[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27691-27693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11672]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64422; File No. SR-NYSEArca-2011-26]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Amending NYSE Arca Equities Rule 7.11 To
Include Additional Securities in the Pilot by Which Such Rule Operates
and Amending NYSE Arca Equities Rule 7.23 To Simplify Certain Aspects
of the Text While Also Conforming Certain of the Percentages Thereunder
to the Proposed Changes to Rule 7.11
May 6, 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 May 4, 2011, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by NYSE Arca. 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 NYSE Arca Equities Rule 7.11 to
include additional securities in the pilot by which such rule operates
and amend NYSE Arca Equities Rule 7.23 to simplify certain aspects of
the text while also conforming certain of the percentages thereunder to
the proposed changes to Rule 7.11. The text of the proposed rule change
is available at the Exchange, 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 self-regulatory organization
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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.11 to include additional
securities in the pilot by which such rule operates and amend Rule 7.23
to simplify certain aspects of the text while also conforming certain
of the percentages thereunder to the proposed changes to Rule 7.11.
The Commission approved Rule 7.11 on a pilot basis on June 10, 2010
to provide for trading pauses in individual securities due to
extraordinary market volatility (``Trading Pause'') in all securities
included within the S&P 500[supreg] Index (``S&P 500'') (``Trading
Pause Pilot'' or ``Pilot'').\3\ The Exchange noted in its filing to
adopt Rule 7.11 that during the Pilot period it would continue to
assess whether additional securities need to be added and whether the
parameters of Rule 7.11 would need to be modified to accommodate
trading characteristics of different securities. The Exchange
subsequently received approval to add to the Pilot the securities
included in the Russell 1000[reg] Index (``Russell 1000'')
and a specified list of Exchange Traded Products (``ETPs'').\4\
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\3\ The Commission approved the Trading Pause Pilot for all
equities exchanges and FINRA. See Securities Exchange Act Release
No. 62252 (June 10, 2010), 75 FR 34186 (June 16, 2010) (File Nos.
SR-BATS-2010-014; SR-EDGA-2010-01; SR-EDGX-2010-01; SR-BX-2010-037;
SR-ISE-2010-48; SR-NYSE-2010-39; SR-NYSEAmex-2010-46; SR-NYSEArca-
2010-41; SR-NASDAQ-2010-061; SR-CHX-2010-10; SR-NSX-2010-05; and SR-
CBOE-2010-047) and Securities Exchange Act Release No. 62251 (June
10, 2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-025). The
Exchange submitted a proposed rule change shortly after the initial
Commission approval order to clarify the procedures applicable to
reopening. See Securities Exchange Act Release No. 62281 (June 11,
2010), 75 FR 34504 (June 17, 2010) (SR-NYSEArca-2010-52).
\4\ The Commission approved the addition to the Trading Pause
Pilot of the securities included in the Russell 1000 and ETPs, where
applicable, for all equities exchanges and FINRA. See Securities
Exchange Act Release No. 62884 (September 10, 2010), 75 FR 56618
(September 16, 2010) (File Nos. SR-BATS-2010-018; SR-BX-2010-044;
SR-CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-EDGX-2010-05;
SR-ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49; SR-NYSEAmex-
2010-63; SR-NYSEArca-2010-61; and SR-NSX-2010-08 and Securities
Exchange Act Release No. 62883 (September 10, 2010), 75 FR 56608
(September 16, 2010) (SR-FINRA-2010-033). The Exchange submitted a
proposed rule change shortly after the addition of the Russell 1000
securities and ETPs to extend the operation of the Pilot, which was
set to expire on December 10, 2010, until April 11, 2011. See
Securities Exchange Act Release No. 63496 (December 9, 2010), 75 FR
78285 (December 15, 2010) (SR-NYSEArca-2010-114). The Pilot is
currently set to 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. See Securities
Exchange Act Release No. 64209 (April 6, 2011), 76 FR 20422 (April
12, 2011) (SR-NYSEArca-2011-14).
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The Exchange has continued to assess whether additional securities
need to be added to the Pilot and whether the parameters of Rule 7.11
need to be modified to accommodate trading characteristics of different
securities. In consultation with other markets and the staff of the
Commission, the Exchange proposes to include all NMS stocks within the
Pilot that are not already included therein, but to apply a wider
Threshold Move percentage to the newly added securities. Accordingly,
the Exchange proposes to delete Commentary .01 to Rule 7.11, as the
text therein would no longer be necessary.
