Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 4, Rules 4752, 4753, and 4754, 49522-49526 [2023-16124]
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49522
Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 17Ad–3(b) (17 CFR
240.17Ad–3(b)), under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.). The Commission plans to submit
this existing collection of information to
the Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 17Ad–3(b) requires registered
transfer agents to send a copy of the
written notice required under Rule
17Ad–2(c), (d), and (h) to the chief
executive officer of each issuer for
which the transfer agent acts when it
has failed to turnaround at least 75% of
all routine items in accordance with the
requirements of Rule 17Ad–2(a), or to
process at least 75% of all items in
accordance with the requirements of
Rule 17Ad–2(b), for two consecutive
months. The issuer may use the
information contained in the notices: (1)
as an early warning of the transfer
agent’s non-compliance with the
Commission’s minimum performance
standards regarding registered transfer
agents; and (2) to become aware of
certain problems and poor performances
with respect to the transfer agents that
are servicing the issuer’s issues. If the
issuer does not receive notice of a
registered transfer agent’s failure to
comply with the Commission’s
minimum performance standards, then
the issuer will be unable to take
remedial action to correct the problem
or to find another registered transfer
agent. Pursuant to Rule 17Ad–3(b), a
transfer agent that has already filed a
Notice of Non-Compliance with the
Commission pursuant to Rule 17Ad–2
will only be required to send a copy of
that notice to issuers for which it acts
when that transfer agent fails to
turnaround 75% of all routine items or
to process 75% of all items for two
consecutive months.
The Commission estimates that only
one transfer agent will be subject to the
third party disclosure requirements of
Rule 17Ad–3(b) each year. If a transfer
agent fails to meet the turnaround and
processing requirements under 17Ad–
3(b), it would simply send its issuerclients a copy of the notice that had
already been produced for the
Commission pursuant to Rule 17Ad–
2(c) or (d). The Commission estimates
the requirement will take the transfer
agent approximately four hours to
complete. The total estimated burden
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associated with Rule 17Ad–3(b) is thus
approximately 4 hours per year. The
Commission estimates that the internal
compliance cost for the transfer agent to
comply with this third party disclosure
requirement will be approximately
$1,128 per year (4 hours × $283 per hour
= $1,128). The total estimated internal
cost of compliance associated with Rule
17Ad–3(b) is thus approximately $1,128
per year. There are no external costs
associated with sending the notice to
issuer-clients.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted by
September 29, 2023.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: July 25, 2023.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–16099 Filed 7–28–23; 8:45 am]
BILLING CODE 8011–01–P
notice is hereby given that on July 19,
2023, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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
Equity 4, Rules 4752, 4753, and 4754 3
to clarify and restate the order in which
Nasdaq prioritizes executions of Orders
in its Opening, Closing, and Halt
Crosses.
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97973; File No. SR–
NASDAQ–2023–024]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Equity 4, Rules 4752, 4753, and 4754
July 25, 2023.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
PO 00000
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Fmt 4703
The Exchange proposes to amend and
restate portions of its Rules governing
its Opening (Rule 4752) and Closing
Crosses (Rule 4754) (collectively, the
‘‘Crosses’’) to clarify the existing
processes for execution prioritization,
including by correcting errors and
omissions, as well as to clarify the
Exchange’s intentions for those
processes. The Exchange also proposes
to amend the Rule governing processing
of the Halt Cross (Rule 4753) to
accurately reflect the relative execution
prioritization of Displayed and NonDisplayed Orders entered therein.
3 References herein to Nasdaq Rules in the 4000
Series shall mean Rules in Nasdaq Equity 4.
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Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
The Exchange’s Rules governing its
Crosses each include a description of
the priority in which the Exchange will
execute Orders eligible to execute in a
Cross when fewer than all such orders
can be executed therein. The priority
assignments are unique to each type of
Cross.
With respect to the Opening and
Closing Crosses, the Exchange generally
assigns priority in buckets as follows,
with orders executed on a price-time
basis within each bucket: (1) market
orders designated for the Crosses; (2)
interest designated for the Crosses that
is priced more aggressively than the
Opening/Closing Cross Price, as
applicable; (3) limit on Open/Close
orders and displayed interest priced at
the Opening/Closing Cross Price; and (4)
non-displayed interest. All orders
unexecuted in the Crosses are cancelled
unless they are otherwise designated to
continue trading afterwards.
The Exchange proposes to restate its
Opening and Closing Cross procedures
to clarify, simplify and, in certain cases,
correct them so that they fully reflect
the Exchange’s intentions and practices.
The Exchange believes that the existing
Rule text is confusing in several
respects. First, the existing prioritization
Rules expressly differentiate between
executions of certain Orders priced
more aggressively than the Cross prices
from those that would be priced at the
Cross prices, even though the concept of
price-time priority necessarily provides
that Orders priced more aggressively
would execute before Orders priced less
aggressively. Second, the existing Rules
describe, but do not always state
expressly, that they prioritize execution
of Displayed Orders and interest before
Non-Displayed Orders. Third, the Rules
do not state clearly how the System
prioritizes certain Orders that are
designated to either execute in the
Crosses or cancel, without rebooking
unaltered into the continuous market.
The Exchange proposes to restate and
clarify these existing Rules for the
Nasdaq Opening and Closing Crosses to
address these issues, as follows.
The Exchange proposes to retain the
first order execution prioritization
bucket for the Nasdaq Opening Cross, at
Rule 4752(d)(3)(A), which states that the
System will first prioritize execution of
Market on Open Orders (‘‘MOOs’’) 4 and
Early Market Hours market peg orders,5
4 A MOO is an Order Type entered without a
price that may be executed only during the Nasdaq
Opening Cross at the price determined by the
Opening Cross. See Rule 4702(b)(8).
5 ‘‘Early Market Hours Orders’’ are those that, if
entered into the System prior to 9:28 a.m. shall be
treated as MOO and LOO, as appropriate, for the
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with time as the secondary priority.
However, the Exchange proposes to
consolidate the next two prioritization
buckets, at Rule 4752(d)(3)(B) and (C).
