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Wednesday, June 24, 2009

Equity Trader Alert #2009 - 43
NASDAQ OMX Introduces Self Match Prevention

Markets Impacted:

  • NASDAQ OMX BX
  • The NASDAQ Stock Market

Contact Information:

What you need to know:

  • Effective Wednesday, July 1, 2009, NASDAQ OMX will introduce Self Match Prevention functionality to The NASDAQ Stock Market.
  • Effective Wednesday, July 1, 2009, NASDAQ OMX will introduce Self Match Prevention functionality to NASDAQ OMX BX, pending filing with the SEC.
  • The new functionality will not allow firms to trade against the same MPID.
  • Firms will be able to opt-in to the functionality on an MPID basis.
  • The “Q” Cancel Order Reason has been updated in the INET FIX, RASH and OUCH protocol specifications to reflect the Self Match Prevention functionality.

What is changing?

Effective Wednesday, July 1, 2009, NASDAQ OMXSM will introduce Self Match Prevention functionality to The NASDAQ Stock Market®. Pending filing with the Securities and Exchange Commission (SEC), NASDAQ OMX will also introduce the functionality to NASDAQ OMX BXSM (BXSM).

This functionality will allow firms to prevent two orders with the same Market Participant Identifier (MPID) from executing against each other.

What is the behavior of the functionality?

Self Match Prevention allows firms to execute shares until the order would execute against the same MPID, and then cancels the remaining shares back.

For example, MPID A enters a 1,000 share buy order on the NASDAQ® book to execute at $10.01. The shares will execute in the following manner:

MPID A Buy Orders Sell Orders on the Book in Price/Time Priority Action
Order         MPID Order         MPID  
MPID A    1,000 @ $10.01 200 @ $10.01    MPID B Executes
MPID A     800 @ $10.01 200 @ $10.01    MPID C Executes
MPID A    600 @ $10.01 200 @ $10.01     MPID A Resting order cancels back with 600 unexecuted shares. Incoming order will remain intact.

How does this affect my firm?

Firms may opt-in to using Self Match Prevention on a per MPID basis. Firm must complete the updated NASDAQ Port Request Form and/or BX Port Request Form for each MPID in order to opt-in to this functionality.

Have the protocol specifications been updated?

The "I" Cancel Order Reason has been updated in the INET FIX, RASH and OUCH protocol specifications to reflect the Self Match Prevention functionality.

Where can I find additional information?


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