[Federal Register Volume 84, Number 230 (Friday, November 29, 2019)]
[Notices]
[Pages 65844-65845]
[FR Doc No: 2019-25828]

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DEPARTMENT OF LABOR

Occupational Safety and Health Administration

[Docket No. OSHA-2012-0004]

The Cadmium in Construction Standard; Extension of the Office of
Management and Budget's (OMB) Approval of Information Collection
(Paperwork) Requirements

AGENCY: Occupational Safety and Health Administration (OSHA), Labor.

ACTION: Request for public comments.

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SUMMARY: OSHA solicits public comments concerning the proposal to
extend the Office of Management and Budget's (OMB) approval of the
information collection requirements specified in the Cadmium in
Construction Standard.

DATES: Comments must be submitted (postmarked, sent, or received) by
January 28, 2020.

ADDRESSES:
    Electronically: You may submit comments and attachments
electronically at http://www.regulations.gov, which is the Federal
eRulemaking Portal. Follow the instructions online for submitting
comments.
    Facsimile: If your comments, including attachments, are not longer
than 10 pages you may fax them to the OSHA Docket Office at (202) 693-
1648.
    Mail, hand delivery, express mail, messenger, or courier service:
When using this method, you must submit your comments and attachments
to the OSHA Docket Office, Docket No. OSHA-2012-0004, Occupational
Safety and Health Administration, U.S. Department of Labor, Room N-
3653, 200 Constitution Avenue NW, Washington, DC 20210. Deliveries
(hand, express mail, messenger, and courier service) are accepted
during the Docket Office's normal business hours, 10:00 a.m. to 3:00
p.m., ET.
    Instructions: All submissions must include the agency name and the
OSHA docket number (OSHA-2012-0004) for the Information Collection
Request (ICR). All comments, including any personal information you
provide, such as social security numbers and dates of birth, are placed
in the public docket without change, and may be made available online
at http://www.regulations.gov. For further information on submitting
comments see the ``Public Participation'' heading in the section of
this notice titled SUPPLEMENTARY INFORMATION.
    Docket: To read or download comments or other material in the
docket, go to http://www.regulations.gov or the OSHA Docket Office at
the above above. All documents in the docket (including this Federal
Register notice) are listed in the http://www.regulations.gov index;
however, some information (e.g., copyrighted material) is not publicly
available to read or download from the website. All submissions,
including copyrighted material, are available for inspection and
copying at the OSHA Docket Office. You also may contact Theda Kenney at
the below phone number to obtain a copy of the ICR.

FOR FURTHER INFORMATION CONTACT: Theda Kenney or Seleda Perryman,
Directorate of Standards and Guidance, OSHA, U.S. Department of Labor;
telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    The Department of Labor, as part of a continuing effort to reduce
paperwork and respondent (i.e., employer) burden, conducts a
preclearance consultation program to provide the public with an
opportunity to comment on proposed and continuing information
collection requirements in accordance with the Paperwork Reduction Act
(PRA) (44 U.S.C. 3506(c)(2)(A)). This program ensures that information
is in the desired format, reporting burden (time and costs) is minimal,
collection instruments are clearly understood, and OSHA's estimate of
the information collection burden is accurate. The Occupational Safety
and Health Act of

1970 (the OSH Act) (29 U.S.C. 651 et seq.) authorizes information
collection by employers as necessary or appropriate for enforcement of
the OSH Act or for developing information regarding the causes and
prevention of occupationl injuries, illnesses, and accidents (29 U.S.C.
657). The OSH Act also requires that OSHA obtain such information with
minimum burden upon employers, especially those operating small
businesses, and to reduce to the maximum extent feasible unnecessary
duplication of effort in obtaining information (29 U.S.C. 657).
    The collection of information requirements specified in the Cadmium
in Construction Standard (29 CFR 1926.1127) protect workers from the
adverse health effects that may result from their exposure to cadmium.
The major collection of information requirements of the Standard
include: Conducting worker exposure monitoring, notifying workers of
their cadmium exposures, implementing a written compliance program,
implementing medical surveillance of workers, providing examining
physicians with specific information, ensuring that workers receive a
copy of their medical surveillance results, maintaining workers'
exposure monitoring and medical surveillance records for specific
periods, and providing access to these records by the worker who is the
subject of the records, the worker's representative, and other
designated parties.

II. Special Issues for Comment

    OSHA has a particular interest in comments on the following issues:
     Whether the proposed information collection requirements
are necessary for the proper performance of the agency's functions,
including whether the information is useful;
     The accuracy of OSHA's estimate of the burden (time and
costs) of the information collection requirements, including the
validity of the methodology and assumptions used;
     The quality, utility, and clarity of the information
collected; and
     Ways to minimize the burden on employers who must comply;
for example, by using automated or other technological information
collection and transmission techniques.

III. Proposed Actions

    The agency is not seeking a burden-hour adjustment and will
summarize any comments submitted in response to this notice and will
include this summary in the request to OMB.
    Type of Review: Extension of a currently approved collection.
    Title: Cadmium in Construction (29 CFR 1926.1127).
    OMB Number: 1218-0186.
    Affected Public: Business or other for-profits.
    Number of Respondents: 10,000.
    Frequency of Response: On occasion; Quarterly; Semi-annually;
Annually.
    Total Responses: 258,250.
    Average Time per Response: Varies from 5 minutes (.08) for an
employer to notify a worker with exposure monitoring results to 1.5
hours to administer worker medical examinations.
    Estimated Total Burden Hours: 33,720.
    Estimated Cost (Operation and Maintenance): $2,082,199.

IV. Public Participation--Submission of Comments on This Notice and
Internet Access to Comments and Submissions

    You may submit comments in response to this document as follows:
(1) Electronically at http://www.regulations.gov, which is the Federal
eRulemaking Portal; (2) by facsimile; or (3) by hard copy. All
comments, attachments, and other material must identify the agency name
and the OSHA docket number for this ICR (Docket No. OSHA-2012-0004).
You may supplement electronic submissions by uploading document files
electronically. If you wish to mail additional materials in reference
to an electronic or facsimile submission, you must submit them to the
OSHA Docket Office (see the section of this notice titled ADDRESSES).
The additional materials must clearly identify your electronic comments
by your name, date, and the docket number so the agency can attach them
to your comments.
    Because of security procedures, the use of regular mail may cause a
significant delay in the receipt of comments. For information about
security procedures concerning the delivery of materials by hand,
express delivery, messenger, or courier service, please contact the
OSHA Docket Office at<PHONE_NUMBER> TTY<PHONE_NUMBER>).
    Comments and submissions are posted without change at http://www.regulations.gov. Therefore, OSHA cautions commenters about
submitting personal information such as your social security number and
date of birth. Although all submissions are listed in the http://www.regulations.gov index, some information (e.g., copyrighted
material) is not publicly available to read or download from this
website. All submissions, including copyrighted material, are available
for inspection and copying at the OSHA Docket Office. Information on
using the http://www.regulations.gov website to submit comments and
access the docket is available at the website's ``User Tips'' link.
Contact the OSHA Docket Office for information about materials not
available from the website, and for assistance in using the internet to
locate docket submissions.

V. Authority and Signature

    Loren Sweatt, Principal Deputy Assistant Secretary of Labor for
Occupational Safety and Health, directed the preparation of this
notice. The authority for this notice is the Paperwork Reduction Act of
1995 (44 U.S.C. 3506 et seq.) and Secretary of Labor's Order No. 1-2012
(77 FR 3912).

    Signed at Washington, DC, on November 22, 2019.
Loren Sweatt,
Principal Deputy Assistant Secretary of Labor for Occupational Safety
and Health.
[FR Doc. 2019-25828 Filed 11-27-19; 8:45 am]
 BILLING CODE 4510-26-P


[Federal Register Volume 77, Number 122 (Monday, June 25, 2012)]
[Notices]
[Pages 37894-37895]
[FR Doc No: 2012-15403]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings 1

    Take notice that the Commission received the following electric
corporate filings:

    Docket Numbers: EC12-86-000.
    Applicants: PacifiCorp.
    Description: Amendment to Application of PacifiCorp.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5170.
    Comments Due: 5 p.m. ET 6/25/12.

