Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Nasdaq Official Closing Price for Nasdaq-Listed Exchange-Traded Products, 44343-44346 [2019-18166]

Download as PDF Federal Register / Vol. 84, No. 164 / Friday, August 23, 2019 / Notices III. Discussion and Commission Findings jbell on DSK3GLQ082PROD with NOTICES After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.22 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act,23 which requires, among other things, that FINRA rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission previously found that the earliest iteration of FINRA’s publication protocols for ATS OTC trade data were consistent with the Act.24 Several commenters on that initial proposal urged FINRA to broaden its publication protocols to include nonATS OTC trading centers, not only ATSs. FINRA responded that ‘‘it considered various alternatives and concluded that ATS trade information was an appropriate first step toward increased transparency in the offexchange OTC market. FINRA stated further that it would consider additional steps, including those suggested by the commenters, in the future.’’ 25 Subsequently, in 2015, FINRA proposed to expand transparency of OTC equity trading data by publishing certain information regarding non-ATS OTC trading.26 At that time, however, FINRA did not believe that publishing volume information for each firm that executed only a small number of trades or shares in any given period would provide meaningful information to the marketplace.27 Therefore, FINRA proposed to combine volume from all members that did not meet a specified minimum threshold and publish such information for those members on an 22 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 23 15 U.S.C. 78o–3(b)(6). 24 See Securities Exchange Act Release No. 71341 (January 17, 2014), 79 FR 4213, 4217 (January 24, 2014) (Order Approving SR–FINRA–2013–042). FINRA subsequently expanded the scope of the ATS OTC trade data that it publishes on its website. See Securities Exchange Act Release No. 76931 (January 19, 2016), 81 FR 4076 (January 25, 2016) (SR–FINRA–2016–002) (immediate effectiveness of proposed rule change relating to ATS volume and trading information). 25 Order Approving SR–FINRA–2013–042, 79 FR at 4215 (citation omitted). 26 See Securities Exchange Act Release No. 75356 (July 2, 2015), 80 FR 39463 (July 9, 2015) (Notice of SR–FINRA–2015–020). 27 See id., 80 FR at 39464. VerDate Sep<11>2014 16:40 Aug 22, 2019 Jkt 247001 aggregated basis.28 The Commission approved the proposed rule change because publishing this data, even though not to the same degree of granularity as ATS OTC trade data, would facilitate better understanding of the OTC equity market.29 FINRA is now proposing to apply to non-ATS OTC trade data more of the publication protocols that it currently applies to ATS OTC trade data. Specifically, FINRA will publish new monthly aggregate block-size trading data for non-ATS OTC trades in NMS stocks, on the same terms as FINRA currently publishes aggregate block-size trading data for ATS trades in NMS stocks. Second, FINRA will eliminate the de minimis exception for publication of aggregate non-ATS trading volume across all NMS stocks and OTC Equity Securities, and publish each firm’s aggregate non-ATS volume on an attributed basis. The Commission believes that the proposal will enhance transparency in the OTC equity market by making additional trading volume data available on FINRA’s website in a manner reasonably designed to avoid adverse market impact, and without imposing any new requirements, on FINRA members. Therefore, the Commission finds that the proposal is consistent with the Act and the rules and regulations thereunder applicable to a national securities association. The Commission notes that it received no comments objecting to the proposal.30 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,31 that the proposed rule change (SR–FINRA– 2019–019) is approved. 28 See id. Securities Exchange Act Release No. 76078 (October 5, 2015), 80 FR 61246, 61247–49 (October 9, 2015) (Order Approving SR–FINRA–2015–020). 30 Two commenters generally supported the proposal while suggesting ways to further expand publication of non-ATS OTC trade data. Clearpool suggested that FINRA eliminate the de minimis exception for purposes of the security-specific nonATS volume data as well as separately identifying a firm’s volume of trading on a single-dealer platform. See Clearpool Letter at 2. Citadel suggested that FINRA separate the monthly aggregate block-size trading data into ETF and nonETF categories to maximize the granularity and utility of the data. See Citadel Letter at 1. In response to these comments, FINRA stated that it ‘‘continue[s] to consider further enhancements to the OTC volume information published on our website and we would consider these suggestions as part of potential future changes, but we would not plan to include them in this filing.’’ Email to David Michehl, Special Counsel, Commission, from Robert McNamee, Assistant General Counsel, FINRA (dated August 8, 2019). 31 15 U.S.C. 78s(b)(2). 29 See PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 44343 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–18167 Filed 8–22–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86705; File No. SR– NASDAQ–2019–061] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Nasdaq Official Closing Price for Nasdaq-Listed ExchangeTraded Products August 19, 2019. 