SEC Plan To End Extraordinary Market Volatility

[Federal Register Volume 77, Number 109 (Wednesday, June 6, 2012)]
[Notices]
[Pages 33498-33522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13653]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67091; File No. 4-631]

Joint Industry Plans; 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.

May 31, 2012.

I. Introduction

    On April 5, 2011, NYSE Euronext, on behalf of New York Stock 
Exchange LLC (``NYSE''), NYSE Amex LLC (``NYSE Amex''),\1\ and NYSE 
Arca, Inc. (``NYSE Arca''), and the following parties to the proposed 
National Market System Plan: BATS Exchange, Inc., BATS Y-Exchange, 
Inc., Chicago Board Options Exchange, Incorporated (``CBOE''), Chicago 
Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., 
Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., 
NASDAQ OMX PHLX LLC, the

[[Page 33499]]

Nasdaq Stock Market LLC, and National Stock Exchange, Inc. 
(collectively with NYSE, NYSE MKT, and NYSE Arca, the 
``Participants''), filed with the Securities and Exchange Commission 
(the ``Commission'') pursuant to Section 11A of the Securities Exchange 
Act of 1934 (``Act''),\2\ and Rule 608 thereunder,\3\ a proposed Plan 
to Address Extraordinary Market Volatility (as amended, the 
``Plan'').\4\ A copy of the Plan is attached as Exhibit A hereto. The 
Participants requested that the Commission approve the Plan as a one-
year pilot.\5\ The Plan was published for comment in the Federal 
Register on June 1, 2011.\6\ The Commission received eighteen comment 
letters in response to the proposal.\7\ On September 27, 2011, the 
Commission extended the deadline for Commission action on the Plan and 
designated November 28, 2011 as the new date by which the Commission 
would be required to take action.\8\ The Commission found that such 
extension was appropriate in order to provide sufficient time to 
consider and take action on the Plan, in light of, among other things, 
the comments received on the proposal.\9\ On November 2, 2011, the 
Participants to the Plan, other than CBOE, responded to the comment 
letters and proposed changes to the Plan that were subsequently 
reflected in an amendment.\10\ On November 18, 2011, the Participants 
consented to the Commission's request that the deadline for Commission 
action on the Plan be extended an additional three months, to February 
29, 2012.\11\ On February 27, 2012, the Participants consented to the 
Commission's request that the deadline for Commission action on the 
Plan be extended an additional three months, to May 31, 2012.\12\ On 
May 24, 2012, the Participants submitted an amendment that proposed 
several changes to the Plan.\13\ This order approves the Plan, as 
amended, on a one-year pilot basis.
---------------------------------------------------------------------------

    \1\ On May 14, 2012, NYSE Amex filed a proposed rule change on 
an immediately effective basis to change its name to NYSE MKT LLC 
(``NYSE MKT''). See Securities Exchange Act Release No. 67037 (May 
21, 2012) (SR-NYSEAmex-2012-32).
    \2\ 15 U.S.C. 78k-1.
    \3\ 17 CFR 242.608.
    \4\ See Letter from Janet M. McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated April 5, 2011 (``Transmittal 
Letter'').
    \5\ Id. at 1.
    \6\ See Securities Exchange Act Release No. 64547 (May 25, 
2011), 76 FR 31647 (``Notice'').
    \7\ See Letter from Steve Wunsch, Wunsch Auction Associates, 
LLC, to Elizabeth M. Murphy, Secretary, Commission, dated June 2, 
2011 (``Wunsch Letter''); Letter from Peter J. Driscoll, Investment 
Professional, Chicago, IL, to Elizabeth M. Murphy, Secretary, 
Commission, dated June 17, 2011 (``Driscoll Letter''); Letter from 
Stuart J. Kaswell, Executive Vice President & Managing Director, 
General Counsel, Managed Funds Association (``MFA''), to Elizabeth 
M. Murphy, Secretary, Commission, dated June 21, 2011 (``MFA 
Letter''); Letter from George U. Sauter, Managing Director and Chief 
Investment Officer, The Vanguard Group, Inc. (``Vanguard''), to 
Elizabeth M. Murphy, Secretary, Commission, dated June 22, 2011 
(``Vanguard Letter''); Letter from Karrie McMillan, General Counsel, 
Investment Company Institute (``ICI''), to Elizabeth M. Murphy, 
Secretary, Commission, dated June 22, 2011 (``ICI Letter''); Letter 
from Manisha Kimmel, Executive Director, Financial Information Forum 
(``FIF''), to Elizabeth M. Murphy, Secretary, Commission, dated June 
22, 2011 (``FIF Letter''); Letter from Craig S. Donohue, Chief 
Executive Officer, CME Group Inc., to Elizabeth M. Murphy, 
Secretary, Commission, dated June 22, 2011 (``CME Letter''); Letter 
from Joseph N. Cangemi, Chairman, and Jim Toes, President and Chief 
Executive Officer, Security Traders Association, to Elizabeth M. 
Murphy, Secretary, Commission, dated June 22, 2011 (``STA Letter''); 
Letter from Leonard J. Amoruso, General Counsel, Knight Capital 
Group, Inc. (``Knight''), to Elizabeth M. Murphy, Secretary, 
Commission, dated June 22, 2011 (``Knight Letter); Letter from Ann 
L. Vlcek, Managing Director and Associate General Counsel, 
Securities Industry and Financial Markets Association (``SIFMA''), 
to Elizabeth M. Murphy, Secretary, Commission, dated June 22, 2011 
(``SIFMA Letter''); Letter from Jamie Selway, Managing Director, and 
Patrick Chi, Chief Compliance Officer, ITG Inc., to Elizabeth M. 
Murphy, Secretary, Commission, dated June 23, 2011 (``ITG Letter''); 
Letter from Jose Marques, Managing Director and Global Head of 
Electronic Equity Trading, Deutsche Bank Securities Inc. (``Deutsche 
Bank''), to Elizabeth M. Murphy, Secretary, Commission, dated June 
23, 2011 (``Deutsche Bank Letter''); Letter from Kimberly Unger, 
Esq., Executive Director, The Security Traders Association of New 
York, Inc., to Elizabeth M. Murphy, Secretary, Commission, dated 
June 23, 2011 (``STANY Letter''); Letter from James J. Angel, Ph.D., 
CFA, Associate Professor of Finance, Georgetown University, 
McDonough School of Business, to Commission, dated June 24, 2011 
(``Angel Letter''); Letter from John A. McCarthy, General Counsel, 
GETCO, to Elizabeth M. Murphy, Secretary, Commission, dated June 24, 
2011 (``GETCO Letter''); Letter from Andrew C. Small, Executive 
Director and General Counsel, Scottrade, Inc., to Elizabeth M. 
Murphy, Secretary, Commission, dated July 5, 2011 (``Scottrade 
Letter''); Letter from Peter Skopp, President, Molinete Trading 
Inc., to Elizabeth M. Murphy, Secretary, Commission, dated July 19, 
2011 (``Molinete Letter''); and Letter from Sal Arnuk, Joe Saluzzi, 
and Paul Zajac, Themis Trading, LLC, to Elizabeth M. Murphy, 
Secretary, Commission (``Themis Letter''). Copies of all comments 
received on the proposed Plan are available on the Commission's Web 
site, located at http://www.sec.gov/comments/4-631/4-631.shtml. 
Comments are also 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. ET.
    \8\ See Securities Exchange Act Release No. 65410 (September 27, 
2011), 76 FR 61121 (Oct. 3, 2011).
    \9\ Id.
    \10\ See Letter from Janet M. McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated November 2, 2011 (``Response 
Letter'').
    \11\ See Letter from Janet M. McGinness, Senior Vice President 
and Corporate Secretary, NYSE Euronext, to Elizabeth M. Murphy, 
Secretary, Commission, dated November 18, 2011.
    \12\ See Letter from Janet M. McGinness, Senior Vice President 
and Corporate Secretary, NYSE Euronext, to Elizabeth M. Murphy, 
Secretary, Commission, dated February 27, 2012.
    \13\ See Letter from Janet M. McGinness, Senior Vice President, 
Legal and Corporate Secretary, NYSE Euronext, to Elizabeth M. 
Murphy, Secretary, Commission, dated May 24, 2012 (``Amendment'').
---------------------------------------------------------------------------

II. Background

    On May 6, 2010, the U.S. equity markets experienced a severe 
disruption.\14\ Among other things, the prices of a large number of 
individual securities suddenly declined by significant amounts in a 
very short time period, before suddenly reversing to prices consistent 
with their pre-decline levels. This severe price volatility led to a 
large number of trades being executed at temporarily depressed prices, 
including many that were more than 60% away from pre-decline prices and 
were broken by the exchanges and FINRA. The Commission was concerned 
that events such as those that occurred on May 6 could seriously 
undermine the integrity of the U.S. securities markets. Accordingly, 
Commission staff has worked with the exchanges and FINRA since that 
time to identify and assess the causes and contributing factors of the 
May 6 market disruption \15\ and to fashion policy responses that will 
help prevent a recurrence.
---------------------------------------------------------------------------

    \14\ The events of May 6 are described more fully in a joint 
report by the staffs of the Commodity Futures Trading Commission 
(``CFTC'') and the Commission. See Report of the Staffs of the CFTC 
and SEC to the Joint Advisory Committee on Emerging Regulatory 
Issues, ``Findings Regarding the Market Events of May 6, 2010,'' 
dated September 30, 2010, available at 
http://www.sec.gov/news/studies/2010/marketevents-report.pdf.
    \15\ Id.
---------------------------------------------------------------------------

    One such response to the events of May 6, 2010, was the development 
of the single-stock circuit breaker pilot program, which was 
implemented through a series of rule filings by the Exchanges and 
FINRA. This pilot was introduced in three stages, beginning in June 
2010. In the first stage, the Commission approved, on an accelerated 
basis, proposed rule changes by the Exchanges and FINRA to pause 
trading during periods of extraordinary market volatility in stocks 
included in Standard & Poor's 500 index.\16\ In the second stage, the 
Commission approved the Exchanges' and FINRA's proposals to add 
securities included in the Russell 1000 index, as well as specified 
exchange traded products (``ETPs''), to the pilot.\17\ In the third 
stage, the

[[Page 33500]]

Commission approved the Exchanges' and FINRA's proposals to add all 
remaining NMS stocks, as defined in Rule 600(b)(47) of Regulation NMS 
under the Act (``NMS Stocks'') \18\ to the pilot.\19\ The Exchanges and 
FINRA each subsequently filed, on an immediately effective basis, 
proposals to exempt all rights and warrants from the pilot.\20\ The 
single-stock circuit breaker pilot is currently set to expire on July 
31, 2012.\21\
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release Nos. 62252 (June 10, 
2010), 75 FR 34186 (June 16, 2010) (File Nos. SR-BATS-2010-014; SR-
EDGA-2010-01; SR-EDGX-2010-01; SR-BX-2010-037; SR-ISE-2010-48; SR-
NYSE-2010-39; SR-NYSEAmex-2010-46; SR-NYSEArca-2010-41; SR-NASDAQ-
2010-061; SR-CHX-2010-10; SR-NSX-2010-05; and SR-CBOE-2010-047); 
62251 (June 10, 2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-
025).
    \17\ See Securities Exchange Act Release Nos. 62884 (September 
10, 2010), 75 FR 56618 (September 16, 2010) (File Nos. SR-BATS-2010-
018; SR-BX-2010-044; SR-CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-
05; SR-EDGX-2010-05; SR-ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-
2010-49; SR-NYSEAmex-2010-63; SR-NYSEArca-2010-61; and SR-NSX-2010-
08); and Securities Exchange Act Release No. 62883 (September 10, 
2010), 75 FR 56608 (September 16, 2010) (SR-FINRA-2010-033).
    \18\ 17 CFR 242.600(b)(47).
    \19\ See Securities Exchange Act Release No. 64735 (June 23, 
2011), 76 FR 38243 (June 29, 2011) (File Nos. SR-BATS-2011-016; SR-
BYX-2011-011; SR-BX-2011-025; SR-CBOE-2011-049; SR-CHX-2011-09; SR-
EDGA-2011-15; SR-EDGX-2011-14; SR-FINRA-2011-023; SR-ISE-2011-028; 
SR-NASDAQ-2011-067; SR-NYSE-2011-21; SR-NYSEAmex-2011-32; SR-
NYSEArca-2011-26; SR-NSX-2011-06; SR-Phlx-2011-64).
    \20\ See, e.g., Securities Exchange Act Release No. 65810 
(November 23, 2011) 76 FR 74080 (November 30, 2011) (SR-NYSE-2011-
57).
    \21\ See, e.g., Securities Exchange Act Release No. 66134 
(January 11, 2012), 77 FR 2592 (January 18, 2012) (SR-NYSE-2011-68).
    In addition to the trading pause pilot for individual 
securities, the Commission and the SROs also implemented other 
regulatory responses to the events of May 6, 2010. For example, the 
Commission approved proposed rule changes that set forth clearer 
standards and reduced the discretion of self-regulatory 
organizations with respect to breaking erroneous trades. See e.g., 
Securities Exchange Act Release No. 62886 (September 10, 2010), 75 
FR 56613 (September 16, 2010). Further, the Commission approved 
proposed rule changes that enhanced the minimum quoting standards 
for equity market makers to require that they post continuous two-
sided quotations within a designated percentage of the inside market 
to eliminate market maker ``stub quotes'' that are so far away from 
the prevailing market that they are clearly not intended to be 
executed. See Securities Exchange Act Release No. 63255 (November 5, 
2010), 75 FR 69484 (November 12, 2010).
---------------------------------------------------------------------------

    The Plan is intended to replace the single-stock circuit breaker 
pilot that is currently in place.

III. Description of the Proposal

    The Participants filed the Plan to create a market-wide limit up-
limit down mechanism that is intended to address extraordinary market 
volatility in NMS Stocks.\22\ The Plan sets forth procedures that 
provide for market-wide limit up-limit down requirements that would be 
designed to prevent trades in individual NMS Stocks from occurring 
outside of the specified price bands.\23\ These limit up-limit down 
requirements would be coupled with trading pauses, as defined in 
Section I(X) of the Plan, to accommodate more fundamental price moves 
(as opposed to erroneous trades or momentary gaps in liquidity).
---------------------------------------------------------------------------

    \22\ See Section I(H) of the Plan.
    \23\ As set forth in Section V of the Plan, the price bands 
would consist of a Lower Price Band and an Upper Price Band for each 
NMS Stock. The price bands would be based on a Reference Price that 
equals the arithmetic mean price of Eligible Reported Transactions 
for the NMS stock over the immediately preceding five-minute period. 
As defined in the proposed Plan, Eligible Reported Transactions 
would have the meaning prescribed by the Operating Committee for the 
proposed Plan, and generally mean transactions that are eligible to 
update the sale price of an NMS Stock.
---------------------------------------------------------------------------

    As set forth in Section V of the Plan, the price bands would 
consist of a Lower Price Band and an Upper Price Band for each NMS 
Stock.\24\ The price bands would be calculated by the Securities 
Information Processors (``SIPs'' or ``Processors'') responsible for 
consolidation of information for an NMS Stock pursuant to Rule 603(b) 
of Regulation NMS under the Act.\25\ Those price bands would be based 
on a Reference Price \26\ for each NMS Stock that equals the arithmetic 
mean price of Eligible Reported Transactions for the NMS Stock over the 
immediately preceding five-minute period. The price bands for an NMS 
Stock would be calculated by applying the Percentage Parameter for such 
NMS Stock to the Reference Price, with the Lower Price Band being a 
Percentage Parameter \27\ below the Reference Price, and the Upper 
Price Band being a Percentage Parameter above the Reference Price. 
Between 9:30 a.m. and 9:45 a.m. ET and 3:35 p.m. and 4:00 p.m. ET, the 
price bands would be calculated by applying double the Percentage 
Parameters.
---------------------------------------------------------------------------

    \24\ Capitalized terms used herein but not otherwise defined 
shall have the meaning ascribed to such terms in the Plan.
    \25\ 17 CFR 242.603(b). The Plan refers to this entity as the 
Processor.
    \26\ See Section I(T) of the Plan.
    \27\ As initially proposed by the Participants, the Percentage 
Parameters for Tier 1 NMS Stocks (i.e., stocks in the S&P 500 Index 
or Russell 1000 Index and certain ETPs) with a Reference Price of 
$1.00 or more would be five percent and less than $1.00 would be the 
lesser of (a) $0.15 or (b) 75 percent. The Percentage Parameters for 
Tier 2 NMS Stocks (i.e., all NMS Stocks other than those in Tier 1) 
with a Reference Price of $1.00 or more would be 10 percent and less 
than $1.00 would be the lesser of (a) $0.15 or (b) 75 percent. The 
Percentage Parameters for a Tier 2 NMS Stock that is a leveraged ETP 
would be the applicable Percentage Parameter set forth above 
multiplied by the leverage ratio of such product. On May 24, 2012, 
the Participants amended the Plan to create a 20% price band for 
Tier 1 and Tier 2 stocks with a Reference Price of $0.75 or more and 
up to and including $3.00. The Percentage Parameter for stocks with 
a Reference Price below $0.75 would be the lesser of (a) $0.15 or 
(b) 75 percent.
---------------------------------------------------------------------------

    The Processors would also calculate a Pro-Forma Reference Price for 
each NMS Stock on a continuous basis during Regular Trading Hours. If a 
Pro-Forma Reference Price did not move by one percent or more from the 
Reference Price in effect, no new price bands would be disseminated, 
and the current Reference Price would remain the effective Reference 
Price. If the Pro-Forma Reference Price moved by one percent or more 
from the Reference Price in effect, the Pro-Forma Reference Price would 
become the Reference Price, and the Processors would disseminate new 
price bands based on the new Reference Price. Each new Reference Price 
would remain in effect for at least 30 seconds.
    When one side of the market for an individual security is outside 
the applicable price band, the Processors would be required to 
disseminate such National Best Bid \28\ or National Best Offer \29\ 
with an appropriate flag identifying it as non-executable. When the 
other side of the market reaches the applicable price band, the market 
for an individual security would enter a Limit State,\30\ and the 
Processors would be required to disseminate such National Best Offer or 
National Best Bid with an appropriate flag identifying it as a Limit 
State Quotation.\31\ All trading would immediately enter a Limit State 
if the National Best Offer equals the Lower Limit Band and does not 
cross the National Best Bid, or the National Best Bid equals the Upper 
Limit Band and does not cross the National Best Offer. Trading for an 
NMS Stock would exit 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 did not exit a Limit State within 15 
seconds, then the Primary Listing Exchange would declare a five-minute 
trading pause, which would be applicable to all markets trading the 
security.
---------------------------------------------------------------------------

    \28\ 17 CFR 242.600(b)(42). See also Section I(G) of the Plan.
    \29\ Id.
    \30\ A stock enters the Limit State if the National Best Offer 
equals the Lower Price Band and does not cross the National Best 
Bid, or the National Best Bid equals the Upper Price Band and does 
not cross the National Best Offer. See Section VI(A) of the Plan.
    \31\ See Section I(D) of the Plan.
---------------------------------------------------------------------------

    These limit up-limit down requirements would be coupled with 
trading pauses \32\ to accommodate more fundamental price moves (as 
opposed to erroneous trades or momentary gaps in liquidity). As set 
forth in more detail in

