Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51097 

16 15 U.S.C. 78s(b)(3)(A). 

17 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 

19b–4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

prior to the filing of the proposed rule change, or 

such shorter time as designated by the Commission. 

The Commission is waiving the five day written 

notice requirement in this case. Therefore, the 

Commission notes that the Exchange has satisfied 

this requirement. 

18For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

19 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). 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposal. 

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 16 and Rule 19b– 

4(f)(6)(iii) thereunder.17 The Exchange 

has asked the Commission to waive the 

30-day operative delay so that the 

proposal may become operative 

immediately upon filing. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest because such waiver will 

allow the clearly erroneous rules to 

continue to operate as they did prior to 

the effectiveness of the Pause Pilot 

expansion to Phase III Securities so that 

similarly situated Trading Permit 

Holders are provided the same 

opportunity of a clearly erroneous 

review. Accordingly, the Commission 

waives the 30-day operative delay 

requirement and designates the 

proposed rule change as operative upon 

filing with the Commission.18

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

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

Number SR–CBOE–2011–078 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–CBOE–2011–078. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, 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 CBOE. 

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–CBOE–2011–078 and 

should be submitted on or before 

September 7, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20904 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65101; File No. SR–FINRA– 

2011–039] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend FINRA Rule 

11892 (Clearly Erroneous Transactions 

in Exchange-Listed Securities) 

August 11, 2011. 

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 August 

10, 2011, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) 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 FINRA. FINRA has designated the 

proposed rule change as constituting a 

‘‘non-controversial’’ rule change under 

paragraph (f)(6) of Rule 19b–4 under the 

Act,3 which renders the proposal 

effective upon receipt of this filing by 

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 

FINRA is proposing to amend FINRA 

Rule 11892 (Clearly Erroneous 

Transactions in Exchange-Listed 

Securities) so that the rule will continue 

to operate in the same manner as it did 

prior to the expansion of the trading 

pause pilot. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 


Emcdonald on DSK2BSOYB1PROD with NOTICES
51098 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

4 In consultation with other self-regulatory 

organizations (‘‘SROs’’) and the Commission, 

FINRA implemented a trading pause pilot, which 

was approved by the Commission on June 10, 2010, 

as part of a concerted effort to strengthen the 

markets after the severe market disruption that 

occurred on May 6, 2010. See Securities Exchange 

Act Release No. 62252 [sic] (June 10, 2010), 75 FR 

34186 [sic] (June 16, 2010). (‘‘trading pause pilot’’). 

5See Securities Exchange Act Release No. 64735 

(June 23, 2011), 76 FR 38243 (June 29, 2011) (Order 

Approving File No. SR–FINRA–2011–023) (‘‘Phase 

III’’). 

6See e.g., SR–NASDAQ–2011–116 (August 8, 

2011). 

7 If no prior day closing price is available, the last 

sale reported to the consolidated tape on the 

previous trading day is used. 

8Pursuant to Rule 11892, the phrase ‘‘trading 

pause trigger price’’ means the price that triggered 

a trading pause on a primary listing market under 

its rules. The trading pause trigger price reflects a 

price calculated by the primary listing market over 

a rolling five minute period and may differ from the 

execution price of a transaction that triggered a 

trading pause. See Rule 11892(b)(4). 

9A ‘‘latency trade’’ is a trade that occurs 

subsequent to a trigger trade but prior to the trading 

pause taking effect. 

10FINRA Rule 11892 (b)(1) provides a numerical 

guideline of 3% for clearly erroneous calculations 

where the reference price is greater than $50.00. 11 15 U.S.C. 78o–3(b)(6). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA 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. FINRA 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 

FINRA is proposing modifications to 

FINRA Rule 11892 in light of the recent 

expansion of the trading pause pilot 4 by 

FINRA and the other SROs to cover 

additional securities.5 As described in 

more detail below, the primary listing 

markets have filed rule changes to 

amend their clearly erroneous rules to 

revert back to the non-trading pause 

clearly erroneous framework for Phase 

III securities and FINRA is proposing 

changes to align its clearly erroneous 

process with the exchanges.6

Effective August 8, 2011, the scope of 

the trading pause pilot was extended 

beyond the securities included in the 

S&P 500® Index, the Russell 1000® 

Index and the pilot list of Exchange 

Traded Products (‘‘Phase I & II 

securities’’) to all other NMS stocks 

(‘‘Phase III securities’’). In addition to 

widening the scope of the securities 

included in the trading pause pilot, the 

Phase III amendments apply a 

significantly higher percentage price 

move to trigger a trading pause for Phase 

III securities than is applicable to the 

Phase I & II securities. Specifically, 

while a ten percent price move within 

a five-minute period continues to apply 

to the Phase I & II securities, the Phase 

III securities are subject to a thirty 

percent price move where the security 

had a closing price the previous trading 

day of $1.00 or more, and a fifty percent 

price move where the security had a 

closing price the previous trading day of 

less than $1.00.7

Rule 11892(b)(4) (Individual Stock 

Trading Pauses) provides that clearly 

erroneous reviews of securities subject 

to the trading pause pilot use the 

‘‘trading pause trigger price’’ 8 as the 

reference price rather than using the 

consolidated last sale, which generally 

is applicable to clearly erroneous 

reviews of non-trading pause pilot 

securities. Because the trading pause 

trigger price percentages for the Phase 

III securities are substantially greater 

than the ten percent threshold 

applicable to the Phase I & II securities, 

applying paragraph (b)(4)’s requirement 

to use the trading pause trigger price for 

Phase III securities would overly limit 

the SROs’ abilities to deem certain 

trades in Phase III securities clearly 

erroneous. 

