

[Federal Register: September 10, 2007 (Volume 72, Number 174)]
[Notices]               
[Page 51693-51695]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se07-90]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56348; File No. SR-NASDAQ-2007-073]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Modify the Halt Cross Process

August 31, 2007.
    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 August 20, 2007, The NASDAQ Stock Market LLC (``Nasdaq''), filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by Nasdaq. On August 31, 2007, the 
Exchange filed Amendment No. 1 to the proposed rule change.\3\ The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder,\5\ which rendered the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced the original filing in its 
entirety.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to make minor modifications to the manner in which 
Nasdaq resumes trading of securities that are the subject of the Nasdaq 
Halt Cross as well as the potential duration of the Display Only 
Period, as set forth in Nasdaq Rule 4120. The text of the proposed rule 
change is available at Nasdaq, the Commission's Public Reference Room, 
and http://www.complinet.com/nasdaq.


II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq 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. Nasdaq 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
    Nasdaq's Halt Cross has been in production for one year and in that 
time it has proven to be a highly successful process to begin trading 
Nasdaq-listed securities. With the transition of Nasdaq-listed trading 
to a single platform in October 2006, Nasdaq implemented a similar 
process for resuming trading in halted stocks referred to as the Halt 
cross, providing greater transparency as issues begin trading again 
after a halt.
    NASDAQ has determined that by amending certain rules governing the 
Halt Cross, NASDAQ can provide more accurate price discovery to market 
participants. First, Nasdaq is proposing to extend the period of time 
those securities may be subject to Display Only status prior to the 
operation of the Halt Cross. Currently, after the initial 15-minute 
Display Only period, Nasdaq may extend the Display Only period for up 
to three additional 5-minute intervals, for a total of 15 additional 
minutes. Nasdaq believes that the price discovery capability of the 
Halt Cross will be improved by permitting additional Display Only 
periods. Therefore, Nasdaq is proposing to authorize up to three 
additional 5-minute extensions of the Display Only Period for a total 
of 30 minutes. This proposal will not alter how Nasdaq extends the 
Display Only period or how Nasdaq operates the Halt Cross.
    Second, Nasdaq is proposing to change the existing mechanism for 
extending the duration of the ``Display Only'' period that occurs prior 
to the Halt Cross during which time members enter quotes and orders 
they expect to participate in the Halt Cross. The current rule states 
that the Display Only period for Halt Crosses will be extended by 5 
minutes in the event that the Current Reference Price moves more than 
10% between the imbalance dissemination 15 seconds prior to the cross 
and the cross time. Nasdaq has reviewed data from Halt Crosses and 
found that the 10% threshold is wider than necessary. For example, in 
reviewing a series of 13 IPOs from the beginning of 2007, 1 moved 4% in 
the last 15 seconds, 1 moved 1.5%, while 11 did not move at all. 
Therefore Nasdaq

[[Page 51694]]

proposes to tighten the systematic trigger to 5% from the current 10%.
    Finally, Nasdaq also proposes to change the provision of the rule 
dealing with the re-opening timeline for the Halt Cross. Currently, the 
Halt Cross initiates in a ``randomization'' period of between 0 and 15 
seconds after the Display Only period. The randomization period was 
designed to deter market participants from timing their participation 
in a way that harmed other participants. This provision, however, 
occasionally results in other markets trading after the issue has re-
opened but prior to Nasdaq restarting trading using the Halt Cross. 
Nasdaq Staff believe that it is potentially disruptive for Nasdaq, as 
the listing market and venue for the majority of electronic trading, 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.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general and with Section 
6(b)(5) of the Act,\7\ 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 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. The proposal will promote 
orderly trading with respect to IPOs and re-openings of halted stocks.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder \9\ because 
it: (i) Does not significantly affect the protection of investors or 
the public interest; (ii) does not impose any significant burden on 
competition; and (iii) by its terms, does not 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.\10\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on August 31, 2007, the date on which the Exchange 
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of the filing.\11\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\12\ The Exchange has requested that 
the Commission waive the 30-day operative delay. In support of this 
request, Nasdaq has represented that the ``randomization'' period of 
between 0 and 15 seconds prior to the execution of the cross currently 
provided for in Rule 4120 has led to confusion in the marketplace 
because it causes Nasdaq, the listing market, to remain in a halted 
state after other trading venues resume trading. Nasdaq believes that 
this delay has the potential to promote ``gaming'' behavior by some 
market participants that is harmful to other market participants and 
also to investors.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission 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. Nasdaq has complied with this requirement.
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it believes that the proposed modifications to the operation of 
Nasdaq's Halt Cross should have a positive impact market quality and 
enhance the orderliness of trading by removing a potential method for 
gaming the re-opening following the Halt Cross. Accordingly, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\13\
---------------------------------------------------------------------------

    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of a rule change pursuant 
to Section 19(b)(3)(A) of the Act,\14\ the Commission may summarily 
abrogate the 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2007-073 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2007-073. 
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 inspection 
and copying 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

[[Page 51695]]

available for inspection and copying at the principal office of the 
Nasdaq. 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-2007-073 and should be submitted on or before October 1, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-17720 Filed 9-7-07; 8:45 am]

BILLING CODE 8010-01-P
