Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NSX Rule 11.19 Governing Clearly Erroneous Executions, 51910-51914 [E9-24249]
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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices
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–ISE–2009–73 and should be
submitted on or before October 29,
2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–24250 Filed 10–7–09; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60762; File No. SR–NSX–
2009–05]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Amend
NSX Rule 11.19 Governing Clearly
Erroneous Executions
October 1, 2009.
mstockstill on DSKH9S0YB1PROD with NOTICES
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
September 30, 2009, the National Stock
Exchange, Inc. (‘‘Exchange’’ or ‘‘NSX’’)
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. NSX
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NSX is proposing to amend NSX Rule
11.19 governing clearly erroneous
executions.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nsx.com, at the principal
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant parts of such
statements.
1. Purpose
The Exchange proposes to amend
NSX Rule 11.19 in order to improve the
Exchange’s rule 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 Corporation 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.
ETP Holder Initiated Review Requests
The Exchange proposes to amend
NSX Rule 11.19 to update the
procedures for requesting a review of a
clearly erroneous transaction. First, the
proposed rule would require that
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.
17 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
18:31 Oct 07, 2009
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
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office of the Exchange, and at the
Commission’s Public Reference Room.
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requests for review be made only by
electronic mail (‘‘e-mail’’) or other
electronic means specified from time to
time by the Exchange. Under the current
policy, the Exchange also allows
requests to be made via telephone and
facsimile. Requiring requests for review
to be made via e-mail creates a standard
format that can easily be logged and
tracked. The Exchange will publish the
e-mail address or other electronic means
to be used for all clearly erroneous
filings in a circular distributed to Equity
Trading Permit (‘‘ETP’’) Holders.5
The Exchange further proposes 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 ETP
Holders 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
requires requests for review to be
received within 15 minutes of the
execution and does not specify what
information is required. The Exchange
believes that 30 minutes is an
appropriate time frame that offers the
requesting party sufficient time to gather
and submit all required information.
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 (‘‘Numerical Guidelines’’). This
proposed language eliminates the
requirement that counterparties be
notified of every request for a ruling and
instead requires notice only when a
request is filed in a timely manner and
satisfies the Numerical Guidelines. This
change alleviates the burden on the
Exchange of notifying the counterparty
when a request for review does not
merit a ruling.
The Exchange proposes to amend
NSX Rule 11.19 to allow an Officer of
the Exchange or such other employee
designee (‘‘Officer’’) 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.
5 NSX Rule 1.5E defines an ‘‘ETP’’ as an Equity
Trading Permit issued by the Exchange for effecting
approved securities transactions on the Exchange’s
trading facilities. An ETP may be issued to a ‘‘sole
proprietorship, partnership, corporation, limited
liability company or other organization which is a
registered broker or dealer pursuant to Section 15
of the Act, and which has been approved by the
Exchange.
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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 NSX, 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 does not
identify specific numeric guidelines for
determining what constitutes a clearly
erroneous transaction. The current rule
simply provides that ‘‘an Officer of the
Exchange or such other designee of the
Exchange shall review the transaction
under dispute and determine whether it
is clearly erroneous, with a view toward
maintaining a fair and orderly market
and the protection of investors and the
public interest.’’ 6 The Exchange
proposes adding certain numerical
thresholds to the Rule that explicitly
state what constitutes a clearly
erroneous execution.
Numerical Guidelines
The proposed numerical guidelines
state that a transaction executed during
Regular Trading Hours 7 or outside
Regular Trading Hours 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
execution time of the transaction under
review determines whether the
guidance threshold is Regular Trading
Hours or outside Regular Trading Hours.
The Reference Price shall be equal to the
Consolidated Last Sale immediately
Regular trading hours numerical guidelines
(subject transaction’s % difference from the
consolidated last sale):
Reference price: Consolidated last sale
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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Establishing Numerical Guidelines
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
NSX further proposes that in Unusual
Circumstances the Exchange may, in its
discretion and with a view toward
maintaining a fair and orderly market
and the protection of investors and the
public interest, use a Reference Price
6 NSX Rule 11.19(b)(i) (prior to the instant rule
change).