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 August 8, 2019, 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 a rule change regarding how the Nasdaq Official Closing Price (‘‘NOCP’’) will be determined for a Nasdaq-listed security that is an exchange-traded product (as defined herein). The text of the proposed rule change is available on the Exchange’s website 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 32 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\23AUN1.SGM 23AUN1 44344 Federal Register / Vol. 84, No. 164 / Friday, August 23, 2019 / Notices 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 jbell on DSK3GLQ082PROD with NOTICES Nasdaq Rule 4754(b) details the processing of the Nasdaq Closing Cross, including how the Exchange determines the NOCP. The Exchange proposes to amend Nasdaq Rule 4754 to amend how the NOCP 3 will be determined for an Exchange-listed security that is an exchange-traded product (‘‘ETP’’) if the Exchange does not conduct a closing cross (‘‘Closing Cross’’).4 ETP for purposes of the proposed rule change means a series of Portfolio Depository Receipts, Index Fund Shares, Managed Fund Shares, or Trust Issued Receipts (as defined in Nasdaq Rules 5705(a) 5705(b), 5735, and 5720, respectively), securities linked to the performance of indexes and commodities (including currencies) (as defined in Nasdaq Rule 5710), Index-Linked Exchangeable Notes, Equity Gold Shares, Trust Certificates, Commodity-Based Trust Shares, Currency Trust Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, Partnership Units, Trust Units, Managed Trust Securities, or Currency Warrants (as defined in Rule 5711(a)–(k)). The proposed functionality in this filing is similar to functionality that has already been approved by the Commission and is operational on NYSE Arca, Inc. (‘‘Arca’’) (the ‘‘Arca 3 As set forth in Nasdaq Rule 4754(b)(4), the NOCP will be the Closing Cross price for stocks that participate in the Closing Cross. 4 The proposed rule change does not apply to Nasdaq Rule 5745 Exchange-Traded Managed Fund Shares (‘‘NextShares’’) or corporate securities. Additionally, it is unnecessary to apply this rule change to NextShares because its’ reference trading price is reset to 100 every day for quoting purposes around which markets are made. The actual NAV price does not correspond to this reference price and therefore the midpoints of the reference price are not applicable in determining a more accurate fair value of the basket. Nasdaq is not proposing this change for corporate securities because unlike ETPs they do not have a known NAV along with an arbitrage component that allows for convergence in price and keeps the prices in line. Corporate securities are priced based upon supply demand factors at moments in time, which result in executed transactions. These transactions are generally recognized as the most relevant current pricing valuation. Feedback from industry participants has not shown any desire to alter closing price valuation processes for commons stocks. VerDate Sep<11>2014 16:40 Aug 22, 2019 Jkt 247001 Rule’’),5 as well as was approved for Bats BZX Exchange, Inc.6 Currently, the NOCP is derived from the Closing Cross 7 on Nasdaq if the security has a closing cross and reflects actual sale prices at one of the most liquid times of the day.8 The Exchange notes that it is not proposing to make changes to the process for determining the price level at which the Closing Cross will occur. Nasdaq believes its Closing Cross has proven to be a valuable pricing tool for issuers, traders, and investors alike; and Nasdaq continually works to enhance the experience for those that rely upon it. The Exchange proposes to amend Nasdaq Rule 4754(b)(4) to amend how the NOCP for a Nasdaq-listed security that is an ETP will be determined if the security does not have a closing cross. Thinly-traded ETPs are less likely to have a Closing Cross, which can result in a closing price that is based on a stale price that is no longer reflective of the value of the security. Specifically, if an ETP is thinly-traded it is currently possible that the NOCP for it will be based on a Nasdaq Last Sale price that may not necessarily reflect the current value of the security. Providing an updated price aligned with the current market value based on quotations in an ETP that is thinly-traded will provide investors and issuers with a more accurate price to mark performance of their funds and portfolios. Nasdaq Rule 4754(b) outlines the process for determining the price level at which the Closing Cross will occur.9 5 See Securities Exchange Act Release No. 82907 (March 20, 2018), 83 FR 12980 (March 26, 2018) (SR–NYSEArca–2018–08) (order approving proposed changes to Arca Rule 1.1(ll) related to determining an Official Closing Price). 6 See Securities Exchange Act Release No. 84738 (Dec. 6, 2018), 83 FR 63932 (Dec. 12, 2018) (SR– CboeBZX–2018–079) (order approving proposed changes to BZX Rule 11.23(c)(2)(B) related to how it would determine the BZX Official Closing Price ). 7 All orders executed in the Closing Cross will be executed at the Closing Cross price, trade reported anonymously, and disseminated via the consolidated tape. The Closing Cross price will be the NOCP for stocks that participate in the Closing Cross. Fifteen minutes after the close of trading, Nasdaq will disseminate via the network processor a trade message setting the NOCP as the official Consolidated Last Sale price in each Nasdaq-listed ETP in which one round lot or more is executed in the Closing Cross where the closing price differs from the Consolidated Last Sale price. 