[Federal Register Volume 77, Number 19 (Monday, January 30, 2012)]
[Notices]
[Pages 4593-4595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-1870]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66214; File No. SR-NASDAQ-2012-010]
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 NMS Stocks Other Than
Rights and Warrants
January 23, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 11, 2012, 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 Substance
of the Proposed Rule Change
The Exchange proposes to extend the pilot period of the trading
pause for individual NMS stocks other than rights and warrants, so that
the pilot will now expire on July 31, 2012.
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-
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listed security, other than rights and warrants, when the price of such
security moves a percentage specified below within a 5-minute period.
(A) The price move shall be 10% or more with respect to securities
included in the S&P 500[supreg] Index, Russell 1000[supreg] Index, and
a pilot list of Exchange Traded Products;
(B) The price move shall be 30% or more with respect to all NMS
stocks not subject to section (a)(i) of this Rule with a price equal to
or greater than $1; and
(C) The price move shall be 50% or more with respect to all NMS
stocks not subject to section (a)(i) of this Rule with a price less
than $1.
The determination that the price of a stock is equal to or greater
than $1 under paragraph (a)(11)(B) above or less than $1 under
paragraph (a)(11)(C) above shall be based on the closing price on the
previous trading day, or, if no closing price exists, the last sale
reported to the Consolidated Tape on the previous trading day.
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 be
in effect during a pilot set to end on July 31, 2012 [January 31,
2012].
* * * * *
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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
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[reg] 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\ On March 31, 2011, the Exchange filed an immediately
effective filing to extend the pilot period an additional four months,
so that the pilot would expire on August 11, 2011 or the date on which
a limit up/limit down mechanism to address extraordinary market
volatility, if adopted, applies.\7\ On June 23, 2011, the Commission
approved the expansion of the pilot to all NMS stocks, but with
different pause-triggering thresholds.\8\ On August 8, 2011, the
Exchange filed an immediately effective filing that removed language
from the rule that tied the expiration of the pilot to the adoption of
a limit up/limit down mechanism to address extraordinary market
volatility, and further extended the pilot period, so that the pilot
would expire on January 31, 2012.\9\ On November 18, 2011, the Exchange
filed an immediately effective filing that excluded rights and warrants
from the pilot.\10\
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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).
\7\ Securities Exchange Act Release No. 64174 (April 4, 2011),
76 FR 19819 (April 8, 2011) (SR-NASDAQ-2011-042).
\8\ Securities Exchange Act Release No. 64735 (June 23, 2011),
76 FR 38243 (June 29, 2011) (SR-NASDAQ-2011-067, et al.).
\9\ Securities Exchange Act Release No. 65094 (August 10, 2011),
76 FR 50779 (August 16, 2011) (SR-NASDAQ-2011-115).
\10\ Securities Exchange Act Release No. 65814 (November 23,
2011), 76 FR 74084 (November 30, 2011) (SR-NASDAQ-2011-154).
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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 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.
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''),\11\ which
requires the rules of an
[[Page 4595]]
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) \12\ 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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\11\ 15 U.S.C. 78f(b)(5).
\12\ 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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
Because the 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 prior to
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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \18\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
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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. For this reason, the Commission
designates the proposed rule change to be operative upon filing.\19\
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\19\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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.
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 email to [email protected]. Please include
File No. SR-NASDAQ-2012-010 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 No. SR-NASDAQ-2012-010. This file
number should be included on the subject line if email 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 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 No. SR-NASDAQ-2012-010 and should be
submitted on or before February 21, 2012.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1870 Filed 1-27-12; 8:45 am]
BILLING CODE 8011-01-P