Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Accept Inbound Orders Routed From Its Affiliates, 65311-65313 [2011-27133]
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sroberts on DSK5SPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,14 which
requires, among other things, that the
Exchange’s rules be 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 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 Exchange’s proposal to relieve
market makers from the obligation to
continuously quote in adjusted series
would not affect market makers’ other
obligations. For example, the
Commission notes that the proposal
does not excuse a market maker from
the obligations to respond with a twosided, legal width market to a call for a
market by a floor broker.15 The
Commission also notes that the proposal
does not excuse a market maker from
the obligation to submit a single quote
or maintain continuous quotes in one or
more series of an option issue within
the market maker’s appointment
whenever, in the judgment of such
Trading Official, it is necessary to do so
in the interest of maintaining fair and
orderly markets.16 Accordingly, the
Exchange’s proposal concerning
adjusted series is narrowly tailored to,
among other things, 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. To the extent such
series, shortly after the adjustment,
become inactive as a result of a lack of
interest in the series by market
participants who have instead focused
their trading in the new standard
contracts, the Exchange’s proposal
would reduce the burden on market
makers to submit continuous quotes that
the Exchange may not submit to OPRA.
In so doing, the proposal may
incentivize market makers to continue
appointments in classes that have
adjusted option series, and thereby
should help maintain liquidity in these
classes to the benefit of the Exchange,
its ATP Holders, and investors. In
addition, the obligation to continuously
quote in such illiquid series, for which
there may be little or no trading interest,
is a minor part of a market maker’s
overall obligations and thus requiring a
continuous quote may not justify the
system resources necessary to
accommodate them.
Further, the proposed new
Commentary .01 to Rule 925.1NY (the
rule applicable to market maker
quotations) to reflect the exception for
LEAPS provided for in Commentary
.03(a) to Rule 903 to the continuous
quoting obligations contained in Rule
925.1NY, is not a new substantive
provision, but rather references the
exception currently provided for in
Commentary .03(a) to Rule 903. In so
doing, the proposed change clarifies the
exception by referencing it in the rule
applicable to market maker quoting
obligations generally.
IV. Conclusion
It Is Therefore Ordered, pursuant to
Section 19(b)(2) of the Act,17 that the
proposed rule change (SR–NYSEAmex–
2011–61) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–27134 Filed 10–19–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65554; File No. SR–
NASDAQ–2011–142]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Accept
Inbound Orders Routed From Its
Affiliates
October 13, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
6, 2011, The NASDAQ Stock Market
LLC (the ‘‘Exchange’’ or ‘‘NASDAQ’’),
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by NASDAQ. 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
NASDAQ is filing with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
to accept inbound orders routed by
Nasdaq Execution Services LLC (‘‘NES’’)
from both the NASDAQ OMX PSX
facility (‘‘PSX’’) of NASDAQ OMX
PHLX (‘‘PHLX’’) as well as from the
NASDAQ OMX BX Equities Market of
NASDAQ OMX BX, Inc. (‘‘BX’’), as
described further below, on a one year
pilot basis.
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com, at
NASDAQ’s principal office, 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,
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
NES provides all routing functions for
The NASDAQ Stock Market
(‘‘NASDAQ’’) as well as, pursuant to
recent proposed rule changes, for BX
and PHLX.3 Accordingly, NASDAQ now
proposes that NES be permitted to route
orders from BX and PSX to the
Exchange on a one year pilot basis.
NES is a broker-dealer and member of
NASDAQ, PHLX and BX. BX, NASDAQ,
PHLX and NES are affiliates. This raises
the issue of an exchange’s affiliation
with a member of such exchange.
Specifically, in connection with prior
filings, the Commission has expressed
concern that the affiliation of an
exchange with one of its members raises
the potential for unfair competitive
advantage and potential conflicts of
interest between an exchange’s self-
17 15
14 15
U.S.C. 78f(b)(5).
15 See NYSE Amex Rule 925NY(b)(6).
16 See NYSE Amex Rule 925.1NY(d).
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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.
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18 17
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3 See Securities Exchange Act Release Nos. 65470
(October 3, 2011) (SR–BX–2011–048); and 65469
(October 3, 2011) (SR–Phlx–2011–108).
