Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ's DOT, DOTI, and LIST Routing Strategies, 18101-18104 [2014-07039]
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Federal Register / Vol. 79, No. 61 / Monday, March 31, 2014 / Notices
investor confusion that could result
from a temporary interruption in the
pilot program. For this reason, the
Commission designates the proposed
rule change to be operative upon
filing.14
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:
Reference Room at 100 F Street NE.,
Washington, DC 20549–1090 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–BYX–
2014–003, and should be submitted on
or before April 21, 2014.
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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2014–07014 Filed 3–28–14; 8:45 am]
BILLING CODE 8011–01–P
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 Number SR–
BYX–2014–003 on the subject line.
Paper Comments
tkelley on DSK3SPTVN1PROD with NOTICES
• 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–BYX–2014–003. 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, 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
13 17 CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with 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.
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18101
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71794; File No. SR–
NASDAQ–2014–025]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify
NASDAQ’s DOT, DOTI, and LIST
Routing Strategies
March 25, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1, and Rule 19b-4 thereunder,2
notice is hereby given that on March 11,
2014, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to modify Rule
4758 with respect to its DOT, DOTI, and
LIST routing strategies. The text of the
proposed rule change is available on the
Exchange’s Web site at https://nasdaq.
cchwallstreet.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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1. Purpose
NASDAQ offers its members optional
routing functionality that allows them to
use NASDAQ’s facilities to access
liquidity available on other trading
venues. The functionality includes a
range of defined routing algorithms—
known as strategies—that determine the
destinations and pattern of routing. The
particular pattern of routing to other
venues associated with a particular
strategy is referred to in Rule 4758 as
the ‘‘System routing table’’ for that
strategy. All routing is designed to be
conducted in a manner consistent with
the requirements of Regulation NMS.
NASDAQ currently offers a set of
strategies designed to allow market
participants to route orders to the
primary market on which a security is
listed. NASDAQ is proposing minor
changes to these strategies to improve
their functioning and the clarity of the
rule that describes them in certain
situations. First, NASDAQ offers the
DOT strategy (which includes several
variations) as a means of designating an
order for routing to the New York Stock
Exchange (‘‘NYSE’’) or NYSE MKT 3 for
participation in their respective opening
or closing processes. DOT orders are
routed directly to NYSE or NYSE MKT,
as appropriate. After attempting to
execute in the opening or closing
process, if any shares remain
unexecuted, DOT orders thereafter
check the NASDAQ Market Center
System for available shares and are
converted into SCAN or STGY orders,
depending on the designation of the
entering firm.4
3 Formerly, NYSE Amex. NASDAQ is amending
Rule 4758 to reflect the change in this exchange’s
name.
4 STGY is a routing option under which orders
check the System for available shares and
Continued
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Federal Register / Vol. 79, No. 61 / Monday, March 31, 2014 / Notices
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NASDAQ is proposing to modify the
language of the rule to make it clear that
a DOT order may be designated to
participate in the opening only or in the
closing only (as provided by the
specifications of the destination market)
or to remain in force after the opening
or closing, as applicable. An order
entered before the open (or close) that
is designated as opening only (or closing
only) will likely be cancelled by the
destination market after the open (or
close) in accordance with its terms and
therefore will not return to NASDAQ,
even if not executed in full. Similarly,
if NASDAQ receives a DOT order after
the security has opened (or closed) and
the order has been designated to
participate in the opening only (or
closing only), the order will
nevertheless be routed to NYSE or
NYSE MKT (which would be expected
to reject the order based on its
designation as opening only or closing
only).5 NASDAQ is also proposing to
add language to the rule to make it clear
that the conversion of DOT orders into
SCAN or STGY orders applies only if
the orders are not designated opening or
closing only and are not fully executed,
rejected, or cancelled by the market to
which they are routed. NASDAQ is also
modifying a sentence describing the
treatment of DOT orders entered after
9:30 a.m. (i.e., orders that are intended
to participate in the opening but that are
entered after the opening); such orders
are not routed to NYSE or NYSE MKT,
but rather are immediately converted to
SCAN or STGY orders. The
modifications make it clear that this
processing logic would be applied to an
order that is intended to participate in
the close but that is entered after the
close. The modifications also make it
clear that the processing logic would not
be applied if the order was designated
as opening only or closing only, since,
as described above, the order would be
routed and would be expected to be
rejected. Finally, NASDAQ is modifying
the rule to provide that DOT orders that
simultaneously route the remaining shares to
destinations on the applicable System routing table.
