Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2 Thereto, Permitting Affiliation With NYFIX Millennium LLC and NYFIX Securities Corporation, 59294-59296 [E9-27501]
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59294
Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Notices
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 7 in general, and furthers the
objectives of Section 6(b)(5) of the Act 8
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
mechanisms of a free and open market
and a national market system, by
identifying the options classes to be
added to the Penny Pilot in a manner
consistent with prior approvals and
filings.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq 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.
mstockstill on DSKH9S0YB1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(i) of
the Act 9 and Rule 19b–4(f)(1)
thereunder,10 NASDAQ has designated
this proposal as one constituting a
stated policy, practice, or interpretation
with respect to the meaning,
administration, or enforcement of an
existing rule.
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
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 15 U.S.C. 78s(b)(3)(A)(i).
10 17 C.F.R. 240.19b–4(f)(1).
8 15
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20:50 Nov 16, 2009
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Company name
US Bancorp
United States Oil Fund LP
ProShares Ultra Financials
Visa Inc
Wells Fargo & Co
Wynn Resorts Ltd
United States Steel Corp
SPDR S&P Homebuilders ETF
Industrial Select Sector SPDR Fund
Utilities Select Sector SPDR Fund
SPDR S&P Retail ETF
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2009–097 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–NASDAQ–2009–097. 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 (https://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,
PO 00000
Frm 00182
Fmt 4703
Sfmt 4703
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 available publicly. All
submissions should refer to File No.
SR–NASDAQ–2009–097 and should be
submitted on or before December 8,
2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–27499 Filed 11–16–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60969; File No. SR–NYSE–
2009–96]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving a Proposed Rule Change,
as Modified by Amendment No. 2
Thereto, Permitting Affiliation With
NYFIX Millennium LLC and NYFIX
Securities Corporation
November 9, 2009.
I. Introduction
On September 22, 2009, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a proposed
rule change, pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 proposing that the
Exchange be affiliated with two
registered broker-dealer subsidiaries of
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\17NON1.SGM
17NON1
Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Notices
NYFIX, Inc. (‘‘NYFIX’’), NYFIX
Millennium L.L.C. (‘‘NYFIX
Millennium’’) and NYFIX Securities
Corporation (‘‘NYFIX Securities’’), for a
period not to exceed six months and
subject to certain limitations and
obligations. The proposed rule change
was published for comment in the
Federal Register on October 5, 2009.3
On November 5, 2009, NYSE filed
Amendment No. 1 to the proposed rule
change, and the Exchange withdrew
Amendment No. 1 to the proposed rule
change on November 6, 2009. On
November 9, 2009, NYSE filed
Amendment No. 2 to the proposed rule
change.4 The Commission received no
comments on the proposal. This order
approves the proposed rule change as
modified by Amendment No. 2.
mstockstill on DSKH9S0YB1PROD with NOTICES
II. Overview
On August 26, 2009, NYSE
Technologies entered into an Agreement
and Plan of Merger (‘‘Merger
Agreement’’) with NYFIX and CBR
Acquisition Corp., a Delaware
corporation and a wholly owned
subsidiary of NYSE Technologies.
Under the terms of the Merger
Agreement, CBR Acquisition Corp. will
merge with and into NYFIX, with
NYFIX surviving the merger as a direct
wholly owned subsidiary of NYSE
Technologies (‘‘Merger’’). Following the
Merger, both the Exchange and NYFIX
will be indirect wholly owned
subsidiaries of NYSE Euronext.
Consequently, NYFIX, and its
subsidiaries NYFIX Millennium and
NYFIX Securities, will be affiliates of
the Exchange.
As a result of the Merger, NYSE
Technologies will acquire, among other
things, NYFIX’s Transaction Services
Division. In the U.S., the Transaction
Services Division is currently composed
of two U.S. registered broker-dealer
subsidiaries: NYFIX Millennium, which
is also an alternative trading system
registered under Regulation ATS under
the Act;5 and, NYFIX Securities. In
addition to other services provided by
NYFIX Millennium and NYFIX
Securities, (1) NYFIX Millennium
provides routing of orders that are not
matched within the NYFIX Millennium
matching system to marketplaces such
as exchanges, electronic communication
3 Securities Exchange Act Release No. 60737
(September 29, 2009), 74 FR 51209 (‘‘Notice’’).
