Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposal Relating to Exchange Rule Regarding Clearly Erroneous Transactions, 51935-51939 [E9-24242]
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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices
system, and, in general, to protect
investors and the public interest. The
proposed rule change would coordinate
standards of review of clearly erroneous
trades across markets, thereby
eliminating conflicting rulings among
exchanges and disparate treatment of
similarly priced trades.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
BX does not believe that the proposed
rule change will impose any burden on
competition 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
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 Act10 and Rule 19b–
4(f)(6) thereunder.11
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act12 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)13
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange requests
that the Commission waive the 30-day
operative delay so that it may
implement the new rule on October 5,
2009, the same date as the other equities
exchanges. The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest
because it will allow the Exchange to
begin applying the new rule on the same
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10 15
U.S.C. 78s(b)(3)(A).
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 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 Exchange has satisfied this
requirement.
12 17 CFR 240.19b–4(f)(6).
13 17 CFR 240.19b–4(f)(6).
11 17
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date as the other equities exchanges.14
Application of the new rule on this date
should help foster transparency and
consistency among those exchanges that
adopt clearly erroneous execution rules
substantially similar to those previously
approved by the Commission.15 For
these reasons, the Commission
designates that the proposed rule
change become operative on October 5,
2009.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BX–2009–060 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–BX–2009–060. This file
number should be included on the
subject line if e-mail 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 (https://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
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposal’s impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
15 See Securities Exchange Act Release No. 60706
(September 22, 2009), 74 FR 49416 (September 28,
2009) (NYSEArca–2009–36).
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51935
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 inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 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 publicly available. All
submissions should refer to File
Number SR–BX–2009–060 and should
be submitted on or before October 29,
2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–24244 Filed 10–7–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60775; File No. SR–CHX–
2009–11]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of a Proposal Relating to Exchange
Rule Regarding Clearly Erroneous
Transactions
October 2, 2009.
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 October
1, 2009, Chicago Stock Exchange, Inc.
(‘‘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. CHX has designated
the proposed rule change as constituting
a rule change under Rule 19b–4(f)(6)
under the Act,3 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The CHX proposes to amend its rules
regarding clearly erroneous transactions.
The text of this proposed rule change is
available on the Exchange’s Web site at
(https://www.chx.com) and in 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
CHX included statements concerning
the purpose of and basis for the
proposed rule changes and discussed
any comments it received regarding the
proposal. 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 modify
Article 20, Rules 10 and 11 in order to
improve the Exchange’s policies and
procedures regarding clearly erroneous
executions. The proposed changes are
part of a market-wide effort designed to
provide transparency and finality with
respect to clearly erroneous executions.
This effort seeks to achieve consistent
results for participants across U.S.
equities exchanges while maintaining a
fair and orderly market, protecting
investors and protecting the public
interest. The proposed changes are more
fully discussed below.
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Definition
The Exchange will maintain the
meaning of the definition of a clearly
erroneous execution, but proposes to
add clarifying language with respect to
cancelled trades. The proposed change
identifies that a transaction made in
clearly erroneous error and agreed to be
canceled by both parties or determined
by the Exchange to be clearly erroneous
will be removed ‘‘from the Consolidated
Tape.’’4 A trade will only be removed
from the Consolidated Tape when the
determination is deemed final and any
applicable appeals have been exhausted.
4 For purposes of this Rule, ‘‘removed from the
Consolidate Tape’’ means that a subsequent
message will be sent to the Consolidated Tape
indicating that a previously executed trade has been
cancelled.
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Participant Initiated Review Requests
The Exchange proposes to amend
Article 20, Rule 10(b) to update the
procedures for requesting a review of a
clearly erroneous transaction. First, the
proposed rule would require that
requests for review be made only by
electronic mail (‘‘email’’) or other
electronic means specified from time to
time by the Exchange. Under its current
rules, the Exchange also allows requests
to be made via facsimile. Requiring
requests for review to be made via email
creates a standard format that can easily
be logged and tracked. The Exchange
will republish the email address or
other electronic means to be used for all
clearly erroneous filings in a circular
distributed to Participants.5
The amended rule specifies that
requests for review must be received by
the Exchange within 30 minutes of the
execution time for orders initially
routed to and executed on the Exchange.
The Exchange proposes that Participants
submit certain essential identifying
information with the request including
the time of the transaction(s), security
symbol(s), number of shares, price(s),
side (bought or sold), and factual basis
for believing that the trade is clearly
erroneous. The current rule already
requires requests for review to be
received within 30 minutes of the
execution, but only requires submission
of such information which is
‘‘reasonably necessary for use by the
Exchange in resolving the matter.’’
The proposed rule also requires the
Exchange to notify the counterparty to
a trade upon receipt of a timely filed
request for review that satisfies the
numerical guidelines set forth within
the Rule. This proposed language
requires notice only when a request is
filed in a timely manner and satisfies
the Numerical Guidelines. This change
alleviates any potential burden on the
Exchange of notifying the counterparty
when a request for review does not
merit a ruling.
The Exchange proposes to amend
Article 20, Rule 10 to allow an Officer
of the Exchange or such other employee
designee (‘‘Officer’’) of CHX to request
additional information from each party
to a transaction under review. Parties to
the review will have 30 minutes from
the time of the request to provide
additional supporting information.
