
[Federal Register: February 25, 2009 (Volume 74, Number 36)]
[Notices]               
[Page 8599-8600]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25fe09-108]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59421; File No. SR-NASDAQ-2009-005]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Accelerated Approval of Proposed Rule Change as Modified by 
Amendment No. 1 Thereto To Reduce Certain Order Exposure Periods on the 
NASDAQ Options Market From Three Seconds to One Second

February 19, 2009.

I. Introduction

    On January 23, 2009, The NASDAQ Stock Market LLC ``NASDAQ''), filed 
with the Securities and Exchange Commission (``Commission'') pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to reduce 
certain order exposure periods on the NASDAQ Options Market (``NOM'') 
from three seconds to one second. NASDAQ filed Amendment 1 to the 
proposed rule change on January 27, 2009. The proposed rule change, as 
modified by Amendment No. 1, was published for comment in the Federal 
Register on February 3, 2009.\3\ The Commission received no comments on 
the proposal. This order approves the proposed rule change, as modified 
by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59310 (January 28, 
2009), 74 FR 5952.
---------------------------------------------------------------------------

II. Description of the Proposal

    The purpose of the proposed rule change is to reduce the exposure 
time during which Options Participants \4\ may not execute as principal 
against orders they represent as agent from three seconds to one 
second. Specifically, NASDAQ proposes to

[[Page 8600]]

amend Chapter VII, Section 12, which currently provides that an Options 
Participant may not execute as principal against orders on the limit 
order book they represent as agent unless: (a) Agency orders are first 
exposed on NOM for at least three seconds, or (b) the Options 
Participant has been bidding or offering on NOM for at least three 
seconds prior to receiving an agency order that is executable against 
such bid or offer. In addition, Options Participants must expose orders 
they represent as agent for at least three seconds before such orders 
may be automatically executed, in whole or in part, against orders 
solicited from members and non-member broker-dealers to transact with 
such orders. Under the proposal, these exposure periods would be 
reduced to one second.
---------------------------------------------------------------------------

    \4\ Pursuant to Chapter I, Section 1(a)(40) of the NOM Rules, 
the term ``Options Participant'' means a firm, or organization that 
is registered with the Exchange for purposes of participating in 
options trading on NOM as a ``Nasdaq Options Order Entry Firm'' or 
``Nasdaq Options Market Maker''.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After carefully reviewing the proposed rule change, the Commission 
finds that the proposal is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.) \5\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\6\ 
which, among other things, requires that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating 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 Commission also finds that the proposed rule 
change is consistent with Section 6(b)(8) of the Act,\7\ which requires 
that the rules of an exchange not impose any burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act.
---------------------------------------------------------------------------

    \5\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Commission believes that, given the electronic environment of 
NASDAQ, reducing each of these exposure periods from three seconds to 
one second could facilitate the prompt execution of orders, while 
continuing to provide market participants with an opportunity to 
compete for exposed bids and offers. To substantiate that NASDAQ 
members could receive, process, and communicate a response back to 
NASDAQ within one second, NASDAQ stated that it distributed a survey to 
all NOM Options Participants. NASDAQ stated that the survey results 
indicated that it typically takes not more than 250 milliseconds for 
members to receive, process, and respond to broadcast messages that 
would be affected by the proposal. NASDAQ also stated that all eight 
members that responded to the survey indicated that reducing the 
exposure period to one second would not impair their ability to 
participate in orders affected by the proposal. Based on NASDAQ's 
statements regarding the survey results, the Commission believes that 
market participants should continue to have opportunities to compete 
for exposed bids and offers within a one second exposure period. 
Accordingly, the Commission believes that it is consistent with the Act 
for NASDAQ to reduce the order handling and exposure times discussed 
herein from three seconds to one second.
    The Commission finds good cause to approve the proposed rule change 
prior to the thirtieth day after publication for comment in the Federal 
Register. The Commission notes that the proposed rule change was 
noticed for a fifteen-day comment period, and no comments were 
received. The Commission believes that NASDAQ has provided reasonable 
support for its belief that its market participants would continue to 
have an opportunity to compete for exposed bids and offers if the 
exposure periods were reduced to one second as proposed. Finally, the 
Commission also notes that the proposed rule change is similar to 
recently approved proposals submitted by the Chicago Board Options 
Exchange, Incorporated, the International Securities Exchange, LLC, and 
NASDAQ OMX PHLX, Inc.\8\ Therefore, the Commission finds good cause, 
consistent with Section 19(b)(2) of the Act,\9\ to approve the proposed 
rule change on an accelerated basis.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release Nos. 58088 (July 2, 
2008), 73 FR 39747 (July 10, 2008) (SR-CBOE-2008-16); 58224 (July 
25, 2008), 73 FR 44303 (July 30, 2008) (SR-ISE-2007-94); and 59081 
(December 11, 2008), 73 FR 76432 (December 16, 2008).
    \9\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NASDAQ-2009-005), as 
modified by Amendment No. 1, be, and hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-4038 Filed 2-24-09; 8:45 am]

BILLING CODE 8011-01-P
