[Federal Register Volume 80, Number 217 (Tuesday, November 10, 2015)]
[Notices]
[Pages 69761-69764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28518]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76340; File No. SR-NASDAQ-2015-135]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the LIST Routing Option

November 4, 2015.
    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 2, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange

[[Page 69762]]

Commission (``SEC'' or ``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.
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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 modify Rule 4758(a)(1)(A)(x), concerning 
LIST Orders.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, 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 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
Background
    Nasdaq is proposing to amend Rule 4758(a)(1)(A)(x) to allow an 
Order \3\ with a LIST routing option \4\ (``LIST Order'') to be 
designated with a Time-in-Force \5\ (``TIF'') of MGTC \6\ or SGTC.\7\ 
The LIST routing option allows a Participant \8\ to participate in the 
opening and closing processes of the primary listing market of the 
particular security, while also taking advantage of the Exchange's 
liquidity during the remainder of the trading day.\9\ Under LIST, the 
Order will sent [sic] by Nasdaq to participate in the primary listing 
market's opening process.\10\ Where Nasdaq is the primary listing 
market for a LIST Order security, rather than route out for the opening 
process, the Order will first participate in Nasdaq's Opening Cross, 
then it will post on the Nasdaq book if it is not executed in full.\11\
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    \3\ As defined by Rule 4701(e).
    \4\ The System provides a variety of routing options. Generally, 
routing options may be combined with all available Order Types and 
Times-in-Force, with the exception of LIST Orders with a Time-in-
Force of GTC and Order Types and Times-in-Force whose terms are 
inconsistent with the terms of a particular routing option. As 
discussed below, although not inconsistent, providing Participants 
the option to designate a LIST Orders [sic] with a GTC Time-in-Force 
has been unavailable due to a technological limitation. With respect 
to LIST Orders, there are no Times-in-Force that are inconsistent 
with its terms. Certain attributes that are inconsistent are also 
mutually exclusive and thus are never received. For example, a LIST 
order cannot also be submitted as a SCAN order. There are other 
instances where the attributes on a LIST order will not result in 
the order exercising the LIST functionality that sends an order to 
the primary listing exchange. For example, a LIST order with a TIF 
of IOC received during regular market hours, would check the system 
for available shares and route as per the LIST routing strategy, but 
would not be sent to the primary listing exchange because of the 
order's immediacy. After attempting to execute within its limit 
price at destinations in the System Routing Table, the order will 
expire as per the IOC TIF and be returned to the customer.
    \5\ The Time-in-Force assigned to an Order means the period of 
time that the Nasdaq Market Center will hold the Order for potential 
execution. Participants specify an Order's Time-in-Force by 
designating a time at which the Order will become active and a time 
at which the Order will cease to be active. See Rule 4703(a).
    \6\ An Order that is designated to deactivate one year after 
entry may be referred to as a ``Good-till-Cancelled'' or ``GTC'' 
Order. If a GTC Order is designated as eligible for execution during 
Market Hours only, it may be referred to as having a Time in Force 
of ``Market Hours Good-till-Cancelled'' or ``MGTC''. If a GTC is 
designated as eligible for execution during System Hours, it may be 
referred to as having a Time in Force of ``System Hours Good-till-
Cancelled'' or ``SGTC''. See Rule 4703(a)(3).
    \7\ Id.
    \8\ As defined by Rule 4701(c).
    \9\ If a member firm designates a LIST Order as only eligible to 
participate in the opening or closing processes of the primary 
listing market, then Nasdaq will route it immediately to that 
exchange if it is accepting Orders. The Exchange notes that such an 
Order cannot have a GTC TIF. Orders designated for participation in 
the opening process only expire after completion thereof if not 
fully executed and thus cannot be GTC. An Order's designation as 
eligible to participate in the opening process only is mutually 
exclusive of the GTC TIF. Likewise, an Order designated for 
participation in the closing process only may not have a GTC TIF, 
since the Order is designated to expire after completion thereof. 
Accordingly, designation of an Order as eligible to participate in 
the closing process only is mutually exclusive of the GTC TIF.
    \10\ The Exchange notes that other primary listing exchanges do 
not all open at the same time as Nasdaq. Therefore, the Exchange 
system will hold orders that would otherwise be sent to an away 
exchange until that exchange begins accepting orders. Prior to being 
sent to the away exchange, the orders are not available for 
execution. For example, Nasdaq holds LIST Orders in NYSE-listed 
securities until NYSE begins to accept them starting at 7:45 a.m. 
ET, at which time Nasdaq sends all such held Orders to NYSE. By 
contrast, for NYSEArca-listed securities, starting at 4 a.m. ET 
Nasdaq sends LIST Orders to NYSEArca when received.
    \11\ See Rule 4752.
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    When Nasdaq determines that the primary market is ``open'',\12\ any 
unexecuted shares that are returned to Nasdaq will execute against 
interest on the Nasdaq book if marketable, and remaining shares that do 
not execute on Nasdaq are routed to Regulation NMS protected market 
centers in accordance with the LIST System routing table.\13\ After 
routing to such destinations, any remaining unexecuted shares are 
returned to Nasdaq and posted on the Nasdaq book.\14\ Similarly, LIST 
Orders entered after the primary listing market's opening process but 
prior to two minutes prior to market close \15\ will check the Nasdaq 
book, route in accordance with the LIST System routing table, and then 
post to the Nasdaq book if there are shares remaining. Should a primary 
listing market initiate a stock halt during system hours and that 
market continues to accept orders, the Exchange will send all open LIST 
Orders on the book to the primary listing market, and upon the 
conclusion of the primary listing market halt resumption process any 
remaining unexecuted shares that return to Nasdaq will execute against 
interest on the Nasdaq book if marketable, with remaining shares 
routing to Regulation NMS protected market centers in accordance with 
the LIST System routing table. After routing to such destinations, any 
remaining unexecuted shares are returned to Nasdaq and posted on the 
Nasdaq book.
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    \12\ Nasdaq currently uses various triggers to determine that 
the primary listing market opening process has completed, including 
its posting of a firm quote, a regular way order print, Nasdaq 
receives open-eligible orders back from the primary listing market, 
or if none of the prior conditions occur then at 9:45 a.m. ET.
    \13\ As provided, in Rule 4758(a)(1)(A), the term ``System 
routing table'' refers to the proprietary process for determining 
the specific trading venues to which the System routes Orders and 
the order in which it routes them. Nasdaq reserves the right to 
maintain a different System routing table for different routing 
options and to modify the System routing table at any time without 
notice.
    \14\ Pursuant to Rule 4758(a)(1)(B), if a routed Order is 
returned, in whole or in part, that Order will receive a new time 
stamp reflecting the time of its return to the System.
    \15\ This period begins at 3:58 p.m. ET, unless the primary 
market closes earlier.
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    Two minutes prior to market close, any LIST Orders on the Nasdaq 
book are sent to their respective primary listing markets to post on 
those markets' books until market close or the Order's cancellation, 
whichever is earlier. LIST Orders entered at or after two minutes prior 
to the end of regular market hours, but before the conclusion of 
regular market hours trading, are also sent to the primary listing 
market for

