Document ID: SEC-2010-1121-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-07-26T04:00Z

[Federal Register: July 26, 2010 (Volume 75, Number 142)]
[Notices]               
[Page 43592-43594]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26jy10-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No.34-62531; File No. SR-NASDAQ-2010-087]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by The NASDAQ Stock Market LLC 
Relating to Trading Halts in Options During a Trading Pause in the 
Underlying Securities

July 19, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on July 14, 2010, The NASDAQ Stock Market LLC (``NASDAQ'') 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 Substance 
of the Proposed Rule Change

    NASDAQ is filing with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') a proposal for the NASDAQ Options Market 
(``NOM'' or ``Exchange'') to amend NOM Chapter V, Section 3 (Trading 
Halts) to enhance the recently-implemented options halt rule whenever 
trading in the underlying security has been paused by the primary 
listing market (the ``options halt rule'').\3\
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    \3\ The options halt rule is also known as the options pause 
rule.
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    The text of the proposed rule change is available from NASDAQ's Web 
site at http://nasdaq.cchwallstreet.com/Filings/, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposal is to amend Chapter V, Section 3 to 
enhance the recently-implemented options halt rule to indicate that if 
trading has not been resumed on the primary listing market for the 
underlying security once ten minutes has passed after an underlying 
security was paused, the Exchange may resume options trading if trading 
has resumed on at least one national securities exchange; and that the 
Exchange will continue certain processes during the halt (maintain 
booked orders, accept orders, and process cancels).
    On June 10, 2010, the Exchange filed an immediately effective 
proposal to establish the options halt rule in new subsection (a)(vi) 
to Chapter V, Section 3.\4\ Subsection (a)(vi) states that trading on 
the Exchange in any option contract shall be halted whenever trading in 
the underlying security has been paused by

[[Page 43593]]

the primary listing market. The rule states further that trading in 
such halted options contracts may be resumed upon a determination by 
the Exchange that the conditions that led to the pause are no longer 
present and that the interests of a fair and orderly market are best 
served by a resumption of trading, which in no circumstances will be 
before the Exchange has received notification that the underlying 
security has resumed trading on at least one exchange.
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    \4\ See Securities Exchange Act Release No. 62270 (June 10, 
2010), 75 FR 34510, (June 17, 2010) (NASDAQ-2010-071) (notice of 
filing and immediate effectiveness regarding options halt rule). The 
Exchange proposed the options halt rule after consultation with 
Commission staff regarding uniform market-wide trading pause 
standards for certain individual stocks that experience rapid price 
movement and for individual equity options overlying those stocks. 
For a similar options halt rule proposed by another options 
exchange, see Securities Exchange Act Release No. 62269 (June 10, 
2010), 75 FR 34491, (June 17, 2010) (Phlx-2010-82)(notice of filing 
and immediate effectiveness regarding options halt rule).
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    On the same day as the Exchange's options halt rule filing, Chicago 
Board Options Exchange (``CBOE'') filed an options halt that is similar 
to the Exchange's options halt rule but has some additional 
elements.\5\ The Exchange's current filing is based on the CBOE filing.
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    \5\ The additional elements include the following: That if 
trading has not been resumed on the primary listing market for the 
underlying security once ten minutes passed after an underlying 
security was paused, the Exchange may resume options trading if at 
least one market has resumed trading in the underlying; and that the 
Exchange will continue certain processes during the halt (maintain 
booked orders, accept orders, and process cancels). See Securities 
Exchange Act Release No. 62272 (June 10, 2010), 75 FR 34509, (June 
17, 2010) (CBOE 2010-055).
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    The Exchange believes that it should continue certain processes and 
procedures independently of an options trading halt. Specifically, the 
Exchange proposes to state in subsection (a)(vi)(B) to Chapter V, 
Section 3 that during the options halt, the Exchange will maintain 
existing orders on the book, accept orders, and process cancels.
    Moreover, the Exchange believes that it should have the ability to 
resume options trading within certain parameters after an underlying 
halt. Specifically, the Exchange proposes to state in subsection 
(a)(vi)(A) to Chapter V, Section 3 that if trading has not been resumed 
on the primary listing market for the underlying security after ten 
minutes have passed since the underlying security was paused by the 
primary listing market, the Exchange may resume trading in options 
contracts if the underlying security has resumed trading on at least 
one national securities exchange.\6\
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    \6\ No changes to the Exchange's trading processes are otherwise 
contemplated by this proposal. For example, transactions that occur 
between the time the pause is imposed on the listing market and the 
halt is processed on the Exchange may be nullified pursuant to 
Chapter V, Section 6. And orders in the affected option that are 
received during the halt on the Exchange will be treated as pre-
opening orders and will be included in the re-opening process upon 
the resumption of trading on the listing market for the underlying 
security pursuant to Chapter VI, Section 8.
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    The Exchange believes that the proposals, individually and 
together, enhance and strengthen the options halt rule and its 
application. The proposals will be immediately implemented upon 
effectiveness of the filing.
    The Exchange believes that the options halt rule as amended ensures 
that the Exchange has the ability to maintain fair and orderly markets 
in options upon the imposition of a single stock trading pause by the 
listing market for the underlying security.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ in particular, in that it 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system. Specifically, the Exchange 
believes that the proposal benefits customers by enhancing the current 
options halt rule to clarify the circumstances under which the Exchange 
may resume options trading, and that the Exchange will continue certain 
order processing and cancellation functions during a halt.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

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 Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to Section 
19(b)(3)(A) \9\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \10\ 
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. The Exchange has asked the Commission to 
waive the 30-day operative delay so that the proposal may become 
operative upon filing. The Commission notes that the proposed rule 
change clarifies certain aspects of the Exchange's rule regarding how 
orders will be handled during options trading halts caused by a pause 
in the trading of the underlying security and also clarifies when the 
Exchange may resume trading when a trading pause in the underlying 
security is prolonged for unknown reasons. The proposed rule change 
does not raise any new substantive issues. For these reasons, the 
Commission believes that the waiver of the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6)(iii). 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 at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
    \11\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2010-087 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.

[[Page 43594]]

All submissions should refer to File Number SR-NASDAQ-2010-087. 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. Copies of the 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 Number SR-NASDAQ-2010-087 and 
should be submitted on or before August 16, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18167 Filed 7-23-10; 8:45 am]
BILLING CODE 8010-01-P