I. Purpose
The purpose of this Information Memo is to:
II. Background
On August 19, 2008, the American Stock Exchange LLC ("Amex"), which has been renamed NYSE Alternext US LLC ("NYSE Alternext"), issued Regulatory Notice 2008-32 concerning 86 Trinity Permits. In that Regulatory Notice, Amex announced that as a result of the then pending acquisition of Amex by NYSE Euronext and the related demutualization, all trading rights relating to Regular Memberships and Options Principal Memberships ("OPMs") existing immediately prior to the close of the acquisition would be cancelled. In its place, temporary trading rights, including physical and electronic access to Amex's trading facilities located at 86 Trinity Place, would be made available to individuals and organizations. This temporary trading permit is known as the "86 Trinity Permit."
As further described in Regulatory Notice 2008-32 and Regulatory Notice 2008-43 (Sept. 23, 2008), individuals and organizations that were authorized to trade at Amex prior to the acquisition, including, (i) owners, lessees or nominees of Regular Memberships or OPMs; (ii) limited trading permit holders; and (iii) associate members, were eligible to receive an 86 Trinity Permit. In addition, as products then listed and traded on Amex before the acquisition were relocated to NYSE Euronext trading systems and facilities ("NYSE Alternext Trading Systems"), the trading rights associated with the 86 Trinity Permit would cease with respect to such products.
Equities Relocation
On December 1, 2008, trading in NYSE Alternext-listed equities was relocated to NYSE Alternext Trading Systems. Accordingly, as of December 1, 2008, 86 Trinity Permit holders no longer have any trading rights with respect to NYSE Alternext-listed equities products. An NYSE Alternext equities trading license is now required to trade NYSE Alternext-listed equities products that have relocated to NYSE Alternext Trading Systems located at 11 Wall Street. 1 All 86 Trinity Permit holders were provided an application for an equities trading license. 2
86 Trinity Permit holders that apply for an NYSE Alternext equities trading license before the options relocation date (see below) and that were not already NYSE member organizations are also deemed approved for an NYSE trading license, which grants rights to trade NYSE-listed securities. However, as required by the SEC, that approval is conditioned upon the 86 Trinity Permit holder meeting the requirements of NYSE Alternext Rules 2, 300-313 - Equities (the "NYSE Alternext Equities Member Organization Rules"), within six months of receiving the NYSE Alternext equities trading license. Such conditional approval as an NYSE member organization is available only for those NYSE Alternext member organizations that applied for an equities trading license while holding an 86 Trinity Permit, i.e., before the options relocation date.
In addition, at this time, to be eligible to be waived in for an NYSE Alternext equities trading license (and also an NYSE trading license), an 86 Trinity Permit holder must also be a FINRA member. For those 86 Trinity Permit holders that are not currently a FINRA member, but are seeking to do a Floor-based equities business (e.g., Floor broker or DMM), the 86 Trinity Permit holder may be eligible to waive into FINRA membership pursuant to FINRA Interpretive Material (IM) 1013-2. 86 Trinity Permit holders seeking electronic access to NYSE Alternext equities are not eligible for the FINRA IM 1013-2 waive-in process. However, an 86 Trinity Permit holder that is not currently an NYSE or FINRA member and is seeking electronic access is eligible to apply for an equities trading license up to the options relocation date. If such equities trading license application is received before the options relocation date, such application will be held in abeyance pending resolution of FINRA membership issues. While an equities trading license will not be issued without FINRA membership, if FINRA membership issues are resolved within six months of the options relocation date, such former 86 Trinity Permit holders will be permitted to waive in as an NYSE member organization without having to apply as a new member organization.
Options Relocation
The relocation of NYSE Amex options trading is scheduled for March 2, 2009 ("options relocation date"). All 86 Trinity Permit holders were provided an ATP Conversion Form to obtain the ATP, which is a waive-in process for 86 Trinity Permit holders to obtain rights to trade options that will be relocated to NYSE Alternext Trading Systems located at 11 Wall Street. 3 After the relocation of NYSE Amex options to NYSE Alternext Trading Systems, a former 86 Trinity Permit Holder will need to complete an ATP Form to obtain trading rights with respect to NYSE Amex options.