For example, assume a Phase III 

security is trading at $100.00 during a 

five-minute period before a $130.00 

trade triggers a trading pause. Under the 

regular clearly erroneous review 

framework of FINRA Rule 11892 (1) 

[sic] through (3), a clearly erroneous 

review of a trigger trade or latency 

trade 9 would apply a clearly erroneous 

price of $103.00 (at and beyond which 

trades may be broken).10 However, 

under the framework set forth in 

paragraph (b)(4), the clearly erroneous 

price would jump to $133.90—making it 

impossible to deem the $130.00 trade 

clearly erroneous. This result occurs 

under paragraph (b)(4) because the 

trigger trade of $130.00, rather than the 

consolidated last sale of $100.00, must 

be used as the reference price to 

determine the price at which trades are 

eligible to be deemed clearly erroneous. 

Because of the lower trigger trade 

threshold for Phase I & II securities, the 

paragraph (b)(4) framework continues to 

be reasonable for these securities but is 

less workable and reasonable for Phase 

III securities given the greater 

percentages that apply. 

As a result, FINRA, along with the 

other SROs, is amending Rule 11892 to 

revert back to the regular clearly 

erroneous calculation standards of 

paragraphs (1) through (3) for the Phase 

III securities, which generally reestablishes the consolidated last sale as 

the reference price and provides further 

flexibility in making clearly erroneous 

determinations in those securities. 

FINRA has filed the proposed rule 

change for immediate effectiveness and 

has requested that the Commission 

waive the requirement that the proposed 

rule change not become operative for 30 

days after the date of the filing so that 

it may become operative immediately. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,11 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade and, in 

general, to protect investors and the 

public interest. 

FINRA believes that the proposed rule 

meets these requirements in that it 

promotes transparency and uniformity 

across markets concerning decisions to 

break clearly erroneous trades, yet also 

ensures fair application of the process 

so that similarly situated members are 

provided the same treatment under the 

rule. FINRA notes that the changes 

proposed herein will in no way interfere 

with the operation of the trading pause 

pilot, as amended, and notes that the 

proposed rule change is consistent with 

the clearly erroneous rules of other 

SROs. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in 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 

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 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51099 

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

13 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 

19b–4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

prior to the filing of the proposed rule change, or 

such shorter time as designated by the Commission. 

The Commission is waiving the five day written 

notice requirement in this case. Therefore, the 

Commission notes that FINRA has satisfied this 

requirement. 

14For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 15 17 CFR 200.30–3(a)(12). 

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

2See Securities Exchange Act Release No. 64722 

(June 22, 2011), 76 FR 37868. 

3See Securities Exchange Act Release Nos. 62139 

(May 19, 2010), 75 FR 29597 (May 26, 2010) (order 

approving proposal to list and trade CBOE Gold 

ETF Volatility Index (‘‘GVZ’’) options on CBOE) 

and 64551 (May 26, 2011), 76 FR 32000 (June 2, 

2011) (order approving proposal to list and trade 

options on certain individual stock based volatility 

indexes and ETF based volatility indexes). 

4See Rules 12.3, 24.1(bb), 24.4C, 24.5.04, 24.6, 

24.9, 24A.7, 24A.8, 24B.7 and 24B.8. 

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)(iii) thereunder.13 FINRA has 

asked the Commission to waive the 30- 

day operative delay so that the proposal 

may become operative immediately 

upon filing. The Commission believes 

that waiving the 30-day operative delay 

is consistent with the protection of 

investors and the public interest 

because such waiver will allow FINRA 

to align its clearly erroneous rules, with 

respect to Phase III securities, to those 

of the exchanges. Accordingly, the 

Commission waives the 30-day 

operative delay requirement and 

designates the proposed rule change as 

operative upon filing with the 

Commission.14

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

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

Number SR–FINRA–2011–039 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–FINRA–2011–039. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, 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 

FINRA. 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–FINRA–2011–039 and 

should be submitted on or before 

September 7, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20902 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65116; File No. SR–CBOE– 

2011–055] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Granting Approval 

of Proposed Rule Change to Trade 

Options on the CBOE Silver ETF 

Volatility Index 

August 11, 2011. 

I. Introduction 

On June 15, 2011, Chicago Board 

Options Exchange, Incorporated (the 

‘‘Exchange’’ or ‘‘CBOE’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’), pursuant to 

Section 19(b)(1) of the Securities 

Exchange Act of 1934 (the ‘‘Act’’),1 a 

proposed rule change to trade options 

on the CBOE Silver ETF Volatility Index 

(‘‘VXSLV’’). The proposed rule change 

was published for comment in the 

Federal Register on June 28, 2011.2 The 

Commission received no comment 

letters on the proposed rule change. 

This order approves the proposed rule 

change. 

II. Description 

The Exchange proposes to amend 

certain of its rules to allow the listing 

and trading of cash-settled, Europeanstyle options on VXSLV. 

The Exchange has previously received 

approval orders to trade options on 

other volatility indexes that are 

calculated using certain individual 

stock and exchange-traded fund (‘‘ETF’’) 

options listed on CBOE.3 In the most 

recent approval order, the Exchange 

genericized certain of its rules to 

collectively refer to these indexes as 

‘‘Individual Stock Based Volatility 

Indexes,’’ ‘‘ETF Based Volatility 

Indexes,’’ and ‘‘Volatility Indexes,’’ as 

applicable.4 The specific Individual 

Stock Based Volatility Indexes and ETF 

Based Volatility Indexes that have been 

approved for options trading are listed 

in Rule 24.1(bb). This filing layers 

VXSLV into CBOE’s existing rule 

framework for ‘‘ETF Based Volatility 


Emcdonald on DSK2BSOYB1PROD with NOTICES