80 FR 20282 - Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update Public Disclosure of Exchange Usage of Market Data
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 72 (April 15, 2015)
Federal Register Volume 80, Issue 72 (April 15, 2015)
| Page Range | 20282-20285 | |
| FR Document | 2015-08545 |
[Federal Register Volume 80, Number 72 (Wednesday, April 15, 2015)] [Notices] [Pages 20282-20285] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-08545] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74690; File No. SR-NASDAQ-2015-033] Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update Public Disclosure of Exchange Usage of Market Data April 9, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that, on April 2, 2015, 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 and II, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \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 The Exchange proposes to update the public disclosure of the sources of data that NASDAQ utilizes when performing (1) order handling and execution; (2) order routing; and (3) related compliance processes. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are bracketed. * * * * * 4759. Data Feeds Utilized [NASDAQ shall publicly disclose the proprietary and network processor feeds utilized by the System for the handling, routing, and execution of orders, as well as for the regulatory compliance processes related to those functions. This information shall be displayed on www.nasdaqtrader.com, and it shall be updated promptly each time NASDAQ determines to add, subtract, or otherwise modify a data source.] The NASDAQ System utilizes the below proprietary and network processor feeds utilized by the System for the handling, routing, and execution of orders, as well as for the regulatory compliance processes related to those functions. The Secondary Source of data is utilized only in emergency market conditions and only until those emergency conditions are resolved. ---------------------------------------------------------------------------------------------------------------- Market center Primary source Secondary source ---------------------------------------------------------------------------------------------------------------- A--NYSE MKT (AMEX)..................... CQS/UQDF.................. n/a B--NASDAQ OMX BX....................... BX ITCH 4.1............... CQS/UQDF D--FINRA ADF........................... CQS/UQDF.................. n/a J--DirectEdge A........................ EdgeBook.................. CQS/UQDF K--DirectEdge X........................ EdgeBook.................. CQS/UQDF M--CSX................................. CQS/UQDF.................. n/a N--NYSE................................ NYSE OpenBook Ultra....... CQS/UQDF P--NYSE Arca........................... ArcaBook Binary CQS/UQDF uncompacted. T/Q--NASDAQ............................ ITCH 4.1.................. CQS/UQDF X--NASDAQ OMX PSX...................... PSX ITCH 4.1.............. CQS/UQDF Y--BATS Y-Exchange..................... BATS PITCH................ CQS/UQDF Z--BATS Exchange....................... BATS PITCH................ CQS/UQDF ---------------------------------------------------------------------------------------------------------------- [[Page 20283]] * * * * * (b) Not applicable. (c) Not applicable. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In her June 5, 2014 market structure speech, the Chair requested that all national securities exchanges review and disclose their policies and procedures governing the market data used when performing important exchange functions.\3\ In a letter dated June 20, 2014, the Director of the Division of Trading and Markets codified this request: --------------------------------------------------------------------------- \3\ See Mary Jo White, Chair, Securities and Exchange Commission, Speech at the Sandler O'Neill & Partners L.P. Global Exchange and Brokerage Conference (June 5, 2014). We believe there is a need for clarity regarding whether (1) the SIP data feeds, (2) proprietary data feeds, or (3) a combination thereof, are used by the exchanges for purposes of (1) order handling and execution (e.g., with pegged or midpoint orders), (2) order routing, and (3) regulatory compliance, as applicable. . . . Accordingly, we ask that proposed rule changes be filed that disclose the particular market data feeds that are used for each of these purposes. Consistent with your recent discussions with Commission staff, we ask that each SRO file these proposed rule changes with the Commission by July 15, 2014.