Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend ISE Rule 2102(f) to Exclude From the Pilot Rule All Rights and Warrants, 74095-74097 [2011-30815]
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Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
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–EDGX–
2011–36 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.
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–EDGX–2011–36 on the subject
line.
emcdonald on DSK5VPTVN1PROD with NOTICES
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
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–EDGX–2011–36. 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/
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. 2011–30818 Filed 11–29–11; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–65820; File No. SR–ISE–
2011–79]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Amend ISE Rule 2102(f) 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 International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) 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 selfregulatory organization. The
18 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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74095
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 2102(f) to exclude from the pilot
rule all rights and warrants.
The text of the proposed rule change
is available on the Exchange’s Internet
Web site at https://www.ise.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room, and at the Commission’s Web
site 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
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 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
ISE proposes to amend Rule 2102(f) to
exclude all rights and warrants from the
trading pause process under the rule.
The Securities and Exchange
Commission (‘‘Commission’’) approved
Rule 2102(f) on a pilot basis on June 10,
2010, together with the analogous rules
of other equity exchanges (collectively
with NASDAQ, the ‘‘Exchanges’’) and
FINRA, to provide for trading pauses in
individual securities due to
extraordinary market volatility in all
securities included within the S&P 500
Index (‘‘S&P 500’’) (the ‘‘Pause Pilot’’).3
NASDAQ noted in its filing to adopt
Rule 2102(f) that during the Pause Pilot
period it would continue to assess
whether additional securities need to be
3 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).
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emcdonald on DSK5VPTVN1PROD with NOTICES
added and whether the parameters of
Rule 2102(f) would need to be modified
to accommodate trading characteristics
of different securities. The Exchanges
and FINRA 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’’).4
On June 23, 2011, the Commission
approved proposed rule changes of the
Exchanges and FINRA to amend their
respective rules to expand the Pause
Pilot to include all remaining NMS
stocks (‘‘Phase III Securities’’), which
includes rights and warrants.5 Unlike
the original Pause Pilot securities,
amended Rule 2102(f) applies wider
percentage price moves to the Phase III
Securities before a trading pause is
triggered.6 The changes to Rule 2102(f)
became effective on August 8, 2011.
The Exchanges and FINRA analyzed
the nature of the trading pauses
triggered since adoption of the Pause
Pilot and found that over 25% of such
pauses have occurred in rights and
warrants. Further, the Exchanges and
FINRA 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% of all
trading pauses occurring through the
end of August 2011. Rights and warrants
trade on equity exchanges, but are
4 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). ISE 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. 63506
(December 9, 2010), 75 FR 78301 (December 15,
2010) (SR–ISE–2010–117). On March 31, 2011, ISE
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. 64193 (April 5, 2011), 76
FR 20062 (April 11, 2011) (SR–ISE–2011–17). On
August 8, 2011, ISE submitted a proposed rule
change to further extend the Pause Pilot until
January 31, 2012. See Securities Exchange Act
Release No. 65072 (August 9, 2011), 76 FR 50513
(August 15, 2011) (SR–ISE–2011–52).
5 See Securities Exchange Act Release No. 64735
(June 23, 2011), 76 FR 38243 (June 29, 2011) (SR–
ISE–2011–028, et al.).
6 Id.
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Jkt 226001
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 the rights and warrants
triggering the circuit breaker under Rule
2102(f) and being 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. As such, the
Exchanges and FINRA have determined
to exclude rights and warrants from the
Pause Pilot, and accordingly, ISE is
proposing to amend Rule 2102(f) to
exclude rights and warrants from the
rule’s application.
2. Statutory Basis
The proposed rule change 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. ISE 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 Rule 2102(f) and be subject to a
trading pause, even while the
underlying security continues to trade.
Although there is little benefit in
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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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 proposed rule change does not
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
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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 10 and Rule
19b–4(f)(6) thereunder.11 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 12 and Rule 19b–4(f)(6)(iii)
thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 15 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
10 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
12 15 U.S.C. 78s(b)(3)(A).
13 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.
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
11 17
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Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
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.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.
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:
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–ISE–2011–79 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–ISE–2011–79. 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
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).
