[Federal Register Volume 79, Number 231 (Tuesday, December 2, 2014)]
[Notices]
[Pages 71490-71493]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28316]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73683; File No. SR-NASDAQ-2014-110]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of a Proposed Rule Change To Adopt NASDAQ Rule 7015(i) 
To Offer the New IPO Workstation

November 25, 2014.
    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 November 14, 2014 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, 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 the 
Substance of the Proposed Rule Change

    NASDAQ proposes to adopt NASDAQ Rule 7015(i) to offer the new IPO 
Workstation.
    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, NASDAQ 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, the Proposed Rule Change

1. Purpose
    NASDAQ recently filed a proposed rule change to offer the IPO 
Indicator as an enhancement to NASDAQ Workstation subscription at no

[[Page 71491]]

additional cost.\3\ The IPO Indicator is designed to assist member 
firms in monitoring their orders in the NASDAQ Halt Cross process 
leading up to the launch of an initial public offering (``IPO''). 
NASDAQ is now proposing to adopt Rule 7015(i) to offer the new IPO 
Workstation, which will provide subscribing member firms with stand-
alone access to the IPO Indicator service, at no cost at this time.
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    \3\ See Securities Exchange Act Release No. 73574 (November 12, 
2014) (awaiting publication in the Federal Register) (SR-NASDAQ-
2014-100).
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Halt Cross Process
    The NASDAQ Halt Cross is designed to provide for an orderly, 
single-priced opening of securities subject to an intraday halt, 
including securities that are the subject of an IPO. Prior to the Cross 
execution, market participants enter quotes and orders eligible for 
participation in the Cross, and NASDAQ disseminates certain information 
regarding buying and selling interest entered and the indicative 
execution price information, known as the Net Order Imbalance Indicator 
or NOII. The NOII is disseminated every five seconds during a 
designated period prior to the completion of the Halt Cross, in order 
to provide market participants with information regarding the possible 
price and volume of the Cross. The information provided in the NOII 
message includes the Current Reference Price,\4\ which is the price at 
which the Cross would occur if it executed at the time of the NOII's 
dissemination, and the number of shares of Eligible Interest,\5\ which 
is defined as any quotation or any order that may be entered into the 
system and designated with a time-in-force that would allow the order 
to be in force at the time of the Halt Cross, that would be paired at 
that price.
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    \4\ See Rule 4753(a)(3)(A).
    \5\ See Rule 4753(a)(5).
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    NASDAQ also disseminates a Market Order Imbalance, which is defined 
as the number of shares of Eligible Interest entered through market 
orders that would not be matched with other order shares at the time of 
the dissemination of an NOII, if in fact there are such unexecutable 
market order shares. When there is a Market Order Imbalance, NASDAQ 
disseminates the imbalance and the buy/sell direction of the imbalance. 
For example, if a buy-direction Market Order Imbalance is disseminated, 
potential sellers in the Cross would know that buy liquidity is 
available at a market price, potentially encouraging them to enter 
additional sell orders to allow the Cross to proceed.
    In addition to disseminating information about Market Order 
Imbalances, NASDAQ also disseminates information about the size and 
buy/sell direction of an Imbalance. An Imbalance is defined as the 
number of shares of Eligible Interest with a limit price equal to the 
Current Reference Price that may not be matched with other order shares 
at a particular price at any given time.\6\ As noted above, Eligible 
Interest is defined as any quotation or any order that may be entered 
into the system and designated with a time-in-force that would allow 
the order to be in force at the time of the Halt Cross. Thus, the 
