[Federal Register Volume 80, Number 81 (Tuesday, April 28, 2015)]
[Notices]
[Pages 23625-23627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09765]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74784; File No. SR-NASDAQ-2015-034]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to NASDAQ Market Center Participant Registration and Sponsored
Access
April 22, 2015.
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 April 20, 2015, 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 and II, below, which Items have been prepared by 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 Rule 4611, entitled ``Nasdaq Market Center
Participant Registration'' and adopt a new Rule 4615, entitled
``Sponsored Participants.''
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
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
The purpose of the proposed rule change is to amend Rule 4611,
entitled ``Nasdaq Market Center Participant Registration'' to relocate
4611(d), pertaining to Sponsored Access, to a new Rule 4615, entitled
``Sponsored Participants,'' and adopt rule text similar to other
exchanges.\3\ The Exchange does not believe that this proposed rule
change will impact market participants currently accessing the System
pursuant to Rule 4611.
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\3\ The proposed rule text is similar to NASDAQ OMX PHLX LLC
(``Phlx'') Rule 1094, the International Securities Exchange LLC
(``ISE'') Rule 706, the Chicago Board Options Exchange Incorporated
(``CBOE'') Rule 6.20A and NYSE ARCA, Inc. (``NYSE Arca'') Rule 7.29.
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On January 13, 2010, the Commission approved the Exchange's current
rule.\4\
[[Page 23626]]
On November 3, 2010, the Commission adopted Rule 15c3-5 which governs
risk management controls by broker-dealers with market access.\5\ At
this time, the Exchange proposes to modify its current rule to conform
the rule text to that of other exchanges. Specifically, this proposed
rule change would conform rule text related to Sponsored Access by
eliminating provisions already covered by 15c3-5. The current rule
applies to members conducting either an equities or an options
business.
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\4\ Securities Exchange Act Release No. 61345 (January 13,
2010), 75 FR 3263 (January 20, 2010) (SR-NASDAQ-2008-104) (``NASDAQ
Sponsored Access Approval Order'').
\5\ Securities Exchange Act Release No. 63241, 75 FR 69792
(November 15, 2010).
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A Sponsored Participant is an entity with authorized electronic
access to the Exchange for the entry and execution of orders. A
Sponsored Participant trades under a Sponsoring Member's execution and
clearing identity pursuant to a sponsorship arrangement. The proposed
rule continues to require the Sponsoring Member to take responsibility
for the Sponsored Participant's activity on the Exchange.
Today, Nasdaq Rule 4611 provides that members that enter into an
arrangement with another person or entity to provide that person with
access to Nasdaq or otherwise allow such person to route its orders to
Nasdaq using the member's market participant identifier, to provide
such access are responsible for all trading conducted pursuant to that
arrangement to the same extent as trading directly conducted by the
member for customers. Consequently, the member is responsible for
implementing policies and procedures for supervising and monitoring
trading effected pursuant to the arrangement to ensure that it is in
compliance with all applicable federal securities laws and rules and
Exchange rules. A Sponsoring Member is required to execute and maintain
agreements with each Sponsored Participants and commit to various
Regulatory requirements and provided access to book and records and
financial information. Financial limits are imposed on Sponsored
Participants. Requirements are specified with respect to permissible
technology. Other arrangements with Third Party Providers must also be
documented and contain the commitments specified in Rule 4611(d)(3)(B).
Rule 4611(d)(4) specified financial controls to monitor and control the
Sponsored Access to limit financial exposure. Rule 4611(d)(5) specifies
regulatory control to effectively monitor and control compliance with
Regulatory Requirements.
The Exchange intends to remove current Rule 4611(d) and adopt a new
Rule 4515 with provisions related to Sponsored Access similar to that
of other exchanges.\6\ The new proposed rule text similarly permits
members conducting, either an equity or options business, to permit
authorized access to the Exchange by Sponsored Participants provided
they enter into a Sponsored Participant Agreement with the Exchange.
Similar to current Rule 4611(d), the Sponsored Participant and its
Sponsoring Member must enter into and maintain an agreement whereby the
Sponsoring Member would continue to be responsible for orders entered
into the System by the Sponsored Participant as well as all actions
taken by the Sponsored Participant. The Sponsored Member shall continue
to be bound to comply with Exchange' governance documents, Bylaws,
Rules and procedures. The Sponsored Participant is required to provide
a list of individuals authorized to access the Nasdaq Market Center on
behalf of the Sponsored Participant and provide training to these
individuals. The Sponsored Member must continue to restrict access to
unauthorized persons, take reasonable security precautions to prevent
unauthorized access, have in place adequate procedures and controls to
monitor use and access to the Nasdaq Stock Market and pay fees that are
owed. The Sponsoring Member must provide the Exchange with Notice of
Consent acknowledging its responsibility for the orders, executions and
actions of its Sponsored Participant at issue. The requirements
specified with new Rule 4615(d), other than the list of individuals and
the Notice of Consent, are currently required today in Rule 4611. The
Exchange's new Rule requires a list of individuals and the consent that
were previously not required by Rule. The rule text of current Rule
4611(d), pertaining to financial and regulatory controls, is being
removed. Members continue to be obligated to adhere to financial and
regulatory controls as specified in Rule 15c3-5. New Rule 4615
specifies the obligations of Sponsoring Members and Sponsoring
Participants relative to accessing the Nasdaq Market Center. This new
rule is consistent with rules of other exchanges.\7\ Market
participants are required to comply with Rule 15c3-5 in addition to
relevant exchange provisions where they are members.
