Federal Register / Vol. 75, No. 186 / Monday, September 27, 2010 / Notices 59311 

cabinet space under contract, which the Exchange 

will endeavor to provide as close as reasonably 

possible to the User’s existing cabinet space, taking 

into consideration power availability within 

segments of the data center and the overall 

efficiency of use of data center resources as 

determined by the Exchange. 

6NYSE represented that pricing for LCN access is 

provided on a stand-alone basis and on a bundled 

basis in combination with SFTI connections and 

optic connections to outside access centers and 

within the data center. The SFTI and optic 

connections are not related to the co-location 

services. 

7 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b 4. 

3Changes are marked to the rule text that appears 

in the electronic manual of Nasdaq found at http:// 

nasdaqomx.cchwallstreet.com. 

addition, the Exchange stated that it will 

offer Users services related to colocation, including cross connections, 

equipment and cable installation, and 

remote ‘‘hot-hands’’ services, which 

allow Users to use on-site data center 

personnel to maintain User equipment. 

The Exchange proposed tiered colocation fees based on the level of 

service (1Gb circuit, 10Gb circuit and 

various bundled options), and 

additional fees for related services. 

NYSE represented that Users that 

receive co-location services from the 

Exchange will not receive any means of 

access to the Exchange’s trading and 

execution systems that is separate from 

or superior to that of Users that do not 

receive co-location services. The 

Exchange noted that all orders sent to 

NYSE enter the Exchange’s trading and 

execution systems through the same 

order gateway regardless of whether the 

sender is co-located in the Exchange’s 

data center or not. Furthermore, NYSE 

noted that co-located Users do not 

receive any market data or data service 

product that is not available to all Users. 

Users that receive co-location services 

normally would expect reduced 

latencies in sending orders to the 

Exchange and receiving market data 

from the Exchange. 

In addition, the Exchange represented 

that co-located Users have the option of 

obtaining access to the Exchange’s 

Liquidity Center Network (‘‘LCN’’), a 

local area network available in the data 

center.6 Co-located Users have the 

option of using either the LCN or the 

Exchange’s Secure Financial 

Transaction Infrastructure (‘‘SFTI’’) 

network, to which all Users have access. 

Because it operates as a local area 

network within the data center, the LCN 

provides reduced latencies in 

comparison with SFTI. Other than the 

reduced latencies, the Exchange 

believes that there are no material 

differences in terms of access to the 

Exchange between Users that choose to 

co-locate and those that do not. 

According to NYSE, SFTI and LCN both 

provide Users with access to the 

Exchange’s trading and execution 

systems and to the Exchange’s 

proprietary market data products. User 

access to non-proprietary market data 

products is available through SFTI and 

not through LCN. 

NYSE represented that it offers colocation space based on availability and 

the Exchange believes that it has 

sufficient space in the Mahwah data 

center to accommodate current demand 

on an equitable basis for the foreseeable 

future. In addition, the Exchange 

believes that any difference among the 

positions of the cabinets within the data 

center does not create any material 

difference to co-location Users in terms 

of access to the Exchange. 

After careful review, the Commission 

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 exchange.7 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(4) of the Act,8 which requires that 

the rules of a national securities 

exchange provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

issuers and other persons using its 

facilities, and with Section 6(b)(5) of the 

Act,9 which requires, among other 

things, that the rules of a national 

securities exchange be 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, and 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Commission believes that the 

proposed tiered fees for co-location and 

related services are reasonable and 

equitably allocated insofar as they are 

applied on the same terms to similarlysituated market participants. In 

addition, the Commission believes that 

the connectivity options described in 

the proposed rule change are not 

unfairly discriminatory because NYSE 

makes the co-location services 

uniformly available to all Users who 

voluntarily request them and pay the 

fees as detailed in the proposal. As 

represented by NYSE, these fees are 

uniform for all such customers and may 

vary from User to User due to each 

User’s choice of service package. 

Finally, the Commission believes that 

the proposal will further the protection 

of investors and the public interest 

because it will provide greater 

transparency regarding the connectivity 

options available to market participants. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–NYSE–2010– 

56) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24061 Filed 9–24–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62950; File No. SR– 

NASDAQ–2010–115] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of a Proposed Rule Change To 

Enhance Quotation Requirements for 

Market Makers 

September 20, 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 

September 17, 2010, 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, II, and 

III 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 Substance of 

the Proposed Rule Change 

NASDAQ proposes to enhance 

quotation requirements for market 

makers. 

