
[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60991-60993]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24001]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70510; File No. SR-ISE-2013-49]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to Amend ISE Rule 2128 Relating to Clearly Erroneous Trades

September 26, 2013.
    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 September 23, 2013, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``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.
---------------------------------------------------------------------------

    \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 is proposing to extend a pilot program related to Rule 
2128, entitled ``Clearly Erroneous Executions.'' The Exchange also 
proposes to remove certain references to individual stock trading 
pauses contained in Rule 2128(c)(4). 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.

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.

[[Page 60992]]

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

1. Purpose
    The purpose of this filing is to extend the effectiveness of the 
Exchange's current rule applicable to Clearly Erroneous Executions and 
to remove references to individual stock trading pauses described in 
Rule 2128(c)(4).
    Portions of Rule 2128, explained in further detail below, are 
currently operating as a pilot program set to expire on September 30, 
2013.\3\ The Exchange proposes to extend the pilot program to April 8, 
2014.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 68822 (Feb. 4, 
2013), 78 FR 9440 (Feb. 8, 2013) (SR-ISE-2013-12).
---------------------------------------------------------------------------

    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to ISE Rule 2128 to provide for uniform treatment: (1) Of 
clearly erroneous execution reviews in multi-stock events involving 
twenty or more securities; and (2) in the event transactions occur that 
result in the issuance of an individual stock trading pause by the 
primary listing market and subsequent transactions that occur before 
the trading pause is in effect on the Exchange.\4\ The Exchange also 
adopted additional changes to Rule 2128 that reduced the ability of the 
Exchange to deviate from the objective standards set forth in Rule 
2128,\5\ and in 2013, adopted a provision designed to address the 
operation of the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan'').\6\ The Exchange believes the 
benefits to market participants from the more objective clearly 
erroneous executions rule should continue on a pilot basis through 
April 8, 2014, which is one year following the commencement of 
operations of the Plan. The Exchange believes that continuing the pilot 
during this time will protect against any unanticipated consequences. 
Thus, the Exchange believes that the protections of the Clearly 
Erroneous Rule should continue while the industry gains further 
experience operating the Limit Up-Limit Down Plan.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 62886 (Sept. 10, 2010), 
75 FR 56613 (Sept. 16, 2010) (SR-ISE-2010-62).
    \5\ Id.
    \6\ See Securities Exchange Act Release No. 68822 (Feb. 4, 
2013), 78 FR 9440 (Feb. 8, 2013) (SR-ISE-2013-12); Securities 
Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 
2012) (the ``Limit Up-Limit Down Release''); see also ISE Rule 
2128(i).
---------------------------------------------------------------------------

    The Exchange also proposes to eliminate all references in Rule 2128 
to individual stock trading pauses issued by a primary listing market. 
Specifically, Rule 2128(c)(4) provides specific rules to follow with 
respect to review of an execution as potentially clearly erroneous when 
there was an individual stock trading pause issued for that security 
and the security is included in the S&P 500[supreg] Index, the Russell 
1000[supreg] Index, or a pilot list of Exchange Traded Products 
(``Original Circuit Breaker Securities''). The stock trading pauses 
described in Rule 2128(c)(4) are being phased out as securities become 
subject to the Plan pursuant to a phased implementation schedule. The 
Plan is already operational with respect to all Original Circuit 
Breaker Securities, and thus, the Exchange believes that all references 
to individual stock trading pauses should be removed, including all 
cross-references to Rule 2128(c)(4) contained in other portions of Rule 
2128.\7\
---------------------------------------------------------------------------

    \7\ The Exchange notes that certain Exchange Traded Products 
(``ETPs'') are not yet subject to the Limit Up-Limit Down Plan. 
Because such ETPs are not on the pilot list of securities, such ETPs 
are not subject to Rule 2128(c)(4). See Securities Exchange Act 
Release No. 65108 (August 11, 2011), 76 FR 51082 (August 17, 2011) 
(SR-ISE-2011-53) (notice of filing and immediate effectiveness to 
define Original Circuit Breaker Securities and to limit application 
of Rule 2128(c)(4) to such securities). Accordingly, the proposed 
rule change does not change the status quo with respect to such 
ETPs. As amended, all securities, including ETPs not subject to the 
Limit Up-Limit Down Plan, will continue to be subject to Rule 
2128(c)(1) through (3).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal 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\ In particular, the 
proposal is consistent with Section 6(b)(5) of the Act,\9\ because it 
would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system. The Exchange believes that the pilot 
program promotes just and equitable principles of trade in that it 
promotes transparency and uniformity across markets concerning review 
of transactions as clearly erroneous. More specifically, the Exchange 
believes that the extension of the pilot would help assure that the 
determination of whether a clearly erroneous trade has occurred will be 
based on clear and objective criteria, and that the resolution of the 
incident will occur promptly through a transparent process. The 
proposed rule change would also 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. Although the Limit Up-Limit Down Plan will become fully 
operational during the same time period as the proposed extended pilot, 
the Exchange believes that maintaining the pilot will help to protect 
against unanticipated consequences. To that end, the extension will 
allow the Exchange to determine whether Rule 2128 is necessary once the 
Plan is fully operational and, if so, whether improvements can be made. 
Finally, the elimination of references to individual stock trading 
pauses will help to avoid confusion amongst market participants, which 
is consistent with the protection of investors and the public interest 
and therefore consistent with the Act. As described above, individual 
stock trading pauses have been replaced by the Limit Up-Limit Down Plan 
with respect to all Original Circuit Breaker Securities.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change 
implicates any competitive issues. To the contrary, the Exchange 
believes that the Financial Industry Regulatory Authority (``FINRA'') 
and other national securities exchanges are also filing similar 
proposals, and thus, that the proposal will help to ensure consistency 
across market centers.

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 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 for 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

[[Page 60993]]

proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)(iii) thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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 asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. 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 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.\12\
---------------------------------------------------------------------------

    \12\ 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 Number SR-ISE-2013-49 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-2013-49. 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 on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-2013-49, and should be submitted on or before 
October 23, 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. 2013-24001 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P