\4\ --------------------------------------------------------------------------- \4\ See Letter from Steven Luparello, Director, SEC Division of Trading and Markets, to Robert Greifeld, Chief Executive Officer, NASDAQ OMX Group, Inc., dated June 20, 2014. NASDAQ fully supports the Commission's efforts to provide more clarity in this area. In fact, in 2011, NASDAQ disclosed its general practices governing the use of market data in the handling, execution, --------------------------------------------------------------------------- and routing of orders on NASDAQ: The Exchange is also changing its policies and procedures under Regulation NMS governing the data feeds used by its execution system and routing engine. Current policies state that those systems use data provided by the network processors. In the future, those systems will use data provided either by the network processors or by proprietary feeds offered by certain exchanges directly to vendors. The determination of which data feed to utilize will be the same as the determination made with respect to the [MatchView] Feed. In other words, the Exchange execution system, routing engine and Feed will each utilize the same data for a given exchange . . . .\5\ --------------------------------------------------------------------------- \5\ See SR-NASDAQ-2011-118 (Aug. 18, 2011); 76 FR 53007 (Aug. 24, 2011). Although, as described above, NASDAQ publicly disclosed its general practice of consuming data from a combination of network processor and proprietary data feeds, NASDAQ did not disclose the specific feeds NASDAQ utilizes for each individual exchange, and it did not describe its data usage practice with respect to related compliance checks. Through this proposed rule change, NASDAQ is publicly clarifying on a market-by-market basis the specific network processor and proprietary data feeds that NASDAQ utilizes for the handling, routing, and execution of orders, and for performing the regulatory compliance checks related to each of those functions. These complex practices are governed by a few, simple principles that are designed to ensure that NASDAQ has the most accurate view of the trading interest available across multiple markets, and to maximize the synchronization of the many exchange functions that depend upon the calculation of an accurate NBBO and top-of-book for each market. These principles are: 1. NASDAQ uses a proprietary data feed from each exchange that provides a reliable proprietary data feed. Where no reliable proprietary data feed is available, NASDAQ uses the network processor feed; 2. Where NASDAQ uses a proprietary data feed for an exchange quote, it also maintains access to the network processor feed as a back-up in the event a specific proprietary feed become unavailable or unusable for any reason; 3. NASDAQ uses the same proprietary data feed when performing order handling, routing, and execution functions, and also when the execution and routing System performs internal compliance checks related to those functions; and 4. NASDAQ acquires and processes all proprietary and network processor feeds via the same technological configuration (i.e., telecommunication circuitry, switches, and feed handlers) to the greatest extent possible. 5. NASDAQ calculates the National Best Bid and Offer (``NBBO'') and top-of-book for each exchange at a single point within the NASDAQ System, and then distributes that data simultaneously to numerous applications performing order handling, routing, execution, and internal compliance functions throughout the NASDAQ System. 6. NASDAQ aggregates odd-lot orders, including those in its own and affiliated markets, when calculating the NBBO based upon a direct feed from an away exchange. NASDAQ processes odd-lot orders from each exchange direct feed in the same manner that that exchange aggregates odd-lots when reporting its own quotations to the SIP. 7. NASDAQ utilizes the NBBO and top-of-book calculations described above for the handling of orders that use those reference points, including all variations of midpoint orders, pegged orders, and price- to-comply orders described in NASDAQ Rule 4751(f), as well as Retail Price Improving Orders described in NASDAQ Rule 4780(a). 8. When calculating the NBBO, the NASDAQ System does not utilize feedback from other venues when calculating the NBBO. The NASDAQ System assumes that a protected quotation to which it has routed an order has been executed and can be removed from the NBBO; it does not await or respond to execution reports from such routing activity. As of the date of this filing, NASDAQ utilizes the following data feeds for the handling, execution and routing of orders, as well as for performing related compliance checks: ---------------------------------------------------------------------------------------------------------------- Market center Primary source Secondary source ---------------------------------------------------------------------------------------------------------------- A--NYSE MKT (AMEX)..................... CQS/UQDF.................. n/a B--NASDAQ OMX BX....................... BX ITCH 4.1............... CQS/UQDF D--FINRA ADF........................... CQS/UQDF.................. n/a [[Page 20284]] J--DirectEdge A........................ EdgeBook.................. CQS/UQDF K--DirectEdge X........................ EdgeBook.................. CQS/UQDF M--CSX................................. CQS/UQDF.................. n/a N--NYSE................................ NYSE OpenBook Ultra....... CQS/UQDF P--NYSE Arca........................... ArcaBook Binary CQS/UQDF uncompacted. T/Q--NASDAQ............................ ITCH 4.1.................. CQS/UQDF X--NASDAQ OMX PSX...................... PSX ITCH 4.1.............. CQS/UQDF Y--BATS Y-Exchange..................... BATS PITCH................ CQS/UQDF Z--BATS Exchange....................... BATS PITCH................ CQS/UQDF ---------------------------------------------------------------------------------------------------------------- NASDAQ uses these feeds to calculate the NBBO via an application called the ``NMSFeed.'' The NMSFeed consumes the NASDAQ Protected Quote Service (``NPQS''), which provides an internal view of that exchange's own market data as NASDAQ ITCH, plus the proprietary and network processor market data feeds listed above. The NMSFeed calculates a Regulation NMS-Compliant ``Best Bid or Offer'' (``Compliant BBO''), and then delivers that information throughout the NASDAQ System, including to the ``OUCH'' order entry ports,\6\ the routing System, and various compliance applications described below. --------------------------------------------------------------------------- \6\ OUCH is a protocol that allows NASDAQ participants to enter, replace and cancel orders and receive executions. In addition to OUCH, NASDAQ offers the FLITE protocol as an option for participants. In this document, references to OUCH also include FLITE because they are interchangeable for these purposes. --------------------------------------------------------------------------- Upon receipt of an update to a protected quote for a specific venue, the NMSFeed updates its quote for that venue, recalculates the consolidated BBO based upon the update, and recalculates the Compliant BBO after applying NASDAQ's own BBO. Any quote that crosses NASDAQ's BBO is ignored. NASDAQ odd lot orders at the same price are aggregated and considered in the NBBO calculation if the sum is greater than or equal to a round lot. Otherwise, they are not considered in the NBBO calculation. Out of the remaining quotes, the most aggressive remaining bid and offer (excluding NASDAQ \7\ and any destination which has been excluded from the NBBO in compliance with the self-help procedures under Regulation NMS) is selected and reported as the best quote. If away markets are crossing the market after applying NASDAQ's BBO, orders will be accepted as originally priced and have the potential to execute. Any order sent to NASDAQ that is not an Intermarket Sweep Order (``ISO'') will have the Compliant BBO check enforced by the System.\8\ --------------------------------------------------------------------------- \7\ Deletion of NASDAQ's quote at this stage of the process is necessary because otherwise the system would prevent valid executions on NASDAQ in the erroneous belief that such executions would be ``trade throughs'' in violation of Regulation NMS. \8\ In general, any order that is sent to NASDAQ with an ISO flag is not re-priced and will be processed at its original price. There are a limited number of circumstances in which an order marked as an ISO will be determined not to be executable at its original price and will be re-priced. These include re-pricing under the Plan to Address Extraordinary Market Volatility, re-pricing to comply with Regulation SHO, and the re-pricing of an order with a post-only condition if NASDAQ has an order at that price at the time the order is accepted. --------------------------------------------------------------------------- The NASDAQ OMX Routing and Special Handling System (``RASH'') utilizes the Compliant BBO to determine if and when an order with special processing directives is marketable either against one or more orders in either the Core Matching System or a remote trading venue. RASH also receives market data feeds from certain venues not displaying protected quotes in the national market system for use in ``QDRK'' and ``QCST'' routing strategies set forth in NASDAQ Rule 4758(a)(1)(A)(xiii) and (xiv), respectively. RASH maintains a number of routing processes, or Routers, unique to each venue that the System accesses. These Routers maintain a limited set of details for orders that are configured as routable by the user, while also monitoring the current best bid and best offer prices on each exchange. The NASDAQ System includes internal compliance applications related to locked and crossed markets, trade throughs, limit-up/limit-down, and Regulation SHO compliance. Each of these applications utilizes the Compliant BBO to ensure compliance with applicable regulations. NASDAQ operates a separate real-time surveillance system that is external to the execution systems and that monitors the execution system's compliance with applicable rules and regulations. The real-time surveillance system utilizes a ``mirrored'' version of the internal NMSFeed in various realtime surveillance patterns, including (1) Lock/ Cross, which detects lock/cross events across all markets, regardless of whether or not NASDAQ is a participant in the event; (2) Trade Through, which detects potential trade through events for all three NASDAQ equity markets; and (3) RegSho, which detects potential RegSho violations, alerting when a trade executes at or below the NBBO at the time of order entry while the stock is in a RegSho restricted state. 