Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 80C-Equities To Establish Rules To Comply With the Requirements of the Plan To Address Extraordinary Market Volatility Submitted to the Commission Pursuant to Rule 608 of Regulation NMS, 10678-10682 [2013-03388]

Download as PDF 10678 Federal Register / Vol. 78, No. 31 / Thursday, February 14, 2013 / Notices increase competition for routing services because the market for order execution is competitive and the Exchange’s proposal provides customers with another alternative to route their orders. The Exchange notes that routing through DE Route is voluntary. Regarding Flag RX, the Exchange believes that its proposal to assess a fee of $0.0030 per share for Members’ orders that route using the ROUX routing strategy and remove liquidity from the away exchange will increase competition because it is comparable to the rates charged by BATS BZX and NASDAQ for similar routing strategies. The Exchange believes that its proposal will have no burden on intramarket competition because the rate applies uniformly to all Members. The Exchange believes that its proposal will increase competition for routing services because the market for order execution is competitive and the Exchange’s proposal provides customers with another alternative to route their orders. The Exchange notes that routing through DE Route is voluntary. 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 foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b–4(f)(2) 14 thereunder. At any time within 60 days of the filing of such 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. sroberts on DSK5SPTVN1PROD with NOTICES 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 Number SR–EDGX–2013–07 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–EDGX–2013–07. 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–EDGX– 2013–07 and should be submitted on or before March 7, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–03426 Filed 2–13–13; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68875; File No. SR– NYSEMKT–2013–05] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 80C—Equities To Establish Rules To Comply With the Requirements of the Plan To Address Extraordinary Market Volatility Submitted to the Commission Pursuant to Rule 608 of Regulation NMS February 8, 2013. 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 January 25, 2013, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Exchange Rule 80C—Equities to establish rules to comply with the requirements of the Plan to Address Extraordinary Market Volatility submitted to the Commission pursuant to Rule 608 of Regulation NMS. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, on the Commission’s Web site at https://www.sec.gov, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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, BILLING CODE 8011–01–P 1 15 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 19b–4(f)(2)[sic]. VerDate Mar<15>2010 17:16 Feb 13, 2013 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 15 17 Jkt 229001 PO 00000 CFR 200.30–3(a)(12). Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\14FEN1.SGM 14FEN1 Federal Register / Vol. 78, No. 31 / Thursday, February 14, 2013 / Notices 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 Exchange Rule 80C—Equities to establish rules to comply with the requirements of the Plan to Address Extraordinary Market Volatility submitted to the Commission pursuant to Rule 608 of Regulation NMS under the Act (the ‘‘Plan’’). The Exchange proposes to adopt the changes for a pilot period that coincides with the pilot period for the Plan, which is currently scheduled as a one-year pilot to begin on April 8, 2013. Background Since May 6, 2010, when the markets experienced excessive volatility in an abbreviated time period, i.e., the ‘‘flash crash,’’ the equities exchanges and FINRA have implemented market-wide measures designed to restore investor confidence by reducing the potential for excessive market volatility. Among the measures adopted include pilot plans for stock-by-stock trading pauses 4 and related changes to the equities market clearly erroneous execution rules 5 and more stringent equities market maker quoting requirements.6 On May 31, 2012, the Commission approved the Plan, as amended, on a one-year pilot basis.7 In addition, the Commission approved changes to the equities market-wide circuit breaker rules on a pilot basis to coincide with the pilot period for the Plan.8 The Plan is designed to prevent trades in individual NMS Stocks from occurring outside of specified Price Bands.9 As described more fully below, the requirements of the Plan are coupled with Trading Pauses to accommodate more fundamental price moves (as 4 See, e.g., Exchange Rule 80C. e.g., Exchange Rule 128. 6 See, e.g., Exchange Rule 104(a)(1)(B). 7 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (File No. 4–631) (Order Approving, on a Pilot Basis, the National Market System Plan To Address Extraordinary Market Volatility). 8 See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– BATS–2011–038; SR–BYX–2011–025; SR–BX– 2011–068; SR–CBOE–2011–087; SR–C2–2011–024; SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX– 2011–30; SR–FINRA–2011–054; SR–ISE–2011–61; SR–NASDAQ–2011–131; SR–NSX–2011–11; SR– NYSE–2011–48; SR–NYSEAmex–2011–73; SR– NYSEArca–2011–68; SR–Phlx–2011–129). 9 Unless otherwise specified, capitalized terms used in this rule filing are based on the defined terms of the Plan. sroberts on DSK5SPTVN1PROD with NOTICES 5 See, VerDate Mar<15>2010 17:16 Feb 13, 2013 Jkt 229001 opposed to erroneous trades or momentary gaps in liquidity). All trading centers in NMS Stocks, including both those operated by Participants and those operated by members of Participants, are required to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with the requirements specified in the Plan.10 As set forth in more detail in the Plan, Price Bands consisting of a Lower Price Band and an Upper Price Band for each NMS Stock are calculated by the Processors.11 When the National Best Bid (Offer) is below (above) the Lower (Upper) Price Band, the Processors shall disseminate such National Best Bid (Offer) with an appropriate flag identifying it as unexecutable. When the National Best Bid (Offer) is equal to the Upper (Lower) Price Band, the Processors shall distribute such National Best Bid (Offer) with an appropriate flag identifying it as a Limit State Quotation.12 All trading centers in NMS Stocks must maintain written policies and procedures that are reasonably designed to prevent the display of offers below the Lower Price Band and bids above the Upper Price Band for NMS Stocks. Notwithstanding this requirement, the Processor