Document ID: SEC-2010-0661-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-05-04T04:00Z

[Federal Register: May 4, 2010 (Volume 75, Number 85)]
[Notices]               
[Page 23825-23827]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04my10-135]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61991; File No. SR-NASDAQ-2010-050]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the NASDAQ Stock Market LLC 
Relating to the Opening of Trading in the NASDAQ Options Market

April 27, 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 April 15, 2010, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') 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 
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

    Nasdaq is filing a proposal for the NASDAQ Options Market (``NOM'' 
or ``Exchange'') to to [sic] modify Chapter VI, Section 8 of the 
Exchange's rules, dealing with the Nasdaq Opening Cross.
    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.

[[Page 23826]]

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
    Nasdaq proposes to modify Chapter VI, Section 8 of the rules 
governing NOM, and in particular governing the opening of trading in 
that market. Currently, pursuant to Chapter VI, Section 8(b) of NOM's 
rules, the Nasdaq Opening Cross occurs once certain preconditions are 
met. Section 8(b) of Chapter VI permits the Opening Cross to occur at 
or after 9:30 if there is no Imbalance \3\, if the dissemination of a 
quote or trade by the Market for the Underlying Security \4\ has 
occurred (or, in the case of index options, the Exchange has received 
the opening price of the underlying index) and if a certain number (as 
the Exchange may determine from time to time) of other options 
exchanges have disseminated a firm quote on the Options Price Reporting 
Authority (``OPRA'').\5\
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    \3\ ``Imbalance'' is defined in Section 8(a)(1) of Chapter VI as 
the number of contracts of Eligible Interest that may not be matched 
with other order contracts at a particular price at any given time.
    \4\ Section 8(a)(5) of Chapter VI defines ``Market for the 
Underlying Security'' as meaning either the primary listing market, 
the primary volume market (defined as the market with the most 
liquidity in that underlying security for the previous two calendar 
months), or the first market to open the underlying security, as 
determined by the Exchange on an issue-by-issue basis and announced 
to the membership on the Exchange's Web site.
    \5\ If all the conditions specified in Section 8(b) of Chapter 
VI have been met except that there is an Imbalance, Section 8(b)(5) 
requires one additional Order Imbalance Indicator message to be 
disseminated, after which the Opening Cross occurs, executing the 
maximum number of contracts. Any remaining Imbalance that is not 
executable in the Opening Cross is canceled.
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    Section 8(c) of Chapter VI governs situations in which the 
requisite number of firm quotes have not been disseminated for an 
option by other options exchanges. No Opening Cross will occur if firm 
quotes are not disseminated for an option by the predetermined number 
of options exchanges until such time during the day that the Exchange 
determines. In that case, provided dissemination of a quote or trade by 
the Market for the Underlying Security has occurred (or, in the case of 
index options, the Exchange has received the opening price of the 
underlying index) the option will open for trading.\6\
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    \6\ If there is interest in the Opening Cross, the option will 
not open for trading in that option until the orders that would be 
executed in the Opening Cross are resolved through the cancellation 
or modification of the orders by the entering party or parties.
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    The Exchange is proposing to amend both Section 8(b) and 8(c) of 
Chapter VI to clarify in each case that the dissemination of a quote or 
trade by the Market for the Underlying Security must occur during 
regular trading hours in order for the NOM opening cross to occur in 
that option. These amendments would establish clearly that this 
precondition for opening trading in an option on NOM would not be met 
if, for example, the Market for the Underlying Security were to both 
open and then halt trading prior to regular trading hours which 
currently begin at 9:30 a.m.
    The Exchange is also proposing to amend Section 8(c)(2) of Chapter 
VI to clarify that if opening quotes or orders lock or cross each other 
such that an Opening Cross can be initiated, the Exchange may open for 
trading in that option even if the orders that would be executed in the 
Opening Cross are not cancelled or modified so that they no longer lock 
or cross each other, if and when the number of options exchanges 
required under the introductory language of Section 8(b) of Chapter VI 
for the opening of trading of System securities have disseminated a 
firm quote on OPRA. This amendment will not make a change in the 
operation of the trading system, but will merely clarify the intended 
NOM opening process.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ in particular, in that it is designed 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. 
Nasdaq believes that the proposal is consistent with this standard 
because the proposed rule change is designed to clarify its rules for 
the benefit of all market participants.
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    \7\ 15 U.S.C. 78f(b).
    \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 
impose any burden on competition 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

    No written comments were either solicited or 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) of the Act \9\ and Rule 19b-4(f)(6) \10\ thereunder 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 after the date of the filing, 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). 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. 
Nasdaq has satisfied this requirement.
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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-2010-050 on the subject line.

[[Page 23827]]

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-2010-050. 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,\11\ 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 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-2010-050 and should 
be submitted on or before May 25, 2010.
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    \11\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov/rules/sro.shtml.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-10275 Filed 5-3-10; 8:45 am]
BILLING CODE 8010-01-P