[Federal Register Volume 75, Number 106 (Thursday, June 3, 2010)]
[Notices]
[Pages 31496-31499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-13338]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62167; File No. SR-NYSE-2010-37]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Add Certain Violations of Its Communications and Give-Up Policies to
Its MRVP
May 25, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on May 12, 2010, the New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III 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 amend NYSE Rule 476A to add Rule 36
(Communications Between Exchange and Members' Offices) to its List of
Exchange Rule Violations and Fines Applicable Thereto (``Minor Rule
Violation Plan'').\3\ The text of the proposed rule change is available
on NYSE's Web site at http://www.nyse.com, on the Commission's Web site
at http://www.sec.gov, at NYSE, and at the Commission's Public
Reference Room.
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\3\ The Exchange's corporate affiliate, NYSE Amex LLC (``NYSE
Amex''), submitted a companion rule filing proposing corresponding
amendments to NYSE Amex Disciplinary Rule 476A. See SR-NYSEAmex-
2010-44.
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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 amend NYSE Rule 476A to add Rule 36
(Communications Between Exchange and Members' Offices) to its Minor
Rule Violation Plan.
Background
Effective October 1, 2008, the Exchange's parent company, NYSE
Euronext, acquired the parent company of NYSE Amex pursuant to an
Agreement and Plan of Merger (the ``Merger'').\4\ In connection with
the
[[Page 31497]]
Merger, on December 1, 2008, NYSE Amex relocated all equities trading
conducted on its legacy trading systems and facilities located at 86
Trinity Place, New York, New York to systems and facilities located at
11 Wall Street, New York, New York (the ``Equities Relocation'').\5\
Similarly, on March 2, 2009, NYSE Amex relocated all its options
trading to trading systems and facilities located at 11 Wall Street,
New York, New York (the ``Options Relocation'').\6\ As a result of the
Equities and Options Relocations, the NYSE and NYSE Amex Equities
Trading Floors are located within the 11 Wall Street building in a room
adjacent to the NYSE Amex Options Trading Floor.
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\4\ See Securities Exchange Act Release No. 58673 (September 29,
2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex-
2008-62) (order approving the Merger).
\5\ See Securities Exchange Act Release No. 58705 (October 1,
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (order
approving the Equities Relocation).
\6\ See Securities Exchange Act Release No. 59472 (February 27,
2009), 74 FR 9843 (March 6, 2009) (SR-NYSEALTR-2008-14) (order
approving the Options Relocation).
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Current NYSE Rule 36
NYSE Rule 36 governs two primary areas: (i) Communications between
the Floor and other locations, and (ii) the use and/or possession of
portable or wireless communication or trading devices.
First, Rule 36 broadly prohibits members and member organizations
from establishing or maintaining any telephonic or electronic
communication between the Floor and any other location without Exchange
approval. In addition, there are several supplementary provisions that
provide more detailed prescriptions for members and member firms.
Rule 36.10 advises members and member organizations that the phone
company will not install or disconnect any line between the Floor and
any other location without Exchange approval and that such requests
should be sent to the Exchange's Market Operations Division. Rule 36.60
further prohibits members and member organizations from listing a phone
line in the name of a non-member.
Rule 36.20 provides that Floor brokers may maintain a phone line at
their booth locations on the Floor, or use an Exchange issued and
authorized portable phone, to communicate with non-members off the
Floor. Only Exchange issued and authorized portable phones may be used
on the Floor in accordance with the prescriptions of Rule 36.21, and
the use of personal phones is expressly prohibited.\7\ Rule 36.21
provides that Floor brokers using an Exchange issued and authorized
portable phone may communicate directly from the point of sale on the
Floor with someone off-Floor. In addition to processing orders, Floor
brokers may also provide ``market look'' observations over the phone.
When taking orders over the phone, Floor brokers must comply with Rule
123(e), which requires entry of the order into an electronic system, as
well as any and all other record retention requirements under Exchange
Rules and the federal securities laws. Exchange issued phones do not
permit call-forwarding or call-waiting and may not block a caller's
identification.
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\7\ Although the Exchange does not currently trade ``basket''
securities, as defined in Rule 800, Rule 36 provides that Floor
brokers trading such securities may establish phone lines at the
basket trading location.
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Notwithstanding the prescriptions of Rule 36.20, Rule 36.23
provides that members and employees of member organizations may use
personal portable or wireless communications devices, including phones,
outside the Exchange Trading Floor.\8\ In addition, members and
employees of member organizations may not use personal portable or
wireless communication devices on the NYSE Amex Options Trading Floor
unless they are also registered to trade options on NYSE Amex.
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\8\ Rule 6A defines ``Trading Floor'' as the restricted-access
physical areas designated by the Exchange for the trading of
equities securities, commonly known as the ``Main Room'' and the
``Garage.'' The Exchange's Trading Floor does not include the areas
where NYSE Amex-listed options are traded, commonly known as the
``Blue Room'' and the ``Extended Blue Room,'' also known as the
``NYSE Amex Options Trading Floor.''
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Rule 36.30 provides that, subject to Exchange approval, a DMM Unit
may maintain a phone line at its post to communicate with its off-Floor
business operations and/or its clearing firm. For trading purposes, a
DMM Unit's phone line may only be used to enter hedging orders through
the firm's off-Floor office or clearing firm, or through a member of an
options or futures exchange as permitted under Rules 98 and 105.