The text of the proposed rule change 

is below. Proposed new language is in 

* * * proposed deletions are in 

[brackets].3

* * * * * 

4751. Definitions 

The following definitions apply to the 

Rule 4600 and 4750 Series for the 

trading of securities listed on Nasdaq or 


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59312 Federal Register / Vol. 75, No. 186 / Monday, September 27, 2010 / Notices 

a national securities exchange other 

than Nasdaq. 

(a)–(b) No Change. 

(c) The term ‘‘Participant’’ shall mean 

an entity that fulfills the obligations 

contained in Rule 4611 regarding 

participation in the System, and shall 

include: 

(1) No Change. 

(2) ‘‘Nasdaq Market Makers[,]’’ or 

‘‘Market Makers,’’ members that are 

registered as Nasdaq Market Makers for 

purposes of participation in the System 

on a fully automated basis with respect 

to one or more System securities. 

(3) No Change. 

(d)–(i) No Change 

* * * * * 

[4613. Character of Quotations 

A member registered as a Nasdaq 

Market Maker shall engage in a course 

of dealings for its own account to assist 

in the maintenance, insofar as 

reasonably practicable, of fair and 

orderly markets in accordance with this 

Rule. 

(a) Quotation Requirements and 

Obligations 

(1) Two-Sided Quote Obligation. For 

each security in which a member is 

registered as a Nasdaq Market Maker, 

the member shall be willing to buy and 

sell such security for its own account on 

a continuous basis and shall enter and 

maintain a two-sided quotation 

(‘‘Principal Quote’’), which is attributed 

to the market maker by a special maker 

participant identifier (‘‘MPID’’) and is 

displayed in the Nasdaq Market Center 

at all times, subject to the procedures for 

excused withdrawal set forth in Rule 

4619. 

(A) A registered market maker must 

display a quotation size for at least one 

normal unit of trading (or a larger 

multiple thereof) when it is not 

displaying a limit order in compliance 

with SEC Rule 604, provided, however, 

that a registered Nasdaq Market Maker 

may augment its displayed quotation 

size to display limit orders priced at the 

market maker’s quotation. Unless 

otherwise designated, a ‘‘normal unit of 

trading’’ shall be 100 shares. 

(B) The minimum quotation 

increment for quotations of $1.00 or 

above in all System Securities shall be 

$0.01. The minimum quotation 

increment in the System for quotations 

below $1.00 in System Securities shall 

be $0.0001. 

(2) The first MPID issued to a member 

pursuant to subparagraph (1) of this 

rule, or Rule 4623, shall be referred to 

as the member’s ‘‘Primary MPID.’’ 

Market makers and ECNs may request 

the use if additional MPIDs that shall be 

referred to as ‘‘Supplemental MPIDs.’’ A 

market maker may request the use of 

Supplemental MPIDs for displaying 

Attributable Quotes/Orders in the 

Nasdaq Quotation Montage for any 

security in which it is registered and 

meets the obligations set forth in 

subparagraph (1) of this rule. An ECN 

may request the use of Supplemental 

MPIDs for displaying Attributable 

Quotes/Orders in the Nasdaq Quotation 

Montage for any security in which it 

meets the obligations set forth in Rule 

4623. A market maker or ECN that 

ceases to meet the obligations 

appurtenant to its Primary MPID in any 

security shall not be permitted to use a 

Supplemental MPID for any purpose in 

that security. 

(3) Market makers and ECNs that are 

permitted the use of Supplemental 

MPIDs for displaying Attributable 

Quotes/Orders pursuant to 

subparagraph (2) of this rule are subject 

to the same rules applicable to the 

members’ first quotation, with two 

exceptions: (a) The continuous twosided quote requirement and excused 

withdrawal procedures described in 

subparagraph (1) above do not apply to 

market makers’ Supplemental MPIDs; 

and (b) Supplemental MPIDs may not be 

used by market makers to engage in 

passive market making or to enter 

stabilizing bids pursuant to Nasdaq 

Rules 4614 and 4619.] 

4613. Market Maker Obligations 

A member registered as a Market 

Maker shall engage in a course of 

dealings for its own account to assist in 

the maintenance, insofar as reasonably 

practicable, of fair and orderly markets 

in accordance with this Rule. 

