13 May 2004

New NYSE Rule 446

NYSE Rule 446

Corporate-Wide BCP

A subsidiary member or member organization may satisfy its obligations under Rule 446 by participation in a corporate-wide BCP that satisfies the Rule's requirements, and that covers its subsidiary (the member or member organization), regardless of whether the parent corporation is a member or member organization of the Exchange. However, inclusion in a corporate-wide BCP does not obviate the need for compliance by the member or member organization with the record-keeping and supervisory requirements of the Rule. If a member or member organization chooses to participate in a parent company's corporate-wide BCP, the record-keeping, supervision, creation, execution, or updating of that plan must comply with Rule 446. In addition, the subsidiary member or member organization must ensure that the parent and subsidiary both comply with NYSE rules on record-keeping and supervision for purposes of Rule 446. Finally, the parent corporation must grant the Exchange access to its BCP upon request. If access is not granted, the subsidiary member or member organization will be deemed not to have complied with Rule 446 requirements.

Financial and Operational Risk Assessments

Rule 446(f) defines the term "financial and operational risk assessments" to mean a "set of written procedures that allow members and member organizations to identify changes in their operational, financial and credit risk exposure."

Operational risk focuses on firms' abilities to maintain communications with customers and to retrieve key activity records through their "mission critical systems." Financial risk relates to firms' abilities to continue to generate revenue and to retain or obtain adequate financing and sufficient capital. In this regard, an eroding financial condition could be exacerbated or caused by deterioration in the value of a firm's investments due to the lack of liquidity in the broader market, which would also hinder the ability of the firm's counter-parties to fulfill their obligations. A firm would be expected to periodically assess changes in these exposures, and in the event of a significant business disruption, the firm would consult its plan and take appropriate action contemplated by its plan. Members' and member organizations' procedures should be written and implemented to reflect the interrelationship among these risks.

Emergency Contact Information

Rule 446(g) requires members and member organizations to designate and identify to the Exchange a senior officer as referenced in Rule 351(e) to approve and review BCPs, as well as an Emergency Contact Person(s). Prompt notification is to be given to the Exchange in the event of a change in such designations. Members and member organizations are required to furnish BCP contact information to the Exchange through the Exchange's Electronic Filing Platform ("EFP").3 In addition, members and member organizations can access and obtain up-to-date information concerning a disruption to normal NYSE business operations through the Exchange's notification telephone line (1-866-NYSEDIAL) and website (http://www.nyse.com/memberinfo).

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