[Federal Register Volume 76, Number 236 (Thursday, December 8, 2011)]
[Notices]
[Pages 76786-76788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31481]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65873; File No. SR-NASDAQ-2011-164]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Correct NOM Rules

 December 2, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on November 29, 2011, The NASDAQ Stock Market LLC (the 
``Exchange'' or ``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 the 
Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is filing with the Securities and Exchange Commission 
(``Commission'') a proposal for the NASDAQ Options Market (``NOM'') to 
eliminate from its rules two order types and two data feeds that are 
not in place. Specifically, NASDAQ proposes to delete Chapter VI, 
Sections 1(e)(1) and (4), 7(b)(3)(A), and 10(1)(B) and (C) to delete 
Reserve Orders and Discretionary Orders from its rules. Secondly, 
NASDAQ proposes to amend Chapter VI, Trading Systems, Section 1(a)(3), 
in order to eliminate from its rules NASDAQ Options Depth at Price and 
NASDAQ Options Net Order Imbalance, two data feeds.\3\
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    \3\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2011-002.
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    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, the Exchange 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. The Exchange 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
    The purpose of the proposed rule change is to make corrections to 
NOM rules that are needed as a result of transitioning to a new system. 
NOM recently completed the rollout of enhancements to its trading 
system; the deletions proposed herein have already been implemented.
    First, NASDAQ proposes to eliminate two order types from its rules. 
Specifically, NASDAQ proposes to amend Chapter VI, Section 1(e)(1) and 
(4), to delete Reserve Orders and Discretionary Orders from its rules. 
These order types are also proposed to be deleted from Chapter VI, 
Section 6(a)(2), Section 7(b)(3)(A), and Section 10(1)(B) and (C).\4\ 
Reserve Orders are limit orders that have both a displayed

[[Page 76787]]

size as well as an additional non-displayed amount. Both the displayed 
and non-displayed portions of a Reserve Order are available for 
potential execution against incoming orders. If the displayed portion 
of a Reserve Order is fully executed, the System will replenish the 
display portion from reserve up to the size of the original display 
amount. A new timestamp is created for the replenished portion of the 
order each time it is replenished from reserve, while the reserve 
portion retains the time-stamp of its original entry. Although Reserve 
Orders were available on NOM, they were rarely used; accordingly, when 
rolling out new trading enhancements, NASDAQ determined not to make the 
technical changes necessary to accommodate them; Reserve Orders have 
not been available on NOM since September 28, 2011.
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    \4\ Because the deletion of subparagraphs (B) and (C) would 
leave the last sentence in paragraph (1) with a list consisting of 
one item (that is, subparagraph (A)), NASDAQ proposes to finish that 
sentence by stating that within each price level, trading interest 
will be executed in time priority; this is not a change to the 
system but rather a clarification of that sentence. The words 
``orders that are displayed within the System'' in paragraph (A) are 
no longer needed because all orders are displayed now that NASDAQ 
will no longer have Reserve and Discretionary Orders.
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    Discretionary Orders are orders that have a displayed price and 
size, as well as a non-displayed discretionary price range, at which 
the entering party, if necessary, is also willing to buy or sell. The 
non-displayed trading interest is not entered into the System book but 
is, along with the displayed size, converted to an IOC buy (sell) order 
priced at the highest (lowest) price in the discretionary price range 
when displayed contracts become available on the opposite side of the 
market or an execution takes place at any price within the 
discretionary price range. The generation of this IOC order is 
triggered by the automatic cancellation of the displayed contracts 
portion of the Discretionary Order. If more than one Discretionary 
Order is available for conversion to an IOC order, the system will 
convert and process all such orders in the same priority in which such 
Discretionary Orders were entered. If an IOC order is not executed in 
full, the unexecuted portion of the order is automatically re-posted 
and displayed in the System book with a new time stamp, at its original 
displayed price, and with its non-displayed discretionary price range. 
Although the Exchange received approval for the Discretionary Order 
type when NOM was launched, it was not made available due to lack of 
participant interest. For this reason, NASDAQ has determined not to 
offer it going forward and, accordingly, did not make the necessary 
technical changes to accommodate this order type when implementing its 
trading enhancements.
    Second, NASDAQ proposes to delete two NOM data feeds from its 
rules, NASDAQ Options Depth at Price (``DAP'') and NASDAQ Options Net 
Order Imbalance (``NOIView''). DAP provides aggregate quotation 
information for each price level of trading interest on the NOM book, 
last sale data for trades executed on NOM, and order imbalance 
information. It is described in Chapter VI, Section 1(a)(3)(C) of NOM 
Rules and is available without charge.\5\ In adopting this rule, the 
Exchange stated that:
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    \5\ See Securities Exchange Act Release No. 63983 (February 25, 
2011), 76 FR 12178 (SR-NASDAQ-2011-032).

* * * NASDAQ is making a voluntary decision to make this data 
available. NASDAQ is not required by the Exchange Act in the first 
instance to make the data available, unlike the best bid and offer 
which must be made available under the Act. NASDAQ chooses to make 
the data available as proposed in order to improve market quality, 
to attract order flow, and to increase transparency. Once this 
filing becomes effective, NASDAQ will be required to continue making 
the data available until such time as NASDAQ changes its rule.\6\
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    \6\ See id. at 12179.

    The Exchange retired DAP because few participants subscribed to it 
and its content is available on another data feed, ITTO; a fee is 
charged for ITTO.
    Similarly, NASDAQ also retired NOIView. NOIView provides order 
imbalance information, which is also available on ITTO. NOIView is 
described in Chapter VI, Section 1(a)(3)(D).
    At this time, NASDAQ is filing this proposed rule change to reflect 
its decision to retire these data feeds and to eliminate them from its 
rules. Although NASDAQ notified subscribers, NASDAQ retired the feeds 
prior to the submission of this filing, as part of a rollout of new 
trading system enhancements. Once an option was switched over to the 
new system, DAP and NOIView were no longer available for that option.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest, because the data is available on 
other data feeds, albeit for a fee, and the Reserve Order and the 
Discretionary Order types were not used or rarely used, such that the 
Exchange does not believe that this elimination will negatively impact 
market quality. The Exchange is not required to make these features 
available and made a decision to eliminate them, which the Exchange 
believes is consistent with promoting just and equitable principles of 
trade as well as protecting investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) \10\ 
thereunder.
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    \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.
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    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 should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 76788]]

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 email to [email protected]. Please include 
File Number SR-NASDAQ-2011-164 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-2011-164. This 
file number should be included on the subject line if email 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, 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 available publicly. All 
submissions should refer to File Number SR-NASDAQ-2011-164 and should 
be submitted on or before December 29, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31481 Filed 12-7-11; 8:45 am]
BILLING CODE 8011-01-P