Document ID: SEC-2014-0002-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2014-01-02T05:00Z

[Federal Register Volume 79, Number 1 (Thursday, January 2, 2014)]
[Notices]
[Pages 162-163]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31368]

[[Page 162]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71187; File No. SR-NASDAQ-2013-165]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify an Aspect of the Implementation of Rule 4626(b)(3)

December 26, 2013.
    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 December 24, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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

    The Exchange is filing a proposal to modify an aspect of the 
implementation of Rule 4626(b)(3), as previously described in SR-
NASDAQ-2013-152,\3\ and to make a related amendment to the text of Rule 
4626(b)(3)(E). The text of the proposed rule change is below. Proposed 
new language is underlined; proposed deletions are in brackets.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 71098 (December 17, 
2013), 78 FR 77540 (December 23, 2013) (SR-NASDAQ-20134-152).
---------------------------------------------------------------------------

* * * * *

Rule 4626. Limitation of Liability

    (a) No change.
    (b) Nasdaq, subject to the express limits set forth below, may 
compensate users of the Nasdaq Market Center for losses directly 
resulting from the systems' actual failure to correctly process an 
order, Quote/Order, message, or other data, provided the Nasdaq Market 
Center has acknowledged receipt of the order, Quote/Order, message, or 
data.
    (1)-(2) No change.
    (3) Notwithstanding subsections (b)(1) and (2) above, for the 
aggregate of all claims alleged by all market participants related to 
errors in the Nasdaq Halt and Imbalance Cross Process in connection 
with the initial public offering of Facebook, Inc. (the ``Cross''), 
including any delay in delivery of confirmations of orders in Facebook, 
Inc. stock on May 18, 2012, the total amount of Nasdaq's payment shall 
not exceed $62 million. Eligibility of claims for payment shall be 
determined in accordance with the following procedures:
    (A)-(D) No change.
    (E) FINRA shall provide to the Nasdaq Board of Directors and the 
Board of Directors of The NASDAQ OMX Group, Inc. an analysis of the 
total value of eligible claims submitted under this subsection (b)(3). 
Nasdaq will thereafter file with the Securities and Exchange Commission 
a rule proposal setting forth the amount of eligible claims under the 
standards set forth in this Rule and the amount proposed to be paid to 
members by Nasdaq. In no event shall Nasdaq make any payments on claims 
pursuant to this subsection (b)(3) until the rule proposal setting 
forth the amount of eligible claims becomes effective [and final]. All 
payments shall be made in cash.
    (F)-(H) No change.
    (4)-(6) 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, 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
    Rule 4626(b)(3) established a one-time, voluntary accommodation 
policy for claims arising from system difficulties that Nasdaq 
experienced during the initial public offering (``IPO'') of Facebook, 
Inc. (``Facebook'' or ``FB'') on May 18, 2012.\4\ The rule describes 
the methodology for submission, evaluation, and payment of such claims. 
Among other things, Rule 4626(b)(3)(E) provides that ``Nasdaq will . . 
. file with the Securities and Exchange Commission a rule proposal 
setting forth the amount of eligible claims under the standards set 
forth in this Rule and the amount proposed to be paid to members by 
Nasdaq.'' On December 9, 2013, Nasdaq submitted SR-NASDAQ-2013-152 to 
satisfy this requirement.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release Nos. 69216 (March 22, 
2013), 78 FR 19040 (March 28, 2013) (SR-NASDAQ-2012-090) (order 
approving Nasdaq proposal to adopted Rule 4626(b)(3) (the ``Approval 
Order'')); 67507 (July 26, 2012), 77 FR 45706 (August 1, 2012) (SR-
NASDAQ-2012-090) (proposal to adopt Rule 4626(b)(3)).
---------------------------------------------------------------------------

    In SR-NASDAQ-2013-152, Nasdaq described, among other things, the 
scope of Rule 4626(b)(3), the process used to evaluate claims, the 
results of that process, and the process for payment of claims. With 
regard to the latter aspect of the filing, Nasdaq stated that it would 
pay all valid claims in accordance with the payment instructions 
provided by the claimant, ``immediately upon the expiration of the 60-
day time period during which [SR-NASDAQ-2013-152] is subject to 
suspension by the Commission.'' Moreover, Rule 4626(b)(3)(E) provides 
that ``[i]n no event shall Nasdaq make any payments on claims pursuant 
to this subsection (b)(3) until the rule proposal setting forth the 
amount of eligible claims becomes effective and final'' (emphasis 
added).
    Nasdaq believes that it would be consistent with the protection of 
investors and the public interest to pay claimants sooner. Accordingly, 
Nasdaq is submitting this proposed rule change to modify this aspect of 
the implementation of Rule 4626(b)(3) by deleting the word ``final'' 
from Rule 4626(b)(3)(E). In order to implement this modification as 
quickly as possible, Nasdaq is requesting that the Commission waive the 
operative delay requirement provided for by Rule 19b-4(f)(6)(iii).\5\ 
If such waiver is granted, Nasdaq intends to pay all valid claims as 
soon as practicable thereafter.
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 6(b) of the Act \6\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \7\ in particular, because the proposal

[[Page 163]]

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. In the Approval Order, the 
Commission found that Rule 4626(b)(3) is consistent with Act because it 
``sets forth objective and transparent processes to determine eligible 
claims and how such claims would be paid to Nasdaq members that elect 
to participate in the accommodation plan.'' The Commission further 
determined that providing compensation pursuant to the rule would be in 
the public interest and that the rule would encourage members to 
compensate their customers. Similarly, Nasdaq believes that this 
proposed rule change is consistent with the Act because it will allow 
Nasdaq to accomplish the approved objectives of the Rule 4626(b)(3) 
through final payment of eligible claims without further delay.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b) (setting forth the prerequisites for 
registration as a national securities exchange).
    \7\ 15 U.S.C. 78f(b)(5) (requiring that an exchange's rules be 
``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; and not [be] designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers, or 
to regulate by virtue of any authority conferred by this chapter 
matters not related to the purposes of this chapter or the 
administration of the exchange'').
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq believes that the proposed rule change will not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, the proposed rule 
change does not relate to the provision of goods or services, nor does 
it impose regulatory restrictions on the ability of members to compete. 
Accordingly, the change does not affect competition in any respect.

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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of 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. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay. The Exchange notes that if 
such waiver is granted, it intends to pay all valid claims as soon as 
practicable thereafter. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because such waiver would allow the Exchange to pay 
claimants without undue delay. For this reason, the Commission 
designates the proposed rule change operative upon filing with the 
Commission.\11\
---------------------------------------------------------------------------

    \10\ Id.
    \11\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 the purposes of the Act.

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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-165 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-2013-165. This 
file number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of NASDAQ. 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-2013-165 and should 
be submitted on or before January 23, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2013-31368 Filed 12-31-13; 8:45 am]
BILLING CODE 8011-01-P