Document ID: SEC-2012-1411-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2012-08-27T04:00Z

[Federal Register Volume 77, Number 166 (Monday, August 27, 2012)]
[Notices]
[Pages 51837-51839]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20971]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67702; File No. SR-NYSEMKT-2012-43]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending the NYSE Amex 
Options LLC Limited Liability Company Agreement To Eliminate Certain 
Restrictions Relating to the Qualification of Founding Firm Advisory 
Committee Members

August 21, 2012.
    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 August 17, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 the NYSE Amex Options LLC (``NYSE 
Amex Options'') Limited Liability Company Agreement (``LLC Agreement'') 
to eliminate certain restrictions relating to the qualification of 
Founding Firm Advisory Committee Members. The text of the proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, on the Commission's Web site at 
www.sec.gov, and at the Commission's Public Reference Room.

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 the LLC Agreement to eliminate 
certain restrictions relating to the qualification of Founding Firm \4\ 
Advisory Committee (``Advisory Committee'') Members. The LLC Agreement 
is the source of NYSE Amex Options' governance and operating authority 
and, therefore, functions in a similar manner as articles of 
incorporation and by-laws function

[[Page 51838]]

for a corporation.\5\ The Founding Firm Advisory Committee is comprised 
of natural persons (each, an ``Advisory Committee Member'') who provide 
advice to the Board.\6\ The Board considers such advice but is not 
bound by it.\7\
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    \4\ Founding Firm means each of the Initial Members (NYSE MKT, 
Goldman, Sachs & Co., Citadel Securities LLC, Banc of America 
Strategic Investments Corporation, Citigroup Financial Strategies, 
Inc., Datek Online Management Corp., UBS Americas Inc., and Barclays 
Electronic Commerce Holdings Inc.) other than NYSE MKT and any 
permitted transferee(s) of such Initial Member, (ii) any required 
transferee deemed to be a Founding Firm by the Board of NYSE Amex 
Options, and (iii) any other Member (a person who is a signatory to 
the LLC Agreement, other than NYSE Euronext, or who has been 
admitted to NYSE Amex Options as a Member in accordance with the LLC 
Agreement and has not ceased to be a Member in accordance with the 
LLC Agreement or for any other reason), other than NYSE MKT, deemed 
to be a Founding Firm by the Board of NYSE Amex Options. See LLC 
Agreement, Section 1.1.
    \5\ See Securities Exchange Act Release No. 64144 (March 29, 
2011), 76 FR 18591 (April 4, 2011) (SR-NYSEAmex-2011-18) (approving 
the formation of a joint venture between the Exchange, its ultimate 
parent NYSE Euronext, and seven other entities to operate an 
electronic trading facility for options contracts).
    \6\ See LLC Agreement, Section 8.3(a).
    \7\ Id.
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    Currently, Section 8.3(d) of the LLC Agreement provides that each 
Founding Firm, prior to designating an individual to the Advisory 
Committee, shall certify in writing to the Board that such individual 
is not then a director (or an alternate director or observer to the 
board or any committee of the board), officer, or employee of a 
Specified Entity; \8\ in the event an individual designated to the 
Advisory Committee becomes a member of the board of directors or 
similar governing body of a Specified Entity, such individual shall 
immediately cease to be an Advisory Committee Member.
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    \8\ Specified Entity means, as of any date, (i) any U.S. 
securities option exchange (or facility thereof) or U.S. alternative 
trading system on which securities option contracts are executed 
(other than NYSE Amex Options or any of its Affiliates) that lists 
for trading any option contract that competes with a product or a 
contract that is contemplated by the then-current business plan of 
NYSE Amex Options to be listed for trading by the Exchange within 
ninety (90) days of such date, (ii) any person that owns or controls 
a U.S. securities option exchange or U.S. alternative trading system 
described in clause (i), and (iii) any affiliate of a person 
described in clause (i) or (ii) above; provided that, in the event 
of a change in applicable law permitting the execution of 
transactions in exchange-listed securities options otherwise than on 
a national securities exchange or facility thereof (including, but 
not limited to, internalization of orders for exchange-listed 
securities options or the execution of such orders on an alternative 
trading system), (x) a system operated by or on behalf of a Founding 
Firm or its affiliates for purposes of the internalization or 
crossing of: (i) Orders of customers of such Founding Firm or its 
affiliates, (ii) orders of such Founding Firm or its affiliates or 
(iii) orders routed from a retail broker-dealer or retail brokerage 
unit, shall not be considered a Specified Entity and (y) in addition 
to the matters covered in clause (x), NYSE Amex Options and the 
Founding Firms will negotiate in good faith the terms of an 
exception from the definition of Specified Entity for any 
alternative trading system owned solely by an individual Founding 
Firm or its affiliates that performs order crossing in a manner that 
does not substantially compete with the Exchange in terms of market 
share and other relevant factors. See LLC Agreement, Section 1.1.
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    The Excange proposes to amend the LLC Agreement to remove the 
restrictions that an individual who serves on the Advisory Committee 
cannot then be or later become a director (or alternate director or 
observer to the board or any committee of the board) of a Specified 
Entity.\9\ The Exchange believes that the Advisory Committee should not 
exclude individuals with certain affiliations with Specified Entities 
because Advisory Committee Members have no formal authority over NYSE 
Amex Options and only provide non-binding advice to the Board. 
Moreover, the Board determines which matters are referred to the 
Advisory Committee and may choose, if necessary and in light of the 
affiliations of Advisory Committee Members, not to seek its advice on 
sensitive competitive issues.\10\ As such, the Exchange believes that 
proposed rule change would not create a significant conflict of 
interest for Advisory Committee Members. In addition, the Exchange 
believes that the current restrictions unnecessarily limit the pool of 
qualified candidates, and the Exchange could benefit from the advice 
and industry knowledge provided by Advisory Committee Members that are 
affiliated with Specified Entities.
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    \9\ The restriction would continue to apply to officers and 
employees of Specified Entities.
    \10\ The Exchange does not propose to change the qualification 
for directors and alternates of the Board of NYSE Amex Options, 
which similarly restricts certain affiliations with Specified 
Entities. See LLC Agreement, Section 8.1(h).
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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''),\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ 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 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes the proposed rule change would 
expand the pool of candidates eligible for membership on the Advisory 
Committee and thereby increase the breadth of industry knowledge that 
will be available to it without creating any conflicts of interest that 
cannot be appropriately managed, which benefits the public interest. 
The increased representation of different constituencies on the 
Advisory Committee also would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, contribute 
to the identification of opportunities for innovation, and enhance 
competition.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the 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 prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 
Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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

[[Page 51839]]

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 email to rule-comments@sec.gov. Please include 
File No. SR-NYSEMKT-2012-43 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 No. SR-NYSEMKT-2012-43. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing 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 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 No. SR-NYSEMKT-2012-43 and should be 
submitted on or before September 17, 2012.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20971 Filed 8-24-12; 8:45 am]
BILLING CODE 8011-01-P