Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend Rules 4702(b)(14) and (b)(15) To Shorten the Holding Period Requirements for Midpoint Extended Life Orders and Midpoint Extended Life Orders Plus Continuous Book, 13962-13965 [2020-04788]
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Federal Register / Vol. 85, No. 47 / Tuesday, March 10, 2020 / Notices
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2019.4 On October 24, 2019, the
Commission extended the time period
within which to approve the proposed
rule changes, disapprove the proposed
rule changes, or institute proceedings to
determine whether to approve or
disapprove the proposed rule changes,
to December 9, 2019.5 The Commission
received one comment letter on the
Original Proposal, a response from the
Exchanges, and a second letter from the
original commenter.6 On December 9,
2019, the Commission instituted
proceedings to determine whether to
approve or disapprove the Original
Proposal.7 On December 23, 2019, the
Exchange filed Amendment No. 1 to the
Original Proposal. Amendment No. 1,
which superseded and replaced the
Original Proposal in its entirety, was
published for comment in the Federal
Register on January 15, 2020.8 The
Commission received another comment
letter on the proposal, as modified by
Amendment No. 1, and a response from
the Exchanges.9
4 See Securities Exchange Act Release Nos. 86865
(September 4, 2019), 84 FR 47592 (SR–NYSE–2019–
46); 86869 (September 4, 2019), 84 FR 47600 (SR–
NYSENAT–2019–19); 86868 (September 4, 2019),
84 FR 47610 (SR–NYSEArca–2019–61); 86867
(September 4, 2019), 84 FR 47563 (SR–
NYSEAMER–2019–34). The proposed rule change
as set forth in these Notices is referred to as the
‘‘Original Proposal.’’
5 See Securities Exchange Act Release Nos. 87399,
84 FR 58189 (October 30, 2019) (SR–NYSE–2019–
46); 87402, 84 FR 58187 (October 30, 2019) (SR–
NYSENAT–2019–19); 87400, 84 FR 58189 (October
30, 2019) (SR–NYSEArca–2019–61); 87401, 84 FR
58188 (October 30, 2019) (SR–NYSEAMER–2019–
34).
6 See, respectively, letter dated October 24, 2019
from John M. Yetter, Vice President and Senior
Deputy General Counsel, Nasdaq Stock Market LLC
(‘‘Nasdaq’’), to Vanessa Countryman, Secretary,
Commission (‘‘Nasdaq Letter’’); letter dated
November 8, 2019 from Elizabeth K. King, Chief
Regulatory Officer, ICE, General Counsel and
Corporate Secretary, NYSE to Ms. Vanessa
Countryman, Secretary, Commission (‘‘NYSE
Response Letter’’); and letter dated November 25,
2019 from Joan C. Conley, Senior Vice President
and Corporate Secretary, Nasdaq, to Vanessa
Countryman, Secretary, Commission (‘‘Nasdaq
Letter II’’). All comments received by the
Commission on the proposed rule change are
available on the Commission’s website at: https://
www.sec.gov/comments/sr-nyse-2019-46/
srnyse201946.htm. NYSE filed comment letters on
behalf of all of the Exchanges.
7 See Securities Exchange Act Release No. 87699
(December 9, 2019), 84 FR 68239 (December 13,
2019) (SR–NYSE–2019–46; SR–NYSENAT–2019–
19; SR–NYSEArca–2019–61; SR–NYSEAMER–
2019–34) (‘‘OIP’’).
8 See Securities Exchange Act Releases No. 87927
(January 9, 2020), 85 FR 2468 (SR–NYSE–2019–46);
87930 (January 9, 2020), 85 FR 2459 (SR–
NYSENAT–2019–19); 87929 (January 9, 2020), 85
FR 2453 (SR–NYSEAMER–2019–34); and 87928
(January 9, 2020), 85 FR 2447 (SR–NYSEArca–
2019–61) (‘‘Notice of Amendment No. 1’’).
Amendment No. 1 also is available at https://
www.sec.gov/comments/sr-nyse-2019-46/
srnyse201946-6584636-201247.pdf.
9 See, respectively, letter dated February 5, 2020
from Joan C. Conley, Senior Vice President and
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Section 19(b)(2) of the Act 10 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of the
filing of the proposed rule change. The
Commission may extend the period for
issuing an order approving or
disapproving the proposed rule change,
however, by not more than 60 days if
the Commission determines that a
longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
changes were published for comment in
the Federal Register on September 10,
2019.11 The 180th day after publication
of the Notice is March 8, 2020. The
Commission is extending the time
period for approving or disapproving
the proposal for an additional 60 days.
