Self-Regulatory Organizations; the NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Order Routing, 25784-25786 [E9-12449]
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25784
Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices
employees of others; (2) business
conduct, trading against firm
recommendations, and private sales; (3)
excessive trading by members, excessive
trading in discretionary accounts,
successive transactions by members,
manipulative operations, reopening
contracts, and loans for accounts of nonmembers; (4) disciplinary proceedings
concerning conduct that is inconsistent
with just and equitable principles of
trade; (5) reporting of certain
information concerning short sales and
proprietary transactions; (6) reporting
and certification of member or member
organization’s supervision and
compliance efforts; (7) formation and
approval or merger organizations; (8)
reporting of short positions; (9)
notification requirements for listed
securities; and (10) disclosure and
monitoring of non-managed fee based
accounts.
In the place of the deleted rules and
interpretations, the Exchange proposes
to adopt rules that are identical to, or
substantially identical to, FINRA Rules
that were approved by the Commission
or were effective upon filing with the
Commission.13 In addition, NYSE is
making non-substantive changes to the
FINRA Rules that it is incorporating to
reflect that they are NYSE rules and is
deleting NYSE rules that have become
outdated and are no longer needed. The
Commission believes that the proposed
rule change is appropriate and should
reduce unnecessary regulatory
duplication of Dual Members by
harmonizing certain NYSE rules with
FINRA Rules. With respect to the
Exchange’s proposal to delete NYSE
Rule 350 (and accompanying
interpretations) and to adopt NYSE Rule
3220 (relating to influencing or
rewarding employees of others), the
Commission notes that NYSE has stated
that immediately upon Commission
approval of new NYSE Rule 3220, it will
issue an Information Memorandum to
its members and member organizations,
including NYSE-only members and
those members registered with FINRA,
clarifying that FINRA’s interpretive
guidance related to FINRA Rule 3220 is
considered part of NYSE Rule 3220, and
that such members and member
organizations are required to regulate
their conduct according to Rule 3220
and the interpretive guidance related to
FINRA Rule 3220.14 Accordingly, the
Commission believes that the proposed
13 See
supra note 3.
telephone conversation between Clare F.
Saperstein, Managing Director, NYSE Regulation,
Inc., and Nancy J. Burke-Sanow, Assistant Director,
Division of Trading and Markets, Commission, May
21, 2009.
14 See
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rule change is consistent with the
requirements of the Act.
II trading system.4 There is no proposed
rule language.
IV. Conclusion
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
NASDAQ 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
NASDAQ Exchange has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,15 that the
proposed rule change (SR–NYSE–2009–
25) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–12451 Filed 5–28–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59948; File No. SR–
NASDAQ–2009–047]
Self-Regulatory Organizations; the
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Order Routing
May 20, 2009.
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 May 15,
2009, The NASDAQ Stock Market LLC
(the ‘‘NASDAQ Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the NASDAQ
Exchange. The NASDAQ Exchange 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NASDAQ Exchange is proposing
to modify the terms and conditions
under which it is affiliated with
NASDAQ Options Services, LLC
(‘‘NOS’’). The NASDAQ Exchange
proposes to implement the proposed
rule change when NASDAQ OMX
PHLX, Inc. (‘‘PHLX’’) implements its XL
15 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
16 17
PO 00000
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq Options Services, LLC
(‘‘NOS’’), which is a subsidiary of the
NASDAQ Exchange, is a registered
broker-dealer and a member of the
NASDAQ Exchange and PHLX. In SR–
NASDAQ–2006–006,5 the Commission
approved the adoption of NASDAQ
Exchange Rule 2140, which provides
that, subject to certain exceptions, the
NASDAQ Exchange may not become an
affiliate of one of its members unless the
terms and conditions of such affiliation
are the subject of an effective filing with
the Commission. Previously, the
Commission had approved the
acquisition of the entity that is now
NOS by The Nasdaq Stock Market, Inc.,
which is now The NASDAQ OMX
Group, Inc. (‘‘NASDAQ OMX’’), the
holding company parent corporation of
the NASDAQ Exchange and PHLX.6
Moreover, in SR–NASDAQ–2007–004
and –080,7 the Commission approved
rules to govern the operation of The
NASDAQ Options Market (‘‘NOM’’) as
an options market of the NASDAQ
Exchange, including rules establishing
NOS as the approved outbound routing
facility of the NASDAQ Exchange for
NOM. The rules governing NOS’s
routing of orders for NOM stipulate,
4 Securities Exchange Act Release No. 59721
(April 7, 2009), 74 FR 17245 (April 14, 2009) (SR–
Phlx–2009–32); Securities Exchange Act Release
No. 59779 (April 16, 2009), 74 FR 18600 (April 23,
2009) (SR–Phlx–2009–32, Amendment No. 1).
