Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change to Modify Chapter VI, Section 8 of the Exchange's Rules, 18589-18591 [2011-7836]

Download as PDF Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2011–32 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64143; File No. SR– NASDAQ–2011–037] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change to Modify Chapter VI, Section 8 of the Exchange’s Rules March 29, 2011. Paper Comments 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 March 15, 2011, The NASDAQ Stock Market LLC (‘‘NASDAQ’’), filed with the Securities All submissions should refer to File and Exchange Commission Number SR–Phlx–2011–32. This file (‘‘Commission’’) the proposed rule number should be included on the change as described in Items I, II, and subject line if e-mail is used. To help the III below, which Items have been Commission process and review your prepared by NASDAQ. The Commission comments more efficiently, please use is publishing this notice to solicit only one method. The Commission will comments on the proposed rule change post all comments on the Commission’s from interested persons. Internet Web site (https://www.sec.gov/ I. Self-Regulatory Organization’s rules/sro.shtml). Copies of the Statement of the Terms of the Substance submission, all subsequent of the Proposed Rule Change amendments, all written statements with respect to the proposed rule NASDAQ proposes to modify Chapter change that are filed with the VI, Section 8 of the Exchange’s rules, Commission, and all written dealing with the Nasdaq Opening Cross. communications relating to the Additionally, NASDAQ is proposing to proposed rule change between the Commission and any person, other than establish a Halt Cross that is nearly identical to the modified Opening Cross those that may be withheld from the on NOM. The Exchange proposes to public in accordance with the implement these changes on or about provisions of 5 U.S.C. 552, will be May 31, 2011. available for Web site viewing and printing in the Commission’s Public The text of the proposed rule change Reference Room on official business is available at https:// days between the hours of 10 a.m. and nasdaq.cchwallstreet.com/, at 3 p.m. Copies of such filing also will be NASDAQ’s principal office, and at the available for inspection and copying at Commission’s Public Reference Room. the principal offices of the Exchange. II. Self-Regulatory Organization’s All comments received will be posted Statement of the Purpose of, and without change; the Commission does Statutory Basis for, the Proposed Rule not edit personal identifying Change information from submissions. You should submit only information that In its filing with the Commission, you wish to make available publicly. All NASDAQ included statements submissions should refer to File concerning the purpose of and basis for Number SR–Phlx–2011–32, and should the proposed rule change and discussed be submitted on or before April 25, any comments it received on the 2011. proposed rule change. The text of these For the Commission, by the Division of statements may be examined at the Trading and Markets, pursuant to delegated places specified in Item IV below. authority.12 NASDAQ has prepared summaries, set Cathy H. Ahn, forth in Sections A, B, and C below, of Deputy Secretary. the most significant aspects of such [FR Doc. 2011–7814 Filed 4–1–11; 8:45 am] statements. Emcdonald on DSK2BSOYB1PROD with NOTICES • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. BILLING CODE 8011–01–P 1 15 12 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:47 Apr 01, 2011 2 17 Jkt 223001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00080 Fmt 4703 Sfmt 4703 18589 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to modify Chapter VI, Section 8 of the rules governing NOM, and in particular governing the opening of trading at the start of the trading day and at the resumption of trading following a halt. Since NOM was launched on March 31, 2008 Nasdaq has monitored the operation of the market to identify instances where market efficiency can be enhanced.3 NASDAQ believes that the opening of the market, while currently quite effective, can be further enhanced, and that a Halt Cross would create a more orderly opening following a trading halt. First, NOM currently employs a series of tie-breakers that resolve instances where multiple prices satisfy the conditions for executing the cross. These tie-breakers govern the calculation of the Current Reference Price that is disseminated to market participants prior to the execution of a cross. The tie-breakers also govern the calculation of the actual cross price. The tiebreakers are criteria that operate in a hierarchy. If one and only one price satisfies the first criterion, the system has no need to move to the second. Conversely, if multiple prices satisfy the first criterion, the algorithm turns to the second criteria and if multiple prices satisfy the second criterion, the algorithm then turns to the third criterion. NASDAQ is proposing to eliminate what currently serves as the second tiebreaker that NOM employs to establish the Current Reference Price as set forth in Chapter VI, Section 8(a)(2(A)(ii) [sic] and the Cross price as set forth in subsection (b)(2)(B) of that Rule. This tie-breaker resolves price disputes based on minimizing order imbalances. In other words, under the current system, when more than one price satisfies equally the first condition for the Opening Cross, the system will choose that price which minimizes the order imbalance remaining if the cross were to be executed. NASDAQ has determined to eliminate this tie-breaker because it has not proven useful in augmenting price discovery prior to the cross or in 3 See Securities Exchange Act Release No. 60905 (Oct. 30, 2009), 74 FR 57544 (Nov. 6, 2009)) (SR– NASDAQ–2009–033); Securities Exchange Act Release No. 57822 (May 15, 2008), 73 FR 29800 (May 22, 2008)) (SR–NASDAQ–2008–045); Securities Exchange Act Release No. 57977 (June 17, 2008), 73 FR 35429 (June 23, 2008) (SR– NASDAQ–2008–052). E:\FR\FM\04APN1.SGM 04APN1 18590 Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices Emcdonald on DSK2BSOYB1PROD with NOTICES NBBO: $1.80 × $1.90 Pre Open NOM Book: a.m. EST. Occasionally, however, NASDAQ has received participant feedback that an options class or classes Buy Buy Sell Sell would benefit from a different contracts prices prices contracts dissemination period due to the trading characteristics of that option. 