Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Adopt a Policy Relating to Its Treatment of Trade Reports That It Determines To Be Inconsistent With the Prevailing Market Retroactive to September 1, 2008, 155-158 [E8-31150]
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Federal Register / Vol. 74, No. 1 / Friday, January 2, 2009 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On December 22, 2008, the
Commission approved a rule filing
submitted by the Exchange in
connection with the Transaction 5
which included the Certificate of
Incorporation. The purpose of this rule
filing is to make technical changes to
the Certificate of Incorporation
necessary to permit the Exchange and
Holdings to effect the Transaction. The
Exchange is proposing to make
technical changes to the Certificate of
Incorporation: (1) Correct the date of
incorporation; (2) correct the address of
Holdings’ registered address in the state
of Delaware; and (3) adopt attestation
language on the signature page.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(1) that an exchange
be so organized so as to have the
capacity to be able to carry out the
purposes of the Exchange Act and to
comply, and (subject to any rule or
order of the Commission pursuant to
Section 17(d) or 19(g)(2) of the Exchange
Act) to enforce compliance by its
members and persons associated with
its members, with the provisions of the
Exchange Act, the rules and regulations
thereunder and the rules of the
exchange. The Exchange also believes
this proposed rule change furthers the
objective of Section 6(b)(5) that an
exchange have rules that, among other
things, are designed to remove
impediments to and perfect the
mechanism for a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. In particular, the
proposed rule change will allow the
Exchange to effect the Transaction,
which was approved by the Commission
on December 22, 2008.6
mstockstill on PROD1PC66 with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
5 Release No. 34–59135 (December 22, 2007); File
No. SR–ISE–2008–85.
6 See footnote 5.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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) of
the Act 7 and Rule 19b–4(f)(3) 8
thereunder. At any time within 60 days
of the filing of such 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2008–97 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street,
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2008–97. 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 (https://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 inspection and copying 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 ISE. 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–ISE–2008–97 and should be
submitted on or before January 23, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–31192 Filed 12–31–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59149; File No. SR–
NASDAQ–2008–101]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Adopt a Policy Relating to Its
Treatment of Trade Reports That It
Determines To Be Inconsistent With
the Prevailing Market Retroactive to
September 1, 2008
December 23, 2008.
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 December
19, 2008, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’) 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 Nasdaq. The Commission is
publishing this notice and order to
solicit comments on the proposed rule
change from interested persons.
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
7 15
U.S.C. 78s(b)(3)(A).
8 17 CFR 19b–4(f)(3).
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Federal Register / Vol. 74, No. 1 / Friday, January 2, 2009 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes that in conjunction
with its previous filing to adopt a policy
relating to its treatment of trade reports
that it determines to be inconsistent
with the prevailing market, to make
such policy retroactive to September 1,
2008. The Exchange does not expect
that the proposed rule change will have
any direct effect, or significant indirect
effect, on any other Exchange rule in
effect at the time of this filing.
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. The text of these
statements may be examined at the
places specified in Item III below, and
is set forth in Sections A, B, and C
below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
mstockstill on PROD1PC66 with NOTICES
1. Purpose
Trades in listed securities
occasionally occur at prices that deviate
from prevailing market prices and those
trades sometimes establish a high, low
or last sale price for a security that does
not reflect the true market for the
security. This filing, which is
substantially similar to the New York
Stock Exchange’s (‘‘NYSE’’) recent
filing, seeks to address such instances of
‘‘aberrant’’ trades.3
The Exchange proposes that its policy
in this regard shall be to contact the
listing exchange (if Nasdaq is not the
listing exchange) and other markets (in
the case of executions that take place
across multiple markets) to determine if
any erroneous trade reports were filed.
If not, or in the case of non-unlisted
trading privilege trades, if Nasdaq
determines the trade price of a trade
through Nasdaq is inconsistent with the
prevailing market for the security after
considering the factors outlined herein,
the Exchange may make the
determination to append an indicator
(an ‘‘Aberrant Report Indicator’’) to the
trade.
