Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.11 to Exclude All Rights and Warrants From the Single Stock Circuit Breaker Under the Rule, 74099-74101 [2011-30807]

Download as PDF Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices available publicly. All submissions should refer to File No. SR–C2–2011– 036 and should be submitted on or before December 21, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2011–30820 Filed 11–29–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65812; File No. SR– NYSEArca–2011–87] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.11 to Exclude All Rights and Warrants From the Single Stock Circuit Breaker Under the Rule November 23, 2011. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 17, 2011, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. emcdonald on DSK5VPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 7.11 to exclude all rights and warrants from the single stock circuit breaker under the rule. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, https://www.nyse.com, and https:// www.sec.gov. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 17:30 Nov 29, 2011 Jkt 226001 and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend NYSE Arca Equities Rule 7.11 to exclude all rights and warrants from the single stock circuit breaker under the rule. The Commission approved NYSE Arca Equities Rule 7.11 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’’) (‘‘Pause Pilot’’).4 The Exchange noted in its filing to adopt NYSE Arca Equities Rule 7.11 that during the Pause Pilot period it would continue to assess whether additional securities need to be added and whether the parameters of NYSE Arca Equities Rule 7.11 would need to be modified to accommodate trading characteristics of different securities. The Exchange subsequently received approval to add to the Pause Pilot the securities included in the Russell 1000® Index (‘‘Russell 1000’’) and a specified list of Exchange Traded Products (‘‘ETPs’’).5 4 The Commission approved the 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). 5 The Commission approved the addition to the 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 Pause Pilot, which was set to expire on December 10, 2010, until April 11, 2011. See Securities Exchange Act Release No. 63496 (December 9, 2010), 75 FR 78285 (December 15, 2010) (NYSEArca–2010–114). The Exchange submitted a proposed rule change to further extend PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 74099 On June 23, 2011, the Commission approved proposed rule changes of the Exchanges to amend certain of their respective rules to expand the Pause Pilot to include all remaining NMS stocks (‘‘Phase III Securities’’), which included rights and warrants.6 Unlike the original Pause Pilot securities, amended NYSE Arca Equities Rule 7.11 applies wider percentage price moves to the Phase III Securities before a trading pause is triggered.7 The changes to NYSE Arca Equities Rule 7.11 became effective on August 8, 2011. The nature of the trading pauses triggered since adoption of the Pause Pilot has been analyzed and over 25% of such pauses have occurred in rights and warrants. Further, exchanges have experienced a significant increase in trading pauses involving rights and warrants since the implementation of the Phase III Securities, with such pauses representing as much as 52% [sic] all trading pauses occurring through the end of August 2011 on one exchange. Rights and warrants trade on equity exchanges, but are closely related to call options. Rights and warrants entitle owners to purchase shares of stock at predetermined prices subject to various timing and other conditions. Like options, the price of rights and warrants are affected by the price of the underlying stock as well as other factors, particularly the volatility of the stock. As a consequence, the prices of rights and warrants may move more dramatically than the prices of the underlying stocks even when the rights and warrants (and the underlying stock) are trading in an orderly manner. This difference in trading behavior may result in a scenario whereby the rights and warrants trigger the circuit breaker under NYSE Arca Equities Rule 7.11 and are subject to a trading pause, even while the underlying stock continues to trade. This can be particularly true of rights and warrants that have low prices. Accordingly, the Exchange is proposing to exclude rights and the Pause Pilot until the earlier of January 31, 2012 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. 65088 (August 10, 2011), 76 FR 50793 (August 16, 2011) (NYSEArca–2011– 55). 6 See Securities Exchange Act Release No. 64735 (June 23, 2011), 76 FR 38243 (June 29, 2011) (NYSEArca–2011–26, et al.). 