[Federal Register Volume 77, Number 223 (Monday, November 19, 2012)]
[Notices]
[Pages 69528-69530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28005]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68220; File No. SR-NYSE-2012-66]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Interim Rule 
Change Relating to Rule 440B(b)

November 13, 2012.
    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 13, 2012, 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 an interim proposed rule change related to 
Rule 440B(b) to provide that on November 12, 2012, the closing price 
for 216 Exchange-listed securities that did not have a closing 
transaction on the Exchange was the consolidated last sale price 
available as of the end of regular trading hours on November 12, 2012, 
and that such closing price shall be the Trigger Price for purposes of 
determining whether a Short Sale Price Test has been triggered pursuant 
to Rule 440B(c) on November 13, 2012. The text of the proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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 an interim proposed rule change for Rule 
440B(b) to provide that on November 12, 2012, the closing price for 216 
Exchange-listed securities that did not have a closing transaction on 
the Exchange was the consolidated last sale price available as of the 
end of regular trading hours on November 12, 2012, and that such 
closing price shall be the Trigger Price for purposes of determining 
whether a Short Sale Price Test has been triggered pursuant to Rule 
440B(c) on November 13, 2012. The Exchange proposes that this interim 
proposed rule change be in effect until the Exchange has an opportunity 
to amend its rules on a permanent basis.

[[Page 69529]]

    Rule 440B sets forth how the Exchange implements the provisions of 
Rule 201 of Regulation SHO (``Rule 201'') \4\ under the Securities 
Exchange Act of 1934 (the ``Act'') which, if triggered, imposes a 
restriction on the prices at which securities may be sold short 
(``Short Sale Price Test''). Among other things, Rule 201 requires 
trading centers to establish, maintain, and enforce written policies 
and procedures reasonably designed to prevent the execution or display 
of a short sale order of a covered security at a price that is less 
than or equal to the current national best bid if the price of a 
covered security decreases by 10% or more from the covered security's 
closing price as determined by the listing market for the covered 
security as of the end of regular trading hours on the prior day. 
Accordingly, Rule 201(b)(1)(i) delegates to the listing market how to 
determine the closing price for a security.
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    \4\ 17 CFR 242.201.
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    Due to a systems issue at the Exchange on November 12, 2012, the 
Exchange was unexpectedly unable to close 216 Exchange-listed 
securities pursuant to the procedures set forth in Rule 123C. The 
Exchange notes that market participants rely on the Exchange's official 
closing price for purposes of calculating the value of mutual funds, 
exchange traded funds, and various indices, among other things. 
Accordingly, on November 12, 2012, the Exchange needed to designate an 
official closing price for the 216 affected symbols that did not have a 
closing transaction at the Exchange. Because those securities continued 
to trade on other markets, the Exchange determined that the appropriate 
official closing price for those securities should be the consolidated 
last sale price available as of the end of regular trading hours on 
November 12, 2012.\5\ The Exchange believes that using the consolidated 
last sale price available as of the end of regular trading hours best 
approximated the market's determination of the appropriate price of 
such securities in the absence of a closing transaction on the listing 
market.
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    \5\ See http://markets.nyx.com/nyse/market-status/view/11558. 
The Exchange notes that for the 216 affected securities, 212 
securities had a consolidated last-sale eligible trade on November 
12, 2012. For the four symbols that did not have a transaction on 
November 12, 2012, the Exchange used the last available consolidated 
last-sale eligible transaction that occurred during regular trading 
hours.
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    Rule 440B establishes procedures for the Exchange, as a listing 
market, to determine whether a Short Sale Price Test has been triggered 
for a covered security. Among other things, Rule 440B(b) defines the 
``Trigger Price'' as the security's closing price on the listing market 
as of the end of regular trading hours on the prior day. Rule 
440B(c)(2) provides that if a covered security did not trade on the 
Exchange on the prior trading day (due to a trading halt, trading 
suspension, or otherwise), the Exchange's determination of the Trigger 
Price shall be based on the last sale price on the Exchange for that 
security on the most recent day on which the security traded. The 
Exchange believes that Rule 440B(c)(2) does not contemplate how the 
Exchange should determine the closing price in the unique circumstances 
that occurred on November 12, 2012, namely, that due to a systems 
issue, the Exchange was unable to conduct a closing transaction in 
securities that otherwise were eligible to trade on other markets. In 
particular, the reason why the Exchange did not trade the 216 
securities was not because of a trading halt or trading suspension, and 
the Exchange does not believe the ``or otherwise'' language in Rule 
440B(c)(2) was designed to address the unanticipated scenario on 
November 12, 2012 when due to a systems issue, the Exchange was unable 
to hold a closing transaction in those securities.
    Because the Exchange has determined that the official closing price 
of the 216 affected securities should be the consolidated last sale 
price available as of the end of regular trading hours, the Exchange 
similarly believes that such consolidated last sale prices should be 
the closing price for purposes of determining the Trigger Price 
pursuant to Rule 440B(b). Accordingly, the Exchange proposes this 
interim proposed rule change for Rule 440B(b) to provide that for 
circumstances when the Exchange does not have a closing transaction, 
but securities are otherwise eligible to trade on other markets, the 
Exchange shall use the consolidated last sale price available as of the 
end of regular trading hours as the closing price for purposes of Rule 
440B. The Exchange further proposes that such closing price shall be 
the Trigger Price for purposes of determining whether a Short Sale 
Price Test has been triggered on the following day pursuant to Rule 
440B(c). The Exchange notes that the proposed interim rule proposal is 
intended to be in place only until the Exchange has an opportunity to 
amend its rules on a permanent basis to address this gap in its rules.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change will promote 
just and equitable principles of trade because it provides for an 
interim measure that provides clarity of how the Exchange, as a listing 
market, determined the Trigger Price for 216 securities that did not 
have a closing transaction at the Exchange on November 12, 2012. In 
particular, the Exchange believes that using the consolidated last sale 
price available as of the end of regular trading hours as the official 
closing price for the affected securities on November 12, 2012 promotes 
just and equitable principles of trade because the consolidated last 
sale price represents the market's determination of the appropriate 
price of the securities in the absence of a closing auction on the 
primary market. The Exchange further believes that using a Trigger 
Price based on the consolidated last sale price available as of the end 
of regular trading hours for purposes of determining whether a Short 
Sale Price Test has been triggered on November 13, 2012 promotes just 
and equitable principles of trade because it provides transparency of 
how the Exchange determined the closing price for purposes of 
triggering a Short Sale Price Test on November 13, 2012.

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.

[[Page 69530]]

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization 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 has determined to waive the five-day prefiling period 
in this case.
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ 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. The Commission hereby 
grants the request.\13\ Waiving the 30-day operative delay will allow 
the Exchange to provide transparency for how the Exchange determined 
the closing price on November 12, 2012. The Commission believes it is 
consistent with the protection of investors and the public interest to 
waive the 30-day operative delay and, therefore, designates the 
proposal as operative upon filing.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ 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).
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    At any time within 60 days of the filing of such 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 Number SR-NYSE-2012-66 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-2012-66. 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 Section, 100 F Street 
NE., Washington, DC 20549-1090. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office and 
on its Internet Web site at www.nyse.com. 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-NYSE-2012-66 and 
should be submitted on or before December 10, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28005 Filed 11-16-12; 8:45 am]
BILLING CODE 8011-01-P