16050 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

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

2 17 CFR 240.19b–4. 

3See 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. 

4Other definitions in current Rule 4751 are being 

superseded by descriptions of Order Types and 

Order Attributes in Rules 4702 and 4703, or are 

being eliminated because they are no longer used. 

The definition of ‘‘Directed Order,’’ which 

described a routing strategy rather than an Order 

Type, is being moved to Rule 4758 (Order Routing). 

In addition, Rule 4755 (Order Entry Parameters) is 

being deleted because the material contained 

therein is superseded by proposed Rules 4702 and 

4703. 

5 17 CFR 242.600. 

6The modified definitions of ‘‘Quotes’’ and 

‘‘Orders’’ are described below. The term 

‘‘Participant’’, which is being amended only to add 

a clarifying reference to Regulation NMS, means an 

entity that fulfills the obligations contained in Rule 

4611 regarding participation in the System, and 

includes Nasdaq ECNs, Nasdaq Market Makers, and 

Order Entry Firms. 

7As provided in proposed Rule 4703, a Displayed 

Order is an Order with a Display Order Attribute 

that allows its price and size to be disseminated to 

Participants. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74558; File No. SR– 

NASDAQ–2015–024] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market, LLC; Notice of 

Proposed Rule Change To Amend and 

Restate Certain Nasdaq Rules That 

Govern the Nasdaq Market Center 

March 20, 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 March 16, 

2015, 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 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 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 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 

Nasdaq proposes 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 

is responsive to the request of 

Commission Chair White that each selfregulatory organization (‘‘SRO’’) 

conduct a comprehensive review of 

each order type offered to members, and 

how it operates in practice.3 Nasdaq 

believes that its current rules and other 

public disclosures provide a 

comprehensive description of the 

operation of the Nasdaq Market Center, 

so that members and the investing 

public have an accurate understanding 

of its market structure. Nevertheless, 

Nasdaq has concluded that a 

restatement of certain rules will further 

enhance their clarity. In particular, 

Nasdaq believes that providing 

additional examples of order type 

operation in the rule text will promote 

greater understanding of Nasdaq’s 

market structure. In addition, Nasdaq 

notes that certain functionality added to 

its market in past years has been 

described as an ‘‘order type’’ but would 

be more precisely described as an 

attribute that may be added to a 

particular order. Accordingly, the 

restated rules will distinguish between 

‘‘Order Types’’ and ‘‘Order Attributes,’’ 

while providing a full description of the 

Order Attributes that may be attached to 

particular Order Types. Except where 

specifically stated otherwise, all 

proposed rules are restatements of 

existing rules and therefore do not 

reflect substantive changes in the rule 

text or in the operation of the Nasdaq 

Market Center. 

General Framework for Rule 

Restatement 

At present, most of the rules 

governing Nasdaq Order Types and 

Order Attributes are found in Rule 4751 

(Definitions). Nasdaq is proposing to 

restate Rule 4751 as Rule 4701, which 

is currently not in use, with certain 

amended definitions being adopted 

therein. Nasdaq is also proposing to 

remove definitions pertaining to Order 

Types and Order Attributes and adopt 

them as separate new Rules 4702 (Order 

Types) and 4703 (Order Attributes). 

While Nasdaq is also proposing certain 

conforming changes to other rules, in 

subsequent proposed rule changes 

Nasdaq plans to restate the remainder of 

the rules numbered 4752 through 4780 

so that they appear sequentially 

following Rule 4703. 

Definitions 

New Rule 4701 will adopt revised 

definitions applicable to the Rule 4000 

Series of the Nasdaq rules: 4

• The terms ‘‘Best Bid’’, ‘‘Best Offer’’, 

‘‘National Best Bid and National Best 

Offer’’, ‘‘Protected Bid’’, ‘‘Protected 

Offer’’, ‘‘Protected Quotation’’, and 

‘‘Intermarket Sweep Order’’ shall have 

the meanings assigned to them under 

Rule 600 under SEC Regulation NMS; 5

provided, however, that the terms ‘‘Best 

Bid’’, ‘‘Best Offer’’, ‘‘Protected Bid’’, 

‘‘Protected Offer’’, and ‘‘Protected 

Quotation’’ shall, unless otherwise 

stated, refer to the bid, offer, or 

quotation of a market center other than 

Nasdaq. The term ‘‘NBBO’’ shall mean 

the ‘‘National Best Bid and National 

Best Offer’’. 

• The term ‘‘Nasdaq Market Center,’’ 

or ‘‘System’’, which defines the 

components of the securities execution 

and trade reporting system owned and 

operated by The NASDAQ Stock Market 

LLC, is being modified to state that the 

System includes a montage for ‘‘Quotes’’ 

and ‘‘Orders’’, referred to as the 

‘‘Nasdaq Book’’, that collects and ranks 

all Quotes and Orders submitted by 

‘‘Participants’’.6 The definition is 

further being modified to make it clear 

that data feeds made available with 

respect to the Nasdaq Market Center 

disseminate depth-of-book data 

regarding Quotes and ‘‘Displayed’’ 

Orders 7 and also such additional 

information about Quotes, Orders, and 

transactions within the Nasdaq Market 

Center as shall be reflected in the 

Nasdaq Rules. 

• The term ‘‘Quote’’ is being modified 

to make it clear that a Quote is an Order 

with Attribution (as defined in Rule 

4703) entered by a Market Maker or 

Nasdaq ECN for display (price and size) 

next to the Participant’s MPID in the 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16051 

8The definition of a ‘‘System Security,’’ which is 

not being modified, includes ‘‘(1) all securities 

listed on Nasdaq and (2) all securities subject to the 

Consolidated Tape Association Plan and the 

Consolidated Quotation Plan except securities 

specifically excluded from trading via a list of 

excluded securities posted on 

www.nasdaqtrader.com.’’ 

9The proposed definition further notes that in 

certain contexts, times cited in the Nasdaq Rules 

may be approximate. For example, for a System 

Security in which the Nasdaq Opening Cross 

occurs, the first transactions executed during 

Market Hours will occur in the Nasdaq Opening 

Cross. However, because Nasdaq Opening Crosses 

for different System Securities occur sequentially 

rather than simultaneously, the first Market Hours 

transactions in a particular System Security are 

likely to occur during a brief period following 9:30 

a.m. ET, not precisely at 9:30 a.m. ET. 

10 It should be noted that Nasdaq Rule 4613(e), 

Nasdaq’s rule with respect to locked and crossed 

markets, as adopted pursuant to Rule 610(d) under 

Regulation NMS and approved by the Commission, 

applies only during Market Hours (approved in 

Securities Exchange Act Release No. 54155 (July 14, 

2006), 71 FR 41291 (July 20, 2006) (SR–NASDAQ– 

2006–001)). Note also that Rule 600 under 

Regulation NMS defines a ‘‘trade-through’’ as ‘‘the 

purchase or sale of an NMS stock during regular 

trading hours, either as principal or agent, at a price 

that is lower than a protected bid or higher than a 

protected offer.’’ ‘‘Regular trading hours’’ are 

defined, in pertinent part, as ‘‘the time between 

9:30 a.m. and 4:00 p.m. Eastern Time.’’ 17 CFR 

242.600. 

11Under Rule 4757, the order in which Orders on 

the Nasdaq Book are presented for execution against 

incoming Orders is determined first by price (with 

better priced Orders presented first). As among 

equally priced Orders, priority is determined by 

Display characteristics and timestamps. Thus, 

Displayed Orders at a given price are processed first 

based on their timestamps, with earlier Orders 

processed first. Next, Orders with a Non-Display 

Attribute (including the Non-Displayed portion of 

an Order with Reserve Size) are processed based on 

their respective timestamps. Finally, an incoming 

Order may be presented for potential execution 

against Supplemental Order (as described in Rule 

4757 and proposed Rule 4702(a)(6)). Nasdaq is 

amending Rule 4757 to remove an obsolete 

reference to Discretionary Orders. As provided in 

current Rule 4751(f)(1) and proposed Rule 4703(g), 

Orders with Discretion Attribute rest on the Nasdaq 

Book at a single price and generate an Order with 

a Time-in-Force of Immediate or Cancel under 

certain circumstances. Thus, an Order with a 

Discretion Attribute would not execute against an 

incoming Order with a price within its 

discretionary range. Nasdaq is amending Rule 4757 

to remove this reference and to make wording 

changes to improve the clarity of the rule. 

12These Order Types are described below and in 

proposed Rule 4702. 

13The Routing Order Attribute is described 

below, in proposed Rule 4703, and in current Rule 

4758. 

14Available Times-in-Force are described below 

and in proposed Rule 4703. 

Nasdaq Book. Accordingly, all Quotes 

are also Orders. 

• The definition of the term ‘‘Order’’ 

is being amended to mean an 

instruction to trade a specified number 

of shares in a specified System 

Security 8 submitted to the Nasdaq 

Market Center by a Participant. An 

‘‘Order Type’’ is a standardized set of 

instructions associated with an Order 

that define how it will behave with 

respect to pricing, execution, and/or 

posting to the Nasdaq Book when 

submitted to Nasdaq. An ‘‘Order 

Attribute’’ is a further set of variable 

instructions that may be associated with 

an Order to further define how it will 

behave with respect to pricing, 

execution, and/or posting to the Nasdaq 

Book when submitted to Nasdaq. The 

available Order Types and Order 

Attributes, and the Order Attributes that 

may be associated with particular Order 

Types, are described in Rules 4702 and 

4703. 

• The term ‘‘ET’’ means Eastern 

Standard Time or Eastern Daylight 

Time, as applicable. 

• The term ‘‘Market Hours’’ is being 

defined to mean the period of time 

beginning at 9:30 a.m. ET and ending at 

4:00 p.m. ET (or such earlier time as 

may be designated by Nasdaq on a day 

when Nasdaq closes early). The term 

‘‘System Hours’’ means the period of 

time beginning at 4:00 a.m. ET and 

ending at 8:00 p.m. ET (or such earlier 

time as may be designated by Nasdaq on 

a day when Nasdaq closes early). The 

term ‘‘Pre-Market Hours’’ means the 

period of time beginning at 4:00 a.m. ET 

and ending immediately prior to the 

commencement of Market Hours. The 

term ‘‘Post-Market Hours’’ means the 

period of time beginning immediately 

after the end of Market Hours and 

ending at 8:00 p.m. ET.9

• The term ‘‘marketable’’ with respect 

to an Order to buy (sell) means that, at 

the time it is entered into the System, 

the Order is priced at the current Best 

Offer or higher (at the current Best Bid 

or lower). 

• The term ‘‘market participant 

identifier’’ or ‘‘MPID’’ means a unique 

four-letter mnemonic assigned to each 

Participant in the Nasdaq Market 

Center. A Participant may have one or 

more than one MPID. 

• The term ‘‘minimum price 

increment’’ means $0.01 in the case of 

a System Security priced at $1 or more 

per share, and $0.0001 in the case of a 

System Security priced at less than $1 

per share. 

• The definition of the term ‘‘System 

Book Feed’’, which means a data feed 

for System Securities, is being amended 

to clarify that it is the data feed 

generally known as the TotalView ITCH 

feed. 

Order Types 

Proposed Rule 4702 provides that 

Participants may express their trading 

interest in the Nasdaq Market Center by 

entering Orders. The Nasdaq Market 

Center offers a range of Order Types that 

behave in the manner specified for each 

particular Order Type. Each Order Type 

may be assigned certain Order 

Attributes that further define its 

behavior. All Order Types and Order 

Attributes operate in a manner that is 

reasonably designed to comply with the 

requirements of Rules 610 and 611 

under Regulation NMS. Specifically, 

Orders are reasonably designed to 

prevent trade-throughs of Protected 

Quotations to the extent required by 

Rule 611 under Regulation NMS, and to 

prevent the display of quotations that 

lock or cross Protected Quotations to the 

extent required by Rule 610 under 

Regulation NMS.10 Each Order must 

designate whether it is to effect a buy, 

a long sale, a short sale, or an exempt 

short sale. 

Proposed Rule 4702 further provides 

that Nasdaq maintains several 

communications protocols for 

Participants to use in entering Orders 

and sending other messages to the 

Nasdaq Market Center: 

• OUCH is a Nasdaq proprietary 

protocol; 

• RASH is a Nasdaq proprietary 

protocol; 

• QIX is a Nasdaq proprietary 

protocol; 

• FLITE is a Nasdaq proprietary 

protocol; 

• FIX is a non-proprietary protocol. 

Except Where Otherwise Stated, All 

Protocols Are Available for All Order 

Types and Order Attributes 

Upon entry, an Order is processed to 

determine whether it may execute 

against any contra-side Orders on the 

Nasdaq Book in accordance with the 

parameters applicable to the Order Type 

and Order Attributes selected by the 

Participant and in accordance with the 

priority for Orders on the Nasdaq Book 

provided in Rule 4757.11 Thus, for 

example, a ‘‘Price to Comply Order’’ 

would be evaluated for potential 

execution in accordance with different 

criteria than a ‘‘Post-Only Order.’’ 12 In 

addition, the Order may have its price 

adjusted in accordance with applicable 

parameters and may be routed to other 

market centers for potential execution if 

designated as ‘‘Routable.’’ 13 The Order 

may then be posted to the Nasdaq Book 

if consistent with the parameters of the 

Order Type and Order Attributes 

selected by the Participant. For 

example, an Order with a ‘‘Time-inForce’’ of ‘‘Immediate or Cancel’’ would 

not be posted.14

Thereafter, as detailed in proposed 

Rules 4702 and 4703, and current Rule 

4758 (Order Routing), there are 

numerous circumstances in which the 

mstockstill on DSK4VPTVN1PROD with NOTICES

16052 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

15Accordingly, there are no circumstances in 

which an Order that was previously entered but not 

displayed on the Nasdaq Book would be displayed 

without also receiving a new timestamp, and thus 

no possibility for a Participant to ‘‘jump the queue’’ 

with respect to other Orders. 

Nasdaq is amending Rule 4756 to make it clear 

that the redesignation of a sell Order as a long sale, 

short sale, or exempt short sale can be done only 

with respect to Orders entered through OUCH or 

FLITE; Orders entered through RASH, QIX, or FIX 

would have to be cancelled and reentered to change 

their designation. Similarly, Rule 4756 is being 

amended to clarify that modification of an Order by 

the Participant to decrease its size is not possible 

with respect to an MOO Order, an LOO Order, an 

OIO Order, an MOC Order, an LOC Order, an IO 

Order, or a Pegged Order (including a Discretionary 

Order that is Pegged). Such an Order would have 

to be cancelled and reentered by the Participant to 

reduce its size. 

16The Pegging Order Attribute adjusts the price 

of the Order based on changes in the NBBO and is 

described below and in proposed Rule 4703. 

17The Reserve Size Order Attribute is described 

below and in Rule 4703. 

18This is the case because when Orders are 

repriced, multiple instructions to reprice are sent 

simultaneously through multiple System gateways 

in order to modify the Orders as quickly as possible 

and thereby minimize the possibility that they will 

be disadvantaged vis-a`-vis newly entered Orders. 

19 Governing handling of Price to Comply and 

Post-Only Orders when formerly unavailable price 

levels become available. 

20See Rules 4703(f) and 4758. 

21Unless the incoming Order was an Order Type 

that was not immediately executable, in which case 

the incoming Order would behave in the manner 

specified for that Order Type. For example, as 

discussed below, a Post-Only Order to sell priced 

at $11 would be repriced and posted at $11.01. 

Order on the Nasdaq Book may be 

modified and receive a new timestamp. 

The sole instances in which the 

modification of an Order on the Nasdaq 

Book will not result in a new timestamp 

are: (i) A decrease in the size of the 

Order due to execution or modification 

by the Participant or by the System, and 

(ii) a redesignation of a sell Order as a 

long sale, a short sale, or an exempt 

short sale.15 Whenever an Order 

receives a new timestamp for any 

reason, it is processed by the System as 

a new Order with respect to potential 

execution against Orders on the Nasdaq 

Book, price adjustment, routing, 

reposting to the Nasdaq Book, and 

subsequent execution against incoming 

Orders, except where otherwise stated. 

Thus, for example, if an Order with a 

‘‘Pegging’’ Order Attribute had its price 

changed due to a change in the NBBO,16

it would be processed by the System as 

a new Order with respect to potential 

execution, price adjustment, routing, 

reposting to the Nasdaq Book, and 

subsequent execution against incoming 

Orders. An exception to the general rule 

is noted in Rule 4703(h) with respect to 

Orders with ‘‘Reserve Size’’ 17 that have 

a Routing Order Attribute; such Orders 

are not routed if reentered due to a 

replenishment of the Order’s Displayed 

Size. 

In addition, the proposed rule notes 

that all Orders are also subject to 

cancellation and/or repricing and 

reentry onto the Nasdaq Book in the 

circumstances described in Rule 

4120(a)(12) (providing for compliance 

with Plan to Address Extraordinary 

Market Volatility) and Rule 4763 

(providing for compliance with 

Regulation SHO). In all circumstances 

where an Order is repriced pursuant to 

those provisions, it is processed by the 

System as a new Order with respect to 

potential execution against Orders on 

the Nasdaq Book, price adjustment, 

routing, reposting to the Nasdaq Book, 

and subsequent execution against 

incoming Orders. If multiple Orders at 

a given price are repriced, the Order in 

which they are reentered is random, 

based on the respective processing time 

for each such Order; 18 provided, 

however, that in the case of Price to 

Comply Orders and Post-Only Orders 

that have their prices adjusted upon 

entry because they lock a Protected 

Quotation but that are subsequently 

displayed at their original entered limit 

price as provided in Rules 4702(b)(1)(B) 

and (4)(B),19 they are processed in 

accordance with the time priority under 

which they were previously ranked on 

the Nasdaq Book. If an Order is repriced 

and/or reentered 10,000 times for any 

reason, the Order will be cancelled. This 

restriction is designed to conserve 

System resources by limiting the 

persistence of Orders that update 

repeatedly without any reasonable 

prospect of execution. 

Proposed Rule 4702 further describes 

the behavior of each Order Type. Except 

where otherwise stated, each Order 

Type is available to all Participants, 

although certain Order Types and Order 

Attributes may require the use of a 

specific protocol. As a result, a 

Participant would be required to use 

that protocol in order to use Order 

Types and Order Attributes available 

through it. Moreover, a small number of 

Order Types and Order Attributes are 

available only to registered Market 

Makers in the security for which they 

are registered. 

Price To Comply Order 

The Price to Comply Order is an 

Order Type designed to comply with 

Rule 610(d) under Regulation NMS by 

having its price and display 

characteristics adjusted to avoid the 

display of quotations that lock or cross 

any Protected Quotation in a System 

Security during Market Hours. The Price 

to Comply Order is also designed to 

provide potential price improvement. 

The Nasdaq Market Center does not 

have a ‘‘plain vanilla’’ limit order that 

attempts to execute at its limit price and 

is then posted at its price or rejected if 

it cannot be posted; rather, the Price to 

Comply Order, with its price and 

display adjustment features, is one of 

the primary Order Types used by 

Participants to access and display 

liquidity in the Nasdaq Market Center. 

The price and display adjustment 

features of the Order Type enhance 

efficiency and investor protection by 

offering an Order Type that first 

attempts to access available liquidity 

and then to post the remainder of the 

Order at prices that are designed to 

maximize their opportunities for 

execution. 

When a Price to Comply Order is 

entered, the Price to Comply Order will 

be executed against previously posted 

Orders on the Nasdaq Book that are 

priced equal to or better than the price 

of the Price to Comply Order, up to the 

full amount of such previously posted 

Orders, unless such executions would 

trade through a Protected Quotation. 

Any portion of the Order that cannot be 

executed in this manner will be posted 

on the Nasdaq Book (and/or routed if it 

has been designated as Routable).20

During Market Hours, the price at 

which a Price to Comply Order is posted 

is determined in the following manner. 

