Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend NASDAQ Rule 4763, 37386-37388 [2011-15916]

Download as PDF 37386 Federal Register / Vol. 76, No. 123 / Monday, June 27, 2011 / Notices the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b– 4(f)(6) thereunder.13 FINRA has requested that the Commission waive the requirement that the rule change, by its terms, not become operative for 30 days after the date of the filing as set forth in Rule 19b–4(f)(6)(iii).14 FINRA believes that the proposed rule change should become operative on July 9, 2011, to avoid any lapse in the application of the rule. The Commission agrees that it is consistent with the protection of investors and the public interest to allow FINRA’s limited exemptive authority to grant relief to members that meet certain criteria from the OATS recording and reporting requirements to continue without a lapse. Therefore, the Commission hereby grants a waiver of the 30-day operative delay.15 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 12 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). Among other things, Rule 19b–4(f)(6)(iii) requires that a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission notes that FINRA has satisfied the pre-filing notice requirement. 14 17 CFR 240.19b–4(f)(6)(iii). 15 For the purposes only of waiving the operative delay of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). mstockstill on DSK4VPTVN1PROD with NOTICES 13 17 VerDate Mar<15>2010 16:51 Jun 24, 2011 Jkt 223001 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–FINRA–2011–029 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. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64715; File No. SR– NASDAQ–2011–084] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend NASDAQ Rule 4763 June 21, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 15, 2011, The NASDAQ Stock Market LLC (the ‘‘Exchange’’ or ‘‘NASDAQ’’) filed All submissions should refer to File with the Securities and Exchange Number SR–FINRA–2011–029. This file Commission (‘‘Commission’’) the number should be included on the proposed rule change as described in subject line if e-mail is used. To help the Items I and II below, which Items have Commission process and review your been substantially prepared by the comments more efficiently, please use Exchange. The Commission is only one method. The Commission will publishing this notice to solicit post all comments on the Commission’s comments on the proposed rule change Internet Web site (https://www.sec.gov/ from interested persons. rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s submission, all subsequent Statement of the Terms of the Substance amendments, all written statements of the Proposed Rule Change with respect to the proposed rule The Exchange is filing this proposed change that are filed with the rule change to amend NASDAQ Rule Commission, and all written 4763 to modify the Exchange’s communications relating to the procedures for early termination of the proposed rule change between the short sale price test restrictions of Rule Commission and any person, other than 201 of Regulation SHO. The text of the those that may be withheld from the proposed rule change is available at public in accordance with the https://nasdaq.cchwallstreet.com/, at provisions of 5 U.S.C. 552, will be NASDAQ’s principal office, and at the available for Web site viewing and Commission’s Public Reference Room. printing in the Commission’s Public II. Self-Regulatory Organization’s Reference Room, 100 F Street, NE., Statement of the Purpose of, and Washington, DC 20549, on official Statutory Basis for, the Proposed Rule business days between the hours of Change 10 a.m. and 3 p.m. Copies of such filing In its filing with the Commission, the also will be available for inspection and Exchange included statements copying at the principal office of concerning the purpose of and basis for FINRA. All comments received will be posted without change; the Commission the proposed rule change and discussed any comments it received on the does not edit personal identifying proposed rule change. The text of these information from submissions. You statements may be examined at the should submit only information that places specified in Item IV below. The you wish to make available publicly. All Exchange has prepared summaries, set submissions should refer to File forth in Sections A, B, and C below, of Number SR–FINRA–2011–029 and the most significant aspects of such should be submitted on or before statements. July 18, 2011. A. Self-Regulatory Organization’s For the Commission, by the Division of Statement of the Purpose of, and Trading and Markets, pursuant to delegated Statutory Basis for, the Proposed Rule authority.16 Change Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–15965 Filed 6–24–11; 8:45 am] BILLING CODE 8011–01–P 1. Purpose On February 26, 2010, the Commission adopted amendments to 1 15 16 17 PO 00000 CFR 200.30–3(a)(12). Frm 00075 Fmt 4703 Sfmt 4703 2 17 E:\FR\FM\27JNN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 27JNN1 Federal Register / Vol. 76, No. 123 / Monday, June 27, 2011 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES Rules 200(g) and 201 of Regulation SHO.3 The amendments became effective on May 10, 2010, and compliance was required by February 28, 2011.4 The amendments to Rule 201 require trading centers 5 such as NASDAQ to establish, maintain, and enforce certain written policies and procedures reasonably designed to comply with the rule.6 NASDAQ is proposing to amend NASDAQ Rule 4763 to modify the Exchange’s procedures for early termination of the short sale price test restrictions of Rule 201 based on a triggering transaction that another exchange or SRO has