Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to extend the temporary suspension of those aspects of Rules 36.20, 36.21, and 36.30 that would not permit Designated Market Makers ("DMMs") and Floor brokers to use personal portable phone devices on the Trading Floor following the
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.
On Thursday, November 1, 2012, the Exchange filed a rule proposal to temporarily suspend those aspects of Rules 36.20, 36.21, and 36.30 that would not permit Floor brokers and Designated Market Makers ("DMMs") to use personal portable phone devices on the Trading Floor
As of Monday, November 5, 2012, although power has been restored to the downtown Manhattan vicinity, other services are not yet fully operational. Among other things, the telephone services provided by third-party carriers to the Exchange are still not fully operational on the Trading Floor, which impacts the ability of Floor members to communicate from the Trading Floor as permitted by Rule 36.
Because of intermittent cell phone service, many Exchange authorized and provided portable phones continue to not be functional and therefore Floor brokers still cannot use the Exchange authorized and provided portable phones, pursuant to Rules 36.20 and 36.21. In certain instances, however, the personal cell phones of Floor brokers are operational on the Trading Floor. The Exchange believes that because communications with customers is a vital part of a Floor broker's role as agent and therefore contributes to maintaining a fair and orderly market, during the period when phone service continues to be intermittent, Floor brokers should be permitted to use personal portable phone devices in lieu of the non-operational Exchange authorized and provided portable phones.
Similarly, the Exchange continues to experience problems with the DMM unit wired telephone lines, which are permitted pursuant to Rule 36.30. In some circumstances, the DMM unit location at the Trading Floor post may receive incoming calls, but the phones are not capable of making outgoing calls. The continued inability of a DMM unit to use its telephone lines could impact the ability of a DMM unit to comply with its obligations in securities registered to the DMM unit. For example, if a DMM unit experiences connectivity issues or problems with its algorithms and needs to speak with one of its back-office support teams, with the current phone limitations, the DMM would not be able to do so.
Accordingly, the Exchange proposes to extend the temporary suspension of those aspects of Rules 36.20, 36.21, and 36.30 that would not permit Floor brokers and DMMs to use personal portable phone devices on the Trading Floor. The Exchange proposes that the extension of the temporary suspension of those aspects of Rules 36.20, 36.21, and 36.30 to permit use of the personal portable phones on the Trading Floor be pursuant to the same terms and conditions of the temporary suspension filed for October 31, 2012 through November 2, 2012, including the record retention requirements related to any use of personal portable phones.
In particular, as set forth in the prior filing, Floor brokers and DMMs that use a portable personal phone must provide the Exchange with the names of all Floor-based personnel who used personal portable phones during this temporary suspension period, together with the phone number and applicable carrier for each number. Floor broker and DMM member organizations must maintain in their books and records all cell phone records that show both incoming and outgoing calls that were made during the period that a personal portable phone was used on the Trading Floor. To the extent the records are unavailable from the third-party carrier, the Floor broker and DMM member organizations must maintain contemporaneous records of all calls made or received on a personal portable phone while on the Trading Floor. As with all member organization records, such cell phone records must be provided to Exchange regulatory staff, including without limitation staff of the Financial Industry Regulatory Authority ("FINRA"), on request.
In addition, the Exchange further notes that DMM units and their Floor-based personnel would remain subject to both the Rule 36.30 and 98 limitations of whom they may contact directly from the Trading Floor.
As noted above, because the Exchange is dependent on third-party carriers for both wired and wireless phone service on the Trading Floor, the Exchange does not know how long the proposed temporary suspension will be required. However, based on current estimates, the Exchange understands that phone service may not be fully restored until at least Wednesday, November 7, 2012, and most likely later than that date. Accordingly, the Exchange proposes
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
In particular, in the aftermath of Hurricane Sandy, while the Exchange was able to open for trading, many of the services that the Exchange depends on from third-party carriers, such as wired and wireless telephone connections, are not fully restored. The Exchange believes that the proposed extension of the temporary suspensions from those aspects of Rule 36 that restrict the use of personal portable phones on the Trading Floor removes impediments to and perfects the mechanism of a free and open market and national market system because the proposed relief will enable both Floor brokers and DMMs to conduct their regular business, notwithstanding the ongoing issues with telephone service. The Exchange further believes that without the requested relief, both Floor brokers and DMMs would be compromised in their ability to conduct their regular course of business on the Trading Floor, which could adversely impact the market generally and investor confidence during this time of unprecedented weather disruptions. In particular, for Floor brokers, because they operate as agents for customers, their inability to communicate with customers could compromise their ability to represent public orders on the Trading Floor. For DMM units, any inability to communicate with personnel from their off-Floor offices, clearing firms, or non-trading related support staff, regardless of where such off-Floor personnel may be located in the aftermath of Hurricane Sandy, could compromise the DMM unit's ability to meet their obligations, particularly if the DMM unit experiences issues with connectivity or its algorithms.
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.
No written comments were solicited or received with respect to the proposed rule change.
Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
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:
* Use the Commission's Internet comment form (
* Send an email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.