The Commission finds that it is
appropriate to designate a longer period
within which to issue an order
approving or disapproving the proposed
rule change so that it has sufficient time
to consider the proposed rule change, as
modified by Amendment No. 1, along
with the comment received on
Amendment No. 1 and the Exchange’s
response. Accordingly, the Commission,
pursuant to Section 19(b)(2) of the
Act,12 designates May 7, 2020, as the
date by which the Commission should
either approve or disapprove the
proposed rule change (File Nos. SR–
NYSE–2019–46, SR–NYSENAT–2019–
19, SR–NYSEArca–2019–61, SR–
NYSEAMER–2019–34), as modified by
Amendment No. 1.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04787 Filed 3–9–20; 8:45 am]
BILLING CODE 8011–01–P
Corporate Secretary, Nasdaq, to Vanessa
Countryman, Secretary, Commission (‘‘Nasdaq
Letter III’’) and letter dated February 25, 2020 from
Elizabeth K. King, Chief Regulatory Officer, ICE,
General Counsel and Corporate Secretary, NYSE to
Ms. Vanessa Countryman, Secretary, Commission
(‘‘NYSE Response Letter II’’). All comments
received by the Commission on the proposed rule
change are available on the Commission’s website
at: https://www.sec.gov/comments/sr-nyse-2019-46/
srnyse201946.htm. NYSE filed comment letters on
behalf of all of the Exchanges.
10 15 U.S.C. 78s(b)(2).
11 See supra note 4.
12 15 U.S.C. 78s(b)(2).
13 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88320; File No. SR–
NASDAQ–2020–011]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend Rules 4702(b)(14) and (b)(15)
To Shorten the Holding Period
Requirements for Midpoint Extended
Life Orders and Midpoint Extended Life
Orders Plus Continuous Book
March 4, 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 February
26, 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
Rules 4702(b)(14) and (b)(15) of the
Exchange’s Rulebook to shorten the
holding period requirements for
Midpoint Extended Life Orders and
Midpoint Extended Life Orders Plus
Continuous Book.
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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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
Rules 4702(b)(14) and (15) of the
Exchange’s Rulebook to shorten the
holding period requirements for its
Midpoint Extended Life Order (‘‘M–
ELO’’) and Midpoint Extended Life
Order Plus Continuous Book (‘‘M–
ELO+CB’’) Order Types.
In 2018, the Exchange introduced the
M–ELO, which is a Non-Displayed
Order priced at the Midpoint between
the National Best Bid and Offer
(‘‘NBBO’’) and which is eligible for
execution only against other eligible M–
ELOs and only after a minimum of onehalf second passes from the time that
the System accepts the order (the
‘‘Holding Period’’).3 In 2019, the
Exchange introduced the M–ELO+CB,
which closely resembles the M–ELO,
except that a M–ELO+CB may execute at
the midpoint of the NBBO, not only
against other eligible M–ELOs (and M–
ELO+CBs), but also against NonDisplayed Orders with Midpoint
Pegging and Midpoint Peg Post-Only
Orders (‘‘Midpoint Orders’’) that rest on
the Continuous Book for at least onehalf second and have Midpoint Trade
Now enabled.4 For both M–ELOs and
M–ELO+CBs, the Holding Period is the
same length of time.
When the Exchange designed M–ELO,
it set the length of the Holding Period
at one-half second because it
determined that this time period would
be sufficient to ensure that likeminded
investors would interact only with each
other, and with minimal market
impacts. Additionally, the Exchange
chose one-half second because it was
then, and it remains today, a time
period that is significantly longer than
the delay mechanisms that other
exchanges employ for similar purposes,
such as the IEX 350 microsecond speed
bump. The Exchange believed that the
longer length of the M–ELO Holding
Period and its simplicity in design
would provide greater protection for
participants than they could achieve
through competing delay mechanisms.
Although the Holding Period
requirement is a key design element of
both the M–ELO and the M–ELO+CB,
3 See Securities Exchange Act Release No. 34–
82825 (March 7, 2018), 83 FR 10937 (March 13,
2018) (SR–NASDAQ–2017–074) (‘‘M–ELO
Approval Order’’).
