Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Modify Order Audit Trail System Rules To Provide an Exemption From Transmission Requirements for Proprietary Orders, 40917-40918 [E7-14356]

Download as PDF Federal Register / Vol. 72, No. 142 / Wednesday, July 25, 2007 / Notices 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 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–2007–042 and should be submitted on or before August 15, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–14315 Filed 7–24–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56096; File No. SR– NASDAQ–2007–037] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Modify Order Audit Trail System Rules To Provide an Exemption From Transmission Requirements for Proprietary Orders rwilkins on PROD1PC63 with NOTICES July 18, 2007. I. Introduction On April 3, 2007, The NASDAQ Stock Market LLC (‘‘Nasdaq’’) 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 provide an exemption from OATS transmission requirements for certain 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Aug<31>2005 19:31 Jul 24, 2007 Jkt 211001 proprietary orders. On June 4, 2007, Nasdaq filed Amendment No. 1. The proposed rule change, as amended, was published for comment in the Federal Register on June 6, 2007.3 The Commission received one comment letter expressing support for the proposal.4 On July 17, 2007, Nasdaq filed Amendment No. 2. This notice and order notices Amendment No. 2; solicits comments from interested persons on Amendment No. 2; and approves the proposed rule change, as amended, on an accelerated basis. II. Description of Proposal Nasdaq proposes to modify its OATS rules to adopt a limited exemption from OATS 5 order data transmission requirements for proprietary trading firms. Nasdaq proposes to define a ‘‘Proprietary Trading Firm’’ as a Nasdaq member that trades its own capital, with all the trading being done in the firm’s accounts by traders that are owners of, employees of, or contractors to the firm. A Proprietary Trading Firm would not have ‘‘customers,’’ as that term is defined in Nasdaq Rule 0120(g) and would not be a member of the NASD. Nasdaq proposes to amend Nasdaq Rule 6955 regarding transmission of OATS data to provide that a Proprietary Trading Firm would be required to transmit OATS order data information to Nasdaq Regulation only upon request.6 Although a Proprietary Trading Firm would not be required to transmit the order data information to Nasdaq Regulation unless requested, it still would be responsible for maintaining and retaining the information in a format that could be easily integrated into the NASD’s OATS system in the event Nasdaq Regulation makes a request for such information. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 2, including whether Amendment No. 2 is consistent with the Act. Comments 3 See Securities Exchange Act Release No. 55870, 72 FR 32692 (June 13, 2007). 4 See letter from Stephen Schuler, Managing Member, Global Electronic Trading Company, LLC to Nancy M. Morris, Secretary, Commission, dated July 3, 2007. 5 OATS is an integrated audit trail of order, quote, and trade information for Nasdaq securities used to recreate events in the life cycle of orders and more completely monitor the trading practices of member firms. 6 Rule 0130 provides that the term Nasdaq Regulation should be understood as also referring to NASD staff, NASD Regulation staff, and NASD departments acting on behalf of Nasdaq pursuant to a regulatory services agreement between Nasdaq and the NASD. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 40917 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 rulecomments@sec.gov. Please include File Number SR–NASDAQ–2007–037 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 Number SR–NASDAQ–2007–037. 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, 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 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 Number SR–NASDAQ–2007–037 and should be submitted on or before August 15, 2007. IV. Discussion After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange,7 and, in 7 The Commission has considered the amended proposed rule change’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). E:\FR\FM\25JYN1.SGM 25JYN1 40918 Federal Register / Vol. 72, No. 142 / Wednesday, July 25, 2007 / Notices particular, the requirements of Section 6 of the Act.8 Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act 9 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. OATS was designed to provide an accurate, time-sequenced record of orders and transactions, beginning with the receipt of an order at the first point of contact between the broker-dealer and the customer or counterparty and further documenting the life of the order through the process of execution. One of the principle objectives of OATS is customer protection through the transparency of the executions of customer orders. The Commission does not believe that the proposed rule change would impact this objective since, by definition, Proprietary Trading Firms do not handle customer orders. Further, the Commission notes that Nasdaq believes that the current requirement for Proprietary Trading Firms to transmit all order data information is onerous and is not offset by an equivalent regulatory benefit. In addition, the Commission notes that this approach parallels the approach undertaken by the New York Stock Exchange (‘‘NYSE’’) in NYSE Rule 132C, which requires NYSE members, upon request, to transmit order tracking data to the NYSE.10 The Commission therefore believes that it is consistent with the Act to permit Proprietary Trading Firms to submit OATS data to Nasdaq only upon request. V. Accelerated Approval The Commission finds good cause for approving the proposed rule change, as modified by Amendment Nos. 1 and 2, prior to the thirtieth day after publishing notice of Amendment No. 2 in the Federal Register pursuant to Section 19(b)(2) of the Act.11 In rwilkins on PROD1PC63 with NOTICES 8 15 U.S.C. 78f. U.S.C. 78f(b)(5). 10 See Securities Exchange Act Release No. 47689 (April 17, 2003), 68 FR 20200 (April 24, 2003) (Order approving SR–NYSE–99–51). 11 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2) of the Act, the Commission may not approve any proposed rule change prior to the thirtieth day after 9 15 VerDate Aug<31>2005 19:31 Jul 24, 2007 Jkt 211001 Amendment No. 2, Nasdaq clarified that the proposed exception from the daily OATS transmissions requirements for Proprietary Trading Firms would not extend to persons associated with Proprietary Trading Firms. The Commission believes that this is a clarifying change to the scope of the proposed rule change and raises no significant regulatory issues. The Commission therefore finds good cause exists to accelerate approval of the proposed change, as modified by Amendment Nos. 1 and 2, pursuant to Section 19(b)(2) of the Act. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,12 that the proposed rule change (SR–NASDAQ– 2007–037), as modified by Amendments No. 1 and 2, is approved on anaccelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–14356 Filed 7–24–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56103; File No. SR–NASD– 2007–039] Self-Regulatory Organizations: National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay Implementation of Certain Changes to the Manning Rule July 19, 2007. 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 June 20, 2007, the National Association of Securities Dealers, Inc. (‘‘NASD’’) 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 substantially prepared by NASD. NASD filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders it effective the date of publication of the notice thereof, unless the Commission finds good cause for so doing. 12 15 U.S.C. 78s(b)(2). 13 17 CFR 200.30–3(a)(12). 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). PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to delay implementation of certain NASD rule changes approved in SR–NASD–2005– 146 until November 26, 2007.5 There are no new changes to the text of NASD rules. The text of the proposed rule change is available at NASD, http://www.nasd.com, and the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD 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. NASD 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 February 26, 2007, the Commission approved SR–NASD–2005– 146, which, among other clarifying and conforming changes, proposed amendments to NASD IM–2110–2 6 to (1) expand the scope to apply to OTC Equity Securities; 7 (2) modify the minimum price-improvement standards for securities trading in decimals; (3) adopt on a permanent basis the pilot price-improvement standards for 5 See Securities Exchange Act Release No. 55351 (February 26, 2007), 72 FR 9810 (March 5, 2007) (order approving SR–NASD–2005–146). 6 Currently, NASD IM–2110–2 generally prohibits a member from trading for its own account in an exchange-listed security at a price that is equal to or better than an unexecuted customer limit order in that security, unless the member immediately thereafter executes the customer limit order at the price at which it traded for its own account or better. As part of SR–NASD–2005–146, NASD replaced the term ‘‘exchange-listed security’’ with the term ‘‘NMS stock,’’ which is defined as any NMS security other than an option. See Rule 600(b)(47) of Regulation NMS. Although the replacement of the term would not become effective until the November 26, 2007 final implementation date, as stated in SR–NASD–2005–146, NASD IM– 2110–2 does not apply to options. 7 See NASD Rule 6610(d) (definition of ‘‘OTC Equity Security’’). E:\FR\FM\25JYN1.SGM 25JYN1

