[Federal Register Volume 78, Number 43 (Tuesday, March 5, 2013)]
[Notices]
[Pages 14378-14380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05019]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68996; File No. SR-NYSE-2013-13]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relocating Certain Futures and Options Trading Conducted on ICE Futures 
U.S. From Rented Space at the New York Mercantile Exchange to the 
Exchange's Facilities at 20 Broad Street and Amending NYSE Rule 6A, 
Which Defines the Terms ``Trading Floor'' and ``NYSE Amex Options 
Trading Floor''

February 27, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'')\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that February 13, 2013, 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 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\ 15 U.S.C. 78a.
    \3\ 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 relocate certain futures and options 
trading conducted on ICE Futures U.S. (``IFUS'') \4\ from rented space 
at the New York Mercantile Exchange (``NYMEX'') to the Exchange's 
facilities at 20 Broad Street and amend NYSE Rule 6A, which defines the 
terms ``Trading Floor'' and ``NYSE Amex Options Trading Floor'' 
(together, the ``Proposal''). 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.
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    \4\ IFUS is a Designated Contract Market pursuant to the 
Commodity Exchange Act, as amended, and is regulated by the U.S. 
Commodity Futures Trading Commission (``CFTC''). IFUS was formerly 
known as the New York Board of Trade (``NYBOT'').
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make trading space at 20 Broad Street, 
commonly known as the ``Blue Room'', available to IFUS to accommodate 
electronic trading of certain futures and options contracts currently 
conducted on IFUS in space rented from the NYMEX. The arrangement would 
be pursuant to an arms-length commercial lease. IFUS's lease on its 
NYMEX trading space expires in June 2013. The Exchange notes that on 
December 20, 2012, Intercontinental Exchange, Inc. (``ICE'') entered 
into a merger agreement to acquire the Exchange's parent, NYSE Euronext 
(the ``Transaction''). IFUS, a wholly-owned subsidiary of ICE, 
requested assistance in relocating its remaining trading floor 
following announcement of the Transaction.
    IFUS trades its products exclusively on an electronic trading 
platform and no longer utilizes open outcry trading. Approximately 40 
traders (the ``IFUS Traders'') \5\ currently utilize the IFUS trading 
floor (along with a small group of clerical staff they employ) as a 
place from which they may accept customer orders and execute electronic 
transactions in IFUS contracts. The IFUS Traders that are proposed to 
relocate to the Blue Room can execute transactions electronically in 
all products listed for trading by the IFUS, including futures and 
options on futures on cotton, frozen concentrated orange juice, coffee, 
sugar, cocoa, energy, foreign currencies, and certain Russell 
Indices.\6\ However, most of the IFUS Traders predominantly execute 
transactions in options on cotton futures. The IFUS Traders, 
collectively, transact less than 5% of average daily IFUS volume 
excluding IFUS energy contracts (which account for approximately 83% of 
IFUS's daily volume) \7\ and a fraction of 1% of the total average 
daily IFUS volume (which includes the energy contracts transacted on 
IFUS). The IFUS Traders do not engage in trading in equity securities 
or securities options through IFUS.
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    \5\ None of the IFUS Traders are members of the Exchange, NYSE 
MKT or NYSE Amex Options.
    \6\ These include the Russell 2000, Russell 1000, and Russell 
Value and Growth, all of which qualify as broad-based indices. The 
Exchange understands, however, that the IFUS Traders primarily trade 
Russell 2000 mini-contracts.
    \7\ In other words, the IFUS Traders transact less than 5% of 
the 17% of IFUS's average daily volume that is not related to energy 
contracts.
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    Further, six of the forty IFUS Traders engage in proprietary-only 
trading while the rest execute customer orders \8\ in addition to 
proprietary trading. IFUS customer orders may be accepted by telephone 
or electronically; however, the IFUS Traders cannot verbally discuss 
orders or transactions with each other while on the trading floor. 
Communications between traders on the floor must be made via instant 
message, email, or recorded telephone line. Order tickets are prepared 
and time-stamped for each customer order, and IFUS, as it does today, 
would have a compliance officer from IFUS Market Regulation in the Blue 
Room performing on-site surveillance on a regular basis.
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    \8\ Pursuant to the definition of the term ``floor broker'' in 
Section 1a(22) of the Commodity Exchange Act, the Floor Traders can 
only execute customer orders from a trading floor that is operated 
and supervised by a contract market such as IFUS.
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    The IFUS Traders will be sitting together in dedicated space in the 
Blue Room. A small group of NYSE Floor brokers, currently in the Blue 
Room, will have their booths nearby.\9\ Both the space to be assigned 
to the IFUS Traders and the NYSE Floor broker booths have privacy 
barriers consisting of eight foot walls which provide visual and sound 
insulation to reduce the likelihood that trading screens can be viewed 
or conversations overheard between firms and traders.\10\ Consequently, 
the Exchange believes that the combination of these visual and 
acoustical barriers, coupled with the IFUS limitations on verbal 
communications related to an order, substantially eliminate the risk 
that either the IFUS Traders or NYSE Floor brokers could overhear each

