[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60991-60993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24001]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70510; File No. SR-ISE-2013-49]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change to Amend ISE Rule 2128 Relating to Clearly Erroneous Trades
September 26, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 23, 2013, the International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') 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 is proposing to extend a pilot program related to Rule
2128, entitled ``Clearly Erroneous Executions.'' The Exchange also
proposes to remove certain references to individual stock trading
pauses contained in Rule 2128(c)(4). The text of the proposed rule
change is available on the Exchange's Internet Web site at http://www.ise.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 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 self-regulatory organization has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.
[[Page 60992]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to extend the effectiveness of the
Exchange's current rule applicable to Clearly Erroneous Executions and
to remove references to individual stock trading pauses described in
Rule 2128(c)(4).
Portions of Rule 2128, explained in further detail below, are
currently operating as a pilot program set to expire on September 30,
2013.\3\ The Exchange proposes to extend the pilot program to April 8,
2014.
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\3\ See Securities Exchange Act Release No. 68822 (Feb. 4,
2013), 78 FR 9440 (Feb. 8, 2013) (SR-ISE-2013-12).
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On September 10, 2010, the Commission approved, on a pilot basis,
changes to ISE Rule 2128 to provide for uniform treatment: (1) Of
clearly erroneous execution reviews in multi-stock events involving
twenty or more securities; and (2) in the event transactions occur that
result in the issuance of an individual stock trading pause by the
primary listing market and subsequent transactions that occur before
the trading pause is in effect on the Exchange.\4\ The Exchange also
adopted additional changes to Rule 2128 that reduced the ability of the
Exchange to deviate from the objective standards set forth in Rule
2128,\5\ and in 2013, adopted a provision designed to address the
operation of the Plan to Address Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan'').\6\ The Exchange believes the
benefits to market participants from the more objective clearly
erroneous executions rule should continue on a pilot basis through
April 8, 2014, which is one year following the commencement of
operations of the Plan. The Exchange believes that continuing the pilot
during this time will protect against any unanticipated consequences.
Thus, the Exchange believes that the protections of the Clearly
Erroneous Rule should continue while the industry gains further
experience operating the Limit Up-Limit Down Plan.
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\4\ Securities Exchange Act Release No. 62886 (Sept. 10, 2010),
75 FR 56613 (Sept. 16, 2010) (SR-ISE-2010-62).
\5\ Id.
\6\ See Securities Exchange Act Release No. 68822 (Feb. 4,
2013), 78 FR 9440 (Feb. 8, 2013) (SR-ISE-2013-12); Securities
Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6,
2012) (the ``Limit Up-Limit Down Release''); see also ISE Rule
2128(i).
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The Exchange also proposes to eliminate all references in Rule 2128
to individual stock trading pauses issued by a primary listing market.
Specifically, Rule 2128(c)(4) provides specific rules to follow with
respect to review of an execution as potentially clearly erroneous when
there was an individual stock trading pause issued for that security
and the security is included in the S&P 500[supreg] Index, the Russell
1000[supreg] Index, or a pilot list of Exchange Traded Products
(``Original Circuit Breaker Securities''). The stock trading pauses
described in Rule 2128(c)(4) are being phased out as securities become
subject to the Plan pursuant to a phased implementation schedule. The
Plan is already operational with respect to all Original Circuit
Breaker Securities, and thus, the Exchange believes that all references
to individual stock trading pauses should be removed, including all
cross-references to Rule 2128(c)(4) contained in other portions of Rule
2128.\7\
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\7\ The Exchange notes that certain Exchange Traded Products
(``ETPs'') are not yet subject to the Limit Up-Limit Down Plan.
Because such ETPs are not on the pilot list of securities, such ETPs
are not subject to Rule 2128(c)(4). See Securities Exchange Act
Release No. 65108 (August 11, 2011), 76 FR 51082 (August 17, 2011)
(SR-ISE-2011-53) (notice of filing and immediate effectiveness to
define Original Circuit Breaker Securities and to limit application
of Rule 2128(c)(4) to such securities). Accordingly, the proposed
rule change does not change the status quo with respect to such
ETPs. As amended, all securities, including ETPs not subject to the
Limit Up-Limit Down Plan, will continue to be subject to Rule
2128(c)(1) through (3).
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2. Statutory Basis
The Exchange believes that its proposal 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\ In particular, the
proposal is consistent with Section 6(b)(5) of the Act,\9\ because it
would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system. The Exchange believes that the pilot
program promotes just and equitable principles of trade in that it
promotes transparency and uniformity across markets concerning review
of transactions as clearly erroneous. More specifically, the Exchange
believes that the extension of the pilot would help assure that the
determination of whether a clearly erroneous trade has occurred will be
based on clear and objective criteria, and that the resolution of the
incident will occur promptly through a transparent process. The
proposed rule change would also help assure consistent results in
handling erroneous trades across the U.S. markets, thus furthering fair
and orderly markets, the protection of investors and the public
interest. Although the Limit Up-Limit Down Plan will become fully
operational during the same time period as the proposed extended pilot,
the Exchange believes that maintaining the pilot will help to protect
against unanticipated consequences. To that end, the extension will
allow the Exchange to determine whether Rule 2128 is necessary once the
Plan is fully operational and, if so, whether improvements can be made.
Finally, the elimination of references to individual stock trading
pauses will help to avoid confusion amongst market participants, which
is consistent with the protection of investors and the public interest
and therefore consistent with the Act. As described above, individual
stock trading pauses have been replaced by the Limit Up-Limit Down Plan
with respect to all Original Circuit Breaker Securities.
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\8\ 15 U.S.C. 78f(b).
\9\ 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
implicates any competitive issues. To the contrary, the Exchange
believes that the Financial Industry Regulatory Authority (``FINRA'')
and other national securities exchanges are also filing similar
proposals, and thus, that the proposal will help to ensure consistency
across market centers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 for 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
[[Page 60993]]
proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)(iii) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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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,
as it will allow the pilot program to continue uninterrupted, thereby
avoiding investor confusion that could result from a temporary
interruption in the pilot program. For this reason, the Commission
designates the proposed rule change to be operative upon filing.\12\
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\12\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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.
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-ISE-2013-49 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-ISE-2013-49. 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 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 offices 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-ISE-2013-49, and should be submitted on or before
October 23, 2013.
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. 2013-24001 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P