Notice2021-28395
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Withdraw Its Trading Insights Product From Sale
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 3, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 1 (Monday, January 3, 2022)</title>
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[Federal Register Volume 87, Number 1 (Monday, January 3, 2022)]
[Notices]
[Pages 130-132]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-28395]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93868; File No. SR-NASDAQ-2021-102]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Withdraw Its Trading Insights Product From Sale
December 27, 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 December 16, 2021, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to withdraw its Trading Insights product from
sale.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</a>, 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 withdraw the Trading
Insights product from sale. Trading Insights is an optional market data
service designed to help members analyze their own order activity.
Nasdaq has determined, however, that the product is no longer needed,
and, for certain components of the product, members are able to gather
similar insights into their own order activity using existing messaging
received on their order acknowledgments. Because Trading Insights is no
longer needed in the industry, Nasdaq has decided to redirect the
resources used to offer Trading Insights toward new tools and services,
and withdraw the product from sale.
Trading Insights
Trading Insights is an optional market data service designed to
help members analyze their own order activity. It is comprised of three
components: (a) Missed Opportunity--Liquidity; (b) Missed Opportunity--
Latency; and (c) Peer Benchmarking.\3\
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\3\ See Securities Exchange Act Release No. 78886 (September 20,
2016), 81 FR 66113 (September 26, 2016) (SR-Nasdaq-2016-101); see
also Securities Exchange Release No. 79035 (October 4, 2016), 81 FR
70207 (October 11, 2016) (SR-Nasdaq-2016-124) (setting fees for
Trading Insights); Securities Exchange Act Release No. 80856 (June
5, 2017), 82 FR 26820 (June 9, 2017) (SR-Nasdaq-2017-051) (modifying
fees to allow members to sponsor their customers to receive Trading
Insights and extending a free trial offer). The initial proposal had
included a Liquidity Dynamics Analysis component, which was to help
market participants identify pockets of accessible liquidity, but
the Exchange later announced that this component would be delayed
and was never made available to subscribers. See Securities Exchange
Release No. 79119 (October 19, 2016), 81 FR 73157 (October 24, 2016)
(SR-Nasdaq-2016-138).
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The Missed Opportunity--Liquidity component identifies when an
order from a market participant could have been increased in size,
resulting in the execution of additional shares, and is designed to
provide information to a market participant interested in gaining
insight into pockets of liquidity.\4\
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\4\ The data elements for this component, in summary, are: (i)
Issue (Nasdaq symbol for the issue); (ii) Buy/Sell Indicator (side
of the market at which the market participants are quoting); (iii)
Price (the price (inclusive of decimal point) at which Nasdaq Market
Center market participants had order interest for the given security
at the given time); (iv) Order Reference Number (the unique
reference number assigned to the new order at the time of receipt);
(v) Order Entry Time Stamp (the time order was received in the
system); (vi) Share Quantity (total number of shares submitted on
original order); and (vii) Missed Opportunity Quantity (total number
of shares missed).
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The Missed Opportunity--Latency component identifies the amount of
time by which an otherwise marketable order missed execution, and is
designed to provide information to market participants interested in
optimizing their models and trading patterns.\5\
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\5\ The data elements for this component, in summary, are: (i)
Issue (Nasdaq symbol for the issue); (ii) Buy/Sell Indicator (side
of the market at which the market participants are quoting); (iii)
Price (the price (inclusive of decimal point) at which Nasdaq Market
Center market participants had order interest for the given security
at the given time); (iv) Order Reference Number (the unique
reference number assigned to the new order at the time of receipt);
(v) Order Size; (vi) Matching Engine times for incoming orders;
(vii) Missed Opportunity times; and (viii) Reasons for not getting
fills. The Missed Opportunity--Latency component would not provide
specific information about resting orders on the Exchange order
book.
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The Peer Benchmarking component ranks the quality of a market
participant's trading performance against its peers, allowing each
participant to view its relative trading performance by port.\6\ It is
designed to help participants better understand trends over time, their
relative performance relative to their competitors in general, and
whether behavioral changes translate into expected results.
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\6\ A port is a means by which a member firm connects to
Nasdaq's systems. Each port would be categorized into a peer
grouping that would be based upon a given set of metrics that would
share similar trading behavior characteristics, and there would be
at least ten peers within a security. The data elements for this
component, in summary, include: (i) Total Dollar Volume; (ii) Total
Share Volume, Share Volume of Liquidity Provision and Accessible for
Tape A, Tape B and Tape C; (iii) Number of Trades, including Hidden
Orders and Number of Hidden Trades; (iv) Mean/Median Trade Size; (v)
Mean/Median Size of Hidden Orders; (vi) Number of Buy/Sell Orders
Received; (vii) Number of Aggressive Orders, Mean Size of Aggressive
Buy/Sell Orders; (viii) Number of Passive Orders, Mean Size of
Displayed Passive Order, Hidden Passive for Buy and Sell Orders;
(ix) Number of Orders at Best Bid/Ask Level; (x) Mean Cost to
Execute for Buy and Sell for 1,000, 5,000, 10,000 Shares; (xi)
Number of Modified/Cancelled Buy/Sell Orders; (xii) Mean Buy/Sell
Price Range; (xiii) Total Number of Buy/Sell Price; (xiv) Number,
Mean--Resting Buy/Sell Price Points; (xv) Missed Opportunities--
Liquidity, Latency; (xvi) Mean Share Volume Against Hidden, Mean
Quote Rotation Time.
