Document ID: SEC-2010-0760-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2010-05-24T04:00Z

[Federal Register: May 24, 2010 (Volume 75, Number 99)]
[Notices]               
[Page 28845-28847]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my10-100]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62131; File No. SR-NSX-2010-05]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing of a Proposed Rule Change To Establish a Trading Halt 
for Individual Stocks Contained in the Standard & Poor's 500 Index That 
Experience a 10 Percent Price Change of 10% or More During a Five-
Minute Period Pursuant to Exchange Rule 11.20

May 19, 2010.
    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 May 18, 2010, National Stock Exchange, Inc. 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 the Exchange. The Commission is publishing this notice 
to solicit comment 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

    National Stock Exchange, Inc. (``NSX[supreg]'' or the ``Exchange'') 
is proposing to establish a trading halt for individual stocks 
contained in the Standard & Poor's 500 Index (``S&P 500'') that 
experience a price change of 10% or more during a five-minute period.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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 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 parts of such 
statements.

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

Purpose
    The Exchange proposes to add NSX Rule 11.20B to provide for a 
trading pause for individual securities for which the Exchange is the 
primary listing market if the price of such security moves 10% or more 
from a sale in a preceding five-minute period. The Exchange is 
proposing this rule addition in consultation with other listing markets 
and staff of the Securities and Exchange Commission to provide for 
uniform market-wide trading pause standards for individual securities 
in the S&P 500[supreg] Index (for which the Exchange is the primary 
listing market) that experience rapid price movement, as set forth 
below (``Circuit Breaker Securities''). Consistent with the other 
markets, the Exchange is proposing that this rule be implemented as a 
six-month pilot so that all of the markets may assess the effect of 
this rule proposal on the national market system.
    As proposed, Rule 11.20B would enable the Exchange to pause trading 
in an individual security that is primary listed [sic] on the Exchange 
(a ``Listed Circuit Breaker Security'') if the price moves by 10% as 
compared to prices of that security in the preceding five-minute period 
during a trading day, which period is defined as a ``Trading Pause.'' 
To enable the market to absorb the opening price of a security and to 
participate in the close, as proposed, the proposed rule would be in 
effect from 9:45 a.m. to 3:35 p.m., Eastern time (all times referenced 
in the Rule have now been converted to reflect Eastern time).
    Proposed Rule 11.20B(b) sets forth the re-opening procedures of a 
Listed Circuit Breaker Security following a Trading Pause. As proposed, 
the Exchange will re-open trading in the Listed Circuit Breaker 
Security at the end of the Trading Pause subject to Exchange 
procedures. As proposed, in the event of a significant imbalance, the 
Exchange may delay the re-opening of the security past the five-minute 
Trading Pause period. The Exchange will notify other markets if it 
cannot reopen because of system changes, thereby enabling other market 
to resume

[[Page 28846]]

trading even if the primary listing market has not re-opened.
    The 10% or more move in price will be calculated by comparing the 
last consolidated sale price of a Listed Circuit Breaker Security 
(``Trigger Trade'') to a reference price every second. For purposes of 
this calculation, the reference price shall be any transaction in that 
security printed to the Consolidated Tape during a five-minute period 
before the Trigger Trade. Because the calculation period begins at 9:45 
a.m., trades occurring after 9:45 a.m. may be a Trigger Trade; however, 
the reference price(s) for such Trigger Trades will begin at 9:45 a.m. 
In such case, in the first five minutes of the calculation period, the 
reference prices for a Trigger Trade will not be based on five minutes 
of trading in that security. For example, a trade at 9:45:05 will be 
compared only to trades between 9:45:00 and 9:45:05. The last potential 
Trigger Trade will be at 3:35 p.m., so that such Trading Pause will end 
at 3:40 p.m.
    As proposed, only regular way, in-sequence transactions qualify as 
either a Trigger Trade or a reference price. To ensure that erroneous 
executions do not trigger a Trading Pause, the Exchange also proposes 
that it can exclude a transaction price from use as a reference price 
or Trigger Trade if it concludes that the transaction price resulted 
from an erroneous trade.
    The proposed rule further provides that if a Trading Pause is 
triggered for a Listed Circuit Breaker Security, the Exchange will 
immediately notify the single plan processor responsible for 
consolidation of information for the security.
    In addition, proposed Rule 11.20B(f) would allow the Exchange to 
pause trading in an individual security when the primary listing market 
for such security issues a trading pause in any Circuit Breaker 
Security. If, however, trading has not resumed on the primary listing 
market and ten minutes have passed since the individual security 
trading pause message has been received from the responsible single 
plan processor, the Exchange may resume trading in such security.
    The proposed rule would apply to trading pauses issued by primary 
listing markets in ``Circuit Breaker Securities,'' as defined in 
proposed Commentary .05. Specifically, on a pilot basis, set to end on 
December 10, 2010, Circuit Breaker Securities would mean the securities 
included in the S&P 500[supreg] Index. Thus, proposed Rule 11.20B would 
be in effect only with respect to securities in the S&P 500[supreg] 
Index.
    In addition to proposing the addition of new Rule 11.20B, the text 
of the prior Rule 11.20 would be reformatted to make clear that newly 
formatted Rule 11.20A applies to market-wide halts whereas proposed new 
Rule 11.20B applies to individual security pauses. The time periods 
specified in Rule 11.20A are also revised to make Eastern time the 
uniform time zone referenced in the rule. Further, the text of Rule 
11.20A(d) is proposed to be moved to a new Rule 11.20C to make clear 
that the NSX book is cleared of all outstanding orders in the context 
of both individual security pauses and market-wide halts. Similarly, 
the commentary to Rule 11.20 is proposed to be edited in conformity 
with the edits proposed elsewhere in the rule. As proposed, nothing in 
the rule would be construed to affect or limit in any way the ability 
of the Exchange to halt or suspend trading n [sic] one or more 
securities pursuant to any other Exchange rule or policy.
Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\3\ 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 
proposed rule change also is designed to support the principles of 
Section 11A(a)(1) \4\ of the Act in that it seeks to assure fair 
competition among brokers and dealers and among exchange markets. The 
Exchange believes that the proposed rule meets these requirements in 
that it promotes transparency and uniformity across markets concerning 
decisions to pause trading in a security when there are significant 
price movements.
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    \3\ 15 U.S.C. 78f(b)(5).
    \4\ 15 U.S.C. 78k-1(a)(1).
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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 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.\5\
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    \5\ The Commission notes that the exchange has requested 
accelerated approval of the filing.
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NSX-2010-05 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 20549-9303.

All submissions should refer to File No. SR-NSX-2010-05. This file 
number should be included in the subject line if e-mail is used. To 
help the Commission process and review 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

[[Page 28847]]

Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of 
such filings will also 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-NSX-2010-05 and should be submitted on or before June 3, 
2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to the delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12424 Filed 5-21-10; 8:45 am]
BILLING CODE 8010-01-P