Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Adopt a New “Early Market On Close” Order Type, 44333-44337 [2020-15792]
Download as PDF
<![CDATA[
Federal Register / Vol. 85, No. 141 / Wednesday, July 22, 2020 / Notices
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: July 16, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15797 Filed 7–21–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89331; File No. SR–
NASDAQ–2019–091]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Withdrawal of Proposed Rule Change
To Adopt a New Rule Concerning
Nasdaq’s Ability To Request
Information From a Listed Company
Regarding the Number of Unrestricted
Publicly Held Shares in Certain
Circumstances and Halt Trading in the
Company’s Security Upon the
Request, and in Certain Circumstances
Request a Plan To Increase the
Number of Unrestricted Publicly Held
Shares To an Amount That Is Higher
Than the Applicable Publicly Held
Shares Requirement
July 16, 2020.
jbell on DSKJLSW7X2PROD with NOTICES
On November 22, 2019, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt a rule specifying
Nasdaq’s ability to request information
from a listed company regarding the
number of unrestricted publicly held
shares when Nasdaq observes unusual
trading characteristics in a security or a
company announces an event that may
cause a contracting in the number of
unrestricted publicly held shares, halt
trading in such company’s securities
upon such a request, and potentially
request a listed company to increase its
number of unrestricted publicly held
shares.
The proposed rule change was
published for comment in the Federal
Register on December 12, 2019.3 On
January 24, 2020, pursuant to Section
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87677
(December 6, 2019), 84 FR 67974 (December 12,
2019). Comment on the proposed rule change can
be found at: https://www.sec.gov/comments/srnasdaq-2019-091/srnasdaq2019091.htm.
2 17
VerDate Sep<11>2014
18:11 Jul 21, 2020
Jkt 250001
19(b(2) of the Exchange Act,4 the
Commission designated a longer period
within which to either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
On March 4, 2020, the Commission
instituted proceedings under Section
19(b)(2)(B) of the Exchange Act 6 to
determine whether to approve or
disapprove the proposed rule change.7
On June 5, 2020, the Commission
designated a longer period for
Commission action on the proposed rule
change.8 On July 8, 2020, the Exchange
withdrew the proposed rule change
(SR–NASDAQ–2019–091).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15791 Filed 7–21–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89329; File No. SR–BOX–
2020–16]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Designation
of Longer Period for Commission
Action on a Proposed Rule Change in
Connection With the Proposed
Commencement of Operations of
Boston Security Token Exchange LLC
(‘‘BSTX’’) as a Facility of the Exchange
July 16, 2020.
On May 21, 2020, BOX Exchange LLC
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change in
connection with the proposed
commencement of operations of Boston
Security Token Exchange LLC as a
facility of the Exchange. The proposed
rule change was published for comment
U.S.C. 78s(b)(2).
Securities Exchange Act Release No. 88028
(January 24, 2020), 85 FR 5500 (January 30, 2020).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 88315,
85 FR 13954 (March 10, 2020).
8 See Securities Exchange Act Release No. 89206,
85 FR 35687 (June 11, 2020). The Commission
designated August 8, 2020, as the date by which it
should approve or disapprove the proposed rule
change.
9 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
44333
in the Federal Register on June 1, 2020.3
The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is July 16, 2020.
The Commission hereby is extending
the 45-day time period for Commission
action on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates August 30, 2020, as the date
by which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–BOX–2020–16).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15790 Filed 7–21–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89334; File No. SR–
NASDAQ–2020–037]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Adopt a New ‘‘Early Market On Close’’
Order Type
4 15
5 See
Frm 00066
Fmt 4703
Sfmt 4703
July 16, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
3 See Securities Exchange Act Release No. 88949
(May 26, 2020), 85 FR 33258.
4 15 U.S.C. 78s(b)(2).
5 Id.
6 17 CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
E:\FR\FM\22JYN1.SGM
22JYN1
44334
Federal Register / Vol. 85, No. 141 / Wednesday, July 22, 2020 / Notices
notice is hereby given that on July 6,
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 adopt the
‘‘Early Market On Close’’ as a new order
type. The Exchange also proposes to
amend Rule 4754 and make conforming
changes to Rules 4703 and 4756.
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.
jbell on DSKJLSW7X2PROD with NOTICES
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 4702 to adopt a new Order Type,
entitled the ‘‘Early Market on Close’’ or
‘‘EMOC’’ Order Type. Generally
speaking, the Exchange intends for the
EMOC to be an additional offering to its
Market On Close (‘‘MOC’’) Orders, as
well as a competitive alternative to the
newly-approved Cboe BZX Market-OnClose order type (the ‘‘Cboe Market
Close’’ or ‘‘CMC’’).3 That is, EMOC
would enable market participants that
wish to buy or sell Nasdaq-listed
securities as part of the Nasdaq closing
auction (the ‘‘Nasdaq Closing Cross’’),
3 See Securities Exchange Act Release No. 34–
88008 (January 21, 2020), 85 FR 4726 (January 27,
2020) (SR-BatsBZX–2017–34) (the ‘‘BZX Approval
Order’’).
VerDate Sep<11>2014
18:11 Jul 21, 2020
Jkt 250001
and to obtain matched executions at the
Nasdaq Closing Cross price, the ability
to do so at a time that is earlier than
what is possible with ordinary MOC
Orders.4
Specifically, an EMOC Order would
be an unpriced Order to buy or sell a
Nasdaq-listed security that the Exchange
would seek to match with other like
orders at 3:35 p.m. Eastern Time (‘‘ET’’).
If so matched, the Exchange would
execute the Order as part of the Nasdaq
Closing Cross.
