Document ID: SEC-2013-0228-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-02-06T05:00Z

[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8668-8670]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02592]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68778; File No. SR-FINRA-2013-011]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Delay the Operative Date of FINRA Rule 6121.02 
(Market-wide Circuit Breakers in NMS Stocks)

January 31, 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 January 30, 2013, 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. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to delay the operative date of FINRA Rule 
6121.02 (Market-wide Circuit Breakers in NMS Stocks), which reflects 
changes to the methodology for triggering market-wide circuit breakers 
for NMS stocks.\3\ FINRA is delaying the operative date from February 
4, 2013 until April 8, 2013 to correspond to the initial date of 
operations for the Regulation NMS Plan to Address Extraordinary Market 
Volatility (the ``Limit Up-Limit Down'' or ``LULD'' Plan'').\4\
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    \3\ The Commission approved the proposed changes to the market-
wide circuit breakers on a pilot basis for a period scheduled to 
start on February 4, 2013. See Securities Exchange Act Release No. 
67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (Order Approving 
File No. SR-FINRA-2011-054).
    \4\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (Order Approving, on a Pilot 
Basis, the Limit Up-Limit Down Plan).
    FINRA anticipates that the initial date of LULD Plan operations 
will be April 8, 2013. See Letter from Janet McGinness, EVP & 
Corporate Secretary, General Counsel, NYSE Markets, to Elizabeth M. 
Murphy, Secretary, SEC dated January 17, 2013 (NYSE Markets). 
Therefore, this proposal likewise delays the operative date of the 
market-wide circuit breaker provisions to April 8, 2013 so that the 
implementation dates for the two pilots remain the same.

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[[Page 8669]]

    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 [sic].

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 proposes to delay the operative date of new FINRA Rule 
6121.02 (``MWCB pilot''), which addresses the methodology for 
triggering market-wide circuit breakers in all NMS stocks otherwise 
than on an exchange from February 4, 2013 until April 8, 2013 to 
coincide with the revised initial date of operations of the LULD Plan, 
unless the MWCB pilot is either extended or approved permanently.
Current Rules
    In 1988, the SEC approved several self-regulatory organization 
(``SRO'') rule proposals that provided for market-wide circuit breakers 
at specified levels to promote stability and investor confidence during 
a period of significant stress, along with a Policy Statement by FINRA 
(then known as NASD) that provided trading halt authority in the event 
of severe market declines.\5\ These measures were adopted as part of an 
effort by the securities and futures markets to implement a coordinated 
means to address potentially destabilizing market volatility.
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    \5\ See Securities Exchange Act Release No. 26198 (October 19, 
1988), 53 FR 41637 (October 24, 1988) (Order Approving File No. SR-
NASD-88-46). FINRA's Policy Statement on Market Closings (``Policy 
Statement'') provided, among other things, that when other major 
securities markets initiate market-wide trading halts in response to 
extraordinary market conditions, FINRA will, upon SEC request, halt 
domestic trading in all securities in equity and equity-related 
securities in the OTC market. As part of the approval order, the SEC 
requested that FINRA impose a trading halt as quickly as practicable 
whenever the NYSE and other equity markets have suspended trading. 
The language in the Policy Statement was subsequently codified, on a 
pilot basis, in Interpretive Material (IM) 4120-3 (later renumbered 
IM-4120-4). See Securities Exchange Act Release No. 39846 (April 9, 
1998), 63 FR 18477 (April 15, 1998) (Order Approving File No. SR-
NASD-98-27). The IM-4120-3 pilot, which also was extended numerous 
times, expired on April 30, 2002.
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    On October 7, 2008, FINRA permanently adopted a new rule--FINRA 
Rule 6121--that authorizes FINRA to halt trading otherwise than on an 
exchange in NMS stocks if other major U.S. securities markets initiate 
market-wide trading halts in response to their rules or extraordinary 
market conditions, or if otherwise directed by the SEC.\6\ Rule 6121 
provides for a halt in trading otherwise than on an exchange in NMS 
stocks to promote stability and investor confidence during a period of 
significant stress.
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    \6\ See Securities Exchange Act Release No. 58753 (October 8, 
2008), 73 FR 61177 (October 15, 2008) (Order Approving File No. SR-
FINRA-2008-048).
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New Rule 6121.02
    FINRA adopted new Supplementary Material .02 to Rule 6121 to add 
more specificity to FINRA's rules for halting trading otherwise than on 
an exchange in all NMS stocks when a market-wide circuit breaker has 
been put into effect on a primary listing market. Thus, new Rule 
6121.02 provides that, in the event of a Level 1, Level 2 or Level 3 
Market Decline,\7\ as determined by a primary listing market and 
publicly disseminated, FINRA shall halt trading otherwise than on an 
exchange in all NMS stocks and shall not permit the resumption of 
trading for the time periods specified by the primary listing market, 
except as otherwise further provided for in the rule.
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    \7\ Rule 6121.02 also provides that a Market Decline means a 
decline in the value of the S&P 500[supreg] Index between 9:30 a.m. 
and 4:00 p.m. on a trading day as compared to the closing value of 
the S&P 500[supreg] Index for the immediately preceding trading day.
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    Specifically, Rule 6121.02 provides that, if trading is halted in 
all NMS stocks for a Level 1 or a Level 2 Market Decline, FINRA will 
halt trading otherwise than on an exchange in all NMS stocks until 
trading has resumed on the primary listing market. If, however, the 
primary listing market does not reopen a security within 15 minutes 
following the end of the 15-minute halt period, FINRA may permit the 
resumption of trading otherwise than on an exchange in that security if 
trading in the security has commenced on at least one other national 
securities exchange. If, however, a Level 3 Market Decline occurs at 
any time during the trading day, FINRA shall halt trading otherwise 
than on an exchange in all NMS stocks until the primary listing market 
opens the next trading day. These amendments were adopted in 
coordination with the other SROs and track the provisions put in place 
by the other SROs.
    The MWCB pilot was adopted for a period that corresponds with the 
pilot period for the LULD Plan so that the impact of the two proposals 
can be reviewed together. In addition, FINRA established that the 
implementation date for the proposed rule changes should be the same 
date that the LULD Plan is implemented so that the SROs and the single 
plan processors responsible for the consolidation of information 
pursuant to Rule 603(b) of Regulation NMS under the Securities Exchange 
Act of 1934 could coordinate making the necessary technological changes 
to implement both pilots.
    The initial date of LULD Plan operations has been changed to April 
8, 2013. Thus, and for the same reasons stated above, FINRA proposes to 
delay the operative date of the MWCB pilot to April 8, 2013 so that the 
implementation date for the MWCB pilot remains the same as that for the 
LULD Plan.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The effective date and the implementation date will be 
the date of filing.
2. Statutory Basis
    FINRA believes that its proposal is consistent with Section 15A(b) 
of the Securities Exchange Act of 1934 (the ``Act'') \8\ [sic] and 
furthers the objectives of Section 15A(b)(6) of the Act,\9\ in 
particular, in that it is 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78o-3(b)(6).
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    Specifically, this rule proposal promotes uniformity across U.S. 
markets concerning when and how to halt trading in all NMS stocks as a 
result of extraordinary market volatility. In addition, delaying the 
operative date of the MWCB pilot until the initial date of operations 
of the LULD Plan would allow the MWCB pilot to begin and end at the 
same time of the LULD Plan so