[[Page 33501]]

the Plan, all trading centers \33\ in NMS Stocks, including both those 
operated by Participants and those operated by members of Participants, 
would be 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.
---------------------------------------------------------------------------

    \32\ 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.
    \33\ As defined in Section I(W) of the Plan, a trading center 
shall have the meaning provided in Rule 600(b)(78) of Regulation NMS 
under the Act.
---------------------------------------------------------------------------

    Under the Plan, all trading centers would be required to establish, 
maintain, and enforce written policies and procedures reasonably 
designed to prevent the display of offers below the Lower Price Band 
and bids above the Upper Price Band for an NMS Stock. The Processors 
would disseminate an offer below the Lower Price Band or bid above the 
Upper Price Band that nevertheless inadvertently may be submitted 
despite such reasonable policies and procedures, but with an 
appropriate flag identifying it as non-executable; such bid or offer 
would not be included in National Best Bid or National Best Offer 
calculations. In addition, all trading centers would be required to 
develop, maintain, and enforce policies and procedures reasonably 
designed to prevent trades at prices outside the price bands, with the 
exception of single-priced opening, reopening, and closing transactions 
on the Primary Listing Exchange.
    As proposed, the Plan would be implemented as a one-year pilot 
program in two Phases. Phase I of the Plan would be implemented 
immediately following the initial date of Plan operations; Phase II of 
the Plan would commence six months after the initial date of the Plan 
or such earlier date as may be announced by the Processors with at 
least 30 days' notice. Phase I of the Plan would apply only to Tier 1 
NMS Stocks, as defined in Appendix A of the Plan. During Phase I of the 
Plan, the first Price Bands would be calculated and disseminated 15 
minutes after the start of Regular Trading Hours, no Price Bands would 
be calculated and disseminated less than 30 minutes before the end of 
Regular Trading Hours, and trading would not enter a Limit State less 
than 25 minutes before the end of Regular Trading Hours. In Phase II, 
the Plan would fully apply to all NMS Stocks beginning at 9:30 a.m. and 
ending at 4:00 p.m. each trading day.
    As stated by the Participants in the Plan, the limit up-limit down 
mechanism is intended to reduce the negative impacts of sudden, 
unanticipated price movements in NMS Stocks,\34\ thereby protecting 
investors and promoting a fair and orderly market.\35\ In particular, 
the Plan is designed to address the type of sudden price movements that 
the market experienced on the afternoon of May 6, 2010.\36\
---------------------------------------------------------------------------

    \34\ 17 CFR 242.600(b)(47).
    \35\ See Transmittal Letter, supra note 4.
    \36\ The limit up-limit down mechanism set forth in the proposed 
Plan would replace the existing single-stock circuit breaker pilot. 
See e.g., Securities Exchange Act Release Nos. 62251 (June 10, 
2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-025); 62883 
(September 10, 2010), 75 FR 56608 (September 16, 2010) (SR-FINRA-
2010-033).
---------------------------------------------------------------------------

IV. Comment Letters and Response Letter

    The Commission received 18 comment letters on the proposed 
Plan.\37\ Many commenters generally supported the Plan,\38\ while 
others indicated that they did not oppose the Plan and its intended 
goals, but raised concerns regarding specific details on the terms of 
the Plan.\39\ A few commenters opposed \40\ the Plan and suggested 
different alternatives to achieve the intended goal of the Plan. The 
Participants responded to the comments regarding the proposal.\41\
---------------------------------------------------------------------------

    \37\ See supra note 7.
    \38\ See MFA Letter at 1; Vanguard Letter at 1; ICI Letter at 1; 
STA Letter at 1; Knight Letter at 1; SIFMA Letter at 1; ITG Letter 
at 1; Deutsche Bank Letter at 1; STANY Letter at 1; GETCO Letter at 
1.
    \39\ See Driscoll Letter at 1; FIF Letter at 1; Angel Letter at 
1 (stating that the proposed Plan is an improvement over the current 
single stock circuit breaker pilot); Scottrade Letter at 1 and 5 
(supporting the goals of the proposed Plan, but stating that it 
believes that more work needs to be done before it can support the 
proposed Plan); Themis Letter at 1 (commending the efforts of the 
proposed Plan); Molinete Letter at 1.
    \40\ See Wunsch Letter at 1; CME Group Letter at 1-2 (supporting 
the proposed Plan's fundamental goal of promoting fair and orderly 
markets and mitigating the negative impacts of sudden and 
extraordinary price movements in NMS stocks, but stating that the 
proposed Plan sets forth an overly complicated and insufficiently 
coordinated structure that, in a macro-liquidity event, will have 
the unintended consequence of undermining rather than promoting 
liquidity).
    \41\ See Response Letter, supra note 10.
---------------------------------------------------------------------------

A. Reference Price Calculation

    As proposed in the Plan, the Processors would be responsible for 
calculating and disseminating the applicable Price Bands as provided 
for in Section V of the Plan. The Processors for each NMS stock would 
calculate and disseminate to the public a Lower Price Band and an Upper 
Price Band during regular trading hours, as defined in Section I(R) of 
the Plan, for such NMS Stock. The Price Bands would be based on a 
Reference Price for each NMS Stock that equals the arithmetic mean 
price of Eligible Reported Transactions \42\ for the NMS stock over the 
immediately preceding five-minute period (except for periods following 
openings and reopenings).\43\ The Price Bands for an NMS Stock would be 
calculated by applying the Percentage Parameter \44\ for such NMS Stock 
to the Reference Price, with the lower Price Band being a Percentage 
Parameter below the Reference Price, and the upper Price Band being a 
Percentage Parameter above the Reference Price. Some commenters 
expressed concern about the complexity involved in calculating the 
Reference Price.\45\
---------------------------------------------------------------------------

    \42\ As defined in the proposed Plan, Eligible Reported 
Transactions shall have the meaning prescribed by the Operating 
Committee for the proposed Plan, and generally mean transactions 
that are eligible to update the sale price of an NMS Stock.
    \43\ See infra, Section III.G. for a discussion on the 
application of the Price Bands at the open and close of the trading 
day.
    \44\ As defined in Section (I)(M) of the proposed Plan, the 
``Percentage Parameter'' means the percentages for each tier of NMS 
Stocks set forth in Appendix A of the Plan. As such, the Percentage 
Parameters for Tier 1 NMS Stocks with a Reference Price of $1.00 or 
more would be 5%, and the Percentage Parameters for Tier 2 NMS 
Stocks with a Reference Price of $1.00 or more would be 10%. For 
Tier 1 and Tier 2 NMS Stocks with a Reference Price less than $0.75, 
the Percentage Parameters would be the lesser of $0.15 or 75%. The 
Percentage Parameters for a Tier 2 NMS Stock that is a leveraged 
exchange-traded product would be the applicable Percentage Parameter 
multiplied by the leverage ratio of such product.
    \45\ See Angel Letter at 4; GETCO Letter at 3-4; MFA Letter at 
5; Molinete Letter at 1-2 (stating that it is not clear whether the 
trades used to calculate the Reference Price are weighted by volume, 
or if this is a strict average of the trade prices reported); Themis 
Letter at 1. See also SIFMA Letter at 8 (noting that if the market 
price for an NMS Stock moves by less than one percent, the Price 
Bands will not change and, as a result, the limit up and limit down 
prices will be closer to four percent than five percent over the 
prevailing market price because a new Reference Price will only be 
disseminated if there is a change of one percent or more in the Pro-
Forma Reference Price over the then prevailing Reference Price).
---------------------------------------------------------------------------

    Commenters suggested alternative ways to calculate the Reference 
Price. In its letter, one commenter suggested simplifying the Reference 
Price calculation by ``calculating a new Reference Price on regular 30 
second intervals, regardless of whether it has changed by 1%'' and 
noted that ``[t]his simplification also obviates the definition of a 
Pro-Forma Reference Price.''\46\ That commenter also recommended 
calculating the Reference Prints with a volume weighted average price 
rather than an arithmetic average price, which would remove the 
possibility of market participants splitting orders in different ways 
to affect the calculation of the Reference Price.\47\ Another commenter 
stated that

[[Page 33502]]

the Participants should consider using the opening price of a stock as 
the Reference Price because it would be much simpler than the 
calculation that the Participants proposed.\48\ Another commenter 
stated that the Participants should consider using the prior day's 
closing price as a static Reference Price, rather than constantly 
updating the Reference Price throughout the trading day, noting that 
this would be similar to how the futures markets calculate their limit 
up-limit down Price Bands.\49\
---------------------------------------------------------------------------

    \46\ See MFA Letter at 5.
    \47\ Id.
    \48\ See Angel Letter 4.
    \49\ See GETCO Letter at 3-4. See also SIFMA Letter at 9 
(requesting that the Participants clarify how Price Bands will apply 
to stocks with prices that cross the one dollar threshold during 
intra-day trading); Molinete Letter at 3-4 (stating its belief that 
changes in Price Band calculations throughout the trading day can 
create problems).
---------------------------------------------------------------------------

    Commenters also stated that certain types of trades should be 
exempted from the Plan and thus the calculation of the Reference Price. 
Three commenters noted that certain Regulation NMS-exempt trades should 
be exempt from the Plan because they are unrelated to the last sale of 
a stock.\50\ More specifically, one commenter stated that ``trading 
centers should be permitted to execute orders internally at prices 
outside of the specified Price Bands if the executions comply [with 
certain Regulation NMS exemptions].'' \51\ That commenter noted that 
most Regulation NMS exemptions ``have corresponding sale conditions 
that identify those trades as being not eligible for last sale.'' \52\ 
Another commenter stated that certain block facilitation trades should 
be exempted from the Plan.\53\ That commenter argued that block 
facilitation trades tend to stabilize the market because a block 
positioner is committing capital to absorb a large trading interest 
that would otherwise impact the market for the underlying stock of the 
block order.\54\ Finally, two commenters suggested that trades that are 
executed outside of the current Price Bands be exempt from Reference 
Price calculations.\55\
---------------------------------------------------------------------------

    \50\ See e.g., FIF Letter at 1-2; Deutsche Bank Letter at 3; 
SIFMA Letter at 2-4.
    \51\ See FIF Letter at 1-2 (listing the exemptions found in Rule 
611(a)--non-convertible preferred securities; Rule 611(b)(2)--not 
regular way; Rule 611(b)(7)--benchmark derivatively priced; Rule 
611(b)(9)--stopped stock; Rule 611(d)--qualified contingent trades; 
Rule 611(d)--error correction; Rule 611(d)--print protection).
    \52\ Id.
    \53\ See Deutsche Bank Letter at 3 (stating that ``it is 
critical for a block facilitator to execute outside a band when the 
market is moving rapidly or it will lose the ability to trade 
effectively for its client.'') See also FIF Letter at 2 (requesting 
an impact analysis on the printing of block transactions accompanied 
by a Regulation NMS sweep as well as block transactions printed 
without ISO modifiers in adherence with Regulation NMS FAQ 3.23).
    \54\ Id.
    \55\ See MFA Letter at 6 (recommend that the Plan include a more 
explicit definition for which prints are included in calculating a 
Reference Price); STANY Letter at 2 (noting that clearly erroneous 
transactions may still occur, and thus suggesting that trades that 
are executed outside the then existing price bands not be included 
in the calculation of the Reference Price).
---------------------------------------------------------------------------

    The Participants noted that alternatives were considered when the 
Plan was being drafted, but the Participants determined that something 
more dynamic would be preferable, and that the five percent level is 
more therefore appropriate, particularly for highly liquid stocks.\56\ 
Moreover, the Participants stated that the proposed one percent 
requirement would help to reduce quote traffic but still provide for 
appropriate adjustments of Reference Prices in a rapidly moving 
market.\57\ The Participants also stated that using the arithmetic 
average would reduce the impact of any erroneous trades that may be 
included in the calculation of the Reference Price.\58\
---------------------------------------------------------------------------

    \56\ See Response Letter at 4.
    \57\ The Participants are not proposing to amend the Plan with 
respect to the calculation of the Reference Price. However, in an 
effort to keep a rapidly-moving market aware of the current price 
bands, the Processor would republish the existing price bands every 
15 seconds. See Response Letter at 5.
    \58\ Id.
---------------------------------------------------------------------------

    As discussed in greater detail below, the Participants recently 
amended the Plan to clarify that the Reference Price used in 
determining which Percentage Parameter is applicable during the trading 
day would be based on the closing price of the subject security on the 
Primary Listing Exchange on the previous trading day or, if no closing 
price exists, the last sale on the Primary Listing Exchange reported by 
the Processors. The Participants also amended the Plan to permit 
certain transactions to execute outside of the price bands. 
Specifically, the Participants proposed that transactions that are 
exempt under Rule 611 of Regulation NMS,\59\ and which do not update 
the last sale price (except if solely because the transaction was 
reported late), should be allowed to execute outside of the price 
bands.\60\ As part of the amendment, the Participants also proposed to 
exclude rights and warrants from the Plan, consistent with the current 
single-stock circuit breaker pilot.\61\
---------------------------------------------------------------------------

    \59\ 17 CFR 242.611.
    \60\ See Amendment, supra note 13.
    \61\ Id.
---------------------------------------------------------------------------

B. Display of Offers Below the Lower Price Band and Bids Above the 
Upper Price Band

    As proposed in the Plan, offers below the Lower Price Band and bids 
above the Upper Price Band would not be displayed on the consolidated 
tape. One commenter disagreed with this aspect of the Plan and stated 
that all quotes should be displayed, but marked as non-executable if 
outside the Price Bands.\62\ That commenter stated that preventing the 
display of quotes outside the Price Bands could lead to unusual side 
effects and that a broker-dealer entering an order on behalf of a 
customer should have the option of re-pricing or posting the order in 
accordance with the customer's wishes, rather than a market center re-
pricing non-executable orders to a Price Band.\63\ Another commenter 
stated that displaying certain non-accessible quotes that are the 
result ``of an altered price discovery process will have greater 
negative implications for investor confidence'' because the only trades 
than can be executed during a Limit State ``do not represent the true 
equilibrium of supply and demand.'' \64\
---------------------------------------------------------------------------

    \62\ See MFA Letter at 2-3.
    \63\ See id.
    \64\ See Driscoll Letter at 3.
---------------------------------------------------------------------------

    The Participants noted that under the Plan, all trading centers 
would be required to establish, maintain, and enforce written policies 
and procedures reasonably designed to prevent the display of offers 
below the Lower Price Band and bids above the Upper Price Band for an 
NMS Stock.\65\ When one side of the market for an individual security 
is outside the applicable Price Band, the Processors would be required 
to disseminate such National Best Bid or National Best Offer with an 
appropriate flag identifying it as non-executable. When the other side 
of the market reaches the applicable Price Band, the market for an 
individual security would enter a Limit State, and the Processor would 
be required to disseminate such National Best Offer or National Best 
Bid with an appropriate flag identifying it as a Limit State Quotation. 
The Participants stated that after considering whether more quotes 
should be displayed as unexecutable, they determined that any potential 
benefits arising from such practice would be outweighed by the risk of 
investor confusion. As a result, the Participants did not believe that 
the Plan should be amended to permit all quotes outside the Price Bands 
to be displayed. The Participants stated that they would continue to 
review this issue and could

[[Page 33503]]

revisit it after gaining experience during the pilot.\66\
---------------------------------------------------------------------------

    \65\ See Response Letter at 4.
    \66\ Id.
---------------------------------------------------------------------------

C. Criteria for Entering the Limit State

    As set forth in Section VI of the Plan, when one side of the market 
for an individual security is outside the applicable Price Band (i.e., 
when the National Best Bid \67\ is below the Lower Limit Band or the 
National Best Offer \68\ is above the Upper Limit Band for an NMS 
Stock), the Processors would be required to disseminate such National 
Best Bid or National Best Offer with an appropriate flag identifying it 
as non-executable. When the other side of the market reaches the 
applicable Price Band (i.e., when the National Best Offer is equal to 
the Lower Limit Band or the National Best Bid is equal to the Upper 
Limit Band for an NMS Stock), the market for an individual security 
would enter a Limit State,\69\ and the Processors would be required to 
disseminate such National Best Offer or National Best Bid with an 
appropriate flag identifying it as a Limit State Quotation.\70\
---------------------------------------------------------------------------

    \67\ 17 CFR 242.600(b)(42). See also Section I(G) of the Plan.
    \68\ Id.
    \69\ As set forth in Section VI(B) of the Plan, when trading for 
an NMS Stock enters a Limit State, the Processor shall cease 
calculating and disseminating updated Reference Prices and Price 
Bands for the NMS Stock until either trading exits the Limit State 
or trading resumes with an opening or re-opening as provided in 
Section V of the proposed Plan.
    \70\ See Section I(D) of the Plan.
---------------------------------------------------------------------------

    Commenters expressed concern that requiring the National Best Bid 
or Offer (``NBBO'') to be equal to, but not necessarily cross the 
applicable Price Band in order to enter a Limit State could create some 
unusual market discrepancies.\71\ One commenter stated that ``it does 
not make sense for a Limit State to be triggered if the national best 
bid or offer equals a price band, but not if the national best bid or 
offer has crossed a price band [because the] same rationale for 
entering a Limit State exists in either case.'' \72\ Instead, the 
commenters suggested that if either the best bid or offer is outside 
the Price Band, the market should enter the Limit State.
---------------------------------------------------------------------------

    \71\ See MFA Letter at 6 (stating that ``buyers may not submit 
orders if the Upper Price Band is sufficiently far away from the 
market'' and recommending that ``if either the best bid or ask is 
outside the Price Band, the market enters a Limit State and has 5 
seconds to readjust before a Trading Halt''); Deutsche Bank Letter 
at 4.
    \72\ See Deutsche Bank Letter at 4 (emphasis in original).
---------------------------------------------------------------------------

    One commenter expressed concern about a scenario where a stock is 
effectively not trading, but still has not entered a Limit State--for 
example, where the National Best Bid is below the Lower Price Band, and 
is thus non-executable, while the National Best Offer remains within 
the price bands. Since, in this example, the offer has not hit the 
Lower Price Band, the Limit State has not yet been triggered; however, 
the market for that stock is essentially one-sided, as the bid cannot 
be executed against. Since the Limit State has not yet been triggered, 
the concern is that the market could remain in this condition for an 
indefinite period of time.\73\
---------------------------------------------------------------------------

    \73\ See Molinete Letter at 2-3 (discussing a situation where 
the market may not enter a Limit State due to a market order against 
an illiquid book that would execute against a quote that is outside 
the applicable price bands).
---------------------------------------------------------------------------

    In the situation where a stock is effectively not trading, i.e., 
because the National Best Bid is below the Lower Price Band, but the 
National Best Offer is still within the price bands and thus the Limit 
State would not be triggered, the Participants responded that the 
National Best Offer would generally follow the National Best Bid 
downwards, and sellers would be willing to offer the stock at the Lower 
Price Band, triggering the Limit State.\74\ The Participants also 
responded that, alternatively, the reference price may be recalculated 
due to transactions occurring in the previous five minutes. This could 
adjust the price bands downwards, potentially bringing the National 
Best Bid within the price bands, at which time it may be executed 
against.\75\ The Participants represented that they would monitor these 
situations during the pilot and consider modifications to the Plan 
structure if needed.\76\
---------------------------------------------------------------------------

    \74\ See Response Letter at 5.
    \75\ Id.
    \76\ Id.
---------------------------------------------------------------------------

