Document ID: SEC-2014-0857-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2014-05-27T04:00Z

[Federal Register Volume 79, Number 101 (Tuesday, May 27, 2014)]
[Notices]
[Pages 30205-30206]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-12073]

[[Page 30205]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72194; File No. SR-NYSEMKT-2014-45]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 975NY to 
Provide for New Procedures To Account for Erroneous Trades Occurring 
From Disruptions and/or Malfunctions of Exchange Systems

May 20, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on May 12, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 975NY to provide for new 
procedures to account for erroneous trades occurring from disruptions 
and/or malfunctions of Exchange systems. The text of the proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 975NY to provide for new 
procedures to account for erroneous trades occurring from disruptions 
and/or malfunctions of Exchange systems. This filing is based on the 
rules of the Chicago Board Options Exchange, Incorporated 
(``CBOE'').\4\
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    \4\ See CBOE Rule 6.25(a)(3). The proposed rule change is also 
substantially similar to NYSE Arca, Inc. (``NYSE Arca'') Rule 6.89 
and is similar to NASDAQ OMX PHLX, LLC (``Phlx'') Rule 
1092(c)(ii)(A).
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    Proposed new Rule 975NY(a)(9) would provide that any electronic or 
open outcry transactions that arise out of a ``verifiable systems 
disruption or malfunction'' in the use or operation of an Exchange 
automated quotation, dissemination, execution, or communication system 
may either be nullified or adjusted by Trading Officials.\5\ In 
addition, the proposed rule would provide that transactions that 
qualify for price adjustment will be adjusted to a Theoretical Price, 
as defined in paragraph (a)(2) of Rule 975NY. The Exchange notes that 
proposed Rule 975NY(a)(9) is virtually identical to CBOE Rule 
6.25(a)(3) and similar to rules in effect at other options exchanges 
that allow for the nullification or modification of transactions that 
resulted from verifiable disruptions and/or malfunctions of Exchanges 
systems.\6\ The proposed rule change differs from CBOE Rule 6.25(a)(3) 
because the Exchange proposes to permit a Trading Official to nullify 
or adjust a transaction, which is similar to NYSE Arca Rule 6.89, 
rather than require nullification or adjustment as required under CBOE 
Rule 6.25(a)(3).
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    \5\ Trading Officials are employees or officers of the Exchange 
and are not affiliated with ATP Holders. See Rule 900.2NY(82).
    \6\ See supra n. 3 [sic].
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    The proposed rule change would provide the Exchange with the same 
authority to nullify or adjust trades in the event of a ``verifiable 
disruption or malfunction'' in the use of operation of its systems as 
other exchanges have. The Exchange believes that it is appropriate to 
provide the flexibility and authority provided for in proposed Rule 
975NY(a)(9) so as not to limit the Exchange's ability to plan for and 
respond to unforeseen systems problems or malfunctions. For this 
reason, the Exchange believes that, in the interest of maintaining a 
fair and orderly market and for the protection of investors, authority 
to nullify trades in these circumstances, consistent with the authority 
on other exchanges, is warranted.
    The Exchange notes that the options markets are currently in the 
process of identifying how to harmonize their respective obvious and 
catastrophic error rules, including a rule specifying the circumstances 
in which an options exchange may nullify trades because of a systems 
problem or malfunction. Because it is uncertain when this harmonized 
rule will be filed with and approved by the Commission, the Exchange 
believes it is critical to its current ability to maintain a fair and 
orderly market and to protect investors to propose an amendment to its 
current Obvious Error and Catastrophic Errors Rule 975NY. Today's 
proposed rule would be superseded by a future proposed harmonized rule.
    The Exchange further proposes that, similar to CBOE Rule 
6.25(b)(3), the Exchange's ability to act on its own motion pursuant to 
proposed Rule 975NY(a)(9) would be subject to Rule 975NY(b)(3) 
procedures for reviewing trades on Exchange motion. Accordingly, the 
Exchange proposes to amend Rule 975NY(b)(3) to provide that the 
Exchange may act on its own motion for any transaction subject to 
paragraphs (a)(3)-(a)(9) of Rule 975NY.
    The Exchange also proposes technical changes that would add 
paragraphs (a)(7) and (a)(8) to Rule 975NY(b)(3), which is consistent 
with CBOE rules, and which cross references were previously 
inadvertently excluded from Rule 975NY(b)(3). The Exchange also 
proposes to amend Rule 975NY(a) to be more similar to the corresponding 
provision in CBOE's rules by deleting the specific paragraph references 
and instead refer generally to the conditions specified in paragraph 
(a) of Rule 975NY.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\7\ in general, and furthers the objectives of Section 6(b)(5),\8\ 
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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).

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[[Page 30206]]

    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
national market system and promote a fair and orderly market because it 
would provide authority for the Exchange to nullify or adjust trades 
that may have resulted from a verifiable systems disruption or 
malfunction. The Exchange believes that it is appropriate to provide 
the flexibility and authority provided for in proposed Rule 975NY(a)(9) 
so as not to limit the Exchange's ability to plan for and respond to 
unforeseen systems problems or malfunctions that may result in harm to 
the public. The Exchange notes that the proposed rule change is based 
on CBOE rules and is substantially similar to rules of other 
markets.\9\ The Exchange further notes that pursuant to existing Rule 
975NY(b)(3), when acting under its own motion to nullify or adjust 
trades pursuant to proposed Rule 975NY(a)(9), the Exchange must 
consider whether taking such action would be in the interest of 
maintaining a fair and order market and for the protection of 
investors.
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    \9\ Supra n. 3 [sic].
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, the Exchange 
believes that the proposed rule change is pro-competitive because it 
will align the Exchange's rules with the rules of other markets, 
including CBOE, NYSE Arca, and Phlx. By adopting proposed Rule 
975NY(a)(9), the Exchange will be in a position to treat transactions 
that are a result of a verifiable systems issue or malfunction in a 
manner similar to other exchanges.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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 after the date of the filing, 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. \12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \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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    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2014-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-45. 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 at 100 F Street NE., 
Washington, DC 20549-1090 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 Number SR-
NYSEMKT-2014-45, and should be submitted on or before June 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12073 Filed 5-23-14; 8:45 am]
BILLING CODE 8011-01-P