Under existing Rule 4752(d)(3)(B), the
System prioritizes Limit on Open
Orders (‘‘LOOs’’),6 limit orders with a
Time in Force (‘‘TIF’’) of Early Market
Hours,7 Opening Imbalance Only Orders
(‘‘OIOs’’),8 SDAY limit orders, SGTC
limit orders, GTMC limit orders, SHEX
limit orders, displayed 9 quotes, and
reserve interest priced more aggressively
than the Nasdaq Opening Cross price
based on limit price with time as the
secondary priority. Under existing Rule
4752(d)(3)(C), the System prioritizes
execution of remaining LOOs and
displayed interest, i.e., LOO orders,
OIO, Early Market Hours Orders and
displayed interest of quotes, SDAY limit
orders, SGTC limit orders, GTMC limit
orders, and SHEX limit orders, at the
Nasdaq Opening Cross price with time
as the secondary priority. Nasdaq
proposes to consolidate these two
buckets into one, as they state
essentially the same thing—that the
Exchange will prioritize as a group the
execution of Displayed Orders and
interest, with price as the primary
priority, and then within each price
level, time as the secondary priority.
purposes of the Nasdaq Opening Cross. See Rule
4752(a)(10).
6 A LOO is an Order Type entered with a price
that may be executed only in the Nasdaq Opening
Cross, and only if the price determined by the
Nasdaq Opening Cross is equal to or better than the
price at which the LOO Order was entered. See
Rule 4702(b)(9).
7 A TIF assigned to an Order means the period of
time that the Nasdaq Market Center will hold the
Order for potential execution. Participants specify
an Order’s Time-in-Force by designating a time at
which the Order will become active and a time at
which the Order will cease to be active. See Rule
4703(a). TIFs that would permit trading on the
Continuous Book during Regular Market Hours
include TIFs of ‘‘Market Hours,’’ ‘‘Market Hours
Day’’ or ‘‘MDAY,’’ ‘‘Market Hours Good-tilCancelled’’ or ‘‘MGTC,’’ ‘‘System Hours,’’ ‘‘System
Hours Good-til-Cancelled’’ or ‘‘SGTC,’’ ‘‘Good-tilCancelled’’ or ‘‘GTC,’’ and Extended Hours Trading
or ‘‘EXT.’’ TIFs that would permit trading on the
Continuous Book after Regular Market Hours
include TIFs of ‘‘System Hours,’’ ‘‘SDAY,’’ ‘‘GTC,’’
and Closing Cross/Extended Hours’’ or ‘‘EXT.’’ See
id.; see Rule 4702(b)(12)(B).
8 An OIO is an Order Type entered with a price
that may be executed only in the Nasdaq Opening
Cross and only against MOO Orders, LOO Orders,
or Early Market Hours Orders. See Rule 4702(b)(10).
9 Display is an Order Attribute that allows the
price and size of an Order to be displayed to market
participants via market data feeds. All Orders that
are Attributable are also displayed, but an Order
may be displayed without being Attributable. As
discussed in Rule 4702, a Non-Displayed Order is
a specific Order Type, but other Order Types may
also be non-displayed if they are not assigned a
Display Order Attribute; however, depending on
context, all Orders that are not displayed may be
referred to as ‘‘Non-Displayed Orders.’’ An Order
with a Display Order Attribute may be referred to
as a ‘‘Displayed Order.’’ See Rule 4703(k).
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That is, there is no reason to distinguish
between Orders priced more
aggressively than the Opening Cross
Price from those priced at the Opening
Cross Price, as the concept of price-time
priority sufficiently implies that the
former category of Orders will execute
prior to the latter category of Orders.10
The proposed amended Rule text also
makes clear that all of the Orders in this
new single prioritization bucket are
either Displayed Orders or, as discussed
below, are neither Displayed nor NonDisplayed Orders, but are currently
treated like Displayed Orders for
purposes of execution priority.11 This
includes auction-only Orders with an
Immediate-or-Cancel Order Attribute
(‘‘IOC’’ Orders) 12 that do not rest on the
Book after entry (and thus are neither
Displayed nor Non-Displayed, strictly
speaking), and are designated to either
execute in the Opening Cross or cancel,
without rebooking unaltered into the
continuous market afterwards. (OIOs are
another example of such an auctiononly Order that is assigned a TIF of IOC
and is therefore treated as a Displayed
Order for purposes of priority.) The
existing prioritization language does not
clearly account for such Orders, and the
proposal codifies their treatment. The
proposed consolidated and restated
10 There is also no reason for the existing Rules
to state the different types of Displayed Limit
Orders that this bucket contains, as all such Limit
Orders are included in it. Thus, the Exchange
proposes to refer to these orders collectively as
‘‘Limit Orders.’’
11 The proposed amended Rule also addresses an
oversight in the prioritization of Reserve Orders.
Currently, Rule 4752(d)(3)(B) expressly sets priority
for ‘‘displayed . . . reserve interest’’—which refers
to the Displayed portion of Reserve Orders—priced
more aggressively than the Cross Price. However,
Rule 4752(d)(3)(C) does not expressly account for
displayed reserve interest priced at the Opening
Cross Price. Instead, the Rule merely implies that
such Orders are included in (C) by referring to
‘‘remaining . . . displayed interest.’’ Market
participants may find such incongruous language
confusing, and the Exchange therefore the Exchange
proposes to delete references to ‘‘reserve interest’’
in existing Rule 4752(d)(3)(B) and the ‘‘interest of
quotes’’ in existing Rule 4752(d)(3)(C) in favor of
the phrase ‘‘the Displayed size of Reserve Orders.’’
12 As stated in Rule 4703(a)(1), an IOC Order is
one that is designated to deactivate immediately
after determining whether the Order is marketable.
Except as provided in Rule 4702 with respect to
Opening Cross/Market Hours Orders and Closing
Cross/Extended Hours Orders, MOO, LOO, OIO,
MOC, LOC and OI Orders all have a Time in Force
of IOC, because they are designated for execution
in the Nasdaq Opening Cross or the Nasdaq Closing
Cross, as applicable, and are cancelled after
determining whether they are executable in such
cross. Such an Order may also be referred to as
having a Time-in-Force of ‘‘On Open’’ or ‘‘On
Close’’, respectively. An MOO, LOO, OIO, MOC,
LOC or IO Order, or any other Order with a Timein-Force of IOC entered between 9:30 a.m. ET and
4:00 p.m. ET, may be referred to as having a Timein-Force of ‘‘Market Hours Immediate or Cancel’’ or
‘‘MIOC.’’
