Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Nasdaq Official Closing Price for Nasdaq-Listed Exchange-Traded Products, 61952-61954 [2019-24694]
Download as PDF
<![CDATA[
61952
Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices
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
Because the proposed rule change
does not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative prior to 30 days from the date
on which it was filed, or such shorter
time as the Commission may designate,
if consistent with the protection of
investors and the public interest, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 7 and Rule 19b–
4(f)(6) thereunder.8
A proposed rule change filed under
Rule 19b–4(f)(6) 9 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),10 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange represents that the
proposal would correctly identify and
publicly state on a market-by-market
basis all of the specific network
processor and proprietary data feeds
that the Exchange utilizes for the
handling, execution and routing of
orders, and for performing the
regulatory compliance checks to each of
those functions. Further, the Exchange
represents that the proposal would
enhance the clarity and transparency in
Exchange Rules surrounding the
inbound routing function performed by
Arca Securities for the Exchange’s
affiliate, NYSE Chicago. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest, and hereby waives the
operative delay and designates the
7 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
9 17 CFR 240.19b–4(f)(6).
10 17 CFR 240.19b–4(f)(6)(iii).
khammond on DSKJM1Z7X2PROD with NOTICES
8 17
VerDate Sep<11>2014
17:47 Nov 13, 2019
Jkt 250001
proposed rule change as operative upon
filing.11
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 12 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2019–79 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–NYSEArca–2019–79. 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
11 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
12 15 U.S.C. 78s(b)(2)(B).
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
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–2019–79 and
should be submitted on or before
December 5, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–24696 Filed 11–13–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87486; File No. SR–
NASDAQ–2019–061]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of
Proposed Rule Change, as Modified by
Amendment No. 1, Relating to the
Nasdaq Official Closing Price for
Nasdaq-Listed Exchange-Traded
Products
November 7, 2019.
I. Introduction
On August 8, 2019, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
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 relating to how the Nasdaq
Official Closing Price (‘‘NOCP’’) will be
determined for a Nasdaq-listed security
that is an exchange-traded product
(‘‘ETP’’). The proposed rule change was
published for comment in the Federal
Register on August 23, 2019.3 On
October 4, 2019, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86705
(August 19, 2019), 84 FR 44343 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
1 15
E:\FR\FM\14NON1.SGM
14NON1
Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 The Commission received
one comment letter from the Exchange
on the proposed rule change.6 On
October 25, 2019, the Exchange filed
Amendment No. 1 to the proposed rule
change.7 The Commission is publishing
this notice to solicit comments on
Amendment No. 1 from interested
persons, and is approving the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
II. Description of the Proposed Rule
Change
khammond on DSKJM1Z7X2PROD with NOTICES
Currently, for a Nasdaq-listed ETP
that participates in the Nasdaq closing
cross, the closing cross price will be the
NOCP.8 For a Nasdaq-listed ETP that
does not have a closing cross, the
Nasdaq last sale price will be the
NOCP.9 According to the Exchange,
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.10 Specifically, if
an ETP is thinly-traded, it is possible
that the NOCP would be based on a
Nasdaq last sale price that may not
necessarily reflect the current value of
the security.11 The Exchange now
proposes to amend Nasdaq Rule
4754(b)(4) to amend how it would
determine the NOCP for a Nasdaq-listed
5 See Securities Exchange Act Release No. 87230,
84 FR 54714 (October 10, 2019). The Commission
designated November 21, 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 See letter from Phil Mackintosh, Chief
Economist, Nasdaq, Inc., dated October 10, 2019,
available at https://www.sec.gov/comments/srnasdaq-2019-061/srnasdaq2019061-6293523193399.pdf (‘‘Nasdaq Letter’’).
7 In Amendment No. 1, the Exchange provided
additional justification for its proposed
methodology for determining the NOCP for Nasdaqlisted ETPs and specified that it will implement the
proposed rule change within 30 calendar days
following Commission approval. Amendment No. 1
is available at https://www.sec.gov/comments/srnasdaq-2019-061/srnasdaq2019061-6353201195587.pdf.