determined was a clearly erroneous execution pursuant to the rules of that exchange or SRO. Under NASDAQ Rule 4763(d), Duration of Short Sale Price Test, once triggered, the short sale price test restriction shall remain in effect until the next trading day when a national best bid for the covered security is calculated and disseminated on a current and continuing basis by a plan processor pursuant to an effective national market system plan,7 as provided for in Rule 201(b)(1)(ii) (the ‘‘Short Sale Period’’). The duration of the Short Sale Period may differ under two different scenarios provided for in Rule 4763.8 First, if the Exchange 3 See Securities Exchange Act Release No. 61595 (February 26, 2010), 75 FR 11232 (March 10, 2010) (File No. S7–08–09; Amendments to Regulation SHO) (‘‘Rule 201 Adopting Release’’). In the Rule 201 Adopting Release, the Commission also adopted amendments to Rule 200(g) of Regulation SHO to include a ‘‘short exempt’’ marking requirement. 17 CFR 242.200(g). 4 See Securities Exchange Act Release No. 63247 (November 4, 2010), 75 FR 68702 (November 9, 2010) (File No. S7–08–09). 5 Rule 201(a)(9) states the term ‘‘trading center’’ will have the same meaning as in Rule 600(b)(78). 17 CFR 242.201(a)(9). Rule 600(b)(78) of Regulation NMS defines a ‘‘trading center’’ as ‘‘a national securities exchange or national securities association that operates an SRO trading facility, an alternative trading system, an exchange market maker, an OTC market maker, or any other broker or dealer that executes orders internally by trading as principal or crossing orders as agent.’’ 17 CFR 242.600(b)(78). 6 See 17 CFR 242.201(b). As a general matter, Rule 201 requires trading centers to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution or display of a short sale order of a covered security at a price that is less than or equal to the current national best bid if the price of that covered security decreases by 10% or more from the covered security’s prior day’s closing price. 17 CFR 242.201(b)(1)(i). 7 See 17 CFR 242.201(b)(1)(ii). See also Division of Trading and Markets: Responses to Frequently Asked Questions Concerning Rule 201 of Regulation SHO, Q&A No. 2.1. 8 In addition, if the price of a covered security declines intra-day by at least 10% on a day on which the security is already subject to the short sale price test restriction of Rule 201, the restriction will be re-triggered and, therefore, will continue in VerDate Mar<15>2010 16:51 Jun 24, 2011 Jkt 223001 determines pursuant to NASDAQ Rule 4763(d)(1) that the short sale price test restriction for a covered security was triggered because of a clearly erroneous execution,9 NASDAQ may lift the short sale price test restriction before the Short Sale Period ends for covered securities for which the Exchange is the listing market.10 Second, if NASDAQ determines pursuant to NASDAQ Rule 4763(d)(2) that the prior day’s closing price for a covered security is incorrect in the System and resulted in an incorrect determination of the Trigger Price,11 the Exchange may correct the prior day’s NASDAQ official closing price and lift the short sale price test restriction before the Short Sale Period ends. For securities for which the Exchange is the listing market, NASDAQ Rule 4763 currently addresses only clearly erroneous triggering transactions deemed to be clearly erroneous executions under the Exchange’s rules, and does not address situations where another exchange or SRO determines, under its respective rules, that a triggering transaction was a clearly erroneous execution. To address this scenario, the Exchange proposes to amend NASDAQ Rule 4763(d) to provide that the Exchange may also lift the short sale price test restrictions before the Short Sale Period ends, for covered securities for which the Exchange is the listing market, if the Exchange has been informed by another exchange or SRO that a transaction in the covered security that occurred at the Trigger Price was a clearly erroneous execution, as determined by that exchange or SRO under its rules.12 effect for the remainder of that day and the following day. See Rule 201 Adopting Release, 75 FR at 11253, n. 290. In addition, Rule 201 does not place any limit on the frequency or number of times the circuit breaker can be re-triggered with respect to a particular stock. See Division of Trading and Markets: Responses to Frequently Asked Questions Concerning Rule 201 of Regulation SHO, Q&A No. 2.2. 9 See NASDAQ Rule 4762 which cross-references NASDAQ Rule 11890 for the standard of determining when a trade is ‘‘clearly erroneous.’’ The terms of a transaction executed on NASDAQ are ‘‘clearly erroneous’’ when there is an obvious error in any term, such as price, number of shares or other unit of trading, or identification of the security. A transaction made in clearly erroneous error and cancelled by both parties or determined by NASDAQ to be clearly erroneous will be removed from the consolidated tape. 10 See 17 CFR 242.201(a)(3). 11 The term ‘‘Trigger Price’’ is used in Rule 4763(b) to refer to a decrease of 10% or more in a security’s price from the security’s closing price on the listing market at the end of regular trading hours on the prior day. 12 The Exchange will only lift the short sale price test restrictions before the Short Sale Period ends under these circumstances when informed by another exchange or SRO that a triggering PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 37387 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,13 in general, and furthers the objectives of Section 6(b)(5) of the Act,14 in particular, in that it is designed to, among other things, prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The proposal is designed to refine the Exchange’s written policies and procedures reasonably designed to prevent the execution or display of a short sale order of a covered security in violation of the short sale price test restrictions established in NASDAQ Rule 4763 and Rule 201. To that end, the proposed rule change expands the ability of the Exchange, as a listing market, to lift short sale price test restrictions to include situations where the Exchange has been informed by another exchange or SRO that a transaction in the covered security that occurred at the Trigger Price was a clearly erroneous execution, as determined by that exchange or SRO under its rules. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. Rather, the change will promote greater competition by allowing NASDAQ to adopt functionality already in use at competing national securities exchanges. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has transaction has been determined to be a clearly erroneous execution under the rules of the exchange or SRO, consistent with the authority of that exchange or SRO for making such determinations. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(5). E:\FR\FM\27JNN1.SGM 27JNN1 37388 Federal Register / Vol. 76, No. 123 / Monday, June 27, 2011 / Notices become effective pursuant to Section 19(b)(3)(A) of the Act 15 and Rule 19b– 4(f)(6) thereunder.16 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. A proposed rule change filed under Rule 19b–4(f)(6) normally may not become operative prior to 30 days after the date of filing.17 However, Rule 19b– 4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest.18 NASDAQ has requested that the Commission waive the 30-day operative delay so that the proposed rule change may become effective and operative immediately upon filing, pursuant to Section 19(b)(3)(A) of the Act 19 and Rule 19b–4(f)(6) 20 thereunder. The Exchange believes that waiver of the delayed operative date is appropriate because the proposed rule change is consistent with the original objective of Rule 4763 (i.e., to permit the Exchange to lift the short sale price test restrictions before the end of a Short Sale Period in the event of a clearly erroneous triggering trade). Specifically, the current rule only addresses triggering transactions deemed to be clearly erroneous executions under the Exchange’s rules. The proposed change would permit the Exchange to lift the short sale price test restrictions before the Short Sale Period ends, for covered securities for which the Exchange is the listing market, if the Exchange has been informed by another exchange or SRO that a transaction in the covered security that occurred at the Trigger Price was a clearly erroneous execution, 15 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 17 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 19b–4(f)(6)(iii) requires that a self regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 18 Id. 19 15 U.S.C. 78s(b)(3)(A). 20 17 CFR 240.19b–4. mstockstill on DSK4VPTVN1PROD with NOTICES 16 17 VerDate Mar<15>2010 16:51 Jun 24, 2011 Jkt 223001 as determined by that exchange or SRO under its rules. The Exchange believes that this proposal is ‘‘non-controversial’’ because it merely seeks to implement additional protections against the triggering of short sale price test restrictions based on transactions determined by an exchange or SRO to be clearly erroneous executions under the rules of that exchange or SRO. For the foregoing reasons, this rule filing qualifies for immediate effectiveness as a ‘‘noncontroversial’’ rule change under paragraph (f)(6) of Rule 19b–4.21 The Commission has considered the Exchange’s request to waive the 30-day operative delay, and hereby grants the request.22 The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, as it will permit the Exchange to lift the short sale price test restrictions of Rule 201, in a covered security for which the Exchange is the listing market, when such restrictions were triggered by a transaction that another exchange or SRO has determined to be a clearly erroneous execution, under the rules of that exchange or SRO. For this reason, the Commission designates the proposed rule change to be operative upon filing. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for 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 such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2011–084, and should be submitted on or before July 18, 2011. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Cathy H. Ahn, Deputy Secretary. 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–2011–084 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2011–084. This file number should be included on the subject line if e-mail is used. 21 17 CFR 240.19b–4(f)(6). the purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 22 For PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 [FR Doc. 2011–15916 Filed 6–24–11; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–64713; File No. SR– NASDAQ–2011–082] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Align Certain Disclosure Requirements in Nasdaq’s Corporate Governance Rules with Similar Disclosure Requirements in the Commission’s Rules June 21, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 9, 2011, The NASDAQ Stock Market LLC (‘‘Nasdaq’’) filed with the Securities and Exchange Commission (‘‘Commission’’) 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\27JNN1.SGM 27JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 123 (Monday, June 27, 2011)]
[Notices]
[Pages 37386-37388]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15916]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64715; File No. SR-NASDAQ-2011-084]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Amend NASDAQ Rule 4763