4 See Securities Exchange Act Release No. 34–
86938 (September 11, 2019), 84 FR 48978
(September 17, 2019) (SR–NASDAQ–2019–048)
(‘‘M–ELO+CB Approval Order’’).
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the length of that Holding Period is not
sacrosanct. After adopting the M–ELO,
the Exchange studied the actual use and
performance of M–ELOs, as well as
customer feedback, and make
refinements, as necessary, to improve its
operation and effectiveness. Indeed,
such study and feedback is what
prompted the Exchange last year to
introduce the M–ELO+CB Order Type as
well as to enhance M–ELO by
permitting odd-lot order sizes.5
Now, after observing M–ELO and M–
ELO+CB trading over the past two years,
and after gathering feedback from
market participants, in particular those
that trade with a longer time horizon
and who are concerned with market
impact, the Exchange has determined
that the length of the Holding Period
can and should be re-calibrated.
Although the Exchange designed M–
ELO and M–ELO+CB for use by market
participants that are less concerned with
achieving rapid executions of their
Orders than are other participants, that
is not to say that M–ELO and M–
ELO+CB users are indifferent about the
length of time in which their M–ELOs
and M–ELO+CBs must wait before they
are eligible for execution. Indeed,
participants have informed the
Exchange that in certain circumstances,
such as when they seek to trade symbols
that on average have a lower time-toexecution than a half-second, they are
reticent to enter M–ELOs or M–
ELO+CBs because even though they
want the protections that M–ELO and
M–ELO+CB provide, the associated
Holding Periods for these Order Types
are too long and present countervailing
risks. That is, the Holding Periods are
longer than necessary and, during the
residual portion of the Holding Periods,
participants risk losing out on favorable
execution opportunities that would
otherwise be available to them had they
placed a non-MELO order. The
Exchange also notes that many
institutional routing strategies
recalibrate using a ‘‘heatmap’’ where
they will route an order based on where
trade activity is occurring, at times; this
recalibration occurs prior to the
completion of the M–ELO and M–
ELO+CB Holding Periods. For such
participants, the opportunity cost of
missed execution opportunities may
outweigh the protective benefits that M–
ELOs and M–ELO+CBs provide.
Based upon this feedback, the
Exchange studied the potential effects of
reducing the length of the Holding
Periods for both M–ELOs and M–
5 See Securities Exchange Act Release No. 34–
86416 (July 19, 2019), 84 FR 35918 (July 25, 2019)
(SR–NASDAQ–2019–044).
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13963
ELO+CBs (as well as for Midpoint
Orders that would execute against M–
ELO+CBs). Ultimately, the Exchange
determined that it could reduce the
Holding Periods to 10 milliseconds
without compromising the protective
power that M–ELO and M–ELO+CB are
intended to provide to participants and
investors. Indeed, the Exchange
examined each of its historical M–ELO
executions to determine at what
Midpoints of the NBBO the M–ELOs
would have executed if their Holding
Periods had been shorter than one-half
second (500 milliseconds). After
examining the historical effects of
shorter Holding Periods of between 10
milliseconds and 400 milliseconds, the
Exchange determined that a reduction of
the M–ELO Holding Period to as short
as 10 milliseconds would have caused
an average impact on markouts of only
0.10 basis points (across all symbols). In
other words, compared to the execution
price of an average M–ELO with a onehalf second Holding Period, the
Exchange found that a M–ELO with a 10
millisecond Holding Period would have
had an average post-execution impact
that was only a tenth of a basis point per
share—a difference in protective effect
that is immaterial.6 Thus, the Exchange
determined that shortening the Holding
Periods to 10 milliseconds for M–ELOs
and M–ELO+CBs would increase the
efficacy of the mechanism while not
undermining the power of those Order
Types to fulfill their underlying purpose
of minimizing market impacts. The
Exchange notes that, even at a length of
10 milliseconds, the Holding Periods
still will be as or more effective than the
delay mechanisms that competing
exchanges employ, such that the M–
ELO and M–ELO+CB would remain
among the highest-performing order
types available to market participants.
At the same time, the Exchange
determined that a reduction in the
Holding Periods to 10 milliseconds
would dramatically add to the
circumstances in which M–ELOs and
M–ELO+CBs would be useful to
participants. Accordingly, the Exchange
proposes to amend Rules 4702(b)(14)
and (15) to decrease to 10 milliseconds
the length of the Holding Periods for M–
ELOs and M–ELO+CB, along with the
length of the corresponding resting
period for Midpoint Orders on the
Continuous Book that are eligible to
interact with M–ELO+CBs.
