Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Proposed Rule Change To Amend BATS Rule 11.18, Entitled “Trading Halts Due to Extraordinary Market Volatility.”, 39060-39063 [2010-16401]
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39060
ACTION:
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
Notice.
This is a notice of an
Administrative declaration of a disaster
for the Commonwealth of Puerto Rico
dated 06/29/2010.
Incident: Severe Storms and Flooding.
Incident Period: 05/28/2010 through
05/30/2010.
DATES: Effective Date: 06/29/2010.
Physical Loan Application Deadline
Date: 08/30/2010.
Economic Injury (EIDL) Loan
Application Deadline Date: 03/29/2011.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Municipalities:
Barranquitas, Dorado, Naranjito, Vega
Alta.
Contiguous Municipalities:
Puerto Rico: Aibonito, Bayamon,
Cidra, Coamo, Comerio, Corozal,
Morovis, Orocovis, Toa Alta, Toa
Baja, Vega Baja.
The Interest Rates are:
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SUMMARY:
For Physical Damage:
Homeowners With Credit Available Elsewhere .........................
Homeowners
Without
Credit
Available Elsewhere ..................
Businesses With Credit Available
Elsewhere .................................
Businesses Without Credit Available Elsewhere .........................
Non-Profit Organizations With
Credit Available Elsewhere .......
Non-Profit Organizations Without
Credit Available Elsewhere .......
For Economic Injury:
Businesses and Small Agricultural
Cooperatives Without Credit
Available Elsewhere ..................
Non-Profit Organizations Without
Credit Available Elsewhere .......
15:28 Jul 06, 2010
Percent
Non-Profit Organizations Without
Credit Available Elsewhere .......
Dated: June 29, 2010.
Karen G. Mills,
Administrator.
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BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #12214 and #12215]
Puerto Rico Disaster #PR–00009
3.000
Percent
For Physical Damage:
Non-Profit Organizations With
Credit Available Elsewhere .......
Non-Profit Organizations Without
Credit Available Elsewhere .......
For Economic Injury:
Fmt 4703
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James E. Rivera,
Associate Administrator for Disaster
Assistance.
BILLING CODE 8025–01–P
SUMMARY:
Frm 00086
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
[FR Doc. 2010–16447 Filed 7–6–10; 8:45 am]
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
PO 00000
3.000
The number assigned to this disaster
for physical damage is 122146 and for
economic injury is 122156.
[FR Doc. 2010–16446 Filed 7–6–10; 8:45 am]
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the Commonwealth of Puerto Rico
(FEMA–1919–DR), dated 06/24/2010.
Incident: Severe Storms and Flooding.
Incident Period: 05/26/2010 through
05/31/2010.
DATES: Effective Date: 06/24/2010.
Physical Loan Application Deadline
Date: 08/23/2010.
Economic Injury (EIDL) Loan
Application Deadline Date: 03/24/2011.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
Percent
hereby given that as a result of the
President’s major disaster declaration on
06/24/2010, Private Non-Profit
5.500 organizations that provide essential
services of governmental nature may file
2.750 disaster loan applications at the address
listed above or other locally announced
6.000 locations.
The following areas have been
4.000 determined to be adversely affected by
the disaster:
3.625
Primary Municipalities:
Arecibo, Barranquitas, Coamo,
3.000
Corozal, Dorado, Naranjito,
Orocovis, Utuado, Vega Alta, Vega
Baja.
4.000
The Interest Rates are:
The number assigned to this disaster
for physical damage is 12216 6 and for
economic injury is 12217 0.
The Commonwealth which received
an EIDL Declaration number is Puerto
Rico.
VerDate Mar<15>2010
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
3.625
3.000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62407; File No. SR–BATS–
2010–18]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To Amend
BATS Rule 11.18, Entitled ‘‘Trading
Halts Due to Extraordinary Market
Volatility.’’
June 30, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 30,
2010, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
BATS Rule 11.18, entitled ‘‘Trading
Halts Due to Extraordinary Market
Volatility.’’
