[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9957-9959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03098]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68839; File No. SR-NASDAQ-2013-014]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Add Routing Functionality to the NASDAQ System
February 6, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on January 23, 2013, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I 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 4758, Order Routing, to add routing
functionality to the NASDAQ System (``System'').
The text of the proposed rule change is below. Proposed new
language is italicized.
* * * * *
Equity Rules
* * * * *
4750. Execution Services
* * * * *
4758. Order Routing
(a) Order Routing Process
(1) No change.
(A) No change.
(i)-(xi) No change.
(xii) QDRK is a routing option under which orders check the
System for available shares and simultaneously route the remaining
shares to destinations on the System routing table that are not
posting Protected Quotations within the meaning of Regulation NMS.
If shares remain un-executed after routing, they are posted on the
book. Once on the book, should the order subsequently be locked or
crossed by another market center, the System will not route the
order to the locking or crossing market center.
(xiii) QCST is a routing option under which orders check the
System for available shares and simultaneously route the remaining
shares to destinations on the System routing table that are not
posting Protected Quotations within the meaning of Regulation NMS
and to certain, but not all, exchanges. If shares remain un-executed
after routing, they are posted on the book. Once on the book, should
the order subsequently be locked or crossed by another market
center, the System will not route the order to the locking or
crossing market center.
Orders that do not check the System for available shares prior
to routing may not be sent to a facility of an exchange that is an
affiliate of Nasdaq, except for orders that are sent to the NASDAQ
OMX BX Equities Market or to the NASDAQ OMX PSX facility of NASDAQ
OMX PHLX.
(B) No change.
(b)-(d) 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. 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 attract additional
business to and enhance the functionality offered by Nasdaq by
providing additional optional outbound routing services. Most equities
exchanges today provide routing services and the Exchange offers a
variety of routing strategies. Currently, Rule 4758, Order Routing,
describes the order routing process and states that all routing shall
be in compliance with Rule 611 of Regulation NMS under the Act.\3\
Furthermore, it enumerates Nasdaq's routing strategies: DOT, DOTI,
STGY, SKNY, SCAN, SKIP, TFTY, MOPP, SAVE, SOLV, LIST and CART.
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\3\ 17 CFR 242.611.
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Proposed Rule 4758(a)(1)(A)(xii) will provide that QDRK is a
routing option under which orders check the System for available shares
and simultaneously route to certain destinations on the System routing
table that are not posting Protected Quotations within the meaning of
Regulation NMS (i.e. ``dark venues'' or ``dark pools''). If shares
remain un-executed after routing, they are posted on the book. Once on
the book, should the order subsequently be locked or crossed by another
market center, the System will not route the order to the locking or
crossing market center. This strategy is intended to attract market
participants that seek to execute on Nasdaq or on dark pools without
executing on another exchange. Members may seek to execute in this
manner to interact with resting liquidity in addition to that available
on Nasdaq, while also minimizing market impact and transaction fees.
For example, if the National Best Bid/Offer (``NBBO'') is $10.00-
$10.01, and Nasdaq, DarkVenueA and ARCA each offer 100 shares at
$10.01, a QDRK order to buy 1000 shares at $10.01 IOC will be handled
as follows: 100 shares for execution on Nasdaq and 100 shares routed to
DarkVenue A simultaneously at $10.01; the remaining 800 shares are not
routed and not executed, and cancelled back to the entering participant
because it was an IOC order. The order did not route to ARCA because it
is not a dark venue. As a second example, if the NBBO is $10.00-$10.01,
and Nasdaq, DarkVenueA and ARCA each offer 100 shares at $10.01, a QDRK
order to buy 1000 shares at
[[Page 9958]]
$10.01 DAY will be handled as follows: 100 shares for execution on
Nasdaq and 100 shares routed to DarkVenue A simultaneously at $10.01;
the remaining 800 shares are posted on the Nasdaq book (because it is a
DAY order). Once again, the order did not route to ARCA because it is
not a dark venue.
Proposed Rule 4758(a)(1)(A)(xiii) will provide that QCST is a
routing option under which orders check the System for available shares
and simultaneously route to select dark venues and to certain low cost
exchanges. If shares remain un-executed after routing, they are posted
on the book. Once on the book, should the order subsequently be locked
or crossed by another market center, the System will not route the
order to the locking or crossing market center. This strategy is also
intended to attract market participants who seek to save on trading
fees by only executing on the Exchange, on dark venues, or on no cost
and low cost exchanges.
For example, if the NBBO is $10.00-$10.01, and Nasdaq, DarkVenueA
and ARCA each offer 100 shares at $10.01, a QCST order to buy 1000
shares at $10.01 DAY will be handled as follows: 100 shares for
execution on Nasdaq and 100 shares routed to DarkVenue A simultaneously
at $10.01; the remaining 800 shares are posted on the Nasdaq book
(because it is a DAY order). The order did not route to ARCA because it
is neither a dark venue nor a no cost or low cost exchange. As a second
example, if the NBBO is $9.90-$10.00, with BYX offering 100 shares at
$10.00 and Nasdaq, DarkVenueA and ARCA each offer 100 shares at $10.01,
a QCST order to buy 1000 shares at $10.01 DAY will be handled as
follows: 100 shares routed to BYX at $10.00, 100 shares for execution
on Nasdaq and 100 shares routed to DarkVenue A simultaneously at
$10.01; the remaining shares are posted on the Nasdaq book (because it
is a DAY order). The order did not route to ARCA because it is neither
a dark venue nor a no cost or low cost exchange.
In all cases, these routing strategies are designed to comply with
SEC Rule 611 and the other provisions of Regulation NMS.\4\
Accordingly, both QDRK and QCST will honor Protected Quotations within
the meaning of Regulation NMS and will not route to any market centers
included in their respective routing table at a price inferior to an
available Protected Quotation. For example, if the NBBO is $9.90-
$10.00, with NYSE offering 100 shares at $10.00 and Nasdaq, DarkVenueA
and ARCA each offering 100 shares at $10.01, a QCST order to buy 1000
shares at $10.01 DAY will not be routed because NYSE's Protected
Quotation is not included in the routing table, by definition, for
QCST.
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\4\ 17 CFR 242.611.
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The Exchange will notify its membership of the implementation date,
which the Exchange expects will be on or about the 30th day after this
filing.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\5\ in general, and with
Sections 6(b)(5) of the Act,\6\ 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, because
Nasdaq will be better able to serve its customers and compete with
other markets by offering additional optional routing services.
Specifically, the two new routing strategies will provide market
participants with greater flexibility in routing orders without
developing order routing strategies on their own.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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 competes with many exchanges and other execution venues for the
execution of orders in equities. Market participants can choose where
to send their orders. Accordingly, the proposal is pro-competitive in
that it affords the Exchange the opportunity to compete with other
exchanges in terms of offering new routing strategies.
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 \7\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such 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. The Exchange has
provided the Commission written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date of
filing of the proposed rule change.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2013-014 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-014.
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
[[Page 9959]]
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2013-014 and should
be submitted on or before March 5, 2013.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03098 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P