Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Exclude All Rights and Warrants from the Pilot Rule for Trading Pauses Due to Extraordinary Market Volatility, 74084-74086 [2011-30809]
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74084
Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
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.
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:
emcdonald on DSK5VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–NYSEAmex–2011–88 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 No.
SR–NYSEAmex–2011–88. This file
number should be included on the
subject line if email 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, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of 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–
NYSEAmex–2011–88 and should be
submitted on or before December 21,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–30806 Filed 11–29–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65814; File No. SR–
NASDAQ–2011–154]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to Exclude All
Rights and Warrants from the Pilot
Rule for Trading Pauses Due to
Extraordinary Market Volatility
November 23, 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 November
18, 2011, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by NASDAQ. The Commission is
publishing this notice 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
NASDAQ proposes to exclude all
rights and warrants from the pilot
trading pause process under Rule
4120(a)(11).
The text of the proposed rule change
is available from NASDAQ’s Web site at
https://nasdaq.cchwallstreet.com/
Filings/, at NASDAQ’s principal office,
and at the Commission’s Public
Reference Room, and https://
www.sec.gov.
18 17
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASDAQ included statements
concerning the purpose of and basis for
the proposed rule change 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.
NASDAQ 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ proposes to amend Rule
4120(a)(11) to exclude all rights and
warrants from the trading pause process
under the rule. The Commission
approved Rule 4120(a)(11) on a pilot
basis on June 10, 2010, together with the
analogous rules of other equity
exchanges (collectively with NASDAQ,
the ‘‘Exchanges’’) and FINRA, to
provide for trading pauses in individual
securities due to extraordinary market
volatility in all securities included
within the S&P 500 Index (‘‘S&P 500’’)
(the ‘‘Pause Pilot’’).3 NASDAQ noted in
its filing to adopt Rule 4120(a)(11) that
during the Pause Pilot period it would
continue to assess whether additional
securities need to be added and whether
the parameters of Rule 4120(a)(11)
would need to be modified to
accommodate trading characteristics of
different securities. The Exchanges and
FINRA subsequently received approval
to add to the Pause Pilot the securities
included in the Russell 1000 Index
(‘‘Russell 1000’’) and a specified list of
Exchange Traded Products (‘‘ETPs’’).4
3 The Commission approved the Pause Pilot for
all equities exchanges and FINRA. See Securities
Exchange Act Release No. 62252 (June 10, 2010), 75
FR 34186 (June 16, 2010) (File Nos. SR–BATS–
2010–014; SR–EDGA–2010–01; SR–EDGX–2010–01;
SR–BX–2010–037; SR–ISE–2010–48; SR–NYSE–
2010–39; SR–NYSEAmex-2010–46; SR–NYSEArca2010–41; SR–NASDAQ–2010–061; SR–CHX–2010–
10; SR–NSX–2010–05; and SR–CBOE–2010–047),
and Securities Exchange Act Release No. 62251
(June 10, 2010), 75 FR 34183 (June 16, 2010) (SR–
FINRA–2010–025).
4 The Commission approved the addition to the
Pause Pilot of the securities included in the Russell
1000 and ETPs, where applicable, for all equities
exchanges and FINRA. See Securities Exchange Act
Release No. 62884 (September 10, 2010), 75 FR
56618 (September 16, 2010) (File Nos. SR–BATS–
2010–018; SR–BX–2010–044; SR–CBOE–2010–065;
SR–CHX–2010–14; SR–EDGA–2010–05; SR–EDGX–
2010–05; SR–ISE–2010–66; SR–NASDAQ–2010–
079; SR–NYSE–2010–49; SR–NYSEAmex–2010–63;
E:\FR\FM\30NON1.SGM
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Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
emcdonald on DSK5VPTVN1PROD with NOTICES
On June 23, 2011, the Commission
approved proposed rule changes of the
Exchanges and FINRA to amend their
respective rules to expand the Pause
Pilot to include all remaining NMS
stocks (‘‘Phase III Securities’’), which
includes rights and warrants.5 Unlike
the original Pause Pilot securities,
amended Rule 4120(a)(11) applies wider
percentage price moves to the Phase III
Securities before a trading pause is
triggered.6 The changes to Rule
4120(a)(11) became effective on August
8, 2011.