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10% ..................................................................
5% ....................................................................
3% ....................................................................
10% ..................................................................
51911
prior to the execution(s) 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 Regular
Trading Hours and 20% for outside
Regular Trading Hours. The proposed
guidelines for sales greater than $25.00
up to and including $50.00 are 5% for
Regular Trading Hours and 10% for
outside Regular Trading Hours. The
proposed guidelines for sales greater
than $50.00 are 3% for Regular Trading
Hours and 6% for outside Regular
Trading Hours. 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
Regular Trading Hours and 10% for
outside Regular Trading Hours. 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:
Outside regular trading numerical guidelines
(subject transaction’s % difference from the
consolidated last sale):
20%.
10%.
6%.
10%.
Core Trading Session Numerical Guidelines Core Trading Session Numerical Guidelines
multiplied by the leverage multiplier (i.e. 2×).
multiplied by the leverage multiplier (i.e. 2×)
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 Regular Trading Hours,
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 NSX Book, which reflects
1,000 shares of liquidity offered at each
of following prices. Executions occur,
moving through the depth of the NSX
Book, as follows:
Trade #1—1,000 shares @ $10.00 (9,000
remaining)
Trade #2—1,000 shares @ $10.20 (8,000
remaining)
Trade #3—1,000 shares @ $10.40 (7,000
remaining)
Trade #4—1,000 shares @ $10.60 (6,000
remaining)
Trade #5—1,000 shares @ $10.80 (5,000
remaining)
Trade #6—1,000 shares @ $11.00 (4,000
remaining)
Trade #7—1,000 shares @ $11.20 (3,000
remaining)
7 Regular Trading Hours begin for each security
at ‘‘8:30:00 am (Central Time) and conclude at
3:00:00 pm (Central Time).’’ NSX Rule 1.5R.
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Trade #8—1,000 shares @ $11.40 (2,000
remaining)
Trade #9—1,000 shares @ $11.60 (1,000
remaining)
Trade #10—1,000 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 broken.
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.
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Additional Factors
The proposed amendments to NSX
Rule 11.19 also enumerate some
additional factors that an officer of the
Exchange or certain other employee
designee 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,
Opening and 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
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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 the
Exchange the ability to expand the
Numerical Guidelines applicable to
transactions occurring between 9:30
a.m. and 10 a.m. (Eastern Time) 8 based
on the disseminated value of the S&P
500 Futures at 9:15 a.m. When the S&P
Futures are up or down from 3% but
less than 5% at 9:15 a.m., the Numerical
Guidelines are doubled. When the S&P
Futures are up or down 5% or more 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 NSX
Rule 11.19 provide that an Officer 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
Corporation shall decline to act.
Review Procedures
Initial Determination
The Exchange proposes removing
language that currently allows an
Officer to modify one or more of the
terms of a transaction under review.
Under the proposed rule, the Officer
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 Core
8 All
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times referenced are Eastern Time (‘‘ET’’).
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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 Hours 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. Similar to
the proposed language for an initial
request for a ruling, all appeal requests
must be made via e-mail.
The current rule provides that the
Exchange shall review and render a
decision upon an appeal within a
timeframe 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 3:00 ET and
the closing of business on the Exchange
should be made as soon as practicable,
but in no case later than the trading day
following the date of the execution
under review. Appeals will not fail for
lack of timeliness. 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 CEE Panel 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. Notwithstanding
anything to the contrary in Chapter X
(Adverse Action) of the NSX Rules, the
proposed rule provides that all
determinations by the CEE Panel shall
constitute final action by the Exchange
on the matter at issue.
System Disruption and Malfunctions
Currently, within the System
Disruptions and Malfunctions section of
the rule, after an officer of the Exchange
or such other senior level employee
designee (‘‘Senior 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
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clearly erroneous execution. The
Exchange must either uphold or nullify
the execution based upon the findings
of the Senior Officer reviewing the
execution.
