[Federal Register Volume 78, Number 47 (Monday, March 11, 2013)]
[Notices]
[Pages 15392-15394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05537]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69039; File No. SR-NASDAQ-2013-031]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Amend the Attestation
Requirement of Rule 4780 To Allow a Retail Member Organization To
Attest That ``Substantially All'' Orders Submitted to the Retail Price
Improvement Program Will Qualify as ``Retail Orders''
March 5, 2013.
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 February 19, 2013, 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 prepared by the self-regulatory
organization. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is filing with the Securities and Exchange Commission
(``SEC'' or ``Commission'') a proposed rule change amend the
attestation requirement of NASDAQ Rule 4780 to allow a Retail Member
Organization (``RMO'') to attest that ``substantially all'' orders
submitted to the Retail Price Improvement Program (the ``Program'')
will qualify as ``Retail Orders.'' NASDAQ Rule 4780(b)(2)(C) currently
requires RMOs to attest that ``any order'' will so qualify, effectively
preventing certain significant retail brokers from participating in the
Program due to operational constraints.
The text of the proposed rule change is available from NASDAQ's Web
site at http://nasdaq.cchwallstreet.com/Filings/, at NASDAQ'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, NASDAQ 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. NASDAQ 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 is proposing an amendment to NASDAQ Rule 4780(b)(2)(C)
to provide that an RMO may attest that ``substantially all'' of the
orders it submits to the Program are Retail Orders, as defined in
NASDAQ Rule 4780(a)(2), replacing the requirement that the RMO must
attest
[[Page 15393]]
that all submitted orders qualify as Retail Orders.\3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 68747 (January 28,
2013) (SR-NYSE-2013-08) (substantially similar to the filing at
hand).
---------------------------------------------------------------------------
Under current NASDAQ Rule 4780, a member organization wishing to
become an RMO must submit: (A) An application form; (B) supporting
documentation; and (C) an attestation that ``any order'' submitted as a
Retail Order will qualify as such under NASDAQ Rule 4780.\4\
---------------------------------------------------------------------------
\4\ A Retail Order is defined in NASDAQ Rule 4780(a)(2), in
part, as ``an agency or riskless principal order that originates
from a natural person and is submitted to NASDAQ by a Retail Member
Organization, provided that no change is made to the terms of the
order with respect to price (except in the case that a market order
is changed to a marketable limit order) or side of market and the
order does not originate from a trading algorithm or any other
computerized methodology.''
---------------------------------------------------------------------------
Accordingly, the Exchange is proposing a de minimis relaxation of
the RMO attestation requirement in order to accommodate these system
limitations and expand the access of retail customers to the benefits
of the Program. Specifically, as proposed an RMO would be permitted to
send de minimis quantities of agency orders to the Exchange as Retail
Orders that cannot be explicitly attested to under existing definitions
of the Program.
The Exchange will issue an Equity Trader Alert to make clear that
the ``substantially all'' language is meant to permit the presence of
only isolated and de minimis quantities of agency orders that do not
qualify as Retail Orders that cannot be segregated from Retail Orders
due to systems limitations. In this regard, an RMO would need to
retain, in its books and records, adequate substantiation that
substantially all orders sent to the Exchange as Retail Orders met the
strict definition and that those orders not meeting the strict
definition are agency orders that cannot be segregated from Retail
Orders due to system limitations, and are de minimis in terms of the
overall number of Retail Orders sent to the Exchange.\5\
---------------------------------------------------------------------------
\5\ The Financial Industry Regulatory Authority, Inc., on behalf
of the Exchange, will review a member organization's compliance with
these requirements.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\6\ In particular, the
Exchange believes the proposed change furthers the objectives of
Section 6(b)(5) of the Act,\7\ in that it 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices because, while
the proposed rule change represents a relaxation of the attestation
requirements, the change is a de minimis relaxation that still requires
the RMO applicant to attest that ``substantially all'' of its orders
will qualify as Retail Orders. The slight relaxation will allow enough
flexibility to accommodate system limitations while still ensuring that
only a fractional amount of orders submitted to the Program would not
qualify as Retail Orders.
The Exchange believes that the proposed rule change promotes just
and equitable principles of trade because it will ensure that similarly
situated member organizations who have only slight differences in the
capability of their systems will be able to equally benefit from the
Program.
The Exchange believes that the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it will allow member organizations,
who are concerned about its system limitations not allowing 100%
certification that submitted orders are Retail Orders, to still
participate in the Program. By removing impediments to participation in
the Program, the proposed change would permit expanded access of retail
customers to the price improvement and transparency offered by the
Program and thereby potentially stimulate further price competition for
retail orders.
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. The Exchange believes that the
amendment, by increasing the level of participation in the Program,
will increase the level of competition around retail executions such
that retail investors would receive better prices than they currently
do on the Exchange and potentially through bilateral internalization
arrangements. The Exchange believes that the transparency and
competitiveness of operating a program such as the Retail Price
Improvement Program on an exchange market would result in better prices
for retail investors, and benefits retail investors by expanding the
capabilities of Exchanges to encompass practices currently allowed on
non-Exchange venues.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
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 [email protected]. Please include
File Number SR-NASDAQ-2013-031 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-2013-031. 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
[[Page 15394]]
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
such 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 publicly available. All submissions should refer to
File Number SR-NASDAQ-2013-031 and should be submitted on or before
April 1, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05537 Filed 3-8-13; 8:45 am]
BILLING CODE 8011-01-P