Document ID: SEC-2008-0939-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-07-10T04:00Z

[Federal Register: July 10, 2008 (Volume 73, Number 133)]
[Notices]               
[Page 39756-39758]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jy08-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58093; File No. SR-NASDAQ-2008-057]

 
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 Governing 
Options Trading

July 3, 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 24, 2008, 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 substantially by Nasdaq. Nasdaq has designated the 
proposed rule change as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A) 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).
    \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 minor and technical corrections to its 
rules for the NASDAQ Options Market (``NOM'').\5\ The text of the 
proposed rule change is available at Nasdaq, the Commission's Public 
Reference Room, and http://www.complinet.com/nasdaq.
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    \5\ See Securities Exchange Act Release No. 57478 (March 12, 
2008), 73 FR 14521 (March 18, 2008) (order approving SR-NASDAQ-2007-
004 and 2007-080).
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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.

[[Page 39757]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On March 12, 2008, the Commission approved SR-NASDAQ-2007-004 and 
SR-NASDAQ-2007-080, proposals to create NOM. Nasdaq has identified six 
minor and technical modifications to the rules governing NOM.
    (1) Nasdaq is proposing to modify the Table of Contents for the 
options rules to conform it to the titles of the previously approved 
rules.
    (2) Nasdaq is proposing to modify Chapter IV, Section 3(i) to 
eliminate the limitation of underlying Fund Shares securities to those 
based on ``broad based'' indexes. Nasdaq is proposing to conform its 
rule to the rules of other options exchanges that permit them to trade 
Fund Shares (including exchange traded funds) based on any index.\6\ 
The four conditions for listing underlying Fund Shares set forth in 
Section 3(i) will remain unchanged. Nasdaq represents that it has the 
necessary systems capacity to support the additional trading of Fund 
Shares that could potentially be listed pursuant to this provision. In 
addition, Nasdaq believes that the capacity required is well within the 
projections that Nasdaq has provided to the Options Price Reporting 
Authority (``OPRA'') and for which OPRA has provisioned.
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    \6\ See, e.g., Philadelphia Stock Exchange Rule 1009.06.
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    To the extent that Nasdaq has incorporated by reference the rules 
of the Chicago Board Options Exchange, Incorporated pertaining to 
margin, position limits, and exercise limits, this proposal is not 
designed to change the application of those requirements. Members 
should be cognizant of the need to comply with those requirements and 
any amendments thereto as applied to different options classes 
(including options on Fund Shares).
    (3) Nasdaq is proposing to modify Chapter IV, Section 6, 
Commentary.01 and Commentary.02, which describe the ``$1 Strikes'' 
Pilot Program, to conform these provisions to the rules of other 
options exchanges. Specifically, Nasdaq proposes to expand and make 
permanent the $1 Strikes Pilot Program to allow it to select a total of 
10, instead of the current 5, individual stocks on which option series 
may be listed at $1 strike price intervals. Additionally, Nasdaq 
proposes to expand the price range on which it may list $1 strikes to 
$3-$50, instead of the current $3-$20. The proposed expanded and 
permanent $1 Strikes Price Program would be known as the ``$1 Strike 
Price Program.'' The existing restrictions on listing $1 strikes would 
continue to apply (i.e., no $1 strike price may be listed that is 
greater than $5 from the underlying stock's closing price in its 
primary market on the previous day or that would result in strike 
prices being $0.50 apart).
    This proposal is designed to respond to the requests of market 
participants for broader participation in the $1 Strikes Price Program 
on Nasdaq. Nasdaq represents that it has the necessary systems capacity 
to support the potential additional trading that might arise from the 
proposed modification of the $1 Strikes Price Program. In addition, 
Nasdaq believes that the capacity required is well within the 
projections that Nasdaq has provided to OPRA and for which OPRA has 
provisioned.
    (4) Nasdaq is proposing to modify Chapter V, Section 1(b)(vi) to 
eliminate cross-references to non-existent rule provisions. The cross-
references were improperly included because Nasdaq modeled its rules 
upon the rules of another exchange but did not copy the specific rules 
that were cross-referenced in Section 1(b)(vi). The specific provisions 
that were cited are not included in the Nasdaq rule manual because they 
pertain to a price improvement mechanism that exists on another market 
that does not exist on Nasdaq. Nasdaq is proposing instead to cross-
reference approved Nasdaq rules proscribing similar fraudulent 
misconduct that could occur on NOM.
    (5) Nasdaq is proposing to modify Chapter XI, Sections 23 (Brokers' 
Blanket Bond) and 25 (Telephone Solicitation) to cross-reference 
existing Nasdaq member conduct rules rather than maintain two separate 
rules governing the same conduct. Specifically, Nasdaq proposes to 
replace Section 23 by instead cross-referencing to NASDAQ Rule 3020, 
which currently requires Nasdaq members to post Fidelity Bonds. Nasdaq 
also proposes to replace Section 25 by cross-referencing current NASDAQ 
Rule 2212 which prescribes members' conduct for telephone solicitation.
    (6) Finally, Nasdaq is proposing to modify Chapter XIV, Section 10 
to clarify that when a halt involving an index option is lifted, 
trading resumes as specified in Chapter V, Section 4 (Resumption of 
Trading After A Halt) rather than as specified in Chapter VI, Section 
8. When Nasdaq first proposed its options trading rules, it planned to 
resume trading by operating a ``Halt Cross,'' which it originally 
described in Chapter VI, Section 8. Nasdaq later amended the proposed 
rules to remove the Halt Cross and to make clear that trading after a 
halt would ``resume'' rather than ``open.'' The cross-reference to the 
Halt Cross in Chapter XIV, Section 10 should have been removed, but was 
overlooked.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general and with Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed 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; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by this 
title matters not related to the purposes of this title or the 
administration of the exchange.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    The proposed changes are either technical in nature or are designed 
to conform the rules of Nasdaq's options market to the rules of other 
options markets or to conform Nasdaq's rules for options trading to its 
rules for equities trading. None of the proposed changes will impact 
the manner in which executions occur on NOM.

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 on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)

[[Page 39758]]

thereunder \10\ because the foregoing proposed rule: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not 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.\11\ The Commission 
expects Nasdaq to continue to monitor for options with little or no 
open interest and trading activity and to act promptly to delist such 
options. In addition, the Commission expects that Nasdaq will continue 
to monitor the trading volume associated with the additional options 
series listed as a result of this proposal and the effect of these 
additional series on market fragmentation and on the capacity of 
Nasdaq's, OPRA's, and vendors' automated systems.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ In addition, Rule 19b-4(f)(6)(iii) requires the self-
regulatory organization to give the Commission 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. Nasdaq has satisfied the five-
day pre-filing 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-2008-057 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-2008-057. 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 publicly available. All 
submissions should refer to File Number SR-NASDAQ-2008-057 and should 
be submitted on or before July 31, 2008.

    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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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15651 Filed 7-9-08; 8:45 am]

BILLING CODE 8010-01-P