[Federal Register Volume 78, Number 28 (Monday, February 11, 2013)]
[Notices]
[Pages 9760-9762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02798]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68816; File No. SR-PHLX-2013-11]
Self-Regulatory Organizations; The NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to [sic]
Proposes To Delay the Operative Date of a Rule Change to Exchange Rule
133
February 1, 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 28, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
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 the
Substance of the Proposed Rule Change
The Exchange proposes a rule change to proposes [sic] to delay the
operative date of a rule change to Exchange Rule 133, which provides
for 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 the proposed rule change [sic] is available at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx, at the Exchange's
principal office, 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 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 Exchange 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 Rule 133, which provides the
methodology for determining when to halt trading in all stocks due to
extraordinary market volatility, 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 period
will begin and end at the same time as the pilot period for the LULD
Plan. The current Rule 133 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 current version of Rule 133 would be in
effect.
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\3\ The Exchange adopted the proposed changes to the market-wide
circuit breakers on a pilot basis for a period 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-
PHLX-2011-129). The Exchange anticipates that the initial date of
LULD Plan operations will be changed to April 8, 2013. The proposal
would delay the operative date to the market-wide circuit breakers
pilot to April 8, 2013 in order for the implementation date for the
market-wide circuit breakers pilot would [sic] remain the same date
as for the LULD Plan.
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Current Rule 133
The Exchange amended Rule 133 on June 6, 2012.\4\ The changes to
Rule 133 are effective, but not operative until February 4, 2013. The
current standard, set forth in the rules of other exchanges,\5\
provides for Level 1, 2, and 3 declines and specified trading halts
following such declines. The values of Levels 1, 2 and 3 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 the beginning of the quarter.
Each percentage calculation is rounded to the nearest fifty points to
create the Levels' trigger points. The values then remain in effect
until the
[[Page 9761]]
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.
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\4\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-PHLX-2011-129).
\5\ The rule was last amended in 1998, when declines based on
specific point drops in the DJIA were replaced with the current
methodology of using a percentage decline that is recalculated
quarterly. See Securities Exchange Act Release No. 39846 (April 9,
1998), 63 FR 18477 (April 15, 1998) (SR-NYSE-98-06, SR-Amex-98-09,
SR-BSE-98-06, SR-CHX-98-08, SR-NASD-98-27, and SR-Phlx-98-15).
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Once a market-wide circuit breaker is in effect, trading in all
stocks halt [sic] for the time periods specified below:
Level 1 Halt anytime before 2:00 p.m.--one hour; at or after 2:00
p.m. but before 2:30 p.m.--30 minutes; at or after 2:30 p.m.--trading
shall continue, unless there is a Level 2 Halt.
Level 2 Halt anytime before 1:00 p.m.--two hours; at or after 1:00
p.m. but before 2:00 p.m.--one hour; at or after 2:00 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 a Rule 80B trading halt for
stocks that comprise the DJIA.
Amended Rule 133
The Exchange amended Rule 133 to revise the current methodology for
determining when to halt trading in all stocks due to extraordinary
market volatility (``market-wide circuit breakers'').\6\ 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 [sic] amended Rule 80B as follows: (i) Replaced the DJIA with
the S&P 500; (ii) replaced the quarterly calendar recalculation of Rule
80B 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 associated
with each market decline level; and (v) modified the times when a
trading halt may be triggered. The Exchange [sic] believes that these
amendments update the rule to reflect today's high-speed, highly
electronic trading market while still meeting the original purpose of
Rule 80B: to ensure that market participants have an opportunity to
become aware of and respond to significant price movements.
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\6\ See supra note 4.
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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 period for the LULD Plan so that the impact of the two proposals
can be reviewed together.\7\ 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 that 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 breakers pilot to
April 8, 2013 in order for the implementation date for the market-wide
circuit breakers pilot would [sic] remain the same date as for the LULD
Plan.
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\7\ 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''),\8\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\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 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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\8\ 15 U.S.C. 78f(b).
\9\ 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
Written comments were neither solicited nor received.
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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ 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 believes
that waiving the 30-day operative delay is
[[Page 9762]]
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 hereby waives the 30-day operative delay and
designates the proposal operative upon filing.\14\
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ 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 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\15\ 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-PHLX-2013-11 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-PHLX-2013-11. 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 on official business
days between the hours of 10:00 a.m. and 3:00 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-PHLX-2013-11, and should be submitted on or before March
4, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
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\16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-02798 Filed 2-8-13; 8:45 am]
BILLING CODE 8011-01-P