[Federal Register Volume 80, Number 58 (Thursday, March 26, 2015)]
[Notices]
[Pages 16050-16072]
[FR Doc No: 2015-06891]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74558; File No. SR-NASDAQ-2015-024]

Self-Regulatory Organizations; The NASDAQ Stock Market, LLC;
Notice of Proposed Rule Change To Amend and Restate Certain Nasdaq
Rules That Govern the Nasdaq Market Center

March 20, 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 March 16, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by NASDAQ. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    Nasdaq proposes to amend and restate certain Nasdaq rules that
govern the Nasdaq Market Center in order to provide a clearer and more
detailed description of certain aspects of its functionality. The text
of the proposed rule change is available at nasdaq.cchwallstreet.com,
at NASDAQ's principal office, and at the Commission's Public Reference
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASDAQ has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to amend and restate certain Nasdaq rules that
govern the Nasdaq Market Center in order to provide a clearer and more
detailed description of certain aspects of its functionality. The
proposed rule change is responsive to the request of Commission Chair
White that each self-regulatory organization (``SRO'') conduct a
comprehensive review of each order type offered to members, and how it
operates in practice.\3\ Nasdaq believes that its current rules and
other public disclosures provide a comprehensive description of the
operation of the Nasdaq Market Center, so that members and the
investing public have an accurate understanding of its market
structure. Nevertheless, Nasdaq has concluded that a restatement of
certain rules will further enhance their clarity. In particular, Nasdaq
believes that providing additional examples of order type operation in
the rule text will promote greater understanding of Nasdaq's market
structure. In addition, Nasdaq notes that certain functionality added
to its market in past years has been described as an ``order type'' but
would be more precisely described as an attribute that may be added to
a particular order. Accordingly, the restated rules will distinguish
between ``Order Types'' and ``Order Attributes,'' while providing a
full description of the Order Attributes that may be attached to
particular Order Types. Except where specifically stated otherwise, all
proposed rules are restatements of existing rules and therefore do not
reflect substantive changes in the rule text or in the operation of the
Nasdaq Market Center.
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    \3\ See Mary Jo White, Chair, Commission, Speech at the Sandler
O'Neill & Partners, L.P. Global Exchange and Brokerage Conference
(June 5, 2014), available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312.
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General Framework for Rule Restatement
    At present, most of the rules governing Nasdaq Order Types and
Order Attributes are found in Rule 4751 (Definitions). Nasdaq is
proposing to restate Rule 4751 as Rule 4701, which is currently not in
use, with certain amended definitions being adopted therein. Nasdaq is
also proposing to remove definitions pertaining to Order Types and
Order Attributes and adopt them as separate new Rules 4702 (Order
Types) and 4703 (Order Attributes). While Nasdaq is also proposing
certain conforming changes to other rules, in subsequent proposed rule
changes Nasdaq plans to restate the remainder of the rules numbered
4752 through 4780 so that they appear sequentially following Rule 4703.
Definitions
    New Rule 4701 will adopt revised definitions applicable to the Rule
4000 Series of the Nasdaq rules: \4\
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    \4\ Other definitions in current Rule 4751 are being superseded
by descriptions of Order Types and Order Attributes in Rules 4702
and 4703, or are being eliminated because they are no longer used.
The definition of ``Directed Order,'' which described a routing
strategy rather than an Order Type, is being moved to Rule 4758
(Order Routing). In addition, Rule 4755 (Order Entry Parameters) is
being deleted because the material contained therein is superseded
by proposed Rules 4702 and 4703.
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     The terms ``Best Bid'', ``Best Offer'', ``National Best
Bid and National Best Offer'', ``Protected Bid'', ``Protected Offer'',
``Protected Quotation'', and ``Intermarket Sweep Order'' shall have the
meanings assigned to them under Rule 600 under SEC Regulation NMS; \5\
provided, however, that the terms ``Best Bid'', ``Best Offer'',
``Protected Bid'', ``Protected Offer'', and ``Protected Quotation''
shall, unless otherwise stated, refer to the bid, offer, or quotation
of a market center other than Nasdaq. The term ``NBBO'' shall mean the
``National Best Bid and National Best Offer''.
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    \5\ 17 CFR 242.600.
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     The term ``Nasdaq Market Center,'' or ``System'', which
defines the components of the securities execution and trade reporting
system owned and operated by The NASDAQ Stock Market LLC, is being
modified to state that the System includes a montage for ``Quotes'' and
``Orders'', referred to as the ``Nasdaq Book'', that collects and ranks
all Quotes and Orders submitted by ``Participants''.\6\ The definition
is further being modified to make it clear that data feeds made
available with respect to the Nasdaq Market Center disseminate depth-
of-book data regarding Quotes and ``Displayed'' Orders \7\ and also
such additional information about Quotes, Orders, and transactions
within the Nasdaq Market Center as shall be reflected in the Nasdaq
Rules.
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    \6\ The modified definitions of ``Quotes'' and ``Orders'' are
described below. The term ``Participant'', which is being amended
only to add a clarifying reference to Regulation NMS, means an
entity that fulfills the obligations contained in Rule 4611
regarding participation in the System, and includes Nasdaq ECNs,
Nasdaq Market Makers, and Order Entry Firms.
    \7\ As provided in proposed Rule 4703, a Displayed Order is an
Order with a Display Order Attribute that allows its price and size
to be disseminated to Participants.
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     The term ``Quote'' is being modified to make it clear that
a Quote is an Order with Attribution (as defined in Rule 4703) entered
by a Market Maker or Nasdaq ECN for display (price and size) next to
the Participant's MPID in the

Nasdaq Book. Accordingly, all Quotes are also Orders.
     The definition of the term ``Order'' is being amended to
mean an instruction to trade a specified number of shares in a
specified System Security \8\ submitted to the Nasdaq Market Center by
a Participant. An ``Order Type'' is a standardized set of instructions
associated with an Order that define how it will behave with respect to
pricing, execution, and/or posting to the Nasdaq Book when submitted to
Nasdaq. An ``Order Attribute'' is a further set of variable
instructions that may be associated with an Order to further define how
it will behave with respect to pricing, execution, and/or posting to
the Nasdaq Book when submitted to Nasdaq. The available Order Types and
Order Attributes, and the Order Attributes that may be associated with
particular Order Types, are described in Rules 4702 and 4703.
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    \8\ The definition of a ``System Security,'' which is not being
modified, includes ``(1) all securities listed on Nasdaq and (2) all
securities subject to the Consolidated Tape Association Plan and the
Consolidated Quotation Plan except securities specifically excluded
from trading via a list of excluded securities posted on
www.nasdaqtrader.com.''
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     The term ``ET'' means Eastern Standard Time or Eastern
Daylight Time, as applicable.
     The term ``Market Hours'' is being defined to mean the
period of time beginning at 9:30 a.m. ET and ending at 4:00 p.m. ET (or
such earlier time as may be designated by Nasdaq on a day when Nasdaq
closes early). The term ``System Hours'' means the period of time
beginning at 4:00 a.m. ET and ending at 8:00 p.m. ET (or such earlier
time as may be designated by Nasdaq on a day when Nasdaq closes early).
The term ``Pre-Market Hours'' means the period of time beginning at
4:00 a.m. ET and ending immediately prior to the commencement of Market
Hours. The term ``Post-Market Hours'' means the period of time
beginning immediately after the end of Market Hours and ending at 8:00
p.m. ET.\9\
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    \9\ The proposed definition further notes that in certain
contexts, times cited in the Nasdaq Rules may be approximate. For
example, for a System Security in which the Nasdaq Opening Cross
occurs, the first transactions executed during Market Hours will
occur in the Nasdaq Opening Cross. However, because Nasdaq Opening
Crosses for different System Securities occur sequentially rather
than simultaneously, the first Market Hours transactions in a
particular System Security are likely to occur during a brief period
following 9:30 a.m. ET, not precisely at 9:30 a.m. ET.
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     The term ``marketable'' with respect to an Order to buy
(sell) means that, at the time it is entered into the System, the Order
is priced at the current Best Offer or higher (at the current Best Bid
or lower).
     The term ``market participant identifier'' or ``MPID''
means a unique four-letter mnemonic assigned to each Participant in the
Nasdaq Market Center. A Participant may have one or more than one MPID.
     The term ``minimum price increment'' means $0.01 in the
case of a System Security priced at $1 or more per share, and $0.0001
in the case of a System Security priced at less than $1 per share.
     The definition of the term ``System Book Feed'', which
means a data feed for System Securities, is being amended to clarify
that it is the data feed generally known as the TotalView ITCH feed.
Order Types
    Proposed Rule 4702 provides that Participants may express their
trading interest in the Nasdaq Market Center by entering Orders. The
Nasdaq Market Center offers a range of Order Types that behave in the
manner specified for each particular Order Type. Each Order Type may be
assigned certain Order Attributes that further define its behavior. All
Order Types and Order Attributes operate in a manner that is reasonably
designed to comply with the requirements of Rules 610 and 611 under
Regulation NMS. Specifically, Orders are reasonably designed to prevent
trade-throughs of Protected Quotations to the extent required by Rule
611 under Regulation NMS, and to prevent the display of quotations that
lock or cross Protected Quotations to the extent required by Rule 610
under Regulation NMS.\10\ Each Order must designate whether it is to
effect a buy, a long sale, a short sale, or an exempt short sale.
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    \10\ It should be noted that Nasdaq Rule 4613(e), Nasdaq's rule
with respect to locked and crossed markets, as adopted pursuant to
Rule 610(d) under Regulation NMS and approved by the Commission,
applies only during Market Hours (approved in Securities Exchange
Act Release No. 54155 (July 14, 2006), 71 FR 41291 (July 20, 2006)
(SR-NASDAQ-2006-001)). Note also that Rule 600 under Regulation NMS
defines a ``trade-through'' as ``the purchase or sale of an NMS
stock during regular trading hours, either as principal or agent, at
a price that is lower than a protected bid or higher than a
protected offer.'' ``Regular trading hours'' are defined, in
pertinent part, as ``the time between 9:30 a.m. and 4:00 p.m.
Eastern Time.'' 17 CFR 242.600.
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    Proposed Rule 4702 further provides that Nasdaq maintains several
communications protocols for Participants to use in entering Orders and
sending other messages to the Nasdaq Market Center:
     OUCH is a Nasdaq proprietary protocol;
     RASH is a Nasdaq proprietary protocol;
     QIX is a Nasdaq proprietary protocol;
     FLITE is a Nasdaq proprietary protocol;
     FIX is a non-proprietary protocol.
Except Where Otherwise Stated, All Protocols Are Available for All
Order Types and Order Attributes
    Upon entry, an Order is processed to determine whether it may
execute against any contra-side Orders on the Nasdaq Book in accordance
with the parameters applicable to the Order Type and Order Attributes
selected by the Participant and in accordance with the priority for
Orders on the Nasdaq Book provided in Rule 4757.\11\ Thus, for example,
a ``Price to Comply Order'' would be evaluated for potential execution
in accordance with different criteria than a ``Post-Only Order.'' \12\
In addition, the Order may have its price adjusted in accordance with
applicable parameters and may be routed to other market centers for
potential execution if designated as ``Routable.'' \13\ The Order may
then be posted to the Nasdaq Book if consistent with the parameters of
the Order Type and Order Attributes selected by the Participant. For
example, an Order with a ``Time-in-Force'' of ``Immediate or Cancel''
would not be posted.\14\
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    \11\ Under Rule 4757, the order in which Orders on the Nasdaq
Book are presented for execution against incoming Orders is
determined first by price (with better priced Orders presented
first). As among equally priced Orders, priority is determined by
Display characteristics and timestamps. Thus, Displayed Orders at a
given price are processed first based on their timestamps, with
earlier Orders processed first. Next, Orders with a Non-Display
Attribute (including the Non-Displayed portion of an Order with
Reserve Size) are processed based on their respective timestamps.
Finally, an incoming Order may be presented for potential execution
against Supplemental Order (as described in Rule 4757 and proposed
Rule 4702(a)(6)). Nasdaq is amending Rule 4757 to remove an obsolete
reference to Discretionary Orders. As provided in current Rule
4751(f)(1) and proposed Rule 4703(g), Orders with Discretion
Attribute rest on the Nasdaq Book at a single price and generate an
Order with a Time-in-Force of Immediate or Cancel under certain
circumstances. Thus, an Order with a Discretion Attribute would not
execute against an incoming Order with a price within its
discretionary range. Nasdaq is amending Rule 4757 to remove this
reference and to make wording changes to improve the clarity of the
rule.
    \12\ These Order Types are described below and in proposed Rule
4702.
    \13\ The Routing Order Attribute is described below, in proposed
Rule 4703, and in current Rule 4758.
    \14\ Available Times-in-Force are described below and in
proposed Rule 4703.
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    Thereafter, as detailed in proposed Rules 4702 and 4703, and
current Rule 4758 (Order Routing), there are numerous circumstances in
which the