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.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
1 15
2 17
E:\FR\FM\07JYN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
07JYN1
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
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
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1. Purpose
The Exchange proposes to amend
BATS Rule 11.18 to add securities
included in the Russell 1000® Index
(‘‘Russell 1000’’) and specified Exchange
Traded Products (‘‘ETPs’’) to the pilot
rule. For purposes of this filing, ETPs
include Exchange Traded Funds
(‘‘ETFs’’),3 Exchange Traded Vehicles
(‘‘ETVs’’),4 and Exchange Traded Notes
(‘‘ETNs’’).5
The primary listing markets for U.S.
stocks recently amended their rules so
that they may, from time to time, issue
a trading pause for an individual
security if the price of such security
moves 10% or more from a sale in a
preceding five-minute period. In this
regard, the Exchange recently proposed
to amend its Rule 11.18(d) to pause
trading in an individual stock when the
primary listing market for such stock
issues a trading pause in any Circuit
Breaker Securities, as defined in
Interpretation and Policy .05 of Rule
11.18. The amendment to BATS Rule
11.18 was approved by the Commission
on June 10, 2010 on a pilot basis set to
end on December 10, 2010.6
Currently, the pilot list of securities is
all securities included in the S&P 500®
3 An ETF is an open-ended registered investment
company under the Investment Company Act of
1940 that has received certain exemptive relief from
the Commission to allow secondary market trading
in the ETF shares. ETFs are generally index-based
products, in that each ETF holds a portfolio of
securities that is intended to provide investment
results that, before fees and expenses, generally
correspond to the price and yield performance of
the underlying benchmark index.
4 An ETV tracks the underlying performance of an
asset or index, allowing investors exposure to
underlying assets such as futures contracts,
commodities, and currency without actually trading
futures or taking physical delivery of the underlying
asset. An ETV is traded intraday like an ETF. An
ETV is an open-ended trust or partnership unit that
is registered under the Securities Act of 1933.
5 An ETN is a senior unsecured debt obligation
designed to track the total return of an underlying
index, benchmark or strategy, minus investor fees.
ETNs are registered under the Securities Act of
1933.
6 See BATS Rule 11.18; see also Securities
Exchange Act Release No. 62252 (June 10, 2010), 75
FR 34186 (June 16, 2010) (SR–BATS–2010–14).
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15:28 Jul 06, 2010
Jkt 220001
Index (‘‘S&P 500’’). As noted in comment
letters to the original filing to amend
BATS Rule 11.18 as described above,
concerns were raised that including
only securities in the S&P 500 in the
pilot rule was too narrow. In particular,
commenters noted that securities that
experienced volatility on May 6, 2010,
including ETFs, should be included in
the pilot. The Exchange agrees with the
commenters that the pilot list of
securities should be expanded.
In consultation with other markets,
the Exchange proposes to add the
securities included in the Russell 1000
and specified ETPs to the pilot
beginning in July 2010, subject to
Commission approval. The Exchange
believes that adding these securities
would begin to address concerns that
the scope of the pilot may be too
narrow, while at the same time
recognizing that during the pilot period,
the markets will continue to review
whether and when to add additional
securities to the pilot and whether the
parameters of the rule should be
adjusted for different securities.
In particular, the Exchange proposes
to add securities included in the Russell
1000 because the Exchange believes that
the securities included in that index
have similar trading characteristics to
securities included in the S&P 500
(many of which are the same securities)
and therefore the existing 10% price
movement applicable before invoking a
trading pause would be appropriate for
the Russell 1000 securities. Because the
Exchange does not propose to modify
the 10% price movement at this time,
the Exchange believes that expanding to
the Russell 1000 is an appropriate next
step. Based on our analysis, the number
of times that the Trading Pause would
be triggered for Russell 1000 securities
would be similar to the instances for the
S&P 500 securities.