4 In Amendment No. 2, the Exchange clarified
that, with respect to the conditions on the
Exchange’s affiliation with NYFIX Millennium and
NYFIX Securities, references to NYFIX also refer to
its subsidiaries, NYFIX Millennium and NYFIX
Securities. This technical amendment does not
require notice and comment, as it did not materially
affect the substance of the rule filing.
5 17 CFR 242.300–303.
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20:50 Nov 16, 2009
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networks, and ATSs, which are not
operated by NYFIX; and (2) NYFIX
Securities provides direct electronic
market access and algorithmic trading
products (together, ‘‘Routing Services’’).
The Exchange proposes to be
affiliated with NYFIX Millennium and
NYFIX Securities for a period not to
exceed six months and subject to certain
terms and conditions that the Exchange
believes effectively address concerns
regarding the (1) the potential for
conflicts of interest where an exchange
is affiliated with a broker-dealer
conducting an order routing business
that may interact with the Exchange
itself, and (2) the potential for
informational advantages that could
place such an affiliated broker-dealer at
a competitive advantage in comparison
with other non-affiliated broker-dealers.
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.6 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,7 which
requires, among other things, that the
rules of a national securities exchange
be 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
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.
In the past, the Commission has
expressed concern that the affiliation of
an exchange with one of its members
raises potential conflicts of interest and
the potential for unfair competitive
advantage.8 The proposed relationship
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b)(5).
8 See, e.g., Securities Exchange Act Release Nos.
54170 (July 18, 2006), 71 FR 42149 (July 25, 2006)
(SR–NASDAQ–2006–006) (order approving
Nasdaq’s proposal to adopt Nasdaq Rule 2140,
restricting affiliations between Nasdaq and its
members); 53382 (February 27, 2006), 71 FR 11251
(March 6, 2006) (SR–NYSE–2005–77) (order
approving combination of NYSE and Archipelago
Holdings, Inc.); 58673 (September 29, 2008), 73 FR
57707 (October 3, 2008) (SR–Amex–2008–62) (order
approving acquisition of the American Stock
Exchange by NYSE Euronext); 59135 (December 22,
PO 00000
Frm 00183
Fmt 4703
Sfmt 4703
59295
raises similar concerns in that the
Exchange will be affiliated with two
broker-dealers that provide Routing
Services for orders that may be routed
to the Exchange in competition with
Exchange members. The Exchange has
requested that the Commission approve
its proposed affiliation with NYFIX
Millennium and NYFIX Securities on a
temporary basis, not to exceed six
months, subject to certain conditions
designed to address such concerns.
Specifically, so long as the Exchange
is affiliated with NYFIX Millennium or
NYFIX Securities and with respect to
the Routing Services provided by each: 9
(1) Neither NYFIX Millennium nor
NYFIX Securities are members of the
Exchange nor will they become
members of the Exchange;
(2) NYFIX does not offer order routing
services other than the Routing Services,
and none of the Routing Services will be
modified unless such modification is
approved by the Commission;
(3) NYFIX will not engage in
proprietary trading;
(4) NYFIX will not accept any new
clients for the Routing Services after the
Merger;
(5) There will continue to be
independent functionality of, and full
public access to, NYSE facilities; and
(6) There will be a complete
separation between NYFIX, on the one
hand, and the Exchange and its
affiliates, on the other (e.g., no shared
office space, no shared employees, no
shared systems).
The Exchange may furnish to NYFIX
the same information on the same terms
that the Exchange makes available in the
normal course of business to any other
person. Specifically:
(a) NYFIX must not be provided an
information advantage concerning the
operation of the Exchange or any of its
facilities, particularly regarding changes
and improvements to the trading
systems, that are not available to the
industry generally.
