[Federal Register Volume 80, Number 12 (Tuesday, January 20, 2015)]
[Notices]
[Pages 2762-2763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00700]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74041; File No. SR-NASDAQ-2014-110]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change To Adopt NASDAQ Rule 7015(i) To Offer
the New IPO Workstation
January 13, 2015.
I. Introduction
On November 14, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to offer stand-alone access to the Exchange's IPO
Indicator service. The proposed rule change was published for comment
in the Federal Register on December 2, 2014.\3\ The Commission received
no comments on the proposal. This order approves the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 73683 (November 25,
2014), 79 FR 71490 (``Notice'').
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II. Description of the Proposal
The Commission recently approved a proposed rule change from the
Exchange to offer the IPO Indicator as an enhancement to the NASDAQ
Workstation at no additional cost.\4\ The Exchange now proposes to
adopt Exchange Rule 7015(i) to offer stand-alone access to the IPO
Indicator service (``IPO Workstation'') at no cost at this time.\5\
That is, a subscription to the full NASDAQ Workstation will not be
required to access the IPO Indicator for those subscribing to the IPO
Workstation.\6\
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\4\ See Securities Exchange Act Release No. 73950 (December 29,
2014), 80 FR 268 (January 5, 2015).
\5\ See Notice, supra note 3 at 71491.
\6\ See id. at 71492.
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The IPO Indicator, according to the Exchange, is designed to assist
member firms in monitoring their orders in the NASDAQ Halt Cross
process leading up to the launch of an initial public offering
(``IPO'').\7\ According to the Exchange, the NASDAQ Halt Cross
(``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 IPO.\8\ Prior to the Cross execution, the
Exchange states that market participants enter quotes and orders
eligible for participation in the Cross, and the Exchange disseminates
certain information regarding buying and selling interest entered and
the indicative execution price information, known as the Net Order
Imbalance Indicator (``NOII'').\9\ The Exchange further states that 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. According to the Exchange, the information provided in
the NOII message includes the Current Reference Price \10\ and the
number of shares of Eligible Interest.\11\
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\7\ See id. at 71491.
\8\ See id.
\9\ See id.
\10\ See Exchange Rule 4753(a)(3)(A). The Exchange describes the
Current Reference Price as the price at which the Cross would occur
if it executed at the time of the NOII's dissemination. See Notice,
supra note 3, at 71491.
\11\ See Exchange Rule 4753(a)(5) (defining Eligible Interest as
``any quotation or any order that has been entered into the system
and designated with a time-in-force that would allow the order to be
in force at the time of the Halt Cross'').
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The Exchange also disseminates information about the size and buy/
sell direction of an Imbalance,\12\ which the Exchange defines as the
number of shares of Eligible Interest with a limit price equal to the
Current Reference Price that may not be matched with other order shares
at a particular price at any given time.\13\ The Exchange states that
the disseminated information reflects all shares eligible for
participation in the Cross, regardless of time-in-force (including non-
displayed shares and reserve size) and is meant to indicate the degree
to which available liquidity on one or the other side of the market
would not be executed if the Cross were to occur at that time.
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\12\ See Exchange Rule 4753(a)(1).
\13\ See Notice, supra note 3, at 71491. The Exchange states
that it also disseminates a Market Order Imbalance, which the
Exchange defines 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 a NOII, if in fact
there are such unexecutable market order shares. See Exchange Rule
4753(a)(2). When there is a Market Order Imbalance, the Exchange
notes that it disseminates the imbalance and the buy/sell direction
of the imbalance. See Notice, supra note 3, at 71491.
