80 FR 73011 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Sponsored Access
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 225 (November 23, 2015)
Federal Register Volume 80, Issue 225 (November 23, 2015)
| Page Range | 73011-73015 | |
| FR Document | 2015-29713 |
[Federal Register Volume 80, Number 225 (Monday, November 23, 2015)] [Notices] [Pages 73011-73015] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-29713] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76449; File No. SR-NASDAQ-2015-140] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Sponsored Access November 17, 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 November 4, 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, II, and III, 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. --------------------------------------------------------------------------- \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 proposes to amend Nasdaq Rule 4615 entitled, ``Sponsored Participants'' to: (1) Define the term ``Sponsored Access'' and ``Customer Agreement;'' (2) specify the requirements to comply with Rule 15c3-5 under the Securities Exchange Act of 1934 (``Market Access Rule''); and (3) remove the requirement that each Sponsored Participant and each Sponsoring Member must enter into certain agreements with the Exchange. 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. [[Page 73012]] 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 filing is to amend Nasdaq Rule 4615 entitled, ``Sponsored Participants'' to: (1) Define the term ``Sponsored Access,'' and specifically stating that compliance with the Market Access Rule is required, and defining ``Customer Agreement'' to refer to the agreement that must be executed between the Sponsoring Participant and the Sponsoring Member; (2) specify the requirements to comply with the Market Access Rule; and (3) remove the requirement that each Sponsored Participant and each Sponsoring Member must enter into certain agreements with the Exchange to streamline its rule and remove unnecessarily burdensome notice requirements to the Exchange. Defining Sponsored Access A Sponsored Participant may be a member or a non-member of the Exchange, such as an institutional investor, that gains access to the Exchange \3\ and trades under a Sponsoring Member's execution and clearing identity pursuant to sponsorship arrangements currently set forth in Nasdaq Rule 4615. The Exchange is proposing to define the term ``Sponsored Access'' to clarify the type of market access arrangement that is subject to Nasdaq Rule 4615. The Exchange proposes to amend Nasdaq Rule 4615(a) to add the following definition, ``Sponsored Access shall mean an arrangement whereby a member permits its customers to enter orders into the Exchange's System that bypass the member's trading system and are routed directly to the Exchange, including routing through a service bureau or other third party technology provider.'' This definition was derived from the Commission's description of Sponsored Access used in the release approving the Market Access Rule.\4\ The Exchange believes that defining Sponsored Access in Nasdaq Rule 4615 will provide market participants with greater clarity concerning Sponsored Access and their obligations with respect to this type of access arrangement. --------------------------------------------------------------------------- \3\ For example, a broker-dealer may allow its customer--whether an institution such as a hedge fund, mutual fund, bank or insurance company, an individual, or another broker-dealer--to use the broker- dealer's MPID, account or other mechanism or mnemonic used to identify a market participant for the purposes of electronically accessing the Exchange. \4\ The Market Access Rule, 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. See Securities Exchange Act Release No. 63241 (November 3, 2010), 75 FR 69792 (November 15, 2010). --------------------------------------------------------------------------- Defining Customer Agreement The Exchange proposes to amend Nasdaq Rule 4615(b)(i) to define the agreement that Sponsored Participants must enter into and maintain with one or more Sponsoring Members to establish proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Nasdaq Market Center, as a ``Customer Agreement.'' Market Access Rule Pursuant to Nasdaq Rule 4615, the Sponsoring Member is responsible for the activities of the Sponsored Participant. Sponsored Participants are required to have procedures in place to comply with Exchange rules, and the Sponsoring Member takes responsibility for the Sponsored Participant's activity on the Exchange. Members may have multiple Sponsored Access relationships in place at a given time. The Exchange's examination program assesses compliance with Nasdaq Rule 4615, among other rules.\5\ The Exchange proposes to specifically enumerate within Nasdaq Rule 4615 the member's obligation to comply with the Market Access Rule, which members are currently required to comply with respecting [sic] market access. The Exchange believes that specifying the obligation to comply with the Market Access Rule specifically will reinforce that Nasdaq Rule 4615 presupposes member compliance with the Market Access Rule. --------------------------------------------------------------------------- \5\ The Exchange has a Regulatory Services Agreement with Financial Industry Regulatory Authority (``FINRA'') to conduct regulatory examinations, among other obligations. --------------------------------------------------------------------------- Elimination of Certain Contract Requirements At this time, the Exchange proposes to remove requirements to submit certain forms to the Exchange. There are three forms that are currently required by Nasdaq Rule 4615: (1) An agreement between the Sponsored Participant and the Exchange (``Exchange Agreement''); (2) a User Agreement between the Sponsored Participant and its Sponsoring Member that is provided to the Exchange; and (3) a Notice of Consent provided to the Exchange by the Sponsoring Member. NASDAQ Rule 4615 will continue to require that each Sponsored Participants enter into a Customer Agreement with each Sponsoring member to establish proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Nasdaq Market Center. These Customer Agreement(s) must incorporate the Sponsorship Provisions set forth in paragraph (ii) in Nasdaq Rule 4615.