Document ID: SEC-2009-1628-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Amex LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, Amending Rule 36-NYSE Amex Equities To Conform With Proposed
Posted Date: 2009-11-18T05:00Z

[Federal Register: November 18, 2009 (Volume 74, Number 221)]
[Notices]               
[Page 59599-59601]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no09-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60984; File No. SR-NYSEAmex-2009-57]

 
Self-Regulatory Organizations; NYSE Amex LLC; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1, Amending Rule 
36--NYSE Amex Equities To Conform With Proposed Amendments to 
Corresponding NYSE Rule 36 To Permit the Use of Personal Portable or 
Wireless Communication Devices Off the Exchange Trading Floor and 
Outside Other Restricted Access Areas

November 10, 2009.

I. Introduction

    On August 27, 2009, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change, 
as modified by Amendment No. 1,\4\ to amend Rule 36--NYSE Amex Equities 
to permit the use of personal portable or wireless communication 
devices off the Exchange Trading Floor and outside other restricted 
access areas, and to make corresponding technical changes. The proposed 
rule change was published for comment in the Federal Register on 
September 28, 2009.\5\ The Commission received no comments regarding 
the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ Amendment No. 1, which the Exchange filed on September 17, 
2009, superseded and replaced the original filing in its entirety.
    \5\ See Securities Exchange Act Release No. 60692 (September 18, 
2009), 74 FR 49428 (``Notice'').
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II. Background

    Currently, Rule 36--NYSE Amex Equities prohibits members and member 
organizations from establishing or maintaining any telephonic or 
electronic communication, including the usage of any portable or 
wireless communication devices (i.e. cellular phone, wireless pager, 
BlackBerry\TM\, etc.), between the Floor, as defined in Rule 6--NYSE 
Amex Equities, and any other location without prior Exchange approval.
    Notwithstanding the general prohibition on the use of portable or 
wireless communication devices, current Rule 36--NYSE Amex Equities 
permits Floor brokers to use Exchange authorized and issued portable 
phones on the Floor to communicate with both member firms and non-
members off the Floor, subject to certain restrictions.\6\ Floor 
brokers may not, however, use Exchange authorized and issued devices on 
the NYSE Amex Options Trading Floor (as defined in Rule 6A--NYSE Amex 
Equities).\7\ In addition, current Rule 36--NYSE Amex Equities permits 
Designated Market Makers (``DMMs''), subject to restriction, to 
maintain at their posts telephone lines to the off-Floor offices of the 
DMM unit or the unit's clearing firm.\8\ Such telephone lines may only 
be used to enter options or futures hedging orders through the DMM 
unit's off-Floor office or the unit's clearing firm, or through a 
member (on the Floor) of an options or futures exchange. These lines 
may not, however, be used for the purpose of transmitting to the Floor 
orders for the purchase or sale of securities. DMMs are also permitted 
to use at their posts wired or wireless devices, including computer 
terminals or laptops, that are registered with the Exchange to 
communicate with their system algorithms.\9\ Under Rule 36--NYSE Amex 
Equities, the use of all other portable or wireless communication 
devices on the Floor is prohibited.
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    \6\ All members and member firm employees who use an Exchange 
authorized and issued portable phone must execute a written 
acknowledgement as to the usage of the phone and authorizing the 
Exchange to receive data and records related to incoming and 
outgoing calls. See NYSE Information Memos 08-40 (August 14, 2008) 
and 08-41 (August 14, 2008) (concerning the use of Exchange 