6 See Nasdaq, ‘‘The Midpoint Extended Life Order
(M–ELO); M–ELO Holding Period,’’ available at
https://www.nasdaq.com/articles/the-midpointextended-life-order-m-elo%3A-m-elo-holdingperiod-2020-02-13 (analyzing effects of shortened
Holding Periods on M–ELO performance).
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The Exchange intends to make the
proposed change effective for M–ELOs
and M–ELO+CBs in the Second Quarter
of 2020. The Exchange will publish a
Trader Alert at least 14 days in advance
of making the proposed change
effective.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Section 6(b)(5) of the Act,8
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, by
allowing for more widespread use of M–
ELOs and M–ELO+CBs.
When the Commission approved the
M–ELO and the M–ELO+CB, it
determined that these Order Types are
consistent with the Act because they
‘‘could create additional and more
efficient trading opportunities on the
Exchange for investors with longer
investment time horizons, including
institutional investors, and could
provide these investors with an ability
to limit the information leakage and the
market impact that could result from
their orders.’’ 9 Nothing about the
Exchange’s proposal should cause the
Commission to revisit or rethink this
determination. Indeed, the proposal will
not alter the fundamental design of
these Order Types, the manner in which
they operate, or their effects.
Even with shortened 10 millisecond
Holding Periods, M–ELOs and M–
ELO+CBs will continue to provide their
users with protection against
information leakage and adverse
selection—and they will do so at levels
which are substantially undiminished
from that which they provide now.10
The 10 millisecond Holding Periods,
moreover, will remain longer than any
delay mechanisms which the
Exchange’s competitors presently
employ.
At the same time, however, the
proposal will benefit market
participants and investors by reducing
the opportunity costs of utilizing M–
ELOs and M–ELO+CBs. The proposal,
in other words, will re-calibrate the
lengths of the Holding Periods so that
M–ELOs and M–ELO+CBs will operate
in the ‘‘Goldilocks’’ zone—their Holding
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 M–ELO Approval Order, supra 83 FR at 10938–
39; M–ELO+CB Approval Order, supra, 84 FR at
48980.
10 See note 6, supra.
8 15
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Periods will not be so short as to render
them unable to provide meaningful
protections against information leakage
and adverse selection, but the Holding
Periods also will not be too long so as
to cause participants and investors to
miss out on favorable execution
opportunities. Nasdaq believes the
proposal will render M–ELOs and M–
ELO+CBs more useful and attractive to
market participants and investors, and
this increased utility and attractiveness,
in turn, will spur an increase in M–ELO
and M–ELO+CB use cases on the
Exchange, both from new and existing
users of M–ELOs and M–ELO+CBs.
Ultimately, the proposal should
enhance market quality by opening up
more use cases for midpoint executions
on the Exchange.
The Exchange notes that use of M–
ELOs and M–ELO+CBs remains
voluntary for all market participants.
Accordingly, if any market participant
feels that the shortened Holding Period
is still too long or too short or because
competing venues offer more attractive
delay mechanisms, then the participants
are free to pursue other trading
strategies or utilize other trading
venues. They need not utilize M–ELOs
or M–ELO+CBs.
Finally, the Exchange notes that it
will continue to conduct real-time
surveillance to monitor the use of M–
ELOs and M–ELO+CBs to ensure that
such usage remains appropriately tied to
the intent of the Order Types. If, as a
result of such surveillance, the
Exchange determines that the shortened
Holding Periods do not serve their
intended purposes, or adversely impact
market quality, then the Exchange will
seek to make further re-calibrations.
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. To the
contrary, the Exchange believes that this
proposal will promote the
competitiveness of the Exchange by
rendering its M–ELO and M–ELO+CB
Order Types more attractive to
participants.
The Exchange adopted the M–ELO
and M–ELO+CB as pro-competitive
measures intended to increase
participation on the Exchange by
allowing certain market participants
that may currently be underserved on
regulated exchanges to compete based
on elements other than speed. The
proposed change continues to achieve
this purpose. With shortened 10
millisecond Holding Periods, both M–
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ELOs and M–ELO+CBs will afford their
users with a level of protection from
information leakage and adverse
selection that is not materially different
from what they presently provide.11 At
the same time, the shortened Holding
Period will increase opportunities to
interact with other like-minded
investors with longer time horizons
while also lowering the opportunity
costs for participants that utilize M–
ELOs and M–ELO+CBs, particularly for
securities that trade within the
‘‘Goldilocks’’ zone. In sum, the
proposed changes will not burden
competition, but instead may promote
competition for liquidity in M–ELOs
and M–ELO+CBs by broadening the
circumstances in which market
participants may find such Orders to be
useful. With the proposed changes,
market participants will be more likely
to determine that the benefits of
entering M–ELOs and M–ELO+CBs
outweigh the risks of doing so.