    As discussed below, in response to commenters' concerns, the 
Participants recently amended the Plan to create a manual override 
function where the National Best Bid (Offer) for a security is below 
(above) the Lower (Upper) Price Band, and the security has not entered 
the Limit State. With this provision, the Primary Listing Exchange has 
the ability to initiate a trading pause for a stock in this 
situation.\77\
---------------------------------------------------------------------------

    \77\ See Amendment, supra note 13.
---------------------------------------------------------------------------

D. Order Handling During the Limit State

    As set forth in the Plan, all trading centers \78\ in NMS Stocks, 
including both those operated by Participants and those operated by 
members of Participants, would be 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. Some commenters stated that clarifications are 
necessary regarding the Commission's Order Handling Rules so that they 
could be applied uniformly across all market centers once the Plan is 
in effect.\79\ One commenter noted that market centers would benefit 
from guidance on best industry standards for handling customer orders 
during the periods of time when securities are in a Limit State, as 
well as periods when trading in a security restarts after a trading 
pause.\80\
---------------------------------------------------------------------------

    \78\ As defined in Section I(W) of the Plan, a trading center 
shall have the meaning provided in Rule 600(b)(78) of Regulation NMS 
under the Exchange Act.
    \79\ See STA Letter at 3; SIFMA Letter at 6 (stating that the 
proposal contemplates that broker-dealers may delay, reprice or 
reject ``held'' orders, thus implicating the limit order display 
rule as well as best execution requirements); Angel Letter at 4 
(requesting the clarification of best execution requirements during 
the Limit State).
    \80\ See STA Letter at 3.
---------------------------------------------------------------------------

E. Duration of the Limit State

    By the terms of the Plan, trading for an NMS Stock would exit a 
Limit State if, within 15 seconds of entering the Limit State, the 
entire size of all Limit State Quotations is executed or cancelled. 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 Plan.
    Two commenters suggested that the Plan should contemplate a longer 
Limit State than 15 seconds, such as 30 seconds, because a shorter time 
period would trigger too many trading pauses.\81\ One commenter 
advocated for a longer Limit State ``[b]ecause the price bands should 
eliminate significant erroneous trades, and trading halts interfere 
with the natural interaction of orders and the price discovery 
process.'' \82\ That commenter stated that halts should thus ``be 
limited to extraordinary circumstances.'' \83\ Another commenter noted 
that ``15 seconds is not a sufficient amount of time for most investors 
to digest information about a limit state condition and to react to the 
information.'' \84\ These commenters believe that a 30 second Limit 
State would provide a more sufficient opportunity for market 
participants to provide liquidity to the market of an NMS Stock. These

[[Page 33504]]

commenters stated that, at a minimum, the timeframe should not be 
shortened from the proposed 15 seconds.
---------------------------------------------------------------------------

    \81\ See Vanguard Letter at 2; ICI Letter at 2. One commenter 
stated it would serve the public to understand why 15 seconds was 
chosen for the Limit State condition, as opposed to 30 seconds, or 
perhaps 60 seconds. See Themis Letter at 1.
    \82\ See Vanguard Letter at 2.
    \83\ Id.
    \84\ See ICI Letter at 2.
---------------------------------------------------------------------------

    Other commenters proposed shortening the length of the Limit State 
to 5 seconds, suggesting that this would be ample time for the market 
to replenish the necessary liquidity given the technological advances 
in modern trading.\85\ One commenter stated that a shorter Limit State 
is preferable because a longer Limit State could lead to wider spreads 
and uncertainty in the options markets.\86\ Another commenter stated 
that retail investors may wonder why their orders had not been 
executed.\87\
---------------------------------------------------------------------------

    \85\ See SIFMA Letter at 5-6; MFA Letter at 6; and Scottrade 
Letter at 2.
    \86\ See SIFMA Letter at 5.
    \87\ See Scottrade Letter at 2 (stating its confidence that 
stocks that enter the Limit State Quotation erroneously will be 
addressed within a 5 second threshold, allowing the security to 
continue trading).
---------------------------------------------------------------------------

    In response, the Participants stated that the 15-second Limit State 
should be long enough to reasonably attract additional available 
liquidity without recourse to a trading pause, while short enough to 
reasonably limit any market uncertainty that might accompany a Limit 
State.\88\ The Participants represented that, during the pilot period, 
they will continue to review the length of the Limit State and consider 
whether, based on that experience, it should be lengthened or 
shortened.\89\
---------------------------------------------------------------------------

    \88\ See Response Letter at 6.
    \89\ Id.
---------------------------------------------------------------------------

F. Criteria for Exiting a Limit State

    Under the Plan, trading for an NMS Stock would exit a Limit State 
if within 15 seconds of entering the Limit State, the entire size of 
all Limit State Quotations is executed or cancelled. Some commenters 
proposed alternative criteria for exiting a Limit State. One commenter 
expressed concern ``that the exit from a Limit State is arbitrary and 
may be easily manipulated * * * [because] it's not clear to market 
participants from moment to moment whether a trading pause will be 
declared or whether the Price Bands will suddenly be adjusted. Exiting 
a Limit State would depend upon the timing of an order that could clear 
out the Limit State quotation and when a new limit order arrives at the 
Limit State quotation.'' \90\ Another commenter suggested that in order 
to reestablish an orderly market, that the Plan should require a new 
bid and a new offer that are executable before the expiration of a 
Limit State period.\91\ Another commenter stated that the conditions 
for exiting a Limit State are not clearly defined in the Plan and 
further clarifications are necessary.\92\
---------------------------------------------------------------------------

    \90\ See MFA Letter at 5.
    \91\ See SIFMA Letter at 6.
    \92\ See Molinete Letter at 3.
---------------------------------------------------------------------------

    The Participants declined to amend the Plan to address these 
concerns, noting in the Response Letter that adding a requirement that 
a new executable bid or offer be entered before exiting a Limit State 
raises the question of who would be obligated to enter such a bid or 
offer.\93\ Moreover, the Participants stated that depending on the 
price movements during the five minutes prior to entering the Limit 
State, the Reference Price may have moved, thus moving the Price 
Bands.\94\ The Participants noted that in such a case, executable bids 
and offers may become available simply by virtue of the recalculated 
Price Bands.
---------------------------------------------------------------------------

    \93\ Id.
    \94\ Id.
---------------------------------------------------------------------------

G. Application of the Price Bands at the Open and Close

    During Phase I of the Plan's implementation time period, the terms 
of the Plan would apply only to Tier 1 NMS Stocks, as defined in 
Appendix A of the Plan, and the first Price Bands would be calculated 
and disseminated 15 minutes after the start of Regular Trading Hours, 
as specified in Section V(A) of the Plan, and no Price Bands would be 
calculated and disseminated less than 30 minutes before the end of 
Regular Trading Hours. In Phase II, the Plan would fully apply to all 
NMS Stocks beginning at 9:30 a.m. ET and ending at 4:00 p.m. ET of each 
trading day.
    Some commenters expressed concerns about the application of the 
Price Bands at the opening of the trading day. One commenter stated 
that the approach proposed in Phase I--the first Price Bands would be 
calculated and disseminated 15 minutes after the start of Regular 
Trading Hours, and no Price Bands would be calculated and disseminated 
less than 30 minutes before the end of Regular Trading Hours--should 
apply to both phases of the Plan.\95\ Another commenter agreed that the 
Plan should not be in effect during the first five minutes of the 
trading day because price information is critical at that time.\96\ 
That commenter also stated that any regulatory gap during this time 
period could be filled by the clearly erroneous trade rules, which it 
proposed should only be in effect during the first five (and last five) 
minutes of the trading day.\97\ Rather than placing a specific time 
limit on the opening, another commenter asserted that it would benefit 
the market if Price Bands were not established until a single opening 
price occurs at the Primary Listing Exchange.\98\ However, one 
commenter stated that the Price Bands should be in effect for the 
entire trading day because long-term investors may appreciate this 
simplicity.\99\
---------------------------------------------------------------------------

    \95\ See SIFMA Letter at 8. The commenter also requested 
clarification on whether it is true that there may be no Price Bands 
in effect for an NMS Stock during the first five minutes if the 
Opening Price for the stock does not occur on the Primary Market 
within that period because there will be no Reference Price under 
such circumstance. See id.
    \96\ See Knight Letter at 3.
    \97\ Id.
    \98\ See Scottrade Letter at 2.
    \99\ See Themis Letter at 1.
---------------------------------------------------------------------------

    Commenters also expressed concerns about the application of the 
Price Bands at the close of the trading day. Six commenters opposed 
applying the Price Bands at the close of the trading day.\100\ These 
commenters described the close of the trading day as a critical part of 
the trading day \101\ and argued that under the terms of the Plan, 
exchanges could have inconsistent closing times as a result of a 
trading pause.\102\ According to these commenters, keeping track of 
various closing times could have serious negative effects for market 
participants attempting to close positions or hedge by the end of the 
day.\103\ Alternatively, one commenter suggested that if there is a 
disruptive event immediately prior to the close, regular-way trading 
and the closing auction should be extended to make sure the closing 
price is accurate.\104\
---------------------------------------------------------------------------

    \100\ Six commenters generally advocated for the Plan not being 
in effect during the final 10 minutes of the trading day, i.e., 3:50 
p.m. to 4:00 p.m. ET. See FIF Letter at 5; Deutsche Bank Letter at 2 
and 4; Knight Letter at 3; SIFMA Letter at 2; ITG Letter at 2; 
Scottrade Letter at 2-3. Two of these commenters suggested that it 
would be ideal to suspend the operation of the Plan from 3:35 p.m. 
to 4:00 p.m. ET. See ITG Letter at 2; Scottrade Letter at 2-3.
    \101\ See e.g., Knight Letter at 3.
    \102\ See e.g., FIF Letter at 5 (stating that exchanges could 
have different closing times as a result of trading pauses); 
Deutsche Bank Letter at 2 (advocating for consistent closing times 
across all of the exchanges).
    \103\ See Deutsche Bank Letter at 2.
    \104\ See Angel Letter at 5.
---------------------------------------------------------------------------

    The Participants stated in the Response Letter that they believe 
that the proposed doubling of the Percentage Parameters around the 
opening and closing periods is appropriate in light of the increased 
volatility at those times, and that no adjustment to the timing or 
levels of the Price Bands should be made to the Plan until experience 
is gained from both Phases I and II.\105\
---------------------------------------------------------------------------

    \105\ See Response Letter at 4.

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

[[Page 33505]]

H. Reopenings on the Primary Listing Exchange

    Under the terms of the Plan, following a trading pause in an NMS 
Stock, and if the Primary Listing Exchange has not declared a 
Regulatory Halt, the next Reference Price would be the Reopening Price 
on the Primary Listing Exchange if such Reopening Price occurs within 
ten minutes after the beginning of the trading pause, and subsequent 
Reference Prices shall be determined in the manner prescribed for 
normal openings, as specified in Section V(B)(1) of the Plan.
    One commenter stated, instead of this provision, exchanges could 
compete for the five to ten minute exclusive window to reopen an 
issue.\106\ The commenter suggested reviewing trading volumes and 
awarding the reopening rights to the venue with the most average daily 
volume over the review period.\107\
---------------------------------------------------------------------------

    \106\ See Driscoll Letter at 2-3.
    \107\ Id. at 4.
---------------------------------------------------------------------------

I. Classification and Treatment of Tier 2 Stocks

    Pursuant to the Plan, Tier 1 NMS Stocks would include all NMS 
Stocks included in the S&P 500 Index, the Russell 1000 Index, and the 
exchange-traded products listed on Schedule 1 to the Plan's Appendix. 
Tier 2 NMS Stocks would include all NMS Stocks other than those in Tier 
1. The Percentage Parameters for Tier 2 NMS Stocks with a Reference 
Price of $1.00 or more would be 10% and the Percentage Parameters for 
Tier 2 NMS Stocks with a Reference Price less than $1.00 would be the 
lesser of (a) $0.15 or (b) 75%.
    One commenter stated that a 10% price band may be too restrictive 
for some Tier 2 stocks and suggested that the Participants reduce the 
number of Tier 2 stocks to a test group.\108\ That commenter also 
stated that a 10% price band may be too restrictive for thinly traded 
stocks.\109\ Another commenter proposed the creation of a Tier 3 for 
stocks with a sufficiently low average daily volume (``ADV'') and wide 
bid-offer spreads.\110\ That commenter stated that the originally 
proposed limit up-limit down parameters may be unsuitable for these 
types of low-liquidity stocks and that they may require a higher 
percentage parameter.\111\
---------------------------------------------------------------------------

    \108\ See MFA Letter at 4.
    \109\ Id. (for example, the commenter suggested that reopening 
rights be awarded to the trading venue with the most average daily 
volume over the review period).
    \110\ See Knight Letter at 3.
    \111\ Id.
---------------------------------------------------------------------------

    As discussed below, the Participants recently amended the Plan to 
create a 20% price band for Tier 1 and Tier 2 stocks with a Reference 
Price equal to $0.75 and up to and including $3.00. The Participants 
also proposed a conforming amendment for Tier 1 and Tier 2 stocks with 
a Reference Price less than $0.75. The Percentage Parameters for these 
stocks shall be the lesser of (a) $0.15 or (b) 75%.\112\ As initially 
proposed, those Percentage Parameters would have applied to Tier 1 and 
Tier 2 stocks with a Reference Price less than $1.00.
---------------------------------------------------------------------------

    \112\ See Amendment, supra note 13.
---------------------------------------------------------------------------

J. Treatment and Impact of the Plan on Exchange Traded Products (ETPs)

    The Commission also received comments on the scope of the Plan as 
it applies to ETPs. ICI stated that all ETFs should be included in the 
pilot on an expedited basis.\113\ Vanguard seconded this idea and noted 
that the original list of ETPs was created when the Commission, FINRA, 
and the exchanges had to act quickly following the market events of May 
6, 2010.\114\
---------------------------------------------------------------------------

    \113\ See ICI Letter at 2-3.
    \114\ See Vanguard Letter at 2.
---------------------------------------------------------------------------

    MFA suggested that there could be unintended consequences of the 
Plan on ETFs (or derivatives) because the spreads in such products 
could increase due to uncertainty in the underlying security, i.e., if 
the components of an ETF are subject to Limit States or trading pauses, 
quotes in the ETF would widen accordingly, potentially causing the ETF 
itself to enter a Limit State.\115\ According to MFA, index arbitragers 
may decline to trade because of uncertainty if they do not have a way 
to hedge risk.\116\
---------------------------------------------------------------------------

    \115\ See MFA Letter at 6.
    \116\ Id.
---------------------------------------------------------------------------

    In response, the Participants noted that the proposed phases of the 
Plan appropriately focus on trading characteristics and volatility 
rather than instrument type, and that including only certain ETPs in 
Tier 1 was consistent with scope of the current single-stock circuit 
breaker pilot.\117\
---------------------------------------------------------------------------

    \117\ See Response Letter at 9.
---------------------------------------------------------------------------

    As discussed below, the Participants recently amended the Plan to 
require a review and update, on a semi-annual basis, of the list of 
ETPs included in Tier I of the Plan, and re-stated the criteria by 
which ETPs would be selected for inclusion in Tier I.

K. Coordination of the Plan With Other Volatility Moderating Mechanisms

    Five commenters noted that the Plan implicates other volatility 
moderating mechanisms that currently exist \118\ and requested that the 
interaction of the Plan with these existing mechanisms be 
clarified.\119\ The commenters stated that the Plan could interact with 
the single-stock circuit breaker pilot,\120\ the Regulation SHO circuit 
breaker,\121\ and the exchange-specific volatility guards.\122\ One 
commenter stated that ``simultaneous triggering of two or more of these 
speed bumps during times of heightened market volatility could cause 
confusion and uncertainty unless there is a scheme in place for handing 
multiple triggers.'' \123\ One commenter advocated that as the 
Participants implement the Plan, the Commission phase out: (1) The NYSE 
LRPs; (2) the Nasdaq Volatility Guard; (3) the Regulation SHO 
alternative uptick rule; and (4) the single-stock circuit 
breakers.\124\ Two commenters also requested that the Commission amend 
clearly erroneous rules so the presumption is that trades executed 
within the Price Band are not subject to being broken.\125\
---------------------------------------------------------------------------

    \118\ See Scottrade Letter at 3; STANY Letter at 4; Knight 
Letter at 2-3; SIFMA Letter at 6-7; CME Letter at 1 and 3 (noting 
that the proposed Plan would replace the existing single-stock 
circuit breaker pilot program currently in effect); FIF Letter at 5 
(noting that under the single-stock circuit breaker pilot, exchanges 
deal with held orders differently).
    \119\ See e.g., Scottrade Letter at 3.
    \120\ See e.g., Scottrade Letter at 3; STANY Letter at 4; FIF 
Letter at 5.
    \121\ See e.g., STANY Letter at 4;
    \122\ See e.g., STANY Letter at 4; Knight Letter at 2-3.
    \123\ See STANY Letter at 4.
    \124\ See Knight Letter at 1.
    \125\ See SIFMA Letter at 6-7; STANY Letter at 4. See also 
Knight Letter at 3 (Knight stated that clearly erroneous rules 
should only operate during the first and last five minutes of the 
trading day and that there is also a utility in extending the 
clearly erroneous rules to after-hours trading).
---------------------------------------------------------------------------

    Another commenter stated that the Plan does not consider how it 
would interact with the market-wide circuit breakers being evaluated by 
the Commission and the U.S. Commodity Futures Trading Commission.\126\ 
This commenter stated that single-stock circuit breaker halts may 
affect products across markets, and may undermine rather than promote 
liquidity during market disruptions.\127\ Moreover, according to this 
commenter, halting individual securities without a market-wide halt 
would, in the case of an index, impair the calculation of that index, 
which would have cross-market effects. This commenter concluded that 
market-wide circuit breakers, coupled with automated volatility and 
risk management functionality, i.e., price bands, protection points, 
order quantity

[[Page 33506]]

protections, and stop logic functionality, would be the better 
alternative.\128\
---------------------------------------------------------------------------

    \126\ See CME Letter at 2-3.
    \127\ Id. at 3.
    \128\ Id.
---------------------------------------------------------------------------

    The Participants noted that some commenters requested that the 
Participants amend their rules to provide that an execution within a 
Price Band could not be deemed a clearly erroneous execution. The 
Participants responded that, while it may be useful to do so and that a 
key benefit of the limit up-limit down mechanism should be the 
prevention of clearly erroneous executions, the clearly erroneous trade 
rules are separate from the Plan and as such the Participants would 
consider such a change on a separate track.\129\
---------------------------------------------------------------------------

    \129\ See Response Letter at 7.
---------------------------------------------------------------------------

L. Coordination and Impact on Other Markets

    Commenters also expressed opinions regarding the impact of the Plan 
on other markets, e.g., options,\130\ futures,\131\ and foreign 
markets.\132\ One commenter suggested that in the options markets, the 
proposed Limit State for an NMS Stock could create uncertainty and 
result in wider spreads on the related option.\133\ In its letter, that 
commenter stated that option traders hedge option transactions with the 
underlying security, so that a Limit State could impact hedging 
activity as well. This commenter suggested that options market-makers 
may be unwilling to be subject to normal market-making requirements and 
minimum quoting widths when the underlying security is in a Limit 
State. Moreover, options markets do not have uniform clearly erroneous 
standards. Accordingly, when the underlying security is in a Limit 
State, some options exchanges may reject all options market orders, 
while other exchanges may reject only orders on the same side of the 
market that caused the Limit State.\134\
---------------------------------------------------------------------------

