[Federal Register Volume 82, Number 67 (Monday, April 10, 2017)]
[Notices]
[Pages 17306-17311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07048]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80374; File No. SR-NYSE-2017-07]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending Rule 36 To Permit 
Exchange Floor Brokers To Use Non-Exchange Provided Telephones on the 
Floor

April 4, 2017.
    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, on March 31, 2017, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange

[[Page 17307]]

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 amend Rule 36 to permit Exchange Floor 
brokers to use non-Exchange provided telephones on the Floor of the 
Exchange and make related changes modeled on rules of the Exchange's 
affiliates NYSE MKT LLC and NYSE Arca, Inc., governing telephone use on 
those markets' options trading floors. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 36 (Communication Between 
Exchange and Members' Offices) to permit Exchange Floor brokers to use 
non-Exchange provided telephones on the Floor of the Exchange (the 
``Floor'') \4\ and make related changes modeled on rules of the 
Exchange's affiliates, NYSE MKT LLC (``NYSE MKT'') and NYSE Arca, Inc. 
(``NYSE Arca''), governing telephone use on those markets' options 
trading floors.
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    \4\ Rule 6 defines the Floor as the trading Floor of the 
Exchange and the premises immediately adjacent thereto, such as the 
various entrances and lobbies of the 11 Wall Street, 18 New Street, 
8 Broad Street, 12 Broad Street and 18 Broad Street Buildings, and 
also means the telephone facilities available in these locations.
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Background

Overview of Rule 36 Requirements

    Rule 36 governs the establishment of telephone or electronic 
communications between the Floor and any other location, which requires 
Exchange approval. Supplementary Material .20, .21 and .23 to Rule 36 
outline the conditions under which Floor brokers are permitted to use 
Exchange authorized and provided portable telephones with the approval 
of the Exchange. These provisions of Rule 36 were originally 
implemented as a six-month pilot in 2003,\5\ which pilots were extended 
and then made permanent in 2008.\6\
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    \5\ See Securities Exchange Act Release No. 47671 (April 11, 
2003), 68 FR 19048 (April 17, 2003) (SR-NYSE-2002-11); Securities 
Exchange Act Release No. 47992 (June 5, 2003), 68 FR 35047 (June 11, 
2003) (SR-NYSE-2003-19).
    \6\ See Securities Exchange Act Release No. 58068 (June 30, 
2008), 73 FR 39363 (July 9, 2008) (SR-NYSE-2008-20) (``Release No. 
58068'').
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    Pursuant to Rule 36.20(a), with Exchange approval, Floor brokers 
may maintain a telephone line or use Exchange authorized and provided 
portable phones, which permit a non-member off the Floor to communicate 
with a member or member organization on the Floor. Subject to the 
exception contained in Rule 36.23, discussed below, Rule 36.20(a) 
expressly prohibits the use of a portable telephone on the Floor other 
than one authorized and issued by the Exchange.
    The use of Exchange authorized and issued portable phones is 
governed by Rule 36.21, which provides that when using an Exchange 
authorized and provided portable phone, a Floor broker:
    (i) May engage in direct voice communications from the point of 
sale on the Floor to an off-Floor location;
    (ii) may provide status and oral execution reports as to orders 
previously received, as well as ``market look'' observations as 
historically have been routinely transmitted from a broker's booth 
location;
    (iii) must comply with Exchange Rule 123(e);
    (iv) must comply with all other rules, policies, and procedures of 
both the Exchange and the federal securities law, including the record 
retention requirements, as set forth in Exchange Rule 440 and SEC Rules 
17a-3 and 17a-4; \7\ and
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    \7\ See 17 CFR 240.17a-3; 17 CFR 240.17a-4.
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    (v) may not use call-forwarding or conference calling. Exchange 
authorized and provided portable phones used by Floor brokers shall not 
have these capabilities.
    Rule 36.21(b) further provides that Floor brokers and their member 
organizations must implement procedures designed to deter anyone 
calling their portable phones from using caller ID block or other means 
to conceal the phone number from which a call is being made. Members 
and member organizations are required to make and retain records 
demonstrating compliance with such procedures.
    Rule 36.23 provides that, notwithstanding any other provision of 
Rule 36, members and employees of member organizations may use personal 
portable communications devices outside the Trading Floor \8\ 
consistent with Exchange Rules and the federal securities laws and the 
rules thereunder, and are prohibited from using personal portable or 
wireless communications devices while on the NYSE Amex Options Trading 
Floor.\9\ The Rule further provides that those members and employees of 
member organizations that are also registered to trade options on NYSE 
Amex are permitted to use personal portable or wireless communication 
devices while on the NYSE Amex Options Trading Floor \10\ in accordance 
with applicable NYSE Amex Options rules and regulations.
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    \8\ Rule 6A defines the Trading Floor as the restricted-access 
physical areas designated by the Exchange for the trading of 
securities, commonly known as the Main Room and the Buttonwood Room 
but does not include the areas in the Buttonwood Room designated by 
the Exchange where NYSE Amex-listed options are traded, which for 
the purposes of the Exchange's Rules is referred to as the ``NYSE 
Amex Options Trading Floor,'' or the physical area within fully 
enclosed telephone booths located in 18 Broad Street at the 
Southeast wall of the Trading Floor.
    \9\ See Rule 6A(b)(i) & notes 10-11, infra.
    \10\ Rule 6A(b) defines ``NYSE Amex Options Trading Floor'' as 
the areas in the Buttonwood Room designated by the Exchange where 
NYSE Amex-listed options are traded. See note 8, supra.
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Rules Governing Telephones on the NYSE MKT and NYSE Arca Options 
Trading Floors