If shares remain un-executed after routing, they are
posted on the NASDAQ book. Once the order is on
the book, if the order is subsequently locked or
crossed by another accessible market center, the
System routes the order to the locking or crossing
market center. SCAN behaves similarly, but once
the order is on the NASDAQ book, the System will
not route the order to a locking or crossing market
center. Although both options are described in Rule
4758 as variations of the DOT strategy, NASDAQ’s
system specifications refer to the SCAN option as
either ‘‘DOTA’’ or ‘‘DOTD’’ and refer to the STGY
option as ‘‘DOTM.’’
5 In the event that an opening or closing only
order was returned to NASDAQ after the time of the
open or close on the destination market, NASDAQ
would cancel the order.
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are designated to participate in an
opening process and that are received
by NASDAQ before the destination
market can receive them will be held
until such time as the destination
market can receive them. Currently,
such orders are routed to the destination
market and may be rejected.
NASDAQ is proposing similar
changes to the DOTI routing strategy.
DOTI is a routing option for orders that
the entering firm wishes to direct to the
NYSE or NYSE MKT without them
returning to the Nasdaq Market Center.
DOTI orders check the System for
available shares and then are sent to
destinations on the System routing table
before being sent to NYSE or NYSE
MKT, as appropriate. Alternatively, the
member entering the order may opt to
have it check the System and then be
sent directly to NYSE or NYSE MKT,
without routing to destinations on the
System routing table.6 DOTI orders do
not return to the Nasdaq Market Center
book after routing.
As is the case with DOT, NASDAQ is
modifying the language of the rule to
make it clear that a DOTI order may be
designated to participate in the opening
only or in the closing only (as provided
by the specifications of the destination
market) or to remain in force after the
opening or closing, as applicable. An
order entered before the open (or close)
that is designated as opening only (or
closing only) will likely be cancelled by
the destination market after the open (or
close) in accordance with its terms and
therefore will not return to NASDAQ,
even if not executed in full. Similarly,
if NASDAQ receives a DOTI order after
the security has opened (or closed) and
the order has been designated to
participate in the opening only (or
closing only), the order will
nevertheless be routed to NYSE or
NYSE MKT (which may reject the order
based on its designation as opening only
or closing only).7 NASDAQ is also
proposing to modify the rule to provide
that DOTI orders that are designated to
participate in an opening process and
that are received by NASDAQ before the
destination market can receive them
will be held until such time as the
destination market can receive them.
LIST is a routing option designed to
allow orders to participate in the
opening and/or closing process of the
primary listing market for a security,
and to follow additional routing logic as
6 This option is referred to in system
specifications as ‘‘DOTZ’’.
7 In the event that an opening or closing only
order was returned to NASDAQ after the time of the
open or close on the destination market, NASDAQ
would cancel the order.
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Frm 00099
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Sfmt 4703
described below.8 A LIST order received
before the security has opened on its
primary listing market will be routed to
the primary listing market for
participation in that market’s opening
process. After the security has opened
on its primary listing market,
unexecuted shares will be returned to
the NASDAQ system.9 Thereafter, the
order will check the System for
available shares and simultaneously
route the remaining shares to
destinations on the System routing
table. Any remaining shares will be
posted on the book. As with DOT and
DOTI, NASDAQ is proposing to modify
the rule governing LIST orders to
provide that if a LIST order is received
by NASDAQ before the destination
market is able to receive orders for its
opening process, the order will be held
until such time as the destination
market can receive it.
