Document ID: SEC-2009-0237-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-02-20T05:00Z

[Federal Register: February 20, 2009 (Volume 74, Number 33)]
[Notices]               
[Page 7947-7952]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe09-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59383; File No. SR-NYSE-2009-07]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending NYSE Rule 123E (``DMM Combination Review Policy'') To Be More 
Consistent With the Exchange's Current Designated Market Maker 
(``DMM'') System

February 11, 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 January 27, 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 prepared by the self-regulatory 
organization. NYSE filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ which 
renders it effective upon filing with the Commission. 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.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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 amend NYSE Rule 123E (``DMM Combination 
Review Policy'') to be more consistent with the Exchange's current 
Designated Market Maker (``DMM'') system.

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.

[[Page 7948]]

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

1. Purpose
    The Exchange proposes to amend NYSE Rule 123E (``DMM Combination 
Review Policy'') to be more consistent with the Exchange's current 
Designated Market Maker (``DMM'') system.
    The Exchange notes that parallel changes are proposed to be made to 
the rules of the NYSE Alternext Exchange (formerly the American Stock 
Exchange).\6\
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    \6\ See SR-NYSEALTR-2009-04.
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Background
a. Origination of Review Process
    In 1986, the Exchange developed procedures for reviewing proposed 
mergers, acquisitions and other combinations between or among 
specialist units.\7\ The procedures were the result of a study of 
significant issues related to the specialist system which concluded, in 
part, that there would be an increasing incidence of specialist 
consolidation as specialist units sought to acquire additional capital 
and resources to meet the growing needs of the market. At that time, 
the Exchange determined that a structured approach for reviewing 
proposed specialist combinations was required in order to avoid the 
formation of specialist units that had capital or operational 
deficiencies that would negatively impact the Exchange's market and 
potentially undermine the orderly evolution of the specialist system. 
The Exchange chose to structure its review based on the degree of 
concentration of securities in the specialist unit(s). After a pilot 
program and a series of amendments, the procedures were permanently 
approved by the Commission in June 1994.\8\ The procedures were 
eventually codified as NYSE Rule 123E in 2002 and subsequently 
amended.\9\
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    \7\ See Securities Exchange Release No. 24411, 52 FR 17870 
(april 29, 1987)SR-NYSE-86-37).
    \8\ See Securities Exchange Release No. 35343 (February 8, 
1995), 60 FR 8437 (February 14, 1995) (SR-NYSE-94-46).
    \9\ See Securities Exchange Release No. 46579 (October 1, 2002), 
67 FR 63004 (October 9, 2002) (SR-NYSE-2002-31); See Securities 
Exchange Release No. 47547 (March 20, 2003), 68 FR 15027 (March 27, 
2003) (SR-NYSE-2002-41); See Securities Exchange Release No. 52969 
(December 16, 2005), 70 FR 76337 (December 23, 2005) (SR-NYSE-2005-
38) (amendment to specialist unit capital requirements); See 
Securities Exchange Release No. 58845 (October 24, 2008), 73 FR 
64379 (October 29, 2008) (NYSE-2008-46) (amendment implementing the 
New Market Model); See Securities Exchange Act Release No. 58857 
(October 24, 2008), 73 FR 65435 (November 3, 2008) (SR-NYSE-2008-52) 
(amendment implementing the new Allocation Policy); See Securities 
Exchange Act Release No. 59077 (December 10, 2008), 73 FR 76691 
(December 17, 2008) (NYSE-2008-127) (technical amendments to correct 
rule reference to DMM net capital requirements).
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b. Current NYSE Rule 123E Requirements
    On October 24, 2008, the Exchange eliminated the specialist system 
and created a Designated Market Maker (``DMM'') system.\10\ At that 
time, the Exchange did not substantively amend the review process 
related to combinations to be consistent with the new DMM system; 
rather, the provisions of NYSE Rule 123E were carried over to govern 
DMM combinations.\11\ The Exchange expected to turn to appropriate 
revisions to Rule 123E as soon as possible following the implementation 
of the DMM system. That work has resulted in this rule proposal.
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    \10\ See Securities Exchange Act Release No. 58845 (October 24, 
2008) (SR-NYSE-2008-46) (``New Market Model'').
    \11\ The Exchange did amend this rule to be consistent with its 
new Allocation policy on October 24, 2008. See Securities Exchange 
Act Release No. 58857 (October 24, 2008), 73 FR 65435 (November 3, 
2008) (SR-NYSE-2008-52).
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    Currently, pursuant to NYSE Rule 123E, the Exchange is responsible 
for reviewing proposed DMM combinations, subject to certain 
considerations, when the proposed DMM unit combination would result in 
an aggregate of more than five percent (``Tier 1 combination''), 10 
percent (``Tier 2 combination'') or 15 percent or more (``Tier 3 
combination'') in any one of four concentration measures: (1) Common 
stocks listed on the Exchange; (2) the 250 most active listed common 
stocks; (3) the total trading volume of common stock listed on the 
Exchange; and (4) the total dollar value of common stock listed on the 
Exchange.
    Where a proposed combination involves or would result in a DMM unit 
accounting for more than five percent of any of the ``concentration 
measures,'' the Exchange is required to review the proposed combination 
to take into consideration:

    (1) the effects of the proposed combination in terms of the 
following criteria:
    (a) strengthening the capital base of the resulting DMM unit;
    (b) minimizing both the potential for financial failure and the 
negative consequences of any such failure on the DMM system as a 
whole; and
    (c) maintaining or increasing operational efficiencies;
    (2) commitment to the Exchange market, focusing on whether the 
constituent DMM units have worked to support, strengthen and advance 
the Exchange, its agency/auction market and its competitiveness in 
relation to other markets; and
    (3) the effect of the proposed combination on overall 
concentration of DMM units.

    Where a DMM unit currently exceeds five percent of any 
concentration measure, and then proposes a combination that would not 
result in increasing its concentration measure by more than two 
percentage points, or not result in the combined unit moving into a 
higher tier classification, the Exchange shall not review the proposed 
combination.
    When a proposed combination has a concentration percentage of 10% 
or higher in any of the four measures set forth above, NYSE Rule 
123E(c)(1)(a)(i)-(iv) requires the combined entity to prove by a 
preponderance of the evidence that the proposed combination: (1) Would 
not create or foster concentration in the DMM business detrimental to 
the Exchange and its markets; (2) would foster competition among DMM 
units; (3) would enhance the performance of the constituent DMM unit 
and the quality of market of stocks involved; and (4) would demonstrate 
that, if approved, the proposed combination is otherwise in the public 
interest.
    Moreover, pursuant to NYSE Rule 123E(d) proposed combinations that 
would result in the DMM units accounting for more than 10% of a 
concentration measure, requires the proponents of the combination to 
submit an operational certification prepared by an independent, 
nationally recognized management consulting organization with respect 
to all aspects of the unit's management and operations.\12\ The 
proponents must also submit an acceptable risk management plan with 
respect to any line of business in which they engage.
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    \12\ The initial rationale behind this additional requirement 
was to minimize the risk of financial and/or operational failure of 
larger specialist units.
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    If the proposed combination has a concentration percentage greater 
than 15%, NYSE Rule 123E (c)(1)(b)(i)-(iv) further requires the 
combined entity to prove that the measures set forth for combination of 
10% are satisfied by clear and convincing evidence.
Proposed Amendments to NYSE Rule 123E
    The Exchange proposes to amend the DMM Combination review to more 
clearly define what constitutes a DMM Combination that requires review 
and approval by the Exchange. The Exchange further seeks to clarify the 
administrative process associated with that review.