    \130\ See SIFMA Letter at 7; STANY Letter at 3-4.
    \131\ See e.g., CME Group Letter, supra note 38.
    \132\ See Angel Letter at 5 (stating that policy makers should 
consider how foreign markets address issues of extraordinary market 
volatility).
    \133\ See STANY Letter at 3-4.
    \134\ Id.
---------------------------------------------------------------------------

    The Participants responded that the Plan will generally benefit the 
market for NMS Stocks and protect investors and should not be delayed 
while further consideration is given to coordination with options and 
futures markets.\135\ The Participants also stated their belief that 
the Plan strikes appropriate balance in the areas noted. Because the 
Plan would be adopted as a pilot, the Participants represented that 
they would have an opportunity to further consider the commenters' 
suggestions above after gaining experience with the Plan.
---------------------------------------------------------------------------

    \135\ See Response Letter at 7.
---------------------------------------------------------------------------

M. Role of the Processors

    The Processors are fundamental to the operation of the Plan. In 
short, the single plan processor responsible for consolidation of 
information for an NMS Stock would be responsible for calculating and 
disseminating the applicable Price Bands as well as marking certain 
quotations as non-executable.
    One commenter stated that the SIPs should run test data to prove 
that they are up to the tasks required by them under the terms of the 
Plan.\136\ Another commenter questioned the ability of the SIPs to 
perform the tasks because under the Plan, SIPs would be producing data 
rather than merely passing through data to the markets for the first 
time.\137\ Another commenter stated that the SIPs should have 
mechanisms to determine when they have invalid or delayed market data 
and thus the ability to halt the dissemination of the Price Bands 
accordingly.\138\ Finally, because SIP data is slower than data 
disseminated directly by an exchange, one commenter questioned whether 
participants co-located to an exchange could calculate Price Band 
information faster than the rest of the market and use this information 
to their advantage.\139\
---------------------------------------------------------------------------

    \136\ See STA Letter at 4.
    \137\ See STANY Letter at 5. See also FIF Letter at 5 (noting 
that it is possible that a trade will be executed at a price within 
the Price Bands, but will be reported to the SIP after the Price 
Band has moved and potentially should be studied.)
    \138\ See SIFMA Letter at 9.
    \139\ See Themis Letter at 1-2.
---------------------------------------------------------------------------

    The Participants responded that the Processor is well-suited to 
carrying out its responsibilities under the Plan and the Participants 
will monitor the Processor's performance during the pilot.\140\
---------------------------------------------------------------------------

    \140\ See Response Letter at 8.
---------------------------------------------------------------------------

N. Operating Committee Composition

    Section III(C) of the Plan provides for each Participant to 
designate an individual to represent the Participant as a member of an 
Operating Committee.\141\ No later than the initial date of the Plan, 
the Operating Committee would be required to designate one member of 
the Operating Committee to act as the Chair of the Operating Committee. 
The Operating Committee would monitor the procedures established 
pursuant to the Plan and advise the Participants with respect to any 
deficiencies, problems, or recommendations as the Operating Committee 
may deem appropriate. While the Plan generally provides that amendments 
to the Plan shall be unanimous, any recommendation for an amendment to 
the Plan from the Operating Committee that receives an affirmative vote 
of at least two-thirds of the Participants, but is less than unanimous, 
would be submitted to the Commission as a request for an amendment to 
the Plan initiated by the Commission under Rule 608 of Regulation NMS 
under the Act.\142\
---------------------------------------------------------------------------

    \141\ See Section I(J) of the proposed Plan.
    \142\ 17 CFR 242.608.
---------------------------------------------------------------------------

    Two commenters suggested that the Operating Committee be 
supplemented by an advisory committee, made up of a cross-section of 
users, investors, and agents in the marketplace, that would report to 
the Operating Committee.\143\ One of these commenters stated that this 
would achieve due process for the both review and recommendations of 
altering the Plan.\144\ In the spirit of transparency, the other 
commenter recommended that the minutes of the Plan committee meetings 
be made available to interested parties.\145\ Two additional commenters 
recommended that industry representatives who are not parties to the 
Plan be added to the Operating Committee of the Plan.\146\
---------------------------------------------------------------------------

    \143\ See STA Letter at 4-5; SIFMA Letter at 7.
    \144\ See STA Letter at 5.
    \145\ See SIFMA Letter at 7.
    \146\ See STANY Letter at 5-6; Driscoll Letter at 4 
(recommending diverse representation of all key trading groups, 
retail order execution representation, institutional buy-side 
representation, representatives of various trading venues and 
representation of those who focus on small capitalization 
securities).
---------------------------------------------------------------------------

    The Participants initially responded that a non-voting advisory 
committee is unnecessary.\147\ Except with respect to the addition of 
new Participants to the Plan, the Participants stated that any proposed 
change in, addition to, or deletion from the Plan would have to be 
effected by means of a written amendment to the Plan that (1) sets 
forth the change, addition, or deletion; (2) is executed on behalf of 
each Participant; and (3) is approved by the SEC pursuant to, or 
otherwise becomes effective under, Rule 608 of Regulation NMS under the 
Exchange Act. Thus, any person affected by changes to the Plan would 
have notice and an opportunity to comment as part of the SEC approval 
process in accordance with Rule 608.\148\
---------------------------------------------------------------------------

    \147\ See Response Letter at 7.
    \148\ Id.
---------------------------------------------------------------------------

    As discussed below, however, the Participants recently proposed an 
amendment to the Plan to create an Advisory Committee to the Operating 
Committee. Members of the Advisory Committee would have the right to 
submit their view on Plan matters to the

[[Page 33507]]

Operating Committee prior to a decision by the Operating Committee on 
such matters. Such matters may include, but would not be limited to, 
proposed material amendments to the Plan. The Operating Committee would 
be required to select at least one representative from each of the 
following categories to be members of the Advisory Committee: (i) A 
broker-dealer with a substantial retail investor customer base, (ii) a 
broker-dealer with a substantial institutional investor customer base, 
(iii) an alternative trading system, and (iv) an investor.\149\
---------------------------------------------------------------------------

    \149\ See Amendment, supra note 13.
---------------------------------------------------------------------------

O. Withdrawal of Participants From the Plan

    Section IX of the Plan provides that a Participant may withdraw 
from the Plan upon obtaining approval from the Commission and upon 
providing not less than 30 days written notice to the other 
participants. Four commenters expressed concern about the withdrawal 
provision and suggested that Commission require FINRA and all trading 
centers to participate in the Plan because withdrawal could create 
problems if only some market centers are part of the Plan.\150\
---------------------------------------------------------------------------

    \150\ See FIF Letter at 5; SIFMA Letter at 7; STANY Letter at 5; 
Molinete Letter at 3.
---------------------------------------------------------------------------

P. Implementation Time-Period

    The Participants proposed that the initial date of the Plan 
operations be 120 calendar days following the publication of the 
Commission's order approving the Plan in the Federal Register. The 
Participants would implement that Plan as a one-year pilot program in 
two Phases, consistent with Section VIII of the Plan. Phase I of Plan 
implementation would apply immediately following the initial date of 
Plan operations; Phase II of the Plan would commence six months after 
the initial date of the Plan or such earlier date as may be announced 
by the Processor with at least 30 days notice. As discussed below, the 
Participants recently proposed an amendment to the Plan that included a 
new implementation date of February 4, 2013.
    One commenter stated that the Plan should be implemented as quickly 
as possible.\151\ Another commenter recommended an implementation date 
of 12 months instead of 120 days,\152\ while another commenter stated 
that the Plan should be implemented no earlier than the second quarter 
of 2012.\153\
---------------------------------------------------------------------------

    \151\ See Vanguard Letter at 2. See also ICI Letter at 3 
(recommending that ETPs be included in the pilot on an expedited 
basis).
    \152\ See FIF Letter at 5-6.
    \153\ See SIFMA Letter at 9. See also Molinete Letter at 5 
(stating that the 120-day implementation time period is too 
ambitious).
---------------------------------------------------------------------------

    Prior to the implementation of Phase II of the Plan, one commenter 
recommended that the Participants analyze empirical evidence derived 
from Phase I.\154\ Another commenter recommended that the Participants 
seek comment before implementing the Plan on a permanent basis.\155\ 
Yet another commenter stated that the Commission should have to approve 
Phase II of the Plan prior to its implementation.\156\
---------------------------------------------------------------------------

    \154\ See Deutsche Bank Letter at 4.
    \155\ See SIFMA Letter at 9.
    \156\ See STANY Letter at 7.
---------------------------------------------------------------------------

Q. Comments on Rule-Making Process of the Plan

    The Participants filed the Plan with the Commission pursuant to 
Section 11A of the Act \157\ and Rule 608 thereunder.\158\ The 
Commission solicited comments on the Plan from interested persons. One 
commenter stated that the process for the creation of a new NMS plan 
circumvented the formal notice and comment process provided for in The 
Administrative Procedure Act.\159\ The commenter stated that the 
existence of confidentiality agreements among the Participants in 
developing the proposal has negative implications for transparency in 
the rulemaking process.\160\
---------------------------------------------------------------------------

    \157\ 15 U.S.C. 78k-1.
    \158\ 17 CFR 242.608.
    \159\ Pub. Law 79-404, 5 U.S.C. 500 et seq. See Driscoll Letter 
at 1.
    \160\ Id (stating that the narrow focus of the group that 
developed the regulation may have also allowed some opportunities to 
increase competition between exchanges to have been overlooked).
---------------------------------------------------------------------------

    Another commenter questioned whether there is a need for a 
Commission rule instead of an NMS plan and stated that ongoing and 
direct involvement of the Commission will be important to efficient and 
effective resolution of interpretive questions relating to the Plan and 
the reasonable policies and procedures.\161\ The same commenter also 
stated that self-regulatory organizations will need to adopt rules 
specifying how they plan to handle orders that have been routed to them 
when such orders present display or execution issues under the 
Plan.\162\
---------------------------------------------------------------------------

    \161\ See SIFMA Letter at 7.
    \162\ Id. at 9.
---------------------------------------------------------------------------

    Finally, one commenter stated that a cost-benefit analysis of the 
Plan should be conducted to address the anticipated costs of 
implementing the Plan, the parties that would pay for new systems, 
whether processors would be allowed to charge more than their costs for 
the new data components of the consolidated feeds, and the incremental 
benefits that would be incurred over the existing trading pause rules 
if the Plan were approved.\163\
---------------------------------------------------------------------------

    \163\ See Scottrade Letter at 4.
---------------------------------------------------------------------------

V. Amendment to the Plan

    On May 24, 2012, in response to the comments received on the 
proposed Plan, the Participants submitted an amendment that proposed 
several changes to the Plan.\164\ First, the participants proposed to 
amend the Plan to allow transactions that are exempt under Rule 611 of 
Regulation NMS \165\, and which do not update the last sale price 
(except if solely because the transaction was reported late), to 
execute outside of the price bands.\166\
---------------------------------------------------------------------------

    \164\ See Amendment, supra note 13.
    \165\ 17 CFR 242.611.
    \166\ See Amendment, supra note 13.
---------------------------------------------------------------------------

    Second, the Participants proposed to amend the Plan to provide for 
a 20% price band for Tier 1 and Tier 2 stocks with a Reference Price 
equal to $0.75 and up to and including $3.00. The Participants also 
proposed a conforming amendment for Tier 1 and Tier 2 stocks with a 
Reference Price less than $0.75. The Percentage Parameters for these 
stocks would be the lesser of (a) $0.15 or (b) 75%.\167\ As initially 
proposed, those Percentage Parameters would apply to Tier 1 and Tier 2 
stocks with a Reference Price less than $1.00.
---------------------------------------------------------------------------

    \167\ Id.
---------------------------------------------------------------------------

    Third, the Participants proposed to amend the Plan to exclude 
rights and warrants from the Plan, consistent with the current single-
stock circuit breaker pilot.\168\
---------------------------------------------------------------------------

    \168\ Id.
---------------------------------------------------------------------------

    Fourth, the Participants proposed to amend the Plan to provide for 
the creation of an Advisory Committee to the Operating Committee. As 
set forth in greater detail in the amendment, the Operating Committee 
would be required to select at least one representative from each of 
the following categories to be members of the Advisory Committee: (i) A 
broker-dealer with a substantial retail investor customer base, (ii) a 
broker-dealer with a substantial institutional investor customer base, 
(iii) an alternative trading system, and (iv) an investor.\169\ Members 
of the Advisory Committee would have the right to submit their view on 
Plan matters to the Operating Committee prior to a decision by the 
Operating Committee on such matters. Such matters could include, but 
would not be limited to, proposed material amendments to the Plan.
---------------------------------------------------------------------------

    \169\ Id.
---------------------------------------------------------------------------

    Fifth, the Participants proposed to amend the Plan to provide for a 
manual

[[Page 33508]]

override functionality when, for example, the National Best Bid for an 
NMS Stock is below the Lower Price Band, the NMS Stock has not entered 
the Limit State, and the Primary Listing Exchange has determined that 
trading in that stock has sufficiently deviated from its normal trading 
characteristics such that a trading pause would promote the Plan's core 
purpose of addressing extraordinary market volatility. Upon making this 
determination, the Primary Listing Exchange would have the ability to 
declare a trading pause in that stock.\170\
---------------------------------------------------------------------------

    \170\ Id.
---------------------------------------------------------------------------

    Sixth, the Participants proposed a new implementation date of 
February 4, 2013. The Participants stated that this date would provide 
appropriate time to develop and test the technology necessary to 
implement the Plan, including market-wide testing.
    Finally, the Participants proposed to amend the Plan to require the 
Participants to review and update, on a semi-annual basis, the list of 
ETPs included in Tier I of the Plan, and re-stated the criteria by 
which ETPs would selected for inclusion in Tier I.\171\
---------------------------------------------------------------------------

    \171\ For example, ETPs, including inverse ETPs, that trade over 
$2,000,000 consolidated average daily volume would be included in 
Tier I, as would ETPs that do not meet this volume criterion, but 
track similar benchmarks.
---------------------------------------------------------------------------

    The Participants also proposed technical changes to the Plan. For 
example, the Participants clarified that Regular Trading Hours could 
end earlier than 4:00 p.m. ET in the case of an early scheduled close. 
The Participants also provided that Participants may re-transmit the 
price bands calculated and disseminated by the Processor. Finally, the 
Participants clarified that the Reference Price used in determining 
which Percentage Parameter is applicable during the trading day would 
be based on the closing price of the subject security on the Primary 
Listing Exchange on the previous trading day or, if no closing price 
exists, the last sale on the Primary Listing Exchange reported by the 
Processor.
    The Participants also proposed to amend the Plan in order to 
collect and provide to the Commission various data and analysis 
throughout the duration of the pilot period. Specifically, the 
Participants will provide summary statistics to the Commission, 
including data covering how often stocks enter the Limit State, and how 
often stocks enter a trading pause as a result of the limit up-limit 
down mechanism. The Participants will also examine certain parameters 
of the limit up-limit down mechanism, including the appropriateness of 
the proposed price bands, and the appropriateness of the duration of 
the Limit State. Finally, the Participants will provide raw data to the 
Commission, including the record of every limit price, the record of 
every Limit State, and the record of every trading pause.

VI. Discussion and Commission Findings

A. Section 11A of the Act

    In 1975, Congress directed the Commission, through the enactment of 
Section 11A of the Act,\172\ to facilitate the establishment of a 
national market system to link together the individual markets that 
trade securities. Congress found the development of a national market 
system to be in the public interest and appropriate for the protection 
of investors and the maintenance of fair and orderly markets to assure 
fair competition among the exchange markets.\173\ Section 11A(a)(3)(B) 
of the Act directs the Commission, ``by rule or order, to authorize or 
require self-regulatory organizations to act jointly with respect to 
matters as to which they share authority under this title in planning, 
developing, operating, or regulating a national market system (or a 
subsystem thereof) or one or more facilities.'' \174\ The Commission's 
approval of a national market system plan is required to be conditioned 
upon a finding that the plan is ``necessary or appropriate in the 
public interest, for the protection of investors and the maintenance of 
fair and orderly markets, to remove impediments to, and perfect the 
mechanism of, a national market system, or otherwise in furtherance of 
the purposes of the Act.'' \175\
---------------------------------------------------------------------------

    \172\ 15 U.S.C. 78k-1.
    \173\ 15 U.S.C. 78k-1(a)(1)(C).
    \174\ 15 U.S.C. 78k-1(a)(3)(B).
    \175\ 17 CFR 242.608(b)(2). See also 15 U.S.C. 78k-1(a).
---------------------------------------------------------------------------

    After carefully considering the proposed Plan and the issues raised 
by the comment letters, the Commission has determined to approve the 
Plan, as amended by the Participants, pursuant to Section 11A(a)(3)(B) 
of the Act \176\ and Rule 608.\177\ The Commission believes that the 
Plan is reasonably designed to prevent potentially harmful price 
volatility, including severe volatility of the kind that occurred on 
May 6, 2010.\178\ The Plan should thereby help promote the goals of 
investor protection and fair and orderly markets. The Commission also 
believes that the Plan is a prudent replacement of the single-stock 
circuit breaker that is currently in effect, and that it is 
appropriately being introduced on a pilot basis. The pilot period will 
allow the public, the Participants, and the Commission to assess the 
operation of the Plan and whether the Plan should be modified prior to 
approval on a permanent basis.
---------------------------------------------------------------------------

    \176\ 15 U.S.C. 78k-1(a)(3)(B).
    \177\ 17 CFR 242.608. In approving this Plan, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \178\ The Commission and the Participants have conducted 
simulations on historical data to examine how a limit up-limit down 
mechanism might work. The simulations generally support the 
structure of the proposal. In particular, the proposal would reduce, 
but not eliminate, extreme short-term price changes, and would not 
result in an excessive number of trading pauses.
    Commission staff, for example, conducted a simulation that 
suggested that the percentage limits should be larger at the open 
and close and that the percentage limits should be larger for lower 
priced stocks. In addition, the simulation suggested that most 
trades occurring outside of the bands are reversed quickly, 
providing support for the notion that a limit state may help avoid 
unnecessary trading pauses. The simulation also showed that an 
average of slightly more than one large index stock would have a 
trading pause every four days, based on the structure of the 
simulation, which was not the same as the proposed structure. A 
follow-up analysis using the proposed structure showed that only one 
large index stock would have a trading pause in the three months 
analyzed.
     The NYSE staff also simulated the proposed limit up-limit down 
mechanism to examine how the mechanism would have worked on May 6th, 
2010. Given time constraints, the simulation was limited to the 
price band aspect of the proposal and did not consider the limit 
state or trading pause provisions of the proposal. This simulation 
suggested that the price bands alone would have reduced the size of 
the flash crash significantly, but stocks would still have 
experienced large five-minute declines. For example, on May 6th, 
Accenture experienced a five-minute decline of 99.98%. The 
simulation suggests that if there had been price bands in place on 
May 6th, the most extreme five-minute decline in Accenture might 
have been 6.43%. While the Commission recognizes that this is still 
a significant decline, it would have much less than the actual 
decline.
     The NYSE simulation also examined the ability of the limit up-
limit down price bands to reduce extreme positive and negative 
returns. In the Tier 1 stocks priced more than $1.00, the price 
bands would eliminate five-minute returns more extreme than 10% and 
-10%. The price bands would reduce but not eliminate these extreme 
five-minute returns in other stocks. A sensitivity analysis 
comparing the proposed price limit percentages to alternative ones 
suggested that the proposed bands behave at least as well as the 
alternatives examined.
---------------------------------------------------------------------------

