Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Amendment No. 3 to a Proposed Rule Change and Order Granting Accelerated Approval to the Proposed Rule Change, as Modified by Amendment Nos. 1 and 3, To Adopt Rule 4753(c) as a Six-Month Pilot in 100 NASDAQ-Listed Securities, 14699-14702 [2011-6171]
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Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Notices
worker adjustment assistance for
workers and former workers of Raleigh
Film and Television Studios, LLC, Los
Angeles, California.
Signed in Washington, DC, on this 4th day
of March 2011.
Del Min Amy Chen,
Certifying Officer, Office of Trade Adjustment
Assistance.
[FR Doc. 2011–6186 Filed 3–16–11; 8:45 am]
BILLING CODE 4510–FN–P
MERIT SYSTEMS PROTECTION
BOARD
I. CALL TO ORDER
II. Approval of the Minutes
III. Approval of the Minutes
IV. Summary Report of the Audit
Committee
V. Summary Report of the Finance,
Budget and Program Committee
VI. Summary Report of the Corporate
Administration Committee
VII. Financial Report & Budget
VIII. National Foreclosure Mitigation
Counseling (NFMC)
IX. Management Report
X. Strategic Plan
XI. Adjournment
Erica Hall,
Assistant Corporate Secretary.
Membership of the Merit Systems
Protection Board’s Performance
Review Board
AGENCY:
AGENDA:
[FR Doc. 2011–6345 Filed 3–15–11; 11:15 am]
BILLING CODE 7570–02–P
Merit Systems Protection
Board.
ACTION:
Notice.
Notice is hereby given of the
members of the Merit Systems
Protection Board’s Performance Review
Board.
DATES: March 17, 2011.
FOR FURTHER INFORMATION CONTACT:
Marion Hines, 202–254–4413.
SUPPLEMENTARY INFORMATION: The Merit
Systems Protection Board is publishing
the names of the new and current
members of the Performance Review
Board (PRB) as required by 5 U.S.C.
4314(c)(4). William D. Spencer,
currently a member of the PRB, will
serve as Chairman of the PRB. James M.
Eisenmann will serve as a new member
of the PRB, and William L. Boulden will
continue to serve as a member of the
PRB. Gail T. Lovelace of the General
Services Administration will continue
to serve as an advisory member of the
PRB.
SUMMARY:
Dated: March 14, 2011.
William D. Spencer,
Clerk of the Board.
[FR Doc. 2011–6239 Filed 3–16–11; 8:45 am]
BILLING CODE 7400–01–P
NEIGHBORHOOD REINVESTMENT
CORPORATION
Regular Board of Directors Meeting;
Sunshine Act
srobinson on DSKHWCL6B1PROD with NOTICES
TIME AND DATE:
11 a.m., Tuesday, March
22, 2011.
PLACE: 1325 G Street, NW., Suite 800,
Boardroom, Washington, DC 20005.
STATUS: Open.
CONTACT PERSON FOR MORE INFORMATION:
Erica Hall, Assistant Corporate
Secretary, (202) 220–2376;
ehall@nw.org.
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NUCLEAR REGULATORY
COMMISSION
[Docket Nos. 52–025 and 52–026; NRC–
2008–0252]
Southern Nuclear Operating Company;
Notice of Availability of Application for
a Combined License
On March 28, 2008, Southern Nuclear
Operating Company (SNC), acting on
behalf of itself and Georgia Power
Company, Oglethorpe Power
Corporation (an Electric Membership
Corporation), Municipal Electric
Authority of Georgia, and the City of
Dalton, Georgia, an incorporated
municipality in the State of Georgia
acting by and through its Board of
Water, Light and Sinking Fund
Commissioners (Dalton Utilities), herein
referred to as the applicant, filed with
the U.S. Nuclear Regulatory
Commission (NRC, the Commission)
pursuant to Section 103 of the Atomic
Energy Act and Title 10 of the Code of
Federal Regulations (10 CFR) Part 52,
‘‘Licenses, Certifications, and Approvals
for Nuclear Power Plants,’’ an
application for combined licenses
(COLs) for two AP1000 advanced
passive pressurized water reactors at the
Vogtle Electric Generating Plant (VEGP)
site located in Burke County, Georgia.
The reactors are to be identified as
VEGP Units 3 and 4. The application is
currently under review by the NRC staff.
An applicant may seek a COL in
accordance with Subpart C of 10 CFR
Part 52. The information submitted by
the applicant includes certain
administrative information, such as
financial qualifications submitted
pursuant to 10 CFR 52.77, as well as
technical information submitted
pursuant to 10 CFR 52.79. This notice
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14699
is being provided in accordance with
the requirements found in 10 CFR
50.43(a)(3).