8 See Nasdaq Rule 4754(b)(4).
9 See Notice, supra note 3, at 44344–45.
10 See id. at 44344.
11 See id.
VerDate Sep<11>2014
17:47 Nov 13, 2019
Jkt 250001
ETP 12 that does not have a closing
cross.13
Under proposed Nasdaq Rule
4754(b)(4)(A), the NOCP for a Nasdaqlisted ETP that does not have a closing
cross would be the time-weighted
average midpoint (‘‘T–WAM’’) of the
national best bid and national best offer
(‘‘NBBO’’), with certain parameters.
Specifically, the T–WAM price would
be a time-weighted average midpoint
value calculation that uses eligible
quotes during the time period of 3:58:00
p.m. to 3:59:55 p.m., based on quotes
observed every second.14 The T–WAM
calculation would only use eligible
quotes, and an eligible quote would be
defined as a quote whose spread is no
greater than a value of 10% of the
midpoint price. Quoted spreads within
the T–WAM time period that are greater
than 10% of the midpoint price would
be excluded from the T–WAM
calculation. Crossed NBBO markets
would also be excluded from the T–
WAM calculation.
As proposed, if there are no eligible
quotes to use in the T–WAM calculation
or if the ETP is halted, the Exchange
would 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, if there are no eligible quotes to
12 As used in proposed Nasdaq Rule 4754(b)(4),
an ETP would mean 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
Nasdaq Rule 5711(a)–(k)). The proposal would not
apply to NextShares (as defined in Nasdaq Rule
5745) and corporate securities. See Notice, supra
note 3, at 44344 n.4.
13 The Exchange is not proposing to change the
process for determining the price level at which the
closing cross will occur. See id. at 44344 n.9.
Nasdaq-listed ETPs that have closing crosses will
continue to be priced using the current process for
calculating the closing cross price. See id. at 44344.
14 The Exchange states that it has considered
using the last sale for an ETP that does not have
a closing cross, but determined that even if the last
sale occurs during the last two minutes leading into
the closing cross, it is not necessarily reflective of
the best price to use for the NOCP (e.g., a wide
quote and a last sale that is based on either the bid
or the offer would not be as accurate as the
midpoint of the prevailing quotes at that time). See
Amendment No. 1, supra note 7, at 3. According to
the Exchange, using the proposed T–WAM
methodology would eliminate a valuation based on
a last sale transaction occurring against an
excessively wide NBBO, and even when spreads are
wide, the midpoint of the spread is usually close
to the fair value of the underlying basket of the ETP.
See id. The Exchange also states that this rationale
is based, in part, on conversations with issuers, who
are supportive of the proposal. See id.
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
61953
use in the T–WAM calculation and no
consolidated last sale prices that day,
the NOCP would be the previous day’s
NOCP. For an ETP that transferred its
listing to Nasdaq, if there are no eligible
quotes to use in the T–WAM calculation
and no consolidated last sale prices that
day, the NOCP would be the previous
day’s closing price as disseminated by
the primary listing market that
previously listed the ETP. For an ETP
that is a new Nasdaq listing, if there are
no eligible quotes to use in the T–WAM
calculation and no consolidated last sale
prices that day, the NOCP would not be
disseminated.
The Exchange proposes to implement
the proposed rule change within 30
calendar days following Commission
approval and will announce the
implementation date via Nasdaq Equity
Trader Alert.15
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.16 In particular, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Act,17 which requires, among
other things, that the rules of a national
securities exchange be designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating transactions in securities, 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, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission also finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
Section 6(b)(8) of the Act,18 which
requires that the rules of a national
securities exchange not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
As noted above, the proposal would
amend how the Exchange would
determine the NOCP for a Nasdaq-listed
15 See Notice, supra note 3, at 44345 and
Amendment No. 1, supra note 7, at 4.
16 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
17 15 U.S.C. 78f(b)(5).
18 15 U.S.C. 78f(b)(8).
