[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Notices]
[Pages 77154-77156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31247]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68520; File No. SR-NYSEMKT-2012-80]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Exchange
Rule 953NY--Trading Halts and Suspensions
December 21, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 10, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') 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 Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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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 Exchange Rule 953NY--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 Exchange Rule 953NY 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'').\5\
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\5\ 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
953NY, which provides that any trade that occurs during a trading halt
on the Exchange in a given option shall be nullified.
Rule 953NY 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 953NY(a), NYSE Amex 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
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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 953NY(b), the
Exchange shall halt trading in any equity option (including options
overlying ETFs), when the underlying security is paused.\6\
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\6\ A trading pause is 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 regulatory or non-regulatory trading halt in an
options class, 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 to Rule 953NY(a), or required pursuant to Rule 953NY(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 an 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 975NY the trade
qualifies as an Obvious or Catastrophic Error, or (ii) pursuant to Rule
965NY Commentary .01, a Trading Official determines that the execution
of such trade was done in violation of certain Exchange rules governing
open outcry trading.\7\ The addition of proposed Commentary .04 to Rule
953NY 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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\7\ 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, unless the Exchange had also halted the trading of
options overlying such security or index.\8\ 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)-(C). 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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\8\ The Exchange notes that Rule 953NY(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''),\9\ in general, and
furthers the objectives of Section 6(b)(5),\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 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 Amex 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
Because the foregoing proposed rule 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 if consistent with the protection of
investors and the public interest, provided that the self-regulatory
organization has given the Commission written notice of its intent to
file 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 proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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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
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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-NYSEMKT-2012-80 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-NYSEMKT-2012-80. 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 Room, 100 F Street NE.,
Washington, DC 20549 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 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 available publicly. All
submissions should refer to File Number SR-NYSEMKT-2012-80 and should
be submitted on or before January 22, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31247 Filed 12-28-12; 8:45 am]
BILLING CODE 8011-01-P