Document ID: SEC-2010-1187-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-08-05T04:00Z

[Federal Register: August 5, 2010 (Volume 75, Number 150)]
[Notices]               
[Page 47330-47332]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05au10-101]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62610; File No. SR-NYSEArca-2010-73]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Arca, Inc. That 
Constitutes a Stated Interpretation With Respect to the Meaning, 
Administration, and Enforcement of NYSE Arca Equities Rule 7.10(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 28, 2010, NYSE Arca, Inc. (``NYSE Arca'' 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes that constitutes [sic] a stated 
interpretation with respect to the meaning, administration, and 
enforcement of NYSE Arca Equities Rule 7.10(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 NYSE Arca Equities 
Rule 7.10(g), concerning the ability of an Exchange Officer to act on 
his or her own motion to review potentially erroneous executions.
    Rule 7.10(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 7.10(g), the Exchange believes that a series 
of transactions in a particular security on one or more trading days 
may 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

[[Page 47331]]

circumstances, the Event may be considered to constitute extraordinary 
circumstances pursuant to Rule 7.10(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.
    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 New York Stock Exchange LLC (``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, the NYSE 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.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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-NYSEArca-2010-73 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-NYSEArca-2010-73. 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-NYSEArca-2010-73 and

[[Page 47332]]

should be submitted on or before August 26, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19247 Filed 8-4-10; 8:45 am]
BILLING CODE 8010-01-P