\6\ The Customer Agreement remains unaffected by this rule proposal. Also, the Exchange is proposing to amend Nasdaq Rule 4615 to identify the aforementioned agreement as the ``Customer Agreement.'' --------------------------------------------------------------------------- \6\ The Customer Agreement is required to include, among other language, all orders entered by the Sponsored Participants and any person acting on behalf of or in the name of such Sponsored Participant and any executions occurring as a result of such orders are binding in all respects on the Sponsoring Member and, also, Sponsoring Member is responsible for any and all actions taken by such Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant. --------------------------------------------------------------------------- Today, only members may request connectivity to the Exchange. A member may obtain one or more ports for the purpose of providing Sponsored Access. If separate ports are requested by a member for the purpose of providing Sponsored Access, the member must request those ports from the Exchange and the member is responsible for the Sponsored Participant's activity on the Exchange. In all circumstances, the Exchange will only permit members to request connectivity to the market and the member is responsible for all customer orders submitted through the member's port. First, the Exchange believes that completing and submitting the Exchange Agreement, User Agreement and Notice of Consent is unnecessarily burdensome in light of the current structure in place at the Exchange. Only members may request connectivity to the Exchange by contacting Nasdaq [[Page 73013]] Subscriber Services. Such connection by the member requires approval by the Exchange for the purpose of testing as well as other relevant information sharing with the Exchange by the member to obtain a port. The Exchange is aware of the member responsible for each of its ports, however the Exchange may not be aware of the member's Sponsored Access arrangements due to varied ways that a member may utilize a port. The Exchange believes the requirement to also complete and submit an Exchange Agreement, User Agreement and Notice of Consent with our Nasdaq Membership Department is viewed as unnecessarily burdensome by members because of the multitude of relationships the member has with various customers. Members have expressed to the Exchange that they have multiple relationships with customers, which customer relationships change over time.\7\ Members have indicated that the necessity to continuously disclose the updated customer relationships to the Exchange is burdensome and unnecessary as they remain responsible for all activity conducted on the Exchange through a port assigned to the member. Further such information is available to the Exchange upon Exchange request from its regulatory group.\8\ --------------------------------------------------------------------------- \7\ For example, a broker-dealer's customers, which could include hedge funds, institutional investors, individual investors, and other broker-dealers. \8\ See Nasdaq Rule 8210. --------------------------------------------------------------------------- Second, the Exchange believes that the Exchange Agreement between the Sponsored Participant and the Exchange is also unnecessarily burdensome. The requirement to provide this form was intended to give the Exchange notification that such a relationship existed and to ensure that the Sponsored Participant was informed of the Exchange's Limited Liability Company Agreement, Bylaws, Rules and procedures. The agreements also provided the Exchange with contractual privity, which would no longer exist with the removal of the Exchange Agreement. The Exchange does not believe the loss of privity with the Sponsored Participant creates a concern as the Exchange has the ability to remove access to the port \9\ at any time if the activity of the Sponsored Participant warrants such removal. In addition, as discussed below, the Sponsored Participant will be made aware of its obligations through the Customer Agreement that it executed with the Sponsoring Member. As noted above, the Exchange only permits its members to request connectivity to the Exchange's System and members responsible for all trades submitted through such ports. Pursuant to Nasdaq Rule 4615 the trading activity of a Sponsored Participant must be monitored by the Sponsoring Member for compliance with the terms of the Customer Agreement with the Sponsoring Participant.\10\ Finally, the member continues to be obligated to comply with Nasdaq Rule 4615 and the Market Access Rule. The Sponsoring Member is responsible for any and all actions taken by such Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant. --------------------------------------------------------------------------- \9\ Nasdaq Rule 4611, entitled ``Nasdaq Market Center Participant Registration'' permits Nasdaq to impose upon any Nasdaq Market Maker, Nasdaq ECN or Order Entry Firm such temporary restrictions upon the automated entry or updating of orders or Quotes/Orders as Nasdaq may determine to be necessary to protect the integrity of Nasdaq's systems. \10\ See Nasdaq Rule 4615(b)(ii)(G). --------------------------------------------------------------------------- Nasdaq Rule 4615 requires that the Sponsored Participant and the Sponsored Member maintain a Customer Agreement to ensure compliance with the Exchange's Rules and obligations related to security, among other things.\11\ Nasdaq Rule 4615 requires that the Customer Agreement specify that the Sponsored Participant shall maintain, keep current and provide to the Sponsoring Member a list of individuals authorized to obtain access to the Exchange on behalf of the Sponsored Participant and provide appropriate training. In addition, pursuant to the Customer Agreement provisions, the Sponsored Participant is required to take reasonable security precautions to prevent unauthorized use or access to the Exchange, including unauthorized entry of information into the Exchange, or the information and data made available therein. Finally, the Customer Agreement must provide that the Sponsored Participant is responsible for any and all orders, trades and other messages and instructions entered, transmitted or received under identifiers, passwords and security codes of authorized individuals, and for the trading and other consequences thereof, including granting unauthorized access to the Exchange. The contents and the requirement for a Customer Agreement are unchanged. --------------------------------------------------------------------------- \11\ See Nasdaq Rule 4615(b)(ii)(B). --------------------------------------------------------------------------- Pursuant to Nasdaq Rule 4615 the Sponsoring Member must provide a Notice of Consent to the Exchange. The Exchange believes that a Notice of Consent provided to the Exchange by the Sponsoring Member is also unnecessarily burdensome. The Notice of Consent notifies the Exchange of the relationship between the Sponsoring Member and the Sponsored Participant. However, as noted above, the Exchange's regulatory group may request information about a particular customer relationship as it deems necessary.