Document ID: SEC-2007-1460-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-10-18T04:00Z

[Federal Register: October 18, 2007 (Volume 72, Number 201)]
[Notices]               
[Page 59129-59130]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18oc07-88]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56654; File No. SR-NYSE-2007-67]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change Relating to NYSE Rule 2 (``Member,'' 
``Membership,'' ``Member Firm,'' etc.)

 October 12, 2007.

I. Introduction

    On July 24, 2007, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to reflect changes in the Exchange's membership 
requirements as a result of the consolidation of the member firm 
regulatory functions of the National Association of Securities Dealers, 
Inc. (``NASD'') and NYSE Regulation, Inc. (``NYSE Regulation''), which 
resulted in a combined self-regulatory organization called Financial 
Industry Regulatory Authority, Inc. (``FINRA'').\3\ The proposed rule 
change was published for comment in the Federal Register on August 7, 
2007.\4\ The Commission received no comment letters on the proposed 
rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 26, 2007, the Commission approved a proposed rule 
change filed by NASD to amend NASD's Certificate of Incorporation to 
reflect its name change to FINRA in connection with the 
consolidation of the member firm regulatory functions of NASD and 
NYSE Regulation, Inc. See Securities Exchange Act Release No. 56146 
(July 26, 2007).
    \4\ See Securities Exchange Act Release No. 56173 (July 31, 
2007), 72 FR 44205 (``Notice'').
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II. Description of the Proposal

    In connection with the recently approved plan to consolidate the 
member regulation operations of NASD and the NYSE Regulation into a 
single organization (``Transaction''),\5\ NYSE proposes to require all 
organizations that currently are NYSE member organizations but are not 
NASD members (``NYSE-only member organizations''), or are organizations 
that propose to become NYSE member organizations, to also be members of 
FINRA. The Exchange notes that most NYSE member organizations are 
already also members of FINRA. According to the Exchange, there are 
approximately 95 NYSE member organizations that are not currently FINRA 
members and that will be required to become FINRA members in order to 
remain NYSE member organizations and to utilize a NYSE trading 
license.\6\ FINRA would become the designated examining authority 
(``DEA'') for all NYSE member organizations.\7\
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    \5\ On July 26, 2007, the Commission approved amendments to 
NASD's By-Laws to implement governance and related changes to 
accommodate the consolidation of the member firm regulatory 
functions of NASD and NYSE Regulation, Inc. See Securities Exchange 
Act Release No. 56145 (July 26, 2007), 72 FR 42169 (August 1, 2007) 
(``Release No. 34-56145''). The date of closing of the Transaction 
was July 30, 2007.
    \6\ NYSE also has allowed an organization to be an NYSE 
``regulation only'' member without purchasing a trading license, if 
the organization qualifies and subjects itself to NYSE regulatory 
jurisdiction. After the Transaction, NYSE will continue to provide 
this status to an organization that is or becomes a FINRA member and 
subjects itself to NYSE jurisdiction, even though the organization 
does not have a NYSE trading license.
    \7\ Historically, NYSE was the DEA for virtually all of its 
member organizations. As part of the Transaction, it is contemplated 
that the Commission will name FINRA as the DEA for all the 
organizations for which NYSE was the DEA.
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    The Exchange proposes to amend the definition of ``member 
organization'' in NYSE Rule 2(b) to provide that membership in FINRA is 
a condition to becoming a member organization of NYSE. NYSE intends to 
keep NYSE Rule 308 (Acceptability Proceedings) in order to retain for 
itself the discretion to deem an applicant unacceptable for NYSE 
membership.
    NYSE-only member organizations would have a 60-day grace period 
within which they must apply for and be approved for FINRA membership. 
This grace period would run from the later of the date of Commission 
approval of either this proposed rule change or NASD's proposed rule 
change to amend its membership rules to permit eligible NYSE-only 
member organizations to become FINRA members through an expedited 
process.\8\
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    \8\ NASD filed a companion proposal, which the Commission 
approved today, that specifies the terms on which eligible NYSE-only 
member organizations can become FINRA members on an expedited basis. 
Pursuant to that proposal, NASD would adopt Interpretive Material 
1013-1 (``IM-1013-1''), which establishes a membership waive-in 
process for eligible NYSE-only member organizations, and 
Interpretive Material Section 4(b)(1) and 4(e) to Schedule A of the 
By-Laws, which exempts the applicants from the fee for each initial 
Form U-4 for the registration of any representative or principal 
associated with the firm at the time it submits its application for 
FINRA membership pursuant to IM-1013-1 and from the FINRA membership 
application fee. See Securities Exchange Act Release No. 56653 (SR-
NASD-2007-056) (``Release No. 34-56653'').
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III. Discussion and Commission Findings

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange \9\ and, in particular, the requirements of Section 6 of the 
Act.\10\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, and 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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    \9\ In approving this proposed rule change, as amended, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that most NYSE member organizations are also 
members of FINRA. Thus, the proposed rule change will primarily affect 
approximately 95 NYSE-only member organizations, in addition to those 
organizations that propose to become NYSE member organizations.
    The Commission believes that the proposed rule change would further 
the consolidation of the member firm regulation functions of NASD and 
NYSE Regulation, as approved by the Commission.\12\ The Commission 
notes that the approximately 95 NYSE-only member organizations that 
must become FINRA members will be able to avail themselves of the 
expedited FINRA membership procedures and the waiver of certain FINRA 
registration and application fees.\13\ Further, the Commission believes 
that the 60-day grace period for eligible NYSE-only

[[Page 59130]]

member organizations to become FINRA members is reasonable.
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    \12\ See Release No. 34-56145, supra note 5.
    \13\ See Release No. 34-56653, supra note 8.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (File No. SR-NYSE-2007-67), be, 
and hereby is, approved.
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-20535 Filed 10-17-07; 8:45 am]

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