Document ID: SEC-2008-0920-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-07-09T04:00Z

[Federal Register: July 9, 2008 (Volume 73, Number 132)]
[Notices]               
[Page 39360-39362]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy08-112]                         

[[Page 39360]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58069; File No. SR-NASDAQ-2008-054]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Regarding Technical and Conforming Changes to Nasdaq Rules

June 30, 2008.
    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 June 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 by the Exchange. Nasdaq 
designated the proposed rule change as ``non-controversial'' under 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to make miscellaneous non-controversial changes to 
the Nasdaq rulebook. Nasdaq proposes to implement the proposed rule 
change immediately. The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and http://
nasdaq.complinet.com.

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. 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 make miscellaneous non-controversial changes to 
the Nasdaq rulebook. When Nasdaq separated from the National 
Association of Securities Dealers, Inc. (``NASD'') and began to operate 
as a national securities exchange in 2006, it adopted a rulebook with 
provisions regulating member conduct that was designed to parallel the 
NASD rulebook in many respects. There were three compelling reasons for 
this approach. First, most Nasdaq members were expected to be members 
of NASD that had traded on the Nasdaq while it was a facility of NASD, 
so these members were accustomed to the requirements of NASD rules. 
Second, adopting rules at variance with NASD rules would impose 
unnecessary regulatory burdens on Nasdaq members by requiring them to 
comply with a new rule set. Third, adopting parallel rules allowed 
Nasdaq and NASD to enter into an agreement under Rule 17d-2 under the 
Act \5\ (the ``17d-2 Agreement'') to allocate responsibility to NASD 
for enforcement of common rules with respect to common members.\6\
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    \5\ 17 CFR 240.17d-2.
    \6\ See Securities Exchange Act Release No. 54136 (July 12, 
2006), 71 FR 40759 (July 18, 2006) (File No. 4-517).
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    The main purpose of this rule change is to adopt conforming changes 
to reflect recent changes to certain NASD rules that impact 
corresponding Nasdaq rules, and to make other related changes to ensure 
that duplicative regulatory burdens are not imposed on Nasdaq members. 
Second, Nasdaq is also amending its rules to reflect the name change of 
NASD to the Financial Industry Regulatory Authority, Inc. (``FINRA'') 
following its merger with elements of the New York Stock Exchange 
(``NYSE'') regulatory unit. As a result of this merger, the corporate 
name of the entity has changed, but NASD rules continue to be 
denominated as such.\7\ Accordingly, references in the Nasdaq rules to 
NASD rules are not being changed at this time, but references to the 
corporate entity and its members are being changed. Third, Nasdaq is 
making a range of changes aimed at deleting obsolete references and 
correcting typographical errors.
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    \7\ The rules of FINRA include both NASD rules and NYSE 
Regulation rules incorporated by FINRA. See http://www.finra.org/
RulesRegulation/FINRARules/index.htm.
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    Specifically, Nasdaq proposes to make the following changes:
     Amending Nasdaq Rule 1017 to conform the rule more closely 
to NASD Rule 1017 so that the rule continues to be covered by the 17d-2 
Agreement. Nasdaq Rule 1017 pertains to approval of changes in 
ownership, control, or business operations by Nasdaq members. In SR-
NASDAQ-2007-085,\8\ Nasdaq adopted amendments to Nasdaq Rule 1017 to 
shorten the time-frame for review of applications under the rule and to 
simplify the standards for approval. These changes were intended to 
benefit Nasdaq members that are not required to become members of FINRA 
because they conduct a limited business that does not involve the 
carrying of customer accounts.
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    \8\ See Securities Exchange Act Release No. 56917 (December 6, 
2007), 72 FR 70632 (December 12, 2007) (SR-NASDAQ-2007-085).
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    As a result of the amendments to the Nasdaq Rule, however, the 
content of NASD Rule 1017 and Nasdaq Rule 1017 are now somewhat 
different and therefore may not be considered eligible for coverage 
under the 17d-2 Agreement. However, Nasdaq believes that no useful 
regulatory purpose would be served by requiring duplicative 
applications to FINRA and Nasdaq, since a joint member could not 
implement a change requiring an application to FINRA until FINRA had 
granted approval. Accordingly, Nasdaq is amending the rule to reinstate 
the time frames for application review previously in effect and to 
incorporate by reference to NASD Rule 1014 the standards for approval 
of applications by FINRA members.\9\ Thus, the coverage of the rule 
would be identical to the NASD rule for joint members, while the 
simplified rule would continue to be applicable to Nasdaq members that 
are not required to become members of FINRA. Nasdaq is also making 
conforming changes to Nasdaq Rules 1012 and 1014.
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    \9\ Nasdaq incorporates by reference a range of NASD rules, 
thereby ensuring that Nasdaq members and FINRA members are subject 
to comparable regulatory standards, reducing regulatory burdens on 
these members, and reducing the extent to which Nasdaq must amend 
its own rules to maintain comparable regulatory standards. In 
connection with this filing, Nasdaq plans to submit an amended 
letter to the Commission requesting an exemption from the rule 
filing requirements of Section 19(b) of the Exchange Act for changes 
to those Nasdaq rules that are effected solely by virtue of a change 
to a cross-referenced NASD rule. See Letter from Edward S. Knight, 
Executive Vice President and General Counsel, Nasdaq, to Nancy 
Morris, Secretary, Commission (January 12, 2006); Securities 
Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 
(January 23, 2006) (File No. 10-131).
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     Amending Nasdaq Rule 1060 to remove the registration 
exemption for

