Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To Eliminate Its Rule Governing the Relation of a Nasdaq Market Maker's Quotations to the Prevailing Market, 57085-57087 [E7-19697]
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Federal Register / Vol. 72, No. 193 / Friday, October 5, 2007 / Notices
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 the changes will
materially enhance the efficiency of its
governance processes while continuing
to ensure a fair representation of its
members in the selection of its directors.
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, as amended.
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
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
All submissions should refer to File
Number SR–NASDAQ–2007–068. 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 (https://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 am and 3 pm.
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–2007–068 and
should be submitted on or before
October 26, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.18
Nancy M. Morris,
Secretary.
[FR Doc. E7–19672 Filed 10–4–07; 8:45 am]
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:
BILLING CODE 8011–01–P
Electronic Comments
Self-Regulatory Organizations; The
NASDAQ Stock Market, LLC; Notice of
Filing of Proposed Rule Change and
Amendment No. 1 Thereto To Eliminate
Its Rule Governing the Relation of a
Nasdaq Market Maker’s Quotations to
the Prevailing Market
yshivers on PROD1PC62 with NOTICES
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2007–068 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.
VerDate Aug<31>2005
15:33 Oct 04, 2007
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56586; File No. SR–
NASDAQ–2007–069]
October 1, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
57085
notice is hereby given that on August 1,
2007, 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 substantially prepared by
Nasdaq. On September 19, 2007, Nasdaq
filed Amendment No. 1 to the proposed
rule change, which replaced the text of
the original filing in its entirety. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to amend Nasdaq
Rule 4613(c) to eliminate a requirement
governing the relation of a Nasdaq
market maker’s quotations to the
prevailing market.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
brackets.3
*
*
*
*
*
4613. Character of Quotations
(a)–(b) No change.
(c) IMPAIRED ABILITY TO ENTER OR
UPDATE QUOTATIONS [Quotations
Reasonably Related to the Market]
[A Nasdaq Market Maker shall enter
and maintain quotations that are
reasonably related to the prevailing
market. Should it appear that a market
maker’s quotations are no longer
reasonably related to the prevailing
market, Nasdaq may require the market
maker to re-enter its quotations. If a
Nasdaq Market Maker whose quotations
are no longer reasonably related to the
prevailing market fails to re-enter its
quotations, Nasdaq may suspend the
market maker’s quotations in one or all
securities.]
In the event that a Nasdaq Market
Maker’s ability to enter or update
quotations is impaired, the market
maker shall immediately contact Nasdaq
Market Operations to request the
withdrawal of its quotations.
In the event that a Nasdaq Market
Maker’s ability to enter or update
quotations is impaired and the market
maker elects to remain in Nasdaq, the
Nasdaq Market Maker shall execute an
offer to buy or sell received from
another member at its quotations as
disseminated through the Nasdaq
Market Center.
3 Changes are marked to the rule text that appears
in the electronic NASDAQ Manual found at https://
www.nasdaqtrader.com.
E:\FR\FM\05OCN1.SGM
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57086
*
Federal Register / Vol. 72, No. 193 / Friday, October 5, 2007 / Notices
(d)–(e) 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
yshivers on PROD1PC62 with NOTICES
1. Purpose
Nasdaq proposes to amend Rule
4613(c) to delete the requirement that a
Nasdaq market maker’s quotations must
be ‘‘reasonably related to the prevailing
market.’’ The purpose of the amendment
is to clarify the obligations of Nasdaq
market makers. The proposed
amendment would delete the first
paragraph of the rule. The remainder of
the rule, which addresses a market
maker’s impaired ability to enter or
update quotations, would remain.
Additionally, Rule 4613(c) would be
revised to read ‘‘Impaired Ability to
Enter or Update Quotations.’’
Nasdaq is not proposing to amend
Rule 4613(a)(1), which contains the
long-standing quotation requirements
and obligations applicable to market
makers. As a result, for each security in
which they are registered, market
makers will continue to be subject to the
requirement to be willing to buy and
sell the security for their own account
on a continuous basis and maintain at
all times a two-sided attributable
quotation that is displayed in the
Nasdaq Quotation Montage. This basic
market maker requirement mirrors the
definition of ‘‘market maker’’ set forth in
Section 3(a)(38) of the Act.4
Furthermore, this basic market maker
obligation is consistent with the market
maker obligations contained in the rules
of other national securities exchanges,
such as NYSE Arca Rule 7.23, which
4 15 U.S.C. 78c(a)(38) states: ‘‘The term ‘market
maker’ means any specialist permitted to act as a
dealer, any dealer acting in the capacity of block
positioner, and any dealer who, with respect to a
security, holds himself out (by entering quotations
in an inter-dealer communications system or
otherwise) as being willing to buy and sell such
security for his own account on a regular or
continuous basis.’’