3 See Securities Exchange Act Release No. 58736
(October 6, 2008), 73 FR 60380 (October 10, 2008)
(SR–NYSE–2008–91). The Exchange notes that
these proposed policies relating to the Exchange’s
treatment of trade reports that it determines to be
inconsistent with the prevailing market are
substantially similar to the NYSE’s proposed
policies.
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Nasdaq trades stocks listed on its own
market and trades on an unlisted trading
privilege (‘‘UTP’’) basis securities listed
on other markets. Nasdaq operates the
securities information processor (‘‘SIP’’),
which processes trade and quote
information for the Nasdaq UTP Plan
(‘‘Nasdaq SIP’’). The Securities Industry
Automation Corporation (‘‘SIAC’’)
serves as the securities information
processor for the CTA Plan and
processes trade and quote information
for trades in non-Nasdaq listed
securities. The Nasdaq SIP and the
Consolidated Tape Association (‘‘CTA’’)
offer each participant in the Nasdaq
UTP and CTA Plan the discretion to
append to the Aberrant Report Indicator
to a trade report to indicate that the
market believes that the trade price in
a trade executed on that market does not
accurately reflect the prevailing market
for the security.4
During the course of surveillance by
the Exchange or as a result of
notification by another market, listed
company or market participant, the
Exchange may become aware of trade
prices that do not accurately reflect the
prevailing market for a security. In such
a case, the Exchange proposes to adopt
as policies that it:
i. May determine to append an
Aberrant Report Indicator to any trade
report with respect to any trade
executed on the Exchange that the
Exchange determines to be inconsistent
with the prevailing market; and
ii. Shall discourage vendors and other
data recipients from using prices to
which the Exchange has appended the
Aberrant Report Indicator in any
calculation of the high, low or last sale
price of a security.
The Exchange notes that although this
filing is substantially similar to the
NYSE’s recent filing, the NYSE filing
seeks retroactive application of their
proposal to January 1, 2007.5 Nasdaq
seeks retroactive application to
September 1, 2008 for this proposal.
This proposal applies the same
guidelines and considers the same
factors during the retroactive period as
set forth in Nasdaq’s companion filing,6
which is substantially identical to this
one except applicable to trades
following that filing’s immediate
effectiveness.
Retroactive application is warranted
in this instance given the
unprecedented market volatility and
4 The CTA recommends that data recipients
should exclude the price of any trade to which the
Aberrant Report Indicator has been appended from
any calculation of the high, low and last sale prices
for the security.
5 Supra note 3.
6 See SR–NASDAQ–2008–100.
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accurate trade reporting issues that all
market centers experienced beginning in
September 2008. Therefore, the
Exchange proposes it should be
permitted to act retroactively to append
the Aberrant Report Indicator to trades
that do not accurately reflect the
prevailing market for a security
commencing as of September 1, 2008.
The Exchange will urge vendors to
disclose the exclusion from high, low or
last sale price data of any trades with an
Aberrant Report Indicator and exclude
them from high, low or last sale price
information they disseminate and to
provide to data users an explanation of
the parameters used in the Exchange’s
aberrant trade policy. Upon initial
adoption of the Aberrant Report
Indicator, the Exchange will contact all
of its listed companies via a Head
Trader Alert to explain the aberrant
trade policy and that the underlying
trades remain valid and will clear. In
the event the trade relates to a Nasdaqlisted security, Nasdaq’s Market
Intelligence Desk will inform the
affected listed company that these are
still valid trades in that they were
executed and not unwound as in the
case of a clearly erroneous trade.
While SIAC, on behalf of the CTA
Plan, and the Nasdaq SIP, on behalf of
the Nasdaq UTP Plan, disseminate their
own calculations of high, low and last
sale prices, vendors and other data
recipients—and not the Exchange—
frequently determine their own
methodology by which they wish to
calculate high, low and last sale prices.
