[Federal Register Volume 77, Number 149 (Thursday, August 2, 2012)]
[Notices]
[Pages 46135-46137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18893]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67518; File No. SR-NASDAQ-2012-089]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the Post-Only Order Type on NOM

July 27, 2012.
    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 July 20, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 46136]]

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

    NASDAQ proposes to add an additional feature to the Post-Only Order 
type on the NASDAQ Options Market (``NOM''), as described further 
below.
    The text of the proposed rule change is available at 
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 self-regulatory organization 
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 III 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, the Proposed Rule Change

1. Purpose
    The Exchange recently adopted a new order type called Post-Only 
Order.\3\ Thereafter, the Exchange amended the order type and delayed 
implementation until February 2012,\4\ and again until March 2012.\5\ 
It became available on March 5, 2012.
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    \3\ See Securities Exchange Act Release No. 65761 (November 16, 
2011), 76 FR 72230 (November 22, 2011) (SR-NASDAQ-2011-152).
    \4\ See Securities Exchange Act Release No. 65929 (December 9, 
2011), 76 FR 78057 (December 15, 2011) (SR-NASDAQ-2011-171).
    \5\ See Securities Exchange Act Release No. 66347 (February 7, 
2012), 77 FR 7639 (February 13, 2012) (SR-NASDAQ-2012-023).
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    A Post-Only Order 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. 
Currently, 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 (``NBBO'') as reflected in the protected 
quotation of another market center, the order will be handled pursuant 
to Chapter VI, Section 7(b)(3)(C).\6\ Post-Only Orders received prior 
to the opening cross or after market close will be rejected. Post-Only 
Orders may not have a time-in-force designation of Good Til Cancelled 
or Immediate or Cancel.
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    \6\ An order will not be executed at a price that trades through 
another market or displayed at a price that would lock or cross 
another market. An order that is designated by the member as 
routable will be routed in compliance with applicable Trade-Through 
and Locked and Crossed Markets restrictions. An order that is 
designated by a member as non-routable will be re-priced in order to 
comply with applicable Trade-Through and Locked and Crossed Markets 
restrictions.
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    At this time, the Exchange proposes to permit firms to have their 
Post-Only Orders returned whenever the order would lock or cross the 
NBBO. Similarly, if the Post-Only Order would be placed on the book at 
a price other than its limit price, if the Participant so chooses, it 
will be returned. This includes situations where the Post-Only Order 
would lock or cross another order on the System, but also covers any 
situation where order is placed on the book at a price other than its 
limit price. The Exchange believes that this implementation will 
satisfy the needs of its Participants, because it will give them 
greater control over the circumstances in which their orders are 
executed. The Exchange will announce the implementation date to its 
membership by Options Trader Alert.
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. NASDAQ believes that permitting 
Participants to have Post-Only Orders returned is consistent with just 
and equitable principles of trade and protects investors and the public 
interest, because Participants, who have requested this feature, may 
prefer to submit the order to another options exchange, for fee or 
other reasons, rather than leave the order on NOM. Additionally, a 
Participant may expect the order to post at its limit price based on 
its view of the current state of the market. Due to its dynamic nature, 
however, the state of the market may change by the time the order is 
received by NOM, resulting in the order being posted at a price other 
than its limit price. In this case, the Participant would rather have 
the order returned so that it can reevaluate the market and make a new 
routing decision. In order to accommodate this request, NASDAQ is 
proposing the new feature for returning Post-Only Orders. The purpose 
of the Post-Only Order is to avoid removing liquidity and the resulting 
execution costs; with the proposed ability to have the order returned, 
Participants should have greater control over the execution and display 
of such order.
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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 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change along with a 
brief description and the 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become

[[Page 46137]]

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 has asked the Commission to waive the 30-day 
operative delay, noting that doing so would immediately provide 
Participants with the option of having their Post-Only Orders returned 
under certain circumstances, as set forth in this proposal. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\13\ Therefore, the Commission designates the proposal 
operative upon filing.
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    \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. 
78c(f).
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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.

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-2012-089 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-2012-089. 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 the 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-2012-089 and should 
be submitted on or before August 23, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18893 Filed 8-1-12; 8:45 am]
BILLING CODE 8011-01-P