[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Notices]
[Pages 66890-66893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27221]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68138; File No. SR-NYSEMKT-2012-59]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change to Temporarily
Suspend Those Aspects of Rules 36.20--Equities, 36.21--Equities, and
36.30--Equities 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 NYSE MKT LLC (``Exchange'' or ``NYSE MKT'')
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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[[Page 66891]]
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--Equities, 36.21--Equities, and 36.30--Equities 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--Equities, 36.21--Equities, and 36.30--Equities 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 phone service is fully restored or Friday, November 2, 2012.\4\
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\3\ Pursuant to Rule 6A--Equities, 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, the New York Stock
Exchange 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--Equities 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--Equities and 36.21--Equities govern
the type of telephone communications that are approved for Floor
brokers and Rule 36.30--Equities governs the type of telephone
communications that are approved for DMMs.
Pursuant to Rule 36.20--Equities, 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--Equities. 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--Equities and 36.21--Equities 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--Equities, 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--Equities.\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--Equities 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--Equities 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)-Equities, (d)(2)(B)(iii)--Equities, (f)(1)(A)(ii)--
Equities, and (f)(2)(A)--Equities.
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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
[[Page 66892]]
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--Equities 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 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 requested
that the Commission waive the 30-day operative delay so that the
proposed rule change may become operative upon filing. The Commission
believes that waiving the 30-day operative delay is
[[Page 66893]]
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-NYSEMKT-2012-59 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-NYSEMKT-2012-59. 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 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-NYSEMKT-2012-59 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. 2012-27221 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P