Document ID: SEC-2009-1675-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-11-30T05:00Z

[Federal Register: November 30, 2009 (Volume 74, Number 228)]
[Notices]               
[Page 62612-62614]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no09-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61043; File No. SR-NYSE-2009-116]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change to Increase the Ceiling on Its 
Equity Ownership Interest in BIDS Holdings L.P. to Less Than 10%

November 20, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on November 18, 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, 
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 increase the ceiling on the Exchange's 
equity ownership interest in BIDS Holdings L.P. (``BIDS''), a member of 
the Exchange, to less than 10% from the current level of less than 9%, 
pursuant to the pilot program that provides an exception to NYSE Rule 
2B by permitting such equity ownership as

[[Page 62613]]

well as allowing BIDS's affiliation with the New York Block Exchange 
LLC, an affiliate of the Exchange.

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
    On January 22, 2009, the Commission approved the governance 
structure proposed by the Exchange with respect to the New York Block 
Exchange (``NYBX''), a new electronic trading facility of the Exchange 
for NYSE-listed securities that was established by means of a joint 
venture between the Exchange and BIDS.\3\ The governance structure that 
was approved is reflected in the Limited Liability Company Agreement of 
New York Block Exchange LLC (the ``Company''), the entity that owns and 
operates NYBX. Under the governance structure approved by the 
Commission, the Exchange and BIDS each own a 50% economic interest in 
the Company. In addition, the Exchange, through its wholly-owned 
subsidiary NYSE Market, Inc. (``NYSE Market''), owns less than 9% of 
the aggregate limited partnership interest in BIDS, which became a 
member of the Exchange in connection with the establishment of NYBX.
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    \3\ See Securities Exchange Act Release No. 59281 (January 22, 
2009), 74 FR 5014 (January 28, 2009) (order approving SR-NYSE-2008-
120) (``Approval Order'').
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    The foregoing ownership arrangements would violate NYSE Rule 2B 
without an exception from the Commission.\4\ First, the Exchange's 
indirect ownership interest in BIDS violates the prohibition in Rule 2B 
against the Exchange maintaining an ownership interest in a member 
organization. Second, BIDS is an affiliate of an affiliate of the 
Exchange,\5\ which violates the prohibition in Rule 2B against a member 
of the Exchange having such status. Consequently, in the Approval 
Order, the Commission permitted an exception to these two potential 
violations of NYSE Rule 2B, subject to a number of limitations and 
conditions. One of the conditions for Commission approval was that: 
``[t]he proposed exception from NYSE Rule 2B to permit NYSE's 
ownership/interest in BIDS and BIDS's affiliation with the Company 
(which is an affiliate of NYSE) would be for a pilot period of 12 
months.'' \6\ Noting that ``NYSE Market currently owns less than a 9% 
equity interest in BIDS,'' the Approval Order stated as another 
condition for Commission approval that: ``NYSE, or any of its 
affiliates, may not directly or indirectly increase such equity 
interest without prior Commission approval.'' \7\
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    \4\ NYSE Rule 2B provides, in relevant part, that: ``[w]ithout 
prior SEC approval, the Exchange or any entity with which it is 
affiliated shall not, directly or indirectly, acquire or maintain an 
ownership interest in a member organization. In addition, a member 
organization shall not be or become an affiliate of the Exchange, or 
an affiliate of any affiliate of the Exchange. * * * The term 
affiliate shall have the meaning specified in Rule 12b-2 under the 
Act.''
    \5\ Specifically, the Company is an affiliate of the Exchange, 
and BIDS is an affiliate of the Company. The affiliation in each 
case is the result of the 50% ownership interest in the Company by 
each of the Exchange and BIDS.
    \6\ See Approval Order, 74 FR at 5018.
    \7\ Id.
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    The Exchange is proposing an increase in the ceiling on its equity 
ownership in BIDS from the current limit of less than 9% to a new limit 
of less than 10%. The purpose of the increase is to allow the Exchange 
to participate in a new round of capital raising by BIDS without 
inadvertently exceeding the current limit. BIDS is offering its members 
the opportunity to invest, on a pro rata basis, in a new class of 
preferred equity interests. The Exchange has determined that, based on 
its expectations regarding the participation of certain other BIDS 
members in the offering, full participation by the Exchange could 
result in a slight increase in its percentage of equity ownership to a 
number somewhere between 9% and 10%. The Exchange does not believe that 
this slight increase in its equity ownership of BIDS is material, but 
it is nonetheless required by the terms of the Approval Order to obtain 
Commission approval for such an increase. Other than this non-material 
increase in the ceiling for the Exchange's equity ownership of BIDS, 
all of the other limitations and conditions required by the terms of 
the Approval Order for the exception to NYSE Rule 2B will continue to 
be applicable during the pilot period.\8\
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    \8\ Id.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \9\ of the 
Act,\10\ in general, and furthers the objectives of Section 6(b)(1) 
\11\ of the Act, which requires a national securities exchange to be so 
organized and have the capacity to carry out the purposes of the Act 
and to comply, and to enforce compliance by its members and persons 
associated with its members, with the provisions of the Act. The 
proposed rule change is also consistent with, and furthers the 
objectives of Section 6(b)(5) \12\ 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 foster cooperation and 
coordination with persons engaged in facilitating 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78.
    \11\ 15 U.S.C. 78f(b)(1).
    \12\ 15 U.S.C. 78f(b)(5).
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    In the Approval Order, the Commission determined that: ``the 
proposed exception from NYSE Rule 2B to permit NYSE's ownership 
interest in BIDS and BIDS's affiliation with the Company is consistent 
with the Act. In particular, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act * * * '' \13\ As the basis 
for its determination, the Commission cited the specific limitations 
and conditions listed in the Approval Order to which its approval of 
the exception to NYSE Rule 2B was subject,\14\ stating: ``These 
conditions appear reasonably designed to mitigate concerns about 
potential conflicts of interest and unfair competitive advantage. * * * 
These conditions appear reasonably designed to promote robust and 
independent regulation of BIDS. * * * The Commission believes that, 
taken together, these conditions are reasonably designed to mitigate 
potential conflicts between the Exchange's commercial interest in BIDS 
and its regulatory responsibilities with respect to BIDS.'' \15\ Other 
than the small, non-material increase of one percentage point in the 
ceiling on its equity ownership of BIDS that the Exchange is proposing, 
all of the other limitations and conditions will continue to be 
applicable during the pilot

[[Page 62614]]

period.\16\ Consequently, the Exchange believes that the exception from 
NYSE Rule 2B described above will continue to be consistent with the 
Act.
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    \13\ See Approval Order, 74 FR at 5018-5019.
    \14\ Id. at 5018.
    \15\ Id. at 5019.
    \16\ The Exchange has previously stated that it and its 
affiliates do not have any voting or other control arrangement with 
any of the other limited partners or general partner of BIDS, and 
this statement will continue to be valid. See Approval Order, 74 FR 
at 5018, n. 69.
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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

    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 self-regulatory organization consents, the Commission will:
    (A) By order approve the 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
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2009-116 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-2009-116. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of the filing will also 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-2009-116 and should be 
submitted on or before December 21, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-28470 Filed 11-27-09; 8:45 am]

BILLING CODE 8011-01-P