Order on the Nasdaq Book may be modified and receive a new timestamp.
The sole instances in which the modification of an Order on the Nasdaq
Book will not result in a new timestamp are: (i) A decrease in the size
of the Order due to execution or modification by the Participant or by
the System, and (ii) a redesignation of a sell Order as a long sale, a
short sale, or an exempt short sale.\15\ Whenever an Order receives a
new timestamp for any reason, it is processed by the System as a new
Order with respect to potential execution against Orders on the Nasdaq
Book, price adjustment, routing, reposting to the Nasdaq Book, and
subsequent execution against incoming Orders, except where otherwise
stated. Thus, for example, if an Order with a ``Pegging'' Order
Attribute had its price changed due to a change in the NBBO,\16\ it
would be processed by the System as a new Order with respect to
potential execution, price adjustment, routing, reposting to the Nasdaq
Book, and subsequent execution against incoming Orders. An exception to
the general rule is noted in Rule 4703(h) with respect to Orders with
``Reserve Size'' \17\ that have a Routing Order Attribute; such Orders
are not routed if reentered due to a replenishment of the Order's
Displayed Size.
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    \15\ Accordingly, there are no circumstances in which an Order
that was previously entered but not displayed on the Nasdaq Book
would be displayed without also receiving a new timestamp, and thus
no possibility for a Participant to ``jump the queue'' with respect
to other Orders.
     Nasdaq is amending Rule 4756 to make it clear that the
redesignation of a sell Order as a long sale, short sale, or exempt
short sale can be done only with respect to Orders entered through
OUCH or FLITE; Orders entered through RASH, QIX, or FIX would have
to be cancelled and reentered to change their designation.
Similarly, Rule 4756 is being amended to clarify that modification
of an Order by the Participant to decrease its size is not possible
with respect to an MOO Order, an LOO Order, an OIO Order, an MOC
Order, an LOC Order, an IO Order, or a Pegged Order (including a
Discretionary Order that is Pegged). Such an Order would have to be
cancelled and reentered by the Participant to reduce its size.
    \16\ The Pegging Order Attribute adjusts the price of the Order
based on changes in the NBBO and is described below and in proposed
Rule 4703.
    \17\ The Reserve Size Order Attribute is described below and in
Rule 4703.
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    In addition, the proposed rule notes that all Orders are also
subject to cancellation and/or repricing and reentry onto the Nasdaq
Book in the circumstances described in Rule 4120(a)(12) (providing for
compliance with Plan to Address Extraordinary Market Volatility) and
Rule 4763 (providing for compliance with Regulation SHO). In all
circumstances where an Order is repriced pursuant to those provisions,
it is processed by the System as a new Order with respect to potential
execution against Orders on the Nasdaq Book, price adjustment, routing,
reposting to the Nasdaq Book, and subsequent execution against incoming
Orders. If multiple Orders at a given price are repriced, the Order in
which they are reentered is random, based on the respective processing
time for each such Order; \18\ provided, however, that in the case of
Price to Comply Orders and Post-Only Orders that have their prices
adjusted upon entry because they lock a Protected Quotation but that
are subsequently displayed at their original entered limit price as
provided in Rules 4702(b)(1)(B) and (4)(B),\19\ they are processed in
accordance with the time priority under which they were previously
ranked on the Nasdaq Book. If an Order is repriced and/or reentered
10,000 times for any reason, the Order will be cancelled. This
restriction is designed to conserve System resources by limiting the
persistence of Orders that update repeatedly without any reasonable
prospect of execution.
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    \18\ This is the case because when Orders are repriced, multiple
instructions to reprice are sent simultaneously through multiple
System gateways in order to modify the Orders as quickly as possible
and thereby minimize the possibility that they will be disadvantaged
vis-[agrave]-vis newly entered Orders.
    \19\ Governing handling of Price to Comply and Post-Only Orders
when formerly unavailable price levels become available.
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    Proposed Rule 4702 further describes the behavior of each Order
Type. Except where otherwise stated, each Order Type is available to
all Participants, although certain Order Types and Order Attributes may
require the use of a specific protocol. As a result, a Participant
would be required to use that protocol in order to use Order Types and
Order Attributes available through it. Moreover, a small number of
Order Types and Order Attributes are available only to registered
Market Makers in the security for which they are registered.
Price To Comply Order
    The Price to Comply Order is an Order Type designed to comply with
Rule 610(d) under Regulation NMS by having its price and display
characteristics adjusted to avoid the display of quotations that lock
or cross any Protected Quotation in a System Security during Market
Hours. The Price to Comply Order is also designed to provide potential
price improvement. The Nasdaq Market Center does not have a ``plain
vanilla'' limit order that attempts to execute at its limit price and
is then posted at its price or rejected if it cannot be posted; rather,
the Price to Comply Order, with its price and display adjustment
features, is one of the primary Order Types used by Participants to
access and display liquidity in the Nasdaq Market Center. The price and
display adjustment features of the Order Type enhance efficiency and
investor protection by offering an Order Type that first attempts to
access available liquidity and then to post the remainder of the Order
at prices that are designed to maximize their opportunities for
execution.
    When a Price to Comply Order is entered, the Price to Comply Order
will be executed against previously posted Orders on the Nasdaq Book
that are priced equal to or better than the price of the Price to
Comply Order, up to the full amount of such previously posted Orders,
unless such executions would trade through a Protected Quotation. Any
portion of the Order that cannot be executed in this manner will be
posted on the Nasdaq Book (and/or routed if it has been designated as
Routable).\20\
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    \20\ See Rules 4703(f) and 4758.
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    During Market Hours, the price at which a Price to Comply Order is
posted is determined in the following manner. If the entered limit
price of the Price to Comply Order would lock or cross a Protected
Quotation and the Price to Comply Order could not execute against an
Order on the Nasdaq Book at a price equal to or better than the price
of the Protected Quotation, the Price to Comply Order will be displayed
on the Nasdaq Book at a price one minimum price increment lower than
the current Best Offer (for a Price to Comply Order to buy) or higher
than the current Best Bid (for a Price to Comply Order to sell) but
will also be ranked on the Nasdaq Book with a non-displayed price equal
to the current Best Offer (for a Price to Comply Order to buy) or to
the current Best Bid (for a Price to Comply Order to sell). The posted
Order will then be available for execution at its non-displayed price,
thus providing opportunities for price improvement to incoming Orders.
    For example, if a Price to Comply Order to buy at $11 would lock a
Protected Offer of $11, the Price to Comply Order will be ranked at a
non-displayed price of $11 but will be displayed at $10.99. An incoming
Order to sell at a price of $11 or lower would execute against the
Price to Comply Order at $11.\21\
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    \21\ Unless the incoming Order was an Order Type that was not
immediately executable, in which case the incoming Order would
behave in the manner specified for that Order Type. For example, as
discussed below, a Post-Only Order to sell priced at $11 would be
repriced and posted at $11.01.

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    During Pre-Market Hours and Post-Market Hours, a Price to Comply
Order will be ranked and displayed at its entered limit price without
adjustment. This is the case because Nasdaq's rule with respect to
locked and crossed markets, as adopted pursuant to Rule 610(d) under
Regulation NMS and approved by the Commission, applies only during
Market Hours.\22\
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    \22\ See supra n. 10.
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    Depending on the protocol used to enter a Price to Comply Order,
Participants have different options with respect to adjustment of the
Price to Comply Order following its initial entry and posting to the
Nasdaq Book. Specifically, if a Price to Comply Order is entered
through RASH, QIX, or FIX, during Market Hours the price of the Price
to Comply Order will be adjusted in the following manner after initial
entry and posting to the Nasdaq Book (unless the Order is assigned a
Routing Order Attribute that would cause it to be routed to another
market center rather than remaining on the Nasdaq Book):
     If the entered limit price of the Price to Comply Order
locked or crossed a Protected Quotation and the NBBO changes, the
displayed and non-displayed price of the Price to Comply Order will be
adjusted repeatedly in accordance with changes to the NBBO; provided,
however, that if the quotation of another market center moves in a
manner that would lock or cross the displayed price of a Price to
Comply Order, the prices of the Price to Comply Order will not be
adjusted. For example, if a Price to Comply Order to buy at $11.02
would cross a Protected Offer of $11, the Order will be ranked at its
non-displayed price of $11 but will be displayed at $10.99. If the Best
Offer then moves to $11.01, the displayed price will be changed to $11
and the Order will be ranked at a non-displayed price of $11.01.
However, if another market center then displays an offer of $11
(thereby locking the previously displayed price of the Price to Comply
Order, notwithstanding Rule 610(d) under Regulation NMS), the price of
the Price to Comply Order will not be changed.\23\ The Order may be
repriced repeatedly until such time as the Price to Comply Order is
able to be ranked and displayed at its original entered limit price
($11.02 in the example). The Price to Comply Order receives a new
timestamp each time its price is changed.
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    \23\ This means that, in general, the price of the Price to
Comply Order will move toward, but not away from, its original
entered limit price. Because a Price to Comply Order is removed from
the Nasdaq Book while it is being repriced, however, it is possible
that the Order's price will move away from its original entered
limit price in the case of a ``race condition'' where the NBBO
changes again while the Order is not on the Nasdaq Book.
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     If the original entered limit price of the Price to Comply
Order would no longer lock or cross a Protected Quotation, the Price to
Comply Order will be ranked and displayed at that price and will
receive a new timestamp, and will not thereafter be adjusted under this
provision.\24\
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    \24\ Thus, the price of the Order will not move beyond its limit
price.
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    If a Price to Comply Order is entered through OUCH or FLITE, during
Market Hours the price of the Price to Comply Order may be adjusted in
the following manner after initial entry and posting to the Nasdaq
Book:
     If the entered limit price of the Price to Comply Order
crossed a Protected Quotation and the NBBO changes so that the Price to
Comply Order could be displayed at a price at or closer to its entered
limit price without locking or crossing a Protected Quotation, the
Price to Comply Order may either remain on the Nasdaq Book unchanged or
may be cancelled back to the Participant, depending on its choice. For
example, if a Price to Comply Order to buy at $11.02 would cross a
Protected Offer of $11, the Order will be ranked at a non-displayed
price of $11 but will be displayed at $10.99. If the Best Offer changes
to $11.01, the Order will not be repriced, but rather will either
remain with a displayed price of $10.99 but ranked at a non-displayed
price of $11 or be cancelled back to the Participant, depending on its
choice. A Participant's choice with regard to maintaining the Price to
Comply Order or cancelling it is set in advance for each port through
which the Participant enters Orders.
     If the entered limit price of the Price to Comply Order
locked a Protected Quotation, the price of the Price to Comply Order
will be adjusted after initial entry only as follows. If the entered
limit price would no longer lock a Protected Quotation, the Price to
Comply Order may either remain on the Nasdaq Book unchanged, may be
cancelled back to the Participant, or may be ranked and displayed at
its original entered limit price, depending on the Participant's
choice. For example, if a Price to Comply Order to buy at $11 would
lock a Protected Offer of $11, the Price to Comply Order will be ranked
at a non-displayed price of $11 but will be displayed at $10.99. If the
Best Offer changes to $11.01, the Price to Comply Order may either
remain with a displayed price of $10.99 but ranked at a non-displayed
price of $11, be cancelled back to the Participant, or be ranked and
displayed at $11, depending on the Participant's choice. A
Participant's choice with regard to maintaining the Price to Comply
Order, cancelling it, or allowing it to be displayed is set in advance
for each port through which the Participant enters Orders. If the Price
to Comply Order is ranked and displayed at its original entered limit
price, it will receive a new timestamp, and will not thereafter be
adjusted under this provision.\25\
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    \25\ Thus, the price of the Order will not move beyond it limit
price.
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    With regard to the foregoing options, it is important to emphasize
that the Price to Comply Order receives a new timestamp whenever its
price is changed, and also receives a new timestamp if the Price to
Comply Order would no longer lock a Protected Quotation and is
therefore displayed at its original entered limit price. Thus, there
are no circumstances under which a Price to Comply Order that
originally locked or crossed a Protected Quotation would ``jump the
queue'' and be displayed at its original entered limit price while
retaining its original time priority. In fact, as discussed throughout
this filing, Nasdaq does not offer any functionality that enables a
Participant to ``jump the queue'' by displaying a previously entered
non-displayed Orders without also receiving a new timestamp.\26\
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    \26\ As a result, it is possible that a new Order that is
entered while previously booked Orders are being repriced may be
placed on the Nasdaq Book ahead of them.
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    The following Order Attributes may be assigned to a Price to Comply
Order. The effect of each Order Attribute is discussed in detail below
with respect to proposed new Rule 4703.
     Price. As described above, the price of the Order may be
adjusted to avoid locking or crossing a Protected Quotation, and may
include a displayed price as well as a non-displayed price.
     Size.
     Reserve Size (available through RASH, FIX and QIX only).
     A Time-in-Force other than ``Immediate or Cancel''
(``IOC'').\27\
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    \27\ As discussed below, IOC is a Time-in-Force under which an
Order is evaluated to determine if it is marketable, with unexecuted
shares cancelled. A Price to Comply Order entered with a Time-in-
Force of IOC would be accepted but would be processed as a Non-
Displayed Order with a Time-in-Force of IOC.
---------------------------------------------------------------------------