    Docket Numbers: EC12-111-000.
    Applicants: Rocky Mountain Power, LLC, San Joaquin Cogen, LLC.
    Description: Application for Authorization for Disposition of
Jurisdictional Facilities and Request for Expedited Action of Rocky
Mountain Power, LLC, et al.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5112.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: EC12-112-000.
    Applicants: High Majestic Wind II, LLC, High Majestic
Interconnection Services, LLC.
    Description: FPA Section 203 Application of High Majestic Wind II,
LLC and High Majestic Interconnection Services, LLC.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5175.
    Comments Due: 5 p.m. ET 7/6/12.

    Take notice that the Commission received the following electric
rate filings:

    Docket Numbers: ER12-2047-000.
    Applicants: NorthWestern Corporation.
    Description: Service Agreement No. 277--Ravalli County Electric
Cooperative, Inc. to be effective 6/14/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5002.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2048-000.
    Applicants: PJM Interconnection, L.L.C.
    Description: Original Service Agreement No. 3330; Queue No. X1-095
to be effective 6/6/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5051.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2049-000.
    Applicants: PJM Interconnection, L.L.C.
    Description: Original Service Agreement No. 3329; Queue No. X1-049
to be effective 6/6/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5062.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2050-000.
    Applicants: PJM Interconnection, L.L.C.
    Description: Original Service Agreement No. 3331; Queue No. X1-100
to be effective 6/6/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5070.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2051-000.
    Applicants: SPS Alpaugh 50, LLC.
    Description: Application for Market-Based Rate Authority (Re-File)
to be effective 8/14/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5074.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2052-000.
    Applicants: SPS Alpaugh North, LLC.

    Description: Application for Market-Based Rate Authority (Re-File)
to be effective 8/14/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5075.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2053-000.
    Applicants: Southern California Edison Company.
    Description: Amended and New Connection Agmts to the El Dorado
System with LADWP, NPC, and SRP to be effective 6/16/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5092.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2054-000.
    Applicants: Southwest Power Pool, Inc.
    Description: 2432 TPW Madison, LLC GIA to be effective 5/18/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5119.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2055-000.
    Applicants: San Gorgonio Farms, Inc.
    Description: FERC Electric Tariff Volume No. 1 to be effective 6/
15/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5124.
    Comments Due: 5 p.m. ET 7/6/12.

    Docket Numbers: ER12-2056-000.
    Applicants: Avista Corporation.
    Description: Avista Grant Interconnect and Operating Agreement to
be effective 6/18/2012.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5140.
    Comments Due: 5 p.m. ET 7/6/12.

    Take notice that the Commission received the following electric
securities filings:

    Docket Numbers: ES12-45-000.
    Applicants: Golden Spread Electric Cooperative, Inc.
    Description: Application of Golden Spread Electric Cooperative,
Inc. for Authorization to Issue Securities Pursuant to Section 204 of
the Federal Power Act.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5180.
    Comments Due: 5 p.m. ET 7/6/12.

    Take notice that the Commission received the following qualifying
facility filings:

    Docket Numbers: QF12-413-000.
    Applicants: Houweling Nurseries Oxnard, Inc.
    Description: Houweling Nurseries Oxnard, Inc. submits FERC Form 556
Notice of Certification of Qualifying Facility Status for a Small Power
Production or Cogeneration Facility.
    Filed Date: 06/15/2012.
    Accession Number: 20120615-5178.
    Comments Due: None Applicable.

    Take notice that the Commission received the following PURPA
210(m)(3) filings:

    Docket Numbers: QM12-4-000.
    Applicants: Public Service Company of New Mexico.
    Description: Application of Public Service Company of New Mexico
for Relief from Mandatory Purchase Obligation.
    Filed Date: 6/15/12.
    Accession Number: 20120615-5179.
    Comments Due: 5 p.m. ET 7/13/12.

    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00
p.m. Eastern time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, service, and qualifying
facilities filings can be found at: http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other information, call<PHONE_NUMBER>
(toll free). For TTY, call<PHONE_NUMBER>.

    Dated: June 18, 2012.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2012-15403 Filed 6-22-12; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register: July 3, 2008 (Volume 73, Number 129)]
[Notices]
[Page 38274-38284]
[DOCID:fr03jy08-114]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58052; File No. SR-NYSE-2008-45]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending NYSE Rule 98 and
Related Rules To Redefine Specialist Operations at the NYSE

June 27, 2008.
    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 June 11, 2008, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially 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 Rule 98 and related rules to
redefine specialist operations at the NYSE. The text of the proposed
rule change is available at NYSE's principal office, the Commission's
Public Reference Room, and http://www.nyse.com.

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 Exchange 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 aspects 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 NYSE is proposing to amend Rule 98 to reduce the regulatory
burdens imposed by the rule and to provide flexibility to member
organizations as to how they can structure their specialist operations
and manage their risks. In particular, because of changes to the
marketplace, including changes to the specialist's role as a result of
the increased use of electronic trading, the Hybrid Market[supreg], and
Regulation NMS, as well as technological advances in surveillance and
internal controls, the NYSE believes that current Rule 98 imposes
unnecessary restrictions on member organizations seeking to engage in
specialist operations at the Exchange.
    Accordingly, the NYSE proposes revising Rule 98 in its entirety to
provide a framework for specialist operations that meet both the
regulatory concerns of the current rule and the reality of today's
marketplace. In addition to changes to Rule 98, the NYSE proposes
making conforming changes to other NYSE rules that rely on Rule 98
exemptions for approved persons. As discussed in further detail below,
the revisions to Rule 98 would include: (1) Redefining the persons to
whom Rule 98 would apply; (2) allowing specialist operations to be
integrated into better capitalized member organizations; (3) permitting
a specialist unit to share non-trading related services with its parent
member organization or approved persons; and (4) providing flexibility
to member organizations and their approved persons in how to conduct
risk management of specialist operations.
    To achieve these changes, the NYSE proposes shifting the paradigm
of Rule 98 from one that assumes that the approved persons of a
specialist member organization are subject to certain NYSE rules unless
an exemption is provided to one where NYSE Regulation, Inc. (``NYSE
Regulation'') reviews whether a trading unit that proposes to engage in
specialist operations is sufficiently walled off from either its
approved persons or parent member organization. Under the new paradigm,
rules governing specialist operations, such as Rule 104, will apply
only to the unit approved to engage in specialist operations at the
NYSE.
    As the NYSE market model continues to evolve, the NYSE believes
that the proposed amendments to Rule 98 will provide a platform from
which to further modernize specialist operations.

A. Background

    The NYSE adopted Rule 98 in 1987 in response to consolidation in
the securities industry, when NYSE specialist firms that had been
independent member-owned entities increasingly became subsidiaries of
larger, better capitalized broker-dealers. Because of the specialists'
unique position within the markets, and the restrictions on dealers
under section 11(a) of the Act,\3\ the Exchange crafted a rule that
governed how larger member organizations could be connected to
specialist firms.
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    \3\ See 15 U.S.C. 78k(a).
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    The rule establishes a functional separation between the specialist
organization and the rest of the broker-dealer. The purpose of that
separation was to eliminate or control conflicts of interest between
the specialist's actions as market maker in an issuer's securities and
other interactions among the specialist's parent or sibling entities
and the issuer.
    In its current form, Rule 98 applies to specialist units and so-
called ``approved persons'' of a specialist organization--that is,
entities that are in a control relationship with a specialist
organization, or share a common corporate parent with the specialist
organization and are engaged in a kindred business.\4\ Such entities
are, by virtue of their association with the specialist organization,
subject to the rules and restrictions applicable to specialists. These
include, among other things, restrictions on the approved persons'
ability to trade in specialty stock options, restrictions on certain of
their business transactions with issuers for whom the specialist
organization is the registered specialist, and limits on the amount of
securities of such issuers that the specialist and approved persons may
own in the aggregate.
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    \4\ See NYSE Rules 2(d) and 304(e).
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    So as not to unreasonably hamstring a broker-dealer organization
overall, Rule 98(b) provides that an approved person may seek Exchange
approval to be exempted from most of those restrictions. To obtain a
Rule 98(b) exemption, the approved person must establish policies and
procedures that are consistent with the Guidelines for Approved Persons
Associated with a Specialist's Member Organization (``Rule 98
Guidelines''). These guidelines set out in detail how approved persons
and associated specialist organizations should structure and conduct
their respective businesses in order to ensure complete separation
between the specialist organization and the rest of the member
organization.
    Among other things, the Rule 98 Guidelines provide that the
specialist member organization be housed in a separate corporate entity
and broker-dealer from its approved persons. Further, to ensure that
information does not flow improperly from the specialist organization
to approved persons and that approved persons do not have undue
influence over particular trading decisions by the specialist, the
guidelines establish ``functional regulations'' that enforce the
required separateness. These include requirements that the
organizations maintain separate books and records, separate financial
accounting, and separate required capital, and that each organization
have in place procedures to safeguard confidential information derived
from business interactions with the issuer or contained in draft
research reports prepared by the approved person.
    The assumption that all entities affiliated with a specialist are
subject to specialist rules unless they have obtained a Rule 98(b)
exemption creates a substantial administrative burden on specialist
organizations and their approved persons: Each approved person of a
specialist organization must establish and continually update a
separate exemption under Rule 98 if it wishes to engage in activity
that would otherwise be restricted under applicable specialist rules.
This burden creates a real and substantial barrier to entry for new
broker-dealers who may want to establish specialist units.
    In the face of significant structural changes to the NYSE and the
equity markets, and in recognition of the vastly different competitive
landscape compared to 1987, the Exchange believes that Rule 98 must be
updated in order to provide both existing and prospective specialist
firms with the necessary tools to remain competitive while at the same
time meeting their obligations as specialists at the NYSE. The proposed
changes to Rule 98 also address the Exchange's desire to ease the
burdens of a new member organization seeking entry to supplement the
six specialist firms currently trading on the Exchange, or the very
real possibility of such a firm replacing one or more of the existing
specialist firms if they withdraw from the market. Concerning the
latter possibility, the NYSE notes that this is not just a theoretical
concern: Within the past six months, two specialist firms have already
withdrawn.

