Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend Rule 11.5(c) to add a new order type, the Edge Market Close
In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule changes and discussed any comments it received on the proposed rule changes. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements.
The Exchange is proposing to amend Rule 11.5(c) to add new subparagraph (15), which would describe a new order type, the EMC Order. An EMC Order would be defined as an order to buy or sell on the Exchange a security that is listed on the New York Stock Exchange LLC (the "NYSE") or The NASDAQ Stock Market LLC ("NASDAQ") (each, a "Listing Market") at the official closing price of such security published by the corresponding Listing Market.
The following examples illustrate how the EMC Order would work. In each case, assume that XYZ stock is listed on the NYSE; therefore, the EMC Cut-Off Time would be 3:40 p.m.
The Exchange is proposing the EMC Order in order to increase the level of
For example, from August 2006 through July 2009, excluding any tiered discounts offered by NASDAQ, NASDAQ charged $0.0005 per side for closing price executions,
Relative to intraday matches or executions the fees charged by the NYSE and NASDAQ for closing price executions are significantly more expensive. For example, large order flow providers that reach certain of NASDAQ's top tiers have a typical cost of match that varies from $0.00005 to $0.0005 (or "1/2 a mil" to "5 mils").
The Exchange has designed the EMC Order to provide an alternative means to obtain a closing price execution, without any impact on the price discovery function of the NYSE's and NASDAQ's respective closing processes. The existence of an alternative venue to obtain closing price executions introduces competition, and, consequently, a potential decrease in the fees charged to market participants for such executions.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act
In particular, the proposed rule change would remove impediments to and perfect the mechanisms of a free and open market and a national market system, and foster cooperation and coordination with persons engaged in facilitating transactions in securities, by promoting competition among national securities exchanges in the execution of matching closing price orders without disrupting the price discovery process of NYSE's and NASDAQ's respective closing processes. The EMC Order would be neutral to price discovery, as it would only execute on the Exchange against a matching contra-side EMC Order. Any imbalance resulting from unmatched EMC Orders to the buy or sell side would be routed to the applicable Listing Market for execution in their respective closing processes. The proposed rule change would protect investors and the public interest by encouraging the NYSE and NASDAQ to compete for market orders in their closing processes.
The Exchange does not believe that the proposed rule changes will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange has neither solicited nor received written comments on the proposed rule changes.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
* Use the Commission's Internet comment form (
* Send an email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.