The proposed Rule provides that, in
the event of a disruption or a
malfunction, a Senior Officer will rely
on the proposed numerical guidelines in
determining whether an execution is
clearly erroneous. However, the Senior
Officer 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 Core Trading Session on the
day following the date of the execution
under review when extraordinary
circumstances exist.
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Officers Acting on Their Own Motion
The Exchange proposes to add a
section to the Rule that will grant Senior
Officers the ability to act on their own
motion to review potentially erroneous
executions. Under the current rule,
Senior Officers have the ability to act
upon their own motion only in the
event of a system disruption or
malfunction. The proposed rule would
allow a Senior Officer to review
executions and rely on the Numerical
Guidelines, under any circumstance. In
extraordinary circumstances a Senior
Officer 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 a Senior Officer 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 to Initial Public
Offerings
The proposed rule also modifies
NSX’s policy on trade nullification and
for UTP securities that are subject to
initial public offerings. Under the
proposed rule, Senior Officers must
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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 Senior Officer may take
action by no later than the start of Core
Trading on the day following the date of
the execution under review.
Effective Date
The Exchange requests that the
effective date for the instant rule change
be October 5, 2009.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) of the
Act,9 in general, and furthers the
objectives of Section 6(b)(5) 10 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. 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 Exchange Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
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
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
10 15
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51913
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 11 and Rule 19b–
4(f)(6) thereunder.12
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 13 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6) 14
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.15
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.16 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.
11 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.
13 17 CFR 240.19b–4(f)(6).
14 17 CFR 240.19b–4(f)(6).
15 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).
16 See Securities Exchange Act Release No. 60706
(September 22, 2009) 74 FR 49416 (September 28,
2009) (NYSEArca-2009–36).
12 17
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Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
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–NSX–2009–05 on the
subject line.
Paper Comments
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• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
[Release No. 34–60760; File No. SR–CBOE–
2009–071]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Regarding the CBSX
Obvious Error Rule
October 1, 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
September 25, 2009, the Chicago Board
All submissions should refer to File
Options Exchange, Incorporated
Number SR–NSX–2009–05. This file
(‘‘Exchange’’ or ‘‘CBOE’’) filed with the
number should be included on the
Securities and Exchange Commission
subject line if e-mail is used. To help the (‘‘Commission’’) the proposed rule
Commission process and review your
change as described in Items I and II
comments more efficiently, please use
below, which Items have been prepared
only one method. The Commission will by the Exchange. CBOE has designated
post all comments on the Commission’s the proposed rule change as constituting
Internet Web site (https://www.sec.gov/
a rule change under Rule 19b–4(f)(6)
rules/sro.shtml). Copies of the
under the Act,3 which renders the
submission, all subsequent
proposal effective upon filing with the
amendments, all written statements
Commission. The Commission is
with respect to the proposed rule
publishing this notice to solicit
change that are filed with the
comments on the proposed rule change
Commission, and all written
from interested persons.
communications relating to the
I. Self-Regulatory Organization’s
proposed rule change between the
Commission and any person, other than Statement of the Terms of Substance of
the Proposed Rule Change
those that may be withheld from the
public in accordance with the
The Exchange proposes to modify the
provisions of 5 U.S.C. 552, will be
CBOE Stock Exchange (‘‘CBSX’’)
available for inspection and copying in
obvious error rule. The text of the
the Commission’s Public Reference
proposed rule change is available on the
Room, 100 F Street, NE., Washington,
Exchange’s Web site (https://
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m. www.cboe.org/Legal), at the Exchange’s
Office of the Secretary and at the
Copies of such filing also will be
Commission.
available for inspection and copying at
the principal office of the Exchange. All II. Self-Regulatory Organization’s
comments received will be posted
Statement of the Purpose of, and
without change; the Commission does
Statutory Basis for, the Proposed Rule
not edit personal identifying
Change
information from submissions. You
In its filing with the Commission, the
should submit only information that
you wish to make publicly available. All self-regulatory organization included
statements concerning the purpose of
submissions should refer to File
and basis for the proposed rule change
Number SR–NSX–2009–05 and should
and discussed any comments it received
be submitted on or before October 29,
on the proposed rule change. The text
2009.
of those statements may be examined at
For the Commission, by the Division of
the places specified in Item IV below.
