
[Federal Register Volume 76, Number 70 (Tuesday, April 12, 2011)]
[Notices]
[Pages 20399-20401]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8726]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64234; File No. SR-NYSEArca-2011-15]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Rule 7.10, Clearly Erroneous Executions, To Extend the Effective Date 
of the Pilot Until the Earlier of August 11, 2011 or the Date on Which 
a Limit Up/Limit Down Mechanism To Address Extraordinary Market 
Volatility, if Adopted, Applies

April 7, 2011.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 31, 2011, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Rule 7.10, which governs 
clearly erroneous executions, to extend the effective date of the pilot 
by which portions of such Rule operate until the earlier of August 11, 
2011 or the date on which a limit up/limit down mechanism to address 
extraordinary market volatility, if adopted, applies. The pilot is 
currently scheduled to expire on April 11, 2011. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, the Commission's Web site at http://www.sec.gov, 
and http://www.nyse.com.

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

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

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

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 7.10, which 
governs clearly erroneous executions, to extend the effective date of 
the pilot by which portions of such Rule operate, until the earlier of 
August 11, 2011 or the date on which a limit up/limit down mechanism to 
address extraordinary market volatility, if adopted, applies. The pilot 
is currently scheduled to expire on April 11, 2011.\4\
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    \4\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-NYSEArca-2010-58). See 
also Securities Exchange Act Release No. 63482 (December 9, 2010), 
75 FR 78331 (December 15, 2010) (SR-NYSEArca-2010-113).
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    On September 10, 2010, the Commission approved, on a pilot basis, 
market-wide amendments to exchanges' rules for clearly erroneous 
executions to set forth clearer standards and curtail discretion with 
respect to breaking

[[Page 20400]]

erroneous trades. In connection with this pilot initiative, the 
Exchange amended NYSE Arca Equities Rule 7.10(c), (e)(2), (f), and (g). 
The amendments provide for uniform treatment of clearly erroneous 
execution reviews (1) in Multi-Stock Events \5\ involving twenty or 
more securities, and (2) in the event transactions occur that result in 
the issuance of an individual security trading pause by the primary 
market and subsequent transactions that occur before the trading pause 
is in effect on the Exchange.\6\ The amendments also eliminated appeals 
of certain rulings made in conjunction with other exchanges with 
respect to clearly erroneous transactions and limited the Exchange's 
discretion to deviate from Numerical Guidelines set forth in the Rule 
in the event of system disruptions or malfunctions.
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    \5\ Terms not defined herein are defined in NYSE Arca Equities 
Rule 7.10.
    \6\ Separately, the Exchange has proposed extend the effective 
date of the trading pause pilot under NYSE Arca Equities Rule 7.11, 
which requires to the Exchange to pause trading in an individual 
security listed on the Exchange if the price moves by 10% as 
compared to prices of that security in the preceding five-minute 
period during a trading day. See SR-NYSEArca-2011-14.
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    If the pilot were not extended, the prior versions of paragraphs 
(c), (e)(2), (f), and (g) of NYSE Arca Equities Rule 7.10 would be in 
effect, and NYSE Arca would have different rules than other exchanges 
and greater discretion in connection with breaking clearly erroneous 
transactions. The Exchange proposes to extend the pilot amendments to 
NYSE Arca Equities Rule 7.10 until the earlier of August 11, 2011 or 
the date on which a limit up/limit down mechanism to address 
extraordinary market volatility, if adopted, applies in order to 
maintain uniform rules across markets and allow the pilot to continue 
to operate without interruption during the same period that the Rule 
7.11 trading pause rule pilot is also in effect. Extension of the pilot 
would permit the Exchange, other national securities exchanges and the 
Commission to further assess the effect of the pilot on the 
marketplace, including whether additional measures should be added, 
whether the parameters of the rule should be modified or whether other 
initiatives should be adopted in lieu of the current pilot.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \7\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5) \8\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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. More specifically, the NYSE Arca believes that the 
extension of the pilot would help assure that the determination of 
whether a clearly erroneous trade has occurred will be based on clear 
and objective criteria, and that the resolution of the incident will 
occur promptly through a transparent process. The proposed rule changes 
would also help assure consistent results in handling erroneous trades 
across the U.S. markets, thus furthering fair and orderly markets, the 
protection of investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\ The Exchange has asked the Commission to 
waive the 30-day operative delay so that the proposal may become 
operative immediately upon filing. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because such waiver will allow the 
pilot program to continue uninterrupted and help ensure uniformity 
among the national securities exchanges and FINRA with respect to the 
treatment of clearly erroneous transactions.\11\ Accordingly, the 
Commission waives the 30-day operative delay requirement and designates 
the proposed rule change as operative upon filing with the Commission.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its 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 filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Commission notes that the Exchange has satisfied 
this requirement.
    \11\ For purposes only of 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 the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-15 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-NYSEArca-2011-15. This 
file number should be included on the subject line if e-mail 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 (http://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

[[Page 20401]]

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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street, NE., Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the principal office of the Exchange. All comments received 
will be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make publicly available. All submissions 
should refer to File Number SR-NYSEArca-2011-15 and should be submitted 
on or before May 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8726 Filed 4-11-11; 8:45 am]
BILLING CODE 8011-01-P