5 Securities Exchange Act Release No. 54170 (July
18, 2006), 71 FR 42149 (July 25, 2006) (SR–
NASDAQ–2006–006).
6 Securities Exchange Act Release No. 52902
(December 7, 2005), 70 FR 73810 (December 13,
2005) (SR–NASD–2005–128).
7 Securities Exchange Act Release No. 57478
(March 12, 2008), 73 FR 14521 (March 18, 2008)
(SR–NASDAQ–2007–004, –080).
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among other things, that: (i) NOS is a
facility of the NASDAQ Exchange; (ii)
use of NOS’s routing function by
NASDAQ Exchange members is
optional; (iii) NOS does not provide
routing of orders in options from NOM
to an exchange that is an affiliate of
NASDAQ unless such orders first
attempt to access any liquidity on the
NOM book; 8 and (iv) NOS is a member
of a self-regulatory organization that is
unaffiliated with the NASDAQ
Exchange and that serves as NOS’s
designated examining authority.
In SR–PHLX–2009–32,9 PHLX,
another exchange subsidiary of
NASDAQ OMX, has proposed
establishing NOS as PHLX’s routing
facility (the ‘‘Routing Facility’’). The
sole use of the Routing Facility by the
PHLX’s new proposed Phlx XL II system
will be to route orders in options listed
and open for trading on the Phlx XL II
system to away markets pursuant to
PHLX rules on behalf of PHLX.
Proposed PHLX Rule 1080(m)(iii)(B)
would provide that the use of NOS to
route orders to other market centers is
optional. Parties that do not desire to
use NOS must designate orders as not
available for routing (i.e., a Do Not
Route Order, as described in proposed
PHLX Rule 1080(m)(iv)(A)).
Proposed PHLX Rule 1080(m)(iii)(C)
would provide that PHLX will establish
and maintain procedures and internal
controls reasonably designed to
adequately restrict the flow of
confidential and proprietary
information between PHLX and the
Routing Facility, and any other entity,
including any affiliate of the Routing
Facility, and, if the Routing Facility or
any of its affiliates engages in any other
business activities other than providing
routing services to the Exchange,
between the segment of the Routing
Facility or affiliate that provides the
other business activities and the routing
services. In SR–PHLX–2009–32, PHLX
further noted that NOS is a member of
a self-regulatory organization that is
unaffiliated with PHLX and that serves
as NOS’s designated examining
authority.10
Finally, proposed PHLX Rule
1080(m)(iii)(D) would state that the
books, records, premises, officers,
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8 Securities
Exchange Act Release No. 59420
(February 19, 2009), 74 FR 8597 (February 25, 2009)
(SR–NASDAQ–2009–011).
9 Securities Exchange Act Release No. 59721
(April 7, 2009), 74 FR 17245 (April 14, 2009) (SR–
Phlx–2009–32); Securities Exchange Act Release
No. 59779 (April 16, 2009), 74 FR 18600 (April 23,
2009) (SR–Phlx–2009–32, Amendment No. 1).
10 The Financial Industry Regulatory Authority
(‘‘FINRA’’) serves as NOS’s designated examining
authority. FINRA is unaffiliated with both PHLX
and the NASDAQ Exchange.
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17:24 May 28, 2009
Jkt 217001
directors, agents, and employees of the
Routing Facility, as a facility of PHLX,
will be deemed to be the books, records,
premises, officers, directors, agents, and
employees of PHLX for purposes of and
subject to oversight pursuant to the Act.
The books and records of the Routing
Facility, as a facility of PHLX, will be
subject at all times to inspection and
copying by PHLX and the Commission.
PHLX has also adopted a rule
restricting affiliation between PHLX and
its members, comparable to the
NASDAQ Exchange’s Rule 2140. See
PHLX Rule 985(b). In SR–PHLX–2009–
32, PHLX has requested that the
Commission allow PHLX to use NOS to
provide routing services for orders
routed to all destinations, provided they
first attempt to access liquidity on
PHLX’s systems before routing to other
exchanges. Thus, the terms and
conditions of PHLX’s order routing
would be substantially similar to those
already approved with respect to
routing by NOM through NOS.
Because orders from PHLX may be
routed to NOM through NOS, it is
necessary for the NASDAQ Exchange to
submit this filing to establish that NOM
may receive such routed orders.
