[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9957-9959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03098]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68839; File No. SR-NASDAQ-2013-014]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Add Routing Functionality to the NASDAQ System

February 6, 2013.
    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 January 23, 2013, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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.
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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 proposes to amend Rule 4758, Order Routing, to add routing 
functionality to the NASDAQ System (``System'').
    The text of the proposed rule change is below. Proposed new 
language is italicized.

* * * * *

Equity Rules

* * * * *

4750. Execution Services

* * * * *

4758. Order Routing

    (a) Order Routing Process
    (1) No change.
    (A) No change.
    (i)-(xi) No change.
    (xii) QDRK is a routing option under which orders check the 
System for available shares and simultaneously route the remaining 
shares to destinations on the System routing table that are not 
posting Protected Quotations within the meaning of Regulation NMS. 
If shares remain un-executed after routing, they are posted on the 
book. Once on the book, should the order subsequently be locked or 
crossed by another market center, the System will not route the 
order to the locking or crossing market center.
    (xiii) QCST is a routing option under which orders check the 
System for available shares and simultaneously route the remaining 
shares to destinations on the System routing table that are not 
posting Protected Quotations within the meaning of Regulation NMS 
and to certain, but not all, exchanges. If shares remain un-executed 
after routing, they are posted on the book. Once on the book, should 
the order subsequently be locked or crossed by another market 
center, the System will not route the order to the locking or 
crossing market center.
    Orders that do not check the System for available shares prior 
to routing may not be sent to a facility of an exchange that is an 
affiliate of Nasdaq, except for orders that are sent to the NASDAQ 
OMX BX Equities Market or to the NASDAQ OMX PSX facility of NASDAQ 
OMX PHLX.
    (B) No change.
    (b)-(d) No change.
* * * * *

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. 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 attract additional 
business to and enhance the functionality offered by Nasdaq by 
providing additional optional outbound routing services. Most equities 
exchanges today provide routing services and the Exchange offers a 
variety of routing strategies. Currently, Rule 4758, Order Routing, 
describes the order routing process and states that all routing shall 
be in compliance with Rule 611 of Regulation NMS under the Act.\3\ 
Furthermore, it enumerates Nasdaq's routing strategies: DOT, DOTI, 
STGY, SKNY, SCAN, SKIP, TFTY, MOPP, SAVE, SOLV, LIST and CART.
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    \3\ 17 CFR 242.611.
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    Proposed Rule 4758(a)(1)(A)(xii) will provide that QDRK is a 
routing option under which orders check the System for available shares 
and simultaneously route to certain destinations on the System routing 
table that are not posting Protected Quotations within the meaning of 
Regulation NMS (i.e. ``dark venues'' or ``dark pools''). If shares 
remain un-executed after routing, they are posted on the book. Once on 
the book, should the order subsequently be locked or crossed by another 
market center, the System will not route the order to the locking or 
crossing market center. This strategy is intended to attract market 
participants that seek to execute on Nasdaq or on dark pools without 
executing on another exchange. Members may seek to execute in this 
manner to interact with resting liquidity in addition to that available 
on Nasdaq, while also minimizing market impact and transaction fees.
    For example, if the National Best Bid/Offer (``NBBO'') is $10.00-
$10.01, and Nasdaq, DarkVenueA and ARCA each offer 100 shares at 
$10.01, a QDRK order to buy 1000 shares at $10.01 IOC will be handled 
as follows: 100 shares for execution on Nasdaq and 100 shares routed to 
DarkVenue A simultaneously at $10.01; the remaining 800 shares are not 
routed and not executed, and cancelled back to the entering participant 
because it was an IOC order. The order did not route to ARCA because it 
is not a dark venue. As a second example, if the NBBO is $10.00-$10.01, 
and Nasdaq, DarkVenueA and ARCA each offer 100 shares at $10.01, a QDRK 
order to buy 1000 shares at

[[Page 9958]]

$10.01 DAY will be handled as follows: 100 shares for execution on 
Nasdaq and 100 shares routed to DarkVenue A simultaneously at $10.01; 
the remaining 800 shares are posted on the Nasdaq book (because it is a 
DAY order). Once again, the order did not route to ARCA because it is 
not a dark venue.
    Proposed Rule 4758(a)(1)(A)(xiii) will provide that QCST is a 
routing option under which orders check the System for available shares 
and simultaneously route to select dark venues and to certain low cost 
exchanges. If shares remain un-executed after routing, they are posted 
on the book. Once on the book, should the order subsequently be locked 
or crossed by another market center, the System will not route the 
order to the locking or crossing market center. This strategy is also 
intended to attract market participants who seek to save on trading 
fees by only executing on the Exchange, on dark venues, or on no cost 
and low cost exchanges.
    For example, if the NBBO is $10.00-$10.01, and Nasdaq, DarkVenueA 
and ARCA each offer 100 shares at $10.01, a QCST order to buy 1000 
shares at $10.01 DAY will be handled as follows: 100 shares for 
execution on Nasdaq and 100 shares routed to DarkVenue A simultaneously 
at $10.01; the remaining 800 shares are posted on the Nasdaq book 
(because it is a DAY order). The order did not route to ARCA because it 
is neither a dark venue nor a no cost or low cost exchange. As a second 
example, if the NBBO is $9.90-$10.00, with BYX offering 100 shares at 
$10.00 and Nasdaq, DarkVenueA and ARCA each offer 100 shares at $10.01, 
a QCST order to buy 1000 shares at $10.01 DAY will be handled as 
follows: 100 shares routed to BYX at $10.00, 100 shares for execution 
on Nasdaq and 100 shares routed to DarkVenue A simultaneously at 
$10.01; the remaining shares are posted on the Nasdaq book (because it 
is a DAY order). The order did not route to ARCA because it is neither 
a dark venue nor a no cost or low cost exchange.
    In all cases, these routing strategies are designed to comply with 
SEC Rule 611 and the other provisions of Regulation NMS.\4\ 
Accordingly, both QDRK and QCST will honor Protected Quotations within 
the meaning of Regulation NMS and will not route to any market centers 
included in their respective routing table at a price inferior to an 
available Protected Quotation. For example, if the NBBO is $9.90-
$10.00, with NYSE offering 100 shares at $10.00 and Nasdaq, DarkVenueA 
and ARCA each offering 100 shares at $10.01, a QCST order to buy 1000 
shares at $10.01 DAY will not be routed because NYSE's Protected 
Quotation is not included in the routing table, by definition, for 
QCST.
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    \4\ 17 CFR 242.611.
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    The Exchange will notify its membership of the implementation date, 
which the Exchange expects will be on or about the 30th day after this 
filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(5) of the Act,\6\ in particular, in that the proposal 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, because 
Nasdaq will be better able to serve its customers and compete with 
other markets by offering additional optional routing services. 
Specifically, the two new routing strategies will provide market 
participants with greater flexibility in routing orders without 
developing order routing strategies on their own.
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    \5\ 15 U.S.C. 78f.
    \6\ 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. 
Nasdaq competes with many exchanges and other execution venues for the 
execution of orders in equities. Market participants can choose where 
to send their orders. Accordingly, the proposal is pro-competitive in 
that it affords the Exchange the opportunity to compete with other 
exchanges in terms of offering new routing strategies.

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 \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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. 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:

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-2013-014 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-2013-014. 
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

[[Page 9959]]

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 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-2013-014 and should 
be submitted on or before March 5, 2013.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03098 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P