Document ID: SEC-2013-0361-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-02-20T05:00Z

[Federal Register Volume 78, Number 34 (Wednesday, February 20, 2013)]
[Notices]
[Pages 11937-11939]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03793]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68915; File No. SR-Phlx-2013-14]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Pilot Period of the Trading Pause for Certain NMS Stocks

February 13, 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 February 1, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or 
``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

    The Exchange proposes to extend the trading pause pilot in certain 
individual NMS stocks when the price moves ten percent or more in the 
preceding five minute period, so that the pilot will now expire on the 
earlier of the initial date of operations of the Regulation NMS Plan to 
Address Extraordinary Market Volatility or February 4, 2014.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *

Rule 3100. Trading Halts on PSX

    (a) Authority to Initiate Trading Halts or Pauses
    In circumstances in which the Exchange deems it necessary to 
protect investors and the public interest, and pursuant to the 
procedures set forth in paragraph (c):
    (1)-(3) No change.
    (4) If a primary listing market issues an individual stock trading 
pause in any of the Circuit Breaker Securities, as defined herein, the 
Exchange will pause trading in that security until trading has resumed 
on the primary listing market. If, however, trading has not resumed on 
the primary listing market and ten minutes have passed since the 
individual stock trading pause message has been received from the 
responsible single plan processor, the Exchange may resume trading in 
such stock. The provisions of this paragraph (a)(4) shall be in effect 
during a pilot set to end on the earlier of the initial date of 
operations of the Regulation NMS Plan to Address Extraordinary Market 
Volatility or February 4, 2014[3]. During the pilot, the term ``Circuit 
Breaker Securities'' shall mean any NMS stock except rights and 
warrants.
    (b)-(c) No change.
* * * * *

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 aspects of such 
statements.

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

1. Purpose
    On June 10, 2010, the Commission granted accelerated approval for a 
pilot period to end December 10, 2010 of proposed rule changes 
submitted by the BATS Exchange, Inc., NASDAQ OMX BX, Inc., Chicago 
Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., 
EDGA Exchange, Inc., EDGX Exchange, Inc., International Securities 
Exchange LLC, The NASDAQ Stock Market LLC (``NASDAQ''), New York Stock 
Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT'') (formerly, NYSE 
Amex LLC), NYSE Arca, Inc. (``NYSE Arca''), and National Stock 
Exchange, Inc. (collectively, the ``Exchanges''), to pause trading 
during periods of extraordinary market volatility in S&P 500 stocks.\3\ 
The rules require the Listing Markets \4\ to issue five-minute trading 
pauses for individual securities for which they are the primary Listing 
Market if the transaction price of the security moves ten percent or 
more from a price in the preceding five-minute period. The Listing 
Markets are required to notify the other Exchanges and market 
participants of the imposition of a trading pause by immediately 
disseminating a special indicator over the consolidated tape. Under the 
rules, once the Listing Market issues a trading pause, the other 
Exchanges are required to pause trading in the security on their 
markets. On September 10, 2010, the Commission approved the respective 
rule filings of the Exchanges to expand application of the pilot to 
securities comprising the Russell 1000[supreg] Index and specified 
Exchange Traded Products.\5\
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    \3\ Securities Exchange Act Release No. 62252 (June 10, 2010), 
75 FR 34186 (June 16, 2010).
    \4\ The term ``Listing Markets'' refers collectively to NYSE, 
NYSE MKT, NYSE Arca, and NASDAQ.
    \5\ Securities Exchange Act Release No. 62884 (September 10, 
2010), 75 FR 56618 (September 16, 2010).
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    In connection with its resumption of trading of NMS Stocks through 
the NASDAQ OMX PSX system, the Exchange adopted Rule 3100(a)(4) so that 
it could participate in the pilot program.\6\ On September 29, 2010, 
the Exchange amended Rule 3100(a)(4) to include stocks comprising the 
Russell 1000[supreg] Index and specified Exchange

[[Page 11938]]