    To address these very real concerns, the Exchange proposes to
fundamentally amend Rule 98. The proposed rule is described in detail
below, but at root, the amendment reverses the assumption that all
affiliated entities of a specialist firm are automatically governed by
the rules applicable to specialists, and shifts the focus of the rule
onto the specialist unit rather than the approved person.
    As part of this restructuring, the NYSE proposes to eliminate the
prescriptive approach of the current rule and move towards a more
principle-based approach. The NYSE believes that a principle-based rule
closely overseen by NYSE Regulation can achieve the same goals as a
rule that attempts to enumerate every possible situation that must be
avoided. For that, the proposed rule still requires NYSE Regulation to
review whether a specialist unit's policies and procedures are
reasonably designed to protect confidential information. However, the
rule provides sufficient flexibility so that as the type of information
that needs to be protected and the manner in which such information can
be protected evolves with changes to the trading environment, so too
can the manner in which NYSE Regulation conducts its review.
    The NYSE believes that the proposed changes to Rule 98 will
minimize regulatory burdens and barriers to entry while at the same
time provide the necessary level of regulatory scrutiny to ensure that
confidential information continues to be protected. In addition, the
proposed changes will reduce the regulatory burdens on existing
specialist member organizations to enable them to continue such
operations at lower cost.

B. Proposed Amendments to Rule 98

1. Applicability of Rule 98
    Under the proposed rule, a member organization seeking to operate a
specialist unit, either as its entire business or as one of its trading
units, would need to apply for and be approved by NYSE Regulation
before it can begin, or if applicable, continue operations as a
specialist unit. As described in more detail below, NYSE Regulation
will review whether a proposed specialist unit has: (1) Adopted written
policies and procedures governing the conduct and supervision of the
business handled by the specialist unit; (2) established a process for
regular review of such written policies and procedures; and (3)
implemented controls and surveillances reasonably designed to prevent
and detect violations of those policies and procedures. Among other
things, these policies and procedures must be reasonably designed to
protect specialist confidential information and non-public order
information, as defined below.
    Once approved, the NYSE specialist rules, as defined below,
including Rule 104, would generally only be applicable to the approved
specialist unit and not to its approved persons or, if applicable,
parent member organization. As discussed in more detail below, on a
case-by-case basis, NYSE Regulation will assess whether an integrated
proprietary aggregation unit that manages the risk for a specialist
unit could be subject to the specialist rules if the integrated
proprietary aggregation unit causes the specialist unit to violate its
obligations.
    The NYSE recognizes that despite the proposed rule changes, an
existing specialist member organization may determine to either keep
its current operational structure or wait before it implements changes
to its operational structure, as permitted by the proposed amended
rule. Because current Rule 98 would still be applicable to those
specialist units that would not have yet sought the relief available
under proposed Rule 98, the Exchange proposes keeping current Rule 98
in its rulebook as ``Rule 98 (Former)'' until such time as all
specialist units are approved pursuant to proposed Rule 98(c). Any new
entrant to become a specialist unit would be required to comply with
proposed Rule 98; current Rule 98 procedures would not be available to
new entrants to the specialist business. As proposed, current Rule
98(b) exemptive relief would be available only so long as the member
organization and its approved persons have not materially changed their
operational structure, internal controls, or compliance and audit
procedures. In such case, the current Rule 98, i.e. , Rule 98 (Former),
would govern the specialist member organization and its approved
persons.\5\ Any significant changes to the status quo after the
effective date of the proposed new rule would require the member
organization to apply for approval pursuant to the procedures described
below.
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    \5\ As discussed in more detail below, in addition to amending
Rule 98, the Exchange proposes to amend related rules that reference
the current Rule 98 exemptions for approved persons. To ensure that
member organizations operating pursuant to Rule 98 (Former) are
subject to the appropriate rules, the Exchange proposes to maintain
two forms of the related rules: the amended version and an otherwise
unchanged version, except for the title ``(Former)'' added to the
unamended version of the rule or, if applicable, the section
affected by the proposed rule change. Once all member organizations
are subject to the proposed Rule 98, the Exchange will file to
delete any ``Former'' versions of Rule 98 and the related rules or
sections.
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    The Exchange recognizes that an existing specialist member
organization that does not implement structural changes to its
operations that would require it to apply for approval under the
proposed rule may still need certain relief available under the
proposed version of the Rule. Accordingly, the Exchange proposes that a
member organization operating pursuant to Rule 98 (Former) may apply
for relief pursuant to proposed Rule 98(e), which concerns sharing non-
trading related services, without first obtaining approval under other
provisions of proposed Rule 98. In such situation, the specialist
member organization would need to apply for approval from NYSE
Regulation to share non-trading related services, as specified in
proposed Rule 98(e). If approved, except for the sharing of non-trading
related services, such member organization and its approved persons
would continue to be subject to Rule 98 (Former) as well as the
``(Former)'' versions of NYSE rules that reference exemptions from Rule
98 for approved persons, as discussed in more detail below.
    Once approved pursuant to proposed Rule 98 to operate a specialist
unit, share non-trading related services, or engage in risk management,
any material changes in how a specialist unit operates its business
would require the specialist unit to resubmit its revised written
policies and procedures to NYSE Regulation for review. For example, if
a specialist unit is approved to operate as a stand-alone aggregation
unit and would like to change its business operations to include the
specialist unit as part of a larger integrated proprietary aggregation
unit, as permitted by proposed Rule 98(d), such change would require
pre-approval.
2. Proposed Definitions
    To ensure clarity, the proposed amendments include a number of
defined terms that are applicable throughout the rule. These
definitions are designed to provide a level of scalability to the rule
so that as the NYSE market model evolves, the definitions used
throughout the rule will have common meaning. Among the proposed
definitions are:
     ``Specialist unit''--this definition is intended to apply
to any trading unit that is seeking approval to operate as a specialist
at the Exchange. As proposed, a specialist unit could be a stand-alone
member organization, an aggregation unit within a member organization,
or a trading unit (or ``desk'') within a larger

