[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12193-12195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4896]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63978; File No. SR-Phlx-2011-25]
Self-Regulatory Organizations; NASDAQ OMX PHLX; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Adopt New Rule
3303 To Implement the Amendments to Regulation SHO
February 25, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on February 18, 2011, The NASDAQ OMX PHLX LLC (``PSX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been substantially prepared by
the Exchange. 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange, pursuant to Section 19(b)(1) of the Act \3\ and Rule
19b-4 \4\ thereunder, proposes to adopt new Rule 3303 as a written
policy or procedure to implement the amendments to Rules 200(g) and 201
of Regulation SHO.\5\
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ 17 CFR 242.200(g); 17 CFR 242.201. See Securities Exchange
Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232 (Mar. 10, 2010)
(amending Rules 201 and 200 of Regulation SHO to adopt a short sale
price test restriction and ``short exempt'' marking requirement).
See also Securities Exchange Act Release No. 63247 (Nov. 4, 2010),
75 FR 68702 (Nov. 9, 2010) (extending the compliance date of the
amendments to Rules 201 and 200 of Regulation SHO until February 28,
2011).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
[[Page 12194]]
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
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 February 26, 2010, the Commission adopted amendments to Rules
200(g) and 201 of Regulation SHO.\6\ The amendments became effective on
May 10, 2010, and compliance is required by February 28, 2011.\7\ The
amendments to Rule 201 of Regulation SHO require trading centers \8\
such as PSX to establish, maintain, and enforce certain written
policies and procedures reasonably designed to comply with the rule.\9\
PSX is proposing to adopt new Rule 3303 as a written policy and
procedure to implement the amendments to Rules 200(g) and 201 of
Regulation SHO.
---------------------------------------------------------------------------
\6\ See supra note 5.
\7\ Id.
\8\ Rule 201(a)(9) states the term ``trading center'' will have
the same meaning as in Rule 600(b)(78). 17 CFR 242.201(a)(9). Rule
600(b)(78) of Regulation NMS defines a ``trading center'' as ``a
national securities exchange or national securities association that
operates an SRO trading facility, an alternative trading system, an
exchange market maker, an OTC market maker, or any other broker or
dealer that executes orders internally by trading as principal or
crossing orders as agent.'' 17 CFR 242.600(b)(78).
\9\ See 17 CFR 242.201(b). The amendments to Rule 200(g) of
Regulation SHO provide a ``short exempt'' marking requirement. See
17 CFR 242.200(g).
---------------------------------------------------------------------------
Proposed Rule 3303(a) defines the terms ``covered security,''
``listing market,'' and ``national best bid'' as having the same
meaning as such terms have in Rule 201 of Regulation SHO.\10\
---------------------------------------------------------------------------
\10\ See Rule 201(a) of Regulation SHO. The System will utilize
the national best bid from the systems information processor. Rule
201(a)(1) defines ``covered security'' to mean any ``NMS stock'' as
defined under Rule 600(b)(47) of Regulation NMS. 17 CFR
242.201(a)(1). Rule 600(b)(47) of Regulation NMS defines an ``NMS
stock'' as ``any NMS security other than an option.'' 17 CFR
242.600(b)(47). Rule 600(b)(46) of Regulation NMS defines an ``NMS
security'' as ``any security or class of securities for which
transaction reports are collected, processed, and made available
pursuant to an effective transaction reporting plan, or an effective
national market system plan for reporting transactions in listed
options.'' 17 CFR 242.600(b)(46).
---------------------------------------------------------------------------
Under Proposed Rule 3303(b), entitled ``Short Sale Price Test,''
the System \11\ will not execute or display a short sale order with
respect to a covered security at a price that is less than or equal to
the current national best bid if the price of that security decreases
by 10% or more from the security's closing price on the listing market
as of the end of regular trading hours on the prior day (``Trigger
Price'').\12\
---------------------------------------------------------------------------
\11\ See Rule 3301(a). The term ``System'' shall mean the
automated system for order execution and trade reporting owned and
operated by PSX.
\12\ See Rule 201(b)(1)(i) of Regulation SHO. Such execution or
display needs to be in compliance with applicable rules concerning
minimum pricing increments. See 17 CFR 242.612.
---------------------------------------------------------------------------
Under Proposed Rule 3303(c), Duration of Short Sale Price Test,
once triggered by the listing market, the short sale price test
restriction shall remain in effect until the next trading day when a
national best bid for the covered security is calculated and
disseminated on a current and continuing basis by a plan processor
pursuant to an effective national market system,\13\ as provided for in
Regulation SHO Rule 201(b)(1)(ii) (the ``Short Sale Period'').
