NASDAQ BX and OATS

As announced in NASDAQ Head Trader Alert #2007-205, NASDAQ OMX has entered into an agreement to acquire the Boston Stock Exchange and related assets, which includes a second self regulatory organization ("SRO") license. Following SEC approval, NASDAQ OMX intends to use this SRO license to operate a second quote in U.S. equity securities called NASDAQ BX.

Orders Transmitted Between FINRA, NASDAQ, or NASDAQ BX Members
Firms that are members of both FINRA and NASDAQ BX will see minimal change from their current OATS reporting obligations upon the official operational date of NASDAQ BX. However, FINRA reminds firms of their obligations under the OATS Rules to: 1) pass Routed Order IDs when electronically routing an order to another firm that is a member of the same SRO; 2) use the Destination Code of "M" (Member) on their OATS Route and Combined Order Route Reports when routing orders to a member of the same SRO; and 3) use the Member Type Code of "M" on OATS New Order and Combined Order Reports when receiving orders from a member of the same SRO.

In the event an order is routed between two firms that are not members of the same SRO (e.g. a FINRA-only or NASDAQ-only member firm routing an order to a NASDAQ BX-only member firm), no Routed Order ID is required to be passed and the Destination Code and Member Type Code would, in most instances, both be populated with "N" (Non-member).

Orders Transmitted to NASDAQ BX
On April 2, 2008, NASDAQ issued the a Technical Update related to access protocol specifications. Firms that route orders electronically to NASDAQ BX will have an obligation to pass a Routed Order ID to NASDAQ BX for matching purposes, such as they do today when routing an order electronically to The NASDAQ Stock Market.

Below please find a matrix of fields OATS will use to match OATS Route and Combined Order/Route Reports to the related order in NASDAQ BX:

Order Modifications in NASDAQ BX
When a customer modifies an existing order, OATS Rules require firms to submit a Cancel/Replace report to reflect the modification. If the order being modified had previously been routed to NASDAQ BX, the member also must update the NASDAQ BX order to reflect the new terms and conditions of the order. When the member updates the corresponding NASDAQ BX order, a new Route Report must be submitted to OATS.

NASDAQ BX requires the member to enter a new Order ID when using the NASDAQ BX Cancel/Replace functionality; therefore, the new OATS Route Report that reflects the NASDAQ BX Cancel/Replace event from the customer also must include a new Routed Order ID that matches to the new NASDAQ BX order. This requirement is to ensure that OATS can match the subsequent Route Report to the NASDAQ BX record.

Firms using intelligent order routing systems to route orders to the NASDAQ BX should continue to report only the initial Route as they do today. System and trader generated modifications and reroutes to the NASDAQ BX that are not at the request of a customer need not be reported to OATS.

Please contact the OATS Helpdesk at (800) 321-6273 with questions regarding this guidance.