[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29187-29190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11733]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69563; File No. SR-NASDAQ-2013-073]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 4120 To Adopt a Modification in the Process for Initiating
Trading of a Security That Is the Subject of a Trading Halt or Pause on
NASDAQ
May 13, 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 29, 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 amend Rule 4120 to adopt a modification in the
process for initiating trading of a security that is the subject of a
trading halt or pause on NASDAQ, and to make several additional
modifications to Rule 4120 to clarify the conditions under which NASDAQ
will conduct a halt cross. NASDAQ proposes to implement the proposed
rule change on a date that is on, or shortly after, the 30th day
following the date of the filing. The text of the proposed rule change
is available on the Exchange's Web site at http://www.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
In 2012, NASDAQ modified its process for commencing trading of a
security that is the subject of an initial public offering (an ``IPO'')
on NASDAQ by allowing market participants to enter orders to be held in
an undisplayed state until the commencement of the Display-Only Period
that occurs prior to
[[Page 29188]]
the IPO.\3\ NASDAQ is now proposing a similar change with regard to
entering orders prior to the end of other trading halts or pauses on
NASDAQ. Rule 4120(a) describes the circumstances under which NASDAQ has
the authority to initiate a trading halt. As detailed in Rule 4120(a),
the specific bases for a halt include the following:
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\3\ Securities Exchange Act Release No. 66652 (March 23, 2012),
77 FR 13129 (March 29, 2012) (SR-NASDAQ-2012-038).
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A halt to permit the dissemination of material news with
respect to a NASDAQ-listed security (Rule 4120(a)(1));
a halt when a security listed on another national
securities exchange is halted to permit dissemination of news (Rule
4120(a)(2)) or due to an order imbalance or influx (Rule 4120(a)(3));
a halt in an American Depository Receipt (``ADR'') or
other security listed on Nasdaq, when the Nasdaq-listed security or the
security underlying the ADR is listed on or registered with another
national or foreign securities exchange or market, and the regulatory
authority overseeing such exchange or market halts trading in such
security for regulatory reasons (Rule 4120(a)(4));
a halt when Nasdaq requests from the issuer information
relating to material news or the issuer's ability to meet Nasdaq
listing qualification requirements, or any other information necessary
to protect investors and the public interest (Rule 4120(a)(5));
a halt trading in a security listed on NASDAQ when
extraordinary market activity in the security is occurring, NASDAQ
determines that the activity is likely to have a material effect on the
market for the security, and NASDAQ believes that the activity is
caused by the misuse or malfunction of an electronic quotation,
communication, reporting, or execution system (Rule 4120(a)(6));
a halt with respect to an index warrant when deemed
appropriate in the interests of a fair and orderly market and to
protect investors (Rule 4120(a)(8));
a halt in a series of Portfolio Depository Receipts, Index
Fund Shares or Managed Fund Shares listed on Nasdaq if the Intraday
Indicative Value or the index value applicable to that series is not
being disseminated as required (Rule 4120(a)(9));
a halt in a Derivative Securities Product (as defined in
Rule 4120(b)(4)(A)) for which a net asset value (``NAV'') or a
Disclosed Portfolio is disseminated if Nasdaq becomes aware that the
NAV or Disclosed Portfolio is not being disseminated to all market
participants at the same time (Rule 4120(a)(10));
a trading pause with respect to NASDAQ-listed stocks that
are not subject to the Limit Up-Limit Down Plan \4\ and that are
experiencing certain large price movements, as defined by Rule
4120(a)(11), or with respect to a NASDAQ-listed stock that is subject
to the Limit Up-Limit Down Plan and that is in a ``straddle state,'' as
defined by Rule 4120(a)(12)(F); and
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\4\ Plan to Address Extraordinary Market Volatility Submitted to
the Commission Pursuant to Rule 608 of Regulation NMS under the Act,
Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR
33498 (June 6, 2012).
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a trading halt in a Derivative Security Product traded
pursuant to unlisted trading privileges for which a ``Required Value,''
such as an intraday indicative value or disclosed portfolio, is not
being disseminated, under the conditions described in Rule 4120(b).\5\
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\5\ Rule 4120 provides for a halt when a security is the subject
of an IPO on NASDAQ (Rule 4120(a)(7)). Entry of orders during an IPO
halt was addressed in a prior proposed rule change. See supra n.3.
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Rule 4120(c)(7) provides that in the case of a halt under Rule
4120(a)(1), (4), (5), (6), (9), (10), or (11), or Rule 4120(b), prior
to terminating the halt, there is a 5-minute Display-Only Period during
which market participants may enter quotes and orders into the NASDAQ
Market Center. At the conclusion of the Display-Only Period, trading
commences through the halt cross process provided for in Rule 4753.\6\
However, if at the end of a Display-Only Period, NASDAQ detects an
order imbalance in the security, the halt may be extended for an
additional Display-Only Period of one minute. NASDAQ notes that the
purpose of the halt cross is to establish a consensus price for the
resumption of trading of securities for which NASDAQ is the primary
listing market. Accordingly, NASDAQ does not believe that it is
warranted to conduct a halt cross for securities listed on other
exchanges. Accordingly, NASDAQ is removing the reference to Rule
4120(b) from Rule 4120(c)(7), since Rule 4120(b) pertains solely to
halts of securities traded on an unlisted traded privileges (``UTP'')
basis. In addition, since halts under Rule 4120(a)(10) may pertain
either to securities listed on NASDAQ or securities traded on a UTP
basis, NASDAQ is further amending the rule to clarify that a halt cross
is conducted only for securities listed on NASDAQ. Finally, since Rule
4120(a)(12)(F) contemplates a halt cross for a NASDAQ-listed security
subject to the Limit Up-Limit Down Plan that is in a straddle state,
NASDAQ is adding a reference to this provision to Rule 4120(c)(7).
