Document ID: SEC-2008-1112-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-08-11T04:00Z

[Federal Register: August 11, 2008 (Volume 73, Number 155)]
[Notices]               
[Page 46676-46679]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au08-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58290; File No. SR-NYSE-2008-70]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending Rules Governing 
Membership in Order To Waive-In Members in Good Standing of the 
American Stock Exchange LLC as Members and Member Organizations of the 
Exchange

August 1, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 30, 2008, the New York Stock Exchange LLC (the ``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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 rules governing membership in order 
to waive-in members in good standing of the American Stock Exchange LLC 
as members and member organizations of the Exchange. The text of the 
proposed rule change is available at the NYSE's principal office, 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
    In connection with the acquisition by NYSE Euronext of The Amex 
Membership Corporation, including the relocation of all equities 
trading conducted on or through the existing systems and facilities of 
the American Stock Exchange LLC (``Amex'') to the trading systems and 
facilities operated by the NYSE (the ``Equities Relocation''), the NYSE 
proposes to amend Rules 2, 300, and 304A in order to provide that all 
NYSE Alternext U.S. LLC (``NYSE Alternext'') member organizations and 
members in good standing are deemed qualified and approved as NYSE 
member organizations or members.

Background

NYSE Alternext Transaction

    On January 17, 2008, the Amex Membership Corporation and NYSE 
Euronext entered into an Agreement and Plan of Merger (``Merger 
Agreement'') whereby, through a series of mergers, NYSE Euronext will 
acquire Amex, and, as a result of these mergers, Amex will become one 
of the U.S. wholly-owned subsidiaries of NYSE Group and will be renamed 
NYSE Alternext U.S. LLC (the ``Mergers'').\3\
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    \3\ See SR-Amex-2008-62 (the ``Merger Transaction filing'').
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    As described more fully in the Merger Transaction filing, in 
connection with the Mergers, Amex proposes to demutualize by separating 
all trading rights from equity ownership in Amex. As part of the 
demutualization, those persons who were previously Amex Regular Members 
or Options Principal Members (``OPMs'') will receive a certain amount 
of NYSE Euronext stock. Once the Mergers close, all trading rights 
appurtenant to the Amex Regular Members' memberships or OPMs' 
memberships will be cancelled.
    As proposed in the Merger Transaction filing, immediately following 
the closing of the Mergers, those persons and entities who were 
authorized to trade on the Amex before the closing of the Mergers, 
including Amex (i) owners, lessees, or nominees of Regular Members or 
OPMs, (ii) limited trading permit holders, and (iii) associate members, 
will be deemed to have satisfied applicable qualification requirements 
necessary to trade in NYSE Alternext's demutualized marketplace and 
will be issued trading permits (referred to as ``86 Trinity Permits'') 
at no cost. The 86 Trinity Permit will authorize owners, lessees, or 
nominees of Amex Regular Members or OPMs, Amex limited trading permit 
holders, and Amex associate members who were authorized to trade on the 
Amex immediately before the Mergers to continue to trade at NYSE 
Alternext's systems and facilities at 86 Trinity Place, New York, New 
York (the ``86 Trinity Trading Systems''). NYSE Alternext will 
recognize the former Amex (i) owners, lessees, or nominees of Regular 
Members or OPMs, (ii) limited trading permit holders, and (iii) 
associate members as either NYSE Alternext member organizations or 
members, as applicable.
    In connection with the Mergers, NYSE Euronext intends to relocate 
all equities trading previously conducted on the 86 Trinity Trading 
Systems to the NYSE's trading systems and facilities located at 11 Wall 
Street, New York, New York (the ``NYSE Alternext Trading Systems''). 
The NYSE Alternext Trading Systems will be operated by the NYSE on 
behalf of NYSE Alternext. NYSE Alternext will also adopt a version of 
the NYSE's rules for trading equities on NYSE Alternext after the 
Equities Relocation.\4\
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    \4\ See SR-Amex-2008-63 (the ``NYSE Alternext Equities 
filing'').

