Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Clearly Erroneous Transactions, 61802-61806 [2010-25137]
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61802
Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices
of the Act 12 in general, and furthers the
objectives of Section 6(b)(5) of the Act 13
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
The Exchange further believes that the
proposal is consistent with the SEC
Quote Rule’s provisions regarding nonfirm quotations.14 Specifically, Rule
602(a)(3)(i) provides that if, at any time
a national securities exchange is open
for trading, the exchange determines,
pursuant to rules approved by the
Commission, that the level of trading
activities or the existence of unusual
market conditions is such that the
exchange is incapable of collecting,
processing, and making available to
vendors the data for a subject security
required to be made available in a
manner that accurately reflects the
current state of the market on such
exchange, such exchange shall
immediately notify all specified persons
of that determination and, upon such
notification, the exchange is relieved of
its obligations under paragraphs (a)(1)
and (2) of Rule 602 relating to collecting
and disseminating quotations, subject to
certain other provisions of Rule
602(a)(3).
By proposing to disseminate a bid of
$0.00 for a size of zero contracts, or an
offer of $0.00 for a size of zero contracts
in certain situations delineated above in
the Exchange’s rules, the Exchange
believes that it is adequately
communicating that it is non-firm on
that side of the market in compliance
with the Quote Rule.
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 not
necessary or appropriate in furtherance
of the purposes of the Act.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
14 See 17 CFR 242.602(a)(3)(i) and (ii).
13 15
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the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 15 and Rule 19b–4(f)(6) 16
thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Phlx–2010–134 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–Phlx–2010–134. 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
15 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.
16 17
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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 the filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Phlx–2010–134 and should
be submitted on or before October 27,
2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–25138 Filed 10–5–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63023; File No. SR–Phlx–
2010–125]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Regarding
Clearly Erroneous Transactions
September 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
September 22, 2010, NASDAQ OMX
PHLX LLC (‘‘PHLX’’ or the ‘‘Exchange’’)
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. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
PHLX Rule 3312, governing clearly
erroneous executions on the NASDAQ
OMX PSX system (‘‘PSX’’). The text of
the proposed rule change is available
from the Exchange’s Web site at https://
nasdaqomxphlx.cchwallstreet.com, at
the Exchange’s principal office, at the
Commission’s Web site at https://
www.sec.gov, 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. The text of
these statements may be examined at
the places specified in Item III below,
and is set forth in Sections A, B, and C
below.
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 is proposing
modifications to its Rule 3312, entitled
Clearly Erroneous Transactions. Rule
3312 was recently approved by the
Commission in connection with a
proposal to resume trading of NMS
stocks through the Exchange’s PSX
system.3 The proposed changes are
designed to conform Rule 3312 to
changes that were recently approved to
the corresponding rules of The
NASDAQ Stock Market (the ‘‘NASDAQ
Exchange’’) and NASDAQ OMX BX
(‘‘BX’’), and other exchanges.4 First, the
Exchange proposes replacing existing
paragraph (a)(2)(C)(ii) of Rule 3312,
entitled ‘‘Unusual Circumstances and
Joint Market Rulings’’ with a new
paragraph, entitled ‘‘Multi-Stock Events
Involving Twenty or More Securities.’’
Second, the Exchange is replacing
existing paragraph (a)(2)(C)(iv) of Rule
3312, entitled ‘‘Numerical Guidelines
Applicable to Volatile Market Opens’’
with a new paragraph, entitled
3 Securities Exchange Act Release No. 62877
(September 9, 2010), 75 FR 56633 (September 16,
2010) (SR–PHLX–2010–79).
4 Securities Exchange Act Release No. 62886
(September 10, 2010), 75 FR 56613 (September 16,
2010) (File Nos. SR–BATS–2010–016; SR–BX–
2010–040; SR–CBOE–2010–056; SR–CHX–2010–13;
SR–EDGA–2010–03; SR–EDGX–2010–03; SR–ISE–
2010–62; SR–NASDAQ–2010–076; SR–NSX–2010–
07; SR–NYSE–2010–47; SR–NYSEAmex–2010–60;
SR–NYSEArca–2010–58).
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‘‘Individual Stock Trading Pauses.’’
Third, the Exchange is proposing
changes to existing paragraph (b) of Rule
3312 to eliminate the ability of the
Exchange to deviate from the Numerical
Guidelines contained in paragraph
(a)(2)(C)(i) when deciding which
transactions will be reviewed by the
Exchange as potentially clearly
erroneous. Fourth, the Exchange
proposes modifications to paragraphs
(a)(2)(C)(i) and (iii) of Rule 3312
consistent with the proposed changes to
paragraphs (a)(2)(C)(ii) and (iv). Finally,
the Exchange proposes amending
paragraph (c)(1), related to appeals of
clearly erroneous execution decisions
by the Exchange, to preserve nonappealability of all joint rulings between
the Exchange and one or more other
market centers.5 As proposed, the
provisions of paragraph (a)(2)(C),
paragraph (b) and paragraph (c)(1) of
Rule 3312, as amended by this filing,
would be in effect during a pilot period
set to end on December 10, 2010. If the
pilot is not either extended or made
permanent by December 10, 2010, the
prior versions of paragraph (a)(2)(C),
paragraph (b) and paragraph (c)(1) of
Rule 3312 would be in effect.
