11832 Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Notices 

8 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

5 17 CFR 242.200(g); 17 CFR 242.201. See 

Securities Exchange Act Release No. 61595 (Feb. 26, 

2010), 75 FR 11232 (Mar. 10, 2010) (‘‘Adopting 

Release’’) (amending Rules 201 and 200 of 

Regulation SHO to adopt a short sale price test 

restriction and ‘‘short exempt’’ marking 

requirement). See also Securities Exchange Act 

Release No. 63247 (Nov. 4, 2010), 75 FR 68702 

(Nov. 9, 2010) (extending the compliance date of 

the amendments to Rules 201 and 200 of Regulation 

SHO until February 28, 2011). 

6See supra note 5. 

7 Id. 

8Rule 201(a)(9) states the term ‘‘trading center’’ 

will have the same meaning as in Rule 600(b)(78). 

17 CFR 242.201(a)(9). Rule 600(b)(78) of Regulation 

NMS 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). 

9See 17 CFR 242.201(b). The amendments to Rule 

200(g) of Regulation SHO provide a ‘‘short exempt’’ 

marking requirement. See 17 CFR 242.200(g). 

10See Rule 201(a) of Regulation SHO. The System 

will utilize the national best bid from the systems 

information processor. Rule 201(a)(1) defines 

‘‘covered security’’ to mean any ‘‘NMS stock’’ as 

defined under Rule 600(b)(47) of Regulation NMS. 

17 CFR 242.201(a)(1). Rule 600(b)(47) of Regulation 

NMS defines an ‘‘NMS stock’’ as ‘‘any NMS security 

other than an option.’’ 17 CFR 242.600(b)(47). 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 242.600(b)(46). 

11See NASDAQ Rule 4751(a). The term ‘‘Nasdaq 

Market Center’’ or ‘‘System’’ shall mean the 

automated system for order execution and trade 

reporting owned and operated by NASDAQ. 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2011–009 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–FINRA–2011–009. 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 website viewing and 

printing in the Commission’s Public 

Reference Room 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 FINRA. 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–FINRA–2011–009, and 

should be submitted on or before March 

24, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4721 Filed 3–2–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63968; File No. SR– 

NASDAQ–2011–030] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Adopt New 

Rule 4763 To Implement the 

Amendments to Regulation SHO 

February 25, 2011. 

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 February 

22, 2011, 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 below, which Items 

have been substantially prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 4

thereunder, proposes to adopt new Rule 

4763 as a written policy or procedure to 

implement the amendments to Rules 

200(g) and 201 of Regulation SHO.5

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaq.cchwallstreet.com/ 

NASDAQ/Filings/, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

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 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 February 26, 2010, the 

Commission adopted amendments to 

Rules 200(g) and 201 of Regulation 

SHO.6 The amendments became 

effective on May 10, 2010, and 

compliance is required by February 28, 

2011.7 The amendments to Rule 201 of 

Regulation SHO require trading centers 8

such as NASDAQ to establish, maintain, 

and enforce certain written policies and 

procedures reasonably designed to 

comply with the rule.9 NASDAQ is 

proposing to adopt new Rule 4763 as a 

written policy and procedure to 

implement the amendments to Rules 

200(g) and 201 of Regulation SHO. 

Proposed Rule 4763(a) defines the 

terms ‘‘covered security,’’ ‘‘listing 

market,’’ and ‘‘national best bid’’ as 

having the same meaning as such terms 

have in Rule 201 of Regulation SHO.10

Under Proposed Rule 4763(b), entitled 

‘‘Short Sale Price Test,’’ the System 11

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 if the price 

of that security decreases by 10% or 

more from the security’s closing price 

on the listing market as of the end of 


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Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Notices 11833 

12See Rule 201(b)(1)(i) of Regulation SHO. Such 

execution or display needs to be in compliance 

with applicable rules concerning minimum pricing 

increments. See 17 CFR 242.612. 

13See NASDAQ Rule 4754. The NASDAQ 

Closing Cross will begin at 4 p.m. EST. The process 

begins at 3:50 p.m. EST, when NASDAQ begins to 

electronically disseminate order imbalance 

indicator messages every 5 seconds, to which 

participants may send orders in response. This 

occurs until 4 p.m. EST when the NASDAQ Closing 

Cross is executed by bringing together all of 

NASDAQ’s order books at a single price which 

maximizes the number of shares of eligible interest 

that can be executed. 

14Under Proposed Rule 4763(c)(2), if a covered 

security did not trade on NASDAQ on the prior 

trading day (due to a trading halt, trading 

suspension, or otherwise), NASDAQ’s 

determination of the Trigger Price shall be based on 

the last sale price on the Exchange for that security 

on the most recent day on which the security 

traded. See also Division of Trading and Markets: 

Responses to Frequently Asked Questions 

Concerning Rule 201 of Regulation SHO, Q&A No. 

3.1 

15See 17 CFR 242.201(a)(6). 

