View this document in context at the NYSE Regulation Rules site:
(a) No DMM unit shall complete a "proposed combination" (as defined below in paragraph (b) of this rule) with one or more other DMM units unless the combination has been approved by the Exchange.
(b) For purposes of this rule, a "proposed combination" means:
(1) a transaction in which two or more DMM units agree to merge or otherwise combine their businesses, with the result that the total number of existing independent DMM units will be reduced;
(2) two or more DMM units agree to combine their businesses with the result that the existing number of DMM units will not be reduced, but one or more of the surviving units is substantially reduced in size; or
(3) a DMM unit merges or otherwise combines with a non-DMM business resulting in a change of control of the existing DMM unit.
(c) Proponents of a DMM unit combination must make a written submission to the Office of the Corporate Secretary of the Exchange, discussing all the factors for review pursuant to subparagraph (d) below. The written submission should also address and discuss:
(1) performance in any securities received through previous combinations or transfers of registrations during the preceding two years;
(2) whether the resulting DMM unit will maintain staffing adequate to the needs of the market place;
(3) whether the proposed combined unit will have a real-time surveillance system that monitors DMM trading and uses exception alerts to detect unusual trades or trading patterns; and
(4) whether the proposed combined unit will have disaster recovery facilities for its computer network and software;
(5) whether it has designated specific individuals to handle unusual situations on the Floor (if so, the names of the individuals);
(6) whether the combined unit will employ a "zone" or other management system on the Floor (with identification of the names of the individuals and their specific responsibilities, as applicable); and
(7) whether the combined unit will designate a senior staff member to be responsible for reviewing DMM performance data, with specific procedures for correcting any deficiencies identified.
(d) The Exchange will consider the following criteria in its review of a proposed combination:
(1) ) the ability of the DMM unit or units resulting from the transaction to comply with NYSE rules, including, without limitation, the provision of Rule 98; Rule 103; Rule 103B, Section II; and Rule 104;
(2) whether the proposed combination minimizes both the potential for financial failure and the negative consequences of any such failure on the DMM system as a whole;
(3) whether the proposed combination maintains or increases operational efficiencies;
(4) the surviving DMM unit's commitment to the Exchange market, including but not limited to whether the constituent DMM units:
(A) work to support, strengthen and advance the Exchange, its market and its competitiveness in relation to other markets;
(B) participate upon request in the Exchange's marketing seminars, sales calls and other marketing initiatives seeking to attract order flow and new listings;
(C) accept innovations in order-routing and other trade-support systems and willingness to make optimal use of the systems once they become fully operational;
(D) assist other units by providing capital and personnel in unusual market situations, such as "breakouts" and difficult openings;
(E) engage in efforts to streamline the efficiency of its own operations and its competitive posture; and
(5) The effect of the proposed combination on overall concentration of DMM units.
(e) Where a proposed combination involves an organization that is not a DMM unit, consideration shall entail an assessment of whether the organization will work to support, strengthen and advance the Exchange, and its competitiveness in relation to other markets.
(f) The Exchange shall approve or disapprove a proposed combination within ten (10) business days based on its assessment of the criteria pursuant to subparagraph (d) above and, in the case of a proposed combination involving a non-DMM unit, its assessment of the additional criteria pursuant to subparagraph (e) above. The Exchange reserves the right to extend its review process if the information submitted by the proponents of the DMM combination is inadequate or requires additional time to review in order for the Exchange to reach a decision.
(1) The Exchange shall approve a proposed combination if the proposed combination satisfies the criteria set forth in Rule 123E(d)(1)-(5) and if the Exchange determines that the proposed combination would:
(A) not create or foster concentration in the DMM business detrimental to the Exchange and its markets;
(B) foster competition among DMM units; and
(C) enhance the performance of the constituent DMM unit and the quality of the markets in the securities involved.
(g) The Exchange may condition its approval upon compliance by the resulting DMM unit with any steps the Exchange may specify to address any concerns it may have in regard to considerations of the above criteria.
(h) In any instance where the Exchange does not approve a proposed DMM combination, the proponents of such proposed combination have a right to have such decision reviewed by the Exchange's Board of Directors.
Adopted: October 1, 2002 effective August 10, 2002 (NYSE-2002-31).
Amended: May 2, 2003 (2002-41); July 25, 2006 (NYSE-2005-38); October 24, 2008 (NYSE-2008-46); October 24, 2008 (NYSE-2008-52); December 10, 2008 (NYSE-2008-127); February 11, 2009 (NYSE-2009-07).