Notice & Comment

SEC Seeks Input on Proposed Delay of Plan to Prevent Rapid Market Changes, by Shannon Allen

The Securities and Exchange Commission (“SEC”) issued a notice soliciting comments on a proposed Fourth Amendment to the Plan to Address Extraordinary Market Volatility (“Plan”).  Specifically, the Plan is calculated to prevent the kind of “sudden price movements” in the market that occurred “on the afternoon of May 6, 2010.”  The Plan creates “market-wide limit up-limit down requirements” intended to stop “trades in individual NMS Stocks . . .outside of . . .  specified Price Bands.”  The “limit up-limit down requirements” combine with “Trading Pauses . . . to accommodate more fundamental price moves . . . .”

In accordance with Section 11A of the Securities Exchange Act of 1934 (“Act”)and Rule 608, NYSE Euronext, on behalf of New York Stock Exchange, LLC (“NYSE”), NYSE MKT, LLC (“NYSE MKT”), and NYSE Arca, Inc. (“NYSE Arca”), and the following parties: 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, and National Stock Exchange, Inc. (the “Participants”), filed a proposal to amend the Plan.  The Participants determined that the proposed amendment involves only technical matters, thus, under Regulation NMS, Rule 608 (b)(3)(iii) the amendment becomes effective upon filing with the SEC.

The Plan’s “limit up-limit down mechanism” is aimed at lessening the “negative impacts of sudden, unanticipated price movements in NMS Stocks” resulting in better protection for investors and “promoting a fair and orderly market.”  The Plan currently provides that mechanisms shall be “fully implemented by October 8, 2013.”

The securities industry requested more time for Participants to test systems.  And Participants claim that providing this additional time to test the way the Plan functions “around the close,” especially “when there is a trading pause less than five minutes before the scheduled close of trading,” is essential and “in the public interest” and for the “protection of investors.”  The Participants propose to delay implementation of the Plan to December 8, 2013.

The SEC solicits comments from interested parties on the Fourth Amendment to the Plan.  All submissions should refer to File Number 4-631, should be submitted by September 24, 2013, and may be submitted by any of the following methods:

  • Electronic Comments:  Use the SEC’s Internet comment form;
  • Email: to (include File Number 4-631 on the subject line); or
  • Paper:  Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

This post was originally published on the legacy ABA Section of Administrative Law and Regulatory Practice Notice and Comment blog, which merged with the Yale Journal on Regulation Notice and Comment blog in 2015.

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