[Federal Register Volume 77, Number 247 (Wednesday, December 26, 2012)]
[Notices]
[Pages 76139-76141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31014]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68474; File No. SR-NYSEArca--2012-141]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Rule 6.65--Trading Halts and Suspensions
December 19, 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 December 10, 2012, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III 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 to amend NYSE Arca Rule 6.65--Trading Halts
and Suspensions. 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 to amend NYSE Arca Rule 6.65 by adopting a
provision governing the nullification of trades that occur while the
options class is subject to a trading halt. This proposal is based on
and substantially similar to Rule 1092(c)(iv)(A) of NASDAQ OMX PHLX,
LLC (``PHLX'').\4\
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\4\ See Securities Exchange Act Release No. 57712 (April 24,
2008), 73 FR 24100 (May 1, 2008). Approval Order for SR-Phlx-2007-
69, as amended.
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Specifically, the Exchange proposes to adopt Commentary .04 to Rule
6.65, which provides that any trade that occurs during a trading halt
on the Exchange in a given option shall be nullified.
Rule 6.65 sets forth the circumstances when the Exchange may halt
trading in an options contract or options series. Such trading halts
are applicable to both electronic and open-outcry trading. Pursuant to
Rule 6.65(a), NYSE Arca shall halt or suspend the trading of options
whenever the Exchange deems such action appropriate in the interests of
a fair and orderly market and to protect investors. Among the factors
that may be considered are: (i) The trading in the underlying stock or
Exchange Traded Funds (``ETF'') has been halted or suspended in the
primary market; (ii) the opening of such underlying stock or ETF in the
primary market has been delayed because of unusual circumstances; (iii)
the Exchange has been advised that the issuer of the underlying stock
or ETF is about to make an important announcement affecting such
issuer; or (iv) other unusual conditions or circumstances are present.
In addition, pursuant to Rule 6.65(b), the Exchange shall halt trading
in any equity option (including options overlying ETFs), when the
underlying security is paused.\5\
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\5\ A trading pause in an underlying security is triggered when
the price of the security falls or rises 10% or more in a rolling 5-
minute window. Trading pauses are initiated by the primary market
where the stock trades.
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Notwithstanding a trading halt in an options security, the Exchange
recognizes that there could be occurrences where an aberrant trade
might still occur after the Exchange has halted trading in a given
options class. For example, this could happen because of a temporary
systems outage, a communications issue between the electronic and
floor-based markets, or other type of in-flight messaging scenario
where the Exchange's automatic execution system executed an order, even
though the options had been halted prior to the time of execution.
Because the Exchange would have already halted trading of the option
class, either because it was warranted in the interest of a fair and
orderly market and the protection of investors pursuant
[[Page 76140]]
to Rule 6.65(a), or required pursuant to Rule 6.65(b) because the
underlying security was paused, the Exchange does not believe that any
trade that takes place after an options class that has been halted on
the Exchange should stand. Proposed Commentary .04 will require the
Exchange to nullify these aberrant trades. The Exchange notes that
executions occurring prior to a trading halt in the options class, but
not yet reported to the Exchange, will still be reported for
dissemination to OPRA after the options have halted. Such trades would
not be subject to nullification by the Exchange pursuant to proposed
Commentary .04.
Under existing rules, the Exchange may only nullify a trade which
occurred during a trading halt if, (i) pursuant to Rule 6.87 the trade
qualifies as an Obvious or Catastrophic Error, or (ii) pursuant to Rule
6.77, a Trading Official determines that the execution of such trade
was done in violation of certain Exchange rules governing open outcry
trading.\6\ The addition of proposed Commentary .04 will expand the
Exchange's authority to nullify trades that may occur during a trading
halt, which the Exchange believes is in keeping with the maintenance of
a fair and orderly market and the protection of investors.
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\6\ A trade may also be nullified, without Exchange interaction,
if all parties to the trade agree to the nullification.
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The Exchange notes that the PHLX Rule 1092(c)(iv) also includes
other provisions related to trading halts and the nullification of
trades. Paragraphs (B)-(C) of the PHLX rule deal with the nullification
of an options trade whenever the underlying security or a certain
percentage of the components of an underlying index have halted,
regardless of whether the options themselves have halted. Exchange
rules do not require that an options class be halted whenever the
underlying security halts, therefore it would be inconsistent to
nullify a trade simply because the underlying security or index
components halted, if the Exchange had not also halted the trading of
options overlying such security or index.\7\ The Exchange only proposes
to nullify a trade in the event the options have been halted by the
Exchange, and therefore is not proposing to adopt PHLX Rule
1092(c)(iv)(B)-(D). Additionally, paragraph (D) of the PHLX rule deals
with Treasury securities. The Exchange does not trade options on
Treasury securities; therefore this provision is not relevant to this
filing.
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\7\ The Exchange notes that Rule 6.65(a) states that the
Exchange may consider the halting of an underlying security as a
factor to be taken into consideration when deciding whether to halt
trading in the options overlying such security, and generally will
do so and will halt an options class whenever an underlying security
or index halts.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule changes are consistent
with the Act because permitting the Exchange to nullify trades that
occur during a trading halt helps to ensure that NYSE Arca may continue
to meet its obligation to maintain a fair and orderly market and
protect investors. In particular, the Exchange believes that the
proposal promotes just and equitable principles of trade because it
will ensure that when the Exchange is halted for trading, no trades
that mistakenly were executed during the halt will be permitted to
stand, thereby assuring consistent treatment of orders during a trading
halt. Furthermore, the proposal removes impediments to and perfects the
mechanism of a free and open market and a national market system by
assuring that when trading is halted, no executions may occur and any
aberrant trades are nullified.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act\10\ and Rule 19b-4(f)(6) thereunder.\11\
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.
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6)\12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\13\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
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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-NYSEArca-2012-141 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-2012-141.
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
[[Page 76141]]
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 20549-1090, on official business days between the hours of 10:00
a.m. and 3:00 p.m. Copies of such filing also will be available for
inspection and copying at the NYSE Arca'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-NYSEArca-2012-141, and should be submitted on or before
January 16, 2013.
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. 2012-31014 Filed 12-21-12; 4:15 pm]
BILLING CODE 8011-01-P