Self-Regulatory Organizations; Chicago Stock Exchange, Incorporated; Notice of Filing Proposed Rule Change To Exclude Rights and Warrants From the Individual Securities Circuit Breaker Rule, 74088-74090 [2011-30813]
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74088
Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
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
available publicly. All submissions
should refer to File No. SR–BATS–
2011–048 and should be submitted on
or before December 21, 2011.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
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–BATS–2011–048 on the subject
line.
emcdonald on DSK5VPTVN1PROD with NOTICES
securities. For this reason, the
Commission designates the proposed
rule change as operative upon the date
of this Notice.16
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.
SECURITIES AND EXCHANGE
COMMISSION
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–BATS–2011–048. 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
16 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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[FR Doc. 2011–30811 Filed 11–29–11; 8:45 am]
BILLING CODE 8011–01–P
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
[Release No. 34–65818; File No. SR–CHX–
2011–32]
Self-Regulatory Organizations;
Chicago Stock Exchange,
Incorporated; Notice of Filing
Proposed Rule Change To Exclude
Rights and Warrants From the
Individual Securities Circuit Breaker
Rule
November 23, 2011.
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 November
21, 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. CHX has
filed this proposal pursuant to Exchange
Act Rule 19b–4(f)(6) 3 which is effective
upon filing with the Commission.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CHX proposes to amend Article 20,
Rule 2(e) to exclude all rights and
warrants from the individual securities
circuit breaker rule. The text of this
proposed rule change is available on the
Exchange’s Web site at (https://
www.chx.com), in the Commission’s
Public Reference Room, and at https://
www.sec.gov.
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
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The Exchange proposes to amend
Article 20, Rule 2(e) to exclude all rights
and warrants from the individual
securities circuit breaker under the rule.
The Commission approved Article 20,
Rule 2(e) 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
Article 20, Rule 2(e) that during the
Pause Pilot period it would continue to
assess whether additional securities
need to be added and whether the
parameters of Article 20, Rule 2(e)
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–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
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Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
emcdonald on DSK5VPTVN1PROD with NOTICES
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 Article 20, Rule 2(e) applies
wider percentage price moves to the
Phase III Securities before a trading
pause is triggered.7 The changes to
Article 20, Rule 2(e) became effective on
August 8, 2011.
CHX 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, CHX has
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 Article 20, Rule 2(e) and are
(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.
63505 (December 9, 2010), 75 FR 78302 (December
15, 2010) (SR–CHX–2010–24). On March 31, 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. 64174 (April 4, 2011), 76
FR 19819 (April 8, 2011) (SR–CHX–2011–05).
6 See Securities Exchange Act Release No. 64735
(June 23, 2011), 76 FR 38243 (June 29, 2011) (SR–
CHX–2011–09, et al.).
7 Under amended Article 20, Rule 2(e), 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.
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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, CHX is proposing to
exclude rights and warrants from the
trading pause under Article 20, Rule
2(e).
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 Article 20, Rule 2(e) 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
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.
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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74089
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act11 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
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).
12 17
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74090
Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
Commission designates the proposed
rule change as operative upon the date
of this Notice.17
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.
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 No. SR–CHX–2011–
32 and should be submitted on or before
December 21, 2011.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
emcdonald on DSK5VPTVN1PROD with NOTICES
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–CHX–2011–32 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–CHX–2011–32. 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
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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[FR Doc. 2011–30813 Filed 11–29–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65827; File No. SR–EDGX–
2011–35]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule To Amend EDGX Rule 11.9
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
17, 2011, the EDGX Exchange, Inc. (the
‘‘Exchange’’ or the ‘‘EDGX’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Item II below, which item have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to introduce
an additional routing option to Rule
11.9 and amend existing routing
options. The text of the proposed rule
change is available on the Exchange’s
Web site at www.directedge.com, on the
Commission’s Web site at www.sec.gov,
at the Exchange’s principal office, and at
the Public Reference Room of the
Commission.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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
self-regulatory organization 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’s current list of routing
options are codified in Rule 11.9(b)(3).
