Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Its Optional Anti-Internalization Functionality, 76795-76797 [2011-31476]
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Federal Register / Vol. 76, No. 236 / Thursday, December 8, 2011 / Notices
All submissions should refer to File
Number SR–Phlx-2011–161. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission,14 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
a.m. and 3 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
publicly available. All submissions
should refer to File Number SR-Phlx2011-161 and should be submitted on or
before December 29, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–31477 Filed 12–7–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
mstockstill on DSK4VPTVN1PROD with NOTICES
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify Its
Optional Anti-Internalization
Functionality
December 2, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
14 The text of the proposed rule change is
available on the Commission’s Web site at https://
www.sec.gov/rules/sro.shtml.
15 17 CFR 200.30–3(a)(12).
15:59 Dec 07, 2011
Jkt 226001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ is filing with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
to modify its optional antiinternalization functionality.
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
[Release No. 34–65868; File No. SR–
NASDAQ–2011–158]
VerDate Mar<15>2010
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
22, 2011, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange.
NASDAQ has designated the proposed
rule change as constituting a rule
change under Rule 19b–4(f)(6) under the
Act,3 which renders the proposal
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
1. Purpose
NASDAQ is proposing to provide a
more granular alternative to the
voluntary anti-internalization
functionality. Under the proposal,
market participants will be given the
additional options of (1) assigning a
group identification modifier at the port
level; and (2) assigning different antiinternalization methodology to specific
order entry ports.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
Currently, anti-internalization
processing is available only on an
MPID-wide basis with only a single
methodology being allowed per MPID.
Market participants direct that a
particular version of anti-internalization
processing be applied to a particular
MPID, which is then applied by the
system to all quotes/orders entered
using that MPID. Market participants
have the option, when entering quotes/
orders using the same MPID they do not
wish to have automatically interact with
each other in the System, to either direct
the System to not execute any part of
the interacting quotes/orders from the
same MPID and, instead, cancel share
amounts of the interacting quotes/orders
back to the entering party with an
arrangement that takes into
consideration the size of the interacting
quotes/orders (Decrement); or,
regardless of the size of the interacting
quotes/orders, cancelling the oldest of
them in full (Cancel Oldest).4
Under the proposal, market
participants entering quotes/orders
under a specific MPID may voluntarily
assign a unique group identification
modifier that represents a group of
quotes/orders from the same market
participant identifier and order entry
port (‘‘Group ID’’). The Group ID will be
a two-character code composed of
alphanumerics and/or spaces, assigned
to a specific order entry port and
updated by NASDAQ on behalf of the
market participant. This additional
option will direct the System to execute
any so designated incoming quotes/
orders against all eligible resting quotes/
orders except those with the both the
same MPID and same Group ID.
If the market participant selects the
option of utilizing the Group ID, the
anti-internalization selection will be
applied to all quotes/orders entered
using both the same MPID and the same
Group ID. If the incoming order has both
the same MPID and the same Group ID,
the two orders will not execute against
each other. If the two orders have the
same MPID and different Group IDs,
then the order will be eligible to execute
against each other as designated by the
anti-internalization method. For
example:
1. Incoming order ‘‘A’’ has an MPID
of ‘‘ABCD’’ and Group ID ‘‘A1,’’ resting
order ‘‘B’’ has an MPID of ‘‘ABCD’’ and
Group ID ‘‘A1’’: in this scenario, these
two orders would not execute against
each other.
2. Incoming order ‘‘C’’ has an MPID of
‘‘EFGH’’ and Group ID ‘‘XY,’’ resting
order ‘‘D’’ has an MPID of ‘‘EFGH’’ and
Group ID ‘‘ZZ’’: in this scenario, these
2 17
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Federal Register / Vol. 76, No. 236 / Thursday, December 8, 2011 / Notices
two orders would execute against each
other.
Additionally, market participants will
now have the option to assign a
different anti-internalization
methodology (Decrement or Cancel
Oldest) to different order entry ports.
The anti-internalization method
assigned to the port sending the
incoming order will determine which
methodology is applied to the orders
prevented from matching. For example:
FIRM XX (MPID ‘‘ABCD’’) utilizes
three ports and has elected to assign
Group IDs to their order entry ports for
the purpose of Anti-Internalization.
Additionally, the market participant
selected different Anti-internalization
methodologies per port as follows:
Port 1: Group ID A1; Antiinternalization methodology:
Decrement.