(b) NYFIX will be prevented from
having any advance knowledge of
proposed changes or modifications to
the operations of the Exchange or its
facilities, including but not limited to
advance knowledge of related filings by
2008), 73 FR 79954 (December 30, 2008) (SR–ISE–
2009–85) (order approving the purchase by ISE
Holdings of an ownership interest in DirectEdge
Holdings LLC); and 59281 (January 22, 2009), 74 FR
5014 (January 28, 2009) (SR–NYSE–2008–120)
(order approving a joint venture between NYSE and
BIDS Holdings L.P.).
9 For the conditions set forth below, references to
NYFIX also refer to its subsidiaries NYFIX
Millennium and NYFIX Securities. See Amendment
No. 2, supra note 4.
E:\FR\FM\17NON1.SGM
17NON1
mstockstill on DSKH9S0YB1PROD with NOTICES
59296
Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Notices
the Exchange pursuant to Rule 19b–4 of
the Act.10
(c) NYFIX will not share employees or
databases with the Exchange, any
facility of the Exchange, or any other
affiliate of the Exchange or their
facilities, and will be housed in a
separate office.
(d) NYFIX will only be notified of any
changes or improvements to any of the
Exchange’s operations or trading
facilities in the same manner that other
persons are notified of such changes or
improvements;
(e) NYFIX will not disclose any
system or design specifications, or any
other information, to any employees of
the Exchange, any facility of the
Exchange, or any other affiliate of the
Exchange or their facilities that would
give NYFIX an unfair advantage over its
competitors.
(f) None of the Exchange, any facility
of the Exchange, or any other affiliate of
the Exchange or their facilities will
disclose any system or design
specifications, or any other information,
to any employees of NYFIX or any
affiliate of NYFIX that would give the
Exchange, any other facility of the
Exchange, any other affiliate of the
Exchange, or NYFIX an unfair advantage
over its competitors.
The Commission also notes that each
of NYFIX Millenium and NYFIX
Securities has the Financial Industry
Regulatory Authority (‘‘FINRA’’), an
unaffiliated self-regulatory organization
(‘‘SRO’’), as its designated examining
authority and neither broker-dealer is a
member of the Exchange.11
The Commission finds that the
temporary proposed affiliation between
the Exchange and NYFIX Millennium
and NYFIX Securities, pursuant to the
proposed terms and conditions, is
consistent with the Act, particularly
Section 6(b)(5) thereunder.12 The
Commission continues to be concerned
about potential unfair competition and
conflicts of interest when an exchange,
or one of its affiliates, is the parent
company of a broker-dealer that
provides Routing Services that may be
in competition with services provided
by members of that exchange. The
Commission believes, however, that the
temporary nature of the affiliation,
together with the proposed terms and
conditions, are reasonably designed to
mitigate concern about potential unfair
competition and conflicts of interest
between the commercial interests of the
10 15
U.S.C. 78a.
Notice.
12 15 U.S.C. 78(f)(b)(5).
11 See
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20:50 Nov 16, 2009
Jkt 220001
Exchange or its affiliates, and the
Exchange’s regulatory responsibilities.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSE–2009–
96), as amended, is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–27501 Filed 11–16–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60978; File No. SR–CBOE–
2009–068]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change To Amend the
$1 Strike Program To Allow Low-Strike
LEAPS
November 10, 2009.
On September 16, 2009, the Chicago
Board Options Exchange, Incorporated
(the ‘‘Exchange’’ or ‘‘CBOE’’) 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 amend CBOE’s $1 Strike
Program. The proposed rule change was
published for comment in the Federal
Register on October 7, 2009.3 The
Commission received no comments on
the proposed rule change. This order
approves the proposed rule change.
LEAPS are long-term equity options
that expire from 12 to 39 months from
the time they are listed.4 The proposed
rule change expands the Exchange’s $1
Strike Program (‘‘Program’’) to permit
the exchange to list LEAPS with low
strike prices 5 and at $1 strike price
13 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 60749
(September 30, 2009), 74 FR 51632.