shall display an offer below the Lower Price Band or a bid above the Upper Price Band, but with a flag that it is nonexecutable. Such bids or offers shall not be included in the National Best Bid or National Best Offer calculations.13 Trading in an NMS Stock immediately enters a Limit State if the National Best Offer (Bid) equals but does not cross the Lower (Upper) Price Band.14 Trading for an NMS stock exits a Limit State if, within 15 seconds of entering the Limit State, all Limit State Quotations were executed or canceled in their entirety. If the market does not exit a Limit State within 15 seconds, then the Primary Listing Exchange would declare a five-minute trading pause pursuant to Section VII of the LULD Plan, which would be applicable to all markets trading the security.15 In addition, the Plan defines a Straddle State as when the National Best Bid (Offer) is below (above) the Lower (Upper) Price Band and the NMS Stock 10 The Exchange is a Participant in the Plan. Section (V)(A) of the Plan. 12 See Section VI(A) of the Plan. 13 See Section VI(A)(3) of the Plan. 14 See Section VI(B)(1) of the Plan. 15 The primary listing market would declare a trading pause in an NMS Stock; upon notification by the primary listing market, the Processor would disseminate this information to the public. No trades in that NMS Stock could occur during the trading pause, but all bids and offers may be displayed. See Section VII(A) of the Plan. 11 See PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 10679 is not in a Limit State. For example, assume the Lower Price Band for an NMS Stock is $9.50 and the Upper Price Band is $10.50, such NMS stock would be in a Straddle State if the National Best Bid were below $9.50, and therefore non-executable, and the National Best Offer were above $9.50 (including a National Best Offer that could be above $10.50). If an NMS Stock is in a Straddle State and trading in that stock deviates from normal trading characteristics, the Primary Listing Exchange may declare a trading pause for that NMS Stock. Proposed Amendment to Rule 80C— Equities The Exchange is required by the Plan to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with the limit up-limit down and trading pause requirements specified in the Plan. In response to the new Plan, the Exchange proposes to amend its Rules accordingly. The Exchange proposes to add Rule 80C(a) to define that ‘‘Plan’’ means the Plan to Address Extraordinary Market Volatility Submitted to the Securities and Exchange Commission Pursuant to Rule 608 of Regulation NMS under the Securities Exchange Act of 1934, Exhibit A to Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012), as it may be amended from time to time. The Exchange proposes to add Rule 80C(a)(2) to state that the Exchange is a Participant in, and subject to the applicable requirements of, the Plan, which establishes procedures to address extraordinary volatility in NMS Stocks. In addition, proposed Rule 80C(a) provides that all capitalized terms not otherwise defined in this Rule shall have the meanings set forth in the Plan or Exchange rules, as applicable. The Exchange proposes to add Rule 80C(a)(3) to provide that member organizations shall comply with the applicable provisions of the Plan. The Exchange believes that this requirement will help ensure the compliance by its members with the provisions of the Plan as required pursuant to Section II(B) of the Plan.16 The Exchange proposes to add Rule 80C(a)(4) to provide that Exchange systems shall not display or execute buy (sell) interest above (below) the Upper (Lower) Price Bands, unless such interest is specifically exempted under the Plan. The Exchange believes that this requirement is reasonably designed to help ensure the compliance with the 16 See E:\FR\FM\14FEN1.SGM Section II(B) of the Plan. 14FEN1 sroberts on DSK5SPTVN1PROD with NOTICES 10680 Federal Register / Vol. 78, No. 31 / Thursday, February 14, 2013 / Notices limit up-limit down and trading pause requirements specified in the Plan, by preventing executions outside the Price Bands as required pursuant to Section VI(A)(1) of the Plan.17 The Exchange proposes Rules regarding the treatment of certain trading interest on the Exchange in order to prevent executions outside the Price Bands and to comply with the new LULD Plan. In particular, the Exchange proposes to add Rule 80C(a)(5) that provides that Exchange systems shall reprice and/or cancel buy (sell) interest that is priced or could be executed above (below) the Upper (Lower) Price Band. Any interest that is repriced pursuant to this Rule shall retain its time stamp of original order entry. Specifically, the Exchange proposes the following provisions regarding the repricing and/or canceling of certain trading interest: • Market Orders. If a market order cannot be fully executed at or within the Price Bands, Exchange systems shall display the unexecuted portion of the buy (sell) market order at the Upper (Lower) Price Band.18 • Limit-Priced Interest. Both displayable and non-displayable incoming limit-priced interest to buy (sell) that is priced above (below) the Upper (Lower) Price Band shall be repriced to the Upper (Lower) Price Band. Exchange systems shall also reprice resting limit-priced interest to buy (sell) to the Upper (Lower) Price Band if Price Bands move and the price of resting limit-priced interest to buy (sell) moves above (below) the Upper (Lower) Price Band. If the Price Bands move and the original limit price of repriced interest is at or within the Price Bands, Exchange systems shall reprice such interest to its original limit price.19 • IOC Orders. If an IOC order cannot be fully executed at or within the Price Bands, Exchange systems shall cancel any unexecuted portion of the IOC Order. • DMM Interest. Exchange systems shall cancel DMM Interest to buy (sell) that is entered manually or via DMMspecific order entry methodology if such interest is priced above (below) the Upper (Lower) Price Band. DMM Interest to buy (sell) that is entered via the same order entry methodology as off-Floor interest shall be repriced pursuant to paragraph (a)(5)(B) of this Rule. 17 See Section VI(A)(1) of the Plan. market participants do not want to have their orders repriced to the Price Band, market Participants may cancel the unexecuted portion of the order or submit such order as an IOC order. 