Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 11.11 to Automatically Prevent Entry of Zero Display Reserve Orders Marked “Sell Short”, 40248-40250 [2013-15932]
Download as PDF
40248
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Notices
emcdonald on DSK67QTVN1PROD with NOTICES
order to provide clearing services for the
LIFFE Securities Products. Accordingly,
ICE Clear Europe has submitted, and the
Commission has granted, ICE Clear
Europe’s application for exemptive
relief from clearing agency registration
under Section 17A(b) of the Exchange
Act and Rule 17Ab2–1 thereunder
solely with respect to ICE Clear Europe’s
provision of clearance and settlement
services for LIFFE Securities Products.30
Given the Exemptive Order,31 the
Commission finds that the Proposal is
consistent with the requirement of
Section 17A(b)(1) of the Act 32 regarding
clearing agency registration.
In addition, the Commission finds
that the Proposal is consistent with the
requirement of the Exchange Act with
respect to promoting the prompt and
accurate clearance and settlement of
securities transactions and, to the extent
applicable, derivative agreements,
contracts, and transactions. The
Proposal contains provisions designed
to permit and facilitate LIFFE Contracts
to be transitioned to and cleared on an
ongoing basis by ICE Clear Europe,
including changes to ICE Clear Europe’s
Rules, as well as its Finance Procedures,
Clearing Procedures, Delivery
Procedures, and Membership
Procedures.
In addition, the Commission finds
that the Proposal is consistent with the
requirements of Section 17A(b)(3)(F) of
the Act 33 regarding the safeguarding of
securities and funds which are in the
custody or control of the clearing agency
or for which it is responsible. Among
other things, the Proposal revises
margin requirements, establishes the
F&O Guaranty Fund to accommodate
the clearing of both LIFFE contracts and
ICE Clear Europe’s existing Energy
Contracts, and revises ICE Clear
Europe’s risk management framework
with respect to LIFFE contracts. The
Proposal includes new policies covering
margin requirements, mark-to-market
margin, capital to margin, membership,
internal rating, backtesting, wrong-way
risk, concentration charges, intraday
margin and stress testing in respect of
the LIFFE A&M clearing relationship.
Relevant models applicable to the
clearing of LIFFE Contracts were
subjected to independent validation as
30 ICE Clear Europe’s Form CA–1 incorporates a
letter from Paul Swann, President, ICE Clear
Europe, to Elizabeth Murphy, Secretary, SEC, dated
June 11, 2013, requesting exemptive relief from
clearing agency registration in connection with the
clearing of LIFFE Securities Products.
31 Supra n. 26.
32 15 U.S.C. 78q–1(b)(1).
33 15 U.S.C. 78q–1(b)(3)(F).
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required by ICE Clear Europe’s model
governance framework.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the Proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the
Act 34 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,35 that the
proposed rule change (File No. SR–
ICEEU–2013–09) be, and hereby is,
approved.36
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.37
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–15999 Filed 7–2–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69874; File No. SR–NSX–
2013–13]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Amending
Exchange Rule 11.11 to Automatically
Prevent Entry of Zero Display Reserve
Orders Marked ‘‘Sell Short’’
June 27, 2013.
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 June 26,
2013, National Stock Exchange, Inc.
(‘‘NSX®’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change, as described in
Items I and II below, which Items have
been prepared by the 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Exchange Rule 11.11 (Orders and
Modifiers) to add new subparagraph
U.S.C. 78q–1.
U.S.C. 78s(b)(2).
36 In approving this proposed rule change the
Commission has considered the proposed rule’s
impact of efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
37 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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34 15
35 15
Frm 00160
Fmt 4703
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(c)(2)(E), which addresses the manner in
which the Exchange’s Trading System
(the ‘‘System’’) will handle a sell short
Zero Display Reserve Order 3 entered by
an Exchange User 4 in a security that
subsequently becomes subject to a short
sale price test restriction under Rule 201
of Regulation SHO 5 of the Act. The rule
amendment and accompanying
technology change address a System
limitation that causes a sell short Zero
Display Reserve Order to be executed at
or below the national best bid during a
period that the security is subject to the
short sale price test restriction.