aggregation unit. Regardless of which corporate structure a member
organization chooses, the term ``specialist unit'' would refer to the
unit that is responsible for specialist activities at the Exchange. If
approved pursuant to proposed Rule 98(c), a specialist unit would be
eligible for allocations under NYSE Rule 103B and be subject to
specialist rules. For purposes of Exchange rules, the term ``specialist
unit'' is synonymous with the term ``specialist organization'' or
``specialist member organization.''
     ``Specialist's account''--this definition refers to any
account through which a specialist unit trades at the Exchange.
Sometimes referred to as a dealer account, this revised definition
would encompass any of the variously-defined accounts that a specialist
unit may use to trade at the Exchange.
     ``Specialist rules''--this definition refers to those
rules that govern specialist conduct or trading at the Exchange.
Currently, the specialist rules include, among others, Rules 104, 105,
and 113, but as the rules at the Exchange change, these rule
designations may change. Accordingly, so that proposed Rule 98 evolves
along with changes to other rules, this proposed definition does not
identify specific rules.
     ``Specialist confidential information''--this definition
concerns the principal or proprietary trading activity of a specialist
unit at the Exchange in the securities allocated to it pursuant to Rule
103B, including the unit's positions in those securities, decisions
relating to trading or quoting in those securities, and any algorithm
or computer system that is responsible for such trading activity and
that interface with Exchange systems, such as the specialist
application protocol interface (``specialist API'').\6\ The definition
does not include information about non-public order information, as
described below.
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    \6\ The specialist API is the electronic link between specialist
trading algorithms and the NYSE Display Book[supreg]. Via this
interface, specialist organization trading algorithms send quoting
and trading messages to the Exchange for implementation in the NYSE
Display Book[supreg], and the Exchange transmits information
necessary to acting as a specialist to specialist organizations.
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     ``Non-public order''--this definition refers to any
information relating to order flow at the Exchange, including verbal
indications of interest made with an expectation of privacy, electronic
order interest, e-quotes, reserve interest, or information about
imbalances at the Exchange, that is not publicly-available on a real-
time basis via an Exchange-provided datafeed, such as NYSE
OpenBook[supreg], or otherwise publicly-available. The definition also
encompasses information regarding a reasonably imminent non-public
transaction or series of transactions. For example, if in requesting
information about the state of the Book, a Floor broker informs the
specialist about an order that he or she has, such information would
fall under the definition of ``non-public order.'' As defined, non-
public orders include order information at the open, any re-openings,
the close, when the security is trading in a slow mode (e.g., in a Gap
quote or LRP situation), and any other information in the NYSE Display
Book[supreg] \7\ that is not available via NYSE OpenBook[supreg].\8\ As
proposed, the linchpin to the definition of ``non-public order'' is
that it is information not publicly available on a real-time basis.
Currently, specialists have unique access to certain non-public order
information. However, in its proposed new market model, the Exchange
will be proposing to change the specialist's access to such non-public
order information. The proposed definition is intended to take into
consideration such future changes so that as the specialist's or
specialist API's access to non-public order information changes, so
will the specialist unit's responsibilities to protect that information
change, but without having to revise Rule 98.
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    \7\ The Display Book system is an order management and execution
facility. The Display Book system receives and displays orders to
the specialists, contains the Book, and provides a mechanism to
execute and report transactions and publish results to the
Consolidated Tape. The Display Book system is connected to a number
of other Exchange systems for the purposes of comparison,
surveillance, and reporting information to customers and other
market data and national market systems.
    \8\ NYSE OpenBook[supreg] provides aggregate limit-order volume
that has been entered on the Exchange at price points for all NYSE-
traded securities.
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     ``Investment banking department'' and ``Research
department''--these definitions refer to the same departments that are
defined as such in NYSE Rule 472 and NASD Rule 2711.
     ``Customer-facing department''--this definition is
intended to encompass any department, division, market-making desk,
aggregation unit, or trading desk that receives, routes, or executes
orders for customer execution or clearing accounts, regardless of
whether such unit also engages in principal or proprietary trading. A
hallmark of this definition is that a customer has an expectation of
confidentiality and best execution on its behalf, which could include a
customer that is another broker-dealer. Examples of trading desks that
would meet this definition include a Nasdaq market-making desk and most
block-trading desks. However, this definition is not intended to
include an aggregation unit that solely conducts proprietary trading or
proprietary market making (sometimes referred to as electronic market
making).
     ``Aggregation unit''--this definition adopts the standard
of Rule 200(f) of Regulation SHO.\9\ The proposed rule uses this term
throughout to refer to any department, division, unit, or trading desk
that has been segregated pursuant to the requirements of Regulation
SHO. The NYSE believes that the Regulation SHO requirements for
establishing an aggregation unit, including any requirements for
information barriers, would be sufficient for segregating a specialist
unit's operations from the remainder of a member organization or its
approved persons.
---------------------------------------------------------------------------

    \9\ See 17 CFR 242.200(f).
---------------------------------------------------------------------------

     ``Non-trading related services''--this definition refers
to the type of support services that a specialist unit may share with
its parent member organization or approved person. The core of the
proposed definition is that the type of services are not related to
making decisions about the day-to-day trading of the specialist unit or
provide trading support to such activity, such as by a trading
assistant or specialist clerk. Examples of non-trading related services
include stock loan (so long as consistent with Regulation SHO),
clearing and settlement, controllers (for financial accounting
purposes), technology support, and personnel who develop applications
and algorithmic models.
     ``Integrated proprietary aggregation unit''--this
definition is intended to encompass any aggregation unit that has a
trading objective to engage in proprietary trading, including
proprietary market-making activities. As defined, an integrated
proprietary aggregation unit must not include any activities that would
be performed by an investment banking, research, or customer-facing
department. Subject to proposed Rule 98(d), a specialist unit could be
part of a member organization's integrated proprietary aggregation
unit. Alternatively, an approved person or member organization could
maintain an integrated proprietary aggregation unit separate from the
specialist unit. In such case, the definition of an integrated
proprietary aggregation unit becomes relevant in connection with
proposed Rule 98(f)(3) and the ability of an approved person to engage
in risk management activities on behalf of the

specialist unit of an associated member organization.
     ``Related products''--this definition refers to any
derivative instrument that is related to a security allocated to a
specialist unit. It can include options, warrants, hybrid securities,
single-stock futures, security-based swap agreements, a forward
contract, or any other contract that is exercisable into or whose price
is based upon or derived from a security listed at the Exchange. The
list referenced in the definition is not intended to be exhaustive and
the definition is intended to cover any existing or future products
that could be related to a security listed at the Exchange.
3. Proposed Rule 98(c): Approval to Operate a Specialist Unit
    Pursuant to proposed Rule 98(c), a member organization must obtain
prior written approval from NYSE Regulation before it can operate a
specialist unit. For approval, a specialist unit must demonstrate that
it has: (i) Adopted and implemented comprehensive written procedures
and guidelines governing the conduct and supervision of business
handled by the specialist unit; (ii) established a process for regular
review of such written policies and procedures; and (iii) implemented
controls and surveillances reasonably designed to prevent and detect
violations of these procedures and guidelines.
    As proposed, these policies and procedures must be reasonably
designed to provide that the specialist unit will maintain the
confidentiality of both specialist confidential information and non-
public orders. The proposed rule enumerates certain bright-line
divisions that the specialist unit must maintain, including information
barriers between the specialist unit and investment banking, research,
and customer-facing departments and approved persons. Such information
barriers should guarantee confidentiality two ways: the specialist unit
cannot access material non-public information about securities
allocated to that unit from either its approved persons or non-
specialist operations of a parent member organization and vice versa.
    With respect to a specialist unit's internal controls and
surveillances, NYSE Regulation will be reviewing such surveillance
plans to determine whether they are reasonably designed to protect
information as required under the proposed rule. Where feasible, NYSE
Regulation will expect specialist units to use automated surveillances
to check for breaches of the information barriers required by the
proposed rule. As with the current rule, NYSE Regulation will also
review whether a member organization has implemented internal audit
procedures relating to compliance with the proposed Rule 98 policies
and procedures.
    In addition to the specific information barriers enumerated in the
proposed rule, if a member organization proposes to operate a
specialist unit as a stand-alone unit, the Exchange proposes importing
the requirements of a Regulation SHO independent trading unit for
specialist units. Accordingly, as required by Rule 200(f) of Regulation
SHO,\10\ NYSE proposes requiring a specialist unit to have a written
plan of organization that specifies its trading objectives and meet all
of the other requirements of an independent trading unit under
Regulation SHO. If a specialist unit seeks to avail itself of the
exemption from NYSE Rule 105 under proposed Rule 98(f)(1), that written
plan of organization would need to include its trading objectives for
trading in related products.
---------------------------------------------------------------------------

    \10\ See 17 CFR part 242.200(f).
---------------------------------------------------------------------------