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Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
prioritization bucket would be as
follows, at a new Rule 4752(d)(3)(B):
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Displayed Orders, with price as the
primary priority, and then within each price
level, with time as the secondary priority,
including the following: LOOs; OIOs; Limit
Orders; the Displayed size of Reserve Orders;
other Displayed interests and all Orders with
TIFs designated to execute in the Opening
Cross and not immediately rebook, unaltered,
into the continuous market;
The Exchange proposes to restate and
renumber current Rule 4752(d)(3)(D),
which prioritizes the execution of the
reserve interest of quotes, SDAY limit
orders, SGTC limit orders, GTMC limit
orders, and SHEX limit orders, at the
Nasdaq Opening Cross price with time
as the secondary priority. Nasdaq
proposes to amend this provision to
state expressly what this provision
implies—that it encompasses the
prioritization of Non-Displayed Orders
in price-time priority. Thus, the
Exchange proposes to replace Rule
4752(d)(3)(D) with a new Rule
4752(d)(3)(C), which would state as
follows: ‘‘Non-Displayed Orders,
including LOOs, Limit Orders, and the
Non-Displayed size of Reserve Orders,
with price as the primary priority, and
then within each price level, time as the
secondary priority.’’
The Exchange proposes to move the
last sentence of Rule 4752(d)(3)(B),
which states that an Order to buy (sell)
that is locked or crossed at its nondisplayed price by a Post-Only Order on
the Nasdaq Book in Early Market Hours,
and which has been deemed to have a
price at one minimum price increment
below (above) the price of the Post-Only
Order, shall be ranked in time priority
behind all orders at the price at which
the Order was posted to the Nasdaq
Book. The Exchange proposes to move
this provision to a new, unnumbered
paragraph in Rule 4752(d)(3) that
follows the prioritization provisions at
(d)(3)(A)–(C). This Exchange proposes
this change because this provision is not
part of the general prioritization of
Displayed and Non-Displayed Orders in
the Cross; rather it provides for special
prioritization of an Order in a specific
circumstance involving interaction with
a specific Order Type. The Exchange
believes that relocating this provision
will avoid confusion.
The Exchange proposes to make
similar amendments to Rule 4754(b)(3),
which governs the execution priority of
Orders and interest in the Nasdaq
Closing Cross when fewer than all MOC,
Limit on Close Orders (‘‘LOCs’’),13 IO,
13 A LOC is an Order Type entered with a price
that may be executed only in the Nasdaq Closing
Cross or the LULD Closing Cross (except as
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and Close Eligible Interest 14 would be
executed therein. Similar to the
Opening Cross Rules, the Exchange
proposes to retain current Rule
4754(b)(3)(A), which prioritizes
execution of Market on Close Orders
(‘‘MOCs’’),15 with time as the secondary
priority. And again, the Exchange
proposes to consolidate and restate the
second and third prioritization buckets.
Existing Rule 4754(b)(3)(B) prioritizes
LOC, limit orders, Imbalance Only
Orders (‘‘IOs’’),16 Displayed quotes and
reserve interest priced more aggressively
than the Nasdaq Closing Cross price
based on price with time as the
secondary priority. Meanwhile, existing
Rule 4754(b)(3)(C) prioritizes LOCs, IOs,
displayed interest of limit orders, and
displayed interest of quotes at the
Nasdaq Closing Cross price with time as
the secondary priority. Again, Nasdaq
proposes to consolidate these two
buckets into one to state more simply
the concept that, in the Closing Cross,
the Exchange will prioritize as a group
the execution of Displayed Orders and
interest, with price as the primary
priority, and then within each price
level, with time as the secondary
priority. As with the Opening Cross,
there is no reason to distinguish in the
Closing Cross between Orders priced
more aggressively than the Closing
Cross Price from those priced at the
Closing Cross Price, as the concept of
price-time priority sufficiently implies
that the former category of Orders will
execute prior to the latter category of
Orders.17 The proposed amended Rule
text also makes clear that all of the
Orders in this new single prioritization
bucket are either Displayed Orders or
are currently treated like Displayed
Orders for purposes of execution
priority, despite being neither Displayed
provided herein), and only if the price determined
by the Nasdaq Closing Cross or the LULD Closing
Cross (except as provided herein) is equal to or
better than the price at which the LOC Order was
entered. See Rule 4702(b)(12).
14 Close Eligible Interest means 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).
15 A MOC is an Order Type entered without a
price that may be executed only during the Nasdaq
Closing Cross at the price determined by the
Closing Cross. See Rule 4702(b)(11).
16 An IO 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).
17 There is also no reason for the existing Rules
to state the different types of Displayed Limit
Orders that this bucket contains, as all such Limit
Orders are included in it. Thus, the Exchange
proposes to refer to these orders collectively as
‘‘Limit Orders.’’
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Fmt 4703
Sfmt 4703
nor Non-Displayed.18 This includes
auction-only IOC Orders that do not rest
on the Book after entry (and thus are
neither Displayed nor Non-Displayed,
strictly speaking), and are designated to
either execute in the Closing Cross or
cancel, without rebooking unaltered
into the continuous market afterwards.
(IOs are another example of such an
auction-only Order that is assigned a
TIF of IOC and is therefore treated as a
Displayed Order for purposes of
priority.) The existing prioritization
language does not clearly account for
such Orders, and the proposal codifies
their treatment. The proposed
consolidated and restated prioritization
bucket would be as follows, at a new
Rule 4754(b)(3)(B):
Displayed Orders, with price as the
primary priority, and then within each price
level, with time as the secondary priority,
including the following: LOCs; IOs; Limit
orders; the Displayed size of Reserve Orders;
other Displayed interest; and all Orders with
TIFs designated to execute in the Nasdaq
Closing Cross and not immediately rebook,
unaltered, into the continuous market after
Regular Market Hours;
The Exchange proposes to restate and
renumber current Rule 4754(b)(3)(D),
which prioritizes the execution of
reserve interest at the Nasdaq Closing
Cross price with time as the secondary
priority. Nasdaq proposes to amend this
provision to state expressly what the
Exchange intends for this provision to
imply—that it encompasses the
prioritization of the Non-Displayed
portion of Reserve Orders and other
Non-Displayed Orders in price-time
priority. Thus, the Exchange proposes to
replace Rule 4754(b)(3)(D) with a new
Rule 4752(b)(3)(C), which would state as
follows: ‘‘Non-Displayed Orders,
including LOCs, Limit Orders, and the
Non-Displayed size of Reserve Orders,
with price as the primary priority, and
then within each price level, time as the
secondary priority.’’
