[Federal Register Volume 78, Number 24 (Tuesday, February 5, 2013)]
[Notices]
[Pages 8213-8216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02484]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68769; File No. SR-C2-2013-006]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Delay the Operative Date of a Rule Change to Exchange Rule 6.32.03
January 30, 2013.
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 January 28, 2013, C2 Options Exchange, Incorporated (the
``Exchange'' or ``C2'') filed with the Securities and Exchange
Commission (``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 8214]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to delay the operative date of a rule change
to Exchange Rule 6.32.03, which provides for methodology for
determining when to halt trading in all stocks due to extraordinary
market volatility, from the date of February 4, 2013, until April 8,
2013.
The text of the proposed rule change is available on the Exchange's
Web site (http://www.c2exchange.com/Legal/), at the Exchange's Office
of the Secretary, and at the Commission [sic].
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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 6.32.03, which provides the
methodology for determining when to halt trading in all stocks due to
extraordinary market volatility,\3\ to delay the operative date of the
pilot by which such Rule operates from the current scheduled date of
February 4, 2013, until April 8, 2013, to coincide with the initial
date of operations of the Regulation NMS Plan to Address Extraordinary
Market Volatility (``LULD Plan'').\4\ As proposed, the pilot period
will begin and end at the same time [sic] the pilot period for the LULD
Plan. The current Rule 6.32.03 would remain in effect until April 8,
2013. If the pilot is not either extended or approved permanently at
the end of the pilot period, the current version of Rule 6.32.03 would
be in effect.
---------------------------------------------------------------------------
\3\ Exchange Rule 6.32.03 does not currently contain any
reference to the specific levels of decline in the DJIA that would
trigger a market-wide trading halt. Instead, the rule provides that
a market-wide halt will be triggered on the Exchange whenever a
market-wide halt is in effect on the New York Stock Exchange
(``NYSE'').
\4\ The Exchange adopted the proposed changes to the market-wide
circuit breakers on a pilot basis for a period that corresponds to
the pilot period for the LULD Plan so that the impact of the two
proposals can be reviewed together. See Securities Exchange Act
Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR-C2-
2011-024). The Exchange anticipates that the initial date of LULD
Plan operations will be changed to April 8, 2013. The proposal would
delay the operative date of the market-wide circuit breakers pilot
to April 8, 2013 in order for the implementation date for the
market-wide circuit breakers pilot would [sic] remain the same date
as for the LULD Plan.
---------------------------------------------------------------------------
Current Rule 6.32.03
In its current form,\5\ the rule provides for Level 1, 2, and 3
declines and specified trading halts following such declines. The
values of Levels 1, 2 and 3 [sic] are calculated at the beginning of
each calendar quarter, using 10%, 20% and 30%, respectively, of the
average closing value of the DJIA for the month prior to the beginning
of the quarter. Each percentage calculation is rounded to the nearest
fifty points to create the Levels' trigger points. The NYSE
disseminates the new trigger levels quarterly to the media and via an
Information Memo and is available on NYSE's Web site.\6\ The values
then remain in effect until the next quarterly calculation,
notwithstanding whether the DJIA has moved and a Level 1, 2, or 3
decline is no longer equal to an actual 10%, 20%, or 30% decline in the
most recent closing value of the DJIA.
---------------------------------------------------------------------------
\5\ The rule was last amended in 1998, when declines based on
specified point drops in the
DJIA were replaced with the current methodology of using a
percentage decline that is recalculated quarterly. See Securities
Exchange Act Release No. 39846 (April 9, 1998), 63 FR 18477 (April
15, 1998) (SR-NYSE-98-06, SR-Amex-98-09, SR-BSE-98-06, SR-CHX-98-08,
SR-NASD-98-27, and SR-Phlx-98-15).
\6\ See e.g., NYSE Regulation Information Memos 11-19 (June 30,
2011) and 11-10 (March 31, 2011).
---------------------------------------------------------------------------
Once a circuit breaker is in effect, trading in all stocks halt for
the time periods specified below:
Level 1 Halt
anytime before 2:00 p.m.--one hour;
at or after 2:00 p.m. but before 2:30 p.m.--30 minutes;
at or after 2:30 p.m.--trading shall continue, unless there is a
Level 2 Halt.
Level 2 Halt
anytime before 1:00 p.m.--two hours;
at or after 1:00 p.m. but before 2:00 p.m.--one hour;
at or after 2:00 p.m.--trading shall halt and not resume for the
rest of the day.
