
[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8675-8677]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02631]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68794; File No. SR-ISE-2013-09]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change to Amend ISE Rule 2102 to Extend the Market-Wide Circuit Breaker 
Pilot Program

January 31, 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 January 29, 2013, International Securities Exchange, LLC (the 
``Exchange'' or ``ISE'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 2102 to delay the operative 
date of a rule change to 2102(g), which provides for methodology for 
determining when to halt trading in all stocks due to extraordinary 
market volatility, from the date of February 4, 2013, until April 8, 
2013.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room [sic].

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 delay the operative date of the pilot in 
Rule 2102(g), which provides the methodology for determining when to 
halt trading in all stocks due to extraordinary market volatility, by 
which such Rule operates from the current scheduled date of February 4, 
2013, until April 8, 2013, to coincide with the initial date of 
operations of the Regulation NMS Plan to Address Extraordinary Market 
Volatility (``LULD Plan'').\3\ As proposed, the pilot period will begin 
and end at the same time [sic] the pilot period for the LULD Plan. The 
current Rule 2102(g) would remain in effect until April 8, 2013. If the 
pilot is not either extended or approved permanently at the end of the 
pilot period, the current version of Rule 2102(g) would be in effect.
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    \3\ The Commission approved the proposed changes to the market-
wide circuit breaker on a pilot basis for a period that corresponds 
to the pilot period for the LULD Plan so that the impact of the two 
proposals can be reviewed together. See Securities Exchange Act 
Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR-
ISE-2011-61). The Exchange anticipates that the initial date of LULD 
Plan operations will be changed to April 8, 2013. The proposal would 
delay the operative date of the market-wide circuit breaker pilot to 
April 8, 2013 in order for the implementation date for the market-
wide circuit breaker pilot would [sic] remain the same date as for 
the LULD Plan.
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Current Rule 2102(g)

    In its current form,\4\ the rule provides for Level 1, 2, and 3 
declines and specified trading halts following such declines. The 
values of Levels 1, 2 and 3 [sic] are calculated at the beginning of 
each calendar quarter, using 10%, 20% and 30%, respectively, of the 
average closing value of the DJIA for the month prior to the beginning 
of the quarter. Each percentage calculation is rounded to the nearest 
fifty points to create the Levels' trigger points. The NYSE 
disseminates the new trigger levels quarterly to the media and via an 
Information Memo and [sic] is available on the Exchange's Web site.\5\ 
The values then remain in effect until the next quarterly calculation, 
notwithstanding whether the DJIA has moved and a Level 1, 2, or 3 
decline is no longer equal to an actual 10%, 20%, or 30% decline in the 
most recent closing value of the DJIA.
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    \4\ The rule was last amended in 1998, when declines based on 
specified point drops in the DJIA were replaced with the current 
methodology of using a percentage decline that is recalculated 
quarterly. See Securities Exchange Act Release No. 39846 (April 9, 
1998), 63 FR 18477 (April 15, 1998) (SR-NYSE-98-06, SR-Amex-98-09, 
SR-BSE-98-06, SR-CHX-98-08, SR-NASD-98-27, and SR-Phlx-98-15).
    \5\ See e.g., NYSE Regulation Information Memos 11-19 (June 30, 
2011) and 11-10 (March 31, 2011).
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    Once a circuit breaker is in effect, trading in all stocks halt 
[sic] for the time periods specified below:

Level 1 Halt

Anytime before 2:00 p.m.--one hour;
At or after 2:00 p.m. but before 2:30 p.m.--30 minutes;
At or after 2:30 p.m.--trading shall continue, unless there is a Level 
2 Halt.

Level 2 Halt

Anytime before 1:00 p.m.--two hours;
At or after 1:00 p.m. but before 2:00 p.m.--one hour;
At or after 2:00 p.m.--trading shall halt and not resume for the rest 
of the day.

[[Page 8676]]

Level 3 Halt

At any time--trading shall halt and not resume for the rest of the day.

    Unless stocks are halted for the remainder of the trading day, 
price indications are disseminated during a Rule 2102(g) trading halt 
for stocks that comprise the DJIA.
    The Exchange adopted paragraph (g) to Rule 2102 to adopt a 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility (``market-wide circuit breaker'').\6\ 
The Exchange, other equities, options, and futures markets, and FINRA 
amended or adopted, as applicable, the market-wide circuit breaker to 
take into consideration the recommendations of the Joint CFTC-SEC 
Advisory Committee on Emerging Regulatory Issues, and to provide for 
more meaningful measures in today's markets of when to halt trading in 
all stocks. The Exchange believes that Rule 2102(g) reflects today's 
high-speed, highly electronic trading market while ensuring that market 
participants have an opportunity to become aware of and respond to 
significant price movements.
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    \6\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-ISE-2011-61).
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    The Exchange adopted [sic] market-wide circuit breaker on a pilot 
basis for a period that corresponds to the pilot period for the LULD 
Plan so that the impact of the two proposals can be reviewed 
together.\7\ In addition, in order for the markets and the single plan 
processors responsible for the consolidation of information pursuant to 
Rule 603(b) of Regulation NMS under the Securities Exchange Act of 1934 
(the ``Act'') to make the necessary technological changes to implement 
both the changes to the market-wide circuit breaker and the proposed 
LULD Plan, the Exchange established that the implementation date for 
the proposed rule changes should be the same date that the LULD Plan is 
implemented. The Exchange anticipates that the initial date of LULD 
Plan operations will be changed to April 8, 2013. For the same reasons 
as stated above, the Exchange proposes to delay the operative date of 
the market-wide circuit breaker pilot to April 8, 2013.
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    \7\ See id.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, this rule proposal supports the objectives of 
perfecting the mechanism of a free and open market and the national 
market system because it promotes uniformity across markets concerning 
when and how to halt trading in all stocks as a result of extraordinary 
market volatility. Additionally, delaying the operative date of the 
market-wide circuit breaker pilot until the initial date of operations 
of the LULD Plan would allow the pilot to begin and end at the same 
time of the LULD Plan so that the Exchange and the Commission could 
further assess the impact of the two pilots on the marketplace or 
whether other initiatives should be adopted in lieu of the pilots, 
which contributes to the protection of investors and the public 
interest.

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 delay the operation of the market-wide circuit breakers 
pilot until April 8, 2013 to allow the pilot period to begin and end at 
the same time as the LULD Plan, which contributes to the protection of 
investors and the public interest. Other competing equity exchanges are 
subject to the same methodology for determining when to halt trading in 
all stocks due to extraordinary market volatility and the same 
requirements specified in the LULD Plan. Thus, the proposed changes 
will not impose any burden on competition while providing that the 
market-wide circuit breakers pilot period corresponds to the pilot 
period for the LULD Plan so that the impact of the two proposals can be 
reviewed together.

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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Doing so will delay the operative date of the market-
wide circuit breakers pilot until the initial date of operations of the 
LULD Plan, thereby allowing the pilot to run simultaneously with the 
LULD Plan, providing an opportunity to properly assess the impact of 
the two pilots on the marketplace and evaluate the pilots' 
effectiveness. Therefore, the Commission designates the proposal 
operative upon filing.\12\
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    \12\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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.

[[Page 8677]]

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-ISE-2013-09 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-ISE-2013-09. 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, 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-ISE-2013-09 and should be 
submitted on or before February 27, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to 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. 2013-02631 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P