NASDAQ is also proposing to modify
the language of the rule governing LIST
orders to make it clear that a LIST order
may be designated to participate in the
opening only, as provided by the
specifications of the destination market.
Accordingly, an order entered before the
open that is designated as opening only
will likely be cancelled by the
destination market after the open in
accordance with its terms and therefore
will not return to NASDAQ, even if not
executed in full. Similarly, if NASDAQ
receives a LIST order after the security
has opened and the order has been
designated to participate in the opening
only, the order will nevertheless be
routed to the primary [sic] market
(which would be expected to reject the
order based on its designation as
opening only).10
Otherwise, if an order that has not
been designated as opening only 11 is
entered after the market open (but
before a time that is two minutes before
market close),12 NASDAQ will check
8 NASDAQ is adding this language to the existing
rule text to describe the overall framework for the
routing strategy.
9 NASDAQ is proposing to add language to the
rule to make it clear that the order would be
returned only to the extent that the order has not
been designated opening only and has not been
fully executed, rejected, or cancelled by the
destination market.
10 In the event that an opening only order was
returned to NASDAQ after the time of the open on
the destination market, NASDAQ would cancel the
order.
11 NASDAQ is proposing to add qualifying
language to the rule to make it clear that the
behavior of orders after the market open would not
apply to an order that has been designated as
opening only.
12 NASDAQ is proposing to replace references to
specific times, such as 4:00 p.m., in Rule 4758 with
more general references to account for the
possibility of variation in the precise time of
NASDAQ’s system hours, the time of the market
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Federal Register / Vol. 79, No. 61 / Monday, March 31, 2014 / Notices
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the System for available shares and
simultaneously route the remaining
shares to destinations on the System
routing table, with remaining shares
posted on the book. Once on the book,
if the order is subsequently locked or
crossed by another market center, the
System will not route the order to the
locking or crossing market center.13
Two minutes before market close, all
LIST orders on the book will route to
the security’s primary listing market for
participation in its closing process.14
Similarly, if a LIST order is received at
or after a time that is two minutes before
market close but before market close,
NASDAQ will check the System for
available shares and simultaneously
route the remaining shares to
destinations on the System routing
table; remaining shares will be routed to
the security’s primary listing market to
participate in its closing process.15 After
the security has closed on the primary
listing market, a LIST order that has not
been designated as closing only and that
has not been fully executed, rejected or
cancelled by the destination market will
be returned to NASDAQ and
unexecuted shares will be posted to the
NASDAQ book.16
NASDAQ is also modifying the
language of the rule governing LIST
orders to make it clear that a LIST order
may be designated to participate in the
closing only, as provided by the
specifications of the destination market.
Accordingly, an order entered before the
open and close, and the periodic occurrence of days
when the markets are planned to close early (e.g.,
the day after Thanksgiving).
13 If trading in the security is stopped across all
markets, LIST orders will be sent to the primary
listing market to participate in its re-opening
process. When normal trading resumes, unexecuted
shares will be removed from the primary listing
market and posted on the NASDAQ book. LIST
orders may not be assigned a time-in-force of [sic]
good-till-cancelled. NASDAQ is proposing to
modify the rule language governing this behavior to
improve its clarity by replacing the words
‘‘cancelled off of the primary’’ with the words
‘‘removed from the primary listing market.’’
14 NASDAQ is proposing to delete language
stating that the routed order ‘‘will be cancelled by
the System’’. The language was intended to reflect
the fact that the routed shares would no longer be
on the NASDAQ book, but the reference to the order
being ‘‘cancelled’’ may be confusing and therefore
is being deleted.
15 NASDAQ notes, however, the certain trading
venues have established cut-off times for
participation in their opening and closing
processes. Orders received by NASDAQ before the
time of the opening or closing processes will be
routed to the primary market; however, if a market
receives such orders after its applicable cut-off time,
the order may be rejected by the destination market.
