[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20735-20736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8808]
[[Page 20735]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64232; File No. SR-NYSE-2011-17]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 128, Clearly Erroneous Executions, To Extend the
Effective Date of the Pilot Until the Earlier of August 11, 2011 or the
Date on Which a Limit Up/Limit Down Mechanism To Address Extraordinary
Market Volatility, if Adopted, Applies
April 7, 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 March 31, 2011, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 amend NYSE Rule 128, which governs clearly
erroneous executions, to extend the effective date of the pilot by
which portions of such Rule operate until the earlier of August 11,
2011 or the date on which a limit up/limit down mechanism to address
extraordinary market volatility, if adopted, applies. The text of the
proposed rule change is available at the Exchange, the Commission's
Public Reference Room, the Commission's website at http://www.sec.gov
and http://www.nyse.com.
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 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
The Exchange proposes to amend NYSE Rule 128, which governs clearly
erroneous executions, to extend the effective date of the pilot by
which portions of such Rule operate, until the earlier of August 11,
2011 or the date on which a limit up/limit down mechanism to address
extraordinary market volatility, if adopted, applies. The pilot is
currently scheduled to expire on April 11, 2011.\4\
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\4\ See Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010) (SR-NYSE-2010-47). See also
Securities Exchange Act Release No. 63479 (December 9, 2010), 75 FR
78274 (December 15, 2010) (SR-NYSE-2010-80).
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On September 10, 2010, the Commission approved, on a pilot basis,
market-wide amendments to exchanges' rules for clearly erroneous
executions to set forth clearer standards and curtail discretion with
respect to breaking erroneous trades. In connection with this pilot
initiative, the Exchange amended NYSE Rule 128(c), (e)(2), (f), and
(g). The amendments provide for uniform treatment of clearly erroneous
execution reviews (1) in Multi-Stock Events \5\ involving twenty or
more securities, and (2) in the event transactions occur that result in
the issuance of an individual security trading pause by the primary
market and subsequent transactions that occur before the trading pause
is in effect on the Exchange.\6\ The amendments also eliminated appeals
of certain rulings made in conjunction with other exchanges with
respect to clearly erroneous transactions and limited the Exchange's
discretion to deviate from Numerical Guidelines set forth in the Rule
in the event of system disruptions or malfunctions.
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\5\ Terms not defined herein are defined in NYSE Rule 128.
\6\ Separately, the Exchange has proposed extend the effective
date of the trading pause pilot under NYSE Rule 80C, which requires
to the Exchange to pause trading in an individual security listed on
the Exchange if the price moves by 10% as compared to prices of that
security in the preceding five-minute period during a trading day.
See SR-NYSE-2011-16.
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If the pilot were not extended, the prior versions of paragraphs
(c), (e)(2), (f), and (g) of Rule 128 would be in effect, and the NYSE
would have different rules than other exchanges and greater discretion
in connection with breaking clearly erroneous transactions. The
Exchange proposes to extend the pilot amendments to NYSE Rule 128 until
the earlier of August 11, 2011 or the date on which a limit up/limit
down mechanism to address extraordinary market volatility, if adopted,
applies in order to maintain uniform rules across markets and allow the
pilot to continue to operate without interruption during the same
period that the Rule 80C trading pause rule pilot is also in effect.
Extension of the pilot would permit the Exchange, other national
securities exchanges and the Commission to further assess the effect of
the pilot on the marketplace, including whether additional measures
should be added, whether the parameters of the rule should be modified
or whether other initiatives should be adopted in lieu of the current
pilot.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \7\ of the
Act, in general, and furthers the objectives of Section 6(b)(5) \8\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, 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. More specifically, the NYSE 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 changes
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.
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\7\ 15 U.S.C. 78f(b).
\8\ 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
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
[[Page 20736]]
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.
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 from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\ 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 because such waiver will allow the
pilot program to continue uninterrupted and help ensure uniformity
among the national securities exchanges and FINRA with respect to the
treatment of clearly erroneous transactions.\11\ Accordingly, the
Commission waives the 30-day operative delay requirement and designates
the proposed rule change as operative upon filing with the Commission.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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 filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Commission notes that the Exchange has satisfied
this requirement.
\11\ For purposes only of waiving the 30-day operative delay,
the Commission has 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 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-NYSE-2011-17 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-NYSE-2011-17. 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 such 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 publicly available. All
submissions should refer to File Number SR-NYSE-2011-17 and should be
submitted on or before May 4, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8808 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P