The Exchanges and FINRA analyzed
the nature of the trading pauses
triggered since adoption of the Pause
Pilot and found that over 25% of such
pauses have occurred in rights and
warrants. Further, the Exchanges and
FINRA have experienced a significant
increase in trading pauses involving
rights and warrants since the
implementation of the Phase III
Securities, with such pauses
representing approximately 52% [sic]
all trading pauses occurring through the
end of August 2011. Rights and warrants
trade on equity exchanges, but are
closely related to call options. Rights
and warrants entitle owners to purchase
shares of stock at predetermined prices
subject to various timing and other
conditions. Like options, the price of
rights and warrants are affected by the
price of the underlying stock as well as
other factors, particularly the volatility
of the stock. As a consequence, the
prices of rights and warrants may move
more dramatically than the prices of the
SR–NYSEArca–2010–61; and SR–NSX–2010–08,
and Securities Exchange Act Release No. 62883
(September 10, 2010), 75 FR 56608 (September 16,
2010) (SR–FINRA–2010–033). NASDAQ submitted
a proposed rule change shortly after the addition of
the Russell 1000 securities and ETPs to extend the
operation of the Pause Pilot, which was set to
expire on December 10, 2010, until April 11, 2011.
See Securities Exchange Act Release No. 63505
(December 9, 2010), 75 FR 78302 (December 15,
2010) (SR–NASDAQ–2010–162). On March 31,
2011, NASDAQ submitted a proposed rule change
to further extend the Pause Pilot until the earlier of
August 11, 2011 or the date on which a limit up/
limit down mechanism to address extraordinary
market volatility, if adopted, applies. See Securities
Exchange Act Release No. 64174 (April 4, 2011), 76
FR 19819 (April 8, 2011) (SR–NASDAQ–2011–042).
On August 8, 2011, NASDAQ submitted a proposed
rule change to further extend the Pause Pilot until
January 31, 2012. See Securities Exchange Act
Release No. 65094 (August 10, 2011), 76 FR 50779
(August 16, 2011) (SR–NASDAQ–2011–115).
5 See Securities Exchange Act Release No. 64735
(June 23, 2011), 76 FR 38243 (June 29, 2011) (SR–
NASDAQ–2011–067, et al.).
6 Under amended Rule 4120(a)(11), a pause is
triggered by a 30% or more price move in a Phase
III Security priced at $1 or higher, and by a 50%
or more price move to such a security priced less
than $1. The price of a security is based on the
closing price on the previous trading day, or, if no
closing price exists, the last sale reported to the
Consolidated Tape on the previous trading day.
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underlying stocks even when the rights
and warrants (and the underlying stock)
are trading in an orderly manner. This
difference in trading behavior may
result in the rights and warrants
triggering the circuit breaker under Rule
4120(a)(11) and being subject to a
trading pause, even while the
underlying stock continues to trade.
This can be particularly true of rights
and warrants that have low prices. As
such, the Exchanges and FINRA have
determined to exclude rights and
warrants from the Pause Pilot, and
accordingly, NASDAQ is proposing to
amend Rule 4120(a)(11) to exclude
rights and warrants from the rule’s
application.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the Act,7
in general, and furthers the objectives of
Section 6(b)(5),8 in particular, in that it
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system. The proposed rule change also
is designed to support the principles of
Section 11A(a)(1) 9 of the Act in that it
seeks to ensure fair competition among
brokers and dealers and among
exchange markets. NASDAQ believes
that the proposed rule meets these
requirements because it excludes certain
securities from the rule’s coverage that
are prone to triggering pauses because of
their unique characteristics. These
securities are unique in that they may
move more dramatically than the prices
of the underlying stocks to which they
are related even when both securities
are trading in an orderly manner. As
such, the securities that are subject to
this proposal may trigger the circuit
breaker under Rule 4120(a)(11) and be
subject to a trading pause, even while
the underlying security continues to
trade. Although there is little benefit in
pausing trading in these securities, such
pauses sequester regulatory resources
that are better applied to the review of
trading pauses in other securities that
have a greater impact on the national
market system.
