Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rules 4120 and 4753, 60130-60132 [2019-24257]

Download as PDF 60130 Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices inaccurate rule text or remove language pertaining to unavailable functionality in the Exchange’s rulebook, thereby reducing confusion and making the Exchange’s rules easier to understand and navigate. The Exchange believes the proposed changes would add transparency to the operation of certain order types, without altering the current functionality. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to 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 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. 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 10:00 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 submissions should refer to File Number SR–NYSEArca–2019–71 and should be submitted on or before November 29, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Jill M. Peterson, Assistant Secretary. 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: [FR Doc. 2019–24255 Filed 11–6–19; 8:45 am] 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– NYSEArca–2019–71 on the subject line. Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rules 4120 and 4753 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–NYSEArca–2019–71. 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 VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87445; File No. SR– NASDAQ–2019–060] November 1, 2019. I. Introduction On July 18, 2019, The Nasdaq Stock Market LLC (‘‘Exchange’’ or ‘‘Nasdaq’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Rules 4120 and 4753 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 to permit the Exchange to declare a regulatory halt in a security that traded in the over-the-counter (‘‘OTC’’) market prior to the initial pricing on the Exchange and to allow for the initial pricing of such a security through the IPO Cross. The proposed rule change was published for comment in the Federal Register on August 6, 2019.3 On September 19, 2019, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On September 19, 2019, the Exchange also filed Amendment No. 1 to the proposed rule change, which amended and superseded the proposed rule change as originally filed.6 The Commission received no comment letters on the proposed rule change. The Commission is publishing this notice and order to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons and to institute proceedings pursuant to Section 19(b)(2)(B) of the Act 7 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1. II. Description of the Proposal Currently, a security that traded in the OTC market immediately prior to listing on the Exchange is released for initial trading on the Exchange by utilizing the Opening Cross pursuant to Rule 3 See Securities Exchange Act Release No. 86537 (July 31, 2019), 84 FR 38321. 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 87012, 84 FR 50490 (September 25, 2019). The Commission designated November 4, 2019 as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 In Amendment No. 1, the Exchange revised the proposal to: (1) Clarify that when a security previously traded in the OTC market is initially priced using the IPO Cross, the fourth tie-breaker for each of the Current Reference Price disseminated in the Nasdaq Order Imbalance Indicator and the price at which the cross will occur will be the price that is closest to the most recent transaction price in the OTC market; (2) specify that, for purposes of this proposed rule change, the use of the term ‘‘regulatory halt’’ refers to Nasdaq’s authority to halt trading in a security under Rule 4120(a)(7); (3) clarify that, currently, a security that traded in the OTC market immediately prior to listing on Nasdaq is released for initial trading on Nasdaq through the Opening Cross under Rule 4752(d) and, pursuant to the proposal, if such an issuer does not retain a financial advisor, the initial pricing will continue to be effected through the Opening Cross; (4) include additional justification in support of the proposed rule change; and (5) make technical and conforming changes. Amendment No. 1 is available at https:// www.sec.gov/comments/sr-nasdaq-2019-060/ srnasdaq2019060-6163792-192369.pdf. 7 15 U.S.C. 78s(b)(2)(B). E:\FR\FM\07NON1.SGM 07NON1 Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices 4752(d).8 The Exchange proposes to amend Rule 4120 to permit the Exchange to declare a regulatory halt 9 in a security that traded in the OTC market prior to its initial pricing on the Exchange.10 The Exchange also proposes to amend Rules 4120 and 4753 to allow for the initial pricing on the Exchange of such a security through the IPO Cross (described in Rules 4120(c)(8) and 4753) if a broker-dealer serving in the role of financial advisor to the issuer is willing to perform the functions under Rule 4120(c)(8) that are performed by an underwriter in an initial public offering.11 If