If no such match occurs, the Exchange
would automatically convert any
unmatched shares of EMOC Orders into
a regular MOC Order for participation in
the Nasdaq Closing Cross, while
retaining their original time priority.
Once converted, unmatched shares of
EMOC Orders would thereafter be
handled in the same manner as an
ordinary MOC Order. Notably, a
participant would be able to cancel or
modify a converted EMOC Order for any
reason after 3:35 and before 3:50 p.m.
ET, just as it would for a MOC Order,
and the participant could cancel or
modify the converted EMOC Order
between 3:50 and prior to 3:58 p.m. ET
to correct a legitimate error in the Order,
again, just as it could with a MOC
Order. Converted shares of EMOC
Orders would execute in the Nasdaq
Closing Cross in the same manner and
with the same priority as does a MOC
Order and it would be subject to the
same auxiliary, LULD Closing Cross,
and contingency procedures as are MOC
Orders. Like MOC Orders, converted
shares of EMOC Orders that remain
unexecuted after the Closing Cross will
be canceled.
The Exchange proposes to allow its
members to enter, cancel, or modify
EMOC Orders beginning at 9:30 a.m.
ET 5 and until immediately prior to 3:35
p.m. ET (or 25 minutes prior to the early
closing time on a day when Nasdaq
closes early). Exchange members would
not be able to enter, cancel, or modify
4 Pursuant to Rule 4702(b)(11), a MOC is an Order
Type entered without a price that may be executed
only during the Nasdaq Closing Cross. MOC Orders
may be entered between 4 a.m. ET and immediately
prior to 3:55 p.m. ET. MOC Orders may be
cancelled and/or modified between 4 a.m. ET and
immediately prior to 3:50 p.m. ET. Between 3:50
p.m. ET and immediately prior to 3:58 p.m. ET, an
MOC Order can be cancelled and/or modified only
if the Participant requests that Nasdaq correct a
legitimate error in the Order (e.g., Side, Size,
Symbol, or Price, or duplication of an Order). MOC
Orders cannot be cancelled or modified at or after
3:58 p.m. ET for any reason. An MOC Order shall
execute only at the price determined by the Nasdaq
Closing Cross.
5 Nasdaq believes that accepting EMOC orders
beginning at 9:30 a.m., is appropriate because it
observes that this is approximately the time that its
members typically begin to enter regular Market on
Close Orders.
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
EMOC Orders at or after 3:35 p.m. (or
at or after 25 minutes prior to the early
closing time on a day when Nasdaq
closes early).6
Pursuant to proposed Rule
4702(b)(16)(B), a Participant would be
able to designate the Time-in-Force for
an EMOC Order either by designating a
Time-in-Force of ‘‘On Close’’ or by
entering a Time-in-Force of IOC and
flagging the Order to participate in the
Nasdaq Closing Cross.
When entering short sale EMOC
Orders, Exchange members would be
required to mark them as ‘‘short’’ or
‘‘short exempt’’ pursuant to Rule
4702(a). The Exchange’s System would
reject EMOC Orders marked ‘‘short,’’
while it would accept and process
EMOC Orders marked ‘‘short exempt’’
in accordance with Rule 4763. This will
ensure that the Exchange is able to
comply with its obligations under Rule
201 of Regulation SHO in the event that
a short sale circuit breaker is triggered
and the Nasdaq Closing Cross price is
not above the national best bid.7
At 3:35 p.m. ET (or 25 minutes prior
to the early closing time on a day when
Nasdaq closes early), the System would
match for execution all buy and sell
EMOC Orders entered into the System
with execution priority determined
based on time-received.
The Exchange would communicate
information about the size of matched
EMOC Orders as part of its Early Order
Imbalance Indicator (‘‘EOII’’) and Order
Imbalance Indicator (‘‘NOII’’).8
6 The QIX order entry protocol would not be
available for the entry of an EMOC because it is
used primarily for quoting purposes.
7 See BZX Approval Order, supra, 85 FR at 4752.
8 The NOII is a message that the Exchange
disseminates by electronic means, beginning at 3:55
p.m. ET (or 5 minutes prior to the early closing time
on a day when Nasdaq closes early), and which
contains information about MOC, LOC, IO, and
Close Eligible Interest and the price at which those
orders would execute at the time of dissemination.
See Rule 4754(a)(7). The information that the NOII
disseminates includes: (i) The ‘‘Current Reference
Price’’ (discussed below); (ii) the number of shares
represented by MOC, LOC, and IO orders that are
paired at the Current Reference Price; (iii) the size
of any ‘‘Imbalance’’ (i.e., the number of shares of
buy or sell MOC or LOC orders that cannot be
matched with other MOC, LOC, or IO order shares
at a particular price at any given time); (iv) the buy/
sell direction of any Imbalance; and (v) indicative
prices at which the Nasdaq Closing Cross would
occur if the Nasdaq Closing Cross were to occur at
that time and the percent by which the indicative
prices are outside the then current Nasdaq Market
Center best bid or best offer, whichever is closer.
See id.
The EOII is an earlier message that the Exchange
disseminates by electronic means, beginning at 3:50
p.m. ET (or 10 minutes prior to the early closing
time on a day when Nasdaq closes early), and
which contains all of the same categories of
information as does the NOII, except that it
excludes indicative pricing information. See Rule
4754(a)(10).
