[Federal Register Volume 76, Number 70 (Tuesday, April 12, 2011)]
[Notices]
[Pages 20417-20418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8625]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64205; File No. SR-EDGX-2011-10]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
EDGX Rule 11.14 To Extend the Operation of the Single Stock Circuit 
Breaker Pilot Program

 April 6, 2011.
    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 April 5, 2011, the EDGX Exchange, Inc. (the ``Exchange'' or the 
``EDGX'') 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 amend EDGX Rule 11.14 to extend the 
operation of the single stock circuit breaker pilot program pursuant to 
the Rule 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 attached as Exhibit 5 and is available on the Exchange's Web site at 
http://www.directedge.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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend EDGX Rule 11.14 to extend the 
operation of a pilot that allows the Exchange to provide for uniform 
market-wide trading pause standards for individual securities in the 
S&P 500 Index, securities included in the Russell 1000[supreg] Index 
(``Russell 1000''), and specified Exchange Traded Products (``ETP'') 
that experience rapid price movement (collectively known as ``Circuit 
Breaker Securities'') through 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.
Background
    Pursuant to Rule 11.14, the Exchange is allowed to pause trading in 
any Circuit Breaker Securities when the primary listing market for such 
stock issues a trading pause in any Circuit Breaker Securities.
    EDGX Rule 11.14 was approved by the Commission on June 10, 2010 on 
a pilot basis to end on December 10, 2010.\3\ The pilot was 
subsequently extended until April 11, 2011.\4\ As the Exchange noted in 
its filing to adopt EDGX Rule 11.14, during the pilot period, the 
Exchange would continue to assess whether additional securities need to 
be added and whether the parameters of the rule would need to be 
modified to accommodate trading characteristics of different 
securities. The original pilot list of securities was all securities 
included in the S&P 500[supreg] Index (``S&P 500''). As noted in 
comment letters to the original filing to adopt EDGX Rule 11.14, 
concerns were raised that including only securities in the S&P 500 in 
the pilot rule was too narrow. In particular, commenters noted that 
securities that experienced volatility on May 6, 2010, including ETFs, 
should be included in the pilot.
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    \3\ See Securities Exchange Act Release No. 62252 (June 10, 
2010) (SR-EDGX-2011-01), 75 FR 34186 (June 16, 2010).
    \4\ See Securities Exchange Act Release No. 63507 (December 9, 
2010) (SR-EDGX-2011-22), 75 FR 78787 (December 16, 2010).
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    In response to these concerns, various exchanges and national 
securities associations collectively determined to expand the list of 
pilot securities to include securities in the Russell 1000 and 
specified ETPs to the pilot beginning in September 2010.\5\ The 
Exchange believed that adding these securities would address concerns 
that the scope of the pilot may be too narrow, while at the same time 
recognizing that during the pilot period, the markets will continue to 
review whether and when to add additional securities to the pilot and 
whether the parameters of the rule should be adjusted for different 
securities.
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    \5\ See Securities Exchange Act Release No. 62884 (September 10, 
2010) (SR-EDGX-2011-05), 75 FR 56618 (September 16, 2010).
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    As noted above, during the pilot, the Exchange continued to re-
assess, in consultation with other markets whether: (i) Specific ETPs 
should be added or removed from the pilot list; (ii) the parameters for 
invoking a trading pause continue to be the appropriate standard; and 
(iii) the parameters should be modified.
    The Exchange believes that an extension of the pilot would continue 
to promote uniformity regarding decisions to pause trading and continue 
to reduce the negative impacts of sudden, unanticipated price movements 
in Circuit Breaker Securities. The Exchange believes that the pilot is 
working well, that it has been infrequently invoked during the past 
four months, and that the Exchange will be in a better position to 
determine the efficacy of providing any additional functionality or 
changes to the pilot by continuing to assess its operation in 
consultation with other exchange and national securities associations. 
Therefore, the Exchange requests an extension of the pilot through 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.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\6\ 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. The 
proposed rule change also is designed to support the principles of 
Section 11A(a)(1) \7\ of the Act 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 promotes uniformity across markets

[[Page 20418]]

concerning decisions to pause trading in a security when there are 
significant price movements. Specifically, an extension will allow the 
Exchange additional time to determine the efficacy of providing any 
additional changes to the pilot.
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    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78k-1(a)(1).
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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

    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 if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change 
pursuant to Rule 19b-4(f)(6) under the Act, an exchange is required 
to give 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 Commission notes that the Exchange 
has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\10\ 
However, Rule 19b-4(f)(6) \11\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ Id.
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    The Commission has considered the Exchange's request to waive the 
30-day operative delay. 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 pilot program to continue 
uninterrupted, thereby avoiding the investor confusion that could 
result from a temporary interruption in the pilot program.\12\ For this 
reason, the Commission designates the proposed rule change to be 
operative upon filing.
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    \12\ 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).
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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 change 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, as amended, 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-EDGX-2011-10 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-EDGX-2011-10. 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 offices 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-EDGX-2011-10, and 
should be submitted on or before May 3, 2011.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8625 Filed 4-11-11; 8:45 am]
BILLING CODE 8011-01-P