authorized and issued portable phones on the Floor, incorporated by 
reference in joint NYSE/NYSE Amex Information Memo 08-66 (December 
22, 2008)).
    \7\ See Rule 36--NYSE Amex Equities, Supplementary Material 
.20--.23
    \8\ The role of DMMs and their obligations on the Exchange 
adopted pursuant to the merger of the Exchange with the New York 
Stock Exchange are described in Securities Exchange Act Release No. 
58845 (October 24, 2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-
2008-46). See also Securities Exchange Act Release No. 59022 
(November 26, 2008), 73 FR 73683 (December 3, 2008) (SR-NYSEALTR-
2008-10). Notably, pursuant to these releases, the Exchange phased 
out the specialist system and adopted a Designated Market Maker 
(``DMM'') structure.
    \9\ See Rule 36.30--NYSE Amex Equities.
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    As noted in the foregoing paragraph, the restrictions on the use of 
portable or wireless communication devices in current Rule 36--NYSE 
Amex Equities relate to what is and is not permissible on the Exchange 
Floor. Under Rule 6--NYSE Amex Equities, the term ``Floor'' is defined 
as having the same meaning given that term ``under the Act.'' The 
Exchange has issued interpretive guidance that the ``Floor'' includes 
the trading Floor of the Exchange and the premises immediately adjacent 
thereto, such as the various entrances and lobbies of the 11 Wall 
Street, 18 New Street, 8 Broad Street, 12 Broad Street and 18 Broad 
Street Buildings, the telephone facilities available in these 
locations, the areas outside the ``Blue Line'' (member and member 
organization booths adjacent to the trading Floor), and any area 
reserved primarily for members, including members' lounges and 
bathrooms.\10\
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    \10\ See NYSE/NYSE Amex Information Memo 08-66 (December 22, 
2008).
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    Recently, the Exchange adopted Rule 6A--NYSE Amex Equities, setting 
forth a definition of ``Trading Floor'' that is distinct from the 
definition of Floor. Specifically, the Equities Trading Floor is an 
area within the area of the ``Floor'' and defined as ``the restricted-
access physical areas designated by the Exchange for the trading of 
securities, commonly known as the `Main Room' and the `Garage.''' As 
such, the Trading Floor's restricted access physical areas include the 
areas outside the Blue Line that include the member and member 
organization booths and/or trading desks. In accordance with Rule 6A--
NYSE Amex Equities, the Equities Trading Floor does not, however, 
include the areas where NYSE Amex-listed options are traded, commonly 
known as the ``Blue Room'' and the ``Extended Blue Room'' (the ``NYSE 
Amex Options Trading Floor'').\11\
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    \11\ In the filing, the Exchange noted that the NYSE Amex 
Options Trading Floor is within the restricted access perimeter that 
encompasses the NYSE and NYSE Amex Equities Trading Floors and thus 
member and member firm employees would not be permitted to use such 
devices in that space under the terms of the proposal. In addition, 
while the Exchange's Options Rules permit NYSE Amex Options members 
to use personal communications devices on the NYSE Amex Options 
Trading Floor, those rules prohibit NYSE Amex Options members from 
using those devices on the Equities Trading Floor of the Exchange. 
See NYSE Amex Options Rule 902NY. In addition, pursuant to the 
definitions of ``Floor'' and ``Trading Floor'' in Rules 6 and 6A--
NYSE Amex Equities, and corresponding NYSE Rules 6 and 6A, the NYSE 
Amex Equities and NYSE Trading Floors overlap and thus references to 
the NYSE Amex ``Equities Trading Floor'' include the NYSE Trading 
Floor. See Securities Exchange Act Release No. 59480 (March 2, 
2009), 74 FR 10109 (March 9, 2009) (SR-NYSEALTR-2009-21) (adopting 
Rule 6A--NYSE Amex Equities.)