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All of the data offered by Trading Insights is specific to the
market participant's port, and no participant would be able to receive
another market participant's data.
All data is provided on a T+1 basis.
Proposed Withdrawal
Nasdaq regularly reviews its product catalog to ensure that the
tools and services it offers fit the needs of its customers. As
explained above, Trading Insights is an optional market data service
designed to help members analyze their own order activity. Nasdaq
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has found, however, that members are able to use messaging received on
their order acknowledgments, coupled with internal software, to obtain
the same insights into trading activity that certain components of
Trading Insights was designed to convey.\7\ Because the product is no
longer needed in the industry, Nasdaq has decided to withdraw it and
its associated fees from the market.
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\7\ Nasdaq had noted previously that some market participants
may be able to derive some of the data provided by Nasdaq Trading
Insights based on executions and internal algorithms created by
customers. See Securities Exchange Act Release No. 78886 (September
20, 2016), 81 FR 66113 (September 26, 2016) (SR-Nasdaq-2016-101).
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The withdrawal of Trading Insights will not materially impact
either Nasdaq's members or the market as a whole. Currently, less than
ten customers purchase Trading Insights. Nasdaq has discussed the
proposed withdrawal with each, and none indicated that withdrawal would
materially impact their operations. Nasdaq also publicly announced its
intent to withdraw Trading Insights in a Data News publication issued
on October 1, 2021,\8\ and received no feedback indicating that
withdrawal would be problematic.
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\8\ See Nasdaq Data News No. 2021-8 (October 1, 2021), available
at <a href="http://www.nasdaqtrader.com/TraderNews.aspx?id=dn2021-8">http://www.nasdaqtrader.com/TraderNews.aspx?id=dn2021-8</a>.
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Withdrawal of Trading Insights will not have a different impact on
different types of market participants. Members that currently purchase
the product have not indicated that they would be materially
disadvantaged by its withdrawal, and members that do not currently
purchase the product would remain unaffected.
In light of the small number of customers currently using the
product, the ability of members to analyze their own order activity
using in-house software, and the lack of any negative feedback after
discussing the proposed withdrawal with Trading Insights customers and
announcing it publicly, Nasdaq proposes to withdraw Trading Insights
from sale as of December 31, 2021.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ 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, and is not designed to permit unfair discrimination between
customers, issuers, brokers or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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Withdrawing a product that is no longer needed in the industry is
the quintessence of competition. The Proposal promotes competition
because Nasdaq, like all of its competitors, has limited resources with
which to attract customers, and, to remain competitive, Nasdaq must use
its resources effectively. Withdrawal will allow Nasdaq to redirect its
internal resources into developing other products that more effectively
meet customer demand.
The Proposal will not permit unfair discrimination between
customers, issuers, brokers, or dealers. Members that currently
purchase the product have not indicated that they would be materially
disadvantaged by its withdrawal, and members that do not currently
purchase the product will remain unaffected. The Proposal therefore
does not permit unfair discrimination.
For all of these reasons, the proposed withdrawal of Trading
Insights promotes just and equitable principles of trade, removes
impediments to and perfects the mechanism of a free and open market and
a national market system, and, in general, protects investors and the
public interest, and does not permit unfair discrimination.
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.
Intermarket Competition
The withdrawal of Trading Insights will have no impact on
intermarket competition (the competition among SROs). As explained
above, the Proposal would allow Nasdaq to redirect its internal
resources into developing other products that more effectively meet
customer demand. Other platforms may use the opportunity of this
withdrawal to introduce their own versions of Trading Insights,
although, as is evident from Nasdaq's experience, such a product may
not elicit high customer demand.
Intramarket Competition
The Proposal will not cause any unnecessary or inappropriate burden
on intramarket competition (competition among exchange customers). As
explained in our discussion of unfair discrimination above, members
that currently purchase the product have not indicated that they would
be materially disadvantaged by its withdrawal, and members that do not
currently purchase the product will remain unaffected. The Proposal
therefore will not cause any unnecessary or inappropriate burden on
intramarket competition.
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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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 met this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ 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 requested that the Commission waive the 30-day operative delay so
that it can withdraw Trading Insights on December 31, 2021. According
to the Exchange, it has publicly announced its intent to withdraw
Trading Insights in October 2021 and received no feedback indicating
that withdrawal would be problematic, and it has discussed the
withdrawal with each of the customers currently purchasing the product
and no customer indicated that withdrawal would materially impact their
operations. For these reasons, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the 30-day operative delay and designates the
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proposed rule change operative upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ 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 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2b595e474e06484446464e455f586b584e48054c445d"><span class="__cf_email__" data-cfemail="b0c2c5dcd59dd3dfddddd5dec4c3f0c3d5d39ed7dfc6">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2021-102 on the subject line.
Paper Comments
<bullet> 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-2021-102. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-102 and should be submitted
on or before January 24, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-28395 Filed 12-30-21; 8:45 am]
BILLING CODE 8011-01-P
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