Trading and Markets, pursuant to delegated
The Exchange has prepared summaries,
17
authority.
set forth in sections A, B, and C below,
Florence E. Harmon,
of the most significant parts of such
Deputy Secretary.
statements.
[FR Doc. E9–24249 Filed 10–7–09; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
CFR 200.30–3(a)(12).
VerDate Nov<24>2008
18:31 Oct 07, 2009
Jkt 220001
PO 00000
Frm 00085
Fmt 4703
1. Purpose
The Exchange proposes to amend
Rule 52.4 in order to improve the CBSX
rule 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.
As proposed, the term ‘‘clearly
erroneous’’ would be defined as when
there is an obvious error in any term,
such as price, number of shares or other
unit of trading, or identification of the
security. Further, a transaction made in
clearly erroneous error and cancelled by
both parties or determined by CBSX to
be clearly erroneous will be removed
from the Consolidated Tape. A trade
will only be removed from the
Consolidated Tape when the
determination is deemed final and any
applicable appeals have been exhausted.
Under the proposed rule, a CBSX
Trader 4 that receives an execution on
an order that was submitted erroneously
to CBSX for its own or customer account
may request that CBSX review the
transaction. One or more senior level
officials of CBSX designated by the
President (‘‘Official’’) shall review the
transaction under dispute and
determine whether it is clearly
erroneous, with a view toward
maintaining a fair and orderly market
and the protection of investors and the
public interest. Such request for review
shall be made in writing via e-mail or
other electronic means specified from
time to time by CBSX in a circular
distributed to CBSX Traders. Requests
for review must be received within
thirty (30) minutes of execution time
and shall include information
concerning 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. Upon
receipt of a timely filed request that
satisfies the numerical guidelines set
forth in paragraph (c)(1) of the Rule, the
counterparty to the trade shall be
notified by CBSX as soon as practicable,
4 A CBSX Trader is defined as an individual who
or organization which has the right to trade on
CBSX (See Rule 50.1).
2 17
17 17
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Sfmt 4703
E:\FR\FM\08OCN1.SGM
08OCN1
]]>Agencies
[Federal Register Volume 74, Number 194 (Thursday, October 8, 2009)]
[Notices]
[Pages 51910-51914]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-24249]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60762; File No. SR-NSX-2009-05]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend NSX Rule 11.19 Governing Clearly Erroneous Executions
October 1, 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 September 30, 2009, the National Stock Exchange, Inc. (``Exchange''
or ``NSX'') 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. NSX 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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NSX is proposing to amend NSX Rule 11.19 governing clearly
erroneous executions.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nsx.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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant 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 NSX Rule 11.19 in order to improve
the Exchange's rule 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 Corporation 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.
---------------------------------------------------------------------------
ETP Holder Initiated Review Requests
The Exchange proposes to amend NSX Rule 11.19 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 (``e-mail'') or other electronic means
specified from time to time by the Exchange. Under the current policy,
the Exchange also allows requests to be made via telephone and
facsimile. Requiring requests for review to be made via e-mail creates
a standard format that can easily be logged and tracked. The Exchange
will publish the e-mail address or other electronic means to be used
for all clearly erroneous filings in a circular distributed to Equity
Trading Permit (``ETP'') Holders.\5\
---------------------------------------------------------------------------
\5\ NSX Rule 1.5E defines an ``ETP'' as an Equity Trading Permit
issued by the Exchange for effecting approved securities
transactions on the Exchange's trading facilities. An ETP may be
issued to a ``sole proprietorship, partnership, corporation, limited
liability company or other organization which is a registered broker
or dealer pursuant to Section 15 of the Act, and which has been
approved by the Exchange.