8 The Closing Cross is designed to gather the maximum liquidity available for execution at the close of trading, and to maximize the number of shares executed at a single price at the close of the trading day. The Closing Cross is made highly transparent to all investors through the widespread dissemination of stock-by-stock information about the Closing Cross, including the potential price and size of the Closing Cross. 9 The Exchange notes that it is not proposing to make changes to the process for determining the price level at which the Closing Cross will occur. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 If a Nasdaq-listed security that is an ETP has a Closing Cross, it will continue to be priced using the current process for calculating the closing price. However, if a Nasdaq-listed security that is an ETP does not have a Closing Cross, then the Exchange believes that a time-weighted average based on the midpoint (‘‘T– WAM’’) of the NBBO 10 leading into the close is likely to be more indicative of the current value of the security. Nasdaq believes the midpoint of current quotations is more reflective of the current value of the ETP than a potentially stale last sale. The T–WAM price will be a timeweighted average midpoint value calculation 11 that uses eligible quotes during the time period 3:58:00 p.m.– 3:59:55 p.m. based on quotes observed each second.12 For example, NBBO = 19.99 × 20.01 (midpoint = $20.00) starting at 3:58:00 p.m. through 3:58:59 p.m. and then the NBBO is updated to 19.95 × 19.97 (midpoint = $19.96) from 3:59:00 p.m. through 3:59:55 p.m., the T–WAM calculation will be $19.98 (19.9807). In cases where the T–WAM is reflected as the ETP’s NOCP, the T– WAM calculation will only use eligible quotes that meet the following validation logic: An eligible quote is defined as a quote whose spread is no greater than a value of 10% of the midpoint price. All quoted spreads within the T–WAM’s stated time period in proposed Nasdaq Rule 4754(b)(4)(A)(i) that are greater than 10% of the midpoint would be excluded from the T–WAM calculation. For example: If the NBBO = 19.99 × 20.01 (midpoint = $20) validation logic would allow a maximum quote width up to $2 to be used as part of the calculation 10 As defined in Nasdaq Rule 4701(j), the term ‘‘NBBO’’ shall mean the ‘‘National Best Bid and National Best Offer’’. 11 The T–WAM calculation will take the midpoint of the NBBO on a 1-second basis and weight according to time-frequency during the time period 3:58:00 p.m.–3:59:55 p.m. 12 Nasdaq’s current process accepts limit on close (‘‘LOC’’) orders for participation in the Closing Cross until 3:58:00 p.m., this is the last opportunity for market participants to enter an on-close order type that can contribute to price discovery. In instances when there is no Closing Cross at 4:00:00 p.m., internal research by the Exchange has shown that using the T–WAM of the time period between 3:58:00 p.m.–3:59:55 p.m. results in a price that reflects a fair current valuation. Nasdaq’s decision to use this time period included an evaluation of the T–WAM calculation price compared against the historical data of the prior day’s actual ETP Closing Cross prices. Nasdaq’s internal research data demonstrated that the calculated T–WAM price was reflective of the price that was similarly calculated by the Closing Cross. Nasdaq’s analysis provided confidence that for thinly-traded ETPs the 3:58:00 p.m.–3:59:55 p.m. time period for the T–WAM, will result in an improved valuation methodology versus using the Nasdaq Last Sale. E:\FR\FM\23AUN1.SGM 23AUN1 Federal Register / Vol. 84, No. 164 / Friday, August 23, 2019 / Notices ($20.00*10% = $2). If the NBBO was 17.00 × 23.00 (midpoint = $20.00) the midpoint would not be used in the T– WAM calculation because it violates the maximum quote width ($20.00*10% = $2). The T–WAM also will exclude crossed NBBO markets. The Exchange believes that the proposed methodology will result in a NOCP that is more reflective of the current market value of the ETP on that trading day. If there are no eligible quotes to determine a T–WAM within the time period or if the ETP is halted, then Nasdaq will use the Consolidated Last Sale price prior to 4:00:00 p.m. as the NOCP. For an ETP that is already listed on Nasdaq and does not have any eligible quotes for the T–WAM methodology or any Consolidated Last Sale prices that day, the NOCP will be the prior day’s NOCP. For an ETP that has transferred its listing to Nasdaq and does not have any eligible quotes for the T–WAM methodology or any Consolidated Last Sale prices that day, the NOCP will be the prior day’s closing price as disseminated by the primary listing market that previously listed it. For an ETP that is a new listing to Nasdaq and does not have any eligible quotes for the T–WAM methodology or any Consolidated Last Sale prices that day, the NOCP will not be disseminated. In order to implement these proposed changes, the Exchange is proposing to amend Nasdaq Rule 4754(b)(4) by adding subsection (A) to this rule. Nasdaq Rule 4754(b)(4), as amended, will define the term ‘‘Exchange-Traded Product’’ and provide that in the event that a Nasdaq listed ETP does not have a closing cross then the T–WAM of the NBBO will be used. jbell on DSK3GLQ082PROD with NOTICES Implementation The Exchange will implement the proposed rule change for determining the NOCP as soon as is practicable after the approval date of this proposed rule change, which may be as early as during the third quarter of 2019, and will announce the implementation date via Nasdaq Equity Trader Alert. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,13 in general, and furthers the objectives of Section 6(b)(5) of the Act,14 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanisms of, a free and open market 13 15 14 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 16:40 Aug 22, 2019 Jkt 247001 and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a method of determining the NOCP in an Exchangelisted security that is an ETP if there is no Closing Cross, as well add a definition of ‘‘Exchange-Traded Product’’ to the rule that will aid market participants in understanding the rule.15 The Exchange believes that the proposed methodology provides for a more up-to date indication of the value of such ETP if there have not been Nasdaq last sale trades leading in to the close of trading. Specifically, this is consistent with the Act because when there is no Closing Cross at 4:00:00 p.m., the Exchange’s internal research has shown that using the T–WAM of the time period between 3:58:00 p.m.– 3:59:55 p.m. results in a price that reflects a fair current valuation and is reflective of the price that was similarly calculated by the Closing Cross.16 This results in an improved valuation methodology versus using the Nasdaq Last Sale to the benefit of market participants since it will provide a closing price that more accurately reflects the most recent and reliable market information possible. The Exchange further believes that since the proposed T–WAM methodology, described herein, will result in a NOCP that is more reflective of the current market value of the ETP on that trading day and it will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system because it will provide for a more robust mechanism to determine the value of an affected ETP for purposes of determining a NOCP. The Exchange also believes that the proposed methodology for determining a NOCP would be appropriate for ETPs 15 The definition of ‘‘Exchange-Traded Product’’ excludes NextShares and does not apply to common stock. Specifically, ETP for purposes of the proposed rule change means a series of Portfolio Depository Receipts, Index Fund Shares, Managed Fund Shares, or Trust Issued Receipts (as defined in Nasdaq Rules 5705(a) 5705(b), 5735, and 5720, respectively), securities linked to the performance of indexes and commodities (including currencies) (as defined in Nasdaq Rule 5710), Index-Linked Exchangeable Notes, Equity Gold Shares, Trust Certificates, Commodity-Based Trust Shares, Currency Trust Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, Partnership Units, Trust Units, Managed Trust Securities, or Currency Warrants (as defined in Rule 5711(a)–(k)). 16 See supra footnote 12. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 44345 because if they are thinly-traded, the price of the Nasdaq Last Sale trade that occurred earlier in a trading day or even from a prior trading day may no longer be reflective of the value of such product, which should be priced relative to the value of the components of such ETP. As such, the Exchange believes recent quoting activity likely will be more reflective of the current value of the ETP. Furthermore, the Exchange is proposing to use the T– WAM of the NBBO to measure such quoting activity in order to avoid overly weighting a potentially stale quote that may occur leading into the close. Currently, the NOCP is derived from the Closing Cross on Nasdaq if the security has a closing cross and reflects actual sale prices. If a Nasdaq-listed security that is an ETP has a Closing Cross, it will continue to be priced using the current process for calculating the closing price. Under the proposed rule change, if a Nasdaq-listed security that is an ETP does not have a Closing Cross, then the T–WAM of the NBBO will be used as the NOCP. If there are no eligible quotes to determine a T–WAM within the time period or if the ETP is halted, then Nasdaq will use the Consolidated Last Sale price prior to 4:00:00 p.m. as the NOCP. For an ETP that is already listed on Nasdaq and does not have any eligible quotes for the T–WAM methodology or any Consolidated Last Sale prices that day, the NOCP will be the prior day’s NOCP .For an ETP that has transferred its listing to Nasdaq and does not have any eligible quotes for the T–WAM methodology or any Consolidated Last Sale prices that day, the NOCP will be the prior day’s closing price as disseminated by the primary listing market that previously listed it. For an ETP that is a new listing to Nasdaq and does not have any eligible quotes for the T–WAM methodology or any Consolidated Last Sale prices that day, the NOCP will not be disseminated. The proposed functionality in this filing is similar to functionality that has already been approved by the Commission and is operational on other exchanges. The Exchange believes that the proposed pricing methodology will promote just and equitable principles of trade, remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest by enhancing how the NOCP will be determined for a Nasdaq-listed security that is an ETP and will be to the benefit of issuers, traders, and investors alike. For the above reasons, the Exchange believes that the proposal is consistent E:\FR\FM\23AUN1.SGM 23AUN1 44346 Federal Register / Vol. 84, No. 164 / Friday, August 23, 2019 / Notices 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 not necessary or appropriate in furtherance of the purposes of the Act, as amended. The proposed rule change is consistent with the rules of the other exchanges and is designed to provide for how the Exchange would determine the NOCP for an Exchange-listed security that is an ETP if there is no Closing Cross, which will help it better compete as a listing venue. 