[Federal Register Volume 78, Number 126 (Monday, July 1, 2013)]
[Notices]
[Pages 39432-39434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15701]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69858; File No. SR-NASDAQ-2013-085]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
amend Rule 4630 to Remove a Restriction on a Member Acting as a
Registered Market Maker in a Commodity-Related Security
June 25, 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 June 14, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
NASDAQ. 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\ 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
NASDAQ proposes to amend NASDAQ Rule 4630(e), which governs the
trading in Commodity-Related Securities.\3\ This rule change to amend
NASDAQ Rule 4630(e) is consistent with a previous NYSE Arca, Inc.
(``NYSE Arca'') rule change discussed herein.
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\3\ The term ``Commodity-Related Security'' means a security
that is issued by a trust, partnership, commodity pool or similar
entity that invests, directly or through another entity, in any
combination of commodities, futures contracts, options on futures
contracts, forward contracts, commodity swaps, or other related
derivatives, or the value of which is determined by the value of
commodities, futures contracts, options on futures contracts,
forward contracts, commodity swaps, or other related derivatives.
See NASDAQ Rule 4630(c)(1).
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The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaq.cchwallstreet.com, at the principal
office of the Exchange, 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
[[Page 39433]]
concerning the purpose of and basis for 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
The Exchange proposes to amend NASDAQ Rule 4630(e) consistent with
a rule change previously made by NYSE Arca in 2010 to its equities
rules in an immediately effective rule filing (the ``NYSE Arca
filing'').\4\ NASDAQ's proposed rule change is to remove the
restriction that a member acting as a registered market maker in a
Commodity-Related Security will not act or register as a market maker
in any commodities, futures contracts, options on futures contracts,
forward contracts, commodity swaps, or other related derivatives
underlying such Commodity-Related Security.
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\4\ See Securities Exchange Act Release No. 62013 (April 30,
2010), 75 FR 25892 (May 10, 2010) (SR-NYSEArca-2010-35).
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The NYSE Arca filing, in part, amended Commentary .01(a) to NYSE
Arca Equities Rule 5.2(j)(6) (``Commentary .01(a)''). The portion of
that amendment that is the focus of this filing affected NYSE Arca's
listing standards for Commodity-Linked Securities. Specifically, the
deletion included removing the prohibition that a registered market
maker in Commodity-Linked Securities could not also act as a market
maker or function in any capacity involving market-making
responsibilities in the commodity reference asset or the components
underlying that commodity reference asset. As amended, NASDAQ Rule
4630(e) would similarly remove this prohibition, which states that a
registered market maker in a Commodity-Related Security is prohibited
from acting or registering as a market maker in any commodities,
futures contracts, options on futures contracts, forward contracts,
commodity swaps, or other related derivatives underlying such
Commodity-Related Security.
NASDAQ Rule 4630(e), as amended, would be similar to current
Commentary .01(a) and would similarly continue to provide that a member
acting as a registered market maker in a Commodity-Related Security
must file with the Exchange's regulation department in a manner
prescribed by such department and keep current a list identifying all
accounts for trading in commodities, futures contracts, options on
futures contracts, forward contracts, commodity swaps, or other related
derivatives underlying such Commodity-Related Security, in which the
market maker holds an interest, over which it may exercise investment
discretion, or in which it shares in the profits and losses.
Additionally, the amended NASDAQ rule would remain consistent with
Commentary .01(a) since it would also continue to provide that no
market maker shall trade in, or exercise investment discretion with
respect to, such underlying commodities, futures contracts, options on
futures contracts, forward contracts, commodity swaps, or other related
derivatives, in an account in which a market maker, directly or
indirectly, controls trading activities, or has an interest in the
profits or losses thereof, that has not been reported as required by
the rule.
NASDAQ Rule 4630(e), as amended, also would remain consistent with
NASDAQ Rules 4630(d) and (g) so that a member acting as a registered
market maker in a Commodity-Related Security remains obligated to
establish adequate information barriers when such market maker engages
in inter-departmental communications. Members should refer to NASD/NYSE
Joint Memo on Chinese Wall Policies and Procedures (NASD Notice to
Members 91-45) for guidance on the ```minimum elements' of adequate
Chinese Wall policy and procedures.'' \5\ For purposes of a Commodity-
Related Security, ``inter-departmental communications'' are defined to
include communications to other departments within the same firm or the
firm's affiliates that involve trading in commodities, futures
contracts, options on futures contracts, forward contracts, commodity
swaps, or other related derivatives underlying such Commodity-Related
Security.\6\
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\5\ See NASDAQ Rule 4630(d).
\6\ See Securities Exchange Act Release No. 55386 (March 2,
2007), 72 FR 10801 (March 2, 2007) (SR-NASDAQ-2007-016).
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In the context of approving a similar proposal by NYSE Arca, the
Commission stated that, ``while information barriers are not
specifically required under the proposal, a [firm's] business model or
business activities may dictate that an information barrier or a
functional separation be part of the appropriate set of policies and
procedures that would be reasonably designed to achieve compliance with
applicable securities law and regulations, and with applicable Exchange
rules.''
The NASDAQ rules discussed above serve to ensure that market makers
in a Commodity-Related Security would continue to have in place the
appropriate policies and procedures with regard to also acting as a
market maker in any commodities, futures contracts, options on futures
contracts, forward contracts, commodity swaps, or other related
derivatives underlying such Commodity-Related Security. This amendment
does not lessen the protection of members from risks associated with
integrated market making and any possible misuse of non-public
information.
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\7\ in general, and with Section
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.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(5).
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Specifically, NASDAQ believes that the change to remove the
restriction in NASDAQ Rule 4630(e) that a member acting as a registered
market maker in a Commodity-Related Security shall not act or register
as a market maker in any commodities, futures contracts, options on
futures contracts, forward contracts, commodity swaps, or other related
derivatives underlying such Commodity-Related Security will remove
impediments to and perfect the mechanism of a free and open market by
providing the same flexibility to NASDAQ that is already available to
NYSE Arca regarding the market maker activities for Commodity-Related
Securities.
Additionally, NASDAQ Rules 4630(d) and (g), in connection with
NASDAQ Rule 4630(e), as amended, would continue to serve to prevent
fraudulent and manipulative acts and practices, as well as to protect
investors and the public interest from concerns that may be associated
with integrated market making and any possible misuse of non-public
information.
[[Page 39434]]
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, as amended. To the contrary,
the Exchange believes the proposal is pro-competitive and is proposed
as a competitive response to the NYSE Arca filing. The Exchange
believes this proposed rule change, which governs the trading in
Commodity-Related Securities is necessary to permit fair competition
among the exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or 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)(ii) of the Act \9\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(a)(ii).
\10\ 17 CFR 240.19b-4(f)(6).
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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
The Exchange has provided 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.
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-2013-085 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-2013-085. 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-2013-085 and
should be submitted on or before July 22, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15701 Filed 6-28-13; 8:45 am]
BILLING CODE 8011-01-P