(a) Quotation Requirements and 

Obligations 

(1) Two-Sided Quote Obligation. For 

each security in which a member is 

registered as a Market Maker, the 

member shall be willing to buy and sell 

such security for its own account on a 

continuous basis during regular market 

hours and shall enter and maintain a 

two-sided trading interest (‘‘Two-Sided 

Obligation’’) that is identified to the 

Exchange as the interest meeting the 

obligation and is displayed in the 

Exchange’s quotation montage at all 

times. Interest eligible to be considered 

as part of a Market Maker’s Two-Sided 

Obligation shall have a displayed 

quotation size of at least one normal 

unit of trading (or a larger multiple 

thereof); provided, however, that a 

Market Maker may augment its TwoSided Obligation size to display limit 

orders priced at the same price as the 

Two-Sided Obligation. Unless otherwise 

designated, a ‘‘normal unit of trading’’ 

shall be 100 shares. After an execution 

against its Two-Sided Obligation, a 

Market Maker must ensure that 

additional trading interest exists in the 

Exchange to satisfy its Two-Sided 

Obligation either by immediately 

entering new interest to comply with 

this obligation to maintain continuous 

two-sided quotations or by identifying 

existing interest on the Exchange book 

that will satisfy this obligation. 

(2) Pricing Obligations. For NMS 

stocks (as defined in Rule 600 under 

Regulation NMS) a Market Maker shall 

adhere to the pricing obligations 

established by this Rule during Regular 

Market Hours. 

(A) Bid Quotations. At the time of 

entry of bid interest satisfying the TwoSided Obligation, the price of the bid 

interest shall be not more than the 

Designated Percentage away from the 

then current National Best Bid, or if no 

National Best Bid, not more than the 

Designated Percentage away from the 

last reported sale from the responsible 

single plan processor. In the event that 

the National Best Bid (or if no National 

Best Bid, the last reported sale) 

increases to a level that would cause the 

bid interest of the Two-Sided Obligation 

to be more than the Defined Limit away 

from the National Best Bid (or if no 

National Best Bid, the last reported 

sale), or if the bid is executed or 

cancelled, the Market Maker shall enter 

new bid interest at a price not more than 

the Designated Percentage away from 

the then current National Best Bid (or if 

no National Best Bid, the last reported 

sale), or identify to the Exchange current 

resting interest that satisfies the TwoSided Obligation. 

(B) Offer Quotations. At the time of 

entry of offer interest satisfying the TwoSided Obligation, the price of the offer 

interest shall be not more than the 

Designated Percentage away from the 

then current National Best Offer, or if no 

National Best Offer, not more than the 

Designated Percentage away from the 

last reported sale received from the 

responsible single plan processor. In the 

event that the National Best Offer (or if 

no National Best Offer, the last reported 

sale) decreases to a level that would 

cause the offer interest of the Two-Sided 

Obligation to be more than the Defined 

Limit away from the National Best Offer 

(or if no National Best Offer, the last 

reported sale), or if the offer is executed 

or cancelled, the Market Maker shall 

enter new offer interest at a price not 

more than the Designated Percentage 

away from the then current National 

Best Offer (or if no National Best Offer, 

the last reported sale), or identify to the 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 186 / Monday, September 27, 2010 / Notices 59313 

4See Exchange Act Release No. 62884 (September 

10, 2010). 

Exchange current resting interest that 

satisfies the Two-Sided Obligation. 

(C) The National Best Bid and Offer 

shall be determined by the Exchange in 

accordance with its procedures for 

determining protected quotations under 

Rule 600 under Regulation NMS. 

(D) For purposes of this Rule, the term 

‘‘Designated Percentage’’ shall mean the 

individual stock pause trigger 

percentage under NASDAQ Rule 

4120(a)(11) (or comparable rule of 

another exchange) less two (2) 

percentage points. For times during 

regular market hours when stock pause 

triggers are not in effect under Rule 

4120(a)(11) (or comparable rule of 

another exchange), the Designated 

Percentage calculation will assume a 

trigger percentage of 22%. For NMS 

stocks that are not subject to such stock 

pause triggers the Designated 

Percentage will assume a trigger 

percentage of 32%. 

(E) For purposes of this Rule, the term 

‘‘Defined Limit’’ shall mean the 

individual stock pause trigger 

percentage under NASDAQ Rule 

4120(a)(11) (or comparable rule of 

another exchange) less one-half (1⁄2) 

percentage point. For times during 

regular market hours when stock pause 

triggers are not in effect under Rule 

4120(a)(11) (or comparable rule of 

another exchange), the Defined Limit 

calculation will assume a trigger 

percentage of 22%. For NMS stocks that 

are not subject to such stock pause 

triggers the Defined Limit calculation 

will assume a trigger percentage of 32%. 

