NYSE Regulation announces that the NYSE and Amex recently amended Rule 70.40(3), allowing proprietary trading from approved booth premises in certain OTCBB and OTC Markets securities.

Rule 70.40 permits Floor broker members ... to access other markets and trade a wider variety of products from their booth premises on the Exchange Trading Floor in a manner similar to an upstairs office.  However, the rule imposes certain restrictions, including prohibiting transactions from an approved booth for:  (i) the member organization's own account;  (ii) the account of an associated person;  or (iii) an account with respect to which they or an associated person exercise investment discretion.

The Exchanges have amended Rule 70.40(3) to permit member organizations to effect transactions from approved booth premises for such accounts - but only in the common, preferred, and debt securities of an operating company quoted on the OTCBB or OTC Markets (an "OTC Security").

Transactions will not be permitted in the following:

• Index-based or derivative securities (e.g., a right or warrant) quoted on the OTCBB or OTC Markets; or
• An OTC Security related to a security listed or traded on the NYSE or NYSE Amex, including the options trading floor.

Under the amended Rule, an OTC Security would be considered related to a security listed or traded on the NYSE or NYSE Amex if the OTC Security is:

• issued by an issuer of a security that is listed or traded on the NYSE or NYSE Amex or that underlies an NYSE Amex option, or an affiliate of such issuer;
• subject to a corporate action that relates to the issuer of a security listed or traded on the NYSE or NYSE Amex or that underlies an NYSE Amex option, or an affiliate of such issuer;
• issued by an issuer of a security that is a component of a narrow-based security index linked to a security that is listed or traded on the NYSE or NYSE Amex or that underlies an NYSE Amex option; or
• issued by a foreign issuer or is a depositary receipt (or equivalent) for such a security, and a security issued by such foreign issuer or a depositary receipt (or the equivalent thereof) for such a security is listed or traded on the NYSE or NYSE Amex or underlies an NYSE Amex option.

For further details, go to:   [Information Memo 11-23, 8/4/11]