Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4759, 58240-58243 [2017-26556]

Download as PDF 58240 Federal Register / Vol. 82, No. 236 / Monday, December 11, 2017 / Notices which the Exchange has in place a comprehensive surveillance sharing agreement. For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional type of Index Fund Shares that will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: A. By order approve or disapprove the proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved. daltland on DSKBBV9HB2PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– CboeBZX–2017–006 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. VerDate Sep<11>2014 17:54 Dec 08, 2017 Jkt 244001 All submissions should refer to File No. SR–CboeBZX–2017–006. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–CboeBZX–2017–006 and should be submitted on or before January 2, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26557 Filed 12–8–17; 8:45 am] BILLING CODE 8011–01–P 28, 2017, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to add additional detail about the purposes for which the Exchange uses securities information processor data pursuant to Rule 4759, and to make other technical corrections to that rule. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82218; File No. SR– NASDAQ–2017–121] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4759 December 5, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 The purpose of the proposed rule change is to add additional detail about the purposes for which the Exchange uses securities information processor (‘‘SIP’’) data pursuant to Rule 4759, and to make other technical corrections to that rule. Rule 4759 lists the proprietary and network processor feeds that are utilized for the handling, routing, and execution of orders, as well as for the regulatory compliance processes related to those functions. The Nasdaq trading system utilizes proprietary market data as the Primary Source of quotation data for the following markets that provide a reliable direct feed: NYSE American, Nasdaq BX, CBOE EDGA, CBOE EDGX, CHX, NYSE, NYSE Arca, Nasdaq, Nasdaq PSX, CBOE BYX, and CBOE E:\FR\FM\11DEN1.SGM 11DEN1 Federal Register / Vol. 82, No. 236 / Monday, December 11, 2017 / Notices daltland on DSKBBV9HB2PROD with NOTICES BZX.3 For each of these markets, the Exchange uses SIP data as the Secondary Source of quotation data.4 Generally, Rule 4759 provides that the Primary Source of data is used for the handling, routing, and execution of orders, as well as for the regulatory compliance processes related to those functions, unless it is delayed by a configurable amount compared to the Secondary Source of data. While this is true for quotation data used by the trading system for the handling, routing, and execution of orders, and also regulatory compliance processes related to those functions, including, for example, determination of tradethroughs under Rule 611 of Regulation NMS, the Exchange uses SIP data for certain trade and administrative messages. For example, the Exchange uses SIP data for limit-up limit-down price bands, market-wide circuit breaker decline and status messages, Regulation SHO state messages, trading state messages (i.e., halts and resumes), and trade messages (i.e., last sale). As described in more detail below, with the exception of last sale information, these messages originate from the SIP, and are often not available on the direct feeds. To mitigate risks associated with a potential SIP outage, however, where the information is available on a direct feed from one or more exchanges, the Exchange uses such direct feed data solely as a backup to the SIP data. The Exchange therefore proposes to amend Rule 4759 to provide that the Nasdaq System consumes quotation data from the listed proprietary and network processor feeds for the handling, routing, and execution of orders, as well as for the regulatory compliance processes related to those functions.5 Furthermore, with the proposed changes, Rule 4759 will provide that the SIP is the Primary Source of certain trade and administrative messages such as limitup limit-down price bands, market-wide circuit breaker decline and status messages, Regulation SHO state messages, halts and resumes, and last sale information, and that, where 3 Several of the exchanges mentioned in this filing have been renamed recently; the names used herein reflect the current names of the exchanges. This proposed rule change also includes amendments to reflect the new names for these exchanges. 4 SIP data is used as the Primary Source for NYSE National, FINRA ADF, and IEX. There is no Secondary Source for these markets. 5 The Exchange notes that the rule language currently provides that the Exchange ‘‘utilizes’’ these feeds. As a non-substantive change, the Exchange is changing this word to ‘‘consumes’’ as this word fits better with language being added to the rule. VerDate Sep<11>2014 17:54 Dec 08, 2017 Jkt 244001 available, the direct feeds are the Secondary Source of such information. For the reasons discussed in this filing, the Exchange believes that it is appropriate to use the SIP as the Primary Source of data for these trade and administrative messages. Limit-up limit-down price bands, for instance, are not available on any of the direct feeds used by the Exchange as these bands are calculated and disseminated by the SIP pursuant to the Plan to Address Extraordinary Market Volatility. Similarly, market-wide circuit breaker decline and status messages, Regulation SHO state messages, and trading state messages are available on some but not other direct feeds. Again, the SIP is responsible for calculating any decline in the S&P 500 Index and disseminating halt messages for the market-wide circuit breaker, and also for disseminating other halts, resumes, and Regulation SHO state messages. In addition, the Exchange’s trading system consumes last sale information from the SIP, which is used for the limited purposes of determining when the Exchange can open securities after an IPO,6 and to calculate the need to trigger a short sale price test under Nasdaq Rule 4763(c) and Rule 201 of Regulation SHO because a covered security for which the Exchange is the listing market has declined 10% or more in one day. Although last sale information is disseminated on proprietary market data feeds, this information is typically included in