Document ID: SEC-2009-0357-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes:  NASDAQ Stock Market LLC
Posted Date: 2009-03-17T04:00Z

[Federal Register: March 17, 2009 (Volume 74, Number 50)]
[Notices]               
[Page 11386-11387]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr09-68]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59547; File No. SR-NASDAQ-2009-014]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish New Rules Applicable to the Nasdaq Market Center and Nasdaq 
Options Market That Explicitly Require Members To Input Accurate 
Information Into Nasdaq Systems

March 10, 2009.
    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 February 23, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by Nasdaq. Nasdaq filed the proposed rule change as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. 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 to establish new rules applicable to the Nasdaq 
Market Center and Nasdaq Options Market that explicitly require members 
to input accurate information into Nasdaq systems. The text of the 
proposed rule change is available from Nasdaq's Web site at http://
nasdaq.cchwallstreet.com, 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. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to adopt new rules that make clear Nasdaq members' 
responsibility to input accurate quotation and order information into 
the Nasdaq Market Center and Nasdaq Options Market (collectively the 
``Nasdaq Markets''). The Nasdaq Markets require entry of certain 
information to post a quote or to enter an order. Such information, 
among other things, identifies the member, the size and price of the 
order or quote, and the member's capacity in placing an order. Accurate 
trade and quote information is fundamental to the operation of an 
efficient and fair market. Moreover, the information input by members 
when posting a quote or placing an order is used for purposes of 
policing the Nasdaq Markets. For example, the Financial Industry 
Regulatory Authority, Inc. (``FINRA'') conducts trade abuse 
surveillances of the Nasdaq Markets on Nasdaq's behalf. The trade abuse 
surveillances use capacity information input by members. A member's 
capacity in a trade concerns whether the member is acting as an agent, 
principal, or ``riskless'' principal in the transaction. Accordingly, 
accurate input of capacity information is of fundamental regulatory 
importance.
    Nasdaq does not have a rule that makes an explicit statement 
regarding a member's obligation to input accurate information into the 
Nasdaq Markets. Notwithstanding, Nasdaq believes that disciplinary 
cases against members entering inaccurate or incomplete information may 
be brought appropriately under Nasdaq Rule 2110, which requires members 
to observe high standards of commercial honor and just and equitable 
principles of trade. Rule 2110 protects the investing public and the 
securities industry from dishonest

[[Page 11387]]

practices that are unfair to investors or hinder the functioning of a 
free and open market, even though those practices may not be illegal or 
violate a specific rule or regulation. Because of the regulatory 
importance of accurate information input into the Nasdaq Markets, 
Nasdaq believes rules that directly address members' obligation to 
provide accurate information are warranted. The proposed rules make 
clear members' obligation to input accurate information into the Nasdaq 
Markets, and that failure to do so would be considered a violation of 
Nasdaq rules.
    Nasdaq notes that FINRA has rules that require the accurate entry 
of certain trade information into its systems. For example, FINRA Rule 
7330(d) requires FINRA members to report to the OTC Reporting Facility 
certain specific trade-related information. A failure to provide such 
information represents a violation of FINRA Rules, and may result in 
disciplinary action. FINRA has substantially similar requirements for 
other trade reporting systems it operates.\5\
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    \5\ See FINRA Rules 7230A and 7230B.
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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 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 amendments proposed 
herein will serve to promote the accuracy of information input into the 
Nasdaq Markets. Accurate information is necessary for the efficient and 
fair operation of the Nasdaq Markets, and will assist Nasdaq in 
surveilling the markets for fraudulent activity.
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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, 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

    This 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, 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). The Exchange also provided the 
Commission with 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 
the proposed rule change as required by Rule 19b-4(f)(6).
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    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.

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-2009-014 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-2009-014. 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 the 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-2009-014 and should 
be submitted on or before April 7, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5714 Filed 3-16-09; 8:45 am]

BILLING CODE 8011-01-P