The Exchange proposes that the Threshold Move required to trigger a
Trading Pause for the proposed new securities be 30% or more for such
securities priced at $1 or higher and 50% or more for such securities
priced less than $1.\5\ The Exchange believes that these percentages
are commensurate with the characteristics shared by the proposed new
securities within these price ranges and would promote the objectives
of the Trading Pause Pilot to reduce the negative impacts of
unanticipated price movements in a security. In particular, the
proposed additional stocks are those not currently included in the S&P
500, Russell 1000, or specified ETPs, and therefore are more likely to
be less liquid securities or securities with lower trading volumes.
Accordingly, the Exchange believes that broader Threshold Move
percentages would be appropriate. Similarly, because leveraged ETPs
trade at a ratio against the associated index, a broader Threshold Move
percentage would also
[[Page 27692]]
be appropriate for leveraged ETPs. In addition, the Exchange believes
that a 50% threshold move is appropriate for securities trading under a
dollar to reflect that price movements of such lower-priced stocks
equate to a higher percentage move than a similar price change would be
for a higher-priced stock.
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\5\ Under the proposed rule change, the price of a security
would be based on the closing price on the previous trading day, or,
if no closing price exists, the last sale reported to the
Consolidated Tape on the previous trading day.
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The Exchange proposes to include new subsections 7.11(a)(i), (ii)
and (iii) to reflect the distinction between the applicable Threshold
Move percentages for current Pilot securities and the proposed new
securities to be included within the Pilot.\6\ The Exchange is not
proposing any other changes to the text of Rule 7.11 or the operation
of the Pilot, and will continue to assess whether the parameters for
invoking a Trading Pause continue to be appropriate and whether the
parameters should be modified.
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\6\ The Exchange is not proposing a change to the Threshold Move
percentage applicable to securities currently included within the
current Pilot. However, the changes proposed herein would require
that certain rule text pertaining to the Threshold Move for the
existing Pilot securities be reorganized within Rule 7.11.
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The proposed changes to the Pilot, if approved, would require that
the text of Rule 7.23(a)(1)(B)(iii) and (iv), which pertains to the
pricing obligations that Market Makers are required to adhere to, be
amended to correct the cross-references therein to Rule 7.11 and the
Threshold Move thereunder. Specifically, the Exchange proposes to
remove any text from Rule 7.23(a)(1)(B)(iii) and (iv) addressing NMS
stocks that are not subject to the Pilot because no such securities
would exist and such text would therefore be unnecessary. The Exchange
also proposes to simplify Rule 7.23(a)(1)(B)(iii) and (iv) by
explicitly stating the percentages that are applicable thereunder and
the times during the trading day when Rule 7.11 is not in effect. The
Exchange notes that part of this proposed change would be substantive,
in that the percentages under Rule 7.23(a)(1)(B)(iii) and (iv) would
decrease slightly for the proposed new securities priced at $1 or
greater. The Exchange believes that this proposed substantive change
would not have a significant impact on Market Maker pricing obligations
and is reasonable because it would ensure that the designated quoting
percentages in Rule 7.23(a)(1)(B) are within a narrower range than the
percentages necessary to trigger a Trading Pause.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\7\ in general, and
furthers the objectives of Section 6(b)(5),\8\ in particular, in that
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
The proposed rule change also is designed to support the principles of
Section 11A(a)(1) \9\ of the Act in that it seeks to ensure fair
competition among brokers and dealers and among exchange markets. The
Exchange believes that the proposed rule meets these requirements
because it expands the scope of the Pilot to cover all NMS stocks while
adjusting the parameters of the rule for different securities in a
manner that will promote uniformity across markets concerning decisions
to pause trading in a security when there are significant price
movements. Additionally, the proposed changes would ensure that the
designated quoting percentages in Rule 7.23(a)(1)(B) are within a
narrower range than the percentages necessary to trigger a Trading
Pause.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 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
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. 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 45 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 or disapprove such 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 protected]. Please include
File Number SR-NYSEArca-2011-26 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-NYSEArca-2011-26.
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 Web site
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 NYSE
Arca. 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-
NYSEArca-2011-26 and should be submitted on or before June 2, 2011
[[Page 27693]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11672 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P