The Exchange is proposing the rule
changes described below in consultation
with other markets and Commission
staff to provide for uniform treatment:
(1) Of clearly erroneous execution
reviews in Multi-Stock Events involving
twenty or more securities; and (2) in the
event transactions occur that result in
the issuance of an individual stock
trading pause by the primary market
and subsequent transactions that occur
before the trading pause is in effect on
the Exchange. The Exchange has also
proposed additional changes to Rule
3312 that reduce the ability of the
Exchange to deviate from the objective
standards set forth in the Rule. In
addition, the Exchange is modifying
certain defined terms in the rule to
match definitions used by other
exchanges in order to avoid the risk of
confusion. The proposed changes are
described in further detail below.
Revised Paragraph (a)(2)(C)(ii) Related
to Multi-Stock Events Involving Twenty
or More Securities
The Exchange proposes to eliminate
the majority of existing paragraph
(a)(2)(C)(ii), which provides flexibility
to the Exchange to use different
Numerical Guidelines or Reference
Prices in various ‘‘Unusual
Circumstances.’’ The Exchange proposes
5 The Exchange is also amending text in
paragraphs (a)(2)(A)(iii)B. and (e)(1) to correct
minor typographical errors in the text of the rule.
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61803
to replace this paragraph with new
language that would apply to MultiStock Events involving twenty or more
securities whose executions occurred
within a period of five minutes or less.
The revised paragraph would retain
language making clear that during
Multi-Stock Events involving twenty or
more securities the number of affected
transactions may be such that
immediate finality is necessary to
maintain a fair and orderly market and
to protect investors and the public
interest. Accordingly, in such
circumstances, decisions made by the
Exchange in consultation with other
markets could not be appealed. Further,
as proposed, in connection with reviews
of Multi-Stock Events involving twenty
or more securities, the Exchange may
use a Reference Price other than
consolidated last sale in its review of
potentially clearly erroneous
executions. With the exception of those
securities under review that are subject
to an individual stock trading pause as
described in proposed paragraph
(a)(2)(C)(iv), and to ensure consistent
application across market centers when
proposed paragraph (a)(2)(C)(ii) is
invoked, the Exchange will promptly
coordinate with the other market centers
to determine the appropriate review
period, which may be greater than the
period of five minutes or less that
triggered application of proposed
paragraph (a)(2)(C)(ii), as well as select
one or more specific points in time prior
to the transactions in question and use
transaction prices at or immediately
prior to the one or more specific points
in time selected as the Reference Price.
The Exchange will nullify as clearly
erroneous all transactions that are at
prices equal to or greater than 30%
away from the Reference Price in each
affected security during the review
period selected by the Exchange and
other markets consistent with the
proposed paragraph (a)(2)(C)(ii).
Because the Exchange and other
market centers are adopting a different
threshold and standards to handle largescale market events, which would
include events occurring during times of
high volatility at the beginning of
regular trading hours, the Exchange
proposes deletion of paragraph
(a)(2)(C)(iv) (‘‘Numerical Guidelines
Applicable to Volatile Market Opens’’)
of the existing rule. The Exchange
believes that this provision is no longer
necessary, and if maintained, could
result in extremely high Numerical
Guidelines (up to 90%) in certain
circumstances.
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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices
Revised Paragraph (a)(2)(C)(iv) Related
to Individual Stock Trading Pauses
The NASDAQ Exchange and other
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 fiveminute period, and other exchanges
have amended their rules to follow
these trading pauses. In this regard, the
Exchange’s approved rules for PSX
pause trading in an individual stock
when the primary listing market for
such stock issues a trading pause, as
provided in Rule 3100(a)(4).6 As
described above, the Exchange is
proposing to eliminate existing
paragraph (a)(2)(C)(iv) (‘‘Numerical
Guidelines Applicable to Volatile
Market Opens’’). The Exchange proposes
adopting a rule, numbered as
(a)(2)(C)(iv) following such elimination,
that will provide for uniform treatment
of clearly erroneous execution reviews
in the event transactions occur that
result in the issuance of an individual
stock trading pause by the primary
listing market and subsequent
transactions that occur before the
trading pause is in effect on the
Exchange. The proposed rule change is
necessary to provide greater certainty of
the clearly erroneous Reference Price for
transactions that trigger a trading pause
(the ‘‘Trigger Trade’’) and subsequent
transactions occurring between the time
of the Trigger Trade and the time the
trading pause message is received by the
Exchange from the single plan processor
responsible for consolidation and
dissemination of information for the
security and put into effect on the
Exchange, especially under highly
volatile and active market conditions.
The Exchange proposes to revise
paragraph (a)(2)(C)(iv) of Rule 3312 to
allow the Exchange to use the price that
triggered a trading pause in an
individual stock (the ‘‘Trading Pause
Trigger Price’’) as the Reference Price for
clearly erroneous execution reviews of a
Trigger Trade and transactions that
occur immediately after a Trigger Trade
but before a trading pause is in effect on
the Exchange. As proposed, the phrase
‘‘Trading Pause Trigger Price’’ shall
mean the price that triggered a trading
pause pursuant to PHLX Rule
3100(a)(4). The Trading Pause Trigger
Price reflects a price calculated by the
primary listing market over a rolling
five-minute period and may differ from
the execution price of a transaction that
triggered a trading pause. The Exchange
will rely on the primary listing market
that issued an individual stock trading
pause to determine and communicate
the Trading Pause Trigger Price for such
stock. The Exchange proposes to make
clear in the text that the proposed
standards in paragraph (a)(2)(C)(iv)
apply regardless of whether the security
at issue is part of a Multi-Stock Event
involving five or more securities as
described in proposed paragraphs
(a)(2)(C)(i) and (ii).