    The Exchange's affiliates, NYSE MKT and NYSE Arca, operate physical 
options trading floors in New York and San Francisco, respectively.\11\ 
NYSE MKT Rule 902NY (Admission and Conduct on the Options Trading 
Floor), governing phone use on the NYSE Amex Options Trading Floor, was 
adopted in 2009 and modeled on NYSE Arca Rule 6.2(h) (Admission to and 
Conduct on the Options Trading Floor).\12\ Both exchanges allow Floor-
based permit holders and their employees to use personal phones on

[[Page 17308]]

the options trading floors subject to the same types of restrictions 
proposed for the Exchange. Neither NYSE MKT nor NYSE Arca provides 
exchange-issued and approved telephones for use on the options trading 
floors.
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    \11\ NYSE MKT operates the NYSE Amex Options Trading Floor in 
New York, while NYSE Arca Options operates an options trading floor 
in San Francisco.
    \12\ See Securities Exchange Act Release No. 59939 (May 19, 
2009), 74 FR 25779 (May 29, 2009) (SR-NYSEAmex-2009-17).
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    Specifically, NYSE MKT Rule 902NY(i)(1) and NYSE Arca Rule 
6.2(h)(1) require permit holders to register, prior to use, any new 
telephones to be used on the options trading floor by sending a 
registered email to the Operations Department, which includes the 
number of the telephone being registered.\13\ Similarly, both rules 
require trading permit holder representatives to attest at the time of 
registration that they are aware of and understand the rules governing 
the use of telephones on the options trading floor. NYSE MKT Rule 
902NY(i)(1) and NYSE Arca Rule 6.2(h)(1) provide that no trading permit 
holder or employee thereof may employ any alternative communication 
device (other than telephones as described herein) on the trading floor 
without prior approval of the respective exchange.\14\
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    \13\ On the NYSE Amex Options market, a permit holder is known 
as an ``Amex Trading Permit Holder'' or ``ATP Holder,'' which is 
defined in NYSE MKT Rule 900.2NY(5) as a natural person, sole 
proprietorship, partnership, corporation, limited liability company 
or other organization, in good standing, that has been issued an 
ATP. See also Rule 900.2NY(4) (defining ``ATP'' as a permit issued 
by NYSE MKT for effecting securities transactions on the Exchange's 
Trading Facilities, defined in Rule 900.2NY(81) as, among places, 
NYSE MKT's facilities for the trading of options 11 Wall Street, New 
York, NY). An ATP Holder must be registered as a broker or dealer. 
Similarly, on the NYSE Arca options market, permit holders are OTP 
Holders or OTP Firms, which are defined in NYSE Arca Rules 1.1(q) 
and (r), respectively.
    \14\ The Exchange does not propose to include the requirements 
of NYSE MKT Rule 902NY(i)(2) (Functionality) and NYSE Arca Rule 
6.2(h)(2) (Functionality) or NYSE MKT Rule 902NY(i)(3) (Requirements 
and Conditions) and NYSE Arca Rule 6.2(h)(3) (Requirements and 
Conditions) in its Rule 36.
    NYSE MKT Rule 902NY(i)(2) and NYSE Arca Rule 6.2(h)(2) prohibit 
maintenance of an open line of continuous communication whereby a 
person not located in the trading crowd may continuously monitor the 
activities in the trading crowd, and covers intercoms, walkie-
talkies and any similar devices. Similarly, NYSE MKT Rule 
902NY(i)(3)(A) and NYSE Arca Rule 6.2(h)(3)(A) provide that only 
quotations that have been publicly disseminated may be provided over 
telephones in trading areas. In today's largely automated trading 
environment on the Exchange, where pricing decisions have moved away 
from market participants on the Trading Floor and there is greater 
availability to all market participants of real-time trade and quote 
information, importing these requirements into Rule 36 would serve 
no purpose. The traditional trading ``crowd'' at the DMM post has 
virtually disappeared, and along with it much of the informational 
imbalance that existed prior to the implementation of Regulation 
NMS. The Exchange also believes that these requirements would be 
incompatible with current Rule 36, which explicitly permits Floor 
brokers to engage in direct voice communication from the point of 
sale on the Floor to an off-Floor location and, more importantly, 
provide status and oral execution reports as to orders previously 
received, as well as ``market look'' observations as historically 
have been routinely transmitted from a broker's booth location.
    Further, NYSE MKT Rule 902NY(i)(3)(B) and NYSE Arca Rule 
6.2(h)(3)(B) require telephone orders to be entered directly to the 
trading zone (NYSE MKT) or trading post (NYSE Arca) only during 
outgoing telephone calls that are initiated from the trading crowd 
(NYSE MKT) or option posts (NYSE Arca), and that all such orders be 
immediately recorded in the Electronic Order Capture System (EOC). 
For the same reasons noted above, the Exchange believes that 
importing these requirements into Rule 36 would serve no purpose. 