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 15 U.S.C. 78k–1(a)(1).
8 15
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74085
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.
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 10 and Rule
19b–4(f)(6) thereunder.11 Because the
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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 12 and Rule 19b–4(f)(6)(iii)
thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 15 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest.
Including rights and warrants in the
pilot program which may trigger a
circuit breaker and be subject to a
trading pause, even while the
10 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
12 15 U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s 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.
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
11 17
E:\FR\FM\30NON1.SGM
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74086
Federal Register / Vol. 76, No. 230 / Wednesday, November 30, 2011 / Notices
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, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of 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–
2011–154 and should be submitted on
or before December 21, 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 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.17
Kevin M. O’Neill,
Deputy Secretary.
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–NASDAQ–2011–154 on the
subject line.
emcdonald on DSK5VPTVN1PROD with NOTICES
underlying security continues to trade,
provides little benefit and has the
potential to create confusion among
investors. Excluding rights and warrants
from the pilot program should minimize
investor confusion that could result
from temporary trading pauses in these
securities. For this reason, the
Commission designates the proposed
rule change as operative upon the date
of this Notice.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.
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 No.
SR–NASDAQ–2011–154. This file
number should be included on the
subject line if email 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
16 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Mar<15>2010
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[FR Doc. 2011–30809 Filed 11–29–11; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–65816; File No. SR–BATS–
2011–048]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Modify Exchange Rule
11.18 Relating to Trading Pauses Due
to Extraordinary Market Volatility
November 23, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
22, 2011, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by 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 amend Rule
11.18, entitled ‘‘Trading Halts Due to
Extraordinary Market Volatility.’’
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Fmt 4703
Sfmt 4703
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 11.18 to exclude all rights and
warrants from the single stock circuit
breaker under the rule. The Commission
approved Rule 11.18(d) and
Interpretation and Policy .05 to Rule
11.18 (the ‘‘Trading Pause Rule’’) on a
pilot basis on June 10, 2010 to provide
for trading pauses in individual
securities due to extraordinary market
volatility (‘‘Trading Pause’’) in all
securities included within the S&P 500®
Index (‘‘S&P 500’’) (‘‘Pause Pilot’’).3 The
Exchange noted in its filing to adopt the
Trading Pause Rule that during the
Pause Pilot period it would continue to
assess whether additional securities
need to be added and whether the
parameters of Rule 11.18 would need to
be modified to accommodate trading
characteristics of different securities.
The Exchange subsequently received
approval to add to the Pause Pilot the
securities included in the Russell 1000®
Index (‘‘Russell 1000’’) and a specified
list of Exchange Traded Products
(‘‘ETPs’’).4
3 The Commission approved the Pause Pilot for
all equities exchanges and FINRA. See Securities
Exchange Act Release No. 62252 (June 10, 2010), 75
FR 34186 (June 16, 2010) (File Nos. SR–BATS–
2010–014; SR–EDGA–2010–01; SR–EDGX–2010–01;
SR–BX–2010–037; SR–ISE–2010–48; SR–NYSE–
2010–39; SR–NYSEAmex–2010–46; SR–NYSEArca–
2010–41; SR–NASDAQ–2010–061; SR–CHX–2010–
10; SR–NSX–2010–05; and SR–CBOE–2010–047)
and Securities Exchange Act Release No. 62251
(June 10, 2010), 75 FR 34183 (June 16, 2010) (SR–
FINRA–2010–025).
4 The Commission approved the addition to the
Pause Pilot of the securities included in the Russell
E:\FR\FM\30NON1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Notices]
[Pages 74084-74086]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30809]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65814; File No. SR-NASDAQ-2011-154]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Exclude All Rights and Warrants from the Pilot Rule for Trading Pauses
Due to Extraordinary Market Volatility
November 23, 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 November 18, 2011, The NASDAQ Stock Market LLC (``NASDAQ''), filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by NASDAQ. The Commission is publishing this notice
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 Substance
of the Proposed Rule Change
NASDAQ proposes to exclude all rights and warrants from the pilot
trading pause process under Rule 4120(a)(11).
