Document ID: SEC-2013-1786-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62814-62815]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24543]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70569; File No. SR-NASDAQ-2013-102]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Approving a Proposed Rule Change To Assume Operational Responsibility 
for Certain Surveillance Activity Currently Performed by FINRA Under 
the Exchange's Authority and Supervision

September 30, 2013.
    On July 31, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') 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 to assume operational responsibility for certain 
surveillance activity currently performed by the Financial Industry 
Regulatory Authority (``FINRA'') under the Exchange's authority and 
supervision. The proposed rule change was published for comment in the 
Federal Register on August 16, 2013.\3\ The Commission received no 
comments on the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 70159 (August 12, 
2013), 78 FR 50123 (August 16, 2013)(``Notice'').
---------------------------------------------------------------------------

    After careful review, the Commission 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 \4\ 
and, in particular, the requirements of Section 6(b)(5) of the Act.\5\ 
Since it became a national securities exchange, NASDAQ has contracted 
with FINRA through various regulatory services agreements to perform 
certain surveillance and other regulatory functions on its behalf.\6\ 
NASDAQ Rule 0150 requires that, unless NASDAQ obtains prior Commission 
approval, the regulatory functions subject to the regulatory services 
agreement in effect at the time when NASDAQ became a national 
securities exchange must continue to be performed by FINRA or an 
affiliate thereof or by another independent self-regulatory 
organization. NASDAQ now proposes to reallocate operational 
responsibility from FINRA to NASDAQ Regulation for a limited number of 
equities surveillance patterns and related review functions focused on: 
(1) Manipulation patterns that monitor solely NASDAQ activity, 
including patterns that monitor the Exchange's opening and closing 
crosses and compliance with minimum bid listing requirements, and (2) 
monitoring of compliance by member firms with elements of the 
Commission's Regulation M \7\ and NASDAQ Rule 4619 compliance.
---------------------------------------------------------------------------

    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ See Securities Exchange Act Release No. 53128 (January 13, 
2006), 71 FR 3550 (January 23, 2006).
    \7\ 17 CFR 242.100 et seq.
---------------------------------------------------------------------------

    In the Notice, the Exchange represents that it has the ability to 
conduct the surveillances and regulatory functions that it will assume. 
The Commission also notes that the Exchange represents that its 
expertise in its own market structure, along with its existing real-
time monitoring of these activities, may enable the Exchange to better 
detect improper activities on its market. Moreover, these patterns, 
underlying rules, and analytical requirements are similar to patterns 
that NASDAQ regulatory personnel already operate for affiliated options 
markets. The Exchange represents that NASDAQ's MarketWatch group, which 
already handles other real-time surveillance of the NASDAQ market, 
should be able to adequately and effectively handle the surveillances 
related to the instant proposed rule change.
    In the Notice, the Exchange further represents that it will 
continue to refer potentially violative conduct to FINRA for further 
review and that FINRA will continue to perform most of the surveillance 
activity for NASDAQ's equity markets. The Exchange also represents that 
FINRA will continue to perform examination and enforcement work, 
subject to NASDAQ's supervision and ultimate responsibility.
    For the foregoing reasons, the Commission believes that the 
proposed rule change is consistent with the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NASDAQ-2013-102) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 17 CFR 200.30-3(a)(12).

[[Page 62815]]

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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24543 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P