Document ID: SEC-2015-0492-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2015-03-23T04:00Z

[Federal Register Volume 80, Number 55 (Monday, March 23, 2015)]
[Notices]
[Pages 15260-15262]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06513]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74518; File No. SR-NASDAQ-2015-022]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Rule 4751(h)(5) Relating to Market Hours IOC Orders

March 17, 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 6, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to simplify processing of Market Hours IOC 
orders and to make clarifying changes to the rule text of Rule 
4751(h)(5).
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 15261]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to modify the time that Market Hours IOC 
(``MIOC'') orders are available for entry into the System.\3\ MIOC is a 
Time in Force \4\ characteristic of an order that will cause it (or 
unexecuted portion thereof) to be canceled if, after entry into the 
System the order (or unexecuted portion thereof) becomes non-marketable 
during the Regular Market Session, 9:30 a.m. until 4:00 p.m. Eastern 
Time.\5\ Pursuant to Rule 4751(h)(5), MIOC Orders are available for 
entry from 4:00 a.m. until 4:00 p.m. Eastern Time; however, a MIOC 
order entered between 4:00 a.m. and 9:30 a.m. Eastern Time is held by 
the System until 9:30 a.m. at which time the System shall determine 
whether the order is marketable and either execute or be canceled.
---------------------------------------------------------------------------

    \3\ As defined by Rule 47151(a). All times noted herein are in 
Eastern Time, unless otherwise noted.
    \4\ Time in Force is the period of time that the System will 
hold an order for potential execution. See Rule 4751(h).
    \5\ As defined by Rule 4120(b)(4)(D).
---------------------------------------------------------------------------

    NASDAQ is proposing to simplify the processing of MIOC orders to 
make it consistent with the meaning of a Time in Force of immediate or 
cancel \6\ and is adding clarifying rule text concerning when such 
orders are available for entry and potential execution. Specifically, 
the Exchange is proposing to only accept MIOC orders after completion 
of the NASDAQ Opening Cross.\7\ The Opening Cross is NASDAQ's process 
for matching orders at the launch of the regular trading hours, and is 
open to all NASDAQ listed securities and NMS securities listed on other 
national securities exchanges (collectively, ``System Securities'').\8\ 
Regular Market Session trading begins in an individual System Security 
at the completion of its opening cross. As a consequence of the 
proposed change, NASDAQ will not hold MIOC orders entered from 4:00 
a.m. up to the completion of the NASDAQ Opening Cross, but rather will 
not accept the order for execution and return it to the member firm. 
NASDAQ is not proposing to change how the MIOC order operates, but only 
the time during which a MIOC order may be entered.
---------------------------------------------------------------------------

    \6\ An order designated as ``immediate or cancel'' represents 
the entering member firm's desire for the order to either execute 
immediately after the System determines whether the order is 
marketable or be canceled.
    \7\ See Rule 4752. Beginning at 9:30 a.m. Eastern Time, the 
System will execute crosses in each individual security traded on 
NASDAQ one by one. The order in which each security is processed is 
random and differs day by day. Upon completion of an individual 
security's cross, Regular Market Session trading begins. The Opening 
Cross process is normally completed in less than one second.
    \8\ NASDAQ notes that it initiates an Opening Cross in all 
System Securities for which there are orders that will execute 
against contra-side orders at 9:30 a.m., at which time the opening 
book and the NASDAQ continuous book are brought together to create 
single NASDAQ opening prices for System Securities. In certain 
cases, a System Security will not have any contra-side interest for 
execution in the Opening Cross, or any orders whatsoever, when the 
Opening Cross process is initiated. When this occurs, NASDAQ 
executes a ``null cross'' instead, whereby no securities are matched 
yet the System receives the necessary precondition to regular hours 
trading that a ``cross'' in the security has occurred. After 
completion of the null cross, regular hours trading begins by 
integrating Market Hours Orders into the book in time priority and 
executing in accordance with market hours rules.
---------------------------------------------------------------------------

    NASDAQ is accordingly deleting text from Rule 4751(h) that 
discusses MIOC order entry beginning at 4:00 a.m. Eastern Time and that 
NASDAQ will hold MIOC orders entered prior to 9:30 a.m. Eastern Time 
until 9:30 a.m. NASDAQ is also consolidating existing rule text and 
adding new text under the rule to make it clear that MIOC orders may be 
entered and potentially executed beginning after the completion of the 
NASDAQ Opening Cross.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6 of the Act,\9\ in general, and further the objectives of 
Section 6(b)(5) of the Act,\10\ in particular, in that they are 
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; and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. Specifically, the proposed changes promote just 
and equitable principles of trade and perfect the mechanisms of a free 
and open market and the national market system by simplifying 
processing of orders that are designated to immediately execute or be 
canceled during the Regular Market Session. Under the current rule, 
NASDAQ must hold MIOC orders entered from 4:00 a.m. to 9:30 a.m. 
Eastern Time, during which member firms may cancel and reenter such 
orders. By preventing MIOC order entry during this time, NASDAQ is 
making the processing of orders designated as MIOC consistent with the 
logic of immediate or cancel functionality, namely to execute 
immediately or be cancelled back in whole or in part. Moreover, NASDAQ 
is adding language to the rule to make it clear when MIOC orders are 
available for both entry and potential execution. As discussed above, 
completion of the NASDAQ Opening Cross in a security marks the 
beginning of Regular Market Hours trading. Accordingly, the changes 
proposed herein both simplify the processing of MIOC orders and clarify 
the rule text, consistent with the objectives of the Act.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule changes will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. 
Specifically, the changes are designed to promote consistency in the 
handling of immediate or cancel-designated orders and to provide 
clarity on when such orders are available for both entry and potential 
execution. Such changes do not place a burden on competition between 
market participants as the changes are applied consistently to all 
participants. Moreover, the proposed changes do not impose a burden on 
competition among exchanges as they are done in the interest of 
providing clarity and consistency in its rules, and are therefore 
irrelevant to competition.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(ii) [sic] of the Act \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\ At any time within 60

[[Page 15262]]

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: (i) Necessary or appropriate in the 
public interest; (ii) for the protection of investors; or (iii) 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(a)(ii) [sic].
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

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-2015-022 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2015-022. 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 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-NASDAQ-2015-022 and should 
be submitted on or before April 13, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-06513 Filed 3-20-15; 8:45 am]
 BILLING CODE 8011-01-P