Routed Executions
The Exchange proposes to give other
market centers an additional 30 minutes
from the receipt of their participant’s
timely filing to request a ruling, but no
longer than 60 minutes from the time of
5 Article 1, Rule 1(s) defines a Participant as any
Participant Firm that holds a valid Trading Permit.
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the execution under review. This
provision accounts for those executions
initially directed to an away market
center and subsequently routed by that
away market center to the Exchange.
For example, assume an order is
initially routed by a participant to
Market Center A and subsequently
routed to the CHX where the order is
executed at a price outside of the
Numerical Guidelines. This provision
generally requires Market Center A to
file with the Exchange within 30
minutes from the time it receives its
participant’s timely filed request for
review. This provision caps the filing
deadline for an away market center at 60
minutes from the time of the execution
under review.
Threshold Factors
Currently, the Exchange’s Clearly
Erroneous Execution rule specifies
numeric guidelines for determining
what constitutes a clearly erroneous
transaction. These guidelines are an
offset of at least twenty percent (20%)
from the prevailing National Best Bid or
Offer (‘‘NBBO’’) at the time of trade
execution for transactions under $1. For
transactions at or exceeding $1, the
relevant NBBO offset is ten percent
(10%). The Exchange proposes to
modify its existing numerical thresholds
to conform to those being adopted by
other trading centers.
Numerical Guidelines
The proposed numerical guidelines
state that a transaction executed during
the Early Session, 6 Regular Trading
Session ,7 Late Trading Session 8 or Late
Crossing Session 9 may be found to be
clearly erroneous only if the price of the
transaction to buy is greater, or less in
the case of a sale, than the reference
price by an amount that equals or
exceeds the numerical guidelines for a
particular transaction category. The
Reference Price shall be equal to the
Consolidated Last Sale immediately
prior to the execution under review,
unless unusual circumstances are
present. The proposed guidelines for
sales greater than $0.00 up to and
including $25.00 are 10% for the
Regular Trading Session and 20% for
the Early, Late Trading and Late
Crossing Sessions. The proposed
guidelines for sales greater than $25.00
6 The Early Session ’’ shall begin at 6 a.m. and
shall end at 8:30 a.m. [Central Time] and shall end
at 8:30 a.m. [Central Time].’’ Article 20, Rule 1(b).
7 The Regular Trading Session ‘‘shall begin at 8:30
a.m. [Central Time] and shall end at 3 p.m. each day
for all securities.’’ Article 20, Rule 1(b).
8 The Late Trading Session begins ‘‘immediately
after the close of the second session and shall end
at 3:15 p.m. [Central Time].’’ Article 20, Rule 1(b).
9 The Late Crossing Session begins ‘‘immediately
after the close of the third session and shall end at
4 p.m. [Central Time].’’ Article 20, Rule 1(b).
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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices
up to and including $50.00 are 5% for
the Regular Trading Session and 10%
for the Early, Late Trading and Late
Crossing Sessions. The proposed
guidelines for sales greater than $50.00
are 3% for the Regular Trading Session
and 6% for the Early, Late Trading and
Late Crossing Sessions. A filing
involving five or more securities by the
same ETP Holder will be aggregated into
a single filing called a ‘‘Multi-Stock
Event.’’ In the case of a Multi-Stock
Event, the proposed guidelines are 10%
for the Regular Trading Session and
10% for the Early, Late Trading and Late
Crossing Sessions. In the case of
Greater than $0.00 up to and including $25.00 ......................
Greater than $25.00 up to and including $50.00 ....................
Greater than $50.00 .................................................................
Multi-Stock Event—Filings involving five or more securities
by the same ETP Holder will be aggregated into a single
filing.
Leveraged ETF/ETN securities ................................................
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Unusual Circumstances
The CHX further proposes that in
Unusual Circumstances the Exchange
may, in its discretion and with a view
toward maintaining a fair and orderly
market, use a Reference Price other than
the consolidated last sale. Unusual
Circumstances may include periods of
extreme market volatility, sustained
illiquidity, or widespread system issues.
Other Reference Prices that the
Exchange may use would include the
consolidated inside price, the
consolidated opening price, the
consolidated prior close, or the
consolidated last sale prior to a series of
executions.
The following example explains the
use of a Reference Price equal to the
consolidated last sale prior to a series of
executions.
ABC has a consolidated last sale of $10.00.
During the Regular Trading Session Customer
A enters a market order to buy 10,000 shares,
although it had intended a market order for
1,000 shares. The size of the order is such
that the order sweeps the CHX Book, which
reflects 1,000 shares of liquidity offered at
each of the following prices. Executions
occur, moving through the depth of Book, as
follows:
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Early, Late Trading and Late Crossing
Session Numerical Guidelines (subject
transaction’s % difference from the
Consolidated Last Sale):
10% .......................................................
5% .........................................................
3% .........................................................
10% .......................................................
20%.
10%.
6%.
10%.
Regular Trading Session Numerical
Guidelines multiplied by the leverage
multiplier (i.e., 2×).
Regular Trading Session Numerical
Guidelines multiplied by the leverage
multiplier (i.e., 2×).