16See Rule 201(b)(3) of Regulation SHO. See 

Division of Trading and Markets: Responses to 

Frequently Asked Questions Concerning Rule 201 

of Regulation SHO, Q&A No. 1.1 (explaining 

calculation of the Trigger Price). 

17See NASDAQ UTP Vendor Alert 2010–9 (July 

15, 2010), available at http:// 

www.nasdaqtrader.com/ 

TraderNews.aspx?id=uva2010-009. 

18See 17 CFR 242.201(b)(1)(ii). See also Division 

of Trading and Markets: Responses to Frequently 

Asked Questions Concerning Rule 201 of 

Regulation SHO, Q&A No. 2.1. 

19 If the price of a covered security declines intraday by at least 10% on a day on which the security 

is already subject to the short sale price test 

restriction of Rule 201, the restriction will be retriggered and, therefore, will continue in effect for 

the remainder of that day and the following day. 

See Adopting Release, 75 FR at 11253, n. 290. In 

addition, Rule 201 does not place any limit on the 

frequency or number of times the circuit breaker 

can be re-triggered with respect to a particular 

stock. See Division of Trading and Markets: 

Responses to Frequently Asked Questions 

Concerning Rule 201 of Regulation SHO, Q&A No. 

2.2. 

20See NASDAQ Rule 4762 which crossreferences NASDAQ Rule 11890 for the standard of 

determining when a trade is ‘‘clearly erroneous.’’ 

The terms of a transaction executed on NASDAQ 

are ‘‘clearly erroneous’’ when there is an obvious 

error in any term, such as price, number of shares 

or other unit of trading, or identification of the 

security. A transaction made in clearly erroneous 

error and cancelled by both parties or determined 

by NASDAQ to be clearly erroneous will be 

removed from the consolidated tape. 

21See 17 CFR 242.201(a)(3). 

22 In the event of a locked market, the short sale 

on-open or on-close orders will be re-priced one 

minimum allowable price increment above the 

current national best bid. 

23Re-pricing of orders, including conversion to 

midpoint orders in the case of on-open and on-close 

orders, occurs simultaneously with the execution of 

the opening and closing crosses. NASDAQ’s system 

takes a snapshot of the orders on the book and the 

current national best bid, validates for compliance 

with Rule 201 of Regulation SHO, and 

simultaneously executes all orders that are available 

for execution at the crossing price. 

24See Adopting Release, 75 FR 11232, at fn. 242– 

244 and accompanying text. 

regular trading hours on the prior day 

(‘‘Trigger Price’’).12 For covered 

securities for which NASDAQ is the 

listing market, the NASDAQ Official 

Closing Price (‘‘NOCP’’) for each security 

is established by the NASDAQ Closing 

Cross pursuant to procedures set forth 

in Rule 4754.13

Under Proposed Rule 4763(c), 

Determination of Trigger Price, 

NASDAQ will continuously compare 

each execution by the System with the 

NOCP 14 and alert the single plan 

processor 15 when a Trigger Price has 

been reached.16 The single plan 

processor will then disseminate a notice 

to market participants in accordance 

with procedures established by the 

single plan processor.17 When the single 

plan processor disseminates such 

notice, NASDAQ will systematically 

apply the short sale price test restriction 

for short sale orders in the covered 

security in the manner described in 

Proposed Rule 4763(b). 

Under Proposed Rule 4763(d), 

Duration of Short Sale Price Test, once 

triggered, the short sale price test 

restriction shall remain in effect until 

the next trading day when a national 

best bid for the covered security is 

calculated and disseminated on a 

current and continuing basis by a plan 

processor pursuant to an effective 

national market system,18 as provided 

for in Regulation SHO Rule 201(b)(1)(ii) 

(the ‘‘Short Sale Period’’). There are two 

exceptions in the proposed rule.19 First, 

if the Exchange determines pursuant to 

Proposed Rule 4763(d)(1) that the short 

sale price test restriction for a covered 

security was triggered because of a 

clearly erroneous execution,20 NASDAQ 

may lift the short sale price test 

restriction before the Short Sale Period 

ends for covered securities for which 

the Exchange is the listing market.21

Second, if NASDAQ determines 

pursuant to Proposed Rule 4763(d)(2) 

that the prior day’s closing price for a 

covered security is incorrect in the 

System and resulted in an incorrect 

determination of the Trigger Price, the 

Exchange may correct the prior day’s 

NOCP and lift the short sale price test 

restriction before the Short Sale Period 

ends. 

Under Proposed Rule 4763(e), Repricing of Orders during Short Sale 

Period, during a Short Sale Period, short 

sale orders that are limited to the 

current national best bid or lower and 

short sale market orders will be repriced by the System one minimum 

allowable price increment above the 

current national best bid (‘‘Permitted 

Price’’). To reflect declines in the 

national best bid, the Exchange will 

continue to re-price a short sale order at 

the lowest Permitted Price down to the 

order’s original limit price, or if a 

market order, until the order is filled. 

