Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 51935 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(6). 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. 

12 17 CFR 240.19b–4(f)(6). 

13 17 CFR 240.19b–4(f)(6). 

14For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposal’s impact on efficiency, competition, and 

capital formation. 15 U.S.C. 78c(f). 

15See Securities Exchange Act Release No. 60706 

(September 22, 2009), 74 FR 49416 (September 28, 

2009) (NYSEArca–2009–36). 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

system, and, in general, to protect 

investors and the public interest. The 

proposed rule change would coordinate 

standards of review of clearly erroneous 

trades across markets, thereby 

eliminating conflicting rulings among 

exchanges and disparate treatment of 

similarly priced trades. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

BX does not believe that the proposed 

rule change will impose any burden on 

competition 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 

Written comments 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: (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, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act10 and Rule 19b– 

4(f)(6) thereunder.11

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act12 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)13

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange requests 

that the Commission waive the 30-day 

operative delay so that it may 

implement the new rule on October 5, 

2009, the same date as the other equities 

exchanges. The Commission believes 

that waiving the 30-day operative delay 

is consistent with the protection of 

investors and the public interest 

because it will allow the Exchange to 

begin applying the new rule on the same 

date as the other equities exchanges.14

Application of the new rule on this date 

should help foster transparency and 

consistency among those exchanges that 

adopt clearly erroneous execution rules 

substantially similar to those previously 

approved by the Commission.15 For 

these reasons, the Commission 

designates that the proposed rule 

change become operative on October 5, 

2009. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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–BX–2009–060 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–BX–2009–060. 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such 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 publicly available. All 

submissions should refer to File 

Number SR–BX–2009–060 and should 

be submitted on or before October 29, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–24244 Filed 10–7–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60775; File No. SR–CHX– 

2009–11] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of a Proposal Relating to Exchange 

Rule Regarding Clearly Erroneous 

Transactions 

October 2, 2009. 

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 October 

1, 2009, Chicago Stock Exchange, Inc. 

(‘‘Exchange’’ or ‘‘CHX’’) 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. CHX has designated 

the proposed rule change as constituting 

a rule change under Rule 19b–4(f)(6) 

under the Act,3 which renders the 

proposal effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

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51936 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 

4For purposes of this Rule, ‘‘removed from the 

Consolidate Tape’’ means that a subsequent 

message will be sent to the Consolidated Tape 

indicating that a previously executed trade has been 

cancelled. 

5Article 1, Rule 1(s) defines a Participant as any 

Participant Firm that holds a valid Trading Permit. 

6The Early Session ’’ shall begin at 6 a.m. and 

shall end at 8:30 a.m. [Central Time] and shall end 

at 8:30 a.m. [Central Time].’’ Article 20, Rule 1(b). 

7The Regular Trading Session ‘‘shall begin at 8:30 

a.m. [Central Time] and shall end at 3 p.m. each day 

for all securities.’’ Article 20, Rule 1(b). 

8The Late Trading Session begins ‘‘immediately 

after the close of the second session and shall end 

at 3:15 p.m. [Central Time].’’ Article 20, Rule 1(b). 

9The Late Crossing Session begins ‘‘immediately 

after the close of the third session and shall end at 

4 p.m. [Central Time].’’ Article 20, Rule 1(b). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The CHX proposes to amend its rules 

regarding clearly erroneous transactions. 

The text of this proposed rule change is 

available on the Exchange’s Web site at 

(http://www.chx.com) and in 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 

CHX included statements concerning 

the purpose of and basis for the 

proposed rule changes and discussed 

any comments it received regarding the 

proposal. The text of these statements 

may be examined at the places specified 

in Item IV below. The CHX 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 modify 

Article 20, Rules 10 and 11 in order to 

improve the Exchange’s policies and 

procedures regarding clearly erroneous 

executions. The proposed changes are 

part of a market-wide effort designed to 

provide transparency and finality with 

respect to clearly erroneous executions. 