(F) Quotation Creation and 

Adjustment. For each Issue in which a 

Market Maker is registered, the System 

shall automatically create a quotation 

for display to comply with this Rule. 

System-created compliant displayed 

quotations will thereafter be allowed to 

rest and not be further adjusted by the 

System unless the relationship between 

the quotation and its related National 

Best Bid or National Best Offer, as 

appropriate, shrinks to the greater of: (a) 

4 percentage points, or, (b) one-quarter 

the applicable percentage necessary to 

trigger an individual stock trading pause 

as described in NASDAQ Rule 

4120(a)(11), or expands to within that 

same percentage less 0.5%, whereupon 

the System will immediately re-adjust 

and display the Market Maker’s quote to 

the appropriate Designated Percentage 

set forth in section (D) above. As the 

System allows for multiple attributable 

quotations by a Market Maker in an 

issue, quotations originally entered by 

Market Makers shall be allowed to move 

freely towards or away from the 

National Best Bid or National Best Offer, 

as appropriate, for potential execution. 

(G) Quotation Refresh After 

Execution. In the event of an execution 

against a System-created compliant 

quotation, the Market Maker shall have 

its quote refreshed by the System on the 

executed side of the market at the 

applicable Designated Percentage away 

from the then National Best Bid (Offer) 

(or if no National Best Bid (Offer), the 

last reported sale). 

(H) Nothing in this Rule shall 

preclude a Market Marker from quoting 

at price levels that are closer to the 

National Best Bid and Offer than the 

levels required by this Rule. 

(I) The minimum quotation increment 

for quotations of $1.00 or above in all 

System Securities shall be $0.01. The 

minimum quotation increment in the 

System for quotations below $1.00 in 

System Securities shall be $0.0001. 

(J) The individual Market Participant 

Identifier (‘‘MPID’’) assigned to a 

member to meet its Two-Sided 

Obligation pursuant to subparagraph 

(a)(1) of this Rule, or Rule 4623, shall be 

referred to as the member’s ‘‘Primary 

MPID.’’ Market Makers and ECNs may 

request the use if additional MPIDs that 

shall be referred to as ‘‘Supplemental 

MPIDs.’’ A Market Maker may request 

the use of Supplemental MPIDs for 

displaying Attributable Quotes/Orders 

in the Nasdaq Quotation Montage for 

any security in which it is registered and 

meets the obligations set forth in 

subparagraph (1) of this rule. An ECN 

may request the use of Supplemental 

MPIDs for displaying Attributable 

Quotes/Orders in the Nasdaq Quotation 

Montage for any security in which it 

meets the obligations set forth in Rule 

4623. A Market Maker or ECN that 

ceases to meet the obligations 

appurtenant to its Primary MPID in any 

security shall not be permitted to use a 

Supplemental MPID for any purpose in 

that security. 

(K) Market Makers and ECNs that are 

permitted the use of Supplemental 

MPIDs for displaying Attributable 

Quotes/Orders pursuant to 

subparagraph (2) of this rule are subject 

to the same rules applicable to the 

members’ first quotation, with two 

exceptions: (a) The continuous twosided quote requirement and excused 

withdrawal procedures described in 

subparagraph (1) above do not apply to 

Market Makers’ Supplemental MPIDs; 

and (b) Supplemental MPIDs may not be 

used by Market Makers to engage in 

passive market making or to enter 

stabilizing bids pursuant to Nasdaq 

Rules 4614 and 4619. 

(b)–(e) No Change. 

* * * * * 

(b) Not applicable. 

(c) Not applicable. 

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 

Market Maker Quote Obligations 

The Exchange proposes to adopt rules 

to enhance minimum quotation 

requirements for market makers. Under 

the proposal, the Exchange will require 

market makers for each stock in which 

they are registered to continuously 

maintain a two-sided quotation within a 

designated percentage of the National 

Best Bid and National Best Offer as 

appropriate. These enhanced market 

maker quotation requirements are 

intended to eliminate trade executions 

against market maker placeholder 

quotations traditionally priced far away 

from the inside market, commonly 

known as ‘‘stub quotes.’’ They are also 

intended to augment and work in 

relation to the single stock pause 

standards already in place on a pilot 

basis for stocks in the S&P 500, Russell 

1000, and specified ETFs.4

Under the proposal, the Exchange will 

require registered market makers to 

enter and maintain quotes priced at no 

more than a certain percentage away 

from the national inside bid and offer. 