     Designation as an ``ISO''. In accordance with Regulation
NMS, a Price to Comply Order designated as an ISO would be processed at
its entered limit price, since such a designation reflects a
representation by the Participant that it has simultaneously

routed one or more additional limit orders, as necessary, to execute
against the full displayed size of any Protected Quotations that the
Price to Comply Order would lock or cross.
     Routing (available through RASH, FIX and QIX only).
     ``Primary Pegging'' and ``Market Pegging'' (available
through RASH, FIX, and QIX only).
     ``Discretion'' (available through RASH, FIX and QIX only).
     Participation in the Nasdaq Opening Cross and/or the
Nasdaq Closing Cross.\28\
---------------------------------------------------------------------------

    \28\ Primary Pegging, Market Pegging, Discretion and
Participation in the Nasdaq Opening Cross and/or the Nasdaq Closing
Cross are discussed below and in proposed Rule 4703.
---------------------------------------------------------------------------

     Display. A Price to Comply Order is always displayed,
although, as provided above, it may also have a non-displayed price
and/or Reserve Size.
Price To Display Order
    A ``Price to Display Order'' is an Order Type designed to comply
with Rule 610(d) under Regulation NMS by avoiding the display of
quotations that lock or cross any Protected Quotation in a System
Security during Market Hours. Price to Display Orders are available
solely to Participants that are Market Makers and are always
Attributable.\29\ Like a Price to Comply Order, a Price to Display
Order is another form of priced Order that first accesses available
liquidity and then posts remaining shares, with price adjustment
features similar to those of the Price to Comply Order that provide a
means to post displayed Orders at prices that are designed to maximize
their opportunities for execution.
---------------------------------------------------------------------------

    \29\ As described below and in proposed Rule 4703, Attribution
is an Order Attribute that allows for display of the price and size
of an Order next to a Market Maker's MPID. In the current rule, the
Price to Display Order is referred to as the ``Price to Comply Post
Order.'' The fact that this Order Type is Attributable and available
only to registered Market Makers reflects a substantive
clarification to the language of the existing rule.
---------------------------------------------------------------------------

    When a Price to Display Order is entered, if its entered limit
price would lock or cross a Protected Quotation, the Price to Display
Order will be repriced to one minimum price increment lower than the
current Best Offer (for a Price to Display Order to buy) or higher than
the current Best Bid (for a Price to Display Order to sell). For
example, if a Price to Display Order to buy at $11 would cross a
Protected Offer of $10.99, the Price to Display Order will be repriced
to $10.98. The Price to Display Order (whether repriced or not
repriced) will then be executed against previously posted Orders on the
Nasdaq Book that are priced equal to or better than the adjusted price
of the Price to Display Order, up to the full amount of such previously
posted Orders, unless such executions would trade through a Protected
Quotation. Any portion of the Order that cannot be executed in this
manner will be posted on the Nasdaq Book (and/or routed if it has been
designated as Routable).\30\
---------------------------------------------------------------------------

    \30\ See Rules 4703(f) and 4758.
---------------------------------------------------------------------------

    During Market Hours, the price at which a Price to Display Order is
displayed and ranked on the Nasdaq Book will be its entered limit price
if the Price to Display Order was not repriced upon entry, or the
adjusted price if the Price to Comply Order [sic] was repriced upon
entry, such that the price will not lock or cross a Protected
Quotation. During Pre-Market Hours and Post-Market Hours, a Price to
Display Order will be displayed and ranked at its entered limit price
without adjustment.
    As is the case with a Price to Comply Order, a Price to Display
Order may be adjusted after initial entry.\31\ Specifically, if a Price
to Display Order is entered through RASH, QIX, or FIX, during Market
Hours the Price to Display Order may be adjusted in the following
manner after initial entry and posting to the Nasdaq Book (unless the
Order is assigned a Routing Order Attribute that would cause it to be
routed to another market center rather than remaining on the Nasdaq
Book):
---------------------------------------------------------------------------

    \31\ These adjustments reflect a substantive clarification to
the language of the existing rule.
---------------------------------------------------------------------------

     If the entered limit price of the Price to Display Order
locked or crossed a Protected Quotation and the NBBO changes, the price
of the Order will be adjusted repeatedly in accordance with changes to
the NBBO; provided, however, that if the quotation of another market
center moves in a manner that would lock or cross the price of a Price
to Display Order, the price of the Price to Display Order will not be
adjusted.\32\ For example, if a Price to Display Order to buy at $11.02
would cross a Protected Offer of $11, the Order will be displayed and
ranked at $10.99. If the Best Offer then moves to $11.01, the
displayed/ranked price will be changed to $11. However, if another
market center then displays an offer of $11 (thereby locking the
previously displayed price of the Price to Display Order,
notwithstanding Rule 610(d) under Regulation NMS), the price of the
Price to Display Order will not be changed. The Order may be repriced
repeatedly until such time as the Price to Display Order is able to be
displayed and ranked at its original entered limit price ($11.02 in the
example). The Price to Display Order receives a new timestamp each time
its price is changed.
---------------------------------------------------------------------------

    \32\ This means that, in general, the price of the Price to
Display Order will move toward, but not away from, its original
entered limit price. Because a Price to Display Order is removed
from the Nasdaq Book while it is being repriced, however, it is
possible that the Order's price will move away from its original
entered limit price in the case of a ``race condition'' where the
NBBO changes again while the Order is not on the Nasdaq Book.
---------------------------------------------------------------------------

     If the original entered limit price of the Price to
Display Order would no longer lock or cross a Protected Quotation, the
Price to Display Order will be displayed and ranked at that price and
will receive a new timestamp, and will not thereafter be adjusted under
this provision.\33\
---------------------------------------------------------------------------

    \33\ Thus, the price of the Order will not move beyond its limit
price.
---------------------------------------------------------------------------

    If a Price to Display Order is entered through OUCH or FLITE,
during Market Hours the Price to Display Order may be adjusted in the
following manner after initial entry and posting to the Nasdaq Book:
     If the entered limit price of the Price to Display Order
locked or crossed a Protected Quotation and the NBBO changes so that
the Price to Display Order could be ranked and displayed at a price at
or closer to its original entered limit price without locking or
crossing a Protected Quotation, the Price to Display Order may either
remain on the Nasdaq Book unchanged or may be cancelled back to the
Participant, depending on the Participant's choice. For example, if a
Price to Display Order to buy at $11.02 would cross a Protected Offer
of $11, the Order will be ranked and displayed at $10.99. If the Best
Offer changes to $11.01, the Price to Display Order will not be
repriced, but rather will either remain at its current price or be
cancelled back to the Participant, depending on its choice. A
Participant's choice with regard to maintaining the Price to Display
Order or cancelling it is set in advance for each port through which
the Participant enters Orders.
    The following Order Attributes may be assigned to a Price to
Display Order:
     Price. As described above, the price of the Order may be
adjusted to avoid locking or crossing a Protected Quotation.
     Size.
     Reserve Size (available through RASH, FIX and QIX only).
     A Time-in-Force other than IOC.\34\
---------------------------------------------------------------------------

    \34\ A Price to Display Order entered with a Time-in-Force of
IOC would be processed as a Non-Displayed Order with a Time-in-Force
of IOC.
---------------------------------------------------------------------------

     Designation as an ISO. In accordance with Regulation NMS,
a Price to Display Order designated as an ISO would be processed at its
entered

limit price, since such a designation reflects a representation by the
Participant that it has simultaneously routed one or more additional
limit orders, as necessary, to execute against the full displayed size
of any Protected Quotations that the Price to Display Order would lock
or cross.
     Routing (available through RASH, FIX and QIX only).\35\
---------------------------------------------------------------------------

    \35\ The availability of routing for Price to Display Orders
reflects a substantive clarification to the language of the existing
rule.
---------------------------------------------------------------------------

     Primary Pegging and Market Pegging (available through
RASH, FIX and QIX only).
     Discretion (available through RASH, FIX and QIX only).
     Participation in the Nasdaq Opening Cross and/or the
Nasdaq Closing Cross.
     Attribution. All Price to Display Orders are Attributable
Orders.
     Display. A Price to Display Order is always displayed (but
may also have Reserve Size).
Non-Displayed Order
    A ``Non-Displayed Order'' is an Order Type that is not displayed to
other Participants, but nevertheless remains available for potential
execution against incoming Orders until executed in full or cancelled.
Thus, the Order Type provides a means by which Participants may access
and/or offer liquidity without signaling to other Participants the
extent of their trading interest. The Order may also serve to provide
price improvement vis-[agrave]-vis the NBBO. Under Regulation NMS, a
Non-Displayed Order may lock a Protected Quotation and may be traded-
through by other market centers.\36\ In addition to the Non-Displayed
Order Type, there are other Order Types that are not displayed on the
Nasdaq Book. Thus, ``Non-Display'' is both a specific Order Type and an
Order Attribute of certain other Order Types.
---------------------------------------------------------------------------

    \36\ Rule 611 [sic] requires exchanges to adopt rules that
``require . . . members reasonably to avoid . . . [d]isplaying
quotations that lock or cross any protected quotations'' (emphasis
added). Similarly, under Rule 600, a Non-Displayed Order is not a
Protected Quotation because it is not displayed. Accordingly, the
definition of trade-through does not apply to a transaction at a
price that is worse than the price of a Non-Displayed Order. Thus,
in opting to use a Non-Displayed Order, a Participant must balance
the benefits of not disclosing its trading intentions against the
loss of trade-through protection. However, because a Non-Displayed
Order may not itself trade-through a Protected Quotation, as
described below, the Nasdaq Market Center protects against such
trade-throughs by repricing and/or cancelling Non-Displayed Orders
that cross or are crossed by a Protected Quotation.
---------------------------------------------------------------------------

    When a Non-Displayed Order is entered, the Non-Displayed Order will
be executed against previously posted Orders on the Nasdaq Book that
are priced equal to or better than the price of the Non-Displayed
Order, up to the full amount of such previously posted Orders, unless
such executions would trade through a Protected Quotation. Any portion
of the Non-Displayed Order that cannot be executed in this manner will
be posted to the Nasdaq Book (unless the Non-Displayed Order has a
Time-in-Force of IOC) and/or routed if it has been designated as
Routable.\37\
---------------------------------------------------------------------------

    \37\ See Rules 4703(f) and 4758.
---------------------------------------------------------------------------

    During Market Hours, the price at which a Non-Displayed Order is
posted is determined in the following manner. If the entered limit
price of the Non-Displayed Order would lock a Protected Quotation, the
Non-Displayed Order will be placed on the Nasdaq Book at the locking
price. If the Non-Displayed Order would cross a Protected Quotation,
the Non-Displayed Order will be repriced to a price that would lock the
Protected Quotation and will be placed on the Nasdaq Book at that
price.\38\ For example, if a Non-Displayed Order to buy at $11 would
cross a Protected Offer of $10.99, the Non-Displayed Order will be
repriced and posted at $10.99. A Non-Displayed Order to buy at $10.99
would also be posted at $10.99. During Pre-Market Hours and Post-Market
Hours, a Non-Displayed Order will be posted at its entered limit price
without adjustment.
---------------------------------------------------------------------------

    \38\ Repricing the crossing Non-Displayed Order helps ensure
that the Non-Displayed Order will not trade-through the Protected
Quotation.
---------------------------------------------------------------------------

    As is the case with a Post to Comply Order, a Non-Displayed Order
may be adjusted after initial entry.\39\ Specifically, if a Non-
Displayed Order is entered through RASH, QIX, or FIX, during Market
Hours the Non-Displayed Order may be adjusted in the following manner
after initial entry and posting to the Nasdaq Book (unless the Order is
assigned a Routing Order Attribute that would cause it to be routed to
another market center rather than remaining on the Nasdaq Book):
---------------------------------------------------------------------------

    \39\ These adjustments reflect a substantive clarification to
the language of the existing rule.
---------------------------------------------------------------------------

     If the original entered limit price of a Non-Displayed
Order is higher than the Best Offer (for an Order to buy) or lower than
the Best Bid (for an Order to sell) and the NBBO moves toward the
original entered limit price of the Non-Displayed Order, the price of
the Non-Displayed Order will be adjusted repeatedly in accordance with
changes to the NBBO. For example, if a Non-Displayed Order to buy at
$11.02 would cross a Protected Offer of $11, the Non-Displayed Order
will be priced and posted at $11. If the Best Offer then changes to
$11.01, the price of the Non-Displayed Order will be changed to $11.01.
The Order may be repriced repeatedly in this manner, receiving a new
timestamp each time its price is changed, until the Non-Displayed Order
is posted at its original entered limit price. \40\ The Non-Displayed
Order will not thereafter be repriced under this provision, except as
provided below with respect to crossing a Protected Quotation.
---------------------------------------------------------------------------

    \40\ Note that because the Order receives a new timestamp, it is
processed like a new Order when it is repriced.
---------------------------------------------------------------------------

     If, after being posted to the Nasdaq Book, the NBBO
changes so that the Non-Displayed Order would cross a Protected
Quotation, the Non-Displayed Order will be repriced at a price that
would lock the new NBBO and receive a new timestamp.\41\ For example,
if a Non-Displayed Order to buy at $11 would lock a Protected Offer of
$11, the Non-Displayed Order will be posted at $11. If the Best Offer
then changes to $10.99, the Non-Displayed Order will be repriced at
$10.99, receiving a new timestamp. The Non-Displayed Order may be
repriced and receive a new timestamp repeatedly.
---------------------------------------------------------------------------

