Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend Rule 4754 Relating to the Limit-Up Limit-Down Closing Cross, 12503-12509 [2021-04307]
Download as PDF
Federal Register / Vol. 86, No. 40 / Wednesday, March 3, 2021 / Notices
ETF on the Exchange prior to 30 days
after the date of the filing. The Shares
of the Fund have not yet commenced
listing and trading, and the proposed
changes to the rule governing their
listing and trading raise no novel or
regulatory issues. For these reasons, the
Commission believes that waiver of the
operative delay is consistent with the
protection of investors and the public
interest, and the Commission hereby
waives the 30-day operative delay and
designates the proposed rule change to
be operative upon filing.13
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2021–14 and
should be submitted on or before March
24, 2021.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
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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–
NYSEArca–2021–14 on the subject line.
Paper Comments
• Send paper comments in triplicate
to: Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2021–14. 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
13 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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[FR Doc. 2021–04308 Filed 3–2–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91212; File No. SR–
NASDAQ–2020–100]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Modify the Quorum
Requirement for Non-U.S. Companies
Under Certain Limited Circumstances
February 25, 2021.
On December 31, 2020, the Nasdaq
Stock Market LLC filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
modify the quorum requirement
applicable to a non-U.S. company where
such company’s home country law is in
direct conflict with Nasdaq’s quorum
requirement. The proposed rule change
was published for comment in the
Federal Register on January 15, 2021.3
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 propose 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 published 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 the
proposed rule change is March 1, 2021.
The Commission is extending this 45day period.
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 April 15, 2021,
as the date by which the Commission
shall either approve or disapprove, or
institute proceedings to determine
whether to approve or disapprove, the
proposed rule change (File No. SR–
NASDAQ–2020–100).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–04310 Filed 3–2–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91208; File No. SR–
NASDAQ–2021–009]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend Rule 4754 Relating to the LimitUp Limit-Down Closing Cross
February 25, 2021.
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
11, 2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
14 17
4 15
1 15
5 15
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90883
(January 11, 2021), 86 FR 4158.
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U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
6 17 CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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Federal Register / Vol. 86, No. 40 / Wednesday, March 3, 2021 / Notices
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 4754 to introduce price protections
for the Limit-Up Limit-Down (‘‘LULD’’)
Closing Cross 3 that are similar to the
protections currently employed by the
standard Nasdaq Closing Cross,4 and to
make other changes related to the LULD
Closing Cross.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, 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 purpose of the proposed rule
change is to amend Rule 4754 to
introduce price protections for the
LULD Closing Cross that are similar to
the protections currently employed by
the standard Nasdaq Closing Cross, and
to make other changes related to the
LULD Closing Cross. With the proposed
changes, the Exchange’s LULD and
standard Closing Cross processes will be
more harmonized, which the Exchange
believes will promote a more consistent
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3 The
LULD Closing Cross is the Exchange’s
auction process for executing closing trades in
Nasdaq-listed securities when a Trading Pause
pursuant to Rule 4120(a)(12) exists at or after 3:50
p.m. and before 4:00 p.m. ET. See Rule 4754(b)(6).
4 ‘‘Nasdaq Closing Cross’’ shall mean the process
for determining the price at which orders shall be
executed at the close and for executing those orders.
See Rule 4754(a).
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experience for members and investors
participating in the close and reduce
any potential confusion regarding
Nasdaq’s closing processes.
Background
The Nasdaq Closing Cross is a
transparent auction process that
determines a single price for the close.
The price determined by the Closing
Cross is also the Nasdaq Official Closing
Price (‘‘NOCP’’) for securities that
participate in the cross. Members can
submit Limit on Close (‘‘LOC’’) Orders,5
Market on Close (‘‘MOC’’) Orders,6 and
Imbalance Only (‘‘IO’’) Orders 7 that are
available to participate in the Closing
Cross along with other Close Eligible
Interest.8 At 4:00 p.m. ET, the Exchange
will execute the Nasdaq Closing Cross at
a price determined in accordance with
Rule 4754(b)(2).
When the Closing Cross price is
calculated as described in Rule
4754(b)(2), the Exchange applies a
boundary within which the cross must
execute to ensure that the closing price
derived does not exceed a price
reasonably tied to the prevailing market
at the time. Specifically, the Exchange
applies a threshold amount to a
benchmark value that, when applied to
an individual security, determines the
threshold price range that a security
may cross, outside of which the closing
price of a security may not occur.9 If the
Closing Cross price of a security would
otherwise be outside of this threshold
range, the Exchange will adjust the
Closing Cross price of the security to a
price within the threshold range that
best satisfies the normal process for
determining the Closing Cross price.10
This adjustment happens automatically
prior to execution of the Closing Cross.
All unexecuted shares designated to
expire upon the conclusion of the
Closing Cross,11 including those that fall
5 A ‘‘Limit On Close Order’’ or ‘‘LOC Order’’ is
an Order Type entered with a price that may be
executed only in the Nasdaq Closing Cross, and
only if the price determined by the Nasdaq Closing
Cross is equal to or better than the price at which
the LOC Order was entered. See Rule 4702(b)(12).
6 A ‘‘Market On Close Order’’ or ‘‘MOC Order’’ is
an Order Type entered without a price that may be
executed only during the Nasdaq Closing Cross. See
Rule 4702(b)(11).
7 An ‘‘Imbalance Only Order’’ or ‘‘IO Order’’ is an
Order entered with a price that may be executed
only in the Nasdaq Closing Cross and only against
MOC Orders or LOC Orders. See Rule 4702(b)(13).
8 ‘‘Close Eligible Interest’’ shall mean any
quotation or any order that may be entered into the
system and designated with a time-in-force of
SDAY, SGTC, MDAY, MGTC, SHEX, or GTMC. See
Rule 4754(a)(1).
9 See Rule 4754(b)(2)(E).
10 See Rules 4754(b)(2)(A)–(D).
11 These are: MOC, LOC, and IO Orders
designated to participate in the Closing Cross. Prior
to the Closing Cross, the Exchange maintains a
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outside of the calculated threshold price
range, are cancelled.
The threshold amounts and
benchmarks are set by Nasdaq
management in advance and
communicated to market participants.
Nasdaq may adjust the threshold
amounts and benchmarks from time to
time based on Nasdaq’s experience with
the Closing Cross. Nasdaq publishes this
information publicly on its website, and
sets the threshold amount so that
repricing of a security is rare.12
Currently, Nasdaq applies a threshold
amount that is the greater of $0.50 or
10%, which is applied to the Nasdaq
Best Bid and Offer (‘‘QBBO’’) midpoint
and is added to the Nasdaq Offer and
subtracted from the Nasdaq Bid to
establish the threshold range. For
example, if the QBBO is $10.00 ×
$11.00, then the midpoint is $10.50 and
the threshold amount is 10%, resulting
in a threshold value of $1.05 (10% of
10.50 = 1.05). This value is then added
to the offer and subtracted from the bid
to obtain the Closing Cross’s threshold
price range. In this example, it would
result in a lower threshold of $8.95
(10.00¥1.05 = 8.95) and an upper
threshold of $12.05 (11.00 + 1.05 =
12.05), thus creating a range between
$8.95 to $12.05, within which the
Closing Cross can occur. This means
$8.95 is the lowest price at which the
cross can occur, and $12.05 is the
highest price at which it can occur. The
threshold range is dynamic; as the
QBBO changes, the threshold price
range changes. The Exchange believes
that the foregoing price thresholds for
the standard Closing Cross has been
effective at facilitating price discovery
and ensuring that the closing price of a
security is reasonably based on current
market conditions in the security, and
therefore proposes to adopt similar
thresholds for its LULD Closing Cross.
Today, in addition to the standard
Nasdaq Closing Cross described above,
the Exchange operates a LULD Closing
Cross that provides an alternative
process for executing closing trades on
Nasdaq. The Exchange conducts this
process (instead of the standard Closing
Cross) for Nasdaq-listed securities when
a Trading Pause pursuant to Rule
4120(a)(12) exists at or after 3:50 p.m.
continuous order book and a Closing Cross order
book. Orders in the Closing Cross order book may
execute only in the Closing Cross process, while
Orders in the continuous book may execute in
regular market hours or in the Closing Cross if the
Order has a time-in-force that will allow it to
remain active.
12 See https://www.nasdaqtrader.com/content/
ProductsServices/Trading/Crosses/openclose_
faqs.pdf.
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Federal Register / Vol. 86, No. 40 / Wednesday, March 3, 2021 / Notices
and before 4:00 p.m. ET.13 The LULD
Closing Cross price will be the NOCP for
Nasdaq-listed securities that participate
in the LULD Closing Cross. Unlike the
standard Closing Cross, the LULD
Closing Cross currently occurs at 4:00
p.m. ET, with no price thresholds, and
may be extended pursuant to Rule
4754(b)(6)(A)(iii) if there is an order
imbalance. In this case, the Exchange
would extend the time of the LULD
Closing Cross in one minute increments
until the order imbalance no longer
exists.14 If this condition persists until
5:00 p.m., Nasdaq would not conduct a
cross in that security and would instead
use the last-sale on Nasdaq as the NOCP
in that security for that trading day.