Trade #1—1000 shares @ $10.00 (9000
remaining)
Trade #2—1000 shares @ $10.20 (8000
remaining)
Trade #3—1000 shares @ $10.40 (7000
remaining)
Trade #4—1000 shares @ $10.60 (6000
remaining)
Trade #5—1000 shares @ $10.80 (5000
remaining)
Trade #6—1000 shares @ $11.00 (4000
remaining)
Trade #7—1000 shares @ $11.20 (3000
remaining)
Trade #8—1000 shares @ $11.40 (2000
remaining)
Trade #9—1000 shares @ $11.60 (1000
remaining)
Trade #10—1000 shares @ $11.80 (complete)
Thus, to be eligible for review, a
transaction must be at a price that is at
least 10% higher than the consolidated
last sale prior to the series of executions.
Customer A could request a ruling for
trades #6 through #10, priced at $11.00
and above, but trades #1 through #5
would not be eligible for review.
Under the proposed rule the Exchange
may also use a higher numerical
guideline if, after market participants
have been alerted to erroneous activity,
the price of the security returns toward
its prior trading range but continues to
trade beyond the price it would have
normally been busted.
Joint Market Rulings
In the interest of achieving
consistency across markets, the
Exchange proposes that, in events that
involve other markets, the Exchange
would have the ability to use a different
Reference Price and/or Numerical
Guideline. In these instances the
Reference Price would be determined
based on a consensus among the
Exchanges where the transactions
occurred. Furthermore, when a ruling is
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Leveraged ETF/ETN securities, the
above guidelines are to be multiplied by
the leverage multiplier of the security.
Executions that do not meet or exceed
the Numerical Guidelines will not be
eligible for review under this section.
The following chart summarizes the
proposed Numerical Guidelines.
Regular Trading Session Numerical
Guidelines (subject transaction’s % difference from the Consolidated Last
Sale):
Reference price: Consolidated Last Sale
Establishing Numerical Guidelines
which are consistent with other market
centers within the Rule brings
regulatory transparency and consistency
in the application of the rules of the
Exchange. These Numerical Guidelines
represent the general consensus
approach and were developed based on
the collective experiences of a marketwide group. The Exchange believes that
the Thresholds established are fair and
appropriate and apply evenly to all
participants.
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made across markets, the Exchange may
determine that the ruling is not eligible
for appeal because immediate finality is
necessary to maintain a fair and orderly
market and to protect investors and the
public interest.
Additional Factors
The proposed amendments to Article
20, Rules 10 and 11 also enumerate
some additional factors that an Officer
may consider when determining
whether an execution is clearly
erroneous. These factors include, but are
not limited to, system malfunctions or
disruptions, volume and volatility for
the security, derivative securities
products that correspond to greater than
100% in the direction of a tracking
index, news released for the security,
whether trading in the security was
recently halted/resumed, whether the
security is an IPO, whether the security
was subject to a stock-split,
reorganization, or other corporate
action, overall market conditions, Late
Session executions, validity of the
consolidated tapes trades and quotes,
consideration of primary market
indications, and executions inconsistent
with the trading pattern in the stock.
Each additional factor shall be
considered with a view toward
maintaining a fair and orderly market,
the protection of investors and the
public interest.
Numerical Guidelines Applicable to
Volatile Market Opens
The Exchange proposes to give itself
the ability to expand the Numerical
Guidelines applicable to transactions
occurring between 9:30 a.m. and 10 a.m.
ET based on the disseminated value of
the S & P 500 Futures at 9:15 a.m. ET.
When the S&P Futures are up or down
from 3% up to but not including 5% at
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the proposed language for an initial
request for a ruling, all appeal requests
must be made via email.
The current rule provides that the
Exchange shall review and render a
decision upon an appeal without
specifying any particular timeframe in
which a decision would be provided by
the Exchange. The proposed rule offers
more definite guidelines to ensure the
expedient resolution of appeals. It
requires the Exchange to review appeals
as soon as practicable, but generally on
the same day as the executions under
review. Appeals received between 2
p.m. CT and the close of trading in the
Late Crossing Session should be made
as soon as practicable, but in no case
later than the trading day following the
date of the execution under review. This
revised provision provides participants
a reasonable expectation of when a
ruling on appeal will generally be made.
Further, the proposed rule declares
that any determination made by an
Officer or by the Committee on
Exchange Procedure shall be rendered
without prejudice as to the right of the
parties to the transaction to submit their
dispute to arbitration. This provision
simply clarifies the fact that nothing in
the proposed rule limits or impedes the
rights of the parties to arbitrate their
dispute.
Review Procedures
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9:15 a.m., the Numerical Guidelines are
doubled. When the S&P Futures are up
or down 5% or greater at 9:15 a.m., the
Numerical Guidelines are tripled. The
Exchange believes that the S&P 500
futures contract is an appropriate and
reliable barometer of market activity
prior to the market opening due to its
broad based market coverage and deep
liquidity. Using the S&P 500 Futures
disseminated value at 9:15 a.m. as the
barometer of market activity, the
Exchange is providing a transparent
means of offering adjusted guidelines in
times of volatile market activity.
Outlier Transactions
The proposed amendments to Article
20, Rule 10 provide that an Officer of
the Exchange may consider requests for
review received after thirty minutes, but
not longer than sixty minutes after the
execution in question in the case of an
Outlier Transaction. An Outlier
Transaction is a transaction where, (1)
the execution price of the security is
greater than three times the current
Numerical Guidelines, or (2) the
execution price of the security breaches
the 52-week high or low, in which case
the Exchange may consider Additional
Factors to determine if the transaction
qualifies for review or if the Exchange
shall decline to act.
