Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 12161 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 17 CFR 242.201. 

5 17 CFR 242.201(b)(1)(i). 

6The proposed rule amendment would establish 

the duration of the Short Sale Price Test. See infra 

note 21 and accompanying text. In addition, the 

proposed rule amendment would provide for an 

Exchange determination that a Short Sale Price Test 

has been triggered for covered securities for which 

the Exchange is the listing market. 

7Amendments to Regulation SHO, Securities 

Exchange Act Release No. 61595 (Feb. 26, 2010), 75 

FR 11232 (Mar. 10, 2010) (‘‘Rule 201 Adopting 

Release’’). In the Rule 201 Adopting Release, the 

Commission also adopted amendments to Rule 

200(g) of Regulation SHO to include a ‘‘short 

exempt’’ marking requirement. 17 CFR 242.200(g). 

8The term ‘‘covered security’’ shall have the same 

meaning as in Rule 201 of Regulation SHO. Rule 

201(a)(1) defines the term ‘‘covered security’’ to 

mean any ‘‘NMS stock’’ as defined under Rule 

600(b)(47) of Regulation NMS. Rule 600(b)(47) of 

Regulation NMS defines an ‘‘NMS stock’’ as ‘‘any 

NMS security other than an option.’’ Rule 600(b)(46) 

of Regulation NMS defines an ‘‘NMS security’’ as 

‘‘any security or class of securities for which 

transaction reports are collected, processed, and 

made available pursuant to an effective transaction 

reporting plan, or an effective national market 

system plan for reporting transactions in listed 

options.’’ 17 CFR 242.201(a)(1); 17 CFR 

242.600(b)(47); and 17 CFR 242.600(b)(46). 

9 17 CFR 242.201(b). 

10Rule 201 Adopting Release, 75 FR 11232. The 

Rule 201 compliance date, originally set for 

November 10, 2010, was extended to February 28, 

2011 in Securities Exchange Act Release No. 63247 

(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). The 

May 10th effective date and February 28th 

compliance date also apply to amended Rule 200(g). 

11Rule 201(a)(9) states that the term ‘‘trading 

center’’ shall have the same meaning as in Rule 

600(b)(78) of Regulation NMS. Rule 600(b)(78) 

defines a ‘‘trading center’’ as ‘‘a national securities 

exchange or national securities association that 

operates an SRO trading facility, an alternative 

trading system, an exchange market maker, an OTC 

market maker, or any other broker or dealer that 

executes orders internally by trading as principal or 

crossing orders as agent.’’ 17 CFR 242.600(b)(78). 

12The term ‘‘national best bid’’ shall have the 

same meaning as in Rule 201 of Regulation SHO. 

Rule 201(a)(4) states that such term shall have the 

same meaning as in Rule 600(b)(42) of Regulation 

NMS. 17 CFR 242.201(a)(4); 17 CFR 242.600(b)(42). 

13The term ‘‘listing market’’ shall have the same 

meaning as in Rule 201 of Regulation SHO. Rule 

201(a)(3) defines the term ‘‘listing market’’ to have 

the same meaning as the term ‘‘listing market’’ as 

defined in the effective transaction reporting plan 

for the covered security. 17 CFR 242.201(a)(3). See 

also 17 CFR 242.201(a)(2). 

14 17 CFR 242.201(b)(1)(i). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63973; File No. SR–NYSE– 

2011–07] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending 

Exchange Rule 1600 (New York Block 

Exchange SM) To Add Provisions on 

Short Sales in Order To Implement the 

Provisions of Rule 201 of Regulation 

SHO Under the Securities Exchange 

Act of 1934 

February 25, 2011. 

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 February 

24, 2011, 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 substantially prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Exchange Rule 1600 (New York Block 

Exchange SM) (‘‘NYBX’’ or the ‘‘Facility’’) 

to add provisions on short sales in order 

to implement the provisions of Rule 201 

of Regulation SHO (‘‘Rule 201’’) 4 under 

the Act which, if triggered, imposes a 

restriction on the prices at which 

securities may be sold short (‘‘Short Sale 

Price Test’’). Among 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.5 The proposed rule amendment 

would establish the protocols for the 

handling of short sale orders by the 

Exchange, as a trading center, in the 

event the Short Sale Price Test is 

triggered by a listing market (including 

the NYSE), including establishing what 

types of short sale orders will be repriced to achieve a permitted price, in 

accordance with Rule 201, during the 

period in which a Short Sale Price Test 

is in effect (‘‘Short Sale Period’’). 