19 See id. 18 If VerDate Mar<15>2010 17:16 Feb 13, 2013 Jkt 229001 • Market Pegging Interest. Market Pegging Interest to buy (sell) shall peg to the specified pegging price or the Upper (Lower) Price Band, whichever is lower (higher). • Sell Short Orders. During a Short Sale Price Test, as set forth in Rule 440B(b), short sale orders priced below the Lower Price Band shall be repriced to the higher of the Lower Price Band or the Permitted Price, as defined in Rule 440B(e).20 • Floor Broker Cross Function. Exchange systems shall not execute orders crossed pursuant to the process provided for in Supplementary Material .10 to Rule 76, if the price of the proposed cross transaction is outside of the Price Bands. • Original Order Instructions. Any interest repriced pursuant to Exchange Rule 80C(a) shall return to its original order instructions for purposes of the reopening transaction following a Trading Pause. The Exchange believes these provisions are reasonably designed to prevent executions outside the Price Bands as required by the limit up-limit down and trading pause requirements specified in the Plan. The Exchange believes that allowing trading interest that would otherwise execute outside the Prices Bands to reprice and keep its original time stamp, helps ensure that trading interest retains its priority while preventing executions in violation with the limit up-limit down and trading pause requirements. The Exchange notes that retention of an original timestamp when interest is repriced occurs only under the operation of this Rule in order to prevent executions outside the Price Bands and to comply with the new LULD Plan and in no other circumstances.21 To the extent that repricing of trading interest is not practical due to systems restrictions such as in the case of the DMM Interest that is entered manually or via DMMspecific order entry methodology, the Exchange proposes to cancel the trading interest in order to prevent executions outside the Price Bands. The Exchange will not reprice a Floor Broker Cross that would execute outside the Price Bands, because such orders are intended to be crossed at the entered price or not at all. Instead, the Exchange will return 20 Since there is no Permitted Price for short sale exempt orders, short sale exempt orders are treated the same as other orders under this Rule. 21 The Exchange notes repricing of trading interest under ordinary circumstances outside of this Rule may be different than pursuant to the proposed Rule. For example, repricing of Market Pegging Interest and Sell Short Orders under ordinary circumstances would receive a new time stamp after repricing. PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 the unexecuted orders to the Floor Broker. The Exchange believes that adding certainty to the treatment and priority of trading interest in these situations will encourage market participants to continue to provide liquidity to the Exchange and thus promote a fair and orderly market. The Exchange proposes Rule 80C(a)(6) that provides that the Exchange systems shall not route buy (sell) interest to an away market displaying a sell (buy) quote that is above (below) the Upper (Lower) Price Band. The Exchange believes that this provision is reasonably designed to prevent an execution outside the Price Bands in a manner that promotes compliance with the limit up-limit down and trading pause requirements specified in the Plan. In addition, the Exchange proposes Rule 80C(a)(7) that provides that the Exchange may declare a Trading Pause for a NMS Stock listed on the Exchange when (i) the National Best Bid (Offer) is below (above) the Lower (Upper) Price Band and the NMS Stock is not in a Limit State; and (ii) trading in that NMS Stock deviates from normal trading characteristics. An Exchange Floor Official may declare such Trading Pause during a Straddle State if such Trading Pause would support the Plan’s goal to address extraordinary market volatility.22 The Exchange believes that this provision is reasonably designed to comply with Section VII(A)(2) of the Plan.23 Consistent with the Plan’s requirements for the Exchange to establish, maintain, and enforce policies and procedures that are reasonably designed to comply with the trading pause requirements specified in the Plan, the Exchanges also proposes to amend the Rules regarding Trading Pauses to correspond with the LULD Plan. The Exchange proposes to provide that during Phase 1 of the Plan, a Trading Pause in Tier 1 NMS Stocks subject to the requirements of the Plan, shall be subject to Plan requirements and Exchange Rule 80C(b)(2); a Trading Pause in Tier 1 NMS Stocks not yet subject to the requirements of the Plan shall be subject to the requirements in paragraphs (b)(1)–(5) of this Rule; and a Trading Pause in Tier 2 NMS Stocks shall be subject to the requirements set forth in Exchange Rule 80C(b)(1)(B)–(5). The proposed change will allow the Trading Pause requirements in Exchange Rule 80C(b)(1) to continue to 22 The Exchange will develop written policies and procedures to determine when to declare a Trading Pause in such circumstances. 23 See Section VII(A)(2) of the Plan. E:\FR\FM\14FEN1.SGM 14FEN1 Federal Register / Vol. 78, No. 31 / Thursday, February 14, 2013 / Notices sroberts on DSK5SPTVN1PROD with NOTICES apply to Tier 1 NMS Stocks during the beginning of Phase I until they are subject to the Plan requirements. Once the Plan has been fully implemented and all NMS Stocks are subject to the Plan, a Trading Pause under the Plan shall be subject to Exchange Rule 80C(b)(2). These proposed changes are designed to comply with Section VIII of the Plan to ensure implementation of the Plan’s requirements.24 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act 25 in general, and furthers the objectives of Section 6(b)(5),26 in particular, in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. The proposal promotes just and equitable principles of trade and removes impediments to, and perfects the mechanism of, a free and open market and a national market system by ensuring that the Exchange systems will not display or execute trading interest outside the Price Bands as required by the limit up-limit down and trading pause requirements specified in the Plan. The proposal will also ensure that the trading interest on the Exchange is either repriced to maintain priority or canceled in a manner that promotes just and equitable principles of trade and removes impediments to, and perfects the mechanism of, a free and open market and a national market system. Specifically, the proposal will help allow market participants to continue to trade NMS Stocks within Price Bands in compliance with the Plan with certainty on how certain orders and trading interest will be treated. Thus, reducing uncertainty regarding the treatment and priority of trading interest with the Price Bands should help encourage market participants to continue to provide liquidity during times of extraordinary market volatility that occur during Regular Trading Hours. The proposal also promotes just and equitable principles of trade and removes impediments to, and perfects the mechanism of, a free and open market and a national market system by ensuring that orders in NMS Stocks are not routed to other exchanges in situations where an execution may occur outside Price Bands, and thereby Section VIII of the Plan. U.S.C. 78f(b). 