[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27134-27136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11326]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64406; File No. SR-NASDAQ-2011-065]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Two-Sided Order for NOM Market Makers
May 4, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on May 3, 2011, The NASDAQ Stock Market LLC (``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
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 is filing with the Securities and Exchange Commission
(``Commission'') a proposal for the NASDAQ Options Market (``NOM'') to
amend Chapter VI, Trading Systems, Section 1, Definitions, to adopt a
``One-cancels-the-other'' order type, as described further below.
This change is scheduled to be implemented on NOM on or about
August 1, 2011; the Exchange will announce the implementation schedule
by Options Trader Alert, once the rollout schedule is finalized.
The text of the proposed rule change is available at
nasdaq.cchwallstreet.com, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to introduce a new order
type to assist Market Makers with their market making requirements
under NOM rules. Currently, on NOM, an Options Market Maker is a
Participant \3\ registered with NASDAQ as a Market Maker.\4\ Market
Makers on NOM have certain obligations such as maintaining two-sided
markets and participating in transactions that are ``reasonably
calculated to contribute to the
[[Page 27135]]
maintenance of a fair and orderly market.'' \5\ The Exchange recently
amended its rules to: (a) Require market maker assignment by option
rather than by series; (b) adopt a $5 quotation spread parameter; and
(c) amend the quoting requirement for Market Makers.\6\
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\3\ The term ``Options Participant'' or ``Participant'' means a
firm or organization that is registered with the Exchange pursuant
to Chapter II of the NOM Rules for purposes of participating in
options trading on NOM as a ``Nasdaq Options Order Entry Firm'' or
``Nasdaq Options Market Maker.''
\4\ See NOM Rules, Chapter VII, Section 2.
\5\ See NOM Rules, Chapter VII, Section 5(a).
\6\ Securities Exchange Act Release No. 64054 (March 8, 2011),
76 FR 14111 (March 15, 2011) (SR-NASDAQ-2011-036).
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Today, Market Makers comply with their obligation to make a two-
sided market by submitting orders into the NOM System, because NOM is
designed as an order-driven system. For example, in the current rules,
the terms ``bid,'' ``offer,'' and ``quote'' are defined in terms of an
order, and the term ``quote'' generally refers to the bid/offer of a
Market Maker. These terms would remain the same.
Under this proposal, Market Makers will continue to be able to
submit orders to fulfill their two-sided market making obligation, but
will also be able to submit a two-sided order, called a ``one-cancels-
the-other'' order, consisting of both a bid and an offer; specifically,
it consists of a buy order and a sell order treated as a unit. The new
``one-cancels-the-other'' order is part of a technological enhancement
intended to offer to Market Makers a two-sided alternative, rather than
having to enter two separate orders each with a bid or offer.
Accordingly, the Exchange proposes to amend its rules to reflect the
new two-sided order. Specifically, the new order type is being added to
Chapter VI, Section 1(e) as new subparagraph (9).
Because NOM Rules require that when there is a bid from a Market
Maker there must also be an offer,\7\ in the case of the new two-sided
order, if after entry into the System either the bid or offer side is
fully executed, the side that is unexecuted is canceled and returned to
the entering Market Maker. Similarly, the new two-sided order is not
routable.
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\7\ See NOM Rules, Chapter VII, Section 6(b), which provides
that a Market Maker that enters a bid (offer) in a series in which
he is registered on NOM must enter an offer (bid).
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The Exchange believes that this new order type is a useful,
additional method of entering orders for Market Makers; the new order
type should aid Market Makers in complying with their continuous
quoting obligations by using this two-sided order rather than two
separate orders. Market Maker obligations are not changing in this
proposal.
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 prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Exchange believes that the
proposal is appropriate and reasonable, because it offers an additional
method for Market Makers to comply with their quoting obligations. The
Exchange also believes that the proposal is consistent with the
obligation in Section 6(b)(5) that the proposal not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers. Although the new order type is only available to Market
Makers, only Market Makers are required by the Exchange's rules to
provide a continuous, two-sided market, which the new order type is
intended to facilitate. It is not unfairly discriminatory because it is
intended to assist Market Makers in complying with their continuous
quoting obligations, including providing two-sided markets.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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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.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)
\11\ thereunder.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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 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 e-mail to [email protected]. Please include
File Number SR-NASDAQ-2011-065 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-2011-065. 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
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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-2011-065 and should
be submitted on or before May 31, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11326 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P