63238 Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 

8The text of the proposed rule change is available 

on Exchange’s Web site at http:// 

www.directedge.com, on the Commission’s Web site 

at http://www.sec.gov, at EDGA, and at the 

Commission’s Public Reference Room. 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission,8 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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–EDGA– 

2010–14 and should be submitted on or 

before November 4, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25743 Filed 10–13–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63040; File No. SR– 

NASDAQ–2010–128] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify the 

Requirements To Qualify for Credits as 

a Designated Liquidity Provider Under 

Rule 7018(i) 

October 5, 2010. 

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 October 

1, 2010, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by NASDAQ. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

NASDAQ proposes to modify the 

requirements to qualify for credits as a 

designated liquidity provider under 

Rule 7018(i) and to make a minor 

technical change. NASDAQ will 

implement the proposed change on 

October 1, 2010. The text of the 

proposed rule change is below. 

Proposed new language is italicized. 

Deleted language is [bracketed]. 

* * * * * 

7018. Nasdaq Market Center Order 

Execution and Routing 

(a)–(h) No change. 

(i) Notwithstanding the foregoing, the 

following charges shall apply to 

transactions in a Qualified Security by 

one of its Designated Liquidity 

Providers: 

Charge to Designated 

Liquidity Provider 

entering Order that 

executes in the 

Nasdaq Market 

Center or attempts 

to execute in the 

Nasdaq Market 

Center prior to routing: 

$0.003 per share executed for securities priced at $1 or 

more per share 

(For securities 

priced at less than 

$1 per share, the 

normal execution 

fee under 7018(a) 

will apply). 

Credit to Designated 

Liquidity Provider 

providing displayed 

liquidity through the 

Nasdaq Market 

Center: 

$0.004 per share executed (or $0, in 

the case of executions against 

Quotes/Orders in 

the Nasdaq Market 

Center at less than 

$1.00 per share), 

up to 10 million 

shares average 

daily volume. 

Normal credits under 

7018(a) apply to 

shares greater than 

10 million average 

daily volume and 

non-displayed liquidity. 

For purposes of this paragraph: 

(1) A security may be designated as a 

‘‘Qualified Security’’ if: 

(A) it is an exchange-traded fund or 

index-linked security listed on Nasdaq 

pursuant to Nasdaq Rules 5705, 5710, or 

5720; 

(B) [there has been no time at which 

its average daily volume on Nasdaq has 

exceeded 10,000,000 shares during two 

calendar months of any three calendarmonth period; and 

(C)] it has at least one Designated 

Liquidity Provider. 

[The security will cease to be a 

Qualified Security at the end of the 

second calendar month that causes the 

condition described in paragraph (B) not 

to be satisfied.] 

(2) A ‘‘Designated Liquidity Provider’’ 

or ‘‘DLP’’ is a registered Nasdaq market 

maker for a Qualified Security that has 

committed to maintain minimum 

performance standards. [Designated 

Liquidity Providers]A DLP shall be 

selected by Nasdaq based on factors 

including, but not limited to, experience 

with making markets in exchangetraded funds and index-linked 

securities, adequacy of capital, 

willingness to promote Nasdaq as a 

marketplace, issuer preference, 

operational capacity, support personnel, 

and history of adherence to Nasdaq 

rules and securities laws. Nasdaq may 

limit the number of Designated 

Liquidity Providers in a security, or 

modify a previously established limit, 

upon prior written notice to members. 

The minimum performance standards 

applicable to a DLP[Designated 

Liquidity Provider] may be determined 

from time to time by Nasdaq and may 

vary depending on the price, liquidity, 

and volatility of the Qualified Security 

in which the DLP[Designated Liquidity 

Provider] is registered. The performance 

measurements will include (A) percent 

of time at the national best bid (best 

offer) (‘‘NBBO’’); (B) percent of 

executions better than the NBBO; (C) 

average displayed size; and (D) average 

quoted spread. 

(3) If a DLP does not meet the 

performance measurements for a given 

month, fees and credits will revert to the 

normal schedule under 7018(a). If a DLP 

does not meet the stated performance 

measurements for 3 out of the past 4 

months, the DLP is subject to forfeit of 

DLP status for that instrument, at 

NASDAQ’s discretion. A DLP must 

provide 30 days written notice if it 

wishes to withdraw its registration in a 

Qualified Security. 

(j) No change. 

