Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Conform SRO Rules to Changes to Rule 10a-1 and Regulation SHO, 69263-69269 [E7-23769]
Download as PDF
<![CDATA[
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
69263
Delivery Procedures) that applies
generally to all CBOT products.5 New
Rules 931 and 932 are identical to
current Regulations 431.07 and 431.08.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
2. Statutory Basis
The Exchange has filed these
proposed regulations pursuant to
section 19(b)(7) of the Act.6 The CBOT
believes that these rules, as renumbered
and reorganized, continue to be
authorized by, and consistent with,
section 6(b)(5) of the Act,7 because they
are designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and to protect investors and the
public interest.
• 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–CBOT–2007–01 on the
subject line.
[Release No. 34–56867; File No. SR–
NASDAQ–2007–065]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Conform
SRO Rules to Changes to Rule 10a–1
and Regulation SHO
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The CBOT does not believe that the
proposed rule changes will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Since the
proposed rule changes will permit the
CBOT to provide a trading venue for
security futures, these rules will serve to
enhance and promote competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rules Received From
Members, Participants, or Others
The CBOT neither solicited nor
received any written comments on the
proposed regulations.
III. Date of Effectiveness of the
Proposed Rules and Timing for
Commission Action
Pursuant to section 19(b)(7)(B) of the
Act,8 the proposed regulations became
effective on October 26, 2007.9 Within
60 days of the date of effectiveness of
the proposed regulations, the
Commission, after consultation with the
CFTC, may summarily abrogate the
proposed regulations and require that
the proposed regulations be re-filed in
accordance with the provisions of
section 19(b)(1) of the Act.10
pwalker on PROD1PC71 with NOTICES
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.
5 See CBOT Rule 701, as certified to the CFTC on
October 25, 2007.
6 15 U.S.C. 78s(b)(7).
7 15 U.S.C. 78f(b)(5).
8 15 U.S.C. 78s(b)(7)(B).
9 The CBOT filed the proposed regulations with
the CFTC, together with a written certification
under Section 5c(c) of the CEA, 7 U.S.C. 7a–2(c),
on October 25, 2007.
10 15 U.S.C. 78s(b)(1).
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
November 29, 2007.
Paper Comments
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 July 11,
2007, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
All submissions should refer to File
the proposed rule change as described
Number SR–CBOT–2007–01. This file
in Items I and II below, which Items
number should be included on the
have been substantially prepared by
subject line if e-mail is used. To help the Nasdaq. Nasdaq has designated the
Commission process and review your
proposed rule change as constituting a
comments more efficiently, please use
non-controversial rule change under
only one method. The Commission will Rule 19b–4(f)(6) under the Act,3 which
post all comments on the Commission’s renders the proposal effective upon
Internet Web site (https://www.sec.gov/
filing with the Commission. The
rules/sro.shtml). Copies of the
Commission is publishing this notice to
submission, all subsequent
solicit comments on the proposed rule
amendments, all written statements
change from interested persons.
with respect to the proposed rule
I. Self-Regulatory Organization’s
change that are filed with the
Statement of the Terms of Substance of
Commission, and all written
the Proposed Rule Change
communications relating to the
proposed rule change between the
Nasdaq proposes a rule change to
Commission and any person, other than eliminate Nasdaq Rule 3350 and IM–
those that may be withheld from the
3350 and to make conforming changes
public in accordance with the
to other Nasdaq rules, as required by
provisions of 5 U.S.C. 552, will be
recent Commission rulemaking.
available for inspection and copying in
The text of the proposed rule change
the Commission’s Public Reference
is below. Proposed new language is
Room, 100 F Street, NE., Washington,
underlined; proposed deletions are in
DC 20549, on official business days
brackets.
between the hours of 10 a.m. and 3 p.m. *
*
*
*
*
Copies of such filing will also be
3350. Reserved. [Short Sale Rule]
available for inspection and copying at
the principal office of the CBOT. All
[(a) With respect to trades executed on
comments received will be posted
Nasdaq, no member shall effect a short
without change; the Commission does
sale for the account of a customer or for
not edit identifying personal
its own account in a Nasdaq Global
information from submissions. You
Market security at or below the current
should submit only information that
best (inside) bid displayed in the
you wish to make available publicly. All National Market System when the
submissions should refer to File No.
current best (inside) bid is below the
SR–CBOT–2007–01 and should be
preceding best (inside) bid in the
submitted on or before December 28,
security. For purposes of this rule, the
2007.
term ‘‘customer’’ includes a nonmember broker-dealer.
For the Commission by the Division of
(b) In determining the price at which
Trading and Markets, pursuant to delegated
a short sale may be effected after a
authority.11
security goes ex-dividend, ex-right, or
Florence E. Harmon,
ex-any other distribution, all quotation
Deputy Secretary.
prices prior to the ‘‘ex’’ date may be
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
[FR Doc. E7–23721 Filed 12–6–07; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
2 17
11 17
PO 00000
CFR 200.30–3(a)(73).
Frm 00083
Fmt 4703
Sfmt 4703
E:\FR\FM\07DEN1.SGM
07DEN1
pwalker on PROD1PC71 with NOTICES
69264
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
reduced by the value of such
distribution.
(c) The provisions of paragraph (a)
shall not apply to:
(1) Sales by a registered market maker
registered in the security on Nasdaq in
connection with bona fide market
making activity. For purposes of this
paragraph, transactions unrelated to
normal market making activity, such as
index arbitrage and risk arbitrage that
are independent from a member’s
market making functions, will not be
considered bona fide market-making
activity.
(2) Any sale by any person, for an
account in which he has an interest, if
such person owns the security sold and
intends to deliver such security as soon
as possible without undue
inconvenience or expense.
(3) Sales by a member, for an account
in which the member has no interest,
pursuant to an order to sell which is
marked ‘‘long’’.
(4) Sales by a member to offset oddlot orders of customers.
(5) Sales by a member to liquidate a
long position which is less than a round
lot, provided that such sale does not
change the position of the member by
more than one unit of trading.
(6) Sales by a person of a security for
a special arbitrage account if the person
then owns another security by virtue of
which the person is, or presently will
be, entitled to acquire an equivalent
number of securities of the same class
of securities sold; provided such sale, or
the purchase which such sale offsets, is
effected for the bona fide purpose of
profiting from a current difference
between the price of the security sold
and the security owned and that such
right of acquisition was originally
attached to or represented by another
security or was issued to all the holders
of any such class of securities of the
issuer.
(7) Sales by a person of a security
effected for a special international
arbitrage account for the bona fide
purpose of profiting from a current
difference between the price of such
security on a securities market not
within or subject to the jurisdiction of
the United States and on such a
securities market subject to the
jurisdiction of the United States;
provided the person at the time of such
sale knows or, by virtue of information
currently received, has reasonable
grounds to believe that an offer enabling
the person to cover such sale is then
available to the person in such foreign
securities market and intends to accept
such offer immediately.
(8) Sales by an underwriter, or any
member of a syndicate or group
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
participating in the distribution of a
security, in connection with an overallotment of securities, or any layoff sale
by such a person in connection with a
distribution of securities through rights
or a standby underwriting commitment.
(9) Sales of securities as to which all
short sale price tests have been
suspended by operation of a Pilot Order
issued by the Commission pursuant to
SEC Rule 202T.
(10) Sales of securities included in the
Nasdaq 100 Index.
(11) Short sales of securities in the
Nasdaq Crossing Network pursuant to
NASDAQ Rule 4770 provided that:
(a) Such short sales involve securities
that comprise the S&P 500 Index;
(b) Such short sales involve securities
that qualify as ‘‘actively-traded
securities’’ under Regulation M; or
(c) Such short sales are part of a
basket transaction of 20 or more
securities in which the subject security
does not comprise more than five
percent of the value of the basket traded.
(d) No member shall effect a short sale
for the account of a customer or for its
own account indirectly or through the
offices of a third party to avoid the
application of this Rule.
(e) No member shall knowingly, or
with reason to know, effect sales for the
account of a customer or for its own
account to avoid the application of this
Rule.
(f) A member that is not currently
registered as a Nasdaq market maker in
a security and that has acquired a
security while acting in the capacity of
a block positioner shall be deemed to
own such security for the purposes of
this Rule notwithstanding that such
member may not have a net long
position in such security if and to the
extent that the member’s short position
in the security is the subject of offsetting
positions created in the course of bona
fide arbitrage, risk arbitrage, or bona fide
hedge activities.
(g) For purposes of this Rule, a
depositary receipt of a security shall be
deemed to be the same security as the
security represented by such receipt.