As proposed, the Numerical
Guidelines set forth in PHLX Rule
3312(a)(2)(C)(i), other than those
Numerical Guidelines applicable to
Multi-Stock Events, would apply to
reviews of Trigger Trades and
subsequent transactions. The Exchange
proposes to review, on its own motion
pursuant to paragraph (b)(2) of the Rule,
all transactions that trigger a trading
pause and subsequent transactions
occurring before the trading pause is in
effect on the Exchange. The Exchange
has proposed to limit such reviews to
reviews of transactions that executed at
a price lower than the Trading Pause
Trigger Price in the event of a price
decline and higher than the Trading
Pause Trigger Price in the event of a
price rise. Because the proposed rules
for trading pauses would only apply
within Regular Trading Hours,7 an
execution would be reviewed and
nullified as clearly erroneous if it
exceeds the following thresholds:
Reference price or product
Numerical guidelines (Subject transaction’s % difference from the Trading Pause Trigger Price)
Greater than $0.00 up to and including $25.00 .......................................
Greater than $25.00 up to and including $50.00 .....................................
Greater than $50.00 .................................................................................
Leveraged ETF/ETN securities ................................................................
10%.
5%.
3%.
Regular Trading Hours Numerical Guidelines multiplied by the leverage
multiplier (i.e., 2x).
Revisions to Paragraph (b)
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To be consistent with other
exchanges, the Exchange is eliminating
paragraph (b) and adding new
paragraphs (b)(1) and (b)(2) to separate
System Disruptions from Own Motion
situations. Consistent with other
proposals made in this filing, the
Exchange proposes modifying paragraph
(b) to eliminate the ability of a Senior
Official to deviate from the Numerical
Guidelines contained in the Rule other
6 Prior to the launch of trading on PSX, the
Exchange will submit a proposed rule change to
amend Rule 3100(a)(4) to reflect changes recently
approved to the corresponding rules of other
exchanges. Securities Exchange Act Release No.
62884 (September 10, 2010), 75 FR 56618
(September 16, 2010) (SR–BATS–2010–018; SR–
BX–2010–044; SR–CBOE–2010–065; SR–CHX–
2010–14; SR–EDGA–2010–05; SR–EDGX–2010–05;
SR–ISE–2010–66; SR–NASDAQ–2010–079; SR–
NYSE–2010–49; SR–NYSEAmex–2010–63; SR–
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than under very limited circumstances
set forth in paragraph (a)(2)(C)(iii).
New paragraph (b)(1) provides a
Senior Official of the Exchange the
ability on his or her own motion, to
review and rule on executions that
result from ‘‘any disruption or a
malfunction in the operation of any
electronic communications and trading
facilities of the Exchange, or
extraordinary market conditions or
other circumstances in which the
nullification of transactions may be
necessary for the maintenance of a fair
and orderly market or the protection of
investors and the public interest exist.’’
New paragraph (b)(2) is similar to
existing Rule 3312(b) and covers other
situations where the Exchange may act
on its own motion. Without
modification, the language
‘‘extraordinary market conditions or
other circumstances * * *’’ in current
Rule 3312(b) would leave the Exchange
with broad discretion to deviate from
the Numerical Guidelines set forth in
NYSEArca–2010–61; SR–NSX–2010–08). Securities
Exchange Act Release No. 62884 amended trading
pause rules originally adopted by PSX in SR–
PHLX–2010–79, supra n. 3, and by other exchanges
in Securities Exchange Act Release No. 62252 (June
10, 2010), 75 FR 34186 (June 16, 2010) (SR–BATS–
2010–014; SR–EDGA–2010–01; SR–EDGX–2010–01;
SR–BX–2010–037; SR–ISE–2010–48; SR–NYSE–
2010–39; SR–NYSEAmex–2010–46; SR–NYSEArca–
2010–41; SR–NASDAQ–2010–061; SR–CHX–2010–
10; SR–NSX–2010–05; SR–CBOE–2010–047).
7 The term ‘‘Regular Trading Hours’’ is being
renamed from ‘‘Core Session’’ in Rule 3312(a)(2)(B)
as the time between 9:30 a.m. and 4 p.m. Eastern
Time. According to rules of the primary listing
markets, an individual stock trading pause can be
issued based on a Trigger Trade that occurs at any
time between 9:45 a.m. and 3:35 p.m. Eastern Time.
See NASDAQ Exchange Rule 4120(a)(11), NYSE
Rule 80C, and NYSE Arca Rule 7.11.
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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices
mstockstill on DSKH9S0YB1PROD with NOTICES
paragraph (a)(2)(C)(i). Thus, the
Exchange proposes narrowing the scope
of paragraph (b) so that it only permits
the Exchange to nullify transactions
consistent with that paragraph
(including at a lower Numerical
Guideline) if there is a disruption or
malfunction in the use of the Exchange’s
system covered by proposed Rule
3312(b)(1).
For the same reason, the Exchange
proposes eliminating the words ‘‘use or’’
from the language in subsection (b) to
make clear that the provision only
applies to a disruption or malfunction of
the Exchange’s system (and not of a user
of the Exchange’s systems).
Paragraph (b)(2) gives a Senior
Official of the Exchange the ability on
his or her own motion to review
transactions as potentially clearly
erroneous. Consistent with the goal of
achieving more objective and standard
results, the Exchange proposes deleting
language in existing paragraph (b) that
would allow the Exchange to deviate
from the Numerical Guidelines
contained in paragraph (a)(2)(C)(i). In
addition, the Exchange proposes to
make clear that any Senior Official
reviewing transactions on his or her
own motion must follow the guidelines
set forth in proposed paragraph
(a)(2)(C)(iv), if applicable. Accordingly,
the Exchange proposes to modify
paragraph (b)(2) to state that an officer
must rely on paragraphs (a)(2)(C)(i)–(iv)
of Rule 3312 when reviewing
transactions on his or her own motion.
