80 FR 12 pgs. 2762-2763 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving a Proposed Rule Change To Adopt NASDAQ Rule 7015(i) To Offer the New IPO Workstation
Type: NOTICEVolume: 80Number: 12Pages: 2762 - 2763
Pages: 2762, 2763Docket number: [Release No. 34-74041; File No. SR-NASDAQ-2014-110]
FR document: [FR Doc. 2015-00700 Filed 1-16-15; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74041; File No. SR-NASDAQ-2014-110]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving a Proposed Rule Change To Adopt NASDAQ Rule 7015(i) To Offer the New IPO Workstation
January 13, 2015.
I. Introduction
On November 14, 2014, The NASDAQ Stock Market LLC ("NASDAQ" or the "Exchange") filed with the Securities and Exchange Commission ("Commission"), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act")1and Rule 19b-4 thereunder,2a proposed rule change to offer stand-alone access to the Exchange's IPO Indicator service. The proposed rule change was published for comment in the Federal Register on December 2, 2014.3The Commission received no comments on the proposal. This order approves the proposed rule change.
Footnotes:
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
3 See Securities Exchange Act Release No. 73683 (November 25, 2014), 79 FR 71490 ("Notice").
II. Description of the Proposal
The Commission recently approved a proposed rule change from the Exchange to offer the IPO Indicator as an enhancement to the NASDAQ Workstation at no additional cost.4The Exchange now proposes to adopt Exchange Rule 7015(i) to offer stand-alone access to the IPO Indicator service ("IPO Workstation") at no cost at this time.5That is, a subscription to the full NASDAQ Workstation will not be required to access the IPO Indicator for those subscribing to the IPO Workstation.6
Footnotes:
4 See Securities Exchange Act Release No. 73950 (December 29, 2014), 80 FR 268 (January 5, 2015).
5 See Notice, supra note 3 at 71491.
6 See id. at 71492.
The IPO Indicator, according to the Exchange, is designed to assist member firms in monitoring their orders in the NASDAQ Halt Cross process leading up to the launch of an initial public offering ("IPO").7According to the Exchange, the NASDAQ Halt Cross ("Cross") is designed to provide for an orderly, single-priced opening of securities subject to an intraday halt, including securities that are the subject of an IPO.8Prior to the Cross execution, the Exchange states that market participants enter quotes and orders eligible for participation in the Cross, and the Exchange disseminates certain information regarding buying and selling interest entered and the indicative execution price information, known as the Net Order Imbalance Indicator ("NOII").9The Exchange further states that the NOII is disseminated every five seconds during a designated period prior to the completion of the Halt Cross, in order to provide market participants with information regarding the possible price and volume of the Cross. According to the Exchange, the information provided in the NOII message includes the Current Reference Price10and the number of shares of Eligible Interest.11
Footnotes:
7 See id. at 71491.
8 See id.
9 See id.
10 See Exchange Rule 4753(a)(3)(A). The Exchange describes the Current Reference Price as the price at which the Cross would occur if it executed at the time of the NOII's dissemination. See Notice, supra note 3, at 71491.
11 See Exchange Rule 4753(a)(5) (defining Eligible Interest as "any quotation or any order that has been entered into the system and designated with a time-in-force that would allow the order to be in force at the time of the Halt Cross").
The Exchange also disseminates information about the size and buy/sell direction of an Imbalance,12which the Exchange defines as the number of shares of Eligible Interest with a limit price equal to the Current Reference Price that may not be matched with other order shares at a particular price at any given time.13The Exchange states that the disseminated information reflects all shares eligible for participation in the Cross, regardless of time-in-force (including non-displayed shares and reserve size) and is meant to indicate the degree to which available liquidity on one or the other side of the market would not be executed if the Cross were to occur at that time.
Footnotes:
12 See Exchange Rule 4753(a)(1).
13 See Notice, supra note 3, at 71491. The Exchange states that it also disseminates a Market Order Imbalance, which the Exchange defines as the number of shares of Eligible Interest entered through market orders that would not be matched with other order shares at the time of the dissemination of a NOII, if in fact there are such unexecutable market order shares. See Exchange Rule 4753(a)(2). When there is a Market Order Imbalance, the Exchange notes that it disseminates the imbalance and the buy/sell direction of the imbalance. See Notice, supra note 3, at 71491.