10 .......... $MKT $MKT 10 Accordingly, NASDAQ is proposing to calibrate the start time for data Opening Auction Price: $1.85—The dissemination between 9:20 a.m. and midpoint of $1.80 and $1.90 9:28 a.m. The initial default time for —For the purpose of this tie-breaker, dissemination to being will remain at a price of $MKT is essentially 9:25. NASDAQ believes that this infinity for buy orders and zero for calibration could benefit investors and sell orders poses little risk. When NASDAQ does —The NBB of $1.80 is used as the minimum price threshold because it change the start time for data is higher than the last crossed NOM dissemination, which will be rare, the new time of imbalance dissemination offer at $MKT commencement would be published in —The NBO of $1.90 is used as the advance and with equal access on the maximum price threshold because it is lower than the lass [sic] crossed NASDAQ Trader Web site. Moreover, NASDAQ is proposing to NOM bid at $MKT modify subsection (b)(5) to clarify when Example 3: an Order Imbalance Indicator will be NBBO: $1.80 × $1.90 disseminated just prior to the opening Pre Open NOM Book: cross. Currently, any time an imbalance remains just prior to the opening cross, Buy Buy Sell Sell contracts prices prices contracts NASDAQ disseminates a final Order Imbalance Indicator. Under the 10 .......... $1.84 $1.75 10 proposed modified rule, NASDAQ will disseminate this final Order Imbalance Opening Auction Price: $1.82—The Indicator only when the imbalance midpoint of $1.80 and $1.84 contains routable trading interest that is —The NBB of $1.80 is used as the marketable against the NBBO. The minimum price threshold because it exchange believes that non-routable is higher than the last crossed NOM interest is best served by being posted offer of $1.75 on the exchange after execution of the —The last crossed NOM bid of $1.84 opening cross.4 Once the cross is is used as the maximum threshold executed and the order is posted, that because it is lower than the NBB of trading interest will be disseminated as $1.90 part of the exchange best bid or offer via NASDAQ believes that this formulation the consolidated data feed. This broad dissemination will better advertise the will improve price discovery and trading interest and thereby increase the execution quality. likelihood of an execution. Additionally, NASDAQ is proposing to modify subsection (a)(2)(E)(iii) which Additionally, the exchange proposes to clarify that after the opening cross is governs when an indicative message is executed, all orders in the imbalance disseminated with a price of ‘‘market.’’ will be cancelled, routed, or posted in First, such message will be accordance with the entering party’s disseminated when there is trading instructions. interest with a market price that is not offset, not when there is marketable Buy Buy Sell Sell 4 NASDAQ states that the goal of NOM’s open is interest. Second, whether NOM contracts prices prices contracts to attract as much liquidity as possible to interact disseminates an indicative price of with any orders that are marketable at the time of 20 .......... $2.00 $1.82 10 ‘‘market’’ will not depend upon the the open. NASDAQ believes that the change to post 1.86 10 available interest being priced lower or non-routable orders (at the NBBO) rather than higher than the near or far clearing disseminating additional imbalance messages provides more advertisement for the order because prices. NASDAQ believes that this Opening Auction/Reference Price: it is broadcast over the consolidated quote feed formulation of ‘‘market’’ will reduce $1.88—The midpoint of $1.86 and rather than just NASDAQ’s proprietary market data potential confusion about NASDAQ’s $1.90 feeds. For routable orders NOM is continuing the —The last crossed NOM offer of $1.86 dissemination practices. current process of advertising the order(s) via an is used as the minimum price NASDAQ is also proposing to modify imbalance message on NASDAQ’s proprietary threshold because it is higher than subsection (b)(1) of Section 8 to provide market data feeds rather than opening immediately and routing the order away. By doing this, the NBB of $1.80 increased calibration of the time at NASDAQ’s goal is to get the order a price that is —The NBO of $1.90 is used as the which imbalance and indicative price equal to or better than the away quoted price. See email from Jeffrey S. Davis, Vice President and maximum price threshold because data will begin to be disseminated. Deputy General Counsel, NASDAQ OMX Group, it is lower than the last crossed Generally, NASDAQ has had positive Inc., to Carl E. Tugberk, Special Counsel, Division NOM bid of $2.00 experience and feedback in beginning of Trading and Markets, Commission, dated March indicative data dissemination at 9:25 Example 2: 29, 2011. operating an effective opening cross. NASDAQ initially adopted the imbalance-based tie-breaker based upon its successful use in the equities opening cross. The imbalance-based tiebreaker has not performed well in the options cross