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Frequently Asked Questions About SuperSoes Updated 12/22/2000 The
following questions regarding SuperSoes are compiled from a number of sources,
including the Nasdaq conference calls regarding SuperSoes the December 4th STANY meeting, fielded telephone inquiries,
and the SuperSoes General Q. When is the new SuperSoes
implementation date? A. Monday, January
22, 2001. Saturday tests am scheduled for December 30, 2000 and January 6, 2001 Q. Why implement SuperSoes?
A.
·
It is an evolutionary step towards the SuperMontage
Computer efficiency‑ That is, during surge times, the
fill rate on SelectNet orders is approximately 50% overall. Therefore, only one in
two orders that enters SelectNet gets filled. During a non‑surge time, the percentage
plummets to approximately 10%, Implementing SuperSoes will allow this market to
focus on delivering executions, rather
than delivering orders, ·
Greater order capacity for the new decimals environment ·
Greater ability to maintain compliance through
automated executions. Q. Are the delays in
implementing SuperSoes and risk-less principal related? A. The delay of
risk-less principal was not related to SuperSoes or visa versa. Q. Wouldn't it have made more sense to keep SOES and make SelectNet a non‑liability
system? A. SuperSoes is an evolutionary
step towards SuperMontage. The idea is to move towards single‑threaded liability. Q. Will SuperSoes operate during the extended market session (after 4:00
p.m.)? A. No. SuperSoes will operate during normal market hours (9:30 a.m. 4‑00 p.m., Eastern Time [ET]. Q.
How will Nasdaq trading be facilitated during the
extended market session? A. SelectNet
liability orders may be sent to access
open quotes. Q. Is there a replay number for the December 14, 2000 SuperSoes conference
call? A. There is not a replay number for the
December 14, 2000 call. Additional FAQs generated from the calls will be Q. Are there any more open conference calls? A. Yes. As a result
of firm input Nasdaq will conduct weekly calls regarding SuperSoes to give updates and take questions raised from the street. Q. Will SuperSoes affect my super cap status? A. Transactions done
through SuperSoes Will count
against your super cap buy or sell thresholds. Thus, a trade in SuperSoes may put you in a super cap condition, but
a super cap condition will not inhibit SOES executions. The only way SOES trades can be prevented in
ACT is if a firm's clearing is deleted. In do situation ACT and SuperSoes authorization would
be suspended. Q. If there are major problems with SuperSoes, is Nasdaq planning to shut
off SuperSoes and go back to the old platform? Would it have to
be street‑wide? Who would make such a decision? Who should firms call if they experience
problems? A‑ Just as today when issues arise in the Nasdaq system, if
there are any problems when SuperSoes is implemented, senior individuals at Nasdaq will make the
decision about what to do. Firms can call Nasdaq Market Operations or Tier I if they are experiencing
real time market issues. ECN Issues Q. What happens
when in ECN or a UTP participant is alone at the inside? Will a SuperSoes order
trade through? A. No. Transactions will only occur at the
inside quote. If there is an ECN alone at the inside, there is the potential for queuing while that ECN executes the trade
and moves out of the way. Our experience is that ECNs have been very quick in responding to
SelectNet orders. To date, Cincinnati and the Chicago Stock Exchange are the two entities
that are UTP exchanges. The Chicago Stock Exchange is planning to participate in SuperSoes
and accept automatic executions just as Market Makers do. Cincinnati has assured us they will
be doing everything not to find themselves at the inside and delaying the market in any way. Q. How will Nasdaq handle the issue when an ECN alone at the inside has
technical problems and SuperSoes won't trade through? A. Nasdaq is
currently discussing this issue with each of the ECNs and Nasdaq's Market
Operations staff (which does have the technological capability to
withdraw ECN quotes) about how to deal with ECN quotes during such instances. Various ECNs have
different views on thew issues. Q. Can Nasdaq allow market participants to test in 10 stocks where ECNs
can be "Soesable" on a partial basis? A. We
will explore this issue prior to the next test or create a test ECN. Q. Is the 100 shares over the displayed size just for Market Makers, or
both Market Makers and ECNs? A. It is for any
participant who participates in auto‑execution. If an ECN does not accept
SuperSoes (none of them will initially), you can send a liability
SelectNet at his price and size as you do today. Q. Will an ECN attempting to hit a Market Maker's quote do so via
SelectNet or SuperSoes? A. SuperSoes. Q. Are ECNs and UTPs accepting SuperSoes orders? A. Currently, no
ECNs have indicated that they will be "full participation “ ECNs when
SuperSoes is implemented. Their quotes will be accessed as they are today,
by sending a preferenced SelectNet order to the ECN. One UTP‑ The Chicago Stock Exchange‑
is planning to accept auto‑execution when SuperSoes is implemented. Q.
