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]

Download as PDF 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. VerDate Mar<15>2010 15:48 Mar 16, 2011 Jkt 223001 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 PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 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, http://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 http://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 E:\FR\FM\17MRN1.SGM U.S.C. 78s(b)(1). 17MRN1 14700 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 VerDate Mar<15>2010 15:48 Mar 16, 2011 Jkt 223001 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. PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 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 E:\FR\FM\17MRN1.SGM 17MRN1 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Notices srobinson on DSKHWCL6B1PROD with NOTICES 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. VerDate Mar<15>2010 15:48 Mar 16, 2011 Jkt 223001 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). PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 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 (http://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 E:\FR\FM\17MRN1.SGM U.S.C. 78s(b)(2). 17MRN1 14702 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 (http://www.sec.gov/rules/ sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 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 http:// 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). VerDate Mar<15>2010 15:48 Mar 16, 2011 Jkt 223001 PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

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 (http://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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 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