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[[Page 59600]]

III. Description of the Proposal

    The Exchange proposes to amend Rule 36--NYSE Amex Equities to 
conform with proposed amendments to corresponding New York Stock 
Exchange (``NYSE'') Rule 36.\12\ The proposed amendments to Rule 36--
NYSE Amex Equities would permit the use of personal portable or 
wireless communication devices outside of the Exchange's Trading Floor 
and other restricted access areas, provided such usage is consistent 
with all other Exchange Rules and federal securities laws and rules 
thereunder. Floor brokers would still be limited to using only Exchange 
authorized and issued portable phones on the Exchange Trading Floor and 
DMMs would still only be permitted to use registered telephone lines 
and/or wired or wireless devices at their posts, and all such devices 
and communications would continue to be regulated by the Exchange.
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    \12\ See Securities Exchange Act Release No. 60691 (September 
18, 2009), 74 FR 49431 (September 28, 2009) (SR-NYSE-2009-84). As 
more fully explained in the Notice, NYSE Amex Equities Rules, are 
substantially identical to NYSE Rules 1-1004.
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    The proposal would permit members and member firm employees to use 
personal portable or wireless communications devices in designated 
areas of the Exchange's buildings and facilities that fall within the 
technical definition of the Floor under Rule 6, but that are outside 
the Trading Floor, and other restricted access points (i.e., where 
there are turnstiles or card swipe pads that electronically release 
locked doors to permit authorized entry).\13\ Because the lobby and 
other corridor areas where usage of personal portable or wireless 
communications devices will now be permitted still fall within the 
broader definition of ``Floor'' under Exchange rules, the Exchange will 
retain jurisdiction over its members in these areas. As such, in its 
filing, the Exchange noted that it would retain jurisdiction over its 
members and member firm employees to regulate conduct that is 
inconsistent with Exchange Rules and/or federal securities laws (e.g., 
trading ahead, insider trading, market manipulation).\14\
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    \13\ In the filing, the Exchange represented that the majority 
of the doors that require card swipe for entry are opaque. See also 
note 20 infra.
    \14\ See Notice, supra note 5.
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    The proposal would thus permit members and member firm employees to 
use their personal communications devices in the in the hallways, 
stairwells, lobbies or members-only areas of the Exchange premises that 
are adjacent to the Equities and Options Trading Floors of the Exchange 
and the NYSE.\15\ The Exchange stated specifically that such usage 
would be permitted in the lobby areas of the Exchange's facilities at 
11 Wall Street, 6 and 18 New Street, and 2, 12, 18 and 20 Broad Street, 
as well as in the corridor in front of the interior elevator bank 
inside of 18 Broad Street.\16\
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    \15\ It is important to note that the NYSE Amex Options Trading 
Floor is within the restricted access perimeter that encompasses the 
NYSE and NYSE Amex Equities Trading Floors and thus member and 
member firm employees would not be permitted to use such devices in 
that space under the terms of the proposed Rule defining where such 
devices are permissible. See proposed Rule 36.23--NYSE Amex 
Equities. In addition, while the Exchange's Options Rules permit 
NYSE Amex Options members to use personal communications devices on 
the NYSE Amex Options Trading Floor, those rules prohibit NYSE Amex 
Options members from using those devices on the Equities Trading 
Floor of the Exchange. See NYSE Amex Options Rule 902NY.
    \16\ See Notice, supra note 5.
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    In its filing, the Exchange stated that the purpose of the proposal 
is to provide Exchange members and member firm employees with a 
reasonable and comfortable space inside the physical confines of the 
Exchange's buildings and facilities within which they may use their 
personal portable or wireless communication devices, without 
diminishing the ability to monitor and regulate their conduct.\17\ 
According to the Exchange, the current prohibitions of Rule 36--NYSE 
Amex Equities and the broad definition of ``Floor'' under Rule 6--NYSE 
Amex Equities together effectively require members and member firm 
employees to exit the Exchange premises in order to use their personal 
portable or wireless communications devices.\18\ In the Exchange's 
view, the distance afforded by allowing a DMM, for example, to use a 
personal portable or wireless communication device outside the 
turnstiles is, in essence, equivalent to requiring a DMM to leave the 
Exchange's premises to do the same.\19\ Further, the Exchange 
represented that any time or place advantage to using such devices 
outside restricted access areas is significantly reduced by the fact 
that a DMM has no line of sight \20\ and no ability to hear trading 
activity on the Floor and the speed of electronic trading would likely 
render stale any information a DMM had prior to leaving his or her post 
on the Trading Floor.\21\
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    \17\ See Notice, supra note 5.
    \18\ See Notice, supra note 5. In the filing, the Exchange 
acknowledged that there are other areas on the Exchange's premises 
where personal communications devices may be used by members and 
member firm employees (e.g., the cafeteria in 11 Wall Street), but 
represented that these areas are either too far from the Trading 
Floor to be practical or do not have adequate reception for such 
devices.
    \19\ See Notice, supra note 5.
    \20\ The Commission notes that in at least one lobby area there 
is a line of sight to the Trading Floor and a trading post, unlike 
other lobby areas where the doors to the Trading Floor are opaque. 
See supra note 13. The Commission acknowledges, however, that it 
would be difficult to see any specific information on the post 
screens from this lobby area. The Commission expects the Exchange to 
monitor this to ensure that this remains the case and that such line 
of sight to the Trading Floor is not misused.
    \21\ See Notice, supra note 5.
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    In addition, noting that the proposed rule amendments specifically 
provide that the use of personal portable or wireless communication 
devices by Exchange members and member firm employees is subject to 
compliance with all other Exchange Rules and/or federal securities 
laws, the Exchange represented that it will issue a Notice to Members 
that will, among other things, remind Exchange members and member firm 
employees of their obligations under the requirements of Securities 
Exchange Act Release Nos. 33-7288 and 34-37182, concerning the ``Use of 
Electronic Media by Broker-Dealers, Transfer Agents, and Investment 
Advisers for Delivery of Information.'' \22\
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    \22\ See Securities Exchange Act Release Nos. 33-7288 and 34-
37182 (May 9, 1996), 61 FR 24643 (May 15, 1996) (S7-13-96). See also 
FINRA Regulatory Notice 2007-59 (December 7, 2007), concerning the 
supervision of electronic communications.
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    The Exchange also proposed to change Rule 36.23--NYSE Amex Equities 
to refer to NYSE Amex Options Rule 902NY to clarify that the Exchange's 
Options Rules permit NYSE Amex Options members to use personal 
communications devices on the NYSE Amex Options Trading Floor, but that 
such rule prohibits NYSE Amex Options members from using those devices 
on the Equities Trading Floor of the Exchange. The Exchange also 
proposed corresponding technical amendments to Rule 36.20--NYSE Amex 
Equities.