Cancellation of Trading Rights After Options Relocation
As of the options relocation, all 86 Trinity Permits will be cancelled. Please note that the trigger for the 86 Trinity Permit cancellation and the concomitant waive-in periods for an equity trading license or ATP is the actual options relocation date. If the currently scheduled options relocation date changes, the 86 Trinity Permit will be cancelled on the new date. If an 86 Trinity Permit holder has not applied for an equities trading license by the options relocation date, that person or organization will not have trading rights to trade NYSE Alternext-listed equities (or NYSE-listed securities) after that date. Similarly, if an 86 Trinity Permit holder has not converted the permit for an ATP by the options relocation date, that person or organization will not have trading rights to trade NYSE Amex options after that date.
To obtain trading rights in either equities or options after the options relocation date, a former 86 Trinity Permit holder will be required to successfully complete an ATP Form to obtain trading rights for NYSE Amex options or an NYSE Alternext equities new member organization application to obtain trading rights for both NYSE Alternext-listed and NYSE-listed equities.
III. Frequently Asked Questions
Q.1 My firm has completed the ATP Conversion Form to trade NYSE Amex options, but does not have an NYSE Alternext equities trading license. Is it too late to obtain trading rights for NYSE Alternext equities?
A.1 No. In order to be eligible to be waived-in for equities trading rights on NYSE Alternext Trading Systems, an 86 Trinity Permit holder must apply for an NYSE Alternext equities trading license before the options relocation date. To qualify for an NYSE Alternext equities trading license, your firm must be a FINRA member. To obtain an NYSE Alternext equities trading license application, please contact Eileen McElduff at (212) 656-8499, or email: crs@nyx.com.
If your firm is a FINRA member and you are seeking electronic access for NYSE Alternext equities, you may begin trading both NYSE Alternext-listed equities and NYSE-listed securities immediately upon receipt of the equities trading license.
If your firm conducts a Floor business and you are seeking Floor-based access, e.g., to operate as an NYSE Alternext equities Floor broker, you will not be permitted to begin trading NYSE Alternext equities until you complete the NYSE Alternext equities mandatory regulatory and operations training programs. See Regulatory Notice 2008-65. Your firm must also submit written policies and procedures to FINRA for review before you may begin trading equities on the Floor. 4 If your Floor-based firm is not already a FINRA member, your firm may be eligible to obtain FINRA membership via FINRA's IM 1013-2 waive-in application.
Any application for an equities trading license submitted after the options relocation date will be treated as if it were a new application for NYSE Alternext equities membership. In such case, to obtain an NYSE Alternext equities trading license, your firm will no longer be eligible to be waived in as an NYSE member organization and you will have to apply for NYSE membership. If your firm is not a FINRA member, you may also have to apply for FINRA membership. Note that FINRA's IM 1013-2 waive-in application process is not available after the options relocation date.
If an 86 Trinity Permit holder is not a FINRA member, to preserve your rights to be eligible to be waived-in for an NYSE Alternext equities trading license, an application for such trading license must be received before the options relocation date. The issuance of such equities trading license is conditioned on either (i) obtaining FINRA membership within six months of the options relocation date, or (ii) a change to NYSE and NYSE Alternext Equities rules concerning the requirement of FINRA membership. See Question 2.
Q.2 My firm applied for an NYSE Alternext equities trading license for electronic-access only before the options relocation date, but my firm is not a FINRA member, does my firm have trading rights in equities?
A.2 Not yet. Both NYSE and NYSE Alternext Equities Rule 2(b) currently require member organizations to be a FINRA member. Pursuant to NYSE Alternext Equities Rule 300.10T, an 86 Trinity Permit holder has six months to comply with the NYSE Alternext Equities Membership Rules, including the requirement that the applicant be a FINRA member. Accordingly, if an 86 Trinity Permit holder that is not a FINRA member has applied for an NYSE Alternext equities trading license before the options relocation date, such application will be held in abeyance for six months to provide time to become a FINRA member.
Accordingly, assuming an 86 Trinity Permit holder timely applied for an equities trading license, i.e., before the options relocation date, such equities trading license will be issued the earlier of (i) when the applicant becomes a FINRA member, provided that is no later than six months after the options relocation date, or (ii) the approval date of the proposed rule change to NYSE and NYSE Alternext Equities Rule 2(b), provided that the applicant meets the requirement of the amended rule.
Q.3 My firm is an 86 Trinity Permit holder and I applied for and received an NYSE Alternext equities trading license. Does my firm need to do anything else to maintain its equity trading license?
A.3 Yes. As noted above, the waive-in process to be approved as an NYSE Alternext member organization and NYSE member organization is conditioned upon the applicant meeting the requirements of the NYSE Alternext Equities Member Organization Rules within six months of receiving the NYSE Alternext equities trading license.