    As discussed above, commenters raised a variety of thoughtful 
concerns about the proposal and recommended certain changes. Some of 
the recommended changes were incorporated in the Amendment. As 
discussed further below, other comments raised important issues that 
are difficult to evaluate fully in the absence of practical experience 
with the Plan. These issues will warrant close consideration during the 
pilot period.
    The Commission believes that it is consistent with the Act to 
approve the

[[Page 33509]]

Plan on a pilot basis at this time because the Plan reflects the 
considered judgments of the Participants on operational issues and 
clearly represents a significant step forward that builds upon the 
experience with the current single-stock circuit breaker. The limit up-
limit down mechanism set forth in the Plan approved today and the 
single-stock circuit breaker are broadly similar in some respects. For 
example, both mechanisms calculate a reference price that is based on a 
rolling five-minute price band, and both mechanisms incorporate a five-
minute trading pause, followed by a reopening auction on the Primary 
Listing Exchange.
    The Plan, however, provides a more finely calibrated mechanism than 
that of the current single-stock circuit breaker. For example, the 
single-stock circuit breaker is triggered by trades that occur at or 
outside of the price band, and erroneous trades have triggered trading 
halts throughout the current pilot. In contrast, under the Plan, all 
trading centers in NMS stocks, including both those operated by 
Participants and those operated by members of Participants, are 
required to establish policies and procedures that are reasonably 
designed to prevent trades at prices outside of the price bands. In 
addition, quotes outside of the price bands will be marked as non-
executable. Given that trades should not occur outside of the price 
bands, the Commission believes that the Plan is reasonably designed to 
reduce the number of erroneous trades in comparison to the current 
single-stock circuit breaker.
    Moreover, Limit States under the Plan (and, ultimately, trading 
pauses) will be triggered by movements in the National Best Bid or the 
National Best Offer, rather than single trades. These quoting-based 
triggers are designed to be more stable and reliable indicators of a 
significant market event than the single trades that currently can 
trigger a single stock circuit breaker. The result of this change 
should be to reduce the frequency of Limit States (and, ultimately, 
trading pauses) to those circumstances that truly warrant a check on 
continuous trading.
    In contrast to the current single-stock circuit breaker, the Plan 
also features a fifteen-second Limit State that precedes a trading 
pause. In those instances where the movement of, for example, the 
National Best Bid below the Lower Price Band is due to a momentary gap 
in liquidity, rather than a fundamental price move, the Limit State is 
reasonably designed to allow the market to quickly correct and resume 
normal trading, without resorting to a trading pause. Because a Limit 
State, rather than a trading pause, may be sufficient to resolve some 
of these scenarios, the corresponding price bands can be narrower than 
in the single-stock circuit breaker. As such, the Commission believes 
that the Plan is reasonably designed to be a more finely calibrated 
mechanism than the current single-stock circuit breaker in guarding 
against market volatility.\179\
---------------------------------------------------------------------------

    \179\ The Commission also finds that the Plan is consistent with 
the requirements of Rule 602 under Regulation NMS. Under that rule, 
bids and offers must be firm, i.e., brokers and dealers are 
obligated to execute any order to buy or sell a subject security 
presented to it by another broker or dealer at a price at least as 
favorable to such buyer or seller as that broker or dealer's 
published bid or published offer in any amount up to its published 
quotation size. Similarly, the best bids and offers collected by 
national securities exchanges must also be firm. See 17 CFR 242.602. 
However, Rule 602(a)(3)(i) relieves exchanges of their obligation to 
collect and make available bids and offers (which are firm) if the 
existence of ``unusual market conditions'' makes those bids and 
offers no longer accurately reflective of the current state of the 
market. This provision also relieves brokers and dealers of their 
corresponding obligation to submit firm quotes. The Commission 
believes that, when the National Best Bid (Offer) crosses the Lower 
(Upper) Price Band, and such quote becomes non-executable, an 
unusual market condition exists for purposes of Rule 602. To the 
extent that this scenario constitutes an unusual market condition, 
the broker or dealer could submit a quote that is outside of the 
applicable price band, and is thus not firm (as it is non-
executable), and the exchange could collect and display such quote, 
without violating Rule 602. The Commission notes, however, that the 
firmness requirement continues to apply to quotes at or within the 
price bands that are submitted by brokers or dealers and collected 
by exchanges, as such quotes are executable.
---------------------------------------------------------------------------

    While the price bands in the Plan are reasonably designed to be 
more finely calibrated than the current single-stock circuit breaker, 
the Commission notes that the Plan is also designed to accommodate more 
fundamental price moves, albeit in a manner that lessens the velocity 
of such moves. In this regard, the Commission notes that the Plan 
provides that the price bands shall not apply to single-priced re-
openings, which allows for the stock to enter a trading pause and 
reopen at a price that is potentially significantly above or below its 
previous price. The Commission finds that this mechanism is reasonably 
designed to allow for more fundamental price moves to occur. To the 
extent that a reopening only may occur following a five-minute trading 
pause, however, the Plan is still reasonably designed to reduce the 
velocity of more significant price moves.
    The Amendment improves the initial proposal by addressing a number 
of concerns raised by commenters. Specifically, it excludes 
transactions that are exempt under Rule 611 of Regulation NMS and do 
not update the last sale price (except if solely because the 
transaction was reported late), from the requirement that such 
transactions occur within the price bands. This exclusion addresses 
commenters' concerns that such transactions often are executed at 
prices unrelated to the current market and do not have the capacity to 
initiate or exacerbate volatility.
    In response to the concerns of commenters about the potential for 
bids or offers in an NMS stock to become unexecutable without 
triggering a Limit State, the Amendment authorizes the Primary Listing 
Exchange manually to declare a trading pause in these circumstances. 
This mechanism should help ensure that the market for a stock does not 
remain impaired for an indefinite period of time, while providing the 
Primary Listing Exchange with the discretion to determine whether such 
impairment is inconsistent with the stock's normal trading 
characteristics.
    The Amendment assigns wider price bands for Tier 1 and Tier 2 
securities that are priced between $0.75 and $3.00 that are reasonably 
designed to reflect more appropriately the characteristics of stocks 
that trade in that price range. Similarly, the Amendment excludes all 
rights and warrants from the Plan, which reflects the trading 
characteristics of such securities and is consistent with the scope of 
the current single-stock circuit breaker pilot. The Amendment's 
provision for evaluating, on a semi-annual basis, the ETPs that are 
included in Tier I helps assure that ETPs meeting the criteria for 
inclusion are appropriately included in Tier I, and vice versa.
    The Amendment also extends the implementation date to February 4, 
2013. This extension of time should provide appropriate time to develop 
and test the technology necessary to implement the Plan, including 
market-wide testing.
    Finally, in response to concerns expressed by commenters, the 
Amendment establishes an Advisory Committee to the Operating Committee 
composed of a broad cross-section of market participants. The Advisory 
Committee members will have the right to submit their views on Plan 
matters to the Operating Committee and thereby engage in the ongoing 
assessment of Plan operations and formulation of future proposed 
amendments to the Plan.
    One serious concern raised by comments was the interaction between 
the limit up-limit down mechanism and the market-wide circuit breakers 
that apply across all securities and securities-related products, 
particularly

[[Page 33510]]

during a ``macro market event'' that affects a large number of 
securities and securities-related products. The Commission is approving 
separately today on a pilot basis SRO proposals to revise these market-
wide circuit breakers and make them more meaningful in today's high-
speed electronic markets.\180\ These SRO rules include both tighter 
parameters and shorter halt periods. The Commission recognizes the 
potential for limit up-limit down trading halts in many securities to 
affect both the calculation of broader indexes and the trading in 
products related to such indexes. Nevertheless, it believes that the 
need for protection against extraordinary volatility in individual 
equities is essential for both investors in such listed equities and 
for their listed companies. Accordingly, it is approving the Plan on a 
pilot basis, but welcomes comments during the pilot period on ways that 
the Plan could be improved to address potential problems in its 
interaction with market-wide circuit breakers. The Commission also is 
accepting comment during the pilot period for the market-wide circuit 
breakers on ways to improve them to address this question on their 
interaction with the Plan.
---------------------------------------------------------------------------

    \180\ See Securities Exchange Act Release No. 67090 (May 31, 
2012) (File Nos. SR-BATS-2011-038; SR-BYX-2011-025; SR-BX-2011-068; 
SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-30; SR-EDGA-2011-31; 
SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-2011-61; SR-NASDAQ-2011-
131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-NYSEAmex-2011-73; SR-
NYSEArca-2011-68; SR-Phlx-2011-129).
---------------------------------------------------------------------------

    The Commission notes that the Participants did not amend the Plan 
to incorporate some of the recommendations to modify the operational 
details of the Plan, including the duration of the Limit State, the 
calculation of the Reference Price, the application of the price bands 
at the open and the close, the criteria required to enter and exit the 
Limit State, and the display of quotes outside of the price bands. The 
Commission recognizes the thoughtfulness of the comments that put 
forward such recommendations, and indeed believes they raise valid 
concerns that warrant close scrutiny during the pilot period. At this 
time, however, the Commission believes that it is consistent with the 
Act to accept the considered collective judgment of the Participants on 
these complex issues, particularly given their expertise and 
responsibility for operating markets on a daily basis.\181\
---------------------------------------------------------------------------

    \181\ The Commission notes that one of the concerns of requiring 
the National Best Offer (Bid) to trigger the Limit Down (Up) may be 
partially alleviated by one of the amendments to the Plan. 
Specifically, if the National Best Bid is outside of the lower price 
band and is thus non-executable, while the offer remains within the 
price bands, the stated concern is that the market for that stock is 
impaired, perhaps for an indefinite period of time, while the stock 
has not entered the Limit State. The Commission believes that the 
addition of a manual override, as proposed by the Participants in 
the amendment to the Plan, may, at least partially, alleviate this 
concern.
---------------------------------------------------------------------------

    Approving the Plan on a pilot basis will allow the Participants and 
the public to gain valuable practical experience with Plan operations 
during the pilot period. This experience should prove invaluable in 
assessing whether further modifications of the Plan are necessary or 
appropriate prior to final approval. The Participants also have agreed 
to provide the Commission with a significant amount of data bearing on 
operational questions that should assist the Commission in its 
evaluation of Plan operations. Finally, the Commission welcomes 
additional comments, and empirical evidence, on the Plan during the 
pilot period to further assist it in its evaluation of the Plan. Of 
course, any final approval of the Plan would require a proposed 
amendment of the Plan, and such amendment will provide an opportunity 
for public comment prior to further Commission action.
    To the extent that the Participants did not amend the Plan to 
reflect other operational or procedural concerns, the Commission 
believes that those suggestions and concerns were generally considered 
by the Participants in developing a uniform proposal that would not be 
excessively complicated and yet could still provide important benefits 
to the markets. For example, one commenter noted that allowing the 
primary listing market to control the re-opening process in the first 
five minutes following a trading pause may confer a competitive 
advantage upon that market. The Commission notes that this aspect of 
the Plan is consistent with the current procedure for re-opening the 
market following a trading pause that has been triggered under the 
single-stock circuit breaker pilot.
    Another commenter suggested that a market-wide limit up-limit down 
mechanism was more appropriately developed through Commission 
rulemaking than through an NMS plan. While a Commission rulemaking may 
be an appropriate means for developing such a mechanism, the Commission 
believes that an NMS plan, which was the means selected by the 
Participants here, is equally appropriate, particularly given the 
Participants' expertise in the trading characteristics in individual 
securities and the operation of market systems.
    Some commenters expressed concern over the provision in the Plan 
governing withdrawal of Participants from the Plan. The Commission 
notes that withdrawing from the Plan would require an amendment to the 
Plan, and Commission approval of that amendment. Given the importance 
of applying a limit up-limit down mechanism uniformly throughout the 
market, the Commission would anticipate approving such withdrawal from 
the Plan only if the Participant seeking to withdraw from the Plan 
ceased to trade NMS securities.
    One commenter suggested that a cost-benefit analysis of the Plan 
should be conducted. The Commission notes that market participants are 
welcome to submit additional comments and empirical evidence during the 
pilot period with respect to, among other things, the operation of the 
limit up-limit down mechanism, its effectiveness in achieving its 
intended goals, and the costs associated therewith. The Commission will 
take such comments into account in considering whether to approve any 
amendment, in accordance with Rule 608 of Regulation NMS, that proposes 
to make the Plan permanent.
    As such, the Commission believes that the Plan is consistent with 
the Act, notwithstanding such comments, and that it is reasonably 
designed to achieve its objective of reducing extraordinary market 
volatility.
    Given that the Plan is being approved on a pilot basis, the 
Commission expects that the Participants will monitor the scope and 
operation of the Plan and study the data produced during that time with 
respect to such issues, and will propose any modifications to the Plan 
that may be necessary or appropriate. Similarly, the Commission expects 
that the Participants will propose any modifications to the Plan that 
may be necessary or appropriate in response to the data being gathered 
by the Participants during the pilot.\182\
---------------------------------------------------------------------------

    \182\ The Commission notes that some of the comments focused on 
the relation between the Plan, and other, exchange-specific 
volatility mechanisms, including the NYSE Liquidity Replenishment 
Points, and the Nasdaq Volatility Guard. While a stated purpose of 
the Plan is to replace the current single-stock circuit breaker, the 
Commission is also aware of the potential for unnecessary complexity 
that could result if the Plan were adopted, and exchange-specific 
volatility mechanisms were retained. To this end, the Commission 
expects that, upon implementation of the Plan, such exchange-
specific volatility mechanisms would be discontinued by the 
respective exchanges. In that regard, the Commission notes that one 
such mechanism, the Nasdaq Volatility Guard, is currently set to 
expire on the earlier of July 31, 2012, or the date on which the 
Plan is approved by the Commission. See Securities Exchange Act 
Release No. 66275 (January 30, 2012), 77 FR 5606 (February 3, 2012) 
(SR-Nasdaq-2012-019).

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

[[Page 33511]]

VII. Conclusion

    It is therefore ordered, pursuant to Sections 11A of the Act,\183\ 
and the rules thereunder, that the Plan (File No. 4-631), as amended, 
is approved on a one-year pilot basis and declared effective, and the 
Participants are authorized to act jointly to implement the Plan as a 
means of facilitating a national market system.
---------------------------------------------------------------------------

    \183\ 15 U.S.C. 78k-1.

    By the Commission.
Elizabeth M. Murphy,
Secretary.

Exhibit A

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

Table of Contents

                            Section                                Page

Preamble.......................................................        1
I. Definitions.................................................        2
II. Parties....................................................        4
III. Amendments to Plan........................................        7
IV. Trading Center Policies and Procedures.....................        8
V. Price Bands.................................................        9
VI. Limit Up-Limit Down Requirements...........................       12
VII. Trading Pauses............................................       14
VIII. Implementation...........................................       15
IX. Withdrawal from Plan.......................................       16
X. Counterparts and Signatures.................................       16
Appendix A--Percentage Parameters..............................       18
Appendix A--Schedule 1.........................................       21
Appendix B--Data...............................................       33

Preamble

    The Participants submit to the SEC this Plan establishing 
procedures to address extraordinary volatility in NMS Stocks. The 
procedures provide for market-wide limit up-limit down requirements 
that prevent trades in individual NMS Stocks from occurring outside of 
the specified Price Bands. These limit up-limit down requirements are 
coupled with Trading Pauses to accommodate more fundamental price 
moves. The Plan procedures are designed, among other things, to protect 
investors and promote fair and orderly markets. The Participants 
developed this Plan pursuant to Rule 608(a)(3) of Regulation NMS under 
the Exchange Act, which authorizes the Participants to act jointly in 
preparing, filing, and implementing national market system plans.

I. Definitions

    (A) ``Eligible Reported Transactions'' shall have the meaning 
prescribed by the Operating Committee and shall generally mean 
transactions that are eligible to update the last sale price of an NMS 
Stock.
    (B) ``Exchange Act'' means the Securities Exchange Act of 1934, as 
amended.
    (C) ``Limit State'' shall have the meaning provided in Section VI 
of the Plan.
    (D) ``Limit State Quotation'' shall have the meaning provided in 
Section VI of the Plan.
    (E) ``Lower Price Band'' shall have the meaning provided in Section 
V of the Plan.
    (F) ``Market Data Plans'' shall mean the effective national market 
system plans through which the Participants act jointly to disseminate 
consolidated information in compliance with Rule 603(b) of Regulation 
NMS under the Exchange Act.
    (G) ``National Best Bid'' and ``National Best Offer'' shall have 
the meaning provided in Rule 600(b)(42) of Regulation NMS under the 
Exchange Act.
    (H) ``NMS Stock'' shall have the meaning provided in Rule 
600(b)(47) of Regulation NMS under the Exchange Act.
    (I) ``Opening Price'' shall mean the price of a transaction that 
opens trading on the Primary Listing Exchange, or, if the Primary 
Listing Exchange opens with quotations, the midpoint of those 
quotations.
    (J) ``Operating Committee'' shall have the meaning provided in 
Section III(C) of the Plan.
    (K) ``Participant'' means a party to the Plan.
    (L) ``Plan'' means the plan set forth in this instrument, as 
amended from time to time in accordance with its provisions.
    (M) ``Percentage Parameter'' shall mean the percentages for each 
tier of NMS Stocks set forth in Appendix A of the Plan.
    (N) ``Price Bands'' shall have the meaning provided in Section V of 
the Plan.
    (O) ``Primary Listing Exchange'' shall mean the Participant on 
which an NMS Stock is listed. If an NMS Stock is listed on more than 
one Participant, the Participant on which the NMS Stock has been listed 
the longest shall be the Primary Listing Exchange.
    (P) ``Processor'' shall mean the single plan processor responsible 
for the consolidation of information for an NMS Stock pursuant to Rule 
603(b) of Regulation NMS under the Exchange Act.
    (Q) ``Pro-Forma Reference Price'' shall have the meaning provided 
in Section V(A)(2) of the Plan.
    (R) ``Regular Trading Hours'' shall have the meaning provided in 
Rule 600(b)(64) of Regulation NMS under the Exchange Act. For purposes 
of the Plan, Regular Trading Hours can end earlier than 4:00 p.m. ET in 
the case of an early scheduled close.
    (S) ``Regulatory Halt'' shall have the meaning specified in the 
Market Data Plans.
    (T) ``Reference Price'' shall have the meaning provided in Section 
V of the Plan.
    (U) ``Reopening Price'' shall mean the price of a transaction that 
reopens

[[Page 33512]]

trading on the Primary Listing Exchange following a Trading Pause or a 
Regulatory Halt, or, if the Primary Listing Exchange reopens with 
quotations, the midpoint of those quotations.
    (V) ``SEC'' shall mean the United States Securities and Exchange 
Commission.
    (W) ``Straddle State'' shall have the meaning provided in Section 
VII(A)(2) of the Plan.
    (X) ``Trading center'' shall have the meaning provided in Rule 
600(b)(78) of Regulation NMS under the Exchange Act.
    (Y) ``Trading Pause'' shall have the meaning provided in Section 
VII of the Plan.
    (Z) ``Upper Price Band'' shall have the meaning provided in Section 
V of the Plan.