a different market data product than the Exchange uses for quotation data, and the Exchange’s trading system therefore also consumes last sale information from the SIP for the limited purposes described above. Finally, the Exchange proposes to make additional technical amendments to Rule 4759. Specifically, several of the exchanges and direct market data feeds described in the rule have been renamed since the Exchange adopted the rule. The Exchange therefore propose to: (1) Rename the exchanges described in the rule so that the exchanges are identified by their new names,7 and (2) replace the names of the individual direct feeds with a generic notation that the ‘‘Direct Feed’’ is used to avoid the need for future updates every time an exchange changes the name of its proprietary market data offerings. These changes are technical amendments and will have no impact on the operation of the Exchange 6 The Exchange waits for a last sale from the listing market prior to starting the Exchange’s opening process following an IPO on another market. 7 The new names of each of the exchanges described in Rule 4759 are used earlier in this filing. See notes 4–5 supra and accompanying text. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 58241 or its use of the identified market data feeds. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Section 6(b)(5) of the Act,9 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The Exchange believes that the proposed rule change removes impediments to and perfects the mechanism of a free and open market and protects investors and the public interest because it provides additional transparency around the purposes for which the Exchange uses SIP data. The proposed rule change does not change the operation of the Exchange or its use of data feeds; rather it clarifies the Exchange’s rules with regard to information consumed from the SIP. Specifically, the proposed rule change indicates that the Exchange uses SIP data for certain administrative messages, including, limit-up limit-down price bands, market-wide circuit breaker decline and status messages, Regulation SHO state messages, and trading state messages (i.e., halts and resumes), as well as trade messages (i.e., last sale). At least one other exchange uses SIP data for these purposes, while continuing to use the direct feeds for quotation data where the direct feeds often offer reduced latency.10 The Exchange believes that it is appropriate to use SIP data as the primary source for administrative messages that originate from the SIP and may or may not be available on particular proprietary market data feeds. Although quote data used for the handling, routing, and execution of orders is typically available with a lower latency over the direct feeds, the same is not true for the administrative messages described above that originate from the SIP and are re-disseminated (or not disseminated at all) by the various direct feeds. The Exchange therefore believes that it is consistent with the public interest and protection of investors to get this information directly from the SIP, i.e., the official source of the information, rather than indirectly from proprietary market data feeds that may or may not redistribute such information. Furthermore, with respect 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 10 See IEX Rule 11.410(a)(3). 9 15 E:\FR\FM\11DEN1.SGM 11DEN1 58242 Federal Register / Vol. 82, No. 236 / Monday, December 11, 2017 / Notices daltland on DSKBBV9HB2PROD with NOTICES to last sale information, such information is used by the trading system for the limited purposes described in this filing, and is not typically available on the direct feeds that the Exchange uses for quotation data. The Exchange therefore also believes that it is appropriate to get last sale information from the SIP. Where the information described in this filing is available on a direct feed, however, direct feed data will be used in the event failover is necessary, thereby adding redundancy and mitigating risks associated with a potential SIP outage. The proposed rule change also makes certain technical amendments to Rule 4759, including updating the names of exchanges that have been renamed since the adoption of this rule. The Exchange believes that it is consistent with the public interest and the protection of investors to update the names of the exchanges listed in Rule 4759 as this change will make it easier for market participants to identify the exchanges for which the Exchange uses the direct feed and/or SIP for the purposes described in the rule. Furthermore, the proposed rule change replaces the names of the direct feeds with a generic notation that the ‘‘Direct Feed’’ is used. The Exchange believes that this change is consistent with the protection of investors and the public interest as the exchanges may change the names of their data feeds periodically, resulting in the list being out of date. Rather than update the list every time a market changes the names of their [sic] proprietary market data products, the Exchange believes that it is preferable to simply explain that the direct feed is used. Several other exchanges also similarly note that the direct feed is used rather than spelling out the names of each feed.11 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issue but rather would provide members and other market participants with information about the purposes for which the Exchange uses SIP data, and make other technical corrections to Rule 4759. No changes to the Exchange’s trading or other systems are being introduced with the proposed rule change, and the Exchange believes that the proposed 11 See e.g. IEX Rule 11.410(a); CBOE BZX Rule 11.26. VerDate Sep<11>2014 19:09 Dec 08, 2017 Jkt 244001 changes will increase transparency around the operation of the Exchange and its use of market data feeds without any significant impact on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 12 and subparagraph (f)(6) of Rule 19b–4 thereunder.13 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 14 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 15 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest as it will allow the Exchange to clarify the purposes for which the Exchange uses SIP data and avoid potential confusion among market participants. Accordingly, the Commission hereby waives the operative delay and designates the proposal operative upon filing.16 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 12 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 14 17 CFR 240.19b–4(f)(6). 