[Federal Register Volume 75, Number 242 (Friday, December 17, 2010)]
[Notices]
[Pages 79056-79058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31682]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63530; File No. SR-NASDAQ-2010-164]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Provide an Exemption from the Thirty-Day Written Notice Requirement of
Rule 7018(i)(3)
December 10, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 79057]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 9, 2010, The NASDAQ Stock Market LLC (``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 the
Substance of the Proposed Rule Change
NASDAQ is proposing to modify the thirty-day written notice
requirement applicable to a member firm seeking to withdraw as
Designated Liquidity Provider.
The text of the proposed rule change is below. Proposed new
language is italicized.
7018. Nasdaq Market Center Order Execution and Routing
(a)-(h) No change.
(i) Notwithstanding the foregoing, the following charges shall
apply to transactions in a Qualified Security by one of its Designated
Liquidity Providers:
------------------------------------------------------------------------
------------------------------------------------------------------------
Charge to Designated Liquidity Provider $0.003 per share executed
entering Order that executes in the for securities priced at $1
Nasdaq Market Center or attempts to or more per share (For
execute in the Nasdaq Market Center prior securities priced at less
to routing:. than $1 per share, the
normal execution fee under
7018(a) will apply).
Credit to Designated Liquidity Provider $0.004 per share executed
providing displayed liquidity through the (or $0, in the case of
Nasdaq Market Center:. executions against Quotes/
Orders in the Nasdaq Market
Center at less than $1.00
per share), up to 10
million shares average
daily volume.
Normal credits under 7018(a)
apply to shares greater
than 10 million average
daily volume and
nondisplayed liquidity.
------------------------------------------------------------------------
For purposes of this paragraph:
(1)-(2) No change.
(3) If a DLP does not meet the performance measurements for a given
month, fees and credits will revert to the normal schedule under
7018(a). If a DLP does not meet the stated performance measurements for
3 out of the past 4 months, the DLP is subject to forfeit of DLP status
for that instrument, at NASDAQ's discretion. A DLP must provide 30 days
written notice if it wishes to withdraw its registration in a Qualified
Security, unless it is also withdrawing as a market maker in the
Qualified Security.
(j) 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 is proposing to modify the thirty-day written notice
requirement applicable to a member firm seeking to withdraw as
Designated Liquidity Provider (``DLP'') in a Qualified Security \3\ to
exempt member firms that are also withdrawing as a market maker in the
Qualified Security. NASDAQ recently amended Rule 7018(i) to include new
subparagraph (3), discussing DLP performance requirements and adopting
a 30 day written notice requirement of a member firm's desire to
withdraw as a DLP in a Qualified Security.\4\ Specifically, NASDAQ
described the consequences of failing to meet the DLP minimum
performance criteria described in Rule 7018(i)(2) and adopted a thirty-
day prior notice obligation on DLPs seeking to withdraw registration in
a Qualified Security. The thirty-day notice requirement was adopted to
ensure that NASDAQ has adequate time to assign a new DLP, thus avoiding
any disruption in market quality that may be caused by the absence of
an assigned DLP.
---------------------------------------------------------------------------
\3\ To be designated as a ``Qualified Security,'' Rule
7018(i)(1) requires that the security is an exchange-traded fund or
index-linked security listed on Nasdaq pursuant to Nasdaq Rules
5705, 5710, or 5720, and that it has at least one Designated
Liquidity Provider.
\4\ Securities Exchange Act Release No. 63040 (October 5, 2010),
75 FR 63238 (October 14, 2010) (SR-NASDAQ-2010-128).
---------------------------------------------------------------------------
NASDAQ is proposing an exemption to the thirty-day written notice
requirement limited to member firms seeking to withdraw both as a DLP
and market maker in a Qualified Security. NASDAQ rules do not specify
or require a minimum time of prior notice of a member firm's desire to
withdraw as a market maker in a particular security.\5\ As such, a
member firm may withdraw from any given security the same day as notice
is provided to NASDAQ. A member firm is, however, restricted from
making a market in any security that it has withdrawn from for 20
days.\6\ To be a DLP, a member firm must be a registered market maker
in the Qualified Security.\7\ Therefore, if a member firm withdraws its
registration as a market maker in a Qualified Security, it is not
eligible to act as a DLP.
---------------------------------------------------------------------------
\5\ Rule 4620(a).
\6\ Id.
\7\ Rule 7018(i)(2).
---------------------------------------------------------------------------
NASDAQ adopted the thirty-day written notice of withdrawal
requirement so that it would have adequate time to assign a new DLP as
a replacement of the withdrawing member firm. Typically, a member firm
would continue as a market maker in the security that it was
withdrawing its DLP designation, and thus was able to avail itself of
the benefits of making a market in the Qualified Security. NASDAQ
believes that, in cases of complete withdrawal from market making in a
Qualified Security, the thirty-day written notice of withdrawal
requirement should not apply, since the member firm is not seeking to
continue availing itself of the benefit of making a market in the
security, but rather is completely withdrawing from making a market in
the security. Such member firms have no intent to make markets in the
security and are precluded from becoming a market maker in the security
for 20 days. Accordingly, NASDAQ does not believe that compelling a
member firm to participate as a market maker and DLP in a security
during the thirty-day notice period is beneficial to the member firm or
the quality of the market in the Qualified Security.
2. Statutory Basis
NASDAQ believes the proposed rule change is consistent with the
provisions of Section 6 of the Act,\8\ in general and with Section
6(b)(5) of the Act,\9\ in particular, which requires that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
[[Page 79058]]
practices, promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest.
NASDAQ believes that the proposed rule change is consistent with these
requirements because exempting member firms that are entirely
withdrawing as a market maker in a Qualified Security from the thirty-
day written notice requirement of Rule 7018(i)(3) eliminates an
inconsistency in the current rules concerning the notice a market maker
is required to provide NASDAQ when it determines to withdraw from
making a market in Qualified Securities. NASDAQ believes a member firm
should be able withdraw from making a market in any security under the
terms of Rule 4620(a) and not be subject to an additional notice
requirement that was designed to apply to member firms that would
continue to participate as a registered market maker in the security.
Further, NASDAQ does not believe that compelling a member firm wishing
to withdraw as a market maker in a Qualified Security to participate as
a market maker and DLP in that security during the thirty-day notice
period is beneficial to the member firm or the quality of the market in
the Qualified Security.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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: (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)\10\ of the Act and Rule 19b-
4(f)(6) thereunder.\11\ At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily 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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
NASDAQ has asked that the Commission waive the 30-day pre-operative
waiting period contained in Rule 19b-4(f)(6)(iii).\12\ NASDAQ has
requested such waiver to quickly cure an unintended inconsistency in
the notice requirements for withdrawing as a market maker in certain
securities. Based on NASDAQ's representations that the proposed rule
change is non-controversial and that no novel issues are presented in
this proposed rule change, the Commission sees no reason to delay
implementation of the proposed rule change. The Commission believes it
is consistent with the protection of investors and the public interest
to waive the 30-day operative delay, and hereby grants such waiver.\13\
---------------------------------------------------------------------------
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
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-2010-164 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-2010-164. 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 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 offices 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-2010-164, and should be submitted on or before
January 7, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2010-31682 Filed 12-16-10; 8:45 am]
BILLING CODE 8011-01-P