June 21, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 15, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

The Exchange is filing this proposed rule change to amend NASDAQ
Rule 4763 to modify the Exchange's procedures for early termination of
the short sale price test restrictions of Rule 201 of Regulation SHO.
The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, and at the
Commission's Public Reference Room.

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

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
On February 26, 2010, the Commission adopted amendments to

[[Page 37387]]

Rules 200(g) and 201 of Regulation SHO.\3\ The amendments became
effective on May 10, 2010, and compliance was required by February 28,
2011.\4\ The amendments to Rule 201 require trading centers \5\ such as
NASDAQ to establish, maintain, and enforce certain written policies and
procedures reasonably designed to comply with the rule.\6\ NASDAQ is
proposing to amend NASDAQ Rule 4763 to modify the Exchange's procedures
for early termination of the short sale price test restrictions of Rule
201 based on a triggering transaction that another exchange or SRO has
determined was a clearly erroneous execution pursuant to the rules of
that exchange or SRO.
---------------------------------------------------------------------------

\3\ See Securities Exchange Act Release No. 61595 (February 26,
2010), 75 FR 11232 (March 10, 2010) (File No. S7-08-09; Amendments
to Regulation SHO) (``Rule 201 Adopting Release''). In the Rule 201
Adopting Release, the Commission also adopted amendments to Rule
200(g) of Regulation SHO to include a ``short exempt'' marking
requirement. 17 CFR 242.200(g).
\4\ See Securities Exchange Act Release No. 63247 (November 4,
2010), 75 FR 68702 (November 9, 2010) (File No. S7-08-09).
\5\ Rule 201(a)(9) states the term ``trading center'' will have
the same meaning as in Rule 600(b)(78). 17 CFR 242.201(a)(9). Rule
600(b)(78) of Regulation NMS defines a ``trading center'' as ``a
national securities exchange or national securities association that
operates an SRO trading facility, an alternative trading system, an
exchange market maker, an OTC market maker, or any other broker or
dealer that executes orders internally by trading as principal or
crossing orders as agent.'' 17 CFR 242.600(b)(78).
\6\ See 17 CFR 242.201(b). As a general matter, Rule 201
requires trading centers to establish, maintain, and enforce written
policies and procedures reasonably designed to prevent the execution
or display of a short sale order of a covered security at a price
that is less than or equal to the current national best bid if the
price of that covered security decreases by 10% or more from the
covered security's prior day's closing price. 17 CFR
242.201(b)(1)(i).
---------------------------------------------------------------------------

