Document ID: SEC-2011-0673-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-05-12T04:00Z

[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27693-27694]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11669]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64419; File No. SR-Phlx-2011-64]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing of Proposed Rule Change To Amend Rule 3100(a)(4) To Include 
Additional Securities in the Pilot by Which Such Rule Operates

May 6, 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 May 4, 2011, NASDAQ OMX PHLX LLC (``Exchange''), 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 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

    The Exchange proposes to amend Rule 3100(a)(4) to include 
additional securities in the pilot by which such rule operates.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *

Rule 3100. Trading Halts on PSX

(a) Authority To Initiate Trading Halts or Pauses

    In circumstances in which the Exchange deems it necessary to 
protect investors and the public interest, and pursuant to the 
procedures set forth in paragraph (c):
    (1)-(3) No change.
    (4) If a primary listing market issues an individual stock 
trading pause in any of the Circuit Breaker Securities, as defined 
herein, the Exchange will pause trading in that security until 
trading has resumed on the primary listing market. If, however, 
trading has not resumed on the primary listing market and ten 
minutes have passed since the individual stock trading pause message 
has been received from the responsible single plan processor, the 
Exchange may resume trading in such stock. The provisions of this 
paragraph (a)(4) shall be in effect during a pilot set to end on the 
earlier of August 11, 2011 or the date on which a limit up/limit 
down mechanism to address extraordinary market volatility, if 
adopted, applies. During the pilot, the term ``Circuit Breaker 
Securities'' shall mean any NMS stock [the securities included in 
the S&P 500[supreg] Index and the Russell 1000[supreg] 
Index, as well as a pilot list of Exchange Traded Products].
    (b)-(c) No change.
* * * * *

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 aspects 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 amend Rule 3100(a)(4) to include 
additional securities in the pilot by which such rule operates.
    On June 10, 2010, the Commission granted accelerated approval, for 
a pilot period to end December 10, 2010, of proposed rule changes 
submitted by the BATS Exchange, Inc., NASDAQ OMX BX, Inc., Chicago 
Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., 
EDGA Exchange, Inc., EDGX Exchange, Inc., International Securities 
Exchange LLC, The NASDAQ Stock Market LLC (``NASDAQ''), New York Stock 
Exchange LLC (``NYSE''), NYSE Amex LLC (``NYSE Amex''), NYSE Arca, Inc. 
(``NYSE Arca''), and National Stock Exchange, Inc. (collectively, the 
``Exchanges''), to pause trading during periods of extraordinary market 
volatility in S&P 500 stocks.\3\ The rules require the Listing Markets 
\4\ to issue five-minute trading pauses for individual securities for 
which they are the primary Listing Market if the transaction price of 
the security moves ten percent or more from a price in the preceding 
five-minute period. The Listing Markets are required to notify the 
other Exchanges and market participants of the imposition of a trading 
pause by immediately disseminating a special indicator over the 
consolidated tape. Under the rules, once the Listing Market issues a 
trading pause, the other Exchanges are required to pause trading in the 
security on their markets. On September 10, 2010, the Commission 
approved the respective rule filings of the Exchanges to expand 
application of the pilot to securities comprising the Russell 
1000[supreg] Index and specified Exchange Traded Products.\5\
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    \3\ See Securities Exchange Act Release No. 62252 (June 10, 
2010), 75 FR 34186 (June 16, 2010).
    \4\ The term ``Listing Markets'' refers collectively to NYSE, 
NYSE Amex, NYSE Arca, and NASDAQ.
    \5\ See Securities Exchange Act Release No. 62884 (September 10, 
2010), 75 FR 56618 (September 16, 2010).
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    In connection with its resumption of trading of NMS Stocks through 
the NASDAQ OMX PSX system, the Exchange adopted Rule 3100(a)(4) so that 
it could participate in the pilot program.\6\ On September 29, 2010, 
the Exchange amended Rule 3100(a)(4) to include stocks comprising the 
Russell 1000[supreg] Index and specified Exchange Traded Products.\7\ 
On December 7, 2010, the Exchange filed an immediately effective filing 
to extend the existing pilot program for four months, so that the pilot 
would expire on April 11, 2011.\8\ On March 31, 2011, the Exchange 
filed an immediately effective filing to extend the existing pilot 
program for four months, so that the pilot would expire on the earlier 
of August 11, 2011 or the date on which a limit up/limit down mechanism 
to address extraordinary market volatility, if adopted, applies.\9\
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    \6\ See Securities Exchange Act Release No. 62877 (September 9, 
2010), 75 FR 56633 (September 16, 2010) (SR-Phlx-2010-79).
    \7\ See Securities Exchange Act Release No. 63004 (September 29, 
2010), 75 FR 61547 (October 5, 2010) (SR-Phlx-2010-126).
    \8\ See Securities Exchange Act Release No. 63504 (December 9, 
2010), 75 FR 78304 (December 15, 2010) (SR-Phlx-2010-174).
    \9\ See Securities Exchange Act Release No. 64175 (April 4, 
2011), 76 FR 19823 (April 8, 2011) (SR-Phlx-2011-44).
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    The Exchanges have continued to assess whether additional 
securities need to be added to the Pilot and whether the parameters of 
the Circuit Breaker Pilot needs to be modified to accommodate trading 
characteristics of different securities. In consultation with other 
markets and the staff of the Commission, the Exchanges are proposing to 
include all NMS stocks within the Pilot that are not already included 
therein, but to apply a wider price move percentage to the newly

[[Page 27694]]

added securities.\10\ Specifically, NYSE, NYSE Amex, NYSE Arca, and 
NASDAQ, as the listing markets, are proposing to set the price move 
required to trigger a trading pause for the proposed new securities to 
be 30% or more for such securities priced at $1 or higher and 50% or 
more for such securities priced less than $1. The listing markets 
believe that applying a broader percentage to securities priced less 
than $1 compared to those priced above $1 is appropriate given that 
lower-priced securities tend to be more volatile, and price movements 
of lower-priced securities equate to a higher percentage move than a 
similar price change for a higher-priced security. The listing markets 
also believe that, since the newly added securities are not currently 
included in the S&P 500 Index, Russell 1000 Index, or specified ETPs, 
they are more likely to be less liquid securities or securities with 
lower trading volumes. Accordingly, the Exchanges believe that broader 
price move percentages would be appropriate. Similarly, because 
leveraged ETPs trade at a ratio against the associated index, a broader 
price move percentage would also be appropriate for leveraged ETPs. As 
such, the Exchange proposes to delete language concerning the limited 
application of pauses in Circuit Breaker Securities from the rule's 
text, as the text therein would no longer be necessary, and to define 
Circuit Breaker Securities as all NMS stocks.
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    \10\ Certain of the Exchanges that have market maker 
requirements are modifying their market maker obligations to fit 
within these new Pilot price move percentages.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5),\12\ in particular, in that 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. 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 ensure fair competition among brokers and dealers 
and among exchange markets. The Exchange believes that the proposed 
rule meets these requirements because it expands the scope of the Pilot 
to cover all NMS stocks, consistent with similar proposals submitted by 
the other Exchanges.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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, as amended.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-64 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-Phlx-2011-64. 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-Phlx-2011-64 and should be 
submitted on or before June 2, 2011.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11669 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P