2306 Federal Register / Vol. 78, No. 7 / Thursday, January 10, 2013 / Notices 

17 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

18 15 U.S.C. 78f(b)(5). 

19 15 U.S.C. 78k–1(a)(1)(C). 

20The Commission notes that CBSX states it 

believes that allowing it to cancel or release orders 

under such circumstances would allow CBSX to 

maintain fair and orderly markets, and that CBOE 

Rule 52.10A is designed to ensure full trade 

certainty for market participants, and avoid 

disrupting the clearance and settlement process. 

See Notice, 77 FR at 70514. The Commission also 

notes that CBOE states that a decision to cancel or 

release orders due to a technical or systems issue 

is not equivalent to CBSX declaring self-help 

against a routing destination pursuant to Rule 611 

of Regulation NMS. See 17 CFR 242.611(b). See also 

Notice, 77 FR at 70512 n.9. 

21See CBOE Rule 52.10A. 

22See CBOE Rules 52.10A(d)(i); 52.10A(e)(ii). 

23See CBOE Rule 52.10A(e)(i). 

24See CBOE Rule 52.10A(d)(ii). 

25See CBOE Rule 52.10A(e)(iii). 

26See, e.g., Securities Exchange Act Release Nos. 

67281 (June 27, 2012), 77 FR 39543 (July 3, 2012) 

(SR–NASDAQ–2012–057); 66963 (May 10, 2012), 

77 FR 28919 (May 16, 2012) (SR–NYSEArca–2012– 

22); 67010 (May 17, 2012), 77 FR 30564 (May 23, 

2012) (SR–EDGX–2012–08); and 67011 (May 17, 

2012), 77 FR 30562 (May 23, 2012) (SR–EDGA– 

2012–09). 

27 15 U.S.C. 78s(b)(2). 

28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

and regulations thereunder applicable to 

a national securities exchange.17 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,18 which 

requires, among other things, that the 

rules of a national securities exchange 

be 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 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 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; and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In addition, the Commission believes 

the proposed rule change is consistent 

with Section 11A(a)(1)(C) of the Act 19

in that it seeks to assure economically 

efficient execution of securities 

transactions. 

The Commission recognizes that 

technical or systems issues may occur, 

and believes that CBOE Rule 52.3A, in 

allowing CBSX to cancel or release 

orders affected by technical or systems 

issues, should provide a reasonably 

efficient means for CBSX to handle such 

orders, and appears reasonably designed 

to permit CBSX to maintain fair and 

orderly markets.20

The Commission also believes that 

allowing CBSX to resolve error positions 

through the use of error accounts 

maintained by its routing brokers or 

CBSX itself pursuant to the procedures 

set forth in the rule, and as described 

above, is consistent with the Act. The 

Commission notes that the rule 

establishes criteria for determining 

which positions are error positions to 

which the rule applies, and the 

procedures for the handling of such 

positions. In particular, the Commission 

notes that CBOE Rule 52.10A only 

applies to error positions that result 

from the Exchanges routing service, and 

that such positions shall be liquidated 

by the routing broker or the Exchange, 

as applicable, as soon as practicable.21

In this regard, the Commission believes 

that the new rule appears reasonably 

designed to further just and equitable 

principles of trade and the protection of 

investors and the public interest, and to 

help prevent unfair discrimination, in 

that it should help assure the handling 

of error positions will be based on clear 

and objective criteria, and that the 

resolution of those positions will occur 

promptly through a transparent process. 

The Commission is also concerned 

about the potential for misuse of 

confidential and proprietary 

information. The Commission notes that 

CBSX or a routing broker, as applicable, 

will establish and enforce policies and 

procedures reasonably designed to (1) 

adequately restrict the flow of 

confidential and proprietary 

information associated with the 

liquidation of the error positions, and 

(2) in the case of liquidations by a 

routing broker, prevent the use of 

information associated with other orders 

subject to the routing services when 

making determinations regarding the 

liquidation of error positions.22

Furthermore, to the extent CBSX uses a 

CBSX Error Account to liquidate error 

positions, the Exchange shall provide 

complete time and price discretion for 

the trading to liquidate error positions 

in a CBSX Error Account to a third-party 

broker-dealer and shall not attempt to 

exercise any influence or control over 

the timing or methods of such trading.23

The Commission believes that these 

requirements should help mitigate the 

Commission’s concerns. In particular, 

the Commission believes that these 

requirements should help assure that 

none of CBSX, its routing brokers, or 

any third-party broker-dealer is able to 

misuse confidential or proprietary 

information obtained in connection 

with the liquidation of error positions 

for its own benefit. The Commission 

also notes that routing brokers would be 

required to make and keep records 

associated with the liquidation of 

routing broker error positions 24 and 

CBOE would be required to make and 

keep records to document all 

determinations to treat positions as error 

positions under this Rule (whether or 

not a CBSX Error Account is used to 

liquidate such error positions), as well 

as records associated with the 

liquidation of CBSX Error Account error 

positions through a third-party brokerdealer.25

Finally, the Commission notes that 

the proposed procedures for canceling 

orders and the handling of error 

positions are consistent with procedures 

the Commission has approved for other 

exchanges.26

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (SR–CBOE–2012– 

109) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2013–00307 Filed 1–9–13; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68579; File No. SR–NYSE– 