---------------------------------------------------------------------------
\13\ See 17 CFR 242.201(b)(1)(ii). See also Division of Trading
and Markets: Responses to Frequently Asked Questions Concerning Rule
201 of Regulation SHO, Q&A No. 2.1.
---------------------------------------------------------------------------
Under Proposed Rule 3303(d), Re-pricing of Orders During Short Sale
Period, during the Short Sale Period, short sale orders that are
limited to the current national best bid or lower and short sale market
orders will be re-priced by the System one minimum allowable price
increment above the current national best bid (``Permitted Price''). To
reflect declines in the national best bid, the Exchange will continue
to re-price a short sale order at the lowest Permitted Price down to
the order's original limit price, or if a market order, until the order
is filled. Non-displayed orders between the PSX bid and offer at the
time of receipt will also be re-priced upward to a Permitted Price to
correspond with a rise in the national best bid. During the Short Sale
Period, immediate or cancel (``IOC'') orders requiring that all or part
of the order be executed immediately will be executed to the extent
possible at a Permitted Price and higher and then cancelled, and will
not be re-priced. Inter-market sweep orders not marked ``short exempt''
will be handled in the same manner as IOC orders.
Pursuant to Proposed Rule 3303(e), Execution of Permissible Orders
during the Short Sale Period, during the Short Sale Period, the System
will execute and display a short sale order without regard to whether
the order is at a Permitted Price or higher if, at the time of initial
display of the short sale order, the order was at a price above the
then current national best bid. This determination is consistent with
Rule 201(b)(1)(iii)(A) of Regulation SHO.\14\ Short sale orders that
are entered into the System prior to the Short Sale Period but that are
not displayed will be re-priced as described in Proposed Rule 3303(d)
as set forth above.
---------------------------------------------------------------------------
\14\ See 17 CFR 242.201(b)(1)(iii)(A).
---------------------------------------------------------------------------
Finally, under Proposed Rule 3303(f), Short Exempt Orders, during
the Short Sale Period, the System will execute and display orders
marked ``short exempt'' without regard to whether the order is at a
Permitted Price or higher.\15\ The System will accept orders marked
``short exempt'' at any time when the System is open for order entry
regardless of whether the short sale price test has been triggered in
the covered security. PSX member firms marking orders ``short exempt''
in reliance on Rule 201(c) or 201(d) are responsible for ensuring that
any such orders meet the criteria of these provisions and are
accurately marked as ``short exempt.'' \16\
---------------------------------------------------------------------------
\15\ See 17 CFR 242.201(b)(1)(iii)(B).
\16\ See Rules 200(g)(2), 201(c) and 201(d) of Regulation SHO.
See also Division of Trading and Markets: Responses to Frequently
Asked Questions Concerning Rule 201 of Regulation SHO, Q&A Nos. 5.4
and 5.5.
---------------------------------------------------------------------------
2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Act,\17\ which requires, among other things, the rules of an
exchange to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest. The proposed
rule change also is designed to support the principles of Section
11A(a)(1) of the Act \18\ in that it seeks to assure fair competition
among brokers and dealers and among exchange markets. The Exchange
believes that the proposed rule meets these requirements in that it
implements rules adopted by the Commission in Regulation SHO under the
Act.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b)(5).
\18\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------
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 not necessary or appropriate in
furtherance of the purposes of the Act.
[[Page 12195]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6)
\20\ thereunder.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally
may not become operative prior to 30 days after the date of filing.\22\
However, Rule 19b-4(f)(6)(iii) \23\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. PSX has requested that the
Commission waive the 30-day operative delay so that it may implement
the change no later than February 28, 2011 to coincide with the
compliance date for the amendments to Rules 200(g) and 201 of
Regulation SHO. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposed rule change, among other things,
implements the amendments to Rules 200(g) and 201 of Regulation SHO
which have a February 28, 2011 compliance date.\24\ For this reason,
the Commission designates the proposed rule change to be operative upon
filing with the Commission.\25\
---------------------------------------------------------------------------
\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and 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. The Exchange has satisfied this requirement.
\23\ Id.
\24\ See supra note 5.
\25\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
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 e-mail to [email protected]. Please include
File Number SR-Phlx-2011-25 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-2011-25. 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, 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-Phlx-2011-25 and should be submitted on
or before March 25, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
---------------------------------------------------------------------------
\26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4896 Filed 3-3-11; 8:45 am]
BILLING CODE 8011-01-P