Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 16019 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 ‘‘DMM unit’’ means any member organization, 

aggregation unit within a member organization, or 

division or department within an integrated 

proprietary aggregation unit of a member 

organization that (i) has been approved by NYSE 

Regulation pursuant to NYSE Rule 98(c), (ii) is 

eligible for allocations under NYSE Rule 103B as a 

DMM unit in a security listed on the Exchange, and 

(iii) has met all registration and qualification 

requirements for DMM units assigned to such unit. 

4The Exchange notes that its affiliate, NYSE 

Amex LLC, has proposed parallel changes its rules. 

See SR–NYSEAmex–2011–16. 

5 ‘‘DMM’’ means any individual qualified to act as 

a DMM on the Floor of the Exchange. 

control number. No person shall be 

subject to any penalty for failing to 

comply with a collection of information 

subject to the PRA that does not display 

a valid Office of Management and 

Budget (OMB) control number. 

Please direct your written comments 

to: Thomas Bayer, Chief Information 

Officer, Securities and Exchange 

Commission, c/o Remi Pavlik-Simon, 

6432 General Green Way, Alexandria, 

Virginia 22312 or send an e-mail to: 

PRA_Mailbox@sec.gov. 

Dated: March 16, 2011. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6656 Filed 3–21–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64088; File No. SR–NYSE– 

2011–10] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending 

NYSE Rule 36 To Permit Written 

Communications To Be Sent 

Electronically Between the Designated 

Market Maker Unit’s Post Location on 

the Floor and the DMM Unit’s Off-Floor 

Offices and to Persons Permitted To 

Provide Non-Trading Related Services 

to the DMM Under Rule 98 

March 17, 2011. 

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 March 

11, 2011, New York Stock Exchange 

LLC (the ‘‘Exchange’’ or ‘‘NYSE’’) 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 NYSE. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

NYSE Rule 36 to permit written 

communications to be sent 

electronically between the Designated 

Market Maker (‘‘DMM’’) unit’s post 

location on the Floor and the DMM 

unit’s off-Floor offices and to persons 

permitted to provide non-trading related 

services to the DMM under Rule 98. The 

text of the proposed rule change is 

available at the Exchange, the 

Commission’s Public Reference Room, 

and http://www.nyse.com. 

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 

NYSE Rule 36 to (i) expand the persons 

with whom DMM unit personnel on the 

Exchange Floor may communicate to 

include persons providing ‘‘non-trading 

related services’’ (as defined in Rule 98) 

to the DMM Unit; and (ii) to expand the 

means of permissible communication to 

include written electronic 

communications between the DMM 

unit’s 3 post location on the Floor and 

specified off-Floor personnel.4 The 

Exchange believes that expanding the 

persons with whom and the means by 

which DMMs 5 on the Floor of the 

Exchange may communicate will both 

allow DMMs to operate more efficiently 

and enhance the audit trail associated 

with DMM communications, thus 

strengthening the regulatory program 

associated with reviewing such 

communications. 

Current NYSE Rule 36 

NYSE Rule 36 broadly provides that 

no member or member organization 

shall establish or maintain any 

telephonic or electronic communication 

between the Floor and any other 

location without Exchange approval. 

NYSE Rule 36.30 provides a limited 

exception for DMM units. Specifically, 

the Rule provides that: 

[w]ith the approval 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 or the unit’s clearing 

firm. Such telephone connection shall not be 

used for the purpose of transmitting to the 

Floor orders for the purchase or sale of 

securities, but may be used to enter options 

or futures hedging orders through the unit’s 

off-Floor office or the unit’s clearing firm, or 

through a member (on the floor) of an options 

or futures exchange as permitted under NYSE 

Rules 98 and 105. 

All DMM units currently have 

Exchange-approved telephone 

connections between the Trading Floor 

post locations and the off-Floor offices 

of the DMM unit. On behalf of NYSE 

Regulation, FINRA regularly examines 

DMM units for compliance with Rule 

36.30, and in particular, whether the 

DMM unit has appropriate policies and 

procedures governing the use of such 

telephone lines and to confirm that the 

telephone lines only connect to the 

approved locations. 

Proposed Amendments to NYSE Rule 36 

The Exchange proposes to amend 

Supplementary Material .30 to update 

the rule to reflect how DMM units are 

permitted to operate pursuant to Rule 

98. Specifically, Rule 98(e) permits a 

DMM unit to share non-trading related 

services with its member organization or 

approved person. Pursuant to Rule 

98(e), when sharing such non-trading 

related services, the DMM unit and 

approved person must have written 

procedures and guidelines to protect 

non-public order information to ensure 

that such information is not used for 

any purpose other than to provide nontrading related services to the DMM 

unit. 

