[Federal Register Volume 79, Number 151 (Wednesday, August 6, 2014)]
[Notices]
[Pages 45860-45862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18582]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72736; File No. SR-NASDAQ-2014-075]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness To Correct Language in the
Text of Rule 4753
August 1, 2014.
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 July 22, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 U.S.C. 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend NASDAQ Rule 4753 to correct
imprecise language in the rule text. The text of the proposed rule
change is available at http://nasdaq.cchwallstreet.com/, at the
Exchange'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, 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
NASDAQ is amending the language of Rule 4753 to correct imprecise
language with respect to imbalance information disseminated prior to
the execution of the NASDAQ Halt Cross (the ``Halt Cross'' or
``Cross''). The NASDAQ Halt Cross is designed to provide for an
orderly, single-priced opening of securities subject to an intraday
halt, including securities that are the subject of an initial public
offering (``IPO''). Prior to the Cross execution, market participants
enter quotes and orders eligible for participation in the Cross, and
NASDAQ disseminates certain information regarding buying and selling
interest entered and the indicative execution price. The information
disseminated by NASDAQ is referred to in Rule 4753 as the ``Order
Imbalance Indicator'', but is sometime also referred to by NASDAQ and
by market participants as the ``Net Order Imbalance Indicator'' or
``NOII''.
At the time when the security is released for trading, the Halt
Cross will occur at the price that maximizes the number of shares of
trading interest eligible for participation in the Cross \3\ to be
executed. If there is more than one such price, the Cross will occur at
the price that minimizes any Imbalance, which is defined in the rule as
``the number of shares of Eligible Interest that may not be matched
with other order shares at a particular price at any given time.'' \4\
The NOII is disseminated every five seconds during a designated period
prior to the completion of the Halt Cross, in order to provide market
participants with information regarding the possible price and volume
of the Cross. The information includes the Current Reference Price,
which is the price at which the Cross would occur if it executed at the
time of the NOII's dissemination, and the number of shares of Eligible
Interest that would be paired at that price. Rule 4753 also provides
that the NOII includes ``the size of any Imbalance'' and ``the buy/sell
direction of any Imbalance'', as well as ``an indicator for `market
buy' or `market sell' '' ``[i]f marketable buy (sell) shares would
remain unexecuted above (below) [the Current Reference Price]''.
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\3\ ``Eligible Interest'' is defined as any quotation or any
order that may be entered into the system and designated with a
time-in-force of SIOC, SDAY, SGTC, MIOC, MDAY, MGTC, SHEX or GTMC.
These respective times-in-force are defined in Rule 4751.
\4\ Additional provisions of Rule 4753, not pertinent to this
proposed rule change, are used to determined the price in the event
that there is more than one price that minimizes any Imbalance.
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While the NOII does provide certain information regarding shares
that might not be executed in the Cross, the information provided is
not precisely described by the defined term ``Imbalance''. It appears,
however, that the original drafter of the rule concluded that because
the NOII does include certain information that might be generally
understood to concern imbalances, the defined term used for determining
the Cross price would also serve to describe the NOII. This conclusion
may have also been influenced by the text of Rules 4752 and 4754, which
describe the NASDAQ Opening Cross and the NASDAQ Closing Cross and
which accurately use a similar defined term to describe information
provided by the NOII for those crosses. However, the NOII for the Halt
Cross provides information about shares that might not be executed in
the Cross only when the `market buy' or `market sell' indicator
described in current Rule 4753(a)(2)(E)(iii) is being disseminated, in
which case the number of shares of Eligible Interest entered through
market orders that would not be executed in the Cross would be
disseminated.\5\ NASDAQ believes that the dissemination of imbalance
[[Page 45861]]
information focused on unmatched market orders because the Cross cannot
occur if not all market orders would be executed. Therefore, the
information is designed to solicit offsetting liquidity that would
allow the Cross to execute. NASDAQ further believes that the
information currently provided through the NOII is well understood by
market participants, and that as a result, a modification to the rule
text to clarify it will not result in any confusion or alteration in
expectations on the part of market participants.
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\5\ The information disseminated does not include marketable
limit orders.
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To address this issue in a comprehensive manner, NASDAQ is
proposing to adopt a new defined term--Market Order Imbalance--that
will be defined as ``the number of shares of Eligible Interest entered
through market orders that would not be matched with other order shares
at the time of the dissemination of an Order Imbalance Indicator.''
NASDAQ is then proposing to amend current Rule 4753(a)(2)(C) and (D) to
provide that the NOII includes the size and buy/sell direction of a
Market Order Imbalance, rather than an Imbalance. Finally, NASDAQ
proposes to delete Rule 4753(a)(2)(E)(iii), since it describes the buy/
sell direction of a Market Order Imbalance and is therefore
redundant.\6\
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\6\ NASDAQ is also proposing to eliminate current reserve
subsection (c) of the rule, and to delete several obsolete
references to the NASDAQ Imbalance Cross, which was otherwise
deleted from the rulebook by Securities Exchange Act Release No.
67678 (August 16, 2012), 77 FR 50738 (August 22, 2012) (SR-NASDAQ-
2012-094)
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \7\ in general, and furthers the objectives of
Section 6(b)(5),\8\ in particular, in that it is designed to promote
just and equitable principles of trade, 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 proposal is consistent with these purposes because it will ensure
that Rule 4753 clearly describes the information provided in the NOII
for the Halt Cross.
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\7\ 15 U.S.C. 78f(b).
\8\ 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
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Because the proposal is
designed merely to ensure that Rule 4753 clearly describes the
information provided in the NOII for the Halt Cross, it does not affect
competition in any respect.
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) \9\ of the Act and
Rule 19b-4(f)(6) \10\ thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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 the 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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A proposed rule change filed under Rule 19b-4(f)(6) of the Act \11\
normally does not become operative prior to 30 days after the date of
the filing. However, pursuant to Rule 19b-4(f)(6)(iii) of the Act,\12\
the Commission may designate a shorter time if such action is
consistent with the protection of investors and the public interest.
The Exchange has requested that the Commission waive the 30-day
operative delay so that the proposal may become operative immediately
upon filing. The Exchange believes that because the proposed rule
change is designed solely to correct and clarify rule text, the public
interest and protection of investors will be better served by
immediately implementing the proposed rule change.
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because waiver will clarify the rule immediately, which could prevent
investor confusion with respect to the rule. The Commission hereby
waives the 30-day operative delay and designates the proposed rule
change to be operative upon filing with the Commission.\13\
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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. 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-2014-075 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-2014-075. 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.,
[[Page 45862]]
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal offices 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-2014-
075, and should be submitted on or before August 27, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18582 Filed 8-5-14; 8:45 am]
BILLING CODE 8011-01-P