Amended Rule 1600 would also 

establish the Facility’s procedures 

regarding the execution and display of 

permissible orders during the Short Sale 

Period, and the execution of orders 

marked ‘‘short exempt.’’ Finally, the 

proposed rule amendment would also 

establish NYBX procedures for the 

execution, routing to the NYSE Display 

Book (‘‘DBK’’) or routing to other 

automated trading centers of orders, if 

the listing market has lifted the Short 

Sale Price Test before the Short Sale 

Period has ended.6 The text of the 

proposed rule change is available at the 

Exchange, the Commission’s Public 

Reference Room, and http:// 

www.nyse.com. 

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 

On February 26, 2010, the 

Commission adopted amendments to 

Rule 201 of Regulation SHO.7 Among 

other things, the amendments establish 

a short sale-related circuit breaker that, 

if triggered with respect to a covered 

security,8 imposes a short sale price 

test.9 Amended Rule 201 became 

effective on May 10, 2010 and the 

compliance date for the Rule is February 

28, 2011.10

Rule 201(b) requires that trading 

centers,11 including the NYSE, 

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 12

if the price of that covered security 

decreases by 10% or more from the 

covered security’s closing price as 

determined by the listing market 13 for 

the covered security as of the end of 

regular trading hours on the prior day 

(‘‘Trigger Price’’).14 In addition, Rule 

201(b) requires that trading centers 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to impose the Short Sale Price 

Test for the remainder of the day and 

the following day when a national best 

bid for the covered security is calculated 

and disseminated on a current and 

continuing basis by a plan processor 


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12162 Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 

15 17 CFR 242.201(b)(1)(ii). In addition, if the 

price of a covered security declines intra-day by at 

least 10% on a day on which the security is already 

subject to the short sale price test restriction of Rule 

201, the restriction will be re-triggered and, 

therefore, will continue in effect for the remainder 

of that day and the following day. See Rule 201 

Adopting Release, 75 FR 11232, 11253, n. 290. Rule 

201 does not place any limit on the frequency or 

number of times the circuit breaker can be retriggered with respect to a particular stock. Division 

of Trading and Markets, Responses to Frequently 

Asked Questions Concerning Rule 201 of 

Regulation SHO, at Q&A 2.2 (‘‘T&M FAQs’’). 

16Rule 201 Adopting Release, 75 FR 11232. 

17Rule 201 Adopting Release, 75 FR 11232, 

11252. 

18 Id. 

19References are to revised Exchange Rule 440B, 

as proposed to be amended in a separate rule filing 

to, among other things, establish procedures for 

determining when the Short Sale Price Test is 

triggered for covered securities for which the 

Exchange is the listing market. See SR–NYSE– 

2011–05. 

20 17 CFR 242.201(b)(3). See also Rule 201(a)(6) 

of Regulation SHO, which defines the term ‘‘plan 

processor’’ to have the same meaning as in Rule 

600(b)(55) of Regulation NMS. 17 CFR 

242.201(a)(6); 17 CFR 242.600(b)(55). The single 

plan processors are ‘‘exclusive processors’’ as 

defined under Section 3(a)(22) of the Act. 15 U.S.C. 

78c(a)(22). 

21Proposed Rule 1600(d)(5)(D). The Short Sale 

Price Test will remain in effect at all times when 

quotation information and the national best bid is 

collected, processed and disseminated. This may 

extend beyond regular trading hours. T&M FAQs, 

supra note 15, at Q&A 2.1. 

22For example, Exchange Rule 440B, as proposed 

to be amended in SR–NYSE–2011–05, provides that 

the Exchange may lift the Short Sale Price Test if 

it determines that the Test was triggered by a 

‘‘clearly erroneous’’ transaction. See proposed NYSE 

Rule 440B(d)(1). 

