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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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 51911 

6NSX Rule 11.19(b)(i) (prior to the instant rule 

change). 

7Regular Trading Hours begin for each security 

at ‘‘8:30:00 am (Central Time) and conclude at 

3:00:00 pm (Central Time).’’ NSX Rule 1.5R. 

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 NSX, 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 does not 

identify specific numeric guidelines for 

determining what constitutes a clearly 

erroneous transaction. The current rule 

simply provides that ‘‘an Officer of the 

Exchange or such other designee of the 

Exchange shall review the transaction 

under dispute and determine whether it 

is clearly erroneous, with a view toward 

maintaining a fair and orderly market 

and the protection of investors and the 

public interest.’’ 6 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 

Regular Trading Hours 7 or outside 

Regular Trading Hours 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 

execution time of the transaction under 

review determines whether the 

guidance threshold is Regular Trading 

Hours or outside Regular Trading Hours. 

The Reference Price shall be equal to the 

Consolidated Last Sale immediately 

prior to the execution(s) 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 Regular 

Trading Hours and 20% for outside 

Regular Trading Hours. The proposed 

guidelines for sales greater than $25.00 

up to and including $50.00 are 5% for 

Regular Trading Hours and 10% for 

outside Regular Trading Hours. The 

proposed guidelines for sales greater 

than $50.00 are 3% for Regular Trading 

Hours and 6% for outside Regular 

Trading Hours. 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 

Regular Trading Hours and 10% for 

outside Regular Trading Hours. 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 hours numerical guidelines 

(subject transaction’s % difference from the 

consolidated last sale): 

Outside regular trading 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 .......................... Core Trading Session Numerical Guidelines 

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

Core Trading Session Numerical Guidelines 

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

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 

NSX further proposes that in Unusual 

Circumstances the Exchange may, in its 

discretion and with a view toward 

maintaining a fair and orderly market 

and the protection of investors and the 

public interest, 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 Regular Trading Hours, 

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 NSX Book, which reflects 

1,000 shares of liquidity offered at each 

of following prices. Executions occur, 

moving through the depth of the NSX 

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) 

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51912 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 

8All times referenced are Eastern Time (‘‘ET’’). 

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 broken. 

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 NSX 

Rule 11.19 also enumerate some 

additional factors that an officer of the 

Exchange or certain other employee 

designee 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, 

Opening and 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 the 

Exchange the ability to expand the 

Numerical Guidelines applicable to 

transactions occurring between 9:30 

a.m. and 10 a.m. (Eastern Time) 8 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% but 

less than 5% at 9:15 a.m., the Numerical 

Guidelines are doubled. When the S&P 

Futures are up or down 5% or more 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 NSX 

Rule 11.19 provide that an Officer 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 

Corporation shall decline to act. 

Review Procedures 

Initial Determination 

The Exchange proposes removing 

language that currently allows an 

Officer to modify one or more of the 

terms of a transaction under review. 

Under the proposed rule, the Officer 

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 Core 

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 Hours 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 3:00 ET and 

the closing of business on the Exchange 

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. Notwithstanding 

anything to the contrary in Chapter X 

(Adverse Action) of the NSX Rules, the 

proposed rule provides that all 

determinations by the CEE Panel shall 

constitute final action by the Exchange 

on the matter at issue. 

System Disruption and Malfunctions 

Currently, within the System 

Disruptions and Malfunctions section of 

the rule, after an officer of the Exchange 

or such other senior level employee 

designee (‘‘Senior 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 

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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Notices 51913 

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

10 15 U.S.C. 78f(b)(4). 

11 15 U.S.C. 78s(b)(3)(A). 

12 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. 

13 17 CFR 240.19b–4(f)(6). 

14 17 CFR 240.19b–4(f)(6). 

15For 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). 

16See Securities Exchange Act Release No. 60706 

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

2009) (NYSEArca-2009–36). 

clearly erroneous execution. The 

Exchange must either uphold or nullify 

the execution based upon the findings 

of the Senior Officer reviewing the 

execution. 

The proposed Rule provides that, in 

the event of a disruption or a 

malfunction, a Senior Officer will rely 

on the proposed numerical guidelines in 

determining whether an execution is 

clearly erroneous. However, the Senior 

Officer 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 Core 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 Senior 

Officers the ability to act on their own 

motion to review potentially erroneous 

executions. Under the current rule, 

Senior 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 a Senior Officer to review 

executions and rely on the Numerical 

Guidelines, under any circumstance. In 

extraordinary circumstances a Senior 

Officer 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 a Senior Officer 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 to Initial Public 

Offerings 

The proposed rule also modifies 

NSX’s policy on trade nullification and 

for UTP securities that are subject to 

initial public offerings. Under the 

proposed rule, Senior 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 Senior Officer may take 

action by no later than the start of Core 

Trading on the day following the date of 

the execution under review. 

Effective Date 

The Exchange requests that the 

effective date for the instant rule change 

be October 5, 2009. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6(b) of the 

Act,9 in general, and furthers the 

objectives of Section 6(b)(5) 10 in 

particular in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. 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 Exchange Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

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 11 and Rule 19b– 

4(f)(6) thereunder.12

A proposed rule change filed 

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

Act 13 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6) 14

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.15

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.16 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. 

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51914 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). 

4A CBSX Trader is defined as an individual who 

or organization which has the right to trade on 

CBSX (See Rule 50.1). 

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–NSX–2009–05 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NSX–2009–05. 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–NSX–2009–05 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. E9–24249 Filed 10–7–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60760; File No. SR–CBOE– 

2009–071] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Regarding the CBSX 

Obvious Error Rule 

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 25, 2009, the Chicago Board 

Options Exchange, Incorporated 

(‘‘Exchange’’ or ‘‘CBOE’’) 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. CBOE 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 

The Exchange proposes to modify the 

CBOE Stock Exchange (‘‘CBSX’’) 

obvious error rule. The text of the 

proposed rule change is available on the 

Exchange’s Web site (http:// 

www.cboe.org/Legal), at the Exchange’s 

Office of the Secretary and at the 

Commission. 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 52.4 in order to improve the CBSX 

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. 

As proposed, the term ‘‘clearly 

erroneous’’ would be defined as 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. Further, a transaction made in 

clearly erroneous error and cancelled by 

both parties or determined by CBSX to 

be clearly erroneous will be removed 

from the Consolidated Tape. A trade 

will only be removed from the 

Consolidated Tape when the 

determination is deemed final and any 

applicable appeals have been exhausted. 

Under the proposed rule, a CBSX 

Trader 4 that receives an execution on 

an order that was submitted erroneously 

to CBSX for its own or customer account 

may request that CBSX review the 

transaction. One or more senior level 

officials of CBSX designated by the 

President (‘‘Official’’) shall review the 

transaction under dispute and 

determine whether it is clearly 

erroneous, with a view toward 

maintaining a fair and orderly market 

and the protection of investors and the 

public interest. Such request for review 

shall be made in writing via e-mail or 

other electronic means specified from 

time to time by CBSX in a circular 

distributed to CBSX Traders. Requests 

for review must be received within 

thirty (30) minutes of execution time 

and shall include information 

concerning 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. Upon 

receipt of a timely filed request that 

satisfies the numerical guidelines set 

forth in paragraph (c)(1) of the Rule, the 

counterparty to the trade shall be 

notified by CBSX as soon as practicable, 

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