[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Pages 6389-6391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01933]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68724; File No. SR-NYSE-2013-03]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Rule 440B To Provide How the Trigger Price Will Be Calculated
if Trading Is Interrupted Because of a Systems or Technical Issue and
Is Not Restored During the Trading Day
January 24, 2013.
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 January 10, 2013, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 440B to provide how the Trigger
Price will be calculated if trading is interrupted because of a systems
or technical issue and is not restored during the trading day. 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 Rule 440B to provide how the Trigger
Price \4\ will be calculated if trading is interrupted because of a
systems or technical issue and is not restored during the trading day.
Specifically, the Exchange proposes to provide that if trading in a
covered security is interrupted because of a systems or technical issue
and is not restored during that trading day, the Exchange's
determination of the Trigger Price shall be based on the consolidated
last sale price for that security on the most recent day on which the
security traded.
---------------------------------------------------------------------------
\4\ Trigger Price is defined in Rule 440B(b). See Rule 440B(b).
Determination of Trigger Price is set forth in Rule 440(c). See Rule
440B(c).
---------------------------------------------------------------------------
The Exchange recently filed 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.\5\ The interim rule is in effect
until the Exchange has an opportunity to amend its rules on a permanent
basis. The Exchange now proposes to establish a rule provision that
provides for how the Trigger Price is determined when a systems or
technical issue prevents the closing of the security at the end of
regular trading hours.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 68220 (November 13,
2012), 77 FR 69528 (November 19, 2012) (SR-NYSE-2012-66).
---------------------------------------------------------------------------
Rule 440B sets forth how the Exchange implements the provisions of
Rule 201 of Regulation SHO (``Rule 201'') \6\ under the Act which, if
triggered, imposes a restriction on the prices at which securities may
be sold short (``Short Sale Price Test''). Among
[[Page 6390]]
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.
---------------------------------------------------------------------------
\6\ 17 CFR 242.201.
---------------------------------------------------------------------------
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.
Because securities listed on the Exchange may continue to trade on
other markets while systems or technical issues prevent trading on the
Exchange, the Exchange believes that, under these circumstances, the
closing price for purposes of determining whether a Short Sale Price
Test has been triggered pursuant to Rule 440B(b) should be the
consolidated last sale price available as of the end of regular trading
hours on that day. The Exchange believes that using the consolidated
last sale price available as of the end of regular trading hours best
approximates the market's determination of the appropriate price of
such securities in the absence of a closing transaction on the listing
market.
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 circumstance
of a systems or technical failure similar to that which occurred on
November 12, 2012. 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.
The Exchange believes that such consolidated last sale prices
should be the closing price for purposes of determining the Trigger
Price pursuant to Rule 440B(b) in the event that trading in a covered
security is interrupted on the Exchange because of a systems or
technical issue and is not restored during the trading day.
Accordingly, the Exchange proposes to amend Rule 440B to provide that
for circumstances when the Exchange does not have a closing transaction
because of systems or technical issues, 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.\7\ This proposed
rule will replace the interim rule in regards to how the Trigger Price
is calculated in these circumstances.\8\
---------------------------------------------------------------------------
\7\ If there is no trading on any market on the day of the
systems or technical issue, the consolidated last sale price
available for a security may be the Exchange's closing price from
the most recent day on which the security traded.
\8\ See supra note 5. The interim rule provided an interpretive
position, while the proposal seeks to amend the text of the Exchange
Rules.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change will promote
just and equitable principles of trade because it provides clarity of
how the Exchange, as a listing market, determines the Trigger Price for
securities that do not have a closing transaction due to a systems or
technical issue. In particular, the Exchange 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 promotes just and equitable
principles of trade because it provides transparency of how the Trigger
Price will be determined for securities that do not have a closing
transaction due to a systems or technical issue.
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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 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 Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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
[[Page 6391]]
filing. The Exchange believes that a waiver of this period is
appropriate as the proposal is designed to provide transparency of how
the Trigger Price will be determined for Exchange listed securities
that did not have a closing transaction at the Exchange due to a
systems or technical issue. According to the Exchange, the waiver of
the operative delay will allow the participants on the Exchange to
benefit from a permanent rule to determine the Trigger Price in
situations where a systems or technical issue prevents a closing price
during regular trading.
---------------------------------------------------------------------------
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission hereby grants the 30-day operative delay
request.\15\ The Commission believes that waiver of the 30-day
operative delay is appropriate as the proposal provides clarity of how
the Exchange, as a listing market, determines how the Trigger Price
will be calculated if trading is interrupted on the Exchange because of
a systems or technical issue and is not restored during the trading
day. The Commission also believes a waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest and, therefore, the Commission designates the proposal
operative upon filing.
---------------------------------------------------------------------------
\15\ 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).
---------------------------------------------------------------------------
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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2013-03 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-2013-03. 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 20549-1090. Copies of the filing will also be available for Web site
viewing and printing 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-2013-03 and should be submitted on or before February 20, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01933 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P