
[Federal Register Volume 80, Number 143 (Monday, July 27, 2015)]
[Notices]
[Pages 44411-44413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18276]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75498; File No. SR-NASDAQ-2015-079]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
NOM Order Routing

July 21, 2015.
    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 July 13, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 proposes to amend Chapter VI (Trading Systems) at 
Section 11 (Order Routing), of the rules governing the NASDAQ Options 
Market (``NOM'' or ``Exchange''), to clarify the manner in which a SEEK 
Order will route again after an initial routing attempt to another 
market center.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, 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 these 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 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 Exchange's rules at Chapter VI, Section 11 provide for the 
manner in which orders submitted to the System \3\ will route to other 
market centers.\4\ The System provides two routing options pursuant to 
which orders are sent to other available market centers for potential 
execution, per the entering firm's instructions. The routing options 
are SEEK and SRCH. Routing options may be combined with all available 
order types and times-in-force, with the exception of order types and 
times-in-force whose terms are inconsistent with the terms of a 
particular routing option. The Exchange is seeking to clarify the 
manner in which a SEEK order will route again, after it is initially 
routed (``re-route'').\5\
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    \3\ The term ``System'' is defined in NOM Rules at Chapter VI, 
Section 1(a).
    \4\ Participants can designate orders as either available for 
routing or not available for routing. See Chapter VI, Sec. 11(a).
    \5\ If an order is only partially routed the portion that was 
not routed will be posted to the book.
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    SEEK is a routing option pursuant to which an order will first 
check the System for available contracts for execution. After checking 
the System for available contracts, orders are sent to other available 
market centers for potential execution, per the entering firm's 
instructions. When checking the book, the System will seek to execute 
at the price at which it would send the order to a destination market 
center.
    SRCH is a routing option pursuant to which an order will first 
check the System for available contracts for execution. After checking 
the System for available contracts, orders are sent to other available 
market centers for potential execution, per the entering firm's 
instructions. When checking the book, the System will seek to execute 
at the price at which it would send the order to a destination market 
center.
    Both SEEK and SRCH eligible unexecuted orders will continue to be 
routed utilizing a route timer. The SEEK or SRCH order will post to the 
book and will be routed after a time period (``Route Timer'') not to 
exceed one second as specified by the Exchange on its Web site provided 
that the order's limit price would lock or cross other market 
center(s).\6\ If, during the Route Timer, any new interest arrives 
opposite the order that is equal to or better than the ABBO \7\ price, 
the order will trade against such new interest at the ABBO price. 
Eligible unexecuted orders will be routed at the end of the Route Timer 
provided the order was not filled and the order's limit price would 
continue to lock or cross the ABBO. If an order was routed with either 
the SEEK or SRCH routing option, and has size after such routing, it 
will execute against contra side interest in the book, post in the 
book, and route again pursuant to the process described above, if 
applicable, if the order's limit price would lock or cross another 
market center(s).
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    \6\ Pursuant to Section 11(c) of Chapter VI, orders sent by the 
System pursuant to the SEEK and SRCH routing options to other 
markets would not retain time priority with respect to other orders 
in the System. If an order routed pursuant to SEEK or SRCH is 
subsequently returned, in whole or in part, that order, or its 
remainder, will receive a new time stamp reflecting the time of its 
return to the System.
    \7\ ABBO is the away market's best bid or offer.
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    With respect to SRCH Orders, if contracts remain un-executed after 
routing, they are posted on the book. Once on the book, should the 
order subsequently be locked or crossed by another market center, it 
will re-route. With SEEK orders, the rule currently states, if 
contracts remain un-executed after routing, they are posted on the 
book. Once on the book at the limit

[[Page 44412]]

price, should the order subsequently be locked or crossed by another 
market center, the System will not route the order to the locking or 
crossing market center.
    The Exchange seeks to amend the rule text in Chapter VI, Section 
11(a)(1)(A) to state, while, on the book at the limit price, should the 
order subsequently be locked or crossed by another market center, the 
System will not route the order to the locking or crossing market 
center. The purpose of this change is to make clear that the SEEK order 
will not re-route as long as that order is at the limit price. The SEEK 
order may re-route, after it has initially routed, when such order 
reprices.
    Example #1: By way of example, if an order is subject to Acceptable 
Trade Range \8\ (``ATR'') with a price band of 0.80 and the order book 
is as follows:

    \8\ The System will calculate an Acceptable Trade Range to limit 
the range of prices at which an order will be allowed to execute. 
The Acceptable Trade Range is calculated by taking the reference 
price, plus or minus a value to be determined by the Exchange. 
(i.e., the reference price - (x) for sell orders and the reference 
price + (x) for buy orders). Upon receipt of a new order, the 
reference price is the national best bid (NBB) for sell orders and 
the national best offer (NBO) for buy orders or the last price at 
which the order is posted whichever is higher for a buy order or 
lower for a sell order. See NASDAQ Rules at Chapter VI, Section 
10(7).
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[cir] Order 1: Buy SEEK order 27(10)
[cir] Order 2: Sell SEEK order 31 (10)
[cir] Order 3: Sell DNR order 29 (10)
Further, if NASDAQ's BBO is 27(10) x 29(10) and the away market is 
27(10) x 33 (10) with an NBBO of 27(20) x 29(10); then
    An incoming Order 4: Buy DNR 30 (100) triggers ATR and the 
following takes place within the order book:
     Order 4 first executes with Order 3 at 29(10)
     ATR timer starts, with Order 4 re-priced and displayed at 
29.80 (90)
     Exchange BBO becomes 29.80 (90) x 31 (10), offer 31 is 
non-firm
     Assume, during ATR timer, away market moves such that new 
away market is 31.10(10) x 33(10)
     After ATR processing concludes, Order 2 is repriced to be 
offered at 31.10 and displayed tick away at 31.20 to avoid locking/
crossing the market
     Exchange BBO becomes 30(90) x 31.20(10)
     After route timer, Order 2 routes to away market at 31.10.
    The Exchange proposes to add the following new sentence, ``SEEK 
orders will not be eligible for routing until the next time the option 
series is subject to a new opening or reopening.'' The purpose of this 
new sentence is to make clear that an opening and reopening will cause 
an order to be eligible for routing. The SEEK order will be treated as 
a new order and therefore will become subject to the routing process 
anew with an opening or reopening process, provided the order locks or 
crosses another market.
    Example #2: By way of example, presume a halt occurred on NOM with 
the following order book:
    [ssquf] Order 1: Buy SEEK Order is on the book at its limit price, 
2.00 (15).
    [ssquf] The related underlying is halted.
    [ssquf] Immediately following the halt, before NOM has re-opened 
the issue, the away market quotes at 1.95 (100) x 1.99 (100).
    [ssquf] Upon re-opening the issue on NOM, the SEEK order routes at 
1.99 (15). The System comes out of a halt with a new opening process 
and treats all orders as if they were new orders thus the SEEK order 
will re-route.
    The Exchange proposes to modify the existing sentence which states, 
``[o]nce on the book at the limit price, should the order subsequently 
be locked or crossed by another market center, the System will not 
route the order to the locking or crossing market center'' to ``[w]hile 
on the book at the limit price, should the order subsequently be locked 
or crossed by another market center, the System will not route the 
order to the locking or crossing market center.'' The Exchange believes 
that this modification reflects more accurate rule text. The Exchange 
believes that market participants are aware of the manner in which the 
SEEK order operates as there has been no System change with respect to 
the function of the SEEK order. The proposed language serves to make 
clear that a SEEK order will not re-route while at its limit price, but 
once that order is re-priced, it may route again.\9\
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    \9\ See Example #1.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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, by amending the rule text to clarify the existing rule text 
and provide the circumstances when a SEEK order would be eligible to 
route, such as (1) when the order is repriced, after it is posted to 
the order book, at a price not at its limit price; and (2) when an 
opening or reopening (after a halt) occurs such that the System views 
these orders as new orders and they become subject to routing anew. The 
Exchange believes that these amendments provide transparency and 
specificity to the Rules and the corrected rule text protects investors 
and the public interest by reducing the potential for investor 
confusion.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the additional language benefits other market 
participants who may not be currently familiar with the routing options 
on NOM to understand the difference between the two routing options 
offered by the Exchange. While the Exchange is modifying the rule text, 
it notes that the System will continue to operate as it does today. 
Rather, the proposed rule text seeks to bring additional clarity to the 
current rule text to clarify when a SEEK order will re-route to another 
market center after it has initially routed. The Exchange believes this 
language corrects the current rule text and more clearly differentiates 
an order routed pursuant to the SEEK routing option as compared to the 
SRCH routing option.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change does 
not create an undue burden on competition as the proposed rule change 
is not a substantive change in that the System will continue to operate 
as it does today. The Exchange desires to amend the current rule text 
to provide two circumstances when the SEEK order would re-route after 
it has initially routed to an away market center. The Exchange believes 
that this proposed rule text will clarify the current rule which states 
that SEEK order will not re-route once it is on the book at the limit 
price. The Exchange is seeking to provide greater transparency in its 
rules. The amendments would apply to all market participants in the 
same manner.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section

[[Page 44413]]

19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
Because the 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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ 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 proposed 
rule change may become operative immediately. The Exchange states that 
the proposal would apply to all market participants in the same manner 
and believes that market participants would benefit from the additional 
clarity the Exchange asserts the proposal would provide in regard to 
the circumstances when a SEEK order is eligible to re-route. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposal provides further clarity regarding the routing 
functionality of the Exchange's SEEK orders, which the Commission 
believes will benefit investors and market participants who use such 
orders to accomplish their trading objectives. For this reason, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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 change 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-079 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2015-079. 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 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-2015-079 and should 
be submitted on or before August 17, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18276 Filed 7-24-15; 8:45 am]
BILLING CODE 8011-01-P