    As with the current rule, proposed Rule 98 would require the
specialist unit to maintain net capital sufficient to meet the
requirements of NYSE Rule 104.21. The NYSE believes that if a
specialist unit is integrated within a larger member organization, the
net capital requirement can be met by having the requisite capital
amount allocated to the specialist unit by the member organization.
    Despite the segregations required by the rule, the NYSE believes
that senior managers who are not dedicated to the specialist unit and
are associated with either an approved person or a member organization
that runs a specialist unit should still be able to provide management
oversight to the specialist unit. As proposed, the revised rule is not
intended to be more restrictive than the current rule, which permits an
approved person to provide general oversight over its associated
specialist member organization. The proposed rule instead shifts from a
detailed list of specific types of oversight that is permissible to a
principle-based approach that focuses on protecting specialist
confidential information and non-public order information. As with the
current rule, as proposed, senior management oversight of a specialist
unit should not conflict with or compromise in any way with the
specialist unit's market-making obligations.
    Proposed Rule 98(c)(2)(E) provides guidance on how a member
organization or approved person should handle situations where a senior
manager is called upon for risk management purposes and in connection
with that role, gains access to specialist confidential information or
non-public order information. The Exchange notes that non-public order
information could become stale if the order is executed or cancelled
without the specialist's knowledge. To ensure that there is no misuse
of such information, whether material or not, the senior manager must
not make (directly or indirectly) specialist confidential information
or non-public order information available to the persons or systems
responsible for making trading decisions in aggregation units,
departments, divisions, or trading desks that are not part of the
specialist unit, including the customer-facing departments. The senior
manager also must not use such information to directly or indirectly
influence the day-to-day trading decisions of the other aggregation
units of the member organization or approved person with respect to the
securities allocated to the specialist unit.
    The NYSE believes that these restrictions on the use of specialist
confidential information and non-public order information are similar
to how broker-dealers currently handle situations where a senior
manager has oversight over multiple aggregation units and in such
capacity, becomes privy to confidential information of one aggregation
unit. For such situations, broker-dealers have already developed
procedures for protecting confidential information and the NYSE
believes that such procedures should be reasonable for the oversight of
a specialist unit as well.
    The Exchange notes that although the proposed amendments to Rule 98
eliminate the exemption process under current Rule 98(b), the review
that NYSE Regulation would conduct when approving a specialist unit
would be as rigorous as the current review for obtaining an exemption,
just simply a different focus of what is reviewed. As with the current
Rule 98 exemption process, staff from both the Market Surveillance
Division of NYSE Regulation as well as relevant staff from the
Financial Industry Regulatory Authority, Inc. (``FINRA''), who are
responsible for the routine examinations of specialist units, would be
involved in reviewing a specialist unit's written policies and
procedures and proposed automated surveillances and controls.\11\
---------------------------------------------------------------------------

    \11\ In connection with the July 2007 transfer of certain member
firm regulation functions from NYSE Regulation to FINRA, NYSE
Regulation and FINRA entered into a regulatory services agreement
(``RSA'') whereby FINRA agreed to provide NYSE Regulation with
certain services relating to NYSE's retained responsibilities to
examine for compliance with NYSE rules that govern trading on or
through the systems and facilities of the Exchange. In particular,
pursuant to the RSA, FINRA participates in the current Rule 98(b)
exemption process and examines specialist firms for compliances with
that rule. As proposed, FINRA would continue to participate in the
approval process under the proposed Rule 98 and examine specialist
units for compliance with the rule.

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

    For existing specialist firms, the initial approval process
associated with any changes to how they operate may require upfront
work to ensure that the specialist unit's policies and procedures are
reasonably designed to meet the requirements of the proposed rule.
However, unlike the current rule, as proposed, specialist units would
be relieved of the requirement to update any written statements to the
Exchange for changes in approved persons or dually-affiliated
employees. Once approved, NYSE Regulation and FINRA would examine
whether a specialist unit's policies and procedures continue to meet
the rule requirements and whether the implemented controls and
automated surveillances are functioning as designed. As part of such
examination review, NYSE Regulation and FINRA will conduct on-site
reviews of a specialist unit to review for breaches of the controls or
surveillances. And, as noted above, if the specialist unit proposes
making any material changes to its operations, it would need to seek
additional approval before it can change its operations.
4. Proposed Rule 98(d): Operating a Specialist Unit Within an
Integrated Proprietary Unit
    One of the goals of proposed Rule 98 is to provide a member
organization with greater flexibility in how it manages the risk of a
specialist unit. As discussed below, in proposed Rule 98(f), the NYSE
proposes providing member organizations with an array of options of how
to conduct risk management. The NYSE believes that the flexibility
afforded by these options will meet the varying business models of the
member organizations currently operating or seeking to operate a
specialist unit at the Exchange.
    As discussed in more detail below, one proposed risk management
model would be to permit a member organization to integrate a
specialist unit within a larger aggregation unit that meets the
requirements of an integrated proprietary aggregation unit. Proposed
Rule 98(d) sets forth the minimum requirements for how to structure
such an integrated unit. While such a unit would be considered a single
aggregation unit for Regulation SHO purposes, as proposed, the member
organization would need to establish information barriers within the
integrated proprietary aggregation unit to restrict access to non-
public order information to the specialist unit only. And depending on
the risk management model proposed by a specialist unit, a member
organization or approved person may need to further segregate the flow
of information within a specialist unit.
    As proposed, the specialist unit that would operate within the
integrated proprietary aggregation unit would need to meet the
requirements of proposed Rule 98(c)(2)(A), (C), (D), and (E) of the
rule, which concern the information barriers associated with the
specialist unit and non-specialist unit operations, net capital
requirements, and senior management oversight. Because an integrated
proprietary aggregation unit that includes a specialist unit would
likely already be subject to Rule 200(f) of Regulation SHO that it
qualify as an independent trading unit, the specialist unit operating
within the integrated proprietary aggregation unit would not need to
separately meet the Rule 200(f) requirement for an independent trading
unit. Accordingly, as proposed, a specialist unit that operates within
an integrated proprietary aggregation unit would not need to meet the
requirements of proposed Rule 98(c)(2)(B), which requires a specialist
unit to separately comply with all of the Regulation SHO independent
trading unit requirements.\12\
---------------------------------------------------------------------------

    \12\ The Exchange recognizes that there may be some Regulation
SHO issues in connection with how a member organization may choose
to structure its specialist unit within an integrated proprietary
aggregation unit or provide risk management to the specialist unit
pursuant to proposed Rule 98(f). In such case, approval to operate
under proposed Rule 98 would not be provided until all Regulation
SHO issues that may arise have been resolved.
---------------------------------------------------------------------------

    In addition to meeting certain requirements of proposed Rule 98(c),
under proposed Rule 98(d)(2)(B), the specialist unit must restrict
access to non-public order information or specialist confidential
information from the rest of the integrated proprietary aggregation
unit. Such information barriers must ensure that both individuals and
systems that are not assigned to the specialist unit do not have access
to non-public order information, or, unless otherwise provided for in
proposed Rule 98(f), specialist confidential information.
    The NYSE believes that as proposed, Rule 98(d)(2)(B) provides
sufficient flexibility for how a member organization structures its
operations to evolve as the NYSE market model changes. For example, the
specialist API currently has access to limited non-public order
information, but does not have access to information available in the
NYSE Display Book. So long as the specialist API has access to that
non-public order information, the Exchange believes that systems not
dedicated to the specialist unit should not be integrated with the
specialist API. Accordingly, the trading algorithms of the integrated
proprietary aggregation unit that are not dedicated to the specialist
unit would not have access to any non-public order information via the
specialist API, or any other system.
    Proposed Rule 98(d)(2)(B)(iii) addresses the situation of
communications from the Floor of the Exchange to the rest of the
integrated proprietary aggregation unit. Currently, specialist unit
employees on the Floor of the Exchange have access to non-public order
information, whether via access to information in the Display
Book[supreg] or because of verbal representations of imminent orders.
The NYSE believes that the best way to ensure that such information is
not provided to individuals or systems not dedicated to the specialist
unit is to restrict communications while the employee is still on the
Floor of the Exchange.
    Proposed Rule 98(d)(2)(B)(iv) considers the possibility that an
individual who works on the Floor of the Exchange \13\ may also, on an
intra-day basis, move to an off-Floor location and engage in a non-
specialist related role within the integrated proprietary aggregation
unit pursuant to proposed Rule 98(d) or for an ``upstairs'' desk
trading in related products within the specialist unit pursuant to
proposed Rule 98(f)(1). In such case, the individual must not make any
non-public order information or, unless specifically provided for,
specialist confidential information, available to individuals or
systems that are not dedicated to the specialist unit. Nor may that
individual use such non-public information, or, except as provided for
in the Rule, specialist confidential information, in any way in
connection with responsibilities that are not related to Floor-based
activities of the specialist unit. For purposes of proposed Rule
98(f)(1), once off the Floor, a specialist may not use non-public
information to directly or indirectly trade in related products.
However, nothing in the rule