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15:33 Oct 04, 2007
Jkt 214001
requires continuous two-sided
quotations but does not contain a
subjective requirement of the
quotations’ relation to the market.
The rule was first introduced in 1987,
at a time when Nasdaq’s market
structure and the regulatory
environment in which it operated were
quite different.5 Nasdaq believes that
the requirement is no longer a
meaningful means of ensuring market
execution quality in the highly
competitive and increasingly automated
environment in which Nasdaq and other
trading venues now operate. Rather,
Nasdaq’s price/time priority execution
algorithm and the obligation to seek
favorable prices imposed by Regulation
NMS and the duty of best execution
ensure that market makers with the
most competitive quotations will
receive executions and thereby provide
incentives to quote at or near the inside
where practicable. Moreover, market
makers who display a quotation that is
not at or near the inside are still
‘‘holding themselves out’’ as willing to
buy and sell for their own account
through an attributable quotation that is
disseminated through public data feeds.
Regulation NMS and best execution
obligations require that customer orders
directed to these market makers in
response to their publicly-displayed
quotations must be executed, at a
minimum, at the national best bid or
offer. Finally, the quality of a market
maker’s order executions can be
objectively determined by a review of
the market execution quality reports
required by Rule 605 under Regulation
NMS.6 Therefore, Nasdaq believes it is
appropriate to eliminate this
requirement.
Deleting the requirement also would
have the benefit of eliminating
confusion about whether particular
market maker behavior constitutes a
violation of the rule. For example,
market makers sometimes reflect their
client’s non-marketable limit orders as
attributable orders in lieu of entering
proprietary quotes. If there are no
current client orders in a particular
stock, in order to meet its two-sided
quotation obligation, the market maker
may display ‘‘stub,’’ or widely spaced,
quotations, such as a bid of $0.01 and
an offer of $2,000 in stocks where this
is the case.
Because of the current rule’s
ambiguity, it may be difficult to
determine whether a stub quote should
5 See Securities Exchange Act Release No. 24579
(June 10, 1987), 52 FR 23117 (June 17, 1987) (SR–
NASD–87–8).
6 17 CFR 242.605. See also Securities Exchange
Act Release No. 51808 (June 9, 2005), 70 FR 37496
(June 29, 2005).
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
be considered ‘‘reasonably related’’ to
the market. Measured against what
another market maker may be quoting,
the stub quote may bear little relation to
the market, but when measured against
the market maker’s practice of
representing customer orders, the stub
quote may be an accurate reflection of
the absence of such orders.
Nasdaq does not believe that the
change in the rule will have any effect
on market quality. However, as is
always the case, Nasdaq will carefully
monitor the performance of market
makers to determine if the change has
any impact on the extent to which
market makers quote at or near the
inside market.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,7 in
general, and with Section 6(b)(5) of the
Act,8 in particular, in that it is designed
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.
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
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
7 15
8 15
E:\FR\FM\05OCN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(5).
05OCN1
Federal Register / Vol. 72, No. 193 / Friday, October 5, 2007 / Notices
A. By order approve such proposed
rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Nancy M. Morris,
Secretary.
[FR Doc. E7–19697 Filed 10–4–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56587; File No. SR–NSX–
2007–10]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2007–069 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.
yshivers on PROD1PC62 with NOTICES
should be submitted on or before
October 26, 2007.
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change to Extend
the Effective Period for Rule 2.12
Regarding Third-Party Routing
Services in Respect of Orders Entered
into NSX BLADESM
October 1, 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
September 28, 2007, the National Stock
All submissions should refer to File
Exchange, Inc. (‘‘NSX’’ or ‘‘Exchange’’)
Number SR–NASDAQ–2007–069. This
filed with the Securities and Exchange
file number should be included on the
subject line if e-mail is used. To help the Commission (‘‘Commission’’) the
proposed rule change as described in
Commission process and review your
Items I and II below, which Items have
comments more efficiently, please use
only one method. The Commission will been substantially prepared by NSX.
post all comments on the Commission’s The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
Internet Web site (https://www.sec.gov/
change pursuant to Section
rules/sro.shtml). Copies of the
19(b)(3)(A)(iii) of the Act 3 and Rule
submission, all subsequent
19b–4(f)(6) thereunder,4 which renders
amendments, all written statements
the proposal effective upon receipt of
with respect to the proposed rule
this filing by the Commission. The
change that are filed with the
Commission is publishing this notice to
Commission, and all written
solicit comments on the proposed rule
communications relating to the
change from interested persons.