Additional Conforming Revisions to
Paragraphs (a)(2)(C)(i) and (a)(2)(C)(iii)
Based on proposed paragraph
(a)(2)(C)(ii), the Exchange has proposed
certain conforming changes to
paragraphs (a)(2)(C)(i) and (iii) of the
existing Rule, as described below.
Under current Rule 3312, a
transaction may be found to be clearly
erroneous only if the price of the
transaction to buy (sell) that is the
subject of the complaint is greater than
(less than) the Reference Price by an
amount that equals or exceeds the
Numerical Guidelines set forth in
paragraphs (a)(2)(C)(i) of the Rule. The
‘‘Reference Price’’ is currently defined as
‘‘the consolidated last sale immediately
prior to the execution(s) under review
except for in Unusual Circumstances
* * * .’’ The Exchange proposes
modifying paragraph (a)(2)(C)(i)
consistent with the changes described
above such that the Exchange shall use
the consolidated last sale immediately
prior to the execution(s) under review as
the Reference Price except for: (A)
Multi-Stock Events involving twenty or
more securities, as described in
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proposed paragraph (a)(2)(C)(ii); (B)
transactions not involving a Multi-Stock
Event as described in proposed
paragraph (a)(2)(C)(ii) that trigger a
trading pause and subsequent
transactions, as described in proposed
paragraph (a)(2)(C)(iv), in which case
the Reference Price shall be determined
in accordance with that paragraph
(a)(2)(C)(iv); and (C) in other
circumstances, such as, for example,
relevant news impacting a security or
securities, periods of extreme market
volatility, sustained illiquidity, or
widespread system issues, where use of
a different Reference Price is necessary
for the maintenance of a fair and orderly
market and the protection of investors
and the public interest. The Exchange
also proposes modifying paragraph
(a)(2)(C)(i) to reduce uncertainty as to
the applicability of the Numerical
Guidelines, by requiring a finding that
an execution was clearly erroneous if
such execution exceeds the Numerical
Guidelines, subject only to the
Additional Factors included in
paragraph (a)(2)(C)(iii). Moreover, the
Exchange proposes revising the existing
description for Multi-Stock Events that
is contained on the Numerical
Guidelines chart to make clear that
different Numerical Guidelines apply
for Multi-Stock Events involving five or
more, but less than twenty, securities
whose executions occurred within a
period of five minutes or less. In
addition, the Exchange proposes adding
to the Numerical Guidelines chart a row
that contains the Numerical Guidelines
(30%) for Multi-Stock Events involving
twenty or more securities whose
executions occurred within a period of
five minutes or less.
The Exchange proposes clarifying
paragraph (a)(2)(C)(iii) to make clear
that the additional factors set forth in
that paragraph are not intended to
provide any discretion to an Exchange
official to deviate from the guidelines
that apply to Multi-Stock Events or to
transactions in securities subject to
individual stock trading pauses.
The Exchange also proposes
amending paragraph (c)(1), related to
appeals of clearly erroneous execution
decisions by the Exchange, to preserve
non-appealability of all joint rulings
between the Exchange and one or more
other market centers. The Exchange
believes that certainty and consistency
is critical to reviews of related
executions that span multiple market
centers. Accordingly, although the
Exchange has proposed deletion of such
language from existing paragraph
(a)(2)(C)(iii), the Exchange proposes
adding such language back in to
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61805
paragraph (c)(1) to make clear that joint
market rulings are not appealable.
Finally, the Exchange is amending
text in paragraphs (a)(2)(A)(iii)B. and
(e)(1) to correct minor typographical
errors in the text of the existing rule.
2. Statutory Basis
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.8
In particular, the proposed change is
consistent with Section 6(b)(5) of the
Act,9 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) 10 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
transparency and uniformity across
markets concerning reviews of
potentially clearly erroneous executions
in various contexts, including reviews
in the context of a Multi-Stock Event
involving twenty or more securities and
reviews resulting from a Trigger Trade
and any executions occurring
immediately after a Trigger Trade but
before a trading pause is in effect on the
Exchange. Further, the Exchange
believes that the proposed changes
enhance the objectivity of decisions
made by the Exchange with respect to
clearly erroneous executions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15 U.S.C. 78k–1(a)(1).
9 15
E:\FR\FM\06OCN1.SGM
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61806
Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; or (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 11 and Rule 19b–
4(f)(6) thereunder.12
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission hereby grants
that request.13 The Commission believes
that waiver of the operative delay is
consistent with the protection of
investors and the public interest
because it has recently approved Phlx’s
proposal to initiate trading on PSX,
which it plans to do on October 8, 2010,
and believes that the proposed rule
change should be implemented on that
date to ensure that the Exchange’s rules
on clearly erroneous trades are
consistent with the recently approved
changes to the clearly erroneous
execution rules of the other markets.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
mstockstill on DSKH9S0YB1PROD with NOTICES
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, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
VerDate Mar<15>2010
19:00 Oct 05, 2010
Jkt 223001
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
No. SR–Phlx–2010–125 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 No.
SR–Phlx–2010–125. 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
Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission,14
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 Phlx.
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 No.
SR–Phlx–2010–125 and should be
submitted on or before October 27,
2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–25137 Filed 10–5–10; 8:45 am]
BILLING CODE 8010–01–P
14 The text of the proposed rule change is
available on the Commission’s Web site at https://
www.sec.gov.