the issuer does not retain a financial advisor, the initial pricing on the Exchange of such a security will continue to be effected through the Opening Cross.12 Moreover, the Exchange proposes to adopt Rules 4753(a)(3)(A)(iv)(e) and 4753(b)(2)(D)(v) to provide that, in the case of the initial pricing of a security that traded in the OTC market pursuant to FINRA Form 211 immediately prior to its initial pricing, the fourth tie-breaker used in calculating each of the Current Reference Price disseminated in the Nasdaq Order Imbalance Indicator for purposes of the IPO Cross and the price at which the IPO Cross will occur will be the price that is closest to the most recent transaction price in the OTC market.13 8 See Amendment 1, supra note 6, at 4 n.4. 9 For purposes of this proposed rule change, the term ‘‘regulatory halt’’ refers to Nasdaq’s authority to halt trading in a security under Rule 4120(a)(7). See id. at 4 n.3. 10 The Exchange states that its proposal would facilitate a more orderly start to trading by permitting the Exchange to declare a regulatory halt in a security that traded in the OTC market prior to its initial pricing on the Exchange, before trading on the Exchange begins, which the Exchange believes would avoid potential price disparities or anomalies that may occur during any unlisted trading privileges (‘‘UTP’’) trading before the first transaction on the primary listing exchange. See id. at 7. 11 Rule 4120(c)(9) currently provides that the IPO Cross process is available for the initial pricing of a security that has not been listed on a national securities exchange or traded in the OTC market pursuant to FINRA Form 211 immediately prior to the initial pricing where a broker-dealer serving in the role of financial advisor to the issuer is willing to perform the functions under Rule 4120(c)(8) that are performed by an underwriter with respect to an initial public offering. The Exchange states that the IPO Cross will be a better mechanism to open trading in securities that traded in the OTC market given that these companies may attract significant interest upon listing on the Exchange from investors who previously could not invest in such securities, and that it will be beneficial to allow significant financial advisor involvement in determining when to launch trading. See id. at 8–9. 12 See id. at 4 n.4. 13 The Exchange states that the most recent transaction price in the OTC market is predictive of the price that will develop upon the listing of the security on the Exchange. See id. at 8. This proposed change to the fourth tie-breaker will not VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 III. Proceedings To Determine Whether To Approve or Disapprove SR– NASDAQ–2019–060, as Modified by Amendment No. 1, and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 14 to determine whether the proposed rule change, as modified by Amendment No. 1, should be approved or disapproved. Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposal, as discussed below. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change, as modified by Amendment No. 1. Pursuant to Section 19(b)(2)(B) of the Act,15 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of, and input from commenters with respect to, the consistency of the proposal with Section 6(b)(5) of the Act.16 Section 6(b)(5) of the Act requires that the rules of a national securities exchange be designed, among other things, 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. As discussed above, the proposal would allow the Exchange to declare a regulatory halt in a security that traded in the OTC market prior to its initial pricing on the Exchange. The proposal would also allow the Exchange to use the IPO Cross to initially price such a security provided that a broker-dealer serving in the role of financial advisor to the issuer is willing to perform the functions under Rule 4120(c)(8) that are performed by an underwriter with respect to an initial public offering, and would establish the fourth tie-breaker used in calculating the Current Reference Price and the IPO Cross price. Currently, the functions performed by an underwriter with respect to an initial public offering under Rule 4120(c)(8) include, for example, providing notice to the Exchange that the security is affect the pricing of a security if the issuer does not retain a financial advisor. See id. at 4 n.5. 14 15 U.S.C. 78s(b)(2)(B). 