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 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. IV. Solicitation of Comments 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–2019–061 on the subject line. jbell on DSK3GLQ082PROD with NOTICES BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 15967 and #15968; Missouri Disaster Number MO–00095] Presidential Declaration Amendment of a Major Disaster for Public Assistance Only for the State of Missouri U.S. Small Business Administration. ACTION: Amendment 1. AGENCY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of MISSOURI (FEMA–4435– DR), dated 05/20/2019. Incident: Severe Storms, Straight-line Winds and Flooding. SUMMARY: 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–2019–061. This file number should be included on the 16:40 Aug 22, 2019 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–18166 Filed 8–22–19; 8:45 am] 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: VerDate Sep<11>2014 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 website (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 website 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 a.m. and 3 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 submissions should refer to File Number SR– NASDAQ–2019–061, and should be submitted on or before September 13, 2019. Jkt 247001 Incident Period: 03/11/2019 through 04/16/2019. Issued on 08/16/2019. Physical Loan Application Deadline Date: 07/19/2019. Economic Injury (EIDL) Loan Application Deadline Date: 02/20/2020. DATES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. ADDRESSES: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. FOR FURTHER INFORMATION CONTACT: The notice of the President’s major disaster declaration for Private Non-Profit organizations in the State of Missouri, dated 05/20/2019, is hereby amended to include the following areas as adversely affected by the disaster. SUPPLEMENTARY INFORMATION: Primary Counties: Cape Girardeau, Pike, Scott. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) James Rivera, Associate Administrator for Disaster Assistance. [FR Doc. 2019–18218 Filed 8–22–19; 8:45 am] BILLING CODE 8026–03–P SMALL BUSINESS ADMINISTRATION Surrender of License of Small Business Investment Company Pursuant to the authority granted to the United States Small Business Administration under the Small Business Investment Act of 1958, as amended, under Section 309 of the Act and Section 107.1900 of the Small Business Administration Rules and Regulations (13 CFR 107.1900) to function as a small business investment company under the Small Business Investment Company License No. 06/ 06–0341 issued to Parallel Investment Opportunity Partners II, LP, said license is hereby declared null and void. United States Small Business Administration Dated: August 15, 2019. A. Joseph Shepard, Associate Administrator for Investment and Innovation. [FR Doc. 2019–18222 Filed 8–22–19; 8:45 am] 17 17 PO 00000 CFR 200.30–3(a)(12). Frm 00072 Fmt 4703 Sfmt 9990 BILLING CODE P E:\FR\FM\23AUN1.SGM 23AUN1

Agencies

[Federal Register Volume 84, Number 164 (Friday, August 23, 2019)]
[Notices]
[Pages 44343-44346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18166]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86705; File No. SR-NASDAQ-2019-061]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change Relating to the Nasdaq 
Official Closing Price for Nasdaq-Listed Exchange-Traded Products

August 19, 2019.
    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 August 8, 2019, 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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes a rule change regarding how the Nasdaq 
Official Closing Price (``NOCP'') will be determined for a Nasdaq-
listed security that is an exchange-traded product (as defined herein).
    The text of the proposed rule change is available on the Exchange's 
website 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

[[Page 44344]]

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
    Nasdaq Rule 4754(b) details the processing of the Nasdaq Closing 
Cross, including how the Exchange determines the NOCP. The Exchange 
proposes to amend Nasdaq Rule 4754 to amend how the NOCP \3\ will be 
determined for an Exchange-listed security that is an exchange-traded 
product (``ETP'') if the Exchange does not conduct a closing cross 
(``Closing Cross'').\4\ ETP for purposes of the proposed rule change 
means a series of Portfolio Depository Receipts, Index Fund Shares, 
Managed Fund Shares, or Trust Issued Receipts (as defined in Nasdaq 
Rules 5705(a) 5705(b), 5735, and 5720, respectively), securities linked 
to the performance of indexes and commodities (including currencies) 
(as defined in Nasdaq Rule 5710), Index-Linked Exchangeable Notes, 
Equity Gold Shares, Trust Certificates, Commodity-Based Trust Shares, 
Currency Trust Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, Trust Units, Managed Trust Securities, 
or Currency Warrants (as defined in Rule 5711(a)-(k)).
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    \3\ As set forth in Nasdaq Rule 4754(b)(4), the NOCP will be the 
Closing Cross price for stocks that participate in the Closing 
Cross.
