SEC consults on Nasdaq’s plans to introduce new Midpoint Trade Now functionality

Maria Nikolova

Midpoint Trade Now will allow a resting Order that becomes locked at its non-displayed price by an incoming Midpoint Peg Post-Only Order to automatically execute against that Midpoint Peg Post-Only Order as a liquidity taker.

The United States Securities and Exchange Commission (SEC) is inviting comments regarding plans by The Nasdaq Stock Market to introduce a new Midpoint Trade Now functionality.

Midpoint Trade Now will be an Order Attribute which allows a resting Order that becomes locked at its non-displayed price by an incoming Midpoint Peg Post-Only Order to automatically execute against that Midpoint Peg Post-Only Order as a liquidity taker. Any remaining shares of the resting Order will remain posted on the Nasdaq Book with the same priority.

The Midpoint Trade Now Order Attribute may be enabled on a port level basis for all Order Types that support it and, for the Non-Displayed Order Type, also on an order-by-order basis. Midpoint Trade Now will be available for all Order entry protocols apart from QIX. The Exchange explains that, although the QIX protocol can support the removing of liquidity, QIX is designed to provide two-sided quote messages to the trading system, unlike the OUCH, RASH, FLITE and FIX protocols, which are designed to facilitate Order submission. Nasdaq adds that QIX is an infrequently-used protocol, and that this protocol cannot support the expansion of fields that adopting the Midpoint Trade Now instruction would require.

The Exchange aims to offer the Midpoint Trade Now instruction for all Orders that have the Non-Displayed Order Attribute and are not otherwise subject to restrictions on execution. Accordingly, the Midpoint Trade Now instruction shall not be available for Price to Display Orders, Market Maker Peg Orders, Supplemental Orders, Market On Open Orders, Limit On Open Orders, Opening Imbalance Only Orders, Market On Close Orders, Limit on Close Orders, Imbalance Only Orders, and Midpoint Extended Life Orders. The Exchange says that these order types are either incapable of having a non-displayed price, hence the use of the Midpoint Trade Now instruction is not applicable, or are subject to other Nasdaq rules regarding the display and execution of those orders, thus the use of the Midpoint Trade Now instruction would be inconsistent with those other Nasdaq rules.

The Midpoint Trade-Now instruction will be available as a port-setting for all other Order Types, namely Price to Comply Orders, Non-Displayed Orders, Post Only Orders and Midpoint Peg Post-Only Orders. On top of that, Midpoint Trade Now will be available on an Order-by-Order basis for Non-Displayed Orders.

Currently, if a Midpoint Peg Post-Only Order that posts to the Nasdaq Book is locking a preexisting Order, the Midpoint Peg Post-Only Order will execute against an incoming Order only if the price of the incoming sell (buy) Order is lower (higher) than the price of the preexisting Order. However, under the proposed functionality, if there is a resting sell (buy) Order on the Nasdaq Book without the Midpoint Trade Now Attribute that is locked at its non-displayed price by a buy (sell) Midpoint Peg Post-Only Order, new incoming Orders (with or without the Midpoint Trade Now Order Attribute), entered at a price equal to or lower (higher) than the non-displayed price of the locked sell (buy) Order, will be able to execute against the Midpoint Peg Post-Only Order at the locking price.

This functionality, according to Nasdaq, will promote an efficient and orderly market by allowing Orders in this scenario to execute and resolve a locked market.

The Exchange aims to implement Midpoint Trade Now in the first quarter of 2019.

Interested persons are invited to submit written data, views, and arguments concerning Nasdaq’s plans. Comments may be submitted via:

  • the Commission’s Internet comment form (; or
  • an e-mail to [email protected] Please include File Number SR-NASDAQ-2018-090 on the subject line.
  • paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2018-090.

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