Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 28299 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The purpose of the proposed rule changes is to 

amend NYSE Amex Equities Rule 70.25 to conform 

with proposed amendments to corresponding NYSE 

Rule 70.25 submitted in a companion filing by the 

New York Stock Exchange LLC (‘‘NYSE’’). See SR– 

NYSE–2009–55, formally submitted June 2, 2009. 

4See Securities Exchange Act Release No. 58673 

(September 29, 2008), 73 FR 57707 (October 3, 

2008) (SR–NYSE–2008–60 and SR–Amex 2008–62) 

(approving the Merger). 

5 15 U.S.C. 78f. 

6See Securities Exchange Act Release No. 58705 

(October 1, 2008), 73 FR 58995 (October 8, 2008) 

(SR–Amex 2008–63) (approving the Equities 

Relocation). 

7See Securities Exchange Act Release Nos. 58705 

(October 1, 2008), 73 FR 58995 (October 8, 2008) 

Continued 

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–2009–53 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–2009–53. 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 inspection and copying 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 will also be available 

for inspection and copying at the 

principal office of the self-regulatory 

organization. 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– 

2009–53 and should be submitted on or 

before July 6, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13968 Filed 6–12–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60055; File No. SR– 

NYSEAmex–2009–24] 

Self-Regulatory Organizations; NYSE 

Amex LLC, Notice of Filing of a 

Proposed Rule Change Amending Rule 

70.25 To Permit All Available Contraside Liquidity To Trigger the Execution 

of a d-Quote 

June 5, 2009. 

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 June 4, 

2009, NYSE Amex LLC (‘‘NYSE Amex’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NYSE Amex. 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 

Rule 70.25 to permit all available 

contra-side liquidity to trigger the 

execution of a d-Quote. 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

NYSE Amex Equities Rule 70.25(c)(iii) 

to provide that all available contra-side 

liquidity within the possible execution 

range of a d-Quote will be considered 

when determining whether to activate a 

d-Quote.3

Background 

As described more fully in a related 

rule filing,4 NYSE Euronext acquired 

The Amex Membership Corporation 

(‘‘AMC’’) pursuant to an Agreement and 

Plan of Merger, dated January 17, 2008 

(the ‘‘Merger’’). In connection with the 

Merger, the Exchange’s predecessor, the 

American Stock Exchange LLC 

(‘‘Amex’’), a subsidiary of AMC, became 

a subsidiary of NYSE Euronext and was 

renamed NYSE Amex LLC (‘‘NYSE 

Amex’’ or the ‘‘Exchange’’), and 

continues to operate as a national 

securities exchange registered under 

Section 6 of the Securities Exchange Act 

of 1934, as amended (the ‘‘Act’’).5 The 

effective date of the Merger was October 

1, 2008. 

In connection with the Merger, on 

December 1, 2008, the Exchange 

relocated all equities trading conducted 

on the Exchange legacy trading systems 

and facilities located at 86 Trinity Place, 

New York, New York, to trading systems 

and facilities located at 11 Wall Street, 

New York, New York (the ‘‘Equities 

Relocation’’). The Exchange’s equity 

trading systems and facilities at 11 Wall 

Street (the ‘‘NYSE Amex Trading 

Systems’’) are operated by the NYSE on 

behalf of the Exchange.6

As part of the Equities Relocation, 

NYSE Amex adopted NYSE Rules 1– 

1004, subject to such changes as 

necessary to apply the Rules to the 

Exchange, as the NYSE Amex Equities 

Rules to govern trading on the NYSE 

Amex Trading Systems.7 The NYSE 


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(SR–Amex 2008–63); 58833 (October 22, 2008), 73 

FR 64642 (October 30, 2008) (SR–NYSE–2008–106); 

58839 (October 23, 2008), 73 FR 64645 (October 30, 

2008) (SR–NYSEALTR–2008–03); 59022 (November 

26, 2008), 73 FR 73683 (December 3, 2008) (SR– 

NYSEALTR–2008–10); and 59027 (November 28, 

2008), 73 FR 73681 (December 3, 2008) (SR– 

NYSEALTR–2008–11). 

