[Federal Register Volume 74, Number 169 (Wednesday, September 2, 2009)]
[Notices]
[Pages 45504-45506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21162]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60570; File No. SR-NASDAQ-2009-079]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Eliminate Flash Orders

August 26, 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 August 21, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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. Nasdaq has designated the proposed rule change as 
effecting a change described under Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
Nasdaq will implement the proposed rule change on September 1, 2009. 
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\ 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 eliminate Flash Orders.\4\ The 
text of the proposed rule change is below. Proposed new language is 
italicized; proposed deletions are in brackets.
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    \4\ Nasdaq filed separate proposals to create flash orders that 
ultimately could be routed to other markets, and flash orders that 
would cancel back to the entering party. See SR-NASDAQ-2009-043 and 
SR-NASDAQ-2009-048. This filing eliminates both versions of these 
orders, with both types referred to herein collectively as Flash 
Orders.
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4750. Nasdaq Market Center-Execution Services
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) Reserved [``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.]
    (12)-(13) No Change.
    (g) through (i) No Change.
* * * * *
4758. Order Routing
(a) Order Routing Process
    (1) The Order Routing Process shall be available to Participants 
from 7:00 a.m. until 8:00 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 and will provide an 
electronic method to distinguish orders displayed during a prerouting 
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 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 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 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

[[Page 45505]]

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 implemented Flash Orders on June 5, 2009. Upon further 
review, Nasdaq proposes to eliminate Flash Orders effective September 
1, 2009.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(5) of the Act,\6\ 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.
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    \5\ 15 U.S.C. 78f.
    \6\ 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.

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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, 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).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\9\ 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. Nasdaq has requested that the 
Commission waive the 30-day operative delay. Nasdaq requests this 
waiver so as to allow it to eliminate Flash Orders on September 1, 
2009.\11\ Based on the foregoing, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest and hereby designates the proposal 
operative on September 1, 2009.\12\
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    \9\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its 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. Nasdaq has satisfied this requirement.
    \10\ Id.
    \11\ See SR-NASDAQ-2009-079, Item 7.
    \12\ For the 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 such 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 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 No. SR-NASDAQ-2009-079 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 No. SR-NASDAQ-2009-079. 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 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 No. SR-NASDAQ-2009-079 and should be 
submitted on or before September 23, 2009.


[[Page 45506]]


    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. E9-21162 Filed 9-1-09; 8:45 am]
BILLING CODE 8010-01-P