Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices 18589 

12 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60905 

(Oct. 30, 2009), 74 FR 57544 (Nov. 6, 2009)) (SR– 

NASDAQ–2009–033); Securities Exchange Act 

Release No. 57822 (May 15, 2008), 73 FR 29800 

(May 22, 2008)) (SR–NASDAQ–2008–045); 

Securities Exchange Act Release No. 57977 (June 

17, 2008), 73 FR 35429 (June 23, 2008) (SR– 

NASDAQ–2008–052). 

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 rulecomments@sec.gov. Please include File 

Number SR–Phlx–2011–32 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–Phlx–2011–32. 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 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 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–Phlx–2011–32, and should 

be submitted on or before April 25, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–7814 Filed 4–1–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64143; File No. SR– 

NASDAQ–2011–037] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change to 

Modify Chapter VI, Section 8 of the 

Exchange’s Rules 

March 29, 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 March 15, 

2011, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’), 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 NASDAQ. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

NASDAQ proposes to modify Chapter 

VI, Section 8 of the Exchange’s rules, 

dealing with the Nasdaq Opening Cross. 

Additionally, NASDAQ is proposing to 

establish a Halt Cross that is nearly 

identical to the modified Opening Cross 

on NOM. The Exchange proposes to 

implement these changes on or about 

May 31, 2011. 

The text of the proposed rule change 

is available at http:// 

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 

Nasdaq proposes to modify Chapter 

VI, Section 8 of the rules governing 

NOM, and in particular governing the 

opening of trading at the start of the 

trading day and at the resumption of 

trading following a halt. Since NOM 

was launched on March 31, 2008 

Nasdaq has monitored the operation of 

the market to identify instances where 

market efficiency can be enhanced.3

NASDAQ believes that the opening of 

the market, while currently quite 

effective, can be further enhanced, and 

that a Halt Cross would create a more 

orderly opening following a trading halt. 

First, NOM currently employs a series 

of tie-breakers that resolve instances 

where multiple prices satisfy the 

conditions for executing the cross. 

These tie-breakers govern the 

calculation of the Current Reference 

Price that is disseminated to market 

participants prior to the execution of a 

cross. The tie-breakers also govern the 

calculation of the actual cross price. The 

tiebreakers are criteria that operate in a 

hierarchy. If one and only one price 

satisfies the first criterion, the system 

has no need to move to the second. 

Conversely, if multiple prices satisfy the 

first criterion, the algorithm turns to the 

second criteria and if multiple prices 

satisfy the second criterion, the 

algorithm then turns to the third 

criterion. 

NASDAQ is proposing to eliminate 

what currently serves as the second tiebreaker that NOM employs to establish 

the Current Reference Price as set forth 

in Chapter VI, Section 8(a)(2(A)(ii) [sic] 

and the Cross price as set forth in 

subsection (b)(2)(B) of that Rule. This 

tie-breaker resolves price disputes based 

on minimizing order imbalances. In 

other words, under the current system, 

when more than one price satisfies 

equally the first condition for the 

Opening Cross, the system will choose 

that price which minimizes the order 

imbalance remaining if the cross were to 

be executed. 

NASDAQ has determined to eliminate 

this tie-breaker because it has not 

proven useful in augmenting price 

discovery prior to the cross or in 


Emcdonald on DSK2BSOYB1PROD with NOTICES
18590 Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices 

4NASDAQ states that the goal of NOM’s open is 

to attract as much liquidity as possible to interact 

with any orders that are marketable at the time of 

the open. NASDAQ believes that the change to post 

non-routable orders (at the NBBO) rather than 

disseminating additional imbalance messages 

provides more advertisement for the order because 

it is broadcast over the consolidated quote feed 

rather than just NASDAQ’s proprietary market data 

feeds. For routable orders NOM is continuing the 

current process of advertising the order(s) via an 

imbalance message on NASDAQ’s proprietary 

market data feeds rather than opening immediately 

and routing the order away. By doing this, 

NASDAQ’s goal is to get the order a price that is 

equal to or better than the away quoted price. See 

email from Jeffrey S. Davis, Vice President and 

Deputy General Counsel, NASDAQ OMX Group, 

Inc., to Carl E. Tugberk, Special Counsel, Division 

of Trading and Markets, Commission, dated March 

29, 2011. 

operating an effective opening cross. 

