
[Federal Register Volume 80, Number 123 (Friday, June 26, 2015)]
[Notices]
[Pages 36865-36867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15686]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75252; File No. SR-NASDAQ-2015-024]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendment No. 1, To 
Amend and Restate Certain Nasdaq Rules That Govern the Nasdaq Market 
Center

June 22, 2015.

 I. Introduction

    On March 16, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend and restate certain Nasdaq rules that 
govern the Nasdaq Market Center in order to provide a clearer and more 
detailed description of certain aspects of its functionality. The 
proposed rule change was published for comment in the Federal Register 
on March 26, 2015.\3\ The Commission received no comment letters 
regarding the proposed rule change. On May 6, 2015, the Commission 
extended to June 24, 2015, the time period in which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether the proposed rule change should be 
disapproved.\4\ On June 15, 2015, the Exchange filed Amendment No. 1 to 
the proposed rule change.\5\ This order approves the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74558 (March 20, 
2015), 80 FR 16050 (``Notice'').
    \4\ See Securities Exchange Act Release No. 74881, 80 FR 27216 
(May 12, 2015).
    \5\ In Amendment No. 1, the Exchange proposed to correct 
typographical errors in the original filing, further improve the 
clarity of certain rule language, and include additional explanation 
with regard to the purpose of the proposed rule change.
---------------------------------------------------------------------------

II. Description of the Amended Proposal

    The Exchange proposes to amend and restate certain rules governing 
the Nasdaq Market Center in order to provide additional detail and 
clarity regarding its order type functionality.\6\ This proposed rule 
change is a response to Chair White's request that each self-regulatory 
organization (``SRO'') conduct a comprehensive review of the operation 
of each of the order types that it offers to members.\7\
---------------------------------------------------------------------------

    \6\ See Notice, 80 FR at 16050.
    \7\ Id.; see also Mary Jo White, Chair, Commission, Speech at 
the Sandler O'Neill & Partners, L.P. Global Exchange and Brokerage 
Conference (June 5, 2014), available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312.
---------------------------------------------------------------------------

    While the Exchange believes that its current rules and other public 
disclosures provide a comprehensive description of the operation of the 
Nasdaq Market Center and are sufficient for members and the investing 
public to have an accurate understanding of its market structure,\8\ it 
also acknowledges that a restatement of certain rules will further 
clarify the operation of its system.\9\ For instance, Nasdaq believes 
that adding examples of order type operation to its rules will promote 
greater understanding of Nasdaq's market structure.\10\ In addition, 
Nasdaq asserts that certain functionality previously described as an 
``order type'' is more precisely characterized as an attribute that may 
be added to a particular order.\11\ Accordingly, this proposed rule 
change distinguishes between ``Order Types'' and ``Order Attributes,'' 
and provides descriptions

[[Page 36866]]

of the Order Attributes that may be attached to particular Order 
Types.\12\
---------------------------------------------------------------------------

    \8\ See Notice, 80 FR at 16050.
    \9\ Id.
    \10\ Id.
    \11\ Id.
    \12\ Id.
---------------------------------------------------------------------------

    Currently, Nasdaq Rule 4751 sets forth most of the rules governing 
Nasdaq's Order Types and Order Attributes, as well as other defined 
terms that pertain to trading securities on the Exchange.\13\ Nasdaq 
proposes to restate and amend Rule 4751 as new Rule 4701.\14\ Nasdaq 
also proposes to amend the definitions pertaining to Order Types and 
Order Attributes and to relocate them from Rule 4751 to new Rules 4702 
(Order Types) and 4703 (Order Attributes), respectively.\15\ In 
addition, Nasdaq proposes certain conforming and technical changes to 
Rules 4752, 4754-4758, and 4780.\16\
---------------------------------------------------------------------------

    \13\ See Rule 4751.
    \14\ See proposed Rule 4701.
    \15\ See proposed Rules 4702 and 4703.
    \16\ Nasdaq states that, in subsequent proposed rule changes, it 
plans to restate the remainder of its Rules numbered 4752 through 
4780 so that they appear sequentially following Rule 4703. See 
Notice, 80 FR at 16050.
---------------------------------------------------------------------------

    Nasdaq represents that, except where specifically stated otherwise, 
all proposed rules are restatements of existing rules and are not 
intended to reflect substantive changes to the rule text or the 
operation of the Nasdaq Market Center.\17\ Proposed Rule 4702 related 
to Order Types contains definitions and descriptions of Price to Comply 
Orders, Price to Display Orders (referred to as ``Price to Comply Post 
Orders'' in current Rule 4751),\18\ Non-Displayed Orders, Post-Only 
Orders, Midpoint Peg Post-Only Orders, Supplemental Orders, Market 
Maker Peg Orders, Market on Open Orders, Limit on Open Orders, Opening 
Imbalance Only Orders, Market on Close Orders, Limit on Close Orders, 
and Imbalance Only Orders. Proposed Rule 4703 related to Order 
Attributes contains definitions and descriptions of time-in-force 
(``TIF'') modifiers, order size, order price, pegging, minimum 
quantity, routing, discretion, reserve size, attribution, intermarket 
sweep order (``ISO'') designation, display, and participation in the 
Nasdaq opening cross or closing cross.\19\
---------------------------------------------------------------------------

