Document ID: SEC-2013-0704-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2013-04-11T04:00Z

[Federal Register Volume 78, Number 70 (Thursday, April 11, 2013)]
[Notices]
[Pages 21634-21641]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08467]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69319; File No. SR-CHX-2013-08]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt and Amend Exchange Rules in Connection With Limit Up-Limit Down 
Plan

April 5, 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 March 28, 2013, the Chicago Stock Exchange, Inc. (``CHX'' 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

    CHX proposes to amend Article 20, Rule 2 and to adopt Article 20, 
Rule 2A to implement the Limit Up-Limit Down requirements as detailed 
in the Regulation NMS Plan to Address Extraordinary Market Volatility 
(the ``Limit Up-Limit Down Plan,'' ``LULD Plan,'' or the 
``Plan''),which was submitted to and approved, on a one-year pilot 
basis, by the Securities and Exchange Commission (the ``Commission'') 
pursuant to Rule 608 of Regulation NMS under the Act. The Exchange also 
proposes to amend Article 1, Rule 2; Article 20, Rule 4; and Article 
20, Rule 8 to comport the CHX Only Price Sliding Processes with the 
proposed Limit Up-Limit Down Price Sliding (``LULD Price Sliding'') 
functionality and amend Article 16, Rule 8 and Article 20, Rule 10 to 
update various citations affected by this proposed rule change. The 
text of this proposed rule change is available on the Exchange's Web 
site at (www.chx.com) and in 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 CHX included statements 
concerning the purpose of and basis for the proposed rule changes 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 CHX 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
    The Exchange proposes to amend Article 20, Rule 2 and adopt Article 
20, Rule 2A (``Limit Up-Limit Down Plan and Trading Pauses in 
Individual Securities Due to Extraordinary Market Volatility'') to 
implement the Limit Up-Limit Down Plan,\3\ as approved by the 
Commission on a one-year pilot basis.\4\ Moreover, the Exchange 
proposes to amend Article 1, Rule 2; Article 20, Rule 4; and Article 
20, Rule 8 to comport the CHX Only Price Sliding Processes with the 
proposed LULD Price Sliding functionality and to amend Article 16, Rule 
8 and Article 20, Rule 10 to update various citations affected by the 
proposed rule change. Among other things, proposed Rule 2A will 
gradually phase out the current single-stock circuit breaker under CHX 
Article 20, Rule 2(d) and (e), which will be modified and incorporated 
as proposed Article 20, Rule 2A(c)(1) and (b)(2), as discussed below.
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    \3\ See Letter from Janet McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated May 24, 2012.
    \4\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Order Approving, 
on a Pilot Basis, the National Market System Plan To Address 
Extraordinary Market Volatility by BATS Exchange, Inc., BATS Y-
Exchange, Inc., Chicago Board Options Exchange, Incorporated, 
Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, 
Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, 
Inc., NASDAQ OMX PHLX LLC, The Nasdaq Stock Market LLC, National 
Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and 
NYSE Arca, Inc).
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    Since May 6, 2010, when the markets experienced excessive 
volatility in an abbreviated time period (i.e., the ``flash

[[Page 21635]]