E:\FR\FM\22JYN1.SGM
22JYN1
Federal Register / Vol. 85, No. 141 / Wednesday, July 22, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
However, the Exchange would not
discretely disclose the number of
matched EMOC shares in the EOII and
NOII. Instead, the Exchange would fold
this information into its disclosure of
the aggregate number of shares that have
been paired at the then Current
Reference Price.9 In other words, the
EOII and NOII would provide an
aggregate disclosure of the numbers of
paired shares that represent EMOC,
regular MOCs, Limit on Close, and
Imbalance Only Orders. The disclosure
would not specify the particular Order
Types that the paired shares represent.10
All matched buy and sell EMOC
Orders would remain in the System
until the Nasdaq Closing Cross occurs.
The System would execute all
previously matched buy and sell EMOC
orders, at the Nasdaq Closing Cross
Price, when the Nasdaq Closing Cross
occurs.
If the Nasdaq Closing Cross price is
selected and fewer than all MOC, LOC,
IO and Close Eligible Interest would be
executed, then Orders will be executed
at the Nasdaq Closing Cross price, with
The Exchange proposes to amend the definitions
of the terms NOII and EOII so that the Rules state
that they will include information about EMOC
Orders and the price at which those Orders would
execute at the time of dissemination.
Nasdaq also proposes to amend the definition of
‘‘Imbalance’’ to include the number of shares of buy
or sell EMOC Orders that cannot be matched with
other EMOC Order shares at a particular price at
any given time. Nasdaq notes that this definitional
change will have no practical effect because shares
of EMOC Orders that are not matched at 3:35 p.m.
would be converted into regular MOC Orders.
9 As set forth in Rule 4754(a)(7), the term
‘‘Current Reference Price’’ means: (i) the single
price that is at or within the current Nasdaq Market
Center best bid and offer at which the maximum
number of shares of MOC, LOC, and IO orders can
be paired; or (ii) if more than one such price exists,
the price that minimizes any imbalance; or (iii) if
more than one such price exists, the entered price
at which shares will remain unexecuted in the
cross; or (iv) if more than one such price exists, the
price that minimizes the distance from the bid-ask
midpoint of the inside quotation prevailing at the
time of the order imbalance indicator
dissemination. The Exchange proposes to amend
the definition of the term ‘‘Current Reference Price’’
so that it also includes shares representing EMOC
Orders (even though EMOC Orders would not affect
the calculation of the Current Reference Price due
to the fact that they would be matched prior to the
calculation of the Price). Nasdaq proposes similar
conforming changes to include EMOCs in the
definitions of the terms ‘‘Far Clearing Price’’ and
‘‘Near Clearing Price.’’
10 Nasdaq notes that in proposing to disseminate
paired EMOC share information as part of its EOII
and NOII, Nasdaq would afford market participants
time to absorb that information and to act on it in
advance of the Nasdaq Closing Cross. That said,
Nasdaq does not believe that market participants
would derive any particular benefit from knowing
which of the aggregate paired shares reflected in the
EOII or NOII are attributable to EMOC Orders; such
a disclosure would not contribute to price discovery
or otherwise materially impact participants’
decisions as to whether or not to participate in the
Nasdaq Closing Cross.
VerDate Sep<11>2014
18:11 Jul 21, 2020
Jkt 250001
previously matched EMOCs executing
first in priority, and then the remaining
Orders executing pursuant to the
existing priority set forth in Rule
4754(b)(3) (as renumbered, (b)(4)). If,
due to insufficient trading interest, no
Nasdaq Closing Cross occurs in a
security on a trading day, then the
Exchange would cancel all matched
EMOCs in the security.11
The Exchange also proposes to amend
Rule 4754 to account for EMOC Orders
in Nasdaq’s auxiliary procedures and
Limit-Up-Limit Down (‘‘LULD’’) Closing
Cross. First, in the event that Nasdaq
employs auxiliary procedures due to
extraordinary volumes in the Closing
Cross,12 Nasdaq proposes to subject
EMOC Orders to the same procedures
that would apply to regular MOC
Orders.13 Second, Nasdaq proposes to
subject EMOC Orders to the same
procedures that would apply to regular
MOC Orders in the event that it
conducts an LULD Closing Cross in a
security.14
When Systems disruptions prevent
the occurrence of the Nasdaq Closing
Cross in a security,15 such that Nasdaq
invokes its contingency procedures,
Nasdaq proposes to handle EMOC
Orders in the same manner that it
handles other open interest designated
for the Nasdaq close. That is, Nasdaq
proposes to cancel all EMOC orders in
the event that an impairment causes it
to invoke its contingency procedures
because any such impairment would
prevent Nasdaq from executing the
Closing Cross in the security. Moreover,
Nasdaq believes that it would be in the
best interest of participants for the
Exchange to cancel their matched
EMOCs so as to allow participants
determine how best to manage their
orders given the circumstances that
would exist under such a scenario.
Finally, Nasdaq notes that it proposes
to make conforming changes to various
provisions of the Rules, including Rule
11 If, as of the Closing Cross cut-off time, there are
matched EMOCs and a continuous market for a
security, but there is no other crossing interest, then
Nasdaq would conduct a Closing Cross with a
Closing Cross price determined pursuant to
4754(b)(2)(A). This reflects the same procedure that
the Exchange would follow in the event that the
only closing interest in a security consisted of
perfectly paired MOC Orders.
12 See Rule 4754(b)(5).
13 However, under proposed Rule 4754(b)(6)(A),
the auxiliary procedures would provide that Nasdaq
may end the order modification and cancellation
periods for EMOCs as early as 3:25 p.m., whereas
for MOCs, Nasdaq may end those periods as early
as 3:40 p.m.
14 See Rule 4754(b)(6). Nasdaq notes that paired
EMOC shares participating in an LULD Closing
Cross would be executed against each other, and
then other Order Types would execute in price/time
priority order.
