[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Notices]
[Pages 66893-66896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27220]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68137; File No. SR-NYSE-2012-58]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Temporarily Suspend Those Aspects of Rules 36.20, 36.21, and 36.30
That Would Not Permit Designated Market Makers and Floor Brokers To Use
Personal Portable Phone Devices on the Trading Floor Following the
Aftermath of Hurricane Sandy From October 31, 2012 Until the Earlier of
When Phone Service Is Fully Restored or Friday, November 2, 2012
November 1, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 1, 2012, the New York Stock Exchange LLC (``Exchange'' or
``NYSE'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to temporarily suspend those aspects of Rules
36.20, 36.21, and 36.30 that would not permit Designated Market Makers
(``DMMs'') and Floor brokers to use personal portable phone devices on
the Trading Floor following the aftermath of Hurricane Sandy from
October 31, 2012 until the earlier of when phone service is fully
restored or Friday, November 2, 2012. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to temporarily suspend those aspects of Rules
36.20, 36.21, and 36.30 that would not permit Floor brokers and
Designated Market Makers (``DMMs'') to use personal portable phone
devices on the Trading Floor \3\ following the aftermath of Hurricane
Sandy and during the period that phone service is not fully functional.
All other aspects of those rules will remain applicable. The Exchange
proposes that the temporary suspensions of Rule 36 requirements be in
effect beginning the first day trading resumed following Hurricane
Sandy and remain in place to the earlier of when
[[Page 66894]]
phone service is fully restored or Friday, November 2, 2012.\4\
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\3\ Pursuant to Rule 6A, the Trading Floor is defined as the
restricted-access physical areas designated by the Exchange for the
trading of securities, but does not include the physical locations
where NYSE Amex Options are traded.
\4\ The Exchange notes that it formally submitted a draft of
this rule proposal through the SEC's prefiling system on October 31,
2012, but that due to technological issues associated with Hurricane
Sandy-related limitations on Exchange staff computer access, the
Exchange was unable to formally submit the filing on October 31,
2012.
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On October 29 and 30, 2012, due to the dangerous conditions that
developed as a result of Hurricane Sandy, and in consultation with
other equities, options, bonds, and derivative exchanges, market
participants, and Commission staff, all U.S. equities and options
markets were closed, including the Exchange, NYSE MKT LLC, and NYSE
Arca, Inc.
On October 31, 2012, notwithstanding the ongoing lack of power in
the downtown Manhattan vicinity, the Exchange, using back-up
generators, was able to open trading at its physical location in New
York City. However, due to intermittent telephone and cell phone
service, neither the wired or wireless telephone connections on the
Trading Floor are fully operational.
Proposed Temporary Suspensions To Permit Use of Personal Portable
Phones
Rule 36.23 generally permits Exchange members, including Floor
brokers and DMMs, to use personal portable telephone devices at
locations outside of the Trading Floor, other than on the NYSE Amex
Options Trading Floor. Rules 36.20 and 36.21 govern the type of
telephone communications that are approved for Floor brokers and Rule
36.30 governs the type of telephone communications that are approved
for DMMs.
Pursuant to Rule 36.20, Floor brokers may maintain a telephone line
on the Trading Floor and use Exchange authorized and provided portable
phones while on the Trading Floor. The use of such Exchange authorized
and provided portable phones is governed by Rule 36.21. Because of
intermittent cell phone service, many Exchange authorized and provided
portable phones are not functional and therefore Floor brokers cannot
use the Exchange authorized and provided portable phones. In certain
instances, however, the personal cell phones of Floor brokers are
operational on the Trading Floor. The Exchange believes that because
communications with customers is a vital part of a Floor broker's role
as agent and therefore contributes to maintaining a fair and orderly
market, during the period when phone service continues to be
intermittent, Floor brokers should be permitted to use personal
portable phone devices in lieu of the non-operational Exchange
authorized and provided portable phones.
The Exchange therefore proposes to temporarily suspend the
limitations in Rules 36.20 and 21 that permit Floor brokers to use only
Exchange authorized and provided portable phones so that Floor brokers
may also use personal portable phones on the Trading Floor. The
Exchange proposes that pursuant to this temporary suspension, Floor
brokers must provide the Exchange with the names of all Floor-based
personnel who used personal portable phones during this temporary
suspension period, together with the phone number and applicable
carrier for each number. Floor broker member organizations must
maintain in their books and records all cell phone records that show
both incoming and outgoing calls that were made during the period that
a personal portable phone was used on the Trading Floor. To the extent
the records are unavailable from the third-party carrier, the Floor
brokers must maintain contemporaneous records of all calls made or
received on a personal portable phone while on the Trading Floor. As
with all member organization records, such cell phone records must be
provided to Exchange regulatory staff, including without limitation
staff of the Financial Industry Regulatory Authority (``FINRA''), on
request.
Pursuant to Rule 36.30, with the permission of the Exchange, a DMM
unit may maintain a telephone line at its stock trading post location
to the off-Floor offices of the DMM unit, the unit's clearing firm, or
to persons providing non-trading related services, as permitted under
Rule 98.\5\ Similar to the issues relating to wireless phone service on
the Trading Floor, the Exchange is experiencing problems with the DMM
unit wired telephone lines. In some circumstances, the DMM unit
location at the Trading Floor post may receive incoming calls, but the
phones are not capable of making outgoing calls.