Permissible quotes are determined by 

the individual character of the security, 

the time of day in which the quote is 

entered, and other factors which are 

summarized below: 

For issues subject to an individual 

stock trading trigger pause, a 

permissible quote is determined by first 

looking at the applicable stock trading 

pause trigger percentage of the security 

and then reducing that number by 2%. 

Since currently the stock pause trigger 

percentage across all exchanges is 10%, 

a market maker’s quote in a such a 


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

6 15 U.S.C. 78k–1(a)(1). 

security may not be more than 8% away 

from the national best bid or best offer 

as appropriate. Once a compliant quote 

is entered, it may rest without 

adjustment until such time as it moves 

to within 1⁄2 of 1% of the applicable 

trigger pause percentage (i.e, currently 

9.5%) whereupon the market maker 

must immediately move its quote back 

to at least the permissible default level 

of 8% away from the national best bid 

or best offer. During times in which a 

trigger pause percentage is not 

applicable (e.g. before 9:45 a.m. and 

after 3:35 p.m.), a market maker must 

maintain a quote no further than 20% 

away from the inside (i.e. it may rest 

without adjustment until it reaches 

21.5%). In the absence of national best 

or best offer, the above calculations will 

remain the same, but will use the 

national last sale instead of the absent 

bid or offer. 

For securities not subject to any 

individual stock pause trigger, the 

proposal will a [sic] assume a 

hypothetical 32% trigger pause, apply a 

2% reduction, and require market 

makers in those issues to maintain 

quotes no more than 30% away from the 

national best and national best offer. 

Like securities subject to stock trading 

pauses, once a compliant quote is 

entered, it may rest without adjustment 

until such time as it moves to within 1⁄2

of 1% of its applicable trigger pause 

percentage (31.5%) whereupon the 

market maker must immediately move 

its quote back to at least the permissible 

default level of 30%. These 

requirements shall apply to Regulation 

NMS securities during normal market 

hours. 

Nothing in the above precludes a 

market maker from voluntarily quoting 

at price levels that are closer to the 

national best bid and best offer than 

required under the proposal. 

Automated Quote Management 

In order to assist market makers in 

meeting their enhanced quotation 

obligations, the Exchange will also 

provide automated quote management 

functionality. For each issue in which a 

market maker is registered, the 

Exchange will automatically create a 

quotation for display to comply with 

this standard set forth in this proposal. 

Compliant displayed quotations will 

thereafter be allowed to rest and not be 

further adjusted by the Exchange unless 

the relationship between the quotation 

and its related national best bid or 

national best offer, as appropriate, 

shrinks to the greater of: (a) 4 percentage 

points, or, (b) one-quarter the applicable 

percentage necessary to trigger an 

individual stock trading pause as 

described in NASDAQ Rule 4120(a)(11), 

or expands to within that same 

percentage less 0.5%, whereupon the 

Exchange will immediately re-adjust 

and display the market maker’s quote to 

the appropriate designated percentage. 

Quotations originally entered by market 

makers shall be allowed to move freely 

towards the national best bid or national 

best offer, as appropriate, for potential 

execution. 

In the event of an execution against a 

System-created compliant quotation, the 

market maker shall have its quote 

refreshed by the System on the executed 

side of the market at the applicable 

designated percentage away from the 

then national best bid (offer), or if no 

national best bid (offer), the last 

reported sale. 

Previously Approved Rule Text 

Finally, the sections (I), (J) and (K) of 

the proposed rule are portions of 

previously approved text of Rule 4613 

that have moved so as group the 

proposed market making standard 

sections together within the rule. 

2. Statutory Basis 

The statutory basis for the proposed 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),5 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) 6 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 minimum 

market maker quotation requirements. 

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. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the Exchange consents, 

the Commission shall: (a) By order 

approve or disapprove such proposed 

rule change, or (b) institute proceedings 

to determine whether the proposed rule 

change should be 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–2010–115 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2010–115. 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 inspection and copying 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 filing also will be 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 186 / Monday, September 27, 2010 / Notices 59315 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 62252 (June 10, 

2010), 75 FR 34186 (June 16, 2010); Exchange Act 

Release No. 62883 (September 10, 2010), 75 FR 

56608 (September 16, 2010). 

