Document ID: SEC-2013-0287-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-02-11T05:00Z

[Federal Register Volume 78, Number 28 (Monday, February 11, 2013)]
[Notices]
[Pages 9760-9762]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02798]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68816; File No. SR-PHLX-2013-11]

Self-Regulatory Organizations; The NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to [sic] 
Proposes To Delay the Operative Date of a Rule Change to Exchange Rule 
133

February 1, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 28, 2013, NASDAQ OMX PHLX LLC (``Phlx'' 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.
---------------------------------------------------------------------------

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

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

    The Exchange proposes a rule change to proposes [sic] to delay the 
operative date of a rule change to Exchange Rule 133, which provides 
for methodology for determining when to halt trading in all stocks due 
to extraordinary market volatility, from the date of February 4, 2013, 
until April 8, 2013.
    The text of the proposed rule change [sic] is available at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx, at the Exchange's 
principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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 Rule 133, which provides the 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility, to delay the operative date of the 
pilot by which such Rule operates from the current scheduled date of 
February 4, 2013, until April 8, 2013, to coincide with the initial 
date of operations of the Regulation NMS Plan to Address Extraordinary 
Market Volatility (``LULD Plan'').\3\ As proposed, the pilot period 
will begin and end at the same time as the pilot period for the LULD 
Plan. The current Rule 133 would remain in effect until April 8, 2013. 
If the pilot is not either extended or approved permanently at the end 
of the pilot period, the current version of Rule 133 would be in 
effect.
---------------------------------------------------------------------------

    \3\ The Exchange adopted the proposed changes to the market-wide 
circuit breakers on a pilot basis for a period that corresponds to 
the pilot period for the LULD Plan so that the impact of the two 
proposals can be reviewed together. See Securities Exchange Act 
Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR-
PHLX-2011-129). The Exchange anticipates that the initial date of 
LULD Plan operations will be changed to April 8, 2013. The proposal 
would delay the operative date to the market-wide circuit breakers 
pilot to April 8, 2013 in order for the implementation date for the 
market-wide circuit breakers pilot would [sic] remain the same date 
as for the LULD Plan.
---------------------------------------------------------------------------

Current Rule 133
    The Exchange amended Rule 133 on June 6, 2012.\4\ The changes to 
Rule 133 are effective, but not operative until February 4, 2013. The 
current standard, set forth in the rules of other exchanges,\5\ 
provides for Level 1, 2, and 3 declines and specified trading halts 
following such declines. The values of Levels 1, 2 and 3 are calculated 
at the beginning of each calendar quarter, using 10%, 20% and 30%, 
respectively, of the average closing value of the Dow Jones Industrial 
Average (``DJIA'') for the month prior to the beginning of the quarter. 
Each percentage calculation is rounded to the nearest fifty points to 
create the Levels' trigger points. The values then remain in effect 
until the

[[Page 9761]]

next quarterly calculation, notwithstanding whether the DJIA has moved 
and a Level 1, 2, or 3 decline is no longer equal to an actual 10%, 
20%, or 30% decline in the most recent closing value of the DJIA.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-PHLX-2011-129).
    \5\ The rule was last amended in 1998, when declines based on 
specific point drops in the DJIA were replaced with the current 
methodology of using a percentage decline that is recalculated 
quarterly. See Securities Exchange Act Release No. 39846 (April 9, 
1998), 63 FR 18477 (April 15, 1998) (SR-NYSE-98-06, SR-Amex-98-09, 
SR-BSE-98-06, SR-CHX-98-08, SR-NASD-98-27, and SR-Phlx-98-15).
---------------------------------------------------------------------------

