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Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the Minimum Quantity Order

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Start Preamble October 12, 2011.

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 September 30, 2011, NASDAQ OMX PHLX LLC (“PHLX”) 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 PHLX. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

PHLX is filing this proposed rule change to modify the operation of its Minimum Quantity Order in the NASDAQ OMX PSX (“PSX”) system. PHLX proposes to implement the rule change on a date that is at least thirty days after the date of the filing, but prior to November 30, 2011. The text of the proposed rule change is available at​nasdaqomxphlx/​phlx, at PHLX'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, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose

In order to provide enhanced functionality, PHLX is proposing to modify the functionality of its Minimum Quantity Order. Minimum Quantity Orders allow a market participant to specify a minimum share amount that the market participant seeks to obtain; accordingly, a Minimum Quantity Order will not execute unless the volume of liquidity available to execute against the order exceeds the designated minimum. A Minimum Quantity Order provides a means by which a market participant may avoid partial executions of orders at sizes that it considers inadequate to achieve its purposes. For example, a market participant seeking to sell a large position in a trading session with high volatility may use the order type to avoid selling only a small portion of the order at the price it considers acceptable.

Currently, Minimum Quantity Orders must be designated with a time-in-force of System Hours Immediate or Cancel or Market Hours Immediate or Cancel. As a result, the order can only be used to “ping” the PSX book to see if there is any posted liquidity that would allow the minimum execution. PHLX is proposing to remove this restriction so that a Minimum Quantity Order could post to the book if it cannot be executed immediately. Once posted, the order will execute if an incoming order that is marketable against it would satisfy its minimum quantity requirement. A Minimum Quantity Order that posts to the book is not displayed. Upon entry, all Minimum Quantity Orders must have a size, and a minimum quantity condition, of at least one round lot.

Under PSX's unique price-size order priority, Minimum Quantity orders at a particular price will be executed after (i) Displayed Orders and (ii) Non-Displayed Orders without a minimum quantity condition and the reserve portion of Reserve Orders (“Non-Displayed Interest”) with a size of at least on [sic] round lot. As among equally priced Minimum Quantity orders, incoming orders that satisfy the minimum quantity condition will be allocated among the resting orders in the ascending order of the size of their minimum quantity condition.[3]


The book has four minimum quantity orders to buy at $10 with the following parameters:

O1: 300 shares, minimum quantity of 100 shares;

O2: 200 shares, minimum quantity of 200 shares;

O3: 500 shares, minimum quantity of 300 shares;

O4: 1000 shares, minimum quantity of 700 shares.

A marketable order to sell 600 shares is entered. 300 shares of the incoming order will be assigned to O1, and 200 shares will be assigned to O2. The remainder of the incoming order will skip O3 and O4 because their minimum quantity conditions cannot be satisfied.

In the event that the shares remaining in the size of a Minimum Quantity Order following a partial execution are less than the minimum quantity specified by the market participant entering the order, the minimum quantity value of the order will be reduced to the number of shares remaining. Thus, for example, if a market participant entered a Minimum Quantity Order with a size of 1,000 and a minimum quantity of 500, and the order was marketable against a 600 share order on the book, the remaining Start Printed Page 64402400 shares of the Minimum Quantity Order would post to the book with a minimum quantity restriction of 400 shares. If the shares remaining in the size of a Minimum Quantity Order following a partial execution are less than one round lot, however, the minimum quantity restriction will no longer be effective.

2. Statutory Basis

PHLX believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,[4] in general, and with Section 6(b)(5) of the Act,[5] in particular, in that the proposal is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Specifically, PHLX believes that the change to the functioning of the Minimum Quantity Order will provide market participants with better control over their trading patterns, thereby providing them with greater potential to improve the quality of their order executions.

B. Self-Regulatory Organization's Statement on Burden on Competition

PHLX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The changes to the Minimum Quantity Order will enhance the functionality offered by PHLX to its members, thereby promoting its competitiveness with other exchanges and non-exchange trading venues that already offer similar functionality.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act [6] and Rule 19b-l4(f)(6) thereunder.[7]

At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:

Electronic Comments

Paper Comments

  • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2011-132. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (​rules/​sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of PHLX. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2011-132 and should be submitted on or before November 8, 2011.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[8]

Elizabeth M. Murphy,


End Signature End Preamble


3.  If there are two or more Minimum Quantity Orders with an equal minimum quantity condition, the System will determine the order of execution on the basis of a random function that assigns each order an equal probability of execution.

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[FR Doc. 2011-26920 Filed 10-17-11; 8:45 am]