Price Thresholds
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The Exchange now proposes to
introduce price protections to the LULD
Closing Cross that will be similar to the
protections used today for the standard
Closing Cross, and will ensure that the
LULD Closing Cross price is reasonably
related to current market conditions.
The proposed price thresholds will be
calculated by applying a threshold
amount set by Nasdaq management in
advance and communicated to market
participants (‘‘LULD Price Thresholds’’).
The LULD Price Thresholds, like the
thresholds presently used for the
standard Closing Cross, will be
published on Nasdaq’s public website.
The LULD Price Thresholds will be
applied to a benchmark associated with
the LULD Band that triggered the
Trading Pause to calculate the
benchmark price range within which
the LULD Closing Cross price must fall
(‘‘Benchmark Prices’’). The Benchmark
Prices will be published via the SIP and
Exchange proprietary data feeds. Nasdaq
will initially set the LULD Price
Thresholds at the greater of $1.00 or
10% for securities with a reference price
greater than $1.00 (or $0.50 for
securities with a benchmark equal to or
less than $1.00), which will be applied
to the last disseminated LULD Auction
Collar, or the LULD Band that triggered
the Trading Pause in the direction of the
trading that invoked the Trading Pause.
To effect these changes, the Exchange
proposes in new paragraph (E) of Rule
13 See Rule 4754(b)(6). While the current language
indicates that the ‘‘stock’’ will resume trading via
the LULD Closing Cross, the Exchange will amend
this Rule to make clear that the LULD Closing Cross
will apply only for Nasdaq-listed securities.
14 Specifically, if the expected cross price moves
the greater of 5% or 50 cents, or if all market orders
will not be executed in the cross, Nasdaq will delay
the execution of the LULD Closing Cross pursuant
to Rule 4754(b)(6)(A)(iii). These volatility checks
are governed by Rule 4120(c)(7)(C).
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4754(b)(6) 15 to provide that the
Benchmark Prices within which the
LULD Closing Cross price must fall is
established by adding (or subtracting) a
threshold amount from the:
(i) Upper (or lower) Auction Collar
that was last updated for any security
that enters a Trading Pause that was
extended prior to 3:50 p.m. ET, rounded
to the nearest minimum price
increment;
(ii) Upper Auction Collar for a Limit
Up triggered pause (or lower Auction
Collar for a Limit Down triggered pause)
for any security that entered a Trading
Pause that was not extended prior to
3:50 p.m. ET, rounded to the nearest
minimum price increment; or
(ii) [sic] Upper Band for a Limit Up
triggered pause (or Lower Band for a
Limit Down triggered pause) for any
security that entered a Trading Pause at
or after 3:50 p.m. ET, rounded to the
nearest minimum price increment.
Nasdaq management shall set and
modify such thresholds from time to
time upon prior notice to market
participants.
As applied, for securities that entered
a Trading Pause prior to 3:50 p.m. ET
and for which the Trading Pause was
subsequently extended, the Exchange
will calculate the lower and upper
Benchmark Prices as follows:
• If the lower Auction Collar was the
collar that was last widened for the
security subject to the Trading Pause,
the lower Benchmark Price will be
calculated by subtracting 10% of the last
updated lower Auction Collar price (or
$1.00 (or $0.50 if the lower Auction
Collar price is equal to or below $1.00),
whichever is greater) from the last
updated lower Auction Collar price
(rounded to the nearest minimum price
increment). The upper Benchmark Price
will be equal to the last updated upper
Auction Collar price that was updated
with the lower Auction Collar price
used to calculate the lower Benchmark
Price.
• If the upper Auction Collar was the
collar that was last widened for the
security subject to the Trading Pause,
the upper Benchmark Price will be
calculated by adding 10% of the last
updated upper Auction Collar price (or
$1.00 (or $0.50 if the upper Auction
Collar price is equal to or below $1.00),
whichever is greater) to the last updated
upper Auction Collar price (rounded to
the nearest minimum price increment).
The lower Benchmark Price will be
equal to the last updated lower Auction
Collar price that was updated with the
15 With
the proposed change, current paragraphs
(C) and (D) will be renumbered as paragraphs (F)
and (G).
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upper Auction Collar price used to
calculate the upper Benchmark Price.
For securities that entered a Trading
Pause that was not extended prior to
3:50 p.m. ET,16 the Exchange will
calculate the lower and upper
Benchmark Prices as follows:
• For a Limit Down triggered pause,
the lower Benchmark Price will be
calculated by subtracting 10% of the
lower Auction Collar price (or $1.00 (or
$0.50 if the lower Auction Collar price
is equal to or below $1.00), whichever
is greater) from the lower Auction Collar
price (rounded to the nearest minimum
price increment). The upper Benchmark
Price will be equal to the upper Auction
Collar price that was disseminated with
the lower Auction Collar price used to
calculate the lower Benchmark Price.
• For a Limit Up triggered pause, the
upper Benchmark Price will be
calculated by adding 10% of the upper
Auction Collar price (or $1.00 (or $0.50
if the upper Auction Collar price is
equal to or below $1.00), whichever is
greater) to the upper Auction Collar
price (rounded to the nearest minimum
price increment). The lower Benchmark
Price will be equal to the lower Auction
Collar price that was disseminated with
the upper Auction Collar price used to
calculate the upper Benchmark Price.
For securities that entered a Trading
Pause at or after 3:50 p.m. ET, the
Exchange will calculate the lower and
upper Benchmark Prices as follows:
• For a Limit Down triggered pause,
the lower Benchmark Price will be
calculated by subtracting 10% of the
Lower LULD Band (or $1.00 (or $0.50 if
the Lower LULD Band is equal to or
below $1.00), whichever is greater) from
the Lower LULD Band (rounded to the
nearest minimum price increment). The
upper Benchmark Price will be equal to
Upper LULD Band in place at the time
the Trading Pause was triggered.
• For a Limit Up triggered pause, the
upper Benchmark Price will be
calculated by adding 10% of the Upper
LULD Band (or $1.00 (or $0.50 if the
Upper LULD Band is equal to or below
$1.00), whichever is greater) to the
Upper LULD Band (rounded to the
nearest minimum price increment). The
lower Benchmark Price will be equal to
Lower LULD Band in place at the time
the Trading Pause was triggered.
At 4:00 p.m. ET, Nasdaq will conduct
the LULD Closing Cross, and if the cross
price would fall outside of the
Benchmark Prices as calculated above,
the LULD Closing Cross will execute all
16 This would occur if, for example, a security
entered a Trading Pause between 3:45 and 3:50 p.m.
ET, and the LULD Auction Collar had not yet been
updated.
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Federal Register / Vol. 86, No. 40 / Wednesday, March 3, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
available orders at a price within or
equal to the Benchmark Prices. Any
unexecuted orders intended for the
Closing Cross (i.e., MOC, LOC, and IO
Orders), including those that fall outside
of the Benchmark Prices, will be
cancelled. This will be similar to the
current standard Closing Cross
functionality as described above. All
other orders not executed in the LULD
Closing Cross will be processed
according to the entering firm’s
instructions, consistent with the current
LULD Closing Cross rule.
The following illustrate how the
proposed Benchmark Prices will be
calculated:
Example 1: Security Enters Trading
Pause Prior to 3:50 p.m.
Assume:
Symbol ABC is a Tier 1 security
Last sale/reference price: $100
LULD price bands: $95 × $105
NBBO updates to $94.50 × $95
At 3:38 p.m., Symbol ABC enters a
Trading Pause
LULD Auction Collars calculated:
Upper Collar: $105
Lower Collar: $90.25
At 3:43 p.m., due to a market order
imbalance, the LULD halt cross will
not occur and the LULD Auction
Collars (1st extension) are
calculated:
Upper Collar: $105
Lower Collar: $85.50
At 3:48 p.m., due to a market order
imbalance, the LULD halt cross will
not occur and the LULD Auction
Collars (2nd extension) are
calculated:
Upper Collar: $105
Lower Collar: $80.75
At 3:50 p.m., the security enters a LULD
Closing Cross and the Benchmark
Prices will be calculated:
Upper Benchmark Price: $105
Lower Benchmark Price: $72.68
Here, the lower Auction Collar is the
collar that was widened in the last
dissemination of the LULD Auction
Collars message, so the Benchmark
Prices will be calculated from the last
updated lower Auction Collar ($80.75).
The threshold amount is 8.075 (10% of
80.75 = 8.075), which is subtracted from
the last updated Auction Collar
(rounded to the nearest price increment)
to calculate the lower Benchmark Price
of 72.68 (80.75¥8.075 = 72.675) (i.e.,
72.68 when rounded to the nearest price
increment). The upper Benchmark Price
of $105 is equal to the last updated
upper Auction Collar price that was
disseminated with the lower Auction
Collar price used to calculate the lower
Benchmark Price. Thus, $72.68 is the
lowest price at which the LULD Closing
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Cross can occur, and $105 is the highest
price at which the cross can occur.
Example 2: Security Enters Trading
Pause After 3:50 p.m.
Assume:
Symbol ABC is a Tier 1 security
Last sale/reference price: $100
LULD price bands: $95 × $105
NBBO updates to $94.50 × $95
At 3:53 p.m., Symbol ABC enters a
Trading Pause and will go through
a LULD Closing Cross.
