Document ID: SEC-2007-1498-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-11-01T04:00Z

[Federal Register: November 1, 2007 (Volume 72, Number 211)]
[Notices]               
[Page 61925-61927]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no07-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56708; File No. SR-NASDAQ-2007-078]

 
Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Nasdaq's Outbound Routing Broker

 October 26, 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 September 7, 2007, 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 substantially prepared by Nasdaq. On 
October 19, 2007, Nasdaq submitted Amendment No. 1 to the proposed rule 
change. The Exchange has filed the proposal as a ``non-controversial'' 
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, as amended, 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 codify the functions of its wholly-owned routing 
broker-dealer Nasdaq Execution Services, LLC (``NES''). The text of the 
proposed rule change is available at Nasdaq, 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
    In July 2006, the Commission approved the integration of Nasdaq's 
three execution systems--the Nasdaq Market Center, the Brut ECN, and 
the INET ECN--into a single execution system with routing functionality 
commonly known as the Nasdaq Single Book (``Single Book'').\5\ In 
coordination with Nasdaq's transition to a registered national 
securities exchange, Single Book commenced full operation for Nasdaq-
listed securities on October 30, 2006, and for other exchange-listed 
securities on February 12, 2007. Since that time, NES has operated 
solely and exclusively as the routing broker for the Exchange, and the 
method for the Exchange to obtain access to better prices displayed in 
other market centers and, more recently, as required under Regulation 
NMS. NES is a facility of Nasdaq and operates no trade matching or 
execution system. Nasdaq states that NES has no customers or users 
other than the Nasdaq exchange itself. Nasdaq states that this filing 
merely seeks the adoption of a rule formally codifying this existing 
and ongoing relationship, and does not alter in any way the current 
operation of either the Exchange

[[Page 61926]]

or the NES facility, nor interactions between them.
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    \5\ See Securities Exchange Act Release No. 54155 (July 14, 
2006), 71 FR 41291 (July 20, 2006) (SR-NASDAQ-2006-001).
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    The proposed rule change would establish rules to describe NES's 
current operations, including that: (1) NES shall route all orders to 
other market centers as directed by Nasdaq; (2) NES will not engage in 
any business other than as a outbound router for Nasdaq unless such 
other business activities are approved by the Commission; (3) NES will 
operate as a facility, as defined in Section 3(a)(2) of the Act, of 
Nasdaq; (4) the designated examining authority of NES will be a self-
regulatory organization unaffiliated with Nasdaq or any of its 
affiliates in accordance with Rule 17d-1 of the Act; (5) NES shall be 
subject to exchange non-discrimination requirements and Nasdaq shall be 
responsible for filing proposed rule changes related to the operation 
of, and fees for services provided by NES with the Commission; (6) NES 
books, records, premises, officers, agents, directors and employees 
shall be deemed to be Nasdaq books, records, premises, officers, 
agents, directors and employees of Nasdaq for purposes of, and subject 
to oversight pursuant to, the Act and shall be subject at all times to 
inspection and copying by the Commission; and (7) NES use is optional 
for Nasdaq's market participants.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general, and with Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, remove impediments to a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
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    \6\ 15 U.S.C. 78f.
    \7\ 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.

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 forgoing rule change does not: (1) Significantly affect 
the protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
after the date of this filing, 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\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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.\10\ 
However, Rule 19b-4(f)(6)(iii) \11\ 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 Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
will immediately codify Nasdaq's relationship with its outbound routing 
broker.\12\ For this reason, the Commission designates the proposed 
rule change to be operative upon filing with the Commission.\13\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its 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. Nasdaq has satisfied the five-day pre-filing notice 
requirement.
    \11\ Id.
    \12\ The Commission notes that Nasdaq's proposal is 
substantially similar to Rule 2.11 of the National Stock Exchange, 
Inc. and Rule 17(b) of the New York Stock Exchange LLC.
    \13\ 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).
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    At any time within 60 days of the filing of such 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.\14\
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    \14\ 15 U.S.C. 78s(b)(3)(C). For purposes of calculating the 60-
day period within which the Commission may summarily abrogate the 
proposal, the Commission considers the period to commence on October 
19, 2007, the date on which the Exchange submitted Amendment No. 1.
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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 an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2007-078 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-2007-078. 
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 am and 3 pm. Copies of the 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-2007-078 and should 
be submitted on or before November 23, 2007.

[[Page 61927]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-21497 Filed 10-31-07; 8:45 am]

BILLING CODE 8011-01-P