16 NASDAQ is proposing to add language to the
existing sentence regarding shares posting to the
NASDAQ book to make it clear that it applies after
the security has closed on the primary market and
applies only if the order has not been designated
as closing only and has not been fully executed,
rejected, or cancelled by the destination market.
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close that is designated as closing only
will likely be cancelled by the
destination market after the close in
accordance with its terms and therefore
will not return to NASDAQ, even if not
executed in full. Similarly, if NASDAQ
receives a LIST order after the security
has closed and the order has been
designated to participate in the closing
only, the order will nevertheless be
routed to the primary [sic] market
(which may reject the order based on its
designation as closing only).17
Currently, any LIST order shares that
are received after market close are
posted to the NASDAQ book. However,
NASDAQ is modifying this behavior, so
that rather than posting to the NASDAQ
book immediately, the order will check
the System for available shares and
simultaneously route the remaining
shares to destinations on the System
routing table. Any remaining shares will
then be posted to the NASDAQ book.18
2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,19 in
general, and with Section 6(b)(5) of the
Act 20 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. NASDAQ believes that
the changes will increase the flexibility
of market participants by making it clear
that they may designate DOT, DOTI, and
LIST orders to participate in the
opening only or closing only of a
primary listing venue, in accordance
with the specifications of the primary
market, and by providing that orders
entered before a destination market is
ready to receive them will be held by
NASDAQ until they may be routed. In
addition, the change with respect to
LIST orders received after a market
close will increase the likelihood of
17 In the event that a closing only order was
returned to NASDAQ after the time of the close on
the destination market, NASDAQ would cancel the
order.
18 As described above, this logic would not apply
if the order was designated as closing only.
NASDAQ is proposing to add language to make it
clear that the routing of orders entered after market
close would not apply if the order was designated
as closing only.
19 15 U.S.C. 78f.
20 15 U.S.C. 78f(b)(5).
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18103
such order’s executing, by providing
that they will be routed before posting
to the NASDAQ book. The changes also
increase the clarity and precision of the
rule text. Collectively, these changes
facilitate transactions in securities and
perfect the mechanism of a free and
open market and a national market
system by providing NASDAQ members
with greater control over the routing of
their orders.
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.
NASDAQ believes that the changes will
promote competition by enhancing the
value of NASDAQ’s routing
functionality to its members. However,
since the use of NASDAQ’s routing
services is optional and members have
numerous alternative mechanisms for
order routing, the changes will not
impair the ability of members to use
other means of accessing competitive
trading venues.
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)(ii) [sic] of the Act 21 and
subparagraph (f)(6) of Rule 19b-4
thereunder.22
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
21 15
U.S.C. 78s(b)(3)(a)(ii) [sic].
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. The Exchange has satisfied this
requirement.
22 17
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Federal Register / Vol. 79, No. 61 / Monday, March 31, 2014 / Notices
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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
IV. Solicitation of Comments
[FR Doc. 2014–07039 Filed 3–28–14; 8:45 am]
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 Number SR–
NASDAQ–2014–025 on the subject line.
Paper Comments
tkelley on DSK3SPTVN1PROD with NOTICES
• 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–2014–025. 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, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2014–025, and should be
submitted on or before April 21, 2014.
18:10 Mar 28, 2014
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
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:
VerDate Mar<15>2010
the most significant aspects of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71789; File No. SR–CBOE–
2014–023]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
March 25, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 12,
2014, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
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
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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1. Purpose
The Exchange proposes to amend its
Fees Schedule, specifically regarding
the CBOE Command Connectivity
Charges. Currently, for every 15 Trading
Permits that a Trading Permit Holder
(‘‘TPH’’) that access CBOE Command
via CMI holds, that TPH receives one
CAS Server (plus one total backup CAS
Server regardless of the number of
Trading Permits that the TPH holds).