23Exchange Rule 1600(b)(2)(A) provides that the 

term ‘‘automated trading center’’ shall have the 

meaning set forth in Rule 600(b)(4) of Regulation 

NMS. 17 CFR 242.600(b)(4). 

24The price of such orders, as re-priced, will be 

used as the limit order price for purposes of 

calculating any Minimum Triggering Volume 

Quantity (‘‘MTV’’) applicable to such orders. See 

Exchange Rule 1600(b)(2)(E) and (c)(3)(B)(ii)(I). See 

proposed Rule 1600(d)(5)(H). 

25Exchange Rule 1600(b)(2)(J) (defining the term 

‘‘User’’). 

26 Id. 

27Rule 201 Adopting Release, 75 FR 11232, 

11247. 

28See 17 CFR 242.612. 

29 17 CFR 242.201(b)(1)(iii)(B). 

30 17 CFR 242.200(g)(2). Under Rule 200(g)(2), an 

order may be marked ‘‘short exempt’’ if the brokerdealer had a reasonable basis for believing that the 

order meets one of the exceptions specified in Rule 

201(d) of Regulation SHO or if it is entered during 

a Short Sale Period and meets the conditions 

specified in Rule 201(c) of Regulation SHO. See 17 

CFR 242.201(d); 17 CFR 242.201(c); T&M FAQs, 

supra note 15, at Q&As 4.2, 5.4 and 5.5. 

31 15 U.S.C. 78f(b). 

32 15 U.S.C. 78f(b)(5). 

pursuant to an effective national market 

system plan.15

In the Rule 201 Adopting Release, the 

Commission stated that it was 

appropriate to adopt a short sale-related 

circuit breaker because, when triggered, 

it will prevent short selling, including 

potentially manipulative or abusive 

short selling, from driving down further 

the price of a security that has already 

experienced a significant intra-day price 

decline, and will facilitate the ability of 

long sellers to sell first upon such a 

decline.16 The Commission further 

stated that this approach establishes a 

narrowly-tailored Rule that strikes an 

appropriate balance between its goal of 

preventing potential short sale abuses 

and the need to limit impediments to 

the normal operations of the market,17

and as such, the Rule will help address 

the erosion of investor confidence in 

markets generally.18 For these reasons, 

the Exchange seeks to amend its short 

sale rule to comply with the 

Commission’s amendment of Rule 201. 

Paragraph (d)(5)(B) of the proposed 

rule makes clear that, in compliance 

with Rule 201, in the event a covered 

security experiences a decrease in price 

of 10% or more, as determined by the 

listing market for the security, from the 

security’s closing price on the listing 

market as of the end of regular trading 

hours on the prior day, the Facility will 

not execute or display a short sale order 

with respect to that security at a price 

that is less than or equal to the current 

national best bid. 

Where the Exchange is the listing 

market for a covered security, Exchange 

systems will determine, in accordance 

with NYSE Rule 440B(c),19 whether the 

short sale price test restrictions of Rule 

201 have been triggered (i.e., whether a 

transaction in a covered security has 

occurred at a Trigger Price) and will 

notify the single plan processor 

responsible for consolidation of 

information for the covered security 

pursuant to Rule 603(b) of Regulation 

NMS.20

Once a Short Sale Price Test is 

triggered by the listing market, the Short 

Sale Price Test will remain in effect 

until the close of trading on the next 

trading day.21 If the listing market lifts 

the Short Sale Price Test before the 

Short Sale Period ends pursuant to the 

listing market’s rules,22 the Facility will 

execute, route to the DBK or route to 

other automated trading centers 23 in 

accordance with Rule 1600(d)(1), 

without regard to the Short Sale Price 

Test. 

