[ by Howard Haykin ] The NYSE proposes to amend NYSE Rule 76, by adding supplementary material relating to current processes used by Floor Brokers to manually cross orders in compliance with Regulation NMS Rule 611 ("Rule 611"). Specifically, the Exchange would allow Floor Brokers to use new functionality for the wireless hand held devices ("HHD") that will assist them in meeting their Rule 611 compliance requirements by providing for a "look-back" period in effecting crosses under NYSE rules.  The Exchange believes that use of the HHD by Floor Brokers to assist in the execution of manual cross trades, combined with a brief and reasonable amount of time to accommodate the manual manner, by which Floor Brokers must comply with NYSE crossing rules, will enhance the efficiency of such crosses and provide a better audit trail for purposes of Rule 611.  The new functionality ("Cross Function") and the proposed procedures are described below. Background. NYSE Rule 76 governs the execution of "cross" or "crossing" orders by Floor Brokers.  It applies only to manual transactions executed at the point of sale on the trading Floor, and provides that when a member has an order to buy and order to sell the same security that can be crossed at the same price, the member is required to announce to the trading crowd the proposed cross by offering the security at a price that is higher than his or her bid by a minimum variation permitted in the security before crossing the orders. Any other member, including the DMM can break up the announced bid and offer by trading with either side of the proposed cross transaction.  If no one in the trading crowd breaks up the proposed cross, the DMM on behalf of the Floor Broker enters the cross transaction into the Exchange’s Display Book system as a completed transaction.  The completed transaction is printed to the Consolidated Tape at that price. Current Procedures. After announcing a proposed cross transaction, the Floor Broker and DMM manually monitor the protected best bid or offer to ensure that the proposed cross can be executed in accordance with the customer’s instructions and in compliance with Rule 611.  In today’s fast-moving, electronic markets, where prices can change in millisecond time frames, this manual monitoring process may not be the optimal manner by which to facilitate and evidence such compliance. The Commission and its staff have recognized the difficulty that broker-dealers face when manually handling orders in light of Rule 611.  Specifically, the SEC staff has issued guidance pertaining to the manual execution of orders under staff FAQ 3.23 of Rule 611.2  Under the FAQ, a broker-dealer that acts as agent in arranging block transactions between two or more parties at prices that are individually negotiated,3 and at a price that is at or  within the protected quotations must capture the negotiated price in its automated system within a reasonable time period.  Due to the manual nature of these transactions, the individually negotiated price may not be at or within the protected bid and offer at the  time the transaction terms ultimately are captured in the automated system.  FAQ 3.23 addresses this issue by permitting the broker-dealer to utilize a 20-second "lookback" period for purposes of demonstrating compliance with Rule 611. Proposed Changes. As proposed, Exchange is proposing a similar means for assisting Floor Brokers with compliance with Rule 611 that is consistent with existing Exchange crossing rules. Exchange Floor Brokers cross large orders pursuant to Rule 76.  In many cases, these orders are sent to a Floor Broker by customers seeking a primary market print, as well as orders from customers who do not wish to have their orders handled by broker-dealers that also trade as principal.  While the crossing of orders by Floor Brokers using the proposed Cross Function would differ in degree from the crossing guidance in FAQ 3.23,4 as discussed below, the fundamental issue of facilitating compliance with Rule 611 when handling large manual trades is the same.  Moreover, the proposed Cross Function is narrowly tailored to address the manual handling of cross orders by Floor Brokers, who face unique issues by virtue of their status as Floor-based participants. Floor Broker activities are subject to various regulatory restrictions that are not imposed upon broker-dealers executing orders off the Floor of the Exchange.  Floor Broker activities on the Floor of the Exchange are subject to Section 11(a) of the Exchange Act and the rules thereunder.5  As such, Floor Brokers are limited in their ability to trade for their own account or for the account of an associated person or an account over which they exercise discretion.  In addition, pursuant to NYSE Rule 112, Floor Brokers are also prohibited from initiating orders on the Trading Floor.  Consequently, Floor Brokers act only as agents on the Floor, even in circumstances where they are representing principal order flow from an associated person or upstairs desk.  Moreover, because Floor Brokers may not access away markets directly while at the point of sale, Floor Brokers cannot rely on the exception set forth in Rule 611(b)(6), which permits market participants to send intermarket sweep orders while simultaneously effecting a crossing transaction that may trade through protected quotations. Proposed Amendment to Rule 76. To assist Floor Brokers in monitoring the price of protected quotations and ensuring compliance with Rule 611, the Exchange proposes the Cross Function as set forth in the proposed supplementary material to Rule 76.  As proposed, Floor Brokers would be able to submit not held orders to be crossed (purchase and sale of the same security) into the HHD at a limit price consistent with customer instructions and as determined by the Floor Broker. The Floor Broker, however, may not use the Cross Function with regard to a cross involving a principal order to buy and a principal order to sell submitted by the same broker-dealer.  After the orders are entered into the HHD, a quote minder function within Exchange systems will monitor protected quotations to determine when the limit prices assigned to the buy and sell orders are such that the orders may be executed consistent  with Rule 611.  When the protected quotation permits a Rule 611-compliant print (i.e., the desired crossing price is at or between the protected bidand offer), the quote minder will: For further details, go to: [NYSE Rule Filing 12-29, 7/13/12].