[Federal Register Volume 79, Number 101 (Tuesday, May 27, 2014)]
[Notices]
[Pages 30205-30206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12073]
[[Page 30205]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72194; File No. SR-NYSEMKT-2014-45]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 975NY to
Provide for New Procedures To Account for Erroneous Trades Occurring
From Disruptions and/or Malfunctions of Exchange Systems
May 20, 2014.
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 May 12, 2014, 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend Rule 975NY to provide for new
procedures to account for erroneous trades occurring from disruptions
and/or malfunctions of Exchange systems. 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 amend Rule 975NY to provide for new
procedures to account for erroneous trades occurring from disruptions
and/or malfunctions of Exchange systems. This filing is based on the
rules of the Chicago Board Options Exchange, Incorporated
(``CBOE'').\4\
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\4\ See CBOE Rule 6.25(a)(3). The proposed rule change is also
substantially similar to NYSE Arca, Inc. (``NYSE Arca'') Rule 6.89
and is similar to NASDAQ OMX PHLX, LLC (``Phlx'') Rule
1092(c)(ii)(A).
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Proposed new Rule 975NY(a)(9) would provide that any electronic or
open outcry transactions that arise out of a ``verifiable systems
disruption or malfunction'' in the use or operation of an Exchange
automated quotation, dissemination, execution, or communication system
may either be nullified or adjusted by Trading Officials.\5\ In
addition, the proposed rule would provide that transactions that
qualify for price adjustment will be adjusted to a Theoretical Price,
as defined in paragraph (a)(2) of Rule 975NY. The Exchange notes that
proposed Rule 975NY(a)(9) is virtually identical to CBOE Rule
6.25(a)(3) and similar to rules in effect at other options exchanges
that allow for the nullification or modification of transactions that
resulted from verifiable disruptions and/or malfunctions of Exchanges
systems.\6\ The proposed rule change differs from CBOE Rule 6.25(a)(3)
because the Exchange proposes to permit a Trading Official to nullify
or adjust a transaction, which is similar to NYSE Arca Rule 6.89,
rather than require nullification or adjustment as required under CBOE
Rule 6.25(a)(3).
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\5\ Trading Officials are employees or officers of the Exchange
and are not affiliated with ATP Holders. See Rule 900.2NY(82).
\6\ See supra n. 3 [sic].
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The proposed rule change would provide the Exchange with the same
authority to nullify or adjust trades in the event of a ``verifiable
disruption or malfunction'' in the use of operation of its systems as
other exchanges have. The Exchange believes that it is appropriate to
provide the flexibility and authority provided for in proposed Rule
975NY(a)(9) so as not to limit the Exchange's ability to plan for and
respond to unforeseen systems problems or malfunctions. For this
reason, the Exchange believes that, in the interest of maintaining a
fair and orderly market and for the protection of investors, authority
to nullify trades in these circumstances, consistent with the authority
on other exchanges, is warranted.
The Exchange notes that the options markets are currently in the
process of identifying how to harmonize their respective obvious and
catastrophic error rules, including a rule specifying the circumstances
in which an options exchange may nullify trades because of a systems
problem or malfunction. Because it is uncertain when this harmonized
rule will be filed with and approved by the Commission, the Exchange
believes it is critical to its current ability to maintain a fair and
orderly market and to protect investors to propose an amendment to its
current Obvious Error and Catastrophic Errors Rule 975NY. Today's
proposed rule would be superseded by a future proposed harmonized rule.
The Exchange further proposes that, similar to CBOE Rule
6.25(b)(3), the Exchange's ability to act on its own motion pursuant to
proposed Rule 975NY(a)(9) would be subject to Rule 975NY(b)(3)
procedures for reviewing trades on Exchange motion. Accordingly, the
Exchange proposes to amend Rule 975NY(b)(3) to provide that the
Exchange may act on its own motion for any transaction subject to
paragraphs (a)(3)-(a)(9) of Rule 975NY.
The Exchange also proposes technical changes that would add
paragraphs (a)(7) and (a)(8) to Rule 975NY(b)(3), which is consistent
with CBOE rules, and which cross references were previously
inadvertently excluded from Rule 975NY(b)(3). The Exchange also
proposes to amend Rule 975NY(a) to be more similar to the corresponding
provision in CBOE's rules by deleting the specific paragraph references
and instead refer generally to the conditions specified in paragraph
(a) of Rule 975NY.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\7\ in general, and furthers the objectives of Section 6(b)(5),\8\
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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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[[Page 30206]]
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
national market system and promote a fair and orderly market because it
would provide authority for the Exchange to nullify or adjust trades
that may have resulted from a verifiable systems disruption or
malfunction. The Exchange believes that it is appropriate to provide
the flexibility and authority provided for in proposed Rule 975NY(a)(9)
so as not to limit the Exchange's ability to plan for and respond to
unforeseen systems problems or malfunctions that may result in harm to
the public. The Exchange notes that the proposed rule change is based
on CBOE rules and is substantially similar to rules of other
markets.\9\ The Exchange further notes that pursuant to existing Rule
975NY(b)(3), when acting under its own motion to nullify or adjust
trades pursuant to proposed Rule 975NY(a)(9), the Exchange must
consider whether taking such action would be in the interest of
maintaining a fair and order market and for the protection of
investors.
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\9\ Supra n. 3 [sic].
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Rather, the Exchange
believes that the proposed rule change is pro-competitive because it
will align the Exchange's rules with the rules of other markets,
including CBOE, NYSE Arca, and Phlx. By adopting proposed Rule
975NY(a)(9), the Exchange will be in a position to treat transactions
that are a result of a verifiable systems issue or malfunction in a
manner similar to other exchanges.
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 \10\ and Rule 19b-4(f)(6) thereunder.\11\
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 after the date of the filing, 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. \12\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\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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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) \13\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\13\ 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-NYSEMKT-2014-45 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2014-45. 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 at 100 F Street NE.,
Washington, DC 20549-1090 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 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-2014-45, and should be submitted on or before June 17, 2014.
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. 2014-12073 Filed 5-23-14; 8:45 am]
BILLING CODE 8011-01-P