[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8673-8675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02591]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68777; File No. SR-CHX-2013-02]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Delaying the Operative Date of a Rule Change to CHX Article 20, Rule 2, 
Which Provides, Among Other Things, Methodology for Determining When to 
Halt Trading in All Stocks Due to Extraordinary Market Volatility From 
the Date of February 4, 2013 Until April 8, 2013

January 31, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on January 25, 2013, the Chicago Stock Exchange, Inc. (the 
``Exchange'' or ``CHX'') 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 delay the operative date of a rule change 
to CHX Article 20, Rule 2, which provides, among other things, the 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility, from the date of February 4, 2013, 
until April 8, 2013. The text of this proposed rule change is available 
on the Exchange's Web site at (www.chx.com) and in the Commission's 
Public Reference Room [sic].

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 CHX included statements 
concerning the purpose of and basis for the proposed rule changes 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 CHX 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 Article 20, Rule 2, which provides, 
among other things, the methodology for determining when to halt 
trading in all stocks due to extraordinary market volatility (``market-
wide circuit breakers''), to delay the operative date of the pilot by 
which such Rule operates from the current scheduled date of February 4, 
2013, until April 8, 2013, to coincide with the initial date of 
operations of the Regulation NMS Plan to Address Extraordinary Market 
Volatility (``LULD Plan'').\3\ As proposed, the pilot will begin and 
end at the same time [sic] the pilot period for the LULD Plan. The 
current Article 20, Rule 2 would remain in effect until April 8, 2013. 
If the pilot is not either extended or approved permanently at the end 
of the pilot period, the portions of the current version of Article 20, 
Rule 2 that outlines the market-wide circuit breakers would be in 
effect.
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    \3\ The Commission approved the proposed changes to the market-
wide circuit breakers on a pilot basis for a period scheduled to 
start on February 4, 2013 that corresponds to the pilot period for 
the LULD Plan so that the impact of the two proposals can be 
reviewed together. See Securities Exchange Act Release No. 67090 
(May 31, 2012), 77 FR 33531 (June 6, 2012) (SR-CHX-2011-30). The 
Exchange anticipates that the initial date of LULD Plan operations 
will be changed to April 8, 2013. This proposal would set the 
operative date of the market-wide circuit breakers pilot to April 8, 
2013 in order for the implementation date for the market-wide 
circuit breakers pilot would remain the same date as for the LULD 
Plan.
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Current Article 20, Rule 2
    In its current form, Article 20, Rule 2 provides for, among other 
things, Level 1, 2 and 3 declines and specified trading halts following 
such declines. The values of Levels 1, 2 and 3 [sic] are calculated at 
the beginning of each calendar quarter, using 10%, 20% and 30%, 
respectively, of the average closing value of the Dow Jones Industrial 
Average (``DJIA'') for the month prior to beginning of the quarter. The 
values remain then in effect until the next quarterly calculation, 
notwithstanding whether the DJIA has moved and a Level 1, 2 or 3 
decline is no longer equal to an actual 10%, 20% or 30% decline in the 
most recent closing value of the DJIA.
    Once the current market-wide circuit breakers are in effect, 
trading in all stocks halt for the time periods specified below (all 
times are in Central Standard Time):

Level 1 Halt
    Anytime before 12:00 [sic] p.m.--one hour;
    At or after 1:00 p.m. but before 1:30 p.m.--30 minutes;
    At or after 1:30 p.m.--trading shall continue, unless there is a 
Level 2 Halt.
Level 2 Halt
    Anytime before 12:00 p.m.--two hours;
    At or after 12:00 p.m. but before 1:00 p.m.--one hour;
    At or after 1:00 p.m.--trading shall halt and not resume for the 
rest of the day.
Level 3 Halt
    At any time--trading shall halt and not resume for the rest of the 
day.

