[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60969-60971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24010]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70519; File No. SR-NYSE-2013-65]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Extending the Pilot Program for Certain Clearly Erroneous Executions
Under Rule 128 and Removing References to Individual Security Trading
Pauses Contained in Rule 128(c)(4)
September 26, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 24, 2013, New York Stock Exchange LLC
(``NYSE'' or the ``Exchange'') filed with the Securities and Exchange
Commission (the ``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\ 15 U.S.C. 78a.
\3\ 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 extend the pilot program for certain
clearly erroneous executions under Rule 128 and remove references to
individual security trading pauses contained in Rule 128(c)(4). The
text of the proposed rule change is available on the Exchange's Web
site at www.nyse.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 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 those 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 extend the pilot program for certain
clearly erroneous executions under Rule 128 and remove references to
individual security trading pauses contained in Rule 128(c)(4).
Portions of Rule 128, 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\ See Securities Exchange Act Release No. 68804 (February 1,
2013), 78 FR 8677 (February 6, 2013) (SR-NYSE-2013-11).
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On September 10, 2010, the Securities and Exchange Commission
(``Commission'') approved, on a pilot basis, changes to Rule 128 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 security trading pause by the primary listing market and
subsequent transactions that occur before the trading pause is in
[[Page 60970]]
effect on the Exchange.\5\ The Exchange also adopted additional changes
to Rule 128 that reduced the ability of the Exchange to deviate from
the objective standards set forth in Rule 128,\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 Rule 128 should continue while the industry gains
further experience operating the Limit Up-Limit Down Plan.
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\5\ See Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010) (SR-NYSE-2010-47).
\6\ Id.
\7\ See Securities Exchange Act Release No. 68804 (February 1,
2013), 78 FR 8677 (February 6, 2013) (SR-NYSE-2013-11); Securities
Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6,
2012) (the ``Limit Up-Limit Down Release''); see also Rule 128(i).
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The Exchange also proposes to eliminate all references in Rule 128
to individual security trading pauses issued by a primary listing
market. Specifically, Rule 128(c)(4) provides specific rules to follow
with respect to review of an execution as potentially clearly erroneous
when there is an individual security trading pause pursuant to Rule
80C. The individual security trading pauses described in Rule
128(c)(4), which apply to the securities included in the S&P 500 and
Russell 1000 indexes as well as to a pilot list of Exchange Traded
Products (the ``subject securities''), 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 subject securities, and thus, the Exchange believes that all
references to individual security trading pauses should be removed,
including all cross-references to Rule 128(c)(4) contained in other
portions of Rule 128.\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 128(c)(4). See Securities Exchange Act
Release No. 65111 (August 11, 2011), 76 FR 52028 (August 19, 2011)
(SR-NYSE-2011-42) (notice of filing and immediate effectiveness to
amend Rule 128 so that clearly erroneous executions involving
securities recently added to the individual security trading pause
pilot under Rule 80C continue to be resolved in the same manner
before being added to the pilot). 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 128(c)(1)
through (3).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\9\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\10\ in particular, 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 ensure
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
128 is necessary once the Plan is fully operational and, if so, whether
improvements can be made. Finally, the elimination of references to
individual security trading pauses will help to avoid confusion among
market participants, which is consistent with the protection of
investors and the public interest and therefore consistent with the
Act. As described above, individual security trading pauses have been
replaced by the Limit Up-Limit Down Plan with respect to securities
that are subject to Rule 80C.
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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, 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
No written comments were solicited or received with respect to 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
[[Page 60971]]
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 proposal 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-NYSE-2013-65 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-NYSE-2013-65. 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-NYSE-2013-65 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. 2013-24010 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P