[Federal Register Volume 76, Number 85 (Tuesday, May 3, 2011)]
[Notices]
[Pages 24954-24956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10654]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64349; File No. SR-NYSEArca-2011-22]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rule 7.16 (Short Sales) To Modify the Exchange's Procedures
for Early Termination of the Short Sale Price Test Restrictions of Rule
201 of Regulation SHO Based on a Triggering Transaction That Another
Exchange or a Self-Regulatory Organization Has Determined Was a Clearly
Erroneous Execution
April 27, 2011.
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 April 25, 2011, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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 substantially prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Equities Rule 7.16 (Short
Sales) to modify the Exchange's procedures for early termination of the
short sale price test restrictions of Rule 201 of Regulation SHO
(``Rule 201'') \4\ under the Act based on a triggering transaction that
another exchange or a self-regulatory organization (``SRO'') has
determined was a clearly erroneous execution pursuant to the rules of
that exchange or SRO. The text of the proposed rule change is available
at the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
---------------------------------------------------------------------------
\4\ 17 CFR 242.201.
---------------------------------------------------------------------------
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
[[Page 24955]]
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
On February 26, 2010, the Commission adopted amendments to Rule
201.\5\ In order to implement the provisions of revised Rule 201, the
Exchange amended NYSE Arca Equities Rule 7.16 (Short Sales) to (1)
Establish procedures for the Exchange, as a listing market, to
determine that the short sale price test restrictions of Rule 201 have
been triggered for a covered security, (2) establish the protocols for
the handling of short sale orders by the Exchange, as a trading center,
in the event the short sale price test restrictions of Rule 201 are
triggered, including establishing what types of short sale orders will
be re-priced to achieve a Permitted Price (as defined and calculated in
NYSE Arca Equities Rule 7.16(f)(v)(C)), in accordance with Rule 201,
during a period when the short sale price test restrictions of Rule 201
are in effect (``Short Sale Period''), (3) establish the Exchange's
procedures regarding the execution and display of permissible orders
during a Short Sale Period, and the execution and display of orders
marked ``short exempt'' during such a period, and (4) provide that,
during a Short Sale Period, Exchange systems will not execute or
display a short sale order with respect to that security at a price
that is less than or equal to the current national best bid, except as
otherwise provided by NYSE Arca Equities Rule 7.16(f) and consistent
with Rule 201.\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 61595 (February 26,
2010), 75 FR 11232 (March 10, 2010) (File No. S7-08-09; Amendments
to Regulation SHO) (``Rule 201 Adopting Release''). In the Rule 201
Adopting Release, the Commission also adopted amendments to Rule
200(g) of Regulation SHO to include a ``short exempt'' marking
requirement. 17 CFR 242.200(g).
\6\ See Securities Exchange Act Release No. 63971 (February 25,
2011), 76 FR 12157 (March 4, 2011) (SR-NYSEArca-2011-05).
---------------------------------------------------------------------------
Under NYSE Arca Equities Rule 7.16(f)(iii), when the Exchange is
the listing market for a covered security, Exchange systems will
determine whether the short sale price test restrictions of Rule 201
have been triggered (i.e., that a covered security has experienced a
decrease in price of 10% or more from the security's closing price as
of the end of regular trading hours on the prior day) and will notify
the single plan processor responsible for consolidation of information
for the covered security pursuant to Rule 603(b) of Regulation NMS.\7\
Once the short sale price test restrictions of Rule 201 are triggered
by the listing market, those restrictions will remain in effect until
the close of trading on the next trading day.\8\
---------------------------------------------------------------------------
\7\ See 17 CFR 242.201(b)(3); 17 CFR 242.603(b). See also Rule
201(a)(6) of Regulation SHO, which defines the term ``plan
processor'' to have the same meaning as in Rule 600(b)(55) of
Regulation NMS. 17 CFR 242.600(b)(55). The single plan processors
are ``exclusive processors'' as defined under Section 3(a)(22) of
the Act. See 15 U.S.C. 78c(a)(22).
