Document ID: SEC-2009-1786-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-12-21T05:00Z

[Federal Register: December 21, 2009 (Volume 74, Number 243)]
[Notices]               
[Page 67942-67944]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21de09-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61158; File No. SR-NYSE-2009-123]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 352 and Adopting New Rule 2150 To Correspond With 
Rule Changes Filed by the Financial Industry Regulatory Authority, Inc.

December 11, 2009.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 10, 2009, the New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by NYSE. NYSE filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders it effective upon filing 
with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 NYSE Rule 352 and adopt new Rule 
2150 to correspond with rule changes filed by the Financial Industry 
Regulatory Authority, Inc. (``FINRA'') and approved by the 
Commission.\5\ The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://
www.nyse.com.
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    \5\ See Securities Exchange Act Release No. 60701 (September 21, 
2009), 74 FR 49425 (September 28, 2009) (order approving FINRA 09-
14).
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule changes is to amend NYSE Rule 352 
(Guarantees, Sharing in Accounts, and Loan Arrangements) and adopt new 
Rule 2150 (Improper Use of Customers' Securities or Funds; Prohibition 
Against Guarantees and Sharing in Accounts) to correspond with rule 
changes filed FINRA and approved by the Commission.

Background

    On July 30, 2007, FINRA's predecessor, the National Association of 
Securities Dealers, Inc. (``NASD''), and NYSE Regulation, Inc. 
(``NYSER'') consolidated their member firm regulation operations into a 
combined organization, FINRA. Pursuant to Rule 17d-2 under the Act,\6\ 
NYSE, NYSER and FINRA entered into an agreement (the ``Agreement'') to 
reduce regulatory duplication for their members by allocating to FINRA 
certain regulatory responsibilities for certain NYSE rules and rule 
interpretations (``FINRA Incorporated NYSE Rules''). NYSE Amex LLC 
(``NYSE Amex'') became a party to the Agreement effective December 15, 
2008.\7\
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    \6\ 15 U.S.C. 78a, et seq.
    \7\ See Securities Exchange Act Release Nos. 56148 (July 26, 
2007), 72 FR 42146 (August 1, 2007) (order approving the Agreement); 
56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) (SR-NASD-2007-
054) (order approving the incorporation of certain NYSE Rules as 
``Common Rules''); and 60409 (July 30, 2009), 74 FR 39353 (August 6, 
2009) (order approving the amended and restated Agreement, adding 
NYSE Amex as a party). Paragraph 2(b) of the Agreement sets forth 
procedures regarding proposed changes by FINRA, NYSE or NYSE Amex to 
the substance of any of the Common Rules.
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    As part of its effort to reduce regulatory duplication and relieve 
firms that are members of FINRA, NYSE and NYSE Amex of conflicting or 
unnecessary regulatory burdens, FINRA is now engaged in the process of 
reviewing and amending the NASD and FINRA Incorporated NYSE Rules in 
order to create a consolidated FINRA rulebook.\8\
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    \8\ FINRA's rulebook currently has three sets of rules: (1) NASD 
Rules, (2) FINRA Incorporated NYSE Rules, 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. For more 
information about the FINRA rulebook consolidation process, see 
FINRA Information Notice, March 12, 2008.
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Proposed Conforming Amendments to NYSE Rules

    FINRA adopted parts of NASD Rule 2330 (Customers' Securities of 
Funds) as consolidated FINRA Rule 2150 (Improper Use of Customers' 
Securities or Funds; Prohibition Against Guarantees and Sharing in 
Accounts). In adopting consolidated FINRA Rule 2150, FINRA also took 
into account certain provisions of FINRA Incorporated NYSE Rule 352 
(Guarantees, Sharing in Accounts, and Loan Arrangements).\9\
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    \9\ See Securities Exchange Act Release No. 60701 (September 21, 
2009), 74 FR 49425 (September 28, 2009).
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    Because they are substantially similar to the provisions of FINRA 
Rule 2150 or are otherwise incorporated into the Supplementary Material 
to the Rule, FINRA deleted the corresponding provisions of FINRA 
Incorporated NYSE Rule 352(a)-(d). In particular, FINRA Incorporated 
NYSE Rule 352(a), which prohibits members, member organizations and 
their employees from guaranteeing or representing that it will 
guarantee a customer against loss in any account or on any transaction, 
is substantially the same as FINRA Rule 2150(b).\10\
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    \10\ See Securities Exchange Act Release No. 60701 (September 
21, 2009), 74 FR 49425 (September 28, 2009).
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    In addition, FINRA Incorporated NYSE Rule 352(b) and (c) prohibit 
members, member organizations and their employees from sharing in 
profits or losses in a customer's account or on any transaction except, 
subject to written authorization by the member or member organization 
(though not prior written customer authorization), in direct proportion 
to the financial contributions made to the account.