Level 3 Halt
at any time--trading shall halt and not resume for the rest of the
day.
Unless stocks are halted for the remainder of the trading day,
price indications are disseminated during a trading halt for stocks
that comprise the DJIA.
Amended Rule 6.32.03
The Exchange amended Rule 6.32.03 to revise the current methodology
for determining when to halt trading in all stocks due to extraordinary
market volatility (``market-wide circuit breakers'').\7\ The Exchange,
other equities, options, and futures markets, and FINRA amended the
market-wide circuit breakers to take into consideration the
recommendations of the Joint CFTC-SEC Advisory Committee on Emerging
Regulatory Issues, and to provide for more meaningful measures in
today's markets of when to halt trading in all stocks. Accordingly, the
Exchange amended Rule 6.32.03 as follows: (i) Replaced the DJIA with
the S&P 500; (ii) replaced the quarterly calendar recalculation of Rule
6.32.03 triggers with daily recalculations; (iii) replaced the 10%,
20%, and 30% market decline percentages with 7%, 13%, and 20% market
decline percentages; (iv) modified the length of the trading halts
associated with each market decline level; and (v) modified the times
when a trading halt may be triggered. The Exchange believes that these
amendments update the rule to reflect today's high-speed, highly
electronic trading market while still meeting the original purpose of
Rule 6.32.03: to ensure that market participants have an opportunity to
become aware of and respond to significant price movements.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-C2-2011-024).
---------------------------------------------------------------------------
The Exchange adopted the proposed changes to the market-wide
circuit breakers on a pilot basis for a period that corresponds to the
pilot period for the LULD Plan so that the impact of the two proposals
can be reviewed together.\8\ In addition, in order for the markets and
the single plan processors responsible for the consolidation of
information pursuant to Rule 603(b) of Regulation NMS under the
Securities Exchange Act of 1934 to make the necessary technological
changes to implement both the changes to the market-wide circuit
breakers and the proposed LULD Plan, the Exchange established that the
implementation date for the proposed rule changes should be the same
date that the LULD Plan is implemented. The Exchange anticipates that
the initial date of LULD Plan operations will be changed to April 8,
2013. For the same reasons as stated
[[Page 8215]]
above, the Exchange proposes to delay the operative date of the market-
wide circuit breakers pilot to April 8, 2013 in order for the
implementation date for the market-wide circuit breakers pilot would
remain the same date as for the LULD Plan.
---------------------------------------------------------------------------
\8\ See id.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
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 regulating, clearing,
settling, processing information with respect to, and facilitation
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
---------------------------------------------------------------------------
In particular, this rule proposal supports the objectives of
perfecting the mechanism of a free and open market and the national
market system because it promotes uniformity across markets concerning
when and how to halt trading in all stocks as a result of extraordinary
market volatility. Additionally, delaying the operative date of the
market-wide circuit breakers pilot until the initial date of operations
of the LULD Plan would allow the pilot to begin and end at the same
time of the LULD Plan so that the Exchange and the Commission could
further assess the impact of the two pilots on the marketplace or
whether other initiatives should be adopted in lieu of the pilots,
which contributes to the protection of investors and the public
interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed changes are being made to delay the operation of the
market-wide circuit breakers pilot until April 8, 2013 to allow the
pilot period to begin and end at the same time as the LULD Plan, which
contributes to the protection of investors and the public interest.
Other competing equity exchanges are subject to the same methodology
for determining when to halt trading in all stocks due to extraordinary
market volatility and the same requirements specified in the LULD Plan.
Thus, the proposed changes will not impose any burden on competition
while providing that the market-wide circuit breakers pilot period
corresponds to the pilot period for the LULD Plan so that the impact of
the two proposals can be reviewed together.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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 waived this requirement.
---------------------------------------------------------------------------
The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. Doing so will delay the operative date of the market-
wide circuit breakers pilot until the initial date of operations of the
LULD Plan, thereby allowing the pilot to run simultaneously with the
LULD Plan, providing an opportunity to properly assess the impact of
the two pilots on the marketplace and evaluate the pilots'
effectiveness. Therefore, the Commission designates the proposal
operative upon filing.\14\
---------------------------------------------------------------------------
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the 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) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\15\ 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-C2-2013-006 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-C2-2013-006. 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
[[Page 8216]]
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the 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-C2-2013-006 and should be submitted on or before
February 26, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02484 Filed 2-4-13; 8:45 am]
BILLING CODE 8011-01-P