Federal Register / Vol. 74, No. 16 / Tuesday, January 27, 2009 / Notices 4799 

14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58145 

(July 11, 2008), 73 FR 41143. 

4See August 7, 2008 letter from Ira D. 

Hammerman, Senior Managing Director and 

General Counsel, Securities Industry and Financial 

Markets Association (‘‘SIFMA’’), to Florence 

Harmon, Acting Secretary, Commission (‘‘SIFMA 

Letter’’). 

5See September 18, 2008 letter from Jeffrey S. 

Davis, Deputy General Counsel and Vice President, 

Nasdaq, to Florence Harmon, Acting Secretary, 

Commission (‘‘Nasdaq Letter’’). 

6SIFMA Letter at 2, quoting the Commission’s 

order approving Nasdaq’s exchange application. See 

Securities Exchange Act Release No. 53128 (January 

13, 2006), 71 FR 3550 (January 23, 2006) (File No. 

10–131), in text following footnote 136. 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–BX–2009–001 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–BX–2009–001. 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 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–BX–2009–001 and should 

be submitted on or before February 17, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–1671 Filed 1–26–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59266; File No. SR– 

NASDAQ–2008–016] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving Proposed Rule Change To 

Create the Nasdaq Market Pathfinders 

Service and Establish Fees for the 

Service 

January 16, 2009. 

I. Introduction and Description of the 

Proposal 

On June 27, 2008, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change that would establish the Nasdaq 

Market Pathfinders Service (‘‘Service’’) 

and establish fees for the Service. The 

Service will allow subscribers to view a 

real time data product that tracks the 

aggregated market activity of certain 

market participants who are 

aggressively buying and/or selling. 

Nasdaq proposes to offer new 

subscribers a 30-day waiver of the user 

fees for the Service. After the conclusion 

of the waiver period, subscribers may 

avail themselves of three different 

subscription options at varying prices. 

The proposed rule change was 

published in the Federal Register on 

July 17, 2008.3 The Commission 

received one comment on the proposal.4

Nasdaq responded to the comment letter 

on September 18, 2008.5 The 

Commission is approving the proposed 

rule change. 

II. Summary of Comment Letter 

The commenter suggests that the 

Commission cannot approve the 

proposed rule change for the following 

reasons: 

—Nasdaq is proposing to make 

commercial use of data supplied to it 

in Nasdaq’s capacity as a regulatory 

body, despite the Commission’s 

previous statement that, with regard 

to OATS information, it does not 

believe such data should be used for 

non-regulatory purposes unless the 

data is made available to other market 

participants on the same terms under 

which it is provided to Nasdaq.6

—Nasdaq has failed to provide a 

detailed discussion of the data or 

analytics to be included in the 

Service. SIFMA stated that several 

firms have expressed concern with 

the proposal’s potential to 

compromise the confidentiality of the 

transacting party’s trading strategies 

or provide misinformation as to a 

transacting party. 

—SIFMA questions whether the Service 

will provide a means to reverse 

engineer the algorithms and strategies 

Nasdaq members have created, or 

whether the impact on such 

algorithms and strategies will be such 

as to render them useless. 

—SIFMA also raised a procedural 

concern, stating that Nasdaq is 

proposing to create a proprietary 

product that uses data its members are 

required to submit without 

compensation; no other exchange or 

market data vendor can replicate this 

product because necessary elements 

are not available to anyone but 

Nasdaq; and no cost data is provided 

to allow an opportunity to determine 

if the fees are fair and reasonable. 

III. Nasdaq’s Response to the Comment 

Letter 

In response to the SIFMA Letter, 

Nasdaq made the following points: 

—SIFMA inaccurately claims that 

Nasdaq is collecting data in its 

capacity as a regulatory body and 

using it for commercial purposes, 

stating that the Service does not use 

OATS information, but instead relies 

on trade information sent directly and 

only from the Nasdaq Matching 

Engine. 

—The Service will not operate in a 

manner that permits users to 

distinguish between short and long 

sales; the Service will not 

compromise the confidentiality of the 

transacting party’s trading strategies, 

nor provide misinformation as to a 

transacting party because there are 

filters in place to prevent this from 

occurring. 

—The Service will not provide a means 

to reverse engineer the algorithms and 

strategies Nasdaq members have 

created, nor will it affect those 

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4800 Federal Register / Vol. 74, No. 16 / Tuesday, January 27, 2009 / Notices 

7 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

8 15 U.S.C. 78f(b)(4). 