E:\FR\FM\14NON1.SGM
14NON1
61954
Federal Register / Vol. 84, No. 220 / Thursday, November 14, 2019 / Notices
ETP that does not have a closing cross.
The Commission notes that the primary
listing market’s closing price for a
security is relied upon by market
participants for a variety of reasons,
including, but not limited to,
calculation of index values, calculation
of the net asset value of mutual funds
and exchange-traded products, the price
of derivatives that are based on the
security, and certain types of trading
benchmarks such as volume weighted
average price strategies. The
Commission believes that the proposed
methodology for determining the NOCP
for a Nasdaq-listed ETP that does not
have a closing cross could provide a
NOCP that is more reflective of the
current value of the ETP than a
potentially stale last sale price,
especially for a thinly-traded ETP.19 In
particular, the Nasdaq last sale trade for
an ETP that occurred earlier in a trading
day or even from a prior trading day
may no longer be reflective of the value
of the ETP, which should be priced
relative to the value of its components.20
The Commission therefore believes that
the Exchange’s proposal is reasonably
designed to achieve the Act’s objectives
to protect investors and the public
interest. Accordingly, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act.
IV. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
khammond on DSKJM1Z7X2PROD with NOTICES
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 1 is consistent with the
Act. Comments may be submitted by
any of the following methods:
19 See Notice, supra note 3, at 44344–45.
Moreover, according to the Exchange, 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. and 3:59:55
p.m. results in a price that reflects a fair current
valuation and is reflective of the price that was
calculated by the closing cross. See id. at 44344
n.12 and 44345. See also Nasdaq Letter, supra note
6 (providing more details regarding the Exchange’s
internal research relating to this proposal).
20 See Notice, supra note 3, 44345. According to
the Exchange, the proposal would not apply to
NextShares because its reference trading price is
reset to 100 every day for quoting purposes and the
actual net asset value does not correspond to this
reference price, and therefore the midpoints are not
applicable in determining a more accurate fair value
of the basket. See id. at 44344 n.4. The proposal also
would not apply to corporate securities because,
unlike ETPs, they do not have a net asset value
along with an arbitrage component that keeps the
prices in line. See id.
VerDate Sep<11>2014
17:47 Nov 13, 2019
Jkt 250001
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.
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
10:00 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–NASDAQ–2019–061, and
should be submitted on or before
December 5, 2019.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. As discussed above, in
Amendment No. 1, the Exchange
provided additional justification for its
proposed methodology for determining
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
the NOCP for Nasdaq-listed ETPs and
specified that it will implement the
proposed rule change within 30
calendar days following Commission
approval. The Commission notes that
Amendment No. 1 does not materially
alter the substance of the proposal and
provides additional clarity and
justification to the proposal.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,21 to approve the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,22 that the
proposed rule change (SR–NASDAQ–
2019–061), as modified by Amendment
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–24694 Filed 11–13–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87490; File No. SR–
NYSENAT–2019–25]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.37 To
Specify in Exchange Rules the
Exchange’s Use of Data Feeds From
NYSE Chicago, Inc.
November 7, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
31, 2019, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
21 15
U.S.C. 78s(b)(2).
22 Id.
23 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\14NON1.SGM
14NON1
]]>Agencies
[Federal Register Volume 84, Number 220 (Thursday, November 14, 2019)]
[Notices]
[Pages 61952-61954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24694]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87486; File No. SR-NASDAQ-2019-061]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Amendment No. 1,
Relating to the Nasdaq Official Closing Price for Nasdaq-Listed
Exchange-Traded Products
November 7, 2019.