[[Page 69763]]

participation in the closing process,\16\ after first checking the 
Nasdaq book for potential execution against interest on the Nasdaq book 
if marketable and then routing in accordance with the LIST System 
routing table.\17\ Shares unexecuted in the closing process or that are 
received after the primary listing market's close with a valid TIF for 
after hours trading \18\ will be posted to the Nasdaq book. Where 
Nasdaq is the primary listing market for a LIST Order security, rather 
than route out for the closing process, the Order will remain posted on 
the Nasdaq book \19\ and be eligible for the Nasdaq Closing Cross. 
Thereafter, the Order will stay on the book to the extent it has a TIF 
that allows it to do so.\20\
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    \16\ As noted in the rule, if a LIST order in a NYSE or NYSE MKT 
security has been designated to participate in the closing only and 
is entered at 3:45 p.m. ET or later (or in the case of an early 
closing, is entered 15 minutes prior to the close or later), the 
order will be rejected.
    \17\ Due to the possibility that Orders received very near the 
4:00 p.m. ET deadline (e.g., 3:59:59:999 p.m. ET) will be routed to 
the primary listing market but arrive after the security has closed, 
customers are encouraged to submit their LIST Orders prior to 3:58 
p.m. ET.
    \18\ Specifically, System Hours and System Hours Expire Time 
TIFs.
    \19\ Such an Order may execute at any time prior to the 
completion of the Closing Cross should it become marketable. If an 
Order in a non-Nasdaq security that is sent to participate in the 
primary listing market's closing process subsequently becomes 
marketable on Nasdaq, the Order will nonetheless remain at the 
primary listing market. Nonetheless, it may become marketable at the 
away exchange and execute prior to the exchange's closing process.
    \20\ See Rule 4754. Because regular trading hours have 
concluded, the trade-through protections of Regulation NMS Rule 611 
do not apply. Nasdaq, nonetheless, routes to venues displaying the 
best price in an effort to gain the best execution of a member 
firm's Order.
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Proposal
    The Exchange is proposing to allow the use of Good-til-Canceled TIF 
with a LIST routing option.\21\ A Participant must designate a time at 
which a given Order will become active and a time at which the Order 
will cease to be active, which is the Order's TIF. The following times 
are available to Nasdaq Participants for deactivating an Order: 
Immediate (i.e., immediately after determining whether the Order is 
marketable); the end of Market Hours; the end of System Hours; one year 
after entry; \22\ or a specific time identified by the Participant, 
provided, however, that an Order specifying an expire time beyond the 
current trading day will be canceled at the end of the current trading 
day.\23\ The ``Good-til-Canceled'' or ``GTC'' TIF will cause an Order 
to deactivate one year after entry if it is not canceled or executed in 
full. If a GTC Order is designated as eligible for execution during 
Market Hours only, it may be referred to as having a TIF of ``Market 
Hours Good-till-Canceled'' or ``MGTC''. If a Participant designates a 
GTC Order as eligible for execution during System Hours, it may be 
referred to as having a TIF of ``System Hours Good-till-Canceled'' or 
``SGTC''.
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    \21\ The Exchange notes that the current functionality of LIST 
will not change other than with respect to timing of the expiration 
of an order designated as MGTC or SGTC.
    \22\ An Order that may be active up to one year after entry may 
nonetheless be returned to the customer in certain circumstances, 
such as excessive messaging, corporate actions, or because it is 
canceled by the participant.
    \23\ See Rule 4703(a).
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    Nasdaq does not currently make MGTC or SGTC available to 
Participants entering LIST orders because it has not programmed the 
System to accept such Orders due to technological challenges. 
Consequently, under the current functionality if the LIST Order is not 
executed in full then it will be canceled when it expires based on the 