This effort seeks to achieve consistent 

results for participants across U.S. 

equities exchanges while maintaining a 

fair and orderly market, protecting 

investors and protecting the public 

interest. The proposed changes are more 

fully discussed below. 

Definition 

The Exchange will maintain the 

meaning of the definition of a clearly 

erroneous execution, but proposes to 

add clarifying language with respect to 

cancelled trades. The proposed change 

identifies that a transaction made in 

clearly erroneous error and agreed to be 

canceled by both parties or determined 

by the Exchange to be clearly erroneous 

will be removed ‘‘from the Consolidated 

Tape.’’4 A trade will only be removed 

from the Consolidated Tape when the 

determination is deemed final and any 

applicable appeals have been exhausted. 

Participant Initiated Review Requests 

The Exchange proposes to amend 

Article 20, Rule 10(b) to update the 

procedures for requesting a review of a 

clearly erroneous transaction. First, the 

proposed rule would require that 

requests for review be made only by 

electronic mail (‘‘email’’) or other 

electronic means specified from time to 

time by the Exchange. Under its current 

rules, the Exchange also allows requests 

to be made via facsimile. Requiring 

requests for review to be made via email 

creates a standard format that can easily 

be logged and tracked. The Exchange 

will republish the email address or 

other electronic means to be used for all 

clearly erroneous filings in a circular 

distributed to Participants.5

The amended rule specifies that 

requests for review must be received by 

the Exchange within 30 minutes of the 

execution time for orders initially 

routed to and executed on the Exchange. 

The Exchange proposes that Participants 

submit certain essential identifying 

information with the request including 

the time of the transaction(s), security 

symbol(s), number of shares, price(s), 

side (bought or sold), and factual basis 

for believing that the trade is clearly 

erroneous. The current rule already 

requires requests for review to be 

received within 30 minutes of the 

execution, but only requires submission 

of such information which is 

‘‘reasonably necessary for use by the 

Exchange in resolving the matter.’’ 

The proposed rule also requires the 

Exchange to notify the counterparty to 

a trade upon receipt of a timely filed 

request for review that satisfies the 

numerical guidelines set forth within 

the Rule. This proposed language 

requires notice only when a request is 

filed in a timely manner and satisfies 

the Numerical Guidelines. This change 

alleviates any potential burden on the 

Exchange of notifying the counterparty 

when a request for review does not 

merit a ruling. 

The Exchange proposes to amend 

Article 20, Rule 10 to allow an Officer 

of the Exchange or such other employee 

designee (‘‘Officer’’) of CHX to request 

additional information from each party 

to a transaction under review. Parties to 

the review will have 30 minutes from 

the time of the request to provide 

additional supporting information. 

Routed Executions 

The Exchange proposes to give other 

market centers an additional 30 minutes 

from the receipt of their participant’s 

timely filing to request a ruling, but no 

longer than 60 minutes from the time of 

the execution under review. This 

provision accounts for those executions 

initially directed to an away market 

center and subsequently routed by that 

away market center to the Exchange. 

For example, assume an order is 

initially routed by a participant to 

Market Center A and subsequently 

routed to the CHX where the order is 

executed at a price outside of the 

Numerical Guidelines. This provision 

generally requires Market Center A to 

file with the Exchange within 30 

minutes from the time it receives its 

participant’s timely filed request for 

review. This provision caps the filing 

deadline for an away market center at 60 

minutes from the time of the execution 

under review. 

Threshold Factors 

Currently, the Exchange’s Clearly 

Erroneous Execution rule specifies 

numeric guidelines for determining 

what constitutes a clearly erroneous 

transaction. These guidelines are an 

offset of at least twenty percent (20%) 

from the prevailing National Best Bid or 

Offer (‘‘NBBO’’) at the time of trade 

execution for transactions under $1. For 

transactions at or exceeding $1, the 

relevant NBBO offset is ten percent 

(10%). The Exchange proposes to 

modify its existing numerical thresholds 

to conform to those being adopted by 

other trading centers. 