Moreover, comparable Exchange system entry requirements to those in 
NYSE MKT Rule 902NY(i)(3)(B) and NYSE Arca Rule 6.2(h)(3)(B) are set 
forth in Rule 123(e).
    NYSE MKT Rule 902NY(i)(3)(C) and NYSE Arca Rule 6.2(h)(3)(C) 
provide that the relevant exchange may require the taping of any 
telephone line into the trading zone (NYSE MKT) or trading post 
(NYSE Arca) or may require permit holders to provide for the tape 
recording of a dedicated line in the trading zone or trading post at 
any time. NYSE MKT Rule 902NY(i)(3)(C) and NYSE Arca Rule 
6.2(h)(3)(C), however, relates to the taping of land lines, not 
cellular or wireless phones. Accordingly, the Exchange does not 
propose to include this requirement in Rule 36.
    Finally, the Exchange does not propose to include the 
requirements found in NYSE MKT Rule 902NY(i)(4)(B) and (C) and NYSE 
Arca Rule 6.2(h)(4)(B) and (C) in its Rule 36. NYSE MKT Rule 
902NY(i)(4)(B) and NYSE Arca Rule 6.2(h)(4)(B) provide that Floor 
brokers and permit holders may receive orders over their phones 
subject to the provisions of NYSE MKT Rule 902NY(i)(3)(B) and NYSE 
Arca Rule 6.2(h)(3)(B), respectively, and that telephonic orders 
entered from off the Trading Floor must be placed with a person 
located in an ATP Holder booth. Similarly, NYSE MKT Rule 
902NY(i)(4)(C) and NYSE Arca Rule 6.2(h)(4)(C) provide that Floor 
brokers receiving orders from a permit holder representative on the 
Trading Floor may immediately represent that order in the trading 
crowd provided that such orders are immediately recorded in EOC. As 
noted, current Rule 36 already contemplates that Floor brokers can 
accept orders via telephone consistent with NYSE rules, including 
the requirement in NYSE Rule 123(e) to first record order details in 
an electronic system on the Floor before representing or executing 
the order.
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    Further, NYSE MKT Rule 902NY(i)(4)(A) and NYSE Arca Rule 
6.2(h)(4)(A) provide that permit holders and employees of permit 
holders may use their own cellular and wireless phones to place calls 
to any person at any location (whether on or off the trading floor). 
Neither exchange prohibits or restricts the use of conference call or 
call forwarding features by permit holders and their employees when 
using personal cellular and wireless phones on the trading floor.
    NYSE MKT Rule 902NY(i)(5) and NYSE Arca Rule 6.2(h)(5) also provide 
that permit holders must maintain records of the use of telephones and 
all other approved alternative communication devices, including logs of 
calls placed, for a period of not less than three years, the first two 
years in an accessible place. Both exchanges reserve the right to 
inspect such records pursuant to NYSE MKT Rule 31 and NYSE Arca Rule 
10.2, respectively.\15\
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    \15\ See NYSE MKT Rule 902NY(i)(5); NYSE Arca Rule 6.2(h)(5).
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    NYSE MKT Rule 902NY(i)(6) and NYSE Arca Rule 6.2(h)(6) provide that 
each exchange may deny, limit or revoke the registration of any 
telephone used on the trading floor whenever it determines that use of 
such device is inconsistent with the public interest, the protection of 
investors, or just and equitable principles of trade, or such device 
has been or is being used to facilitate any violation of the Act, as 
amended, or rules thereunder, or the rules of the respective exchange.
    Finally, NYSE MKT Rule 902NY(i)(7) and NYSE Arca Rule 6.2(h)(7) 
provide that the respective exchanges assume no liability to permit 
holders due to conflicts between phones in use on the options trading 
floor or due to electronic interference problems resulting from the use 
of telephones on the trading floor.
Proposed Rule Change
    The Exchange proposes to amend Rule 36 to permit Floor brokers to 
use any cellular or wireless telephone properly registered with the 
Exchange on the Floor, thereby eliminating the requirement that Floor 
brokers only use Exchange-approved and provided portable phones. The 
proposed changes are based on the rules of NYSE MKT and NYSE Arca 
governing use of cellular phones on the options trading floors of those 
exchanges and include proposed safeguards surrounding the use of non-
Exchange issued devices modeled on the rules of those Exchange 
affiliates.
    To effect these changes, the Exchange proposes the following 
amendments to Rule 36.20(a):
     First, the requirement for prior Exchange approval to 
utilize cellular or wireless telephones on the Floor would remain 
unchanged and would be strengthened by the Exchange's proposal to add 
the phrase ``and subject to the registration requirements set forth in 
Supplementary Material .21'' in the first sentence of subparagraph (a).
     Second, the Exchange proposes to delete the phrase ``an 
Exchange authorized and provided portable'' before the word 
``telephone'' in the first sentence of subparagraph (a) and replace it 
with the term ``a cellular or wireless.'' \16\ The Exchange also 
proposes a non-substantive grammatical

