Document ID: SEC-2013-1719-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2013-10-02T04:00Z

[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60945-60946]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24006]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70515; File No. SR-CHX-2013-17]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend a Pilot Program Related to Article 20, Rule 10 Concerning the 
Handling of Clearly Erroneous Transactions

September 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby 
given that, on September 24, 2013 the Chicago Stock Exchange, Inc. 
(``CHX'' or the ``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

    CHX proposes to extend a pilot program related to Article 20, Rule 
10, entitled ``Handling of Clearly Erroneous Transactions.'' The 
Exchange also proposes to remove certain references to individual stock 
trading pauses contained in Article 20, Rule 10(c)(4). The Exchange has 
designated this proposal as non-controversial and provided the 
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the 
Act.\3\
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    \3\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of this proposed rule change is available on the 
Exchange's Web site at (www.chx.com) and in 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 CHX included statements 
concerning the purpose of and basis for the proposed rule changes 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 CHX 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 the 
Exchange's current rule applicable to Clearly Erroneous Executions and 
to remove references to individual stock trading pauses described in 
Article 20, Rule 10(c)(4).
    Portions of Article 20, Rule 10, explained in further detail below, 
are currently operating as a pilot program set to expire on September 
30, 2013.\4\ The Exchange proposes to extend the pilot program to April 
8, 2014.
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    \4\ See Securities Exchange Act Release No. 68802 (February 1, 
2013), 78 FR 9092 (Feb. 7, 2013) (SR-CHX-2013-04).
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    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to Article 20, Rule 10 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 on the Exchange.\5\ The Exchange also 
adopted additional changes to Article 20, Rule 10 that reduced the 
ability of the Exchange to deviate from the objective standards set 
forth in Article 20, Rule 10,\6\ and in 2013, adopted a provision 
designed to address the operation of 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'').\7\ The Exchange 
believes the benefits to market participants from the more objective 
clearly erroneous executions rule should continue on a pilot basis 
through April 8, 2014, which is one year following the commencement of 
operations of the Plan. The Exchange believes that continuing the pilot 
during this time will protect against any unanticipated consequences. 
Thus, the Exchange believes that the protections of the Clearly 
Erroneous Rule should continue while the industry gains further 
experience operating the Limit Up-Limit Down Plan.
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    \5\ Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-CHX-2010-13).
    \6\ Id.
    \7\ See Securities Exchange Act Release No. 68802 (February 1, 
2013), 78 FR 9092 (Feb. 7, 2013) (SR-CHX-2013-04); Securities 
Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 
2012) (the ``Limit Up-Limit Down Release''); see also CHX Article 
20, Rule 10(i).
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    The Exchange also proposes to eliminate all references in Article 
20, Rule 10 to individual stock trading pauses issued by a primary 
listing market. Specifically, Article 20, Rule 10(c)(4) provides 
specific rules to follow with respect to review of an execution as 
potentially clearly erroneous when there was an individual stock 
trading pause issued for that security and the security is included in 
the S&P 500[supreg] Index, the Russell 1000[supreg] Index, or a pilot 
list of Exchange Traded Products (``Subject Securities''). The stock 
trading pauses described in Article 20, Rule 10(c)(4) are being phased 
out as securities become subject to the Plan pursuant to a phased 
implementation schedule. The Plan is already operational with respect 
to all Subject Securities, and thus, the Exchange believes that all 
references to individual stock trading pauses should be removed, 
including all cross-references to Article 20, Rule 10(c)(4) contained 
in other portions of Article 20, Rule 10.\8\
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    \8\ The Exchange notes that certain Exchange Traded Products 
(``ETPs'') are not yet subject to the Limit Up-Limit Down Plan. 
Because such ETPs are not on the pilot list of securities, such ETPs 
are not subject to Article 20, Rule 10(c)(4). See Securities 
Exchange Act Release No. 65115 (August 11, 2011), 76 FR 51447 
(August 18, 2011) (SR-CHX-2011-22) (notice of filing and immediate 
effectiveness to limit application of Article 20, Rule 10(c)(4) to 
the Subject Securities). Accordingly, the proposed rule change does 
not change the status quo with respect to such ETPs. As amended, all 
securities, including ETPs not subject to the Limit Up-Limit Down 
Plan, will continue to be subject to Article 20, Rule 10(c)(1) 
through (3).
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 2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules

[[Page 60946]]

and regulations thereunder that are applicable to a national securities 
exchange, and, in particular, with the requirements of Section 6(b) of 
the Act.\9\ In particular, the proposal is consistent with Section 
6(b)(5) of the Act,\10\ because it would promote just and equitable 
principles of trade, remove impediments to, and perfect the mechanism 
of, a free and open market and a national market system. The Exchange 
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. More 
specifically, the Exchange believes that the extension of the pilot 
would help assure that the determination of whether a clearly erroneous 
transaction 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 would also help assure 
consistent results in handling erroneous transactions across the U.S. 
markets, thus furthering fair and orderly markets, the protection of 
investors and the public interest. Although the Limit Up-Limit Down 
Plan will become fully operational during the same time period as the 
proposed extended pilot, the Exchange believes that maintaining the 
pilot will help to protect against unanticipated consequences. To that 
end, the extension will allow the Exchange to determine whether Article 
20, Rule 10 is necessary once the Plan is fully operational and, if so, 
whether improvements can be made. Finally, the elimination of 
references to individual stock trading pauses will help to avoid 
confusion amongst market participants, which is consistent with the 
protection of investors and the public interest and therefore 
consistent with the Act. As described above, individual stock trading 
pauses have been replaced by the Limit Up-Limit Down Plan with respect 
to all Subject Securities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change 
implicates any competitive issues. To the contrary, the Exchange 
believes that the Financial Industry Regulatory Authority (``FINRA'') 
and other national securities exchanges are also filing similar 
proposals, and thus, that the proposal will help to ensure consistency 
across market centers.

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

    No written comments were either solicited or received.

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 \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange 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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    The Exchange 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 pilot program to continue uninterrupted, thereby 
avoiding 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.\13\
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    \13\ 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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-CHX-2013-17 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-CHX-2013-17. 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-CHX-2013-17 and should be 
submitted on or before October 23, 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. 2013-24006 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P