If the entered limit price of the Price to 

Comply Order would lock or cross a 

Protected Quotation and the Price to 

Comply Order could not execute against 

an Order on the Nasdaq Book at a price 

equal to or better than the price of the 

Protected Quotation, the Price to 

Comply Order will be displayed on the 

Nasdaq Book at a price one minimum 

price increment lower than the current 

Best Offer (for a Price to Comply Order 

to buy) or higher than the current Best 

Bid (for a Price to Comply Order to sell) 

but will also be ranked on the Nasdaq 

Book with a non-displayed price equal 

to the current Best Offer (for a Price to 

Comply Order to buy) or to the current 

Best Bid (for a Price to Comply Order to 

sell). The posted Order will then be 

available for execution at its nondisplayed price, thus providing 

opportunities for price improvement to 

incoming Orders. 

For example, if a Price to Comply 

Order to buy at $11 would lock a 

Protected Offer of $11, the Price to 

Comply Order will be ranked at a nondisplayed price of $11 but will be 

displayed at $10.99. An incoming Order 

to sell at a price of $11 or lower would 

execute against the Price to Comply 

Order at $11.21

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16053 

22See supra n. 10. 

23This means that, in general, the price of the 

Price to Comply Order will move toward, but not 

away from, its original entered limit price. Because 

a Price to Comply Order is removed from the 

Nasdaq Book while it is being repriced, however, 

it is possible that the Order’s price will move away 

from its original entered limit price in the case of 

a ‘‘race condition’’ where the NBBO changes again 

while the Order is not on the Nasdaq Book. 

24Thus, the price of the Order will not move 

beyond its limit price. 

25Thus, the price of the Order will not move 

beyond it limit price. 

26As a result, it is possible that a new Order that 

is entered while previously booked Orders are being 

repriced may be placed on the Nasdaq Book ahead 

of them. 

27As discussed below, IOC is a Time-in-Force 

under which an Order is evaluated to determine if 

it is marketable, with unexecuted shares cancelled. 

A Price to Comply Order entered with a Time-inForce of IOC would be accepted but would be 

processed as a Non-Displayed Order with a Timein-Force of IOC. 

During Pre-Market Hours and PostMarket Hours, a Price to Comply Order 

will be ranked and displayed at its 

entered limit price without adjustment. 

This is the case because Nasdaq’s rule 

with respect to locked and crossed 

markets, as adopted pursuant to Rule 

610(d) under Regulation NMS and 

approved by the Commission, applies 

only during Market Hours.22

Depending on the protocol used to 

enter a Price to Comply Order, 

Participants have different options with 

respect to adjustment of the Price to 

Comply Order following its initial entry 

and posting to the Nasdaq Book. 

Specifically, if a Price to Comply Order 

is entered through RASH, QIX, or FIX, 

during Market Hours the price of the 

Price to Comply Order will be adjusted 

in the following manner after initial 

entry and posting to the Nasdaq Book 

(unless the Order is assigned a Routing 

Order Attribute that would cause it to be 

routed to another market center rather 

than remaining on the Nasdaq Book): 

• If the entered limit price of the 

Price to Comply Order locked or crossed 

a Protected Quotation and the NBBO 

changes, the displayed and nondisplayed price of the Price to Comply 

Order will be adjusted repeatedly in 

accordance with changes to the NBBO; 

provided, however, that if the quotation 

of another market center moves in a 

manner that would lock or cross the 

displayed price of a Price to Comply 

Order, the prices of the Price to Comply 

Order will not be adjusted. For example, 

if a Price to Comply Order to buy at 

$11.02 would cross a Protected Offer of 

$11, the Order will be ranked at its nondisplayed price of $11 but will be 

displayed at $10.99. If the Best Offer 

then moves to $11.01, the displayed 

price will be changed to $11 and the 

Order will be ranked at a non-displayed 

price of $11.01. However, if another 

market center then displays an offer of 

$11 (thereby locking the previously 

displayed price of the Price to Comply 

Order, notwithstanding Rule 610(d) 

under Regulation NMS), the price of the 

Price to Comply Order will not be 

changed.23 The Order may be repriced 

repeatedly until such time as the Price 

to Comply Order is able to be ranked 

and displayed at its original entered 

limit price ($11.02 in the example). The 

Price to Comply Order receives a new 

timestamp each time its price is 

changed. 

• If the original entered limit price of 

the Price to Comply Order would no 

longer lock or cross a Protected 

Quotation, the Price to Comply Order 

will be ranked and displayed at that 

price and will receive a new timestamp, 

and will not thereafter be adjusted 

under this provision.24

If a Price to Comply Order is entered 

through OUCH or FLITE, during Market 

Hours the price of the Price to Comply 

Order may be adjusted in the following 

manner after initial entry and posting to 

the Nasdaq Book: 

• If the entered limit price of the 

Price to Comply Order crossed a 

Protected Quotation and the NBBO 

changes so that the Price to Comply 

Order could be displayed at a price at 

or closer to its entered limit price 

without locking or crossing a Protected 

Quotation, the Price to Comply Order 

may either remain on the Nasdaq Book 

unchanged or may be cancelled back to 

the Participant, depending on its choice. 

For example, if a Price to Comply Order 

to buy at $11.02 would cross a Protected 

Offer of $11, the Order will be ranked 

at a non-displayed price of $11 but will 

be displayed at $10.99. If the Best Offer 

changes to $11.01, the Order will not be 

repriced, but rather will either remain 

with a displayed price of $10.99 but 

ranked at a non-displayed price of $11 

or be cancelled back to the Participant, 

depending on its choice. A Participant’s 

choice with regard to maintaining the 

Price to Comply Order or cancelling it 

is set in advance for each port through 

which the Participant enters Orders. 

• If the entered limit price of the 

Price to Comply Order locked a 

Protected Quotation, the price of the 

Price to Comply Order will be adjusted 

after initial entry only as follows. If the 

entered limit price would no longer lock 

a Protected Quotation, the Price to 

Comply Order may either remain on the 

Nasdaq Book unchanged, may be 

cancelled back to the Participant, or 

may be ranked and displayed at its 

original entered limit price, depending 

on the Participant’s choice. For 

example, if a Price to Comply Order to 

buy at $11 would lock a Protected Offer 

of $11, the Price to Comply Order will 

be ranked at a non-displayed price of 

$11 but will be displayed at $10.99. If 

the Best Offer changes to $11.01, the 

Price to Comply Order may either 

remain with a displayed price of $10.99 

but ranked at a non-displayed price of 

$11, be cancelled back to the 

Participant, or be ranked and displayed 

at $11, depending on the Participant’s 

choice. A Participant’s choice with 

regard to maintaining the Price to 

Comply Order, cancelling it, or allowing 

it to be displayed is set in advance for 

each port through which the Participant 

enters Orders. If the Price to Comply 

Order is ranked and displayed at its 

original entered limit price, it will 

receive a new timestamp, and will not 

thereafter be adjusted under this 

provision.25

With regard to the foregoing options, 

it is important to emphasize that the 

Price to Comply Order receives a new 

timestamp whenever its price is 

changed, and also receives a new 

timestamp if the Price to Comply Order 

would no longer lock a Protected 

Quotation and is therefore displayed at 

its original entered limit price. Thus, 

there are no circumstances under which 

a Price to Comply Order that originally 

locked or crossed a Protected Quotation 

would ‘‘jump the queue’’ and be 

displayed at its original entered limit 

price while retaining its original time 

priority. In fact, as discussed throughout 

this filing, Nasdaq does not offer any 

functionality that enables a Participant 

to ‘‘jump the queue’’ by displaying a 

previously entered non-displayed 

Orders without also receiving a new 

timestamp.26

The following Order Attributes may 

be assigned to a Price to Comply Order. 

The effect of each Order Attribute is 

discussed in detail below with respect 

to proposed new Rule 4703. 

• Price. As described above, the price 

of the Order may be adjusted to avoid 

locking or crossing a Protected 

Quotation, and may include a displayed 

price as well as a non-displayed price. 

• Size. 

• Reserve Size (available through 

RASH, FIX and QIX only). 

• A Time-in-Force other than 

‘‘Immediate or Cancel’’ (‘‘IOC’’).27

• Designation as an ‘‘ISO’’. In 

accordance with Regulation NMS, a 

Price to Comply Order designated as an 

ISO would be processed at its entered 

limit price, since such a designation 

reflects a representation by the 

Participant that it has simultaneously 

mstockstill on DSK4VPTVN1PROD with NOTICES

16054 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

28Primary Pegging, Market Pegging, Discretion 

and Participation in the Nasdaq Opening Cross and/ 

or the Nasdaq Closing Cross are discussed below 

and in proposed Rule 4703. 

29As described below and in proposed Rule 4703, 

Attribution is an Order Attribute that allows for 

display of the price and size of an Order next to 

a Market Maker’s MPID. In the current rule, the 

Price to Display Order is referred to as the ‘‘Price 

to Comply Post Order.’’ The fact that this Order 

Type is Attributable and available only to registered 

Market Makers reflects a substantive clarification to 

the language of the existing rule. 

30See Rules 4703(f) and 4758. 

31These adjustments reflect a substantive 

clarification to the language of the existing rule. 

32This means that, in general, the price of the 

Price to Display Order will move toward, but not 

away from, its original entered limit price. Because 

a Price to Display Order is removed from the 

Nasdaq Book while it is being repriced, however, 

it is possible that the Order’s price will move away 

from its original entered limit price in the case of 

a ‘‘race condition’’ where the NBBO changes again 

while the Order is not on the Nasdaq Book. 

33Thus, the price of the Order will not move 

beyond its limit price. 

34A Price to Display Order entered with a Timein-Force of IOC would be processed as a NonDisplayed Order with a Time-in-Force of IOC. 

routed one or more additional limit 

orders, as necessary, to execute against 

the full displayed size of any Protected 

Quotations that the Price to Comply 

Order would lock or cross. 

• Routing (available through RASH, 

FIX and QIX only). 

• ‘‘Primary Pegging’’ and ‘‘Market 

Pegging’’ (available through RASH, FIX, 

and QIX only). 

• ‘‘Discretion’’ (available through 

RASH, FIX and QIX only). 

• Participation in the Nasdaq 

Opening Cross and/or the Nasdaq 

Closing Cross.28

• Display. A Price to Comply Order is 

always displayed, although, as provided 

above, it may also have a non-displayed 

price and/or Reserve Size. 

Price To Display Order 

A ‘‘Price to Display Order’’ is an 

Order Type designed to comply with 

Rule 610(d) under Regulation NMS by 

avoiding the display of quotations that 

lock or cross any Protected Quotation in 

a System Security during Market Hours. 

Price to Display Orders are available 

solely to Participants that are Market 

Makers and are always Attributable.29

Like a Price to Comply Order, a Price to 

Display Order is another form of priced 

Order that first accesses available 

liquidity and then posts remaining 

shares, with price adjustment features 

similar to those of the Price to Comply 

Order that provide a means to post 

displayed Orders at prices that are 

designed to maximize their 

opportunities for execution. 

When a Price to Display Order is 

entered, if its entered limit price would 

lock or cross a Protected Quotation, the 

Price to Display Order will be repriced 

to one minimum price increment lower 

than the current Best Offer (for a Price 

to Display Order to buy) or higher than 

the current Best Bid (for a Price to 

Display Order to sell). For example, if a 

Price to Display Order to buy at $11 

would cross a Protected Offer of $10.99, 

the Price to Display Order will be 

repriced to $10.98. The Price to Display 

Order (whether repriced or not repriced) 

will then be executed against previously 

posted Orders on the Nasdaq Book that 

are priced equal to or better than the 

adjusted price of the Price to Display 

Order, up to the full amount of such 

previously posted Orders, unless such 

executions would trade through a 

Protected Quotation. Any portion of the 

Order that cannot be executed in this 

manner will be posted on the Nasdaq 

Book (and/or routed if it has been 

designated as Routable).30

During Market Hours, the price at 

which a Price to Display Order is 

displayed and ranked on the Nasdaq 

Book will be its entered limit price if the 

Price to Display Order was not repriced 

upon entry, or the adjusted price if the 

Price to Comply Order [sic] was 

repriced upon entry, such that the price 

will not lock or cross a Protected 

Quotation. During Pre-Market Hours 

and Post-Market Hours, a Price to 

Display Order will be displayed and 

ranked at its entered limit price without 

adjustment. 

As is the case with a Price to Comply 

Order, a Price to Display Order may be 

adjusted after initial entry.31

Specifically, if a Price to Display Order 

is entered through RASH, QIX, or FIX, 

during Market Hours the Price to 

Display Order may be adjusted in the 

following manner after initial entry and 

posting to the Nasdaq Book (unless the 

Order is assigned a Routing Order 

Attribute that would cause it to be 

routed to another market center rather 

than remaining on the Nasdaq Book): 

• If the entered limit price of the 

Price to Display Order locked or crossed 

a Protected Quotation and the NBBO 

changes, the price of the Order will be 

adjusted repeatedly in accordance with 

changes to the NBBO; provided, 

however, that if the quotation of another 

market center moves in a manner that 

would lock or cross the price of a Price 

to Display Order, the price of the Price 

to Display Order will not be adjusted.32

For example, if a Price to Display Order 

to buy at $11.02 would cross a Protected 

Offer of $11, the Order will be displayed 

and ranked at $10.99. If the Best Offer 

then moves to $11.01, the displayed/

ranked price will be changed to $11. 

However, if another market center then 

displays an offer of $11 (thereby locking 

the previously displayed price of the 

Price to Display Order, notwithstanding 

Rule 610(d) under Regulation NMS), the 

price of the Price to Display Order will 

not be changed. The Order may be 

repriced repeatedly until such time as 

the Price to Display Order is able to be 

displayed and ranked at its original 

entered limit price ($11.02 in the 

example). The Price to Display Order 

receives a new timestamp each time its 

price is changed. 

• If the original entered limit price of 

the Price to Display Order would no 

longer lock or cross a Protected 

Quotation, the Price to Display Order 

will be displayed and ranked at that 

price and will receive a new timestamp, 

and will not thereafter be adjusted 

under this provision.33

If a Price to Display Order is entered 

through OUCH or FLITE, during Market 

Hours the Price to Display Order may be 

adjusted in the following manner after 

initial entry and posting to the Nasdaq 

Book: 

• If the entered limit price of the 

Price to Display Order locked or crossed 

a Protected Quotation and the NBBO 

changes so that the Price to Display 

Order could be ranked and displayed at 

a price at or closer to its original entered 

limit price without locking or crossing 

a Protected Quotation, the Price to 

Display Order may either remain on the 

Nasdaq Book unchanged or may be 

cancelled back to the Participant, 

depending on the Participant’s choice. 

For example, if a Price to Display Order 

to buy at $11.02 would cross a Protected 

Offer of $11, the Order will be ranked 

and displayed at $10.99. If the Best 

Offer changes to $11.01, the Price to 

Display Order will not be repriced, but 

rather will either remain at its current 

price or be cancelled back to the 

Participant, depending on its choice. A 

Participant’s choice with regard to 

maintaining the Price to Display Order 

or cancelling it is set in advance for 

each port through which the Participant 

enters Orders. 

The following Order Attributes may 

be assigned to a Price to Display Order: 

• Price. As described above, the price 

of the Order may be adjusted to avoid 

locking or crossing a Protected 

Quotation. 

• Size. 

• Reserve Size (available through 

RASH, FIX and QIX only). 

• A Time-in-Force other than IOC.34

• Designation as an ISO. In 

accordance with Regulation NMS, a 

Price to Display Order designated as an 

ISO would be processed at its entered 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16055 

35The availability of routing for Price to Display 

Orders reflects a substantive clarification to the 

language of the existing rule. 

36Rule 611 [sic] requires exchanges to adopt rules 

that ‘‘require . . . members reasonably to avoid . . . 

[d]isplaying quotations that lock or cross any 

protected quotations’’ (emphasis added). Similarly, 

under Rule 600, a Non-Displayed Order is not a 

Protected Quotation because it is not displayed. 

Accordingly, the definition of trade-through does 

not apply to a transaction at a price that is worse 

than the price of a Non-Displayed Order. Thus, in 

opting to use a Non-Displayed Order, a Participant 

must balance the benefits of not disclosing its 

trading intentions against the loss of trade-through 

protection. However, because a Non-Displayed 

Order may not itself trade-through a Protected 

Quotation, as described below, the Nasdaq Market 

Center protects against such trade-throughs by 

repricing and/or cancelling Non-Displayed Orders 

that cross or are crossed by a Protected Quotation. 

37See Rules 4703(f) and 4758. 38Repricing the crossing Non-Displayed Order 

helps ensure that the Non-Displayed Order will not 

trade-through the Protected Quotation. 39These adjustments reflect a substantive 

clarification to the language of the existing rule. 

40Note that because the Order receives a new 

timestamp, it is processed like a new Order when 

it is repriced. 

41 Id. As noted above, the cancellation of a NonDisplayed Order in this circumstance helps ensure 

that the Non-Displayed Order will not trade through 

a Protected Quotation. 

limit price, since such a designation 

reflects a representation by the 

Participant that it has simultaneously 

routed one or more additional limit 

orders, as necessary, to execute against 

the full displayed size of any Protected 

Quotations that the Price to Display 

Order would lock or cross. 

• Routing (available through RASH, 

FIX and QIX only).35

• Primary Pegging and Market 

Pegging (available through RASH, FIX 

and QIX only). 

• Discretion (available through 

RASH, FIX and QIX only). 

• Participation in the Nasdaq 

Opening Cross and/or the Nasdaq 

Closing Cross. 

• Attribution. All Price to Display 

Orders are Attributable Orders. 

• Display. A Price to Display Order is 

always displayed (but may also have 

Reserve Size). 

Non-Displayed Order 

A ‘‘Non-Displayed Order’’ is an Order 

Type that is not displayed to other 

Participants, but nevertheless remains 

available for potential execution against 

incoming Orders until executed in full 

or cancelled. Thus, the Order Type 

provides a means by which Participants 

may access and/or offer liquidity 

without signaling to other Participants 

the extent of their trading interest. The 

Order may also serve to provide price 

improvement vis-a`-vis the NBBO. Under 

Regulation NMS, a Non-Displayed 

Order may lock a Protected Quotation 

and may be traded-through by other 

market centers.36 In addition to the NonDisplayed Order Type, there are other 

Order Types that are not displayed on 

the Nasdaq Book. Thus, ‘‘Non-Display’’ 

is both a specific Order Type and an 

Order Attribute of certain other Order 

Types. 

When a Non-Displayed Order is 

entered, the Non-Displayed Order will 

be executed against previously posted 

Orders on the Nasdaq Book that are 

priced equal to or better than the price 

of the Non-Displayed Order, up to the 

full amount of such previously posted 

Orders, unless such executions would 

trade through a Protected Quotation. 

Any portion of the Non-Displayed Order 

that cannot be executed in this manner 

will be posted to the Nasdaq Book 

(unless the Non-Displayed Order has a 

Time-in-Force of IOC) and/or routed if 

it has been designated as Routable.37

During Market Hours, the price at 

which a Non-Displayed Order is posted 

is determined in the following manner. 

If the entered limit price of the NonDisplayed Order would lock a Protected 

Quotation, the Non-Displayed Order 

will be placed on the Nasdaq Book at 

the locking price. If the Non-Displayed 

Order would cross a Protected 

Quotation, the Non-Displayed Order 

will be repriced to a price that would 

lock the Protected Quotation and will be 

placed on the Nasdaq Book at that 

price.38 For example, if a Non-Displayed 

Order to buy at $11 would cross a 

Protected Offer of $10.99, the NonDisplayed Order will be repriced and 

posted at $10.99. A Non-Displayed 

Order to buy at $10.99 would also be 

posted at $10.99. During Pre-Market 

Hours and Post-Market Hours, a NonDisplayed Order will be posted at its 

entered limit price without adjustment. 