In addition, the Exchange, in
consultation with other markets,
proposes to add to the pilot a selected
list of ETPs. The Exchange developed
the proposed pilot list of ETPs first by
identifying all ETPs across multiple
asset classes and issuers, including
domestic equity, international equity,
fixed income, currency, and
commodities and futures. The Exchange
next excluded the leveraged ETPs and
sorted the list by notional consolidated
average daily volume (‘‘CADV’’) using
year-to-date CADV ending May 5, 2010,
multiplied by the closing price on May
5, 2010. The Exchange then selected
those symbols, including inverse ETPs,
that trade over $2,000,000 CADV year to
date through May 5, 2010. To ensure
that ETPs that track similar benchmarks
but that do not meet this volume
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39061
criterion do not become subject to
pricing volatility when a component
security is the subject of a trading pause,
the Exchange proposes to include
certain non-leveraged ETPs that have
traded below this volume criterion, but
that track the same benchmark as an
ETP that does meet the volume
criterion.
The Exchange believes that the
proposed list of ETPs is appropriate
because it identifies those ETPs that
have component securities that largely
track the securities included in the S&P
500 and Russell 1000. Accordingly, if an
S&P 500 or Russell 1000 security
experiences a trading pause, any
resulting price volatility in a related
ETP, regardless of the CADV of the ETP,
would also be subject to a trading pause
trigger. As with the proposal to add the
Russell 1000 securities, the Exchange
selected the proposed ETPs because it
believes that the existing 10% price
movement would be an appropriate
price movement before invoking a
trading pause for ETPs with these
characteristics. The Exchange does not
believe that the 10% price movement is
an appropriate threshold for leveraged
ETPs because by definition, leveraged
ETPs are based on multiples of price
movements in the underlying index.
Accordingly, a 10% percent price
movement in a leveraged ETP may not
signify extraordinary volatility. Because
the Exchange is not proposing to adopt
revised price movement thresholds at
this time, the Exchange is therefore not
proposing to include leveraged ETPs for
now.
As proposed, the list includes broadbased ETPs, which the Exchange
recognizes has raised some debate. In
particular, concerns have been raised
about whether halting an index-based
ETP may impact an index-based option
or future. However, the Exchange
believes that including broad-based
ETPs is appropriate so that ETP
investors are protected should the
component securities experience such
volatility that trading in the broad-based
ETP is impacted, as it was on May 6,
2010. Because this is a pilot rule, the
markets can continue to assess whether
it is appropriate to have a trading pause
in broad-based ETPs when there is not
a similar trading pause in related indexbased options or futures.
As noted above, during the pilot, the
Exchange will continue to re-assess
whether specific ETPs should be added
or removed from the pilot list. The
Exchange will also assess whether the
parameters for invoking a trading pause
continue to be the appropriate standard
and whether the parameters should be
modified.
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39062
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
To effect this change, the Exchange
proposes to amend Interpretation and
Policy .05 to BATS Rule 11.18 to
provide that the pilot applies to
securities in the S&P 500, securities in
the Russell 1000, as well as specified
ETPs. The pilot list of ETPs is identified
in Exhibit 3.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the Act.7
In particular, the proposed change is
consistent with Section 6(b)(5) of the
Act,8 because it would promote just and
equitable principles of trade, remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system, and, in
general, protect investors and the public
interest. The proposed rule change is
also designed to support the principles
of Section 11A(a)(1) 9 of the Act in that
it seeks to assure fair competition
among brokers and dealers and among
exchange markets. The Exchange
believes that the proposed rule meets
these requirements in that it promotes
uniformity across markets concerning
which securities are covered by the
pause during the pilot period.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change imposes any
burden on competition.
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.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
9 15 U.S.C. 78k–1(a)(1).
A. By order approve such proposed
rule change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.10
Electronic Comments
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.
The Commission notes that ETF
trades constituted a substantial majority
of the trades that were cancelled on May
6, and the proposed amendments would
bring certain ETFs within the scope of
the trading pause pilot for the first time.
The Commission solicits comment
regarding the inclusion of ETFs within
the trading pause pilot. The
Commission requests comment in
particular on the implications of
including in the trading pause pilot
ETFs on broad-based indices that also
underlie options and futures products.
What are the potential benefits and risks
of including those ETFs in the pilot
under circumstances where other
products based on the same index may
not be subject to any trading pause, or
may be subject to a different type of
trading pause? Are existing mechanisms
available in the markets for those other
products sufficient to address any crossmarket linkage concerns? What are the
potential effects on price discovery and
trading behavior in the different
markets?
