
[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20780-20782]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8800]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64238; File No. SR-NASDAQ-2011-043]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Extend the Pilot Period of Amendments to the Clearly Erroneous Rule

April 7, 2011.
    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 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 recent 
amendments to Rule 11890, concerning clearly erroneous transactions, so 
that the pilot will now expire 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.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in [brackets].
* * * * *
11890. Clearly Erroneous Transactions
    The provisions of paragraphs (C), (c)(1), (b)(i), and (b)(ii) of 
this Rule, as amended on September 10, 2010, shall be in effect during 
a pilot period 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]. If the pilot 
is not either extended or approved permanent by the

[[Page 20781]]

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], the prior versions of paragraphs (C), (c)(1), 
and (b) shall be in effect.
    (a)-(f) No change.
* * * * *

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.

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

1. Purpose
    On September 10, 2010, the Commission approved, for a pilot period 
to end December 10, 2010, 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 Amex LLC, NYSE Arca, Inc., and National Stock 
Exchange, Inc., to amend certain of their respective rules to set forth 
clearer standards and curtail discretion with respect to breaking 
erroneous trades.\3\ The changes were adopted to address concerns that 
the lack of clear guidelines for dealing with clearly erroneous 
transactions may have added to the confusion and uncertainty faced by 
investors on May 6, 2010. 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.\4\
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    \3\ Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010).
    \4\ Securities Exchange Act Release No. 63489; (December 9, 
2010), 75 FR 78281 (December 15, 2010).
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    The Exchange believes that the pilot program has been successful in 
providing greater transparency and certainty to the process of breaking 
erroneous trades. The Exchange also believes that a four month 
extension of the pilot is warranted so that it may continue to monitor 
the effects of the pilot on the markets and investors, and consider 
appropriate adjustments, as necessary. The Exchange notes, however, 
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. Under such a mechanism, trades 
in a security outside a price band would not be allowed, thus 
eliminating clearly erroneous transactions from occurring altogether. 
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''),\5\ which requires 
the rules of an 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) \6\ 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 break erroneous 
trades.
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    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6)(iii) thereunder.\8\ The Exchange has asked the Commission to 
waive the 30-day operative delay so that the proposal may become 
operative immediately upon filing. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because such waiver will allow the 
pilot program to continue uninterrupted and help ensure uniformity 
among the national securities exchanges and FINRA with respect to the 
treatment of clearly erroneous transactions.\9\ Accordingly, the 
Commission waives the 30-day operative delay requirement and designates 
the proposed rule change as operative upon filing with the Commission.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
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 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.
    \9\ 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. 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 proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

[[Page 20782]]

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-2011-043 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-2011-043. 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 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-2011-043 and should be submitted on or before May 4, 2011.

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8800 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P


