Document ID: SEC-2013-0304-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-02-12T05:00Z

[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9975-9977]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03188]

[[Page 9975]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68854; File No. SR-CBOE-2013-010]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Extend the Individual Stock Trading Pause Pilot Program

February 6, 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 January 28, 2013, Chicago Board Options Exchange, Incorporated 
(``CBOE'' 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

    The Exchange proposes to extend the individual stock trading pause 
pilot program pertaining to the CBOE Stock Exchange, LLC (``CBSX,'' the 
CBOE's stock trading facility). This rule change simply seeks to extend 
the pilot. No other changes to the pilot are being proposed.
(additions are italicized; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *
    1. Rule 6.3C--Individual Stock Trading Pause Due to Extraordinary 
Market Volatility
    2.
* * * * *
* * * Interpretations and Policies:
* * * * *
    .03 The provisions of this Rule shall be in effect for eligible NMS 
stocks during a pilot period ending on the earlier of the initial date 
of operations of the Regulation NMS Plan to Address Extraordinary 
Market Volatility or February 4, 2014[3]. The term ``eligible NMS 
stocks'' shall mean NMS stocks, other than rights and warrants. Trading 
in an eligible NMS stock will pause between the hours of 8:45 a.m. and 
2:35 p.m. (all times are CT), or in the case of an early scheduled 
close, 25 minutes before the close of trading, if the price of the 
stock moved by a percentage specified below within a five-minute period 
(``Threshold Move''), as calculated by the primary listing market as 
follows:
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission.

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
    Rule 6.3C, Individual Stock Trading Pauses Due to Extraordinary 
Market Volatility, was approved by the Securities and Exchange 
Commission (``Commission'') on June 10, 2010 on a pilot basis. The 
pilot is currently set to expire on February 4, 2013.\3\ The rule was 
developed in consultation with U.S. listing markets to provide for 
uniform market-wide trading pause standards for certain individual 
stocks that experience rapid price movement.\4\
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    \3\ See Securities Exchange Act Release Nos. 62252 (June 10, 
2010), 75 FR 34186 (June 16, 2010)(SR-CBOE-2010-047)(approval order 
establishing pilot through December 10, 2010); 63502 (December 9, 
2010), 75 FR 78306 (December 15, 2010)(SR-CBOE-2010-112)(extension 
of pilot through April 11, 2011); 64194 (April 5, 2011), 76 FR 2-389 
(April 12, 2011)(SR-CBOE-2011-031)(extension of pilot through the 
earlier of August 11, 2011 or the date on which a limit up-limit 
down mechanism to address extraordinary market volatility, if 
adopted, applies to the Circuit Breaker Stocks); 65070 (August 9, 
2011), 76 FR 50516 (August 15, 2011)(SR-CBOE-2011-076)(extension of 
pilot through January 31, 2012); 66166 (January 17, 2012), 77 FR 
3311 (January 23, 2012)(SR-CBOE-2012-01)(extension of pilot through 
July 31, 2012); and 67574 (August 2, 2012), 77 FR 49848 (August 17, 
2012)(SR-CBOE-2012-069)(extension of pilot through February 4, 
2012).
    \4\ The pilot list of stocks originally included all stocks in 
the S&P 500 Index, but it has been expanded over time to include all 
NMS stocks, other than rights and warrants. See Securities Exchange 
Act Release Nos. 62884 (September 10, 2010), 75 FR 56618 (September 
16, 2010)(SR-CBOE-2010-065)(order approving expansion of the 
individual stock trading pause pilot to include all stocks in the 
Russell 1000 index and a pilot list of Exchange Traded Products); 
64735 (June 23, 2011), 76 FR 38243 (June 29, 2011)(SR-CBOE-2011-
049)(order approving further expansion of the individual stock 
trading pause pilot to include all NMS stocks effective August 8, 
2011); and 65824 (November 23, 2011), 76 FR 74111 (November 30, 
2011)(SR-CBOE-2011-111)(immediately effective rule change to amend 
the individual stock trading pause pilot to exclude all rights and 
warrants).
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    As the duration of the pilot expires on February 4, 2013, the 
Exchange is proposing to extend the effectiveness of Rule 6.3C until 
the earlier of the initial date of operations of the Regulation NMS 
Plan to Address Extraordinary Market Volatility or February 4, 2014. 
The pilot will continue to operate as to individual securities until 
such security is subject to the Regulation NMS Plan to Address 
Extraordinary Market Volatility. Extending the extension date would 
allow the pilot to continue to operate without interruption until 
implementation of the Regulation NMS Plan to Address Extraordinary 
Market Volatility.\5\ The Regulation NMS Plan to Address Extraordinary 
Market Volatility will not begin initial operations on February 4, 2013 
as initially planned, but has an amended anticipated implementation 
date of April 8, 2013.\6\ If the Regulation NMS Plan to Address 
Extraordinary Market Volatility has an initial date of operations 
before February 4, 2014, the proposed pilot for trading pauses will 
expire at that time.
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    \5\ 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).
    \6\ See Letter from Janet M. McGinness, Executive Vice President 
and Corporate Secretary, General Counsel, NYSE Markets, to Elizabeth 
M. Murphy, Secretary, Commission, dated January 17, 2013.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section

[[Page 9976]]

6(b)(5) \8\ requirements that the rules of an exchange be 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 regulating, clearing, settling, 
processing information with respect to, and facilitation transactions 
in securities, 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \9\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, the Exchange believes that the change proposed 
herein meets these requirements in that it promotes uniformity across 
markets concerning decisions to pause trading in a security when there 
are significant price movements, which promotes just and equitable 
principles of trade and removes impediments to, and perfects the 
mechanism of, a free and open market and a national market system. 
Additionally, extension of the pilot until the earlier of the initial 
date of operations of the Regulation NMS Plan to Address Extraordinary 
Market Volatility or February 4, 2014 would allow the pilot to continue 
to operate without interruption while the Exchange and the Commission 
further assess the effect of the pilot on the marketplace or whether 
other initiatives should be adopted in lieu of the current pilot, which 
contributes to the protection of investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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 extend the operation of the trading pause pilot until the 
earlier of the initial date of operations of the Regulation NMS Plan to 
Address Extraordinary Market Volatility or February 4, 2014 would allow 
the pilot to continue to operate without interruption until 
implementation of the Regulation NMS Plan to Address Extraordinary 
Market Volatility, which contributes to the protection of investors and 
the public interest. Other competing equity exchanges are subject to 
the same trading pause requirements specified in the Plan. Thus, the 
proposed changes will not impose any burden on competition while 
providing trading pause requirements specified in the Plan.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 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.
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    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 consistent with the 
protection of investors and the public interest because such waiver 
would allow the pilot program to continue uninterrupted. Accordingly, 
the Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.\14\
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    \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).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-CBOE-2013-010 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-CBOE-2013-010. 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

[[Page 9977]]

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-CBOE-2013-010 and should be 
submitted on or before March 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03188 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P