The text of the proposed rule change is available from NASDAQ's Web
site at https://nasdaq.cchwallstreet.com/Filings/, at NASDAQ's principal
office, and at the Commission's Public Reference Room, and https://www.sec.gov.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ included statements
concerning the purpose of and basis for the proposed rule change 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. NASDAQ 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ proposes to amend Rule 4120(a)(11) to exclude all rights and
warrants from the trading pause process under the rule. The Commission
approved Rule 4120(a)(11) on a pilot basis on June 10, 2010, together
with the analogous rules of other equity exchanges (collectively with
NASDAQ, the ``Exchanges'') and FINRA, to provide for trading pauses in
individual securities due to extraordinary market volatility in all
securities included within the S&P 500 Index (``S&P 500'') (the ``Pause
Pilot'').\3\ NASDAQ noted in its filing to adopt Rule 4120(a)(11) that
during the Pause Pilot period it would continue to assess whether
additional securities need to be added and whether the parameters of
Rule 4120(a)(11) would need to be modified to accommodate trading
characteristics of different securities. The Exchanges and FINRA
subsequently received approval to add to the Pause Pilot the securities
included in the Russell 1000 Index (``Russell 1000'') and a specified
list of Exchange Traded Products (``ETPs'').\4\
---------------------------------------------------------------------------
\3\ The Commission approved the Pause Pilot for all equities
exchanges and FINRA. See Securities Exchange Act Release No. 62252
(June 10, 2010), 75 FR 34186 (June 16, 2010) (File Nos. SR-BATS-
2010-014; SR-EDGA-2010-01; SR-EDGX-2010-01; SR-BX-2010-037; SR-ISE-
2010-48; SR-NYSE-2010-39; SR-NYSEAmex-2010-46; SR-NYSEArca-2010-41;
SR-NASDAQ-2010-061; SR-CHX-2010-10; SR-NSX-2010-05; and SR-CBOE-
2010-047), and Securities Exchange Act Release No. 62251 (June 10,
2010), 75 FR 34183 (June 16, 2010) (SR-FINRA-2010-025).
\4\ The Commission approved the addition to the Pause Pilot of
the securities included in the Russell 1000 and ETPs, where
applicable, for all equities exchanges and FINRA. See Securities
Exchange Act Release No. 62884 (September 10, 2010), 75 FR 56618
(September 16, 2010) (File Nos. SR-BATS-2010-018; SR-BX-2010-044;
SR-CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-EDGX-2010-05;
SR-ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49; SR-NYSEAmex-
2010-63; SR-NYSEArca-2010-61; and SR-NSX-2010-08, and Securities
Exchange Act Release No. 62883 (September 10, 2010), 75 FR 56608
(September 16, 2010) (SR-FINRA-2010-033). NASDAQ submitted a
proposed rule change shortly after the addition of the Russell 1000
securities and ETPs to extend the operation of the Pause Pilot,
which was set to expire on December 10, 2010, until April 11, 2011.
See Securities Exchange Act Release No. 63505 (December 9, 2010), 75
FR 78302 (December 15, 2010) (SR-NASDAQ-2010-162). On March 31,
2011, NASDAQ submitted a proposed rule change to further extend the
Pause Pilot until the earlier of August 11, 2011 or the date on
which a limit up/limit down mechanism to address extraordinary
market volatility, if adopted, applies. See Securities Exchange Act
Release No. 64174 (April 4, 2011), 76 FR 19819 (April 8, 2011) (SR-
NASDAQ-2011-042). On August 8, 2011, NASDAQ submitted a proposed
rule change to further extend the Pause Pilot until January 31,
2012. See Securities Exchange Act Release No. 65094 (August 10,
2011), 76 FR 50779 (August 16, 2011) (SR-NASDAQ-2011-115).
