Document ID: SEC-2013-0693-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend its Rule 11.24, Limit Up/Limit Down
Posted Date: 2013-04-10T04:00Z

[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21485-21487]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08322]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69296; File No. SR-NSX-2013-12]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend its Rule 11.24, Limit Up/Limit Down

April 4, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on April 3, 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 amend Rule 11.24(k) regarding routing of 
orders under the National Market System Plan established pursuant to 
Rule 608 of the Exchange Act, to address extraordinary market 
volatility (the ``Regulation NMS Plan to Address Extraordinary Market 
Volatility'' or ``Plan''),\3\ also known as Limit Up/Limit Down. 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.\4\
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    \3\ See Appendix A to Securities Exchange Act Release No. 67091 
(May 31, 2012) 77 FR 33498 (June 6, 2012).
    \4\ 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, on the Commission's Web site at http://www.sec.gov, and at 
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 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

[[Page 21486]]

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
    Since May 6, 2010, when the markets experienced excessive 
volatility in an abbreviated time period, i.e., the ``flash crash,'' 
the national securities exchanges that list and trade equity securities 
and the Financial Industry Regulatory Authority (``FINRA'') have 
implemented market-wide measures that are designed to restore investor 
confidence in the markets by reducing the potential for excessive 
volatility. The measures adopted include pilot plans for stock-by-stock 
trading pauses \5\ and related changes to the equities market clearly 
erroneous execution rules,\6\ and more stringent equity market maker 
quoting requirements.\7\ On May 31, 2012, the Commission approved the 
Plan, on a pilot basis.\8\ On March 8, 2013, the Commission published 
the Exchange's proposed rule change to comply with the Plan, which is 
to become operative on April 8, 2013.\9\
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    \5\ See e.g., NSX Rule 11.20B.
    \6\ See e.g., NSX Rule 11.19.
    \7\ See e.g., NSX Rule 11.8(a)(1)(B)(iv) and (v).
    \8\ See Securities Exchange Act Release No. 67091 (May 31, 2012) 
77 FR 33498 (June 6, 2012) (Order approving, on a Pilot Basis, the 
National Market System Plan to Address Extraordinary Market 
Activity).
    \9\ See Securities Exchange Act Release No. 69087 (March 8, 
2013), 78 FR 16325 (March 14, 2012) (SR-NSX-2013-09)
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    The Plan is designed to prevent trades in NMS Stocks from occurring 
outside of specified Price Bands.\10\ Price Bands consisting of a Lower 
Price Band and an Upper Price Band for each NMS Stock are calculated by 
the Processors.\11\ The Price Bands are coupled with Trading Pauses to 
accommodate more fundamental price moves. All trading centers in NMS 
Stocks, including both those operated by Participants and those 
operated by members of Participants, are required to establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to comply with the requirements specified in the 
Plan.\12\
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    \10\ Unless otherwise specified, capitalized terms used in this 
rule filing are based on defined terms in the Plan.
    \11\ See Section V(A) of the Plan.
    \12\ The Exchange is a Participant in the Plan.
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    In sum, Exchange Rule 11.24, Limit Up-Limit Down, addresses the 
treatment of certain orders to prevent executions outside the Price 
Bands.\13\ The Exchange proposes to amend Rule 11.24(k) in order to 
explain how the Exchange will route orders under the Plan. Rule 
11.24(k) currently states that the Exchange will route orders to an 
away market in accordance with Rule 11.15(a)(ii) regardless of whether 
the away market is displaying a sell (buy) quote that is above (below) 
the Upper (Lower) Price Band. The Exchange now proposes to not route an 
order unless an away market is displaying trading interest at or within 
the Price Bands. As amended, Rule 11.24(k) will state that the Exchange 
will not route an order unless an away market is displaying a sell 
(buy) quote that is at or below (above) the Upper (Lower) Price 
Band.\14\ The Exchange believes that this provision is reasonably 
designed to prevent an execution from occurring outside the Price Bands 
in a manner that promotes compliance with the Limit Up-Limit Down and 
Trading Pause requirements specified in the Plan. This approach is also 
consistent with that of other exchanges, including the New York Stock 
Exchange, Inc. (``NYSE'') \15\ and EDGA Exchange, Inc. (``EDGA'').\16\
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    \13\ See supra note 9.
    \14\ Under NSX Rule 11.15(a)(iii), unless the terms of the order 
direct otherwise, any order not executed in full on the Exchange 
which is not eligible for routing away (e.g,, no away market is 
displaying a sell (buy) quote that is at or below (above) the Upper 
(Lower) Price Band), or which is not executed in full when routed 
away, will be ranked in the NSX Book in accordance with the order 
priority rules under NSX Rule 11.14 and eligible for execution in 
accordance with NSX Rule 11.15.
    \15\ See Securities Exchange Act Release No. 68876 (February 8, 
2013), 78 FR 10643 (February 14, 2013) (SR-NYSE-2013-09).
    \16\ See Securities Exchange Act Release No. 69002 (February 27, 
2013), 78 FR 14394 (March 5, 2013) (SR-EDGA-2013-08).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Exchange Act.\17\ In addition, 
the rule furthers the objective of Section 6(b)(5) of the Exchange Act 
\18\ by promoting just and equitable principles of trade, removing 
impediments to, and perfecting the mechanisms of, a free and open 
national market system while protecting investors and the public 
interest. The proposal furthers these causes by ensuring that orders in 
NMS Stocks are not routed to other away markets where an execution may 
occur outside the Price Bands, and thereby is reasonably designed to 
prevent an execution outside the Price Bands in a manner that promotes 
compliance with the Limit Up-Limit Down and Trading Pause requirements 
specified in the Plan.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 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. All national securities 
exchanges are required to establish, maintain, and enforce policies and 
procedures reasonably designed to comply with the requirements of the 
Plan. Every member of those exchanges, including ETP Holders of the 
Exchange, are subject to those procedures and prevented from executing 
an order in an NMS Stock outside of the Price Bands prescribed by the 
Plan. Therefore, the Exchange believes the proposed rule change does 
not 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

    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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 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) \21\ normally 
does not become operative prior to 30 days after

[[Page 21487]]

the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ 
the 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. The Commission believes that waiving the operative delay and 
designating April 8, 2013 as the operative date of the proposed rule 
change is consistent with the protection of investors and the public 
interest because such waiver would allow the proposed rule change to be 
operative on the initial date of Plan operations. Accordingly, the 
Commission hereby grants the Exchange's request and designates an 
operative date of April 8, 2013.\23\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of waiving the 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-NSX-2013-12 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-NSX-2013-12. 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-NSX-2013-12 and should be 
submitted on or before May 1, 2013.
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    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08322 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P