\12\ Further, the Exchange is made aware of the existence of ports when the Sponsoring Member requests connectivity to the Exchange and the Members are responsible for all trading activity by its Sponsored Participant. In addition, the Exchange, through its Regulatory Services Agreement with the Financial Industry Regulatory Authority (FINRA), reviews for member compliance with Nasdaq Rule 4615 and the Market Access Rule. The Exchange has the ability to remove access to the port \13\ at any time if the activity of the Sponsored Participant would warrant such removal. --------------------------------------------------------------------------- \12\ See Nasdaq Rule 8210. \13\ See note 9. --------------------------------------------------------------------------- In light of the foregoing, the requirement to complete and submit an Exchange Agreement and Notice of Consent with the Nasdaq Membership Department is viewed as unnecessarily burdensome by members, who must update their customer relationships internally and provides such information upon Exchange request. Finally, the Exchange notes it is correcting a capitalization in Nasdaq Rule 4615(ii)(C). 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \14\ in general, and furthers the objectives of Section 6(b)(5) of the Act \15\ 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 enhancing the risk protections available to Exchange members. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b). \15\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Defining Sponsored Access Adding a definition of Sponsored Access will assist market participants to understand the type of arrangements that are subject to Nasdaq Rule 4615 and such clarity will serve to promote just and equitable principles of trade. Members have indicated, and the Exchange believes, that adding the Sponsored Access definition will provide members with additional guidance with respect to Nasdaq Rule 4615. [[Page 73014]] Defining Customer Agreement Defining the agreement that Sponsored Participants must enter into and maintain with one or more Sponsoring Members to establish proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Nasdaq Market Center, as a ``Customer Agreement'' will also serve to provide members with clarity on the agreement that the Exchange will continue to require and the obligations that are contained within the Customer Agreement. This amendment is non- substantive. Market Access Rule Members continue to be required to comply with Rule 4615 and the Market Access Rule. The Exchange believes that specifically enumerating the member's responsibility to comply with the Market Access Rule will provide member's with additional guidance concerning the application of the Rule. This change is non-substantive as members are currently responsible to comply with the Market Access Rule. Elimination of Certain Contract Requirements Removing the requirement to submit and complete an Exchange Agreement, User Agreement and Notice of Consent will remove impediments to and perfect the mechanism of a free and open market by removing a burdensome and time-consuming requirement for members. While elimination of the Exchange Agreement requirement will also eliminate the Exchange's contractual privity with the Sponsored Participant, he [sic] Exchange notes that any potential concerns to the loss of privity are mitigated by the Exchange's ability to restrict the Sponsored Participant's access to a port \16\ at any time it is warranted by the Sponsored Participant's trading activity. Also, members have indicated that customer relationships must be frequently updated and it is unnecessarily burdensome to continuously update the Exchange with this information that is available upon request. Connectivity to the Exchange is authorized by the Exchange and must be requested by a member of the Exchange. Such connection requires approval by the Exchange, testing and other security features as well as information sharing with the Exchange by the member. In addition, Nasdaq Rule 4615 delineates the terms of the required contractual relationship between the Sponsoring Member and the Sponsored Participant in the Customer Agreement, which remains in effect. The Exchange believes that the Notice of Consent is unnecessary as Sponsoring Members must request connectivity to the Exchange as well as enter into a Customer Agreement with the Sponsored Participant. Finally, as is the case with other Exchange Rules, the Exchange examines for compliance with Nasdaq Rule 4615 and may request information about any customer relationship which concerns the Exchange. --------------------------------------------------------------------------- \16\ See note 9. --------------------------------------------------------------------------- The requirement to also complete and submit an Exchange Agreement, User Agreement and a Notice of Consent with our Nasdaq Membership Department is viewed as unnecessarily burdensome by members, who must update their customer relationships internally. 