Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Extend a Pilot Program Related to Trading Pauses Due to Extraordinary Market Volatility, 27680-27683 [2011-11675]
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27680
Federal Register / Vol. 76, No. 92 / Thursday, May 12, 2011 / Notices
substantive, in that the percentages
under Rule 4613(a) would decrease
slightly for the proposed new securities
priced at $1 or greater. The Exchange
believes that this proposed substantive
change would not have a significant
impact on Market Maker pricing
obligations and is reasonable because it
would ensure that the designated
quoting percentages in Rule 4613(a) are
within a narrower range than the
percentages necessary to trigger a
Trading Pause.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Section 6(b)(5),8 in
particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. The
proposed rule change also is designed to
support the principles of Section
11A(a)(1) 9 of the Act in that it seeks to
ensure fair competition among brokers
and dealers and among exchange
markets. The Exchange believes that the
proposed rule meets these requirements
because it expands the scope of the Pilot
to cover all NMS stocks while adjusting
the parameters of the rule for different
securities in a manner that will promote
uniformity across markets concerning
decisions to pause trading in a security
when there are significant price
movements. Additionally, the proposed
changes would ensure that the
designated quoting percentages in Rule
4613(a) are within a narrower range
than the percentages necessary to trigger
a Trading Pause.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
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.
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 15 U.S.C. 78k–1(a)(1).
8 15
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 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 or disapprove
such proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
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–
NASDAQ–2011–067 and should be
submitted on or before June 2, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–11615 Filed 5–11–11; 8:45 am]
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–NASDAQ–2011–067 on the
subject line.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64433; File No. SR–BYX–
2011–011]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To Extend a
Pilot Program Related to Trading
Pauses Due to Extraordinary Market
Volatility
May 6, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
• Send paper comments in triplicate
notice is hereby given that on May 4,
to Elizabeth M. Murphy, Secretary,
2011, BATS Y-Exchange, Inc. (the
Securities and Exchange Commission,
‘‘Exchange’’ or ‘‘BYX’’) filed with the
100 F Street, NE., Washington, DC
Securities and Exchange Commission
20549–1090.
(‘‘Commission’’) the proposed rule
All submissions should refer to File
change as described in Items I and II
Number SR–NASDAQ–2011–067. This
below, which Items have been prepared
file number should be included on the
by the Exchange. The Commission is
subject line if e-mail is used. To help the
publishing this notice to solicit
Commission process and review your
comments on the proposed rule change
comments more efficiently, please use
from interested persons.
only one method. The Commission will
post all comments on the Commission’s I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
Internet Web site (https://www.sec.gov/
the Proposed Rule Change
rules/sro.shtml). Copies of the
submission, all subsequent
The Exchange is filing with the
amendments, all written statements
Commission a proposal to extend a pilot
with respect to the proposed rule
program previously approved by the
change that are filed with the
Commission related to Rule 11.18,
Commission, and all written
entitled ‘‘Trading Halts Due to
communications relating to the
Extraordinary Market Volatility,’’ to
proposed rule change between the
include additional securities in the pilot
Commission and any person, other than by which such rule operates. The
those that may be withheld from the
Exchange also proposes to amend Rule
public in accordance with the
11.8, entitled ‘‘Obligations of Market
provisions of 5 U.S.C. 552, will be
Makers,’’ to conform certain of the
available for Web site viewing and
printing in the Commission’s Public
10 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
Reference Room, 100 F Street, NE.,
2 17 CFR 240.19b–4.
Washington, DC 20549, on official
Paper Comments
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Federal Register / Vol. 76, No. 92 / Thursday, May 12, 2011 / Notices
percentages thereunder consistent with
the proposed changes to the pilot.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to extend a
pilot program previously approved by
the Commission related to Rule 11.18,
entitled ‘‘Trading Halts Due to
Extraordinary Market Volatility,’’ to
include additional securities in the pilot
by which such rule operates. The
Exchange also proposes to amend Rule
11.8, entitled ‘‘Obligations of Market
Makers,’’ to conform certain of the
percentages thereunder consistent with
the proposed changes to the pilot.