Accordingly, the Exchange has
determined to amend Rule 11.11 by
adding new subparagraph (c)(2)(E)
which will provide that the Exchange’s
System will automatically reject the
entry of a Zero Display Reserve Order
marked as ‘‘sell short.’’ The Exchange
has stated that the present rule
amendment is a temporary measure
intended to address Rule 201 Regulation
SHO compliance with regard to Zero
Display Reserve Orders. The Exchange
has further stated that it intends to make
subsequent permanent modifications to
the System that will eliminate the need
to automatically reject all Zero Display
Reserve Orders marked ‘‘sell short.’’
Accordingly, the Exchange will seek
Commission approval of a proposal to
replace subparagraph (c)(2)(E) by
August 30, 2013, the date by which the
Exchange anticipates the permanent
modifications to the System will be
ready to implement, and to propose any
other rule amendments necessary to
further address the Exchange’s Rule 201
Regulation SHO compliance.
The text of the proposed rule change
is available on the Exchange’s Web site
at www.nsx.com, at the Exchange’s
principal office, and at the
Commission’s Public Reference Room.
3Under Exchange Rule 11.11(c)(2), a Reserve
Order is defined as a limit order with a portion of
the quantity displayed (‘‘display quantity’’) and
with a reserve portion of the quantity (‘‘reserve
quantity’’) that is not displayed. Rule 11.11(c)(2)(A)
provides, in relevant part, that a Reserve Order can
be entered with a display quntity of zero, in which
case the Reserve Order will be known as ‘‘Zero
Display Reserve Order.’’
4 NSX Rule 1.5 defines the term ‘‘User’’ as any
ETP Holder or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Rule 11.9.
5 17 CFR 242.201. See Securities Exchange Act
Release No. 61595 (February 26, 2010), 75 FR 11232
(March 10, 2010) (‘‘Rule 201 Adopting Release’’)
and Securities Exchange Act Release No. 63247
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). See also
Division of Trading and Markets: Responses to
Frequently Asked Questions Concerning Rule 201
of Regulation SHO, January 20, 2011 at https://
www.sec.gov/divisions/marketreg/
mrfaqregsho1204.htm (‘‘Rule 201 FAQs’’). Rule 201
applies to any ‘‘trading center’’ as defined in Rule
201(a)(9) of Regulation SHO that executes or
displays a short sale order in a covered security.
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Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
emcdonald on DSK67QTVN1PROD with NOTICES
1. Purpose
The Exchange is proposing to amend
Rule 11.11 to add new subparagraph
(c)(2)(E), which will provide that the
Exchange will automatically block the
entry by Users of Zero Display Reserve
Orders marked ‘‘sell short.’’ All such
orders will be rejected back to the
entering User. The rule amendment and
accompanying changes to the System
will automatically reject the entry of
such orders and thereby prevent a
subsequent execution of such orders at
or below the national best bid during a
time period that the security is the
subject of a short sale price test
restriction.
Rule 201(b)(1)(i) of Regulation SHO
requires trading centers,6 including the
Exchange, to establish, maintain and
enforce written policies and procedures
reasonably designed to prevent the
execution or display of a short sale
order of a covered security at a price
that is less than or equal to the current
national best bid if the price of that
covered security decreases by 10% or
more from such security’s closing price
on the listing market at the close of
regular trading hours on the prior day.
Rule 201(b)(1)(ii) of Regulation SHO
provides that trading centers must
establish, maintain and enforce written
policies and procedure reasonably
designed to enforce the short sale price
test restriction for the remainder of the
trading day and the following day, when
a national best bid for the covered
6 For
purposes of Regulation SHO, the term
‘‘trading center’’ has the same meaning as in Rule
600(b)(78) of Regulation NMS, which defines a
‘‘trading center’’ as ‘‘. . . a national securities
exchange or national securities association that
operates an SRO trading facility, an alternative
trading system, an exchange market maker, an OTC
market maker, or any other broker or dealer that
executes orders internally by trading as principal or
crossing orders as agent.’’