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,\9\ in general and with Sections 6(b)(5) of the Act,\10\ in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78f. \10\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that its proposal to describe the Exchange's use of data feeds removes impediments to and perfects the mechanism of a free and open market and protects investors and the public interest because it provides additional specificity and transparency. The Exchange's proposal will enable investors to better assess the quality of the Exchange's execution and routing services. The proposal does not change the operation of the Exchange or its use of data feeds; rather it describes how, and for what purposes, the Exchange uses the quotes disseminated from data feeds to calculate the NBBO for a security for purposes of Regulation NMS, Regulation SHO and various order types that update based on changes to the applicable NBBO. The Exchange believes the additional transparency into the operation of the Exchange as described in the proposal will remove impediments to and perfect the [[Page 20285]] mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange 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. To the contrary, the Exchange believes the proposal would enhance competition because describing the Exchange's use of data feeds enhances transparency and enables investors to better assess the quality of the Exchange's execution and routing services. 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 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, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ --------------------------------------------------------------------------- \11\ 15 U.S.C. 78s(b)(3)(A). \12\ 17 CFR 240.19b-4(f)(6). 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. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \13\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing, noting that waiver of the operative delay would permit the Exchange to immediately enhance transparency. The Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.\15\ --------------------------------------------------------------------------- \13\ 17 CFR 240.19b-4(f)(6). \14\ 17 CFR 240.19b-4(f)(6)(iii). \15\ For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- 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. 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NASDAQ-2015-033 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2015-033. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 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-2015-033 and should be submitted on or before May 6, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-08545 Filed 4-14-15; 8:45 am] BILLING CODE 8011-01-P
![20282 Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices
IV. Solicitation of Comments Washington, DC 20549, on official (‘‘SEC’’ or ‘‘Commission’’) the proposed
Interested persons are invited to business days between the hours of rule change as described in Items I and
submit written data, views, and 10:00 a.m. and 3:00 p.m. Copies of such II, below, which Items have been
arguments concerning the foregoing, filings will also be available for prepared by the Exchange. The
including whether the proposed rule inspection and copying at the principal Commission is publishing this notice to
change is consistent with the Act. office of ICE Clear Credit and on ICE solicit comments on the proposed rule
Comments may be submitted by any of Clear Credit’s Web site at https:// change from interested persons.
the following methods: www.theice.com/clear-credit/regulation.
All comments received will be posted I. Self-Regulatory Organization’s
Electronic Comments without change; the Commission does Statement of the Terms of Substance of
the Proposed Rule Change
• Use the Commission’s Internet not edit personal identifying
comment form (http://www.sec.gov/ information from submissions. You The Exchange proposes to update the
rules/sro.shtml); or should submit only information that public disclosure of the sources of data
• Send an email to rule-comments@ you wish to make available publicly. All that NASDAQ utilizes when performing
sec.gov. Please include File Number SR– submissions should refer to File (1) order handling and execution; (2)
ICC–2015–006 on the subject line. Number SR–ICC–2015–006 and should order routing; and (3) related
be submitted on or before May 6, 2015. compliance processes.