The Exchange proposes to delete
current Rule 4754(b)(3)(E), which states
that unexecuted MOC, LOC, and IO
orders will be canceled. The Exchange
18 The proposed amended Rule also addresses an
oversight in the prioritization of Reserve Orders.
Currently, Rule 4754(b)(3)(B) expressly sets priority
for ‘‘displayed . . . reserve interest’’—which refers
to the Displayed portion of Reserve Orders—priced
more aggressively than the Cross Price. However,
Rule 4754(b)(3)(C) does not expressly account for
Displayed Reserve interest priced at the Opening
Cross Price. Instead, the Rule merely implies that
such Orders are included in (C) by referring to
‘‘remaining . . . displayed interest.’’ Market
participants may find such incongruous language
confusing, and the Exchange proposes to delete
references to ‘‘reserve interest’’ in existing Rule
4754(b)(3)(B) and the ‘‘interest of quotes’’ in
existing Rule 4754(b)(3)(C) in favor of the phrase
‘‘Displayed size of Reserve Orders.’’
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proposes to delete this provision
because it does not concern the
prioritization of execution and it is
redundant of statements of the
cancellation conductions for these
Order Types as set forth in Rule 4702.
The Exchange also notes that a similar
provision does not exist in Rule
4752(d)(3) governing the Nasdaq
Opening Cross, such that the deletion of
this provision will render both sets of
Cross rules consistent.
The Exchange proposes to move the
last sentence of Rule 4754(b)(3)(B),
which states that an Order to buy (sell)
that is locked or crossed at its nondisplayed price by a Post-Only Order on
the Nasdaq Book, and which has been
deemed to have a price at one minimum
price increment below (above) the price
of the Post-Only Order, shall be ranked
in time priority behind all orders at the
price at which the Order was posted to
the Nasdaq Book. The Exchange
proposes to move this provision to a
new, unnumbered paragraph in Rule
4754(b)(3) that follows the prioritization
provisions at (b)(3)(A)–(C). This
Exchange proposes this change because
this provision is not part of the general
prioritization of Displayed and NonDisplayed Orders in the Cross; rather it
provides for special prioritization of an
Order in a specific circumstance
involving interaction with a specific
Order Type. The Exchange believes that
relocating this provision will avoid
confusion.
In addition to the above, the Exchange
proposes to amend Rule 4753, which
governs the Exchange’s procedures for
conducting the Halt Cross when fewer
than all shares of Eligible Interest 19 are
executed at the Nasdaq Halt Cross price.
Currently, Rule 4753(b)(3) states that, if
the Nasdaq Halt Cross price is selected
and fewer than all shares of Eligible
Interest that are available in the Nasdaq
Market Center would be executed, all
Eligible Interest shall be executed at the
Nasdaq Halt Cross price in price-time
priority.20 The Exchange proposes to
amend this Rule to account for the fact
that it fails to distinguish between how
the System prioritizes Displayed (and
19 Eligible Interest is any quotation or any Order
that has been entered into the system and
designated with a TIF that would allow the order
to be in force at the time of the Halt Cross. See Rule
4753(a)(5).
20 Rule 4753(b)(3) also states that an Order to buy
(sell) that is locked or crossed at its non-displayed
price by a Post-Only Order on the Nasdaq Book, and
which has been deemed to have a price at one
minimum price increment below (above) the price
of the Post-Only Order, shall be ranked in time
priority ahead of all orders one minimum price
increment below (above) the price of the Post-Only
Order but behind all orders at the price at which
the Order was posted to the Nasdaq Book.
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IOCs and IOs treated as Displayed
Orders) vis-a-vis Non-Displayed Eligible
Interest in a Halt Cross. Specifically, the
Exchange proposes to amend the
reference to ‘‘price/time’’ priority to
state instead ‘‘price/display/time
priority.’’ The Exchange also proposes
to add a sentence which states that
Displayed Eligible Interest and Orders
with IOC shall be ranked in time
priority ahead of Non-Displayed Eligible
Interest with the same prices.
This proposed amendment is
intended to codify existing practice and
to render Halt Cross prioritization
procedures roughly consistent with
those of the Opening and Closing
Crosses.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with section 6(b)
of the Act,21 in general, and furthers the
objectives of section 6(b)(5) of the Act,22
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.
It is consistent with the Act to for the
Exchange to amend its Rules governing
its Crosses so that they account for how
the System prioritizes certain Orders in
certain situations and so that they
accurately and clearly distinguish
between how the System prioritizes
Displayed versus Non-Displayed
variants of Orders in the Crosses, as well
as Orders with IOC that do not survive
the Crosses. It is in the best interests of
investors and the public, and consistent
with the maintenance of an orderly
market, to maintain comprehensive,
accurate, and specific rules governing
the prioritization of order execution in
the Nasdaq Crosses. Doing so will avoid
potential participant and investor
confusion and frustration as well as
promote confidence and participation in
the Crosses.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change will clarify and
correct the Exchange’s Rules governing
its prioritization of order executions in
the Cross. Such changes are neither
intended to nor will they adversely
impact competition. If anything, the
PO 00000
21 15
22 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00092
Fmt 4703
Sfmt 4703
49525
Exchange expects that the proposed
changes will promote competition by
increasing confidence in and the
attractiveness of participating in the
Exchange’s Crosses.
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
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 23 and Rule 19b–
4(f)(6) thereunder.24
A proposed rule change filed under
Rule 19b–4(f)(6) 25 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 26 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest
because the proposed rule change does
not raise any new or novel issues.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposed rule change as
operative upon filing.27
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
23 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
25 17 CFR 240.19b–4(f)(6).