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17:48 Jul 02, 2013
Jkt 229001
security is calculated and disseminated
on a current and continuing basis by a
plan processor pursuant to an effective
national market system plan.
Rule 201(b)(1)(iii)(A) of Regulation
SHO provides that a trading center’s
written policies and procedures must be
reasonably designed to permit the
execution of a displayed short sale order
of a covered security by a trading center
if, at the time of initial display of the
short sale order, the order was at a price
above the current national best bid.7
Exchange Rule 11.11(c)(2)(A) provides
that a User may enter a Reserve Order
with a display quantity of zero, in
which case the Reserve Order will be
known as a Zero Display Reserve Order.
Because no order designated by a User
as a Zero Display Reserve Order ever
becomes displayed, any such order
marked ‘‘sell short’’ does not qualify for
the exception under Rule
201(b)(1)(iii)(A) of Regulation SHO.
Recently, the Exchange became aware
of a System limitation that permits the
execution of a sell short Zero Display
Reserve Order at or below the national
best bid while the covered security was
in a short sale price test restriction. The
operation of the System in these
circumstances is not consistent with
Rule 201(b) of Regulation SHO.
Accordingly, the Exchange has
determined to amend Rule 11.11 by
adding new subparagraph(c)(2)(E)
which will provide that the Exchange’s
System will automatically reject the
entry of a Zero Display Reserve Order
marked as ‘‘sell short.’’ The Exchange
has stated that the present rule
amendment is a temporary measure
intended to address Rule 201 Regulation
SHO compliance with regard to Zero
Display Reserve Orders. The Exchange
has further stated that it intends to make
subsequent permanent modifications to
the System that will eliminate the need
to automatically reject all Zero Display
Reserve Orders marked ‘‘sell short.’’
Accordingly, the Exchange will seek
Commission approval of a proposal to
replace subparagraph (c)(2)(E) by
August 30, 2013, the date by which the
Exchange anticipates the permanent
modifications to the System will be
ready to implement, and to propose any
other rule amendments necessary to
further address the Exchange’s Rule 201
Regulation SHO compliance.
7 The second exception, not relevant for purposes
of this filing, requires the trading center to have
policies and procedures permitting the execution of
an order in a covered security marked ‘‘short
exempt’’ without regard to whether the order is at
a price that is less than or equal to the current
national best bid.
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Frm 00161
Fmt 4703
Sfmt 4703
40249
2. Statutory Basis
The proposed rule change to provide
that the System will automatically reject
the entry of Zero Display Reserve orders
marked ‘‘sell short’’ is consistent with
Section 6(b) 8 of the Act and,
specifically with Rule 201 of Regulation
SHO. Because such orders are not
displayed, they are not within the
exception under Rule 201(b)(1)(iii)(A)
discussed above. The rule amendment
will address Rule 201 of Regulation
SHO compliance by preventing the
execution or display of a short sale
order of a covered security at an
impermissible price when the short sale
price restriction is in effect. In this
regard, the amendment will further the
purposes of the Act and specifically
Rule 201 of Regulation SHO.
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 for the
furtherance of the Act. The Exchange
plans to issue written notification of the
rule amendment to all Users, advising
them that all Zero Display Reserve
Orders marked ‘‘sell short’’ will be
rejected by the System. Users can assess
the impact of the rule amendment on
their order entry strategies and
practices, and determine whether to
send orders to another execution venue.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 9 and Rule
19b–4(f)(6) thereunder.10 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
because the proposed rule change (i)
Does not significantly affect the
8 15
U.S.C. 78f(b).
U.S.C. 78s(b)(3)(A)(iii).
10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) 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 requested a waiver of this requirement.
9 15
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40250
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Notices
emcdonald on DSK67QTVN1PROD with NOTICES
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not 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.