bars a specialist unit from moving personnel among different positions
intraday, so long as the restrictions on information flow and use are
followed. The NYSE believes that this would provide member
organizations with sufficient flexibility to transfer its employees
among various roles, including on the Floor of the Exchange and in a
specialist unit upstairs location during a given trading day. For
intra-day transfers, the Exchange will expect specialist units to have
written policies and procedures reasonably designed to ensure that non-
public order information and specialist confidential information
(unless otherwise permitted) would not be used from an off-Floor
location. The Exchange notes that in addition to the information
barriers required by proposed Rule 98, specialists must continue to
abide by Exchange rules that govern their access to and use of non-
public order information.\14\
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    \13\ Note that NYSE rules define being on the Floor to include
the trading Floor of the Exchange, and the premises immediately
adjacent thereto, such as the various entrances and lobbies of 11
Wall Street, 18 New Street, 12 Broad Street, and 18 Broad Street, as
well as the telephone lobby in the first basement of 11 Wall Street.
See Rule 112(b).
    \14\ See, e.g. , NYSE Rules 70.20(h)(ii), 104(b), 115, and 115A.
---------------------------------------------------------------------------

    As noted above, an integrated proprietary aggregation unit would
need to qualify as an aggregation unit, which for Regulation SHO
purposes, requires the unit to net its positions. While the proposed
rule would no longer require separate books and records for a
specialist unit, to ensure that NYSE Regulation can review the trading
activity by the specialist unit at the Exchange without having to parse
through commingled records, under proposed Rule 98(d)(2)(C), in
addition to meeting Regulation SHO requirements, an integrated
proprietary aggregation unit must maintain records of its specialist's
accounts in a manner that is separate from the accounts of the
integrated proprietary aggregation unit.\15\
---------------------------------------------------------------------------

    \15\ The Exchange is engaging in a separate discussion with
Commission staff of the Regulation SHO implications of requiring a
specialist unit to separately aggregate its trading positions for
purposes of Exchange rules.
---------------------------------------------------------------------------

    In addition to the above, the integrated proprietary aggregation
unit must have written policies and procedures that address how it will
ensure that the unit will not engage in any activities that could
violate other Exchange rules or federal securities laws and
regulations, including Regulation SHO. The policies and procedures must
address, at a minimum, how the unit will ensure against front running,
wash sales, and market manipulation.
    In connection with wash sales, a potential concern for an
integrated proprietary aggregation unit is the possibility that the
specialist unit could be selling (buying) one of the securities
registered to it and an individual or trading system of the integrated
proprietary aggregation unit could at the same time be buying (selling)
that same security at the Exchange. With the proper use of mnemonics
associated with those orders, Exchange systems are capable of rejecting
one side of those orders. Because the presumption would be in favor of
the specialist unit trading, i.e., to meet its affirmative obligations
at the Exchange, the NYSE proposes rejecting the order from the
integrated proprietary aggregation unit.
    The NYSE also proposes that to the extent an integrated proprietary
aggregation unit directs its trading at the Exchange in any security
that has been allocated to the specialist unit through the specialist
unit, such trading would be subject to the specialist rules. In other
words, while the specialist unit would be subject to certain market-
making obligations while trading at the Exchange, the integrated
proprietary aggregation unit's independent ``upstairs'' operations
would be able to trade freely.
    Finally, to ensure that NYSE Regulation can review the trading
activities of the integrated proprietary aggregation unit, proposed
Rule 98(d)(4) requires member organizations to maintain audit trail
information for any trading by such unit, including trading at the
Exchange and at other market centers. The NYSE proposes to amend NYSE
Rule 132B to have the Order Tracking System (``OTS'') requirements
apply to trading by a specialist unit, and if applicable, an integrated
proprietary aggregation unit. Member organizations must maintain
sufficient records to reconstruct in a time-sequenced manner its
trading in securities allocated to the specialist unit and any trading
by the integrated proprietary aggregation unit in those securities in
other market centers or trading in related products.
    As with the approval process under proposed Rule 98(c), to obtain
approval to operate a specialist unit within an integrated proprietary
aggregation unit, a member organization would need to submit its
written policies and procedures to NYSE Regulation for review of
whether such policies and procedures are reasonably designed to meet
the rule requirements. Once approved under proposed Rule 98(d), NYSE
Regulation and FINRA would continue to examine whether a specialist
unit's policies and procedures continue to meet the rule requirements
and whether the implemented controls and surveillances plans are
functioning as designed.
5. Proposed Rule 98(e): Sharing Non-Trading Related Services
    One of the restrictions of current Rule 98 is the limit on a
specialist member organization and its approved persons to share
operational support personnel. In its current form, Rule 98(c) permits
dual affiliation only if the specialist member organization and
approved person provide the Exchange with a written statement of the
duties of such person and why it is necessary for the individual to
have a dual affiliation. Any changes to dual affiliations must be
submitted to the Exchange for approval in advance of making such
change.
    The NYSE believes that current Rule 98(c) unnecessarily restricts
the ability of a specialist member organization and its approved person
to share non-trading related services, i.e., operational support
services. Accordingly, the NYSE proposes amending Rule 98 to permit the
sharing of non-trading related services, subject to the approval of
NYSE Regulation.
    As with the approval process to become a specialist unit, the
approval process for a specialist unit to share non-trading related
services with its parent member organization or approved person would
require the specialist unit to: (1) Adopt written policies and
procedures governing the sharing or non-trading related services; (2)
establish a process for regular review of such written policies and
procedures; and (3) implement controls and surveillances reasonably
designed to prevent and detect violations of those policies and
procedures. In accordance with the purpose of Rule 98, such policies
and procedures must be reasonably designed to protect specialist
confidential information and non-public order information.
    The NYSE understands that personnel or systems that provide non-
trading related services may have access to specialist confidential
information or non-public order information. For example, clearance and
settlement services would have knowledge of specialist positions in
securities, and technological support personnel may have knowledge of
how a specialist algorithm conducts its trading. However, access to
such information should not be the basis for restricting the sharing of
such personnel or systems. Rather, such personnel or systems can be
shared so long as the specialist unit has controls reasonably designed
to ensure that the individuals or systems who have access to specialist
confidential information or non-public information neither provide nor
make available that information to any

