[Federal Register: April 1, 2008 (Volume 73, Number 63)]
[Notices]
[Page 17393-17395]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap08-90]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57564; File No. SR-NASDAQ-2008-022]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Modify the Rules Governing the Operation of The NASDAQ Options
Market
March 26, 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 March 19, 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 substantially by Nasdaq. Nasdaq has filed this proposal
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders the proposal 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)(iii).
\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 make five modifications to the rules governing
its recently-approved NASDAQ Options Market (``NOM'').\5\ Specifically,
Nasdaq proposes to: (1) Revise Chapter VI, Section 1(a)(2) of the NOM
Rules to clarify that all options trades will be reported to the
Options Price Regulatory Authority (``OPRA''); (2) modify Chapter VI,
Section 8 of the NOM Rules to
[[Page 17394]]
change the final tie-breakers for the Order Imbalance Indicator and the
execution algorithm of the Opening and Closing Crosses; (3) replace
improper references to the Nasdaq Market Center with proper references
to NOM; (4) revise Chapter VII, Section 6(c)(ii)(2) of the NOM Rules to
replace an inaccurate reference to a subsection of Rule 602 of
Regulation NMS under the Act; \6\ and (5) revise Chapter VI, Sections 7
and 10 of the NOM Rules to eliminate erroneous references to Displayed
Orders, which is not a defined term in the NOM Rules.
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\5\ See Securities Exchange Act Release No. 57478 (March 12,
2008), 73 FR 14521 (March 18, 2008) (order approving File Nos. SR-
NASDAQ-2007-004 and SR-NASDAQ-2007-080) (``NOM Approval Order'').
\6\ 17 CFR 242.602.
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The text of the proposed rule change is available at Nasdaq, in the
Commission's Public Reference Room, and at 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
On March 12, 2008, the Commission approved the Nasdaq proposals
establishing NOM.\7\ Nasdaq has identified the following five minor
modifications to the operation and rules governing NOM that Nasdaq
believes will improve the fair and orderly operation of NOM.
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\7\ See NOM Approval Order, supra note 5.
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(1) Nasdaq proposes to modify Chapter VI, Section 1(a)(2) of the
NOM Rules to clarify that all options trades will be reported to OPRA.
In its initial filing, Nasdaq inadvertently implied that it has
discretion to withhold transaction reports when, in fact, no such
discretion exists. All transaction reports by NOM will be reported to
OPRA.
(2) Nasdaq proposes to modify Chapter VI, Section 8 of the NOM
Rules to change the final tie-breakers for the Order Imbalance
Indicator and the execution algorithm of the Opening and Closing
Crosses. With respect to the Closing Cross, Nasdaq proposes to clarify
that the Closing Cross execution price will be the price that maximizes
the number of paired contracts of available interest within NOM at the
time of the Closing Cross. This formulation is the same as the
formulation that Nasdaq uses in its Closing Cross for equities.
With respect to the Opening Cross, Nasdaq proposes to use as the
final tie-breaker for the Order Imbalance Indicator and for the Opening
Cross execution algorithm the midpoint price of the available trading
interest within NOM at 9:30 a.m., rather than the Nasdaq Official
Closing price from the previous trading day. After further discussion
with industry representatives, Nasdaq has determined that using the
prior day's closing price would introduce unnecessary uncertainty due
to price changes that can and often do occur overnight. Nasdaq believes
that using the midpoint price of trading interest available within NOM
at 9:30 a.m. will be beneficial because it is the same tiebreaker that
Nasdaq applies for its equities Opening Cross. In addition, Nasdaq
believes that this price is more likely to produce a relevant market
price because trading interest within NOM is more likely to reflect
current market conditions than is the prior day's closing price.
(3) Nasdaq proposes to replace improper references to the Nasdaq
Market Center with proper references to NOM. Throughout Chapter VI,
Sections 8 and 9 of the NOM Rules, Nasdaq improperly referred to the
Nasdaq Market Center rather than to NOM. Nasdaq believes that this
technical correction will reduce confusion about Nasdaq's options
rules.
(4) Nasdaq proposes to modify Chapter VII, Section 6(c)(ii)(2) of
the NOM Rules to add one reference and to replace an inaccurate
reference to subsections of Rule 602 of Regulation NMS under the Act.
(5) Nasdaq proposes to modify Chapter VI, Sections 7 and 10 of the
NOM Rules to eliminate erroneous references to Displayed Orders, which
is not a defined term within the NOM Rules. The rules will refer
instead to orders that are displayed within the System.
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 it is designed to promote
just and equitable principles of trade, to foster cooperation 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; and are not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers, or to regulate by virtue of the authority conferred by this
title matters not related to the purposes of this title or the
administration of the exchange.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(5).
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Nasdaq notes that, with the exception of the changes proposed for
the Nasdaq Opening and Closing Crosses, none of the proposed changes
will impact the manner in which executions occur on NOM. According to
Nasdaq, the proposed changes to the Opening and Closing Crosses are
designed to improve both the quality and the predictability of
executions during these two critical periods of the day. In addition,
Nasdaq states that the proposed changes will more closely conform
Nasdaq's options and equities trading platform, thereby facilitating
improved trading by Nasdaq members.
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. Nasdaq notes, to the contrary,
that the proposed rules are designed to effectuate the orderly launch
of NOM, the seventh U.S. options market, which, Nasdaq believes, will
increase competition for the quotation and trading of standardized
equity and index options.
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
Nasdaq has designated the proposed rule change as one that: (i)
Does not significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) does not become operative for 30 days from the date of
filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest. In
addition, as required
[[Page 17395]]
under Rule 19b-4(f)(6)(iii),\10\ Nasdaq provided the Commission with
written notice of its intention to file the proposed rule change, along
with a brief description and the text of the proposed rule change, at
least five business days prior to filing the proposal with the
Commission. Therefore, the foregoing rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6)
thereunder.\12\
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\10\ 17 CFR 240.19b-4(f)(6)(iii).
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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Pursuant to Rule 19b-4(f)(6)(iii) under the Act, a proposal does
not become operative for 30 days after the date of its filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest. Nasdaq has asked the
Commission to waive the 30-day operative delay to allow the proposal to
be operative on March 31, 2008, the day Nasdaq plans to launch NOM.
Nasdaq states that it has carefully planned a detailed and thorough
testing and roll-out schedule for the NOM market, and has coordinated
this schedule with numerous industry participants. Nasdaq believes that
disrupting this schedule for the proposed modifications would cause
disproportionate inconvenience and delay the launch of a process that
will benefit investors. The Commission notes that waiving the 30-day
operative delay will allow Nasdaq to launch NOM pursuant to its planned
schedule. Further, the proposal will clarify NOM's rules, correct
technical errors, and provide greater consistency between NOM's opening
and closing procedures and the opening and closing procedures Nasdaq
uses in its equity market. For these reasons, the Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest and therefore
designates that the proposal become operative immediately.
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-2008-022 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 No. SR-NASDAQ-2008-022. 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 a.m. and 3 p.m. 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 No. SR-NASDAQ-
2008-022 and should be submitted on or before April 22, 2008.
For the Commission, by the Division of Trading and Markets,
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. E8-6611 Filed 3-31-08; 8:45 am]
BILLING CODE 8011-01-P