As is the case with a Post to Comply 

Order, a Non-Displayed Order may be 

adjusted after initial entry.39

Specifically, if a Non-Displayed Order is 

entered through RASH, QIX, or FIX, 

during Market Hours the Non-Displayed 

Order may be adjusted in the following 

manner after initial entry and posting to 

the Nasdaq Book (unless the Order is 

assigned a Routing Order Attribute that 

would cause it to be routed to another 

market center rather than remaining on 

the Nasdaq Book): 

• If the original entered limit price of 

a Non-Displayed Order is higher than 

the Best Offer (for an Order to buy) or 

lower than the Best Bid (for an Order to 

sell) and the NBBO moves toward the 

original entered limit price of the NonDisplayed Order, the price of the NonDisplayed Order will be adjusted 

repeatedly in accordance with changes 

to the NBBO. For example, if a NonDisplayed Order to buy at $11.02 would 

cross a Protected Offer of $11, the NonDisplayed Order will be priced and 

posted at $11. If the Best Offer then 

changes to $11.01, the price of the NonDisplayed Order will be changed to 

$11.01. The Order may be repriced 

repeatedly in this manner, receiving a 

new timestamp each time its price is 

changed, until the Non-Displayed Order 

is posted at its original entered limit 

price. 40 The Non-Displayed Order will 

not thereafter be repriced under this 

provision, except as provided below 

with respect to crossing a Protected 

Quotation. 

• If, after being posted to the Nasdaq 

Book, the NBBO changes so that the 

Non-Displayed Order would cross a 

Protected Quotation, the Non-Displayed 

Order will be repriced at a price that 

would lock the new NBBO and receive 

a new timestamp.41 For example, if a 

Non-Displayed Order to buy at $11 

would lock a Protected Offer of $11, the 

Non-Displayed Order will be posted at 

$11. If the Best Offer then changes to 

$10.99, the Non-Displayed Order will be 

repriced at $10.99, receiving a new 

timestamp. The Non-Displayed Order 

may be repriced and receive a new 

timestamp repeatedly. 

If a Non-Displayed Order is entered 

through OUCH or FLITE, during Market 

Hours the Non-Displayed Order may be 

adjusted in the following manner after 

initial entry and posting to the Nasdaq 

Book: 

• If the original entered limit price of 

the Non-Displayed Order locked or 

crossed a Protected Quotation and the 

NBBO changes so that the NonDisplayed Order could be posted at a 

price at or closer to its original entered 

limit price without crossing a Protected 

Quotation, the Non-Displayed Order 

may either remain on the Nasdaq Book 

unchanged or may be cancelled back to 

the Participant, depending on its choice. 

For example, if a Non-Displayed Order 

to buy at $11.02 would cross a Protected 

Offer of $11, the Order will be priced at 

$11. If the Best Offer changes to $11.01, 

the Order will not be repriced, but 

rather will either remain at its current 

$11 price or be cancelled back to the 

Participant, depending on its choice. A 

Participant’s choice with regard to 

maintaining the Non-Displayed Order or 

cancelling it is set in advance for each 

port through which the Participant 

enters Orders. 

• If, after a Non-Displayed Order is 

posted to the Nasdaq Book, the NBBO 

changes so that the Non-Displayed 

Order would cross a Protected 

Quotation, the Non-Displayed Order 

will be cancelled back to the 

mstockstill on DSK4VPTVN1PROD with NOTICES

16056 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

42Midpoint Pegging is described below and in 

proposed Rule 4703. Specifically, an Order with the 

Midpoint Pegging Attribute that is entered through 

OUCH or FLITE is priced upon entry but is not 

repriced based on changes to the NBBO. 

Accordingly, the Order is cancelled if it is no longer 

at the midpoint between the NBBO. 

43The Minimum Quantity Order Attribute is 

described below and in proposed Rule 4703. 

44For example, if a Non-Displayed Order to buy 

at $11 would lock the price of a Protected Offer at 

$11, the Non-Displayed Order could be posted at 

$11 regardless of whether it was marked as an ISO. 

Accordingly, even if the Non-Displayed Order was 

marked as an ISO, the System would not accept a 

Displayed Order priced at $11 unless (i) the 

Displayed Order was itself marked as an ISO, or (ii) 

market data received by the System demonstrated 

that the Protected Offer had been removed. 

45Pegging to the Midpoint is described below and 

in proposed Rule 4703. The full functionality of 

Midpoint Pegging is available through RASH, FIX 

and QIX, and more limited functionality is available 

through OUCH and FLITE. 

46Securities Exchange Act Release No. 73333 

(October 9, 2014), 79 FR 62223 (October 16, 2014) 

(SR–NYSE–2014–32 and SR–NYSEMKT–2014–56) 

(hereinafter ‘‘SR–NYSE–2014–32 Approval Order’’) 

(approving ‘‘Add Liquidity Only’’ modifier that 

operates in a manner similar to Post-Only Order). 

47 Details regarding the processing of a Post-Only 

Order that locks or crosses both a Protected 

Quotation and an Order on the Nasdaq Book; the 

potential execution of a Post-Only Order priced at 

more than $1 per share; and the processing of a 

Post-Only Order with a Time-in-Force of IOC reflect 

substantive clarifications to the language of the 

existing rule. 

Participant. For example, if a NonDisplayed Order to buy at $11 would 

lock a Protected Offer of $11, the NonDisplayed Order will be posted at $11. 

If the Best Offer then changes to $10.99, 

the Non-Displayed Order will be 

cancelled back to the Participant. 

• If a Non-Displayed Order entered 

through OUCH or FLITE is assigned a 

Midpoint Pegging Order Attribute,42

and if, after being posted to the Nasdaq 

Book, the NBBO changes so that the 

Non-Displayed Order is no longer at the 

Midpoint between the NBBO, the NonDisplayed Order will be cancelled back 

to the Participant. In addition, if a NonDisplayed Order entered through OUCH 

or FLITE is assigned a Midpoint Pegging 

Attribute and also has a limit price that 

is lower than the midpoint between the 

NBBO for an Order to buy (higher than 

the midpoint between the NBBO for an 

Order to sell), the Order will 

nevertheless be accepted at its limit 

price and will be cancelled if the 

midpoint between the NBBO moves 

lower than (higher than) the price of an 

Order to buy (sell). The following Order 

Attributes may be assigned to a NonDisplayed Order: 

• Price. As described above, the price 

of the Order may be adjusted to avoid 

crossing a Protected Quotation. 

• Size. 

• ‘‘Minimum Quantity’’.43

• Time-in-Force. 

• Designation as an ISO. In 

accordance with Regulation NMS, a 

Non-Displayed Order designated as an 

ISO would be processed at its entered 

limit price, since such a designation 

reflects a representation by the 

Participant that it has simultaneously 

routed one or more additional limit 

orders, as necessary, to execute against 

the full displayed size of any Protected 

Quotations that the Non-Displayed 

Order would cross. As discussed above, 

a Non-Displayed Order would be 

accepted at a price that locked a 

Protected Quotation, even if the Order 

was not designated as an ISO, because 

the non-displayed nature of the Order 

allows it to lock a Protected Quotation 

under Regulation NMS. Accordingly, 

the System would not interpret receipt 

of a Non-Displayed Order marked ISO 

that locked a Protected Quotation as the 

basis for determining that the Protected 

Quotation had been executed for 

purposes of accepting additional Orders 

at that price level.44

• Routing (available through RASH, 

FIX and QIX only). 

• Primary Pegging and Market 

Pegging (available through RASH, FIX 

and QIX only). 

• Pegging to the Midpoint.45

• Discretion (available through 

RASH, FIX and QIX only). 

• Participation in the Nasdaq 

Opening Cross and/or the Nasdaq 

Closing Cross. 

Post-Only Orders 

A ‘‘Post-Only Order’’ is an Order Type 

designed to have its price adjusted as 

needed to post to the Nasdaq Book in 

compliance with Rule 610(d) under 

Regulation NMS by avoiding the display 

of quotations that lock or cross any 

Protected Quotation in a System 

Security during Market Hours, or to 

execute against locking or crossing 

quotations in circumstances where 

economically beneficial to the 

Participant entering the Post-Only 

Order. Post-Only Orders are always 

displayed, although as discussed below, 

they may also have a non-displayed 

price in circumstances similar to a Price 

to Comply Order. Post-Only Orders are 

thus designed to allow Participants to 

help control their trading costs, while 

also ‘‘provid[ing] displayed liquidity to 

the market and thereby contribut[ing] to 

public price discovery—an objective 

that is fully consistent with the Act.’’ 46

In addition, under some circumstances, 

Post-Only Orders provide price 

improvement. 

During Market Hours, a Post-Only 

Order is evaluated at the time of entry 

with respect to locking or crossing other 

Orders on the Nasdaq Book, Protected 

Quotations, and potential execution as 

follows: 47

• If a Post-Only Order would lock or 

cross a Protected Quotation, the price of 

the Order will first be adjusted. If the 

Order is Attributable, its adjusted price 

will be one minimum price increment 

lower than the current Best Offer (for 

bids) or higher than the current Best Bid 

(for offers). If the Order is not 

Attributable, its adjusted price will be 

equal to the current Best Offer (for bids) 

or the current Best Bid (for offers). 

However, the Order will not post or 

execute until the Order, as adjusted, is 

evaluated with respect to Orders on the 

Nasdaq Book. 

• If the adjusted price of the PostOnly Order would not lock or cross an 

Order on the Nasdaq Book, the Order 

will be posted in the same manner as a 

Price to Comply Order (if it is not 

Attributable) or a Price to Display Order 

(if it is Attributable). Specifically, if the 

Post-Only Order is not Attributable, it 

will be displayed on the Nasdaq Book 

at a price one minimum price increment 

lower than the current Best Offer (for 

bids) or higher than the current Best Bid 

(for offers) but will be ranked on the 

Nasdaq Book with a non-displayed price 

equal to the current Best Offer (for bids) 

or to the current Best Bid (for offers). 

For example, if a Post-Only Order to buy 

at $11 would lock a Protected Offer of 

$11, the Order will be ranked at a nondisplayed price of $11 but will be 

displayed at $10.99. If the Post-Only 

Order is Attributable, it will be ranked 

and displayed on the Nasdaq Book at a 

price one minimum increment lower 

than the current Best Offer (for bids) or 

higher than the current Best Bid (for 

offers). Thus, in the preceding example, 

the Post-Only Order to buy would be 

ranked and displayed at $10.99. 

• If the adjusted price of the PostOnly Order would lock or cross an 

Order on the Nasdaq Book, the Post 

Only Order will be repriced, ranked, 

and displayed at one minimum price 

increment below the current best-priced 

Order to sell on the Nasdaq Book (for 

bids) or above the current best-priced 

Order to buy on the Nasdaq Book (for 

offers); provided, however, the PostOnly Order will execute if (i) it is priced 

below $1.00 and the value of price 

improvement associated with executing 

against an Order on the Nasdaq Book (as 

measured against the original limit price 

of the Order) equals or exceeds the sum 

of fees charged for such execution and 

the value of any rebate that would be 

provided if the Order posted to the 

Nasdaq Book and subsequently 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16057 

48This functionality reflects the overall purpose 

of the Post-Only Order, which is not to post to the 

Nasdaq Book in all circumstances, but rather to 

assist Participants in controlling execution costs by 

allowing consideration of price improvement, fees, 

and rebates in the handling of the Order. Thus, 

entering a Post-Only Order with a Time-in-Force of 

IOC allows a Participant to stipulate that an Order 

will execute only if it receives price improvement. 

49These adjustments reflect a substantive 

clarification to the language of the existing rule. 

50This means that, in general, the price of the 

Post-Only Order will move toward, but not away 

from, its original entered limit price. Because a 

Post-Only Order is removed from the Nasdaq Book 

while it is being repriced, however, it is possible 

that the Order’s price will move away from its 

original entered limit price in the case of a ‘‘race 

condition’’ where the NBBO changes again while 

the Order is not on the Nasdaq Book. 

51Thus, the price of the Order will not move 

beyond its limit price. 52These adjustments reflect a substantive 

clarification to the language of the existing rule. 53Thus, the price of the Order will not move 

beyond its limit price. 

provided liquidity, or (ii) it is priced at 

$1.00 or more and the value of price 

improvement associated with executing 

against an Order on the Nasdaq Book (as 

measured against the original limit price 

of the Order) equals or exceeds $0.01 

per share. For example, if a Participant 

entered a Non-Attributable Post-Only 

Order to buy at $11.01, another market 

center is displaying a Protected Offer at 

$11, and there is a Non-Displayed Order 

on the Nasdaq Book to sell at $11, the 

adjusted price of the Post-Only Order 

will be $11. However, because the PostOnly Order would be executable against 

the Non-Displayed Order on the Nasdaq 

Book and would receive $0.01 price 

improvement (as measured against the 

original $11.01 price of the Post-Only 

Order), the Post-Only Order would 

execute. 

• If the Post-Only Order would not 

lock or cross a Protected Quotation but 

would lock or cross an Order on the 

Nasdaq Book, the Post Only Order will 

be repriced, ranked, and displayed at 

one minimum price increment below 

the current best-priced Order to sell on 

the Nasdaq Book (for bids) or above the 

current best-priced Order to buy on the 

Nasdaq Book (for offers); provided, 

however, the Post-Only Order will 

execute if (i) it is priced below $1.00 

and the value of price improvement 

associated with executing against an 

Order on the Nasdaq Book equals or 

exceeds the sum of fees charged for such 

execution and the value of any rebate 

that would be provided if the Order 

posted to the Nasdaq Book and 

subsequently provided liquidity, or (ii) 

it is priced at $1.00 or more and the 

value of price improvement associated 

with executing against an Order on the 

Nasdaq Book equals or exceeds $0.01 

per share. For example, if a Participant 

entered a Post-Only Order to buy at 

$11.02, the Best Offer was $11.04, and 

there was a Non-Displayed Order on the 

Nasdaq Book to sell at $11.02, the PostOnly Order would be ranked and 

displayed at $11.01. However, if a 

Participant entered a Post-Only Order to 

buy at $11.03, the Order would execute 

against the Order on the Nasdaq Book at 

$11.02, receiving $0.01 per share price 

improvement. 

• If a Post-Only Order is entered with 

a Time-in-Force of IOC, the price of an 

Order to buy (sell) will be repriced to 

the lower of (higher of) (i) one minimum 

price increment below (above) the price 

of the Order or (ii) the current Best Offer 

(Best Bid). The Order will execute 

against any Order on the Nasdaq Book 

with a price equal to or better than the 

adjusted price of the Post-Only Order. If 

the Post-Only Order cannot execute, it 

will be cancelled. For example, if a PostOnly Order to buy at $11 with a Timein-Force of IOC was entered and the 

current Best Offer was $11.01, the Order 

would be repriced to $10.99; however, 

if the Best Offer was $10.98, the Order 

would be repriced to $10.98.48

• If a Post-Only Order would not lock 

or cross an Order on the Nasdaq Book 

or any Protected Quotation, it will be 

posted on the Nasdaq Book at its 

entered limit price. 

During Pre-Market and Post-Market 

Hours, a Post-Only Order will be 

processed in a manner identical to 

Market Hours with respect to locking or 

crossing Orders on the Nasdaq Book, but 

will not have its price adjusted with 

respect to locking or crossing the 

quotations of other market centers. 

If a Post-Only Order is entered 

through RASH, QIX, or FIX, during 

System Hours the Post-Only Order may 

be adjusted in the following manner 

after initial entry and posting to the 

Nasdaq Book: 49

• If the original entered limit price of 

the Post-Only Order is not being 

displayed, the displayed (and nondisplayed price, if any) of the Order will 

be adjusted repeatedly in accordance 

with changes to the NBBO or the best 

price on the Nasdaq Book, as applicable; 

provided, however, that if the quotation 

of another market center moves in a 

manner that would lock or cross the 

displayed price of a Post-Only Order, 

the price(s) of the Post-Only Order will 

not be adjusted.50 For example, if a NonAttributable Post-Only Order to buy at 

$11.02 would cross a Protected Offer of 

$11, the Order will be ranked at a nondisplayed price of $11 but will be 

displayed at $10.99. If the Best Offer 

then moves to $11.01, the displayed 

price will be changed to $11 and the 

non-displayed price at which the Order 

is ranked will be changed to $11.01. 

However, if another market center then 

displays an offer of $11 (thereby locking 

the previously displayed price of the 

Post-Only Order notwithstanding Rule 

610(d) under Regulation NMS), the 

price of the Post-Only Order will not be 

changed. The Order may be repriced 

repeatedly until such time as the PostOnly Order is able to be displayed at its 

original entered limit price ($11.02 in 

the example). The Post-Only Order 

receives a new timestamp each time its 

price is changed. If the original entered 

limit price of the Post-Only Order 

would no longer lock or cross a 

Protected Quotation or an Order on the 

Nasdaq Book, the Post-Only Order will 

be ranked and displayed at that price 

and will receive a new timestamp, and 

will not thereafter be adjusted under 

this provision.51

If a Post-Only Order is entered 

through OUCH or FLITE, the Post-Only 

Order may be adjusted in the following 

manner after initial entry and posting to 

the Nasdaq Book: 52

• During Market Hours, if the original 

entered limit price of the Post-Only 

Order locked or crossed a Protected 

Quotation, the Post-Only Order may be 

adjusted after initial entry in the same 

manner as a Price to Comply Order (or 

a Price to Display Order, if it is 

Attributable). Thus, in the case of a 

Non-Attributable Post-Only Order that 

crossed a Protected Quotation, if the 

NBBO changed so that the Post-Only 

Order could be ranked and displayed at 

a price at or closer to its original entered 

limit price without locking or crossing 

a Protected Quotation, the Post-Only 

Order may either remain on the Nasdaq 

Book unchanged or may be cancelled 

back to the Participant, depending on its 

choice. In the case of a Non-Attributable 

Post-Only Order that locked a Protected 

Quotation, if the limit price would no 

longer lock a Protected Quotation, the 

Post-Only Order may either remain on 

the Nasdaq Book unchanged, may be 

cancelled back to the Participant, or 

may be ranked and displayed at its 

original entered limit price, depending 

on the Participant’s choice, and will not 

thereafter be adjusted under this 

provision.53 If the Post-Only Order is 

displayed at its original entered limit 

price, it will receive a new timestamp. 

Finally, in the case of an Attributable 

Post-Only Order that locked or crossed 

a Protected Quotation, if the NBBO 

changed so that the Post-Only Order 

could be ranked and displayed at a price 

at or closer to its original entered limit 

price without locking or crossing a 

Protected Quotation, the Post-Only 

Order may either remain on the Nasdaq 

mstockstill on DSK4VPTVN1PROD with NOTICES

16058 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

54 In the SR–NYSE–2014–32 Approval Order, the 

Commission affirmed that exchanges may adopt 

rules allowing market participants to ‘‘ship and 

post’’ (i.e., to ship limit orders, as necessary, to 

remove Protected Quotations while posting an order 

at the formerly locking price). The Commission 

further determined that a Day Order with an 

‘‘Access Liquidity Only’’ (similar to a Post-Only 

Order) modifier could be marked as an ISO. Of 

course, as required by its obligations as a selfregulatory organization, Nasdaq maintains an active 

regulatory surveillance and enforcement program to 

verify that Participants are not improperly 

designating Orders as ISOs. 

55The price level would be considered open if a 

subsequent Displayed Order marked ISO was 

received at that price or if market data received by 

the System demonstrated that the Protected 

Quotation had been removed. 

56That is, if no market center is disseminating a 

displayed bid or a displayed offer, such that it is 

impossible to determine a midpoint price. 

Book unchanged or may be cancelled 

back to the Participant, depending on 

the Participant’s choice. A Participant’s 

choice with regard to adjustment of 

Post-Only Orders is set in advance for 

each port through which the Participant 

enters Orders. 

• During System Hours, if the original 

entered limit price of the Post-Only 

Order locked or crossed an Order on the 

Nasdaq Book and the Nasdaq Book 

changes so that the original entered 

limit price would no longer lock or 

cross an Order on the Nasdaq Book, the 

Post-Only Order may either remain on 

the Nasdaq Book unchanged or may be 

cancelled back to the Participant, 

depending on the Participant’s choice. 

