Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NSX Rule 11.23(a) Which Defines the Phrase “Riskless Principal Transaction”, 70400-70402 [E8-27579]

Download as PDF 70400 Federal Register / Vol. 73, No. 225 / Thursday, November 20, 2008 / Notices particular, the requirements of Section 6(b) of the Act.8 Specifically, the Exchange believes that the proposed rule change is consistent with the Section 6(b)(5) of the Act 9 requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. Therefore, the Commission designates the proposal operative upon filing. At any time within 60 days of the filing of such 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. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate 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: C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; or (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b–4(f)(6) thereunder.11 The Exchange has asked the Commission to waive the operative delay to permit the proposed rule change to become operative prior to the 30th day after filing. The Commission has determined that waiving the 30-day operative delay of the Exchange’s proposal is consistent with the protection of investors and the public interest because such waiver will enable the Exchange to better meet customer demand in light of recent increased volatility in the marketplace.12 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission deems this requirement to be met. 12 For purposes only of waiving the 30-day operative delay, the Commission has considered the rwilkins on PROD1PC63 with NOTICES 9 15 VerDate Aug<31>2005 18:26 Nov 19, 2008 Jkt 217001 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–Phlx–2008–78 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2008–78. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of 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 No. SR–Phlx–2008–78 and should be submitted on or before December 11, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Florence E. Harmon, Acting Secretary. [FR Doc. E8–27578 Filed 11–19–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58953; File No. SR–NSX– 2008–20] Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NSX Rule 11.23(a) Which Defines the Phrase ‘‘Riskless Principal Transaction’’ November 14, 2008. Pursuant to section 19(b)(3)(A) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 13, 2008, National Stock Exchange, Inc. (‘‘NSX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change, as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comment on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NSX Rule 11.23(a), which defines the phrase ‘‘riskless principal transaction,’’ to make clear that the definition includes transactions where an ETP Holder receives orders that may be executed in whole or in part in other market venues. As explained in further detail below, this amendment will clarify the scope of the exception to NSX’s Customer Priority rule contained in Rule 12.6(d), and will more closely align NSX’s rules with those used by other self-regulatory organizations (‘‘SROs’’). 13 17 proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\20NON1.SGM 20NON1 Federal Register / Vol. 73, No. 225 / Thursday, November 20, 2008 / Notices The text of the proposed rule change is available on the Exchange’s Web site at http://www.nsx.com, at the principal office of the Exchange, and at 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, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change rwilkins on PROD1PC63 with NOTICES 1. Purpose NSX Rule 12.6 prohibits an ETP Holder from placing an order for its own account (or an account in which it or one of its associated persons is interested) while it holds an unexecuted, marketable customer order for the same security, unless an exception applies. Specifically, Rule 12.6 provides: (a) No ETP Holder shall (i) personally buy or initiate the purchase of any security traded on the Exchange for its own account or for any account in which it or any associated person of the ETP Holder is directly or indirectly interested while such an ETP Holder holds or has knowledge that any person associated with it holds an unexecuted market order to buy such security in the unit of trading for a customer, or (ii) sell or initiate the sale of any such security for any such account while it personally holds or has knowledge that any person associated with it holds an unexecuted market order to sell such security in the unit of trading for a customer. (b) No ETP Holder shall (i) buy or initiate the purchase of any such security for any account in which it or any associated person of the ETP Holder is directly or indirectly interested at or below the price at which it personally holds or has knowledge that any person associated with it holds an unexecuted limited price order to buy such security in the unit of trading for a customer or (ii) sell or initiate the sale of any such security for any such account at or above the price at which it personally holds or has knowledge that any person VerDate Aug<31>2005 18:26 Nov 19, 2008 Jkt 217001 associated with it holds an unexecuted limited price order to sell such security in the unit of trading for a customer. Rule 12.6(d) provides an exception to provisions (a) and (b) where ‘‘an ETP Holder engages in trading activity to facilitate the execution, on a riskless principal basis, of another order from its customer * * * provided that the requirements of Rule 11.23 are satisfied * * * .’’ (emphasis added.) Thus, to meet the exception in Rule 12.6(d), an ETP Holder also must comply with Rule 11.23. In turn, Rule 11.23(a) defines the phrase ‘‘riskless principal transaction’’ to mean: Two offsetting principal transaction legs in which an ETP Holder, (i) after having received an order to buy a security that it holds for execution on the Exchange, purchases the security as principal at the same price, exclusive of markups, markdowns, commissions and other fees, to satisfy all or a portion of the order to buy or (ii) after having received an order to sell a security that it holds for execution on the Exchange, sells the security as principal at the same price, exclusive of markups, markdowns, commissions and other fees, to satisfy all or a portion of the order to sell. (emphasis added.) Therefore, if an ETP Holder receives an order to buy or sell a security, but does not hold that order for execution on the Exchange, any resulting transaction might not meet the definition of a riskless principal transaction in Rule 11.23(a). For the same reason, such a transaction also might not meet the exception in Rule 12.6(d). In addition, it is unclear whether an order submitted to a ETP Holder without a designated marketplace for execution could be ‘‘[held] for execution on the Exchange,’’ particularly where the ETP Holder executes the first leg of what generally would be considered a riskless principal transaction on a market other than the Exchange and completes the transaction with its customer on the Exchange. Because the customer has not designated where the order should be executed, and because the first leg of the order was in fact executed off the Exchange, such an order might not be viewed as being ‘‘[held] for execution on the Exchange.’’ Accordingly, the transaction might not be a ‘‘riskless principal transaction’’ within the meaning of Rule 11.23(a) and, therefore, might not satisfy the exception contained in Rule 12.6(d), even if the transaction was done to facilitate a customer order. NSX proposes to remove the requirement that an order be ‘‘[held] for execution on the Exchange’’ from the definition of a ‘‘riskless principal PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 70401 transaction’’ in Rule 11.23(a) to permit the type of transaction described above to qualify as a ‘‘riskless principal transaction’’ and, where the other requirements are met, to meet the exception in Rule 12.6(d). The exception in Rule 12.6(d) is designed to allow ETP Holders to place proprietary trades ahead of customer orders only where such proprietary trades are for the benefit of a customer. This exception recognizes that, in some instances, an ETP Holder’s nominal trading ahead may nevertheless benefit, rather than harm, a customer. It makes no difference to this analysis whether the customer specified that its order was to be executed on the Exchange, or whether the order can be characterized as being ‘‘[held] for execution on the Exchange.’’ Amended Rule 11.23(a) also would be consistent with other SRO rules. For example, Financial Industry Regulatory Authority (‘‘FINRA’’) NASD Rule 2111 and IM–2110–2 both allow a firm to trade ahead of a customer order if, among other things, the member’s proprietary trade is a riskless principal transaction, as defined in various NASD rules, that is used to facilitate a customer order. The definition of a riskless principal transaction in NASD rules is substantially similar to the definition in NSX Rule 11.23(a) except, of course, that it is not limited to orders held for execution on any particular securities exchange or in any particular venue.3 New York Stock Exchange (‘‘NYSE’’) Rule 92 also allows firms to trade ahead of customer orders where the firm’s proprietary order is a riskless principal transaction designed to facilitate a customer order. NYSE Rule 92 does not require that an order be held for execution on the NYSE or any other venue or securities exchange to qualify for this exception.4 Amending Rule 11.23(a) will therefore make NSX rules consistent with analogous SRO rules. Statutory Basis The Exchange believes that the proposed rule change is consistent with 3 See, e.g., NASD Rule 4632(d)(3)(B) (defining a riskless principal transaction as a ‘‘transaction in which a member after having received an order to buy a security, purchases the security as principal at the same price to satisfy the order to buy or, after having received an order to sell, sells the security as principal at the same price to satisfy the order to sell’’) (cited in NASD Rule 2111(f)(1) and IM– 2110–2). 