Document ID: SEC-2007-0680-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-05-15T04:00Z

[Federal Register: May 15, 2007 (Volume 72, Number 93)]
[Notices]               
[Page 27344-27346]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15my07-87]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55721; File No. SR-NASDAQ-2007-047]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish an Opening and Closing Cross for Securities Listed on the 
NYSE, Amex, and Regional Exchanges

May 7, 2007.
    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 May 1, 2007, 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, II and III below, which Items have been prepared by the 
Exchange. The Exchange filed the proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act\3\ and Rule 19b-4(f)(6) thereunder, 
which renders it effective upon filing with the Commission.\4\ 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 a rule change to provide an open and close that 
matches orders where possible and provides a useful, tradable, robust 
opening and closing price for all securities listed on the New York 
Stock Exchange (``NYSE''), the American Stock Exchange (``Amex''), and 
regional exchanges. The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and http://www.nasdaq.com
.

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's Opening and Closing Crosses are price discovery facilities 
that cross orders at a single price. Nasdaq proposes to extend the 
success of Nasdaq's Opening and Closing Cross matching functionality, 
which has been widely accepted in the industry, for all of the 
securities listed on the NYSE, Amex, and regional exchanges (the ``non-
Nasdaq securities'') with adjustments, as necessary, to comply with 
National Market System Plans and SEC rules specific to those 
securities,

[[Page 27345]]

such as SEC Rule 10a-1. \5\ Other than the exception described above, 
the processing will be exactly the same for the non-Nasdaq securities 
as the current process for Nasdaq securities.\6\
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    \5\ Nasdaq Rule 3350, which governs short sales in Nasdaq 
securities, uses the latest bid change to determine the validity of 
a short sale. SEC Rule 10a-1, which governs short sales in non-
Nasdaq securities, uses the last sale change to determine the 
validity of a short sale. Nasdaq will ensure that the Opening and 
Closing Crosses for non-Nasdaq securities comply with SEC Rule 10a-
1. This difference will not impact the way orders are entered, 
displayed, priced or executed within the crosses; it is entirely a 
change that is internal to Nasdaq.
    \6\ Nasdaq Rule 4752 currently limits the Opening Cross to 
Nasdaq-listed securities. Nasdaq proposes to remove that restriction 
and leave the substance of the rule unchanged. Nasdaq Rule 4754, 
governing the Closing Cross, contains no parallel restriction, 
therefore no change to Rule 4754 is required.
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    The proposed rule changes would provide Nasdaq with an open and 
close that matches orders and provides a useful, tradable, robust 
opening and closing price. Additionally, the process used will add 
transparency to the open and close in the same orderly process that is 
used for securities listed on Nasdaq. The same order types currently 
offered in the opening and closing process will be applied to non-
Nasdaq securities, including: ``On Open,'' ``Opening Imbalance Only,'' 
``On Close,'' ``Closing Imbalance Only,'' and ``Imbalance Only.'' The 
methodology used to determine the Opening and Closing Cross prices for 
non-Nasdaq securities as well as the execution algorithm for 
determining order priority will be identical to those currently 
employed for Nasdaq securities. Continuous information regarding the 
imbalances and indicative prices will be disseminated prior to the 
Opening and Closing Crosses exactly as it is currently disseminated for 
Nasdaq securities.
    Like the current Opening and Closing Crosses for Nasdaq-listed 
securities, the Crosses for non-Nasdaq securities will have built in 
parameters to protect investors against executions that are not in line 
with normal trading in a given security. For non-Nasdaq securities the 
benchmark will be adjusted as necessary to account for the fact that a 
large percentage of share volume is traded on other markets.
    Nasdaq will launch the Opening and Closing Crosses for non-Nasdaq 
securities in a phased manner. Nasdaq's current intention is to begin 
with less than ten securities and, after determining that it is prudent 
to proceed, select another larger group of less than one hundred 
securities and, once again after determining that it is prudent to 
proceed, continue the roll-out in a prudent manner until the roll-out 
is complete. Using a phased-in approach should ensure a smooth and 
orderly transition from the current opening process to the Nasdaq 
Opening and Closing Crosses and should be completed within several 
weeks of its initiation.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general and with Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed 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. The proposed rule change is 
based on successful experience with the Opening and Closing Cross for 
Nasdaq listed securities and is consistent with these requirements in 
that the changes are designed to address market participant input.
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    \7\ 15 U.S.C. 78f.
    \8\ 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 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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\9\ and Rule 19b-4(f)(6) thereunder.\10\ As required by Rule 19b-
4(f)(6)(iii), Nasdaq provided the Commission with written notice of its 
intent to file the proposed rule change at least five business days 
prior to filing the proposal with the Commission or such shorter period 
as designated by the Commission. 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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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 e-mail to rule-comments@sec.gov. Please include File 

Number SR-NASDAQ-2007-047 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2007-047. 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. Copies of such 
filing will also 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

[[Page 27346]]

information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File number SR-NASDAQ-2007-047 and should be submitted on or before 
June 5, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-9249 Filed 5-14-07; 8:45 am]

BILLING CODE 8010-01-P