Therefore, the Exchange shall endeavor
to explain to those vendors and other
data recipients the deleterious effects
that can result from including in the
calculations a trade to which the
Aberrant Report Indicator has been
appended.
In making the determination to
append the Aberrant Report Indicator,
the Exchange shall consider all factors
related to a trade, including, but not
limited to, the following:
• Material news released for the
security;
• Suspicious trading activity;
• System malfunctions or
disruptions;
• Locked or crossed markets;
• A recent trading halt or resumption
of trading in the security;
• Whether the security is in its initial
public offering;
• Volume and volatility for the
security;
• Whether the trade price represents
a 52-week high or low for the security;
• Whether the trade price deviates
significantly from recent trading
patterns in the security;
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02JAN1
Federal Register / Vol. 74, No. 1 / Friday, January 2, 2009 / Notices
mstockstill on PROD1PC66 with NOTICES
• Whether the trade price reflects a
stock-split, reorganization or other
corporate action;
• The validity of consolidated tape
trades and quotes in comparison to
national best bids and offers; and
• The general volatility of market
conditions.
In determining whether trade prices
are inconsistent with the prevailing
market, the Exchange proposes that its
policy shall be to follow the following
general guidelines: The Exchange will
review whether a trade price does not
reflect the prevailing market for a
security if the trade occurs during
regular trading hours (i.e., 9:30 a.m. to
4 p.m.) and occurs at a price that
deviates from the ‘‘Reference Price’’ by
an amount that meets or exceeds the
following thresholds:
with the guidelines set forth above.
Where appropriate, the Exchange may
apply the Aberrant Report Indicator to
trades that were reported prior to the
adoption of this policy.
2. Statutory Basis
Nasdaq believes that the proposal is
consistent with Section 6(b) of the Act,7
in general, and Section 6(b)(5) of the
Act,8 in particular, in that it is designed
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.
Numerical
In particular, the Aberrant Report
Trade price
threshold
Indicator is consistent with the
(percent)
protection of investors and the public
Between $0 and $15.00 .......
7 interest in that the Exchange will seek
Between $15.01 and $50.00
5 to ensure a proper understanding of the
In excess of $50.00 ..............
3 Aberrant Report Indicator among
securities market participants by: (i)
The ‘‘Reference Price’’ refers to (a) if
Urging vendors to disclose the exclusion
the primary market for the security is
from high, low or last sale price data of
open at the time of the trade, the
any aberrant trades excluded from high,
national best bid or offer for the
low or last sale price information they
security, or (b) if the primary market for disseminate and to provide to data users
the security is not open at the time of
an explanation of the parameters used
the trade, the first executable quote or
in the Exchange’s aberrant trade policy;
print for the security on the primary
(ii) informing the affected listed
market after execution of the trade in
company each time the Exchange or
question. However, if the circumstances
another market appends the Aberrant
suggest that a different Reference Price
Report Indicator to a trade in a Nasdaqwould be more appropriate, the
listed stock; and (iii) reminding the
Exchange will use the different
users of the information that these are
Reference Price. For instance, if the
still valid trades in that they were
national best bid and offer for the
executed and not unwound as in the
security are so wide apart as to fail to
case of a clearly erroneous trade.
reflect the market for the security, the
B. Self-Regulatory Organization’s
Exchange might use as the Reference
Statement on Burden on Competition
Price a trade price or best bid or offer
that was available prior to the trade in
Nasdaq does not believe that the
question.
proposed rule change will impose any
If Nasdaq determines that a trade
burden on competition that is not
price does not reflect the prevailing
necessary or appropriate in furtherance
market for a security and the trade
of the purposes of the Act.
represented the last sale of the security
C. Self-Regulatory Organization’s
on the Exchange during a trading
Statement on Comments on the
session, the Exchange may also
Proposed Rule Change Received From
determine to remove that trade’s
Members, Participants or Others
designation as the last sale and the
preceding last sale eligible trade would
Written comments were neither
become the new last sale. Nasdaq may
solicited nor received.
do so either on the day of the trade or
III. Date of Effectiveness of the
at a later date, so as to provide
Proposed Rule Change and Timing for
reasonable time for the Exchange to
Commission Action
conduct due diligence regarding the
trade, including the consideration of
Within 35 days of the date of
input from markets and other market
publication of this notice in the Federal
participants.