The Commission approved Rule
11.18(d) on a pilot basis on June 10,
2010 to allow other national securities
exchanges and FINRA to pause trading
in an individual stock when the primary
listing market for such stock issues a
trading pause due to extraordinary
market volatility (‘‘Trading Pause’’) in a
security included within the S&P 500®
Index (‘‘S&P 500’’) (‘‘Trading Pause Pilot’’
or ‘‘Pilot’’).3 Other national securities
exchanges and FINRA subsequently
received approval to add to the Pilot the
securities included in the Russell 1000®
3 Prior to the Exchange’s approval to register as
a national securities exchange, the Commission
approved the Trading Pause Pilot for all equities
exchanges and FINRA. See Securities Exchange Act
Release No. 62252 (June 10, 2010), 75 FR 34186
(June 16, 2010) (File Nos. 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; and SR–CBOE–2010–047) and Securities
Exchange Act Release No. 62251 (June 10, 2010), 75
FR 34183 (June 16, 2010) (SR–FINRA–2010–025).
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Index (‘‘Russell 1000’’) and a specified
list of Exchange Traded Products
(‘‘ETPs’’).4 The Exchange adopted the
Pilot prior to commencing operations as
a national securities exchange.5
The Exchange has continued to assess
whether additional securities need to be
added to the Pilot and whether the
parameters of Rule 11.18 need to be
modified to accommodate trading
characteristics of different securities. In
consultation with other markets and the
staff of the Commission, the Exchange
proposes to include all NMS stocks
within the Pilot that are not already
included therein. Accordingly, the
Exchange proposes to modify the
definition of ‘‘Circuit Breaker Securities’’
in Interpretation and Policy .05 to Rule
11.18 to include all NMS stocks. The
Exchange is not proposing any other
changes to the text of Rule 11.18 or the
operation of the Pilot, and will continue
to assess whether the parameters for
invoking a Trading Pause continue to be
appropriate and whether the parameters
should be modified.6
4 The Commission approved the addition to the
Trading Pause Pilot of the securities included in the
Russell 1000 and ETPs, where applicable, for all
equities exchanges and FINRA. See Securities
Exchange Act Release No. 62884 (September 10,
2010), 75 FR 56618 (September 16, 2010) (File Nos.
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; and
SR–NSX–2010–08 and Securities Exchange Act
Release No. 62883 (September 10, 2010), 75 FR
56608 (September 16, 2010) (SR–FINRA–2010–033).
5 See Securities Exchange Act Release No. 63097
(October 13, 2010), 75 FR 64767 (October 20, 2010)
(SR–BYX–2010–002). The Exchange submitted a
proposed rule change shortly after the adoption of
the Pilot to extend the operation of the Pilot, which
was set to expire on December 10, 2010, until April
11, 2011. See Securities Exchange Act Release No.
63513 (December 9, 2010), 75 FR 78784 (December
16, 2010) (SR–BYX–2010–007). More recently, the
Exchange submitted a proposed rule change to
extend the operation of the Pilot until the earlier of
August 11, 2011 or the date on which a limit up/
limit down mechanism to address extraordinary
market volatility, if adopted, applies. Securities
Exchange Act Release No. 64214 (April 6, 2011), 76
FR 20430 (April 12, 2011) (SR–BYX–2011–007).
6 The Exchange notes that it does not currently
calculate the percentage necessary for a Trading
Pause to be issued, but instead relies on the primary
listing market for each security to perform such
calculation and disseminate information if and
when a Trading Pause is in effect. Nonetheless, the
Exchange supports the percentages at which
Trading Pauses will trigger, which are being
concurrently proposed by the primary listing
markets with respect to the NMS stocks that are
being added to the Pilot. In particular, the proposed
additional stocks are those not currently included
in the S&P 500 Index, Russell 1000 Index, or
specified ETPs, and therefore are more likely to be
less liquid securities or securities with lower
trading volumes. Accordingly, the Exchange agrees
that broader percentages to trigger a Trading Pause
would be appropriate. Similarly, because leveraged
ETPs trade at a ratio against the associated index,
a broader percentage to trigger a Trading Pause
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The proposed changes to the Pilot, if
approved, would require that the text of
Rule 11.8(d)(2)(D) and (E), which
pertain to the pricing obligations that
Market Makers 7 are required to adhere
to, be amended to ensure consistency
with the percentage moves that will
trigger a Trading Pause on the primary
listing markets (a ‘‘Trigger Percentage’’).
