Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Post-Only Order Type on NOM
Federal Register, Volume 77 Issue 149 (Thursday, August 2, 2012)
Federal Register Volume 77, Number 149 (Thursday, August 2, 2012)
Notices
Pages 46135-46137
From the Federal Register Online via the Government Printing Office www.gpo.gov
FR Doc No: 2012-18893
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-67518; File No. SR-NASDAQ-2012-089
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Post-Only Order Type on NOM
July 27, 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 July 20, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') a 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 CFR 240.19b-4.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
NASDAQ proposes to add an additional feature to the Post-Only Order type on the NASDAQ Options Market (``NOM''), as described further below.
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.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
The Exchange recently adopted a new order type called Post-Only Order.\3\ Thereafter, the Exchange amended the order type and delayed implementation until February 2012,\4\ and again until March 2012.\5\ It became available on March 5, 2012.
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\3\ See Securities Exchange Act Release No. 65761 (November 16, 2011), 76 FR 72230 (November 22, 2011) (SR-NASDAQ-2011-152).
\4\ See Securities Exchange Act Release No. 65929 (December 9, 2011), 76 FR 78057 (December 15, 2011) (SR-NASDAQ-2011-171).
\5\ See Securities Exchange Act Release No. 66347 (February 7, 2012), 77 FR 7639 (February 13, 2012) (SR-NASDAQ-2012-023).
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A Post-Only Order is an order that will not remove liquidity from the System and is to be ranked and executed on the Exchange or cancelled, as appropriate, without routing away to another market. Currently, Post-Only Orders are evaluated at the time of entry with respect to locking or crossing other orders as follows: (i) if a Post-
Only Order would lock or cross an order on the System, the order will be re-priced to $.01 below the current low offer (for bids) or above the current best bid (for offers) and displayed by the System at one minimum price increment below the current low offer (for bids) or above the current best bid (for offers); and (ii) if a Post-Only Order would not lock or cross an order on the System but would lock or cross the National Best Bid or Offer (``NBBO'') as reflected in the protected quotation of another market center, the order will be handled pursuant to Chapter VI, Section 7(b)(3)(C).\6\ Post-Only Orders received prior to the opening cross or after market close will be rejected. Post-Only Orders may not have a time-in-force designation of Good Til Cancelled or Immediate or Cancel.
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\6\ An order will not be executed at a price that trades through another market or displayed at a price that would lock or cross another market. An order that is designated by the member as routable will be routed in compliance with applicable Trade-Through and Locked and Crossed Markets restrictions. An order that is designated by a member as non-routable will be re-priced in order to comply with applicable Trade-Through and Locked and Crossed Markets restrictions.
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At this time, the Exchange proposes to permit firms to have their Post-Only Orders returned whenever the order would lock or cross the NBBO. Similarly, if the Post-Only Order would be placed on the book at a price other than its limit price, if the Participant so chooses, it will be returned. This includes situations where the Post-Only Order would lock or cross another order on the System, but also covers any situation where order is placed on the book at a price other than its limit price. The Exchange believes that this implementation will satisfy the needs of its Participants, because it will give them greater control over the circumstances in which their orders are executed. The Exchange will announce the implementation date to its membership by Options Trader Alert.
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Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Act \7\ in general, and furthers the objectives of Section 6(b)(5) of the Act \8\ 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. NASDAQ believes that permitting Participants to have Post-Only Orders returned is consistent with just and equitable principles of trade and protects investors and the public interest, because Participants, who have requested this feature, may prefer to submit the order to another options exchange, for fee or other reasons, rather than leave the order on NOM. Additionally, a Participant may expect the order to post at its limit price based on its view of the current state of the market. Due to its dynamic nature, however, the state of the market may change by the time the order is received by NOM, resulting in the order being posted at a price other than its limit price. In this case, the Participant would rather have the order returned so that it can reevaluate the market and make a new routing decision. In order to accommodate this request, NASDAQ is proposing the new feature for returning Post-Only Orders. The purpose of the Post-Only Order is to avoid removing liquidity and the resulting execution costs; with the proposed ability to have the order returned, Participants should have greater control over the execution and display of such order.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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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 not necessary or appropriate in furtherance of the purposes of the Act.
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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.
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Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Because the 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 if consistent with the protection of investors and the public interest, the proposed rule change 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). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change along with a brief description and the text of 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \11\ normally does not become
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operative for 30 days after the date of its filing. However, Rule 19b-
4(f)(6) \12\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay, noting that doing so would immediately provide Participants with the option of having their Post-Only Orders returned under certain circumstances, as set forth in this proposal. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.\13\ Therefore, the Commission designates the proposal operative upon filing.
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ For purposes only of waiving the 30-day operative delay, the Commission has 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 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.
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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 rule-comments@sec.gov. Please include File Number SR-NASDAQ-2012-089 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-2012-089. 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., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 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-2012-089 and should be submitted on or before August 23, 2012.
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. 2012-18893 Filed 8-1-12; 8:45 am
BILLING CODE 8011-01-P