provided information reflects all shares eligible for participation in 
the Cross, regardless of time-in-force, and includes non-displayed 
shares and reserve size. As such, the Imbalance information indicates 
the degree to which available liquidity on one or the other side of the 
market would not be executed if the Cross were to occur at that time.
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    \6\ See Rule 4753(a)(1).
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    Generally, a Halt in a security is terminated when NASDAQ 
determines to release a security, at which time the Display Only Period 
begins, culminating in the Halt Cross whereby the security is released 
for regular hours trading at the price that maximizes the number of 
shares of trading interest eligible for participation in the Cross to 
be executed.\7\ In the case of an IPO, underwriters to an IPO make a 
determination to launch an IPO during the Pre-Launch Period \8\ when 
they believe the security is ready to trade. When the underwriter 
informs NASDAQ that it is ready to launch the IPO, the NASDAQ system 
will calculate the Current Reference Price at that time (the ``Expected 
Price'') and display it to the underwriter. If the underwriter then 
approves proceeding, the NASDAQ system will conduct two validation 
checks. Specifically, the NASDAQ system will determine whether all 
market orders will be executed in the cross, and whether the Expected 
Price and the price calculated by the Cross differ by an amount in 
excess of the price band selected by the underwriter.\9\ If either of 
the validation checks fail, the security will not be released for 
trading and the Pre-Launch Period will continue seamlessly until all 
requirements are met. Alternatively, the underwriter may, with the 
concurrence of NASDAQ, determine to postpone and reschedule the IPO.
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    \7\ See Rule 4753(b) for a description of the processing of the 
Halt Cross.
    \8\ The Pre-Launch Period is the second phase of a two-phase 
process that NASDAQ uses for launching IPOs. The Pre-Launch Period 
follows a 15-minute Display Only Period and is of no fixed duration. 
During both periods, the NOII is disseminated every five seconds.
    \9\ See Rule 4120(c)(8)(B).
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IPO Indicator and IPO Workstation
    The IPO Indicator service will provide member firms with more 
information about interest in an IPO security. Specifically, the IPO 
Indicator will provide information about the number and price at which 
shares of a member firm's orders entered for execution in an IPO Halt 
Cross (``IPO shares'') would execute in an IPO if it were to price at 
the present time. The IPO Indicator uses the NOII information of an IPO 
security together with information about the subscribing member firm's 
orders on NASDAQ in the IPO security.\10\ As noted above, NASDAQ has 
separately proposed \11\ to offer the IPO Indicator as an enhancement 
to the NASDAQ Workstation. Similar to accessing the IPO Indicator from 
the NASDAQ Workstation, subscribing member firms will access the IPO 
Indicator from the main IPO Workstation screen, which will allow the 
subscriber to select an IPO security by ticker and see the Current 
Reference Price,\12\ the number of paired shares, and the number of 
imbalance shares during the Display Only and Pre-Launch Periods. The 
screen will also provide the total number of IPO shares the member firm 
has entered for execution in the IPO Halt Cross, the nature of such 
shares (buy or sell), and the number of IPO shares that would be 
executed in the Halt Cross at that time for each of those categories. A 
subscribing member firm will also be able to access further detail on 
its IPO shares presented by individual order or order block, which will 
include the number of IPO shares in a particular order or order block, 
the number and percentage of IPO shares of the order or order block 
that would be executed in the Halt Cross if it occurred at any given 
time in the process, based on the NOII disseminated every five seconds, 
and the price at which the order or order block was submitted. As such, 
the IPO Indicator will provide member firms with information consistent 
with what NASDAQ currently disseminates during the IPO launch process, 
but as it relates to a

[[Page 71492]]