(h)(1) A member shall be permitted,
consistent with its quotation
obligations, to execute a short sale for
the account of an options market maker
that would otherwise be in
contravention of this Rule, if:
(A) The options market maker is
registered with a qualified options
exchange as a qualified options market
maker in a stock options class on a
Nasdaq Global Market security or an
options class on a qualified stock index;
and
(B) The short sale is an exempt hedge
transaction.
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
(2) For purposes of this paragraph:
(A)(i) An ‘‘exempt hedge transaction,’’
in the context of qualified options
market makers in stock options classes,
shall mean a short sale in a Nasdaq
Global Market security that was effected
to hedge, and in fact serves to hedge, an
existing offsetting options position or an
offsetting options position that was
created in a transaction(s)
contemporaneous with the short sale,1
provided that when establishing the
short position the options market maker
is eligible to receive(s) good faith margin
pursuant to section 220.12 of Regulation
T under the Act for that transaction.
(ii) An ‘‘exempt hedge transaction,’’ in
the context of qualified options market
makers in stock index options classes,
shall mean a short sale in a Nasdaq
Global Market security that was effected
to hedge, and in fact serves to hedge, an
existing offsetting stock index options
position or an offsetting stock index
options position that was created in a
transaction(s) contemporaneous with
the short sale, provided that:
a. The security sold short is a
component security of the index
underlying such offsetting index options
position;
b. The index underlying such
offsetting index options position is a
‘‘qualified stock index;’’ and
c. The dollar value of all exempt short
sales effected to hedge the offsetting
stock index options position does not
exceed the aggregate current index value
of the offsetting options position.
(iii) Notwithstanding any other
provision of this paragraph (h), any
transaction unrelated to normal options
market making activity, such as index
arbitrage or risk arbitrage that in either
case is independent of an options
market maker’s market making
functions, will not be considered an
‘‘exempt hedge transaction.’’
(B) A ‘‘qualified options market
maker’’ shall mean an options market
maker who has received an appointment
as a ‘‘qualified options market maker’’
for certain classes of stock options on
Nasdaq Global Market securities and/or
index options on qualified stock indexes
pursuant to the rules of a qualified
options exchange.
(C) A ‘‘qualified options exchange’’
shall mean a national securities
exchange that has approved rules and
procedures providing for:
(i) Designating market makers as
qualified options market makers, which
standards shall be designed to identify
options market makers who regularly
engage in market making activities in
the particular options class(es);
(ii) The surveillance of its market
maker’s utilization of the exemption set
E:\FR\FM\07DEN1.SGM
07DEN1
pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
forth in paragraph (h)(1) to assure that
short sales effected by qualified options
market makers are exempt hedge
transactions and that other nonqualified market makers are not
utilizing the exemption; and
(iii) Authorization of Nasdaq to
withdraw, suspend or modify the
designation of a qualified options
market maker but only if a qualified
options exchange has determined that
the qualified options market maker has
failed to comply with the terms of the
exemption, and that such a withdrawal,
suspension or modification of the
market maker’s exemption is warranted
in light of the substantial, willful, or
continuing nature of the violation.
(D) A ‘‘qualified stock index’’ shall
mean any stock index that includes one
or more Nasdaq Global Market
securities, provided that more than 10%
of the weight of the index is accounted
for by Nasdaq Global Market securities
and provided further that the
qualification of an index as a qualified
stock index shall be reviewed as of the
end of each calendar quarter, and the
index shall cease to qualify if the value
of the index represented by one or more
Nasdaq Global Market securities is less
than 8% at the end of any subsequent
calendar quarter.
(E) ‘‘Aggregate current index value’’
shall mean the current index value
times the index multiplier.
(F) A member will not be in violation
of paragraph (a) above if the member
executes a short sale for the account of
an options market maker that is in
contravention of this paragraph (h),
provided that the member did not know
or have reason to know that the options
market maker’s short sale was in
contravention of this paragraph (h).
(i)(1) A member shall be permitted,
consistent with its quotation
obligations, to execute a short sale for
the account of a warrant market maker
that would otherwise be in
contravention of this Rule, if:
(A) The warrant market maker is a
registered Nasdaq market maker for the
warrant; and
(B) The short sale is an exempt hedge
transaction that results in a fully hedged
position.
(2) For purposes of this paragraph, an
‘‘exempt hedge transaction’’ shall mean
a short sale in a Nasdaq Global Market
security that was effected to hedge, and
in fact serves to hedge, an existing
offsetting warrant position or an
offsetting warrant position that was
created in a transaction(s)
contemporaneous with the short sale.2
Notwithstanding any other provision of
this paragraph, any transaction
unrelated to normal warrant market
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
making activity, such as index arbitrage
or risk arbitrage that in either case is
independent of a warrant market
maker’s market making functions, will
not be considered an ‘‘exempt hedge
transaction.’’
(3) Nasdaq may withdraw, suspend or
modify the exemption for a warrant
market maker upon determination that
the market maker has failed to comply
with the terms of the exemption, and
that such a withdrawal, suspension or
modification of the market maker’s
exemption is warranted in light of the
substantial, willful, or continuing nature
of the violation.
(4) A member will not be in violation
of paragraph (a) above if the member
executes a short sale for the account of
a warrant market maker that is in
contravention of this paragraph (i),
provided that the member did not know
or have reason to know that the warrant
market maker’s short sale was in
contravention of paragraph (i).
(j) Pursuant to the Rule 9600 Series or
on Nasdaq’s own motion, Nasdaq may
exempt either unconditionally, or on
specified terms and conditions, any
transaction or class of transactions from
the provisions of this Rule.
(k) Definitions:
(1) The term ‘‘short sale’’ shall have
the same meaning as contained in SEC
Rule 200, adopted pursuant to the Act.
(2) The term ‘‘block positioner’’ shall
have the same meaning as contained in
SEC Rule 3b–8(c) for ‘‘Qualified Block
Positioner’’ adopted pursuant to the Act.
(l) This section shall be in effect until
December 15, 2006.]
[1 The phrase contemporaneously
established includes transactions
occurring simultaneously as well as
transactions occurring within the same
brief period of time.]
[2 The phrase contemporaneously
established includes transactions
occurring simultaneously as well as
transactions occurring within the same
brief period of time.]
[IM–3350. Short Sale Rule]
[(a)(1) In developing a Short Sale Rule
for Nasdaq Global Market securities,
Nasdaq has adopted an exemption to the
Rule for certain market making activity.
This exemption is an essential
component of the Rule because bona
fide market making activity is necessary
and appropriate to maintain continuous,
liquid markets in Nasdaq Global Market
securities. Rule 3350(c)(1) states that
short selling prohibitions shall not
apply to sales by registered Nasdaq
market makers in connection with bona
fide market making activity and
specifies that transactions unrelated to
normal market making activity, such as
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
69265
index arbitrage and risk arbitrage that
are independent from a member’s
market making functions, will not be
considered as bona fide market making.
Thus two standards are to be applied:
One must be a registered Nasdaq market
maker and one must engage in ‘‘bona
fide’’ market making activity to take
advantage of this exemption. With this
interpretation, Nasdaq wishes to clarify
for members some of the factors that
will be taken into consideration when
reviewing market making activity that
may not be deemed to be bona fide
market making activity and therefore
would not be exempted from the Rule’s
application.
(2) First, as the Rule indicates, bona
fide market making activity does not
include activity that is unrelated to
market making functions, such as index
arbitrage and risk arbitrage that is
independent from a member’s market
making functions. While these types of
arbitrage activity appear to be suitable
for the firm’s overall hedging or risk
management concerns, they do not
warrant an exemption from the Rule.
However, short sales of a security of a
company involved in a merger or
acquisition will be deemed bona fide
market-making activity if made to hedge
the purchase or prospective purchase
(based on communicated indications of
interest) of another security of a
company involved in the merger or
acquisition, which purchase was made,
or is to be made, in the course of bona
fide market making activity. The
purchase of a security of a company
involved in a merger or acquisition
made to hedge a short sale of another
security involved in the merger or
acquisition, which sale was made in the
course of bona fide market making
activity, will not cause the sale to be
deemed unrelated to normal marketmaking activity. Short sales made to
hedge any such purchases or
prospective purchases must be
reasonably consistent with the exchange
ratio (or exchange ratio formula)
specified by the terms of the merger or
acquisition.
(3) Similarly, bona fide market
making would exclude activity that is
related to speculative selling strategies
of the member or investment decisions
of the firm and is disproportionate to
the usual market making patterns or
practices of the member in that security.
Nasdaq does not anticipate that a firm
could properly take advantage of its
market maker exemption to effectuate
such speculative or investment short
selling decisions. Disproportionate short
selling in a market making account to
effectuate such strategies will be viewed
by Nasdaq as inappropriate activity that
E:\FR\FM\07DEN1.SGM
07DEN1
pwalker on PROD1PC71 with NOTICES
69266
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
does not represent bona fide market
making and would therefore be in
violation of Rule 3350.
