Document ID: SEC-2011-0333-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2011-03-10T05:00Z

[Federal Register Volume 76, Number 47 (Thursday, March 10, 2011)]
[Notices]
[Pages 13249-13250]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5517]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64040; File No. SR-NYSEAmex-2011-11]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Proposed Rule Change Amending Rule 103B--NYSE Amex Equities To Modify 
the Application of the Exchange's Designated Market Maker 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, NYSE Amex LLC (the ``Exchange'' or 
``NYSE Amex'') 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 Rule 103B--NYSE Amex Equities 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 Rule 103B--NYSE Amex Equities provides that 
when two NYSE Amex 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 Rule 103B--NYSE Amex Equities, 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 Rule 103B--NYSE Amex Equities.\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

[[Page 13250]]

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 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 Rule 103B--NYSE Amex 
Equities, 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 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 Rule 103B--NYSE Amex 
Equities, 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 Rule 103B--NYSE Amex Equities, 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 and all DMMs are 
subject to the same Exchange rules and oversight when conducting their 
DMM activities.
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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-NYSEAmex-2011-11 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-NYSEAmex-2011-11. 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, 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-
NYSEAmex-2011-11 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. 2011-5517 Filed 3-9-11; 8:45 am]
BILLING CODE 8011-01-P