I. Introduction
On August 8, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') 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 relating to how the Nasdaq Official Closing Price
(``NOCP'') will be determined for a Nasdaq-listed security that is an
exchange-traded product (``ETP''). The proposed rule change was
published for comment in the Federal Register on August 23, 2019.\3\ On
October 4, 2019, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which
[[Page 61953]]
to approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ The Commission received one comment letter
from the Exchange on the proposed rule change.\6\ On October 25, 2019,
the Exchange filed Amendment No. 1 to the proposed rule change.\7\ The
Commission is publishing this notice to solicit comments on Amendment
No. 1 from interested persons, and is approving the proposed rule
change, as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 86705 (August 19,
2019), 84 FR 44343 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 87230, 84 FR 54714
(October 10, 2019). The Commission designated November 21, 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\ See letter from Phil Mackintosh, Chief Economist, Nasdaq,
Inc., dated October 10, 2019, available at https://www.sec.gov/comments/sr-nasdaq-2019-061/srnasdaq2019061-6293523-193399.pdf
(``Nasdaq Letter'').
\7\ In Amendment No. 1, the Exchange provided additional
justification for its proposed methodology for determining the NOCP
for Nasdaq-listed ETPs and specified that it will implement the
proposed rule change within 30 calendar days following Commission
approval. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2019-061/srnasdaq2019061-6353201-195587.pdf.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
Currently, for a Nasdaq-listed ETP that participates in the Nasdaq
closing cross, the closing cross price will be the NOCP.\8\ For a
Nasdaq-listed ETP that does not have a closing cross, the Nasdaq last
sale price will be the NOCP.\9\ According to the Exchange, 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.\10\ Specifically, if an ETP is
thinly-traded, it is possible that the NOCP would be based on a Nasdaq
last sale price that may not necessarily reflect the current value of
the security.\11\ The Exchange now proposes to amend Nasdaq Rule
4754(b)(4) to amend how it would determine the NOCP for a Nasdaq-listed
ETP \12\ that does not have a closing cross.\13\
---------------------------------------------------------------------------
\8\ See Nasdaq Rule 4754(b)(4).
\9\ See Notice, supra note 3, at 44344-45.
\10\ See id. at 44344.
\11\ See id.
\12\ As used in proposed Nasdaq Rule 4754(b)(4), an ETP would
mean 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 Nasdaq Rule 5711(a)-(k)). The proposal would not apply to
NextShares (as defined in Nasdaq Rule 5745) and corporate
securities. See Notice, supra note 3, at 44344 n.4.
\13\ The Exchange is not proposing to change the process for
determining the price level at which the closing cross will occur.
See id. at 44344 n.9. Nasdaq-listed ETPs that have closing crosses
will continue to be priced using the current process for calculating
the closing cross price. See id. at 44344.
---------------------------------------------------------------------------
Under proposed Nasdaq Rule 4754(b)(4)(A), the NOCP for a Nasdaq-
listed ETP that does not have a closing cross would be the time-
weighted average midpoint (``T-WAM'') of the national best bid and
national best offer (``NBBO''), with certain parameters. Specifically,
the T-WAM price would be a time-weighted average midpoint value
calculation that uses eligible quotes during the time period of 3:58:00
p.m. to 3:59:55 p.m., based on quotes observed every second.\14\ The T-
WAM calculation would only use eligible quotes, and an eligible quote
would be defined as a quote whose spread is no greater than a value of
10% of the midpoint price. Quoted spreads within the T-WAM time period
that are greater than 10% of the midpoint price would be excluded from
the T-WAM calculation. Crossed NBBO markets would also be excluded from
the T-WAM calculation.
---------------------------------------------------------------------------
\14\ The Exchange states that it has considered using the last
sale for an ETP that does not have a closing cross, but determined
that even if the last sale occurs during the last two minutes
leading into the closing cross, it is not necessarily reflective of
the best price to use for the NOCP (e.g., a wide quote and a last
sale that is based on either the bid or the offer would not be as
accurate as the midpoint of the prevailing quotes at that time). See
Amendment No. 1, supra note 7, at 3. According to the Exchange,
using the proposed T-WAM methodology would eliminate a valuation
based on a last sale transaction occurring against an excessively
wide NBBO, and even when spreads are wide, the midpoint of the
spread is usually close to the fair value of the underlying basket
of the ETP. See id. The Exchange also states that this rationale is
based, in part, on conversations with issuers, who are supportive of
the proposal. See id.