VerDate Mar<15>2010
17:30 Nov 29, 2011
Jkt 226001
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–ISE–2011–
79 and should be submitted on or before
December 21, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–30815 Filed 11–29–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65825; File No. SR–C2–
2011–036]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Related to Trading Halts
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
23, 2011, the C2 Options Exchange,
Incorporated (‘‘Exchange’’ or ‘‘C2’’) 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 Exchange. The
Exchange has designated the proposal as
a ‘‘non-controversial’’ proposed rule
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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74097
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b-4(f)(6) thereunder.4 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 is proposing to make a
conforming amendment to C2 Rule 6.32,
Trading Halts, as it relates to individual
stock trading pauses in underlying
stocks. The text of the proposed rule
change is available on the Exchange’s
Web site (https://www.c2exchange.com/
Legal/RuleFilings.aspx), at the
Exchange’s Office of the Secretary 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 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 individual stock trading pause
pilot rule was developed in consultation
with U.S. listing markets to provide for
uniform market-wide trading pause
standards for certain underlying
individual stocks that experience rapid
price movement. In conjunction with
the pilot, C2 (and other options
exchanges) adopted rules that provide
that trading in the overlying options on
an eligible stock would halt when the
primary listing market for the
underlying stock issues a trading pause.
The underlying individual stock
trading pause pilot was recently
expanded to include all NMS stocks.5
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 The pilot list of stocks originally included all
stocks in the S&P 500 Index, but it has been
expanded over time to include all NMS stocks. See,
e.g., Securities Exchange Act Release Nos. 62884
(September 10, 2010), 75 FR 56618 (September 16,
2010)(SR–CBOE–2010–065)(order approving
4 17
Continued
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]]>Agencies
[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Notices]
[Pages 74095-74097]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30815]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65820; File No. SR-ISE-2011-79]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend ISE Rule 2102(f) 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 International Securities Exchange, LLC
(the ``Exchange'' or the ``ISE'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 2102(f) to exclude from the
pilot rule all rights and warrants.
The text of the proposed rule change is available on the Exchange's
Internet Web site at https://www.ise.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room, and at the
Commission's Web site 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 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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
ISE proposes to amend Rule 2102(f) to exclude all rights and
warrants from the trading pause process under the rule. The Securities
and Exchange Commission (``Commission'') approved Rule 2102(f) on a
pilot basis on June 10, 2010, together with the analogous rules of
other equity exchanges (collectively with NASDAQ, the ``Exchanges'')
and FINRA, to provide for trading pauses in individual securities due
to extraordinary market volatility in all securities included within
the S&P 500 Index (``S&P 500'') (the ``Pause Pilot'').\3\ NASDAQ noted
in its filing to adopt Rule 2102(f) that during the Pause Pilot period
it would continue to assess whether additional securities need to be
[[Page 74096]]
added and whether the parameters of Rule 2102(f) would need to be
modified to accommodate trading characteristics of different
securities. The Exchanges and FINRA 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'').\4\
---------------------------------------------------------------------------
\3\ 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).
\4\ 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). ISE 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. 63506 (December 9, 2010), 75
FR 78301 (December 15, 2010) (SR-ISE-2010-117). On March 31, 2011,
ISE 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. 64193 (April 5, 2011), 76 FR 20062 (April 11, 2011) (SR-ISE-
2011-17). On August 8, 2011, ISE submitted a proposed rule change to
further extend the Pause Pilot until January 31, 2012. See
Securities Exchange Act Release No. 65072 (August 9, 2011), 76 FR
50513 (August 15, 2011) (SR-ISE-2011-52).
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On June 23, 2011, the Commission approved proposed rule changes of
the Exchanges and FINRA to amend their respective rules to expand the
Pause Pilot to include all remaining NMS stocks (``Phase III
Securities''), which includes rights and warrants.\5\ Unlike the
original Pause Pilot securities, amended Rule 2102(f) applies wider
percentage price moves to the Phase III Securities before a trading
pause is triggered.\6\ The changes to Rule 2102(f) became effective on
August 8, 2011.
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\5\ See Securities Exchange Act Release No. 64735 (June 23,
2011), 76 FR 38243 (June 29, 2011) (SR-ISE-2011-028, et al.).
\6\ Id.
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The Exchanges and FINRA analyzed the nature of the trading pauses
triggered since adoption of the Pause Pilot and found that over 25% of
such pauses have occurred in rights and warrants. Further, the
Exchanges and FINRA 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%
of 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 the rights and warrants triggering the circuit breaker under
Rule 2102(f) and being 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. As such, the Exchanges and
FINRA have determined to exclude rights and warrants from the Pause
Pilot, and accordingly, ISE is proposing to amend Rule 2102(f) to
exclude rights and warrants from the rule's application.
2. Statutory Basis
The proposed rule change 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. ISE 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 Rule 2102(f) 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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 \10\ and Rule 19b-4(f)(6) thereunder.\11\
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 \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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) \14\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ 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
[[Page 74097]]
the proposal may become operative immediately upon filing.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 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.\16\
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\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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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-ISE-2011-79 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-ISE-2011-79. 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-ISE-2011-79 and should be
submitted on or before December 21, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30815 Filed 11-29-11; 8:45 am]
BILLING CODE 8011-01-P