2012–78] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Eliminating 

Certain Credits Within the New York 

Stock Exchange LLC Price List 

January 4, 2013. 

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 December 

21, 2012, New York Stock Exchange 

LLC (the ‘‘Exchange’’ or ‘‘NYSE’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 


wreier-aviles on DSK5TPTVN1PROD with 
Federal Register / Vol. 78, No. 7 / Thursday, January 10, 2013 / Notices 2307 

3See Securities Exchange Act Release No. 68021 

(October 9, 2012), 77 FR 63406 (October 16, 2012) 

(SR–NYSE–2012–50). 

4The credit does not apply to transactions in the 

Active Securities in the Retail Liquidity Program. 

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

6 15 U.S.C. 78f(b)(4). 

7 15 U.S.C. 78f(b)(5). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to eliminate 

certain credits within its Price List, 

which the Exchange proposes to become 

operative on January 1, 2013. The text 

of the proposed rule change is available 

on the Exchange’s Web site at 

www.nyse.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 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 eliminate 

certain credits within its Price List, 

which the Exchange proposes to become 

operative on January 1, 2013. 

Currently, the Exchange provides a 

credit per share of $0.0002 for member 

organizations, floor brokers, Designated 

Market Makers (‘‘DMMs’’), and 

Supplemental Liquidity Providers 

(‘‘SLPs’’) that provide displayed 

liquidity to the Exchange in the 

following ten active securities (‘‘Active 

Securities’’): 3

Company name Symbol 

Bank of America Corp. ............... BAC 

Citigroup Inc. .............................. C 

Ford Motor Company ................. F 

General Electric .......................... GE 

JPMorgan Chase & Co. ............. JPM 

Nokia Corporation ....................... NOK 

PFIZER Inc. ................................ PFE 

Sprint Nextel Corporation ........... S 

AT&T Inc. .................................... T 

Wells Fargo & Co. ...................... WFC 

The credit applies to transactions in 

the Active Securities and is in addition 

to any other credit for floor and nonfloor transactions.4

The Exchange proposes to eliminate 

this credit for member organizations, 

floor brokers, DMMs, and SLPs from the 

Fee Schedule because the incremental 

credit has not resulted in significant 

additional liquidity in the Active 

Securities. 

The proposed changes are not 

otherwise intended to address any other 

problem, and the Exchange is not aware 

of any significant problem that the 

affected market participants would have 

in complying with the proposed 

changes. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,5 in general, and 

furthers the objectives of Section 6(b)(4) 

of the Act,6 in particular, because it 

provides for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and issuers and 

other persons using its facilities and 

does not unfairly discriminate between 

customers, issuers, brokers, or dealers. 

The Exchange also believes that the 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,7 in particular, 

because 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 regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to, 

and perfect the mechanisms of, a free 

and open market and a national market 

system and, in general, to protect 

investors and the public interest and 

because it is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange believes that 

eliminating the credit for transactions in 

Active Securities for member 

organizations, floor brokers, DMMs, and 

SLPs is reasonable because it did not 

encourage sufficient additional liquidity 

and competition in the Active Securities 

on the Exchange. As such, the Exchange 

believes it is reasonable not to provide 

an additional credit for transactions in 

the Active Securities. The Exchange 

believes that eliminating the credit for 

transactions in Active Securities is 

equitable and not unfairly 

discriminatory because all similarly 

situated member organizations, floor 

brokers, DMMs, and SLPs would be 

subject to the same fee structure. In 

addition, the Exchange believes that 

eliminating the credit is equitable and 

not unfairly discriminatory because it 

did not generate enough additional 

volumes of liquidity in Active Securities 

to warrant the additional credit. 

The Exchange believes that the 

proposed change is designed to provide 

appropriate incentives for all market 

participants, thereby removing 

impediments to and perfecting the 

mechanism of a free and open market 

system. In addition, for the reasons 

stated above, the proposed changes are 

not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

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 Act because the 

additional credit for executions in 

Active Securities did not contribute to 

a meaningful change in market share 

across NYSE-listed stocks, and 

therefore, the Exchange expects that 

eliminating the credit will similarly 

have little impact on the Exchange or in 

other securities markets. As stated 

above, the Exchange believes that the 

proposed change would impact all 

similarly situated market participants 

equally, and as such, the proposed 

change would not impose a disparate 

burden on competition either among or 

between classes of market participants. 

