[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Pages 78057-78059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32143]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65929; File No. SR-NASDAQ-2011-171]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Post-Only Order

December 9, 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 December 6, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'')

[[Page 78058]]

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 the Exchange. 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 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 
amend Chapter VI, Trading Systems, Section 1, Definitions, to change 
the definition of ``Post-Only Order,'' as described further below, and 
delay its implementation until February 2012.
    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 those 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 parts of such 
statements.

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

1. Purpose
    The Exchange recently adopted a new order type called Post-Only 
Order,\3\ which is an order that will not remove liquidity from the 
System and is to be ranked and executed on the Exchange or cancelled, 
as appropriate, without routing away to another market.\4\ Post-Only 
Orders may not have a time-in-force designation of Good Til Cancelled 
(``GTC'').\5\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 65761 (November 16, 
2011), 76 FR 72230 (November 22, 2011)(SR-NASDAQ-2011-152).
    \4\ Post-Only Orders are evaluated at the time of entry with 
respect to locking or crossing other orders as follows: (i) If a 
Post-Only Order would lock or cross an order on the System, the 
order will be re-priced to $.01 below the current low offer (for 
bids) or above the current best bid (for offers) and displayed by 
the System at one minimum price increment below the current low 
offer (for bids) or above the current best bid (for offers); and 
(ii) if a Post-Only Order would not lock or cross an order on the 
System but would lock or cross the national best bid or offer as 
reflected in the protected quotation of another market center, the 
order will be handled pursuant to Chapter VI, Section 7(b)(3)(C).
    \5\ See NOM Rules, Chapter VI, Section 1(g).
---------------------------------------------------------------------------

    At this time, the Exchange proposes to amend the definition in 
Chapter VI, Section 1(e)(11), to provide that, like the time-in-force 
designation of GTC, a Post-Only Order cannot have a time-in-force 
designation of Immediate or Cancel (or IOC). Immediate or Cancel, which 
is described in Chapter VI, Section 1(g)(2), means for orders so 
designated, that if after entry into the System a marketable order (or 
unexecuted portion thereof) becomes non-marketable, the order (or 
unexecuted portion thereof) shall be canceled and returned to the 
entering participant. Accordingly, IOC orders are available to trade 
immediately and, if not executed, are then cancelled back to the 
Participant.
    The Exchange believes that the IOC time-in-force designation is not 
appropriate for Post-Only Orders, because IOC orders cannot post on the 
book and Post-Only Orders cannot remove liquidity, such that there 
would be no logical outcome for an IOC Post-Only Order. Accordingly, 
the Exchange is proposing to expressly state in its rules that such 
orders do not exist.
    In addition, the Exchange proposes to delay the implementation of 
Post-Only Orders to take aforementioned change into account and delay 
implementation until February 2012. The Exchange will announce the 
specific date that these orders will become available to its membership 
via an Options Trader Alert.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ 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 it better explains an 
additional order type on NOM, making clear that the IOC time-in-force 
is not available and the order type is not available until February 
2012, which the Exchange believes is consistent with just and equitable 
principles of trade. Because the Post-Only Order is designed to 
encourage displayed liquidity and offer NOM market participants greater 
flexibility to post liquidity on NOM, limiting the time-in-force is 
consistent with removing impediments to and perfecting the mechanisms 
of a free and open market and a national market system.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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 \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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 \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) 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 in order to 
implement this proposal prior to December 8, 2011, because, without 
such a waiver, the Exchange's recent filing adopting the new Post-Only 
order type would become operative on December 8,

[[Page 78059]]

2011.\11\ The Exchange, however, will not be ready to implement the new 
order type until February 2012. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest, because it will allow the Exchange 
to immediately delay the implementation of Post-Only orders, preventing 
a gap between when the new order type is operative under the rules and 
when the new order type will be implemented and available for use in 
February 2012. For these reasons, the Commission designates that the 
proposed rule change become operative immediately upon filing.\12\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ See supra note 3.
    \12\ 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. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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.

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 email to [email protected]. Please include 
File Number SR-NASDAQ-2011-171 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.

All submissions should refer to File Number SR-NASDAQ-2011-171. 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 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-2011-171 and should 
be submitted on or before January 5, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32143 Filed 12-14-11; 8:45 am]
BILLING CODE 8011-01-P