Citation: "79 FR 36840"
Document Number: "Release No. 34-72460"
June 24, 2014.
Notice is hereby given that, pursuant to Section 11A(a)(3)(B) of Securities Exchange Act of 1934 ("Act"), /1/ the
FOOTNOTE 1 Section 11A(a)(3)(B) authorizes the Commission, in furtherance of its statutory directive to facilitate the establishment of a national market system, by rule or order, "to authorize or require self-regulatory organizations to act jointly with respect to matters as to which they share authority under [the Act] in planning, developing, operating, or regulating a national market system (or a subsystem thereof) or one or more facilities thereof." 15 U.S.C. 78k-1(a)(3)(B). END FOOTNOTE
FOOTNOTE 2 17 CFR 242.608. END FOOTNOTE
Prior to implementing decimal pricing in
At the same time, the exchanges and NASDAQ (the predecessor to
FOOTNOTE 4 See Securities Exchange Act Release Nos. 31118 (
FOOTNOTE 5 See Securities Exchange Act Release No. 42360 (
FOOTNOTE 6 In
FOOTNOTE 7 The exchanges and
In 2004, the Commission proposed, and then re-proposed, Rule 612 of Regulation NMS to establish a minimum price variation ("MPV") of one penny. /8/ Several commenters on the original proposal had recommended an MPV of greater than one penny. In response, the Commission noted that proposed Rule 612 would "set a floor for the MPV, not determine an optimal MPV." /9/ The Commission further stated that the conversion to decimal pricing had "reduced spreads, thus resulting in reduced trading costs for investors entering orders--particularly for smaller orders--that are executed at or within the quotations," /10/ and because of these benefits the Commission did not propose a higher MPV. It added, however, that "if the SROs in the future believe that an increase in the MPV is necessary or desirable, they may propose rule changes to institute the higher MPV" /11/ and that the Commission would evaluate them at that time. In 2005, the Commission adopted Regulation NMS Rule 612, and since that time the one penny MPV has applied to all listed stocks priced at
FOOTNOTE 8 See Securities Exchange Act Release No. 50870 (
FOOTNOTE 9 Id. at 77458. END FOOTNOTE
FOOTNOTE 10 Id. END FOOTNOTE
FOOTNOTE 11 Id. END FOOTNOTE
FOOTNOTE 12 Rule 612 specifies minimum pricing increments for NMS stocks. In general, Rule 612 prohibits market participants from displaying, ranking, or accepting quotations, orders, or indications of interest in any NMS stock priced in an increment smaller than
Since the adoption of Regulation NMS, the Commission has continued to evaluate tick sizes in the equity markets. /13/ In
FOOTNOTE 13 In addition, the Commission has evaluated tick sizes in the options market and has approved a penny pilot program in the options markets. See e.g., Securities and Exchange Act Release Nos. 55153 (
FOOTNOTE 14 See Securities Exchange Act Release No. 61358 (
FOOTNOTE 15 See, e.g., Letters from
FOOTNOTE 16 See, e.g., Letters from
FOOTNOTE 17 See, e.g., Letters from
From time to time since the introduction of decimal pricing, concerns have been raised that the one penny MPV may be detrimental to small- and middle-sized companies. In particular, a few studies have raised questions regarding whether decimalization has reduced incentives for underwriters to pursue public offerings of smaller companies, limited the production of sell-side research for small and middle capitalization companies, and made it less attractive to become a market maker in the shares of smaller companies. /18/
FOOTNOTE 18 For a complete discussion of these studies see Report to
FOOTNOTE 19 See id. END FOOTNOTE
The Decimalization Report summarized the academic literature relating to the impact of decimalization on the market generally, and on the securities of small and middle capitalization companies. The Commission staff noted that there were no academic papers that directly examined the relationship between decimalization and the number of IPOs. The academic studies summarized in the Decimalization Report analyzed decimalization's impact on spreads, depth, execution speed, trade size, specialist/market maker participation and profitability, market and limit orders, order routing, volatility, and incentives for broker promotion. The Decimalization Report identified the main empirical findings of the academic literature in each of these areas. For example, some studies found that while both effective and quoted spreads declined after decimalization, there is some evidence that, at least for NASDAQ small capitalization stocks, the decline is not statistically significant, and the effect of decimalization on institutional transaction costs is mixed. In addition, some studies found that while quoted depth, on average, declined after decimalization, cumulative depth at competitive prices did not change. Some studies found that market maker participation increased after decimalization across all market capitalization categories, but decimalization does not appear to have reduced profitability.