Specifically, in order to adopt the
proposed changes to the Pilot, the
primary listing markets will apply
different Trigger Percentages to the
newly added securities, including 30%
for NMS stocks priced equal to or
greater than $1 per share that are not
included in the S&P 500, the Russell
1000 or the specified list of ETPs and
50% for NMS stocks priced below $1
per share that are not included in the
S&P 500, the Russell 1000 or the
specified list of ETPs (‘‘Low Priced
Securities’’). In order to accommodate
this change, the Exchange proposes to
modify the language of its quoting
requirements for Market Makers, which
are intended to be within the bounds of
the Trigger Percentages.
As set forth in the Exchange’s current
Rule, the pricing obligations applicable
to quotations of Market Makers are
based on the ‘‘Designated Percentage’’
and the ‘‘Defined Limit,’’ which are
determined based on the applicable
Trigger Percentage. Currently, the
Exchange’s formula for calculating the
Designated Percentage is the Trigger
Percentage minus 2%. The current
formula for calculating the Defined
Limit is the Trigger Percentage minus
0.5%. The Exchange proposes to apply
the existing formulas for calculating the
Designated Percentage and Defined
Limit to all NMS stocks other than Low
Priced securities. Thus, there will be no
change to the existing Designated
Percentage of 8% and Defined Limit of
9.5% for securities included in the S&P
500, the Russell 1000 or the specified
list of ETPs (or 20% and 21.5% when
trading pauses are not in effect). For
newly added NMS stocks priced $1 or
above, this formula will mean a
Designated Percentage of 28% and a
Defined Limit of 29.5%.
The Exchange proposes to add
language stating that for Low Priced
Securities the Designated Percentage
would also be appropriate for leveraged ETPs.
Finally, the Exchange agrees that lower-priced
securities should be governed by a broader
percentage prior to triggering a Trading Pause than
other NMS stocks because lower-priced securities
may tend to be more volatile, and price movements
of lower-priced stocks equate to a higher percentage
move than a similar price change for a higherpriced stock.
7 The term Market Maker means a Member that
acts as a Market Maker on BYX pursuant to Chapter
XI of the Exchange’s rules.
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will be 20 percentage points less than
the Trigger Percentage and the Defined
Limit will be 18.5 percentage points less
than the Trigger Percentage.
Accordingly, the Designated Percentage
and Defined Limit would be 30% and
31.5%, respectively, for Low Priced
Securities.
Similarly, and consistent with the
rules of the primary listing markets, the
Exchange proposes to state that with
respect to securities included in S&P
500, the Russell 1000 or the specified
list of ETPs, such products have
different quotation requirements at the
open and close of trading each day.
Specifically, the Exchange proposes to
state that with respect to such products,
the quotation requirements apply with a
Designated Percentage of 20% and a
Defined Limit of 21.5% for times during
Regular Trading Hours when stock
pause triggers are not in effect under the
rules of the primary listing market. For
all other NMS stocks, the Designated
Percentage and Defined Limit will not
change for the open or the close of
trading.
The Exchange notes that part of this
proposed change would be substantive,
in that the percentages under Rule
11.8(d)(2)(D) and (E) would decrease
slightly for the proposed new NMS
stocks priced at $1 or greater. The
Exchange believes that this proposed
substantive change would not have a
significant impact on Market Maker
pricing obligations and is reasonable
because it would ensure that the
designated quoting percentages in 11.18
are within a narrower range than the
percentages necessary to trigger a
Trading Pause.
The Exchange also proposes to modify
Rule 11.8(e), which describes an
optional functionality that the Exchange
offers to Exchange Market Makers to
assist such Market Makers with
maintenance of their quotations under
Rule 11.8. Specifically, for Market
Makers that utilize the functionality, the
Exchange enters bids and offers at the
Designated Percentage and cancels and
replaces the bid or offer if it drifts away
from the NBBO to the Defined Limit or
away from the Designated Percentage
towards the NBBO by a number of
percentage points determined by the
Exchange. If a bid or offer entered
pursuant to proposed paragraph (e) is
executed, the Exchange will re-enter a
new bid or offer on behalf of a Market
Maker. In order to reduce the
operational burden on the Exchange, the
Exchange proposes to use the same
Designated Percentage and Defined
Limit for all NMS stocks that are being
added to the Pilot regardless of the price
per share of such stocks. Accordingly,
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for purposes of its optional quotation
functionality, the Exchange will use a
consistent Designated Percentage of
28% and a consistent Defined Limit of
29.5% for all NMS stocks not included
in S&P 500, the Russell 1000 or the
specified list of ETPs. Market Makers
managing their own quoting on the
Exchange may still quote in accordance
with the rule based on the Designated
Percentage and Defined Limit
established for Low Priced Securities
(30% and 31.5%, respectively).