crash''), the exchanges and FINRA (the ``Participants'') have 
implemented market-wide measures designed to restore investor 
confidence by reducing the potential for excessive market volatility. 
Among the measures adopted include the trading halts in all stocks 
triggered by extraordinary market volatility,\5\ pilot plans for stock-
by-stock trading pauses \6\ and related changes to the clearly 
erroneous execution rules \7\ and more stringent market maker quoting 
requirements.\8\
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    \5\ See CHX Article 20, Rule 2.
    \6\ Id.
    \7\ See CHX Article 20, Rule 10.
    \8\ See CHX Article 16, Rule 8(a)(2).
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    On April 5, 2011, the Participants filed the Limit Up-Limit Down 
Plan,\9\ amendments to which were subsequently filed on May 24, 2012 
\10\ and January 17, 2013.\11\ On May 31, 2012, the Commission approved 
the Plan, as amended, on a one-year pilot basis.\12\ As proposed, the 
Plan is designed to prevent trades in individual NMS stocks from 
occurring outside specified Price Bands.\13\ As detailed below, the 
requirements of the Plan are coupled with Trading Pauses to accommodate 
more fundamental price moves, as opposed to erroneous trades or 
momentary gaps in liquidity. 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.\14\ As set forth in 
more detail in the Plan, Price Bands consisting of a Lower Price Band 
and an Upper Price Band for each NMS Stock are calculated by the 
Processors.\15\ When the National Best Bid (Offer) is below (above) the 
Lower (Upper) Price Band, the Processors shall disseminate such 
National Best Bid (Offer) with an appropriate flag identifying it as 
not executable. When the National Best Bid (Offer) is equal to the 
Upper (Lower) Price Band, the Processors shall distribute such National 
Best Bid (Offer) with an appropriate flag identifying it as a Limit 
State Quotation.\16\ All trading centers in NMS Stocks must maintain 
written policies and procedures that are reasonably designed to prevent 
the display of offers below the Lower Price Band and bids above the 
Upper Price Band for NMS Stocks. However, the Processor shall 
nevertheless display an offer (bid) below (above) the Lower (Upper) 
Price Band, but with a flag that it is non-executable. Such bids or 
offers shall not be included in the National Best Bid (``NBB'') or 
National Best Offer (``NBO'' and together with the NBB, ``NBBO'') 
calculations.\17\
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    \9\ See Letter from Janet McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated April 5, 2011.
    \10\ See Letter from Janet McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated May 24, 2012.
    \11\ See Letter from Janet McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated January 17, 2013.
    \12\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Order Approving, 
on a Pilot Basis, the National Market System Plan To Address 
Extraordinary Market Volatility by BATS Exchange, Inc., BATS Y-
Exchange, Inc., Chicago Board Options Exchange, Incorporated, 
Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, 
Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, 
Inc., NASDAQ OMX PHLX LLC, The Nasdaq Stock Market LLC, National 
Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and 
NYSE Arca, Inc).
    \13\ Unless otherwise specified, capitalized terms used in this 
rule filing are based on the defined terms of the Plan.
    \14\ The Exchange is a Participant in the Plan.
    \15\ See Section (V)(A) of the Plan.
    \16\ See Section VI(A) of the Plan.
    \17\ See Section VI(A)(3) of the Plan.
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    Trading in a NMS Stock immediately enters a Limit State if the NBO 
(NBB) equals but does not cross the Lower (Upper) Price Band.\18\ 
Trading for a NMS stock exits a Limit State if, within 15 seconds of 
entering the Limit State, all Limit State Quotations were executed or 
canceled in their entirety. If the market does not exit a Limit State 
within 15 seconds, then the Primary Listing Exchange would declare a 
five-minute trading pause pursuant to Section VII of the LULD Plan, 
which would be applicable to all markets trading the security.\19\ In 
addition, the Plan defines a Straddle State as when the NBB (NBO) is 
below (above) the Lower (Upper) Price Band and the NMS Stock is not in 
a Limit State.
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    \18\ See Section VI(B)(1) of the Plan.
    \19\ The primary listing market would declare a trading pause in 
an NMS Stock; upon notification by the primary listing market, the 
Processor would disseminate this information to the public. No 
trades in that NMS Stock could occur during the trading pause, but 
all bids and offers may be displayed. See Section VII(A) of the 
Plan. As discussed below, however, upon declaring a Trading Pause, 
the Exchange proposes to cancel orders resting in the CHX book, as 
well as reject all incoming orders in the affected NMS stock during 
the Trading Pause.
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    For example, assume the Lower Price Band for an NMS Stock is $9.50 
and the Upper Price Band is $10.50, such NMS stock would be in a 
Straddle State if the NBB were below $9.50 and therefore not executable 
and the NBO were above $9.50 (including a NBO that could be above 
$10.50). If an NMS Stock is in a Straddle State and trading in that 
stock deviates from normal trading characteristics, the Primary Listing 
Exchange may declare a trading pause for that NMS Stock.
Proposed Article 20, Rule 2A
    Pursuant to the Plan, the Exchange is required to establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to comply with the Limit Up-Limit Down and Trading 
Pause requirements specified in the Plan. As such, the Exchange 
proposes that the following rules be operative April 8, 2013.
Proposed Article 20, Rule 2A(a)
``Limit Up-Limit Down Requirements''
    Proposed paragraph (a)(1)(A) states that ``Plan'' means the Plan to 
Address Extraordinary Market Volatility Submitted to the Securities and 
Exchange Commission Pursuant to Rule 608 of Regulation NMS under the 
Securities Exchange Act of 1934, Exhibit A to Securities Exchange Act 
Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012), as it may 
be amended from time to time. Also, proposed paragraph (a)(1)(B) states 
that all capitalized terms not otherwise defined in this Rule shall 
have the meanings set forth in the Plan or Exchange rules, as 
applicable. Proposed paragraph (a)(2) states that the Exchange is a 
Participant in, and subject to the applicable requirements of, the 
Plan, which establishes procedures to address extraordinary volatility 
in NMS Stocks. Proposed paragraph (a)(3) states that member 
organizations shall comply with the applicable provisions of the Plan. 
The Exchange believes that this requirement will help ensure the 
compliance by its members with the provisions of the Plan as required 
pursuant to Section II(B) of the Plan.\20\
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    \20\ See Section II(B) of the Plan.
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    Proposed paragraph (a)(4) outlines how the Exchange will comply 
with the Plan's requirement that the Exchange establish, maintain and 
enforce written policies and procedures that are reasonably designed to 
prevent (1) trades at prices that are below the Lower Price Band or 
above the Upper Price Band for an NMS Stock \21\ and (2) the display of 
offers below the Lower Price Band and bids above the Upper Price Band 
for an NMS Stock.\22\
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    \21\ See Section VI(A)(1) of the Plan.
    \22\ See Section VI(A)(3) of the Plan.
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    Specifically, proposed subparagraph (A) states that the Matching 
System shall not execute any orders at prices that are below the Lower 
Price Band or above the Upper Price Band, unless

[[Page 21636]]

