Nasdaq Market Center Systems Description

inside; (2) the MOC and LOC imbalance at the current Nasdaq best bid or offer, 

depending on the direction of the imbalance; (3) the buy/sell direction of that imbalance, 

and the current inside price; (4) an indicative clearing price range at which the Nasdaq 

Closing Cross would occur if the Nasdaq Closing Cross were to occur at that time and (5) 

the percent by which that indicative price varies from the Nasdaq inside price.  The 

indicative clearing price range is bounded on the far side by the price at which the MOC, 

LOC, and IO orders would clear with only each other.  It is bounded on the near side by 

the price at which the Nasdaq Closing Orders and continuous orders (excluding volume 

that is available only by order delivery) would clear.  Where no clearing price exists, 

Nasdaq disseminates the phrase “market buy” or “market sell.” 

 

The Nasdaq Closing Cross begins at 4:00:00 and, thus, does not affect Nasdaq 

Market Center processing that occurs during normal market hours.  The Nasdaq Closing 

Cross concludes at approximately 4:00:05 at which time the closing executions are 

reported to the consolidated tape for Nasdaq securities.   

 

 

If the Nasdaq Closing Cross price is selected and fewer than all Nasdaq Closing 

Orders and all continuous orders that are available for automatic execution in the Nasdaq 

Market Center would be executed, the system executes orders in the following priority:  

 

•

 

MOC orders, with time as the secondary priority;  

•

 

LOC orders, limit orders, IO orders, displayed quotes and reserve interest that 

are priced more aggressively than the Nasdaq Closing Cross price; 

•

 

LOC orders, displayed interest of limit orders, and displayed interest of quotes 

at the Nasdaq Closing Cross price with time as the secondary priority; 

•

 

Reserve interest and IO orders at the Nasdaq Closing Cross price with time as 

the secondary priority. 

 

All orders that are executable will be executed at the Nasdaq Closing Cross price and 

reported to the consolidated tape with SIZE as the contra party.  The Nasdaq Closing 

Cross price and the associated paired volume will then be disseminated as the Nasdaq 

Official Closing Price.  

 

XI. Routing 

 

The Nasdaq Market Center offers an optional routing feature that routes orders in 

Nasdaq-listed securities to other markets when those markets are displaying quotes at 

prices that are superior to those displayed in Nasdaq and are accessible through the 

router.  Nasdaq Market Center participants may choose on an order-by-order basis 

whether they want an order routed outside the Nasdaq Market Center.  Routed orders are 

executed pursuant to the rules and regulations of the destination market.  Orders in stocks 

subject to the Intermarket Trading System (“ITS”) plan may be routed to the New York 

Stock Exchange, the American Stock Exchange, and regional exchanges through the ITS 

linkage in accordance with rules governing use of that linkage, or through direct linkages 

established through Nasdaq’s Brut facility, as described below.   

 

 

13

---

Nasdaq accesses the quotes of exchanges through its broker-dealer subsidiary, 

Brut, which may not be a member of all exchanges.  Routing done by Brut for the Nasdaq 

Market Center is conducted separately from routing the Brut Facility performs for its 

subscribers.  Nasdaq will route orders to exchanges in which Brut is not a member, to the 

extent Brut has access to the market participants displaying quotes in these other markets.  

For example, one national securities exchange’s quotes can be accessed indirectly by 

routing orders to the ECN that is the predominant, if not sole, market participant 

displaying quotes on that exchange.  In addition,  Nasdaq also may route orders to market 

centers that display their quotes through the NASD’s Alternative Display Facility and 

market centers that do not display their quotes through exchanges or the ADF. 

 

The processing of an order marked for routing differs depending on whether there 

are quotes on other markets at prices superior to those displayed on Nasdaq and whether 

such quotes are accessible by Nasdaq.  For each order flagged for routing, the Nasdaq 

Market Center determines whether Nasdaq is at the best price vis-à-vis other markets that 

are accessible through Nasdaq’s router.   If Nasdaq is displaying the best prices, the order 

will be executed in full or up to the maximum amount of shares available in Nasdaq at 

the price levels that are superior to the prices at these other markets.  Nasdaq would then 

route any unfilled portion of the order to accessible markets that are displaying quotes 

superior to Nasdaq’s updated quotes.  If more than one market is at a price level that is 

superior to Nasdaq’s displayed price, the computer algorithm of the Nasdaq Market 

Center router will determine the market, or markets, to which the order will be sent, 

based on several factors including the number of shares being displayed, response time, 

likelihood of undisplayed trading interest, and the cost of accessing the market. 

 

 If other markets accessible through the router have prices superior to those on 

Nasdaq when an order is next in line to be processed, the order will by-pass the Nasdaq 

Market Center execution algorithm and will be routed to a market or markets displaying 

the superior priced quotes.

6

  If an order (or a portion of the order) remains unfilled after 

being routed, it will be returned to Nasdaq where, if the order is marketable, it will be 

returned to the Non-Directed Order processing queue, where it can be executed in 

Nasdaq, or routed again, if Nasdaq is not at the best price when the order is next in line in 

the processing queue.

7 

  Once a routed limit order is no longer marketable, whether it 

becomes non-marketable upon return to Nasdaq or while in the execution queue, it will 

placed on the Nasdaq Market Center book, if consistent with the order’s time in force 

                                                 

6

  

When a member submits a market order to the Nasdaq Market Center and has 

chosen to have the order routed, if routed, the market order will be routed to 

another market as a limit order. An order that has been routed to another market 

shall have no time standing in the Nasdaq Market Center execution queue relative 

to other orders in the Nasdaq Market Center.   

7

  

A market order that is converted to a limit order when it is routed to another 

market will become a market order again upon return to Nasdaq. However, if after 

being placed back in the order execution queue the order is routed yet again, it 

will be re-converted to a limit order. 

 

14

---