Document ID: SEC-2008-0143-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-01-29T05:00Z

[Federal Register: January 29, 2008 (Volume 73, Number 19)]
[Notices]               
[Page 5248-5249]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29ja08-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57175; File No. SR-NASDAQ-2008-006)

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify the Recipients of Certain Risk Disclosures

January 18, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 17, 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 prepared substantially by Nasdaq. Nasdaq filed 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 it 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 amend Rule 4631 to clarify to whom members must 
provide disclosures pursuant to the Rule. Nasdaq proposes to implement 
the proposed rule change immediately.
    The text of the proposed rule change is available at http://nasdaq.complinet.com
, the principal office of Nasdaq, and the 

Commission's Public Reference Room.

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. 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 amend Rule 4631, which covers the disclosures 
required of members when accepting certain orders for trades outside 
the regular market session, to clarify to whom members must provide 
these disclosures. Rule 4631 requires members to provide certain risk 
disclosures to non-members prior to accepting orders for the pre- or 
post-market sessions. The term ``non-member'' may be interpreted to 
include a broker-dealer who is not a member of Nasdaq. In the approval 
order for the Rule,\5\ however, the discussion of Nasdaq's purpose for 
Rule 4631 is framed in terms of disclosures to ``non-member 
customers.'' Nasdaq Rule 0120(g) defines the term ``customer'' to 
exclude a broker or dealer.\6\ The differing terminology used in the 
Rule and in the approval order has caused some confusion among members.
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    \5\ Securities Exchange Act Release No. 56985 (December 18, 
2007), 72 FR 73388 (December 27, 2007) (SR-NASDAQ-2007-098).
    \6\ Rule 0120(g) states: The term ``customer'' shall not include 
a broker or dealer.
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    Nasdaq notes that, as currently written, Rule 4631 could be 
interpreted to require members to make the risk disclosures to non-
member broker-dealers, but not to member broker-dealers. Nasdaq 
believes that such a technical distinction is not meaningful nor was it 
Nasdaq's intention to make such a distinction when proposing the Rule. 
By clarifying that the Rule applies to members' disclosures to 
customers, as defined by Rule 0120(g), Nasdaq would avoid further 
member confusion surrounding the reading of the Rule and its associated 
approval order, while remaining consistent with the rule's intent.
    Accordingly, Nasdaq believes it is necessary to amend Rule 4631 to 
make clear that the disclosures required by the Rule apply to members 
when accepting orders from customers, not ``non-members.''
2. Statutory Basis
    The proposed rule change is consistent with the provisions of 
Section 6 of the Act,\7\ in general, and with Sections 6(b)(1) and 
(b)(5) of the Act,\8\ in particular, in that the proposal enables 
Nasdaq to be so organized as to have the capacity to be able to carry 
out the purposes of the Act and to comply with and enforce compliance 
by

[[Page 5249]]

members and persons associated with members with provisions of the Act, 
the rules and regulations thereunder, and self-regulatory organization 
rules, and 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. 
Nasdaq believes that the clarification of Rule 4631 is needed to avoid 
further confusion surrounding its applicability. Currently, members may 
be interpreting the Rule inconsistently, thus providing disclosures to 
parties that were not contemplated as requiring the protections of the 
Rule. Nasdaq believes that the proposed amendment will ensure that 
members are aware of their obligations under the rule and thus foster 
consistent member compliance.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(1) and (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 impose 
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 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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. 
The Commission has determined to waive the five-day pre-filing 
period in this case.
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    Nasdaq has requested that the Commission waive the 30-day pre-
operative period. The Commission believes that conforming the language 
of the Rule to Nasdaq's intent in establishing it is consistent with 
the protection of investors and the public interest. The Rule was 
designed to ensure that customers receive appropriate disclosures of 
the risks of trading outside of regular trading hours, not non-member 
broker-dealers. The Commission hereby grants Nasdaq's request and 
designates the proposal as operative upon filing.\11\
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    \11\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 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 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-2008-006 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2008-006. 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, 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-2008-006 and should be submitted on or before 
February 19, 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,
Deputy Secretary.
 [FR Doc. E8-1463 Filed 1-28-08; 8:45 am]

BILLING CODE 8011-01-P