[Federal Register Volume 75, Number 150 (Thursday, August 5, 2010)]
[Notices]
[Pages 47332-47333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19266]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62607; File No. SR-ISE-2010-80]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by International Securities
Exchange, LLC That Constitutes a Stated Interpretation With Respect to
the Meaning, Administration, and Enforcement of Rule 2128
July 30, 2010.
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 July 29, 2010, International Securities Exchange, LLC (the
``Exchange'' or ``ISE'') 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
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 a rule change that constitutes a stated
interpretation with respect to the meaning, administration, and
enforcement of Rule 2128. The proposed rule change is available on the
Exchange's Web site at http://www.ise.com, at the Exchange's principal
office, and at the Public Reference Room of the Commission.
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt a stated interpretation with respect
to the meaning, administration, and enforcement of Rule 2128(g),
concerning the ability of an Exchange Officer to act on his or her own
motion to review potentially erroneous executions.
Rule 2128(g) provides that an Officer, acting on his or her own
motion, may review potentially erroneous executions that occur on the
Exchange and may, among other things, declare such transaction(s) null
and void. When extraordinary circumstances exist, any such action must
be taken by no later than the start of the Regular Market Session of
the Exchange on the trading day following the date of execution(s)
under review.
For purposes of Rule 2128(g), the Exchange believes that a series
of transactions in a particular security on one or more trading days
may be viewed as one event if all such transactions were effected based
on incorrect or grossly misinterpreted structural or issuance
information, resulting in a severe pricing dislocation for all such
transactions (the ``Event''). In such circumstances, the Event may be
considered to constitute extraordinary circumstances pursuant to Rule
2128(g).
An Officer acting on his or her own motion may take action to
declare all transactions that occurred during the Event null and void
not later than before the start of the next trading date following the
last such transaction in the Event. If the security is halted
immediately following the last transaction in the Event, and before
pricing ceases to be dislocated, the next trading date for all
transactions comprising the Event will be the date on which trading
resumes following the halt.
In particular, the Exchange believes that the interpretation is
applicable to a recent event involving a New York Stock Exchange LLC
(``NYSE'') offer (``NYSE Exchange Offer'') made by U.S. Bancorp in
which there were a series of executions based on incorrect or grossly
misinterpreted structural or issuance information, as a result of which
the securities traded at severely dislocated prices.
In May 2010, U.S. Bancorp commenced an offer to exchange up to
1,250,000 Depositary Shares, each representing a 1/100 the interest in
a share of Series A Non-Cumulative Perpetual Preferred Stock, $100,000
liquidation preference per share (the ``Depositary Shares'') for any
and all of the 1,250,000 outstanding 6.189% Fixed-to-Floating Rate
Normal ITS issued by U.S. Bancorp Capital IX, each with a liquidation
amount of $1,000 (the ``Normal ITS''). The Depositary Shares were
approved for listing on the NYSE under the symbol USB PRA. On June 11,
2010, the NYSE opened the shares on a quote, but trading did not
commence until June 16, 2010 at prices in the range of $85.00 per
share. There were additional executions on the ISE Stock Exchange in
the $79.00 to $85.00 price range on June 17 and 18, 2010.
On June 18, 2010, the NYSE halted trading in the Depositary Shares
on all markets and alerted U.S. Bancorp and other exchanges that traded
the Depositary Shares of the pricing discrepancy. For purposes of this
stated interpretation, the Exchange believes that the trading in
Depository Shares from June 16 to June 18 constituted a single event
because that trading was based on incorrect or grossly misinterpreted
structural or issuance information that resulted in severe price
dislocation (the ``U.S. Bancorp Event''). Because the Depository Shares
were halted before the price of the Depository Shares ceased to be
dislocated, and remain halted, the Exchange believes that, pursuant to
this interpretation, an Officer may review trading in Depository Shares
and may declare null and void all trading in the U.S. Bancorp Event,
provided such declaration is made before the security resumes trading
following the trading halt.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\3\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\4\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, 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 proposed stated interpretation promotes just and
equitable principles of trade because it ensures that a potentially
erroneous execution may be
[[Page 47333]]
reviewed if such executions are based on incorrect or grossly
misinterpreted structural or issuance information, resulting in a
severe pricing dislocation for all such transactions. The stated
interpretation also enables the Exchange to declare null and void such
potentially erroneous executions during a halt in trading, but before
trading resumes at a price based on the corrected information.
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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \5\ of the Act and Rule 19b-4(f)(1) \6\ thereunder. At any
time within the 60-day period beginning on the date 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.
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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f)(6).
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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 e-mail to [email protected]. Please include
File Number SR-ISE-2010-80 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-2010-80. This file
number should be included on the subject line if e-mail 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 a.m. and 3 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-ISE-2010-80 and should be submitted on or before August
26, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19266 Filed 8-4-10; 8:45 am]
BILLING CODE 8010-01-P