---------------------------------------------------------------------------
As proposed, if there are no eligible quotes to use in the T-WAM
calculation or if the ETP is halted, the Exchange would 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, if there are no eligible quotes
to use in the T-WAM calculation and no consolidated last sale prices
that day, the NOCP would be the previous day's NOCP. For an ETP that
transferred its listing to Nasdaq, if there are no eligible quotes to
use in the T-WAM calculation and no consolidated last sale prices that
day, the NOCP would be the previous day's closing price as disseminated
by the primary listing market that previously listed the ETP. For an
ETP that is a new Nasdaq listing, if there are no eligible quotes to
use in the T-WAM calculation and no consolidated last sale prices that
day, the NOCP would not be disseminated.
The Exchange proposes to implement the proposed rule change within
30 calendar days following Commission approval and will announce the
implementation date via Nasdaq Equity Trader Alert.\15\
---------------------------------------------------------------------------
\15\ See Notice, supra note 3, at 44345 and Amendment No. 1,
supra note 7, at 4.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\16\ In particular, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\17\
which requires, among other things, that the rules of a national
securities exchange be designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating transactions in securities, 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, and not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers. The Commission also
finds that the proposed rule change, as modified by Amendment No. 1, is
consistent with Section 6(b)(8) of the Act,\18\ which requires that the
rules of a national securities exchange not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
---------------------------------------------------------------------------
\16\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\17\ 15 U.S.C. 78f(b)(5).
\18\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As noted above, the proposal would amend how the Exchange would
determine the NOCP for a Nasdaq-listed
[[Page 61954]]
ETP that does not have a closing cross. The Commission notes that the
primary listing market's closing price for a security is relied upon by
market participants for a variety of reasons, including, but not
limited to, calculation of index values, calculation of the net asset
value of mutual funds and exchange-traded products, the price of
derivatives that are based on the security, and certain types of
trading benchmarks such as volume weighted average price strategies.
The Commission believes that the proposed methodology for determining
the NOCP for a Nasdaq-listed ETP that does not have a closing cross
could provide a NOCP that is more reflective of the current value of
the ETP than a potentially stale last sale price, especially for a
thinly-traded ETP.\19\ In particular, the Nasdaq last sale trade for an
ETP that occurred earlier in a trading day or even from a prior trading
day may no longer be reflective of the value of the ETP, which should
be priced relative to the value of its components.\20\ The Commission
therefore believes that the Exchange's proposal is reasonably designed
to achieve the Act's objectives to protect investors and the public
interest. Accordingly, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act.
---------------------------------------------------------------------------
\19\ See Notice, supra note 3, at 44344-45. Moreover, according
to the Exchange, 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. and 3:59:55 p.m. results in a price
that reflects a fair current valuation and is reflective of the
price that was calculated by the closing cross. See id. at 44344
n.12 and 44345. See also Nasdaq Letter, supra note 6 (providing more
details regarding the Exchange's internal research relating to this
proposal).
\20\ See Notice, supra note 3, 44345. According to the Exchange,
the proposal would not apply to NextShares because its reference
trading price is reset to 100 every day for quoting purposes and the
actual net asset value does not correspond to this reference price,
and therefore the midpoints are not applicable in determining a more
accurate fair value of the basket. See id. at 44344 n.4. The
proposal also would not apply to corporate securities because,
unlike ETPs, they do not have a net asset value along with an
arbitrage component that keeps the prices in line. See id.
---------------------------------------------------------------------------
IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 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 10:00 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-NASDAQ-2019-061, and should be submitted
on or before December 5, 2019.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. As discussed above, in Amendment No. 1, the
Exchange provided additional justification for its proposed methodology
for determining the NOCP for Nasdaq-listed ETPs and specified that it
will implement the proposed rule change within 30 calendar days
following Commission approval. The Commission notes that Amendment No.
1 does not materially alter the substance of the proposal and provides
additional clarity and justification to the proposal. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\21\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-NASDAQ-2019-061), as
modified by Amendment No. 1, be, and hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------
\22\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24694 Filed 11-13-19; 8:45 am]
BILLING CODE 8011-01-P
