[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8659-8661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02632]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68795; File No. SR-BYX-2013-007]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Delay
the Operative Date of Changes to the Rule for Halting Trading in All
Stocks Due to Extraordinary Market Volatility
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 30, 2013, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to delay the operative date of a rule
change to BYX Rule 11.18, which provides 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 the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room [sic].
[[Page 8660]]
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 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 delay the operative date of the pilot in
BYX Rule 11.18, which provides the methodology for determining when to
halt trading in all stocks due to extraordinary market volatility, from
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 period
will begin and end at the same time [sic] the pilot period for the LULD
Plan. The current Rule 11.18 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 11.18 would be
in effect.
---------------------------------------------------------------------------
\3\ The Commission approved the proposed changes to the market-
wide circuit breaker 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-BYX-2011-025). 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.
---------------------------------------------------------------------------
Current Rule 11.18
In its current form,\4\ 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 declines 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 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.
---------------------------------------------------------------------------
\4\ 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).
---------------------------------------------------------------------------
Once a Rule 11.18 circuit breaker is in effect, trading in all
stocks halt [sic] 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 11.18 trading halt for
stocks that comprise the DJIA.
Amended Rule 11.18
The Exchange amended BYX Rule 11.18 to revise the methodology for
determining when to halt trading in all stocks due to extraordinary
market volatility (``market-wide circuit breaker'').\5\ The Exchange,
other equities, options, and futures markets, and FINRA amended the
market-wide circuit breaker 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 BYX Rule 11.18 as follows: (i) Replaced the DJIA with
the S&P 500; (ii) replaced the quarterly calendar recalculation of Rule
11.18 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
BYX Rule 11.18: to ensure that market participants have an opportunity
to become aware of and respond to significant price movements.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-BYX-2011-025).
---------------------------------------------------------------------------
The Exchange adopted the proposed changes to the market-wide
circuit breaker 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.\6\ 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 Act \7\
to make the necessary technological changes to implement both the
changes to the market-wide circuit breaker 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 reasons stated above, the
Exchange proposes to delay the operative date of the market-wide
circuit breaker pilot to April 8, 2013.
---------------------------------------------------------------------------
\6\ See id.
\7\ 17 CFR 242.603(b).
---------------------------------------------------------------------------
2. Statutory Basis
The rule change is consistent with the requirements of the Act and
the rules and regulations thereunder that are applicable to a national
securities exchange, and, in particular, with the requirements of
Section 6(b) of the Act.\8\ Specifically, the proposed change is
consistent with Section 6(b)(5) of the Act,\9\ because 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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
[[Page 8661]]
trading in all stocks as a result of extraordinary market volatility.
Additionally, delaying the operative date of the market-wide circuit
breaker 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 delay in the operation
of the market-wide circuit breaker pilot until April 8, 2013 will 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 requirements specified in the
LULD Plan. Thus, the proposed changes will not impose any burden on
competition while providing that the market-wide circuit breaker 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 has neither solicited nor received written 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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
Exchange has satisfied 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.\12\
---------------------------------------------------------------------------
\12\ 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) \13\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\13\ 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-BYX-2013-007 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-BYX-2013-007. 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-BYX-2013-007 and should be
submitted on or before February 27, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02632 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P