Paper Comments
For the Commission, by the Division of The text of the proposed rule change
• Send paper comments in triplicate Trading and Markets, pursuant to delegated
to Secretary, Securities and Exchange is below. Proposed new language is
authority.12 italicized; proposed deletions are
Commission, 100 F Street NE., Brent J. Fields,
Washington, DC 20549–1090. bracketed.
Secretary. * * * * *
All submissions should refer to File [FR Doc. 2015–08543 Filed 4–14–15; 8:45 am]
Number SR–ICC–2015–006. This file 4759. Data Feeds Utilized
BILLING CODE 8011–01–P
number should be included on the
subject line if email is used. To help the [NASDAQ shall publicly disclose the
Commission process and review your proprietary and network processor feeds
SECURITIES AND EXCHANGE
comments more efficiently, please use utilized by the System for the handling,
COMMISSION
only one method. The Commission will routing, and execution of orders, as well
post all comments on the Commission’s [Release No. 34–74690; File No. SR– as for the regulatory compliance
Internet Web site (http://www.sec.gov/ NASDAQ–2015–033] processes related to those functions.
rules/sro.shtml). Copies of the This information shall be displayed on
Self-Regulatory Organizations; The www.nasdaqtrader.com, and it shall be
submission, all subsequent NASDAQ Stock Market, LLC; Notice of
amendments, all written statements updated promptly each time NASDAQ
Filing and Immediate Effectiveness of determines to add, subtract, or
with respect to the proposed rule Proposed Rule Change To Update
change that are filed with the otherwise modify a data source.]
Public Disclosure of Exchange Usage
Commission, and all written of Market Data The NASDAQ System utilizes the
communications relating to the below proprietary and network
proposed rule change between the April 9, 2015. processor feeds utilized by the System
Commission and any person, other than Pursuant to Section 19(b)(1) of the for the handling, routing, and execution
those that may be withheld from the Securities Exchange Act of 1934 of orders, as well as for the regulatory
public in accordance with the (‘‘Act’’),1 and Rule 19b-4 thereunder,2 compliance processes related to those
provisions of 5 U.S.C. 552, will be notice is hereby given that, on April 2, functions. The Secondary Source of
available for Web site viewing and 2015, The NASDAQ Stock Market LLC data is utilized only in emergency
printing in the Commission’s Public (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the market conditions and only until those
Reference Room, 100 F Street NE., Securities and Exchange Commission emergency conditions are resolved.
Market center Primary source Secondary source
A—NYSE MKT (AMEX) ................................................... CQS/UQDF ...................................................................... n/a
B—NASDAQ OMX BX ..................................................... BX ITCH 4.1 .................................................................... CQS/UQDF
D—FINRA ADF ................................................................ CQS/UQDF ...................................................................... n/a
J—DirectEdge A ............................................................... EdgeBook ........................................................................ CQS/UQDF
K—DirectEdge X .............................................................. EdgeBook ........................................................................ CQS/UQDF
M—CSX ............................................................................ CQS/UQDF ...................................................................... n/a
N—NYSE .......................................................................... NYSE OpenBook Ultra .................................................... CQS/UQDF
P—NYSE Arca ................................................................. ArcaBook Binary uncompacted ....................................... CQS/UQDF
T/Q—NASDAQ ................................................................. ITCH 4.1 .......................................................................... CQS/UQDF
X—NASDAQ OMX PSX ................................................... PSX ITCH 4.1 .................................................................. CQS/UQDF
Y—BATS Y-Exchange ..................................................... BATS PITCH .................................................................... CQS/UQDF
Z—BATS Exchange ......................................................... BATS PITCH .................................................................... CQS/UQDF
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12 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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![Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20283
* * * * * The Exchange is also changing its policies 3. NASDAQ uses the same proprietary
(b) Not applicable. and procedures under Regulation NMS data feed when performing order
(c) Not applicable. governing the data feeds used by its handling, routing, and execution
execution system and routing engine. Current functions, and also when the execution
II. Self-Regulatory Organization’s policies state that those systems use data
Statement of the Purpose of, and provided by the network processors. In the
and routing System performs internal
Statutory Basis for, the Proposed Rule future, those systems will use data provided compliance checks related to those
Change either by the network processors or by functions; and
proprietary feeds offered by certain 4. NASDAQ acquires and processes
In its filing with the Commission, the exchanges directly to vendors. The all proprietary and network processor
Exchange included statements determination of which data feed to utilize feeds via the same technological
concerning the purpose of and basis for will be the same as the determination made configuration (i.e., telecommunication
the proposed rule change and discussed with respect to the [MatchView] Feed. In circuitry, switches, and feed handlers)
any comments it received on the other words, the Exchange execution system,
to the greatest extent possible.