A copy of the application is available
for public inspection at the
Commission’s Public Document Room
(PDR), located at One White Flint North,
Public File Area O1 F21, 11555
Rockville Pike (first floor), Rockville,
Maryland, and via the Agencywide
Documents Access and Management
System (ADAMS) Public Electronic
Reading Room on the Internet at the
NRC Web site, https://www.nrc.gov/
reading-rm/adams.html. The accession
number for the application cover letter
is ML081050133. Other publicly
available documents related to the
application, including revisions filed
after the initial submission, are also
posted in ADAMS. Persons who do not
have access to ADAMS, or who
encounter problems in accessing the
documents located in ADAMS, should
contact the NRC Public Document Room
staff by telephone at 1–800–397–4209 or
301–415–4737, or by e-mail to
pdr@nrc.gov. The application is also
available at https://www.nrc.gov/
reactors/new-reactors/col.html.
Dated at Rockville, Maryland, this 10th day
of March 2011.
For the Nuclear Regulatory Commission.
Ravindra Joshi,
Senior Project Manager, AP10000 Projects
Branch 1, Division of New Reactor Licensing,
Office of New Reactor.
[FR Doc. 2011–6219 Filed 3–16–11; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64071; File No. SR–
NASDAQ–2010–074]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Amendment No. 3 to a
Proposed Rule Change and Order
Granting Accelerated Approval to the
Proposed Rule Change, as Modified by
Amendment Nos. 1 and 3, To Adopt
Rule 4753(c) as a Six-Month Pilot in
100 NASDAQ-Listed Securities
March 11, 2011.
I. Introduction
On June 18, 2010, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’),1 and Rule 19b–4
1 15
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U.S.C. 78s(b)(1).
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Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Notices
thereunder,2 a proposed rule change to
implement, on a six-month pilot basis,
a volatility-based trading pause in 100
Nasdaq-listed securities (‘‘Volatility
Guard’’). On June 25, 2010, Nasdaq filed
Amendment No. 1 to the proposed rule
change. The proposed rule change, as
modified by Amendment No. 1, was
published for comment in the Federal
Register on July 15, 2010.3 The
Commission received four comment
letters on the proposal.4 Nasdaq
responded to these comments on August
12, 2010.5 The Commission
subsequently extended the time period
in which to either approve the proposed
rule change, or to institute proceedings
to determine whether to disapprove the
proposed rule change, to October 13,
2010.6 On October 13, 2010, the
Commission instituted proceedings to
determine whether to disapprove the
proposed rule change.7 The Commission
thereafter received a fifth comment
letter on the proposed rule change.8 On
January 10, 2011, the Commission
extended the time period within which
to either approve or disapprove the
proposed rule change to March 11,
2011.9 On March 10, 2011, the Exchange
filed Amendment Nos. 2 and 3 to the
proposed rule change.10 The
Commission is publishing this notice
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 62468
(July 7, 2010), 75 FR 41258.
4 See Letter from Joe Ratterman, Chairman and
Chief Executive Officer, BATS Global Markets, Inc.,
to Hon. Mary Schapiro, Chairman, Commission,
dated July 1, 2010 (‘‘BATS Letter’’); Letter from Jose
Marques, Managing Director, Deutsche Bank
Securities Inc., to Elizabeth M. Murphy, Secretary,
Commission, dated July 21, 2010 (‘‘Deutsche Bank
Letter’’); Letter from Janet M. Kissane, Senior Vice
President, Legal and Corporate Secretary, NYSE
Euronext, to Elizabeth Murphy, Secretary,
Commission, dated August 3, 2010 (‘‘NYSE Letter’’);
Letter from Ann L. Vlcek, Managing Director and
Associate General Counsel, Securities Industry and
Financial Markets Association, to Elizabeth M.
Murphy, Secretary, Commission, dated June 25,
2010 (‘‘SIFMA Letter’’).
5 See Letter from T. Sean Bennett, Assistant
General Counsel, Nasdaq, to Elizabeth M. Murphy,
Secretary, Commission (‘‘Nasdaq response’’).
6 See Securities Exchange Act Release No. 62740
(August 18, 2010), 75 FR 52049 (August 24, 2010).
7 See Securities Exchange Act Release No. 63098
(October 13, 2010), 75 FR 64384 (October 19, 2010).
8 See Letter from Timothy Quast, Managing
Director, Modern IR LLC, to Elizabeth M. Murphy,
Secretary, Commission, dated November 11, 2010
(‘‘Modern IR Letter’’).
9 See Securities Exchange Act Release No. 63685,
76 FR 2732 (January 14, 2011).
10 See Amendment No. 3 dated March 10, 2011
(‘‘Amendment No. 3’’). Amendment No. 3 replaces
and supersedes Amendment No. 2. Amendment
No. 3 extended the proposed start date of the pilot
program from August 1, 2010 to a pilot period
ending six months after the date of Commission
approval of SR–NASDAQ–2010–074. The Exchange
proposed to implement the rule change on a date
to be announced to the public through a widely
disseminated alert.
srobinson on DSKHWCL6B1PROD with NOTICES
3 See
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and order to solicit comments on
Amendment No. 3 and to approve the
proposed rule change, as modified by
Amendment Nos. 1 and 3, on an
accelerated basis.