during NASDAQ’s experience. First, imbalances occur less often in the options market. Additionally, in NASDAQ’s experience, such imbalances that do exist generally are much smaller in size than in the equities market. As a result, the size of an imbalance in an options cross rarely provides a meaningful basis for distinguishing between multiple prices at which a cross could occur. NASDAQ believes that elimination of this tie breaker will not hinder price discovery and will allow NASDAQ to focus the cross on the most relevant criteria. NASDAQ is also proposing to modify the ‘‘mid-point’’ tie-breaker for the price dissemination and cross calculation which are set forth in modified subsections 8(a)(2(A)(iii) [sic] and the Cross price as set forth in subsection (b)(2)(C). Rather than choosing the midpoint of the NBBO, as happens today, the exchange will choose a price that more accurately represents the supply and demand in the market at the time of reference price dissemination and/or auction execution. A minimum threshold price, based on the higher of the last crossed NOM offer or the NBB, will be chosen and a maximum threshold price, based on the lower of the last crossed NOM bid or the NBO. The midpoint (in $0.01 increments) of the minimum threshold price and maximum threshold price will be the price if this tiebreaker is reached. NASDAQ poses the following illustrations, each based on the assumption that other markets are open and NASDAQ is not: Example 1: NBBO: $1.80 × $1.90 Pre Open NOM Book: VerDate Mar<15>2010 18:47 Apr 01, 2011 Jkt 223001 PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 E:\FR\FM\04APN1.SGM 04APN1 Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices Finally, NASDAQ is proposing to reestablish an Opening Cross to be executed upon the termination of a trading halt.5 Having operated NOM for almost two years, NASDAQ has determined in its experience that an auction will provide a more orderly opening of the market after a halt. This is particularly true because NOM has attracted significantly higher levels of liquidity, an important ingredient for a successful cross. Accordingly, NASDAQ is proposing to modify Chapter V, Section 4 (Resumption of Trading After a Halt) and various subsections of Chapter VI, Section 8. The Opening Cross will operate in the same manner following a trading halt as it operates at the start of the trading day, including dissemination of the Order Imbalance Indicator, matching algorithm, and posing or routing of interest that remains unexecuted following execution of the opening cross. The Opening Cross for halted options will differ only in the time at which it occurs and the fact that that time is determined pursuant to Chapter V, Section 4. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 6 in general, and furthers the objectives of Section 6(b)(5) of the Act 7 in particular, in that it is designed to promote just and equitable principles of trade, 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. Nasdaq believes that the proposal is consistent with this standard because the proposed rule change is designed to improve execution quality at the critical opening of the market both at the start of the trading day and following a trading halt. B. Self-Regulatory Organization’s Statement on Burden on Competition Emcdonald on DSK2BSOYB1PROD with NOTICES 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. 5 When Nasdaq first proposed its options trading rules, it planned to resume trading by operating a ‘‘Halt Cross,’’ which it originally described in Chapter VI, Section 8. Nasdaq later amended the proposed rules to remove the Halt Cross. See Securities Exchange Act Release Nos. 57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (SR– NASDAQ–2007–004 and SR–NASDAQ–2007–080) (approval order regarding NOM Rules including Chapters III and XIV). 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 18:47 Apr 01, 2011 Jkt 223001 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 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 self-regulatory organization consents, the Commission will: 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, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2011–037 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–2011–037. This file number should be included on the subject line if e-mail 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 (https://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 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 18591 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 on official business days between the hours of 10 a.m. and 3 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–2011–037, and should be submitted on or before April 25, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–7836 Filed 4–1–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64144; File No. SR– NYSEAmex-2011–18] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of Proposed Rule Change Relating to the Formation of a Joint Venture Between the Exchange, Its Ultimate Parent NYSE Euronext, and Seven Other Entities To Operate an Electronic Trading Facility for Options Contracts March 29, 2011. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on March 23, 2011, NYSE Amex LLC (the ‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’ or ‘‘SEC’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\04APN1.SGM 04APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 64 (Monday, April 4, 2011)]
[Notices]
[Pages 18589-18591]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7836]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64143; File No. SR-NASDAQ-2011-037]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change to Modify Chapter VI, Section
8 of the Exchange's Rules