    \4\ The proposed rule change does not apply to Nasdaq Rule 5745 
Exchange-Traded Managed Fund Shares (``NextShares'') or corporate 
securities. Additionally, it is unnecessary to apply this rule 
change to NextShares because its' reference trading price is reset 
to 100 every day for quoting purposes around which markets are made. 
The actual NAV price does not correspond to this reference price and 
therefore the midpoints of the reference price are not applicable in 
determining a more accurate fair value of the basket. Nasdaq is not 
proposing this change for corporate securities because unlike ETPs 
they do not have a known NAV along with an arbitrage component that 
allows for convergence in price and keeps the prices in line. 
Corporate securities are priced based upon supply demand factors at 
moments in time, which result in executed transactions. These 
transactions are generally recognized as the most relevant current 
pricing valuation. Feedback from industry participants has not shown 
any desire to alter closing price valuation processes for commons 
stocks.
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    The proposed functionality in this filing is similar to 
functionality that has already been approved by the Commission and is 
operational on NYSE Arca, Inc. (``Arca'') (the ``Arca Rule''),\5\ as 
well as was approved for Bats BZX Exchange, Inc.\6\
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    \5\ See Securities Exchange Act Release No. 82907 (March 20, 
2018), 83 FR 12980 (March 26, 2018) (SR-NYSEArca-2018-08) (order 
approving proposed changes to Arca Rule 1.1(ll) related to 
determining an Official Closing Price).
    \6\ See Securities Exchange Act Release No. 84738 (Dec. 6, 
2018), 83 FR 63932 (Dec. 12, 2018) (SR-CboeBZX-2018-079) (order 
approving proposed changes to BZX Rule 11.23(c)(2)(B) related to how 
it would determine the BZX Official Closing Price[thinsp]).
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    Currently, the NOCP is derived from the Closing Cross \7\ on Nasdaq 
if the security has a closing cross and reflects actual sale prices at 
one of the most liquid times of the day.\8\ The Exchange notes that it 
is not proposing to make changes to the process for determining the 
price level at which the Closing Cross will occur. Nasdaq believes its 
Closing Cross has proven to be a valuable pricing tool for issuers, 
traders, and investors alike; and Nasdaq continually works to enhance 
the experience for those that rely upon it.
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    \7\ All orders executed in the Closing Cross will be executed at 
the Closing Cross price, trade reported anonymously, and 
disseminated via the consolidated tape. The Closing Cross price will 
be the NOCP for stocks that participate in the Closing Cross. 
Fifteen minutes after the close of trading, Nasdaq will disseminate 
via the network processor a trade message setting the NOCP as the 
official Consolidated Last Sale price in each Nasdaq-listed ETP in 
which one round lot or more is executed in the Closing Cross where 
the closing price differs from the Consolidated Last Sale price.
    \8\ The Closing Cross is designed to gather the maximum 
liquidity available for execution at the close of trading, and to 
maximize the number of shares executed at a single price at the 
close of the trading day. The Closing Cross is made highly 
transparent to all investors through the widespread dissemination of 
stock-by-stock information about the Closing Cross, including the 
potential price and size of the Closing Cross.
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    The Exchange proposes to amend Nasdaq Rule 4754(b)(4) to amend how 
the NOCP for a Nasdaq-listed security that is an ETP will be determined 
if the security does not have a closing cross. Thinly-traded ETPs are 
less likely to have a Closing Cross, which can result in a closing 
price that is based on a stale price that is no longer reflective of 
the value of the security. Specifically, if an ETP is thinly-traded it 
is currently possible that the NOCP for it will be based on a Nasdaq 
Last Sale price that may not necessarily reflect the current value of 
the security. Providing an updated price aligned with the current 
market value based on quotations in an ETP that is thinly-traded will 
provide investors and issuers with a more accurate price to mark 
performance of their funds and portfolios.
    Nasdaq Rule 4754(b) outlines the process for determining the price 
level at which the Closing Cross will occur.\9\ If a Nasdaq-listed 
security that is an ETP has a Closing Cross, it will continue to be 
priced using the current process for calculating the closing price. 
However, if a Nasdaq-listed security that is an ETP does not have a 
Closing Cross, then the Exchange believes that a time-weighted average 
based on the midpoint (``T-WAM'') of the NBBO \10\ leading into the 
close is likely to be more indicative of the current value of the 
security. Nasdaq believes the midpoint of current quotations is more 
reflective of the current value of the ETP than a potentially stale 
last sale.
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    \9\ The Exchange notes that it is not proposing to make changes 
to the process for determining the price level at which the Closing 
Cross will occur.
    \10\ As defined in Nasdaq Rule 4701(j), the term ``NBBO'' shall 
mean the ``National Best Bid and National Best Offer''.
