Document ID: SEC-2010-0813-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-06-03T04:00Z

[Federal Register: June 3, 2010 (Volume 75, Number 106)]
[Notices]               
[Page 31496-31499]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jn10-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62167; File No. SR-NYSE-2010-37]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Add Certain Violations of Its Communications and Give-Up Policies to 
Its MRVP

May 25, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on May 12, 2010, the New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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.
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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 NYSE Rule 476A to add Rule 36 
(Communications Between Exchange and Members' Offices) to its List of 
Exchange Rule Violations and Fines Applicable Thereto (``Minor Rule 
Violation Plan'').\3\ The text of the proposed rule change is available 
on NYSE's Web site at http://www.nyse.com, on the Commission's Web site 
at http://www.sec.gov, at NYSE, and at the Commission's Public 
Reference Room.
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    \3\ The Exchange's corporate affiliate, NYSE Amex LLC (``NYSE 
Amex''), submitted a companion rule filing proposing corresponding 
amendments to NYSE Amex Disciplinary Rule 476A. See SR-NYSEAmex-
2010-44.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

 1. Purpose
    The Exchange proposes to amend NYSE Rule 476A to add Rule 36 
(Communications Between Exchange and Members' Offices) to its Minor 
Rule Violation Plan.
Background
    Effective October 1, 2008, the Exchange's parent company, NYSE 
Euronext, acquired the parent company of NYSE Amex pursuant to an 
Agreement and Plan of Merger (the ``Merger'').\4\ In connection with 
the

[[Page 31497]]

Merger, on December 1, 2008, NYSE Amex relocated all equities trading 
conducted on its legacy trading systems and facilities located at 86 
Trinity Place, New York, New York to systems and facilities located at 
11 Wall Street, New York, New York (the ``Equities Relocation'').\5\ 
Similarly, on March 2, 2009, NYSE Amex relocated all its options 
trading to trading systems and facilities located at 11 Wall Street, 
New York, New York (the ``Options Relocation'').\6\ As a result of the 
Equities and Options Relocations, the NYSE and NYSE Amex Equities 
Trading Floors are located within the 11 Wall Street building in a room 
adjacent to the NYSE Amex Options Trading Floor.
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    \4\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex-
2008-62) (order approving the Merger).
    \5\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (order 
approving the Equities Relocation).
    \6\ See Securities Exchange Act Release No. 59472 (February 27, 
2009), 74 FR 9843 (March 6, 2009) (SR-NYSEALTR-2008-14) (order 
approving the Options Relocation).
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Current NYSE Rule 36
    NYSE Rule 36 governs two primary areas: (i) Communications between 
the Floor and other locations, and (ii) the use and/or possession of 
portable or wireless communication or trading devices.
    First, Rule 36 broadly prohibits members and member organizations 
from establishing or maintaining any telephonic or electronic 
communication between the Floor and any other location without Exchange 
approval. In addition, there are several supplementary provisions that 
provide more detailed prescriptions for members and member firms.
    Rule 36.10 advises members and member organizations that the phone 
company will not install or disconnect any line between the Floor and 
any other location without Exchange approval and that such requests 
should be sent to the Exchange's Market Operations Division. Rule 36.60 
further prohibits members and member organizations from listing a phone 
line in the name of a non-member.
    Rule 36.20 provides that Floor brokers may maintain a phone line at 
their booth locations on the Floor, or use an Exchange issued and 
authorized portable phone, to communicate with non-members off the 
Floor. Only Exchange issued and authorized portable phones may be used 
on the Floor in accordance with the prescriptions of Rule 36.21, and 
the use of personal phones is expressly prohibited.\7\ Rule 36.21 
provides that Floor brokers using an Exchange issued and authorized 
portable phone may communicate directly from the point of sale on the 
Floor with someone off-Floor. In addition to processing orders, Floor 
brokers may also provide ``market look'' observations over the phone. 
When taking orders over the phone, Floor brokers must comply with Rule 
123(e), which requires entry of the order into an electronic system, as 
well as any and all other record retention requirements under Exchange 
Rules and the federal securities laws. Exchange issued phones do not 
permit call-forwarding or call-waiting and may not block a caller's 
identification.
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    \7\ Although the Exchange does not currently trade ``basket'' 
securities, as defined in Rule 800, Rule 36 provides that Floor 
brokers trading such securities may establish phone lines at the 
basket trading location.
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    Notwithstanding the prescriptions of Rule 36.20, Rule 36.23 
provides that members and employees of member organizations may use 
personal portable or wireless communications devices, including phones, 
outside the Exchange Trading Floor.\8\ In addition, members and 
employees of member organizations may not use personal portable or 
wireless communication devices on the NYSE Amex Options Trading Floor 
unless they are also registered to trade options on NYSE Amex.
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    \8\ Rule 6A defines ``Trading Floor'' as the restricted-access 
physical areas designated by the Exchange for the trading of 
equities securities, commonly known as the ``Main Room'' and the 
``Garage.'' The Exchange's Trading Floor does not include the areas 
where NYSE Amex-listed options are traded, commonly known as the 
``Blue Room'' and the ``Extended Blue Room,'' also known as the 
``NYSE Amex Options Trading Floor.''
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    Rule 36.30 provides that, subject to Exchange approval, a DMM Unit 
may maintain a phone line at its post to communicate with its off-Floor 
business operations and/or its clearing firm. For trading purposes, a 
DMM Unit's phone line may only be used to enter hedging orders through 
the firm's off-Floor office or clearing firm, or through a member of an 
options or futures exchange as permitted under Rules 98 and 105.
    Under Rule 36.30, a DMM Unit may also maintain a wired or wireless 
device that has been registered with the Exchange, such as a computer 
terminal or laptop, to communicate with the DMM Unit's off-Floor 
algorithms. A DMM Unit using such a wired or wireless device must 
certify that the device operates in accordance with all SEC and 
Exchange rules, policies, and procedures. In addition, the DMM Unit 
must create and maintain records of all messages generated by the wired 
or wireless device in compliance with NYSE Rule 440 and SEC Rules 17a-3 
and 17a-4.
    In addition, a DMM Unit registered in an Investment Company Unit 
(as defined in Section 703.16 of the Listed Company Manual) or a Trust 
Issued Receipt (as defined in Rule 1200) may use a telephone connection 
or order entry terminal at its post to enter proprietary orders in (i) 
the Investment Company Unit or Trust Issued Receipt in another market 
center, (ii) a component security of such a Unit or Receipt, or (iii) 
options or futures related to such Unit or Receipt, and may also use 
the phone to obtain market information with respect to such securities. 
Any such order executed on the Exchange must be entered and executed in 
compliance with Exchange Rule 112.20 and SEC Rule 11a2-2(T) and may 
only be entered for hedging purposes.\9\
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    \9\ The Exchange does not currently list or trade any Investment 
Company Units or Trust Issued Receipts.
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    To address concerns regarding improper information sharing between 
the Exchange's Trading Floor and the adjacent NYSE Amex Options Trading 
Floor, Rule 36.70 prohibits members and member firm employees from (i) 
using or possessing any wireless trading device that may be used to 
view or enter orders into the Exchange's trading systems while on the 
NYSE Amex Options Trading Floor, and (ii) using or possessing any 
wireless trading device that may be used to view or enter orders into 
the NYSE Amex Options trading systems while on the Exchange's Trading 
Floor. These prohibitions apply to any and all wireless trading 
devices, including devices issued by the Exchange or NYSE Amex, as well 
as devices that are proprietary to a member, member organization or 
other entity.
    Finally, Rules 36.40 and 36.50 prescribe certain timing and 
handling requirements for ``give-up'' or ``step out'' transactions, 
whereby a member or member organization executes a customer trade on 
behalf of another member. While not directly related to member or 
member organization communications or the use and/or possession of 
portable or wireless communication or trading devices, these 
requirements are important for ensuring that members and member 
organizations properly document these types of transactions.
Proposed Rule Change
    As noted above, the Exchange proposes to add NYSE Rule 36 to its