individuals or systems not part of the specialist unit. In particular,
under no circumstances should non-public order information or
specialist confidential information be made available to the investment
banking, research, or customer-facing departments.
    Before a specialist unit can share non-trading related services,
NYSE Regulation will review whether the specialist unit has adopted
policies and procedures and controls and surveillances reasonably
designed to protect specialist confidential information and non-public
order information. Once approved, a specialist unit would no longer
need to provide NYSE Regulation with a written statement of why a
certain individual has a dual affiliation and update such written
statements if the individual involved changes. On an ongoing basis,
NYSE Regulation and FINRA will examine whether the specialist unit's
policies and procedures and controls comply with the requirements of
the rule.
6. Proposed Rule 98(f): Risk Management
    Specialist member organizations and their approved persons are
currently limited in their ability to manage the specialist member
organization's trading risks: Rule 98 currently restricts an approved
person from being involved in any trading decisions of an associated
specialist member organization; Rule 105 currently restricts the
specialist member organization's ability to trade in options and
single-stock futures related to the securities allocated to the
specialist member organization. Together, these restrictions place
specialist member organizations at a competitive disadvantage vis-
[agrave]-vis other market-making or trading firms.
    The NYSE believes that the changes to the marketplace that have
occurred since 1987, when Rule 98 was adopted, call for an overhaul of
how specialist units are permitted to manage their risk. For example,
when Rule 98 was adopted, the NYSE enjoyed an approximately 85% market
share in trading of NYSE-listed securities and specialists participated
in approximately 12% of the transactions at the Exchange. Now, the
NYSE's market share for listed securities hovers under 40%, and of
that, specialist participation is in the range of two percent. These
numbers are telling: Because of automatic executions at the Exchange,
specialists no longer have a unique advantage over other market
participants. To the contrary, specialists are now at a disadvantage to
other market participants because they must meet their affirmative and
negative obligations to the Exchange, yet cannot participate in the
type of hedging activities that other market participants may and can
do.
    Accordingly, the Exchange proposes providing specialist units with
the ability to manage their risks by broadening the ability to trade in
related products and expanding the universe of who may be involved in
managing the risk of the specialist unit. Because there is no single
correct model for risk management, the NYSE proposes providing
specialist units with options of how to manage their risk, which they
can choose to use in combination or alone. Regardless of which model a
specialist unit proposes to adopt for risk management, at all times,
the specialist unit will be ultimately responsible for its quoting or
trading decisions at the Exchange.
a. Specialist Unit Risk Management
    In order to provide a specialist unit with greater risk management
tools, the NYSE proposes permitting specialist units to apply for an
exemption from the Rule 105(b)-(d) restrictions on trading options and
single-stock futures. In connection with this change, the NYSE proposes
amending Rule 105 so that it applies only to a specialist unit, and not
to any other departments or units of a member organization or approved
person. If approved for an exemption from Rule 105, a specialist unit
would be permitted to trade in related products, subject to proposed
Rule 98(f)(1).\16\
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    \16\ The Exchange also proposes amending section (m) of the Rule
105 Guidelines to provide that a specialist unit is not permitted to
engage in market-making activities in single-stock futures or
options. However, if eligible for an exemption under Rule 105(b)-
(d), nothing restricts a specialist unit from having a trading desk
that trades in options or single-stock futures. Because an
integrated proprietary aggregation unit that includes a specialist
unit may engage in options market making, the Exchange proposes
eliminating sections (m)(ii) and (iii) of the Rule 105 Guidelines.
---------------------------------------------------------------------------

    As proposed, to obtain an exemption from Rule 105, the specialist
unit must: (i) Adopt and implement comprehensive written procedures and
guidelines governing the conduct of trading in related products; (ii)
establish a process for regular review of such written procedures and
guidelines; and (iii) implement controls and surveillances reasonably
designed to prevent and detect violations of these procedures and
guidelines.
    These policies and procedures must be reasonably designed to ensure
that the individuals or systems responsible for trading related
products do not have access to non-public order information, or, unless
otherwise specifically provided for, specialist confidential
information. In addition, individuals who work on the Floor of the
Exchange would not be permitted to trade or direct trading in related
products, nor would the specialist API be permitted to make any trading
decisions in related products. Accordingly, any trading in related
products by the specialist unit must be conducted by an off-Floor,
i.e., ``upstairs'' office. All trading in related products must be
conducted by individuals who are qualified and registered to trade in
the marketplaces where such trading occurs. Moreover, the member
organization that houses the specialist unit must be a member of FINRA
or other self-regulatory organizations, as required by each marketplace
where the specialist unit proposes to trade.
    The NYSE believes that a specialist unit should have the
flexibility to transfer its employees among different functions within
the unit. Accordingly, the proposed rule does not expressly prohibit
specialists from trading in related products; it only bars directly
entering or executing trades in related products while on the Floor of
the Exchange.\17\ As proposed, a specialist unit could transfer a
specialist back and forth from the Floor of the Exchange to a
specialist unit upstairs desk that trades in related products, so long
as that specialist is registered and qualified to trade in related
products and non-public order information is not used when trading in
related products. In such case, however, a specialist unit must have
policies and procedures reasonably designed to ensure that a specialist
who moves off the Floor of the Exchange does not make available or use
any non-public information or, unless otherwise specified, specialist
confidential information, to which the specialist may have had access
while on the Floor of the Exchange. As noted above, while off the Floor
of the Exchange, specialists continue to be subject to other NYSE rules
that govern their access to and use of non-public order information.
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    \17\ The Exchange notes that a specialist unit that has not been
approved for an exemption from Rule 105 under proposed Rule 98(f)(1)
would still be permitted to enter orders in options or single-stock
futures from the Floor, subject to the requirements of Rule 105.
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    To ensure that the specialist unit upstairs desk that trades in
related products can effectively hedge the specialist unit's positions,
the NYSE proposes that the specialist unit upstairs desk have
electronic access to the trades by the specialist unit at the Exchange
in securities allocated to the specialist unit

that have been printed to the Consolidated Tape.
    Currently, senior managers of specialist member organizations can
be privy to information about trading on the Floor of the Exchange as
well as any hedging conducted by the specialist member organization,
even though such hedging opportunities are limited. For example,
currently, a specialist on the Floor can call his or her senior manager
to discuss hedging strategies. Under the proposed exemption from Rule
105, the NYSE believes that specialist unit senior managers should be
able to continue in that role and provide oversight of both Floor
specialist operations and any specialist unit upstairs trading in
related products. The NYSE believes that the oversight model that works
for larger broker-dealers, whose senior managers have a role with
respect to multiple aggregation units, should apply within a specialist
unit as well.
    Accordingly, the NYSE proposes Rule 98(f)(1)(vi) to address how a
senior manager of a specialist unit should handle situations where he
or she has access to non-public order information in connection with
his or her role as a senior manager. As with proposed Rule 98(c)(2)(E),
when trading in related products, the specialist unit must have
policies and procedures reasonably designed to ensure that the
specialist unit senior manager who has access to non-public order
information does not provide such information to the specialist unit
upstairs trading desk responsible for trading related products or use
such non-public information to directly or indirectly influence trading
by that upstairs desk.
b. Integrated Proprietary Aggregation Unit Risk Management
    Proposed Rule 98(f)(2) addresses how an integrated proprietary
aggregation unit that has been approved pursuant to proposed Rule 98(d)
to include a specialist unit could engage in risk management of the
specialist unit's positions. At a minimum, an integrated proprietary
aggregation unit must have policies and procedures that are reasonably
designed to meet the protections enumerated in the rule, including how
it trades in related products on behalf of a specialist unit and how it
electronically accesses the specialist unit's trades at the Exchange in
securities allocated to the specialist unit that have been printed to
the Consolidated Tape.
    In addition, proposed Rule 98(f)(2)(A)(i) would permit an
integrated proprietary aggregation unit to send appetites of trading or
quoting direction to the specialist unit. In practice, this would
permit a non-specialist unit ``upstairs'' risk management desk that has
real-time access both to the specialist unit's positions in securities
allocated to it and to the integrated proprietary aggregation unit's
positions in related products and other securities to provide
electronic direction to the specialist unit of whether to trade or
quote in a certain direction. The Exchange believes that permitting an
integrated proprietary aggregation unit to send quoting messages that
are based on real-time positions of the unit as a whole will enable a
specialist unit to better meet any quoting requirements at the
Exchange. In other words, the specialist unit will no longer need to
operate in a vacuum when determining how or when to quote at the
Exchange.
    As proposed, the specialist unit would be ultimately responsible
for whether to accept the electronic trading direction submitted by the
integrated proprietary aggregation unit upstairs desk; a specialist
unit must comply at all times with its market-marking obligations,
including the specialist rules, notwithstanding any electronic trading
directions received from that upstairs desk. Stated otherwise, the
specialist unit would operate independently and be free to accept or
reject the electronic trading directions sent by the integrated
proprietary aggregation unit. However, to the extent an integrated
proprietary aggregation unit causes a specialist unit to violate one or
more of the specialist rules, the Exchange proposes that in such case,
the integrated proprietary aggregation unit should also be held to
those standards.
    At this time, as noted above, because of access to non-public order
information, the NYSE does not believe it would be feasible to permit
communications, whether verbal or electronic, from the specialist or
the specialist API to the individuals or systems responsible for
trading in related products and other securities within the integrated
proprietary aggregation unit, or, if applicable, to an upstairs desk
within the specialist unit. However, as the NYSE market model evolves,
the NYSE will continue to review how best to integrate a specialist
unit within an integrated proprietary aggregation unit, including the
possibility of fully integrating the trading systems that interact with
the Exchange for the specialist unit and the trading systems that trade
in related products and other securities. The NYSE believes that
ultimately, a competitive trading model would permit full integration,
including permitting two-way communications among trading desks.
c. Approved Person Risk Management
    As proposed, another option available to firms to manage the risk
of the specialist unit is to permit a separate integrated proprietary
aggregation unit that is housed in either an approved person or a
member organization that runs a specialist unit to provide the same
level of risk management as proposed for an integrated proprietary
aggregation unit that includes a specialist unit. This option would
provide flexibility for broker-dealers that want to keep the specialist
unit as a separate member organization or aggregation unit, yet still
have an approved person or separate aggregation unit provide risk
management services for the specialist unit.
    As with proposed Rule 98(f)(2), proposed Rule 98(f)(3) would
require that the approved person not have access to either specialist
confidential information and non-public order information, except as
provided for in that section of the rule. Specifically, an integrated
proprietary aggregation unit of an approved person could have access to
the trades by a specialist unit at the Exchange in securities allocated
to that unit, so long as such trades have been printed to the
Consolidated Tape.
    And as with proposed Rule 98(f)(2), an approved person could send
electronic appetites of how the specialist unit should trade or quote
in its allocated securities. As discussed above, a specialist unit
would be free to reject or accept such electronic directions as it sees
fit to meet its market-making obligations at the Exchange.
    The Exchange notes that an approved person that provides risk
management under this proposed section may not itself be an NYSE member
organization. In such case, the individuals at the approved person
responsible for making risk management decisions on behalf of the
specialist unit should be dually employed by the specialist unit that
is part of an NYSE member organization and the approved person so that
they are subject to the jurisdiction of NYSE Regulation.
7. Proposed Rule 98(g): Failure To Maintain Confidentiality, Reporting
Obligations, and Breaches
    The NYSE proposes to keep certain provisions of current Rule 98,
but adjust them to reflect the changes to the rest of the rule. In
particular, current Rule 98(i) has been amended and is included in
proposed Rule 98(g); current Rule 98(j) has been amended and is
included in

