[Federal Register Volume 75, Number 7 (Tuesday, January 12, 2010)]
[Notices]
[Pages 1669-1670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-301]



[[Page 1669]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61294; File No. SR-NYSE-2009-135]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending NYSE Rule 18 To Eliminate the $500 Minimum Net Loss 
Requirement for a Member Organization To Seek Compensation in the Event 
of an Exchange System Failure

January 6, 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 December 31, 2009, 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 18 (``Compensation in 
Relation to Exchange System Failure'') to eliminate the $500 minimum 
net loss requirement for a member organization to seek compensation in 
the event of an Exchange System failure. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, the Commission's Web site at http://www.sec.gov, and the 
Exchange's Web site at 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Through this filing, the Exchange proposes to amend NYSE Rule 18 
(``Compensation in Relation to Exchange System Failure'') to eliminate 
the $500 minimum net loss requirement for a member organization to seek 
compensation in the event of an Exchange System failure. Member 
organizations would therefore be permitted to submit a claim for 
compensations without having to meet a minimum net loss threshold as 
long as such claims meet the other criteria of NYSE Rule 18. \4\
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    \4\ The Exchange notes that similar changes are proposed to the 
rules of its affiliate, NYSE Amex LLC. See SR-NYSEAmex 2009-100.
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    NYSE Rule 18 was established to provide a mechanism for member 
organizations to receive compensation for losses sustained in relation 
to an Exchange system failure.\5\ It provides that member organizations 
that sustain a loss in relation to an Exchange system failure \6\ are 
eligible to submit a claim, per incident, for compensation to the 
Exchange if certain requirements are met. Specifically, pursuant to 
NYSE Rule 18(a), claim is eligible for compensation if the Exchange's 
Division of Floor Operations determines that: (i) A valid order was 
accepted by the Exchange's systems; (ii) an Exchange system failure, as 
defined in NYSE Rule 18(b), occurred during the execution of said 
order; (iii) a member organization sustained a loss related to an 
Exchange system failure; (iv) the net loss was at least $500; \7\ and 
(v) the Exchange's Division of Floor Operations received from the 
member organizations that sustained such loss, verbal \8\ notice by the 
market opening on the next business day following the system failure 
and written notice by the end of the third business day following the 
system failure.
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    \5\ See Securities Exchange Act Release No. 55555 (March 27, 
2007), 72 FR 16841 (April 5, 2007) (SR-NYSE-2007-09) (adopting the 
rule and making the operation of the rule was retroactive to 
September 1, 2006).
    \6\ Pursuant to NYSE Rule 18(b), a system failure is defined as 
a malfunction of the Exchange's physical equipment, devices and/or 
programming which results in an incorrect execution of an order or 
no execution of an order that was received in Exchange systems. 
Through this filing, the Exchange further seeks to change the word 
``which'' in this subsection of the rule to ``that'' in order to 
make it grammatically correct.
    \7\ As the Exchange gained experience with the administration of 
NYSE Rule 18, it reviewed the members that were eligible to receive 
compensation pursuant to the rule and made changes to allow more 
member organizations eligible to submit claims. See Securities 
Exchange Act Release No. 56718 (October 29, 2007), 72 FR 62506 
(November 5, 2007) (SR-NYSE-2007-95) (reducing the minimum net loss 
from $5,000 to $500).
    \8\ Through this filing the Exchange further seeks to change the 
word ``verbal'' to the word ``oral'' to make clear that the initial 
notice is not required in writing.
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    The provision that the member organization sustain a minimum net 
total loss of $500 requires the member organization to deduct any 
profits received in relation to the same incident before submitting the 
claim amount.\9\ Member organizations are not permitted to aggregate 
losses incurred as a result of more than one system failure in order to 
satisfy the $500 minimum claim requirement. As a result, certain member 
organizations have been precluded from submitting claims for losses 
sustained in relation to an Exchange system failure.
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    \9\ See Securities Exchange Release No. 59486 (March 2, 2009), 
74 FR 10104 (March 9, 2009) (SR-NYSE-2009-16) (Clarifying among 
other things, that if members and member organizations retain 
profits from a system malfunction, then they are required to net 
such profits against any losses from the same malfunction before 
submitting any claims).
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    The Exchange seeks to have the rule be even more inclusive of its 
member organizations that may sustain a loss in the event of an 
Exchange system failure. Based on its experience, the Exchange has 
concluded that it is no longer necessary to prescribe a minimum net 
loss in order for its member organizations to be eligible to submit 
claims. Accordingly, the Exchange seeks to eliminate the minimum net 
loss provision of NYSE Rule 18. The Exchange believes that this will 
allow more member organizations opportunities to seek compensation for 
losses sustained in relation to an Exchange system failure.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\10\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\11\ 
in particular, in that 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 rule change is in keeping with these principles 
in that it serves to eliminate the minimum net loss threshold 
requirement in relation to an Exchange system failure in order to be

[[Page 1670]]

more inclusive and provide more opportunities for member organizations 
to be compensated for losses sustained in relation to an Exchange 
system failure thus protecting investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ 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.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because doing so will allow member organizations to immediately seek 
compensation for losses of less than $500 sustained in relation to an 
Exchange system failure. For this reason, the Commission designates 
that the proposed rule change become immediately operative.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposal'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 [email protected]. Please include 
File Number SR-NYSE-2009-135 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-2009-135. 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 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 publicly available. All 
submissions should refer to File Number SR-NYSE-2009-135 and should be 
submitted on or before February 2, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-301 Filed 1-11-10; 8:45 am]
BILLING CODE 8011-01-P