    Once a market-wide circuit breaker is in effect, trading in all 
stocks halt [sic] for the time periods specified below:
    Level 1 Halt anytime before 2:00 p.m.--one hour; at or after 2:00 
p.m. but before 2:30 p.m.--30 minutes; at or after 2:30 p.m.--trading 
shall continue, unless there is a Level 2 Halt.
    Level 2 Halt anytime before 1:00 p.m.--two hours; at or after 1:00 
p.m. but before 2:00 p.m.--one hour; at or after 2:00 p.m.--trading 
shall halt and not resume for the rest of the day.
    Level 3 Halt at any time--trading shall halt and not resume for the 
rest of the day.
    Unless stocks are halted for the remainder of the trading day, 
price indications are disseminated during a Rule 80B trading halt for 
stocks that comprise the DJIA.
Amended Rule 133
    The Exchange amended Rule 133 to revise the current methodology for 
determining when to halt trading in all stocks due to extraordinary 
market volatility (``market-wide circuit breakers'').\6\ The Exchange, 
other equities, options, and futures markets, and FINRA amended the 
market-wide circuit breakers to take into consideration the 
recommendations of the Joint CFTC-SEC Advisory Committee on Emerging 
Regulatory Issues, and to provide for more meaningful measures in 
today's markets of when to halt trading in all stocks. Accordingly, the 
Exchange [sic] amended Rule 80B as follows: (i) Replaced the DJIA with 
the S&P 500; (ii) replaced the quarterly calendar recalculation of Rule 
80B triggers with daily recalculations; (iii) replaced the 10%, 20%, 
and 30% market decline percentages with 7%, 13%, and 20% market decline 
percentages; (iv) modified the length of the trading halts associated 
with each market decline level; and (v) modified the times when a 
trading halt may be triggered. The Exchange [sic] believes that these 
amendments update the rule to reflect today's high-speed, highly 
electronic trading market while still meeting the original purpose of 
Rule 80B: to ensure that market participants have an opportunity to 
become aware of and respond to significant price movements.
---------------------------------------------------------------------------

    \6\ See supra note 4.
---------------------------------------------------------------------------

    The Exchange adopted the proposed changes to the market-wide 
circuit breakers on a pilot basis for a period that corresponds to the 
pilot period for the LULD Plan so that the impact of the two proposals 
can be reviewed together.\7\ In addition, in order for the markets and 
the single plan processors responsible for the consolidation of 
information pursuant to Rule 603(b) of Regulation NMS under the 
Securities Exchange Act of 1934 to make the necessary technological 
changes to implement both the changes to the market-wide circuit 
breakers and the proposed LULD Plan, the Exchange established that the 
implementation date for the proposed rule changes should be the same 
date that the LULD Plan is implemented. The Exchange anticipates that 
the initial date of LULD Plan operations will be changed to April 8, 
2013. For the same reasons as stated above, the Exchange proposes to 
delay the operative date of the market-wide circuit breakers pilot to 
April 8, 2013 in order for the implementation date for the market-wide 
circuit breakers pilot would [sic] remain the same date as for the LULD 
Plan.
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\8\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\9\ 
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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, this rule proposal supports the objectives of 
perfecting the mechanism of a free and open market and the national 
market system because it promotes uniformity across markets concerning 
when and how to halt trading in all stocks as a result of extraordinary 
market volatility. Additionally, delaying the operative date of the 
market-wide circuit breakers pilot until the initial date of operations 
of the LULD Plan would allow the pilot to begin and end at the same 
time of the LULD Plan so that the Exchange and the Commission could 
further assess the impact of the two pilots on the marketplace or 
whether other initiatives should be adopted in lieu of the pilots, 
which contributes to the protection of investors and the public 
interest.

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. The proposed changes are 
being made to delay the operation of the market-wide circuit breakers 
pilot until April 8, 2013 to allow the pilot period to begin and end at 
the same time as the LULD Plan, which contributes to the protection of 
investors and the public interest. Other competing equity exchanges are 
subject to the same methodology for determining when to halt trading in 
all stocks due to extraordinary market volatility and the same 
requirements specified in the LULD Plan. Thus, the proposed changes 
will not impose any burden on competition while providing that the 
market-wide circuit breakers pilot period corresponds to the pilot 
period for the LULD Plan so that the impact of the two proposals can be 
reviewed together.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ 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

[[Page 9762]]

consistent with the protection of investors and the public interest. 
Doing so will delay the operative date of the market-wide circuit 
breakers pilot until the initial date of operations of the LULD Plan, 
thereby allowing the pilot to run simultaneously with the LULD Plan, 
providing an opportunity to properly assess the impact of the two 
pilots on the marketplace and evaluate the pilots' effectiveness. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposal operative upon filing.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-PHLX-2013-11 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-PHLX-2013-11. 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 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 offices 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-PHLX-2013-11, and should be submitted on or before March 
4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2013-02798 Filed 2-8-13; 8:45 am]
BILLING CODE 8011-01-P