Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 11, Rule 11890 (Clearly Erroneous Transactions)

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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 64967-64969]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-20806]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106631; File No. SR-NASDAQ-2026-083]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Equity 11, Rule 11890 (Clearly Erroneous Transactions)

October 7, 2026.
    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 September 25, 2026, 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 amend Equity 11, Rule 11890 (Clearly 
Erroneous Transactions) in light of the Commission's approval of 
Overnight Protected Bands for 23/5 Trading.
    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 amend Equity 11, Rule 11890 (Clearly 
Erroneous Transactions) in light of the Commission's approval of 
Overnight Protected Bands under the LULD Plan for 23/5 Trading.
Background
    In conjunction with the industry's plans for the introduction of 
trading 23 hours a day, 5 days a week (``23/5 Trading''), the Operating 
Committee of the Plan to Address Extraordinary Market Volatility 
(``LULD Plan'') filed proposed Amendment 27 to the LULD Plan, which 
proposed to establish price band protections during overnight trading 
hours (``Overnight Price Bands'').\3\ The Operating Committee proposed 
that the Overnight Price Bands would initially be temporary static 
bands 20% above and below two reference points, and that after 
implementation, the Operating Committee would evaluate the performance 
of such Overnight Price Bands and propose appropriate changes in a new 
plan amendment.\4\ On August 5, 2026, the Commission approved the 
proposal.\5\
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    \3\ See Securities Exchange Act Release No. 105596 (June 1, 
2026), 91 FR 33774 (June 4, 2026) (File No. 4-631) (Notice of Filing 
of 27th Amendment to the National Market System Plan).
    \4\ See id.
    \5\ See Securities Exchange Act Release No. 106042 (August 5, 
2026), 91 FR 51515 (August 10, 2026) (File No. 4-631) (Order 
Granting Approval of the 27th Amendment to the National Market 
System Plan to Address Extraordinary Market Volatility to Establish 
Temporary Price Band Protections in Overnight Trading).
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    In light of the Commission's approval of these changes to the LULD 
Plan, the Exchange now proposes several amendments to Rule 11890 
regarding Clearly Erroneous Transactions. In general, the rule 
describes the process a market participant may use to request 
cancellation of a transaction that was ``clearly erroneous.'' The 
current rule's central premise is that if LULD Price Bands under the 
LULD Plan were available and correct at the time the transaction was 
executed, the transaction is not eligible for clearly erroneous review. 
Specifically, Rule 11890(a)(2)(C)(1) currently provides that ``[i]f the 
execution time of the transaction(s) under review is during Regular 
Market Hours, the transaction will not be reviewable as clearly 
erroneous'' except in certain limited circumstances, including when (A) 
the transaction is in an NMS stock that is not subject to the LULD Plan 
(e.g., rights and warrants), (B) the transaction was executed at a time 
with LULD Price Bands were unavailable or trading should have been 
prevented due to a regulatory halt or other halt, or (C) several other 
limited circumstances.\6\ In approving the existing version of the 
rule, the Commission noted that restricting clearly erroneous review in 
this way during times when LULD Price Bands were in effect was 
``consistent with the Act and will further the goal of providing 
greater certainty to market participants that trades executed within 
the Price Bands will stand and not be broken. . . . Thus, the proposal 
is designed to limit the potential discordance between the LULD 
mechanism and CEE review process.'' \7\
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    \6\ See Rule 11890(a)(2)(C)(1)(i), (ii), and (iii).
    \7\ See Securities Exchange Act Release No. 95658 (September 1, 
2022), 87 FR 55060 at 55063 (September 8, 2022) (SR-CboeBZX-2022-
037) (Order Approving a Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 2, to Amend BZX Rule 11.17, Clearly Erroneous 
Executions).

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[[Page 64968]]

