Document ID: SEC-2009-1636-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Eliminate Rules Related to Nasdaq's PORTAL Market
Posted Date: 2009-11-19T05:00Z

[Federal Register: November 19, 2009 (Volume 74, Number 222)]
[Notices]               
[Page 60006-60008]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no09-81]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60991; File No. SR-NASDAQ-2009-092]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Eliminate Rules Related to Nasdaq's PORTAL Market

November 12, 2009.
    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 October 26, 2009, The NASDAQ Stock Market LLC (``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 Nasdaq. Nasdaq 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

    Nasdaq proposes to eliminate rules related to Nasdaq's PORTAL 
Market. The text of the proposed rule change is below. The text of the 
proposed rule change is attached as Exhibit 5 and [sic] is available at 
http://www.cchwallstreet.com/nasdaq.\4\
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    \4\ Changes are marked to the rules of The NASDAQ Stock Market 
LLC found at http://nasdaqomx.cchwallstreet.com.
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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 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 eliminate rules related to its PORTAL Market.

Background

    The National Association of Securities Dealers, Inc. (``NASD'') 
created the PORTAL Market in 1990,\5\ simultaneously with the SEC's 
adoption of Rule 144A,\6\ to be a new trading system for the purpose of 
quoting, trading, and reporting trades in securities deemed eligible 
for resale by Qualified Institutional Buyers under Rule 144A. Rule 144A 
provides an exemption from registration under Section 5 of the 
Securities Act \7\ for resales of privately placed securities to 
investors that meet the eligibility requirements of being a qualified 
institutional buyer (``QIB'') under Rule 144A(a)(1),\8\ i.e., 
institutional investors that in the aggregate own or invest on a 
discretionary basis at least $100 million in securities and broker/
dealers that in the aggregate own or invest on a discretionary basis at 
least $10 million in securities. The PORTAL Market did

[[Page 60007]]

not develop as anticipated.\9\ For many years, the sole function of the 
NASD related to the PORTAL market was to review whether an issue of 
privately placed securities met the eligibility requirements of Rule 
144A, thereby qualifying the securities for book-entry services offered 
by the Depository Trust Company (``DTC'').
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    \5\ Securities Exchange Act Release No. 27956 (Apr. 27, 1990); 
55 FR 18781 (May 4, 1990) (the ``original PORTAL rule filing'').
    \6\ Securities Act Release No. 6862 (April 23, 1990); 55 FR 
17933 (April 30, 1990).
    \7\ 17 U.S.C. 77e.
    \8\ 17 CFR 230.144A(a)(1).
    \9\ For more information related to the background of The PORTAL 
Market, see Securities Exchange Act Release No. 55669 (April 25, 
2007); 72 FR 23874 (May 1, 2007).
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    The staff of Nasdaq has historically had responsibility for review 
of PORTAL applications to determine the eligibility of securities and, 
originally, PORTAL participants (including broker/dealers and 
investors). Upon the separation of Nasdaq from the NASD and the 
approval of Nasdaq as a registered national securities exchange under 
Section 6 of the Act, the review functions for PORTAL market 
eligibility were retained by Nasdaq and the PORTAL Market Rules in the 
NASD Rule 5300 Series became the Nasdaq Rule 6500 Series.\10\ The NASD 
continued, however, to regulate trading [sic] reporting for PORTAL-
designated securities. On July 31, 2007, the SEC approved amendments to 
the PORTAL rules that reestablished a trading system for the purpose of 
quoting and trading securities eligible for resale by qualified 
institutional buyers under SEC Rule 144A.\11\ During the period 
following the reestablishment of the Nasdaq PORTAL Market, Nasdaq 
reexamined the operational and ownership structure of PORTAL with a 
view to adopting changes that reflected the preferences of market 
participants and enhanced the operation of the system. As a result of 
this review, Nasdaq filed with the Commission rules that terminated the 
operation of the Nasdaq PORTAL Market for trading PORTAL equity 
securities, while allowing Nasdaq to continue to review and designate 
both restricted debt and equity securities as PORTAL-eligible 
securities in its SRO capacity. Nasdaq also indicated its intention to 
enter into agreements with certain of its members or their affiliates 
(the ``Firms'') to create, and take a minority interest in, the PORTAL 
Alliance, a Delaware limited liability company principally formed to 
operate a private open-access over-the-counter platform to facilitate 
transactions in 144A restricted securities.\12\ Nasdaq has entered into 
such agreements and will be providing technological and operational 
support, in a non-SRO capacity, to that over-the-counter platform. 
Recently, DTC eliminated its book-entry eligibility requirement that 
certain Rule 144A securities be included in an SRO Rule 144A System, 
like PORTAL. As such, market participants no longer need to seek PORTAL 
designation to obtain DTC book-entry.\13\
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    \10\ Securities Exchange Act Release No. 53128 (Jan. 13, 2006); 
71 FR 3550 (Jan. 23, 2006).
    \11\ Securities Exchange Act Release No. 56172 (July 31, 2007); 
72 FR 44196 (SR-NASDAQ-2006-065). At the time of approval, Nasdaq 
indicated that it would first operate a system for trading PORTAL 
equity, and thereafter would enable the system to trade PORTAL debt 
securities. While the PORTAL equity functionality was made available 
on August 15, 2007, Nasdaq did not, and has not, implemented any 
trading functionality for PORTAL debt securities.
    \12\ Securities Exchange Act Release No. 58638 (September 24, 
2008); 73 FR 57188 (October 1, 2008).
    \13\ Securities Exchange Act Release No. 59384 (February 11, 
2009); 74 FR 7941 (February 20, 2009).
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The Proposal

    Based on the foregoing, Nasdaq has determined to terminate its 
PORTAL security designation processes, as well as remove rules related 
to the PORTAL Market from its rulebook.\14\ Nasdaq notes in making this 
proposal that the vast majority of PORTAL Market rules describe a 
system for the trading of PORTAL debt securities, a system that is not 
in operation. Further, Nasdaq's PORTAL security designation rules are 
no longer necessary as a result of DTC's elimination of the SRO Rule 
144A System requirement.\15\ Finally, Nasdaq specifically notes that 
nothing in this proposal is intended to impact securities previously 
designated as PORTAL securities or alter any existing regulatory 
obligation applicable to such securities, including, but not limited 
to, any trade reporting obligation imposed by any self-regulatory 
organization.\16\
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    \14\ Nasdaq will continue to impose fees for The PORTAL 
Reference Database. See NASDAQ Rule 7050.
    \15\ Nasdaq is no longer accepting new applications for debt or 
equity securities seeking PORTAL designation.
    \16\ For example, FINRA Rule 6630.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\17\ in general, and with 
Sections 6(b)(5) of the Act,\18\ 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. In 
particular, Nasdaq's current PORTAL operations are limited,\19\ and its 
security designation processes are no longer need to [sic] for issuers 
to obtain DTC book-entry services. As such, elimination of the PORTAL 
rules will provide clarity regarding the status of the PORTAL Market.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ The Commission understands that Nasdaq no longer performs 
any functions related to PORTAL.
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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, as amended.

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; 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) \20\ of the Act and Rule 19b-
4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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 Commission notes that the Exchange has satisfied the 
five-day pre-filing notice 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.

[[Page 60008]]

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-2009-092 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-2009-092. 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 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-2009-092 and should be submitted on or before 
December 10, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27747 Filed 11-18-09; 8:45 am]

BILLING CODE 8011-01-P