System Disruption and Malfunctions
Currently, Systems Disruptions and
Malfunctions are addressed in Article
20, Rule 11. The Exchange proposes to
consolidate these provisions within
Article 20, Rule 10 for the sake of intermarket consistency. Within the current
System Disruptions and Malfunctions
provisions, after an Officer determines
that a trade was clearly erroneous he
may declare the transaction null and
void or modify the trade to attempt to
achieve and equitable rectification of
the error. The proposed Rule eliminates
the Exchange’s ability to modify a
clearly erroneous execution. The
Exchange must either uphold or nullify
the execution based upon the findings
of the Officer reviewing the execution.
The proposed Rule provides that, in
the event of a disruption or a
malfunction, an Officer of the Exchange
or other senior level employee designee
will rely on the proposed numerical
guidelines in determining whether an
execution is clearly erroneous.
However, the Officer or senior level
employee may also use a lower
Numerical Guideline if necessary to
maintain a fair and orderly market,
protect investors, and protect the public
interest. The proposed rule also adds
that actions taken under these
circumstances must be taken within 30
Initial Determination
The Exchange proposes to remove
language in Article 20, Rules 10 and 11
that currently allows an Officer to
modify one or more of the terms of a
transaction under review. Under the
proposed rule, the Officer of the
Exchange will only have the authority to
break the trades or rule to let the trades
stand. This change attempts to remove
the subjectivity from the rule that is
necessitated by an adjustment.
The Exchange also proposes adding
language stating that a determination
shall be made generally within 30
minutes of receipt of the complaint, but
in no case later than the start of Regular
Trading on the following trading day.
Rulings made outside of 30 minutes by
an Officer will not fail for lack of
timeliness. The guideline simply
provides participants an appropriate
expectation that a ruling will generally
be made within 30 minutes, and in no
case later than the start of Regular
Trading on the following trading day.
Appeals
The Exchange proposes to amend the
appeals procedure for trades that are
deemed to be clearly erroneous. First,
the Exchange will no longer accept
appeal requests via facsimile or in
writing (i.e., hand delivered). Similar to
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minutes of detection of the erroneous
transaction in the ordinary case, and by
no later than the start of the Regular
Trading Session on the day following
the date of the execution under review
when extraordinary circumstances exist.
Officers Acting on Their Own Motion
The Exchange proposes to add a
section to the Rule that will grant
Officers (or such other senior level
employee designee) the ability to act on
their own motion to review potentially
erroneous executions. Under the current
rule, Officers have the ability to act
upon their own motion only in the
event of a system disruption or
malfunction, or when extraordinary
market conditions or other
circumstances exist in which the
nullification or modification of
transactions may be necessary for the
maintenance of a fair and orderly
market or the protection of investors
and the public interest. The proposed
rule would allow an Officer of the
Exchange or other senior level employee
designee to review executions and rely
on the Numerical Guidelines, under any
circumstance. In extraordinary
circumstances an Officer (or such other
senior level employee designee) may
apply a lower Numerical Guideline if it
is determined that such action is
necessary to maintain a fair and orderly
market or protect investors and the
public interest. In some instances the
Exchange may detect a single execution
that breaches the Numerical Guidelines
but is not the subject of a ruling request.
This provision gives the Exchange the
ability to review such executions.
Additionally, in practice clearly
erroneous executions commonly involve
multiple parties and multiple
executions. In such instances, all
affected parties may not request a
ruling. The Exchange proposes this
provision to permit an Officer (or such
other senior level employee designee) to
rule on a group of transactions related
to the same occurrence or event as a
whole, without a formal request for a
ruling from every affected party.
Trade Nullification for UTP Securities
That Are Subject of Initial Public
Offerings
The proposed rule also provides a
specific policy on trade nullification
and for UTP securities that are subject
to initial public offerings. Under the
proposed rule, Officers must either
declare an opening transaction null and
void or decline to take action, but can
no longer be adjusted. Furthermore, the
proposed rule requires that, in
extraordinary circumstances, the
reviewing Officer (or such other senior
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level employee designee) may take
action by no later than the start of
Regular Trading on the day following
the date of the execution under review.
Effective Date
As noted above, the proposed rule
amendments are submitted as part of a
marketwide initiative to standardize the
various clearly erroneous rules of
national securities exchanges. As such,
the exchanges have agreed to a
coordinated implementation and
effective date of October 5, 2009 for
these changes.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act in general,10 and
furthers the objectives of Section 6(b)(5)
in particular,11 in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transaction in securities, to
remove impediments and perfect the
mechanisms of a free and open market,
and, in general, to protect investors and
the public interest. The proposed rule
change provides transparency and
finality for participants and creates
consistent results across U.S. equities
exchanges with respect to clearly
erroneous executions. This proposed
change further promotes the
maintenance of a fair and orderly
market, the protection of investors and
the protection of 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.
