[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60941-60943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24002]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70511; File No. SR-EDGX-2013-35]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Amend
EDGX Rule 11.13, Clearly Erroneous Executions
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 25, 2013, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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 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\ 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 filing with the Commission a proposal to extend a
pilot program related to Rule 11.13, entitled ``Clearly Erroneous
Executions.'' The Exchange also proposes to remove certain references
to individual stock trading pauses contained in Rule 11.13(c)(4). 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.\3\ All of the changes described herein are applicable to EDGX
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.
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\3\ 17 CFR 240.19b-4(f)(6)(iii).
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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 the
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 11.13(c)(4).
Portions of Rule 11.13, explained in further detail below, are
currently operating as a pilot program set to expire on September 30,
2013.\4\ The Exchange proposes to extend the pilot program to April 8,
2014.
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\4\ Securities Exchange Act Release No. 68814 (February 1,
2013), 78 FR 9086 (February 7, 2013) (SR-EDGX-2013-06).
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On September 10, 2010, the Commission approved, on a pilot basis,
changes to Exchange Rule 11.13 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.\5\ The Exchange also
adopted additional changes to Rule 11.13 that reduced the ability of
the Exchange to deviate from the objective standards set forth in Rule
11.13,\6\ 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'').\7\ 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
[[Page 60942]]
further experience operating the Limit Up-Limit Down Plan.
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\5\ Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010) (SR-EDGX-2010-03).
\6\ Id.
\7\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release''); see also Exchange Rule 11.13(i).
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The Exchange also proposes to eliminate all references in Rule
11.13 to individual stock trading pauses issued by a primary listing
market. Specifically, Rule 11.13(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 11.13(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 11.13(c)(4)
contained in other portions of Rule 11.13.\8\
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\8\ 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 11.13(c)(4). See Securities Exchange Act
Release No. 65109 (August 11, 2011), 76 FR 51103 (August 17, 2011)
(SR-EDGX-2011-25) (notice of filing and immediate effectiveness to
define Subject [sic] Securities and to limit application of Rule
11.13(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 11.13(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.\9\ In particular, the
proposal is consistent with Section 6(b)(5) of the Act,\10\ 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 11.13 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 Subject [sic] Securities.
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\9\ 15 U.S.C. 78f(b).
\10\ 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 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 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 proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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.\13\
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\13\ 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 No. SR-EDGX-2013-35 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 No. SR-EDGX-2013-35. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
[[Page 60943]]
comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's 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 available publicly. All submissions should refer to
File No. SR-EDGX-2013-35 and should be submitted on or before October
23, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24002 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P