Document ID: SEC-2011-1627-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-10-20T04:00Z

[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65306-65307]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27136]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65575; File No. SR-NASDAQ-2011-141]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Interpretation of Rule 4120(a)(11)

October 14, 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 October 6, 2011, the NASDAQ Stock Market, LLC (``NASDAQ'' or 
``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 NASDAQ. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify its interpretation of Rule 4120(a)(11) 
regarding at what price level to initiate a subsequent trading halts 
for any security that has been previously halted. NASDAQ will implement 
the proposed change immediately upon filing. There is no new proposed 
rule text, and a copy of the proposed rule change is available at 
http://nasdaqomx.cchwallstreet.com, at NASDAQ's principal office, 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, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is modifying its interpretation and practices related to 
certain language contained in Rule 4120(a)(11) which generally allows 
for the pausing of trading in individual securities should that 
security experience a significant percentage price increase or decline. 
Once a stock is halted pursuant to the rule, a five-minute halt period 
commences, after which trading is re-commenced using prices determined 
by NASDAQ's halt-cross process.
    Currently, NASDAQ interprets language in Rule 4120(a) that states 
``[p]rice moves under this paragraph will be calculated by changes in 
each consolidated last-sale price disseminated by a network processor 
over a five minute rolling period measured continuously[.]'' as 
requiring a continuous look back of five minutes--even when a stock is 
currently halted for a previous triggering price increase or decline. 
In this situation, trade reports for transactions taking place 
immediately before, or contemporaneous with, the halt can be submitted 
and disseminated, and thus set a new ``within five minutes'' comparison 
price level with any subsequent opening price coming out of the halt-
cross process. Should a resulting price decline differential between 
the late intra-halt disseminated price and any new opening price coming 
out of the cross halt be great enough, another disruptive halt can be 
triggered.
    In response, NASDAQ proposes to modify its interpretation of what 
price its systems will for [sic] consider for evaluating the need for 
any subsequent

[[Page 65307]]

halt during the initial time period when a stock is coming out of a 
halt commenced pursuant to Rule 4120(a)(11). Under the proposed change, 
NASDAQ systems will not look back for any prices disseminated during a 
halt and instead will use the opening price determined by its halt-
cross process as the initial price level against which subsequent price 
increases or declines will be measured. As before, any subsequent 
triggering price increases or declines within any continuous five-
minute period, even one immediately triggering a halt in comparison to 
the halt-cross process, will initiate a halt in conformity with Rule 
4120(a)(11).
    NASDAQ believes that the above interpretation will ensure that 
prices determined and submitted at a period of time around the start of 
a trading halt do not carry over and inappropriately impact attempts to 
re-start trading after that halt. NASDAQ also understands that this 
approach to initial pricing coming out of a halt is already in effect 
at other listing markets likewise subject to uniform percentage 
increase or decline stock halt rules.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\3\ in general, and with Section 
6(b)(5) of the Act \4\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, 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 transactions 
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. NASDAQ believes that the 
change will result in the adoption of a clear policy with respect to 
the meaning, administration, and enforcement of Rule 4120(a)(11), 
thereby promoting members' understanding of the parameters of the rule 
and the efficiency of its administration.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    As all listing markets are subject to uniform halt rules, and it is 
NASDAQ's understanding that its proposed approach to evaluating prices 
coming out of a halt is similar to that already being used by other 
listing markets, 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\5\ 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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include 
File No. SR-NASDAQ-2011-141 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 No. SR-NASDAQ-2011-141. 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 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 No. SR-NASDAQ-
2011-141 and should be submitted on or before November 10, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27136 Filed 10-19-11; 8:45 am]
BILLING CODE 8011-01-P