[[Page 14379]]

other's customer orders or other confidential trading information. 
Nonetheless, the names of the IFUS Traders will be provided to the 
Financial Industry Regulatory Authority (``FINRA'') which conducts 
surveillance of the NYSE and NYSE MKT markets to enable FINRA to more 
readily identify any potentially violative trading by the IFUS 
Traders.\11\
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    \9\ However, the Exchange expects to relocate the NYSE Floor 
brokers to an area adjacent to the Garage once certain ongoing 
renovations are complete.
    \10\ The booths are approximately 40 feet long by 10 feet wide. 
The barriers are eight feet high on both sides except for the two 
gated and badge access entry and exit points at the front and back 
of the booth, which are four feet high.
    \11\ Providing the names of the IFUS Traders to FINRA will be 
for the purpose of regulatory information sharing. Neither the 
Exchange nor FINRA will be responsible for regulating or surveilling 
the IFUS Traders' activity and the IFUS Traders will not be subject 
to the Exchange's jurisdiction. Rather, the IFUS Traders will 
continue to be regulated by IFUS as they are today.
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    In light of the fact that the IFUS Traders do not trade any of the 
products traded on NYSE, and the extremely limited overlap in related 
products traded by the IFUS Traders and on the NYSE, as well as the 
very small volume of predominantly cotton options executed by the IFUS 
Traders, it is highly unlikely that any order handled by one of them 
could impact the price of any individual security traded on the 
Exchange. In this regard, the Exchange believes that the pricing 
correlation between order flow in IFUS products and securities traded 
on NYSE is tenuous at most. Consequently, even if an NYSE Floor broker 
in the Blue Room were to overhear the terms of an order handled by an 
IFUS Trader, or vice-a-versa, the likelihood that the information could 
be used to benefit that trader's or broker's proprietary, personal or 
other customer trading is extremely unlikely. This is also true with 
respect to the Russell Index products given their broad-based nature. 
The Exchange believes that the same considerations apply with respect 
to NYSE MKT Equities, which operates on the NYSE Trading floor, and 
NYSE Amex Options, which operates on a trading floor that is adjacent 
to NYSE. Nonetheless, NYSE Floor brokers initiating trades based on 
confidential order information overheard from the IFUS Traders would be 
subject to disciplinary action for violating NYSE rules, including NYSE 
Rules 2010 and 2020, which require members and member organizations to 
observe high standards of commercial honor, to use just and equitable 
principles of trade, and prohibit the use of manipulative, deceptive or 
fraudulent devices.
    Further, IFUS will issue a regulatory notice specifying the method 
IFUS Traders must use to access the Blue Room and prohibiting the IFUS 
Traders from entering the Main Room, where most of the NYSE and NYSE 
MKT Equities Floor brokers and all NYSE and NYSE MKT Equities 
Designated Market Makers (``DMMs'') are located as well as the NYSE 
Amex Options trading floor. Specifically, the IFUS Traders will be 
required to take the 18 Broad Street entrance elevator and enter the 
Trading Floor using the turnstile nearest the Blue Room. The Exchange 
will periodically monitor badge swipes at that turnstile. Moreover, the 
Exchange will install a security door requiring a badge swipe to enter 
and exit the physical area to be occupied by the IFUS Traders. The IFUS 
Traders will also wear distinctive badges and trading jackets. NYSE 
Floor Governors and FINRA's On Floor Surveillance Unit will be 
instructed to identify and promptly report violations of the 
restriction on entering the Main Room to the IFUS Market Supervision 
officer. IFUS Traders entering the Main Room in violation of this 
restriction could face disciplinary action pursuant to IFUS Rule 4.04, 
