[Federal Register Volume 78, Number 70 (Thursday, April 11, 2013)]
[Notices]
[Pages 21655-21657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08469]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69322; File No. SR-NASDAQ-2013-061]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Rule 4120
April 5, 2013.
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 April 1, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``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
NASDAQ proposes to adopt NASDAQ Rule 4120(c)(7)(D) concerning the
extension of the Display Only Period conducted prior to the IPO Halt
Cross under NASDAQ Rule 4753. The Exchange has designated the proposed
changes herein as immediately effective.
The text of the proposed rule change is below. Proposed new
language is underlined; proposed deletions are in brackets.
4120. Trading Halts
(a)-(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), (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) A trading halt initiated under Rule 4120(a)(7) shall be
terminated when Nasdaq releases the security for trading. Prior to
terminating the halt, there will be a 15-minute Display Only Period
during which market participants may enter quotes and orders in that
security in Nasdaq systems. In addition, beginning at 7 a.m., market
participants may enter Market Hours Day Orders in a security that is
the subject of an Initial Public Offering on Nasdaq and designate such
orders to be held until the beginning of the Display Only Period, at
which time they will be entered into the system. At the conclusion of
the 15-minute Display Only Period, the security shall be released for
trading unless Nasdaq extends the Display Only Period for up to six
additional 5-minute Display Only Periods pursuant to subparagraph (C)
or (D) below. At the conclusion of the Display Only Period(s), there
shall be an additional delay of between zero and 15 seconds (randomly
selected) and then trading shall resume pursuant to Rule 4753.
(C) If at the end of a Display Only Period, Nasdaq detects an order
imbalance in the security, Nasdaq will extend the Display Only Period
as permitted under subparagraphs (A) and (B) above. Order 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.
(D) At any time within the last five minutes prior to the end of a
Display
[[Page 21656]]
Only Period, Nasdaq may extend the Display Only Period as permitted
under subparagraph (B) above at the request of an underwriter of an
IPO.
* * * * *
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 proposes to adopt Rule 4120(c)(7)(D) to describe an
additional basis for extending the Display Only Period as permitted by
Rule 4120(c)(7)(B), and is making a conforming change to Rule
4120(c)(7)(B). Rule 4120(c)(7)(B) governs the orderly launch of trading
of a company's securities approved for listing on NASDAQ in an initial
public offering (``IPO''). Rule 4120(c)(7)(B), provides a fifteen-
minute ``Display Only Period'' prior to terminating the halt imposed on
an IPO security before it opens for trading for the first time on
NASDAQ pursuant to the IPO Halt Cross of Rule 4753. Under Rule
4120(c)(7)(B), at the conclusion of the fifteen-minute Display Only
Period NASDAQ may extend the period for up to six additional five-
minute Display Only Periods, pursuant to the basis described under Rule
4120(c)(7)(C). Rule 4120(c)(7)(C) allows an extension when NASDAQ
detects an order imbalance in the security.
In May 2007, nearly a year after the launch of the IPO Halt Cross,
NASDAQ determined to change its internal procedures to consider
requests by underwriting firms involved in an IPO to extend the Display
Only Period by five minutes, up to a maximum of six five-minute
extensions. NASDAQ made the change based on its experience with
operating the IPO process and in an effort to ensure the orderly
operation of the IPO process. NASDAQ found that underwriters possess
valuable information about the pending IPO given their unique position
in the market, including the state of IPO orders resting on the
underwriter's book, and believed that it is in the best interest of the
markets to extend the 15-minute Display Only Period upon the request of
a market maker. Accordingly, pursuant NASDAQ's internal procedures it
relies on the underwriter's reasonable judgment as to whether a five-
minute extension of the Display Only Period will improve the price
discovery process of the IPO Halt Cross, and thereby help to ensure a
fair and orderly launch of trading in the IPO security.
NASDAQ is amending its rules to memorialize the underwriter-
requested extension process under Rule 4120(c)(7)(D). NASDAQ developed
criteria for determining whether to grant an underwriter-requested
extension of the Display Only Period, and applies such criteria
consistently in every IPO wherein an underwriter makes an extension
request. NASDAQ may change such criteria from time to time in the
interest of improving the IPO process for market participants.
NASDAQ notes that other markets also recognize the importance of
allowing underwriters to extend the IPO auctions of their markets. For
example, BATS Exchange, Inc. permits an extension to its IPO Auction
Quote-Only period upon the request of an underwriter, with no limit on
the number or length of extensions. Affording underwriters the ability
to request an extension is consistent with NASDAQ's goal of promoting a
fair and orderly market and NASDAQ believes that it is appropriate to
include its long-standing procedure in its rules. Doing so will provide
market participants with a better understanding the operation of the
Display Only Period of the IPO process. Accordingly, NASDAQ is
proposing to adopt new Rule 4120(c)(7)(D) to reflect that it may
consider the request of an underwriter of an IPO to extend the Display
Only Period by five minutes, up to a maximum six five-minute
extensions.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\3\ in general, and with
Section 6(b)(5) of the Act,\4\ 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, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The proposed rule change promotes this goal by
establishing in NASDAQ's rules an IPO process that protects investors
and the public interest by ensuring an orderly opening of trading in
IPOs on NASDAQ. NASDAQ believes that underwriters of IPOs have unique
insight into the investor interest in the IPO, and therefore are
uniquely positioned to evaluate the book and make extension decisions
to ensure an orderly IPO launch. NASDAQ notes that the criteria it
applies in considering an underwriter-requested extension are applied
consistently to every IPO, and therefore do not permit NASDAQ to
discriminate in any manner.
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\3\ 15 U.S.C. 78f.
\4\ 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 believes that the proposal is irrelevant to competition
because it is not driven by, nor impactful to, competition.
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 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)(ii) of the Act \5\ and Rule 19b-4(f)(6) thereunder.\6\
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\5\ 15 U.S.C. 78s(b)(3)(a)(ii).
\6\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \7\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to
[[Page 21657]]
Rule 19b-4(f)(6)(iii) \8\ 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. NASDAQ believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because the proposed rule change provides an additional
means by which NASDAQ may extend the Display Only Period, which is in
the interest of providing a fair and orderly launch of trading in an
IPO security. The Exchange also notes that other markets allow
underwriter-requested extensions of their pre-IPO quote periods. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it may aid in the fair and orderly launch of trading in an IPO
security. For this reason, the Commission designates the proposed rule
change to be operative upon filing.\9\
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\7\ 17 CFR 240.19b-4(f)(6).
\8\ 17 CFR 240.19b-4(f)(6)(iii).
\9\ 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 proposal 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-2013-061 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-2013-061. 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
10:00 a.m. and 3:00 p.m. 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-2013-061 and should
be submitted on or before May 2, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08469 Filed 4-10-13; 8:45 am]
BILLING CODE 8011-01-P