Document ID: SEC-2009-0720-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 2 Thereto, Changing Certain NYSE Rules and Rule Interpretations To Harmonize Them With Changes to Corresponding Rules Filed by the Financial Industry Regulatory Authority, Inc.
Posted Date: 2009-05-29T04:00Z

[Federal Register Volume 74, Number 102 (Friday, May 29, 2009)]
[Notices]
[Pages 25783-25784]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-12451]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59965; File No. SR-NYSE-2009-25]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 2 Thereto, 
Changing Certain NYSE Rules and Rule Interpretations To Harmonize Them 
With Changes to Corresponding Rules Filed by the Financial Industry 
Regulatory Authority, Inc.

May 21, 2009.

I. Introduction

    On March 9, 2009, 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 make changes to certain NYSE rules and rule 
interpretations, to be effective retroactively to December 15, 2008, to 
harmonize them with changes to corresponding rules that were filed by 
the Financial Industry Regulatory Authority, Inc. (``FINRA'') and 
approved by the Commission or were effective upon filing with the 
Commission.\3\ On March 27, 2009, the Exchange filed Amendment No. 1 to 
the proposed rule change, which was withdrawn.\4\ On March 30, 2009, 
the Exchange filed Amendment No. 2 to the proposed rule change.\5\ The 
proposed rule change was published in the Federal Register on April 6, 
2009.\6\ The Commission received no comments on the proposal. This 
order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58461 (September 4, 
2008), 73 FR 52710 (September 10, 2008) (SR-FINRA-2008-033); 
Securities Exchange Act Release No. 58514 (September 11, 2008), 73 
FR 54190 (September 18, 2008) (SR-FINRA-2008-039); Securities 
Exchange Act Release No. 58643 (September 25, 2008), 73 FR 57174 
(October 1, 2008) (SR-FINRA-2008-021, -022, -026,-028, -029); 
Securities Exchange Act Release No. 58660 (September 26, 2008), 73 
FR 57393 (October 2, 2008) (SR-FINRA-2008-027); Securities Exchange 
Act Release No. 58661 (September 26, 2008), 73 FR 57395 (October 2, 
2008) (SR-FINRA-2008-030); and Securities Exchange Act Release No. 
59097 (December 12, 2008), 73 FR 78412 (December 22, 2008) (SR-
FINRA-2008-057).
    \4\ On March 30, 2009, the Exchange withdrew Amendment No. 1.
    \5\ Amendment No. 2 to SR-NYSE-2009-25 replaced the original 
filing in its entirety. References to Amendment No. 1 in Amendment 
No. 2 should be read as Amendment No. 2. See telephone conversation 
between Clare F. Saperstein, Managing Director, NYSE Regulation, 
Inc., and Nancy J. Burke-Sanow, Assistant Director, Division of 
Trading and Markets, Commission, March 30, 2009.
    \6\ See Securities Exchange Act Release No. 59655 (March 30, 
2009), 74 FR 15563 (``Notice'').
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II. Description of the Proposal

