[Federal Register Volume 75, Number 162 (Monday, August 23, 2010)]
[Notices]
[Pages 51859-51861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20818]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62735; File No. SR-NASDAQ-2010-101]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Delete Rule 4770 in Its Entirety and To Eliminate a Related Reference
From the Rules
August 17, 2010.
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 August 10, 2010, The NASDAQ Stock Market LLC (``NASDAQ'') 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 the
Substance of the Proposed Rule Change
NASDAQ is proposing to delete Rule 4770 in its entirety from the
NASDAQ rulebook and to also eliminate a reference to Rule 4770 from
Rule 4751(f)(13). The text of the proposed rule change is below.
Proposed new language is italicized and proposed deletions are in
[brackets].
* * * * *
4751. Definitions
The following definitions apply to the Rule 4600 and 4750 Series
for the trading of securities listed on Nasdaq or a national
securities exchange other than Nasdaq.
(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)--(12) No change.
(13) ``Collared Orders'' are all Unpriced Orders except: (1)
Market On Open Orders as defined in Rule 4752; (2) Market On Close
Orders as defined in Rule 4754; or (3) Unpriced Orders included by
the System in any Nasdaq Halt Cross or Nasdaq Imbalance Cross, each
as defined in Rule 4753[; or (4) Unpriced Orders that are Reference
Price Cross Orders as defined in Rule 4770]. Any portion of a
Collared Order that would execute (either on NASDAQ or when routed
to another market center) at a price more than $0.25 or 5 percent
worse than the NBBO at the time when the order reaches the System,
whichever is greater, will be cancelled.
(g)--(i) No change.
* * * * *
4770. Reserved[Nasdaq Crossing Network
(a) Definitions. For the purposes of this rule the term:
(1) ``Nasdaq Reference Price Cross'' shall mean the process for
executing orders at a predetermined reference price at a randomly
selected point in time during a five-second trading window beginning
at 10:45 a.m., 12:45 p.m. and 2:45 p.m. Eastern Time during the
regular hours session and at 4:30 p.m. during the after hours
session.
(2) ``Nasdaq Reference Price Cross eligible securities'' shall
mean Nasdaq-listed securities and securities listed on the New York
Stock Exchange, the American Stock Exchange or a regional exchange.
(3) (A) ``Reference Price Cross Order'' or ``RPC'' shall mean a
market or limit order to buy or sell in Nasdaq Reference Price
eligible securities that may be executed only during a Nasdaq
Reference Price Cross. RPC orders shall not be displayed and must be
designated with a time-in-force value to participate either:
(i) in the next scheduled regular hours cross with unexecuted
shares being immediately canceled back to the market participant
after that cross (NXT);
(ii) in all remaining crosses during the trading day with
unexecuted shares being immediately canceled back to the market
participant after the final regular hours cross (REG); or
(iii) in all remaining crosses in the current day with
unexecuted shares immediately canceled back to the market
participant after the after hours cross (ALX).
(B) Starting at 7:30 a.m. Eastern Time until the time of the
last after hours session Reference Price Cross, participants may
enter, cancel or correct RPC orders, but such orders shall not be
available for execution until the next eligible Reference Price
Cross. RPC orders must be entered in round lots with a minimum size
of one round lot and may designate a minimum acceptable execution
quantity. All RPC orders must be available for automatic execution.
(b) Processing of Nasdaq Reference Price Cross.
(1) Each Nasdaq Reference Price Cross shall occur during the
regular hours session or the after hours session window commencing
at such times as may be designated by Nasdaq upon prior notice to
market participants.
(2) Nasdaq Reference Price Crosses that occur during the regular
hours session shall be executed at the midpoint of the national best
bid and offer, trade reported without identifying the contra party,
and disseminated via the consolidated tape.
(3) Nasdaq Reference Price Crosses that occur during the after
hours session shall execute at the Nasdaq Official Closing Price for
Nasdaq-listed securities or at the official closing price of the
primary market for securities listed on the New York Stock Exchange,
the American Stock Exchange or a regional exchange, shall be trade
reported without identifying the contra party, and disseminated via
the consolidated tape.
(4) RPC orders will be allocated on a pro-rata basis, such that
shares will be allocated pro-rata in round lots to eligible orders
based on the original size of the order. If additional shares remain
after the initial pro-rata allocation, those shares will continue to
be allocated pro-rata to eligible orders until a number of round
lots remain that is less than the number of eligible orders. Any
remaining shares will be allocated to the order which has designated
the smallest minimum acceptable execution quantity. If more than one
such order exists, any remaining shares will be allocated to the
oldest eligible order. If the allocation to an eligible order would
be less than the minimum acceptable execution quantity for that
order, the order shall not be eligible for execution in that cross.