7 15 U.S.C. 78f(b).
The Exchange proposes to use the
8 15 U.S.C. 78f(b)(5).
Aberrant Report Indicator in accordance
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157
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 the proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2008–101 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street,
NE., Washington, DC 20549–9303.
All submissions should refer to File
Number SR–NASDAQ–2008–101. 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 https://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 inspection and copying in
the Commission’s Public Reference
Room 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
offices of Nasdaq. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
E:\FR\FM\02JAN1.SGM
02JAN1
158
Federal Register / Vol. 74, No. 1 / Friday, January 2, 2009 / Notices
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–NASDAQ–2008–101 and
should be submitted on or before
January 23, 2009.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–31150 Filed 12–31–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt a
Policy Relating to Its Treatment of
Trade Reports That It Determines To
Be Inconsistent With the Prevailing
Market
December 23, 2008.
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 December
19, 2008, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’) 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 Nasdaq. Nasdaq has designated this
proposal as eligible for immediate
effectiveness pursuant to Exchange Act
Rule 19b–4(f)(6). The Commission is
publishing this notice and order to
solicit comments on the proposed rule
change from interested persons.
mstockstill on PROD1PC66 with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to adopt a policy
relating to its treatment of trade reports
that it determines to be inconsistent
with the prevailing market. The
Exchange does not expect that the
proposed rule change will have any
direct effect, or significant indirect
effect, on any other Exchange rule in
effect at the time of this filing.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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16:23 Dec 31, 2008
Jkt 217001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
[Release No. 34–59151; File No. SR–
NASDAQ–2008–100]
9 17
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of, and basis for, the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below, and
is set forth in Sections A, B, and C
below.
Trades in listed securities
occasionally occur at prices that deviate
from prevailing market prices and those
trades sometimes establish a high, low
or last sale price for a security that does
not reflect the true market for the
security. This filing, which is
substantially similar to the New York
Stock Exchange’s (‘‘NYSE’’) recent
filing, seeks to address such instances of
‘‘aberrant’’ trades.3
The Exchange proposes that its policy
in this regard shall be to contact the
listing exchange (if Nasdaq is not the
listing exchange) and other markets (in
the case of executions that take place
across multiple markets) to determine if
any erroneous trade reports were filed.
If not, or in the case of non-unlisted
trading privilege trades, if Nasdaq
determines the trade price is
inconsistent with the prevailing market
for the security after considering the
factors outlined herein, the Exchange
may make the determination to append
an indicator (an ‘‘Aberrant Report
Indicator’’) to the trade.
Nasdaq trades stocks listed on its own
market and trades on an unlisted trading
privilege (‘‘UTP’’) basis securities listed
on other markets. Nasdaq operates the
securities information processor (‘‘SIP’’),
which processes trade and quote
information for the Nasdaq UTP Plan
(‘‘Nasdaq SIP’’). The Securities Industry
Automation Corporation (‘‘SIAC’’)
serves as the securities information
processor for the CTA Plan and
processes trade and quote information.
The Nasdaq SIP and the Consolidated
Tape Association (‘‘CTA’’) offer each
participant in the Nasdaq UTP and CTA
3 See Securities Exchange Act Release No. 58736
(October 6, 2008), 73 FR 60380 (October 10, 2008)
(SR-NYSE–2008–91). The Exchange notes that these
proposed policies relating to the Exchange’s
treatment of trade reports that it determines to be
inconsistent with the prevailing market are
substantially similar to the NYSE’s proposed
policies.