26 17 CFR 240.19b–4(f)(6)(iii).
27 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).
24 17
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Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
ddrumheller on DSK120RN23PROD with NOTICES1
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–2023–024 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–2023–024. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection.
VerDate Sep<11>2014
18:11 Jul 28, 2023
Jkt 259001
All submissions should refer to file
number SR–NASDAQ–2023–024 and
should be submitted on or before
August 21, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–16124 Filed 7–28–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97983; File No. SR–
CboeBZX–2023–050]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Exchange Rules To Provide Users With
a Risk Setting They May Elect To Apply
to Their Orders That Will Allow Them
To Reject Market Orders During
Continuous Trading and/or Auctions
July 25, 2023.
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 July 14,
2023, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘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
Cboe BZX Exchange, Inc. (‘‘BZX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposal to
amend Interpretation and Policy .01 to
Rule 11.13 in connection with a risk
setting that Users 3 may elect to apply to
their orders that will allow them to
reject market orders during continuous
trading and/or auctions.4 The text of the
proposed rule change is provided in
Exhibit 5.
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 A User is any Member or Sponsored Participant
who is authorized to obtain access to the System
pursuant to Rule 11.13. See Rule 1.5(cc).
4 The Exchange plans to implement the proposed
rule change on a date that will be circulated in a
notice from the Cboe Trade Desk to all Members.
PO 00000
28 17
1 15
Frm 00093
Fmt 4703
Sfmt 4703
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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 this proposal is to
amend Interpretation and Policy .01 to
Rule 11.13 to allow the Exchange to
offer its Users the ability to apply a risk
setting to their orders that will allow
them to reject market orders during
continuous trading or auctions (‘‘Market
Order Check’’). Pursuant to
Interpretation and Policy .01 to Rule
11.13, the Exchange currently offers
certain optional risk settings applicable
to a User’s activities on the Exchange.
Specifically, pursuant to Interpretation
and Policy .01(c), the Exchange
currently provides Users with the
controls to restrict order types or
modifiers that can be utilized (including
pre-market, post-market, short sales,
ISOs, and Directed ISOs). When
utilized, this optional risk tool acts as a
risk filter by evaluating a User’s orders
to determine whether the orders comply
with certain criteria established by the
User.
Based on feedback from its Members,
the Exchange now seeks to expand this
risk setting to allow a User to restrict
additional order types from being
entered—market orders during
continuous trading and/or market orders
during auctions (‘‘Market Order
Check’’).5 The Market Order Check will
5 The Exchange notes that the proposed Market
Order Check will treat Stop Orders as regular
market orders. A ‘‘Stop Order’’ Stop Order is an
order that becomes a BZX market order when the
stop price is elected. A Stop Order to buy is elected
when the consolidated last sale in the security
E:\FR\FM\31JYN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Notices]
[Pages 49522-49526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16124]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97973; File No. SR-NASDAQ-2023-024]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Equity 4, Rules 4752, 4753, and 4754
July 25, 2023.
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 July 19, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 Equity 4, Rules 4752, 4753, and 4754
\3\ to clarify and restate the order in which Nasdaq prioritizes
executions of Orders in its Opening, Closing, and Halt Crosses.
---------------------------------------------------------------------------
\3\ References herein to Nasdaq Rules in the 4000 Series shall
mean Rules in Nasdaq Equity 4.
---------------------------------------------------------------------------
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 Exchange proposes to amend and restate portions of its Rules
governing its Opening (Rule 4752) and Closing Crosses (Rule 4754)
(collectively, the ``Crosses'') to clarify the existing processes for
execution prioritization, including by correcting errors and omissions,
as well as to clarify the Exchange's intentions for those processes.
The Exchange also proposes to amend the Rule governing processing of
the Halt Cross (Rule 4753) to accurately reflect the relative execution
prioritization of Displayed and Non-Displayed Orders entered therein.
[[Page 49523]]
The Exchange's Rules governing its Crosses each include a
description of the priority in which the Exchange will execute Orders
eligible to execute in a Cross when fewer than all such orders can be
executed therein. The priority assignments are unique to each type of
Cross.
With respect to the Opening and Closing Crosses, the Exchange
generally assigns priority in buckets as follows, with orders executed
on a price-time basis within each bucket: (1) market orders designated
for the Crosses; (2) interest designated for the Crosses that is priced
more aggressively than the Opening/Closing Cross Price, as applicable;
(3) limit on Open/Close orders and displayed interest priced at the
Opening/Closing Cross Price; and (4) non-displayed interest. All orders
unexecuted in the Crosses are cancelled unless they are otherwise
designated to continue trading afterwards.
The Exchange proposes to restate its Opening and Closing Cross
procedures to clarify, simplify and, in certain cases, correct them so
that they fully reflect the Exchange's intentions and practices. The
Exchange believes that the existing Rule text is confusing in several
respects. First, the existing prioritization Rules expressly
differentiate between executions of certain Orders priced more
aggressively than the Cross prices from those that would be priced at
the Cross prices, even though the concept of price-time priority
necessarily provides that Orders priced more aggressively would execute
before Orders priced less aggressively. Second, the existing Rules
describe, but do not always state expressly, that they prioritize
execution of Displayed Orders and interest before Non-Displayed Orders.
Third, the Rules do not state clearly how the System prioritizes
certain Orders that are designated to either execute in the Crosses or
cancel, without rebooking unaltered into the continuous market.
The Exchange proposes to restate and clarify these existing Rules
for the Nasdaq Opening and Closing Crosses to address these issues, as
follows.
The Exchange proposes to retain the first order execution
prioritization bucket for the Nasdaq Opening Cross, at Rule
4752(d)(3)(A), which states that the System will first prioritize
execution of Market on Open Orders (``MOOs'') \4\ and Early Market
Hours market peg orders,\5\ with time as the secondary priority.
However, the Exchange proposes to consolidate the next two
prioritization buckets, at Rule 4752(d)(3)(B) and (C).
---------------------------------------------------------------------------
\4\ A MOO is an Order Type entered without a price that may be
executed only during the Nasdaq Opening Cross at the price
determined by the Opening Cross. See Rule 4702(b)(8).