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[[Page 74085]]
On June 23, 2011, the Commission approved proposed rule changes of
the Exchanges and FINRA to amend their respective rules to expand the
Pause Pilot to include all remaining NMS stocks (``Phase III
Securities''), which includes rights and warrants.\5\ Unlike the
original Pause Pilot securities, amended Rule 4120(a)(11) applies wider
percentage price moves to the Phase III Securities before a trading
pause is triggered.\6\ The changes to Rule 4120(a)(11) became effective
on August 8, 2011.
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\5\ See Securities Exchange Act Release No. 64735 (June 23,
2011), 76 FR 38243 (June 29, 2011) (SR-NASDAQ-2011-067, et al.).
\6\ Under amended Rule 4120(a)(11), a pause is triggered by a
30% or more price move in a Phase III Security priced at $1 or
higher, and by a 50% or more price move to such a security priced
less than $1. The price of a security is based on the closing price
on the previous trading day, or, if no closing price exists, the
last sale reported to the Consolidated Tape on the previous trading
day.
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The Exchanges and FINRA analyzed the nature of the trading pauses
triggered since adoption of the Pause Pilot and found that over 25% of
such pauses have occurred in rights and warrants. Further, the
Exchanges and FINRA have experienced a significant increase in trading
pauses involving rights and warrants since the implementation of the
Phase III Securities, with such pauses representing approximately 52%
[sic] all trading pauses occurring through the end of August 2011.
Rights and warrants trade on equity exchanges, but are closely related
to call options. Rights and warrants entitle owners to purchase shares
of stock at predetermined prices subject to various timing and other
conditions. Like options, the price of rights and warrants are affected
by the price of the underlying stock as well as other factors,
particularly the volatility of the stock. As a consequence, the prices
of rights and warrants may move more dramatically than the prices of
the underlying stocks even when the rights and warrants (and the
underlying stock) are trading in an orderly manner. This difference in
trading behavior may result in the rights and warrants triggering the
circuit breaker under Rule 4120(a)(11) and being subject to a trading
pause, even while the underlying stock continues to trade. This can be
particularly true of rights and warrants that have low prices. As such,
the Exchanges and FINRA have determined to exclude rights and warrants
from the Pause Pilot, and accordingly, NASDAQ is proposing to amend
Rule 4120(a)(11) to exclude rights and warrants from the rule's
application.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\7\ in general, and furthers the objectives of Section 6(b)(5),\8\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The proposed rule change also is
designed to support the principles of Section 11A(a)(1) \9\ of the Act
in that it seeks to ensure fair competition among brokers and dealers
and among exchange markets. NASDAQ believes that the proposed rule
meets these requirements because it excludes certain securities from
the rule's coverage that are prone to triggering pauses because of
their unique characteristics. These securities are unique in that they
may move more dramatically than the prices of the underlying stocks to
which they are related even when both securities are trading in an
orderly manner. As such, the securities that are subject to this
proposal may trigger the circuit breaker under Rule 4120(a)(11) and be
subject to a trading pause, even while the underlying security
continues to trade. Although there is little benefit in pausing trading
in these securities, such pauses sequester regulatory resources that
are better applied to the review of trading pauses in other securities
that have a greater impact on the national market system.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78k-1(a)(1).
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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.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Including rights and warrants in the pilot program which may trigger a
circuit breaker and be subject to a trading pause, even while the
[[Page 74086]]
underlying security continues to trade, provides little benefit and has
the potential to create confusion among investors. Excluding rights and
warrants from the pilot program should minimize investor confusion that
could result from temporary trading pauses in these securities. For
this reason, the Commission designates the proposed rule change as
operative upon the date of this Notice.\16\
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\16\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-NASDAQ-2011-154 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 No. SR-NASDAQ-2011-154. This file
number should be included on the subject line if email 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, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of 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-2011-154 and should be
submitted on or before December 21, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30809 Filed 11-29-11; 8:45 am]
BILLING CODE 8011-01-P
