
[Federal Register Volume 78, Number 51 (Friday, March 15, 2013)]
[Notices]
[Pages 16549-16551]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05983]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69108; File No. SR-NASDAQ-2013-037]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Clarify the Maximum Time Afforded to a Market Maker To Meet Its 
Market Making Obligations Upon Rejoining the Market After an Excused 
Withdrawal Under Rule 4619

March 11, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on February 25, 2013, The NASDAQ Stock Market LLC 
(``NASDAQ'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the self-
regulatory organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify what is the maximum time afforded 
to a market maker to rejoin the market after an excused withdrawal 
under Rule 4619 [sic]. The Exchange will implement the proposed changes 
as soon as the rule change is operative.
    The text of the proposed rule change is below. Proposed new 
language is in italics.
* * * * *

4619. Withdrawal of Quotations and Passive Market Making

    (a)-(f) No change.
    (g) A Nasdaq Market Maker that wishes to reinstate its quotations 
in a security after an excused withdrawal pursuant to Rule 4619 shall 
contact Nasdaq to notify Nasdaq of its intention to be reinstated. Upon 
confirmation by Nasdaq that the market maker is reinstated, the market 
maker will have no longer than ten minutes to meet its market making 
obligations under Rule 4613.
* * * * *

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 is proposing to amend Rule 4619 to clarify the maximum 
permissible time afforded an Exchange market maker in which to resume 
making a market in a security after an excused withdrawal under the 
rule. When a NASDAQ market maker is ready to resume market making after 
an excused withdrawal, it informs NASDAQ of its intent to resume. 
NASDAQ in turn confirms receipt of such notice and updates the market 
maker's registration status in the relevant security or securities.\4\ 
If the market maker uses NASDAQ's automated quotation refresh 
functionality (``AQR''),\5\ NASDAQ will, concurrent with the receipt of 
notice, commence automated quoting thereby satisfying the member firm's 
market making obligations [sic]. A market maker not using AQR is 
responsible for reentering the market upon providing notice to NASDAQ 
of its intent to do so. Until November 2012, nearly all NASDAQ market 
makers used AQR and the majority of NASDAQ market makers continue to 
use AQR at this time.
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    \4\ A request to reinstate market making after an excused 
withdrawal may be submitted to NASDAQ by phone, email, or facsimile.
    \5\ Rules 4613(a)(2)(F) and (G). NASDAQ adopted AQR as part of 
an effort to address issues uncovered by the aberrant trading that 
occurred on May 6, 2010. AQR is designed to help Exchange market 
makers meet their market making obligations for each stock in which 
they are registered to continuously maintain a two-sided quotation 
within a designated percentage of the National Best Bid and National 
Best Offer, as appropriate. See Securities Exchange Act Release No. 
63255 (November 5, 2010), 75 FR 69484 (November 12, 2010) (SR-
NASDAQ-2010-115, et al.).
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    NASDAQ is retiring AQR effective February 25, 2013,\6\ and is 
requiring

[[Page 16550]]

market makers to either use the Market Maker Peg Order \7\ or develop 
an alternative means to meet their market making obligations. As a 
consequence, market makers have begun to opt out of AQR and NASDAQ 
anticipates many more will do so as the AQR sunset date approaches. For 
the handful of market makers that do not use AQR currently, NASDAQ 
provides a reasonable time for the market maker to rejoin the market 
after providing notice of its intent to do so. NASDAQ monitors this 
timeframe and in no case has a market maker taken longer than ten 
minutes to rejoin the market after providing notice.
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    \6\ Securities Exchange Act Release No. 68654 (January 15, 
2013), 78 FR 4536 (January 22, 2013) (SR-NASDAQ-2013-007).
    \7\ Rule 4751(f)(15).
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    A consequence of AQR's retirement is that, thereafter, all NASDAQ 
market makers will no longer automatically resume market making 
concurrent with notice to the Exchange of their intent to do so after 
an excused withdrawal under Rule 4619. Accordingly, the Exchange is 
proposing to amend Rule 4619 to provide Exchange market makers with up 
to ten minutes to rejoin the market after NASDAQ confirms that the 
market maker is reinstated in the security or securities subject to an 
excused withdrawal under Rule 4619 [sic]. After expiration of the ten-
minute period, a market maker's obligations under Rule 4613 will apply 
[sic]. NASDAQ believes that ten minutes is a reasonable amount of time 
for a market maker to rejoin the market, and that it provides a 
definite time after which a market maker's obligations under Rule 4613 
begin. NASDAQ notes that, for some market makers, the ten minute time-
frame proposed herein may be more than adequate to allow them to rejoin 
the market after receiving confirmation from NASDAQ. NASDAQ believes 
that small market makers may not have as efficient and automated 
processes to rejoin the market as compared to larger market making 
firms. Consequently, the proposed ten minute timeframe is reasonably 
adequate for such small market makers, but not excessive. Moreover, in 
light of the fact that AQR was widely-adopted by NASDAQ market makers 
and its imminent retirement, the process proposed herein will be new to 
the vast majority of Exchange market makers.
    NASDAQ stresses that the proposed timeframe sets a maximum time 
allowable for a market maker to reenter the market, and that it expects 
member firms to reenter at the earliest time possible after receiving 
confirmation from NASDAQ that it is reinstated. Once the market maker 
reenters the market its obligations under Rule 4613 begin, even if the 
time is less than ten minutes from receiving notice from NASDAQ. The 
Exchange will monitor use of this timeframe and may adjust the length 
of time if it appears to be excessive.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\8\ which requires the rules of an exchange to promote just 
and equitable principles of trade, 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 
Exchange believes that the proposed rule meets these requirements in 
that it provides Exchange market makers with clarity on the maximum 
permissible time for a market maker reenter the market after receiving 
confirmation of its re-registration from the Exchange. With this 
information, Exchange market makers are aware of when their obligations 
under Rule 4613 begin and thus can avoid inadvertent violation of 
Exchange rules.
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    \8\ 15 U.S.C. 78f(b)(5).
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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 necessary or 
appropriate in furtherance of the purposes of the Act, as amended. To 
the contrary, the proposed rule change will promote competition by 
providing further clarity to Exchange market making obligations, thus 
allowing market makers to make more informed market making decisions 
and ensuring all Exchange market makers are aware of when their Rule 
4613 obligations begin. Moreover, by placing an express limit on the 
time afforded to market makers to rejoin the market, market makers will 
be incentivized to adopt procedures to timely rejoin the market.

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 after the date of the filing, 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) 
\10\ thereunder.
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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) 
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 Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay.\11\ The Commission believes that waiver of the 
operative delay is consistent with the protection of investors and the 
public interest. Such waiver would allow the proposed rules to become 
operative at the same time as NASDAQ retires its AQR functionality. 
Without waiving the operative 30-day operative delay, Exchange market 
makers may not be able to automatically resume market making concurrent 
with its notice to NASDAQ of its intent to do so. Accordingly, the 
Commission designates the proposal operative upon filing.\12\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change'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 summarily may temporarily suspend 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-037 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.


[[Page 16551]]


All submissions should refer to File Number SR-NASDAQ-2013-037. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. 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-2013-037 and should 
be submitted on or before April 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05983 Filed 3-14-13; 8:45 am]
BILLING CODE 8011-01-P