\5\ ``Early Market Hours Orders'' are those that, if entered
into the System prior to 9:28 a.m. shall be treated as MOO and LOO,
as appropriate, for the purposes of the Nasdaq Opening Cross. See
Rule 4752(a)(10).
---------------------------------------------------------------------------
Under existing Rule 4752(d)(3)(B), the System prioritizes Limit on
Open Orders (``LOOs''),\6\ limit orders with a Time in Force (``TIF'')
of Early Market Hours,\7\ Opening Imbalance Only Orders (``OIOs''),\8\
SDAY limit orders, SGTC limit orders, GTMC limit orders, SHEX limit
orders, displayed \9\ quotes, and reserve interest priced more
aggressively than the Nasdaq Opening Cross price based on limit price
with time as the secondary priority. Under existing Rule 4752(d)(3)(C),
the System prioritizes execution of remaining LOOs and displayed
interest, i.e., LOO orders, OIO, Early Market Hours Orders and
displayed interest of quotes, SDAY limit orders, SGTC limit orders,
GTMC limit orders, and SHEX limit orders, at the Nasdaq Opening Cross
price with time as the secondary priority. Nasdaq proposes to
consolidate these two buckets into one, as they state essentially the
same thing--that the Exchange will prioritize as a group the execution
of Displayed Orders and interest, with price as the primary priority,
and then within each price level, time as the secondary priority. That
is, there is no reason to distinguish between Orders priced more
aggressively than the Opening Cross Price from those priced at the
Opening Cross Price, as the concept of price-time priority sufficiently
implies that the former category of Orders will execute prior to the
latter category of Orders.\10\ The proposed amended Rule text also
makes clear that all of the Orders in this new single prioritization
bucket are either Displayed Orders or, as discussed below, are neither
Displayed nor Non-Displayed Orders, but are currently treated like
Displayed Orders for purposes of execution priority.\11\ This includes
auction-only Orders with an Immediate-or-Cancel Order Attribute
(``IOC'' Orders) \12\ that do not rest on the Book after entry (and
thus are neither Displayed nor Non-Displayed, strictly speaking), and
are designated to either execute in the Opening Cross or cancel,
without rebooking unaltered into the continuous market afterwards.
(OIOs are another example of such an auction-only Order that is
assigned a TIF of IOC and is therefore treated as a Displayed Order for
purposes of priority.) The existing prioritization language does not
clearly account for such Orders, and the proposal codifies their
treatment. The proposed consolidated and restated
[[Page 49524]]
prioritization bucket would be as follows, at a new Rule 4752(d)(3)(B):
---------------------------------------------------------------------------
\6\ A LOO is an Order Type entered with a price that may be
executed only in the Nasdaq Opening Cross, and only if the price
determined by the Nasdaq Opening Cross is equal to or better than
the price at which the LOO Order was entered. See Rule 4702(b)(9).
\7\ A TIF assigned to an Order means the period of time that the
Nasdaq Market Center will hold the Order for potential execution.
Participants specify an Order's Time-in-Force by designating a time
at which the Order will become active and a time at which the Order
will cease to be active. See Rule 4703(a). TIFs that would permit
trading on the Continuous Book during Regular Market Hours include
TIFs of ``Market Hours,'' ``Market Hours Day'' or ``MDAY,'' ``Market
Hours Good-til-Cancelled'' or ``MGTC,'' ``System Hours,'' ``System
Hours Good-til-Cancelled'' or ``SGTC,'' ``Good-til-Cancelled'' or
``GTC,'' and Extended Hours Trading or ``EXT.'' TIFs that would
permit trading on the Continuous Book after Regular Market Hours
include TIFs of ``System Hours,'' ``SDAY,'' ``GTC,'' and Closing
Cross/Extended Hours'' or ``EXT.'' See id.; see Rule 4702(b)(12)(B).
\8\ An OIO is an Order Type entered with a price that may be
executed only in the Nasdaq Opening Cross and only against MOO
Orders, LOO Orders, or Early Market Hours Orders. See Rule
4702(b)(10).
\9\ Display is an Order Attribute that allows the price and size
of an Order to be displayed to market participants via market data
feeds. All Orders that are Attributable are also displayed, but an
Order may be displayed without being Attributable. As discussed in
Rule 4702, a Non-Displayed Order is a specific Order Type, but other
Order Types may also be non-displayed if they are not assigned a
Display Order Attribute; however, depending on context, all Orders
that are not displayed may be referred to as ``Non-Displayed
Orders.'' An Order with a Display Order Attribute may be referred to
as a ``Displayed Order.'' See Rule 4703(k).
\10\ There is also no reason for the existing Rules to state the
different types of Displayed Limit Orders that this bucket contains,
as all such Limit Orders are included in it. Thus, the Exchange
proposes to refer to these orders collectively as ``Limit Orders.''
\11\ The proposed amended Rule also addresses an oversight in
the prioritization of Reserve Orders. Currently, Rule 4752(d)(3)(B)
expressly sets priority for ``displayed . . . reserve interest''--
which refers to the Displayed portion of Reserve Orders--priced more
aggressively than the Cross Price. However, Rule 4752(d)(3)(C) does
not expressly account for displayed reserve interest priced at the
Opening Cross Price. Instead, the Rule merely implies that such
Orders are included in (C) by referring to ``remaining . . .
displayed interest.'' Market participants may find such incongruous
language confusing, and the Exchange therefore the Exchange proposes
to delete references to ``reserve interest'' in existing Rule
4752(d)(3)(B) and the ``interest of quotes'' in existing Rule
4752(d)(3)(C) in favor of the phrase ``the Displayed size of Reserve
Orders.''
\12\ As stated in Rule 4703(a)(1), an IOC Order is one that is
designated to deactivate immediately after determining whether the
Order is marketable. Except as provided in Rule 4702 with respect to
Opening Cross/Market Hours Orders and Closing Cross/Extended Hours
Orders, MOO, LOO, OIO, MOC, LOC and OI Orders all have a Time in
Force of IOC, because they are designated for execution in the
Nasdaq Opening Cross or the Nasdaq Closing Cross, as applicable, and
are cancelled after determining whether they are executable in such
cross. Such an Order may also be referred to as having a Time-in-
Force of ``On Open'' or ``On Close'', respectively. An MOO, LOO,
OIO, MOC, LOC or IO Order, or any other Order with a Time-in-Force
of IOC entered between 9:30 a.m. ET and 4:00 p.m. ET, may be
referred to as having a Time-in-Force of ``Market Hours Immediate or
Cancel'' or ``MIOC.''