(b) With respect to trades executed on
or reported to Nasdaq, Rule 3350
requires that no member shall effect a
short sale for the account of a customer
or for its own account in a Nasdaq
Global Market security at or below the
current best (inside) bid displayed in
the Nasdaq Market Center when the
current best (inside) bid is below the
proceeding best (inside) bid in the
security. For purposes of this rule, the
term ‘‘customer’’ includes a nonmember broker-dealer. Nasdaq has
determined that in order to effect a
‘‘legal’’ short sale when the current best
bid is lower than the preceding best bid
the short sale must be executed at a
price of at least $0.01 above the current
inside bid when the current inside
spread is $0.01 or greater. The last sale
report for such a trade would, therefore,
be above the inside bid by at least $0.01.
(c)(1) Rule 3350 prohibits a member
from effecting a short sale for the
account of a customer or for its own
account directly or through the offices
of a third party for the purpose of
avoiding the application of the Short
Sale Rule. Further, the Rule prohibits a
member from knowingly, or with reason
to know, effecting sales for the account
of a customer or for its own account for
the purpose of avoiding the Rule. With
this interpretation, Nasdaq wishes to
clarify some of the circumstances under
which a member would be deemed to be
in violation of Rule 3350.
(2) For example, in instances where
the current best bid is below the
preceding best bid, if a market maker
alone at the inside best bid were to
lower its bid and then raise it to create
an ‘‘up bid’’ for the purpose of
facilitating a short sale, Nasdaq would
consider such activity to be a
manipulative act and a violation of
Nasdaq’s Short Sale Rule. Nasdaq also
would consider it a manipulative act
and a violation of the Rule if a market
maker with a long stock position were
to raise its bid above the inside bid and
then lower it to create a ‘‘down bid’’ for
the purpose of precluding market
participants from selling short. In
addition, if a market maker agrees to an
arrangement proposed by a member or
a customer whereby the market maker
raises its bid in Nasdaq in order to effect
a short sale for the other party and is
protected against any loss on the trade
or on any other executions effected at its
new bid price, the market maker would
be deemed to be in violation of Rule
3350. Similarly, a market maker would
be deemed in violation of the Rule if it
entered into an arrangement with a
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
member or a customer whereby it used
its exemption from the rule to sell short
at the bid at successively lower prices,
accumulating a short position, and
subsequently offsetting those sales
through a transaction at a prearranged
price, for the purpose of avoiding
compliance with the Rule, and with the
understanding that the market maker
would be guaranteed by the member or
customer against losses on the trades.
(3) Nasdaq believes that members’
activities to circumvent the Rule
through indirect actions such as
executions with other members or
through facilitation of customer orders
while being protected from loss are
antithetical to the purposes of the Rule.
Accordingly, Nasdaq will consider any
such activity as a violation of Rule 3350.
(d) Nasdaq calculates changes to the
inside bid displayed in the Nasdaq
Market Center and disseminates a ‘‘bid
arrow’’ via Nasdaq data feeds for market
participants to use to comply with Rule
3350 when utilizing the execution
functionality of the Nasdaq Market
Center. The initial bid arrow each day
shall be calculated at market open as
follows.
(1) For stocks subject to Rule 4709(c),
the initial bid arrow after completing
the process described in Rule 4709(c)(1)
through (3) shall be up and the next and
subsequent bid arrows shall be
calculated by comparing the bid arrow
with each quotation update processed
by the Nasdaq system after the system
begins processing pursuant to Rule
4709(c)(4).
(2) For stocks described in Rule
4704(d), the initial bid arrow at the
conclusion of the Nasdaq Opening Cross
shall be up and the next and subsequent
bid arrows shall be calculated by
comparing the bid arrow with each
quotation update processed by the
Nasdaq system after the Nasdaq
Opening Cross concludes.]
3360. Short-Interest Reporting
(a) To the extent such information is
not otherwise reported to the NASD in
conformance with NASD Rule 3360,
each member shall maintain a record of
total ‘‘short’’ positions in all customer
and proprietary firm accounts in
securities listed on Nasdaq and shall
regularly report such information to
Nasdaq in such a manner as may be
prescribed by Nasdaq. Reports shall be
made as of the close of the settlement
date designated by Nasdaq. Reports
shall be received by Nasdaq no later
than the second business day after the
reporting settlement date designated by
Nasdaq.
(b) For purposes of this Rule:
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
(1) ‘‘short’’ positions to be reported
are those resulting from ‘‘short sales’’ as
that term is defined in SEC Rule 200(a)
of Regulation SHO, with the exception
of positions that meet the following
requirements: [of Subsections (e)(1), (6),
(7), (8), and (10) of SEC Rule 10a–1
adopted under the Act; and]
(A) any sale by any person, for an
account in which he has an interest, if
such person owns the security sold and
intends to deliver such security as soon
as is possible without undue
inconvenience or expense;
(B) any sale of a security covered by
a short sale rule on a national securities
exchange (except a sale to a stabilizing
bid complying with Rule 104 of
Regulation M) effected with the
approval of such exchange which is
necessary to equalize the price of such
security thereon with the current price
of such security on another national
securities exchange which is the
principal exchange market for such
security;
(C) any sale of a security for a special
arbitrage account by a person who then
owns another security by virtue of which
he is, or presently will be, entitled to
acquire an equivalent number of
securities of the same class as the
securities sold; provided such sale, or
the purchase which such sale offsets, is
effected for the bona fide purpose of
profiting from a current difference
between the price of the security sold
and the security owned and that such
right of acquisition was originally
attached to or represented by another
security or was issued to all the holders
of any such class of securities of the
issuer;
(D) any sale of a security registered
on, or admitted to unlisted trading
privileges on, a national securities
exchange effected for a special
international arbitrage account for the
bona fide purpose of profiting from a
current difference between the price of
such security on a securities market not
within or subject to the jurisdiction of
the United States and on a securities
market subject to the jurisdiction of the
United States; provided the seller at the
time of such sale knows or, by virtue of
information currently received, has
reasonable grounds to believe that an
offer enabling him to cover such sale is
then available to him in such foreign
securities market and intends to accept
such offer immediately; and
(E) any sale by an underwriter, or any
member of a syndicate or group
participating in the distribution of a
security, in connection with an overallotment of securities, or any lay-off
sale by such a person in connection with
a distribution of securities through
E:\FR\FM\07DEN1.SGM
07DEN1
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
pwalker on PROD1PC71 with NOTICES
rights or a standby underwriting
commitment.
(2) No change.
*
*
*
*
*
IM–4390 Impact of Non-Designation of
Dually Listed Securities
To foster competition among markets
and further the development of the
national market system following the
repeal of NYSE Rule 500, Nasdaq shall
permit issuers whose securities are
listed on the New York Stock Exchange
to apply also to list those securities on
the Nasdaq Global Market (‘‘NGM’’).
Nasdaq shall make an independent
determination of whether such issuers
satisfy all applicable listing
requirements and shall require issuers
to enter into a dual listing agreement
with Nasdaq.
While Nasdaq shall certify such
dually listed securities for listing on the
NGM, Nasdaq shall not exercise its
authority under Rule 4390 separately to
designate or register such dually listed
securities as Nasdaq national market
system securities within the meaning of
Section 11A of the Act or the rules
thereunder. As a result, these securities,
which are already designated as
national market system securities under
the Consolidated Quotation Service
(‘‘CQS’’) and Consolidated Tape
Association national market system
plans (‘‘CQ and CTA Plans’’), shall
remain subject to those plans and shall
not become subject to the Nasdaq UTP
Plan, the national market system plan
governing securities designated by
Nasdaq. For purposes of the national
market system, such securities shall
continue to trade under their current
one, two, or three-character ticker
symbol. Nasdaq shall continue to send
all quotations and transaction reports in
such securities to the processor for the
CTA Plan. In addition, dually listed
issues that are currently eligible for
trading via the Intermarket Trading
System (‘‘ITS’’) shall remain so and
continue to trade on the Nasdaq
Intermarket trading platform as they do
today.
Through this interpretation, Nasdaq
also resolves any potential conflicts that
arise under Nasdaq rules as a result of
a single security being both a security
subject to the CQ and CTA Plans (a
‘‘CQS security’’), which is subject to one
set of rules, and a listed NGM security,
which is subject to a different set of
rules. Specifically, dually listed
securities shall be Nasdaq securities for
purposes of rules related to listing and
delisting, and shall remain as CQS
securities under all other Nasdaq rules.
