[Federal Register Volume 76, Number 28 (Thursday, February 10, 2011)]
[Notices]
[Pages 7602-7604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2927]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63836; File No. SR-NASDAQ-2011-004]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 4758 To Add a New Routing Option, LIST
February 3, 2011.
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 January 24, 2011, The NASDAQ Stock Market LLC (the
``Exchange'' or ``NASDAQ'') 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 Exchange has designated the proposed rule change as
constituting a non-controversial rule change under Rule 19b-4(f)(6)
under the Act,\3\ which renders the proposal effective upon filing with
the Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
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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 NASDAQ
Rule 4758 to add a new routing option, LIST. The text of the proposed
rule change is available at http://nasdaqomxbx.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 those 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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add a routing strategy, LIST, that will
provide firms flexibility to participate in the opening and closing
processes of the primary listing markets and also take advantage of the
Exchange's liquidity during the remainder of the trading day. LIST is a
variation on a currently existing routing strategy, SKIP, but offers
increased sensitivity to the opening and closing crosses on securities'
primary listing markets.
Under LIST, an order received before the security's primary listing
market opening will participate in the primary listing market's opening
cross, after which any unexecuted shares will check the NASDAQ book.
The security's primary listing market is considered ``open'' after the
first of the following occurs: (1) The primary listing market returns
the order; (2) NASDAQ receives the first regular way print from the
primary; or (3) the time is 9:45 a.m.
Remaining shares will then be routed to Reg-NMS protected market
centers in accordance with the LIST System routing table,\4\ and then
return to be posted on the NASDAQ book.\5\ Similarly, LIST orders
entered after the primary listing market's opening process but prior to
3:58 p.m. will check the NASDAQ book, route in accordance
[[Page 7603]]
with the LIST System routing table, and then post to the NASDAQ book.
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\4\ As provided, in Rule 4758(a)(1)(A), the term ``System
routing table'' refers to the proprietary process for determining
the specific trading venues to which the System routes orders and
the order in which it routes them. NASDAQ reserves the right to
maintain a different System routing table for different routing
options and to modify the System routing table at any time without
notice.
\5\ Pursuant to NASDAQ Rule 4758(a)(1)(B), if a routed order is
returned, in whole or in part, that order will receive a new time
stamp reflecting the time of its return to the System.
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At 3:58 p.m., all LIST orders on the book will be sent to their
primary listing market, as ``day'' orders, to participate in the
closing cross. LIST orders entered at or after 3:58 p.m. but before 4
p.m. will also be sent to their primary listing market for the closing
cross, after first checking the NASDAQ book and routing in accordance
with the LIST System routing table.\6\ Shares unexecuted in the closing
process will be posted to the NASDAQ book.
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\6\ Due to the possibility that orders received very near the
4:00 p.m. deadline (e.g. 3:59:59:999) will be routed to the primary
listing market but arrive after the security has closed, customers
are encouraged to submit their LIST orders prior to 3:58.
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LIST orders received after 4 p.m. will be posted to the NASDAQ
book. Where NASDAQ is the primary listing market for a LIST order
security, the order will be routed as described above, although rather
than route out for the open and/or close, it will participate in
NASDAQ's open and/or closing cross.
If trading in the security is stopped across all markets, LIST
orders will be sent to the primary listing market to participate in the
re-opening process. When normal trading resumes, the orders will be
cancelled off of the primary and posted on the NASDAQ book.
NASDAQ has designed LIST to be Reg-NMS compliant, and believes that
LIST, like all NASDAQ routing strategies, conforms to Reg-NMS
requirements. LIST orders may not be designated as MGTC or SGTC.
The proposed LIST option is similar to two order types utilized by
NYSE Arca, as established by SR-NYSEArca 2009-56: \7\ The ``Primary
Until 9:45 Order'' and the ``Primary After 3:45 Order.'' NASDAQ's LIST
order type combines these two separate NYSE Arca routing options into a
single order type. In addition, under a LIST routing strategy, unlike
under its NYSE Arca counterparts, orders will be removed from the
primary listing market upon the primary listing market's open rather
than at the 9:45 cutoff time.
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\7\ Securities Exchange Act Release No. 60256 (July 7, 2009), 74
FR 33489 (July 13, 2009) (SR-NYSEArca-2009-56).