For example, if a Post-Only Order to buy 

at $11 would lock an Order on the 

Nasdaq Book priced at $11, the PostOnly Order will be ranked and 

displayed at $10.99. If the Order at $11 

is cancelled or executed, the Post-Only 

Order may either remain with a 

displayed price of $10.99 or be 

cancelled back to the Participant, 

depending on the Participant’s choice. 

A Participant’s choice with regard to 

maintaining the Post-Only Order or 

cancelling it is set in advance for each 

port through which the Participant 

enters Orders. 

The following Order Attributes may 

be assigned to a Post-Only Order: 

• Price. As described above, the price 

of the Order may be adjusted to avoid 

locking or crossing a Protected 

Quotation, and may include a displayed 

price as well as a non-displayed price. 

• Size. 

• Time-in-Force. 

• Designation as an ISO. In 

accordance with Regulation NMS, a 

Post-Only Order designated as an ISO 

that locked or crossed a Protected 

Quotation would be processed at its 

entered limit price, since such a 

designation reflects a representation by 

the Participant that it has 

simultaneously routed one or more 

additional limit orders, as necessary, to 

execute against the full displayed size of 

any Protected Quotations that the PostOnly Order would lock or cross.54

However, as described above, a PostOnly Order designated as an ISO that 

locked or crossed an Order on the 

Nasdaq Book would either execute at 

time of entry or would have its price 

adjusted prior to posting. Accordingly, 

the System would not interpret receipt 

of a Post-Only Order marked ISO that 

had its price adjusted prior to posting as 

the basis for determining that any 

Protected Quotation at the Order’s 

original entered limit price level had 

been executed for purposes of accepting 

additional Orders at that price level.55

However, if the Post-Only Order is 

ranked and displayed at its adjusted 

price, the System would consider the 

adjusted price level to be open for 

purposes of accepting additional Orders 

at that price level. For example, assume 

that there is a Protected Offer at $11 and 

a Participant enters a Post-Only Order 

marked ISO to buy at $11. If there are 

no Orders to sell at $11 on the Nasdaq 

Book, the Order to buy will be displayed 

and ranked at $11, since the designation 

of the Order as an ISO reflects the 

Participant’s representation that it has 

routed one or more additional limit 

orders, as necessary, to execute against 

the full displayed size of any Protected 

Quotations that the Post-Only Order 

would lock or cross. However, if there 

was also an Order to sell at $11 on the 

Nasdaq Book, the Post-Only Order will 

be repriced, ranked, and displayed at 

$10.99. In that case, the mere fact that 

the Post-Only Order was designated as 

an ISO would not allow Nasdaq to 

conclude that the $11 price level was 

‘‘open’’ for receiving orders to buy at 

that price; the $11 price level would be 

considered open only if market data 

received by the System demonstrated 

that the Protected Offer at $11 had been 

removed or if a subsequent Displayed 

Order marked ISO was received and 

ranked at that price. 

• Attribution. 

• Participation in the Nasdaq 

Opening Cross and/or the Nasdaq 

Closing Cross. 

• Display. A Post-Only Order is 

always displayed, although as provided 

above, may also have a non-displayed 

price. 

Midpoint Peg Post-Only Orders 

A ‘‘Midpoint Peg Post-Only Order’’ is 

an Order Type with a Non-Display 

Order Attribute that is priced at the 

midpoint between the NBBO and that 

will execute upon entry against locking 

or crossing quotes only in circumstances 

where economically beneficial to the 

party entering the Order. Because the 

Order is priced at the midpoint, it can 

provide price improvement to incoming 

Orders when it is executed after posting 

to the Nasdaq Book. The Midpoint Peg 

Post-Only Order is available during 

Market Hours only. 

A Midpoint Peg Post-Only Order must 

be assigned a limit price. When a 

Midpoint Peg Post-Only Order is 

entered, it will be priced at the 

midpoint between the NBBO, unless 

such midpoint is higher than (lower 

than) the limit price of an Order to buy 

(sell), in which case the Order will be 

priced at its limit price. If the NBBO is 

locked, the Midpoint Peg Post-Only 

Order will be priced at the locking 

price, if the NBBO is crossed, it will 

nevertheless be priced at the midpoint 

between the NBBO, and if there is no 

NBBO,56 the Order will be rejected. The 

Midpoint Peg Post-Only Order will post 

to the Nasdaq Book unless it is a buy 

(sell) Order that is priced higher than 

(lower than) a sell (buy) Order on the 

Nasdaq Book, in which case it will 

execute at the price of the Order on the 

Nasdaq Book. For example, if the Best 

Bid was $11 and the Best Offer was 

$11.06, the price of the Midpoint Peg 

Post-Only Order would be $11.03. If 

there was a Non-Displayed Order (or 

another Order with a Non-Display Order 

Attribute) on the Nasdaq Book to sell at 

$11.02, the incoming Midpoint Peg 

Post-Only Order would execute against 

it at $11.02. However, if there was a 

Non-Displayed Order (or another Order 

with a Non-Display Order Attribute) to 

sell at $11.03, the Midpoint Peg PostOnly Order would post at $11.03. While 

a Midpoint Peg Post-Only Order that 

posts to the Nasdaq Book is locking a 

preexisting Order, the Midpoint Peg 

Post-Only Order will execute against an 

incoming Order only if the price of the 

incoming sell (buy) Order is lower 

(higher) than the price of the preexisting 

Order. Thus, in the previous example, if 

the incoming Midpoint Peg Post-Only 

Order locked the preexisting NonDisplayed Order at $11.03, the Midpoint 

Peg Post-Only Order could execute only 

against an incoming Order to sell priced 

at less than $11.03. 

For purposes of any cross in which a 

Midpoint Peg Post-Only Order 

participates, a Midpoint Peg Post-Only 

Order to buy (sell) that is locking a 

preexisting Order shall be deemed to 

have a price equal to the price of the 

highest sell Order (lowest buy Order) 

that would be eligible to execute against 

the Midpoint Peg Post-Only Order in 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16059 

57The functionality associated with OUCH and 

FLITE reflects a substantive clarification to the 

existing rule. 

such circumstances. This is the case 

because, as described above, a Midpoint 

Peg Post-Only Order that is locking a 

preexisting Order cedes priority to it 

and is executable only at a price beyond 

the limit price of the preexisting Order. 

Thus, a Midpoint Peg Post-Only Order 

to buy that locked a preexisting NonDisplayed Order to sell at $11.03 would 

be deemed to have a price of $11.02. It 

should be noted, however, that 

Midpoint Peg Post-Only Orders may not 

be entered prior to the Nasdaq Opening 

Cross, and the System attempts to 

cancel Midpoint Peg Post-Only Orders 

prior to the commencement of the 

Nasdaq Closing Cross. Thus, the Order 

would not participate in the Nasdaq 

Opening Cross under any 

circumstances, and would participate in 

the Nasdaq Closing Cross only in a 

‘‘race’’ condition whereby the 

cancellation message was not processed 

until after the Nasdaq Closing Cross had 

occurred. A Midpoint Peg Post-Only 

Order could, however, participate in a 

Halt Cross under Rule 4753. 

If a Midpoint Peg Post-Only Order is 

entered through RASH, QIX, or FIX, the 

Midpoint Peg Post-Only Order may be 

adjusted in the following manner after 

initial entry and posting to the Nasdaq 

Book: 

• The price of the Midpoint Peg PostOnly Order will be updated repeatedly 

to equal the midpoint between the 

NBBO; provided, however, that the 

Order will not be priced higher (lower) 

than the limit price of an Order to buy 

(sell). In the event that the midpoint 

between the NBBO becomes higher than 

(lower than) the limit price of an Order 

to buy (sell), the price of the Order will 

stop updating, but will resume updating 

if the midpoint becomes lower than 

(higher than) the limit price of an Order 

to buy (sell). Similarly, if a Midpoint 

Peg Post-Only Order is on the Nasdaq 

Book and subsequently there is no 

NBBO, the Order will be cancelled. The 

Midpoint Peg Post-Only Order receives 

a new timestamp each time its price is 

changed. 

If a Midpoint Peg Post-Only Order is 

entered through OUCH or FLITE, the 

Midpoint Peg Post-Only Order may be 

adjusted in the following manner after 

initial entry and posting to the Nasdaq 

Book: 

• The price at which the Midpoint 

Peg Post-Only Order is ranked on the 

Nasdaq Book is the midpoint between 

the NBBO, unless the Order has a limit 

price that is lower than the midpoint 

between the NBBO for an Order to buy 

(higher than the midpoint between the 

NBBO for an Order to sell), in which 

case the Order will be ranked on the 

Nasdaq Book at its limit price. The price 

of the Order will not thereafter be 

adjusted based on changes to the NBBO. 

If, after being posted to the Nasdaq 

Book, the NBBO changes so that 

midpoint between the NBBO is lower 

than (higher than) the price of a 

Midpoint Peg Post-Only Order to buy 

(sell), the Midpoint Peg Post-Only Order 

will be cancelled back to the 

Participant. For example, if the Best Bid 

is $11 and the Best Offer is $11.06, a 

Midpoint Peg Post-Only Order to buy 

would post at $11.03. If, thereafter, the 

Best Offer is reduced to $11.05, the 

Midpoint Peg Post-Only Order will be 

cancelled back to the Participant.57

The following Order Attributes may 

be assigned to a Midpoint Peg Post-Only 

Order: 

• Price of more than $1 per share. A 

Midpoint Peg Post-Only Order that 

would be assigned a price of $1 or less 

per share will be rejected or cancelled, 

as applicable. 

• Size. 

• A Time-in-Force other than IOC; 

provided, however, that regardless of 

the Time-in-Force entered, a Midpoint 

Post-Only Order may not be active 

outside of Market Hours. A Midpoint 

Peg Post-Only Order entered prior to the 

beginning of Market Hours will be 

rejected. A Midpoint Peg Post-Only 

Order remaining on the Nasdaq Book at 

4:00 p.m. ET will be cancelled by the 

System; provided, however, that if the 

Nasdaq Closing Cross for the security 

that is the subject of the Order occurs 

prior to the cancellation message being 

fully processed, a Midpoint Peg PostOnly Order may participate in the 

Nasdaq Closing Cross. 

• Pegging to the midpoint is required 

for Midpoint Peg Post-Only Orders 

entered through RASH, QIX or FIX. As 

discussed above, the price of a Midpoint 

Peg Post-Only Order entered through 

OUCH or FLITE will be pegged to the 

midpoint upon entry and not adjusted 

thereafter. 

• Minimum Quantity. 

• Non-Display. All Midpoint Peg 

Post-Only Orders are Non-Displayed. 

Supplemental Orders 

A ‘‘Supplemental Order’’ is an Order 

Type with a Non-Display Order 

Attribute that is held on the Nasdaq 

Book in order to provide liquidity at the 

NBBO through a special execution 

process described in Rule 4757(a)(1)(D). 

A Supplemental Order may be entered 

through the OUCH protocol only. The 

Order allows a Participant to provide 

greater depth of liquidity at the NBBO 

without signaling the full extent of its 

trading interest to other Participants. 

Upon entry, a Supplemental Order 

will always post to the Nasdaq Book at 

a price equal to the Best Bid (for buys) 

or the Best Offer (for sells). Thereafter, 

the Supplemental Order may execute 

against an Order that is designated as 

eligible for routing, after the Order has 

executed against all other liquidity on 

the Nasdaq Book but before routing. An 

Order will execute against a 

Supplemental Order(s) only at the 

NBBO, only if the NBBO is not locked 

or crossed, and only if the Order can be 

executed in full. If a Supplemental 

Order is not executed in full, the 

remaining portion of the Supplemental 

Order shall remain on the Nasdaq Book 

as a Supplemental Order until the 

Supplemental Order is fully executed, 

the Supplemental Order is cancelled by 

the Participant that entered the 

Supplemental Order, or the size of the 

Supplemental Order is reduced to less 

than one normal unit of trading (in 

which case the Supplemental Order will 

be cancelled automatically). 

The following Order Attributes may 

be assigned to a Supplemental Order: 

• Price. The Price of a Supplemental 

Order to buy is always equal to the Best 

Bid, and the price of a Supplemental 

Order to sell is always equal to the Best 

Offer. 

• Size. All Supplemental Orders must 

be entered with a size of one or more 

normal units of trading. When a 

Supplemental Order is reduced to less 

than one normal unit of trading, the 

remainder of the Supplemental Order 

will be cancelled automatically. 

• A Time-in-Force other than IOC. A 

Supplemental Order may be entered at 

any time during Pre-Market Hours or 

Market Hours, but is available for 

potential execution only during Market 

Hours. Any Supplemental Orders still 

on the Nasdaq Book at the conclusion of 

Market Hours will be cancelled. 

Supplemental Orders may not 

participate in the Nasdaq Opening Cross 

or the Nasdaq Closing Cross. 

• Primary Pegging. A Supplemental 

Order is not pegged to the NBBO 

through the regular Primary Pegging 

Order Attribute, and therefore does not 

have its price adjusted continually. 

However, if an incoming Order is 

potentially executable against a 

Supplemental Order, the System will set 

the price of the Supplemental Order at 

the NBBO on the same side of the 

market, with no offset. As a result, a 

Supplemental Order may only execute 

at the NBBO. 

• Non-Display. All Supplemental 

Orders are Non-Displayed. 

mstockstill on DSK4VPTVN1PROD with NOTICES

16060 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

58As with other Order Types, the Market Maker 

Peg Order must be an Order either to buy or to sell; 

thus, at least two Orders would be required to 

maintain a two-sided quotation. 

59The definition of Market On Open Order, as 

well as the definitions of Limit On Open Order, 

Opening Imbalance Only Order, Market On Close 

Order, Limit On Close Order, and Imbalance Only 

Order, is currently found in Rule 4752 and 4754. 

Accordingly, conforming changes are being 

proposed to those rules to reflect the adoption of 

the definitions in new Rule 4702. 

Market Maker Peg Order 

A ‘‘Market Maker Peg Order’’ is an 

Order Type designed to allow a Market 

Maker to maintain a continuous twosided quotation at a price that is 

compliant with the quotation 

requirements for Market Makers set 

forth in Rule 4613(a)(2).58 The price of 

the Market Maker Peg Order is set with 

reference to a ‘‘Reference Price’’ in order 

to keep the price of the Market Maker 

Peg Order within a bounded price range. 

A Market Maker Peg Order may be 

entered through RASH, FIX or QIX only. 

A Market Maker Peg Order must be 

entered with a limit price beyond which 

the Order may not be priced. The 

Reference Price for a Market Maker Peg 

Order to buy (sell) is the then-current 

Best Bid (Best Offer) (including Nasdaq), 

or if no such Best Bid or Best Offer, the 

most recent reported last-sale eligible 

trade from the responsible single plan 

processor for that day, or if none, the 

previous closing price of the security as 

adjusted to reflect any corporate actions 

(e.g., dividends or stock splits) in the 

security. 

Upon entry, the price of a Market 

Maker Peg Order to buy (sell) is 

automatically set by the System at the 

Designated Percentage (as defined in 

Rule 4613) away from the Reference 

Price in order to comply with the 

quotation requirements for Market 

Makers set forth in Rule 4613(a)(2). For 

example, if the Best Bid is $10 and the 

Designated Percentage for the security is 

8%, the price of a Market Marker Peg 

Order to buy would be $9.20. If the limit 

price of the Order is not within the 

Designated Percentage, the Order will be 

sent back to the Participant. 

Once a Market Maker Peg Order has 

posted to the Nasdaq Book, its price is 

adjusted if needed as the Reference 

Price changes. Specifically, if as a result 

of a change to the Reference Price, the 

difference between the price of the 

Market Maker Peg Order and the 

Reference Price reaches the Defined 

Limit (as defined in Rule 4613), the 

price of a Market Maker Peg Order to 

buy (sell) will be adjusted to the 

Designated Percentage away from the 

Reference Price. In the foregoing 

example, if the Defined Limit is 9.5% 

and the Best Bid increased to $10.17, 

such that the price of the Market Maker 

Peg Order would be more than 9.5% 

away, the Order will be repriced to 

$9.35, or 8% away from the Best Bid. 

Note that calculated prices of less than 

the minimum increment will be 

rounded in a manner that ensures that 

the posted price will be set at a level 

that complies with the percentages 

stipulated by this rule. If the limit price 

of the Order is outside the Defined 

Limit, the Order will be sent back to the 

Participant. 

Similarly, if as a result of a change to 

the Reference Price, the price of a 

Market Maker Peg Order to buy (sell) is 

within one minimum price variation 

more than (less than) a price that is 4% 

less than (more than) the Reference 

Price, rounded up (down), then the 

price of the Market Maker Peg Order to 

buy (sell) will be adjusted to the 

Designated Percentage away from the 

Reference Price. For example, if the Best 

Bid is $10 and the Designated 

Percentage for the security is 8%, the 

price of a Market Marker Peg Order to 

buy would initially be $9.20. If the Best 

Bid then moved to $9.57, such that the 

price of the Market Maker Peg Order 

would be a minimum of $0.01 more 

than a price that is 4% less than the Best 

Bid, rounded up (i.e., $9.57 ¥ ($9.57 × 

0.04) = $9.1872, rounding up to $9.19), 

the Order will be repriced to $8.81, or 

8% away from the Best Bid. 

A Market Maker may enter a Market 

Maker Peg Order with a more aggressive 

offset than the Designated Percentage, 

but such an offset will be expressed as 

a price difference from the Reference 

Price. Such a Market Maker Peg Order 

will be repriced in the same manner as 

a Price to Display Order with 

Attribution and Primary Pegging. As a 

result, the price of the Order will be 

adjusted whenever the price to which 

the Order is pegged is changed. 

A new timestamp is created for a 

Market Maker Peg Order each time that 

its price is adjusted. In the absence of 

a Reference Price, a Market Maker Peg 

Order will be cancelled or rejected. If, 

after entry, a Market Maker Peg Order is 

priced based on a Reference Price other 

than the NBBO and such Market Maker 

Peg Order is established as the Best Bid 

or Best Offer, the Market Maker Peg 

Order will not be subsequently adjusted 

in accordance with this rule until a new 

Reference Price is established. If a 

Market Maker Peg Order is repriced 

1,000 times, it will be cancelled. This 

restriction is designed to conserve 

System resources by limiting the 

persistence of Orders that update 

repeatedly without any reasonable 

prospect of execution. 

Notwithstanding the availability of 

Market Maker Peg Order functionality, a 

Market Maker remains responsible for 

entering, monitoring, and resubmitting, 

as applicable, quotations that meet the 

requirements of Rule 4613. 

The following Order Attributes may 

be assigned to a Market Maker Peg 

Order: 

• Price. As discussed above, the price 

of Market Maker Peg Order is 

established by the Nasdaq Market 

Center based on the Reference Price, the 

Designated Percentage (or a narrower 

offset established by the Market Maker), 

the Defined Limit, and the 4% 

minimum difference from the NBBO. 

• Size. 

• A Time-in-Force other than IOC or 

‘‘Good-till-Cancelled’’. 

• Participation in the Nasdaq 

Opening Cross and/or the Nasdaq 

Closing Cross. 

• If the Market Maker designates a 

more aggressive offset, Primary Pegging 

is required. 

• Attribution. All Market Maker Peg 

Orders are Attributable. 

• Display. Market Marker Peg Orders 

are always Displayed. 

Market on Open Order 59

A ‘‘Market On Open Order’’ or ‘‘MOO 

Order’’ is an Order Type entered 

without a price that may be executed 

only during the Nasdaq Opening Cross. 

Subject to the qualifications provided 

below, MOO Orders may be entered, 

cancelled, and/or modified between 4 

a.m. ET and immediately prior to 9:28 

a.m. ET. An MOO Order may not be 

cancelled or modified at or after 9:28 

a.m. ET. An MOO Order shall execute 

only at the price determined by the 

Nasdaq Opening Cross. 

The following Order Attributes may 

be assigned to a Market On Open Order: 

• Price. An MOO Order is entered 

without a price and shall execute only 

at the price determined by the Nasdaq 

Opening Cross. 

• Size. 