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 not necessary or appropriate in furtherance of the purposes of the Act for the reasons below. Defining Sponsored Access The addition of a definition for Sponsored Access will assist market participants to understand the type of arrangement subject to Nasdaq Rule 4615 and such clarity will serve to promote just and equitable principles of trade. Defining Customer Agreement Defining the agreement that Sponsored Participants must enter into and maintain with one or more Sponsoring Members to establish proper relationship(s) and account(s) through which the Sponsored Participant may trade on the Nasdaq Market Center, as a ``Customer Agreement'' does not create an undue burden on competition as this amendment is non- substantive and the Exchange believes that providing guidance concerning the type of arrangement subject to Nasdaq Rule 4615 will facilitate member compliance and does not unduly burden competition. Market Access Rule In addition, the Exchange believes that specifically enumerating the member's obligation to comply with the Market Access Rule does not create an undue burden on competition, but rather reinforces the application of the Rule. This change is non-substantive as members are currently responsible to comply with the Market Access Rule. Elimination of Certain Contract Requirements Removing the requirement to complete an Exchange Agreement, User Agreement and Notice of Consent under Nasdaq Rule 4615 does not create an undue burden on competition. The Exchange believes that this requirement is unnecessarily burdensome as the Exchange's regulatory group may request information about a particular customer relationship as it deems necessary.\17\ Further, the Exchange is made aware of the existence of ports when the Sponsoring Member requests connectivity to the Exchange and the Members are responsible for all trading activity by its Sponsored Participant. In order to obtain connectivity to the Exchange, members are required to contact Nasdaq Subscriber Services and request a connection to the market. Such connection requires approval by the Exchange, testing and other security features as well as information sharing with the Exchange by the member. Only members are permitted to request connectivity to the Exchange. The requirement to also complete and submit an Exchange Agreement, User Agreement and a Notice of Consent with our Nasdaq Membership Department is viewed as unnecessarily burdensome by members, who must update their customer relationships internally. Additionally, the Exchange examines for compliance with Nasdaq Rule 4615 and may request information about any customer relationship which concerns the Exchange. --------------------------------------------------------------------------- \17\ See Nasdaq Rule 8210. --------------------------------------------------------------------------- The Sponsoring Member remains responsible for customer activity conducted on the Exchange through the Customer Agreement, among other obligations. Additionally, Sponsored Participants that obtain access to the Exchange's System are required to take reasonable security precautions and prevent unauthorized use or access to the Nasdaq Market Center, including unauthorized entry of information into the Nasdaq Market Center,\18\ pursuant to the Customer Agreement. Further, the Sponsored Participants is responsible to establish adequate procedures and controls that permit it to effectively monitor its employees', agents' and customers' use and access to the Nasdaq Market Center for compliance with the terms of this agreement.\19\ In addition, the Exchange, through its Regulatory Services Agreement with FINRA conducts reviews of members for compliance with Nasdaq Rule 4615 and [[Page 73015]] the Market Access Rule. The Exchange has the ability to remove access to the port \20\ at any time if the activity of the Sponsored Participant would warrant such removal. Finally, Nasdaq Rule 4615 is currently applicable to all Nasdaq members that desire to sponsor access for its customers and applies to trading in all securities on the Exchange. --------------------------------------------------------------------------- \18\ See Nasdaq Rule 4615(b)(ii)(G). \19\ See Nasdaq Rule 4615(b)(ii)(H). \20\ See note 9. --------------------------------------------------------------------------- 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)(iii) of the Act \21\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\22\ --------------------------------------------------------------------------- \21\ 15 U.S.C. 78s(b)(3)(a)(iii). \22\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 CommentsUse 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-2015-140 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2015-140. 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-2015-140 and should be submitted on or before December 14, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-29713 Filed 11-20-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 225 / Monday, November 23, 2015 / Notices 73011
result in any burden on intermarket temporarily suspend such rule change if should refer to File No. SR–EDGA–
competition that is not necessary or it appears to the Commission that such 2015–42, and should be submitted on or
appropriate in furtherance of the action is necessary or appropriate in the December 14, 2015.
purposes of the Act. public interest, for the protection of
For the Commission, by the Division of
investors; or otherwise in furtherance of
C. Self-Regulatory Organization’s Trading and Markets, pursuant to delegated
the purposes of the Act. If the
Statement on Comments on the authority.18
Commission takes such action, the
Proposed Rule Change Received From Robert W. Errett,
Commission shall institute proceedings
Members, Participants, or Others Deputy Secretary.
to determine whether the proposed rule
No comments were solicited or should be approved or disapproved. [FR Doc. 2015–29710 Filed 11–20–15; 8:45 am]
received on the proposed rule change. BILLING CODE 8011–01–P
IV. Solicitation of Comments
III. Date of Effectiveness of the
Interested persons are invited to
Proposed Rule Change and Timing for
submit written data, views, and SECURITIES AND EXCHANGE
Commission Action
arguments concerning the foregoing, COMMISSION
Because the proposed rule change including whether the proposed rule
does not: (i) Significantly affect the change is consistent with the Act.
protection of investors or the public [Release No. 34–76449; File No. SR–
Comments may be submitted by any of
interest; (ii) impose any significant NASDAQ–2015–140]
the following methods:
burden on competition; and (iii) become
operative for 30 days from the date on Electronic Comments Self-Regulatory Organizations; The
which it was filed, or such shorter time • Use the Commission’s Internet NASDAQ Stock Market LLC; Notice of
as the Commission may designate if comment form (http://www.sec.gov/ Filing and Immediate Effectiveness of
consistent with the protection of rules/sro.shtml); or Proposed Rule Change Relating to
investors and the public interest, the • Send an email to rule-comments@ Sponsored Access
proposed rule change has become sec.gov. Please include File No. SR–
November 17, 2015.
effective pursuant to Section 19(b)(3)(A) EDGA–2015–42 on the subject line.
