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Monday, July 21, 2014

Equity Trader Alert #2014 - 54
NASDAQ OMX PSX Receives SEC Approval for Price Setter Pro Rata

Category:

  • New Functionality
  • System Impact

Markets Impacted:

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As announced in ETA #2014 – 48, PSX is updating the priority structure for executing orders on the exchange. 

PSX has received SEC approval for a new priority and execution algorithm structure and will move forward with Price Setter Pro Rata. The approval notice from the SEC notes:  

“The Commission further believes that PSX’s Pro Rata Algorithm may encourage participants to display greater size on PSX. This in turn could facilitate a more efficient execution of larger orders and foster best execution and price discovery. Accordingly, the Commission believes that the Pro Rata Algorithm proposed by PHLX is consistent with the Act.” [Emphasis added]

Effective Friday, August 1, 2014, all symbols on PSX will trade using the Price Setter Pro Rata execution algorithm.

Price Setter Pro Rata

Under this priority structure, orders that set the PSX Best Bid or Offer (PSX BBO) will be guaranteed a 40% allocation when incoming marketable orders are executed. The remaining 60% of a given order will be executed against resting orders via a size pro rata allocation.

Testing for the Price Rata execution algorithm is available daily in the PSX NTF. Please contact NASDAQ OMX U.S. Market Operations at +1 212 231 5180 to schedule your test.

For More information on PSX pricing, please see the PSX Pricing Page.

Please Note: Although PSX plans to set all symbols to Price Setter Pro Rata on August 1, 2014, the proposed rule allows PSX to configure symbols as pro rata without the price setter incentive or as price/time.  If PSX chooses to change the configuration of a symbol, members will be given at least 30 days notice.

 

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