Document ID: SEC-2008-1381-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-10-08T04:00Z

[Federal Register: October 8, 2008 (Volume 73, Number 196)]
[Notices]               
[Page 59019-59021]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08oc08-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58706; File No. SR-NYSE-2008-70]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval 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

October 1, 2008.

I. Introduction

    On July 30, 2008, 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 amending its rules governing membership in order 
to permit members in good standing of the American Stock Exchange LLC 
(``Amex'') to waive-in to NYSE after the acquisition of Amex by NYSE 
Euronext. The proposed rule change was published for comment in the 
Federal Register on August 11, 2008.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58290 (August 1, 
2008), 73 FR 46676 (August 11, 2008) (SR-NYSE-2008-70).
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II. Description of the Proposal

    As described in a separate proposed rule change,\4\ on January 17, 
2008, the Amex Membership Corporation and NYSE Euronext entered into an 
Agreement and Plan of Merger whereby, through a series of mergers 
(``Mergers''), NYSE Euronext will acquire Amex, and, as a result of 
these mergers, Amex will become a wholly-owned subsidiary of NYSE Group 
and be renamed NYSE Alternext US LLC. Immediately following the closing 
of the Mergers, those persons and entities who were authorized to trade 
on Amex before the closing of the Mergers will be deemed to have 
satisfied applicable qualification requirements necessary to trade on 
NYSE Alternext and will be issued trading permits (referred to as ``86 
Trinity Permits'') which will allow them to continue to trade on NYSE 
Alternext's systems and facilities at 86 Trinity Place, New York, New 
York (``86 Trinity Trading Systems'').
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    \4\ See Securities Exchange Act Release No. 58284 (August 1, 
2008), 73 FR 46086 (August 7, 2008) (SR-Amex-2008-62) (``Acquisition 
Proposal'').
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    Subsequently, NYSE Euronext intends to relocate all equities 
trading previously conducted on the 86 Trinity Trading Systems to 11 
Wall Street, New York, New York (the ``Equities Relocation'').\5\ The 
NYSE Alternext trading systems at 11 Wall Street will be operated by 
NYSE on behalf of NYSE Alternext. NYSE Alternext will also adopt a 
version of NYSE's rules for trading equities on NYSE Alternext after 
the Equities Relocation.\6\ Holders of the 86 Trinity Permits will be 
able to apply for an NYSE Alternext equities trading

[[Page 59020]]

license or options trading permit upon the Equities or Options 
Relocation, as applicable. 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.
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    \5\ Subsequently, NYSE Alternext will also relocate all options 
trading conducted on the 86 Trinity Trading Systems to 11 Wall 
Street and utilize a trading system based on the options trading 
system used by NYSE Arca, Inc. (``Options Relocation,'' and, 
together with the Equities Relocation, the ``Relocations'').
    \6\ See Securities Exchange Act Release No. 58265 (July 30, 
2008), 73 FR 46075 (August 7, 2008) (SR-Amex-2008-63) (``NYSE 
Alternext Equities filing''). In the NYSE Alternext Equities filing, 
NYSE Alternext also proposed to adopt rules governing member 
organizations that are closely modeled existing NYSE Rules. After 
the closing of the Mergers, there may be NYSE Alternext members or 
member organizations holding an 86 Trinity Permit that do not 
immediately qualify for membership under the new NYSE Alternext 
membership rules. Amex has proposed that any such member would 
automatically retain its membership and have a six-month grace 
period to meet the new membership requirements. The grace period 
would commence from the date the member receives an NYSE Alternext 
equities trading permit in exchange for a valid 86 Trinity Permit.
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NYSE and NYSE Alternext Membership Rules and Proposed Changes

