Document ID: SEC-2011-0504-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-04-13T04:00Z

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20747-20749]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8913]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64262; File No. SR-NASDAQ-2011-047]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Conform Rules 2360, 2361, 2370, 6951 to FINRA Rule Changes

April 8, 2011.
    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 April 1, 2011, The NASDAQ Stock Market LLC (``NASDAQ'') 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 NASDAQ. 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ is filing with the Securities Commission [sic] a proposal 
for NASDAQ to amend NASDAQ Rules 2360 (Approval Procedures for Day-
Trading Accounts); 2361 (Day-Trading Risk Disclosure Statement); 2370 
(Borrowing From or Lending to Customers); and 6951 (Definitions) to 
make non-substantive changes that reflect recent changes to 
corresponding rules of the Financial Industry Regulatory Authority 
(``FINRA'').
    The text of the proposed rule change is available from NASDAQ's Web 
site at http://nasdaq.cchwallstreet.com/Filings/, at NASDAQ's principal 
office, 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, 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
    The Exchange is not making any substantive changes to the content 
of its rules. The purpose of this proposal is to update NASDAQ Rules 
2360, 2361, 2370, and 6951 to reflect proper cross-references to 
corresponding FINRA rules.
    Many of NASDAQ's rules are based on rules of FINRA (formerly the 
National Association of Securities Dealers (``NASD'')). During 2008, 
FINRA embarked on an extended process of moving rules formerly 
designated as ``NASD Rules'' into a consolidated FINRA rulebook. In 
most cases, FINRA has renumbered these rules, and in some cases has 
substantively amended them. Accordingly, NASDAQ also proposes to 
initiate a process of modifying its rulebook to ensure that NASDAQ 
rules corresponding to FINRA/NASD rules continue to mirror them as 
closely as practicable. In some cases, it will not be possible for the 
rule

[[Page 20748]]

numbers of NASDAQ rules to mirror corresponding FINRA rules, because 
existing or planned NASDAQ rules make use of those numbers. However, 
wherever possible, NASDAQ plans to update its rules to reflect changes 
to corresponding FINRA rules.
    In SR-FINRA-2009-059,\3\ FINRA adopted, with minor changes, NASD 
Rules 2360 and 2361 regarding day trading into the FINRA consolidated 
rulebook as FINRA Rules 2130 and 2270, respectively. FINRA Rules 2130 
and 2270, like former NASD Rules 2360 and 2361, define day-trading 
strategy and focus on members' obligations to disclose to non-
institutional customers the basic risks of engaging in a day-trading 
strategy and to assess the appropriateness of day-trading strategies 
for such customers. FINRA Rule 2130 creates an obligation on members 
that promote a day-trading strategy regarding account-opening approval 
procedures for non-institutional customers. FINRA Rule 2270 creates an 
obligation on such members to disclose to non-institutional customers 
the unique risks of engaging in a day-trading strategy. NASDAQ is, by 
this filing, updating the references in its Rules 2360 and 2361 from 
NASD Rules 2360 and 2361 to FINRA Rules 2130 and 2270.
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    \3\ See Securities Exchange Release No. 61059 (November 24, 
2009), 74 FR 62847 (December 1, 2009) (SR-FINRA-2009-059) (notice of 
filing and immediate effectiveness). See also Securities Exchange 
Release No. 59432 (February 23, 2009), 74 FR 9121 (March 2, 2009) 
(SR-FINRA-2009-005) (notice of filing and immediate effectiveness 
regarding, among other things, updated rule cross-references and 
other non-substantive technical changes to FINRA Rules 2360 and 
2370).
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    NASDAQ is similarly updating the reference in its Rule 2370 from 
NASD Rule 2370 to FINRA Rule 3240. In SR-FINRA-2009-095,\4\ FINRA 
adopted, with minor changes, NASD Rule 2370 regarding borrowing from or 
lending to customers into the FINRA consolidated rulebook as FINRA Rule 
3240, and added record retention requirements. FINRA Rule 3240, like 
former NASD Rules 2370, focuses in general on the appropriateness of 
particular lending arrangements between FINRA member broker-dealers and 
their registered persons and customers (to the extent permitted by the 
member) and the potential for conflicts of interests between both the 
registered person and his or her customer and the registered person and 
the member with which he or she is associated.
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    \4\ See Securities Exchange Release No. 61537 (February 18, 
2010), 75 FR 8772 (February 25, 2010)(SR-FINRA-2009-095)(order 
approving, among other things, adoption of NASD Rule 2370 as FINRA 
Rule 3240).
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    Additionally, in SR-FINRA-2009-005,\5\ FINRA renumbered cross-
references in its rules from NYSE Rule 80A to NYSE Rule 132B on the 
basis of a New York Stock Exchange (``NYSE'' or NYSE Euronext'') rule 
proposal.\6\ In that proposal, NYSE rescinded its Rule 80A regarding 
index arbitration [sic] restrictions and repositioned the definitions 
of ``index arbitrage'' and ``program trading'' into NYSE Rule 132B. 
Because NASDAQ Rule 6951 refers in its definitions of index arbitrage 
and program trading to Rule 80A, NASDAQ is, by this filing, updating 
the references in its Rule 6951 from NYSE Rule 80A to 132B.
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    \5\ See Securities Exchange Release No. 59432 (February 23, 
2009), 74 FR 9121 (March 2, 2009) (SR-FINRA-2009-005) (notice of 
filing and immediate effectiveness).
    \6\ See Securities Exchange Release No. 56726 (October 31, 
2007), 72 FR 62719 (November 6, 2007) (SR-NYSE-2007-96) (notice of 
filing and immediate effectiveness).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\7\ in general, and with 
Sections 6(b)(5) of the Act,\8\ in particular, in that the proposal 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 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 
changes will conform NASDAQ Rules 2360, 2361, 2370, and 6951 to recent 
changes made to several corresponding FINRA rules, to promote 
application of consistent regulatory standards.
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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.

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

    The Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to Section 
19(b)(3)(A) \9\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \10\ 
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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
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. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

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-2011-047 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2011-047. This 
file number should be included on the subject line if e-mail is used.

[[Page 20749]]

    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 Web site 
viewing and printing 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 offices of the Exchange. 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-2011-047, and should be submitted on or before 
May 4, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8913 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P