[Federal Register Volume 76, Number 80 (Tuesday, April 26, 2011)]
[Notices]
[Pages 23351-23352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-9971]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64312; File No. SR-NASDAQ-2011-053]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt an Order Price Protection Feature
April 20, 2011.
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 April 14, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') 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 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 the
Substance of the Proposed Rule Change
NASDAQ is filing with the Commission a proposal for the NASDAQ
Options Market (``NOM'') to amend Chapter VI, Trading Systems, to adopt
new Section 18, Order Price Protection.
This change is scheduled to be implemented on NOM on or about
August 1, 2011; the Exchange will announce the implementation schedule
by Options Trader Alert, once the rollout schedule is finalized.
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.
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 and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASDAQ has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to address risks to
market participants of human error in entering orders at unintended
prices. To that end, the Exchange has developed a program known as
Order Price Protection (``OPP''), which would prevent certain orders
from executing or being placed on the book at prices outside pre-set
standard limits. The System would reject such orders rather than
executing them automatically. The operation of the OPP, which is very
similar to PHLX Rule 1080.07, would be set forth in new Section 18 of
Chapter VI.
The OPP feature would prevent certain day limit, good til cancelled
or immediate or cancel orders at prices outside of certain pre-set
limits from being accepted by the System. OPP would apply to all
options, but would not apply to market orders or Intermarket Sweep
Orders. OPP would be operational each trading day after the opening
until the close of trading, except during trading halts. The Exchange
would also be able to temporarily deactivate OPP from time to time on
an intraday basis at its discretion if it determined that volatility
warranted deactivation. Participants would be notified of intraday OPP
deactivation due to volatility and any subsequent intraday reactivation
by the Exchange through the issuance of system status messages.
The OPP will help Participants control risk by checking each order,
before it is accepted into the System, against certain parameters
established by new Chapter VI, Section 18. It would compare price
instructions on the order against the current contraside National Best
Bid Offer (``NBBO''),\3\ and would automatically reject the order if it
is priced outside the range established in Section 18.
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\3\ See Chapter I, Section 1(a)(33).
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The range of permissible orders depends on whether the contra-side
of an incoming order is greater than $1.00, or equal to or less than
$1.00. If the NBBO on the contra-side of an incoming order were greater
than $1.00, orders with a limit more than 50% through such contra-side
NBBO would be rejected by the System upon receipt. For example, if the
NBBO on the offer side were $1.10, an order to buy options for more
than $1.65 would be rejected. Similarly, if the NBBO on the bid side
were $1.10, an order to sell options for less than $0.55 would be
rejected.
If the NBBO on the contra-side of an incoming order were less than
or equal to $1.00, orders with a limit more than 100% through such
contra-side NBBO would be rejected by the System upon receipt. For
example, if the NBBO on the offer side were $1.00, an order to buy
options for more than $2.00 would be rejected. However, if the NBBO of
the bid side of an incoming order to sell were less than or equal to
$1.00, the OPP limits set forth above would result in all incoming sell
orders being accepted regardless of their limit.
Like the PHLX's OPP, NOM's will be available for Participants'
orders, but not for market making.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the
[[Page 23352]]
objectives of Section 6(b)(5) of the Act \5\ 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, by
mitigating risks to market participants of human error in entering
orders at clearly unintended prices.
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\4\ 15 U.S.C. 78f(b).
\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
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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) \7\
thereunder.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 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.
The Exchange has satisfied this requirement.
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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-2011-053 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-2011-053. 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 website
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 offices 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-2011-053 and
should be submitted on or before May 16, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-9971 Filed 4-25-11; 8:45 am]
BILLING CODE 8011-01-P