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.
mstockstill on DSKH9S0YB1PROD with NOTICES
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
10 15
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Nov<24>2008
18:31 Oct 07, 2009
Jkt 220001
become effective pursuant to Section
19(b)(3)(A) of the Act 12 and Rule 19b–
4(f)(6) thereunder.13
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 14 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6) 15
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange requests
that the Commission waive the 30-day
operative delay so that it may
implement the new rule on October 5,
2009, the same date as the other equities
exchanges. The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest
because it will allow the Exchange to
begin applying the new rule on the same
date as the other equities exchanges.16
Application of the new rule on this date
should help foster transparency and
consistency among those exchanges that
adopt clearly erroneous execution rules
substantially similar to those previously
approved by the Commission.17 For
these reasons, the Commission
designates that the proposed rule
change become operative on October 5,
2009.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
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:
12 15
U.S.C. 78s(b)(3)(A).
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 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 Exchange has satisfied this
requirement.
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6).
16 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposal’s impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
17 See Securities Exchange Act Release No. 60706
(September 22, 2009), 74 FR 49416 (September 28,
2009) (NYSEArca–2009–36).
13 17
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
51939
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CHX–2009–11 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–CHX–2009–11. This file
number should be included on the
subject line if e-mail 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 (https://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 inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 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 publicly available. All
submissions should refer to File
Number SR–CHX–2009–11 and should
be submitted on or before October 29,
2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–24242 Filed 10–7–09; 8:45 am]
BILLING CODE 8011–01–P
18 17
E:\FR\FM\08OCN1.SGM
CFR 200.30–3(a)(12).
08OCN1
]]>Agencies
[Federal Register Volume 74, Number 194 (Thursday, October 8, 2009)]
[Notices]
[Pages 51935-51939]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-24242]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60775; File No. SR-CHX-2009-11]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposal Relating to
Exchange Rule Regarding Clearly Erroneous Transactions
October 2, 2009.
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 October 1, 2009, Chicago Stock Exchange, Inc. (``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. CHX has
designated the proposed rule change as constituting a rule change under
Rule 19b-4(f)(6) under the Act,\3\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
[[Page 51936]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CHX proposes to amend its rules regarding clearly erroneous
transactions. The text of this proposed rule change is available on the
Exchange's Web site at (https://www.chx.com) and in 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 CHX included statements
concerning the purpose of and basis for the proposed rule changes and
discussed any comments it received regarding the proposal. 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 modify Article 20, Rules 10 and 11 in
order to improve the Exchange's policies and procedures regarding
clearly erroneous executions. The proposed changes are part of a
market-wide effort designed to provide transparency and finality with
respect to clearly erroneous executions. This effort seeks to achieve
consistent results for participants across U.S. equities exchanges
while maintaining a fair and orderly market, protecting investors and
protecting the public interest. The proposed changes are more fully
discussed below.
Definition
The Exchange will maintain the meaning of the definition of a
clearly erroneous execution, but proposes to add clarifying language
with respect to cancelled trades. The proposed change identifies that a
transaction made in clearly erroneous error and agreed to be canceled
by both parties or determined by the Exchange to be clearly erroneous
will be removed ``from the Consolidated Tape.''\4\ A trade will only be
removed from the Consolidated Tape when the determination is deemed
final and any applicable appeals have been exhausted.
---------------------------------------------------------------------------
\4\ For purposes of this Rule, ``removed from the Consolidate
Tape'' means that a subsequent message will be sent to the
Consolidated Tape indicating that a previously executed trade has
been cancelled.
---------------------------------------------------------------------------
Participant Initiated Review Requests
The Exchange proposes to amend Article 20, Rule 10(b) to update the
procedures for requesting a review of a clearly erroneous transaction.
First, the proposed rule would require that requests for review be made
only by electronic mail (``email'') or other electronic means specified
from time to time by the Exchange. Under its current rules, the
Exchange also allows requests to be made via facsimile. Requiring
requests for review to be made via email creates a standard format that
can easily be logged and tracked. The Exchange will republish the email
address or other electronic means to be used for all clearly erroneous
filings in a circular distributed to Participants.\5\
---------------------------------------------------------------------------
\5\ Article 1, Rule 1(s) defines a Participant as any
Participant Firm that holds a valid Trading Permit.
---------------------------------------------------------------------------
The amended rule specifies that requests for review must be
received by the Exchange within 30 minutes of the execution time for
orders initially routed to and executed on the Exchange. The Exchange
proposes that Participants submit certain essential identifying
information with the request including the time of the transaction(s),
security symbol(s), number of shares, price(s), side (bought or sold),
and factual basis for believing that the trade is clearly erroneous.
The current rule already requires requests for review to be received
within 30 minutes of the execution, but only requires submission of
such information which is ``reasonably necessary for use by the
Exchange in resolving the matter.''
The proposed rule also requires the Exchange to notify the
counterparty to a trade upon receipt of a timely filed request for
review that satisfies the numerical guidelines set forth within the
Rule. This proposed language requires notice only when a request is
filed in a timely manner and satisfies the Numerical Guidelines. This
change alleviates any potential burden on the Exchange of notifying the
counterparty when a request for review does not merit a ruling.
The Exchange proposes to amend Article 20, Rule 10 to allow an
Officer of the Exchange or such other employee designee (``Officer'')
of CHX to request additional information from each party to a
transaction under review. Parties to the review will have 30 minutes
from the time of the request to provide additional supporting
information.
Routed Executions
The Exchange proposes to give other market centers an additional 30
minutes from the receipt of their participant's timely filing to
request a ruling, but no longer than 60 minutes from the time of the
execution under review. This provision accounts for those executions
initially directed to an away market center and subsequently routed by
that away market center to the Exchange.
