Document ID: SEC-2008-0765-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-06-02T04:00Z

[Federal Register: June 2, 2008 (Volume 73, Number 106)]
[Notices]               
[Page 31523-31524]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jn08-115]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57873; File No. SR-NASDAQ-2008-044]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change To Amend Nasdaq Rule 4420(g)

May 27, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 13, 2008, 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 prepared substantially by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and is granting 
accelerated approval to the proposed rule change.
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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

    Nasdaq proposes to amend Nasdaq Rule 4420(g) for the purpose of 
adding new text clarifying that securities listed under the rule are 
done so pursuant to Rule 19b-4(e) of the Act.\3\ Nasdaq also proposes 
to remove the maximum term limitation set forth in the rule and to 
allow securities listed under the rule to be based on multiple 
underlying securities. The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, and 
http://www.nasdaq.com.
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    \3\ 17 CFR 240.19b-4(e).
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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. 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
    Nasdaq proposes an amendment to Nasdaq Rule 4420(g) to clarify that 
Selected Equity-linked Debt Securities (``SEEDS'') listed on the Nasdaq 
Global Market are listed pursuant to Rule 19b-4(e) of the Act.\4\ Rule 
19b-4(e) allows self-regulatory organizations (``SROs'') to, among 
other things, list and trade new derivative securities products without 
going through the rule change process under Section 19(b) of the 
Act.\5\ Specifically, Rule 19b-4(e) provides that the listing and 
trading of derivatives securities products is not deemed a proposed 
rule change under Rule 19b-4(c)(1). To qualify for this exemption from 
Rule 19b-4(c)(1), an SRO must have existing, Commission-approved 
trading rules, procedures, and listing standards for the product class 
that would include the new derivative securities product. In addition, 
the SRO must have a surveillance program for the product class.
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    \4\ Id.
    \5\ 15 U.S.C. 78s(b)(1).
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    Nasdaq adopted its listing rules for SEEDS in 1994,\6\ prior to the 
Commission's amendment to Rule 19b-4 of the Act, which added paragraph 
(e) and its exemption from the Section 19(b) rule change filing 
requirement. Subsequent to the Commission's amendment of Rule 19b-4 in 
1998,\7\ Nasdaq did not amend its rule relating to the listing of SEEDS 
to clarify that such securities are considered derivative securities 
products and, as such, may be listed and traded without submitting a 
proposed rule change under Section 19(b). Nasdaq has adopted listing 
rules for derivative securities products subsequent to the Commission's 
adoption of the 1998 amendment to Rule 19b-4(e) that specifically note 
that such listing is pursuant to Rule 19b-4(e).\8\ Accordingly, Nasdaq 
is filing this rule change proposal to make clear in its rules that 
SEEDS listed under Rule 4420(g) are done so pursuant to Rule 19b-4(e) 
of the Act.
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    \6\ Securities Exchange Act Release No. 34758 (September 30, 
1994), 59 FR 50943 (October 6, 1994), (SR-NASD-94-49).
    \7\ Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998), (File No. S7-13-98).
    \8\ See e.g., Securities Exchange Act Release No. 45920 (May 13, 
2002), 67 FR 35605 (May 20, 2002) (SR-NASD-2002-45).
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    Nasdaq is also proposing to amend 4420(g) to conform the rule to 
the analogous rule of the American Stock Exchange LLC (``Amex'').\9\ 
Nasdaq notes that Amex requires its Equity Linked Term Notes to have 
only a minimum term of one year, with no maximum term limit;\10\ 
however, Nasdaq limits SEEDS based on a domestic security to a term of 
one to seven years, and limits SEEDS based on a non-U.S. security or 
sponsored ADR to a maximum term of three years.\11\ Amex's listing 
rules also allow Equity Linked Term Notes to be linked up to thirty 
underlying equity securities if all of the underlying equity securities 
individually satisfy the applicable listing standards. As such, Nasdaq 
is proposing to allow SEEDS to be listed on up to thirty equity 
securities and have only a minimum term of one year, with no maximum 
term.
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    \9\ Section 107B of the Amex Company Guide.
    \10\ Like the Amex, The New York Stock Exchange also requires 
equity-linked debt securities to have only a minimum term of one 
year, with no maximum term. See Paragraph 703.21 NYSE Listed Company 
Manual.
    \11\ Rule 4420(g)(2)(D).

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[[Page 31524]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \12\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5),\13\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanisms of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. Nasdaq believes that the clarification of Nasdaq Rule 4420(g) 
is needed to avoid further confusion surrounding the part of the Act 
that such securities are listed. In addition, Nasdaq believes that 
eliminating the maximum term of SEEDS and allowing SEEDS to be linked 
to multiple securities provides issuers with flexibility to create such 
securities and allows Nasdaq to compete effectively with the other 
markets, while maintaining high standards and protecting investors. 
Nasdaq notes that the Commission has already determined, through its 
approval of the Amex rules, that linking Equity Linked Term Notes to up 
to thirty underlying securities without a maximum term is consistent 
with Section 6(b)(5) of the Act.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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 impose 
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. 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-2008-044 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2008-044. 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 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-2008-044 and should 
be submitted on or before June 23, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\14\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\15\ which 
requires that the rules of an exchange be designed, among other things, 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, 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.
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    \14\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving this proposal before 
the 30th day after the publication of notice thereof in the Federal 
Register. The proposed rule change seeks to clarify that the Exchange's 
listing and trading of SEEDS is subject to Rule 19b-4(e) under the Act 
and would conform the Exchange's rules to those of other exchanges.\16\ 
In addition, the proposed changes relating to the number of securities 
that may underlie SEEDS and the term of a SEED seek to conform the 
Exchange's rules to those of other exchanges that have been previously 
approved by the Commission.\17\ Therefore, Commission does not believe 
that this proposal raises any novel regulatory issues and believes that 
accelerating approval of this proposal is appropriate and would ensure 
that the Exchange's rules clearly reflect the standards for listing and 
trading SEEDS and conform Nasdaq's rules to those of other exchanges 
without delay.
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    \16\ See e.g., Chicago Board Options Exchange Rule 31.5(I) and 
NYSE Arca Rule 5.2(j)(2).
    \17\ See supra notes 9-10 and accompanying text.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-NASDAQ-2008-044), be, and it 
hereby is, approved on an accelerated basis.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-12196 Filed 5-30-08; 8:45 am]

BILLING CODE 8010-01-P