NASDAQ initially adopted the 

imbalance-based tie-breaker based upon 

its successful use in the equities 

opening cross. The imbalance-based tiebreaker has not performed well in the 

options cross during NASDAQ’s 

experience. First, imbalances occur less 

often in the options market. 

Additionally, in NASDAQ’s experience, 

such imbalances that do exist generally 

are much smaller in size than in the 

equities market. As a result, the size of 

an imbalance in an options cross rarely 

provides a meaningful basis for 

distinguishing between multiple prices 

at which a cross could occur. NASDAQ 

believes that elimination of this tie 

breaker will not hinder price discovery 

and will allow NASDAQ to focus the 

cross on the most relevant criteria. 

NASDAQ is also proposing to modify 

the ‘‘mid-point’’ tie-breaker for the price 

dissemination and cross calculation 

which are set forth in modified 

subsections 8(a)(2(A)(iii) [sic] and the 

Cross price as set forth in subsection 

(b)(2)(C). Rather than choosing the 

midpoint of the NBBO, as happens 

today, the exchange will choose a price 

that more accurately represents the 

supply and demand in the market at the 

time of reference price dissemination 

and/or auction execution. A minimum 

threshold price, based on the higher of 

the last crossed NOM offer or the NBB, 

will be chosen and a maximum 

threshold price, based on the lower of 

the last crossed NOM bid or the NBO. 

The midpoint (in $0.01 increments) of 

the minimum threshold price and 

maximum threshold price will be the 

price if this tiebreaker is reached. 

NASDAQ poses the following 

illustrations, each based on the 

assumption that other markets are open 

and NASDAQ is not: 

Example 1: 

NBBO: $1.80 × $1.90 

Pre Open NOM Book: 

Buy 

contracts 

Buy 

prices 

Sell 

prices 

Sell 

contracts 

20 .......... $2.00 $1.82 10 

1.86 10 

Opening Auction/Reference Price: 

$1.88—The midpoint of $1.86 and 

$1.90 

—The last crossed NOM offer of $1.86 

is used as the minimum price 

threshold because it is higher than 

the NBB of $1.80 

—The NBO of $1.90 is used as the 

maximum price threshold because 

it is lower than the last crossed 

NOM bid of $2.00 

Example 2: 

NBBO: $1.80 × $1.90 

Pre Open NOM Book: 

Buy 

contracts 

Buy 

prices 

Sell 

prices 

Sell 

contracts 

10 .......... $MKT $MKT 10 

Opening Auction Price: $1.85—The 

midpoint of $1.80 and $1.90 

—For the purpose of this tie-breaker, 

a price of $MKT is essentially 

infinity for buy orders and zero for 

sell orders 

—The NBB of $1.80 is used as the 

minimum price threshold because it 

is higher than the last crossed NOM 

offer at $MKT 

—The NBO of $1.90 is used as the 

maximum price threshold because 

it is lower than the lass [sic] crossed 

NOM bid at $MKT 

Example 3: 

NBBO: $1.80 × $1.90 

Pre Open NOM Book: 

Buy 

contracts 

Buy 

prices 

Sell 

prices 

Sell 

contracts 

10 .......... $1.84 $1.75 10 

Opening Auction Price: $1.82—The 

midpoint of $1.80 and $1.84 

—The NBB of $1.80 is used as the 

minimum price threshold because it 

is higher than the last crossed NOM 

offer of $1.75 

—The last crossed NOM bid of $1.84 

is used as the maximum threshold 

because it is lower than the NBB of 

$1.90 

NASDAQ believes that this formulation 

will improve price discovery and 

execution quality. 

Additionally, NASDAQ is proposing 

to modify subsection (a)(2)(E)(iii) which 

governs when an indicative message is 

disseminated with a price of ‘‘market.’’ 

First, such message will be 

disseminated when there is trading 

interest with a market price that is not 

offset, not when there is marketable 

interest. Second, whether NOM 

disseminates an indicative price of 

‘‘market’’ will not depend upon the 

available interest being priced lower or 

higher than the near or far clearing 

prices. NASDAQ believes that this 

formulation of ‘‘market’’ will reduce 

potential confusion about NASDAQ’s 

dissemination practices. 

NASDAQ is also proposing to modify 

subsection (b)(1) of Section 8 to provide 

increased calibration of the time at 

which imbalance and indicative price 

data will begin to be disseminated. 

