Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5740 Regarding Information Circular Requirements

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<title>Federal Register, Volume 91 Issue 196 (Tuesday, October 13, 2026)</title>
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[Federal Register Volume 91, Number 196 (Tuesday, October 13, 2026)]
[Notices]
[Pages 65019-65022]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-20800]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106625; File No. SR-NASDAQ-2026-085]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Rule 5740 Regarding Information Circular Requirements

October 7, 2026.
    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 September 28, 2026, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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: (i) amend Rule 5740 to add express cross-
references to General 9, Section 10 and Equity 2, Section 20, replace 
the cross-reference to Rule 4630 with Equity 10, Section 8, and specify 
Equity 4 for Rule 4120; (ii) delete Rule 5740(a)(1) in its entirety, 
thereby removing the requirement that the Exchange distribute an 
information circular to Exchange members (``Members'') prior to the 
commencement of trading in each UTP Derivative Security (as defined 
below) that generally includes the same information as contained in the 
information circular provided by the listing exchange; (iii) amend Rule 
5740(a)(2) to require that the written description referenced therein 
be provided in a form approved by the listing exchange or prepared by 
the open-ended management company issuing such securities, not later 
than the time a confirmation of the first transaction in such series is 
delivered to such purchaser; and (iv) renumber Rules 5740(a)(2) through 
(5) as Rules 5740(a)(1) through (4), respectively, and make other 
technical and non-substantive changes.
    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>, and at the principal office of the Exchange.

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 eliminate the requirement that the 
Exchange distribute an information circular to Members prior to the 
commencement of trading in each UTP Derivative Security \3\ that 
generally includes the same information as contained in the information 
circular provided by the listing exchange as provided in Rule 
5740(a)(1). The Exchange also proposes to amend the introductory 
paragraph of Rule 5740 to add express cross-references to General 9, 
Section 10 (Recommendations to Customers (Suitability)) and Equity 2, 
Section 20 (Customer Disclosures), replace the cross-reference to Rule 
4630 with Equity

