Document ID: SEC-2008-0392-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2008-03-13T04:00Z

[Federal Register: March 13, 2008 (Volume 73, Number 50)]
[Notices]               
[Page 13597-13599]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr08-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57448; File No. SR-NSX-2008-05]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1 Thereto, Consolidating into 
a Single Rule Certain Requirements for Products Traded on the Exchange 
Pursuant to Unlisted Trading Privileges

March 6, 2008.
    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 March 6, 2008, the National Stock Exchange, Inc. (``Exchange'' or 
``NSX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
On March 6, 2008, the Exchange filed Amendment No. 1 to the proposed 
rule change. This order provides notice of the proposed rule change, as 
amended, and approves the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to consolidate into a 
single rule certain requirements for products traded on the Exchange 
pursuant to unlisted trading privileges (``UTP'') that have been 
established in various new products proposals previously approved by 
the Commission. The text of the proposed rule change is available at 
the Exchange's principal office, on the Exchange's Web site (http://
www.nsx.com) 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 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 III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of

[[Page 13598]]

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
    The Exchange proposes to amend its rules to consolidate into a 
single rule certain requirements for products traded on the Exchange 
pursuant to unlisted trading privileges (``UTP'') that have been 
established in various new products proposals previously approved by 
the Commission. The Exchange proposes to amend NSX Rule 15.9 to set 
forth rules regarding the extension of UTP to a security that is listed 
on another national securities exchange. Any such security will be 
subject to all Exchange trading rules applicable to equity securities, 
unless otherwise noted. The Exchange will file with the Commission a 
Form 19b-4(e) with respect to any such security that is a ``new 
derivative securities product'' as defined in Rule 19b-4(e) under the 
Act.\3\ In addition, any new derivative securities product traded on 
the Exchange pursuant to proposed NSX Rule 15.9 will be subject to the 
following criteria.
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    \3\ 17 CFR 240.19b-4(e).
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    Proposed NSX Rule 15.9B(2) provides that the Exchange will 
distribute an information circular prior to the commencement of trading 
in such new derivative securities product which generally will include 
the same information as the information circular provided by the 
listing exchange, including: (1) The special risks of trading the new 
derivative securities product, including NSX Rule 3.7; \4\ (2) the 
Exchange's rules that will apply to the new derivative securities 
product, including the suitability rule; (3) information about the 
dissemination of value of the underlying assets or indexes; and (4) the 
risk of trading during irregular trading hours due to the lack of 
calculation or dissemination of the intraday indicative value 
(``Intraday Indicative Value'') or a similar value.\5\
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    \4\ NSX Rule 3.7 requires the ETP Holder to have reasonable 
grounds to believe that a recommendation made by the ETP Holder is 
suitable for the customer.
    \5\ NSX's pre-market session is from 8 a.m. until 9:29:59 a.m. 
Eastern Time and NSX's post-market session is from 4:00:01 p.m. to 
6:30 p.m. Eastern Time.
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    Proposed NSX Rule 15.9(B)(3) reminds ETP Holders \6\ that they are 
subject to the prospectus delivery requirements under the Securities 
Act of 1933, as amended (``Securities Act''), unless the new derivative 
securities product is the subject of an order by the Commission 
exempting the product from certain prospectus delivery requirements 
under Section 24(d) of the Investment Company Act of 1940 (``1940 
Act'') and the product is not otherwise subject to prospectus delivery 
requirements under the Securities Act. The Exchange will inform its ETP 
Holders regarding the application of the provisions of this 
subparagraph to a particular series of exchange-traded funds governed 
by the 1940 Act by means of an information circular. This section also 
includes a definition of the term exchange-traded fund.
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    \6\ An ETP Holder is a registered broker or dealer that has been 
issued an Equity Trading Permit (``ETP'') by NSX.
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    Proposed NSX Rule 15.9B(4) addresses trading halts in the new 
derivative securities products traded on the Exchange pursuant to UTP. 
Proposed NSX Rule 15.9B(4) provides that the Exchange, upon 
notification by the listing market of a halt due to a temporary 
interruption in the calculation or wide dissemination of the Intraday 
Indicative Value (or a similar value) or the value of the underlying 
index or instrument, will immediately halt trading in that product on 
the Exchange. If the Intraday Indicative Value (or a similar value) or 
the value of the underlying index or instrument continues not to be 
calculated or widely available as of trading on the Exchange on the 
next business day, the Exchange shall not commence trading of the 
product that day. If an interruption in the calculation or wide 
dissemination of the Intraday Indicative Value (or a similar value) or 
the value of the underlying index or instrument continues, the Exchange 
may resume trading in the product only if calculation and wide 
dissemination of the Intraday Indicative Value (or a similar value) or 
the value of the underlying index or instrument resumes or trading in 
such series resumes in the listing market.\7\
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    \7\ The Exchange also has authority to suspend or halt trading 
under NSX Rules 11.20, 12.11, and 15.7.
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    Additionally, pursuant to NSX Rule 15.9B(4)(b), the Exchange will 
immediately halt trading in any new derivative securities product if 
the listing exchange notifies the Exchange that the net asset value is 
not being disseminated to all market participants at the same time. The 
Exchange will resume trading in the new derivative securities product 
only when the net asset value is disseminated to all market 
participants at the same time or trading in the new derivative 
securities product resumes on the listing market.
    Lastly, NSX represents that the Exchange's surveillance procedures 
for new derivative securities products traded on the Exchange pursuant 
to UTP will be similar to the procedures used for equity securities 
traded on the Exchange and will incorporate and rely upon existing 
Exchange surveillance systems. The Exchange will closely monitor 
activity in new derivative securities products traded on the Exchange 
pursuant to UTP and deter any potential improper trading activity. The 
proposed rule change also provides that the Exchange will enter into a 
comprehensive surveillance sharing agreement (``CSSA'') with a market 
trading components of the index or portfolio on which the new 
derivative securities product is based to the same extent as the 
listing exchange's rules require the listing market to enter into a 
CSSA with such market.\8\
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    \8\ Although NSX's rules have provisions that relate to the 
activities of market makers, the Exchange currently has no market 
makers and is not approving any ETP Holder's registration as a 
market maker in any security. If NSX decides to provide for market 
makers, it will seek to amend NSX Rule 15.9 to provide for certain 
restrictions on the activities of such market makers to facilitate 
surveillance.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is found in 
Section 6(b)(5),\9\ in that the proposed rule change is designed to 
promote just and equitable principles of trade, 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.
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    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 13599]]