\8\ The short sale price test restrictions will remain in effect
at all times when quotation information and the national best bid is
collected, processed and disseminated pursuant to a national market
system plan. This may extend beyond regular trading hours. Division
of Trading & Markets: Responses to Frequently Asked Questions
Concerning Rule 201 of Regulation SHO, at Q&A 2.1.
---------------------------------------------------------------------------
If, however, the Exchange determines that the short sale price test
for a covered security was triggered because of a clearly erroneous
execution on the Exchange,\9\ pursuant to NYSE Arca Equities Rule
7.16(f)(iv)(A), the Exchange may lift the short sale price test
restrictions before the Short Sale Period ends for a security for which
the Exchange is the listing market or, for a security listed on another
market, notify the other market of the Exchange's determination that
the triggering transaction was a clearly erroneous execution.
---------------------------------------------------------------------------
\9\ Determination of a ``clearly erroneous'' execution will be
made in accordance with NYSE Arca Equities Rule 7.10.
---------------------------------------------------------------------------
For securities for which the Exchange is the listing market, NYSE
Arca Equities Rule 7.16 currently addresses only clearly erroneous
triggering transactions deemed to be clearly erroneous executions under
the Exchange's rules, and does not address situations where another
exchange or a SRO determines, under its respective rules, that a
triggering transaction was a clearly erroneous execution. To address
this scenario, the Exchange proposes to amend NYSE Arca Equities Rule
7.16(f)(iv)(A) \10\ to provide that the Exchange may also lift the
short sale price test restrictions before the Short Sale Period ends,
for covered securities for which the Exchange is the listing market, if
the Exchange has been informed by another exchange or a SRO that a
transaction in the covered security that occurred at the Trigger Price
\11\ was a clearly erroneous execution, as determined by that exchange
or SRO under its rules.\12\
---------------------------------------------------------------------------
\10\ The Exchange is also proposing two technical amendments to
NYSE Arca Equities Rule 7.16 to correct references to the Exchange
(in subparagraphs (f)(iv)(A) and (f)(iv)(B) of NYSE Arca Equities
Rule 7.16).
\11\ The term ``Trigger Price'' is used in NYSE Arca Equities
Rule 7.16(f) to refer to a decrease of 10% or more in a security's
price from the security's closing price on the listing market as of
the end of regular trading hours on the prior day. Under NYSE Arca
Equities Rule 7.16(f)(iii), the short sale price test restrictions
of Rule 201 are triggered if a transaction in a covered security
occurs at a Trigger Price.
\12\ The Exchange will only lift the short sale price test
restrictions before the Short Sale Period ends under these
circumstances when informed by another exchange or a SRO that a
triggering transaction has been determined to be a clearly erroneous
execution under the rules of the exchange or SRO, consistent with
the authority of that exchange or SRO for making such
determinations.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to, among
other things, prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, and, in general, to
protect investors and the public interest. The proposal is designed to
refine the Exchange's written policies and procedures reasonably
designed to prevent the execution or display of a short sale order of a
covered security in violation of the short sale price test restrictions
established in Rule 201. To that end, the proposed rule change expands
the ability of the Exchange, as a listing market, to lift short sale
price test restrictions to include situations where another exchange or
a SRO has determined that a triggering transaction was a clearly
erroneous execution under the rules of that exchange or SRO.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
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
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 24956]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
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 prior to
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 and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
---------------------------------------------------------------------------
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission has considered the Exchange's request to waive the
30-day operative delay, and hereby grants the request. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest, as it will permit the
Exchange to lift Rule 201's short sale price test restrictions, in a
covered security for which the Exchange is the listing market, when
such restrictions were triggered by a transaction that another exchange
or a SRO has determined to be a clearly erroneous execution, pursuant
to the rules of that exchange or SRO.\19\ For this reason, the
Commission designates the proposed rule change to be operative upon
filing.
---------------------------------------------------------------------------
\19\ For the purposes only of waiving the operative delay of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such 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 e-mail to [email protected]. Please include
File Number SR-NYSEArca-2011-22 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-NYSEArca-2011-22. 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, 100 F
Street, NE., Washington, DC 20549-1090. Copies of the filing will also
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-
NYSEArca-2011-22 and should be submitted on or before May 24, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10654 Filed 5-2-11; 8:45 am]
BILLING CODE 8011-01-P