Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend Rule 4121(b), 3992-3995 [2020-01096]

Download as PDF 3992 Federal Register / Vol. 85, No. 15 / Thursday, January 23, 2020 / Notices and reports required by SEC Rule 17a– 5 covering periods through the termination date have been reviewed and accepted. Section 3. Interpretation of Terms (a) For purposes of calculating assessments[ this article]: [(a)](i) The term ‘‘securities in trading accounts’’ shall mean securities held for sale in the ordinary course of business and not identified as having been held for investment. [(b)](ii) The term ‘‘securities in investment accounts’’ shall mean securities that are clearly identified as having been acquired for investment in accordance with provisions of the Internal Revenue Code applicable to dealers in securities. [(c)](iii) The term ‘‘fees and other income from such other categories of the securities business’’ shall mean all revenue related either directly or indirectly to the securities business except revenue included in Section 16(9)(A)–(K) and revenue specifically excepted in Section 4(c)(3)(C). (b) For purposes of this Article: (i) Gross Revenues. The term ‘‘gross revenues from the securities business’’ includes the revenues in the definition of gross revenues from the securities business set forth in the applicable sections of the Act. (ii) Net Operating Revenues. The term ‘‘net operating revenues from the securities business’’ means gross revenues from the securities business less interest and dividend expenses, and includes those clarifications as are set forth in the SIPC assessment forms and instructions. (iii) SIPC Fund or Fund. The term ‘‘SIPC Fund’’ or ‘‘Fund’’ is as defined in Section 4(a)(2) of the Act, exclusive of confirmed lines of credit. (iv) SIPC’s unrestricted net assets. The term ‘‘SIPC’s unrestricted net assets’’ means the lesser of SIPC’s unrestricted net assets as reflected in SIPC’s most recent audited Statement of Financial Position or reasonably expected by SIPC to be reflected in its next audited Statement of Financial Position. V. Solicitation of Comments jbell on DSKJLSW7X2PROD with NOTICES Interested persons are invited to submit written data, views, and arguments concerning the foregoing by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/other.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SIPC–2019–02 on the subject line. VerDate Sep<11>2014 17:13 Jan 22, 2020 Jkt 250001 Paper Comments • Send paper comments to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All comments should refer to File Number SIPC–2019–02. 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/other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed bylaw changes that are filed with the Commission, and all written communications relating to the proposed bylaw changes 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 Commission. 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 SIPC–2019–02, and should be submitted on or before February 13, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–01023 Filed 1–22–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88004; File No. SR– NASDAQ–2020–003] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend Rule 4121(b) January 17, 2020. 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 January 14, 2020, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 4121(b) concerning the resumption of trading following a Level 3 marketwide circuit breaker halt. 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 Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 4121(b) concerning the resumption of trading following a Level 3 marketwide circuit breaker halt. The Exchange is proposing this rule change in conjunction with other national securities exchanges and the Financial Industry Regulatory Authority (‘‘FINRA’’). Rule 4121 provides a methodology for determining when to halt trading in all stocks due to extraordinary market volatility (i.e., market-wide circuit breakers). The market-wide circuit breaker mechanism (‘‘MWCB’’) under Rule 4121 was approved by the 1 15 17 17 PO 00000 CFR 200.30–3(f)(2)(i); 17 CFR 200.30–3(f)(3). Frm 00102 Fmt 4703 Sfmt 4703 2 17 E:\FR\FM\23JAN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 23JAN1 Federal Register / Vol. 85, No. 15 / Thursday, January 23, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES Commission to operate on a pilot basis,3 the term of which was to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS (the ‘‘LULD Plan’’),4 including any extensions to the pilot period for the LULD Plan.5 The Commission recently approved an amendment to the LULD Plan for it to operate on a permanent, rather than pilot, basis.6 In light of the proposal to make the LULD Plan permanent, the Exchange amended Rule 4121 to untie the pilot’s effectiveness from that of the LULD Plan and to extend the pilot’s effectiveness to the close of business on October 18, 2019.7 The Exchange then filed to extend the pilot for an additional year to the close of business on October 18, 2020.8 The market-wide circuit breaker under Rule 4121 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equity exchanges and FINRA adopted uniform rules on a pilot basis relating to market-wide circuit breakers in 2012 (‘‘MWCB Rules’’), which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.9 Market-wide circuit breakers provide for trading halts in all equities and options markets during a 3 See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– NASDAQ–2011–131). 