[Federal Register: October 18, 2007 (Volume 72, Number 201)]
[Notices]
[Page 59129-59130]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18oc07-88]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56654; File No. SR-NYSE-2007-67]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving Proposed Rule Change Relating to NYSE Rule 2 (``Member,''
``Membership,'' ``Member Firm,'' etc.)
October 12, 2007.
I. Introduction
On July 24, 2007, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to reflect changes in the Exchange's membership
requirements as a result of the consolidation of the member firm
regulatory functions of the National Association of Securities Dealers,
Inc. (``NASD'') and NYSE Regulation, Inc. (``NYSE Regulation''), which
resulted in a combined self-regulatory organization called Financial
Industry Regulatory Authority, Inc. (``FINRA'').\3\ The proposed rule
change was published for comment in the Federal Register on August 7,
2007.\4\ The Commission received no comment letters on the proposed
rule change. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On July 26, 2007, the Commission approved a proposed rule
change filed by NASD to amend NASD's Certificate of Incorporation to
reflect its name change to FINRA in connection with the
consolidation of the member firm regulatory functions of NASD and
NYSE Regulation, Inc. See Securities Exchange Act Release No. 56146
(July 26, 2007).
\4\ See Securities Exchange Act Release No. 56173 (July 31,
2007), 72 FR 44205 (``Notice'').
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II. Description of the Proposal
In connection with the recently approved plan to consolidate the
member regulation operations of NASD and the NYSE Regulation into a
single organization (``Transaction''),\5\ NYSE proposes to require all
organizations that currently are NYSE member organizations but are not
NASD members (``NYSE-only member organizations''), or are organizations
that propose to become NYSE member organizations, to also be members of
FINRA. The Exchange notes that most NYSE member organizations are
already also members of FINRA. According to the Exchange, there are
approximately 95 NYSE member organizations that are not currently FINRA
members and that will be required to become FINRA members in order to
remain NYSE member organizations and to utilize a NYSE trading
license.\6\ FINRA would become the designated examining authority
(``DEA'') for all NYSE member organizations.\7\
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\5\ On July 26, 2007, the Commission approved amendments to
NASD's By-Laws to implement governance and related changes to
accommodate the consolidation of the member firm regulatory
functions of NASD and NYSE Regulation, Inc. See Securities Exchange
Act Release No. 56145 (July 26, 2007), 72 FR 42169 (August 1, 2007)
(``Release No. 34-56145''). The date of closing of the Transaction
was July 30, 2007.
\6\ NYSE also has allowed an organization to be an NYSE
``regulation only'' member without purchasing a trading license, if
the organization qualifies and subjects itself to NYSE regulatory
jurisdiction. After the Transaction, NYSE will continue to provide
this status to an organization that is or becomes a FINRA member and
subjects itself to NYSE jurisdiction, even though the organization
does not have a NYSE trading license.
\7\ Historically, NYSE was the DEA for virtually all of its
member organizations. As part of the Transaction, it is contemplated
that the Commission will name FINRA as the DEA for all the
organizations for which NYSE was the DEA.
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The Exchange proposes to amend the definition of ``member
organization'' in NYSE Rule 2(b) to provide that membership in FINRA is
a condition to becoming a member organization of NYSE. NYSE intends to
keep NYSE Rule 308 (Acceptability Proceedings) in order to retain for
itself the discretion to deem an applicant unacceptable for NYSE
membership.
NYSE-only member organizations would have a 60-day grace period
within which they must apply for and be approved for FINRA membership.
This grace period would run from the later of the date of Commission
approval of either this proposed rule change or NASD's proposed rule
change to amend its membership rules to permit eligible NYSE-only
member organizations to become FINRA members through an expedited
process.\8\
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\8\ NASD filed a companion proposal, which the Commission
approved today, that specifies the terms on which eligible NYSE-only
member organizations can become FINRA members on an expedited basis.
Pursuant to that proposal, NASD would adopt Interpretive Material
1013-1 (``IM-1013-1''), which establishes a membership waive-in
process for eligible NYSE-only member organizations, and
Interpretive Material Section 4(b)(1) and 4(e) to Schedule A of the
By-Laws, which exempts the applicants from the fee for each initial
Form U-4 for the registration of any representative or principal
associated with the firm at the time it submits its application for
FINRA membership pursuant to IM-1013-1 and from the FINRA membership
application fee. See Securities Exchange Act Release No. 56653 (SR-
NASD-2007-056) (``Release No. 34-56653'').
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III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange \9\ and, in particular, the requirements of Section 6 of the
Act.\10\ Specifically, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\11\ which
requires, among other things, that the rules of a national securities
exchange be designed to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, and 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.
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\9\ In approving this proposed rule change, as amended, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(5).
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The Commission notes that most NYSE member organizations are also
members of FINRA. Thus, the proposed rule change will primarily affect
approximately 95 NYSE-only member organizations, in addition to those
organizations that propose to become NYSE member organizations.
The Commission believes that the proposed rule change would further
the consolidation of the member firm regulation functions of NASD and
NYSE Regulation, as approved by the Commission.\12\ The Commission
notes that the approximately 95 NYSE-only member organizations that
must become FINRA members will be able to avail themselves of the
expedited FINRA membership procedures and the waiver of certain FINRA
registration and application fees.\13\ Further, the Commission believes
that the 60-day grace period for eligible NYSE-only
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member organizations to become FINRA members is reasonable.
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\12\ See Release No. 34-56145, supra note 5.
\13\ See Release No. 34-56653, supra note 8.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (File No. SR-NYSE-2007-67), be,
and hereby is, approved.
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\14\ 15 U.S.C. 78s(b)(2).
\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-20535 Filed 10-17-07; 8:45 am]
BILLING CODE 8011-01-P