Numerical Guidelines 

The proposed numerical guidelines 

state that a transaction executed during 

the Early Session, 6 Regular Trading 

Session ,7 Late Trading Session 8 or Late 

Crossing Session 9 may be found to be 

clearly erroneous only if the price of the 

transaction to buy is greater, or less in 

the case of a sale, than the reference 

price by an amount that equals or 

exceeds the numerical guidelines for a 

particular transaction category. The 

Reference Price shall be equal to the 

Consolidated Last Sale immediately 

prior to the execution under review, 

unless unusual circumstances are 

present. The proposed guidelines for 

sales greater than $0.00 up to and 

including $25.00 are 10% for the 

Regular Trading Session and 20% for 

the Early, Late Trading and Late 

Crossing Sessions. The proposed 

guidelines for sales greater than $25.00 

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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 51937 

up to and including $50.00 are 5% for 

the Regular Trading Session and 10% 

for the Early, Late Trading and Late 

Crossing Sessions. The proposed 

guidelines for sales greater than $50.00 

are 3% for the Regular Trading Session 

and 6% for the Early, Late Trading and 

Late Crossing Sessions. A filing 

involving five or more securities by the 

same ETP Holder will be aggregated into 

a single filing called a ‘‘Multi-Stock 

Event.’’ In the case of a Multi-Stock 

Event, the proposed guidelines are 10% 

for the Regular Trading Session and 

10% for the Early, Late Trading and Late 

Crossing Sessions. In the case of 

Leveraged ETF/ETN securities, the 

above guidelines are to be multiplied by 

the leverage multiplier of the security. 

Executions that do not meet or exceed 

the Numerical Guidelines will not be 

eligible for review under this section. 

The following chart summarizes the 

proposed Numerical Guidelines. 

Reference price: Consolidated Last Sale 

Regular Trading Session Numerical 

Guidelines (subject transaction’s % difference from the Consolidated Last 

Sale): 

Early, Late Trading and Late Crossing 

Session Numerical Guidelines (subject 

transaction’s % difference from the 

Consolidated Last Sale): 

Greater than $0.00 up to and including $25.00 ...................... 10% ....................................................... 20%. 

Greater than $25.00 up to and including $50.00 .................... 5% ......................................................... 10%. 

Greater than $50.00 ................................................................. 3% ......................................................... 6%. 

Multi-Stock Event—Filings involving five or more securities 

by the same ETP Holder will be aggregated into a single 

filing.

10% ....................................................... 10%. 

Leveraged ETF/ETN securities ................................................ Regular Trading Session Numerical 

Guidelines multiplied by the leverage 

multiplier (i.e., 2×).

Regular Trading Session Numerical 

Guidelines multiplied by the leverage 

multiplier (i.e., 2×). 

Establishing Numerical Guidelines 

which are consistent with other market 

centers within the Rule brings 

regulatory transparency and consistency 

in the application of the rules of the 

Exchange. These Numerical Guidelines 

represent the general consensus 

approach and were developed based on 

the collective experiences of a marketwide group. The Exchange believes that 

the Thresholds established are fair and 

appropriate and apply evenly to all 

participants. 

Unusual Circumstances 

The CHX further proposes that in 

Unusual Circumstances the Exchange 

may, in its discretion and with a view 

toward maintaining a fair and orderly 

market, use a Reference Price other than 

the consolidated last sale. Unusual 

Circumstances may include periods of 

extreme market volatility, sustained 

illiquidity, or widespread system issues. 

Other Reference Prices that the 

Exchange may use would include the 

consolidated inside price, the 

consolidated opening price, the 

consolidated prior close, or the 

consolidated last sale prior to a series of 

executions. 

The following example explains the 

use of a Reference Price equal to the 

consolidated last sale prior to a series of 

executions. 

ABC has a consolidated last sale of $10.00. 