(5) If the reference price described in subparagraph (3) above
is outside the benchmarks established by Nasdaq by a threshold
amount at the time an after hours cross is scheduled to occur, the
Nasdaq Reference Price Cross shall not occur for that security.
Nasdaq management shall set and modify such benchmarks and
thresholds from time to time upon prior notice to market
participants.
[[Page 51860]]
(6) If the national best bid and offer is crossed at the time of
a Reference Price Cross during the regular hours session, the cross
shall be delayed for up to five minutes beyond the time the
Reference Price Cross was scheduled to occur and shall execute at
the midpoint of the national best bid and offer when the quote
becomes uncrossed. In the event the quote remains crossed beyond
five minutes after the time of the scheduled Reference Price Cross,
the cross will not occur and unexecuted NXT orders shall be returned
to market participants.
(7) If the national best bid and offer is locked at the time of
a Reference Price Cross during the regular hours session, the cross
shall execute at the lock price.
(8) If trading in a security is halted for regulatory or other
reasons at the time a cross is scheduled to occur, the cross will
not occur and all unexecuted NXT orders shall be returned to market
participants.]
* * * * *
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaq.com, on the Commission's Web site at
http://www.sec.gov, at the Exchange, and at the Commission's Public
Reference Room. A copy of this filing is available on the Exchange's
Web site at http://www.nasdaq.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, NASDAQ 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, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ is proposing to eliminate Rule 4770 in its entirety. Rule
4770 sets forth the rules applicable to the Nasdaq Crossing Network.
The Commission approved the Nasdaq Crossing Network on July 5, 2006.\3\
The Nasdaq Crossing Network provides an execution option to market
participants trading in NASDAQ and other exchange-listed securities
that facilitates the execution of trades quickly and anonymously. The
Nasdaq Crossing Network executes the Nasdaq Reference Price Cross, an
automated and random matching mechanism, at certain pre-determined
points during the day. All eligible orders for the Nasdaq Reference
Price Crosses are executed in accordance with a predetermined algorithm
at the NBBO midpoint on a pro-rata basis and at the NOCP or Primary
Market Close, as applicable, for post-close cross executions. The
likelihood that a participant will be able to execute all or some of
its orders in the Nasdaq Reference Price Cross is directly related to
the number of participants acting as counterparties in the cross at any
one time. NASDAQ notes that there is light participation in the Nasdaq
Reference Price Cross, and is therefore proposing to cease offering the
cross and to remove Rule 4770 from NASDAQ's rules. NASDAQ is also
eliminating reference to Rule 4770 from Rule 4751(f)(13).
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\3\ Securities Exchange Act Release No. 54248 (July 31, 2006),
71 FR 44738 (August 7, 2006) (SR-NASDAQ-2006-019). Prior to the
effective date of NASDAQ's operation as an exchange for NASDAQ-
listed securities, the rule governing the Nasdaq Crossing Network
had been approved as an NASD rule (NASD Rule 4716). Securities
Exchange Act Release No. 54101 (July 5, 2006), 71 FR 39382 (July 12,
2006) (SR-NASD-2005-140).
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2. Statutory Basis
NASDAQ believes the proposed rule change is consistent with the
provisions of Section 6 of the Act,\4\ in general and with Section
6(b)(5) of the Act,\5\ in particular, which requires that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest. The
proposed rule change is consistent with these requirements in that
NASDAQ has determined that it will eliminate an automated crossing
mechanism based on low usage and lack of customer demand, which negate
its usefulness in facilitating transactions in securities.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(5).
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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.
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
The proposed rule change is effective upon filing pursuant to
Section 19(b)(3)(A) of the Act and paragraph (f)(6) of Rule 19b-4
thereunder, in that the proposed rule change: (i) Does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) does not 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;
provided the self-regulatory organization has given 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, or such shorter time as designated by the Commission.
NASDAQ believes that the proposed rule change will eliminate a
little-used crossing process from NASDAQ's rules, which, because of the
low number of participants, does not benefit the price-discovery
process and overall market confidence in any material manner. NASDAQ
will remove Rule 4770 from its rules effective September 13, 2010.
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.
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 e-mail to [email protected]. Please include
File No. SR-NASDAQ-2010-101 on the subject line.
[[Page 51861]]
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 No. SR-NASDAQ-2010-101. This file
number should be included on the subject line if e-mail 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 such filing also will be available for
inspection and copying at the principal office of NASDAQ. 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 No. SR-NASDAQ-2010-101 and should be
submitted on or before September 13, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20818 Filed 8-20-10; 8:45 am]
BILLING CODE 8010-01-P