This would mean that a TPH who had,
say, 29 Trading Permits would only
receive one CAS Server (plus the
backup). The Exchange proposes to
instead add a chart listing the amounts
of Trading Permits and corresponding
CAS Servers: 3
Trading
Permits
1–15 ..............
16–30 ............
31–45 ............
46–60 ............
61–75 ............
76–90 ............
91+ ................
CAS Servers
1
2
3
4
5
6
7
+
+
+
+
+
+
+
1
1
1
1
1
1
1
backup
backup
backup
backup
backup
backup
backup
Total CAS
Servers
2
3
4
5
6
7
8
The effect of this change would be to
increase the number of CAS Servers that
many TPHs receive (for example, a TPH
that has 29 permits would now receive
two CAS Servers (plus a backup) before
having to pay for an extra CAS Server
(which costs $10,000 per month), so
TPHs may be able to save $10,000.
The Exchange also proposes to change
its calculation of the volume thresholds
for its Liquidity Provider Sliding Scale,
which provides for reduced transaction
fees for Market-Makers that reach
certain volume thresholds.4 Currently,
the volume thresholds are based on total
national Market-Maker multiply-listed
options volume. However, this does not
account for products traded solely on
3 Corresponding to this change, the Exchange
proposes to delete from the ‘‘Notes’’ section
regarding this fee the language ‘‘For every 15
Trading Permits that a TPH that accesses CBOE
Command via CMI holds, that TPH receives one
CAS Server (plus one total backup CAS Server
regardless of the number of Trading Permits that the
TPH holds).’’ That language will be replaced with
the statement: ‘‘TPHs will receive CAS Servers
based on the number of trading permits a TPH
holds.’’
4 The Liquidity Provider Sliding Scale applies in
all products except mini-options, SPX, SPXpm,
SRO, VIX or other VOLATILITY INDEXES, OEX or
XEO (the ‘‘Excluded Products’’). For more
information regarding the Liquidity Provider
Sliding Scale, see the CBOE Fees Schedule.
E:\FR\FM\31MRN1.SGM
31MRN1
]]>Agencies
[Federal Register Volume 79, Number 61 (Monday, March 31, 2014)]
[Notices]
[Pages 18101-18104]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-07039]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71794; File No. SR-NASDAQ-2014-025]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ's DOT, DOTI, and LIST Routing Strategies
March 25, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\, and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 11, 2014, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ proposes to modify Rule 4758 with respect to its DOT, DOTI,
and LIST routing strategies. The text of the proposed rule change is
available on the Exchange's Web site at https://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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ offers its members optional routing functionality that
allows them to use NASDAQ's facilities to access liquidity available on
other trading venues. The functionality includes a range of defined
routing algorithms--known as strategies--that determine the
destinations and pattern of routing. The particular pattern of routing
to other venues associated with a particular strategy is referred to in
Rule 4758 as the ``System routing table'' for that strategy. All
routing is designed to be conducted in a manner consistent with the
requirements of Regulation NMS.
NASDAQ currently offers a set of strategies designed to allow
market participants to route orders to the primary market on which a
security is listed. NASDAQ is proposing minor changes to these
strategies to improve their functioning and the clarity of the rule
that describes them in certain situations. First, NASDAQ offers the DOT
strategy (which includes several variations) as a means of designating
an order for routing to the New York Stock Exchange (``NYSE'') or NYSE
MKT \3\ for participation in their respective opening or closing
processes. DOT orders are routed directly to NYSE or NYSE MKT, as
appropriate. After attempting to execute in the opening or closing
process, if any shares remain unexecuted, DOT orders thereafter check
the NASDAQ Market Center System for available shares and are converted
into SCAN or STGY orders, depending on the designation of the entering
firm.\4\
---------------------------------------------------------------------------
\3\ Formerly, NYSE Amex. NASDAQ is amending Rule 4758 to reflect
the change in this exchange's name.