[[Page 17309]]

change to replace the word ``which'' with ``that'' before the word 
``permits.''
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    \16\ NYSE MKT Rule 902NY and NYSE Arca Rule 6.2(h) utilize the 
phrase ``cellular and cordless.'' The Exchange proposes to instead 
use the more modern synonym, ``wireless.''
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     Third, the Exchange would change the reference to 
``portable'' phones to ``cellular or wireless'' in the second sentence 
of subparagraph (a). The Exchange also proposes non-substantive changes 
at the end of the second sentence to replace a capital ``S'' with a 
lower case ``s'' in the word ``See'' and to delete the word ``for'' 
following the word ``See'' before ``e.g.,''
     Finally, in the last sentence of subparagraph (a), the 
Exchange would replace the word ``portable'' with ``cellular or 
wireless.'' The Exchange would also replace the phrase ``authorized and 
issued by'' with ``registered with'' before ``the Exchange'' and add 
the clause ``as provided in .21 of this Rule'' after ``the Exchange'' 
and before ``is prohibited.''
    To continue to enable the Exchange to regulate and control 
equipment and communications on the Floor, the Exchange proposes the 
following amendments to Rules 36.21 and 36.23, which are modeled on the 
rules of the Exchange's affiliates. The proposed rule changes would set 
forth the conditions under which Floor brokers would be permitted to 
use their own cellular or wireless telephones on the Floor.
     First, the Exchange proposes to replace ``an Exchange 
authorized and provided portable'' in the heading to Rule 36.21 with 
``a cellular or wireless'' before ``phone.''
     Second, the Exchange proposes a new subparagraph (a) to 
Rule 36.21 requiring Floor brokers to register, prior to use, any 
cellular or wireless telephone proposed to be used on the Floor by 
submitting a request in writing to the Exchange in a format acceptable 
to the Exchange.\17\ Proposed Rule 36.21(a) would further require that 
Floor brokers attest at the time of registration that they are aware of 
and understand the rules governing the use of telephones on the 
Floor.\18\ Finally, separate from the registration and use of 
telephones, under the proposed Rule, no Floor broker may employ any 
alternative communication device on the Floor (other than telephones as 
described in the proposed rule) without prior Exchange approval. The 
Exchange would thus retain the authority to review and approve any 
alternative communication device prior to use. The requirements in 
proposed Rule 36.21(a) are based on the requirements specified in NYSE 
MKT Rule 902NY(i)(1) and NYSE Arca Rule 6.2(h)(1), described above. The 
language of proposed Rule 36.21(a) is different than the NYSE MKT and 
NYSE Arca rules on which it is based because of the inclusion of 
conforming references to ``Floor brokers,'' ``cellular or wireless 
telephone,'' one reference to ``devices'' rather than ``telephones,'' 
and the use of ``Floor'' rather than ``Trading Floor.'' The proposed 
Rule also requires Floor brokers and not Floor broker 
``representatives'' to attest.\19\
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    \17\ The Exchange does not propose to specify in the Rule that 
an email or other writing be sent to a specific Exchange department. 
Rather, the Exchange will specify where the email should be sent in 
regulatory guidance that the Exchange would issue following approval 
of this rule filing. The guidance would also specify that the 
registration email identify the telephone number of the phone being 
registered.
    \18\ A proposed attestation is attached as Exhibit 5A. The 
Exchange previously developed an acknowledgement for Floor brokers 
to sign providing specified terms of usage in connection with the 
use of Exchange authorized and issued portable phones that was filed 
with the Commission. See Release No. 58068, 73 FR at 39363, n. 10. 
The proposed attestation requirements would supersede and replace 
the previously filed acknowledgment form. Similarly, the Exchange 
filed regulatory guidance with the Commission regarding the use of 
portable phones on the Floor. See id.; Member Education Bulletins 
2005-20 (November 28, 2005) and 2005-23 (December 2, 2005). This 