Similarly, the Commission solicits
comments on the potential benefits and
risks of excluding such ETFs from the
pilot, particularly under circumstances
where the securities underlying the ETF
are included in the pilot. If there are
trading pauses for the component
securities of an index but not for an ETF
based on that index, what consequences
might that have for the ETF or for other
products based on that index? If there
are trading pauses in an ETF but not in
the stocks that underlie that ETF, what
consequences might that have for the
underlying stocks or other products?
What are the potential effects on price
discovery for the ETF, the underlying
stocks and other products?
Are there other market-based
characteristics or metrics that should be
considered for purposes of determining
which ETFs should be included in the
trading pause pilot, or for re-calibrating
particular features of the trading pause?
In addition, the Commission solicits
comments regarding the operation of the
7 15
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15:28 Jul 06, 2010
10 The Commission notes that the Exchange has
requested accelerated approval of the filing.
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Frm 00088
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Sfmt 4703
trading pause pilot to date with respect
to stocks in the S&P 500.
Comments may be submitted by any
of the following methods:
• 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–BATS–2010–18 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–BATS–2010–18. 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 Web site viewing and
printing in the Commission’s Public
Reference Room 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 offices of the Exchange.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–BATS–2010–18, and
should be submitted on or before July
19, 2010.11
11 The Commission believes that a 10-day
comment period is reasonable, given the urgency of
the matter. It will provide adequate time for
comment.
E:\FR\FM\07JYN1.SGM
07JYN1
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–16401 Filed 7–6–10; 8:45 am]
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
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62410; File No. SR–NSX–
2010–08]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing of a Proposed Rule Change
To Include Additional Securities in the
Trading Halt Pilot Program Under
Exchange Rule 11.20B
June 30, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 30,
2010, National Stock Exchange, Inc.
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change, as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comment on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
National Stock Exchange, Inc.
(‘‘NSX®’’ or the ‘‘Exchange’’) is proposing
to amend NSX Rule 11.20B to add
additional securities to the pilot rule.
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.
cprice-sewell on DSK8KYBLC1PROD with NOTICES
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
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
15:28 Jul 06, 2010
Jkt 220001
1. Purpose
The Exchange proposes to amend
NSX Rule 11.20B to add securities
included in the Russell 1000 ® Index
(‘‘Russell 1000’’) and specified Exchange
Traded Products (‘‘ET Products’’) to the
pilot rule. For purposes of this filing, ET
Products include Exchange Traded
Funds (‘‘ETF 3’’), Exchange Traded
Vehicles (‘‘ETV 4’’), and Exchange
Traded Notes (‘‘ETN 5’’).
NSX Rule 11.20B was approved by
the Securities and Exchange
Commission (the ‘‘Commission’’) on
June 10, 2010 on a pilot basis to end on
December 10, 2010.6 As the Exchange
noted in its filing to adopt NSX Rule
11.20B, during the pilot period, the
Exchange, in conjunction with other
markets in the national market system,
would continue to assess whether
additional securities need to be added
and whether the parameters of the rule
would need to be modified to
accommodate trading characteristics of
different securities.
Currently, the pilot list of securities is
all securities included in the S&P 500®
Index (‘‘S&P 500’’). As noted in comment
letters relating to the original filing to
adopt NSX Rule 11.20B, concerns were
raised that including only securities in
the S&P 500 in the pilot rule was too
narrow. In particular, commenting
parties noted that securities that
experienced volatility on May 6, 2010,
including ETFs, should be included in
the pilot. The Exchange agrees with the
commenting parties that the pilot list of
securities should be expanded.
3 An ETF is an open-ended registered investment
company under the Investment Company Act of
1940 that has received certain exemptive relief from
the SEC to allow secondary market trading in the
ETF shares. ETFs are generally index-based
products, in that each ETF holds a portfolio of
securities that is intended to provide investment
results that, before fees and expenses, generally
correspond to the price and yield performance of
the underlying benchmark index.
