Document ID: SEC-2009-0428-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-03-30T04:00Z

[Federal Register: March 30, 2009 (Volume 74, Number 59)]
[Notices]               
[Page 14179-14181]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30mr09-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59621; File No. SR-NYSE-2009-30]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Extending the Operative Date of NYSE Rule 92(c)(3) From March 31, 2009 
to July 31, 2009

March 23, 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 March 13, 2009, the New York Stock Exchange LLC (``NYSE'' or 
``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 the Exchange. The Exchange 
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 the proposed 
rule change 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 extend the operative date of NYSE Rule 
92(c)(3) from March 31, 2009 to July 31, 2009. The text of the proposed 
rule change is available at NYSE, 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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to extend the delayed operative date of 
NYSE Rule 92(c)(3) from March 31, 2009 to July 31, 2009. The Exchange 
believes that this extension will provide the time necessary for the 
Exchange and the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') to harmonize their respective rules concerning customer 
order protection to achieve a standardized industry practice.
Background
    On July 5, 2007, the Commission approved amendments to NYSE Rule 92 
to permit riskless principal trading at the Exchange.\5\ These 
amendments were filed in part to begin the harmonization process 
between Rule 92 and FINRA's Manning Rule.\6\ In connection with those 
amendments, the Exchange implemented for an operative date of January 
16, 2008, NYSE Rule 92(c)(3), which permits Exchange member 
organizations to submit riskless principal orders to the Exchange, but 
requires them to submit to a designated Exchange database a report of 
the execution of the facilitated order. That rule also requires members 
to submit to that same database sufficient information to provide an 
electronic link of the execution of the facilitated order to all of the 
underlying orders.
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    \5\ See Securities Exchange Act Release No. 34-56017 (July 5, 
2007), 72 FR 38110 (July 12, 2007), SR-NYSE-2007-21.
    \6\ See NASD Rule 2111 and IM-2110-2.
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    For purposes of NYSE Rule 92(c)(3), the Exchange informed member 
organizations that when executing riskless principal transactions, 
firms must submit order execution reports to the Exchange's Front End 
Systemic Capture (``FESC'') database linking the execution of the 
riskless principal order on the Exchange to the specific underlying 
orders. The information provided must be sufficient for both member 
firms and the Exchange to reconstruct in a time-sequenced manner all 
orders, including allocations to the underlying orders, with respect to 
which a member organization is claiming the riskless principal 
exception.
    Because the rule change required both the Exchange and member 
organizations to make certain changes to their trading and order 
management systems, the NYSE filed for immediate effectiveness to delay 
to May 14, 2008 the operative date of the NYSE Rule 92(c)(3) 
requirements, including submitting end-of-day allocation reports for 
riskless principal transactions and using the riskless principal 
account type indicator.\7\ The Exchange filed for an additional 
extension of the operative date of Rule 92(c)(3) to March 31, 2009.\8\
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    \7\ See Securities Exchange Act Release No. 56968 (Dec. 14, 
2007), 72 FR 72432 (Dec. 20, 2007), SR-NYSE-2007-114.
    \8\ See Securities Exchange Act Release No. 57682 (April 17, 
2008), 73 FR 22193 (April 24, 2008), SR-NYSE-2008-29.
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Request for Extension \9\
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    \9\ NYSE Amex LLC has filed a companion rule filing to conform 
its Equities Rules to the changes proposed in this filing. See SR-
NYSEALTR-2009-29, formally submitted March 13, 2009).
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    FINRA and the Exchange have been working diligently on fully 
harmonizing their respective rules, including reviewing the 
possibilities for a uniform reporting standard for riskless principal 
transactions. However, because of the complexity of the existing 
customer order protection rules, including the need for input from 
industry participants as well as Commission approval, the Exchange and 
FINRA will not have harmonized their respective customer order 
protection rules by March 31, 2009.
    The Exchange notes that it has reached agreement with FINRA on a 
harmonized approach to customer order protection rules. As authorized 
by their respective Boards, FINRA and NYSE Regulation, Inc. have each 
published a

[[Page 14180]]

Notice to Members/Information Memo that solicits comments from their 
respective member participants on the proposed harmonized approach to 
customer order protection.\10\ Because industry participants need to 
code their trading systems to comply with customer order protection 
rules, the Exchange believes that industry input is vital to ensuring 
that the approach to customer order protection both meets regulatory 
needs of protecting customer orders, but is also feasible 
technologically.
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    \10\ See NYSE Regulation Information Memo 09-13 (March 12, 
2009); FINRA Regulatory Notice 09-15 (March 12, 2009).
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    The Exchange continues to believe that pending full harmonization 
of the respective customer order protection rules, it would be 
premature to require firms to meet the current Rule 92(c)(3) FESC 
reporting requirements.\11\ Indeed, having differing reporting 
standards for riskless principal orders would appear to defeat the 
overall goal of the harmonization process.
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    \11\ The Exchange notes that it would also need to make 
technological changes to implement the proposed FESC reporting 
solution for Rule 92(c)(3).
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    Accordingly, to provide the Exchange and FINRA the time necessary 
to review their respective rules and develop a harmonized rule set that 
would apply across their respective marketplaces, the Exchange is 
proposing to delay the operative date for NYSE Rule 92(c)(3) from March 
31, 2009 to July 31, 2009.
    Pending the harmonization of the two rules, the Exchange will 
continue to require that, as of the date each member organization 
implements riskless principal routing, the member organization have in 
place systems and controls that allow them to easily match and tie 
riskless principal execution on the Exchange to the underlying orders 
and that they be able to provide this information to the Exchange upon 
request. To make clear that this requirement continues, the Exchange 
proposes to add supplementary material to Rule 92 that explains that 
the Rule 92(c)(3) reporting requirements are suspended until July 31, 
2009 and that member organizations are required to have in place such 
systems and controls relating to their riskless principal executions on 
the Exchange. Moreover, the Exchange will coordinate with FINRA to 
examine for compliance with the rule requirements.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, insofar as 
it is 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 the proposed extension provides 
the Exchange and FINRA the time necessary to develop a harmonized rule 
concerning customer order protection that will enable member 
organizations to participate in the national market system without 
unnecessary impediments.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the 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 \14\ and 
Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\16\ 
However, Rule 19b-4(f)(6)(iii) \17\ 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. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the Exchange to extend the operative date of NYSE Rule 
92(c)(3) without interruption. For this reason, the Commission 
designates the proposed rule change to be operative upon filing with 
the Commission.\18\
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    \16\ 17 CFR 240.19b-4(f)(6)(iii). 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 Exchange has satisfied this requirement.
    \17\ Id.
    \18\ For the 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).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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-2009-30 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-2009-30. 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

[[Page 14181]]

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 am and 3 pm. 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-2009-30 and should be submitted on or before April 20, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Florence E. Harmon,
Deputy Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-6962 Filed 3-27-09; 8:45 am]