    \41\ Id. As noted above, the cancellation of a Non-Displayed
Order in this circumstance helps ensure that the Non-Displayed Order
will not trade through a Protected Quotation.
---------------------------------------------------------------------------

    If a Non-Displayed Order is entered through OUCH or FLITE, during
Market Hours the Non-Displayed Order may be adjusted in the following
manner after initial entry and posting to the Nasdaq Book:
     If the original entered limit price of the Non-Displayed
Order locked or crossed a Protected Quotation and the NBBO changes so
that the Non-Displayed Order could be posted at a price at or closer to
its original entered limit price without crossing a Protected
Quotation, the Non-Displayed Order may either remain on the Nasdaq Book
unchanged or may be cancelled back to the Participant, depending on its
choice. For example, if a Non-Displayed Order to buy at $11.02 would
cross a Protected Offer of $11, the Order will be priced at $11. If the
Best Offer changes to $11.01, the Order will not be repriced, but
rather will either remain at its current $11 price or be cancelled back
to the Participant, depending on its choice. A Participant's choice
with regard to maintaining the Non-Displayed Order or cancelling it is
set in advance for each port through which the Participant enters
Orders.
     If, after a Non-Displayed Order is posted to the Nasdaq
Book, the NBBO changes so that the Non-Displayed Order would cross a
Protected Quotation, the Non-Displayed Order will be cancelled back to
the

Participant. For example, if a Non-Displayed Order to buy at $11 would
lock a Protected Offer of $11, the Non-Displayed Order will be posted
at $11. If the Best Offer then changes to $10.99, the Non-Displayed
Order will be cancelled back to the Participant.
     If a Non-Displayed Order entered through OUCH or FLITE is
assigned a Midpoint Pegging Order Attribute,\42\ and if, after being
posted to the Nasdaq Book, the NBBO changes so that the Non-Displayed
Order is no longer at the Midpoint between the NBBO, the Non-Displayed
Order will be cancelled back to the Participant. In addition, if a Non-
Displayed Order entered through OUCH or FLITE is assigned a Midpoint
Pegging Attribute and also has a limit price that is lower than the
midpoint between the NBBO for an Order to buy (higher than the midpoint
between the NBBO for an Order to sell), the Order will nevertheless be
accepted at its limit price and will be cancelled if the midpoint
between the NBBO moves lower than (higher than) the price of an Order
to buy (sell). The following Order Attributes may be assigned to a Non-
Displayed Order:
---------------------------------------------------------------------------

    \42\ Midpoint Pegging is described below and in proposed Rule
4703. Specifically, an Order with the Midpoint Pegging Attribute
that is entered through OUCH or FLITE is priced upon entry but is
not repriced based on changes to the NBBO. Accordingly, the Order is
cancelled if it is no longer at the midpoint between the NBBO.
---------------------------------------------------------------------------

     Price. As described above, the price of the Order may be
adjusted to avoid crossing a Protected Quotation.
     Size.
     ``Minimum Quantity''.\43\
---------------------------------------------------------------------------

    \43\ The Minimum Quantity Order Attribute is described below and
in proposed Rule 4703.
---------------------------------------------------------------------------

     Time-in-Force.
     Designation as an ISO. In accordance with Regulation NMS,
a Non-Displayed Order designated as an ISO would be processed at its
entered limit price, since such a designation reflects a representation
by the Participant that it has simultaneously routed one or more
additional limit orders, as necessary, to execute against the full
displayed size of any Protected Quotations that the Non-Displayed Order
would cross. As discussed above, a Non-Displayed Order would be
accepted at a price that locked a Protected Quotation, even if the
Order was not designated as an ISO, because the non-displayed nature of
the Order allows it to lock a Protected Quotation under Regulation NMS.
Accordingly, the System would not interpret receipt of a Non-Displayed
Order marked ISO that locked a Protected Quotation as the basis for
determining that the Protected Quotation had been executed for purposes
of accepting additional Orders at that price level.\44\
---------------------------------------------------------------------------

    \44\ For example, if a Non-Displayed Order to buy at $11 would
lock the price of a Protected Offer at $11, the Non-Displayed Order
could be posted at $11 regardless of whether it was marked as an
ISO. Accordingly, even if the Non-Displayed Order was marked as an
ISO, the System would not accept a Displayed Order priced at $11
unless (i) the Displayed Order was itself marked as an ISO, or (ii)
market data received by the System demonstrated that the Protected
Offer had been removed.
---------------------------------------------------------------------------

     Routing (available through RASH, FIX and QIX only).
     Primary Pegging and Market Pegging (available through
RASH, FIX and QIX only).
     Pegging to the Midpoint.\45\
---------------------------------------------------------------------------

    \45\ Pegging to the Midpoint is described below and in proposed
Rule 4703. The full functionality of Midpoint Pegging is available
through RASH, FIX and QIX, and more limited functionality is
available through OUCH and FLITE.
---------------------------------------------------------------------------

     Discretion (available through RASH, FIX and QIX only).
     Participation in the Nasdaq Opening Cross and/or the
Nasdaq Closing Cross.
Post-Only Orders
    A ``Post-Only Order'' is an Order Type designed to have its price
adjusted as needed to post to the Nasdaq Book in compliance with Rule
610(d) under Regulation NMS by avoiding the display of quotations that
lock or cross any Protected Quotation in a System Security during
Market Hours, or to execute against locking or crossing quotations in
circumstances where economically beneficial to the Participant entering
the Post-Only Order. Post-Only Orders are always displayed, although as
discussed below, they may also have a non-displayed price in
circumstances similar to a Price to Comply Order. Post-Only Orders are
thus designed to allow Participants to help control their trading
costs, while also ``provid[ing] displayed liquidity to the market and
thereby contribut[ing] to public price discovery--an objective that is
fully consistent with the Act.'' \46\ In addition, under some
circumstances, Post-Only Orders provide price improvement.
---------------------------------------------------------------------------

    \46\ Securities Exchange Act Release No. 73333 (October 9,
2014), 79 FR 62223 (October 16, 2014) (SR-NYSE-2014-32 and SR-
NYSEMKT-2014-56) (hereinafter ``SR-NYSE-2014-32 Approval Order'')
(approving ``Add Liquidity Only'' modifier that operates in a manner
similar to Post-Only Order).
---------------------------------------------------------------------------

    During Market Hours, a Post-Only Order is evaluated at the time of
entry with respect to locking or crossing other Orders on the Nasdaq
Book, Protected Quotations, and potential execution as follows: \47\
---------------------------------------------------------------------------

    \47\ Details regarding the processing of a Post-Only Order that
locks or crosses both a Protected Quotation and an Order on the
Nasdaq Book; the potential execution of a Post-Only Order priced at
more than $1 per share; and the processing of a Post-Only Order with
a Time-in-Force of IOC reflect substantive clarifications to the
language of the existing rule.
---------------------------------------------------------------------------

     If a Post-Only Order would lock or cross a Protected
Quotation, the price of the Order will first be adjusted. If the Order
is Attributable, its adjusted price will be one minimum price increment
lower than the current Best Offer (for bids) or higher than the current
Best Bid (for offers). If the Order is not Attributable, its adjusted
price will be equal to the current Best Offer (for bids) or the current
Best Bid (for offers). However, the Order will not post or execute
until the Order, as adjusted, is evaluated with respect to Orders on
the Nasdaq Book.
     If the adjusted price of the Post-Only Order would not
lock or cross an Order on the Nasdaq Book, the Order will be posted in
the same manner as a Price to Comply Order (if it is not Attributable)
or a Price to Display Order (if it is Attributable). Specifically, if
the Post-Only Order is not Attributable, it will be displayed on the
Nasdaq Book at a price one minimum price increment lower than the
current Best Offer (for bids) or higher than the current Best Bid (for
offers) but will be ranked on the Nasdaq Book with a non-displayed
price equal to the current Best Offer (for bids) or to the current Best
Bid (for offers). For example, if a Post-Only Order to buy at $11 would
lock a Protected Offer of $11, the Order will be ranked at a non-
displayed price of $11 but will be displayed at $10.99. If the Post-
Only Order is Attributable, it will be ranked and displayed on the
Nasdaq Book at a price one minimum increment lower than the current
Best Offer (for bids) or higher than the current Best Bid (for offers).
Thus, in the preceding example, the Post-Only Order to buy would be
ranked and displayed at $10.99.
     If the adjusted price of the Post-Only Order would lock or
cross an Order on the Nasdaq Book, the Post Only Order will be
repriced, ranked, and displayed at one minimum price increment below
the current best-priced Order to sell on the Nasdaq Book (for bids) or
above the current best-priced Order to buy on the Nasdaq Book (for
offers); provided, however, the Post-Only Order will execute if (i) it
is priced below $1.00 and the value of price improvement associated
with executing against an Order on the Nasdaq Book (as measured against
the original limit price of the Order) equals or exceeds the sum of
fees charged for such execution and the value of any rebate that would
be provided if the Order posted to the Nasdaq Book and subsequently

provided liquidity, or (ii) it is priced at $1.00 or more and the value
of price improvement associated with executing against an Order on the
Nasdaq Book (as measured against the original limit price of the Order)
equals or exceeds $0.01 per share. For example, if a Participant
entered a Non-Attributable Post-Only Order to buy at $11.01, another
market center is displaying a Protected Offer at $11, and there is a
Non-Displayed Order on the Nasdaq Book to sell at $11, the adjusted
price of the Post-Only Order will be $11. However, because the Post-
Only Order would be executable against the Non-Displayed Order on the
Nasdaq Book and would receive $0.01 price improvement (as measured
against the original $11.01 price of the Post-Only Order), the Post-
Only Order would execute.
     If the Post-Only Order would not lock or cross a Protected
Quotation but would lock or cross an Order on the Nasdaq Book, the Post
Only Order will be repriced, ranked, and displayed at one minimum price
increment below the current best-priced Order to sell on the Nasdaq
Book (for bids) or above the current best-priced Order to buy on the
Nasdaq Book (for offers); provided, however, the Post-Only Order will
execute if (i) it is priced below $1.00 and the value of price
improvement associated with executing against an Order on the Nasdaq
Book equals or exceeds the sum of fees charged for such execution and
the value of any rebate that would be provided if the Order posted to
the Nasdaq Book and subsequently provided liquidity, or (ii) it is
priced at $1.00 or more and the value of price improvement associated
with executing against an Order on the Nasdaq Book equals or exceeds
$0.01 per share. For example, if a Participant entered a Post-Only
Order to buy at $11.02, the Best Offer was $11.04, and there was a Non-
Displayed Order on the Nasdaq Book to sell at $11.02, the Post-Only
Order would be ranked and displayed at $11.01. However, if a
Participant entered a Post-Only Order to buy at $11.03, the Order would
execute against the Order on the Nasdaq Book at $11.02, receiving $0.01
per share price improvement.
     If a Post-Only Order is entered with a Time-in-Force of
IOC, the price of an Order to buy (sell) will be repriced to the lower
of (higher of) (i) one minimum price increment below (above) the price
of the Order or (ii) the current Best Offer (Best Bid). The Order will
execute against any Order on the Nasdaq Book with a price equal to or
better than the adjusted price of the Post-Only Order. If the Post-Only
Order cannot execute, it will be cancelled. For example, if a Post-Only
Order to buy at $11 with a Time-in-Force of IOC was entered and the
current Best Offer was $11.01, the Order would be repriced to $10.99;
however, if the Best Offer was $10.98, the Order would be repriced to
$10.98.\48\
---------------------------------------------------------------------------

    \48\ This functionality reflects the overall purpose of the
Post-Only Order, which is not to post to the Nasdaq Book in all
circumstances, but rather to assist Participants in controlling
execution costs by allowing consideration of price improvement,
fees, and rebates in the handling of the Order. Thus, entering a
Post-Only Order with a Time-in-Force of IOC allows a Participant to
stipulate that an Order will execute only if it receives price
improvement.
---------------------------------------------------------------------------

     If a Post-Only Order would not lock or cross an Order on
the Nasdaq Book or any Protected Quotation, it will be posted on the
Nasdaq Book at its entered limit price.
    During Pre-Market and Post-Market Hours, a Post-Only Order will be
processed in a manner identical to Market Hours with respect to locking
or crossing Orders on the Nasdaq Book, but will not have its price
adjusted with respect to locking or crossing the quotations of other
market centers.
    If a Post-Only Order is entered through RASH, QIX, or FIX, during
System Hours the Post-Only Order may be adjusted in the following
manner after initial entry and posting to the Nasdaq Book: \49\
---------------------------------------------------------------------------

    \49\ These adjustments reflect a substantive clarification to
the language of the existing rule.
---------------------------------------------------------------------------