During the Short Sale Period, short 

sale orders that are limited to the 

national best bid or lower and short sale 

market orders will be re-priced by the 

Facility one minimum price increment 

above the current national best bid 

(‘‘Permitted Price’’) to permit their 

execution at a price that is compliant 

with the Short Sale Price Test before 

being executed, routed to the DBK or 

rerouted to other automated trading 

centers,24 unless, on an order-by-order 

basis, the NYBX User 25 has requested 

that an order be cancelled back to the 

User.26 Consistent with Rule 201,27 the 

Permitted Price for securities for which 

the national best bid is $1 or more is 

$.01 above the national best bid; the 

Permitted Price for securities for which 

the national best bid is below $1 is 

$.0001 above the national best bid.28 To 

reflect declines in the national best bid, 

the Facility will continue to re-price a 

short sale order at the lowest Permitted 

Price down to the order’s original limit 

price. 

With respect to NYBX pegging orders 

during the Short Sale Period, New York 

Block Exchange Market Pegging Orders, 

as defined in Rule 1600(c)(2)(A)(iii), to 

sell short at the national best bid will be 

re-priced, as described above, one 

minimum price increment above the 

current national best bid. In addition, 

during the Short Sale Period, any type 

of NYBX pegging order, as defined in 

Rule 1600(c)(2)(A) or Rules 

1600(c)(2)(A)(i)–(iii), to sell short that 

contains an instruction to peg plus or 

minus the Exchange’s minimum price 

variation will be rejected by Exchange 

systems. 

As permitted by Rule 201, during the 

Short Sale Period, the Facility will 

execute, route to the DBK or route to 

other automated trading centers, in 

accordance with Rule 1600(d)(1), orders 

marked ‘‘short exempt’’ without regard 

to whether the order is at a Permitted 

Price.29 The Facility will also accept 

orders marked ‘‘short exempt’’ at any 

time when such systems are open for 

order entry, regardless of whether the 

Short Sale Price Test has been 

triggered.30

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,31 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,32

in particular, in that it is designed to, 

among other things, prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. The 

proposal is designed to implement the 

provisions of Rule 201 of Regulation 

SHO with respect to the operation of the 

Facility by establishing, maintaining 

and enforcing written policies and 

procedures reasonably designed to 

prevent the execution or display of a 

short sale order of a covered security in 

violation of the short sale price test 

restrictions established in that rule. To 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 12163 

33 15 U.S.C. 78s(b)(3)(A)(iii). 

34 17 CFR 240.19b–4(f)(6). 

35 15 U.S.C. 78s(b)(3)(A)(iii). 

36 17 CFR 240.19b–4(f)(6)(iii). 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 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. 

37 17 CFR 240.19b–4(f)(6). 

38 17 CFR 240.19b–4(f)(6)(iii). 

39For 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). 

40 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b4. 

that end, the proposed rule change will, 

among other things, establish the 

Facility’s procedures regarding the 

execution, routing to the DBK and 

routing to other automated trading 

centers of permissible orders during the 

Short Sale Period, and the execution of 

orders marked ‘‘short exempt.’’ 

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 33 and Rule 

19b–4(f)(6) thereunder.34 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 35 and Rule 19b–4(f)(6)(iii) 

thereunder.36

A proposed rule change filed under 

Rule 19b–4(f)(6) 37 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),38 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 

filing. The Commission hereby grants 

the request.39 Waiving the 30-day 

operative delay will allow the Exchange 

to implement the proposed amendments 

by February 28, 2011, which, as noted 

by the Exchange, is the compliance date 

for amendments to Regulation SHO 

under the Act. By waiving the operative 

delay, the Exchange will be able to 

comply with the amendments to 

Regulation SHO by February 28, 2011. 

Therefore, the Commission believes it is 

consistent with the protection of 

investors and the public interest to 

waive the 30-day operative delay and 

designates the proposal as operative 

upon filing. 

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. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2011–07 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–2011–07. This file 

number should be included on the 

subject line if e-mail 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 

inspection and copying at the NYSE’s 

principal office and on its Internet Web 

site at http://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–2011–07 and should 

be submitted on or before March 25, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.40

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4891 Filed 3–3–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63975; File No. SR–BX– 

2011–010] 

Self-Regulatory Organizations; 

NASDAQ OMX BX; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Adopt New Rule 4763 

Regarding Short Sales 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on February 

18, 2011, NASDAQ OMX BX LLC (‘‘BX’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been 

substantially prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 


jlentini on DSKJ8SOYB1PROD with NOTICES