Wednesday, March 13, 2013

Equity Trader Alert #2013 - 23
NASDAQ OMX to Re-Launch PSX with ETP Focus

Markets Impacted:

Contact Information:

What you need to know:

  • PSX will be reintroduced with a new price-time execution model and an emphasis on Exchange Traded Products (ETPs), pending Securities and Exchange Commission (SEC) approval.

What is changing?

Pending SEC approval, NASDAQ OMX PSXSM (PSXSM) will adopt a price-time execution model. The price-time execution model is simple, easily adoptable and well understood by the vast majority of market participants. This execution model is currently employed by the NASDAQ Stock Market® (NASDAQ®), NASDAQ OMX BXSM (BXSM), and other U.S. equity exchanges. Depending on the date of SEC approval, the change will be implemented as early as May 1, 2013.

Under the proposed PSX execution model, all displayed limit orders will be ranked for execution first according to price level; orders of the same price will be ranked based on the time at which they were entered into the system. Non-displayed shares will be executed after displayed shares at the same price level.

Why is PSX changing its execution model?

The uniqueness of the PSX pro-rata execution model among US equity exchanges limited adoption by some potential participants. Additionally, the pro-rata execution model found traction in only a sub-set of securities. PSX's new price-time model will encourage broader participation and more robust quoting in the full range of NMS securities.

How will PSX support trading of ETPs?

PSX plans to establish itself as the pre-eminent destination for trading ETPs through a combination of meaningful economic incentives for participants and the establishment of programs designed to attract committed liquidity providers. These programs will be announced at a later date and will be subject to filing with the SEC.

If I'm already a PSX participant, what membership changes do I need to make to continue to trade on PSX?

  • If your firm is currently a PSX participant, no further membership steps are required.
  • If your firm is a PHLX member but does not currently trade on PSX, you can request connectivity to PSX by submitting the PSX Request Form to the NASDAQ OMX Membership Department.
  • If your firm is not a PHLX member, you must complete the PHLX membership application process, regardless of whether your firm is a member of another NASDAQ OMX exchange.

Can I use my existing ports to access PSX after re-launch?

Yes, PSX members can continue to trade on PSX using their existing connections.

What securities will PSX trade?

PSX will continue to trade all Reg NMS protected securities listed on NASDAQ, NYSE, NYSE Arca, NYSE Amex and other regional exchanges.

Will there be registered market making opportunities following the re-launch?

Yes, PSX will introduce Registered Market Maker (RMM) status in all securities.

RMMs are required to maintain a continuous, two-sided quote of at least one round lot during regular market hours for each security in which they are registered.

What functionality will be available?

Following the re-launch, PSX will offer order types and functionality consistent with the current features available on NASDAQ.

Where can I find additional information?

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