As detailed in Equity Trader Alert #2016-56, Nasdaq is introducing additional price protections for the opening auction cross process. These new protections are designed to mitigate the potential for price dislocations at market open. The rollout for this change will be done in a phased approach consisting of four tranches. The first tranche was rolled out on March 15, 2016. This is a reminder that tranche two is set to rollout on March 21, 2016. A full rollout schedule is detailed below.

Currently, Nasdaq bounds the opening and closing crosses by calculating 10% of the Nasdaq Best Bid/Offer midpoint price and subtracting that from the bid and adding it to the offer to create an allowable opening price range for the opening cross. The execution price of the cross will be within this boundary at all times.

In addition to this current price protection, Nasdaq will add three new price checks to improve price protections in the cross process. These three new checks will be performed in each security to validate the calculated opening cross price. If the calculated opening cross price of a given symbol fails the opening price validation parameters, then Nasdaq will cancel all orders, including IOC, DAY and GTC orders, tagged with opening instructions in the impacted security and regular market hours trading will begin.

• Check A: The opening cross price must be within an acceptable range of the close from the previous night (NOCP for Nasdaq listed stocks and consolidated close for non- Nasdaq listed stocks)


• Check B: The opening cross price must be within an acceptable range of the last Nasdaq trade (round or odd lot) after 9:15 a.m. ET


• Check C: The opening cross price must be within an acceptable range of the Nasdaq Best Bid for Opening Cross prices higher than previous close or the Nasdaq Best Offer for Opening Cross prices lower than previous close

The calculated opening cross price must pass at least one of the three checks; if the cross price fails all three checks, then all orders in the opening cross book for that given symbol will be cancelled back to customers with a new reason code of “X” (this includes Limit On-Open (LOO), Market-On Open (MOO), Imbalance Only open orders, Market Day orders (MDAY) and Market Hours Good-Till-Cancelled orders (MGTC). Any orders that are already acknowledged on the continuous book will remain on the book and closing cross orders will not be cancelled and regular market hours trading will begin.

Nasdaq will use a threshold of the greater of $0.50 or 10% for checks A, B, and C. Nasdaq may elect to change the threshold value in the future. Any changes in the threshold values will be posted on Nasdaq’s webpage and communicated to participants via an Equities Trader Alert.

The rollout will commence in four tranches:

• Tranche 1 covers a subset of the Limit-Up Limit-Down (“LULD”) Tier 2 securities -- Complete


• Tranche 2 covers the remaining LULD Tier 2 securities – scheduled rollout date 3/21/16


• Tranche 3 covers a subset of the LULD Tier 1 securities – scheduled rollout date 3/28/16


• Tranche 4 covers all remaining securities – scheduled rollout date 4/4/16

Detailed information on the groups of symbols and the rollout dates can be found here.