[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62814-62815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24543]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70569; File No. SR-NASDAQ-2013-102]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change To Assume Operational Responsibility
for Certain Surveillance Activity Currently Performed by FINRA Under
the Exchange's Authority and Supervision
September 30, 2013.
On July 31, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to assume operational responsibility for certain
surveillance activity currently performed by the Financial Industry
Regulatory Authority (``FINRA'') under the Exchange's authority and
supervision. The proposed rule change was published for comment in the
Federal Register on August 16, 2013.\3\ The Commission received no
comments on the proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 70159 (August 12,
2013), 78 FR 50123 (August 16, 2013)(``Notice'').
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After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange \4\
and, in particular, the requirements of Section 6(b)(5) of the Act.\5\
Since it became a national securities exchange, NASDAQ has contracted
with FINRA through various regulatory services agreements to perform
certain surveillance and other regulatory functions on its behalf.\6\
NASDAQ Rule 0150 requires that, unless NASDAQ obtains prior Commission
approval, the regulatory functions subject to the regulatory services
agreement in effect at the time when NASDAQ became a national
securities exchange must continue to be performed by FINRA or an
affiliate thereof or by another independent self-regulatory
organization. NASDAQ now proposes to reallocate operational
responsibility from FINRA to NASDAQ Regulation for a limited number of
equities surveillance patterns and related review functions focused on:
(1) Manipulation patterns that monitor solely NASDAQ activity,
including patterns that monitor the Exchange's opening and closing
crosses and compliance with minimum bid listing requirements, and (2)
monitoring of compliance by member firms with elements of the
Commission's Regulation M \7\ and NASDAQ Rule 4619 compliance.
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\4\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\5\ 15 U.S.C. 78f(b)(5).
\6\ See Securities Exchange Act Release No. 53128 (January 13,
2006), 71 FR 3550 (January 23, 2006).
\7\ 17 CFR 242.100 et seq.
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In the Notice, the Exchange represents that it has the ability to
conduct the surveillances and regulatory functions that it will assume.
The Commission also notes that the Exchange represents that its
expertise in its own market structure, along with its existing real-
time monitoring of these activities, may enable the Exchange to better
detect improper activities on its market. Moreover, these patterns,
underlying rules, and analytical requirements are similar to patterns
that NASDAQ regulatory personnel already operate for affiliated options
markets. The Exchange represents that NASDAQ's MarketWatch group, which
already handles other real-time surveillance of the NASDAQ market,
should be able to adequately and effectively handle the surveillances
related to the instant proposed rule change.
In the Notice, the Exchange further represents that it will
continue to refer potentially violative conduct to FINRA for further
review and that FINRA will continue to perform most of the surveillance
activity for NASDAQ's equity markets. The Exchange also represents that
FINRA will continue to perform examination and enforcement work,
subject to NASDAQ's supervision and ultimate responsibility.
For the foregoing reasons, the Commission believes that the
proposed rule change is consistent with the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-NASDAQ-2013-102) be, and it
hereby is, approved.
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\8\ 15 U.S.C. 78s(b)(2).
\9\ 17 CFR 200.30-3(a)(12).
[[Page 62815]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24543 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P