II. Description of the Proposal
Nasdaq proposed to adopt, on a pilot
basis, a volatility-based trading halt for
100 Nasdaq-listed securities. Under this
proposal, Nasdaq would suspend
trading in a security if a trade in that
security is executed at a price that
exceeds a certain threshold, as
measured over the preceding 30
seconds. The triggering threshold varies
according to the price of the security,
i.e., 15% for securities with an
execution price of $1.75 and under;
10% for securities over $1.75 and up to
$25; 5% for securities over $25 and up
to $50; and 3% for securities over $50.
If the Volatility Guard were triggered,
Nasdaq would suspend trading in that
security for a period of 60 seconds, but
would maintain all current quotes and
orders during that time, and would
continue to accept quotes and orders.
Following this 60-second period,
Nasdaq would re-open the market using
its Halt Cross mechanism.11 According
to Nasdaq, the proposed Volatility
Guard is similar in purpose to the
Liquidity Replenishment Points
(‘‘LRPs’’) rules that currently exist on the
New York Stock Exchange (‘‘NYSE’’).12
III. Comment Letters
The Commission received four
comment letters opposing the proposed
rule change 13 and one comment letter
in favor of the proposed rule change.14
Nasdaq responded to the comments
regarding its proposal.15
Three of the four commenters
opposing the proposal expressed
concerns about its effect upon market
volatility. These commenters stated that
the Volatility Guard could actually
increase volatility marketwide by redirecting trading in a security to other
potentially less liquid venues once
trading in that security had been halted
on Nasdaq.16 One commenter
specifically argued that this proposal,
coupled with the LRPs currently in
effect on the NYSE, would result in
disparate market approaches towards
11 The Nasdaq Halt Cross is ‘‘the process for
determining the price at which Eligible Interest
shall be executed at the open of trading for a halted
security and for executing that Eligible Interest.’’
See Nasdaq Rule 4753(a)(3).
12 See NYSE Rule 1000(a)(iv).
13 See BATS Letter; Deutsche Bank Letter; SIFMA
Letter; Modern IR Letter.
14 See NYSE Letter.
15 See Nasdaq response, supra note 5.
16 See BATS Letter at 2; Deutsche Bank Letter at
4; SIFMA Letter at 3.
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dampening volatility that may create
confusion among market participants,
particularly in times of market stress,
and exacerbate market volatility.17
Another commenter argued that the
Volatility Guard would inappropriately
impede the market’s price-setting
mechanism, to the detriment of issuers
and investors.18
One commenter, however, supported
Nasdaq’s ‘‘right to design the controls it
believes are best for trading on its
market.’’ 19 This commenter stated that
the national market system was
designed to encourage competitive
distinctions such as Nasdaq’s Volatility
Guard and NYSE’s LRPs.20 According to
this commenter, both the Nasdaq
proposal and the NYSE LRPs ‘‘provide
certainty and predictability of
operation,’’ and permit those markets to
pursue strategies where the quality of
price need not always defer to speed of
execution.21
In its response, Nasdaq rejected the
argument that the proposed Volatility
Guard would exacerbate market
volatility.22 Nasdaq stated that it
specifically designed the proposed
Volatility Guard to work within the
parameters of the single-stock circuit
breaker pilot program currently in effect
across all markets, and to avoid the
potential for conflicting standards
between the two mechanisms.23 Nasdaq
also asserted that there is no evidence
that the proposed Volatility Guard
would increase volatility in a particular
security; rather, Nasdaq stated that the
Volatility Guard would actually keep
aberrant volatility on Nasdaq from
spreading to other markets.24
Nasdaq also argued that the proposed
Volatility Guard differed significantly
from the NYSE LRPs, and that
criticizing the Volatility Guard by
comparing it to the LRPs was
misleading. Nasdaq stated that the
Volatility Guard, unlike the LRPs,
would be based on clear and predictable
criteria that would trigger a pause only
in the event of a significant imbalance.25
Accordingly, Nasdaq did not believe it
appropriate to make a generic assertion
that all market-based single-stock
17 See
Deutsche Bank Letter at 4.
Modern IR Letter at 1–2.
19 See NYSE Letter at 2. In its comment letter,
NYSE also addressed what it perceived as Nasdaq’s
inaccurate description of the LRPs. NYSE provided
additional detail about the LRPs, the role of the
LRPs during the events of May 6, 2010, and the
interaction between LRPs and the single-stock
circuit breaker pilot program.
