Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4120 To Adopt a Modification in the Process for Initiating Trading of a Security That Is the Subject of a Trading Halt or Pause on NASDAQ, 29187-29190 [2013-11733]
Download as PDF
Federal Register / Vol. 78, No. 96 / Friday, May 17, 2013 / Notices
wreier-aviles on DSK5TPTVN1PROD with NOTICES
will also be collected on a same-day
basis and DTC is adding language to the
Settlement Service Guide in this regard.
In addition, DTC is adding language to
the Settlement Service Guide to clarify
that the relevant Guide provisions shall
apply only to the calculation and
collection of DTC Participants Fund
deposits, as described in the Guide, and
do not supersede or limit any provisions
of the DTC Rules or any rights of DTC
in accordance with applicable law and
DTC’s Rules and Procedures, including
but not limited to transactions in
securities and money payments.
Finally, DTC is making certain
clarifying and technical changes to the
language as set forth in the ‘‘Participants
Fund’’ section of its Settlement Service
Guide, including (i) updating the
description of the purpose of the
Participants Fund, (ii) updating the use
of defined terms, such as ‘‘Participant,’’
and (iii) updating and adding subject
headings.
III. Discussion
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.10
Section 17A(b)(3)(F) of the Act requires
that, among other things, ‘‘[t]he rules of
the clearing agency are designed to
promote the prompt and accurate
clearance and settlement of securities
transactions and . . . to assure the
safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible.’’ 11 Furthermore,
Commission Rule 17Ad–22(d)(11)
regarding default procedures, adopted
as part of the Clearing Agency
Standards,12 requires that registered
clearing agencies ‘‘establish, implement,
maintain and enforce written policies
and procedures reasonably designed to,
as applicable: . . . establish default
procedures that ensure that the clearing
agency can take timely action to contain
losses and liquidity pressures and to
continue meeting its obligations in the
event of a participant default.’’13
Here, as described above, DTC’s
proposed rule change to accelerate
collection of increases in Participants’
Required Participants Fund Deposits in
certain circumstances from two business
10 15
U.S.C. 78(s)(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
12 Release No. 34–68080 (Oct. 22, 2012), 77 FR
66219 (Nov. 2, 2012).
13 17 CFR 240.17Ad–22(d)(11).
11 15
VerDate Mar<15>2010
15:20 May 16, 2013
Jkt 229001
days to the same day that the Participant
is notified of the increase should,
generally, help further safeguard the
securities and settlement process as a
whole, as required by Section
17A(b)(3)(F) of the Act,14 since DTC will
have access to the required funds,
which are calculated by an established
formula, more quickly. More
specifically, this rule change should
help improve DTC’s ability to take
timely action to contain losses and
liquidity pressures and to continue
meeting its obligations in the event of a
Participant default, as required by
Commission Rule 17Ad–22(d)(11),15 by
providing DTC with funds likely
necessary to contain such losses and
liquidity pressures in the event of a
defaulting Participant.
IV. Conclusion
On the basis of the foregoing, the
Commission finds the Proposed Rule
Change is consistent with the
requirements of the Act, particularly
with the requirements of Section 17A of
the Act,16 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,17 that the
proposed rule change SR–DTC–2013–01
be and hereby is approved.18
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–11758 Filed 5–16–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69563; File No. SR–
NASDAQ–2013–073]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
4120 To Adopt a Modification in the
Process for Initiating Trading of a
Security That Is the Subject of a
Trading Halt or Pause on NASDAQ
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
14 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(d)(11).
16 15 U.S.C. 78q–1.
17 15 U.S.C. 78s(b)(2).
18 In approving the Proposed Rule Change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
19 17 CFR 200.30–3(a)(12).
15 17
Frm 00077
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 29,
2013, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or ‘‘Exchange’’) 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
NASDAQ proposes to amend Rule
4120 to adopt a modification in the
process for initiating trading of a
security that is the subject of a trading
halt or pause on NASDAQ, and to make
several additional modifications to Rule
4120 to clarify the conditions under
which NASDAQ will conduct a halt
cross. NASDAQ proposes to implement
the proposed rule change on a date that
is on, or shortly after, the 30th day
following the date of the filing. The text
of the proposed rule change is available
on the Exchange’s Web site at https://
www.nasdaq.cchwallstreet.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. 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
May 13, 2013.
