Wednesday, March 6, 2013

Equity Trader Alert #2013 - 20
UPDATED 3/25/13: SEC Approves Member Accommodation Program and Data Request in Relation to the Facebook Inc. (FB) IPO Cross

What is the Member Accommodation Program?

UPDATED 3/25/13: The SEC has approved The NASDAQ Stock Market^® (NASDAQ^®) rule change to establish a one-time, voluntary Member Accommodation Program to expand the pool available to compensate members for qualified losses arising directly from the IPO Cross system errors in FB on May 18, 2012. Members requesting accommodation will have one week from the date of approval to provide the information needed by FINRA to evaluate their requests.

The rule change to NASDAQ Rule 4626 establishes specific limited eligibility requirements for orders to qualify for inclusion in the evaluation process, from which the amount of compensation to be provided will be determined.

Which IPO orders are eligible for accommodation?

The following FB IPO Cross-eligible orders qualify for accommodation under the proposed Member Accommodation Program:

1. IPO Cross-eligible orders to sell that were submitted between 11:11 a.m. and 11:30 a.m., that were priced at $42 or less, and that did not execute.
2. IPO Cross-eligible orders to sell that were submitted between 11:11 a.m. and11:30 a.m., that were priced at $42 or less, and that executed at a price below $42.00.
3. IPO Cross-eligible orders to buy priced at exactly $42.00 that were executed in the Cross but not immediately confirmed.
4. IPO Cross-eligible orders to buy priced above $42.00 that were executed in the Cross but not immediately confirmed, but only to the extent entered with respect to a customer that was permitted by the member to cancel its order prior to 1:50 p.m. and for which a request to cancel the order was submitted to NASDAQ by the member, also prior to 1:50 p.m.

Firms should refer to the rule filing for more information regarding the specific eligibility requirements for orders to qualify for the Member Accommodation Program.

How will accommodations under the proposed Member Accommodation Program be assessed?

FINRA will evaluate claims using the criteria in the rule filing and approval order to determine the eligibility and value of each member's claim. FINRA will make its evaluation on data provided by NASDAQ as well as the supplemental information requested below from claimants and any additional information requested from claimants by FINRA.

As described in the rule filing, NASDAQ proposed to establish a uniform reference price as the benchmark for determining the loss incurred by (1) qualified sell orders that failed to execute and (2) qualified buy orders that were not immediately confirmed. Qualified sell orders that received inferior executions would use their actual execution price as the benchmark for assessing accommodation value.

What information are members be required to provide?

The following order detail is required for all IPO Cross Orders for which an accommodation is sought. Order information should be entered into an MS Excel workbook with each column appropriately identified, in the order defined below. Additionally, firms should provide information for execution(s) received, if any, on the affected IPO orders. Required data elements for orders submitted to the NASDAQ IPO Cross are:

• The number corresponding to the specific IPO Cross-eligible order category that qualifies for accommodation under the Member Accommodation Program. The corresponding numbers are:

  Category 1	IPO Cross-eligible orders to sell that were submitted between 11:11 a.m. and 11:30 a.m., that were priced at $42 or less, and that did not execute
  Category 2	IPO Cross-eligible orders to sell that were submitted between 11:11 a.m. and 11:30 a.m., that were priced at $42 or less, and that executed at an inferior price
  Category 3	IPO Cross-eligible orders to buy priced at exactly $42.00 that were executed in the cross but not immediately confirmed
  Category 4	IPO Cross-eligible orders to buy priced above $42.00 and that were executed in the Cross but not immediately confirmed, but only to the extent entered with respect to a customer that was permitted by the member to cancel its order prior to 1:50 p.m. and for which a request to cancel the order was submitted to NASDAQ by the member, also prior to 1:50 p.m.

• NASDAQ-assigned FIX, RASH, QIX, or OUCH Account
• Order reference number assigned by NASDAQ for the last modification (e.g., cancel/replace for FIX/QIX or modify/replace for OUCH)
• MPID
• Symbol
• Date
• Order Time
• ClientOrderID or UserToken
• Limit Price or blank if no limit price
• Entered Size
• Side
• TIF Instruction
• Number of shares executed, if applicable
• Price of execution or VWAP if multiple executions on the order occurred at different prices, if applicable

Do I also need to include records of eligible offsetting trades and subsequent cancellations with respect to the above orders?