Treating dually listed securities as CQS
securities under Nasdaq rules is
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
consistent with their continuing status
as CQS securities under the CTA, CQ,
and ITS national market system, as
described above. This interpretation
also preserves the status quo and avoids
creating potential confusion for
investors and market participants that
currently trade these securities on
Nasdaq.
For example, Nasdaq shall continue to
honor the trade halt authority of the
primary market under the CQ and CT
Plans. Nasdaq Rule 4120(a)(2) and (3)
governing CQS securities shall apply to
dually listed securities, whereas Nasdaq
Rule 4120(a)(1), (4), (5), (6), and (7) shall
not. [SEC Rule 10a–1 governing short
sales of CQS securities shall continue to
apply to dually listed securities, rather
than Nasdaq Rule 3350 governing short
sales of Nasdaq-listed securities.]
Market makers in dually listed
securities shall retain all obligations
imposed by the Nasdaq Rule 5200 Series
regarding CQS securities rather than
assuming the obligations appurtenant to
Nasdaq-listed securities. The fees
applicable to CQS securities set forth in
Nasdaq Rule 7010 shall continue to
apply to dually listed issues.
*
*
*
*
*
4755. Order Entry Parameters
(a) System Orders
(1) General—A System order is an
order that is entered into the System for
display and/or execution as appropriate.
Such orders are executable against
marketable contra-side orders in the
System.
(A) All System Orders shall indicate
limit price and whether they are a buy,
short sale, [short-sale exempt,] or long
sale. Systems Orders can be designated
as Market Hours Immediate or Cancel
(‘‘MIOC’’), Market Hours Good-tillCancelled (‘‘MGTC’’), Market Hours Day
(‘‘MDAY’’), System Hours Expire Time
(‘‘SHEX’’), System Hours Day (‘‘SDAY’’),
System Hours Immediate or Cancel
(‘‘SIOC’’), System Hours Good-tillCancelled (‘‘SGTC’’), or Good-til-Market
Close ‘‘GTMC’’).
(B)–(C) No change.
(2) Reserved [Short Sale
Compliance—System orders to sell short
shall not be executed if the execution of
such an order would violate any
applicable short sale regulation of the
SEC or Nasdaq. For Nasdaq securities,
the System shall validate for short sale
compliance using a bid tick based upon
changes to the national best bid and
offer disseminated pursuant to an
effective transaction reporting plan. For
NYSE and Amex securities, the System
shall validate for short sale compliance
based upon changes to the consolidated
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
69267
last sale disseminated pursuant to an
effective transaction reporting plan.]
(3)–(4) No change.
*
*
*
*
*
4758. Order Routing
(a) Order Routing Process
(1) No change. The Order Routing
Process shall be available to Participants
from 7 a.m. until 8 p.m. Eastern Time,
and shall route orders as described
below: Beginning March 5, 2007, in
connection with the trading of securities
governed by Regulation NMS, all
routing of orders shall comply with Rule
611 of Regulation NMS under the
Exchange Act.
(A)–(B) No change.
(C) Priority of Routed Orders.
Regardless of the routing option
selected, orders sent by the System to
other markets do not retain time priority
with respect to other orders in the
System and the System shall continue to
execute other orders while routed orders
are away at another market center. Once
routed by the System, an order becomes
subject to the rules and procedures of
the destination market including, but
not limited to, [short-sale regulation
and] order cancellation. If a routed order
is subsequently returned, in whole or in
part, that order, or its remainder, shall
receive a new time stamp reflecting the
time of its return to the System.
4759. ITS Commitments
Until such time as Nasdaq withdraws
from the ITS Plan, Quotes and Orders
that are eligible for ITS will be
processed by the System and routed to
the appropriate Non-Nasdaq Participant
Market as an ITS Commitment in
accordance with the requirements of the
ITS Plan and all applicable Nasdaq
rules. Nasdaq shall participate in the
ITS Plan as set forth below.
(a) No change.
(b) Inbound ITS Commitments
(1) No change.
(2) [If the ITS Commitment, if
executed, would result in a violation of
SEC Rule 10a–1, the Nasdaq Market
Center will decline it.] Reserved
(3) No change.
(c) Outbound Commitments: Any
‘‘commitment to trade,’’ which is
transmitted by Nasdaq to another NonNasdaq ITS Participant Market through
ITS, shall be firm and irrevocable for the
period of thirty seconds following
transmission by the sender. All such
commitments to trade shall, at a
minimum:
(1)–(5) No change.
[(6) designate the commitment
‘‘short’’ or ‘‘short exempt’’ whenever it
is a commitment to sell which, if it
E:\FR\FM\07DEN1.SGM
07DEN1
69268
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
should result in an execution in the
receiving market, would result in a short
sale to which the provisions of SEC Rule
10a–1(a) under the Act would apply.]
(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. The text of these
statements may be examined at the
places specified in Item IV below, and
is set forth in sections A, B, and C
below.
pwalker on PROD1PC71 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On June 13, 2007, the SEC voted to
adopt certain amendments to SEC Rule
10a–1 and Regulation SHO under the
Act. The amendments, among other
things: (1) Eliminate the short sale price
test contained in SEC Rule 10a–1; (2)
add Rule 201(a) of Regulation SHO to
provide that no price test, including any
price test of any self-regulatory
organization (‘‘SRO’’), shall apply to
short sales in any security; (3) add Rule
201(b) of Regulation SHO to prohibit
any SRO from having a price test; and
(4) amend Rule 200(g) of Regulation
SHO to remove the requirement that a
broker-dealer mark a sell order of an
equity security as ‘‘short exempt’’ if the
seller is relying on an exception from
the price test of Rule 10a–1, or any price
test of any exchange or national
securities association. The amendments
to SEC Rule 10a–1 and Regulation SHO
became effective on July 3, 2007, and
had a July 6, 2007 compliance date.
The purpose of this proposed rule
change is to make conforming changes
to Nasdaq rules to reflect the
elimination of SEC Rule 10a–1 and
other amendments to Regulation SHO
by: (1) Eliminating references to SEC
Rule 10a–1 in Nasdaq rules; and (2)
repealing Nasdaq’s short sale rule
contained in Rule 3350 and IM–3350, as
well as amending Nasdaq rules that
reference Rule 3350 or IM–3350.
Eliminating References to SEC Rule
10a–1 in Nasdaq Rules. Currently, Rule
3360 (Short-Interest Reporting) requires
members to record and report short
interest information to Nasdaq.
Reportable short positions are those
resulting from ‘‘short sales’’ as the term
is defined in SEC Rule 200 of Regulation
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
SHO, with the exception of positions
that meet the requirements of
subsections (e)(1), (6), (7), (8), and (10)
of Rule 10a–1 of the Act.4 As a result of
the repeal of SEC Rule 10a–1, these
subsections will no longer exist.
Therefore, Nasdaq is proposing a
technical change to Rule 3360 to replace
the references to these exceptions to
SEC Rule 10a–1 with the underlying
rule text of each provision. Nasdaq also
is proposing to make conforming
amendments to IM–4390 and Rules
4744, 4758, and 4759 to remove
references to SEC Rule 10a–1.
Repeal of Nasdaq’s Short Sale Rule.
As noted above, the SEC has removed
the restrictions on the execution prices
of short sales and prohibited SROs from
having price tests. Rule 3350 and IM–
3350 generally prohibit a member from
effecting short sales in Nasdaq Global
Market securities otherwise than on an
exchange for a customer account, or the
member’s own account, at or below the
current national best (inside) bid, when
the current national best (inside) bid is
below the preceding national best
(inside) bid. As an SRO, Nasdaq now is
prohibited from having such a short sale
price test under newly adopted SEC
Rule 201 of Regulation SHO.
Accordingly, Nasdaq proposes to repeal
its short sale rule contained in Rule
3350 and the related interpretive
material in IM–3350 and is proposing
conforming changes to IM–4390 and
Rules 4755, 4758, and 4759 to delete
references to Rule 3350 in such rules.
Technical Changes. Nasdaq also
proposes to make a technical change to
the text of Rule 3360. Specifically, Rule
3360(b) provides that, subject to certain
limited exceptions, short positions
required to be reported under the rule
are those resulting from short sales as
the term is defined in Rule 200 of
Regulation SHO. The term ‘‘short sale’’
is actually defined in Rule 200(a) of
Regulation SHO. Therefore, Nasdaq is
proposing to amend the text of Rule
3360 to reference Regulation SHO Rule
200(a), instead of Rule 200, to eliminate
any confusion.
Implementation. As noted above,
Nasdaq has filed the proposed rule
change for immediate effectiveness.
Nasdaq proposes to make the proposed
rule change operative on July 6, 2007, to
coincide with the operative date of the
amendments to SEC Rule 10a–1 and
Regulation SHO.