PO 00000
29187
Fmt 4703
Sfmt 4703
In 2012, NASDAQ modified its
process for commencing trading of a
security that is the subject of an initial
public offering (an ‘‘IPO’’) on NASDAQ
by allowing market participants to enter
orders to be held in an undisplayed
state until the commencement of the
Display-Only Period that occurs prior to
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\17MYN1.SGM
17MYN1
wreier-aviles on DSK5TPTVN1PROD with NOTICES
29188
Federal Register / Vol. 78, No. 96 / Friday, May 17, 2013 / Notices
the IPO.3 NASDAQ is now proposing a
similar change with regard to entering
orders prior to the end of other trading
halts or pauses on NASDAQ. Rule
4120(a) describes the circumstances
under which NASDAQ has the authority
to initiate a trading halt. As detailed in
Rule 4120(a), the specific bases for a
halt include the following:
• A halt to permit the dissemination
of material news with respect to a
NASDAQ-listed security (Rule
4120(a)(1));
• a halt when a security listed on
another national securities exchange is
halted to permit dissemination of news
(Rule 4120(a)(2)) or due to an order
imbalance or influx (Rule 4120(a)(3));
• a halt in an American Depository
Receipt (‘‘ADR’’) or other security listed
on Nasdaq, when the Nasdaq-listed
security or the security underlying the
ADR is listed on or registered with
another national or foreign securities
exchange or market, and the regulatory
authority overseeing such exchange or
market halts trading in such security for
regulatory reasons (Rule 4120(a)(4));
• a halt when Nasdaq requests from
the issuer information relating to
material news or the issuer’s ability to
meet Nasdaq listing qualification
requirements, or any other information
necessary to protect investors and the
public interest (Rule 4120(a)(5));
• a halt trading in a security listed on
NASDAQ when extraordinary market
activity in the security is occurring,
NASDAQ determines that the activity is
likely to have a material effect on the
market for the security, and NASDAQ
believes that the activity is caused by
the misuse or malfunction of an
electronic quotation, communication,
reporting, or execution system (Rule
4120(a)(6));
• a halt with respect to an index
warrant when deemed appropriate in
the interests of a fair and orderly market
and to protect investors (Rule
4120(a)(8));
• a halt in a series of Portfolio
Depository Receipts, Index Fund Shares
or Managed Fund Shares listed on
Nasdaq if the Intraday Indicative Value
or the index value applicable to that
series is not being disseminated as
required (Rule 4120(a)(9));
• a halt in a Derivative Securities
Product (as defined in Rule
4120(b)(4)(A)) for which a net asset
value (‘‘NAV’’) or a Disclosed Portfolio
is disseminated if Nasdaq becomes
aware that the NAV or Disclosed
Portfolio is not being disseminated to all
3 Securities Exchange Act Release No. 66652
(March 23, 2012), 77 FR 13129 (March 29, 2012)
(SR–NASDAQ–2012–038).
VerDate Mar<15>2010
15:20 May 16, 2013
Jkt 229001
market participants at the same time
(Rule 4120(a)(10));
• a trading pause with respect to
NASDAQ-listed stocks that are not
subject to the Limit Up-Limit Down
Plan 4 and that are experiencing certain
large price movements, as defined by
Rule 4120(a)(11), or with respect to a
NASDAQ-listed stock that is subject to
the Limit Up-Limit Down Plan and that
is in a ‘‘straddle state,’’ as defined by
Rule 4120(a)(12)(F); and
• a trading halt in a Derivative
Security Product traded pursuant to
unlisted trading privileges for which a
‘‘Required Value,’’ such as an intraday
indicative value or disclosed portfolio,
is not being disseminated, under the
conditions described in Rule 4120(b).5
Rule 4120(c)(7) provides that in the
case of a halt under Rule 4120(a)(1), (4),
(5), (6), (9), (10), or (11), or Rule 4120(b),
prior to terminating the halt, there is a
5-minute Display-Only Period during
which market participants may enter
quotes and orders into the NASDAQ
Market Center. At the conclusion of the
Display-Only Period, trading
commences through the halt cross
process provided for in Rule 4753.6
However, if at the end of a Display-Only
Period, NASDAQ detects an order
imbalance in the security, the halt may
be extended for an additional DisplayOnly Period of one minute. NASDAQ
notes that the purpose of the halt cross
is to establish a consensus price for the
resumption of trading of securities for
which NASDAQ is the primary listing
market. Accordingly, NASDAQ does not
believe that it is warranted to conduct
a halt cross for securities listed on other
exchanges. Accordingly, NASDAQ is
removing the reference to Rule 4120(b)
from Rule 4120(c)(7), since Rule 4120(b)
pertains solely to halts of securities
traded on an unlisted traded privileges
(‘‘UTP’’) basis. In addition, since halts
under Rule 4120(a)(10) may pertain
either to securities listed on NASDAQ
4 Plan to Address Extraordinary Market Volatility
Submitted to the Commission Pursuant to Rule 608
of Regulation NMS under the Act, Securities
Exchange Act Release No. 67091 (May 31, 2012), 77
FR 33498 (June 6, 2012).
