
[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Notices]
[Pages 47154-47156]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19213]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67555; File No. SR-NYSE-2012-32]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 128, Which Governs Clearly Erroneous Executions, to 
Extend the Effective Date of the Pilot by Which Portions of Such Rule 
Operate Until February 4, 2013

August 1, 2012.
    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 July 20, 2012, the New York Stock Exchange LLC (``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 self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rule 128, which governs clearly

[[Page 47155]]

erroneous executions, to extend the effective date of the pilot by 
which portions of such Rule operate until February 4, 2013. The pilot 
is currently scheduled to expire on July 31, 2012. 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, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of 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 NYSE Rule 128, which governs clearly 
erroneous executions, to extend the effective date of the pilot by 
which portions of such Rule operate, until February 4, 2013. The pilot 
is currently scheduled to expire on July 31, 2012.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-NYSE-2010-47). See also 
Securities Exchange Act Release Nos. 63479 (December 9, 2010), 75 FR 
78274 (December 15, 2010) (SR-NYSE-2010-80); 64232 (April 7, 2011), 
76 FR 20735 (April 13, 2011) (SR-NYSE-2011-17); 65064 (August 9, 
2011), 76 FR 50505 (August 15, 2011) (SR-NYSE-2011-41); and 66136 
(January 11, 2012), 77 FR 2589 (January 18, 2012) (SR-NYSE-2011-69).
---------------------------------------------------------------------------

    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 erroneous trades. In connection with this pilot 
initiative, the Exchange amended NYSE Rule 128(c), (e)(2), (f), and 
(g). The amendments provide for uniform treatment of clearly erroneous 
execution reviews (1) in Multi-Stock Events \4\ 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.\5\ 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.
---------------------------------------------------------------------------

    \4\ Terms not defined herein are defined in NYSE Rule 128.
    \5\ Separately, the Exchange has proposed extend the effective 
date of the trading pause pilot under NYSE Rule 80C, which requires 
to the Exchange to pause trading in an individual security listed on 
the Exchange if the price moves by a specified percentage as 
compared to prices of that security in the preceding five-minute 
period during a trading day. See SR-NYSE-2012-31.
---------------------------------------------------------------------------

    If the pilot were not extended, the prior versions of paragraphs 
(c), (e)(2), (f), and (g) of Rule 128 would be in effect, and the NYSE 
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 Rule 128 until 
February 4, 2013 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 80C 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.\6\
---------------------------------------------------------------------------

    \6\ This proposed extension would also permit the pilot to 
operate until the National Market System Plan to Address 
Extraordinary Market Volatility is implemented, which will occur on 
February 4, 2013. 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).
---------------------------------------------------------------------------

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 Exchange believes that the 
extension of the pilot would promote just and equitable principles of 
trade because it would help assure that the determination of whether a 
clearly erroneous trade has occurred will be based on clear and 
objective criteria. Additionally, resolution of the incident will occur 
promptly through a transparent process, which the Exchange believes 
would protect investors and the public interest. The proposed rule 
change would also foster cooperation and coordination with persons 
engaged in facilitating transactions in securities and to remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system because it would 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. Finally, the proposed rule change would permit the 
pilot to operate until the National Market System Plan to Address 
Extraordinary Market Volatility is implemented, which will occur on 
February 4, 2013.\9\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See supra note 7.
---------------------------------------------------------------------------

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on

[[Page 47156]]

competition; and (iii) become operative prior to 30 days from the date 
on which it was filed, or such shorter time as the Commission may 
designate, if consistent with the protection of investors and the 
public interest, the proposed rule change has become effective pursuant 
to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)(iii) 
thereunder.\13\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
---------------------------------------------------------------------------

    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
it will allow the pilot program to continue uninterrupted, thereby 
avoiding the investor confusion that could result from a temporary 
interruption in the pilot program. For this reason, the Commission 
designates the proposed rule change to be operative upon filing.\16\
---------------------------------------------------------------------------

    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 Email to rule-comments@sec.gov. Please include 
File No. SR-NYSE-2012-32 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NYSE-2012-32. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commissions 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 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. Copies of such filing also will 
be available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2012-32 and should be submitted by August 28, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19213 Filed 8-6-12; 8:45 am]
BILLING CODE 8011-01-P


