Document ID: SEC-2013-0365-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-02-20T05:00Z

[Federal Register Volume 78, Number 34 (Wednesday, February 20, 2013)]
[Notices]
[Pages 11923-11925]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03817]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68917; File No. SR-NASDAQ-2013-026]

Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Pilot Period of the Trading Pause for Certain NMS Stocks

February 13, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 1, 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 extend the trading pause pilot in certain 
individual NMS stocks when the price moves ten percent or more in the 
preceding five minute period, so that the pilot will now expire on the 
earlier of the initial date of operations of the Regulation NMS Plan to 
Address Extraordinary Market Volatility or February 4, 2014. The 
Exchange will implement the proposed changes on February 4, 2013.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *

4120. Trading Halts

(a) Authority to Initiate Trading Halts or Pauses

    In circumstances in which Nasdaq deems it necessary to protect 
investors and the public interest, Nasdaq, pursuant to the 
procedures set forth in paragraph (c):
    (1)-(10) No change.
    (11) shall, between 9:45 a.m. and 3:35 p.m., or in the case of 
an early scheduled close, 25 minutes before the close of trading, 
immediately pause trading for 5 minutes in any Nasdaq-listed 
security, other than rights and warrants, when the price of such 
security moves a percentage specified below within a 5-minute 
period.
    (A) The price move shall be 10% or more with respect to 
securities included in the S&P 500[supreg] Index, Russell 
1000[supreg] Index, and a pilot list of Exchange Traded Products;
    (B) The price move shall be 30% or more with respect to all NMS 
stocks not subject to section (a)(11)(A) of this Rule with a price 
equal to or greater than $1; and
    (C) The price move shall be 50% or more with respect to all NMS 
stocks not subject to section (a)(11)(A) of this Rule with a price 
less than $1.
    The determination that the price of a stock is equal to or 
greater than $1 under paragraph (a)(11)(B) above or less than $1 
under paragraph (a)(11)(C) above shall be based on the last reported 
closing price on Nasdaq.
    At the end of the trading pause, Nasdaq will re-open the 
security using the Halt Cross process set forth in Nasdaq Rule 4753. 
In the event of a significant imbalance at the end of a trading 
pause, Nasdaq may delay the re-opening of a security.
    Nasdaq will issue a notification if it cannot resume trading for 
a reason other than a significant imbalance.
    Price 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. 
Only regular way in-sequence transactions qualify for use in 
calculations of price moves. Nasdaq can exclude a transaction price 
from use if it concludes that the transaction price resulted from an 
erroneous trade.
    If a trading pause is triggered under this paragraph, Nasdaq 
shall immediately notify the single plan processor responsible for 
consolidation of information for the security pursuant to Rule 603 
of Regulation NMS under the Securities Exchange Act of 1934. If a 
primary listing market issues an individual stock trading pause, 
Nasdaq will pause trading in that security until trading has resumed 
on the primary listing market or notice has been received from the 
primary listing market that trading may resume. If the primary 
listing market does not reopen within 10 minutes of notification of 
a trading pause, Nasdaq may resume trading the security.
    The provisions of this paragraph shall be in effect during a 
pilot set to end on the earlier of the initial date of operations of 
the Regulation NMS Plan to Address Extraordinary Market Volatility 
or February 4, 2014[3].

(b)-(c) No change.

* * * * *

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.