II. Parties

(A) List of Parties

    The parties to the Plan are as follows:

(1) BATS Exchange, Inc., 8050 Marshall Drive, Lenexa, Kansas 66214.
(2) BATS Y-Exchange, Inc., 8050 Marshall Drive, Lenexa, Kansas 66214.
(3) Chicago Board Options Exchange, Incorporated, 400 South LaSalle 
Street, Chicago, Illinois 60605.
(4) Chicago Stock Exchange, Inc., 440 South LaSalle Street, Chicago, 
Illinois 60605.
(5) EDGA Exchange, Inc., 545 Washington Boulevard, Sixth Floor, Jersey 
City, NJ 07310.
(6) EDGX Exchange, Inc., 545 Washington Boulevard, Sixth Floor, Jersey 
City, NJ 07310.
(7) Financial Industry Regulatory Authority, Inc., 1735 K Street, NW., 
Washington, DC 20006.
(8) NASDAQ OMX BX, Inc., One Liberty Plaza, New York, New York 10006.
(9) NASDAQ OMX PHLX LLC, 1900 Market Street, Philadelphia, Pennsylvania 
19103.
(10) The Nasdaq Stock Market LLC, 1 Liberty Plaza, 165 Broadway, New 
York, NY 10006.
(11) National Stock Exchange, Inc., 101 Hudson, Suite 1200, Jersey 
City, NJ 07302.
(12) New York Stock Exchange LLC, 11 Wall Street, New York, New York 
10005.
(13) NYSE MKT LLC, 20 Broad Street, New York, New York 10005.
(14) NYSE Arca, Inc., 100 South Wacker Drive, Suite 1800, Chicago, IL 
60606.

(B) Compliance Undertaking

    By subscribing to and submitting the Plan for approval by the SEC, 
each Participant agrees to comply with and to enforce compliance, as 
required by Rule 608(c) of Regulation NMS under the Exchange Act, by 
its members with the provisions of the Plan. To this end, each 
Participant shall adopt a rule requiring compliance by its members with 
the provisions of the Plan, and each Participant shall take such 
actions as are necessary and appropriate as a participant of the Market 
Data Plans to cause and enable the Processor for each NMS Stock to 
fulfill the functions set forth in this Plan.

(C) New Participants

    The Participants agree that any entity registered as a national 
securities exchange or national securities association under the 
Exchange Act may become a Participant by: (1) becoming a participant in 
the applicable Market Data Plans; (2) executing a copy of the Plan, as 
then in effect; (3) providing each then-current Participant with a copy 
of such executed Plan; and (4) effecting an amendment to the Plan as 
specified in Section III(B) of the Plan.

(D) Advisory Committee

    (1) Formation. Notwithstanding other provisions of this Plan, an 
Advisory Committee to the Plan shall be formed and shall function in 
accordance with the provisions set forth in this section.
    (2) Composition. Members of the Advisory Committee shall be 
selected for two-year terms as follows:
    (A) Advisory Committee Selections. By affirmative vote of a 
majority of the Participants, the Participants shall select at least 
one representatives from each of the following categories to be members 
of the Advisory Committee: (1) A broker-dealer with a substantial 
retail investor customer base; (2) a broker-dealer with a substantial 
institutional investor customer base; (3) an alternative trading 
system; and (4) an investor.
    (3) Function. Members of the Advisory Committee shall have the 
right to submit their views to the Operating Committee on Plan matters, 
prior to a decision by the Operating Committee on such matters. Such 
matters shall include, but not be limited to, proposed material 
amendments to the Plan.
    (4) Meetings and Information. Members of the Advisory Committee 
shall have the right to attend meetings of the Operating Committee and 
to receive any information concerning Plan matters; provided, however, 
that the Operating Committee may meet in executive session if, by 
affirmative vote of a majority of the Participants, the Operating 
Committee determines that an item of Plan business requires 
confidential treatment.

III. Amendments to Plan

(A) General Amendments

    Except with respect to the addition of new Participants to the 
Plan, any proposed change in, addition to, or deletion from the Plan 
shall be effected by means of a written amendment to the Plan that: (1) 
Sets forth the change, addition, or deletion; (2) is executed on behalf 
of each Participant; and, (3) is approved by the SEC pursuant to Rule 
608 of Regulation NMS under the Exchange Act, or otherwise becomes 
effective under Rule 608 of Regulation NMS under the Exchange Act.

(B) New Participants

    With respect to new Participants, an amendment to the Plan may be 
effected by the new national securities exchange or national securities 
association executing a copy of the Plan, as then in effect (with the 
only changes being the addition of the new Participant's name in 
Section II(A) of the Plan) and submitting such executed Plan to the SEC 
for approval. The amendment shall be effective when it is approved by 
the SEC in accordance with Rule 608 of Regulation NMS under the 
Exchange Act or otherwise becomes effective pursuant to Rule 608 of 
Regulation NMS under the Exchange Act.

(C) Operating Committee

    (1) Each Participant shall select from its staff one individual to 
represent the Participant as a member of an Operating Committee, 
together with a substitute for such individual. The substitute may 
participate in deliberations of the Operating Committee and shall be 
considered a voting member thereof only in the absence of the primary 
representative. Each Participant shall have one vote on all matters 
considered by the Operating Committee. No later than the initial date 
of Plan operations, the Operating Committee shall designate one member 
of the Operating Committee to act as the Chair of the Operating 
Committee.
    (2) The Operating Committee shall monitor the procedures 
established pursuant to this Plan and advise the Participants with 
respect to any deficiencies, problems, or recommendations as the 
Operating Committee may deem appropriate. The Operating Committee shall 
establish specifications and procedures for the implementation and 
operation of the Plan that are consistent with the provisions of this 
Plan and the Appendixes thereto. With respect to

[[Page 33513]]

matters in this paragraph, Operating Committee decisions shall be 
approved by a simple majority vote.
    (3) Any recommendation for an amendment to the Plan from the 
Operating Committee that receives an affirmative vote of at least two-
thirds of the Participants, but is less than unanimous, shall be 
submitted to the SEC as a request for an amendment to the Plan 
initiated by the Commission under Rule 608 of Regulation NMS.

IV. Trading Center Policies and Procedures

    All trading centers in NMS Stocks, including both those operated by 
Participants and those operated by members of Participants, shall 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to comply with the limit up-limit down 
requirements specified in Sections VI of the Plan, and to comply with 
the Trading Pauses specified in Section VII of the Plan.

V. Price Bands

(A) Calculation and Dissemination of Price Bands

    (1) The Processor for each NMS stock shall calculate and 
disseminate to the public a Lower Price Band and an Upper Price Band 
during Regular Trading Hours for such NMS Stock. The Price Bands shall 
be based on a Reference Price for each NMS Stock that equals the 
arithmetic mean price of Eligible Reported Transactions for the NMS 
stock over the immediately preceding five-minute period (except for 
periods following openings and reopenings, which are addressed below). 
If no Eligible Reported Transactions for the NMS Stock have occurred 
over the immediately preceding five-minute period, the previous 
Reference Price shall remain in effect. The Price Bands for an NMS 
Stock shall be calculated by applying the Percentage Parameter for such 
NMS Stock to the Reference Price, with the Lower Price Band being a 
Percentage Parameter below the Reference Price, and the Upper Price 
Band being a Percentage Parameter above the Reference Price. The Price 
Bands shall be calculated during Regular Trading Hours. Between 9:30 
a.m. and 9:45 a.m. ET, and 3:35 p.m. and 4:00 p.m. ET, or in the case 
of an early scheduled close, during the last 25 minutes of trading 
before the early scheduled close, the Price Bands shall be calculated 
by applying double the Percentage Parameters set forth in Appendix A. 
If a Reopening Price does not occur within ten minutes after the 
beginning of a Trading Pause, the Price Band, for the first 30 seconds 
following the reopening after that Trading Pause, shall be calculated 
by applying triple the Percentage Parameters set forth in Appendix A.
    (2) The Processor shall calculate a Pro-Forma Reference Price on a 
continuous basis during Regular Trading Hours, as specified in Section 
V(A)(1) of the Plan. If a Pro-Forma Reference Price has not moved by 1% 
or more from the Reference Price currently in effect, no new Price 
Bands shall be disseminated, and the current Reference Price shall 
remain the effective Reference Price. When the Pro-Forma Reference 
Price has moved by 1% or more from the Reference Price currently in 
effect, the Pro-Forma Reference Price shall become the Reference Price, 
and the Processor shall disseminate new Price Bands based on the new 
Reference Price; provided, however, that each new Reference Price shall 
remain in effect for at least 30 seconds.

(B) Openings

    (1) Except when a Regulatory Halt is in effect at the start of 
Regular Trading Hours, the first Reference Price for a trading day 
shall be the Opening Price on the Primary Listing Exchange in an NMS 
Stock if such Opening Price occurs less than five minutes after the 
start of Regular Trading Hours. During the period less than five 
minutes after the Opening Price, a Pro-Forma Reference Price shall be 
updated on a continuous basis to be the arithmetic mean price of 
Eligible Reported Transactions for the NMS Stock during the period 
following the Opening Price (including the Opening Price), and if it 
differs from the current Reference Price by 1% or more shall become the 
new Reference Price, except that a new Reference Price shall remain in 
effect for at least 30 seconds. Subsequent Reference Prices shall be 
calculated as specified in Section V(A) of the Plan.
    (2) If the Opening Price on the Primary Listing Exchange in an NMS 
Stock does not occur within five minutes after the start of Regular 
Trading Hours, the first Reference Price for a trading day shall be the 
arithmetic mean price of Eligible Reported Transactions for the NMS 
Stock over the preceding five minute time period, and subsequent 
Reference Prices shall be calculated as specified in Section V(A) of 
the Plan.

(C) Reopenings

    (1) Following a Trading Pause in an NMS Stock, and if the Primary 
Listing Exchange has not declared a Regulatory Halt, the next Reference 
Price shall be the Reopening Price on the Primary Listing Exchange if 
such Reopening Price occurs within ten minutes after the beginning of 
the Trading Pause, and subsequent Reference Prices shall be determined 
in the manner prescribed for normal openings, as specified in Section 
V(B)(1) of the Plan. If such Reopening Price does not occur within ten 
minutes after the beginning of the Trading Pause, the first Reference 
Price following the Trading Pause shall be equal to the last effective 
Reference Price before the Trading Pause. Subsequent Reference Prices 
shall be calculated as specified in Section V(A) of the Plan.
    (2) Following a Regulatory Halt, the next Reference Price shall be 
the Opening or Reopening Price on the Primary Listing Exchange if such 
Opening or Reopening Price occurs within five minutes after the end of 
the Regulatory Halt, and subsequent Reference Prices shall be 
determined in the manner prescribed for normal openings, as specified 
in Section V(B)(1) of the Plan. If such Opening or Reopening Price has 
not occurred within five minutes after the end of the Regulatory Halt, 
the Reference Price shall be equal to the arithmetic mean price of 
Eligible Reported Transactions for the NMS Stock over the preceding 
five minute time period, and subsequent Reference Prices shall be 
calculated as specified in Section V(A) of the Plan.

VI. Limit Up-Limit Down Requirements

(A) Limitations on Trades and Quotations Outside of Price Bands

    (1) All trading centers in NMS Stocks, including both those 
operated by Participants and those operated by members of Participants, 
shall establish, maintain, and enforce written policies and procedures 
that are reasonably designed to prevent trades at prices that are below 
the Lower Price Band or above the Upper Price Band for an NMS Stock. 
Single-priced opening, reopening, and closing transactions on the 
Primary Listing Exchange, however, shall be excluded from this 
limitation. In addition, any transaction that both does not update the 
last sale price (except if solely because the transaction was reported 
late) and is excepted or exempt from Rule 611 under Regulation NMS 
shall be excluded from this limitation.
    (2) When a National Best Bid is below the Lower Price Band or a 
National Best Offer is above the Upper Price Band for an NMS Stock, the 
Processor shall disseminate such National Best Bid or National Best 
Offer with an appropriate flag identifying it as non-executable. When a 
National Best Offer is equal to

[[Page 33514]]

the Lower Price Band or a National Best Bid is equal to the Upper Price 
Band for an NMS Stock, the Processor shall distribute such National 
Best Bid or National Best Offer with an appropriate flag identifying it 
as a ``Limit State Quotation''.
    (3) All trading centers in NMS Stocks, including both those 
operated by Participants and those operated by members of Participants, 
shall establish, maintain, and enforce 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 an NMS Stock. 
The Processor shall disseminate an offer below the Lower Price Band or 
bid above the Upper Price Band that may be submitted despite such 
reasonable policies and procedures, but with an appropriate flag 
identifying it as non-executable; provided, however, that any such bid 
or offer shall not be included in National Best Bid or National Best 
Offer calculations.

(B) Entering and Exiting a Limit State

    (1) All trading for an NMS Stock shall immediately enter a Limit 
State if the National Best Offer equals the Lower Price Band and does 
not cross the National Best Bid, or the National Best Bid equals the 
Upper Price Band and does not cross the National Best Offer.
    (2) When trading for an NMS Stock enters a Limit State, the 
Processor shall disseminate this information by identifying the 
relevant quotation (i.e., a National Best Offer that equals the Lower 
Price Band or a National Best Bid that equals the Upper Price Band) as 
a Limit State Quotation. At this point, the Processor shall cease 
calculating and disseminating updated Reference Prices and Price Bands 
for the NMS Stock until either trading exits the Limit State or trading 
resumes with an opening or re-opening as provided in Section V.
    (3) Trading for an NMS Stock shall exit a Limit State if, within 15 
seconds of entering the Limit State, the entire size of all Limit State 
Quotations are executed or cancelled.
    (4) If trading for an NMS Stock exits a Limit State within 15 
seconds of entry, the Processor shall immediately calculate and 
disseminate updated Price Bands based on a Reference Price that equals 
the arithmetic mean price of Eligible Reported Transactions for the NMS 
Stock over the immediately preceding five-minute period (including the 
period of the Limit State).
    (5) If trading for an NMS Stock does not exit a Limit State within 
15 seconds of entry, the Limit State will terminate when the Primary 
Listing Exchange declares a Trading Pause pursuant to Section VII of 
the Plan. If trading for an NMS Stock is in a Limit State at the end of 
Regular Trading Hours, the Limit State will terminate when the Primary 
Listing Exchange executes a closing transaction in the NMS Stock or 
five minutes after the end of Regular Trading Hours, whichever is 
earlier.

VII. Trading Pauses

(A) Declaration of Trading Pauses

    (1) If trading for an NMS Stock does not exit a Limit State within 
15 seconds of entry during Regular Trading Hours, then the Primary 
Listing Exchange shall declare a Trading Pause for such NMS Stock and 
shall notify the Processor.
    (2) The Primary Listing Exchange may also declare a Trading Pause 
for an NMS Stock when an NMS Stock is in a Straddle State, which is 
when National Best Bid (Offer) is below (above) the Lower (Upper) Price 
Band and the NMS Stock is not in a Limit State, and trading in that NMS 
Stock deviates from normal trading characteristics such that declaring 
a Trading Pause would support the Plan's goal to address extraordinary 
market volatility. The Primary Listing Exchange shall develop policies 
and procedures for determining when it would declare a Trading Pause in 
such circumstances. If a Trading Pause is declared for an NMS Stock 
under this provision, the Primary Listing Exchange shall notify the 
Processor.
    (3) The Processor shall disseminate Trading Pause information to 
the public. No trades in an NMS Stock shall occur during a Trading 
Pause, but all bids and offers may be displayed.

(B) Reopening of Trading During Regular Trading Hours

    (1) Five minutes after declaring a Trading Pause for an NMS Stock, 
and if the Primary Listing Exchange has not declared a Regulatory Halt, 
the Primary Listing Exchange shall attempt to reopen trading using its 
established reopening procedures. The Trading Pause shall end when the 
Primary Listing Exchange reports a Reopening Price.
    (2) The Primary Listing Exchange shall notify the Processor if it 
is unable to reopen trading in an NMS Stock for any reason other than a 
significant order imbalance and if it has not declared a Regulatory 
Halt. The Processor shall disseminate this information to the public, 
and all trading centers may begin trading the NMS Stock at this time.
    (3) If the Primary Listing Exchange does not report a Reopening 
Price within ten minutes after the declaration of a Trading Pause in an 
NMS Stock, and has not declared a Regulatory Halt, all trading centers 
may begin trading the NMS Stock.
    (4) When trading begins after a Trading Pause, the Processor shall 
update the Price Bands as set forth in Section V(C)(1) of the Plan.

(C) Trading Pauses Within Five Minutes of the End of Regular Trading 
Hours

    (1) If a Trading Pause for an NMS Stock is declared less than five 
minutes before the end of Regular Trading Hours, the Primary Listing 
Exchange shall attempt to execute a closing transaction using its 
established closing procedures. All trading centers may begin trading 
the NMS Stock when the Primary Listing Exchange executes a closing 
transaction.
    (2) If the Primary Listing Exchange does not execute a closing 
transaction within five minutes after the end of Regular Trading Hours, 
all trading centers may begin trading the NMS Stock.

VIII. Implementation

(A) Phase I

    (1) Phase I of Plan implementation shall apply immediately 
following the initial date of Plan operations.
    (2) During Phase I, the Plan shall apply only to the Tier 1 NMS 
Stocks identified in Appendix A of the Plan.
    (3) During Phase I, the first Price Bands for a trading day shall 
be calculated and disseminated 15 minutes after the start of Regular 
Trading Hours as specified in Section (V)(A) of the Plan. No Price 
Bands shall be calculated and disseminated less than 30 minutes before 
the end of Regular Trading Hours, and trading shall not enter a Limit 
State less than 25 minutes before the end of Regular Trading Hours.

(B) Phase II--Full Implementation

    Six months after the initial date of Plan operations, or such 
earlier date as may be announced by the Processor with at least 30 days 
notice, the Plan shall fully apply (i) to all NMS Stocks; and (ii) 
beginning at 9:30 a.m. ET, and ending at 4:00 p.m. ET each trading day, 
or earlier in the case of an early scheduled close or if the Processor 
disseminates a closing trade for the Primary Listing Exchange.

(C) Pilot

    The Plan shall be implemented on a one-year pilot basis.

IX. Withdrawal from Plan

    If a Participant obtains SEC approval to withdraw from the Plan, 
such Participant may withdraw from the Plan

[[Page 33515]]

at any time on not less than 30 days' prior written notice to each of 
the other Participants. At such time, the withdrawing Participant shall 
have no further rights or obligations under the Plan.

X. Counterparts and Signatures

    The Plan may be executed in any number of counterparts, no one of 
which need contain all signatures of all Participants, and as many of 
such counterparts as shall together contain all such signatures shall 
constitute one and the same instrument.
    IN WITNESS THEREOF, this Plan has been executed as of the--day of--
------2012 by each of the parties hereto.