15 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63025; File No. SR–MSRB–
2010–08]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Amendment
No. 1 to and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, to Amend Rule A–
3, on Membership on the Board, To
Comply With the Dodd-Frank Wall
Street Reform and Consumer
Protection Act
September 30, 2010.
On August 27, 2010, the Municipal
Securities Rulemaking Board (‘‘Board’’
or ‘‘MSRB’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend MSRB Rule A–3, on membership
on the Board, to comply with the
requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (‘‘Dodd-Frank Act’’).3 The
Commission published the proposed
rule change for comment in the Federal
Register on September 8, 2010.4 The
Commission received ten comment
letters, the MSRB’s response, and a
supplemental response to the MSRB’s
response.5 On September 30, 2010, the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Public Law No. 111–203, 124 Stat. 1376
(2010).
4 See Securities Exchange Act Release No. 62827
(September 1, 2010), 75 FR 54673.
5 See e-mail from Peter Shapiro, Managing
Director, Swap Financial Group, LLC, dated
September 14, 2010 (‘‘Swap Financial Letter’’);
email from Kevin Olson, dated September 17, 2010
(‘‘Olson Letter’’); letter from Mike Nicholas, Chief
Executive Officer, Bond Dealers of America, dated
September 17, 2010 (‘‘Bond Dealers Letter’’); letter
from Robert W. Doty, President, American
Governmental Financial Services, dated September
21, 2010 (‘‘AGFS Letter I’’); letter from Joy A.
Howard, Principal, WM Financial Strategies, dated
September 21, 2010 (‘‘WM Financial Letter’’); letter
from Steve Apfelbacher, President, National
Association of Independent Public Finance
Advisors, dated September 22, 2010 (‘‘NAIPFA
Letter’’); letter from Michael Decker, Managing
Director and Co-Head, Municipal Securities
Division, Securities Industry and Financial Markets
Association, dated September 22, 2010 (‘‘SIFMA
Letter’’); letter from Susan Gaffney, Director, Federal
Liaison Center, Government Finance Officers
Association, dated September 22, 2010 (‘‘GFOA
Letter’’); letter from Thomas M. DeMars, Managing
Principal, Fieldman, Rolapp & Associates, dated
September 22, 2010 (‘‘Fieldman Letter’’); letter from
Lawrence P. Sandor, Senior Associate General
Counsel, MSRB, dated September 23, 2010 (‘‘MSRB
Response Letter’’); email from Robert W. Doty,
President, American Governmental Financial
Services, dated September 27, 2010 (‘‘AGFS Letter
2 17
E:\FR\FM\06OCN1.SGM
06OCN1
]]>Agencies
[Federal Register Volume 75, Number 193 (Wednesday, October 6, 2010)]
[Notices]
[Pages 61802-61806]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-25137]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63023; File No. SR-Phlx-2010-125]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
Clearly Erroneous Transactions
September 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 September 22, 2010, NASDAQ OMX PHLX LLC (``PHLX'' or the
``Exchange'') 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. 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.
---------------------------------------------------------------------------
[[Page 61803]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend PHLX Rule 3312, governing clearly
erroneous executions on the NASDAQ OMX PSX system (``PSX''). The text
of the proposed rule change is available from the Exchange's Web site
at https://nasdaqomxphlx.cchwallstreet.com, at the Exchange's principal
office, at the Commission's Web site at https://www.sec.gov, 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. The
text of these statements may be examined at the places specified in
Item III below, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing modifications to its Rule 3312, entitled
Clearly Erroneous Transactions. Rule 3312 was recently approved by the
Commission in connection with a proposal to resume trading of NMS
stocks through the Exchange's PSX system.\3\ The proposed changes are
designed to conform Rule 3312 to changes that were recently approved to
the corresponding rules of The NASDAQ Stock Market (the ``NASDAQ
Exchange'') and NASDAQ OMX BX (``BX''), and other exchanges.\4\ First,
the Exchange proposes replacing existing paragraph (a)(2)(C)(ii) of
Rule 3312, entitled ``Unusual Circumstances and Joint Market Rulings''
with a new paragraph, entitled ``Multi-Stock Events Involving Twenty or
More Securities.'' Second, the Exchange is replacing existing paragraph
(a)(2)(C)(iv) of Rule 3312, entitled ``Numerical Guidelines Applicable
to Volatile Market Opens'' with a new paragraph, entitled ``Individual
Stock Trading Pauses.'' Third, the Exchange is proposing changes to
existing paragraph (b) of Rule 3312 to eliminate the ability of the
Exchange to deviate from the Numerical Guidelines contained in
paragraph (a)(2)(C)(i) when deciding which transactions will be
reviewed by the Exchange as potentially clearly erroneous. Fourth, the
Exchange proposes modifications to paragraphs (a)(2)(C)(i) and (iii) of
Rule 3312 consistent with the proposed changes to paragraphs
(a)(2)(C)(ii) and (iv). Finally, the Exchange proposes amending
paragraph (c)(1), related to appeals of clearly erroneous execution
decisions by the Exchange, to preserve non-appealability of all joint
rulings between the Exchange and one or more other market centers.\5\
As proposed, the provisions of paragraph (a)(2)(C), paragraph (b) and
paragraph (c)(1) of Rule 3312, as amended by this filing, would be in
effect during a pilot period set to end on December 10, 2010. If the
pilot is not either extended or made permanent by December 10, 2010,
the prior versions of paragraph (a)(2)(C), paragraph (b) and paragraph
(c)(1) of Rule 3312 would be in effect.
