Document ID: SEC-2014-1326-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2014-08-06T04:00Z

[Federal Register Volume 79, Number 151 (Wednesday, August 6, 2014)]
[Notices]
[Pages 45860-45862]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18582]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72736; File No. SR-NASDAQ-2014-075]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness To Correct Language in the 
Text of Rule 4753

 August 1, 2014.
    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 July 22, 2014, 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 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 U.S.C. 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NASDAQ Rule 4753 to correct 
imprecise language in the rule text. The text of the proposed rule 
change is available at http://nasdaq.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 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
    NASDAQ is amending the language of Rule 4753 to correct imprecise 
language with respect to imbalance information disseminated prior to 
the execution of the NASDAQ Halt Cross (the ``Halt Cross'' or 
``Cross''). The NASDAQ Halt Cross is designed to provide for an 
orderly, single-priced opening of securities subject to an intraday 
halt, including securities that are the subject of an initial public 
offering (``IPO''). Prior to the Cross execution, market participants 
enter quotes and orders eligible for participation in the Cross, and 
NASDAQ disseminates certain information regarding buying and selling 
interest entered and the indicative execution price. The information 
disseminated by NASDAQ is referred to in Rule 4753 as the ``Order 
Imbalance Indicator'', but is sometime also referred to by NASDAQ and 
by market participants as the ``Net Order Imbalance Indicator'' or 
``NOII''.
    At the time when the security is released for trading, the Halt 
Cross will occur at the price that maximizes the number of shares of 
trading interest eligible for participation in the Cross \3\ to be 
executed. If there is more than one such price, the Cross will occur at 
the price that minimizes any Imbalance, which is defined in the rule as 
``the number of shares of Eligible Interest that may not be matched 
with other order shares at a particular price at any given time.'' \4\ 
The NOII is disseminated every five seconds during a designated period 
prior to the completion of the Halt Cross, in order to provide market 
participants with information regarding the possible price and volume 
of the Cross. The information includes the Current Reference Price, 
which is the price at which the Cross would occur if it executed at the 
time of the NOII's dissemination, and the number of shares of Eligible 
Interest that would be paired at that price. Rule 4753 also provides 
that the NOII includes ``the size of any Imbalance'' and ``the buy/sell 
direction of any Imbalance'', as well as ``an indicator for `market 
buy' or `market sell' '' ``[i]f marketable buy (sell) shares would 
remain unexecuted above (below) [the Current Reference Price]''.
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    \3\ ``Eligible Interest'' is defined as any quotation or any 
order that may be entered into the system and designated with a 
time-in-force of SIOC, SDAY, SGTC, MIOC, MDAY, MGTC, SHEX or GTMC. 
These respective times-in-force are defined in Rule 4751.
    \4\ Additional provisions of Rule 4753, not pertinent to this 
proposed rule change, are used to determined the price in the event 
that there is more than one price that minimizes any Imbalance.
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    While the NOII does provide certain information regarding shares 
that might not be executed in the Cross, the information provided is 
not precisely described by the defined term ``Imbalance''. It appears, 
however, that the original drafter of the rule concluded that because 
the NOII does include certain information that might be generally 
understood to concern imbalances, the defined term used for determining 
the Cross price would also serve to describe the NOII. This conclusion 
may have also been influenced by the text of Rules 4752 and 4754, which 
describe the NASDAQ Opening Cross and the NASDAQ Closing Cross and 
which accurately use a similar defined term to describe information 
provided by the NOII for those crosses. However, the NOII for the Halt 
Cross provides information about shares that might not be executed in 
the Cross only when the `market buy' or `market sell' indicator 
described in current Rule 4753(a)(2)(E)(iii) is being disseminated, in 
which case the number of shares of Eligible Interest entered through 
market orders that would not be executed in the Cross would be 
disseminated.\5\ NASDAQ believes that the dissemination of imbalance

[[Page 45861]]

information focused on unmatched market orders because the Cross cannot 
occur if not all market orders would be executed. Therefore, the 
information is designed to solicit offsetting liquidity that would 
allow the Cross to execute. NASDAQ further believes that the 
information currently provided through the NOII is well understood by 
market participants, and that as a result, a modification to the rule 
text to clarify it will not result in any confusion or alteration in 
expectations on the part of market participants.
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    \5\ The information disseminated does not include marketable 
limit orders.
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    To address this issue in a comprehensive manner, NASDAQ is 
proposing to adopt a new defined term--Market Order Imbalance--that 
will be defined as ``the number of shares of Eligible Interest entered 
through market orders that would not be matched with other order shares 
at the time of the dissemination of an Order Imbalance Indicator.'' 
NASDAQ is then proposing to amend current Rule 4753(a)(2)(C) and (D) to 
provide that the NOII includes the size and buy/sell direction of a 
Market Order Imbalance, rather than an Imbalance. Finally, NASDAQ 
proposes to delete Rule 4753(a)(2)(E)(iii), since it describes the buy/
sell direction of a Market Order Imbalance and is therefore 
redundant.\6\
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    \6\ NASDAQ is also proposing to eliminate current reserve 
subsection (c) of the rule, and to delete several obsolete 
references to the NASDAQ Imbalance Cross, which was otherwise 
deleted from the rulebook by Securities Exchange Act Release No. 
67678 (August 16, 2012), 77 FR 50738 (August 22, 2012) (SR-NASDAQ-
2012-094)
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \7\ in general, and furthers the objectives of 
Section 6(b)(5),\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, 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. 
The proposal is consistent with these purposes because it will ensure 
that Rule 4753 clearly describes the information provided in the NOII 
for the Halt Cross.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. Because the proposal is 
designed merely to ensure that Rule 4753 clearly describes the 
information provided in the NOII for the Halt Cross, it does not affect 
competition in any respect.

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, it has 
become effective pursuant to Section 19(b)(3)(A) \9\ of the Act and 
Rule 19b-4(f)(6) \10\ thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 the 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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    A proposed rule change filed under Rule 19b-4(f)(6) of the Act \11\ 
normally does not become operative prior to 30 days after the date of 
the filing. However, pursuant to Rule 19b-4(f)(6)(iii) of the Act,\12\ 
the Commission may 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 so that the proposal may become operative immediately 
upon filing. The Exchange believes that because the proposed rule 
change is designed solely to correct and clarify rule text, the public 
interest and protection of investors will be better served by 
immediately implementing the proposed rule change.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 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 
because waiver will clarify the rule immediately, which could prevent 
investor confusion with respect to the rule. The Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change to be operative upon filing with the Commission.\13\
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    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 such 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 change 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-2014-075 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-2014-075. 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.,

[[Page 45862]]

Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices 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-2014-
075, and should be submitted on or before August 27, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18582 Filed 8-5-14; 8:45 am]
BILLING CODE 8011-01-P