51082 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3For purposes of this filing, the term 

‘‘Exchanges’’ refers collectively to BATS Exchange, 

Inc., BATS Y–Exchange, Inc., NASDAQ OMX BX, 

Inc., Chicago Board Options Exchange, Inc., 

Chicago Stock Exchange, Inc., EDGA Exchange, 

Inc., EDGX Exchange, Inc., International Securities 

Exchange LLC, The NASDAQ Stock Market LLC, 

New York Stock Exchange LLC, NYSE Amex LLC, 

NYSE Arca, Inc., National Stock Exchange, Inc. and 

NASDAQ OMX PHLX LLC. 

4See Securities Exchange Act Release Nos. 62252 

(June 10, 2010), 75 FR 34186 (June 16, 2010) (File 

Nos. SR–BATS–2010–014; SR–EDGA–2010–01; SR– 

EDGX– 2010–01; SR–BX–2010–037; SR–ISE– 2010– 

48; SR–NYSE–2010–39; SR– NYSEAmex– 2010–46; 

SR–NYSEArca–2010–41; SR–NASDAQ– 2010–061; 

SR– CHX–2010–10; SR–NSX–2010–05; and SR– 

CBOE–2010–047); 62251 (June 10, 2010), 75 FR 

34183 (June 16, 2010) (SR–FINRA–2010–025). 

5See e.g., Securities Exchange Act Release Nos. 

62884 (September 10, 2010), 75 FR 56618 

(September 16, 2010) (File Nos. SR–BATS–2010– 

018; SR–BX–2010–044; SR– CBOE–2010–065; SR– 

CHX–2010–14; SR–EDGA–2010–05; SR–EDGX– 

2010–05; SR– ISE–2010–66; SR–NASDAQ–2010– 

079; SR–NYSE–2010–49; SR–NYSEAmex–2010– 

63; SR–NYSEArca–2010–61; and SR–NSX–2010– 

08); and Securities Exchange Act Release No. 62883 

(September 10, 2010),75 FR 56608 (September 16, 

2010) (SR– FINRA–2010–033). 

6See Securities Exchange Act Release No. 62886 

(September 16 [sic], 2010), 75 FR 56613 (September 

16, 2010) (File Nos. SR–BATS–2010–016; SR–BX– 

2010–040; SR– CBOE–2010–056; SR–CHX–2010– 

13; SR–EDGA–2010–03; SR–EDGX–2010–03; SR– 

ISE–2010–62; SR–NASDAQ–2010–076; SR–NSX– 

2010–07; SR–NYSE–2010–47; SR– NYSEAmex– 

2010–60; and SR–NYSEArca–2010–58). 

7Pursuant to Rule 2128(c)(1), a security with a 

Reference Price of greater than zero and up to and 

including $25 is subject to a 10% threshold; a 

security with a Reference Price of greater than $25 

and up to and including $50 is subject to a 5% 

threshold; and a security with a Reference Price of 

greater than $50 is subject to a 3% threshold. 

8Rule 2128(c)(4). 

9Securities Exchange Act Release No. 64735 

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

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 PHLX. 

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–Phlx–2011–114 and should 

be submitted on or before September 7, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20907 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65108; File No. SR–ISE– 

2011–53] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Amend ISE Rule 2128 

August 11, 2011. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on August 

10, 2011, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘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 selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 2128, governing clearly erroneous 

executions, so that the rule will 

continue to operate in the same manner 

after changes to the single stock trading 

pause process are effective. 

The text of the proposed rule change 

is available on the Exchange’s Internet 

Web site at http://www.ise.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 

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 

Background 

The Exchanges 3 and FINRA, in 

consultation with the Securities and 

Exchange Commission (‘‘Commission’’), 

have made changes to their respective 

rules in a concerted effort to strengthen 

the markets after the severe market 

disruption that occurred on May 6, 

2010. One such effort by the Exchanges 

and FINRA was to adopt a uniform 

trading pause process during periods of 

extraordinary market volatility as a pilot 

in S&P 500® Index stocks (‘‘Pause 

Pilot’’), approved by the Commission on 

June 10, 2010.4 On September 10, 2010, 

the Commission approved the 

Exchanges’ and FINRA’s proposals to 

add the securities included in the 

Russell 1000 Index and specified ETPs 

to the Pause Pilot.5 On September 10, 

2010, the Commission also approved 

changes proposed by the Exchanges to 

amend certain of their respective rules 

to set forth clearer standards and curtail 

their discretion with respect to breaking 

erroneous trades.6 The changes, among 

other things, provided uniform 

treatment of clearly erroneous execution 

reviews in the event of transactions that 

result in the issuance of an individual 

stock trading pause pursuant to the 

Pause Pilot on the listing market and 

those that occur up to the time the 

trading pause message is received by the 

other markets from the single plan 

processor responsible for consolidation 

and dissemination of information for the 

security (‘‘Latency Trades’’). 