of the Act 15 and paragraph (f)(6) of Rule Pursuant to Section 19(b)(1) of the
Paper Comments Securities Exchange Act of 1934
19b–4 thereunder.16 The Exchange has
given the Commission written notice of • Send paper comments in triplicate (‘‘Act’’),1 and Rule 19b–4 thereunder,2
its intent to file the proposed rule to Secretary, Securities and Exchange notice is hereby given that on November
change, along with a brief description Commission, 100 F Street NE., 4, 2015, The NASDAQ Stock Market
and text of the proposed rule change at Washington, DC 20549–1090. LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
least five business days prior to the date All submissions should refer to File No. with the Securities and Exchange
of filing of the proposed rule change, or SR–EDGA–2015–42. This file number Commission (‘‘SEC’’ or ‘‘Commission’’)
such shorter time as designated by the should be included on the subject line the proposed rule change as described
Commission. if email is used. To help the in Items I, II, and III, below, which Items
The Exchange has asked the Commission process and review your have been prepared by NASDAQ. The
Commission to waive the 30-day comments more efficiently, please use Commission is publishing this notice to
operative delay so that the proposal may only one method. The Commission will solicit comments on the proposed rule
become operative immediately upon post all comments on the Commission’s change from interested persons.
filing. The Exchange states that having Internet Web site (http://www.sec.gov/
this additional voluntary routing option rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s
will give market participants greater submission, all subsequent Statement of the Terms of Substance of
flexibility in routing orders and allow amendments, all written statements the Proposed Rule Change
them to more easily access liquidity on with respect to the proposed rule
change that are filed with the NASDAQ proposes to amend Nasdaq
BGM Affiliated exchanges. In addition,
Commission, and all written Rule 4615 entitled, ‘‘Sponsored
the Exchange states that the proposed
communications relating to the Participants’’ to: (1) Define the term
rule change is similar to a routing
proposed rule change between the ‘‘Sponsored Access’’ and ‘‘Customer
option offered by other exchanges and
Commission and any person, other than Agreement;’’ (2) specify the
does not propose any new or unique
those that may be withheld from the requirements to comply with Rule
functionality. Based on the foregoing,
public in accordance with the 15c3–5 under the Securities Exchange
the Commission believes that the waiver
provisions of 5 U.S.C. 552, will be Act of 1934 (‘‘Market Access Rule’’); and
of the operative delay is consistent with
the protection of investors and the available for Web site viewing and (3) remove the requirement that each
public interest.17 Therefore, the printing in the Commission’s Public Sponsored Participant and each
Commission hereby waives the Reference Room, 100 F Street NE., Sponsoring Member must enter into
operative delay and designates the Washington, DC 20549 on official certain agreements with the Exchange.
proposal operative upon filing. business days between the hours of The text of the proposed rule change
At any time within 60 days of the 10:00 a.m. and 3:00 p.m. Copies of such is available on the Exchange’s Web site
filing of the proposed rule change, the filing also will be available for at http://
Commission summarily may inspection and copying at the principal www.nasdaq.cchwallstreet.com, at the
wgreen on DSK2VPTVN1PROD with NOTICES
office of the Exchange. All comments principal office of the Exchange, and at
15 15 U.S.C. 78s(b)(3)(A). received will be posted without change; the Commission’s Public Reference
16 17 CFR 240.19b–4. the Commission does not edit personal Room.
17 For purposes only of waiving the 30-day
identifying information from
operative delay, the Commission has also
considered the proposed rule’s impact on
submissions. You should submit only 18 17 CFR 200.30–3(a)(12).
efficiency, competition, and capital formation. See information that you wish to make 1 15 U.S.C. 78s(b)(1).
15 U.S.C. 78c(f). available publicly. All submissions 2 17 CFR 240.19b–4.
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![73012 Federal Register / Vol. 80, No. 225 / Monday, November 23, 2015 / Notices
II. Self-Regulatory Organization’s member permits its customers to enter member compliance with the Market
Statement of the Purpose of, and orders into the Exchange’s System that Access Rule.
Statutory Basis for, the Proposed Rule bypass the member’s trading system and
Elimination of Certain Contract
Change are routed directly to the Exchange,
Requirements
In its filing with the Commission, the including routing through a service
bureau or other third party technology At this time, the Exchange proposes to
Exchange included statements remove requirements to submit certain
concerning the purpose of and basis for provider.’’ This definition was derived
from the Commission’s description of forms to the Exchange. There are three
the proposed rule change and discussed forms that are currently required by
any comments it received on the Sponsored Access used in the release
approving the Market Access Rule.4 The Nasdaq Rule 4615: (1) An agreement
proposed rule change. The text of these between the Sponsored Participant and
statements may be examined at the Exchange believes that defining
Sponsored Access in Nasdaq Rule 4615 the Exchange (‘‘Exchange Agreement’’);
places specified in Item IV below. The (2) a User Agreement between the
Exchange has prepared summaries, set will provide market participants with
greater clarity concerning Sponsored Sponsored Participant and its
forth in sections A, B, and C below, of Sponsoring Member that is provided to
the most significant aspects of such Access and their obligations with
respect to this type of access the Exchange; and (3) a Notice of
statements. Consent provided to the Exchange by
arrangement.
A. Self-Regulatory Organization’s the Sponsoring Member. NASDAQ Rule
Statement of the Purpose of, and Defining Customer Agreement 4615 will continue to require that each
Statutory Basis for, the Proposed Rule Sponsored Participants enter into a
The Exchange proposes to amend Customer Agreement with each
Change Nasdaq Rule 4615(b)(i) to define the Sponsoring member to establish proper
1. Purpose agreement that Sponsored Participants relationship(s) and account(s) through
must enter into and maintain with one which the Sponsored Participant may
The purpose of the filing is to amend
or more Sponsoring Members to trade on the Nasdaq Market Center.
