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Wednesday, April 4, 2012

Equity Technical Update #2012 - 10
NASDAQ Introduces Minor IPO Order Entry Enhancements

Markets Impacted:

Contact Information:

What you need to know:

  • REMINDER: On Friday, April 20, 2012, The NASDAQ Stock Market® (NASDAQ®) will begin accepting DAY orders in IPO securities at system start-up, rather than beginning during the quoting period, pending Securities and Exchange Commission (SEC) review.
  • UPDATE: Please be advised that IPO orders submitted before the quoting period will not receive an acknowledgement until the beginning of the quoting period.
  • NASDAQ will accept routable buy market orders in IPOs, beginning Monday, April 9, 2012.

How is order entry changing for IPOs?

Currently, NASDAQ rejects orders in IPO securities entered prior to the 15 minute Display-Only period (the "quoting period") preceding the IPO's release from halt status and the commencement of trading.

Pending SEC review, beginning April 20, 2012, NASDAQ will accept orders in IPO securities beginning at system start-up, provided those orders are marked Time-in-Force of DAY and designated for holding through entry via RASH or FIX ports. These orders will be held in an un-displayed state until the quoting period begins, at which point they will be entered into the system. Orders held in this manner will not receive time priority compared to other orders entered at the start of the Display-Only period.

UPDATE: Please be advised that orders submitted before the quoting period will not receive an acknowledgement until the beginning of the quoting period. Firms may also opt-in individual ports to receive a pending acknowledgement message at the time of order submission. To enable this behavior, please contact NASDAQ OMX Trade Desk at +1 212 231 5100.

How has NASDAQ's interpretation of FINRA Rule 5131 changed?

As previously announced in ERA 2011-13, FINRA Rule 5131 became effective on September 26, 2011. Since that time, NASDAQ has interpreted the rule to prohibit the exchange's acceptance of routable buy market orders in IPO securities.

After consultation with FINRA, NASDAQ has revised this interpretation because such orders are executed in the exchange's opening and therefore are never held by NASDAQ routing broker. Accordingly, NASDAQ will begin to accept buy market orders in NASDAQ-listed IPOs regardless of routing instruction. This change will be implemented beginning Monday, April 9, 2012.

FINRA member firms entering market orders must ensure that they are doing so in compliance with FINRA Rule 5131, which provides that members may not accept a market order for the purchase of shares of a new issue in the secondary market prior to the commencement of trading of such shares in the secondary market.

Where can I find additional information?


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