4 An ETV tracks the underlying performance of an
asset or index, allowing investors exposure to
underlying assets such as futures contracts,
commodities, and currency without actually trading
futures or taking physical delivery of the underlying
asset. An ETV is traded intraday like an ETF. An
ETV is an open-ended trust or partnership unit that
is registered under the Securities Act of 1933.
5 An ETN is a senior unsecured debt obligation
designed to track the total return of an underlying
index, benchmark or strategy, minus investor fees.
ETNs are registered under the Securities Act of
1933 and are redeemable to the issuer.
6 See Securities Exchange Act Release No. 62252
(June 10, 2010) (SR–NSX–2010–05).
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39063
In consultation with other markets,
the Exchange proposes to add the
securities included in the Russell 1000
and specified ET Products to the pilot
beginning in July 2010, subject to
Commission approval. The Exchange
believes that adding these securities
would begin to address concerns that
the scope of the pilot may be too
narrow, while at the same time
recognizing that during the pilot period,
the markets will continue to review
whether and when to add additional
securities to the pilot and whether the
parameters of the rule should be
adjusted for different securities.
In particular, the Exchange, in
conjunction with other markets,
proposes to add securities included in
the Russell 1000 because the Exchange
believes that the securities included in
that index have similar trading
characteristics to securities included in
the S&P 500 (many of which are the
same securities) and therefore the
existing 10% price movement
applicable before invoking a trading
pause would be appropriate for the
Russell 1000 securities. Because the
Exchange does not propose to modify
the 10% price movement at this time,
the Exchange believes that expanding to
the Russell 1000 is an appropriate next
step. Based on our analysis, the number
of times that the Trading Pause would
be triggered for Russell 1000 securities
would be similar to the instances for the
S&P 500 securities.
In addition, the Exchange, in
consultation with other markets,
proposes to add to the pilot a selected
list of ET Products. The proposed pilot
list of ET Products was developed, first,
by identifying all ET Products across
multiple asset classes and issuers,
including domestic equity, international
equity, fixed income, currency, and
commodities and futures. Leveraged ET
Products were excluded and the list was
then sorted by notional consolidated
average daily volume (‘‘CADV’’) using
year-to date CADV ending May 5, 2010,
multiplied by closing price on May 5,
2010. Those symbols, including inverse
ET Products, that trade over $2,000,000
of CADV year-to-date through May 5,
2010 were then selected. To ensure that
all ET Products that track similar
benchmarks but do not meet this
volume criterion do not become subject
to pricing volatility when a component
security is the subject of a trading pause,
the Exchange proposes to include
certain non-leveraged ET Products that
have traded below this volume criterion,
but that track the same benchmark as an
ET Product that does meet the volume
criterion.
E:\FR\FM\07JYN1.SGM
07JYN1
]]>Agencies
[Federal Register Volume 75, Number 129 (Wednesday, July 7, 2010)]
[Notices]
[Pages 39060-39063]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-16401]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62407; File No. SR-BATS-2010-18]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Amend BATS Rule 11.18, Entitled
``Trading Halts Due to Extraordinary Market Volatility.''
June 30, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 30, 2010, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend BATS Rule 11.18, entitled
``Trading Halts Due to Extraordinary Market Volatility.''
The text of the proposed rule change is available at the Exchange's
Web site at https://www.batstrading.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
[[Page 39061]]
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 BATS Rule 11.18 to add securities
included in the Russell 1000[supreg] Index (``Russell 1000'') and
specified Exchange Traded Products (``ETPs'') to the pilot rule. For
purposes of this filing, ETPs include Exchange Traded Funds
(``ETFs''),\3\ Exchange Traded Vehicles (``ETVs''),\4\ and Exchange
Traded Notes (``ETNs'').\5\
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\3\ An ETF is an open-ended registered investment company under
the Investment Company Act of 1940 that has received certain
exemptive relief from the Commission to allow secondary market
trading in the ETF shares. ETFs are generally index-based products,
in that each ETF holds a portfolio of securities that is intended to
provide investment results that, before fees and expenses, generally
correspond to the price and yield performance of the underlying
benchmark index.
\4\ An ETV tracks the underlying performance of an asset or
index, allowing investors exposure to underlying assets such as
futures contracts, commodities, and currency without actually
trading futures or taking physical delivery of the underlying asset.