Under NASDAQ Rule 4763(d), Duration of Short Sale Price Test, once
triggered, the short sale price test restriction shall remain in effect
until the next trading day when a national best bid for the covered
security is calculated and disseminated on a current and continuing
basis by a plan processor pursuant to an effective national market
system plan,\7\ as provided for in Rule 201(b)(1)(ii) (the ``Short Sale
Period''). The duration of the Short Sale Period may differ under two
different scenarios provided for in Rule 4763.\8\ First, if the
Exchange determines pursuant to NASDAQ Rule 4763(d)(1) that the short
sale price test restriction for a covered security was triggered
because of a clearly erroneous execution,\9\ NASDAQ may lift the short
sale price test restriction before the Short Sale Period ends for
covered securities for which the Exchange is the listing market.\10\
Second, if NASDAQ determines pursuant to NASDAQ Rule 4763(d)(2) that
the prior day's closing price for a covered security is incorrect in
the System and resulted in an incorrect determination of the Trigger
Price,\11\ the Exchange may correct the prior day's NASDAQ official
closing price and lift the short sale price test restriction before the
Short Sale Period ends.
---------------------------------------------------------------------------

\7\ See 17 CFR 242.201(b)(1)(ii). See also Division of Trading
and Markets: Responses to Frequently Asked Questions Concerning Rule
201 of Regulation SHO, Q&A No. 2.1.
\8\ In addition, if the price of a covered security declines
intra-day by at least 10% on a day on which the security is already
subject to the short sale price test restriction of Rule 201, the
restriction will be re-triggered and, therefore, will continue in
effect for the remainder of that day and the following day. See Rule
201 Adopting Release, 75 FR at 11253, n. 290. In addition, Rule 201
does not place any limit on the frequency or number of times the
circuit breaker can be re-triggered with respect to a particular
stock. See Division of Trading and Markets: Responses to Frequently
Asked Questions Concerning Rule 201 of Regulation SHO, Q&A No. 2.2.
\9\ See NASDAQ Rule 4762 which cross-references NASDAQ Rule
11890 for the standard of determining when a trade is ``clearly
erroneous.'' The terms of a transaction executed on NASDAQ are
``clearly erroneous'' when there is an obvious error in any term,
such as price, number of shares or other unit of trading, or
identification of the security. A transaction made in clearly
erroneous error and cancelled by both parties or determined by
NASDAQ to be clearly erroneous will be removed from the consolidated
tape.
\10\ See 17 CFR 242.201(a)(3).
\11\ The term ``Trigger Price'' is used in Rule 4763(b) to refer
to a decrease of 10% or more in a security's price from the
security's closing price on the listing market at the end of regular
trading hours on the prior day.
---------------------------------------------------------------------------

For securities for which the Exchange is the listing market, NASDAQ
Rule 4763 currently addresses only clearly erroneous triggering
transactions deemed to be clearly erroneous executions under the
Exchange's rules, and does not address situations where another
exchange or SRO determines, under its respective rules, that a
triggering transaction was a clearly erroneous execution. To address
this scenario, the Exchange proposes to amend NASDAQ Rule 4763(d) to
provide that the Exchange may also lift the short sale price test
restrictions before the Short Sale Period ends, for covered securities
for which the Exchange is the listing market, if the Exchange has been
informed by another exchange or SRO that a transaction in the covered
security that occurred at the Trigger Price was a clearly erroneous
execution, as determined by that exchange or SRO under its rules.\12\
---------------------------------------------------------------------------