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10, Section 8, and specify Equity 4 for Rule 4120. The Exchange also 
proposes to amend Rule 5740(a)(2) to require that the written 
description referenced therein be provided in a form approved by the 
listing exchange or prepared by the open-ended management company 
issuing such securities, not later than the time a confirmation of the 
first transaction in such series is delivered to such purchaser.\4\ 
Lastly, the Exchange proposes to renumber Rules 5740(a)(2) through (5) 
as Rules 5740(a)(1) through (4), respectively, and make other technical 
and non-substantive changes. The proposal is similar to a proposal that 
Cboe BZX Exchange, Inc. (``Cboe BZX'') filed with the Commission.\5\
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    \3\ A ``UTP Derivative Security'' is any security that is a 
``new derivative securities product'' as defined in Rule 19b-4(e) 
under the Act. See Rule 5740(a).
    \4\ As further described below, the Exchange will notify Members 
of the written description requirement under Rule 5740(a)(2) by 
means of an information circular. Such written description will only 
be required when required by the listing exchange.
    \5\ See Securities Exchange Act Release No. 105715 (June 17, 
2026), 91 FR 37477 (June 23, 2026) (SR-CboeBZX-2026-054).
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    Rule 5740 governs the trading of UTP Derivative Securities on the 
Exchange--securities listed on another national securities exchange 
that trade on the Exchange pursuant to unlisted trading privileges 
(``UTP''). Under current Rule 5740(a)(1), the Exchange must distribute 
an information circular prior to the commencement of trading in each 
UTP Derivative Security that generally mirrors the information circular 
issued by the listing exchange, including: (a) the special risks of 
trading the new derivative securities product; (b) the Exchange rules 
that will apply to the new derivative securities product, including 
Rule 2310; \6\ (c) information about the dissemination of the value of 
the underlying assets or indexes; and (d) the applicable trading hours 
for the UTP Derivative Security and the risks of trading during the 
period from 8:00 a.m. to 9:30 a.m. and from 4:00 p.m. to 7:00 p.m. due 
to the lack of calculation or dissemination of the underlying index 
value, the Intra-Day Indicative Value (as defined in Rule 
5705(a)(3)(C)) or a similar value. The Exchange proposes to delete Rule 
5740(a)(1) in its entirety.
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    \6\ As discussed later in this filing, Rule 5740(a)(1) presently 
refers to Rule 2310, which is an obsolete reference to the 
suitability provisions. The suitability provisions are now set forth 
in General 9, Section 10, so the Exchange is updating the obsolete 
rule reference in Rule 5740(a)(1).
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    The information circular requirement is unnecessary because the 
primary listing exchange's information circular already provides 
Members with the same disclosures the Exchange would otherwise be 
required to produce. Members have access to the primary listing 
exchange's information circular prior to the commencement of UTP 
trading and may rely upon it for the same purposes.\7\ The Exchange's 
issuance of a separate, duplicative circular therefore serves no 
independent investor protection function.
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    \7\ Such information circulars are generally available on the 
primary listing market's website.
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    The Exchange also proposes to amend the introductory paragraph of 
Rule 5740 to add express cross-references to General 9, Section 10 
(Recommendations to Customers (Suitability)) and Equity 2, Section 20 
(Customer Disclosures), replace the cross-reference to Rule 4630 with 
Equity 10, Section 8, and specify Equity 4 for Rule 4120. Current Rule 
5740(a)(1) references both the recommendations to customers/suitability 
provisions addressed by General 9, Section 10 and the risk of trading 
outside of Regular Market Hours \8\ addressed by Equity 2, Section 
20.\9\ Because the Exchange proposes to delete Rule 5740(a)(1) in its 
entirety, the Exchange is adding express cross-references to those 
rules in the introductory paragraph of Rule 5740 to preserve their 
visibility in the context of UTP Derivative Securities. These rules 
already apply to Members by operation of the Exchange's rulebook. The 
cross-references are intended to make the applicable framework explicit 
in the context of UTP Derivative Securities. General 9, Section 10, 
which incorporates FINRA Rule 2111 by reference, independently requires 
Members to ensure that any recommendation of a UTP Derivative Security 
is suitable for the customer based on the customer's investment 
profile, a standing obligation that applies regardless of whether the 
Exchange has issued a product-specific information circular. Similarly, 
Equity 2, Section 20 independently requires Members to provide 
customers with a written disclosure of the risks of trading outside of 
Regular Market Hours before accepting any order for execution during 
such sessions, a standing obligation not contingent on the Exchange's 
issuance of a product-specific information circular.
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    \8\ ``Regular Market Hours'' means the trading sub-session of 
the Day Session that operates from 9:30 a.m. until 4:00 p.m. or 4:15 
p.m. on Business Days. See Equity 4, Rule 4120(a)(19).
    \9\ The Exchange notes that the rule currently references Rule 
2310, which is an obsolete reference to the provisions addressing 
recommendations to customers and suitability. The Exchange 
previously replaced Rule 2310 with Rule 2111A, and subsequently 
relocated Rule 2111A to General 9, Section 10. See Securities 
Exchange Act Release Nos. 68389 (December 10, 2012), 77 FR 74538 
(December 14, 2012) (SR-NASDAQ-2012-122); and 87778 (December 17, 
2019), 84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098).
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    Because Rule 5740(a)(1) has historically served as the mechanism 
through which the Exchange satisfies the notification obligation under 
Rule 5740(a)(2), deletion of Rule 5740(a)(1) necessitates a conforming 
amendment to Rule 5740(a)(2). The Exchange proposes to amend Rule 
5740(a)(2) to require that the written description referenced therein 
be provided in a form approved by the listing exchange or prepared by 
the open-ended management company issuing such securities, not later 
than the time a confirmation of the first transaction in such series is 
delivered to such purchaser. The Exchange will notify Members by 
information circular that such written description will only be 
required when mandated by the listing exchange. This amendment is 
consistent with the broader purpose of the proposed rule change: where 
the listing exchange's information circular already provides Members 
with the information necessary to assess a UTP Derivative Security, a 
duplicative written description obligation serves no independent 
investor protection function. Members may rely on the listing 
exchange's information circular in the same manner and to the same 
effect.
    Finally, the Exchange proposes a number of technical and non-
substantive changes to Rule 5740. First, the Exchange proposes to 
renumber existing Rules 5740(a)(2) through (5) as Rules 5740(a)(1) 
through (4), respectively. Second, the Exchange proposes to update a 
number of obsolete rule citations. Specifically in the introductory 
paragraph of Rule 5740 and in proposed Rule 5740(a)(3), the Exchange 
proposes to update the current cite to Rule 4630 to Equity 10, Section 
8.\10\ The Exchange also proposes in the introductory paragraph of Rule 
5740 and in proposed Rule 5740(a)(2) to update the current cite to Rule 
4120 to Equity 4, Rule 4120.\11\
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    \10\ The Exchange relocated Rule 4630 to Equity 10, Section 8. 
See Securities Exchange Act Release No. 87778 (December 17, 2019), 
84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098).
    \11\ The Exchange relocated Rule 4120 to Equity 4, Rule 4120. 
See Securities Exchange Act Release No. 87778 (December 17, 2019), 
84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\13\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and