4 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a mechanism to address extraordinary market volatility in individual securities. 5 See Securities Exchange Act Release Nos. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– NASDAQ–2011–131) (Approval Order); and 68786 (January 31, 2013), 78 FR 8666 (February 6, 2013) (SR–NASDAQ–2013–021) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Delay the Operative Date of a Rule Change to Nasdaq Rule 4121). 6 See Securities Exchange Act Release No. 85623 (April 11, 2019), 84 FR 16086 (April 17, 2019). 7 See Securities Exchange Act Release No. 85578 (April 9, 2019), 84 FR 15271 (April 15, 2019) (SR– NASDAQ–2019–027). 8 See Securities Exchange Act Release No. 86944 (September 12, 2019), 84 FR 49141 (September 18, 2019) (SR–NASDAQ–2019–072). 9 See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– BATS–2011–038; SR–BYX–2011–025; SR–BX– 2011–068; SR–CBOE–2011–087; SR–C2–2011–024; SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX– 2011–30; SR–FINRA–2011–054; SR–ISE–2011–61; SR–NASDAQ–2011–131; SR–NSX–2011–11; SR– NYSE–2011–48; SR–NYSEAmex–2011–73; SR– NYSEArca–2011–68; SR–Phlx–2011–129) (‘‘MWCB Approval Order’’). VerDate Sep<11>2014 17:13 Jan 22, 2020 Jkt 250001 severe market decline as measured by a single-day decline in the S&P 500 Index. Pursuant to Rule 4121, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day’s closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. A market decline that triggers a Level 3 halt at any time during the trading day would halt market-wide trading until the primary listing market opens the next trading day. Today, in the event that a Level 3 market decline occurs, the Exchange would halt trading for the remainder of the trading day, and would not resume until the primary listing market opens the next trading day. Thus, if the primary listing market is Nasdaq, the Exchange would resume trading in its listed securities at 4:00 a.m. ET on the next trading day, which is the beginning of the Exchange’s Pre-Market Session.10 Effectively, Nasdaq would open its listed securities for trading following a Level 3 halt the same as a regular trading day under its current MWCB Level 3 re-opening procedures.11 For non-Nasdaq listed securities, however, Nasdaq would resume trading once the primary listing market has re-opened the security for trading, which time may currently vary depending on the primary listing market.12 Upon feedback from industry participants, the Exchange has been working with other national securities exchanges and FINRA to establish a standardized approach for resuming trading in all NMS Stocks following a Level 3 halt. The proposed approach would allow for the opening of all 10 Pre-Market Session means the trading session that begins at 4:00 a.m. and continues until 9:30 a.m. See Rule 4120(b)(4). 11 The Nasdaq system begins accepting and processing eligible orders in time priority at 4:00 a.m. ET. See Nasdaq Rule 4752(b) for further description of trading in the Pre-Market Session. 12 Furthermore, there may be cross-market differences in how each exchange currently opens the next day after a Level 3 MWCB halt. As discussed above, while Nasdaq currently resumes trading in its listed securities no differently from a regular trading day, other exchanges may, for instance, conduct a halt auction rocess [sic] instead of opening in the normal course under their respective rules. As discussed later in this filing, the proposed changes will allow each exchange to resume trading in all securities the next trading day following a Level 3 halt no differently from a regular trading day. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 3993 securities the next trading day after a Level 3 halt as a regular trading day, and is designed to ensure that Level 3 MWCB events are handled in a more consistent manner that is transparent for market participants.13 As proposed, a Level 3 halt would end at the end of the trading day on which it is declared. This proposed change would allow for next-day trading to resume in all NMS Stocks no differently from any other trading day. In other words, an exchange could resume trading in any security when it first begins trading under its rules and would not need to wait for the primary listing market to re-open trading in a security before it could start trading such security.14 Accordingly, under the proposal, the Exchange could begin trading all securities at the beginning of the Exchange’s Pre-Market Session, just as it currently does for Nasdaq-listed securities. To effect this change, the Exchange proposes to delete the language in Rule 4121(b)(ii) requiring the Exchange to wait until the primary listing exchange opens the next trading day following a Level 3 market decline, and specify that the Exchange will halt trading for the remainder of the trading day.15 The proposed rule change would therefore allow each exchange to resume trading in all securities the next trading day following a Level 3 halt at whatever time such exchange normally begins trading under its rules, which for Nasdaq would be at the beginning of the Pre-Market Session at 4:00 a.m. ET under its current rules. The Exchange also expects that the primary listing exchanges will facilitate this change by