[Federal Register Volume 77, Number 219 (Tuesday, November 13, 2012)]
[Notices]
[Pages 67720-67722]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27549]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68162; File No. SR-NYSEMKT-2012-62]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Extend the Temporary
Suspension of 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 November 5, 2012
Until the Earlier of When Phone Service Is Fully Restored or Friday,
November 9, 2012
November 5, 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 5, 2012, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II 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.
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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 extend the temporary suspension of 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 November 5, 2012 until
the earlier of when phone service is fully restored or Friday, November
9, 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
On Thursday, November 1, 2012, the Exchange filed a rule proposal
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 was not fully
functional.\4\ Pursuant to that filing, all other aspects of those
rules remained applicable and the temporary suspensions of Rule 36
requirements were in effect beginning the first day trading resumed
following Hurricane Sandy until Friday, November 2, 2012.
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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\ See Securities Exchange Act Release No. 68138 (Nov. 1, 2012)
(SR-NYSEMKT-2012-59).
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As of Monday, November 5, 2012, although power has been restored to
the downtown Manhattan vicinity, other services are not yet fully
operational. Among other things, the telephone services provided by
third-party carriers to the Exchange are still not fully operational on
the Trading Floor, which impacts the ability of Floor members to
communicate from the Trading Floor as permitted by Rule 36--Equities.
Because of intermittent cell phone service, many Exchange
authorized and provided portable phones continue to not be functional
and therefore Floor brokers still cannot use the Exchange authorized
and provided portable phones, pursuant to Rules 36.20--Equities and
36.21--Equities. 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
[[Page 67721]]
permitted to use personal portable phone devices in lieu of the non-
operational Exchange authorized and provided portable phones.
Similarly, the Exchange continues to experience problems with the
DMM unit wired telephone lines, which are permitted pursuant to Rule
36.30--Equities. 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. The continued 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 extend the temporary
suspension of those aspects of Rules 36.20--Equities, 36.21--Equities,
and 36.30--Equities that would not permit Floor brokers and DMMs to use
personal portable phone devices on the Trading Floor. The Exchange
proposes that the extension of the temporary suspension of those
aspects of Rules 36.20--Equities, 36.21--Equities, and 36.30--Equities
to permit use of the personal portable phones on the Trading Floor be
pursuant to the same terms and conditions of the temporary suspension
filed for October 31, 2012 through November 2, 2012, including the
record retention requirements related to any use of personal portable
phones.\5\
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\5\ See id. (notice that describes the terms and conditions of
the temporary suspension).
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In particular, as set forth in the prior filing, Floor brokers and
DMMs that use a portable personal phone 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 and DMM
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 broker and DMM member organizations 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.
In addition, the Exchange further notes that DMM units and their
Floor-based personnel would remain subject to both the Rule 36.30--
Equities and 98--Equities limitations of whom they may contact directly
from the Trading Floor.\6\ 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 continue 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.\7\
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\6\ 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 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.
\7\ 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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As noted above, 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. However, based on current estimates, the
Exchange understands that phone service may not be fully restored until
at least Wednesday, November 7, 2012, and most likely later than that
date. Accordingly, the Exchange proposes that the extension of the
temporary suspensions of those aspects of Rule 36--Equities that do not
permit DMMs or Floor brokers to use personal portable phones on the
Trading Floor continue until the earlier of when phone service is fully
restored or Friday, November 9, 2012.\8\
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\8\ The Exchange will provide notice of this rule filing to the
DMMs and Floor brokers, including the applicable recordkeeping and
other requirements. If telephone service is fully restored prior to
November 9, 2012, the Exchange will notify DMMs and Floor brokers
that the temporary suspension of those aspects of Rule 36 that do
not permit the use of personal portable phones on the Trading Floor
has expired as of the time that phone service is fully restored.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 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 extension of the temporary suspensions from
those aspects of Rule 36--Equities 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.
[[Page 67722]]
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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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 \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \14\ 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 continue uninterrupted the
emergency temporary relief necessitated by Hurricane Sandy's disruption
of telephone service, as described herein and in the Exchange's prior
filing seeking such relief, until the earlier of when phone service is
fully restored or Friday, November 9, 2012. Therefore, the Commission
hereby waives the 30-day operative delay and designates the proposal
operative upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 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-2012-62 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-2012-62. 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-2012-62 and should
be submitted on or before December 4, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27549 Filed 11-9-12; 8:45 am]
BILLING CODE 8011-01-P