PO 00000
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Fmt 4703
Sfmt 4703
Plan the discretion to append to the
Aberrant Report Indicator to a trade
report to indicate that the market
believes that the trade price in a trade
executed on that market does not
accurately reflect the prevailing market
for the security.4
During the course of surveillance by
the Exchange or as a result of
notification by another market, listed
company or market participant, the
Exchange may become aware of trade
prices that do not accurately reflect the
prevailing market for a security. In such
a case, the Exchange proposes to adopt
as policies that it:
i. May determine to append an
Aberrant Report Indicator to any trade
report with respect to any trade
executed on the Exchange that the
Exchange determines to be inconsistent
with the prevailing market; and
ii. Shall discourage vendors and other
data recipients from using prices to
which the Exchange has appended the
Aberrant Report Indicator in any
calculation of the high, low or last sale
price of a security.
The Exchange will urge vendors to
disclose the exclusion from high, low or
last sale price data of any trades with an
Aberrant Report Indicator and exclude
them from high, low or last sale price
information they disseminate and to
provide to data users an explanation of
the parameters used in the Exchange’s
aberrant trade policy. Upon initial
adoption of the Aberrant Report
Indicator, the Exchange will contact all
of its listed companies via a Head
Trader Alert to explain the aberrant
trade policy and that the underlying
trades remain valid and will clear. In
the event the trade relates to a Nasdaqlisted security, Nasdaq’s Market
Intelligence Desk will inform the
affected listed company that these are
still valid trades in that they were
executed and not unwound as in the
case of a clearly erroneous trade.
While SIAC, on behalf of the CTA
Plan, and the Nasdaq SIP, on behalf of
the Nasdaq UTP Plan, disseminate their
own calculations of high, low and last
sale prices, vendors and other data
recipients—and not the Exchange—
frequently determine their own
methodology by which they wish to
calculate high, low and last sale prices.
Therefore, the Exchange shall endeavor
to explain to those vendors and other
data recipients the deleterious effects
that can result from including in the
calculations a trade to which the
4 The CTA recommends that data recipients
should exclude the price of any trade to which the
Aberrant Report Indicator has been appended from
any calculation of the high, low and last sale prices
for the security.
E:\FR\FM\02JAN1.SGM
02JAN1
]]>Agencies
[Federal Register Volume 74, Number 1 (Friday, January 2, 2009)]
[Notices]
[Pages 155-158]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-31150]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59149; File No. SR-NASDAQ-2008-101]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt a Policy Relating to
Its Treatment of Trade Reports That It Determines To Be Inconsistent
With the Prevailing Market Retroactive to September 1, 2008
December 23, 2008.
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 December 19, 2008, The NASDAQ Stock Market LLC (``Nasdaq'') 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 Nasdaq. The Commission is publishing this notice
and order 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 proposes that in conjunction with its previous filing to
adopt a policy relating to its treatment of trade reports that it
determines to be inconsistent with the prevailing market, to make such
policy retroactive to September 1, 2008. The Exchange does not expect
that the proposed rule change will have any direct effect, or
significant indirect effect, on any other Exchange rule in effect at
the time of this filing.
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. The
text of these statements may be examined at the places specified in
Item III below, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Trades in listed securities occasionally occur at prices that
deviate from prevailing market prices and those trades sometimes
establish a high, low or last sale price for a security that does not
reflect the true market for the security. This filing, which is
substantially similar to the New York Stock Exchange's (``NYSE'')
recent filing, seeks to address such instances of ``aberrant''
trades.\3\
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\3\ See Securities Exchange Act Release No. 58736 (October 6,
2008), 73 FR 60380 (October 10, 2008) (SR-NYSE-2008-91). The
Exchange notes that these proposed policies relating to the
Exchange's treatment of trade reports that it determines to be
inconsistent with the prevailing market are substantially similar to
the NYSE's proposed policies.