which prohibits conduct or practices inconsistent with just and 
equitable principles of trade or conduct detrimental to the best 
interests of IFUS. The Exchange believes that these restrictions are 
appropriate to prevent the IFUS Traders from having potential access to 
any nonpublic information that might be available at the DMM booths.
    Based on the limited trading conducted by the IFUS Traders, the 
extremely limited overlap in products traded and the controls that will 
be put in place, the Exchange does not believe that the proposed 
relocation of the IFUS Traders to the Blue Room raises any regulatory 
concerns.
    The Exchange also proposes to amend NYSE Rule 6A, which defines the 
term ``Trading Floor'' to update the definition. NYSE Rule 6A provides 
that the term ``Trading Floor'' means the restricted-access physical 
areas designated by the Exchange for the trading of securities, 
commonly known as the ``Main Room'' and the ``Garage.'' NYSE Rule 6A 
further provides that 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,'' which, for the purposes 
of the Exchange's Rules, are referred to as the ``NYSE Amex Options 
Trading Floor.''
    The Exchange proposes to amend NYSE Rule 6A to add ``Blue Room'' to 
the definition of ``Trading Floor'' and remove that term from the 
definition of ``NYSE Amex Options Trading Floor''.
    The Exchange notes that the proposed rule change would not have an 
impact on the Exchange's trading rules or the IFUS rules, nor would it 
have an impact on the Exchange's or IFUS' authority to bring a 
disciplinary action for violation of those rules.
2. Statutory Basis
    The Exchange believes that the Proposal is consistent with the 
provisions of Section 6 of the Act,\12\ in general, and Section 6(b)(5) 
of the Act,\13\ 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. The Exchange believes that the 
Proposal is designed to remove impediments to and perfect the mechanism 
of a free and open market and a national market system. The Exchange 
believes that the proposed rule change will permit the Exchange to 
allow IFUS Traders to utilize space on the trading floor within the 
existing regulatory framework at the Exchange, to efficiently and 
effectively conduct business in their respective area consistent with 
maintaining necessary distinctions between the two organizations. 
Moreover, the proposed rule changes will impose restrictions designed 
to prevent inappropriate information sharing by and between members and 
member firm employees on the Trading Floor of the Exchange and the IFUS 
Traders in the proposed IFUS Trading area. The Exchange believes that 
updating the references in the Exchange rules to reflect the correct 
use of the Exchange Trading Floor may help eliminate potential 
confusion among investors and other market participants on the Exchange 
who may not be aware of which portion of the trading space will be used 
as the Trading Floor.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5) [sic].
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the Proposal will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal is designed to 
promote competition by providing the Exchange the additional 
flexibility to maximize the use of its trading floor space.

[[Page 14380]]

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6)\16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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    At any time within 60 days of the filing of such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2013-13 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-2013-13. 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 Section, 100 F Street 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office and 
on its Internet Web site at www.nyse.com. 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-NYSE-2013-13 and should be submitted on 
or before March 26, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05019 Filed 3-4-13; 8:45 am]
BILLING CODE 8011-01-P