[Federal Register Volume 76, Number 68 (Friday, April 8, 2011)]
[Notices]
[Pages 19819-19821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8374]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64174; File No. SR-NASDAQ-2011-042]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Extend the Pilot Period of the Trading Pause for Individual Stocks
Contained in the Standard & Poor's 500 Index, Russell 1000 Index, and
Specified Exchange Traded Products That Experience a Price Change of
10% or More During a Five-Minute Period
April 4, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 19820]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 31, 2011, The NASDAQ Stock Market LLC (``Exchange''), filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to extend the pilot period of the trading
pause for individual stocks contained in the Standard & Poor's 500
Index, Russell 1000 Index, and specified Exchange Traded Products that
experience a price change of 10% or more during a five-minute period,
so that the pilot will now expire the earlier of August 11, 2011 or the
date on which a limit up/limit down mechanism to address extraordinary
market volatility, if adopted, applies.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.
* * * * *
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., or in the case of
an early scheduled close, 25 minutes before the close of trading,
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 Russell 1000 Index, as well
as a pilot list of Exchange Traded Products.
The provisions of this paragraph shall be in effect during a
pilot set to end on the earlier of August 11, 2011 or the date on
which a limit up/limit down mechanism to address extraordinary
market volatility, if adopted, applies[April 11, 2011].
* * * * *
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.
1. Purpose
On June 10, 2010, the Commission granted accelerated approval, for
a pilot period to end December 10, 2010, for a proposed rule change
submitted by the Exchange, together with related rule changes of the
BATS Exchange, Inc., NASDAQ OMX BX, Inc., Chicago Board Options
Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange,
Inc., EDGX Exchange, Inc., International Securities Exchange LLC, New
York Stock Exchange LLC (``NYSE''), NYSE Amex LLC (``NYSE Amex''), NYSE
Arca, Inc. (``NYSE Arca''), and National Stock Exchange, Inc.
(collectively, the ``Exchanges''), to pause trading during periods of
extraordinary market volatility in S&P 500 stocks.\3\ The rules require
the Listing Markets \4\ to issue five-minute trading pauses for
individual securities for which they are the primary Listing Market if
the transaction price of the security moves ten percent or more from a
price in the preceding five-minute period. The Listing Markets are
required to notify the other Exchanges and market participants of the
imposition of a trading pause by immediately disseminating a special
indicator over the consolidated tape. Under the rules, once the Listing
Market issues a trading pause, the other Exchanges are required to
pause trading in the security on their markets. On September 10, 2010,
the Commission approved the respective rule filings of the Exchanges to
expand application of the pilot to the Russell 1000[supreg] Index and
specified Exchange Traded Products.\5\ On December 7, 2010, the
Exchange filed an immediately effective filing to extend the existing
pilot program for four months, so that the pilot would expire on April
11, 2011.\6\
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\3\ Securities Exchange Act Release No. 62252 (June 10, 2010),
75 FR 34186 (June 16, 2010) (SR-NASDAQ-2010-061).
\4\ The term ``Listing Markets'' refers collectively to NYSE,
NYSE Amex, NYSE Arca, and the Exchange.
\5\ Securities Exchange Act Release No. 62884 (September 10,
2010), 75 FR 56618 (September 16, 2010) (SR-NASDAQ-2010-079).
\6\ Securities Exchange Act Release No. 63505 (December 9,
2010), 75 FR 78302 (December 15, 2010) (SR-NASDAQ-2010-162).
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The Exchange believes that the pilot program has been successful in
reducing the negative impacts of sudden, unanticipated price movements
in the securities covered by the pilot. The Exchange also believes that
an additional four month extension of the pilot is warranted so that it
may continue to assess whether circuit breakers are the best means to
reduce the negative impacts of sudden, unanticipated price movements or
whether alternative mechanisms would be more effective in achieving
this goal. In this regard, the Exchange notes that the Exchanges are
developing a ``limit up/limit down'' mechanism to reduce the negative
impacts of sudden, unanticipated price movements in securities traded
on the Exchanges. As such, the proposed extension may be shorter in
duration should the Exchange adopt a limit up/limit down mechanism to
address extraordinary market volatility. Accordingly, the Exchange is
filing to further extend the pilot program until the earlier of August
11, 2011 or the date on which a limit up/limit down mechanism to
address extraordinary market volatility, if adopted, applies.
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''),\7\ which requires
the rules of an
[[Page 19821]]
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) \8\ of the Act in that it seeks to
assure 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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\7\ 15 U.S.C. 78f(b)(5).
\8\ 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, as amended.
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
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 if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change
pursuant to Rule 19b-4(f)(6) under the Act, an exchange is required
to give the Commission written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date
of filing of the proposed rule change, or such shorter time as
designated by the Commission. The Commission notes that the Exchange
has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\11\
However, Rule 19b-4(f)(6) \12\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay.
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\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ Id.
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The Commission has considered the Exchange's request to waive the
30-day operative delay. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest, as it will allow the pilot program to continue
uninterrupted, thereby avoiding the investor confusion that could
result from a temporary interruption in the pilot program.\13\ For this
reason, the Commission designates the proposed rule change to be
operative upon filing.
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\13\ For the purposes only of waiving the operative delay of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2011-042 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2011-042. 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 offices 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-2011-042, and
should be submitted on or before April 29, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8374 Filed 4-7-11; 8:45 am]
BILLING CODE 8011-01-P