proposed rule change. The text of these routing engine and Feed will each utilize the
statements may be examined at the same data for a given exchange . . . .5 5. NASDAQ calculates the National
places specified in Item IV below. The Best Bid and Offer (‘‘NBBO’’) and top-
Although, as described above, of-book for each exchange at a single
Exchange has prepared summaries, set
NASDAQ publicly disclosed its general point within the NASDAQ System, and
forth in sections A, B, and C below, of
practice of consuming data from a then distributes that data
the most significant aspects of such
combination of network processor and simultaneously to numerous
statements.
proprietary data feeds, NASDAQ did not applications performing order handling,
A. Self-Regulatory Organization’s disclose the specific feeds NASDAQ routing, execution, and internal
Statement of the Purpose of, and utilizes for each individual exchange, compliance functions throughout the
Statutory Basis for, the Proposed Rule and it did not describe its data usage NASDAQ System.
Change practice with respect to related 6. NASDAQ aggregates odd-lot orders,
1. Purpose compliance checks. including those in its own and affiliated
Through this proposed rule change, markets, when calculating the NBBO
In her June 5, 2014 market structure NASDAQ is publicly clarifying on a
speech, the Chair requested that all based upon a direct feed from an away
market-by-market basis the specific exchange. NASDAQ processes odd-lot
national securities exchanges review
network processor and proprietary data orders from each exchange direct feed in
and disclose their policies and
feeds that NASDAQ utilizes for the the same manner that that exchange
procedures governing the market data
handling, routing, and execution of aggregates odd-lots when reporting its
used when performing important
orders, and for performing the own quotations to the SIP.
exchange functions.3 In a letter dated
regulatory compliance checks related to 7. NASDAQ utilizes the NBBO and
June 20, 2014, the Director of the
each of those functions. These complex top-of-book calculations described
Division of Trading and Markets
practices are governed by a few, simple above for the handling of orders that use
codified this request:
principles that are designed to ensure those reference points, including all
We believe there is a need for clarity that NASDAQ has the most accurate
regarding whether (1) the SIP data feeds, (2)
variations of midpoint orders, pegged
view of the trading interest available orders, and price-to-comply orders
proprietary data feeds, or (3) a combination
thereof, are used by the exchanges for
across multiple markets, and to described in NASDAQ Rule 4751(f), as
purposes of (1) order handling and execution maximize the synchronization of the well as Retail Price Improving Orders
(e.g., with pegged or midpoint orders), (2) many exchange functions that depend described in NASDAQ Rule 4780(a).
order routing, and (3) regulatory compliance, upon the calculation of an accurate 8. When calculating the NBBO, the
as applicable. . . . Accordingly, we ask that NBBO and top-of-book for each market. NASDAQ System does not utilize
proposed rule changes be filed that disclose These principles are:
the particular market data feeds that are used feedback from other venues when
for each of these purposes. Consistent with 1. NASDAQ uses a proprietary data calculating the NBBO. The NASDAQ
your recent discussions with Commission feed from each exchange that provides System assumes that a protected
staff, we ask that each SRO file these a reliable proprietary data feed. Where quotation to which it has routed an
proposed rule changes with the Commission no reliable proprietary data feed is order has been executed and can be
by July 15, 2014.4 available, NASDAQ uses the network removed from the NBBO; it does not
NASDAQ fully supports the processor feed; await or respond to execution reports
Commission’s efforts to provide more 2. Where NASDAQ uses a proprietary from such routing activity.