    Currently, LULD Price Bands are available only during Regular 
Market Hours, meaning that the restrictions on clearly erroneous review 
described above apply only during Regular Market Hours. With the 
introduction of Overnight Price Bands, the Exchange now proposes to 
extend the existing restrictions on clearly erroneous review to the 
period when Overnight Price Bands are in place. This proposed change 
would be consistent with the Commission's rationale in approving the 
current version of the rule because it would limit any potential 
discordance between the LULD mechanism and CEE review in the overnight 
trading session, providing greater certainty to market participants 
that trades executed with the Overnight Price Bands will stand and not 
be broken.
Proposed Changes to Rule 11890(a)(2)(C)(1)
    To implement this change, the Exchange proposes to add several 
definitions to Rule 11890(a)(2)(C)(1). First, the Exchange would add 
that the term ``LULD Protected Hours'' includes Regular Market Hours 
and ``Overnight Protected Hours'' defined in Section VIII of the LULD 
Plan. Second, the Exchange would define ``LULD Price Bands'' or ``Price 
Bands'' to mean the Price Bands defined in Section V of the LULD Plan 
(i.e., the Price Bands that apply during Regular Market Hours) and 
``Overnight Price Bands'' as defined in Section VIII of the LULD Plan 
(i.e., the Price Bands that apply to the Overnight Protected Hours from 
9:00 p.m. ET through 4:00 a.m. ET).
    The Exchange proposes to amend the current first sentence of Rule 
11890(a)(2)(C)(1) to replace the phrase ``Regular Market Hours'' with 
``LULD Protected Hours,'' to provide that ``[i]f the execution time of 
the transaction(s) under review is during LULD Protected Hours, the 
transaction will not be reviewable as clearly erroneous . . . .'' This 
change would extend the LULD-based restrictions on clearly erroneous 
review currently in place during Regular Market Hours to the Overnight 
Protected Hours.
    The Exchange also proposes to amend Rule 11890(a)(2)(C)(1)(ii)'s 
reference to ``Percentage Parameter'' to incorporate the Percentage 
Parameter that applies to Overnight Protected Hours. The amended 
provision would provide for the applicability of clearly erroneous 
review if the price of the transaction to buy (sell) that is the 
subject of the clearly erroneous complaint is greater than (less than) 
the Reference Price by an amount that equals or exceeds the applicable 
Percentage Parameter defined in Appendix A to the LULD Plan (with 
respect to the Price Bands that apply during Regular Market Hours) or 
the ``Overnight Percentage Parameter defined in Section VIII of the 
LULD Plan'' (with respect to Overnight Protected Hours).
    In addition to these changes, the Exchange also proposes to make a 
non-substantive change to Rule 11890(a)(2)(C)(1)(i), substituting the 
term ``LULD Plan'' for the current text ``the Plan to Address 
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS 
under the Act (the `Limit Up-Limit Down Plan' or `LULD Plan,')'' as the 
``LULD Plan'' would be defined in the proposed revision to Rule 
11890(a)(2)(C)(1).
Proposed Changes to 11890(a)(2)(A)(iii), (a)(2)(C)(2), (a)(2)(D)(3), 
and (b)(i)
    As noted above, current Rule 11890(a)(2)(C)(1) permits clearly 
erroneous review even during Regular Market Hours when the transaction 
in question is in an NMS Stock that is not subject to the LULD Plan, 
i.e., rights and warrants. Such transactions are reviewed for clearly 
erroneous status using the procedures set out in Rule 
11890(a)(2)(C)(2), including the Numerical Guidelines set out in the 
table accompanying Rule 11890(a)(2)(C)(2)(i). The Exchange now proposes 
to introduce a similar provision regarding transactions in NMS Stocks 
not subject to the LULD Plan that are executed during the Overnight 
Protected Hours; such transactions would be subject to the same 
Numerical Guidelines as transactions occurring in Pre-Market Hours, 
Post-Market Hours, and the Night Session.
    The heading of Rule 11890(a)(2)(C)(2) addresses ``[r]eview of 
transactions occurring during Pre-Market Hours or Post-Market Hours or 
Night Session or eligible for review pursuant to paragraph (c)(1)(i).'' 
The Exchange proposes to replace the phrase ``eligible for review 
pursuant to paragraph (c)(1)(i)'' (which, in the current rule, means 
transactions executed during Regular Market Hours in NMS Stocks not 
subject to the LULD Plan) with ``during LULD Protected Hours in NMS 
Stocks not subject to the LULD Plan.'' This proposed language would 
cover transactions in NMS Stocks not subject to the LULD Plan in 
Regular Market Hours and expand the same treatment to transactions 
executed in NMS Stocks not subject to the LULD Plan during Overnight 
Protected Hours. As such, the proposed change is not novel.
    The Exchange proposes to make the same change everywhere else such 
language appears in the rule--namely, in the text of paragraphs 
(a)(2)(A)(iii), (a)(2)(C)(2)(i), (a)(2)(C)(2)(ii), (a)(2)(C)(2)(iii), 
(a)(2)(D)(3), and (b)(i).\8\ In each case, the Exchange proposes to 
replace the phrase ``transactions occurring during Pre-Market Hours or 
Post-Market Hours or Night Session or eligible for review'' pursuant to 
subparagraph (C)(1)(i) with ``transactions occurring during Pre-Market 
Hours or Post-Market Hours or Night Session or during LULD Protected 
Hours in NMS Stocks not subject to the LULD Plan.''
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    \8\ Paragraphs (a)(2)(A)(iii), (a)(2)(C)(2)(i), 
(a)(2)(C)(2)(ii), and (a)(2)(C)(2)(iii) specify general rules for 
applying clearly erroneous review to transactions where such review 
is not precluded by paragraph (a)(2)(C)(1). Paragraph (a)(2)(D)(3) 
specifies conditions where the Exchange may use a revised Reference 
Price for the purpose of clearly erroneous review in certain 
transactions where such review is not precluded by paragraph 
(a)(2)(C)(1). Paragraph (b)(i) specifies that for transactions where 
clearly erroneous review is not precluded by paragraph (a)(2)(C)(1), 
a senior officer may initiate clearly erroneous review on his or her 
own motion.
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    The Exchange also proposes to make corresponding changes to the 
headings of the table accompanying Rule 11890(a)(2)(C)(2)(i). The 
Exchange proposes to change the heading of the second column from 
``Regular Market Hours Numerical Guidelines for transactions eligible 
for review pursuant to subparagraph (C)(1)(i)'' to ``Numerical 
Guidelines for Transactions Executed During Regular Market Hours in NMS 
Stocks Not Subject to the LULD Plan.'' This change would simply replace 
the shorthand ``eligible for review pursuant to subparagraph 
(C)(1)(i)'' with the fuller description that such transactions are 
``executed during Regular Market Hours in NMS Stocks not subject to the 
LULD Plan,'' and is not a substantive change.
    Similarly, the Exchange proposes to change the heading of the third 
column from ``Pre-Market Hours, Post-Market Hours and Night Session 
Numerical Guidelines'' to ``Numerical Guidelines for Transactions 
Executed During Pre-Market Hours, Post-Market Hours and Night Session 
or During Overnight Protected Hours in NMS Stocks Not Subject to the 
LULD Plan.'' The proposed change addresses the fact that transactions 
executed during Overnight Protected Hours in NMS Stocks not subject to 
the LULD Plan are eligible for clearly erroneous review--just as are 
transactions in NMS Stocks not subject to the LULD Plan executed during 
Regular Market Hours--but at the Numerical Guidelines that apply 
outside of Regular Market Hours. Together, these proposed changes

