Document ID: SEC-2013-0306-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-02-12T05:00Z

[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9966-9968]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03100]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68841; File No. SR-NASDAQ-2013-020]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Establish the Limit Locator Service Offered at No Cost to Subscribing 
Members

February 6, 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 28, 2013, 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 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.
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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

    The Exchange proposes to establish the Limit Locator service 
offered at no cost to subscribing members beginning February 4, 2013. 
The text of the proposed rule change is below. Proposed new language is 
italicized.

7061. Limit Locator

    Limit Locator is a tool to assist a member firm in monitoring 
its trades reported into the FINRA/NASDAQ TRF for compliance with 
the requirements of the National Market System Plan to Address 
Extraordinary Market Volatility. The service provides a subscribing 
member firm with an overview of its trades reported at, or outside 
of, a designated Limit Up/Limit Down pricing band. The service will 
provide a total count of the subscribing member firm's trades in 
each category as well as present this information graphically, on a 
rolling month basis. A subscribing member firm is able to create 
custom emails alerts to notify users when a trade is reported at, or 
outside of, a Limit Up/Limit Down pricing band. Limit Locator is 
accessed through the NASDAQ Workstation or Weblink ACT 2.0 and is 
offered at no cost at this time.
* * * * *

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 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. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to adopt a new add on tool to the NASDAQ 
Workstation and/or Weblink ACT 2.0, Limit Locator, to assist a member 
firm in monitoring its trades reported into the FINRA/NASDAQ TRF 
(``TRF'') for compliance with the requirements of the National Market 
System Plan to Address Extraordinary Market Volatility (the 
``Plan'').\3\ The Plan provides a limit up/limit down mechanism 
designed to prevent trades in NMS securities from occurring outside of 
specified price bands. The bands will be set a percentage level above 
and below the average reference price of the security over the 
immediately preceding five-minute period, and are calculated on a 
continuous basis during regular trading hours. If the National Best 
Offer (``NBO'') equals the lower price band without crossing the NBO, 
or National Best Bid (``NBB'') equals the upper price band without 
crossing the NBB, then the stock will enter a limit state quotation 
period of 15 seconds during which no new reference prices or price 
bands will be calculated. A stock will exit the limit state when the 
entire size of all quotations are either executed or cancelled. If the 
limit state exists and trading continues to occur at the price band, or 
no trading occurs within the price band, for more than 15 second then a 
five minute trading pause will be enacted. The Plan requires that 
member firms establish, maintain, and enforce written policies and 
procedures that are reasonably designed to comply with the limit up-
limit down and trading pause requirements specified in the Plan.
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    \3\ On April 5, 2011, the Exchange, together with other self-
regulatory organizations, filed with the Commission a national 
market system plan to adopt a market-wide limit up/limit down system 
to reduce the negative impacts of sudden, unanticipated price 
movements in NMS Stocks, like that which was experienced on May 6, 
2010. Securities Exchange Act Release No. 64547 (May 25, 2011), 76 
FR 31647 (June 1, 2011) (File No. 4-631). The Plan was approved by 
the Commission on a pilot basis on May 31, 2012. Securities Exchange 
Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012).
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    NASDAQ is proposing to offer Limit Locator to member firms to 
assist them in monitoring compliance with the Plan by tracking trades 
reported to the TRF that occur at, or outside of, the limit up/limit 
down bands and providing notice thereof.\4\ A record will be displayed 
if Limit Locator finds that a trade was reported: at lower price band; 
at higher price band; outside lower price band; or outside lower price 
band [sic]. The service will provide a subscribing member firm with 
both daily trade data and 30 days of historical data, which will be 
available for export in CSV format. The information provided by the 
service is presented numerically as a running intra-day count of all 
trades that fit within each of the four categories, and presented 
graphically as daily totals on a rolling month basis. A subscribing 
member firm will also have the option to receive email alerts when a 
trade is reported to the TRF at, or outside of, a limit up/limit down 
band.
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    \4\ Limit Locator will help a subscribing member firm to 
identify trades reported to the TRF that occurred at or outside of 
the limit up/limit down bands, but will not prevent such trades from 
occurring. A member firm may use the information provided by Limit 
Locator to prevent additional violations of the Plan from occurring 
by taking corrective action, but use of Limit Locator does not 
satisfy a member firm's obligation under the Plan to establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to comply with the limit up/limit down and 
trading pause requirements.
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    On April 8, 2013, Phase I of the Plan will go into effect. Phase I 
of the Plan will apply only to Tier 1 NMS Stocks. To assist firms in 
preparing for the implementation of Phase I, the Security [sic] 
Information Processors will begin disseminating limit up/limit down 
information in select stocks on a test basis beginning February 4, 
2013. Accordingly, NASDAQ is proposing to offer Limit Locator on 
February 4, 2013 so that member firms may begin to use the tool 
concurrent with the availability of the limit up/limit down test data. 
The Exchange is proposing to offer Limit Locator at no cost to members 
at this time, but may assess a fee in the future. Any such fee would be 
filed with the Commission.

[[Page 9967]]

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\5\ which requires that the rules of an 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest; and 
are not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The Exchange believes the proposed rule 
change is consistent with these requirements because the proposed 
service provides a subscribing member firm with a useful monitoring and 
analytical tool with which it may determine where its TRF-reported 
trades are occurring in relation to the limit up/limit down bands, 
receive notice of trades that occurred at, or outside of, the limit up/
limit down bands, and conduct research using thirty days of historical 
data.
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    \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 
proposed service is designed to promote a competitive marketplace by 
promoting compliance with the Plan. In furtherance of that goal, the 
proposed service provides a subscribing member firm with a tool to 
identify orders reported to the TRF that fall at or outside of the 
limit up/limit down bands, and receive notice thereof. With that 
information, the member firm may take corrective action to avoid 
further violations of the Plan. Moreover, the proposed service will 
allow a subscribing member firm the ability to research its historical 
trades.

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 has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 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 under Rule 19b-4(f)(6) \8\ 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\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the Exchange to offer this service on February 4, 2013, the 
date that the markets will begin transmitting limit up/limit down data 
for select test securities and approximately two months prior to the 
Phase I Plan implementation date. By waiving the operative delay, 
member firms will be afforded additional time to subscribe to, and test 
adequately, the service. Accordingly, the Commission hereby grants the 
Exchange's request and designates the proposal operative upon 
filing.\10\
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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 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) of the Act \11\ 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 No. SR-NASDAQ-2013-020 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-2013-020. 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, 100 F Street NE., 
Washington, DC 20549, 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 office of the Exchange. All 
comments

[[Page 9968]]

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-2013-020 and should be 
submitted on or before March 5, 2013.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03100 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P