[[Page 7949]]

    The Exchange proposes to amend NYSE Rule 123E to eliminate the 
current ``Tier'' system as the mechanism for determining the nature of 
the review for a proposed DMM combination. At the time the combination 
review procedures were first adopted in 1986, there were 55 specialist 
units on the Exchange. The threshold concentration level of five 
percent in any one of the four concentration measures defined in the 
Rule was needed to focus on combinations that would have significant 
impact on the Exchange. Today, there are six DMMs approved to operate 
on the Exchange; as such, any proposed combination has the potential to 
have significant impact on the Exchange's ability to maintain its DMM 
system and provide a fair and orderly market place. Accordingly, the 
Exchange proposes to eliminate threshold concentration levels as the 
instigating factor for the Exchange to review a proposed DMM 
combination. Pursuant to proposed NYSE Rule 123E(a), any ``proposed 
combination'' must be approved by the Exchange.
    Proposed NYSE Rule 123E(b) defines a ``proposed combination'' to 
include changes to the current DMM unit business that has the potential 
to have significant impact on the Exchange's market. As such, the 
Exchange will review when: (1) Two or more DMM units merge or otherwise 
combine their businesses with the result that the total number of 
existing DMM units will be reduced; (2) two or more DMM units combine 
their businesses with the result that the existing number of DMM units 
is not reduced, but one or more of the surviving units is substantially 
reduced in size; or (3) a DMM unit merges or otherwise combines with a 
non-DMM business resulting in a change of control of the existing DMM 
unit.\13\
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    \13\ The current provisions of NYSE Rule 123E(g)(4) will be 
deleted and not incorporated in the text of the proposed definition 
of ``proposed combination.'' NYSE Rule 123E(g)(4) includes as a 
definition of a DMM combination: ``an individual DMM leaving an 
existing unit and proposing to take securities with him or her to 
join another existing unit.'' Securities allocated on the Exchange 
are assigned to DMM units pursuant to NYSE Rule 103B with an 
individual employed by the unit assigned as the DMM. As such, the 
individual DMM on the NYSE is not permitted to take securities with 
him or her if the DMM becomes employed by another DMM unit. 
Accordingly, this concept is not being carried over into proposed 
NYSE Rule 123E. See e-mail from Deanna Logan, Managing Director, 
NYSE Regulation, Inc., to David Liu, Assistant Director, Commission, 
dated January 30, 2009 (``January 30 e-mail'').
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    The current rule does not specify where the correspondence 
regarding a proposed combination should be directed. Through this 
amendment, the Exchange would require the proponents of a proposed 
combination to direct the correspondence to the Office of the Corporate 
Secretary.\14\ This department will be able to coordinate and 
facilitate the timely review of the request.
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    \14\ See proposed NYSE Rule 123E(c). See January 30 e-mail,
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    Similar to the current rule, the written submission should address 
all the factors for review as well as: (1) Performance in any 
securities received through previous combinations or transfers of 
registrations during the preceding two years; (2) whether the resulting 
DMM unit will maintain staffing adequate to the needs of the market 
place; (3) whether the proposed combined unit will have a real-time 
surveillance system that monitors DMM trading and uses exception alerts 
to detect unusual trades or trading patterns; (4) whether the proposed 
combined unit will have disaster recovery facilities for its computer 
network and software; (5) whether it has designated specific 
individuals to handle unusual situations on the Floor (if so, the names 
of the individuals); (6) whether the combined unit will employ a 
``zone'' or other management system on the Floor (with identification 
of the names of the individuals and their specific responsibilities, as 
applicable); and (7) whether the combined unit will designate a senior 
staff member to be responsible for reviewing DMM performance data, with 
specific procedures for correcting any deficiencies identified.\15\
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    \15\ See proposed NYSE Rule 123E(c).
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    The Exchange further proposes to rescind the requirement to submit 
an operational certification prepared by an independent, nationally 
recognized management consulting organization with respect to all 
aspects of the firm's management and operations for proposed 
combinations as it related to proposed combinations of 10% or higher, 
as required by NYSE Rule 123E(d).
    In 1994, when the rule was amended to add this requirement for 
proposed combinations of specialist units that would account for more 
than 10% of a concentration measure, there were approximately 40 
specialist units on the Floor. Specialist units at that time were 
relatively small independent companies. The Exchange believed that the 
independent certification was necessary to determine whether the 
combined entity had the managerial and operational capabilities to 
operate as a larger-sized specialist unit.
    Today, the DMM system is comprised of six DMM units, all of which 
are relatively large, well-capitalized firms. The Exchange believes 
that the management and operational concerns originally associated with 
the combination of individual specialist units does not exist today, 
given the characteristics of the organizations engaged in market making 
as DMMs, and given the changed nature of the role DMMs play in the 
current market environment compared with the role played by specialists 
when this Rule was originally adopted. Furthermore, the Exchange 
submits that its current rules already address and monitor the 
management and operational requirements originally contemplated by the 
performance of an independent consultant and therefore, such outside 
certification is duplicative and unnecessary.
    On July 30, 2007, NASD and NYSE Regulation, Inc. consolidated their 
member firm regulation operations into a combined organization, 
FINRA.\16\ As part of its duties and responsibilities, FINRA oversees 
NYSE Member Firm Regulation and carefully reviews organizations seeking 
membership with FINRA and the NYSE. FINRA and NYSE Consolidated Rules 
both require that all prospective member organizations comply with the 
Securities and Exchange Act of 1934 [sic] as well as its rules with 
regard to the creation and preservation of books and records, the 
corporate structure of the proposed member organization, the 
supervision and control, and the net capital requirements of the 
proposed member organization. Furthermore, these rules require annual 
audits of the member organization's financial statements by an 
independent public account and the