member firm's orders and in greater detail.
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    \10\ The information provided by the IPO Indicator is limited to 
the subscribing member firm's orders.
    \11\ Supra note 3.
    \12\ The Exchange notes that, in situations where there is a 
Market Order Imbalance, the NOII does not provide a Current 
Reference Price, since not all market orders could be executed in 
the cross and therefore there is no price at which the IPO cross 
could occur.
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    NASDAQ notes that the IPO Indicator will provide member firms with 
more information on their orders for participation in an IPO Halt 
Cross, which will, in turn, allow them to make better informed 
investment decisions. Although, NASDAQ believes the functionality 
provided by the IPO Indicator will be useful to all member firms 
seeking to participate in the IPO Halt Cross process, underwriters to 
an IPO may find the functionality particularly useful as they will have 
current and ongoing information on the nature of their order book in 
the IPO shares relative to the orders that would be executed at any 
given time, thus allowing them to make better informed decisions on the 
timing of the IPO's launch. In this regard, the IPO Indicator may help 
an underwriter to make a determination to launch an IPO at a time most 
likely to avoid an order imbalance,\13\ thus increasing the likelihood 
of a fair and orderly launch of the IPO when the underwriter informs 
NASDAQ that it is prepared to launch the IPO security.
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    \13\ As defined by Rules 4120(c)(7)(C)(2) and (3).
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    The proposed IPO Workstation will provide member firms with another 
means to access IPO Indicator, as an alternative to a full NASDAQ 
Workstation subscription. The Exchange notes that not all member firms 
subscribe to the NASDAQ Workstation and prospective users of the IPO 
Indicator may not desire to pay for a full Workstation subscription for 
the sole purpose of accessing the IPO Indicator. Accordingly, the 
Exchange is proposing to offer the IPO Indicator functionality through 
a stand-alone ``Workstation light'' subscription, the IPO Workstation. 
The IPO Indicator functionality is unchanged from the enhancement that 
is proposed for a NASDAQ Workstation subscription. Unlike a NASDAQ 
Workstation subscription, however, the IPO Workstation subscription 
will provide only the IPO Indicator service and the NOII data for IPO 
securities.\14\
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    \14\ IPO Workstation subscribers will not have access to various 
tools, functionality and data provided with a full NASDAQ 
Workstation subscription. For a description of NASDAQ Workstation 
functionality, see http://www.nasdaqtrader.com/Trader.aspx?id=Workstation.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \15\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\16\ in particular, in that it is designed 
to promote just and equitable principles of trade, 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. The proposal is consistent with these requirements because it 
will expand the information made available to market participants about 
their orders and the interplay of supply and demand of buy and sell 
orders leading up to the completion of an IPO Halt Cross. The 
information provided by the proposed IPO Indicator may be particularly 
useful to underwriters of IPOs, who ultimately make the decision to 
launch an IPO or to postpone it. In this regard, the IPO Indicator will 
provide underwriters with a near real time assessment of the number and 
price at which their IPO shares will execute at any given time, 
consequently allowing them to make better informed decisions with 
regard to the timing of an IPO's launch. The proposed change will 
thereby perfect the mechanisms of a free and open market by helping 
ensure the security price is reasonably stable at the time the 
underwriter determines to launch the IPO. Moreover, the proposed change 
will protect investors and the public interest by providing additional 
transparency regarding the IPO Halt Cross, helping market participants 
to understand the degree of supply and demand for the security that is 
the subject of the IPO Halt Cross and the nature of the execution of 
IPO orders that they would receive at any given time in the IPO launch 
process. Offering the IPO Indicator through the IPO Workstation ensures 
that all member firms that are interested in subscribing to the IPO 
Indicator have a no cost means to access it, in lieu of a paying for a 
full NASDAQ Workstation subscription.
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    \15\ 15 U.S.C. 78f (b).
    \16\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. Specifically, the proposed 
change serves merely to increase the information provided by NASDAQ 
regarding the nature of the execution they would receive in an IPO at 
any given time in the process, thereby assisting market participants in 
making informed investment decisions regarding their participation in 
the IPO Halt Cross. The proposed change also expands access to this 
information by offering the service through a no cost alternative to a 
full NASDAQ Workstation subscription. The proposed change does not 
restrict the ability of market participants to participate in the IPO 
Halt Cross in any respect, and therefore does not impose any burden on 
competition.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

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-2014-110 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-110. 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

[[Page 71493]]

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-2014-110, and should be submitted on or before 
December 23, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28316 Filed 12-1-14; 8:45 am]
BILLING CODE 8011-01-P