Document ID: SEC-2009-0767-0001
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 Reduce the Length of the Optional Pre-Routing Display Period for Its DOT, SCAN and STGY Routing Strategies
Posted Date: 2009-06-09T04:00Z

[Federal Register: June 9, 2009 (Volume 74, Number 109)]
[Notices]
[Page 27365-27367]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jn09-150]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60039; File No. SR-NASDAQ-2009-050]

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 Reduce the Length of the
Optional Pre-Routing Display Period for Its DOT, SCAN and STGY Routing
Strategies

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 21, 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 June 2, 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 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Nasdaq proposes a rule change to reduce the length of the optional
pre-routing display period for its DOT, SCAN and STGY routing
strategies.
    The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.

[[Page 27366]]

4758. Order Routing
(a) Order Routing Process
    (1) The Order Routing Process shall be available to Participants
from 7 a.m. until 8 p.m. Eastern Time, and shall route orders as
described below: All routing of orders shall comply with Rule 611 of
Regulation NMS under the Exchange Act.
    (A) The System provides three routing options. Of these three, DOT
is only available for orders ultimately sought to be directed to either
the New York Stock Exchange (``NYSE'') or NYSE Amex. The System will
consider the quotations only of accessible markets or NYSE Amex. The
System will consider the quotations only of accessible markets[.] and
will provide an electronic method to distinguish orders displayed
during a pre-routing display period from the System's protected quote
under Regulation NMS. The three System routing options are:
    (i) DOT (``DOT'')--under this option, after checking the System for
available shares if so instructed by the entering firm, orders are sent
to other available market centers for potential execution, per entering
firm's instructions, before being sent to the destination exchange, so
long as the price at such market centers would not violate the Order
Protection Rule. If instructed by the entering firm, prior to sending
orders to other available markets, such orders shall be displayed to
Nasdaq market participants (and market data vendors) for potential
execution, at the NBBO price, for a period of time not to exceed [3
seconds] one-half of one second as determined by Nasdaq. Any un-
executed portion will thereafter be sent to the NYSE or NYSE Amex, as
appropriate, at the order's original limit order price. This option may
only be used for orders with time-in-force parameters of either SDAY,
SIOC, MDAY, MIOC, GTMC or market-on-open/close. Notwithstanding the
foregoing, orders designated for participation in the NYSE or NYSE Amex
opening or closing processes will not check the System for available
shares prior to routing.
    (ii) Reactive Electronic Only (``STGY'')--under this option, after
checking the System for available shares if so instructed by the
entering firm, orders are sent to other available market centers for
potential execution, per entering firm's instructions. When checking
the book, the System will seek to execute at the price it would send
the order to a destination market center. If instructed by the entering
firm, prior to sending orders to other available markets, such orders
shall be displayed to Nasdaq market participants (and market data
vendors) for potential execution, at the NBBO price, for a period of
time not to exceed [3 seconds] one-half of one second as determined by
Nasdaq. If shares remain un-executed after routing, they are posted on
the book. Once on the book, should the order subsequently be locked or
crossed by another accessible market center, the System shall route the
order to the locking or crossing market center. With the exception of
the Minimum Quantity order type, all time-in-force parameters and order
types may be used in conjunction with this routing option.
    (iii) Electronic Only Scan (``SCAN'')--under this option, after
checking the System for available shares if so instructed by the
entering firm, orders are sent to other available market centers for
potential execution, per entering firm's instructions, in compliance
with Rule 611 under Regulation NMS. When checking the book, the System
will seek to execute at the price it would send the order to a
destination market center. If instructed by the entering firm, prior to
sending orders to other available markets, such orders shall be
displayed to Nasdaq market participants (and market data vendors) for
potential execution, at the NBBO price, for a period of time not to
exceed [3 seconds] one-half of one second as determined by Nasdaq. If
shares remain un-executed after routing, they are posted on the book.
Once on the book, should the order subsequently be locked or crossed by
another market center, the System will not route the order to the
locking or crossing market center. With the exception of the Minimum
Quantity order type, all time-in-force parameters and order types may
be used in conjunction with this routing option. Orders that do not
check the System for available shares prior to routing may not be sent
to a facility of an exchange that is an affiliate of Nasdaq, except for
orders that are sent to the NASDAQ OMX BX Equities Market.
    (B) No Change.
    (b) 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 reduce the maximum length of the optional
pre-routing period for its DOT, SCAN and STGY routing strategies.
Currently, the maximum time period for the optional pre-route period is
3 seconds, and Nasdaq is now proposing to reduce this maximum pre-route
time period to one-half of one second. Orders entered using any form of
the DOT, SCAN or STGY routing strategies will, after first executing to
the maximum extent possible in Nasdaq's book, have their remaining
share amounts and prices displayed to Nasdaq market participants and
market data vendors for a period of time determined by Nasdaq which
will not, under the proposal, exceed one-half of one second. This
display to Nasdaq market participants and market data vendors takes
place before routing any order or order remainder to any other
available market and parties not wishing to have their orders displayed
prior to routing may direct the system to avoid the pre-routing display
period. Nasdaq will provide an electronic method to distinguish orders
displayed during the pre-routing display period from the System's
protected quote under Regulation NMS.
    Except for the changes to the DOT, SCAN and STGY routing
functionality itself described here, nothing in this 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

[[Page 27367]]

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.
The Commission has determined to waive the five-day pre-filing
period in this case.
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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 8, 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 investors and the public interest and designates the
proposal operative on June 8, 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 June 2, 2009, the date on which 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-2009-050 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-2009-050. 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-2009-050 and should
be submitted on or before June 30, 2009.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-13424 Filed 6-8-09; 8:45 am]

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