proposed rule change between the
Commission and any person, other than I. Self-Regulatory Organization’s
those that may be withheld from the
Statement of the Terms of Substance of
public in accordance with the
the Proposed Rule Change
provisions of 5 U.S.C. 552, will be
The Exchange is proposing to extend
available for inspection and copying in
the effective period for Rule 2.12, which
the Commission’s Public Reference
describes the terms under which the
Room, 100 F Street, NE., Washington,
Exchange provides routing services
DC 20549, on official business days
procured from a third party with respect
between the hours of 10 am and 3 pm.
to orders entered into its trading system,
Copies of such filing also will be
NSX BLADESM. The text of the
available for inspection and copying at
proposed rule change is available at
the principal office of Nasdaq. All
NSX, the Commission’s Public
comments received will be posted
Reference Room, and https://
without change; the Commission does
www.nsx.com.
not edit personal identifying
information from submissions. You
9 17 CFR 200.30–3(a)(12).
should submit only information that
1 15 U.S.C. 78s(b)(1).
you wish to make available publicly. All
2 17 CFR 240.19b–4.
submissions should refer to File
3 15 U.S.C. 78s(b)(3)(A)(iii).
Number SR–NASDAQ–2007–069 and
4 17 CFR 240.19b–4(f)(6).
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15:33 Oct 04, 2007
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57087
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
Exchange Rules 2.11 and 2.12 to extend
the effective period for Rule 2.12
(relating to the Exchange’s use of a third
party to provide outbound routing of
orders from the Exchange to other
trading centers (‘‘Routing Services’’)
through March 31, 2008, and to delay
the effectiveness of Rule 2.11 (relating to
the outbound routing function of the
Exchange’s affiliate, NSX Securities,
LLC) until April 1, 2008.
Rule 2.11 provides for certain terms
and conditions under which NSX
Securities, LLC (‘‘NSX Securities’’), an
affiliate of the Exchange, will provide
Routing Services. Rule 2.11 was
approved by the Commission in
connection with the approval of the
Exchange’s new trading rules relating to
NSX BLADE on August 31, 2006.5 The
Exchange filed and received approval
for the addition of Rule 2.12, which
provides for terms and conditions of the
Exchange’s use of a third party to
provide Routing Services.6 The
Exchange subsequently filed to extend
the effective period for Rule 2.12.7
Rule 2.12 currently provides that it is
effective through September 30, 2007,
with Rule 2.11 becoming effective on
October 1, 2007. In connection with the
rule filing adding Rule 2.12,8 the
5 See Securities Exchange Act Release No. 54391
(August 31, 2006), 71 FR 52836 (September 7, 2006)
(SR–NSX–2006–08).
6 See Securities Exchange Act Release No. 54808
(November 21, 2006), 71 FR 69163 (November 29,
2006) (SR–NSX–2006–15).
7 See Securities Exchange Act Release Nos. 55624
(April 12, 2007), 72 FR 19732 (April 19, 2007) (SR–
NSX–2007–04) and 56067 (July 13, 2007), 72 FR
39650 (July 19, 2007) (SR–NSX–2007–08).
8 See Securities Exchange Act Release No. 54808
(November 21, 2006), 71 FR 69163 (November 29,
2006) (SR–NSX–2006–15).
E:\FR\FM\05OCN1.SGM
05OCN1
]]>Agencies
[Federal Register Volume 72, Number 193 (Friday, October 5, 2007)]
[Notices]
[Pages 57085-57087]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-19697]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56586; File No. SR-NASDAQ-2007-069]
Self-Regulatory Organizations; The NASDAQ Stock Market, LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
Eliminate Its Rule Governing the Relation of a Nasdaq Market Maker's
Quotations to the Prevailing Market
October 1, 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 August 1, 2007, 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 substantially prepared by Nasdaq. On September 19, 2007,
Nasdaq filed Amendment No. 1 to the proposed rule change, which
replaced the text of the original filing in its entirety. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to amend Nasdaq Rule 4613(c) to eliminate a
requirement governing the relation of a Nasdaq market maker's
quotations to the prevailing market.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.\3\
---------------------------------------------------------------------------
\3\ Changes are marked to the rule text that appears in the
electronic NASDAQ Manual found at https://www.nasdaqtrader.com.
---------------------------------------------------------------------------
* * * * *
4613. Character of Quotations
(a)-(b) No change.
(c) Impaired Ability to Enter or Update Quotations [Quotations
Reasonably Related to the Market]
[A Nasdaq Market Maker shall enter and maintain quotations that are
reasonably related to the prevailing market. Should it appear that a
market maker's quotations are no longer reasonably related to the
prevailing market, Nasdaq may require the market maker to re-enter its
quotations. If a Nasdaq Market Maker whose quotations are no longer
reasonably related to the prevailing market fails to re-enter its
quotations, Nasdaq may suspend the market maker's quotations in one or
all securities.]
In the event that a Nasdaq Market Maker's ability to enter or
update quotations is impaired, the market maker shall immediately
contact Nasdaq Market Operations to request the withdrawal of its
quotations.
