Notice2022-12732
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, To Modify Equity 4, Rule 4120 To Add Categories of Regulatory and Operational Halts, To Reorganize the Remaining Text of the Rule, and To Make Conforming Changes to Related Rules
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
June 14, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 114 (Tuesday, June 14, 2022)</title>
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[Federal Register Volume 87, Number 114 (Tuesday, June 14, 2022)]
[Notices]
[Pages 36018-36023]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12732]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95069; File No. SR-NASDAQ-2022-017]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order
Approving Proposed Rule Change, as Modified by Amendment No. 1, To
Modify Equity 4, Rule 4120 To Add Categories of Regulatory and
Operational Halts, To Reorganize the Remaining Text of the Rule, and To
Make Conforming Changes to Related Rules
June 8, 2022.
I. Introduction
On February 22, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to modify Equity 4, Rule 4120 to add categories of
regulatory and operational halts, to reorganize the remaining text of
the rule, and to make conforming changes to related rules. The proposed
rule change was published for comment in the Federal Register on March
11, 2022.\3\ On April 21, 2022, pursuant to Section 19(b)(2) of the
Act,\4\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ On April 29, 2022, the Exchange filed
Amendment No. 1 to the proposed rule change, which amended and
superseded the
[[Page 36019]]
proposed rule change as originally filed. Amendment No. 1 was published
for comment in the Federal Register on May 9, 2022.\6\ This order
approves the proposed rule change, as modified by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 94370 (March 7,
2022), 87 FR 14071.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 94778, 87 FR 25069
(April 27, 2022). The Commission designated June 9, 2022 as the date
by which the Commission shall approve or disapprove, or institute
proceedings to determine whether to disapprove, the proposed rule
change.
\6\ See Securities Exchange Act Release No. 94838 (May 3, 2022),
87 FR 27683 (``Amendment No. 1''). The Commission received one
comment letter on the proposed rule change, which does not relate to
the substance of the proposed rule change. The comment letter is
available at <a href="https://www.sec.gov/comments/sr-nasdaq-2022-017/srnasdaq2022017-289449.htm">https://www.sec.gov/comments/sr-nasdaq-2022-017/srnasdaq2022017-289449.htm</a>.
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II. Description of the Proposal
On May 28, 2021, the Commission approved the Fiftieth Amendment to
the Joint Self-Regulatory Organization Plan (``Plan'') Governing the
Collection, Consolidation and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis (``Amended UTP
Plan''),\7\ which revised the Plan's provisions that governed
Regulatory Halts \8\ and Operational Halts.\9\ In particular, the
Amended UTP Plan sets forth the circumstances in which a Primary
Listing Market \10\ may declare a Regulatory Halt for any security for
which it is the Primary Listing Market, and the factors a Primary
Listing Market will consider when determining whether to declare a
Regulatory Halt.\11\ The Amended UTP Plan also sets forth the process
for initiating a Regulatory Halt, including the start time of a
Regulatory Halt and the dissemination of notice of a Regulatory
Halt,\12\ as well as the process for resuming trading after a
Regulatory Halt other than a SIP Halt, including the Primary Listing
Market's determination of a resumption and the resumption time.\13\ In
addition, the Amended UTP Plan sets forth a specific process for
resumption of trading after a SIP Halt, including the Primary Listing
Market's determination of a resumption and the SIP Halt Resume
Time.\14\ Finally, the Amended UTP Plan requires a Plan participant to
notify the Processor where it has declared an Operational Halt.\15\
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\7\ See Securities Exchange Act Release No. 92071, 86 FR 29846
(June 3, 2021) (S7-24-89) (``Fiftieth Amendment Order'').
\8\ A ``Regulatory Halt'' is ``a halt declared by the Primary
Listing Market in trading in one or more securities on all Trading
Centers for regulatory purposes, including for the dissemination of
material news, news pending, suspensions, or where otherwise
necessary to maintain a fair and orderly market. A Regulatory Halt
includes a trading pause triggered by Limit Up Limit Down, a halt
based on Extraordinary Market Activity, a trading halt triggered by
a Market-Wide Circuit Breaker, and a SIP Halt.'' See Section X.A.10
of the Amended UTP Plan.
\9\ An ``Operational Halt'' is ``a halt in trading in one or
more securities only on a Market declared by such Participant and is
not a Regulatory Halt.'' See Section X.A.7 of the Amended UTP Plan.