\12\ The Exchange will only lift the short sale price test
restrictions before the Short Sale Period ends under these
circumstances when informed by another exchange or SRO that a
triggering transaction has been determined to be a clearly erroneous
execution under the rules of the exchange or SRO, consistent with
the authority of that exchange or SRO for making such
determinations.
---------------------------------------------------------------------------

2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to, among
other things, prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, and, in general, to
protect investors and the public interest. The proposal is designed to
refine the Exchange's written policies and procedures reasonably
designed to prevent the execution or display of a short sale order of a
covered security in violation of the short sale price test restrictions
established in NASDAQ Rule 4763 and Rule 201. To that end, the proposed
rule change expands the ability of the Exchange, as a listing market,
to lift short sale price test restrictions to include situations where
the Exchange has been informed by another exchange or SRO that a
transaction in the covered security that occurred at the Trigger Price
was a clearly erroneous execution, as determined by that exchange or
SRO under its rules.
---------------------------------------------------------------------------

\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. Rather, the change
will promote greater competition by allowing NASDAQ to adopt
functionality already in use at competing national securities
exchanges.

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

Written comments were neither solicited nor received.

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

Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has

[[Page 37388]]

become effective pursuant to Section 19(b)(3)(A) of the Act \15\ and
Rule 19b-4(f)(6) thereunder.\16\
---------------------------------------------------------------------------

\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\17\
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest.\18\ NASDAQ has requested that the
Commission waive the 30-day operative delay so that the proposed rule
change may become effective and operative immediately upon filing,
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6)
\20\ thereunder. The Exchange believes that waiver of the delayed
operative date is appropriate because the proposed rule change is
consistent with the original objective of Rule 4763 (i.e., to permit
the Exchange to lift the short sale price test restrictions before the
end of a Short Sale Period in the event of a clearly erroneous
triggering trade). Specifically, the current rule only addresses
triggering transactions deemed to be clearly erroneous executions under
the Exchange's rules. The proposed change would permit the Exchange to
lift the short sale price test restrictions before the Short Sale
Period ends, for covered securities for which the Exchange is the
listing market, if the Exchange has been informed by another exchange
or SRO that a transaction in the covered security that occurred at the
Trigger Price was a clearly erroneous execution, as determined by that
exchange or SRO under its rules.
---------------------------------------------------------------------------

\17\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the date of filing
of the proposed rule change, or such shorter time as designated by
the Commission. The Exchange has satisfied this requirement.
\18\ Id.
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

The Exchange believes that this proposal is ``non-controversial''
because it merely seeks to implement additional protections against the
triggering of short sale price test restrictions based on transactions
determined by an exchange or SRO to be clearly erroneous executions
under the rules of that exchange or SRO. For the foregoing reasons,
this rule filing qualifies for immediate effectiveness as a
``noncontroversial'' rule change under paragraph (f)(6) of Rule 19b-
4.\21\
---------------------------------------------------------------------------

\21\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

The Commission has considered the Exchange's request to waive the
30-day operative delay, and hereby grants the request.\22\ The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it will permit the Exchange to lift the short sale price test
restrictions of Rule 201, in a covered security for which the Exchange
is the listing market, when such restrictions were triggered by a
transaction that another exchange or SRO has determined to be a clearly
erroneous execution, under the rules of that exchange or SRO. For this
reason, the Commission designates the proposed rule change to be
operative upon filing.
---------------------------------------------------------------------------

\22\ For the purposes only of waiving the 30-day operative delay
of this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2011-084 on the subject line.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2011-084. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for 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 such filing also will be available for inspection and copying at the
principal offices of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly.
All submissions should refer to File Number SR-NASDAQ-2011-084, and
should be submitted on or before July 18, 2011.
---------------------------------------------------------------------------

\23\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15916 Filed 6-24-11; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.