Market Watch

Description and Responsibilities

Nasdaq operates a multifaceted surveillance program; including real-time surveillance, post-trade surveillance, testing of exchange trading system to confirm alignment with exchange rules, membership application reviews, and oversight of examination, investigation and legal services outsourced to FINRA, an independent securities industry regulatory authority. NASDAQ MarketWatch provides real-time surveillance for activity on the NASDAQ Stock Market, NASDAQ BX, NASDAQ PSX, NASDAQ Options Market and the NASDAQ BX Options Market to maintain an orderly marketplace and level playing field for investors, market participants and listed companies. Additional MarketWatch staff work on the NASDAQ PHLX trading floor providing similar coverage for electronic and floor based trading on NASDAQ PHLX. In an effort to foster marketplace integrity, MarketWatch oversees the complete and timely disclosure of material information by NASDAQ-listed companies. In addition, MarketWatch monitors compliance with Exchange rules and policies through real-time surveillance of price and volume information reported by market participants in equities and options transactions. MarketWatch maintains a suite of post-trade surveillance patterns covering the NASDAQ markets. MarketWatch works closely with NASDAQ business lines and FINRA in an effort to provide innovative, fair and equitable regulation for the NASDAQ markets. When activity is suspected of being potentially in violation of Exchange rules, MarketWatch refers the activity to FINRA's regulatory groups for further review and potential disciplinary action. Information received by MarketWatch is confidential and used strictly for regulatory purposes. MarketWatch implements fair and independent decisions within the scope of its authority and without influence from other NASDAQ offices.

Disclosure

NASDAQ Stock Market Rules require that, except in unusual circumstances, companies make prompt disclosure to the public through any Regulation FD-compliant method (or combination of methods) of disclosure of any material information that would reasonably be expected to affect the value of its securities or influence investors' decisions. Companies are required to notify MarketWatch at least ten minutes prior to the public release of certain material news announcements when the public release of the information is made between 7:00 a.m. - 8:00 p.m. ET. If the public release of the material information is made outside of 7:00 a.m. - 8:00 p.m. ET, companies must notify MarketWatch of the material information prior to 6:50 a.m. ET. This notification must be provided to MarketWatch through the Electronic Disclosure submission system accessible at www.nasdaq.net. MarketWatch does not accept material news disclosures by fax or phone, except in emergency situations. MarketWatch business hours are from 4:00 a.m. to 8:00 p.m. ET, Monday through Friday. NASDAQ MarketWatch assesses company disclosures for materiality and in certain circumstances, may implement a temporary trading halt to allow for even dissemination of the information. A trading halt provides the public with an opportunity to evaluate material information and consider it in making investment decisions.

MarketWatch monitors real time trading in all NASDAQ securities during the trading day for price and volume activity utilizing automated surveillance systems. In the event of certain price and volume movements without a reasonable explanation, MarketWatch may contact a company in order to review the unusual market activity. MarketWatch treats the information provided by the company and other sources in a highly confidential manner, and uses it to assess market activity and assist in maintaining fair and orderly markets. A NASDAQ listing includes an obligation to disclose to MarketWatch information that the company is not otherwise disclosing to the investing public or the financial community.