A proposed rule change filed under
Rule 19b–4(f)(6) 11 normally does not
become operative prior to 30 days from
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),12 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest.
The Exchange has requested the
Commission to waive the 30-day
operative delay, as well as the 5-day
pre-filing requirement, so that the
proposed rule change may become
effective and operative upon filing. The
Commission believes that waiving the
30-day operative delay and the 5-day
pre-filing requirement is consistent with
the protection of investors and the
public interest. The Exchange, as a
trading center, is required under
Regulation SHO to establish, maintain
and enforce written policies and
procedures reasonably designed to
prevent the execution of sell short
orders of covered securities subject to
the short sale price test restriction at or
below the current national best bid.
Because the rule amendment is
designed to address this requirement
under Rule 201, the Commission agrees
to waive the operative delay and prefiling requirement. Accordingly, the
Commission grants the Exchange’s
request and designates the proposal
effective upon filing.13
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 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:
11 Id.
12 17
CFR 240.19b–4(f)(6)(iii).
13 For purposes of only waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition
and capital formation. See 15 U.S.C. 78c(f).
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17:48 Jul 02, 2013
Jkt 229001
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–NSX–2013–13 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–NSX–2013–13. This file number
should be included in the subject line
if email is used. To help the
Commission process and review
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. eastern time. Copies of
such filings will also 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–NSX–
2013–13 and should be submitted on or
before July 24, 2013.
For the Commission by the Division of
Trading and Markets, pursuant to the
delegated authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–15932 Filed 7–2–13; 8:45 am]
BILLING CODE 8011–01–P
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14 17
CFR 200.30–3(a)(12).
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Fmt 4703
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69864; File No. SR–DTC–
2013–08]
Self-Regulatory Organizations; The
Depository Trust Company (‘‘DTC’’);
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Implement a Fee
Associated With the Expansion of
DTC’s Ability To Collect and Pass
Through Fees Owed by Participants to
American Depositary Receipt Agents
June 26, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 13,
2013, DTC filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II and III below, which Items
have been prepared primarily by DTC.
DTC filed the rule change pursuant to
Section 19(b)(3)(A) 3 of the Act and Rule
19b–4(f)(2) 4 thereunder, so that the
proposal was effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the rule change from
interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purposed of the proposed rule
change is to implement a fee associated
with the expansion of DTC’s ability to
collect and pass through fees owed by
DTC participants (‘‘Participants’’) to
American Depositary Receipt Agents.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
DTC 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. DTC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.5
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
5 The Commission has modified the text of the
summaries prepared by DTC.
2 17
E:\FR\FM\03JYN1.SGM
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Agencies
[Federal Register Volume 78, Number 128 (Wednesday, July 3, 2013)]
[Notices]
[Pages 40248-40250]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15932]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69874; File No. SR-NSX-2013-13]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Exchange Rule 11.11 to Automatically Prevent Entry of Zero
Display Reserve Orders Marked ``Sell Short''
June 27, 2013.
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 June 26, 2013, National Stock Exchange, Inc. (``NSX[supreg]''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change, as described in Items I and
II below, which Items have been prepared by the Exchange. 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend Exchange Rule 11.11 (Orders and
Modifiers) to add new subparagraph (c)(2)(E), which addresses the
manner in which the Exchange's Trading System (the ``System'') will
handle a sell short Zero Display Reserve Order \3\ entered by an
Exchange User \4\ in a security that subsequently becomes subject to a
short sale price test restriction under Rule 201 of Regulation SHO \5\
of the Act. The rule amendment and accompanying technology change
address a System limitation that causes a sell short Zero Display
Reserve Order to be executed at or below the national best bid during a
period that the security is subject to the short sale price test
restriction. Accordingly, the Exchange has determined to amend Rule
11.11 by adding new subparagraph (c)(2)(E) which will provide that the
Exchange's System will automatically reject the entry of a Zero Display
Reserve Order marked as ``sell short.'' The Exchange has stated that
the present rule amendment is a temporary measure intended to address
Rule 201 Regulation SHO compliance with regard to Zero Display Reserve
Orders. The Exchange has further stated that it intends to make
subsequent permanent modifications to the System that will eliminate
the need to automatically reject all Zero Display Reserve Orders marked
``sell short.'' Accordingly, the Exchange will seek Commission approval
of a proposal to replace subparagraph (c)(2)(E) by August 30, 2013, the
date by which the Exchange anticipates the permanent modifications to
the System will be ready to implement, and to propose any other rule
amendments necessary to further address the Exchange's Rule 201
Regulation SHO compliance.