For example, assume an order is initially routed by a participant
to Market Center A and subsequently routed to the CHX where the order
is executed at a price outside of the Numerical Guidelines. This
provision generally requires Market Center A to file with the Exchange
within 30 minutes from the time it receives its participant's timely
filed request for review. This provision caps the filing deadline for
an away market center at 60 minutes from the time of the execution
under review.
Threshold Factors
Currently, the Exchange's Clearly Erroneous Execution rule
specifies numeric guidelines for determining what constitutes a clearly
erroneous transaction. These guidelines are an offset of at least
twenty percent (20%) from the prevailing National Best Bid or Offer
(``NBBO'') at the time of trade execution for transactions under $1.
For transactions at or exceeding $1, the relevant NBBO offset is ten
percent (10%). The Exchange proposes to modify its existing numerical
thresholds to conform to those being adopted by other trading centers.
Numerical Guidelines
The proposed numerical guidelines state that a transaction executed
during the Early Session, \6\ Regular Trading Session ,\7\ Late Trading
Session \8\ or Late Crossing Session \9\ may be found to be clearly
erroneous only if the price of the transaction to buy is greater, or
less in the case of a sale, than the reference price by an amount that
equals or exceeds the numerical guidelines for a particular transaction
category. The Reference Price shall be equal to the Consolidated Last
Sale immediately prior to the execution under review, unless unusual
circumstances are present. The proposed guidelines for sales greater
than $0.00 up to and including $25.00 are 10% for the Regular Trading
Session and 20% for the Early, Late Trading and Late Crossing Sessions.
The proposed guidelines for sales greater than $25.00
[[Page 51937]]
up to and including $50.00 are 5% for the Regular Trading Session and
10% for the Early, Late Trading and Late Crossing Sessions. The
proposed guidelines for sales greater than $50.00 are 3% for the
Regular Trading Session and 6% for the Early, Late Trading and Late
Crossing Sessions. A filing involving five or more securities by the
same ETP Holder will be aggregated into a single filing called a
``Multi-Stock Event.'' In the case of a Multi-Stock Event, the proposed
guidelines are 10% for the Regular Trading Session and 10% for the
Early, Late Trading and Late Crossing Sessions. In the case of
Leveraged ETF/ETN securities, the above guidelines are to be multiplied
by the leverage multiplier of the security. Executions that do not meet
or exceed the Numerical Guidelines will not be eligible for review
under this section. The following chart summarizes the proposed
Numerical Guidelines.
---------------------------------------------------------------------------
\6\ The Early Session '' shall begin at 6 a.m. and shall end at
8:30 a.m. [Central Time] and shall end at 8:30 a.m. [Central
Time].'' Article 20, Rule 1(b).
\7\ The Regular Trading Session ``shall begin at 8:30 a.m.
[Central Time] and shall end at 3 p.m. each day for all
securities.'' Article 20, Rule 1(b).
\8\ The Late Trading Session begins ``immediately after the
close of the second session and shall end at 3:15 p.m. [Central
Time].'' Article 20, Rule 1(b).
\9\ The Late Crossing Session begins ``immediately after the
close of the third session and shall end at 4 p.m. [Central Time].''
Article 20, Rule 1(b).
----------------------------------------------------------------------------------------------------------------
Early, Late Trading and Late
Regular Trading Session Numerical Crossing Session Numerical
Reference price: Consolidated Last Sale Guidelines (subject transaction's Guidelines (subject
% difference from the transaction's % difference from
Consolidated Last Sale): the Consolidated Last Sale):
----------------------------------------------------------------------------------------------------------------
Greater than $0.00 up to and including 10%.............................. 20%.
$25.00.
Greater than $25.00 up to and including 5%............................... 10%.
$50.00.
Greater than $50.00........................ 3%............................... 6%.
Multi-Stock Event--Filings involving five 10%.............................. 10%.
or more securities by the same ETP Holder
will be aggregated into a single filing.
Leveraged ETF/ETN securities............... Regular Trading Session Numerical Regular Trading Session
Guidelines multiplied by the Numerical Guidelines multiplied
leverage multiplier (i.e., 2x). by the leverage multiplier
(i.e., 2x).
----------------------------------------------------------------------------------------------------------------
Establishing Numerical Guidelines which are consistent with other
market centers within the Rule brings regulatory transparency and
consistency in the application of the rules of the Exchange. These
Numerical Guidelines represent the general consensus approach and were
developed based on the collective experiences of a market-wide group.
The Exchange believes that the Thresholds established are fair and
appropriate and apply evenly to all participants.
Unusual Circumstances
The CHX further proposes that in Unusual Circumstances the Exchange
may, in its discretion and with a view toward maintaining a fair and
orderly market, use a Reference Price other than the consolidated last
sale. Unusual Circumstances may include periods of extreme market
volatility, sustained illiquidity, or widespread system issues. Other
Reference Prices that the Exchange may use would include the
consolidated inside price, the consolidated opening price, the
consolidated prior close, or the consolidated last sale prior to a
series of executions.
The following example explains the use of a Reference Price equal
to the consolidated last sale prior to a series of executions.
ABC has a consolidated last sale of $10.00. During the Regular
Trading Session Customer A enters a market order to buy 10,000
shares, although it had intended a market order for 1,000 shares.
