Notice2025-10747
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 6, Section 4 (Exchange Sharing of Participant Risk Settings) To Permit the Allocation of Responsibility to Clearing Members
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 13, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 113 (Friday, June 13, 2025)</title>
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[Federal Register Volume 90, Number 113 (Friday, June 13, 2025)]
[Notices]
[Pages 25095-25097]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-10747]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103211; File No. SR-NASDAQ-2025-043]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Equity 6, Section 4 (Exchange Sharing of Participant Risk
Settings) To Permit the Allocation of Responsibility to Clearing
Members
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 May 29, 2025, 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, II, and III, 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 amend Equity 6, Section 4 (Exchange
Sharing of Participant Risk Settings) to permit the allocation of
responsibility to clearing members, as described further below.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings</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 Exchange proposes to amend Equity 6, Section 4 to permit the
allocation of responsibility to clearing members. Specifically, the
Exchange proposes to add Section 4(b)(Clearing Member Designation) to
allow for a Participant that does not self-clear to allocate
responsibility for establishing and adjusting the risk levels to a
clearing member that clears transactions on behalf of the
Participant.\3\ A clearing member guarantees transactions executed on
Nasdaq for members with whom it has entered into a clearing
arrangement, and therefore bears the risk associated with those
transactions. Because clearing members bear the risk on behalf of their
Participant, the Exchange believes that it is appropriate for the
clearing member to have knowledge of what risk settings the Participant
may utilize within the Exchange's trading system, as well as the option
to set and adjust the risk levels. Therefore, the Exchange proposes to
make the risk settings in Equity 6, Section 5 available to clearing
members, as well as the option to set and adjust the risk levels, if
authorized by the Participant.
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\3\ The term ``Participant'' has the meaning set forth in Equity
1, Section 1(a)(5). A ``Participant'' is an entity that fulfills the
obligations contained in Equity 2, Section 3 regarding participation
in the System, and includes Nasdaq ECNs, Nasdaq Market Makers, and
Order Entry Firms.
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For clarification, the Exchange does not guarantee that these risk
controls will be sufficiently comprehensive to meet all of a
Participant's needs, nor are the controls designed to be the sole
[[Page 25096]]
means of risk management, and using these controls will not necessarily
meet a Participant's obligations required by Exchange or federal rules
(including, without limitation, the Rule 15c3-5 under the Act \4\
(``Rule 15c3-5'')). Use of the Exchange's risk settings in Equity 6,
Section 5 will not automatically constitute compliance with Exchange or
federal rules and responsibility for compliance with all Exchange and
SEC rules remains with the Participant.\5\
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\4\ 17 CFR 240.15c3-5.
\5\ See Division of Trading and Markets, Responses to Frequently
Asked Questions Concerning Risk Management Controls for Brokers or
Dealers with Market Access, available at <a href="https://www.sec.gov/divisions/marketreg/faq-15c-5-risk-management-controls-bd.htm">https://www.sec.gov/divisions/marketreg/faq-15c-5-risk-management-controls-bd.htm</a>.
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If a Participant chooses to designate responsibility to its
clearing member, the Participant may view any risk levels established
by the clearing member pursuant to proposed Section 4(b). Even if a
clearing member is designated, a Participant will continue to be
notified by the Exchange of any action taken regarding its trading
activity. A Participant may revoke responsibility allocated to its
clearing member at any time.
The Exchange also proposes numbering the provisions in Equity 6,
Section 4 for clarity and labeling the first paragraph as ``Sharing
Risk Settings'' to conform with the proposed language in Section 4. By
allowing Participants to allocate the responsibility for establishing
and adjusting such risk settings to its clearing member, the Exchange
believes clearing members may reduce potential risks that they assume
when clearing for Participants of the Exchange.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendment to Equity 6,
Section 4 would provide clearing members, who have assumed certain
risks of Participants, greater control over risk tolerance and exposure
on behalf of their correspondent Participant, while helping to ensure
that both Participant and its clearing member are aware of developing
issues.
A clearing member guarantees transactions executed on Nasdaq for
members with whom it has entered into a clearing arrangement, and
therefore bears the risk associated with those transactions. The
Exchange therefore believes that it is appropriate for the clearing
member to have knowledge of what risk settings the Participant may
utilize within the Exchange's trading system, as well as the option to
set and adjust the risk levels. The proposal will permit clearing
members who have a financial interest in the risk settings of
Participants with whom the Participants have entered into clearing
arrangements to better monitor and manage the potential risks assumed
by clearing members, thereby providing clearing members with greater
control and flexibility over setting their own risk tolerance and
exposure and aiding clearing members in complying with the Act.
The Exchange also believes the proposed amendments will assist
Participants and clearing members in managing their financial exposure
which, in turn, could enhance the integrity of trading on the
securities markets and help to assure the stability of the financial
system. Moreover, a Participant may revoke responsibility allocated to
its clearing member at any time.
The Exchange believes that the proposed rule changes do not
unfairly discriminate among the Exchange's Participants because use of
the risk settings under Equity 6, Section 5 are available to all
Participants and their clearing members, if authorized. In addition,
because all orders on the Exchange would pass through the risk checks,
there would be no difference in the latency experienced by Participants
who have opted to use the risk settings versus those who have not opted
to use them.\8\
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\8\ All Exchange orders pass through a basic risk checks
regardless of whether a Participant opts into a risk setting.
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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 proposed rule change is
designed to provide Participants and their clearing members with
additional means to monitor and control risk. The proposed rule may
increase confidence in the proper functioning of the markets and
contribute to additional competition among trading venues and broker-
dealers. Rather than impede competition, the proposal is designed to
facilitate more robust risk management by Participants and clearing
members, which, in turn, could enhance the integrity of trading on the
securities markets and help to assure the stability of the financial
system.
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)(iii) of the Act \9\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 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 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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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 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="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#3143445d541c525e5c5c545f4542714254521f565e47"><span class="__cf_email__" data-cfemail="1f6d6a737a327c7072727a716b6c5f6c7a7c31787069">[email protected]</span></a>. Please include
file number SR-NASDAQ-2025-043 on the subject line.
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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-2025-043. 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-2025-043 and should
be submitted on or before July 7, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-10747 Filed 6-12-25; 8:45 am]
BILLING CODE 8011-01-P
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