51906 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

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. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60761; File No. SR–ISE– 

2009–73] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change and Amendment No. 1 Thereto 

Relating to Clearly Erroneous 

Executions 

October 1, 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 

September 28, 2009, the International 

Securities Exchange, LLC (‘‘Exchange’’ 

or ‘‘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. 

On October 1, 2009, the ISE filed 

Amendment No. 1 to the proposed rule 

change. The ISE 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, 

as amended, from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE proposes to amend ISE Rule 

2128 governing clearly erroneous 

executions. 

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 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. 

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 ISE 

Rule 2128 by replacing the current rule 

text, in its entirety, with newly 

proposed rule text in order to improve 

the Exchange’s policies and procedures 

regarding clearly erroneous executions. 

The newly proposed rule text is 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. This 

proposed rule change shall be effective 

on October 5, 2009. The proposed rule 

text is more fully discussed below. 

Definition 

The Exchange proposes to adopt a 

definition of a clearly erroneous 

execution and adopt language 

addressing cancelled trades. The 

proposed rule text states that a 

transaction is ‘‘clearly erroneous’’ when 

there is an obvious error in any term, 

such as price, number of shares or other 

unit of trading, or identification of the 

security. The proposed rule text also 

states 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. 

Equity Electronic Access Member 

Initiated Review Requests 

In ISE Rule 2128(b), the Exchange 

proposes 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 

(‘‘e-mail’’) or other electronic means 

specified from time to time by the 

Exchange. Requiring requests for review 

to be made via e-mail creates a standard 

format that can easily be logged and 

tracked. The Exchange will publish the 

email address or other electronic means 

to be used for all clearly erroneous 

filings in a circular distributed to Equity 

Electronic Access Members (‘‘Equity 

EAMs’’). 

The Exchange further proposes 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 Equity 

EAMs 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 Exchange 

believes that 30 minutes is an 

appropriate time frame that offers the 

requesting party sufficient time to gather 

and submit all required information. 

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. The Exchange proposes to 

adopt language allowing an Officer of 

the Exchange or such other employee 

designee (‘‘Officer’’) of ISE 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 ISE 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 

The Exchange proposes adding 

certain numerical thresholds to the Rule 

that explicitly state what constitutes a 

clearly erroneous execution. 

Numerical Guidelines 

The proposed numerical guidelines 

state that a transaction executed during 

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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 51907 

5The Regular Market Session begins for each 

security with the Opening Transaction, as defined 

in Rule 2106, and continues until the primary 

listing market closes such security. See ISE Rule 

2102(b) and (c). 

6The Pre-Market Session begins at 8 a.m. and 

concludes with the Opening Transaction of a 

security. See ISE Rule 2102(a). 

7The Post-Market Session begins following the 

conclusion of the Regular Market Session and 

concludes at 8 p.m. See ISE Rule 2102(d). 

the Regular Market Session 5 or the PreMarket Session 6 and Post-Market 

Session 7 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 and up to and 

including $25.00 are 10% for the 

Regular Market Session and 20% for the 

Pre-Market Session and Post-Market 

Sessions. The proposed guidelines for 

sales greater than $25.00 and up to and 

including $50.00 are 5% for the Regular 

Market Session and 10% for Pre-Market 

Session and Post-Market Sessions. The 

proposed guidelines for sales greater 

than $50.00 are 3% for the Regular 

Market Session and 6% for Pre-Market 

Session and Post-Market Sessions. A 

filing involving five or more securities 

by the same Equity EAM 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 

Market Session and 10% for the PreMarket Session and Post-Market 

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 market session numerical guidelines 

(subject transaction’s percent difference from 

the consolidated last sale): 

Pre-market session and post-market session 

numerical guidelines (subject transaction’s 

percent difference from the consolidated last 

sale): 

Greater than $0.00 and up to and including 

$25.00.

10% .................................................................. 20%. 

Greater than $25.00 and 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 Equity EAM will 

be aggregated into a single filing.

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

Leveraged ETF/ETN securities ......................... Regular Market Session Numerical Guidelines 

multiplied by the leverage multiplier (i.e. 2x).

Regular Market Session Numerical Guidelines 

multiplied by the leverage multiplier (i.e. 2x). 

Establishing Numerical Guidelines 

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 market-wide group. 

The Exchange believes that the 

Thresholds established are fair and 

appropriate and apply evenly to all 

participants. 