26 15 U.S.C. 78f(b)(5). is reasonably designed to prevent an execution outside the Price Bands in a manner that promotes compliance with the limit up-limit down and trading pause requirements specified in the Plan. 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. The proposed changes are being made to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with the limit up-limit down and trading pause requirements specified in the Plan, of which other equities exchanges are also Participants of. Other competing equity exchanges are subject to the same limit up-limit down and trading pause requirements specified in the Plan. Thus, the proposed changes will not impose any burden on competition while providing certainty of treatment and execution of trading interest on the Exchange to market participants during periods of extraordinary volatility in NMS stock while in compliance with the limit up-limit down and trading pause requirements specified in the Plan. 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 27 and Rule 19b–4(f)(6) thereunder.28 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 and Rule 19b–4(f)(6)(iii) thereunder. 24 See 25 15 VerDate Mar<15>2010 17:16 Feb 13, 2013 27 15 28 17 Jkt 229001 PO 00000 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). Frm 00090 Fmt 4703 Sfmt 4703 10681 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) of the Act 29 to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File No. SR–NYSEMKT–2013–05 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–NYSEMKT–2013–05. 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 10:00 a.m. and 3:00 p.m. Copies of such 29 15 E:\FR\FM\14FEN1.SGM U.S.C. 78s(b)(2)(B). 14FEN1 10682 Federal Register / Vol. 78, No. 31 / Thursday, February 14, 2013 / Notices 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–NYSEMKT– 2013–05 and should be submitted on or before March 7, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–03388 Filed 2–13–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68883; File No. SR–EDGX– 2013–04] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend EDGX Rule 11.14 To Extend the Operation of the Single Stock Circuit Breaker Program February 8, 2013. sroberts on DSK5SPTVN1PROD with NOTICES 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 January 30, 2013, EDGX Exchange, Inc. (‘‘EDGX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend EDGX Rule 11.14 to extend the operation of the single stock circuit breaker pilot program (the ‘‘Pilot’’) from the current scheduled expiration date of February 4, 2013 until the earlier of the initial date of operations of the Regulation NMS Plan to Address Extraordinary Market Volatility (the ‘‘Plan’’) or February 4, 2014. All of the changes described herein are applicable to EDGX Members. The text of the proposed rule change is available on the 30 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 17:16 Feb 13, 2013 Jkt 229001 Exchange’s Internet Web site at www.directedge.com, at the Exchange’s principal office, and at the Public Reference Room of the Commission. 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend EDGX Rule 11.14 to extend the operation of the Pilot from the current scheduled expiration date of February 4, 2013 3 until the earlier of the initial date of operations of the Plan or February 4, 2014. The Pilot will continue to operate as to individual securities until such security is subject to the Plan. EDGX Rule 11.14 requires the Exchange to pause trading in an individual security listed on the Exchange if the primary listing market for such stock issues a trading pause. Such trading pause will continue until trading has resumed on the primary listing market. However, the Exchange may resume trading in such stock if trading has not resumed on the primary listing market and ten minutes have passed since the individual stock trading pause message has been received from the responsible single plan processor. The Pilot was developed and implemented as a market-wide initiative by the Exchange and other national securities exchanges in consultation with the Securities and Exchange Commission (the ‘‘Commission’’) staff and is currently applicable to all NMS stocks and specified exchange-traded products.4 3 See Securities Exchange Release No. 67502 (July 25, 2012), 77 FR 45394 (July 31, 2012) (SR–EDGX– 2012–28). 4 The Exchange notes that the other national securities exchanges and the Financial Industry Regulatory Authority have adopted the Pilot in substantially similar form. 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– PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 The extension proposed herein would allow the Pilot to continue to operate without interruption until implementation of the Plan.5 The Plan will begin initial operations on April 8, 2013.6 If the Plan has an initial date of operations before February 4, 2014, the proposed Pilot for trading pauses would expire at that time. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,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 remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that the change proposed herein meets these requirements in that it promotes 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). See also 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). See also Securities Exchange Act Release No. 63500 (December 9, 2010), 75 FR 78309 (December 15, 2010) (SR–NYSE–2010–81). A proposal to, among other things, expand the Pilot to include all NMS stocks not already included therein was implemented on August 8, 2011. See Securities Exchange Act Release No. 64735 (June 23, 2011), 76 FR 38243 (June 29, 2011) (File Nos. SR–BATS–2011–016; SR–BYX–2011–011; SR–BX– 2011–025; SR–CBOE–2011–049; SR–CHX–2011–09; SR–EDGA–2011–15; SR–EDGX–2011–14; SR– FINRA–2011–023; SR–ISE–2011–028; SR– NASDAQ–2011–067; SR–NYSE–2011–21; SR– NYSEAmex–2011–32; SR–NYSEArca–2011–26; SR– NSX–2011–06; and SR–Phlx–2011–64). 5 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (File No. 4–631) (Order Approving, on a Pilot Basis, the National Market System Plan To Address Extraordinary Market Volatility by BATS Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc). 6 Letter from Janet McGinness, Executive Vice President and Corporate Secretary, NYSE Markets, to Elizabeth Murphy, Secretary, Securities and Exchange Commission, dated January 17, 2013. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). E:\FR\FM\14FEN1.SGM 14FEN1