5 Rule 4120 provides for a halt when a security
is the subject of an IPO on NASDAQ (Rule
4120(a)(7)). Entry of orders during an IPO halt was
addressed in a prior proposed rule change. See
supra n.3.
6 Rule 4120 also provides for a Display-Only
Period and a halt cross in the case of a halt under
Rule 4120(b). Since that rule applies only to
securities traded on an unlisted trading privileges
(‘‘UTP’’) basis, NASDAQ believes that it is not
necessary to conduct a halt cross prior to
resumption of trading, consistent with other halts
applicable to securities that are traded on a UTP
basis. Accordingly, the rule is being amended to
remove the reference to Rule 4120(b) from the
provision of the rule that requires a cross for the
resumption of trading.
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
or securities traded on a UTP basis,
NASDAQ is further amending the rule
to clarify that a halt cross is conducted
only for securities listed on NASDAQ.
Finally, since Rule 4120(a)(12)(F)
contemplates a halt cross for a
NASDAQ-listed security subject to the
Limit Up-Limit Down Plan that is in a
straddle state, NASDAQ is adding a
reference to this provision to Rule
4120(c)(7).
Halts for securities not listed on
NASDAQ are terminated at the time
specified by NASDAQ, and a halt cross
is not performed prior to resumption of
trading.
Under the current process, quotes and
orders in a halted security (with the
exception of a security halted for an
IPO) may not be entered until the
commencement of the Display-Only
Period, in the instance of a security for
which a halt cross will occur, or until
the resumption of trading in other
instances. However, NASDAQ believes
that the quality of its process for
commencing trading in the halted
security would be enhanced by allowing
market participants to enter orders to be
held but not displayed until the
beginning of the Display-Only Period, in
the instances of a security for which a
halt cross will occur, or until the
resumption of trading in other
instances.7 Specifically, NASDAQ
believes that this change will provide
for a greater number of orders being
entered prior to commencement of
trading, resulting in a higher level of
order interaction in the cross or at the
resumption of trading.8
Orders entered in this manner will be
held in a suspended state until the
beginning of the Display-Only Period or
the resumption of trading, as applicable,
at which time they will be entered into
the system. Market participants may
cancel orders entered in this manner in
the same way they would cancel any
other order. Orders entered prior to the
Display-Only Period or the resumption
of trading, as applicable, will be rejected
unless they are designated for holding.
7 Because the orders would be held in an
undisplayed state, the change would not implicate
NASDAQ Rule 3340 or FINRA Rule 5260, which
prohibit transactions, publication of quotations, or
publication of indications of interest during a
trading halt.
8 NASDAQ notes that in the case of a trading
pause under Rule 4120(a)(11) or (12), the DisplayOnly Period commences at the same time as the
trading pause. Accordingly, the proposed rule
change does not alter the status quo with respect
to such trading pauses. Rather, the proposed rule
change provides that ‘‘in instances where a trading
halt is in effect prior to the commencement of the
Display Only Period, market participants may enter
orders in a security that is the subject of the trading
halt on Nasdaq and designate such orders to be held
until the beginning of the Display Only Period.’’
E:\FR\FM\17MYN1.SGM
17MYN1
Federal Register / Vol. 78, No. 96 / Friday, May 17, 2013 / Notices
With respect to halts for which a halt
cross will not occur, the orders will be
entered into the continuous market once
trading resumes.9 With respect to halts
for which a cross will occur, the orders
will be processed in the manner
provided for in Rule 4753.