such interest is specifically exempted under the Plan. Thereunder, 
proposed subparagraph (A)(i) states that ``Limit'' orders, as defined 
under current Article 1, Rule 2(p),\23\ shall not be executed at a 
price above the Upper Price Band or below the Lower Price Band; 
proposed subparagraph (A)(ii) states that ``Market'' orders, as defined 
under Article 1, Rule 2(n),\24\ may execute at the most aggressive 
permissible price at or within the Price Bands and that all Market 
orders are Immediate or Cancel and shall not be posted to the CHX book; 
\25\ and proposed subparagraph (A)(iii) states that ``Cross'' orders, 
as defined under Article 1, Rule 2(e),\26\ shall not be executed at a 
price above the Upper Price Band or below the Lower Price Band. 
Moreover, proposed subparagraph (B) states that a buy (sell) order 
shall not be displayed at a price above (below) the Upper (Lower) Price 
Band and that such an order may be eligible for Limit Up-Limit Down 
Price Sliding (``LULD Price Sliding''), pursuant to proposed paragraph 
(b). Finally, proposed subparagraph (C) states that the Matching System 
shall not route buy (sell) interest to an away market displaying a sell 
(buy) quote that is above (below) the Upper (Lower) Price Band.
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    \23\ CHX Article 1, Rule 2(p) defines ``Limit order'' as ``an 
order to buy or sell a specific amount of a security at a specific 
price or better if obtainable once the order has been submitted to 
the market.
    \24\ CHX Article 1, Rule 2(n) defines ``IOC Market'' as ``a 
market order that is to be executed only during the Regular Trading 
Session, either in whole or in part, at or better than the 
Exchange's BBO (including any reserve size or other undisplayed 
orders at or better than that price), with any unexecuted balance of 
the order to be immediately cancelled. IOC market orders shall not 
be accepted until (i) the primary market in a security has opened 
trading in that security or (ii) two senior officers of the Exchange 
have determined that it is appropriate for the Exchange to accept 
IOC market orders. For purposes of this rule, another exchange will 
be considered to have opened for trading in a security when the 
first trade in that security occurs in that market on or after 8:30 
a.m.''
    \25\ The Matching System will only accept Market orders as IOC.
    \26\ CHX Article 1, Rule 2(e) defines ``cross'' as ``an order to 
buy and sell the same security at a specific price better than the 
best bid and offer displayed in the Matching System and which would 
not constitute a trade-through under Reg NMS (including all 
applicable exceptions and exemptions). A cross order may represent 
interest of one or more Participants of the Exchange, but may only 
be executed in an increment permitted by Article 20, Rule 
4(a)(7)(b).''
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Proposed Article 20, Rule 2A(b)
``LULD Price Sliding''
    Proposed paragraph (b)(1) outlines the Exchange's proposed Limit 
Up-Limit Down Price Sliding (``LULD Price Sliding''), the purpose of 
which is to provide CHX Participants a price sliding functionality for 
eligible incoming and resting limit orders to follow movements in the 
Price Bands, so as to promote liquidity by reducing the number of 
automatic cancellations. Specifically, proposed paragraph (b)(1) states 
that all fully-displayable incoming and resting limit orders shall be 
eligible for LULD Price Sliding and that an order sender may not opt-
out of the proposed LULD Price Sliding for eligible orders. That is, 
the order sender may not instruct the Matching System to cancel orders 
that are eligible for the proposed LULD Price Sliding if the 
functionality is triggered.\27\ In addition, since only fully-
displayable limit orders are eligible for LULD Price Sliding, limit 
orders marked either ``Reserve Size,'' as defined under Article 1, Rule 
2(dd) \28\ or ``Do Not Display,'' as defined under Article 1, Rule 2(j) 
\29\ shall not be eligible for the proposed LULD Price Sliding. Also, 
proposed paragraph (b)(1) provides that all eligible orders shall 
retain their original limit price and sequence number,\30\ 
notwithstanding price sliding. The importance of this language is that, 
as discussed in detail below, LULD Price Sliding will continuously 
price slide orders up to its original limit price and that all price 
slid orders will be sorted for order execution priority based on 
original limit price, then time of order entry.
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    \27\ Notwithstanding, an order sender may cancel an order at any 
time after order entry and prior to order execution. Under certain 
circumstances, an order may be cancelled after order execution. See 
CHX Article 20, Rules 9 and 10.
    \28\ CHX Article 1, Rule 2(dd) defines ``Reserve Size'' as ``an 
order that identifies a portion of the order that should be 
displayed and a portion of the order that should not be displayed, 
along with an instruction that the displayed portion should be 
refreshed to the original display quantity (or the remaining number 
of shares, if less) whenever the displayed share size falls below a 
specified threshold.''
    \29\ CHX Article 1, Rule 2(j) defines ``Do Not Display'' as ``an 
order that should only be executed or displayed within the 
Exchange's Matching System and should not be routed to another 
market. Any types of cross, IOC or FOK orders are deemed to have 
been received with a `do not route' condition.''
    \30\ The CHX sequence number is a unique number assigned by the 
Matching System to every order upon initial order entry. Since the 
CHX Matching System can only receive one order at a time, each order 
will receive a unique sequence number and, consequently, it is 
impossible for two orders to have the same sequence number.
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    Thereunder, proposed subparagraph (A) states that an eligible 
incoming buy (sell) order that would be displayed at a price above 
(below) the Upper (Lower) Price Band shall be price slid to the Upper 
(Lower) Price Band, subject to proposed paragraph (b)(2). As discussed 
below, proposed paragraph (b)(2) outlines the interplay between LULD 
Price Sliding and the Exchange's other price sliding functionality, the 
CHX Only Price Sliding Processes, detailed under Article 1, Rule 
2(y).\31\ In addition, proposed subparagraph (A) clarifies that a cross 
order priced above the Upper Price Band or below the Lower Price Band 
shall be cancelled and that an ineligible incoming buy (sell) order 
(e.g. an undisplayed or partially displayed limit order) that would 
post at a price above (below) the Upper (Lower) Price Band shall also 
be cancelled.
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    \31\ The Exchange also proposes to amend the current CHX Only 
Price Sliding Processes to comport it with the proposed LULD Price 
Sliding, as propose Article 1, Rule 2(y), as discussed in detail 
below.
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    Example 1. Assume that the Upper Price Band for security XYZ is 
$10.50, the NBO for security XYZ is $10.55 and there are no orders for 
security XYZ resting on the CHX book. Assume that the Matching System 
then receives an incoming fully-displayable limit bid for security XYZ 
priced at $10.53 (``Bid A''). Pursuant to proposed paragraph (b)(1), 
since Bid A is a limit order that is fully-displayable, it is eligible 
for LULD Price Sliding. Also, pursuant to proposed subparagraph (A), 
since Bid A would be displayed at a price above the Upper Price Band, 
Bid A will be price slid to the Upper Price Band at $10.50. Bid A would 
thus be executable and displayed at $10.50.
    Proposed subparagraph (B) states that an eligible resting buy 
(sell) order that, at the time of entry, was displayed at a price at or 
below (above) the Upper (Lower) Price Band, but, due to movements in 
the Price Band, would now be displayed at a price above (below) the 
Upper (Lower) Price Band, shall be price slid to the Upper (Lower) 
Price Band, subject to proposed paragraph (b)(2). In addition, proposed 
subparagraph (B) clarifies that an ineligible resting buy (sell) order 
that, at the time of entry, was posted at a price at or below (above) 
the Upper (Lower) Price Band, but, due to movements in the Price Band, 
would now be posted at a price above (below) the Upper (Lower) Price 
Band, shall be cancelled.
    Proposed subparagraph (C) states that an eligible price slid buy 
(sell) order shall be continuously price slid to follow bi-directional 
movements to the Upper (Lower) Price Band, so that the buy (sell) order 
is always displayed at the Upper (Lower) Price Band, subject to 
proposed paragraph (b)(2). However, a price slid order that could be 
displayed at a more aggressive price will never be price slid through 
its original limit price. Given that Price Bands may move quickly and 
frequently, the Exchange submits that a continuous LULD Price Sliding 
process is essential to avoiding

