Nasdaq OMX Group has filed an application with the Securities and Exchange Commission to create a new order type that is pegged to the intraday net asset value of a given exchange-traded products.
The SEC had been scheduled to approve or disapprove the order type by Tuesday, April 16. But it extended the period of review until June 15, to have “sufficient time” to review comments on the plan.
Here’s a snapshot of the order type.
NAME: INAV Pegged Orders for ETFs
FILING NUMBER: SR-NASDAQ-2012-117
COMING TO: NASDAQ Stock Market
WHEN: Under review by the SEC.
AIMED AT: Institutional and retail investors.
GIST: This optional order type would be available only for exchange-traded funds whose components are U.S. stocks. The value of the components would be assessed every 15 seconds, to create a new Intraday Net Asset Value. The pegged order would be priced relative to the INAV.
HOW IT WOULD WORK: The order would specify that its price will be equal to or offset a designated amount away from the Intraday Net Asset Value.
As the value of the INAV changes, the price of the order (limit price) will change accordingly.
A Pegged Order could have a limit price beyond which the order shall not be executed. The order cannot be routed elsewhere.
EXAMPLE: The best bid is $20.00 a share for a particular ETF. The best offer is $20.06 at 10:00:00. The intraday net asset value of a share is updated at 10:00:02 a.m. and published as $19.98. An INAV Peg Order to sell entered at 10:00:04 would be priced at $19.98 and execute at $20.00, the best bid.
If a buyer were to enter the market, its order would also be pegged at $19.98 protecting it from paying the offer price, $20.06, a premium to the fund’s current fair value.
ADDITIONAL FEATURES: The order can be either displayed or not. If a market participant utilizes the non-displayed order type, its order will be placed lower in the priority queue than displayed orders within each price point.
