Friday, June 5, 2009

Equity Trader Alert #2009 - 35
NASDAQ Provides an Update on New Flash Orders

What is the behavior of the new NASDAQ Only Flash Order?

NASDAQ^® will introduce new NASDAQ Only Flash Orders that will provide additional order exposure for customers. These orders will be available today, Friday, June 5, 2009.

After attempting to sweep the NASDAQ book, a NASDAQ Only Flash Order will disseminate via TotalView-ITCH^® for up to one half second at the most aggressive price possible that would not result in a trade through.

• Orders that become non-marketable and that do not execute in the flash period will remain on the book, unless cancelled by the customer.
• Orders that remain marketable after the flash period will be cancelled.
• Orders executed during the flash period will receive the full liquidity provider credit and will receive the liquidity code of “A.”

What enhancements have been made to routable orders?

Effective Monday, June 8, 2009, NASDAQ will introduce enhancements that make routable orders more efficient and cost effective.

After sweeping the NASDAQ book, the flash-enhanced routable order will be displayed via TotalView-ITCH for 20 to 30 milliseconds at the most aggressive price possible that would not result in a trade through before routing to away markets.

• Flash-enhanced routable orders will receive the liquidity code of “J” and will have the opportunity to earn the following rebates rather than be charged a routing fee:
  • Firms that add more than an average of 35 million shares per day will receive a rebate of $0.0015.
  • All other firms will receive a rebate of $0.0010.
• The standard low $0.0026 routing fee will be applicable for orders that execute on an away market after the flash period.

What routing strategies can I use to take advantage of the enhancement to routable orders?

The new enhancement to routable orders is available via STGY, SCAN, DOTA and DOTM.

What routing strategies should I use if I do not wish to utilize the enhanced routable orders?

Customers may opt to use the routing strategies SCNF (for SCAN) and SGNF (for STGY) if they do not want this functionality applied to their routable orders. These routing strategies are currently available for customer use.

How can I distinguish a Flash Order on my data feed?

NASDAQ OMX^SM plans to introduce new versions of the TotalView-ITCH data feed that will enable customers to differentiate Flash Orders from other orders on the book. NASDAQ OMX will be posting the specifications and ordering information for the new TotalView-ITCH feed with the flash order identifier in a Data News alert.

Earlier versions of the TotalView-ITCH service will carry the Flash Order data without the identifier.

Have the protocol specifications been updated?

Yes, updated protocol specifications have been posted on the NASDAQ OMX Trader^® website. The display code of “S” has been added to OUCH, INET, RASH and all FIX protocols and the “F” code has been added to the OUCH protocol to support the NASDAQ Only Flash Orders. Specifications for the QIX, RASH, CTCI and INET FIX protocols have also been updated with the SCNF and SGNF routing strategies to support changes to routable orders. These routing strategies are currently available for customer use.

Where can I get additional information?

• Refer to the Routing Strategies and Order Types Reference Guide.
• Refer to the updated protocol specifications on the NASDAQ OMX Trader website.
• To learn more about how to utilize the new Flash functionality, contact Transaction Services U.S. Market Sales at +1 800 846 0477.