filing would supersede that guidance, and the Exchange would issue 
appropriate regulatory guidance prior to the effective date of this 
rule filing.
    \19\ See NYSE MKT Rule 902NY(i)(1) and NYSE Arca Rule 6.2(h)(1) 
(imposing the attestation requirement on ``ATP Holder 
representatives'' and ``OTP Holder and OTP Firm representatives'').
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     Third, current subparagraph (a) of Rule 36.21 would become 
new subparagraph (b) and the Exchange would delete ``an Exchange 
authorized and provided portable'' before ``phone,'' replace it with 
``a cellular or wireless,'' and add the phrase ``on the Floor'' after 
``phone.'' The Exchange would also retain current subparts (i)-(iv) and 
delete current subpart (v), which prohibits the use of call-forwarding 
or conference calling. These requirements were added to Rule 36 in 
2006.\20\ As noted above, the rules of NYSE MKT and NYSE Arca, both of 
which permit non-exchange issued telephones to be used on the options 
trading floors, do not contain similar prohibitions on call-forwarding 
or conference calling. The Exchange believes that the current 
prohibitions on use of call-forwarding or conference calling are no 
longer necessary and that it would be consistent with the Act to 
eliminate these prohibitions. First, the prohibition on forwarding 
calls prevented Floor brokers from forwarding calls placed to an 
Exchange-issued device to a non-Exchange issued device. Once Floor 
brokers are able to use non-Exchange issued telephones, the rationale 
for the prohibition would no longer apply. Moreover, the Exchange 
believes that, if this feature were used to forward calls from one 
registered cell phone to another registered cell phone on the Floor, 
both phones would independently be subject to the obligations of 
proposed Rule 36 and therefore subject to Exchange jurisdiction. To the 
extent such calls are forwarded to a telephone that is not located on 
the Floor, Rule 36 would not apply to a telephone that was not 
physically present on the Floor. With respect to the call conferencing 
feature, current Rule 36.21 does not restrict with whom a Floor broker 
may communicate when using a portable phone at the point of sale. 
Moreover, if this feature were used, any records of such calls would be 
captured pursuant to paragraph (d) of Rule 36.21 below and would be 
available to the Exchange upon request.
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    \20\ See Securities Exchange Act Release No. 53213 (Feb. 2, 
2006), 71 FR 7103 (Feb. 10, 2006) (SR-NYSE-2005-80).
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     Fourth, current subparagraph (b) would become proposed 
subparagraph (c).\21\ The Exchange would also replace the word 
``portable'' in proposed subparagraph (c) with ``cellular or 
wireless.''
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    \21\ Rule 36.21(b) provides that Floor brokers and their member 
organizations must implement procedures designed to deter anyone 
calling their portable phone from using caller ID block or other 
means to conceal the phone number from which a call is being made. 
Members and member organizations are required to make and retain 
records demonstrating compliance with such procedures.
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     Fifth, the Exchange proposes a new subparagraph (d) of 
Rule 36.21 providing that Floor brokers must maintain records of the 
use of telephones and all other approved communication devices, 
including logs of calls placed, for a period of not less than three 
years, the first two years in an accessible place, and that the 
Exchange reserves the right to periodically inspect such records. 
Proposed new subparagraph (d) is based on NYSE MKT Rule 902NY(i)(5) and 
NYSE Arca Rule 6.2(h)(5). Proposed Rule 36.21(d) is different than the 
NYSE MKT and NYSE Arca rules on which it is based because of the 
inclusion of conforming references to ``Floor brokers.'' The last 
sentence of the proposed Rule also provides that the Exchange reserves 
the right to periodically inspect records pursuant to Rule 8210, which 
governs provision of information and testimony and inspection and 
copying of books, and is analogous to NYSE MKT Rule 31 and NYSE Arca 
Rule 10.2.
     Sixth, the Exchange proposes a new subparagraph (e) that 
provides the