Accordingly, the NASDAQ Exchange
proposes that NOS be permitted to route
orders from PHLX to NOM subject to the
following: (i) NOS is approved as and
remains a facility of PHLX; (ii) use of
NOS’s Routing Facility function by
PHLX members continues to be
optional; (iii) NOS does not provide
routing of orders in options from PHLX
to the NASDAQ Exchange or any
trading facilities thereof, unless such
orders first attempt to access any
liquidity on the PHLX book, and (iv)
NOS is a member of a self-regulatory
organization that is unaffiliated with
PHLX and the NASDAQ Exchange and
that serves as NOS’s designated
examining authority. The terms and
conditions under which NOM would
receive orders from PHLX through NOS
are the same as the terms and conditions
under which PHLX has been approved
to receive orders from NOM through
NOS.
2. Statutory Basis
The NASDAQ Exchange believes that
the proposed rule change is consistent
with the provisions of Section 6 of the
Act,11 in general, and with Section
6(b)(5) of the Act,12 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
11 15
12 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(5).
Frm 00089
Fmt 4703
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25785
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. The
proposed rule change would permit
inbound routing of orders from PHLX to
NOM through NOS in accordance with
the terms and conditions governing
order routing that have been approved
by the Commission with respect to
receipt of orders by PHLX from NOM
through NOS.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The NASDAQ Exchange does not
believe that the proposed rule change
will result in any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments 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 proposed rule change: (i)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not become operative for 30
days after the date of the filing, 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 13 and Rule 19b–
4(f)(6) thereunder.14
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.15 However, Rule 19b–
4(f)(6)(iii) 16 permits the Commission to
13 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6)(iii) requires that a self-regulatory
organization submit to the Commission 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 NASDAQ Exchange has satisfied
this requirement.
16 Id.
14 17
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Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
NASDAQ Exchange has requested that
the Commission waive the 30-day
operative delay. The Commission notes
that the NASDAQ Exchange’s proposal
is substantially similar to the proposal
of another national securities exchange
previously approved by the Commission
and does not raise any new substantive
issues.17 The NASDAQ Exchange
proposes to implement the proposed
rule change when PHLX implements its
XLII trading system, and states that
waiving the operative delay will ensure
that the NASDAQ Exchange is able to
implement the proposed rule change at
such time.18 For these reasons, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest, and designates the
proposed rule change to be operative
upon filing with the Commission.19
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 rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2009–047 on the
subject line.
mstockstill on PROD1PC66 with NOTICES
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2009–047. This
17 See Securities Exchange Act Release No. 58179
(July 17, 2008), 73 FR 42874 (July 23, 2008) (SR–
Phlx-2008–31).
18 See SR–NASDAQ–2009–047, Items 2 and 7.
19 For the purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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17:24 May 28, 2009
Jkt 217001
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 NASDAQ
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–2009–047 and should be
submitted on or before June 19, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–12449 Filed 5–28–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59945; File No. SR–OCC–
2009–09]
Self-Regulatory Organizations; the
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
Cross-Margining of Security Futures
on Exchange-Traded Funds Based on
Broad-Based Stock Indices
May 20, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
April 17, 2009, The Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
20 17
1 15
PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
Frm 00090
Fmt 4703
Sfmt 4703
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which items have been
prepared primarily by OCC. OCC filed
the proposed rule change pursuant to
Section 19(b)(3)(A)(i) of the Act 2 and
Rule 19b–4(f)(1) 3 thereunder so that the
proposal was effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change would
certify security futures contracts on two
exchange-traded funds (‘‘ETFs’’) based
on broad-based stock indices as eligible
contracts for purposes of OCC–CME
cross-margining.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
OCC 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. OCC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of such statements.4
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In proposed rule change File Nos. SR–
OCC–2008–03 and SR–OCC–2008–12,
respectively, OCC submitted rule
changes to (i) expand its crossmargining programs with commodity
clearing organizations to include as
eligible contracts security futures on
ETFs based on broad-based securities
indices and (ii) file an Amended and
Restated OCC–CME Cross-Margining
Agreement (‘‘OCC–CME XM
Agreement’’) and related forms of
clearing member and market
professional’s agreements.5 The Exhibit
A attached to the OCC–CME XM
Agreement referenced security futures
on two such ETFs, Standard & Poor’s
Depository Receipts (‘‘SPY’’) and
2 15
U.S.C. 78s(b)(3)(A)(i).
CFR 240.19b–4(f)(1).
4 The Commission has modified parts of these
statements.
5 Securities Exchange Act Release Nos. 57543
(March 20, 2008), 73 FR 16405 (March 27, 2008)
and 58258 (July 30, 2008), 73 FR 46133 (August 7,
2008), respectively.