The Benchmark Prices will be
calculated:
Upper Benchmark Price: $105
Lower Benchmark Price: $85.50
Here, the security entered a Limit Down
triggered pause, so the Benchmark
Prices will be calculated from the Lower
LULD Band ($95). The threshold
amount is 9.50 (10% of 95 = 9.50),
which is subtracted from the Lower
LULD Band to calculate the lower
Benchmark Price of 85.50 (95 × 9.50 =
85.50). The upper Benchmark Price of
$105 is equal to the Upper LULD Band
in place at the time the Trading Pause
was triggered. Thus, $85.50 is the lowest
price at which the LULD Closing Cross
can occur, and $105 is the highest price
at which the cross can occur.
Execution Processing
In connection with the changes
proposed above to introduce price
protections for the LULD Closing Cross,
the Exchange proposes to amend the
methodology for determining the LULD
cross price. Specifically, the Exchange
proposes the following in new
paragraph (D) of Rule 4754(b)(6):
(D)(i) The LULD Closing Cross will
occur at the price within the benchmark
prices established pursuant to paragraph
(E) below (‘‘Benchmark Prices’’) that
maximizes the number of shares of
Eligible Interest in the Nasdaq Market
Center to be executed.
(ii) If more than one price exists under
subparagraph (i), the LULD Closing
Cross shall occur at the price within the
Benchmark Prices that minimizes any
Imbalance.
(iii) If more than one price exists
under subparagraph (ii), the LULD
Closing Cross shall occur at the entered
price within the Benchmark Prices at
which shares will remain unexecuted in
the cross.
(iv) If there is no price within the
Benchmark Prices that satisfies the
above conditions, then the LULD
Closing Cross shall occur at:
(a) If an Imbalance exists, a price
equal to the upper (lower) Benchmark
Price for a buy (sell) Imbalance; or
(b) if no Imbalance exists, a price that
minimizes the distance from the last
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Sfmt 4703
published Upper Band (Lower Band) for
a Limit Up (Limit Down) Trading Pause.
Today, the LULD Closing Cross price
is determined by the same execution
algorithm as currently used by the
standard Closing Cross.17 As discussed
below, the proposed execution
algorithm retains many aspects of the
standard cross methodology with
certain intended differences.
The first tiebreaker in new paragraph
(D)(i) will be substantially similar to the
existing tiebreaker in Rule
4754(b)(2)(A),18 except that the
proposed language will specify the
LULD cross price must also fall within
the proposed Benchmark Prices
established pursuant to new paragraph
(E) of Rule 4754(b)(6). In connection
with this change, the Exchange also
proposes to add a definition for
‘‘Eligible Interest,’’ which is currently
undefined in this Rule. Specifically, the
Exchange proposes to add in new
paragraph (A)(i) of Rule 4754(b)(6) that
for purposes of the LULD Closing Cross
rule, Eligible Interest shall have the
same meaning as ‘‘Close Eligible
Interest’’ in Rule 4754(a), with the
addition of any new orders, with an
eligible underlying Order Type and
Attribute, entered during the Trading
Pause. The proposed change reflects
current system behavior, and indicates
that there is an additional category of
orders that may participate in the LULD
Closing Cross (i.e., new incoming
orders, with an eligible underlying
Order Type and Attribute, entered
during the Trading Pause), which are
not fully applicable in the context of the
standard close. The Exchange therefore
believes that using the proposed
definition throughout the LULD Closing
Cross rule (instead of ‘‘Close Eligible
Interest’’ as currently used in the
standard Closing Cross) will better align
the rule to the current operation of the
system.
The second tiebreaker in new
paragraph (D)(ii) will be based on the
same principle as the existing tiebreaker
in Rule 4754(b)(2)(B) (i.e., to minimize
the number of shares that cannot be
matched in the cross).19 However, the
new tiebreaker will specify that the
LULD Closing Cross price must be
within the proposed Benchmark Prices
17 See
Rule 4754(b)(2)(A)–(D).
4754(b)(2)(A) currently provides that the
Nasdaq Closing Cross will occur at the price that
maximizes the number of shares of Eligible Interest
in the Nasdaq Market Center to be executed.
19 Rule 4754(b)(2)(B) currently provides that if
more than one price exists under subparagraph (A),
the Nasdaq Closing Cross shall occur at the price
that minimizes the number of shares of buy or sell
MOC or LOC orders that cannot be matched with
other MOC or LOC, Close Eligible interest, or IO
order shares.
18 Rule
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and at the price that minimizes any
Imbalance, which will be defined in
new paragraph (A)(ii) of Rule 4754(b)(6)
as the number of shares of buy or sell
MOC or LOC orders or Eligible Interest
that cannot be matched with other
MOC, LOC, or IO order shares or
Eligible Interest at a particular price at
any given time. The Exchange notes that
the proposed change to state that the
LULD cross price must minimize any
Imbalance within the second tiebreaker
is a corrective change to more accurately
reflect how the system in the LULD
Closing Cross currently behaves.
Specifically, the change addresses that
during a LULD Closing Cross, the
Exchange considers all orders when
calculating the Imbalance, whereas the
standard Closing Cross considers orders
specifically designated for participation
in the Closing Cross (i.e., MOC, LOC, or
IO orders). This reflects current system
behavior, which automatically
designates all orders (whether resting on
the book, or new incoming orders
entered during the cross) for
participation in LULD Closing Cross.
The third tiebreaker in new paragraph
(D)(iii) will be substantially similar to
the existing tiebreaker in Rule
4754(b)(2)(C),20 except that the
proposed language will specify the
LULD cross price must also fall within
the proposed Benchmark Prices.
The fourth and final tiebreaker in new
paragraph (D)(iv) will be used if there is
no price within the proposed
Benchmark Prices that satisfies the
conditions described above in (D)(i)–
(iii), and speaks to two possible
outcomes. The first outcome is reached
when an Imbalance exists, in which
case the LULD cross price would be the
upper (lower) Benchmark Price for a
buy (sell) Imbalance. The Exchange
believes that this outcome is the
appropriate result in the presence of an
Imbalance as it best reflects current
market forces while also making it clear
to market participants that the
imbalance exists. The second outcome
is reached when there is no Imbalance,
in which case the LULD Closing Cross
would occur at a price that minimizes
the distance from the last published
Upper Band (Lower Band) for a Limit
Up (Limit Down) Trading Pause. This
tiebreaker is similar to the existing
tiebreaker in Rule 4754(b)(2)(D) 21 in
jbell on DSKJLSW7X2PROD with NOTICES
20 Rule
4754(b)(2)(C) currently provides that if
more than one price exists under subparagraph (B),
the Nasdaq Closing Cross shall occur at the entered
price at which shares will remain unexecuted in the
cross.
21 Rule 4754(b)(2)(D) currently provides that if
more than one price exists under subparagraph (C),
the Nasdaq Closing Cross shall occur at: A price
that minimizes the distance from the System bid-
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that the price that minimizes the
distance from the last published Upper
or Lower Band is effectively considered
the midpoint price for the LULD Closing
Cross. Unlike the existing tiebreaker,
which uses the price that minimizes the
distance from the System bid-ask
midpoint, the proposed tiebreaker will
use the relevant LULD Band. The
Exchange believes this is the more
appropriate result because unlike a
standard Closing Cross, there is no
continuous market just prior to the
execution of the LULD Closing Cross, so
using the relevant LULD Band more
accurately reflects current market
conditions as opposed to the System
bid-ask midpoint.
Timing of LULD Closing Cross
The Exchange also proposes to amend
the LULD Closing Cross Rule to remove
all provisions relating to extending the
cross past 4:00 p.m. ET as this language
will no longer be necessary with the
changes proposed herein. In particular,
the Exchange proposes to delete Rule
4754(b)(6)(A)(iii) as this provision
relates to how the Exchange would
extend the time of the LULD Closing
Cross. Further, the Exchange proposes
to amend current Rule 4754(b)(6)(C)(iii)
(renumbered to Rule 4754(b)(6)(D)(iii)
[sic] under this proposal) to delete the
last two sentences, which provide how
certain new orders may be entered or
modified after 4:00 p.m. ET.
MOC/LOC/IO Order Handling
The Exchange also proposes other
aligning changes to the LULD Closing
Cross that would more closely
harmonize this process with the current
standard Closing Cross. In Rule
4754(b)(6)(C)(iii) (renumbered to Rule
4754(b)(6)(D)(iii) [sic]), the Exchange
proposes to remove the parenthetical
that excludes MOC and LOC orders
from being entered, modified, and
cancelled in the LULD Closing Cross.
The Exchange proposes to allow MOC
and LOC orders to participate in the
LULD Closing Cross in order to align
with the regular Closing Cross where
such orders may participate pursuant to
Rules 4702(b)(11) and 4702(b)(12). The
Exchange similarly proposes to allow IO
orders to participate in the LULD
Closing Cross in the same manner as in
the regular Closing Cross (i.e., pursuant
to Rule 4702(b)(13)). Accordingly, the
Exchange will add that MOC, LOC and
IO orders may be entered, modified, and
cancelled pursuant to Rules 4702(b)(11),
4702(b)(12) and 4702(b)(13). The
Exchange will also delete current Rule
ask midpoint at the time of the Nasdaq Closing
Cross.