During the Regular Trading Session Customer 

A enters a market order to buy 10,000 shares, 

although it had intended a market order for 

1,000 shares. The size of the order is such 

that the order sweeps the CHX Book, which 

reflects 1,000 shares of liquidity offered at 

each of the following prices. Executions 

occur, moving through the depth of Book, as 

follows: 

Trade #1—1000 shares @ $10.00 (9000 

remaining) 

Trade #2—1000 shares @ $10.20 (8000 

remaining) 

Trade #3—1000 shares @ $10.40 (7000 

remaining) 

Trade #4—1000 shares @ $10.60 (6000 

remaining) 

Trade #5—1000 shares @ $10.80 (5000 

remaining) 

Trade #6—1000 shares @ $11.00 (4000 

remaining) 

Trade #7—1000 shares @ $11.20 (3000 

remaining) 

Trade #8—1000 shares @ $11.40 (2000 

remaining) 

Trade #9—1000 shares @ $11.60 (1000 

remaining) 

Trade #10—1000 shares @ $11.80 (complete) 

Thus, to be eligible for review, a 

transaction must be at a price that is at 

least 10% higher than the consolidated 

last sale prior to the series of executions. 

Customer A could request a ruling for 

trades #6 through #10, priced at $11.00 

and above, but trades #1 through #5 

would not be eligible for review. 

Under the proposed rule the Exchange 

may also use a higher numerical 

guideline if, after market participants 

have been alerted to erroneous activity, 

the price of the security returns toward 

its prior trading range but continues to 

trade beyond the price it would have 

normally been busted. 

Joint Market Rulings 

In the interest of achieving 

consistency across markets, the 

Exchange proposes that, in events that 

involve other markets, the Exchange 

would have the ability to use a different 

Reference Price and/or Numerical 

Guideline. In these instances the 

Reference Price would be determined 

based on a consensus among the 

Exchanges where the transactions 

occurred. Furthermore, when a ruling is 

made across markets, the Exchange may 

determine that the ruling is not eligible 

for appeal because immediate finality is 

necessary to maintain a fair and orderly 

market and to protect investors and the 

public interest. 

Additional Factors 

The proposed amendments to Article 

20, Rules 10 and 11 also enumerate 

some additional factors that an Officer 

may consider when determining 

whether an execution is clearly 

erroneous. These factors include, but are 

not limited to, system malfunctions or 

disruptions, volume and volatility for 

the security, derivative securities 

products that correspond to greater than 

100% in the direction of a tracking 

index, news released for the security, 

whether trading in the security was 

recently halted/resumed, whether the 

security is an IPO, whether the security 

was subject to a stock-split, 

reorganization, or other corporate 

action, overall market conditions, Late 

Session executions, validity of the 

consolidated tapes trades and quotes, 

consideration of primary market 

indications, and executions inconsistent 

with the trading pattern in the stock. 

Each additional factor shall be 

considered with a view toward 

maintaining a fair and orderly market, 

the protection of investors and the 

public interest. 

Numerical Guidelines Applicable to 

Volatile Market Opens 

The Exchange proposes to give itself 

the ability to expand the Numerical 

Guidelines applicable to transactions 

occurring between 9:30 a.m. and 10 a.m. 

ET based on the disseminated value of 

the S & P 500 Futures at 9:15 a.m. ET. 

When the S&P Futures are up or down 

from 3% up to but not including 5% at 

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51938 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 

9:15 a.m., the Numerical Guidelines are 

doubled. When the S&P Futures are up 

or down 5% or greater at 9:15 a.m., the 

Numerical Guidelines are tripled. The 

Exchange believes that the S&P 500 

futures contract is an appropriate and 

reliable barometer of market activity 

prior to the market opening due to its 

broad based market coverage and deep 

liquidity. Using the S&P 500 Futures 

disseminated value at 9:15 a.m. as the 

barometer of market activity, the 

Exchange is providing a transparent 

means of offering adjusted guidelines in 

times of volatile market activity. 

Outlier Transactions 

The proposed amendments to Article 

20, Rule 10 provide that an Officer of 

the Exchange may consider requests for 

review received after thirty minutes, but 

not longer than sixty minutes after the 

execution in question in the case of an 

Outlier Transaction. An Outlier 

Transaction is a transaction where, (1) 

the execution price of the security is 

greater than three times the current 

Numerical Guidelines, or (2) the 

execution price of the security breaches 

the 52-week high or low, in which case 

the Exchange may consider Additional 

Factors to determine if the transaction 

qualifies for review or if the Exchange 

shall decline to act. 