clarity in this area. In fact, in 2011, data feed for an exchange quote, it also As of the date of this filing, NASDAQ
NASDAQ disclosed its general practices maintains access to the network utilizes the following data feeds for the
governing the use of market data in the processor feed as a back-up in the event handling, execution and routing of
handling, execution, and routing of a specific proprietary feed become orders, as well as for performing related
orders on NASDAQ: unavailable or unusable for any reason; compliance checks:
Market center Primary source Secondary source
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A—NYSE MKT (AMEX) ................................................... CQS/UQDF ...................................................................... n/a
B—NASDAQ OMX BX ..................................................... BX ITCH 4.1 .................................................................... CQS/UQDF
D—FINRA ADF ................................................................ CQS/UQDF ...................................................................... n/a
3 See Mary Jo White, Chair, Securities and 4 See Letter from Steven Luparello, Director, SEC 5 See SR–NASDAQ–2011–118 (Aug. 18, 2011); 76
Exchange Commission, Speech at the Sandler Division of Trading and Markets, to Robert Greifeld, FR 53007 (Aug. 24, 2011).
O’Neill & Partners L.P. Global Exchange and Chief Executive Officer, NASDAQ OMX Group,
Brokerage Conference (June 5, 2014). Inc., dated June 20, 2014.
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![Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20285
mechanism of a free and open market the waiver of the operative delay is available for Web site viewing and
and a national market system, and, in consistent with the protection of printing in the Commission’s Public
general, protect investors and the public investors and the public interest. Reference Room, 100 F Street NE.,
interest. Therefore, the Commission hereby Washington, DC 20549, on official
waives the operative delay and business days between the hours of
B. Self-Regulatory Organization’s
designates the proposal operative upon 10:00 a.m. and 3:00 p.m. Copies of the
Statement on Burden on Competition
filing.15 filing also will be available for
The Exchange does not believe that At any time within 60 days of the inspection and copying at the principal
the proposed rule change will result in filing of the proposed rule change, the office of the Exchange. All comments
any burden on competition that is not Commission summarily may received will be posted without change;
necessary or appropriate in furtherance temporarily suspend such rule change if the Commission does not edit personal
of the purposes of the Act, as amended. it appears to the Commission that such identifying information from
To the contrary, the Exchange believes action is necessary or appropriate in the submissions. You should submit only
the proposal would enhance public interest, for the protection of information that you wish to make
competition because describing the investors, or otherwise in furtherance of available publicly. All submissions
Exchange’s use of data feeds enhances the purposes of the Act. If the should refer to File Number SR–
transparency and enables investors to Commission takes such action, the NASDAQ–2015–033 and should be
better assess the quality of the Commission shall institute proceedings submitted on or before May 6, 2015.
Exchange’s execution and routing to determine whether the proposed rule
services. For the Commission, by the Division of
should be approved or disapproved.
Trading and Markets, pursuant to delegated
C. Self-Regulatory Organization’s IV. Solicitation of Comments authority.16
Statement on Comments on the Interested persons are invited to Brent J. Fields,
Proposed Rule Change Received From submit written data, views and Secretary.
Members, Participants, or Others arguments concerning the foregoing, [FR Doc. 2015–08545 Filed 4–14–15; 8:45 am]
No written comments were either including whether the proposed rule BILLING CODE 8011–01–P
solicited or received. change is consistent with the Act.