* * * * * 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 63239 

3The Designated Liquidity Provider pricing 

incentive program was implemented in August 

2007. See Securities Exchange Act Release No. 

56130 (July 25, 2007), 72 FR 42163 (August 1, 2007) 

(SR–NASDAQ–2007–061). 

4 15 U.S.C. 78f. 

5 15 U.S.C. 78f(b)(4). 

6 15 U.S.C. 78s(b)(3)(a)(ii). 

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 is proposing to modify the 

criteria required of Designated Liquidity 

Providers to qualify for credits in 

transactions involving a Qualified 

Security.3 Currently, a Designated 

Liquidity Provider (‘‘DLP’’) may receive 

a credit of $0.004 per share executed (or 

$0, in the case of executions against 

Quotes/Orders in the Nasdaq Market 

Center at less than $1.00 per share) if it 

provides liquidity in a Qualified 

Security to the Nasdaq Market Center. A 

Qualified Security is defined by three 

criteria in Rule 7018(i)(1): (A) It must be 

an exchange-traded fund or indexlinked security listed on Nasdaq 

pursuant to Nasdaq Rules 5705, 5710, or 

5720; (B) there has been no time at 

which its average daily volume on 

Nasdaq has exceeded 10 million shares 

during two calendar months of any 

three calendar-month period; and (C) it 

has at least one Designated Liquidity 

Provider. A security will cease to be 

classified as a Qualified Security at the 

end of the second calendar month that 

causes the condition described in 

paragraph (B) not to be satisfied. 

NASDAQ is eliminating requirement 

‘‘(B)’’ of the definition of Qualified 

Security together with related language 

under the rule, and will now permit 

DLPs to qualify for the credit in a 

Qualified Security with an average daily 

volume during the month of up to 10 

million. Any average daily volume for 

the month in the Qualified Security in 

excess of 10 million would be assessed 

the standard rates found under Rule 

7018(a). As such, a DLP will be able to 

receive the higher $0.004 credit on up 

to 10 million shares of average daily 

volume per month in a Qualified 

Security, even if the DLP exceeds 10 

million in average daily volume in a 

given month. 

NASDAQ is also limiting the 

availability of the credit to only DLPs 

providing displayed liquidity through 

the Nasdaq Market Center. A primary 

purpose of the credit program in 

Qualified Securities is to promote an 

active and liquid trading market in ETFs 

and ILSs. As currently written, however, 

Rule 7018(i) provides a credit for any 

type of liquidity provided by a DLP, 

even if the liquidity is not-displayed 

and thus not promoting price discovery 

through active public display. NASDAQ 

believes that the program should only 

award DLPs that make markets in a 

Qualified Security by providing 

displayed liquidity. 

NASDAQ is adding new rule text 

describing the consequences of failing to 

meet the DLP minimum performance 

criteria described in Rule 7018(i)(2). The 

minimum performance standards 

applicable to a DLP are determined by 

NASDAQ and may vary depending on 

the price, liquidity, and volatility of a 

particular Qualified Security. These 

performance measurements include: (A) 

Percent of time at the NBBO; (B) percent 

of executions better than the NBBO; (C) 

average displayed size; and (D) average 

quoted spread. NASDAQ may remove 

DLPs that do not meet performance 

standards, or that decide to change their 

status, at any time. NASDAQ is 

providing clarifying information 

regarding the consequences of failing to 

meet the minimum performance 

standards. Specifically, if a DLP fails to 

meet minimum performance standards 

in a given month, fees will revert to the 

standard schedule of fees and credits 

under Rule 7018(a). If a DLP fails to 

meet minimum performance standards 

for three out of the past four months, it 

will lose DLP status for that instrument. 

NASDAQ is imposing a thirty-day prior 

notice obligation on DLPs seeking to 

withdraw registration in a Qualified 

Security. This thirty-day notice 

requirement will ensure that NASDAQ 

has adequate time to assign a new DLP, 

thus avoiding any disruption in market 

quality that may be caused by the 

absence of an assigned DLP. 

Last, NASDAQ is making a nonsubstantive technical change to the rule 

by providing the acronym ‘‘DLP’’ as an 

alternative to ‘‘Designated Liquidity 

Provider’’ for use in the rule text. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,4 in 

general, and Section 6(b)(4) of the Act,5

in particular, because it provides for the 

equitable allocation of reasonable dues, 

fees and other charges among members 

and issuers and other persons using any 

facility or system that NASDAQ 

operates or controls, and it does not 

unfairly discriminate between 

customers, issuers, brokers or dealers. 

