Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing of Proposed Rule Change To Amend EDGA Rule 11.14, Entitled “Trading Halts Due to Extraordinary Volatility”, 39074-39076 [2010-16410]
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39074
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
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.8
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning all aspects of the
foregoing, including whether the
proposed rule change is consistent with
the Act.
For markets trading exchange-traded
products,9 the Commission has solicited
comment on the implications of
including a trading pause pilot for
exchange-traded funds for broad-based
indices that also underlie options and
futures products.
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:
cprice-sewell on DSK8KYBLC1PROD with NOTICES
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–NYSEAmex–2010–63 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–NYSEAmex–2010–63. 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).
8 The Commission notes that the Exchange has
requested accelerated approval of the filing.
9 See, e.g., SR–NYSEArca–2010–61.
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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–NYSEAmex–2010–63, and
should be submitted on or before July
19, 2010.10
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–16406 Filed 7–6–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62417; File No. SR–EDGA–
2010–05]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To Amend
EDGA Rule 11.14, Entitled ‘‘Trading
Halts Due to Extraordinary Volatility’’
June 30, 2010.
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 June 30,
2010, EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) 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
10 The Commission believes that a 10-day
comment period is reasonable, given the urgency of
the matter. It will provide adequate time for
comment.
11 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
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
EDGA Rule 11.14, entitled ‘‘Trading
Halts Due to Extraordinary Volatility’’ to
add additional securities to the pilot
rule. The text of the proposed rule
change is available at the Exchange’s
Web site at https://www.directedge.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
EDGA Rule 11.14 to add securities
included in the Russell 1000® Index
(‘‘Russell 1000’’) and specified Exchange
Traded Products (‘‘ETP’’) to the pilot
rule. For purposes of this filing, ETPs
include Exchange Traded Funds
(‘‘ETF’’),3 Exchange Traded Vehicles
(‘‘ETV’’),4 and Exchange Traded Notes
(‘‘ETN’’).5
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.
E:\FR\FM\07JYN1.SGM
07JYN1
cprice-sewell on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
EDGA Rule 11.14 was approved by
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 EDGA Rule 11.14, during
the pilot period, the Exchange 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 to the original filing to adopt
EDGA Rule 11.14, 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.
In response to these concerns, various
exchanges and national securities
associations have collectively
determined to expand the list of pilot
securities. As part of a coordinated
filing with the 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 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 may be appropriate for the
Russell 1000 securities.
In addition, the Exchange, in
consultation with other markets,
proposes to add to the pilot a selected
list of ETPs. The proposed pilot list of
ETPs was developed by first identifying
all ETPs across multiple asset classes
and issuers, including domestic equity,
international equity, fixed income,
currency, and commodities and futures.
Next, leveraged ETPs were excluded
and sorted by notional consolidated
average daily volume (‘‘CADV’’) using
year-to-date CADV ending May 5, 2010,
6 See Securities Exchange Act Release No. 62252
(June 10, 2010) (SR–EDGA–2010–01).
VerDate Mar<15>2010
15:28 Jul 06, 2010
Jkt 220001
multiplied by the closing price on May
5, 2010. Then, those symbols, including
inverse ETPs, that trade over $2,000,000
CADV year to date through May 5, 2010,
were selected. 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 nonleveraged ETPs that have traded below
this volume criterion, but that track the
same benchmark as an ETP that does
meet the volume criterion.
The proposed list of ETPs identify
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 proposed ETPs were
selected because they were consistent
with the existing 10% 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 noted above, during the pilot, the
Exchange will continue to re-assess, in
consultation with other markets,
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.
To effect this change, the Exchange
proposes to amend supplementary
material .05 to Rule 11.14 to provide
that the pilot applies to all securities in
the S&P 500, securities in the Russell
1000, as well as specified ETPs.
2. Statutory Basis
Approval of the rule change proposed
in this submission 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
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
39075
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
decisions to pause trading in a security
when there are significant price
movements.
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
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning all aspects of the
foregoing, including whether the
proposed rule change is consistent with
the Act.
The Commission notes that ETF
trades constituted a substantial majority
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 15 U.S.C. 78k–1(a)(1).