An ETV is traded intraday like an ETF. An ETV is an open-ended trust
or partnership unit that is registered under the Securities Act of
1933.
\5\ An ETN is a senior unsecured debt obligation designed to
track the total return of an underlying index, benchmark or
strategy, minus investor fees. ETNs are registered under the
Securities Act of 1933.
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The primary listing markets for U.S. stocks recently amended their
rules so that they may, from time to time, issue a trading pause for an
individual security if the price of such security moves 10% or more
from a sale in a preceding five-minute period. In this regard, the
Exchange recently proposed to amend its Rule 11.18(d) to pause trading
in an individual stock when the primary listing market for such stock
issues a trading pause in any Circuit Breaker Securities, as defined in
Interpretation and Policy .05 of Rule 11.18. The amendment to BATS Rule
11.18 was approved by the Commission on June 10, 2010 on a pilot basis
set to end on December 10, 2010.\6\
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\6\ See BATS Rule 11.18; see also Securities Exchange Act
Release No. 62252 (June 10, 2010), 75 FR 34186 (June 16, 2010) (SR-
BATS-2010-14).
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Currently, the pilot list of securities is all securities included
in the S&P 500[supreg] Index (``S&P 500''). As noted in comment letters
to the original filing to amend BATS Rule 11.18 as described above,
concerns were raised that including only securities in the S&P 500 in
the pilot rule was too narrow. In particular, commenters noted that
securities that experienced volatility on May 6, 2010, including ETFs,
should be included in the pilot. The Exchange agrees with the
commenters that the pilot list of securities should be expanded.
In consultation with other markets, the Exchange proposes to add
the securities included in the Russell 1000 and specified ETPs to the
pilot beginning in July 2010, subject to Commission approval. The
Exchange believes that adding these securities would begin to address
concerns that the scope of the pilot may be too narrow, while at the
same time recognizing that during the pilot period, the markets will
continue to review whether and when to add additional securities to the
pilot and whether the parameters of the rule should be adjusted for
different securities.
In particular, the Exchange proposes to add securities included in
the Russell 1000 because the Exchange believes that the securities
included in that index have similar trading characteristics to
securities included in the S&P 500 (many of which are the same
securities) and therefore the existing 10% price movement applicable
before invoking a trading pause would be appropriate for the Russell
1000 securities. Because the Exchange does not propose to modify the
10% price movement at this time, the Exchange believes that expanding
to the Russell 1000 is an appropriate next step. Based on our analysis,
the number of times that the Trading Pause would be triggered for
Russell 1000 securities would be similar to the instances for the S&P
500 securities.
In addition, the Exchange, in consultation with other markets,
proposes to add to the pilot a selected list of ETPs. The Exchange
developed the proposed pilot list of ETPs first by identifying all ETPs
across multiple asset classes and issuers, including domestic equity,
international equity, fixed income, currency, and commodities and
futures. The Exchange next excluded the leveraged ETPs and sorted the
list by notional consolidated average daily volume (``CADV'') using
year-to-date CADV ending May 5, 2010, multiplied by the closing price
on May 5, 2010. The Exchange then selected those symbols, including
inverse ETPs, that trade over $2,000,000 CADV year to date through May
5, 2010. To ensure that ETPs that track similar benchmarks but that do
not meet this volume criterion do not become subject to pricing
volatility when a component security is the subject of a trading pause,
the Exchange proposes to include certain non-leveraged ETPs that have
traded below this volume criterion, but that track the same benchmark
as an ETP that does meet the volume criterion.
The Exchange believes that the proposed list of ETPs is appropriate
because it identifies those ETPs that have component securities that
largely track the securities included in the S&P 500 and Russell 1000.
Accordingly, if an S&P 500 or Russell 1000 security experiences a
trading pause, any resulting price volatility in a related ETP,
regardless of the CADV of the ETP, would also be subject to a trading
pause trigger. As with the proposal to add the Russell 1000 securities,
the Exchange selected the proposed ETPs because it believes that the
existing 10% price movement would be an appropriate price movement
before invoking a trading pause for ETPs with these characteristics.