8The Display Book system is an order 

management and execution facility. The Display 

Book system receives and displays orders to the 

DMMs, contains the Book, and provides a 

mechanism to execute and report transactions and 

publish results to the Consolidated Tape. The 

Display Book system is connected to a number of 

other Exchange systems for the purposes of 

comparison, surveillance, and reporting 

information to customers and other market data and 

national market systems. 

9See Rule 70.25(a)(iv) (‘‘Discretionary 

instructions will be applied only if all d-Quoting 

prerequisites are met. Otherwise, the d-Quote will 

be handled as a regular e-Quote, notwithstanding 

the fact that the Floor broker has designated the eQuote as a d-Quote.’’). 

10Historically, Amex Floor brokers also had 

convert-and-parity (‘‘CAP’’) functionality similar to 

the NYSE CAP functionality. Amex eliminated this 

functionality in connection with the 

implementation of Regulation NMS. 

Amex Equities Rules, which became 

operative on December 1, 2008, are 

substantially identical to the current 

NYSE Rules 1–1004 and the Exchange 

continues to update the NYSE Amex 

Equities Rules as necessary to conform 

with rule changes to corresponding 

NYSE Rules filed by the NYSE. 

NYSE Amex Equities Rule 70.25 

Rule 70.25 governs the entry, 

validation, and execution of bids and 

offers represented by a Floor broker on 

the Floor of the Exchange via agency 

interest files (‘‘e-Quotes’’) that include 

discretionary instructions as to size and/ 

or price (‘‘d-Quotes’’). The discretionary 

instructions that a Floor broker may 

include with an e-Quote can relate to 

the price at which the d-Quote may 

trade and the number of shares to which 

the discretionary price instruction 

applies. 

Rule 70.25(c) provides that a Floor 

broker may designate the amount of his 

or her e-Quote to which discretionary 

pricing instructions apply. Floor brokers 

may also designate a minimum or 

maximum size of contra-side volume 

with which the Floor broker is willing 

to trade using discretionary pricing 

instructions. However, under current 

Rule 70.25(c)(iii), Exchange systems 

currently look only at the contra-side 

displayed interest on the Display 

Book® 8 (‘‘Book’’) to determine whether 

the contra-side volume is within the dQuote’s discretionary size range. 

Therefore, the displayed bid or offer 

must meet the minimum volume of the 

d-Quote before a d-Quote can be 

activated. 

For example, assuming the Exchange 

Best Bid and Offer (‘‘BBO’’) is .05 bid for 

1,000 shares and offering 1,000 shares at 

.08, a d-Quote bidding for .05 with four 

cents of price discretion and a minimum 

share volume subject to such 

discretionary pricing instructions of 

4,000 shares would not be activated 

because the displayed offer of 1,000 

shares is not sufficient to fill the 

discretionary size instructions. 

Accordingly, that d-Quote would not 

trade. 

Similarly, the d-Quote would not be 

activated even if the Book has contraside undisplayed interest that could 

meet both the discretionary pricing and 

volume instructions of the d-Quote. 

Taking the same example as above, if 

Exchange systems have 3,000 shares 

offered at .09, which is not part of the 

displayed offer but is both within the 

discretionary pricing and volume 

instructions of the d-Quote (1,000 shares 

at the displayed offer at .08 plus 3,000 

shares of contra-side volume at .09 

meets the 4,000 minimum size and price 

instruction of the d-Quote), the d-Quote 

would not trade. Or, if in addition to the 

1,000 shares offered at .08 that is 

displayed, there is an additional 3,000 

shares offered at .08 in reserve interest, 

notwithstanding that the displayed offer 

and reserve interest at the .08 price 

point would meet the discretionary 

volume instructions of the d-Quote, the 

d-Quote would not trade. 

