[Federal Register Volume 73, Number 155 (Monday, August 11, 2008)]
[Notices]
[Pages 46668-46670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18383]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58282; File No. SR-NASDAQ-2008-067]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding Letters of Guarantee for Options Participants
August 1, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 29, 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. Nasdaq has designated the proposed rule
change as constituting a non-controversial rule change under Rule 19b-
4(f)(6) under the Act,\3\ which renders the proposal effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Nasdaq is filing a proposed rule change for the NASDAQ Options
Market (``NOM'') to modify Chapter VII, Section 8 of its options rules
to require Letters of Guarantee for each options participant, rather
than each market maker.
The text of the proposed rule change is below. Proposed new
language is in italics; proposed deletions are in brackets.\4\
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\4\ Changes are marked to the rule text that appears in the
electronic manual of The NASDAQ Stock Market, LLC found at http://nasdaq.cchwallstreet.com/.
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* * * * *
Chapter VII Market Participants
* * * * *
Sec. 8 Letters of Guarantee
(a) Required of Each Options Participant [Market Maker]. No Options
Participant [Market Maker] shall make any transactions on NOM unless a
Letter of Guarantee has been issued for such Participant by a Clearing
Participant and filed with Nasdaq Regulation, and unless such Letter of
Guarantee has not
[[Page 46669]]
been revoked pursuant to paragraph (c) of this Section.
(b)-(c) 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 has determined that requiring a Letter of Guarantee for each
options participant would decrease the individual risk exposure of each
options participant as well as the systemic risk of exposure to
Nasdaq's options marketplace. Requiring a Letter of Guarantee of market
makers provides a measure of protection but it does not provide
protection with respect to options participants that enter orders and
liquidity into the market in the same fashion as market makers but to a
lesser degree. It will also provide incremental protection to clearing
brokers by providing advanced notice and requiring acknowledgment that
a new firm will be using their clearing services.
Nasdaq's determination is based in part on conversations with
current options participants as well as potential options participants.
It is also based on Rule 3.28 of the Chicago Board Options Exchange
which requires letters of guarantee for all trading activity on that
exchange regardless of whether the firm is a registered specialist or
not. In addition, all options participants are required by Chapter VI,
Section 15 of Nasdaq's options rules to document its relationship with
a clearing firm by submitting one of several documents, including a
Letter of Guarantee.
Nasdaq will work with its membership to ensure full and timely
compliance with this proposed rule change. While many members are
familiar with Letters of Guarantee through, for example, compliance
with Chapter VI, Section 15 or their membership at other exchanges,
Nasdaq will provide all members 45 days from the date of filing of the
proposed rule change to comply with the new requirement. In addition,
Nasdaq will issue an Options Trader Alert to members explaining the new
requirement and providing notice of the compliance date.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Securities Exchange Act of
1934, in general and with Section 6(b)(5) of the Act, in particular, in
that it is designed 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; and are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers, or to regulate by virtue of any authority
conferred by this title matters not related to the purposes of this
title or the administration of the exchange. The proposed changes are
consistent with the statute in that they are designed to facilitate
transactions in options on the Nasdaq Options Market by minimizing
counter-party risk and encouraging participants to provide liquidity in
Quarterly Options Series.
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. To the contrary, the proposal
is designed to enhance competition and is based upon the rules of
another national securities exchange that trades standardized options.
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: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 19b-
4(f)(6) thereunder.\6\ Nasdaq will make the proposed rule change
operative 45 days from the date of filing this proposal.
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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f)(6).
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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 (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NASDAQ-2008-067 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-2008-067. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549 on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at
[[Page 46670]]
Nasdaq's principal office. 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-2008-067, and should be submitted on or before September 2,
2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-18383 Filed 8-8-08; 8:45 am]
BILLING CODE 8010-01-P