III. Date of Effectiveness of the Comments may be submitted by any of
the following methods: SECURITIES AND EXCHANGE
Proposed Rule Change and Timing for
COMMISSION
Commission Action Electronic Comments
Because the proposed rule change • Use the Commission’s Internet [Release No. 34–74692; File No. SR–BATS–
does not (i) significantly affect the comment form (http://www.sec.gov/ 2015–28]
protection of investors or the public rules/sro.shtml); or
interest; (ii) impose any significant • Send an email to rule-comments@ Self-Regulatory Organizations; BATS
burden on competition; and (iii) become sec.gov. Please include File Number SR– Exchange, Inc.; Notice of Filing and
operative for 30 days from the date on NASDAQ–2015–033 on the subject line. Immediate Effectiveness of a Proposed
which it was filed, or such shorter time Rule Change Related to Fees for Use
Paper Comments of BATS Exchange, Inc.
as the Commission may designate, the
proposed rule change has become • Send paper comments in triplicate April 9, 2015.
effective pursuant to Section 19(b)(3)(A) to Secretary, Securities and Exchange
Commission, 100 F Street NE., Pursuant to section 19(b)(1) of the
of the Act 11 and Rule 19b–4(f)(6) Securities Exchange Act of 1934 (the
thereunder.12 Washington, DC 20549–1090.
‘‘Act’’),1 and Rule 19b–4 thereunder,2
A proposed rule change filed All submissions should refer to File
notice is hereby given that on April 1,
pursuant to Rule 19b–4(f)(6) under the Number SR–NASDAQ–2015–033. This
2015, BATS Exchange, Inc. (the
Act 13 normally does not become file number should be included on the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
operative for 30 days after the date of its subject line if email is used. To help the
Securities and Exchange Commission
filing. However, Rule 19b–4(f)(6)(iii) 14 Commission process and review your
(‘‘Commission’’) the proposed rule
permits the Commission to designate a comments more efficiently, please use
change as described in Items I, II, and
shorter time if such action is consistent only one method. The Commission will
III below, which Items have been
with the protection of investors and the post all comments on the Commission’s
prepared by the Exchange. The
public interest. The Exchange has asked Internet Web site (http://www.sec.gov/
Exchange has designated the proposed
the Commission to waive the 30-day rules/sro.shtml). Copies of the
rule change as one establishing or
operative delay so that the proposal may submission, all subsequent
changing a member due, fee, or other
become operative immediately upon amendments, all written statements
charge imposed by the Exchange under
filing, noting that waiver of the with respect to the proposed rule
section 19(b)(3)(A)(ii) of the Act 3 and
operative delay would permit the change that are filed with the
Exchange to immediately enhance Rule 19b–4(f)(2) thereunder,4 which
Commission, and all written
transparency. The Commission believes renders the proposed rule change
communications relating to the
effective upon filing with the
proposed rule change between the
11 15 U.S.C. 78s(b)(3)(A).
Commission. The Commission is
Commission and any person, other than
12 17 CFR 240.19b–4(f)(6). As required under Rule publishing this notice to solicit
those that may be withheld from the
19b–4(f)(6)(iii), the Exchange provided the comments on the proposed rule change
tkelley on DSK3SPTVN1PROD with NOTICES
public in accordance with the
Commission with written notice of its intent to file from interested persons.
the proposed rule change, along with a brief provisions of 5 U.S.C. 552, will be
description and the text of the proposed rule
16 17 CFR 200.30–3(a)(12).
change, at least five business days prior to the date 15 For purposes only of waiving the 30-day
1 15 U.S.C. 78s(b)(1).
of filing of the proposed rule change, or such operative delay, the Commission has also
shorter time as designated by the Commission. considered the proposed rule’s impact on
2 17 CFR 240.19b–4.
13 17 CFR 240.19b–4(f)(6). 3 15 U.S.C. 78s(b)(3)(A)(ii).
efficiency, competition, and capital formation. See
14 17 CFR 240.19b–4(f)(6)(iii). 15 U.S.C. 78c(f). 4 17 CFR 240.19b–4(f)(2).
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Document Created: 2015-12-18 11:13:27
Document Modified: 2015-12-18 11:13:27
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 20282 |
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