     If the original entered limit price of the Post-Only Order
is not being displayed, the displayed (and non-displayed price, if any)
of the Order will be adjusted repeatedly in accordance with changes to
the NBBO or the best price on the Nasdaq Book, as applicable; provided,
however, that if the quotation of another market center moves in a
manner that would lock or cross the displayed price of a Post-Only
Order, the price(s) of the Post-Only Order will not be adjusted.\50\
For example, if a Non-Attributable Post-Only Order to buy at $11.02
would cross a Protected Offer of $11, the Order will be ranked at a
non-displayed price of $11 but will be displayed at $10.99. If the Best
Offer then moves to $11.01, the displayed price will be changed to $11
and the non-displayed price at which the Order is ranked will be
changed to $11.01. However, if another market center then displays an
offer of $11 (thereby locking the previously displayed price of the
Post-Only Order notwithstanding Rule 610(d) under Regulation NMS), the
price of the Post-Only Order will not be changed. The Order may be
repriced repeatedly until such time as the Post-Only Order is able to
be displayed at its original entered limit price ($11.02 in the
example). The Post-Only Order receives a new timestamp each time its
price is changed. If the original entered limit price of the Post-Only
Order would no longer lock or cross a Protected Quotation or an Order
on the Nasdaq Book, the Post-Only Order will be ranked and displayed at
that price and will receive a new timestamp, and will not thereafter be
adjusted under this provision.\51\
---------------------------------------------------------------------------

    \50\ This means that, in general, the price of the Post-Only
Order will move toward, but not away from, its original entered
limit price. Because a Post-Only Order is removed from the Nasdaq
Book while it is being repriced, however, it is possible that the
Order's price will move away from its original entered limit price
in the case of a ``race condition'' where the NBBO changes again
while the Order is not on the Nasdaq Book.
    \51\ Thus, the price of the Order will not move beyond its limit
price.
---------------------------------------------------------------------------

    If a Post-Only Order is entered through OUCH or FLITE, the Post-
Only Order may be adjusted in the following manner after initial entry
and posting to the Nasdaq Book: \52\
---------------------------------------------------------------------------

    \52\ These adjustments reflect a substantive clarification to
the language of the existing rule.
---------------------------------------------------------------------------

     During Market Hours, if the original entered limit price
of the Post-Only Order locked or crossed a Protected Quotation, the
Post-Only Order may be adjusted after initial entry in the same manner
as a Price to Comply Order (or a Price to Display Order, if it is
Attributable). Thus, in the case of a Non-Attributable Post-Only Order
that crossed a Protected Quotation, if the NBBO changed so that the
Post-Only Order could be ranked and displayed at a price at or closer
to its original entered limit price without locking or crossing a
Protected Quotation, the Post-Only Order may either remain on the
Nasdaq Book unchanged or may be cancelled back to the Participant,
depending on its choice. In the case of a Non-Attributable Post-Only
Order that locked a Protected Quotation, if the limit price would no
longer lock a Protected Quotation, the Post-Only Order may either
remain on the Nasdaq Book unchanged, may be cancelled back to the
Participant, or may be ranked and displayed at its original entered
limit price, depending on the Participant's choice, and will not
thereafter be adjusted under this provision.\53\ If the Post-Only Order
is displayed at its original entered limit price, it will receive a new
timestamp. Finally, in the case of an Attributable Post-Only Order that
locked or crossed a Protected Quotation, if the NBBO changed so that
the Post-Only Order could be ranked and displayed at a price at or
closer to its original entered limit price without locking or crossing
a Protected Quotation, the Post-Only Order may either remain on the
Nasdaq

Book unchanged or may be cancelled back to the Participant, depending
on the Participant's choice. A Participant's choice with regard to
adjustment of Post-Only Orders is set in advance for each port through
which the Participant enters Orders.
---------------------------------------------------------------------------

    \53\ Thus, the price of the Order will not move beyond its limit
price.
---------------------------------------------------------------------------

     During System Hours, if the original entered limit price
of the Post-Only Order locked or crossed an Order on the Nasdaq Book
and the Nasdaq Book changes so that the original entered limit price
would no longer lock or cross an Order on the Nasdaq Book, the Post-
Only Order may either remain on the Nasdaq Book unchanged or may be
cancelled back to the Participant, depending on the Participant's
choice. For example, if a Post-Only Order to buy at $11 would lock an
Order on the Nasdaq Book priced at $11, the Post-Only Order will be
ranked and displayed at $10.99. If the Order at $11 is cancelled or
executed, the Post-Only Order may either remain with a displayed price
of $10.99 or be cancelled back to the Participant, depending on the
Participant's choice. A Participant's choice with regard to maintaining
the Post-Only Order or cancelling it is set in advance for each port
through which the Participant enters Orders.
    The following Order Attributes may be assigned to a Post-Only
Order:
     Price. As described above, the price of the Order may be
adjusted to avoid locking or crossing a Protected Quotation, and may
include a displayed price as well as a non-displayed price.
     Size.
     Time-in-Force.
     Designation as an ISO. In accordance with Regulation NMS,
a Post-Only Order designated as an ISO that locked or crossed a
Protected Quotation would be processed at its entered limit price,
since such a designation reflects a representation by the Participant
that it has simultaneously routed one or more additional limit orders,
as necessary, to execute against the full displayed size of any
Protected Quotations that the Post-Only Order would lock or cross.\54\
However, as described above, a Post-Only Order designated as an ISO
that locked or crossed an Order on the Nasdaq Book would either execute
at time of entry or would have its price adjusted prior to posting.
Accordingly, the System would not interpret receipt of a Post-Only
Order marked ISO that had its price adjusted prior to posting as the
basis for determining that any Protected Quotation at the Order's
original entered limit price level had been executed for purposes of
accepting additional Orders at that price level.\55\ However, if the
Post-Only Order is ranked and displayed at its adjusted price, the
System would consider the adjusted price level to be open for purposes
of accepting additional Orders at that price level. For example, assume
that there is a Protected Offer at $11 and a Participant enters a Post-
Only Order marked ISO to buy at $11. If there are no Orders to sell at
$11 on the Nasdaq Book, the Order to buy will be displayed and ranked
at $11, since the designation of the Order as an ISO reflects the
Participant's representation that it has routed one or more additional
limit orders, as necessary, to execute against the full displayed size
of any Protected Quotations that the Post-Only Order would lock or
cross. However, if there was also an Order to sell at $11 on the Nasdaq
Book, the Post-Only Order will be repriced, ranked, and displayed at
$10.99. In that case, the mere fact that the Post-Only Order was
designated as an ISO would not allow Nasdaq to conclude that the $11
price level was ``open'' for receiving orders to buy at that price; the
$11 price level would be considered open only if market data received
by the System demonstrated that the Protected Offer at $11 had been
removed or if a subsequent Displayed Order marked ISO was received and
ranked at that price.
---------------------------------------------------------------------------

    \54\ In the SR-NYSE-2014-32 Approval Order, the Commission
affirmed that exchanges may adopt rules allowing market participants
to ``ship and post'' (i.e., to ship limit orders, as necessary, to
remove Protected Quotations while posting an order at the formerly
locking price). The Commission further determined that a Day Order
with an ``Access Liquidity Only'' (similar to a Post-Only Order)
modifier could be marked as an ISO. Of course, as required by its
obligations as a self-regulatory organization, Nasdaq maintains an
active regulatory surveillance and enforcement program to verify
that Participants are not improperly designating Orders as ISOs.
    \55\ The price level would be considered open if a subsequent
Displayed Order marked ISO was received at that price or if market
data received by the System demonstrated that the Protected
Quotation had been removed.
---------------------------------------------------------------------------

     Attribution.
     Participation in the Nasdaq Opening Cross and/or the
Nasdaq Closing Cross.
     Display. A Post-Only Order is always displayed, although
as provided above, may also have a non-displayed price.
Midpoint Peg Post-Only Orders
    A ``Midpoint Peg Post-Only Order'' is an Order Type with a Non-
Display Order Attribute that is priced at the midpoint between the NBBO
and that will execute upon entry against locking or crossing quotes
only in circumstances where economically beneficial to the party
entering the Order. Because the Order is priced at the midpoint, it can
provide price improvement to incoming Orders when it is executed after
posting to the Nasdaq Book. The Midpoint Peg Post-Only Order is
available during Market Hours only.
    A Midpoint Peg Post-Only Order must be assigned a limit price. When
a Midpoint Peg Post-Only Order is entered, it will be priced at the
midpoint between the NBBO, unless such midpoint is higher than (lower
than) the limit price of an Order to buy (sell), in which case the
Order will be priced at its limit price. If the NBBO is locked, the
Midpoint Peg Post-Only Order will be priced at the locking price, if
the NBBO is crossed, it will nevertheless be priced at the midpoint
between the NBBO, and if there is no NBBO,\56\ the Order will be
rejected. The Midpoint Peg Post-Only Order will post to the Nasdaq Book
unless it is a buy (sell) Order that is priced higher than (lower than)
a sell (buy) Order on the Nasdaq Book, in which case it will execute at
the price of the Order on the Nasdaq Book. For example, if the Best Bid
was $11 and the Best Offer was $11.06, the price of the Midpoint Peg
Post-Only Order would be $11.03. If there was a Non-Displayed Order (or
another Order with a Non-Display Order Attribute) on the Nasdaq Book to
sell at $11.02, the incoming Midpoint Peg Post-Only Order would execute
against it at $11.02. However, if there was a Non-Displayed Order (or
another Order with a Non-Display Order Attribute) to sell at $11.03,
the Midpoint Peg Post-Only Order would post at $11.03. While a Midpoint
Peg Post-Only Order that posts to the Nasdaq Book is locking a
preexisting Order, the Midpoint Peg Post-Only Order will execute
against an incoming Order only if the price of the incoming sell (buy)
Order is lower (higher) than the price of the preexisting Order. Thus,
in the previous example, if the incoming Midpoint Peg Post-Only Order
locked the preexisting Non-Displayed Order at $11.03, the Midpoint Peg
Post-Only Order could execute only against an incoming Order to sell
priced at less than $11.03.
---------------------------------------------------------------------------

    \56\ That is, if no market center is disseminating a displayed
bid or a displayed offer, such that it is impossible to determine a
midpoint price.
---------------------------------------------------------------------------

    For purposes of any cross in which a Midpoint Peg Post-Only Order
participates, a Midpoint Peg Post-Only Order to buy (sell) that is
locking a preexisting Order shall be deemed to have a price equal to
the price of the highest sell Order (lowest buy Order) that would be
eligible to execute against the Midpoint Peg Post-Only Order in

such circumstances. This is the case because, as described above, a
Midpoint Peg Post-Only Order that is locking a preexisting Order cedes
priority to it and is executable only at a price beyond the limit price
of the preexisting Order. Thus, a Midpoint Peg Post-Only Order to buy
that locked a preexisting Non-Displayed Order to sell at $11.03 would
be deemed to have a price of $11.02. It should be noted, however, that
Midpoint Peg Post-Only Orders may not be entered prior to the Nasdaq
Opening Cross, and the System attempts to cancel Midpoint Peg Post-Only
Orders prior to the commencement of the Nasdaq Closing Cross. Thus, the
Order would not participate in the Nasdaq Opening Cross under any
circumstances, and would participate in the Nasdaq Closing Cross only
in a ``race'' condition whereby the cancellation message was not
processed until after the Nasdaq Closing Cross had occurred. A Midpoint
Peg Post-Only Order could, however, participate in a Halt Cross under
Rule 4753.
    If a Midpoint Peg Post-Only Order is entered through RASH, QIX, or
FIX, the Midpoint Peg Post-Only Order may be adjusted in the following
manner after initial entry and posting to the Nasdaq Book:
     The price of the Midpoint Peg Post-Only Order will be
updated repeatedly to equal the midpoint between the NBBO; provided,
however, that the Order will not be priced higher (lower) than the
limit price of an Order to buy (sell). In the event that the midpoint
between the NBBO becomes higher than (lower than) the limit price of an
Order to buy (sell), the price of the Order will stop updating, but
will resume updating if the midpoint becomes lower than (higher than)
the limit price of an Order to buy (sell). Similarly, if a Midpoint Peg
Post-Only Order is on the Nasdaq Book and subsequently there is no
NBBO, the Order will be cancelled. The Midpoint Peg Post-Only Order
receives a new timestamp each time its price is changed.
    If a Midpoint Peg Post-Only Order is entered through OUCH or FLITE,
the Midpoint Peg Post-Only Order may be adjusted in the following
manner after initial entry and posting to the Nasdaq Book:
     The price at which the Midpoint Peg Post-Only Order is
ranked on the Nasdaq Book is the midpoint between the NBBO, unless the
Order has a limit price that is lower than the midpoint between the
NBBO for an Order to buy (higher than the midpoint between the NBBO for
an Order to sell), in which case the Order will be ranked on the Nasdaq
Book at its limit price. The price of the Order will not thereafter be
adjusted based on changes to the NBBO. If, after being posted to the
Nasdaq Book, the NBBO changes so that midpoint between the NBBO is
lower than (higher than) the price of a Midpoint Peg Post-Only Order to
buy (sell), the Midpoint Peg Post-Only Order will be cancelled back to
the Participant. For example, if the Best Bid is $11 and the Best Offer
is $11.06, a Midpoint Peg Post-Only Order to buy would post at $11.03.
If, thereafter, the Best Offer is reduced to $11.05, the Midpoint Peg
Post-Only Order will be cancelled back to the Participant.\57\
---------------------------------------------------------------------------

    \57\ The functionality associated with OUCH and FLITE reflects a
substantive clarification to the existing rule.
---------------------------------------------------------------------------

