
[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8680-8682]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02594]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68780; File No. SR-BATS-2013-010]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Delay 
the Operative Date of Changes to the Rule for Halting Trading in All 
Stocks Due to Extraordinary Market Volatility

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 30, 2013, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') 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 is proposing to delay the operative date of a rule 
change to BATS Rule 11.18, which provides the 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 at the Exchange's 
Web site at http://www.batstrading.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 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 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 proposes to delay the operative date of the pilot in 
BATS Rule 11.18, which provides the methodology for determining when to 
halt trading in all stocks due to extraordinary market volatility, from 
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 11.18 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 11.18 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 scheduled to 
start on February 4, 2013 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-BATS-2011-38). 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 to remain the same date as for the LULD Plan.
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Current Rule 11.18
    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 declines 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 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).
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    Once a Rule 11.18 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.
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 11.18 trading halt for 
stocks that comprise the DJIA.
Amended Rule 11.18
    The Exchange amended BATS Rule 11.18 to revise the methodology for 
determining when to halt trading in all stocks due to extraordinary 
market volatility (``market-wide circuit breaker'').\5\ The Exchange, 
other equities, options, and futures markets, and FINRA amended 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. Accordingly, the 
Exchange amended BATS Rule 11.18 as follows: (i) Replaced the DJIA with 
the S&P 500; (ii) replaced the quarterly calendar recalculation of Rule 
11.18 triggers with daily recalculations; (iii) replaced the 10%, 20%, 
and 30% market decline percentages with 7%, 13%, and 20% market decline 
percentages; (iv) modified the length of the trading halts associated 
with each market decline level; and (v) modified the times when a 
trading halt may be triggered. The Exchange believes that these 
amendments update the rule to reflect today's high-speed, highly 
electronic trading market while still meeting the original purpose of 
BATS Rule 11.18: to ensure that market

[[Page 8681]]

participants have an opportunity to become aware of and respond to 
significant price movements.
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    \5\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-38).
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    The Exchange adopted 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.\6\ 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 Act \7\ 
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 reasons 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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    \6\ See id.
    \7\ 17 CFR 242.603(b).
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2. Statutory Basis
    The rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder that are applicable to a national 
securities exchange, and, in particular, with the requirements of 
Section 6(b) of the Act.\8\ Specifically, the proposed change is 
consistent with Section 6(b)(5) of the Act,\9\ because 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 delay in the operation 
of the market-wide circuit breaker pilot until April 8, 2013 will 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 requirements specified in the 
LULD Plan. Thus, the proposed changes will not impose any burden on 
competition while providing that the market-wide circuit breaker 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 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

    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. 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-BATS-2013-010 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-BATS-2013-010. 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

[[Page 8682]]

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-BATS-2013-010 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. 2013-02594 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P


