[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76505-76506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30803]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63414; File No. SR-NASDAQ-2010-153]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by The NASDAQ Stock Market LLC 
To Clarify the Exclusion of Partial Trading Days From Certain 
Calculations Within the Investor Support Program

December 2, 2010.
    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 November 24, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``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 the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is filing with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') a proposal for the NASDAQ Options Market 
(``NOM'' or ``Exchange'') to clarify that partial trading days will not 
be counted toward the calculation of certain Investor Support Program 
(``ISP'') credit eligibility requirements pursuant to subsection (c)(2) 
of the rule.
    The text of the proposed rule change is available from NASDAQ's Web 
site at http://nasdaq.cchwallstreet.com/Filings/, at NASDAQ's principal 
office, 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, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rule 7014 to clarify that 
partial trading days will not be counted toward the calculation of 
certain ISP credit eligibility requirements pursuant to subsection 
(c)(2) of the rule, particularly the average daily number of shares of 
liquidity provided in orders entered by the member through its ISP-
designated ports and executed in the Nasdaq Market Center during the 
month.
    The Exchange established an Investor Support Program that enables 
NASDAQ members to earn a monthly fee credit for providing additional 
liquidity to NASDAQ and increasing the NASDAQ-traded volume of what are 
generally considered to be retail and institutional investor orders in 
exchange-traded securities (``targeted liquidity'').\3\ The goal of the 
ISP is to incentivize members to provide such targeted liquidity to the 
NASDAQ Market Center.\4\ The Exchange noted in the ISP Filing that 
maintaining and increasing the proportion of orders in exchange-listed 
securities executed on a registered exchange (rather than relying on 
any of the available off-exchange execution methods) would help raise 
investors' confidence in the fairness of their transactions and would 
benefit all investors by deepening NASDAQ's liquidity pool, supporting 
the quality of price discovery, promoting market transparency and 
improving investor protection.
---------------------------------------------------------------------------

    \3\ For a detailed description of the Investor Support Program, 
see Securities Exchange Act Release No. 63270 (November 8, 2010), 75 
FR 69489 (November 12, 2010) (NASDAQ-2010-141) (notice of filing and 
immediate effectiveness) (the ``ISP Filing'').
    \4\ The Commission has recently expressed its concern that a 
significant percentage of the orders of individual investors are 
executed at over the counter (``OTC'') markets, that is, at off-
exchange markets; and that a significant percentage of the orders of 
institutional investors are executed in dark pools. Securities 
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594 
(January 21, 2010) (Concept Release on Equity Market Structure, 
``Concept Release''). See also Mary L. Schapiro, Strengthening Our 
Equity Market Structure (Speech at the Economic Club of New York, 
Sept. 7, 2010) (``Schapiro Speech,'' available on the Commission Web 
site) (comments of Commission Chairman on what she viewed as a 
troubling trend of reduced participation in the equity markets by 
individual investors, and that nearly 30 percent of volume in U.S.-
listed equities is executed in venues that do not display their 
liquidity or make it generally available to the public).
---------------------------------------------------------------------------

    Partial trading days are not excluded from the average daily number 
of shares of liquidity provided and executed pursuant to certain ISP 
credit eligibility criteria in the rule and the Exchange now proposes a 
change to do so.\5\
---------------------------------------------------------------------------

    \5\ NASDAQ notes that exclusion of partial trading days would be 
consistent with how the Exchange treats partial trading days for 
tabulation of pricing tiers under Rule 7018(j).
---------------------------------------------------------------------------

    To further the ISP goal of attracting certain targeted retail and 
institution liquidity, the ISP limits ISP credit eligibility to 
targeted liquidity-enhancing orders in large part by: Establishing a 
monthly ISP Execution Ratio \6\ of 10 or above (subsection (c)(1)); and 
a monthly cap of 10 million for the average daily number of shares of 
liquidity provided in orders entered by the member through its ISP-
designated ports and executed in the NASDAQ Market Center during the 
month (subsection (c)(2)). As noted, in the ISP Filing the Exchange did 
not exclude partial trading days from the calculation of order numbers 
pursuant to subsection (c)(2) of the rule. The Exchange believes that 
the inclusion of partial trading days \7\ may serve to improperly skew 
the operative calculations. As such, the Exchange proposes to add new 
section (c)(3) that states that for purposes of determining the average 
daily number of shares of liquidity provided pursuant to subsection 
(c)(2) of this Rule, any day that the market is not open for the entire 
trading day will be excluded from such calculation.\8\
---------------------------------------------------------------------------

    \6\ The term ``ISP Execution Ratio'' is defined as: The ratio of 
(i) the total number of liquidity-providing orders entered by a 
member through its ISP-designated ports during the specified time 
period to (ii) the number of liquidity-providing orders entered by 
such member through its ISP-designated ports and executed (in full 
or partially) in the NASDAQ Market Center during such time period 
(provided that: (i) No order shall be counted as executed more than 
once; (ii) no Pegged Orders, odd-lot orders, or MIOC or SIOC orders 
shall be included in the tabulation; and (iii) no order shall be 
included in the tabulation if it executes but does not add 
liquidity). Rule 7014 (d)(3).
    \7\ A partial trading day may occur, as an example, immediately 
after the Thanksgiving holiday.
    \8\ There have been no partial trading days in the month of 
November previous to the date of submission of the filing and it 
would therefore not be retroactive in effect.

---------------------------------------------------------------------------

[[Page 76506]]

    The Exchange believes that the proposed change to the ISP, which 
will be equally applicable to all ISP participants, should be conducive 
to further enhancing the program's fairness and equitability.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\9\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which NASDAQ operates or controls, and 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, in general, to protect investors and the public interest. The rule 
change enhances the Investor Support Program, which helps to raise 
investors' confidence in the fairness of their transactions and benefit 
all investors by deepening NASDAQ's liquidity pool, supporting the 
quality of price discovery, promoting market transparency and improving 
investor protection.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\11\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2010-153 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-2010-153. 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 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 a.m. and 3 p.m. Copies of such 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-2010-153 and should be submitted on or before December 29, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30803 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P