[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60943-60945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24008]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70517; File No. SR-NYSEMKT-2013-78]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Extending the Pilot 
Program for Certain Clearly Erroneous Executions Under Rule 128--
Equities and Removing References to Individual Security Trading Pauses 
Contained in Rule 128(c)(4)--Equities

September 26, 2013.
    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 September 24, 2013, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 extend the pilot program for certain 
clearly erroneous executions under Rule 128--Equities and remove 
references to individual security trading pauses contained in Rule 
128(c)(4)--Equities. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to extend the pilot program for certain 
clearly erroneous executions under Rule 128--Equities and remove 
references to individual security trading pauses contained in Rule 
128(c)(4)--Equities. Portions of Rule 128--Equities, explained in 
further detail below, are currently operating as a pilot program set to 
expire on September 30, 2013.\4\ The Exchange proposes to extend the 
pilot program to April 8, 2014.
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    \4\ See Securities Exchange Act Release No. 68801 (February 1, 
2013), 78 FR 8630 (February 6, 2013) (SR-NYSEMKT-2013-11).
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    On September 10, 2010, the Securities and Exchange Commission 
(``Commission'') approved, on a pilot basis, changes to Rule 128--
Equities to provide for uniform treatment: (1) Of clearly erroneous 
execution reviews in multi-stock events involving twenty or more 
securities; and (2) in the event transactions occur that result in the 
issuance of an individual security trading pause by the primary listing 
market and subsequent transactions that occur before the trading pause 
is in effect on the Exchange.\5\ The Exchange also adopted additional 
changes to Rule 128--Equities that reduced the ability of the Exchange 
to deviate from the objective standards set forth in Rule 128--
Equities,\6\ and in 2013, adopted a provision designed to address the 
operation of the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan'').\7\ The Exchange believes the 
benefits to market participants from the more objective clearly 
erroneous executions rule should continue on a pilot basis through 
April 8, 2014, which is one year following the commencement of 
operations of the Plan. The Exchange believes that continuing the pilot 
during this time will protect against any unanticipated consequences. 
Thus, the Exchange believes that the protections of Rule 128--Equities 
should continue while the industry gains further experience operating 
the Limit Up-Limit Down Plan.
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    \5\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-NYSEAmex-2010-60).
    \6\ Id.
    \7\ See Securities Exchange Act Release No. 68801 (February 1, 
2013), 78 FR 8630 (February 6, 2013) (SR-NYSEMKT-2013-11); 
Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 
33498 (June 6, 2012) (the ``Limit Up-Limit Down Release''); see also 
Rule 128(i)--Equities.
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    The Exchange also proposes to eliminate all references in Rule 
128--Equities to individual security trading pauses issued by a primary 
listing market. Specifically, Rule 128(c)(4)--Equities provides 
specific rules to follow with respect to review of an execution as 
potentially clearly erroneous when there is an individual security 
trading pause pursuant to Rule 80C--Equities. The individual security 
trading pauses described in Rule 128(c)(4)--Equities, which apply to 
the securities included in the S&P 500 and Russell 1000 indexes as well 
as to a pilot list of Exchange Traded Products (the ``subject 
securities''), are being phased out as securities become subject to the 
Plan pursuant to a phased implementation schedule. The Plan is already 
operational with respect to all subject securities, and thus, the 
Exchange believes that all references to individual security trading 
pauses should be removed, including all cross-

[[Page 60944]]

references to Rule 128(c)(4)--Equities contained in other portions of 
Rule 128--Equities.\8\
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    \8\ The Exchange notes that certain Exchange Traded Products 
(``ETPs'') are not yet subject to the Limit Up-Limit Down Plan. 
Because such ETPs are not on the pilot list of securities, such ETPs 
are not subject to Rule 128(c)(4)--Equities. See Securities Exchange 
Act Release No. 65102 (August 11, 2011), 76 FR 51111 (August 17, 
2011) (SR-NYSEAmex-2011-60) (notice of filing and immediate 
effectiveness to amend Rule 128--Equities so that clearly erroneous 
executions involving securities recently added to the individual 
security trading pause pilot under Rule 80C--Equities continue to be 
resolved in the same manner before being added to the pilot). 
Accordingly, the proposed rule change does not change the status quo 
with respect to such ETPs. As amended, all securities, including 
ETPs not subject to the Limit Up-Limit Down Plan, will continue to 
be subject to Rule 128(c)(1) through (3)--Equities.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\10\ in particular, because it would promote just and equitable 
principles of trade, remove impediments to, and perfect the mechanism 
of, a free and open market and a national market system. The Exchange 
believes that the pilot program promotes just and equitable principles 
of trade in that it promotes transparency and uniformity across markets 
concerning review of transactions as clearly erroneous. More 
specifically, the Exchange believes that the extension of the pilot 
would help assure that the determination of whether a clearly erroneous 
trade has occurred will be based on clear and objective criteria, and 
that the resolution of the incident will occur promptly through a 
transparent process. The proposed rule change would also help ensure 
consistent results in handling erroneous trades across the U.S. 
markets, thus furthering fair and orderly markets, the protection of 
investors and the public interest. Although the Limit Up-Limit Down 
Plan will become fully operational during the same time period as the 
proposed extended pilot, the Exchange believes that maintaining the 
pilot will help to protect against unanticipated consequences. To that 
end, the extension will allow the Exchange to determine whether Rule 
128--Equities is necessary once the Plan is fully operational and, if 
so, whether improvements can be made. Finally, the elimination of 
references to individual security trading pauses will help to avoid 
confusion among market participants, which is consistent with the 
protection of investors and the public interest and therefore 
consistent with the Act. As described above, individual security 
trading pauses have been replaced by the Limit Up-Limit Down Plan with 
respect to securities that are subject to Rule 80C--Equities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change 
implicates any competitive issues. To the contrary, the Exchange 
believes that the Financial Industry Regulatory Authority (``FINRA'') 
and other national securities exchanges are also filing similar 
proposals, and thus, the proposal will help to ensure consistency 
across market centers.

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

    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 for 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 \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    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 consistent with the protection of investors and the public interest, 
as it will allow the pilot program to continue uninterrupted, thereby 
avoiding 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.\13\
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    \13\ 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 proposal 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-NYSEMKT-2013-78 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-NYSEMKT-2013-78. 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.shtm). 
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

[[Page 60945]]

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-NYSEMKT-2013-78 and should be submitted on or before October 23, 
2013.

    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. 2013-24008 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P