The size of the order is such that the order sweeps the CHX Book,
which reflects 1,000 shares of liquidity offered at each of the
following prices. Executions occur, moving through the depth of
Book, as follows:
Trade 1--1000 shares @ $10.00 (9000 remaining)
Trade 2--1000 shares @ $10.20 (8000 remaining)
Trade 3--1000 shares @ $10.40 (7000 remaining)
Trade 4--1000 shares @ $10.60 (6000 remaining)
Trade 5--1000 shares @ $10.80 (5000 remaining)
Trade 6--1000 shares @ $11.00 (4000 remaining)
Trade 7--1000 shares @ $11.20 (3000 remaining)
Trade 8--1000 shares @ $11.40 (2000 remaining)
Trade 9--1000 shares @ $11.60 (1000 remaining)
Trade 10--1000 shares @ $11.80 (complete)
Thus, to be eligible for review, a transaction must be at a price
that is at least 10% higher than the consolidated last sale prior to
the series of executions. Customer A could request a ruling for trades
6 through 10, priced at $11.00 and above, but trades
1 through 5 would not be eligible for review.
Under the proposed rule the Exchange may also use a higher
numerical guideline if, after market participants have been alerted to
erroneous activity, the price of the security returns toward its prior
trading range but continues to trade beyond the price it would have
normally been busted.
Joint Market Rulings
In the interest of achieving consistency across markets, the
Exchange proposes that, in events that involve other markets, the
Exchange would have the ability to use a different Reference Price and/
or Numerical Guideline. In these instances the Reference Price would be
determined based on a consensus among the Exchanges where the
transactions occurred. Furthermore, when a ruling is made across
markets, the Exchange may determine that the ruling is not eligible for
appeal because immediate finality is necessary to maintain a fair and
orderly market and to protect investors and the public interest.
Additional Factors
The proposed amendments to Article 20, Rules 10 and 11 also
enumerate some additional factors that an Officer may consider when
determining whether an execution is clearly erroneous. These factors
include, but are not limited to, system malfunctions or disruptions,
volume and volatility for the security, derivative securities products
that correspond to greater than 100% in the direction of a tracking
index, news released for the security, whether trading in the security
was recently halted/resumed, whether the security is an IPO, whether
the security was subject to a stock-split, reorganization, or other
corporate action, overall market conditions, Late Session executions,
validity of the consolidated tapes trades and quotes, consideration of
primary market indications, and executions inconsistent with the
trading pattern in the stock. Each additional factor shall be
considered with a view toward maintaining a fair and orderly market,
the protection of investors and the public interest.
Numerical Guidelines Applicable to Volatile Market Opens
The Exchange proposes to give itself the ability to expand the
Numerical Guidelines applicable to transactions occurring between 9:30
a.m. and 10 a.m. ET based on the disseminated value of the S & P 500
Futures at 9:15 a.m. ET. When the S&P Futures are up or down from 3% up
to but not including 5% at
[[Page 51938]]
9:15 a.m., the Numerical Guidelines are doubled. When the S&P Futures
are up or down 5% or greater at 9:15 a.m., the Numerical Guidelines are
tripled. The Exchange believes that the S&P 500 futures contract is an
appropriate and reliable barometer of market activity prior to the
market opening due to its broad based market coverage and deep
liquidity. Using the S&P 500 Futures disseminated value at 9:15 a.m. as
the barometer of market activity, the Exchange is providing a
transparent means of offering adjusted guidelines in times of volatile
market activity.
Outlier Transactions
The proposed amendments to Article 20, Rule 10 provide that an
Officer of the Exchange may consider requests for review received after
thirty minutes, but not longer than sixty minutes after the execution
in question in the case of an Outlier Transaction. An Outlier
Transaction is a transaction where, (1) the execution price of the
security is greater than three times the current Numerical Guidelines,
or (2) the execution price of the security breaches the 52-week high or
low, in which case the Exchange may consider Additional Factors to
determine if the transaction qualifies for review or if the Exchange
shall decline to act.
Review Procedures
Initial Determination
The Exchange proposes to remove language in Article 20, Rules 10
and 11 that currently allows an Officer to modify one or more of the
terms of a transaction under review. Under the proposed rule, the
Officer of the Exchange will only have the authority to break the
trades or rule to let the trades stand. This change attempts to remove
the subjectivity from the rule that is necessitated by an adjustment.
The Exchange also proposes adding language stating that a
determination shall be made generally within 30 minutes of receipt of
the complaint, but in no case later than the start of Regular Trading
on the following trading day. Rulings made outside of 30 minutes by an
Officer will not fail for lack of timeliness. The guideline simply
provides participants an appropriate expectation that a ruling will
generally be made within 30 minutes, and in no case later than the
start of Regular Trading on the following trading day.
Appeals
The Exchange proposes to amend the appeals procedure for trades
that are deemed to be clearly erroneous. First, the Exchange will no
longer accept appeal requests via facsimile or in writing (i.e., hand
delivered). Similar to the proposed language for an initial request for
a ruling, all appeal requests must be made via email.