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[[Page 46677]]

    As described more fully in the NYSE Alternext Equities filing, the 
Equities Relocation will take place as soon as practicable after the 
closing of the Mergers. Similarly, NYSE Alternext will relocate all 
options trading conducted on the 86 Trinity Trading Systems to new 
facilities of NYSE Alternext to be located at 11 Wall Street, which 
facilities will utilize a trading system based on the options trading 
system used by NYSE Arca, Inc. (``NYSE Arca'') (``Options Relocation,'' 
and, together with the Equities Relocation, the ``Relocations'').
    Holders of the 86 Trinity Permits will be able to apply for an NYSE 
Alternext equities trading license or options trading permit upon the 
Equities or Options Relocations, as applicable. After the Equities 
Relocation, a holder of an 86 Trinity Permit will only be able to trade 
products other than those that have relocated to NYSE Alternext Trading 
Systems. After the Options Relocation, the 86 Trinity Permits will be 
canceled.\5\
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    \5\ See SR-Amex-2008-62.
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    As described more fully in the NYSE Alternext Equities Rule filing, 
NYSE Alternext is proposing to adopt rules governing member 
organizations that are closely modeled on existing NYSE Rules 2 and 
300-313. These rules are substantially similar to current Amex rules 
concerning membership.\6\ Nonetheless, the Exchange recognizes that, 
after the closing of the Mergers, there may be NYSE Alternext members 
or member organizations holding an 86 Trinity Permit that may not 
immediately qualify for membership under the NYSE Alternext Equities 
Rules. NYSE Alternext is proposing to continue to approve such members 
and member organizations as NYSE Alternext members and member 
organizations notwithstanding whether they meet the proposed new 
standards. Such approval would be conditioned upon the NYSE Alternext 
member or member organization meeting the requirements of the adopted 
rules within a grace period of six months from the date that the member 
organization receives its NYSE Alternext equities trading license in 
exchange for a valid 86 Trinity Permit. NYSE Alternext would revoke a 
member organization's approval to trade if it fails to meet the new 
membership qualifications by the close of the grace period. NYSE 
Alternext would also reserve the right to commence proceedings to 
terminate such a member organization's membership, if applicable.
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    \6\ See NYSE Rules 300-313 and Amex Rules 300, 301, 310, 311, 
312, 341, 353, 356, and 359 and Article IV of the Amex Constitution.
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    In the NYSE Alternext Equities Rule filing, NYSE Alternext is also 
proposing to provide NYSE Alternext members with a grace period of six 
months within which to meet NYSE Alternext Equities proposed Rule 304A 
requirements to pass an examination required by the Exchange. This 
grace period would begin to run from the date that the individual 
member transfers to the NYSE Alternext Trading Systems, which may be a 
later date than the Equities Relocation.

NYSE and NYSE Alternext Membership Rules

    After the Equities Relocation, 86 Trinity Permit holders who apply 
to receive an NYSE Alternext equities trading license will also receive 
an NYSE Market trading license. In order to effectuate the issuance of 
these licenses, several changes are necessary to both the NYSE's and 
NYSE Alternext's rules regarding membership so that both SROs will have 
consistent standards for membership. The changes to Amex/NYSE Alternext 
rules are addressed in the NYSE Alternext Equities Rule Filing; \7\ 
this filing addresses the necessary changes to NYSE rules.
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    \7\ See SR-Amex-2008-63.
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    NYSE Rule 2 defines the terms ``member'' and ``member 
organization.'' Under NYSE Rule 2(b), a ``member organization'' means a 
registered broker or dealer (unless exempt pursuant to the Act) that is 
also a member of FINRA and has been approved by the Exchange to 
designate an associated natural person to effect transactions on the 
Floor of the Exchange. The term also includes any natural person so 
registered and approved and who directly effects transactions on the 
Floor of the Exchange.\8\ NYSE Rule 2(a) provides that a ``member'' 
includes any person associated with and designated by a member 
organization to effect transactions on the Floor of the Exchange.
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    \8\ The term ``member organization'' also includes ``member 
firm'' and ``member corporation.'' See NYSE Rule 2(b)(iii).
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    NYSE Rule 300 requires members and member organizations to have a 
trading license in order to effect transactions on the Floor of the 
Exchange or through any facility thereof. Only qualified and approved 
NYSE member organizations may acquire and hold a trading license. An 
NYSE member organization that holds a trading license may designate an 
NYSE member to effect transactions on its behalf on the Floor of the 
Exchange.

