[Federal Register Volume 77, Number 223 (Monday, November 19, 2012)]
[Notices]
[Pages 69528-69530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28005]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68220; File No. SR-NYSE-2012-66]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Interim Rule
Change Relating to Rule 440B(b)
November 13, 2012.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on November 13, 2012, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 an interim proposed rule change related to
Rule 440B(b) to provide that on November 12, 2012, the closing price
for 216 Exchange-listed securities that did not have a closing
transaction on the Exchange was the consolidated last sale price
available as of the end of regular trading hours on November 12, 2012,
and that such closing price shall be the Trigger Price for purposes of
determining whether a Short Sale Price Test has been triggered pursuant
to Rule 440B(c) on November 13, 2012. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes an interim proposed rule change for Rule
440B(b) to provide that on November 12, 2012, the closing price for 216
Exchange-listed securities that did not have a closing transaction on
the Exchange was the consolidated last sale price available as of the
end of regular trading hours on November 12, 2012, and that such
closing price shall be the Trigger Price for purposes of determining
whether a Short Sale Price Test has been triggered pursuant to Rule
440B(c) on November 13, 2012. The Exchange proposes that this interim
proposed rule change be in effect until the Exchange has an opportunity
to amend its rules on a permanent basis.
[[Page 69529]]
Rule 440B sets forth how the Exchange implements the provisions of
Rule 201 of Regulation SHO (``Rule 201'') \4\ under the Securities
Exchange Act of 1934 (the ``Act'') which, if triggered, imposes a
restriction on the prices at which securities may be sold short
(``Short Sale Price Test''). Among other things, Rule 201 requires
trading centers to establish, maintain, and enforce written policies
and procedures reasonably designed to prevent the execution or display
of a short sale order of a covered security at a price that is less
than or equal to the current national best bid if the price of a
covered security decreases by 10% or more from the covered security's
closing price as determined by the listing market for the covered
security as of the end of regular trading hours on the prior day.
Accordingly, Rule 201(b)(1)(i) delegates to the listing market how to
determine the closing price for a security.
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\4\ 17 CFR 242.201.
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Due to a systems issue at the Exchange on November 12, 2012, the
Exchange was unexpectedly unable to close 216 Exchange-listed
securities pursuant to the procedures set forth in Rule 123C. The
Exchange notes that market participants rely on the Exchange's official
closing price for purposes of calculating the value of mutual funds,
exchange traded funds, and various indices, among other things.
Accordingly, on November 12, 2012, the Exchange needed to designate an
official closing price for the 216 affected symbols that did not have a
closing transaction at the Exchange. Because those securities continued
to trade on other markets, the Exchange determined that the appropriate
official closing price for those securities should be the consolidated
last sale price available as of the end of regular trading hours on
November 12, 2012.\5\ The Exchange believes that using the consolidated
last sale price available as of the end of regular trading hours best
approximated the market's determination of the appropriate price of
such securities in the absence of a closing transaction on the listing
market.
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\5\ See http://markets.nyx.com/nyse/market-status/view/11558.
The Exchange notes that for the 216 affected securities, 212
securities had a consolidated last-sale eligible trade on November
12, 2012. For the four symbols that did not have a transaction on
November 12, 2012, the Exchange used the last available consolidated
last-sale eligible transaction that occurred during regular trading
hours.
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Rule 440B establishes procedures for the Exchange, as a listing
market, to determine whether a Short Sale Price Test has been triggered
for a covered security. Among other things, Rule 440B(b) defines the
``Trigger Price'' as the security's closing price on the listing market
as of the end of regular trading hours on the prior day. Rule
440B(c)(2) provides that if a covered security did not trade on the
Exchange on the prior trading day (due to a trading halt, trading
suspension, or otherwise), the Exchange's determination of the Trigger
Price shall be based on the last sale price on the Exchange for that
security on the most recent day on which the security traded. The
Exchange believes that Rule 440B(c)(2) does not contemplate how the
Exchange should determine the closing price in the unique circumstances
that occurred on November 12, 2012, namely, that due to a systems
issue, the Exchange was unable to conduct a closing transaction in
securities that otherwise were eligible to trade on other markets. In
particular, the reason why the Exchange did not trade the 216
securities was not because of a trading halt or trading suspension, and
the Exchange does not believe the ``or otherwise'' language in Rule
440B(c)(2) was designed to address the unanticipated scenario on
November 12, 2012 when due to a systems issue, the Exchange was unable
to hold a closing transaction in those securities.
Because the Exchange has determined that the official closing price
of the 216 affected securities should be the consolidated last sale
price available as of the end of regular trading hours, the Exchange
similarly believes that such consolidated last sale prices should be
the closing price for purposes of determining the Trigger Price
pursuant to Rule 440B(b). Accordingly, the Exchange proposes this
interim proposed rule change for Rule 440B(b) to provide that for
circumstances when the Exchange does not have a closing transaction,
but securities are otherwise eligible to trade on other markets, the
Exchange shall use the consolidated last sale price available as of the
end of regular trading hours as the closing price for purposes of Rule
440B. The Exchange further proposes that such closing price shall be
the Trigger Price for purposes of determining whether a Short Sale
Price Test has been triggered on the following day pursuant to Rule
440B(c). The Exchange notes that the proposed interim rule proposal is
intended to be in place only until the Exchange has an opportunity to
amend its rules on a permanent basis to address this gap in its rules.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\7\ 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change will promote
just and equitable principles of trade because it provides for an
interim measure that provides clarity of how the Exchange, as a listing
market, determined the Trigger Price for 216 securities that did not
have a closing transaction at the Exchange on November 12, 2012. In
particular, the Exchange believes that using the consolidated last sale
price available as of the end of regular trading hours as the official
closing price for the affected securities on November 12, 2012 promotes
just and equitable principles of trade because the consolidated last
sale price represents the market's determination of the appropriate
price of the securities in the absence of a closing auction on the
primary market. The Exchange further believes that using a Trigger
Price based on the consolidated last sale price available as of the end
of regular trading hours for purposes of determining whether a Short
Sale Price Test has been triggered on November 13, 2012 promotes just
and equitable principles of trade because it provides transparency of
how the Exchange determined the closing price for purposes of
triggering a Short Sale Price Test on November 13, 2012.
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.
[[Page 69530]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give 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 date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Commission has determined to waive the five-day prefiling period
in this case.
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A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. 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 hereby
grants the request.\13\ Waiving the 30-day operative delay will allow
the Exchange to provide transparency for how the Exchange determined
the closing price on November 12, 2012. The Commission believes it is
consistent with the protection of investors and the public interest to
waive the 30-day operative delay and, therefore, designates the
proposal as operative upon filing.
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of such 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 email to [email protected]. Please include
File Number SR-NYSE-2012-66 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-NYSE-2012-66. This file
number should be included on the subject line if email 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 Section, 100 F Street
NE., Washington, DC 20549-1090. Copies of the filing will also be
available for inspection and copying at the NYSE's principal office and
on its Internet Web site at www.nyse.com. 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 available publicly.
All submissions should refer to File Number SR-NYSE-2012-66 and
should be submitted on or before December 10, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28005 Filed 11-16-12; 8:45 am]
BILLING CODE 8011-01-P