3 17
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Agencies
[Federal Register Volume 74, Number 102 (Friday, May 29, 2009)]
[Notices]
[Pages 25784-25786]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-12449]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59948; File No. SR-NASDAQ-2009-047]
Self-Regulatory Organizations; the NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Order Routing
May 20, 2009.
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 May 15, 2009, The NASDAQ Stock Market LLC (the ``NASDAQ Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the NASDAQ Exchange. The NASDAQ Exchange 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
The NASDAQ Exchange is proposing to modify the terms and conditions
under which it is affiliated with NASDAQ Options Services, LLC
(``NOS''). The NASDAQ Exchange proposes to implement the proposed rule
change when NASDAQ OMX PHLX, Inc. (``PHLX'') implements its XL II
trading system.\4\ There is no proposed rule language.
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 59721 (April 7, 2009),
74 FR 17245 (April 14, 2009) (SR-Phlx-2009-32); Securities Exchange
Act Release No. 59779 (April 16, 2009), 74 FR 18600 (April 23, 2009)
(SR-Phlx-2009-32, Amendment No. 1).
---------------------------------------------------------------------------
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 NASDAQ 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 NASDAQ Exchange 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 Options Services, LLC (``NOS''), which is a subsidiary of
the NASDAQ Exchange, is a registered broker-dealer and a member of the
NASDAQ Exchange and PHLX. In SR-NASDAQ-2006-006,\5\ the Commission
approved the adoption of NASDAQ Exchange Rule 2140, which provides
that, subject to certain exceptions, the NASDAQ Exchange may not become
an affiliate of one of its members unless the terms and conditions of
such affiliation are the subject of an effective filing with the
Commission. Previously, the Commission had approved the acquisition of
the entity that is now NOS by The Nasdaq Stock Market, Inc., which is
now The NASDAQ OMX Group, Inc. (``NASDAQ OMX''), the holding company
parent corporation of the NASDAQ Exchange and PHLX.\6\ Moreover, in SR-
NASDAQ-2007-004 and -080,\7\ the Commission approved rules to govern
the operation of The NASDAQ Options Market (``NOM'') as an options
market of the NASDAQ Exchange, including rules establishing NOS as the
approved outbound routing facility of the NASDAQ Exchange for NOM. The
rules governing NOS's routing of orders for NOM stipulate,
[[Page 25785]]
among other things, that: (i) NOS is a facility of the NASDAQ Exchange;
(ii) use of NOS's routing function by NASDAQ Exchange members is
optional; (iii) NOS does not provide routing of orders in options from
NOM to an exchange that is an affiliate of NASDAQ unless such orders
first attempt to access any liquidity on the NOM book; \8\ and (iv) NOS
is a member of a self-regulatory organization that is unaffiliated with
the NASDAQ Exchange and that serves as NOS's designated examining
authority.
---------------------------------------------------------------------------
\5\ Securities Exchange Act Release No. 54170 (July 18, 2006),
71 FR 42149 (July 25, 2006) (SR-NASDAQ-2006-006).
\6\ Securities Exchange Act Release No. 52902 (December 7,
2005), 70 FR 73810 (December 13, 2005) (SR-NASD-2005-128).
\7\ Securities Exchange Act Release No. 57478 (March 12, 2008),
73 FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004, -080).
\8\ Securities Exchange Act Release No. 59420 (February 19,
2009), 74 FR 8597 (February 25, 2009) (SR-NASDAQ-2009-011).
---------------------------------------------------------------------------
In SR-PHLX-2009-32,\9\ PHLX, another exchange subsidiary of NASDAQ
OMX, has proposed establishing NOS as PHLX's routing facility (the
``Routing Facility''). The sole use of the Routing Facility by the
PHLX's new proposed Phlx XL II system will be to route orders in
options listed and open for trading on the Phlx XL II system to away
markets pursuant to PHLX rules on behalf of PHLX. Proposed PHLX Rule
1080(m)(iii)(B) would provide that the use of NOS to route orders to
other market centers is optional. Parties that do not desire to use NOS
must designate orders as not available for routing (i.e., a Do Not
Route Order, as described in proposed PHLX Rule 1080(m)(iv)(A)).
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\9\ Securities Exchange Act Release No. 59721 (April 7, 2009),
74 FR 17245 (April 14, 2009) (SR-Phlx-2009-32); Securities Exchange
Act Release No. 59779 (April 16, 2009), 74 FR 18600 (April 23, 2009)
(SR-Phlx-2009-32, Amendment No. 1).
