
[Federal Register Volume 76, Number 158 (Tuesday, August 16, 2011)]
[Notices]
[Pages 50779-50781]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20735]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65094; File No. SR-NASDAQ-2011-11]


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 NMS Stocks

August 10, 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 August 8, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 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 on January 31, 2012.
    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 a percentage specified below 
within a 5-minute period.
    (A) The price move shall be 10% or more with respect to securities 
included in the S&P 500[reg] Index, Russell 1000[reg] Index, and a 
pilot list of Exchange Traded Products;
    (B) The price move shall be 30% or more with respect to all NMS 
stocks not subject to section (a)(i) of this Rule with a price equal to 
or greater than $1; and
    (C) The price move shall be 50% or more with respect to all NMS 
stocks not subject to section (a)(i) of this Rule with a price less 
than $1.
    The determination that the price of a stock is equal to or greater 
than $1 under paragraph (a)(11)(B) above or less than $1 under 
paragraph (a)(11)(C) above shall be based on the closing price on the 
previous trading day, or, if no closing price exists, the last sale 
reported to the Consolidated Tape on the previous trading day.
    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.

[[Page 50780]]

    The provisions of this paragraph shall be in effect during a pilot 
set to end on [the earlier of ]January 31, 2012[August 11, 2011 or the 
date on which a limit up/limit down mechanism to address extraordinary 
market volatility, if adopted, applies].
* * * * *

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 the 
Statutory Basis for, the Proposed Rule Change

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[reg] 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\ On March 31, 2011, the Exchange filed an immediately 
effective filing to extend the pilot period an additional four months, 
so that the pilot would expire on August 11, 2011 or the date on which 
a limit up/limit down mechanism to address extraordinary market 
volatility, if adopted, applies.\7\ On June 23, 2011, the Commission 
approved the expansion of the pilot to all NMS stocks, but with 
different pause-triggering thresholds.\8\
---------------------------------------------------------------------------

    \3\ See 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\ See Securities Exchange Act Release No. 62884 (September 10, 
2010), 75 FR 56618 (September 16, 2010) (SR-NASDAQ-2010-079).
    \6\ See Securities Exchange Act Release No. 63505 (December 9, 
2010), 75 FR 78302 (December 15, 2010) (SR-NASDAQ-2010-162).
    \7\ See Securities Exchange Act Release No. 64174 (April 4, 
2011), 76 FR 19819 (April 8, 2011) (SR-NASDAQ-2011-042).
    \8\ See Securities Exchange Act Release No. 64735 (June 23, 
2011), 76 FR 38243 (June 29, 2011) (SR-NASDAQ-2011-067, et al.).
---------------------------------------------------------------------------

    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 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.
    Accordingly, the Exchange is filing to further extend the pilot 
program until January 31, 2012 and remove language from the rule 
concerning the ``limit up/limit down'' mechanism.
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''),\9\ 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) \10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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 \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The

[[Page 50781]]

Exchange has asked the Commission to waive the 30-day operative delay 
so that the proposal may become operative immediately upon filing.
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 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, 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. For this reason, the Commission 
designates the proposed rule change as operative upon filing.\17\
---------------------------------------------------------------------------

    \17\ 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).
---------------------------------------------------------------------------

    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:

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 No. SR-NASDAQ-2011-115 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 No. SR-NASDAQ-2011-115. 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 available publicly. All 
submissions should refer to File No. SR-NASDAQ-2011-115 and should be 
submitted on or before September 6, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Elizabeth M. Murphy,
Secretary.
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2011-20735 Filed 8-15-11; 8:45 am]
BILLING CODE 8011-01-P