Agencies

[Federal Register Volume 78, Number 31 (Thursday, February 14, 2013)]
[Notices]
[Pages 10678-10682]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03388]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68875; File No. SR-NYSEMKT-2013-05]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 
80C--Equities To Establish Rules To Comply With the Requirements of the 
Plan To Address Extraordinary Market Volatility Submitted to the 
Commission Pursuant to Rule 608 of Regulation NMS

February 8, 2013.
    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 January 25, 2013, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 Exchange Rule 80C--Equities to 
establish rules to comply with the requirements of the Plan to Address 
Extraordinary Market Volatility submitted to the Commission pursuant to 
Rule 608 of Regulation NMS. The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, on the Commission's Web site at https://www.sec.gov, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the 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,

[[Page 10679]]

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 Exchange Rule 80C--Equities to 
establish rules to comply with the requirements of the Plan to Address 
Extraordinary Market Volatility submitted to the Commission pursuant to 
Rule 608 of Regulation NMS under the Act (the ``Plan''). The Exchange 
proposes to adopt the changes for a pilot period that coincides with 
the pilot period for the Plan, which is currently scheduled as a one-
year pilot to begin on April 8, 2013.
Background
    Since May 6, 2010, when the markets experienced excessive 
volatility in an abbreviated time period, i.e., the ``flash crash,'' 
the equities exchanges and FINRA have implemented market-wide measures 
designed to restore investor confidence by reducing the potential for 
excessive market volatility. Among the measures adopted include pilot 
plans for stock-by-stock trading pauses \4\ and related changes to the 
equities market clearly erroneous execution rules \5\ and more 
stringent equities market maker quoting requirements.\6\ On May 31, 
2012, the Commission approved the Plan, as amended, on a one-year pilot 
basis.\7\ In addition, the Commission approved changes to the equities 
market-wide circuit breaker rules on a pilot basis to coincide with the 
pilot period for the Plan.\8\
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    \4\ See, e.g., Exchange Rule 80C.
    \5\ See, e.g., Exchange Rule 128.
    \6\ See, e.g., Exchange Rule 104(a)(1)(B).
    \7\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Order Approving, 
on a Pilot Basis, the National Market System Plan To Address 
Extraordinary Market Volatility).
    \8\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-038; SR-BYX-2011-
025; SR-BX-2011-068; SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-
30; SR-EDGA-2011-31; SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-
2011-61; SR-NASDAQ-2011-131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-
NYSEAmex-2011-73; SR-NYSEArca-2011-68; SR-Phlx-2011-129).
---------------------------------------------------------------------------