In addition, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues. In such 

an environment, the Exchange must 

continually review, and consider 

adjusting, its fees and credits to remain 

competitive with other exchanges. For 

the reasons described above, the 

Exchange believes that the proposed 

rule change promotes a competitive 

environment. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 


wreier-aviles on DSK5TPTVN1PROD with 
2308 Federal Register / Vol. 78, No. 7 / Thursday, January 10, 2013 / Notices 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(2). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 68262 

(November 19, 2012), 77 FR 70517 (November 26, 

2012) (SR–CBOE–2012–108) (‘‘Notice’’). 

4See Notice, 77 FR at 70518. 

5See Notice, 77 FR at 70518 n.4, n.8, and 

accompanying text. 

6See Notice, 77 FR at 70518. For examples of 

some of the circumstances in which the Exchange 

may decide to cancel orders, see Notice, 77 FR at 

70519. 

7See Notice, 77 FR at 70518. Specifically, CBOE 

Rule 6.14C defines ‘‘error positions’’ as ‘‘unmatched 

trade positions that may occur in connection with 

the routing service provided under Rule 6.14B’’. 

For examples of some of the circumstances that 

may lead to error positions, see Notice, 77 FR at 

70520–21. 

8See CBOE Rule 6.6A(a). 

19(b)(3)(A) 8 of the Act and 

subparagraph (f)(2) of Rule 19b–4 9

thereunder, because it establishes a due, 

fee, or other charge imposed by NYSE. 

At any time within 60 days of the 

filing of such 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 email to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2012–78 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–NYSE–2012–78. This file 

number should be included on the 

subject line if email 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 

10:00 a.m. and 3:00 p.m. Copies of the 

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 

available publicly. All submissions 

should refer to File Number SR–NYSE– 

2012–78 and should be submitted on or 

before January 31, 2013. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2013–00310 Filed 1–9–13; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68585; File No. SR–CBOE– 

2012–108] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Approving a 

Proposed Rule Change To Address the 

Authority To Cancel Orders When a 

Technical or Systems Issue Occurs 

and To Describe the Operation of 

Routing Service Error Accounts 

January 4, 2013. 

I. Introduction 

On November 8, 2012, the Chicago 

Board Options Exchange, Incorporated 

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

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

(i) address the authority of the Exchange 

to cancel orders (or release routingrelated orders) when a technical or 

systems issue occurs; and (ii) describe 

the operation of an Exchange error 

account(s) and routing broker error 

account(s), which may be used to 

liquidate unmatched executions that 

may occur in the provision of the 

Exchange’s routing service. The 

proposed rule change was published for 

comment in the Federal Register on 

November 26, 2012.3 The Commission 

received no comment letters regarding 

the proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposal 

In its proposal, the Exchange states 

that it operates a ‘‘hybrid’’ style system 

of trading that allows automatic 

executions to occur electronically and 

open outcry trades to occur on the floor 

of the Exchange.4 As part of this 

infrastructure, the Exchange states that 

it automatically routes orders to other 

exchanges under certain circumstances. 

These routing services are provided in 

conjunction with one or more routing 

brokers that are not affiliated with the 

Exchange.5 Mechanically, when the 

Exchange receives an order from a 

Trading Permit Holder that is held in 

the Exchange system and determines to 

route an order to another exchange, the 

Exchange provides the routing broker 

with a corresponding order and 

instructions to route the order to 

another exchange. The routing broker 

then sends the corresponding order to 

the other exchange. 

In its proposal, CBOE states that the 

Exchange may encounter situations that 

make it necessary to cancel orders (or 

release routing-related orders),6 and to 

resolve error positions that result from 

errors of the Exchange, routing brokers, 

or another exchange.7

Proposed Rule 6.6A (Order 

Cancellation/Release) 

New CBOE Rule 6.6A provides CBOE 

with general authority to cancel orders 

as it deems to be necessary to maintain 

fair and orderly markets if a technical or 

systems issue occurs at the Exchange, a 

routing broker in connection with the 

routing service provided under CBOE 

Rule 6.14B, or another exchange to 

which an Exchange order has been 

routed. It also provides that a routing 

broker may only cancel orders being 

routed to another exchange based on the 

Exchange’s standing or specific 

instructions or as otherwise provided in 

the Exchange Rules. CBOE will be 

required to provide notice of the 

cancellation to affected Trading Permit 

Holders as soon as practicable.8

Paragraph (b) of the rule provides that 

the Exchange may also determine to 

release orders being held on the 


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