15 Id. 16 15 U.S.C. 78f(b)(5). PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 60131 ready to trade, selecting price bands for the price validation test, and determining to postpone and reschedule the initial public offering. The underwriter functions under Rule 4120(c)(8) currently also apply to a broker-dealer serving in the role of financial advisor to the issuer of a security that has not been listed on a national securities exchange or traded in the OTC market pursuant to FINRA Form 211 immediately prior to its initial pricing on the Exchange, if the IPO Cross is used for the initial pricing of such a security on the Exchange. In the current proposal, the Exchange states that the IPO Cross will be a better mechanism to open trading in securities that traded in the OTC market given that these companies may attract significant interest upon listing on the Exchange from investors who previously could not invest in a security that was traded in the OTC market, and it would be beneficial to allow significant financial advisor involvement in determining when to launch trading.17 The Commission seeks commenters’ views on the sufficiency and merit of the Exchange’s statements in support of the proposal, which are set forth in Amendment No. 1,18 in addition to any other comments they may wish to submit about the proposed rule change. IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their data, views, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) or any other provision of the Act, or the rules and regulations thereunder. Although there does not appear to be any issues relevant to approval or disapproval which would be facilitated by an oral presentation of data, views, and arguments, the Commission will consider, pursuant to Rule 19b–4 under the Act,19 any request for an opportunity to make an oral presentation.20 17 See Amendment 1, supra note 6, at 8–9. Amendment 1, supra note 6. 19 17 CFR 240.19b–4. 20 Section 19(b)(2) of the Act, as amended by the Securities Acts Amendments of 1975, Public Law 94–29 (June 4, 1975), grants to the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a 18 See E:\FR\FM\07NON1.SGM Continued 07NON1 60132 Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change, as modified by Amendment No. 1, should be approved or disapproved by November 29, 2019. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by December 12, 2019. 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– NASDAQ–2019–060 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 No. SR–NASDAQ–2019–060. The 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 10:00 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 submissions should refer to File No. SR–NASDAQ–2019–060 and should be particular proposal by a self-regulatory organization. See Securities Acts Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 submitted by November 29, 2019. Rebuttal comments should be submitted by December 12, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–24257 Filed 11–6–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87441; File No. SR–FINRA– 2019–026] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to SR–FINRA– 2015–036 November 1, 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 October 25, 2019, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. 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 FINRA is proposing to extend, to March 25, 2021, the implementation date of the amendments to FINRA Rule 4210 (Margin Requirements) pursuant to SR–FINRA–2015–036, other than the amendments pursuant to SR–FINRA– 2015–036 that were implemented on December 15, 2016. The proposed rule change would not make any changes to the text of FINRA rules. 21 17 CFR 200.30–3(a)(12); 17 CFR 200.30– 3(a)(57). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 The text of the proposed rule change is available on FINRA’s website at https://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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 On October 6, 2015, FINRA filed with the Commission proposed rule change SR–FINRA–2015–036, which proposed to amend FINRA Rule 4210 to establish margin requirements for (1) To Be Announced (‘‘TBA’’) transactions, inclusive of adjustable rate mortgage (‘‘ARM’’) transactions; (2) Specified Pool Transactions; and (3) transactions in Collateralized Mortgage Obligations (‘‘CMOs’’), issued in conformity with a program of an agency or GovernmentSponsored Enterprise (‘‘GSE’’), with forward settlement dates, as defined more fully in the filing (collectively, ‘‘Covered Agency Transactions’’). The Commission approved SR–FINRA– 2015–036 on June 15, 2016 (the ‘‘Approval Date’’).4 Pursuant to Partial Amendment No. 3 to SR–FINRA–2015–036, FINRA announced in Regulatory Notice 16–31 that the rule change would become effective on December 15, 2017, 18 months from the Approval Date, except that the risk limit determination requirements as set forth in paragraphs (e)(2)(F), (e)(2)(G) and (e)(2)(H) of Rule 4210 and in new Supplementary Material .05, each as respectively amended or established by SR–FINRA– 2015–036 (collectively, the ‘‘risk limit determination requirements’’), would 4 See Securities Exchange Act Release No. 78081 (June 15, 2016), 81 FR 40364 (June 21, 2016) (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval to a Proposed Rule Change to Amend FINRA Rule 4210 (Margin Requirements) to Establish Margin Requirements for the TBA Market, as Modified by Amendment Nos. 1, 2, and 3; File No. SR–FINRA–2015–036). E:\FR\FM\07NON1.SGM 07NON1