[[Page 39361]]

associated persons of broker-dealers engaged exclusively in options 
trading. The exemption is inconsistent with recently approved rules for 
the NASDAQ Options Market, which requires registration of such 
persons.\10\
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    \10\ See Securities Exchange Act Release No. 57478 (March 12, 
2008), 73 FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and -080).
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     Adopting new Nasdaq Rule 1160 and amending Nasdaq Rules 
1120, 1150, and 3520 and IM-3011-2 to conform to changes to 
corresponding NASD rules \11\ regarding the time frame for members to 
report changes in contact information. NASD Rule 1160 contemplates that 
FINRA members will use the NASD Contact System to report changes; 
because this system is not available to non-FINRA members at this time, 
the corresponding Nasdaq Rule requires use of this system by Nasdaq 
members that are FINRA members and submissions via e-mail or paper mail 
for other Nasdaq members.
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    \11\ See Securities Exchange Act Release No. 56179 (August 1, 
2007), 72 FR 44203 (August 7, 2007) (SR-NASD-2007-034).
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     Amending Nasdaq IM-2110-3, IM-2110-6, and IM-2110-7, whose 
text is virtually identical to corresponding NASD rules, by requiring 
Nasdaq members to comply with the corresponding NASD rules, thereby 
incorporating by reference the NASD rules.\12\ Similarly, Nasdaq is 
incorporating by reference new NASD Rules 2290,\13\ 2342,\14\ 2441,\15\ 
and 3160.\16\
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    \12\ See supra note 9.
    \13\ See Securities Exchange Act Release No. 56645 (October 11, 
2007), 72 FR 59317 (October 19, 2007) (SR-NASD-2005-080).
    \14\ See Securities Exchange Act Release No. 55737 (May 10, 
2007), 72 FR 27606 (May 16, 2007) (SR-NASD-2006-124).
    \15\ See Securities Exchange Act Release No. 54088 (June 30, 
2006), 71 FR 38950 (July 10, 2006) (SR-NASD-2004-135).
    \16\ See Securities Exchange Act Release No. 54456 (September 
15, 2006), 71 FR 56203 (September 26, 2006) (SR-NASD-2006-064).
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     Amending Nasdaq Rule 2320 and adopting IM-2320 to reflect 
changes made to the corresponding NASD Rules by SR-NASD-2004-026.\17\
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    \17\ See Securities Exchange Act Release No. 54339 (August 21, 
2006), 71 FR 50959 (August 28, 2006) (SR-NASDAQ-2004-026).
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     Amending Nasdaq Rule 2340 to reflect changes made to the 
corresponding NASD Rule by SR-NASD-2006-066.\18\
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    \18\ See Securities Exchange Act Release No. 54811 (November 22, 
2006), 71 FR 69161 (November 29, 2006) (SR-NASD-2006-066).
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     Amending Nasdaq IM-2210-4, to adopt a simplified version 
of the changes made to NASD IM-2210-4 by SR-FINRA-2007-014.\19\ 
Specifically, while NASD IM-2210-4 requires FINRA members advertising 
FINRA membership on their Web sites to provide a link to the FINRA Web 
site in order to provide investors with information about FINRA, Nasdaq 
believes that such a requirement would be inappropriate for a for-
profit exchange such as Nasdaq. The Nasdaq rule, however, like the 
FINRA rule, will provide that members may indicate Nasdaq membership in 
any communication with the public, provided that the communication 
complies with the applicable standards of Nasdaq Rule 2210 (which 
governs member advertising) and neither states nor implies that Nasdaq, 
or any other corporate name or facility affiliated with Nasdaq, or any 
other regulatory organization endorses, indemnifies, or guarantees the 
member's business practices, selling methods, the class or type of 
securities offered, or any specific security.
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    \19\ See Securities Exchange Act Release No. 56615 (October 4, 
2007), 72 FR 58136 (October 12, 2007) (SR-FINRA-2007-014).
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     Amending Nasdaq Rule 3010 to reflect changes made to the 
corresponding NASD Rule by SR-NASD-2003-104.\20\
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    \20\ See Securities Exchange Act Release No. 52403 (September 9, 
2005), 70 FR 54782 (September 16, 2005) (SR-NASD-2003-104).