Unusual Circumstances 

ISE 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 Market 

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 ISE Book, which 

reflects 1,000 shares of liquidity offered 

at each of following prices. Executions 

occur, moving through the depth of 

Book, as follows: 

Trade #1—1,000 shares @ $10.00 (9,000 

remaining) 

Trade #2—1,000 shares @ $10.20 (8,000 

remaining) 

Trade #3—1,000 shares @ $10.40 (7,000 

remaining) 

Trade #4—1,000 shares @ $10.60 (6,000 

remaining) 

Trade #5—1,000 shares @ $10.80 (5,000 

remaining) 

Trade #6—1,000 shares @ $11.00 (4,000 

remaining) 

Trade #7—1,000 shares @ $11.20 (3,000 

remaining) 

Trade #8—1,000 shares @ $11.40 (2,000 

remaining) 

Trade #9—1,000 shares @ $11.60 (1,000 

remaining) 

Trade #10—1,000 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 

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51908 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 

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 ISE 

Rule 2128 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, Pre-Market and Post-Market 

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 expand the 

Numerical Guidelines applicable to 

transactions occurring between 9:30 

a.m. and 10 a.m. based on the 

disseminated value of the S&P 500 

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

Futures are up or down from 3% to up 

to but not including 5% at 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. By 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 ISE 

Rule 2128 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 

Under the proposed rule, the Officer 

will only have the authority to break the 

trades or rule to let the trades stand and 

will no longer have the authority to 

adjust one or more terms of the 

transaction. This limitation 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 the 

Regular Market Session 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 the Regular 

Market Session 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. Similar to 

the proposed language for an initial 

request for a ruling, all appeal requests 

must be made via e-mail. 

The current rule provides that the 

Exchange shall review and render a 

decision upon an appeal within a 

timeframe 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 3 p.m. ET 

and the close of trading in the PostMarket 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. Appeals will 

not fail for lack of timeliness. 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 CEE Panel 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, within the System 

Disruptions and Malfunctions section of 

the rule, 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 

Market 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 an 

Officer of the Exchange or 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. 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 of the 

Exchange or 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 

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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 51909 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4). 

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). 

16The Commission considers the 60-day period 

within which the Commission may summarily 

abrogate the proposal pursuant to Section 

19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C), to 

commence on October 1, 2009, the date ISE filed 

Amendment No. 1 to the proposal. 

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 of the 

Exchange or 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 modifies ISE’s 

policy on trade nullification and for 

UTP securities that are subject to initial 

public offerings. Under the proposed 

rule, an Officer of the Exchange or other 

senior level employee designee 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 of the Exchange or 

other senior level employee designee 

may take action by no later than the 

start of the Regular Market Session on 

the day following the date of the 

execution under review. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,8

in general, and furthers the objectives of 

Section 6(b)(4),9 in particular, in that it 

is designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

other persons using its facilities. The 

proposed rule change provides 

transparency and finality for Equity 

EAMs 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 proposed rule change does not 

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 

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 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 10 and Rule 19b– 

4(f)(6) thereunder.11

A proposed rule change filed 

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

Act 12 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, as amended, 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.16

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–ISE–2009–73 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–2009–73. 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. 

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51910 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 

17 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). 

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. 

5NSX Rule 1.5E defines an ‘‘ETP’’ as an Equity 

Trading Permit issued by the Exchange for effecting 

approved securities transactions on the Exchange’s 

trading facilities. An ETP may be issued to a ‘‘sole 

proprietorship, partnership, corporation, limited 

liability company or other organization which is a 

registered broker or dealer pursuant to Section 15 

of the Act, and which has been approved by the 

Exchange. 

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–ISE–2009–73 and should be 

submitted on or before October 29, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–24250 Filed 10–7–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60762; File No. SR–NSX– 

2009–05] 

Self-Regulatory Organizations; 

National Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change To Amend 

NSX Rule 11.19 Governing Clearly 

Erroneous Executions 

October 1, 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 

September 30, 2009, the National Stock 

Exchange, Inc. (‘‘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. NSX 

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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NSX is proposing to amend NSX Rule 

11.19 governing clearly erroneous 

executions. 

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. 

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 

NSX Rule 11.19 in order to improve the 

Exchange’s rule 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 Corporation 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. 

ETP Holder Initiated Review Requests 

The Exchange proposes to amend 

NSX Rule 11.19 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 (‘‘e-mail’’) or other 

electronic means specified from time to 

time by the Exchange. Under the current 

policy, the Exchange also allows 

requests to be made via telephone and 

facsimile. Requiring requests for review 

to be made via e-mail creates a standard 

format that can easily be logged and 

tracked. The Exchange will publish the 

e-mail address or other electronic means 

to be used for all clearly erroneous 

filings in a circular distributed to Equity 

Trading Permit (‘‘ETP’’) Holders.5

The Exchange further proposes 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 ETP 

Holders 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 

requires requests for review to be 

received within 15 minutes of the 

execution and does not specify what 

information is required. The Exchange 

believes that 30 minutes is an 

appropriate time frame that offers the 

requesting party sufficient time to gather 

and submit all required information. 

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 (‘‘Numerical Guidelines’’). This 

proposed language eliminates the 

requirement that counterparties be 

notified of every request for a ruling and 

instead requires notice only when a 

request is filed in a timely manner and 

satisfies the Numerical Guidelines. This 

change alleviates the burden on the 

Exchange of notifying the counterparty 

when a request for review does not 

merit a ruling. 

The Exchange proposes to amend 

NSX Rule 11.19 to allow an Officer of 

the Exchange or such other employee 

designee (‘‘Officer’’) 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. 

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