
[Federal Register: February 4, 2010 (Volume 75, Number 23)]
[Notices]               
[Page 5822-5824]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe10-82]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61429; File No. SR-NASDAQ-2010-009]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change, 
as Modified by Amendment No. 1 Thereto, To Amend Its Financial 
Responsibility Rules To Reflect Changes to Corresponding FINRA Rules

January 27, 2010.
    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 January

[[Page 5823]]

21, 2010, 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 and II below, which Items 
have been prepared by the Exchange. The Exchange filed Amendment No. 1 
on January 22, 2010. The Exchange has designated the proposed rule 
change as constituting a non-controversial rule change 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, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing this proposed rule change to delete Rule 
3130 and IM-3130, to adopt a new Rule 4000A series, and to amend Rules 
9557 and 9559 to conform NASDAQ's rules to recent changes to the rules 
of the Financial Industry Regulatory Authority (``FINRA''). The 
Exchange will implement the proposed rule change thirty days after the 
date of the filing. The text of the proposed rule change is available 
at http://nasdaqomx.cchwallstreet.com, at the Exchange's principal 
office, and at 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, 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
    NASDAQ proposes certain conforming changes to its rules concerning 
members' financial responsibilities in light of changes made to the 
rules of FINRA. Many of NASDAQ's rules are based on rules of FINRA 
(formerly the National Association of Securities Dealers (``NASD'')). 
During 2008, FINRA embarked on an extended process of moving rules 
formerly designated as ``NASD Rules'' into a consolidated FINRA 
rulebook. In most cases, FINRA has renumbered these rules, and in some 
cases has substantively amended them. Accordingly, NASDAQ also has 
initiated a process of modifying its rulebook to ensure that NASDAQ 
rules corresponding to FINRA/NASD rules continue to mirror them as 
closely as practicable. In some cases, it is not possible for the rule 
numbers of NASDAQ rules to mirror corresponding FINRA rules, because 
existing or planned NASDAQ rules make use of those numbers. However, 
wherever possible, NASDAQ plans to update its rules to reflect changes 
to corresponding FINRA rules.
    This filing addresses changes to NASDAQ rules to conform them to 
FINRA's new consolidated financial responsibility rules.\4\ These rules 
establish criteria that promote the permanency of member's capital, 
requiring the review and approval of material financial transactions 
and establishing criteria intended to identify member firms approaching 
financial difficulty and to monitor their financial and operational 
condition. FINRA's new financial responsibility rules incorporate many 
of the provisions of the prior NASD and NYSE rules, but streamlined and 
reorganized the provisions. FINRA also tiered many provisions to apply 
only to those firms that clear or carry customer accounts.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 60933 (November 4, 
2009), 74 FR 58334 (November 12, 2009) (SR-FINRA-2008-067).
---------------------------------------------------------------------------

    Currently, NASDAQ Rule 3130 and IM-3130 incorporate by reference 
old NASD Rule 3130 and IM-3130. These rules concerned FINRA's authority 
to regulate the activities of members experiencing financial or 
operational difficulties. In adopting the new financial responsibility 
rules, FINRA eliminated NASD Rule 3130 and IM-3130, and replaced them 
with several rules that represented a consolidation of the old NASD and 
NYSE rules concerning financial responsibility. As a consequence, 
NASDAQ is also deleting Rule 3130 and IM-3130, and replacing them with 
new rules found under a new Rule 4000A series.\5\ These new NASDAQ 
rules incorporate by reference the analogous newly-adopted financial 
responsibility rules of FINRA found in FINRA Rules 4110, 4120, 4140 and 
4521. Consistent with current NASDAQ Rule 3130(b), NASDAQ is proposing 
to make clear in proposed Rules 4110A, 4120A and 4140A that references 
to Rule 9557 are to NASDAQ's Rule 9557.
---------------------------------------------------------------------------

    \5\ FINRA also eliminated NASD Rule 3131 and adopted FINRA Rule 
4130 in its place. NASD Rule 3131 concerned the regulation of 
members registered with the SEC pursuant to Section 15C of the 
Exchange Act. NASDAQ does not have such a class of membership, and 
as such, did not adopt NASD Rule 3131 and is not proposing to adopt, 
or incorporate by reference, FINRA Rule 4130.
---------------------------------------------------------------------------

    FINRA also revised FINRA Rule 9557 (Procedures for Regulating 
Activities Under FINRA Rules 4110, 4120 and 4130 Regarding a Member 
Experiencing Financial or Operational Difficulties) and FINRA Rule 9559 
(Hearing Procedures for Expedited Proceedings Under the Rule 9550 
Series). FINRA Rules 9557 and 9559 address service of notice to member 
firms that are experiencing financial or operational difficulties and 
the related hearing procedures. FINRA made a number of conforming 
revisions to Rules 9557 and 9559 in light of several of the new 
financial responsibility rules. NASDAQ Rules 9557 and 9559 mirror the 
analogous rules of FINRA in substance, with only minor technical 
differences.\6\ As such, NASDAQ is proposing to make the same changes 
Rules 9557 and 9559 as FINRA made to its Rules 9557 and 9559, with 
minor technical differences.
---------------------------------------------------------------------------

    \6\ For example, FINRA Rule 9557(c)(5) references ``FINRA 
staff'' whereas proposed NASDAQ Rule 9557(c)(5) references instead 
``Nasdaq Regulation staff.''
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\7\ in general, and with 
Sections 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 
changes will conform NASDAQ rules to recent changes made to 
corresponding FINRA rules, to promote application of consistent 
regulatory standards.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

[[Page 5824]]

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

    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\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under 19b-4(f)(6) normally does not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. The Commission believes that the 
earlier operative date is consistent with the protection of investors 
and the public interest because the proposed rule change permits Nasdaq 
to implement the rule without further delay and in time for the 
operative date of FINRA's financial responsibility rules.\12\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6). 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 Commission notes that NASDAQ has satisfied the five-
day pre-filing notice requirement.
    \12\ 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).
---------------------------------------------------------------------------

    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.\13\
---------------------------------------------------------------------------

    \13\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the proposed rule change to have been filed 
on January 21, 2010, the date Nasdaq filed Amendment No. 1.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2001-004 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 Number SR-NASDAQ-2010-009. 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 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 offices 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-2010-009, and 
should be submitted on or before February 25, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2331 Filed 2-3-10; 8:45 am]
BILLING CODE 8011-01-P

