Document ID: SEC-2008-1306-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-09-25T04:00Z

[Federal Register: September 25, 2008 (Volume 73, Number 187)]
[Notices]               
[Page 55580-55582]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se08-95]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58608; File No. SR-NYSEArca-2008-101]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Arca, Inc. To Temporarily 
Suspend the Requirements of NYSE Arca Rule 2.4 and Related NYSE Arca 
Rules Concerning Options Trading Permit Holder Applications and 
Approvals In Order To Immediately Approve Barclays Capital Inc. as an 
NYSE Arca OTP Holder

September 19, 2008.
    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 September 19, 2008, NYSE Arca, Inc. (``NYSE Arca'' 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 Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the 
proposal effective upon filing with the Commission.\6\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ NYSE Arca gave the Commission written notice of its 
intention to file the proposed rule change on September 19, 2008. 
The Commission reviewed the proposed rule change and gave NYSE Arca 
permission to file the proposed the rule change on the same day. 
NYSE Arca asked the Commission to waive the 30-day operative delay. 
See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to temporarily suspend the requirements of 
NYSE Arca Rule 2.4 and related NYSE Arca rules concerning Options 
Trading Permit (``OTP'') Holder applications and approvals in order to 
immediately approve Barclays Capital Inc. (``BCI'') as an NYSE Arca OTP 
Holder, subject to BCI complying with Exchange rules for applying to 
become an OTP Holder (and being approved by the Exchange) within 60 
days of the date that BCI is provisionally approved as an NYSE Arca OTP 
Holder.

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 Exchange proposes to temporarily suspend the requirements of 
NYSE Arca Rule 2.4 and related rules regarding the application and 
approval of OTP Holders in order to immediately approve, as an NYSE 
Arca OTP Holder, the entity that acquires the assets of Lehman Brothers 
Inc. (``LBI''). The Exchange proposes this temporary suspension on an 
emergency basis to ensure that the acquiring entity, Barclays Capital 
Inc. (``BCI''), which is a U.S. registered broker dealer and FINRA 
member, will be able to expeditiously complete its proposed acquisition 
of certain LBI assets and begin operating former LBI business lines, as 
early as September 22, 2008. This proposed temporary suspension is 
contingent upon BCI having applied for and been approved as a new NYSE 
Arca OTP Holder pursuant to Exchange rules within 60 days of the date 
that BCI is provisionally approved as an NYSE Arca OTP Holder pursuant 
to this rule filing.

[[Page 55581]]