\10\ The ``Primary Listing Market'' is ``the national securities
exchange on which an Eligible Security is listed. If an Eligible
Security is listed on more than one national securities exchange,
Primary Listing Market means the exchange on which the security has
been listed the longest.'' See Section X.A.8 of the Amended UTP
Plan.
\11\ See Section X.C of the Amended UTP Plan. See also Section
X.G of the Amended UTP Plan (requiring a Plan participant to halt
trading for any security traded on its market if the Primary Listing
Market declares a Regulatory Halt for the security).
\12\ See Section X.D of the Amended UTP Plan. See also Section
X.H of the Amended UTP Plan (setting forth further requirements for
notifications of the initiation and lifting of Regulatory Halts).
\13\ See Section X.E of the Amended UTP Plan.
\14\ See Section X.F of the Amended UTP Plan.
\15\ See Section X.B of the Amended UTP Plan.
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The Exchange proposes to amend Rule 4120 to incorporate provisions
of the Amended UTP Plan, including the provisions that were approved as
part of the Fiftieth Amendment to the Plan, and to reorganize certain
existing text in Rule 4120 without substantive change other than to
conform to the language of the Amended UTP Plan. The Exchange also
proposes to add new text in Rule 4120 pursuant to, and to implement,
the provisions of the Amended UTP Plan. Finally, the Exchange proposes
to make conforming changes throughout its rules to reflect Rule 4120,
as amended by this proposal.
Proposed Rule 4120(a) would set forth the definitions for certain
terms that are used in the rule. In particular, proposed Rule 4120(a)
would incorporate certain definitions from the Amended UTP Plan \16\
and Commission rules,\17\ and would include certain relocated
definitions that currently exist in Rule 4120.\18\ The Exchange also
proposes to incorporate the definition of Regular Trading Hours from
the Amended UTP Plan, which refers to the definition in Rule 600 of
Regulation NMS (i.e., between 9:30 a.m. and 4:00 p.m. Eastern
Time).\19\ This reflects a change from the Exchange's current
definition of Regular Market Session, which means the trading session
from 9:30 a.m. until 4:00 p.m. or 4:15 p.m.\20\ According to the
Exchange, no securities currently traded on the Exchange close at 4:15
p.m. and therefore the alternative closing time reflected in the
current definition of Regular Market Session is unnecessary.\21\ In
connection with the proposed definition of Regular Trading Hours, the
Exchange proposes to define Post-Market Session to mean the trading
session that begins after Regular Trading Hours at approximately 4:00
p.m., and that continues until 8:00 p.m.\22\ According to the Exchange,
this proposed definition will reflect that all securities traded on the
Exchange commence their closing process at 4:00 p.m.\23\ The Exchange
also states that the word ``approximately'' in the proposed definition
reflects that the Exchange's closing cross preceding the Post-Market
Session at 4:00 p.m. is not instantaneous.\24\ Finally, the Exchange
proposes to add definitions for the terms SIP \25\ and SIP Plan.\26\
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\16\ Specifically, the Exchange proposes to incorporate the
definitions for the following terms from the Amended UTP Plan:
Extraordinary Market Activity, Material SIP Latency, Operating
Committee, Operational Halt, Primary Listing Market, Processor,
Regulatory Halt, SIP Halt, SIP Halt Resume Time, and SIP Outage. See
Sections X.A.1, X.A.5, IV.A, X.A.7, X.A.8, III.Q, X.A.10, X.A.11,
X.A.12, and X.A.13 of the Amended UTP Plan, respectively.
\17\ Specifically, the Exchange proposes to incorporate the
definition of Trading Center from Rule 600(b)(95) of Regulation NMS.
See 17 CFR 242.600(b)(95).
\18\ Specifically, the Exchange proposes to relocate the
following definitions within Rule 4120 without substantive change:
Derivative Securities Product, IPO, Pre-Market Session, and Required
Value.
\19\ Specifically, Regulation NMS defines Regular Trading Hours
as the time between 9:30 a.m. and 4:00 p.m. Eastern Time, or such
other time as is set forth in the procedures established pursuant to
17 CFR 242.605(a)(2). See 17 CFR 242.600(b)(77).
\20\ The Exchange proposes to make conforming changes to Rules
5710 and 5711 to replace the term ``Regular Market Session'' with
the term ``Regular Trading Hours.''
