The NASDAQ button routes orders to the NASDAQ Market Maker System, sometimes referred to as the Small Order Execution System (SOES).
There are three types of NASDAQ securities:
All NASDAQ National Market Issues can be traded through the NASDAQ Market Maker System, subject to the current tier size restrictions. National Market Issues are ‘Mandatory SOES’ stocks, meaning that all the registered market makers in these stocks must accept orders from the NASDAQ Market Maker System.
NASDAQ Small-Cap Issues are qualified as "Non-mandatory SOES" securities. Non-mandatory SOES means that the NASDAQ market makers in these stocks are not obligated to execute orders from the NASDAQ Market Maker System (SOES). In fact, a market maker in a NASDAQ Small-Cap stock could choose to accept SOES orders today, but then not to accept SOES orders tomorrow.
Ultimate Trader will reject an order for a NASDAQ Small-Cap stock when there are no market makers accepting orders from the NASDAQ Market Maker System. You can confirm the status of any NASDAQ Issue, Small-Cap or National Market, in the Wall Street Journal's NASDAQ Issues section, which has a complete list of both National Market and
Small-Cap Issues.
If you are attempting to trade a NASDAQ Small-Cap Issue via the NASDAQ button and it is rejected, you have four other transaction options:
Post your order to SelectNet
Post your order to the Instinet ECN
Call Client Services to place your order
You can only buy or sell a quantity equal to or less than the tier size for that stock (as determined by NASDAQ) during a 5 minute period.
You cannot buy the same stock via the NASDAQ Market Maker System within 5 minutes of a previous purchase of that stock (assuming your prior purchase was for a quantity equal to the tier size for that stock).
Conversely, you cannot sell short the same stock via the NASDAQ Market Maker System within 5 minutes of shorting that stock the first time.
Note that this rule, known as the "5 Minute Rule", does not prevent you from selling a stock (or buying a stock in the case of a short sale) you had previously bought less than 5 minutes ago.
You can buy a stock that you had previously sold or sold short (assuming the buy is not within 5 minutes of a previous buy in the same stock on SOES).
Maximum size is 999,999 shares for automatic execution.
You cannot use the NASDAQ button to enter a bid or offer. The NASDAQ button is used only for trading on a posted market maker price (i.e., you can only place limit orders to Buy at the current Ask and limit orders to Sell at the current Bid, not between or outside the spread.)
You cannot use the NASDAQ button to trade on an ECN price (i.e., INCA, BTRD, ATTN, REDI, BRUT, or Instinet).
All NASDAQ (SOES) orders must be sent as a DAY, MKT (Market) and PART (Partial) order OR as DAY, LMT (Limit) and PART.
Due to the rule changes implemented on 1/20/97, AON (all or none) orders are no longer permissible for NASDAQ (SOES) execution.
SOES orders are not immediately returned when an ECN or UTP participant is alone at the inside (i.e., there are no Market Makers at the inside quote). SOES orders are held in queue until executable for a specified period of time, initially set at 90 seconds. This "hold time" gives the market three options:
Allow the ECN (INET, INCA, ATTN, BTRD, REDI, TNTO, and BRUT) to move away, creating a new inside;
Give the Market Makers time to adjust their quotes to create a new inside
Allow a Market Maker to join the ECN at their price.
If one of these events happens prior to the end of the ninety seconds, the order will either execute or be rejected if it is no longer executable. If none of these conditions occur, however, the order will time out at the end of the 90 seconds and be returned to the entering firm. NASD® Rule 4730 is being amended accordingly.
NASDAQ will accept an order entered as GTC but it will treat this order as a DAY order because after the close, NASDAQ cancels all unexecuted Limit orders.
In the event you are not filled at the best price posted (because the market moved away suddenly) or you received a partial fill at the best price, your order or the remainder of your order is filled at the next best price. You may find this useful if you feel you must get in or out of the position even if it means trading at the next best price.
SOES limit orders can only be entered at the best SOES Market Maker's Bid (when selling) or Ask price (when buying), not between the spread, and not outside the current market. These orders fill at the price entered in the Price box of the Order Entry window or Order Load panel. If the price moves away from the price specified in your LMT order, or 3 minutes elapse without your order being filled, whichever comes first, the order is automatically canceled.