The Exchange believes that because 

Rule 98(e) sets forth protections for nonpublic order information, Rule 36.30 

should be amended to permit DMM 

units on the Trading Floor to maintain 

specified telephone and other permitted 

communication devices (as discussed 

more fully below) to persons providing 

non-trading related services permitted 

under Rule 98. This will enable DMM 

units to permit their Floor-based 

personnel to communicate directly with 

persons providing operational support 

services, such as a technology help desk 

that may be located within an approved 

person. 

The Exchange further proposes to 

amend NYSE Rule 36 to add 


srobinson on DSKHWCL6B1PROD with NOTICES
16020 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 

6Except as provided in Rule 36, no other type of 

communication application may be used by a DMM 

or DMM unit to communicate between the DMM 

unit’s post location on the Floor and the off-Floor 

offices of the DMM unit and any other location, and 

the use of cell phones, Blackberrys, and similar 

devices by DMM’s while on the Trading Floor 

would continue to be prohibited. 7See, e.g., Rules 98(d)(2)(B)(iii) and (f)(1)(A)(ii). 

8See Securities Exchange Act Release No. 53539 

(March 22, 2006), 71 FR 16353 (March 31, 2006) 

(SR–NYSE–2004–05). 

9See Securities Exchange Act Release No. 58845 

(Oct. 24, 2008), 73 FR 64379 (Oct. 29. 2008) (SR– 

NYSE–2008–46). 

Supplementary Material .31 that would 

permit a DMM unit to install and 

maintain certain written electronic 

communication applications. 

Specifically, proposed Supplementary 

Material .31(a) would permit a DMM 

unit, with the approval of the Exchange 

and subject to the conditions set forth in 

Supplementary Material .31, to establish 

and maintain a wired or wireless device 

capable of sending and receiving written 

communications electronically through 

an Exchange-approved connection (a 

‘‘Permitted Communications Device’’).6

Except as specified in the amendment 

to Supplementary Material .30, the 

proposed addition of Supplementary 

Material .31 would not alter in any way 

the universe of off-Floor individuals 

with whom Floor-based personnel may 

communicate or the content of such 

communications; rather, it would only 

expand the means by which such 

communications may be transmitted. 

Accordingly, under proposed 

Supplementary Material .31(b), DMM 

units would be permitted to connect 

Floor-based personnel via the Permitted 

Communications Device to persons with 

whom they are otherwise permitted to 

communicate pursuant to Rules 36.30 

and 98, i.e., certain personnel in the offFloor offices of the DMM unit, the DMM 

unit’s clearing operations, and persons 

who are permitted to provide nontrading related services to the DMM unit 

under Rule 98. Once connected, the onFloor and off-Floor personnel would be 

permitted to use the Permitted 

Communications Device for two-way 

written electronic communications. 

The Exchange further notes that 

nothing in proposed Supplementary 

Material .31 would alter the obligations 

of a DMM unit to meet existing 

requirements under Rule 98 to, among 

other things, protect non-public order 

information and maintain appropriate 

information barriers in accordance with 

Rule 98. Because DMM units would 

continue to be subject to Rule 98, while 

on the Floor, DMM unit personnel could 

not use the Permitted Communications 

Device to communicate with off-Floor 

personnel in violation of Rule 98. For 

example, DMM units will continue to be 

subject to provisions of Rule 98 

governing restrictions on 

communications with off-Floor 

individuals or systems responsible for 

making trading decisions in related 

products.7

A DMM unit would be obligated to 

program its communications system so 

that a Permitted Communications 

Device would not operate in a manner 

that enables written electronic 

communications to or from any location 

or individual other than as described in 

the proposed Supplementary Material. 

Among other things, the DMM unit 

would be required to program its 

communications system to ensure that 

messages cannot be forwarded to 

individuals with whom Floor personnel 

are not permitted to communicate. As 

part of the approval process, DMM units 

would need to identify to the Exchange 

who would have access to the Permitted 

Communications Devices and the basis 

for why any proposed off-Floor persons 

are permitted to communicate with 

individuals located on the Trading 

Floor. 

Under proposed Supplementary 

Material .31(c), a DMM unit’s member 

organization would be required to 

maintain records of all written 

communications sent from or to the 

DMM unit’s Floor-based employees via 

the Permitted Communications Device 

in accordance with NYSE Rule 440 and 

SEC Rule 17a–4(b)(4) and in such format 

as may be prescribed by the Exchange. 

