Notice2022-25472
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay Implementation of Pending Amendments to Equity 4, Rules 4120, 4702 and 4703
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 23, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 225 (Wednesday, November 23, 2022)</title>
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[Federal Register Volume 87, Number 225 (Wednesday, November 23, 2022)]
[Notices]
[Pages 71712-71714]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25472]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96341; File No. SR-NASDAQ-2022-065]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Delay Implementation of Pending Amendments to Equity 4, Rules 4120,
4702 and 4703
November 17, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 14, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``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 delay implementation of pending amendments
to Equity 4, Rules 4120, 4702 and 4703 \3\ in light of planned changes
to the System.
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\3\ References herein to Nasdaq Rules in the 4000 Series shall
mean Rules in Nasdaq Equity 4.
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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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
On November 14, 2022, the Exchange plans introduce a new upgraded
version of the OUCH Order entry protocol \4\ that will, when fully
implemented, enable the Exchange to make functional improvements to
specific Order Types \5\ and Order Attributes.\6\ The Exchange filed
its proposal (the ``Proposal'') for these enhancements with the SEC on
September 14, 2022, and in the Proposal the Exchange stated that its
operative date would be November 14.\7\ The Exchange recently issued a
reminder of that operative date in an Equity Trader Alert.\8\ The
Exchange now wishes to inform participants that while it intends to
proceed with introducing technical upgrades to OUCH on November 14th,
the functional upgrades affecting Order Types, Order Attributes, and
Order Handling and trading behavior will not be available on that date.
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\4\ The OUCH Order entry protocol is a proprietary protocol that
allows subscribers to quickly enter orders into the System and
receive executions. OUCH accepts limit Orders from members, and if
there are matching Orders, they will execute. Non-matching Orders
are added to the Limit Order Book, a database of available limit
Orders, where they are matched in price-time priority. OUCH only
provides a method for members to send Orders and receive status
updates on those Orders. See <a href="https://www.nasdaqtrader.com/Trader.aspx?id=OUCH">https://www.nasdaqtrader.com/Trader.aspx?id=OUCH</a>.
\5\ An ``Order Type'' is a standardized set of instructions
associated with an Order that define how it will behave with respect
to pricing, execution, and/or posting to the Exchange Book when
submitted to Nasdaq. See Equity 1, Section 1(a)(7).
\6\ An ``Order Attribute'' is a further set of variable
instructions that may be associated with an Order to further define
how it will behave with respect to pricing, execution, and/or
posting to the Exchange Book when submitted to the Exchange. See id.
\7\ See Securities Exchange Act Release No. 34-95768 (September
14, 2022); 87 FR 57534 (September 20, 2022) (SR-Nasdaq-2022-051).
\8\ See Equity Trader Alert 2022-96 (October 26, 2022),
available at <a href="http://www.nasdaqtrader.com/TraderNews.aspx?id=%20ETA2022-96">http://www.nasdaqtrader.com/TraderNews.aspx?id=%20ETA2022-96</a>.
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By way of background, the functional enhancements to OUCH set forth
in the Proposal will enable the Exchange to upgrade the logic and
implementation of certain of its Order Types and Order Attributes so
that the features are more robust, streamlined, and harmonized across
the Exchange's Systems and Order entry protocols. The Exchange
developed OUCH with simplicity in mind, and therefore, it presently
lacks certain complex order handling capabilities. By contrast, the
Exchange specifically designed its RASH Order Entry Protocol \9\ to
support advanced functionality, including discretion, random reserve,
pegging and routing. The introduction of OUCH upgrades will enable
participants to utilize OUCH, in addition to RASH, to enter Order Types
that require advanced functionality. Thus, the upgrades will not
introduce new functionality, but rather, it will offer to OUCH users
advanced functionality that already exists for RASH users.
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\9\ The RASH (Routing and Special Handling) Order entry protocol
is a proprietary protocol that allows members to enter Orders,
cancel existing Orders and receive executions. RASH allows
participants to use advanced functionality, including discretion,
random reserve, pegging and routing. See <a href="http://nasdaqtrader.com/content/technicalsupport/specifications/TradingProducts/rash_sb.pdf">http://nasdaqtrader.com/content/technicalsupport/specifications/TradingProducts/rash_sb.pdf</a>.