Finally, the Exchange proposes to
simplify Rule 11.18 by adopting
Interpretation and Policy .01, which
will, in chart form, explicitly state the
percentages that are applicable under
the Rule for different types of securities
and at different times.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the Act.8
In particular, the proposal 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. The
proposed rule change is also consistent
with Section 11A(a)(1) of the Act 10 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 because it expands
the scope of the Pilot to cover all NMS
stocks while adjusting the parameters of
the rule for different securities in a
manner that will promote uniformity
across markets concerning decisions to
pause trading in a security when there
are significant price movements.
Additionally, the proposed changes
would ensure that the designated
quoting percentages in Rule 11.18 are
within a narrower range than the
percentages necessary to trigger a
Trading Pause on a primary listing
market.
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.
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15 U.S.C. 78k–1(a)(1).
9 15
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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 45 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 or disapprove
such proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be 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–BYX–2011–011 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–BYX–2011–011. 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
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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–BYX–
2011–011 and should be submitted on
or before June 2, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–11675 Filed 5–11–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64431; File No. SR–CHX–
2011–09]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing of Proposed Change To Add
All NMS Stocks to the Single Securities
Circuit Breaker Pilot Program
May 6, 2011.
wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on May 4,
2011, the Chicago Stock Exchange, Inc.
(‘‘CHX’’ 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 CHX. 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
CHX proposes to amend CHX Article
20, Rule 2 to add all NMS stocks to the
pilot program relating to individual
securities circuit breakers and amend
11 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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CHX Article 16, Rule 8 to simplify
certain aspects of the text while also
conforming certain of the percentages
thereunder to CHX Article 20, Rule 2.
The text of this proposed rule change is
available on the Exchange’s Web site at
(https://www.chx.com) and in the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
CHX included statements concerning
the purpose of and basis for the
proposed rule changes and discussed
any comments it received regarding the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CHX has prepared
summaries, set forth in sections A, B
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
CHX Article 20, Rule 2 to include
additional securities in the pilot by
which such rule operates, to specify the
thresholds used by the primary listing
markets in determining when to pause
trading and to amend CHX Article 16,
Rule 8 to simplify certain aspects of the
text while also conforming certain of the
percentages thereunder to CHX Article
20, Rule 2.
The Commission approved
amendments to CHX Article 20, Rule 2
on a pilot basis on June 10, 2010 to
provide for trading pauses in individual
securities due to extraordinary market
volatility (‘‘Trading Pause’’) in all
securities included within the S&P
500® Index (‘‘S&P 500’’) (‘‘Trading Pause
Pilot’’ or ‘‘Pilot’’).3 The Exchange noted
in its filing to adopt amendments to
CHX Article 20, Rule 2 that during the
Pilot period it would continue to assess
whether additional securities need to be
3 The Commission approved the Trading Pause
Pilot for all equities exchanges and FINRA. See
Securities Exchange Act Release No. 62252 (June
10, 2010), 75 FR 34186 (June 16, 2010) (File Nos.
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; and SR–
CBOE–2010–047) and Securities Exchange Act
Release No. 62251 (June 10, 2010), 75 FR 34183
(June 16, 2010) (SR–FINRA–2010–025). The NYSE
submitted a proposed rule change shortly after the
initial Commission approval order to clarify the
procedures applicable to reopening. See Securities
Exchange Act Release No. 62284 (June 11, 2010), 75
FR 34498 (June 17, 2010) (SR–NYSE–2010–45).
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27683
added and whether the parameters of
CHX Article 20, Rule 2 would need to
be modified to accommodate trading
characteristics of different securities.
The Exchange subsequently received
approval to add to the Pilot the
securities included in the Russell 1000®
Index (‘‘Russell 1000’’) and a specified
list of Exchange Traded Products
(‘‘ETPs’’).4
The Exchange has continued to assess
whether additional securities need to be
added to the Pilot and whether the
parameters of CHX Article 20, Rule 2
need to be modified to accommodate
trading characteristics of different
securities. In consultation with other
markets and the staff of the
Commission, the Exchange proposes to
include all NMS stocks within the Pilot
that are not already included therein.