March 29, 2011.
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 March 15, 2011, The NASDAQ Stock Market LLC (``NASDAQ''), 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 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 the
Substance of the Proposed Rule Change

NASDAQ proposes to modify Chapter VI, Section 8 of the Exchange's
rules, dealing with the Nasdaq Opening Cross. Additionally, NASDAQ is
proposing to establish a Halt Cross that is nearly identical to the
modified Opening Cross on NOM. The Exchange proposes to implement these
changes on or about May 31, 2011.
The text of the proposed rule change is available at https://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 these statements may be examined at the places specified in
Item IV below. NASDAQ 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
Nasdaq proposes to modify Chapter VI, Section 8 of the rules
governing NOM, and in particular governing the opening of trading at
the start of the trading day and at the resumption of trading following
a halt. Since NOM was launched on March 31, 2008 Nasdaq has monitored
the operation of the market to identify instances where market
efficiency can be enhanced.\3\ NASDAQ believes that the opening of the
market, while currently quite effective, can be further enhanced, and
that a Halt Cross would create a more orderly opening following a
trading halt.
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\3\ See Securities Exchange Act Release No. 60905 (Oct. 30,
2009), 74 FR 57544 (Nov. 6, 2009)) (SR-NASDAQ-2009-033); Securities
Exchange Act Release No. 57822 (May 15, 2008), 73 FR 29800 (May 22,
2008)) (SR-NASDAQ-2008-045); Securities Exchange Act Release No.
57977 (June 17, 2008), 73 FR 35429 (June 23, 2008) (SR-NASDAQ-2008-
052).
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First, NOM currently employs a series of tie-breakers that resolve
instances where multiple prices satisfy the conditions for executing
the cross. These tie-breakers govern the calculation of the Current
Reference Price that is disseminated to market participants prior to
the execution of a cross. The tie-breakers also govern the calculation
of the actual cross price. The tiebreakers are criteria that operate in
a hierarchy. If one and only one price satisfies the first criterion,
the system has no need to move to the second. Conversely, if multiple
prices satisfy the first criterion, the algorithm turns to the second
criteria and if multiple prices satisfy the second criterion, the
algorithm then turns to the third criterion.
NASDAQ is proposing to eliminate what currently serves as the
second tie-breaker that NOM employs to establish the Current Reference
Price as set forth in Chapter VI, Section 8(a)(2(A)(ii) [sic] and the
Cross price as set forth in subsection (b)(2)(B) of that Rule. This
tie-breaker resolves price disputes based on minimizing order
imbalances. In other words, under the current system, when more than
one price satisfies equally the first condition for the Opening Cross,
the system will choose that price which minimizes the order imbalance
remaining if the cross were to be executed.
NASDAQ has determined to eliminate this tie-breaker because it has
not proven useful in augmenting price discovery prior to the cross or
in