sending resume messages to the applicable securities information processor (‘‘SIP’’) to lift the Level 3 trading halt message in all securities. The resumption messages will be disseminated after the SIP has started on the next trading day and before the start of the earliest pre-market trading session of all exchanges. If a security is 13 Of note, the U.S. futures markets, which have similar rules for coordinated MWCB halts, normally begin their ‘‘next day’’ trading session at 6:00 p.m. ET (for CFE and CME) or at 8:00 p.m. ET (for ICE). If the U.S. futures markets amend their MWCB rules, as needed, to allow for normal course trading following a Level 3 halt, the futures markets would resume trading in their normal course at 6:00 p.m. ET (CFE and CME) or 8:00 p.m. ET (ICE) the same day as the Level 3 halt. 14 The Exchange anticipates that the other national securities exchanges and FINRA will also file similar proposals to amend their MWCB rules on the resumption of trading following Level 3 halts, and amend their rules, where required, to have their Level 3 next-day openings happen normally. 15 Presently, the Exchange’s equities trading day ends at 8:00 p.m. ET. E:\FR\FM\23JAN1.SGM 23JAN1 jbell on DSKJLSW7X2PROD with NOTICES 3994 Federal Register / Vol. 85, No. 15 / Thursday, January 23, 2020 / Notices separately subject to a regulatory halt that has not ended, the primary listing exchange would replace the Level 3 halt message with the applicable regulatory halt message. Having a consistent approach for all securities will make the opening process the day after a Level 3 halt more uniform and reduce complexity, which the Exchange believes is important after a significant market event. Based on industry feedback, the Exchange believes that opening in the normal course in all equity securities as opposed to, for instance, having a normal opening for Nasdaq-listed securities only or conducting a halt auction prior to resuming trading, will be more beneficial to the marketplace. By allowing trading to resume after a Level 3 halt in all securities no differently from any normal trading day under the respective rules of each exchange, the proposed rule change would provide greater certainty to the marketplace by ensuring a familiar experience for all market participants that trade NMS Stocks and balances out potential concerns around volatility. While the Exchange recognizes that the impact of this proposal is to permit all securities to be traded in the Pre-Market Session, which does not have certain price protections for volatility such as LULD Bands or MWCB protections, the Exchange nonetheless believes that this outcome is outweighed by the benefits provided by opening in the Pre-Market Session in a manner that is more familiar to the marketplace. Moreover, allowing the resumption of trading to occur on the Exchange at the beginning of the Pre-Market Session in all NMS Stocks will allow for price formation to occur earlier in the trading day, which in turn allows market participants to react to news that has developed. As such, trading at the beginning of regular hours may be more orderly. confidence during a period of significant stress when securities markets experience extreme broad-based declines. The Exchange believes that the proposed rule change promotes just and equitable principles of trade in that it promotes transparency and uniformity across markets concerning when and how to halt trading in all stocks as a result of extraordinary market volatility, and how the markets will resume trading following a Level 3 market decline. As described above, the Exchange, together with other national securities exchanges and FINRA, is seeking to adopt a standardized approach related to resuming trading in NMS Stocks after a Level 3 MWCB halt. In this regard, the Exchange believes that the proposal to resume trading in all securities following a Level 3 halt in the same manner that securities would open trading on a regular trading day (i.e., the beginning of the Pre-Market Session at 4 a.m. ET on Nasdaq) will benefit investors, the national market system, Exchange members, and the Exchange market by promoting a fair and orderly market and reducing confusion during a significant crossmarket event. By allowing trading to resume after a Level 3 halt in all securities no differently from any normal trading day under the respective rules of each exchange, the proposed rule change would provide greater certainty to the marketplace by ensuring a familiar experience for all market participants that trade NMS Stocks. Based on the foregoing, the Exchange believes the benefits to market participants from the MWCB under Rule 4121 with the proposed standardized process for resuming trading in all securities following a Level 3 halt will promote fair and orderly markets, and protect investors and the public interest. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,16 in general, and furthers the objectives of Section 6(b)(5) of the Act,17 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The market-wide circuit breaker mechanism under Rule 4121 is an important, automatic mechanism that is invoked to promote stability and investor B. Self-Regulatory Organization’s Statement on Burden on Competition 16 15 17 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:13 Jan 22, 2020 Jkt 250001 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 because the proposed Level 3 rule change described above would standardize the opening process for all securities on the Exchange, which would make the opening process the day after a Level 3 halt more uniform and reduce complexity. Further, the Exchange understands that FINRA and other national securities exchanges will file similar proposals to adopt the proposed Level 3 rule change. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 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 such 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 rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2020–003 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–2020–003. 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 E:\FR\FM\23JAN1.SGM 23JAN1 Federal Register / Vol. 85, No. 15 / Thursday, January 23, 2020 / Notices 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–2020–003 and should be submitted on or before February 13, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–01096 Filed 1–22–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87989; File No. SR– NYSEAMER–2020–03] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change To Amend the Rule 6800 Series, the Exchange’s Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail January 16, 2020. jbell on DSKJLSW7X2PROD with NOTICES 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 January 3, 2020, NYSE American LLC (‘‘NYSE American’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Rule 6800 Series, the Exchange’s compliance rule (‘‘Compliance Rule’’) 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 17:13 Jan 22, 2020 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 self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to amend the Rule 6800 Series, the Compliance Rule regarding the CAT NMS Plan to be consistent with certain proposed amendments to and exemptions from the CAT NMS Plan as well as to facilitate the retirement of certain existing regulatory systems. As described more fully below, the proposed rule change would make the following changes to the Compliance Rule: • Revise data reporting requirements for the Firm Designated ID; • Add additional data elements to the CAT reporting requirements for Industry Members to facilitate the retirement of the Financial Industry Regulatory Authority, Inc.’s (‘‘FINRA’’) Order Audit Trail System (‘‘OATS’’); • Add additional data elements related to OTC Equity Securities that FINRA currently receives from ATSs that trade OTC Equity Securities for regulatory oversight purposes to the CAT reporting requirements for Industry Members; 3 Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth in the Compliance Rule. 1 15 VerDate Sep<11>2014 regarding the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’) 3 to be consistent with certain proposed amendments to and exemptions from the CAT NMS Plan as well as to facilitate the retirement of certain existing regulatory systems. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. Jkt 250001 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 3995 • Implement a phased approach for Industry Member reporting to the CAT (‘‘Phased Reporting’’); • Revise the CAT reporting requirements regarding cancelled trades and SRO-Assigned Market Participant Identifiers of clearing brokers, if applicable, in connection with order executions, as such information will be available from FINRA’s trade reports submitted to the CAT; • To the extent that any Industry Member’s order handling or execution systems utilize time stamps in increments finer than milliseconds, revise the timestamp granularity requirement to require such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment up to nanoseconds; • Revise the reporting requirements to address circumstances in which an Industry Member uses an established trading relationship for an individual Customer (rather than an account) on the order reported to the CAT; and • Revise the CAT reporting requirements so Industry Members would not be required to report to the Central Repository dates of birth, SSNs or account numbers for individuals. i. Firm Designated ID The Participants filed with the Commission a proposed amendment to the CAT NMS Plan to amend the requirements for Firm Designated IDs in two ways: (1) To prohibit the use of account numbers as Firm Designated IDs for trading accounts that are not proprietary accounts; and (2) to require that the Firm Designated ID for a trading account be persistent over time for each Industry Member so that a single account may be tracked across time within a single Industry Member.4 As a result, the Exchange proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 6810 to reflect the changes to the CAT NMS Plan regarding the requirements for Firm Designated IDs. Rule 6810(r) (previously Rule 6810(q)) defines the term ‘‘Firm Designated ID’’ to mean ‘‘a unique identifier for each trading account designated by Industry Members for purposes of providing data to the Central Repository, where each such identifier is unique among all identifiers from any given Industry Member for each business date.’’ The Exchange proposes to amend the definition of a ‘‘Firm Designated ID’’ in 4 See Letter to Vanessa Countryman, Secretary, SEC, from Michael Simon, CAT NMS Plan Operating Committee Chair re: Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail (Nov. 20, 2019). E:\FR\FM\23JAN1.SGM 23JAN1