The Exchange is also proposing to
amend the text of CHX Article 20, Rule
2 to specify the thresholds used by the
primary listing markets in determining
when to pause trading.
In particular, the proposed additional
stocks are those not currently included
in the S&P 500 Index, Russell 1000
Index, or specified ETPs, and therefore
are more likely to be less liquid
securities or securities with lower
trading volumes. Accordingly, the
Exchange believes that broader
Threshold Move percentages would be
appropriate. Similarly, because
leveraged ETPs trade at a ratio against
the associated index, a broader
Threshold Move percentage would also
be appropriate for leveraged ETPs.
Additionally, in those instances where
such securities are priced below $1 and
price movements equate to a higher
percentage move, the Exchange believes
4 The Commission approved the addition to the
Trading Pause Pilot of the securities included in the
Russell 1000 and ETPs, where applicable, for all
equities exchanges and FINRA. See Securities
Exchange Act Release No. 62884 (September 10,
2010), 75 FR 56618 (September 16, 2010) (File Nos.
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; and
SR–NSX–2010–08 and Securities Exchange Act
Release No. 62883 (September 10, 2010), 75 FR
56608 (September 16, 2010) (SR–FINRA–2010–033).
The Exchange submitted a proposed rule change
shortly after the addition of the Russell 1000
securities and ETPs to extend the operation of the
Pilot, which was set to expire on December 10,
2010, until April 11, 2011. See Securities Exchange
Act Release No. 63498 (December 9, 2010), 75 FR
78310 (December 15, 2010) (SR–CHX–2010–24).
Then, in April 2011, the Exchange submitted
another rule change to further extend the operation
of the Pilot until the earlier of August 11, 2011 or
the date on which a limit up/limit down
mechanism to address extraordinary market
volatility, if adopted, applies. See Securities
Exchange Act Release No. 64203 (April 6, 2011), 76
FR 20393 (April 12, 2011) (SR–CHX–2011–05).
E:\FR\FM\12MYN1.SGM
12MYN1
Agencies
[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27680-27683]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11675]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64433; File No. SR-BYX-2011-011]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Extend a Pilot Program Related to
Trading Pauses Due to Extraordinary Market Volatility
May 6, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 4, 2011, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposal to extend a
pilot program previously approved by the Commission related to Rule
11.18, entitled ``Trading Halts Due to Extraordinary Market
Volatility,'' to include additional securities in the pilot by which
such rule operates. The Exchange also proposes to amend Rule 11.8,
entitled ``Obligations of Market Makers,'' to conform certain of the
[[Page 27681]]
percentages thereunder consistent with the proposed changes to the
pilot.
The text of the proposed rule change is available at the Exchange's
Web site at https://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
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 extend a pilot program previously approved
by the Commission related to Rule 11.18, entitled ``Trading Halts Due
to Extraordinary Market Volatility,'' to include additional securities
in the pilot by which such rule operates. The Exchange also proposes to
amend Rule 11.8, entitled ``Obligations of Market Makers,'' to conform
certain of the percentages thereunder consistent with the proposed
changes to the pilot.
The Commission approved Rule 11.18(d) on a pilot basis on June 10,
2010 to allow other national securities exchanges and FINRA to pause
trading in an individual stock when the primary listing market for such
stock issues a trading pause due to extraordinary market volatility
(``Trading Pause'') in a security included within the S&P 500[reg]
Index (``S&P 500'') (``Trading Pause Pilot'' or ``Pilot'').\3\ Other
national securities exchanges and FINRA subsequently received approval
to add to the Pilot the securities included in the Russell 1000[supreg]
Index (``Russell 1000'') and a specified list of Exchange Traded
Products (``ETPs'').\4\ The Exchange adopted the Pilot prior to
commencing operations as a national securities exchange.\5\
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\3\ Prior to the Exchange's approval to register as a national
securities exchange, the Commission approved the Trading Pause Pilot
for all equities exchanges and FINRA. See Securities Exchange Act
Release No. 62252 (June 10, 2010), 75 FR 34186 (June 16, 2010) (File
Nos. 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; and SR-CBOE-2010-047) and Securities Exchange Act Release No.
62251 (June 10, 2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-
025).
