71768 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

11See Securities Exchange Act Release No. 63202 

(October 28, 2010), 75 FR 67794 (November 3, 2010) 

(SR–CBOE–2010–080). 

12The text of the proposed rule change is 

available on the Commission’s Web site at http:// 

www.sec.gov. 

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. 63068 

(October 8, 2010), 75 FR 63528 (SR–BYX–2010– 

001). 4The Exchange filed Amendment No. 1 on 

November 8, 2010. Amendment No. 1 modifies the 

proposal so that a market maker is not expected to 

enter a quote based on the prior day’s last sale at 

the commencement of regular trading hours if there 

is no National Best Bid (‘‘NBB’’) or National Best 

Offer (‘‘NBO’’). As amended, in such a circumstance, 

the quoting obligation would commence as soon as 

there has been a regular-way transaction on the 

primary listing market in the security, as reported 

by the responsible single plan processor. In 

addition, the Amendment modifies the proposal so 

that a market maker’s quoting obligation shall be 

suspended during a trading halt, suspension or 

pause, and shall not re-commence until after the 

first regular-way transaction on the primary listing 

market following that halt, suspension or pause, as 

reported by the responsible single plan processor. 

Finally, so that the markets may coordinate 

implementation upon approval of the proposed rule 

changes, BYX stated in Amendment No. 1 that the 

planned implementation date for the proposed rule 

change would be December 6, 2010. 

5The events of May 6 are described more fully 

in the report of the staffs of the Commodity Futures 

Trading Commission (‘‘CFTC’’) and the Commission, 

titled Report of the Staffs of the CFTC and SEC to 

the Joint Advisory Committee on Emerging 

Regulatory Issues, ‘‘Findings Regarding the Market 

Events of May 6, 2010,’’ dated September 30, 2010 

(‘‘May 6 Staff Report’’). 

6See Securities Exchange Act Release Nos. 62945 

(September 20, 2010), 75 FR 58460 (September 24, 

new regulatory issues.11 For these 

reasons, the Commission designates the 

proposed rule change as operative upon 

filing. 

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 rulecomments@sec.gov. Please include File 

Number SR–Phlx–2010–159 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–Phlx–2010–159. 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.12 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–Phlx– 

2010–159 and should be submitted on 

or before December 15, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29562 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

(Release No. 34–63342; File No. SR–BYX– 

2010–001) 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval to Proposed 

Rule Change, as Modified by 

Amendment No. 1, to Amend BYX Rule 

11.8, Entitled ‘‘Obligations of Market 

Makers’’ 

November 18, 2010. 

I. Introduction 

On September 27, 2010, BATS 

Y-Exchange, Inc. (‘‘BYX’’ or the 

‘‘Exchange’’), filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) 1 of the Securities Exchange Act 

of 1934 (‘‘Act’’), and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend its rules to enhance minimum 

quoting standards for market makers 

registered with the Exchange. The 

purpose of this rule change is to require 

equity market makers to post 

continuous two-sided quotations within 

a designated percentage of the inside 

market to eliminate market maker ‘‘stub 

quotes,’’ that are so far away from the 

prevailing market that they are not 

intended to be executed (such as an 

order to buy at a penny or sell at 

$100,000). 

The proposed rule change was 

published for comment in the Federal 

Register on October 15, 2010.3 In 

addition, BYX filed an Amendment No. 

1 to the proposed rule change.4 The 

Commission received no comments on 

the proposed rule change. The 

Commission is publishing this notice 

and order to solicit comments on 

Amendment No. 1 and to approve the 

proposed rule change, as amended, on 

an accelerated basis. 

II. Description of the Proposal 

On May 6, 2010, the U.S. equity 

markets experienced a severe 

disruption.5 Among other things, the 

prices of a large number of individual 

securities suddenly declined by 

significant amounts in a very short time 

period, before suddenly reversing to 

prices consistent with their pre-decline 

levels. This severe price volatility led to 

a large number of trades being executed 

at temporarily depressed prices, 

including many that were more than 

60% away from pre-decline prices and 

subsequently broken. 

As noted in the May 6 Staff Report, 

executions against stub quotes 

represented a significant proportion of 

broken trades on May 6. To address this 

aspect of the events of May 6, in 

coordination with the Commission, in 

addition to the Exchange, nine of the 

national securities exchanges and the 

Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed 

proposals to address stub quotes by 

introducing minimum quoting 

standards for market makers.6 Those 

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Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71769 

2010) (SR–BATS–2010–025); 62954 (September 20, 

2010), 75 FR 59305 (September 27, 2010) (SR–BX– 

2010–66); 62951 (September 20, 2010), 75 FR 59309 

(September 27, 2010) (SR–CBOE–2010–087); 62949 

(September 20, 2010), 75 FR 59315 (September 27, 

2010) (SR–CHX–2010–22); 62953 (September 20, 

2010), 75 FR 59300 (September 27, 2010) (SR– 

FINRA–2010–049); 62950 (September 20, 2010), 75 

FR 59311 (September 27, 2010) (SR–NASDAQ– 

2010–115); 62952 (September 20, 2010), 75 FR 

59316 (September 27, 2010) (SR–NSX–2010–12); 

62948 (September 20, 2010), 75 FR 58455 

(September 24, 2010) (SR–NYSE–2010–69); 62947 

(September 20, 2010), 75 FR 58453 (September 24, 

2010) (SR–NYSEAmex–2010–96); 62946 

(September 20, 2010), 75 FR 58462 (September 24, 

2010) (SR–NYSEArca–2010–83). 