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Proposed PHLX Rule 1080(m)(iii)(C) would provide that PHLX will
establish and maintain procedures and internal controls reasonably
designed to adequately restrict the flow of confidential and
proprietary information between PHLX and the Routing Facility, and any
other entity, including any affiliate of the Routing Facility, and, if
the Routing Facility or any of its affiliates engages in any other
business activities other than providing routing services to the
Exchange, between the segment of the Routing Facility or affiliate that
provides the other business activities and the routing services. In SR-
PHLX-2009-32, PHLX further noted that NOS is a member of a self-
regulatory organization that is unaffiliated with PHLX and that serves
as NOS's designated examining authority.\10\
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\10\ The Financial Industry Regulatory Authority (``FINRA'')
serves as NOS's designated examining authority. FINRA is
unaffiliated with both PHLX and the NASDAQ Exchange.
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Finally, proposed PHLX Rule 1080(m)(iii)(D) would state that the
books, records, premises, officers, directors, agents, and employees of
the Routing Facility, as a facility of PHLX, will be deemed to be the
books, records, premises, officers, directors, agents, and employees of
PHLX for purposes of and subject to oversight pursuant to the Act. The
books and records of the Routing Facility, as a facility of PHLX, will
be subject at all times to inspection and copying by PHLX and the
Commission.
PHLX has also adopted a rule restricting affiliation between PHLX
and its members, comparable to the NASDAQ Exchange's Rule 2140. See
PHLX Rule 985(b). In SR-PHLX-2009-32, PHLX has requested that the
Commission allow PHLX to use NOS to provide routing services for orders
routed to all destinations, provided they first attempt to access
liquidity on PHLX's systems before routing to other exchanges. Thus,
the terms and conditions of PHLX's order routing would be substantially
similar to those already approved with respect to routing by NOM
through NOS.
Because orders from PHLX may be routed to NOM through NOS, it is
necessary for the NASDAQ Exchange to submit this filing to establish
that NOM may receive such routed orders. Accordingly, the NASDAQ
Exchange proposes that NOS be permitted to route orders from PHLX to
NOM subject to the following: (i) NOS is approved as and remains a
facility of PHLX; (ii) use of NOS's Routing Facility function by PHLX
members continues to be optional; (iii) NOS does not provide routing of
orders in options from PHLX to the NASDAQ Exchange or any trading
facilities thereof, unless such orders first attempt to access any
liquidity on the PHLX book, and (iv) NOS is a member of a self-
regulatory organization that is unaffiliated with PHLX and the NASDAQ
Exchange and that serves as NOS's designated examining authority. The
terms and conditions under which NOM would receive orders from PHLX
through NOS are the same as the terms and conditions under which PHLX
has been approved to receive orders from NOM through NOS.
2. Statutory Basis
The NASDAQ Exchange believes that the proposed rule change is
consistent with the provisions of Section 6 of the Act,\11\ in general,
and with Section 6(b)(5) of the Act,\12\ 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.
The proposed rule change would permit inbound routing of orders from
PHLX to NOM through NOS in accordance with the terms and conditions
governing order routing that have been approved by the Commission with
respect to receipt of orders by PHLX from NOM through NOS.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NASDAQ Exchange does not believe that the proposed rule change
will result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments 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 proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days after the date of the filing, 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 \13\ and
Rule 19b-4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\15\
However, Rule 19b-4(f)(6)(iii) \16\ permits the Commission to
[[Page 25786]]
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The NASDAQ Exchange
has requested that the Commission waive the 30-day operative delay. The
Commission notes that the NASDAQ Exchange's proposal is substantially
similar to the proposal of another national securities exchange
previously approved by the Commission and does not raise any new
substantive issues.\17\ The NASDAQ Exchange proposes to implement the
proposed rule change when PHLX implements its XLII trading system, and
states that waiving the operative delay will ensure that the NASDAQ
Exchange is able to implement the proposed rule change at such
time.\18\ For these reasons, the Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest, and designates the proposed rule change to be
operative upon filing with the Commission.\19\
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\15\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission 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 NASDAQ Exchange has satisfied this requirement.
\16\ Id.
\17\ See Securities Exchange Act Release No. 58179 (July 17,
2008), 73 FR 42874 (July 23, 2008) (SR-Phlx-2008-31).
\18\ See SR-NASDAQ-2009-047, Items 2 and 7.
\19\ For the purposes only of waiving the 30-day operative
delay, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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-2009-047 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2009-047. 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 NASDAQ 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-2009-
047 and should be submitted on or before June 19, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Florence E. Harmon,
Deputy Secretary.
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\20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-12449 Filed 5-28-09; 8:45 am]
BILLING CODE 8010-01-P