Document ID: SEC-2010-0323-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2010-03-04T05:00Z

[Federal Register: March 4, 2010 (Volume 75, Number 42)]
[Notices]               
[Page 9990-9992]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04mr10-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61573; File No. SR-NASDAQ-2010-022]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ Stock Market, LLC. Inc. 
Relating To Amending NASDAQ Options Market (``NOM'') Chapter V, Section 
6, Obvious Errors

February 23, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on February 18, 2010, The NASDAQ Stock Market LLC (``NASDAQ'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and 
II, below, which Items have been prepared by the 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

    NASDAQ proposes to amend NASDAQ Options Market (``NOM'') Rule 
Chapter V, Section 6, Obvious Errors, to adopt the ability to review 
transactions on NASDAQ's own motion.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, 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 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
    The purpose of the proposed rule change is to amend NOM Chapter V, 
Section 6 pertaining to the nullification and adjustment of options 
transactions. Specifically, NASDAQ proposes to adopt a provision which 
provides that in the interest of maintaining a fair and orderly market 
and for the protection of investors, the Chief Regulatory Officer of 
NASDAQ or his/her designee who is an officer (collectively ``NASDAQ 
officer''), may, on his or her own motion or upon request, determine to 
review any transaction occurring on NASDAQ that is believed to be 
erroneous.\3\ A transaction reviewed pursuant to this provision may be 
nullified or adjusted only if it is determined by the NASDAQ officer 
that the transaction is an obvious error as provided in Chapter V, 
Section 6. A transaction would be adjusted or nullified in accordance 
with the provision under which it is deemed an erroneous transaction. 
The NASDAQ officer may be assisted by a designated employee in NASDAQ 
Regulation that is trained in the application of this rule for 
reviewing a transaction(s).
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    \3\ In the event a party to a transaction requests that NASDAQ 
review a transaction, the NASDAQ officer nonetheless would need to 
determine, on his or her own motion, whether to review the 
transaction.
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    The NASDAQ officer shall act pursuant to this paragraph as soon as 
possible after receiving notification of the transaction, and 
ordinarily would be expected to act on the same day as the transaction 
occurred. However, because a transaction under review may have occurred 
near the close of trading or due

[[Page 9991]]

to unusual circumstances, the rule provides that the NASDAQ officer 
shall act no later than 9:30 a.m. (ET) on the next trading day 
following the date of the transaction in question. A party affected by 
a determination to nullify or adjust a transaction pursuant to this 
provision may appeal such determination in accordance with Chapter V, 
Section 6; however, a determination by a NASDAQ officer not to review a 
transaction, or a determination not to nullify or adjust a transaction 
for which a review was requested or conducted, is not appealable. 
NASDAQ believes it is appropriate to limit review on appeal to only 
those situations in which a transaction is actually nullified or 
adjusted.
    This provision is not intended to replace a party's obligation to 
request a review, within the required time periods under Chapter V, 
Section 6, of any transaction that it believes meets the criteria for 
an obvious error. And, if a transaction is reviewed and a determination 
has been rendered pursuant to Chapter V, Section 6, no additional 
relief may be granted under this new provision. Moreover, NASDAQ does 
not anticipate exercising this new authority in every situation in 
which a party fails to make a timely request for review of this 
transaction pursuant to Chapter V, Section 6. NASDAQ believes this 
provision should help to protect the integrity of its marketplace by 
vesting a NASDAQ officer with the authority to review a transaction 
that may be erroneous, in those situations where a party failed to make 
a timely request for a review.
    NASDAQ believes that the provision would also be useful in 
situations where some parties, but not all, to trades around the same 
time have requested a review. Under the rule, reviews are currently 
request-based. Under the proposal, in this situation, NASDAQ would be 
able to invoke this provision to review a series of trades, whether or 
not all parties requested it.
2. Statutory Basis
    NASDAQ believes that its proposal is consistent with Section 6(b) 
of the Act \4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \5\ 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 notes that a NASDAQ officer can adjust or nullify a transaction 
under the authority granted by this provision only if the transaction 
meets the objective criteria for an obvious error under NASDAQ rules.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 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

    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; or (iii) 
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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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, 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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    The Exchange has requested that the Commission waive the 30-day 
operative delay so that the Exchange may promptly implement the 
proposed rule change. The Exchange believes that a recent trading 
situation that resulted in divergent outcomes on some other options 
markets could have been handled in a more clear and orderly way if the 
new provision had been in place. The Commission notes that the proposed 
rule change is substantively identical to a previously approved 
proposal from CBOE \8\ and thus presents no new regulatory issues. The 
Commission believes that, under the circumstances, it is appropriate 
and consistent with the protection of investors and the public interest 
to waive the 30-day operative delay. Therefore, the Commission hereby 
designates the proposed rule change operative upon filing.\9\
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    \8\ See Exchange Act Release No. 60978 (November 10, 2009), 74 
FR 59296 (November 17, 2009) (approving SR-CBOE-2009-68).
    \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 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 No. SR-NASDAQ-2010-022 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 No. SR-NASDAQ-2010-022. 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,\10\ 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

[[Page 9992]]

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 No. SR-NASDAQ-2010-022 and should be submitted on or before March 
25, 2010.
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    \10\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.

    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. 2010-4452 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P