[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27689-27691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11673]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64425; File No. SR-NSX-2011-06]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change To Amend Its Rules To Extend a
Pilot Program Regarding Trading Pauses in Individual Securities Due to
Extraordinary Market Volatility to All NMS Stocks and To Make
Conforming Changes to Market Maker Quoting Obligations
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, the National Stock Exchange, Inc. (``Exchange'' or
``NSX'') 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 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 Substance
of the Proposed Rule Change
National Stock Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') is
proposing to amend Rule 11.20B to include additional securities in the
pilot by which such rule operates and amend Rule 11.8 to simplify
certain aspects of the text while also conforming certain of the
percentages thereunder to the proposed changes to Rule 11.20B.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nsx.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
With this rule change, the Exchange is proposing to amend Rule
11.20B to include additional securities in the pilot by which such rule
operates and amend Rule 11.8 to simplify certain aspects of the text
while also conforming certain of the percentages thereunder to the
proposed changes to Rule 11.20B.
NSX Rule 11.20B (Trading Pauses in Individual Securities Due to
Extraordinary Market Volatility) was approved by the Securities and
Exchange Commission (the ``Commission'') on June 10, 2010 on a pilot
basis (``Pilot'') to end on December 10, 2010.\3\ The Pilot end date
was subsequently extended until August 11, 2011 or to coincide, if
applicable, with the earlier implementation date of the limit up/limit
down mechanism.\4\ Similar rule changes were adopted by other markets
in the national market system in a coordinated manner.
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\3\ See Securities Exchange Act Release No. 62252 (June 10,
2010), 75 FR 34186 (June 16, 2010) (SR-NSX-2010-05).
\4\ See Securities Exchange Act Release No. 63512 (December 9,
2010), 75 FR 78786 (December 16, 2010) (SR-NSX-2010-17); and
Securities Exchange Act Release No. 64213 (April 6, 2011), 76 FR
20409 (April 12, 2011) (SR-NSX-2011-04).
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As the Exchange noted in its filing to adopt NSX Rule 11.20B,
during the Pilot period, the Exchange, in conjunction with other
markets in the national market system, would continue to assess whether
additional securities need to be added and whether the parameters of
the rule would need to be modified to accommodate trading
characteristics of different securities. When initially adopted on June
10, 2010, the pilot included all securities included within the S&P
500[supreg] Index. On September 10, 2010 NSX Rule 11.20B was expanded
to securities included in the Russell 1000[supreg] Index (``Russell
1000'') and specified Exchange Traded Products (``ETPs''). \5\
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\5\ See Securities Exchange Act Release No. 62884 (September 10,
2010), 75 FR 56618 (September 16, 2010) (SR-NSX-2010-08).
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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 11.20B
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. In addition, a wider
Threshold Move percentage would apply to the newly added securities.
Because the proposed additional stocks are those not currently included
in the S&P 500 Index, Russell 1000 Index, or specified ETPs, and
therefore are more likely to be less liquid securities or securities
with lower trading volume, 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 be appropriate for leveraged ETPs.
Securities priced below $1 are proposed to have a higher Threshold Move
than higher priced securities because lower-priced securities may tend
to be more volatile, and price movements of lower-priced securities
equate to a higher percentage move than a similar price change for a
higher-priced security.
Accordingly, the Exchange proposes to expand the definition of the
term ``Circuit Breaker Securities'' set forth in Commentary .05 to Rule
11.20 to include all NMS stocks. The Exchange
[[Page 27690]]
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.\6\ 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 Pilot to reduce the negative impacts of unanticipated price
movements in a security. The Exchange proposes to include new
subsections 11.20B(a)(1), (2) and (3) 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.\7\ The Exchange is not proposing any other changes to the text
of Rule 11.20B 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\ 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.
\7\ 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 requires that
certain rule text pertaining to the Threshold Move for the existing
Pilot securities be reorganized within Rule 11.20B(a).
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The proposed changes to the Pilot, if approved, would require that
the text of Rule 11.8(a)(1)(B)(iv) and (v), which pertains to the
pricing obligations that Market Makers are required to adhere to, be
amended to correct the cross-references therein to Rule 11.20B and the
Threshold Move thereunder. Specifically, the Exchange proposes to
remove any text from Rule 11.8(a)(1)(B)(iv) and (v) 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 11.8(a)(1)(B)(iv) and (v) by explicitly
stating the percentages that are applicable thereunder and the times
during the trading day when Rule 11.20B is not in effect. The Exchange
notes that part of this proposed change would be substantive, in that
the percentages under Rule 11.8(a)(1)(B)(iv) and (v) 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 11.8(a)(1)(B) are within a narrower range than the
percentages necessary to trigger a Trading Pause.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\8\ in general, and
Section 6(b)(5) of the Act,\9\ 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)
\10\ 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 11.8(a)(1)(B) are within a narrower range than the
percentages necessary to trigger a Trading Pause.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 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 inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
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-NSX-2011-06 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-NSX-2011-06. 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 NSX. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that
[[Page 27691]]
you wish to make publicly available. All submissions should refer to
File Number SR-NSX-2011-06 and should be submitted on or before June 2,
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11673 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P