Under Rule 36.30, a DMM Unit may also maintain a wired or wireless
device that has been registered with the Exchange, such as a computer
terminal or laptop, to communicate with the DMM Unit's off-Floor
algorithms. A DMM Unit using such a wired or wireless device must
certify that the device operates in accordance with all SEC and
Exchange rules, policies, and procedures. In addition, the DMM Unit
must create and maintain records of all messages generated by the wired
or wireless device in compliance with NYSE Rule 440 and SEC Rules 17a-3
and 17a-4.
In addition, a DMM Unit registered in an Investment Company Unit
(as defined in Section 703.16 of the Listed Company Manual) or a Trust
Issued Receipt (as defined in Rule 1200) may use a telephone connection
or order entry terminal at its post to enter proprietary orders in (i)
the Investment Company Unit or Trust Issued Receipt in another market
center, (ii) a component security of such a Unit or Receipt, or (iii)
options or futures related to such Unit or Receipt, and may also use
the phone to obtain market information with respect to such securities.
Any such order executed on the Exchange must be entered and executed in
compliance with Exchange Rule 112.20 and SEC Rule 11a2-2(T) and may
only be entered for hedging purposes.\9\
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\9\ The Exchange does not currently list or trade any Investment
Company Units or Trust Issued Receipts.
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To address concerns regarding improper information sharing between
the Exchange's Trading Floor and the adjacent NYSE Amex Options Trading
Floor, Rule 36.70 prohibits members and member firm employees from (i)
using or possessing any wireless trading device that may be used to
view or enter orders into the Exchange's trading systems while on the
NYSE Amex Options Trading Floor, and (ii) using or possessing any
wireless trading device that may be used to view or enter orders into
the NYSE Amex Options trading systems while on the Exchange's Trading
Floor. These prohibitions apply to any and all wireless trading
devices, including devices issued by the Exchange or NYSE Amex, as well
as devices that are proprietary to a member, member organization or
other entity.
Finally, Rules 36.40 and 36.50 prescribe certain timing and
handling requirements for ``give-up'' or ``step out'' transactions,
whereby a member or member organization executes a customer trade on
behalf of another member. While not directly related to member or
member organization communications or the use and/or possession of
portable or wireless communication or trading devices, these
requirements are important for ensuring that members and member
organizations properly document these types of transactions.
Proposed Rule Change
As noted above, the Exchange proposes to add NYSE Rule 36 to its
[[Page 31498]]
Minor Rule Violation Plan under Rule 476A.
Under the Exchange's Minor Rule Violation Plan, the Exchange may
impose a fine, not to exceed $5,000, on any member, member
organization, allied member, approved person, or registered or non-
registered employee of a member or member organization for a minor
violation of specified Exchange rules. Such fines provide a meaningful
sanction for rule violations where the facts and circumstances of the
violation do not warrant the initiation of a formal disciplinary
procedure under Rule 476, but do require a regulatory response that is
more significant than an admonition letter.\10\
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\10\ The Exchange's Minor Rule Violation Plan was originally
adopted by the Exchange and approved by the Commission in 1985. See
Securities Exchange Act Release No. 34-21688 (January 25, 1985), 50
FR 5025-01 (February 5, 1985) (SR-NYSE-84-27). It has been amended
numerous times since its adoption.
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Currently, because Rule 36 is not part of the Exchange's Minor Rule
Violation Plan, if a member or member firm employee were to violate the
prohibitions set forth in Rule 36 the Exchange would be limited to
issuing either an admonition letter or initiating formal proceedings
under Rule 476. This is the case whether or not the member or member
firm employee violated the rule once or many times, and regardless of
whether he or she made an inadvertent error or an intentional one.
The Exchange believes that the current regulatory approach for
dealing with Rule 36 violations is too inflexible. The Exchange
recognizes that members or member firm employees may violate the
prescriptions of Rule 36 intentionally, as well as accidentally or
inadvertently. When a violation is intentional, formal disciplinary
measures in accordance with Rule 476 may be warranted. However, while
an admonition letter might be appropriate for an isolated accidental or
inadvertent violation, in other cases an admonition letter would be
inadequate even though a formal proceeding may not be warranted. The
Exchange believes that the addition of Rule 36 to its Minor Rule
Violation Plan under Rule 476A will provide a more flexible and
appropriate enforcement tool that preserves the Exchange's discretion
to seek formal discipline under appropriate circumstances.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with, and furthers the objectives of, Section 6(b)(5) of the Act,\11\
in that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest. The proposed rule change also furthers the objectives
of Section 6(b)(6) of the Act,\12\ in that it provides for appropriate
discipline for violations of Exchange rules and regulations.
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\11\ 15 U.S.C. 78f(b)(5).
\12\ 15 U.S.C. 78f(b)(6).
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The Exchange believes that the proposed rule change will provide
the Exchange with greater regulatory flexibility to enforce the
prescriptions of NYSE Rule 36 in a more informal manner while also
preserving the Exchange's discretion to seek formal discipline for more
serious transgressions as warranted.
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 foregoing proposed rule change: (i) Does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) by its terms, does not become operative for 30 days from the
date on which it was filed, or such shorter time as the Commission may
designate, if consistent with the protection of investors and the
public interest, it has become effective pursuant to Section
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the self-regulatory organization to submit to 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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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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 e-mail to [email protected]. Please include
File Number SR-NYSE-2010-37 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-2010-37. This file
number should be included on the subject line if e-mail 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
a.m. and 3 p.m. Copies of such 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
[[Page 31499]]
available publicly. All submissions should refer to File Number SR-
NYSE-2010-37 and should be submitted on or before June 24, 2010.
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) and 200.30-3(a)(44).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13338 Filed 6-2-10; 8:45 am]
BILLING CODE 8010-01-P