\21\ See Amendment No. 1, supra note 6, at 27694.
\22\ Currently, Post-Market Session means the trading session
that begins at 4:00 p.m. or 4:15 p.m., and that continues until 8:00
p.m. See current Rule 4120(b)(4)(C).
\23\ See Amendment No. 1, supra note 6, at 27686, 27689.
\24\ See id. at 27689.
\25\ The Exchange proposes to define SIP to have the same
meaning as the term Processor in the Amended UTP Plan or in the
Consolidated Tape Association Plan, as applicable. See proposed Rule
4120(a)(10).
\26\ The Exchange proposes to define SIP Plan to mean the
national market system plan governing the SIP. See proposed Rule
4120(a)(17).
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Proposed Rule 4120(b)(1) would set forth three categories of
Regulatory Halts: (a) those provided by the Amended UTP Plan; \27\ (b)
discretionary Regulatory Halts; and (3) mandatory Regulatory Halts.
With respect to discretionary Regulatory Halts, the Exchange proposes
to relocate, without substantive change other than to conform to the
language of the Amended UTP Plan, certain existing provisions of Rule
4120 under which the Exchange may halt trading.\28\ The
[[Page 36020]]
Exchange also proposes to incorporate the provision of the Amended UTP
Plan that permits Regulatory Halts in connection with a national,
regional, or localized disruption.\29\ In addition, the Exchange
proposes to delete existing rule text that describes a halt type that
is obsolete \30\ and halt types that are superseded by the new proposed
text within Rule 4120.\31\
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\27\ The Amended UTP Plan provides that a Primary Listing Market
may declare a Regulatory Halt in trading for any security for which
it is the Primary Listing Market: as provided for in the rules of
the Primary Listing Market; if it determines there is a SIP Outage,
Material SIP Latency, or Extraordinary Market Activity; or in the
event of national, regional, or localized disruption that
necessitates a Regulatory Halt to maintain a fair and orderly
market. See Section X.C.1 of the Amended UTP Plan.
\28\ Specifically, the Exchange proposes to relocate rule
provisions relating to the following types of halts: request of
certain information from the issuer (with revisions to conform to
the language of the Amended UTP Plan regarding Regulatory Halts to
maintain a fair and orderly market and regarding the considerations
of a Primary Listing Market for initiating a Regulatory Halt);
dissemination of material news; in connection with an IPO; and halt
of index warrants, Derivative Securities Products, American
Depositary Receipts, and other securities listed on the Exchange
under specified conditions. See proposed Rule 4120(b)(1)(B). Rule
4120 currently permits the Exchange to halt trading in a security
listed on the Exchange, if the security is listed on another
national securities exchange and that exchange halts the security
for regulatory reasons. The Exchange now proposes to remove the
reference to another national securities exchange because under the
Amended UTP Plan, if the Nasdaq-listed security is also listed on
another national securities exchange, only the Primary Listing
Market may declare a Regulatory Halt, and the Exchange would be
required to halt trading in a security if its Primary Listing Market
declares a Regulatory Halt. See proposed Rule 4120(b)(1)(B)(vi).
\29\ See Section X.C.1(c) of the Amended UTP Plan.
\30\ The Exchange proposes to delete current Rule 4120(a)(11),
which has been superseded by the LULD Plan.
\31\ The Exchange proposes to delete current Rule 4120(a)(6),
which would be superseded by the provisions of the Amended UTP Plan
relating to Regulatory Halts due to Extraordinary Market Activity
(as proposed to be incorporated within proposed Rule 4120), as well
as current Rule 4120(a)(3)(A), which will be superseded by the
Exchange's proposed rules governing Operational Halts.
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With respect to mandatory Regulatory Halts, the Exchange proposes
to relocate, without substantive change, certain existing provisions of
Rule 4120 under which the Exchange is required to halt trading.\32\ The
Exchange also proposes to make clear that a trading halt due to
extraordinary market volatility (i.e., the market-wide circuit breaker)
is a mandatory Regulatory Halt.\33\
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\32\ Specifically, the Exchange proposes to relocate rule
provisions relating to the following types of halts: Derivative
Securities Products when certain information is not disseminated to
all market participants at the same time; the Limit Up-Limit Down
(``LULD'') mechanism; and Equity Investment Tracking Stocks and
Subscription Receipts under specified conditions. See proposed Rule
4120(b)(1)(C).
