Document ID: SEC-2011-1794-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2011-11-22T05:00Z

[Federal Register Volume 76, Number 225 (Tuesday, November 22, 2011)]
[Notices]
[Pages 72230-72231]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30056]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65761; File No. SR-NASDAQ-2011-152]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt a ``Post-Only'' Order Type

November 16, 2011.
    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 November 8, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' 
or ``NASDAQ'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is filing with the Commission a proposal for the NASDAQ 
Options Market (``NOM'') to amend Chapter VI, Trading Systems, Section 
1, Definitions, and Section 6, Acceptance of Quotes and Orders, to 
adopt a ``Post-Only Order,'' as described further below.
    The text of the proposed rule change is available at http://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, 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 purpose of the proposed rule change is to introduce a new order 
type to NOM which is intended to attract new business. Specifically, a 
Post-Only Order is an order that will not remove liquidity from the 
System. A Post-Only Order is to be ranked and executed on the Exchange 
or cancelled, as appropriate, without routing away to another market. 
Post-Only Orders are evaluated at the time of entry with respect to 
locking or crossing other orders as follows: (i) if a Post-Only Order 
would lock or cross an order on the System, the order will be re-priced 
to $.01 below the current low offer (for bids) or above the current 
best bid (for offers) and displayed by the System at one minimum price 
increment below the current low offer (for bids) or above the current 
best bid (for offers); and (ii) if a Post-Only Order would not lock or 
cross an order on the System but would lock or cross the national best 
bid or offer as reflected in the protected quotation of another market 
center, the order will be handled pursuant to Chapter VI, Section 
7(b)(3)(C).
    The following examples illustrate how a Post-Only Order will be 
handled. If NOM is the only options market on the NBBO with a market of 
$1.00-$1.05, and Exchange B had a market of $ 0.99-$1.07, then a Post-
Only Order to buy at $1.05 would be handled as follows: Because the 
price on the buy order is equal to the lowest NOM offer ($1.05), and 
because NOM's offer is better than any other market's offer, the order 
would be processed pursuant to Chapter VI, Section 1(e)(11)(i), such 
that the order would be re-priced to $1.04 and displayed at $1.04. 
Similarly, if a market participant were to enter a Post-Only order to 
buy at $1.06, a price which crosses the NOM market, the result would be 
the same: the order would be re-priced to $1.04 and displayed at $1.04.
    As a second example, if NOM is not part of the NBBO, because NOM's 
market is $1.00-$1.06, and the NBBO is Market B with a market of $1.01-
$1.04, then a Post-Only Order to buy at $1.05 would be handled as 
follows: Because it would lock the NBBO (the NBO is $1.04), but not the 
NOM BBO, it would be processed as explained in Chapter VI, Section 1 
(e)(11)(ii) and Chapter VI, Section 7(b)(3)(c): It would be re-priced 
to $1.04 and displayed at $1.03. In this case, the Post-Only Order to 
buy at $1.05 is being treated the same as a non-Post Only limit order 
that is designated as non-routable. Similarly, if a market participant 
were to enter a Post-Only order to buy at $1.05, a price which crosses 
the NBBO, the result would be the same: The order would be re-priced to 
$1.04 and displayed at $1.03.
    Post-Only Orders received prior to the opening cross or after 
market close will not be accepted. Post-Only Orders may not have a 
time-in-force designation of Good Til Cancelled (``GTC'').\3\
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    \3\ See NOM Rules, Chapter VI, Section 1(g).
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    The Exchange proposes to add this definition to its rules in 
Chapter VI as new Section 1(e)(11). The Exchange also proposes to refer 
to Post-Only Orders in Section 6(a)(2) of its rules, where there is a 
list of order types. Many equities and options markets currently have 
similar orders, and the definition of this new order type is consistent 
with the definitions contained in other exchanges' rules.\4\ In 
addition, repricing to avoid locking and crossing other markets 
currently applies to nonroutable orders on NOM pursuant to Chapter VI, 
Section 7(b)(3)(C) in the same way.
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    \4\ See e.g., BATS Rule 21.1(d)(9).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \6\ in particular, in that it 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market

[[Page 72231]]

and a national market system, and, in general, to protect investors and 
the public interest, because it offers an additional order type on NOM, 
which should offer investors new trading opportunities on the Exchange, 
consistent with just and equitable principles of trade. Furthermore, 
the Post-Only Order is designed to encourage displayed liquidity and 
offer NOM market participants greater flexibility to post liquidity on 
NOM, consistent with removing impediments to and perfecting the 
mechanisms of a free and open market and a national market system.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) \8\ 
thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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.
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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. If the Commission 
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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-152 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-2011-152. 
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 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-NASDAQ-2011-152 and 
should be submitted on or before December 13, 2011.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30056 Filed 11-21-11; 8:45 am]
BILLING CODE 8011-01-P