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Fmt 4703
Sfmt 4703
12507
4754(b)(6)(C)(i), which sets forth special
handling instructions for MOC, LOC,
and IO orders in an LULD Closing Cross.
In particular, this Rule stipulates that in
the event of an LULD Closing Cross,
MOC, LOC and IO orders intended for
the closing cross entered into the system
and placed on the book prior to the
Trading Pause will remain on the book
to participate in the LULD Closing
Cross, and that such orders may not be
modified or cancelled. With the
proposed changes to allow MOC, LOC,
and IO orders to participate in the LULD
Closing Cross in the same way as a
standard Closing Cross, this provision is
no longer necessary.
Net Order Imbalance Indicator
The Exchange proposes to amend
Rule 4754(b)(6)(B), which governs the
Net Order Imbalance Indicator (‘‘NOII’’)
message for the LULD Closing Cross and
disseminates information about MOC,
LOC, IO, and Close Eligible Interest and
the price at which those orders would
execute at the time of dissemination.
The Rule currently provides that Nasdaq
shall continue disseminating the NOII
every second until After Hours Trading
begins. The Exchange notes, however,
that it recently updated its Closing Cross
to allow for the dissemination of
abbreviated NOII data (i.e., Early Order
Imbalance Indicator) 22 every 10 seconds
between 3:50 p.m. ET and 3:55 p.m. ET,
which would be followed by the
dissemination of regular NOII data
between 3:55 and market close.23 This
change should have been reflected in
the LULD Closing Cross rule in Rule
4754(b)(6)(B) as well. Accordingly, the
Exchange proposes to amend the Rule to
more accurately reflect current System
behavior, and provide that Nasdaq shall
continue disseminating the NOII
pursuant to Rule 4754(b)(1) until After
Hours Trading begins.
The Rule also indicates that the NOII
message displays the Near Price, Far
Price, and Reference Prices, which all
currently represent the price at which
the LULD Closing Cross would execute
should the cross conclude at that time.
With the proposed changes to
implement the new Benchmark Prices,
the Near Price and Reference Price will
both represent the price at which the
LULD Closing Cross would execute,
bounded by the Benchmark Prices, at
22 ‘‘Early Order Imbalance Indicator’’ shall mean
a message disseminated by electronic means
containing the same information as the Order
Imbalance Indicator, except that it will exclude
information about indicative prices, as set forth in
subparagraph (a)(7)(E) of Rule 4754. See Rule
4754(a)(10).
23 See Securities Exchange Act Release No. 85292
(March 12, 2019), 84 FR 9848 (March 18, 2019) (SR–
NASDAQ–2019–010).
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the time of dissemination. The Far Price
will represent the price at which the
LULD Closing Cross would execute if
the cross were not bounded by the
Benchmark Prices. The Far Price will be
different from the Near Price and
Reference Price to indicate that not all
marketable orders can be filled within
the Benchmark Prices. To effect this
change, Rule 4754(b)(6)(B) will be
amended to provide that the Near Price
and Reference Prices contained in the
NOII will represent the price at which
the LULD Closing Cross would execute
should the cross conclude at that time,
and the Far Price will represent the
price at which Eligible Interest would
execute.
Corrective Changes
The Exchange proposes a corrective
change in Rule 4754(b)(6)(A)(i), which
currently contains language relating to
Trading Pauses ‘‘triggered’’ at or after
3:50 and before 4:00 p.m. The Exchange
previously amended paragraph (b)(6) of
Rule 4754 in 2017 to provide that the
cross is employed when a Trading Pause
exists at or after 3:50 and before 4:00
p.m., but inadvertently did not make a
similar change in paragraph (b)(6)(A)(i)
of this Rule.24 The Exchange now
proposes to amend this provision
accordingly.
Lastly, the Exchange proposes to
update obsolete cross-cites to Rule 4751
within Rules 4756(c)(3)(B) and 4763(b).
Rule 4751 was previously relocated as
part of a prior rule filing, so the
proposed changes will update the
obsolete references to their current
locations in the Rulebook.25
jbell on DSKJLSW7X2PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,26 in general, and furthers the
objectives of Section 6(b)(5) of the Act,27
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
The Exchange believes that its
proposal will promote just and equitable
principles of trade because it will
implement price protections for the
LULD Closing Cross that are similar to
the protections used today for the
24 See Securities Exchange Act Release No. 79876
(January 25, 2017), 82 FR 8888 (January 31, 2017)
(SR–NASDAQ–2016–131).
25 See Securities Exchange Act Release No. 75252
(June 22, 2015), 80 FR 36865 (June 26, 2015) (SR–
NASDAQ–2015–024).
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(5).
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17:29 Mar 02, 2021
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standard Closing Cross. As explained
above, the Exchange currently calculates
and applies a price threshold range
within which the standard Closing
Cross must execute. The Exchange
believes that this mechanism has been
effective in facilitating a fair and orderly
price discovery process at the close, and
ensuring that the cross price derived
does not exceed a price reasonably tied
to the prevailing market at the time. The
Exchange has therefore determined to
apply similar protections for the LULD
Closing Cross. The Exchange believes
that its proposal will benefit members
and investors by facilitating price
discovery. Additionally, introducing
price protections to the LULD Closing
Cross in the manner discussed above
will further harmonize the Exchange’s
LULD and standard Closing Cross
processes, thereby promoting a more
consistent experience for members and
investors, and reducing any potential
confusion regarding Nasdaq’s closing
processes. The Exchange believes that
calculating price thresholds associated
with the LULD band that triggered the
Trading Pause as discussed above will
ensure that the LULD Closing Cross
executes at a reasonable level relative to
the last disseminated LULD Auction
Collar, or the LULD band itself, thereby
mitigating price dislocations in the
cross. The Exchange also believes that
allowing members to enter, modify and
cancel new MOC, LOC and IO orders
pursuant to Rules 4702(b)(11),
4702(b)(12), and 4702(b)(13) in the
LULD Closing Cross will keep these
close order type functionality consistent
with the standard close behavior, and
will facilitate a more efficient closing
auction by allowing additional interest
to participate in the close.
The Exchange believes that the
amended execution algorithm for the
LULD Closing Cross is consistent with
the Act because it is substantially
similar to the execution logic that is
used for the cross today, with certain
intended differences. The proposed
tiebreakers in new paragraphs (D)(i)–(iii)
of Rule 4754(b)(6) are designed to
preserve to the extent possible the
current tiebreakers in paragraphs
(B)(2)(A)–(C) of Rule 4754(b)(2) while
accommodating the proposed
Benchmark Prices. The proposed
changes to add the definitions of
Eligible Interest and Imbalance as used
in the proposed first and second
tiebreakers are consistent with the
protection of investors and the public
interest because these changes will more
accurately describe how the LULD
Closing Cross price will be determined
pursuant to the tiebreakers in proposed
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Fmt 4703
Sfmt 4703
Rule 4754(b)(6)(A) and (B). As it relates
to the fourth tiebreaker proposed in new
paragraph (D)(iv) of Rule 4754(b)(6), the
Exchange believes that using the
Benchmark Price in the presence of an
Imbalance is appropriate and best
reflects current market forces while also
making it clear to market participants
that the Imbalance exists. The Exchange
also believes that using the price that
minimizes the distance from the last
published LULD Band more accurately
reflects current market conditions as
opposed to using the existing tiebreaker
based on the System bid-ask midpoint
as there is no continuous market just
prior to the execution of the LULD
Closing Cross.
With respect to not extending a LULD
Closing Cross past 4:00 p.m. ET, the
Exchange believes that the clarity that
comes from requiring that the LULD
Closing Cross occur at 4:00 p.m. ET will
help reduce uncertainty for members
participating in the cross. While the
Exchange recognizes the reasons for
extending the LULD Closing Cross may
exist where there are unmatched market
orders or dramatic price movements
during the cross, the Exchange believes
based on its experience with the cross
that these concerns are outweighed by
the importance of providing members
and the investing public with a
definitive market close and a NOCP at
4:00 p.m. ET. Taken together with the
proposed price thresholds, the Exchange
believes that the LULD Closing Cross
process, as amended, will reduce
unnecessary confusion by providing
certainty that the LULD Closing Cross
will occur at a specified time, and will
occur at a price that is reasonably based
on current market conditions.
The Exchange also believes that it is
appropriate to amend Rule 4754(b)(6)(B)
to specify the contents of the NOII
message for LULD Closing Cross. The
proposed changes will bring greater
transparency around what information
is disseminated for the LULD Closing
Cross, and is therefore consistent with
the public interest and the protection of
investors.
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. Today, the
standard Nasdaq Closing Cross provides
a transparent auction process for
executing member interest at the close.
The proposed rule change is designed to
further align the Exchange’s LULD
Closing Cross with the standard Closing
Cross to promote a more consistent
E:\FR\FM\03MRN1.SGM
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experience for members and investors,
and reducing any potential confusion
regarding Nasdaq’s closing processes.