\33\ See proposed Rule 4120(b)(1)(C)(iii).
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Proposed Rule 4120(b)(2) would set forth the procedures for
initiating a Regulatory Halt, which would be substantively identical to
the analogous provisions in the Amended UTP Plan that were approved as
part of the Fiftieth Amendment. Consistent with the Amended UTP
Plan,\34\ proposed Rule 4120(b)(2) would govern the start time of a
Regulatory Halt, the notification of a Regulatory Halt, retroactive
halts, consultations and considerations prior to declaring a Regulatory
Halt, and evaluations after the declaration of a Regulatory Halt.\35\
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\34\ See Sections X.C.2, X.D, and X.H of the Amended UTP Plan.
\35\ The Exchange proposes to delete current Rule 4120(c)(4),
which describes the start time of a trading halt and the manner in
which the Exchange disseminates notice of the commencement of a
trading halt, and current Rule 4120(c)(6)(A), which describes
trading halts due to extraordinary market activity. These rules
would be replaced by the proposed rules that incorporate provisions
of the Amended UTP Plan that govern the start time and notification
of trading halts, including trading halts due to Extraordinary
Market Activity.
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Proposed Rule 4120(b)(3) would govern the scenario where another
exchange initiates a Regulatory Halt. Consistent with the Amended UTP
Plan,\36\ proposed Rule 4120(b)(3) would provide that the Exchange
would halt trading for a security when the Primary Listing Market
declares a Regulatory Halt for the security.\37\ The Exchange also
proposes to relocate, without substantive change, existing provisions
of Rule 4120 that govern halts for Derivative Securities Products that
are traded on the Exchange pursuant to unlisted trading privileges.\38\
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\36\ See Section X.G of the Amended UTP Plan.
\37\ The Exchange proposes to delete current Rule 4120(a)(2),
which permits the Exchange to halt trading in a security listed on
another exchange during a trading halt imposed by such exchange to
permit the dissemination of material news.
\38\ See proposed Rule 4120(b)(3)(A)(ii).
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Proposed Rule 4120(b)(4) would set forth the process for the
resumption of trading after a Regulatory Halt. With respect to
Regulatory Halts other than IPO or SIP Halts, proposed Rule
4120(b)(4)(A) would provide for the timing and notification of
resumption where the Exchange is the Primary Listing Market, consistent
with the Amended UTP Plan.\39\ The Exchange also proposes to relocate,
without substantive change, existing provisions of Rule 4120 that
govern the process for the resumption of trading following Regulatory
Halts other than IPO or SIP halts, including specific provisions that
govern the process for the resumption of trading following LULD
halts.\40\ Moreover, consistent with the Amended UTP Plan,\41\ proposed
Rule 4120(b)(4)(A) would provide for the timing of a resumption where
the Exchange is not the Primary Listing Market.\42\
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\39\ See Sections X.E.1 and X.H of the Amended UTP Plan. The
Exchange proposes to delete current Rule 4120(c)(5), which describes
the resumption time following a trading halt and the manner in which
the Exchange disseminates notice of the resumption, and current Rule
4120(c)(6)(B), which describes resumptions following trading halts
due to extraordinary market activity. These rules would be replaced
by proposed rules that incorporate the provisions of the Amended UTP
Plan that govern the resumption of trading following trading halts,
including trading halts due to Extraordinary Market Activity.
\40\ See proposed Rule 4120(b)(4)(A)(i)a-e. The Exchange also
proposes to clarify that the resumption process in proposed Rule
4120(b)(4)(A)(i)a-e applies to all types of Regulatory Halts other
than SIP Halts or IPO Halts. See Amendment No. 1, supra note 6, at
27691. Similarly, the Exchange proposes to amend Rule 4753(b) to
specify that the halt cross process in Rule 4753 applies generally
to Nasdaq-listed securities that are the subject of a trading halt
or pause under Rule 4120.
\41\ See Section X.E.2 of the Amended UTP Plan.
\42\ See proposed Rule 4120(b)(4)(A)(ii).