4 15 U.S.C. 78f(b)(5). 

5 15 U.S.C. 78k–1(a)(1). 

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 publicly available. All 

submissions should refer to File 

Number SR–NASDAQ–2010–115 and 

should be submitted on or before 

October 18, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24054 Filed 9–24–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62949; File No. SR–CHX– 

2010–22] 

Self-Regulatory Organizations; The 

Chicago Stock Exchange, Inc.; Notice 

of Filing of a Proposed Rule Change 

To Enhance Quotation Requirements 

for Market Makers 

September 20, 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 

September 17, 2010, The Chicago Stock 

Exchange, Inc. (‘‘CHX’’ 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 Substance of 

the Proposed Rule Change 

The CHX proposes to amend its rules 

to enhance quotation requirements for 

market makers. The text of this 

proposed rule change is available on the 

Exchange’s Web site at (http:// 

www.chx.com) and in 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 

CHX included statements concerning 

the purpose of and basis for the 

proposed rule changes and discussed 

any comments it received regarding the 

proposal. The text of these statements 

may be examined at the places specified 

in Item IV below. The CHX 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 

Market Maker Quote Obligations 

The Exchange proposes to adopt rules 

to enhance minimum quotation 

requirements for market makers. Under 

the proposal, the Exchange will require 

market makers for each stock in which 

they are registered to continuously 

maintain a two-sided quotation within a 

designated percentage of the National 

Best Bid and National Best Offer as 

appropriate. These enhanced market 

maker quotation requirements are 

intended to eliminate trade executions 

against market maker placeholder 

quotations traditionally priced far away 

from the inside market, commonly 

known as ‘‘stub quotes.’’ They are also 

intended to augment and work in 

relation to the single stock pause 

standards already in place on a pilot 

basis for stocks in the S&P 500, Russell 

1000 and certain Specified Exchange 

Traded Products.3

Under the proposal, the Exchange will 

require registered market makers to 

enter and maintain quotes priced at no 

more than a certain percentage away 

from the national inside bid and offer. 

Permissible quotes are determined by 

the individual character of the security, 

the time of day in which the quote is 

entered, and other factors which are 

summarized below: 

For issues subject to an individual 

stock trading trigger pause, a 

permissible quote is determined by first 

looking at the applicable stock trading 

pause trigger percentage of the security 

and then reducing that number by 2%. 

Since currently the stock pause trigger 

percentage across all exchanges is 10%, 

a market maker’s quote in such a 

security may not be more than 8% away 

from the national best bid or best offer 

as appropriate. Once a compliant quote 

is entered, it may rest without 

adjustment until such time as it moves 

to within 1⁄2 of 1% of the applicable 

trigger pause percentage (i.e., currently 

9.5%) whereupon the market maker 

must immediately move its quote back 

to at least the permissible default level 

of 8% away from the national best bid 

or best offer. During times in which a 

trigger pause percentage is not 

applicable (e.g. before 9:45 a.m. and 

after 3:35 p.m.), a market maker must 

maintain a quote no further than 20% 

away from the inside (i.e., it may rest 

without adjustment until it reaches 

21.5%). In the absence of national best 

or best offer, the above calculations will 

remain the same, but will use the 

national last sale instead of the absent 

bid or offer. 

For securities not subject to any 

individual stock pause trigger, the 

proposal will a [sic] assume a 

hypothetical 32% trigger pause, apply a 

2% reduction, and require market 

makers in those issues to maintain 

quotes no more than 30% away from the 

national best and national best offer. 

Like securities subject to stock trading 

pauses, once a compliant quote is 

entered, it may rest without adjustment 

until such time as it moves to within 1⁄2; 

of 1% of its applicable trigger pause 

percentage (31.5%) whereupon the 

market maker must immediately move 

its quote back to at least the permissible 

default level of 30%. These 

requirements shall apply to Regulation 

NMS securities during normal market 

hours. 

Nothing in the above precludes a 

market maker from voluntarily quoting 

at price levels that are closer to the 

national best bid and best offer than 

required under the proposal. 

2. Statutory Basis 

The statutory basis for the proposed 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),4 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) 5 of the 

Act in that it seeks to assure fair 

competition among brokers and dealers 

and among exchange markets. The 


srobinson on DSKHWCL6B1PROD with NOTICES