
[Federal Register Volume 78, Number 43 (Tuesday, March 5, 2013)]
[Notices]
[Pages 14388-14390]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05018]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68997; File No. SR-NYSEMKT-2013-13]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relocating Certain 
Futures and Options Trading Conducted on ICE Futures U.S. From Rented 
Space at the New York Mercantile Exchange to the Exchange's Facilities 
at 20 Broad Street and Amending Rule 6A--Equities, Which Defines the 
Terms ``Trading Floor'' and ``NYSE Amex Options Trading Floor''

February 27, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on February 13, 2013, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to relocate certain futures and options 
trading conducted on ICE Futures U.S. (``IFUS'') \4\ from rented space 
at the New York Mercantile Exchange (``NYMEX'') to the Exchange's 
facilities at 20 Broad Street and amend Rule 6A--Equities, which 
defines the terms ``Trading Floor'' and ``NYSE Amex Options Trading 
Floor'' (together, the ``Proposal''). The text of the proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
---------------------------------------------------------------------------

    \4\ IFUS is a Designated Contract Market pursuant to the 
Commodity Exchange Act, as amended, and is regulated by the U.S. 
Commodity Futures Trading Commission (``CFTC''). IFUS was formerly 
known as the New York Board of Trade (``NYBOT'').
---------------------------------------------------------------------------

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make trading space at 20 Broad Street, 
commonly known as the ``Blue Room'', available to IFUS to accommodate 
electronic trading of certain futures and options contracts currently 
conducted on IFUS in space rented from the NYMEX. The arrangement would 
be pursuant to an arms-length commercial lease. IFUS's lease on its 
NYMEX trading space expires in June 2013. The Exchange notes that on 
December 20, 2012, Intercontinental Exchange, Inc. (``ICE'') entered 
into a merger agreement to acquire the Exchange's parent, NYSE Euronext 
(the ``Transaction''). IFUS, a wholly-owned subsidiary of ICE, 
requested assistance in relocating its remaining trading floor 
following announcement of the Transaction.
    IFUS trades its products exclusively on an electronic trading 
platform and no longer utilizes open outcry trading. Approximately 40 
traders (the ``IFUS Traders'') \5\ currently utilize the IFUS trading 
floor (along with a small group of clerical staff they employ) as a 
place from which they may accept customer orders and execute electronic 
transactions in IFUS contracts. The IFUS Traders that are proposed to 
relocate to the Blue Room can execute transactions electronically in 
all products listed for trading by the IFUS, including futures and 
options on futures on cotton, frozen concentrated orange juice, coffee, 
sugar, cocoa, energy, foreign currencies, and certain Russell 
Indices.\6\ However, most of the IFUS Traders predominantly execute 
transactions in options on cotton futures. The IFUS Traders, 
collectively, transact less than 5% of average daily IFUS volume 
excluding IFUS energy contracts (which account for approximately 83% of 
IFUS's daily volume) \7\ and a fraction of 1% of the total average 
daily IFUS volume (which includes the energy contracts transacted on 
IFUS). The IFUS Traders do not engage in trading in equity securities 
or securities options through IFUS.
---------------------------------------------------------------------------

    \5\ None of the IFUS Traders are members of the Exchange, New 
York Stock Exchange LLC (``NYSE'') or NYSE Amex Options.
    \6\ These include the Russell 2000, Russell 1000, and Russell 
Value and Growth, all of which qualify as broad-based indices. The 
Exchange understands, however, that the IFUS Traders primarily trade 
Russell 2000 mini-contracts.
    \7\ In other words, the IFUS Traders transact less than 5% of 
the 17% of IFUS's average daily volume that is not related to energy 
contracts.
---------------------------------------------------------------------------

    Further, six of the forty IFUS Traders engage in proprietary-only 
trading while the rest execute customer orders \8\ in addition to 
proprietary trading. IFUS customer orders may be accepted by telephone 
or electronically; however, the IFUS Traders cannot verbally discuss 
orders or transactions with each other while on the trading floor. 
Communications between traders on the floor must be made via instant 
message, email, or recorded telephone line. Order tickets are prepared 
and time-stamped