4 See CBOE Rule 5.8.
5 CBOE, along with the other options exchanges,
recently amended the Options Listing Procedures
Plan (‘‘OLPP’’) to adopt objective, exercise price
range limitations applicable to options on
individual equity securities, ETFs, and trust-issued
receipts. See Securities Exchange Act Release No.
60531 (August 19, 2009), 74 FR 43173 (August 26,
2009) (approving Amendment No. 3 to the OLPP).
The exercise price range limitations of paragraph
(3)(g) of the OLPP state that the exercise price of
each newly listed option on an equity security, ETF,
14 17
PO 00000
Frm 00184
Fmt 4703
Sfmt 4703
intervals. Specifically, the Exchange
will be able to list LEAPS series having
strike prices of $1, $2, $3, $4, and $5 in
up to 200 option classes on individual
securities that are in the Exchange’s
Program or another exchange’s
Program.6 CBOE believes that deep outof-the-money put options that could be
listed under this proposal are
functionally similar to credit default
swaps and could be a viable, liquid
alternative to OTC-traded credit default
swaps.
The margin requirements set forth in
Chapter XII of the Exchange’s rules and
the position and exercise requirements
set forth in CBOE Rules 4.11 and 4.12
will apply to these new series, and no
changes to those requirements were
proposed.
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.7 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,8 which
requires, among other things, that the
rules of an exchange be designed to
promote just and equitable principles of
trade, 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
Commission believes that the low-strike
LEAPS contemplated in this proposal
will provide investors with a potentially
useful investment choice. The proposal
will extend to these options the benefits
of a listed exchange market, which
or trust-issued receipt shall be fixed at a price per
unit that is reasonably close to the price of the
underlying security at or about the time of the series
listing. Under paragraph (3)(g)(i), if the price of the
underlying security is less than or equal to $20, the
exchange shall not list new option series with an
exercise price more than 100% above or below the
price of the underlying security; and if the price of
the underlying security is greater than $20, the
exchange shall not list new option series with an
exercise price more than 50% above or below the
price of the underlying security. However,
paragraph (3)(g)(ii) of the OLPP states that these
exercise price range limitations do not apply with
regard to, among others, option classes participating
in the Program. Therefore, LEAPS series listed
under this proposal would not be subject to the
exercise price range limitations contained in
paragraph (3)(g).
6 However, if the Exchange already has listed a
LEAPS series with a $2.50 strike price, it would be
permitted under this proposal to list additional
series with strike prices of $1, $4, and $5, but not
series with strike prices of $2 or $3. See CBOE Rule
5.5, Interpretation .01(a)(3).
7 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
E:\FR\FM\17NON1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 220 (Tuesday, November 17, 2009)]
[Notices]
[Pages 59294-59296]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-27501]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60969; File No. SR-NYSE-2009-96]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving a Proposed Rule Change, as Modified by Amendment No. 2
Thereto, Permitting Affiliation With NYFIX Millennium LLC and NYFIX
Securities Corporation
November 9, 2009.
I. Introduction
On September 22, 2009, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a proposed rule change, pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule
19b-4 thereunder,\2\ proposing that the Exchange be affiliated with two
registered broker-dealer subsidiaries of
[[Page 59295]]
NYFIX, Inc. (``NYFIX''), NYFIX Millennium L.L.C. (``NYFIX Millennium'')
and NYFIX Securities Corporation (``NYFIX Securities''), for a period
not to exceed six months and subject to certain limitations and
obligations. The proposed rule change was published for comment in the
Federal Register on October 5, 2009.\3\ On November 5, 2009, NYSE filed
Amendment No. 1 to the proposed rule change, and the Exchange withdrew
Amendment No. 1 to the proposed rule change on November 6, 2009. On
November 9, 2009, NYSE filed Amendment No. 2 to the proposed rule
change.\4\ The Commission received no comments on the proposal. This
order approves the proposed rule change as modified by Amendment No. 2.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 60737 (September 29,
2009), 74 FR 51209 (``Notice'').
