[Federal Register Volume 67, Number 174 (Monday, September 9, 2002)]
[Notices]
[Pages 57264-57265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22771]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46443; File No. SR-NYSE-2002-35]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Business 
Continuity and Contingency Planning

August 30, 2002.
    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 August 16, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 as amended from interested persons.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that the National Association of 
Securities Dealers, Inc. (``NASD'') has proposed a substantially 
similar business continuity plan rule (File No. SR-NASD-2002-108). 
The Commission intends to notice concurrently both the NASD proposal 
and the NYSE proposal. The Commission further notes that, while the 
NYSE rule would potentially apply to dual NASD and NYSE members, the 
similarity of the NASD and NYSE proposed rules should prevent 
conflicting compliance obligations on the part of such dual members.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes to adopt new NYSE Rule 446, Business Continuity 
and Contingency. The proposed rule would require members and member 
organizations to develop, maintain, review, and update business 
continuity and contingency plans that establish procedures to be 
followed in the event of an emergency or significant business 
disruption. The text of the proposed rule change is below. Proposed new 
language is in italics.

Business Continuity and Contingency Plans

New Rule 446

    (a) Members and member organizations must develop and maintain a 
written business continuity and contingency plan establishing 
procedures to be followed in the event of an emergency or significant 
business disruption. Members and member organizations must make such 
plan available to the Exchange upon request.
    (b) Members and member organizations must conduct a yearly review 
of their business continuity and contingency plan to determine whether 
any modifications are necessary in light of changes to the member's or 
member organization's operations, structure, business or location.
    (c) The requirements of a business continuity and contingency plan 
shall be tailored to the size and needs of a member or member 
organization. Each plan, however, must, at a minimum, address:
    (1) Books and records back-up and recovery (hard copy and 
electronic);
    (2) identification of all mission critical systems and back-up for 
such systems;
    (3) financial and operational risk assessments;
    (4) alternate communications between customers and the firm;
    (5) alternate communications between the firm and its employees;
    (6) alternate physical location of employees;
    (7) business constituent, bank and counter-party impact;
    (8) regulatory reporting; and
    (9) communications with regulators.
    (d) The term ``mission critical system,'' for purposes of this 
Rule, means any system that is necessary, depending on the nature of a 
member's or member organization's business, to ensure prompt and 
accurate processing of securities transactions, including order taking, 
entry, execution, comparison, allocation, clearance and settlement of 
securities transactions, the maintenance of customer accounts, access 
to customer accounts and the delivery of funds and securities.
    (e) The term ``financial and operational risk assessments,'' for 
purposes of this Rule, means a set of written procedures that allow 
members and member organizations to identify changes in their 
operational, financial, and credit risk exposure.
    (f) Members and member organizations must designate a senior 
officer, as defined in Rule 351(e), to approve the Plan, who shall also 
be responsible for the required annual review, as well as an Emergency 
Contact Person(s). Such individuals must be identified to the Exchange 
(by name, title, mailing address, e-mail address, telephone number, and 
facsimile number). Prompt notification must be given to the Exchange of 
any change in such designations.

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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The events of September 11, 2001, and its disruptive impact on the 
manner in which the securities industry operated has re-emphasized the 
need for greater contingency planning for business continuity.
    The Exchange proposes new Rule 446 as set forth above, which will 
require members and member organizations to develop, maintain, review, 
and update business continuity and contingency plans that establish 
procedures to be followed in the event of an emergency or significant 
business disruption. Members and member organizations will be required 
to make such plans available to the Exchange upon request. Members and 
member organizations will also be required to conduct a yearly review 
of their business continuity and contingency plan to determine whether 
any modifications are necessary in light of changes to the member's or 
member organization's operations, structure, business or location.
    Plans must, at a minimum, address: books and records back-up and 
recovery (hard copy and electronic); identification of all mission 
critical systems and back-up for such systems; financial and 
operational risk assessments; alternate communications between 
customers and the firm; alternate communications between the firm and 
its employees; alternate physical location of employees; business 
constituent, bank and counter-

[[Page 57265]]

party impact; regulatory reporting; and communications with regulators.
    The term ``mission critical system,'' as defined in the Rule, means 
any system that is necessary, depending on the nature of a member's or 
member organization's business, to ensure prompt and accurate 
processing of securities transactions, including order taking, entry, 
execution, comparison, allocation, clearance and settlement of 
securities transactions, the maintenance of customer accounts, access 
to customer accounts and the delivery of funds and securities.
    The term ``financial and operational risk assessments,'' for 
purposes of this Rule, means a set of written procedures that allow 
members and member organizations to identify changes in their 
operational, financial, and credit risk exposure.
    The proposed rule also requires that members and member 
organizations designate and notify the Exchange of a senior officer 
designated to approve and annually review the plans and an Emergency 
Contact person(s). Members and member organizations would be required 
to make such plans available to the Exchange upon request.
    The Exchange has worked cooperatively with the NASD in the 
development of this rule and expects that the NASD will file 
substantially the same rule with the Commission.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6(b) of the Act,\4\ in general, and 
section 6(b)(5) of the Act,\5\ in particular, which requires, among 
other things, that the rules of an exchange be designed, among other 
things, to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-NYSE-2002-35 and 
should be submitted by September 30, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22771 Filed 9-6-02; 8:45 am]
BILLING CODE 8010-01-P