Agencies

[Federal Register Volume 84, Number 216 (Thursday, November 7, 2019)]
[Notices]
[Pages 60130-60132]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24257]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87445; File No. SR-NASDAQ-2019-060]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Amendment No. 1 and Order Instituting Proceedings 
To Determine Whether To Approve or Disapprove a Proposed Rule Change, 
as Modified by Amendment No. 1, To Amend Rules 4120 and 4753

November 1, 2019.

I. Introduction

    On July 18, 2019, The Nasdaq Stock Market LLC (``Exchange'' or 
``Nasdaq'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Rules 4120 and 4753 to permit the 
Exchange to declare a regulatory halt in a security that traded in the 
over-the-counter (``OTC'') market prior to the initial pricing on the 
Exchange and to allow for the initial pricing of such a security 
through the IPO Cross. The proposed rule change was published for 
comment in the Federal Register on August 6, 2019.\3\ On September 19, 
2019, pursuant to Section 19(b)(2) of the Act,\4\ the Commission 
designated a longer period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to disapprove the proposed rule change.\5\ On 
September 19, 2019, the Exchange also filed Amendment No. 1 to the 
proposed rule change, which amended and superseded the proposed rule 
change as originally filed.\6\ The Commission received no comment 
letters on the proposed rule change. The Commission is publishing this 
notice and order to solicit comments on the proposed rule change, as 
modified by Amendment No. 1, from interested persons and to institute 
proceedings pursuant to Section 19(b)(2)(B) of the Act \7\ to determine 
whether to approve or disapprove the proposed rule change, as modified 
by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 86537 (July 31, 
2019), 84 FR 38321.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 87012, 84 FR 50490 
(September 25, 2019). The Commission designated November 4, 2019 as 
the date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ In Amendment No. 1, the Exchange revised the proposal to: 
(1) Clarify that when a security previously traded in the OTC market 
is initially priced using the IPO Cross, the fourth tie-breaker for 
each of the Current Reference Price disseminated in the Nasdaq Order 
Imbalance Indicator and the price at which the cross will occur will 
be the price that is closest to the most recent transaction price in 
the OTC market; (2) specify that, for purposes of this proposed rule 
change, the use of the term ``regulatory halt'' refers to Nasdaq's 
authority to halt trading in a security under Rule 4120(a)(7); (3) 
clarify that, currently, a security that traded in the OTC market 
immediately prior to listing on Nasdaq is released for initial 
trading on Nasdaq through the Opening Cross under Rule 4752(d) and, 
pursuant to the proposal, if such an issuer does not retain a 
financial advisor, the initial pricing will continue to be effected 
through the Opening Cross; (4) include additional justification in 
support of the proposed rule change; and (5) make technical and 
conforming changes. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2019-060/srnasdaq2019060-6163792-192369.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

II. Description of the Proposal

    Currently, a security that traded in the OTC market immediately 
prior to listing on the Exchange is released for initial trading on the 
Exchange by utilizing the Opening Cross pursuant to Rule

[[Page 60131]]

4752(d).\8\ The Exchange proposes to amend Rule 4120 to permit the 
Exchange to declare a regulatory halt \9\ in a security that traded in 
the OTC market prior to its initial pricing on the Exchange.\10\ The 
Exchange also proposes to amend Rules 4120 and 4753 to allow for the 
initial pricing on the Exchange of such a security through the IPO 
Cross (described in Rules 4120(c)(8) and 4753) if a broker-dealer 
serving in the role of financial advisor to the issuer is willing to 
perform the functions under Rule 4120(c)(8) that are performed by an 
underwriter in an initial public offering.\11\ If the issuer does not 
retain a financial advisor, the initial pricing on the Exchange of such 
a security will continue to be effected through the Opening Cross.\12\ 
Moreover, the Exchange proposes to adopt Rules 4753(a)(3)(A)(iv)(e) and 
4753(b)(2)(D)(v) to provide that, in the case of the initial pricing of 
a security that traded in the OTC market pursuant to FINRA Form 211 
immediately prior to its initial pricing, the fourth tie-breaker used 
in calculating each of the Current Reference Price disseminated in the 
Nasdaq Order Imbalance Indicator for purposes of the IPO Cross and the 
price at which the IPO Cross will occur will be the price that is 
closest to the most recent transaction price in the OTC market.\13\
---------------------------------------------------------------------------

