Federal Register / Vol. 76, No. 71 / Wednesday, April 13, 2011 / Notices 20741 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities and Exchange Act Release No. 

63909 (February 15, 2011), 76 FR 9838 (February 

22, 2011) (‘‘Notice’’). 

4See Securities Exchange Act Rel. No. 60132 

(June 17, 2009), 74 FR 30191 (June 24, 2009) (File 

No. SR–FINRA–2009–015). FINRA announced 

implementation of New Rule 13806 (Promissory 

Note Proceedings) in Regulatory Notice 09–48 

(August 2009). The effective date was September 

14, 2009. 5See Rule 13802(c)(3). 6Under Rule 13806, if an associated person does 

not file an answer, or files an answer but does not 

assert any counterclaims or third party claims, 

regardless of the amount in dispute, a single 

statutory discrimination qualified arbitrator decides 

the case. If an associated person files a counterclaim 

or third party claim, FINRA bases panel 

composition on the amount of the counterclaim or 

third party claim. For counterclaims and third party 

claims that are not more than $100,000, FINRA 

appoints a single statutory discrimination qualified 

arbitrator. For counterclaims and third party claims 

of more than $100,000, FINRA appoints a threearbitrator panel comprised of a statutory 

discrimination qualified arbitrator, a public 

arbitrator, and a non-public arbitrator. 

7Of the first 175 promissory note cases 

completed, arbitrators decided the case on the 

pleadings 76 percent of the time (unless the case 

concluded by settlement or some other means). 

8See Rule 12400(c). 

9 15 U.S.C. 78o–3(b)(6). 

10 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

11 15 U.S.C. 78o–3(b)(6). 

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–BYX– 

2011–006 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

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8848 Filed 4–12–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64226; File No. SR–FINRA– 

2011–005] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Approval of a Proposed Rule Change 

Relating to Promissory Note 

Proceedings 

April 7, 2011. 

I. Introduction 

On February 4, 2011, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a 

proposed rule change to amend Rule 

13806 of the Code of Arbitration 

Procedure for Industry Disputes 

(‘‘Industry Code’’) to provide that FINRA 

will appoint a chair-qualified public 

arbitrator also qualified to resolve 

statutory discrimination cases. The 

proposed rule change was published for 

comment in the Federal Register on 

February 22, 2011.3 The Commission 

did not receive any comments on the 

proposal. This order approves the 

proposed change. 

II. Description of the Proposal 

In 2009, FINRA implemented new 

procedures to expedite the 

administration of cases that solely 

involve a broker-dealer’s claim that an 

associated person failed to pay money 

owed on a promissory note.4 Under 

these procedures, FINRA appoints a 

single chair-qualified public arbitrator 

from the roster of arbitrators approved 

to hear statutory discrimination claims 

(a statutory discrimination qualified 

arbitrator) 5 to resolve the dispute.6

These specially qualified arbitrators are 

public chair-qualified arbitrators who 

also are attorneys familiar with 

employment law and have at least ten 

years of legal experience. In addition, 

they may not have represented 

primarily the views of employers or of 

employees within the last five years. 

FINRA proposed using statutory 

discrimination qualified arbitrators 

because of the depth of their experience 

and their familiarity with employment 

law. At the time that FINRA filed the 

proposed rule change, these arbitrators 

were underutilized at the forum. 

Since implementing the new 

procedures, FINRA has found that 

promissory note cases do not require 

extensive experience or depth of 

knowledge (or the limitation on 

representation of employers or of 

employees within the last five years). In 

a majority of completed cases, 

arbitrators decided the case on the 

pleadings and the respondent broker did 

not appear.7 Experience with the new 

procedures led FINRA to propose 

amending the Industry Code to provide 

that FINRA will appoint a chairqualified public arbitrator to a panel 

resolving a promissory note dispute 

instead of appointing a statutory 

discrimination qualified arbitrator. 

Chair-qualified arbitrators have 

completed chair training and are 

attorneys who have served through 

award on at least two cases, or, if not 

attorneys, are arbitrators who have 

served through award on at least three 

cases.8

In addition, the number of promissory 

note cases has more than doubled in the 

past two years. As a result of this 

substantial increase, it is becoming more 

difficult to appoint panels solely with 

statutory discrimination qualified 

arbitrators to these cases. Under the 

proposed rule change, the number of 

arbitrators available for appointment in 

promissory note cases would increase 

significantly. The proposed rule change 

would ensure that FINRA has a 

sufficient number of qualified 

arbitrators readily available to resolve 

these matters. 

As explained in the Notice, FINRA 

believes that the proposed rule change 

is consistent with the provisions of 

Section 15A(b)(6) of the Act,9 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change is consistent with 

the provisions of the Act noted above 

because it would ensure that FINRA has 

a sufficient number of qualified 

arbitrators readily available to resolve 

promissory note cases. 

III. Discussion of Comment Letters 

The Commission did not receive any 

comment letters regarding the proposed 

rule change. 

IV. Commission Findings 

The Commission has carefully 

reviewed the proposed rule change and 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities association.10 In particular, 

the Commission finds that the proposed 

rule change is consistent with Section 

15A(b)(6) of the Act,11 which requires, 

among other things, that FINRA rules 

must be designed to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. More 

specifically, the Commission finds that 

the proposed rule change to allow chairqualified arbitrators to hear promissory 

note cases would help to ensure that 

there are sufficient number of qualified 

arbitrators readily available to resolve 

such cases. 