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Proposed Rule 4120(b)(4)(B) would set forth the process for the
resumption of trading after a SIP Halt. Consistent with the Amended UTP
Plan,\43\ proposed Rule 4120(b)(4)(B) would set forth the
considerations for the Exchange in determining the SIP Halt Resume
Time, and the Exchange's ability to delay the SIP Halt Resume Time or
stagger the SIP Halt Resume Time for multiple symbols. Also consistent
with the Amended UTP Plan,\44\ the Exchange would terminate a SIP Halt
with a notification that specifies a SIP Halt Resume Time.\45\ As
required by the Amended UTP Plan,\46\ the Exchange proposes to provide
a minimum five-minute notice of a SIP Halt Resume Time, during which
period (``Display Only Period'') market participants may enter quotes
and orders in the affected securities.\47\ Also as required by the
Amended UTP Plan,\48\ the Exchange proposes to provide that, during
Regular Trading Hours, the last SIP Halt Resume Time would be 20
minutes before the end of Regular Trading Hours (e.g., 3:40 p.m.
ET).\49\ The Exchange states that 20 minutes before the end of Regular
Trading Hours is the latest time that the
[[Page 36021]]
Exchange believes that it would be able to conduct an orderly halt
cross process and without impacting the closing cross process.\50\
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\43\ See Section X.F of the Amended UTP Plan.
\44\ See id.
\45\ See proposed Rule 4120(b)(4)(B)(i)b.
\46\ See Section X.F.2 of the Amended UTP Plan (stating that the
Primary Listing Market ``shall provide a minimum notice of a SIP
Halt Resume Time, as specified by the rules of the Primary Listing
Market, during which period market participants may enter quotes and
orders in affected securities'').
\47\ See proposed Rule 4120(b)(4)(B)(i)b.
\48\ See Section X.F.2 of the Amended UTP Plan (stating that
``[d]uring Regular Trading Hours, the last SIP Halt Resume Time
before the end of Regular Trading Hours shall be an amount of time
as specified by the rules of the Primary Listing Market'').
\49\ See proposed Rule 4120(b)(4)(B)(i)b. If trading has not
resumed by this time, the Exchange would establish its closing price
in the halted securities using its contingency closing process in
Rule 4754(b)(7). See Amendment No. 1, supra note 6, at 27692.
\50\ See Amendment No. 1, supra note 6, at 27692.
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For a SIP Halt initiated by the Exchange, the Exchange also
proposes to use the same reopening process as for non-IPO and non-LULD
Regulatory Halts, except that the Display Only Period will be a minimum
of five minutes, and may be extended at the discretion of the Exchange
if it believes that trading will not resume in a fair and orderly
manner.\51\ Furthermore, as required by the Amended UTP Plan,\52\ the
Exchange proposes that, for a SIP Halt initiated by the Exchange, if
during Regular Trading Hours, the Exchange does not resume trading in a
security for which it is the Primary Listing Market within 10 minutes
after the SIP Halt Resume Time, then other markets may resume trading
in that security.\53\ The Exchange states that the proposed 10-minute
time period corresponds to a 10-minute time period set forth in the
LULD Plan, after which the Processor may update LULD price bands for
paused securities if the primary listing market for such security is
unable to reopen trading following a trading pause due to a systems or
technology issue.\54\
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\51\ See proposed Rule 4120(b)(4)(B)(i)c. See also Section X.F
of the Amended UTP Plan (stating that the Primary Listing Market
``retains discretion to delay the SIP Halt Resume Time if it
believes trading will not resume in a fair and orderly manner'').
\52\ See Section X.F.3 of the Amended UTP Plan (stating that
``[d]uring Regular Trading Hours, if the Primary Listing Market does
not open a security within the amount of time as specified by the
rules of the Primary Listing Market after the SIP Halt Resume Time,
a Participant may resume trading in that security'').
\53\ See proposed Rule 4120(b)(4)(B)(i)d.
\54\ See Amendment No. 1, supra note 6, at 27692.
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With respect to a SIP Halt initiated by another exchange that is
the Primary Listing Market, during Regular Trading Hours, the Exchange
would resume trading after trading has resumed on the Primary Listing
Market or notice has been received from the Primary Listing Market that
trading may resume.\55\ Consistent with the Amended UTP Plan,\56\
during Regular Trading Hours, if the Primary Listing Market does not
open a security within the amount of time specified by the rules of the
Primary Listing Market after the SIP Halt Resume Time, the Exchange may
resume trading in that security; and outside Regular Trading Hours, the
Exchange may resume trading immediately after the SIP Halt Resume
Time.\57\
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\55\ See proposed Rule 4120(b)(4)(B)(ii).
