[Federal Register Volume 75, Number 227 (Friday, November 26, 2010)]
[Notices]
[Pages 72855-72857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29721]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63341; File No. SR-NASDAQ-2010-147]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Two Aspects of the Rules and Operation of The NASDAQ Options
Market
November 18, 2010.
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 November 10, 2010, The NASDAQ Stock Market
[[Page 72856]]
LLC (the ``Exchange'' or ``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 the Exchange. The 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.
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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 Substance
of the Proposed Rule Change
The Exchange is filing this proposed rule change to modify two
aspects of the rules and operation of the NASDAQ Options Market
(``NOM''): (1) To eliminate the Closing Cross set forth in Chapter VI,
Section 9 of the rules; and (2) to increase the maximum order size from
9,999 to 999,999 contracts in Chapter VI, Section 1 of the rules. The
text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at the Exchange'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, 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The NASDAQ Options Market (``NOM''), the options trading facility
of The NASDAQ Stock Market LLC, has been fully operational for just
over two years. After assessing NOM's performance, NASDAQ has
identified two minor changes to NOM's operation: (1) Eliminating the
Closing Cross set forth in Chapter VI, Section 9 of the rules; and (2)
increasing the maximum order size from 9,999 to 999,999 contracts in
Chapter VI, Section 1 of the rules. NASDAQ believes that neither of
these changes will have a material impact on the operation of NOM or of
NOM members.
1. Eliminating the NOM Closing Cross
NASDAQ's proposal to transport the closing cross from NASDAQ's
equities market to NOM was intended to determine whether a standard
closing cross could aid price discovery and liquidity in a derivative
product. Although a few market participants experimented with the NOM
Closing Cross just after launch, the Closing Cross never attracted
meaningful liquidity. The Closing Cross has not been used by any market
participant in any options class for quite some time. Accordingly,
NASDAQ is proposing to eliminate that functionality from the technology
and from the rule book (Chapter VI, Section 9) governing NOM.
2. Increasing the Maximum Order Size
NASDAQ members have requested the ability to enter orders into the
system of greater than 9,999 contracts. The existing limit on order
size was a technological constraint that can easily be modified.
Accordingly, NASDAQ proposes to modify the system and downstream
processes and data feeds to accept orders of up to 999,999 contracts.
Following this change, NOM will match the maximum order size currently
in place at other options exchanges.\4\
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\4\ See. e.g., BATS Exchange Rule 21.1(e) (``The term ``Order
Size'' shall mean the number of contracts up to 999,999 associated
with the Order''); CBOE Regulatory Circular RG 10-43 (March 26,
2010) at https://www.cboe.org/publish/RegCir/RG10-043.pdf.
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NASDAQ has safeguards in place to protect the market from
inadvertent entry of large orders. Each member that requests
connectivity through an order entry port is required to specify the
maximum order size for its individual port.\5\ NASDAQ sets the default
maximum order size at 2,500 contracts. Members are permitted to deviate
from the default maximum order size but NASDAQ members are required to
have processes and procedures in place to ensure the proper entry and
monitoring of orders entered into NASDAQ systems. Prior to implementing
this change, NASDAQ will issue an alert to members to ensure that they
have policies and procedures in place to employ the new functionality
in a prudent fashion.
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\5\ See NASDAQ Options Port Request Form at http://www.nasdaqtrader.com/content/AdministrationSupport/AgreementsTrading/options_portrequest.pdf.
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2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\6\ in general, and with Section
6(b)(5) of the Act,\7\ 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 changes
should enhance the NOM market as described above based on NASDAQ's
experience operating NOM for two years.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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\8\ and Rule 19b-
4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such 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
[[Page 72857]]
the purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-147 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-2010-147. 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,\10\ 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 the
filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NASDAQ-2010-147 and should be submitted on or before
December 17, 2010.
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\10\ The text of the proposed rule change is available on
Exchange's Web site at http://nasdaq.cchwallstreet.com/, on the
Commission's Web site at http://www.sec.gov, at NASDAQ, and at the
Commission's Public Reference Room.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-29721 Filed 11-24-10; 8:45 am]
BILLING CODE 8011-01-P