[Federal Register: April 4, 2007 (Volume 72, Number 64)]
[Notices]
[Page 16389-16391]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ap07-95]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55550; File No. SR-NASDAQ-2007-010)
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendment No. 2 Thereto To Amend Rule 4611 Relating to Sponsored
Access
March 28, 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 February 16, 2007, 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 substantially prepared by Nasdaq. On
February 23, 2007, Nasdaq filed Amendment No. 1 to the proposed rule
change but subsequently withdrew it. On February 23, 2007, Nasdaq filed
Amendment No. 2 to the proposed rule change. The Exchange has filed the
proposal as a ``non-controversial'' rule change pursuant to Section
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which
renders it 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\ 15 U.S.C. 78s(b)(3)(A).
\4\ 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 amend the Nasdaq Rule 4611 to update and codify
the requirements applicable to Nasdaq members that provide sponsored
access to other firms and customers to the Nasdaq execution system. The
text of the proposed rule change is available at Nasdaq, the
Commission's Public Reference Room, and http://www.nasdaq.com.
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 proposes to amend the Nasdaq Rule 4611 to update and codify
the requirements applicable to Nasdaq members that provide sponsored
access to other firms and customers to the Nasdaq execution system.
Currently, Nasdaq members provide sponsored access consistent with
guidance set forth in NASD Notice to Members 98-66 as updated by the
NASD in Notice
[[Page 16390]]
to Members 04-66.\5\ Consistent with its status as an independent self-
regulatory organization and the need to establish rules governing the
use of its systems, Nasdaq proposes to adopt a sponsored access rule in
the Nasdaq Rule Manual.
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\5\ Nasdaq established Rule 4611(d) in order to codify the
requirements set forth in the aforementioned NASD Notices to
Members. See Securities Exchange Act Release No. 55061 (January 8,
2007), 72 FR 2052 (January 17, 2007) (SR-NASDAQ-2006-061). Nasdaq is
amending Rule 4611(d) in order to match the regulatory requirements
imposed by another exchange and, thereby, to promote uniform
regulation of sponsored access relationships.
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In recognition of the fact that Nasdaq members are members of other
exchanges, that they use other exchanges' systems, and that they
provide or receive sponsored access on other exchanges in the same
manner as on Nasdaq, Nasdaq is proposing to adopt a sponsored access
rule that is identical to that of another exchange, specifically NYSE
Arca, Inc. (``NYSE Arca''). The NYSE Arca sponsored access rule has, by
virtue of Commission approval, been determined to be consistent with
the Act, including being consistent with the public interest and the
protection of investors.
The proper usage of Nasdaq's systems and the protection of
investors will be achieved in several ways. Sponsored participants must
enter into and maintain customer agreements with one or more sponsoring
members, establishing proper relationships and accounts through which
the sponsored participant may trade on the Nasdaq Market Center. In
such customer agreements sponsored participant and its sponsoring
member must agree in writing to ``Sponsorship Provisions'' that (1)
obligates the sponsoring member and sponsored participant to enter into
a contractual relationship with Nasdaq; (2) ensures that orders and
trades are honored; (3) holds the sponsoring member responsible for the
conduct of sponsored participants; (4) obligates sponsored participants
to comply with all applicable Nasdaq rules; (5) restricts access to
Nasdaq systems to a limited group of known and educated users, (6)
requires sponsoring members to have procedures to monitor its
employees, agents, and customers in their access to and use of Nasdaq
systems; and (7) ensures full payment of all applicable Nasdaq fees.
The proposed rule change is intended to codify practices currently
in use in existing sponsored access relationships.
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 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.
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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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change does not: (1) Significantly
affect the protection of investors or the public interest; (2) impose
any significant burden on competition; and (3) become operative for 30
days after the date of this filing, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\10\
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because such waiver
would permit Nasdaq to immediately implement the proposed rule change.
For this reason, the Commission designates the proposed rule change to
be operative upon filing with the Commission.\12\
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\10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the date of filing
of the proposed rule change, or such shorter time as designated by
the Commission. Nasdaq has satisfied the five-day pre-filing notice
requirement.
\11\ Id.
\12\ For the purposes only of waiving the 30-day operative
delay, the Commission has 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 such proposed rule
change the Commission may summarily abrogate 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 (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2007-010 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2007-010. 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
[[Page 16391]]
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. Copies of the filing also will be available for
inspection and copying at the principal office of 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-2007-010 and should
be submitted on or before April 25, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6179 Filed 4-3-07; 8:45 am]
BILLING CODE 8010-01-P