[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76505-76506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30803]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63414; File No. SR-NASDAQ-2010-153]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by The NASDAQ Stock Market LLC
To Clarify the Exclusion of Partial Trading Days From Certain
Calculations Within the Investor Support Program
December 2, 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 24, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``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 self-regulatory
organization. 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.
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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
(``SEC'' or ``Commission'') a proposal for the NASDAQ Options Market
(``NOM'' or ``Exchange'') to clarify that partial trading days will not
be counted toward the calculation of certain Investor Support Program
(``ISP'') credit eligibility requirements pursuant to subsection (c)(2)
of the rule.
The text of the proposed rule change is available from NASDAQ's Web
site at http://nasdaq.cchwallstreet.com/Filings/, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend Rule 7014 to clarify that
partial trading days will not be counted toward the calculation of
certain ISP credit eligibility requirements pursuant to subsection
(c)(2) of the rule, particularly the average daily number of shares of
liquidity provided in orders entered by the member through its ISP-
designated ports and executed in the Nasdaq Market Center during the
month.
The Exchange established an Investor Support Program that enables
NASDAQ members to earn a monthly fee credit for providing additional
liquidity to NASDAQ and increasing the NASDAQ-traded volume of what are
generally considered to be retail and institutional investor orders in
exchange-traded securities (``targeted liquidity'').\3\ The goal of the
ISP is to incentivize members to provide such targeted liquidity to the
NASDAQ Market Center.\4\ The Exchange noted in the ISP Filing that
maintaining and increasing the proportion of orders in exchange-listed
securities executed on a registered exchange (rather than relying on
any of the available off-exchange execution methods) would help raise
investors' confidence in the fairness of their transactions and would
benefit all investors by deepening NASDAQ's liquidity pool, supporting
the quality of price discovery, promoting market transparency and
improving investor protection.
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\3\ For a detailed description of the Investor Support Program,
see Securities Exchange Act Release No. 63270 (November 8, 2010), 75
FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice of filing and
immediate effectiveness) (the ``ISP Filing'').
\4\ The Commission has recently expressed its concern that a
significant percentage of the orders of individual investors are
executed at over the counter (``OTC'') markets, that is, at off-
exchange markets; and that a significant percentage of the orders of
institutional investors are executed in dark pools. Securities
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594
(January 21, 2010) (Concept Release on Equity Market Structure,
``Concept Release''). See also Mary L. Schapiro, Strengthening Our
Equity Market Structure (Speech at the Economic Club of New York,
Sept. 7, 2010) (``Schapiro Speech,'' available on the Commission Web
site) (comments of Commission Chairman on what she viewed as a
troubling trend of reduced participation in the equity markets by
individual investors, and that nearly 30 percent of volume in U.S.-
listed equities is executed in venues that do not display their
liquidity or make it generally available to the public).
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Partial trading days are not excluded from the average daily number
of shares of liquidity provided and executed pursuant to certain ISP
credit eligibility criteria in the rule and the Exchange now proposes a
change to do so.\5\
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\5\ NASDAQ notes that exclusion of partial trading days would be
consistent with how the Exchange treats partial trading days for
tabulation of pricing tiers under Rule 7018(j).
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To further the ISP goal of attracting certain targeted retail and
institution liquidity, the ISP limits ISP credit eligibility to
targeted liquidity-enhancing orders in large part by: Establishing a
monthly ISP Execution Ratio \6\ of 10 or above (subsection (c)(1)); and
a monthly cap of 10 million for the average daily number of shares of
liquidity provided in orders entered by the member through its ISP-
designated ports and executed in the NASDAQ Market Center during the
month (subsection (c)(2)). As noted, in the ISP Filing the Exchange did
not exclude partial trading days from the calculation of order numbers
pursuant to subsection (c)(2) of the rule. The Exchange believes that
the inclusion of partial trading days \7\ may serve to improperly skew
the operative calculations. As such, the Exchange proposes to add new
section (c)(3) that states that for purposes of determining the average
daily number of shares of liquidity provided pursuant to subsection
(c)(2) of this Rule, any day that the market is not open for the entire
trading day will be excluded from such calculation.\8\
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\6\ The term ``ISP Execution Ratio'' is defined as: The ratio of
(i) the total number of liquidity-providing orders entered by a
member through its ISP-designated ports during the specified time
period to (ii) the number of liquidity-providing orders entered by
such member through its ISP-designated ports and executed (in full
or partially) in the NASDAQ Market Center during such time period
(provided that: (i) No order shall be counted as executed more than
once; (ii) no Pegged Orders, odd-lot orders, or MIOC or SIOC orders
shall be included in the tabulation; and (iii) no order shall be
included in the tabulation if it executes but does not add
liquidity). Rule 7014 (d)(3).
\7\ A partial trading day may occur, as an example, immediately
after the Thanksgiving holiday.
\8\ There have been no partial trading days in the month of
November previous to the date of submission of the filing and it
would therefore not be retroactive in effect.
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[[Page 76506]]
The Exchange believes that the proposed change to the ISP, which
will be equally applicable to all ISP participants, should be conducive
to further enhancing the program's fairness and equitability.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\9\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility or system which NASDAQ operates or controls, and 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, in general, to protect investors and the public interest. The rule
change enhances the Investor Support Program, which helps to raise
investors' confidence in the fairness of their transactions and benefit
all investors by deepening NASDAQ's liquidity pool, supporting the
quality of price discovery, promoting market transparency and improving
investor protection.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4) and (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.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\11\ 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. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2010-153 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-2010-153. 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-2010-153 and should be submitted on or before December 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30803 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P