In the event that a Nasdaq Market Maker's ability to enter or
update quotations is impaired and the market maker elects to remain in
Nasdaq, the Nasdaq Market Maker shall execute an offer to buy or sell
received from another member at its quotations as disseminated through
the Nasdaq Market Center.
[[Page 57086]]
(d)-(e) 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 proposes to amend Rule 4613(c) to delete the requirement
that a Nasdaq market maker's quotations must be ``reasonably related to
the prevailing market.'' The purpose of the amendment is to clarify the
obligations of Nasdaq market makers. The proposed amendment would
delete the first paragraph of the rule. The remainder of the rule,
which addresses a market maker's impaired ability to enter or update
quotations, would remain. Additionally, Rule 4613(c) would be revised
to read ``Impaired Ability to Enter or Update Quotations.''
Nasdaq is not proposing to amend Rule 4613(a)(1), which contains
the long-standing quotation requirements and obligations applicable to
market makers. As a result, for each security in which they are
registered, market makers will continue to be subject to the
requirement to be willing to buy and sell the security for their own
account on a continuous basis and maintain at all times a two-sided
attributable quotation that is displayed in the Nasdaq Quotation
Montage. This basic market maker requirement mirrors the definition of
``market maker'' set forth in Section 3(a)(38) of the Act.\4\
Furthermore, this basic market maker obligation is consistent with the
market maker obligations contained in the rules of other national
securities exchanges, such as NYSE Arca Rule 7.23, which requires
continuous two-sided quotations but does not contain a subjective
requirement of the quotations' relation to the market.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78c(a)(38) states: ``The term `market maker' means
any specialist permitted to act as a dealer, any dealer acting in
the capacity of block positioner, and any dealer who, with respect
to a security, holds himself out (by entering quotations in an
inter-dealer communications system or otherwise) as being willing to
buy and sell such security for his own account on a regular or
continuous basis.''
---------------------------------------------------------------------------
The rule was first introduced in 1987, at a time when Nasdaq's
market structure and the regulatory environment in which it operated
were quite different.\5\ Nasdaq believes that the requirement is no
longer a meaningful means of ensuring market execution quality in the
highly competitive and increasingly automated environment in which
Nasdaq and other trading venues now operate. Rather, Nasdaq's price/
time priority execution algorithm and the obligation to seek favorable
prices imposed by Regulation NMS and the duty of best execution ensure
that market makers with the most competitive quotations will receive
executions and thereby provide incentives to quote at or near the
inside where practicable. Moreover, market makers who display a
quotation that is not at or near the inside are still ``holding
themselves out'' as willing to buy and sell for their own account
through an attributable quotation that is disseminated through public
data feeds. Regulation NMS and best execution obligations require that
customer orders directed to these market makers in response to their
publicly-displayed quotations must be executed, at a minimum, at the
national best bid or offer. Finally, the quality of a market maker's
order executions can be objectively determined by a review of the
market execution quality reports required by Rule 605 under Regulation
NMS.\6\ Therefore, Nasdaq believes it is appropriate to eliminate this
requirement.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 24579 (June 10,
1987), 52 FR 23117 (June 17, 1987) (SR-NASD-87-8).
\6\ 17 CFR 242.605. See also Securities Exchange Act Release No.
51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------
Deleting the requirement also would have the benefit of eliminating
confusion about whether particular market maker behavior constitutes a
violation of the rule. For example, market makers sometimes reflect
their client's non-marketable limit orders as attributable orders in
lieu of entering proprietary quotes. If there are no current client
orders in a particular stock, in order to meet its two-sided quotation
obligation, the market maker may display ``stub,'' or widely spaced,
quotations, such as a bid of $0.01 and an offer of $2,000 in stocks
where this is the case.
Because of the current rule's ambiguity, it may be difficult to
determine whether a stub quote should be considered ``reasonably
related'' to the market. Measured against what another market maker may
be quoting, the stub quote may bear little relation to the market, but
when measured against the market maker's practice of representing
customer orders, the stub quote may be an accurate reflection of the
absence of such orders.
Nasdaq does not believe that the change in the rule will have any
effect on market quality. However, as is always the case, Nasdaq will
carefully monitor the performance of market makers to determine if the
change has any impact on the extent to which market makers quote at or
near the inside market.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\7\ in general, and with Section
6(b)(5) of the Act,\8\ in particular, in that it is designed 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.
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\7\ 15 U.S.C. 78f.
\8\ 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.
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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
[[Page 57087]]
A. By order approve such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2007-069 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-2007-069. 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 (https://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 am and 3 pm. 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-2007-069 and should
be submitted on or before October 26, 2007.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
[FR Doc. E7-19697 Filed 10-4-07; 8:45 am]
BILLING CODE 8011-01-P
