Document ID: SEC-2014-0499-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2014-03-28T04:00Z

[Federal Register Volume 79, Number 60 (Friday, March 28, 2014)]
[Notices]
[Pages 17615-17617]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-06890]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71781; File No. SR-FINRA-2014-013]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Clearly Erroneous Pilot Program for 
Exchange-Listed Securities

March 24, 2014.
    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 March 19, 2014, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``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 extend a pilot program related to FINRA Rule 
11892, entitled ``Clearly Erroneous Transactions in Exchange-Listed 
Securities.''
    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.

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
    The purpose of this filing is to extend the effectiveness of 
FINRA's current rule

[[Page 17616]]

applicable to clearly erroneous transactions in exchange listed 
securities. Portions of Rule 11892 (Clearly Erroneous Transactions in 
Exchange-Listed Securities), explained in further detail below, 
currently are operating as a pilot program set to expire on April 8, 
2014.\3\ FINRA proposes to extend the pilot program to coincide with 
the pilot period for the Plan to Address Extraordinary Market 
Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the 
``Limit Up-Limit Down Plan'' or the ``Plan''), including any extensions 
to the pilot period for the Plan.\4\
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    \3\ See Securities Exchange Act Release No. 70516 (September 26, 
2013), 78 FR 60952 (October 2, 2013) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2013-041).
    \4\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
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    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to FINRA Rule 11892 to provide for uniform treatment: (1) Of 
clearly erroneous execution reviews in multi-stock events involving 
twenty or more securities; and (2) in the event transactions occur that 
result in the issuance of an individual stock trading pause by the 
primary listing market and subsequent transactions that occur before 
the trading pause is in effect over-the-counter.\5\ FINRA also adopted 
additional changes to Rule 11892 that reduced FINRA's ability to 
deviate from the objective standards set forth in Rule 11892,\6\ and in 
2013, adopted a provision designed to address the operation of the 
Plan.\7\
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    \5\ See Securities Exchange Act Release No. 62885 (September 10, 
2010), 75 FR 56641 (September 16, 2010) (Order Approving File No. 
SR-FINRA-2010-032).
    \6\ See supra note 5.
    \7\ See Securities Exchange Act Release No. 68808 (February 1, 
2013), 78 FR 9083 (February 7, 2013) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2013-012).
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    FINRA believes the benefits to market participants from the more 
objective clearly erroneous transactions rule should continue on a 
pilot basis to coincide with the operation of the Limit Up-Limit Down 
Plan. FINRA believes that continuing the pilot will protect against any 
unanticipated consequences. Thus, FINRA believes that the protections 
of the clearly erroneous rule should continue while the industry gains 
further experience operating the 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 the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities association and, in particular, 
with the requirements of Section 15A of the Act.\8\ In particular, the 
proposal is consistent with Section 15A(b)(6) \9\ because 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. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(6).
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    Although the Limit Up-Limit Down Plan is operational, FINRA 
believes that maintaining the pilot will help to protect against 
unanticipated consequences. Thus, FINRA believes that the protections 
of the clearly erroneous rule should continue while the industry gains 
further experience operating the Plan. FINRA also believes that the 
pilot program promotes just and equitable principles of trade in that 
it promotes transparency and uniformity across markets concerning 
review of transactions as clearly erroneous. Thus, FINRA believes that 
the extension of the pilot would help assure that the determination of 
whether a clearly erroneous trade has occurred will be based on clear 
and objective criteria, and that the resolution of the incident will 
occur promptly through a transparent process. The proposed rule change 
also would help assure consistent results in handling erroneous trades 
across the U.S. markets, thus furthering fair and orderly markets, the 
protection of investors and the public interest. Based on the 
foregoing, FINRA believes the benefits to market participants from the 
more objective clearly erroneous transactions rule should continue on a 
pilot basis to coincide with the operation of the Limit Up-Limit Down 
Plan.

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

    FINRA does not believe that the proposed rule change implicates any 
competitive issues. To the contrary, FINRA believes that the other 
self-regulatory organizations also are filing similar proposals, and 
thus, that the proposal will help to ensure consistency across the U.S.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    FINRA has not solicited, and does not intend to solicit, comments 
on this proposed rule change. FINRA has not received any written 
comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), FINRA provided the Commission with written notice of 
its intent to file the proposed rule change, along with a brief 
description and the 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.
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    FINRA 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, as 
it will allow the clearly erroneous pilot program to continue 
uninterrupted while the industry gains further experience operating 
under the Limit Up-Limit Down Plan, and avoid any investor confusion 
that could result from a temporary interruption in the pilot program. 
For this reason, the Commission designates the proposed rule change to 
be operative upon filing.\12\
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    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

[[Page 17617]]

Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2014-013 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2014-013. 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-2014-013 and should be 
submitted on or before April 18, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06890 Filed 3-27-14; 8:45 am]
BILLING CODE 8011-01-P