
[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8638-8640]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02593]



[[Page 8638]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68779; File No. SR-NSX-2013-04]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Delay the Operative Date of Rule 11.20A Regarding Market-Wide Circuit 
Breakers 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 25, 2013, National Stock Exchange, Inc. (the 
``Exchange'' or ``NSX'') 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.
---------------------------------------------------------------------------

    \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 delay the operative date of a rule change 
to Exchange Rule 11.20A, 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 
Web site at http://www.nsx.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 amend Exchange Rule 11.20A, which provides 
the methodology for determining when to halt trading in all stocks due 
to extraordinary market volatility, to delay the operative date of the 
pilot 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 the pilot period for the LULD Plan. 
The current Exchange Rule 11.20A 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 Exchange Rule 
11.20A would be in effect.
---------------------------------------------------------------------------

    \3\ The Commission approved the proposed changes to the market-
wide circuit breakers 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-NSX-2011-11). 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.
---------------------------------------------------------------------------

Current Exchange Rule 11.20A
    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 New York Stock Exchange, Inc. 
(``NYSE'') disseminates the new trigger levels quarterly to the media 
and via an Information Memo and [sic] is available on the NYSE's Web 
site.\4\ 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.
---------------------------------------------------------------------------

    \4\ See e.g., NYSE Regulation Information Memos 11-19 (June 30, 
2011) and 11-10 (March 31, 2011).
---------------------------------------------------------------------------

    Once an Exchange Rule 11.20A 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 11.20A trading halt for 
stocks that comprise the DJIA.
Amended Exchange Rule 11.20A
    The Exchange amended Exchange Rule 11.20A to revise the current 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility (``market-wide circuit breakers'').\5\ 
The Exchange, other equities, options, and futures markets, and FINRA 
amended the market-wide circuit breakers 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 Rule 11.20A as follows: (i) Replaced the DJIA with the 
S&P 500; (ii) replaced the quarterly calendar recalculation of Exchange 
Rule 11.20A 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 
Exchange Rule 11.20A: To ensure that market participants have an 
opportunity to

[[Page 8639]]

become aware of and respond to significant price movements.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-NSX-2011-11).
---------------------------------------------------------------------------

    The Exchange adopted the proposed changes to the market-wide 
circuit breakers 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 
Securities Exchange Act of 1934 to make the necessary technological 
changes to implement both the changes to the market-wide circuit 
breakers 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 in order for the implementation date for the market-wide 
circuit breaker pilot to remain the same date as for the LULD Plan.
---------------------------------------------------------------------------

    \6\ See id.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\7\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\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 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 breakers 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

    Written comments on the proposed rule change were neither solicited 
nor received.

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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 
Commission has waived this requirement.
---------------------------------------------------------------------------

    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.\11\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NSX-2013-04 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-NSX-2013-04. 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

[[Page 8640]]

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-NSX-2013-04 and should be 
submitted on or before February 27, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02593 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P


