
[Federal Register Volume 76, Number 68 (Friday, April 8, 2011)]
[Notices]
[Pages 19819-19821]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8374]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64174; File No. SR-NASDAQ-2011-042]


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 Individual Stocks 
Contained in the Standard & Poor's 500 Index, Russell 1000 Index, and 
Specified Exchange Traded Products That Experience a Price Change of 
10% or More During a Five-Minute Period

April 4, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 19820]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 31, 2011, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend the pilot period of the trading 
pause for individual stocks contained in the Standard & Poor's 500 
Index, Russell 1000 Index, and specified Exchange Traded Products that 
experience a price change of 10% or more during a five-minute period, 
so that the pilot will now expire the earlier of August 11, 2011 or the 
date on which a limit up/limit down mechanism to address extraordinary 
market volatility, if adopted, applies.
    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-listed 
security when the price of such security moves 10 percent or more 
within a 5-minute period. 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 only apply to securities 
in the Standard & Poor's 500 Index, the Russell 1000 Index, as well 
as a pilot list of Exchange Traded Products.
    The provisions of this paragraph shall be in effect during a 
pilot set to end on the earlier of August 11, 2011 or the date on 
which a limit up/limit down mechanism to address extraordinary 
market volatility, if adopted, applies[April 11, 2011].
* * * * *

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 aspects of such 
statements.
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[supreg] 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\
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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).
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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 four month 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. In this regard, the Exchange notes that the Exchanges are 
developing a ``limit up/limit down'' mechanism to reduce the negative 
impacts of sudden, unanticipated price movements in securities traded 
on the Exchanges. As such, the proposed extension may be shorter in 
duration should the Exchange adopt a limit up/limit down mechanism to 
address extraordinary market volatility. Accordingly, the Exchange is 
filing to further extend the pilot program until the earlier of August 
11, 2011 or the date on which a limit up/limit down mechanism to 
address extraordinary market volatility, if adopted, applies.
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''),\7\ which requires 
the rules of an

[[Page 19821]]

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) \8\ 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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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 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

    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 if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change 
pursuant to Rule 19b-4(f)(6) under the Act, an exchange is required 
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 filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Commission notes that the Exchange 
has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\11\ 
However, Rule 19b-4(f)(6) \12\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay.
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ Id.
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    The Commission has considered the Exchange's request to waive the 
30-day operative delay. 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.\13\ For this 
reason, the Commission designates the proposed rule change to be 
operative upon filing.
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    \13\ For the purposes only of waiving the operative delay of 
this proposal, the Commission has 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

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-2011-042 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-2011-042. 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 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 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-2011-042, and 
should be submitted on or before April 29, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8374 Filed 4-7-11; 8:45 am]
BILLING CODE 8011-01-P


