Document ID: SEC-2011-0337-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2011-03-10T05:00Z

[Federal Register Volume 76, Number 47 (Thursday, March 10, 2011)]
[Notices]
[Pages 13251-13252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5516]

[[Page 13251]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64039; File No. SR-NYSE-2011-09]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending Exchange Rule 103B To 
Modify the Application of the Exchange's Designated Market Maker 
(``DMM'') Allocation Policy in the Event of a Merger Involving One or 
More Listed Companies

March 4, 2011.
    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 February 24, 2011, 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\ 15 U.S.C. 78a.
    \3\ 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 Exchange Rule 103B to modify the 
application of the Exchange's Designated Market Maker (``DMM'') 
allocation policy in the event of a merger involving one or more listed 
companies. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, on the Commission's 
Web site at http://www.sec.gov, 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
    Policy Note VI(D)(1) to Exchange Rule 103B provides that when two 
NYSE listed companies merge, the post-merger listed company is assigned 
to the DMM in the company that is determined to be the survivor-in-fact 
(dominant company). Under Exchange policy, the determination of which 
company is the survivor-in-fact is based on which of the merging 
companies provides the chief executive officer and a majority of the 
board of directors of the post-merger listed company. The policy 
focuses on the CEO and the make-up of the board of the post-merger 
listed company rather than on any criteria based on the relative sizes 
of the pre-merger companies because the Exchange believes that the 
post-merger listed company's CEO and board will have the relationship 
with the DMM going forward and should therefore be comfortable with the 
DMM allocated to the post-merger listed company. Under the Exchange 
policy, no survivor-in-fact will be found if one of the merging 
companies provides the CEO and the other merging company provides a 
majority or half of the board of the post-merger listed company. Where 
no survivor-in-fact can be identified, the post-merger listed company 
may select one of the units trading the merging companies without the 
security being referred for reallocation, or it may request that the 
matter be referred for allocation through the allocation process 
pursuant to Exchange Rule 103B, Section III. In addition, Policy Note 
VI(D)(3) provides that in situations involving the merger of a listed 
company and an unlisted company, where the unlisted company is 
determined to be the survivor-in-fact, the post-merger listed company 
may choose to remain registered with the DMM unit that had traded the 
listed company entity in the merger, or it may request that the matter 
be referred for allocation through the allocation process pursuant to 
Exchange Rule 103B.\4\
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    \4\ A company seeking to choose a DMM through the allocation 
process must select a minimum of three DMM units to interview from 
the pool of DMM units eligible to participate in the allocation 
process and must notify the Exchange of its choice of DMM within two 
business days of the interviews. Alternatively, the company can 
delegate to the Exchange the authority to select its DMM. In that 
case, the selection is made by an Exchange Selection Panel (``ESP'') 
comprised of senior management of the Exchange, Exchange floor 
operations staff and non-DMM Executive Floor Governors or Floor 
Governors.
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    The Exchange believes that the decision as to how the stock of a 
post-merger listed company is allocated should be made solely by the 
post-merger listed company itself, rather than on the basis of which 
company is determined to be the survivor-in-fact in the merger. The 
Exchange believes that it is important that the CEO and board of the 
post-merger listed company are comfortable with its assigned DMM and 
that it therefore makes sense to give the post-merger listed company as 
much control as possible over the allocation decision. Consequently, 
the Exchange proposes to amend Policy Note VI(D)(1) and (3) to provide 
that in all listed company mergers, either between two listed companies 
or a listed company and an unlisted company, the management of the 
post-merger listed company will be able to choose to retain either of 
the incumbent DMMs (in the case of a merger between two listed 
companies) or the incumbent DMM (in the case of a merger between a 
listed company and an unlisted company) or request to have the security 
referred for reallocation. In no case will the policy dictate that a 
post-merger listed company must retain an incumbent DMM unless it 
chooses to do so. The Exchange notes that Section 806.01 of the NYSE 
Listed Company Manual provides that a listed company can request a 
change of DMM at any time and that giving post-merger listed companies 
control over the allocation decision in connection with a merger is 
consistent with that approach. The Exchange also notes that the 
proposed rule change would only affect a very small number of companies 
and their DMMs, as it would be applicable only in the case of a merger 
transaction where one of the two merging companies would otherwise be 
deemed the ``survivor-in-fact'' under Exchange policies.
    The Exchange notes that Policy Note VI(D)(1) and (3) both provide 
that DMM units that are ineligible to receive a new allocation due to 
their failure to meet the requirements of Exchange Rule 103B, Section 
II(D) and (E) will remain eligible to be selected pursuant to Policy 
Note VI(D)(1) or (3), as applicable. The Exchange proposes to amend the 
language in each section to clarify that its intent is that in such 
cases the applicable DMM unit will be eligible to be selected in its 
capacity as the DMM for one of the two pre-merger listed companies (in 
the case of a merger between two listed companies) or in its capacity 
as DMM of the pre-merger

[[Page 13252]]

listed company (in the case of a merger between a listed company and an 
unlisted company), but will not be eligible to participate in the 
allocation process if the post-merger company requests that the matter 
be referred for allocation through the allocation process pursuant to 
NYSE Rule 103B, Section III. In the event that such a situation were to 
arise, the Exchange would inform the listed company of such DMM unit's 
ineligibility under Exchange Rule 103B, Section II(D) or (E).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \5\ of the Securities Exchange Act of 1934 (the 
``Act''),\6\ in general, and furthers the objectives of Section 6(b)(5) 
of the Act,\7\ in particular in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, 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. The Exchange believes that 
the proposed amendments are consistent with Section 6(b)(5) of the Act 
in that their sole purpose is to provide more control over the DMM 
allocation process to companies involved in mergers, all DMMs are 
subject to the same Exchange rules and oversight when conducting their 
DMM activities, and the proposed amendments are consistent with Section 
806.01 of the Listed Company Manual as previously approved by the 
Commission.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78a.
    \7\ 15 U.S.C. 78f(b)(5).
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2011-09 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-2011-09. 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 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 
a.m. and 3 p.m. Copies of such 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-2011-09 and should be 
submitted on or before March 31, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5516 Filed 3-9-11; 8:45 am]
BILLING CODE 8011-01-P