[Federal Register Volume 74, Number 127 (Monday, July 6, 2009)]
[Notices]
[Pages 32014-32015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15740]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60182; File No. SR-NASDAQ-2009-057]


 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Provide an Optional Anti-Internalization Functionality

June 26, 2009.
    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 23, 2009, 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 and 
II below, which Items have been prepared by NASDAQ. NASDAQ filed the 
proposed rule change as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
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.
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    \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)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes a rule change to provide an optional anti-
internalization functionality.
    The text of the proposed rule change is below. Proposed new 
language is underlined and proposed deletions are in brackets.
* * * * *
    4757. Book Processing
    (a) System orders shall be executed through the Nasdaq Book Process 
set forth below:
    (1)-(3) No Change.
    (4) Exception: Anti-Internalization--Market participants may direct 
that quotes/orders entered into the System not execute against quotes/
orders entered under the same MPID. In such a case, the later entered 
of the quote/orders will be cancelled back to the entering party.
* * * * *

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
    NASDAQ is proposing to provide a voluntary anti-internalization 
function. Under the proposal, market participants entering quotes/
orders under a specific market participant identifier (``MPID'') may 
voluntarily direct that they not execute against other quotes/orders 
entered into the System under the same MPID.
    Under the proposal, the System, if requested, will not execute 
quote/orders entered under the same MPID against each other. Instead, 
the System will execute against all eligible trading interest of other 
market participants, in time-priority, up to the point where it would 
interact with a resting order having the MPID and thereupon immediately 
cancel any remaining portion of the most recently entered of the two 
same-MPID quote/orders to its entering party.
    Anti-internalization functionality is designed to assist market 
participants in complying with certain rules and regulations of the 
Employee Retirement Income Security Act (``ERISA'') that preclude and/
or limit managing broker-dealers of such accounts from trading as 
principal with orders generated for those accounts. It can also assist 
market participants in reducing execution fees potentially resulting 
from the interaction of executable buy and sell trading interest from 
the same firm. Nasdaq notes that use of the functionality does not 
relieve or otherwise modify the duty of best execution owed to orders 
received from public customers. As such, market participants using 
anti-internalization functionality will need to take appropriate steps 
to ensure that public customer orders that do not execute because of 
the use of anti-internalization functionality ultimately receive the 
same execution price (or better) they would have originally obtained if 
execution of the order was not inhibited by the functionality.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(5) of the Act,\6\ 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. Nasdaq notes 
that similar functionality has previously approved for earlier Nasdaq 
market systems.\7\
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See SR-NASD-2003-039.
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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.

[[Page 32015]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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, or such shorter time as designated by the 
Commission. The Exchange has fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the benefits of this functionality 
to NASDAQ market participants expected from the rule change will not be 
delayed. The Commission believes that waiving the 30-day operative 
delay to make this functionality available without delay is consistent 
with the protection of investors and the public interest. Therefore, 
the Commission designates the proposal operative upon filing.\10\
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    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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 e-mail to [email protected]. Please include 
File Number SR-NASDAQ-2009-057 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-2009-057. 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 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 such filing also will be available for 
inspection and copying at the principal office of the 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-2009-057 and should 
be submitted on or before July 27, 2009.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-15740 Filed 7-2-09; 8:45 am]
BILLING CODE 8010-01-P