The current rule provides that the Exchange shall review and render
a decision upon an appeal without specifying any particular timeframe
in which a decision would be provided by the Exchange. The proposed
rule offers more definite guidelines to ensure the expedient resolution
of appeals. It requires the Exchange to review appeals as soon as
practicable, but generally on the same day as the executions under
review. Appeals received between 2 p.m. CT and the close of trading in
the Late Crossing Session should be made as soon as practicable, but in
no case later than the trading day following the date of the execution
under review. This revised provision provides participants a reasonable
expectation of when a ruling on appeal will generally be made.
Further, the proposed rule declares that any determination made by
an Officer or by the Committee on Exchange Procedure shall be rendered
without prejudice as to the right of the parties to the transaction to
submit their dispute to arbitration. This provision simply clarifies
the fact that nothing in the proposed rule limits or impedes the rights
of the parties to arbitrate their dispute.
System Disruption and Malfunctions
Currently, Systems Disruptions and Malfunctions are addressed in
Article 20, Rule 11. The Exchange proposes to consolidate these
provisions within Article 20, Rule 10 for the sake of inter-market
consistency. Within the current System Disruptions and Malfunctions
provisions, after an Officer determines that a trade was clearly
erroneous he may declare the transaction null and void or modify the
trade to attempt to achieve and equitable rectification of the error.
The proposed Rule eliminates the Exchange's ability to modify a clearly
erroneous execution. The Exchange must either uphold or nullify the
execution based upon the findings of the Officer reviewing the
execution.
The proposed Rule provides that, in the event of a disruption or a
malfunction, an Officer of the Exchange or other senior level employee
designee will rely on the proposed numerical guidelines in determining
whether an execution is clearly erroneous. However, the Officer or
senior level employee may also use a lower Numerical Guideline if
necessary to maintain a fair and orderly market, protect investors, and
protect the public interest. The proposed rule also adds that actions
taken under these circumstances must be taken within 30 minutes of
detection of the erroneous transaction in the ordinary case, and by no
later than the start of the Regular Trading Session on the day
following the date of the execution under review when extraordinary
circumstances exist.
Officers Acting on Their Own Motion
The Exchange proposes to add a section to the Rule that will grant
Officers (or such other senior level employee designee) the ability to
act on their own motion to review potentially erroneous executions.
Under the current rule, Officers have the ability to act upon their own
motion only in the event of a system disruption or malfunction, or when
extraordinary market conditions or other circumstances exist in which
the nullification or modification of transactions may be necessary for
the maintenance of a fair and orderly market or the protection of
investors and the public interest. The proposed rule would allow an
Officer of the Exchange or other senior level employee designee to
review executions and rely on the Numerical Guidelines, under any
circumstance. In extraordinary circumstances an Officer (or such other
senior level employee designee) may apply a lower Numerical Guideline
if it is determined that such action is necessary to maintain a fair
and orderly market or protect investors and the public interest. In
some instances the Exchange may detect a single execution that breaches
the Numerical Guidelines but is not the subject of a ruling request.
This provision gives the Exchange the ability to review such
executions. Additionally, in practice clearly erroneous executions
commonly involve multiple parties and multiple executions. In such
instances, all affected parties may not request a ruling. The Exchange
proposes this provision to permit an Officer (or such other senior
level employee designee) to rule on a group of transactions related to
the same occurrence or event as a whole, without a formal request for a
ruling from every affected party.
Trade Nullification for UTP Securities That Are Subject of Initial
Public Offerings
The proposed rule also provides a specific policy on trade
nullification and for UTP securities that are subject to initial public
offerings. Under the proposed rule, Officers must either declare an
opening transaction null and void or decline to take action, but can no
longer be adjusted. Furthermore, the proposed rule requires that, in
extraordinary circumstances, the reviewing Officer (or such other
senior
[[Page 51939]]
level employee designee) may take action by no later than the start of
Regular Trading on the day following the date of the execution under
review.
Effective Date
As noted above, the proposed rule amendments are submitted as part
of a marketwide initiative to standardize the various clearly erroneous
rules of national securities exchanges. As such, the exchanges have
agreed to a coordinated implementation and effective date of October 5,
2009 for these changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general,\10\ and furthers the
objectives of Section 6(b)(5) in particular,\11\ in that it is designed
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transaction in securities, to remove impediments and perfect the
mechanisms of a free and open market, and, in general, to protect
investors and the public interest. The proposed rule change provides
transparency and finality for participants and creates consistent
results across U.S. equities exchanges with respect to clearly
erroneous executions. This proposed change further promotes the
maintenance of a fair and orderly market, the protection of investors
and the protection of the public interest.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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 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 Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \14\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \15\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay so that it may
implement the new rule on October 5, 2009, the same date as the other
equities exchanges. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because it will allow the Exchange to begin applying
the new rule on the same date as the other equities exchanges.\16\
Application of the new rule on this date should help foster
transparency and consistency among those exchanges that adopt clearly
erroneous execution rules substantially similar to those previously
approved by the Commission.\17\ For these reasons, the Commission
designates that the proposed rule change become operative on October 5,
2009.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposal's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\17\ See Securities Exchange Act Release No. 60706 (September
22, 2009), 74 FR 49416 (September 28, 2009) (NYSEArca-2009-36).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CHX-2009-11 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-CHX-2009-11. This file
number should be included on the subject line if e-mail 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 (https://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 inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 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 publicly available. All
submissions should refer to File Number SR-CHX-2009-11 and should be
submitted on or before October 29, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24242 Filed 10-7-09; 8:45 am]
BILLING CODE 8011-01-P