    On July 30, 2007, the National Association of Securities Dealers, 
Inc. (``NASD'') and NYSE Regulation, Inc., the regulatory subsidiary of 
the New York Stock Exchange (``NYSE''), consolidated their member firm 
regulation operations into FINRA. In connection with this 
consolidation, FINRA is in the process of establishing a consolidated 
FINRA rulebook (the ``Consolidated FINRA Rulebook'') \7\ that will 
harmonize NASD rules and NYSE rules relating to member firm 
regulation.\8\ All of these rules will be identified as ``FINRA Rules'' 
when the rule consolidation process is completed.
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    \7\ The current FINRA rulebook consists of three sets of rules: 
(1) NASD Rules, (2) rules and rule interpretations incorporated from 
the NYSE (``FINRA Incorporated NYSE Rules'') (together, referred to 
as the ``Transitional Rulebook''), and (3) consolidated FINRA Rules. 
The FINRA Incorporated NYSE Rules apply only to those members of 
FINRA that are also members of the NYSE (``Dual Members''), while 
the consolidated FINRA Rules apply to all FINRA members.
    \8\ Pursuant to Rule 17d-2 under the Act, NYSE, NYSER and NASD 
entered into an agreement (``Rule 17d-2 Agreement'') to reduce 
regulatory duplication for Dual Members by allocating to FINRA 
regulatory responsibility for specified NYSE rules (the ``Common 
Rules''). See Securities Exchange Act Release No. 56148 (July 26, 
2007), 72 FR 42146 (August 1, 2007) (Notice of Filing and Order 
Approving and Declaring Effective a Plan for the Allocation of 
Regulatory Responsibilities). The Common Rules include the FINRA 
Incorporated NYSE Rules. See Securities Exchange Act Release No. 
56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) (Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule 
Change to Incorporate Certain NYSE Rules Relating to Member Firm 
Conduct) (SR-NASD-2007-054). Paragraph 2(b) of the Rule 17d-2 
Agreement sets forth procedures regarding proposed changes by either 
NYSE or FINRA to the substance of any of the Common Rules.
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    To reduce regulatory duplication, the Exchange proposes to 
harmonize several NYSE rules with certain FINRA rule changes by 
deleting NYSE rules and rule interpretations and replacing them with 
rules that are identical to, or substantially identical to, the FINRA 
Rules that were approved by, or were effective upon filing with, the 
Commission, subject to technical amendments to conform them to the 
Exchange. The Exchange also proposes to adopt the same rule numbers 
used in the Consolidated FINRA Rulebook to allow members and others to 
more readily identify those NYSE rules that have been harmonized with 
FINRA Rules. The Notice provides a more detailed description of the 
FINRA rule changes and the Exchange's proposed conforming rule 
changes.\9\
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    \9\ See Notice, supra note 6.
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III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \10\ and the rules and regulations thereunder applicable to a 
national securities exchange.\11\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\12\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, 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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    \10\ 15 U.S.C. 78f.
    \11\ 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).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange is deleting certain rules and rule interpretations 
pertaining to: (1) Compensation or gratuities to

[[Page 25784]]

employees of others; (2) business conduct, trading against firm 
recommendations, and private sales; (3) excessive trading by members, 
excessive trading in discretionary accounts, successive transactions by 
members, manipulative operations, reopening contracts, and loans for 
accounts of non-members; (4) disciplinary proceedings concerning 
conduct that is inconsistent with just and equitable principles of 
trade; (5) reporting of certain information concerning short sales and 
proprietary transactions; (6) reporting and certification of member or 
member organization's supervision and compliance efforts; (7) formation 
and approval or merger organizations; (8) reporting of short positions; 
(9) notification requirements for listed securities; and (10) 
disclosure and monitoring of non-managed fee based accounts.
    In the place of the deleted rules and interpretations, the Exchange 
proposes to adopt rules that are identical to, or substantially 
identical to, FINRA Rules that were approved by the Commission or were 
effective upon filing with the Commission.\13\ In addition, NYSE is 
making non-substantive changes to the FINRA Rules that it is 
incorporating to reflect that they are NYSE rules and is deleting NYSE 
rules that have become outdated and are no longer needed. The 
Commission believes that the proposed rule change is appropriate and 
should reduce unnecessary regulatory duplication of Dual Members by 
harmonizing certain NYSE rules with FINRA Rules. With respect to the 
Exchange's proposal to delete NYSE Rule 350 (and accompanying 
interpretations) and to adopt NYSE Rule 3220 (relating to influencing 
or rewarding employees of others), the Commission notes that NYSE has 
stated that immediately upon Commission approval of new NYSE Rule 3220, 
it will issue an Information Memorandum to its members and member 
organizations, including NYSE-only members and those members registered 
with FINRA, clarifying that FINRA's interpretive guidance related to 
FINRA Rule 3220 is considered part of NYSE Rule 3220, and that such 
members and member organizations are required to regulate their conduct 
according to Rule 3220 and the interpretive guidance related to FINRA 
Rule 3220.\14\ Accordingly, the Commission believes that the proposed 
rule change is consistent with the requirements of the Act.
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    \13\ See supra note 3.
    \14\ See telephone conversation between Clare F. Saperstein, 
Managing Director, NYSE Regulation, Inc., and Nancy J. Burke-Sanow, 
Assistant Director, Division of Trading and Markets, Commission, May 
21, 2009.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-NYSE-2009-25) be, and it 
hereby is, approved.
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    \15\ 15 U.S.C. 78s(b)(2).

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-12451 Filed 5-28-09; 8:45 am]
BILLING CODE 8010-01-P