Document ID: SEC-2011-0186-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-02-10T05:00Z

[Federal Register Volume 76, Number 28 (Thursday, February 10, 2011)]
[Notices]
[Pages 7602-7604]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2927]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63836; File No. SR-NASDAQ-2011-004]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 4758 To Add a New Routing Option, LIST

February 3, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on January 24, 2011, The NASDAQ Stock Market LLC (the 
``Exchange'' or ``NASDAQ'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the 
Exchange. The Exchange has designated the proposed rule change as 
constituting a non-controversial rule change under Rule 19b-4(f)(6) 
under the 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

    The Exchange is filing this proposed rule change to amend NASDAQ 
Rule 4758 to add a new routing option, LIST. The text of the proposed 
rule change is available at http://nasdaqomxbx.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 and 
discussed any comments it received on the proposed rule change. The 
text of those 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 parts 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 add a routing strategy, LIST, that will 
provide firms flexibility to participate in the opening and closing 
processes of the primary listing markets and also take advantage of the 
Exchange's liquidity during the remainder of the trading day. LIST is a 
variation on a currently existing routing strategy, SKIP, but offers 
increased sensitivity to the opening and closing crosses on securities' 
primary listing markets.
    Under LIST, an order received before the security's primary listing 
market opening will participate in the primary listing market's opening 
cross, after which any unexecuted shares will check the NASDAQ book. 
The security's primary listing market is considered ``open'' after the 
first of the following occurs: (1) The primary listing market returns 
the order; (2) NASDAQ receives the first regular way print from the 
primary; or (3) the time is 9:45 a.m.
    Remaining shares will then be routed to Reg-NMS protected market 
centers in accordance with the LIST System routing table,\4\ and then 
return to be posted on the NASDAQ book.\5\ Similarly, LIST orders 
entered after the primary listing market's opening process but prior to 
3:58 p.m. will check the NASDAQ book, route in accordance

[[Page 7603]]