[[Page 7950]]

submission of an audited financial and operational report to the 
Exchange.\17\
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    \16\ Pursuant to Rule 17d-2 under the Securities Exchange Act of 
1934, as amended (the ``Exchange Act''), NYSE, NYSE Regulation, 
Inc., and NASD entered into an agreement (the ``Agreement'') to 
reduce regulatory duplication for firms that are members of FINRA 
and also members of NYSE on or after July 30, 2007 (``Dual 
Members''), by allocating to FINRA certain regulatory 
responsibilities for selected NYSE rules. The Agreement includes a 
list of all of those NYSE and NASD rules for which FINRA has assumed 
regulatory responsibilities (``Common Rules''). See Securities 
Exchange Act Release No. 56148 (July 26, 2007), 72 FR 42146 (August 
1, 2007) (Notice of Filing and Order Approving and Declaring 
Effective a Plan for the Allocation of Regulatory Responsibilities). 
The Common Rules include those NYSE rules that FINRA has 
incorporated into its rulebook (the ``NYSE Incorporated Rules''). 
See Securities Exchange Act Release No. 56147 (July 26, 2007), 72 FR 
42166 (August 1, 2007) (Notice of Filing and Order Granting 
Accelerated Approval of Proposed Rule Change to Incorporate Certain 
NYSE Rules Relating to Member Firm Conduct; File No. SR-NASD-2007-
054). 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.
    \17\ See, e.g., NYSE and FINRA Rules 104, 311, 325-328, 382 and 
418.
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    The structure and regulatory concerns that accompany applications 
for membership on the Exchange in today's market have been carefully 
considered and addressed in the FINRA and NYSE Consolidated Rules. 
These Rules create a multi-tiered level of review to ensure that 
requirements related to appropriate managerial and financial 
capabilities for DMM units are in place from the onset of membership 
with the Exchange to the approval of members as DMMs.
    In addition, NYSE Rule 98 monitors and regulates the member 
organization's managerial and operational systems. Under NYSE Rule 98, 
FINRA reviews the managerial aspects of a DMM unit and requires a DMM 
unit to: (i) Adopt and implement comprehensive written procedures and 
guidelines governing the conduct and supervision of business handled by 
such unit; (ii) establish a process for regular review of such written 
procedures and guidelines; and (iii) implement controls and 
surveillances reasonably designed to prevent and detect violations of 
these procedures and guidelines.
    Furthermore, NYSE Rule 103 and NYSE Rule 104 regulate a DMM unit's 
compliance with capital requirements. NYSE Rule 103 sets forth the 
criteria that an Exchange member must satisfy in order to apply as a 
DMM unit. For example, the Exchange reviews the member organization's 
market making ability and the capital available for market making. 
Specifically, NYSE Rule 103.20 imposes stringent net capital 
requirements for DMM units and requires the DMM unit to immediately 
notify the Exchange if it is unable to comply with these prescribed 
requirements. The Exchange therefore believes that the requirement for 
an independent, nationally recognized management consulting 
organization review with respect to all aspects of the proposed 
combined entity's management and operations is no longer warranted. 
NYSE Rule 104 sets forth the dealings and responsibilities of DMMs and 
requires the DMM units to maintain compliance at all times with NYSE 
and SEC regulations.
    The Exchange submits that the FINRA and NYSE Consolidated Rules 
currently in place appropriately monitor and review organizations 
seeking initial membership to the Exchange and the ability to operate 
as a DMM on the Exchange. These Rules operate to ensure continued 
compliance with protocols required of Exchange members. This new 
regulatory structure obviates the need for an independent consultant to 
perform a review of a proposed combination's management and operational 
efficiencies.
    The Exchange further seeks to make consistent the criteria for the 
Exchange's review of a proposed combination with the requirements for 
operating a DMM unit. The Exchange will therefore review whether the 
proposed combined entity will be able to comply with NYSE Rule 103B, 
Section II \18\ as well as the provision of NYSE Rules 98, 103 and 104. 
Additionally, the Exchange proposes to retain the criteria set forth in 
the current process and include as part of its review: (1) Whether the 
proposed combination minimizes both the potential for financial failure 