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\6\ Rule 4120 also provides for a Display-Only Period and a halt
cross in the case of a halt under Rule 4120(b). Since that rule
applies only to securities traded on an unlisted trading privileges
(``UTP'') basis, NASDAQ believes that it is not necessary to conduct
a halt cross prior to resumption of trading, consistent with other
halts applicable to securities that are traded on a UTP basis.
Accordingly, the rule is being amended to remove the reference to
Rule 4120(b) from the provision of the rule that requires a cross
for the resumption of trading.
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Halts for securities not listed on NASDAQ are terminated at the
time specified by NASDAQ, and a halt cross is not performed prior to
resumption of trading.
Under the current process, quotes and orders in a halted security
(with the exception of a security halted for an IPO) may not be entered
until the commencement of the Display-Only Period, in the instance of a
security for which a halt cross will occur, or until the resumption of
trading in other instances. However, NASDAQ believes that the quality
of its process for commencing trading in the halted security would be
enhanced by allowing market participants to enter orders to be held but
not displayed until the beginning of the Display-Only Period, in the
instances of a security for which a halt cross will occur, or until the
resumption of trading in other instances.\7\ Specifically, NASDAQ
believes that this change will provide for a greater number of orders
being entered prior to commencement of trading, resulting in a higher
level of order interaction in the cross or at the resumption of
trading.\8\
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\7\ Because the orders would be held in an undisplayed state,
the change would not implicate NASDAQ Rule 3340 or FINRA Rule 5260,
which prohibit transactions, publication of quotations, or
publication of indications of interest during a trading halt.
\8\ NASDAQ notes that in the case of a trading pause under Rule
4120(a)(11) or (12), the Display-Only Period commences at the same
time as the trading pause. Accordingly, the proposed rule change
does not alter the status quo with respect to such trading pauses.
Rather, the proposed rule change provides that ``in instances where
a trading halt is in effect prior to the commencement of the Display
Only Period, market participants may enter orders in a security that
is the subject of the trading halt on Nasdaq and designate such
orders to be held until the beginning of the Display Only Period.''
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Orders entered in this manner will be held in a suspended state
until the beginning of the Display-Only Period or the resumption of
trading, as applicable, at which time they will be entered into the
system. Market participants may cancel orders entered in this manner in
the same way they would cancel any other order. Orders entered prior to
the Display-Only Period or the resumption of trading, as applicable,
will be rejected unless they are designated for holding.
[[Page 29189]]
With respect to halts for which a halt cross will not occur, the orders
will be entered into the continuous market once trading resumes.\9\
With respect to halts for which a cross will occur, the orders will be
processed in the manner provided for in Rule 4753.
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\9\ Orders entered and held during the halt period will be
entered into the continuous market in the order in which they were
received. However, such orders will be entered contemporaneously
with any orders received through order entry ports after the halt is
terminated. Thus, the relative priority of orders received during
the halt and orders received through order entry ports after the
halt is terminated will be a function of the duration of system
processing associated with each particular order. As a result,
orders received during the halt will not automatically have priority
over orders received at the conclusion of the halt.
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2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\10\ in general, and with
Section 6(b)(5) of the Act,\11\ in particular, in that the proposal 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 regulating, clearing,
settling, processing information with respect to, and facilitating
transactions 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. Specifically,
NASDAQ believes that the change to allow entry of quotes and orders for
holding during a trading halt will provide for a greater number of
orders being entered prior to commencement of trading, resulting in a
higher level of order interaction in the re-opening process. Thus,
NASDAQ believes that the change will remove impediments to and perfect
the mechanism of a free and open market. NASDAQ further believes that
the proposed change to clarify that halt crosses will not be conducted
for the resumption of trading in securities traded on a UTP basis is
consistent with the halt cross's purpose of establishing a consensus
price for the resumption of trading of securities for which NASDAQ is
the primary listing market. Because this price is established by the
listing market for securities that NASDAQ trades on a UTP basis, NASDAQ
believes that conducting a halt cross for such securities is not
necessary to remove impediments to and perfect the mechanism of a free
and open market and a national market system.
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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ 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. Specifically,
NASDAQ believes that this change will provide for a greater number of
orders being entered prior to commencement of trading, resulting in a
higher level of order interaction. NASDAQ believes that this change
will promote competition by enhancing the attractiveness of NASDAQ as a
trading venue through higher order fill rates and more complete price
discovery. Moreover, because the change will not affect the
availability or price of goods or services offered by NASDAQ or others,
it will not impose any burden on 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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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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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.
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-2013-073 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-2013-073. 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 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 publicly available. All
submissions should refer to File Number SR-NASDAQ-2013-073 and should
be submitted on or before June 7, 2013.
[[Page 29190]]
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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Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2013-11733 Filed 5-16-13; 8:45 am]
BILLING CODE 8011-01-P