Proposed Amendments to Exchange Rules

    The Exchange proposes to add supplementary material to NYSE Rule 2 
to provide that an NYSE Alternext member organization is deemed 
qualified and approved as an NYSE member organization and thus eligible 
to hold an NYSE trading license. The Exchange further proposes that 
Exchange membership would be automatic for NYSE Alternext member 
organizations and that such NYSE Alternext member organizations would 
be exempt from the Exchange's new member organization application fee, 
as required by NYSE Rule 311(a) and set forth on the NYSE Price List. 
In addition, the Exchange proposes that any natural persons associated 
with an NYSE Alternext member organization and who has been approved by 
NYSE Alternext as a member and has been designated by an NYSE Alternext 
member organization to effect transactions on the Floor of NYSE 
Alternext would be deemed approved as an NYSE member.
    As proposed, NYSE Alternext member organizations and members that 
have been approved as member organizations and members by NYSE 
Alternext and that seek an NYSE Alternext equities trading license 
would be automatically waived in as NYSE member organizations and 
members. In this regard, the NYSE notes that NYSE Alternext will have 
the same standard for membership as the NYSE, so that if NYSE Alternext 
determines that an applicant is qualified to be an NYSE Alternext 
member organization, the NYSE will accept NYSE Alternext's 
determination as conclusive evidence that the applicant is eligible for 
NYSE membership. In accordance with the Mergers, NYSE Alternext will 
certify to the Exchange that all such transferring members met the 
Amex's minimum membership standards at the time that they were approved 
for membership and that nothing has come to the attention of NYSE 
Alternext that would disqualify any of these members. If an 86 Trinity 
Permit is revoked for any reason, such NYSE Alternext member 
organization would not be deemed eligible to be approved as an NYSE 
member organization.
    The Exchange is also proposing to adopt a temporary rule to apply 
to any NYSE Alternext member organizations that were approved as NYSE 
Alternext member organizations because they were a holder of an 86 
Trinity Permit. Pursuant to proposed Rule 300.10T, which is closely 
modeled on the version of a similar rule in the NYSE Alternext

[[Page 46678]]

