[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21485-21487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08322]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69296; File No. SR-NSX-2013-12]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend its Rule 11.24, Limit Up/Limit Down
April 4, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on April 3, 2013, National Stock Exchange,
Inc. (``NSX[supreg]'' or the ``Exchange'') 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
comment 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 amend Rule 11.24(k) regarding routing of
orders under the National Market System Plan established pursuant to
Rule 608 of the Exchange Act, to address extraordinary market
volatility (the ``Regulation NMS Plan to Address Extraordinary Market
Volatility'' or ``Plan''),\3\ also known as Limit Up/Limit Down. The
Exchange has designated this proposal as non-controversial and provided
the Commission with the notice required by Rule 19b-4(f)(6)(iii) under
the Act.\4\
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\3\ See Appendix A to Securities Exchange Act Release No. 67091
(May 31, 2012) 77 FR 33498 (June 6, 2012).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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The text of the proposed rule change is available on the Exchange's
Web site at http://www.nsx.com, at the principal office of the
Exchange, on the Commission's Web site at http://www.sec.gov, 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 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
[[Page 21486]]
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
Since May 6, 2010, when the markets experienced excessive
volatility in an abbreviated time period, i.e., the ``flash crash,''
the national securities exchanges that list and trade equity securities
and the Financial Industry Regulatory Authority (``FINRA'') have
implemented market-wide measures that are designed to restore investor
confidence in the markets by reducing the potential for excessive
volatility. The measures adopted include pilot plans for stock-by-stock
trading pauses \5\ and related changes to the equities market clearly
erroneous execution rules,\6\ and more stringent equity market maker
quoting requirements.\7\ On May 31, 2012, the Commission approved the
Plan, on a pilot basis.\8\ On March 8, 2013, the Commission published
the Exchange's proposed rule change to comply with the Plan, which is
to become operative on April 8, 2013.\9\
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\5\ See e.g., NSX Rule 11.20B.
\6\ See e.g., NSX Rule 11.19.
\7\ See e.g., NSX Rule 11.8(a)(1)(B)(iv) and (v).
\8\ See Securities Exchange Act Release No. 67091 (May 31, 2012)
77 FR 33498 (June 6, 2012) (Order approving, on a Pilot Basis, the
National Market System Plan to Address Extraordinary Market
Activity).
\9\ See Securities Exchange Act Release No. 69087 (March 8,
2013), 78 FR 16325 (March 14, 2012) (SR-NSX-2013-09)
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The Plan is designed to prevent trades in NMS Stocks from occurring
outside of specified Price Bands.\10\ Price Bands consisting of a Lower
Price Band and an Upper Price Band for each NMS Stock are calculated by
the Processors.\11\ The Price Bands are coupled with Trading Pauses to
accommodate more fundamental price moves. All trading centers in NMS
Stocks, including both those operated by Participants and those
operated by members of Participants, are required to establish,
maintain, and enforce written policies and procedures that are
reasonably designed to comply with the requirements specified in the
Plan.\12\
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\10\ Unless otherwise specified, capitalized terms used in this
rule filing are based on defined terms in the Plan.
\11\ See Section V(A) of the Plan.
\12\ The Exchange is a Participant in the Plan.
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In sum, Exchange Rule 11.24, Limit Up-Limit Down, addresses the
treatment of certain orders to prevent executions outside the Price
Bands.\13\ The Exchange proposes to amend Rule 11.24(k) in order to
explain how the Exchange will route orders under the Plan. Rule
11.24(k) currently states that the Exchange will route orders to an
away market in accordance with Rule 11.15(a)(ii) regardless of whether
the away market is displaying a sell (buy) quote that is above (below)
the Upper (Lower) Price Band. The Exchange now proposes to not route an
order unless an away market is displaying trading interest at or within
the Price Bands. As amended, Rule 11.24(k) will state that the Exchange
will not route an order unless an away market is displaying a sell
(buy) quote that is at or below (above) the Upper (Lower) Price
Band.\14\ The Exchange believes that this provision is reasonably
designed to prevent an execution from occurring outside the Price Bands
in a manner that promotes compliance with the Limit Up-Limit Down and
Trading Pause requirements specified in the Plan. This approach is also
consistent with that of other exchanges, including the New York Stock
Exchange, Inc. (``NYSE'') \15\ and EDGA Exchange, Inc. (``EDGA'').\16\
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\13\ See supra note 9.
\14\ Under NSX Rule 11.15(a)(iii), unless the terms of the order
direct otherwise, any order not executed in full on the Exchange
which is not eligible for routing away (e.g,, no away market is
displaying a sell (buy) quote that is at or below (above) the Upper
(Lower) Price Band), or which is not executed in full when routed
away, will be ranked in the NSX Book in accordance with the order
priority rules under NSX Rule 11.14 and eligible for execution in
accordance with NSX Rule 11.15.
\15\ See Securities Exchange Act Release No. 68876 (February 8,
2013), 78 FR 10643 (February 14, 2013) (SR-NYSE-2013-09).
\16\ See Securities Exchange Act Release No. 69002 (February 27,
2013), 78 FR 14394 (March 5, 2013) (SR-EDGA-2013-08).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Exchange Act.\17\ In addition,
the rule furthers the objective of Section 6(b)(5) of the Exchange Act
\18\ by promoting just and equitable principles of trade, removing
impediments to, and perfecting the mechanisms of, a free and open
national market system while protecting investors and the public
interest. The proposal furthers these causes by ensuring that orders in
NMS Stocks are not routed to other away markets where an execution may
occur outside the Price Bands, and thereby is reasonably designed to
prevent an execution outside the Price Bands in a manner that promotes
compliance with the Limit Up-Limit Down and Trading Pause requirements
specified in the Plan.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C 78f(b)(5).
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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. All national securities
exchanges are required to establish, maintain, and enforce policies and
procedures reasonably designed to comply with the requirements of the
Plan. Every member of those exchanges, including ETP Holders of the
Exchange, are subject to those procedures and prevented from executing
an order in an NMS Stock outside of the Price Bands prescribed by the
Plan. Therefore, the Exchange believes the proposed rule change does
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
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 \19\ and Rule 19b-4(f)(6) thereunder.\20\
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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\19\ 15 U.S.C. 78s(b)(3)(A)(iii).
\20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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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A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally
does not become operative prior to 30 days after
[[Page 21487]]
the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\
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. The Commission believes that waiving the operative delay and
designating April 8, 2013 as the operative date of the proposed rule
change is consistent with the protection of investors and the public
interest because such waiver would allow the proposed rule change to be
operative on the initial date of Plan operations. Accordingly, the
Commission hereby grants the Exchange's request and designates an
operative date of April 8, 2013.\23\
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\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii).
\23\ For purposes only of waiving the 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 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.
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-NSX-2013-12 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-NSX-2013-12. 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 such 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 publicly available. All
submissions should refer to File Number SR-NSX-2013-12 and should be
submitted on or before May 1, 2013.
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\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08322 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P