[Federal Register Volume 78, Number 11 (Wednesday, January 16, 2013)]
[Notices]
[Pages 3480-3482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00791]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68617; File No. SR-NASDAQ-2013-005]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish the Latency Optics Add-on Service to QView

January 10, 2013.
    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 January 4, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange''), 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

    The Exchange proposes to establish the Latency Optics add-on 
service to QView offered at no cost to subscribing members beginning 
February 4, 2013, and for a monthly fee beginning April 1, 2013.
    The text of the proposed rule change is below. Proposed new 
language is italicized.

7058. QView

    (a) QView is a web-based tool designed to give a subscribing 
member the ability to track its order flow on Nasdaq, and create 
both real-time and historical reports of such order flow. Members 
may subscribe to QView for a fee of $600 per month, per member firm.
    (b) A QView subscriber may subscribe to the Latency Optics add-
on service. Latency Optics is a web-based tool accessed through 
QView that provides a subscribing member the ability to monitor the 
latency of its order messages through its OUCH ports on the Nasdaq 
system in real-time, analyze the latency of messages sent to the 
Nasdaq system, and compare its latency to the average latency on the 
Nasdaq system at any given time. In addition users can view latency 
detail for order to book (i.e., how quickly an order is visible on 
the ITCH feed).
    A member may subscribe to the Latency Optics add-on at no cost 
beginning February 4, 2013, and for a fee of $2,900 per month/per 
member beginning April 1, 2013. A Latency Optics subscription 
includes subscription to TradeInfo for up to 5 users at no 
additional cost beginning April 1, 2013.
* * * * *

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 Exchange is proposing to adopt a new add on service to QView 
that provides a subscribing member firm with real-time order latency 
and analytical tools to measure the historical latency of the member 
firm's order messages sent to and from the NASDAQ Market Center 
(``System'') through the member firm's OUCH ports \3\ and received on 
ITCH ports. Latency Optics, which is accessed through QView,\4\ allows 
a subscribing member firm to view the latency of its orders, segregated 
by MPID and/or ports. The tool measures: (1) The roundtrip time that it 
takes from when an order enters the NASDAQ network to the time the 
acknowledgement is received back to the client edge; (2) the roundtrip 
time that it takes from when an order enters the NASDAQ network to the 
time that the order appears on the TotalView ITCH multicast feed; and 
(3) the roundtrip time that it takes from when an order cancel request 
enters the NASDAQ network to when the out message is received back to 
the client edge. The data provided by Latency Optics is displayed 
graphically and in table format, showing the latency experienced by the 
subscribing member firm for each of the three categories of latency for 
the current trading day, segregated by the firm's MPIDs and/or ports. 
The subscribing member firm may select an individual port to drill down 
to more detailed latency information concerning that port for the 
current trading day, including trade-by-trade latency data. The 
subscribing member firm may further drill down to more detailed 
information on one of the three individual latency categories for the 
individual port.
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    \3\ A port is a means by which a member firm may connect to the 
System. Ports are designated by the connection protocol used (e.g., 
OUCH, FIX, RASH).
    \4\ QView is a web-based, front-end application that allows a 
subscribing member firm to track all of its trading activity on the 
Exchange through detailed order and execution summaries. In 
addition, QView provides a subscribing member firm with statistics 
concerning the total number of executions, total volume, dollar 
value of executions, executions by symbol, add versus remove, buy 
versus sell, display versus non-display, number of open orders, use 
of routing strategies and liquidity code designation.
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    Latency Optics allows a subscribing member firm to set an alert 
when a certain latency threshold is reached in any of the three 
categories of latency measured. The thresholds for the alerts are 
determined by the subscribing member firm and are individually set by 
port, and the firm may elect to have the alert notifications provided 
hourly or at the end of the trading day.
    The Exchange is proposing to offer the Latency Optics at no cost, 
other than subscription to QView and at least one subscription to 
TradeInfo,\5\ on February 4, 2013. As noted, Latency Optics is an add-
on service to QView, and as such a member firm must also subscribe to 
QView to access Latency Optics. In addition, a member firm that 
subscribes to QView, and by extension Latency Optics, must also have at 
least one TradeInfo subscription. TradeInfo allows a subscribing member 
firm to query for their [sic] orders submitted to the System and 
perform certain actions concerning the queried orders, such as 
canceling open orders. TradeInfo is the means by which a member firm 
accesses QView and Latency Optics. TradeInfo is offered complimentary 
as part of the NASDAQ Workstation or separately for a fee of $95 per 
user, per month. Each TradeInfo user account provides an access point 
to QView and Latency Optics, therefore a member firm that subscribes to 
multiple TradeInfo accounts may access both QView and Latency Optics 
through each of its TradeInfo user accounts concurrently. The Exchange 
is proposing to assess the monthly fee of $2,900 per member firm for 
Latency Optics, beginning on April 1, 2013, and which will include up 
to 5 monthly subscriptions to TradeInfo. Any TradeInfo subscriptions 
held by a