10 The Commission notes that the Exchange has
requested accelerated approval of the filing.
8 15
E:\FR\FM\07JYN1.SGM
07JYN1
39076
Federal Register / Vol. 75, No. 129 / Wednesday, July 7, 2010 / Notices
cprice-sewell on DSK8KYBLC1PROD with NOTICES
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
trading pause pilot to date with respect
to stocks in the S&P 500.
Comments may be submitted by any
of the following methods:
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–EDGA–2010–05. 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
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–EDGA–
2010–05 and should be submitted on or
before July 19, 2010.11
[Release No. 34–62413; File No. SR–
NYSEArca–2010–61]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–16410 Filed 7–6–10; 8:45 am]
BILLING CODE 8010–01–P
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–EDGA–2010–05 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
VerDate Mar<15>2010
15:28 Jul 06, 2010
Jkt 220001
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
NYSE Arca, Inc. Amending NYSE Arca
Equities Rule 7.11 To Add Additional
Securities to the Pilot Rule
June 30, 2010.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 30,
2010, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Equities Rule 7.11 to add
additional securities to the pilot rule.
The text of the proposed rule change is
available at the Exchange, the
Commission’s Web site at https://
www.sec.gov, the Commission’s Public
Reference Room, and https://
www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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.
12 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
1. Purpose
The Exchange proposes to amend
NYSE Arca Equities Rule 7.11 to add
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Agencies
[Federal Register Volume 75, Number 129 (Wednesday, July 7, 2010)]
[Notices]
[Pages 39074-39076]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-16410]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62417; File No. SR-EDGA-2010-05]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Amend EDGA Rule 11.14, Entitled
``Trading Halts Due to Extraordinary Volatility''
June 30, 2010.
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 June 30, 2010, EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'')
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend EDGA Rule 11.14, entitled
``Trading Halts Due to Extraordinary Volatility'' to add additional
securities to the pilot rule. The text of the proposed rule change is
available at the Exchange's Web site at https://www.directedge.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 EDGA Rule 11.14 to add securities
included in the Russell 1000[supreg] Index (``Russell 1000'') and
specified Exchange Traded Products (``ETP'') to the pilot rule. For
purposes of this filing, ETPs include Exchange Traded Funds
(``ETF''),\3\ Exchange Traded Vehicles (``ETV''),\4\ and Exchange
Traded Notes (``ETN'').\5\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
[[Page 39075]]
EDGA Rule 11.14 was approved by 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 EDGA Rule 11.14, during the pilot period, the
Exchange 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.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 62252 (June 10,
2010) (SR-EDGA-2010-01).
---------------------------------------------------------------------------
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 adopt EDGA Rule 11.14, 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.
In response to these concerns, various exchanges and national
securities associations have collectively determined to expand the list
of pilot securities. As part of a coordinated filing with the 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 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 may be appropriate for the Russell 1000
securities.
In addition, the Exchange, in consultation with other markets,
proposes to add to the pilot a selected list of ETPs. The proposed
pilot list of ETPs was developed by first identifying all ETPs across
multiple asset classes and issuers, including domestic equity,
international equity, fixed income, currency, and commodities and
futures. Next, leveraged ETPs were excluded and sorted 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.
Then, those symbols, including inverse ETPs, that trade over $2,000,000
CADV year to date through May 5, 2010, were selected. 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 proposed list of ETPs identify 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 proposed ETPs were selected because they were
consistent with the existing 10% 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 noted above, during the pilot, the Exchange will continue to re-
assess, in consultation with other markets, 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.
To effect this change, the Exchange proposes to amend supplementary
material .05 to Rule 11.14 to provide that the pilot applies to all
securities in the S&P 500, securities in the Russell 1000, as well as
specified ETPs.
2. Statutory Basis
Approval of the rule change proposed in this submission 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 decisions to pause
trading in a security when there are significant price movements.
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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 all aspects of the foregoing, including whether
the proposed rule change is consistent with the Act.
The Commission notes that ETF trades constituted a substantial
majority
[[Page 39076]]
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-EDGA-2010-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGA-2010-05. 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
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-EDGA-2010-05 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.
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. 2010-16410 Filed 7-6-10; 8:45 am]
BILLING CODE 8010-01-P