Document ID: SEC-2013-1794-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62782-62784]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24547]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70589; File No. SR-NSX-2013-19]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 11.19 To Extend Pilot Program Regarding Clearly Erroneous 
Executions

October 1, 2013.
    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 September 30, 2013, National Stock Exchange, Inc. 
(``NSX[supreg]'' 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 
comment 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 extend a pilot program related to Rule 
11.19, entitled ``Clearly Erroneous Executions.'' The Exchange also 
proposes to remove certain references to individual stock trading 
pauses contained in Rule 11.19(c)(4) and to amend to Rule 11.19 to make 
technical and non-substantive changes in the rule text. 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 the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

[[Page 62783]]

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 parts 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 
Rule 11.19(c)(4). Portions of Rule 11.19, 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. 68803 (February 1, 
2013); 78 FR 9078 (February 7, 2013); SR-NSX-2013-06.
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    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to NSX Rule 11.19 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 changes to Rule 11.19 that reduced the ability of the Exchange 
to deviate from the objective standards set forth in Rule 11.19 \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\ See Securities Exchange Act Release No. 62886 (September 10, 
2010); 75 FR 56613 (September 16, 2010); SR-NSX-2010-06 [sic].
    \6\ Id.
    \7\ See Securities Exchange Act Release No. 69087 (March 14, 
2013), 78 FR 16325 (March 14, 2013) [sic]; SR-NSX-2013-09 [sic]; 
Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 
33498 (June 6, 2012); SR-NSX-2011-11 [sic] (May 31, 2012) [sic]; see 
also NSX Rule 11.19(j).
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    The Exchange also proposes to eliminate all references in Rule 
11.19 to individual stock trading pauses issued by a primary listing 
market. Specifically, Rule 11.19(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 (``Circuit Breaker Securities''). The stock trading 
pauses described in Rule 11.19(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 Circuit 
Breaker Securities and thus the Exchange believes that all references 
to individual stock trading pauses should be removed, including all 
cross-references to Rule 11.19(c)(4) contained in other portions of 
Rule 11.19.\8\
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    \8\ The Exchange notes that certain Exchange Traded Products 
(``ETPs'') are not yet subject to the Plan. Because such ETPs are 
not on the pilot list of securities, such ETPs are not subject to 
Rule 11.19(c)(4). See Securities Exchange Act Release No. 65114 
(August 11, 2011); 76 FR 51439 (August 18, 2011); SR-NSX-2011-10. 
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 Plan, will continue to be subject to Rule 11.19(c)(1) through 
(3).
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    Finally, the Exchange is proposing amendments to Rule 11.19 to make 
technical and non-substantive changes in the rule text. These changes 
include removing incorrect references in the first paragraph of the 
rule to paragraph (i) when the correct reference should be to paragraph 
(j), and correcting certain other language and punctuation issues.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules 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 and 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 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 would also 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. Although the 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 Rule 11.19 is necessary once the Plan is fully 
operational and, if so, whether improvements can be made. The 
elimination of references to individual stock trading pauses will help 
to avoid confusion among 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 Plan with respect to all Circuit 
Breaker Securities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    With respect to the technical, non-substantive changes to the text 
of Rule 11.19, the Exchange believes that these are consistent with 
Section 6(b)(5) of the Act in that they correct certain incorrect 
references to other section of the rule text and other language and 
punctuation items, thereby enhancing the clarity of Exchange rules, 
which is consistent with promoting just and equitable principles of 
trade and the protection of investors and the public interest.

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

[[Page 62784]]

Exchange believes that the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') and other national securities exchanges are also 
filing similar proposals, and thus, that the proposal will help to 
ensure consistent rules across market centers.

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

    Written comments on the proposed rule change were neither solicited 
nor 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 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 No. SR-NSX-2013-19 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 No. SR-NSX-2013-19. 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 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 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 available publicly. All 
submissions should refer to File No. SR-NSX-2013-19 and should be 
submitted on or before November 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
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    \14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-24547 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P