[[Page 21637]]

excessive order cancellations and to ensure that orders are constantly 
being displayed at the most aggressive permissible price within the 
Price Bands, subject to Rule 610(d) of Regulation NMS and Rule 201 of 
Regulation SHO.
    Example 2. Assume the same as Example 1 and that the Matching 
System receives an incoming fully-displayable limit bid at $10.50 
(``Bid B''). Thus, the CHX Book has two resting bids for security XYZ 
at $10.50. Assume further that the Upper Price Band moves to $10.49 and 
the NBO remains at $10.55. Pursuant to proposed subparagraph (B), since 
Bid B, at the time of entry, was displayed at a price at the Upper 
Price Band, but, due to a movement in the Upper Price Band, would now 
be displayed at a price above the Upper (Lower) Price Band, Bid B will 
be price slid to the new Upper Price Band at $10.49. In addition, 
pursuant to proposed subparagraph (C), Bid A would be price slid to 
$10.49 as well since eligible price slid orders shall be continuously 
price slid to follow bi-directional movements to the Price Bands. Thus, 
both Bid A and Bid B would be executable and displayed at $10.49.
    Example 3. Assume the same as Example 2. Assume further that the 
Upper Price Band moves from $10.49 to $10.52 and the NBO remains at 
$10.55. Pursuant to proposed subparagraph (C), Bid A would be price 
slid to $10.52, since eligible price slid bids will be continuously 
price slid to follow changes to the Upper Price Band. However, pursuant 
to proposed subparagraph (C), Bid B would only be price slid to $10.50, 
since an eligible order will never be price slid through its original 
limit price.
    Examples 1-3 address scenarios where the Upper (Lower) Price Band 
is below (above) the NBO. If the NBO (NBB) is at or below (above) the 
Upper (Lower) Price Band, the applicability of any price sliding to any 
eligible incoming or resting orders would depend on their limit prices 
and whether or not such orders are also eligible for the CHX Only Price 
Sliding Processes.
    Thus, proposed paragraph (b)(2) details the interplay between LULD 
Price Sliding and the CHX Only Price Sliding Processes, which is 
comprised of NMS Price Sliding and Short Sale Price Sliding. 
Specifically, proposed paragraph (b)(2) begins by stating that any 
order eligible for the CHX Only Price Sliding Processes shall be 
eligible for LULD Price Sliding. This is because Article 1, Rule 2(y) 
provides that all fully-displayable limit orders marked ``CHX Only'' 
are eligible for the CHX Only Price Sliding Processes, whereas proposed 
paragraph (b)(1) states that all fully-displayable limit orders are 
eligible for LULD Price Sliding. Thus, an order eligible for LULD Price 
Sliding shall only be eligible for CHX Only Price Sliding if it is 
marked ``CHX Only.''
    Thereunder, proposed subparagraph (A) describes how orders that are 
dually eligible for LULD Price Sliding and the CHX Only Price Sliding 
Processes will be price slid, under certain market and order pricing 
conditions. Specifically, proposed subparagraph (A)(i) states that if a 
dually eligible order would be displayed at a price in violation of any 
combination of Rule 610(d) of Regulation NMS, Rule 201 of Regulation 
SHO or the Plan, the order shall be price slid to the most aggressive 
permissible prices, in compliance with Regulation NMS, Regulation SHO, 
and the Plan. Proposed subparagraph (A)(ii) states that if a dually 
eligible price slid resting order could be executable and/or displayed 
at a more aggressive price, the order shall be price slid to, and 
displayed at, the most aggressive permissible prices, in compliance 
with Regulation NMS, Regulation SHO, and the Plan. The value of the 
``most aggressive permissible prices'' will depend on the pricing of 
the NBBO and the Price Bands, as shown below.
    Example 4. Assume that the NBO for security XYZ is priced at $10.00 
and the Upper Price Band for security XYZ is priced at $10.50. Assume 
further that the CHX book has no resting orders for security XYZ. Then 
assume that the Matching System receives three dually eligible incoming 
bids in quick succession for security XYZ (``Bids A, B and C''). Bid A 
is priced at $10.00 and locks the NBO; Bid B is priced at $10.01 and 
crosses the NBO; and Bid C is priced at $10.51 and is priced through 
the Upper Price Band. Pursuant to proposed subparagraph (A)(i), all 
three bids must be price slid to the ``most aggressive permissible 
prices,'' in compliance with Regulation NMS, Regulation SHO and the 
Plan. The only price sliding functionality that would result in price 
sliding that satisfies all three considerations is NMS Price Sliding. 
Thus, all three bids would be executable at the NBO priced at $10.00 
and displayed at one minimum price increment below the NBO at $9.99.
    Example 5. Assume the same as Example 4, except that the NBO moves 
to $10.40 and the Upper Price Band remains at $10.50. Since all three 
bids had been price slid away from their original limit prices, 
pursuant to proposed subparagraph (A)(ii), the change in the NBO would 
allow the bids to be price slid to, and displayed at, more aggressive 
permissible prices. Thus, Bid A would remain executable at $10.00, but 
would now be displayed at $10.00 since it has reached its original 
limit price; Bid B would be price slid to $10.01 and displayed at 
$10.01, since it has reached its original limit price; and Bid C would 
be price slid to $10.40 and displayed at $10.39. Similarly, if the NBO 
instead moved to $10.51, Bids A and B would have been price slid to 
their original limit prices, whereas Bid C would have been price slid 
to the Upper Price Band. In such a scenario, Bid C priced at the Upper 
Price Band is its ``most aggressive permissible price.'' Alternatively, 
if the Upper Price Band moved away, but the NBO remained the same, all 
three bids would have remained at their respective prices, because the 
bids were already priced at their most aggressive permissible prices.
    Proposed subparagraph (B) outlines what would happen to an order 
that is eligible for LULD Price Sliding, but not eligible for the CHX 
Only Price Sliding Processes (i.e. the order is a fully-displayable 
limit order not marked ``CHX Only''), under certain market and pricing 
conditions. Specifically, proposed subparagraph (B)(i) provides that an 
incoming buy (sell) order that is eligible for LULD Price Sliding only 
shall be rejected if it would be displayed at a price that locks or 
crosses the NBO (NBB) and the NBO (NBB) is at or below (above) the 
Upper (Lower) Price Band.
    Example 6. Assume that the NBO for security XYZ is priced at $10.45 
and the Upper Price Band for security XYZ is priced at $10.50. Assume 
further that the CHX book has no resting orders for security XYZ. Then 
assume that the Matching System first receives an incoming bid eligible 
for LULD Price Sliding only priced at $10.46 (``Bid A''), then another 
incoming bid eligible for LULD Price Sliding only priced at $10.52 
(``Bid B''). Since Bid A and Bid B are not eligible for CHX Only Price 
Sliding Processes and the display of Bid A and Bid B would cross the 
NBO priced at $10.45, pursuant to subparagraph (B)(i), both orders 
would be cancelled. Alternatively, if the NBO were priced at $10.51, 
Bid A would have posted at its original limit price of $10.46, whereas 
Bid B would have been price slid to the Upper Price Band, since the NBO 
was priced above the Upper Price Band, pursuant to proposed paragraph 
(b)(1)(A).
    Proposed subparagraph (B)(ii) states that an order that is eligible 
for LULD Price Sliding only shall be cancelled if the price sliding of 
the resting order pursuant to LULD Price Sliding would