Generally, NASDAQ has had positive 

experience and feedback in beginning 

indicative data dissemination at 9:25 

a.m. EST. Occasionally, however, 

NASDAQ has received participant 

feedback that an options class or classes 

would benefit from a different 

dissemination period due to the trading 

characteristics of that option. 

Accordingly, NASDAQ is proposing to 

calibrate the start time for data 

dissemination between 9:20 a.m. and 

9:28 a.m. The initial default time for 

dissemination to being will remain at 

9:25. NASDAQ believes that this 

calibration could benefit investors and 

poses little risk. When NASDAQ does 

change the start time for data 

dissemination, which will be rare, the 

new time of imbalance dissemination 

commencement would be published in 

advance and with equal access on the 

NASDAQ Trader Web site. 

Moreover, NASDAQ is proposing to 

modify subsection (b)(5) to clarify when 

an Order Imbalance Indicator will be 

disseminated just prior to the opening 

cross. Currently, any time an imbalance 

remains just prior to the opening cross, 

NASDAQ disseminates a final Order 

Imbalance Indicator. Under the 

proposed modified rule, NASDAQ will 

disseminate this final Order Imbalance 

Indicator only when the imbalance 

contains routable trading interest that is 

marketable against the NBBO. The 

exchange believes that non-routable 

interest is best served by being posted 

on the exchange after execution of the 

opening cross.4 Once the cross is 

executed and the order is posted, that 

trading interest will be disseminated as 

part of the exchange best bid or offer via 

the consolidated data feed. This broad 

dissemination will better advertise the 

trading interest and thereby increase the 

likelihood of an execution. 

Additionally, the exchange proposes to 

clarify that after the opening cross is 

executed, all orders in the imbalance 

will be cancelled, routed, or posted in 

accordance with the entering party’s 

instructions. 


Emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices 18591 

5When Nasdaq first proposed its options trading 

rules, it planned to resume trading by operating a 

‘‘Halt Cross,’’ which it originally described in 

Chapter VI, Section 8. Nasdaq later amended the 

proposed rules to remove the Halt Cross. See 

Securities Exchange Act Release Nos. 57478 (March 

12, 2008), 73 FR 14521 (March 18, 2008) (SR– 

NASDAQ–2007–004 and SR–NASDAQ–2007–080) 

(approval order regarding NOM Rules including 

Chapters III and XIV). 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(5). 

8 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

Finally, NASDAQ is proposing to reestablish an Opening Cross to be 

executed upon the termination of a 

trading halt.5 Having operated NOM for 

almost two years, NASDAQ has 

determined in its experience that an 

auction will provide a more orderly 

opening of the market after a halt. This 

is particularly true because NOM has 

attracted significantly higher levels of 

liquidity, an important ingredient for a 

successful cross. Accordingly, NASDAQ 

is proposing to modify Chapter V, 

Section 4 (Resumption of Trading After 

a Halt) and various subsections of 

Chapter VI, Section 8. The Opening 

Cross will operate in the same manner 

following a trading halt as it operates at 

the start of the trading day, including 

dissemination of the Order Imbalance 

Indicator, matching algorithm, and 

posing or routing of interest that 

remains unexecuted following 

execution of the opening cross. The 

Opening Cross for halted options will 

differ only in the time at which it occurs 

and the fact that that time is determined 

pursuant to Chapter V, Section 4. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 6 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 7

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. 

Nasdaq believes that the proposal is 

consistent with this standard because 

the proposed rule change is designed to 

improve execution quality at the critical 

opening of the market both at the start 

of the trading day and following a 

trading halt. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

A. By order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be 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, 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–037 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–2011–037. 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 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 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–2011–037, and 

should be submitted on or before April 

25, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–7836 Filed 4–1–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64144; File No. SR– 

NYSEAmex-2011–18] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing of 

Proposed Rule Change Relating to the 

Formation of a Joint Venture Between 

the Exchange, Its Ultimate Parent 

NYSE Euronext, and Seven Other 

Entities To Operate an Electronic 

Trading Facility for Options Contracts 

March 29, 2011. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on March 

23, 2011, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’ or 

‘‘SEC’’) the proposed rule change as 

described in Items I and II below, which 

Items have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


Emcdonald on DSK2BSOYB1PROD with NOTICES