    \17\ Id.
    \18\ Id. at 16054 n.29.
    \19\ The Notice contains additional details related to proposed 
Rules 4702 and 4703. See Notice, 80 FR at 16051-69.
---------------------------------------------------------------------------

    In Amendment No. 1, the Exchange proposes to add language further 
explaining the operation of the following order types: Post-Only 
Orders; orders with a time-in-force of IOC, including Routable Orders 
and Post-Only Orders; Market Maker Peg Orders; orders with Midpoint 
Pegging, Primary Pegging or Market Pegging; Midpoint Peg Post-Only 
Orders; orders designated with both Pegging and Routing attributes; 
Minimum Quantity Orders; and orders designated with a reactive routing 
strategy.\20\ For example, the Exchange states that for Order Types 
that list both Pegging and Routing as possible Order Attributes, the 
two Order Attributes may be combined since Pegging serves to establish 
the price of the order, while Routing establishes the market center(s) 
to which the system's routing functionality may direct a routed order 
if liquidity is available at that price.\21\ The Exchange also proposes 
to add further specification regarding the availability of certain 
order types only through certain communication protocols.\22\ For 
example, the Exchange states that a Post-Only Order with a TIF of IOC 
may not be entered through the RASH, QIX, or FIX protocols.\23\ In 
addition, the Exchange proposes to add language stating that one or 
more Order Attributes may be assigned to a single order, but if the use 
of multiple Order Attributes would result in contradictory 
instructions, the system will reject the order or remove non-conforming 
Order Attributes.\24\


---------------------------------------------------------------------------

    \20\ See Amendment No. 1.
    \21\ Id.
    \22\ Id.
    \23\ Id.
    \24\ Id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\25\ In particular, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\26\ which 
requires, among other things, that the rules of a national securities 
exchange be 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, 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; and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \25\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that the Exchange believes that the proposal 
is consistent with section 6(b)(5) of the Act because the reorganized 
and enhanced descriptions of its Order Types, Order Attributes, and 
related System functionality should promote just and equitable 
principles of trade and perfect the mechanisms of a free and open 
market and the national market system by providing greater clarity 
concerning certain aspects of the System's operations.\27\ In addition, 
the Commission notes that Nasdaq believes that the proposed rule change 
should contribute to the protection of investors and the public 
interest by making Nasdaq's rules easier to understand.\28\ Further, 
Nasdaq believes that additional specificity in its rules will promote a 
better understanding of Nasdaq's operation, thereby facilitating fair 
competition among brokers and dealers and among markets.\29\
---------------------------------------------------------------------------

    \27\ See Notice, 80 FR at 16069.
    \28\ Id.
    \29\ Id.
---------------------------------------------------------------------------

    The Commission notes that, according to the Exchange, the proposal 
does not add any new functionality but instead re-organizes the 
Exchange's order type rules and provides additional detail regarding 
the order type functionality currently offered by the Exchange. Based 
on the Exchange's representation, the Commission believes that the 
proposed rule change does not raise any novel regulatory considerations 
and should provide greater specificity, clarity and transparency with 
respect to the order type functionality available on the Exchange. In 
addition, the Commission notes that the Exchange's proposed rule 
changes provide additional detail related to functionality for certain 
order types and the handling of orders during initial entry and after 
posting to the Nasdaq Book. Accordingly, the Commission believes that 
this proposed rule change should provide greater transparency with 
respect to the Exchange's order type functionality. For these reasons, 
the Commission believes that the proposal should help to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, 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 Commission finds good cause to approve the filing, as amended 
by Amendment No. 1 to the proposed rule change, prior to the thirtieth 
day after

[[Page 36867]]

the date of publication of notice of filing thereof in the Federal 
Register. The proposed amendments should further increase the 
Exchange's transparency with respect to the operation of various order 
types and modifiers, and serve to enhance investors' understanding of 
the tools available with respect to the handling of their orders. 
Accelerated approval would allow the Exchange to update its rule text 
immediately, thus providing users with greater clarity with respect to 
the use and potential use of functionality offered by the Exchange. In 
addition, the initial proposal was open for comment for twenty-one days 
after publication and generated no comment. Accordingly, the Commission 
believes that good cause exists, consistent with sections 6(b)(5) and 
19(b) of the Act,\30\ to approve the filing, as amended by Amendment 
No. 1 to the proposed rule change, on an accelerated basis.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(5); 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2015-024 on the subject line.

Paper Comments

     Send paper comments in triplicate to Robert W. Errett, 
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-024. 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 
10:00 a.m. and 3:00 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-2015-024 and should 
be submitted on or before July 17, 2015.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\31\ that the proposed rule change (SR-NASDAQ-2015-024) be, and it 
hereby is, approved, as amended.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(2).
    \32\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15686 Filed 6-25-15; 8:45 am]
 BILLING CODE 8011-01-P