Port 2: Group ID A1; Antiinternalization methodology: Cancel
Oldest.
Port 3: Group ID B1; Antiinternalization methodology: Cancel
Oldest.
If an incoming order from Port 1 tries
to interact with a resting order from Port
3, the orders will execute because they
have the same MPID but different Group
IDs.
If an incoming order from Port 1 tries
to interact with a resting order from Port
2, then the anti-internalization method
selected for Port 1 will apply to the
order. In this case, the Decrement
method would apply.
If an incoming order from Port 2 tries
to interact with a resting order from Port
1, then the anti-internalization method
selected for Port 2 will apply. In this
case, the Cancel Oldest methodology
would apply.
Anti-internalization functionality is
designed to assist market participants in
complying with certain rules and
regulations of the Employee Retirement
Income Security Act (‘‘ERISA’’) that
preclude and/or limit managing brokerdealers of such accounts from trading as
principal with orders generated for
those accounts. It can also assist market
participants in reducing execution fees
potentially resulting from the
interaction of executable buy and sell
trading interest from the same firm.
NASDAQ notes that use of the
functionality does not relieve or
otherwise modify the duty of best
execution owed to orders received from
public customers. As such, market
participants using anti-internalization
functionality will need to take
appropriate steps to ensure that public
customer orders that do not execute
because of the use of anti-internalization
functionality ultimately receive the
VerDate Mar<15>2010
15:59 Dec 07, 2011
Jkt 226001
same execution price (or better) they
would have originally obtained if
execution of the order was not inhibited
by the functionality.
2. Statutory Basis
NASDAQ 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. Specifically, the Group
ID allows firms to better manage order
flow and prevent undesirable
executions against themselves.
NASDAQ notes that a similar
functionality was effective upon filing
with the Commission for EDGX
Exchange, Inc.7
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
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
5 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
7 See EDGX Exchange, Inc. Rule 11.9(f); Securities
and Exchange Release No. 53428 (December 3,
2010), 75 FR 76763 (December 9, 2010) (SR–EDGX–
2010–18), which was based on NYSEArca Equities
Rule 7.31(qq). NASDAQ’s current proposal differs
from EDGX Rule 11.9(f) and NYSEArca Equities
Rule 7.31(qq) in that there are additional methods
relating to additional modifiers that do not apply
to NASDAQ. Furthermore, EDGX utilizes the
additional identity modifier at the port level as well
as at the order level.
6 15
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 8 and Rule 19b–
4(f)(6) thereunder.9
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 10 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6) 11
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. NASDAQ requests that
the Commission waive the 30-day
operative delay so that NASDAQ may
immediately offer its market
participants the ability to better manage
their order flow and prevent undesirable
executions with themselves, which in
turn may decrease costs to customers of
such firms. The Commission notes that
the proposal is based on similar rules of
other exchanges 12 and believes that
waiving the 30-day operative delay 13 is
consistent with the protection of
investors and the public interest.
Therefore, the Commission designates
the proposal operative upon filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
8 15
U.S.C. 78s(b)(3)(A).
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 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. NASDAQ has satisfied this
requirement.
10 17 CFR 240.19b–4(f)(6).
11 17 CFR 240.19b–4(f)(6).
12 See EDGX Exchange, Inc. Rule 11.9(f) and
NYSEArca Equities Rule 7.31(qq).
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
9 17
E:\FR\FM\08DEN1.SGM
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Federal Register / Vol. 76, No. 236 / Thursday, December 8, 2011 / Notices
Number SR–NASDAQ–2011–158 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–2011–158. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission,14 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
a.m. and 3 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
publicly available. All submissions
should refer to File Number SR–
NASDAQ–2011–158 and should be
submitted on or before December 29,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–31476 Filed 12–7–11; 8:45 am]
mstockstill on DSK4VPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
14 The text of the proposed rule change is
available on the Commission’s Web site at https://
www.sec.gov/rules/sro.shtml.
15 17 CFR 200.30–3(a)(12).
VerDate Mar<15>2010
15:59 Dec 07, 2011
Jkt 226001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65867; File No. SR–BX–
2011–080]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Modify Its
Optional Anti-Internalization
Functionality
December 2, 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 November
22, 2011, NASDAQ OMX BX, Inc. (‘‘BX’’
or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated the proposed rule change as
constituting a rule change under Rule
19b–4(f)(6) under the Act,3 which
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to modify its optional antiinternalization functionality.