Nasdaq Rule 4615 entitled, ‘‘Sponsored
establish proper relationship(s) and These Customer Agreement(s) must
Participants’’ to: (1) Define the term
account(s) through which the Sponsored incorporate the Sponsorship Provisions
‘‘Sponsored Access,’’ and specifically
Participant may trade on the Nasdaq set forth in paragraph (ii) in Nasdaq
stating that compliance with the Market
Market Center, as a ‘‘Customer Rule 4615.6 The Customer Agreement
Access Rule is required, and defining
Agreement.’’ remains unaffected by this rule
‘‘Customer Agreement’’ to refer to the
agreement that must be executed Market Access Rule proposal. Also, the Exchange is
between the Sponsoring Participant and proposing to amend Nasdaq Rule 4615
the Sponsoring Member; (2) specify the Pursuant to Nasdaq Rule 4615, the to identify the aforementioned
requirements to comply with the Market Sponsoring Member is responsible for agreement as the ‘‘Customer
Access Rule; and (3) remove the the activities of the Sponsored Agreement.’’
requirement that each Sponsored Participant. Sponsored Participants are Today, only members may request
Participant and each Sponsoring required to have procedures in place to connectivity to the Exchange. A member
Member must enter into certain comply with Exchange rules, and the may obtain one or more ports for the
agreements with the Exchange to Sponsoring Member takes responsibility purpose of providing Sponsored Access.
streamline its rule and remove for the Sponsored Participant’s activity If separate ports are requested by a
unnecessarily burdensome notice on the Exchange. Members may have member for the purpose of providing
requirements to the Exchange. multiple Sponsored Access Sponsored Access, the member must
relationships in place at a given time. request those ports from the Exchange
Defining Sponsored Access The Exchange’s examination program and the member is responsible for the
A Sponsored Participant may be a assesses compliance with Nasdaq Rule Sponsored Participant’s activity on the
member or a non-member of the 4615, among other rules.5 The Exchange Exchange. In all circumstances, the
Exchange, such as an institutional proposes to specifically enumerate Exchange will only permit members to
investor, that gains access to the within Nasdaq Rule 4615 the member’s request connectivity to the market and
Exchange 3 and trades under a obligation to comply with the Market the member is responsible for all
Sponsoring Member’s execution and Access Rule, which members are customer orders submitted through the
clearing identity pursuant to currently required to comply with member’s port.
respecting [sic] market access. The First, the Exchange believes that
sponsorship arrangements currently set
Exchange believes that specifying the completing and submitting the
forth in Nasdaq Rule 4615. The
obligation to comply with the Market Exchange Agreement, User Agreement
Exchange is proposing to define the
Access Rule specifically will reinforce and Notice of Consent is unnecessarily
term ‘‘Sponsored Access’’ to clarify the
that Nasdaq Rule 4615 presupposes burdensome in light of the current
type of market access arrangement that
structure in place at the Exchange. Only
is subject to Nasdaq Rule 4615. The
members may request connectivity to
Exchange proposes to amend Nasdaq 4 The Market Access Rule, among other things,
requires broker-dealers providing others with access the Exchange by contacting Nasdaq
Rule 4615(a) to add the following
to an exchange or alternative trading system to
definition, ‘‘Sponsored Access shall establish, document, and maintain a system of risk 6 The Customer Agreement is required to include,
mean an arrangement whereby a management controls and supervisory procedures among other language, all orders entered by the
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reasonably designed to manage the financial, Sponsored Participants and any person acting on
3 For example, a broker-dealer may allow its regulatory, and other risks of providing such access. behalf of or in the name of such Sponsored
customer—whether an institution such as a hedge See Securities Exchange Act Release No. 63241 Participant and any executions occurring as a result
fund, mutual fund, bank or insurance company, an (November 3, 2010), 75 FR 69792 (November 15, of such orders are binding in all respects on the
individual, or another broker-dealer—to use the 2010). Sponsoring Member and, also, Sponsoring Member
broker-dealer’s MPID, account or other mechanism 5 The Exchange has a Regulatory Services is responsible for any and all actions taken by such
or mnemonic used to identify a market participant Agreement with Financial Industry Regulatory Sponsored Participant and any person acting on
for the purposes of electronically accessing the Authority (‘‘FINRA’’) to conduct regulatory behalf of or in the name of such Sponsored
Exchange. examinations, among other obligations. Participant.