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The Exchange proposes that its policy in this regard shall be to
contact the listing exchange (if Nasdaq is not the listing exchange)
and other markets (in the case of executions that take place across
multiple markets) to determine if any erroneous trade reports were
filed. If not, or in the case of non-unlisted trading privilege trades,
if Nasdaq determines the trade price of a trade through Nasdaq is
inconsistent with the prevailing market for the security after
considering the factors outlined herein, the Exchange may make the
determination to append an indicator (an ``Aberrant Report Indicator'')
to the trade.
Nasdaq trades stocks listed on its own market and trades on an
unlisted trading privilege (``UTP'') basis securities listed on other
markets. Nasdaq operates the securities information processor
(``SIP''), which processes trade and quote information for the Nasdaq
UTP Plan (``Nasdaq SIP''). The Securities Industry Automation
Corporation (``SIAC'') serves as the securities information processor
for the CTA Plan and processes trade and quote information for trades
in non-Nasdaq listed securities. The Nasdaq SIP and the Consolidated
Tape Association (``CTA'') offer each participant in the Nasdaq UTP and
CTA Plan the discretion to append to the Aberrant Report Indicator to a
trade report to indicate that the market believes that the trade price
in a trade executed on that market does not accurately reflect the
prevailing market for the security.\4\
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\4\ The CTA recommends that data recipients should exclude the
price of any trade to which the Aberrant Report Indicator has been
appended from any calculation of the high, low and last sale prices
for the security.
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During the course of surveillance by the Exchange or as a result of
notification by another market, listed company or market participant,
the Exchange may become aware of trade prices that do not accurately
reflect the prevailing market for a security. In such a case, the
Exchange proposes to adopt as policies that it:
i. May determine to append an Aberrant Report Indicator to any
trade report with respect to any trade executed on the Exchange that
the Exchange determines to be inconsistent with the prevailing market;
and
ii. Shall discourage vendors and other data recipients from using
prices to which the Exchange has appended the Aberrant Report Indicator
in any calculation of the high, low or last sale price of a security.
The Exchange notes that although this filing is substantially
similar to the NYSE's recent filing, the NYSE filing seeks retroactive
application of their proposal to January 1, 2007.\5\ Nasdaq seeks
retroactive application to September 1, 2008 for this proposal. This
proposal applies the same guidelines and considers the same factors
during the retroactive period as set forth in Nasdaq's companion
filing,\6\ which is substantially identical to this one except
applicable to trades following that filing's immediate effectiveness.
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\5\ Supra note 3.
\6\ See SR-NASDAQ-2008-100.
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Retroactive application is warranted in this instance given the
unprecedented market volatility and accurate trade reporting issues
that all market centers experienced beginning in September 2008.
Therefore, the Exchange proposes it should be permitted to act
retroactively to append the Aberrant Report Indicator to trades that do
not accurately reflect the prevailing market for a security commencing
as of September 1, 2008.
The Exchange will urge vendors to disclose the exclusion from high,
low or last sale price data of any trades with an Aberrant Report
Indicator and exclude them from high, low or last sale price
information they disseminate and to provide to data users an
explanation of the parameters used in the Exchange's aberrant trade
policy. Upon initial adoption of the Aberrant Report Indicator, the
Exchange will contact all of its listed companies via a Head Trader
Alert to explain the aberrant trade policy and that the underlying
trades remain valid and will clear. In the event the trade relates to a
Nasdaq-listed security, Nasdaq's Market Intelligence Desk will inform
the affected listed company that these are still valid trades in that
they were executed and not unwound as in the case of a clearly
erroneous trade.
While SIAC, on behalf of the CTA Plan, and the Nasdaq SIP, on
behalf of the Nasdaq UTP Plan, disseminate their own calculations of
high, low and last sale prices, vendors and other data recipients--and
not the Exchange--frequently determine their own methodology by which
they wish to calculate high, low and last sale prices. Therefore, the
Exchange shall endeavor to explain to those vendors and other data
recipients the deleterious effects that can result from including in
the calculations a trade to which the Aberrant Report Indicator has
been appended.