BATS EXCHANGE, INC.
BY:--------------------------------------------------------------------
BATS Y-EXCHANGE, INC.
BY:--------------------------------------------------------------------
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
BY:--------------------------------------------------------------------
CHICAGO STOCK EXCHANGE, INC.
BY:--------------------------------------------------------------------
EDGA EXCHANGE, INC.
BY:--------------------------------------------------------------------
EDGX EXCHANGE, INC.
BY:--------------------------------------------------------------------
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.
BY:--------------------------------------------------------------------
NASDAQ OMX BX, INC.
BY:--------------------------------------------------------------------
NASDAQ OMX PHLX LLC
BY:--------------------------------------------------------------------
THE NASDAQ STOCK MARKET LLC
BY:--------------------------------------------------------------------
NATIONAL STOCK EXCHANGE, INC.
BY:--------------------------------------------------------------------
NEW YORK STOCK EXCHANGE LLC
BY:--------------------------------------------------------------------
NYSE MKT LLC
BY:--------------------------------------------------------------------
NYSE ARCA, INC.
BY:--------------------------------------------------------------------

Appendix A--Percentage Parameters

I. Tier 1 NMS Stocks

    (1) Tier 1 NMS Stocks shall include all NMS Stocks included in 
the S&P 500 Index, the Russell 1000 Index, and the exchange-traded 
products (``ETP'') listed on Schedule 1 to this Appendix. Schedule 1 
to the Appendix will be reviewed and updated semi-annually based on 
the fiscal year by the Primary Listing Exchange to add ETPs that 
meet the criteria, or delete ETPs that are no longer eligible. To 
determine eligibility for an ETP to be included as a Tier 1 NMS 
Stock, all ETPs across multiple asset classes and issuers, including 
domestic equity, international equity, fixed income, currency, and 
commodities and futures will be identified. Leveraged ETPs will be 
excluded and the list will be sorted by notional consolidated 
average daily volume (``CADV''). The period used to measure CADV 
will be from the first day of the previous fiscal half year up until 
one week before the beginning of the next fiscal half year. Daily 
volumes will be multiplied by closing prices and then averaged over 
the period. ETPs, including inverse ETPs, that trade over $2,000,000 
CADV will be eligible to be included as a Tier 1 NMS Stock. To 
ensure that ETPs that track similar benchmarks but that do not meet 
this volume criterion do not become subject to pricing volatility 
when a component security is the subject of a trading pause, non-
leveraged ETPs that have traded below this volume criterion, but 
that track the same benchmark as an ETP that does meet the volume 
criterion, will be deemed eligible to be included as a Tier 1 NMS 
Stock. The semi-annual updates to Schedule 1 do not require an 
amendment to the Plan. The Primary Listing Exchanges will maintain 
the updated Schedule 1 on their respective Web sites.
    (2) The Percentage Parameters for Tier 1 NMS Stocks with a 
Reference Price more than $3.00 shall be 5%.
    (3) The Percentage Parameters for Tier 1 NMS Stocks with a 
Reference Price equal to $0.75 and up to and including $3.00 shall 
be 20%.
    (4) The Percentage Parameters for Tier 1 NMS Stocks with a 
Reference Price less than $0.75 shall be the lesser of (a) $0.15 or 
(b) 75%.
    (5) The Reference Price used for determining which Percentage 
Parameter shall be applicable during a trading day shall be based on 
the closing price of the NMS Stock on the Primary Listing Exchange 
on the previous trading day, or if no closing price exists, the last 
sale on the Primary Listing Exchange reported by the Processor.

II. Tier 2 NMS Stocks

    (1) Tier 2 NMS Stocks shall include all NMS Stocks other than 
those in Tier 1, provided, however, that all rights and warrants are 
excluded from the Plan.
    (2) The Percentage Parameters for Tier 2 NMS Stocks with a 
Reference Price more than $3.00 shall be 10%.
    (3) The Percentage Parameters for Tier 2 NMS Stocks with a 
Reference Price equal to $0.75 and up to and including $3.00 shall 
be 20%.
    (4) The Percentage Parameters for Tier 2 NMS Stocks with a 
Reference Price less than $0.75 shall be the lesser of (a) $0.15 or 
(b) 75%.
    (5) Notwithstanding the foregoing, the Percentage Parameters for 
a Tier 2 NMS Stock that is a leveraged ETP shall be the applicable 
Percentage Parameter set forth in clauses (2), (3), or (4) above, 
multiplied by the leverage ratio of such product.
    (6) The Reference Price used for determining which Percentage 
Parameter shall be applicable during a trading day shall be based on 
the closing price of the NMS Stock on the Primary Listing Exchange 
on the previous trading day, or if no closing price exists, the last 
sale on the Primary Listing Exchange reported by the Processor.

                         Appendix A--Schedule 1
------------------------------------------------------------------------
            Symbol                                Name
------------------------------------------------------------------------
AAVX.........................  ETRACS Daily Short 1-Month S&P 500 VIX
                                Futures ETN
AAXJ.........................  iShares MSCI All Country Asia ex Japan
                                Index Fund
ACWI.........................  iShares MSCI ACWI Index Fund
ACWX.........................  iShares MSCI ACWI ex US Index Fund
AGG..........................  iShares Barclays Aggregate Bond Fund
AGZ..........................  iShares Barclays Agency Bond Fund
ALD..........................  WisdomTree Asia Local Debt Fund
AMJ..........................  JPMorgan Alerian MLP Index ETN
AMLP.........................  Alerian MLP ETF
BAB..........................  PowerShares Build America Bond Portfolio
BDG..........................  PowerShares DB Base Metals Long ETN
BIK..........................  SPDR S&P BRIC 40 ETF
BIL..........................  SPDR Barclays Capital 1-3 Month T-Bill
                                ETF
BIV..........................  Vanguard Intermediate-Term Bond ETF
BKF..........................  iShares MSCI BRIC Index Fund
BKLN.........................  PowerShares Senior Loan Portfolio
BLV..........................  Vanguard Long-Term Bond ETF
BND..........................  Vanguard Total Bond Market ETF
BNO..........................  United States Brent Oil Fund LP
BOND.........................  Pimco Total Return ETF
BOS..........................  PowerShares DB Base Metals Short ETN

[[Page 33516]]

BRF..........................  Market Vectors Brazil Small-Cap ETF
BSV..........................  Vanguard Short-Term Bond ETF
BWX..........................  SPDR Barclays Capital International
                                Treasury Bond ETF
BXDB.........................  Barclays ETN+short B Leveraged ETN Linked
                                to S&P 500
CEW..........................  WisdomTree Dreyfus Emerging Currency Fund
CFT..........................  iShares Barclays Credit Bond Fund
CIU..........................  iShares Barclays Intermediate Credit Bond
                                Fund
CLY..........................  iShares 10+ Year Credit Bond Fund
CORN.........................  Teucrium Corn Fund
CSJ..........................  iShares Barclays 1-3 Year Credit Bond
                                Fund
CVY..........................  Guggenheim Multi-Asset Income ETF
CWB..........................  SPDR Barclays Capital Convertible
                                Securities ETF
CWI..........................  SPDR MSCI ACWI ex-US ETF
CYB..........................  WisdomTree Dreyfus Chinese Yuan Fund
DBA..........................  PowerShares DB Agriculture Fund
DBB..........................  PowerShares DB Base Metals Fund
DBC..........................  PowerShares DB Commodity Index Tracking
                                Fund
DBE..........................  PowerShares DB Energy Fund
DBO..........................  PowerShares DB Oil Fund
DBP..........................  PowerShares DB Precious Metals Fund
DBV..........................  PowerShares DB G10 Currency Harvest Fund
DEM..........................  WisdomTree Emerging Markets Equity Income
                                Fund
DGL..........................  PowerShares DB Gold Fund
DGS..........................  WisdomTree Emerging Markets SmallCap
                                Dividend Fund
DGZ..........................  PowerShares DB Gold Short ETN
DHS..........................  WisdomTree Equity Income Fund
DIA..........................  SPDR Dow Jones Industrial Average ETF
                                Trust
DJCI.........................  E-TRACS UBS AG Dow Jones-UBS Commodity
                                Index Total Return ETN
DJP..........................  iPath Dow Jones-UBS Commodity Index Total
                                Return ETN
DLN..........................  WisdomTree LargeCap Dividend Fund
DOG..........................  ProShares Short Dow30
DON..........................  WisdomTree MidCap Dividend Fund
DOO..........................  WisdomTree International Dividend Ex-
                                Financials Fund
DTN..........................  WisdomTree Dividend Ex-Financials Fund
DVY..........................  iShares Dow Jones Select Dividend Index
                                Fund
DWM..........................  WisdomTree DEFA Fund
DWX..........................  SPDR S&P International Dividend ETF
DXJ..........................  WisdomTree Japan Hedged Equity Fund
ECH..........................  iShares MSCI Chile Investable Market
                                Index Fund
ECON.........................  EGShares Emerging Markets Consumer ETF
EDIV.........................  SPDR S&P Emerging Markets Dividend ETF
EDV..........................  Vanguard Extended Duration Treasury ETF
EEB..........................  Guggenheim BRIC ETF
EEM..........................  iShares MSCI Emerging Markets Index Fund
EFA..........................  iShares MSCI EAFE Index Fund
EFG..........................  iShares MSCI EAFE Growth Index
EFV..........................  iShares MSCI EAFE Value Index
EFZ..........................  ProShares Short MSCI EAFE
EIDO.........................  iSHARES MSCI Indonesia Investable Market
                                Index Fund
ELD..........................  WisdomTree Emerging Markets Local Debt
                                Fund
ELR..........................  SPDR Dow Jones Large Cap ETF
EMB..........................  iShares JPMorgan USD Emerging Markets
                                Bond Fund
EMLC.........................  Market Vectors Emerging Markets Local
                                Currency Bond ETF
EMM..........................  SPDR Dow Jones Mid Cap ETF
EPHE.........................  iShares MSCI Philippines Investable
                                Market Index Fund
EPI..........................  WisdomTree India Earnings Fund
EPP..........................  iShares MSCI Pacific ex-Japan Index Fund
EPU..........................  iShares MSCI All Peru Capped Index Fund
ERUS.........................  iShares MSCI Russia Capped Index Fund
EUM..........................  ProShares Short MSCI Emerging Markets
EWA..........................  iShares MSCI Australia Index Fund
EWC..........................  iShares MSCI Canada Index Fund
EWD..........................  iShares MSCI Sweden Index Fund
EWG..........................  iShares MSCI Germany Index Fund
EWH..........................  iShares MSCI Hong Kong Index Fund
EWI..........................  iShares MSCI Italy Index Fund
EWJ..........................  iShares MSCI Japan Index Fund
EWL..........................  iShares MSCI Switzerland Index Fund
EWM..........................  iShares MSCI Malaysia Index Fund
EWP..........................  iShares MSCI Spain Index Fund
EWQ..........................  iShares MSCI France Index Fund
EWS..........................  iShares MSCI Singapore Index Fund

[[Page 33517]]

EWT..........................  iShares MSCI Taiwan Index Fund
EWU..........................  iShares MSCI United Kingdom Index Fund
EWW..........................  iShares MSCI Mexico Investable Market
                                Index Fund
EWX..........................  SPDR S&P Emerging Markets SmallCap ETF
EWY..........................  iShares MSCI South Korea Index Fund
EWZ..........................  iShares MSCI Brazil Index Fund
EZA..........................  iShares MSCI South Africa Index Fund
EZU..........................  iShares MSCI EMU Index Fund
FBT..........................  First Trust NYSE Arca Biotechnology Index
                                Fund
FCG..........................  First Trust ISE-Revere Natural Gas Index
                                Fund
FDL..........................  First Trust Morningstar Dividend Leaders
                                Index
FDN..........................  First Trust Dow Jones Internet Index Fund
FEX..........................  First Trust Large Cap Core AlphaDEX Fund
FEZ..........................  SPDR EURO STOXX 50 ETF
FGD..........................  First Trust DJ Global Select Dividend
                                Index Fund
FLAT.........................  iPath US Treasury Flattener ETN
FNX..........................  First Trust Mid Cap Core AlphaDEX Fund
FRI..........................  First Trust S&P REIT Index Fund
FVD..........................  First Trust Value Line Dividend Index
                                Fund
FXA..........................  CurrencyShares Australian Dollar Trust
FXB..........................  CurrencyShares British Pound Sterling
                                Trust
FXC..........................  CurrencyShares Canadian Dollar Trust
FXD..........................  First Trust Consumer Discretionary
                                AlphaDEX Fund
FXE..........................  CurrencyShares Euro Trust
FXF..........................  CurrencyShares Swiss Franc Trust
FXG..........................  First Trust Consumer Staples AlphaDEX
                                Fund
FXH..........................  First Trust Health Care AlphaDEX Fund
FXI..........................  iShares FTSE China 25 Index Fund
FXL..........................  First Trust Technology AlphaDEX Fund
FXU..........................  First Trust Utilities AlphaDEX Fund
FXY..........................  CurrencyShares Japanese Yen Trust
FXZ..........................  First Trust Materials AlphaDEX Fund
GAZ..........................  iPath Dow Jones-UBS Natural Gas Subindex
                                Total Return ETN
GCC..........................  GreenHaven Continuous Commodity Index
                                Fund
GDX..........................  Market Vectors Gold Miners ETF
GDXJ.........................  Market Vectors Junior Gold Miners ETF
GIY..........................  Guggenheim Enhanced Core Bond ETF
GLD..........................  SPDR Gold Shares
GMF..........................  SPDR S&P Emerging Asia Pacific ETF
GNR..........................  SPDR S&P Global Natural Resources ETF
GOVT.........................  iShares Barclays U.S. Treasury Bond Fund
GSG..........................  iShares S&P GSCI Commodity Indexed Trust
GSP..........................  iPath GSCI Total Return Index ETN
GSY..........................  Guggenheim Enhanced Short Duration Bond
                                ETF
GVI..........................  iShares Barclays Intermediate Government/
                                Credit Bond Fund
GWX..........................  SPDR S&P International Small Cap ETF
GXC..........................  SPDR S&P China ETF
GXG..........................  Global X FTSE Colombia 20 ETF
HAO..........................  Guggenheim China Small Cap ETF
HDGE.........................  Active Bear ETF/The
HDV..........................  iShares High Dividend Equity Fund
HYD..........................  Market Vectors High Yield Municipal Index
                                ETF
HYG..........................  iShares iBoxx $ High Yield Corporate Bond
                                Fund
HYS..........................  PIMCO 0-5 Year High Yield Corporate Bond
                                Index Fund
IAU..........................  iShares Gold Trust
IBB..........................  iShares Nasdaq Biotechnology Index Fund
ICF..........................  iShares Cohen & Steers Realty Majors
                                Index Fund
ICI..........................  iPath Optimized Currency Carry ETN
IDU..........................  iShares Dow Jones US Utilities Sector
                                Index Fund
IDV..........................  iShares Dow Jones International Select
                                Dividend Index Fund
IDX..........................  Market Vectors Indonesia Index ETF
IEF..........................  iShares Barclays 7-10 Year Treasury Bond
                                Fund
IEI..........................  iShares Barclays 3-7 Year Treasury Bond
                                Fund
IEO..........................  iShares Dow Jones US Oil & Gas
                                Exploration & Production Index Fund
IEV..........................  iShares S&P Europe 350 Index Fund
IEZ..........................  iShares Dow Jones US Oil Equipment &
                                Services Index Fund
IGE..........................  iShares S&P North American Natural
                                Resources Sector Index Fund
IGF..........................  iShares S&P Global Infrastructure Index
                                Fund
IGOV.........................  iShares S&P/Citigroup International
                                Treasury Bond Fund
IGS..........................  ProShares Short Investment Grade
                                Corporate
IGV..........................  iShares S&P North American Technology-
                                Software Index Fund
IHE..........................  iShares Dow Jones US Pharmaceuticals
                                Index Fund

[[Page 33518]]

IHF..........................  iShares Dow Jones US Healthcare Providers
                                Index Fund
IHI..........................  iShares Dow Jones US Medical Devices
                                Index Fund
IJH..........................  iShares S&P MidCap 400 Index Fund
IJJ..........................  iShares S&P MidCap 400/BARRA Value Index
                                Fund
IJK..........................  iShares S&P MidCap 400 Growth Index Fund
IJR..........................  iShares S&P SmallCap 600 Index Fund
IJS..........................  iShares S&P SmallCap 600 Value Index Fund
IJT..........................  iShares S&P SmallCap 600/BARRA Growth
                                Index Fund
ILF..........................  iShares S&P Latin America 40 Index Fund
INDA.........................  iShares MSCI India Index Fund
INDY.........................  iShares S&P India Nifty 50 Index Fund
INP..........................  iPath MSCI India Index ETN
IOO..........................  iShares S&P Global 100 Index Fund
IPE..........................  SPDR Barclays Capital TIPS ETF
ITB..........................  iShares Dow Jones US Home Construction
                                Index Fund
ITM..........................  Market Vectors Intermediate Municipal ETF
IVE..........................  iShares S&P 500 Value Index Fund
IVOO.........................  Vanguard S&P Mid-Cap 400 ETF
IVOP.........................  iPath Inverse S&P 500 VIX Short-Term
                                FuturesTM ETN II
IVV..........................  iShares S&P 500 Index Fund/US
IVW..........................  iShares S&P 500 Growth Index Fund
IWB..........................  iShares Russell 1000 Index Fund
IWC..........................  iShares Russell Microcap Index Fund
IWD..........................  iShares Russell 1000 Value Index Fund
IWF..........................  iShares Russell 1000 Growth Index Fund
IWM..........................  iShares Russell 2000 Index Fund
IWN..........................  iShares Russell 2000 Value Index Fund
IWO..........................  iShares Russell 2000 Growth Index Fund
IWP..........................  iShares Russell Midcap Growth Index Fund
IWR..........................  iShares Russell Midcap Index Fund
IWS..........................  iShares Russell Midcap Value Index Fund
IWV..........................  iShares Russell 3000 Index Fund
IWW..........................  iShares Russell 3000 Value Index Fund
IWY..........................  iShares Russell Top 200 Growth Index Fund
IWZ..........................  iShares Russell 3000 Growth Index Fund
IXC..........................  iShares S&P Global Energy Sector Index
                                Fund
IXG..........................  iShares S&P Global Financials Sector
                                Index Fund
IXJ..........................  iShares S&P Global Healthcare Sector
                                Index Fund
IXN..........................  iShares S&P Global Technology Sector
                                Index Fund
IXP..........................  iShares S&P Global Telecommunications
                                Sector Index Fund
IYC..........................  iShares Dow Jones US Consumer Services
                                Sector Index Fund
IYE..........................  iShares Dow Jones US Energy Sector Index
                                Fund
IYF..........................  iShares Dow Jones US Financial Sector
                                Index Fund
IYG..........................  iShares Dow Jones US Financial Services
                                Index Fund
IYH..........................  iShares Dow Jones US Healthcare Sector
                                Index Fund
IYJ..........................  iShares Dow Jones US Industrial Sector
                                Index Fund
IYK..........................  iShares Dow Jones US Consumer Goods
                                Sector Index Fund
IYM..........................  iShares Dow Jones US Basic Materials
                                Sector Index Fund
IYR..........................  iShares Dow Jones US Real Estate Index
                                Fund
IYT..........................  iShares Dow Jones Transportation Average
                                Index Fund
IYW..........................  iShares Dow Jones US Technology Sector
                                Index Fund
IYY..........................  iShares Dow Jones US Index Fund
IYZ..........................  iShares Dow Jones US Telecommunications
                                Sector Index Fund
JJC..........................  iPath Dow Jones-UBS Copper Subindex Total
                                Return ETN
JJG..........................  iPath Dow Jones-UBS Grains Subindex Total
                                Return ETN
JNK..........................  SPDR Barclays Capital High Yield Bond ETF
JXI..........................  iShares S&P Global Utilities Sector Index
                                Fund
JYN..........................  iPath JPY/USD Exchange Rate ETN
KBE..........................  SPDR S&P Bank ETF
KBWB.........................  PowerShares KBW Bank Portfolio
KIE..........................  SPDR S&P Insurance ETF
KOL..........................  Market Vectors Coal ETF
KRE..........................  SPDR S&P Regional Banking ETF
KXI..........................  iShares S&P Global Consumer Staples
                                Sector Index Fund
LAG..........................  SPDR Barclays Capital Aggregate Bond ETF
LQD..........................  iShares iBoxx Investment Grade Corporate
                                Bond Fund
LTPZ.........................  PIMCO 15+ Year US TIPS Index Fund
LWC..........................  SPDR Barclays Capital Long Term Corporate
                                BondETF
MBB..........................  iShares Barclays MBS Bond Fund
MBG..........................  SPDR Barclays Capital Mortgage Backed
                                Bond ETF
MCHI.........................  iShares MSCI China Index Fund
MDY..........................  SPDR S&P MidCap 400 ETF Trust