15 17 CFR 240.19b–4(f)(6)(iii). 16 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 13 17 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2017–121 on the subject line. Paper Comments • Send 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–2017–121. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All E:\FR\FM\11DEN1.SGM 11DEN1 Federal Register / Vol. 82, No. 236 / Monday, December 11, 2017 / Notices submissions should refer to File Number SR–NASDAQ–2017–121 and should be submitted on or before January 2, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26556 Filed 12–8–17; 8:45 am] (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82217; File No. SR– CboeBZX–2017–005] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of a Series of the Cboe Vest S&P 500 Buffer Protect Strategy ETF Under the ETF Series Solutions Trust, Under Rule 14.11(c)(3), Index Fund Shares December 5, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 21, 2017, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. daltland on DSKBBV9HB2PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to list and trade shares of a series of the Cboe Vest S&P 500® Buffer Protect Strategy ETF under the ETF Series Solutions Trust (the ‘‘Trust’’), under Rule 14.11(c)(3) (‘‘Index Fund Shares’’). The text of the proposed rule change is available at the Exchange’s Web site at www.markets.cboe.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 17:54 Dec 08, 2017 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of each series of the Cboe Vest S&P 500® Buffer Protect Strategy ETF (each a ‘‘Fund’’ and, collectively, the ‘‘Funds’’) under Rule 14.11(c)(3), which governs the listing and trading of Index Fund Shares based on equity securities indexes on the Exchange. In total, the Exchange is proposing to list and trade Shares of twelve monthly series of the Cboe Vest S&P 500® Buffer Protect Strategy ETF. Each Fund will be an index-based exchange traded fund (‘‘ETF’’). The Funds will include the following: Cboe Vest S&P 500® Buffer Protect Strategy (January) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (February) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (March) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (April) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (May) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (June) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (July) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (August) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (September) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (October) ETF; Cboe Vest S&P 500® Buffer Protect Strategy (November) ETF; and Cboe Vest S&P 500® Buffer Protect Strategy (December) ETF. Each Fund will be based on the Cboe S&P 500 Buffer Protect Index (Month) Series, where ‘‘Month’’ is the corresponding month associated with the roll date of the applicable Fund (each an ‘‘Index’’ and, collectively, the ‘‘Indexes’’). The Shares will be offered by the Trust, which was established as a Delaware statutory trust on February 9, 2012. The Trust is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Funds on Form N–1A (‘‘Registration Statement’’) with the Commission.3 The Funds’ 3 See Registration Statement on Form N–1A for the Trust, dated October 24, 2017 (File Nos. 333– 179562 and 811–22668). The descriptions of the 1 15 VerDate Sep<11>2014 concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. Jkt 244001 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 58243 adviser, Cboe Vest Financial, LLC (the ‘‘Adviser’’), and index provider, Cboe Exchange, Inc. (‘‘Cboe Options’’ or the ‘‘Index Provider’’), are not registered as broker-dealers, but are affiliated with a broker-dealer. The Index Provider has implemented and will maintain a ‘‘fire wall’’ with respect to such broker-dealer and its personnel regarding access to information concerning the composition and/or changes to the Indexes. In addition, Index Provider personnel who make decisions regarding the Index composition or methodology are subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the Index, pursuant to Rule 14.11(c)(3)(B)(iii). The Adviser has also implemented and will maintain a ‘‘fire wall’’ with respect to such broker-dealer and its personnel regarding access to information concerning the composition and/or changes to the portfolio. In addition, Adviser personnel who make decisions regarding a Fund’s portfolio are subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding a Fund’s portfolio. In the event that (a) the Adviser becomes registered as a broker-dealer or newly affiliated with another broker-dealer; or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer; it will implement a fire wall with respect to its relevant personnel or such broker-dealer affiliate, as applicable, regarding access to information concerning the composition and/or changes to the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. The Exchange also notes that the Adviser is a BZX Affiliate as defined in Rule 14.3(e)(1)(A),4 but the Funds are not Affiliate Securities, as defined in Funds and the Shares contained herein are based, in part, on information in the Registration Statement. The Commission has not yet issued an order granting exemptive relief to the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a–1) applicable to the activities of the Funds, but the Funds will not be listed on the Exchange until such an order is issued and any conditions contained therein are satisfied [sic] 4 As defined in Rule 14.3(e)(1)(A), the term ‘‘BZX Affiliate’’ means the Exchange and any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Exchange, where ‘‘control’’ means that one entity possesses, directly or indirectly, voting control of the other entity either through ownership of capital stock or other equity securities or through majority representation on the board of directors or other management body of such entity. E:\FR\FM\11DEN1.SGM 11DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 236 (Monday, December 11, 2017)]
[Notices]
[Pages 58240-58243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82218; File No. SR-NASDAQ-2017-121]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 4759

