Nasdaq Market Center Systems Description

E. 

Quote Decrementation  

 

If an execution is delivered to a quoting market participant that accepts automatic 

executions, the system automatically decrements the participant’s display quote/SIZE 

quote in the montage and the aggregate quote size by the size of the execution.  If the 

participant’s displayed size is decremented to less than a round lot and the market 

participant has reserve size, the displayed size will be replenished from reserve.  

 

For quoting market participants that accept delivery, Nasdaq automatically 

decrements the participant’s display quote/SIZE quote in the montage and the aggregate 

quote by the size of the delivered order.  Nasdaq will continue delivering orders to such 

participant, up to its displayed and reserve size, regardless of whether it has processed the 

previous orders, until all size is exhausted.  

 

If the delivery participant declines or partially fills the order or fails to respond 

within 30 seconds, Nasdaq sends the order (or the remaining portion thereof) back into 

the system for immediate delivery to (or execution against) the next available participant.  

If an ECN, whether it accepts automatic execution or delivery, has its attributable interest 

reduced to less than one round lot without an update or without transmission of another 

attributable quote/order to Nasdaq, Nasdaq will “zero out” the display quote on the 

exhausted side.  If both sides are reduced to zero without an update or transmission of 

another attributable quote/order, the ECN is be placed into an excused withdrawal state 

and restored once the ECN transmits to Nasdaq a revised attributable entry. While the 

ECN is in an excused withdrawal state, the system will still access the ECN’s non-

attributable orders. 

 

F. 

Quote Refresh  

 

To assist with the requirement of maintaining a two-sided, attributable quote, 

market participants are able to use the Automatic Quote Refresh (AQR) functionality. 

When a market participant’s principal attributable quote is exhausted to less than one 

round lot, the system refreshes the market maker’s price and size by an increment and to 

a size amount designated by the participant.  

 

If a market participant is utilizing AQR but has an attributable entry in the system 

that is priced at or better than the quote/order that would be created by the AQR, Nasdaq 

displays the better-priced attributable quote/order, not the AQR-produced quote/order.  If 

a market participant is not utilizing AQR and has given Nasdaq multiple attributable 

quotes/orders, Nasdaq displays the participant’s next best-priced attributable entry when 

its attributable quote/order is decremented to less then one round lot.  

 

If all of a market participant’s attributable interest is reduced to less than one 

round lot and the participant is not using AQR, Nasdaq will zero out only the exhausted 

side of the market for thirty seconds.  During this period, the participant can update its 

quote/order by transmitting a revised attributable quote/order to Nasdaq.  If, after thirty 

seconds, the market participant does not update its quote or voluntarily withdraw from 

 

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the market, the Nasdaq Market Center will refresh its quote to the designated tick (price 

interval) away from the worst-displayed price in the montage.  If there are no market 

participants with a current quote in the montage, the price will be set to at least one tick 

inferior from the last valid inside, or to at least one tick inferior from the market 

participant’s last displayed price prior to time out processing, whichever is less.  If the 

new quote would result in a locked-or-crossed market situation, the system will open the 

quote at least one tick inferior to the contra side of the market so that a locked-or-crossed 

condition would not exist.  

 

VIII.  Avoidance of Locked or Crossed Markets  

 

If a quoting market participant enters a quote that would lock or cross the market, 

it will receive a system warning.  In order to complete the quote/order entry, the 

participant is required to override the system warning.  If the market participant overrides 

the warning, the Nasdaq Market Center does not display the order as part of a display 

quote, but instead the order will be treated as a marketable limit order and entered into 

the Nasdaq Market Center as an for execution in time priority.  Locking/crossing orders 

automatically execute against the quote they are locking/crossing.  A warning message is 

not provided.  

 

For locked market situations, orders are routed to the quoting market 

participant(s) next in queue that would be locked, and are executed (or delivered for 

execution) at the price of the locking quote/order. For crossed market situations, the 

crossing order is routed to the next quoting market participant(s) in queue and is executed 

(or delivered for execution) at the price of the displayed quote/order that would have been 

crossed.  

 

Once the lock or cross is cleared, if the quoting market participant’s order is not 

completely filled, the Nasdaq Market Center will reformat the order and display it as part 

of a displayed quote on behalf of the entering participants. If the market moves and the 

order is no longer locking or crossing, the system will either return the order or include it 

as part of a displayed quote.   

 

IX. 

Nasdaq Opening Process  

 

 

Nasdaq recently introduced a new market open process and modifications to its 

pre-opening trading environment for all Nasdaq-listed stocks.  Nasdaq adapted the Total 

Day order (“X Order”) and the Total Immediate or Cancel order (“IOX”), which were 

already in use for non-Nasdaq exchange-listed securities, for use in the Nasdaq-listed pre-

open environment.  X Orders, which can be entered beginning at 7:30 a.m., are available 

for execution beginning at 9:25 and continuing until the end of the trading day.  If not 

executed by that time, X Orders are cancelled automatically from the system and returned 

to the entering party.  An IOX Order must be priced and if after entry into the Nasdaq 

Market Center it becomes non-marketable, the unexecuted portion will be canceled and 

returned to the entering party.  IOX Orders are available for entry and execution between 

9:25 a.m. and 4:00 p.m.   

 

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