2. Statutory Basis
wreier-aviles on DSK5TPTVN1PROD with NOTICES
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,10 in
general, and with Section 6(b)(5) of the
Act,11 in particular, in that the proposal
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
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. Specifically, NASDAQ
believes that the change to allow entry
of quotes and orders for holding during
a trading halt will provide for a greater
number of orders being entered prior to
commencement of trading, resulting in
a higher level of order interaction in the
re-opening process. Thus, NASDAQ
believes that the change will remove
impediments to and perfect the
mechanism of a free and open market.
NASDAQ further believes that the
proposed change to clarify that halt
crosses will not be conducted for the
resumption of trading in securities
traded on a UTP basis is consistent with
the halt cross’s purpose of establishing
a consensus price for the resumption of
trading of securities for which NASDAQ
is the primary listing market. Because
this price is established by the listing
market for securities that NASDAQ
trades on a UTP basis, NASDAQ
believes that conducting a halt cross for
such securities is not necessary to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system.
9 Orders entered and held during the halt period
will be entered into the continuous market in the
order in which they were received. However, such
orders will be entered contemporaneously with any
orders received through order entry ports after the
halt is terminated. Thus, the relative priority of
orders received during the halt and orders received
through order entry ports after the halt is
terminated will be a function of the duration of
system processing associated with each particular
order. As a result, orders received during the halt
will not automatically have priority over orders
received at the conclusion of the halt.
10 15 U.S.C. 78f.
11 15 U.S.C. 78f(b)(5).
VerDate Mar<15>2010
15:20 May 16, 2013
Jkt 229001
29189
B. Self-Regulatory Organization’s
Statement on Burden on Competition
investors, or otherwise in furtherance of
the purposes of the Act.
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.
Specifically, NASDAQ believes that this
change will provide for a greater
number of orders being entered prior to
commencement of trading, resulting in
a higher level of order interaction.
NASDAQ believes that this change will
promote competition by enhancing the
attractiveness of NASDAQ as a trading
venue through higher order fill rates and
more complete price discovery.
Moreover, because the change will not
affect the availability or price of goods
or services offered by NASDAQ or
others, it will not impose any burden on
competition.
IV. Solicitation of Comments
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
No written comments were either
solicited or 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 12 and Rule
19b–4(f)(6) thereunder.13 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 and Rule 19b–4(f)(6)(iii)
thereunder.
At any time within 60 days of the
filing of such 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
12 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) 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.
13 17
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
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 rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2013–073 on the
subject line.
Paper Comments
All submissions should refer to File
Number SR–NASDAQ–2013–073. 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
10:00 a.m. and 3:00 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
publicly available. All submissions
should refer to File Number SR–
NASDAQ–2013–073 and should be
submitted on or before June 7, 2013.
E:\FR\FM\17MYN1.SGM
17MYN1
29190
Federal Register / Vol. 78, No. 96 / Friday, May 17, 2013 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Lynn M. Powalski,
Deputy Secretary.
responded to the comment letters and
filed Amendment No. 1 to the proposed
rule change.6 This order approves the
proposed rule change, as modified by
Amendment No. 1.
[FR Doc. 2013–11733 Filed 5–16–13; 8:45 am]
II. Description of the Proposal
FINRA trade reporting rules currently
require that members report OTC
transactions in NMS stocks and OTC
Equity Securities that are executed
during the hours that the FINRA
Facilities are open within 30 seconds of
execution.7 In addition, members must
report the cancellation of a trade within
30 seconds of the time of cancellation if
the trade is both executed and cancelled
on the same day during normal market
hours.8 Under current FINRA guidance,
members are expected to report
transactions as soon as practicable and
would violate the rule if they withhold
trade reports, e.g., by programming their
systems to delay reporting until the last
permissible second.9
FINRA proposed to amend its trade
reporting rules to require members to
report OTC transactions in NMS stocks
and OTC Equity Securities as soon as
practicable, but no later than 10
seconds, following execution and to
report trade cancellations as soon as
practicable, but no later than 10
seconds, after the time of cancellation.10
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69561; File No. SR–FINRA–
2013–013]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving the
Proposed Rule Change, as Modified by
Amendment No. 1, To Require
Members To Report OTC Equity
Transactions as Soon as Practicable,
But No Later Than 10 Seconds,
Following Execution
May 13, 2013.