    The Plan is designed to prevent trades in individual NMS Stocks 
from occurring outside of specified Price Bands.\9\ As described more 
fully below, the requirements of the Plan are coupled with Trading 
Pauses to accommodate more fundamental price moves (as opposed to 
erroneous trades or momentary gaps in liquidity). All trading centers 
in NMS Stocks, including both those operated by Participants and those 
operated by members of Participants, are required to establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to comply with the requirements specified in the 
Plan.\10\ As set forth in more detail in the Plan, Price Bands 
consisting of a Lower Price Band and an Upper Price Band for each NMS 
Stock are calculated by the Processors.\11\ When the National Best Bid 
(Offer) is below (above) the Lower (Upper) Price Band, the Processors 
shall disseminate such National Best Bid (Offer) with an appropriate 
flag identifying it as unexecutable. When the National Best Bid (Offer) 
is equal to the Upper (Lower) Price Band, the Processors shall 
distribute such National Best Bid (Offer) with an appropriate flag 
identifying it as a Limit State Quotation.\12\ All trading centers in 
NMS Stocks must maintain written policies and procedures that are 
reasonably designed to prevent the display of offers below the Lower 
Price Band and bids above the Upper Price Band for NMS Stocks. 
Notwithstanding this requirement, the Processor shall display an offer 
below the Lower Price Band or a bid above the Upper Price Band, but 
with a flag that it is non-executable. Such bids or offers shall not be 
included in the National Best Bid or National Best Offer 
calculations.\13\
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    \9\ Unless otherwise specified, capitalized terms used in this 
rule filing are based on the defined terms of the Plan.
    \10\ The Exchange is a Participant in the Plan.
    \11\ See Section (V)(A) of the Plan.
    \12\ See Section VI(A) of the Plan.
    \13\ See Section VI(A)(3) of the Plan.
---------------------------------------------------------------------------

    Trading in an NMS Stock immediately enters a Limit State if the 
National Best Offer (Bid) equals but does not cross the Lower (Upper) 
Price Band.\14\ Trading for an NMS stock exits a Limit State if, within 
15 seconds of entering the Limit State, all Limit State Quotations were 
executed or canceled in their entirety. If the market does not exit a 
Limit State within 15 seconds, then the Primary Listing Exchange would 
declare a five-minute trading pause pursuant to Section VII of the LULD 
Plan, which would be applicable to all markets trading the 
security.\15\ In addition, the Plan defines a Straddle State as when 
the National Best Bid (Offer) is below (above) the Lower (Upper) Price 
Band and the NMS Stock is not in a Limit State. For example, assume the 
Lower Price Band for an NMS Stock is $9.50 and the Upper Price Band is 
$10.50, such NMS stock would be in a Straddle State if the National 
Best Bid were below $9.50, and therefore non-executable, and the 
National Best Offer were above $9.50 (including a National Best Offer 
that could be above $10.50). If an NMS Stock is in a Straddle State and 
trading in that stock deviates from normal trading characteristics, the 
Primary Listing Exchange may declare a trading pause for that NMS 
Stock.
---------------------------------------------------------------------------

    \14\ See Section VI(B)(1) of the Plan.
    \15\ The primary listing market would declare a trading pause in 
an NMS Stock; upon notification by the primary listing market, the 
Processor would disseminate this information to the public. No 
trades in that NMS Stock could occur during the trading pause, but 
all bids and offers may be displayed. See Section VII(A) of the 
Plan.
---------------------------------------------------------------------------

Proposed Amendment to Rule 80C--Equities
    The Exchange is required by the Plan to establish, maintain, and 
enforce written policies and procedures that are reasonably designed to 
comply with the limit up-limit down and trading pause requirements 
specified in the Plan. In response to the new Plan, the Exchange 
proposes to amend its Rules accordingly.
    The Exchange proposes to add Rule 80C(a) to define that ``Plan'' 
means the Plan to Address Extraordinary Market Volatility Submitted to 
the Securities and Exchange Commission Pursuant to Rule 608 of 
Regulation NMS under the Securities Exchange Act of 1934, Exhibit A to 
Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 
(June 6, 2012), as it may be amended from time to time. The Exchange 
proposes to add Rule 80C(a)(2) to state that the Exchange is a 
Participant in, and subject to the applicable requirements of, the 
Plan, which establishes procedures to address extraordinary volatility 
in NMS Stocks. In addition, proposed Rule 80C(a) provides that all 
capitalized terms not otherwise defined in this Rule shall have the 
meanings set forth in the Plan or Exchange rules, as applicable.
    The Exchange proposes to add Rule 80C(a)(3) to provide that member 
organizations shall comply with the applicable provisions of the Plan. 
The Exchange believes that this requirement will help ensure the 
compliance by its members with the provisions of the Plan as required 
pursuant to Section II(B) of the Plan.\16\
---------------------------------------------------------------------------

    \16\ See Section II(B) of the Plan.
---------------------------------------------------------------------------

    The Exchange proposes to add Rule 80C(a)(4) to provide that 
Exchange systems shall not display or execute buy (sell) interest above 
(below) the Upper (Lower) Price Bands, unless such interest is 
specifically exempted under the Plan. The Exchange believes that this 
requirement is reasonably designed to help ensure the compliance with 
the

[[Page 10680]]

limit up-limit down and trading pause requirements specified in the 
Plan, by preventing executions outside the Price Bands as required 
pursuant to Section VI(A)(1) of the Plan.\17\
---------------------------------------------------------------------------

    \17\ See Section VI(A)(1) of the Plan.
---------------------------------------------------------------------------

