[Federal Register Volume 74, Number 196 (Tuesday, October 13, 2009)]
[Notices]
[Pages 52522-52523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-24515]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60794; File No. SR-NASDAQ-2009-084]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Potential Payment Amounts Available Under Nasdaq Rule 4626
October 6, 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 September 25, 2009, The NASDAQ Stock Market LLC (the ``Exchange'' or
``Nasdaq'') 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 Exchange. The
Exchange has designated the proposed rule change as effecting a change
described under Rule 19b-4(f)(6) under the Act,\3\ 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\ 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
The Exchange is filing with the Commission a proposed rule change
to modify potential payment amounts available under Nasdaq Rule 4626.
Nasdaq will implement the proposed rule change effective November 1,
2009. The text of the proposed rule change is below. Proposed new
language is in italics and proposed deletions are in brackets.
* * * * *
4626. Limitation of Liability
(a) No Change.
(b) Nasdaq, subject to the express limits set forth below, may
compensate users of the Nasdaq Market Center for losses directly
resulting from the systems' actual failure to correctly process an
order, Quote/Order, message, or other data, provided the Nasdaq Market
Center has acknowledged receipt of the order, Quote/Order, message, or
data.
[(1) For one or more claims made by a single market participant
related to the use of the Nasdaq Market Center on a single trading day,
Nasdaq's liability shall not exceed the larger of $100,000, or the
amount of any recovery obtained by Nasdaq under any applicable
insurance policy.]
[(2) For the aggregate of all claims made by all market
participants related to the use of the Nasdaq Market Center on a single
trading day, Nasdaq's liability shall not exceed the larger of
$250,000, or the amount of the recovery obtained by Nasdaq under any
applicable insurance policy.]
[(3)] (1) For the aggregate of all claims made by all market
participants related to the use of the Nasdaq Market Center during a
single calendar month, Nasdaq's liability shall not exceed the larger
of $500,000, or the amount of the recovery obtained by Nasdaq under any
applicable insurance policy.
[(4)] (2) In the event all of the claims arising out of the use of
the Nasdaq Market Center cannot be fully satisfied because in the
aggregate they exceed the maximum amount of liability provided for in
this Rule, then the maximum amount will be proportionally allocated
among all such claims arising [on a single trading day, or] during a
single calendar month [, as applicable].
[(5)] (3) All claims for compensation pursuant to this Rule shall
be in writing and must be submitted no later than [the opening of
trading] 12 p.m. ET on the next business day following the day on which
the use of the Nasdaq Market Center gave rise to such claims. Nothing
in this rule shall obligate Nasdaq to seek recovery under any
applicable insurance policy.
* * * * *
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
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. 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
Currently, Nasdaq provides a limited exception to its general
limitation of liability rules that allows for the payment of claims to
users for order processing failures in the Nasdaq Market Center. Nasdaq
proposes to modify its process for allocating such payments and extend
the time period for users to submit such claims. Under the proposal,
Nasdaq will eliminate the $100,000 and $250,000 daily caps on liability
and consider all such claims on a monthly basis subject to the already
existing $500,000 monthly liability cap. If the total amount of all
claims from all users in a calendar month exceeds the $500,000 monthly
liability cap, the $500,000 maximum monthly dollar amount will be
proportionally allocated among all such claims as set forth in the
current rule.
Nasdaq is also proposing to extend, until 12 noon ET on the next
business day following the day on which the use of the Nasdaq Market
Center gives rise to a claim, the time period during which claims
seeking compensation must be submitted.
As Nasdaq analyzes total eligible liability claims on a per-month
look-back basis, the proposal, in effect, would allow Nasdaq an
increased capability to compensate a market participant(s) up to the
monthly cap of $500,000 even though the losses occurred on a single day
or were across multiple days for a single participant. The expansion of
time to make such compensation claims likewise increases the ability of
market participants to submit claims in a timely manner. Finally,
Nasdaq notes that other market centers have rules in place to provide
[[Page 52523]]
limited compensation for system malfunctions.\4\
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\4\ See NYSE Arca Equities Rule 13.2 and ISE Rule 705.
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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. As Nasdaq
analyzes total eligible liability claims on a per-month look-back
basis, the proposal, in effect, would allow Nasdaq an increased
capability to compensate a market participant(s) up to the monthly cap
of $500,000 even though the losses occurred on a single day or were
across multiple days for a single participant. The expansion of time to
make such compensation claims likewise increases the ability of market
participants to submit claims in a timely manner.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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.
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 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act\7\ and Rule 19b-4(f)(6)\8\
thereunder.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
Nasdaq has satisfied this requirement.
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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 No. SR-NASDAQ-2009-084 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 No. SR-NASDAQ-2009-084. 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 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 No. SR-NASDAQ-2009-084 and should be
submitted on or before November 3, 2009.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24515 Filed 10-9-09; 8:45 am]
BILLING CODE 8011-01-P