[Federal Register Volume 75, Number 201 (Tuesday, October 19, 2010)]
[Notices]
[Pages 64370-64371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26245]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63083; File No. SR-NASDAQ-2010-127]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ's Order Routing Rule
October 13, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 1, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``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 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing this proposed rule change to amend Rule 4758
to modify the SAVE routing option to reflect the expected launch of
NASDAQ OMX PSX (``PSX'') as a new venue for trading NMS stocks on
October 8, 2010. NASDAQ proposes to implement the proposed rule change
on October 8, 2010, or, if the Commission does not waive the 30-day
waiting period specified in Rule 19b-4(f)(6)(iii),\3\ on a date that is
30 days after the date of this filing. 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.
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\3\ 17 CFR 240.19b-4(f)(6)(iii).
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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 III below, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ is amending Rule 4758, which describes its order routing
processes, to modify the existing SAVE routing option. Under the SAVE
routing option, a market participant may specify that an order will
either (i) route to NASDAQ OMX BX (``BX''), check the NASDAQ book, and
then route to other venues on the SAVE System routing table, or (ii)
check the NASDAQ book first and then route to destinations on the SAVE
System routing table.\4\ Under the second option, the applicable
routing table includes BX, and as is the case with all market
destinations, the placement of BX on the routing table depends on
NASDAQ's ongoing assessments of factors such as latency, fill rates,
reliability, and cost. If shares remain un-executed after routing, they
are posted to the NASDAQ book and do not route out again. All routing
complies with the requirements of Rule 611 of Regulation NMS. Under
Rule 7018, NASDAQ passes through, without modification, applicable BX
fees or rebates. In the case of BX, this means that NASDAQ passes
through the $0.0001 per share executed credit paid by BX to market
participants when accessing liquidity. Thus, the routing strategy
provides market participants with the option of routing to a venue with
a negative execution cost before accessing liquidity on NASDAQ and
other venues. Market participants that wish to access NASDAQ before
routing to BX may also use the SAVE strategy, and will receive the same
pricing as those that opt to route to BX first, subject to the fact
that they are likely to have more shares executed on NASDAQ, at a
higher cost, than those that use SAVE to route to BX first.
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\4\ Under Rule 4758, the ``System routing table'' is defined as
the proprietary process for determining the specific trading venues
to which the NASDAQ System routes orders and the order in which it
routes them. The definition reflects the fact that NASDAQ, like
other trading venues, maintains different routing tables for
different routing options and modifies them on a regular basis to
reflect assessments about the destination markets. Such assessments
consider factors such as a destination's latency, fill rates,
reliability, and cost. Accordingly, the definition specifies that
NASDAQ reserves the right to maintain a different routing table for
different routing options and to modify routing tables at any time
without notice. At present, all System routing tables include NASDAQ
OMX BX (``BX''), and it is expected that they will be modified also
to include PSX. Thus, all routed orders have the opportunity to
route to this venue, with the exception of DOT orders routed
directly to the NYSE or NYSE Amex opening or closing processes and
directed orders that are directed to route to venues other than BX.
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NASDAQ is amending the SAVE strategy to provide that in
circumstances where a market participants [sic] opts to route to BX
before checking the NASDAQ book, the order will also route to PSX after
BX but before checking NASDAQ. PSX will be charging $0.0013 per share
executed to access liquidity, a higher rate than BX, but half the fee
charged by NASDAQ itself to access liquidity. Moreover, NASDAQ recently
amended Rule 7018 to provide that orders routed to PSX using the SAVE
strategy will receive a pass-through of applicable charges.
Accordingly, NASDAQ believes that it is appropriate to amend the
strategy, to give market participants the option of routing to these
two low cost venues before accessing NASDAQ. As is currently the case,
however, members will also have option of checking NASDAQ first using
the strategy, in which case they will still receive pass through
pricing if their orders are subsequently routed to BX or PSX.
2. Statutory Basis
NASDAQ 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. The proposed
change to modify the SAVE routing will provide market participants with
greater flexibility in routing orders to BX and PSX, as low cost
trading venues.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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[[Page 64371]]
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.
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) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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 filing of the proposed
rule change, or such shorter time as designated by the Commission.
Nasdaq has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \9\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. NASDAQ requests that
the Commission waive the 30-day operative delay because it currently
has the technological changes ready to support the proposed rule
change, and believes that the benefits of providing members with an
additional option for routing to a new low cost trading venue should
not be delayed. The Commission believes that waiving the 30-day
operative delay \10\ is consistent with the protection of investors and
the public interest and designates the proposal operative upon filing.
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\9\ 17 CFR 240.19b-4(f)(6).
\10\ 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule 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 e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-127 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-2010-127. 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,\11\ 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, 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-2010-127 and should
be submitted on or before November 9, 2010.
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\11\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26245 Filed 10-18-10; 8:45 am]
BILLING CODE 8011-01-P