20 Id.
21 Id. at 3–4.
22 See Nasdaq response, supra note 5, at 2.
23 Id.
24 Id.
25 Id. at 3.
18 See
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Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Notices
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trading pauses are detrimental to the
overall market.26
Finally, Nasdaq stated that it was
proposing to employ prudent
precautions in implementing the
Volatility Guard. In particular, Nasdaq
would implement the Volatility Guard
as a pilot, limited in time and scope,
during which time the Volatility Guard
could be adjusted as needed. Nasdaq
would also provide data to the
Commission during the pilot period
about the efficiency and effect of the
Volatility Guard.27
IV. Discussion and Commission
Findings
After carefully considering the
proposal and the comments submitted,
the Commission finds that the proposed
rule change, as modified by Amendment
Nos. 1 and 3, is consistent with the
requirements of the Act and the rules
and regulations thereunder.28
Specifically, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,29 which
requires that the rules of an exchange be
designed, among other things, to
prevent fraudulent and manipulative
acts and practices, 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.
Nasdaq’s proposal is presented by the
Exchange as an effort to protect Nasdaqlisted securities and Nasdaq market
participants from aberrant volatility,
such as that witnessed on May 6, 2010.
According to Nasdaq, the Volatility
Guard is similar in purpose to the LRP
rules that currently exist on the NYSE.
A few commenters argued that
individual exchange-specific
mechanisms to moderate volatility may
in fact exacerbate the volatility of the
market overall, create confusion, and
complicate the operation of the marketwide single stock circuit breakers.30
However, the commenters opposing the
proposal did not provide data or other
evidence to support their contention. In
addition, the Commission notes that the
presence of another exchange-specific
volatility moderator, the NYSE LRPs,
was not found by the Report of the
Staffs of the Commodity Futures
Trading Commission and the
26 Id.
27 Id.
28 In approving this amendment, the Commission
has considered the proposed amendment’s impact
of efficiency, competition, and capital formation.
15 U.S.C. 78c(f).
29 15 U.S.C. 78f(b)(5).
30 See notes 16–17 supra and accompanying text.
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15:48 Mar 16, 2011
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Commission (the ‘‘May 6 Staff
Report’’) 31 to have caused or created the
broad-based liquidity crisis on that
day.32
Since the events of May 6, 2010, the
Commission has been working with the
exchanges and FINRA on a consistent
mechanism, applicable throughout the
U.S. markets, to moderate excessive
volatility in individual securities. On
June 10, 2010, the Commission
approved, on a pilot basis, circuit
breaker rules that pause trading for five
minutes in a security in the S&P 500
Index if its price moves ten percent or
more over a five-minute period.33 On
September 10, 2010, the circuit breaker
pilot was expanded to include securities
in the Russell 1000 Index and certain
exchange-traded products.34 The
Commission continues to work with the
exchanges and FINRA to assess the
operation of the circuit breaker pilot and
its possible expansion, as well as the
prospect of supplementing the circuit
breakers with ‘‘limit up/limit down’’
style trading parameters.
In light of the fact that the circuit
breaker mechanism in effect today
applies only to certain securities, and
that its operation currently is being
evaluated under the pilot, and in
recognition of the current existence of
NYSE’s LRPs, the Commission believes
there is continued room for
experimentation with certain exchangespecific volatility moderators.
Accordingly, the Commission today
finds that Nasdaq’s proposal to
implement the Volatility Guard for a
six-month pilot program in 100 Nasdaqlisted securities is consistent with the
Act.
The Commission emphasizes,
however, that it is continuing to work
diligently with the exchanges and
FINRA to develop an appropriate
consistent cross-market mechanism to
moderate excessive volatility that could
31 See Report of the Staffs of the CFTC and SEC
to the Joint Advisory Committee on Emerging
Regulatory Issues, ‘‘Findings Regarding the Market
Events of May 6, 2010’’, dated September 30, 2010.
32 Id. at 70. The May 6 Staff Report did note,
however, that the increasing number of LRPs being
triggered on NYSE underscored the severity of
market conditions as they were unfolding, and that
this additional ‘‘evidence’’ played into market
participants’ decisions to reduce liquidity, pause
trading, or withdraw from the markets. Id. at 70–
71.
33 See Securities Exchange Act Release Nos.
62251, 75 FR 34183 (June 16, 2010); 62252, 75 FR
34186 (June 16, 2010).
34 See Securities Exchange Act Release Nos.
62883, 75 FR 56608 (September 16, 2010); 62884,
75 FR 56618 (September 16, 2010). The circuit
breaker pilot currently is scheduled to end on April
11, 2011. See e.g., Securities Exchange Act Release
Nos. 63497 (December 9, 2010), 75 FR 56618
(December 15, 2010); 63503 (December 9, 2010), 75
FR 78316 (December 15, 2010).
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14701
be applied widely to individual
exchange-listed securities and to
address commenters’ concerns regarding
the complexity and potential confusion
of exchange-specific volatility
moderators. To the extent the
Commission approves such a
mechanism, whether it be an expanded
circuit breaker with a limit up/limit
down feature or otherwise, the
Commission may no longer be able to
find that exchange-specific volatility
moderators—including both Nasdaq’s
Volatility Guard and the NYSE’s LRPs—
are consistent with the Act.
V. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,35 for approving the proposed rule
change, as modified by Amendment
Nos. 1 and 3 thereto, prior to the 30th
day after the date of publication of
Amendment No. 3 in the Federal
Register. In Amendment No. 3, the
Exchange proposed to change the start
date of the pilot period from August 1,
2010 to a pilot period ending six months
after the date of Commission approval of
SR–NASDAQ–2010–074, because as
originally proposed, the pilot period
would have expired on February 1,
2011, which is prior to the
Commission’s approval date. By
granting accelerated approval, the pilot
program may be implemented without
delay. Accordingly, the Commission
finds that good cause exists to approve
the proposal, as modified by
Amendment Nos. 1 and 3, on an
accelerated basis.
VI. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 3 to
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–2010–074 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.
35 15
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U.S.C. 78s(b)(2).
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Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Notices
All submissions should refer to File
Number SR–NASDAQ–2010–074. 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
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 Web site viewing and
printing in the Commission’s Public
Reference Room, on official business
days between the hours of 10 a.m. and
3 p.m. Copies of the filing 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 No.
SR–NASDAQ–2010–074 and should be
submitted on or before April 7, 2011.
VII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,36 that the
proposed rule change (SR–NASDAQ–
2010–074), as modified by Amendment
Nos. 1 and 3, be, and hereby is,
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–6171 Filed 3–16–11; 8:45 am]
srobinson on DSKHWCL6B1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64075; File No. SR–Phlx–
2011–28]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
NASDAQ OMX PHLX LLC To Expand
the Number of Components in the
PHLX Oil Service SectorSM Known as
OSX SM, on Which Options Are Listed
and Traded
March 11, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on March 2,
2011, NASDAQ OMX PHLX LLC (‘‘Phlx’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘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 comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposal to expand the
number of components in the PHLX Oil
Service SectorSM (the ‘‘Index’’ or
‘‘OSXSM’’), on which options are listed
and traded, and the Index weighting
methodology [sic].3 No other changes
are made to the Index or the options
thereon.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.com/
NASDAQOMXPHLX/Filings/, 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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 PHLX Oil Service SectorSM may also be known
as PHLX Oil Service SectorSM Index or PHLX Oil
Service Index.
2 17
36 15
37 17
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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15:48 Mar 16, 2011
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forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposal is to
expand to thirty the number of
components in the PHLX Oil Service
SectorSM or OSXSM, on which options
are listed and traded, and change the
Index weighting methodology to
modified capitalization-weighted.4 No
other changes are made to the Index or
the options thereon.
OSXSM options subsequent to this
proposal will be identical to OSXSM
options that are currently listed and
trading except for the number of
components in and the weighting
methodology of the underlying Index;
and will trade pursuant to similar
contract specifications (updated
regarding components and weighting
methodology).5 The only post-proposal
difference in OSXSM options is that they
will overly [sic] an Index with thirty
components (the current Index has
fifteen components) that will be
modified capitalization-weighted (the
current Index is price-weighted).
Background
The Exchange currently has initial
listing and maintenance listing
standards for options on indexes in Rule
1009A that are designed to allow the
Exchange to list options on narrowbased indexes 6 and broad based
indexes7 pursuant to generic listing
standards (the ‘‘Index Listing
Standards’’).8 The PHLX Oil Service
4 The Exchange notes that changing the weighting
of the Index from price-weighting to modified
capitalization-weighting does not by itself require a
rule filing proposal because both weighting
methodologies are acceptable per the current
generic index listing standards found in Rule
1009A(b)(2). The weighting change is included in
this proposal only in conjunction with increasing
the number of Index components by more than the
amount indicated in Rule 1009A(c)(2), which
requires a rule filing proposal.
5 The contract specifications for OSXSM options
are available at https://www.nasdaqtrader.com/
micro.aspx?id=phlxsectorscontractspecs.
6 A narrow-based index or industry index is
defined as: An index designed to be representative
of a particular industry or a group of related
industries. The term ‘‘narrow-based index’’ includes
indices the constituents of which are all
headquartered within a single country. Rule
1000A(b)(12).
7 A broad-based index or market index is defined
as: An index designed to be representative of a
stock market as a whole or of a range of companies
in unrelated industries. Rule 1000A(b)(11).
8 Rule 1009A establishes generic listing standards
for options on narrow-based and broad-based
E:\FR\FM\17MRN1.SGM
17MRN1
]]>Agencies
[Federal Register Volume 76, Number 52 (Thursday, March 17, 2011)]
[Notices]
[Pages 14699-14702]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6171]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64071; File No. SR-NASDAQ-2010-074]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Amendment No. 3 to a Proposed Rule Change and Order
Granting Accelerated Approval to the Proposed Rule Change, as Modified
by Amendment Nos. 1 and 3, To Adopt Rule 4753(c) as a Six-Month Pilot
in 100 NASDAQ-Listed Securities
March 11, 2011.
