Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Federal Register: May 22, 2008 (Volume 73, Number 100)
Notices
Page 29800-29802
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DOCID:fr22my08-95
SECURITIES AND EXCHANGE COMMISSION
Release No. 34-57822; File No. SR-NASDAQ-2008-045
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Modify the Opening of Trading on the NASDAQ Options Market
May 15, 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 13, 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, II, and III below, which Items have been substantially prepared by the
Exchange. Nasdaq has filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(5) thereunder,\4\ which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\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)(5).
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
Nasdaq proposes to modify the opening of trading on the NASDAQ
Options Market (``NOM'') as set forth in Chapter VI, Section 8 of the
Nasdaq Rules governing options trading. The text of the proposed rule change is available at Nasdaq, the Commission's Public Reference Room, and http://nasdaq.complinet.com.
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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.
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Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change 1. Purpose
Nasdaq proposes to modify Chapter VI, Section 8 of the rules governing NOM, and in particular governing the opening of trading in that market. Since Nasdaq launched NOM on March 31, 2008, Nasdaq has monitored the operation of the market to identify instances where market efficiency can be enhanced. Nasdaq believes that the opening of the market, while currently quite effective, can be further enhanced.
Nasdaq's current opening processes are set to occur at a fixed time
(9:30 a.m.) even when it appears that NOM would open at a price that is away from the prevailing market. Deviation from the prevailing market is somewhat reconciled by automated adjustments that occur within NOM's execution engine, preventing unacceptable harm to investors or NOM participants.
Nonetheless, Nasdaq has determined that the opening of options trading can be enhanced by delaying the opening until such time as the execution of the Opening Cross or, where no Opening Cross will occur, the opening print is in line with the overall marketplace.
Specifically, Nasdaq proposes to enhance its opening process by (1) delaying the Opening Cross in the event that after the execution of the
Opening Cross the NOM best bid and offer would be outside certain pre- determined threshold amounts, and (2) delaying the opening of trading if after the opening print the NOM best bid and offer would be outside the same pre-determined threshold amounts in instances where there is insufficient interest available to initiate the Opening Cross.
Nasdaq believes this proposed modification is superior to the current process of opening of trading at a fixed time at a price that is adjusted to fall within the pre-determined threshold. Delaying the opening will allow NOM participants time to enter additional liquidity into the system, resulting in a more efficient opening process and reducing potential volatility around the open. If such a delay were to occur, the Opening Cross, and thus regular market trading, would not commence until such time as it is determined that the width requirements can be met. Nasdaq believes this amendment will increase efficiency of trading around the open. Nasdaq plans to use the threshold amounts prescribed in the obvious error guidelines set forth in Chapter V, Sec. 6 of the NOM rules. 2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6(b) of the Act,\5\ in general, and with
Section 6(b)(5) of the Act,\6\ in particular, in that it is designed 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 proposal is consistent with this standard because the proposed rule change is designed to improve execution quality at the critical opening of the market.
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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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. To the contrary, Nasdaq believes that by enhancing NOM's opening of trading, the proposed rule change will require competing markets to improve their opening processes and thereby enhance competition between the markets.
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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.
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Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) have the effect of limiting the access to or availability of an existing order entry or trading system of the Exchange, the foregoing rule change has become effective immediately pursuant to Section 19(b)(3)(A)(iii) of the Act \7\ and
Rule 19b-4(f)(5) thereunder.\8\ 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.
\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(f)(5).
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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-2008-045 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-045. 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
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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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the 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-2008-045 and should be submitted on or before
June 12, 2008.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\9\
\9\ 17 CFR 200.30-3(a)(12).
Florence E. Harmon,
Deputy Secretary.
FR Doc. E8-11426 Filed 5-21-08; 8:45 am
BILLING CODE 8010-01-P
