[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62928-62930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24648]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70653; File No. SR-NYSEMKT-2013-79]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 2--
Equities To Specify That the Definition of An Approved Person Does Not 
Include a Governmental Entity and Amending Rule 304--Equities To 
Provide That if a Governmental Entity Directly or Indirectly Owns a 
Member Organization, Then the Member Organization Must Identify Such 
Governmental Entity to the Exchange

October 10, 2013.
    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 September 26, 2013, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III 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 Rule 2--Equities to specify that the 
definition of an approved person does not include a governmental entity 
and amend Rule 304--Equities to provide that if a governmental entity 
directly or indirectly owns a member organization, then the member 
organization must identify such governmental entity to the Exchange. 
The text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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
    The Exchange proposes to amend Rule 2--Equities to specify that the 
definition of an approved person does not include a governmental entity 
and amend Rule 304 to provide that if a governmental entity directly or 
indirectly owns a member organization, then the member organization 
must identify such governmental entity to the Exchange.
    Under Rule 2(b)(i)--Equities, a ``member organization'' is defined 
as a registered broker-dealer that has been approved for membership on 
the Exchange. To qualify as a member organization, a broker-dealer must 
be a member of either (i) the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') or (ii) a registered securities exchange other than 
the Exchange. Under Rule 2(c)--Equities, an approved person of a member 
organization is defined as a person, other than a member, principal 
executive or employee of a member organization, who controls a member 
organization, is engaged in a securities or kindred business that is 
controlled by a member or member organization, or is a U.S.-registered 
broker-dealer under common control with a member organization. Under 
Rule 2(d)--Equities, ``control'' means the power to direct or cause the 
direction of the management or policies of a person whether through 
ownership of securities, by contract or otherwise. A person is presumed 
to control another person if such person, directly or indirectly, (i) 
has the right to vote 25 percent or more of the voting securities, (ii) 
is entitled to receive 25 percent or more of the net profits, or (iii) 
is a director, general partner or principal executive (or person 
occupying a similar status or performing similar functions) of the 
other person.\4\
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    \4\ The Exchange notes that the approved person definition is an 
Exchange convention and is not intended to be identical to the 
definition of ``associated person'' pursuant to Section 3(a)(18) of 
the Act. See 15 U.S.C. 78c(a)(18).
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    Rule 304--Equities provides that a member organization must 
identify each approved person to the Exchange. Each approved person 
must execute a written consent to the jurisdiction of the Exchange and 
agree to (1) supply the Exchange with information relating to the 
existence of any statutory disqualification to which the approved 
person or any person associated with the approved person may be 
subject, as defined in the Act; (2) abide by such provisions of the 
rules of the Exchange relating to approved persons as shall from time 
to time be in effect; and (3) permit examination by the Exchange, or 
any person designated by it, at any time or from time to time, of its 
books and records to verify the accuracy of the information required to 
be supplied herein and by the rules of the Exchange. Supplementary 
Material .10 to Rule 304--Equities sets forth certain additional 
requirements for approved persons domiciled outside the United States.
    The Exchange recently received a membership application for a 
broker-dealer that is an approved FINRA member; this broker-dealer has 
an owner that is a governmental entity that indirectly controls the 
broker-dealer and thus falls within the definition of approved person 
under the Exchange's rules. This is the first time that the Exchange 
has received a membership application presenting this ownership 
structure. The Exchange notes that a governmental entity could be 
either a direct or an indirect owner of a member organization, and by 
virtue of its control, fall within the Exchange's definition of 
approved person, although this result was not contemplated at the time 
the definition was created. The

[[Page 62929]]

Exchange does not believe that the Exchange could, under conflict of 
laws, have jurisdiction over a governmental entity and therefore 
requiring a governmental entity that falls under the Exchange's 
definition of approved person to consent to jurisdiction, as required 
by Rule 304, would not be possible. In light of these conflicts and in 
the interest of providing better notice to member organizations, the 
Exchange proposes to amend Rule 2(c) -Equities to specifically exclude 
a governmental entity from the definition of approved person. The 
proposed rule text would define governmental entity as a sovereign 
nation, state, territory, or other political subdivision, agency, or 
instrumentality thereof. While it is unnecessary for a governmental 
entity to be deemed an approved person under the Exchange's rules, the 
Exchange nonetheless wishes to have all direct and indirect owners that 
control member organizations identified to the Exchange. Therefore, the 
Exchange proposes to add new Supplementary Material .20 to Rule 304--
Equities to specify that a member organization that is directly or 
indirectly controlled by a governmental entity as defined in Rule 
2(c)--Equities is required to identify such governmental entity to the 
Exchange.\5\
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    \5\ The Exchange notes that irrespective of the proposed rule 
change, under the Act, any person that directly or indirectly 
controls a broker-dealer falls within the Act's definition of an 
associated person, and that the Act defines the term ``person'' to 
include a government or political subdivision, agency, or 
instrumentality of a government. See 15 U.S.C. 78c(a)(9) and (18). 
Nonetheless, neither the Act nor any rule thereunder requires a 
direct or indirect owner of a broker-dealer to execute any type of 
written consent to jurisdiction; only the broker-dealer itself does 
so by virtue of executing and submitting the Form BD.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\7\ in particular, because it 
is designed to foster cooperation and coordination with persons engaged 
in regulating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
The Exchange believes that the proposed rule change would remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system because the Exchange does not have 
jurisdiction over governmental entities and therefore could not require 
a governmental entity to execute a written consent to the Exchange's 
jurisdiction and attempting to do so would serve no regulatory purpose. 
The proposed rule change would take such conflicts of law rules into 
account and provide better notice to member organizations about the 
operation of the Exchange's rules. The proposed rule change would 
protect investors and the public interest because a member organization 
would be required to identify to the Exchange any governmental entity 
that directly or indirectly controlled it. All other Exchange 
membership requirements would remain applicable as would any other 
Exchange rules that would apply to the member organization. For these 
reasons, the Exchange believes that the proposal is consistent with the 
Act.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\8\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. To the contrary, the Exchange would be at a 
competitive disadvantage in the absence of a proposed rule change. As 
noted above, the Exchange has a pending application for a member 
organization that has a governmental entity as a controlling indirect 
owner, and FINRA has already approved this broker-dealer for membership 
under FINRA rules. By amending its rules so that this governmental 
entity need not execute a written consent to jurisdiction under Rule 
304--Equities, the Exchange can facilitate the approval of this broker-
dealer as its member too. The Exchange has not identified any other 
self-regulatory organization that requires a direct or indirect owner 
of a broker-dealer to execute a written consent to jurisdiction.
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    \8\ 15 U.S.C. 78f(b)(8).
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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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ 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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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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 email to [email protected]. Please include 
File Number SR-NYSEMKT-2013-79 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 62930]]

Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2013-79. This 
file number should be included on the subject line if email 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 Section, 100 F Street 
NE., Washington, DC 20549-1090. 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 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-NYSEMKT-2013-79 and should be submitted 
on or before November 12, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24648 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P