7See Securities Exchange Act Release No. 63255 

(November 5, 2010), 75 FR 69484 (November 12, 

2010) (SR–BATS–2010–025; SR–BX–2010–66; SR– 

CBOE–2010–087; SR–CHX–2010–22; SR–FINRA– 

2010–049; SR–NASDAQ–2010–115; SR–NSX– 

2010–12; SR–NYSE–2010–69; SR–NYSEAmex– 

2010–96; SR–NYSEArca–2010–83). 

8As noted, Amendment No. 1 modifies the BYX 

proposal so that the quoting obligation would 

commence as soon as there has been a regular-way 

transaction on the primary listing market in the 

security, as reported by the responsible single plan 

processor. The Amendment also modifies that the 

market maker’s quoting obligations shall be 

suspended during a trading halt, suspension or 

pause, and shall not re-commence until the firstregular way print on the primary listing market 

following that halt, suspension or pause, as 

reported by the responsible single plan processor. 

See supra note 4. The BYX amendment is 

substantively identical to the amendments filed by 

the nine national securities exchanges and FINRA 

in connection with their filings. 

9See 17 CFR 242.600 (defining NMS stock as ‘‘any 

NMS security other than an option’’ and 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’’). 

10See Securities Exchange Act Release Nos. 

62283 (September 10, 2010), 75 FR 56608 

(September 16, 2010); 62884 (September 10, 2010), 

75 FR 56618 (September 16, 2010). 11 15 U.S.C. 78f(b)(5). 

12 In approving the proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 13 15 U.S.C. 78k–1(a)(1). 14 15 U.S.C. 78f(b)(5). 

proposals were approved by the 

Commission on November 5, 2010.7

The BYX proposal is substantively 

identical to the market maker quotation 

requirements that were previously 

approved by the Commission for the 

nine national securities exchanges and 

FINRA. The proposal requires market 

makers to maintain continuous twosided quotations throughout the trading 

day 8 that are within a certain 

percentage band of the national best bid 

and offer (‘‘NBBO’’). These requirements 

apply to all NMS stocks 9 during normal 

market hours. For stocks subject to the 

individual stock circuit breaker pilot 

program (i.e., stocks that are included in 

the S&P 500, stocks that are included in 

the Russell 1000, and certain exchangetraded products),10 market makers must 

enter quotes that are not more than 8% 

away from the NBBO. A quote that is 

entered at or within 8% away from the 

NBBO is allowed to drift a certain 

additional amount away from the NBBO 

before it must be adjusted by the market 

maker. However, if the NBBO moves to 

a point such that the quote is 9.5% away 

from the NBBO, that quote must be 

adjusted so that it is no further than 8% 

away from the NBBO. During times in 

which a single-stock circuit breaker is 

not applicable (i.e., before 9:45 a.m. and 

after 3:35 p.m.), market makers for such 

securities must maintain a quote no 

further than 20% away from the NBBO. 

Similar to the requirements when the 

single-stock circuit breakers are in 

effect, a market maker’s quote may drift 

an additional 1.5% away from the 

NBBO without adjustment (i.e., until it 

is 21.5% away from the NBBO), at 

which point it would need to be 

adjusted to a quote no further than 20% 

away from the NBBO. In the absence of 

an NBBO, the same percentages apply, 

but the market maker must use the 

consolidated last sale instead of the 

NBBO. 

For securities that are not subject to 

the single-stock circuit breakers, market 

makers must maintain quotes that are no 

more than 30% away from the NBBO. 

Like securities subject to the singlestock circuit breakers, if the NBBO 

moves to a point such that the quote is 

31.5% away from the NBBO, the quote 

must be adjusted to a quote no further 

than 30% away from the NBBO. 

Nothing in the BYX proposal 

precludes a market maker from 

voluntarily quoting at price levels that 

are closer to the NBBO than required 

under the proposal. 

The planned implementation date for 

the proposed rule change is December 6, 

2010. 

BYX also proposed an optional 

functionality to automatically update 

market makers’ quotes. Upon the 

request of a market maker, the BYX 

system would automatically enter and 

adjust quotes in accordance with the 

proposed quotation requirements. If a 

market maker cancelled the quotations 

entered by BYX through this 

functionality, the market maker would 

remain responsible for complying with 

the minimum quotation requirements 

imposed by the new rule. 