Review Procedures 

Initial Determination 

The Exchange proposes to remove 

language in Article 20, Rules 10 and 11 

that currently allows an Officer to 

modify one or more of the terms of a 

transaction under review. Under the 

proposed rule, the Officer of the 

Exchange will only have the authority to 

break the trades or rule to let the trades 

stand. This change attempts to remove 

the subjectivity from the rule that is 

necessitated by an adjustment. 

The Exchange also proposes adding 

language stating that a determination 

shall be made generally within 30 

minutes of receipt of the complaint, but 

in no case later than the start of Regular 

Trading on the following trading day. 

Rulings made outside of 30 minutes by 

an Officer will not fail for lack of 

timeliness. The guideline simply 

provides participants an appropriate 

expectation that a ruling will generally 

be made within 30 minutes, and in no 

case later than the start of Regular 

Trading on the following trading day. 

Appeals 

The Exchange proposes to amend the 

appeals procedure for trades that are 

deemed to be clearly erroneous. First, 

the Exchange will no longer accept 

appeal requests via facsimile or in 

writing (i.e., hand delivered). Similar to 

the proposed language for an initial 

request for a ruling, all appeal requests 

must be made via email. 

The current rule provides that the 

Exchange shall review and render a 

decision upon an appeal without 

specifying any particular timeframe in 

which a decision would be provided by 

the Exchange. The proposed rule offers 

more definite guidelines to ensure the 

expedient resolution of appeals. It 

requires the Exchange to review appeals 

as soon as practicable, but generally on 

the same day as the executions under 

review. Appeals received between 2 

p.m. CT and the close of trading in the 

Late Crossing Session should be made 

as soon as practicable, but in no case 

later than the trading day following the 

date of the execution under review. This 

revised provision provides participants 

a reasonable expectation of when a 

ruling on appeal will generally be made. 

Further, the proposed rule declares 

that any determination made by an 

Officer or by the Committee on 

Exchange Procedure shall be rendered 

without prejudice as to the right of the 

parties to the transaction to submit their 

dispute to arbitration. This provision 

simply clarifies the fact that nothing in 

the proposed rule limits or impedes the 

rights of the parties to arbitrate their 

dispute. 

System Disruption and Malfunctions 

Currently, Systems Disruptions and 

Malfunctions are addressed in Article 

20, Rule 11. The Exchange proposes to 

consolidate these provisions within 

Article 20, Rule 10 for the sake of intermarket consistency. Within the current 

System Disruptions and Malfunctions 

provisions, after an Officer determines 

that a trade was clearly erroneous he 

may declare the transaction null and 

void or modify the trade to attempt to 

achieve and equitable rectification of 

the error. The proposed Rule eliminates 

the Exchange’s ability to modify a 

clearly erroneous execution. The 

Exchange must either uphold or nullify 

the execution based upon the findings 

of the Officer reviewing the execution. 

The proposed Rule provides that, in 

the event of a disruption or a 

malfunction, an Officer of the Exchange 

or other senior level employee designee 

will rely on the proposed numerical 

guidelines in determining whether an 

execution is clearly erroneous. 

However, the Officer or senior level 

employee may also use a lower 

Numerical Guideline if necessary to 

maintain a fair and orderly market, 

protect investors, and protect the public 

interest. The proposed rule also adds 

that actions taken under these 

circumstances must be taken within 30 

minutes of detection of the erroneous 

transaction in the ordinary case, and by 

no later than the start of the Regular 

Trading Session on the day following 

the date of the execution under review 

when extraordinary circumstances exist. 

