Document ID: SEC-2009-1460-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2009-10-13T04:00Z

[Federal Register: October 13, 2009 (Volume 74, Number 196)]
[Notices]               
[Page 52522-52523]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13oc09-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60794; File No. SR-NASDAQ-2009-084]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Potential Payment Amounts Available Under Nasdaq Rule 4626

October 6, 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 September 25, 2009, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``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 the Exchange. The 
Exchange has designated the proposed rule change as effecting a change 
described 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 Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposed rule change 
to modify potential payment amounts available under Nasdaq Rule 4626. 
Nasdaq will implement the proposed rule change effective November 1, 
2009. The text of the proposed rule change is below. Proposed new 
language is in italics and proposed deletions are in brackets.
* * * * *
4626. Limitation of Liability
    (a) No Change.
    (b) Nasdaq, subject to the express limits set forth below, may 
compensate users of the Nasdaq Market Center for losses directly 
resulting from the systems' actual failure to correctly process an 
order, Quote/Order, message, or other data, provided the Nasdaq Market 
Center has acknowledged receipt of the order, Quote/Order, message, or 
data.
    [(1) For one or more claims made by a single market participant 
related to the use of the Nasdaq Market Center on a single trading day, 
Nasdaq's liability shall not exceed the larger of $100,000, or the 
amount of any recovery obtained by Nasdaq under any applicable 
insurance policy.]
    [(2) For the aggregate of all claims made by all market 
participants related to the use of the Nasdaq Market Center on a single 
trading day, Nasdaq's liability shall not exceed the larger of 
$250,000, or the amount of the recovery obtained by Nasdaq under any 
applicable insurance policy.]
    [(3)] (1) For the aggregate of all claims made by all market 
participants related to the use of the Nasdaq Market Center during a 
single calendar month, Nasdaq's liability shall not exceed the larger 
of $500,000, or the amount of the recovery obtained by Nasdaq under any 
applicable insurance policy.
    [(4)] (2) In the event all of the claims arising out of the use of 
the Nasdaq Market Center cannot be fully satisfied because in the 
aggregate they exceed the maximum amount of liability provided for in 
this Rule, then the maximum amount will be proportionally allocated 
among all such claims arising [on a single trading day, or] during a 
single calendar month [, as applicable].
    [(5)] (3) All claims for compensation pursuant to this Rule shall 
be in writing and must be submitted no later than [the opening of 
trading] 12 p.m. ET on the next business day following the day on which 
the use of the Nasdaq Market Center gave rise to such claims. Nothing 
in this rule shall obligate Nasdaq to seek recovery under any 
applicable insurance policy.
* * * * *

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. The Exchange 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
    Currently, Nasdaq provides a limited exception to its general 
limitation of liability rules that allows for the payment of claims to 
users for order processing failures in the Nasdaq Market Center. Nasdaq 
proposes to modify its process for allocating such payments and extend 
the time period for users to submit such claims. Under the proposal, 
Nasdaq will eliminate the $100,000 and $250,000 daily caps on liability 
and consider all such claims on a monthly basis subject to the already 
existing $500,000 monthly liability cap. If the total amount of all 
claims from all users in a calendar month exceeds the $500,000 monthly 
liability cap, the $500,000 maximum monthly dollar amount will be 
proportionally allocated among all such claims as set forth in the 
current rule.
    Nasdaq is also proposing to extend, until 12 noon ET on the next 
business day following the day on which the use of the Nasdaq Market 
Center gives rise to a claim, the time period during which claims 
seeking compensation must be submitted.
    As Nasdaq analyzes total eligible liability claims on a per-month 
look-back basis, the proposal, in effect, would allow Nasdaq an 
increased capability to compensate a market participant(s) up to the 
monthly cap of $500,000 even though the losses occurred on a single day 
or were across multiple days for a single participant. The expansion of 
time to make such compensation claims likewise increases the ability of 
market participants to submit claims in a timely manner. Finally, 
Nasdaq notes that other market centers have rules in place to provide

[[Page 52523]]

limited compensation for system malfunctions.\4\
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    \4\ See NYSE Arca Equities Rule 13.2 and ISE Rule 705.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(5) of the Act,\6\ 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. As Nasdaq 
analyzes total eligible liability claims on a per-month look-back 
basis, the proposal, in effect, would allow Nasdaq an increased 
capability to compensate a market participant(s) up to the monthly cap 
of $500,000 even though the losses occurred on a single day or were 
across multiple days for a single participant. The expansion of time to 
make such compensation claims likewise increases the ability of market 
participants to submit claims in a timely manner.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act\7\ and Rule 19b-4(f)(6)\8\ 
thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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 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 this 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 No. SR-NASDAQ-2009-084 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-2009-084. 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 No. SR-NASDAQ-2009-084 and should be 
submitted on or before November 3, 2009.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24515 Filed 10-9-09; 8:45 am]

BILLING CODE 8011-01-P