and the negative consequences of any such failure on the DMM system as 
a whole; (2) whether the proposed combination maintains or increases 
operational efficiencies; (3) the surviving DMM unit's commitment to 
the Exchange's market; and (4) the effect of the proposed combination 
on overall concentration of DMM units.\19\
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    \18\ The Exchange established an allocation system based on a 
single objective measure to determine a DMM unit's eligibility to 
participate in the allocation process. See Securities Exchange 
Release No. 58363 (August 14, 2008), 73 FR 49514 (August 21, 2008) 
(SR-NYSE-2008-52). See January 30 e-mail, supra, note 11.
    \19\ The Exchange seeks to eliminate references to certain 
legacy programs that the Exchange no longer operates. Specifically, 
NYSE Rule 123E, Supplementary Material. 10(a) refers to 
participation in a ``FACTS'' program which is no longer maintained 
by the Exchange.
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    As set forth above, the NYSE has regulations in place to ensure 
that its members and those members seeking approval as DMM units have 
the necessary managerial and operational capabilities to operate on the 
Exchange. Furthermore, these NYSE rules also specifically dictate 
stringent capital requirements that its members and DMM units are 
required to maintain in order to comply with NYSE and SEC rules. DMM 
units that are not capable of meeting these requirements must notify 
the Exchange immediately and are monitored by the Exchange. 
Accordingly, the Exchange submits that the retention of the rule 
requiring an independent consultant to conduct an operational 
certification regarding a DMM unit's management and operations for 
proposed combinations would be duplicative and unnecessary since the 
Exchange has the appropriate procedures and rules in place to regulate 
its members and DMM units and ensure their compliance with all 
necessary requirements.
    The Exchange's ultimate determination to approve or disapprove a 
proposed combination will be based upon a determination that the 
proposed combination has satisfied the criteria set forth in proposed 
NYSE Rule 123E(d)(1)-(5) and the Exchange determines that the proposed 
combination would: (1) Not create or foster concentration in the DMM 
business detrimental to the Exchange and its markets; (2) foster 
competition among DMM units; and (3) enhance the performance of the 
constituent DMM unit and the quality of the markets in the securities 
involved.\20\ The Exchange may condition its approval upon compliance 
by the resulting DMM unit with any steps the Exchange may specify to 
address any concerns it may have in regard to considerations of the 
above criteria.
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    \20\ See Proposed NYSE Rule 123E(f). See January 30 e-mail, 
supra, note 11.
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    To ensure the fairness of the new process, pursuant to proposed 
NYSE Rule 123E(f), the Exchange must approve or disapprove a proposed 
combination within ten (10) business days of the written 
submission.\21\ The Exchange reserves the right to extend its review 
process if the information submitted by the proponents of the DMM 
combination is inadequate or requires additional time to review in 
order for the Exchange to reach a decision.
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    \21\ The Exchange however, reserves the right to extend its 
review process if the information submitted by the proponents of the 
combination is inadequate to enable the Exchange to reach a 
decision.
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    In any instance where the Exchange does not approve a proposed 
combination, the proponents of such proposed combination have a right 
to have such decision reviewed by the Exchange's Board of Directors.
Conclusion
    The Exchange believes that the proposed modifications to the 
Exchange's current administrative procedures relating to the review of 
a proposed DMM combination, which clarify what constitutes a proposed 
combination and amend the criteria used to review the proposed 
combination, are consistent with the current DMM system and will 
provide a more reasonable review than the current procedures which were 
predicated on the specialist system and the Exchange's market as they 
existed in 1994. Moreover, by establishing a deadline for the 
completion of the review and a right to appeal to the Exchange Board of 
Directors, the NYSE believes that its process will be fair and

