[Federal Register: August 21, 2008 (Volume 73, Number 163)]
[Notices]
[Page 49512-49513]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21au08-98]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58357; File No. SR-NASDAQ-2008-068]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
as Modified by Amendment No. 1 To Modify Rule 4770 To Enhance Trading
in the NASDAQ Crossing Network
August 13, 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 August 11, 2008, 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
prepared by Nasdaq. Nasdaq has designated this proposal as non-
controversial and provided the Commission with the notice required by
Exchange Act Rule 19b-4(f)(6)(iii). This rule proposal, which is
effective upon filing with the Commission, shall become operative on
September 1, 2008. On August 13, 2008, the Exchange submitted Amendment
No. 1 to the proposed rule change.\3\ 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\ The Commission considers the 60-day abrogation period to
have commenced on August 13, 2008, the date the Exchange filed
Amendment No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq is filing a rule proposal to modify Rule 4770 to enhance
trading in the NASDAQ Crossing Network. Nasdaq proposes to implement
the proposed rule change on September 1, 2008.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.\4\
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\4\ Changes are marked to the rule text that appears in the
electronic Nasdaq Manual found at http://
nasdaqomx.cchwallstreet.com.
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* * * * *
4770. Nasdaq Crossing Network
(a) Definitions. For the purposes of this rule the term:
(1) ``Nasdaq Reference Price Cross'' shall mean the process for
executing orders at a predetermined reference price at a randomly
selected point in time during a five-second [one minute] trading window
beginning at 10:45 a.m., 12:45 p.m. and 2:45 p.m. Eastern Time during
the regular hours session and at 4:30 p.m. during the after hours
session.
(2) No Change.
(3) No Change.
(b) No Change.
* * * * *
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 is filing a rule proposal to modify Rule 4770 to enhance
trading in the NASDAQ Crossing Network. The Commission approved the
Nasdaq Crossing Network on July 5, 2006.\5\ The Nasdaq Crossing Network
provides an execution option to market participants trading in Nasdaq
and other exchange-listed securities that facilitates the execution of
trades quickly and anonymously.
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\5\ See Securities Exchange Act Release No. 54248 (July 31,
2006) (SR-NASDAQ-2006-019). Prior to the effective date of Nasdaq's
operation as an exchange for Nasdaq-listed securities, the rule
governing the Nasdaq Crossing Network had been approved as an NASD
rule (NASD Rule 4716). Securities Exchange Act Release No. 54101
(July 5, 2006), 71 FR 39382 (July 12, 2006) (SR-NASD-2005-140).
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In order to minimize the opportunity for manipulation, Nasdaq
executes the cross through an automated and random matching mechanism
at a randomly selected time during the predetermined one-minute cross-
trading window. Nasdaq introduced the randomization period in order to
prevent market participants from entering or cancelling orders in the
Nasdaq Crossing Network in an attempt to improperly influence the
execution price of a cross. The randomization period was thought to
protect both market participants and public investors from potential
manipulation.
In response to input from our members and other market
participants, Nasdaq proposes to modify the 60-second ``randomization
period'' of [sic] that precedes the execution of all crosses within the
Nasdaq Crossing Network. Based upon changing market conditions, Nasdaq
has now determined that the full benefits of the randomization period
can be realized through a shorter randomization period of five seconds
rather than 60 seconds.
The speed of order routing and execution in the marketplace has
increased substantially since the launch of the Nasdaq Crossing
Network. As a result, a random period of five seconds is sufficient to
create significant risk of a delayed execution outside the control of a
market participant. In other words, there is little incremental benefit
of a random period longer than five seconds.
[[Page 49513]]
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Securities Exchange Act of 1934,\6\
in general and with Section 6(b)(5) of the Act,\7\ in particular, in
that it is designed 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; and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers, or to regulate by virtue of any authority
conferred by this title matters not related to the purposes of this
title or the administration of the exchange. The proposal satisfies
this requirement in that it is designed to increase order interaction
and the likelihood of execution in the Nasdaq Crossing Network while
maintaining investor protection associated with a random delay to
decrease the potential for manipulation.
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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. To the contrary, the proposal
is designed to enhance competition by making Nasdaq's trading mechanism
more effective and competitive.
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 proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, 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). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with 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 fulfilled this requirement.
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Nasdaq has asked the Commission to waive the operative delay to
permit the proposed rule change to become operative on September 1,
2008. The Commission has determined that allowing the filing to become
operative on September 1, 2008, is consistent with the protection of
investors and the public interest.\10\ Nasdaq has represented that it
intends to re-launch the Nasdaq Crossing Network on September 1, 2008.
As part of the re-launch, Nasdaq has stated that it will educate
members regarding the liquidity, transparency and execution quality
available through the Nasdaq Crossing Network. Nasdaq intends to also
reduce prices to encourage participants to participate in the Crossing
Network and thereby create a deeper source of liquidity.\11\ The
Commission believes that allowing Nasdaq to introduce the reduced
randomization period as part of its September 1, 2008 re-launch will
assist market participants that utilize the Nasdaq Crossing Network in
understanding how the system operates with the reduced randomization
period in place.
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\10\ 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. See 15 U.S.C.
78c(f).
\11\ The Commission notes that any proposed change in fees must
be filed with the Commission pursuant to Rule 19b-4. See 17 CFR
240.19b-4.
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At any time within 60 days of the filing of the 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-2008-068 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-2008-068. 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 Section, 100 F Street,
NE., Washington, DC 20549-1090 on official business days between the
hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal offices 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-2008-068 and should be submitted on or before September 11,
2008.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19351 Filed 8-20-08; 8:45 am]
BILLING CODE 8010-01-P