    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 the Financial Industry Regulatory Authority, Inc. 
(``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. 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.
    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 a qualified and approved 
NYSE member organization 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.
    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 any NYSE Alternext member 
organization, and that such NYSE Alternext member organization would be 
exempt from the Exchange's new member organization application fee. In 
addition, the Exchange proposes that any natural person associated with 
an NYSE Alternext member organization, who has been approved by NYSE 
Alternext as a member and 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 members and member organizations and 
that seek an NYSE Alternext equities trading license would be 
automatically waived in as members and member organizations of NYSE. 
NYSE Alternext will have the same standards for membership as NYSE; 
therefore, if NYSE Alternext determines that an applicant is qualified 
to be an NYSE Alternext member organization, NYSE will accept NYSE 
Alternext's determination as conclusive evidence that the applicant is 
eligible for NYSE membership. NYSE Alternext will certify to the 
Exchange that each such transferring member met Amex's minimum 
membership standards at the time that it was approved for membership 
and that nothing has come to the attention of NYSE Alternext that would 
disqualify that member. If that member's 86 Trinity Permit were revoked 
for any reason, it would not be deemed eligible to be approved as an 
NYSE member organization.
    Some NYSE Alternext members that waive into NYSE might not be fully 
compliant with all NYSE membership requirements at the time of the 
waive-in.\7\ NYSE has proposed to provide any such member with a six-
month grace period in 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 at 11 Wall Street. If 
the member organization fails to meet all NYSE membership requirements 
by the close of the grace period, NYSE would revoke its approval to 
trade. NYSE would also reserve the right to commence proceedings to 
terminate that member organization.
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    \7\ The Exchange has noted that the current Amex rules governing 
membership are substantially similar to Exchange rules governing 
membership. However, there are some small variations in the 
membership requirements. For example, NYSE requires a member 
organization to 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. Amex does not have such a requirement. 
See NYSE Rule 313.20. Accordingly, if an 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.
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    In addition, the Exchange proposes to provide a temporary exemption 
from the NYSE Rule 2 requirement that each member organization be a 
FINRA member. This exemption would apply to any NYSE Alternext member 
organization that: (1) Holds a valid 86 Trinity Permit as of the date 
that the NYSE Alternext member organization transfers its equities 
operations to NYSE Alternext trading systems at 11 Wall Street; (2) is 
not currently a FINRA member; and (3) is eligible for FINRA's waive-in 
membership process.\8\ The Exchange proposes a 60-day grace period for 
any such NYSE Alternext member organization to apply for and be 
approved as a FINRA member. Such grace period would run from the date 
that the NYSE Alternext member organization transfers its equities 
operation to NYSE Alternext trading systems at 11 Wall Street.
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    \8\ See Securities Exchange Act Release No. 58291 (August 1, 
2008), 73 FR 46661 (August 11, 2008) (SR-FINRA-2008-043).
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    Finally, the Exchange proposes to add temporary Rule 304A.90T to 
provide a similar six-month grace period so that an approved person of 
a member organization, as opposed to the member organization itself, 
may address any changes that that approved person would have to make in 
connection with being associated with a member organization. If an 
approved person who has been designated to effect transactions on the 
floor of the Exchange fails to meet the relevant requirements by the 
end of the grace period, such approved person would not be permitted to 
effect trades on the floor until such requirements were met.

III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\9\ In particular, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\10\ which, among 
other things, requires 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 
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. The 
Commission also finds that the proposed rule change is consistent with 
Section 6(b)(8) of the Act,\11\ which requires that the rules of an 
exchange not impose any burden on

[[Page 59021]]

competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(8).
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    NYSE Alternext intends to adopt membership rules that are nearly 
identical to those of NYSE.\12\ Thus, if a firm were to meet NYSE 
Alternext's membership rules, then it also will have met NYSE's rules. 
Moreover, the same staff that administer NYSE membership rules will 
also administer NYSE Alternext membership rules. Therefore, the 
Commission believes it is consistent with the Act for NYSE to waive in 
NYSE Alternext members that have been duly admitted to NYSE Alternext 
membership. Such action will eliminate regulatory duplication without 
undermining compliance with applicable membership requirements. 
Similarly, the Commission believes it is consistent with the Act for 
NYSE to waive the new member application fee for NYSE Alternext members 
that waive into NYSE.
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    \12\ See NYSE Alternext Equities filing, supra note 6.
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    Certain NYSE Alternext members that will be waived in to NYSE do 
not currently meet all of NYSE's membership requirements. In a separate 
order, the Commission has approved Amex's proposal to give its existing 
members a six-month grace period to meet the new NYSE Alternext 
membership requirements.\13\ In this proposal, NYSE is offering such 
members a similar six-month grace period to meet the NYSE membership 
requirements. The Commission believes that this aspect of the proposal 
reasonably balances the desire to allow NYSE Alternext members to 
continue their businesses and participate in the Relocations with the 
need to ensure compliance with applicable membership requirements.
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    \13\ See Securities Exchange Act Release No. 58705 (October 1, 
2008) (SR-Amex-2008-63).
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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 (SR-NYSE-2008-70) be, and hereby 
is, approved.
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    \14\ 15 U.S.C. 78s(b)(2).

    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. E8-23767 Filed 10-7-08; 8:45 am]

BILLING CODE 8011-01-P