Document ID: SEC-2008-1307-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-09-25T04:00Z

[Federal Register: September 25, 2008 (Volume 73, Number 187)]
[Notices]               
[Page 55573-55575]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se08-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58606; File No. SR-Amex-2008-72]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the American Stock Exchange 
LLC Temporarily Suspending the Requirements of Its Rules Concerning the 
Approval of New Member Organizations in Order To Approve Barclays 
Capital Inc. Immediately and Provisionally as a New Member Organization

September 19, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on September 19, 2008, the American Stock Exchange 
LLC (``Amex'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission.\5\ 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)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ Amex gave the Commission written notice of its intention to 
file the proposed rule change on September 19, 2008. The Commission 
reviewed the proposed rule change and gave Amex permission to file 
the proposed rule change on the same day. Amex asked the Commission 
to waive the 30-day operative delay. See Rule 19b-4(f)(6)(iii). 17 
CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to temporarily suspend the requirements 
of Article IV, Section 2 of the Amex Constitution and related Amex 
rules concerning the approval of new member organizations in order to 
approve Barclays Capital Inc. (``BCI'') as a new associate member 
organization, subject to BCI complying with Exchange rules for a new 
member organization within 60 days of the date that BCI is 
provisionally approved.
    The text of the proposed rule change is available on the Amex's Web 
site at http://www.amex.com, the Office of the Secretary, the Amex 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 Amex 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 these statements may be examined at the places specified in 
Item IV below. The Amex has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects 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 this rule filing to temporarily suspend the 
requirements of Article IV, Section 2 of the Amex Constitution and 
related Amex rules concerning the approval of new member organizations 
in order to immediately approve as an Amex associate member 
organization BCI, which is the entity acquiring the assets of Lehman 
Brothers Inc. (``LBI'').\6\ The Exchange proposes this temporary 
suspension on an emergency basis to ensure that BCI will be able to 
expeditiously complete its proposed acquisition of certain LBI assets 
and begin operating former LBI business lines by September 22, 2008. 
This proposed temporary suspension is contingent upon BCI complying 
with all requirements of a new Amex member organization applicant 
within 60 days of the date that BCI is provisionally approved as an 
Amex member organization under this rule filing.
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    \6\ LBI also was an associate member organization. ``Associate'' 
denotes that the member organization has no floor presence and only 
accesses the Exchange electronically.
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a. Background
(i) Lehman Files for Bankruptcy
    On September 15, 2008, Lehman Brothers Holding Inc. (``Lehman''), 
after a precipitous decline in its financial condition, filed for 
bankruptcy protection in the United States Bankruptcy Court for the 
Southern District of New York under Chapter 11 of the U.S. bankruptcy 
code. Lehman is the parent holding company of LBI, which is a 
registered broker dealer and Amex member organization. Although LBI did 
not file for bankruptcy protection at that time, Lehman's Chapter 11 
status impacted the ability of LBI to continue operations.
    On September 17, 2008, Barclays Bank PLC (``Barclays''), a global 
financial services provider, announced that it had agreed to acquire 
the LBI investment banking and capital markets operations and 
supporting infrastructure for $1.75 billion (the ``proposed 
acquisition''). As part of the proposed acquisition, Barclays would be 
acquiring the LBI fixed income and equities sales, trading and 
research, and investment banking businesses (the ``LBI businesses''). 
Barclays would also be acquiring approximately 10,000 LBI employees, 
the Lehman headquarters located at 745 Seventh Avenue in New York City, 
and two data centers located in New Jersey. The proposed acquisition is 
subject to a number of conditions, including approval by the United 
States Bankruptcy Court for the Southern District of New York and other 
regulatory approvals and antitrust review. Moreover, if the proposed 
acquisition is not completed by September 24, 2008, Barclays may 
terminate the agreement to acquire LBI businesses.
(ii) Barclays Will Transfer LBI Assets to BCI
    On September 19, 2008, Barclays announced that certain LBI assets, 
including its employees and businesses, will be transferred to its 
wholly-owned subsidiary, BCI. BCI is a registered U.S. broker dealer 
and FINRA member, but not currently approved as an Amex member 
organization.
    The Exchange understands that LBI will likely file for some form of 
bankruptcy protection on Friday, September 19, 2008, and thus by the 
close of business on Friday, LBI will be in the control of a trustee. 
The Exchange further understands that, subject to approval by the 
bankruptcy court, as part of the bankruptcy proceeding, LBI assets will 
be sold to Barclays and transferred to BCI. Accordingly, as early as 
September 19, 2008, BCI may own and control the LBI businesses.