The Exchange notes that decreasing 

the minimum discretionary size of the 

d-Quote would not permit the d-Quote 

to trade with the contra-side liquidity 

because the discretionary pricing 

instructions of a d-Quote are active only 

for that portion of an e-Quote that also 

has discretionary size instructions.9 For 

example, if a d-Quote for 1,000 shares 

has a discretionary price range of .04 

and a minimum volume of 100 shares, 

in the above example, only those 100 

shares would trade against the 

displayed offer. The remaining 900 

shares would be treated as an e-Quote 

bid for .05 and would not be eligible to 

trade with the displayed offer or any 

other interest within the discretionary 

price instructions. 

Proposed Amendment 

The Exchange proposes to amend 

Rule 70.25(c)(iii) to remove the 

restriction that only the displayed 

interest will be considered when 

determining whether the contra-side 

volume is within the discretionary 

pricing instructions of the d-Quote. The 

Exchange believes that all interest 

willing to trade at certain price points 

should be permitted to trade. Because 

Exchange systems have both displayed 

and undisplayed liquidity, considering 

only displayed contra-side liquidity 

does not take into account the true state 

of liquidity when determining whether 

to activate a d-Quote. The current rule 

therefore restricts which interest may be 

considered rather than allow willing 

interest to interact. 

As proposed, if all available contraside volume within the discretionary 

price and size instructions of a d-Quote 

is considered, such d-Quote will trade 

against such contra-side liquidity in the 

same manner that a market order or a 

marketable limit order would execute 

against such available contra-side 

liquidity. For example, assuming that 

the Exchange BBO is still .05 bid for 

1,000 shares and offering 1,000 shares at 

.08, if a market order or marketable limit 

order to buy 4,000 shares entered 

Exchange systems, such order would 

trade not only with the displayed offer 

of .08, but would also trade with any 

reserve interest that is better than the 

displayed offer (e.g., if there is nondisplayed interest offered at .07), reserve 

interest at the price of the displayed 

offer, and if there is insufficient 

liquidity at the displayed offer price or 

better, the market order would sweep up 

the Book. Similarly, as proposed, if the 

d-Quote bid for .05 had four cents of 

price discretion for a minimum size of 

4,000 shares, that d-Quote would 

interact with the market the same as a 

market order or a marketable limit order 

to buy 4,000 shares. 

The Exchange notes that the d-Quote 

functionality sought with this rule 

proposal provides Floor brokers with 

functionality similar to that previously 

available to Floor brokers at the NYSE 

and Amex.10 As permitted by former 

NYSE Rule 123A.30(a), a CAP–DI order 

was the elected or converted portion of 

a percentage order that was convertible 

on a destabilizing tick and designated 

for immediate execution or cancel 

election. When elected, a CAP–DI order 

would have automatically executed 

against any contra-side volume available 

at the electing price and was eligible to 

participate in a sweep. The Rule 

70.25(c)(iii) limitation that only 

displayed interest is considered when 

determining whether the contra-side 

volume meets the d-Quotes 

discretionary size instructions was 

added during a time when Floor brokers 

still had the ability to enter CAP–DI 

orders. 

In connection with the Next 

Generation Market Model, the NYSE 

eliminated CAP orders in part because 

the manner in which such orders were 

processed impeded the efficiency of the 


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Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 28301 

11See Securities Exchange Act Release Nos. 

58845 (Oct. 24, 2008), 73 FR 64379 (Oct. 29, 2008) 

(SR–NYSE–2008–46) and 59022 (November 26, 

2008), 73 FR 73683 (December 3, 2008) (SR– 

NYSEALTR–2008–10). 

12See id. 

13 15 U.S.C. 78f(b)(5). 

14 15 U.S.C. 78k–1(a)(1). 