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In the case of an IPO, the Exchange states that the Halt Cross
operates as follows: first, the underwriters to the IPO make a
determination to launch the IPO during the Pre-Launch Period \14\ when
the underwriters believe the security is ready to trade.\15\ Second,
once the underwriter informs the Exchange that it is ready to launch
the IPO, the NASDAQ system calculates the Current Reference Price at
that time (the ``Expected Price'') and displays it to the
underwriter.\16\ If the underwriter then approves proceeding, the
NASDAQ system conducts two validation checks: (1) The NASDAQ system
determines whether all market orders will execute in the cross; and (2)
whether the Expected Price and the price calculated by the Cross differ
by an amount in excess of the price band selected by the
underwriter.\17\ According to the Exchange, if either of the validation
checks fails, the security will not be released for trading and the
Pre-Launch
[[Page 2763]]
Period will continue until all requirements are met.\18\
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\14\ The Exchange explains that the Pre-Launch Period is the
second phase of a two-phase process that NASDAQ uses for launching
IPOs. See id. According to the Exchange, the Pre-Launch Period
follows a 15-minute Display Only Period and is of no fixed duration.
See id. In addition, the Exchange states that the NOII is
disseminated every five seconds during both periods. See id.
\15\ See id.
\16\ See id.
\17\ See Notice, supra note 3, at 71491.
\18\ See id. Alternatively, the underwriter may, with the
concurrence of the Exchange, determine to postpone and reschedule
the IPO. See id.
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The Exchange proposes to offer the IPO Indicator to provide
information about the number and price at which shares of a member
firm's orders entered for execution in an IPO Halt Cross (``IPO
shares'') would execute in an IPO if it were to price at the present
time.\19\ Under the proposal, the IPO Indicator will now be offered as
a stand-alone service and would use the NOII information of an IPO
security together with information about the member firm's orders on
NASDAQ in the IPO security.\20\ The Exchange notes that, similar to
accessing the IPO Indicator from the NASDAQ Workstation as the Exchange
currently offers,\21\ subscribing member firms will be able to access
the IPO Indicator from the main IPO Workstation screen.\22\ Under the
proposal, the Exchange states that member firms using the IPO Indicator
would be able to see the Current Reference Price, the number of paired
shares, the number of imbalance shares, the total number of IPO shares
the subscribing member firm has entered for execution in the IPO Halt
Cross, the nature of such shares (buy or sell), and the number of IPO
shares that would be executed in the Halt Cross at that time for each
of those categories.\23\ In addition, the Exchange states that
subscribing member firms using the IPO Indicator would also be able to
see details about its IPO shares presented by individual orders or
order blocks, which would include the number of IPO shares in a
particular order or order block, the number and percentage of IPO
shares of the order or order block that would be executed in the Halt
Cross if it occurred at any given time in the process, based on the
NOII disseminated every five seconds, and the price at which the order
or order block was submitted.\24\
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\19\ See id.
\20\ The Exchange states that the information provided by the
IPO Indicator is limited to the subscribing member firm's orders.
See id.
\21\ See supra note 4 and accompanying text.
\22\ See Notice, supra note 3, at 71491.
\23\ See id.
\24\ See id.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\25\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\26\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, 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, and Section 6(b)(8) of the Act,\27\ which requires
that the rules of the exchange do not impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the Act.
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\25\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\26\ 15 U.S.C. 78f(b)(5).
\27\ 15 U.S.C. 78f(b)(8).
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As described above, the Exchange proposes to adopt Exchange Rule
7015(i) to offer stand-alone access to the IPO Indicator. The
Commission notes that it recently approved a proposed rule change that
allows the Exchange to provide the IPO Indicator through the NASDAQ
Workstation.\28\ Offering the IPO indicator through the IPO Workstation
will provide all member firms that are interested in subscribing to the
IPO indicator a means to access it, at no cost at this time, in lieu of
paying for a full NASDAQ Workstation subscription.\29\ Accordingly, the
Commission believes that the proposed rule change adopting the IPO
Workstation is designed to protect investors and the public interest by
providing member firms with more information regarding their orders
submitted for participation in an IPO Halt Cross.
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\28\ See supra note 4 and accompanying text.
\29\ See Notice, supra note 3 at 71492. The Exchange notes that
not all member firms subscribe to the NASDAQ Workstation and
prospective users of the IPO indicator may not desire to pay for a
full NASDAQ Workstation subscription for the sole purpose of
assessing the IPO indicator.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-NASDAQ-2014-110) be, and it
hereby is, approved.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00700 Filed 1-16-15; 8:45 am]
BILLING CODE 8011-01-P