7 Under amended NYSE Arca Equities Rule 7.11, a pause is triggered by a 30% or more price move in a Phase III Security priced at $1 or higher, and by a 50% or more price move to such a security priced less than $1. The price of a security is based on the closing price on the previous trading day, or, if no closing price exists, the last sale reported to the Consolidated Tape on the previous trading day. E:\FR\FM\30NON1.SGM 30NON1 74100 Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices warrants from the trading pause under NYSE Arca Equities Rule 7.11. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),8 in general, and furthers the objectives of Section 6(b)(5),9 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) 10 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 excludes certain securities from the rule’s coverage that are prone to triggering pauses because of their unique characteristics. These securities are unique in that they may move more dramatically than the prices of the underlying stocks to which they are related even when both securities are trading in an orderly manner. As such, the securities that are subject to this proposal may trigger the circuit breaker under NYSE Arca Equities Rule 7.11 and be subject to a trading pause, even while the underlying security continues to trade. Although there is little benefit in pausing trading in these securities, such pauses sequester regulatory resources that are better applied to the review of trading pauses in other securities that have a greater impact on the national market system. B. Self-Regulatory Organization’s Statement on Burden on Competition emcdonald on DSK5VPTVN1PROD with NOTICES 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 No written comments were solicited or received with respect to the proposed rule change. 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 10 15 U.S.C. 78k–1(a)(1). 9 15 VerDate Mar<15>2010 17:30 Nov 29, 2011 Jkt 226001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 11 and Rule 19b–4(f)(6) thereunder.12 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b–4(f)(6)(iii) thereunder.14 A proposed rule change filed under Rule 19b–4(f)(6) 15 normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b–4(f)(6)(iii) 16 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Including rights and warrants in the pilot program which may trigger a circuit breaker and be subject to a trading pause, even while the underlying security continues to trade, provides little benefit and has the potential to create confusion among investors. Excluding rights and warrants from the pilot program should minimize investor confusion that could result from temporary trading pauses in these securities. For this reason, the Commission designates the proposed rule change as operative upon the date of this Notice.17 11 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s 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. 15 17 CFR 240.19b–4(f)(6). 16 17 CFR 240.19b–4(f)(6)(iii). 17 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 12 17 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 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. 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 email to rulecomments@sec.gov. Please include File No. SR–NYSEArca–2011–87 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–NYSEArca–2011–87. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make E:\FR\FM\30NON1.SGM 30NON1 Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices available publicly. All submissions should refer to File No. SR–NYSEArca– 2011–87 and should be submitted on or before December 21, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. 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 self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. BILLING CODE 8011–01–P A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 1. Purpose [FR Doc. 2011–30807 Filed 11–29–11; 8:45 am] [Release No. 34–65822; File No. SR–EDGA– 2011–38] Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend EDGA Rule 11.14 to Exclude From the Pilot Rule All Rights and Warrants November 23, 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 November 22, 2011, the EDGA Exchange, Inc. (the ‘‘Exchange’’ or the ‘‘EDGA’’) 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 self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. emcdonald on DSK5VPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend EDGA Rule 11.14 to exclude from the pilot rule all rights and warrants. The text of the proposed rule change is attached as Exhibit 5 3 and is available on the Exchange’s Web site at https:// www.directedge.com, at the Exchange’s principal office, at the Public Reference Room of the Commission, and at https:// www.sec.gov. 