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 Number SR-NSX-2008-05 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.

All submissions should refer to File Number SR-NSX-2008-05. 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, 100 F Street, NE., 
Washington, DC 20549, 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 NSX. 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-NSX-2008-05 and should be 
submitted on or before April 3, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange. In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act in that it is 
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 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.
    This proposal would consolidate into a single rule various 
provisions related to UTP that have been established in other new 
products proposals previously approved by the Commission. In addition, 
proposed NSX Rule 15.9 is closely modeled on a similar rule of another 
exchange, changes to which were recently approved by the 
Commission.\10\ The Commission finds good cause for approving the 
proposed rule change prior to the 30th day after the date of 
publication of the notice of filing thereof in the Federal Register. 
NSX's proposal does not raise any novel issues, and accelerated 
approval thereof will expedite the trading of additional products by 
the Exchange, subject to consistent and reasonable standards. 
Therefore, the Commission finds good cause, consistent with Section 
19(b)(2) of the Act, to approve the proposed rule change on an 
accelerated basis.
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    \10\ See Securities Exchange Act Release No. 57387 (February 27, 
2008), 73 FR 11965 (March 5, 2008) (SR-ISE-2007-99).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change, as amended (SR-NSX-2008-05) is 
hereby approved on an accelerated basis.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4969 Filed 3-12-08; 8:45 am]

BILLING CODE 8011-01-P