Book.11 Accordingly, Floor brokers no 

longer have the capability to enter an 

order into Exchange systems that would 

be elected at certain price points and 

then be eligible to trade with any 

available contra-side liquidity. The 

Exchange notes that, when the NYSE 

eliminated CAP orders, it did not have 

the technology to permit d-Quotes to 

fully replicate the functionality of a CAP 

order. Moreover, when d-Quote 

functionality was introduced in October 

2006, the NYSE did not offer the ability 

to enter fully dark reserve interest. Since 

that time, the NYSE and NYSE Amex 

have added two new order types, the 

Minimum Display Reserve Order and 

the Non-Displayable Reserve Order.12

By restricting d-Quotes to be active only 

when the displayed interest meets the 

discretionary size instructions, d-Quotes 

are limited in their ability to interact 

with the type of liquidity that exists at 

the Exchange. 

The Exchange therefore believes that 

the modernization of d-Quote 

functionality proposed in this rule filing 

enables willing interest to trade with all 

willing contra-side liquidity, including 

reserve interest, which will result in 

greater executed volume, better fill 

rates, new price improvement 

opportunities for incoming orders, and 

improved overall market quality. 

Additionally, the proposed functionality 

for d-Quotes is consistent with the 

initial purpose of providing Floor 

brokers with functionality to replicate 

the functionalities and characteristics 

that Floor brokers exercised in an 

auction-market model and to modernize 

such tools as the manner of trading at 

the Exchange evolves. As such, this 

enhancement does not expand 

functionality available to Floor brokers 

but merely restores functionality that 

previously existed, albeit in a slightly 

different format. 

The Exchange further believes that 

providing this improved functionality 

provides customers with a greater array 

of execution and representation choices 

when routing an order to the Exchange. 

For example, a customer currently can 

choose, among others, to route an order 

directly to the Book electronically from 

an off-Floor location or route an order 

to a Floor broker for the Floor broker to 

represent on the Floor of the Exchange. 

These options provide different benefits 

for the customer. For example, routing 

an order directly to Exchange systems 

provides the benefit of an ultra low 

latency execution, which is particularly 

important for an algorithmically-driven 

trading strategy. Additionally, a 

customer may choose to use a Floor 

broker because that customer wants the 

benefit of that broker’s expertise in 

managing complex orders, performing 

price discovery, and exercising 

discretion at the point of sale. 

By modernizing d-Quote 

functionality, the Exchange is therefore 

not only replacing functionality that 

was previously eliminated, but is also 

providing customers who elect to use a 

Floor broker with functionality to meet 

the diverse needs of all customers. 

2. Statutory Basis 

The statutory basis for the proposed 

rule change is Section 6(b)(5) of the 

Act 13 which requires the rules of an 

exchange 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 proposed rule 

change also is designed to support the 

principles of Section 11A(a)(1) 14 of the 

Act in that it seeks to assure fair 

competition among brokers and dealers 

and among exchange markets and the 

practicability of brokers executing 

investor’s orders in the best market. The 

Exchange believes that permitting dQuotes to consider all available contraside liquidity when determining 

whether the discretionary size range of 

the d-Quote has been met meets such 

goals because it ensures that customer 

orders eligible to trade will execute 

against willing contra-side liquidity. 

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 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve the proposed 

rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

The Exchange has requested 

accelerated approval of this proposed 

rule change prior to the 30th day after 

the date of publication of the notice in 

the Federal Register. The Commission 

is considering granting accelerated 

approval of the proposed rule change at 

the end of a 21-day comment period. 

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–NYSEAmex–2009–24 on 

the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEAmex–2009–24. 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 


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28302 Federal Register / Vol. 74, No. 113 / Monday, June 15, 2009 / Notices 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’) (together, the NASD Rules and Incorporated 

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

are also members of the NYSE (‘‘Dual Members’’). 

The FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see FINRA 

Information Notice, March 12, 2008 (Rulebook 

Consolidation Process). 