In the Decimalization Report, the Commission staff also surveyed tick-size conventions in non-U.S. markets. Many foreign jurisdictions utilize a tiered tick size approach that provides greater variability for tick sizes based on the price level of a stock rather than the "one size fits all" approach utilized in
FOOTNOTE 20 See Decimalization Report at 18. The Decimalization Report also examined the level of small company IPOs in other countries during the time before and after decimalization to assess whether other countries had experienced declines in small company IPOs like the U.S. experienced. An examination of other countries' IPO activities did not show a decline like that experienced in the U.S., even in those countries that have smaller tick sizes. END FOOTNOTE
Finally, the Decimalization Report considered the panel discussion that occurred during the meeting of the
FOOTNOTE 21 More information on the committee is available at http://www.sec.gov/info/smallbus/acsec.shtml. END FOOTNOTE
FOOTNOTE 22 See note 26 infra. END FOOTNOTE
While the Decimalization Report did not reach any firm conclusions about the impact of decimalization on the number of IPOs or the liquidity and trading of small capitalization companies, it did recommend that the Commission continue to study this area. The Decimalization Report specifically suggested a public roundtable, where recommendations could be presented on a pilot program that would generate data to allow the Commission to further assess decimalization's impact. On
FOOTNOTE 23 There was some discussion at the Roundtable about the
FOOTNOTE 24 See e.g. letters from
FOOTNOTE 25 A transcript of the Decimalization Roundtable is available at http://www.sec.gov/news/otherwebcasts/2013/decimalization-transcript-020513.txt. In addition, comments received by the Commission are available at http://www.sec.gov/comments/4-657/4-657.shtml. Since the roundtable, the Commission has received eleven additional comment letters. Generally, these later commenters expressed support for a pilot program to test wider tick size for smaller capitalization companies. See, e.g., letters from
Since the Decimalization Roundtable, discussions have continued with respect to the possibility of raising the minimum tick sizes for small capitalization stocks, and the prospect of a pilot program to test the impact thereof.
FOOTNOTE 28 This report is available at http://www.equitycapitalformationtaskforce.com/files/ECF%20From%20the%20On-Ramp%20to%20the%20Freeway%20vF.pdf. END FOOTNOTE
More recently, on
FOOTNOTE 33 The Commission continues to review the findings and recommendations of the
Section 11A(a)(2) of the Act /34/ directs the Commission, having due regard for the public interest, the protection of investors, and the maintenance of fair and orderly markets, to facilitate the establishment of a national market system for securities. Section 11A(a)(3)(B) provides the Commission the authority to require the SROs, by order, "to act jointly . . . in planning, developing, operating, or regulating a national market system (or a subsystem thereof)." /35/
FOOTNOTE 34 15 U.S.C. 78k-1(a)(2). END FOOTNOTE
FOOTNOTE 35 15 U.S.C. 78k-1(a)(3)B). END FOOTNOTE
The Commission believes that it is in the public interest for the Participants to develop and file with the Commission a Tick Size Pilot Plan, with the terms and conditions set forth in Section III below, as a national market system ("NMS") plan pursuant to Rule 608(a) of Regulation NMS. /36/ Once filed, the Commission would publish the Tick Size Pilot Plan for public comment, and thereafter consider whether to approve it, in accordance with Rule 608(b) of Regulation NMS. /37/
FOOTNOTE 36 17 CFR 242.608(a). END FOOTNOTE
FOOTNOTE 37 17 CFR 242.608(b). END FOOTNOTE
Decimalization of the U.S. equity markets occurred over a decade ago. Since that time, the nature of trading, the structure of the markets, and the roles of market participants have changed significantly. /38/ As discussed above, concerns have been expressed from a variety of sources that decimalization, and the associated one penny MPV, may have had a detrimental impact on the trading and liquidity of small capitalization stocks. /39/ Therefore, the Commission believes that it is in the public interest for the Commission to further study and assess decimalization's impact on the liquidity and trading of the securities of small capitalization companies. /40/ The submission of proposed NMS plan for a Tick Size Pilot Plan will provide the Commission with the means to continue to gather further information and views on the impact of decimalization on the liquidity and trading of the securities of small capitalization companies. In addition, a proposed NMS plan for a Tick Size Pilot Plan would allow the Commission to gather further comments on whether a Tick Size Pilot Plan is a viable vehicle by which the Commission could gather data to test whether a wider tick benefits small capitalization companies and their investors.
