
[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Pages 6389-6391]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01933]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68724; File No. SR-NYSE-2013-03]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 440B To Provide How the Trigger Price Will Be Calculated 
if Trading Is Interrupted Because of a Systems or Technical Issue and 
Is Not Restored During the Trading Day

January 24, 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 10, 2013, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') 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 Rule 440B to provide how the Trigger 
Price will be calculated if trading is interrupted because of a systems 
or technical issue and is not restored during the trading day. 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 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 Rule 440B to provide how the Trigger 
Price \4\ will be calculated if trading is interrupted because of a 
systems or technical issue and is not restored during the trading day. 
Specifically, the Exchange proposes to provide that if trading in a 
covered security is interrupted because of a systems or technical issue 
and is not restored during that trading day, the Exchange's 
determination of the Trigger Price shall be based on the consolidated 
last sale price for that security on the most recent day on which the 
security traded.
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    \4\ Trigger Price is defined in Rule 440B(b). See Rule 440B(b). 
Determination of Trigger Price is set forth in Rule 440(c). See Rule 
440B(c).
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    The Exchange recently filed an interim proposed rule change for 
Rule 440B(b) to provide that on November 12, 2012, the closing price 
for 216 Exchange-listed securities that did not have a closing 
transaction on the Exchange was the consolidated last sale price 
available as of the end of regular trading hours on November 12, 2012, 
and that such closing price shall be the Trigger Price for purposes of 
determining whether a Short Sale Price Test has been triggered pursuant 
to Rule 440B(c) on November 13, 2012.\5\ The interim rule is in effect 
until the Exchange has an opportunity to amend its rules on a permanent 
basis. The Exchange now proposes to establish a rule provision that 
provides for how the Trigger Price is determined when a systems or 
technical issue prevents the closing of the security at the end of 
regular trading hours.
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    \5\ See Securities Exchange Act Release No. 68220 (November 13, 
2012), 77 FR 69528 (November 19, 2012) (SR-NYSE-2012-66).
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    Rule 440B sets forth how the Exchange implements the provisions of 
Rule 201 of Regulation SHO (``Rule 201'') \6\ under the Act which, if 
triggered, imposes a restriction on the prices at which securities may 
be sold short (``Short Sale Price Test''). Among

[[Page 6390]]

other things, Rule 201 requires trading centers 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 a covered security decreases by 10% or more 
from the covered security's closing price as determined by the listing 
market for the covered security as of the end of regular trading hours 
on the prior day. Accordingly, Rule 201(b)(1)(i) delegates to the 
listing market how to determine the closing price for a security.
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    \6\ 17 CFR 242.201.
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    The Exchange notes that market participants rely on the Exchange's 
official closing price for purposes of calculating the value of mutual 
funds, exchange traded funds, and various indices, among other things. 
Because securities listed on the Exchange may continue to trade on 
other markets while systems or technical issues prevent trading on the 
Exchange, the Exchange believes that, under these circumstances, the 
closing price for purposes of determining whether a Short Sale Price 
Test has been triggered pursuant to Rule 440B(b) should be the 
consolidated last sale price available as of the end of regular trading 
hours on that day. The Exchange believes that using the consolidated 
last sale price available as of the end of regular trading hours best 
approximates the market's determination of the appropriate price of 
such securities in the absence of a closing transaction on the listing 
market.
    Rule 440B establishes procedures for the Exchange, as a listing 
market, to determine whether a Short Sale Price Test has been triggered 
for a covered security. Among other things, Rule 440B(b) defines the 
``Trigger Price'' as the security's closing price on the listing market 
as of the end of regular trading hours on the prior day. Rule 
440B(c)(2) provides that if a covered security did not trade on the 
Exchange on the prior trading day (due to a trading halt, trading 
suspension, or otherwise), the Exchange's determination of the Trigger 
Price shall be based on the last sale price on the Exchange for that 
security on the most recent day on which the security traded. The 
Exchange believes that Rule 440B(c)(2) does not contemplate how the 
Exchange should determine the closing price in the unique circumstance 
of a systems or technical failure similar to that which occurred on 
November 12, 2012. In particular, the reason why the Exchange did not 
trade the 216 securities was not because of a trading halt or trading 
suspension, and the Exchange does not believe the ``or otherwise'' 
language in Rule 440B(c)(2) was designed to address the unanticipated 
scenario on November 12, 2012 when due to a systems issue, the Exchange 
was unable to hold a closing transaction in those securities.
    The Exchange believes that such consolidated last sale prices 
should be the closing price for purposes of determining the Trigger 
Price pursuant to Rule 440B(b) in the event that trading in a covered 
security is interrupted on the Exchange because of a systems or 
technical issue and is not restored during the trading day. 
Accordingly, the Exchange proposes to amend Rule 440B to provide that 
for circumstances when the Exchange does not have a closing transaction 
because of systems or technical issues, but securities are otherwise 
eligible to trade on other markets, the Exchange shall use the 
consolidated last sale price available as of the end of regular trading 
hours as the closing price for purposes of Rule 440B.\7\ This proposed 
rule will replace the interim rule in regards to how the Trigger Price 
is calculated in these circumstances.\8\
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    \7\ If there is no trading on any market on the day of the 
systems or technical issue, the consolidated last sale price 
available for a security may be the Exchange's closing price from 
the most recent day on which the security traded.
    \8\ See supra note 5. The interim rule provided an interpretive 
position, while the proposal seeks to amend the text of the Exchange 
Rules.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change will promote 
just and equitable principles of trade because it provides clarity of 
how the Exchange, as a listing market, determines the Trigger Price for 
securities that do not have a closing transaction due to a systems or 
technical issue. In particular, the Exchange believes that using a 
Trigger Price based on the consolidated last sale price available as of 
the end of regular trading hours for purposes of determining whether a 
Short Sale Price Test has been triggered promotes just and equitable 
principles of trade because it provides transparency of how the Trigger 
Price will be determined for securities that do not have a closing 
transaction due to a systems or technical issue.

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 \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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 date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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

[[Page 6391]]

filing. The Exchange believes that a waiver of this period is 
appropriate as the proposal is designed to provide transparency of how 
the Trigger Price will be determined for Exchange listed securities 
that did not have a closing transaction at the Exchange due to a 
systems or technical issue. According to the Exchange, the waiver of 
the operative delay will allow the participants on the Exchange to 
benefit from a permanent rule to determine the Trigger Price in 
situations where a systems or technical issue prevents a closing price 
during regular trading.
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission hereby grants the 30-day operative delay 
request.\15\ The Commission believes that waiver of the 30-day 
operative delay is appropriate as the proposal provides clarity of how 
the Exchange, as a listing market, determines how the Trigger Price 
will be calculated if trading is interrupted on the Exchange because of 
a systems or technical issue and is not restored during the trading 
day. The Commission also believes a waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest and, therefore, the Commission designates the proposal 
operative upon filing.
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    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 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 purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(2)(B).
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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 Number SR-NYSE-2013-03 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-2013-03. 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 (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, 100 F Street NE., Washington, 
DC 20549-1090. Copies of the filing will also be available for Web site 
viewing and printing at the NYSE's principal office and on its Internet 
Web site at www.nyse.com. 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-2013-03 and should be submitted on or before February 20, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01933 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P