• Time-in-Force. An MOO Order may 

execute only in the Nasdaq Opening 

Cross. However, a Participant may 

designate the Time-in-Force for an MOO 

Order either by designating a Time-inForce of ‘‘On Open’’ or by entering 

another Order Type with a Market 

Pegging Attribute and flagging the Order 

to participate in the Nasdaq Opening 

Cross. An MOO Order entered through 

RASH or FIX with a Time-in-Force of 

IOC and flagged to participate in the 

Nasdaq Opening Cross that is entered 

after the time of the Nasdaq Opening 

Cross will be accepted but will be 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16061 

60 Details with regard to the treatment of LOO 

Orders entered after 9:28 a.m. reflect a substantive 

clarification to existing rules. 

converted into a Non-Displayed Order 

with a Time-in-Force of IOC and a price 

established using the Market Pegging 

Order Attribute with no offset. An Order 

with a Market Pegging Attribute and a 

Time-in-Force other than IOC that is 

flagged to participate in the Nasdaq 

Opening Cross and entered at or after 

9:28 a.m. will be held and entered into 

the System after the completion of the 

Nasdaq Opening Cross. All other MOO 

Orders entered at or after 9:28 a.m. will 

be rejected. 

• Participation in the Nasdaq 

Opening Cross is required for this Order 

Type. 

Limit on Open Order 

A ‘‘Limit On Open Order’’ or ‘‘LOO 

Order’’ is an Order Type entered with a 

price that may be executed only in the 

Nasdaq Opening Cross, and only if the 

price determined by the Nasdaq 

Opening Cross is equal to or better than 

the price at which the LOO Order was 

entered. Subject to the qualifications 

provided below, LOO Orders may be 

entered, cancelled, and/or modified 

between 4 a.m. ET and immediately 

prior to 9:28 a.m. ET. 

The following Order Attributes may 

be assigned to a Limit On Open Order: 

• Price. 

• Size. 

• Time-in-Force. In general, an LOO 

Order may execute only in the Nasdaq 

Opening Cross. However, a Participant 

may designate the Time-in-Force for an 

LOO Order either by designating a 

Time-in-Force of ‘‘On Open,’’ in which 

case the Order will execute solely in the 

Nasdaq Opening Cross, or by entering 

another Order Type and Time-in-Force 

and flagging the Order to participate in 

the Nasdaq Opening Cross. In the latter 

case, if the Participant designates a 

Time-in-Force of IOC, the Order will 

participate solely in the Nasdaq 

Opening Cross. If the Participant enters 

a Time-in-Force that continues after the 

time of the Nasdaq Opening Cross, the 

Order will participate in the Nasdaq 

Opening Cross like an LOO Order, while 

operating thereafter in accordance with 

its designated Order Type and Order 

Attributes (if not executed in full in the 

Nasdaq Opening Cross). Such an Order 

may be referred to as an ‘‘Opening 

Cross/Market Hours Order.’’ If such an 

Order has a Time-in-Force that 

continues until at least the time of the 

Nasdaq Closing Cross, the Order may be 

referred to as a ‘‘Cross to Cross Order.’’ 

• Following the Nasdaq Opening 

Cross, an Opening Cross/Market Hours 

Order may not operate as a Post-Only 

Order, Midpoint Peg Post-Only Order, a 

Supplemental Order, a Retail Order, or 

an RPI Order. In the case of a Market 

Maker Peg Order entered prior to 9:28 

a.m. ET that is also designated to 

participate in the Nasdaq Opening 

Cross, the price of the Order for 

purposes of operating as an LOO Order 

will be established on entry and will not 

thereafter be pegged until after the 

completion of the Nasdaq Opening 

Cross. An Opening Cross/Market Hours 

Order that is entered between 9:28 a.m. 

and the time of the Nasdaq Opening 

Cross will be (i) held and entered into 

the System after the completion of the 

Nasdaq Opening Cross if it has been 

assigned a Pegging Attribute or Routing 

Attribute, (ii) treated as an Opening 

Imbalance Only Order and entered into 

the System after the completion of the 

Nasdaq Opening Cross if entered 

through RASH, QIX, or FIX but not 

assigned a Pegging Attribute or Routing 

Attribute, or (iii) treated as an Opening 

Imbalance Only Order and cancelled 

after the Nasdaq Opening Cross if 

entered through OUCH or FLITE. An 

Opening Cross/Market Hours Order 

entered through RASH or FIX after the 

time of the Nasdaq Opening Cross will 

be accepted but the Nasdaq Opening 

Cross flag will be ignored. A Routable 

Order flagged to participate in the 

Nasdaq Opening Cross with a Time-inForce other than IOC and entered at or 

after 9:28 a.m. will be held and entered 

into the System after the Nasdaq 

Opening Cross. All other LOO Orders 

and Opening Cross/Market Hours 

Orders entered at or after 9:28 a.m. will 

be rejected.60

• Participation in the Nasdaq 

Opening Cross is required for this Order 

Type. 

Opening Imbalance Only Order 

An ‘‘Opening Imbalance Only Order’’ 

or ‘‘OIO Order’’ is an Order Type 

entered with a price that may be 

executed only in the Nasdaq Opening 

Cross and only against MOO Orders, 

LOO Orders, or Early Market Hours 

Orders (as defined in Rule 4752). OIO 

Orders may be entered between 4:00 

a.m. ET until the time of execution of 

the Nasdaq Opening Cross, but may not 

be cancelled or modified at or after 9:28 

a.m. ET. If the entered price of an OIO 

Order to buy (sell) is higher than (lower 

than) the highest bid (lowest offer) on 

the Nasdaq Book, the price of the OIO 

Order will be modified repeatedly to 

equal the highest bid (lowest offer) on 

the Nasdaq Book; provided, however, 

that the price of the Order will not be 

moved beyond its stated limit price. 

Thus, for example, if an OIO Order to 

buy was entered with a price of $11 and 

the current highest bid on the Nasdaq 

Book was $10.99, the OIO Order would 

be priced at $10.99. If the highest bid 

subsequently became $10.98, the OIO 

Order would again be repriced. 

However, if the highest bid moved to 

$11.01, the OIO Order would not be 

repriced. 

The following Order Attributes may 

be assigned to an Opening Imbalance 

Only Order: 

• Price. 

• Size. 

• Time-in-Force. An OIO Order may 

execute only in the Nasdaq Opening 

Cross. An OIO Order entered after the 

time of the execution of the Nasdaq 

Opening Cross will be rejected. 

• Participation in the Nasdaq 

Opening Cross is required for this Order 

Type. 

Market On Close Order 

A ‘‘Market On Close Order’’ or ‘‘MOC 

Order’’ is an Order Type entered 

without a price that may be executed 

only during the Nasdaq Closing Cross. 

Subject to the qualifications provided 

below, MOC Orders may be entered, 

cancelled, and/or modified between 4 

a.m. ET and immediately prior to 3:50 

p.m. ET. Between 3:50 p.m. ET and 

immediately prior to 3:55 p.m. ET, an 

MOC Order can be cancelled and/or 

modified only if the Participant requests 

that Nasdaq correct a legitimate error in 

the Order (e.g., Side, Size, Symbol, or 

Price, or duplication of an Order). MOC 

Orders cannot be cancelled or modified 

at or after 3:55 p.m. ET for any reason. 

An MOC Order shall execute only at the 

price determined by the Nasdaq Closing 

Cross. 

The following Order Attributes may 

be assigned to a Market On Close Order: 

• Price. An MOC Order is entered 

without a price and shall execute only 

at the price determined by the Nasdaq 

Closing Cross. 

• Size. 

• Time-in-Force. An MOC Order may 

execute only in the Nasdaq Closing 

Cross. However, a Participant may 

designate the Time-in-Force for an MOC 

Order either by designating a Time-inForce of ‘‘On Close’’ or by entering a 

Time-in-Force of IOC and flagging the 

Order to participate in the Nasdaq 

Closing Cross. All MOC Orders entered 

after 3:50 p.m. ET will be rejected. 

Participation in the Nasdaq Closing 

Cross is required for this Order Type. 

Limit On Close Order 

A ‘‘Limit On Close Order’’ or ‘‘LOC 

Order’’ is an Order Type entered with a 

price that may be executed only in the 

Nasdaq Closing Cross, and only if the 

mstockstill on DSK4VPTVN1PROD with NOTICES

16062 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

61 Details with regard to the treatment of LOC 

Orders entered after 3:55 p.m. reflect a substantive 

clarification to existing rules. 

62Nasdaq’s affiliate exchange, NASDAQ OMX 

BX, Inc., however, has recently adopted these Order 

Types. See Securities Exchange Act Release No. 

73702 (November 28, 2014), 79 FR 72049 

(December 4, 2014) (SR–BX–2014–048). 

63The SCAN routing strategy is described in Rule 

4758. The ability to enter a SCAN Order with at 

Time-in-Force that commences at 8:00 a.m. reflects 

a substantive clarification to existing rules. 

price determined by the Nasdaq Closing 

Cross is equal to or better than the price 

at which the LOC Order was entered. 

Subject to the qualifications provided 

below, LOC Orders may be entered, 

cancelled, and/or modified between 4 

a.m. ET and immediately prior to 3:50 

p.m. ET. Between 3:50 p.m. ET and 

immediately prior to 3:55 p.m. ET, an 

LOC Order can be cancelled but not 

modified, and only if the Participant 

requests that Nasdaq correct a legitimate 

error in the Order (e.g., Side, Size, 

Symbol, or Price, or duplication of an 

Order). 

The following Order Attributes may 

be assigned to a Limit On Close Order: 

• Price. 

• Size. 

• Time-in-Force. In general, an LOC 

Order may execute only in the Nasdaq 

Closing Cross. However, a Participant 

may designate the Time-in-Force for an 

LOC Order either by designating a Timein-Force of ‘‘On Close,’’ in which case 

the Order will execute solely in the 

Nasdaq Closing Cross, or by entering 

another Order Type and Time-in-Force 

and flagging the Order to participate in 

the Nasdaq Closing Cross. In the latter 

case, if the Participant designates a 

Time-in-Force of IOC, the Order will 

participate solely in the Nasdaq Closing 

Cross. If the Participant enters a Timein-Force that continues after the time of 

the Nasdaq Closing Cross, the Order will 

participate in the Nasdaq Closing Cross 

like an LOC Order, while operating 

thereafter in accordance with its 

designated Order Type and Order 

Attributes (if not executed in full in the 

Nasdaq Closing Cross). Such an Order 

may be referred to as a ‘‘Closing Cross/ 

Extended Hours Order.’’ 

• Following the Nasdaq Closing 

Cross, a Closing Cross/Extended Hours 

Order may not operate as a Post-Only 

Order, Midpoint Peg Post-Only Order, 

Supplemental Order, Retail Order, or 

RPI Order. In the case of a Market Maker 

Peg Order entered prior to 3:50 p.m. ET 

that is also designated to participate in 

the Nasdaq Closing Cross, the price of 

the Order for purposes of operating as 

an LOC Order will be established on 

entry and will not thereafter be pegged 

until after the completion of the Nasdaq 

Closing Cross. A Closing Cross/

Extended Hours Order that is entered 

between 3:50 p.m. and the time of the 

Nasdaq Closing Cross will be (i) rejected 

if it has been assigned a Pegging 

Attribute, (ii) treated as an Imbalance 

Only Order and then entered into the 

System after the completion of the 

Nasdaq Closing Cross if entered through 

RASH, QIX, or FIX but not assigned a 

Pegging Attribute, and (iii) treated as an 

Imbalance Only Order and cancelled 

after the Nasdaq Closing Cross if entered 

through OUCH or FLITE. A Closing 

Cross/Extended Hours Order entered 

through OUCH, FLITE, RASH, or FIX 

with a Time-in-Force other than IOC 

after the time of the Nasdaq Closing 

Cross will be accepted but the Nasdaq 

Closing Cross flag will be ignored. All 

other LOC Orders and Closing Cross/

Extended Hours Orders entered at or 

after 3:50 p.m. ET will be rejected.61

• Participation in the Nasdaq Closing 

Cross is required for this Order Type. 

Imbalance Only Order 

An ‘‘Imbalance Only Order’’ or ‘‘IO 

Order’’ is an Order entered with a price 

that may be executed only in the Nasdaq 

Closing Cross and only against MOC 

Orders or LOC Orders. IO Orders may be 

entered between 4:00 a.m. ET until the 

time of execution of the Nasdaq Closing 

Cross, but may not [sic] cancelled or 

modified at or after 3:50 p.m. ET. 

Between 3:50 p.m. ET and immediately 

prior to 3:55 p.m. ET, however, an IO 

Order can be cancelled and/or modified 

if the Participant requests that Nasdaq 

correct a legitimate error in the Order 

(e.g., Side, Size, Symbol, or Price, or 

duplication of an Order). IO Orders 

cannot be cancelled or modified at or 

after 3:55 p.m. ET for any reason. If the 

price of an IO Order to buy (sell) is 

higher than (lower than) the highest bid 

(lowest offer) on the Nasdaq Book, the 

price of the IO Order will be modified 

repeatedly to equal the highest bid 

(lowest offer) on the Nasdaq Book; 

provided, however, that the price of the 

Order will not be moved beyond its 

stated limit price. Thus, for example, if 

an IO Order to buy was entered with a 

price of $11 and the current highest bid 

on the Nasdaq Book was $10.99, the IO 

Order would be priced at $10.99. If the 

highest bid subsequently became 

$10.98, the IO Order would again be 

repriced. However, if the highest bid 

moved to $11.01, the IO Order would 

not be repriced. 

The following Order Attributes may 

be assigned to an Imbalance Only Order: 

• Price. 

• Size. 

• Time-in-Force. An IO Order may 

execute only in the Nasdaq Closing 

Cross. An IO Order entered after the 

time of the Nasdaq Closing Cross will be 

rejected. 

• Participation in the Nasdaq Closing 

Cross is required for this Order Type. 

Retail Price Improving Order and Retail 

Order 

These Order Types are currently 

described in Rule 4780 and were 

operated under a pilot program that 

expired on December 31, 2014. Because 

Nasdaq has opted not to extend this 

pilot, it is proposing to delete Rule 

4780. Accordingly, these Order Types 

are not described in the restated rules.62

Order Attributes 

Proposed Rule 4702 lists the Order 

Attributes that may be assigned to 

specific Order Types. Proposed Rule 

4703 details the parameters of each 

Order Attribute. 

Time-in-Force 

The ‘‘Time-in-Force’’ assigned to an 

Order means the period of time that the 

Nasdaq Market Center will hold the 

Order for potential execution. 

Participants specify an Order’s Time-inForce by designating a time at which the 

Order will become active and a time at 

which the Order will cease to be active. 

The available times for activating Orders 

are: 

• The time of the Order’s receipt by 

the Nasdaq Market Center; 

• the Nasdaq Opening Cross (or 9:30 

a.m. ET in the case of a security for 

which no Nasdaq Opening Cross 

occurs); 

• Market Hours, beginning after the 

completion of the Nasdaq Opening 

Cross (or at 9:30 a.m. ET in the case of 

a security for which no Nasdaq Opening 

Cross occurs); 

• the Nasdaq Closing Cross (or the 

end of Market Hours in the case of a 

security for which no Nasdaq Closing 

Cross occurs); 

• 8:00 a.m. ET, in the case of an Order 

using the SCAN routing strategy 63 that 

is entered prior to 8:00 a.m. ET; 

• the beginning of the Display-Only 

Period, in the case of a security that is 

the subject of a trading halt and for 

which trading will resume pursuant to 

a halt cross; and 

• the resumption of trading, in the 

case of a security that is the subject of 

a trading halt and for which trading 

resumes without a halt cross. 

The available times for deactivating 

Orders are: 

• ‘‘Immediate’’ (i.e., immediately after 

determining whether the Order is 

marketable); 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16063 

64This is the case because otherwise the Pegged 

Order would become pegged to itself it set the 

NBBO. 

65For example, if an Order to buy with Primary 

Pegging is entered with a limit price of $11.05 at 

a time when the Inside Bid is $11, the initial price 

of the Order will be $11. If, thereafter, the Inside 

Bid changes to $11.05, $11.06, and $11.04, the price 

of the Order at such times will be $11.05, $11.05, 

and $11.04. 

• the end of Market Hours; 

• the end of System Hours; 

• one year after entry; or 

• a specific time identified by the 

Participant; provided, however, that an 

Order specifying an expire time beyond 

the current trading day will be cancelled 

at the end of the current trading day. 

Notwithstanding the Time-in-Force 

originally designated for an Order, a 

Participant may always cancel an Order 

after it is entered. 

The following Times in Force are 

referenced elsewhere in Nasdaq’s Rules 

by the designations noted below: 

• An Order that is designated to 

deactivate immediately after 

determining whether the Order is 

marketable may be referred to as having 

a Time in Force of ‘‘Immediate or 

Cancel’’ or ‘‘IOC’’. Except as provided in 

Rule 4702 with respect to Opening 

Cross/Market Hours Orders and Closing 

Cross/Extended Hours Orders, MOO, 

LOO, OIO, MOC, LOC and OI Orders all 

have a Time in Force of IOC, because 

they are designated for execution in the 

Nasdaq Opening Cross or the Nasdaq 

Closing Cross, as applicable, and are 

cancelled after determining whether 

they are executable in such cross. Such 

an Order may also be referred to as 

having a Time-in-Force of ‘‘On Open’’ or 

‘‘On Close’’, respectively. An MOO, 

LOO, OIO, MOC, LOC or IO Order, or 

any other Order with a Time-in-Force of 

IOC entered between 9:30 a.m. ET and 

4:00 p.m. ET, may be referred to as 

having a Time-in-Force of ‘‘Market 

Hours Immediate or Cancel’’ or 

‘‘MIOC’’. An Order with a Time-inForce of IOC that is entered at any time 

between 4:00 a.m. ET and 8:00 p.m. ET 

may be referred to as having a Time-inForce of ‘‘System Hours Immediate or 

Cancel’’ or ‘‘SIOC’’. 

• An Order that is designated to 

deactivate at 8:00 p.m. may be referred 

to as having a Time in Force of ‘‘System 

Hours Day’’ or ‘‘SDAY’’. 

• An Order that is designated to 

deactivate one year after entry may be 

referred to as a ‘‘Good-till-Cancelled’’ or 

‘‘GTC’’ Order. If a GTC Order is 

designated as eligible for execution 

during Market Hours only, it may be 

referred to as having a Time in Force of 

‘‘Market Hours Good-till-Cancelled’’ or 

‘‘MGTC’’. If a GTC is designated as 

eligible for execution during System 

Hours, it may be referred to as having 

a Time in Force of ‘‘System Hours Goodtill-Cancelled’’ or ‘‘SGTC’’. 

• An Order that is designated to 

deactivate at the time specified in 

advance by the entering Participant may 

be referred to as having a Time-in-Force 

of ‘‘System Hours Expire Time’’ or 

‘‘SHEX’’. 

• An Order that is designated to 

activate at any time during Market 

Hours and deactivate at the completion 

of the Nasdaq Closing Cross may be 

referred to as having a Time-in-Force of 

‘‘Market Hours Day’’ or ‘‘MDAY’’. An 

Order entered with a Time-in-Force of 

MDAY after the completion of the 

Nasdaq Closing Cross will be rejected. 

• An Order that is designated to 

activate when entered and deactivate at 

the completion of the Nasdaq Closing 

Cross may be referred to as having a 

Time in Force of ‘‘Good-till-Market 

Close’’ or ‘‘GTMC’’. GTMC Orders 

entered after 4:00 p.m. ET will be 

rejected. 

• A Participant entering an Order 

using the SCAN routing strategy prior to 

8:00 a.m. ET may designate the Order to 

activate upon entry, or at 8:00 a.m. ET. 

The latter option may be referred to as 

‘‘ESCN’’. 