9The proposal meets the criteria, formulated by 

the Commission in connection with the petition 

filed by NetCoalition, for approval of proposed rule 

changes concerning the distribution of non-core 

market data. See Securities Exchange Act Release 

Nos. 59039 (December 2, 2008), 73 FR 74770 

(December 9, 2008) (SR–NYSEArca–2006–21) and 

55011 (December 27, 2006) (order granting petition 

for review of SR–NYSEArca–2006–21). In its order 

issued in connection with the NetCoalition petition, 

the Commission stated that ‘‘reliance on 

competitive forces is the most appropriate and 

effective means to assess whether the terms for the 

distribution of non-core data are equitable, fair and 

reasonable, and not unreasonably discriminatory.’’ 

73 FR at 74781–82. As such, the ‘‘existence of 

significant competition provides a substantial basis 

for finding that the terms of an exchange’s fee 

proposal are equitable, fair, reasonable, and not 

unreasonably or unfairly discriminatory.’’ Id. at 

74782. If an exchange ‘‘was subject to significant 

competitive forces in setting the terms of a 

proposal,’’ a proposal will be approved unless the 

Commission determines that ‘‘there is a substantial 

countervailing basis to find that the terms 

nevertheless fail to meet an applicable requirement 

of the Exchange Act or the rules thereunder.’’ Id. 

at 74781. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See SR–NYSEArca–2008–108, Securities 

Exchange Act Release No. 34–59004 [sic] 

(November 24, 2008) 73 FR 207 [sic] (October 24, 

2008) [sic] (filing seeking approval for listing and 

trading of options on Managed Fund Shares) and 

SR–NYSEArca–2008–66, Securities [sic] Act 

Release No. 34–59055 [sic] (December 4, 2008) 73 

FR 238 [sic] (December 10, 2008) (filing seeking 

approval for Listing and Trading Options on Shares 

of the iShares COMEX Gold Trust and the iShares 

Silver Trust). 

algorithms and strategies in such a 

way as to render them useless. 

—The Service is a sentiment indicator 

that would provide users with an 

indication of how a specific type of 

market participant feels about certain 

securities, making available to the 

public information that is sometimes 

referred to as ‘‘the word on the street’’ 

as compiled from order flow on the 

trading desks of large broker-dealers. 

—Nasdaq believes that it has provided 

adequate justification for the fees. 

IV. Discussion and Commission 

Findings 

The Commission has reviewed 

carefully the proposed rule change, the 

comment letter, and Nasdaq’s response 

to the comment letter, and finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange 7 and, in particular, Section 

6(b)(4) of the Act,8 which requires, 

among other things, that Nasdaq’s rules 

provide 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 

that it not unfairly discriminate between 

customers, issuers, brokers or dealers. 

The Commission believes that the 

proposed rule change is consistent with 

these statutory standards. 

Nasdaq has represented that the 

Service is a voluntary one, and that the 

information provided to subscribers is 

not comprised of data that brokerdealers are obligated to provide to 

Nasdaq for regulatory purposes because 

of Nasdaq’s status as a self-regulatory 

organization. Additionally, brokerdealers do not need the Service to 

perform their duties, so the decision to 

purchase the Service is truly voluntary 

and dependent upon each brokerdealer’s business model. Finally, 

because the Service is voluntary, 

Nasdaq has met the statutory standard 

by pricing the Service according to free 

market principles; indeed, if Nasdaq 

priced the Service too high, brokerdealers could simply opt not to 

purchase the Service. The Commission 

believes that Nasdaq’s fees for the 

Service are both reasonable and 

equitably allocated.9 Additionally, the 

Commission does not believe that the 

Pathfinder Service will allow reverse 

engineering of the algorithms and 

strategies created by Nasdaq members; 

Nasdaq has explained the various ways 

the information is filtered, and has 

stated that such filtering will prevent 

this from occurring. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 10, that the 

proposed rule change (SR–NASDAQ– 

2008–016) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–1674 Filed 1–26–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59264; File No. SR– 

NYSEArca–2009–02] 

Self-Regulatory Organizations; Notice 

of Filing of and Immediate 

Effectiveness of Proposed Rule 

Change by NYSE Arca, Inc. To Amend 

or Eliminate Unnecessary Rule Text 

January 16, 2009. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on January 

8, 2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend or 

eliminate several of its rules in order to 

remove unnecessary rule text related to 

terms or systems that are now obsolete. 

The text of the proposed rule change is 

attached to the proposed rule change as 

Exhibit 5. A copy of this filing is 

available on the Exchange’s Web site at 

http://www.nyse.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 

self-regulatory organization 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this filing by NYSE 

Arca is to correct certain NYSE Arca 

cross-references and remove obsolete 

and unnecessary rule text. By abolishing 

these out-dated references and 

correcting cross-references, the 

Exchange is not changing or altering any 

obligation, rights, policies or practices 

enumerated within its rules. 

The specific proposed changes are 

discussed in further detail below. 

• Rule 5.3(g). Criteria for Underlying 

Securities: The Exchange is changing the 

numbering within the rule because two 

separate rule filings were approved at 

different times which affected the numbering 

within the rule.4

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