15 See Rule 4754(b)(7).
PO 00000
Frm 00068
Fmt 4703
Sfmt 4703
44335
4703(a)(1), (c), and (l), and Rule 4756
(a)(3).
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,
because it is an additional offering to its
existing MOC Order type, and it will
provide for a competitive alternative to
the CMC order type. The proposed rule
change would further remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system by
promoting competition among national
securities exchanges in the execution of
market-on-close orders for Nasdaq-listed
securities at the Nasdaq Closing Cross
price.
Unlike CMCs, which siphon off orders
from the primary listing exchanges and
thereby threaten to undermine the
integrity of the primary listing
exchanges’ closing auction processes,
the EMOC Order Type would have no
such effects. Instead, EMOC Orders are
designed to help keep market-on-close
orders in Nasdaq-listed securities on
Nasdaq, which is sensible given that
Nasdaq is the primary listing market for
these securities and its Closing Cross
establishes their official closing prices.
The proposal would help to ensure that
Nasdaq is able to continue to conduct its
industry-leading Closing Cross auction
smoothly and efficiently, and without
undue complexity, to the benefit of all
participants.
Meanwhile, participants that choose
to utilize EMOC Orders could take
comfort in knowing that Nasdaq, unlike
BZX, is already experienced in
executing market on close orders in
Nasdaq-listed securities and that Nasdaq
has a track record of doing so
competently and reliably. Moreover,
because Nasdaq’s Closing Cross process
is subject to the Commission’s highest
regulatory standards for security,
integrity, reliability, and resiliency,
participants can feel at ease knowing
that Nasdaq will treat EMOC Orders
with the utmost care, and that the
Commission will hold Nasdaq
accountable if it fails to do so. The BZX
Market on Close process, on the other
16 15
17 15
E:\FR\FM\22JYN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
22JYN1
44336
Federal Register / Vol. 85, No. 141 / Wednesday, July 22, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
hand, is untested and subject to lower
regulatory standards.18
The Exchange also believes that its
proposed design of EMOC is equitable,
provides for a free and open market, and
is in the interests of investors and the
public and a national market system.
For example, Nasdaq believes that it is
equitable and in the interest of investors
to provide for unmatched shares of
EMOC Orders to convert to regular MOC
Orders at 3:35 p.m. because doing so
reduces the operational risk for market
participants relative to other alternatives
such as CMC as they would not have to
take additional action to submit new
MOC Orders should they remain
interested in participating in the Nasdaq
Closing Cross despite the lack of a
match. Meanwhile, participants that do
not wish to proceed with MOC Orders
in this instance would remain free to
cancel or modify their orders for at least
15 minutes after conversion.
Additionally, Nasdaq believes that it
is equitable and in the interest of
investors to cancel EMOC Orders in the
event that Nasdaq does not conduct a
Closing Cross because to do otherwise
would force market participants to
execute EMOC Orders at prices that may
be stale 19 and which may not reflect the
true market price for such securities.
Moreover, Nasdaq notes that this
proposal is the same as how Nasdaq
handles other open cross-only interest
when no Closing Cross occurs.
Nasdaq also believes that it is
equitable and facilitates a free and open
market to handle EMOC Orders
similarly to other Order Types in the
event of extraordinary volume at the
close, insufficient trading interest to
conduct an LULD Closing Cross in a
security following an LULD trading
pause, the occurrence of an LULD
Closing Cross in a security, and when
the Exchange applies contingency
procedures.
Lastly, Nasdaq believes that its
proposal facilitates a free and open
market incorporating into its EOII and
NOII publications the numbers of paired
18 See BZX Approval Order, supra, at 4734
(‘‘[T]he fact that closing auction systems are subject
to the heightened requirements of Regulation SCI
for critical SCI systems could encourage market
participants to send MOC orders to closing auctions
on the primary listing exchanges due to the
additional regulatory protections required of such
systems.’’).
19 If a disruption prevents the occurrence of
Nasdaq Closing Cross, then under contingency
procedures described in Rule 4754(b)(7), the
Exchange will execute orders at the Nasdaq Official
Closing Price, which may be, under certain
circumstances, the last consolidated last-sale
eligible trade price for a security during regular
trading hours or, if there were no such trades on
the day in question, the Nasdaq Official Closing
Price of the security on the prior trading day.
VerDate Sep<11>2014
18:11 Jul 21, 2020
Jkt 250001
shares of EMOC Orders in advance of
the Nasdaq Closing Cross. By including
EMOC paired shares information in the
EOII and NOII publications, Nasdaq will
ensure that market participants are
adequately informed about the depth of
interest in its Closing Cross at a point in
time when they are able to act on that
information by choosing whether to
participate in the Closing Cross. Nasdaq
notes that its proposal is consistent with
the interests of investors and the public
to simply add EMOC-related paired
shares to its aggregate EOII and NOII
disclosures of paired shares, rather than
to separately identify the number of
paired shares that are due to EMOC
Orders, because the Exchange does not
believe participants would gain any
valuable insights from a separate
disclosure. Nasdaq notes that it does not
separately identify paired shares that are
attributable to MOC or Limit on Close
Orders.
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. The
Exchange believes the proposal would
increase competition among exchanges
by offering a competitive alternative to
BZX’s Market-On-Close process. Indeed,
the proposal will offer market
participants an option to enter early
market on close orders for Nasdaq-listed
stocks, while providing the added
benefit of executing those orders in a
process that is recognized for its
reliability and which is more highlyregulated than is the BZX Market Close
process. Moreover, unlike other
offerings that siphon orders from the
price discovery process on the primary
market, Nasdaq’s proposal will not
contribute to the fragmentation of the
closing process for Nasdaq-listed
securities. Finally, EMOC would offer
participants reduced operational risk by
automatically converting their
unmatched EMOCs to MOCs at 3:35
p.m. and retaining its original time
priority, while still affording them the
opportunity to cancel converted orders
prior to the Closing Cross Cutoff Time.
