Document ID: SEC-2012-0090-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2012-01-20T05:00Z

[Federal Register Volume 77, Number 13 (Friday, January 20, 2012)]
[Notices]
[Pages 3019-3021]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1034]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66153; File No. SR-NASDAQ-2012-009]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Rules 4613(a)(2)(F) and (G) To Allow Exchange Market Makers To 
Opt Out of the Automated Quote Management Service

January 13, 2012.
    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 January 11, 2012, The NASDAQ Stock Market LLC (the 
``Exchange'' or ``NASDAQ'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rules 4613(a)(2)(F) and (G) to 
reflect changes to the Automated Quote Management service that will 
allow market makers to opt out of the service.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

4613. Market Maker Obligations

    A member registered as a Market Maker shall engage in a course of 
dealings for its own account to assist in the maintenance, insofar as 
reasonably practicable, of fair and orderly markets in accordance with 
this Rule.
(a) Quotation Requirements and Obligations
    (1) No change.
    (2) Pricing Obligations. For NMS stocks (as defined in Rule 600 
under Regulation NMS) a Market Maker shall adhere to the pricing 
obligations established by this Rule during Regular Trading Hours; 
provided, however, that such pricing obligations (i) shall not commence 
during any trading day until after the first regular way transaction on 
the primary listing market in the security, as reported by the 
responsible single plan processor, and (ii) shall be suspended during a 
trading halt, suspension, or pause, and shall not re-commence until 
after the first regular way transaction on the primary listing market 
in the security following such halt, suspension, or pause, as reported 
by the responsible single plan processor
    (A)-(E) No change.
    (F) Quotation Creation and Adjustment. For each Issue in which a 
Market Maker is registered, the System shall, in the absence of a 
quotation that complies with this Rule entered by that Market Maker, 
automatically create a quotation for display to comply with this Rule. 
System-created compliant displayed quotations will thereafter be 
allowed to rest and not be further adjusted by the System unless the 
relationship between the quotation and its related National Best Bid or 
National Best Offer, as appropriate, shrinks to the greater of: (a) 4 
percentage points, or, (b) one-quarter the applicable percentage 
necessary to trigger an individual stock trading pause as described in 
NASDAQ Rule 4120(a)(11), or expands to within that same percentage less 
0.5%, whereupon the System will immediately re-adjust and display the 
Market Maker's quote to the appropriate Designated Percentage set forth 
in section (D) above. Quotations originally entered by Market Makers 
which have not been modified by the System upon entry or after resting 
on the book shall be allowed to move freely towards the National Best 
Bid or National Best Offer, as appropriate, for potential execution. A 
Market Maker may opt out of this service at any time by informing 
Nasdaq of its desire to cease the service. Nasdaq will reinitiate 
service upon a Market Maker's request.
    (G) Quotation Refresh After Execution. In the event of an execution

[[Page 3020]]

against a System created compliant quotation, the Market Maker shall 
have its quote refreshed by the System on the executed side of the 
market at the applicable Designated Percentage away from the then 
National Best Bid (Offer) (or if no National Best Bid (Offer), the last 
reported sale). A Market Maker may opt out of this service at any time 
by informing Nasdaq of its desire to cease the service. Nasdaq will 
reinitiate service upon a Market Maker's request.
    (H)-(K) No change.
    (b)-(e) No change.
* * * * *

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 the 
Statutory Basis for, the Proposed Rule Change [sic]

1. Purpose
    NASDAQ proposes to amend Rules 4613(a)(2)(F) and (G) to allow 
Exchange market makers to opt out of the Automated Quote Management 
service.
Automated Quote Management
    On November 5, 2010, the Commission approved all new Rule 4613, 
which included the Exchange's Automated Quote Management service 
provided under Rules 4613(a)(2)(F) and (G).\3\ The Automated Quote 
Management service assists market makers in meeting their enhanced 
quotation obligations. For each issue in which a market maker is 
registered, the Exchange automatically creates a quotation for display 
to comply with the quoting requirements of Rule 4613(a). Compliant 
displayed quotations are thereafter allowed to rest and not be further 
adjusted by the Exchange unless the relationship between the quotation 
and its related national best bid or national best offer, as 
appropriate, shrinks to the greater of: (a) 4 percentage points, or, 
(b) one-quarter the applicable percentage necessary to trigger an 
individual stock trading pause as described in Rule 4120(a)(11), or 
expands to within that same percentage less 0.5%, whereupon the 
Exchange will immediately re-adjust and display the market maker's 
quote to the appropriate designated percentage. Quotations originally 
entered by market makers are allowed to move freely towards the 
national best bid or national best offer, as appropriate, for potential 
execution.
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    \3\ See Securities Exchange Act Release No. 63255 (November 5, 
2010), 75 FR 69484 (November 12, 2010) (SR-NASDAQ-2010-115, et al.).
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    In the event of an execution against an Exchange-created compliant 
quotation, the market maker has its quote refreshed by the Exchange on 
the executed side of the market at the applicable designated percentage 
away from the then national best bid (offer), or if no national best 
bid (offer), the last reported sale.
New Functionality
    As initially adopted, the Automated Quote Management service is 
currently applied to all Exchange market makers, with no provision for 
such member firms to opt out of the service. The Exchange is proposing 
to make the Automated Quote Management service voluntary and is adding 
functionality to allow Exchange market makers to opt out of the 
service. An Exchange market maker must inform the Exchange of its 
desire to opt out of the Automated Quote Management service, otherwise 
the service will continue to apply to the market maker's quotes. An 
Exchange market maker that has opted out of the Automated Quote 
Management service may opt back into the service by likewise informing 
the Exchange. To provide notice to the Exchange, a market maker must 
inform the NASDAQ Trade Desk in writing via tradedesk@nasdaqomx.com of 
its desire to opt in or out of the service. The NASDAQ Trade Desk will 
process the request once received and confirm the market maker's change 
in Automated Quote Management service status. An Exchange market maker 
may request that the Exchange change its status intraday. The Exchange 
will process such requests as they are received and the processing time 
may vary based on factors such as the number of requests received.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\4\ in general, and furthers the objectives of Section 6(b)(5),\5\ 
in particular, 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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. Allowing Exchange market makers to 
opt out of AQR will provide such firms the option to control their 
quote in all instances. A market maker that opts out of Automated Quote 
Management service may develop its own system to manage its quote, 
individually tailored to the firm's operations and which may be 
superior to the Automated Quote Management service. Accordingly, the 
Exchange believes that the proposed changes to Rule 4613(a)(2) meet the 
requirements of Section 6(b)(5) of the Act \6\ in that they will allow 
Exchange market makers to develop individual solutions to their market 
making quoting obligations, potentially superior to that of the 
Automated Quote Management service.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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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 proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \7\ and 
Rule 19b-4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). 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. The Exchange has satisfied this requirement.

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[[Page 3021]]

    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 the proposal only allows Exchange market makers 
to opt out of the Automated Quote Management service which will enable 
market makers to manage their own quotes if they so choose. Therefore, 
the Commission designates the proposed rule change to be operative upon 
filing with the Commission.\9\
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    \9\ For 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 the proposed rule 
change, the Commission summarily may temporarily suspend 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-009 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-2012-009. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing 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 the filing also will be available for 
inspection and copying at the principal office 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-2012-009 and should 
be submitted on or before February 10, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1034 Filed 1-19-12; 8:45 am]
BILLING CODE 8011-01-P