Document ID: SEC-2010-1185-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-08-05T04:00Z

[Federal Register: August 5, 2010 (Volume 75, Number 150)]
[Notices]               
[Page 47327-47328]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05au10-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62609; File No. SR-NYSE-2010-55]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
That Constitutes a Stated Interpretation With Respect to the Meaning, 
Administration, and Enforcement of Rule 128(g)

July 30, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 27, 2010, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 a rule change that constitutes a stated 
interpretation with respect to the meaning, administration, and 
enforcement of Rule 128(g). The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, and 
http://www.nyse.com.

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 self-regulatory organization 
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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt a stated interpretation with respect 
to the meaning, administration, and enforcement of Rule 128(g), 
concerning the ability of an Exchange Officer to act on his or her own 
motion to review potentially erroneous executions.
    Rule 128(g) provides that an Officer, acting on his or her own 
motion, may review potentially erroneous executions that occur on the 
Exchange and may, among other things, declare such transaction(s) null 
and void. When extraordinary circumstances exist, any such action must 
be taken by no later than the start of the Regular Trading Hours of the 
Exchange on the trading day following the date of execution(s) under 
review.
    For purposes of Rule 128(g), the Exchange believes that a series of 
transactions in a particular security on one or more trading days mayl 
[sic] be viewed as one event if all such transactions were effected 
based on incorrect or grossly misinterpreted structural or issuance 
information, resulting in a severe pricing dislocation for all such 
transactions (the ``Event''). In such circumstances, the Event may be 
considered to constitute extraordinary circumstances pursuant to Rule 
128(g). An Officer acting on his or her own motion may take action to 
declare all transactions that occurred during the Event null and void 
not later than before the start of the next trading date following the 
last such transaction in the Event. If the security is halted 
immediately following the last transaction in the Event, and before 
pricing ceases to be dislocated, the next trading date for all 
transactions comprising the Event will be the date on which trading 
resumes following the halt.

[[Page 47328]]

    In particular, the Exchange believes that the interpretation is 
applicable to a recent event involving an exchange offer (``Exchange 
Offer'') made by U.S. Bancorp in which there were a series of 
executions based on incorrect or grossly misinterpreted structural or 
issuance information, as a result of which the securities traded at 
severely dislocated prices.
    In May 2010, U.S. Bancorp commenced an offer to exchange up to 
1,250,000 Depositary Shares, each representing a 1/100 the interest in 
a share of Series A Non-Cumulative Perpetual Preferred Stock, $100,000 
liquidation preference per share (the ``Depositary Shares'') for any 
and all of the 1,250,000 outstanding 6.189% Fixed-to-Floating Rate 
Normal ITS issued by U.S. Bancorp Capital IX, each with a liquidation 
amount of $1,000 (the ``Normal ITS''). The Depositary Shares were 
approved for listing on the NYSE under the symbol USB PRA. On June 11, 
2010, the NYSE opened the shares on a quote, but trading did not 
commence until June 16, 2010 at prices in the range of $79.00 per 
share. There were additional executions on the Exchange in that price 
range on June 17 and 18, 2010.
    On June 18, 2010, Exchange staff learned that the prices at which 
trades had executed were not consistent with the value of the security, 
which was closer to an $800 price. Upon learning of the pricing 
disparity, the Exchange immediately halted trading in the Depositary 
Shares on all markets and alerted U.S. Bancorp and other exchanges that 
traded the Depositary Shares of the pricing discrepancy.
    For purposes of this stated interpretation, the Exchange believes 
that the trading in Depository Shares from June 16 to June 18 
constituted a single event because that trading was based on incorrect 
or grossly misinterpreted structural or issuance information that 
resulted in severe price dislocation (the ``U.S. Bancorp Event''). 
Because the Depository Shares were halted before the price of the 
Depository Shares ceased to be dislocated, and remain halted, the 
Exchange believes that, pursuant to this interpretation, an Officer may 
review trading in Depository Shares and may declare null and void all 
trading in the U.S. Bancorp Event, provided such declaration is made 
before the security resumes trading following the trading halt.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\3\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\4\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Exchange 
believes that the proposed stated interpretation promotes just and 
equitable principles of trade because it ensures that a potentially 
erroneous execution may be reviewed if such executions are based on 
incorrect or grossly misinterpreted structural or issuance information, 
resulting in a severe pricing dislocation for all such transactions. 
The stated interpretation also enables the Exchange to declare null and 
void such potentially erroneous executions during a halt in trading, 
but before trading resumes at a price based on the corrected 
information.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 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 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 solicited or received with respect to the 
proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \5\ of the Act and Rule 19b-4(f)(1) \6\ thereunder. At any 
time within the 60-day period beginning on the date 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.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2010-55 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-NYSE-2010-55. 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, on official 
business days between the hours of 10 a.m. and 3 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-NYSE-2010-55 and should be submitted on or before August 
26, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19265 Filed 8-4-10; 8:45 am]
BILLING CODE 8010-01-P