proposed Rule 98(h); and, current Rule 98(k) has been amended and is
included in proposed Rule 98(i).
    Under proposed Rule 98(g), as with the current rule, if a
specialist becomes aware of non-public material information from its
approved person or parent member organization, such specialist may have
to cease acting as a specialist in the security involved, which was
formerly referred to as ``giving up the Book.'' The proposed rule does
not change how such determinations would be made. However, the proposed
rule updates the language of the rule and separates the rule into
easier-to-read subsections.
    Under proposed Rule 98(h), the NYSE proposes adding to the existing
reporting obligations that a specialist unit must report any actual
breaches or internal investigations of possible breaches of the
information barriers required by the rule. The reporting obligation for
internal investigations is intended to be similar in effect to the
reporting obligation pursuant to NYSE Rules 351(e) and 342.21. In
particular, under proposed Rule 98(h)(4), a specialist unit will be
required to conduct an internal investigation into any trading activity
that may be a result of a breach of the information barriers required
by proposed Rules 98(c), (d), (e), and (f). On a quarterly basis, a
specialist unit must report in writing to NYSE Regulation whether it
has commenced such an internal investigation, the quarterly progress of
any open investigations, what remedial measures, if any, were taken,
and the completion of any internal investigation, including the
methodology and results of such investigation, any internal
disciplinary action taken, and any referral of the matter to the NYSE,
another self-regulatory organization, or the Commission.
    Finally, as with the current rule, proposed Rule 98(i) provides
that any breach of the proposed Rule could result in disciplinary
action, including the withdrawal of one or more securities allocated to
the specialist unit or withdrawal of approval to operate a specialist
unit. The Exchange notes that as with the current rule, any trading by
any person while in possession of material, non-public information
received as a result of any breach of internal controls required by
proposed Rule 98 may violate Rule 10b-5 of the Act,\18\ Rule 14e-3 of
the Act,\19\ NYSE Rule 104, just and equitable principles of trade or
one or more provisions of the Act, or regulations thereunder or rules
of the Exchange. The Exchange intends to review carefully any such
trading of which it becomes aware with a view towards determining
whether any such violation has occurred.
---------------------------------------------------------------------------

    \18\ See 17 CFR Part 240.10b-5.
    \19\ See 17 CFR Part 240.14e-3.
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C. Proposed Amendments to Related Rules

    As noted above, because of the shift in paradigm away from approved
persons, the NYSE proposes amending those NYSE rules that refer to
approved persons and the need for an exemption from Rule 98.
1. Proposed Amendments to Rule 98A
    NYSE Rule 98A requires approved persons to agree in writing not to
cause a specialist or odd-lot dealer to violate rules applicable to the
specialist or odd-lot dealer. The rule further requires that approved
persons report to the Exchange any off-Floor orders for securities in
which an associated specialist member organization specializes for any
account in which the approved person has a direct or indirect interest.
    Because of the proposed changes to Rule 98, and in particular, the
recognition that an appropriately walled-off specialist unit
ameliorates the need to scrutinize the trading by an approved person,
the NYSE proposes eliminating those portions of Rule 98A that concern
approved persons. However, the NYSE would keep the limitation on an
issuer, or a partner or subsidiary thereof, from becoming an approved
person of a specialist unit.
2. Proposed Amendments to Rules 99, 102, 103B, 104, and 113
    In their current form, NYSE Rules 99, 103B, 104, and 113
specifically apply to approved persons, unless such approved person has
obtained an exemption under Rule 98. To ensure consistency among NYSE
rules, and in particular, to ensure that the revised paradigm of
proposed Rule 98 is consistently applied, the NYSE proposes to amend
Rules 99, 103B, 104, and 113 to eliminate the references to approved
persons.\20\
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    \20\ For the period of time that the current Rule 98 stays in
the NYSE Rules as ``NYSE Rule 98 (Former),'' each of NYSE Rules 99,
103B, 104, and 113 will have two forms: one to meet the requirements
of NYSE Rule 98 (Former) and one to meet the requirements of
proposed Rule 98. The version of the rules that relate to Rule 98
(Former) will be similarly designated with the ``(Former'') title
either for the entire rule, or for a section of a rule, as
appropriate.
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    In addition, the Exchange proposes to delete Rule 102, which
concerns trading in options by odd-lot dealers. Because the Exchange no
longer has separate odd-lot dealers and all specialists are also
responsible for odd-lot trading in securities in which they are
registered, there is no need for a separate rule governing trading in
related products by an odd-lot dealer. Accordingly, because Rule 102 is
duplicative of the standards set forth in proposed Rules 98 and 105,
the Exchange proposes deleting that rule.
3. Proposed Amendments to Rule 460
    In addition to amending Rule 460 to ensure consistent application
of proposed Rule 98 and making other non-substantive changes, the NYSE
proposes eliminating Rule 460.20 that approved persons of specialist
member organizations be held to any limits on beneficial ownership of
any equity security in which an associated specialist unit is
registered. Instead, as proposed, any limitations on beneficial
ownership should apply only to the specialist unit that has been
approved pursuant to proposed Rule 98, and not to any other aggregation
unit or other department or division of the member organization.
    With respect to the specialist unit's beneficial ownership of
outstanding shares of securities allocated to such unit, the NYSE
proposes to amend NYSE Rule 460.10 to require that a specialist unit
report when its beneficial ownership of outstanding shares exceeds 5%
and to update such report if the beneficial ownership either falls
below 5% or exceeds 10%. The NYSE thus proposes to eliminate the
requirement that a specialist unit seek NYSE Regulation approval before
it may have more than 10% beneficial ownership of a listed security.
The NYSE believes that because of the reduced market share of the NYSE
and the limited impact of specialist trading on securities allocated to
a specialist unit, the protections of the existing rule are no longer
necessary. However, the NYSE proposes retaining the prohibition on a
specialist unit having beneficial ownership of more than 25% of the
outstanding shares in a security allocated to such unit. Because the
changes to the marketplace are in effect now, the Exchange believes
that the changes to Rule 460 should be implemented notwithstanding
whether a specialist member organization continues to operate under
Rule 98 (Former). Accordingly, the Exchange proposes having a single
version of Rule 460 to reflect the proposed amendments.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
and

furthers the objectives of section 6(b)(5) of the Act,\21\ 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.
---------------------------------------------------------------------------

    \21\ 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
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

II. 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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

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<EMAIL_ADDRESS>Please include
File Number SR-NYSE-2008-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NYSE-2008-45. 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 the filing also will be available for
inspection and copying at the principal office of the NYSE. 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-NYSE-2008-45 and should be
submitted on or before July 24, 2008.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15165 Filed 7-2-08; 8:45 am]

BILLING CODE 8010-01-P