[[Page 3481]]

Latency Optics subscriber in excess of 5 will continue to be assessed 
the normal monthly subscription fee after April 1, 2013.
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    \5\ TradeInfo allows a subscribing member firm to perform 
actions on their [sic] orders, such as querying all orders in a 
particular security or all orders of a particular type, regardless 
of their status (open, canceled, executed, etc.). For example, after 
querying for open orders the user is then able to select that open 
order and is allowed to make corrections to the order or cancel the 
order. See Rule 7015(f); see also Securities Exchange Act Release 
No. 55135 (January 19, 2007), 72 FR 3893 (January 26, 2007)(SR-
NASDAQ-2006-062).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\6\ in general, and Section 
6(b)(4) of the Act,\7\ in particular, because it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
members and issuers and other persons using any facility or system that 
NASDAQ operates or controls. The Latency Optics add-on service is 
voluntary and the subscription fee will be imposed on all purchasers 
equally. NASDAQ notes that Latency Optics is only available for a 
member firm's OUCH ports at this time. NASDAQ believes that it is 
equitable and not unfairly discriminatory to limit the add-on service 
to OUCH ports because the measure of latency monitored by the service 
is of greatest value to users of OUCH ports. OUCH is a NASDAQ 
proprietary protocol that is used by member firms to access the System 
as efficiently as possible.\8\ For such OUCH port users, latency as 
measured by the Latency Optics service may be important in making 
investment decisions. Should a member firm wish to access the 
information provided by a Latency Optics subscription, it may subscribe 
to and trade via an OUCH port at any time, thus enabling it to 
subscribe to Latency Optics. NASDAQ may offer Latency Optics for other 
types of ports should there be member firm interest in expanding the 
add-on service to cover these ports. The proposed fee will be allocated 
to cover the costs associated with establishing the service, responding 
to customer requests, configuring NASDAQ systems, programming to user 
specifications, and administering the service, among other things, and 
may provide NASDAQ with a profit to the extent costs are covered.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ The OUCH protocol, unlike the FIX protocol for example, does 
not provide routing or special order instructions such as directed 
orders, or order types that check the NASDAQ book first and then 
route away to other destinations.
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    The Exchange determined that the proposed fee is reasonable based 
on member firm interest in the service, costs associated with 
developing and supporting the service, and the value that the Latency 
Optics service provides to subscribing member firms. The information 
provided by the Latency Optics service relates to the subscribing 
member firm's order message activity through its OUCH ports, and is a 
measure of the speed at which such message activity is passing through 
in any given time. This information is valuable to member firms that 
rely on high connectivity speed to effectuate their trading strategies.
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\9\ which requires that the rules of an 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest; and 
are not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The Exchange believes the proposed rule 
change is consistent with these requirements because the proposed 
service provides a subscribing member firm with a useful analytical 
tool with which it may measure latency of order messages sent to, and 
received from, the System. With this information, a subscribing member 
firm will know what latency it is experiencing for a given order or 
execution on NASDAQ, and make more informed decisions based on this 
knowledge. Accordingly, the Exchange believes that the proposed service 
will further goals of the Act by providing a subscribing member firm 
with greater transparency with respect to latency it is experiencing in 
real-time through its connectivity to the System.
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    \9\ 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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. To 
the contrary, the Exchange believes that the proposed rule change will 
promote competition among Exchanges by encouraging them to provide 
their members with useful metrics concerning the latency experienced by 
their order messages, similar to Latency Optics. Such services would 
provide market participants with greater insight into the performance 
they receive from a particular market thus allowing them to make more 
informed investment decisions. As such, the Exchange believes that only 
competitor markets will be burdened by the proposed new service, as 
they may be forced to develop and offer a similar service to their 
members to remain competitive. The Exchange believes that this is 
appropriate in furtherance of the purposes of the Act because, by 
offering such services to its members, these competitor markets will 
allow a greater number of market participants to make more informed 
investment decisions.

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)(ii) [sic] of the Act \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(a)(ii) [sic].
    \11\ 17 CFR 240.19b-4(f)(6).
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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. 
The Exchange has provided 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.

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:

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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-2013-005 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-2013-005. 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices 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-2013-
005, and should be submitted on or before February 6, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00791 Filed 1-15-13; 8:45 am]
BILLING CODE 8011-01-P