---------------------------------------------------------------------------
The Exchange further proposes 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 ETP Holders 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 requires requests for review to be received within 15
minutes of the execution and does not specify what information is
required. The Exchange believes that 30 minutes is an appropriate time
frame that offers the requesting party sufficient time to gather and
submit all required information.
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 (``Numerical Guidelines''). This proposed language eliminates the
requirement that counterparties be notified of every request for a
ruling and instead requires notice only when a request is filed in a
timely manner and satisfies the Numerical Guidelines. This change
alleviates the burden on the Exchange of notifying the counterparty
when a request for review does not merit a ruling.
The Exchange proposes to amend NSX Rule 11.19 to allow an Officer
of the Exchange or such other employee designee (``Officer'') 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.
[[Page 51911]]
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 NSX, 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 does not
identify specific numeric guidelines for determining what constitutes a
clearly erroneous transaction. The current rule simply provides that
``an Officer of the Exchange or such other designee of the Exchange
shall review the transaction under dispute and determine whether it is
clearly erroneous, with a view toward maintaining a fair and orderly
market and the protection of investors and the public interest.'' \6\
The Exchange proposes adding certain numerical thresholds to the Rule
that explicitly state what constitutes a clearly erroneous execution.
---------------------------------------------------------------------------
\6\ NSX Rule 11.19(b)(i) (prior to the instant rule change).
---------------------------------------------------------------------------
Numerical Guidelines
The proposed numerical guidelines state that a transaction executed
during Regular Trading Hours \7\ or outside Regular Trading Hours 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 execution time of the
transaction under review determines whether the guidance threshold is
Regular Trading Hours or outside Regular Trading Hours. The Reference
Price shall be equal to the Consolidated Last Sale immediately prior to
the execution(s) 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 Regular Trading Hours and 20% for outside
Regular Trading Hours. The proposed guidelines for sales greater than
$25.00 up to and including $50.00 are 5% for Regular Trading Hours and
10% for outside Regular Trading Hours. The proposed guidelines for
sales greater than $50.00 are 3% for Regular Trading Hours and 6% for
outside Regular Trading Hours. 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 Regular Trading Hours and
10% for outside Regular Trading Hours. 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:
---------------------------------------------------------------------------
\7\ Regular Trading Hours begin for each security at ``8:30:00
am (Central Time) and conclude at 3:00:00 pm (Central Time).'' NSX
Rule 1.5R.
------------------------------------------------------------------------
Regular trading Outside regular
hours numerical trading numerical
guidelines (subject guidelines (subject
Reference price: transaction's % transaction's %
Consolidated last sale difference from the difference from the
consolidated last consolidated last
sale): sale):
------------------------------------------------------------------------
Greater than $0.00 up to and 10%................. 20%.
including $25.00.
Greater than $25.00 up to 5%.................. 10%.
and including $50.00.
Greater than $50.00......... 3%.................. 6%.
Multi-Stock Event--Filings 10%................. 10%.
involving five or more
securities by the same ETP
Holder will be aggregated
into a single filing.
Leveraged ETF/ETN securities Core Trading Session Core Trading Session
Numerical Numerical
Guidelines Guidelines
multiplied by the multiplied by the
leverage multiplier leverage multiplier
(i.e. 2x). (i.e. 2x)
------------------------------------------------------------------------
Establishing Numerical Guidelines 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
NSX further proposes that in Unusual Circumstances the Exchange
may, in its discretion and with a view toward maintaining a fair and
orderly market and the protection of investors and the public interest,
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 Regular Trading
Hours, 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 NSX Book, which reflects 1,000 shares
of liquidity offered at each of following prices. Executions occur,
moving through the depth of the NSX Book, as follows:
Trade 1--1,000 shares @ $10.00 (9,000 remaining)
Trade 2--1,000 shares @ $10.20 (8,000 remaining)
Trade 3--1,000 shares @ $10.40 (7,000 remaining)
Trade 4--1,000 shares @ $10.60 (6,000 remaining)
Trade 5--1,000 shares @ $10.80 (5,000 remaining)
Trade 6--1,000 shares @ $11.00 (4,000 remaining)
Trade 7--1,000 shares @ $11.20 (3,000 remaining)
[[Page 51912]]
Trade 8--1,000 shares @ $11.40 (2,000 remaining)
Trade 9--1,000 shares @ $11.60 (1,000 remaining)
Trade 10--1,000 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 broken.