FOOTNOTE 38 See e.g., Concept Release, supra note 14. END FOOTNOTE
FOOTNOTE 39 See e.g., Rebuilding the IPO On-Ramp, presented to the
FOOTNOTE 40 The Commission notes that some market participants have recommended that the Commission implement a pilot program that would permit tick increments smaller than
In the Decimalization Report, the Commission staff reviewed academic literature related to the impact of decimalization on the U.S. equity markets. While the academic literature indicated a number of potential benefits from decimalization, such as an overall reduction in effective and quoted spreads, there was some evidence that, at least for NASDAQ small capitalization stocks, the decline was not statistically significant. /41/ The academic literature also found, post-decimalization, evidence of a decline in quoted depth on average (although cumulative depth at competitive prices did not appear to change), smaller trade sizes, and an increase in the total time to work institutional orders. /42/ In addition, the Decimalization Report noted that the U.S. has an essentially flat, "one size fits all" tick size regime, as compared with many foreign jurisdictions that have adopted tiered regimes where the tick size varies depending on the price level of a stock. /43/ Finally, at the Decimalization Roundtable, there was broad support among the panelists for the Commission to conduct a pilot program with respect to the impact of wider tick sizes on liquidity in small capitalization companies, even though views differed on the likely outcome of the pilot. /44/
FOOTNOTE 41 See Decimalization Report. END FOOTNOTE
FOOTNOTE 42 See id. END FOOTNOTE
FOOTNOTE 43 See id. END FOOTNOTE
FOOTNOTE 44 See supra note 25 and accompanying text. END FOOTNOTE
Support for a pilot program is not universal, however, particularly given that an increase in minimum tick sizes may raise costs for investors. This view was reflected, for example, at the Roundtable and in the recommendations of the
FOOTNOTE 45 See supra notes 29 to 33 and accompanying text. END FOOTNOTE
Nevertheless, the Commission believes that legitimate questions have been raised as to whether the minimum tick size regime for the U.S. equity markets should be refined and enhanced. Specifically, the Commission preliminarily believes that it should assess, through a targeted short-term pilot program, whether wider minimum tick sizes for small capitalization stocks would enhance market quality to the benefit of market participants, issuers and U.S. investors. The Commission preliminarily believes that such a pilot should facilitate studies of the effect of tick size on liquidity, execution quality for investors, volatility, market maker profitability, competition, transparency and institutional ownership. The Commission has set forth the details of a pilot program that the Commission preliminarily believes would produce measurable data that would allow the Commission and others to conduct such studies.
Further, the Commission preliminarily believes that the pilot described below is sufficiently limited so as to not cause excessive disruption to the market. The Commission preliminarily believes that the terms of the Tick Size Pilot Plan and the securities to be included should mitigate potential harm to investors in the form of increasing transaction costs, as expressed by the
The Commission is ordering the Participants to jointly file the Tick Size Pilot Plan to assure that the pilot program, if ultimately approved by the Commission, applies uniformly across the U.S. markets. Once the Participants file the Tick Size Pilot Plan with the Commission, it will be published for public comment, and the Commission will carefully evaluate the comments received as the Commission considers whether to approve the Tick Size Pilot Plan. /46/
FOOTNOTE 46 17 CFR 242.608(b). END FOOTNOTE
III. Tick Size Pilot Plan
The Commission hereby orders the Participants to develop and jointly file with the Commission, as an NMS plan pursuant to Rule 608(a) of Regulation NMS, /47/ a Tick Size Pilot Plan with the following terms and conditions:
FOOTNOTE 47 17 CFR 242.608(a). END FOOTNOTE
* Duration. The length of the pilot program ("Pilot") contemplated by the Tick Size Pilot Plan shall be one year. The Commission notes that there has been broad discussion about how long a pilot should run. /48/ The Commission preliminarily believes that a one-year time period would generate sufficient data to reliably analyze the effects and impact of wider tick size. /49/ The Commission preliminarily believes that the Participants should monitor the data generated during the Pilot Period. /50/ The Commission expects that the data produced during the Pilot Period should allow the Commission and Participants to monitor the impact of the Pilot on the market and investors. Further, the Commission would engage in a proactive, ongoing review of the data that could inform whether any modifications of the Pilot are necessary.