Trading Halts

MarketWatch makes reasonable efforts to conduct timely reviews of material news notifications, reach appropriate determinations regarding the materiality of the announcement, monitor newswires for material news affecting NASDAQ companies and, when appropriate, implement temporary trading halts prior to the public dissemination of the material news. The consideration of temporary trading halts occurs during regular market hours as well as during pre-market and after-hours trading sessions. MarketWatch generally implements trading halts from 7:00 a.m. - 8:00 p.m. ET. Between 4:00 a.m. and 7:00 a.m. ET, MarketWatch may implement temporary trading halts at the request of a NASDAQ company when related to material news or in conjunction with a regulatory trading halt imposed by a foreign listing market. A temporary trading halt benefits existing and potential shareholders by ensuring that material news is distributed equally among all market participants and by ensuring that all trading is based on publicly held facts. Trading is normally resumed in a stock about thirty minutes following the dissemination of the material announcement through the news media or another Regulation FD-compliant manner, although NASDAQ may vary the length of the trading halt in consultation with the company, or when NASDAQ is scheduling trading resumptions around the open or close of regular market hours. NASDAQ usually reaches out to the company before making a halt determination. MarketWatch may need to ask questions and review the news content in more depth with the company. This is especially common when reviewing disclosures related to clinical trials, FDA-related issues, developments regarding customers or suppliers and legal or regulatory developments. If MarketWatch is unable to reach a company official to review the materiality of the announcement before the news is made public, it is possible that a halt may not be implemented prior to dissemination because an evaluation with the company could not be completed. Prior to implementing a trading halt, MarketWatch will verify the news with a company official to ensure the security of the disclosure information. The staff will call the corporate official at the company's main number or will call the corporate official directly at the phone number on file with NASDAQ in order to complete this verification. If MarketWatch is unable to verify the information with the company before the release of the material news announcement, MarketWatch may halt trading once the news disclosure is made public, (e.g. if the news disclosure is a press release, the trading halt will be implemented once the news crosses the newswires). In cases where MarketWatch does not receive prior notification of material news (for example, a company does not submit the prior notification), or is unaware material news is being made public (such as might occur in the case of an unsolicited tender offer), MarketWatch monitors the newswires and may have to make an assessment once the news is public whether any further steps are appropriate. There may be situations where, due to the passage of time, NASDAQ determines that a trading halt would not be in the best interests of the market. In general, any trades that occur during the period after news dissemination but before implementation of the trading halt, or that occur if no halt is implemented, will stand unless these trades result from a trading error that meets the requirements of NASDAQ Rule 11890. NASDAQ also follows regulatory halts implemented in non-NASDAQ-listed securities by the listing exchange. MarketWatch is informed of these regulatory halts by data feed or other notification by the listing exchange. MarketWatch attempts to implement these halts as rapidly as possible after notification, but timing is affected by factors similar to those outlined above, including delays in notification by the listing exchange. NASDAQ will determine the status of trades that occur prior to NASDAQ implementing a halt in non-NASDAQ-listed securities on a case by case basis after consultation with other affected markets.

(This Trading Halt description is for informational purposes only. NASDAQ reserves the right to take any and all actions, at any time, to halt or resume trading in securities trading in any of its systems.)

Compliance

NASDAQ MarketWatch monitors trading compliance in the NASDAQ Stock Market, NASDAQ BX and NASDAQ PSX for equities and the NASDAQ Options Market,NASDAQ BX Options Market and NASDAQ PHLX Market. It is the MarketWatch analysts' responsibility to protect marketplace integrity by reviewing alerts generated by real-time automated detection systems, or the post-trade surveillance systems. MarketWatch immediately resolves any trade reporting issues relating to the accuracy of price and volume information reported by market participants trading and quoting NASDAQ or exchange-listed securities in NASDAQ Systems. MarketWatch performs several regulatory functions related to Reg NMS Compliance including Trade Through, Locked and Crossed markets and Self Help compliance. MarketWatch actively monitors IPOs during the opening quote process to facilitate an orderly open. The trade adjudication process for NASDAQ equity and option transactions is administered by MarketWatch. This includes coordination with other markets when larger trading issues affect multiple market centers.

Regulatory Technology

NASDAQ MarketWatch recognizes the need to have technical expertise on staff to assist with maintaining regulatory compliance when changes are made to NASDAQ trading systems, rule book, data feeds, and surveillance applications. The Regulatory Technology team is responsible for ensuring that both business and technical changes are in compliance with the NASDAQ rule book. This team is the liaison to other business units within NASDAQ as well as external regulatory groups.

MarketWatch Market Regulation

NASDAQ MarketWatch is responsible for overseeing the efficiency and effectiveness of FINRA regulatory programs undertaken by FINRA Market Regulation on behalf of the NASDAQ Stock Market, NASDAQ BX, NASDAQ PSX, NASDAQ Options Market, NASDAQ PHLX and NASDAQ BX Options Market. MarketWatch's primary task is to coordinate the services that NASDAQ purchases from FINRA Market Regulation. In this role, MarketWatch develops reporting standards for FINRA Market Regulation, and reviews the activities of FINRA Market Regulation for consistency with NASDAQ's self-regulatory responsibilities. MarketWatch assists the Chief Regulatory Officers of NASDAQ's exchanges and works closely with NASDAQ's Information Technology business line and the Office of General Counsel to facilitate day-to-day information sharing between NASDAQ and FINRA.

NASDAQ MarketWatch Duties

NASDAQ MarketWatch Duties include:

• Review material news disclosures
• Trading Halt administration
• Review of unusual market activity
• Review of market participant trading activity
• Trade Break Adjudication
• Clearly Erroneous for Equities
• Obvious Error for Option trades
• Reg NMS compliance
• Initial Public Offering (IPO) release process
• Excused Withdrawals and Reg M activity
• Market participant quoting obligations administration
• Post-trade surveillance pattern reviews
• Enforcement of minor rule plan and order and decorum requirements
• Refer potential violations to FINRA
• Oversight of FINRA regulation programs for NASDAQ
• Assess the quality and preparedness of NASDAQ member applicants
• Process terminations and withdrawals of member firms

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