    The following Order Attributes may be assigned to a Midpoint Peg
Post-Only Order:
     Price of more than $1 per share. A Midpoint Peg Post-Only
Order that would be assigned a price of $1 or less per share will be
rejected or cancelled, as applicable.
     Size.
     A Time-in-Force other than IOC; provided, however, that
regardless of the Time-in-Force entered, a Midpoint Post-Only Order may
not be active outside of Market Hours. A Midpoint Peg Post-Only Order
entered prior to the beginning of Market Hours will be rejected. A
Midpoint Peg Post-Only Order remaining on the Nasdaq Book at 4:00 p.m.
ET will be cancelled by the System; provided, however, that if the
Nasdaq Closing Cross for the security that is the subject of the Order
occurs prior to the cancellation message being fully processed, a
Midpoint Peg Post-Only Order may participate in the Nasdaq Closing
Cross.
     Pegging to the midpoint is required for Midpoint Peg Post-
Only Orders entered through RASH, QIX or FIX. As discussed above, the
price of a Midpoint Peg Post-Only Order entered through OUCH or FLITE
will be pegged to the midpoint upon entry and not adjusted thereafter.
     Minimum Quantity.
     Non-Display. All Midpoint Peg Post-Only Orders are Non-
Displayed.
Supplemental Orders
    A ``Supplemental Order'' is an Order Type with a Non-Display Order
Attribute that is held on the Nasdaq Book in order to provide liquidity
at the NBBO through a special execution process described in Rule
4757(a)(1)(D). A Supplemental Order may be entered through the OUCH
protocol only. The Order allows a Participant to provide greater depth
of liquidity at the NBBO without signaling the full extent of its
trading interest to other Participants.
    Upon entry, a Supplemental Order will always post to the Nasdaq
Book at a price equal to the Best Bid (for buys) or the Best Offer (for
sells). Thereafter, the Supplemental Order may execute against an Order
that is designated as eligible for routing, after the Order has
executed against all other liquidity on the Nasdaq Book but before
routing. An Order will execute against a Supplemental Order(s) only at
the NBBO, only if the NBBO is not locked or crossed, and only if the
Order can be executed in full. If a Supplemental Order is not executed
in full, the remaining portion of the Supplemental Order shall remain
on the Nasdaq Book as a Supplemental Order until the Supplemental Order
is fully executed, the Supplemental Order is cancelled by the
Participant that entered the Supplemental Order, or the size of the
Supplemental Order is reduced to less than one normal unit of trading
(in which case the Supplemental Order will be cancelled automatically).
    The following Order Attributes may be assigned to a Supplemental
Order:
     Price. The Price of a Supplemental Order to buy is always
equal to the Best Bid, and the price of a Supplemental Order to sell is
always equal to the Best Offer.
     Size. All Supplemental Orders must be entered with a size
of one or more normal units of trading. When a Supplemental Order is
reduced to less than one normal unit of trading, the remainder of the
Supplemental Order will be cancelled automatically.
     A Time-in-Force other than IOC. A Supplemental Order may
be entered at any time during Pre-Market Hours or Market Hours, but is
available for potential execution only during Market Hours. Any
Supplemental Orders still on the Nasdaq Book at the conclusion of
Market Hours will be cancelled. Supplemental Orders may not participate
in the Nasdaq Opening Cross or the Nasdaq Closing Cross.
     Primary Pegging. A Supplemental Order is not pegged to the
NBBO through the regular Primary Pegging Order Attribute, and therefore
does not have its price adjusted continually. However, if an incoming
Order is potentially executable against a Supplemental Order, the
System will set the price of the Supplemental Order at the NBBO on the
same side of the market, with no offset. As a result, a Supplemental
Order may only execute at the NBBO.
     Non-Display. All Supplemental Orders are Non-Displayed.

Market Maker Peg Order
    A ``Market Maker Peg Order'' is an Order Type designed to allow a
Market Maker to maintain a continuous two-sided quotation at a price
that is compliant with the quotation requirements for Market Makers set
forth in Rule 4613(a)(2).\58\ The price of the Market Maker Peg Order
is set with reference to a ``Reference Price'' in order to keep the
price of the Market Maker Peg Order within a bounded price range. A
Market Maker Peg Order may be entered through RASH, FIX or QIX only. A
Market Maker Peg Order must be entered with a limit price beyond which
the Order may not be priced. The Reference Price for a Market Maker Peg
Order to buy (sell) is the then-current Best Bid (Best Offer)
(including Nasdaq), or if no such Best Bid or Best Offer, the most
recent reported last-sale eligible trade from the responsible single
plan processor for that day, or if none, the previous closing price of
the security as adjusted to reflect any corporate actions (e.g.,
dividends or stock splits) in the security.
---------------------------------------------------------------------------

    \58\ As with other Order Types, the Market Maker Peg Order must
be an Order either to buy or to sell; thus, at least two Orders
would be required to maintain a two-sided quotation.
---------------------------------------------------------------------------

    Upon entry, the price of a Market Maker Peg Order to buy (sell) is
automatically set by the System at the Designated Percentage (as
defined in Rule 4613) away from the Reference Price in order to comply
with the quotation requirements for Market Makers set forth in Rule
4613(a)(2). For example, if the Best Bid is $10 and the Designated
Percentage for the security is 8%, the price of a Market Marker Peg
Order to buy would be $9.20. If the limit price of the Order is not
within the Designated Percentage, the Order will be sent back to the
Participant.
    Once a Market Maker Peg Order has posted to the Nasdaq Book, its
price is adjusted if needed as the Reference Price changes.
Specifically, if as a result of a change to the Reference Price, the
difference between the price of the Market Maker Peg Order and the
Reference Price reaches the Defined Limit (as defined in Rule 4613),
the price of a Market Maker Peg Order to buy (sell) will be adjusted to
the Designated Percentage away from the Reference Price. In the
foregoing example, if the Defined Limit is 9.5% and the Best Bid
increased to $10.17, such that the price of the Market Maker Peg Order
would be more than 9.5% away, the Order will be repriced to $9.35, or
8% away from the Best Bid. Note that calculated prices of less than the
minimum increment will be rounded in a manner that ensures that the
posted price will be set at a level that complies with the percentages
stipulated by this rule. If the limit price of the Order is outside the
Defined Limit, the Order will be sent back to the Participant.
    Similarly, if as a result of a change to the Reference Price, the
price of a Market Maker Peg Order to buy (sell) is within one minimum
price variation more than (less than) a price that is 4% less than
(more than) the Reference Price, rounded up (down), then the price of
the Market Maker Peg Order to buy (sell) will be adjusted to the
Designated Percentage away from the Reference Price. For example, if
the Best Bid is $10 and the Designated Percentage for the security is
8%, the price of a Market Marker Peg Order to buy would initially be
$9.20. If the Best Bid then moved to $9.57, such that the price of the
Market Maker Peg Order would be a minimum of $0.01 more than a price
that is 4% less than the Best Bid, rounded up (i.e., $9.57 - ($9.57 x
0.04) = $9.1872, rounding up to $9.19), the Order will be repriced to
$8.81, or 8% away from the Best Bid.
    A Market Maker may enter a Market Maker Peg Order with a more
aggressive offset than the Designated Percentage, but such an offset
will be expressed as a price difference from the Reference Price. Such
a Market Maker Peg Order will be repriced in the same manner as a Price
to Display Order with Attribution and Primary Pegging. As a result, the
price of the Order will be adjusted whenever the price to which the
Order is pegged is changed.
    A new timestamp is created for a Market Maker Peg Order each time
that its price is adjusted. In the absence of a Reference Price, a
Market Maker Peg Order will be cancelled or rejected. If, after entry,
a Market Maker Peg Order is priced based on a Reference Price other
than the NBBO and such Market Maker Peg Order is established as the
Best Bid or Best Offer, the Market Maker Peg Order will not be
subsequently adjusted in accordance with this rule until a new
Reference Price is established. If a Market Maker Peg Order is repriced
1,000 times, it will be cancelled. This restriction is designed to
conserve System resources by limiting the persistence of Orders that
update repeatedly without any reasonable prospect of execution.
    Notwithstanding the availability of Market Maker Peg Order
functionality, a Market Maker remains responsible for entering,
monitoring, and resubmitting, as applicable, quotations that meet the
requirements of Rule 4613.
    The following Order Attributes may be assigned to a Market Maker
Peg Order:
     Price. As discussed above, the price of Market Maker Peg
Order is established by the Nasdaq Market Center based on the Reference
Price, the Designated Percentage (or a narrower offset established by
the Market Maker), the Defined Limit, and the 4% minimum difference
from the NBBO.
     Size.
     A Time-in-Force other than IOC or ``Good-till-Cancelled''.
     Participation in the Nasdaq Opening Cross and/or the
Nasdaq Closing Cross.
     If the Market Maker designates a more aggressive offset,
Primary Pegging is required.
     Attribution. All Market Maker Peg Orders are Attributable.
     Display. Market Marker Peg Orders are always Displayed.
Market on Open Order \59\
---------------------------------------------------------------------------

    \59\ The definition of Market On Open Order, as well as the
definitions of Limit On Open Order, Opening Imbalance Only Order,
Market On Close Order, Limit On Close Order, and Imbalance Only
Order, is currently found in Rule 4752 and 4754. Accordingly,
conforming changes are being proposed to those rules to reflect the
adoption of the definitions in new Rule 4702.
---------------------------------------------------------------------------

    A ``Market On Open Order'' or ``MOO Order'' is an Order Type
entered without a price that may be executed only during the Nasdaq
Opening Cross. Subject to the qualifications provided below, MOO Orders
may be entered, cancelled, and/or modified between 4 a.m. ET and
immediately prior to 9:28 a.m. ET. An MOO Order may not be cancelled or
modified at or after 9:28 a.m. ET. An MOO Order shall execute only at
the price determined by the Nasdaq Opening Cross.
    The following Order Attributes may be assigned to a Market On Open
Order:
     Price. An MOO Order is entered without a price and shall
execute only at the price determined by the Nasdaq Opening Cross.
     Size.
     Time-in-Force. An MOO Order may execute only in the Nasdaq
Opening Cross. However, a Participant may designate the Time-in-Force
for an MOO Order either by designating a Time-in-Force of ``On Open''
or by entering another Order Type with a Market Pegging Attribute and
flagging the Order to participate in the Nasdaq Opening Cross. An MOO
Order entered through RASH or FIX with a Time-in-Force of IOC and
flagged to participate in the Nasdaq Opening Cross that is entered
after the time of the Nasdaq Opening Cross will be accepted but will be

converted into a Non-Displayed Order with a Time-in-Force of IOC and a
price established using the Market Pegging Order Attribute with no
offset. An Order with a Market Pegging Attribute and a Time-in-Force
other than IOC that is flagged to participate in the Nasdaq Opening
Cross and entered at or after 9:28 a.m. will be held and entered into
the System after the completion of the Nasdaq Opening Cross. All other
MOO Orders entered at or after 9:28 a.m. will be rejected.
     Participation in the Nasdaq Opening Cross is required for
this Order Type.
Limit on Open Order
    A ``Limit On Open Order'' or ``LOO Order'' is an Order Type entered
with a price that may be executed only in the Nasdaq Opening Cross, and
only if the price determined by the Nasdaq Opening Cross is equal to or
better than the price at which the LOO Order was entered. Subject to
the qualifications provided below, LOO Orders may be entered,
cancelled, and/or modified between 4 a.m. ET and immediately prior to
9:28 a.m. ET.
    The following Order Attributes may be assigned to a Limit On Open
Order:
     Price.
     Size.
     Time-in-Force. In general, an LOO Order may execute only
in the Nasdaq Opening Cross. However, a Participant may designate the
Time-in-Force for an LOO Order either by designating a Time-in-Force of
``On Open,'' in which case the Order will execute solely in the Nasdaq
Opening Cross, or by entering another Order Type and Time-in-Force and
flagging the Order to participate in the Nasdaq Opening Cross. In the
latter case, if the Participant designates a Time-in-Force of IOC, the
Order will participate solely in the Nasdaq Opening Cross. If the
Participant enters a Time-in-Force that continues after the time of the
Nasdaq Opening Cross, the Order will participate in the Nasdaq Opening
Cross like an LOO Order, while operating thereafter in accordance with
its designated Order Type and Order Attributes (if not executed in full
in the Nasdaq Opening Cross). Such an Order may be referred to as an
``Opening Cross/Market Hours Order.'' If such an Order has a Time-in-
Force that continues until at least the time of the Nasdaq Closing
Cross, the Order may be referred to as a ``Cross to Cross Order.''
     Following the Nasdaq Opening Cross, an Opening Cross/
Market Hours Order may not operate as a Post-Only Order, Midpoint Peg
Post-Only Order, a Supplemental Order, a Retail Order, or an RPI Order.
In the case of a Market Maker Peg Order entered prior to 9:28 a.m. ET
that is also designated to participate in the Nasdaq Opening Cross, the
price of the Order for purposes of operating as an LOO Order will be
established on entry and will not thereafter be pegged until after the
completion of the Nasdaq Opening Cross. An Opening Cross/Market Hours
Order that is entered between 9:28 a.m. and the time of the Nasdaq
Opening Cross will be (i) held and entered into the System after the
completion of the Nasdaq Opening Cross if it has been assigned a
Pegging Attribute or Routing Attribute, (ii) treated as an Opening
Imbalance Only Order and entered into the System after the completion
of the Nasdaq Opening Cross if entered through RASH, QIX, or FIX but
not assigned a Pegging Attribute or Routing Attribute, or (iii) treated
as an Opening Imbalance Only Order and cancelled after the Nasdaq
Opening Cross if entered through OUCH or FLITE. An Opening Cross/Market
Hours Order entered through RASH or FIX after the time of the Nasdaq
Opening Cross will be accepted but the Nasdaq Opening Cross flag will
be ignored. A Routable Order flagged to participate in the Nasdaq
Opening Cross with a Time-in-Force other than IOC and entered at or
after 9:28 a.m. will be held and entered into the System after the
Nasdaq Opening Cross. All other LOO Orders and Opening Cross/Market
Hours Orders entered at or after 9:28 a.m. will be rejected.\60\
---------------------------------------------------------------------------