\4\ The Commission approved the addition to the Trading Pause
Pilot of the securities included in the Russell 1000 and ETPs, where
applicable, for all equities exchanges and FINRA. See Securities
Exchange Act Release No. 62884 (September 10, 2010), 75 FR 56618
(September 16, 2010) (File Nos. 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; and SR-NSX-2010-08 and Securities
Exchange Act Release No. 62883 (September 10, 2010), 75 FR 56608
(September 16, 2010) (SR-FINRA-2010-033).
\5\ See Securities Exchange Act Release No. 63097 (October 13,
2010), 75 FR 64767 (October 20, 2010) (SR-BYX-2010-002). The
Exchange submitted a proposed rule change shortly after the adoption
of the Pilot to extend the operation of the Pilot, which was set to
expire on December 10, 2010, until April 11, 2011. See Securities
Exchange Act Release No. 63513 (December 9, 2010), 75 FR 78784
(December 16, 2010) (SR-BYX-2010-007). More recently, the Exchange
submitted a proposed rule change to extend the operation of the
Pilot until the earlier of August 11, 2011 or the date on which a
limit up/limit down mechanism to address extraordinary market
volatility, if adopted, applies. Securities Exchange Act Release No.
64214 (April 6, 2011), 76 FR 20430 (April 12, 2011) (SR-BYX-2011-
007).
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The Exchange has continued to assess whether additional securities
need to be added to the Pilot and whether the parameters of Rule 11.18
need to be modified to accommodate trading characteristics of different
securities. In consultation with other markets and the staff of the
Commission, the Exchange proposes to include all NMS stocks within the
Pilot that are not already included therein. Accordingly, the Exchange
proposes to modify the definition of ``Circuit Breaker Securities'' in
Interpretation and Policy .05 to Rule 11.18 to include all NMS stocks.
The Exchange is not proposing any other changes to the text of Rule
11.18 or the operation of the Pilot, and will continue to assess
whether the parameters for invoking a Trading Pause continue to be
appropriate and whether the parameters should be modified.\6\
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\6\ The Exchange notes that it does not currently calculate the
percentage necessary for a Trading Pause to be issued, but instead
relies on the primary listing market for each security to perform
such calculation and disseminate information if and when a Trading
Pause is in effect. Nonetheless, the Exchange supports the
percentages at which Trading Pauses will trigger, which are being
concurrently proposed by the primary listing markets with respect to
the NMS stocks that are being added to the Pilot. In particular, the
proposed additional stocks are those not currently included in the
S&P 500 Index, Russell 1000 Index, or specified ETPs, and therefore
are more likely to be less liquid securities or securities with
lower trading volumes. Accordingly, the Exchange agrees that broader
percentages to trigger a Trading Pause would be appropriate.
Similarly, because leveraged ETPs trade at a ratio against the
associated index, a broader percentage to trigger a Trading Pause
would also be appropriate for leveraged ETPs. Finally, the Exchange
agrees that lower-priced securities should be governed by a broader
percentage prior to triggering a Trading Pause than other NMS stocks
because lower-priced securities may tend to be more volatile, and
price movements of lower-priced stocks equate to a higher percentage
move than a similar price change for a higher-priced stock.
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The proposed changes to the Pilot, if approved, would require that
the text of Rule 11.8(d)(2)(D) and (E), which pertain to the pricing
obligations that Market Makers \7\ are required to adhere to, be
amended to ensure consistency with the percentage moves that will
trigger a Trading Pause on the primary listing markets (a ``Trigger
Percentage''). Specifically, in order to adopt the proposed changes to
the Pilot, the primary listing markets will apply different Trigger
Percentages to the newly added securities, including 30% for NMS stocks
priced equal to or greater than $1 per share that are not included in
the S&P 500, the Russell 1000 or the specified list of ETPs and 50% for
NMS stocks priced below $1 per share that are not included in the S&P
500, the Russell 1000 or the specified list of ETPs (``Low Priced
Securities''). In order to accommodate this change, the Exchange
proposes to modify the language of its quoting requirements for Market
Makers, which are intended to be within the bounds of the Trigger
Percentages.
---------------------------------------------------------------------------
\7\ The term Market Maker means a Member that acts as a Market
Maker on BYX pursuant to Chapter XI of the Exchange's rules.