The proposed change will not place a
burden on competition among market
venues, as any market may adopt an
order type that operates similarly to a
M–ELO or a M–ELO+CB with a 10
millisecond Holding Period.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
11 See
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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–2020–011 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.
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All submissions should refer to File
Number SR–NASDAQ–2020–011. 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–2020–011, and
should be submitted on or before March
31, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04788 Filed 3–9–20; 8:45 am]
BILLING CODE 8011–01–P
12 17
CFR 200.30–3(a)(12).
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Summary of the Application
1. Applicant was incorporated under
the laws of the Commonwealth of
[Investment Company Act Release No.
Virginia on July 13, 1993 and is
33810; File No. 811–08387]
registered under the Act as a closed-end
investment company. It operated as a
Waterside Capital Corporation
small business investment company
under a license from the Small Business
March 4, 2020.
Administration (the ‘‘SBA’’) and was
AGENCY: Securities and Exchange
internally managed.1
Commission (‘‘Commission’’).
2. On March 30, 2010, the SBA
ACTION: Notice.
notified applicant that its account had
been transferred to liquidation status
Notice of an application for an order
and that its outstanding debentures plus
under section 8(f) of the Investment
accrued interest were due and payable
Company Act of 1940 (the ‘‘Act’’)
within fifteen days of the notification.
declaring that the applicant has ceased
Applicant did not have sufficient liquid
to be an investment company.
assets to make that payment and the
Applicant: Waterside Capital
SBA repurchased the debentures under
Corporation.
a note agreement with applicant (the
Filing Dates: The application was
‘‘Note Agreement’’).
filed on January 18, 2018, and amended
3. On May 24, 2012, the SBA
on June 4, 2018, October 30, 2018, June
delivered to applicant a notice of an
12, 2019, August 26, 2019, December 20, event of default for failure to meet the
2019, and February 26, 2020.
principal repayment schedule under the
Hearing or Notification of Hearing: An Note Agreement (the ‘‘Notice’’). Under
order granting the request will be issued the terms of the Notice and the Note
unless the Commission orders a hearing. Agreement, the SBA maintained a
Interested persons may request a
continuing right to terminate the Note
hearing by writing to the Commission’s
Agreement and appoint a receiver to
Secretary and serving applicant with a
manage applicant’s assets.
copy of the request, personally or by
4. On November 20, 2013, the SBA
mail. Hearing requests should be
filed a complaint in the United States
received by the Commission by 5:30
District Court for the Eastern District of
p.m. on March 30, 2020 and should be
Virginia (the ‘‘District Court’’) seeking,
accompanied by proof of service on
among other things, receivership for
applicant, in the form of an affidavit or,
applicant and a judgment in the amount
for lawyers, a certificate of service.
outstanding under the Note Agreement
Pursuant to rule 0–5 under the Act,
plus continuing interest. On May 28,
hearing requests should state the nature 2014, the District Court entered an order
of the writer’s interest, any facts bearing (the ‘‘Order’’) that appointed the SBA as
upon the desirability of a hearing on the receiver of applicant. The SBA
matter, the reason for the request, and
designated a principal agent to act on its
the issues contested. Persons who wish
behalf as the receiver (the ‘‘Receiver’’).
to be notified of a hearing may request
The Order authorized the Receiver to act
notification by writing to the
for the purpose of marshaling and
Commission’s Secretary.
liquidating in an orderly manner all of
applicant’s assets (the ‘‘Receivership’’).
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street The Order also served to enter judgment
against applicant for its liability in
NE, Washington, DC 20549–1090.
excess of $11,000,000 to the SBA.
Applicant: c/o Jolie Kahn, Esq., 12 E
5. Applicant effectively stopped
49th Street, 11th Floor, New York, NY
conducting an active business upon the
10017.
appointment of the SBA as Receiver.