Nasdaq believes that the proposed
rule change is consistent with the
PO 00000
Nasdaq Rule 3360(b)(1).
Frm 00088
Fmt 4703
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will impose 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 on the proposed
rule change 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 6 and Rule 19b–
4(f)(6) thereunder.7 Nasdaq has
requested that the Commission waive
the 5-day pre-filing notice and 30-day
pre-operative period requirements for
‘‘non-controversial’’ proposals, based
upon a representation that such waivers
will allow Nasdaq to implement the rule
changes to conform to currently
effective changes in Regulation SHO
and Rule 10a–1. In light of the
foregoing, the Commission believes that
waiver of the 5-day notice and 30-day
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
has determined to waive the notice
requirement and the operative delay,8
and the proposed rule change has
become effective pursuant to section
5 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f)(6).
8 For purposes only of waiving the 30 day preoperative period, the Commission has considered
the impact of the proposed rule change on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
6 15
2. Statutory Basis
4 See
provisions of section 6(b)(5) of the Act,5
which requires, among other things, that
Nasdaq rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. Nasdaq believes that the
proposed rule change is necessary and
appropriate to comply with the
amendments to SEC Rule 10a–1 and
Regulation SHO.
Sfmt 4703
E:\FR\FM\07DEN1.SGM
07DEN1
Federal Register / Vol. 72, No. 235 / Friday, December 7, 2007 / Notices
19(b)(3)(A) of the Act,9 and Rule 19b–
4(f)(6) thereunder,10 with no operative
delay.
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:
pwalker on PROD1PC71 with NOTICES
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–2007–065 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2007–065. 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 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.
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
10 17
VerDate Aug<31>2005
16:30 Dec 06, 2007
Jkt 214001
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–2006–065 and
should be submitted on or before
December 28, 2007.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–23769 Filed 12–6–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56883; File No. SR–NSX–
2007–11]
Self-Regulatory Organizations; The
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change as Modified
by Amendment Nos. 1 and 2 Thereto,
To Modify Rebate Programs for
Automatic Execution Transactions in
Certain Designated ETFs
December 3, 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 October
1, 2007, the National Stock Exchange,
Inc. (‘‘NSX’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
Exchange. On October 31, 2007 NSX
filed Amendment No. 1 to the proposed
rule change. On November 13, 2007
NSX filed Amendment No. 2 to the
proposed rule change. The Exchange
filed the proposed rule change pursuant
to Section 19(b)(3)(A) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders it effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
11 17
CFR 200.30–3(a)(12).
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)(2).
1 15
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
69269
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NSX is proposing a change to its
Rules and Fee Schedule to modify its
market data rebate program and its
liquidity provider rebate program for
transactions that are executed through
NSX BLADESM, the Exchange’s trading
platform, effective October 1, 2007. The
Exchange wishes to modify these rebate
programs for only those transactions in
certain Designated ETF Shares in which
the User effecting such order has chosen
the automatic execution mode of order
interaction as set forth in Exchange Rule
11.13(b)(1). The text of the proposed
rule change is available at the
Exchange’s Web site, https://
www.nsx.com, the Exchange 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,
NSX 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. NSX 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
Pursuant to Exchange Rule 16.1(a),
the Exchange maintains a Fee Schedule
that contains its current fees, dues and
other charges applicable to transactions
in NSX BLADE (the ‘‘NSX BLADE Fee
Schedule’’). Currently, the NSX BLADE
Fee Schedule provides for a rebate of
$0.0030 per share for adding liquidity
into NSX BLADE through transactions
in which ETP Holders have selected the
Automatic Execution mode of order
interaction (‘‘AutoEx’’), regardless of
which symbol such transaction
involves. Similarly, orders that are
AutoEx at less than $1.00 per share will
result in a rebate for a dollar amount
equal to 0.3% of the price per share,
multiplied by the number of shares
executed. The Exchange also currently
provides a 100% pro rata transaction
credit of gross Tape ‘‘A’’, ‘‘B’’ and ‘‘C’’
market data revenue associated with
E:\FR\FM\07DEN1.SGM
07DEN1
]]>Agencies
[Federal Register Volume 72, Number 235 (Friday, December 7, 2007)]
[Notices]
[Pages 69263-69269]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23769]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56867; File No. SR-NASDAQ-2007-065]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Conform SRO Rules to Changes to Rule 10a-1 and Regulation SHO
November 29, 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 July 11, 2007, 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
substantially prepared by Nasdaq. Nasdaq has designated the proposed
rule change as constituting a non-controversial rule change under Rule
19b-4(f)(6) under the Act,\3\ 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 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 a rule change to eliminate Nasdaq Rule 3350 and IM-
3350 and to make conforming changes to other Nasdaq rules, as required
by recent Commission rulemaking.
The text of the proposed rule change is below. Proposed new
language is underlined; proposed deletions are in brackets.
* * * * *
3350. Reserved. [Short Sale Rule]
[(a) With respect to trades executed on Nasdaq, no member shall
effect a short sale for the account of a customer or for its own
account in a Nasdaq Global Market security at or below the current best
(inside) bid displayed in the National Market System when the current
best (inside) bid is below the preceding best (inside) bid in the
security. For purposes of this rule, the term ``customer'' includes a
non-member broker-dealer.
(b) In determining the price at which a short sale may be effected
after a security goes ex-dividend, ex-right, or ex-any other
distribution, all quotation prices prior to the ``ex'' date may be
[[Page 69264]]
reduced by the value of such distribution.
(c) The provisions of paragraph (a) shall not apply to:
(1) Sales by a registered market maker registered in the security
on Nasdaq in connection with bona fide market making activity. For
purposes of this paragraph, transactions unrelated to normal market
making activity, such as index arbitrage and risk arbitrage that are
independent from a member's market making functions, will not be
considered bona fide market-making activity.
(2) Any sale by any person, for an account in which he has an
interest, if such person owns the security sold and intends to deliver
such security as soon as possible without undue inconvenience or
expense.
(3) Sales by a member, for an account in which the member has no
interest, pursuant to an order to sell which is marked ``long''.
(4) Sales by a member to offset odd-lot orders of customers.
(5) Sales by a member to liquidate a long position which is less
than a round lot, provided that such sale does not change the position
of the member by more than one unit of trading.
(6) Sales by a person of a security for a special arbitrage account
if the person then owns another security by virtue of which the person
is, or presently will be, entitled to acquire an equivalent number of
securities of the same class of securities sold; provided such sale, or
the purchase which such sale offsets, is effected for the bona fide
purpose of profiting from a current difference between the price of the
security sold and the security owned and that such right of acquisition
was originally attached to or represented by another security or was
issued to all the holders of any such class of securities of the
issuer.
(7) Sales by a person of a security effected for a special
international arbitrage account for the bona fide purpose of profiting
from a current difference between the price of such security on a
securities market not within or subject to the jurisdiction of the
United States and on such a securities market subject to the
jurisdiction of the United States; provided the person at the time of
such sale knows or, by virtue of information currently received, has
reasonable grounds to believe that an offer enabling the person to
cover such sale is then available to the person in such foreign
securities market and intends to accept such offer immediately.
(8) Sales by an underwriter, or any member of a syndicate or group
participating in the distribution of a security, in connection with an
over-allotment of securities, or any layoff sale by such a person in
connection with a distribution of securities through rights or a
standby underwriting commitment.
(9) Sales of securities as to which all short sale price tests have
been suspended by operation of a Pilot Order issued by the Commission
pursuant to SEC Rule 202T.
(10) Sales of securities included in the Nasdaq 100 Index.
(11) Short sales of securities in the Nasdaq Crossing Network
pursuant to NASDAQ Rule 4770 provided that:
(a) Such short sales involve securities that comprise the S&P 500
Index;
(b) Such short sales involve securities that qualify as ``actively-
traded securities'' under Regulation M; or
(c) Such short sales are part of a basket transaction of 20 or more
securities in which the subject security does not comprise more than
five percent of the value of the basket traded.
(d) No member shall effect a short sale for the account of a
customer or for its own account indirectly or through the offices of a
third party to avoid the application of this Rule.
(e) No member shall knowingly, or with reason to know, effect sales
for the account of a customer or for its own account to avoid the
application of this Rule.
(f) A member that is not currently registered as a Nasdaq market
maker in a security and that has acquired a security while acting in
the capacity of a block positioner shall be deemed to own such security
for the purposes of this Rule notwithstanding that such member may not
have a net long position in such security if and to the extent that the
member's short position in the security is the subject of offsetting
positions created in the course of bona fide arbitrage, risk arbitrage,
or bona fide hedge activities.
(g) For purposes of this Rule, a depositary receipt of a security
shall be deemed to be the same security as the security represented by
such receipt.