TIF assigned to the Order, which could be immediately (after 
determining whether the Order is marketable) or up to the end of the 
current trading day at which time the LIST Order would be canceled. The 
Exchange is now technologically able to allow a LIST Order to have a 
TIF of MGTC or SGTC, so it is proposing to eliminate the current 
limitation and allow Participants to designate a LIST Order with a GTC 
attribute. Nasdaq notes that the operation of the LIST Order will 
remain unchanged, with only the time that the Order remains active 
affected. For example, a Participant entering a LIST Order that would 
only be available for execution during Market Hours would, under the 
current rules, designate the Order with a TIF of MDAY.\24\ If such a 
LIST Order is not executed in full at the end of Market Hours, the 
Order would be canceled and thereafter the Participant would need to 
enter a new LIST Order with a TIF of MDAY for potential execution the 
following day. Nasdaq is proposing to allow a Participant to instead 
apply a TIF of MGTC or SGTC, which would allow the Order to remain 
active up to a year after entry, unless canceled or executed in full. 
Accordingly, Nasdaq is providing Participants with additional 
flexibility and control over the execution of their LIST Orders, which 
is currently available for other Order types on Nasdaq, and is 
providing efficiency and reducing cost and message traffic for 
Participants that currently replicate the proposed functionality using 
other TIFs.
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    \24\ See Rule 4703(a)(5).
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    By way of example, at 6 a.m. a Participant enters a LIST MGTC order 
to buy 1,000 shares of IBM, a NYSE-listed security. The Order is held 
by Nasdaq until 7:45 a.m. and then sent by the System to NYSE to 
participate in the NYSE opening. In the NYSE opening process 500 shares 
of the Order are executed. The remaining 500 shares of the Order are 
sent back to Nasdaq, where it checks the Nasdaq book and receives an 
execution of 100 shares against a resting sell Order. The remaining 400 
shares of the Order are then routed to away markets, where the Order 
receives an execution on ARCA of 100 shares. The remaining 300 shares 
are then posted to the Nasdaq book. At 2 p.m., a market participant 
enters a sell Order that executes against the resting Order for 100 
shares. At 3:58 p.m. the remaining 200 shares are sent to NYSE to 
participate in the NYSE closing process. In the NYSE closing process, 
100 shares are executed with the remaining 100 returning to Nasdaq to 
be held until 7:45 a.m. the next day,\25\ at which time the Order \26\ 
is again sent away to NYSE and would follow the process described 
above.
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    \25\ By contrast, if the LIST Order was entered with a TIF of 
SGTC, instead of being held upon arrival at NASDAQ (because Market 
Hours have concluded), the Order would be posted on the NASDAQ book 
until 8 p.m. and thereafter held until 7:45 a.m. the next day.
    \26\ The Order retains all of its original attributes, including 
information concerning the Order as it was initially entered by the 
Participant.
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    The scenario described above would be slightly different if the 
Order was received for a security listed on Nasdaq. For example, at 6 
a.m. a Participant enters a LIST MGTC order to buy 1,000 shares of 
AAPL, a Nasdaq-listed security. The Order is placed into the Nasdaq 
opening and in the Nasdaq opening process 500 shares of the Order are 
executed. The remaining 500 shares would then be transferred to the 
Nasdaq continuous book. At 2 p.m., a market participant enters a sell 
Order that executes against the resting Order for 100 shares, leaving 
400 shares resting on the continuous book. At 3:58 p.m. the remaining 
400 shares would continue to rest on the Nasdaq continuous book until 
the closing cross. When the closing cross occurs, 100 shares are 
executed in the cross. The remaining 300 shares would be held by Nasdaq 
until the next day, at which time the Order would participate in the 
Nasdaq opening process.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the

