Document ID: SEC-2009-0771-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change, as Modified by Amendment No. 1, Thereto To Establish a New Voluntary Flash and Cancel Order
Posted Date: 2009-06-09T04:00Z

[Federal Register: June 9, 2009 (Volume 74, Number 109)]
[Notices]
[Page 27367-27369]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jn09-151]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60037; File No. SR-NASDAQ-2009-048]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change,
as Modified by Amendment No. 1, Thereto To Establish a New Voluntary
Flash and Cancel Order

June 3, 2009.
    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 May 20, 2009, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``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. On May 29, 2009,
Nasdaq filed Amendment No. 1 to the proposed rule change. Nasdaq has
designated the proposed rule change, as amended, as constituting a rule
change under Rule 19b-4(f)(6) under the Act,\3\ which renders the
proposal, as amended, effective upon filing with the Commission. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, 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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[[Page 27368]]

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Nasdaq proposes a rule change to establish a new voluntary Flash
and Cancel Order. The text of the proposed rule change is below.
Proposed new language is italicized; proposed deletions are in
brackets.
4751. Definitions
    The following definitions apply to the Rule 4600 and 4750 Series
for the trading of securities listed on Nasdaq or a national securities
exchange other than Nasdaq.
    (a) through (e) No Change.
    (f) The term ``Order Type'' shall mean the unique processing
prescribed for designated orders that are eligible for entry into the
System, and shall include:
    (1)-(10) No Change.
    (11) ``Flash and Cancel Orders'' are market or marketable limit
orders which are to be executed in whole or in part immediately upon
receipt by the System with any unfilled balance being displayed to
Nasdaq market participants (and market data vendors) for potential
execution for a period of time not to exceed one-half of one second. If
any unfilled balance remains after such display, such marketable
unfilled balance shall be cancelled back to the entering party, and
such nonmarketable unfilled balance shall be retained by the System for
potential execution. The System will provide an electronic method to
distinguish the Flash Order during the flash period from the System's
protected quote under Regulation NMS.
    (g) through (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
    Nasdaq is proposing to establish a new voluntary Flash and Cancel
Order type. A Flash and Cancel Order will provide an optional pre-
cancellation display period for market and marketable limit orders so
designated. Under the proposal, market and marketable limit orders
designated as Flash and Cancel Orders will, after first executing to
the maximum extent possible in Nasdaq's book, have their unexecuted
portions displayed for potential execution at the NBBO such that a
trade-through will not occur, to Nasdaq market participants and market
data vendors for a period of time determined by Nasdaq which will not
exceed one-half of one second. If any unfilled balance remains after
such display, such marketable unfilled balance shall be cancelled back
to the entering party, and such non-marketable unfilled balance shall
be placed on the book for potential execution. As with other Nasdaq
order types, the attributes of the Flash and Cancel Order may be
combined with all Nasdaq non-routable order types. Nasdaq will provide
an electronic method to distinguish the Flash Order during the flash
period from the System's protected quote under Regulation NMS.
    Nasdaq notes that flash and cancel order functionality has already
been approved by the Commission for use by the CBOE Stock Exchange and
that such functionality can be expected to provide Nasdaq system users
with greater control over their trading. Except for the behavior of the
Flash and Cancel Order described here, nothing in the proposal will
modify or alter any existing rule or process related to order priority,
order execution, trade-through protection or locked or crossed markets.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\4\ in general, and with
Sections 6(b)(5) of the Act,\5\ 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. Nasdaq notes
that similar functionality has already been found to be consistent with
the Act by the Commission.\6\
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Securities Exchange Act Release No. 54422 (September 11,
2006), 71 FR 54537 (September 15, 2006) (SR-CBOE-2004-21);
Securities Exchange Act Release No. 59359 (February 4, 2009), 74 FR
6927 (February 11, 2009) (SR-CBOE-2008-123).
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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.

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) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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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.
Nasdaq has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \9\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \10\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. Nasdaq requests that
the Commission waive the 30-day operative delay because the Exchange
expects to have technologies in place to support the proposed rule
change, as amended, on or about June 5, 2009, and believes that the
expected benefits to Nasdaq market participants from the proposed rule
change, as amended, should not be delayed. The Commission believes that
waiving the 30-day operative delay \11\ is consistent with the
protection of

[[Page 27369]]

investors and the public interest and designates the proposal operative
on June 5, 2009.
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    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ For purposes only of waiving the 30-day operative delay,
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 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.\12\
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    \12\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers the period
to commence on May 29, 2009, the date on which the Nasdaq submitted
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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-2009-048 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-2009-048. 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, 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 publicly available. All
submissions should refer to File Number SR-NASDAQ-2009-048 and should
be submitted on or before June 30, 2009.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-13423 Filed 6-8-09; 8:45 am]

BILLING CODE 8010-01-P