The text of the proposed rule change
is available at https://
nasdaqomxbx.cchwallstreet.com/, at the
Exchange’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, 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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to provide
a more granular alternative to the
voluntary anti-internalization
functionality. Under the proposal,
market participants will be given the
additional options of (1) assigning a
group identification modifier at the port
level; and (2) assigning different antiinternalization methodology to specific
order entry ports.
Currently, anti-internalization
processing is available only on an
MPID-wide basis with only a single
methodology being allowed per MPID.
Market participants direct that a
particular version of anti-internalization
processing be applied to a particular
MPID, which is then applied by the
system to all quotes/orders entered
using that MPID. Market participants
have the option, when entering quotes/
orders using the same MPID they do not
wish to have automatically interact with
each other in the System, to either direct
the System to not execute any part of
the interacting quotes/orders from the
same MPID and, instead, cancel share
amounts of the interacting quotes/orders
back to the entering party with an
arrangement that takes into
consideration the size of the interacting
quotes/orders (Decrement); or,
regardless of the size of the interacting
quotes/orders, cancelling the oldest of
them in full (Cancel Oldest).4
Under the proposal, market
participants entering quotes/orders
under a specific MPID may voluntarily
assign a unique group identification
modifier that represents a group of
quotes/orders from the same market
participant identifier and order entry
port (‘‘Group ID’’). The Group ID will be
a two-character code composed of
alphanumerics and/or spaces, assigned
to a specific order entry port and
updated by the Exchange on behalf of
the market participant. This additional
option will direct the System to execute
any so designated incoming quotes/
orders against all eligible resting quotes/
orders except those with the both the
same MPID and same Group ID.
If the market participant selects the
option of utilizing the Group ID, the
anti-internalization selection will be
applied to all quotes/orders entered
using both the same MPID and the same
Group ID. If the incoming order has both
the same MPID and the same Group ID,
the two orders will not execute against
2 17
PO 00000
Frm 00109
Fmt 4703
4 See
Sfmt 4703
76797
E:\FR\FM\08DEN1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 236 (Thursday, December 8, 2011)]
[Notices]
[Pages 76795-76797]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31476]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65868; File No. SR-NASDAQ-2011-158]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Its Optional Anti-Internalization Functionality
December 2, 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 November 22, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. NASDAQ has
designated the proposed rule change as constituting a rule change under
Rule 19b-4(f)(6) under the Act,\3\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to modify its optional anti-
internalization functionality.
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 is proposing to provide a more granular alternative to the
voluntary anti-internalization functionality. Under the proposal,
market participants will be given the additional options of (1)
assigning a group identification modifier at the port level; and (2)
assigning different anti-internalization methodology to specific order
entry ports.
Currently, anti-internalization processing is available only on an
MPID-wide basis with only a single methodology being allowed per MPID.
Market participants direct that a particular version of anti-
internalization processing be applied to a particular MPID, which is
then applied by the system to all quotes/orders entered using that
MPID. Market participants have the option, when entering quotes/orders
using the same MPID they do not wish to have automatically interact
with each other in the System, to either direct the System to not
execute any part of the interacting quotes/orders from the same MPID
and, instead, cancel share amounts of the interacting quotes/orders
back to the entering party with an arrangement that takes into
consideration the size of the interacting quotes/orders (Decrement);
or, regardless of the size of the interacting quotes/orders, cancelling
the oldest of them in full (Cancel Oldest).\4\
---------------------------------------------------------------------------
\4\ See Exchange Rule 4757(a)(4).
---------------------------------------------------------------------------
Under the proposal, market participants entering quotes/orders
under a specific MPID may voluntarily assign a unique group
identification modifier that represents a group of quotes/orders from
the same market participant identifier and order entry port (``Group
ID''). The Group ID will be a two-character code composed of
alphanumerics and/or spaces, assigned to a specific order entry port
and updated by NASDAQ on behalf of the market participant. This
additional option will direct the System to execute any so designated
incoming quotes/orders against all eligible resting quotes/orders
except those with the both the same MPID and same Group ID.
If the market participant selects the option of utilizing the Group
ID, the anti-internalization selection will be applied to all quotes/
orders entered using both the same MPID and the same Group ID. If the
incoming order has both the same MPID and the same Group ID, the two
orders will not execute against each other. If the two orders have the
same MPID and different Group IDs, then the order will be eligible to
execute against each other as designated by the anti-internalization
method. For example:
1. Incoming order ``A'' has an MPID of ``ABCD'' and Group ID
``A1,'' resting order ``B'' has an MPID of ``ABCD'' and Group ID
``A1'': in this scenario, these two orders would not execute against
each other.
