Document ID: SEC-2013-1773-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62915-62917]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24647]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70652; File No. SR-NYSE-2013-66]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 2 To Specify That the Definition of an Approved Person 
Does Not Include a Governmental Entity and Amending Rule 304 To Provide 
That If a Governmental Entity Directly or Indirectly Owns a Member 
Organization, Then the Member Organization Must Identify Such 
Governmental Entity to The Exchange

October 10, 2013.
    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 September 26, 2013, 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, 
II, and III 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 Rule 2 to specify that the 
definition of an approved person does not include a governmental entity 
and amend Rule 304 to provide that if a governmental entity directly or 
indirectly owns a member organization, then the member organization 
must identify such governmental entity to the Exchange. 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, 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 Rule 2 to specify that the 
definition of an approved person does not include a governmental entity 
and amend Rule 304 to provide that if a governmental entity directly or 
indirectly owns a member organization, then the member organization 
must identify such governmental entity to the Exchange.
    Under Rule 2(b)(i), a ``member organization'' is defined as a 
registered broker-dealer that has been approved for membership on NYSE. 
To qualify as a member organization, a broker-dealer must be a member 
of either (i) the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') or (ii) a registered securities exchange other than NYSE. 
Under Rule 2(c), an approved person of a member organization is defined 
as a person, other than a member, principal executive or employee of a 
member organization, who controls a member organization, is engaged in 
a securities or kindred business that is controlled by a member or 
member organization, or is a U.S.-registered broker-dealer under common 
control with a member organization. Under Rule 2(d), ``control'' means 
the power to direct or cause the direction of the management or 
policies of a person whether through ownership of securities, by 
contract or otherwise. A person is presumed to control another person 
if such person, directly or indirectly, (i) has the right to vote 25 
percent or more of the voting securities, (ii) is entitled to receive 
25 percent or more of the net profits, or (iii) is a director, general 
partner or principal executive (or person occupying a similar status or 
performing similar functions) of the other person.\4\
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    \4\ The Exchange notes that the approved person definition is an 
Exchange convention and is not intended to be identical to the 
definition of ``associated person'' pursuant to Section 3(a)(18) of 
the Act. See 15 U.S.C. 78c(a)(18).
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    Rule 304 provides that a member organization must identify each 
approved person to the Exchange. Each approved person must execute a 
written consent to the jurisdiction of the Exchange and agree to (1) 
supply the Exchange with information relating to

[[Page 62916]]

the existence of any statutory disqualification to which the approved 
person or any person associated with the approved person may be 
subject, as defined in the Act; (2) abide by such provisions of the 
rules of the Exchange relating to approved persons as shall from time 
to time be in effect; and (3) permit examination by the Exchange, or 
any person designated by it, at any time or from time to time, of its 
books and records to verify the accuracy of the information required to 
be supplied herein and by the rules of the Exchange. Supplementary 
Material .10 to Rule 304 sets forth certain additional requirements for 
approved persons domiciled outside the United States.
    The Exchange recently received a membership application for a 
broker-dealer that is an approved FINRA member; this broker-dealer has 
an owner that is a governmental entity that indirectly controls the 
broker-dealer and thus falls within the definition of approved person 
under the Exchange's rules. This is the first time that the Exchange 
has received a membership application presenting this ownership 
structure. The Exchange notes that a governmental entity could be 
either a direct or an indirect owner of a member organization, and by 
virtue of its control, fall within the Exchange's definition of 
approved person, although this result was not contemplated at the time 
the definition was created. The Exchange does not believe that the 
Exchange could, under conflict of laws, have jurisdiction over a 
governmental entity and therefore requiring a governmental entity that 
falls under the Exchange's definition of approved person to consent to 
jurisdiction, as required by Rule 304, would not be possible. In light 
of these conflicts and in the interest of providing better notice to 
member organizations, the Exchange proposes to amend Rule 2(c) to 
specifically exclude a governmental entity from the definition of 
approved person. The proposed rule text would define governmental 
entity as a sovereign nation, state, territory, or other political 
subdivision, agency, or instrumentality thereof. While it is 
unnecessary for a governmental entity to be deemed an approved person 
under the Exchange's rules, the Exchange nonetheless wishes to have all 
direct and indirect owners that control member organizations identified 
to the Exchange. Therefore, the Exchange proposes to add new 
Supplementary Material .20 to Rule 304 to specify that a member 
organization that is directly or indirectly controlled by a 
governmental entity as defined in Rule 2(c) is required to identify 
such governmental entity to the Exchange.\5\
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    \5\ The Exchange notes that irrespective of the proposed rule 
change, under the Act, any person that directly or indirectly 
controls a broker-dealer falls within the Act's definition of an 
associated person, and that the Act defines the term ``person'' to 
include a government or political subdivision, agency, or 
instrumentality of a government. See 15 U.S.C. 78c(a)(9) and (18). 
Nonetheless, neither the Act nor any rule thereunder requires a 
direct or indirect owner of a broker-dealer to execute any type of 
written consent to jurisdiction; only the broker-dealer itself does 
so by virtue of executing and submitting the Form BD.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\7\ in particular, because it 
is designed to foster cooperation and coordination with persons engaged 
in regulating transactions in securities, to remove impediments to, and 
perfect the mechanisms 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 rule change would remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system because the Exchange does not have 
jurisdiction over governmental entities and therefore could not require 
a governmental entity to execute a written consent to the Exchange's 
jurisdiction and attempting to do so would serve no regulatory purpose. 
The proposed rule change would take such conflicts of law rules into 
account and provide better notice to member organizations about the 
operation of the Exchange's rules. The proposed rule change would 
protect investors and the public interest because a member organization 
would be required to identify to the Exchange any governmental entity 
that directly or indirectly controlled it. All other Exchange 
membership requirements would remain applicable as would any other 
Exchange rules that would apply to the member organization. For these 
reasons, the Exchange believes that the proposal is consistent with the 
Act.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\8\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. To the contrary, the Exchange would be at a 
competitive disadvantage in the absence of a proposed rule change. As 
noted above, the Exchange has a pending application for a member 
organization that has a governmental entity as a controlling indirect 
owner, and FINRA has already approved this broker-dealer for membership 
under FINRA rules. By amending its rules so that this governmental 
entity need not execute a written consent to jurisdiction under Rule 
304, the Exchange can facilitate the approval of this broker-dealer as 
its member too. The Exchange has not identified any other self-
regulatory organization that requires a direct or indirect owner of a 
broker-dealer to execute a written consent to jurisdiction.
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    \8\ 15 U.S.C. 78f(b)(8).
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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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if

[[Page 62917]]

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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2013-66 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-2013-66. 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 inspection and 
copying in the Commission's Public Reference Section, 100 F Street NE., 
Washington, DC 20549-1090. Copies of the filing will also be available 
for Web site viewing and printing at the NYSE's principal office and on 
its Internet Web site at www.nyse.com. 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-2013-66 and should be submitted on 
or before November 12, 2013.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24647 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P