
[Federal Register: March 9, 2010 (Volume 75, Number 45)]
[Notices]               
[Page 10855-10856]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr10-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61626; File No. SR-NYSE-2010-07]

 
Self-Regulatory Organizations; New York Stock Exchange, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 476 To Add a Provision for Violations Relating to 
Failing To Observe High Standards of Commercial Honor and Just and 
Equitable Principles of Trade

March 2, 2010.
    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 5, 2010, 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 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 NYSE Rule 476 to add a provision for 
violations relating to failing to observe high standards of commercial 
honor and just and equitable principles of trade. 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.

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

1. Purpose
    In this filing, the New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') proposes to amend Rule 476 to add a provision for 
violations relating to failing to observe high standards of commercial 
honor and just and equitable principles of trade. The Commission 
previously approved an amendment to NYSE Rule 476 to delete subsection 
(a)(6), which concerned just and equitable principles of trade.\4\ The 
rationale for that deletion was because NYSE adopted Rule 2010, which 
provided for the same content as the prior version of Rule 476(a)(6) 
and which harmonized the Exchange rule with the NYSE Amex LLC (``NYSE 
Amex'') and Financial Industry Regulatory Authority, Inc. (``FINRA'') 
standards for just and equitable principles of trade.
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    \4\ See Securities Exchange [sic] Release No. 59965 (May 21, 
2009), 74 FR 25783 (May 29, 2009) (SR-NYSE-2009-25).
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    However, in deleting Rule 476(a)(6) and replacing it with Rule 
2010, the Exchange inadvertently deleted the ability for the Exchange 
to bring charges relating to failing to observe high standards of 
commercial honor and just and equitable principles of trade against 
approved persons, principal executives, and employees of member 
organizations. As approved, NYSE Rule 2010 is applicable only to 
members and member organizations. Accordingly, the Exchange proposes to 
amend Rule 476, which has an enabling provision to bring charges 
against approved persons and employees of member organizations, to add 
subsection (a)(6) to cover the same content that was previously 
deleted. To ensure that the standards for just and equitable principles 
of trade are consistent across Exchange rules, NYSE Amex, and FINRA, 
the Exchange proposes to adopt rule text that mirrors the standard set 
forth in Rule 2010, which is virtually identical to NYSE Amex Equities 
Rule 2010 and FINRA Rule 2010. As proposed, NYSE Rule 476(a)(6) would 
read as follows: ``failing to observe high standards of commercial 
honor and just and equitable principles of trade.''
    In adopting this revised rule text for Rule 476(a)(6), the Exchange 
would be able to bring a charge relating to failing to observe high 
standards of commercial honor and just and equitable principles of 
trade against not only members and member organizations, but also 
against principal executives, approved persons, and employees of member 
organizations. This proposal is consistent with FINRA Rule 2010 because 
under FINRA Rule 0140, persons associated with a FINRA member have the 
same duties and obligations as a member under FINRA rules. Accordingly, 
FINRA has the authority to charge an associated person with a violation 
of Rule 2010. By adding this standard to Rule 476(a)(6), the Exchange 
will similarly have the authority to charge an employee of a member 
organization with a violation relating to failing to observe high 
standards of commercial honor and just and equitable principles of 
trade.
    To ensure full harmonization, the Exchange also proposes amending 
Rule 476(a)(5) and deleting the phrase ``fraud or fraudulent acts'' and 
replacing it with the rule text from Rule 2020 to provide that the 
Exchange can bring charges against an employee of a member organization 
for effecting any transaction in, or inducing the purchase or sale of, 
any security by means of any manipulative, deceptive or other 
fraudulent device or contrivance.
    Finally, the Exchange proposes deleting the reference to ``allied 
member,'' which no longer is a category

[[Page 10856]]

at the Exchange, and replacing it with ``principal executive.'' \5\
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    \5\ See Securities Exchange Act Release No. 58549 (Sept. 15, 
2008), 73 FR 54444 (Sept. 19, 2008) (SR-NYSE-2008-80) (deleting the 
term ``allied member'' and replacing it with ``principal 
executive'').
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2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act \6\ which requires the rules of an exchange 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 change also is designed to support the principles of 
Section 11A(a)(1) \7\ of the Act in that it seeks to assure fair 
competition among brokers and dealers and among exchange markets. The 
Exchange believes this rule proposal ensures that it will be enabled to 
charge, as necessary, when a member, member organization, principal 
executive, approved person, or employee of a member organization fails 
to observe high standards of commercial honor and just and equitable 
principles of trade, as contemplated by the Act, or effects any 
transaction in, or induces the purchase or sale of, any security by 
means of any manipulative, deceptive or other fraudulent device or 
contrivance.
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    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78k-1(a)(1).
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ 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. The Commission notes that 
the proposed rule change is restoring the Exchange's ability to 
discipline employees of member organizations under paragraphs (a)(5) 
and (a)(6) of Rule 476. The proposed rule change does not raise any new 
substantive issues and will harmonize NYSE Rules and FINRA Rules in 
this regard. For these reasons, the Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission designates 
the proposed rule change effective and operative upon filing.\12\
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    \10\ 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 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.
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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).
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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-2010-07 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-2010-07. 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,\13\ 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 also will be 
available for inspection and copying at the principal office of NYSE 
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-2010-07 and should be 
submitted on or before March 30, 2010.
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    \13\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov/.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4912 Filed 3-8-10; 8:45 am]
BILLING CODE 8011-01-P