I. Introduction
On February 1, 2013, Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to require that
members report over-the-counter
(‘‘OTC’’) transactions in NMS stocks and
OTC Equity Securities,3 and
cancellations of such transactions, to
FINRA as soon as practicable, but no
later than 10 seconds, following
execution (or cancellation, as
applicable). The proposed rule change
was published for comment in the
Federal Register on February 12, 2013.4
The Commission received five comment
letters in response to the proposed rule
change.5 On May 7, 2013 FINRA
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 OTC transactions in NMS stocks, as defined in
SEC Rule 600(b) of Regulation NMS, are reported
through the Alternative Display Facility (‘‘ADF’’) or
a Trade Reporting Facility (‘‘TRF’’), and
transactions in ‘‘OTC Equity Securities,’’ as defined
in FINRA Rule 6420 (i.e., non-NMS stocks such as
OTC Bulletin Board and OTC Market securities), are
reported through the OTC Reporting Facility
(‘‘ORF’’). The ADF, TRFs and ORF are collectively
referred to herein as the ‘‘FINRA Facilities.’’
4 See Securities Exchange Act Release No. 68842
(February 6, 2013), 78 FR 9963 (‘‘Notice’’).
5 See Letter from Christopher Nagy, President,
KOR Trading LLC to Elizabeth M. Murphy,
Secretary, Commission, dated March 5, 2013 (‘‘KOR
Letter’’); Letter from David J. Amster, Chief
Compliance Officer, CRT Capital Group to the
Commission, dated March 5, 2013 (‘‘CRT Letter’’);
Letter from David S. Sieradzki, Partner, Bracewell
& Giuliani LLP on behalf of GFI Securities LLC to
Elizabeth M. Murphy, Secretary, Commission, dated
wreier-aviles on DSK5TPTVN1PROD with NOTICES
1 15
VerDate Mar<15>2010
15:20 May 16, 2013
Jkt 229001
March 5, 2013 (‘‘GFI Letter’’); Letter from Manisha
Kimmel, Executive Director, Financial Information
Forum to Elizabeth M. Murphy, Secretary,
Commission, dated March 6, 2013 (‘‘FIF Letter’’);
and Letter from Theodore R. Lazo, Managing
Director and Associate General Counsel, Securities
Industry and Financial Markets Association to
Elizabeth M. Murphy, Secretary, Commission, dated
March 18, 2013 (‘‘SIFMA Letter’’).
6 See Letter from Stephanie Dumont, Senior Vice
President and Director of Capital Markets Policy,
FINRA to the Commission dated May 7, 2013
(‘‘FINRA Response’’). See also Amendment No. 1
dated May 7, 2013 (FINRA proposed to adopt
Supplementary Material to provide it will take such
factors as the complexity and manual nature of the
execution and reporting of the trade into
consideration in determining whether ‘‘reasonable
justification’’ exists to excuse what otherwise may
be deemed to be a pattern or practice of late trade
reporting). (‘‘Amendment No. 1’’). Because
Amendment No. 1 is technical in nature, it is not
subject to notice and comment.
7 See, e.g., FINRA Rules 6282(a), 6380A(a),
6380B(a) and 6622(a).
The TRFs and ORF are open between 8:00 a.m.
and 8:00 p.m., and the ADF is open between 8:00
a.m. and 6:30 p.m.
8 See, e.g., FINRA Rules 6282(j)(2)(A),
6380A(g)(2)(A), 6380B(f)(2)(A) and 6622(f)(2)(A).
Members must report all cancellations of
previously reported trades to FINRA; however,
where the trade is executed or canceled outside of
normal market hours, the 30-second requirement
does not apply to the reporting of the cancellation.
9 See FINRA Regulatory Notice 10–24 (April
2010).
10 FINRA also is proposing conforming changes to
replace the reference to 30 seconds with 10 seconds
in the rules relating to the reporting of stop stock
and ‘‘prior reference price’’ transactions. See FINRA
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
Under the proposed rule change, all
transactions not reported within 10
seconds will be marked late (unless
expressly subject to a different reporting
requirement 11 or excluded from the
trade reporting rules altogether). In the
filing, FINRA stated that it understands
that there will be isolated instances
where a member is unable to report
trades within the time period prescribed
by rule, and FINRA will continue to
look for a pattern or practice 12 of
unexcused late trade reporting before
taking action against a member.