[[Page 33519]]

MGC..........................  Vanguard Mega Cap 300 ETF
MGK..........................  Vanguard Mega Cap 300 Growth ETF
MINT.........................  PIMCO Enhanced Short Maturity Strategy
                                Fund
MLPI.........................  UBS E-TRACS Alerian MLP Infrastructure
                                ETN
MLPN.........................  Credit Suisse Cushing 30 MLP Index ETN
MOO..........................  Market Vectors Agribusiness ETF
MUB..........................  iShares S&P National Municipal Bond Fund
MXI..........................  iShares S&P Global Materials Sector Index
                                Fund
MYY..........................  ProShares Short MidCap 400
NKY..........................  MAXIS Nikkei 225 Index Fund ETF
OEF..........................  iShares S&P 100 Index Fund
OIH..........................  Market Vectors Oil Service ETF
OIL..........................  iPath Goldman Sachs Crude Oil Total
                                Return Index ETN
PALL.........................  ETFS Physical Palladium Shares
PBJ..........................  Powershares Dynamic Food & Beverage
                                Portfolio
PCEF.........................  PowerShares CEF Income Composite
                                Portfolio
PCY..........................  PowerShares Emerging Markets Sovereign
                                Debt Portfolio
PDP..........................  Powershares DWA Technical Leaders
                                Portfolio
PEY..........................  PowerShares High Yield Equity Dividend
                                Achievers Portfolio
PFF..........................  iShares S&P US Preferred Stock Index Fund
PFM..........................  PowerShares Dividend Achievers Portfolio
PGF..........................  PowerShares Financial Preferred Portfolio
PGX..........................  PowerShares Preferred Portfolio
PHB..........................  PowerShares Fundamental High Yield
                                Corporate Bond Portfolio
PHO..........................  PowerShares Water Resources Portfolio
PHYS.........................  Sprott Physical Gold Trust
PID..........................  PowerShares International Dividend
                                Achievers Portfolio
PIE..........................  PowerShares DWA Emerging Markets
                                Technical Leaders Portfolio
PIN..........................  PowerShares India Portfolio
PJP..........................  Powershares Dynamic Pharmaceuticals
                                Portfolio
PLW..........................  PowerShares 1-30 Laddered Treasury
                                Portfolio
PPH..........................  Market Vectors Pharmaceutical ETF
PPLT.........................  ETFS Platinum Trust
PRF..........................  Powershares FTSE RAFI US 1000 Portfolio
PRFZ.........................  PowerShares FTSE RAFI US 1500 Small-Mid
                                Portfolio
PSLV.........................  Sprott Physical Silver Trust
PSP..........................  PowerShares Global Listed Private Equity
                                Portfolio
PSQ..........................  ProShares Short QQQ
PVI..........................  PowerShares VRDO Tax Free Weekly
                                Portfolio
PXH..........................  PowerShares FTSE RAFI Emerging Markets
                                Portfolio
PZA..........................  PowerShares Insured National Municipal
                                Bond Portfolio
QQQ..........................  Powershares QQQ Trust Series 1
REM..........................  iShares FTSE NAREIT Mortgage Plus Capped
                                Index Fund
REMX.........................  Market Vectors Rare Earth/Strategic
                                Metals ETF
REZ..........................  iShares FTSE NAREIT Residential Plus
                                Capped Index Fund
RFG..........................  Guggenheim S&P Midcap 400 Pure Growth ETF
RJA..........................  ELEMENTS Linked to the Rogers
                                International Commodity Index--Agri Tot
                                Return
RJI..........................  ELEMENTS Linked to the Rogers
                                International Commodity Index--Total
                                Return
RJN..........................  ELEMENTS Linked to the Rogers
                                International Commodity Index--Energy To
                                Return
RJZ..........................  ELEMENTS Linked to the Rogers
                                International Commodity Index--Metals
                                Tot Return
RPG..........................  Guggenheim S&P 500 Pure Growth ETF
RSP..........................  Guggenheim S&P 500 Equal Weight ETF
RSX..........................  Market Vectors Russia ETF
RTH..........................  Market Vectors Retail ETF
RWM..........................  ProShares Short Russell 2000
RWO..........................  SPDR Dow Jones Global Real Estate ETF
RWR..........................  SPDR Dow Jones REIT ETF
RWX..........................  SPDR Dow Jones International Real Estate
                                ETF
RYH..........................  Guggenheim S&P 500 Equal Weight
                                Healthcare ETF
SAGG.........................  Direxion Daily Total Bond Market Bear 1x
                                Shares
SCHA.........................  Schwab US Small-Cap ETF
SCHB.........................  Schwab US Broad Market ETF
SCHD.........................  Schwab US Dividend Equity ETF
SCHE.........................  Schwab Emerging Markets Equity ETF
SCHF.........................  Schwab International Equity ETF
SCHG.........................  Schwab U.S. Large-Cap Growth ETF
SCHH.........................  Schwab U.S. REIT ETF
SCHM.........................  Schwab U.S. Mid-Cap ETF
SCHO.........................  Schwab Short-Term U.S. Treasury ETF
SCHP.........................  Schwab U.S. TIPs ETF
SCHR.........................  Schwab Intermediate-Term U.S. Treasury
                                ETF
SCHV.........................  Schwab U.S. Large-Cap Value ETF

[[Page 33520]]

SCHX.........................  Schwab US Large-Cap ETF
SCHZ.........................  Schwab U.S. Aggregate Bond ETF
SCPB.........................  SPDR Barclays Capital Short Term
                                Corporate Bond ETF
SCZ..........................  iShares MSCI EAFE Small Cap Index Fund
SDY..........................  SPDR S&P Dividend ETF
SEF..........................  ProShares Short Financials
SGG..........................  iPath Dow Jones-UBS Sugar Subindex Total
                                Return ETN
SGOL.........................  ETFS Gold Trust
SH...........................  ProShares Short S&P 500
SHM..........................  SPDR Nuveen Barclays Capital Short Term
                                Municipal Bond ETF
SHV..........................  iShares Barclays Short Treasury Bond Fund
SHY..........................  iShares Barclays 1-3 Year Treasury Bond
                                Fund
SIL..........................  Global X Silver Miners ETF
SIVR.........................  ETFS Physical Silver Shares
SJB..........................  ProShares Short High Yield
SJNK.........................  SPDR Barclays Capital Short Term High
                                Yield Bond ETF
SLV..........................  iShares Silver Trust
SLX..........................  Market Vectors Steel Index Fund
SMH..........................  Market Vectors Semiconductor ETF
SOXX.........................  iShares PHLX SOX Semiconductor Sector
                                Index Fund
SPLV.........................  PowerShares S&P 500 Low Volatility
                                Portfolio
SPY..........................  SPDR S&P 500 ETF Trust
SPYG.........................  SPDR S&P 500 Growth ETF
SPYV.........................  SPDR S&P 500 Value ETF
STIP.........................  iShares Barclays 0-5 Year TIPS Bond Fund
STPP.........................  iPath US Treasury Steepener ETN
STPZ.........................  PIMCO 1-5 Year US TIPS Index Fund
SUB..........................  iShares S&P Short Term National AMT-Free
                                Municipal Bond Fund
SVXY.........................  ProShares Short VIX Short-Term Futures
                                ETF
TAN..........................  Guggenheim Solar ETF
TBF..........................  ProShares Short 20+ Year Treasury
TBX..........................  ProShares Short 7-10 Treasury
TFI..........................  SPDR Nuveen Barclays Capital Municipal
                                Bond ETF
THD..........................  iShares MSCI Thailand Index Fund
TIP..........................  iShares Barclays TIPS Bond Fund
TLH..........................  iShares Barclays 10-20 Year Treasury Bond
                                Fund
TLT..........................  iShares Barclays 20+ Year Treasury Bond
                                Fund
TUR..........................  iShares MSCI Turkey Index Fund
UDN..........................  PowerShares DB US Dollar Index Bearish
                                Fund
UGA..........................  United States Gasoline Fund LP
UNG..........................  United States Natural Gas Fund LP
URA..........................  Global X Uranium ETF
USCI.........................  United States Commodity Index Fund
USL..........................  United States 12 Month Oil Fund LP
USO..........................  United States Oil Fund LP
UUP..........................  PowerShares DB US Dollar Index Bullish
                                Fund
VAW..........................  Vanguard Materials ETF
VB...........................  Vanguard Small-Cap ETF
VBK..........................  Vanguard Small-Cap Growth ETF
VBR..........................  Vanguard Small-Cap Value ETF
VCIT.........................  Vanguard Intermediate-Term Corporate Bond
                                ETF
VCLT.........................  Vanguard Long-Term Corporate Bond ETF
VCR..........................  Vanguard Consumer Discretionary ETF
VCSH.........................  Vanguard Short-Term Corporate Bond ETF
VDC..........................  Vanguard Consumer Staples ETF
VDE..........................  Vanguard Energy ETF
VEA..........................  Vanguard MSCI EAFE ETF
VEU..........................  Vanguard FTSE All-World ex-US ETF
VFH..........................  Vanguard Financials ETF
VGK..........................  Vanguard MSCI European ETF
VGT..........................  Vanguard Information Technology ETF
VHT..........................  Vanguard Health Care ETF
VIG..........................  Vanguard Dividend Appreciation ETF
VIIX.........................  VelocityShares VIX Short Term ETN
VIOO.........................  Vanguard S&P Small-Cap 600 ETF
VIS..........................  Vanguard Industrials ETF
VIXM.........................  ProShares VIX Mid-Term Futures ETF
VIXY.........................  ProShares VIX Short-Term Futures ETF
VMBS.........................  Vanguard Mortgage-Backed Securities ETF
VNM..........................  Market Vectors Vietnam ETF
VNQ..........................  Vanguard REIT ETF
VO...........................  Vanguard Mid-Cap ETF

[[Page 33521]]

VOE..........................  Vanguard Mid-Cap Value Index Fund/Closed-
                                end
VONE.........................  Vanguard Russell 1000
VONG.........................  Vanguard Russell 1000 Growth ETF
VONV.........................  Vanguard Russell 1000 Value
VOO..........................  Vanguard S&P 500 ETF
VOOG.........................  Vanguard S&P 500 Growth ETF
VOOV.........................  Vanguard S&P 500 Value ETF
VOT..........................  Vanguard Mid-Cap Growth Index Fund/Closed-
                                end
VOX..........................  Vanguard Telecommunication Services ETF
VPL..........................  Vanguard MSCI Pacific ETF
VPU..........................  Vanguard Utilities ETF
VQT..........................  Barclays ETN+ ETNs Linked to the S&P 500
                                Dynamic VEQTORTM TotaL Return Index
VSS..........................  Vanguard FTSE All World ex-US Small-Cap
                                ETF
VT...........................  Vanguard Total World Stock Index Fund ETF
VTHR.........................  Vanguard Russell 3000
VTI..........................  Vanguard Total Stock Market ETF
VTV..........................  Vanguard Value ETF
VTWG.........................  Vanguard Russell 2000 Growth
VTWO.........................  Vanguard Russell 2000
VTWV.........................  Vanguard Russell 2000 Value
VUG..........................  Vanguard Growth ETF
VV...........................  Vanguard Large-Cap ETF
VWO..........................  Vanguard MSCI Emerging Markets ETF
VXAA.........................  ETRACS 1-Month S&P 500 VIX Futures ETN
VXEE.........................  ETRACS 5-Month S&P 500 VIX Futures ETN
VXF..........................  Vanguard Extended Market ETF
VXUS.........................  Vanguard Total International Stock ETF
VXX..........................  iPATH S&P 500 VIX Short-Term Futures ETN
VXZ..........................  iPATH S&P 500 VIX Mid-Term Futures ETN
VYM..........................  Vanguard High Dividend Yield ETF
VZZB.........................  iPath Long Enhanced S&P 500 VIX Mid-Term
                                FuturesTM ETN II
WDTI.........................  WisdomTree Managed Futures Strategy Fund
WIP..........................  SPDR DB International Government
                                Inflation-Protected Bond ETF
XBI..........................  SPDR S&P Biotech ETF
XES..........................  SPDR S&P Oil & Gas Equipment & Services
                                ETF
XHB..........................  SPDR S&P Homebuilders ETF
XIV..........................  VelocityShares Daily Inverse VIX Short
                                Term ETN
XLB..........................  Materials Select Sector SPDR Fund
XLE..........................  Energy Select Sector SPDR Fund
XLF..........................  Financial Select Sector SPDR Fund
XLG..........................  Guggenheim Russell Top 50 ETF
XLI..........................  Industrial Select Sector SPDR Fund
XLK..........................  Technology Select Sector SPDR Fund
XLP..........................  Consumer Staples Select Sector SPDR Fund
XLU..........................  Utilities Select Sector SPDR Fund
XLV..........................  Health Care Select Sector SPDR Fund
XLY..........................  Consumer Discretionary Select Sector SPDR
                                Fund
XME..........................  SPDR S&P Metals & Mining ETF
XOP..........................  SPDR S&P Oil & Gas Exploration &
                                Production ETF
XPH..........................  SPDR S&P Pharmaceuticals ETF
XRT..........................  SPDR S&P Retail ETF
XSD..........................  SPDR S&P Semiconductor ETF
XXV..........................  iPath Inverse S&P 500 VIX Short-Term
                                Futures ETN
ZROZ.........................  PIMCO 25+ Year Zero Coupon US Treasury
                                Index Fund
------------------------------------------------------------------------

Appendix B--Data

    Unless otherwise specified, the following data shall be 
collected and transmitted to the SEC in an agreed-upon format on a 
monthly basis, to be provided 30 calendar days following month end. 
Unless otherwise specified, the Primary Listing Exchanges shall be 
responsible for collecting and transmitting the data to the SEC. 
Data collected in connection with Sections II(E)-(G) below shall be 
transmitted to the SEC with a request for confidential treatment 
under the Freedom of Information Act. 5 U.S.C. 552, and the SEC's 
rules and regulations thereunder.

I. Summary Statistics

    A. Frequency with which NMS Stocks enter a Limit State. Such 
summary data shall be broken down as follows:

1. Partition stocks by category
    a. Tier 1 non-ETP issues >$3.00
    b. Tier 1 non-ETP issues > =$0.75 and =$3.00
    c. Tier 1 non-ETP issues <$0.75 d. Tier 1 non-leveraged ETPs in each of above categories e. Tier 1 leveraged ETPs in each of above categories f. Tier 2 non-ETPs in each of above categories g. Tier 2 non-leveraged ETPs in each of above categories h. Tier 2 leveraged ETPs in each of above categories 2. Partition by time of day a. Opening (prior to 9:45 a.m. ET) b. Regular (between 9:45 a.m. ET and 3:35 p.m. ET) c. Closing (after 3:35 p.m. ET) d. Within five minutes of a Trading Pause re-open or IPO open [[Page 33522]] 3. Track reasons for entering a Limit State, such as: a. Liquidity gap -price reverts from a Limit State Quotation and returns to trading within the Price Bands b. Broken trades c. Primary Listing Exchange manually declares a Trading Pause pursuant to Section (VII)(2) of the Plan d. Other B. Determine (1), (2) and (3) for when a Trading Pause has been declared for an NMS Stock pursuant to the Plan. II. Raw Data (all Participants, except A-E, which are for the Primary Listing Exchanges only) A. Record of every Straddle State. 1. Ticker, date, time entered, time exited, flag for ending with Limit State, flag for ending with manual override. 2. Pipe delimited with field names as first record. B. Record of every Price Band 1. Ticker, date, time at beginning of Price Band, Upper Price Band, Lower Price Band 2. Pipe delimited with field names as first record C. Record of every Limit State 1. Ticker, date, time entered, time exited, flag for halt 2. Pipe delimited with field names as first record D. Record of every Trading Pause or halt 1. Ticker, date, time entered, time exited, type of halt (i.e., regulatory halt, non-regulatory halt, Trading Pause pursuant to the Plan, other) 2. Pipe delimited with field names as first record E. Data set or orders entered into reopening auctions during halts or Trading Pauses 1. Arrivals, Changes, Cancels,  shares, limit/market, side, 
Limit State side
2. Pipe delimited with field name as first record

    F. Data set of order events received during Limit States
    G. Summary data on order flow of arrivals and cancellations for 
each 15-second period for discrete time periods and sample stocks to 
be determined by the SEC in subsequent data requests. Must indicate 
side(s) of Limit State.

1. Market/marketable sell orders arrivals and executions
    a. Count
    b. Shares
    c. Shares executed
2. Market/marketable buy orders arrivals and executions
    a. Count
    b. Shares
    c. Shares executed
3. Count arriving, volume arriving and shares executing in limit 
sell orders above NBBO mid-point
4. Count arriving, volume arriving and shares executing in limit 
sell orders=NBBO mid-point (non-marketable)
5. Count arriving, volume arriving and shares executing in limit buy 
orders above NBBO mid-point (non-marketable)
6. Count arriving, volume arriving and shares executing in limit buy 
orders below NBBO mid-point
7. Count and volume arriving of limit sell orders priced at or above 
NBBO+$0.05
8. Count and volume arriving of limit buy orders priced at or below 
NBBO-$0.05
9. Count and volume of (iii-viii) for cancels
10. Include: Ticker, date, time at start, time of Limit State, data 
item fields, last sale prior to 1-minute period (null if no trades 
today), range during 15-second period, last trade during 15-second 
period

III. At Least Two Months Prior to the End of the Pilot Period, All 
Participants Shall Provide to the SEC Assessments Relating to Impact of 
the Plan and Calibration of the Percentage Parameters as Follows:

    A. Assess the statistical and economic impact on limit order 
book of approaching Price Bands.
    B. Assess the statistical and economic impact of the Price Bands 
on erroneous trades.
    C. Assess the statistical and economic impact of the 
appropriateness of the Percentage Parameters used for the Price 
Bands.
    D. Assess whether the Limit State is the appropriate length to 
allow for liquidity replenishment when a Limit State is reached 
because of a temporary liquidity gap.
    E. Evaluate concerns from the options markets regarding the 
statistical and economic impact of Limit States on liquidity and 
market quality in the options markets. (Participants that operate 
options exchange should also prepare such assessment reports.)
    F. Assess whether the process for entering a Limit State should 
be adjusted and whether Straddle States are problematic.
    G. Assess whether the process for exiting a Limit State should 
be adjusted.
    H. Assess whether the Trading Pauses are too long or short and 
whether the reopening procedures should be adjusted.

[FR Doc. 2012-13653 Filed 6-5-12; 8:45 am]
BILLING CODE 8011-01-P