[Federal Register Volume 79, Number 60 (Friday, March 28, 2014)]
[Notices]
[Pages 17617-17619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-06892]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71783; File No. SR-Phlx-2014-18]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to the
Clearly Erroneous Rule
March 24, 2014.
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 March 18, 2014, 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.
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
The purpose of this filing is to extend the effectiveness of the
Exchange's current rule applicable to clearly erroneous executions.
Portions of Rule 3312, explained in further detail below, are currently
operating as a pilot program set to expire on April 8, 2014.\3\ The
Exchange proposes to extend the pilot program to coincide with the
pilot period for 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''), including any extensions to the
pilot period for the Plan.\4\
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\3\ Securities Exchange Act Release No. 70541 (Sept. 27, 2013),
78 FR 61431 (Oct. 3, 2013) (SR-Phlx-2013-97).
\4\ Securities Exchange Act Release No. 67091 (May 31, 2012), 77
FR 33498 (June 6, 2012).
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On September 10, 2010, the Commission approved, for a pilot period,
the proposed rule changes of the other national securities exchanges
and the Financial Industry Regulatory Authority (``FINRA'') to their
respective rules concerning clearly erroneous executions 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 other
markets.\5\ The other national securities exchanges and FINRA also
adopted additional changes to their respective clearly erroneous
execution rules that reduced their ability to deviate from the
objective standards set forth in those rules.\6\ In connection with its
resumption of trading of NMS Stocks through NASDAQ OMX PSX system, the
Exchange amended Rule 3312 to conform it to the newly-adopted changes
to the clearly erroneous execution rules of other national securities
exchanges and FINRA, so that it could participate in the pilot
program.\7\ In 2013, the Exchange
[[Page 17618]]
adopted a provision designed to address the operation of the Plan.\8\
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\5\ Securities Exchange Act Release No. 62886 (Sept. 10, 2010),
75 FR 56613 (Sept. 16, 2010).
\6\ Id.
\7\ Securities Exchange Act Release No. 63023 (Sept. 30, 2010),
75 FR 61802 (Oct. 6, 2010) (SR-Phlx-2010-125).
\8\ Securities Exchange Act Release No. 68820 (Feb. 1, 2013), 78
FR 9436 (Feb. 8, 2013) (SR-Phlx-2013-12); see also Rule 3312(g).
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The Exchange believes the benefits to market participants from the
more objective clearly erroneous executions rule should continue on a
pilot basis to coincide with the operation of the Limit Up-Limit Down
Plan. The Exchange believes that continuing the pilot 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 Plan.
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. Although the Limit Up-Limit Down
Plan is operational, the Exchange believes that maintaining the pilot
will help to protect against unanticipated consequences. Thus, the
Exchange believes that the protections of the Rule 3312 should continue
while the industry gains further experience operating the Plan. The
Exchange also 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. Thus, 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. Based on the foregoing, the Exchange
believes the benefits to market participants from the more objective
clearly erroneous executions rule should continue on a pilot basis to
coincide with the operation of the Limit Up-Limit Down Plan.
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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
implicates any competitive issues. To the contrary, the Exchange
believes that 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 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 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 clearly erroneous pilot program to continue
uninterrupted while the industry gains further experience operating
under the Limit Up-Limit Down Plan, and avoid any 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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-Phlx-2014-18 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2014-18. 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
[[Page 17619]]
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-2014-18 and should be submitted on or before April 18, 2014.
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. 2014-06892 Filed 3-27-14; 8:45 am]
BILLING CODE 8011-01-P