[[Page 14389]]

for each customer order, and IFUS, as it does today, would have a 
compliance officer from IFUS Market Regulation in the Blue Room 
performing on-site surveillance on a regular basis.
---------------------------------------------------------------------------

    \8\ Pursuant to the definition of the term ``floor broker'' in 
Section 1a(22) of the Commodity Exchange Act, the Floor Traders can 
only execute customer orders from a trading floor that is operated 
and supervised by a contract market such as IFUS.
---------------------------------------------------------------------------

    The IFUS Traders will be sitting together in dedicated space in the 
Blue Room. A small group of NYSE MKT Floor brokers, currently in the 
Blue Room, will have their booths nearby.\9\ Both the space to be 
assigned to the IFUS Traders and the NYSE MKT Floor broker booths have 
privacy barriers consisting of eight foot walls which provide visual 
and sound insulation to reduce the likelihood that trading screens can 
be viewed or conversations overheard between firms and traders.\10\ 
Consequently, the Exchange believes that the combination of these 
visual and acoustical barriers, coupled with the IFUS limitations on 
verbal communications related to an order, substantially eliminate the 
risk that either the IFUS Traders or NYSE MKT Floor brokers could 
overhear each other's customer orders or other confidential trading 
information. Nonetheless, the names of the IFUS Traders will be 
provided to the Financial Industry Regulatory Authority (``FINRA'') 
which conducts surveillance of the NYSE MKT and NYSE markets to enable 
FINRA to more readily identify any potentially violative trading by the 
IFUS Traders.\11\
---------------------------------------------------------------------------

    \9\ However, the Exchange expects to relocate the NYSE MKT Floor 
brokers to an area adjacent to the Garage once certain ongoing 
renovations are complete.
    \10\ The booths are approximately 40 feet long by 10 feet wide. 
The barriers are eight feet high on both sides except for the two 
gated and badge access entry and exit points at the front and back 
of the booth, which are four feet high.
    \11\ Providing the names of the IFUS Traders to FINRA will be 
for the purpose of regulatory information sharing. Neither the 
Exchange nor FINRA will be responsible for regulating or surveilling 
the IFUS Traders' activity and the IFUS Traders will not be subject 
to the Exchange's jurisdiction. Rather, the IFUS Traders will 
continue to be regulated by IFUS as they are today.
---------------------------------------------------------------------------