    \60\ Details with regard to the treatment of LOO Orders entered
after 9:28 a.m. reflect a substantive clarification to existing
rules.
---------------------------------------------------------------------------

     Participation in the Nasdaq Opening Cross is required for
this Order Type.
Opening Imbalance Only Order
    An ``Opening Imbalance Only Order'' or ``OIO Order'' is an Order
Type entered with a price that may be executed only in the Nasdaq
Opening Cross and only against MOO Orders, LOO Orders, or Early Market
Hours Orders (as defined in Rule 4752). OIO Orders may be entered
between 4:00 a.m. ET until the time of execution of the Nasdaq Opening
Cross, but may not be cancelled or modified at or after 9:28 a.m. ET.
If the entered price of an OIO Order to buy (sell) is higher than
(lower than) the highest bid (lowest offer) on the Nasdaq Book, the
price of the OIO Order will be modified repeatedly to equal the highest
bid (lowest offer) on the Nasdaq Book; provided, however, that the
price of the Order will not be moved beyond its stated limit price.
Thus, for example, if an OIO Order to buy was entered with a price of
$11 and the current highest bid on the Nasdaq Book was $10.99, the OIO
Order would be priced at $10.99. If the highest bid subsequently became
$10.98, the OIO Order would again be repriced. However, if the highest
bid moved to $11.01, the OIO Order would not be repriced.
    The following Order Attributes may be assigned to an Opening
Imbalance Only Order:
     Price.
     Size.
     Time-in-Force. An OIO Order may execute only in the Nasdaq
Opening Cross. An OIO Order entered after the time of the execution of
the Nasdaq Opening Cross will be rejected.
     Participation in the Nasdaq Opening Cross is required for
this Order Type.
Market On Close Order
    A ``Market On Close Order'' or ``MOC Order'' is an Order Type
entered without a price that may be executed only during the Nasdaq
Closing Cross. Subject to the qualifications provided below, MOC Orders
may be entered, cancelled, and/or modified between 4 a.m. ET and
immediately prior to 3:50 p.m. ET. Between 3:50 p.m. ET and immediately
prior to 3:55 p.m. ET, an MOC Order can be cancelled and/or modified
only if the Participant requests that Nasdaq correct a legitimate error
in the Order (e.g., Side, Size, Symbol, or Price, or duplication of an
Order). MOC Orders cannot be cancelled or modified at or after 3:55
p.m. ET for any reason. An MOC Order shall execute only at the price
determined by the Nasdaq Closing Cross.
    The following Order Attributes may be assigned to a Market On Close
Order:
     Price. An MOC Order is entered without a price and shall
execute only at the price determined by the Nasdaq Closing Cross.
     Size.
     Time-in-Force. An MOC Order may execute only in the Nasdaq
Closing Cross. However, a Participant may designate the Time-in-Force
for an MOC Order either by designating a Time-in-Force of ``On Close''
or by entering a Time-in-Force of IOC and flagging the Order to
participate in the Nasdaq Closing Cross. All MOC Orders entered after
3:50 p.m. ET will be rejected. Participation in the Nasdaq Closing
Cross is required for this Order Type.
Limit On Close Order
    A ``Limit On Close Order'' or ``LOC Order'' is an Order Type
entered with a price that may be executed only in the Nasdaq Closing
Cross, and only if the

price determined by the Nasdaq Closing Cross is equal to or better than
the price at which the LOC Order was entered. Subject to the
qualifications provided below, LOC Orders may be entered, cancelled,
and/or modified between 4 a.m. ET and immediately prior to 3:50 p.m.
ET. Between 3:50 p.m. ET and immediately prior to 3:55 p.m. ET, an LOC
Order can be cancelled but not modified, and only if the Participant
requests that Nasdaq correct a legitimate error in the Order (e.g.,
Side, Size, Symbol, or Price, or duplication of an Order).
    The following Order Attributes may be assigned to a Limit On Close
Order:
     Price.
     Size.
     Time-in-Force. In general, an LOC Order may execute only
in the Nasdaq Closing Cross. However, a Participant may designate the
Time-in-Force for an LOC Order either by designating a Time-in-Force of
``On Close,'' in which case the Order will execute solely in the Nasdaq
Closing Cross, or by entering another Order Type and Time-in-Force and
flagging the Order to participate in the Nasdaq Closing Cross. In the
latter case, if the Participant designates a Time-in-Force of IOC, the
Order will participate solely in the Nasdaq Closing Cross. If the
Participant enters a Time-in-Force that continues after the time of the
Nasdaq Closing Cross, the Order will participate in the Nasdaq Closing
Cross like an LOC Order, while operating thereafter in accordance with
its designated Order Type and Order Attributes (if not executed in full
in the Nasdaq Closing Cross). Such an Order may be referred to as a
``Closing Cross/Extended Hours Order.''
     Following the Nasdaq Closing Cross, a Closing Cross/
Extended Hours Order may not operate as a Post-Only Order, Midpoint Peg
Post-Only Order, Supplemental Order, Retail Order, or RPI Order. In the
case of a Market Maker Peg Order entered prior to 3:50 p.m. ET that is
also designated to participate in the Nasdaq Closing Cross, the price
of the Order for purposes of operating as an LOC Order will be
established on entry and will not thereafter be pegged until after the
completion of the Nasdaq Closing Cross. A Closing Cross/Extended Hours
Order that is entered between 3:50 p.m. and the time of the Nasdaq
Closing Cross will be (i) rejected if it has been assigned a Pegging
Attribute, (ii) treated as an Imbalance Only Order and then entered
into the System after the completion of the Nasdaq Closing Cross if
entered through RASH, QIX, or FIX but not assigned a Pegging Attribute,
and (iii) treated as an Imbalance Only Order and cancelled after the
Nasdaq Closing Cross if entered through OUCH or FLITE. A Closing Cross/
Extended Hours Order entered through OUCH, FLITE, RASH, or FIX with a
Time-in-Force other than IOC after the time of the Nasdaq Closing Cross
will be accepted but the Nasdaq Closing Cross flag will be ignored. All
other LOC Orders and Closing Cross/Extended Hours Orders entered at or
after 3:50 p.m. ET will be rejected.\61\
---------------------------------------------------------------------------

    \61\ Details with regard to the treatment of LOC Orders entered
after 3:55 p.m. reflect a substantive clarification to existing
rules.
---------------------------------------------------------------------------

     Participation in the Nasdaq Closing Cross is required for
this Order Type.
Imbalance Only Order
    An ``Imbalance Only Order'' or ``IO Order'' is an Order entered
with a price that may be executed only in the Nasdaq Closing Cross and
only against MOC Orders or LOC Orders. IO Orders may be entered between
4:00 a.m. ET until the time of execution of the Nasdaq Closing Cross,
but may not [sic] cancelled or modified at or after 3:50 p.m. ET.
Between 3:50 p.m. ET and immediately prior to 3:55 p.m. ET, however, an
IO Order can be cancelled and/or modified if the Participant requests
that Nasdaq correct a legitimate error in the Order (e.g., Side, Size,
Symbol, or Price, or duplication of an Order). IO Orders cannot be
cancelled or modified at or after 3:55 p.m. ET for any reason. If the
price of an IO Order to buy (sell) is higher than (lower than) the
highest bid (lowest offer) on the Nasdaq Book, the price of the IO
Order will be modified repeatedly to equal the highest bid (lowest
offer) on the Nasdaq Book; provided, however, that the price of the
Order will not be moved beyond its stated limit price. Thus, for
example, if an IO Order to buy was entered with a price of $11 and the
current highest bid on the Nasdaq Book was $10.99, the IO Order would
be priced at $10.99. If the highest bid subsequently became $10.98, the
IO Order would again be repriced. However, if the highest bid moved to
$11.01, the IO Order would not be repriced.
    The following Order Attributes may be assigned to an Imbalance Only
Order:
     Price.
     Size.
     Time-in-Force. An IO Order may execute only in the Nasdaq
Closing Cross. An IO Order entered after the time of the Nasdaq Closing
Cross will be rejected.
     Participation in the Nasdaq Closing Cross is required for
this Order Type.
Retail Price Improving Order and Retail Order
    These Order Types are currently described in Rule 4780 and were
operated under a pilot program that expired on December 31, 2014.
Because Nasdaq has opted not to extend this pilot, it is proposing to
delete Rule 4780. Accordingly, these Order Types are not described in
the restated rules.\62\
---------------------------------------------------------------------------

    \62\ Nasdaq's affiliate exchange, NASDAQ OMX BX, Inc., however,
has recently adopted these Order Types. See Securities Exchange Act
Release No. 73702 (November 28, 2014), 79 FR 72049 (December 4,
2014) (SR-BX-2014-048).
---------------------------------------------------------------------------

Order Attributes
    Proposed Rule 4702 lists the Order Attributes that may be assigned
to specific Order Types. Proposed Rule 4703 details the parameters of
each Order Attribute.
Time-in-Force
    The ``Time-in-Force'' assigned to an Order means the period of time
that the Nasdaq Market Center will hold the Order for potential
execution. Participants specify an Order's Time-in-Force by designating
a time at which the Order will become active and a time at which the
Order will cease to be active. The available times for activating
Orders are:
     The time of the Order's receipt by the Nasdaq Market
Center;
     the Nasdaq Opening Cross (or 9:30 a.m. ET in the case of a
security for which no Nasdaq Opening Cross occurs);
     Market Hours, beginning after the completion of the Nasdaq
Opening Cross (or at 9:30 a.m. ET in the case of a security for which
no Nasdaq Opening Cross occurs);
     the Nasdaq Closing Cross (or the end of Market Hours in
the case of a security for which no Nasdaq Closing Cross occurs);
     8:00 a.m. ET, in the case of an Order using the SCAN
routing strategy \63\ that is entered prior to 8:00 a.m. ET;
---------------------------------------------------------------------------

    \63\ The SCAN routing strategy is described in Rule 4758. The
ability to enter a SCAN Order with at Time-in-Force that commences
at 8:00 a.m. reflects a substantive clarification to existing rules.
---------------------------------------------------------------------------

     the beginning of the Display-Only Period, in the case of a
security that is the subject of a trading halt and for which trading
will resume pursuant to a halt cross; and
     the resumption of trading, in the case of a security that
is the subject of a trading halt and for which trading resumes without
a halt cross.
    The available times for deactivating Orders are:
     ``Immediate'' (i.e., immediately after determining whether
the Order is marketable);

     the end of Market Hours;
     the end of System Hours;
     one year after entry; or
     a specific time identified by the Participant; provided,
however, that an Order specifying an expire time beyond the current
trading day will be cancelled at the end of the current trading day.

    Notwithstanding the Time-in-Force originally designated for an
Order, a Participant may always cancel an Order after it is entered.