[[Page 17310]]

Exchange with the ability to deny, limit or revoke registration of any 
device used on the Floor whenever it determines, in accordance with the 
procedures set forth in Rule 9558,\22\ that use of such a device is 
inconsistent with the public interest, the protection of investors, or 
just and equitable principles of trade, or such device has been or is 
being used to facilitate any violation of the Act, as amended, the 
rules thereunder, or the Exchange's rules. Proposed Rule 36.21(e) is 
based on NYSE MKT Rule 902NY(i)(6) and NYSE Arca Rule 6.2(h)(6). 
Proposed Rule 36.21(e) is different than the NYSE MKT and NYSE Arca 
rules on which it is based because of the inclusion of conforming 
references to ``device'' rather than ``telephone'' and ``Floor'' rather 
than ``Trading Floor.'' The proposed Rule also omits the reference to 
Rule 475 in NYSE MKT Rule 902NY(i)(6) and the reference to NYSE Arca 
Rule 10.14 in NYSE Arca Rule 6.2(h)(6). NYSE Rule 475 has been 
superseded by NYSE Rule 9558, which is referenced in the proposed Rule. 
Rule 9558 is also the closest Exchange analogue to NYSE Arca Rule 
10.14.
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    \22\ Rule 9558 relates to summary proceedings for actions 
authorized by Section 6(d)(3) of the Act.
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     Seventh, the Exchange would adopt a new subparagraph (f) 
providing that the Exchange assumes no liability to Floor brokers due 
to conflicts between phones in use on the Floor or due to electronic 
interference problems resulting from the use of telephones on the 
Floor. Proposed Rule 36.21(f) is based on NYSE MKT Rule 902NY(i)(7) and 
NYSE Arca Rule 6.2(h)(7) and, except for conforming references to 
``Floor brokers'' and ``Floor'' rather than ``Trading Floor,'' is 
identical to the NYSE MKT and NYSE Arca Rules.\23\
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    \23\ The Exchange notes that proposed Rule 36.21(f) is similar 
to the rules of other exchanges that seek to limit or cap liability 
for losses arising from the use of an exchange's facilities, 
systems, or equipment. See, e.g., Nasdaq Rule 4626 (Limitation of 
Liability); NYSE Arca Rules 2.8 (No Liability for Using Exchange 
Facilities) and 14.2 (Liability of Exchange); NYSE Arca Equities 
Rule 2.7 (No Liability for Using Trading Facilities) and 13.2 
(Liability of Corporation). See generally NYSE Rule 17 (Use of 
Exchange Facilities and Vendor Services) and 18 (Compensation in 
Relation to Exchange Failure).
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     Finally, the Exchange would replace three references to 
``personal portable'' with ``cellular'' in current Rule 36.23.
    The proposed changes to Rule 36, with the exception of current Rule 
36.23, would not apply to Designated Market Makers, who would continue 
to be subject to Rules 36.30 and 36.31.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\24\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\25\ 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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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that permitting Floor brokers 
to use any cellular or wireless telephone properly registered with the 
Exchange on the Floor and eliminating the requirement that Floor 
brokers only use Exchange-approved and provided portable phones are 
designed to prevent fraudulent and manipulative acts and practices and 
would be consistent with the public interest and the protection of 
investors because of the numerous safeguards surrounding the use of 
non-Exchange issued devices also proposed for inclusion in Rule 36. The 
proposed safeguards would include:
     Requiring Floor brokers to register personal communication 
devices prior to use;
     attesting at the time of registration that they are aware 
of and understand the rules governing the use of telephones on the 
Floor;
     prohibiting employment of alternative communication 
devices on the Floor without prior Exchange approval;
     requiring Floor brokers to maintain records of the use of 
telephones and all other approved alternative communication devices, 
including logs of calls placed, for a period of not less than three 
years, the first two years in an accessible place, for inspection by 
the Exchange at any time; and
     empowering the Exchange to deny, limit or revoke 
registration of any device used on the Floor whenever it determines 
that use of such a device is inconsistent with the public interest, the 
