Document ID: SEC-2009-0235-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2009-02-20T05:00Z

[Federal Register: February 20, 2009 (Volume 74, Number 33)]
[Notices]               
[Page 7943-7945]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe09-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59392; File No. SR-NASDAQ-2009-006]

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

February 11, 2009.
    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 28, 2009, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``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 Nasdaq. Nasdaq filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders it 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 to establish a Post-Only Order. The text of the 
proposed rule change is below. Proposed new language is italicized.\5\
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    \5\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://
nasdaq.cchwallstreet.com.
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* * * * *
    4751. Definitions
    (a)-(e) No change.
    (f) No change.
    (1)-(9) No change.
    (10) ``Post-Only Orders'' are orders that if, at the time of entry, 
would lock an order on the System, the order will be re-priced and 
displayed by the System to one minimum price increment (i.e., $0.01 or 
$0.0001) below the current low offer (for bids) or above the current 
best bid (for offers).
    (g)-(i) 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
    In order to provide enhanced functionality, Nasdaq proposes to 
adopt an additional order type known as the Post-Only Order. A Post-
Only Order is an order that does not remove liquidity

[[Page 7944]]

from the System upon entry if it would lock an order on Nasdaq's system 
for trading cash equities (the ``System''). If, at the time of entry, a 
Post-Only Order would lock an order on the System it will be re-priced 
and displayed by the System to one minimum price increment (i.e., $0.01 
or $0.0001) below the current low offer (for bids) or above the current 
best bid (for offers). In the case of a Post-Only Order locking an 
order, the Post-Only Order will be repriced only once upon entry into 
the System. Post-Only Orders will not be routed away to other trading 
centers.
    An example of how the price sliding mechanism will work if the 
Post-Only Order locks an order on the System is as follows:
     The System is displaying a $10.15 offer.
     A firm enters a Post-Only Order to buy at $10.15.
     The incoming Post-Only Order will go on the book and 
display at $10.14.
    If the Post-Only Order would lock or cross a protected quote of 
another market center the post-only logic is not applicable and the 
order will be processed in the same manner as a Price to Comply Post 
Order.
     Another market center is displaying a $10.15 offer.
     A firm enters a Post-Only Order to buy at $10.15.
     The incoming Post-Only Order will be accepted and display 
at $10.14.
    If the Post-Only Order would cross another order already on the 
System and the price improvement for executing the order is greater 
than the liquidity taker fee and higher than the rebate for being a 
liquidity provider, then the post-only logic is not applicable and the 
order will be processed and execute in the same manner as an order with 
a time-in-force of Immediate or Cancel (IOC).
     The System is displaying a $10.15 offer.
     A firm enters a Post-Only Order to buy at $10.16.
     The incoming Post-Only Order will execute at $10.15.
    Nasdaq believes that the Post-Only Order type will increase the 
ability of market participants to control their provision or taking of 
market liquidity and thus better anticipate their trading costs. Nasdaq 
notes that orders similar to the proposed Post-Only Order type are 
already in use by other market centers.\6\ In addition, the process for 
re-pricing Post-Only Orders is comparable to the existing re-pricing 
mechanism approved for use for Price to Comply Post Orders.\7\
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    \6\ See Rule 4751(f)(9) of NASDAQ OMX BX, Rule 11.9(c)(5) of the 
BATS Exchange and Rule 7.31 of NYSE Arca. The proposed Post-Only 
Order would operate in the same manner as the Post-Only Order 
adopted by NASDAQ OMX BX and have functionalities similar to the 
NYSE Arca Adding Liquidity Only Order and the BATS Post Only Order.
    \7\ See Rule 4751(f)(8).
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\8\ in general, and furthers the objectives of 
Section 6(b)(5),\9\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Specifically, the Post-Only 
Order is designed to encourage displayed liquidity and to offer Nasdaq 
users greater discretion and flexibility to post liquidity on Nasdaq.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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. To the contrary, 
Nasdaq believes that the Post-Only Order is designed to compete with 
orders already approved and in use at other national securities 
exchanges, thereby enhancing competition between the exchanges.

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 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 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 
\10\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\12\ 
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay and designate the proposed 
rule change operative upon filing. 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 other 
self-regulatory organizations have similar order types \14\ and that 
this filing raises no new regulatory issues. Therefore, the Commission 
designates the proposal operative upon filing.\15\
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    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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 complied with this requirement.
    \13\ Id.
    \14\ See BATS Exchange, Inc. Rule 11.9(c)(5) and NASDAQ OMX BX, 
Inc. Rule 4751(f)(9).
    \15\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 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 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 No. SR-NASDAQ-2009-006 on the subject line.

[[Page 7945]]

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

All submissions should refer to File Number SR-NASDAQ-2009-006. 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, 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 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-2009-006 and should be submitted on or before 
March 13, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3574 Filed 2-19-09; 8:45 am]

BILLING CODE 8011-01-P