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 NSX Rule 11.19 also enumerate some
additional factors that an officer of the Exchange or certain other
employee designee 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, Opening and 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 the Exchange the ability to expand
the Numerical Guidelines applicable to transactions occurring between
9:30 a.m. and 10 a.m. (Eastern Time) \8\ based on the disseminated
value of the S&P 500 Futures at 9:15 a.m. When the S&P Futures are up
or down from 3% but less than 5% at 9:15 a.m., the Numerical Guidelines
are doubled. When the S&P Futures are up or down 5% or more 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.
---------------------------------------------------------------------------
\8\ All times referenced are Eastern Time (``ET'').
---------------------------------------------------------------------------
Outlier Transactions
The proposed amendments to NSX Rule 11.19 provide that an Officer
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 Corporation shall decline to
act.
Review Procedures
Initial Determination
The Exchange proposes removing language that currently allows an
Officer to modify one or more of the terms of a transaction under
review. Under the proposed rule, the Officer 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 Core 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 Hours 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. Similar to the proposed
language for an initial request for a ruling, all appeal requests must
be made via e-mail.
The current rule provides that the Exchange shall review and render
a decision upon an appeal within a timeframe 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 3:00 ET and the
closing of business on the Exchange should be made as soon as
practicable, but in no case later than the trading day following the
date of the execution under review. Appeals will not fail for lack of
timeliness. 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 CEE Panel 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. Notwithstanding anything to the contrary in
Chapter X (Adverse Action) of the NSX Rules, the proposed rule provides
that all determinations by the CEE Panel shall constitute final action
by the Exchange on the matter at issue.
System Disruption and Malfunctions
Currently, within the System Disruptions and Malfunctions section
of the rule, after an officer of the Exchange or such other senior
level employee designee (``Senior 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
[[Page 51913]]
clearly erroneous execution. The Exchange must either uphold or nullify
the execution based upon the findings of the Senior Officer reviewing
the execution.
The proposed Rule provides that, in the event of a disruption or a
malfunction, a Senior Officer will rely on the proposed numerical
guidelines in determining whether an execution is clearly erroneous.
However, the Senior Officer 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 Core 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
Senior Officers the ability to act on their own motion to review
potentially erroneous executions. Under the current rule, Senior
Officers have the ability to act upon their own motion only in the
event of a system disruption or malfunction. The proposed rule would
allow a Senior Officer to review executions and rely on the Numerical
Guidelines, under any circumstance. In extraordinary circumstances a
Senior Officer 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 a Senior Officer 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 to Initial
Public Offerings
The proposed rule also modifies NSX's policy on trade nullification
and for UTP securities that are subject to initial public offerings.
Under the proposed rule, Senior 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 Senior Officer may take
action by no later than the start of Core Trading on the day following
the date of the execution under review.
Effective Date
The Exchange requests that the effective date for the instant rule
change be October 5, 2009.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(5) \10\ 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.
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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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 \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \14\ 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.\15\
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.\16\ For these reasons, the Commission
designates that the proposed rule change become operative on October 5,
2009.
---------------------------------------------------------------------------
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 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).
\16\ 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.
[[Page 51914]]
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-NSX-2009-05 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-NSX-2009-05. 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-NSX-2009-05 and should be
submitted on or before October 29, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24249 Filed 10-7-09; 8:45 am]
BILLING CODE 8011-01-P
