Document ID: SEC-2009-0434-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-04-01T04:00Z

[Federal Register: April 1, 2009 (Volume 74, Number 61)]
[Notices]               
[Page 14831-14834]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap09-80]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59626; File No. SR-NYSE-2009-33]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Modifying the Wireless Data Communications Initiatives and Codifying 
the Wireless Policy

 March 25, 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 March 20, 2009, the New York Stock Exchange, LLC (``NYSE'' 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. NYSE has submitted 
the proposed rule change pursuant to Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to: (1) Modify its Wireless Data 
Communications Initiatives (referred to herein as the ``Wireless 
Policy'') to eliminate the requirement that all orders or messages 
transmitted electronically from off the Floor must first be recorded in 
a Floor broker's booth location on the Floor (``Floor booth'') before 
being transmitted to the Floor broker's wireless hand-held device for 
representation and execution; (2) modify the Wireless Policy to 
eliminate the requirement that Floor booth locations print paper 
records of all orders; (3) modify the interpretation of NYSE Rule 117 
as it applies to what constitutes a ``written order''; and (4) codify 
the Wireless Policy as amended herein.

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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to: (1) Modify its Wireless Data 
Communications Initiatives (referred to herein as the ``Wireless 
Policy'') \4\ to eliminate the requirement that all orders or messages 
transmitted electronically from off the Floor must first be recorded in 
a Floor broker's booth location on the Floor (``Floor booth'') before 
being transmitted to the Floor broker's wireless hand-held device for 
representation and execution; (2) modify the Wireless Policy to 
eliminate the requirement that Floor booth locations print paper 
records of all orders; (3) modify the interpretation of NYSE Rule 117 
as it applies to what constitutes a ``written order''; and (4) codify 
the Wireless Policy as amended herein.
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    \4\ See Securities Exchange Act Release No. 36156 (August 25, 
1995), 60 FR 45756 (September 1, 1995) (SR-NYSE-95-22). The approval 
order of the initial filing and subsequent amendment by the 
Commission to changes to the Wireless Data Communications 
Initiatives has historically been referred to by the NYSE as the 
``Wireless Policy.'' See also Securities Exchange Act Release No. 
39379 (December 1, 1997), 62 FR 64615 (December 8, 1997) (SR-NYSE-
97-17).
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    The Exchange notes that parallel changes are proposed to be made to 
the rules of the NYSE Amex Exchange (formerly the American Stock 
Exchange).\5\
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    \5\ See SR-NYSEAmex-2009-02 (to be filed on March 23, 2009).
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Background
    On August 25, 1995, the Commission approved the Exchange's 
introduction of wireless data communications technology to the Floor. 
One feature of the wireless technology was the use of wireless hand-
held data communications devices on the Floor. A wireless hand-held 
device (``hand-

[[Page 14832]]