Agencies

[Federal Register Volume 72, Number 142 (Wednesday, July 25, 2007)]
[Notices]
[Pages 40917-40918]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-14356]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56096; File No. SR-NASDAQ-2007-037]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Amendment No. 2 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 
2, To Modify Order Audit Trail System Rules To Provide an Exemption 
From Transmission Requirements for Proprietary Orders

July 18, 2007.

I. Introduction

    On April 3, 2007, The NASDAQ Stock Market LLC (``Nasdaq'') 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 
provide an exemption from OATS transmission requirements for certain 
proprietary orders. On June 4, 2007, Nasdaq filed Amendment No. 1. The 
proposed rule change, as amended, was published for comment in the 
Federal Register on June 6, 2007.\3\ The Commission received one 
comment letter expressing support for the proposal.\4\ On July 17, 
2007, Nasdaq filed Amendment No. 2. This notice and order notices 
Amendment No. 2; solicits comments from interested persons on Amendment 
No. 2; and approves the proposed rule change, as amended, on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55870, 72 FR 32692 
(June 13, 2007).
    \4\ See letter from Stephen Schuler, Managing Member, Global 
Electronic Trading Company, LLC to Nancy M. Morris, Secretary, 
Commission, dated July 3, 2007.
---------------------------------------------------------------------------