\56\ See Section X.F.3 of the Amended UTP Plan.
\57\ See proposed Rule 4120(b)(4)(B)(ii).
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The Exchange proposes to relocate, without substantive change, the
existing provisions of Rule 4120 that govern the process for resumption
of trading following an IPO halt.\58\
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\58\ See proposed Rule 4120(b)(4)(C).
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The Exchange proposes to adopt Rule 4120(c) to govern Operational
Halts on the Exchange. Consistent with current Rule 4120, proposed Rule
4120(c)(1) would allow the Exchange to declare an Operational Halt in a
security listed on the Exchange if the Primary Listing Market imposes
an Operational Halt in a security that is a derivative or component of
the security listed on the Exchange. Proposed Rule 4120(c)(1) would
also allow the Exchange to declare an Operational Halt for a security
if the Exchange itself is experiencing extraordinary market activity or
when it is otherwise necessary to maintain a fair and orderly market or
in the public interest. Consistent with the Amended UTP Plan,\59\
proposed Rule 4120(c)(2) would require the Exchange to notify the
Processor if it has concerns about its ability to collect and transmit
quotation and transactions information, or where it has declared an
Operational Halt or suspension of trading.
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\59\ See Section X.B of the Amended UTP Plan.
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Under proposed Rule 4120(c)(3), the Exchange may resume trading
following an Operational Halt when it determines that trading may
resume on its market in a fair and orderly manner and in accordance
with its rules.\60\ As proposed, when the Exchange is the Primary
Listing Market, the resumption of trading after an Operational Halt
would follow the same reopening process as for a non-IPO and non-LULD
Regulatory Halt.\61\ However, the Exchange would be able to determine
to resume trading without a halt cross if it determines that such
action is in the best interests of the market.\62\ According to the
Exchange, in certain circumstances, a halt cross following an
Operational Halt, which only applies to the Exchange, may be disruptive
or result in trade-throughs.\63\ The Exchange also states that another
exchange already has the flexibility to reopen trading without an
auction following an Operational Halt.\64\ As proposed, when the
Exchange is not the Primary Listing Market, but halted trading based on
an Operational Halt initiated by the Primary Listing Market, the
Exchange would be able to resume trading once it has determined that
trading may be resumed in a fair and orderly manner.\65\
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\60\ As proposed, trading in a security subject to an
Operational Halt would resume at the time specified by the Exchange
in a notice disseminated in the same manner as a notice initiating a
Regulatory Halt. See proposed Rule 4120(c)(3)(C).
\61\ See proposed Rule 4120(c)(3)(A).
\62\ See id. For any Operational Halt for which a halt cross
will not occur, consistent with current Rule 4120, orders entered
during the halt will not be accepted, unless subject to instructions
that the order will be directed to another exchange as described in
Rule 4758. See proposed Rule 4120(c)(3)(B). The Exchange also
proposes to make conforming changes to Rule 4753(b) to provide that,
for Nasdaq-listed securities that are the subject of a trading halt
or pause pursuant to Rule 4120, market hours trading will commence
when the Exchange releases the security, in the case of a security
for which the Exchange determines not to hold a halt cross.
\63\ See Amendment No. 1, supra note 6, at 27693.
\64\ See id.
\65\ See proposed Rule 4120(c)(3)(A).
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Finally, the Exchange proposes to make non-substantive and
conforming changes throughout its rules. Specifically, the Exchange
proposes update its rules that currently contain cross-citations to
various provisions of Rule 4120 to reflect the citations for these same
provisions in proposed Rule 4120.\66\ The Exchange also proposes to
remove references to the obsolete Intermarket Trading System \67\ and
to update references to the obsolete circuit breaker in current Rule
4120(a)(11) with references to the LULD mechanism.\68\ In addition, the
Exchange proposes to remove rule text relating to the applicability of
Rule 4120 to dually-listed securities, because the Amended UTP Plan
defines the Primary Listing Market for a dually-listed security and
sets forth the role of the Primary Listing Market in trading halts.\69\
Moreover, the Exchange proposes to remove rule text relating to
Exchange notification of material news by issuers, which is already
covered elsewhere in the Exchange's rules.\70\
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\66\ See proposed changes to Rule 4702, Rule 4753, Rule 4754,
IM-5315-2, IM-5405-1, IM-5505-1, and Rule 5711.