Size 

Except as otherwise provided, an 

Order may be entered in any whole 

share size between one share and 

999,999 shares. Orders for fractional 

shares are not permitted. The following 

terms may be used to describe particular 

Order sizes: 

• ‘‘normal unit of trading’’ or ‘‘round 

lot’’ means the size generally employed 

by traders when trading a particular 

security, which is 100 shares in most 

instances; 

• ‘‘mixed lot’’ means a size of more 

than one normal unit of trading but not 

a multiple thereof; and 

• ‘‘odd lot’’ means a size of less than 

one normal unit of trading. 

Price 

With limited exceptions, all Orders 

must have a price, such that they will 

execute only if the price available is 

equal to or better than the price of the 

Order. The maximum price that the 

System will accept is $199,999.99. MOO 

and MOC Orders are not assigned a 

price by the entering party and execute 

at the price of the Nasdaq Opening 

Cross and Nasdaq Closing Cross, 

respectively. Moreover, certain Orders 

have a price that is determined by the 

Nasdaq Market Center based on the 

NBBO or other reference prices, rather 

than by the Participant. As described 

below with respect to the Pegging Order 

Attribute, an Order may have a price 

that it pegged to the opposite side of the 

market, in which case the Order will 

behave like a ‘‘market order’’ or 

‘‘unpriced order’’ (i.e., an Order that 

executes against accessible liquidity on 

the opposite side of the market, 

regardless of its price). 

Pegging 

Pegging is an Order Attribute that 

allows an Order to have its price 

automatically set with reference to the 

NBBO; provided, however, that if 

Nasdaq is the sole market center at the 

Best Bid or Best Offer (as applicable), 

then the price of any Displayed Order 

with Pegging will be set with reference 

to the highest bid or lowest offer 

disseminated by a market center other 

than Nasdaq.64 An Order with a Pegging 

Order Attribute may be referred to as a 

‘‘Pegged Order.’’ The price to which an 

Order is pegged is referred to as the 

Inside Quotation, the Inside Bid, or the 

Inside Offer, as appropriate. There are 

three varieties of Pegging: 

• Primary Pegging means Pegging 

with reference to the Inside Quotation 

on the same side of the market. For 

example, if the Inside Bid was $11, an 

Order to buy with Primary Pegging 

would be priced at $11. 

• Market Pegging means Pegging with 

reference to the Inside Quotation on the 

opposite side of the market. For 

example, if the Inside Offer was $11.06, 

an Order to buy with Market Pegging 

would be priced at $11.06. 

• Midpoint Pegging means Pegging 

with reference to the midpoint between 

the Inside Bid and the Inside Offer (the 

‘‘Midpoint’’). Thus, if the Inside Bid was 

$11 and the Inside Offer was $11.06, an 

Order with Midpoint Pegging would be 

priced at $11.03. An Order with 

Midpoint Pegging is not displayed. An 

Order with Midpoint Pegging may be 

executed in sub-pennies if necessary to 

obtain a midpoint price. 

Pegging is available only during Market 

Hours. An Order with Pegging may 

specify a limit price beyond which the 

Order may not be executed; provided, 

however, that if an Order has been 

assigned a Pegging Order Attribute and 

a Discretion Order Attribute, the Order 

may execute at any price within the 

discretionary price range, even if 

beyond the limit price specified with 

respect to the Pegging Order Attribute. 

If an Order with Pegging is priced at its 

limit price, the price of the Order may 

nevertheless be changed to a less 

aggressive price based on changes to the 

Inside Quotation.65 In addition, an 

Order with Primary Pegging or Market 

Pegging may specify an Offset Amount, 

mstockstill on DSK4VPTVN1PROD with NOTICES

16064 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

such that the price of the Order will 

vary from the Inside Quotation by the 

selected Offset Amount. The Offset 

Amount may be either aggressive or 

passive. Thus, for example, if a 

Participant entered an Order to buy with 

Primary Pegging and a passive Offset 

Amount of $0.05 and the Inside Bid was 

$11, the Order would be priced at 

$10.95. If the Participant selected an 

aggressive Offset Amount of $0.02, 

however, the Order would be priced at 

$11.02. An Order with Primary Pegging 

and an Offset Amount will not be 

Displayed, unless the Order is 

Attributable. An Order with Midpoint 

Pegging will not be Displayed. An Order 

with Market Pegging and no Offset 

behaves as a ‘‘market order’’ with 

respect to any liquidity on the Nasdaq 

Book at the Inside Quotation on the 

opposite side of the market because it is 

immediately executable at that price. If, 

at the time of entry, there is no price to 

which a Pegged Order can be pegged, 

the Order will be rejected. In the case of 

an Order with Midpoint Pegging, if the 

Inside Bid and Inside Offer are locked, 

the Order will be priced at the locking 

price, if the Inside Bid and Inside Offer 

are crossed, the Order will nevertheless 

be priced at the midpoint between the 

Inside Bid and Inside Offer, and if there 

is no Inside Bid and/or Inside Offer, the 

Order will be rejected. 

Primary Pegging and Market Pegging 

are available through RASH, QIX, and 

FIX only. An Order entered through 

OUCH or FLITE with Midpoint Pegging 

will have its price set upon initial entry 

to the Midpoint, unless the Order has a 

limit price that is lower than the 

Midpoint for an Order to buy (higher 

than the Midpoint for an Order to sell), 

in which case the Order will be ranked 

on the Nasdaq Book at its limit price. 

Thereafter, if the NBBO changes so that 

the Midpoint is lower than (higher than) 

the price of an Order to buy (sell), the 

Pegged Order will be cancelled back to 

the Participant. 

An Order entered through RASH, QIX 

or FIX with Pegging will have its price 

set upon initial entry and will thereafter 

have its price reset in accordance with 

changes to the relevant Inside 

Quotation. An Order with Pegging 

receives a new timestamp whenever its 

price is updated and therefore will be 

evaluated with respect to possible 

execution (and routing, if it has been 

assigned a Routing Order Attribute) in 

the same manner as a newly entered 

Order. If the price to which an Order is 

pegged is not available, the Order will 

be rejected. 

Pegging functionality allows a 

Participant to have the System adjust 

the price of the Order continually in 

order to keep the price within defined 

parameters. Thus, the System performs 

price adjustments that would otherwise 

be performed by the Participant through 

cancellation and reentry of Orders. The 

fact that a new timestamp is created for 

a Pegged Order whenever it has its price 

adjusted allows the Order to seek 

additional execution opportunities and 

ensures that the Order does not ‘‘jump 

the queue’’ with respect to any Orders 

that were previously at the Pegged 

Order’s new price level. 

If an Order with Primary Pegging is 

updated 1,000 times, it will be 

cancelled; if an Order with other forms 

of Pegging is updated 10,000 times, it 

will be cancelled. This restriction is 

designed to conserve System resources 

by limiting the persistence of Orders 

that update repeatedly without any 

reasonable prospect of execution. 

Minimum Quantity 

Minimum Quantity is an Order 

Attribute that allows a Participant to 

provide that an Order will not execute 

unless a specified minimum quantity of 

shares can be obtained. Thus, the 

functionality serves to allow a 

Participant that may wish to buy or sell 

a large amount of a security to avoid 

signaling its trading interest unless it 

can purchase a certain minimum 

amount. An Order with a Minimum 

Quantity Order Attribute may be 

referred to as a ‘‘Minimum Quantity 

Order.’’ For example, a Participant 

could enter an Order with a Size of 1000 

shares and specify a Minimum Quantity 

of 500 shares. 

A Participant may specify two 

alternatives with respect to the 

processing of a Minimum Quantity 

Order at time of entry: 

• First, the Participant may specify 

that the minimum quantity condition 

may be satisfied by execution against 

multiple Orders. In that case, upon 

entry, the System would determine 

whether there were one or more posted 

Orders executable against the incoming 

Order with an aggregate size of at least 

the minimum quantity (500 shares in 

the above example). If there were not, 

the Order would post on the Nasdaq 

Book in accordance with the 

characteristics of its underlying Order 

Type. 

• Second, the Participant may specify 

that the minimum quantity condition 

must be satisfied by execution against 

one or more Orders, each of which must 

have a size that satisfies the minimum 

quantity condition. If there are such 

Orders but there are also other Orders 

that do not satisfy the minimum 

quantity condition, the Minimum 

Quantity Order will be partially 

executed and the remainder of the Order 

will be cancelled. For example, if a 

Participant entered an Order to buy at 

$11 with a size of 1,500 shares and a 

minimum quantity condition of 500 

shares, and there were three Orders to 

sell at $11 on the Nasdaq Book, two 

with a size of 500 shares each and one 

with a size of 200 shares, the two 500 

share Orders would execute and the 

remainder of the Minimum Quantity 

Order would be cancelled. 

Alternatively, if the Order would lock or 

cross Orders on the Nasdaq Book but 

none of the resting Orders would satisfy 

the minimum quantity condition, an 

Order with a minimum quantity 

condition to buy (sell) will be repriced 

to one minimum price increment lower 

than (higher than) the lowest price 

(highest price) of such Orders. For 

example, if there was an Order to buy 

at $11 with a minimum quantity 

condition of 500 shares, and there were 

resting Orders on the Nasdaq Book to 

sell 200 shares at $10.99 and 300 shares 

at $11, the Order would be repriced to 

$10.98 and ranked at that price. 

Once posted to the Nasdaq Book, a 

Minimum Quantity Order retains its 

Minimum Quantity Order Attribute, 

such that the Order may execute only 

against incoming Orders with a size of 

at least the minimum quantity 

condition. An Order that has a 

Minimum Quantity Order Attribute and 

that posts to the Nasdaq Book will not 

be displayed. 

Upon entry, an Order with a 

Minimum Quantity Order Attribute 

must have a size of at least one round 

lot. An Order entered through OUCH or 

FLITE may have a minimum quantity 

condition of any size of at least one 

round lot. An Order entered through 

RASH, QIX or FIX must have a 

minimum quantity of one round lot or 

any multiple thereof, and a mixed lot 

minimum quantity condition will be 

rounded down to the nearest round lot. 

In the event that the shares remaining in 

the size of an Order with a Minimum 

Quantity Order Attribute following a 

partial execution thereof are less than 

the minimum quantity specified by the 

Participant entering the Order, the 

minimum quantity value of the Order 

will be reduced to the number of shares 

remaining. An Order with a Minimum 

Quantity Order Attribute may not be 

displayed; if a Participant marks an 

Order with both a Minimum Quantity 

Order Attribute and a Display Order 

Attribute, the System will accept the 

Order but will give a Time-in-Force of 

IOC, regardless of the Time-in-Force 

marked by the Participant. An Order 

marked with a Minimum Quantity 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16065 

66The proposed rule text reflects a substantive 

clarification to the existing description of 

Discretionary Orders. 

67 It should be noted that a Discretionary IOC is 

deemed to be accessing liquidity for purposes of 

Nasdaq’s schedule of fees and rebates, unless one 

Discretionary IOC executes against another 

Discretionary IOC, in which case the Order that had 

reached the Nasdaq Book first would be deemed to 

provide liquidity. See Rule 7018(d). Thus, a 

Participant may not use a Discretionary IOC to 

obtain a rebate for accessing previously posted 

liquidity. 

68The SCAN routing strategy is described in Rule 

4758. 

Order Attribute and a Routing Order 

Attribute will be rejected. 

Routing 

Routing is an Order Attribute that 

allows a Participant to designate an 

Order to employ one of several Routing 

Strategies offered by Nasdaq, as 

described in Rule 4758; such an Order 

may be referred to as a ‘‘Routable 

Order.’’ Upon receipt of an Order with 

the Routing Order Attribute, the System 

will process the Order in accordance 

with the applicable Routing Strategy. In 

the case of a limited number of Routing 

Strategies, the Order will be sent 

directly to other market centers for 

potential execution. For most other 

Routing Strategies, the Order will 

attempt to access liquidity available on 

Nasdaq in the manner specified for the 

underlying Order Type and will then be 

routed in accordance with the 

applicable Routing Strategy. Shares of 

the Order that cannot be executed are 

then returned to Nasdaq, where they 

will (i) again attempt to access liquidity 

available on Nasdaq and (ii) post to the 

Nasdaq Book or be cancelled, depending 

on the Time-in-Force of the Order. 

Under certain Routing Strategies, the 

Order may be routed again if the System 

observes an accessible quotation of 

another market center, and returned to 

Nasdaq again for potential execution 

and/or posting to the Nasdaq Book. 

In connection with the trading of 

securities governed by Regulation NMS, 

all Orders shall be routed for potential 

execution in compliance with 

Regulation NMS. Where appropriate, 

Routable Orders will be marked as 

Intermarket Sweep Orders. 

Discretion 

Discretion is an Order Attribute under 

which an Order has a non-displayed 

discretionary price range within which 

the entering Participant is willing to 

trade; such an Order may be referred to 

as a ‘‘Discretionary Order.’’ 66 Thus, an 

Order with Discretion has both a price 

(for example, buy at $11) and a 

discretionary price range (for example, 

buy up to $11.03). Depending on the 

Order Type used, the price may be 

displayed (for example, a Price to 

Display Order) or non-displayed (for 

example, a Non-Displayed Order). The 

discretionary price range is always nondisplayed. In addition, it should be 

noted that the Discretion Order 

Attribute may be combined with the 

Pegging Order Attribute, in which case 

either the price of the Order or the 

discretionary price range or both may be 

pegged in the ways described in Rule 

4702(d) with respect to the Pegging 

Order Attribute. For example, an Order 

with Discretion to buy might be pegged 

to the Best Bid with a $0.05 passive 

Offset and might have a discretionary 

price range pegged to the Best Bid with 

a $0.02 passive Offset. In that case, if the 

Best Bid was $11, the price of the Order 

would be $10.95, with a discretionary 

price range up to $10.98. If the Best Bid 

moved to $10.99, the price of the Order 

would then be $10.94, with a 

discretionary price range up to $10.97. 

Alternatively, if the price of the Order 

was pegged but the discretionary price 

range was not, the price of the Order 

would be $10.94, but the discretionary 

price range would continue to range up 

to $10.98. Likewise, if the discretionary 

price range was pegged but the price of 

the Order was not, the Order would 

remain priced at $10.95 but with a 

discretionary price range of up to 

$10.97. A Participant may also specify 

a limit price beyond which the 

discretionary price range may not 

extend. 

Under the circumstances described 

below, the Nasdaq Market Center 

processes an Order with Discretion by 

generating a Non-Displayed Order with 

a Time-in-Force of IOC (a ‘‘Discretionary 

IOC’’) that will attempt to access 

liquidity available within the 

discretionary price range. The 

Discretionary IOC will not be permitted 

to execute, however, if the price of the 

execution would trade through a 

Protected Quotation. If more than one 

Order with Discretion satisfies 

conditions that would cause the 

generation of a Discretionary IOC 

simultaneously, the order in which such 

Discretionary IOCs are presented for 

execution is random, based on the 

respective processing time for each such 

Order. Whenever a Discretionary IOC is 

generated, the underlying Order with 

Discretion will be withheld or removed 

from the Nasdaq Book and will then be 

routed and/or placed on the Nasdaq 

Book if the Discretionary IOC does not 

exhaust the full size of the underlying 

Order with Discretion, with its price 

determined by the underlying Order 

Type and Order Attributes selected by 

the Participant.67 Because the 

circumstances under which a 

Discretionary IOC will be generated are 

dependent upon a range of factors, 

several specific scenarios are described 

below. 

• If an Order has been assigned a 

Discretion Order Attribute, but has not 

been assigned a Routing Order 

Attribute, upon entry of the Order, the 

Nasdaq Market Center will 

automatically generate a Discretionary 

IOC with a price equal to the highest 

price for an Order with Discretion to 

buy (lowest price for an Order with 

Discretion to sell) within the 

discretionary price range and a size 

equal to the full size of the underlying 

Order to determine if there are any 

Orders within the discretionary price 

range on the Nasdaq Book. If the 

Discretionary IOC does not exhaust the 

full size of the Order with Discretion, 

the remaining size of the Order with 

Discretion will post to the Nasdaq Book 

in accordance with the parameters that 

apply to the underlying Order Type. 

Thus, for example, if a Participant 

enters a Price to Display Order to buy 

at $11 with a discretionary price range 

of up to $11.03, upon entry the Nasdaq 

Market Center will generate a 

Discretionary IOC to buy priced at 

$11.03. If there is an Order on the 

Nasdaq Book to sell priced at $11.02 

and an execution at $11.02 would not 

trade through a Protected Quotation, the 

Discretionary IOC will execute against 

the Order on the Nasdaq Book, up to the 

full size of each Order. Any remaining 

size of the Price to Display Order would 

post to the Nasdaq Book in accordance 

with its parameters. 

• After the Order posts to the Nasdaq 

Book, the Nasdaq Market Center System 

will examine whether at any time there 

is an Order on the Nasdaq Book with a 

price in the discretionary price range 

against which the Order with Discretion 

could execute. In doing so, the Nasdaq 

Market Center System will examine all 

Orders (including Orders that are not 

Displayed). If the Nasdaq Market Center 

System observes such an Order, it will 

generate a Discretionary IOC with a 

price equal to the highest price for an 

Order to buy (lowest price for an Order 

to sell) within the discretionary price 

range and a size equal to the full size of 

the Order. 

• If an Order that uses a passive 

routing strategy (i.e., a strategy such as 

SCAN 68 that does not seek routing 

opportunities after posting to the 

Nasdaq Book) has been assigned a 

Discretion Order Attribute but does not 

have a pegged discretionary price range, 

mstockstill on DSK4VPTVN1PROD with NOTICES

16066 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

69The STGY routing strategy is described in Rule 

4758. 

upon entry of the Order, the Nasdaq 

Market Center will examine all Orders 

(including Orders that are not 

Displayed) on the Nasdaq Book to 

determine if there is an Order on the 

Nasdaq Book with a price in the 

discretionary price range against which 

the Order with Discretion could 

execute. If the Nasdaq Market Center 

System observes such an Order, it will 

generate a Discretionary IOC with a 

price equal to the price of the Order on 

the Nasdaq Book and a size equal to the 

applicable size of the Order on the 

Nasdaq Book. The Nasdaq Market 

Center System will also determine if 

there are any accessible quotations with 

prices that are within the discretionary 

price range at destinations on the 

applicable routing table for the selected 

routing strategy. If there are such 

quotations, the Nasdaq Market Center 

System will generate one or more 

Discretionary IOCs to route to such 

destinations, with a price and size that 

match the price and size of the market 

center’s quotation. If necessary to 

maximize execution opportunities and 

comply with Regulation NMS, the 

System’s routing broker may mark such 

Discretionary IOCs as Intermarket 

Sweep Orders. If the Discretionary 

IOC(s) do not exhaust the full size of the 

Order with Discretion, the remaining 

size of the Order with Discretion will 

post to the Nasdaq Book in accordance 

with the parameters that apply to the 

underlying Order Type. The Nasdaq 

Market Center System will then 

examine whether at any time there is an 

Order on the Nasdaq Book with a price 

in the discretionary price range against 

which the Order with Discretion could 

execute. In doing so, the Nasdaq Market 

Center System will examine all Orders 

(including Orders that are not 

Displayed). If the Nasdaq Market Center 

System observes such an Order, it will 

generate a Discretionary IOC with a 

price equal to the price of the Order on 

the Nasdaq Book and a size equal to the 

applicable size of the Order on the 

Nasdaq Book. 