December 5, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 28, 2017, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to add additional detail about the purposes 
for which the Exchange uses securities information processor data 
pursuant to Rule 4759, and to make other technical corrections to that 
rule.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to add additional detail 
about the purposes for which the Exchange uses securities information 
processor (``SIP'') data pursuant to Rule 4759, and to make other 
technical corrections to that rule. Rule 4759 lists the proprietary and 
network processor feeds that are utilized for the handling, routing, 
and execution of orders, as well as for the regulatory compliance 
processes related to those functions. The Nasdaq trading system 
utilizes proprietary market data as the Primary Source of quotation 
data for the following markets that provide a reliable direct feed: 
NYSE American, Nasdaq BX, CBOE EDGA, CBOE EDGX, CHX, NYSE, NYSE Arca, 
Nasdaq, Nasdaq PSX, CBOE BYX, and CBOE

[[Page 58241]]

BZX.\3\ For each of these markets, the Exchange uses SIP data as the 
Secondary Source of quotation data.\4\
---------------------------------------------------------------------------

    \3\ Several of the exchanges mentioned in this filing have been 
renamed recently; the names used herein reflect the current names of 
the exchanges. This proposed rule change also includes amendments to 
reflect the new names for these exchanges.
    \4\ SIP data is used as the Primary Source for NYSE National, 
FINRA ADF, and IEX. There is no Secondary Source for these markets.
---------------------------------------------------------------------------