[[Page 21638]]

result in a violation of either the prohibition against locked and 
crossed markets under Rule 610(d) of Regulation NMS or the short sale 
price test restriction under Rule 201 of Regulation SHO.
    Example 7. Assume that the NBO for security XYZ is $10.51 and the 
Upper Price Band is $10.50. Assume that the CHX book has one resting 
order for security XYZ and it is a price slid bid at $10.50, with an 
original limit price of $10.52 (``Bid A''). Now assume that the Upper 
Price Band moves to $10.52. If Bid A were to be price slid to $10.52, 
pursuant to proposed paragraph (b)(1)(C), Bid A would be displayed at a 
price that would cross the NBO at $10.51, in violation of Rule 610(d) 
of Regulation NMS. Thus, since Bid A is not eligible for the CHX Only 
Price Sliding Processes, Bid A will be cancelled, pursuant to proposed 
subparagraph (B)(ii). Alternatively, if Bid A were eligible for NMS 
Price Sliding, Bid A would have remained displayed at $10.50, but would 
have been executable at $10.51, pursuant to proposed paragraph 
(b)(2)(A)(ii).
    Proposed paragraph (b)(3) addresses the issue of order execution 
priority for orders that have been price slid pursuant to LULD Price 
Sliding. Specifically, proposed paragraph (b)(3) states that eligible 
orders subject to LULD Price Sliding will retain their time priority 
versus other orders based upon the time those orders were initially 
received by the Matching System. This language mirrors current CHX 
Article 1, Rule 2(y)(4), which establishes an identical requirement for 
orders subject to the CHX Only Price Sliding Processes.\32\ In 
addition, the proposed paragraph further states that if an eligible 
order is price slid pursuant to LULD Price Sliding, it shall receive 
order execution priority pursuant to Article 20, Rule 8(a)(7). To this 
end, the Exchange also proposes to amend CHX Article 20, Rule 8(b)(7) 
to reflect that orders subject to the CHX Only Price Sliding Processes 
and/or the proposed LULD Price Sliding shall be subject to ``Working 
Price Priority,'' which establishes order execution priority of an 
order based first on its working price (i.e. most aggressive executable 
price), then time of original order entry (i.e. sequence number).\33\ 
The following examples illustrate how Working Price Priority would 
function.
---------------------------------------------------------------------------

    \32\ CHX Article 1, Rule 2(y)(4) states as follows:
    Original Time Priority Retained. CHX Only orders subject to the 
Price Sliding Processes will retain their time priority versus other 
orders based upon the time those orders were initially received by 
the Matching System.
    \33\ See CHX Article 1, Rule 2(y); see also Securities Exchange 
Act Release No. 69075 (March 8, 2013), 78 FR 16311 (March 14, 2013) 
(SR-CHX-2013-07).
    The term ``Working Price Priority'' best describes the current 
order execution priority scheme currently utilized by the CHX Only 
Price Sliding Processes, which the Exchange now proposes to apply to 
orders subject to LULD Price Sliding. As such, for ease of 
reference, the Exchange proposes to replace the term ``ranked 
price'' with the more accurate term ``working price'' in CHX Article 
20, Rule 8(a)(7). In amending Rule 8(a)(7), the Exchange does not 
propose to substantively modify the order execution scheme currently 
utilized by the CHX Only Price Sliding Processes.
---------------------------------------------------------------------------

    Example 8. Assume that the NBB for security XYZ is $9.50, the Lower 
Price Band for security XYZ is $9.51 and the short sale price test 
restriction is not in effect for security XYZ. Assume further that the 
CHX book has no resting orders for security XYZ. Then assume that a 
fully-displayable CHX Only inbound limit offer for security XYZ priced 
at $9.51, with a sequence number of 10 (``Offer A''), is received by 
the Matching System. Then assume that two additional fully-displayable 
CHX Only inbound limit offers for security XYZ priced at $9.50 each, 
with sequence numbers of 20 (``Offer B'') and 30 (``Offer C''), 
respectively, are received by the Matching System. The order execution 
priority of the offers is as follows (roman numbers represent order 
execution priority):
---------------------------------------------------------------------------

    \34\ In situations, such as Offer A, where an inbound order is 
posted to the CHX book without price sliding, the Working Price and 
Limit Price of the order will always be the same.

(i): 10............................  A--Original Limit       Work: $9.51 \34\......  Display: $9.51.
                                      Price: $9.51.
(ii): 20...........................  B--Original Limit       Work: $9.51...........  Display: $9.51.
                                      Price: $9.50.
(iii): 30..........................  C--Original Limit       Work: $9.51...........  Display: $9.51.
                                      Price: $9.50.
 

Offer A is not price slid because its limit price locks the Lower Price 
Band at $9.51. In contrast, Offers B and C are price slid and displayed 
at $9.51 because their limit prices at $9.50 cross the Lower Price 
Band. Thus, Offer A receives order execution priority over Offers B and 
C because although Offers B and C have a superior limit price to Offer 
A, Offer A has a superior working price to Offers B and C. In turn, 
Offer B receives order execution priority over Offer C because although 
both are priced identically, Offer B has a superior sequence number to 
Offer C.
    Example 9. Assume the same as Example 8. Now assume that the NBB 
remains at $9.50, but the Lower Price Band moves from $9.51 to $9.49. 
At this point, the order execution priority of the offers is as 
follows:
---------------------------------------------------------------------------

    \35\ In situations, such as Offer A, where an inbound order is 
posted to the CHX book without price sliding, the Working Price and 
Limit Price of the order will always be the same.

(i): 20............................  B--Original Limit       Work: $9.50...........  Display: $9.51.
                                      Price: $9.50.
(ii): 30...........................  C--Original Limit       Work: $9.50...........  Display: $9.51.
                                      Price: $9.50.
(iii): 10..........................  A--Original Limit       Work: $9.51 \35\......  Display: $9.51.
                                      Price: $9.51.
 