4 In addition to being subject to SEC and FINRA 

rules, Dual Members also remain subject to the 

NYSE’s rulebook. FINRA notes that the NYSE may 

determine to retain NYSE Rule 134 for its own 

purposes. 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of NYSE. 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 publicly available. All 

submissions should refer to File 

Number SR–NYSEAmex–2009–24 and 

should be submitted on or before July 6, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13966 Filed 6–12–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60070; File No. SR–FINRA– 

2009–038] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Repeal 

Incorporated NYSE Rule 134 

(Differences and Omissions—Cleared 

Transactions) and NYSE Rule 440I 

(Records of Compensation 

Arrangements—Floor Brokerage) as 

Part of the Process To Develop the 

Consolidated FINRA Rulebook 

June 8, 2009. 

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 June 1, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by FINRA. 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 

FINRA is proposing to repeal 

Incorporated NYSE Rule 134 

(Differences and Omissions—Cleared 

Transactions) and Incorporated NYSE 

Rule 440I (Records of Compensation 

Arrangements—Floor Brokerage), as part 

of the process of developing the 

consolidated FINRA rulebook. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to repeal NYSE 

Incorporated Rule 134 (Differences and 

Omissions—Cleared Transactions) and 

NYSE Incorporated Rule 440I (Records 

of Compensation Arrangements—Floor 

Brokerage), to remove rules that are 

specific to the New York Stock 

Exchange, LLC (‘‘NYSE’’) marketplace 

and relate primarily to activities by floor 

brokers. 

Incorporated NYSE Rule 134 

(Differences and Omissions—Cleared 

Transactions) 

The proposed rule change would 

repeal Incorporated NYSE Rule 134, 

which sets forth procedures for clearing 

member firms to identify uncompared 

transactions and resolve them by 

making any necessary additions, 

deletions or changes to their data on the 

facility system. The rule provides 

guidelines for the review of uncompared 

transactions by clearing member firms 

and details the manner and timing of 

notifications that must be provided and 

the types of records that must be 

maintained. 

Further, NYSE Rule 134(d) requires 

floor brokers to maintain or participate 

in an error account in which all bona 

fide error transactions are processed and 

recorded. The rule defines an ‘‘error’’ to 

include an execution outside of an 

order’s written instructions (e.g., wrong 

security, wrong side of the market, 

outside the limit price, over buying or 

selling, duplicate execution, etc.) or 

missing the market on a ‘‘held’’ order. 

In such cases, floor brokers use their 

error account to assume or acquire a 

position as a result of a legitimate error. 

Floor brokers are required pursuant to 

the rule to maintain a signed, timestamped record, including supporting 

documentation of such error. The rule 

further requires every member not 

associated with a member organization, 

and every member associated with a 

member organization that derives at 

least 75% of its revenue from floor 

brokerage based on execution of orders 

on the floor to report to the NYSE error 

transactions in such member’s or his or 

her member organization’s account 

which result in a profit of more than 

$500 for any transaction, or for more 

than $3,000 in any calendar week. Such 

reports must contain a detailed record of 

the errors and liquidating transactions. 

FINRA is proposing to delete 

Incorporated NYSE Rule 134 from the 

Transitional Rulebook and not adopt the 

rule into the Consolidated FINRA 

Rulebook because the rule is narrowly 

directed to the trading activities of 

NYSE floor brokers. FINRA believes that 

it is not necessary to transfer NYSE Rule 

134 into the Consolidated FINRA 

Rulebook because the resolution of 

trading errors on the NYSE and 

recordkeeping of error accounts is 

specific to the NYSE.4

Incorporated NYSE Rule 440I (Records 

of Compensation Arrangements—Floor 

Brokerage) 

The proposed rule change would also 

repeal Incorporated NYSE Rule 440I, 

which requires each member and 

member organization that is ‘‘primarily 

engaged as an agent in executing 

transactions on the Floor of the 

Exchange’’ (e.g., $2 brokers or 


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