NASDAQ believes that by allocating 

pricing benefits to market makers that 

make tangible commitments to 

enhancing market quality for ETFs and 

ILSs listed on NASDAQ, the proposal 

will encourage the development of new 

financial products, provide a better 

trading environment for investors in 

ETFs and ILSs, and encourage greater 

competition between listing venues for 

ETFs and ILSs. The changes proposed 

herein are designed to further promote 

liquid markets in ETFs and ILSs, and to 

ensure that DLPs are provided adequate 

incentives to continue to meet 

minimum standards to participate in the 

credit program. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ believes that the proposed 

rule change will encourage greater 

competition among venues that list 

ETFs and ILSs, and will further 

strengthen the quality of the NASDAQ 

market as a venue for transactions in 

ETFs and ILSs. Accordingly, NASDAQ 

does not believe that the proposed rule 

change will result in any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.6 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 


jlentini on DSKJ8SOYB1PROD with NOTICES
63240 Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 It should be noted that the circumstances under 

which it is possible to enter a market order in PSX 

are limited to market peg orders that are entered 

when PSX has some liquidity at the NBBO on the 

side of the market to which the order pegs. 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2010–128 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2010–128. This 

file number should be included on the 

subject line if e-mail is used. 

To help the Commission process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/sro.shtml). 

Copies of the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such filing also will be 

available for inspection and copying at 

the principal offices of the Exchange. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2010–128, and 

should be submitted on or before 

November 4, 2010. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25741 Filed 10–13–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63051; File No. SR–Phlx– 

2010–135] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Regarding 

Collars for Unpriced Orders 

October 6, 2010. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on 

September 29, 2010, NASDAQ OMX 

PHLX LLC (‘‘Phlx’’ or the ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘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 

Phlx Rule 4751 to include system 

functionality that will cancel any 

portion of an unpriced order submitted 

to NASDAQ OMX PSX (‘‘PSX’’) that 

would execute at a price that is more 

than $0.25 or 5 percent worse than the 

national best bid and offer at the time 

the order initially reaches the Exchange, 

whichever is greater. The text of the 

proposed rule change is available from 

the Exchange’s Web site at http:// 

nasdaqomxphlx.cchwallstreet.com, at 

the Exchange’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, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change. The text of 

these statements may be examined at 

the places specified in Item IV below, 

and is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to protect market participants 

by reducing the risk that unpriced 

orders, also known as market orders, 

will execute at prices that are 

significantly worse than the national 

best bid and offer (‘‘NBBO’’) at the time 

the Exchange receives the order.3 The 

Exchange believes that most market 

participants expect that their order will 

be executed at its full size at a price 

reasonably related to the prevailing 

market. However, participants may not 

be aware that there is insufficient 

liquidity at or near the NBBO to fill the 

entire order, particularly for more 

thinly-traded securities. 

Prior to the launch of trading on PSX, 

the Exchange is proposing to implement 

functionality in its trading systems that 

would cancel any portion of unpriced 

orders that would execute on PSX at a 

price that is the greater of $0.25 or 5 

percent worse than the NBBO at the 

time the Exchange receives the order. 

Unpriced orders that would be subject 

to this calculation and potential 

cancellation are defined in Phlx Rule 

3301(f)(9) as ‘‘Unpriced Orders.’’ 

The following example illustrates 

how the Unpriced Order process would 

work. A market participant submits a 

Market Peg order to buy 500 shares. The 

NBBO is $6.00 bid by $6.05 offer, with 

100 shares available on each side. PSX 

has 100 shares available at the $6.05 to 

sell at the offer price and also has 

reserve orders to sell 100 shares at $6.32 

and 400 shares at $6.40. No other 

market center is publishing offers to sell 

the security at prices in the range of 

$6.05 to $6.40. 

In this example, the Unpriced Order 

would be executed in the following 

manner: 

• 100 shares would be executed by 

PSX at the $6.05; 

• 100 shares would be executed by 

PSX at $6.32 (more than $0.25 but less 

than 5 percent worse than the NBBO); 

and 

• 200 shares, representing the 

remainder of the Unpriced Order, would 

be cancelled because the remaining 


jlentini on DSKJ8SOYB1PROD with NOTICES