Document ID: SEC-2009-0358-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes:  NASDAQStock Market LLC
Posted Date: 2009-03-17T04:00Z

[Federal Register: March 17, 2009 (Volume 74, Number 50)]
[Notices]               
[Page 11389-11391]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr09-70]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59557; File No. SR-NASDAQ-2009-017]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the Processing of Orders on the NASDAQ Options Market

March 11, 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 March 6, 2009, The NASDAQ Stock Market LLC (``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 Nasdaq. Pursuant to Section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(5) thereunder,\4\ Nasdaq has designated this 
proposal as one effecting a change in an existing order-entry or 
trading system of a self-regulatory organization. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(5).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing a proposed rule change to offer the ``WAIT'' order 
modifier for use with orders entered into the NASDAQ Options Market 
(``NOM''). This modifier is designed to enhance compliance with the 
Order Exposure requirement set forth at Chapter VII, Section 12 of the 
NOM Rules.
    The text of the proposed rule change is available from Nasdaq's Web 
site at http://cchwallstreet.com/nasdaqomx/ at Nasdaq's principal 
office, and at the Commission's Public Reference Room.
    Proposed new language is italicized; proposed deletions are in 
brackets.\5\
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    \5\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://www.complinet.com/
nasdaq.
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* * * * *

Chapter VI, Trading Systems

Sec. 1. Definitions

    The following definitions apply to Chapter VI for the trading of 
options listed on NOM.
    (a)-(f) No Change.
    (g)
    (1)-(4) No Change.
    (5) ``WAIT'' shall mean for orders so designated, that upon entry 
into the System, the order is held for one second without processing 
for potential display and/or execution. After one second, the order is 
processed for potential display and/or execution in accordance with all 
order entry instructions as determined by the entering party.
    (h) No Change.
* * * * *

Sec. 6. Acceptance of Quotes and Orders

    All bids or offers made and accepted on NOM in accordance with the 
NOM Rules shall constitute binding contracts, subject to applicable 
requirements of the Rules of the Exchange and the Rules of the Clearing 
Corporation.
    (a) General--A System order is an order that is entered into the 
System for display and/or execution as appropriate. Such orders are 
executable against marketable contra-side orders in the System.
    (1) All System Orders shall indicate limit price and whether they 
are a call or put and buy or sell. Systems Orders can be designated as 
Immediate or Cancel (``IOC''), Good-till-Cancelled (``GTC''), Day 
(``DAY''), [or] WAIT or Expire Time (``EXPR'').
    (2) 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. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On February 19, 2009, the Securities Exchange Commission approved 
Nasdaq's proposal to reduce the Order Exposure requirement set forth at 
Chapter VII, Section 12 of the NOM Rules from three seconds to one 
second.\6\ Chapter VII, Section 12 prohibits Options Participants from 
executing as principal orders they

[[Page 11390]]

represent as agent unless (i) agency orders are first exposed on NOM 
for at least one (1) second or (ii) the Options Participant has been 
bidding or offering on NOM for at least one (1) second prior to 
receiving an agency order that is executable against such bid or offer. 
This rule ensures that Options Participant do not gain at the expense 
of customers by depriving them of the opportunity to interact with 
orders in the NOM System.
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    \6\ See Exchange Act Release No. 59421 (Feb. 19, 2009) 
(accelerated approval of SR-Nasdaq-2009-005).
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    NOM Participants that enter agency orders into the NOM System have 
asked Nasdaq to develop an automated mechanism that permits them to 
enter orders into NOM as soon as the orders are received but that also 
prevents them from interacting with their own agency orders in 
violation of the order exposure requirement. Nasdaq believes this is an 
efficient use of resources because it will allow Nasdaq to program its 
NOM Systems once rather than have multiple Options Participant re-
program their systems.
    In order to accomplish that request, Nasdaq has developed the 
``WAIT'' modifier which can be appended to an order prior to entry into 
NOM Systems. The WAIT modifier will instruct NOM Systems to wait 
precisely one second from the time of order entry before processing the 
order in accordance with the other instructions attached to that order. 
Upon expiration of the one-second WAIT period, the System will time 
stamp, route, display, or execute the order in accordance with the 
entering party's other order entry instructions. Thus, the WAIT 
modifier does not affect the existing display, routing, or execution 
priorities of the NOM Systems or any other obligations of NOM 
Participants as set forth in the NOM rules.
    Orders designated with the WAIT modifier are independent of all 
other orders, including an agency order that is being exposed pursuant 
to Chapter VII, Section 12. WAIT orders are not associated or in any 
way linked to another order entered into the System, as is the case 
with certain facilitation orders at other options exchanges. The System 
will process the WAIT order even if a customer order entered into the 
System simultaneously with the WAIT order has been executed or 
cancelled during the WAIT second, unless the WAIT order itself is 
modified or cancelled pursuant to System rules. As a result, there is 
no guarantee that an order designated as WAIT will execute against 
another specific order. Use of the WAIT modifier is completely 
voluntary.
    Nasdaq believes that the implementation of the aforementioned rule 
change modifying Nasdaq order entry options will enhance compliance 
with NOM rules and also preserve order execution opportunities on NOM.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with Section 
6(b)(5) of the Act,\8\ 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. The proposed rule change 
promotes these goals by enhancing market quality and protecting 
investors and market participants from executions that violate Chapter 
VII, Section 12 of NOM Rules.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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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. To the contrary, 
Nasdaq fully expects that other options exchanges will copy this 
proposed rule change shortly after its implementation.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and subparagraph (f)(5) of Rule 19b-4 
thereunder \10\ as one that effects a change that: (A) Does not 
significantly affect the protection of investors or the public 
interest; (B) does not impose any significant burden on competition; 
and (C) does not have the effect of limiting the access to or 
availability of the system.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(5).
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    Specifically, the proposed rule change will benefit the protection 
of investors and the public interest by enhancing market quality and 
protecting investors and market participants from execution that 
violate Chapter VII, Section 12 of NOM Rules. The proposed rule change 
does not place a burden on competition but rather enhances competition 
among the markets. The proposed rule change does not limit access to or 
availability of the system.
    Nasdaq believes that this proposal with respect to the WAIT 
modifier is properly designated as a change to an existing order entry 
system because the proposal modifies the timing of processing but not 
the manner in which orders are displayed, prioritized, executed, routed 
or otherwise processed within the System. Nasdaq has designated similar 
proposals in this fashion in the past, including a proposal to delay 
the operation of the Opening Cross on NOM.\11\
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    \11\ Exchange Act Release No. 57822 (May 15, 2008) (SR-NASDAQ-
2008-045); 73 FR 29800 (May 22, 2008).
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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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2009-017 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2009-017. 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

[[Page 11391]]

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 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 Nasdaq. 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-2009-017 and 
should be submitted on or before April 7, 2009.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5722 Filed 3-16-09; 8:45 am]

BILLING CODE 8011-01-P