(h)(1) A member shall be permitted, consistent with its quotation
obligations, to execute a short sale for the account of an options
market maker that would otherwise be in contravention of this Rule, if:
(A) The options market maker is registered with a qualified options
exchange as a qualified options market maker in a stock options class
on a Nasdaq Global Market security or an options class on a qualified
stock index; and
(B) The short sale is an exempt hedge transaction.
(2) For purposes of this paragraph:
(A)(i) An ``exempt hedge transaction,'' in the context of qualified
options market makers in stock options classes, shall mean a short sale
in a Nasdaq Global Market security that was effected to hedge, and in
fact serves to hedge, an existing offsetting options position or an
offsetting options position that was created in a transaction(s)
contemporaneous with the short sale,1 provided that when
establishing the short position the options market maker is eligible to
receive(s) good faith margin pursuant to section 220.12 of Regulation T
under the Act for that transaction.
(ii) An ``exempt hedge transaction,'' in the context of qualified
options market makers in stock index options classes, shall mean a
short sale in a Nasdaq Global Market security that was effected to
hedge, and in fact serves to hedge, an existing offsetting stock index
options position or an offsetting stock index options position that was
created in a transaction(s) contemporaneous with the short sale,
provided that:
a. The security sold short is a component security of the index
underlying such offsetting index options position;
b. The index underlying such offsetting index options position is a
``qualified stock index;'' and
c. The dollar value of all exempt short sales effected to hedge the
offsetting stock index options position does not exceed the aggregate
current index value of the offsetting options position.
(iii) Notwithstanding any other provision of this paragraph (h),
any transaction unrelated to normal options market making activity,
such as index arbitrage or risk arbitrage that in either case is
independent of an options market maker's market making functions, will
not be considered an ``exempt hedge transaction.''
(B) A ``qualified options market maker'' shall mean an options
market maker who has received an appointment as a ``qualified options
market maker'' for certain classes of stock options on Nasdaq Global
Market securities and/or index options on qualified stock indexes
pursuant to the rules of a qualified options exchange.
(C) A ``qualified options exchange'' shall mean a national
securities exchange that has approved rules and procedures providing
for:
(i) Designating market makers as qualified options market makers,
which standards shall be designed to identify options market makers who
regularly engage in market making activities in the particular options
class(es);
(ii) The surveillance of its market maker's utilization of the
exemption set
[[Page 69265]]
forth in paragraph (h)(1) to assure that short sales effected by
qualified options market makers are exempt hedge transactions and that
other non-qualified market makers are not utilizing the exemption; and
(iii) Authorization of Nasdaq to withdraw, suspend or modify the
designation of a qualified options market maker but only if a qualified
options exchange has determined that the qualified options market maker
has failed to comply with the terms of the exemption, and that such a
withdrawal, suspension or modification of the market maker's exemption
is warranted in light of the substantial, willful, or continuing nature
of the violation.
(D) A ``qualified stock index'' shall mean any stock index that
includes one or more Nasdaq Global Market securities, provided that
more than 10% of the weight of the index is accounted for by Nasdaq
Global Market securities and provided further that the qualification of
an index as a qualified stock index shall be reviewed as of the end of
each calendar quarter, and the index shall cease to qualify if the
value of the index represented by one or more Nasdaq Global Market
securities is less than 8% at the end of any subsequent calendar
quarter.
(E) ``Aggregate current index value'' shall mean the current index
value times the index multiplier.
(F) A member will not be in violation of paragraph (a) above if the
member executes a short sale for the account of an options market maker
that is in contravention of this paragraph (h), provided that the
member did not know or have reason to know that the options market
maker's short sale was in contravention of this paragraph (h).
(i)(1) A member shall be permitted, consistent with its quotation
obligations, to execute a short sale for the account of a warrant
market maker that would otherwise be in contravention of this Rule, if:
(A) The warrant market maker is a registered Nasdaq market maker
for the warrant; and
(B) The short sale is an exempt hedge transaction that results in a
fully hedged position.
(2) For purposes of this paragraph, an ``exempt hedge transaction''
shall mean a short sale in a Nasdaq Global Market security that was
effected to hedge, and in fact serves to hedge, an existing offsetting
warrant position or an offsetting warrant position that was created in
a transaction(s) contemporaneous with the short sale.\2\
Notwithstanding any other provision of this paragraph, any transaction
unrelated to normal warrant market making activity, such as index
arbitrage or risk arbitrage that in either case is independent of a
warrant market maker's market making functions, will not be considered
an ``exempt hedge transaction.''
(3) Nasdaq may withdraw, suspend or modify the exemption for a
warrant market maker upon determination that the market maker has
failed to comply with the terms of the exemption, and that such a
withdrawal, suspension or modification of the market maker's exemption
is warranted in light of the substantial, willful, or continuing nature
of the violation.
(4) A member will not be in violation of paragraph (a) above if the
member executes a short sale for the account of a warrant market maker
that is in contravention of this paragraph (i), provided that the
member did not know or have reason to know that the warrant market
maker's short sale was in contravention of paragraph (i).
(j) Pursuant to the Rule 9600 Series or on Nasdaq's own motion,
Nasdaq may exempt either unconditionally, or on specified terms and
conditions, any transaction or class of transactions from the
provisions of this Rule.
(k) Definitions:
(1) The term ``short sale'' shall have the same meaning as
contained in SEC Rule 200, adopted pursuant to the Act.
(2) The term ``block positioner'' shall have the same meaning as
contained in SEC Rule 3b-8(c) for ``Qualified Block Positioner''
adopted pursuant to the Act.
(l) This section shall be in effect until December 15, 2006.]
[\1\ The phrase contemporaneously established includes transactions
occurring simultaneously as well as transactions occurring within the
same brief period of time.]
[\2\ The phrase contemporaneously established includes transactions
occurring simultaneously as well as transactions occurring within the
same brief period of time.]
[IM-3350. Short Sale Rule]
[(a)(1) In developing a Short Sale Rule for Nasdaq Global Market
securities, Nasdaq has adopted an exemption to the Rule for certain
market making activity. This exemption is an essential component of the
Rule because bona fide market making activity is necessary and
appropriate to maintain continuous, liquid markets in Nasdaq Global
Market securities. Rule 3350(c)(1) states that short selling
prohibitions shall not apply to sales by registered Nasdaq market
makers in connection with bona fide market making activity and
specifies that transactions unrelated to normal market making activity,
such as index arbitrage and risk arbitrage that are independent from a
member's market making functions, will not be considered as bona fide
market making. Thus two standards are to be applied: One must be a
registered Nasdaq market maker and one must engage in ``bona fide''
market making activity to take advantage of this exemption. With this
interpretation, Nasdaq wishes to clarify for members some of the
factors that will be taken into consideration when reviewing market
making activity that may not be deemed to be bona fide market making
activity and therefore would not be exempted from the Rule's
application.
(2) First, as the Rule indicates, bona fide market making activity
does not include activity that is unrelated to market making functions,
such as index arbitrage and risk arbitrage that is independent from a
member's market making functions. While these types of arbitrage
activity appear to be suitable for the firm's overall hedging or risk
management concerns, they do not warrant an exemption from the Rule.
However, short sales of a security of a company involved in a merger or
acquisition will be deemed bona fide market-making activity if made to
hedge the purchase or prospective purchase (based on communicated
indications of interest) of another security of a company involved in
the merger or acquisition, which purchase was made, or is to be made,
in the course of bona fide market making activity. The purchase of a
security of a company involved in a merger or acquisition made to hedge
a short sale of another security involved in the merger or acquisition,
which sale was made in the course of bona fide market making activity,
will not cause the sale to be deemed unrelated to normal market-making
activity. Short sales made to hedge any such purchases or prospective
purchases must be reasonably consistent with the exchange ratio (or
exchange ratio formula) specified by the terms of the merger or
acquisition.
(3) Similarly, bona fide market making would exclude activity that
is related to speculative selling strategies of the member or
investment decisions of the firm and is disproportionate to the usual
market making patterns or practices of the member in that security.
Nasdaq does not anticipate that a firm could properly take advantage of
its market maker exemption to effectuate such speculative or investment
short selling decisions. Disproportionate short selling in a market
making account to effectuate such strategies will be viewed by Nasdaq
as inappropriate activity that
[[Page 69266]]
does not represent bona fide market making and would therefore be in
violation of Rule 3350.
(b) With respect to trades executed on or reported to Nasdaq, Rule
3350 requires that no member shall effect a short sale for the account
of a customer or for its own account in a Nasdaq Global Market security
at or below the current best (inside) bid displayed in the Nasdaq
Market Center when the current best (inside) bid is below the
proceeding best (inside) bid in the security. For purposes of this
rule, the term ``customer'' includes a non-member broker-dealer. Nasdaq
has determined that in order to effect a ``legal'' short sale when the
current best bid is lower than the preceding best bid the short sale
must be executed at a price of at least $0.01 above the current inside
bid when the current inside spread is $0.01 or greater. The last sale
report for such a trade would, therefore, be above the inside bid by at
least $0.01.
