[Federal Register Volume 74, Number 109 (Tuesday, June 9, 2009)]
[Notices]
[Pages 27365-27367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13424]


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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 [email protected]. 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]
BILLING CODE 8010-01-P