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, 62928-62930 [2013-24648]
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62928
Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
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
10:00 a.m. and 3:00 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 Number SR–BYX–
2013–035 and should be submitted on
or before November 12, 2013
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–24658 Filed 10–21–13; 8:45 am]
BILLING CODE 8011–01–P
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
sroberts on DSK5SPTVN1PROD with FRONT MATTER
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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
11 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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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
PO 00000
Frm 00346
Fmt 4703
Sfmt 4703
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
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 brokerdealer 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
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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Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
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
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
sroberts on DSK5SPTVN1PROD with FRONT MATTER
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.
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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21:08 Oct 21, 2013
Jkt 232001
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.
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 brokerdealer as its member too. The Exchange
has not identified any other selfregulatory organization that requires a
direct or indirect owner of a brokerdealer to execute a written consent to
jurisdiction.
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.
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.
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.
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 email to rulecomments@sec.gov. Please include File
Number SR–NYSEMKT–2013–79 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
10 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii).
13 15 U.S.C. 78s(b)(2)(B).
11 17
8 15
9 15
PO 00000
U.S.C. 78f(b)(8).
U.S.C. 78s(b)(3)(A)(iii).
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62929
E:\FR\FM\22OCN1.SGM
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62930
Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
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 (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 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
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–24648 Filed 10–21–13; 8:45 am]
sroberts on DSK5SPTVN1PROD with FRONT MATTER
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70701]
Order Providing Broker-Dealers a
Temporary Exemption From the
Requirements of Certain New
Amendments to the Financial
Responsibility Rules for BrokerDealers Under the Securities Exchange
Act of 1934
October 17, 2013.
I. Background
On July 30, 2013, the Securities and
Exchange Commission (‘‘Commission’’)
voted to adopt amendments to the
broker-dealer net capital rule (Rule
15c3–1),1 customer protection rule (Rule
15c3–3),2 books and records rules (Rules
17a–3 and 17a–4),3 and notification rule
(Rule 17a–11) 4 promulgated under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’). The amendments are
designed to address several areas of
concern regarding the financial
responsibility requirements for brokerdealers. The adopting release provided
that the amendments are effective on
October 21, 2013.5
Industry representatives have
indicated through physical and
telephonic meetings with Commission
staff that, as broker-dealers have worked
to meet the October 21, 2013 effective
date, some have determined that they
will be unable to complete by that date
the significant operational and systems
changes necessary to comply with
certain of the final rule amendments.
For example, broker-dealers that
maintain custody of customer securities
and cash (a ‘‘carrying broker-dealer’’)
have said they are unable to comply
with the requirements of paragraph
(e)(5) of Rule 15c3–3 by the current
effective date. This provision places
restrictions on a carrying broker-dealer’s
ability to use cash bank deposits to meet
customer or PAB reserve deposit
requirements by excluding cash
deposits held at an affiliated bank and
limiting cash held at non-affiliated
banks to an amount no greater than 15%
of the bank’s equity capital, as reported
by the bank in its most recent Call
Report.6 These carrying broker-dealers
1 17
CFR 240.15c3–1.
CFR 240.15c3–3.
3 17 CFR 240.17a 3 and 17a 4.
4 17 CFR 240.17a 11. Financial Responsibility
Rules for Broker-Dealers, Exchange Act Release No.
70072 (July 30, 2013), 78 FR 51824 (Aug. 21, 2013).
5 Financial Responsibility Rules for BrokerDealers, Exchange Act Release No. 70072 (July 30,
2013), 78 FR 51824 (Aug. 21, 2013).
6 See paragraph (e)(5) of Rule 15c3–3, as adopted.
See also Financial Responsibility Rules for Broker2 17
14 17
CFR 200.30–3(a)(12).
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Frm 00348
Fmt 4703
Sfmt 4703
indicated that it would be a challenge to
open new reserve accounts and make
the appropriate systems changes by
October 21, 2013 because, in part,
negotiating new reserve account deposit
agreements and obtaining
acknowledgement letters required by
paragraph (f) of Rule 15c3–3 from new
banks generally take significantly more
time than the 60 days afforded under
the final rule amendments.
Further, broker-dealers have indicated
that 60 days is insufficient for
implementing the system changes
necessary for the customer account
opening documentation and processes,
as well as account notices and
disclosures, required in connection with
new requirements under paragraph (j)(2)
to Rule 15c3–3 regarding the treatment
of customers’ free credit balances.
Additionally, broker-dealer
representatives have indicated that
some broker-dealers may need
additional time to completely and
accurately document their market,
credit, and liquidity risk management
controls under new paragraph (a)(23) to
Rule 17a–3.7
Therefore, the Commission has
determined to provide a temporary
exemption to broker-dealers from the
requirements of the following new
amendments to the broker-dealer
financial responsibility rules adopted in
Exchange Act Release No. 70072: (1)
Rule 15c3–3, except paragraph (j)(1); 8
(2) Rule 15c3–3a; (3) Rule 17a–3; (4)
Rule 17a–4; and (5) paragraph
(c)(2)(iv)(E)(2) of Rule 15c3–1.9 The
Dealers, 78 FR at 51904. The final rules define the
term PAB account to mean a proprietary securities
account of a broker or dealer (which includes a
foreign broker or dealer, or a foreign bank acting as
a broker or dealer) other than a delivery-versuspayment account or a receipt-versus-payment
account. The term does not include an account that
has been subordinated to the claims of creditors of
the carrying broker or dealer. See paragraph (a)(16)
of Rule 15c3–3, as adopted. See also Financial
Responsibility Rules for Broker-Dealers, 78 FR at
51903.
7 See paragraph (a)(23) of Rule 17a–3, as adopted
and paragraph (e)(9) of Rule 17a–4, as adopted. See
also Financial Responsibility Rules for BrokerDealers, 78 FR at 51907.
8 As adopted paragraph (j)(1) of Rule 15c3–3
incorporates certain requirements from Rule 15c3–
2 (customers’ free credit balances), including the
requirement that broker-dealers inform customers of
the amounts due to them and that such amounts are
payable on demand. Rule 15c3–2 is being
eliminated as a separate rule because it is largely
irrelevant in light of the requirements in Rule 15c3–
3. See paragraph (j)(1) of Rule 15c3–3, as adopted.
See also Financial Responsibility Rules for BrokerDealers, 78 FR at 51836–51837.
9 As adopted paragraph (c)(2)(iv)(E)(2) of Rule
15c3–1 provides that a broker-dealer need not
deduct cash and securities held in a securities
account at a carrying broker-dealer except where
the account has been subordinated to the claims of
creditors of the carrying broker-dealer. See
paragraph (c)(2)(iv)(E)(2) of Rule 15c3–1, as
E:\FR\FM\22OCN1.SGM
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]]>Agencies
[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62928-62930]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24648]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. 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 (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 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
