Notice2023-26725
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a New LSTY Routing Option Under Rule 4758
Primary source
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Published
December 6, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 233 (Wednesday, December 6, 2023)</title>
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[Federal Register Volume 88, Number 233 (Wednesday, December 6, 2023)]
[Notices]
[Pages 84853-84855]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-26725]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99044; File No. SR-NASDAQ-2023-049]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a New LSTY Routing Option Under Rule 4758
November 30, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 16, 2023, 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 adopt a new LSTY routing option under Rule
4758.
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
[[Page 84854]]
the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Equity 4, Rule 4758 to add
subsection (a)(1)(A)(x)b. for a new routing option \3\ called LSTY. The
proposed LSTY voluntary routing option arose out of client interest in
Nasdaq amending its rules to create a new routing strategy similar to
the existing LIST strategy.\4\ Clients currently using the LIST routing
strategy have requested that Nasdaq provide a version of this strategy
that will look to access available liquidity at their limit price or
better by rerouting to away market centers in the event their order is
locked or crossed by an away market center while the order is on the
book. This proposed change will introduce a new variation of the LIST
strategy, called LSTY, that will share all existing functionality with
LIST with the exception of routing to away market centers after an
order is booked.
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\3\ Routing is an Order Attribute that allows a Participant to
designate an Order to employ one of several Routing Strategies (also
called ``routing options'') offered by Nasdaq, as described in Rule
4758; such an Order may be referred to as a ``Routable Order.'' Upon
receipt of an Order with the Routing Order Attribute, the System
will process the Order in accordance with the applicable Routing
Strategy. In the case of a limited number of Routing Strategies, the
Order will be sent directly to other market centers for potential
execution. For most other Routing Strategies, the Order will attempt
to access liquidity available on Nasdaq in the manner specified for
the underlying Order Type and will then be routed in accordance with
the applicable Routing Strategy. Shares of the Order that cannot be
executed are then returned to Nasdaq, where they will (i) again
attempt to access liquidity available on Nasdaq and (ii) post to the
Nasdaq Book or be cancelled, depending on the Time-in-Force of the
Order. See Rule 4703(f).
\4\ LIST is a routing option designed to allow orders to
participate in the opening and/or closing process of the primary
listing market for a security. See Nasdaq Rule 4758(a)(1)(A)(x).
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After the security has opened on its primary listing market, a LIST
order that has not been designated opening only and that has not been
fully executed, rejected, or cancelled will be returned to the Nasdaq
system (the ``System''). Thereafter, the order will check the System
for available shares and simultaneously route the remaining shares to
destinations on the System routing table. Any remaining shares are
posted on the Nasdaq book. In addition, if a LIST order is entered
after the security has opened on the primary listing market (but prior
to two minutes before market close) and the order has not been
designated to participate in the opening only, Nasdaq will check the
System for available shares and simultaneously route the remaining
shares to destinations on the System routing table, with remaining
shares posted on the book.
Once the order is on the book, orders entered with the LIST routing
option do not route the order to the locking or crossing market center.
With the proposed LSTY routing option, once on the book, should the
order subsequently be locked or crossed by another market center, the
System will route the order to the locking or crossing market center.
Two minutes before market close, all LIST orders on the book will
begin routing to the security's primary listing market for
participation in its closing process. If a LIST order is received at or
after a time that is two minutes before market close but before market
close, Nasdaq will check the System for available shares and
simultaneously route the remaining shares to destinations on the System
routing table; remaining shares will be routed to the security's
primary listing market to participate in its closing process.
In sum, LSTY is a routing option that is a variation of the LIST
routing option and shares all the existing functionality with the
exception that after an order is booked, if the order is subsequently
locked or crossed by another market center, the System will route the
order to the locking or crossing market center. The System will only
route an order to the locking or crossing market center after the
security has opened on the primary listing market and prior to two
minutes before market close.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\6\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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In particular, the proposed rule change will satisfy the objectives
of Section 6(b)(5) of the Act by providing market participants with an
additional voluntary routing strategy that is similar to the existing
LIST strategy, except where that System will route an order to the
locking or crossing market center should the order subsequently be
locked or crossed by another accessible market center once the order is
on the book. The proposed change is designed to route to locking or
crossing quotations, which clears locked or crossed market conditions
and helps support fair and orderly markets that protects investors and
the public interest.
Nasdaq also believes the proposal is not designed to permit unfair
discrimination among market participants because the proposal is for a
voluntary routing option and will be available to any market
participant that so chooses to use it. Additionally, as the Exchange
notes above, the LSTY routing option is similar to the existing LIST
routing option already offered by the Exchange.
For the foregoing reasons, the Exchange believes that the proposed
rule change is consistent with the Act.
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
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. As discussed above, the
proposed routing option is voluntary and similar to an existing routing
option. Furthermore, the Exchange provides routing services in a highly
competitive market in which participants may avail themselves of a wide
variety of routing options offered by other exchanges, alternative
trading systems, other broker-dealers, market participants' own
proprietary routing systems, and service bureaus. In such an
environment, system enhancements such as the changes proposed in this
rule filing do not burden competition, because they can succeed in
attracting order flow to the Exchange only if they offer investors
higher quality and better value than services offered by others.
Encouraging competitors to provide higher quality and better value is
the essence of a well-functioning competitive marketplace.
For the foregoing reasons, the Exchange does not believe the
proposed rule change will result in any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
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.
[[Page 84855]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\
Because the 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, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(f)(6).
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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) \11\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ 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 Exchange states that
it wants to implement the LSTY routing option during the 4th quarter of
2023 and granting the waiver would allow market participants and their
customers to benefit more immediately from the increased order handling
flexibility provided by the LSTY routing option. In addition, the
Exchange stated that the proposed rule change presents no unique or
novel issues that have not already been addressed by the Commission.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposal operative upon filing.\13\
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission 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 such 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) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\14\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a5d7d0c9c088c6cac8c8c0cbd1d6e5d6c0c68bc2cad3"><span class="__cf_email__" data-cfemail="2c5e594049014f4341414942585f6c5f494f024b435a">[email protected]</span></a>. Please include
file number SR-NASDAQ-2023-049 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-2023-049. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NASDAQ-2023-049 and should
be submitted on or before December 27, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26725 Filed 12-5-23; 8:45 am]
BILLING CODE 8011-01-P
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