\67\ See proposed changes to IM-5220.
\68\ See proposed changes to Rule 5711.
\69\ See proposed changes to IM-5220.
\70\ See current Rule 4120(c)(1) and (2).
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III. Discussion and Commission Findings
The Commission believes that the proposed rule change, as modified
by Amendment No. 1, is consistent with the requirements of the Act and
the rules and regulations thereunder that are applicable to a national
securities exchange. In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Act,\71\ which requires, among other
things, that the rules of a national securities exchange be designed to
prevent fraudulent and manipulative
[[Page 36022]]
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
facilitating transactions in securities, 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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\71\ 15 U.S.C. 78f(b)(5).
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As described above, the Exchange proposes to amend Rule 4120 to
incorporate provisions of the Amended UTP Plan, including the
provisions that were approved as part of the Fiftieth Amendment to the
Plan; reorganize certain existing text in Rule 4120 without substantive
change, other than to conform to the language of the Amended UTP Plan;
add new text in Rule 4120 pursuant to the provisions of the Amended UTP
Plan; and make conforming changes throughout its rules to reflect Rule
4120, as amended by this proposal.
In approving the Fiftieth Amendment to the Plan, the Commission
stated that the amendment established a clear and uniform approach with
respect to trading halts under various defined circumstances.\72\ In
particular, the Commission stated that the Fiftieth Amendment provided
uniform rules that govern how Plan participants will address, among
other things, the initiation, implementation, and communication of
trading halts, as well as the resumption of trading after a trading
halt, thereby clarifying the procedures to be followed and the
standards to be applied, improving coordination and certainty among the
Plan participants and other market participants, and enhancing the
resiliency and integrity of market systems.\73\ The Commission also
stated that the requirement for Primary Listing Markets to make good-
faith determinations concerning the appropriateness of declaring a
Regulatory Halt and resuming trading thereafter should promote fair and
orderly markets and the protection of investors, because it encourages
Primary Listing Markets to consider the broader interests of the
national market system and addresses potential concerns that Primary
Listing Markets may be subject to commercial pressures in making
decisions to call a Regulatory Halt and resuming trading
thereafter.\74\
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\72\ See Fiftieth Amendment Order, supra note 7, at 29848.
\73\ See id.
\74\ See id.
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The Commission believes that the Exchange's proposal to incorporate
provisions of the Amended UTP Plan, including the provisions that were
approved as part of the Fiftieth Amendment, is consistent with the goal
of establishing a clear and uniform approach with respect to trading
halts under various defined circumstances, improving coordination and
certainty among the Plan participants and other market participants,
enhancing the resiliency and integrity of market systems, and
encouraging Primary Listing Markets to consider the broader interests
of the national market system in declaring a Regulatory Halt and
resuming trading thereafter. The Commission similarly believes that the
Exchange's proposal to reorganize the provisions of existing Rule 4120
that describe the various types of discretionary and mandatory
Regulatory Halts, with changes to conform these provisions to the
language of the Amended UTP Plan, is consistent with these goals.\75\
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\75\ See supra notes 19-23 and accompanying text (describing the
proposal to replace the term ``Regular Market Session'' with the
term ``Regular Trading Hours'' and to make conforming and clarifying
changes to the definition of ``Post-Market Session'') and note 28
and accompanying text (describing the proposal to amend Rule 4120 to
conform to the fair and orderly market standard for Regulatory Halts
in the Amended UTP Plan and to reflect that, under the Amended UTP
Plan, only the Primary Listing Market may declare a Regulatory Halt,
and the Exchange would be required to halt trading in a security if
its Primary Listing Market declares a Regulatory Halt). Also as
described above, the Exchange proposes to add the market-wide
circuit breaker halt as a type of mandatory Regulatory Halt. See
supra note 33 and accompanying text.
