Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by The NASDAQ Stock Market LLC Adopting a Limited Exemption From OATS Order Data Recordation Requirements for Registered Options Market Makers, 160-161 [E8-31203]
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160
Federal Register / Vol. 74, No. 1 / Friday, January 2, 2009 / Notices
market does not accurately reflect the
prevailing market for the security. In
addition, the Commission notes that
Nasdaq will use objective numerical
thresholds in determining whether a
trade report is eligible to have an
Aberrant Trade Indicator appended to it.
The Commission further notes that
Nasdaq’s appending the Aberrant Trade
Indicator to a trade report has no effect
on the validity of the underlying trade.
Finally, waiving the 30-day operative
delay will allow Nasdaq to apply the
proposed change to future aberrant
trades immediately.12 Based on the
above, the Commission designates the
proposal to become operative upon
filing.
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 the 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 rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2008–100 on the
subject line.
mstockstill on PROD1PC66 with NOTICES
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–NASDAQ–2008–100. 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
12 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
impact of the proposed rule on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
VerDate Aug<31>2005
16:23 Dec 31, 2008
Jkt 217001
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of Nasdaq. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2008–100 and
should be submitted on or before
January 23, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–31191 Filed 12–31–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59163; File No. SR–
NASDAQ–2008–097]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
The NASDAQ Stock Market LLC
Adopting a Limited Exemption From
OATS Order Data Recordation
Requirements for Registered Options
Market Makers
December 24, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
12, 2008, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by Nasdaq. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to adopt a limited
exemption from OATS order data
recordation requirements for Bona Fide
Hedging Transactions in Nasdaq-listed
equities that are transacted by Nasdaq
members that are registered market
makers in standardized options.
The text of the proposed rule change
is below. Proposed new language is in
italics; proposed deletions are in
[brackets].3
*
*
*
*
*
6951. Definitions
For purposes of the Rule 6950 Series:
(a)–(h) No change.
(i) ‘‘Order’’ shall mean any oral, written, or
electronic instruction to effect a transaction
in an equity security listed on The Nasdaq
Stock Market that is received by a member
from another person for handling or
execution, or that is originated by a
department of a member for execution by the
same or another member, other than any such
instruction to effect (1) a proprietary
transaction originated by a trading desk in
the ordinary course of a member’s market
making activities in a Nasdaq-listed equity
security or (2) effect a Bona Fide Hedge
Transaction involving a Nasdaq-listed equity
security originated by a trading desk in the
ordinary course of the member’s options
market making activities.
(j)–(n) No change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq proposes to modify its OATS
rules to adopt a limited exemption from
OATS order recordation requirements
for bona fide hedging transactions in
Nasdaq-listed equity securities that are
part of a Nasdaq member’s market
3 Changes are marked to the rule text that appears
in the electronic manual of Nasdaq found at
https://nasdaq.complinet.com.
E:\FR\FM\02JAN1.SGM
02JAN1
mstockstill on PROD1PC66 with NOTICES
Federal Register / Vol. 74, No. 1 / Friday, January 2, 2009 / Notices
making activity in options. The proposal
applies to options transaction on any
options market in any standardized
option made available for clearing
through the Options Clearing
Corporation.
OATS is an integrated audit trail of
order, quote, and trade information for
Nasdaq equity securities used to
recreate events in the life cycle of orders
and more completely monitor the
trading practices of member firms. The
basis for OATS is customer protection
through the transparency of the
executions of customer orders in equity
securities. OATS was designed to
provide an accurate, time-sequenced
record of orders and transactions,
beginning with the receipt of an equity
order at the first point of contact
between the broker-dealer and the
customer or counterparty and further
documenting the life of the equity order
through the process of execution.
Consistent with that basis, there is
currently no OATS requirement with
respect to options listed on the
NASDAQ Options Market. Additionally,
there are currently exemptions from
OATS requirements for orders entered
by market makers in Nasdaq securities
and by proprietary trading firms because
such orders are not submitted on behalf
of customers and therefore do not
necessitate the customer protection
provided by OATS.
The proposed rule change does not
impact the customer protection
orientation of OATS since, by
definition, bona fide hedging
transactions in equity securities that are
undertaken by options market makers
do not involve customer orders in those
equity securities. Rather, bona fide
hedging transactions in equity securities
are undertaken by an options market
maker to hedge against the firm risk that
it creates through its conduct as a
registered options market maker.
Accordingly, submitting bona fide
hedging transactions to OATS recording
requirements provides no customer
protection or equivalent regulatory
benefit. It is also very expensive for
firms that are not currently FINRA
members or that do not currently trade
NASDAQ equities to develop and
maintain the compliance systems and
compliance staff required to
continuously monitor the daily
transmission of OATS data.