FOR FURTHER INFORMATION CONTACT:
Over the course of the Receivership, the
Laura J. Riegel, Senior Counsel, at (202)
activity of applicant was limited to the
551–3038, or Daniele Marchesani,
liquidation of applicant’s assets by the
Assistant Chief Counsel, at (202) 551–
Receiver and the payment of the
6821 (Division of Investment
proceeds to the SBA and for the
Management, Chief Counsel’s Office).
expenses of the Receivership. Effective
SUPPLEMENTARY INFORMATION: The
March 20, 2017, the SBA revoked the
following is a summary of the
license that it had granted to applicant.
application. The complete application
6. On June 28, 2017, the District Court
may be obtained via the Commission’s
entered an order that terminated the
website by searching for the file
Receivership and discharged all claims
number, or for an applicant using the
and obligations of applicant other than
Company name box, at https://
www.sec.gov/search/search.htm or by
1 Applicant’s outstanding shares of common stock
are traded on the Pink® Open Market.
calling (202) 551–8090.
SECURITIES AND EXCHANGE
COMMISSION
PO 00000
Frm 00109
Fmt 4703
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]]>Agencies
[Federal Register Volume 85, Number 47 (Tuesday, March 10, 2020)]
[Notices]
[Pages 13962-13965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04788]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88320; File No. SR-NASDAQ-2020-011]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Amend Rules 4702(b)(14) and
(b)(15) To Shorten the Holding Period Requirements for Midpoint
Extended Life Orders and Midpoint Extended Life Orders Plus Continuous
Book
March 4, 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 February 26, 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.
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\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 Rules 4702(b)(14) and (b)(15) of the
Exchange's Rulebook to shorten the holding period requirements for
Midpoint Extended Life Orders and Midpoint Extended Life Orders Plus
Continuous Book.
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.
[[Page 13963]]
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 Rules 4702(b)(14) and (15) of the
Exchange's Rulebook to shorten the holding period requirements for its
Midpoint Extended Life Order (``M-ELO'') and Midpoint Extended Life
Order Plus Continuous Book (``M-ELO+CB'') Order Types.
In 2018, the Exchange introduced the M-ELO, which is a Non-
Displayed Order priced at the Midpoint between the National Best Bid
and Offer (``NBBO'') and which is eligible for execution only against
other eligible M-ELOs and only after a minimum of one-half second
passes from the time that the System accepts the order (the ``Holding
Period'').\3\ In 2019, the Exchange introduced the M-ELO+CB, which
closely resembles the M-ELO, except that a M-ELO+CB may execute at the
midpoint of the NBBO, not only against other eligible M-ELOs (and M-
ELO+CBs), but also against Non-Displayed Orders with Midpoint Pegging
and Midpoint Peg Post-Only Orders (``Midpoint Orders'') that rest on
the Continuous Book for at least one-half second and have Midpoint
Trade Now enabled.\4\ For both M-ELOs and M-ELO+CBs, the Holding Period
is the same length of time.
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\3\ See Securities Exchange Act Release No. 34-82825 (March 7,
2018), 83 FR 10937 (March 13, 2018) (SR-NASDAQ-2017-074) (``M-ELO
Approval Order'').
\4\ See Securities Exchange Act Release No. 34-86938 (September
11, 2019), 84 FR 48978 (September 17, 2019) (SR-NASDAQ-2019-048)
(``M-ELO+CB Approval Order'').
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When the Exchange designed M-ELO, it set the length of the Holding
Period at one-half second because it determined that this time period
would be sufficient to ensure that likeminded investors would interact
only with each other, and with minimal market impacts. Additionally,
the Exchange chose one-half second because it was then, and it remains
today, a time period that is significantly longer than the delay
mechanisms that other exchanges employ for similar purposes, such as
the IEX 350 microsecond speed bump. The Exchange believed that the
longer length of the M-ELO Holding Period and its simplicity in design
would provide greater protection for participants than they could
achieve through competing delay mechanisms.
Although the Holding Period requirement is a key design element of
both the M-ELO and the M-ELO+CB, the length of that Holding Period is
not sacrosanct. After adopting the M-ELO, the Exchange studied the
actual use and performance of M-ELOs, as well as customer feedback, and
make refinements, as necessary, to improve its operation and
effectiveness. Indeed, such study and feedback is what prompted the
Exchange last year to introduce the M-ELO+CB Order Type as well as to
enhance M-ELO by permitting odd-lot order sizes.\5\
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\5\ See Securities Exchange Act Release No. 34-86416 (July 19,
2019), 84 FR 35918 (July 25, 2019) (SR-NASDAQ-2019-044).