    Unless stocks are halted for the remainder of the trading day, 
price indications are disseminated during an Article 20, Rule 2 trading 
halt for stocks that comprise the DJIA.
Amended Article 20, Rule 2
    The Exchange amended Article 20, Rule 2 to revise the current 
market-wide circuit breakers.\4\ The Exchange, other equities, options, 
and futures markets, and FINRA amended the market-wide circuit breakers 
to take into consideration the recommendations of the Joint CFTC-SEC 
Advisory Committee on Emerging Regulatory Issues, and to provide for 
more meaningful measures in today's markets of when to halt trading in 
all stocks. Accordingly, the Exchange amended Article 20, Rule 2 as 
follows: (i) Replaced the DJIA with the S&P 500; (ii) replaced the 
quarterly calendar recalculation of market-wide circuit breaker 
triggers with daily recalculations; (iii) replaced the 10%, 20% and 30% 
market decline percentages with 7%, 13% and 20% market decline 
percentages; (iv) modified the length of the trading halts

[[Page 8674]]

associated with each market decline level; and (v) modified the times 
when a trading halt may be triggered. The Exchange believes that these 
amendments update the rule to reflect today's high-speed, highly 
electronic trading market while still meeting the original purpose of 
the market-wide circuit breakers provisions of Article 20, Rule 2: to 
ensure that market participants have an opportunity to become aware of 
and respond to significant price movements.
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    \4\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-CHX-2011-30).
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    The Exchange adopted the proposed changes to the market-wide 
circuit breakers on a pilot basis for a period that corresponds to the 
pilot for the LULD Plan so that the impact of the two proposals can be 
reviewed together.\5\ In addition, in order for the markets and the 
single plan processors responsible for the consolidation of information 
pursuant to Rule 603(b) of Regulation NMS under the Securities Exchange 
Act of 1934 to make the necessary technological changes to implement 
both the changes to the market-wide circuit breakers and the proposed 
LULD Plan, the Exchange established the implementation date for the 
proposed rule changes should be the same date that the LULD Plan is 
implemented. The Exchange anticipates that the initial date of LULD 
Plan operations will be changed to April 8, 2013. For the same reasons 
as stated above, the Exchange proposes to delay the operative date of 
the market-wide circuit breaker pilot to April 8, 2013 in order for the 
implementation date for the market-wide circuit breaker pilot to remain 
the same date as for the LULD Plan.
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    \5\ See id.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (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 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    Specifically, this rule proposal supports the objectives of 
perfecting the mechanism of a free and open market and the national 
market system because it promotes uniformity across markets concerning 
when and how to halt trading in all stocks as a result of extraordinary 
market volatility. Additionally, delaying the operative date of the 
market-wide circuit breakers pilot until the initial date of operations 
of the LULD Plan would allow the pilot to begin and end at the same 
time of the LULD Plan so that the Exchange and the Commission could 
further assess the impact of the two pilots on the marketplace or 
whether other initiatives should be adopted in lieu of the pilots, 
which contributes to the protection of investors and the public 
interest.

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. The proposed changes are 
being made to delay the operation of the market-wide circuit breakers 
pilot until April 8, 2013 to allow the pilot period to begin and end at 
the same time as the LULD Plan, which contributes to the protection of 
investors and the public interest. Other competing equity exchanges are 
subject to the same methodology for determining when to halt trading in 
all stocks due to extraordinary market volatility and the same 
requirements specified in the LULD Plan. Thus, the proposed changes 
will not impose any burden on competition while providing that the 
market-wide circuit breakers pilot period corresponds to the pilot 
period for the LULD Plan so that the impact of the two proposals can be 
reviewed together.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \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). 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 
Commission has waived this requirement.
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    The Exchange has requested that the Commission 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. Doing so will delay the operative date of the market-
wide circuit breakers pilot until the initial date of operations of the 
LULD Plan, thereby allowing the pilot to run simultaneously with the 
LULD Plan, providing an opportunity to properly assess the impact of 
the two pilots on the marketplace and evaluate the pilots' 
effectiveness. Therefore, the Commission designates the proposal 
operative upon filing.\10\
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    \10\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
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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-CHX-2013-02 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-CHX-2013-02. This 
file number should be included on the

[[Page 8675]]

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 10:00 a.m. and 3:00 p.m. Copies of 
the 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 Number SR-CHX-2013-02 and should be submitted on or before 
February 27, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02591 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P