Additionally, information regarding
bona fide hedging transactions retained
by a registered NOM market maker is
otherwise available to FINRA and
Nasdaq Regulation through Nasdaq’s
electronic delivery systems, upon
request. This information includes trade
reporting data, including order time and
VerDate Aug<31>2005
16:23 Dec 31, 2008
Jkt 217001
sales data captured by the Nasdaq
system.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,4 in
general, and with Section 6(b)(5) of the
Act,5 in particular, in that the proposal
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self regulatory
organization consents, the Commission
will:
(A) By order approve the proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
4 15
5 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(5).
Frm 00093
Fmt 4703
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–2008–097 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–NASDAQ–2008–097. 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 the filing also will be available
for inspection and copying at the
principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2008–097 and
should be submitted on or before
January 23, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–31203 Filed 12–31–08; 8:45 am]
BILLING CODE 8011–01–P
6 17
Sfmt 4703
161
E:\FR\FM\02JAN1.SGM
CFR 200.30–3(a)(12).
02JAN1
]]>Agencies
[Federal Register Volume 74, Number 1 (Friday, January 2, 2009)]
[Notices]
[Pages 160-161]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-31203]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59163; File No. SR-NASDAQ-2008-097]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by The NASDAQ Stock Market LLC Adopting a Limited Exemption From
OATS Order Data Recordation Requirements for Registered Options Market
Makers
December 24, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 12, 2008, The NASDAQ Stock Market LLC (``Nasdaq''),
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by Nasdaq. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to adopt a limited exemption from OATS order data
recordation requirements for Bona Fide Hedging Transactions in Nasdaq-
listed equities that are transacted by Nasdaq members that are
registered market makers in standardized options.
The text of the proposed rule change is below. Proposed new
language is in italics; proposed deletions are in [brackets].\3\
---------------------------------------------------------------------------
\3\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at https://nasdaq.complinet.com.
---------------------------------------------------------------------------
* * * * *
6951. Definitions
For purposes of the Rule 6950 Series:
(a)-(h) No change.
(i) ``Order'' shall mean any oral, written, or electronic
instruction to effect a transaction in an equity security listed on
The Nasdaq Stock Market that is received by a member from another
person for handling or execution, or that is originated by a
department of a member for execution by the same or another member,
other than any such instruction to effect (1) a proprietary
transaction originated by a trading desk in the ordinary course of a
member's market making activities in a Nasdaq-listed equity security
or (2) effect a Bona Fide Hedge Transaction involving a Nasdaq-
listed equity security originated by a trading desk in the ordinary
course of the member's options market making activities.
(j)-(n) No change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. Nasdaq has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to modify its OATS rules to adopt a limited
exemption from OATS order recordation requirements for bona fide
hedging transactions in Nasdaq-listed equity securities that are part
of a Nasdaq member's market
[[Page 161]]
making activity in options. The proposal applies to options transaction
on any options market in any standardized option made available for
clearing through the Options Clearing Corporation.
OATS is an integrated audit trail of order, quote, and trade
information for Nasdaq equity securities used to recreate events in the
life cycle of orders and more completely monitor the trading practices
of member firms. The basis for OATS is customer protection through the
transparency of the executions of customer orders in equity securities.
OATS was designed to provide an accurate, time-sequenced record of
orders and transactions, beginning with the receipt of an equity order
at the first point of contact between the broker-dealer and the
customer or counterparty and further documenting the life of the equity
order through the process of execution.
Consistent with that basis, there is currently no OATS requirement
with respect to options listed on the NASDAQ Options Market.
Additionally, there are currently exemptions from OATS requirements for
orders entered by market makers in Nasdaq securities and by proprietary
trading firms because such orders are not submitted on behalf of
customers and therefore do not necessitate the customer protection
provided by OATS.
The proposed rule change does not impact the customer protection
orientation of OATS since, by definition, bona fide hedging
transactions in equity securities that are undertaken by options market
makers do not involve customer orders in those equity securities.
Rather, bona fide hedging transactions in equity securities are
undertaken by an options market maker to hedge against the firm risk
that it creates through its conduct as a registered options market
maker. Accordingly, submitting bona fide hedging transactions to OATS
recording requirements provides no customer protection or equivalent
regulatory benefit. It is also very expensive for firms that are not
currently FINRA members or that do not currently trade NASDAQ equities
to develop and maintain the compliance systems and compliance staff
required to continuously monitor the daily transmission of OATS data.
Additionally, information regarding bona fide hedging transactions
retained by a registered NOM market maker is otherwise available to
FINRA and Nasdaq Regulation through Nasdaq's electronic delivery
systems, upon request. This information includes trade reporting data,
including order time and sales data captured by the Nasdaq system.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\4\ in general, and with Section
6(b)(5) of the Act,\5\ in particular, in that the proposal is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f.
\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 result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change 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-2008-097 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-NASDAQ-2008-097. 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2008-097 and should
be submitted on or before January 23, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
---------------------------------------------------------------------------
\6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-31203 Filed 12-31-08; 8:45 am]
BILLING CODE 8011-01-P