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, 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Commission notes that Exhibit 5 is attached to the rule filing, but not to this Notice. 1 15 VerDate Mar<15>2010 17:30 Nov 29, 2011 Jkt 226001 The Exchange proposes to amend EDGA Rule 11.14(d) to exclude all rights and warrants from the single stock circuit breaker under the rule. The Commission approved EDGA Rule 11.14 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’’) (‘‘Pause Pilot’’).4 The Exchange noted in its filing to adopt EDGA Rule 11.14 that during the Pause Pilot period it would continue to assess whether additional securities need to be added and whether the parameters of EDGA Rule 11.14 would need to be modified to accommodate trading characteristics of different securities. The Exchange subsequently received approval to add to the Pause Pilot the securities included in the Russell 1000 reg; Index (‘‘Russell 1000’’) and a specified list of Exchange Traded Products (‘‘ETPs’’).5 4 The Commission approved the 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–NYSEArca2010–41; 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). 5 The Commission approved the addition to the 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 Pause Pilot, which was set to expire on December 10, 2010, until April 11, 2011. See Securities Exchange Act Release No. 63514 (December 9, 2010), 75 FR 78783 (December PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 74101 On June 23, 2011, the Commission approved proposed rule changes of the Exchanges to amend certain of their respective rules to expand the Pause Pilot to include all remaining NMS stocks (‘‘Phase III Securities’’), which included rights and warrants.6 Unlike the original Pause Pilot securities, the rules of primary listing markets apply wider percentage price moves to the Phase III Securities before a trading pause is triggered.7 These changes to the rules of primary listing markets became effective on August 8, 2011. Various exchanges and national securities associations, including the Exchange, have analyzed the nature of the trading pauses triggered since adoption of the Pause Pilot and noted that over 25% of such pauses have occurred in rights and warrants. Further, several primary listing markets have experienced a significant increase in trading pauses involving rights and warrants since the implementation of the Phase III Securities, with such pauses representing approximately 52% [sic] all trading pauses occurring through the end of August 2011. Rights and warrants trade on equity exchanges, but are closely related to call options. Rights and warrants entitle owners to purchase shares of stock at predetermined prices subject to various timing and other conditions. Like options, the price of rights and warrants are affected by the price of the underlying stock as well as other factors, particularly the volatility of the stock. As a consequence, the prices of rights and warrants may move more dramatically than the prices of the underlying stocks even when the rights and warrants (and the underlying stock) are trading in an orderly manner. This difference in trading behavior may result in a scenario whereby the rights and warrants trigger the circuit breaker under the rules of various primary listing markets and are subject to a trading pause, even while the 16, 2010) (SR–EDGA–2010–23). On April 5, 2011, the Exchange submitted a proposed rule change to further extend the Pause 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. 64204 (April 6, 2011), 76 FR 20394 (April 12, 2011) (SR–EDGA–2011–11). 6 See Securities Exchange Act Release No. 64735 (June 23, 2011), 76 FR 38243 (June 29, 2011) (SR– EDGA–2011–15 and Amendment No. 1 thereto, et al). 7 Under the rules of primary listing markets, (i.e. Nasdaq Rule 4120(a)(11)), a pause is triggered by a 30% or more price move in a Phase III Security priced at $1 or higher, and by a 50% or more price move to such a security priced less than $1. The price of a security is based on the closing price on the previous trading day, or, if no closing price exists, the last sale reported to the Consolidated Tape on the previous trading day. E:\FR\FM\30NON1.SGM 30NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Notices]
[Pages 74099-74101]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30807]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65812; File No. SR-NYSEArca-2011-87]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rule 7.11 to Exclude All Rights and Warrants From the Single
Stock Circuit Breaker Under the Rule