2. Incoming order ``C'' has an MPID of ``EFGH'' and Group ID
``XY,'' resting order ``D'' has an MPID of ``EFGH'' and Group ID
``ZZ'': in this scenario, these
[[Page 76796]]
two orders would execute against each other.
Additionally, market participants will now have the option to
assign a different anti-internalization methodology (Decrement or
Cancel Oldest) to different order entry ports. The anti-internalization
method assigned to the port sending the incoming order will determine
which methodology is applied to the orders prevented from matching. For
example:
FIRM XX (MPID ``ABCD'') utilizes three ports and has elected to
assign Group IDs to their order entry ports for the purpose of Anti-
Internalization. Additionally, the market participant selected
different Anti-internalization methodologies per port as follows:
Port 1: Group ID A1; Anti-internalization methodology: Decrement.
Port 2: Group ID A1; Anti-internalization methodology: Cancel
Oldest.
Port 3: Group ID B1; Anti-internalization methodology: Cancel
Oldest.
If an incoming order from Port 1 tries to interact with a resting
order from Port 3, the orders will execute because they have the same
MPID but different Group IDs.
If an incoming order from Port 1 tries to interact with a resting
order from Port 2, then the anti-internalization method selected for
Port 1 will apply to the order. In this case, the Decrement method
would apply.
If an incoming order from Port 2 tries to interact with a resting
order from Port 1, then the anti-internalization method selected for
Port 2 will apply. In this case, the Cancel Oldest methodology would
apply.
Anti-internalization functionality is designed to assist market
participants in complying with certain rules and regulations of the
Employee Retirement Income Security Act (``ERISA'') that preclude and/
or limit managing broker-dealers of such accounts from trading as
principal with orders generated for those accounts. It can also assist
market participants in reducing execution fees potentially resulting
from the interaction of executable buy and sell trading interest from
the same firm. NASDAQ notes that use of the functionality does not
relieve or otherwise modify the duty of best execution owed to orders
received from public customers. As such, market participants using
anti-internalization functionality will need to take appropriate steps
to ensure that public customer orders that do not execute because of
the use of anti-internalization functionality ultimately receive the
same execution price (or better) they would have originally obtained if
execution of the order was not inhibited by the functionality.
2. Statutory Basis
NASDAQ 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. Specifically,
the Group ID allows firms to better manage order flow and prevent
undesirable executions against themselves. NASDAQ notes that a similar
functionality was effective upon filing with the Commission for EDGX
Exchange, Inc.\7\
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
\7\ See EDGX Exchange, Inc. Rule 11.9(f); Securities and
Exchange Release No. 53428 (December 3, 2010), 75 FR 76763 (December
9, 2010) (SR-EDGX-2010-18), which was based on NYSEArca Equities
Rule 7.31(qq). NASDAQ's current proposal differs from EDGX Rule
11.9(f) and NYSEArca Equities Rule 7.31(qq) in that there are
additional methods relating to additional modifiers that do not
apply to NASDAQ. Furthermore, EDGX utilizes the additional identity
modifier at the port level as well as at the order level.
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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
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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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 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.
NASDAQ has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \10\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \11\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. NASDAQ requests that
the Commission waive the 30-day operative delay so that NASDAQ may
immediately offer its market participants the ability to better manage
their order flow and prevent undesirable executions with themselves,
which in turn may decrease costs to customers of such firms. The
Commission notes that the proposal is based on similar rules of other
exchanges \12\ and believes that waiving the 30-day operative delay
\13\ is consistent with the protection of investors and the public
interest. Therefore, the Commission designates the proposal operative
upon filing.
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ See EDGX Exchange, Inc. Rule 11.9(f) and NYSEArca Equities
Rule 7.31(qq).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File
[[Page 76797]]
Number SR-NASDAQ-2011-158 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-2011-158. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission,\14\ 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 a.m. and 3 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 publicly available. All
submissions should refer to File Number SR-NASDAQ-2011-158 and should
be submitted on or before December 29, 2011.
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\14\ The text of the proposed rule change is available on the
Commission's Web site at https://www.sec.gov/rules/sro.shtml.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31476 Filed 12-7-11; 8:45 am]
BILLING CODE 8011-01-P
