Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 51439 

2The number of burden hours stated in this 

notice is lower than the number of burden hours 

stated in the 60 day notice (‘‘Proposed Collection; 

Comment Request’’) published earlier this year in 

connection with this OMB control number. The 

reason for this difference is that the burden hours 

stated in the 60-day notice had been based on the 

number of respondent broker-dealers who had 

complied with Rule 17a–10 during 2009 (i.e., 168 

respondents), whereas the burden hours in this 

notice reflect the more updated number of 

respondent broker-dealers who complied with Rule 

17a–10 during 2010 (i.e., 103 respondents). 

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 

NASDAX [sic] OMX PHLX LLC. 

4Securities 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). 

6Securities Exchange Act Release No. 62886 

(September 16, 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). 

Paragraph (b) of Rule 17a–10 provides 

that the provisions of paragraph (a) do 

not apply to members of national 

securities exchanges or registered 

national securities associations that 

maintain records containing the 

information required by Form X–17A–5 

and which transmit to the Commission 

copies of the records pursuant to a plan 

which has been declared effective by the 

Commission. 

The primary purpose of Rule 17a–10 

is to obtain the economic and statistical 

data necessary for an ongoing analysis 

of the securities industry. As originally 

adopted in 1968, Rule 17a–10 required 

brokers and dealers to provide their 

revenue and expense data on a special 

form. The Rule was amended in 1977 to 

eliminate the form. The data previously 

reported on the form is now reported 

using Form X–17A–5 and its 

supplementary schedules. 

The Commission estimates that 

approximately 103 broker-dealers will 

spend an average of approximately 12 

hours per year complying with Rule 

17a–10. Thus, the total compliance 

burden is estimated to be approximately 

1,236 burden-hours per year.2

The Commission may not conduct or 

sponsor a collection of information 

unless it displays a currently valid OMB 

control number. No person shall be 

subject to any penalty for failing to 

comply with a collection of information 

subject to the PRA that does not display 

a valid OMB control number. 

Background documentation for this 

information collection may be viewed at 

the following link, http:// 

www.reginfo.gov. Comments should be 

directed to: (i) Desk Officer for the 

Securities and Exchange Commission, 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10102, New Executive 

Office Building, Washington, DC 20503 

or by sending an e-mail to: 

Shagufta_Ahmed@omb.eop.gov; and (ii) 

Thomas Bayer, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way, 

Alexandria, VA 22312 or send an e-mail 

to: PRA_Mailbox@sec.gov. Comments 

must be submitted to OMB within 30 

days of this notice. 

August 12, 2011. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21031 Filed 8–17–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65114; File No. SR–NSX– 

2011–10] 

Self-Regulatory Organizations; 

National Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change to Amend 

NSX Rule 11.19(c) Relating to Clearly 

Erroneous Transactions 

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 

11, 2011, National Stock Exchange, Inc. 

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. The 

Commission is publishing this notice to 

solicit comment on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

National Stock Exchange, Inc. 

(‘‘NSX®’’ or ‘‘Exchange’’) proposes to 

amend its rules to ensure NSX Rule 

11.19(c) will continue to operate in the 

same way after changes to the single 

stock trading pauses are effective. 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Background 

The exchanges 3 and FINRA 

(collectively, the ‘‘Markets’’), in 

consultation with the Securities and 

Exchange Commission (‘‘SEC’’ or the 

‘‘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 

Markets 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 Market’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 Markets 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 

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51440 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 

7Pursuant to Rule 11.19(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 11.19 (c)(4). 

9Securities Exchange Act Release No. 64735 

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

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. 

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 11.19, the 

Exchange replaced existing Rule 

11.19(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 11.19(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 

11.19(c)(1).7 The Reference Price, for 

purposes of Rule 11.19(c)(4), 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 the Exchange would be 

broken by the Exchange pursuant to 

Rule 11.19(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 

Markets to include all remaining NMS 

stocks (‘‘Phase III Securities’’).9 The new 

pilot rules, which will be 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 Rules 

11.19(c)(1) to 11.19(c)(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 five 

minute period. As a result, a ETP Holder 

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 

themselves of a clearly erroneous 

review. A similarly situated ETP Holder 

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 

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

themselves of the clearly erroneous 

process. Another ETP Holder 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. The 

Exchange believes that this would be an 

inequitable result and an arbitrary 

application of the clearly erroneous 

process. Specifically, the Exchange 

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 Rules 11.19(c)(1)–(3). 

Applying the clearly erroneous 

process under Rules 11.19(c)(1)–(3) to 

the Phase III Securities would allow the 

Exchange 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, an ETP Holder 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 Rule 

11.19(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 ETP Holder 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 

ETP Holders 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 11.19(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 ETP 

Holders would not be provided relief 

under the clearly erroneous rules merely 

due to the imposition of a Pause Pilot 

halt, notwithstanding that other ETP 

Holders with transactions that occur at 

the same rolling five minute percentage 

difference. The Exchange believes a 

better outcome is to afford all ETP 

Holders 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. 

The Exchange believes that this would 

be an arbitrary application of the clearly 

erroneous process in a manner that is 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 51441 

11NSX 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). 

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). 

unfair and not consistent with the spirit 

and purpose of the rule. Accordingly, 

the Exchange is proposing to amend 

Rules 11.19(c)(1)–(4) to specify that Rule 

11.19(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 

Securities Exchange Act of 1934 (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. The 

Exchange 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 ETP Holders are 

provided the same opportunity of a 

clearly erroneous review. The Exchange 

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 Exchange does not believe that 

the proposed rule change will impose 

any inappropriate burden on 

competition. 

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 14 and Rule 19b– 

4(f)(6)(iii) thereunder.15 The Exchange 

has asked the Commission to waive the 

5-day written notice requirement and 

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 ETP 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.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–NSX–2011–10 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–2011–10. 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 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– 

2011–10 and should be submitted on or 

before September 8, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21025 Filed 8–17–11; 8:45 am] 

BILLING CODE 8011–01–P 

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