---------------------------------------------------------------------------
As set forth in the Exchange's current Rule, the pricing
obligations applicable to quotations of Market Makers are based on the
``Designated Percentage'' and the ``Defined Limit,'' which are
determined based on the applicable Trigger Percentage. Currently, the
Exchange's formula for calculating the Designated Percentage is the
Trigger Percentage minus 2%. The current formula for calculating the
Defined Limit is the Trigger Percentage minus 0.5%. The Exchange
proposes to apply the existing formulas for calculating the Designated
Percentage and Defined Limit to all NMS stocks other than Low Priced
securities. Thus, there will be no change to the existing Designated
Percentage of 8% and Defined Limit of 9.5% for securities included in
the S&P 500, the Russell 1000 or the specified list of ETPs (or 20% and
21.5% when trading pauses are not in effect). For newly added NMS
stocks priced $1 or above, this formula will mean a Designated
Percentage of 28% and a Defined Limit of 29.5%.
The Exchange proposes to add language stating that for Low Priced
Securities the Designated Percentage
[[Page 27682]]
will be 20 percentage points less than the Trigger Percentage and the
Defined Limit will be 18.5 percentage points less than the Trigger
Percentage. Accordingly, the Designated Percentage and Defined Limit
would be 30% and 31.5%, respectively, for Low Priced Securities.
Similarly, and consistent with the rules of the primary listing
markets, the Exchange proposes to state that with respect to securities
included in S&P 500, the Russell 1000 or the specified list of ETPs,
such products have different quotation requirements at the open and
close of trading each day. Specifically, the Exchange proposes to state
that with respect to such products, the quotation requirements apply
with a Designated Percentage of 20% and a Defined Limit of 21.5% for
times during Regular Trading Hours when stock pause triggers are not in
effect under the rules of the primary listing market. For all other NMS
stocks, the Designated Percentage and Defined Limit will not change for
the open or the close of trading.
The Exchange notes that part of this proposed change would be
substantive, in that the percentages under Rule 11.8(d)(2)(D) and (E)
would decrease slightly for the proposed new NMS stocks priced at $1 or
greater. The Exchange believes that this proposed substantive change
would not have a significant impact on Market Maker pricing obligations
and is reasonable because it would ensure that the designated quoting
percentages in 11.18 are within a narrower range than the percentages
necessary to trigger a Trading Pause.
The Exchange also proposes to modify Rule 11.8(e), which describes
an optional functionality that the Exchange offers to Exchange Market
Makers to assist such Market Makers with maintenance of their
quotations under Rule 11.8. Specifically, for Market Makers that
utilize the functionality, the Exchange enters bids and offers at the
Designated Percentage and cancels and replaces the bid or offer if it
drifts away from the NBBO to the Defined Limit or away from the
Designated Percentage towards the NBBO by a number of percentage points
determined by the Exchange. If a bid or offer entered pursuant to
proposed paragraph (e) is executed, the Exchange will re-enter a new
bid or offer on behalf of a Market Maker. In order to reduce the
operational burden on the Exchange, the Exchange proposes to use the
same Designated Percentage and Defined Limit for all NMS stocks that
are being added to the Pilot regardless of the price per share of such
stocks. Accordingly, for purposes of its optional quotation
functionality, the Exchange will use a consistent Designated Percentage
of 28% and a consistent Defined Limit of 29.5% for all NMS stocks not
included in S&P 500, the Russell 1000 or the specified list of ETPs.
Market Makers managing their own quoting on the Exchange may still
quote in accordance with the rule based on the Designated Percentage
and Defined Limit established for Low Priced Securities (30% and 31.5%,
respectively).
Finally, the Exchange proposes to simplify Rule 11.18 by adopting
Interpretation and Policy .01, which will, in chart form, explicitly
state the percentages that are applicable under the Rule for different
types of securities and at different times.
2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\8\ In particular, the
proposal 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. The proposed rule change is also
consistent with Section 11A(a)(1) of the Act \10\ 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 because it expands the scope of the Pilot to cover all NMS
stocks while adjusting the parameters of the rule for different
securities in a manner that will promote uniformity across markets
concerning decisions to pause trading in a security when there are
significant price movements. Additionally, the proposed changes would
ensure that the designated quoting percentages in Rule 11.18 are within
a narrower range than the percentages necessary to trigger a Trading
Pause on a primary listing market.
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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 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 45 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 or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be 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 Number SR-BYX-2011-011 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-BYX-2011-011. 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
[[Page 27683]]
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-BYX-2011-011 and should be submitted on or before June
2, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11675 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P