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 62877 (September 9,
2010), 75 FR 56633 (September 16, 2010) (SR-PHLX-2010-79).
\4\ Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010) (File Nos. SR-BATS-2010-016;
SR-BX-2010-040; SR-CBOE-2010-056; SR-CHX-2010-13; SR-EDGA-2010-03;
SR-EDGX-2010-03; SR-ISE-2010-62; SR-NASDAQ-2010-076; SR-NSX-2010-07;
SR-NYSE-2010-47; SR-NYSEAmex-2010-60; SR-NYSEArca-2010-58).
\5\ The Exchange is also amending text in paragraphs
(a)(2)(A)(iii)B. and (e)(1) to correct minor typographical errors in
the text of the rule.
---------------------------------------------------------------------------
The Exchange is proposing the rule changes described below in
consultation with other markets and Commission staff to provide for
uniform treatment: (1) Of clearly erroneous execution reviews in Multi-
Stock Events involving twenty or more securities; and (2) in the event
transactions occur that result in the issuance of an individual stock
trading pause by the primary market and subsequent transactions that
occur before the trading pause is in effect on the Exchange. The
Exchange has also proposed additional changes to Rule 3312 that reduce
the ability of the Exchange to deviate from the objective standards set
forth in the Rule. In addition, the Exchange is modifying certain
defined terms in the rule to match definitions used by other exchanges
in order to avoid the risk of confusion. The proposed changes are
described in further detail below.
Revised Paragraph (a)(2)(C)(ii) Related to Multi-Stock Events Involving
Twenty or More Securities
The Exchange proposes to eliminate the majority of existing
paragraph (a)(2)(C)(ii), which provides flexibility to the Exchange to
use different Numerical Guidelines or Reference Prices in various
``Unusual Circumstances.'' The Exchange proposes to replace this
paragraph with new language that would apply to Multi-Stock Events
involving twenty or more securities whose executions occurred within a
period of five minutes or less. The revised paragraph would retain
language making clear that during Multi-Stock Events involving twenty
or more securities the number of affected transactions may be such that
immediate finality is necessary to maintain a fair and orderly market
and to protect investors and the public interest. Accordingly, in such
circumstances, decisions made by the Exchange in consultation with
other markets could not be appealed. Further, as proposed, in
connection with reviews of Multi-Stock Events involving twenty or more
securities, the Exchange may use a Reference Price other than
consolidated last sale in its review of potentially clearly erroneous
executions. With the exception of those securities under review that
are subject to an individual stock trading pause as described in
proposed paragraph (a)(2)(C)(iv), and to ensure consistent application
across market centers when proposed paragraph (a)(2)(C)(ii) is invoked,
the Exchange will promptly coordinate with the other market centers to
determine the appropriate review period, which may be greater than the
period of five minutes or less that triggered application of proposed
paragraph (a)(2)(C)(ii), as well as select one or more specific points
in time prior to the transactions in question and use transaction
prices at or immediately prior to the one or more specific points in
time selected as the Reference Price. The Exchange will nullify as
clearly erroneous all transactions that are at prices equal to or
greater than 30% away from the Reference Price in each affected
security during the review period selected by the Exchange and other
markets consistent with the proposed paragraph (a)(2)(C)(ii).
Because the Exchange and other market centers are adopting a
different threshold and standards to handle large-scale market events,
which would include events occurring during times of high volatility at
the beginning of regular trading hours, the Exchange proposes deletion
of paragraph (a)(2)(C)(iv) (``Numerical Guidelines Applicable to
Volatile Market Opens'') of the existing rule. The Exchange believes
that this provision is no longer necessary, and if maintained, could
result in extremely high Numerical Guidelines (up to 90%) in certain
circumstances.
[[Page 61804]]
Revised Paragraph (a)(2)(C)(iv) Related to Individual Stock Trading
Pauses
The NASDAQ Exchange and other 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, and other exchanges have amended their rules to follow these
trading pauses. In this regard, the Exchange's approved rules for PSX
pause trading in an individual stock when the primary listing market
for such stock issues a trading pause, as provided in Rule
3100(a)(4).\6\ As described above, the Exchange is proposing to
eliminate existing paragraph (a)(2)(C)(iv) (``Numerical Guidelines
Applicable to Volatile Market Opens''). The Exchange proposes adopting
a rule, numbered as (a)(2)(C)(iv) following such elimination, that will
provide for uniform treatment of clearly erroneous execution reviews in
the event transactions occur that result in the issuance of an
individual stock trading pause by the primary listing market and
subsequent transactions that occur before the trading pause is in
effect on the Exchange. The proposed rule change is necessary to
provide greater certainty of the clearly erroneous Reference Price for
transactions that trigger a trading pause (the ``Trigger Trade'') and
subsequent transactions occurring between the time of the Trigger Trade
and the time the trading pause message is received by the Exchange from
the single plan processor responsible for consolidation and
dissemination of information for the security and put into effect on
the Exchange, especially under highly volatile and active market
conditions.
---------------------------------------------------------------------------
\6\ Prior to the launch of trading on PSX, the Exchange will
submit a proposed rule change to amend Rule 3100(a)(4) to reflect
changes recently approved to the corresponding rules of other
exchanges. Securities Exchange Act Release No. 62884 (September 10,
2010), 75 FR 56618 (September 16, 2010) (SR-BATS-2010-018; SR-BX-
2010-044; SR-CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-
EDGX-2010-05; SR-ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49;
SR-NYSEAmex-2010-63; SR-NYSEArca-2010-61; SR-NSX-2010-08).