Pursuant to FINRA Rules 6181 and
6623, unexcused late reporting occurs
when there are ‘‘repeated reports of
executions submitted after the required
time period without reasonable
justification or exceptional
circumstances.’’ The rules also provide
that ‘‘[e]xceptional circumstances will
be determined on a case-by-case basis
and may include instances of system
failure by a member or service bureau,
or unusual market conditions, such as
extreme volatility in a security, or in the
market as a whole.’’
FINRA also proposed to adopt
Supplementary Material to clarify the
requirement that members report trades
and trade cancellations ‘‘as soon as
practicable.’’ Specifically, the proposed
Supplementary Material provides that
members must adopt policies and
procedures reasonably designed to
achieve compliance with this
requirement and must program systems
to commence the trade reporting process
without delay upon execution (or
cancellation, as applicable). Where a
member has such reasonably designed
policies, procedures and systems in
place, the member will not be viewed as
violating the ‘‘as soon as practicable’’
requirement because of delays in trade
reporting that are due to external factors
so long as the member does not
purposely delay the reporting of the
trade. The proposed Supplementary
Material also expressly prohibits
members from purposely withholding
trade reports, e.g., by programming their
systems to delay reporting until the last
permissible second. FINRA notes that
members that engage in a pattern and
practice 13 of unexcused late reporting
(i.e., reporting later than 10 seconds
Rules 6282(a)(4), 6380A(a)(5), 6380B(a)(5) and
6622(a)(5).
11 For example, the proposed rule change will not
amend the reporting requirements applicable to
transactions in Restricted Equity Securities, as
defined in Rule 6420, effected under Securities Act
Rule 144A, which transactions currently are not
subject to the 30-second reporting requirement. See
Rule 6622(a)(3).
12 See, e.g., FINRA Rule 6282. See also
Amendment No. 1.
13 Id.
E:\FR\FM\17MYN1.SGM
17MYN1
Agencies
[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29187-29190]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11733]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69563; File No. SR-NASDAQ-2013-073]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 4120 To Adopt a Modification in the Process for Initiating
Trading of a Security That Is the Subject of a Trading Halt or Pause on
NASDAQ
May 13, 2013.
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 April 29, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') 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.
---------------------------------------------------------------------------
\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 amend Rule 4120 to adopt a modification in the
process for initiating trading of a security that is the subject of a
trading halt or pause on NASDAQ, and to make several additional
modifications to Rule 4120 to clarify the conditions under which NASDAQ
will conduct a halt cross. NASDAQ proposes to implement the proposed
rule change on a date that is on, or shortly after, the 30th day
following the date of the filing. The text of the proposed rule change
is available on the Exchange's Web site at https://www.nasdaq.cchwallstreet.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. 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
In 2012, NASDAQ modified its process for commencing trading of a
security that is the subject of an initial public offering (an ``IPO'')
on NASDAQ by allowing market participants to enter orders to be held in
an undisplayed state until the commencement of the Display-Only Period
that occurs prior to
[[Page 29188]]
the IPO.\3\ NASDAQ is now proposing a similar change with regard to
entering orders prior to the end of other trading halts or pauses on
NASDAQ. Rule 4120(a) describes the circumstances under which NASDAQ has
the authority to initiate a trading halt. As detailed in Rule 4120(a),
the specific bases for a halt include the following:
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 66652 (March 23, 2012),
77 FR 13129 (March 29, 2012) (SR-NASDAQ-2012-038).
---------------------------------------------------------------------------
A halt to permit the dissemination of material news with
respect to a NASDAQ-listed security (Rule 4120(a)(1));
a halt when a security listed on another national
securities exchange is halted to permit dissemination of news (Rule
4120(a)(2)) or due to an order imbalance or influx (Rule 4120(a)(3));
a halt in an American Depository Receipt (``ADR'') or
other security listed on Nasdaq, when the Nasdaq-listed security or the
security underlying the ADR is listed on or registered with another
national or foreign securities exchange or market, and the regulatory
authority overseeing such exchange or market halts trading in such
security for regulatory reasons (Rule 4120(a)(4));
a halt when Nasdaq requests from the issuer information
relating to material news or the issuer's ability to meet Nasdaq
listing qualification requirements, or any other information necessary
to protect investors and the public interest (Rule 4120(a)(5));
a halt trading in a security listed on NASDAQ when
extraordinary market activity in the security is occurring, NASDAQ
determines that the activity is likely to have a material effect on the
market for the security, and NASDAQ believes that the activity is
caused by the misuse or malfunction of an electronic quotation,
communication, reporting, or execution system (Rule 4120(a)(6));
a halt with respect to an index warrant when deemed
appropriate in the interests of a fair and orderly market and to
protect investors (Rule 4120(a)(8));
a halt in a series of Portfolio Depository Receipts, Index
Fund Shares or Managed Fund Shares listed on Nasdaq if the Intraday
Indicative Value or the index value applicable to that series is not
being disseminated as required (Rule 4120(a)(9));
a halt in a Derivative Securities Product (as defined in
Rule 4120(b)(4)(A)) for which a net asset value (``NAV'') or a
Disclosed Portfolio is disseminated if Nasdaq becomes aware that the
NAV or Disclosed Portfolio is not being disseminated to all market
participants at the same time (Rule 4120(a)(10));
a trading pause with respect to NASDAQ-listed stocks that
are not subject to the Limit Up-Limit Down Plan \4\ and that are
experiencing certain large price movements, as defined by Rule
4120(a)(11), or with respect to a NASDAQ-listed stock that is subject
to the Limit Up-Limit Down Plan and that is in a ``straddle state,'' as
defined by Rule 4120(a)(12)(F); and
---------------------------------------------------------------------------
\4\ Plan to Address Extraordinary Market Volatility Submitted to
the Commission Pursuant to Rule 608 of Regulation NMS under the Act,
Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR
33498 (June 6, 2012).
---------------------------------------------------------------------------
a trading halt in a Derivative Security Product traded
pursuant to unlisted trading privileges for which a ``Required Value,''
such as an intraday indicative value or disclosed portfolio, is not
being disseminated, under the conditions described in Rule 4120(b).\5\
---------------------------------------------------------------------------
\5\ Rule 4120 provides for a halt when a security is the subject
of an IPO on NASDAQ (Rule 4120(a)(7)). Entry of orders during an IPO
halt was addressed in a prior proposed rule change. See supra n.3.
---------------------------------------------------------------------------
Rule 4120(c)(7) provides that in the case of a halt under Rule
4120(a)(1), (4), (5), (6), (9), (10), or (11), or Rule 4120(b), prior
to terminating the halt, there is a 5-minute Display-Only Period during
which market participants may enter quotes and orders into the NASDAQ
Market Center. At the conclusion of the Display-Only Period, trading
commences through the halt cross process provided for in Rule 4753.\6\
However, if at the end of a Display-Only Period, NASDAQ detects an
order imbalance in the security, the halt may be extended for an
additional Display-Only Period of one minute. NASDAQ notes that the
purpose of the halt cross is to establish a consensus price for the
resumption of trading of securities for which NASDAQ is the primary
listing market. Accordingly, NASDAQ does not believe that it is
warranted to conduct a halt cross for securities listed on other
exchanges. Accordingly, NASDAQ is removing the reference to Rule
4120(b) from Rule 4120(c)(7), since Rule 4120(b) pertains solely to
halts of securities traded on an unlisted traded privileges (``UTP'')
basis. In addition, since halts under Rule 4120(a)(10) may pertain
either to securities listed on NASDAQ or securities traded on a UTP
basis, NASDAQ is further amending the rule to clarify that a halt cross
is conducted only for securities listed on NASDAQ. Finally, since Rule
4120(a)(12)(F) contemplates a halt cross for a NASDAQ-listed security
subject to the Limit Up-Limit Down Plan that is in a straddle state,
NASDAQ is adding a reference to this provision to Rule 4120(c)(7).
---------------------------------------------------------------------------
\6\ Rule 4120 also provides for a Display-Only Period and a halt
cross in the case of a halt under Rule 4120(b). Since that rule
applies only to securities traded on an unlisted trading privileges
(``UTP'') basis, NASDAQ believes that it is not necessary to conduct
a halt cross prior to resumption of trading, consistent with other
halts applicable to securities that are traded on a UTP basis.
Accordingly, the rule is being amended to remove the reference to
Rule 4120(b) from the provision of the rule that requires a cross
for the resumption of trading.
---------------------------------------------------------------------------
Halts for securities not listed on NASDAQ are terminated at the
time specified by NASDAQ, and a halt cross is not performed prior to
resumption of trading.