[[Page 31498]]

Minor Rule Violation Plan under Rule 476A.
    Under the Exchange's Minor Rule Violation Plan, the Exchange may 
impose a fine, not to exceed $5,000, on any member, member 
organization, allied member, approved person, or registered or non-
registered employee of a member or member organization for a minor 
violation of specified Exchange rules. Such fines provide a meaningful 
sanction for rule violations where the facts and circumstances of the 
violation do not warrant the initiation of a formal disciplinary 
procedure under Rule 476, but do require a regulatory response that is 
more significant than an admonition letter.\10\
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    \10\ The Exchange's Minor Rule Violation Plan was originally 
adopted by the Exchange and approved by the Commission in 1985. See 
Securities Exchange Act Release No. 34-21688 (January 25, 1985), 50 
FR 5025-01 (February 5, 1985) (SR-NYSE-84-27). It has been amended 
numerous times since its adoption.
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    Currently, because Rule 36 is not part of the Exchange's Minor Rule 
Violation Plan, if a member or member firm employee were to violate the 
prohibitions set forth in Rule 36 the Exchange would be limited to 
issuing either an admonition letter or initiating formal proceedings 
under Rule 476. This is the case whether or not the member or member 
firm employee violated the rule once or many times, and regardless of 
whether he or she made an inadvertent error or an intentional one.
    The Exchange believes that the current regulatory approach for 
dealing with Rule 36 violations is too inflexible. The Exchange 
recognizes that members or member firm employees may violate the 
prescriptions of Rule 36 intentionally, as well as accidentally or 
inadvertently. When a violation is intentional, formal disciplinary 
measures in accordance with Rule 476 may be warranted. However, while 
an admonition letter might be appropriate for an isolated accidental or 
inadvertent violation, in other cases an admonition letter would be 
inadequate even though a formal proceeding may not be warranted. The 
Exchange believes that the addition of Rule 36 to its Minor Rule 
Violation Plan under Rule 476A will provide a more flexible and 
appropriate enforcement tool that preserves the Exchange's discretion 
to seek formal discipline under appropriate circumstances.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with, and furthers the objectives of, Section 6(b)(5) of the Act,\11\ 
in that it is 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 proposed rule change also furthers the objectives 
of Section 6(b)(6) of the Act,\12\ in that it provides for appropriate 
discipline for violations of Exchange rules and regulations.
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    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(6).
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    The Exchange believes that the proposed rule change will provide 
the Exchange with greater regulatory flexibility to enforce the 
prescriptions of NYSE Rule 36 in a more informal manner while also 
preserving the Exchange's discretion to seek formal discipline for more 
serious transgressions as warranted.

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

    Because the foregoing proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 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, 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)(iii) 
requires the self-regulatory organization to submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of 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. The Exchange has satisfied this requirement.
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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-2010-37 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-2010-37. 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 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 
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

[[Page 31499]]

available publicly. All submissions should refer to File Number SR-
NYSE-2010-37 and should be submitted on or before June 24, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12) and 200.30-3(a)(44).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13338 Filed 6-2-10; 8:45 am]
BILLING CODE 8010-01-P