Can an ECN that does not participate In SuperSoes
send SuperSoes orders? A‑ Yes, ECNs
that elect to participate as order entry ECNs in SuperSoes may send SuperSoes
orders to other SuperSoes Market
Makers and full participant ECNs. Q. When an ECN is alone at the inside, the SuperSoes order is held for
90 seconds or until a Market Maker joins the inside. Isn’t this
time period too long to wait for an execution, especially in a fast‑moving
security? If an ECN is alone at the inside, how would I get to another Market Maker at a price away from
the inside if I do not access the ECN's quote? A. In order to reach
a market participant at another price when an ECN is alone at the inside, you
may send an oversized order via SelectNet to the other participant.
However, you may enter a preferenced SelectNet order to access the ECN's quote at the inside. Miscellaneous Q. What steps are being taken by Nasdaq to gather and incorporate feedback
from firms into this release? A. Nasdaq
has launched a communications campaign to share information and gather feedback
by sending account managers to their assigned firms. Also, we are
communicating with firms and gathering feedback via various websites, webcasts, Head Trader
Alerts, pop‑up windows via main Nasdaq Workstation II (NWII), and frequent conference calls
with the industry. We are trying to reach the traders in every way imaginable. Unfortunately,
due to the time constraints surrounding coding and programming, Nasdaq win be
unable to incorporate the current feedback into the
January 22nd release. However, we will be looking at the industry's needs and
suggestions post‑implementation to see how they may
be included in the future. Please note that
various vendors are Incorporating industry feedback into their products for
SuperSoes implementation on January 22, 2001. Q. With SelectNet
as a non‑liability system in this new environment, does the new
environment affect the Trade‑or‑Move (TOM) rule? A‑ No, the new SuperSoes
environment will not affect the TOM rule. SelectNet will remain the same in pre‑open
and after hours. Q. What if there
is still a high volume of SelectNet trades and those SelectNet messages get
lost in the traffic and are unseen by the trader on
his NWII? A.
We continue to assess capacity needs and make system changes to ensure
that we can handle projected SelectNet volume Q. How does
SuperSoes affect SuperMontage? Can SuperSoes wait until SuperMontage is
implemented? A. SuperMontage is still on
schedule and is not affected by the delayed SuperSoes implementation. SuperSoes
cannot wait until SuperMontage due to the greater capacity needs that will be
incurred with the decimal release. Q. Nasdaq states
that a minimum of 1,000 shares must initially be displayed when reserve is
used. Can that be interpreted to mean that you can
change display size to 100 shares provided it was initially 1,000 shares? A. No, firms must
display 1,000 shares when using reserve size. They may only display less than
1,000 shares if their size is decremented as a result of SuperSoes
executions. Q. If I am at the
inside bid and I am Soesed when I am using reserve, my size is reset to 1,000
shares. If I have an internal system that updates my
size to 100 shares, am I in any violation? A. Yes, firms must display 1,000
shares when using reserve size. They may only display less than 1,000 shares if
their size is decremented as a result of SuperSoes executions. Odd Lot Q. How are odd lot orders executed in SuperSoes? A. Odd lots have the same time
delay between executions as with all other round lot (RL) trades. However, odd
lot executions do not decrement display or reserve size. Q. Is there a
concern that market participants will abuse the fact that odd lot executions
will not decrement their quote? A. Nasdaq Market Surveillance will
be monitoring on a real‑time basis for signs of this possible abuse. Q. What would
prevent traders from entering in 99‑share orders to prevent display size
from decrementing and thereby disguising their
reserve? A. Nasdaq
Surveillance will be monitoring odd lot usage closely. Q. During an odd lot rotation, does Nasdaq decrement display size for each
odd lot execution? A. No, odd lot executions do not
decrement display or reserve size.
Nasdaq will be looking at this issue in the future. Please note, certain vendors are adding
functionality to handle odd lot executions. Quotes/Orders Q. What are the restrictions
placed on canceling orders once they have been entered into the system? Can orders be canceled immediately after they are entered? A. There are no
restrictions and you may attempt to cancel at any time, however, if the order has already been executed it cannot be canceled. Q. Does SuperSoes allow my firm to execute my SOES orders against my own
quote? A. Yes. For example,
if you submit a market sell order and your bid is present, your order can be executed against your own quote. Our
system does not preclude that. This is favorable when the order represents an agency order. Nasdaq
and NASD Regulation are exploring this issue with respect to Erisa Requirements. NASD Regulation will be monitoring the
practice and will be certainly aware of patterns that might become apparent in which there is
explicit behavior that looks like manipulation. Q. Is my bid quote re‑ranked when I update my offer price? A. Yes, there is a
single timer for both the bid and the offer. Q. Are there any plans to make
bid and offer quotes Independent of each other? A. Nasdaq does have
plans to make bid and offer quotes independent. With the implementation of SuperMontage, Nasdaq will be operating on a single‑threaded
system on one computer. We will also have a timer for the bid and a separate timer for the offer,
which will allow the bid quote to be moved without re‑ranking the offer quote. Q. How long will an order stay open before Nasdaq returns it to the Order
Entry participant? A. Today the time
out parameter is 180 seconds at market open and 90 seconds during the trading
day. It will be the same in SuperSoes. Q. Are smaller orders in queue behind large orders? A. There is a level
playing field in SuperSoes. It can be used by Order Entry firms, by ECNs, and
by Market Makers. If someone else enters an order and it comes in
a second before yours, then they will get that execution before you, whether it is another
Order Entry firm or Market Maker or an ECN. It is simply time priority. First in, gets the execution. Q. Can a Market Maker view pre‑open orders? A. No. Q. Must preferenced SelectNet
orders be sent in amounts of 100 shares or greater? In other words, will the software not even except the order? What would happen if
the order was sent with less than the Market Maker's displayed size? A.Yes, orders preferenced to
Market Maker must be at least I 00 shares greater than the display size and
designated as All‑or‑None
(AON) or must have a minimum acceptable quantity (MAQ) of 100
shares greater than the displayed quote.