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.
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2020–037 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–2020–037. 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
E:\FR\FM\22JYN1.SGM
22JYN1
Federal Register / Vol. 85, No. 141 / Wednesday, July 22, 2020 / Notices
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–2020–037, and
should be submitted on or before
August 12, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15792 Filed 7–21–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213
jbell on DSKJLSW7X2PROD with NOTICES
Extension:
Rule 17g–1and Form NRSRO SEC File No.
270–563, OMB Control No. 3235–0625
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 17g-1, Form
NRSRO and Instructions to Form
NRSRO under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.).1 The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget for
extension and approval.
Rule 17g–1, Form NRSRO and the
Instructions to Form NRSRO contain
certain recordkeeping and disclosure
requirements for NRSROs. Currently,
there are 9 credit rating agencies
registered as NRSROs with the
Commission. The Commission estimates
that the total burden for respondents to
comply with Rule 17g-1 and Form
NRSRO is 4,160 hours, which includes
one-time reporting burdens for new
registration applications, registration for
additional categories of credit ratings,
withdrawals of NRSRO applications,
and withdrawals of NRSRO registration.
20 17
1 See
CFR 200.30–3(a)(12).
17 CFR 240.17g-1 and 17 CFR 249b.300.
VerDate Sep<11>2014
18:11 Jul 21, 2020
Jkt 250001
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information on respondents; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
The Commission may not conduct or
sponsor a collection of information
unless it displays a currently valid
control number. No person shall be
subject to any penalty for failing to
comply with a collection of information
subject to the PRA that does not display
a valid Office of Management and
Budget (OMB) control number.
Please direct your written comments
to: Dave Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Cynthia
Roscoe, 100 F St. NE, Washington, DC
20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: July 16, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–15800 Filed 7–21–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension: Rule 0–2, Form ADV–NR SEC File
No. 270–214, OMB Control No. 3235–
0240
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for extension of the previously
approved collection of information
discussed below.
The title for the collection of
information is ‘‘Rule 0–2 and Form
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
44337
ADV–NR under the Investment Advisers
Act of 1940.’’ Rule 0–2 and Form ADV–
NR facilitate service of process on a
non-resident investment adviser, or on a
non-resident general partner or nonresident managing agent of an
investment adviser. Form ADV–NR
designates the Secretary of the
Commission, among others, as the nonresident general partner’s or nonresident managing agent’s agent for
service of process. The collection of
information is necessary for us to obtain
appropriate consent to permit the
Commission and other parties to bring
actions against non-resident partners
and agents for violations of the federal
securities laws and to enable the
commencement of legal and/or
regulatory actions against investment
advisers that are doing business in the
United States, but are not residents. The
respondents to this information
collection would be each non-resident
general partner or non-resident
managing agent of an SEC-registered
investment adviser and each nonresident general partner or non-resident
managing agent of an exempt reporting
adviser. The Commission has estimated
that compliance with the requirement to
complete Form ADV–NR imposes a total
burden of approximately 1.0 hour for an
adviser. Based on our experience with
these filings, we estimate that we will
receive 53 Form ADV–NR filings
annually. Based on the 1.0 hour per
respondent estimate, the Commission
staff estimates a total annual burden of
53 hours for this collection of
information.
Rule 0–2 and Form ADV–NR do not
require recordkeeping or records
retention. The collection of information
requirements under the rule and form is
mandatory. The information collected
pursuant to Rule 0–2 and Form ADV–
NR is a filing with the Commission.
This filing is not kept confidential and
must be preserved until at least three
years after termination of the enterprise.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid control
number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
E:\FR\FM\22JYN1.SGM
22JYN1
]]>Agencies
[Federal Register Volume 85, Number 141 (Wednesday, July 22, 2020)]
[Notices]
[Pages 44333-44337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15792]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89334; File No. SR-NASDAQ-2020-037]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt a New ``Early Market
On Close'' Order Type
July 16, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\
[[Page 44334]]
notice is hereby given that on July 6, 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt the ``Early Market On Close'' as a
new order type. The Exchange also proposes to amend Rule 4754 and make
conforming changes to Rules 4703 and 4756.
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 4702 to adopt a new Order Type,
entitled the ``Early Market on Close'' or ``EMOC'' Order Type.
Generally speaking, the Exchange intends for the EMOC to be an
additional offering to its Market On Close (``MOC'') Orders, as well as
a competitive alternative to the newly-approved Cboe BZX Market-On-
Close order type (the ``Cboe Market Close'' or ``CMC'').\3\ That is,
EMOC would enable market participants that wish to buy or sell Nasdaq-
listed securities as part of the Nasdaq closing auction (the ``Nasdaq
Closing Cross''), and to obtain matched executions at the Nasdaq
Closing Cross price, the ability to do so at a time that is earlier
than what is possible with ordinary MOC Orders.\4\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 34-88008 (January
21, 2020), 85 FR 4726 (January 27, 2020) (SR-BatsBZX-2017-34) (the
``BZX Approval Order'').
\4\ Pursuant to Rule 4702(b)(11), a MOC is an Order Type entered
without a price that may be executed only during the Nasdaq Closing
Cross. MOC Orders may be entered between 4 a.m. ET and immediately
prior to 3:55 p.m. ET. MOC Orders may be cancelled and/or modified
between 4 a.m. ET and immediately prior to 3:50 p.m. ET. Between
3:50 p.m. ET and immediately prior to 3:58 p.m. ET, an MOC Order can
be cancelled and/or modified only if the Participant requests that
Nasdaq correct a legitimate error in the Order (e.g., Side, Size,
Symbol, or Price, or duplication of an Order). MOC Orders cannot be
cancelled or modified at or after 3:58 p.m. ET for any reason. An
MOC Order shall execute only at the price determined by the Nasdaq
Closing Cross.