Agencies

[Federal Register Volume 85, Number 15 (Thursday, January 23, 2020)]
[Notices]
[Pages 3992-3995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01096]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88004; File No. SR-NASDAQ-2020-003]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Amend Rule 4121(b)

January 17, 2020.
    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 January 14, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Rule 4121(b) concerning the 
resumption of trading following a Level 3 market-wide circuit breaker 
halt.
    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 Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend Rule 4121(b) concerning the 
resumption of trading following a Level 3 market-wide circuit breaker 
halt. The Exchange is proposing this rule change in conjunction with 
other national securities exchanges and the Financial Industry 
Regulatory Authority (``FINRA'').
    Rule 4121 provides a methodology for determining when to halt 
trading in all stocks due to extraordinary market volatility (i.e., 
market-wide circuit breakers). The market-wide circuit breaker 
mechanism (``MWCB'') under Rule 4121 was approved by the

[[Page 3993]]

Commission to operate on a pilot basis,\3\ the term of which was to 
coincide with the pilot period for the Plan to Address Extraordinary 
Market Volatility Pursuant to Rule 608 of Regulation NMS (the ``LULD 
Plan''),\4\ including any extensions to the pilot period for the LULD 
Plan.\5\ The Commission recently approved an amendment to the LULD Plan 
for it to operate on a permanent, rather than pilot, basis.\6\ In light 
of the proposal to make the LULD Plan permanent, the Exchange amended 
Rule 4121 to untie the pilot's effectiveness from that of the LULD Plan 
and to extend the pilot's effectiveness to the close of business on 
October 18, 2019.\7\ The Exchange then filed to extend the pilot for an 
additional year to the close of business on October 18, 2020.\8\
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    \3\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-NASDAQ-2011-131).
    \4\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a 
mechanism to address extraordinary market volatility in individual 
securities.
    \5\ See Securities Exchange Act Release Nos. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-NASDAQ-2011-131) (Approval 
Order); and 68786 (January 31, 2013), 78 FR 8666 (February 6, 2013) 
(SR-NASDAQ-2013-021) (Notice of Filing and Immediate Effectiveness 
of Proposed Rule Change to Delay the Operative Date of a Rule Change 
to Nasdaq Rule 4121).
    \6\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019).
    \7\ See Securities Exchange Act Release No. 85578 (April 9, 
2019), 84 FR 15271 (April 15, 2019) (SR-NASDAQ-2019-027).
    \8\ See Securities Exchange Act Release No. 86944 (September 12, 
2019), 84 FR 49141 (September 18, 2019) (SR-NASDAQ-2019-072).
---------------------------------------------------------------------------

    The market-wide circuit breaker under Rule 4121 provides an 
important, automatic mechanism that is invoked to promote stability and 
investor confidence during a period of significant stress when 
securities markets experience extreme broad-based declines. All U.S. 
equity exchanges and FINRA adopted uniform rules on a pilot basis 
relating to market-wide circuit breakers in 2012 (``MWCB Rules''), 
which are designed to slow the effects of extreme price movement 
through coordinated trading halts across securities markets when severe 
price declines reach levels that may exhaust market liquidity.\9\ 
Market-wide circuit breakers provide for trading halts in all equities 
and options markets during a severe market decline as measured by a 
single-day decline in the S&P 500 Index.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-038; SR-BYX-2011-
025; SR-BX-2011-068; SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-
30; SR-EDGA-2011-31; SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-
2011-61; SR-NASDAQ-2011-131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-
NYSEAmex-2011-73; SR-NYSEArca-2011-68; SR-Phlx-2011-129) (``MWCB 
Approval Order'').
---------------------------------------------------------------------------