    The following Times in Force are referenced elsewhere in Nasdaq's
Rules by the designations noted below:
     An Order that is designated to deactivate immediately
after determining whether the Order is marketable may be referred to as
having a Time in Force of ``Immediate or Cancel'' or ``IOC''. Except as
provided in Rule 4702 with respect to Opening Cross/Market Hours Orders
and Closing Cross/Extended Hours Orders, MOO, LOO, OIO, MOC, LOC and OI
Orders all have a Time in Force of IOC, because they are designated for
execution in the Nasdaq Opening Cross or the Nasdaq Closing Cross, as
applicable, and are cancelled after determining whether they are
executable in such cross. Such an Order may also be referred to as
having a Time-in-Force of ``On Open'' or ``On Close'', respectively. An
MOO, LOO, OIO, MOC, LOC or IO Order, or any other Order with a Time-in-
Force of IOC entered between 9:30 a.m. ET and 4:00 p.m. ET, may be
referred to as having a Time-in-Force of ``Market Hours Immediate or
Cancel'' or ``MIOC''. An Order with a Time-in-Force of IOC that is
entered at any time between 4:00 a.m. ET and 8:00 p.m. ET may be
referred to as having a Time-in-Force of ``System Hours Immediate or
Cancel'' or ``SIOC''.
     An Order that is designated to deactivate at 8:00 p.m. may
be referred to as having a Time in Force of ``System Hours Day'' or
``SDAY''.
     An Order that is designated to deactivate one year after
entry may be referred to as a ``Good-till-Cancelled'' or ``GTC'' Order.
If a GTC Order is designated as eligible for execution during Market
Hours only, it may be referred to as having a Time in Force of ``Market
Hours Good-till-Cancelled'' or ``MGTC''. If a GTC is designated as
eligible for execution during System Hours, it may be referred to as
having a Time in Force of ``System Hours Good-till-Cancelled'' or
``SGTC''.
     An Order that is designated to deactivate at the time
specified in advance by the entering Participant may be referred to as
having a Time-in-Force of ``System Hours Expire Time'' or ``SHEX''.
     An Order that is designated to activate at any time during
Market Hours and deactivate at the completion of the Nasdaq Closing
Cross may be referred to as having a Time-in-Force of ``Market Hours
Day'' or ``MDAY''. An Order entered with a Time-in-Force of MDAY after
the completion of the Nasdaq Closing Cross will be rejected.
     An Order that is designated to activate when entered and
deactivate at the completion of the Nasdaq Closing Cross may be
referred to as having a Time in Force of ``Good-till-Market Close'' or
``GTMC''. GTMC Orders entered after 4:00 p.m. ET will be rejected.
     A Participant entering an Order using the SCAN routing
strategy prior to 8:00 a.m. ET may designate the Order to activate upon
entry, or at 8:00 a.m. ET. The latter option may be referred to as
``ESCN''.
Size
    Except as otherwise provided, an Order may be entered in any whole
share size between one share and 999,999 shares. Orders for fractional
shares are not permitted. The following terms may be used to describe
particular Order sizes:
     ``normal unit of trading'' or ``round lot'' means the size
generally employed by traders when trading a particular security, which
is 100 shares in most instances;
     ``mixed lot'' means a size of more than one normal unit of
trading but not a multiple thereof; and
     ``odd lot'' means a size of less than one normal unit of
trading.
Price
    With limited exceptions, all Orders must have a price, such that
they will execute only if the price available is equal to or better
than the price of the Order. The maximum price that the System will
accept is $199,999.99. MOO and MOC Orders are not assigned a price by
the entering party and execute at the price of the Nasdaq Opening Cross
and Nasdaq Closing Cross, respectively. Moreover, certain Orders have a
price that is determined by the Nasdaq Market Center based on the NBBO
or other reference prices, rather than by the Participant. As described
below with respect to the Pegging Order Attribute, an Order may have a
price that it pegged to the opposite side of the market, in which case
the Order will behave like a ``market order'' or ``unpriced order''
(i.e., an Order that executes against accessible liquidity on the
opposite side of the market, regardless of its price).
Pegging
    Pegging is an Order Attribute that allows an Order to have its
price automatically set with reference to the NBBO; provided, however,
that if Nasdaq is the sole market center at the Best Bid or Best Offer
(as applicable), then the price of any Displayed Order with Pegging
will be set with reference to the highest bid or lowest offer
disseminated by a market center other than Nasdaq.\64\ An Order with a
Pegging Order Attribute may be referred to as a ``Pegged Order.'' The
price to which an Order is pegged is referred to as the Inside
Quotation, the Inside Bid, or the Inside Offer, as appropriate. There
are three varieties of Pegging:
---------------------------------------------------------------------------

    \64\ This is the case because otherwise the Pegged Order would
become pegged to itself it set the NBBO.
---------------------------------------------------------------------------

     Primary Pegging means Pegging with reference to the Inside
Quotation on the same side of the market. For example, if the Inside
Bid was $11, an Order to buy with Primary Pegging would be priced at
$11.
     Market Pegging means Pegging with reference to the Inside
Quotation on the opposite side of the market. For example, if the
Inside Offer was $11.06, an Order to buy with Market Pegging would be
priced at $11.06.
     Midpoint Pegging means Pegging with reference to the
midpoint between the Inside Bid and the Inside Offer (the
``Midpoint''). Thus, if the Inside Bid was $11 and the Inside Offer was
$11.06, an Order with Midpoint Pegging would be priced at $11.03. An
Order with Midpoint Pegging is not displayed. An Order with Midpoint
Pegging may be executed in sub-pennies if necessary to obtain a
midpoint price.

Pegging is available only during Market Hours. An Order with Pegging
may specify a limit price beyond which the Order may not be executed;
provided, however, that if an Order has been assigned a Pegging Order
Attribute and a Discretion Order Attribute, the Order may execute at
any price within the discretionary price range, even if beyond the
limit price specified with respect to the Pegging Order Attribute. If
an Order with Pegging is priced at its limit price, the price of the
Order may nevertheless be changed to a less aggressive price based on
changes to the Inside Quotation.\65\ In addition, an Order with Primary
Pegging or Market Pegging may specify an Offset Amount,

such that the price of the Order will vary from the Inside Quotation by
the selected Offset Amount. The Offset Amount may be either aggressive
or passive. Thus, for example, if a Participant entered an Order to buy
with Primary Pegging and a passive Offset Amount of $0.05 and the
Inside Bid was $11, the Order would be priced at $10.95. If the
Participant selected an aggressive Offset Amount of $0.02, however, the
Order would be priced at $11.02. An Order with Primary Pegging and an
Offset Amount will not be Displayed, unless the Order is Attributable.
An Order with Midpoint Pegging will not be Displayed. An Order with
Market Pegging and no Offset behaves as a ``market order'' with respect
to any liquidity on the Nasdaq Book at the Inside Quotation on the
opposite side of the market because it is immediately executable at
that price. If, at the time of entry, there is no price to which a
Pegged Order can be pegged, the Order will be rejected. In the case of
an Order with Midpoint Pegging, if the Inside Bid and Inside Offer are
locked, the Order will be priced at the locking price, if the Inside
Bid and Inside Offer are crossed, the Order will nevertheless be priced
at the midpoint between the Inside Bid and Inside Offer, and if there
is no Inside Bid and/or Inside Offer, the Order will be rejected.
---------------------------------------------------------------------------

    \65\ For example, if an Order to buy with Primary Pegging is
entered with a limit price of $11.05 at a time when the Inside Bid
is $11, the initial price of the Order will be $11. If, thereafter,
the Inside Bid changes to $11.05, $11.06, and $11.04, the price of
the Order at such times will be $11.05, $11.05, and $11.04.
---------------------------------------------------------------------------

    Primary Pegging and Market Pegging are available through RASH, QIX,
and FIX only. An Order entered through OUCH or FLITE with Midpoint
Pegging will have its price set upon initial entry to the Midpoint,
unless the Order has a limit price that is lower than the Midpoint for
an Order to buy (higher than the Midpoint for an Order to sell), in
which case the Order will be ranked on the Nasdaq Book at its limit
price. Thereafter, if the NBBO changes so that the Midpoint is lower
than (higher than) the price of an Order to buy (sell), the Pegged
Order will be cancelled back to the Participant.
    An Order entered through RASH, QIX or FIX with Pegging will have
its price set upon initial entry and will thereafter have its price
reset in accordance with changes to the relevant Inside Quotation. An
Order with Pegging receives a new timestamp whenever its price is
updated and therefore will be evaluated with respect to possible
execution (and routing, if it has been assigned a Routing Order
Attribute) in the same manner as a newly entered Order. If the price to
which an Order is pegged is not available, the Order will be rejected.
    Pegging functionality allows a Participant to have the System
adjust the price of the Order continually in order to keep the price
within defined parameters. Thus, the System performs price adjustments
that would otherwise be performed by the Participant through
cancellation and reentry of Orders. The fact that a new timestamp is
created for a Pegged Order whenever it has its price adjusted allows
the Order to seek additional execution opportunities and ensures that
the Order does not ``jump the queue'' with respect to any Orders that
were previously at the Pegged Order's new price level.
    If an Order with Primary Pegging is updated 1,000 times, it will be
cancelled; if an Order with other forms of Pegging is updated 10,000
times, it will be cancelled. This restriction is designed to conserve
System resources by limiting the persistence of Orders that update
repeatedly without any reasonable prospect of execution.
Minimum Quantity
    Minimum Quantity is an Order Attribute that allows a Participant to
provide that an Order will not execute unless a specified minimum
quantity of shares can be obtained. Thus, the functionality serves to
allow a Participant that may wish to buy or sell a large amount of a
security to avoid signaling its trading interest unless it can purchase
a certain minimum amount. An Order with a Minimum Quantity Order
Attribute may be referred to as a ``Minimum Quantity Order.'' For
example, a Participant could enter an Order with a Size of 1000 shares
and specify a Minimum Quantity of 500 shares.
    A Participant may specify two alternatives with respect to the
processing of a Minimum Quantity Order at time of entry:
     First, the Participant may specify that the minimum
quantity condition may be satisfied by execution against multiple
Orders. In that case, upon entry, the System would determine whether
there were one or more posted Orders executable against the incoming
Order with an aggregate size of at least the minimum quantity (500
shares in the above example). If there were not, the Order would post
on the Nasdaq Book in accordance with the characteristics of its
underlying Order Type.
     Second, the Participant may specify that the minimum
quantity condition must be satisfied by execution against one or more
Orders, each of which must have a size that satisfies the minimum
quantity condition. If there are such Orders but there are also other
Orders that do not satisfy the minimum quantity condition, the Minimum
Quantity Order will be partially executed and the remainder of the
Order will be cancelled. For example, if a Participant entered an Order
to buy at $11 with a size of 1,500 shares and a minimum quantity
condition of 500 shares, and there were three Orders to sell at $11 on
the Nasdaq Book, two with a size of 500 shares each and one with a size
of 200 shares, the two 500 share Orders would execute and the remainder
of the Minimum Quantity Order would be cancelled. Alternatively, if the
Order would lock or cross Orders on the Nasdaq Book but none of the
resting Orders would satisfy the minimum quantity condition, an Order
with a minimum quantity condition to buy (sell) will be repriced to one
minimum price increment lower than (higher than) the lowest price
(highest price) of such Orders. For example, if there was an Order to
buy at $11 with a minimum quantity condition of 500 shares, and there
were resting Orders on the Nasdaq Book to sell 200 shares at $10.99 and
300 shares at $11, the Order would be repriced to $10.98 and ranked at
that price.

Once posted to the Nasdaq Book, a Minimum Quantity Order retains its
Minimum Quantity Order Attribute, such that the Order may execute only
against incoming Orders with a size of at least the minimum quantity
condition. An Order that has a Minimum Quantity Order Attribute and
that posts to the Nasdaq Book will not be displayed.
    Upon entry, an Order with a Minimum Quantity Order Attribute must
have a size of at least one round lot. An Order entered through OUCH or
FLITE may have a minimum quantity condition of any size of at least one
round lot. An Order entered through RASH, QIX or FIX must have a
minimum quantity of one round lot or any multiple thereof, and a mixed
lot minimum quantity condition will be rounded down to the nearest
round lot. In the event that the shares remaining in the size of an
Order with a Minimum Quantity Order Attribute following a partial
execution thereof are less than the minimum quantity specified by the
Participant entering the Order, the minimum quantity value of the Order
will be reduced to the number of shares remaining. An Order with a
Minimum Quantity Order Attribute may not be displayed; if a Participant
marks an Order with both a Minimum Quantity Order Attribute and a
Display Order Attribute, the System will accept the Order but will give
a Time-in-Force of IOC, regardless of the Time-in-Force marked by the
Participant. An Order marked with a Minimum Quantity

Order Attribute and a Routing Order Attribute will be rejected.
Routing
    Routing is an Order Attribute that allows a Participant to
designate an Order to employ one of several Routing Strategies offered
by Nasdaq, as described in Rule 4758; such an Order may be referred to
as a ``Routable Order.'' Upon receipt of an Order with the Routing
Order Attribute, the System will process the Order in accordance with
the applicable Routing Strategy. In the case of a limited number of
Routing Strategies, the Order will be sent directly to other market
centers for potential execution. For most other Routing Strategies, the
Order will attempt to access liquidity available on Nasdaq in the
manner specified for the underlying Order Type and will then be routed
in accordance with the applicable Routing Strategy. Shares of the Order
that cannot be executed are then returned to Nasdaq, where they will
(i) again attempt to access liquidity available on Nasdaq and (ii) post
to the Nasdaq Book or be cancelled, depending on the Time-in-Force of
the Order. Under certain Routing Strategies, the Order may be routed
again if the System observes an accessible quotation of another market
center, and returned to Nasdaq again for potential execution and/or
posting to the Nasdaq Book.
    In connection with the trading of securities governed by Regulation
NMS, all Orders shall be routed for potential execution in compliance
with Regulation NMS. Where appropriate, Routable Orders will be marked
as Intermarket Sweep Orders.
Discretion
    Discretion is an Order Attribute under which an Order has a non-
displayed discretionary price range within which the entering
Participant is willing to trade; such an Order may be referred to as a
``Discretionary Order.'' \66\ Thus, an Order with Discretion has both a
price (for example, buy at $11) and a discretionary price range (for
example, buy up to $11.03). Depending on the Order Type used, the price
may be displayed (for example, a Price to Display Order) or non-
displayed (for example, a Non-Displayed Order). The discretionary price
range is always non-displayed. In addition, it should be noted that the
Discretion Order Attribute may be combined with the Pegging Order
Attribute, in which case either the price of the Order or the
discretionary price range or both may be pegged in the ways described
in Rule 4702(d) with respect to the Pegging Order Attribute. For
example, an Order with Discretion to buy might be pegged to the Best
Bid with a $0.05 passive Offset and might have a discretionary price
range pegged to the Best Bid with a $0.02 passive Offset. In that case,