    In light of the fact that the IFUS Traders do not trade any of the 
products traded on NYSE MKT, and the extremely limited overlap in 
related products traded by the IFUS Traders and on the NYSE MKT, as 
well as the very small volume of predominantly cotton options executed 
by the IFUS Traders, it is highly unlikely that any order handled by 
one of them could impact the price of any individual security traded on 
the Exchange. In this regard, the Exchange believes that the pricing 
correlation between order flow in IFUS products and securities traded 
on NYSE MKT is tenuous at most. Consequently, even if an NYSE MKT Floor 
broker in the Blue Room were to overhear the terms of an order handled 
by an IFUS Trader, or vice-a-versa, the likelihood that the information 
could be used to benefit that trader's or broker's proprietary, 
personal or other customer trading is extremely unlikely. This is also 
true with respect to the Russell Index products given their broad-based 
nature. The Exchange believes that the same considerations apply with 
respect to the NYSE, which operates on the same Trading floor, and NYSE 
Amex Options, which operates on a trading floor that is adjacent to 
NYSE MKT. Nonetheless, NYSE MKT Floor brokers initiating trades based 
on confidential order information overheard from the IFUS Traders would 
be subject to disciplinary action for violating NYSE MKT rules, 
including Rules 2010--Equities and 2020--Equities, which require 
members and member organizations to observe high standards of 
commercial honor, to use just and equitable principles of trade, and 
prohibit the use of manipulative, deceptive or fraudulent devices.
    Further, IFUS will issue a regulatory notice specifying the method 
IFUS Traders must use to access the Blue Room and prohibiting the IFUS 
Traders from entering the Main Room, where most of the NYSE MKT and 
NYSE Equities Floor brokers and all NYSE MKT and NYSE Designated Market 
Makers (``DMMs'') are located as well as the NYSE Amex Options trading 
floor. Specifically, the IFUS Traders will be required to take the 18 
Broad Street entrance elevator and enter the Trading Floor using the 
turnstile nearest the Blue Room. The Exchange will periodically monitor 
badge swipes at that turnstile. Moreover, the Exchange will install a 
security door requiring a badge swipe to enter and exit the physical 
area to be occupied by the IFUS Traders. The IFUS Traders will also 
wear distinctive badges and trading jackets. NYSE MKT Floor Governors 
and FINRA's On Floor Surveillance Unit will be instructed to identify 
and promptly report violations of the restriction on entering the Main 
Room to the IFUS Market Supervision officer. IFUS Traders entering the 
Main Room in violation of this restriction could face disciplinary 
action pursuant to IFUS Rule 4.04, which prohibits conduct or practices 
inconsistent with just and equitable principles of trade or conduct 
detrimental to the best interests of IFUS. The Exchange believes that 
these restrictions are appropriate to prevent the IFUS Traders from 
having potential access to any nonpublic information that might be 
available at the DMM booths.
    Based on the limited trading conducted by the IFUS Traders, the 
extremely limited overlap in products traded and the controls that will 
be put in place, the Exchange does not believe that the proposed 
relocation of the IFUS Traders to the Blue Room raises any regulatory 
concerns.
    The Exchange also proposes to amend Rule 6A--Equities, which 
defines the term ``Trading Floor'' to update the definition. Rule 6A--
Equities provides that the term ``Trading Floor'' means the restricted-
access physical areas designated by the Exchange for the trading of 
securities, commonly known as the ``Main Room'' and the ``Garage.'' 
Rule 6A--Equities further provides that 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,'' 
which, for the purposes of the Exchange's Rules, are referred to as the 
``NYSE Amex Options Trading Floor.''
    The Exchange proposes to amend Rule 6A--Equities to add ``Blue 
Room'' to the definition of ``Trading Floor'' and remove that term from 
the definition of ``NYSE Amex Options Trading Floor''.
    The Exchange notes that the proposed rule change would not have an 
impact on the Exchange's trading rules or the IFUS rules, nor would it 
have an impact on the Exchange's or IFUS' authority to bring a 
disciplinary action for violation of those rules.
2. Statutory Basis
    The Exchange believes that the Proposal is consistent with the 
provisions of Section 6 of the Act,\12\ in general, and Section 6(b)(5) 
of the Act,\13\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that the 
Proposal is designed to remove impediments to and perfect the mechanism 
of a free and open market and a national market system. The Exchange 
believes that the proposed rule change will permit the Exchange to 
allow IFUS Traders to utilize space on the trading floor within the 
existing regulatory framework at the Exchange, to efficiently and 
effectively conduct business in their respective area consistent with 
maintaining

[[Page 14390]]

necessary distinctions between the two organizations. Moreover, the 
proposed rule changes will impose restrictions designed to prevent 
inappropriate information sharing by and between members and member 
firm employees on the Trading Floor of the Exchange and the IFUS 
Traders in the proposed IFUS Trading area. The Exchange believes that 
updating the references in the Exchange rules to reflect the correct 
use of the Exchange Trading Floor may help eliminate potential 
confusion among investors and other market participants on the Exchange 
who may not be aware of which portion of the trading space will be used 
as the Trading Floor.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5) [sic].
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the Proposal will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal is designed to 
promote competition by providing the Exchange the additional 
flexibility to maximize the use of its trading floor space.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2013-13 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-NYSEMKT-2013-13. This 
file number should be included on the subject line if email 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 Section, 100 F Street 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office and 
on its Internet Web site at www.nyse.com. 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-NYSEMKT-2013-13 and should be submitted 
on or before March 26, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05018 Filed 3-4-13; 8:45 am]
BILLING CODE 8011-01-P


