Document ID: SEC-2010-0123-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-01-22T05:00Z

[Federal Register: January 22, 2010 (Volume 75, Number 14)]
[Notices]               
[Page 3774-3776]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ja10-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61323; File No. SR-NASDAQ-2009-116]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Amend Rule 2240 and 2250 To 
Reflect Changes to Corresponding FINRA Rules

January 11, 2010.
    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 December 30, 2009, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\ 
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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ The 
NASDAQ Stock Market LLC (the ``Exchange'' or ``NASDAQ'') is filing with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change to amend NASDAQ Rule 2240 and 2250 to reflect recent changes to 
corresponding rules of the Financial Industry Regulatory Authority 
(``FINRA''). The text of the proposed rule change is below. Additions 
are in italics; deletions are in brackets.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
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NASDAQ Stock Market Rules

* * * * *
[2240. Disclosure of Control Relationship with Issuer
Nasdaq Members shall comply with NASD Rule 2240 as if such Rule were 
part of Nasdaq's Rules.]
* * * * *
[2250. Disclosure of Participation or Interest in Primary or Secondary 
Distribution
Nasdaq Members shall comply with NASD Rule 2250 as if such Rule were 
part of Nasdaq's Rules.]
* * * * *
2262. Disclosure of Control Relationship with Issuer
Nasdaq Members shall comply with FINRA Rule 2262 as if such Rule were 
part of Nasdaq's Rules.
* * * * *
2269. Disclosure of Participation or Interest in Primary or Secondary 
Distribution
Nasdaq Members shall comply with FINRA Rule 2269 as if such Rule were 
part of Nasdaq's Rules.
* * * * *

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 IV below. The Exchange 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
    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

[[Page 3775]]

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 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.
    This filing addresses NASDAQ Rule 2240 entitled ``Disclosure of 
Control Relationship with Issuer'' and 2250 entitled ``Disclosure of 
Participation or Interest in Primary or Secondary Distribution.'' 
NASDAQ Rule 2262 makes reference to NASD 2240 entitled ``Disclosure of 
Control Relationship with Issuer.'' FINRA filed a proposed rule change 
to adopt NASD Rule 2240 as FINRA Rule 2262, NASD Rule 2250 as FINRA 
Rule 2269 and NASD Rule 3340 as FINRA Rule 5260.\6\
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    \6\ Securities Exchange Act Release No. 60659 (September 11, 
2009), 74 FR 48117 (September 21, 2009) (SR-FINRA-2009-044).
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    FINRA transferred NASD Rule 2240 unchanged into the Consolidated 
FINRA Rulebook as FINRA Rule 2262. FINRA Rule 2262 provides that a 
member controlled by, controlling, or under common control with the 
issuer of any security must, before entering into any contract with or 
for a customer for the purchase or sale of such security, disclose to 
the customer the existence of such control; if such disclosure is not 
made in writing, it must be supplemented by written disclosure at or 
before the completion of the transaction.
    FINRA transferred NASD Rule 2250 unchanged into the Consolidated 
FINRA Rulebook as FINRA Rule 2269. FINRA Rule 2269 provides that if a 
member is acting as a broker for a customer, or is acting for both the 
customer and some other person, or is acting as a dealer and receives 
or has promise of receiving a fee from a customer for advising the 
customer with respect to securities, then the member must, at or before 
the completion of any transaction for or with the customer in any 
security in the primary or secondary distribution of which the member 
is participating or is otherwise financially interested, give the 
customer written notification of the existence of such participation or 
interest.
    FINRA transferred NASD Rule 3340 without material change into the 
Consolidated FINRA Rulebook as FINRA Rule 5260. FINRA Rule 5260 
prohibits members from, directly or indirectly, effecting transactions 
or publishing quotations or indications of interest (``IOIs'') in (1) 
any security with respect to which a trading halt is in effect; or (2) 
any security future when there is a regulatory trading halt in effect 
with respect to the underlying security. The trading and quoting 
conduct prohibited by Rule 3340 is triggered only when a trading halt 
is in effect. The rule also provides that, in the event that FINRA 
halts over-the-counter trading and quoting in NMS stocks because the 
Alternative Display Facility (``ADF'') or a Trade Reporting Facility 
(``TRF'') is unable to transmit real-time information to the applicable 
Securities Information Processor, members are not prohibited from 
trading through other markets for which trading is not halted.
    NASDAQ is proposing to amend NASDAQ Rule 2240 by renaming Rule 2240 
to new Rule 2262. Also, NASDAQ is proposing to amend NASDAQ Rule 2250 
by renaming Rule 2250 to new Rule 2269. NASDAQ would delete current 
Rules 2240 and 2250. NASDAQ also proposes to amend the references to 
NASD Rule 2240 and 2250 to instead state FINRA Rules 2262 and 2269 in 
the new Rules 2262 and 2269, respectively. No changes are necessary to 
Rule 3340.
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 2240 and 2250 to recent changes made 
to corresponding FINRA rules and rename Rules 2240 and 2250 to new 
Rules 2262 and 2269 respectively.
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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

    The Exchange 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

    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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-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-2009-116 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2009-116. 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

[[Page 3776]]

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 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 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-2009-116 and should be submitted 
on or before February 12, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1140 Filed 1-21-10; 8:45 am]
BILLING CODE 8011-01-P