[Federal Register Volume 75, Number 99 (Monday, May 24, 2010)]
[Notices]
[Pages 28839-28841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12422]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62129; File No. SR-NASDAQ-2010-061]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of a Proposed Rule Change To Establish a Trading Pause
for Individual Stocks Contained in the Standard & Poor's 500 Index That
Experience a Price Change of 10% or More During a Five-Minute Period
May 19, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 18, 2010, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by Nasdaq. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to establish a trading pause for individual stocks contained in the
Standard & Poor's 500 Index (``S&P 500'') that experience a price
change of 10% or more during a five-minute period.
The text of the proposed rule change is below. Proposed new
language is in italics and proposed deletions are in [brackets].\3\
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\3\ Changes are marked to the rule text that appears in the
electronic manual of NASDAQ found at http://nasdaqomx.cchwallstreet.com.
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* * * * *
4120. Trading Halts
(a) Authority to Initiate Trading Halts or Pauses
In circumstances in which Nasdaq deems it necessary to protect
investors and the public interest, Nasdaq, pursuant to the
procedures set forth in paragraph (c):
(1)-(10) No Change.
(11) shall, between 9:45 a.m. and 3:35 p.m., immediately pause
trading for 5 minutes in any Nasdaq-listed security when the price
of such security moves 10 percent or more within a 5-minute period.
At the end of the trading pause, Nasdaq will re-open the security
using the Halt Cross process set forth in Nasdaq Rule 4753. In the
event of a significant imbalance at the end of a trading pause,
Nasdaq may delay the re-opening of a security.
Nasdaq will issue a notification if it cannot resume trading for
a reason other than a significant imbalance.
Price moves under this paragraph will be calculated by changes
in each consolidated last-sale price disseminated by a network
processor over a five minute rolling period measured continuously.
Only regular way in-sequence transactions qualify for use in
calculations of price moves. Nasdaq can exclude a transaction price
from use if it concludes that the transaction price resulted from an
erroneous trade.
If a trading pause is triggered under this paragraph, Nasdaq
shall immediately notify the single plan processor responsible for
consolidation of information for the security pursuant to Rule 603
of Regulation NMS under the Securities Exchange Act of 1934. If a
primary listing market issues an individual stock trading pause,
Nasdaq will pause trading in that security until trading has resumed
on the primary listing market or notice has been received from the
primary listing market that trading may resume. If the primary
listing market does not reopen within 10 minutes of notification of
a trading pause, Nasdaq may resume trading the security.
The provisions of this paragraph shall only apply to securities
in the Standard & Poor's 500 Index.
The provisions of this paragraph shall be in effect during a
pilot set to end on December 10, 2010.
(b) No Change.
(c) Procedure for Initiating a Trading Halt
(1)-(6) No Change.
(7)
(A) A trading halt or pause initiated under Rule 4120(a)(1),
(4), (5), (6), (9), [or] (10), (11) or Rule 4120(b) shall be
terminated when Nasdaq releases the security for trading. Prior to
terminating the halt, there will be a 5-minute Display Only Period
during which market participants may enter quotations and orders in
that security in Nasdaq systems. At the conclusion of the 5-minute
Display Only Period, the security shall be released for trading
unless Nasdaq extends the Display Only Period for an additional 1-
minute period pursuant to subparagraph (C) below. At the conclusion
of the Display Only Period, trading shall immediately resume
pursuant to Rule 4753.
(B) No Change.
(C) If at the end of a Display Only Period, Nasdaq detects an
[liquidity] order imbalance in the security, Nasdaq will extend the
Display Only Period as permitted under subparagraphs (A) and (B)
above. [Liquidity] Order [I]imbalances shall be established when (i)
the Current Reference Prices, as defined in Rule 4753(a)(2)(A),
disseminated 15 seconds and immediately prior to the end of the
Display Only Period differ by more than the greater of 5 percent or
50 cents, or (ii) all buy or sell market orders will not be executed
in the cross.
* * * * *
4753. Nasdaq Halt and Imbalance Crosses
(a) No Change.
(b) Processing of Nasdaq Halt Cross. For Nasdaq-listed
securities that are the subject of a trading halt or pause initiated
pursuant
[[Page 28840]]
to Rule 4120(a)(1), (4), (5), (6) [or], (7)or 11, the Nasdaq Halt
Cross shall occur at the time specified by Nasdaq pursuant to Rule
4120, and Market hours trading shall commence when the Nasdaq Halt
Cross concludes.
