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Monday, June 27, 2011

Equity Regulatory Alert #2011 - 9
Single Stock Circuit Breaker Functionality to be Expanded to All Reg NMS Securities

Markets Impacted:

Contact Information:

What you need to know:

  • On June 23, 2011, the SEC approved new rules to expand the Single Stock Trading Pause pilot to include the remaining Reg NMS securities not covered by the current scope of the pilot (“Phase III securities”), but to require wider percentage price moves before a trading pause is triggered for the newly added securities.
  • The SEC also approved new market maker quoting obligations for Phase III securities.
  • Effective Monday, August 8, 2011, The NASDAQ Stock Market® (NASDAQ®), NASDAQ OMX BXSM (BXSM) and NASDAQ OMX PSXSM (PSXSM) will expand the Single Stock Trading Pause functionality to all Reg NMS securities, including Exchange-Traded Products (ETPs).

What has been approved?

The SEC approved new rules submitted by the national securities exchanges and the Financial Industry Regulatory AuthorityTM (FINRATM) to amend the Single Stock Trading Pause pilot to include the remaining Reg NMS securities and establish wider percentage price moves before a trading pause is triggered for the newly added securities. The SEC also approved new market maker quoting obligations for the newly added securities.

When will the trading pause functionality be expanded to all Reg NMS securities?

Effective Monday, August 8, 2011, NASDAQ, BX and PSX will expand the Single Stock Circuit Breaker functionality to all Reg NMS securities.

What are the trading pause trigger percentages for each phase of securities?

For Phase I securities (those included in the S&P 500 Index) and Phase II securities (those included in the Russell 1000 and select ETPs), a trading pause is triggered after experiencing a price change of 10% or more in either direction.

For Phase III securities, the price move required to trigger a trading pause will be 30% or more for securities priced at $1 or higher and 50% or more for securities priced less than $1.

What are the new market maker quoting obligations for Phase III securities?

Currently, market makers may fulfill their quoting obligations by maintaining a quote 30% away from the National Best Bid and Offer (NBBO) in a security that is not included in the Single Stock Circuit Breaker pilot. The new quoting obligation for Phase III securities trading at or above $1 (for which the new trading pause trigger is 30%) will be 28% away from the NBBO. The quoting obligation for Phase III securities trading below $1 (which will be subject to the 50% threshold) will remain unchanged.

Are any technical changes required by firms?

No, the inclusion of new securities will not require any technical changes. NASDAQ OMX will update the NASDAQ Automatic Quote Refresh functionality internally to reflect the percentage change for market maker quoting obligations.

How are trading pauses disseminated via NASDAQ OMX market data feeds?

For market data information, refer to Data Technical News #2010-18.

Where can I find additional information?


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