Officers Acting on Their Own Motion 

The Exchange proposes to add a 

section to the Rule that will grant 

Officers (or such other senior level 

employee designee) the ability to act on 

their own motion to review potentially 

erroneous executions. Under the current 

rule, Officers have the ability to act 

upon their own motion only in the 

event of a system disruption or 

malfunction, or when extraordinary 

market conditions or other 

circumstances exist in which the 

nullification or modification of 

transactions may be necessary for the 

maintenance of a fair and orderly 

market or the protection of investors 

and the public interest. The proposed 

rule would allow an Officer of the 

Exchange or other senior level employee 

designee to review executions and rely 

on the Numerical Guidelines, under any 

circumstance. In extraordinary 

circumstances an Officer (or such other 

senior level employee designee) may 

apply a lower Numerical Guideline if it 

is determined that such action is 

necessary to maintain a fair and orderly 

market or protect investors and the 

public interest. In some instances the 

Exchange may detect a single execution 

that breaches the Numerical Guidelines 

but is not the subject of a ruling request. 

This provision gives the Exchange the 

ability to review such executions. 

Additionally, in practice clearly 

erroneous executions commonly involve 

multiple parties and multiple 

executions. In such instances, all 

affected parties may not request a 

ruling. The Exchange proposes this 

provision to permit an Officer (or such 

other senior level employee designee) to 

rule on a group of transactions related 

to the same occurrence or event as a 

whole, without a formal request for a 

ruling from every affected party. 

Trade Nullification for UTP Securities 

That Are Subject of Initial Public 

Offerings 

The proposed rule also provides a 

specific policy on trade nullification 

and for UTP securities that are subject 

to initial public offerings. Under the 

proposed rule, Officers must either 

declare an opening transaction null and 

void or decline to take action, but can 

no longer be adjusted. Furthermore, the 

proposed rule requires that, in 

extraordinary circumstances, the 

reviewing Officer (or such other senior 

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10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6). 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. 

14 17 CFR 240.19b–4(f)(6). 

15 17 CFR 240.19b–4(f)(6). 

16For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposal’s impact on efficiency, competition, and 

capital formation. 15 U.S.C. 78c(f). 

17See Securities Exchange Act Release No. 60706 

(September 22, 2009), 74 FR 49416 (September 28, 

2009) (NYSEArca–2009–36). 18 17 CFR 200.30–3(a)(12). 

level employee designee) may take 

action by no later than the start of 

Regular Trading on the day following 

the date of the execution under review. 

Effective Date 

As noted above, the proposed rule 

amendments are submitted as part of a 

marketwide initiative to standardize the 

various clearly erroneous rules of 

national securities exchanges. As such, 

the exchanges have agreed to a 

coordinated implementation and 

effective date of October 5, 2009 for 

these changes. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act in general,10 and 

furthers the objectives of Section 6(b)(5) 

in particular,11 in that it is designed to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transaction in securities, to 

remove impediments and perfect the 

mechanisms of a free and open market, 

and, in general, to protect investors and 

the public interest. The proposed rule 

change provides transparency and 

finality for participants and creates 

consistent results across U.S. equities 

exchanges with respect to clearly 

erroneous executions. This proposed 

change further promotes the 

maintenance of a fair and orderly 

market, the protection of investors and 

the protection of 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. 

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. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing 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, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 12 and Rule 19b– 

4(f)(6) thereunder.13

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 14 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6) 15

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange requests 

that the Commission waive the 30-day 

operative delay so that it may 

implement the new rule on October 5, 

2009, the same date as the other equities 

exchanges. The Commission believes 

that waiving the 30-day operative delay 

is consistent with the protection of 

investors and the public interest 

because it will allow the Exchange to 

begin applying the new rule on the same 

date as the other equities exchanges.16

Application of the new rule on this date 

should help foster transparency and 

consistency among those exchanges that 

adopt clearly erroneous execution rules 

substantially similar to those previously 

approved by the Commission.17 For 

these reasons, the Commission 

designates that the proposed rule 

change become operative on October 5, 

2009. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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–CHX–2009–11 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–CHX–2009–11. 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 inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such 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 publicly available. All 

submissions should refer to File 

Number SR–CHX–2009–11 and should 

be submitted on or before October 29, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–24242 Filed 10–7–09; 8:45 am] 

BILLING CODE 8011–01–P 

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