[Federal Register: February 28, 2008 (Volume 73, Number 40)]
[Notices]
[Page 10852-10854]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28fe08-115]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57368; File No. SR-NASDAQ-2008-011]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Equity Securities Using Alternative Settlement Processes in
Nasdaq's PORTAL System
February 21, 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 February 7, 2008, The NASDAQ Stock Market LLC (``Nasdaq'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared primarily by Nasdaq. Nasdaq has filed the
proposal pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder \4\ so that the proposal was effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to allow issuers of PORTAL equity securities to
select settlement procedures that do not involve submission to The
Depository Trust Company (``DTC'').
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.
[[Page 10853]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Currently, in order to qualify for inclusion in Nasdaq's PORTAL
Market (``PORTAL''), an equity security must be depository eligible.\5\
Recently, however, issuers and market participants have implemented
alternative regular way non-DTC settlement arrangements for a small
subset of Commission Rule 144A equity offerings in order to ensure
compliance with various regulatory obligations or trading conditions
for the security imposed by its issuer including monitoring the number
of record holders for purposes of determining the issuer's reporting
obligations under Section 12(g) of the Act. These alternative
settlement arrangements are generally implemented through the execution
of written agreements among the market participants that obligate them
to settle transactions in accordance with the alternative settlement
process. Having agreed to follow and be subject to the alternative
settlement process, approved participants are then given authorizing
credentials that allow them to engage in transactions in the
alternative settlement security with other preapproved counter-parties.
This process enhances the likelihood that trades in such securities
settle appropriately.
---------------------------------------------------------------------------
\5\ Rule 6502(b)(1)(C). Nasdaq defines ``depository eligible''
in Rule 11310. Although not specifically required, the primary
securities depository for Nasdaq transactions is DTC.
---------------------------------------------------------------------------
In order to provide the enhanced functionality and transparency of
the PORTAL system to such issuers, Nasdaq proposes to allow restricted
securities using such alternative settlement processes access to
PORTAL. Under the proposal, issuers of Rule 144A equity securities, as
defined in Rule 6501(c) of the PORTAL Market rules (``PORTAL Equity
Securities''), that intend to use an alternative settlement process
would have their issues designated as PORTAL Equity Securities, which
would permit such PORTAL Equity Securities to be quoted, traded, and
reported for dissemination and regulatory purposes through the PORTAL
System like other PORTAL Equity Securities. In order to qualify for
PORTAL designation, the alternative settlement security must use an
alternative settlement process that: (1) Is mandated by the issuer; (2)
provides adequate disclosure to investors of the existence of the
alternative settlement process, and (3) includes information,
technology, and procedures sufficient for Nasdaq to send and receive
transaction and other information necessary to the effectuate the
process. For qualified alternative settlement securities, the PORTAL
system will establish communication linkages and processes with the
operators of alternative settlement processes that will be used to seek
to ensure that only PORTAL market participants that have met the
prerequisites for participation in the process enter indicative quotes,
orders, or execute a trade through the PORTAL System in the alternative
settlement security. For example, the PORTAL system will regularly
communicate with operators of alternative settlement processes and will
prevent entities that have not been approved by those operators from
entering quotes or orders in the particular alternative settlement
security into PORTAL. Once a trade in a PORTAL Equity Security that
relies upon an alternative settlement process is consummated, details
of the trade will be provided to the alternative settlement process by
the PORTAL system.
Nasdaq believes that the above proposal enhances the flexibility
for issuers of Commission Rule 144 equity securities to choose a non-
DTC settlement process that meets their needs and also increases the
efficiency and transparency of the trading in such issues through
access to the PORTAL system.
Nasdaq states that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\6\ in general, and with Sections
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. Nasdaq believes that
offering access to its PORTAL system to equity securities that rely on
an alternative settlement processes will enhance the efficiency and
transparency of the trading of such securities and will facilitate the
reporting of trades in such securities.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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
Nasdaq did not solicit or receive written comments on the proposed
rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant Section
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder \9\
because it 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 from the date on
which it was filed, or such shorter time as the Commission may
designate. 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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 No. SR-NASDAQ-2008-011 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-2008-011. This file
[[Page 10854]]
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, 100 F Street, NE.,
Washington, DC 20549, 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 Nasdaq's principal office. 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-2008-011 and should be
submitted on or before March 20, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. E8-3733 Filed 2-27-08; 8:45 am]
BILLING CODE 8011-01-P