[[Page 67943]]

FINRA Incorporated NYSE Rule 352(c) also permits sharing in customer 
losses resulting from an erroneous transaction. FINRA Incorporated NYSE 
Rule 352(d) permits sharing arrangements that comply with Rule 205 of 
the Investment Advisers Act of 1940, as amended,\11\ though again, 
there is no requirement for prior written customer authorization. These 
provisions are all substantially similar to those of consolidated FINRA 
Rule 2150(c) and the Supplementary Material.\12\
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    \11\ 15 U.S.C. 80b-1, et seq.
    \12\ See Securities Exchange Act Release No. 60701 (September 
21, 2009), 74 FR 49425 (September 28, 2009).
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    To harmonize the NYSE Rules with the approved FINRA Rules, the 
Exchange correspondingly proposes to delete the provisions of NYSE Rule 
352(a)-(d) and replace them with proposed NYSE Rule 2150, which is 
substantially similar to the new FINRA Rule.\13\ As proposed, NYSE Rule 
2150 adopts the same language as FINRA Rule 2150, except for 
substituting for or adding to, as needed, the term ``member 
organization'' for the term ``member'', and making corresponding 
technical changes. In addition, in Supplementary Material .04 to 
proposed Rule 2150, the Exchange substituted NYSE Rules 346, 407 and 
407A for NASD Rules 3030, 3040 and 3050 cross-referenced in the FINRA 
Rule, as these rules, which are analogous in purpose, have not yet been 
harmonized by FINRA.
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    \13\ NYSE Amex has submitted a companion rule filing amending 
its rules in accordance with FINRA's rule changes. See SR-NYSE-Amex-
2009-88.
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    Finally, in order to ensure that both proposed NYSE Rule 2150 and 
FINRA Rule 2150 are fully harmonized, the Exchange also proposes to add 
Supplementary Material .05 to NYSE Rule 2150 to provide that, for the 
purposes of the rule, the term ``associated person of a member or 
member organization'' shall have the same meaning as the terms ``person 
associated with a member'' or ``associated person of a member'' as 
defined in Article I (rr) of the FINRA By-Laws.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6(b) of the Act,\14\ in general, and further the 
objectives of Section 6(b)(5) of the Act,\15\ in particular, in that 
they 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 proposed rule changes also support the principles 
of Section 11A(a)(1) \16\ of the Act in that they seek to ensure the 
economically efficient execution of securities transactions and fair 
competition among brokers and dealers and among exchange markets.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78k-1(a)(1).
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    The Exchange believes that the proposed rule changes support the 
objectives of the Act by providing greater harmonization between NYSE 
Rules and FINRA Rules of similar purpose, resulting in less burdensome 
and more efficient regulatory compliance for Dual Members. To the 
extent the Exchange has proposed changes that differ from the FINRA 
version of the Rules, such changes are technical in nature and do not 
change the substance of the proposed NYSE Rules.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the foregoing 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 public interest, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6) 
thereunder.\20\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally does not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \21\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay set forth in Rule 19b-
4(f)(6)(iii) under the Act \22\ in order for the rule to become 
operative upon filing. The Commission notes that the operative date of 
FINRA 2150 becomes operative on December 14, 2009.\23\ The Commission 
believes that the earlier operative date is consistent with the 
protection of investors and the public interest because the proposed 
rule change permits the Exchange to implement the rule without further 
delay and will prevent any potential regulatory gaps between the FINRA 
and NYSE Rules.\24\
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    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of 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 Commission notes that NYSE has satisfied the five-
day pre-filing notice requirement.
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ See FINRA Regulatory Notice 09-60 (October 15, 2009).
    \24\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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.

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-2009-123 on the subject line.

[[Page 67944]]

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-2009-123. 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 inspection and 
copying 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 NYSE. 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-2009-123 and should be 
submitted on or before January 11, 2010.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\25\
Florence E. Harmon,
Deputy Secretary.
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    \25\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-30242 Filed 12-18-09; 8:45 am]

BILLING CODE 8011-01-P