    Pursuant to Rule 4121, a market-wide trading halt will be triggered 
if the S&P 500 Index declines in price by specified percentages from 
the prior day's closing price of that index. Currently, the triggers 
are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 
2), and 20% (Level 3). A market decline that triggers a Level 1 or 
Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt 
market-wide trading for 15 minutes, while a similar market decline at 
or after 3:25 p.m. ET would not halt market-wide trading. A market 
decline that triggers a Level 3 halt at any time during the trading day 
would halt market-wide trading until the primary listing market opens 
the next trading day.
    Today, in the event that a Level 3 market decline occurs, the 
Exchange would halt trading for the remainder of the trading day, and 
would not resume until the primary listing market opens the next 
trading day. Thus, if the primary listing market is Nasdaq, the 
Exchange would resume trading in its listed securities at 4:00 a.m. ET 
on the next trading day, which is the beginning of the Exchange's Pre-
Market Session.\10\ Effectively, Nasdaq would open its listed 
securities for trading following a Level 3 halt the same as a regular 
trading day under its current MWCB Level 3 re-opening procedures.\11\ 
For non-Nasdaq listed securities, however, Nasdaq would resume trading 
once the primary listing market has re-opened the security for trading, 
which time may currently vary depending on the primary listing 
market.\12\
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    \10\ Pre-Market Session means the trading session that begins at 
4:00 a.m. and continues until 9:30 a.m. See Rule 4120(b)(4).
    \11\ The Nasdaq system begins accepting and processing eligible 
orders in time priority at 4:00 a.m. ET. See Nasdaq Rule 4752(b) for 
further description of trading in the Pre-Market Session.
    \12\ Furthermore, there may be cross-market differences in how 
each exchange currently opens the next day after a Level 3 MWCB 
halt. As discussed above, while Nasdaq currently resumes trading in 
its listed securities no differently from a regular trading day, 
other exchanges may, for instance, conduct a halt auction rocess 
[sic] instead of opening in the normal course under their respective 
rules. As discussed later in this filing, the proposed changes will 
allow each exchange to resume trading in all securities the next 
trading day following a Level 3 halt no differently from a regular 
trading day.
---------------------------------------------------------------------------

    Upon feedback from industry participants, the Exchange has been 
working with other national securities exchanges and FINRA to establish 
a standardized approach for resuming trading in all NMS Stocks 
following a Level 3 halt. The proposed approach would allow for the 
opening of all securities the next trading day after a Level 3 halt as 
a regular trading day, and is designed to ensure that Level 3 MWCB 
events are handled in a more consistent manner that is transparent for 
market participants.\13\
---------------------------------------------------------------------------

    \13\ Of note, the U.S. futures markets, which have similar rules 
for coordinated MWCB halts, normally begin their ``next day'' 
trading session at 6:00 p.m. ET (for CFE and CME) or at 8:00 p.m. ET 
(for ICE). If the U.S. futures markets amend their MWCB rules, as 
needed, to allow for normal course trading following a Level 3 halt, 
the futures markets would resume trading in their normal course at 
6:00 p.m. ET (CFE and CME) or 8:00 p.m. ET (ICE) the same day as the 
Level 3 halt.
---------------------------------------------------------------------------

    As proposed, a Level 3 halt would end at the end of the trading day 
on which it is declared. This proposed change would allow for next-day 
trading to resume in all NMS Stocks no differently from any other 
trading day. In other words, an exchange could resume trading in any 
security when it first begins trading under its rules and would not 
need to wait for the primary listing market to re-open trading in a 
security before it could start trading such security.\14\ Accordingly, 
under the proposal, the Exchange could begin trading all securities at 
the beginning of the Exchange's Pre-Market Session, just as it 
currently does for Nasdaq-listed securities.
---------------------------------------------------------------------------

    \14\ The Exchange anticipates that the other national securities 
exchanges and FINRA will also file similar proposals to amend their 
MWCB rules on the resumption of trading following Level 3 halts, and 
amend their rules, where required, to have their Level 3 next-day 
openings happen normally.
---------------------------------------------------------------------------

    To effect this change, the Exchange proposes to delete the language 
in Rule 4121(b)(ii) requiring the Exchange to wait until the primary 
listing exchange opens the next trading day following a Level 3 market 
decline, and specify that the Exchange will halt trading for the 
remainder of the trading day.\15\ The proposed rule change would 
therefore allow each exchange to resume trading in all securities the 
next trading day following a Level 3 halt at whatever time such 
exchange normally begins trading under its rules, which for Nasdaq 
would be at the beginning of the Pre-Market Session at 4:00 a.m. ET 
under its current rules. The Exchange also expects that the primary 
listing exchanges will facilitate this change by sending resume 
messages to the applicable securities information processor (``SIP'') 
to lift the Level 3 trading halt message in all securities. The 
resumption messages will be disseminated after the SIP has started on 
the next trading day and before the start of the earliest pre-market 
trading session of all exchanges. If a security is