I. Introduction
On June 18, 2010, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4
[[Page 14700]]
thereunder,\2\ a proposed rule change to implement, on a six-month
pilot basis, a volatility-based trading pause in 100 Nasdaq-listed
securities (``Volatility Guard''). On June 25, 2010, Nasdaq filed
Amendment No. 1 to the proposed rule change. The proposed rule change,
as modified by Amendment No. 1, was published for comment in the
Federal Register on July 15, 2010.\3\ The Commission received four
comment letters on the proposal.\4\ Nasdaq responded to these comments
on August 12, 2010.\5\ The Commission subsequently extended the time
period in which to either approve the proposed rule change, or to
institute proceedings to determine whether to disapprove the proposed
rule change, to October 13, 2010.\6\ On October 13, 2010, the
Commission instituted proceedings to determine whether to disapprove
the proposed rule change.\7\ The Commission thereafter received a fifth
comment letter on the proposed rule change.\8\ On January 10, 2011, the
Commission extended the time period within which to either approve or
disapprove the proposed rule change to March 11, 2011.\9\ On March 10,
2011, the Exchange filed Amendment Nos. 2 and 3 to the proposed rule
change.\10\ The Commission is publishing this notice and order to
solicit comments on Amendment No. 3 and to approve the proposed rule
change, as modified by Amendment Nos. 1 and 3, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62468 (July 7,
2010), 75 FR 41258.
\4\ See Letter from Joe Ratterman, Chairman and Chief Executive
Officer, BATS Global Markets, Inc., to Hon. Mary Schapiro, Chairman,
Commission, dated July 1, 2010 (``BATS Letter''); Letter from Jose
Marques, Managing Director, Deutsche Bank Securities Inc., to
Elizabeth M. Murphy, Secretary, Commission, dated July 21, 2010
(``Deutsche Bank Letter''); Letter from Janet M. Kissane, Senior
Vice President, Legal and Corporate Secretary, NYSE Euronext, to
Elizabeth Murphy, Secretary, Commission, dated August 3, 2010
(``NYSE Letter''); Letter from Ann L. Vlcek, Managing Director and
Associate General Counsel, Securities Industry and Financial Markets
Association, to Elizabeth M. Murphy, Secretary, Commission, dated
June 25, 2010 (``SIFMA Letter'').
\5\ See Letter from T. Sean Bennett, Assistant General Counsel,
Nasdaq, to Elizabeth M. Murphy, Secretary, Commission (``Nasdaq
response'').
\6\ See Securities Exchange Act Release No. 62740 (August 18,
2010), 75 FR 52049 (August 24, 2010).
\7\ See Securities Exchange Act Release No. 63098 (October 13,
2010), 75 FR 64384 (October 19, 2010).
\8\ See Letter from Timothy Quast, Managing Director, Modern IR
LLC, to Elizabeth M. Murphy, Secretary, Commission, dated November
11, 2010 (``Modern IR Letter'').
\9\ See Securities Exchange Act Release No. 63685, 76 FR 2732
(January 14, 2011).
\10\ See Amendment No. 3 dated March 10, 2011 (``Amendment No.
3''). Amendment No. 3 replaces and supersedes Amendment No. 2.
Amendment No. 3 extended the proposed start date of the pilot
program from August 1, 2010 to a pilot period ending six months
after the date of Commission approval of SR-NASDAQ-2010-074. The
Exchange proposed to implement the rule change on a date to be
announced to the public through a widely disseminated alert.
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II. Description of the Proposal
Nasdaq proposed to adopt, on a pilot basis, a volatility-based
trading halt for 100 Nasdaq-listed securities. Under this proposal,
Nasdaq would suspend trading in a security if a trade in that security
is executed at a price that exceeds a certain threshold, as measured
over the preceding 30 seconds. The triggering threshold varies
according to the price of the security, i.e., 15% for securities with
an execution price of $1.75 and under; 10% for securities over $1.75
and up to $25; 5% for securities over $25 and up to $50; and 3% for
securities over $50. If the Volatility Guard were triggered, Nasdaq
would suspend trading in that security for a period of 60 seconds, but
would maintain all current quotes and orders during that time, and
would continue to accept quotes and orders. Following this 60-second
period, Nasdaq would re-open the market using its Halt Cross
mechanism.\11\ According to Nasdaq, the proposed Volatility Guard is
similar in purpose to the Liquidity Replenishment Points (``LRPs'')
rules that currently exist on the New York Stock Exchange
(``NYSE'').\12\
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\11\ The Nasdaq Halt Cross is ``the process for determining the
price at which Eligible Interest shall be executed at the open of
trading for a halted security and for executing that Eligible
Interest.'' See Nasdaq Rule 4753(a)(3).