Under the current process, quotes and orders in a halted security
(with the exception of a security halted for an IPO) may not be entered
until the commencement of the Display-Only Period, in the instance of a
security for which a halt cross will occur, or until the resumption of
trading in other instances. However, NASDAQ believes that the quality
of its process for commencing trading in the halted security would be
enhanced by allowing market participants to enter orders to be held but
not displayed until the beginning of the Display-Only Period, in the
instances of a security for which a halt cross will occur, or until the
resumption of trading in other instances.\7\ Specifically, NASDAQ
believes that this change will provide for a greater number of orders
being entered prior to commencement of trading, resulting in a higher
level of order interaction in the cross or at the resumption of
trading.\8\
---------------------------------------------------------------------------
\7\ Because the orders would be held in an undisplayed state,
the change would not implicate NASDAQ Rule 3340 or FINRA Rule 5260,
which prohibit transactions, publication of quotations, or
publication of indications of interest during a trading halt.
\8\ NASDAQ notes that in the case of a trading pause under Rule
4120(a)(11) or (12), the Display-Only Period commences at the same
time as the trading pause. Accordingly, the proposed rule change
does not alter the status quo with respect to such trading pauses.
Rather, the proposed rule change provides that ``in instances where
a trading halt is in effect prior to the commencement of the Display
Only Period, market participants may enter orders in a security that
is the subject of the trading halt on Nasdaq and designate such
orders to be held until the beginning of the Display Only Period.''
---------------------------------------------------------------------------
Orders entered in this manner will be held in a suspended state
until the beginning of the Display-Only Period or the resumption of
trading, as applicable, at which time they will be entered into the
system. Market participants may cancel orders entered in this manner in
the same way they would cancel any other order. Orders entered prior to
the Display-Only Period or the resumption of trading, as applicable,
will be rejected unless they are designated for holding.
[[Page 29189]]
With respect to halts for which a halt cross will not occur, the orders
will be entered into the continuous market once trading resumes.\9\
With respect to halts for which a cross will occur, the orders will be
processed in the manner provided for in Rule 4753.
---------------------------------------------------------------------------
\9\ Orders entered and held during the halt period will be
entered into the continuous market in the order in which they were
received. However, such orders will be entered contemporaneously
with any orders received through order entry ports after the halt is
terminated. Thus, the relative priority of orders received during
the halt and orders received through order entry ports after the
halt is terminated will be a function of the duration of system
processing associated with each particular order. As a result,
orders received during the halt will not automatically have priority
over orders received at the conclusion of the halt.
---------------------------------------------------------------------------
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\10\ in general, and with
Section 6(b)(5) of the Act,\11\ in particular, in that the proposal 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 regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Specifically,
NASDAQ believes that the change to allow entry of quotes and orders for
holding during a trading halt will provide for a greater number of
orders being entered prior to commencement of trading, resulting in a
higher level of order interaction in the re-opening process. Thus,
NASDAQ believes that the change will remove impediments to and perfect
the mechanism of a free and open market. NASDAQ further believes that
the proposed change to clarify that halt crosses will not be conducted
for the resumption of trading in securities traded on a UTP basis is
consistent with the halt cross's purpose of establishing a consensus
price for the resumption of trading of securities for which NASDAQ is
the primary listing market. Because this price is established by the
listing market for securities that NASDAQ trades on a UTP basis, NASDAQ
believes that conducting a halt cross for such securities is not
necessary to remove impediments to and perfect the mechanism of a free
and open market and a national market system.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f.
\11\ 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. Specifically,
NASDAQ believes that this change will provide for a greater number of
orders being entered prior to commencement of trading, resulting in a
higher level of order interaction. NASDAQ believes that this change
will promote competition by enhancing the attractiveness of NASDAQ as a
trading venue through higher order fill rates and more complete price
discovery. Moreover, because the change will not affect the
availability or price of goods or services offered by NASDAQ or others,
it will not impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or 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 \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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.
---------------------------------------------------------------------------
At any time within 60 days of the filing of such 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 Number SR-NASDAQ-2013-073 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-2013-073. 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
10:00 a.m. and 3:00 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 publicly available. All
submissions should refer to File Number SR-NASDAQ-2013-073 and should
be submitted on or before June 7, 2013.
[[Page 29190]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2013-11733 Filed 5-16-13; 8:45 am]
BILLING CODE 8011-01-P