IV. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange. 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\23\ which requires, among 
other things, that the rules of a national securities exchange be 
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

[[Page 59601]]

open market and a national market system, and in general, to protect 
investors and the public interest.\24\
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    \23\ 15 U.S.C. 78f(b)(5).
    \24\ In approving this proposed rule change, 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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    The Exchange has proposed that members and member firm employees be 
permitted to use personal portable or wireless communication devices 
off the Exchange Trading Floor and outside of restricted access areas 
(i.e. restricted access areas are areas where there are turnstiles or 
card swipe pads that electronically release locked doors to permit 
authorized entry),\25\ subject to compliance with all other Exchange 
Rules and the federal securities laws and rules thereunder. The 
proposal marks a departure from the Exchange's current prohibition on 
the use of such devices in areas that are in close proximity to the 
Trading Floor of the Exchange, and its stated policy that ``best 
practice'' is for ``personal contacts made using portable communication 
devices, whether Exchange issued or not, [to] be made outside the 
building.'' \26\
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    \25\ As noted above, restricted access areas include the areas 
outside the Blue Line that include member and member organization 
booths and/or trading desks.
    \26\ See NYSE/NYSE Amex Information Memo 08-66 (December 22, 
2008).
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    The Commission finds, however, that the proposal strikes a 
reasonable balance between the Exchange's interest in providing a 
convenient and comfortable space for Exchange members and member firm 
employees to use their personal portable communications devices inside 
Exchange buildings and its interest in minimizing the risk of misuse of 
such devices, which are not subject to the same surveillance as 
Exchange authorized and issued devices. In particular, the Commission 
notes the Exchange's representation that any time or place advantage to 
using personal portable communication devices outside restricted points 
of access to the Trading Floor is ``significantly reduced by the fact 
that a Floor Broker or DMM has no line of sight and no ability to hear 
trading activity on the [Trading] Floor and the speed of electronic 
trading would likely render stale any information a DMM had prior to 
leaving his or her post on the Trading Floor.'' \27\ As noted above, 
the Commission expects that the Exchange will, in the exercise of its 
regulatory responsibilities, work to ensure that any line of sight to 
the Trading Floor that may exist does not allow access to Trading Floor 
information that may raise concerns.\28\
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    \27\ See Notice, supra note 5.
    \28\ See supra note 20.
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    The Commission notes that the Exchange retains jurisdiction over 
its members for their conduct in the new areas where the use of 
personal communication devices will now be permitted because these 
areas are still within the broader definition of Floor under Rule 6--
NYSE Amex Equities.\29\ The Commission further notes the Exchange's 
representation that it will issue a Notice to Members reminding members 
of their obligations under Securities Exchange Act Release Nos. 33-7288 
and 34-37182, concerning the ``Use of Electronic Media by Broker-
Dealers, Transfer Agents, and Investment Advisers for Delivery of 
Information.'' \30\ In these releases, among other things, the 
Commission noted that the substantive and liability provisions of the 
federal securities laws, as well as the recordkeeping requirements of 
the Act apply equally to electronic and paper based media.\31\
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    \29\ See note 14 and accompanying text supra.
    \30\ See Securities Act Release No 7288 and Securities Exchange 
Act Release No. 37182 (May 9, 1996), 61 FR 24643 (May 15, 1996) (S7-
13-96).
    \31\ Id. See also FINRA Regulatory Notice 2007-59 (December 7, 
2007), concerning the supervision of electronic communications, 
which among other things, reminds member firms of their obligation 
to (1) have supervisory policies and procedures to monitor all 
electronic communications technology used by the firm and its 
associated persons to conduct the firm's business; and (2) ensure 
that their use of electronic communications media enables them to 
make and keep records, as required by Commission and Exchange rules 
(e.g., Rules 17a-3 and 17a-4 under the Act and Rule 440--NYSE Amex 
Equities).
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    The Commission further finds that the added reference in Rule 36.23 
to NYSE Amex Options Rule 902NY is consistent with the Act because it 
ensures that Rule 36.23 references a rule that clarifies members' 
obligations. The Commission also finds the proposed technical changes 
to Rules 36.20 to be consistent with the Act.
    Based on the foregoing, the Commission therefore finds the proposal 
to be consistent with the Act. The Commission believes that the 
proposal to permit the use of personal communication devices in certain 
specified areas adjacent to the Exchange's Equities Trading Floor, the 
NYSE Amex Options Trading Floor, and the NYSE Trading Floor, while not 
without any risk, is tempered by the speed of electronic trading, the 
existence of access barriers between such Trading Floors and the areas 
where use of personal communication devices will now be permitted, and 
the fact that the Exchange retains jurisdiction over its members while 
they are in these areas. The Commission expects, however, that the 
Exchange will monitor compliance with the new rule and inform the 
Commission if it encounters difficulties in implementing and enforcing 
it or otherwise finds that that the new rule raises regulatory 
concerns.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\32\ that the proposed rule change (SR-NYSEAmex-2009-57), as 
amended, be, and hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27609 Filed 11-17-09; 8:45 am]

BILLING CODE 8011-01-P