Displayed Orders, with price as the primary priority, and then
within each price level, with time as the secondary priority,
including the following: LOOs; OIOs; Limit Orders; the Displayed
size of Reserve Orders; other Displayed interests and all Orders
with TIFs designated to execute in the Opening Cross and not
---------------------------------------------------------------------------
immediately rebook, unaltered, into the continuous market;
The Exchange proposes to restate and renumber current Rule
4752(d)(3)(D), which prioritizes the execution of the reserve interest
of quotes, SDAY limit orders, SGTC limit orders, GTMC limit orders, and
SHEX limit orders, at the Nasdaq Opening Cross price with time as the
secondary priority. Nasdaq proposes to amend this provision to state
expressly what this provision implies--that it encompasses the
prioritization of Non-Displayed Orders in price-time priority. Thus,
the Exchange proposes to replace Rule 4752(d)(3)(D) with a new Rule
4752(d)(3)(C), which would state as follows: ``Non-Displayed Orders,
including LOOs, Limit Orders, and the Non-Displayed size of Reserve
Orders, with price as the primary priority, and then within each price
level, time as the secondary priority.''
The Exchange proposes to move the last sentence of Rule
4752(d)(3)(B), which states that an Order to buy (sell) that is locked
or crossed at its non-displayed price by a Post-Only Order on the
Nasdaq Book in Early Market Hours, and which has been deemed to have a
price at one minimum price increment below (above) the price of the
Post-Only Order, shall be ranked in time priority behind all orders at
the price at which the Order was posted to the Nasdaq Book. The
Exchange proposes to move this provision to a new, unnumbered paragraph
in Rule 4752(d)(3) that follows the prioritization provisions at
(d)(3)(A)-(C). This Exchange proposes this change because this
provision is not part of the general prioritization of Displayed and
Non-Displayed Orders in the Cross; rather it provides for special
prioritization of an Order in a specific circumstance involving
interaction with a specific Order Type. The Exchange believes that
relocating this provision will avoid confusion.
The Exchange proposes to make similar amendments to Rule
4754(b)(3), which governs the execution priority of Orders and interest
in the Nasdaq Closing Cross when fewer than all MOC, Limit on Close
Orders (``LOCs''),\13\ IO, and Close Eligible Interest \14\ would be
executed therein. Similar to the Opening Cross Rules, the Exchange
proposes to retain current Rule 4754(b)(3)(A), which prioritizes
execution of Market on Close Orders (``MOCs''),\15\ with time as the
secondary priority. And again, the Exchange proposes to consolidate and
restate the second and third prioritization buckets.
---------------------------------------------------------------------------
\13\ A LOC is an Order Type entered with a price that may be
executed only in the Nasdaq Closing Cross or the LULD Closing Cross
(except as provided herein), and only if the price determined by the
Nasdaq Closing Cross or the LULD Closing Cross (except as provided
herein) is equal to or better than the price at which the LOC Order
was entered. See Rule 4702(b)(12).
\14\ Close Eligible Interest means 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).
\15\ A MOC is an Order Type entered without a price that may be
executed only during the Nasdaq Closing Cross at the price
determined by the Closing Cross. See Rule 4702(b)(11).
---------------------------------------------------------------------------
Existing Rule 4754(b)(3)(B) prioritizes LOC, limit orders,
Imbalance Only Orders (``IOs''),\16\ Displayed quotes and reserve
interest priced more aggressively than the Nasdaq Closing Cross price
based on price with time as the secondary priority. Meanwhile, existing
Rule 4754(b)(3)(C) prioritizes LOCs, IOs, displayed interest of limit
orders, and displayed interest of quotes at the Nasdaq Closing Cross
price with time as the secondary priority. Again, Nasdaq proposes to
consolidate these two buckets into one to state more simply the concept
that, in the Closing Cross, the Exchange will prioritize as a group the
execution of Displayed Orders and interest, with price as the primary
priority, and then within each price level, with time as the secondary
priority. As with the Opening Cross, there is no reason to distinguish
in the Closing Cross between Orders priced more aggressively than the
Closing Cross Price from those priced at the Closing Cross Price, as
the concept of price-time priority sufficiently implies that the former
category of Orders will execute prior to the latter category of
Orders.\17\ The proposed amended Rule text also makes clear that all of
the Orders in this new single prioritization bucket are either
Displayed Orders or are currently treated like Displayed Orders for
purposes of execution priority, despite being neither Displayed nor
Non-Displayed.\18\ This includes auction-only IOC Orders that do not
rest on the Book after entry (and thus are neither Displayed nor Non-
Displayed, strictly speaking), and are designated to either execute in
the Closing Cross or cancel, without rebooking unaltered into the
continuous market afterwards. (IOs are another example of such an
auction-only Order that is assigned a TIF of IOC and is therefore
treated as a Displayed Order for purposes of priority.) The existing
prioritization language does not clearly account for such Orders, and
the proposal codifies their treatment. The proposed consolidated and
restated prioritization bucket would be as follows, at a new Rule
4754(b)(3)(B):
---------------------------------------------------------------------------
\16\ An IO 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).
\17\ There is also no reason for the existing Rules to state the
different types of Displayed Limit Orders that this bucket contains,
as all such Limit Orders are included in it. Thus, the Exchange
proposes to refer to these orders collectively as ``Limit Orders.''
\18\ The proposed amended Rule also addresses an oversight in
the prioritization of Reserve Orders. Currently, Rule 4754(b)(3)(B)
expressly sets priority for ``displayed . . . reserve interest''--
which refers to the Displayed portion of Reserve Orders--priced more
aggressively than the Cross Price. However, Rule 4754(b)(3)(C) does
not expressly account for Displayed Reserve interest priced at the
Opening Cross Price. Instead, the Rule merely implies that such
Orders are included in (C) by referring to ``remaining . . .
displayed interest.'' Market participants may find such incongruous
language confusing, and the Exchange proposes to delete references
to ``reserve interest'' in existing Rule 4754(b)(3)(B) and the
``interest of quotes'' in existing Rule 4754(b)(3)(C) in favor of
the phrase ``Displayed size of Reserve Orders.''