Orders that are not oversized with these qualifiers will be automatically rejected.
If an oversized order is entered and not flagged with a qualifier AON or MAQ and 100 shares greater than the display size, Nasdaq
will append the MAQ. Q. Do I have to enter a SelectNet order 100 shares greater than the amount
I want to sell? A. No, to send a SelectNet order
to a Market Maker or ECN that takes SOES auto‑execution orders, you must
make the order 100 shares greater then the preferenced Market Maker's display
size. If you are sending the order to an ECN not participating in SuperSoes, you can send do order equal to their size. Q. Can a broadcast order be sent on SeletNet (albeit an oversized order)? A. Broadcast orders can still be
sent, although they do not have to be oversized. Since they are not preferenced to a particular Market Maker, they would never cause a market participant to incur
liability. Pricing Q. How is the fee structure
arranged? A. Fees are charged
to the order
entry side per order, not per individual executions within an order. Q.
Are the fees for canceling going to stay in place,
both for SOES (SuperSoes) add SelectNet? A. Yes. Time Intervals Q. Why did Nasdaq change the 90‑second time interval delay to 15
seconds? This creates a problem because some of my incoming
orders will time out before they have time to execute. A. Nasdaq has not changed the 90 second
interval delay. Firms have varying opinions on this, but the stronger opinion maintained that they wanted control over how
long their order could stay in the system. Nasdaq has decided not to change the interval delay. Q. What is the Interval delay for Nasdaq stocks using SuperSoes? A. The interval
delay for most Nasdaq stocks is five (5) seconds between executions. This does
not include the Nasdaq 100 Index, which has a two (2) second interval delay*,
or Initial Public Offerings (IPOs) and secondaries, which
have a zero (effectively) time interval*. *pending SEC approval Q. Why isn't there a zero time interval on all Nasdaq stocks? A. Firms have
varying opinions on whether they want a short or long interval. To follow are a
few reasons why Nasdaq believes the interval
delay against the same Market Maker at the same price is no an issue: ·
Firms entering orders to access all available size can
do so without delay. ·
This delay is only following a partial execution of a
quote at a given price level to a given firm. ·
In today's market, as we move to decimals and the kind
of size displayed at the inside, we feel that the delay will not be a problem. In order to deal with concerns, we
shortened the delay to two seconds for Nasdaq 100 stocks*. For IPOs and secondaries we set it
to zero seconds (effectively)*. *
pending SEC approval. Q. I understand dot Market
Makers will have up to five (5) seconds (or less if it is an NDX 100 or IPO to the fill an order. If a number of orders come to the
Market Maker and he's the only quote at
the inside, does he HAVE to wait five (5) seconds in between
each fill or can he fill the orders as quickly as he’d like? A. The only way for
the Market Maker to make himself immediately eligible is to send a quote update of price, size, or reserve.
This update will take the Market Maker out of the interval delay, and if he is alone at the
inside, he will be eligible for the next execution. Q. If there are a number of Market Makers at the inside (excluding reserve
size), does the first order go to the first Market Maker, and
then must that Market Maker wait five (5) seconds before he fills another order? During
that five (5) second period, are the other orders coming in are being filled by the next Market Maker's
in time priority? A. Yes. Q. Will the 10‑second cancel rule still apply when SelectNet
preferencing either Market Makers or ECNs? A. The 10‑second
cancel rule will continue to apply to SelectNet orders. The 10‑second
policy does not nor will it apply to SOES or
SuperSoes. Q. Is the 10‑second no‑cancel window going to remain in
effect? A. No, that does not apply to SOES
or SuperSoes orders. (Currently an order sent on SelectNet cannot be canceled
in less than 10 seconds). Q. How quickly can intervals between executions be re‑calibrated In
the event of problems? A. We do not have
permission from the SEC to change interval delays on an intra‑day or
inter‑day basis. |