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Now, after observing M-ELO and M-ELO+CB trading over the past two
years, and after gathering feedback from market participants, in
particular those that trade with a longer time horizon and who are
concerned with market impact, the Exchange has determined that the
length of the Holding Period can and should be re-calibrated. Although
the Exchange designed M-ELO and M-ELO+CB for use by market participants
that are less concerned with achieving rapid executions of their Orders
than are other participants, that is not to say that M-ELO and M-ELO+CB
users are indifferent about the length of time in which their M-ELOs
and M-ELO+CBs must wait before they are eligible for execution. Indeed,
participants have informed the Exchange that in certain circumstances,
such as when they seek to trade symbols that on average have a lower
time-to-execution than a half-second, they are reticent to enter M-ELOs
or M-ELO+CBs because even though they want the protections that M-ELO
and M-ELO+CB provide, the associated Holding Periods for these Order
Types are too long and present countervailing risks. That is, the
Holding Periods are longer than necessary and, during the residual
portion of the Holding Periods, participants risk losing out on
favorable execution opportunities that would otherwise be available to
them had they placed a non-MELO order. The Exchange also notes that
many institutional routing strategies recalibrate using a ``heatmap''
where they will route an order based on where trade activity is
occurring, at times; this recalibration occurs prior to the completion
of the M-ELO and M-ELO+CB Holding Periods. For such participants, the
opportunity cost of missed execution opportunities may outweigh the
protective benefits that M-ELOs and M-ELO+CBs provide.
Based upon this feedback, the Exchange studied the potential
effects of reducing the length of the Holding Periods for both M-ELOs
and M-ELO+CBs (as well as for Midpoint Orders that would execute
against M-ELO+CBs). Ultimately, the Exchange determined that it could
reduce the Holding Periods to 10 milliseconds without compromising the
protective power that M-ELO and M-ELO+CB are intended to provide to
participants and investors. Indeed, the Exchange examined each of its
historical M-ELO executions to determine at what Midpoints of the NBBO
the M-ELOs would have executed if their Holding Periods had been
shorter than one-half second (500 milliseconds). After examining the
historical effects of shorter Holding Periods of between 10
milliseconds and 400 milliseconds, the Exchange determined that a
reduction of the M-ELO Holding Period to as short as 10 milliseconds
would have caused an average impact on markouts of only 0.10 basis
points (across all symbols). In other words, compared to the execution
price of an average M-ELO with a one-half second Holding Period, the
Exchange found that a M-ELO with a 10 millisecond Holding Period would
have had an average post-execution impact that was only a tenth of a
basis point per share--a difference in protective effect that is
immaterial.\6\ Thus, the Exchange determined that shortening the
Holding Periods to 10 milliseconds for M-ELOs and M-ELO+CBs would
increase the efficacy of the mechanism while not undermining the power
of those Order Types to fulfill their underlying purpose of minimizing
market impacts. The Exchange notes that, even at a length of 10
milliseconds, the Holding Periods still will be as or more effective
than the delay mechanisms that competing exchanges employ, such that
the M-ELO and M-ELO+CB would remain among the highest-performing order
types available to market participants. At the same time, the Exchange
determined that a reduction in the Holding Periods to 10 milliseconds
would dramatically add to the circumstances in which M-ELOs and M-
ELO+CBs would be useful to participants. Accordingly, the Exchange
proposes to amend Rules 4702(b)(14) and (15) to decrease to 10
milliseconds the length of the Holding Periods for M-ELOs and M-ELO+CB,
along with the length of the corresponding resting period for Midpoint
Orders on the Continuous Book that are eligible to interact with M-
ELO+CBs.
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\6\ See Nasdaq, ``The Midpoint Extended Life Order (M-ELO); M-
ELO Holding Period,'' available at https://www.nasdaq.com/articles/the-midpoint-extended-life-order-m-elo%3A-m-elo-holding-period-2020-02-13 (analyzing effects of shortened Holding Periods on M-ELO
performance).
