
[Federal Register: June 10, 2008 (Volume 73, Number 112)]
[Notices]               
[Page 32776-32778]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jn08-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57910; File No. SR-NASDAQ-2008-049]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the Processing of Price To Comply Orders

June 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 May 30, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') 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 the Exchange. 
The Exchange has designated the proposed rule change as a ``non-
controversial'' rule change pursuant to

[[Page 32777]]

Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change 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

    The Exchange proposes to modify the processing of Price to Comply 
orders contained in Nasdaq Rule 4751(f)(7). The Exchange proposes to 
implement the proposed rule change on June 2, 2008. The text of the 
proposed rule change is available at Nasdaq, the Commission's Public 
Reference Room, and http://www.nasdaq.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, the Exchange 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. 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
    The Exchange proposes to modify the rule language pertaining to 
``Price to Comply Order'' as set forth in Rule 4751(f)(7) of the Nasdaq 
Rules. Price to Comply Orders were originally conceived and approved 
when Nasdaq integrated its three execution systems into the Nasdaq 
Single Book in 2007.\5\
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    \5\ See Securities Exchange Act Release No. 54155 (July 14, 
2006), 71 FR 41291 (July 20, 2006) (SR-NASDAQ-2006-001).
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    Price to Comply Orders were designed to allow members to quote 
aggressively and still comply with the locked and crossed markets 
provisions of Regulation NMS.\6\ Specifically, Price to Comply Orders 
are orders that, if, at the time of entry, would create a violation of 
Rule 610(d) of Regulation NMS by locking or crossing the protected 
quote of an external market or would cause an Order Protection Rule 
violation,\7\ the order will be converted by the System to a Non-
Displayed Order and re-priced to the current low offer (for bids) or to 
the current best bid (for offers). Such Non-Displayed Orders are 
cancelled by the System if the market moves through the price of the 
order after the order is accepted.
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    \6\ See 17 CFR 242.610(d).
    \7\ See 17 CFR 242.611.
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    In order to increase transparency and efficiency, Nasdaq is 
proposing to modify the display of Price to Comply Orders, while 
maintaining the current processing logic. Nasdaq will continue the 
current practice of posting Price to Comply orders using the current 
logic, buy orders are priced at the inside offer and sell orders are 
priced at the inside bid. Rather than convert a locking or crossing 
order to Non-Displayed, Nasdaq will display the order at the most 
aggressive price possible, one minimum price increment worse than the 
locking price. With the change, orders will now be displayed at a price 
which is either alone or will join the National Best Bid and Offer 
(``NBBO'').
    An example of how this will apply to orders is below: The National 
market is $9.97 x $10.00. A firm enters a Price to Comply order to buy 
at $10.01.
     Today, the order will reside on the Nasdaq book as non-
displayed for $10.00.
     With the proposed rule change, the order will reside on 
the Nasdaq book non-displayed for $10.00 and will also be displayed at 
$9.99. If a seller comes to Nasdaq at $9.99, the order will execute at 
$10.00.
    As noted in the proposed rule, Price to Comply Orders that would 
lock or cross the market will be displayed at the best price possible 
consistent with the provisions of Regulation NMS. The displayed and 
undisplayed price of an individual order may be priced one or more 
times depending upon the manner of order entry into the System. 
Specifically, if a member chooses to enter a Price to Comply Order via 
Nasdaq's RASH protocol, the order is priced upon entry and may be 
adjusted multiple times in response to changes in the prevailing NBBO 
to move the displayed price closer to the original entered price and 
display the best possible price consistent with the provisions of 
Regulation NMS. Each time the displayed price is adjusted, the order 
will receive a new timestamp for purposes of determining its price/time 
priority according to Nasdaq's existing processing rules. If a Price to 
Comply Order is entered via Nasdaq's OUCH protocol, the order will be 
repriced only upon entry. The order is not repriced in the event the 
prevailing NBBO changes.
    Nasdaq believes that the implementation of the aforementioned rule 
change modifying Nasdaq order display will enhance transparency and 
order execution opportunities on Nasdaq. Currently, all Price to Comply 
orders are non-displayed. In the new environment, since the order is 
displayed, it will be more transparent and better able to promote order 
interaction.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\8\ in general, and with Section 
6(b)(5) of the Act,\9\ 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. Nasdaq believes this 
proposal is consistent with the Act and specifically Rule 610 of 
Regulation NMS.
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    \8\ 15 U.S.C. 78f.
    \9\ 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. To the contrary, 
Nasdaq believes that its processing of Price to Comply Orders is 
designed to compete with orders already approved and in use at other 
national securities exchanges, enhancing competition between the 
exchanges.

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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section

[[Page 32778]]

19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\12\ 
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission 
designates the proposed rule change to be operative upon filing with 
the Commission.\14\
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    \12\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) 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. The Exchange has satisfied this notice requirement.
    \13\ Id.
    \14\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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-2008-049 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-2008-049. 
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 am and 3 pm. Copies of the filing 
also will be available for inspection and copying at the principal 
office of the Exchange. 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-2008-049 and should be submitted on or before July 1, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-12901 Filed 6-9-08; 8:45 am]

BILLING CODE 8010-01-P
