Document ID: SEC-2009-0083-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-01-16T05:00Z

[Federal Register: January 16, 2009 (Volume 74, Number 11)]
[Notices]               
[Page 3120-3123]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ja09-146]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59231; File No. SR-NYSE-2008-143]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending NYSE Rule 103B (``Security Allocation and Reallocation'') to: 
(1) Prohibit DMM Units From Communicating With Issuers After Receipt of 
Notice From the Exchange of the Issuer's Impending Listing; (2) Provide 
DMM Unit Marketing Materials to the Issuer Prior to the Scheduled 
Interview Rather Than the Day Before; and (3) Allow an Issuer 
Transferring From NYSE Alternext U.S. LLC to the NYSE To Retain its DMM 
Unit if Such DMM Unit Is an Approved and Registered DMM on the NYSE

January 12, 2009.
    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 December 31, 2008, 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 NYSE Rule 103B (``Security 
Allocation and Reallocation'') to: (1) Prohibit DMM units from 
communicating with issuers after receipt of notice from the Exchange of 
the issuer's impending listing; (2) provide DMM unit marketing 
materials to the issuer prior to the scheduled interview rather than 
the day before; and (3) allow an issuer transferring from NYSE 
Alternext U.S. LLC (``Alternext'') to the NYSE to retain its DMM unit 
if such DMM unit is an approved and registered DMM on the NYSE.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nyse.com), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

[[Page 3121]]

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 amend NYSE Rule 103B (``Security 
Allocation and Reallocation'') to: (1) Prohibit DMM units from 
communicating with issuers after receipt of notice from the Exchange of 
the issuer's impending listing; (2) provide DMM unit marketing 
materials to the issuer prior to the scheduled interview rather than 
the day before; and (3) allow an issuer transferring from NYSE 
Alternext U.S. LLC (``Alternext'') to the NYSE to retain its DMM unit 
if such DMM unit is an approved and registered DMM on the NYSE.
    The Exchange notes that parallel changes are proposed to be made to 
the rules of the NYSE Alternext Exchange (formerly the American Stock 
Exchange).\4\
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    \4\ See SR-NYSEALTR-2008-21 (to be filed on December 31, 2008).
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I. Background
    On October 24, 2008, the NYSE amended its allocation process to 
provide issuers with more autonomy in the selection of its assigned DMM 
unit.\5\ The revised allocation process established a single objective 
measure \6\ to determine a DMM unit's eligibility to participate in the 
allocation process. The single objective measure made it feasible for 
an issuer to select and conduct interviews of eligible DMM units or 
delegate the selection to the Exchange.\7\ DMM units selected for an 
interview are notified directly by the Exchange and may provide 
material to the Exchange which will be given to the issuer the day 
before the scheduled interview.
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    \5\ See Securities Exchange Act Release No. 58857 (October 24, 
2008), 73 FR 65435 (November 3, 2008) (SR-NYSE-2008-52)(''Allocation 
Policy''). Specialist units were eliminated and replaced with DMM 
units in the new Market Model filing. See Securities Exchange Act 
Release No. 58845 (October 24, 2008), 73 FR 64379 (October 29, 2008) 
(SR-NYSE-2008-46) (``New Market Model'').
    \6\ DMM units are eligible to participate in the allocation 
process of a listed security when the DMM unit has not failed to 
comply with its quoting requirements for ``Less Active'' (any listed 
security that has a consolidated average daily volume of less than 
one million shares per calendar month)'' and ``More Active'' (any 
listed security that has a consolidated average daily volume equal 
to or greater than one million shares per calendar month)'' 
securities. Those DMM units that have failed to meet the quoting 
requirement for a consecutive two month period are ineligible for a 
minimum of two months following the second consecutive month of its 
failure to meet its quoting requirement. (``Penalty Period''). The 
DMM unit must satisfy the quoting requirement for the two 
consecutive months of the Penalty Period to be eligible to 
participate in the allocation process. See NYSE Rule 103B, Section 
II(J)(2).
    \7\ NYSE Rule 103B, Section III.
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II. Proposed Amendments
    During the administration of the new allocation process, it has 
become clear that certain amendments to the rule are required as a 
result of certain practical considerations that need to be addressed in 
the application of the rule.
1. Interview Process
    The Exchange proposes to amend Section III(A) of NYSE Rule 103B to 
prohibit DMM units from having contact with an issuer after the 
Exchange provides notice to DMM units about the issuer's impending 
listing on the NYSE. Pursuant to the Exchange's former Allocation 
Policy, specialists were required to cease communication with an issuer 
once the Exchange issued the invitation for specialists to apply for an 
issue.
    The modification to the allocation process to allow an issuer to 
select its DMM units from the list of eligible DMM units on the 
Exchange ended the administrative need for the Exchange to solicit 
applications from DMM units which would have triggered the prohibition 
of communication between DMM units and listing companies. Thus, the 
Exchange inadvertently removed the prohibition of ending communication 
between the DMM unit and the issuer prior to the interview. Currently 
NYSE 103B prohibits communication between DMM units and issuers 
following their interview.
    The Exchange still believes that prohibiting communication between 
DMM units and issuers just prior to the interview is appropriate in 
order to promote fairness and objectivity in the interview process. The 
Exchange therefore proposes to amend NYSE Rule 103B, Section III to add 
a section prohibiting DMM units, or any individuals acting on their 
behalf, from having any contact with any listing company once the 
Exchange provides written notice to DMM units that the listing company 
is listing on the Exchange.
    In addition to the above modification related to the interview 
process, the Exchange further seeks to allow more flexibility in the 
delivery of DMM marketing materials to an issuer based on the 
availability of the issuer. Currently, the rule provides that DMM 
marketing materials are to be provided the day before the interview. 
The Exchange proposes to amend the language to allow for the marketing 
materials to be provided prior to the interview. Some issuers that 
interview at the Exchange may be in transit the day prior to the 
interview or participating in road shows and business trips and are 
therefore unavailable to receive the materials the day before the 
scheduled interview. In those instances the Exchange provides the 
issuer with the materials the day of the interview. In instances where 
an issuer is available to receive the marketing materials in advance of 
the scheduled interview the Exchange would like to be able to provide 
the materials to the issuer. Accordingly, the Exchange proposes to 
amend the rule to simply state that the Exchange will provide the 
issuer with the DMM units' marketing materials prior to the interview.
2. Allocation of Listing Companies Transferring From Alternext to the 
NYSE
    On October 1, 2008, the Exchange completed its acquisition of 
Alternext.\8\ Alternext, similar to the Exchange, operates a DMM system 
and securities traded on Alternext are assigned to a DMM unit. In 
certain instances, Alternext DMM units may also be registered DMM units 
on the NYSE.
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    \8\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-AMEX-2008-62 and SR-NYSE-
2008-60).
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    In these instances, the Exchange seeks to afford issuers 
transferring from Alternext the same privileges it affords issuers 
transferring from its other affiliated Exchange, NYSE Arca.\9\ 
Specifically, the Exchange seeks to amend NYSE Rule 103B to allow an 
issuer that transfers from Alternext to the NYSE to waive the 
allocation process in instances where the issuer's