4 NYSE Rule 92(c)(1) (‘‘The facilitated order must be a ‘riskless principal transaction,’ which is when a member or member organization, after having received an order to buy a security, purchases the security as principal at the same price to satisfy the order to buy or, after having received an order to sell, sells the security as principal at the same price to satisfy the order to sell.’’) E:\FR\FM\20NON1.SGM 20NON1 70402 Federal Register / Vol. 73, No. 225 / Thursday, November 20, 2008 / Notices the provisions of Section 6(b) of the Securities Exchange Act of 1934 (‘‘Act’’),5 which requires, among other things, that NSX Rules 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. The proposed rule change will clarify the application of Rule 12.6(d) and will more closely align that rule with the rules of other SROs. • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NSX–2008–20 on the subject line. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action rwilkins on PROD1PC63 with NOTICES The proposed rule change will take effect 30 days from the date of filing (or such shorter time as the Commission may designate) pursuant to Section 19(b)(3)(A)(ii) of the Act 6 and subparagraph (f)(6) of Rule 19b–4 7 thereunder, because the proposal: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the selfregulatory organization has given the Commission written notice of its intent to file the proposed rule change at least five business days prior to the filing date of the proposed rule change.8 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, U.S.C. 78f(b). U.S.C. 78s(b)(3)(A)(ii). 7 17 CFR 240.19b–4. 8 As required under Rule 19b–4(f)(6)(iii), NSX provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date. 19:38 Nov 19, 2008 Jkt 217001 Florence E. Harmon, Acting Secretary. [FR Doc. E8–27579 Filed 11–19–08; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11487] Indiana Disaster Number IN–00027 U.S. Small Business Administration. AGENCY: ACTION: Amendment 2. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for • Send paper comments in triplicate the State of Indiana (FEMA–1795–DR), to Secretary, Securities and Exchange dated 09/23/2008. Commission, 100 F Street, NE., Incident: Severe Storms and Flooding. Washington, DC 20549–1090. Incident Period: 09/12/2008 through All submissions should refer to File 10/06/2008. Number SR–NSX–2008–20. This file Effective Date: 11/07/2008. number should be included on the Physical Loan Application Deadline subject line if e-mail is used. To help the Date: 11/24/2008. Commission process and review your comments more efficiently, please use Economic Injury (EIDL) Loan only one method. The Commission will Application Deadline Date: 06/23/2009. post all comments on the Commission’s ADDRESSES: Submit completed loan Internet Web site (http://www.sec.gov/ applications to: U.S. Small Business rules/sro.shtml). Copies of the Administration, Processing and submission, all subsequent Disbursement Center, 14925 Kingsport amendments, all written statements Road, Fort Worth, TX 76155. with respect to the proposed rule FOR FURTHER INFORMATION CONTACT: A. change that are filed with the Escobar, Office of Disaster Assistance, Commission, and all written U.S. Small Business Administration, communications relating to the 409 3rd Street, SW., Suite 6050, proposed rule change between the Commission and any person, other than Washington, DC 20416 those that may be withheld from the SUPPLEMENTARY INFORMATION: The notice public in accordance with the of the President’s major disaster provisions of 5 U.S.C. 552, will be declaration for Private Non-Profit available for inspection and copying in organizations in the State of Indiana, the Commission’s Public Reference dated 09/23/2008, is hereby amended to Room on official business days between include the following areas as adversely the hours of 10 a.m. and 3 p.m. Copies affected by the disaster. of such filing also will be available for Primary Counties: Daviess, La Porte. inspection and copying at the principal office of NSX. All comments received All other information in the original will be posted without change; the declaration remains unchanged. Commission does not edit personal (Catalog of Federal Domestic Assistance identifying information from Numbers 59002 and 59008) submissions. You should submit only Herbert L. Mitchell, information that you wish to make Associate Administrator for Disaster available publicly. All submissions Assistance. should refer to File Number SR–NSX– 2008–20 and should be submitted on or [FR Doc. E8–27551 Filed 11–19–08; 8:45 am] before December 11, 2008. BILLING CODE 8025–01–P Paper Comments The Exchange has neither solicited nor received written comments on the proposed rule change. VerDate Aug<31>2005 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: • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition. 6 15 IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Electronic Comments B. Self-Regulatory Organization’s Statement on Burden on Competition 5 78 or otherwise in furtherance of the purposes of the Act.9 9 15 PO 00000 U.S.C. 78s(b)(3)(C). Frm 00094 Fmt 4703 10 17 Sfmt 4703 E:\FR\FM\20NON1.SGM CFR 200.30–3(a)(12). 20NON1