November 23, 2011.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on November 17, 2011, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to amend NYSE Arca Equities Rule 7.11 to
exclude all rights and warrants from the single stock circuit breaker
under the rule. The text of the proposed rule change is available at
the Exchange, the Commission's Public Reference Room, https://www.nyse.com, and https://www.sec.gov.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to amend NYSE Arca Equities Rule 7.11 to
exclude all rights and warrants from the single stock circuit breaker
under the rule. The Commission approved NYSE Arca Equities Rule 7.11 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[reg] Index
(``S&P 500'') (``Pause Pilot'').\4\ The Exchange noted in its filing to
adopt NYSE Arca Equities Rule 7.11 that during the Pause Pilot period
it would continue to assess whether additional securities need to be
added and whether the parameters of NYSE Arca Equities Rule 7.11 would
need to be modified to accommodate trading characteristics of different
securities. The Exchange subsequently received approval to add to the
Pause Pilot the securities included in the Russell 1000[supreg] Index
(``Russell 1000'') and a specified list of Exchange Traded Products
(``ETPs'').\5\
---------------------------------------------------------------------------

\4\ The Commission approved the 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).
\5\ The Commission approved the addition to the 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 Pause Pilot,
which was set to expire on December 10, 2010, until April 11, 2011.
See Securities Exchange Act Release No. 63496 (December 9, 2010), 75
FR 78285 (December 15, 2010) (NYSEArca-2010-114). The Exchange
submitted a proposed rule change to further extend the Pause Pilot
until the earlier of January 31, 2012 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. 65088
(August 10, 2011), 76 FR 50793 (August 16, 2011) (NYSEArca-2011-55).
---------------------------------------------------------------------------

On June 23, 2011, the Commission approved proposed rule changes of
the Exchanges to amend certain of their respective rules to expand the
Pause Pilot to include all remaining NMS stocks (``Phase III
Securities''), which included rights and warrants.\6\ Unlike the
original Pause Pilot securities, amended NYSE Arca Equities Rule 7.11
applies wider percentage price moves to the Phase III Securities before
a trading pause is triggered.\7\ The changes to NYSE Arca Equities Rule
7.11 became effective on August 8, 2011.
---------------------------------------------------------------------------

\6\ See Securities Exchange Act Release No. 64735 (June 23,
2011), 76 FR 38243 (June 29, 2011) (NYSEArca-2011-26, et al.).
\7\ Under amended NYSE Arca Equities Rule 7.11, a pause is
triggered by a 30% or more price move in a Phase III Security priced
at $1 or higher, and by a 50% or more price move to such a security
priced less than $1. The price of a security is based on the closing
price on the previous trading day, or, if no closing price exists,
the last sale reported to the Consolidated Tape on the previous
trading day.
---------------------------------------------------------------------------

The nature of the trading pauses triggered since adoption of the
Pause Pilot has been analyzed and over 25% of such pauses have occurred
in rights and warrants. Further, exchanges have experienced a
significant increase in trading pauses involving rights and warrants
since the implementation of the Phase III Securities, with such pauses
representing as much as 52% [sic] all trading pauses occurring through
the end of August 2011 on one exchange. Rights and warrants trade on
equity exchanges, but are closely related to call options. Rights and
warrants entitle owners to purchase shares of stock at predetermined
prices subject to various timing and other conditions. Like options,
the price of rights and warrants are affected by the price of the
underlying stock as well as other factors, particularly the volatility
of the stock. As a consequence, the prices of rights and warrants may
move more dramatically than the prices of the underlying stocks even
when the rights and warrants (and the underlying stock) are trading in
an orderly manner. This difference in trading behavior may result in a
scenario whereby the rights and warrants trigger the circuit breaker
under NYSE Arca Equities Rule 7.11 and are subject to a trading pause,
even while the underlying stock continues to trade. This can be
particularly true of rights and warrants that have low prices.
Accordingly, the Exchange is proposing to exclude rights and

[[Page 74100]]

warrants from the trading pause under NYSE Arca Equities Rule 7.11.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\9\ 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) \10\ 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 excludes certain securities from the rule's coverage that
are prone to triggering pauses because of their unique characteristics.
These securities are unique in that they may move more dramatically
than the prices of the underlying stocks to which they are related even
when both securities are trading in an orderly manner. As such, the
securities that are subject to this proposal may trigger the circuit
breaker under NYSE Arca Equities Rule 7.11 and be subject to a trading
pause, even while the underlying security continues to trade. Although
there is little benefit in pausing trading in these securities, such
pauses sequester regulatory resources that are better applied to the
review of trading pauses in other securities that have a greater impact
on the national market system.
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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

No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \16\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Including rights and warrants in the pilot program which may trigger a
circuit breaker and be subject to a trading pause, even while the
underlying security continues to trade, provides little benefit and has
the potential to create confusion among investors. Excluding rights and
warrants from the pilot program should minimize investor confusion that
could result from temporary trading pauses in these securities. For
this reason, the Commission designates the proposed rule change as
operative upon the date of this Notice.\17\
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\17\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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.

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 email to rule-comments@sec.gov. Please include
File No. SR-NYSEArca-2011-87 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-NYSEArca-2011-87. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make

[[Page 74101]]

available publicly. All submissions should refer to File No. SR-
NYSEArca-2011-87 and should be submitted on or before December 21,
2011.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30807 Filed 11-29-11; 8:45 am]
BILLING CODE 8011-01-P

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