This PDF is the current document as it appeared on Public Inspection on 11/06/2012 at 08:45 am.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, 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.
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
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  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.
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. 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.
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—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.
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.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, in general, and furthers the objectives of Section 6(b)(5) of the Act, 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.
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  and Rule 19b-4(f)(6) thereunder.
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act  normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)  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 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.
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:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
- Send an email to firstname.lastname@example.org. Please include File Number SR-NYSEMKT-2012-59 on the subject line.
- 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.
Kevin M. O'Neill,
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.Back to Citation
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.Back to Citation
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.Back to Citation
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.Back to Citation
7. The Exchange will provide notice of this rule filing to the DMMs and Floor brokers, including the applicable recordkeeping and other requirements.Back to Citation
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.Back to Citation
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).Back to Citation
[FR Doc. 2012-27221 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P