Document ID: SEC-2008-1395-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-10-09T04:00Z

[Federal Register: October 9, 2008 (Volume 73, Number 197)]
[Notices]               
[Page 59696-59698]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc08-155]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58721; File No. SR-NASDAQ-2008-079]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating To Order Routing

October 2, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\

[[Page 59697]]

notice is hereby given that on September 29, 2008, The NASDAQ Stock 
Market LLC (``NASDAQ'' or ``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 
NASDAQ. NASDAQ filed the proposed rule change as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it 
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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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

    NASDAQ proposes to modify Rule 4758, Order Routing, to require that 
orders routed to the New York Stock Exchange LLC (``NYSE'') or the 
American Stock Exchange LLC (``AMEX'') through NASDAQ's DOT routing 
strategy check the NASDAQ book prior to routing, except in the case of 
orders directed for participation in the NYSE or AMEX opening or 
closing processes. NASDAQ proposes to make the change operative on 
October 1, 2008. The text of the proposed rule amendment is as follows, 
with deletions in [brackets] and additions italicized: 4758. Order 
Routing
    (a) Order Routing Process
    (1) The Order Routing Process shall be available to Participants 
from 7:00 a.m. until 8:00 p.m. Eastern Time, and shall route orders as 
described below: All routing of orders shall comply with Rule 611 of 
Regulation NMS under the Exchange Act.
    (A) The System provides three routing options. Of these three, DOT 
is only available for orders ultimately sought to be directed to either 
the New York Stock Exchange (``NYSE'') or the American Stock Exchange 
(``AMEX''). The System will consider the quotations only of accessible 
markets. The three System routing options are:
    (i) DOT (``DOT'')--under this option, after checking the System for 
available shares [if so instructed by the entering firm], orders are 
sent to other available market centers for potential execution, per 
entering firm's instructions, before being sent to the destination 
exchange, so long as the price at such market centers would not violate 
the Order Protection Rule. Any un-executed portion will thereafter be 
sent to the NYSE or AMEX, as appropriate, at the order's original limit 
order price. This option may only be used for orders with time-in-force 
parameters of either SDAY, SIOC, MDAY, MIOC, GTMC or market-on-open/
close. Notwithstanding the foregoing, orders designated for 
participation in the NYSE or AMEX opening or closing processes will not 
check the System for available shares prior to routing.
    (ii)-(iii) No change.
    (B) No change.
    (b) 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 amending Rule 4758 to make its procedures for routing 
orders to NYSE and AMEX more consistent with its procedures for routing 
to other trading venues. Currently, a NASDAQ member seeking to route 
orders that are eligible for posting on the NYSE or AMEX books has the 
option of instructing NASDAQ Execution Services, the routing broker for 
NASDAQ, to bypass the NASDAQ book altogether and route the order 
directly to the destination exchange. By contrast, members seeking to 
bypass the NASDAQ book to reach venues other than NYSE and AMEX may do 
so only for the purpose of removing liquidity from the other venue 
through the use of ``directed orders.'' As NYSE's and AMEX's share of 
trading in U.S. cash equities decreases, less volume is being routed 
through this specialized routing option. Accordingly, NASDAQ proposes 
to eliminate the functionality that allows members to post liquidity on 
the NYSE or AMEX books without first checking the NASDAQ book, while 
continuing to allow members to post on NYSE or AMEX after checking the 
NASDAQ book, or to route directed orders to NYSE or AMEX that remove 
liquidity without first checking the NASDAQ book.
    Members seeking to use NASDAQ to route to NYSE and AMEX will 
continue to have the following options: (i) Access available liquidity 
on NASDAQ and then route for posting at the away market; \5\ (ii) 
access available liquidity, route to the away market to access 
available liquidity, and then return to NASDAQ for posting; \6\ (iii) 
access only displayed liquidity on NASDAQ and other venues (including 
NYSE and/or AMEX) prior to cancelling or returning to NASDAQ for 
posting; \7\ or (iv) route directed orders to NYSE or AMEX without 
checking the NASDAQ book, but on an immediate-or-cancel (IOC) basis 
only.\8\ In addition, members seeking to route orders to NYSE or AMEX 
for purposes of participating in opening or closing processes will 
continue to have the option of bypassing the NASDAQ book.\9\
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    \5\ See NASDAQ Rule 4758(a)(1)(A)(i) (including proposed 
amendments).
    \6\ See NASDAQ Rule 4758(a)(1)(A)(ii) and (iii). Orders that 
return for posting may, in turn, be designated as eligible either 
for routing again if they subsequently become executable (``STGY'') 
or designated to remain on the NASDAQ book after posting (``SCAN'').
    \7\ Id. Both SCAN and STGY allow market participants to instruct 
whether the order should access all available liquidity or only 
displayed liquidity.
    \8\ See NASDAQ Rule 4751(f)(9).
    \9\ See NASDAQ Rule 4758(a)(1)(A)(i) (including proposed 
amendments).
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2. Statutory Basis
    NASDAQ believes the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\10\ in general, and with Section 
6(b)(5) of the Act,\11\ in particular, in that it is designed to 
prevent fraudulent and manipulative 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 mechanisms of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The change will eliminate 
functionality that allows members to post liquidity on the NYSE or AMEX 
books without first checking the NASDAQ book, in accordance with 
decreasing use of this functionality. Following the change, members 
will continue to have numerous options for routing to NYSE and AMEX, 
including the use of

[[Page 59698]]

directed IOC orders that bypass the NASDAQ book, and orders that are 
eligible for posting at NYSE or AMEX after checking the NASDAQ book.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(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 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\14\ 
However, Rule 19b-4(f)(6)(iii) \15\ 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 states that 
waiver of the 30-day operative delay will allow NASDAQ to make its 
processes for routing to various exchanges consistent at the beginning 
of October 2008. Because the current functionality for routing and 
posting to NYSE and AMEX without checking the NASDAQ book has a 
particular fee associated with it, elimination of this option will 
affect the calculation of NASDAQ's bills to members, which are prepared 
on a monthly basis. Therefore, making the proposed change effective at 
the beginning of the month will promote efficiency and clarity in 
NASDAQ's billing processes.
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    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
NASDAQ has complied with this requirement.
    \15\ Id.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission hereby grants the Exchange's request and designates the 
proposal as operative beginning on October 1, 2008.\16\
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    \16\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-NASDAQ-2008-079 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street, NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2008-079. 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 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-2008-079 and should be submitted on or before 
October 30, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-23978 Filed 10-8-08; 8:45 am]

BILLING CODE 8011-01-P