As part of the changes to the clearly 

erroneous process under Rule 2128, ISE 

replaced existing Rule 2128(c)(4) with 

all new text to provide clarity in the 

clearly erroneous process when a Pause 

Pilot trading pause is triggered. 

Pursuant to Rule 2128(c)(4), Latency 

Trades will be broken by the Exchange 

if they exceed the applicable percentage 

from the Reference Price, as noted in the 

table found under Rule 2128(c)(1).7 The 

Reference Price, for purposes of Rule 

11.13(c)(4) [sic], is the price that 

triggered a trading pause pursuant to the 

Pause Pilot (the ‘‘Trading Pause Trigger 

Price’’). As such, Latency Trades that 

occur on ISE would be broken by the 

Exchange pursuant to Rule 2128(c)(4) if 

the transaction occurred at either three, 

five or ten percent above the Trading 

Pause Trigger Price.8

On June 23, 2011, the Commission 

approved a joint proposal to expand the 

respective Pause Pilot rules of the 

Exchanges and FINRA to include all 

remaining National Market System 

(‘‘NMS’’) stocks (‘‘Phase III 

Securities’’).9 The new pilot rules, 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 51083 

Nos. SR–BATS–2011–016; SR–BYX–2011–011; SR– 

BX–2011–025; SR– CBOE–2011–049; SR–CHX– 

2011–09; SR–EDGA–2011–15; SR–EDGX–2011–14; 

SR– FINRA–2011–023; SR–ISE–2011–028; SR– 

NASDAQ–2011–067; SR–NYSE–2011–21; SR– 

NYSEAmex–2011–32; SR–NYSEArca–2011–26; SR– 

NSX–2011–06; SR–Phlx– 2011–64). 

10 Id. 

11 ISE notes that the Exchanges are filing similar 

proposals to make the changes proposed herein. 

12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78k–1(a)(1). 

which were implemented on August 8, 

2011, not only expand the application of 

the Pause Pilot, but also apply larger 

percentage moves that trigger a pause to 

the Phase III Securities. Specifically, the 

rules of the listing markets were 

amended so that a pause in a Phase III 

Security with a closing price on the 

previous trading day of $1 or more is 

triggered by a 30 percent price move 

within a five minute period. A pause in 

a Phase III Security with closing price 

on the previous trading day of less than 

$1 is triggered by a 50 percent price 

move within a five minute period. If no 

prior day closing price is available, the 

last sale reported to the Consolidated 

Tape on the previous trading day is 

used. 

The Issue 

The recently-approved changes to the 

Pause Pilot will have the unintended 

effect of removing the Phase III 

Securities from the normal clearly 

erroneous process and potentially result 

in unfair outcomes in the face of severe 

volatility in such securities. Phase III 

Securities are currently subject to the 

clearly erroneous process under Rule 

2128(c)(1)–(3), which apply to all 

securities except the current Pause Pilot 

securities subject to a pause. For 

purposes of transactions in securities 

not involving Pause Pilot securities, or 

transactions involving Pause Pilot 

securities that occur when there is not 

a pause pursuant to the Pause Pilot, the 

Reference Price is the consolidated last 

sale price immediately prior to the 

execution(s) under review, subject to 

certain exceptions.10 As noted above, 

the Trading Pause Trigger Price is used 

as the Reference Price when a Pause 

Pilot pause is in effect. As a 

consequence, under the current rules a 

Latency Trade is subject to the clearly 

erroneous thresholds based on the 

Trading Pause Trigger Price, which 

represents a ten percent or greater move 

in the transacted price of the security in 

a five-minute period. 

Under the new Pause Pilot rules, a 

Latency Trade in a Phase III Security 

occurs only after either a 30 or 50 

percent (or greater) move in the 

transacted price of the security in a fiveminute period. As a result, a member 

firm that trades in a Phase III Security 

that triggers a clearly erroneous 

threshold of three, five or ten percent 

from the Reference Price, yet falls below 

the Pause Pilot trigger of either 30 or 50 

percent, would be able to avail itself of 

a clearly erroneous review. A similarly 

situated member firm that transacts in 

the same security as a Latency Trade at 

a price equal to or greater than the Phase 

III Security thresholds, yet less than the 

clearly erroneous thresholds under Rule 

2128(c)(1), would not be able to avail 

itself of the clearly erroneous process. 

