Document ID: SEC-2007-0293-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-02-27T05:00Z

[Federal Register: February 27, 2007 (Volume 72, Number 38)]
[Notices]               
[Page 8818-8820]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe07-148]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55323; File No. SR-NASDAQ-2007-009]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Intermarket Sweep Orders

February 21, 2007.
    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 February 16, 2007, the NASDAQ Stock Market LLC (``Nasdaq'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II, below, which Items 
have been substantially prepared by Nasdaq. Nasdaq has designated the 
proposed rule change as constituting a ``non-controversial'' rule 
change under 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 the 
Substance of the Proposed Rule Change

    Nasdaq is proposing to modify Rule 4759 to permit Nasdaq members to 
submit Intermarket Sweep Orders (``ISOs'') to Nasdaq if they have 
simultaneously sent an ISO (or comparable order) for the full displayed 
size of the top of the book of every other ITS participant displaying a 
better-priced quotation. The text of the proposed rule change is 
available at Nasdaq, 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, 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
    As part of its rollout of its new Single Book execution system, 
Nasdaq is preparing to launch additional features of its compliance 
with Regulation NMS (``Reg. NMS''). Specifically, Nasdaq is preparing 
to accept ISOs. Like other markets, Nasdaq is proposing to accept ISOs 
prior to the Trading Phase Date, currently March 5, 2007, in order to 
ensure a smooth transition to the Single Book System functionality for 
compliance with Reg. NMS.
    Like other markets that have received approval to accept ISOs prior 
to the Trading Phase Date,\5\ Nasdaq seeks to

[[Page 8819]]

amend its rules to require member organizations that send ISOs to 
Nasdaq prior to the Trading Phase Date of Reg. NMS to simultaneously 
send an ISO (or comparable order) for the full displayed size of the 
top of the book of every other ITS participant displaying a better-
priced quotation. The proposed temporary rule is intended to mirror the 
requirement, which will be operative after the Trading Phase Date, that 
all incoming ISOs meet the requirements as described in Rule 600(b)(30) 
of Reg. NMS,\6\ and is designed to ensure that member organizations 
honor better-priced quotes of other ITS participants when submitting 
ISOs to Nasdaq prior to the Trading Phase Date. Nasdaq expects that 
this temporary rule will be in effect only until the Trading Phase 
Date, at which time it will be deleted from its rulebook. Nasdaq 
represents that, during the applicability of this rule, Nasdaq will 
conduct surveillance to assure that its Participants are in compliance 
with its rules on the use of ISOs.
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    \5\ See, e.g., Securities Exchange Act Release No. 55210 
(January 31, 2007), 72 FR 5777 (February 7, 2007) (SR-NYSE-2007-08). 
Nasdaq notes that its proposed rule change is identical to the New 
York Stock Exchange LLC's rule change.
    \6\ 17 CFR 242.600(b)(30).
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    In addition, Nasdaq notes that it has requested an exemption from 
certain provisions of the Intermarket Trading System Plan and Nasdaq 
Rules 4756 and 4759 to allow Nasdaq to implement the Reg. NMS 
compliance aspects of the Single Book rollout prior to the Trading 
Phase Date.
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 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. The proposed rule change is 
designed to permit Nasdaq to implement functionality required for 
compliance with Regulation NMS in an orderly fashion and to permit 
Nasdaq members to gain experience with that functionality prior to its 
full implementation.
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    \7\ 15 U.S.C. 78f.
    \8\ 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, as amended.

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\ because 
the proposal 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 if consistent with the protection of investors and the public 
interest.\11\ Nasdaq has requested that the Commission waive the 30-day 
operative delay and designate the proposed rule change to be operative 
upon filing with the Commission. The Commission hereby grants the 
request.\12\ The Commission believes that such waiver is consistent 
with the protection of investors and the public interest because 
immediate effectiveness of the proposed rule change will assist Nasdaq 
in its efforts to ensure that its member organizations honor better-
priced quotations of other ITS participants when they send ISOs to 
Nasdaq for execution and also will allow Nasdaq members to gain 
experience with the new ISO order type and functionality prior to its 
full implementation on the Trading Phase date. In addition, the 
Commission notes that the Nasdaq's proposal is based upon a proposed 
rule change recently adopted by the New York Stock Exchange LLC.\13\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ Rule 19b-4(f)(6)(iii) under the Act 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. Nasdaq 
has satisfied the pre-filing requirement.
    \12\ For purposes only of waiving the 30-day operative delay of 
the proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \13\ See supra note 5 (citing to SR-NYSE-2007-08).
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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.\14\
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    \14\ See 15 U.S.C. 78s(b)(3)(C).
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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-2007-009 in the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2007-009. 
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 Room. Copies of the 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

[[Page 8820]]

information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2007-009 and should be submitted 
on or before March 20, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3293 Filed 2-26-07; 8:45 am]

BILLING CODE 8010-01-P