(c)(1) Rule 3350 prohibits a member from effecting a short sale for
the account of a customer or for its own account directly or through
the offices of a third party for the purpose of avoiding the
application of the Short Sale Rule. Further, the Rule prohibits a
member from knowingly, or with reason to know, effecting sales for the
account of a customer or for its own account for the purpose of
avoiding the Rule. With this interpretation, Nasdaq wishes to clarify
some of the circumstances under which a member would be deemed to be in
violation of Rule 3350.
(2) For example, in instances where the current best bid is below
the preceding best bid, if a market maker alone at the inside best bid
were to lower its bid and then raise it to create an ``up bid'' for the
purpose of facilitating a short sale, Nasdaq would consider such
activity to be a manipulative act and a violation of Nasdaq's Short
Sale Rule. Nasdaq also would consider it a manipulative act and a
violation of the Rule if a market maker with a long stock position were
to raise its bid above the inside bid and then lower it to create a
``down bid'' for the purpose of precluding market participants from
selling short. In addition, if a market maker agrees to an arrangement
proposed by a member or a customer whereby the market maker raises its
bid in Nasdaq in order to effect a short sale for the other party and
is protected against any loss on the trade or on any other executions
effected at its new bid price, the market maker would be deemed to be
in violation of Rule 3350. Similarly, a market maker would be deemed in
violation of the Rule if it entered into an arrangement with a member
or a customer whereby it used its exemption from the rule to sell short
at the bid at successively lower prices, accumulating a short position,
and subsequently offsetting those sales through a transaction at a
prearranged price, for the purpose of avoiding compliance with the
Rule, and with the understanding that the market maker would be
guaranteed by the member or customer against losses on the trades.
(3) Nasdaq believes that members' activities to circumvent the Rule
through indirect actions such as executions with other members or
through facilitation of customer orders while being protected from loss
are antithetical to the purposes of the Rule. Accordingly, Nasdaq will
consider any such activity as a violation of Rule 3350.
(d) Nasdaq calculates changes to the inside bid displayed in the
Nasdaq Market Center and disseminates a ``bid arrow'' via Nasdaq data
feeds for market participants to use to comply with Rule 3350 when
utilizing the execution functionality of the Nasdaq Market Center. The
initial bid arrow each day shall be calculated at market open as
follows.
(1) For stocks subject to Rule 4709(c), the initial bid arrow after
completing the process described in Rule 4709(c)(1) through (3) shall
be up and the next and subsequent bid arrows shall be calculated by
comparing the bid arrow with each quotation update processed by the
Nasdaq system after the system begins processing pursuant to Rule
4709(c)(4).
(2) For stocks described in Rule 4704(d), the initial bid arrow at
the conclusion of the Nasdaq Opening Cross shall be up and the next and
subsequent bid arrows shall be calculated by comparing the bid arrow
with each quotation update processed by the Nasdaq system after the
Nasdaq Opening Cross concludes.]
3360. Short-Interest Reporting
(a) To the extent such information is not otherwise reported to the
NASD in conformance with NASD Rule 3360, each member shall maintain a
record of total ``short'' positions in all customer and proprietary
firm accounts in securities listed on Nasdaq and shall regularly report
such information to Nasdaq in such a manner as may be prescribed by
Nasdaq. Reports shall be made as of the close of the settlement date
designated by Nasdaq. Reports shall be received by Nasdaq no later than
the second business day after the reporting settlement date designated
by Nasdaq.
(b) For purposes of this Rule:
(1) ``short'' positions to be reported are those resulting from
``short sales'' as that term is defined in SEC Rule 200(a) of
Regulation SHO, with the exception of positions that meet the following
requirements: [of Subsections (e)(1), (6), (7), (8), and (10) of SEC
Rule 10a-1 adopted under the Act; and]
(A) any sale by any person, for an account in which he has an
interest, if such person owns the security sold and intends to deliver
such security as soon as is possible without undue inconvenience or
expense;
(B) any sale of a security covered by a short sale rule on a
national securities exchange (except a sale to a stabilizing bid
complying with Rule 104 of Regulation M) effected with the approval of
such exchange which is necessary to equalize the price of such security
thereon with the current price of such security on another national
securities exchange which is the principal exchange market for such
security;
(C) any sale of a security for a special arbitrage account by a
person who then owns another security by virtue of which he is, or
presently will be, entitled to acquire an equivalent number of
securities of the same class as the securities sold; provided such
sale, or the purchase which such sale offsets, is effected for the bona
fide purpose of profiting from a current difference between the price
of the security sold and the security owned and that such right of
acquisition was originally attached to or represented by another
security or was issued to all the holders of any such class of
securities of the issuer;
(D) any sale of a security registered on, or admitted to unlisted
trading privileges on, a national securities exchange effected for a
special international arbitrage account for the bona fide purpose of
profiting from a current difference between the price of such security
on a securities market not within or subject to the jurisdiction of the
United States and on a securities market subject to the jurisdiction of
the United States; provided the seller at the time of such sale knows
or, by virtue of information currently received, has reasonable grounds
to believe that an offer enabling him to cover such sale is then
available to him in such foreign securities market and intends to
accept such offer immediately; and
(E) any sale by an underwriter, or any member of a syndicate or
group participating in the distribution of a security, in connection
with an over-allotment of securities, or any lay-off sale by such a
person in connection with a distribution of securities through
[[Page 69267]]
rights or a standby underwriting commitment.
(2) No change.
* * * * *
IM-4390 Impact of Non-Designation of Dually Listed Securities
To foster competition among markets and further the development of
the national market system following the repeal of NYSE Rule 500,
Nasdaq shall permit issuers whose securities are listed on the New York
Stock Exchange to apply also to list those securities on the Nasdaq
Global Market (``NGM''). Nasdaq shall make an independent determination
of whether such issuers satisfy all applicable listing requirements and
shall require issuers to enter into a dual listing agreement with
Nasdaq.
While Nasdaq shall certify such dually listed securities for
listing on the NGM, Nasdaq shall not exercise its authority under Rule
4390 separately to designate or register such dually listed securities
as Nasdaq national market system securities within the meaning of
Section 11A of the Act or the rules thereunder. As a result, these
securities, which are already designated as national market system
securities under the Consolidated Quotation Service (``CQS'') and
Consolidated Tape Association national market system plans (``CQ and
CTA Plans''), shall remain subject to those plans and shall not become
subject to the Nasdaq UTP Plan, the national market system plan
governing securities designated by Nasdaq. For purposes of the national
market system, such securities shall continue to trade under their
current one, two, or three-character ticker symbol. Nasdaq shall
continue to send all quotations and transaction reports in such
securities to the processor for the CTA Plan. In addition, dually
listed issues that are currently eligible for trading via the
Intermarket Trading System (``ITS'') shall remain so and continue to
trade on the Nasdaq Intermarket trading platform as they do today.
Through this interpretation, Nasdaq also resolves any potential
conflicts that arise under Nasdaq rules as a result of a single
security being both a security subject to the CQ and CTA Plans (a ``CQS
security''), which is subject to one set of rules, and a listed NGM
security, which is subject to a different set of rules. Specifically,
dually listed securities shall be Nasdaq securities for purposes of
rules related to listing and delisting, and shall remain as CQS
securities under all other Nasdaq rules. Treating dually listed
securities as CQS securities under Nasdaq rules is consistent with
their continuing status as CQS securities under the CTA, CQ, and ITS
national market system, as described above. This interpretation also
preserves the status quo and avoids creating potential confusion for
investors and market participants that currently trade these securities
on Nasdaq.
For example, Nasdaq shall continue to honor the trade halt
authority of the primary market under the CQ and CT Plans. Nasdaq Rule
4120(a)(2) and (3) governing CQS securities shall apply to dually
listed securities, whereas Nasdaq Rule 4120(a)(1), (4), (5), (6), and
(7) shall not. [SEC Rule 10a-1 governing short sales of CQS securities
shall continue to apply to dually listed securities, rather than Nasdaq
Rule 3350 governing short sales of Nasdaq-listed securities.] Market
makers in dually listed securities shall retain all obligations imposed
by the Nasdaq Rule 5200 Series regarding CQS securities rather than
assuming the obligations appurtenant to Nasdaq-listed securities. The
fees applicable to CQS securities set forth in Nasdaq Rule 7010 shall
continue to apply to dually listed issues.