---------------------------------------------------------------------------
Specifically, an EMOC Order would be an unpriced Order to buy or
sell a Nasdaq-listed security that the Exchange would seek to match
with other like orders at 3:35 p.m. Eastern Time (``ET''). If so
matched, the Exchange would execute the Order as part of the Nasdaq
Closing Cross.
If no such match occurs, the Exchange would automatically convert
any unmatched shares of EMOC Orders into a regular MOC Order for
participation in the Nasdaq Closing Cross, while retaining their
original time priority. Once converted, unmatched shares of EMOC Orders
would thereafter be handled in the same manner as an ordinary MOC
Order. Notably, a participant would be able to cancel or modify a
converted EMOC Order for any reason after 3:35 and before 3:50 p.m. ET,
just as it would for a MOC Order, and the participant could cancel or
modify the converted EMOC Order between 3:50 and prior to 3:58 p.m. ET
to correct a legitimate error in the Order, again, just as it could
with a MOC Order. Converted shares of EMOC Orders would execute in the
Nasdaq Closing Cross in the same manner and with the same priority as
does a MOC Order and it would be subject to the same auxiliary, LULD
Closing Cross, and contingency procedures as are MOC Orders. Like MOC
Orders, converted shares of EMOC Orders that remain unexecuted after
the Closing Cross will be canceled.
The Exchange proposes to allow its members to enter, cancel, or
modify EMOC Orders beginning at 9:30 a.m. ET \5\ and until immediately
prior to 3:35 p.m. ET (or 25 minutes prior to the early closing time on
a day when Nasdaq closes early). Exchange members would not be able to
enter, cancel, or modify EMOC Orders at or after 3:35 p.m. (or at or
after 25 minutes prior to the early closing time on a day when Nasdaq
closes early).\6\
---------------------------------------------------------------------------
\5\ Nasdaq believes that accepting EMOC orders beginning at 9:30
a.m., is appropriate because it observes that this is approximately
the time that its members typically begin to enter regular Market on
Close Orders.
\6\ The QIX order entry protocol would not be available for the
entry of an EMOC because it is used primarily for quoting purposes.
---------------------------------------------------------------------------
Pursuant to proposed Rule 4702(b)(16)(B), a Participant would be
able to designate the Time-in-Force for an EMOC Order either by
designating a Time-in-Force of ``On Close'' or by entering a Time-in-
Force of IOC and flagging the Order to participate in the Nasdaq
Closing Cross.
When entering short sale EMOC Orders, Exchange members would be
required to mark them as ``short'' or ``short exempt'' pursuant to Rule
4702(a). The Exchange's System would reject EMOC Orders marked
``short,'' while it would accept and process EMOC Orders marked ``short
exempt'' in accordance with Rule 4763. This will ensure that the
Exchange is able to comply with its obligations under Rule 201 of
Regulation SHO in the event that a short sale circuit breaker is
triggered and the Nasdaq Closing Cross price is not above the national
best bid.\7\
---------------------------------------------------------------------------
\7\ See BZX Approval Order, supra, 85 FR at 4752.
---------------------------------------------------------------------------
At 3:35 p.m. ET (or 25 minutes prior to the early closing time on a
day when Nasdaq closes early), the System would match for execution all
buy and sell EMOC Orders entered into the System with execution
priority determined based on time-received.
The Exchange would communicate information about the size of
matched EMOC Orders as part of its Early Order Imbalance Indicator
(``EOII'') and Order Imbalance Indicator (``NOII'').\8\
[[Page 44335]]
However, the Exchange would not discretely disclose the number of
matched EMOC shares in the EOII and NOII. Instead, the Exchange would
fold this information into its disclosure of the aggregate number of
shares that have been paired at the then Current Reference Price.\9\ In
other words, the EOII and NOII would provide an aggregate disclosure of
the numbers of paired shares that represent EMOC, regular MOCs, Limit
on Close, and Imbalance Only Orders. The disclosure would not specify
the particular Order Types that the paired shares represent.\10\
---------------------------------------------------------------------------
\8\ The NOII is a message that the Exchange disseminates by
electronic means, beginning at 3:55 p.m. ET (or 5 minutes prior to
the early closing time on a day when Nasdaq closes early), and which
contains information about MOC, LOC, IO, and Close Eligible Interest
and the price at which those orders would execute at the time of
dissemination. See Rule 4754(a)(7). The information that the NOII
disseminates includes: (i) The ``Current Reference Price''
(discussed below); (ii) the number of shares represented by MOC,
LOC, and IO orders that are paired at the Current Reference Price;
(iii) the size of any ``Imbalance'' (i.e., the number of shares of
buy or sell MOC or LOC orders that cannot be matched with other MOC,
LOC, or IO order shares at a particular price at any given time);
(iv) the buy/sell direction of any Imbalance; and (v) indicative
prices at which the Nasdaq Closing Cross would occur if the Nasdaq
Closing Cross were to occur at that time and the percent by which
the indicative prices are outside the then current Nasdaq Market
Center best bid or best offer, whichever is closer. See id.
The EOII is an earlier message that the Exchange disseminates
by electronic means, beginning at 3:50 p.m. ET (or 10 minutes prior
to the early closing time on a day when Nasdaq closes early), and
which contains all of the same categories of information as does the
NOII, except that it excludes indicative pricing information. See
Rule 4754(a)(10).