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Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
sroberts on DSK5SPTVN1PROD with NOTICES
regulatory obligations and its
commercial interests.4
Recognizing that the Commission has
previously expressed concern regarding
the potential for conflicts of interest in
instances where a member firm is
affiliated with an exchange of which it
is a member, the Exchange previously
proposed, and the Commission
approved, limitations and conditions on
NES’s affiliation with the NASDAQ.5
The Commission has also expressed
concern regarding the potential for
conflicts of interest in instances where
a member firm is affiliated with an
exchange to which it is routing orders.6
To address the Commission’s concerns,
NASDAQ proposes to accept inbound
orders that NES routes from PHLX and
BX, respectively, in its capacity as a
facility of PHLX and BX, subject to
certain limitations and conditions:
• First, the Exchange and the
Financial Industry Regulatory Authority
(‘‘FINRA’’) will maintain a Regulatory
Contract, as well as an agreement
pursuant to Rule 17d–2 under the Act
(‘‘17d–2 Agreement’’).7 Pursuant to the
Regulatory Contract and the 17d–2
Agreement, FINRA will be allocated
regulatory responsibilities to review
NES’s compliance with certain
Exchange rules.8 Pursuant to the
Regulatory Contract, however, NASDAQ
retains ultimate responsibility for
enforcing its rules with respect to NES.
• Second, FINRA will monitor NES
for compliance with the Exchange’s
trading rules, and will collect and
maintain certain related information.9
• Third, FINRA will provide a report
to the Exchange’s chief regulatory
officer (‘‘CRO’’), on a quarterly basis,
that: (i) Quantifies all alerts (of which
FINRA is aware) that identify NES as a
participant that has potentially violated
Commission or Exchange rules, and (ii)
4 See Securities Exchange Act Release Nos. 59153
(December 23, 2008), 73 FR 80485 (SR–NASDAQ–
2008–098); and 62736 (August 17, 2010), 75 FR
51861 (August 23, 2010) (SR–NASDAQ–2010–100).
5 Id.
6 See Securities Exchange Act Release No. 62877
(September 9, 2010), 75 FR 56633 (September 16,
2010) (SR–PHLX–2010–79).
7 17 CFR 240.17d–2.
8 NES is also subject to independent oversight by
FINRA, its designated examining authority, for
compliance with financial responsibility
requirements.
9 Pursuant to the Regulatory Contract, both
FINRA and the Exchange will collect and maintain
all alerts, complaints, investigations and
enforcement actions in which NES (in its capacity
as a facility of PHLX or BX routing orders to the
Exchange) is identified as a participant that has
potentially violated applicable Commission or
Exchange rules. The Exchange and FINRA will
retain these records in an easily accessible manner
in order to facilitate any potential review conducted
by the Commission’s Office of Compliance
Inspections and Examinations.
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lists all investigations that identify NES
as a participant that has potentially
violated Commission or Exchange rules.
• Fourth, the Exchange will adopt
Rule 2160(c), which requires NASDAQ
OMX, as the holding company owning
both the Exchange and NES, to establish
and maintain procedures and internal
controls reasonably designed to ensure
that NES does not develop or implement
changes to its system, based on nonpublic information obtained regarding
planned changes to the Exchange’s
systems as a result of its affiliation with
the Exchange, until such information is
available generally to similarly situated
Exchange members, in connection with
the provision of inbound order routing
to the Exchange.
• Fifth, the Exchange proposes that
the routing of orders from NES to the
Exchange, in NES’s capacity as a facility
of PHLX as well as BX, be authorized for
a pilot period of one year.
The Exchange believes that the abovelisted conditions protect the
independence of the Exchange’s
regulatory responsibility with respect to
NES, and that these mitigate the
aforementioned concerns about
potential conflicts of interest and unfair
competitive advantage.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,10
in general, and with Sections 6(b)(5) of
the Act,11 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,
because the proposed rule change will
allow the Exchange to receive inbound
routes of orders from NES, acting in its
capacity as a facility of PHLX or BX, in
a manner consistent with prior
approvals and established protections.
The Exchange believes that the
proposed conditions establish
mechanisms that protect the
independence of the Exchange’s
regulatory responsibility with respect to
NES, as well as ensure that NES cannot
use any information it may have
10 15
11 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(5).
Frm 00155
Fmt 4703
Sfmt 4703
because of its affiliation with the
Exchange to its advantage.
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
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 12 and Rule 19b–
4(f)(6) thereunder.13
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Exchange believes that the
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest
because it would benefit users by
offering more opportunities for their
orders to be executed.14 The
Commission notes that the proposed
rule change is consistent with rules of
other national securities exchanges, and
does not raise any new substantive
issues.15 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
proposal to be operative upon filing
with the Commission.16
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s 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 Exchange
has satisfied this requirement.
14 See SR–NASDAQ–2011–142, Item 7.
15 See, e.g., Securities Exchange Act Release Nos.
62901 (September 13, 2010), 75 FR 57097
(September 17, 2010) (SR–BATS–2010–024); and
64729 (June 23, 2011), 76 FR 38232 (June 29, 2011)
(SR–NYSE–2011–24).
16 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
13 17
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Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend 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.
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–2011–142 and should be
submitted on or before November 10,
2011.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Elizabeth M. Murphy,
Secretary.