    The Exchange proposes Rules regarding the treatment of certain 
trading interest on the Exchange in order to prevent executions outside 
the Price Bands and to comply with the new LULD Plan. In particular, 
the Exchange proposes to add Rule 80C(a)(5) that provides that Exchange 
systems shall reprice and/or cancel buy (sell) interest that is priced 
or could be executed above (below) the Upper (Lower) Price Band. Any 
interest that is repriced pursuant to this Rule shall retain its time 
stamp of original order entry. Specifically, the Exchange proposes the 
following provisions regarding the repricing and/or canceling of 
certain trading interest:
     Market Orders. If a market order cannot be fully executed 
at or within the Price Bands, Exchange systems shall display the 
unexecuted portion of the buy (sell) market order at the Upper (Lower) 
Price Band.\18\
---------------------------------------------------------------------------

    \18\ If market participants do not want to have their orders 
repriced to the Price Band, market Participants may cancel the 
unexecuted portion of the order or submit such order as an IOC 
order.
---------------------------------------------------------------------------

     Limit-Priced Interest. Both displayable and non-
displayable incoming limit-priced interest to buy (sell) that is priced 
above (below) the Upper (Lower) Price Band shall be repriced to the 
Upper (Lower) Price Band. Exchange systems shall also reprice resting 
limit-priced interest to buy (sell) to the Upper (Lower) Price Band if 
Price Bands move and the price of resting limit-priced interest to buy 
(sell) moves above (below) the Upper (Lower) Price Band. If the Price 
Bands move and the original limit price of repriced interest is at or 
within the Price Bands, Exchange systems shall reprice such interest to 
its original limit price.\19\
---------------------------------------------------------------------------

    \19\ See id.
---------------------------------------------------------------------------

     IOC Orders. If an IOC order cannot be fully executed at or 
within the Price Bands, Exchange systems shall cancel any unexecuted 
portion of the IOC Order.
     DMM Interest. Exchange systems shall cancel DMM Interest 
to buy (sell) that is entered manually or via DMM-specific order entry 
methodology if such interest is priced above (below) the Upper (Lower) 
Price Band. DMM Interest to buy (sell) that is entered via the same 
order entry methodology as off-Floor interest shall be repriced 
pursuant to paragraph (a)(5)(B) of this Rule.
     Market Pegging Interest. Market Pegging Interest to buy 
(sell) shall peg to the specified pegging price or the Upper (Lower) 
Price Band, whichever is lower (higher).
     Sell Short Orders. During a Short Sale Price Test, as set 
forth in Rule 440B(b), short sale orders priced below the Lower Price 
Band shall be repriced to the higher of the Lower Price Band or the 
Permitted Price, as defined in Rule 440B(e).\20\
---------------------------------------------------------------------------

    \20\ Since there is no Permitted Price for short sale exempt 
orders, short sale exempt orders are treated the same as other 
orders under this Rule.
---------------------------------------------------------------------------

     Floor Broker Cross Function. Exchange systems shall not 
execute orders crossed pursuant to the process provided for in 
Supplementary Material .10 to Rule 76, if the price of the proposed 
cross transaction is outside of the Price Bands.
     Original Order Instructions. Any interest repriced 
pursuant to Exchange Rule 80C(a) shall return to its original order 
instructions for purposes of the re-opening transaction following a 
Trading Pause.
    The Exchange believes these provisions are reasonably designed to 
prevent executions outside the Price Bands as required by the limit up-
limit down and trading pause requirements specified in the Plan. The 
Exchange believes that allowing trading interest that would otherwise 
execute outside the Prices Bands to reprice and keep its original time 
stamp, helps ensure that trading interest retains its priority while 
preventing executions in violation with the limit up-limit down and 
trading pause requirements. The Exchange notes that retention of an 
original timestamp when interest is repriced occurs only under the 
operation of this Rule in order to prevent executions outside the Price 
Bands and to comply with the new LULD Plan and in no other 
circumstances.\21\ To the extent that repricing of trading interest is 
not practical due to systems restrictions such as in the case of the 
DMM Interest that is entered manually or via DMM-specific order entry 
methodology, the Exchange proposes to cancel the trading interest in 
order to prevent executions outside the Price Bands. The Exchange will 
not reprice a Floor Broker Cross that would execute outside the Price 
Bands, because such orders are intended to be crossed at the entered 
price or not at all. Instead, the Exchange will return the unexecuted 
orders to the Floor Broker. The Exchange believes that adding certainty 
to the treatment and priority of trading interest in these situations 
will encourage market participants to continue to provide liquidity to 
the Exchange and thus promote a fair and orderly market.
---------------------------------------------------------------------------

    \21\ The Exchange notes repricing of trading interest under 
ordinary circumstances outside of this Rule may be different than 
pursuant to the proposed Rule. For example, repricing of Market 
Pegging Interest and Sell Short Orders under ordinary circumstances 
would receive a new time stamp after repricing.
---------------------------------------------------------------------------

