[Federal Register Volume 77, Number 150 (Friday, August 3, 2012)]
[Notices]
[Pages 46543-46546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18998]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67535; File No. SR-NASDAQ-2012-087]


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 Other Than 
Rights and Warrants

July 30, 2012.
    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 July 19, 2012, 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 self-regulatory organization. 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

    The Exchange proposes to extend the pilot period of the trading 
pause for individual NMS stocks other than rights and warrants, so that 
the pilot will now expire on February 4, 2013.
    The text of the proposed rule change is below. Proposed new 
language is in italics; 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

[[Page 46544]]

scheduled close, 25 minutes before the close of trading, immediately 
pause trading for 5 minutes in any Nasdaq-listed security, other than 
rights and warrants, 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[supreg] Index, Russell 1000[supreg] 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)(11)(A) 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)(11)(A) 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.
    The provisions of this paragraph shall be in effect during a pilot 
set to end on February 4, 2013 [July 31, 2012].
    (b)-(c) 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 self-regulatory organization 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 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 MKT LLC (``NYSE MKT'') 
(formerly, NYSE Amex LLC), 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\ 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\ On August 8, 
2011, the Exchange filed an immediately effective filing that removed 
language from the rule that tied the expiration of the pilot to the 
adoption of a limit up/limit down mechanism to address extraordinary 
market volatility, and further extended the pilot period, so that the 
pilot would expire on January 31, 2012.\9\ On November 18, 2011, the 
Exchange filed an immediately effective filing that excluded rights and 
warrants from the pilot.\10\ On January 23, 2012, the Commission 
approved an extension of the pilot to July 31, 2012.\11\
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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 MKT, 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).
    \7\ Securities Exchange Act Release No. 64174 (April 4, 2011), 
76 FR 19819 (April 8, 2011) (SR-NASDAQ-2011-042).
    \8\ Securities Exchange Act Release No. 64735 (June 23, 2011), 
76 FR 38243 (June 29, 2011) (SR-NASDAQ-2011-067, et al.).
    \9\ Securities Exchange Act Release No. 65094 (August 10, 2011), 
76 FR 50779 (August 16, 2011) (SR-NASDAQ-2011-115).
    \10\ Securities Exchange Act Release No. 65814 (November 23, 
2011), 76 FR 74084 (November 30, 2011) (SR-NASDAQ-2011-154).
    \11\ Securities Exchange Act Release No. 66214 (January 23, 
2012), 77 FR 4593 (January 30, 2012) (SR-NASDAQ-2012-010).
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    On May 31, 2012, the Commission approved, on a pilot basis, the 
National Market System Plan to Address Extraordinary Market 
Volatility.\12\ This plan creates a market-wide limit up-limit down 
mechanism that is intended to address extraordinary market volatility 
in NMS Stocks, which will be implemented on February 4, 2013. Once

[[Page 46545]]

implemented, the limit up/limit down mechanism to address extraordinary 
market volatility will render the current stock trading pause pilot 
duplicative and unnecessary. Accordingly, the Exchange is proposing to 
extend the single stock trading pause pilot so that it will now expire 
on February 4, 2013, when the limit up/limit down mechanism to address 
extraordinary market volatility is to be implemented.
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    \12\ Securities Exchange Act Release No. 67091 (May 31, 2012), 
77 FR 33498 (June 6, 2012).
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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 extension of the pilot is warranted so that it may 
continue to apply the circuit breaker to reduce the negative impacts of 
sudden, unanticipated price movements until it is replaced by the limit 
up/limit down mechanism.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\13\ 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) \14\ 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. In addition, the Exchange believes extending the pilot 
to February 4, 2013 is consistent with the requirement to protect 
investors because it will permit the circuit breaker to continue to 
reduce the negative impacts of sudden, unanticipated price movements 
until it is replaced by the preferred limit up/limit down mechanism.
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    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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 \17\ and Rule 19b-
4(f)(6)(iii) thereunder.\18\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \20\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    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 to be operative upon filing.\21\
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    \21\ 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).
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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:

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 No. SR-NASDAQ-2012-087 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-2012-087. 
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 Commissions 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. 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 Number SR-

[[Page 46546]]

NASDAQ-2012-087 and should be submitted by August 24, 2012.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18998 Filed 8-2-12; 8:45 am]
BILLING CODE 8011-01-P