[[Page 3994]]

separately subject to a regulatory halt that has not ended, the primary 
listing exchange would replace the Level 3 halt message with the 
applicable regulatory halt message.
---------------------------------------------------------------------------

    \15\ Presently, the Exchange's equities trading day ends at 8:00 
p.m. ET.
---------------------------------------------------------------------------

    Having a consistent approach for all securities will make the 
opening process the day after a Level 3 halt more uniform and reduce 
complexity, which the Exchange believes is important after a 
significant market event. Based on industry feedback, the Exchange 
believes that opening in the normal course in all equity securities as 
opposed to, for instance, having a normal opening for Nasdaq-listed 
securities only or conducting a halt auction prior to resuming trading, 
will be more beneficial to the marketplace. By allowing trading to 
resume after a Level 3 halt in all securities no differently from any 
normal trading day under the respective rules of each exchange, the 
proposed rule change would provide greater certainty to the marketplace 
by ensuring a familiar experience for all market participants that 
trade NMS Stocks and balances out potential concerns around volatility. 
While the Exchange recognizes that the impact of this proposal is to 
permit all securities to be traded in the Pre-Market Session, which 
does not have certain price protections for volatility such as LULD 
Bands or MWCB protections, the Exchange nonetheless believes that this 
outcome is outweighed by the benefits provided by opening in the Pre-
Market Session in a manner that is more familiar to the marketplace. 
Moreover, allowing the resumption of trading to occur on the Exchange 
at the beginning of the Pre-Market Session in all NMS Stocks will allow 
for price formation to occur earlier in the trading day, which in turn 
allows market participants to react to news that has developed. As 
such, trading at the beginning of regular hours may be more orderly.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\17\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. The market-wide circuit breaker mechanism under Rule 4121 is 
an important, automatic mechanism that is invoked to promote stability 
and investor confidence during a period of significant stress when 
securities markets experience extreme broad-based declines. The 
Exchange believes that the proposed rule change promotes just and 
equitable principles of trade in that it promotes transparency and 
uniformity across markets concerning when and how to halt trading in 
all stocks as a result of extraordinary market volatility, and how the 
markets will resume trading following a Level 3 market decline. As 
described above, the Exchange, together with other national securities 
exchanges and FINRA, is seeking to adopt a standardized approach 
related to resuming trading in NMS Stocks after a Level 3 MWCB halt. In 
this regard, the Exchange believes that the proposal to resume trading 
in all securities following a Level 3 halt in the same manner that 
securities would open trading on a regular trading day (i.e., the 
beginning of the Pre-Market Session at 4 a.m. ET on Nasdaq) will 
benefit investors, the national market system, Exchange members, and 
the Exchange market by promoting a fair and orderly market and reducing 
confusion during a significant cross-market event. By allowing trading 
to resume after a Level 3 halt in all securities no differently from 
any normal trading day under the respective rules of each exchange, the 
proposed rule change would provide greater certainty to the marketplace 
by ensuring a familiar experience for all market participants that 
trade NMS Stocks.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Based on the foregoing, the Exchange believes the benefits to 
market participants from the MWCB under Rule 4121 with the proposed 
standardized process for resuming trading in all securities following a 
Level 3 halt will promote fair and orderly markets, and protect 
investors and the public interest.

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 because the proposed Level 3 
rule change described above would standardize the opening process for 
all securities on the Exchange, which would make the opening process 
the day after a Level 3 halt more uniform and reduce complexity. 
Further, the Exchange understands that FINRA and other national 
securities exchanges will file similar proposals to adopt the proposed 
Level 3 rule change.

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 such 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-2020-003 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-2020-003. 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

[[Page 3995]]

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-2020-003 and 
should be submitted on or before February 13, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-01096 Filed 1-22-20; 8:45 am]
 BILLING CODE 8011-01-P
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