[Federal Register Volume 75, Number 142 (Monday, July 26, 2010)]
[Notices]
[Pages 43592-43594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18167]
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SECURITIES AND EXCHANGE COMMISSION
[Release No.34-62531; File No. SR-NASDAQ-2010-087]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by The NASDAQ Stock Market LLC
Relating to Trading Halts in Options During a Trading Pause in the
Underlying Securities
July 19, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on July 14, 2010, The NASDAQ Stock Market LLC (``NASDAQ'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II 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
NASDAQ is filing with the Securities and Exchange Commission
(``SEC'' or ``Commission'') a proposal for the NASDAQ Options Market
(``NOM'' or ``Exchange'') to amend NOM Chapter V, Section 3 (Trading
Halts) to enhance the recently-implemented options halt rule whenever
trading in the underlying security has been paused by the primary
listing market (the ``options halt rule'').\3\
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\3\ The options halt rule is also known as the options pause
rule.
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The text of the proposed rule change is available from NASDAQ's Web
site at http://nasdaq.cchwallstreet.com/Filings/, at NASDAQ's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ 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. NASDAQ has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposal is to amend Chapter V, Section 3 to
enhance the recently-implemented options halt rule to indicate that if
trading has not been resumed on the primary listing market for the
underlying security once ten minutes has passed after an underlying
security was paused, the Exchange may resume options trading if trading
has resumed on at least one national securities exchange; and that the
Exchange will continue certain processes during the halt (maintain
booked orders, accept orders, and process cancels).
On June 10, 2010, the Exchange filed an immediately effective
proposal to establish the options halt rule in new subsection (a)(vi)
to Chapter V, Section 3.\4\ Subsection (a)(vi) states that trading on
the Exchange in any option contract shall be halted whenever trading in
the underlying security has been paused by
[[Page 43593]]
the primary listing market. The rule states further that trading in
such halted options contracts may be resumed upon a determination by
the Exchange that the conditions that led to the pause are no longer
present and that the interests of a fair and orderly market are best
served by a resumption of trading, which in no circumstances will be
before the Exchange has received notification that the underlying
security has resumed trading on at least one exchange.
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\4\ See Securities Exchange Act Release No. 62270 (June 10,
2010), 75 FR 34510, (June 17, 2010) (NASDAQ-2010-071) (notice of
filing and immediate effectiveness regarding options halt rule). The
Exchange proposed the options halt rule after consultation with
Commission staff regarding uniform market-wide trading pause
standards for certain individual stocks that experience rapid price
movement and for individual equity options overlying those stocks.
For a similar options halt rule proposed by another options
exchange, see Securities Exchange Act Release No. 62269 (June 10,
2010), 75 FR 34491, (June 17, 2010) (Phlx-2010-82)(notice of filing
and immediate effectiveness regarding options halt rule).
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On the same day as the Exchange's options halt rule filing, Chicago
Board Options Exchange (``CBOE'') filed an options halt that is similar
to the Exchange's options halt rule but has some additional
elements.\5\ The Exchange's current filing is based on the CBOE filing.
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\5\ The additional elements include the following: That if
trading has not been resumed on the primary listing market for the
underlying security once ten minutes passed after an underlying
security was paused, the Exchange may resume options trading if at
least one market has resumed trading in the underlying; and that the
Exchange will continue certain processes during the halt (maintain
booked orders, accept orders, and process cancels). See Securities
Exchange Act Release No. 62272 (June 10, 2010), 75 FR 34509, (June
17, 2010) (CBOE 2010-055).
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The Exchange believes that it should continue certain processes and
procedures independently of an options trading halt. Specifically, the
Exchange proposes to state in subsection (a)(vi)(B) to Chapter V,
Section 3 that during the options halt, the Exchange will maintain
existing orders on the book, accept orders, and process cancels.
Moreover, the Exchange believes that it should have the ability to
resume options trading within certain parameters after an underlying
halt. Specifically, the Exchange proposes to state in subsection
(a)(vi)(A) to Chapter V, Section 3 that if trading has not been resumed
on the primary listing market for the underlying security after ten
minutes have passed since the underlying security was paused by the
primary listing market, the Exchange may resume trading in options
contracts if the underlying security has resumed trading on at least
one national securities exchange.\6\
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\6\ No changes to the Exchange's trading processes are otherwise
contemplated by this proposal. For example, transactions that occur
between the time the pause is imposed on the listing market and the
halt is processed on the Exchange may be nullified pursuant to
Chapter V, Section 6. And orders in the affected option that are
received during the halt on the Exchange will be treated as pre-
opening orders and will be included in the re-opening process upon
the resumption of trading on the listing market for the underlying
security pursuant to Chapter VI, Section 8.
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The Exchange believes that the proposals, individually and
together, enhance and strengthen the options halt rule and its
application. The proposals will be immediately implemented upon
effectiveness of the filing.
The Exchange believes that the options halt rule as amended ensures
that the Exchange has the ability to maintain fair and orderly markets
in options upon the imposition of a single stock trading pause by the
listing market for the underlying security.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \7\ in general, and furthers the objectives of Section
6(b)(5) of the Act \8\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system. Specifically, the Exchange
believes that the proposal benefits customers by enhancing the current
options halt rule to clarify the circumstances under which the Exchange
may resume options trading, and that the Exchange will continue certain
order processing and cancellation functions during a halt.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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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 were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange believes that the foregoing proposed rule change may
take effect upon filing with the Commission pursuant to Section
19(b)(3)(A) \9\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \10\
because the foregoing proposed rule change does not: (i) Significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate. The Exchange has asked the Commission to
waive the 30-day operative delay so that the proposal may become
operative upon filing. The Commission notes that the proposed rule
change clarifies certain aspects of the Exchange's rule regarding how
orders will be handled during options trading halts caused by a pause
in the trading of the underlying security and also clarifies when the
Exchange may resume trading when a trading pause in the underlying
security is prolonged for unknown reasons. The proposed rule change
does not raise any new substantive issues. For these reasons, the
Commission believes that the waiver of the 30-day operative delay is
consistent with the protection of investors and the public
interest.\11\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
\11\ For purposes only of waiving the 30-day operative delay of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-087 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
[[Page 43594]]
All submissions should refer to File Number SR-NASDAQ-2010-087. 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. Copies of the filing also will
be available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly.
All submissions should refer to File Number SR-NASDAQ-2010-087 and
should be submitted on or before August 16, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18167 Filed 7-23-10; 8:45 am]
BILLING CODE 8010-01-P