[[Page 18590]]

operating an effective opening cross. NASDAQ initially adopted the
imbalance-based tie-breaker based upon its successful use in the
equities opening cross. The imbalance-based tie-breaker has not
performed well in the options cross during NASDAQ's experience. First,
imbalances occur less often in the options market. Additionally, in
NASDAQ's experience, such imbalances that do exist generally are much
smaller in size than in the equities market. As a result, the size of
an imbalance in an options cross rarely provides a meaningful basis for
distinguishing between multiple prices at which a cross could occur.
NASDAQ believes that elimination of this tie breaker will not hinder
price discovery and will allow NASDAQ to focus the cross on the most
relevant criteria.
NASDAQ is also proposing to modify the ``mid-point'' tie-breaker
for the price dissemination and cross calculation which are set forth
in modified subsections 8(a)(2(A)(iii) [sic] and the Cross price as set
forth in subsection (b)(2)(C). Rather than choosing the midpoint of the
NBBO, as happens today, the exchange will choose a price that more
accurately represents the supply and demand in the market at the time
of reference price dissemination and/or auction execution. A minimum
threshold price, based on the higher of the last crossed NOM offer or
the NBB, will be chosen and a maximum threshold price, based on the
lower of the last crossed NOM bid or the NBO. The midpoint (in $0.01
increments) of the minimum threshold price and maximum threshold price
will be the price if this tiebreaker is reached.
NASDAQ poses the following illustrations, each based on the
assumption that other markets are open and NASDAQ is not:

Example 1:
NBBO: $1.80 x $1.90
Pre Open NOM Book:

------------------------------------------------------------------------
Buy Sell Sell
Buy contracts prices prices contracts
------------------------------------------------------------------------
20..................................... $2.00 $1.82 10
......... 1.86 10
------------------------------------------------------------------------

Opening Auction/Reference Price: $1.88--The midpoint of $1.86 and $1.90
--The last crossed NOM offer of $1.86 is used as the minimum price
threshold because it is higher than the NBB of $1.80
--The NBO of $1.90 is used as the maximum price threshold because
it is lower than the last crossed NOM bid of $2.00

Example 2:
NBBO: $1.80 x $1.90
Pre Open NOM Book:

------------------------------------------------------------------------
Buy Sell Sell
Buy contracts prices prices contracts
------------------------------------------------------------------------
10..................................... $MKT $MKT 10
------------------------------------------------------------------------

Opening Auction Price: $1.85--The midpoint of $1.80 and $1.90
--For the purpose of this tie-breaker, a price of $MKT is
essentially infinity for buy orders and zero for sell orders
--The NBB of $1.80 is used as the minimum price threshold because
it is higher than the last crossed NOM offer at $MKT
--The NBO of $1.90 is used as the maximum price threshold because
it is lower than the lass [sic] crossed NOM bid at $MKT

Example 3:
NBBO: $1.80 x $1.90
Pre Open NOM Book:

------------------------------------------------------------------------
Buy Sell Sell
Buy contracts prices prices contracts
------------------------------------------------------------------------
10..................................... $1.84 $1.75 10
------------------------------------------------------------------------

Opening Auction Price: $1.82--The midpoint of $1.80 and $1.84
--The NBB of $1.80 is used as the minimum price threshold because
it is higher than the last crossed NOM offer of $1.75
--The last crossed NOM bid of $1.84 is used as the maximum
threshold because it is lower than the NBB of $1.90

