[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8646-8648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02626]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68785; File No. SR-NYSEArca-2013-06]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Delaying the
Operative Date of a Rule Change to Exchange Rule 7.12, 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
January 31, 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 23, 2013, 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 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.
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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 delay the operative date of a rule change
to Exchange Rule 7.12, 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 [sic] 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.12, which provides the
methodology for determining when to halt trading in all stocks due to
extraordinary market volatility, 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 7.12 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 7.12 would be in
effect.
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\4\ 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-NYSEArca-2011-68).
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 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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Current Rule 7.12
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 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 Exchange disseminates
the new trigger levels quarterly to the media and via an Information
Memo and [sic] is available on the Exchange'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.
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\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).
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Once a Rule 7.12 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 Rule 7.12 trading halt for
stocks that comprise the DJIA.
Amended Rule 7.12
The Exchange amended Rule 7.12 to revise the current methodology
for determining when to halt trading in all stocks due to extraordinary
market volatility (``market-wide circuit
[[Page 8647]]
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 7.12 as follows: (i)
Replaced the DJIA with the S&P 500; (ii) replaced the quarterly
calendar recalculation of Rule 7.12 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 7.12: to ensure that market participants have
an opportunity to become aware of and respond to significant price
movements.
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\7\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-NYSEArca-2011-68).
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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 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 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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\8\ 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''),\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 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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\9\ 15 U.S.C. 78f(b).
\10\ 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 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.
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
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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 filing. 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 hereby
waives the 30-day operative delay and designates the proposal operative
upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ 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 such proposed rule
change, the Commission summarily may
[[Page 8648]]
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.
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\16\ 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-NYSEArca-2013-06 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-2013-06. 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 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-NYSEArca-2013-06 and should
be submitted on or before February 27, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02626 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P