    Generally, Rule 4759 provides that the Primary Source of data is 
used for the handling, routing, and execution of orders, as well as for 
the regulatory compliance processes related to those functions, unless 
it is delayed by a configurable amount compared to the Secondary Source 
of data. While this is true for quotation data used by the trading 
system for the handling, routing, and execution of orders, and also 
regulatory compliance processes related to those functions, including, 
for example, determination of trade-throughs under Rule 611 of 
Regulation NMS, the Exchange uses SIP data for certain trade and 
administrative messages. For example, the Exchange uses SIP data for 
limit-up limit-down price bands, market-wide circuit breaker decline 
and status messages, Regulation SHO state messages, trading state 
messages (i.e., halts and resumes), and trade messages (i.e., last 
sale). As described in more detail below, with the exception of last 
sale information, these messages originate from the SIP, and are often 
not available on the direct feeds. To mitigate risks associated with a 
potential SIP outage, however, where the information is available on a 
direct feed from one or more exchanges, the Exchange uses such direct 
feed data solely as a backup to the SIP data.
    The Exchange therefore proposes to amend Rule 4759 to provide that 
the Nasdaq System consumes quotation data from the listed proprietary 
and network processor feeds for the handling, routing, and execution of 
orders, as well as for the regulatory compliance processes related to 
those functions.\5\ Furthermore, with the proposed changes, Rule 4759 
will provide that the SIP is the Primary Source of certain trade and 
administrative messages such as limit-up limit-down price bands, 
market-wide circuit breaker decline and status messages, Regulation SHO 
state messages, halts and resumes, and last sale information, and that, 
where available, the direct feeds are the Secondary Source of such 
information. For the reasons discussed in this filing, the Exchange 
believes that it is appropriate to use the SIP as the Primary Source of 
data for these trade and administrative messages. Limit-up limit-down 
price bands, for instance, are not available on any of the direct feeds 
used by the Exchange as these bands are calculated and disseminated by 
the SIP pursuant to the Plan to Address Extraordinary Market 
Volatility. Similarly, market-wide circuit breaker decline and status 
messages, Regulation SHO state messages, and trading state messages are 
available on some but not other direct feeds. Again, the SIP is 
responsible for calculating any decline in the S&P 500 Index and 
disseminating halt messages for the market-wide circuit breaker, and 
also for disseminating other halts, resumes, and Regulation SHO state 
messages. In addition, the Exchange's trading system consumes last sale 
information from the SIP, which is used for the limited purposes of 
determining when the Exchange can open securities after an IPO,\6\ and 
to calculate the need to trigger a short sale price test under Nasdaq 
Rule 4763(c) and Rule 201 of Regulation SHO because a covered security 
for which the Exchange is the listing market has declined 10% or more 
in one day. Although last sale information is disseminated on 
proprietary market data feeds, this information is typically included 
in a different market data product than the Exchange uses for quotation 
data, and the Exchange's trading system therefore also consumes last 
sale information from the SIP for the limited purposes described above.
---------------------------------------------------------------------------

    \5\ The Exchange notes that the rule language currently provides 
that the Exchange ``utilizes'' these feeds. As a non-substantive 
change, the Exchange is changing this word to ``consumes'' as this 
word fits better with language being added to the rule.
    \6\ The Exchange waits for a last sale from the listing market 
prior to starting the Exchange's opening process following an IPO on 
another market.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to make additional technical 
amendments to Rule 4759. Specifically, several of the exchanges and 
direct market data feeds described in the rule have been renamed since 
the Exchange adopted the rule. The Exchange therefore propose to: (1) 
Rename the exchanges described in the rule so that the exchanges are 
identified by their new names,\7\ and (2) replace the names of the 
individual direct feeds with a generic notation that the ``Direct 
Feed'' is used to avoid the need for future updates every time an 
exchange changes the name of its proprietary market data offerings. 
These changes are technical amendments and will have no impact on the 
operation of the Exchange or its use of the identified market data 
feeds.
---------------------------------------------------------------------------