\4\ In Amendment No. 2, the Exchange clarified that, with
respect to the conditions on the Exchange's affiliation with NYFIX
Millennium and NYFIX Securities, references to NYFIX also refer to
its subsidiaries, NYFIX Millennium and NYFIX Securities. This
technical amendment does not require notice and comment, as it did
not materially affect the substance of the rule filing.
---------------------------------------------------------------------------
II. Overview
On August 26, 2009, NYSE Technologies entered into an Agreement and
Plan of Merger (``Merger Agreement'') with NYFIX and CBR Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of NYSE
Technologies. Under the terms of the Merger Agreement, CBR Acquisition
Corp. will merge with and into NYFIX, with NYFIX surviving the merger
as a direct wholly owned subsidiary of NYSE Technologies (``Merger'').
Following the Merger, both the Exchange and NYFIX will be indirect
wholly owned subsidiaries of NYSE Euronext. Consequently, NYFIX, and
its subsidiaries NYFIX Millennium and NYFIX Securities, will be
affiliates of the Exchange.
As a result of the Merger, NYSE Technologies will acquire, among
other things, NYFIX's Transaction Services Division. In the U.S., the
Transaction Services Division is currently composed of two U.S.
registered broker-dealer subsidiaries: NYFIX Millennium, which is also
an alternative trading system registered under Regulation ATS under the
Act;\5\ and, NYFIX Securities. In addition to other services provided
by NYFIX Millennium and NYFIX Securities, (1) NYFIX Millennium provides
routing of orders that are not matched within the NYFIX Millennium
matching system to marketplaces such as exchanges, electronic
communication networks, and ATSs, which are not operated by NYFIX; and
(2) NYFIX Securities provides direct electronic market access and
algorithmic trading products (together, ``Routing Services'').
---------------------------------------------------------------------------
\5\ 17 CFR 242.300-303.
---------------------------------------------------------------------------
The Exchange proposes to be affiliated with NYFIX Millennium and
NYFIX Securities for a period not to exceed six months and subject to
certain terms and conditions that the Exchange believes effectively
address concerns regarding the (1) the potential for conflicts of
interest where an exchange is affiliated with a broker-dealer
conducting an order routing business that may interact with the
Exchange itself, and (2) the potential for informational advantages
that could place such an affiliated broker-dealer at a competitive
advantage in comparison with other non-affiliated broker-dealers.
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.\6\ In particular, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\7\ which
requires, among other things, that the rules of a national securities
exchange be 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 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.
---------------------------------------------------------------------------
\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In the past, the Commission has expressed concern that the
affiliation of an exchange with one of its members raises potential
conflicts of interest and the potential for unfair competitive
advantage.\8\ The proposed relationship raises similar concerns in that
the Exchange will be affiliated with two broker-dealers that provide
Routing Services for orders that may be routed to the Exchange in
competition with Exchange members. The Exchange has requested that the
Commission approve its proposed affiliation with NYFIX Millennium and
NYFIX Securities on a temporary basis, not to exceed six months,
subject to certain conditions designed to address such concerns.
---------------------------------------------------------------------------
\8\ See, e.g., Securities Exchange Act Release Nos. 54170 (July
18, 2006), 71 FR 42149 (July 25, 2006) (SR-NASDAQ-2006-006) (order
approving Nasdaq's proposal to adopt Nasdaq Rule 2140, restricting
affiliations between Nasdaq and its members); 53382 (February 27,
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order
approving combination of NYSE and Archipelago Holdings, Inc.); 58673
(September 29, 2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-
62) (order approving acquisition of the American Stock Exchange by
NYSE Euronext); 59135 (December 22, 2008), 73 FR 79954 (December 30,
2008) (SR-ISE-2009-85) (order approving the purchase by ISE Holdings
of an ownership interest in DirectEdge Holdings LLC); and 59281
(January 22, 2009), 74 FR 5014 (January 28, 2009) (SR-NYSE-2008-120)
(order approving a joint venture between NYSE and BIDS Holdings
L.P.).