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     Amending Nasdaq IM-4390 and Rules 3390, 4611, 4619, 4625, 
4756, 4758, 4761, and 6430 (redesignated as Rule 3350), and deleting 
Nasdaq Rules 4602 and 4759 and IM-4759-1, to reflect the termination of 
the Intermarket Trading System Plan and the NYSE Direct + System.
     Amending Nasdaq Rule 4613 and IM-4390 to eliminate 
obsolete references to previously deleted rules.
     Amending Nasdaq Rule 4618 to clarify that transactions in 
any security, not just Nasdaq-listed securities, may be settled ``ex-
clearing'' if the parties to the transaction agree.
     Amending Nasdaq Rule 4625 to reflect the previous deletion 
of a requirement that market maker quotations be reasonably related to 
the prevailing market.\21\
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    \21\ See Securities Exchange Act Release No. 56759 (November 7, 
2007), 72 FR 64102 (November 14, 2007) (SR-NASDAQ-2007-069).
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     Amending Nasdaq Rule 4751 to correct technical errors in 
the description of the scope of securities traded on the Nasdaq Market 
Center, the definition of ``Nasdaq ECNs,'' and the definition of the 
``Price to Comply Post Order,'' and to remove obsolete language 
associated with the transition by the Nasdaq Market Center to the 
Regulation NMS environment.
     Amending Nasdaq Rule 4758 to clarify the description of 
Nasdaq's order routing options.
     Redesignating Nasdaq Rules 6430 and 6440 as Rules 3350 and 
3351 and making amendments to reflect amendments to a corresponding 
NASD rule, Rule 5120, that were made by SR-NASD-2006-104.\22\
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    \22\ See Securities Exchange Act Release No. 54798 (November 21, 
2006), 71 FR 69156 (November 29, 2006) (SR-NASD-2006-104).
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     Amending Nasdaq Rule 6951 to reflect changes to the 
corresponding NASD Rule made by SR-NASD-2007-028.\23\
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    \23\ See Securities Exchange Act Release No. 56003 (July 2, 
2007), 72 FR 37287 (July 9, 2007) (SR-NASD-2007-028).
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     Amending Nasdaq Rules 9556, 9800, 9810, and 9860 to 
reflect changes to the corresponding NASD Rules made by SR-NASD-2005-
061 and SR-NASD-2007-033.\24\
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    \24\ See Securities Exchange Act Release Nos. 51860 (June 16, 
2005), 70 FR 36427 (June 23, 2005) (SR-NASD-2005-061); and 55819 
(May 25, 2007), 72 FR 30895 (June 4, 2007) (SR-NASD-2007-033).
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     Amending Nasdaq IM-10100 and Rules 10100 and 10102 to 
reflect the replacement by FINRA of the Rule 10000 Series with the Rule 
12000 and Rule 13000 Series.\25\ The NASD Rule 10000 Series governed 
all arbitration disputes submitted by members, associated persons and 
customers. The NASD replaced that single rule series with two rule 
series: The 12000 Series governing disputes with customers and the 
13000 Series governing industry disputes. Nasdaq members are subject to 
the new NASD Rule 12000 and 13000 Series, just as they were subject to 
the old NASD 10000 Series.
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    \25\ See Securities Exchange Act Release No. 55158 (January 24, 
2007), 72 FR 4574 (January 31, 2007) (SR-NASD-2003-158 and SR-NASD-
2004-011).
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     Amending Nasdaq Rule 11810 to reflect changes to the 
corresponding NASD Rule made by SR-NASD-2007-035.\26\
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    \26\ See Securities Exchange Act Release No. 56972 (December 14, 
2007), 72 FR 73927 (December 28, 2007) (SR-NASD-2007-035).
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     Amending Nasdaq Rules 0115, 1002, 2210, 2211, 3010, 3110, 
4380, 9120, and 11630 and IM-3011-1 and IM-4390 to correct 
typographical errors.
    Amending Nasdaq Rules 0120, 0130, 1001, 1002, 1012, 1022, 1050, 
1060, 1120, 2111, 2210, 2361, 2520, 3010, 3012, 3020, 3070, 3150, 3510, 
4120, 4200, 4619, 4624, 6951, 6954, 6955, 8001, 8210, 8211, 9001, 9120, 
9521, 9552, 9553, 9554, 9555, 9556, 9557, 9558, 9810, 10001, 10100, 
11210, 11860, and 11870, and IM-1002-4, IM-1022-2, IM-2110-2, IM-10100, 
and IM-11130 to reflect the name change of NASD to FINRA.
     Amending Nasdaq Rule 2140 to reflect the change in the 
name of the Commission's Division of Market

