[Federal Register Volume 73, Number 50 (Thursday, March 13, 2008)]
[Notices]
[Pages 13596-13597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4984]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57452; File No. SR-NASDAQ-2008-004]


 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Order Granting Approval of Proposed Rule Change Related to Supplemental 
Market Participant Identifiers

March 7, 2008.

I. Introduction

    On January 9, 2008, 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 make permanent the pilot program that allows 
market makers and Electronic Communication Networks (``ECNs'') to 
obtain supplemental market participant identifiers (``MPIDs''). In 
addition, Nasdaq proposes to remove any restrictions on the number of 
MPIDs a market participant may request for displaying attributable 
quotes or orders. The proposed rule change was published for comment in 
the Federal Register on February 1, 2008.\3\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change.
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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. 57212 (January 28, 
2008), 73 FR 6229 (``Notice'').
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II. Description of Proposal

    Nasdaq proposes to make permanent the pilot program incorporated in

[[Page 13597]]

Nasdaq Rule 4613(a)(2) that allows market makers and ECNs to obtain 
supplemental MPIDs. The rule has operated as a temporary pilot since it 
was first adopted in June 2003 and since that time, Nasdaq continued to 
apply the procedures set forth in the rule and the related interpretive 
material.\4\ In accordance with the pilot program, market makers and 
ECNs can be issued a maximum of nine supplemental MPIDs. Nasdaq 
proposes to remove the current restriction that limits the number of 
supplemental MPIDs that market makers and ECNs can request for 
displaying attributable quotes or orders. In addition, Nasdaq proposes 
to remove IM-4613, which sets forth the procedures for allocating 
supplemental MPIDs.
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    \4\ See Securities Exchange Act Release No. 47954 (May 30, 
2003), 68 FR 34017 (June 6, 2003). See also IM-4613--Procedures for 
Allocation of Second Displayable MPIDs. According to Nasdaq, the 
pilot inadvertently was permitted to lapse on November 30, 2006.
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    Nasdaq's proposal will prohibit market makers and ECNs from using a 
supplemental MPID to violate Exchange or Commission rules.\5\ If it is 
determined that a supplemental MPID is being used improperly, Nasdaq 
will withdraw its grant of the supplemental MPID for all purposes for 
all securities. In addition, if a market maker or ECN fails to fulfill 
the conditions appurtenant to its primary MPID (e.g., by being placed 
into an unexcused withdrawal), it will not be permitted to use any 
supplemental MPID for any purpose in that security.
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    \5\ Members will be prohibited from using a supplemental MPID to 
avoid their Manning obligations under IM-2110-2, best execution 
obligations under Nasdaq Rule 2320, or their obligations under the 
Commission's Order Handling Rules. Members will be required to 
continue to comply with the firm quote rule, the OATS rules, and the 
Commission's order routing and execution quality disclosure rules. 
See Notice, supra note 3, at 6229-30.
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III. Discussion and Commission Findings

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange.\6\ In 
particular, the Commission believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\7\ in that it is designed 
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.
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    \6\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal to make permanent the 
pilot program that allows market makers and ECNs to obtain supplemental 
MPIDs is consistent with the Act. The proposal should provide market 
participants with flexibility to organize diverse order flows from 
customers and to route orders from different trading desks and units 
within their organizations.
    The Exchange also proposes to remove any restrictions on the number 
of MPIDs a market participant may request for displaying attributable 
quotes or orders. According to Nasdaq, this restriction was adopted due 
to technological limitations. The Exchange has represented that this 
technological limitation no longer exists.\8\ In addition, Nasdaq 
proposes to remove IM-4613, which sets forth the procedures for 
allocating supplemental MPIDs. This method of allocating supplemental 
MPIDs was necessary due to the limited number of available MPIDs. The 
removal of Nasdaq's technological limitation on the number of MPIDs for 
a given security makes the procedures unnecessary.
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    \8\ See Notice, supra note 3, at 6229.
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    The Commission notes that Nasdaq represents that a supplemental 
MPID would be withdrawn for all purposes and for all securities if it 
were to be determined that such supplemental MPID was being used 
improperly.\9\ In addition, Nasdaq represents that a market maker or 
ECN will be prohibited from using any supplemental MPID for any purpose 
in a security, if it fails to fulfill the conditions appurtenant to its 
primary MPID for such security.\10\ In the Commission's view, these 
procedures should ensure that market makers and ECNs utilize MPIDs in 
accordance with Exchange rules.
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    \9\ See Notice, supra note 3, at 6230.
    \10\ Id.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NASDAQ-2008-004) be, and it 
hereby is, approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12 \
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-4984 Filed 3-12-08; 8:45 am]
BILLING CODE 8011-01-P