Further, the proposed changes will
allow additional interest (i.e., new
MOC, LOC, and IO orders) to participate
in the LULD Closing Cross, and thereby
provide a more efficient process for
executing closing interest, and
enhancing price discovery during the
close.
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:
jbell on DSKJLSW7X2PROD with NOTICES
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–2021–009 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–2021–009. 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
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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–2021–009 and
should be submitted on or before March
24, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–04307 Filed 3–2–21; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16882 and #16883;
Oklahoma Disaster Number OK–00145]
Presidential Declaration of a Major
Disaster for the State of Oklahoma
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for the State of Oklahoma
(FEMA–4587–DR), dated 02/24/2021.
Incident: Severe Winter Storms.
Incident Period: 02/08/2021 through
02/20/2021.
DATES: Issued on 02/24/2021.
Physical Loan Application Deadline
Date: 04/26/2021.
Economic Injury (EIDL) Loan
Application Deadline Date: 11/24/2021.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
SUMMARY:
28 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00100
Fmt 4703
Sfmt 4703
12509
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
FOR FURTHER INFORMATION CONTACT:
Notice is
hereby given that as a result of the
President’s major disaster declaration on
02/24/2021, applications for disaster
loans may be filed at the address listed
above or other locally announced
locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties (Physical Damage and
Economic Injury Loans): Canadian,
Carter, Cherokee, Comanche,
Cotton, Hughes, Jefferson, Le Flore,
Mcintosh, Oklahoma, Okmulgee,
Osage, Pittsburg, Stephens, Tulsa,
Wagoner.
Contiguous Counties (Economic Injury
Loans Only):
Oklahoma: Adair, Atoka, Blaine,
Caddo, Cleveland, Coal, Creek,
Delaware, Garvin, Grady, Haskell,
Johnston, Kay, Kingfisher, Kiowa,
Latimer, Lincoln, Logan, Love,
Marshall, Mayes, McClain,
McCurtain, Murray, Muskogee,
Noble, Okfuskee, Pawnee, Pontotoc,
Pottawatomie, Pushmataha, Rogers,
Seminole, Sequoyah, Tillman,
Washington.
Arkansas: Polk, Scott, Sebastian.
Kansas: Chautauqua, Cowley.
Texas: Clay, Montague, Wichita.
The Interest Rates are:
SUPPLEMENTARY INFORMATION:
Percent
For Physical Damage:
Homeowners with Credit Available Elsewhere ......................
Homeowners without Credit
Available Elsewhere ..............
Businesses with Credit Available Elsewhere ......................
Businesses
without
Credit
Available Elsewhere ..............
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Businesses & Small Agricultural
Cooperatives without Credit
Available Elsewhere
Non-Profit Organizations without
Credit Available Elsewhere
2.500
1.250
6.000
3.000
2.000
2.000
3.000
2.000
The number assigned to this disaster
for physical damage is 16882 7 and for
economic injury is 16883 0.
E:\FR\FM\03MRN1.SGM
03MRN1
Agencies
[Federal Register Volume 86, Number 40 (Wednesday, March 3, 2021)]
[Notices]
[Pages 12503-12509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04307]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91208; File No. SR-NASDAQ-2021-009]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Amend Rule 4754 Relating to
the Limit-Up Limit-Down Closing Cross
February 25, 2021.
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 11, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
[[Page 12504]]
(``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 amend Rule 4754 to introduce price
protections for the Limit-Up Limit-Down (``LULD'') Closing Cross \3\
that are similar to the protections currently employed by the standard
Nasdaq Closing Cross,\4\ and to make other changes related to the LULD
Closing Cross.
---------------------------------------------------------------------------
\3\ The LULD Closing Cross is the Exchange's auction process for
executing closing trades in Nasdaq-listed securities when a Trading
Pause pursuant to Rule 4120(a)(12) exists at or after 3:50 p.m. and
before 4:00 p.m. ET. See Rule 4754(b)(6).
\4\ ``Nasdaq Closing Cross'' shall mean the process for
determining the price at which orders shall be executed at the close
and for executing those orders. See Rule 4754(a).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 purpose of the proposed rule change is to amend Rule 4754 to
introduce price protections for the LULD Closing Cross that are similar
to the protections currently employed by the standard Nasdaq Closing
Cross, and to make other changes related to the LULD Closing Cross.
With the proposed changes, the Exchange's LULD and standard Closing
Cross processes will be more harmonized, which the Exchange believes
will promote a more consistent experience for members and investors
participating in the close and reduce any potential confusion regarding
Nasdaq's closing processes.
Background
The Nasdaq Closing Cross is a transparent auction process that
determines a single price for the close. The price determined by the
Closing Cross is also the Nasdaq Official Closing Price (``NOCP'') for
securities that participate in the cross. Members can submit Limit on
Close (``LOC'') Orders,\5\ Market on Close (``MOC'') Orders,\6\ and
Imbalance Only (``IO'') Orders \7\ that are available to participate in
the Closing Cross along with other Close Eligible Interest.\8\ At 4:00
p.m. ET, the Exchange will execute the Nasdaq Closing Cross at a price
determined in accordance with Rule 4754(b)(2).
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\5\ A ``Limit On Close Order'' or ``LOC Order'' is an Order Type
entered with a price that may be executed only in the Nasdaq Closing
Cross, and only if the price determined by the Nasdaq Closing Cross
is equal to or better than the price at which the LOC Order was
entered. See Rule 4702(b)(12).
\6\ A ``Market On Close Order'' or ``MOC Order'' is an Order
Type entered without a price that may be executed only during the
Nasdaq Closing Cross. See Rule 4702(b)(11).
\7\ An ``Imbalance Only Order'' or ``IO Order'' is an Order
entered with a price that may be executed only in the Nasdaq Closing
Cross and only against MOC Orders or LOC Orders. See Rule
4702(b)(13).
\8\ ``Close Eligible Interest'' shall mean any quotation or any
order that may be entered into the system and designated with a
time-in-force of SDAY, SGTC, MDAY, MGTC, SHEX, or GTMC. See Rule
4754(a)(1).
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When the Closing Cross price is calculated as described in Rule
4754(b)(2), the Exchange applies a boundary within which the cross must
execute to ensure that the closing price derived does not exceed a
price reasonably tied to the prevailing market at the time.
Specifically, the Exchange applies a threshold amount to a benchmark
value that, when applied to an individual security, determines the
threshold price range that a security may cross, outside of which the
closing price of a security may not occur.\9\ If the Closing Cross
price of a security would otherwise be outside of this threshold range,
the Exchange will adjust the Closing Cross price of the security to a
price within the threshold range that best satisfies the normal process
for determining the Closing Cross price.\10\ This adjustment happens
automatically prior to execution of the Closing Cross. All unexecuted
shares designated to expire upon the conclusion of the Closing
Cross,\11\ including those that fall outside of the calculated
threshold price range, are cancelled.
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\9\ See Rule 4754(b)(2)(E).
\10\ See Rules 4754(b)(2)(A)-(D).
\11\ These are: MOC, LOC, and IO Orders designated to
participate in the Closing Cross. Prior to the Closing Cross, the
Exchange maintains a continuous order book and a Closing Cross order
book. Orders in the Closing Cross order book may execute only in the
Closing Cross process, while Orders in the continuous book may
execute in regular market hours or in the Closing Cross if the Order
has a time-in-force that will allow it to remain active.
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The threshold amounts and benchmarks are set by Nasdaq management
in advance and communicated to market participants. Nasdaq may adjust
the threshold amounts and benchmarks from time to time based on
Nasdaq's experience with the Closing Cross. Nasdaq publishes this
information publicly on its website, and sets the threshold amount so
that repricing of a security is rare.\12\ Currently, Nasdaq applies a
threshold amount that is the greater of $0.50 or 10%, which is applied
to the Nasdaq Best Bid and Offer (``QBBO'') midpoint and is added to
the Nasdaq Offer and subtracted from the Nasdaq Bid to establish the
threshold range. For example, if the QBBO is $10.00 x $11.00, then the
midpoint is $10.50 and the threshold amount is 10%, resulting in a
threshold value of $1.05 (10% of 10.50 = 1.05). This value is then
added to the offer and subtracted from the bid to obtain the Closing
Cross's threshold price range. In this example, it would result in a
lower threshold of $8.95 (10.00-1.05 = 8.95) and an upper threshold of
$12.05 (11.00 + 1.05 = 12.05), thus creating a range between $8.95 to
$12.05, within which the Closing Cross can occur. This means $8.95 is
the lowest price at which the cross can occur, and $12.05 is the
highest price at which it can occur. The threshold range is dynamic; as
the QBBO changes, the threshold price range changes. The Exchange
believes that the foregoing price thresholds for the standard Closing
Cross has been effective at facilitating price discovery and ensuring
that the closing price of a security is reasonably based on current
market conditions in the security, and therefore proposes to adopt
similar thresholds for its LULD Closing Cross.
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\12\ See https://www.nasdaqtrader.com/content/ProductsServices/Trading/Crosses/openclose_faqs.pdf.
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Today, in addition to the standard Nasdaq Closing Cross described
above, the Exchange operates a LULD Closing Cross that provides an
alternative process for executing closing trades on Nasdaq. The
Exchange conducts this process (instead of the standard Closing Cross)
for Nasdaq-listed securities when a Trading Pause pursuant to Rule
4120(a)(12) exists at or after 3:50 p.m.