Pursuant to proposed Rule 2A(b)(2)(A)(ii), Offers B and C have been 
price slid to the NBB locking price of $9.50 and remain displayed at 
$9.51, which are the most aggressive permissible prices that Offers B 
and C could be executed and displayed in compliance with Regulation 
NMS, Regulation SHO, and the Plan. In contrast, Offer A remains 
executable and displayed at $9.51, because an order will never be price 
slid through its original limit price. Thus, Offers B and C have jumped 
Offer A for order execution priority. Moreover, just as in Example 8, 
Offer B maintains priority over Offer C because Offer B has a superior 
sequence number to Offer C. If the Lower Price Band were to move back 
to $9.51, Offer A would jump Offers B and C for order execution 
priority, which would result in order execution priority as detailed in 
Example 8.
Proposed Article 20, Rule 2A(c)
``Trading Pauses''
    Proposed paragraph (c) outlines the phase-in of the Plan \36\ and 
the Exchange's protocol for a Trading Pause in a NMS security. 
Specifically, proposed paragraph (c) begins by stating that securities 
shall remain subject to

[[Page 21639]]

the requirements of proposed paragraphs (c)(1) and (c)(2) below until 
such securities become subject to the Plan. Moreover, once an NMS Stock 
is subject to the Plan, the security shall only be subject to a Trading 
Pause under the Plan consistent with proposed paragraphs (c)(3) and 
(c)(4) below. The Exchange believes this language is consistent with 
the Plan's requirements for the Exchange to establish, maintain, and 
enforce policies and procedures that are reasonably designed to comply 
with the Trading Pause requirements specified in the Plan.\37\
---------------------------------------------------------------------------

    \36\ See Section VIII of the Plan.
    \37\ Id.
---------------------------------------------------------------------------

    Proposed paragraphs (c)(3) states that a Trading Pause shall be 
commenced by the Exchange pursuant to the Plan.\38\ Proposed 
subparagraph (A) provides that when a Trading Pause is declared, the 
Exchange shall cancel all orders in the NMS Stock subject to the 
Trading Pause resting in the CHX book. In addition, proposed 
subparagraph (B) provides that no trades in the NMS Stock subject to 
the Trading Pause shall be executed on the Exchange or any other 
trading center and the Matching System shall reject all incoming orders 
in the NMS Stock subject to the Trading Pause.
---------------------------------------------------------------------------

    \38\ The Exchange will develop written policies and procedures 
to determine when to declare a Trading Pause in the situation where 
the Exchange may declare a Trading Pause for a NMS Stock listed on 
the Exchange when (i) the NBB (NBO) is below (above) the Lower 
(Upper) Price Band and the NMS Stock is not in a Limit State; and 
(ii) trading in that NMS Stock deviates from normal trading 
characteristics. See Section VII(A)(1) of the Plan.
---------------------------------------------------------------------------

    Proposed paragraph (c)(4) states after a Trading Pause, the 
Exchange shall attempt to reopen trading in the NMS Stock subject to 
the Trading Pause, pursuant to the Plan and to procedures adopted by 
the Exchange and communicated by notice to its Participants.\39\ 
Proposed paragraph (c)(4) simply states that nothing in this proposed 
Rule 2A should be construed to limit the ability of the Exchange to 
otherwise halt, suspend, or pause the trading in any stock or stocks 
traded on the Exchange pursuant to any other Exchange rule or policy. 
This language is nearly identical to current CHX Article 20, Rule 2(f), 
now proposed Rule 2(d).
---------------------------------------------------------------------------

    \39\ See Section VII(B) and (C) of the Plan.
---------------------------------------------------------------------------

Proposed Article 1, Rule 2(y)
``CHX Only''
    The Exchange proposed to amend Article 1, Rule 2(y), which defines 
the ``CHX Only'' order type and the corresponding CHX Only Price 
Sliding Processes, to modify the CHX Only order type only to the extent 
necessary to comport it with the Plan and the Exchange's proposed LULD 
Price Sliding. As such, the Exchange proposes to make the amendments to 
Article 1, Rule 2(y) operative April 8, 2013, to coincide with the 
operative date for the Plan.
    In 2011, the Exchange introduced the CHX Only order type, amended 
in 2013,\40\ which is designed to encourage displayed liquidity on the 
Exchange and to reduce automatic cancellations by the Matching 
System.\41\ The CHX Only order type is a limit order that is to be 
ranked and executed on the Exchange, without routing away to another 
trading center.\42\ Order senders have the option to default all limit 
orders to ``CHX Only'' and therefore be subject to the CHX Only Price 
Sliding Processes. The CHX Only Price Sliding Processes is an order 
handling functionality comprised of NMS Price Sliding and Short Sale 
Price Sliding, to ensure compliance with Rule 610(d) of Regulation NMS 
and Rule 201 of Regulation SHO. The CHX Only Price Sliding Processes 
are applied to all CHX Only orders that, at the time of order entry, 
would be in violation of Rule 610(d) of Regulation NMS and/or Rule 201 
of Regulation SHO, if displayed or executed at the limit price. 
However, a CHX Only order that, at the time of order entry, could be 
displayed or executed in compliance with Regulation NMS and Rule 201 of 
Regulation SHO will not be subject to the CHX Only Price Sliding 
Processes and shall be displayed and executable without price sliding.
---------------------------------------------------------------------------

    \40\ See Securities Exchange Act Release No. 69075 (March 8, 
2013), 78 FR 16311 (March 14, 2013) (SR-CHX-2013-07).
    \41\ Prior to the recent amendment, the CHX Only order type was 
originally adopted in 2011. See Securities Exchange Act Release No. 
64319 (Apr. 21, 2011), 76 FR 23634 (Apr. 27, 2011) (SR-CHX-2011-04).
    \42\ The Exchange currently offers one order subtype (i.e. CHX 
Only) and two order modifiers (``Do Not Route,'' under CHX Article 
1, Rule 2(k) and ``Post Only,'' under CHX Article 20, Rule 4(b)(18)) 
that require order execution on the Exchange only. Of the three, 
only orders marked CHX Only are eligible for the CHX Only Price 
Sliding Processes. An order that is not marked CHX Only shall not be 
eligible for the CHX Only Price Sliding Processes.
---------------------------------------------------------------------------

