Document ID: SEC-2009-1030-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by New York Stock Exchange LLC Amending NYSE Rule 2 To Redefine the Term "Member Organization"
Posted Date: 2009-07-24T04:00Z

[Federal Register: July 24, 2009 (Volume 74, Number 141)]
[Notices]               
[Page 36797-36799]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jy09-151]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60318; File No. SR-NYSE-2009-63]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by New York Stock Exchange LLC 
Amending NYSE Rule 2 To Redefine the Term ``Member Organization''

July 16, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 30, 2009, 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 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\ 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 2 to redefine the term 
``member organization.'' The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, and 
http://www.nyse.com.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend its rules to broaden the 
definition of a ``member organization'' to include a registered broker 
or dealer that is not a member of the Financial Industry Regulatory 
Authority (``FINRA'') so long as the broker or dealer is a member of 
another registered securities exchange. However, member organizations 
that transact business with public customers or conduct business on the 
Floor of the Exchange must at all times be members of FINRA. The 
revised definition as proposed is consistent with the rules of other 
national securities exchanges that have been approved by the 
Commission.
    Under current NYSE Rule 2(b)(i), a registered broker or dealer must 
be a member of FINRA in order to qualify as a ``member organization'' 
of the Exchange and to be eligible for an NYSE trading license. Under 
this arrangement, FINRA is the DEA for all NYSE member organizations. 
Similarly, NYSE Rule 2(b)(ii) provides that a registered broker or 
dealer can become a member organization, even though it does not own an 
NYSE trading license, if it agrees to be regulated as such by the 
Exchange, but only if it is a member of FINRA. The Exchange proposes to 
make membership more broadly available to other registered brokers or 
dealers who are not FINRA members but who are members of another 
registered securities exchange and do not transact business with public 
customers or conduct business on the Floor of the Exchange. The 
Exchange believes that this change can be made without any sacrifice of 
regulatory rigor.
    Under the proposed rule change, those NYSE member organizations 
that are also members of FINRA will continue to be regulated pursuant 
to the terms of the existing allocation plan pursuant to Rule 17d-2 of 
the Act among FINRA, NYSE, and NYSE Regulation, Inc. (``NYSE 
Regulation''), and FINRA will continue to be the DEA for these member 
organizations. For those NYSE member organizations that are not members 
of FINRA, but are

[[Page 36798]]

members of another registered securities exchange, NYSE Regulation will 
provide for the exercise of certain of its regulatory responsibilities 
with respect to these member organizations pursuant to an amendment to 
an existing regulatory services agreement among NYSE, NYSE Regulation, 
and FINRA.\3\
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    \3\ Because the new class of member organization proposed in 
this rule filing would not be FINRA members, they would not be 
covered under an existing allocation plan among NYSE, NYSE 
Regulation, and NASD (k/n/a FINRA) pursuant to Rule 17d-2 under the 
Securities Exchange Act of 1934, as amended (the ``17d-2 
Agreement''). 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). Accordingly, pursuant to an amendment 
to an existing regulatory services agreement, NYSE Regulation will 
retain FINRA to provide regulatory services for certain NYSE rules 
defined as ``Common Rules'' under the 17d-2 Agreement for any NYSE 
member organization that is not a FINRA member, starting from the 
effective date of this filing.
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    The Exchange believes that the proposed rule change is consistent 
with the rules of other registered national securities exchanges that 
have previously been approved by the Commission. For example, the rules 
of BATS Exchange, Inc. (``BATS'') provide that ``any registered broker 
or dealer which is a member of another registered national securities 
exchange or association or any person associated with such a registered 
broker or dealer shall be eligible'' to be a member of that 
exchange.\4\ Stated otherwise, to be eligible for BATS membership, a 
firm must be a member of either FINRA or another registered national 
securities exchange. Similarly, the rules of National Stock Exchange, 
Inc. (``NSX'') contain no requirement for FINRA membership in its 
eligibility requirements and restrictions applicable to a registered 
broker or dealer that seeks to become an ETP Holder on that 
Exchange.\5\
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    \4\ See BATS Rule 2.3.
    \5\ See NSX Rules 2.3 and 2.4.
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    Finally, the rules of The NASDAQ Stock Market LLC (``Nasdaq'') 
provide for membership in Nasdaq of a registered broker or dealer that 
is either a member of FINRA or a member of another registered 
securities exchange, with the additional requirement (also being 
proposed herein by the Exchange) that ``Nasdaq members that transact 
business with customers shall at all times be members of FINRA.'' \6\ 
The term ``customers'' in the foregoing sentence refers to public 
customers and does not include brokers or dealers.\7\
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    \6\ See Nasdaq Rule 1002(e). See also Nasdaq Rule 1014(a)(3).
    \7\ See Nasdaq Rule 0120(g).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5) \9\ in 
particular in that 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, 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. More specifically, the NYSE believes that, by (i) 
expanding the number of registered brokers and dealers that are 
eligible to become NYSE member organizations and trade on the Exchange, 
while maintaining high regulatory standards with respect to such firms, 
and (ii) aligning NYSE membership requirements more closely with those 
of other registered securities exchanges, the proposed rule change will 
contribute to perfecting the mechanism of a free and open market and a 
national market system, which outcomes are also consistent with the 
protection of investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 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, it has become 
effective pursuant to 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 Exchange may expand the number of 
registered brokers and dealers that are eligible to become NYSE member 
organizations and trade on the Exchange without delay. The Commission 
has determined that waiving the 30-day operative delay of the 
Exchange's proposal is consistent with the protection of investors and 
the public interest because such waiver will enable the Exchange to 
extend Exchange membership to registered broker-dealers that are 
members of other exchanges in a manner that is consistent with the 
rules of other exchanges, which previously were approved by the 
Commission.\12\ Therefore, the Commission designates the proposal 
operative upon filing.\13\
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    \12\ See, e.g., Securities Exchange Act Release Nos. 58375 
(August 18, 2008), 73 FR 49498 (August 21, 2008) (order approving 
rules of BATs Exchange); 53128 (January 13, 2006), 71 FR 3550 
(January 23, 2006) (order approving rules of the Nasdaq Stock Market 
LLC).
    \13\ 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-2009-63 on the subject line.

[[Page 36799]]

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-2009-63. 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 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-2009-63 and should be 
submitted on or before August 14, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-17630 Filed 7-23-09; 8:45 am]

BILLING CODE 8010-01-P