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\5\ Rule 36.30 restricts a DMM unit from using the post
telephone lines to transmit to the Floor orders for the purchase or
sale of securities. In addition, Rule 98 sets forth restrictions on
communications between the Floor-based personnel of a DMM unit and
off-Floor personnel. See, e.g., Rules 98(c)(2)(A), (d)(2)(B)(iii),
(f)(1)(A)(ii), and (f)(2)(A).
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The inability of a DMM unit to use its telephone lines could impact
the ability of a DMM unit to comply with its obligations in securities
registered to the DMM unit. For example, if a DMM unit experiences
connectivity issues or problems with its algorithms and needs to speak
with one of its back-office support teams, with the current phone
limitations, the DMM would not be able to do so. Accordingly, the
Exchange proposes to temporarily suspend the requirements of Rule 36.30
that restrict the use of personal cell phones so that DMM unit Trading
Floor personnel may use personal portable phone devices while on the
Trading Floor in lieu of their non-operational wired telephone lines.
The Exchange proposes that notwithstanding this temporary
suspension, DMM units and their Floor-based personnel would remain
subject to both the Rule 36.30 and 98 limitations of whom they may
contact directly from the Trading Floor. However, because of the
extensive, ongoing issues with power and phone lines in the New York
City area and vicinity, the persons with whom a DMM may be permitted to
communicate from the Trading Floor may not be at their regular physical
location. Accordingly, the Exchange proposes to temporarily permit DMMs
to use their personal portable phones to contact the off-Floor persons
that they are permitted to contact by rule, even if such off-Floor
personnel are not located in their regular office locations. The
Exchange believes that this relief is consistent with guidance issued
by FINRA, which recognizes that in the aftermath of Hurricane Sandy, a
FINRA member may relocate displaced office personnel to temporary
locations.\6\
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\6\ See FINRA Regulatory Notice 12-45. The Exchange notes that
all member organizations operating a DMM unit are also FINRA
members, and therefore subject to the guidance set forth in FINRA
Regulatory Notice 12-45.
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DMM units that use personal portable phones during this temporary
suspension must provide the Exchange with the names of all Floor-based
personnel who used personal portable phones during this temporary
suspension period, together with the phone number and applicable
carrier for each number. DMM units must also maintain in their books
and records all cell phone records that show both incoming and outgoing
calls that were made during the period that a personal portable phone
was used on the Trading Floor. To the extent the records are
unavailable from the third-party carrier, the DMM unit must maintain
contemporaneous records of all calls made or received on a personal
portable phone while on the Trading Floor. As with all member
organization records, such cell phone records must be provided to
Exchange regulatory staff, including without limitation staff of the
FINRA, on request.
At this time, because the Exchange is dependent on third-party
carriers for both wired and wireless phone service
[[Page 66895]]
on the Trading Floor, the Exchange does not know how long the proposed
temporary suspension will be required. The Exchange therefore proposes
that the temporary suspensions of Rule 36 requirements remain in place
to the earlier of when phone service is fully restored or Friday,
November 2, 2012.\7\
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\7\ The Exchange will provide notice of this rule filing to the
DMMs and Floor brokers, including the applicable recordkeeping and
other requirements.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\9\ 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 mechanism of a free and open market and a national market system.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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In particular, in the aftermath of Hurricane Sandy, while the
Exchange was able to open for trading, many of the services that the
Exchange depends on from third-party carriers, such as wired and
wireless telephone connections, are not fully restored. The Exchange
believes that the proposed temporary suspensions from those aspects of
Rule 36 that restrict the use of personal portable phones on the
Trading Floor removes impediments to and perfects the mechanism of a
free and open market and national market system because the proposed
relief will enable both Floor brokers and DMMs to conduct their regular
business, notwithstanding the ongoing issues with telephone service.
The Exchange further believes that without the requested relief, both
Floor brokers and DMMs would be compromised in their ability to conduct
their regular course of business on the Trading Floor, which could
adversely impact the market generally and investor confidence during
this time of unprecedented weather disruptions. In particular, for
Floor brokers, because they operate as agents for customers, their
inability to communicate with customers could compromise their ability
to represent public orders on the Trading Floor. For DMM units, any
inability to communicate with personnel from their off-Floor offices,
clearing firms, or non-trading related support staff, regardless of
where such off-Floor personnel may be located in the aftermath of
Hurricane Sandy, could compromise the DMM unit's ability to meet their
obligations, particularly if the DMM unit experiences issues with
connectivity or its algorithms.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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.
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
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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \12\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \13\ permits the Commission to
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. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission notes
that doing so will allow the Exchange to make the emergency temporary
relief described in this proposal, which was necessitated by Hurricane
Sandy's disruption of telephone service, available on October 31, 2012,
the first day that the Exchange reopened for trading following
Hurricane Sandy. Therefore, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\14\
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2012-58 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-NYSE-2012-58. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public
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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
the 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-NYSE-2012-58 and should be submitted on or before
November 28, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27220 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P