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–2011–142 on the
subject line.
sroberts on DSK5SPTVN1PROD 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–2011–142. 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 Web site viewing and
printing 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
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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[FR Doc. 2011–27133 Filed 10–19–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65551; File No. SR–FINRA–
2011–056]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7730
Regarding TRACE Reporting Fees For
Transactions in Agency Pass-Through
Mortgage-Backed Securities Traded
‘‘To Be Announced’’
65313
a TRACE-Eligible Security that is an
Agency Pass-Through Mortgage-Backed
Security traded ‘‘to be announced’’ and
to incorporate minor technical
amendments.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA, on the Commission’s
Web site at https://www.sec.gov, 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,
FINRA 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. FINRA 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
October 13, 2011.
1. Purpose
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 30, 2011, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
‘‘establishing or changing a due, fee or
other charge’’ under Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon receipt of this
filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
On May 16, 2011, amendments to the
FINRA Rule 6700 Series (the TRACE
rules) and Rule 7730 (TRACE fees)
became effective.5 The amendments
defined Asset-Backed Securities
(‘‘ABS’’) as TRACE-Eligible Securities
and extended TRACE reporting
requirements to transactions in ABS in
the TRACE rules.6 In addition, the
TRACE reporting fees in effect for
transactions in corporate bonds and
Agency Debt Securities were extended
to transactions in ABS in Rule 7730.7
As a result, currently the reporting fee
for transactions in ABS, including
Agency Pass-Through Mortgage-Backed
Securities (‘‘Agency Pass-Through
MBS’’) traded to-be-announced
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 7730 to establish a transaction
reporting fee of $1.50 per transaction for
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
1 15
PO 00000
Frm 00156
Fmt 4703
Sfmt 4703
5 See Securities Exchange Act Release No. 61566
(February 22, 2010), 75 FR 9262 (March 1, 2010)
(order approving File No. SR–FINRA–2009–065)
(‘‘TRACE ABS filing’’); Securities Exchange Act
Release No. 64364 (April 28, 2011), 76 FR 25385
(May 4, 2011) (order approving File No. SR–
FINRA–2011–012) (‘‘supplemental TRACE ABS
filing’’); Regulatory Notice 10–55 (October 2010)
(establishing May 16, 2011 as the effective date for
the TRACE ABS filing); and Regulatory Notice 11–
20 (May 2011) (establishing May 16, 2011 as the
effective date for the supplemental TRACE ABS
filing).
6 ‘‘Asset-Backed Security’’ and ‘‘TRACE-Eligible
Security’’ are defined in, respectively, Rule 6710(m)
and Rule 6710(a).
7 ‘‘Agency Debt Security’’ is defined in Rule
6710(l).
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]]>Agencies
[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65311-65313]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27133]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65554; File No. SR-NASDAQ-2011-142]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Accept Inbound Orders Routed From Its Affiliates
October 13, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 6, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or
``NASDAQ''), filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been 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 is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to accept inbound orders routed
by Nasdaq Execution Services LLC (``NES'') from both the NASDAQ OMX PSX
facility (``PSX'') of NASDAQ OMX PHLX (``PHLX'') as well as from the
NASDAQ OMX BX Equities Market of NASDAQ OMX BX, Inc. (``BX''), as
described further below, on a one year pilot basis.
The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com, at NASDAQ's principal office, 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, 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
NES provides all routing functions for The NASDAQ Stock Market
(``NASDAQ'') as well as, pursuant to recent proposed rule changes, for
BX and PHLX.\3\ Accordingly, NASDAQ now proposes that NES be permitted
to route orders from BX and PSX to the Exchange on a one year pilot
basis.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 65470 (October 3,
2011) (SR-BX-2011-048); and 65469 (October 3, 2011) (SR-Phlx-2011-
108).
---------------------------------------------------------------------------
NES is a broker-dealer and member of NASDAQ, PHLX and BX. BX,
NASDAQ, PHLX and NES are affiliates. This raises the issue of an
exchange's affiliation with a member of such exchange. Specifically, in
connection with prior filings, the Commission has expressed concern
that the affiliation of an exchange with one of its members raises the
potential for unfair competitive advantage and potential conflicts of
interest between an exchange's self-
[[Page 65312]]
regulatory obligations and its commercial interests.\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release Nos. 59153 (December 23,
2008), 73 FR 80485 (SR-NASDAQ-2008-098); and 62736 (August 17,
2010), 75 FR 51861 (August 23, 2010) (SR-NASDAQ-2010-100).