FOOTNOTE 48 See e.g., Letters from
FOOTNOTE 49 These preliminary beliefs are based on analysis of power statistics for relevant liquidity measure, e.g., trading volume. Being able to examine a subset of stocks facilitates the examination of potential threshold levels. END FOOTNOTE
FOOTNOTE 50 During the Pilot Period, the Commission preliminarily believes that Participants should notify the Commission if they detect any broadly negative impact of the Pilot on market quality. END FOOTNOTE
* Securities. The securities to be included in the Pilot shall be securities that are NMS common stocks with: (1) A market capitalization of
FOOTNOTE 51 The market capitalization and average daily trading volume thresholds are based on a staff examination of effective spreads. Stocks above these thresholds typically have effective spreads below
FOOTNOTE 52 "Sub-penny stocks" are NMS stocks with a stock price below
In addition, these thresholds are not set directly by the tick size so they are relatively exogenous, which could help to inform the Commission about any potential rulemaking based on the results of the Pilot. Overall, because the stocks below these thresholds have higher average effective spreads, the thresholds, though exogenous help to target the pilot towards those stocks most likely to benefit from a larger tick size. Finally, this group is broad enough to allow researchers to examine various threshold levels for potential rulemaking.
* Pilot Design. The Pilot should consist of one control group and three test groups with 300
FOOTNOTE 53 Some commenters suggested that a pilot test several tick sizes. See e.g., Letter from
FOOTNOTE 54 These preliminary beliefs are based on staff analysis of power statistics for relevant liquidity measures, e.g., trading volume. In particular, the staff focused on the least active stocks and assessed how many stocks would be needed to detect changes in daily liquidity measures. The staff selected 300 as a sample size to provide sufficient power to detect changes in liquidity measures for a subset of pilot stocks. END FOOTNOTE
* Test Group One.
FOOTNOTE 55 See supra note 51. END FOOTNOTE
FOOTNOTE 56 The transaction cost is measured by the difference of an investor buying a security at the offer and then immediately selling the same security at the bid. Thus, the wider the minimum quoting increment, the greater the transaction cost would be for such round trip trade. END FOOTNOTE
There are other
* Test Group Two.
FOOTNOTE 57 A volume-weighted average price trade is calculated by summing up the products of the number of shares traded and the respective share price, and dividing by the total number of shares bought. A time-weighted average price trade is calculated as the average price of a security over a specified period of time. END FOOTNOTE
FOOTNOTE 58 A qualified contingent trade is a transaction consisting of two or more component orders, executed as agent or principal, where: (1) At least one component order is in an NMS stock; (2) all components are effected with a product or price contingency that either has been agreed to by the respective counterparties or arranged for by a broker-dealer as principal or agent; (3) the execution of one component is contingent upon the execution of all other components at or near the same time; (4) the specific relationship between the component orders (e.g., the spread between the prices of the component orders) is determined at the time the contingent order is placed; (5) the component orders bear a derivative relationship to one another, represent different classes of shares of the same issuer, or involve the securities of participants in mergers or with intentions to merge that have been announced or since cancelled; (6) the transaction is fully hedged (without regard to any prior existing position) as a result of the other components of the contingent trade; and (7) the transaction that is part of a contingent trade involves at least 10,000 shares or has a market value of at least
The Commission preliminarily believes that changing the quoting increment alone may not be adequate to test the effects of larger tick size. The Commission preliminarily believes that if the minimum quoting increment is changed without corresponding changes to the minimum trading increment, market participants may be hesitant to display liquidity because of the ability to step ahead of wider quotes. Therefore, the Commission preliminarily believes that a test group should be established to examine this potential impact on displayed liquidity in conjunction with Test Group One. /59/ The Commission also preliminarily believes that limited exceptions to the trading increment should be allowed so as not to prohibit certain categories of trades that are broadly beneficial to market participants today. First, negotiated trades such as volume-weighted average price trades or time-weighted average price trades are used to execute a trading strategy over volume or time. By their definition, the price to be executed with these negotiated trades would not be at the NBBO or a
FOOTNOTE 59 A pilot with Test Group Two alone cannot examine the issue. A comparison of Test Group Two to Test Group One can test the incremental effect of adding trading increments to wider quoting increments. END FOOTNOTE
FOOTNOTE 60 The Commission staff has previously stated that, with respect to Rule 612 of Regulation NMS a performance target is not generally a price subject to Rule 612 as long as it is not used analogously to a limit price for ranking or displaying an order. However, if the performance target were an explicit impermissible sub-penny price and also served as a limit price, then accepting the order would be a violation. Similarly, if the customer specifies a limit price in addition to the performance target, the limit price must meet the requirements of the Rule. Available at (http://www.sec.gov/divisions/marketreg/subpenny612faq.htm). The negotiated trade exception contained herein would be subject to the same general principle, i.e., the trades must not be designed to explicitly circumvent the trading increment. END FOOTNOTE
FOOTNOTE 61 See e.g., BATS BYX Rule 11.24; Nasdaq Rule 4780; NYSE Rule 107C; NYSE Arca Equities Rule 7.44; and NYSE MKT Rule 107C. END FOOTNOTE
FOOTNOTE 62 Today, retail investors typically receive price improvement on their orders over the NBBO. The Concept Release noted that in 2009, the eight broker-dealers with significant retail customer accounts route nearly 100% of their customer market orders to over-the-counter market makers for execution. See Concept Release, supra note 14. See also Letters from
* Test Group Three.