---------------------------------------------------------------------------
\3\Under Exchange Rule 11.11(c)(2), a Reserve Order is defined
as a limit order with a portion of the quantity displayed (``display
quantity'') and with a reserve portion of the quantity (``reserve
quantity'') that is not displayed. Rule 11.11(c)(2)(A) provides, in
relevant part, that a Reserve Order can be entered with a display
quntity of zero, in which case the Reserve Order will be known as
``Zero Display Reserve Order.''
\4\ NSX Rule 1.5 defines the term ``User'' as any ETP Holder or
Sponsored Participant who is authorized to obtain access to the
System pursuant to Rule 11.9.
\5\ 17 CFR 242.201. See Securities Exchange Act Release No.
61595 (February 26, 2010), 75 FR 11232 (March 10, 2010) (``Rule 201
Adopting Release'') and Securities Exchange Act Release No. 63247
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). See also Division of
Trading and Markets: Responses to Frequently Asked Questions
Concerning Rule 201 of Regulation SHO, January 20, 2011 at https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm (``Rule 201
FAQs''). Rule 201 applies to any ``trading center'' as defined in
Rule 201(a)(9) of Regulation SHO that executes or displays a short
sale order in a covered security.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at www.nsx.com, at the Exchange's principal office, and at the
Commission's Public Reference Room.
[[Page 40249]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend Rule 11.11 to add new
subparagraph (c)(2)(E), which will provide that the Exchange will
automatically block the entry by Users of Zero Display Reserve Orders
marked ``sell short.'' All such orders will be rejected back to the
entering User. The rule amendment and accompanying changes to the
System will automatically reject the entry of such orders and thereby
prevent a subsequent execution of such orders at or below the national
best bid during a time period that the security is the subject of a
short sale price test restriction.
Rule 201(b)(1)(i) of Regulation SHO requires trading centers,\6\
including the Exchange, to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the execution or
display of a short sale order of a covered security at a price that is
less than or equal to the current national best bid if the price of
that covered security decreases by 10% or more from such security's
closing price on the listing market at the close of regular trading
hours on the prior day. Rule 201(b)(1)(ii) of Regulation SHO provides
that trading centers must establish, maintain and enforce written
policies and procedure reasonably designed to enforce the short sale
price test restriction for the remainder of the trading day and the
following day, when a national best bid for the covered security is
calculated and disseminated on a current and continuing basis by a plan
processor pursuant to an effective national market system plan.
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\6\ For purposes of Regulation SHO, the term ``trading center''
has the same meaning as in Rule 600(b)(78) of Regulation NMS, which
defines a ``trading center'' as ``. . . a national securities
exchange or national securities association that operates an SRO
trading facility, an alternative trading system, an exchange market
maker, an OTC market maker, or any other broker or dealer that
executes orders internally by trading as principal or crossing
orders as agent.''
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Rule 201(b)(1)(iii)(A) of Regulation SHO provides that a trading
center's written policies and procedures must be reasonably designed to
permit the execution of a displayed short sale order of a covered
security by a trading center if, at the time of initial display of the
short sale order, the order was at a price above the current national
best bid.\7\
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\7\ The second exception, not relevant for purposes of this
filing, requires the trading center to have policies and procedures
permitting the execution of an order in a covered security marked
``short exempt'' without regard to whether the order is at a price
that is less than or equal to the current national best bid.