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20742 Federal Register / Vol. 76, No. 71 / Wednesday, April 13, 2011 / Notices 

12 15 U.S.C. 78s(b)(2). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 64071 

(March 11, 2011), 76 FR 14699 (March 17, 2011) 

(SR–NASDAQ–2010–074). Amendment 1 to SR– 

NASDAQ–2010–074 designated the NASDAQ 100 

Index as the 100 pilot securities. 

4The Nasdaq Halt Cross is ‘‘the process for 

determining the price at which Eligible Interest 

shall be executed at the open of trading for a halted 

security and for executing that Eligible Interest.’’ 

See Nasdaq Rule 4753(a)(3). 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,12 that the 

proposed rule change (SR–FINRA– 

2011–005), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8897 Filed 4–12–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64268; File No. SR– 

NASDAQ–2011–051] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify the 

Effective Hours of Rule 4753(c) 

April 8, 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 April 7, 

2011, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’ or the ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

NASDAQ is proposing to amend Rule 

4753(c) to change the effective time of 

the rule from 9:30 a.m. to 4 p.m., to 9:45 

a.m. to 3:35 p.m. 

The text of the proposed rule change 

is below. Proposed new language is 

italicized; proposed deletions are in 

brackets. 

* * * * * 

4753. Nasdaq Halt and Imbalance 

Crosses 

(a)–(b) No change. 

(c) For a pilot period ending six 

months after the date of Commission 

approval of SR–NASDAQ–2010–074, 

between 9:45[30] a.m. and 3:35[4:00] 

p.m. EST, the System will automatically 

monitor System executions to determine 

whether the market is trading in an 

orderly fashion and whether to conduct 

an Imbalance Cross in order to restore 

an orderly market in a single Nasdaq 

Security. 

(1) An Imbalance Cross shall occur if 

the System executes a transaction in a 

Nasdaq Security at a price that is 

beyond the Threshold Range away from 

the Triggering Price for that security. 

The Triggering Price for each Nasdaq 

Security shall be the price of any 

execution by the System in that security 

within the prior 30 seconds. The 

Threshold Range shall be determined as 

follows: 

Execution price 

Threshold 

range away 

from triggering 

price (percent) 

$1.75 and under ................... 15 

Over $1.75 and up to $25 .... 10 

Over $25 and up to $50 ....... 5 

Over $50 ............................... 3 

(2) If the System determines pursuant 

to subsection (1) above to conduct an 

Imbalance Cross in a Nasdaq Security, 

the System shall automatically cease 

executing trades in that security for a 

60-second Display Only Period. During 

that 60-second Display Only Period, the 

System shall: 

(A) maintain all current quotes and 

orders and continue to accept quotes 

and orders in that System Security; and 

(B) Disseminate by electronic means 

an Order Imbalance Indicator every 5 

seconds. 

(3) At the conclusion of the 60-second 

Display Only Period, the System shall 

re-open the market by executing the 

Nasdaq Halt Cross as set forth in 

subsection (b)(2)–(4) above. 

(4) If the opening price established by 

the Nasdaq Halt Cross pursuant to 

subsection (b)(2)(A)–(D) above is outside 

the benchmarks established by Nasdaq 

by a threshold amount, the Nasdaq Halt 

Cross will occur at the price within the 

threshold amounts that best satisfies the 

conditions of subparagraphs (b)(2)(A) 

through (D) above. Nasdaq management 

shall set and modify such benchmarks 

and thresholds from time to time upon 

prior notice to market participants. 

(d) 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 

NASDAQ is proposing to amend Rule 

4753(c) to change the effective time of 

the rule from 9:30 a.m. to 4 p.m., to 9:45 

a.m. to 3:35 p.m. On March 11, 2011, 

the Commission approved Rule 4753(c) 

(the ‘‘Volatility Guard’’), a volatilitybased pause in trading in individual 

NASDAQ-listed securities traded on 

NASDAQ (‘‘NASDAQ Securities’’), as a 

six month pilot applied to the NASDAQ 

100 Index securities.3 The Volatility 

Guard automatically suspends trading 

in individual NASDAQ Securities that 

are the subject of abrupt and significant 

intraday price movements between 9:30 

a.m. and 4 p.m. Eastern Standard Time 

(‘‘EST’’). Volatility Guard is triggered 

automatically when the execution price 

of a pilot security moves more than a 

fixed amount away from a preestablished ‘‘triggering price’’ for that 

security. The triggering price for each 

pilot security is the price of any 

execution by the system in that security 

within the previous 30 seconds. For 

each pilot security, the system 

continually compares the price of each 

execution in the system against the 

prices of all system executions in that 

security over the 30 seconds. Once 

triggered, NASDAQ institutes a formal 

trading halt during which time 

NASDAQ systems are prohibited from 

executing orders. Members, however, 

may continue to enter quotes and 

orders, which are queued during a 60- 

second Display Only Period. At the 

conclusion of the Display Only Period, 

the queued orders are executed at a 

single price, pursuant to NASDAQ’s 

Halt Cross mechanism.4

NASDAQ is preparing to implement 

the Volatility Guard in the second 

quarter of 2011, and through these 

preparations NASDAQ identified a 

possible concern with the effective time 

mstockstill on DSKH9S0YB1PROD with NOTICES