FOOTNOTE 63 For retail investor orders, trading centers would be required to provide the minimum price improvement of 10% of the
FOOTNOTE 64 Block size refers to an order that is (1) at least 10,000 shares or (2) for a quantity of stock having a market value of at least
FOOTNOTE 65 Intermarket sweep orders are exceptions provided in Rule 611(b)(5) and (6) of Regulation NMS that enable an order router to sweep one or more price levels simultaneously at multiple trading centers without violating trade-through restrictions. As defined in Rule 600(b)(30) of Regulation NMS, intermarket sweep orders must be routed to execute against the full displayed size of any protected quotation that otherwise would be traded through by the orders. See also Responses to Frequently Asked Questions Concerning Rule 611 and Rule 610 of Regulation NMS, Question 4.04 (
The Commission preliminarily believes that a trade-at requirement should be included in the Pilot. /66/ When quoting and trading increments are widened in the absence of a trade-at requirement, the Commission preliminarily believes there is a possibility trading volume could migrate away from "lit venues"--trading venues that provide public pre-trade transparency by displaying the best-priced quotations--to "dark venues" that do not provide such public pre-trade price transparency. The percentage of trading volume executed in dark venues has increased in recent years. In 2009, trading volume executed in dark venues was approximately 25 percent. Today, it is approximately 35 percent. /67/ The Commission believes that if trading volume in
FOOTNOTE 66 One commenter supports the inclusion of a trade-at requirement in a tick pilot. See letter from
FOOTNOTE 67 See OTC Trading: Description of Non-ATS OTC Trading in National Market System Stocks by
Therefore, the Commission preliminarily believes that the Pilot should test whether a trade-at requirement would stem the potential migration of trading volume away from these lit venues. The inclusion of a trade-at requirement would allow the Commission generate and analyze data on the impact of a trade-at requirement in conjunction with wider tick sizes. In particular, a comparison of Test Group Three to Test Group Two would provide insight into the incremental effects of a trade-at requirement.
* SRO Data for the Tick Size Pilot. The Commission preliminarily believes that the following data should be collected and transmitted to the Commission and made available to the public in an agreed-upon format on the frequency noted below. The Commission intends to study such data to assess the impact of the changes made under the Pilot. The Commission believes that making the data available to the public, in an agreed-upon format would facilitate the public's ability to assess the impact of the pilot.
* Identification of
* Pilot Data. The Commission preliminarily believes that the Participants should provide to the Commission the data set forth in Annex B or explain in the NMS Plan any data alternatives that would to the same extent facilitate the studies of the effect of tick size mentioned in this order. All data must be provided in an agreed-upon format, on a monthly basis and made publicly available. The data should be provided for dates starting six months prior to the Pilot period through six months after the end of the Pilot period. The Commission intends to study such data to assess the impact of the changes made under the Pilot.
