[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8670-8673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02644]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68806; File No. SR-EDGA-2013-05]
Self-Regulatory Organizations; EDGA 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
February 1, 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 31, 2013, EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') 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
[[Page 8671]]
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 EDGA Rule 11.14, 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. All of the
changes described herein are applicable to EDGA Members. The text of
the proposed rule change is available on the Exchange's Internet Web
site at www.directedge.com, at the Exchange's principal office, and at
the Public Reference Room of 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 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 these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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 delay the operative date of the pilot in
Rule 11.14, 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 11.14 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 11.14 would be
in effect.
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\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-EDGA-2011-31). 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 11.14
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 [sic] are calculated at the beginning of
each calendar quarter by the primary listing market, 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 primary listing markets disseminate the new
trigger levels quarterly to the media, via information memos and
publication on their Web sites. 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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\4\ NYSE Rule 80B, the analogous rule from the New York Stock
Exchange LLC, 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).
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Once a Rule 11.14 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 11.14 trading halt for
stocks that comprise the DJIA.
Amended Rule 11.14
The Exchange amended Rule 11.14 to revise the current 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 Rule 11.14 as follows: (i) Replaced the DJIA with the
S&P 500; (ii) replaced the quarterly calendar recalculation of Rule
11.14 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 11.14: to ensure that market participants have an opportunity to
become aware of and respond to significant price movements.
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\5\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-EDGA-2011-31).
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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 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 same reasons as stated above, the
Exchange proposes to delay the operative date of the market-wide
circuit breaker pilot to April 8, 2013.
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\6\ See id.
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[[Page 8672]]
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 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 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 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 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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.
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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.\11\
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\11\ 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) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\12\ 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-EDGA-2013-05 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-EDGA-2013-05. 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-EDGA-2013-05 and should be
submitted on or before February 27, 2013.
[[Page 8673]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02644 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P