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    The T-WAM price will be a time-weighted average midpoint value 
calculation \11\ that uses eligible quotes during the time period 
3:58:00 p.m.-3:59:55 p.m. based on quotes observed each second.\12\ For 
example, NBBO = 19.99 x 20.01 (midpoint = $20.00) starting at 3:58:00 
p.m. through 3:58:59 p.m. and then the NBBO is updated to 19.95 x 19.97 
(midpoint = $19.96) from 3:59:00 p.m. through 3:59:55 p.m., the T-WAM 
calculation will be $19.98 (19.9807).
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    \11\ The T-WAM calculation will take the midpoint of the NBBO on 
a 1-second basis and weight according to time-frequency during the 
time period 3:58:00 p.m.-3:59:55 p.m.
    \12\ Nasdaq's current process accepts limit on close (``LOC'') 
orders for participation in the Closing Cross until 3:58:00 p.m., 
this is the last opportunity for market participants to enter an on-
close order type that can contribute to price discovery. In 
instances when there is no Closing Cross at 4:00:00 p.m., internal 
research by the Exchange has shown that using the T-WAM of the time 
period between 3:58:00 p.m.-3:59:55 p.m. results in a price that 
reflects a fair current valuation. Nasdaq's decision to use this 
time period included an evaluation of the T-WAM calculation price 
compared against the historical data of the prior day's actual ETP 
Closing Cross prices. Nasdaq's internal research data demonstrated 
that the calculated T-WAM price was reflective of the price that was 
similarly calculated by the Closing Cross. Nasdaq's analysis 
provided confidence that for thinly-traded ETPs the 3:58:00 p.m.-
3:59:55 p.m. time period for the T-WAM, will result in an improved 
valuation methodology versus using the Nasdaq Last Sale.
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    In cases where the T-WAM is reflected as the ETP's NOCP, the T-WAM 
calculation will only use eligible quotes that meet the following 
validation logic: An eligible quote is defined as a quote whose spread 
is no greater than a value of 10% of the midpoint price. All quoted 
spreads within the T-WAM's stated time period in proposed Nasdaq Rule 
4754(b)(4)(A)(i) that are greater than 10% of the midpoint would be 
excluded from the T-WAM calculation. For example: If the NBBO = 19.99 x 
20.01 (midpoint = $20) validation logic would allow a maximum quote 
width up to $2 to be used as part of the calculation

[[Page 44345]]

($20.00*10% = $2). If the NBBO was 17.00 x 23.00 (midpoint = $20.00) 
the midpoint would not be used in the T-WAM calculation because it 
violates the maximum quote width ($20.00*10% = $2). The T-WAM also will 
exclude crossed NBBO markets. The Exchange believes that the proposed 
methodology will result in a NOCP that is more reflective of the 
current market value of the ETP on that trading day.
    If there are no eligible quotes to determine a T-WAM within the 
time period or if the ETP is halted, then Nasdaq will use the 
Consolidated Last Sale price prior to 4:00:00 p.m. as the NOCP. For an 
ETP that is already listed on Nasdaq and does not have any eligible 
quotes for the T-WAM methodology or any Consolidated Last Sale prices 
that day, the NOCP will be the prior day's NOCP. For an ETP that has 
transferred its listing to Nasdaq and does not have any eligible quotes 
for the T-WAM methodology or any Consolidated Last Sale prices that 
day, the NOCP will be the prior day's closing price as disseminated by 
the primary listing market that previously listed it. For an ETP that 
is a new listing to Nasdaq and does not have any eligible quotes for 
the T-WAM methodology or any Consolidated Last Sale prices that day, 
the NOCP will not be disseminated.
    In order to implement these proposed changes, the Exchange is 
proposing to amend Nasdaq Rule 4754(b)(4) by adding subsection (A) to 
this rule. Nasdaq Rule 4754(b)(4), as amended, will define the term 
``Exchange-Traded Product'' and provide that in the event that a Nasdaq 
listed ETP does not have a closing cross then the T-WAM of the NBBO 
will be used.
Implementation
    The Exchange will implement the proposed rule change for 
determining the NOCP as soon as is practicable after the approval date 
of this proposed rule change, which may be as early as during the third 
quarter of 2019, and will announce the implementation date via Nasdaq 
Equity Trader Alert.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would provide for a method of 
determining the NOCP in an Exchange-listed security that is an ETP if 
there is no Closing Cross, as well add a definition of ``Exchange-
Traded Product'' to the rule that will aid market participants in 
understanding the rule.\15\ The Exchange believes that the proposed 
methodology provides for a more up-to date indication of the value of 
such ETP if there have not been Nasdaq last sale trades leading in to 
the close of trading. Specifically, this is consistent with the Act 
because when there is no Closing Cross at 4:00:00 p.m., the Exchange's 
internal research has shown that using the T-WAM of the time period 
between 3:58:00 p.m.-3:59:55 p.m. results in a price that reflects a 
fair current valuation and is reflective of the price that was 
similarly calculated by the Closing Cross.\16\ This results in an 
improved valuation methodology versus using the Nasdaq Last Sale to the 
benefit of market participants since it will provide a closing price 
that more accurately reflects the most recent and reliable market 
information possible.