1. Background
A. Lehman Files for Bankruptcy
    On September 15, 2008, Lehman Brothers Holding Inc. (``Lehman'') 
filed for bankruptcy protection in the United States Bankruptcy Court 
for the Southern District of New York under Chapter 11 of the U.S. 
bankruptcy code. Lehman is the parent holding company of LBI, which is 
a registered broker dealer and NYSE Arca OTP Holder.
    Although LBI did not file for bankruptcy protection at that time, 
Lehman's Chapter 11 status impacted the ability of LBI to continue 
operations.
    On September 17, 2008, Barclays Bank PLC (``Barclays''), a global 
financial services provider, announced that it had agreed to acquire 
the LBI investment banking and capital markets operations and 
supporting infrastructure for $1.75 billion (the ``proposed 
acquisition''). As part of the proposed acquisition, Barclays would be 
acquiring the LBI fixed income and equities sales, trading and 
research, and investment banking businesses, including Lehman Brothers 
Market Makers (``LBMM'') (the ``LBI businesses''). Barclays would also 
be acquiring approximately 10,000 LBI employees, the Lehman 
headquarters located at 745 Seventh Avenue in New York City, and two 
data centers located in New Jersey.
    The proposed acquisition is subject to a number of conditions, 
including approval by the United States Bankruptcy Court for the 
Southern District of New York and other regulatory approvals and 
antitrust review. Moreover, if the proposed acquisition is not 
completed by September 24, 2008, Barclays may terminate the agreement 
to acquire LBI businesses.
B. Barclays Will Transfer LBI Assets to BCI
    On September 19, 2008, Barclays announced that certain LBI assets, 
including its employees and businesses, will be transferred to its 
wholly-owned subsidiary, BCI. BCI is a registered U.S. broker dealer 
and FINRA member. However, BCI is not currently approved as an NYSE 
Arca OTP Holder.
    The Exchange understands that LBI will likely file for some form of 
bankruptcy protection on Friday, September 19, 2008, and thus by the 
close of business on Friday, LBI will be in the control of a trustee. 
The Exchange further understands that, subject to approval by the 
bankruptcy court, as part of the bankruptcy proceeding, LBI assets will 
be sold to Barclays and transferred to BCI. Accordingly, as early as 
September 19, 2008, BCI may own and control the LBI businesses.
2. Proposed Temporary Suspension of NYSE Arca Rule 2.4 and Related 
Rules
A. Background
    NYSE Arca Rule 2.4 requires any individual or organization applying 
to become an OTP Holder to complete an application and file it with the 
Exchange. NYSE Arca OTP Holder status cannot be transferred to the 
acquiring entity; the entity that proposes to continue the business 
operations of the predecessor member organization must be separately 
approved as an NYSE Arca OTP Holder.
B. A Temporary Suspension of NYSE Arca Rule 2.4 and Related Rules for 
BCI Is Consistent With the Act
    As proposed, BCI will continue the business operations of LBI in 
the same manner that they were operated by LBI. Because the bankruptcy 
proceeding for LBI will likely be on September 19, 2008, BCI could be 
eligible to begin operations as an NYSE Arca OTP Holder on Monday, 
September 22, 2008.
    To ensure that BCI can continue the LBI operations without 
unnecessary interruption, including all operations that required LBI to 
be an NYSE Arca OTP Holder, such as entering orders directly with the 
Exchange, the Exchange believes that BCI should be approved immediately 
as an NYSE Arca OTP Holder. The Exchange notes that BCI is already a 
registered broker dealer, which is a prerequisite to becoming an NYSE 
Arca OTP Holder. See NYSE Arca Rule 2.3.
    The Exchange therefore proposes providing BCI with a temporary 
suspension of NYSE Arca Rules 2.4 and 2.23, as they relate to approval 
to operate as an NYSE Arca OTP Holder and approval of a proposed OTP 
Holder's approved persons, and immediately approve BCI as an OTP 
Holder. As proposed, this temporary suspension is contingent upon:
     BCI providing the Exchange with sufficient information to 
confirm that BCI will meet its capital requirements as an NYSE Arca OTP 
Holder; and
     Within 60 days of BCI's approval as an NYSE Arca OTP 
Holder under this proposed filing, BCI and its approved persons will 
have applied for and complied with the Exchange's new member 
organization requirements, as set forth in the Exchange's rules.
    Moreover, the Exchange proposes that in addition to being approved 
as an NYSE Arca OTP Holder, to ensure that certain LBI market making 
operations can continue, BCI should also be deemed approved as a Market 
Maker as defined under NYSE Arca Rules 6.32A and 6.33. This approval is 
contingent upon BCI certifying in writing to the Exchange that, for the 
period immediately following approval as an NYSE Arca OTP Holder until 
such time that BCI is independently approved as an NYSE Arca OTP 
Holder:
     BCI will maintain the existing LBMM technologies, 
staffing, supervisory structure, and written supervisory procedures 
with respect to its market making operations; and
     Within 60 days of BCI's approval as an NYSE Arca OTP 
Holder under this proposed filing, BCI and its approved persons will 
have applied for registration as a Market Maker and will have been 
approved by the Exchange as a Market Maker, consistent with the 
Exchange's requirements for registration as a Market Maker pursuant to 
NYSE Arca Rule 6.33(a).
    Upon receipt of such written statement, the Exchange will approve 
BCI as a successor entity to LBI's registration as a Market Maker on 
the Exchange.
    As proposed, if BCI does not apply for and be approved as a new 
NYSE Arca OTP Holder pursuant to Exchange rules within 60 days of the 
effective date of this filing, BCI's provisional status as an approved 
NYSE Arca OTP Holder will no longer be effective.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\7\ in general, and furthers the objectives of Section 6(b)(5) 
of the Act,\8\ in particular, because it is 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

[[Page 55582]]

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: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for 30 days from the date of filing, 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 \9\ and 
Rule 19b-4(f)(6) thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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.
    NYSE Arca has requested the Commission to waive the 30-day 
operative delay. The Commission hereby grants NYSE Arca's request.\11\ 
The Commission notes that the Exchange is proposing that certain of its 
rules relating to membership requirements be temporarily suspended so 
that BCI can be provisionally approved as an NYSE Arca OTP Holder. The 
proposed relief does not exempt BCI from Exchange rule requirements 
governing member organizations. BCI would have a 60-day grace period 
within which to apply for and be approved under relevant Exchange 
rules. Moreover, the Commission believes that immediate effectiveness 
is appropriate to ensure a smooth transition of the LBI businesses to 
another entity. In particular, with respect to BCI, time is of the 
essence as it has been announced that BCI may succeed to LBI's assets 
as early as September 19, 2008. Therefore, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest and designates the proposed rule 
change as operative upon filing.
---------------------------------------------------------------------------

    \11\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposal's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

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-NYSEArca-2008-101 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2008-101. 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 between the hours 
of 10 a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at NYSE Arca's principal office and on its 
Internet 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-NYSEArca-2008-101 and should be 
submitted on or before October 16, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-22504 Filed 9-24-08; 8:45 am]

BILLING CODE 8010-01-P