• If an Order that uses a reactive 

routing strategy (i.e., a strategy such as 

STGY 69 that seeks routing opportunities 

after posting to the Nasdaq Book) has 

been assigned a Discretion Order 

Attribute but does not have a pegged 

discretionary price range, upon entry of 

the Order, the Nasdaq Market Center 

will examine all Orders (including 

Orders that are not Displayed) on the 

Nasdaq Book to determine if there is an 

Order on the Nasdaq Book with a price 

in the discretionary price range against 

which the Order with Discretion could 

execute. If the Nasdaq Market Center 

System observes such an Order, it will 

generate a Discretionary IOC with a 

price equal to the price of the Order on 

the Nasdaq Book and a size equal to the 

applicable size of the Order on the 

Nasdaq Book. The Nasdaq Market 

Center System will also determine if 

there are any accessible quotations with 

prices that are within the discretionary 

price range at destinations on the 

applicable routing table for the selected 

routing strategy. If there are such 

quotations, the Nasdaq Market Center 

System will generate one or more 

Discretionary IOCs to route to such 

destinations, with a price and size that 

match the price and size of the market 

center’s quotation. If necessary to 

maximize execution opportunities and 

comply with Regulation NMS, the 

System may mark such Discretionary 

IOCs as Intermarket Sweep Orders. If 

the Discretionary IOC(s) do not exhaust 

the full size of the Order with 

Discretion, the remaining size of the 

Order with Discretion will post to the 

Nasdaq Book in accordance with the 

parameters that apply to the underlying 

Order Type. The Nasdaq Market Center 

System will then examine whether at 

any time there is an Order on the 

Nasdaq Book or an accessible quotation 

at another trading venue with a price in 

the discretionary price range against 

which the Order with Discretion could 

execute. In examining the Nasdaq Book, 

the Nasdaq Market Center System will 

examine all Orders (including Orders 

that are not Displayed). If the Nasdaq 

Market Center System observes such an 

Order or quotation, it will generate a 

Discretionary IOC with a price equal to 

the price of such the Order or quotation 

and a size equal to the applicable size 

of the Order on the Nasdaq Book or the 

displayed size of the quotation. 

• If an Order that uses a passive 

routing strategy has been assigned a 

Discretion Order Attribute and does 

have a pegged discretionary price range, 

upon entry of the Order, the Nasdaq 

Market Center will examine all Orders 

(including Orders that are not 

Displayed) on the Nasdaq Book to 

determine if there is an Order on the 

Nasdaq Book with a price in the 

discretionary price range against which 

the Order with Discretion could 

execute. If the Nasdaq Market Center 

System observes such an Order, it will 

generate a Discretionary IOC with a 

price equal to the price of the Order on 

the Nasdaq Book and a size equal to the 

applicable size of the Order on the 

Nasdaq Book. The Nasdaq Market 

Center System will also determine if 

there are any accessible quotations with 

prices that are within the discretionary 

price range at destinations on the 

applicable routing table for the selected 

routing strategy. If there are such 

quotations, the Nasdaq Market Center 

System will generate one or more 

Discretionary IOCs to route to such 

destinations, with a price and size that 

match the price and size of the market 

center’s quotation. If necessary to 

maximize execution opportunities and 

comply with Regulation NMS, the 

System may mark such Discretionary 

IOCs as Intermarket Sweep Orders. If 

the Discretionary IOC(s) do not exhaust 

the full size of the Order with 

Discretion, the remaining size of the 

Order with Discretion will post to the 

Nasdaq Book in accordance with the 

parameters that apply to the underlying 

Order Type. Thereafter, the Order will 

not generate further Discretionary IOCs 

unless the Order is updated in a manner 

that causes it to receive a new 

timestamp, in which case the Order will 

behave in the same manner as a newly 

entered Order. 

• If an Order that uses a reactive 

routing strategy has been assigned a 

Discretion Order Attribute and does 

have a pegged discretionary price range, 

upon entry of the Order, the Nasdaq 

Market Center will examine all Orders 

(including Orders that are not 

Displayed) on the Nasdaq Book to 

determine if there is an Order on the 

Nasdaq Book with a price in the 

discretionary price range against which 

the Order with Discretion could 

execute. If the Nasdaq Market Center 

System observes such an Order, it will 

generate a Discretionary IOC with a 

price equal to the price of the Order on 

the Nasdaq Book and a size equal to the 

applicable size of the Order on the 

Nasdaq Book. The Nasdaq Market 

Center System will also determine if 

there are any accessible quotations with 

prices that are within the discretionary 

price range at destinations on the 

applicable routing table for the selected 

routing strategy. If there are such 

quotations, the Nasdaq Market Center 

System will generate one or more 

Discretionary IOCs to route to such 

destinations, with a price and size that 

match the price and size of the market 

center’s quotation. If necessary to 

maximize execution opportunities and 

comply with Regulation NMS, the 

System may mark such Discretionary 

IOCs as Intermarket Sweep Orders. If 

the Discretionary IOC(s) do not exhaust 

the full size of the Order with 

Discretion, the remaining size of the 

Order with Discretion will post to the 

Nasdaq Book in accordance with the 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16067 

70Because the Displayed Order is reentered and 

the Non-Displayed Order is not, there are 

circumstances in which the Displayed Order may 

receive a different price than the Non-Displayed 

Order. For example, if, upon reentry, a Price to 

Display Order would lock or cross a newly posted 

Protected Quotation, the price of the Order will be 

adjusted but its associated Non-Displayed Order 

would not be adjusted. In that circumstance, it 

would be possible for the better priced NonDisplayed Order to execute prior to the Price to 

Display Order. 

71The ability to specify a random size reflects a 

substantive clarification of existing rules. 

72 In addition, Orders that are assigned a Routing 

Order Attribute may be designated as ISOs by 

Nasdaq when routed to other market centers to 

maximize their opportunities for execution. 

parameters that apply to the underlying 

Order Type. The Nasdaq Market Center 

System will then examine whether at 

any time there is an Order on the 

Nasdaq Book or an accessible quotation 

at another trading venue with a price in 

the discretionary price range against 

which the Order with Discretion could 

execute. In examining the Nasdaq Book, 

the Nasdaq Market Center System will 

examine Displayed Orders but will not 

examine Non-Displayed Orders. If the 

Nasdaq Market Center System observes 

such an Order or quotation, it will 

generate a Discretionary IOC with a 

price equal to the price of such the 

Order or quotation and a size equal to 

the applicable size of the Order on the 

Nasdaq Book or the displayed size of the 

quotation. 

Reserve Size 

Reserve Size is an Order Attribute that 

permits a Participant to stipulate that an 

Order Type that is displayed may have 

its displayed size replenished from 

additional non-displayed size. An Order 

with Reserve Size may be referred to as 

a ‘‘Reserve Order.’’ At the time of entry, 

the displayed size of such an Order 

selected by the Participant must be one 

or more normal units of trading; an 

Order with a displayed size of a mixed 

lot will be rounded down to the nearest 

round lot. A Reserve Order with 

displayed size of an odd lot will be 

accepted but with the full size of the 

Order displayed. Reserve Size is not 

available for Orders that are not 

displayed; provided, however, that if a 

Participant enters Reserve Size for a 

Non-Displayed Order with a Time-inForce of IOC, the full size of the Order, 

including Reserve Size, will be 

processed as a Non-Displayed Order. 

Whenever a Participant enters an 

Order with Reserve Size, the Nasdaq 

Market Center will process the Order as 

two Orders: A Displayed Order (with 

the characteristics of its selected Order 

Type) and a Non-Displayed Order. Upon 

entry, the full size of each such Order 

will be processed for potential 

execution in accordance with the 

parameters applicable to the Order 

Type. For example, a Participant might 

enter a Price to Display Order with 200 

shares displayed and an additional 

3,000 shares non-displayed. Upon entry, 

the Order would attempt to execute 

against available liquidity on the 

Nasdaq Book, up to 3,200 shares. 

Thereafter, unexecuted portions of the 

Order would post to the Nasdaq Book as 

a Displayed Price to Display Order and 

a Non-Displayed Order; provided, 

however, that if the remaining total size 

is less than the display size stipulated 

by the Participant, the Displayed Order 

will post without Reserve Size. Thus, if 

3,050 shares executed upon entry, the 

Price to Display Order would post with 

a size of 150 shares and no Reserve Size. 

When an Order with Reserve Size is 

posted, if there is an execution against 

the Displayed Order that causes its size 

to decrease below a normal unit of 

trading, another Displayed Order will be 

entered at the level stipulated by the 

Participant while the size of the NonDisplayed Order will be reduced by the 

same amount. Any remaining size of the 

original Displayed Order will remain on 

the NASDAQ Book. The new Displayed 

Order will receive a new timestamp, but 

the Non-Displayed Order (and the 

original Displayed Order, if any) will 

not; although the new Displayed Order 

will be processed by the System as a 

new Order in most respects at that time, 

if it was designated as Routable, the 

System will not automatically route it 

upon reentry. For example, if a Price to 

Comply Order with Reserve Size posted 

with a Displayed Size of 200 shares, 

along with a Non-Displayed Order of 

3,000 and the 150 shares of the 

Displayed Order was executed, the 

remaining 50 shares of the original Price 

to Comply Order would remain, a new 

Price to Comply Order would post with 

a size of 200 shares and a new 

timestamp, and the Non-Displayed 

Order would be decremented to 2,800 

shares.70

A Participant may stipulate that the 

Displayed Order should be replenished 

to its original size. Alternatively, the 

Participant may stipulate that the 

original and subsequent displayed size 

will be an amount randomly determined 

based on factors selected by the 

Participant.71 Specifically, the 

Participant would select both a 

theoretical displayed size and a range 

size, which may be any share amount 

less than the theoretical displayed size. 

The actual displayed size will then be 

determined by the System within a 

range in which the minimum size is the 

theoretical displayed size minus the 

range size, and the maximum size is (i) 

the minimum size plus (ii) an amount 

that is two times the range size minus 

one round lot. For example, if the 

theoretical displayed size is 600 shares 

and the range size is 500, the minimum 

displayed size will be 100 shares 

(600¥500), and the maximum size will 

be 1,000 shares ((600¥500) + ((2 × 

500)¥100)). 

When the Displayed Order with 

Reserve Size is executed and 

replenished, applicable market data 

disseminated by Nasdaq will show the 

execution and decrementation of the 

Displayed Order, followed by 

replenishment of the Displayed Order. 

In all cases, if the remaining size of the 

Non-Displayed Order is less than the 

fixed or random amount stipulated by 

the Participant, the full remaining size 

of the Non-Displayed Order will be 

displayed and the Non-Displayed Order 

will be removed. 

Attribution 

Attribution is an Order Attribute that 

permits a Participant to designate that 

the price and size of the Order will be 

displayed next to the Participant’s MPID 

in market data disseminated by Nasdaq. 

An Order with Attribution is referred to 

as an ‘‘Attributable Order’’ and an Order 

without attribution is referred to as a 

‘‘Non-Attributable Order.’’ 

Intermarket Sweep Order 

Designation of an Order as an 

Intermarket Sweep Order, or ISO, is an 

Order Attribute that allows the Order to 

be executed within the Nasdaq Market 

Center by Participants at multiple price 

levels without respect to Protected 

Quotations of other market centers 

within the meaning of Rule 600(b) 

under Regulation NMS. ISOs are 

immediately executable within the 

Nasdaq Market Center against Orders 

against which they are marketable. An 

Order designated as an ISO may not be 

assigned a Routing Order Attribute; 

provided, however, that an Order using 

the Directed Order strategy may be 

designated as an ISO with respect to the 

market center to which it is directed.72

In connection with the trading of 

securities governed by Regulation NMS, 

Intermarket Sweep Orders shall be 

executed exclusively within the System 

and the entering Participant shall be 

responsible for compliance with Rules 

610 and 611 under Regulation NMS 

with respect to order protection and 

locked and crossed markets with respect 

to such Orders. Orders eligible for 

execution outside the System shall be 

processed in compliance with 

Regulation NMS, including accessing 

Protected Quotations and resolving 

mstockstill on DSK4VPTVN1PROD with NOTICES

16068 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

73Thus, for example, a Non-Displayed Order with 

a Time-in-Force of IOC marked ISO could execute 

against Orders on the Nasdaq Book. However, the 

price level of the Non-Displayed Order would be 

considered open for Orders to post only if 

applicable market data showed that the price level 

was available. 

74 Data about executions reflect both sides of a 

trade in instances where trades executed on Nasdaq 

and one side of a trade in instances where a 

Routable Order executed at another market center. 

The data does not include information about Orders 

with a Time-in-Force of GTC to the extent that such 

Orders executed on a day after the day of their 

original entry. 

locked and crossed markets, as 

instructed. 

Simultaneously with the routing of an 

ISO to the System, one or more 

additional limit orders, as necessary, are 

routed by the entering Participant to 

execute against the full displayed size of 

any Protected Quotation with a price 

that is superior to the price of the Order 

identified as an Intermarket Sweep 

Order (as defined in Rule 600(b) under 

Regulation NMS). These additional 

routed orders must be identified as 

Intermarket Sweep Orders. 

Upon receipt of an ISO, the System 

will consider the stated price of the ISO 

to be available for other Orders to be 

entered at that price, unless the ISO is 

not itself accepted at that price level (for 

example, a Post-Only Order that has its 

price adjusted to avoid executing 

against an Order on the Nasdaq Book) or 

the ISO is not Displayed.73

In addition, as described with respect 

to various Order Types, such as the 

Price to Comply Order, Orders on the 

Nasdaq Book that had their price 

adjusted may be eligible to be reentered 

at the stated price of the ISO. For 

example, if a Price to Comply Order to 

buy at $11 would lock a Protected Offer 

at $11, the Price to Comply Order will 

be posted with a non-displayed price of 

$11 and a displayed price of $10.99. If 

the System then receives an ISO to buy 

at $11, the ISO will be posted at $11 and 

the Price to Comply Order will be 

reentered at $11 (if the Participant opted 

to have its Orders reentered). The 

respective priority of such reentered 

Orders will be maintained among 

multiple repriced Orders; however, 

other new Orders may also be received 

after receipt of the ISO but before the 

repricing of the Price to Comply Order 

is complete; accordingly, the priority of 

an Order on the Nasdaq Book vis-a`-vis 

a newly entered Order is not 

guaranteed. 

Display 

Display is an Order Attribute that 

allows the price and size of an Order to 

be displayed to market participants via 

market data feeds. All Orders that are 

Attributable are also displayed, but an 

Order may be displayed without being 

Attributable. As discussed in Rule 4702, 

a Non-Displayed Order is a specific 

Order Type, but other Order Types may 

also be non-displayed if they are not 

assigned a Display Order Attribute; 

however, depending on context, all 

Orders that are not displayed may be 

referred to as ‘‘Non-Displayed Orders.’’ 

An Order with a Display Order Attribute 

may be referred to as a ‘‘Displayed 

Order.’’ 

Participation in the Nasdaq Opening 

Cross or the Nasdaq Closing Cross 

All Order Types except Supplemental 

Orders, Retail Orders, and RPI Orders 

participate in the Nasdaq Opening Cross 

and/or the Nasdaq Closing Cross if the 

Order has a Time-in-Force that would 

cause the Order to be in effect at the 

time of the Nasdaq Opening Cross 

and/or Nasdaq Closing Cross. MOO 

Orders, LOO Orders, and IOI Orders 

participate in the Nasdaq Opening Cross 

in the manner specified in Rule 4752. 

Other Order Types eligible to participate 

in the Nasdaq Opening Cross operate as 

‘‘Market Hours Orders’’ or ‘‘Open 

Eligible Interest’’ as specified in Rule 

4752. MOC Orders, LOC Orders and IO 

Orders participate in the Nasdaq Closing 

Cross in the manner specified in Rule 

4754. Other Order Types eligible to 

participate in the Nasdaq Closing Cross 

operate as ‘‘Close Eligible Interest’’ in 

the manner specified in Rule 4754. 

Statistics on Order Types Usage 

Although Nasdaq, like many 

exchanges, offers a wide range of 

possible combinations of Order Types 

and Order Attributes in order to provide 

options that support of [sic] a range of 

legitimate trading strategies, Nasdaq 

believes that an analysis of the extent of 

usage of particular Order Type 

permutations is important to promoting 

a deeper understanding of current 

market structure. Based on analysis of a 

month of data for the period from 

August 26, 2013 through September 29, 

2013, Nasdaq offers the following 

observations about the usage of different 

Order Types on its market: 

• 23.38% of entered Order volume 

was Price to Comply Orders with no 

Order Attributes other than price and 

size. Such Orders were involved in 

10.67% of execution volume.74 Price to 

Display Orders with no special Order 

Attributes accounted for 0.82% of Order 

volume and 0.16% of execution volume. 

• 28.22% of entered Order volume 

was Post-Only Orders with no Order 

Attributes other than price and size. 

Such Orders were involved in 11.79% 

of execution volume. 

• Non-Displayed Orders with a Timein-Force of IOC and no special Order 

Attributes accounted for 4.25% of 

entered Order volume and 14.03% of 

execution volume. Non-Displayed 

Orders with a Time-in-Force of IOC 

marked as ISOs but with no other 

special Order Attributes accounted for 

2.17% of entered Order volume and 

23.89% of execution volume. 

• Non-Displayed Orders with a Timein-Force longer than IOC but no special 

Order Attributes accounted for 19.15% 

of entered Order volume and 1.48% of 

execution volume. 

• Post-Only Orders marked ISO but 

with no other special Order Attributes 

accounted for 7.65% of entered Order 

volume and 6.75% of execution volume. 

Price to Comply Orders marked ISO but 

with no other special Order Attributes 

accounted for 2.75% of entered Order 

volume and 1.24% of execution volume. 

• MOO, LOO, IOI, MOC, LOC and IO 

Orders accounted for 1.3% of entered 

Order volume and 8.73% of execution 

volume. 

• All other Order Type and Order 

Attribute combinations accounted for 

10.31% of entered Order volume and 

21.27% of execution volume. Of these, 

the predominant Order Type was Price 

to Comply Orders using special Order 

Attributes, accounting for 4.94% of 

entered Order volume and 15.82% of 

execution volume. Moreover, in the case 

of 76.15% of the entered volume and 

61.82% of the executed volume of these 

Orders (i.e., Price to Comply Orders 

using special Order Attributes), the only 

special Order Attributes being used 

were Routing and/or Reserve Size. 

Thus, while a range of combinations 

of Order Types and Order Attributes can 

exist in Nasdaq, Nasdaq believes that 

these data support the conclusion that 

many of these possible combinations are 

not used to any appreciable extent. 

Rather, the vast majority of Order entry 

and Order execution volume is 

attributable to a small number of simple 

combinations: IOC Orders designed to 

access posted liquidity, various forms of 

priced limit Orders designed to access 

available liquidity and thereafter post to 

the Nasdaq Book to provide liquidity, 

and Post-Only Orders, which promote 

price discovery by offering displayed 

liquidity at a price that may narrow the 

bid/offer spread on Nasdaq and/or 

provide price improvement to 

subsequent Orders. The inclusion of an 

ISO Order Attribute on Orders is done 

in full compliance with Regulation NMS 

and serves to provide notice to Nasdaq 

that liquidity has been accessed on 

other markets at a given price level in 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16069 

75 15 U.S.C. 78f. 

76 15 U.S.C. 78f(b)(5). 

77 15 U.S.C. 78k–1(a)(1). 78SR–NYSE–2014–32 Approval Order. 

order to allow it to post liquidity on 

Nasdaq at that price. While Nasdaq does 

not believe that its Order Type offerings 

are excessively complex, given the 

relatively limited usage of certain Order 

Types and Order Attributes, Nasdaq is 

continuing to analyze whether changes 

may be made to eliminate any Order 

Types, Order Attributes, or permissible 

combinations in a manner that would 

further promote the goals of 

transparency and ease of use for 

Participants. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,75 in 

general, and with Section 6(b)(5) of the 

Act 76 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 proposed rule 

change also is designed to support the 

principles of Section 11A(a)(1) of the 

Act 77 in that it seeks to assure fair 

competition among brokers and dealers 

and among exchange markets. In 

particular, Nasdaq believes that the 

reorganized and enhanced descriptions 

of its Order Types, Order Attributes, and 

related System functionality will 

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. Nasdaq further 

believes that the proposed rule change 

will contribute to the protection of 

investors and the public interest by 

making Nasdaq’s rules easier to 

understand. Nasdaq further believes that 

the proposed rules, together with the 

presented statistics regarding Order 

Type and Order Attribute usage, will 

promote the efficient execution of 

investor transactions and further 

enhance public understanding of 

Nasdaq’s operations, and thereby 

strengthen investor confidence in 

Nasdaq and in the national market 

system. In addition, 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 exchange markets. 