\4\ STGY is a routing option under which orders check the System
for available shares and simultaneously route the remaining shares
to destinations on the applicable System routing table. If shares
remain un-executed after routing, they are posted on the NASDAQ
book. Once the order is on the book, if the order is subsequently
locked or crossed by another accessible market center, the System
routes the order to the locking or crossing market center. SCAN
behaves similarly, but once the order is on the NASDAQ book, the
System will not route the order to a locking or crossing market
center. Although both options are described in Rule 4758 as
variations of the DOT strategy, NASDAQ's system specifications refer
to the SCAN option as either ``DOTA'' or ``DOTD'' and refer to the
STGY option as ``DOTM.''
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[[Page 18102]]
NASDAQ is proposing to modify the language of the rule to make it
clear that a DOT order may be designated to participate in the opening
only or in the closing only (as provided by the specifications of the
destination market) or to remain in force after the opening or closing,
as applicable. An order entered before the open (or close) that is
designated as opening only (or closing only) will likely be cancelled
by the destination market after the open (or close) in accordance with
its terms and therefore will not return to NASDAQ, even if not executed
in full. Similarly, if NASDAQ receives a DOT order after the security
has opened (or closed) and the order has been designated to participate
in the opening only (or closing only), the order will nevertheless be
routed to NYSE or NYSE MKT (which would be expected to reject the order
based on its designation as opening only or closing only).\5\ NASDAQ is
also proposing to add language to the rule to make it clear that the
conversion of DOT orders into SCAN or STGY orders applies only if the
orders are not designated opening or closing only and are not fully
executed, rejected, or cancelled by the market to which they are
routed. NASDAQ is also modifying a sentence describing the treatment of
DOT orders entered after 9:30 a.m. (i.e., orders that are intended to
participate in the opening but that are entered after the opening);
such orders are not routed to NYSE or NYSE MKT, but rather are
immediately converted to SCAN or STGY orders. The modifications make it
clear that this processing logic would be applied to an order that is
intended to participate in the close but that is entered after the
close. The modifications also make it clear that the processing logic
would not be applied if the order was designated as opening only or
closing only, since, as described above, the order would be routed and
would be expected to be rejected. Finally, NASDAQ is modifying the rule
to provide that DOT orders that are designated to participate in an
opening process and that are received by NASDAQ before the destination
market can receive them will be held until such time as the destination
market can receive them. Currently, such orders are routed to the
destination market and may be rejected.
---------------------------------------------------------------------------
\5\ In the event that an opening or closing only order was
returned to NASDAQ after the time of the open or close on the
destination market, NASDAQ would cancel the order.
---------------------------------------------------------------------------
NASDAQ is proposing similar changes to the DOTI routing strategy.
DOTI is a routing option for orders that the entering firm wishes to
direct to the NYSE or NYSE MKT without them returning to the Nasdaq
Market Center. DOTI orders check the System for available shares and
then are sent to destinations on the System routing table before being
sent to NYSE or NYSE MKT, as appropriate. Alternatively, the member
entering the order may opt to have it check the System and then be sent
directly to NYSE or NYSE MKT, without routing to destinations on the
System routing table.\6\ DOTI orders do not return to the Nasdaq Market
Center book after routing.
---------------------------------------------------------------------------
\6\ This option is referred to in system specifications as
``DOTZ''.
---------------------------------------------------------------------------
As is the case with DOT, NASDAQ is modifying the language of the
rule to make it clear that a DOTI order may be designated to
participate in the opening only or in the closing only (as provided by
the specifications of the destination market) or to remain in force
after the opening or closing, as applicable. An order entered before
the open (or close) that is designated as opening only (or closing
only) will likely be cancelled by the destination market after the open
(or close) in accordance with its terms and therefore will not return
to NASDAQ, even if not executed in full. Similarly, if NASDAQ receives
a DOTI order after the security has opened (or closed) and the order
has been designated to participate in the opening only (or closing
only), the order will nevertheless be routed to NYSE or NYSE MKT (which
may reject the order based on its designation as opening only or
closing only).\7\ NASDAQ is also proposing to modify the rule to
provide that DOTI orders that are designated to participate in an
opening process and that are received by NASDAQ before the destination
market can receive them will be held until such time as the destination
market can receive them.