* * * * *
4755. Order Entry Parameters
(a) System Orders
(1) General--A System order is an order that is entered into the
System for display and/or execution as appropriate. Such orders are
executable against marketable contra-side orders in the System.
(A) All System Orders shall indicate limit price and whether they
are a buy, short sale, [short-sale exempt,] or long sale. Systems
Orders can be designated as Market Hours Immediate or Cancel
(``MIOC''), Market Hours Good-till-Cancelled (``MGTC''), Market Hours
Day (``MDAY''), System Hours Expire Time (``SHEX''), System Hours Day
(``SDAY''), System Hours Immediate or Cancel (``SIOC''), System Hours
Good-till-Cancelled (``SGTC''), or Good-til-Market Close ``GTMC'').
(B)-(C) No change.
(2) Reserved [Short Sale Compliance--System orders to sell short
shall not be executed if the execution of such an order would violate
any applicable short sale regulation of the SEC or Nasdaq. For Nasdaq
securities, the System shall validate for short sale compliance using a
bid tick based upon changes to the national best bid and offer
disseminated pursuant to an effective transaction reporting plan. For
NYSE and Amex securities, the System shall validate for short sale
compliance based upon changes to the consolidated last sale
disseminated pursuant to an effective transaction reporting plan.]
(3)-(4) No change.
* * * * *
4758. Order Routing
(a) Order Routing Process
(1) No change. The Order Routing Process shall be available to
Participants from 7 a.m. until 8 p.m. Eastern Time, and shall route
orders as described below: Beginning March 5, 2007, in connection with
the trading of securities governed by Regulation NMS, all routing of
orders shall comply with Rule 611 of Regulation NMS under the Exchange
Act.
(A)-(B) No change.
(C) Priority of Routed Orders. Regardless of the routing option
selected, orders sent by the System to other markets do not retain time
priority with respect to other orders in the System and the System
shall continue to execute other orders while routed orders are away at
another market center. Once routed by the System, an order becomes
subject to the rules and procedures of the destination market
including, but not limited to, [short-sale regulation and] order
cancellation. If a routed order is subsequently returned, in whole or
in part, that order, or its remainder, shall receive a new time stamp
reflecting the time of its return to the System.
4759. ITS Commitments
Until such time as Nasdaq withdraws from the ITS Plan, Quotes and
Orders that are eligible for ITS will be processed by the System and
routed to the appropriate Non-Nasdaq Participant Market as an ITS
Commitment in accordance with the requirements of the ITS Plan and all
applicable Nasdaq rules. Nasdaq shall participate in the ITS Plan as
set forth below.
(a) No change.
(b) Inbound ITS Commitments
(1) No change.
(2) [If the ITS Commitment, if executed, would result in a
violation of SEC Rule 10a-1, the Nasdaq Market Center will decline it.]
Reserved
(3) No change.
(c) Outbound Commitments: Any ``commitment to trade,'' which is
transmitted by Nasdaq to another Non-Nasdaq ITS Participant Market
through ITS, shall be firm and irrevocable for the period of thirty
seconds following transmission by the sender. All such commitments to
trade shall, at a minimum:
(1)-(5) No change.
[(6) designate the commitment ``short'' or ``short exempt''
whenever it is a commitment to sell which, if it
[[Page 69268]]
should result in an execution in the receiving market, would result in
a short sale to which the provisions of SEC Rule 10a-1(a) under the Act
would apply.]
(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. The
text of these statements may be examined at the places specified in
Item IV below, and is set forth in sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On June 13, 2007, the SEC voted to adopt certain amendments to SEC
Rule 10a-1 and Regulation SHO under the Act. The amendments, among
other things: (1) Eliminate the short sale price test contained in SEC
Rule 10a-1; (2) add Rule 201(a) of Regulation SHO to provide that no
price test, including any price test of any self-regulatory
organization (``SRO''), shall apply to short sales in any security; (3)
add Rule 201(b) of Regulation SHO to prohibit any SRO from having a
price test; and (4) amend Rule 200(g) of Regulation SHO to remove the
requirement that a broker-dealer mark a sell order of an equity
security as ``short exempt'' if the seller is relying on an exception
from the price test of Rule 10a-1, or any price test of any exchange or
national securities association. The amendments to SEC Rule 10a-1 and
Regulation SHO became effective on July 3, 2007, and had a July 6, 2007
compliance date.
The purpose of this proposed rule change is to make conforming
changes to Nasdaq rules to reflect the elimination of SEC Rule 10a-1
and other amendments to Regulation SHO by: (1) Eliminating references
to SEC Rule 10a-1 in Nasdaq rules; and (2) repealing Nasdaq's short
sale rule contained in Rule 3350 and IM-3350, as well as amending
Nasdaq rules that reference Rule 3350 or IM-3350.
Eliminating References to SEC Rule 10a-1 in Nasdaq Rules.
Currently, Rule 3360 (Short-Interest Reporting) requires members to
record and report short interest information to Nasdaq. Reportable
short positions are those resulting from ``short sales'' as the term is
defined in SEC Rule 200 of Regulation SHO, with the exception of
positions that meet the requirements of subsections (e)(1), (6), (7),
(8), and (10) of Rule 10a-1 of the Act.\4\ As a result of the repeal of
SEC Rule 10a-1, these subsections will no longer exist. Therefore,
Nasdaq is proposing a technical change to Rule 3360 to replace the
references to these exceptions to SEC Rule 10a-1 with the underlying
rule text of each provision. Nasdaq also is proposing to make
conforming amendments to IM-4390 and Rules 4744, 4758, and 4759 to
remove references to SEC Rule 10a-1.
---------------------------------------------------------------------------
\4\ See Nasdaq Rule 3360(b)(1).
---------------------------------------------------------------------------
Repeal of Nasdaq's Short Sale Rule. As noted above, the SEC has
removed the restrictions on the execution prices of short sales and
prohibited SROs from having price tests. Rule 3350 and IM-3350
generally prohibit a member from effecting short sales in Nasdaq Global
Market securities otherwise than on an exchange for a customer account,
or the member's own account, at or below the current national best
(inside) bid, when the current national best (inside) bid is below the
preceding national best (inside) bid. As an SRO, Nasdaq now is
prohibited from having such a short sale price test under newly adopted
SEC Rule 201 of Regulation SHO. Accordingly, Nasdaq proposes to repeal
its short sale rule contained in Rule 3350 and the related interpretive
material in IM-3350 and is proposing conforming changes to IM-4390 and
Rules 4755, 4758, and 4759 to delete references to Rule 3350 in such
rules.
Technical Changes. Nasdaq also proposes to make a technical change
to the text of Rule 3360. Specifically, Rule 3360(b) provides that,
subject to certain limited exceptions, short positions required to be
reported under the rule are those resulting from short sales as the
term is defined in Rule 200 of Regulation SHO. The term ``short sale''
is actually defined in Rule 200(a) of Regulation SHO. Therefore, Nasdaq
is proposing to amend the text of Rule 3360 to reference Regulation SHO
Rule 200(a), instead of Rule 200, to eliminate any confusion.
Implementation. As noted above, Nasdaq has filed the proposed rule
change for immediate effectiveness. Nasdaq proposes to make the
proposed rule change operative on July 6, 2007, to coincide with the
operative date of the amendments to SEC Rule 10a-1 and Regulation SHO.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of section 6(b)(5) of the Act,\5\ which requires, among
other things, that Nasdaq rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. Nasdaq believes that the proposed rule change is
necessary and appropriate to comply with the amendments to SEC Rule
10a-1 and Regulation SHO.
---------------------------------------------------------------------------
\5\ 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 impose
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 on the proposed rule change 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 \6\ and Rule 19b-
4(f)(6) thereunder.\7\ Nasdaq has requested that the Commission waive
the 5-day pre-filing notice and 30-day pre-operative period
requirements for ``non-controversial'' proposals, based upon a
representation that such waivers will allow Nasdaq to implement the
rule changes to conform to currently effective changes in Regulation
SHO and Rule 10a-1. In light of the foregoing, the Commission believes
that waiver of the 5-day notice and 30-day operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission has determined to waive the notice
requirement and the operative delay,\8\ and the proposed rule change
has become effective pursuant to section
[[Page 69269]]
19(b)(3)(A) of the Act,\9\ and Rule 19b-4(f)(6) thereunder,\10\ with no
operative delay.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
\8\ For purposes only of waiving the 30 day pre-operative
period, the Commission has considered the impact of the proposed
rule change on efficiency, competition and capital formation. 15
U.S.C. 78c(f).
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2007-065 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2007-065. 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 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-2006-065 and should
be submitted on or before December 28, 2007.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23769 Filed 12-6-07; 8:45 am]
BILLING CODE 8011-01-P