Under proposed Supplementary 

Material .31(d), a DMM unit’s member 

organization would be required to 

establish policies and procedures 

reasonably designed to ensure that use 

of the Permitted Communications 

Device is consistent with all SEC rules 

and Exchange rules, policies and 

procedures. In particular, pursuant to 

NYSE Rule 342, DMM units would be 

required to implement appropriate 

procedures of supervision and control 

and to provide for the review of the 

written electronic communications sent 

to and from the DMM unit’s post 

location on the Floor via the Permitted 

Communications Device. Among other 

things, the written procedures should 

address the regulatory requirements 

associated with the program, including 

what measures the DMM unit will 

follow to ensure that only those 

individuals permitted to communicate 

via the Permitted Communications 

Device have access to it. 

The Exchange believes that allowing 

DMM units to use a Permitted 

Communications Device would provide 

an effective way for DMMs to 

communicate with their member 

organization and promote more efficient 

supervision, compliance, and 

operations. For example, a DMM unit 

could use a Permitted Communications 

Device to obtain permission from senior 

management to exceed risk limits to 

facilitate a block trade or otherwise meet 

an affirmative obligation, to more 

quickly correct a technological issue 

with the DMM unit’s algorithms, to 

meet business continuity obligations by 

providing an additional means of 

communication in the event of a wideranging telephone outage or other 

Exchange system outage, and to confirm 

that a stock could be borrowed to cover 

a short position. 

The Exchange further believes that the 

use of such written communications 

and the related retention requirements 

not only would enable the DMM unit to 

monitor communications to and from 

the Floor, but also would enable FINRA 

to enhance its regulatory program 

associated with reviewing such 

communications. In particular, FINRA 

would be able to review the email 

system operating the connections 

between the Trading Floor and off-Floor 

locations and related written 

supervisory procedures. The regulatory 

program would be further strengthened 

because with the use of auditable 

written electronic communications, 

FINRA would also be able to review 

both the content of communications and 

the parties to such communications. 

The Exchange believes that the 

enhanced regulatory program associated 

with the more robust audit trail would 

benefit the markets by providing a better 

manner by which to review DMM 

compliance with Federal and Exchange 

rules. 

Finally, the Exchange proposes a 

technical change to Rule 36.30 to 

conform Rule 36 to changes made to 

Rule 104 that deleted the requirement 

that DMM units obtain annual 

certifications for their algorithms. The 

Exchange added the relevant provision 

to Rule 36.30 in connection with the 

Hybrid Market changes to Rule 104, 

when the then specialist algorithm had 

an advance ‘‘look’’ at incoming orders.8

In connection with the adoption of the 

New Market Model, the Exchange 

eliminated the algorithmic order-byorder look, which rendered the need for 

an annual certification moot.9

Accordingly, Rule 104 no longer 

includes a requirement that DMM units 

annually certify their algorithms. The 

Exchange therefore proposes to amend 

Rule 36 to conform to the changes to 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 16021 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78s(b)(3)(A)(iii). 

13 17 CFR 240.19b–4(f)(6). 

14 17 CFR 240.19b–4(f)(6). 

15 17 CFR 240.19b–4(f)(6)(iii). 

16 17 CFR 200.30–3(a)(12). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

Rule 104 and similarly delete the 

requirement for an annual certification. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,10 in general, and 

further the objectives of Section 6(b)(5) 

of the Act,11 in particular, in that they 

are designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. The 

Exchange believes that the proposed 

rule change supports the objectives of 

the Act by permitting greater and more 

effective communication between 

DMMs and DMM unit’s on the Floor 

and their upstairs offices, while at the 

same time providing for a more robust 

audit trail that would enable FINRA to 

enhance the regulatory program 

associated with reviewing DMM 

communications from the Trading 

Floor. The Exchange believes that these 

regulatory enhancements will benefit 

the market by protecting investors and 

the public interest. 

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 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 12 and Rule 

19b–4(f)(6) thereunder.13 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. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 14 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),15 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. 

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. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2011–10 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–2011–10. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of 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–NYSE– 

2011–10 and should be submitted on or 

before April 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6708 Filed 3–21–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64086; File No. SR– 

NYSEArca–2011–09] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Adopting Rules Related 

to Qualified Contingent Cross Orders 

March 17, 2011. 

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 

14, 2011, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to adopt rules 

related to Qualified Contingent Cross 

Orders (‘‘QCCs’’). The text of the 


srobinson on DSKHWCL6B1PROD with NOTICES