[Federal Register Volume 76, Number 158 (Tuesday, August 16, 2011)]
[Notices]
[Pages 50786-50788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20726]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65092; File No. SR-EDGX-2011-23]


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 Until January 31, 2012

August 10, 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 August 5, 2011, the EDGX Exchange, Inc. (the 
``Exchange'' or ``EDGX'') 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 EDGX Rule 11.14 to extend the 
operation of the single stock circuit breaker pilot program (the 
``Pilot'') pursuant to the Rule until January 31, 2012. The text of the 
proposed rule change 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 the 
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 NMS stocks through January 31, 
2012.
Background
    Pursuant to Rule 11.14, the Exchange is allowed to pause trading in 
any NMS stock when the primary listing market for such stock issues a 
trading pause in such NMS stock. The Exchange will pause trading in 
such security until trading has resumed on the primary listing market.
    EDGX Rule 11.14 was approved by the Commission on June 10, 2010 on 
a Pilot basis to end on December 10, 2010.\4\ The Pilot was 
subsequently extended until April 11, 2011.\5\ The Pilot was then 
further extended 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.\6\
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    \4\ See Securities Exchange Act Release No. 62252 (June 10, 
2010) (SR-EDGX-2010-01), 75 FR 34186 (June 16, 2010).
    \5\ See Securities Exchange Act Release No. 63507 (December 9, 
2010) (SR-EDGX-2010-22), 75 FR 78787 (December 16, 2010).
    \6\ See Securities Exchange Act Release No. 64205 (April 6, 
2011) (SR-EDGX-2011-10), 76 FR 20417 (April 12, 2011).
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    In its initial filing to adopt EDGX Rule 11.14, the Exchange stated 
that the original Pilot list of securities was all securities included 
in the S&P 500[supreg] Index (``S&P 500''). The Exchange also noted in 
that filing that it would continue to assess whether additional 
securities needed to be added or removed from the Pilot list and 
whether the parameters of the rule needed to be modified to accommodate 
trading characteristics of different securities. As noted in comment 
letters to the initial 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.
    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.\7\ 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 would 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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    \7\ See Securities Exchange Act Release No. 62884 (September 10, 
2010) (SR-EDGX-2010-05), 75 FR 56618 (September 16, 2010).
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    As a result of consulting with other markets and the staff of the 
Commission, the Exchange subsequently included all NMS stocks within 
the Pilot that were not already included therein.\8\ In particular, the 
additional stocks were those not

[[Page 50787]]

included in the S&P 500, Russell 1000 Index, or specified ETPs, and 
therefore were more likely to be less liquid securities or securities 
with lower trading volumes. The Exchange stated that it would continue 
to assess whether the parameters for invoking a trading pause continued 
to be appropriate and whether the parameters should be modified.
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    \8\ See Securities Exchange Act Release No. 64375 (June 23, 
2011) (SR-EDGX-2011-14), 76 FR 38243 (June 29, 2011).
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    The Exchange believes that an extension of the Pilot through 
January 31, 2012 would continue to promote uniformity regarding 
decisions to pause trading and continue to reduce the negative impacts 
of sudden, unanticipated price movements in NMS stocks. 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 further 
assess the effect of the Pilot on the market or whether other 
initiatives should be adopted in lieu of the current Pilot. Therefore, 
the Exchange requests an extension of the Pilot through January 31, 
2012.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\9\ 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) \10\ 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 concerning decisions to 
pause trading in a security when there are significant price movements. 
The Exchange believes that the Pilot is working well, that it has been 
infrequently invoked during the past four months, and that the 
extension of the Pilot will allow the Exchange to further assess the 
effect of the Pilot on the market or whether other initiatives should 
be adopted in lieu of the current Pilot.
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    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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 \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \16\ 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.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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    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. For this reason, the Commission 
designates the proposed rule change to be operative upon filing.\17\
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    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 No. SR-EDGX-2011-23 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 No. SR-EDGX-2011-23. 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 website 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

[[Page 50788]]

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 No. SR-EDGX-2011-23 and should be submitted on or 
before September 6, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20726 Filed 8-15-11; 8:45 am]
BILLING CODE 8011-01-P