[Federal Register Volume 77, Number 74 (Tuesday, April 17, 2012)]
[Notices]
[Pages 22829-22831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9139]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66780; File No. SR-NASDAQ-2012-049]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 4751
April 11, 2012.
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 5, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, 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.
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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 this proposed rule change to amend the definition
of ``Directed Orders'' in Rule 4751(f)(9).
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.\3\
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\3\ Changes are marked to the rule text that appears in the
electronic Nasdaq Manual found at http://nasdaqomx.cchwallstreet.com.
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* * * * *
4751. Definitions
(a)-(e) No change.
(f) The term ``Order Type'' shall mean the unique processing
prescribed for designated orders that are eligible for entry into the
System, and shall include:
(1)-(8) No change.
(9) ``Directed Orders'' are orders that are directed to an exchange
other than Nasdaq as directed by the entering party without checking
the Nasdaq book. If unexecuted, the order (or unexecuted portion
thereof) shall be returned to the entering party. [This option may only
be used for orders with time-in-force parameters of IOC.]
Directed Orders may be designated as intermarket sweep orders by
the entering party to execute against the full displayed size of any
protected bid or offer (as defined in Rule 600(b) of Regulation NMS
under the Act). A broker-dealer that designates an order as an
intermarket sweep order has the responsibility of complying with Rules
610 and 611 of Regulation NMS. Directed Orders marked as intermarket
sweep may only be used with time-in-force parameters of IOC.
Directed Orders may not be directed to a facility of an exchange
that is an affiliate of Nasdaq except for Directed Orders directed to
the NASDAQ OMX BX Equities Market or to the NASDAQ OMX PSX facility of
NASDAQ OMX PHLX.
(10)-(13) No change.
(g)-(i) No change.
* * * * *
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
Rule 4751(f)(9) defines a ``Directed Order'' as an order that is
directed to an exchange other than NASDAQ as directed by the entering
party without checking the NASDAQ book and, if unexecuted, the order
(or unexecuted portion thereof) must be returned to the entering party.
Currently, however, this option is only available for Directed Orders
with time-in-force (``Time-in-Force'') \4\ parameters of immediate or
cancel (``IOC'').
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\4\ Time-in-Force denotes the period of time that the Nasdaq
Market Center will hold an order for potential execution. See NASDAQ
Rule 4751(h).
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NASDAQ proposes to modify Rule 4751(f)(9) by removing the above
restriction. The elimination of this restriction would then allow the
Nasdaq Market Center (``System'') via its broker-dealer, NASDAQ
Execution Services (``NES''), to direct customer orders that would post
liquidity to particular away markets. This would further enable members
to specify the maximum length of time to allow these orders to remain
booked in accordance with any applicable rules of the away market. The
proposed rule change would enhance order execution opportunities for
market participants by increasing the mobility of liquidity, augmenting
liquidity at less liquid venues and generally increasing the
interconnectedness of the exchanges.
Additionally, Rule 4751(f)(9) would be clarified to specifically
state that a Directed Order that is marked as an intermarket sweep
order must be marked as IOC. By making this clarification, NASDAQ will
prevent its routing broker from locking or crossing an away market
because of customer instructions.
The proposed rule change, in essence, makes the Exchange's Directed
Order similar to the BATS Exchange's ``Modified Destination Specific
Order.'' \5\ The remaining difference
[[Page 22830]]
between the two order types is that for the BATS Modified Destination
Specific Order, orders that are not executed in full are returned to
the exchange, while for NASDAQ Directed Orders, orders that are not
executed in full would be returned to the customer.
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\5\ See Securities Exchange Act Release No. 58546 (September 15,
2008), 73 FR 54440 (September 19, 2008) (SR-BATS-2008-003). See BATS
Rule 11.9(c)(13).
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The only reason initially for the inclusion of this restrictive
clause in Rule 4751(f)(9) was to accurately reflect the configuration
of the Directed Order router. Since NASDAQ now intends to provide all
Directed Orders with the option of being directed to away markets to
post liquidity, the configuration of the System must be similarly
updated to reflect this change.
The elimination of this restriction also serves to increase
investor choice. Specifically, Directed Order types that do not include
an IOC instruction would now provide investors with an additional
method of connecting to another exchange for the purpose of providing
liquidity. Users of NASDAQ's router would be able to, for example, post
two-sided quotes on any exchange without having to establish
connectivity to these exchanges separately. The proposed rule change
also would improve the competitive landscape by creating a means by
which NASDAQ customers could post liquidity at away markets and,
thereby, remove barriers to participation on these markets.
Finally, NASDAQ already permits order types that allow for the
posting of liquidity at away markets. In particular, the DOTI strategy
has the ability to post to the New York Stock Exchange (``NYSE'').\6\
DOTI is a routing option for orders that the entering firm wishes to
direct to the NYSE or NYSE Amex without returning to the System. DOTI
orders check the System for available shares and then are sent to
destinations on the System routing table before being sent to NYSE or
NYSE Amex, as appropriate. DOTI orders do not return to the System book
after routing. The entering firm may alternatively elect to have DOTI
orders check the System for available shares and thereafter be directly
sent to NYSE or NYSE Amex as appropriate.
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\6\ See NASDAQ Rule 4758(a)(1)(A).
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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, by eliminating the restriction which permits only
Directed Orders with Time-in-Force parameters of IOC, as well as by
clarifying that a Directed Order that is marked as an intermarket sweep
order must also be marked as IOC, NASDAQ believes that the proposed
rule change will enhance the interconnectedness of the national market
system, increase investor choice, and improve order execution
opportunities for market participants by increasing the mobility of
liquidity, removing barriers to participation, and augmenting liquidity
at less liquid venues. Thus, the proposed rule change will directly
foster cooperation and will remove impediments to and perfect the
mechanism of a free and open market, and is fully consistent with the
protection of investors and the public interest.
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. NASDAQ believes
that the proposed rule change will serve to increase the
interconnectedness of the national market system and also serves to
increase investor choice by allowing the System via NES to direct
customer orders that would post liquidity to particular away markets.
The changes will also enhance NASDAQ's competitive stance vis-[agrave]-
vis the Modified Destination Specific Order of the BATS Exchange.
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 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\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 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-2012-049 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-2012-049. 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
[[Page 22831]]
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 the filing will also be available for
inspection and copying at the Exchange's principal office. 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 publicly available. All
submissions should refer to File Number SR-NASDAQ-2012-049 and should
be submitted on or before May 8, 2012.
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. 2012-9139 Filed 4-16-12; 8:45 am]
BILLING CODE 8011-01-P