[[Page 55574]]

b. Proposed Temporary Suspension of Article IV, Section 2 of the Amex 
Constitution and Related Rules
(i) Amex Member Organization Application Process
    When a corporate acquisition concerns an asset transfer only, and 
not an acquisition of the corporate entity itself, Amex member 
organization status cannot be simply transferred to the acquiring 
entity. Rather, the entity that proposes to continue the business 
operations of the predecessor member organization must be separately 
approved as an Amex member organization.
    Article IV, Section 2 of the Amex Constitution generally provides 
in relevant part that ``[n]o * * * entity shall become or remain a 
member organization * * * unless such organization * * * meets and 
continues to meet the standards prescribed in the Constitution and 
rules of the Exchange.'' More specifically, Amex Rule 310 provides that 
any organization which proposes to become a member organization shall 
notify the Exchange in writing and submit such information as may be 
required by Amex rules. Collectively, Amex Rules 310-312 and 354-356 
set forth the specific information that must be submitted to the 
Exchange, and procedures that must be followed, by a prospective 
membership organization (and/or its associate members, allied members, 
and approved persons) before membership will be approved. Information 
that must typically be submitted with an application to become a member 
organization includes, among other things:
     Charters, certificates of incorporation, by-laws, stock 
certificates, and other miscellaneous agreements and documents relating 
to corporate governance matters;
     Statements of financial condition;
     Certified lists of stockholders; proposed members, 
directors or approved persons; and principal executive officers; and
     Opinions of counsel as to various matters.
    Amex membership department staff, working with Amex regulation 
staff, review all of the information submitted to verify that all of 
the rules of the Exchange are being followed, with such process 
generally taking several months to complete.
    Ordinarily, in the context of an acquisition, the separate Amex 
approval of the new membership organization would occur following 
adequate advance notice by the acquirer, in order to afford the Amex 
membership department sufficient time to collect, evaluate, and process 
all of the materials it needs from the acquirer without any cessation 
of the target's business operations while the approval of the new 
membership organization is pending. However, in light of the speed of 
the acquisition of LBI's business operations by BCI, the ordinary Amex 
membership department approval process cannot occur on its usual time 
frame without creating a substantial gap in LBI's operations on the 
Exchange. To avoid such a gap--which the exchange understands would be 
damaging to LBI's business, the interests of its numerous customers, 
and the prospective transaction with Barclays--Amex proposes to 
temporarily suspend the rules governing the approval process for new 
membership organizations, solely insofar as they apply to BCI.
(ii) A Temporary Suspension of Article II, Section 2 (and Related Amex 
Rules) for BCI Is Necessary
    As noted, BCI--already a registered broker-dealer and FINRA 
member--will continue the business operations of LBI in the same manner 
that they were operated by LBI. Because the bankruptcy court is 
expected to approve BCI's acquisition of the assets of LBI as early as 
Friday, September 19, 2008, BCI could be ready to begin operations on 
the Amex as early as Monday, September 22, 2008. However, absent a 
suspension of the relevant Amex rules, BCI would be unable to continue 
LBI's operations without interruption because of the time frame 
required to complete the member organization application process.
    The Exchange therefore proposes providing BCI with a temporary 
suspension of Article IV, Section 2 of the Amex Constitution, as well 
as Amex Rules 310-312 and 354-356, as they relate to approval to 
operate an Amex member organization and approval of a proposed member 
organization's approved persons, so that BCI can be immediately 
approved as a member organization. As proposed, this temporary 
suspension is contingent upon BCI and its approved persons within 60 
days completing all steps otherwise required to obtain approval as a 
member organization (as set forth in Article IV, Section 2 of the Amex 
Constitution and Amex Rules 310-312 and 354-56), failing which BCI's 
provisional status as an Amex member organization will no longer be 
effective.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \7\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5) \8\ in particular in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange did not receive any written comments on the proposed 
rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for 30 days from the date of filing, 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) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    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.
    The Amex has requested the Commission to waive the 30-day operative 
delay. The Commission hereby grants Amex's request.\11\ The Commission 
notes that the Exchange is

[[Page 55575]]

proposing that certain of its rules relating to membership requirements 
be temporarily suspended so that BCI can be provisionally approved as 
an Amex member organization. The proposed relief does not exempt BCI 
from Exchange rule requirements governing member organizations. BCI 
would have a 60-day grace period within which to apply for and be 
approved under relevant Exchange rules. Moreover, the Commission 
believes that immediate effectiveness is appropriate to ensure a smooth 
transition of the LBI businesses to another entity. In particular, with 
respect to BCI, time is of the essence as it has been announced that 
BCI may succeed to LBI's assets as early as September 19, 2008. 
Therefore, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest and designates the proposed rule change as operative upon 
filing.
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    \11\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposal's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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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 e-mail to rulecomments@sec.gov. Please include 
File No. SR-Amex-2008-72 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 No. SR-Amex-2008-72. 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 at (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 inspection and 
copying in the Commission's Public Reference Room 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 No. SR-Amex-
2008-72 and should be submitted on or before October 16, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-22505 Filed 9-24-08; 8:45 am]

BILLING CODE 8010-01-P