[[Page 3122]]

security was assigned to a registered DMM unit that is also an approved 
and registered DMM unit on the NYSE.\10\ In any event, the issuer may 
still choose to follow the regular allocation process and have its 
security referred for allocation through the allocation process 
pursuant to NYSE Rule 103B, Section III. If the listing company chooses 
to have its DMM unit selected by the Exchange pursuant to NYSE Rule 
103B, Section III(B), and requests not to be allocated to the DMM unit 
that was its Alternext DMM unit, such request will be honored.
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    \9\ See Securities Exchange Act Release No. 55641 (April 17, 
2007), 72 FR 20396 (April 24, 2007) (SR-NYSE-2007-39) (amending NYSE 
Rule 103B to allow an issuer to waive the allocation process when 
the issuer's security was assigned an LMM that was also a registered 
NYSE specialist, thus affording the issuer to retain the same market 
maker).
    \10\ Currently, the proposed waiver of the allocation process 
would occur in very limited circumstances because only one DMM unit 
is registered on both Alternext and the NYSE.
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    The Exchange believes that the proposed rule change is consistent 
with the goals of the Allocation policy to provide an incentive for 
ongoing enhancement of the relationship between the listing company and 
the DMM unit, to encourage continued high performance of the DMM unit 
by allowing them to use their experience and knowledge of the listing 
company's securities and to provide the best possible match between the 
DMM unit and the security.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5),\11\ which requires that an exchange 
have rules that are designed 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 these objectives. The 
amendments sought herein seek to alleviate impediments in the 
administrative process of assigning securities to DMM units which 
ultimately facilitates the fair and orderly trading in the subject 
security.
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    \11\ 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 proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the 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 \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-(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give 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 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 pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the Exchange to immediately remove any disparity 
in the treatment afforded issuers of the NYSE's affiliate exchanges and 
to further objectivity and fairness of the allocation process by 
immediately establishing the specific point in time when DMM units must 
cease communication with issuers prior to interviews. The language 
being used in this proposed rule filing for the transfer of issuers 
from NYSE Alternext to NYSE is substantively similar to the language 
already in place for its other related Exchange, NYSE Arca.\16\ 
Furthermore, the proposed rule filing seeks to restore language 
regarding the prohibition of communication between the DMM units and 
the issuer that was inadvertently omitted from the former NYSE Rule 
103B to the current NYSE Rule 103B. For these reasons, the Commission 
designates that the proposed rule change become operative immediately 
upon filing.\17\
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    \16\ See Securities Exchange Act Release No. 55641 (April 17 
2007), 72 FR 20396 (April 24, 2007) (SR-NYSE-2007-39).
    \17\ 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. 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 the 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-2008-143 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-2008-143. 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

[[Page 3123]]

provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of the 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-2008-143 and should be submitted on or before February 6, 2009.

    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. E9-932 Filed 1-15-09; 8:45 am]

BILLING CODE 8011-01-P