held'') is a tool used by NYSE Floor brokers as part of an integrated 
Floor order management system to trade and to send and receive 
messages. Such messages can consist of the price, size and time of the 
orders as well as cancellations and modification of orders from the 
hand-held to the Floor booth and thereafter to locations off the Floor. 
The Exchange developed and installed a wireless data communications 
infrastructure on its Floor and provided its Floor brokers with hand-
helds. The Exchange also allowed private vendors to offer hand-helds, 
with any needed support infrastructure, to be used by Floor brokers.
    The Wireless Policy was implemented in four phases in order to 
adequately install and test the viability of the wireless data 
communication infrastructure and connections to private vendor hand-
helds.
    By December 1997, the Exchange had completed the second phase of 
the implementation of the Wireless Policy, namely the supervision of 
additional pilot testing of independent wireless data communication 
services, including the services offered by the Exchange. After 
entering the next phase, the Exchange amended the Wireless Policy to, 
inter alia, modify the types of wireless data communications that the 
Exchange would permit over the infrastructure by allowing 
communications between two hand-helds on the Floor.\6\
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    \6\ See Securities Exchange Act Release No. 39379 (December 1, 
1997), 62 FR 64615 (December 8, 1997) (SR-NYSE-97-17). The 1997 
amendments also clarified that a vendor cannot provide wireless data 
communications services to Floor members unless such member is a 
member organization of the Exchange; and announced the forms of 
agreement and provisions pursuant to which the Exchange would allow 
vendors and member organizations to provide wireless data 
communications services to members on the Floor of the Exchange in 
the production roll-out environment.
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    The purpose of the 1997 amendments was to permit communication 
between two hand-helds on the Floor, thereby eliminating the first step 
of routing all such communications to the Floor booth. These amendments 
expedited the transmittal and receipt of orders and to allow for more 
efficient processing of orders and dissemination of information.
NYSE Rule 117 and the Wireless Policy
    NYSE Rule 117 (``Orders of Members to be in Writing'') states that 
no member on the Floor shall make any bid, offer or transaction for or 
on behalf of another member except pursuant to a written or 
electronically recorded order.
    Pursuant to the Wireless Policy, the Exchange interpreted NYSE Rule 
117 to mean that an order sent to an Exchange Floor member by an 
authorized hand-held constituted a ``written order'' for the purposes 
of NYSE Rule 117 if the member could show that the transmission of the 
order: (1) Provided adequate information relating to the price, size 
and time of the order, the cancellation of the order and any other 
relevant order information; (2) satisfied the Exchange's audit trail 
requirements; and (3) satisfied all other Exchange reporting and 
record-keeping requirements.
    Furthermore, the Wireless Policy provided that all orders entered 
from off the Floor were required to be transmitted to a Floor broker's 
booth terminal prior to transmission to the Floor broker's hand-
held.\7\ In addition, the Wireless Policy required Floor brokers to 
create and maintain a paper record at the booth to supplement the 
electronic record of an order transmitted from an off-Floor location to 
a booth terminal and, from the booth to a Floor broker's hand-held.\8\
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    \7\ See Securities Exchange Act Release No. 36156 (August 25, 
1995), 60 FR 45756 (September 1, 1995) (SR-NYSE-95-22) at Footnote 
8.
    \8\ Id. at Footnote 9.
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    Since the implementation of the Wireless Policy in 1995 and its 
subsequent amendment, the Exchange has made significant technological 
developments to the operation of its market. The Exchange has evolved 
into a more electronic market and the NYSE's trading systems have been 
continuously upgraded to provide for greater speed and efficiency in 
processing orders and reports through the hand-held.
    The current electronic trading environment on the Floor has 
obviated the necessity for paper orders, as well as the need to 
electronically route all messages through the booth as an intermediate 
step between the Floor broker's hand-held and the message's points of 
origin and destination. In particular, the NYSE's systems have evolved 
significantly since the Wireless Policy was first approved, and are now 
capable of capturing all order information, including price, size and 
time, electronically, thereby rendering paper records unnecessary. In 
recognition of this, subsequent to the implementation of the Wireless 
policy, the Exchange amended NYSE Rule 123 (Record of Orders) to add 
sections (e) (System Entry Required) and (f) (Reports of Order 
Executions).\9\ These amendments required the entry of order 
information and execution reports into an electronic system on the 
Floor. All NYSE broker trading systems operate to create an electronic 
order trail, making the creation of a supplemental paper audit trail 
obsolete.\10\
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    \9\ See Securities Exchange Act Release No. 43689 (December 7, 
2000), 65 FR 79145 (December 18, 2000) (SR-NYSE-98-25).
    \10\ Additionally, the NYSE has adopted NYSE Rule 132A 
(Synchronization of Member Business Clocks) and NYSE 132B (Order 
Tracking Requirements). These rules require that members and member 
organizations create and maintain electronic records of orders 
originated, received, and transmitted to a market center for 
execution. These Rules, in conjunction with the amendments to NYSE 
Rule 123 which requires system entry on the Floor, create an 
electronic record of orders, transmittals, and executions.
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Proposed Modifications to the Wireless Policy and Interpretation of 
NYSE Rule 117
    The Exchange now proposes to amend the Wireless Policy and the 
interpretation of NYSE Rule 117, to provide that wireless 
communications can be sent and received directly to and from the hand-
held. For example, orders entered from off the Floor may be transmitted 
directly to a hand-held, bypassing the booth.\11\ Likewise, Floor 
brokers may send order-related messages (e.g., cancellations and 
administrative messages) and information (e.g., Market Look data) back 
to the customer directly through the hand-held. The Exchange seeks to 
modify its Wireless Policy to eliminate the requirement that orders be 
routed to the booth terminal before being received by the hand-held. 
Order-related messages or information sent from the hand-held would 
also not be routed to the booth terminal before being transmitted off-
Floor. Pursuant to the instant proposal, orders and order-related 
messages or information may be sent directly to and received by the 
hand-held. These proposed amendments to the Wireless Policy do not 
change the content of what is sent currently to and from the hand-helds 
but simply amends the procedure for transmitting such information to 
and from the hand-held.
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    \11\ In 2007, the NYSE amended NYSE Rule 54 and other rules to 
permit appropriately registered and supervised employees working in 
Exchange Regulation-approved booths to process orders sent to the 
booth in the same manner that sales traders in an ``upstairs'' 
office are allowed to process orders. See Securities Exchange Act 
Release No. 55908 (June 14, 2007), 72 FR 34056 (June 20, 2007) (SR-
NYSE-07-51). See also Exchange Information Memo 07-77. This 
amendment to the Wireless Policy would not impact those rules 
because the direct transmittal of an order from off the Floor to the 
handheld would constitute a determination to have the order 
represented and executed on the NYSE Floor, and not processed in the 
booth in the same manner as an ``upstairs'' trading desk.
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    Pursuant to the proposed new Wireless Policy, where: (1) Orders are 
transmitted electronically from a member's off-Floor location to a 
booth

