[Federal Register Volume 76, Number 164 (Wednesday, August 24, 2011)]
[Pages 53007-53009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21610]



[Release No. 34-65159; File No. SR-NASDAQ-2011-118]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Change the Name and Modify the Contents of the NASDAQ Ouch BBO Feed

August 18, 2011.
    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 12, 2011, 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. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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

    The Exchange is filing this proposed rule change to change the name 
of the NASDAQ Ouch BBO Feed to the NASDAQ MatchView Feed (the ``Feed'') 
and to modify the contents of the Feed in two ways. The Feed provides a 
view of how the Exchange views the Best Bid and Offer (``BBO'') 
available from all market centers for each individual security the 
Exchange trades.
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

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
    This proposal regards the NASDAQ MatchView Feed (formerly known as 
the NASDAQ Ouch BBO Feed), a data feed that represents the Exchange's 
view of best bid and offer data received from all market centers. The 
Feed is available to all Exchange members and market participants 
equally at no charge, offering all participants transparent, real-time 
data concerning the Exchange's view of the BBO data. The Exchange makes 
the Feed available on a subscription basis to market participants that 
are connected to the Exchange whether through extranets, direct 
connection, or Internet-based virtual private networks.
    Currently, the Feed reflects the Exchange's view of the BBO data, 
at any given time, based on orders executed on the Exchange and updated 
quote information from the network processors.\3\ The Feed contains the 
following data elements: symbol, bid price, and ask price.\4\ Unlike 
the Nasdaq TotalView feed, the MatchView feed does not contain 
information about individual orders, either those residing within the 
Exchange system or those executed or routed by the Exchange. Unlike the 
network processor feeds containing the National Best Bid and Offer 
(``NBBO''), the MatchView Feed does not identify either the market 
center quoting the BBO or the size of the

[[Page 53008]]

BBO quotes. It merely contains the symbol and bid and offer prices.

    \3\ The Feed does not reflect all information available to the 
Exchange. Specifically, the Feed excludes information about the 
routing of orders to away exchanges. Thus, although the Exchange 
execution system and routing engine know when a bid or offer from an 
away market is no longer available because the Exchange has routed 
an order to the bid or offer, the Feed does not reflect such routing 
    \4\ The Feed also contains a time stamp and message type field 
for reference.

    The Exchange is modifying the inputs used for calculating the 
prices reflected on the Feed. Currently, the Feed reflects bids and 
offers contained on data feeds from the network processors, as well as 
certain NASDAQ orders referenced below. In the future, the Feed will 
continue to reflect these orders entered on the Exchange but rather 
than reflect only individual exchange bids and offers received from the 
network processors, the Feed will reflect individual exchange bids and 
offers received either from the network processor or directly from an 
exchange that disseminates bids and offers to vendors via a proprietary 
data feed. The Exchange will reflect bids and offers from another 
exchange's proprietary data feed only when the Exchange deems the 
proprietary data feed to be sufficiently reliable and also faster than 
the network processor.\5\

    \5\ The Exchange is also changing its policies and procedures 
under Regulation NMS governing the data feeds used by its execution 
system and routing engine. Current policies state that those systems 
use data provided by the network processors. In the future, those 
systems will use data provided either by the network processors or 
by proprietary feeds offered by certain exchanges directly to 
vendors. The determination of which data feed to utilize will be the 
same as the determination made with respect to the Feed. In other 
words, the Exchange execution system, routing engine and Feed will 
each utilize the same data for a given exchange although, as set 
forth in footnote 3 above, the Feed does not contain all information 
available to the execution system and routing engine.

    This determination--whether to utilize bids and offers from the 
network processor feed or from a direct proprietary data feed--will be 
made by the Exchange on a market-by-market basis based upon objective 
criteria about reliability and speed. The determination, once made, 
will apply to all bids and offers from an exchange; it will not be made 
on a stock-by-stock basis. Additionally, the determination, once made, 
will be valid until such time as the away exchange stops disseminating 
the proprietary data feed in a manner that meets NASDAQ's objective 
criteria (for example, when that exchange experiences operational 
difficulties that reduce the reliability and speed of its proprietary 
data feed). For exchanges that do not disseminate proprietary data 
feeds or whose proprietary data feeds lack sufficient reliability and 
speed, the Feed will continue to reflect bids and offers disseminated 
via the network processor feeds.
    Additionally, in a previous filing, the Exchange noted that the 
Feed depicts the Exchange's view of the BBO for all markets other than 
the Exchange.\6\ In one narrow set of circumstances, the Feed will show 
the BBO for all markets including the Exchange. Specifically, an order 
received by the Exchange that improves the BBO will be reflected in the 
Feed when three circumstances are met: (1) The Exchange receives an 
order marked by the entering member as any visible bookable order that 
is not an IOC and is an ``Inter-market Sweep'' (an order known as a 
``Day ISO''); (2) the Day ISO order is priced higher than the current 
Best Bid or lower than the current Best Offer disseminated by the 
network processor or applicable exchange proprietary data feed; and (3) 
the Day ISO represents the new best bid or offer on the Exchange. In 
those circumstances, the new best bid or offer on the Exchange will be 
transmitted to the network processor and then reflected on the Feed 
(and the Exchange's other proprietary data feeds, such as NASDAQ 
TotalView). As stated above, the Feed does not show the market center 
responsible (whether the Exchange or an away market) for either the 
Best Bid or Best Offer reflected on the Feed.

    \6\ See Securities Exchange Act Release No. 61451 (Feb. 1, 
2010); 75 FR 6246 (Feb. 8, 2010) (filing SR-NASDAQ-2010-012).

    These modifications to the Feed will enhance market transparency 
and foster competition among orders and markets. Member firms may use 
the Feed to more accurately price their orders based on the Exchange's 
view of what the BBO is at any point in time, including bids and offers 
received via proprietary data feeds which may not be reflected in the 
official NBBO due to latencies inherent in the NBBO's dissemination. As 
a consequence, member firms may more accurately price their orders on 
the Exchange, thereby avoiding price adjustments by the Exchange based 
on a quote that is no longer available. Additionally, members can use 
the Feed to price orders more aggressively to narrow the NBBO and 
provide better reference prices for investors.
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 Sections 
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 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 Exchange believes that 
this proposal is in keeping with those principles by enhancing 
transparency through the dissemination of the most accurate quotations 
data and by clarifying its contents.

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).

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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 Exchange has satisfied this requirement.

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \12\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that the Commission waive the 30-day operative delay because it would 
permit the Exchange to immediately provide the new content of the 
NASDAQ MatchView Feed to market participants. The Commission believes 
that waiving

[[Page 53009]]

the 30-day operative delay \13\ is consistent with the protection of 
investors and the public interest and designates the proposal operative 
upon filing.

    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 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. 

    At any time within 60 days of the filing of the 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 

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-2011-118 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-2011-118. 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 Web site 
viewing and printing 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-2011-118 and should be submitted on or before 
September 14, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\

    \14\ 17 CFR 200.30-3(a)(12).

Elizabeth M. Murphy,
[FR Doc. 2011-21610 Filed 8-23-11; 8:45 am]