with the LIST System routing table, and then post to the NASDAQ book.
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    \4\ As provided, in Rule 4758(a)(1)(A), the term ``System 
routing table'' refers to the proprietary process for determining 
the specific trading venues to which the System routes orders and 
the order in which it routes them. NASDAQ reserves the right to 
maintain a different System routing table for different routing 
options and to modify the System routing table at any time without 
notice.
    \5\ Pursuant to NASDAQ Rule 4758(a)(1)(B), if a routed order is 
returned, in whole or in part, that order will receive a new time 
stamp reflecting the time of its return to the System.
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    At 3:58 p.m., all LIST orders on the book will be sent to their 
primary listing market, as ``day'' orders, to participate in the 
closing cross. LIST orders entered at or after 3:58 p.m. but before 4 
p.m. will also be sent to their primary listing market for the closing 
cross, after first checking the NASDAQ book and routing in accordance 
with the LIST System routing table.\6\ Shares unexecuted in the closing 
process will be posted to the NASDAQ book.
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    \6\ Due to the possibility that orders received very near the 
4:00 p.m. deadline (e.g. 3:59:59:999) will be routed to the primary 
listing market but arrive after the security has closed, customers 
are encouraged to submit their LIST orders prior to 3:58.
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    LIST orders received after 4 p.m. will be posted to the NASDAQ 
book. Where NASDAQ is the primary listing market for a LIST order 
security, the order will be routed as described above, although rather 
than route out for the open and/or close, it will participate in 
NASDAQ's open and/or closing cross.
    If trading in the security is stopped across all markets, LIST 
orders will be sent to the primary listing market to participate in the 
re-opening process. When normal trading resumes, the orders will be 
cancelled off of the primary and posted on the NASDAQ book.
    NASDAQ has designed LIST to be Reg-NMS compliant, and believes that 
LIST, like all NASDAQ routing strategies, conforms to Reg-NMS 
requirements. LIST orders may not be designated as MGTC or SGTC.
    The proposed LIST option is similar to two order types utilized by 
NYSE Arca, as established by SR-NYSEArca 2009-56: \7\ The ``Primary 
Until 9:45 Order'' and the ``Primary After 3:45 Order.'' NASDAQ's LIST 
order type combines these two separate NYSE Arca routing options into a 
single order type. In addition, under a LIST routing strategy, unlike 
under its NYSE Arca counterparts, orders will be removed from the 
primary listing market upon the primary listing market's open rather 
than at the 9:45 cutoff time.
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    \7\ Securities Exchange Act Release No. 60256 (July 7, 2009), 74 
FR 33489 (July 13, 2009) (SR-NYSEArca-2009-56).
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    This rule change also introduces fees for the new LIST routing 
strategy. The fees for LIST orders that participate in the open or 
closing process at the securities' primary listing market are the fees 
charged to Nasdaq by those venues, passed through to the member. 
Specifically, the fee for LIST orders that participate in the NYSE 
closing process is $0.00085 per share executed, while the fee for 
orders participating in the opening process or the re-opening process 
after trading is halted across all markets is $0.0005 per share 
executed. The fee for LIST orders and DOT orders \8\ participating in 
the NYSE opening process is subject to a $10,000 per month per member 
cap. The fee for LIST orders that participate in the NYSEAmex closing 
process is $0.00085 per share executed, while the fee for orders 
participating in the opening process or the re-opening process after 
trading is halted across all markets is $0.0005 per share executed. The 
fee for LIST orders that participate in the NYSEArca closing process or 
the re-opening process after trading is halted across all markets is 
$0.0010 per share executed, while the fee for orders participating in 
the opening process is $0.0005 per share executed. The fee for LIST 
orders participating in the NYSEArca opening process is subject to a 
$10,000 per month per member cap. LIST orders that participate in 
NASDAQ's opening, closing, and halt re-opening processes are charged 
NASDAQ's usual fees for those processes, as provided in Rule 7018(d) 
and (e).
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    \8\ DOT orders are an existing order type that is also eligible 
to participate in the NYSE opening process.
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    LIST orders that execute at venues other than NASDAQ, but not in 
the opening or closing processes, are charged $0.0030 per share 
executed, and orders that execute in NASDAQ outside of its opening and 
closing processes are charged NASDAQ's regular execution fee, which is 
also $0.0030 per share executed. Because LIST orders have the potential 
to post at NYSEArca or NYSEAmex and then be routed to other venues by 
those exchanges, NASDAQ is also adding language stipulating that it 
will pass on to its member any routing fees charged to it by NYSEArca 
or NYSEAmex. Similar language is already in Rule 7018 with respect to 
routing charges assessed by NYSE.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\9\ in general, and with 
Sections 6(b)(5) of the Act,\10\ 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 Exchange 
believes that the proposed routing option will accomplish those ends by 
providing more flexible options, insomuch as it offers a means for 
NASDAQ members to route to the opening and closing processes of U.S. 
listing venues, while also allowing unexecuted shares to route to other 
trading venues and post on the NASDAQ book.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
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    The rule change is also consistent with Section 6(b)(5) of the 
Act,\11\ in that 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 which NASDAQ operates or controls. 
The fees assessed for a LIST order to participate in the open and 
closing of the security's primary listing market are based on the fees 
and rebates that are charged and offered to NASDAQ by the exchanges to 
which it routes. As such, a member will pay the same fees for 
participation in the opening and closing of the security's primary 
listing market when using LIST as it would if it went to that venue 
directly. A member will also pay the same fee for executing at venues 
other than NASDAQ outside the open or close under LIST as it would 
under alternative NASDAQ routing strategies, including STGY, SCAN, 
SKNY, and SKIP. Finally, LIST orders that participate in NASDAQ's 
opening and closing processes are charged NASDAQ's usual fees for those 
processes, as provided in Rule 7018(d) and (e). In sum, the LIST order 
fees are set to reflect NASDAQ's routing costs while offering members a 
routing option they have requested. Use of the routing option is, of 
course, entirely voluntary.
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    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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.

[[Page 7604]]

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 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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. 
NASDAQ has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
it expects to have the technological changes in place to support the 
proposed rule change by February 7, 2011, and believes that the 
benefits to market participants expected from the rule change should 
not be delayed. The Exchange believes that the rule change will reduce 
the messaging traffic that is now required to achieve the same result, 
and thus contribute to a more efficient public market.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that the proposed routing strategy is similar to 
routing order types that were implemented by NYSE Arca.\16\ Therefore, 
the Commission designates the proposal operative upon filing.\17\
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    \16\ Securities Exchange Act Release No. 60256 (July 7, 2009), 
74 FR 33489 (July 13, 2009) (SR-NYSEArca-2009-56).
    \17\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2011-004 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2011-004. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, 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 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-2011-004 and should be submitted on or before March 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-2927 Filed 2-9-11; 8:45 am]
BILLING CODE 8011-01-P