Document ID: SEC-2013-0257-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-02-07T05:00Z

[Federal Register Volume 78, Number 26 (Thursday, February 7, 2013)]
[Notices]
[Pages 9090-9092]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02704]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68799; File No. SR-NASDAQ-2013-015]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to NASDAQ Rule 4120

February 1, 2013.
    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 January 24, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by NASDAQ. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The NASDAQ Stock Market LLC proposes to correct an erroneous 
deletion from NASDAQ Rule 4120(c)(7)(B) related to the randomization 
period conducted prior to the IPO Cross under NASDAQ Rule 4753. The 
Exchange has designated the proposed changes herein as immediately 
effective.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, 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. 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
    The Exchange hereby amends NASDAQ Rule 4120(c)(7)(B) which governs 
the orderly launch of trading in initial public offerings (``IPOs'') of 
NASDAQ-listed securities. Specifically, NASDAQ is amending Rule 
4120(c)(7)(B) to insert language that describes the randomization 
period of zero to fifteen seconds that automatically occurs prior to 
the IPO Cross set forth in NASDAQ Rule 4753. The randomization period 
is designed to prevent gaming of the IPO Cross by delaying for a 
variable amount of time the precise moment of execution of each IPO 
Cross. Although NASDAQ's execution system currently includes and for 
years has included a randomization period for each IPO Cross, the 
language describing the randomization period was erroneously removed 
from Rule 4120(c)(7)(B).
    On August 20, 2007, NASDAQ filed SR-NASDAQ-2007-073 (``Original 
Halt Cross Filing'') which, among other things, removed from Rule 
4120(b)(7)(A) the rule language accurately describing the randomization 
period prior to the launch of the NASDAQ Halt Cross. The purpose 
section of the Original Halt Cross Filing stated as a rationale that:

    The randomization period was designed to deter market 
participants from timing their participation in a way that harmed 
other participants. This provision, however, results in other 
markets trading after the issue has re-opened but prior to NASDAQ 
restarting trading using the Halt Cross. NASDAQ believe[s] that it 
is confusing and disruptive to market participants for NASDAQ, the 
listing market, to continue a halt after other market centers have 
resumed trading and, therefore, proposes to eliminate the random 
period prior to the execution of the Halt Cross.

    This explanation focuses on Halt Crosses that NASDAQ initiates 
following halts of stocks that have

[[Page 9091]]

previously traded in the secondary market; the reasoning does not apply 
in the context of an IPO launch, as there is no trading on other 
markets until the IPO Cross is completed.
    Nevertheless, Amendment 1 to SR-NASDAQ-2007-073 (``Amended Halt 
Cross Filing''), which superseded the Original Halt Cross Filing, 
erroneously removed the language accurately describing the 
randomization period for each IPO Cross.\3\ The Amended Halt Cross 
filing, among other things, removed the language describing the 
randomization period from both the provisions governing the Halt Cross 
(Rule 4120(c)(7)(A)) and the IPO Cross (Rule 4120(c)(7)(B)). The 
Amended Halt Cross Filing offered no rationale for removing the 
randomization period prior to the IPO Cross. In actuality, NASDAQ did 
not intend to remove the randomization period and, in fact, the NASDAQ 
system has continued through the present to include a randomization 
period prior to each IPO Cross. Accordingly, NASDAQ is proposing to re-
instate in Rule 4120(c)(7)(B) language that accurately describes the 
randomization period that is identical to the language it erroneously 
removed via the Amended Halt Cross Filing.
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    \3\ See Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Modify the Halt Cross Process, Securities Exchange 
Act Release No. 56348 (Aug. 31, 2007); 72 FR 51693 (Sept. 6, 2007).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\4\ in general, and with 
Section 6(b)(5) of the Act,\5\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transaction in securities, 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 promotes this goal by accurately describing an element of 
NASDAQ's trading system that already protects investors and the public 
interest by ensuring an orderly opening of trading in IPOs of NASDAQ-
listed securities. The specific functionality, the randomization 
period, is designed to and does in fact prevent improper timing by an 
Exchange member of its participation in the IPO Cross in a manner that 
could harm other participants.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. The 
Exchange's proposed rule change is unrelated to competition, because it 
does not change the Exchange's current process and therefore will 
neither alter the Exchange's competitiveness nor inhibit the ability of 
any person to compete in the securities markets. Rather, the change is 
focused solely upon ensuring that NASDAQ's rules accurately describe 
the process in place to promote the orderly launch of trading following 
an IPO on NASDAQ.

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 from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) \6\ of the Act and 
Rule 19b-4(f)(6) \7\ thereunder.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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 the filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) \8\ under 
the Act normally does not become operative prior to 30 days after the 
date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii) \9\ 
under the Act, the Commission may designate a shorter time if such 
action is consistent with the protection of investors and the public 
interest. The Exchange has asked the Commission to waive the 30-day 
operative delay so that the Exchange can, pursuant to its rules, use 
the randomization period to prevent improper timing by Exchange members 
participating in an IPO Cross in a manner that could harm other market 
participants. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest as the randomization period was previously in NASDAQ's rules 
and is designed to prevent gaming of an IPO Cross by delaying for a 
variable amount of time the precise moment of execution of each IPO 
Cross.\10\ In addition, the Exchange represented that the NASDAQ system 
already provides for the randomization period, therefore, waiving the 
30-day operative delay will enable NASDAQ to bring its rules and system 
in alignment quickly, thus reducing the potential for investor 
confusion. Therefore, the Commission hereby waives the 30-day operative 
delay and designates the proposed rule change to be operative upon 
filing with the Commission.
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-015 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission,

[[Page 9092]]

100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2013-015. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASDAQ-2013-015, and should be submitted on or before 
February 28, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02704 Filed 2-6-13; 8:45 am]
BILLING CODE 8011-01-P