[[Page 12505]]
and before 4:00 p.m. ET.\13\ The LULD Closing Cross price will be the
NOCP for Nasdaq-listed securities that participate in the LULD Closing
Cross. Unlike the standard Closing Cross, the LULD Closing Cross
currently occurs at 4:00 p.m. ET, with no price thresholds, and may be
extended pursuant to Rule 4754(b)(6)(A)(iii) if there is an order
imbalance. In this case, the Exchange would extend the time of the LULD
Closing Cross in one minute increments until the order imbalance no
longer exists.\14\ If this condition persists until 5:00 p.m., Nasdaq
would not conduct a cross in that security and would instead use the
last-sale on Nasdaq as the NOCP in that security for that trading day.
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\13\ See Rule 4754(b)(6). While the current language indicates
that the ``stock'' will resume trading via the LULD Closing Cross,
the Exchange will amend this Rule to make clear that the LULD
Closing Cross will apply only for Nasdaq-listed securities.
\14\ Specifically, if the expected cross price moves the greater
of 5% or 50 cents, or if all market orders will not be executed in
the cross, Nasdaq will delay the execution of the LULD Closing Cross
pursuant to Rule 4754(b)(6)(A)(iii). These volatility checks are
governed by Rule 4120(c)(7)(C).
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Price Thresholds
The Exchange now proposes to introduce price protections to the
LULD Closing Cross that will be similar to the protections used today
for the standard Closing Cross, and will ensure that the LULD Closing
Cross price is reasonably related to current market conditions.
The proposed price thresholds will be calculated by applying a
threshold amount set by Nasdaq management in advance and communicated
to market participants (``LULD Price Thresholds''). The LULD Price
Thresholds, like the thresholds presently used for the standard Closing
Cross, will be published on Nasdaq's public website. The LULD Price
Thresholds will be applied to a benchmark associated with the LULD Band
that triggered the Trading Pause to calculate the benchmark price range
within which the LULD Closing Cross price must fall (``Benchmark
Prices''). The Benchmark Prices will be published via the SIP and
Exchange proprietary data feeds. Nasdaq will initially set the LULD
Price Thresholds at the greater of $1.00 or 10% for securities with a
reference price greater than $1.00 (or $0.50 for securities with a
benchmark equal to or less than $1.00), which will be applied to the
last disseminated LULD Auction Collar, or the LULD Band that triggered
the Trading Pause in the direction of the trading that invoked the
Trading Pause.
To effect these changes, the Exchange proposes in new paragraph (E)
of Rule 4754(b)(6) \15\ to provide that the Benchmark Prices within
which the LULD Closing Cross price must fall is established by adding
(or subtracting) a threshold amount from the:
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\15\ With the proposed change, current paragraphs (C) and (D)
will be renumbered as paragraphs (F) and (G).
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(i) Upper (or lower) Auction Collar that was last updated for any
security that enters a Trading Pause that was extended prior to 3:50
p.m. ET, rounded to the nearest minimum price increment;
(ii) Upper Auction Collar for a Limit Up triggered pause (or lower
Auction Collar for a Limit Down triggered pause) for any security that
entered a Trading Pause that was not extended prior to 3:50 p.m. ET,
rounded to the nearest minimum price increment; or
(ii) [sic] Upper Band for a Limit Up triggered pause (or Lower Band
for a Limit Down triggered pause) for any security that entered a
Trading Pause at or after 3:50 p.m. ET, rounded to the nearest minimum
price increment.
Nasdaq management shall set and modify such thresholds from time to
time upon prior notice to market participants.
As applied, for securities that entered a Trading Pause prior to
3:50 p.m. ET and for which the Trading Pause was subsequently extended,
the Exchange will calculate the lower and upper Benchmark Prices as
follows:
If the lower Auction Collar was the collar that was last
widened for the security subject to the Trading Pause, the lower
Benchmark Price will be calculated by subtracting 10% of the last
updated lower Auction Collar price (or $1.00 (or $0.50 if the lower
Auction Collar price is equal to or below $1.00), whichever is greater)
from the last updated lower Auction Collar price (rounded to the
nearest minimum price increment). The upper Benchmark Price will be
equal to the last updated upper Auction Collar price that was updated
with the lower Auction Collar price used to calculate the lower
Benchmark Price.
If the upper Auction Collar was the collar that was last
widened for the security subject to the Trading Pause, the upper
Benchmark Price will be calculated by adding 10% of the last updated
upper Auction Collar price (or $1.00 (or $0.50 if the upper Auction
Collar price is equal to or below $1.00), whichever is greater) to the
last updated upper Auction Collar price (rounded to the nearest minimum
price increment). The lower Benchmark Price will be equal to the last
updated lower Auction Collar price that was updated with the upper
Auction Collar price used to calculate the upper Benchmark Price.
For securities that entered a Trading Pause that was not extended
prior to 3:50 p.m. ET,\16\ the Exchange will calculate the lower and
upper Benchmark Prices as follows:
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\16\ This would occur if, for example, a security entered a
Trading Pause between 3:45 and 3:50 p.m. ET, and the LULD Auction
Collar had not yet been updated.
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For a Limit Down triggered pause, the lower Benchmark
Price will be calculated by subtracting 10% of the lower Auction Collar
price (or $1.00 (or $0.50 if the lower Auction Collar price is equal to
or below $1.00), whichever is greater) from the lower Auction Collar
price (rounded to the nearest minimum price increment). The upper
Benchmark Price will be equal to the upper Auction Collar price that
was disseminated with the lower Auction Collar price used to calculate
the lower Benchmark Price.
For a Limit Up triggered pause, the upper Benchmark Price
will be calculated by adding 10% of the upper Auction Collar price (or
$1.00 (or $0.50 if the upper Auction Collar price is equal to or below
$1.00), whichever is greater) to the upper Auction Collar price
(rounded to the nearest minimum price increment). The lower Benchmark
Price will be equal to the lower Auction Collar price that was
disseminated with the upper Auction Collar price used to calculate the
upper Benchmark Price.
For securities that entered a Trading Pause at or after 3:50 p.m.
ET, the Exchange will calculate the lower and upper Benchmark Prices as
follows:
For a Limit Down triggered pause, the lower Benchmark
Price will be calculated by subtracting 10% of the Lower LULD Band (or
$1.00 (or $0.50 if the Lower LULD Band is equal to or below $1.00),
whichever is greater) from the Lower LULD Band (rounded to the nearest
minimum price increment). The upper Benchmark Price will be equal to
Upper LULD Band in place at the time the Trading Pause was triggered.
For a Limit Up triggered pause, the upper Benchmark Price
will be calculated by adding 10% of the Upper LULD Band (or $1.00 (or
$0.50 if the Upper LULD Band is equal to or below $1.00), whichever is
greater) to the Upper LULD Band (rounded to the nearest minimum price
increment). The lower Benchmark Price will be equal to Lower LULD Band
in place at the time the Trading Pause was triggered.
At 4:00 p.m. ET, Nasdaq will conduct the LULD Closing Cross, and if
the cross price would fall outside of the Benchmark Prices as
calculated above, the LULD Closing Cross will execute all
[[Page 12506]]
available orders at a price within or equal to the Benchmark Prices.
Any unexecuted orders intended for the Closing Cross (i.e., MOC, LOC,
and IO Orders), including those that fall outside of the Benchmark
Prices, will be cancelled. This will be similar to the current standard
Closing Cross functionality as described above. All other orders not
executed in the LULD Closing Cross will be processed according to the
entering firm's instructions, consistent with the current LULD Closing
Cross rule.
The following illustrate how the proposed Benchmark Prices will be
calculated:
Example 1: Security Enters Trading Pause Prior to 3:50 p.m.
Assume:
Symbol ABC is a Tier 1 security
Last sale/reference price: $100
LULD price bands: $95 x $105
NBBO updates to $94.50 x $95
At 3:38 p.m., Symbol ABC enters a Trading Pause
LULD Auction Collars calculated:
Upper Collar: $105
Lower Collar: $90.25
At 3:43 p.m., due to a market order imbalance, the LULD halt cross will
not occur and the LULD Auction Collars (1st extension) are calculated:
Upper Collar: $105
Lower Collar: $85.50
At 3:48 p.m., due to a market order imbalance, the LULD halt cross will
not occur and the LULD Auction Collars (2nd extension) are calculated:
Upper Collar: $105
Lower Collar: $80.75
At 3:50 p.m., the security enters a LULD Closing Cross and the
Benchmark Prices will be calculated:
Upper Benchmark Price: $105
Lower Benchmark Price: $72.68
Here, the lower Auction Collar is the collar that was widened in the
last dissemination of the LULD Auction Collars message, so the
Benchmark Prices will be calculated from the last updated lower Auction
Collar ($80.75). The threshold amount is 8.075 (10% of 80.75 = 8.075),
which is subtracted from the last updated Auction Collar (rounded to
the nearest price increment) to calculate the lower Benchmark Price of
72.68 (80.75-8.075 = 72.675) (i.e., 72.68 when rounded to the nearest
price increment). The upper Benchmark Price of $105 is equal to the
last updated upper Auction Collar price that was disseminated with the
lower Auction Collar price used to calculate the lower Benchmark Price.
