[Federal Register Volume 75, Number 83 (Friday, April 30, 2010)]
[Notices]
[Pages 22887-22889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10082]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61981; File No. SR-NASDAQ-2010-051]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Concerning Intermarket Option Linkage
April 26, 2010.
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 April 20, 2010, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the 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
The Exchange is filing with the Commission a proposed rule change
to delete its Temporary Rule Governing Phase-Out of P and P/A Orders
\3\ and amend several references in the rules to the Plan for the
Purpose of Creating and Operating an Intermarket Linkage (``Linkage
Plan'').\4\ In addition, the Exchange also proposes to amend its fees
in Rule 7050, NASDAQ Options Market, to discontinue its current pilot
program (the ``pilot'') relating to options
[[Page 22888]]
transaction fees for trades executed via the Intermarket Option Linkage
(``Linkage'') on the Exchange.
---------------------------------------------------------------------------
\3\ See Chapter XII, Intermarket Linkage Rules, Section 4,
Temporary Rule Governing Phase-Out of P and P/A Orders.
\4\ See Securities Exchange Act Release No. 57545 (March 21,
2008), 73 FR 16394 (March 27, 2008). On July 28, 2000, the
Commission approved a national market system plan for the purpose of
creating and operating an intermarket options market linkage
(``Linkage'') proposed by the then American Stock Exchange LLC, now
NYSE Amex LLC (``NYSE Amex''), Chicago Board Options Exchange, Inc.
(``CBOE''), and International Securities Exchange LLC (``ISE''). See
Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR
48023, (August 4, 2000). Subsequently, Philadelphia Stock Exchange,
Inc., now NASDAQ OMX PHLX, Inc. (``Phlx''), Pacific Exchange, Inc.,
now NYSE Arca, Inc. (``NYSE Arca'') and Boston Stock Exchange, Inc.,
now NASDAQ OMX BX, Inc. (``BSX'') joined the Linkage Plan. See
Securities Exchange Act Release Nos. 43573 (November 16, 2000), 65
FR 70851, (November 28, 2000); 43574 (November 16, 2000), 65 FR
70850, (November 28, 2000); and 49198 (February 5, 2004), 69 FR
7029, (February 12, 2004). The Exchange was added as a Participant
to the Linkage Plan. Linkage was governed by the Options Linkage
Authority under the conditions set forth under the Plan for the
Purpose of Creating and Operating an Intermarket Option Linkage
approved by the Commission.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com, on the Commission's Web site
at http://www.sec.gov, at Nasdaq, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to eliminate existing
references to the Linkage Plan and also replace some references to the
Linkage Plan with references to the Options Order Protection and
Locked/Crossed Market Plan (``Plan'') in order to clarify the current
rules in effect.
On June 17, 2008, the Exchange filed the Plan, joining all other
approved options markets in adopting the Plan.\5\ The Plan requires
each options exchange to adopt rules implementing various requirements
specified in the Plan. The Plan replaces the former Linkage Plan. The
Linkage Plan required Participating Exchanges to operate a stand-alone
system or ``Linkage'' for sending order-flow between exchanges to limit
trade-throughs.\6\ The Options Clearing Corporation (``OCC'') operated
the Linkage system (the ``System'').\7\ The Exchange adopted various
new rules in connection with the Plan to avoid trade-throughs and
locked markets, among other things.\8\ The Exchange currently offers
private routing directly to away markets.\9\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 60405 (July 30,
2009), 74 FR 39362 (August 6, 2009) (National Market System Plan
Relating to Options Order Protection and Locked/Crossed Markets).
The Plan is a national market system plan proposed by the seven
existing options exchanges and approved by the Commission. See
Securities Exchange Act Release No. 59647 (March 30, 2009), 74 FR
15010 (April 2, 2009) (``Plan Notice'') and 60405 (July 30, 2009),
74 FR 39362 (August 6, 2009) (``Plan Approval''). The seven options
exchanges are: Chicago Board Options Exchange, Incorporated
(``CBOE''); International Securities Exchange LLC (``ISE''); NASDAQ
OMX BX, Inc. (``BOX''); The NASDAQ Stock Market LLC (``Nasdaq'');
NYSE Amex LLC (``NYSE Amex''); NYSE Arca, Inc. (``NYSE Arca''); and
Phlx (each exchange individually a ``Participant'' and, together,
the ``Participating Options Exchanges'').
