[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Notices]
[Pages 74082-74084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30806]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65811; File No. SR-NYSEAmex-2011-88]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Equities Rule 80C to Exclude All Rights and Warrants From the Single 
Stock Circuit Breaker Under the Rule

November 23, 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 November 17, 2011, NYSE Amex LLC (the ``Exchange'' or 
``NYSE Amex'') 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 Amex Equities Rule 80C to 
exclude all rights and warrants from the single stock circuit breaker 
under the rule. The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, http://www.nyse.com, and http://www.sec.gov.

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 Amex Equities Rule 80C to 
exclude all rights and warrants from the single stock circuit breaker 
under the rule. The Commission approved NYSE Amex Equities Rule 80C on 
a pilot basis on June 10, 2010 to provide for trading pauses in 
individual securities due to extraordinary market volatility (``Trading 
Pause'') in all securities included within the S&P 500[supreg] Index 
(``S&P 500'') (``Pause Pilot'').\4\ The Exchange noted in its filing to 
adopt NYSE Amex Equities Rule 80C that during the Pause Pilot period it 
would continue to assess whether additional securities need to be added 
and whether the parameters of NYSE Amex Equities Rule 80C would need to 
be modified to accommodate trading characteristics of different 
securities. The Exchange subsequently received approval to add to the 
Pause Pilot the securities included in the Russell 1000[supreg] Index 
(``Russell 1000'') and a specified list of Exchange Traded Products 
(``ETPs'').\5\
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    \4\ The Commission approved the Pause Pilot for all equities 
exchanges and FINRA. See Securities Exchange Act Release No. 62252 
(June 10, 2010), 75 FR 34186 (June 16, 2010) (File Nos. SR-BATS-
2010-014; SR-EDGA-2010-01; SR-EDGX-2010-01; SR-BX-2010-037; SR-ISE-
2010-48; SR-NYSE-2010-39; SR-NYSEAmex-2010-46; SR-NYSEArca-2010-41; 
SR-NASDAQ-2010-061; SR-CHX-2010-10; SR-NSX-2010-05; and SR-CBOE-
2010-047) and Securities Exchange Act Release No. 62251 (June 10, 
2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-025).
    \5\ The Commission approved the addition to the Pause Pilot of 
the securities included in the Russell 1000 and ETPs, where 
applicable, for all equities exchanges and FINRA. See Securities 
Exchange Act Release No. 62884 (September 10, 2010), 75 FR 56618 
(September 16, 2010) (File Nos. SR-BATS-2010-018; SR-BX-2010-044; 
SR-CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-EDGX-2010-05; 
SR-ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49; SR-NYSEAmex-
2010-63; SR-NYSEArca-2010-61; and SR-NSX-2010-08 and Securities 
Exchange Act Release No. 62883 (September 10, 2010), 75 FR 56608 
(September 16, 2010) (SR-FINRA-2010-033). The Exchange submitted a 
proposed rule change shortly after the addition of the Russell 1000 
securities and ETPs to extend the operation of the Pause Pilot, 
which was set to expire on December 10, 2010, until April 11, 2011. 
See Securities Exchange Act Release No. 63501 (December 9, 2010), 75 
FR 78307 (December 15, 2010) (NYSEAmex-2010-117). The Exchange 
submitted a proposed rule change to further extend the Pause Pilot 
until the earlier of January 31, 2012 or the date on which a limit 
up/limit down mechanism to address extraordinary market volatility, 
if adopted, applies. See Securities Exchange Act Release No. 65089 
(August 10, 2011), 76 FR 50791 (August 16, 2011) (NYSEAmex-2011-57).

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[[Page 74083]]

    On June 23, 2011, the Commission approved proposed rule changes of 
the Exchanges to amend certain of their respective rules to expand the 
Pause Pilot to include all remaining NMS stocks (``Phase III 
Securities''), which included rights and warrants.\6\ Unlike the 
original Pause Pilot securities, amended NYSE Amex Equities Rule 80C 
applies wider percentage price moves to the Phase III Securities before 
a trading pause is triggered.\7\ The changes to NYSE Amex Equities Rule 
80C became effective on August 8, 2011.
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    \6\ See Securities Exchange Act Release No. 64735 (June 23, 
2011), 76 FR 38243 (June 29, 2011) (NYSEAmex-2011-32, et al.).
    \7\ Under amended NYSE Amex Equities Rule 80C, a pause is 
triggered by a 30% or more price move in a Phase III Security priced 
at $1 or higher, and by a 50% or more price move to such a security 
priced less than $1. The price of a security is based on the closing 
price on the previous trading day, or, if no closing price exists, 
the last sale reported to the Consolidated Tape on the previous 
trading day.
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    The nature of the trading pauses triggered since adoption of the 
Pause Pilot has been analyzed and over 25% of such pauses have occurred 
in rights and warrants. Further, exchanges have experienced a 
significant increase in trading pauses involving rights and warrants 
since the implementation of the Phase III Securities, with such pauses 
representing as much as 52% [sic] all trading pauses occurring through 
the end of August 2011 on one exchange. Rights and warrants trade on 
equity exchanges, but are closely related to call options. Rights and 
warrants entitle owners to purchase shares of stock at predetermined 
prices subject to various timing and other conditions. Like options, 
the price of rights and warrants are affected by the price of the 
underlying stock as well as other factors, particularly the volatility 
of the stock. As a consequence, the prices of rights and warrants may 
move more dramatically than the prices of the underlying stocks even 
when the rights and warrants (and the underlying stock) are trading in 
an orderly manner. This difference in trading behavior may result in a 
scenario whereby the rights and warrants trigger the circuit breaker 
under NYSE Amex Equities Rule 80C and are subject to a trading pause, 
even while the underlying stock continues to trade. This can be 
particularly true of rights and warrants that have low prices. 
Accordingly, the Exchange is proposing to exclude rights and warrants 
from the trading pause under NYSE Amex Equities Rule 80C.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and 
furthers the objectives of Section 6(b)(5),\9\ 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, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
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 ensure fair 
competition among brokers and dealers and among exchange markets. The 
Exchange believes that the proposed rule meets these requirements 
because it excludes certain securities from the rule's coverage that 
are prone to triggering pauses because of their unique characteristics. 
These securities are unique in that they may move more dramatically 
than the prices of the underlying stocks to which they are related even 
when both securities are trading in an orderly manner. As such, the 
securities that are subject to this proposal may trigger the circuit 
breaker under NYSE Amex Equities Rule 80C and be subject to a trading 
pause, even while the underlying security continues to trade. Although 
there is little benefit in pausing trading in these securities, such 
pauses sequester regulatory resources that are better applied to the 
review of trading pauses in other securities that have a greater impact 
on the national market system.
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    \8\ 15 U.S.C. 78f(b).
    \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 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.

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. 
Including rights and warrants in the pilot program which may trigger a 
circuit breaker and be subject to a trading pause, even while the 
underlying security continues to trade, provides little benefit and has 
the potential to create confusion among investors. Excluding rights and 
warrants from the pilot program should minimize investor confusion that 
could result from temporary trading pauses in these securities. For 
this reason, the Commission designates the proposed rule change as 
operative upon the date of this Notice.\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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[[Page 74084]]

    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 email to [email protected]. Please include 
File No. SR-NYSEAmex-2011-88 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-NYSEAmex-2011-88. This file 
number should be included on the subject line if email 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 available publicly. All 
submissions should refer to File No. SR-NYSEAmex-2011-88 and should be 
submitted on or before December 21, 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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30806 Filed 11-29-11; 8:45 am]
BILLING CODE 8011-01-P