Agencies

[Federal Register Volume 73, Number 225 (Thursday, November 20, 2008)]
[Notices]
[Pages 70400-70402]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27579]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58953; File No. SR-NSX-2008-20]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend NSX Rule 11.23(a) Which Defines the Phrase ``Riskless Principal 
Transaction''

November 14, 2008.
    Pursuant to section 19(b)(3)(A) of the Securities Exchange Act of 
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on November 13, 2008, National Stock Exchange, Inc. 
(``NSX[supreg]'' or the ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change, as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comment on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NSX Rule 11.23(a), which defines the 
phrase ``riskless principal transaction,'' to make clear that the 
definition includes transactions where an ETP Holder receives orders 
that may be executed in whole or in part in other market venues. As 
explained in further detail below, this amendment will clarify the 
scope of the exception to NSX's Customer Priority rule contained in 
Rule 12.6(d), and will more closely align NSX's rules with those used 
by other self-regulatory organizations (``SROs'').

[[Page 70401]]

    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.com, at the principal office of the 
Exchange, and at 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, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NSX Rule 12.6 prohibits an ETP Holder from placing an order for its 
own account (or an account in which it or one of its associated persons 
is interested) while it holds an unexecuted, marketable customer order 
for the same security, unless an exception applies. Specifically, Rule 
12.6 provides:
    (a) No ETP Holder shall (i) personally buy or initiate the purchase 
of any security traded on the Exchange for its own account or for any 
account in which it or any associated person of the ETP Holder is 
directly or indirectly interested while such an ETP Holder holds or has 
knowledge that any person associated with it holds an unexecuted market 
order to buy such security in the unit of trading for a customer, or 
(ii) sell or initiate the sale of any such security for any such 
account while it personally holds or has knowledge that any person 
associated with it holds an unexecuted market order to sell such 
security in the unit of trading for a customer.
    (b) No ETP Holder shall (i) buy or initiate the purchase of any 
such security for any account in which it or any associated person of 
the ETP Holder is directly or indirectly interested at or below the 
price at which it personally holds or has knowledge that any person 
associated with it holds an unexecuted limited price order to buy such 
security in the unit of trading for a customer or (ii) sell or initiate 
the sale of any such security for any such account at or above the 
price at which it personally holds or has knowledge that any person 
associated with it holds an unexecuted limited price order to sell such 
security in the unit of trading for a customer.
    Rule 12.6(d) provides an exception to provisions (a) and (b) where 
``an ETP Holder engages in trading activity to facilitate the 
execution, on a riskless principal basis, of another order from its 
customer * * * provided that the requirements of Rule 11.23 are 
satisfied * * * .'' (emphasis added.) Thus, to meet the exception in 
Rule 12.6(d), an ETP Holder also must comply with Rule 11.23. In turn, 
Rule 11.23(a) defines the phrase ``riskless principal transaction'' to 
mean:

    Two offsetting principal transaction legs in which an ETP 
Holder, (i) after having received an order to buy a security that it 
holds for execution on the Exchange, purchases the security as 
principal at the same price, exclusive of markups, markdowns, 
commissions and other fees, to satisfy all or a portion of the order 
to buy or (ii) after having received an order to sell a security 
that it holds for execution on the Exchange, sells the security as 
principal at the same price, exclusive of markups, markdowns, 
commissions and other fees, to satisfy all or a portion of the order 
to sell.

(emphasis added.)