\6\ See footnote 4.
\7\ See footnote 4.
\8\ See footnote 5.
\9\ See Chapter VI, Trading Systems, Section 11, Order Routing.
---------------------------------------------------------------------------
The Exchange adopted a temporary rule entitled Temporary Rule
Governing Phase-Out of P and P/A Orders (``Temporary Rule''),\10\ in
order to facilitate the participation of certain Participating
Exchanges who may require the use of Principal Acting as Agent Orders
(``P/A Orders'') \11\ and Principal Orders (``P'') \12\ after
implementation of the Plan.\13\ Certain Participating Exchanges
required a temporary transition period during which they continued to
utilize these order types that existed under the Linkage Plan. The
Exchange proposed substantially similar rules with that of the other
Participating Exchanges to accommodate the possibility of continued use
of P/A Orders and P Orders. At this time all Participating Exchanges
have discontinued use of the Linkage Plan. The Exchange proposes at
this time to delete this Temporary Rule because it is no longer
necessary in light of the discontinued use of the Linkage Plan. The
Exchange also proposes to delete a reference to the Linkage Plan in
Chapter VII, Market Participants, Section 5, Obligations of Market
Makers. Additionally, the Exchange proposes to amend Section 1,
Definitions, in Chapter XII, Intermarket Linkage Rules, to redefine
``Plan'' to comport with the new Plan.
---------------------------------------------------------------------------
\10\ See Chapter XII, Intermarket Linkage Rules, Section 4,
Temporary Rule Governing Phase-Out of P and P/A Orders.
\11\ A P/A Order is an order for the principal account of a
Primary Market Maker (or equivalent entity on another Eligible
Exchange that is authorized to represent Public Customer orders),
reflecting the terms of a related unexecuted Public Customer order
for which the Primary Market Maker is acting as agent. See Chapter
XII, Section 4(d)(4)(i).
\12\ A Principal Order is an order for the principal account of
a market maker (or equivalent entity on another Eligible Exchange)
and is not a P/A Order. See Chapter XII, Section 4 (d)(ii).
\13\ See Securities Exchange Act Release No. 60525 (August 18,
2009), 74 FR 43188 (August 26, 2009) (SR-NASDAQ-2009-056). Linkage
was governed by the Options Linkage Authority under the conditions
set forth under the Plan for the Purpose of Creating and Operating
an Intermarket Option Linkage approved by the Commission. The
registered U.S. options markets were linked together on a real-time
basis through a network capable of transporting orders and messages
to and from each market.
---------------------------------------------------------------------------
The Exchange proposes to discontinue the current pilot program
related to transaction fees sent to the Exchange via Linkage. The
current pilot is set to expire July 31, 2010.\14\
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 60407 (July 30,
2009), 74 FR 39720 (August 7, 2009) (SR-NASDAQ-2009-073).
---------------------------------------------------------------------------
Under the Exchange's current rule, the fee for members or non-
members entering orders via Linkage that execute on the Exchange is
$0.45 per executed contract. Because there are no longer any
participant exchanges to the Linkage Plan, the Exchange proposes to
discontinue the pilot. The Exchange also proposes to amend Rule 7050,
NASDAQ Options Market, to remove all references to Linkage fees.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \15\ in general, and furthers the objectives of Section
6(b)(5) of the Act \16\ in particular, in that it is designed to
promote just and equitable principles of trade, 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, by proposing the elimination of its Temporary Rule, which
reflects usage of a former Linkage Plan that has since been replaced by
a new Plan. In addition, the Exchange believes that amending its Rules
to refer to the current Plan and by proposing to discontinue its pilot,
to clarify that Linkage fees are no longer applicable, will provide its
members clarity.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant
[[Page 22889]]
burden on competition; and (iii) become operative for 30 days after the
date of the filing, or such shorter time as the Commission may
designate, it has become effective pursuant to 19(b)(3)(A) of the Act
\17\ and Rule 19b-4(f)(6) \18\ thereunder.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
Nasdaq has satisfied this requirement.
---------------------------------------------------------------------------
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.
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-2010-051 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-2010-051. 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 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-2010-051 and should be submitted on or before May 21, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10082 Filed 4-29-10; 8:45 am]
BILLING CODE 8011-01-P