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Specifically, so long as the Exchange is affiliated with NYFIX
Millennium or NYFIX Securities and with respect to the Routing Services
provided by each: \9\
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\9\ For the conditions set forth below, references to NYFIX also
refer to its subsidiaries NYFIX Millennium and NYFIX Securities. See
Amendment No. 2, supra note 4.
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(1) Neither NYFIX Millennium nor NYFIX Securities are members of
the Exchange nor will they become members of the Exchange;
(2) NYFIX does not offer order routing services other than the
Routing Services, and none of the Routing Services will be modified
unless such modification is approved by the Commission;
(3) NYFIX will not engage in proprietary trading;
(4) NYFIX will not accept any new clients for the Routing Services
after the Merger;
(5) There will continue to be independent functionality of, and
full public access to, NYSE facilities; and
(6) There will be a complete separation between NYFIX, on the one
hand, and the Exchange and its affiliates, on the other (e.g., no
shared office space, no shared employees, no shared systems).
The Exchange may furnish to NYFIX the same information on the same
terms that the Exchange makes available in the normal course of
business to any other person. Specifically:
(a) NYFIX must not be provided an information advantage concerning
the operation of the Exchange or any of its facilities, particularly
regarding changes and improvements to the trading systems, that are not
available to the industry generally.
(b) NYFIX will be prevented from having any advance knowledge of
proposed changes or modifications to the operations of the Exchange or
its facilities, including but not limited to advance knowledge of
related filings by
[[Page 59296]]
the Exchange pursuant to Rule 19b-4 of the Act.\10\
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\10\ 15 U.S.C. 78a.
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(c) NYFIX will not share employees or databases with the Exchange,
any facility of the Exchange, or any other affiliate of the Exchange or
their facilities, and will be housed in a separate office.
(d) NYFIX will only be notified of any changes or improvements to
any of the Exchange's operations or trading facilities in the same
manner that other persons are notified of such changes or improvements;
(e) NYFIX will not disclose any system or design specifications, or
any other information, to any employees of the Exchange, any facility
of the Exchange, or any other affiliate of the Exchange or their
facilities that would give NYFIX an unfair advantage over its
competitors.
(f) None of the Exchange, any facility of the Exchange, or any
other affiliate of the Exchange or their facilities will disclose any
system or design specifications, or any other information, to any
employees of NYFIX or any affiliate of NYFIX that would give the
Exchange, any other facility of the Exchange, any other affiliate of
the Exchange, or NYFIX an unfair advantage over its competitors.
The Commission also notes that each of NYFIX Millenium and NYFIX
Securities has the Financial Industry Regulatory Authority (``FINRA''),
an unaffiliated self-regulatory organization (``SRO''), as its
designated examining authority and neither broker-dealer is a member of
the Exchange.\11\
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\11\ See Notice.
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The Commission finds that the temporary proposed affiliation
between the Exchange and NYFIX Millennium and NYFIX Securities,
pursuant to the proposed terms and conditions, is consistent with the
Act, particularly Section 6(b)(5) thereunder.\12\ The Commission
continues to be concerned about potential unfair competition and
conflicts of interest when an exchange, or one of its affiliates, is
the parent company of a broker-dealer that provides Routing Services
that may be in competition with services provided by members of that
exchange. The Commission believes, however, that the temporary nature
of the affiliation, together with the proposed terms and conditions,
are reasonably designed to mitigate concern about potential unfair
competition and conflicts of interest between the commercial interests
of the Exchange or its affiliates, and the Exchange's regulatory
responsibilities.
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\12\ 15 U.S.C. 78(f)(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-NYSE-2009-96), as amended,
is hereby approved.
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\13\ 15 U.S.C. 78s(b)(2).
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. E9-27501 Filed 11-16-09; 8:45 am]
BILLING CODE 8011-01-P