    \8\ See Amendment 1, supra note 6, at 4 n.4.
    \9\ For purposes of this proposed rule change, the term 
``regulatory halt'' refers to Nasdaq's authority to halt trading in 
a security under Rule 4120(a)(7). See id. at 4 n.3.
    \10\ The Exchange states that its proposal would facilitate a 
more orderly start to trading by permitting the Exchange to declare 
a regulatory halt in a security that traded in the OTC market prior 
to its initial pricing on the Exchange, before trading on the 
Exchange begins, which the Exchange believes would avoid potential 
price disparities or anomalies that may occur during any unlisted 
trading privileges (``UTP'') trading before the first transaction on 
the primary listing exchange. See id. at 7.
    \11\ Rule 4120(c)(9) currently provides that the IPO Cross 
process is available for the initial pricing of a security that has 
not been listed on a national securities exchange or traded in the 
OTC market pursuant to FINRA Form 211 immediately prior to the 
initial pricing where a broker-dealer serving in the role of 
financial advisor to the issuer is willing to perform the functions 
under Rule 4120(c)(8) that are performed by an underwriter with 
respect to an initial public offering. The Exchange states that the 
IPO Cross will be a better mechanism to open trading in securities 
that traded in the OTC market given that these companies may attract 
significant interest upon listing on the Exchange from investors who 
previously could not invest in such securities, and that it will be 
beneficial to allow significant financial advisor involvement in 
determining when to launch trading. See id. at 8-9.
    \12\ See id. at 4 n.4.
    \13\ The Exchange states that the most recent transaction price 
in the OTC market is predictive of the price that will develop upon 
the listing of the security on the Exchange. See id. at 8. This 
proposed change to the fourth tie-breaker will not affect the 
pricing of a security if the issuer does not retain a financial 
advisor. See id. at 4 n.5.
---------------------------------------------------------------------------

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NASDAQ-2019-060, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \14\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of proceedings is appropriate at this time in 
view of the legal and policy issues raised by the proposal, as 
discussed below. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide additional comment on the 
proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\15\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the consistency 
of the proposal with Section 6(b)(5) of the Act.\16\ Section 6(b)(5) of 
the Act requires that the rules of a national securities exchange be 
designed, among other things, 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.
---------------------------------------------------------------------------

    \15\ Id.
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As discussed above, the proposal would allow the Exchange to 
declare a regulatory halt in a security that traded in the OTC market 
prior to its initial pricing on the Exchange. The proposal would also 
allow the Exchange to use the IPO Cross to initially price such a 
security provided that a broker-dealer serving in the role of financial 
advisor to the issuer is willing to perform the functions under Rule 
4120(c)(8) that are performed by an underwriter with respect to an 
initial public offering, and would establish the fourth tie-breaker 
used in calculating the Current Reference Price and the IPO Cross 
price. Currently, the functions performed by an underwriter with 
respect to an initial public offering under Rule 4120(c)(8) include, 
for example, providing notice to the Exchange that the security is 
ready to trade, selecting price bands for the price validation test, 
and determining to postpone and reschedule the initial public offering. 
The underwriter functions under Rule 4120(c)(8) currently also apply to 
a broker-dealer serving in the role of financial advisor to the issuer 
of a security that has not been listed on a national securities 
exchange or traded in the OTC market pursuant to FINRA Form 211 
immediately prior to its initial pricing on the Exchange, if the IPO 
Cross is used for the initial pricing of such a security on the 
Exchange. In the current proposal, the Exchange states that the IPO 
Cross will be a better mechanism to open trading in securities that 
traded in the OTC market given that these companies may attract 
significant interest upon listing on the Exchange from investors who 
previously could not invest in a security that was traded in the OTC 
market, and it would be beneficial to allow significant financial 
advisor involvement in determining when to launch trading.\17\ The 
Commission seeks commenters' views on the sufficiency and merit of the 
Exchange's statements in support of the proposal, which are set forth 
in Amendment No. 1,\18\ in addition to any other comments they may wish 
to submit about the proposed rule change.
---------------------------------------------------------------------------

    \17\ See Amendment 1, supra note 6, at 8-9.
    \18\ See Amendment 1, supra note 6.
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) or any other provision of the Act, or the rules and regulations 
thereunder. Although there does not appear to be any issues relevant to 
approval or disapproval which would be facilitated by an oral 
presentation of data, views, and arguments, the Commission will 
consider, pursuant to Rule 19b-4 under the Act,\19\ any request for an 
opportunity to make an oral presentation.\20\
---------------------------------------------------------------------------

    \19\ 17 CFR 240.19b-4.
    \20\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).

---------------------------------------------------------------------------

[[Page 60132]]

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by November 29, 
2019. Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by December 12, 2019.
    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 No. SR-NASDAQ-2019-060 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 No. SR-NASDAQ-2019-060. The 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 10:00 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 submissions 
should refer to File No. SR-NASDAQ-2019-060 and should be submitted by 
November 29, 2019. Rebuttal comments should be submitted by December 
12, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24257 Filed 11-6-19; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.