[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8673-8675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02591]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68777; File No. SR-CHX-2013-02]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Delaying the Operative Date of a Rule Change to CHX Article 20, Rule 2,
Which Provides, Among Other Things, 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
January 31, 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 25, 2013, the Chicago Stock Exchange, Inc. (the
``Exchange'' or ``CHX'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 delay the operative date of a rule change
to CHX Article 20, Rule 2, which provides, among other things, the
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 this proposed rule change is available
on the Exchange's Web site at (www.chx.com) and in the Commission's
Public Reference Room [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 CHX included statements
concerning the purpose of and basis for the proposed rule changes 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 CHX 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 Article 20, Rule 2, which provides,
among other things, the methodology for determining when to halt
trading in all stocks due to extraordinary market volatility (``market-
wide circuit breakers''), 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'').\3\ As proposed, the pilot will begin and
end at the same time [sic] the pilot period for the LULD Plan. The
current Article 20, Rule 2 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 portions of the current version of Article 20,
Rule 2 that outlines the market-wide circuit breakers would be in
effect.
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\3\ The Commission approved the proposed changes to the market-
wide circuit breakers on a pilot basis for a period scheduled to
start on February 4, 2013 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-CHX-2011-30). The
Exchange anticipates that the initial date of LULD Plan operations
will be changed to April 8, 2013. This proposal would set 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.
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Current Article 20, Rule 2
In its current form, Article 20, Rule 2 provides for, among other
things, 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 Dow Jones Industrial
Average (``DJIA'') for the month prior to beginning of the quarter. The
values remain then 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.
Once the current market-wide circuit breakers are in effect,
trading in all stocks halt for the time periods specified below (all
times are in Central Standard Time):
Level 1 Halt
Anytime before 12:00 [sic] p.m.--one hour;
At or after 1:00 p.m. but before 1:30 p.m.--30 minutes;
At or after 1:30 p.m.--trading shall continue, unless there is a
Level 2 Halt.
Level 2 Halt
Anytime before 12:00 p.m.--two hours;
At or after 12:00 p.m. but before 1:00 p.m.--one hour;
At or after 1:00 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 an Article 20, Rule 2 trading
halt for stocks that comprise the DJIA.
Amended Article 20, Rule 2
The Exchange amended Article 20, Rule 2 to revise the current
market-wide circuit breakers.\4\ 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 Article 20, Rule 2 as
follows: (i) Replaced the DJIA with the S&P 500; (ii) replaced the
quarterly calendar recalculation of market-wide circuit breaker
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
[[Page 8674]]
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
the market-wide circuit breakers provisions of Article 20, Rule 2: to
ensure that market participants have an opportunity to become aware of
and respond to significant price movements.
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\4\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-CHX-2011-30).
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The Exchange adopted the proposed changes to the market-wide
circuit breakers on a pilot basis for a period that corresponds to the
pilot for the LULD Plan so that the impact of the two proposals can be
reviewed together.\5\ 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 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 above, the Exchange proposes to delay the operative date of
the market-wide circuit breaker pilot to April 8, 2013 in order for the
implementation date for the market-wide circuit breaker pilot to remain
the same date as for the LULD Plan.
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\5\ See id.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (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 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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Specifically, 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 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. 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
No written comments were either solicited or received.
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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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.
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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.\10\
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\10\ 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).
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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) \11\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(2)(B).
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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-CHX-2013-02 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-CHX-2013-02. This
file number should be included on the
[[Page 8675]]
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
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-CHX-2013-02 and should be submitted on or before
February 27, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02591 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P