Document ID: SEC-2011-0895-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-06-28T04:00Z

[Federal Register: June 28, 2011 (Volume 76, Number 124)]
[Notices]               
[Page 37872-37873]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jn11-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64724; File No. SR-NASDAQ-2011-085]

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

 June 22, 2011.
    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 June 20, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'') filed with the Securities and Exchange Commission 
(``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, to provide that Participants can designate that their 
market orders not executed after a pre-established period of time be 
cancelled back to the Participant, as described below. This optional 
feature will be called the Market Order Timer.
    This change is scheduled to be implemented on NOM on or about 
August 1, 2011; the Exchange will announce the implementation schedule 
by Options Trader Alert, once the rollout schedule is finalized.
    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 reflect in NOM's 
rules new functionality respecting market orders. The Market Order 
Timer is intended to provide an optional protection to all Participants 
who enter market orders. This protection should help Participants 
better manage both their risk and their order flow by controlling how 
long a market order remains in the market.
    Currently, Chapter VI, Section 1(e)(5) defines market orders as 
orders to buy or sell at the best price available at the time of 
execution. The Exchange proposes to add an additional sentence to this 
Section to reflect new functionality, which is that Participants can 
designate that their market orders not executed after a pre-established 
period of time will be cancelled back to the Participant. The pre-
established period of time, and any changes thereto, will be published 
in a NOM notification to Participants, with sufficient advanced notice. 
The pre-established period of time will be the same for all options. 
The Exchange believes that this functionality should be beneficial to 
Participants who choose to employ it, because it should serve as an 
additional feature for Participants to manage their market orders on 
NOM.
    Pursuant to Chapter VI, Sections 1 and 6 of NOM's rules, various 
time-in-force (``TIF'') designations are available on NOM, including 
Immediate or Cancel (``IOC''), Good-till-Cancelled (``GTC''), Day 
(``DAY''), WAIT or Expire Time (``EXPR'').\3\ Currently, market orders 
on NOM are treated as IOC, but the Exchange will soon accept, pursuant 
to its existing rules, market orders with a time-in-force of DAY and 
GTC \4\ at the same time that the Market Order Timer is implemented. 
Accordingly, the Market Order Timer should be particularly useful for 
NOM Participants

[[Page 37873]]

to manage market orders with TIFs other than IOC.
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    \3\ EXPR was eliminated in SR-NASDAQ-2011-052. See Securities 
Exchange Act Release No. 64311 (April 20, 2011), 76 FR 23349 (April 
26, 2011). This is scheduled to take effect in August 2011.
    \4\ See Chapter VI, Section 6(a)(1). Because Market Orders will 
no longer be limited to IOC, the System will employ the normal book 
order processing that applies to limit orders today for Market 
Orders. See Chapter VI, Section 6, Acceptance of Quotes and Orders, 
Section 7, Entry and Display Orders, Section 10, Book Processing and 
Section 11, Order Routing.
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    Some Participants would prefer to have market orders cancelled if 
they are not executed within a short timeframe, even if the order is 
marked with a TIF of DAY or GTC. Other participants prefer to leave the 
market order with an exchange even if it is not executed right away. 
The Exchange believes that both the Market Order Timer and the 
additional TIFs should be useful additional features for NOM 
Participants. A common use of DAY and GTC market orders is when a 
customer is trying to sell an option that no longer holds any value. 
The customer enters a market order to sell that the customer expects 
the exchange to retain on its book in the event that another 
participant is willing to buy the option at $0.01 or $0.05. In this 
case, the market order cannot be executed, because there is no interest 
on the other side; thus, the Market Order Timer can be helpful when 
there is no contra-side interest, and, conversely, it is not needed 
when a marketable order executes right away. Accordingly, customers 
should benefit from the additional TIFs for market orders as well as 
from being able to choose whether a Market Order Timer applies.
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 and a national market system, and, in general, to protect 
investors and the public interest. The Exchange believes that the 
proposal should help market participants better manage their market 
orders by providing a timer mechanism, which should, in turn, protect 
investors and the public interest and promote just and equitable 
principles of trade. The ability to, in effect, have market orders 
automatically cancel after a pre-established time period helps market 
participants manage the potential risks of using market orders.
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-085 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-2011-085. 
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 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-2011-085 and 
should be submitted on or before July 19, 2011.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16085 Filed 6-27-11; 8:45 am]
BILLING CODE 8011-01-P