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Specifically, the Proposal will amend Rule 4702 pertaining to Order
Types to specify that, going forward, OUCH may be used to enter certain
Order Types together with certain Order Attributes, whereas now, Rule
4702 specifies that RASH, FIX, and QIX, but not OUCH, may be used to
enter such combinations of Order Types and Attributes.\10\ The Proposal
will also adjust the current functionality of the Pegging,\11\
Reserve,\12\ and Trade Now Order Attributes,\13\ as described therein,
so that they align with how OUCH, once upgraded, will handle these
Order Attributes going forward.
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\10\ The planned upgrades will enable members to utilize OUCH in
additional circumstances, including for the entry of: (1) Price to
Comply and Price to Display Orders with the Reserve Size, Primary
and Market Pegging, and Discretion Order Attributes; (2) Non-
Displayed Orders with the Primary and Market Pegging, Midpoint
Pegging (in scenarios described in amended Rule 4703(d)), and
Discretion Order Attributes; and (3) Market Maker Peg Orders.
\11\ See Rule 4703(d).
\12\ See Rule 4703(h).
\13\ See Rule 4703(m)-(n).
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Unfortunately, none of these new OUCH functionalities set forth in
the Proposal will be available on November 14, 2022, and they may not
be available for several months thereafter due to delays in completing
the necessary
[[Page 71713]]
development work. The Exchange still will make the new version of OUCH
available for participant use on November 14th, as the Exchange will be
in a position on that date to implement certain technical enhancements
to the OUCH Protocol of value to participants. However, these technical
enhancements will not affect existing Order Types, Order Attributes, or
Order handling or trading behavior on the Exchange.
As such, the new Rules set forth in the Proposal will not be
operational on November 14th. Instead, existing Rules governing Order
Types, Order Attributes and Order handling and trading behavior on the
Exchange will continue to apply as of November 14th and until such date
as all of the functional upgrades to OUCH are complete and ready for
implementation. The Exchange will announce the implementation date of
the new OUCH functionalities, and of the new Rules set forth in the
Proposal, in an Equity Trader Alert at least 30 days prior to
implementation. A present, the Exchange expects that the new OUCH
functionality will be ready for full implementation in the second or
third quarter of 2023, although that time frame is subject to change.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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It is consistent with the Act to delay implementation of pending
amendments to the Exchange's Rulebook relating to effectuate functional
upgrades to OUCH because such functional upgrades will not be ready for
implementation upon the launch of the new version of the OUCH protocol
on November 14, 2022. The Exchange believes that it is in the best
interests of investors and the public, and consistent with the
maintenance of an orderly market, to avoid confusion by maintaining its
current Rulebook governing OUCH until such time as the Exchange is
ready to implement the new functionality.
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
merely delay the implementation schedule for the Proposal as well as
the Rules that will apply to participants and their Orders in the
interim period.
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 prior to 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)(iii) of the Act \16\ and Rule
19b-4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii), 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 so that the proposal
may become operative immediately upon filing.
The Commission believes that a waiver of the operative delay is
consistent with the protection of investors and the public interest
because it allow the Exchange to avoid confusion that might otherwise
arise on November 14, 2022, the date when the Proposal is currently
scheduled to become operative, if the Exchange's Rulebook was to
suggest to participants that OUCH Orders will behave in a manner that
is not yet accurate. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposal operative upon filing.
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 under
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 15 U.S.C. 78s(b)(2)(B).
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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#1c6e697079317f7371717972686f5c6f797f327b736a"><span class="__cf_email__" data-cfemail="bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2022-065 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-2022-065. 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
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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-2022-065 and should
be submitted on or before December 14, 2022.
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\19\ 17 CFR 200.30-3(a)(12), (59).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25472 Filed 11-22-22; 8:45 am]
BILLING CODE 8011-01-P
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