[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61431-61433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24159]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70541; File No. SR-Phlx-2013-97]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to the
Clearly Erroneous Rule
September 27, 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 September 26, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``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 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 extend the pilot period of recent
amendments to Rule 3312, concerning clearly erroneous transactions, so
that the pilot will now expire on April 8, 2014. The Exchange also
proposes to remove certain references to individual stock trading
pauses contained in Rule 3312(a)(2)(C)(iv).
The text of the proposed rule change is available from Phlx's Web
site at http://nasdaqomxphlx.cchwallstreet.com, at Phlx's principal
office, 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 Exchange 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
On September 10, 2010, the Commission approved, for a pilot period
to end December 10, 2010, a proposed rule change submitted by The
NASDAQ Stock Market LLC, BATS Exchange, Inc., NASDAQ OMX BX, Inc.,
Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange,
Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., International
Securities Exchange LLC, New York Stock Exchange LLC, NYSE MKT LLC
(formerly, NYSE Amex LLC), NYSE Arca, Inc., and National Stock
Exchange, Inc., to amend certain of their respective rules to set forth
clearer standards and curtail discretion with respect to breaking
erroneous trades.\3\ The changes were adopted to address concerns that
the lack of clear guidelines for dealing with clearly erroneous
transactions may have added to the confusion and uncertainty faced by
investors on May 6, 2010. In connection with its resumption of trading
of NMS Stocks through PSX, the Exchange amended Rule 3312 to conform it
to the newly-adopted changes to the other exchanges' clearly erroneous
rules, so that it could participate in the pilot program.\4\ The pilot
program was extended several times since its adoption and is currently
set to expire on September 30, 2013.\5\ In its rule change that
extended the pilot program to September 30, 2013,\6\ the Exchange also
adopted a provision designed to address the operation of the National
Market System Plan to Address Extraordinary Market Volatility \7\ (the
``Limit Up-Limit Down Plan''). 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 commencement of operations of the Limit Up-
Limit Down Plan. The Exchange believes that continuing the pilot during
this time will protect against any unanticipated consequences. Thus,
the Exchange
[[Page 61432]]
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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\3\ Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010).
\4\ Securities Exchange Act Release No. 63023 (September 30,
2010), 75 FR 61802 (October 6, 2010) (SR-Phlx-2010-125).
\5\ Securities Exchange Act Release No. 68820 (February 1,
2013), 78 FR 9436 (February 8, 2013) (SR-Phlx-2013-12).
\6\ Id.
\7\ Securities Exchange Act Release No. 67091 (May 31, 2012), 77
FR 33498 (June 6, 2012); see also Rule 3312(g).
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The Exchange also proposes to eliminate all references in Rule 3312
to individual stock trading pauses issued by a primary listing market.
Specifically, Rule 3312(a)(2)(C)(iv) 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 Index, the Russell
1000 Index, or a pilot list of Exchange Traded Products (``Subject
Securities''). The stock trading pauses described in Rule
3312(a)(2)(C)(iv) are being phased out as securities become subject to
the Limit Up-Limit Down Plan pursuant to a phased implementation
schedule. The Limit Up-Limit Down Plan is already operational with
respect to all Subject Securities, and thus, the Exchange believes that
all references to individual stock trading pauses should be removed,
including all cross-references to Rule 3312(a)(2)(C)(iv) contained in
other portions of Rule 3312.\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 3312(a)(2)(C)(iv). Securities Exchange Act
Release No. 65106 (August 11, 2011), 76 FR 51079 (August 17, 2011)
(SR-Phlx-2011-114) (notice of filing and immediate effectiveness to
amend the clearly erroneous rule to specify that Rule
3312(a)(2)(C)(iv) applies only to the current securities of the
Individual Stock Trading Pause 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
3312(a)(2)(C)(i)-(iii).
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2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Securities Exchange Act of 1934 (the ``Act''),\9\ which requires
the rules of an exchange 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. The Exchange believes that the pilot
program promotes just and equitable principals 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 3312 is necessary once the
Limit Up-Limit Down 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 Act. As described
above, individual stock trading pauses have been replaced by the Limit
Up-Limit Down Plan with respect to all Subject Securities.
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\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 will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. To
the contrary, the Exchange believes that the Financial Industry
Regulatory Authority 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
Written comments were neither solicited nor received.
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 \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 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-Phlx-2013-97 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-Phlx-2013-97. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
[[Page 61433]]
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-Phlx-2013-97 and should be submitted on or before
October 24, 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. 2013-24159 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P