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    \15\ The definition of ``Exchange-Traded Product'' excludes 
NextShares and does not apply to common stock. Specifically, ETP for 
purposes of the proposed rule change means a series of Portfolio 
Depository Receipts, Index Fund Shares, Managed Fund Shares, or 
Trust Issued Receipts (as defined in Nasdaq Rules 5705(a) 5705(b), 
5735, and 5720, respectively), securities linked to the performance 
of indexes and commodities (including currencies) (as defined in 
Nasdaq Rule 5710), Index-Linked Exchangeable Notes, Equity Gold 
Shares, Trust Certificates, Commodity-Based Trust Shares, Currency 
Trust Shares, Commodity Index Trust Shares, Commodity Futures Trust 
Shares, Partnership Units, Trust Units, Managed Trust Securities, or 
Currency Warrants (as defined in Rule 5711(a)-(k)).
    \16\ See supra footnote 12.
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    The Exchange further believes that since the proposed T-WAM 
methodology, described herein, will result in a NOCP that is more 
reflective of the current market value of the ETP on that trading day 
and it will serve to remove impediments to and perfect the mechanism of 
a free and open market and a national market system because it will 
provide for a more robust mechanism to determine the value of an 
affected ETP for purposes of determining a NOCP.
    The Exchange also believes that the proposed methodology for 
determining a NOCP would be appropriate for ETPs because if they are 
thinly-traded, the price of the Nasdaq Last Sale trade that occurred 
earlier in a trading day or even from a prior trading day may no longer 
be reflective of the value of such product, which should be priced 
relative to the value of the components of such ETP. As such, the 
Exchange believes recent quoting activity likely will be more 
reflective of the current value of the ETP. Furthermore, the Exchange 
is proposing to use the T-WAM of the NBBO to measure such quoting 
activity in order to avoid overly weighting a potentially stale quote 
that may occur leading into the close.
    Currently, the NOCP is derived from the Closing Cross on Nasdaq if 
the security has a closing cross and reflects actual sale prices. If a 
Nasdaq-listed security that is an ETP has a Closing Cross, it will 
continue to be priced using the current process for calculating the 
closing price. Under the proposed rule change, if a Nasdaq-listed 
security that is an ETP does not have a Closing Cross, then the T-WAM 
of the NBBO will be used as the NOCP. If there are no eligible quotes 
to determine a T-WAM within the time period or if the ETP is halted, 
then Nasdaq will use the Consolidated Last Sale price prior to 4:00:00 
p.m. as the NOCP. For an ETP that is already listed on Nasdaq and does 
not have any eligible quotes for the T-WAM methodology or any 
Consolidated Last Sale prices that day, the NOCP will be the prior 
day's NOCP .For an ETP that has transferred its listing to Nasdaq and 
does not have any eligible quotes for the T-WAM methodology or any 
Consolidated Last Sale prices that day, the NOCP will be the prior 
day's closing price as disseminated by the primary listing market that 
previously listed it. For an ETP that is a new listing to Nasdaq and 
does not have any eligible quotes for the T-WAM methodology or any 
Consolidated Last Sale prices that day, the NOCP will not be 
disseminated.
    The proposed functionality in this filing is similar to 
functionality that has already been approved by the Commission and is 
operational on other exchanges. The Exchange believes that the proposed 
pricing methodology will promote just and equitable principles of 
trade, remove impediments to, and perfect the mechanisms of, a free and 
open market and a national market system and, in general, protect 
investors and the public interest by enhancing how the NOCP will be 
determined for a Nasdaq-listed security that is an ETP and will be to 
the benefit of issuers, traders, and investors alike.
    For the above reasons, the Exchange believes that the proposal is 
consistent

[[Page 44346]]

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 not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The proposed rule 
change is consistent with the rules of the other exchanges and is 
designed to provide for how the Exchange would determine the NOCP for 
an Exchange-listed security that is an ETP if there is no Closing 
Cross, which will help it better compete as a listing venue.

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

    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.

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-2019-061 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-2019-061. 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 website (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 website 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 a.m. and 3 
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 submissions 
should refer to File Number SR-NASDAQ-2019-061, and should be submitted 
on or before September 13, 2019.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18166 Filed 8-22-19; 8:45 am]
 BILLING CODE 8011-01-P
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