Document ID: SEC-2010-0948-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-06-28T04:00Z

[Federal Register: June 28, 2010 (Volume 75, Number 123)]
[Notices]               
[Page 36729-36730]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jn10-131]                         

[[Page 36729]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62355; File No. SR-NYSE-2010-46]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Adopting New Rule 0 To Provide That Certain References in Exchange 
Rules Should Be Understood to Also Include FINRA, as Applicable.

June 22, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on June 14, 2010, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt new Rule 0 to provide that certain 
references in Exchange rules should be understood to also include 
FINRA, as applicable. The text of the proposed rule change is available 
at the Exchange, the Commission's Web site at http://www.sec.gov, the 
Commission's Public Reference Room, and http://www.nyse.com.

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 purpose of this proposed rule change is to add a new Rule 0 in 
connection with the FINRA Consolidation, to provide that certain 
references in Exchange rules should be understood to also include 
FINRA, as applicable. Specifically, proposed Rule 0 sets forth that the 
Exchange and FINRA are parties to a Regulatory Services Agreement 
(``RSA'') pursuant to which FINRA has agreed to perform certain of the 
Exchange's member regulatory functions on behalf of the Exchange \4\ 
and that Exchange rules that refer to NYSE Regulation, Inc., NYSE 
Regulation staff or departments, Exchange staff, and Exchange 
departments should be understood as also referring to FINRA staff and 
FINRA departments acting on behalf of the Exchange pursuant to the RSA, 
as applicable. The proposed new rule further provides that 
notwithstanding that the Exchange has entered into an RSA with FINRA to 
perform certain of the Exchange's member regulatory functions, the 
Exchange shall retain ultimate legal responsibility for, and control 
of, such functions.
---------------------------------------------------------------------------

    \4\ The Exchange and FINRA are also party to an allocation plan 
pursuant to Section 17(d)(1) of the Securities Exchange Act of 1934 
and Rule 17d-2 thereunder.
---------------------------------------------------------------------------

    Background
    NYSE Group, NYSE Regulation, Inc. (``NYSE Regulation''), NYSE, NYSE 
Arca, Inc. (``NYSE Arca''), and NYSE Amex LLC (``NYSE Amex'') 
(collectively, the ``NYSE Group Exchanges'') anticipate entering into 
an RSA and an allocation plan pursuant to Section 17(d)(1) of the 
Securities Exchange Act of 1934 and Rule 17d-2 thereunder that 
together, when effective, will result in consolidating with FINRA 
essentially all member regulatory functions that are currently 
performed by NYSE Regulation on behalf of the Exchange and the other 
NYSE Group Exchanges.\5\ The evolution and increasing fragmentation of 
the securities markets has heightened the need for effective cross-
market, cross-product oversight, and the Exchange believes that as a 
centralized regulatory utility, FINRA is well positioned to perform 
such consolidated regulatory services. Among other things, FINRA will 
conduct examinations and surveillance of member and member firm conduct 
under Exchange rules, investigate and enforce violations of Exchange 
rules, and conduct disciplinary proceedings arising out of such 
enforcement actions. NYSE Regulation currently performs the Exchange's 
regulatory functions pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \5\ NYSE Regulation will continue to have ultimate authority (as 
between itself and FINRA) regarding the proper interpretation of the 
rules of the NYSE Group Exchanges. NYSE Regulation will also 
continue to be responsible for listing regulation at the NYSE 
Exchanges.
    \6\ NYSE Regulation currently performs the regulatory functions 
of NYSE Arca and NYSE Amex pursuant to RSAs.
---------------------------------------------------------------------------

    Proposed Rule
    In connection with the FINRA Consolidation, the Exchange proposes 
to add new Rule 0. As proposed, Rule 0 sets forth that (i) the Exchange 
and FINRA are parties to an RSA pursuant to which FINRA has agreed to 
perform certain of the Exchange's member regulatory functions on behalf 
of the Exchange; and (ii) Exchange rules that refer to NYSE Regulation, 
Inc., NYSE Regulation staff or departments, Exchange staff, and 
Exchange departments should be understood as also referring to FINRA 
staff and FINRA departments acting on behalf of the Exchange pursuant 
to the RSA, as applicable. Additionally, proposed Rule 0 would set 
forth that notwithstanding that the Exchange has entered into an RSA 
with FINRA to perform certain of the Exchange's member regulatory 
functions, the Exchange shall retain ultimate legal responsibility for, 
and control of, such functions.
    As noted above, the Exchange will be consolidating essentially all 
member regulatory functions with FINRA, in order to enhance cross-
market, cross-product regulatory oversight and address the increasing 
market fragmentation. In connection therewith, FINRA is hiring 
substantially all the management and staff from NYSE Regulation who do 
market surveillance and enforcement for the NYSE Group Exchanges, so 
that the expertise related to those functions will reside with FINRA. 
Thus, the Exchange will necessarily rely on FINRA to determine the 
manner by which the regulatory services will be provided and the 
appropriate regulatory action to be taken to address particular 
matters. While the Exchange will have oversight rights with respect to 
FINRA's performance under the RSA, it will not exercise day to day 
control of such functions.
    The proposed rule text is substantially identical to Nasdaq Rule 
0130.
2. Statutory Basis
    The Exchange believes that the proposed rule changes [sic] are 
consistent with Section 6(b) of the Act,\7\

[[Page 36730]]

in general, and further the objectives of Section 6(b)(5) of the 
Act,\8\ in particular, in that they [sic] are 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. The Exchange 
believes that the proposed rule changes [sic] support the objectives of 
the Act by providing greater transparency to members and member 
organizations that FINRA will be providing regulatory services on 
behalf of the Exchange and that therefore the entity contacting members 
and member organization in connection with such regulation may be 
FINRA, even if an Exchange rule specifies that NYSE Regulation or the 
Exchange will be performing such function.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    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 for 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 \9\ and Rule 19b-
4(f)(6) \10\ thereunder.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 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.
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest, 
because such waiver will enable the Exchange to implement new Rule 0 
commensurate with its entering into the RSA. In addition, as noted by 
the Exchange, the proposal is consistent with the rules of other self-
regulatory organizations previously approved by the Commission.\11\ For 
these reasons, the Commission designates the proposed rule change as 
operative upon filing.\12\
---------------------------------------------------------------------------

    \11\ See Nasdaq Rule 0130 and BATS Rule 8.1(d).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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-2010-46 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-2010-46. 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 Web site viewing and 
printing in the Commission's Public Reference Room, on official 
business days between the hours of 10 a.m. and 3 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; 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-2010-46 and should be submitted on or before July 
19, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15650 Filed 6-25-10; 8:45 am]
BILLING CODE 8010-01-P