Most of the System functionality 

described in the proposed rule change 

has already been described in previous 

proposed rule changes by Nasdaq and 

approved or permitted to take effect on 

an immediate basis by the Commission. 

However, Nasdaq believes that the 

reiteration of several principles 

underlying its Order Types and Order 

Attributes might be helpful in 

promoting a fuller understanding of 

these rules’ operation and their 

consistency with the Act. 

The functionality underlying Price to 

Comply Orders and Price to Display 

Orders provides a means by which 

Participants may enter a displayed limit 

order in compliance with Regulation 

NMS without the Participant 

definitively ascertaining whether the 

price of the Order would lock or cross 

a Protected Quotation. In the absence of 

the repricing functionality associated 

with the Order, Nasdaq would need to 

reject the Order if it locked or crossed 

a Protected Quotation. 

By accepting a Price to Comply Order 

with a locking, non-displayed price and 

displayed price that is one minimum 

increment inferior to the locking price, 

Nasdaq allows this Order Type to 

achieve several purposes. First, the 

displayed price of the Order promotes 

price discovery by establishing a new 

NBBO or adding to liquidity available at 

the NBBO. Second, the non-displayed 

price of the Order allows the Order to 

provide price improvement when the 

Order is executed. A Price to Display 

Order similarly promotes price 

discovery by establishing a new NBBO 

or adding liquidity available at the 

NBBO. It also provides one of the Order 

Types through which a Market Maker 

may offer displayed liquidity that is 

Attributable to its MPID. Notably, given 

the price adjustment functionality of the 

Order, it allows a Market Maker to offer 

Attributable liquidity at the NBBO. 

In addition, the repricing 

functionality associated with Price to 

Comply Orders and Price to Display 

Orders, whereby an Order that has been 

repriced by the System upon entry may 

be cancelled or reentered if a previously 

unavailable price level becomes 

available, promotes price discovery and 

provision of greater liquidity by 

facilitating the display of an Order at its 

chosen limit price. Because a reentered 

Order always receives a new timestamp, 

moreover, the functionality does not 

present fairness concerns that might 

arise if an Order that was not displayed 

became displayed at a different price 

level while retaining the timestamp that 

it received when originally entered. 

The Non-Displayed Order provides a 

means by which Participants may access 

and/or offer liquidity without signaling 

to other Participants the extent of their 

trading interest. Moreover, because the 

Non-Displayed Order may lock a 

Protected Quotation, it provides a 

means by which a Participant may 

provide price improvement. For 

example, if the Best Bid was $11 and the 

Best Offer was $11.01, a Non-Displayed 

Order to buy at $11.01 would provide 

$0.01 price improvement to an 

incoming sell Order priced at the Best 

Bid. 

In addition, the repricing 

functionality associated with NonDisplayed Order promotes provision of 

greater liquidity and eventual price 

discovery (via reporting of Order 

executions) because it facilitates the 

posting of a Non-Displayed Order at its 

chosen limit price. In addition, the 

functionality that cancels NonDisplayed Orders when crossed by a 

Protected Quotation helps to prevent 

trade-throughs by ensuring that a NonDisplayed Order will not execute at a 

price inferior to the Price of a Protected 

Quotation. Because a reentered Order 

always receives a new timestamp, 

moreover, the functionality does not 

present fairness concerns that might 

arise if an Order was able to move price 

while retaining an earlier timestamp. 

The primary purpose of Post-Only 

Orders is to ‘‘provide displayed 

liquidity to the market and thereby 

contribute to public price discovery—an 

objective that is fully consistent with 

the Act.’’ 78 Under the prevailing 

‘‘maker/taker’’ cost structure of most 

exchanges, the Post-Only Order also 

allows a Participant to control its 

trading costs by giving consideration to 

costs in determining whether the Order 

should execute upon entry. However, 

the manner in which the Post-Only 

Order operates ensures that a Post-Only 

Order that locks or crosses an Order on 

the Nasdaq Book will either execute 

upon entry or post at a displayed price 

that potentially provides liquidity. 

Moreover, because a Post-Only Order 

does not cancel back to the Participant 

if it cannot post at its limit price, it does 

not provide a means to ascertain the 

existence of locking or crossing Orders 

without also reflecting a commitment to 

execute or post and display. Similarly, 

the functionality that allows a Post-Only 

Order to be marked IOC does not 

provide information regarding the 

existence of locking or crossing Orders 

on the Nasdaq Book since the Order has 

mstockstill on DSK4VPTVN1PROD with NOTICES

16070 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

79See SR–NYSE–2014–32 Approval Order 

(affirming that exchanges may adopt rules allowing 

market participants to ‘‘ship and post’’). 

its price adjusted automatically, without 

reference to the price of any other 

Orders other than Orders at the NBBO. 

In addition, the processing of PostOnly Orders with respect to locking or 

crossing Protected Quotations serves the 

same purposes as the processing 

discussed above with respect to Price to 

Comply Orders and Price to Display 

Orders. By accepting a Non-Attributable 

Post-Only Order that locks or crosses a 

Protected Quotation with a locking, 

non-displayed price and displayed price 

that is one minimum increment inferior 

to the locking price, Nasdaq allows the 

displayed price of the Order to promote 

price discovery by establishing a new 

NBBO or adding to liquidity available at 

the NBBO, while also allowing the nondisplayed price of the Order to provide 

price improvement when the Order is 

executed. An Attributable Post-Only 

Order similarly promotes price 

discovery by establishing a new NBBO 

or adding liquidity available at the 

NBBO. 

The repricing functionality associated 

with Post-Only Orders, whereby an 

Order that has been repriced by the 

System upon entry may be cancelled or 

reentered if a previously unavailable 

price level becomes available, promotes 

price discovery and provision of greater 

liquidity by facilitating the display of an 

Order at its chosen limit price. Because 

a reentered Order always receives a new 

timestamp, moreover, the functionality 

does not present fairness concerns that 

might arise if an Order that was not 

displayed became displayed at a 

different price level while retaining the 

timestamp that it received when 

originally entered. 

A Post-Only Order may be designated 

as an ISO and accepted at a price that 

locks or crosses a Protected Quotation, 

since such designation reflects a 

representation by the Participant that it 

has simultaneously routed one or more 

additional limit orders, as necessary, to 

execute against the full displayed size of 

any Protected Quotations that the PostOnly Order would lock or cross.79

Because Nasdaq maintains an active 

regulatory surveillance and enforcement 

program to verify that Participants are 

not improperly designating Orders as 

ISOs, the possibility for a Participant to 

systematically use a Post-Only Order 

marked ISO to occupy a price level 

while locking Protected Quotations is 

mitigated. Moreover, the System does 

not interpret a Post-Only Order that is 

marked ISO but that has its price 

adjusted prior to posting as the basis for 

accepting additional Orders at the 

Order’s limit price level, thereby 

providing further assurance against the 

use of an ISO designation for an 

improper purpose. 

Like a Post-Only Order, a Midpoint 

Peg Post-Only Order allows a 

Participant to control its trading costs by 

executing upon entry when receiving 

price improvement but otherwise 

posting to the Nasdaq Book. Thereafter, 

the Order Type serves to provide price 

improvement to other incoming Orders 

by executing a price between the NBBO. 

Although the Order Type has a NonDisplay Order Attribute, the Order 

further serves to promote price 

discovery when it executes by evincing 

the existence of trading interest at a 

price better than the NBBO. 

Supplemental Orders allow a 

Participant to provide greater depth of 

liquidity at the NBBO without signaling 

the full extent of its trading interest to 

other Participants. The Order Type 

thereby may promote more rapid and 

complete execution of incoming Orders, 

potentially eliminating the need for 

such Orders to be routed in order to 

access liquidity available at other 

market centers. The requirement that a 

Supplemental Order may execute only 

at the NBBO ensures that the Order 

Type may not be used to provide 

inferior executions. 

Market Maker Peg Orders allow a 

Market Maker to maintain a continuous 

two-sided quotation at a price that is 

compliant with the requirements for 

Market Makers set forth in Rule 

4613(a)(2). Thus, the Order Type serves 

the function of ensuring that Market 

Makers offer Displayed and Attributable 

liquidity at prices that bear a reasonable 

relation to the NBBO. Of course, Market 

Makers may also provide liquidity at 

prices closer to the NBBO than those 

established by the Market Maker Peg 

Order, but the Order Type enables the 

Market Maker to provide a backstop of 

liquidity at prices that are not 

unreasonably distant from the NBBO. 

The variety of Order Types associated 

with the Nasdaq Opening Cross and the 

Nasdaq Closing Cross—Market On Open 

Orders, Limit On Open Orders, Opening 

Imbalance Only Orders, Market On 

Close Orders, Limit On Close Orders, 

and Imbalance Only Orders—all provide 

means for a Participant to enter Orders 

into Nasdaq’s single price auction 

process for establishing the market open 

and market close price each day. As 

detailed in approved Rules 4752 and 

4754, the auction processes seek to 

establish a price that maximizes 

execution opportunities for Crosseligible Orders. MOO and MOC Orders 

allow a Participant to execute shares at 

whatever price the Cross is executed, 

thereby maximizing execution 

opportunities; LOO and LOC Orders 

allow a Participant to set a price limit 

on potential executions; and OIO and IO 

Orders allow a Participant to provide 

liquidity to MOO and LOO or MOC and 

LOC Orders that would not otherwise 

execute in the Cross, at a price pegged 

to the Nasdaq inside price leading up to 

the Cross. Nasdaq believes that all of 

these Order Types promote the interest 

of investors in conducting an orderly 

process for establishing the opening and 

closing prices of securities. 

Several of the available Order 

Attributes merely provide means to 

designate the basic parameters of any 

Order: These include price, size, Timein-Force, Attribution, Display, and 

Participation in the Nasdaq Opening 

Cross and/or the Nasdaq Closing Cross. 

The proposed rules clearly state 

limitations applicable to each of these 

parameters, such as available Times-inForce and limitations on the permissible 

prices and sizes of Orders. 

The Pegging Order Attribute allows a 

Participant to have the System adjust 

the price of the Order continually in 

order to keep the price within defined 

parameters. Thus, the System performs 

price adjustments that would otherwise 

be performed by the Participant through 

cancellation and reentry of Orders. The 

fact that a new timestamp is created for 

a Pegged Order whenever it has its price 

adjusted allows the Order to seek 

additional execution opportunities and 

ensures that the Order does not ‘‘jump 

the queue’’ with respect to any Orders 

that were previously at the Pegged 

Order’s new price level. Thus, while the 

Order Attribute may be seen as 

introducing additional complexity with 

respect to the operation of the Nasdaq 

market, it is in effect merely a process 

for removing and entering Orders at new 

prices based on changed market 

conditions. 

The Minimum Quantity Order 

Attribute allows a Participant that may 

wish to buy or sell a large amount of a 

security to avoid signaling its trading 

interest unless it can purchase a certain 

minimum amount. Thus, the Order 

Attribute supports the interest of 

institutional investors and others in 

being able to minimize the impact of 

their trading on the price of securities. 

The Routing Order Attribute, which is 

thoroughly described in existing Rule 

4758, provides an optional means by 

which a Participant may direct Nasdaq 

to seek opportunities to execute an 

Order at other market centers. The 

System is designed to pursue execution 

opportunities on behalf of Participants 

in an aggressive manner by, in most 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 16071 

80SR–NYSE–2014–32 Approval Order. 

81 Id. 

instances, first obtaining shares 

available on the Nasdaq Book, then 

routing to other market centers in 

accordance with the strategy designated 

by the Participant, then returning [sic] 

the Nasdaq Book as if a new Order 

before posting to the Nasdaq Book. In 

addition, to maximize execution 

opportunities, the System will, as 

appropriate and in accordance with 

Regulation NMS, designate a Routable 

Order as an Intermarket Sweep Order. 

The Discretion Order Attribute allows 

a Participant to expand opportunities 

for an Order to access liquidity by 

allowing it to execute at any price 

within a specified range. Thus, while 

there is some complexity associated 

with the processing of Discretionary 

Orders, the Order Attribute merely 

allows the System to ascertain whether, 

under the conditions provided for in the 

rule, the Participant could access 

liquidity at a price within the range that 

the Participant has designated. If so, the 

Order Attribute generates an IOC Order 

to access the liquidity. Moreover, it 

should be noted that although in some 

circumstances, the System will examine 

Orders on the Nasdaq Book that are not 

Displayed to ascertain the existence of 

execution opportunities, the System 

would convey information to the 

Participant regarding such Orders only 

by executing against them. Thus, the 

discretionary price range reflects an 

actionable commitment by the 

Participant to trade at prices in that 

range. As a result, the Order Attribute 

promotes price discovery through 

executions that occur in the price range. 

Finally, it should be noted that 

Discretionary IOCs access liquidity, and 

therefore the Order Attribute does not 

present an opportunity for a Participant 

to obtain a rebate with respect to 

executions against previously posted 

Orders. 

The Reserve Size Order Attribute 

allows a Participant to display trading 

interest at a given price while also 

posting additional non-displayed 

trading interest. The functionality 

assists the Participant in managing this 

trading interest by eliminating the need 

for the Participant to enter additional 

size following the execution of the 

displayed trading interest. Thus, the 

functionality achieves a balance 

between promoting price discovery 

through displayed size and allowing a 

Participant to guard against price impact 

by hiding the full extent of its trading 

interest. The random reserve feature of 

the Order further assists a Participant in 

not revealing the extent of its trading 

interest because it diminishes the 

likelihood that other Participants will 

conclude that the Order is a Reserve 

Size Order if they repeatedly view it 

being replenished at the same size. 

Similarly, the manner in which Nasdaq 

disseminates data regarding the 

execution and replenishment of a 

Reserve Size Order ensures that the 

process is indistinguishable to other 

Participants from the execution of an 

Order without Reserve Size followed by 

the entry of a new Order; this processing 

also ensures that only the displayed 

portion of the Reserve Size Order is 

treated as a Protected Quotation. 

The Intermarket Sweep Order 

attribute is a function of Regulation 

NMS, which provides for an Order to 

execute without respect to Protected 

Quotations if it is designated as an ISO 

and if one or more additional limit 

orders, as necessary, are routed to 

execute against the full displayed size of 

any Protected Quotation with a price 

that is superior to the price of the Order 

identified as an ISO. As recently 

reaffirmed by the Commission, 

Regulation NMS allows such additional 

orders to be routed by an exchange or 

by the Participant that enters the ISO.80

Accordingly, the exchange receiving an 

ISO may accept the receipt of the Order 

as a representation that the Participant 

entering it has satisfied its obligations; 

provided, however, that the exchange 

itself maintains a surveillance and 

enforcement program to verify that the 

Participant is not acting in violation of 

this requirement. For this reason, it is 

also consistent with the Act for a 

Participant to designate an Order with a 

Time-in-Force longer than IOC, or an 

Order with functionality such as the 

Post-Only Order, as an ISO.81

Specifically, attaching an ISO 

designation to such Order reflects a 

representation that the Participant has 

determined that Protected Quotations at 

the price of the Order have been 

eliminated, such that the Order is 

entitled to post and provide liquidity. In 

the case of a Post-Only Order, however, 

if the Order’s price is adjusted to avoid 

executing against an Order on the 

Nasdaq Book, Nasdaq will not consider 

the ISO designation in determining 

whether the Post-Only Order’s limit 

price level is now open, since the PostOnly ISO itself is not actually posting at 

that price. Accordingly, in that 

circumstance the use of a Post-Only ISO 

cannot be used to open a price level to 

additional Orders unless Nasdaq 

ascertains through market data provided 

by other exchanges that the price level 

actually is open. 

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 that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. As 

previously stated, the Exchange is not 

proposing substantively to modify the 

operation of any of its current Order 

Types or Order Attributes or the 

operation of the System; rather, the 

proposed rule change is intended to 

provide more detail regarding the 

System’s functionality. The proposed 

rule change is not designed to address 

any competitive issues, but rather to 

provide additional specificity and 

transparency to Participants and the 

investing public regarding Nasdaq’s 

Order Types, Order Attributes, and 

System functionality. Since the 

Exchange does not propose 

substantively to modify the operation of 

Order Types, Order Attributes, or 

System functionality, the proposed 

changes will not impose any burden on 

competition. 

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 Exchange consents, 

the Commission shall: (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 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. 

mstockstill on DSK4VPTVN1PROD with NOTICES

16072 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Notices 

82 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’), and NASDAQ OMX BX, Inc. (‘‘BX’’) 

are self-regulatory organizations (‘‘SROs’’) that are 

wholly owned subsidiaries of The NASDAQ OMX 

Group, Inc. (the ‘‘Group’’). 

4Surveillance agreements are also referred to in 

Exchange rules as ‘‘surveillance sharing 

agreements’’ or ‘‘comprehensive surveillance 

sharing agreements’’ (‘‘CSSA’’). See, e.g., Rules 1009 

and 803. 

5ETFs are also referred to in Exchange rules as 

‘‘Fund Shares.’’ See, e.g., Rules 1009 and 1009A 

[sic]. 

6NASDAQ is the principal exchange within the 

Group for listing ETFs. NASDAQ has generic listing 

standards for PDRs and IFSs. See NASDAQ Rule 

5705(b)(3)(A)(ii) regarding IFSs and 5705(a)(3)(A)(ii) 

regarding PDRs (IFSs and PDRs are together known 

as ETFs in NASDAQ Rule 5705). See also NYSE 

MKT Rule 1000 Commentary .03(a)(B); NYSE Arca 

Equities Rule 5.2(j)(3) Commentary .01(a)(B); and 

BATS Rule 14.11(b)(3)(A)(ii). 

7 17 CFR 240.19b–4(e). 

8 17 CFR 240.19b–4(c)(1). 

9 15 U.S.C. 78s(b). 

10When relying on Rule 19b–4(e), the SRO must 

submit Form 19b–4(e) to the Commission within 

five business days after the SRO begins trading the 

new derivative securities products. See Securities 

Exchange Act Release No. 40761 (December 8, 

1998), 63 FR 70952 (December 22, 1998). 

11See NASDAQ Rule 5705(a)(3)(A)(ii) and 

(b)(3)(A)(ii); NYSE MKT Rule 1000, Commentary 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, 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 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–2015–024, and should be 

submitted on or before April 16, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.82

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06891 Filed 3–25–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74553; File No. SR–Phlx– 

2015–27] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Surveillance Agreements 

March 20, 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 March 

16, 2015, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) 3 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 1009 (Criteria for Underlying 

Securities) to allow the listing of options 

overlying Exchange-Traded Fund Shares 

(‘‘ETFs’’) that are listed pursuant to 

generic listing standards on equities 

exchanges for series of portfolio 

depositary receipts (‘‘PDRs’’) and index 

fund shares (‘‘IFSs’’) based on 

international or global indexes, 

pursuant to which a comprehensive 

surveillance agreement 4 is not required. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/

micro.aspx?id=PHLXRulefilings, 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 proposes to amend 

Commentary .06 to Rule 1009 to allow 

the listing of options overlying ETFs 5

that are listed pursuant to generic listing 

standards on equities exchanges for 

series of PDRs and IFSs based on 

international or global indexes under 

which a CSSA is not required.6 Adding 

proposed new Commentary .06(b)(i) to 

Rule 1009 will enable the Exchange to 

list and trade options on ETFs without 

a CSSA provided that the underlying 

ETF is listed on an equities exchange 

pursuant to the generic listings 

standards that do not require a CSSA 

pursuant to Rule 19b–4(e) of the 

Exchange Act.7

Rule 19b–4(e) provides that the listing 

and trading of a new derivative 

securities product by an SRO shall not 

be deemed a proposed rule change, 

pursuant to paragraph (c)(l) of Rule 19b– 

4 8 if the Commission has approved, 

pursuant to Section 19(b) of the Act,9

the SRO’s trading rules, procedures and 

listing standards for the product class 

that would include the new derivatives 

securities product, and the SRO has a 

surveillance program for the product 

class.10 This proposal allows the 

Exchange to list and trade options on 

ETFs based on international or global 

indexes that meet the generic listing 

standards.11

mstockstill on DSK4VPTVN1PROD with NOTICES