provide greater harmonization between the Exchange and NASD rules by 
eliminating the prior consent requirement for branch office approval 
and replacing it with a notice requirement so that dual NYSE/NASD 
member organizations must only comply with one standard.

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

    The Exchange has neither solicited nor received written comments on 
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: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, become operative for 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, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act\12\ and 
Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of 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 Commission notes that NYSE has satisfied the five-
day pre-filing notice requirement.
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest.
    The Exchange believes that good cause exists to justify immediate 
effectiveness because under the proposed amendments to Rule 342(c), the 
Exchange will continue to receive the same information it currently 
receives under the prior consent requirement and thus, will be able to 
monitor branch office applications. Also, the front-end completeness 
checks in CRD, coupled with the continued receipt of branch office 
profile information contained on Form BR, will afford the Exchange the 
opportunity to thoroughly monitor branch office filings submitted and 
take action where appropriate without unduly delaying the initiation of 
business activities at such offices.
    The Commission believes that for these reasons, and because the 
proposed rule change more closely conforms NYSE and NASD regulatory 
standards, waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing with the Commission.\14\
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    \14\ 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 such 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.\15\
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    \15\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on July 26, 2007, the date on which NYSE submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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-2007-59 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F. Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSE-2007-59. 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 such filing also will be available for 
inspection and copying at the principal office of NYSE. 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-2007-59 and should be 
submitted on or before August 23, 2007.

    For the Commission, by the Division of Market Regulation, 
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. E7-14914 Filed 8-1-07; 8:45 am]

BILLING CODE 8010-01-P