Notice2022-24649
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Specify an Implementation Timeframe for the Introduction of Enhanced Anti-Internalization Functionality
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
November 14, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 218 (Monday, November 14, 2022)</title>
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[Federal Register Volume 87, Number 218 (Monday, November 14, 2022)]
[Notices]
[Pages 68212-68214]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24649]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96248; File No. SR-NASDAQ-2022-060]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Specify an Implementation Timeframe for the Introduction of Enhanced
Anti-Internalization Functionality
November 7, 2022.
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 October 31, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II, below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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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 specify an implementation timeframe for
the introduction of enhanced anti-internalization functionality.
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.
[[Page 68213]]
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 specify an
implementation timeframe for the introduction of enhanced anti-
internalization functionality. The Exchange previously filed \3\ a rule
change to enhance the anti-internalization functionality available on
the Exchange by giving market participants the flexibility to choose to
have this protection apply to market participants under Common
Ownership.\4\
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\3\ Securities Exchange Act Release No. 96069 (October 13,
2022), 87 FR 63558 (October 19, 2022).
\4\ The Exchange previously proposed to define ``Common
Ownership'' under Equity 4, Rule 4757 to mean participants under 75%
common ownership or control. See id.
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By way of background, anti-internalization, also known as self-
match prevention, is an optional feature available on the Exchange that
currently (1) prevents two orders with the same Market Participant
Identifier (MPID) from executing against each other, or (2) prevents
two orders entered through a specific order entry port from executing
against each other (in the case of market participants using the OUCH
order entry protocol). The enhanced anti-internalization functionality,
as proposed in SR-NASDAQ-2022-056,\5\ would permit market participants
to direct that quotes/orders entered into the System not execute
against quotes/orders entered across MPIDs that are under Common
Ownership.
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\5\ Supra note 4.
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The previous rule filing \6\ to enhance the anti-internalization
functionality available on the Exchange did not specify an
implementation date. The Exchange proposes to establish an
implementation timeframe that extends beyond 30 days after the date of
filing of SR-NASDAQ-2022-056.\7\ Specifically, the Exchange proposes to
implement the enhanced anti-internalization functionality no later than
the First Quarter of 2023. The delay would provide the Exchange
additional time to develop and test this functionality. The Exchange
will issue an Equities Trader Alert to provide notification of the
change and relevant implementation date prior to introducing the new
functionality.
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\6\ Id.
\7\ Id.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\9\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest.
The change in anti-internalization functionality will enhance self-
trade protections provided to market participants and the Exchange
desires to rollout the anti-internalization functionality at a later
date to allow sufficient time to develop and test this functionality.
As proposed herein, the Exchange will offer the enhanced anti-
internalization functionality no later than the First Quarter of 2023.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change will impact the intense competition that
exists in the equities markets. The Exchange does not believe that the
proposed delay will impose any significant burden on inter-market
competition as it does not impact the ability of other markets to offer
or not offer competing functionality. The Exchange does not believe
that the proposed rule change will impose any burden on intra-market
competition because all participants uniformly will not be able to take
advantage of the enhanced anti-internalization functionality until it
is implemented. The Exchange intends to offer the optional, enhanced
anti-internalization functionality no later than the First Quarter of
2023.
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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission
may 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. Waiver of the
operative delay would allow the Exchange to extend the implementation
timeframe of SR-NASDAQ-2022-056 prior to the scheduled effective date
for SR-NASDAQ-2022-056, which is scheduled to become effective on
November 5, 2022. The Exchange states that extending the implementation
timeframe prior to the currently scheduled effective date will ensure
that the Exchange's rules continue to properly reflect the delay of the
enhanced anti-internalization functionality, which will not be
available on the Exchange by the currently scheduled date. The Exchange
further states that delaying the introduction of the enhanced anti-
internalization functionality will provide additional time to develop
and test this functionality. The Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\14\
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ For purposes only of waiving the 30-day operative delay,
the Commission also has 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
[[Page 68214]]
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#1a686f767f37797577777f746e695a697f79347d756c"><span class="__cf_email__" data-cfemail="fc8e899099d19f9391919992888fbc8f999fd29b938a">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2022-060 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-2022-060. 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-2022-060 and should be submitted
on or before December 5, 2022.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24649 Filed 11-10-22; 8:45 am]
BILLING CODE 8011-01-P
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