[Federal Register: September 10, 2007 (Volume 72, Number 174)]
[Notices]
[Page 51693-51695]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se07-90]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56348; File No. SR-NASDAQ-2007-073]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Modify the Halt Cross Process
August 31, 2007.
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 August 20, 2007, 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 substantially prepared by Nasdaq. On August 31, 2007, the
Exchange filed Amendment No. 1 to the proposed rule change.\3\ The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder,\5\ which rendered the proposal effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced the original filing in its
entirety.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to make minor modifications to the manner in which
Nasdaq resumes trading of securities that are the subject of the Nasdaq
Halt Cross as well as the potential duration of the Display Only
Period, as set forth in Nasdaq Rule 4120. The text of the proposed rule
change is available at Nasdaq, the Commission's Public Reference Room,
and http://www.complinet.com/nasdaq.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq's Halt Cross has been in production for one year and in that
time it has proven to be a highly successful process to begin trading
Nasdaq-listed securities. With the transition of Nasdaq-listed trading
to a single platform in October 2006, Nasdaq implemented a similar
process for resuming trading in halted stocks referred to as the Halt
cross, providing greater transparency as issues begin trading again
after a halt.
NASDAQ has determined that by amending certain rules governing the
Halt Cross, NASDAQ can provide more accurate price discovery to market
participants. First, Nasdaq is proposing to extend the period of time
those securities may be subject to Display Only status prior to the
operation of the Halt Cross. Currently, after the initial 15-minute
Display Only period, Nasdaq may extend the Display Only period for up
to three additional 5-minute intervals, for a total of 15 additional
minutes. Nasdaq believes that the price discovery capability of the
Halt Cross will be improved by permitting additional Display Only
periods. Therefore, Nasdaq is proposing to authorize up to three
additional 5-minute extensions of the Display Only Period for a total
of 30 minutes. This proposal will not alter how Nasdaq extends the
Display Only period or how Nasdaq operates the Halt Cross.
Second, Nasdaq is proposing to change the existing mechanism for
extending the duration of the ``Display Only'' period that occurs prior
to the Halt Cross during which time members enter quotes and orders
they expect to participate in the Halt Cross. The current rule states
that the Display Only period for Halt Crosses will be extended by 5
minutes in the event that the Current Reference Price moves more than
10% between the imbalance dissemination 15 seconds prior to the cross
and the cross time. Nasdaq has reviewed data from Halt Crosses and
found that the 10% threshold is wider than necessary. For example, in
reviewing a series of 13 IPOs from the beginning of 2007, 1 moved 4% in
the last 15 seconds, 1 moved 1.5%, while 11 did not move at all.
Therefore Nasdaq
[[Page 51694]]
proposes to tighten the systematic trigger to 5% from the current 10%.
Finally, Nasdaq also proposes to change the provision of the rule
dealing with the re-opening timeline for the Halt Cross. Currently, the
Halt Cross initiates in a ``randomization'' period of between 0 and 15
seconds after the Display Only period. The randomization period was
designed to deter market participants from timing their participation
in a way that harmed other participants. This provision, however,
occasionally results in other markets trading after the issue has re-
opened but prior to Nasdaq restarting trading using the Halt Cross.
Nasdaq Staff believe that it is potentially disruptive for Nasdaq, as
the listing market and venue for the majority of electronic trading, to
continue a halt after other market centers have resumed trading and,
therefore proposes to eliminate the random period prior to the
execution of the Halt Cross.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\6\ in general and with Section
6(b)(5) of the Act,\7\ in particular, in that it is designed 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. The proposal will promote
orderly trading with respect to IPOs and re-openings of halted stocks.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(5).
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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 proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder \9\ because
it: (i) Does not significantly affect the protection of investors or
the public interest; (ii) does not impose any significant burden on
competition; and (iii) by its terms, does not become operative for 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.\10\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers the period
to commence on August 31, 2007, the date on which the Exchange
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of the filing.\11\
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.\12\ The Exchange has requested that
the Commission waive the 30-day operative delay. In support of this
request, Nasdaq has represented that the ``randomization'' period of
between 0 and 15 seconds prior to the execution of the cross currently
provided for in Rule 4120 has led to confusion in the marketplace
because it causes Nasdaq, the listing market, to remain in a halted
state after other trading venues resume trading. Nasdaq believes that
this delay has the potential to promote ``gaming'' behavior by some
market participants that is harmful to other market participants and
also to investors.
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\11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the
Commission 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. Nasdaq has complied with this requirement.
\12\ 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
because it believes that the proposed modifications to the operation of
Nasdaq's Halt Cross should have a positive impact market quality and
enhance the orderliness of trading by removing a potential method for
gaming the re-opening following the Halt Cross. Accordingly, the
Commission designates the proposal to be effective and operative upon
filing with the Commission.\13\
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of a rule change pursuant
to Section 19(b)(3)(A) of the Act,\14\ the Commission may summarily
abrogate the 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.
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\14\ 15 U.S.C. 78s(b)(3)(A).
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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 (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2007-073 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2007-073.
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 (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying 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
[[Page 51695]]
available for inspection and copying at the principal office of the
Nasdaq. 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-2007-073 and should be submitted on or before October 1, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-17720 Filed 9-7-07; 8:45 am]
BILLING CODE 8010-01-P