[[Page 14833]]

terminal and then the order is retransmitted from the booth terminal to 
a member's hand-held; or (2) order-related messages or information are 
transmitted directly to the hand-held, bypassing the booth, a record 
must be established and maintained which reflects the time the order or 
order-related message or information was received by the booth terminal 
or the hand-held. The time of receipt will be captured by the Booth or 
the hand-held, depending upon where the order was routed. The record of 
time of receipt by a hand-held and [sic] will be established and 
maintained by such device or the Booth and by the server which receives 
a message acknowledgment from the hand-held or the Booth. The Booth 
will not be required to print records.
    Orders sent from off-Floor to the booth or the hand-held are first 
sent through a secured network and routed to an NYSE wired database 
that captures and records the orders. Likewise, order related messages 
or information generated from the Floor broker's booth or hand-helds 
are transmitted back to the Exchange-wired databases via the secured 
wireless network, where the information is captured and recorded, and 
then sent off-Floor to the customer via the Exchanges secured network. 
In short, Exchange wired databases capture and record all of the 
information sent to and transmitted from the hand-held.
    The Exchange notes that the transmission of orders from off-Floor 
locations directly to the hand-helds and order-related messages or 
information sent from hand-helds to off-Floor locations will not result 
in an increased risk of loss of order information. As is the case 
today, all orders and order-related messages or information will be 
recorded in an Exchange database upon receipt and prior to delivery to 
the hand-held. In the event that a hand-held loses connectivity with 
the database, all incoming and outgoing transactions will continue to 
be captured and stored in said database and will be re-transmitted to 
the hand-held once connectivity is restored. To further mitigate the 
risk of any loss of data, the NYSE infrastructure offers a fully 
redundant, dual-sited back-up database. This same infrastructure is 
currently in place today for orders received into NYSE systems destined 
for a booth. Therefore, all the information captured by the database is 
the identical information that would be captured had the order been 
sent to the Floor booth before being sent to the hand-held or the 
order-related message or information had been sent from the hand-held 
to the Floor booth. The informational content transmitted to and from 
the hand-held remains the same and is not affected by these proposed 
amendments.
    Furthermore, this change will not impact the requirements for the 
system entry of orders and execution reports under NYSE Rules 123(e) 
and (f). All order, order messages and report information captured by 
the database will be provided electronically in the same manner as 
orders transmitted directly to a booth today for audit trail purposes. 
The wireless infrastructure captures the same information that was 
previously captured in the Floor booth. The hand-held will operate as 
the functional equivalent as the Floor booth premise for order receipt 
and retention purposes.
    Removing the requirement that orders be transmitted to the Floor 
booth will not affect the adequacy of information that is required to 
be provided through the hand-held. In fact, the hand-held will continue 
to provide the requisite information as to price, size and time of the 
order, and information if the order is cancelled. Audit trail 
information will be captured electronically by the hand-held, thereby 
obviating the need for the transmission to the booth terminal which 
historically recorded this information.
    NYSE Rule 117 will now be interpreted to recognize any order 
transmitted directly to the hand-held to constitute a written order 
since the requisite information as to price, size and time of the 
order, and information if the order is cancelled will be captured by 
the hand-held. Furthermore, the information directly sent to the hand-
held satisfies the Exchange's audit trail requirements and all other 
Exchange reporting and record-keeping requirements.
    The Exchange believes that this proposal will provide for a more 
efficient and expeditious mechanism for order execution. The Exchange 
further believes that its customers and market participants will 
benefit from faster order execution, enhanced market quality and a 
reduction in latency of order executions as a result of this proposal.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5),\12\ which requires that an exchange 
have rules that are designed to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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 is 
consistent with these objectives in that it enables the Exchange to 
further facilitate transactions on the NYSE Trading Floor by 
eliminating the requirements that orders entered from off the Floor 
require transmission to a Floor booth before being transmitted to the 
hand-held for representation and execution or that order-related 
messages or information from the hand-held be transmitted to a Floor 
booth before being transmitted off-Floor. The elimination of this 
routing through the Floor booth terminal removes an impediment to the 
order execution system and provides for a faster, more efficient method 
of order execution.
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    \12\ 15 U.S.C. 78f (b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
NYSE has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \16\ permits the Commission to 
designate a shorter time if such action is consistent

[[Page 14834]]

with the protection of investors and the public interest. NYSE requests 
that the Commission waive the 30-day operative delay in order to 
immediately remove an impediment to the efficient execution of customer 
orders and transmission of order-related messages or information. The 
Exchange believes that it promotes the protection of investors and 
serves the public interest to have its systems allow for the delivery 
of customer orders to the point of sale and order-related messages or 
information back to the customer immediately now that hand-held 
technology is capable of meeting all audit trail requirements. The 
Commission notes the Exchange's representation that the proposed 
changes to the Wireless Policy do not change the content of what is 
sent to and from the hand-helds, but simply amends the procedure for 
transmitting such information. In addition, the Commission notes the 
Exchange's representation with regard to the ability of Exchange 
systems to capture and record all information sent to and transmitted 
from the handhelds. For these reasons, the Commission believes that 
waiving the 30-day operative delay \17\ is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission designates the proposal operative upon filing.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2009-33 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-2009-33. 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 such 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 publicly available. All 
submissions should refer to File Number SR-NYSE-2009-33 and should be 
submitted on or before April 22, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-7214 Filed 3-31-09; 8:45 am]

BILLING CODE 8011-01-P