[Federal Register Volume 78, Number 126 (Monday, July 1, 2013)]
[Notices]
[Pages 39432-39434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15701]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69858; File No. SR-NASDAQ-2013-085]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
amend Rule 4630 to Remove a Restriction on a Member Acting as a 
Registered Market Maker in a Commodity-Related Security

June 25, 2013.
    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 14, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
NASDAQ. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to amend NASDAQ Rule 4630(e), which governs the 
trading in Commodity-Related Securities.\3\ This rule change to amend 
NASDAQ Rule 4630(e) is consistent with a previous NYSE Arca, Inc. 
(``NYSE Arca'') rule change discussed herein.
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    \3\ The term ``Commodity-Related Security'' means a security 
that is issued by a trust, partnership, commodity pool or similar 
entity that invests, directly or through another entity, in any 
combination of commodities, futures contracts, options on futures 
contracts, forward contracts, commodity swaps, or other related 
derivatives, or the value of which is determined by the value of 
commodities, futures contracts, options on futures contracts, 
forward contracts, commodity swaps, or other related derivatives. 
See NASDAQ Rule 4630(c)(1).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, 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, the Exchange included statements

[[Page 39433]]

concerning the purpose of and basis for 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
    The Exchange proposes to amend NASDAQ Rule 4630(e) consistent with 
a rule change previously made by NYSE Arca in 2010 to its equities 
rules in an immediately effective rule filing (the ``NYSE Arca 
filing'').\4\ NASDAQ's proposed rule change is to remove the 
restriction that a member acting as a registered market maker in a 
Commodity-Related Security will not act or register as a market maker 
in any commodities, futures contracts, options on futures contracts, 
forward contracts, commodity swaps, or other related derivatives 
underlying such Commodity-Related Security.
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    \4\ See Securities Exchange Act Release No. 62013 (April 30, 
2010), 75 FR 25892 (May 10, 2010) (SR-NYSEArca-2010-35).
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    The NYSE Arca filing, in part, amended Commentary .01(a) to NYSE 
Arca Equities Rule 5.2(j)(6) (``Commentary .01(a)''). The portion of 
that amendment that is the focus of this filing affected NYSE Arca's 
listing standards for Commodity-Linked Securities. Specifically, the 
deletion included removing the prohibition that a registered market 
maker in Commodity-Linked Securities could not also act as a market 
maker or function in any capacity involving market-making 
responsibilities in the commodity reference asset or the components 
underlying that commodity reference asset. As amended, NASDAQ Rule 
4630(e) would similarly remove this prohibition, which states that a 
registered market maker in a Commodity-Related Security is prohibited 
from acting or registering as a market maker in any commodities, 
futures contracts, options on futures contracts, forward contracts, 
commodity swaps, or other related derivatives underlying such 
Commodity-Related Security.
    NASDAQ Rule 4630(e), as amended, would be similar to current 
Commentary .01(a) and would similarly continue to provide that a member 
acting as a registered market maker in a Commodity-Related Security 
must file with the Exchange's regulation department in a manner 
prescribed by such department and keep current a list identifying all 
accounts for trading in commodities, futures contracts, options on 
futures contracts, forward contracts, commodity swaps, or other related 
derivatives underlying such Commodity-Related Security, in which the 
market maker holds an interest, over which it may exercise investment 
discretion, or in which it shares in the profits and losses.
    Additionally, the amended NASDAQ rule would remain consistent with 
Commentary .01(a) since it would also continue to provide that no 
market maker shall trade in, or exercise investment discretion with 
respect to, such underlying commodities, futures contracts, options on 
futures contracts, forward contracts, commodity swaps, or other related 
derivatives, in an account in which a market maker, directly or 
indirectly, controls trading activities, or has an interest in the 
profits or losses thereof, that has not been reported as required by 
the rule.
    NASDAQ Rule 4630(e), as amended, also would remain consistent with 
NASDAQ Rules 4630(d) and (g) so that a member acting as a registered 
market maker in a Commodity-Related Security remains obligated to 
establish adequate information barriers when such market maker engages 
in inter-departmental communications. Members should refer to NASD/NYSE 
Joint Memo on Chinese Wall Policies and Procedures (NASD Notice to 
Members 91-45) for guidance on the ```minimum elements' of adequate 
Chinese Wall policy and procedures.'' \5\ For purposes of a Commodity-
Related Security, ``inter-departmental communications'' are defined to 
include communications to other departments within the same firm or the 
firm's affiliates that involve trading in commodities, futures 
contracts, options on futures contracts, forward contracts, commodity 
swaps, or other related derivatives underlying such Commodity-Related 
Security.\6\
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    \5\ See NASDAQ Rule 4630(d).
    \6\ See Securities Exchange Act Release No. 55386 (March 2, 
2007), 72 FR 10801 (March 2, 2007) (SR-NASDAQ-2007-016).
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    In the context of approving a similar proposal by NYSE Arca, the 
Commission stated that, ``while information barriers are not 
specifically required under the proposal, a [firm's] business model or 
business activities may dictate that an information barrier or a 
functional separation be part of the appropriate set of policies and 
procedures that would be reasonably designed to achieve compliance with 
applicable securities law and regulations, and with applicable Exchange 
rules.''
    The NASDAQ rules discussed above serve to ensure that market makers 
in a Commodity-Related Security would continue to have in place the 
appropriate policies and procedures with regard to also acting as a 
market maker in any commodities, futures contracts, options on futures 
contracts, forward contracts, commodity swaps, or other related 
derivatives underlying such Commodity-Related Security. This amendment 
does not lessen the protection of members from risks associated with 
integrated market making and any possible misuse of non-public 
information.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with Section 
6(b)(5) of the Act,\8\ 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.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    Specifically, NASDAQ believes that the change to remove the 
restriction in NASDAQ Rule 4630(e) that a member acting as a registered 
market maker in a Commodity-Related Security shall not act or register 
as a market maker in any commodities, futures contracts, options on 
futures contracts, forward contracts, commodity swaps, or other related 
derivatives underlying such Commodity-Related Security will remove 
impediments to and perfect the mechanism of a free and open market by 
providing the same flexibility to NASDAQ that is already available to 
NYSE Arca regarding the market maker activities for Commodity-Related 
Securities.
    Additionally, NASDAQ Rules 4630(d) and (g), in connection with 
NASDAQ Rule 4630(e), as amended, would continue to serve to prevent 
fraudulent and manipulative acts and practices, as well as to protect 
investors and the public interest from concerns that may be associated 
with integrated market making and any possible misuse of non-public 
information.

[[Page 39434]]

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, as amended. To the contrary, 
the Exchange believes the proposal is pro-competitive and is proposed 
as a competitive response to the NYSE Arca filing. The Exchange 
believes this proposed rule change, which governs the trading in 
Commodity-Related Securities is necessary to permit fair competition 
among the exchanges.

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

    No written comments were either solicited or 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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    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. 
The Exchange has provided the Commission 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.

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 email to [email protected]. Please include 
File Number SR-NASDAQ-2013-085 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-2013-085. This 
file number should be included on the subject line if email 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 10:00 a.m. and 
3:00 p.m. Copies of the 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-2013-085 and 
should be submitted on or before July 22, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15701 Filed 6-28-13; 8:45 am]
BILLING CODE 8011-01-P