\12\ See NYSE Rule 1000(a)(iv).
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III. Comment Letters
The Commission received four comment letters opposing the proposed
rule change \13\ and one comment letter in favor of the proposed rule
change.\14\ Nasdaq responded to the comments regarding its
proposal.\15\
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\13\ See BATS Letter; Deutsche Bank Letter; SIFMA Letter; Modern
IR Letter.
\14\ See NYSE Letter.
\15\ See Nasdaq response, supra note 5.
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Three of the four commenters opposing the proposal expressed
concerns about its effect upon market volatility. These commenters
stated that the Volatility Guard could actually increase volatility
marketwide by re-directing trading in a security to other potentially
less liquid venues once trading in that security had been halted on
Nasdaq.\16\ One commenter specifically argued that this proposal,
coupled with the LRPs currently in effect on the NYSE, would result in
disparate market approaches towards dampening volatility that may
create confusion among market participants, particularly in times of
market stress, and exacerbate market volatility.\17\ Another commenter
argued that the Volatility Guard would inappropriately impede the
market's price-setting mechanism, to the detriment of issuers and
investors.\18\
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\16\ See BATS Letter at 2; Deutsche Bank Letter at 4; SIFMA
Letter at 3.
\17\ See Deutsche Bank Letter at 4.
\18\ See Modern IR Letter at 1-2.
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One commenter, however, supported Nasdaq's ``right to design the
controls it believes are best for trading on its market.'' \19\ This
commenter stated that the national market system was designed to
encourage competitive distinctions such as Nasdaq's Volatility Guard
and NYSE's LRPs.\20\ According to this commenter, both the Nasdaq
proposal and the NYSE LRPs ``provide certainty and predictability of
operation,'' and permit those markets to pursue strategies where the
quality of price need not always defer to speed of execution.\21\
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\19\ See NYSE Letter at 2. In its comment letter, NYSE also
addressed what it perceived as Nasdaq's inaccurate description of
the LRPs. NYSE provided additional detail about the LRPs, the role
of the LRPs during the events of May 6, 2010, and the interaction
between LRPs and the single-stock circuit breaker pilot program.
\20\ Id.
\21\ Id. at 3-4.
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In its response, Nasdaq rejected the argument that the proposed
Volatility Guard would exacerbate market volatility.\22\ Nasdaq stated
that it specifically designed the proposed Volatility Guard to work
within the parameters of the single-stock circuit breaker pilot program
currently in effect across all markets, and to avoid the potential for
conflicting standards between the two mechanisms.\23\ Nasdaq also
asserted that there is no evidence that the proposed Volatility Guard
would increase volatility in a particular security; rather, Nasdaq
stated that the Volatility Guard would actually keep aberrant
volatility on Nasdaq from spreading to other markets.\24\
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\22\ See Nasdaq response, supra note 5, at 2.
\23\ Id.
\24\ Id.
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Nasdaq also argued that the proposed Volatility Guard differed
significantly from the NYSE LRPs, and that criticizing the Volatility
Guard by comparing it to the LRPs was misleading. Nasdaq stated that
the Volatility Guard, unlike the LRPs, would be based on clear and
predictable criteria that would trigger a pause only in the event of a
significant imbalance.\25\ Accordingly, Nasdaq did not believe it
appropriate to make a generic assertion that all market-based single-
stock
[[Page 14701]]
trading pauses are detrimental to the overall market.\26\
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\25\ Id. at 3.
\26\ Id.
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Finally, Nasdaq stated that it was proposing to employ prudent
precautions in implementing the Volatility Guard. In particular, Nasdaq
would implement the Volatility Guard as a pilot, limited in time and
scope, during which time the Volatility Guard could be adjusted as
needed. Nasdaq would also provide data to the Commission during the
pilot period about the efficiency and effect of the Volatility
Guard.\27\
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\27\ Id.
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IV. Discussion and Commission Findings
After carefully considering the proposal and the comments
submitted, the Commission finds that the proposed rule change, as
modified by Amendment Nos. 1 and 3, is consistent with the requirements
of the Act and the rules and regulations thereunder.\28\ Specifically,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\29\ which requires that the rules of an
exchange be designed, among other things, to prevent fraudulent and
manipulative acts and practices, 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.
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\28\ In approving this amendment, the Commission has considered
the proposed amendment's impact of efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
\29\ 15 U.S.C. 78f(b)(5).