    \7\ The new names of each of the exchanges described in Rule 
4759 are used earlier in this filing. See notes 4-5 supra and 
accompanying text.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change removes 
impediments to and perfects the mechanism of a free and open market and 
protects investors and the public interest because it provides 
additional transparency around the purposes for which the Exchange uses 
SIP data. The proposed rule change does not change the operation of the 
Exchange or its use of data feeds; rather it clarifies the Exchange's 
rules with regard to information consumed from the SIP. Specifically, 
the proposed rule change indicates that the Exchange uses SIP data for 
certain administrative messages, including, limit-up limit-down price 
bands, market-wide circuit breaker decline and status messages, 
Regulation SHO state messages, and trading state messages (i.e., halts 
and resumes), as well as trade messages (i.e., last sale). At least one 
other exchange uses SIP data for these purposes, while continuing to 
use the direct feeds for quotation data where the direct feeds often 
offer reduced latency.\10\
---------------------------------------------------------------------------

    \10\ See IEX Rule 11.410(a)(3).
---------------------------------------------------------------------------

    The Exchange believes that it is appropriate to use SIP data as the 
primary source for administrative messages that originate from the SIP 
and may or may not be available on particular proprietary market data 
feeds. Although quote data used for the handling, routing, and 
execution of orders is typically available with a lower latency over 
the direct feeds, the same is not true for the administrative messages 
described above that originate from the SIP and are re-disseminated (or 
not disseminated at all) by the various direct feeds. The Exchange 
therefore believes that it is consistent with the public interest and 
protection of investors to get this information directly from the SIP, 
i.e., the official source of the information, rather than indirectly 
from proprietary market data feeds that may or may not redistribute 
such information. Furthermore, with respect

[[Page 58242]]

to last sale information, such information is used by the trading 
system for the limited purposes described in this filing, and is not 
typically available on the direct feeds that the Exchange uses for 
quotation data. The Exchange therefore also believes that it is 
appropriate to get last sale information from the SIP. Where the 
information described in this filing is available on a direct feed, 
however, direct feed data will be used in the event failover is 
necessary, thereby adding redundancy and mitigating risks associated 
with a potential SIP outage.
    The proposed rule change also makes certain technical amendments to 
Rule 4759, including updating the names of exchanges that have been 
renamed since the adoption of this rule. The Exchange believes that it 
is consistent with the public interest and the protection of investors 
to update the names of the exchanges listed in Rule 4759 as this change 
will make it easier for market participants to identify the exchanges 
for which the Exchange uses the direct feed and/or SIP for the purposes 
described in the rule. Furthermore, the proposed rule change replaces 
the names of the direct feeds with a generic notation that the ``Direct 
Feed'' is used. The Exchange believes that this change is consistent 
with the protection of investors and the public interest as the 
exchanges may change the names of their data feeds periodically, 
resulting in the list being out of date. Rather than update the list 
every time a market changes the names of their [sic] proprietary market 
data products, the Exchange believes that it is preferable to simply 
explain that the direct feed is used. Several other exchanges also 
similarly note that the direct feed is used rather than spelling out 
the names of each feed.\11\
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    \11\ See e.g. IEX Rule 11.410(a); CBOE BZX Rule 11.26.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issue but rather would provide 
members and other market participants with information about the 
purposes for which the Exchange uses SIP data, and make other technical 
corrections to Rule 4759. No changes to the Exchange's trading or other 
systems are being introduced with the proposed rule change, and the 
Exchange believes that the proposed changes will increase transparency 
around the operation of the Exchange and its use of market data feeds 
without any significant impact on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest as it will allow the 
Exchange to clarify the purposes for which the Exchange uses SIP data 
and avoid potential confusion among market participants. Accordingly, 
the Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2017-121 on the subject line.

Paper Comments

     Send 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-2017-121. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All

[[Page 58243]]

submissions should refer to File Number SR-NASDAQ-2017-121 and should 
be submitted on or before January 2, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26556 Filed 12-8-17; 8:45 am]
 BILLING CODE 8011-01-P

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