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Exchange Rule 11.11(c)(2)(A) provides that a User may enter a
Reserve Order with a display quantity of zero, in which case the
Reserve Order will be known as a Zero Display Reserve Order. Because no
order designated by a User as a Zero Display Reserve Order ever becomes
displayed, any such order marked ``sell short'' does not qualify for
the exception under Rule 201(b)(1)(iii)(A) of Regulation SHO.
Recently, the Exchange became aware of a System limitation that
permits the execution of a sell short Zero Display Reserve Order at or
below the national best bid while the covered security was in a short
sale price test restriction. The operation of the System in these
circumstances is not consistent with Rule 201(b) of Regulation SHO.
Accordingly, the Exchange has determined to amend Rule 11.11 by
adding new subparagraph(c)(2)(E) which will provide that the Exchange's
System will automatically reject the entry of a Zero Display Reserve
Order marked as ``sell short.'' The Exchange has stated that the
present rule amendment is a temporary measure intended to address Rule
201 Regulation SHO compliance with regard to Zero Display Reserve
Orders. The Exchange has further stated that it intends to make
subsequent permanent modifications to the System that will eliminate
the need to automatically reject all Zero Display Reserve Orders marked
``sell short.'' Accordingly, the Exchange will seek Commission approval
of a proposal to replace subparagraph (c)(2)(E) by August 30, 2013, the
date by which the Exchange anticipates the permanent modifications to
the System will be ready to implement, and to propose any other rule
amendments necessary to further address the Exchange's Rule 201
Regulation SHO compliance.
2. Statutory Basis
The proposed rule change to provide that the System will
automatically reject the entry of Zero Display Reserve orders marked
``sell short'' is consistent with Section 6(b) \8\ of the Act and,
specifically with Rule 201 of Regulation SHO. Because such orders are
not displayed, they are not within the exception under Rule
201(b)(1)(iii)(A) discussed above. The rule amendment will address Rule
201 of Regulation SHO compliance by preventing the execution or display
of a short sale order of a covered security at an impermissible price
when the short sale price restriction is in effect. In this regard, the
amendment will further the purposes of the Act and specifically Rule
201 of Regulation SHO.
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\8\ 15 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
for the furtherance of the Act. The Exchange plans to issue written
notification of the rule amendment to all Users, advising them that all
Zero Display Reserve Orders marked ``sell short'' will be rejected by
the System. Users can assess the impact of the rule amendment on their
order entry strategies and practices, and determine whether to send
orders to another execution venue.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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 because the
proposed rule change (i) Does not significantly affect the
[[Page 40250]]
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) does not 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.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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 requested a waiver of this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally
does not become operative prior to 30 days from the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\11\ Id.
\12\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has requested the Commission to waive the 30-day
operative delay, as well as the 5-day pre-filing requirement, so that
the proposed rule change may become effective and operative upon
filing. The Commission believes that waiving the 30-day operative delay
and the 5-day pre-filing requirement is consistent with the protection
of investors and the public interest. The Exchange, as a trading
center, is required under Regulation SHO to establish, maintain and
enforce written policies and procedures reasonably designed to prevent
the execution of sell short orders of covered securities subject to the
short sale price test restriction at or below the current national best
bid. Because the rule amendment is designed to address this requirement
under Rule 201, the Commission agrees to waive the operative delay and
pre-filing requirement. Accordingly, the Commission grants the
Exchange's request and designates the proposal effective upon
filing.\13\
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\13\ For purposes of only waiving the 30-day operative delay,
the Commission has 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 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 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 Number SR-NSX-2013-13 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-NSX-2013-13. This file
number should be included in the subject line if email is used. To help
the Commission process and review 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. eastern time. Copies of such filings will also 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-NSX-2013-13 and should be
submitted on or before July 24, 2013.
For the Commission by the Division of Trading and Markets,
pursuant to the delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15932 Filed 7-2-13; 8:45 am]
BILLING CODE 8011-01-P