[[Page 69764]]

provisions of Section 6 of the Act,\27\ in general, and with Section 
6(b)(5) of the Act,\28\ in particular, because 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 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Exchange believes that the change Nasdaq is making to Rule 
4758(a)(1)(A)(x) will provide Participants with additional flexibility 
and control over the execution of their Orders. Specifically, the 
Exchange is providing Participants with the option to designate a LIST 
Order to remain active for up to one year, unless canceled or executed 
in full. The Exchange notes that other Order routing options offered by 
the Exchange allow TIFs of MGTC and SGTC.\29\ Moreover, Participants 
are currently able to achieve the same outcome as a TIF of MGTC or SGTC 
with their LIST Orders by entering such orders with a TIF of MDAY or 
SDAY, respectively, for every trading day. As such, the proposed change 
will make this process more efficient and less costly to Participants 
by eliminating the need to reenter the Order for every trading day. 
Lastly, the Exchange is now technologically able to process LIST Orders 
with TIFs of MGTC and SGTC, and believes that allowing Participants to 
apply these TIFs to LIST Orders will benefit Participants by providing 
additional flexibility and control over their executions, in the same 
way that Participants have with other Order routing options. For these 
reasons, the Exchange believes that the proposed change further 
perfects the market and raises no investor protection concerns.
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    \27\ 15 U.S.C. 78f.
    \28\ 15 U.S.C. 78f(b)(5).
    \29\ See, e.g., STGY and SCAN routing options under Rules 
4758(a)(1)(A)(iii) and (iv), respectively.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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.\30\ The Exchange 
notes that the proposed two optional LIST TIFs will benefit Nasdaq 
Participants by providing them with greater flexibility and control 
over their LIST Orders, and will save Participants time and reduce 
their costs to the extent they replicate the proposed functionality 
using MDAY and SDAY TIFs. As such, the proposed change may make Nasdaq 
a more attractive venue to market participants. If the proposed change 
does make Nasdaq a more attractive venue, it will likely promote 
competition among exchanges and other market venues to the benefit of 
all market participants.
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    \30\ 15 U.S.C. 78f(b)(8).
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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)(iii) of the Act \31\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\32\ 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: (i) Necessary or appropriate in the 
public interest; (ii) for the protection of investors; or (iii) 
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.
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    \31\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \32\ 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, 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. The Exchange has satisfied this requirement.
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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-2015-135 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2015-135. 
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 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-2015-135, and should be submitted on or before December 1, 2015.
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    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
Brent J. Fields,
Secretary.
[FR Doc. 2015-28518 Filed 11-9-15; 8:45 am]
 BILLING CODE 8011-01-P