Self-Regulatory Organizations; Proposed Rule Changes:

Text

---

 

Federal Register Volume 76, Number 130 (Thursday, July 7, 2011)

Notices

Pages 39951-39953

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

FR Doc No: 2011-16930

SECURITIES AND EXCHANGE COMMISSION

Release No. 34-64782; File No. SR-NYSE-2011-26

Self-Regulatory Organizations; New York Stock Exchange LLC;

Notice of Filing and Immediate Effectiveness of Proposed Rule Change

Deleting the Text of NYSE Rule 409(f) and Adopting the Text of FINRA

Rule 2232 and Deleting the Rule Interpretations to NYSE Rule 346

June 30, 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 June 17, 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 substantially prepared by the self- regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

\1\ 15 U.S.C. 78s(b)(1).

\2\ 15 U.S.C. 78a et seq.

\3\ 17 CFR 240.19b-4.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes (1) To delete the text of NYSE Rule 409(f) and adopt the text of FINRA Rule 2232 and (2) delete the Rule

Interpretations to NYSE Rule 346. The text of the proposed rule change is available at the Exchange, 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 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.

Page 39952

A. Self-Regulatory Organization's Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule Change 1. Purpose

The Exchange proposes to (1) Delete the text of NYSE Rule 409(f) and adopt the text of FINRA Rule 2232 and (2) delete the Rule

Interpretations to NYSE Rule 346.

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.\4\ Pursuant to Rule 17d-2 under the Act,

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.\5\

\4\ See Securities Exchange Act Release No. 62970 (Sept. 22, 2010), 75 FR 59771 (Sept. 28, 2010) (order approving SR-FINRA-2010- 37).

\5\ 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 LLC 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.

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.\6\

\6\ 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.

NYSE Rule 409(f) and FINRA Rule 2232

In connection with the rule consolidation efforts between the

Exchange and FINRA, the Commission has recently approved FINRA Rule 2232,\7\ which is modeled after NYSE Rule 409(f), NASD Rule 2230 and

NASD IM-2110-6.\8\ FINRA Rule 2232 requires member firms, at or before the completion of any transaction in any security effected for or with an account of a customer, to give or send to such customer written notification (``confirmation'') in conformity with the requirements of

Rule 10b-10 under the Act. A confirmation given or sent pursuant to

FINRA Rule 2232 must further disclose (1) With respect to any transaction in any NMS stock, as defined in Rule 600 of SEC Regulation

NMS, or any security subject to the reporting requirements of the FINRA

Rule 6600 Series, other than direct participation programs as defined in FINRA Rule 6420, the settlement date of the transaction; and (2) with respect to any transaction in a callable equity security, that (A) the security is a callable equity security and (B) a customer may contact the member for more information concerning the security.

\7\ See Securities Exchange Act Release No. 63150 (October 21, 2010), 75 FR 66173 (October 27, 2010) (SR-FINRA-2009-058). See also

Securities Exchange Act Release No. 63561 (December 16, 2010), 75 FR 80556 (December 22, 2010) (SR-FINRA-2010-066).

\8\ NYSE Rule 409(f) currently provides that confirmation of all transactions in securities admitted to dealings on the Exchange, sent by members or member organizations to their customers, shall clearly set forth with a suitable legend the settlement date of each transaction.

The Exchange proposes to delete the text of NYSE Rule 409(f) \9\ and adopt the text of FINRA Rule 2232 as NYSE Rule 2232, with certain technical changes. Specifically, for consistency with Exchange rules, the Exchange proposes to change all references to ``members'' to

``member organizations.'' The Exchange also proposes to delete the text of Commentary .20 to Rule 411, which will no longer be applicable after the deletion of the text of NYSE Rule 409(f). The Exchange proposes that these changes, including new NYSE Rule 2232, be effective on the same date as FINRA makes FINRA Rule 2232 effective.\10\

\9\ NYSE Rule 409(f) would be marked as ``Reserved'' until such time as NYSE Rule 409 is fully harmonized with FINRA rules. The

Exchange notes that FINRA has proposed a rule change that would result in the deletion of the remaining text of FINRA Incorporated

NYSE Rule 409. See Securities Exchange Act Release No. 59921 (May 14, 2009), 74 FR 23912 (May 21, 2009) (SR-FINRA-2009-028).

\10\ See FINRA Regulatory Notice 10-62. The implementation date is currently scheduled for June 17, 2011. NYSE Amex also has submitted a companion rule filing amending its rules in accordance with FINRA's rule changes. See SR-NYSEAmex-2011-41.

Rule Interpretations to NYSE Rule 346

The Exchange has previously submitted a proposed rule change with the Commission that deleted NYSE Rule 346 (Limitations--Employment and

Association with Members and Member Organizations) and adopted new Rule 3270 (Outside Business Activities of Registered Persons) to correspond with rule changes filed by FINRA and approved by the Commission.\11\ As such, the Exchange also proposes to delete the Rule Interpretations to

NYSE Rule 346 in their entirety, which were also deleted by FINRA when it deleted its Incorporated NYSE Rule 346. To harmonize Exchange Rule

Interpretations with FINRA's rule, the Exchange proposes that this change be immediately effective upon filing.

\11\ See Securities Exchange Act Release No. 64131 (March 28, 2011), 76 FR 18285 (April 1, 2011) (SR-NYSE-2011-12). See also

Securities Exchange Act Release No. 62762 (August 23, 2010), 75 FR 53362 (August 31, 2010) (order approving SR-FINRA-2009-042).

2. Statutory Basis

The proposed rule change is consistent with Section 6(b) of the

Act,\12\ in general, and furthers the objectives of Section 6(b)(5),\13\ 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. Specifically, the Exchange believes that the proposed rule change supports 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. 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. Additionally, the proposed deletion of the Rule

Interpretations to NYSE Rule 346 would result in the removal of interpretations to an NYSE Rule that no longer exists and would therefore eliminate any potential confusion among members or member organizations regarding the applicability of such Rule Interpretations.

\12\ 15 U.S.C. 78f(b).

\13\ 15 U.S.C. 78f(b)(5).

Page 39953

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 \14\ and Rule 19b-4(f)(6) thereunder.\15\

Because the 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 prior to 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 the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b- 4(f)(6)(iii) thereunder.

\14\ 15 U.S.C. 78s(b)(3)(A)(iii).

\15\ 17 CFR 240.19b-4(f)(6).

A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of the filing.\16\

However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. In its filing, the

Exchange notes that the proposal to add new NYSE Rule 2232 is substantially similar to the rule that the Commission approved for

FINRA,\18\ and the proposal conforms the Exchange's Rules with those of

FINRA, in furtherance of the consolidation of the member firm regulation functions of NYSE, NYSE Amex Equities, and FINRA.

Furthermore, the proposed deletion of the Rule Interpretations to NYSE

Rule 346 would remove interpretations to an NYSE Rule that no longer exists and would therefore eliminate any potential confusion among members or member organizations regarding the applicability of such

Rule Interpretations. For these reasons, 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 to be operative upon filing with the Commission.\19\

\16\ Id.

\17\ 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.

\18\ See note 6, supra.

\19\ For 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).

At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend 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-2011-26 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-2011-26. 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 the filing will also be available for inspection and copying at the NYSE's principal office and on its

Internet Web site at http://www.nyse.com. 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-2011-26 and should be submitted on or before July 28, 2011.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\

\20\ 17 CFR 200.30-3(a)(12).

Cathy H. Ahn,

Deputy Secretary.

FR Doc. 2011-16930 Filed 7-6-11; 8:45 am

BILLING CODE 8011-01-P

---