Thus, $72.68 is the lowest price at which the LULD Closing Cross can
occur, and $105 is the highest price at which the cross can occur.
Example 2: Security Enters Trading Pause After 3:50 p.m.
Assume:
Symbol ABC is a Tier 1 security
Last sale/reference price: $100
LULD price bands: $95 x $105
NBBO updates to $94.50 x $95
At 3:53 p.m., Symbol ABC enters a Trading Pause and will go through a
LULD Closing Cross.
The Benchmark Prices will be calculated:
Upper Benchmark Price: $105
Lower Benchmark Price: $85.50
Here, the security entered a Limit Down triggered pause, so the
Benchmark Prices will be calculated from the Lower LULD Band ($95). The
threshold amount is 9.50 (10% of 95 = 9.50), which is subtracted from
the Lower LULD Band to calculate the lower Benchmark Price of 85.50 (95
x 9.50 = 85.50). The upper Benchmark Price of $105 is equal to the
Upper LULD Band in place at the time the Trading Pause was triggered.
Thus, $85.50 is the lowest price at which the LULD Closing Cross can
occur, and $105 is the highest price at which the cross can occur.
Execution Processing
In connection with the changes proposed above to introduce price
protections for the LULD Closing Cross, the Exchange proposes to amend
the methodology for determining the LULD cross price. Specifically, the
Exchange proposes the following in new paragraph (D) of Rule
4754(b)(6):
(D)(i) The LULD Closing Cross will occur at the price within the
benchmark prices established pursuant to paragraph (E) below
(``Benchmark Prices'') that maximizes the number of shares of Eligible
Interest in the Nasdaq Market Center to be executed.
(ii) If more than one price exists under subparagraph (i), the LULD
Closing Cross shall occur at the price within the Benchmark Prices that
minimizes any Imbalance.
(iii) If more than one price exists under subparagraph (ii), the
LULD Closing Cross shall occur at the entered price within the
Benchmark Prices at which shares will remain unexecuted in the cross.
(iv) If there is no price within the Benchmark Prices that
satisfies the above conditions, then the LULD Closing Cross shall occur
at:
(a) If an Imbalance exists, a price equal to the upper (lower)
Benchmark Price for a buy (sell) Imbalance; or
(b) if no Imbalance exists, a price that minimizes the distance
from the last published Upper Band (Lower Band) for a Limit Up (Limit
Down) Trading Pause.
Today, the LULD Closing Cross price is determined by the same
execution algorithm as currently used by the standard Closing
Cross.\17\ As discussed below, the proposed execution algorithm retains
many aspects of the standard cross methodology with certain intended
differences.
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\17\ See Rule 4754(b)(2)(A)-(D).
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The first tiebreaker in new paragraph (D)(i) will be substantially
similar to the existing tiebreaker in Rule 4754(b)(2)(A),\18\ except
that the proposed language will specify the LULD cross price must also
fall within the proposed Benchmark Prices established pursuant to new
paragraph (E) of Rule 4754(b)(6). In connection with this change, the
Exchange also proposes to add a definition for ``Eligible Interest,''
which is currently undefined in this Rule. Specifically, the Exchange
proposes to add in new paragraph (A)(i) of Rule 4754(b)(6) that for
purposes of the LULD Closing Cross rule, Eligible Interest shall have
the same meaning as ``Close Eligible Interest'' in Rule 4754(a), with
the addition of any new orders, with an eligible underlying Order Type
and Attribute, entered during the Trading Pause. The proposed change
reflects current system behavior, and indicates that there is an
additional category of orders that may participate in the LULD Closing
Cross (i.e., new incoming orders, with an eligible underlying Order
Type and Attribute, entered during the Trading Pause), which are not
fully applicable in the context of the standard close. The Exchange
therefore believes that using the proposed definition throughout the
LULD Closing Cross rule (instead of ``Close Eligible Interest'' as
currently used in the standard Closing Cross) will better align the
rule to the current operation of the system.
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\18\ Rule 4754(b)(2)(A) currently provides that the Nasdaq
Closing Cross will occur at the price that maximizes the number of
shares of Eligible Interest in the Nasdaq Market Center to be
executed.
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The second tiebreaker in new paragraph (D)(ii) will be based on the
same principle as the existing tiebreaker in Rule 4754(b)(2)(B) (i.e.,
to minimize the number of shares that cannot be matched in the
cross).\19\ However, the new tiebreaker will specify that the LULD
Closing Cross price must be within the proposed Benchmark Prices
[[Page 12507]]
and at the price that minimizes any Imbalance, which will be defined in
new paragraph (A)(ii) of Rule 4754(b)(6) as the number of shares of buy
or sell MOC or LOC orders or Eligible Interest that cannot be matched
with other MOC, LOC, or IO order shares or Eligible Interest at a
particular price at any given time. The Exchange notes that the
proposed change to state that the LULD cross price must minimize any
Imbalance within the second tiebreaker is a corrective change to more
accurately reflect how the system in the LULD Closing Cross currently
behaves. Specifically, the change addresses that during a LULD Closing
Cross, the Exchange considers all orders when calculating the
Imbalance, whereas the standard Closing Cross considers orders
specifically designated for participation in the Closing Cross (i.e.,
MOC, LOC, or IO orders). This reflects current system behavior, which
automatically designates all orders (whether resting on the book, or
new incoming orders entered during the cross) for participation in LULD
Closing Cross.
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\19\ Rule 4754(b)(2)(B) currently provides that if more than one
price exists under subparagraph (A), the Nasdaq Closing Cross shall
occur at the price that minimizes the number of shares of buy or
sell MOC or LOC orders that cannot be matched with other MOC or LOC,
Close Eligible interest, or IO order shares.
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The third tiebreaker in new paragraph (D)(iii) will be
substantially similar to the existing tiebreaker in Rule
4754(b)(2)(C),\20\ except that the proposed language will specify the
LULD cross price must also fall within the proposed Benchmark Prices.
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\20\ Rule 4754(b)(2)(C) currently provides that if more than one
price exists under subparagraph (B), the Nasdaq Closing Cross shall
occur at the entered price at which shares will remain unexecuted in
the cross.
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The fourth and final tiebreaker in new paragraph (D)(iv) will be
used if there is no price within the proposed Benchmark Prices that
satisfies the conditions described above in (D)(i)-(iii), and speaks to
two possible outcomes. The first outcome is reached when an Imbalance
exists, in which case the LULD cross price would be the upper (lower)
Benchmark Price for a buy (sell) Imbalance. The Exchange believes that
this outcome is the appropriate result in the presence of an Imbalance
as it best reflects current market forces while also making it clear to
market participants that the imbalance exists. The second outcome is
reached when there is no Imbalance, in which case the LULD Closing
Cross would occur at a price that minimizes the distance from the last
published Upper Band (Lower Band) for a Limit Up (Limit Down) Trading
Pause. This tiebreaker is similar to the existing tiebreaker in Rule
4754(b)(2)(D) \21\ in that the price that minimizes the distance from
the last published Upper or Lower Band is effectively considered the
midpoint price for the LULD Closing Cross. Unlike the existing
tiebreaker, which uses the price that minimizes the distance from the
System bid-ask midpoint, the proposed tiebreaker will use the relevant
LULD Band. The Exchange believes this is the more appropriate result
because unlike a standard Closing Cross, there is no continuous market
just prior to the execution of the LULD Closing Cross, so using the
relevant LULD Band more accurately reflects current market conditions
as opposed to the System bid-ask midpoint.
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\21\ Rule 4754(b)(2)(D) currently provides that if more than one
price exists under subparagraph (C), the Nasdaq Closing Cross shall
occur at: A price that minimizes the distance from the System bid-
ask midpoint at the time of the Nasdaq Closing Cross.
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Timing of LULD Closing Cross
The Exchange also proposes to amend the LULD Closing Cross Rule to
remove all provisions relating to extending the cross past 4:00 p.m. ET
as this language will no longer be necessary with the changes proposed
herein. In particular, the Exchange proposes to delete Rule
4754(b)(6)(A)(iii) as this provision relates to how the Exchange would
extend the time of the LULD Closing Cross. Further, the Exchange
proposes to amend current Rule 4754(b)(6)(C)(iii) (renumbered to Rule
4754(b)(6)(D)(iii) [sic] under this proposal) to delete the last two
sentences, which provide how certain new orders may be entered or
modified after 4:00 p.m. ET.
MOC/LOC/IO Order Handling
The Exchange also proposes other aligning changes to the LULD
Closing Cross that would more closely harmonize this process with the
current standard Closing Cross. In Rule 4754(b)(6)(C)(iii) (renumbered
to Rule 4754(b)(6)(D)(iii) [sic]), the Exchange proposes to remove the
parenthetical that excludes MOC and LOC orders from being entered,
modified, and cancelled in the LULD Closing Cross. The Exchange
proposes to allow MOC and LOC orders to participate in the LULD Closing
Cross in order to align with the regular Closing Cross where such
orders may participate pursuant to Rules 4702(b)(11) and 4702(b)(12).