II. Description of Proposal

    Nasdaq proposes to modify its OATS rules to adopt a limited 
exemption from OATS \5\ order data transmission requirements for 
proprietary trading firms. Nasdaq proposes to define a ``Proprietary 
Trading Firm'' as a Nasdaq member that trades its own capital, with all 
the trading being done in the firm's accounts by traders that are 
owners of, employees of, or contractors to the firm. A Proprietary 
Trading Firm would not have ``customers,'' as that term is defined in 
Nasdaq Rule 0120(g) and would not be a member of the NASD.
---------------------------------------------------------------------------

    \5\ OATS is an integrated audit trail of order, quote, and trade 
information for Nasdaq securities used to recreate events in the 
life cycle of orders and more completely monitor the trading 
practices of member firms.
---------------------------------------------------------------------------

    Nasdaq proposes to amend Nasdaq Rule 6955 regarding transmission of 
OATS data to provide that a Proprietary Trading Firm would be required 
to transmit OATS order data information to Nasdaq Regulation only upon 
request.\6\ Although a Proprietary Trading Firm would not be required 
to transmit the order data information to Nasdaq Regulation unless 
requested, it still would be responsible for maintaining and retaining 
the information in a format that could be easily integrated into the 
NASD's OATS system in the event Nasdaq Regulation makes a request for 
such information.
---------------------------------------------------------------------------

    \6\ Rule 0130 provides that the term Nasdaq Regulation should be 
understood as also referring to NASD staff, NASD Regulation staff, 
and NASD departments acting on behalf of Nasdaq pursuant to a 
regulatory services agreement between Nasdaq and the NASD.
---------------------------------------------------------------------------

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2, including whether Amendment No. 2 
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-2007-037 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 Number SR-NASDAQ-2007-037. 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, 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 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 Number SR-NASDAQ-2007-037 and should 
be submitted on or before August 15, 2007.

IV. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange,\7\ and, in

[[Page 40918]]

particular, the requirements of Section 6 of the Act.\8\ Specifically, 
the Commission finds that the proposal is consistent with Section 
6(b)(5) of the Act \9\ 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.
---------------------------------------------------------------------------

    \7\ The Commission has considered the amended proposed rule 
change's impact on efficiency, competition and capital formation. 15 
U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    OATS was designed to provide an accurate, time-sequenced record of 
orders and transactions, beginning with the receipt of an order at the 
first point of contact between the broker-dealer and the customer or 
counterparty and further documenting the life of the order through the 
process of execution. One of the principle objectives of OATS is 
customer protection through the transparency of the executions of 
customer orders. The Commission does not believe that the proposed rule 
change would impact this objective since, by definition, Proprietary 
Trading Firms do not handle customer orders. Further, the Commission 
notes that Nasdaq believes that the current requirement for Proprietary 
Trading Firms to transmit all order data information is onerous and is 
not offset by an equivalent regulatory benefit. In addition, the 
Commission notes that this approach parallels the approach undertaken 
by the New York Stock Exchange (``NYSE'') in NYSE Rule 132C, which 
requires NYSE members, upon request, to transmit order tracking data to 
the NYSE.\10\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 47689 (April 17, 
2003), 68 FR 20200 (April 24, 2003) (Order approving SR-NYSE-99-51).
---------------------------------------------------------------------------

    The Commission therefore believes that it is consistent with the 
Act to permit Proprietary Trading Firms to submit OATS data to Nasdaq 
only upon request.

V. Accelerated Approval

    The Commission finds good cause for approving the proposed rule 
change, as modified by Amendment Nos. 1 and 2, prior to the thirtieth 
day after publishing notice of Amendment No. 2 in the Federal Register 
pursuant to Section 19(b)(2) of the Act.\11\ In Amendment No. 2, Nasdaq 
clarified that the proposed exception from the daily OATS transmissions 
requirements for Proprietary Trading Firms would not extend to persons 
associated with Proprietary Trading Firms. The Commission believes that 
this is a clarifying change to the scope of the proposed rule change 
and raises no significant regulatory issues. The Commission therefore 
finds good cause exists to accelerate approval of the proposed change, 
as modified by Amendment Nos. 1 and 2, pursuant to Section 19(b)(2) of 
the Act.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2) of the 
Act, the Commission may not approve any proposed rule change prior 
to the thirtieth day after the date of publication of the notice 
thereof, unless the Commission finds good cause for so doing.
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NASDAQ-2007-037), as 
modified by Amendments No. 1 and 2, is approved on an accelerated 
basis.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14356 Filed 7-24-07; 8:45 am]
BILLING CODE 8010-01-P