Equities filing, the Exchange would provide NYSE Alternext member 
organizations with a six-month grace period within which to meet the 
requirements of Exchange rules governing membership. Such grace period 
would begin to run from the date that the NYSE Alternext member 
organization transfers its equities operations to the NYSE Alternext 
Trading Systems pursuant to a valid 86 Trinity Permit. If a member 
organization fails to meet the requirements of Exchange rules governing 
membership by the close of the grace period, the Exchange would revoke 
a member organization's approval to trade. The Exchange would also 
reserve the right to commence proceedings to terminate such a member 
organization, if applicable.
    The Exchange notes that the current Amex rules governing membership 
are substantially similar to Exchange rules governing membership.\9\ An 
Exchange requirement that the Amex currently does not have is that a 
member organization must submit an opinion of counsel that a member 
corporation's stock is validly issued and outstanding and that the 
restrictions and provisions required by the Exchange on the transfer, 
issuance, conversion and redemption of its stock have been made legally 
effective.\10\ Accordingly, if a NYSE Alternext member organization has 
not previously provided such an opinion of counsel to Amex, it must be 
provided to NYSE Alternext within six months of the member organization 
transferring its equities operations to the NYSE Alternext Trading 
Systems pursuant to a valid 86 Trinity Permit.\11\
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    \9\ Compare NYSE Rules 311-313 with Amex Rules 300, 301, 310, 
311, 312, 341, 353, 356, and 359 and Article IV of the Amex 
Constitution.
    \10\ See NYSE Rule 313.20.
    \11\ The Exchange rules governing membership impose certain 
ongoing obligations on member organizations that are not contained 
in the Amex membership rules and which NYSE Alternext member 
organizations would need to meet. See NYSE Rules 311(b)(7), 
312(f)(2), 313.10, 313.21, and 313.23.
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    Similar to the NYSE Alternext Equities Rule filing, the Exchange 
proposes that NYSE Alternext members be provided a grace period of six 
months within which to meet NYSE Rule 304A requirements to pass an 
examination required by the Exchange. The Exchange believes that this 
grace period should begin to run from the date that the individual 
member transfers to the NYSE Alternext Trading Systems, which may be a 
later date than the Equities Relocation. In addition, the Exchange 
proposes adding temporary Rule 304A.90T to address any changes that an 
approved person may have to make in connection with being associated 
with an Exchange member organization.
    Finally, the Exchange proposes providing a temporary exemption from 
the Rule 2 requirement that all member organizations be a FINRA member 
for those NYSE Alternext member organizations that: (i) Hold a valid 86 
Trinity Permit as of the date that the NYSE Alternext member 
organization transfers its equities operations to NYSE Alternext 
Trading Systems; (ii) are not currently a FINRA member; and (iii) are 
eligible for FINRA's waive-in membership process under FINRA's proposed 
Interpretive Material 1013-2.\12\ The Exchange proposes a 60-day grace 
period for such NYSE Alternext member organizations to apply for and be 
approved as FINRA members. Such grace period would run from the date 
that the NYSE Alternext member organization transfers its equities 
operation to NYSE Alternext Trading Systems pursuant to a valid 86 
Trinity Permit, which may be a later date than the Equities Relocation.
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    \12\ See SR-FINRA-2008-043.
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    The proposed changes to Exchange rules are contingent on the 
approval of the Merger Transaction filing, the closing of the Mergers, 
and the approval of the NYSE Alternext Equities Rule filing.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
and furthers the objectives of Section 6(b)(5) \13\ of the Act, in that 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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 also is designed to 
support the principles of Section 11A(a)(1) \14\ of the Act in that it 
seeks to assure fair competition among brokers and dealers and among 
exchange markets and the practicability of brokers executing investors' 
orders in the best market.
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    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78k-1(a)(1).
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    Specifically, because NYSE and NYSE Alternext intend to have 
identical membership standards, the NYSE believes that amending NYSE 
Rule 2 to permit the cross-licensing of members and member 
organizations based on approval from only one of the two self-
regulatory organizations will remove an impediment to free and open 
markets by eliminating unnecessary regulatory duplication in the 
membership process. Through this regulatory streamlining, the NYSE and 
NYSE Alternext will enable broker-dealers to more efficiently enter 
both the NYSE and NYSE Alternext market centers to begin providing 
services on behalf of their customers. At the same time, the NYSE notes 
that this proposal will not in any way lessen the regulatory scrutiny 
that new NYSE members receive (and therefore does not adversely affect 
the public interest or investor protection), since, prior to the NYSE 
deeming their applications approved, applicants will have been reviewed 
and approved by a self-regulatory organization that is applying the 
same standard as the NYSE itself would apply.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the NYSE consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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

[[Page 46679]]

     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2008-70 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-NYSE-2008-70. 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, 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-2008-70 and should be submitted on or before September 2, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-18374 Filed 8-8-08; 8:45 am]

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