[[Page 8670]]

that FINRA, the other SROs and the Commission can assess the impact of 
the two pilots on the marketplace or whether other initiatives should 
be adopted in lieu of the pilots, which contributes to the protection 
of investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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. The proposed changes are being 
made to delay the operation of the MWCB pilot until April 8, 2013 to 
allow it to begin and end at the same time as the LULD Plan, which 
contributes to the protection of investors and the public interest. The 
other SROs are subject to the same methodology for determining when to 
halt trading in all NMS stocks due to extraordinary market volatility 
and the same requirements specified in the LULD Plan. Thus, the 
proposed changes will not impose any burden on competition while 
providing that the MWCB pilot period corresponds to the pilot period 
for the LULD Plan so that the impact of the two proposals can be 
reviewed together.

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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires FINRA to give 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 date of filing of the proposed rule change, or such shorter 
time as designated by the Commission. The Commission has waived this 
requirement.
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    FINRA has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
Doing so will delay the operative date of the market-wide circuit 
breakers pilot until the initial date of operations of the LULD Plan, 
thereby allowing the pilot to run simultaneously with the LULD Plan, 
providing an opportunity to properly assess the impact of the two 
pilots on the marketplace and evaluate the pilots' effectiveness. 
Therefore, the Commission designates the proposal operative upon 
filing.\12\
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    \12\ For 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).
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    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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 rule-comments@sec.gov. Please 
include File Number SR-FINRA-2013-011 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-2013-011. 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 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 available publicly. All submissions 
should refer to File Number SR-FINRA-2013-011 and should be submitted 
on or before February 27, 2013.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02592 Filed 2-5-13; 8:45 am]
BILLING CODE 8011-01-P