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![73014 Federal Register / Vol. 80, No. 225 / Monday, November 23, 2015 / Notices
Defining Customer Agreement remains in effect. The Exchange believes Elimination of Certain Contract
Defining the agreement that that the Notice of Consent is Requirements
Sponsored Participants must enter into unnecessary as Sponsoring Members Removing the requirement to
and maintain with one or more must request connectivity to the complete an Exchange Agreement, User
Sponsoring Members to establish proper Exchange as well as enter into a Agreement and Notice of Consent under
relationship(s) and account(s) through Customer Agreement with the Nasdaq Rule 4615 does not create an
which the Sponsored Participant may Sponsored Participant. Finally, as is the undue burden on competition. The
trade on the Nasdaq Market Center, as case with other Exchange Rules, the Exchange believes that this requirement
a ‘‘Customer Agreement’’ will also serve Exchange examines for compliance with is unnecessarily burdensome as the
to provide members with clarity on the Nasdaq Rule 4615 and may request Exchange’s regulatory group may
agreement that the Exchange will information about any customer request information about a particular
continue to require and the obligations relationship which concerns the customer relationship as it deems
that are contained within the Customer Exchange. necessary.17 Further, the Exchange is
Agreement. This amendment is non- The requirement to also complete and made aware of the existence of ports
substantive. submit an Exchange Agreement, User when the Sponsoring Member requests
Market Access Rule Agreement and a Notice of Consent with connectivity to the Exchange and the
our Nasdaq Membership Department is Members are responsible for all trading
Members continue to be required to viewed as unnecessarily burdensome by activity by its Sponsored Participant. In
comply with Rule 4615 and the Market members, who must update their order to obtain connectivity to the
Access Rule. The Exchange believes that customer relationships internally. Exchange, members are required to
specifically enumerating the member’s contact Nasdaq Subscriber Services and
responsibility to comply with the B. Self-Regulatory Organization’s
Statement on Burden on Competition request a connection to the market.
Market Access Rule will provide
Such connection requires approval by
member’s with additional guidance
The Exchange does not believe that the Exchange, testing and other security
concerning the application of the Rule.
the proposed rule change will impose features as well as information sharing
This change is non-substantive as
any burden on competition not with the Exchange by the member. Only
members are currently responsible to
necessary or appropriate in furtherance members are permitted to request
comply with the Market Access Rule.
of the purposes of the Act for the connectivity to the Exchange. The
Elimination of Certain Contract reasons below. requirement to also complete and
Requirements submit an Exchange Agreement, User
Defining Sponsored Access Agreement and a Notice of Consent with
Removing the requirement to submit
and complete an Exchange Agreement, The addition of a definition for our Nasdaq Membership Department is
User Agreement and Notice of Consent Sponsored Access will assist market viewed as unnecessarily burdensome by
will remove impediments to and perfect participants to understand the type of members, who must update their
the mechanism of a free and open arrangement subject to Nasdaq Rule customer relationships internally.
market by removing a burdensome and 4615 and such clarity will serve to Additionally, the Exchange examines
time-consuming requirement for promote just and equitable principles of for compliance with Nasdaq Rule 4615
members. While elimination of the trade. and may request information about any
Exchange Agreement requirement will customer relationship which concerns
also eliminate the Exchange’s Defining Customer Agreement the Exchange.
contractual privity with the Sponsored The Sponsoring Member remains
Defining the agreement that responsible for customer activity
Participant, he [sic] Exchange notes that Sponsored Participants must enter into
any potential concerns to the loss of conducted on the Exchange through the
and maintain with one or more Customer Agreement, among other
privity are mitigated by the Exchange’s Sponsoring Members to establish proper
ability to restrict the Sponsored obligations. Additionally, Sponsored
relationship(s) and account(s) through Participants that obtain access to the
Participant’s access to a port 16 at any which the Sponsored Participant may
time it is warranted by the Sponsored Exchange’s System are required to take
trade on the Nasdaq Market Center, as reasonable security precautions and
Participant’s trading activity. Also,
a ‘‘Customer Agreement’’ does not prevent unauthorized use or access to
members have indicated that customer
create an undue burden on competition the Nasdaq Market Center, including
relationships must be frequently
as this amendment is non-substantive unauthorized entry of information into
updated and it is unnecessarily
and the Exchange believes that the Nasdaq Market Center,18 pursuant to
burdensome to continuously update the
providing guidance concerning the type the Customer Agreement. Further, the
Exchange with this information that is
of arrangement subject to Nasdaq Rule Sponsored Participants is responsible to
available upon request. Connectivity to
4615 will facilitate member compliance establish adequate procedures and
the Exchange is authorized by the
and does not unduly burden controls that permit it to effectively
Exchange and must be requested by a
member of the Exchange. Such competition. monitor its employees’, agents’ and
connection requires approval by the Market Access Rule customers’ use and access to the Nasdaq
Exchange, testing and other security Market Center for compliance with the
features as well as information sharing In addition, the Exchange believes terms of this agreement.19 In addition,
with the Exchange by the member. In that specifically enumerating the the Exchange, through its Regulatory
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addition, Nasdaq Rule 4615 delineates member’s obligation to comply with the Services Agreement with FINRA
the terms of the required contractual Market Access Rule does not create an conducts reviews of members for
relationship between the Sponsoring undue burden on competition, but compliance with Nasdaq Rule 4615 and
Member and the Sponsored Participant rather reinforces the application of the
in the Customer Agreement, which Rule. This change is non-substantive as 17 See Nasdaq Rule 8210.
members are currently responsible to 18 See Nasdaq Rule 4615(b)(ii)(G).
16 See note 9. comply with the Market Access Rule. 19 See Nasdaq Rule 4615(b)(ii)(H).
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![Federal Register / Vol. 80, No. 225 / Monday, November 23, 2015 / Notices 73015
the Market Access Rule. The Exchange Electronic Comments SECURITIES AND EXCHANGE
has the ability to remove access to the COMMISSION
port 20 at any time if the activity of the • Use the Commission’s Internet
Sponsored Participant would warrant comment form (http://www.sec.gov/ Submission for OMB Review;
such removal. Finally, Nasdaq Rule rules/sro.shtml); or Comment Request
4615 is currently applicable to all • Send an email to rule-comments@ Upon Written Request, Copies Available
Nasdaq members that desire to sponsor sec.gov. Please include File Number SR– From: Securities and Exchange
access for its customers and applies to NASDAQ–2015–140 on the subject line. Commission, Office of FOIA Services,
trading in all securities on the 100 F Street NE., Washington, DC
Paper Comments
Exchange. 20549–2736.
