[Federal Register: March 13, 2008 (Volume 73, Number 50)]
[Notices]
[Page 13596-13597]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr08-93]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57452; File No. SR-NASDAQ-2008-004]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Order Granting Approval of Proposed Rule Change Related to Supplemental
Market Participant Identifiers
March 7, 2008.
I. Introduction
On January 9, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') 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 make permanent the pilot program that allows
market makers and Electronic Communication Networks (``ECNs'') to
obtain supplemental market participant identifiers (``MPIDs''). In
addition, Nasdaq proposes to remove any restrictions on the number of
MPIDs a market participant may request for displaying attributable
quotes or orders. The proposed rule change was published for comment in
the Federal Register on February 1, 2008.\3\ The Commission received no
comments on the proposed rule change. This order approves the proposed
rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 57212 (January 28,
2008), 73 FR 6229 (``Notice'').
---------------------------------------------------------------------------
II. Description of Proposal
Nasdaq proposes to make permanent the pilot program incorporated in
[[Page 13597]]
Nasdaq Rule 4613(a)(2) that allows market makers and ECNs to obtain
supplemental MPIDs. The rule has operated as a temporary pilot since it
was first adopted in June 2003 and since that time, Nasdaq continued to
apply the procedures set forth in the rule and the related interpretive
material.\4\ In accordance with the pilot program, market makers and
ECNs can be issued a maximum of nine supplemental MPIDs. Nasdaq
proposes to remove the current restriction that limits the number of
supplemental MPIDs that market makers and ECNs can request for
displaying attributable quotes or orders. In addition, Nasdaq proposes
to remove IM-4613, which sets forth the procedures for allocating
supplemental MPIDs.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 47954 (May 30,
2003), 68 FR 34017 (June 6, 2003). See also IM-4613--Procedures for
Allocation of Second Displayable MPIDs. According to Nasdaq, the
pilot inadvertently was permitted to lapse on November 30, 2006.
---------------------------------------------------------------------------
Nasdaq's proposal will prohibit market makers and ECNs from using a
supplemental MPID to violate Exchange or Commission rules.\5\ If it is
determined that a supplemental MPID is being used improperly, Nasdaq
will withdraw its grant of the supplemental MPID for all purposes for
all securities. In addition, if a market maker or ECN fails to fulfill
the conditions appurtenant to its primary MPID (e.g., by being placed
into an unexcused withdrawal), it will not be permitted to use any
supplemental MPID for any purpose in that security.
---------------------------------------------------------------------------
\5\ Members will be prohibited from using a supplemental MPID to
avoid their Manning obligations under IM-2110-2, best execution
obligations under Nasdaq Rule 2320, or their obligations under the
Commission's Order Handling Rules. Members will be required to
continue to comply with the firm quote rule, the OATS rules, and the
Commission's order routing and execution quality disclosure rules.
See Notice, supra note 3, at 6229-30.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange.\6\ In
particular, the Commission believes that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\7\ in that it is designed
to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------
\6\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposal to make permanent the
pilot program that allows market makers and ECNs to obtain supplemental
MPIDs is consistent with the Act. The proposal should provide market
participants with flexibility to organize diverse order flows from
customers and to route orders from different trading desks and units
within their organizations.
The Exchange also proposes to remove any restrictions on the number
of MPIDs a market participant may request for displaying attributable
quotes or orders. According to Nasdaq, this restriction was adopted due
to technological limitations. The Exchange has represented that this
technological limitation no longer exists.\8\ In addition, Nasdaq
proposes to remove IM-4613, which sets forth the procedures for
allocating supplemental MPIDs. This method of allocating supplemental
MPIDs was necessary due to the limited number of available MPIDs. The
removal of Nasdaq's technological limitation on the number of MPIDs for
a given security makes the procedures unnecessary.
---------------------------------------------------------------------------
\8\ See Notice, supra note 3, at 6229.
---------------------------------------------------------------------------
The Commission notes that Nasdaq represents that a supplemental
MPID would be withdrawn for all purposes and for all securities if it
were to be determined that such supplemental MPID was being used
improperly.\9\ In addition, Nasdaq represents that a market maker or
ECN will be prohibited from using any supplemental MPID for any purpose
in a security, if it fails to fulfill the conditions appurtenant to its
primary MPID for such security.\10\ In the Commission's view, these
procedures should ensure that market makers and ECNs utilize MPIDs in
accordance with Exchange rules.
---------------------------------------------------------------------------
\9\ See Notice, supra note 3, at 6230.
\10\ Id.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-NASDAQ-2008-004) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12 \
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4984 Filed 3-12-08; 8:45 am]
BILLING CODE 8011-01-P