    Therefore, if an ETP Holder receives an order to buy or sell a 
security, but does not hold that order for execution on the Exchange, 
any resulting transaction might not meet the definition of a riskless 
principal transaction in Rule 11.23(a). For the same reason, such a 
transaction also might not meet the exception in Rule 12.6(d).
    In addition, it is unclear whether an order submitted to a ETP 
Holder without a designated marketplace for execution could be ``[held] 
for execution on the Exchange,'' particularly where the ETP Holder 
executes the first leg of what generally would be considered a riskless 
principal transaction on a market other than the Exchange and completes 
the transaction with its customer on the Exchange. Because the customer 
has not designated where the order should be executed, and because the 
first leg of the order was in fact executed off the Exchange, such an 
order might not be viewed as being ``[held] for execution on the 
Exchange.'' Accordingly, the transaction might not be a ``riskless 
principal transaction'' within the meaning of Rule 11.23(a) and, 
therefore, might not satisfy the exception contained in Rule 12.6(d), 
even if the transaction was done to facilitate a customer order.
    NSX proposes to remove the requirement that an order be ``[held] 
for execution on the Exchange'' from the definition of a ``riskless 
principal transaction'' in Rule 11.23(a) to permit the type of 
transaction described above to qualify as a ``riskless principal 
transaction'' and, where the other requirements are met, to meet the 
exception in Rule 12.6(d). The exception in Rule 12.6(d) is designed to 
allow ETP Holders to place proprietary trades ahead of customer orders 
only where such proprietary trades are for the benefit of a customer. 
This exception recognizes that, in some instances, an ETP Holder's 
nominal trading ahead may nevertheless benefit, rather than harm, a 
customer. It makes no difference to this analysis whether the customer 
specified that its order was to be executed on the Exchange, or whether 
the order can be characterized as being ``[held] for execution on the 
Exchange.''
    Amended Rule 11.23(a) also would be consistent with other SRO 
rules. For example, Financial Industry Regulatory Authority (``FINRA'') 
NASD Rule 2111 and IM-2110-2 both allow a firm to trade ahead of a 
customer order if, among other things, the member's proprietary trade 
is a riskless principal transaction, as defined in various NASD rules, 
that is used to facilitate a customer order. The definition of a 
riskless principal transaction in NASD rules is substantially similar 
to the definition in NSX Rule 11.23(a) except, of course, that it is 
not limited to orders held for execution on any particular securities 
exchange or in any particular venue.\3\ New York Stock Exchange 
(``NYSE'') Rule 92 also allows firms to trade ahead of customer orders 
where the firm's proprietary order is a riskless principal transaction 
designed to facilitate a customer order. NYSE Rule 92 does not require 
that an order be held for execution on the NYSE or any other venue or 
securities exchange to qualify for this exception.\4\ Amending Rule 
11.23(a) will therefore make NSX rules consistent with analogous SRO 
rules.
---------------------------------------------------------------------------

    \3\ See, e.g., NASD Rule 4632(d)(3)(B) (defining a riskless 
principal transaction as a ``transaction in which a member after 
having received an order to buy a security, purchases the security 
as principal at the same price to satisfy the order to buy or, after 
having received an order to sell, sells the security as principal at 
the same price to satisfy the order to sell'') (cited in NASD Rule 
2111(f)(1) and IM-2110-2).
    \4\ NYSE Rule 92(c)(1) (``The facilitated order must be a 
`riskless principal transaction,' which is when a member or member 
organization, after having received an order to buy a security, 
purchases the security as principal at the same price to satisfy the 
order to buy or, after having received an order to sell, sells the 
security as principal at the same price to satisfy the order to 
sell.'')
---------------------------------------------------------------------------

Statutory Basis

    The Exchange believes that the proposed rule change is consistent 
with

[[Page 70402]]

the provisions of Section 6(b) of the Securities Exchange Act of 1934 
(``Act''),\5\ which requires, among other things, that NSX Rules 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. The proposed rule change 
will clarify the application of Rule 12.6(d) and will more closely 
align that rule with the rules of other SROs.
---------------------------------------------------------------------------

    \5\ 78 U.S.C. 78f(b).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change will take effect 30 days from the date of 
filing (or such shorter time as the Commission may designate) pursuant 
to Section 19(b)(3)(A)(ii) of the Act \6\ and subparagraph (f)(6) of 
Rule 19b-4 \7\ thereunder, because the proposal: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
self-regulatory organization has given the Commission written notice of 
its intent to file the proposed rule change at least five business days 
prior to the filing date of the proposed rule change.\8\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4.
    \8\ As required under Rule 19b-4(f)(6)(iii), NSX provided the 
Commission with written notice of its intent to file the proposed 
rule change at least five business days prior to the filing date.
---------------------------------------------------------------------------

    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.\9\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NSX-2008-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSX-2008-20. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal office of 
NSX. 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-NSX-
2008-20 and should be submitted on or before December 11, 2008.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27579 Filed 11-19-08; 8:45 am]
BILLING CODE 8011-01-P