[Federal Register Volume 78, Number 26 (Thursday, February 7, 2013)]
[Notices]
[Pages 9090-9092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02704]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68799; File No. SR-NASDAQ-2013-015]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to NASDAQ Rule 4120
February 1, 2013.
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 January 24, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') 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 the
Substance of the Proposed Rule Change
The NASDAQ Stock Market LLC proposes to correct an erroneous
deletion from NASDAQ Rule 4120(c)(7)(B) related to the randomization
period conducted prior to the IPO Cross under NASDAQ Rule 4753. The
Exchange has designated the proposed changes herein as immediately
effective.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, 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, the Exchange included statements
concerning the purpose of and basis for 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
The Exchange hereby amends NASDAQ Rule 4120(c)(7)(B) which governs
the orderly launch of trading in initial public offerings (``IPOs'') of
NASDAQ-listed securities. Specifically, NASDAQ is amending Rule
4120(c)(7)(B) to insert language that describes the randomization
period of zero to fifteen seconds that automatically occurs prior to
the IPO Cross set forth in NASDAQ Rule 4753. The randomization period
is designed to prevent gaming of the IPO Cross by delaying for a
variable amount of time the precise moment of execution of each IPO
Cross. Although NASDAQ's execution system currently includes and for
years has included a randomization period for each IPO Cross, the
language describing the randomization period was erroneously removed
from Rule 4120(c)(7)(B).
On August 20, 2007, NASDAQ filed SR-NASDAQ-2007-073 (``Original
Halt Cross Filing'') which, among other things, removed from Rule
4120(b)(7)(A) the rule language accurately describing the randomization
period prior to the launch of the NASDAQ Halt Cross. The purpose
section of the Original Halt Cross Filing stated as a rationale that:
The randomization period was designed to deter market
participants from timing their participation in a way that harmed
other participants. This provision, however, results in other
markets trading after the issue has re-opened but prior to NASDAQ
restarting trading using the Halt Cross. NASDAQ believe[s] that it
is confusing and disruptive to market participants for NASDAQ, the
listing market, to continue a halt after other market centers have
resumed trading and, therefore, proposes to eliminate the random
period prior to the execution of the Halt Cross.
This explanation focuses on Halt Crosses that NASDAQ initiates
following halts of stocks that have
[[Page 9091]]
previously traded in the secondary market; the reasoning does not apply
in the context of an IPO launch, as there is no trading on other
markets until the IPO Cross is completed.
Nevertheless, Amendment 1 to SR-NASDAQ-2007-073 (``Amended Halt
Cross Filing''), which superseded the Original Halt Cross Filing,
erroneously removed the language accurately describing the
randomization period for each IPO Cross.\3\ The Amended Halt Cross
filing, among other things, removed the language describing the
randomization period from both the provisions governing the Halt Cross
(Rule 4120(c)(7)(A)) and the IPO Cross (Rule 4120(c)(7)(B)). The
Amended Halt Cross Filing offered no rationale for removing the
randomization period prior to the IPO Cross. In actuality, NASDAQ did
not intend to remove the randomization period and, in fact, the NASDAQ
system has continued through the present to include a randomization
period prior to each IPO Cross. Accordingly, NASDAQ is proposing to re-
instate in Rule 4120(c)(7)(B) language that accurately describes the
randomization period that is identical to the language it erroneously
removed via the Amended Halt Cross Filing.
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\3\ See Notice of Filing and Immediate Effectiveness of Proposed
Rule Change to Modify the Halt Cross Process, Securities Exchange
Act Release No. 56348 (Aug. 31, 2007); 72 FR 51693 (Sept. 6, 2007).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\4\ in general, and with
Section 6(b)(5) of the Act,\5\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transaction in securities, 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 promotes this goal by accurately describing an element of
NASDAQ's trading system that already protects investors and the public
interest by ensuring an orderly opening of trading in IPOs of NASDAQ-
listed securities. The specific functionality, the randomization
period, is designed to and does in fact prevent improper timing by an
Exchange member of its participation in the IPO Cross in a manner that
could harm other participants.
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\4\ 15 U.S.C. 78f.
\5\ 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, as amended. The
Exchange's proposed rule change is unrelated to competition, because it
does not change the Exchange's current process and therefore will
neither alter the Exchange's competitiveness nor inhibit the ability of
any person to compete in the securities markets. Rather, the change is
focused solely upon ensuring that NASDAQ's rules accurately describe
the process in place to promote the orderly launch of trading following
an IPO on NASDAQ.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or 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, it has
become effective pursuant to Section 19(b)(3)(A) \6\ of the Act and
Rule 19b-4(f)(6) \7\ thereunder.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6). 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, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of the 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 pursuant to Rule 19b-4(f)(6) \8\ under
the Act normally does not become operative prior to 30 days after the
date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii) \9\
under the Act, 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 Exchange can, pursuant to its rules, use
the randomization period to prevent improper timing by Exchange members
participating in an IPO Cross in a manner that could harm other market
participants. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest as the randomization period was previously in NASDAQ's rules
and is designed to prevent gaming of an IPO Cross by delaying for a
variable amount of time the precise moment of execution of each IPO
Cross.\10\ In addition, the Exchange represented that the NASDAQ system
already provides for the randomization period, therefore, waiving the
30-day operative delay will enable NASDAQ to bring its rules and system
in alignment quickly, thus reducing the potential for investor
confusion. Therefore, the Commission hereby waives the 30-day operative
delay and designates the proposed rule change to be operative upon
filing with the Commission.
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\8\ 17 CFR 240.19b-4(f)(6).
\9\ 17 CFR 240.19b-4(f)(6)(iii).
\10\ 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 such 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 under
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(2)(B).
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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 Number SR-NASDAQ-2013-015 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 9092]]
100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-015. 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 on official business
days between the hours of 10:00 a.m. and 3:00 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-2013-015, and should be submitted on or before
February 28, 2013.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02704 Filed 2-6-13; 8:45 am]
BILLING CODE 8011-01-P