Document ID: SEC-2012-2170-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2012-12-31T05:00Z

[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Notices]
[Pages 77154-77156]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31247]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68520; File No. SR-NYSEMKT-2012-80]

 Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Exchange 
Rule 953NY--Trading Halts and Suspensions

December 21, 2012.

    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 December 10, 2012, 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 Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Exchange Rule 953NY--Trading Halts 
and Suspensions. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Exchange Rule 953NY by adopting a 
provision governing the nullification of trades that occur while the 
options class is subject to a trading halt. This proposal is based on 
and substantially similar to Rule 1092(c)(iv)(A) of NASDAQ OMX PHLX, 
LLC (``PHLX'').\5\
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    \5\ See Securities Exchange Act Release No. 57712 (April 24, 
2008) 73 FR 24100 (May 1, 2008). Approval Order for SR-Phlx-2007-69, 
as amended.
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    Specifically, the Exchange proposes to adopt Commentary .04 to Rule 
953NY, which provides that any trade that occurs during a trading halt 
on the Exchange in a given option shall be nullified.
    Rule 953NY sets forth the circumstances when the Exchange may halt 
trading in an options contract or options series. Such trading halts 
are applicable to both electronic and open-outcry trading. Pursuant to 
Rule 953NY(a), NYSE Amex shall halt or suspend the trading of options 
whenever the Exchange deems such action appropriate in the interests of 
a fair and orderly market and to protect investors. Among the factors 
that may be considered are: (i) The trading in the

[[Page 77155]]

underlying stock or Exchange Traded Funds (``ETF'') has been halted or 
suspended in the primary market; (ii) the opening of such underlying 
stock or ETF in the primary market has been delayed because of unusual 
circumstances; (iii) the Exchange has been advised that the issuer of 
the underlying stock or ETF is about to make an important announcement 
affecting such issuer; or (iv) other unusual conditions or 
circumstances are present. In addition, pursuant to Rule 953NY(b), the 
Exchange shall halt trading in any equity option (including options 
overlying ETFs), when the underlying security is paused.\6\
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    \6\ A trading pause is in an underlying security is triggered 
when the price of the security falls or rises 10% or more in a 
rolling 5-minute window. Trading pauses are initiated by the primary 
market where the stock trades.
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    Notwithstanding a regulatory or non-regulatory trading halt in an 
options class, the Exchange recognizes that there could be occurrences 
where an aberrant trade might still occur after the Exchange has halted 
trading in a given options class. For example, this could happen 
because of a temporary systems outage, a communications issue between 
the electronic and floor-based markets, or other type of in-flight 
messaging scenario where the Exchange's automatic execution system 
executed an order, even though the options had been halted prior to the 
time of execution. Because the Exchange would have already halted 
trading of the option class, either because it was warranted in the 
interest of a fair and orderly market and the protection of investors 
pursuant to Rule 953NY(a), or required pursuant to Rule 953NY(b) 
because the underlying security was paused, the Exchange does not 
believe that any trade that takes place after an options class that has 
been halted on the Exchange should stand. Proposed Commentary .04 will 
require the Exchange to nullify these aberrant trades. The Exchange 
notes that executions occurring prior to a trading halt in an options 
class but not yet reported to the Exchange, will still be reported for 
dissemination to OPRA after the options have halted. Such trades would 
not be subject to nullification by the Exchange pursuant to proposed 
Commentary .04.
    Under existing rules, the Exchange may only nullify a trade which 
occurred during a trading halt if, (i) pursuant to Rule 975NY the trade 
qualifies as an Obvious or Catastrophic Error, or (ii) pursuant to Rule 
965NY Commentary .01, a Trading Official determines that the execution 
of such trade was done in violation of certain Exchange rules governing 
open outcry trading.\7\ The addition of proposed Commentary .04 to Rule 
953NY will expand the Exchange's authority to nullify trades that may 
occur during a trading halt, which the Exchange believes is in keeping 
with the maintenance of a fair and orderly market and the protection of 
investors.
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    \7\ A trade may also be nullified, without Exchange interaction, 
if all parties to the trade agree to the nullification.
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    The Exchange notes that the PHLX Rule 1092(c)(iv) also includes 
other provisions related to trading halts and the nullification of 
trades. Paragraphs (B)-(C) of the PHLX rule deal with the nullification 
of an options trade whenever the underlying security or a certain 
percentage of the components of an underlying index have halted, 
regardless of whether the options themselves have halted. Exchange 
rules do not require that an options class be halted whenever the 
underlying security halts, therefore it would be inconsistent to 
nullify a trade simply because the underlying security or index 
components halted, unless the Exchange had also halted the trading of 
options overlying such security or index.\8\ The Exchange only proposes 
to nullify a trade in the event the options have been halted by the 
Exchange, and therefore is not proposing to adopt PHLX Rule 
1092(c)(iv)(B)-(C). Additionally, paragraph (D) of the PHLX rule deals 
with Treasury securities. The Exchange does not trade options on 
Treasury securities; therefore this provision is not relevant to this 
filing.
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    \8\ The Exchange notes that Rule 953NY(a) states that the 
Exchange may consider the halting of an underlying security as a 
factor to be taken into consideration when deciding whether to halt 
trading in the options overlying such security, and generally will 
do so and will halt an options class whenever an underlying security 
or index halts.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\9\ in general, and 
furthers the objectives of Section 6(b)(5),\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule changes are consistent 
with the Act because permitting the Exchange to nullify trades that 
occur during a trading halt helps to ensure that NYSE Amex may continue 
to meet its obligation to maintain a fair and orderly market and 
protect investors. In particular, the Exchange believes that the 
proposal promotes just and equitable principles of trade because it 
will ensure that when the Exchange is halted for trading, no trades 
that mistakenly were executed during the halt will be permitted to 
stand, thereby assuring consistent treatment of orders during a trading 
halt. Furthermore, the proposal removes impediments to and perfects the 
mechanism of a free and open market and a national market system by 
assuring that when trading is halted, no executions may occur and any 
aberrant trades are nullified.

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

    Because the foregoing proposed rule 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 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, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file 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 proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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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

[[Page 77156]]

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-NYSEMKT-2012-80 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-NYSEMKT-2012-80. 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 available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2012-80 and should 
be submitted on or before January 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31247 Filed 12-28-12; 8:45 am]
BILLING CODE 8011-01-P