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[[Page 13964]]
The Exchange intends to make the proposed change effective for M-
ELOs and M-ELO+CBs in the Second Quarter of 2020. The Exchange will
publish a Trader Alert at least 14 days in advance of making the
proposed change effective.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ 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,
by allowing for more widespread use of M-ELOs and M-ELO+CBs.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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When the Commission approved the M-ELO and the M-ELO+CB, it
determined that these Order Types are consistent with the Act because
they ``could create additional and more efficient trading opportunities
on the Exchange for investors with longer investment time horizons,
including institutional investors, and could provide these investors
with an ability to limit the information leakage and the market impact
that could result from their orders.'' \9\ Nothing about the Exchange's
proposal should cause the Commission to revisit or rethink this
determination. Indeed, the proposal will not alter the fundamental
design of these Order Types, the manner in which they operate, or their
effects.
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\9\ M-ELO Approval Order, supra 83 FR at 10938-39; M-ELO+CB
Approval Order, supra, 84 FR at 48980.
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Even with shortened 10 millisecond Holding Periods, M-ELOs and M-
ELO+CBs will continue to provide their users with protection against
information leakage and adverse selection--and they will do so at
levels which are substantially undiminished from that which they
provide now.\10\ The 10 millisecond Holding Periods, moreover, will
remain longer than any delay mechanisms which the Exchange's
competitors presently employ.
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\10\ See note 6, supra.
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At the same time, however, the proposal will benefit market
participants and investors by reducing the opportunity costs of
utilizing M-ELOs and M-ELO+CBs. The proposal, in other words, will re-
calibrate the lengths of the Holding Periods so that M-ELOs and M-
ELO+CBs will operate in the ``Goldilocks'' zone--their Holding Periods
will not be so short as to render them unable to provide meaningful
protections against information leakage and adverse selection, but the
Holding Periods also will not be too long so as to cause participants
and investors to miss out on favorable execution opportunities. Nasdaq
believes the proposal will render M-ELOs and M-ELO+CBs more useful and
attractive to market participants and investors, and this increased
utility and attractiveness, in turn, will spur an increase in M-ELO and
M-ELO+CB use cases on the Exchange, both from new and existing users of
M-ELOs and M-ELO+CBs. Ultimately, the proposal should enhance market
quality by opening up more use cases for midpoint executions on the
Exchange.
The Exchange notes that use of M-ELOs and M-ELO+CBs remains
voluntary for all market participants. Accordingly, if any market
participant feels that the shortened Holding Period is still too long
or too short or because competing venues offer more attractive delay
mechanisms, then the participants are free to pursue other trading
strategies or utilize other trading venues. They need not utilize M-
ELOs or M-ELO+CBs.
Finally, the Exchange notes that it will continue to conduct real-
time surveillance to monitor the use of M-ELOs and M-ELO+CBs to ensure
that such usage remains appropriately tied to the intent of the Order
Types. If, as a result of such surveillance, the Exchange determines
that the shortened Holding Periods do not serve their intended
purposes, or adversely impact market quality, then the Exchange will
seek to make further re-calibrations.
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. To the contrary, the Exchange
believes that this proposal will promote the competitiveness of the
Exchange by rendering its M-ELO and M-ELO+CB Order Types more
attractive to participants.
The Exchange adopted the M-ELO and M-ELO+CB as pro-competitive
measures intended to increase participation on the Exchange by allowing
certain market participants that may currently be underserved on
regulated exchanges to compete based on elements other than speed. The
proposed change continues to achieve this purpose. With shortened 10
millisecond Holding Periods, both M-ELOs and M-ELO+CBs will afford
their users with a level of protection from information leakage and
adverse selection that is not materially different from what they
presently provide.\11\ At the same time, the shortened Holding Period
will increase opportunities to interact with other like-minded
investors with longer time horizons while also lowering the opportunity
costs for participants that utilize M-ELOs and M-ELO+CBs, particularly
for securities that trade within the ``Goldilocks'' zone. In sum, the
proposed changes will not burden competition, but instead may promote
competition for liquidity in M-ELOs and M-ELO+CBs by broadening the
circumstances in which market participants may find such Orders to be
useful. With the proposed changes, market participants will be more
likely to determine that the benefits of entering M-ELOs and M-ELO+CBs
outweigh the risks of doing so.
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\11\ See id.
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The proposed change will not place a burden on competition among
market venues, as any market may adopt an order type that operates
similarly to a M-ELO or a M-ELO+CB with a 10 millisecond Holding
Period.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 13965]]
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-2020-011 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-2020-011. 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-2020-011, and should be submitted
on or before March 31, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04788 Filed 3-9-20; 8:45 am]
BILLING CODE 8011-01-P