[[Page 7951]]

allow member organizations to properly manage their business 
initiatives.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5),\22\ 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 proposed rule change is 
consistent with these objectives in that it enables the Exchange to 
further enhance the process by which it reviews proposed combinations 
of DMM units. Through the instant filing to make its internal 
administrative process related to the Exchange review of a proposed DMM 
combination consistent with the underlying requirements for DMMs and 
maintaining criteria that fosters the DMM system, the Exchange believes 
that it is facilitating transactions. Specifically, the Exchange 
believes that the proposed changes to the DMM combination review 
process are necessary to facilitate the continuation of its DMM system 
which allows the Exchange to provide its market participants with a 
market maker that is responsible for: (i) Providing liquidity to the 
market when there is a recognized need for additional liquidity; (ii) 
bridging the gap between supply/demand by purchasing when no one else 
is buying or selling when no one else is selling; and (iii) overall 
maintaining a fair and orderly market, that ultimately removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system and, in general, protects investors and the 
public interest.
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    \22\ 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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms, does not become operative for 30 days after 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 \23\ and Rule 19b-4(f)(6) thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\25\ 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 requested that the Commission waive 
the 30-day operative delay and designate the proposed rule change 
operative upon filing.
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    \25\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission 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. NYSE has satisfied this requirement.
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    The Exchange believes that the instant filing is non-controversial 
because it amends NYSE Rule123E, which was historically predicated on 
the specialist system and the Exchange's market as it existed in 1994, 
to employ simplified criteria to govern a proposed DMM combination. The 
Exchange believes that such criteria are more consistent with the 
current DMM system. The Exchange submits that good cause exists to 
justify waiver of the operative delay in order to allow the Exchange to 
have an established procedure that is consistent with its new market 
model. In light of the current economic environment which has witnessed 
swift consolidations among financial institutions, the Exchange 
believes that is essential to be equipped with the ability to 
expeditiously review and approve proposed DMM combinations using 
criteria that reflects the current operation of the Exchange, thereby 
maintaining the integrity of the Exchange's DMM systems which 
ultimately protects investors and the public interest.
    In light of the forgoing, the Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Therefore, the Commission designates the 
proposal operative upon filing.\26\
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    \26\ For purposes only of waiving the operative delay for this 
proposal, 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.\27\
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    \27\ 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-2009-07 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-2009-07. 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

[[Page 7952]]

the Commission's Public Reference Room 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 
available publicly. All submissions should refer to File Number SR-
NYSE-2009-07 and should be submitted on or before March 13, 2009.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3611 Filed 2-19-09; 8:45 am]

BILLING CODE 8011-01-P