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Nasdaq's proposal is presented by the Exchange as an effort to
protect Nasdaq-listed securities and Nasdaq market participants from
aberrant volatility, such as that witnessed on May 6, 2010. According
to Nasdaq, the Volatility Guard is similar in purpose to the LRP rules
that currently exist on the NYSE. A few commenters argued that
individual exchange-specific mechanisms to moderate volatility may in
fact exacerbate the volatility of the market overall, create confusion,
and complicate the operation of the market-wide single stock circuit
breakers.\30\ However, the commenters opposing the proposal did not
provide data or other evidence to support their contention. In
addition, the Commission notes that the presence of another exchange-
specific volatility moderator, the NYSE LRPs, was not found by the
Report of the Staffs of the Commodity Futures Trading Commission and
the Commission (the ``May 6 Staff Report'') \31\ to have caused or
created the broad-based liquidity crisis on that day.\32\
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\30\ See notes 16-17 supra and accompanying text.
\31\ See Report of the Staffs of the CFTC and SEC to the Joint
Advisory Committee on Emerging Regulatory Issues, ``Findings
Regarding the Market Events of May 6, 2010'', dated September 30,
2010.
\32\ Id. at 70. The May 6 Staff Report did note, however, that
the increasing number of LRPs being triggered on NYSE underscored
the severity of market conditions as they were unfolding, and that
this additional ``evidence'' played into market participants'
decisions to reduce liquidity, pause trading, or withdraw from the
markets. Id. at 70-71.
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Since the events of May 6, 2010, the Commission has been working
with the exchanges and FINRA on a consistent mechanism, applicable
throughout the U.S. markets, to moderate excessive volatility in
individual securities. On June 10, 2010, the Commission approved, on a
pilot basis, circuit breaker rules that pause trading for five minutes
in a security in the S&P 500 Index if its price moves ten percent or
more over a five-minute period.\33\ On September 10, 2010, the circuit
breaker pilot was expanded to include securities in the Russell 1000
Index and certain exchange-traded products.\34\ The Commission
continues to work with the exchanges and FINRA to assess the operation
of the circuit breaker pilot and its possible expansion, as well as the
prospect of supplementing the circuit breakers with ``limit up/limit
down'' style trading parameters.
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\33\ See Securities Exchange Act Release Nos. 62251, 75 FR 34183
(June 16, 2010); 62252, 75 FR 34186 (June 16, 2010).
\34\ See Securities Exchange Act Release Nos. 62883, 75 FR 56608
(September 16, 2010); 62884, 75 FR 56618 (September 16, 2010). The
circuit breaker pilot currently is scheduled to end on April 11,
2011. See e.g., Securities Exchange Act Release Nos. 63497 (December
9, 2010), 75 FR 56618 (December 15, 2010); 63503 (December 9, 2010),
75 FR 78316 (December 15, 2010).
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In light of the fact that the circuit breaker mechanism in effect
today applies only to certain securities, and that its operation
currently is being evaluated under the pilot, and in recognition of the
current existence of NYSE's LRPs, the Commission believes there is
continued room for experimentation with certain exchange-specific
volatility moderators. Accordingly, the Commission today finds that
Nasdaq's proposal to implement the Volatility Guard for a six-month
pilot program in 100 Nasdaq-listed securities is consistent with the
Act.
The Commission emphasizes, however, that it is continuing to work
diligently with the exchanges and FINRA to develop an appropriate
consistent cross-market mechanism to moderate excessive volatility that
could be applied widely to individual exchange-listed securities and to
address commenters' concerns regarding the complexity and potential
confusion of exchange-specific volatility moderators. To the extent the
Commission approves such a mechanism, whether it be an expanded circuit
breaker with a limit up/limit down feature or otherwise, the Commission
may no longer be able to find that exchange-specific volatility
moderators--including both Nasdaq's Volatility Guard and the NYSE's
LRPs--are consistent with the Act.
V. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\35\ for approving the proposed rule change, as modified by
Amendment Nos. 1 and 3 thereto, prior to the 30th day after the date of
publication of Amendment No. 3 in the Federal Register. In Amendment
No. 3, the Exchange proposed to change the start date of the pilot
period from August 1, 2010 to a pilot period ending six months after
the date of Commission approval of SR-NASDAQ-2010-074, because as
originally proposed, the pilot period would have expired on February 1,
2011, which is prior to the Commission's approval date. By granting
accelerated approval, the pilot program may be implemented without
delay. Accordingly, the Commission finds that good cause exists to
approve the proposal, as modified by Amendment Nos. 1 and 3, on an
accelerated basis.
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\35\ 15 U.S.C. 78s(b)(2).
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VI. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 3
to 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-2010-074 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
[[Page 14702]]
All submissions should refer to File Number SR-NASDAQ-2010-074. 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 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 Web site viewing and
printing in the Commission's Public Reference Room, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing 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 No. SR-NASDAQ-2010-074 and should be submitted on or before April
7, 2011.
VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\36\ that the proposed rule change (SR-NASDAQ-2010-074), as
modified by Amendment Nos. 1 and 3, be, and hereby is, approved on an
accelerated basis.
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\36\ 15 U.S.C. 78s(b)(2).
\37\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6171 Filed 3-16-11; 8:45 am]
BILLING CODE 8011-01-P