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\6\ The proposed rule text is similar to NASDAQ OMX PHLX LLC
(``Phlx'') Rule 1094, the International Securities Exchange LLC
(``ISE'') Rule 706, the Chicago Board Options Exchange Incorporated
(``CBOE'') Rule 6.20A and NYSE ARCA, Inc. (``NYSE Arca'') Rule 7.29.
\7\ Id.
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The rule text is the current Rule 4611(d)(3) requires a Sponsoring
Member that provides Sponsored Access to execute and maintain
agreements with each Sponsored Participant containing the commitments
noted in Rule 4611(d)(3)(i) through (v). The proposed rule would
require the Sponsored Participant to enter into and maintain customer
agreements with one or more Sponsoring Members establishing proper
relationship(s) and account(s) through which the Sponsored Participant
may trade on the Nasdaq Market Center in accordance with provisions set
forth in Rule 4615(b)(ii). In addition, proposed Rule 4615(b)(ii)(D)
requires the Sponsored Participant to maintain, keep current and
provide to the Sponsoring Member a list of individuals authorized to
obtain access to the Nasdaq Market Center on behalf of the Sponsored
Participant. This list of authorized persons is not required under the
current rules.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \8\ in general, and furthers the objectives of Section
6(b)(5) of the Act \9\ in particular, 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,
by continuing to permit market participants gain access to a
marketplace. Specifically, the Exchange believes the proposed rule
change is consistent with the Section 6(b)(5) requirements that the
rules of an exchange be designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, 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
to perfect the mechanism for a free and open market and a national
market system, and, in general, to protect investors and the public
interest.\10\ Additionally, the Exchange believes the proposed rule
change is consistent with the Section 6(b)(5) requirement that the
rules of a national securities exchange be designed to not permit
unfair
[[Page 23627]]
discrimination between customer, issuers, brokers or dealers.\11\
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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The Commission adopted Rule 15c3-5 under the Act, which, among
other things, requires broker-dealers providing others with access to
an exchange or alternative trading system to establish, document, and
maintain a system of risk management controls and supervisory
procedures reasonably designed to manage the financial, regulatory, and
other risks of providing such access.\12\ Rule 15c3-5 requires members
to have in place certain pre-trade risk controls filters for sponsored
orders, prior to those order being sent to the Exchange to ensure that
regulatory and financial risk controls. Pursuant to Rule 15c3-5,
broker-dealers with market access are obligated to establish, document,
and maintain a system of risk management controls and supervisory
procedures reasonably designed to manage financial, regulatory, and
other risks of this business activity.
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\12\ See Securities Exchange Act Release No. 63241 (November 3,
2010), 75 FR 69792 (November 15, 2010).
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The Exchange believes that the changes proposed herein should
continue to offer market participants access to its marketplace. The
Exchange believes that proposed Rule 4615 continues to require members
to provide requisite information concerning sponsored arrangements,
which aids the Exchange's efforts to monitor and regulate Nasdaq's
markets and aids the prevention of fraudulent and manipulative
practices.
The Exchange believes that the proposed rule change is designed to
avoid unfair discrimination among members, as the proposed rule change
provides for the Exchange to impose requirements on members in an
objective manner. Finally, the proposed rule change will help remove
impediments to and promote a free and open market and a national market
system because it is consistent with rules in place at other exchanges
and imposes similar requirements on its members.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule for
Sponsored Access will continue to treat all members, equity and
options, in a uniform fashion. The proposed rule change seeks to
provide clear guidelines on the responsibilities of Sponsoring Members
that provide Sponsored Access as well as the responsibilities owed by
Sponsoring Members, with respect to Sponsored Participants, to the
Exchange.
The proposed rule change does not impose any undue burden on
competition, rather it seeks to enable market participants to gain
access to the marketplace.
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) of the Act \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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.
The Exchange has satisfied this requirement.
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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 change should be approved or
disapproved.
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-2015-034 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2015-034. 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 will also 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-2015-034 and should
be submitted on or before May 19, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09765 Filed 4-27-15; 8:45 am]
BILLING CODE 8011-01-P