Securities Exchange Act Release No. 62884 amended trading pause
rules originally adopted by PSX in SR-PHLX-2010-79, supra n. 3, and
by other exchanges in Securities Exchange Act Release No. 62252
(June 10, 2010), 75 FR 34186 (June 16, 2010) (SR-BATS-2010-014; SR-
EDGA-2010-01; SR-EDGX-2010-01; SR-BX-2010-037; SR-ISE-2010-48; SR-
NYSE-2010-39; SR-NYSEAmex-2010-46; SR-NYSEArca-2010-41; SR-NASDAQ-
2010-061; SR-CHX-2010-10; SR-NSX-2010-05; SR-CBOE-2010-047).
---------------------------------------------------------------------------
The Exchange proposes to revise paragraph (a)(2)(C)(iv) of Rule
3312 to allow the Exchange to use the price that triggered a trading
pause in an individual stock (the ``Trading Pause Trigger Price'') as
the Reference Price for clearly erroneous execution reviews of a
Trigger Trade and transactions that occur immediately after a Trigger
Trade but before a trading pause is in effect on the Exchange. As
proposed, the phrase ``Trading Pause Trigger Price'' shall mean the
price that triggered a trading pause pursuant to PHLX Rule 3100(a)(4).
The Trading Pause Trigger Price reflects a price calculated by the
primary listing market over a rolling five-minute period and may differ
from the execution price of a transaction that triggered a trading
pause. The Exchange will rely on the primary listing market that issued
an individual stock trading pause to determine and communicate the
Trading Pause Trigger Price for such stock. The Exchange proposes to
make clear in the text that the proposed standards in paragraph
(a)(2)(C)(iv) apply regardless of whether the security at issue is part
of a Multi-Stock Event involving five or more securities as described
in proposed paragraphs (a)(2)(C)(i) and (ii).
As proposed, the Numerical Guidelines set forth in PHLX Rule
3312(a)(2)(C)(i), other than those Numerical Guidelines applicable to
Multi-Stock Events, would apply to reviews of Trigger Trades and
subsequent transactions. The Exchange proposes to review, on its own
motion pursuant to paragraph (b)(2) of the Rule, all transactions that
trigger a trading pause and subsequent transactions occurring before
the trading pause is in effect on the Exchange. The Exchange has
proposed to limit such reviews to reviews of transactions that executed
at a price lower than the Trading Pause Trigger Price in the event of a
price decline and higher than the Trading Pause Trigger Price in the
event of a price rise. Because the proposed rules for trading pauses
would only apply within Regular Trading Hours,\7\ an execution would be
reviewed and nullified as clearly erroneous if it exceeds the following
thresholds:
---------------------------------------------------------------------------
\7\ The term ``Regular Trading Hours'' is being renamed from
``Core Session'' in Rule 3312(a)(2)(B) as the time between 9:30 a.m.
and 4 p.m. Eastern Time. According to rules of the primary listing
markets, an individual stock trading pause can be issued based on a
Trigger Trade that occurs at any time between 9:45 a.m. and 3:35
p.m. Eastern Time. See NASDAQ Exchange Rule 4120(a)(11), NYSE Rule
80C, and NYSE Arca Rule 7.11.
------------------------------------------------------------------------
Numerical guidelines (Subject
transaction's % difference from
Reference price or product the Trading Pause Trigger
Price)
------------------------------------------------------------------------
Greater than $0.00 up to and including 10%.
$25.00.
Greater than $25.00 up to and including 5%.
$50.00.
Greater than $50.00.................... 3%.
Leveraged ETF/ETN securities........... Regular Trading Hours Numerical
Guidelines multiplied by the
leverage multiplier (i.e.,
2x).
------------------------------------------------------------------------
Revisions to Paragraph (b)
To be consistent with other exchanges, the Exchange is eliminating
paragraph (b) and adding new paragraphs (b)(1) and (b)(2) to separate
System Disruptions from Own Motion situations. Consistent with other
proposals made in this filing, the Exchange proposes modifying
paragraph (b) to eliminate the ability of a Senior Official to deviate
from the Numerical Guidelines contained in the Rule other than under
very limited circumstances set forth in paragraph (a)(2)(C)(iii).
New paragraph (b)(1) provides a Senior Official of the Exchange the
ability on his or her own motion, to review and rule on executions that
result from ``any disruption or a malfunction in the operation of any
electronic communications and trading facilities of the Exchange, or
extraordinary market conditions or other circumstances in which the
nullification of transactions may be necessary for the maintenance of a
fair and orderly market or the protection of investors and the public
interest exist.''
New paragraph (b)(2) is similar to existing Rule 3312(b) and covers
other situations where the Exchange may act on its own motion. Without
modification, the language ``extraordinary market conditions or other
circumstances * * *'' in current Rule 3312(b) would leave the Exchange
with broad discretion to deviate from the Numerical Guidelines set
forth in
[[Page 61805]]
paragraph (a)(2)(C)(i). Thus, the Exchange proposes narrowing the scope
of paragraph (b) so that it only permits the Exchange to nullify
transactions consistent with that paragraph (including at a lower
Numerical Guideline) if there is a disruption or malfunction in the use
of the Exchange's system covered by proposed Rule 3312(b)(1).
For the same reason, the Exchange proposes eliminating the words
``use or'' from the language in subsection (b) to make clear that the
provision only applies to a disruption or malfunction of the Exchange's
system (and not of a user of the Exchange's systems).