The Exchange proposes to amend the definitions of the terms
NOII and EOII so that the Rules state that they will include
information about EMOC Orders and the price at which those Orders
would execute at the time of dissemination.
Nasdaq also proposes to amend the definition of ``Imbalance''
to include the number of shares of buy or sell EMOC Orders that
cannot be matched with other EMOC Order shares at a particular price
at any given time. Nasdaq notes that this definitional change will
have no practical effect because shares of EMOC Orders that are not
matched at 3:35 p.m. would be converted into regular MOC Orders.
\9\ As set forth in Rule 4754(a)(7), the term ``Current
Reference Price'' means: (i) the single price that is at or within
the current Nasdaq Market Center best bid and offer at which the
maximum number of shares of MOC, LOC, and IO orders can be paired;
or (ii) if more than one such price exists, the price that minimizes
any imbalance; or (iii) if more than one such price exists, the
entered price at which shares will remain unexecuted in the cross;
or (iv) if more than one such price exists, the price that minimizes
the distance from the bid-ask midpoint of the inside quotation
prevailing at the time of the order imbalance indicator
dissemination. The Exchange proposes to amend the definition of the
term ``Current Reference Price'' so that it also includes shares
representing EMOC Orders (even though EMOC Orders would not affect
the calculation of the Current Reference Price due to the fact that
they would be matched prior to the calculation of the Price). Nasdaq
proposes similar conforming changes to include EMOCs in the
definitions of the terms ``Far Clearing Price'' and ``Near Clearing
Price.''
\10\ Nasdaq notes that in proposing to disseminate paired EMOC
share information as part of its EOII and NOII, Nasdaq would afford
market participants time to absorb that information and to act on it
in advance of the Nasdaq Closing Cross. That said, Nasdaq does not
believe that market participants would derive any particular benefit
from knowing which of the aggregate paired shares reflected in the
EOII or NOII are attributable to EMOC Orders; such a disclosure
would not contribute to price discovery or otherwise materially
impact participants' decisions as to whether or not to participate
in the Nasdaq Closing Cross.
---------------------------------------------------------------------------
All matched buy and sell EMOC Orders would remain in the System
until the Nasdaq Closing Cross occurs. The System would execute all
previously matched buy and sell EMOC orders, at the Nasdaq Closing
Cross Price, when the Nasdaq Closing Cross occurs.
If the Nasdaq Closing Cross price is selected and fewer than all
MOC, LOC, IO and Close Eligible Interest would be executed, then Orders
will be executed at the Nasdaq Closing Cross price, with previously
matched EMOCs executing first in priority, and then the remaining
Orders executing pursuant to the existing priority set forth in Rule
4754(b)(3) (as renumbered, (b)(4)). If, due to insufficient trading
interest, no Nasdaq Closing Cross occurs in a security on a trading
day, then the Exchange would cancel all matched EMOCs in the
security.\11\
---------------------------------------------------------------------------
\11\ If, as of the Closing Cross cut-off time, there are matched
EMOCs and a continuous market for a security, but there is no other
crossing interest, then Nasdaq would conduct a Closing Cross with a
Closing Cross price determined pursuant to 4754(b)(2)(A). This
reflects the same procedure that the Exchange would follow in the
event that the only closing interest in a security consisted of
perfectly paired MOC Orders.
---------------------------------------------------------------------------
The Exchange also proposes to amend Rule 4754 to account for EMOC
Orders in Nasdaq's auxiliary procedures and Limit-Up-Limit Down
(``LULD'') Closing Cross. First, in the event that Nasdaq employs
auxiliary procedures due to extraordinary volumes in the Closing
Cross,\12\ Nasdaq proposes to subject EMOC Orders to the same
procedures that would apply to regular MOC Orders.\13\ Second, Nasdaq
proposes to subject EMOC Orders to the same procedures that would apply
to regular MOC Orders in the event that it conducts an LULD Closing
Cross in a security.\14\
---------------------------------------------------------------------------
\12\ See Rule 4754(b)(5).
\13\ However, under proposed Rule 4754(b)(6)(A), the auxiliary
procedures would provide that Nasdaq may end the order modification
and cancellation periods for EMOCs as early as 3:25 p.m., whereas
for MOCs, Nasdaq may end those periods as early as 3:40 p.m.
\14\ See Rule 4754(b)(6). Nasdaq notes that paired EMOC shares
participating in an LULD Closing Cross would be executed against
each other, and then other Order Types would execute in price/time
priority order.
---------------------------------------------------------------------------
When Systems disruptions prevent the occurrence of the Nasdaq
Closing Cross in a security,\15\ such that Nasdaq invokes its
contingency procedures, Nasdaq proposes to handle EMOC Orders in the
same manner that it handles other open interest designated for the
Nasdaq close. That is, Nasdaq proposes to cancel all EMOC orders in the
event that an impairment causes it to invoke its contingency procedures
because any such impairment would prevent Nasdaq from executing the
Closing Cross in the security. Moreover, Nasdaq believes that it would
be in the best interest of participants for the Exchange to cancel
their matched EMOCs so as to allow participants determine how best to
manage their orders given the circumstances that would exist under such
a scenario.
---------------------------------------------------------------------------
\15\ See Rule 4754(b)(7).
---------------------------------------------------------------------------
Finally, Nasdaq notes that it proposes to make conforming changes
to various provisions of the Rules, including Rule 4703(a)(1), (c), and
(l), and Rule 4756 (a)(3).