The Exchange does not believe that the 10% price movement is an
appropriate threshold for leveraged ETPs because by definition,
leveraged ETPs are based on multiples of price movements in the
underlying index. Accordingly, a 10% percent price movement in a
leveraged ETP may not signify extraordinary volatility. Because the
Exchange is not proposing to adopt revised price movement thresholds at
this time, the Exchange is therefore not proposing to include leveraged
ETPs for now.
As proposed, the list includes broad-based ETPs, which the Exchange
recognizes has raised some debate. In particular, concerns have been
raised about whether halting an index-based ETP may impact an index-
based option or future. However, the Exchange believes that including
broad-based ETPs is appropriate so that ETP investors are protected
should the component securities experience such volatility that trading
in the broad-based ETP is impacted, as it was on May 6, 2010. Because
this is a pilot rule, the markets can continue to assess whether it is
appropriate to have a trading pause in broad-based ETPs when there is
not a similar trading pause in related index-based options or futures.
As noted above, during the pilot, the Exchange will continue to re-
assess whether specific ETPs should be added or removed from the pilot
list. The Exchange will also assess whether the parameters for invoking
a trading pause continue to be the appropriate standard and whether the
parameters should be modified.
[[Page 39062]]
To effect this change, the Exchange proposes to amend
Interpretation and Policy .05 to BATS Rule 11.18 to provide that the
pilot applies to securities in the S&P 500, securities in the Russell
1000, as well as specified ETPs. The pilot list of ETPs is identified
in Exhibit 3.
2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\7\ In particular, the
proposed change is consistent with Section 6(b)(5) of the Act,\8\
because it would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system, and, in general, protect investors and
the public interest. The proposed rule change is also designed to
support the principles of Section 11A(a)(1) \9\ of the Act in that it
seeks to assure fair competition among brokers and dealers and among
exchange markets. The Exchange believes that the proposed rule meets
these requirements in that it promotes uniformity across markets
concerning which securities are covered by the pause during the pilot
period.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.\10\
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\10\ The Commission notes that the Exchange has requested
accelerated approval of the filing.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act.
The Commission notes that ETF trades constituted a substantial
majority of the trades that were cancelled on May 6, and the proposed
amendments would bring certain ETFs within the scope of the trading
pause pilot for the first time. The Commission solicits comment
regarding the inclusion of ETFs within the trading pause pilot. The
Commission requests comment in particular on the implications of
including in the trading pause pilot ETFs on broad-based indices that
also underlie options and futures products. What are the potential
benefits and risks of including those ETFs in the pilot under
circumstances where other products based on the same index may not be
subject to any trading pause, or may be subject to a different type of
trading pause? Are existing mechanisms available in the markets for
those other products sufficient to address any cross-market linkage
concerns? What are the potential effects on price discovery and trading
behavior in the different markets?
Similarly, the Commission solicits comments on the potential
benefits and risks of excluding such ETFs from the pilot, particularly
under circumstances where the securities underlying the ETF are
included in the pilot. If there are trading pauses for the component
securities of an index but not for an ETF based on that index, what
consequences might that have for the ETF or for other products based on
that index? If there are trading pauses in an ETF but not in the stocks
that underlie that ETF, what consequences might that have for the
underlying stocks or other products? What are the potential effects on
price discovery for the ETF, the underlying stocks and other products?
Are there other market-based characteristics or metrics that should
be considered for purposes of determining which ETFs should be included
in the trading pause pilot, or for re-calibrating particular features
of the trading pause?
In addition, the Commission solicits comments regarding the
operation of the trading pause pilot to date with respect to stocks in
the S&P 500.
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-BATS-2010-18 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-BATS-2010-18. 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 Web site
viewing and printing in the Commission's Public Reference Room 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 offices of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-BATS-2010-18, and should be submitted on or before July
19, 2010.\11\
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\11\ The Commission believes that a 10-day comment period is
reasonable, given the urgency of the matter. It will provide
adequate time for comment.
[[Page 39063]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16401 Filed 7-6-10; 8:45 am]
BILLING CODE 8010-01-P