NASDAQ believes that this formulation will improve price discovery and
execution quality.
Additionally, NASDAQ is proposing to modify subsection
(a)(2)(E)(iii) which governs when an indicative message is disseminated
with a price of ``market.'' First, such message will be disseminated
when there is trading interest with a market price that is not offset,
not when there is marketable interest. Second, whether NOM disseminates
an indicative price of ``market'' will not depend upon the available
interest being priced lower or higher than the near or far clearing
prices. NASDAQ believes that this formulation of ``market'' will reduce
potential confusion about NASDAQ's dissemination practices.
NASDAQ is also proposing to modify subsection (b)(1) of Section 8
to provide increased calibration of the time at which imbalance and
indicative price data will begin to be disseminated. Generally, NASDAQ
has had positive experience and feedback in beginning indicative data
dissemination at 9:25 a.m. EST. Occasionally, however, NASDAQ has
received participant feedback that an options class or classes would
benefit from a different dissemination period due to the trading
characteristics of that option. Accordingly, NASDAQ is proposing to
calibrate the start time for data dissemination between 9:20 a.m. and
9:28 a.m. The initial default time for dissemination to being will
remain at 9:25. NASDAQ believes that this calibration could benefit
investors and poses little risk. When NASDAQ does change the start time
for data dissemination, which will be rare, the new time of imbalance
dissemination commencement would be published in advance and with equal
access on the NASDAQ Trader Web site.
Moreover, NASDAQ is proposing to modify subsection (b)(5) to
clarify when an Order Imbalance Indicator will be disseminated just
prior to the opening cross. Currently, any time an imbalance remains
just prior to the opening cross, NASDAQ disseminates a final Order
Imbalance Indicator. Under the proposed modified rule, NASDAQ will
disseminate this final Order Imbalance Indicator only when the
imbalance contains routable trading interest that is marketable against
the NBBO. The exchange believes that non-routable interest is best
served by being posted on the exchange after execution of the opening
cross.\4\ Once the cross is executed and the order is posted, that
trading interest will be disseminated as part of the exchange best bid
or offer via the consolidated data feed. This broad dissemination will
better advertise the trading interest and thereby increase the
likelihood of an execution. Additionally, the exchange proposes to
clarify that after the opening cross is executed, all orders in the
imbalance will be cancelled, routed, or posted in accordance with the
entering party's instructions.
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\4\ NASDAQ states that the goal of NOM's open is to attract as
much liquidity as possible to interact with any orders that are
marketable at the time of the open. NASDAQ believes that the change
to post non-routable orders (at the NBBO) rather than disseminating
additional imbalance messages provides more advertisement for the
order because it is broadcast over the consolidated quote feed
rather than just NASDAQ's proprietary market data feeds. For
routable orders NOM is continuing the current process of advertising
the order(s) via an imbalance message on NASDAQ's proprietary market
data feeds rather than opening immediately and routing the order
away. By doing this, NASDAQ's goal is to get the order a price that
is equal to or better than the away quoted price. See email from
Jeffrey S. Davis, Vice President and Deputy General Counsel, NASDAQ
OMX Group, Inc., to Carl E. Tugberk, Special Counsel, Division of
Trading and Markets, Commission, dated March 29, 2011.

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[[Page 18591]]

Finally, NASDAQ is proposing to re-establish an Opening Cross to be
executed upon the termination of a trading halt.\5\ Having operated NOM
for almost two years, NASDAQ has determined in its experience that an
auction will provide a more orderly opening of the market after a halt.
This is particularly true because NOM has attracted significantly
higher levels of liquidity, an important ingredient for a successful
cross. Accordingly, NASDAQ is proposing to modify Chapter V, Section 4
(Resumption of Trading After a Halt) and various subsections of Chapter
VI, Section 8. The Opening Cross will operate in the same manner
following a trading halt as it operates at the start of the trading
day, including dissemination of the Order Imbalance Indicator, matching
algorithm, and posing or routing of interest that remains unexecuted
following execution of the opening cross. The Opening Cross for halted
options will differ only in the time at which it occurs and the fact
that that time is determined pursuant to Chapter V, Section 4.
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\5\ When Nasdaq first proposed its options trading rules, it
planned to resume trading by operating a ``Halt Cross,'' which it
originally described in Chapter VI, Section 8. Nasdaq later amended
the proposed rules to remove the Halt Cross. See Securities Exchange
Act Release Nos. 57478 (March 12, 2008), 73 FR 14521 (March 18,
2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-080) (approval order
regarding NOM Rules including Chapters III and XIV).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of Section
6(b)(5) of the Act \7\ in particular, in that it is designed to promote
just and equitable principles of trade, 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.
Nasdaq believes that the proposal is consistent with this standard
because the proposed rule change is designed to improve execution
quality at the critical opening of the market both at the start of the
trading day and following a trading halt.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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.

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

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 self-regulatory organization consents, the Commission will:
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, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2011-037 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-2011-037. This
file number should be included on the subject line if e-mail 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 (https://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 on
official business days between the hours of 10 a.m. and 3 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-2011-037, and should be submitted on or before
April 25, 2011.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7836 Filed 4-1-11; 8:45 am]
BILLING CODE 8011-01-P

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