[Federal Register Volume 78, Number 91 (Friday, May 10, 2013)]
[Notices]
[Pages 27466-27468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11145]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69521; File No. SR-NASDAQ-2013-071]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend NASDAQ Rule 4763

May 6, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4\2\ thereunder, notice is hereby given 
that on April 24, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, which Items have been prepared by NASDAQ. 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

    NASDAQ proposes to amend NASDAQ Rule 4763 (Short Sale Price Test 
Pursuant to Rule 201 of Regulation SHO) to establish that the short 
sale price test for NASDAQ-listed securities will not be calculated 
until after NASDAQ completes the Nasdaq Opening Cross or, where no 
Nasdaq Opening Cross occurs, begins trading pursuant to NASDAQ Rule 
4752.
    The text of the proposed rule change is below.\3\ Proposed new 
language is italicized; deletions are bracketed.
---------------------------------------------------------------------------

    \3\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://nasdaq.cchwallstreet.com.
---------------------------------------------------------------------------

* * * * *
    4763. Short Sale Price Test Pursuant to Rule 201 of Regulation SHO
    (a)-(b) No change.
    (c) Determination of Trigger Price. For covered securities for 
which the Exchange is the listing market, the System shall determine 
whether a transaction in a covered security has occurred at a Trigger 
Price and shall immediately notify the single plan processor.
    (1) The System will not calculate the Trigger Price of a covered 
security until: [it opens trading for that security.]
    (A) after the completion of the Nasdaq Opening Cross pursuant to 
Rule 4752(d), for securities in which a Nasdaq Opening Cross occurs, or
    (B) after the System begins trading pursuant to Rule 4752(c) for 
securities in which no Nasdaq Opening Cross occurs.
    (2) No change.
    (d)-(g) 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. 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
    Rule 201 of Regulation SHO \4\ contains a short sale-related 
circuit breaker that, if triggered, imposes a restriction on the prices 
at which securities may be sold short (``short sale price test''). Rule 
201(b) requires that trading centers,\5\ such as NASDAQ, establish, 
maintain, and enforce written policies and procedures reasonably 
designed to prevent the execution or display of a short sale order of a 
covered security \6\ at a price that is less than or equal to the 
current national best bid \7\ if the price of that covered security 
decreases by 10% or more from the covered security's closing price as 
determined by the listing market \8\ for the covered security as of the 
end of regular trading hours \9\ on the prior day (``Trigger

[[Page 27467]]

Price''). Rule 4763(b) provides, in compliance with Rule 201, that in 
the event the short sale price test is triggered, the Exchange will not 
execute or display a short sale order with respect to a covered 
security at a price that is less than or equal to the current national 
best bid.
---------------------------------------------------------------------------

    \4\ 17 CFR 242.201. See also Securities Exchange Act Release No. 
61595 (Feb. 26, 2010), 75 Fed. Reg. 11232 (Mar. 10, 2010) and 
Division of Trading and Markets: Responses to Frequently Asked 
Questions Concerning Rule 201 of Regulation SHO (``T&M FAQs'').
    \5\ Rule 201(a)(9) states that the term ``trading center'' shall 
have the same meaning as in Rule 600(b)(78) of Regulation NMS. Rule 
600(b)(78) defines a ``trading center'' as ``a national securities 
exchange or national securities association that operates an SRO 
trading facility, an alternative trading system, an exchange market 
maker, an OTC market maker, or any other broker or dealer that 
executes orders internally by trading as principal or crossing 
orders as agent.'' 17 CFR 242.600(b)(78).
    \6\ The term ``covered security'' shall have the same meaning as 
in Rule 201 of Regulation SHO. Rule 201(a)(1) defines the term 
``covered security'' to mean any ``NMS stock'' as defined under Rule 
600(b)(47) of Regulation NMS. Rule 600(b)(47) of Regulation NMS 
defines an ``NMS stock'' as ``any NMS security other than an 
option.'' Rule 600(b)(46) of Regulation NMS defines an ``NMS 
security'' as ``any security or class of securities for which 
transaction reports are collected, processed, and made available 
pursuant to an effective transaction reporting plan, or an effective 
national market system plan for reporting transactions in listed 
options.'' 17 CFR 242.201(a)(1); 17 CFR 242.600(b)(47); and 17 CFR 
242.600(b)(46).
    \7\ The term ``national best bid'' shall have the same meaning 
as in Rule 201 of Regulation SHO. Rule 201(a)(4) states that such 
term shall have the same meaning as in Rule 600(b)(42) of Regulation 
NMS. 17 CFR 242.201(a)(4). See also 17 CFR 242.600(b)(42).
    \8\ The term ``listing market'' shall have the same meaning as 
in Rule 201 of Regulation SHO. Rule 201(a)(3) defines the term 
``listing market'' to have the same meaning as the term ``listing 
market'' as defined in the effective transaction reporting plan for 
the covered security. 17 CFR 242.201(a)(3). See also 17 CFR 
242.201(a)(2).
    \9\ ``Regular trading hours'' is defined in Rule 201 to have the 
same meaning as in Rule 600(b)(64) of Regulation NMS. See Rule 
201(a)(7). Rule 600(b)(64) provides that ``Regular trading hours 
means the time between 9:30 a.m. and 4:00 p.m. Eastern Time, or such 
other time as is set forth in the procedures established pursuant to 
Sec.  242.605(a)(2).'' 17 CFR 242.600(b)(64). See also T&M FAQs 1.1 
and 1.2.
---------------------------------------------------------------------------

