Document ID: SEC-2009-0656-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify DOT, SCAN and STGY Routing Strategies To Incorporate an Optional Pre-Routing Display Period
Posted Date: 2009-05-14T04:00Z

[Federal Register: May 14, 2009 (Volume 74, Number 92)]
[Notices]               
[Page 22794-22796]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14my09-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59875; File No. SR-NASDAQ-2009-043]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify DOT, SCAN and STGY Routing Strategies To Incorporate an Optional 
Pre-Routing Display Period

May 6, 2009.
    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 April 30, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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 Nasdaq. Nasdaq has designated the proposed rule change as 
constituting a non-controversial rule change under Rule 19b-4(f)(6) 
under the

[[Page 22795]]

Act,\3\ which renders the proposal effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes a rule change to modify its DOT, SCAN and STGY 
routing strategies so as to incorporate an optional pre-routing display 
period for all orders using such strategies.
    The text of the proposed rule change is below. Proposed new 
language is italicized.
4758. Order Routing
    (a) Order Routing Process
    (1) The Order Routing Process shall be available to Participants 
from 7 a.m. until 8 p.m. Eastern Time, and shall route orders as 
described below: All routing of orders shall comply with Rule 611 of 
Regulation NMS under the Exchange Act.
    (A) The System provides three routing options. Of these three, DOT 
is only available for orders ultimately sought to be directed to either 
the New York Stock Exchange (``NYSE'') or NYSE Amex. The System will 
consider the quotations only of accessible markets. The three System 
routing options are:

    (i) DOT (``DOT'')--under this option, after checking the System 
for available shares if so instructed by the entering firm, orders 
are sent to other available market centers for potential execution, 
per entering firm's instructions, before being sent to the 
destination exchange, so long as the price at such market centers 
would not violate the Order Protection Rule. If instructed by the 
entering firm, prior to sending orders to other available markets, 
such orders shall be displayed to Nasdaq market participants (and 
market data vendors) for potential execution, at the NBBO price, for 
a period of time not to exceed 3 seconds as determined by Nasdaq. 
Any un-executed portion will thereafter be sent to the NYSE or NYSE 
Amex, as appropriate, at the order's original limit order price. 
This option may only be used for orders with time-in-force 
parameters of either SDAY, SIOC, MDAY, MIOC, GTMC or market-on-open/
close. Notwithstanding the foregoing, orders designated for 
participation in the NYSE or NYSE Amex opening or closing processes 
will not check the System for available shares prior to routing.
    (ii) Reactive Electronic Only (``STGY'')--under this option, 
after checking the System for available shares if so instructed by 
the entering firm, orders are sent to other available market centers 
for potential execution, per entering firm's instructions. When 
checking the book, the System will seek to execute at the price it 
would send the order to a destination market center. If instructed 
by the entering firm, prior to sending orders to other available 
markets, such orders shall be displayed to Nasdaq market 
participants (and market data vendors) for potential execution, at 
the NBBO price, for a period of time not to exceed 3 seconds as 
determined by Nasdaq. If shares remain un-executed after routing, 
they are posted on the book. Once on the book, should the order 
subsequently be locked or crossed by another accessible market 
center, the System shall route the order to the locking or crossing 
market center. With the exception of the Minimum Quantity order 
type, all time-in-force parameters and order types may be used in 
conjunction with this routing option.
    (iii) Electronic Only Scan (``SCAN'')--under this option, after 
checking the System for available shares if so instructed by the 
entering firm, orders are sent to other available market centers for 
potential execution, per entering firm's instructions, in compliance 
with Rule 611 under Regulation NMS. When checking the book, the 
System will seek to execute at the price it would send the order to 
a destination market center. If instructed by the entering firm, 
prior to sending orders to other available markets, such orders 
shall be displayed to Nasdaq market participants (and market data 
vendors) for potential execution, at the NBBO price, for a period of 
time not to exceed 3 seconds as determined by Nasdaq. If shares 
remain un-executed after routing, they are posted on the book. Once 
on the book, should the order subsequently be locked or crossed by 
another market center, the System will not route the order to the 
locking or crossing market center. With the exception of the Minimum 
Quantity order type, all time-in-force parameters and order types 
may be used in conjunction with this routing option.
    Orders that do not check the System for available shares prior 
to routing may not be sent to a facility of an exchange that is an 
affiliate of Nasdaq, except for orders that are sent to the NASDAQ 
OMX BX Equities Market.
    (B) No change.

    (b) No change.
* * * * *

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 expand its DOT, SCAN and STGY routing 
strategies to provide an optional pre-routing display period for orders 
using those strategies. Under the proposal, orders entered using any 
form of the DOT, SCAN or STGY routing strategies will, after first 
executing to the maximum extent possible in Nasdaq's book, have their 
remaining share amounts and prices displayed to Nasdaq market 
participants and market data vendors for a period of time determined by 
Nasdaq which will not exceed 3 seconds. This display to Nasdaq market 
participants and market data vendors shall take place before routing 
any order or order remainder to any other available market and will be 
the default processing preference for the DOT, SCAN and STGY 
strategies. Parties not wishing to have their orders displayed prior to 
routing may direct the system to avoid the pre-routing display period.
    Nasdaq notes that such pre-routing display functionality has 
already been approved by the Commission for use by the CBOE Stock 
Exchange and that such functionality can be expected to provide system 
users with greater control over their trading. Except for the changes 
to the DOT, SCAN and STGY routing functionality itself describe here, 
nothing in the proposal will modify or alter any existing rule or 
process related to order priority, order execution, trade-through 
protection or locked or crossed markets.
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 with 
Sections 6(b)(5) of the Act,\5\ 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. Nasdaq notes 
that similar functionality has already been

[[Page 22796]]

found to be consistent with the Act by the Commission.\6\
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Securities Exchange Act Release No. 54422 (September 11, 
2006), 71 FR 54537 (September 15, 2006) (SR-CBOE-2004-21); 
Securities Exchange Act Release No. 59359 (February 4, 2009), 74 FR 
6927 (February 11, 2009) (SR-CBOE-2008-123).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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

    Written comments were neither solicited nor received.

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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \7\ and 
Rule 19b-4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires that 
a self-regulatory organization submit to the Commission written 
notice of its intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. Nasdaq 
has requested that the Commission waive this five-day pre-filing 
notice requirement. The Commission hereby grants this request.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2009-043 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-2009-043. 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 inspection 
and copying 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 Nasdaq. 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-2009-043 and should 
be submitted on or before June 4, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-11168 Filed 5-13-09; 8:45 am]

BILLING CODE 8010-01-P