* Assessments. The Commission preliminarily believes that the Participants, either individually or jointly, should provide to the Commission and make publicly available their assessment of the impact of the Pilot no later than six months after the end of the Pilot Period, as follows:
A. Assess the statistical and economic impact of an increase in the quoting increment on market quality.
B. Assess the statistical and economic impact of an increase in the quoting increment on the number of market makers. /68/
FOOTNOTE 68 The term "market makers" includes all registered market makers and other registered liquidity providers. END FOOTNOTE
C. Assess the statistical and economic impact of an increase in the quoting increment on market maker participation.
D. Assess the statistical and economic impact of an increase in the quoting increment on market maker profits.
E. Assess the statistical and economic impact of an increase in the quoting increment on market transparency.
F. Evaluate whether any thresholds can differentiate the results of the above assessments across stocks (e.g., whether stocks above the threshold have negative effects while stocks below the threshold have positive effects).
G. Assess the statistical and economic impact of the above assessments for the incremental impact of a trading increment and for the joint effect of an increase in a quoting increment with the addition of a trading increment.
H. Assess the statistical and economic impact of the above assessments for the incremental impact of a trade-at rule and for the joint effect of an increase in a quoting increment with the addition of a trading increment and a trade-at rule.
I. Assess any other economic issues that the Participants believe the Commission should consider in any rulemaking that may follow the Pilot.
It is hereby ordered, pursuant to Section 11A(a)(3)(B) of the Act, /69/ that the Participants act jointly in developing and filing with the Commission, as an NMS plan pursuant to Rule 608(a) of Regulation NMS, /70/ a Tick Size Pilot Plan, as described above. The Participants are ordered to file with the Commission such Tick Size Pilot Plan no later than
FOOTNOTE 69 15 U.S.C. 78k-1(a)(3)(B). END FOOTNOTE
FOOTNOTE 70 17 CFR 242.608(a). END FOOTNOTE
By the Commission.
Kevin M. O'Neill,
These datasets can include additional fields as agreed upon by the Participants.
1. A dataset identifying pilot stocks containing the following fields in a pipe delimited format with the field names as the first record. The SROs should use consistent file name formats.
(a) Ticker Symbol
(b) Security Name
(c) Listing Exchange
(1) "C" for stocks in the
(2) "G1" for stocks in Test Group One
(3) "G2" for stocks in Test Group Two
(4) "G3" for stocks in Test Group Three
2. A dataset that identifies changes in the pilot ticker symbols on that day containing the following fields and in a pipe delimited format with field names as the first record. The SROs should use consistent file name formats.
(a) Ticker Symbol
(b) Security Name
(c) Listing Exchange
(d) Effective Date
(e) Deleted Date
(1) "C" for stocks in the
(2) "G1" for stocks in Test Group One
(3) "G2" for stocks in Test Group Two
(4) "G3" for stocks in Test Group Three
(g) Old Ticker Symbol(s)
(f) Reason for the change--character value agreed upon by SROs
These datasets can include additional fields as agreed upon by the SROs. The data need only include stocks meeting the thresholds for inclusion in one of the three Test Groups and the
A dataset of daily market quality statistics of orders by security, order type, original order size (as observed by SRO), hidden status, and coverage under Rule 605 in a pipe delimited format with field names as the first record:
1. Minimum Fields: Same as Rule 605 fields, except as modified below, and, as defined below, Rule 605 Coverage, Hidden Status, Original Percentage Hidden, and Final Percentage Hidden.
2. The SRO should include only orders executed on their exchanges (or OTC in the case of FINRA).
3. The order size should be the original order size as observed by the SRO.
4. Modified order size categories (slightly different than Rule 605): Less than 100, 100 to 499 shares, 500 to 1999 shares, 2000 to 4999 shares, 5000 to 9999 shares, and 10000 or greater shares.
5. Modified execution speed categories include: Orders executed from 0 to < 100 microseconds, 100 microseconds to < 100 milliseconds, 100 milliseconds to < 1 second, 1 second to < 30 seconds, 30 seconds to < 60 seconds, 60 seconds to < 5 minutes, 5 minutes to 30 minutes.
6. Hidden status should include orders for which the instructions indicate that the order is not displayable in part or full.
(a) Hidden status is a character variable with the values "entirely displayable," "partially displayable," and "not displayable" or other values as agreed upon by the SROs.
(b) Original Percentage Hidden is the percentage of shares not displayable as of order receipt, regardless of its placement relative to the quotes. For example, a buy order for 5000 shares with an instruction to not display 4000 shares would be 80% hidden regardless of whether it is greater than or less than the bid price.
(c) Final Percentage Hidden is the percentage of shares not displayed prior to final order execution or cancellations. For example, suppose a buy order for 5000 shares with an instruction to display not more than 1000 shares at a time. After the first 1000 shares execute a second 1000 is displayed. If the order is cancelled before any more executions, the final percentage hidden is 60%.