    Currently, for those orders subject to the CHX Only Price Sliding 
Processes, the Matching System will reprice, re-rank and/or re-display 
certain CHX Only orders multiple times depending on changes to the NBBO 
(the repricing of CHX Only sell short orders subject to Rule 201 of 
Regulation SHO is dependent solely on declines to the NBB), so long as 
the order can be ranked and displayed in an increment consistent with 
the provisions of Rule 610(d) of Regulation NMS and Rule 201 of 
Regulation SHO, until the order is executed, cancelled or the original 
limit price is reached. Also, the CHX Only Price Sliding Processes are 
based on Protected Quotations\43\ at equities exchanges other than the 
Exchange (Short Sale Price Sliding is based on the NBB) and all CHX 
Only limit orders subject to the CHX Only Price Sliding Processes shall 
maintain their original limit price and shall retain their time 
priority with respect to other orders based upon the time those orders 
were initially received by the Matching System. Finally, orders that 
have been price slid pursuant to the CHX Only Price Sliding Processes 
are prioritized for order execution by the price at which they are 
``ranked'' (i.e. ``working'' price or ``executable'' price), then time 
of receipt (i.e. sequence number).
---------------------------------------------------------------------------

    \43\ Pursuant to Article 20, Rule 6(a)(1), the Exchange defines 
``Protected Quotation'' as that term is defined under Rule 600(b) of 
Regulation NMS (17 CFR 242.600(b)), which states ``protected 
quotation means a protected bid or a protected offer.'' In turn, 
Rule 600(b)(57) of Regulation NMS (17 CFR 242.600(b)(57)) states, 
``protected bid or offer means a quotation in an NMS stock that: (i) 
Is displayed by an automated trading center; (ii) is disseminated 
pursuant to an effective national market system plan; and (iii) is 
an automated quotation that is the best bid or best offer of a 
national securities exchange, the best bid or best offer of The 
Nasdaq Stock Market, Inc., or the best bid or best offer of a 
national securities association other than the best bid or best 
offer of the Nasdaq Stock Market, Inc.''
---------------------------------------------------------------------------

    The Exchange now proposes to make the following amendments and/or 
additions to Rule 2(y). First, the Exchange proposes to add an 
additional sentence above paragraph (y)(1) that provides that CHX Only 
orders shall also be eligible for LULD Price Sliding, pursuant to 
proposed Article 20, Rule 2A(b)(2). As discussed above, pursuant to 
proposed Article 20, Rule 2A(b)(2), all limit orders marked CHX Only 
are eligible for LULD Price Sliding precisely because limit orders 
marked CHX Only will always be fully-displayable.
    The Exchange proposes to amend paragraph (y)(1) to comport NMS 
Price Sliding with the Plan. Specifically, the Exchange proposes to add 
an additional sentence to proposed paragraph (y)(1)(A) that provides 
that if the NBB (NBO) is priced below (above) the Lower (Upper) Price 
Band, an incoming CHX Only sell (buy) order that, at the time of entry, 
would be displayed at a price below (above) the Lower (Upper) Price 
Band, shall be ranked and displayed at the Lower (Upper) Price Band, 
pursuant to proposed Article 20, Rule 2A(b)(2)(A)(i).
    The Exchange also proposes to add similar language to paragraph 
(y)(1)(B). Specifically, the Exchange proposes to add an additional 
sentence to

[[Page 21640]]

subparagraph (i) that provides that if the NBB (NBO) moves to a price 
below (above) the Lower (Upper) Price Band, the resting CHX Only sell 
(buy) order shall be re-ranked at the Lower (Upper) Price Band, 
pursuant to proposed Article 20, Rule 2A(b)(2)(A)(ii). In addition, the 
Exchange proposes to add an additional sentence to subparagraph (ii) 
that provides that if the NBB (NBO) moves to a price below (above) the 
Lower (Upper) Price Band, the resting CHX Only order shall be re-
displayed at the Lower (Upper) Price Band, pursuant to Article 20, Rule 
2A(b)(2)(A)(ii).
    The Exchange further proposes to amend paragraph (y)(2) to comport 
Short Sale Price Sliding with the Plan. Specifically, the Exchange 
proposes to amend subparagraph (A) to provide that a CHX Only sell 
short order that, at the time of entry, could not be executed or 
displayed in compliance with Rule 201 of Regulation SHO will be 
repriced and displayed by the Matching System at the greater of one 
minimum price variation above the current NBB or the Lower Price Band, 
pursuant to Article 20, Rule 2A(b)(2)(A)(i). Similarly, the Exchange 
proposes to amend subparagraph (B) to provide that to reflect declines 
in the NBB and/or the Lower Price Band, the Matching System will 
continue to reprice and display a CHX Only sell short order subject to 
Rule 201 of Regulation SHO at the greater of the Permitted Price or the 
Lower Price Band, until the order is executed, cancelled or its 
original limit price is reached, pursuant to Article 20, Rule 
2A(b)(2)(A)(ii). The purpose of these amendments are to ensure that in 
the instance where the Lower Price Band is above the NBB and the short 
sale price test restriction under Rule 201 of Regulation SHO is in 
effect, orders are not priced or price slid below the Lower Price Band.
    The Exchange also proposes to amend paragraph (y)(2)(D) to provide 
that when a short sale price test restriction under Rule 201 of 
Regulation SHO is in effect, the Matching System may execute a CHX Only 
sell short order subject to Short Sale Price Sliding at a price below 
the Permitted Price if, at the time of initial display of the short 
sale order, the order was at a price above the then current NBB; 
provided, however, that the CHX Only sell short order is priced at or 
above the Lower Price Band at the time it is priced below the Permitted 
Price. The purpose of this amendment is to prohibit an order that may 
be executed pursuant to Rule 201(b)(1)(iii)(A) of Regulation SHO from 
executing at a price below the Lower Price Band.
Article 20, Rule 4(b)(18)
``Post Only''
    The Exchange proposes to amend Rule 4(b)(18), to comport the 
definition of ``Post Only'' with the Plan. Specifically, Rule 4(b)(18) 
defines ``Post Only'' as an order as one that is to be posted on the 
Exchange and not routed away to another trading center. Furthermore, a 
Post Only order will be immediately cancelled under two circumstances. 
First, a Post Only order that would remove liquidity from the CHX book 
will be immediately cancelled. Second, a Post Only order that, at the 
time of order entry, would lock or cross a Protected Quotation of an 
external market will be immediately cancelled; provided, however, that 
if the Post Only order is marked ``CHX Only'' and is eligible for the 
CHX Only Price Sliding Processes, pursuant to Article 1, Rule 2(y), the 
Post Only order that would lock or cross a Protected Quotation of an 
external market shall be subject to the CHX Only Price Sliding 
Processes and shall not be immediately cancelled.
    In light of the Plan and LULD Price Sliding, the Exchange proposes 
to amend Rule 4(b)(18)(B) to provide that a Post Only order will be 
immediately cancelled when, at the time of order entry, the Post Only 
order would lock or cross a Protected Quotation of an external market; 
provided, however, that if the Post Only order is marked ``CHX Only'' 
and is eligible for the CHX Only Price Sliding Processes, pursuant to 
Article 1, Rule 2(y), the Post Only order that would lock or cross a 
Protected Quotation of an external market shall be subject to the CHX 
Only Price Sliding Processes or Limit Up-Limit Down Price Sliding, 
pursuant to Article 20, Rule 2A(b), whichever is applicable, and shall 
not be immediately cancelled.
Article 16, Rule 8
Article 20, Rule 10
Citation Updates
    In light of this proposed rule change, current Article 20, Rule 
2(e) will no longer exist. As discussed above, current Article 20, Rule 
2(e) has been modified and incorporated into proposed Article 20, Rule 
2A as proposed Rule 2A(c)(1). Thus, the Exchange proposes to update all 
citations to the current Article 20, Rule 2(e) in the CHX rules, which 
are specifically found under Article 16, Rule 8 and Article 20, Rule 
10.\44\
---------------------------------------------------------------------------

