Document ID: SEC-2011-0675-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2011-05-12T04:00Z

[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27683-27684]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11674]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64431; File No. SR-CHX-2011-09]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Change To Add All NMS Stocks to the Single 
Securities Circuit Breaker Pilot Program

May 6, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on May 4, 2011, 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 CHX. 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 amend CHX Article 20, Rule 2 to add all NMS stocks 
to the pilot program relating to individual securities circuit breakers 
and amend CHX Article 16, Rule 8 to simplify certain aspects of the 
text while also conforming certain of the percentages thereunder to CHX 
Article 20, Rule 2. The text of this proposed rule change is available 
on the Exchange's Web site at (http://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 regarding the proposal. 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 Exchange proposes to amend CHX Article 20, Rule 2 to include 
additional securities in the pilot by which such rule operates, to 
specify the thresholds used by the primary listing markets in 
determining when to pause trading and to amend CHX Article 16, Rule 8 
to simplify certain aspects of the text while also conforming certain 
of the percentages thereunder to CHX Article 20, Rule 2.
    The Commission approved amendments to CHX Article 20, Rule 2 on a 
pilot basis on June 10, 2010 to provide for trading pauses in 
individual securities due to extraordinary market volatility (``Trading 
Pause'') in all securities included within the S&P 500[reg] Index 
(``S&P 500'') (``Trading Pause Pilot'' or ``Pilot'').\3\ The Exchange 
noted in its filing to adopt amendments to CHX Article 20, Rule 2 that 
during the Pilot period it would continue to assess whether additional 
securities need to be added and whether the parameters of CHX Article 
20, Rule 2 would need to be modified to accommodate trading 
characteristics of different securities. The Exchange subsequently 
received approval to add to the Pilot the securities included in the 
Russell 1000[reg] Index (``Russell 1000'') and a specified list of 
Exchange Traded Products (``ETPs'').\4\
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    \3\ The Commission approved the Trading Pause Pilot for all 
equities exchanges and FINRA. See Securities Exchange Act Release 
No. 62252 (June 10, 2010), 75 FR 34186 (June 16, 2010) (File Nos. 
SR-BATS-2010-014; SR-EDGA-2010-01; SR-EDGX-2010-01; SR-BX-2010-037; 
SR-ISE-2010-48; SR-NYSE-2010-39; SR-NYSEAmex-2010-46; SR-NYSEArca-
2010-41; SR-NASDAQ-2010-061; SR-CHX-2010-10; SR-NSX-2010-05; and SR-
CBOE-2010-047) and Securities Exchange Act Release No. 62251 (June 
10, 2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-025). The NYSE 
submitted a proposed rule change shortly after the initial 
Commission approval order to clarify the procedures applicable to 
reopening. See Securities Exchange Act Release No. 62284 (June 11, 
2010), 75 FR 34498 (June 17, 2010) (SR-NYSE-2010-45).
    \4\ The Commission approved the addition to the Trading Pause 
Pilot of the securities included in the Russell 1000 and ETPs, where 
applicable, for all equities exchanges and FINRA. See Securities 
Exchange Act Release No. 62884 (September 10, 2010), 75 FR 56618 
(September 16, 2010) (File Nos. SR-BATS-2010-018; SR-BX-2010-044; 
SR-CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-EDGX-2010-05; 
SR-ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49; SR-NYSEAmex-
2010-63; SR-NYSEArca-2010-61; and SR-NSX-2010-08 and Securities 
Exchange Act Release No. 62883 (September 10, 2010), 75 FR 56608 
(September 16, 2010) (SR-FINRA-2010-033). The Exchange submitted a 
proposed rule change shortly after the addition of the Russell 1000 
securities and ETPs to extend the operation of the Pilot, which was 
set to expire on December 10, 2010, until April 11, 2011. See 
Securities Exchange Act Release No. 63498 (December 9, 2010), 75 FR 
78310 (December 15, 2010) (SR-CHX-2010-24). Then, in April 2011, the 
Exchange submitted another rule change to further extend the 
operation of the Pilot until 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. See Securities 
Exchange Act Release No. 64203 (April 6, 2011), 76 FR 20393 (April 
12, 2011) (SR-CHX-2011-05).
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    The Exchange has continued to assess whether additional securities 
need to be added to the Pilot and whether the parameters of CHX Article 
20, Rule 2 need to be modified to accommodate trading characteristics 
of different securities. In consultation with other markets and the 
staff of the Commission, the Exchange proposes to include all NMS 
stocks within the Pilot that are not already included therein. The 
Exchange is also proposing to amend the text of CHX Article 20, Rule 2 
to specify the thresholds used by the primary listing markets in 
determining when to pause trading.
    In particular, the proposed additional stocks are those not 
currently included in the S&P 500 Index, Russell 1000 Index, or 
specified ETPs, and therefore are more likely to be less liquid 
securities or securities with lower trading volumes. Accordingly, the 
Exchange believes that broader Threshold Move percentages would be 
appropriate. Similarly, because leveraged ETPs trade at a ratio against 
the associated index, a broader Threshold Move percentage would also be 
appropriate for leveraged ETPs. Additionally, in those instances where 
such securities are priced below $1 and price movements equate to a 
higher percentage move, the Exchange believes

[[Page 27684]]

that an even broader Threshold Move percentage is appropriate.
    The proposed changes to the Pilot, if approved, would also require 
that the text of Article 16, Rule 8, which pertains to the pricing 
obligations that Market Makers are required to adhere to, be amended to 
adopt cross-references therein to CHX Article 20, Rule 2 and the 
Threshold Move thereunder. Specifically, the Exchange proposes to 
remove any text from CHX Article 16, Rule 8 addressing NMS stocks that 
are not subject to the Pilot because no such securities would exist and 
such text would therefore be unnecessary. The Exchange also proposes to 
simplify CHX Article 16, Rule 8 by explicitly stating the percentages 
that are applicable thereunder and the times during the trading day 
when stock pause triggers are not in effect under CHX Article 20, Rule 
2 (or comparable rule of another exchange). The Exchange notes that 
part of this proposed change would be substantive, in that the 
percentages under CHX Article 16, Rule 8 would decrease slightly for 
the proposed new securities priced at $1 or greater. The Exchange 
believes that this proposed substantive change would not have a 
significant impact on Market Maker pricing obligations and is 
reasonable because it would ensure that the designated quoting 
percentages in CHX Article 16, Rule 8 are within a narrower range than 
the percentages necessary to trigger a Trading Pause.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\5\ in general, and furthers the objectives of Section 6(b)(5),\6\ 
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) \7\ 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 while adjusting the parameters of the rule for 
different securities in a manner that will promote uniformity across 
markets concerning decisions to pause trading in a security when there 
are significant price movements. Additionally, the proposed changes 
would ensure that the designated quoting percentages in CHX Article 16, 
Rule 8 are within a narrower range than the percentages necessary to 
trigger a Trading Pause.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 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 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    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-CHX-2011-09 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-2011-09. 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-CHX-2011-09 and should be 
submitted on or before June 2, 2011.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11674 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P