Displayed Orders, with price as the primary priority, and then
within each price level, with time as the secondary priority,
including the following: LOCs; IOs; Limit orders; the Displayed size
of Reserve Orders; other Displayed interest; and all Orders with
TIFs designated to execute in the Nasdaq Closing Cross and not
immediately rebook, unaltered, into the continuous market after
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Regular Market Hours;
The Exchange proposes to restate and renumber current Rule
4754(b)(3)(D), which prioritizes the execution of reserve interest at
the Nasdaq Closing Cross price with time as the secondary priority.
Nasdaq proposes to amend this provision to state expressly what the
Exchange intends for this provision to imply--that it encompasses the
prioritization of the Non-Displayed portion of Reserve Orders and other
Non-Displayed Orders in price-time priority. Thus, the Exchange
proposes to replace Rule 4754(b)(3)(D) with a new Rule 4752(b)(3)(C),
which would state as follows: ``Non-Displayed Orders, including LOCs,
Limit Orders, and the Non-Displayed size of Reserve Orders, with price
as the primary priority, and then within each price level, time as the
secondary priority.''
The Exchange proposes to delete current Rule 4754(b)(3)(E), which
states that unexecuted MOC, LOC, and IO orders will be canceled. The
Exchange
[[Page 49525]]
proposes to delete this provision because it does not concern the
prioritization of execution and it is redundant of statements of the
cancellation conductions for these Order Types as set forth in Rule
4702. The Exchange also notes that a similar provision does not exist
in Rule 4752(d)(3) governing the Nasdaq Opening Cross, such that the
deletion of this provision will render both sets of Cross rules
consistent.
The Exchange proposes to move the last sentence of Rule
4754(b)(3)(B), which states that an Order to buy (sell) that is locked
or crossed at its non-displayed price by a Post-Only Order on the
Nasdaq Book, and which has been deemed to have a price at one minimum
price increment below (above) the price of the Post-Only Order, shall
be ranked in time priority behind all orders at the price at which the
Order was posted to the Nasdaq Book. The Exchange proposes to move this
provision to a new, unnumbered paragraph in Rule 4754(b)(3) that
follows the prioritization provisions at (b)(3)(A)-(C). This Exchange
proposes this change because this provision is not part of the general
prioritization of Displayed and Non-Displayed Orders in the Cross;
rather it provides for special prioritization of an Order in a specific
circumstance involving interaction with a specific Order Type. The
Exchange believes that relocating this provision will avoid confusion.
In addition to the above, the Exchange proposes to amend Rule 4753,
which governs the Exchange's procedures for conducting the Halt Cross
when fewer than all shares of Eligible Interest \19\ are executed at
the Nasdaq Halt Cross price. Currently, Rule 4753(b)(3) states that, if
the Nasdaq Halt Cross price is selected and fewer than all shares of
Eligible Interest that are available in the Nasdaq Market Center would
be executed, all Eligible Interest shall be executed at the Nasdaq Halt
Cross price in price-time priority.\20\ The Exchange proposes to amend
this Rule to account for the fact that it fails to distinguish between
how the System prioritizes Displayed (and IOCs and IOs treated as
Displayed Orders) vis-a-vis Non-Displayed Eligible Interest in a Halt
Cross. Specifically, the Exchange proposes to amend the reference to
``price/time'' priority to state instead ``price/display/time
priority.'' The Exchange also proposes to add a sentence which states
that Displayed Eligible Interest and Orders with IOC shall be ranked in
time priority ahead of Non-Displayed Eligible Interest with the same
prices.
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\19\ Eligible Interest is any quotation or any Order that has
been entered into the system and designated with a TIF that would
allow the order to be in force at the time of the Halt Cross. See
Rule 4753(a)(5).
\20\ Rule 4753(b)(3) also states that an Order to buy (sell)
that is locked or crossed at its non-displayed price by a Post-Only
Order on the Nasdaq Book, and which has been deemed to have a price
at one minimum price increment below (above) the price of the Post-
Only Order, shall be ranked in time priority ahead of all orders one
minimum price increment below (above) the price of the Post-Only
Order but behind all orders at the price at which the Order was
posted to the Nasdaq Book.
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This proposed amendment is intended to codify existing practice and
to render Halt Cross prioritization procedures roughly consistent with
those of the Opening and Closing Crosses.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\21\ in general, and furthers the objectives of section
6(b)(5) of the Act,\22\ 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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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
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It is consistent with the Act to for the Exchange to amend its
Rules governing its Crosses so that they account for how the System
prioritizes certain Orders in certain situations and so that they
accurately and clearly distinguish between how the System prioritizes
Displayed versus Non-Displayed variants of Orders in the Crosses, as
well as Orders with IOC that do not survive the Crosses. It is in the
best interests of investors and the public, and consistent with the
maintenance of an orderly market, to maintain comprehensive, accurate,
and specific rules governing the prioritization of order execution in
the Nasdaq Crosses. Doing so will avoid potential participant and
investor confusion and frustration as well as promote confidence and
participation in the Crosses.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change will
clarify and correct the Exchange's Rules governing its prioritization
of order executions in the Cross. Such changes are neither intended to
nor will they adversely impact competition. If anything, the Exchange
expects that the proposed changes will promote competition by
increasing confidence in and the attractiveness of participating in the
Exchange's Crosses.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 19b-
4(f)(6) thereunder.\24\
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \26\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest because the proposed
rule change does not raise any new or novel issues. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change as operative upon filing.\27\
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\25\ 17 CFR 240.19b-4(f)(6).
\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ 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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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such
[[Page 49526]]
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule change
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NASDAQ-2023-024 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-2023-024. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-NASDAQ-2023-024 and
should be submitted on or before August 21, 2023.
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), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-16124 Filed 7-28-23; 8:45 am]
BILLING CODE 8011-01-P
