Federal Register, Volume 76 Issue 71 (Wednesday, April 13, 2011)

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20789-20791]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8831]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64239; File No. SR-Phlx-2011-45]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Extend
the Pilot Period of Amendments to the Clearly Erroneous Rule

April 7, 2011.
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 March 31, 2011, NASDAQ OMX PHLX LLC (``Exchange''), filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
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 the
Substance of the Proposed Rule Change

The Exchange proposes to extend the pilot period of recent
amendments to Rule 3312, concerning clearly erroneous transactions, so
that the pilot will now expire on the earlier of August 11, 2011 or the
date on which a limit up/limit down mechanism to address extraordinary
market volatility, if adopted, applies.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in [brackets].
* * * * *
Rule 3312. Clearly Erroneous Transactions
The provisions of paragraphs (a)(2)(C), (b), and (c)(1) of this
Rule, as amended by SR-Phlx-2010-125, shall be in effect during a pilot
period set to end on the earlier of August 11, 2011 or the date on
which a limit up/limit down mechanism to address extraordinary market
volatility, if adopted, applies [April 11, 2011]. If the pilot is not
either extended or approved permanent by the earlier of August 11, 2011
or the date on which a limit up/limit down mechanism to address
extraordinary market volatility, if adopted, applies [April 11, 2011],
the prior versions of paragraphs (a)(2)(C), (b), and (c)(1) shall be in
effect.
(a)-(f) No change.
* * * * *

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 these 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
On September 10, 2010, the Commission approved, for a pilot period
to end December 10, 2010, a proposed rule change submitted by the BATS

[[Page 20790]]

Exchange, Inc., NASDAQ OMX BX, Inc., Chicago Board Options Exchange,
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX
Exchange, Inc., International Securities Exchange LLC, The NASDAQ Stock
Market LLC, New York Stock Exchange LLC, NYSE Amex LLC, NYSE Arca,
Inc., and National Stock Exchange, Inc. (collectively, the
``Exchanges''), to amend certain of their respective rules to set forth
clearer standards and curtail discretion with respect to breaking
erroneous trades.\3\ The changes were adopted to address concerns that
the lack of clear guidelines for dealing with clearly erroneous
transactions may have added to the confusion and uncertainty faced by
investors on May 6, 2010. In connection with its resumption of trading
of NMS Stocks through PSX, the Exchange amended Rule 3312 to conform it
to the newly-adopted changes to the Exchanges' clearly erroneous rules,
so that it could participate in the pilot program.\4\ On December 7,
2010, the Exchange filed an immediately effective filing to extend the
existing pilot program for four months, so that the pilot would expire
on April 11, 2011.\5\
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\3\ Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010).
\4\ Securities Exchange Act Release No. 63023 (September 30,
2010), 75 FR 61802 (October 6, 2010).
\5\ Securities Exchange Act Release No. 63491 (December 9,
2010), 75 FR 78297 (December 15, 2010).
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The Exchange believes that the pilot program has been successful in
providing greater transparency and certainty to the process of breaking
erroneous trades. The Exchange also believes that a four month
extension of the pilot is warranted so that it may continue to monitor
the effects of the pilot on the markets and investors, and consider
appropriate adjustments, as necessary. The Exchange notes, however,
that the Exchanges are developing a ``limit up/limit down'' mechanism
to reduce the negative impacts of sudden, unanticipated price movements
in securities traded on the Exchanges. Under such a mechanism, trades
in a security outside a price band would not be allowed, thus
eliminating clearly erroneous transactions from occurring altogether.
As such, the proposed extension may be shorter in duration should the
Exchange adopt a limit up/limit down mechanism to address extraordinary
market volatility. Accordingly, the Exchange is filing to further
extend the pilot program until the earlier of August 11, 2011 or the
date on which a limit up/limit down mechanism to address extraordinary
market volatility, if adopted, applies.
2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Securities Exchange Act of 1934 (the ``Act''),\6\ which requires
the rules of an exchange 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. The proposed rule change also is
designed to support the principles of Section 11A(a)(1) \7\ of the Act
in that it seeks to assure fair competition among brokers and dealers
and among exchange markets. The Exchange believes that the proposed
rule meets these requirements in that it promotes transparency and
uniformity across markets concerning decisions to break erroneous
trades.
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\6\ 15 U.S.C. 78f(b)(5).
\7\ 15 U.S.C. 78k-1(a)(1).
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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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\ The Exchange has asked the Commission to
waive the 30-day operative delay so that the proposal may become
operative immediately upon filing. The Commission believes that waiving
the 30-day operative delay is consistent with the protection of
investors and the public interest because such waiver will allow the
pilot program to continue uninterrupted and help ensure uniformity
among the national securities exchanges and FINRA with respect to the
treatment of clearly erroneous transactions.\10\ Accordingly, the
Commission waives the 30-day operative delay requirement and designates
the proposed rule change as operative upon filing with the Commission.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self- regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Commission notes that the Exchange has satisfied
this requirement.
\10\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

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 rule-comments@sec.gov. Please include
File Number SR-Phlx-2011-45 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2011-45. 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

[[Page 20791]]

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 website viewing and printing 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 such
filing also will be available for inspection and copying at the
principal office of the Exchange. 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 publicly available. All submissions should refer to
File Number SR-Phlx-2011-45 and should be submitted on or before May 4,
2011.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8831 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P