    Under Rule 4763(c), where NASDAQ is the listing market for a 
covered security, the System (as defined in NASDAQ Rule 4751(a)) will 
determine whether the short sale price test of Rule 201 has been 
triggered (i.e., whether a transaction in a covered security has 
occurred at a Trigger Price) and will immediately notify the single 
plan processor for the covered security. Currently under Rule 
4763(c)(1), the System will not calculate the Trigger Price of a 
covered security until the Exchange opens trading for that security. 
Because the phrase ``opens trading'' is not defined in NASDAQ's rules, 
some ambiguity exists regarding its precise application. The purpose of 
the proposed rule change is to clearly establish when NASDAQ will begin 
calculating whether the short sale price test of Rule 201 of Regulation 
SHO under the Act has been triggered for NASDAQ-listed securities.
    Specifically, NASDAQ members have questioned whether the short sale 
price test can be triggered in a NASDAQ-listed security by an execution 
on an away market that occurs after 9:30:00 a.m. but before NASDAQ 
completes the Nasdaq Opening Cross pursuant to Rule 4752. Typically, 
NASDAQ systems require less than 2 seconds to complete all Nasdaq 
Opening Crosses in NASDAQ-listed securities. Therefore, this question 
applies only to the limited circumstances in which an away market 
prints a regular way execution which would trigger the short sale price 
test of Rule 201 under Regulation SHO during the brief period after 
9:30:00 but prior to the Nasdaq Opening Cross.
    Accordingly, NASDAQ is modifying Rule 4763(c)(1) to state 
specifically when NASDAQ will begin calculating whether a transaction 
in a covered security has occurred at a Trigger Price. For securities 
in which a Nasdaq Opening Cross occurs as described in Rule 4752(d), 
NASDAQ will begin calculating the short sale price test after 
completing the Nasdaq Opening Cross. For securities in which no Nasdaq 
Opening Cross occurs, as described in Rule 4752(c), NASDAQ will begin 
calculating the short sale price test immediately when the System 
begins regular way trading pursuant to Rule 4752(c). NASDAQ believes 
that this proposed change eliminates any ambiguity that exists in the 
current rule.\10\
---------------------------------------------------------------------------

    \10\ The proposed rule does not affect market participants' 
obligations contained in Regulation SHO under the Act. See 17 CFR 
242.200 et seq.
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes that its proposal is consistent with Section 6(b) 
of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ in particular, in that it is designed 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. Specifically, NASDAQ believes that it is important to resolve 
ambiguity in NASDAQ's rules, particularly a rule that NASDAQ 
administers as a listing market and that impacts all trading in a given 
security. The proposed change will enhance the fairness and efficiency 
of the NASDAQ market without affecting market participants' ability or 
cost to comply with applicable regulatory requirements.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 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. NASDAQ does not 
believe that competition exists regarding when an exchange begins 
calculating the short sale price test. However, to the extent such 
competition exists today, the proposed rule change conforms to the 
current practice of the New York Stock Exchange (``NYSE'') and, 
therefore, equalizes the two markets' competitive positions.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not become operative for 30 days after the date of the 
filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, 
the proposed rule change is effective upon filing pursuant to Section 
19(b)(3)(A) of the Act \13\ and paragraph (f)(6) of Rule 19b-4 
thereunder.\14\
---------------------------------------------------------------------------

    \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 a self-regulatory organization to provide the Commission 
with 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 Exchange has fulfilled this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. 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. The Exchange requests that the Commission waive 
the 30-day operative delay because the proposed rule change provides 
more clarity regarding the application of Regulation SHO under the Act 
and resolves an ambiguity in the Exchange's rules. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest.\15\ Waiver of the 
operative delay will allow the Exchange to resolve a potential 
ambiguity in NASDAQ's rules. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
---------------------------------------------------------------------------

    \15\ 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 such 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 27468]]

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 Number SR-NASDAQ-2013-071 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-2013-071. 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 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 10:00 a.m. and 
3:00 p.m. Copies of the 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-NASDAQ-2013-071 and 
should be submitted on or before May 31, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11145 Filed 5-9-13; 8:45 am]
BILLING CODE 8011-01-P