[top] In the case of an IPO, the Exchange states that the Halt Cross operates as follows: first, the underwriters to the IPO make a determination to launch the IPO during the Pre-Launch Period14when the underwriters believe the security is ready to trade.15Second, once the underwriter informs the Exchange that it is ready to launch the IPO, the NASDAQ system calculates the Current Reference Price at that time (the "Expected Price") and displays it to the underwriter.16If the underwriter then approves proceeding, the NASDAQ system conducts two validation checks: (1) The NASDAQ system determines whether all market orders will execute in the cross; and (2) whether the Expected Price and the price calculated by the Cross differ by an amount in excess of the price band selected by the underwriter.17According to the Exchange, if either of the validation checks fails, the security will not be released for trading and the Pre-Launch
Footnotes:
14 The Exchange explains that the Pre-Launch Period is the second phase of a two-phase process that NASDAQ uses for launching IPOs. See id. According to the Exchange, the Pre-Launch Period follows a 15-minute Display Only Period and is of no fixed duration. See id. In addition, the Exchange states that the NOII is disseminated every five seconds during both periods. See id.
15 See id.
16 See id.
17 See Notice, supra note 3, at 71491.
18 See id. Alternatively, the underwriter may, with the concurrence of the Exchange, determine to postpone and reschedule the IPO. See id.
The Exchange proposes to offer the IPO Indicator to provide information about the number and price at which shares of a member firm's orders entered for execution in an IPO Halt Cross ("IPO shares") would execute in an IPO if it were to price at the present time.19Under the proposal, the IPO Indicator will now be offered as a stand-alone service and would use the NOII information of an IPO security together with information about the member firm's orders on NASDAQ in the IPO security.20The Exchange notes that, similar to accessing the IPO Indicator from the NASDAQ Workstation as the Exchange currently offers,21subscribing member firms will be able to access the IPO Indicator from the main IPO Workstation screen.22Under the proposal, the Exchange states that member firms using the IPO Indicator would be able to see the Current Reference Price, the number of paired shares, the number of imbalance shares, the total number of IPO shares the subscribing member firm has entered for execution in the IPO Halt Cross, the nature of such shares (buy or sell), and the number of IPO shares that would be executed in the Halt Cross at that time for each of those categories.23In addition, the Exchange states that subscribing member firms using the IPO Indicator would also be able to see details about its IPO shares presented by individual orders or order blocks, which would include the number of IPO shares in a particular order or order block, the number and percentage of IPO shares of the order or order block that would be executed in the Halt Cross if it occurred at any given time in the process, based on the NOII disseminated every five seconds, and the price at which the order or order block was submitted.24
Footnotes:
19 See id.
20 The Exchange states that the information provided by the IPO Indicator is limited to the subscribing member firm's orders. See id.
21 See supra note 4 and accompanying text.
22 See Notice, supra note 3, at 71491.
23 See id.
24 See id.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.25In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,26which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and Section 6(b)(8) of the Act,27which requires that the rules of the exchange do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
Footnotes:
25 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
26 15 U.S.C. 78f(b)(5).
27 15 U.S.C. 78f(b)(8).
As described above, the Exchange proposes to adopt Exchange Rule 7015(i) to offer stand-alone access to the IPO Indicator. The Commission notes that it recently approved a proposed rule change that allows the Exchange to provide the IPO Indicator through the NASDAQ Workstation.28Offering the IPO indicator through the IPO Workstation will provide all member firms that are interested in subscribing to the IPO indicator a means to access it, at no cost at this time, in lieu of paying for a full NASDAQ Workstation subscription.29Accordingly, the Commission believes that the proposed rule change adopting the IPO Workstation is designed to protect investors and the public interest by providing member firms with more information regarding their orders submitted for participation in an IPO Halt Cross.
Footnotes:
28 See supra note 4 and accompanying text.
29 See Notice, supra note 3 at 71492. The Exchange notes that not all member firms subscribe to the NASDAQ Workstation and prospective users of the IPO indicator may not desire to pay for a full NASDAQ Workstation subscription for the sole purpose of assessing the IPO indicator.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,30that the proposed rule change (SR-NASDAQ-2014-110) be, and it hereby is, approved.
Footnotes:
30 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31
Footnotes:
31 17 CFR 200.30-3(a)(12).
Brent J. Fields,
Secretary.
[FR Doc. 2015-00700 Filed 1-16-15; 8:45 am]
BILLING CODE 8011-01-P