III. Commission Findings 

The Commission finds that the 

proposed rule change implementing 

enhanced market maker quotation 

standards is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

national securities exchanges. In 

particular, the Commission finds that 

the proposal is consistent with Section 

6(b)(5) of the Act,11 which, among other 

things, requires that the rules of national 

securities exchanges be designed to 

prevent fraudulent and manipulative 

acts and practices, 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.12 The Commission also 

believes that the proposal is consistent 

with Section 11A(a)(1) of the Act13 in 

that it seeks to assure fair competition 

among brokers and dealers and among 

exchange markets. 

By requiring market makers to 

maintain quotes that are priced within 

a broad range around the NBBO, the 

proposed rule should help assure that 

quotations submitted by market makers 

to an exchange, and displayed to market 

participants, bear some relationship to 

the prevailing market price, and thus 

should promote fair and orderly markets 

and the protection of investors. In 

addition, by precluding market makers 

from submitting ‘‘stub’’ quotes that are 

so far away from the prevailing market 

price that they are not intended to be 

executed, the proposed rule should 

reduce the risk that trades will occur at 

irrational prices. As noted above, a large 

number of trades were executed at 

irrational prices on May 6, 2010 and 

were ultimately broken. In this respect, 

the proposal also should promote the 

goals of investor protection and fair and 

orderly markets. Finally, because BYX is 

proposing a rule that, in conjunction 

with the rules of the other national 

securities exchanges and FINRA, creates 

uniform rules with respect to these 

market maker quoting obligations, the 

proposed rule change as a whole will 

assure these baseline standards are 

applied throughout the equity markets. 

The Commission also finds that the 

functionality proposed by the Exchange 

is consistent with Section 6(b)(5) of the 

Act,14 which, among other things, 

requires that the rules of national 

securities exchanges be designed to 

prevent fraudulent and manipulative 

acts and practices, 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 

functionality should assist market 

makers on BYX in maintaining 

continuous, two-sided limit orders 

within the prescribed limits in the 

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71770 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

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

16 15 U.S.C. 78s(b)(2). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(3). 

4Changes are marked to the rule text that appears 

in the electronic manual of Nasdaq found at 

http://nasdaq.cchwallstreet.com/. 5 15 U.S.C. 78f. 

securities in which they are registered to 

satisfy their new quoting obligations. 

IV. Accelerated Approval 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,15 for approving the proposed 

Amendment No. 1 on an accelerated 

basis. The amendment reflects the 

concern that the proposed market maker 

quoting obligations should not apply 

during times when market makers 

should be permitted to absorb material 

information affecting a security for 

which they are registered as a market 

maker, whether before or during the 

trading day, i.e., until there has been a 

regular-way transaction on a security’s 

primary listing market or during a 

trading halt. Approving the amendment 

on an accelerated basis would allow 

these provisions to be effective as of the 

implementation date of the new market 

maker requirements. 

V. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether Amendment No. 1 to 

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–BYX–2010–001 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–BYX–2010–001. 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 filings 

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–BYX– 

2010–001 and should be submitted on 

or before December 15, 2010. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,16 that the 

proposed rule change (SR–BYX–2010– 

001), as modified by Amendment No. 1, 

be, and hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29614 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63332; File No. SR– 

NASDAQ–2010–146] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Regarding a 

Clerical Change to Nasdaq Rules 

November 17, 2010. 

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 November 

10, 2010, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by Nasdaq. Nasdaq proposes to 

make a clerical correction to the Nasdaq 

rulebook under Rule 19b–4(f)(3) under 

the Act,3 which renders the proposal 

effective upon filing with the 

Commission. 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 

Nasdaq proposes to make clerical 

corrections to the Nasdaq rulebook. 

Nasdaq proposes to implement the 

proposed rule change immediately. 

The text of the proposed rule change 

is available on Nasdaq’s Web site 

http://nasdaq.cchwallstreet.com, at 

Nasdaq’s principal office, and at the 

Commission’s Public Reference Room. 

Proposed new language is in italics; 

proposed deletions are in brackets.4

* * * * * 

7026. Distribution Models 

(a)–(b) No Change. 

(c) [(d)] Reserved 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq 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. Nasdaq 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 proposes to make a clerical 

correction to the Nasdaq rulebook. 

Specifically, Nasdaq proposes to change 

Nasdaq Rule 7026(d) to Nasdaq Rule 

7026(c). Nasdaq is making this change 

due to an inadvertent clerical error in 

the original filing, which listed the final 

subparagraph of Nasdaq Rule 7026 as 

(d) rather than correctly as subparagraph 

(c). Nasdaq is making no other changes 

to Nasdaq Rule 7026. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,5 in 

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