The NYSE Alternext Equities Member Organization Rules are substantially similar to the former Amex rules that governed Regular Members and OPMs, except for one difference with respect to member organizations organized as corporations, as described below. Accordingly, except for one requirement in NYSE Alternext Rule 313.20-Equities, NYSE Alternext equities member organizations are deemed to have satisfied the NYSE Alternext Equities Member Organization Rules.
All NYSE Alternext equities member organizations that (i) were not previously an NYSE member organization; (ii) are a corporation, including an LLC; and (iii) have an NYSE Alternext equities trading license should note that they must comply with NYSE Alternext Rule 313.20 within six months of obtaining their equity trading license. Specifically, such firms must submit an opinion of counsel in form and substance satisfactory to the Exchange stating that its stock is validly issued and outstanding and that the provisions required by the Exchange on the transfer, issuance, conversion, and redemption of its stock have been made legally effective.
Please submit such opinions of counsel to: crs@nyx.com. If a member organization corporation fails to submit such opinion of counsel, NYSE Alternext reserves the right to commence proceedings to terminate such member organization's membership.
Q.4 My firm has an 86 Trinity Permit and received an NYSE Alternext equities trading license. We are interested in trading options, but do not want to apply for an ATP yet. Can we use the conversion application after the options relocation?
A.4 No. Because the 86 Trinity Permit will be cancelled after options relocate to NYSE Alternext Trading Systems, your firm will not have the necessary trading rights to convert into an ATP. To obtain an ATP after the options relocation, your firm will have to complete the full ATP application (ATP Form)
Q.5 My firm has an 86 Trinity Permit and will be trading NYSE Amex options with an ATP. We are interested in trading equities, but do not want to apply for an equities trading license yet. After the options relocation, will my firm be deemed approved as an NYSE Alternext equities member organization and thus eligible for an equities trading license?
A.5 No. To be deemed approved as an NYSE member organization, a firm must have had a valid 86 Trinity Permit at the time it applied for an equities trading license. If an ATP holder does not apply for an equities trading license during the period that the 86 Trinity Permit is still valid, such ATP holder will not be deemed to have met the requirements of the NYSE Alternext Equities Membership Rules and the corresponding NYSE Rules. After the options relocation, to obtain an equities trading license, an ATP holder must successfully complete the regular application process for approval as an NYSE and NYSE Alternext equities member organization.
Q.6 My firm was an Amex associate member and we do not want either an ATP or equities trading license at this time. Are we approved for an ATP or an equities trading license after the options relocation date?
A.6 No. After the options relocation date, an 86 Trinity Permit holder that has not obtained an ATP or equities trading license will have to successfully complete the ATP Form or NYSE Alternext member organization application to be eligible to conduct any NYSE Alternext trading. See Questions 4 and 5.
V. Staff Contacts
Questions regarding applying for an NYSE Alternext equities trading license may be directed to:
Eileen McElduff, at (212) 656-8499
Michelle Liguori, at (212) 656-5388
Questions regarding applying for an NYSE Amex ATP or NYSE membership may be directed to:
1 (888) 689-7739 (option 3) or crs@nyx.com
Questions regarding general membership issues may be directed to:
Clare Saperstein, Managing Director, NYSE Regulation, Inc. (212) 656-2355
1 Exchange Traded Funds ("ETFs") and other structured products formerly listed on Amex have been transferred to NYSE Arca. 86 Trinity Permit holders do not have any rights to trade such former Amex-listed ETFs and other structured products now that they are listed on NYSE Arca. To trade such products, former Amex members must obtain an NYSE Arca Equity Trading Permit ("ETP").
2 See Memo to NYSE Alternext member organizations from Eileen McElduff, dated October 24, 2008. All 86 Trinity Permit holders were asked to complete Form 1. NYSE Alternext member organizations seeking an equities trading license, for either Floor-based or electronic access, were required to submit Form 2. NYSE Alternext member organizations seeking a Floor-based equities presence were required to submit Form 3.
3 See Email to 86 Trinity Permit holders dated December 1, 2008.
4 For information and details about the regulatory prerequisites to relocating a Floor-based equities trading business to NYSE Alternext Trading Systems located at 11 Wall Street, see Amex Regulatory Notices 2008-28 (July 31, 2008), 2008-38 (Sept. 19, 2008), 2008-46 (Oct. 1, 2008), and 2008-60 (Nov. 25, 2008).