Document ID: SEC-2008-1116-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-08-11T04:00Z

[Federal Register: August 11, 2008 (Volume 73, Number 155)]
[Notices]               
[Page 46668-46670]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au08-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58282; File No. SR-NASDAQ-2008-067]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Letters of Guarantee for Options Participants

August 1, 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 July 29, 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 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 is filing a proposed rule change for the NASDAQ Options 
Market (``NOM'') to modify Chapter VII, Section 8 of its options rules 
to require Letters of Guarantee for each options participant, rather 
than each market maker.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.\4\
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    \4\ Changes are marked to the rule text that appears in the 
electronic manual of The NASDAQ Stock Market, LLC found at http://
nasdaq.cchwallstreet.com/.
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* * * * *

Chapter VII Market Participants

* * * * *

Sec. 8 Letters of Guarantee

    (a) Required of Each Options Participant [Market Maker]. No Options 
Participant [Market Maker] shall make any transactions on NOM unless a 
Letter of Guarantee has been issued for such Participant by a Clearing 
Participant and filed with Nasdaq Regulation, and unless such Letter of 
Guarantee has not

[[Page 46669]]

been revoked pursuant to paragraph (c) of this Section.
    (b)-(c) No change.
* * * * *

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 has determined that requiring a Letter of Guarantee for each 
options participant would decrease the individual risk exposure of each 
options participant as well as the systemic risk of exposure to 
Nasdaq's options marketplace. Requiring a Letter of Guarantee of market 
makers provides a measure of protection but it does not provide 
protection with respect to options participants that enter orders and 
liquidity into the market in the same fashion as market makers but to a 
lesser degree. It will also provide incremental protection to clearing 
brokers by providing advanced notice and requiring acknowledgment that 
a new firm will be using their clearing services.
    Nasdaq's determination is based in part on conversations with 
current options participants as well as potential options participants. 
It is also based on Rule 3.28 of the Chicago Board Options Exchange 
which requires letters of guarantee for all trading activity on that 
exchange regardless of whether the firm is a registered specialist or 
not. In addition, all options participants are required by Chapter VI, 
Section 15 of Nasdaq's options rules to document its relationship with 
a clearing firm by submitting one of several documents, including a 
Letter of Guarantee.
    Nasdaq will work with its membership to ensure full and timely 
compliance with this proposed rule change. While many members are 
familiar with Letters of Guarantee through, for example, compliance 
with Chapter VI, Section 15 or their membership at other exchanges, 
Nasdaq will provide all members 45 days from the date of filing of the 
proposed rule change to comply with the new requirement. In addition, 
Nasdaq will issue an Options Trader Alert to members explaining the new 
requirement and providing notice of the compliance date.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 
1934, in general and with Section 6(b)(5) of the Act, in particular, in 
that it is designed 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. The proposed changes are 
consistent with the statute in that they are designed to facilitate 
transactions in options on the Nasdaq Options Market by minimizing 
counter-party risk and encouraging participants to provide liquidity in 
Quarterly Options Series.

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. To the contrary, the proposal 
is designed to enhance competition and is based upon the rules of 
another national securities exchange that trades standardized options.

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 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) of the Act \5\ and Rule 19b-
4(f)(6) thereunder.\6\ Nasdaq will make the proposed rule change 
operative 45 days from the date of filing this proposal.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6).
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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-2008-067 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-2008-067. 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

[[Page 46670]]

Nasdaq's principal office. 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-2008-067, and should be submitted on or before September 2, 
2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-18383 Filed 8-8-08; 8:45 am]

BILLING CODE 8010-01-P