Yes, records for any offsetting trades that meet the requirements in the rule filing would also be required (or if no offsetting trades, a statement to that effect). On the same worksheet and in the row(s) of data that correspond to the IPO Cross order identified above, filers should also provide information on all trade executions (e.g., covering trades) that created a realized loss with respect to the above IPO Cross orders to the extent that they can be identified. If there were multiple executions that caused a realized loss with respect to a single IPO Cross order identified above, provide an aggregate share volume, the volume weighted average price, and the time of the first and last execution in lieu of execution information for each individual transaction. Further control and reference numbers are not required for multiple executions. If a single execution that caused a realized loss was related to multiple IPO cross orders identified above, provide one record for each IPO Cross order^[1]. For qualifying orders in category (4), filers should also provide cancellation information for the customer cancellation and the firm's corresponding cancellation submitted to NASDAQ.

Firms should provide the following information for offsetting trades and cancellations:

• Executing market center (for a single execution)
• NASDAQ-assigned FIX, RASH, QIX, or OUCH Account, if applicable
• Order reference number assigned by NASDAQ, if applicable
• FINRA/NASDAQ TRF ACT Control Number, if applicable
• FINRA/NYSE TRF Control Number, if applicable
• Other applicable exchange control or reference number, if applicable
• MPID or applicable exchange identifier
• Time of first execution (for a single execution)
• Time of last execution (for multiple executions)
• ClientOrderID or UserToken if applicable
• Execution Price (VWAP for multiple executions)
• Shares Executed
• Side
• Order Cancellation Time, if applicable
• # of Shares Cancelled, if applicable
• OATS Order Receiving Firm Order ID# of Customer Cancellation
• Order Reference Number assigned by NASDAQ for cancellation

[1] For example, if there was one sell execution for 200 shares that corresponds to two IPO Cross sell orders for 100 shares, then there should be two rows of data with the offsetting sell execution data repeated in both rows.

Do I need to calculate the loss for each IPO Cross Order for which an accommodation is sought?

Yes, on the same worksheet and in the row of data that corresponds to each IPO Cross order identified above, filers should calculate the member's direct trading loss incurred using the formulas described in the rule change. Firms must identify the benchmark (i.e., actual execution price or uniform reference price) used for the calculation of the loss. Additionally, firms must indicate whether the calculated Member's Share loss with respect to category (4) was reduced by 30% pursuant to NASDAQ Rule 4626(b)(3)(A)(iv).

In what format do I need to submit the supplemental information?

The supplemental information must be provided in an MS Excel workbook as .xls or .xlsx file. The workbook should be clearly labeled to identify the filer. Contact information should be provided on the first worksheet of the workbook. No order or execution data should be included on the first worksheet.

What should I do if I already submitted a claim?

Please verify that the claim contains all of the required information. If it does, please send an email to IPOaccommodations@nasdaqomx.com to confirm that the information is complete. If it does not, please submit the missing information to the same address.

Is there a MS Excel sample workbook available?

CORRECTED 3/20/2013: Yes, a sample MS Excel workbook may be obtained here.

Executing Market identifiers are:

Will any additional information be required?

FINRA reserves the right, in consultation with NASDAQ, to request additional information in processing a filer's request for accommodation under the Member Accommodation Program. Filers will then be required at a later date to provide details regarding any compensation, accommodation, or other economic benefit provided or to be provided by the filer to its customers.

Who should I contact if I have questions?

Questions on providing supplemental data should be directed to: Thomas.obrien@nasdaqomx.com. Questions regarding the Member Accommodation Program should be directed to Transaction Services U.S. Market Sales at +1 800 846 0477.

Where can I find additional information?

• Contact the NASDAQ OMX Trade Desk at +1 212 231 5100.

---




Email Alert Subscriptions:
Nasdaq offers customers the ability to self select news delivery across various Nasdaq markets. Create and maintain a profile for updating alert preferences and contact information. Visit the enrollment form on the Nasdaq Trader website and sign up today! Please note that if you choose to unsubscribe from an email list, you may no longer receive potentially critical emails from the NASDAQ Stock Market regarding Nasdaq's trading and data products, regulatory issues or marketplace initiatives. To unsubscribe, also click on the enrollment form

Please follow Nasdaq on Facebook RSS and Twitter.

Nasdaq (Nasdaq: NDAQ) is a leading global provider of trading, clearing, exchange technology, listing, information and public company services. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 90 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to approximately 3,900 total listings with a market value of approximately $13 trillion. To learn more, visit: business.nasdaq.com.

View NASDAQTrader.com Mobile