    \44\ It is important to note that the Exchange does not propose 
to make any substantive amendments to Article 16, Rule 8 and Article 
20, Rule 10.
---------------------------------------------------------------------------

    With respect to Article 16, Rule 8(a), the Exchange proposes to 
amend paragraphs (a)(2)(D) and (E) to update citations of current Rule 
2 to both proposed Rule 2 and proposed Rule 2A; current Rule 2(e)(i) to 
proposed Rule 2A(c)(1)(A); current Rule 2(e)(ii) to proposed Rule 
2A(c)(1)(B); and current Rule 2(e)(iii) to proposed Rule 2A(c)(1)(C).
    With respect to Article 20, Rule 10, the Exchange proposes to amend 
paragraph (c)(1)-(3) to delete all citations to Article 20, Rule 2(e) 
and to replace them with references to ``certain specified 
securities,'' which are described in paragraph (c)(4). In turn, the 
Exchange proposes to amend paragraph (c)(4) to delete all citations to 
Article 20, Rule 2(e) and to replace them with the term ``Subject 
Securities,'' which the Exchange proposes to define as any securities 
included in the ``S&P 500[supreg] Index, the Russell 1000[supreg] 
Index, as well as a pilot list of Exchange Traded Products.'' \45\
---------------------------------------------------------------------------

    \45\ These proposed amendments to Article 20, Rule 10 are 
identical to the language and citation methodology of BATS BZX Rule 
11.17(c)(1)-(4).
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Rule 608(c) of 
Regulation NMS,\46\ which requires the Exchange, as a sponsor and 
participant to an effective national market system plan, namely the 
amended Limit Up-Limit Down Plan, to comply with the terms of the Plan, 
as submitted to the Commission on May 24, 2012 \47\ and approved by the 
Commission on May 31, 2012 \48\ pursuant to Rule 608(b)(2) of 
Regulation NMS.\49\
---------------------------------------------------------------------------

    \46\ 17 CFR 242.608(c).
    \47\ See Letter from Janet McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated May 24, 2012.
    \48\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Order Approving, 
on a Pilot Basis, the National Market System Plan To Address 
Extraordinary Market Volatility by BATS Exchange, Inc., BATS Y-
Exchange, Inc., Chicago Board Options Exchange, Incorporated, 
Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, 
Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, 
Inc., NASDAQ OMX PHLX LLC, The Nasdaq Stock Market LLC, National 
Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and 
NYSE Arca, Inc).
    \49\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    Moreover, the proposed rule changes are consistent with Section 
6(b) of the Act \50\ in general, and furthers the objectives of Section 
6(b)(5) \51\ in particular, in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and

[[Page 21641]]

coordination with persons engaged in facilitating transaction in 
securities, to remove impediments and perfect the mechanisms of a free 
and open market, and, in general, to protect investors and the public 
interest. Specifically, the Exchange believes that the proposed rule 
change supports the objective of the Act by providing harmonization 
between CHX Rules and rules of all other organization subject to the 
requirements of the Plan, so as to promote uniformity across markets 
concerning when and how to halt trading in individual NMS Stocks as a 
result of extraordinary market volatility. Such uniformity would also 
result in less burdensome and more efficient regulatory compliance. In 
addition, the Exchange submits that the proposed rules concerning the 
Limit Up-Limit Down requirements are consistent with the protection of 
investors and the public interest in that the proposed rules will 
promote investor confidence by reducing the potential for excessive 
market volatility.
---------------------------------------------------------------------------

    \50\ 15 U.S.C. 78f(b).
    \51\ 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. Specifically, the Exchange 
believes that the proposed change will result in the uniform 
implementation of the Limit Up-Limit Down Plan,\52\ among all of the 
organizations subject to the Plan.
---------------------------------------------------------------------------

    \52\ See Letter from Janet McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated May 24, 2012.
---------------------------------------------------------------------------

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

    No written comments were either solicited or 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 \53\ and Rule 19b-4(f)(6) thereunder.\54\ 
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.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \54\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \55\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\56\ 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 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 proposal to become operative by the April 8, 2013 date 
of implementation for the Limit Up-Limit Down Plan. Accordingly, the 
Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.\57\
---------------------------------------------------------------------------

    \55\ 17 CFR 240.19b-4(f)(6).
    \56\ 17 CFR 240.19b-4(f)(6)(iii).
    \57\ 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).
---------------------------------------------------------------------------

    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-CHX-2013-08 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-CHX-2013-08. 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-CHX-2013-08 and should be 
submitted on or before May 2, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\58\
---------------------------------------------------------------------------

    \58\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08467 Filed 4-10-13; 8:45 am]
BILLING CODE 8011-01-P