Paragraph (b)(2) gives a Senior Official of the Exchange the
ability on his or her own motion to review transactions as potentially
clearly erroneous. Consistent with the goal of achieving more objective
and standard results, the Exchange proposes deleting language in
existing paragraph (b) that would allow the Exchange to deviate from
the Numerical Guidelines contained in paragraph (a)(2)(C)(i). In
addition, the Exchange proposes to make clear that any Senior Official
reviewing transactions on his or her own motion must follow the
guidelines set forth in proposed paragraph (a)(2)(C)(iv), if
applicable. Accordingly, the Exchange proposes to modify paragraph
(b)(2) to state that an officer must rely on paragraphs (a)(2)(C)(i)-
(iv) of Rule 3312 when reviewing transactions on his or her own motion.
Additional Conforming Revisions to Paragraphs (a)(2)(C)(i) and
(a)(2)(C)(iii)
Based on proposed paragraph (a)(2)(C)(ii), the Exchange has
proposed certain conforming changes to paragraphs (a)(2)(C)(i) and
(iii) of the existing Rule, as described below.
Under current Rule 3312, a transaction may be found to be clearly
erroneous only if the price of the transaction to buy (sell) that is
the subject of the complaint is greater than (less than) the Reference
Price by an amount that equals or exceeds the Numerical Guidelines set
forth in paragraphs (a)(2)(C)(i) of the Rule. The ``Reference Price''
is currently defined as ``the consolidated last sale immediately prior
to the execution(s) under review except for in Unusual Circumstances *
* * .'' The Exchange proposes modifying paragraph (a)(2)(C)(i)
consistent with the changes described above such that the Exchange
shall use the consolidated last sale immediately prior to the
execution(s) under review as the Reference Price except for: (A) Multi-
Stock Events involving twenty or more securities, as described in
proposed paragraph (a)(2)(C)(ii); (B) transactions not involving a
Multi-Stock Event as described in proposed paragraph (a)(2)(C)(ii) that
trigger a trading pause and subsequent transactions, as described in
proposed paragraph (a)(2)(C)(iv), in which case the Reference Price
shall be determined in accordance with that paragraph (a)(2)(C)(iv);
and (C) in other circumstances, such as, for example, relevant news
impacting a security or securities, periods of extreme market
volatility, sustained illiquidity, or widespread system issues, where
use of a different Reference Price is necessary for the maintenance of
a fair and orderly market and the protection of investors and the
public interest. The Exchange also proposes modifying paragraph
(a)(2)(C)(i) to reduce uncertainty as to the applicability of the
Numerical Guidelines, by requiring a finding that an execution was
clearly erroneous if such execution exceeds the Numerical Guidelines,
subject only to the Additional Factors included in paragraph
(a)(2)(C)(iii). Moreover, the Exchange proposes revising the existing
description for Multi-Stock Events that is contained on the Numerical
Guidelines chart to make clear that different Numerical Guidelines
apply for Multi-Stock Events involving five or more, but less than
twenty, securities whose executions occurred within a period of five
minutes or less. In addition, the Exchange proposes adding to the
Numerical Guidelines chart a row that contains the Numerical Guidelines
(30%) for Multi-Stock Events involving twenty or more securities whose
executions occurred within a period of five minutes or less.
The Exchange proposes clarifying paragraph (a)(2)(C)(iii) to make
clear that the additional factors set forth in that paragraph are not
intended to provide any discretion to an Exchange official to deviate
from the guidelines that apply to Multi-Stock Events or to transactions
in securities subject to individual stock trading pauses.
The Exchange also proposes amending paragraph (c)(1), related to
appeals of clearly erroneous execution decisions by the Exchange, to
preserve non-appealability of all joint rulings between the Exchange
and one or more other market centers. The Exchange believes that
certainty and consistency is critical to reviews of related executions
that span multiple market centers. Accordingly, although the Exchange
has proposed deletion of such language from existing paragraph
(a)(2)(C)(iii), the Exchange proposes adding such language back in to
paragraph (c)(1) to make clear that joint market rulings are not
appealable.
Finally, the Exchange is amending text in paragraphs
(a)(2)(A)(iii)B. and (e)(1) to correct minor typographical errors in
the text of the existing rule.
2. Statutory Basis
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.\8\ In particular, the
proposed change is consistent with Section 6(b)(5) of the Act,\9\
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) \10\ 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 transparency and uniformity
across markets concerning reviews of potentially clearly erroneous
executions in various contexts, including reviews in the context of a
Multi-Stock Event involving twenty or more securities and reviews
resulting from a Trigger Trade and any executions occurring immediately
after a Trigger Trade but before a trading pause is in effect on the
Exchange. Further, the Exchange believes that the proposed changes
enhance the objectivity of decisions made by the Exchange with respect
to clearly erroneous executions.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 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 will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
[[Page 61806]]
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; or (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\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, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission hereby grants that request.\13\ The
Commission believes that waiver of the operative delay is consistent
with the protection of investors and the public interest because it has
recently approved Phlx's proposal to initiate trading on PSX, which it
plans to do on October 8, 2010, and believes that the proposed rule
change should be implemented on that date to ensure that the Exchange's
rules on clearly erroneous trades are consistent with the recently
approved changes to the clearly erroneous execution rules of the other
markets.
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-Phlx-2010-125 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 No. SR-Phlx-2010-125. 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 Web site (https://www.sec.gov/rules/sro.shtml). Copies
of the submission,\14\ 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 Phlx. 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 No. SR-Phlx-2010-125 and should be submitted on or
before October 27, 2010.
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\14\ The text of the proposed rule change is available on the
Commission's Web site at https://www.sec.gov.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25137 Filed 10-5-10; 8:45 am]
BILLING CODE 8010-01-P