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As described above, the implementation of certain provisions of the
Amended UTP Plan, which were approved as part of the Fiftieth
Amendment, requires the Exchange to adopt certain rules.\76\ In
accordance with these provisions of the Amended UTP Plan, the Exchange
proposes to adopt a five-minute minimum notice and Display Only Period
for a SIP Halt Resume Time, which is consistent with the minimum length
of the Display Only Period that the Exchange applies to certain other
types of Regulatory Halts.\77\ The Exchange also proposes to establish
the last SIP Halt Resume Time as 20 minutes before the end of Regular
Trading Hours, which is designed to allow the Exchange to conduct an
orderly halt cross process before the end of Regular Trading Hours and
without impacting the closing cross process.\78\ Moreover, the Exchange
proposes to provide a 10-minute waiting period for other markets to
resume trading in a security, if the Exchange is the Primary Listing
Market for the security and does not resume trading following the SIP
Halt Resume Time, which is similar to a waiting period that is
currently in the LULD Plan. The Commission believes that these aspects
of the proposal are reasonably designed to allow the Exchange to
implement the Fiftieth Amendment to the Plan.
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\76\ See supra notes 46-54 and accompanying text.
\77\ See current Rule 4120(c)(7).
\78\ As described above, for a SIP Halt initiated by the
Exchange, the Exchange proposes to resume trading using the same
reopening process as for non-IPO and non-LULD Regulatory Halts. See
supra note 51 and accompanying text.
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Furthermore, as described above, the Exchange proposes to specify
in Rule 4120(c) the circumstances under which it may declare an
Operational Halt (which applies only to trading on the Exchange), as
well as the process for initiating an Operational Halt and resuming
trading following an Operational Halt. The Exchange proposes to use the
existing halt cross process to reopen trading following an Operational
Halt, although the Exchange would be permitted to reopen trading
following an Operational Halt without a halt cross if it determines
such action to be in the best interest of the market. The Commission
believes that the proposed rules governing Operational Halts on the
Exchange are reasonably designed to allow the Exchange to halt trading
(which applies only to trading on the Exchange) when there are unusual
conditions with respect to trading on the Exchange and when necessary
to main a fair and orderly market on the Exchange.\79\ The Commission
also believes that the proposed rules would allow the Exchange to
resume trading following an Operational Halt in a fair and orderly
manner using the Exchange's established halt cross process, while
providing the Exchange the ability to reopen trading without a halt
cross if that is in the best interest of the market, including when
trading has continued in a fair and orderly manner on other markets.
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\79\ The Exchange currently has authority under its bylaws to
implement an Operational Halt under certain circumstances. See
Article IX, Section 5 of the Exchange's By-Laws (stating that the
Exchange board, or such person or persons as may be designated by
the board, in the event of an emergency or extraordinary market
conditions, has the authority to take any action regarding the
trading in or operation of the Exchange).
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Finally, the Commission believes that the proposed non-substantive
and conforming changes would remove obsolete or superseded text from
the Exchange's rules \80\ and ensure internal
[[Page 36023]]
consistency within the Exchange's rules.\81\
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\80\ See supra notes 30-31 (describing the deletion of rule
provisions that are superseded by the LULD Plan, the Amended UTP
Plan, and the proposed rules on Operational Halts), notes 35 and 39
(describing the deletion of rule provisions that are superseded by
the Amended UTP Plan), notes 67-68 and accompany text (describing
the deletion of references to the obsolete Intermarket Trading
system and circuit breaker), and note 70 and accompanying text
(describing the deletion of rule provisions that are covered
elsewhere in the Exchange's rules).
\81\ See supra note 66 and accompany text (describing updates to
the cross-citations to the provisions within Rule 4120) and note 69
and accompany text (describing deletions to ensure consistency with
the definition and role of the Primary Listing Market under the
Amended UTP Plan). See also supra note 40 (describing the proposal
to relocate the provisions of existing Rule 4120 that describe the
reopening process following a Regulatory Halt, with a proposed
change to clarify the applicability of the process to the various
types of Regulatory Halts, and the proposal to amend Rule 4753(b) to
specify that the halt cross process in Rule 4753 applies generally
to Nasdaq-listed securities that are the subject of a trading halt
or pause in Rule 4120).
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For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with the
Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\82\ that the proposed rule change (SR-NASDAQ-2022-017), as
modified by Amendment No. 1, be, and hereby is approved.
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\82\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\83\
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\83\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12732 Filed 6-13-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on June 14, 2022.
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