Traded Products.\7\ On December 7, 2010, the Exchange filed an 
immediately effective filing to extend the existing pilot program for 
four months, so that the pilot would expire on April 11, 2011.\8\ On 
March 31, 2011, the Exchange filed an immediately effective filing to 
extend the pilot period an additional four months, so that the pilot 
would expire on August 11, 2011 or the date on which a limit up/limit 
down mechanism to address extraordinary market volatility, if adopted, 
applies.\9\ On June 23, 2011, the Commission approved the expansion of 
the pilot to all NMS stocks, but with different pause-triggering 
thresholds.\10\ On August 8, 2011, the Exchange filed an immediately 
effective filing that removed language from the rule that tied the 
expiration of the pilot to the adoption of a limit up/limit down 
mechanism to address extraordinary market volatility, and further 
extended the pilot period, so that the pilot would expire on January 
31, 2012.\11\ On November 18, 2011, the Exchange filed an immediately 
effective filing that excluded rights and warrants from the pilot.\12\ 
On January 23, 2012, the Commission approved an extension of the pilot 
to July 31, 2012.\13\
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    \6\ Securities Exchange Act Release No. 62877 (September 9, 
2010), 75 FR 56633 (September 16, 2010) (SR-Phlx-2010-79).
    \7\ Securities Exchange Act Release No. 63004 (September 29, 
2010), 75 FR 61547 (October 5, 2010) (SR-Phlx-2010-126).
    \8\ Securities Exchange Act Release No. 63504 (December 9, 
2010), 75 FR 78304 (December 15, 2010) (SR-Phlx-2010-174).
    \9\ Securities Exchange Act Release No. 64175 (April 4, 2011), 
76 FR 19823 (April 8, 2011) (SR-Phlx-2011-044).
    \10\ Securities Exchange Act Release No. 64735 (June 23, 2011), 
76 FR 38243 (June 29, 2011) (SR-Phlx-2011-064, et al.).
    \11\ Securities Exchange Act Release No. 65083 (August 10, 
2011), 76 FR 50801 (August 16, 2011) (SR-Phlx-2011-113).
    \12\ Securities Exchange Act Release No. 65813 (November 23, 
2011), 76 FR 74113 (November 30, 2011) (SR-Phlx-2011-158).
    \13\ Securities Exchange Act Release No. 66216 (January 23, 
2012), 77 FR 4385 (January 27, 2012) (SR-Phlx-2012-07).
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    On May 31, 2012, the Commission approved, on a pilot basis, the 
National Market System Plan to Address Extraordinary Market 
Volatility.\14\ This plan creates a market-wide limit up-limit down 
mechanism that is intended to address extraordinary market volatility 
in NMS Stocks, with a planned implementation date of February 4, 2013. 
Once implemented, the limit up/limit down mechanism to address 
extraordinary market volatility will render the current stock trading 
pause pilot duplicative and unnecessary. The Exchange filed a rule 
change proposal to extend the single stock trading pause pilot so that 
it will now expire on February 4, 2013, when the limit up/limit down 
mechanism to address extraordinary market volatility is to be 
implemented.\15\
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    \14\ Securities Exchange Act Release No. 67091 (May 31, 2012), 
77 FR 33498 (June 6, 2012).
    \15\ Securities Exchange Act Release No. 67537 (July 30, 2012), 
77 FR 46546 (August 3, 2012) (SR-Phlx-2012-99).
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    The Exchange, in conjunction with the Exchanges and FINRA, recently 
filed an amendment to the Plan to change the date of initial operations 
of the Plan from February 4, 2013 to April 8, 2013. Accordingly, the 
Exchange is proposing to extend the expiration of the trading pause 
pilot to the earlier of the initial date of operations of the Plan or 
February 4, 2014 to allow adequate time for the Plan's implementation. 
The Exchange believes that the pilot program has been successful in 
reducing the negative impacts of sudden, unanticipated price movements 
in the securities covered by the pilot. The Exchange also believes that 
an additional extension of the pilot is warranted so that it may 
continue to apply the circuit breaker to reduce the negative impacts of 
sudden, unanticipated price movements until it is replaced by the limit 
up/limit down mechanism.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act, which requires the rules of an exchange 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 change proposed herein meets these requirements in 
that it promotes uniformity across markets concerning decisions to 
pause trading in a security when there are significant price movements, 
which promotes just and equitable principles of trade and removes 
impediments to, and perfects the mechanism of, a free and open market 
and a national market system. Additionally, extension of the pilot 
until the earlier of the initial date of operations of the Plan or 
February 4, 2014 would allow the pilot to continue to operate without 
interruption while the Exchange and the Commission further assess the 
effect of the pilot on the marketplace or whether other initiatives 
should be adopted in lieu of the current pilot, which contributes to 
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 will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
proposed changes are being made to extend the operation of the trading 
pause pilot until the earlier of the initial date of operations of the 
Plan or February 4, 2014 would allow the pilot to continue to operate 
without interruption until implementation of the Plan, which 
contributes to the protection of investors and the public interest. 
Other competing equity exchanges are subject to the same trading pause 
requirements specified in the Plan. Thus, the proposed changes will not 
impose any burden on competition while providing trading pause 
requirements specified in the Plan.

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

    Written comments were neither solicited nor received.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
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 prior to 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and 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. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the

[[Page 11939]]

Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest. 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 
because such waiver would allow the pilot program to continue 
uninterrupted. Accordingly, the Commission hereby grants the Exchange's 
request and designates the proposal operative upon filing.\20\
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 such 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 Number SR-Phlx-2013-14 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-Phlx-2013-14. 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 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-Phlx-2013-14 and should be 
submitted on or before March 13, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03793 Filed 2-19-13; 8:45 am]
BILLING CODE 8011-01-P