    The Exchange proposes Rule 80C(a)(6) that provides that the 
Exchange systems shall not route buy (sell) interest to an away market 
displaying a sell (buy) quote that is above (below) the Upper (Lower) 
Price Band. The Exchange believes that this provision is reasonably 
designed to prevent an execution outside the Price Bands in a manner 
that promotes compliance with the limit up-limit down and trading pause 
requirements specified in the Plan.
    In addition, the Exchange proposes Rule 80C(a)(7) that provides 
that the Exchange may declare a Trading Pause for a NMS Stock listed on 
the Exchange when (i) the National Best Bid (Offer) is below (above) 
the Lower (Upper) Price Band and the NMS Stock is not in a Limit State; 
and (ii) trading in that NMS Stock deviates from normal trading 
characteristics. An Exchange Floor Official may declare such Trading 
Pause during a Straddle State if such Trading Pause would support the 
Plan's goal to address extraordinary market volatility.\22\ The 
Exchange believes that this provision is reasonably designed to comply 
with Section VII(A)(2) of the Plan.\23\
---------------------------------------------------------------------------

    \22\ The Exchange will develop written policies and procedures 
to determine when to declare a Trading Pause in such circumstances.
    \23\ See Section VII(A)(2) of the Plan.
---------------------------------------------------------------------------

    Consistent with the Plan's requirements for the Exchange to 
establish, maintain, and enforce policies and procedures that are 
reasonably designed to comply with the trading pause requirements 
specified in the Plan, the Exchanges also proposes to amend the Rules 
regarding Trading Pauses to correspond with the LULD Plan. The Exchange 
proposes to provide that during Phase 1 of the Plan, a Trading Pause in 
Tier 1 NMS Stocks subject to the requirements of the Plan, shall be 
subject to Plan requirements and Exchange Rule 80C(b)(2); a Trading 
Pause in Tier 1 NMS Stocks not yet subject to the requirements of the 
Plan shall be subject to the requirements in paragraphs (b)(1)-(5) of 
this Rule; and a Trading Pause in Tier 2 NMS Stocks shall be subject to 
the requirements set forth in Exchange Rule 80C(b)(1)(B)-(5). The 
proposed change will allow the Trading Pause requirements in Exchange 
Rule 80C(b)(1) to continue to

[[Page 10681]]

apply to Tier 1 NMS Stocks during the beginning of Phase I until they 
are subject to the Plan requirements. Once the Plan has been fully 
implemented and all NMS Stocks are subject to the Plan, a Trading Pause 
under the Plan shall be subject to Exchange Rule 80C(b)(2). These 
proposed changes are designed to comply with Section VIII of the Plan 
to ensure implementation of the Plan's requirements.\24\
---------------------------------------------------------------------------

    \24\ See Section VIII of the Plan.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \25\ in general, and furthers the objectives of 
Section 6(b)(5),\26\ in particular, in that it is designed to promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanisms of a free and open market and a national market 
system and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposal promotes just and equitable principles of trade and 
removes impediments to, and perfects the mechanism of, a free and open 
market and a national market system by ensuring that the Exchange 
systems will not display or execute trading interest outside the Price 
Bands as required by the limit up-limit down and trading pause 
requirements specified in the Plan.
    The proposal will also ensure that the trading interest on the 
Exchange is either repriced to maintain priority or canceled in a 
manner that promotes just and equitable principles of trade and removes 
impediments to, and perfects the mechanism of, a free and open market 
and a national market system. Specifically, the proposal will help 
allow market participants to continue to trade NMS Stocks within Price 
Bands in compliance with the Plan with certainty on how certain orders 
and trading interest will be treated. Thus, reducing uncertainty 
regarding the treatment and priority of trading interest with the Price 
Bands should help encourage market participants to continue to provide 
liquidity during times of extraordinary market volatility that occur 
during Regular Trading Hours.
    The proposal also promotes just and equitable principles of trade 
and removes impediments to, and perfects the mechanism of, a free and 
open market and a national market system by ensuring that orders in NMS 
Stocks are not routed to other exchanges in situations where an 
execution may occur outside Price Bands, and thereby is reasonably 
designed to prevent an execution outside the Price Bands in a manner 
that promotes compliance with the limit up-limit down and trading pause 
requirements specified in the Plan.

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. The proposed changes are 
being made to establish, maintain, and enforce written policies and 
procedures that are reasonably designed to comply with the limit up-
limit down and trading pause requirements specified in the Plan, of 
which other equities exchanges are also Participants of. Other 
competing equity exchanges are subject to the same limit up-limit down 
and trading pause requirements specified in the Plan. Thus, the 
proposed changes will not impose any burden on competition while 
providing certainty of treatment and execution of trading interest on 
the Exchange to market participants during periods of extraordinary 
volatility in NMS stock while in compliance with the limit up-limit 
down and trading pause requirements specified in the Plan.

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 \27\ and Rule 19b-4(f)(6) thereunder.\28\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \28\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) of the Act \29\ to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEMKT-2013-05 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-NYSEMKT-2013-05. 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 
10:00 a.m. and 3:00 p.m. Copies of such

[[Page 10682]]

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-NYSEMKT-2013-05 and should be submitted on or before March 
7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03388 Filed 2-13-13; 8:45 am]
BILLING CODE 8011-01-P
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