[Federal Register: June 10, 2008 (Volume 73, Number 112)]
[Notices]
[Page 32776-32778]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jn08-91]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57910; File No. SR-NASDAQ-2008-049]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Modify the Processing of Price To Comply Orders
June 3, 2008.
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 May 30, 2008, 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 the Exchange.
The Exchange has designated the proposed rule change as a ``non-
controversial'' rule change pursuant to
[[Page 32777]]
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposed rule change effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change 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
The Exchange proposes to modify the processing of Price to Comply
orders contained in Nasdaq Rule 4751(f)(7). The Exchange proposes to
implement the proposed rule change on June 2, 2008. 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, 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
The Exchange proposes to modify the rule language pertaining to
``Price to Comply Order'' as set forth in Rule 4751(f)(7) of the Nasdaq
Rules. Price to Comply Orders were originally conceived and approved
when Nasdaq integrated its three execution systems into the Nasdaq
Single Book in 2007.\5\
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\5\ See Securities Exchange Act Release No. 54155 (July 14,
2006), 71 FR 41291 (July 20, 2006) (SR-NASDAQ-2006-001).
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Price to Comply Orders were designed to allow members to quote
aggressively and still comply with the locked and crossed markets
provisions of Regulation NMS.\6\ Specifically, Price to Comply Orders
are orders that, if, at the time of entry, would create a violation of
Rule 610(d) of Regulation NMS by locking or crossing the protected
quote of an external market or would cause an Order Protection Rule
violation,\7\ the order will be converted by the System to a Non-
Displayed Order and re-priced to the current low offer (for bids) or to
the current best bid (for offers). Such Non-Displayed Orders are
cancelled by the System if the market moves through the price of the
order after the order is accepted.
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\6\ See 17 CFR 242.610(d).
\7\ See 17 CFR 242.611.
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In order to increase transparency and efficiency, Nasdaq is
proposing to modify the display of Price to Comply Orders, while
maintaining the current processing logic. Nasdaq will continue the
current practice of posting Price to Comply orders using the current
logic, buy orders are priced at the inside offer and sell orders are
priced at the inside bid. Rather than convert a locking or crossing
order to Non-Displayed, Nasdaq will display the order at the most
aggressive price possible, one minimum price increment worse than the
locking price. With the change, orders will now be displayed at a price
which is either alone or will join the National Best Bid and Offer
(``NBBO'').
An example of how this will apply to orders is below: The National
market is $9.97 x $10.00. A firm enters a Price to Comply order to buy
at $10.01.
Today, the order will reside on the Nasdaq book as non-
displayed for $10.00.
With the proposed rule change, the order will reside on
the Nasdaq book non-displayed for $10.00 and will also be displayed at
$9.99. If a seller comes to Nasdaq at $9.99, the order will execute at
$10.00.
As noted in the proposed rule, Price to Comply Orders that would
lock or cross the market will be displayed at the best price possible
consistent with the provisions of Regulation NMS. The displayed and
undisplayed price of an individual order may be priced one or more
times depending upon the manner of order entry into the System.
Specifically, if a member chooses to enter a Price to Comply Order via
Nasdaq's RASH protocol, the order is priced upon entry and may be
adjusted multiple times in response to changes in the prevailing NBBO
to move the displayed price closer to the original entered price and
display the best possible price consistent with the provisions of
Regulation NMS. Each time the displayed price is adjusted, the order
will receive a new timestamp for purposes of determining its price/time
priority according to Nasdaq's existing processing rules. If a Price to
Comply Order is entered via Nasdaq's OUCH protocol, the order will be
repriced only upon entry. The order is not repriced in the event the
prevailing NBBO changes.
Nasdaq believes that the implementation of the aforementioned rule
change modifying Nasdaq order display will enhance transparency and
order execution opportunities on Nasdaq. Currently, all Price to Comply
orders are non-displayed. In the new environment, since the order is
displayed, it will be more transparent and better able to promote order
interaction.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\8\ in general, and with Section
6(b)(5) of the Act,\9\ 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. Nasdaq believes this
proposal is consistent with the Act and specifically Rule 610 of
Regulation NMS.
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\8\ 15 U.S.C. 78f.
\9\ 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. To the contrary,
Nasdaq believes that its processing of Price to Comply Orders is
designed to compete with orders already approved and in use at other
national securities exchanges, enhancing competition between the
exchanges.
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
[[Page 32778]]
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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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 filing.\12\
However, Rule 19b-4(f)(6)(iii) \13\ 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. The Commission
designates the proposed rule change to be operative upon filing with
the Commission.\14\
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\12\ 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. The Exchange has satisfied this notice requirement.
\13\ Id.
\14\ 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-2008-049 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-049.
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, on official
business days between the hours of 10 am and 3 pm. Copies of the 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 Number
SR-NASDAQ-2008-049 and should be submitted on or before July 1, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-12901 Filed 6-9-08; 8:45 am]
BILLING CODE 8010-01-P