The Exchange similarly proposes to allow IO orders to participate in
the LULD Closing Cross in the same manner as in the regular Closing
Cross (i.e., pursuant to Rule 4702(b)(13)). Accordingly, the Exchange
will add that MOC, LOC and IO orders may be entered, modified, and
cancelled pursuant to Rules 4702(b)(11), 4702(b)(12) and 4702(b)(13).
The Exchange will also delete current Rule 4754(b)(6)(C)(i), which sets
forth special handling instructions for MOC, LOC, and IO orders in an
LULD Closing Cross. In particular, this Rule stipulates that in the
event of an LULD Closing Cross, MOC, LOC and IO orders intended for the
closing cross entered into the system and placed on the book prior to
the Trading Pause will remain on the book to participate in the LULD
Closing Cross, and that such orders may not be modified or cancelled.
With the proposed changes to allow MOC, LOC, and IO orders to
participate in the LULD Closing Cross in the same way as a standard
Closing Cross, this provision is no longer necessary.
Net Order Imbalance Indicator
The Exchange proposes to amend Rule 4754(b)(6)(B), which governs
the Net Order Imbalance Indicator (``NOII'') message for the LULD
Closing Cross and disseminates information about MOC, LOC, IO, and
Close Eligible Interest and the price at which those orders would
execute at the time of dissemination. The Rule currently provides that
Nasdaq shall continue disseminating the NOII every second until After
Hours Trading begins. The Exchange notes, however, that it recently
updated its Closing Cross to allow for the dissemination of abbreviated
NOII data (i.e., Early Order Imbalance Indicator) \22\ every 10 seconds
between 3:50 p.m. ET and 3:55 p.m. ET, which would be followed by the
dissemination of regular NOII data between 3:55 and market close.\23\
This change should have been reflected in the LULD Closing Cross rule
in Rule 4754(b)(6)(B) as well. Accordingly, the Exchange proposes to
amend the Rule to more accurately reflect current System behavior, and
provide that Nasdaq shall continue disseminating the NOII pursuant to
Rule 4754(b)(1) until After Hours Trading begins.
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\22\ ``Early Order Imbalance Indicator'' shall mean a message
disseminated by electronic means containing the same information as
the Order Imbalance Indicator, except that it will exclude
information about indicative prices, as set forth in subparagraph
(a)(7)(E) of Rule 4754. See Rule 4754(a)(10).
\23\ See Securities Exchange Act Release No. 85292 (March 12,
2019), 84 FR 9848 (March 18, 2019) (SR-NASDAQ-2019-010).
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The Rule also indicates that the NOII message displays the Near
Price, Far Price, and Reference Prices, which all currently represent
the price at which the LULD Closing Cross would execute should the
cross conclude at that time. With the proposed changes to implement the
new Benchmark Prices, the Near Price and Reference Price will both
represent the price at which the LULD Closing Cross would execute,
bounded by the Benchmark Prices, at
[[Page 12508]]
the time of dissemination. The Far Price will represent the price at
which the LULD Closing Cross would execute if the cross were not
bounded by the Benchmark Prices. The Far Price will be different from
the Near Price and Reference Price to indicate that not all marketable
orders can be filled within the Benchmark Prices. To effect this
change, Rule 4754(b)(6)(B) will be amended to provide that the Near
Price and Reference Prices contained in the NOII will represent the
price at which the LULD Closing Cross would execute should the cross
conclude at that time, and the Far Price will represent the price at
which Eligible Interest would execute.
Corrective Changes
The Exchange proposes a corrective change in Rule 4754(b)(6)(A)(i),
which currently contains language relating to Trading Pauses
``triggered'' at or after 3:50 and before 4:00 p.m. The Exchange
previously amended paragraph (b)(6) of Rule 4754 in 2017 to provide
that the cross is employed when a Trading Pause exists at or after 3:50
and before 4:00 p.m., but inadvertently did not make a similar change
in paragraph (b)(6)(A)(i) of this Rule.\24\ The Exchange now proposes
to amend this provision accordingly.
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\24\ See Securities Exchange Act Release No. 79876 (January 25,
2017), 82 FR 8888 (January 31, 2017) (SR-NASDAQ-2016-131).
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Lastly, the Exchange proposes to update obsolete cross-cites to
Rule 4751 within Rules 4756(c)(3)(B) and 4763(b). Rule 4751 was
previously relocated as part of a prior rule filing, so the proposed
changes will update the obsolete references to their current locations
in the Rulebook.\25\
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\25\ See Securities Exchange Act Release No. 75252 (June 22,
2015), 80 FR 36865 (June 26, 2015) (SR-NASDAQ-2015-024).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\26\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\27\ 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.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposal will promote just and
equitable principles of trade because it will implement price
protections for the LULD Closing Cross that are similar to the
protections used today for the standard Closing Cross. As explained
above, the Exchange currently calculates and applies a price threshold
range within which the standard Closing Cross must execute. The
Exchange believes that this mechanism has been effective in
facilitating a fair and orderly price discovery process at the close,
and ensuring that the cross price derived does not exceed a price
reasonably tied to the prevailing market at the time. The Exchange has
therefore determined to apply similar protections for the LULD Closing
Cross. The Exchange believes that its proposal will benefit members and
investors by facilitating price discovery. Additionally, introducing
price protections to the LULD Closing Cross in the manner discussed
above will further harmonize the Exchange's LULD and standard Closing
Cross processes, thereby promoting a more consistent experience for
members and investors, and reducing any potential confusion regarding
Nasdaq's closing processes. The Exchange believes that calculating
price thresholds associated with the LULD band that triggered the
Trading Pause as discussed above will ensure that the LULD Closing
Cross executes at a reasonable level relative to the last disseminated
LULD Auction Collar, or the LULD band itself, thereby mitigating price
dislocations in the cross. The Exchange also believes that allowing
members to enter, modify and cancel new MOC, LOC and IO orders pursuant
to Rules 4702(b)(11), 4702(b)(12), and 4702(b)(13) in the LULD Closing
Cross will keep these close order type functionality consistent with
the standard close behavior, and will facilitate a more efficient
closing auction by allowing additional interest to participate in the
close.
The Exchange believes that the amended execution algorithm for the
LULD Closing Cross is consistent with the Act because it is
substantially similar to the execution logic that is used for the cross
today, with certain intended differences. The proposed tiebreakers in
new paragraphs (D)(i)-(iii) of Rule 4754(b)(6) are designed to preserve
to the extent possible the current tiebreakers in paragraphs (B)(2)(A)-
(C) of Rule 4754(b)(2) while accommodating the proposed Benchmark
Prices. The proposed changes to add the definitions of Eligible
Interest and Imbalance as used in the proposed first and second
tiebreakers are consistent with the protection of investors and the
public interest because these changes will more accurately describe how
the LULD Closing Cross price will be determined pursuant to the
tiebreakers in proposed Rule 4754(b)(6)(A) and (B). As it relates to
the fourth tiebreaker proposed in new paragraph (D)(iv) of Rule
4754(b)(6), the Exchange believes that using the Benchmark Price in the
presence of an Imbalance is appropriate and best reflects current
market forces while also making it clear to market participants that
the Imbalance exists. The Exchange also believes that using the price
that minimizes the distance from the last published LULD Band more
accurately reflects current market conditions as opposed to using the
existing tiebreaker based on the System bid-ask midpoint as there is no
continuous market just prior to the execution of the LULD Closing
Cross.
With respect to not extending a LULD Closing Cross past 4:00 p.m.
ET, the Exchange believes that the clarity that comes from requiring
that the LULD Closing Cross occur at 4:00 p.m. ET will help reduce
uncertainty for members participating in the cross. While the Exchange
recognizes the reasons for extending the LULD Closing Cross may exist
where there are unmatched market orders or dramatic price movements
during the cross, the Exchange believes based on its experience with
the cross that these concerns are outweighed by the importance of
providing members and the investing public with a definitive market
close and a NOCP at 4:00 p.m. ET. Taken together with the proposed
price thresholds, the Exchange believes that the LULD Closing Cross
process, as amended, will reduce unnecessary confusion by providing
certainty that the LULD Closing Cross will occur at a specified time,
and will occur at a price that is reasonably based on current market
conditions.
The Exchange also believes that it is appropriate to amend Rule
4754(b)(6)(B) to specify the contents of the NOII message for LULD
Closing Cross. The proposed changes will bring greater transparency
around what information is disseminated for the LULD Closing Cross, and
is therefore consistent with the public interest and the protection of
investors.
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. Today, the standard Nasdaq
Closing Cross provides a transparent auction process for executing
member interest at the close. The proposed rule change is designed to
further align the Exchange's LULD Closing Cross with the standard
Closing Cross to promote a more consistent
[[Page 12509]]
experience for members and investors, and reducing any potential
confusion regarding Nasdaq's closing processes. Further, the proposed
changes will allow additional interest (i.e., new MOC, LOC, and IO
orders) to participate in the LULD Closing Cross, and thereby provide a
more efficient process for executing closing interest, and enhancing
price discovery during the close.
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-2021-009 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-2021-009. 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-2021-009 and should be submitted
on or before March 24, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04307 Filed 3-2-21; 8:45 am]
BILLING CODE 8011-01-P