Document ID: SEC-2023-0268-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2023-03-10T05:00Z

[Federal Register Volume 88, Number 47 (Friday, March 10, 2023)]
[Notices]
[Pages 15106-15108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04876]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97048; File No. SR-NYSE-2023-15]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 313

March 6, 2023.
    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 February 27, 2023, 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 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\ 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 313 to eliminate text 
reflecting outdated requirements. The proposed rule change is available 
on the Exchange's website 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 313 to delete the current text 
of Supplementary Material .22 and designate Rule 313.22 as 
``Reserved.''
    Rule 313 sets forth certain corporate, limited liability company, 
or partnership documents that each member organization must submit to 
the Exchange to enter into and continue in NYSE membership. The Rule 
also sets forth certain restrictions on capital withdrawals and 
distributions applicable to member corporations and partnerships.
    Rule 313.22 currently provides that the certificate of 
incorporation of a member corporation must contain provisions 
authorizing the corporation to redeem or convert outstanding shares of 
voting stock to a fixed income security when such shares are owned by 
any person required to be approved by the Board of Directors of the 
Exchange as a member or approved person and such person fails or ceases 
to be so approved, as may be necessary to reduce such party's ownership 
of voting stock in the member corporation below the level that would 
enable such party to exercise controlling influence over the management 
or policies of such member corporation.
    Rule 313.22 also provides that, if the certificate of incorporation 
of a member corporation subject to Rule 325 provides that a stockholder 
may compel the redemption of his stock, such certificate must provide 
that, unless such stockholder has prior written approval of the 
Exchange, the redemption may

[[Page 15107]]

only be effected on a date not less than six months after receipt by 
the member corporation of a written request for redemption, given no 
sooner than six months after the date of the original issuance of such 
shares (or any predecessor shares). Rule 313.22 also requires a member 
corporation to promptly notify the Exchange of the receipt of any 
request for redemption of any stock or if any redemption is not made 
because prohibited under the provisions of Rule 15c3-1.\3\
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    \3\ See 17 CFR 240.15c3-1.
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    Finally, Rule 313.22 provides that each stock certificate of a 
member corporation must state, on its face, the restrictions set forth 
in Rule 15c3-1(e) relating to the redemption of stock or a full summary 
thereof.
Proposed Rule Change
    The Exchange proposes to delete the text of Rule 313.22 and 
designate Rule 313.22 as ``Reserved.''
    The Exchange believes that Rule 313.22, which was adopted in 1970 
and last amended in 1976 to incorporate references to then newly 
adopted Rule 15c3-1,\4\ requiring a member corporation's certificate of 
incorporation to contain specific provisions relating to the redemption 
and conversion of stock and requiring a member corporation's stock 
certificate to include the restrictions set forth in Rule 15c3-1(e) 
relating to the redemption of stock no longer serves a regulatory, 
business or investor protection purpose and in fact poses an 
unnecessary obstacle for prospective applicants for Exchange 
membership. Specifically, the Exchange believes that the provisions of 
Rule 313.22 are duplicative of the requirements of Rule 15c3-1, as well 
as other Exchange and Financial Industry Regulatory Authority, Inc. 
(``FINRA'') rules adopted subsequent to the implementation of Rule 
313.22. The Exchange notes that the proposed change relates only to 
Rule 313.22's requirements concerning the contents of a member 
organization's certificate of incorporation or stock certificate and 
would not otherwise impact a member organization's continuing 
obligation to comply with the net capital requirements of Rule 15c3-1, 
including pursuant to NYSE Rule 4110 and, for the large number of 
member organizations that are also members of FINRA, FINRA Rule 4110. 
Both NYSE Rule 4110 and FINRA Rule 4110 require, among other things, 
that a member organization must suspend business operations during any 
period in which it is not in compliance with applicable net capital 
requirements set forth in Rule 15c3-1 and that no equity capital of a 
member organization may be withdrawn for a period of one year from the 
date such equity capital is contributed.\5\
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    \4\ See SR-NYSE-75-11. Prior to the change, proprietors had been 
able to withdraw all of their capital even where such action would 
result in a capital ratio or minimum dollar capital in violation of 
the net capital rule.
    \5\ See NYSE Rule 4110 (Capital Compliance); FINRA Rule 4110 
(Capital Compliance), available at: https://www.finra.org/rules-guidance/rulebooks/finra-rules/4110. The Exchange adopted Rule 4110 
in 2010 to harmonize its rules with FINRA Rule 4110. See Securities 
Exchange Act Release No. 61557 (February 22, 2010), 75 FR 9472 
(March 2, 2010) (SR-NYSE-2010-10) (Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by New York 
Stock Exchange LLC Changing Certain NYSE Rules and Rule 
Interpretations To Correspond With Rule Changes Filed by the 
Financial Industry Regulatory Authority, Inc.).
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    The Exchange believes that the elimination of the requirements set 
forth in current Rule 313.22 would simplify the membership application 
process without impacting the Exchange's ability to ensure that member 
organizations are qualified for Exchange membership and would be held 
to the requirements of Exchange rules. Prospective member organizations 
would continue to be subject to the membership application process, 
which calls for applicants to submit materials including organizational 
documents, financial statements, and records relating to the 
organization's designated supervisors and principals.\6\ Approved 
member organizations are bound to abide by Exchange rules, and the 
Exchange would continue to have the authority to enforce member 
organizations' obligations under Exchange rules (including compliance 
with relevant net capital requirements pursuant to Rule 15c3-1, as 
applicable).\7\
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    \6\ The NYSE membership application is available at: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Application_for_Membership.pdf.
    \7\ The Exchange notes that the proposed change would likewise 
have no impact on FINRA's authority to enforce its rules with 
respect to member organizations that are also FINRA members.
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    The Exchange also believes that the requirements of Rule 313.22, to 
the extent they necessitate modifications to a member corporation's 
certificate of incorporation or stock certificate, may be burdensome to 
prospective member organizations given the potential difficulty of 
amending such documents and could deter organizations from seeking 
Exchange membership. The Exchange thus believes that eliminating the 
requirements of Rule 313.22 could make the membership application 
process more accessible to prospective member organizations, thereby 
encouraging additional corporations to consider and apply for Exchange 
membership.
    Finally, Rule 313.22 currently includes a provision referring to 
member corporations subject to Rule 325, which rule was designated as 
``Reserved'' in 2010.\8\ Accordingly, the Exchange believes that the 
portion of Rule 313.22 setting forth requirements relating to 
corporations subject to Rule 325 likewise no longer has application.
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    \8\ See Securities Exchange Act Release No. 61557 (February 22, 
2010), 75 FR 9472 (March 2, 2010) (SR-NYSE-2010-10) (Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule 
Change by New York Stock Exchange LLC Changing Certain NYSE Rules 
and Rule Interpretations To Correspond With Rule Changes Filed by 
the Financial Industry Regulatory Authority, Inc.).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that eliminating the requirements of Rule 
313.22 with respect to member corporations would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system by simplifying the application process for prospective 
member organizations and in turn encouraging organizations to apply for 
Exchange membership. The Exchange believes that the requirements of 
Rule 313.22 do not currently serve a regulatory or business purpose and 
do not further investor protection interests, particularly since the 
deletion of the requirements in Rule 313.22 would not impact the 
Exchange's ability to make informed decisions with respect to 
applicants for Exchange membership or to require member organizations 
to abide by Exchange rules, including rules relating to their net 
capital obligations pursuant to Rule 15c3-1. The Exchange further 
believes that the issues that may have been contemplated when Rule 
313.22 was adopted (such as ensuring that a member organization's 
controlling persons are qualified and that member organizations comply 
with the relevant provisions of Rule 15c3-1) are adequately addressed 
by both the