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This rule change also introduces fees for the new LIST routing
strategy. The fees for LIST orders that participate in the open or
closing process at the securities' primary listing market are the fees
charged to Nasdaq by those venues, passed through to the member.
Specifically, the fee for LIST orders that participate in the NYSE
closing process is $0.00085 per share executed, while the fee for
orders participating in the opening process or the re-opening process
after trading is halted across all markets is $0.0005 per share
executed. The fee for LIST orders and DOT orders \8\ participating in
the NYSE opening process is subject to a $10,000 per month per member
cap. The fee for LIST orders that participate in the NYSEAmex closing
process is $0.00085 per share executed, while the fee for orders
participating in the opening process or the re-opening process after
trading is halted across all markets is $0.0005 per share executed. The
fee for LIST orders that participate in the NYSEArca closing process or
the re-opening process after trading is halted across all markets is
$0.0010 per share executed, while the fee for orders participating in
the opening process is $0.0005 per share executed. The fee for LIST
orders participating in the NYSEArca opening process is subject to a
$10,000 per month per member cap. LIST orders that participate in
NASDAQ's opening, closing, and halt re-opening processes are charged
NASDAQ's usual fees for those processes, as provided in Rule 7018(d)
and (e).
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\8\ DOT orders are an existing order type that is also eligible
to participate in the NYSE opening process.
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LIST orders that execute at venues other than NASDAQ, but not in
the opening or closing processes, are charged $0.0030 per share
executed, and orders that execute in NASDAQ outside of its opening and
closing processes are charged NASDAQ's regular execution fee, which is
also $0.0030 per share executed. Because LIST orders have the potential
to post at NYSEArca or NYSEAmex and then be routed to other venues by
those exchanges, NASDAQ is also adding language stipulating that it
will pass on to its member any routing fees charged to it by NYSEArca
or NYSEAmex. Similar language is already in Rule 7018 with respect to
routing charges assessed by NYSE.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\9\ in general, and with
Sections 6(b)(5) of the Act,\10\ 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 Exchange
believes that the proposed routing option will accomplish those ends by
providing more flexible options, insomuch as it offers a means for
NASDAQ members to route to the opening and closing processes of U.S.
listing venues, while also allowing unexecuted shares to route to other
trading venues and post on the NASDAQ book.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
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The rule change is also consistent with Section 6(b)(5) of the
Act,\11\ in that it provides for the equitable allocation of reasonable
dues, fees and other charges among members and issuers and other
persons using any facility or system which NASDAQ operates or controls.
The fees assessed for a LIST order to participate in the open and
closing of the security's primary listing market are based on the fees
and rebates that are charged and offered to NASDAQ by the exchanges to
which it routes. As such, a member will pay the same fees for
participation in the opening and closing of the security's primary
listing market when using LIST as it would if it went to that venue
directly. A member will also pay the same fee for executing at venues
other than NASDAQ outside the open or close under LIST as it would
under alternative NASDAQ routing strategies, including STGY, SCAN,
SKNY, and SKIP. Finally, LIST orders that participate in NASDAQ's
opening and closing processes are charged NASDAQ's usual fees for those
processes, as provided in Rule 7018(d) and (e). In sum, the LIST order
fees are set to reflect NASDAQ's routing costs while offering members a
routing option they have requested. Use of the routing option is, of
course, entirely voluntary.
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\11\ 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
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.
[[Page 7604]]
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 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)
thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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 under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission
may 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 so that the proposal
may become operative immediately upon filing. The Exchange states that
it expects to have the technological changes in place to support the
proposed rule change by February 7, 2011, and believes that the
benefits to market participants expected from the rule change should
not be delayed. The Exchange believes that the rule change will reduce
the messaging traffic that is now required to achieve the same result,
and thus contribute to a more efficient public market.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 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.
The Commission notes that the proposed routing strategy is similar to
routing order types that were implemented by NYSE Arca.\16\ Therefore,
the Commission designates the proposal operative upon filing.\17\
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\16\ Securities Exchange Act Release No. 60256 (July 7, 2009),
74 FR 33489 (July 13, 2009) (SR-NYSEArca-2009-56).
\17\ For purposes only of waiving the operative delay for this
proposal, 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.
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-2011-004 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-2011-004. 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 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-2011-004 and should be submitted on or before March 3, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-2927 Filed 2-9-11; 8:45 am]
BILLING CODE 8011-01-P