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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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed deletion of Rule 5740(a)(1) 
is consistent with the Act because the primary listing exchange's 
information circular already provides Members with the same disclosures 
that the Exchange's information circular would contain. The investor 
protection functions historically served by the information circular 
requirement are independently addressed through the primary listing 
exchange's information circular and the Member-level obligations 
imposed by General 9, Section 10 and Equity 2, Section 20, to which the 
Exchange proposes to add express cross-references in the introductory 
paragraph of Ruel [sic] 5740. The proposed amendment to Rule 5740(a)(2) 
ensures that where a written description is required, it is provided in 
a form approved by the listing exchange, thereby aligning the 
Exchange's requirements with those of the primary listing market. The 
Exchange will further notify Members by information circular that such 
written description will only be required when mandated by the listing 
exchange, ensuring that no duplicative obligation is imposed where the 
listing exchange has not determined one to be warranted. The 
renumbering of Rules 5740(a)(2) through (5) and to update the obsolete 
rule cites as discussed above is ministerial. Additionally, as 
discussed above, the proposal does not raise any novel issues not 
previously considered by the Commission.\14\ For these reasons, the 
Exchange believes that the proposed rule change is consistent with the 
Act.
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    \14\ See supra note 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 proposed rule change 
eliminates duplicative procedural obligations applicable to the 
Exchange in its capacity as a UTP trading venue. It does not alter the 
terms or conditions under which UTP Derivative Securities may be traded 
on the Exchange, impose any new requirements on Members, or affect the 
ability of any market participant to access the Exchange's markets. 
Members will continue to have access to the primary listing exchange's 
information circular prior to the commencement of UTP trading and may 
rely upon it for the same purposes as the Exchange's information 
circular. The proposed amendment to Rule 5740(a)(2) aligns the written 
description obligation with the primary listing market's requirements 
and does not impose any burden on Members beyond what the primary 
listing market itself requires. Accordingly, the Exchange does not 
believe the proposed rule change imposes any burden on competition 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.

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) of the Act \15\ and Rule 19b-4(f)(6) \16\ thereunder. 
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; or (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 \17\ and Rule 19b-4(f)(6) \18\ thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 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) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\20\ 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 proposed 
rule change may become operative immediately upon filing. The Exchange 
states that the proposed rule change eliminates duplicative procedural 
obligations applicable to the Exchange in its capacity as a UTP trading 
venue because the primary listing exchange's information circular 
already provides Members with the same disclosures the Exchange would 
otherwise be required to produce.\21\ The Exchange also notes that the 
proposed rule change does not alter the terms or conditions under which 
UTP Derivative Securities may be traded on the Exchange. For these 
reasons, the Commission finds that waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposed rule change to be operative upon filing.\22\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ The Exchange represents that such information circulars are 
generally available on the primary listing exchange's website. See 
supra note 7.
    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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.

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#4c3e392029612f2321212922383f0c3f292f622b233a"><span class="__cf_email__" data-cfemail="7200071e175f111d1f1f171c0601320117115c151d04">[email&#160;protected]</span></a>. Please include 
file number SR-NASDAQ-2026-085 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-2026-085. 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 filing will be available for inspection and 
copying at the principal office of the Exchange. Do not include 
personal identifiable

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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-2026-085 and should be submitted on or before November 3, 
2026.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-20800 Filed 10-9-26; 8:45 am]
BILLING CODE 8011-01-P


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