---------------------------------------------------------------------------
Recognizing that the Commission has previously expressed concern
regarding the potential for conflicts of interest in instances where a
member firm is affiliated with an exchange of which it is a member, the
Exchange previously proposed, and the Commission approved, limitations
and conditions on NES's affiliation with the NASDAQ.\5\ The Commission
has also expressed concern regarding the potential for conflicts of
interest in instances where a member firm is affiliated with an
exchange to which it is routing orders.\6\ To address the Commission's
concerns, NASDAQ proposes to accept inbound orders that NES routes from
PHLX and BX, respectively, in its capacity as a facility of PHLX and
BX, subject to certain limitations and conditions:
---------------------------------------------------------------------------
\5\ Id.
\6\ See Securities Exchange Act Release No. 62877 (September 9,
2010), 75 FR 56633 (September 16, 2010) (SR-PHLX-2010-79).
---------------------------------------------------------------------------
First, the Exchange and the Financial Industry Regulatory
Authority (``FINRA'') will maintain a Regulatory Contract, as well as
an agreement pursuant to Rule 17d-2 under the Act (``17d-2
Agreement'').\7\ Pursuant to the Regulatory Contract and the 17d-2
Agreement, FINRA will be allocated regulatory responsibilities to
review NES's compliance with certain Exchange rules.\8\ Pursuant to the
Regulatory Contract, however, NASDAQ retains ultimate responsibility
for enforcing its rules with respect to NES.
---------------------------------------------------------------------------
\7\ 17 CFR 240.17d-2.
\8\ NES is also subject to independent oversight by FINRA, its
designated examining authority, for compliance with financial
responsibility requirements.
---------------------------------------------------------------------------
Second, FINRA will monitor NES for compliance with the
Exchange's trading rules, and will collect and maintain certain related
information.\9\
---------------------------------------------------------------------------
\9\ Pursuant to the Regulatory Contract, both FINRA and the
Exchange will collect and maintain all alerts, complaints,
investigations and enforcement actions in which NES (in its capacity
as a facility of PHLX or BX routing orders to the Exchange) is
identified as a participant that has potentially violated applicable
Commission or Exchange rules. The Exchange and FINRA will retain
these records in an easily accessible manner in order to facilitate
any potential review conducted by the Commission's Office of
Compliance Inspections and Examinations.
---------------------------------------------------------------------------
Third, FINRA will provide a report to the Exchange's chief
regulatory officer (``CRO''), on a quarterly basis, that: (i)
Quantifies all alerts (of which FINRA is aware) that identify NES as a
participant that has potentially violated Commission or Exchange rules,
and (ii) lists all investigations that identify NES as a participant
that has potentially violated Commission or Exchange rules.
Fourth, the Exchange will adopt Rule 2160(c), which
requires NASDAQ OMX, as the holding company owning both the Exchange
and NES, to establish and maintain procedures and internal controls
reasonably designed to ensure that NES does not develop or implement
changes to its system, based on non-public information obtained
regarding planned changes to the Exchange's systems as a result of its
affiliation with the Exchange, until such information is available
generally to similarly situated Exchange members, in connection with
the provision of inbound order routing to the Exchange.
Fifth, the Exchange proposes that the routing of orders
from NES to the Exchange, in NES's capacity as a facility of PHLX as
well as BX, be authorized for a pilot period of one year.
The Exchange believes that the above-listed conditions protect the
independence of the Exchange's regulatory responsibility with respect
to NES, and that these mitigate the aforementioned concerns about
potential conflicts of interest and unfair competitive advantage.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\10\ in general, and with
Sections 6(b)(5) of the Act,\11\ 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, because the
proposed rule change will allow the Exchange to receive inbound routes
of orders from NES, acting in its capacity as a facility of PHLX or BX,
in a manner consistent with prior approvals and established
protections. The Exchange believes that the proposed conditions
establish mechanisms that protect the independence of the Exchange's
regulatory responsibility with respect to NES, as well as ensure that
NES cannot use any information it may have because of its affiliation
with the Exchange to its advantage.
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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, 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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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
Exchange has satisfied this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Exchange believes that the waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest because it would benefit users by offering more
opportunities for their orders to be executed.\14\ The Commission notes
that the proposed rule change is consistent with rules of other
national securities exchanges, and does not raise any new substantive
issues.\15\ 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 proposal to be operative
upon filing with the Commission.\16\
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\14\ See SR-NASDAQ-2011-142, Item 7.
\15\ See, e.g., Securities Exchange Act Release Nos. 62901
(September 13, 2010), 75 FR 57097 (September 17, 2010) (SR-BATS-
2010-024); and 64729 (June 23, 2011), 76 FR 38232 (June 29, 2011)
(SR-NYSE-2011-24).
\16\ For 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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[[Page 65313]]
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend 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-2011-142 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-2011-142. 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 Web site
viewing and printing 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 Number SR-
NASDAQ-2011-142 and should be submitted on or before November 10, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27133 Filed 10-19-11; 8:45 am]
BILLING CODE 8011-01-P