---------------------------------------------------------------------------
\7\ In the event that an opening or closing only order was
returned to NASDAQ after the time of the open or close on the
destination market, NASDAQ would cancel the order.
---------------------------------------------------------------------------
LIST is a routing option designed to allow orders to participate in
the opening and/or closing process of the primary listing market for a
security, and to follow additional routing logic as described below.\8\
A LIST order received before the security has opened on its primary
listing market will be routed to the primary listing market for
participation in that market's opening process. After the security has
opened on its primary listing market, unexecuted shares will be
returned to the NASDAQ system.\9\ Thereafter, the order will check the
System for available shares and simultaneously route the remaining
shares to destinations on the System routing table. Any remaining
shares will be posted on the book. As with DOT and DOTI, NASDAQ is
proposing to modify the rule governing LIST orders to provide that if a
LIST order is received by NASDAQ before the destination market is able
to receive orders for its opening process, the order will be held until
such time as the destination market can receive it.
---------------------------------------------------------------------------
\8\ NASDAQ is adding this language to the existing rule text to
describe the overall framework for the routing strategy.
\9\ NASDAQ is proposing to add language to the rule to make it
clear that the order would be returned only to the extent that the
order has not been designated opening only and has not been fully
executed, rejected, or cancelled by the destination market.
---------------------------------------------------------------------------
NASDAQ is also proposing to modify the language of the rule
governing LIST orders to make it clear that a LIST order may be
designated to participate in the opening only, as provided by the
specifications of the destination market. Accordingly, an order entered
before the open that is designated as opening only will likely be
cancelled by the destination market after the open in accordance with
its terms and therefore will not return to NASDAQ, even if not executed
in full. Similarly, if NASDAQ receives a LIST order after the security
has opened and the order has been designated to participate in the
opening only, the order will nevertheless be routed to the primary
[sic] market (which would be expected to reject the order based on its
designation as opening only).\10\
---------------------------------------------------------------------------
\10\ In the event that an opening only order was returned to
NASDAQ after the time of the open on the destination market, NASDAQ
would cancel the order.
---------------------------------------------------------------------------
Otherwise, if an order that has not been designated as opening only
\11\ is entered after the market open (but before a time that is two
minutes before market close),\12\ NASDAQ will check
[[Page 18103]]
the System for available shares and simultaneously route the remaining
shares to destinations on the System routing table, with remaining
shares posted on the book. Once on the book, if the order is
subsequently locked or crossed by another market center, the System
will not route the order to the locking or crossing market center.\13\
Two minutes before market close, all LIST orders on the book will route
to the security's primary listing market for participation in its
closing process.\14\ Similarly, if a LIST order is received at or after
a time that is two minutes before market close but before market close,
NASDAQ will check the System for available shares and simultaneously
route the remaining shares to destinations on the System routing table;
remaining shares will be routed to the security's primary listing
market to participate in its closing process.\15\ After the security
has closed on the primary listing market, a LIST order that has not
been designated as closing only and that has not been fully executed,
rejected or cancelled by the destination market will be returned to
NASDAQ and unexecuted shares will be posted to the NASDAQ book.\16\
---------------------------------------------------------------------------
\11\ NASDAQ is proposing to add qualifying language to the rule
to make it clear that the behavior of orders after the market open
would not apply to an order that has been designated as opening
only.
\12\ NASDAQ is proposing to replace references to specific
times, such as 4:00 p.m., in Rule 4758 with more general references
to account for the possibility of variation in the precise time of
NASDAQ's system hours, the time of the market open and close, and
the periodic occurrence of days when the markets are planned to
close early (e.g., the day after Thanksgiving).
