Document ID: SEC-2013-2085-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-12-10T05:00Z

[Federal Register Volume 78, Number 237 (Tuesday, December 10, 2013)]
[Notices]
[Pages 74206-74208]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29385]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70985; File No. SR-NASDAQ-2013-145]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Acceptable Trade Range

December 4, 2013.
    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 November 21, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, below, which Items have been prepared by NASDAQ. 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 proposes to amend rule text related to Acceptable Trade 
Range.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, at the Commission's Public Reference Room, and 
on the Commission's Web site at http://www.sec.gov.

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 amend rule text in 
Chapter VI, Section 10 entitled ``Book

[[Page 74207]]

Processing'' to add additional rule text regarding Acceptable Trade 
Range. The Acceptable Trade Range is a mechanism to prevent the system 
\3\ [sic] from experiencing dramatic price swings by creating a level 
of protection that prevents the market from moving beyond set 
thresholds. The thresholds consist of a Reference Price plus (minus) 
set dollar amounts based on the nature of the option and the premium of 
the option.
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    \3\ The term ``System'' shall mean the automated system for 
order execution and trade reporting owned and operated by The Nasdaq 
Options Market LLC. See NOM Rules at Chapter VI, Section 1(a).
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    Currently, the rule provides that the system will calculate an 
Acceptable Trade Range to limit the range of prices at which an order 
will be allowed to execute. The Acceptable Trade Range is calculated by 
taking the reference price, plus or minus a value to be determined by 
the Exchange (i.e., the reference price-(x) for sell orders and the 
reference price + (x) for buy orders).\4\ Upon receipt of a new order, 
the reference price is the National Best Bid (NBB) for sell orders and 
the National Best Offer (NBO) for buy orders or the last price at which 
the order is posted whichever is higher for a buy order or lower for a 
sell order. If an order reaches the outer limit of the Acceptable Trade 
Range (the ``Threshold Price'') without being fully executed, it will 
be posted at the Threshold Price for a brief period, not to exceed one 
second (``Posting Period''), to allow more liquidity to be collected. 
Upon posting, either the current Threshold Price of the order or an 
updated NBB for buy orders or the NBO for sell orders (whichever is 
higher for a buy order/lower for a sell order) then becomes the 
reference price for calculating a new Acceptable Trade Range. If the 
order remains unexecuted, a New [sic] Acceptable Trade Range will be 
calculated and the order will execute, route, or post up to the new 
Acceptable Trade Range Threshold Price. Today, this process will repeat 
until the order is executed, cancelled, or posted at its limit price.
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    \4\ The Acceptable Trade Range settings are tied to the option 
premium.
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    The Exchange proposes to amend this rule to provide that this 
process will repeat until either (i) the order/quote is executed, 
cancelled, or posted at its limit price or (ii) the order has been 
subject to a configurable number of instances of the Acceptable Trade 
Range as determined by the Exchange.\5\ Once the maximum number of 
instances has been reached, the order is returned. The Exchange will 
establish a maximum number of Acceptable Trade Range iterations, until 
the order is cancelled. The Exchange will update the Trading System 
Settings page located on the NASDAQTrader.com Web site to display the 
maximum number of Acceptable Trade Range iterations and will provide 
updates to the table via an Options Trader Alert, generally the prior 
day, to its membership via Options Trader Alerts. The Exchange will 
provide sufficient advanced notice of changes. This is the same process 
which currently exists on NASDAQ OMX PHLX LLC (``Phlx'').\6\
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    \5\ NOM Participants may elect to have their orders cancelled by 
the System after the first iteration.
    \6\ See Phlx Rule 1080(p).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ 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, 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change is consistent with these requirements in 
that it will continue to reduce the negative impacts of sudden, 
unanticipated volatility in individual options, and serve to preserve 
an orderly market in a transparent and uniform manner, enhance the 
price-discovery process, increase overall market confidence, and 
promote fair and orderly markets and the protection of investors. This 
functionality should continue to result in greater continuity in prices 
as it is designed to prevent immediate or rapid executions at far away 
prices; thereby protecting investors and the public interest. The 
Exchange believes that the addition of [sic] configurable number of 
iterations when the Acceptable Trade Range would apply will provide NOM 
Participants with more certainty as to the application of the Rule. 
Overall the Acceptable Trade Range Rule should reduce the negative 
impacts of sudden, unanticipated volatility in and enhance the price-
discovery process.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange believes this proposed rule change would provide 
NOM Participants greater certainty when transacting orders on the 
Exchange and continue to reduce the negative impacts of sudden, 
unanticipated volatility in and enhance the price-discovery process.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ Because 
the 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 prior to 
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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of 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 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.

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:

[[Page 74208]]

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-2013-145 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-2013-145. 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 
10:00 a.m. and 3:00 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-2013-145 and should 
be submitted on or before December 31, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29385 Filed 12-9-13; 8:45 am]
BILLING CODE 8011-01-P