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, because it is an additional offering to its existing MOC
Order type, and it will provide for a competitive alternative to the
CMC order type. The proposed rule change would further remove
impediments to and perfect the mechanisms of a free and open market and
a national market system by promoting competition among national
securities exchanges in the execution of market-on-close orders for
Nasdaq-listed securities at the Nasdaq Closing Cross price.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Unlike CMCs, which siphon off orders from the primary listing
exchanges and thereby threaten to undermine the integrity of the
primary listing exchanges' closing auction processes, the EMOC Order
Type would have no such effects. Instead, EMOC Orders are designed to
help keep market-on-close orders in Nasdaq-listed securities on Nasdaq,
which is sensible given that Nasdaq is the primary listing market for
these securities and its Closing Cross establishes their official
closing prices. The proposal would help to ensure that Nasdaq is able
to continue to conduct its industry-leading Closing Cross auction
smoothly and efficiently, and without undue complexity, to the benefit
of all participants.
Meanwhile, participants that choose to utilize EMOC Orders could
take comfort in knowing that Nasdaq, unlike BZX, is already experienced
in executing market on close orders in Nasdaq-listed securities and
that Nasdaq has a track record of doing so competently and reliably.
Moreover, because Nasdaq's Closing Cross process is subject to the
Commission's highest regulatory standards for security, integrity,
reliability, and resiliency, participants can feel at ease knowing that
Nasdaq will treat EMOC Orders with the utmost care, and that the
Commission will hold Nasdaq accountable if it fails to do so. The BZX
Market on Close process, on the other
[[Page 44336]]
hand, is untested and subject to lower regulatory standards.\18\
---------------------------------------------------------------------------
\18\ See BZX Approval Order, supra, at 4734 (``[T]he fact that
closing auction systems are subject to the heightened requirements
of Regulation SCI for critical SCI systems could encourage market
participants to send MOC orders to closing auctions on the primary
listing exchanges due to the additional regulatory protections
required of such systems.'').
---------------------------------------------------------------------------
The Exchange also believes that its proposed design of EMOC is
equitable, provides for a free and open market, and is in the interests
of investors and the public and a national market system. For example,
Nasdaq believes that it is equitable and in the interest of investors
to provide for unmatched shares of EMOC Orders to convert to regular
MOC Orders at 3:35 p.m. because doing so reduces the operational risk
for market participants relative to other alternatives such as CMC as
they would not have to take additional action to submit new MOC Orders
should they remain interested in participating in the Nasdaq Closing
Cross despite the lack of a match. Meanwhile, participants that do not
wish to proceed with MOC Orders in this instance would remain free to
cancel or modify their orders for at least 15 minutes after conversion.
Additionally, Nasdaq believes that it is equitable and in the
interest of investors to cancel EMOC Orders in the event that Nasdaq
does not conduct a Closing Cross because to do otherwise would force
market participants to execute EMOC Orders at prices that may be stale
\19\ and which may not reflect the true market price for such
securities. Moreover, Nasdaq notes that this proposal is the same as
how Nasdaq handles other open cross-only interest when no Closing Cross
occurs.
---------------------------------------------------------------------------
\19\ If a disruption prevents the occurrence of Nasdaq Closing
Cross, then under contingency procedures described in Rule
4754(b)(7), the Exchange will execute orders at the Nasdaq Official
Closing Price, which may be, under certain circumstances, the last
consolidated last-sale eligible trade price for a security during
regular trading hours or, if there were no such trades on the day in
question, the Nasdaq Official Closing Price of the security on the
prior trading day.
---------------------------------------------------------------------------
Nasdaq also believes that it is equitable and facilitates a free
and open market to handle EMOC Orders similarly to other Order Types in
the event of extraordinary volume at the close, insufficient trading
interest to conduct an LULD Closing Cross in a security following an
LULD trading pause, the occurrence of an LULD Closing Cross in a
security, and when the Exchange applies contingency procedures.
Lastly, Nasdaq believes that its proposal facilitates a free and
open market incorporating into its EOII and NOII publications the
numbers of paired shares of EMOC Orders in advance of the Nasdaq
Closing Cross. By including EMOC paired shares information in the EOII
and NOII publications, Nasdaq will ensure that market participants are
adequately informed about the depth of interest in its Closing Cross at
a point in time when they are able to act on that information by
choosing whether to participate in the Closing Cross. Nasdaq notes that
its proposal is consistent with the interests of investors and the
public to simply add EMOC-related paired shares to its aggregate EOII
and NOII disclosures of paired shares, rather than to separately
identify the number of paired shares that are due to EMOC Orders,
because the Exchange does not believe participants would gain any
valuable insights from a separate disclosure. Nasdaq notes that it does
not separately identify paired shares that are attributable to MOC or
Limit on Close Orders.
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. The Exchange believes the
proposal would increase competition among exchanges by offering a
competitive alternative to BZX's Market-On-Close process. Indeed, the
proposal will offer market participants an option to enter early market
on close orders for Nasdaq-listed stocks, while providing the added
benefit of executing those orders in a process that is recognized for
its reliability and which is more highly-regulated than is the BZX
Market Close process. Moreover, unlike other offerings that siphon
orders from the price discovery process on the primary market, Nasdaq's
proposal will not contribute to the fragmentation of the closing
process for Nasdaq-listed securities. Finally, EMOC would offer
participants reduced operational risk by automatically converting their
unmatched EMOCs to MOCs at 3:35 p.m. and retaining its original time
priority, while still affording them the opportunity to cancel
converted orders prior to the Closing Cross Cutoff Time.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2020-037 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-2020-037. 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
[[Page 44337]]
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-2020-037, and should
be submitted on or before August 12, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15792 Filed 7-21-20; 8:45 am]
BILLING CODE 8011-01-P