[[Page 39362]]

Regulation to the Division of Trading and Markets.
     Amending Nasdaq IM-10100 to correct the names of several 
exchanges listed in the rule.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\27\ in general, and Section 6(b)(5) of the Act,\28\ 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 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. The proposed rule change 
makes miscellaneous changes to Nasdaq rules to maintain appropriate 
parallelism with corresponding NASD rules, in order to prevent 
unnecessary regulatory burdens and promote efficient administration of 
the rules. The change also makes minor updates and corrections to 
certain Nasdaq rules.
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    \27\ 15 U.S.C. 78f.
    \28\ 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 result 
in 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the 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 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 \29\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\30\ As required under Rule 19b-4(f)(6)(iii),\31\ 
Nasdaq provided the Commission with written notice of its intent to 
file the proposed rule change, along with a brief description and text 
of the proposed rule change, prior to the date of filing of the 
proposed rule change.
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 17 CFR 240.19b-4(f)(6).
    \31\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative for 30 days after the date of filing.\32\ However, 
Rule 19b-4(f)(6)(iii) \33\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. Nasdaq has requested that the 
Commission waive the 30-day operative delay because the proposed rule 
change: (1) makes miscellaneous changes to Nasdaq rules in order to 
maintain appropriate parallelism with corresponding NASD rules, prevent 
unnecessary regulatory burdens, and promote efficient administration of 
the rules; and (2) makes minor updates and corrections to certain 
Nasdaq rules.
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    \32\ Id.
    \33\ Id.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow Nasdaq to immediately conform its rules to 
corresponding NASD rules. This will ensure that such Nasdaq rules will 
continue to be covered by the existing 17d-2 Agreement between Nasdaq 
and FINRA and that unnecessary duplicatory regulatory burdens are not 
imposed on Nasdaq members. Further, waiving the operative delay will 
allow Nasdaq to immediately make minor updates and corrections to 
certain Nasdaq rules, which are non-substantive and do not raise any 
regulatory issues. For these reasons, the Commission designates that 
the proposed rule change become operative immediately.\34\
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    \34\ 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 the 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-2008-054 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-2008-054. 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 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-2008-054 and should 
be submitted on or before July 30, 2008.
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    \35\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-15486 Filed 7-8-08; 8:45 am]

BILLING CODE 8010-01-P