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Friday, January 28, 2011

Data Technical News #2011 - 3
Reg SHO Testing Availability

Markets Impacted:

  • The NASDAQ Stock Market
  • NASDAQ OMX BX
  • NASDAQ OMX PSX
  • UTP/SIP

Contact Information:

What you need to know:

  • NASDAQ OMX® and the UTP Securities Information Processor (SIP) will offer testing opportunities for market participants and market data redistributors on Saturday, February 26, 2011, in support of the Securities and Exchange Commission (SEC) Regulation SHO (Reg SHO) short sale circuit breaker rule.
  • Updated 2/22/2011: Reg SHO testing in the NTF and nightly SIP testing has been extended to March 4, 2011

What is being tested?

NASDAQ OMX will test trading and market data functionality for the release of SEC Reg SHO changes on Monday, February 28, 2011.

As a reminder, under amended SEC Rule 201, the SEC is requiring that the U.S. exchanges establish procedures to prevent the execution or display of a short sale order of a covered security at a price that is less than or equal to the current national best bid when the price of that security decreases by 10% or more from the prior day’s adjusted closing price. Once the price test restriction has been triggered, SEC Rule 201 (also known as the Alternative Uptick Rule) would apply to short sale orders in that security for the remainder of the day as well as the following day.

When will the testing be offered?

NASDAQ OMX will conduct user acceptance tests (UATs) for market participants and market data distributors on Saturday, February 26, 2011.

For this test, NASDAQ OMX expects to send out the pre-opening spins between 8:00 a.m., Eastern Time (ET) and 8:55 a.m., ET. NASDAQ OMX production systems will open for pre-market trading in all securities at 9:00 a.m., ET, followed by a market open at 9:30 a.m., ET. NASDAQ OMX expects that the market close event will occur at 12:00 p.m., ET.

How will NASDAQ OMX indicate when the SEC short sale-related circuit breaker has been triggered in a NASDAQ-listed security?

As outlined in Data Technical News #2010-23, NASDAQ OMX will introduce a new Reg SHO Short Sale Price Test Restricted Indicator administrative message format on the UTP data feeds and select NASDAQ OMX proprietary data feeds to indicate that an issue has breached the SEC Rule 201 short sale price test threshold. On the UTP data feeds, the new message will be identified as Message Category "A", Message Type "V". On the NASDAQ, BX and PSX proprietary data feeds, the new message will be identified as Message Type "Y".

The Reg SHO Short Sale Price Test Restricted Indicator message will include Issue Symbol and Reg SHO Action. The defined values for the Reg SHO Action field will be as follows:

Reg SHO Action Value Definition
0 No Reg SHO Short Sale Price Test Restriction
1 Reg SHO Short Sale Price Test Restriction is in effect due to an intra-day price drop in security
2 Reg SHO Short Sale Price Test Restriction remains in effect

In addition to the real-time messages, NASDAQ OMX will add a spin of Reg SHO Price Test Indicator messages to its pre-opening processes on the UTP, NASDAQ, BX and PSX data feeds. Please refer to the NASDAQ OMX and UTP data feed specification documents for additional processing information.

What NASDAQ OMX data feeds will carry the test data?

NASDAQ OMX will support all UTP data feeds and proprietary equity data feed products during the Saturday UATs.

The new Reg SHO Short Sale Price Test messages, however, will only be supported on the following data feeds:

  • UTP Quotation Data Feed (UQDF)
  • UTP Trade Data Feed (UTDF)
  • OTC Montage Data Feed (OMDF)
  • NASDAQ TotalView-ITCH – Versions 4.1 and 3.2
  • NASDAQ TotalView-Aggregated – Version 1.1
  • NASDAQ NOIView – Version 2.1
  • NASDAQ Level 2 – Version 1.1
  • NASDAQ Basic / NASDAQ Best Bid and Offer (QBBO) – Version 1.1
  • NASDAQ Last Sale (NLS) – Version 1.1
  • NLS Plus 1.0
  • NASDAQ Market Pathfinders 1.1
  • BX TotalView-ITCH – Versions 4.1 and 3.2
  • BX Basic / BX Best Bid and Offer (BX BBO) – Version 1.1
  • BX Last Sale (BLS) – Version 1.1
  • PSX TotalView-ITCH – Versions 4.1 and 3.2
  • PSX Basic / PSX Best Bid and Offer (PSX BBO) – Version 1.1
  • PSX Last Sale (PLS) – Version 1.1

Please note that NASDAQ OMX disseminates data over the production data feed channels during Saturday UATs.

For NASDAQ-listed issues, what test will be run for the UATs?

NASDAQ OMX will test the following scenarios during the Saturday testing:

Scenario #
 Scenario Symbol Approximate Time Notes
1
 Short sale circuit breaker triggered intraday ZRAN 10:00-10:10
2
 Short sale circuit breaker triggered intraday and then subsequently revoke the circuit breaker due to the trades being deemed erroneous DAVE 10:10-10:20 Triggered at ~10:10 and reset at ~10:20
3
 Short sale circuit breaker changed from a state of 2 (2nd day of circuit breaker) back to a state of 1 (1st day of a circuit breaker), which will then be reset back to a state of 2 due to the trades being deemed erroneous MNKD 10:20-10:30 Triggered at ~10:20 and reset at ~10:30
4
 Symbol will start the day in a state of 2 to signify the 2nd day of the short sale circuit breaker ERIC Start of Day Symbol will open with Reg SHO restriction in effect. New opening cross functionality may be tested.
5
 Short sale circuit breaker will be extended due to the circuit breaker being re-triggered and will revert back to a state of 1 CADX 10:35-10:45
6
 Trigger a single stock circuit breaker and a short sale circuit breaker at approximately the same time JDSU 10:45-10:55 Halt cross may be tested upon resumption from single stock trading pause.
7
 Trigger a single stock circuit breaker without triggering a short sale circuit breaker CPWR 10:55-11:05
8
 Closing cross ZRAN, MNKD, ERIC, CADX, JDSU 12:00 New short sale closing cross functionality may be tested with any symbol that triggers the circuit breaker during the testing session

To ensure a controlled test for the stated test symbols, NASDAQ OMX reserves the right to halt the issues until the schedule event time. NASDAQ OMX will use its System Status page to communicate exactly when each scenario will be tested.

Please note that it is possible for short sale circuit breakers to be triggered in other NASDAQ-listed issues based on market participant testing activity.

Has NASDAQ OMX issued any display recommendations for the SEC Regulation SHO Price Test Restricted Indicator?

Yes. NASDAQ OMX strongly recommends that market data distributors display the SEC Regulation SHO Price Test Indicator on all real-time single security quotation and order displays. Please refer to the NASDAQ OMX Data Policies document for details.

Where can I find additional information?

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