In this filing, the Exchange proposes to
amend the language of two routing
options contained in Rule 11.9(b)(3) to
modify the behavior of unexecuted
shares and distinguish the execution
path if an order is sent as a Day Order 3
versus an Immediate-or-Cancel (‘‘IOC’’) 4
order.
Specifically, Rule 11.9(b)(3)(h)
provides that the RDOT routing option
checks the System for available shares
and then is sent sequentially to
destinations on the System routing
table. If shares remain unexecuted after
routing, they are sent to the NYSE. The
Exchange proposes to modify this
strategy to provide that any unexecuted
shares can be re-routed by the NYSE
and any remainder after routing will be
posted to the NYSE book, unless
otherwise instructed by the User. The
phrase ‘‘unless otherwise instructed by
the User’’ is proposed to be added to the
rule to account for the fact that if a User
sends an IOC order, it will not post to
the NYSE book.
Rule 11.9(b)(3)(i) provides that the
RDOX routing option checks the System
for available shares and then is sent to
the NYSE. The Exchange proposes to
amend this strategy to provide that the
unexecuted shares can be re-routed by
the NYSE and any remainder after
routing will be posted to the NYSE
book, unless otherwise instructed by the
User. The phrase ‘‘unless otherwise
instructed by the User’’ is proposed to
be added to the rule [sic] account for the
fact that if a User sends an IOC order,
it will not post to the NYSE book.
18 17
1 15
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3 As
4 As
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defined in Rule 11.5(b)(2).
defined in Rule 11.5(b)(1).
30NON1
]]>Agencies
[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Notices]
[Pages 74088-74090]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30813]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65818; File No. SR-CHX-2011-32]
Self-Regulatory Organizations; Chicago Stock Exchange,
Incorporated; Notice of Filing Proposed Rule Change To Exclude Rights
and Warrants From the Individual Securities Circuit Breaker Rule
November 23, 2011.
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 November 21, 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. CHX has filed this
proposal pursuant to Exchange Act Rule 19b-4(f)(6) \3\ which is
effective upon filing with the Commission.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to amend Article 20, Rule 2(e) to exclude all rights
and warrants from the individual securities circuit breaker rule. The
text of this proposed rule change is available on the Exchange's Web
site at (https://www.chx.com), in the Commission's Public Reference
Room, 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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Article 20, Rule 2(e) to exclude all
rights and warrants from the individual securities circuit breaker
under the rule. The Commission approved Article 20, Rule 2(e) 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[supreg] Index
(``S&P 500'') (``Pause Pilot'').\4\ The Exchange noted in its filing to
adopt Article 20, Rule 2(e) that during the Pause Pilot period it would
continue to assess whether additional securities need to be added and
whether the parameters of Article 20, Rule 2(e) 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\
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\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. 63505 (December 9, 2010), 75
FR 78302 (December 15, 2010) (SR-CHX-2010-24). On March 31, 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. 64174 (April 4, 2011), 76 FR 19819 (April 8, 2011) (SR-
CHX-2011-05).
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[[Page 74089]]
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 Article 20, Rule 2(e) applies
wider percentage price moves to the Phase III Securities before a
trading pause is triggered.\7\ The changes to Article 20, Rule 2(e)
became effective on August 8, 2011.
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\6\ See Securities Exchange Act Release No. 64735 (June 23,
2011), 76 FR 38243 (June 29, 2011) (SR-CHX-2011-09, et al.).
\7\ Under amended Article 20, Rule 2(e), 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.
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CHX 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, CHX has 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 Article 20, Rule 2(e) 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, CHX is
proposing to exclude rights and warrants from the trading pause under
Article 20, Rule 2(e).
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.
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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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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 Article 20, Rule 2(e) 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
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 either solicited or received.
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
[[Page 74090]]
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-CHX-2011-32 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-CHX-2011-32. 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 available publicly. All
submissions should refer to File No. SR-CHX-2011-32 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. 2011-30813 Filed 11-29-11; 8:45 am]
BILLING CODE 8011-01-P
