[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