protection of investors, or just and equitable principles of trade, or 
such device.
    The Exchange believes that these proposed safeguards, modeled on 
the rules of the Exchange's affiliates, establish an appropriate 
regulatory framework for supervising and monitoring use of 
communication devices on the Exchange's trading Floor consistent with 
the objectives of Section 6(b)(5) of the Act.
    The Exchange further believes that deleting the current requirement 
in Rule 36 prohibiting the use of call-forwarding or conference calling 
would be consistent with the public interest and the protection of 
investors because, as noted above, such requirements are not currently 
in place on the NYSE MKT and NYSE Arca options trading floors. As noted 
above, the rationale for the prohibition was aimed at preventing Floor 
brokers from forwarding calls to non-Exchange issued phones and would 
be moot if Floor brokers are only using non-Exchange issued devices. If 
a call is forwarded from a registered cellular or wireless phone to 
another registered telephone (wired or not) on the Floor, the phone 
that received the calls would separately be subject to the obligations 
of proposed Rule 36 and therefore subject to Exchange jurisdiction. If 
a call is forwarded to a telephone located off of the Floor, Rule 36 
would not be implicated because the person on the phone would not be 
physically located on the Floor. In addition, the Exchange believes 
that if Floor brokers use cellular or wireless telephones that include 
call conferencing features, any such use would be captured on the 
records of use of such telephones that Floor brokers would be required 
to maintain pursuant to proposed paragraph (d) of Rule 36.21.
    The Exchange believes that including a provision in proposed Rule 
36.21 providing that the Exchange assumes no liability to Floor brokers 
due to conflicts between phones in use on the Floor or due to 
electronic interference problems resulting from the use of telephones 
on the Floor removes impediments to and perfects the mechanism of a 
free and open market by adding transparency to the Exchange's rules 
regarding use of personal telephone equipment on Exchange premises.
    The Exchange also believes that the proposed amendments to Rule 36 
support the mechanism of free and open markets by continuing to provide 
a means for increased communication by Floor brokers to and from the 
Floor.
    Finally, the Exchange believes that replacing the outdated word 
``portable'' with ``cellular or wireless'' in Rule 36.20 and .21 and 
replacing ``personal portable'' with ``cellular'' in Rule 36.23 removes 
impediments to and perfects the mechanism of a free and open market by 
removing confusion that may result from having obsolete and outdated 
references in the Exchange's rulebook. Similarly, the Exchange further 
believes that the proposal

[[Page 17311]]

removes impediments to and perfects the mechanism of a free and open 
market by ensuring that persons subject to the Exchange's jurisdiction, 
regulators, and the investing public can more easily navigate and 
understand the Exchange's rulebook. The Exchange believes that 
eliminating obsolete and outdated references would be consistent with 
the public interest and the protection of investors because investors 
will not be harmed and in fact would benefit from increased 
transparency, thereby reducing potential confusion. Removing such 
obsolete and outdated references will also further the goal of 
transparency and add clarity to the Exchange's rules.

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. The Exchange does not 
believe that the proposed rule change will impose any burden on 
competition because the proposed change relates to how Floor brokers 
are permitted to communicate on the Floor and proposes no change for 
other market participants. In addition, the Exchange does not believe 
that the proposed changes will impose any competitive burden because 
Floor brokers will operate in the same manner but with telephone 
equipment that is not Exchange-issued.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the 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. 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-2017-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2017-07. 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-2017-07, and should 
be submitted on or before May 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07048 Filed 4-7-17; 8:45 am]
 BILLING CODE 8011-01-P