(1)-(5) No Change.
(c)-(d) No Change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to adopt rules to provide for a trading pause for
individual securities for which the Exchange is the primary listing
market if the price of such security moves 10% or more from a sale in a
preceding five-minute period. The Exchange is proposing this rule
addition in consultation with other markets and staff of the Securities
and Exchange Commission to provide for uniform market-wide trading
pause standards for individual securities in the S&P 500[supreg] Index
that experience a rapid price movement, as set forth below.
The Exchange is proposing that this rule be implemented on a pilot
basis, set to end on December 10, 2010. During this pilot period, the
rule would be in effect only with respect to securities included in the
S&P 500[supreg] Index. During that pilot period, the Exchange will
continue to assess whether additional securities need to be added and
whether the parameters of the rule would need to be modified to
accommodate trading characteristics of different securities.
As proposed, the rule would enable the Exchange to pause trading in
an individual security listed on the Exchange if the price moves by 10%
as compared to prices of that security in the preceding five-minute
period during a trading day. To enable the market to absorb the opening
price of a security and to participate in the close, as proposed, the
proposed rule would be in effect from 9:45 a.m. to 3:35 p.m., Eastern
Time.
Proposed Rule 4120(a)(11) sets forth the re-opening procedures
following a trading pause. As proposed, NASDAQ would be responsible for
re-opening trading at the end of the trading pause using existing
procedures for the NASDAQ Halt Cross set forth in Rule 4753.
Unlike a re-opening following a regulatory halt, the re-opening of
a security following a trading pause shall be at the end of the trading
pause. However, in the event of a significant imbalance, the Exchange
may delay the re-opening of the security past the five-minute trading
pause period. The Exchange will notify other markets if it cannot
reopen because of issues unrelated to an imbalance, thereby enabling
other markets to resume trading even if the primary market has not re-
opened. The Exchange notes that if it re-opens the security after other
markets have resumed trading, such reopening is subject to Rule
611(b)(3) of Regulation NMS as an exception to the Order Protection
Rule.
The 10% or more move in price will be calculated by changes in each
consolidated last-sale price disseminated by a network processor over a
five minute rolling period measured continuously. In the first five
minutes of the calculation period, prices for comparison will not be
based on five minutes of trading in that security. For example, a trade
at 9:45:05 will be compared only to trades between 9:45:00 and 9:45:05.
The last potential trade to trigger a pause will be at 3:35 p.m., so
that such trading pause will end at 3:40 p.m.
As proposed, only regular way, in-sequence transactions qualify as
[sic] use in price movement calculations. To attempt to ensure that
erroneous executions do not trigger a trading pause, the Exchange also
proposes that it can exclude a transaction price from use in
calculating price movements if it concludes that the transaction price
resulted from an erroneous execution.
The proposed rule further provides that if a trading pause is
triggered, the Exchange will immediately notify the single plan
processor responsible for consolidation of information for the
security.
The Exchange further proposes to include in the rule that if the
listing market for a security pauses under its respective rules, the
Exchange will also pause trading in that security until the listing
market has either resumed trading or the Exchange has received notice
from the primary listing market that trading may resume. Moreover, if
the primary listing market does not reopen trading in the security
within 10 minutes of notification of a trading pause, the Exchange may
resume trading of the security.
2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Securities Exchange Act of 1934 (the ``Act''),\4\ which requires
the rules of an exchange to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system and, in general, to protect
investors and the public interest. The proposed rule change also is
designed to support the principles of Section 11A(a)(1) \5\ of the Act
in that it seeks to ensure fair competition among brokers and dealers
and among exchange markets. The Exchange believes that the proposed
rule meets these requirements in that it promotes transparency and
uniformity across markets concerning decisions to pause trading in a
security when there are significant price movements.
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\4\ 15 U.S.C. 78f(b)(5).
\5\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.\6\
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\6\ The Commission notes that the Exchange has requested
accelerated approval of the filing.
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[[Page 28841]]
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-Nasdaq-2010-061 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Nasdaq-2010-061. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of Nasdaq.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make publicly
available. All submissions should refer to File Number SR-Nasdaq-2010-
061 and should be submitted on or before June 3, 2010.\7\
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\7\ The Commission believes that a 10-day comment period is
reasonable, given the urgency of the matter. It will provide
adequate time for comment.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
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\8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-12422 Filed 5-21-10; 8:45 am]
BILLING CODE 8010-01-P