7. Orders to include: Market orders, marketable limit orders, inside-the-quote limit orders, at-the-quote limit orders, near-the-quote limit orders, and intermarket sweep orders (ISOs), including those not covered by Rule 605.
8. Rule 605 coverage: Indicate whether the order is covered in Rule 605 ("Yes") or reason for not covered (character variable with the consistent values across SROs such as "opening", "closing", "stop price", "full size", "short sale", "other tick/bid sensitive", "not held", "special settlement", "non-market," "order size >10,000", or other values as agreed upon by SROs).
A dataset of daily number of registered market makers /71/ by security in a pipe delimited format with field names as the first record:
FOOTNOTE 71 The term "market makers" includes all registered market makers and other registered liquidity providers. END FOOTNOTE
1. Minimum fields: SRO, number of registered market makers, number of other registered liquidity suppliers.
A dataset of daily market maker participation and trading profits of orders by security in a pipe delimited format with field names as the first record:
1. Minimum fields: SRO, total market maker share participation, total market maker trade participation, cross-quote market maker share participation, cross-quote market maker trade participation, inside-the-quote market maker share participation, inside-the-quote market maker trade participation, at-the-quote market maker share participation, at-the-quote market maker trade participation, outside-the-quote market maker share participation, outside-the-quote market maker trade participation, raw market maker realized trading profits, market maker realized trading profits net of fees and rebates, raw market maker unrealized trading profits.
2. Participation fields:
(a) Share participation: The number of shares purchased or sold by market makers in a principal trade, not including riskless principal. When aggregating across market makers, this should be a share-weighted average per market maker.
(b) Trade participation: The number of purchases and sales by market makers in a principal trade, not including riskless principal. When aggregating across market makers, this should be a trade-weighted average per market maker.
(c) Cross-quote participation refers to the market maker buying at or above the national best offer or selling at or below the national best bid at the time of the trade.
(d) Inside-the-quote participation refers to a trade price that is between the national best bid and offer prices at the time of the trade.
(e) At-the-quote (outside-the-quote) participation refers to a buy price that is equal to (less than) the national best bid price at the time of or immediately before the trade. In the case of downward moving national best bid, use the national best bid price immediately before the trade. Otherwise, use the national best bid price at the time of trade. For a sell price, use the same method with the national best offer price.
3. Trading profit fields:
(a) Realized trading profits are the difference between the market value of market maker sales (shares sold x price) and the market value of market maker purchases (shares purchased x price). Use a LIFO-like method for determining which share prices to use in the calculation. When aggregating across market makers, this should be a share-weighted average per market maker.
(b) Realized trading profits net of fees and rebates are the realized trading profits plus rebates the market maker collects from trading on that day minus access fees the market maker pays for trading on that day. If estimated before allocations of rebates and fees, use expected rebates and fees.
(c) Unrealized trading profits are the difference between the purchase or sale price of the end-of-day inventory position of the market maker and the official closing price. In the case of a short position, subtract the closing price from the sale price. In the case of a long position, subtract the purchase price from the closing price.
A dataset of market orders and marketable limit orders in a pipe delimited format with field names as the first record.
1. Minimum fields: Ticker symbol, date, order receipt time, order type, order size in shares, order side ("B", "S", or "SS"), order price (if marketable limit), NB quoted price, NB quoted depth in lots, receiving market offer for buy or bid for sell, receiving market depth (offer for buy and bid for sell), indicator for quote leader, average execution price (share-weighted), executed shares, canceled shares, routed shares, routed average execution price (share-weighted), indicator for special handling instructions.
2. Quote variables:
(a) NB quoted price is the national best offer for buys and the national best bid for sells.
(b) NB quoted depth is the NBO depth for buys and NBB depth for sells.
(c) The indicator for quote leader is 1 if the receiving market was the first market to post the NBB for a sell or NBO for a buy.
3. Average execution price is a share-weighted average that includes only executions on the receiving market. Routed average execution price is a share-weighted average that includes only shares routed away from the receiving market.
4. Routed shares refers to the number of shares in the order that were routed to another exchange or market.
5. The indicator for special handling instructions should identify orders that contain instructions that could result in delayed execution or an execution price other than the quote.
[FR Doc. 2014-15205 Filed 6-27-14;
BILLING CODE 8011-01-P
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