[[Page 11924]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On June 10, 2010, the Commission granted accelerated approval for a 
pilot period to end December 10, 2010, for a proposed rule change 
submitted by the Exchange, together with related rule changes of the 
BATS Exchange, Inc., NASDAQ OMX BX, Inc., Chicago Board Options 
Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, 
Inc., EDGX Exchange, Inc., International Securities Exchange LLC, New 
York Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT'') 
(formerly, NYSE Amex LLC), NYSE Arca, Inc. (``NYSE Arca''), and 
National Stock Exchange, Inc. (collectively, the ``Exchanges''), to 
pause trading during periods of extraordinary market volatility in S&P 
500 stocks.\3\ The rules require the Listing Markets \4\ to issue five-
minute trading pauses for individual securities for which they are the 
primary Listing Market if the transaction price of the security moves 
ten percent or more from a price in the preceding five-minute period. 
The Listing Markets are required to notify the other Exchanges and 
market participants of the imposition of a trading pause by immediately 
disseminating a special indicator over the consolidated tape. Under the 
rules, once the Listing Market issues a trading pause, the other 
Exchanges are required to pause trading in the security on their 
markets. On September 10, 2010, the Commission approved the respective 
rule filings of the Exchanges to expand application of the pilot to the 
Russell 1000[supreg] Index and specified Exchange Traded Products.\5\ 
On December 7, 2010, the Exchange filed an immediately effective filing 
to extend the existing pilot program for four months, so that the pilot 
would expire on April 11, 2011.\6\ On March 31, 2011, the Exchange 
filed an immediately effective filing to extend the pilot period an 
additional four months, so that the pilot would expire on August 11, 
2011 or the date on which a limit up/limit down mechanism to address 
extraordinary market volatility, if adopted, applies.\7\ On June 23, 
2011, the Commission approved the expansion of the pilot to all NMS 
stocks, but with different pause-triggering thresholds.\8\ On August 8, 
2011, the Exchange filed an immediately effective filing that removed 
language from the rule that tied the expiration of the pilot to the 
adoption of a limit up/limit down mechanism to address extraordinary 
market volatility, and further extended the pilot period, so that the 
pilot would expire on January 31, 2012.\9\ On November 18, 2011, the 
Exchange filed an immediately effective filing that excluded rights and 
warrants from the pilot.\10\ On January 23, 2012, the Commission 
approved an extension of the pilot to July 31, 2012.\11\
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    \3\ Securities Exchange Act Release No. 62252 (June 10, 2010), 
75 FR 34186 (June 16, 2010) (SR-NASDAQ-2010-061).
    \4\ The term ``Listing Markets'' refers collectively to NYSE, 
NYSE MKT, NYSE Arca, and the Exchange.
    \5\ Securities Exchange Act Release No. 62884 (September 10, 
2010), 75 FR 56618 (September 16, 2010) (SR-NASDAQ-2010-079).
    \6\ Securities Exchange Act Release No. 63505 (December 9, 
2010), 75 FR 78302 (December 15, 2010) (SR-NASDAQ-2010-162).
    \7\ Securities Exchange Act Release No. 64174 (April 4, 2011), 
76 FR 19819 (April 8, 2011) (SR-NASDAQ-2011-042).
    \8\ Securities Exchange Act Release No. 64735 (June 23, 2011), 
76 FR 38243 (June 29, 2011) (SR-NASDAQ-2011-067, et al.).
    \9\ Securities Exchange Act Release No. 65094 (August 10, 2011), 
76 FR 50779 (August 16, 2011) (SR-NASDAQ-2011-115).
    \10\ Securities Exchange Act Release No. 65814 (November 23, 
2011), 76 FR 74084 (November 30, 2011) (SR-NASDAQ-2011-154).
    \11\ Securities Exchange Act Release No. 66214 (January 23, 
2012), 77 FR 4593 (January 30, 2012) (SR-NASDAQ-2012-010).
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    On May 31, 2012, the Commission approved, on a pilot basis, the 
National Market System Plan to Address Extraordinary Market Volatility 
(the ``Plan'').\12\ This plan creates a market-wide limit up-limit down 
mechanism that is intended to address extraordinary market volatility 
in NMS Stocks, with a planned implementation date of February 4, 2013. 
Once implemented, the limit up/limit down mechanism to address 
extraordinary market volatility will render the current stock trading 
pause pilot duplicative and unnecessary. The Exchange filed a rule 
change proposal to extend the single stock trading pause pilot so that 
it will now expire on February 4, 2013, when the limit up/limit down 
mechanism to address extraordinary market volatility is to be 
implemented.\13\
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    \12\ Securities Exchange Act Release No. 67091 (May 31, 2012), 
77 FR 33498 (June 6, 2012).
    \13\ Securities Exchange Act Release No. 67535 (July 30, 2012), 
77 FR 46543 (August 3, 2012) (SR-NASDAQ-2012-087).
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    The Exchange, in conjunction with the Exchanges and FINRA, recently 
filed an amendment to the Plan to change the date of initial operations 
of the Plan from February 4, 2013 to April 8, 2013. Accordingly, the 
Exchange is proposing to extend the expiration of the trading pause 
pilot to the earlier of the initial date of operations of the Plan or 
February 4, 2014 to allow adequate time for the Plan's implementation. 
The Exchange believes that the pilot program has been successful in 
reducing the negative impacts of sudden, unanticipated price movements 
in the securities covered by the pilot. The Exchange also believes that 
an additional extension of the pilot is warranted so that it may 
continue to apply the circuit breaker to reduce the negative impacts of 
sudden, unanticipated price movements until it is replaced by the limit 
up/limit down mechanism.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\14\ 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 
Exchange believes that the change proposed herein meets these 
requirements in that it promotes uniformity across markets concerning 
decisions to pause trading in a security when there are significant 
price movements, which promotes just and equitable principles of trade 
and removes impediments to, and perfects the mechanism of, a free and 
open market and a national market system. Additionally, extension of 
the pilot until the earlier of the initial date of operations of the 
Plan or February 4, 2014 would allow the pilot to continue to operate 
without interruption while the Exchange and the Commission further 
assess the effect of the pilot on the marketplace or whether other 
initiatives should be adopted in lieu of the current pilot, which 
contributes to the protection of investors and the public interest.
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    \14\ 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 changes are being made to extend the operation of the trading 
pause pilot until the earlier of the initial date of operations of the 
Plan or February 4, 2014 would allow the pilot to continue to operate 
without interruption until implementation of the Plan, which 
contributes to the protection of investors and the public interest. 
Other competing equity exchanges are subject to the same trading pause 
requirements specified in

[[Page 11925]]

the Plan. Thus, the proposed changes will not impose any burden on 
competition while providing trading pause requirements specified in the 
Plan.

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 \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 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) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ 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 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 pilot program to continue uninterrupted. Accordingly, 
the Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.\19\
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ 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.

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-2013-026 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 Number SR-NASDAQ-2013-026. 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 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-2013-026 and should 
be submitted on or before March 13, 2013.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03817 Filed 2-19-13; 8:45 am]
BILLING CODE 8011-01-P