Non-displayed orders between the 

NASDAQ bid and offer at the time of 

receipt will also be re-priced upward to 

a Permitted Price to correspond with a 

rise in the national best bid. During the 

Short Sale Period, immediate or cancel 

(‘‘IOC’’) orders requiring that all or part 

of the order be executed immediately 

will be executed to the extent possible 

at a Permitted Price and higher and then 

cancelled, and will not be re-priced. 

Inter-market sweep orders not marked 

‘‘short exempt’’ will be handled in the 

same manner as IOC orders. 

Also during the Short Sale Period, 

Limit-on-Open and Market-on-Open 

Orders defined in NASDAQ Rule 

4752(a)(3) and (a)(4) and Limit-on-Close 

and Market-on-Close Orders defined in 

NASDAQ Rule 4754(a)(4) and (a)(5) 

shall be re-priced as described above 

unless the spread between the national 

best bid and offer is $0.01.22 In that 

case, such orders shall be converted to 

Mid-Point Peg Orders defined in 

NASDAQ Rule 4751(f)(4). Once 

converted, such orders will be priced at 

the midpoint of the national best bid 

and offer and may execute in subpennies if necessary to obtain a 

midpoint price.23 Converting and repricing on-open and on-close orders 

will facilitate that such orders are 

permitted to execute in the critical 

opening and closing crosses. As noted 

in the Adopting Release, the ‘‘short sale 

price test restrictions of Rule 201 will 

accommodate matching systems that 

execute trades at an independentlyderived price because such systems are 

designed so that matches occur above 

the current national best bid.’’ 24

Pursuant to Proposed Rule 4763(f), 

Execution of Permissible Orders during 

the Short Sale Period, during the Short 

Sale Period, the System will execute 

and display a short sale order without 

regard to whether the order is at a 

Permitted Price or higher if, at the time 

of initial display of the short sale order, 

the order was at a price above the then 

current national best bid. This 

determination is consistent with Rule 

201(b)(1)(iii)(A) of Regulation SHO. 

Short sale orders that are entered into 

the System prior to the Short Sale 

Period but are not displayed will be repriced as described in Proposed Rule 

4763(e) as set forth above. 

Finally, under Proposed Rule 4763(g), 

Short Exempt Orders, during the Short 

Sale Period, the System will execute 

and display orders marked ‘‘short 

exempt’’ without regard to whether the 


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11834 Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Notices 

25See 17 CFR 242.201(b)(1)(iii)(B). 

26See Rules 200(g)(2), 201(c) and 201(d) of 

Regulation SHO. See also Division of Trading and 

Markets: Responses to Frequently Asked Questions 

Concerning Rule 201 of Regulation SHO, Q&A Nos. 

4.2, 5.4 and 5.5. 

27 15 U.S.C. 78f(b)(5). 

28 15 U.S.C. 78k–1(a)(1). 

29 15 U.S.C. 78s(b)(3)(A). 

30 17 CFR 240.19b–4(f)(6). 

31 Id. 

32 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 date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

33 Id. 

34See supra note 5. 

35For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule change’s impact on efficiency, 

competition, and capital formation. 15 U.S.C. 78c(f). 36 17 CFR 200.30–3(a)(12). 

order is at a Permitted Price or higher.25

The System will accept orders marked 

‘‘short exempt’’ at any time when the 

System is open for order entry 

regardless of whether the short sale 

price test has been triggered in the 

covered security. NASDAQ member 

firms marking orders ‘‘short exempt’’ in 

reliance on Rule 201(c) or 201(d) are 

responsible for ensuring that any such 

orders meet the criteria of these 

provisions and are accurately marked as 

‘‘short exempt.’’ 26

2. Statutory Basis 

The statutory basis for the proposed 

rule change is Section 6(b)(5) of the 

Act,27 which requires, among other 

things, the rules of an exchange to 

promote just and equitable principles of 

trade, 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) of the Act 28 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 implements rules adopted by 

the Commission in Regulation SHO 

under the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or 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 after the date of 

the filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act 29 and Rule 19b–4(f)(6) 30

thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 31 normally may not 

become operative prior to 30 days after 

the date of filing.32 However, Rule 19b– 

4(f)(6)(iii) 33 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. 

NASDAQ has requested that the 

Commission waive the 30-day operative 

delay so that it may implement the 

change no later than February 28, 2011 

to coincide with the compliance date for 

the amendments to Rules 200(g) and 201 

of Regulation SHO. The Commission 

believes that waiver of the operative 

delay is consistent with the protection 

of investors and the public interest 

because the proposed rule change, 

among other things, implements the 

amendments to Rules 200(g) and 201 of 

Regulation SHO which have a February 

28, 2011 compliance date.34 For this 

reason, the Commission designates the 

proposed rule change to be operative 

upon filing with the Commission.35

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 

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 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 rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–030 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–2011–030. 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 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–2011–030 and 

should be submitted on or before March 

24, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4722 Filed 3–2–11; 8:45 am] 

BILLING CODE 8011–01–P 


srobinson on DSKHWCL6B1PROD with NOTICES