[[Page 15108]]

application review process and the processes in place for the oversight 
of member organizations' compliance with Exchange rules.
    The Exchange also believes that the proposed change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and is designed to protect investors and the 
public interest because it would improve the efficiency of the 
membership application process and the clarity of the Exchange's rules 
by removing the outdated and unnecessarily burdensome requirements that 
a member corporation's certificate of incorporation and stock 
certificate contain specific language relating to the redemption. The 
Exchange also notes that the proposed change to no longer require 
specific language referencing Rule 15c3-1 in the certificate of 
incorporation and stock certificate would not impact a member 
organization's obligation to comply with the relevant net capital 
requirements of Rule 15c3-1, including pursuant to NYSE Rule 4110 and 
FINRA Rule 4110, as applicable. The Exchange further believes that 
broadening the prospective Exchange membership pool by eliminating 
requirements that no longer serve regulatory or business purposes and 
do not offer a necessary investor protection would benefit investors 
and the public interest by facilitating increased market participation 
and depth at the Exchange.

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. The Exchange believes that 
the proposed rule change could promote competition by removing an 
outdated requirement applicable to prospective member organizations 
that are corporations. The Exchange believes that deleting the 
requirements set forth in Rule 313.22 (particularly those calling for 
modification of a corporation's certificate of incorporation and/or 
stock certificate) could result in less burdensome and more efficient 
standards for prospective member organizations to meet, thereby 
encouraging additional corporations to consider pursuing Exchange 
membership. Expanding the prospective Exchange membership pool by 
eliminating a requirement that no longer appears to serve a business, 
regulatory, or other purpose could promote competition by increasing 
market participation and depth at the Exchange.

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 \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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 \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its 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 such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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 [email protected]. Please include 
File Number SR-NYSE-2023-15 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-2023-15. 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 website (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 website 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 10:00 a.m. and 
3:00 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2023-15 and should be submitted on 
or before March 31, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04876 Filed 3-9-23; 8:45 am]
BILLING CODE 8011-01-P