Another member firm that transacts in 

the same security as a Latency Trade 

that exceeds three, five or ten percent 

from the Trading Pause Trigger Price 

would automatically receive clearly 

erroneous relief. ISE believes that this 

would be an inequitable result and an 

arbitrary application of the clearly 

erroneous process. Specifically, ISE 

believes that, since the 30 and 50 

percent triggers of the Pause Pilot are 

substantially greater than the 10 percent 

threshold of the original Pause Pilot, the 

Phase III Securities should remain 

under the current clearly erroneous 

process of Rule 2128(c)(1)–(3). 

Applying the clearly erroneous 

process under Rule 2128(c)(1)–(3) to the 

Phase III Securities would allow ISE to 

review all transactions that exceed the 

normal clearly erroneous thresholds and 

Reference Price, and, importantly, avoid 

arbitrary selection of ‘‘winners’’ and 

‘‘losers’’ in the face of severe volatile 

moves in a security of 30 or 50 percent 

over a five minute period. For example, 

a member firm that trades in a Phase III 

Security that triggers a clearly erroneous 

threshold of three, five or ten percent, 

yet falls below the Pause Pilot trigger 

threshold trading at 29 percent from the 

prior day’s closing price, would be 

potentially entitled to a clearly 

erroneous break pursuant to Rule 

2128(c)(1). Should trading in that same 

stock trigger a trading pause at a price 

of 30 or 50 percent greater than the prior 

day’s close, the member firm would not 

be entitled to a clearly erroneous trade 

break unless that trade exceeded three, 

five or ten percent beyond the price that 

triggered the pause. This scenario 

causes an inequity among a group of 

member firms that have transactions in 

the Phase III Securities falling between 

the three, five and ten percent 

thresholds from the Reference Price 

under the normal Rule 2128(c)(1) clearly 

erroneous process and the Pause Pilot 

clearly erroneous triggers of three, five 

or ten percent away from the Trading 

Pause Trigger Price. Such member firms 

would not be provided relief under the 

clearly erroneous rules merely due to 

the imposition of a Pause Pilot halt, 

notwithstanding that other member 

firms with transactions that occur at the 

same rolling five minute percentage 

difference would be provided such 

relief. ISE believes a better outcome is 

to afford all members transacting in 

Phase III Securities the opportunity of 

having such trades reviewed. 

Summary 

The expansion of the Pause Pilot to 

the Phase III Securities will have the 

unintended consequence of setting the 

point at which a clearly erroneous 

transaction occurs once a Pause Pilot 

pause is initiated far beyond the triggers 

applied prior to the expansion, which 

will, in turn, prevent certain market 

participants from availing themselves of 

the clearly erroneous rules, 

notwithstanding that other similarly 

situated participants are able to do so. 

ISE believes that this would be an 

arbitrary application of the clearly 

erroneous process in a manner that is 

unfair and not consistent with the spirit 

and purpose of the rule. Accordingly, 

ISE is proposing to amend Rule 

2128(c)(1)–(4) to specify that Rule 

2128(c)(4) applies only to the current 

securities of Pause Pilot, and not to 

Phase III Securities.11

2. Statutory Basis 

The statutory basis for the proposed 

rule change is Section 6(b)(5) of the 

Act,12 which requires the rules of an 

exchange to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. The proposed rule 

change also is designed to support the 

principles of Section 11A(a)(1) 13 of the 

Act in that it seeks to assure fair 

competition among brokers and dealers 

and among exchange markets. ISE 

believes that the proposed rule meets 

these requirements in that it promotes 

transparency and uniformity across 

markets concerning decisions to break 

erroneous trades, yet also ensures fair 

application of the process so that 

similarly situated member firms are 

provided the same opportunity of a 

clearly erroneous review. ISE notes that 

the changes proposed herein will in no 

way interfere with the operation of the 

Pause Pilot process, as amended. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 


Emcdonald on DSK2BSOYB1PROD with NOTICES
51084 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Notices 

14 15 U.S.C. 78s(b)(3)(A). 

15 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. 

16For 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). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 14 and Rule 19b– 

4(f)(6)(iii) thereunder.15 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 member firms 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.16

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–ISE–2011–53 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–2011–53. 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 ISE. 

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–2011–53 and should be 

submitted on or before September 7, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20909 Filed 8–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65110; File No. SR–EDGA– 

2011–26] 

Self-Regulatory Organizations; EDGA 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend EDGA Rule 

11.13 

August 11, 2011. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on August 8, 

2011, the EDGA Exchange, Inc. (the 

‘‘Exchange’’ or the ‘‘EDGA’’) 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 self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 11.13, governing clearly erroneous 

executions, so that the rule will 

continue to operate in the same manner 

after changes to the single stock trading 

pause process are effective. The text of 

the proposed rule change is attached as 

Exhibit 5 and is available on the 

Exchange’s Web site at http:// 

www.directedge.com, at the Exchange’s 

principal office, and at the Public 

Reference Room of 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 

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 


Emcdonald on DSK2BSOYB1PROD with NOTICES