C. Self-Regulatory Organization’s • Send paper comments in triplicate Extension:
Statement on Comments on the to Secretary, Securities and Exchange Form N–8F, SEC File No. 270–136,
Proposed Rule Change Received From Commission, 100 F Street NE., OMB Control No. 3235–0157.
Members, Participants, or Others Washington, DC 20549–1090.
Notice is hereby given that, pursuant
All submissions should refer to File to the Paperwork Reduction Act of 1995
No written comments were either
solicited or received. Number SR–NASDAQ–2015–140. This (44 U.S.C. 3501 et seq.), the Securities
file number should be included on the and Exchange Commission (the
III. Date of Effectiveness of the subject line if email is used. To help the ‘‘Commission’’) is soliciting comments
Proposed Rule Change and Timing for Commission process and review your on the collection of information
Commission Action comments more efficiently, please use summarized below. The Commission
only one method. The Commission will plans to submit this existing collection
Because the foregoing proposed rule of information to the Office of
post all comments on the Commission’s
change does not: (i) Significantly affect Management and Budget for extension
Internet Web site (http://www.sec.gov/
the protection of investors or the public and approval.
rules/sro.shtml). Copies of the
interest; (ii) impose any significant Form N–8F (17 CFR 274.218) is the
submission, all subsequent
burden on competition; and (iii) become form prescribed for use by registered
amendments, all written statements
operative for 30 days from the date on investment companies in certain
with respect to the proposed rule
which it was filed, or such shorter time circumstances to request orders of the
as the Commission may designate, it has change that are filed with the
Commission declaring that the
become effective pursuant to Section Commission, and all written
registration of that investment company
19(b)(3)(A)(iii) of the Act 21 and communications relating to the
cease to be in effect. The form requests
subparagraph (f)(6) of Rule 19b–4 proposed rule change between the information about: (i) The investment
thereunder.22 Commission and any person, other than company’s identity, (ii) the investment
those that may be withheld from the company’s distributions, (iii) the
At any time within 60 days of the public in accordance with the
filing of the proposed rule change, the investment company’s assets and
provisions of 5 U.S.C. 552, will be liabilities, (iv) the events leading to the
Commission summarily may available for Web site viewing and
temporarily suspend such rule change if request to deregister, and (v) the
printing in the Commission’s Public conclusion of the investment company’s
it appears to the Commission that such
Reference Room, 100 F Street NE., business. The information is needed by
action is: (i) Necessary or appropriate in
Washington, DC 20549, on official the Commission to determine whether
the public interest; (ii) for the protection
business days between the hours of an order of deregistration is appropriate.
of investors; or (iii) otherwise in
10:00 a.m. and 3:00 p.m. Copies of the The Form takes approximately 5.2
furtherance of the purposes of the Act.
filing also will be available for hours on average to complete. It is
If the Commission takes such action, the
inspection and copying at the principal estimated that approximately 150
Commission shall institute proceedings
office of the Exchange. All comments investment companies file Form N–8F
to determine whether the proposed rule
received will be posted without change; annually, so the total annual burden for
should be approved or disapproved. The
the Commission does not edit personal the form is estimated to be
Exchange has provided the Commission
identifying information from approximately 780 hours. The estimate
written notice of its intent to file the of average burden hours is made solely
proposed rule change, along with a brief submissions. You should submit only
information that you wish to make for the purposes of the Paperwork
description and text of the proposed Reduction Act and is not derived from
rule change, at least five business days available publicly. All submissions
should refer to File Number SR– a comprehensive or even a
prior to the date of filing of the representative survey or study.
proposed rule change. NASDAQ–2015–140 and should be
The collection of information on Form
submitted on or before December 14,
IV. Solicitation of Comments N–8F is not mandatory. The information
2015.
provided on Form N–8F is not kept
Interested persons are invited to For the Commission, by the Division of confidential. An agency may not
submit written data, views, and Trading and Markets, pursuant to delegated conduct or sponsor, and a person is not
arguments concerning the foregoing, authority.23 required to respond to, a collection of
including whether the proposed rule Robert W. Errett, information unless it displays a
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change is consistent with the Act. Deputy Secretary. currently-valid OMB control number.
Comments may be submitted by any of [FR Doc. 2015–29713 Filed 11–20–15; 8:45 am] Written comments are requested on:
the following methods: (i) Whether the collections of
BILLING CODE 8011–01–P
information are necessary for the proper
20 See note 9. performance of the functions of the
21 15 U.S.C. 78s(b)(3)(a)(iii). Commission, including whether the
22 17 CFR 240.19b–4(f)(6). 23 17 CFR 200.30–3(a)(12). information has practical utility; (ii) the
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Document Created: 2018-03-01 11:18:02
Document Modified: 2018-03-01 11:18:02
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 73011 |
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