In making the determination to append the Aberrant Report
Indicator, the Exchange shall consider all factors related to a trade,
including, but not limited to, the following:
Material news released for the security;
Suspicious trading activity;
System malfunctions or disruptions;
Locked or crossed markets;
A recent trading halt or resumption of trading in the
security;
Whether the security is in its initial public offering;
Volume and volatility for the security;
Whether the trade price represents a 52-week high or low
for the security;
Whether the trade price deviates significantly from recent
trading patterns in the security;
[[Page 157]]
Whether the trade price reflects a stock-split,
reorganization or other corporate action;
The validity of consolidated tape trades and quotes in
comparison to national best bids and offers; and
The general volatility of market conditions.
In determining whether trade prices are inconsistent with the
prevailing market, the Exchange proposes that its policy shall be to
follow the following general guidelines: The Exchange will review
whether a trade price does not reflect the prevailing market for a
security if the trade occurs during regular trading hours (i.e., 9:30
a.m. to 4 p.m.) and occurs at a price that deviates from the
``Reference Price'' by an amount that meets or exceeds the following
thresholds:
------------------------------------------------------------------------
Numerical
Trade price threshold
(percent)
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Between $0 and $15.00................................... 7
Between $15.01 and $50.00............................... 5
In excess of $50.00..................................... 3
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The ``Reference Price'' refers to (a) if the primary market for the
security is open at the time of the trade, the national best bid or
offer for the security, or (b) if the primary market for the security
is not open at the time of the trade, the first executable quote or
print for the security on the primary market after execution of the
trade in question. However, if the circumstances suggest that a
different Reference Price would be more appropriate, the Exchange will
use the different Reference Price. For instance, if the national best
bid and offer for the security are so wide apart as to fail to reflect
the market for the security, the Exchange might use as the Reference
Price a trade price or best bid or offer that was available prior to
the trade in question.
If Nasdaq determines that a trade price does not reflect the
prevailing market for a security and the trade represented the last
sale of the security on the Exchange during a trading session, the
Exchange may also determine to remove that trade's designation as the
last sale and the preceding last sale eligible trade would become the
new last sale. Nasdaq may do so either on the day of the trade or at a
later date, so as to provide reasonable time for the Exchange to
conduct due diligence regarding the trade, including the consideration
of input from markets and other market participants.
The Exchange proposes to use the Aberrant Report Indicator in
accordance with the guidelines set forth above. Where appropriate, the
Exchange may apply the Aberrant Report Indicator to trades that were
reported prior to the adoption of this policy.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act,\7\ in general, and Section 6(b)(5) of the Act,\8\ in
particular, in that it is designed 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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In particular, the Aberrant Report Indicator is consistent with the
protection of investors and the public interest in that the Exchange
will seek to ensure a proper understanding of the Aberrant Report
Indicator among securities market participants by: (i) Urging vendors
to disclose the exclusion from high, low or last sale price data of any
aberrant trades excluded from high, low or last sale price information
they disseminate and to provide to data users an explanation of the
parameters used in the Exchange's aberrant trade policy; (ii) informing
the affected listed company each time the Exchange or another market
appends the Aberrant Report Indicator to a trade in a Nasdaq-listed
stock; and (iii) reminding the users of the information that these are
still valid trades in that they were executed and not unwound as in the
case of a clearly erroneous trade.
B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq 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 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
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 the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2008-101 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-9303.
All submissions should refer to File Number SR-NASDAQ-2008-101. 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 https://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 inspection
and copying in the Commission's Public Reference Room 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 offices of Nasdaq. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only
[[Page 158]]
information that you wish to make available publicly.
All submissions should refer to File Number SR-NASDAQ-2008-101 and
should be submitted on or before January 23, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-31150 Filed 12-31-08; 8:45 am]
BILLING CODE 8011-01-P