\13\ If trading in the security is stopped across all markets,
LIST orders will be sent to the primary listing market to
participate in its re-opening process. When normal trading resumes,
unexecuted shares will be removed from the primary listing market
and posted on the NASDAQ book. LIST orders may not be assigned a
time-in-force of [sic] good-till-cancelled. NASDAQ is proposing to
modify the rule language governing this behavior to improve its
clarity by replacing the words ``cancelled off of the primary'' with
the words ``removed from the primary listing market.''
\14\ NASDAQ is proposing to delete language stating that the
routed order ``will be cancelled by the System''. The language was
intended to reflect the fact that the routed shares would no longer
be on the NASDAQ book, but the reference to the order being
``cancelled'' may be confusing and therefore is being deleted.
\15\ NASDAQ notes, however, the certain trading venues have
established cut-off times for participation in their opening and
closing processes. Orders received by NASDAQ before the time of the
opening or closing processes will be routed to the primary market;
however, if a market receives such orders after its applicable cut-
off time, the order may be rejected by the destination market.
\16\ NASDAQ is proposing to add language to the existing
sentence regarding shares posting to the NASDAQ book to make it
clear that it applies after the security has closed on the primary
market and applies only if the order has not been designated as
closing only and has not been fully executed, rejected, or cancelled
by the destination market.
---------------------------------------------------------------------------
NASDAQ is also modifying the language of the rule governing LIST
orders to make it clear that a LIST order may be designated to
participate in the closing only, as provided by the specifications of
the destination market. Accordingly, an order entered before the close
that is designated as closing only will likely be cancelled by the
destination market after the close in accordance with its terms and
therefore will not return to NASDAQ, even if not executed in full.
Similarly, if NASDAQ receives a LIST order after the security has
closed and the order has been designated to participate in the closing
only, the order will nevertheless be routed to the primary [sic] market
(which may reject the order based on its designation as closing
only).\17\
---------------------------------------------------------------------------
\17\ In the event that a closing only order was returned to
NASDAQ after the time of the close on the destination market, NASDAQ
would cancel the order.
---------------------------------------------------------------------------
Currently, any LIST order shares that are received after market
close are posted to the NASDAQ book. However, NASDAQ is modifying this
behavior, so that rather than posting to the NASDAQ book immediately,
the order will check the System for available shares and simultaneously
route the remaining shares to destinations on the System routing table.
Any remaining shares will then be posted to the NASDAQ book.\18\
---------------------------------------------------------------------------
\18\ As described above, this logic would not apply if the order
was designated as closing only. NASDAQ is proposing to add language
to make it clear that the routing of orders entered after market
close would not apply if the order was designated as closing only.
---------------------------------------------------------------------------
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\19\ in general, and with
Section 6(b)(5) of the Act \20\ 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. NASDAQ
believes that the changes will increase the flexibility of market
participants by making it clear that they may designate DOT, DOTI, and
LIST orders to participate in the opening only or closing only of a
primary listing venue, in accordance with the specifications of the
primary market, and by providing that orders entered before a
destination market is ready to receive them will be held by NASDAQ
until they may be routed. In addition, the change with respect to LIST
orders received after a market close will increase the likelihood of
such order's executing, by providing that they will be routed before
posting to the NASDAQ book. The changes also increase the clarity and
precision of the rule text. Collectively, these changes facilitate
transactions in securities and perfect the mechanism of a free and open
market and a national market system by providing NASDAQ members with
greater control over the routing of their orders.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f.
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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. NASDAQ believes
that the changes will promote competition by enhancing the value of
NASDAQ's routing functionality to its members. However, since the use
of NASDAQ's routing services is optional and members have numerous
alternative mechanisms for order routing, the changes will not impair
the ability of members to use other means of accessing competitive
trading venues.
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)(ii) [sic] of the Act \21\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\22\
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(3)(a)(ii) [sic].
\22\ 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.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
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
[[Page 18104]]
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.
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 Number SR-NASDAQ-2014-025 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-2014-025. 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, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2014-025, and should
be submitted on or before April 21, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07039 Filed 3-28-14; 8:45 am]
BILLING CODE 8011-01-P