[[Page 64969]]

would extend the eligibility of clearly erroneous review for 
transactions in NMS Stocks not subject to the LULD Plan that is 
currently in place during Regular Market Hours to the Overnight 
Protected Hours, and would apply the Commission's recent approval of 
Overnight Price Bands to the clearly erroneous executions rule.
Implementation
    The Exchange understands that the other national securities 
exchanges and FINRA will also file similar proposals, the substance of 
which are identical to this proposal. The Exchange proposes that this 
rule change would become operative at the commencement of 23/5 Trading, 
which is scheduled to commence industry-wide on December 6, 2026.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed change is consistent with 
just and equitable principles of trade because it extends the basic 
premise of the current rule that clearly erroneous review should be 
generally unavailable any time a transaction is executed within LULD 
Price Bands at a time the Price Bands were available and correct. 
Currently, LULD Price Bands are available only during Regular Market 
Hours, meaning that the restrictions on clearly erroneous review 
described above apply only during Regular Market Hours. With the 
introduction of Overnight Price Bands, the Exchange believes that 
extending such restrictions on clearly erroneous review to the period 
when Overnight Price Bands are in place would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system by enhancing the transparency and consistency of the rule.
    The resulting rule would thus extend the LULD-related limits on 
clearly erroneous review that are applicable in Regular Market Hours to 
the overnight period. The proposed change would also be consistent with 
the Commission's rationale in approving the current version of the rule 
because it would limit any potential discordance between the LULD 
mechanism and CEE review in the overnight trading session, providing 
greater certainty to market participants that trades executed with the 
Overnight Price Bands will stand and not be broken.\11\
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    \11\ See 87 FR 55060 at 55063, supra note 7.
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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. Rather than impacting 
competition, the proposed change would simply extend the basic premise 
of the current rule that clearly erroneous review should be generally 
unavailable any time a transaction is executed within LULD Price Bands 
at a time the Price Bands were available and correct. The Exchange 
understands that the other national securities exchanges and FINRA will 
also file similar proposals, the substance of which are identical to 
this proposal. Thus, the proposed rule change will help to ensure 
consistency across SROs without implicating any competitive issues.

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 \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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#f684839a93db95999b9b93988285b6859395d8919980"><span class="__cf_email__" data-cfemail="3e4c4b525b135d5153535b504a4d7e4d5b5d10595148">[email&#160;protected]</span></a>. Please include 
file number SR-NASDAQ-2026-083 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-2026-083. 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 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-2026-083 and should be submitted 
on or before November 3, 2026.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-20806 Filed 10-9-26; 8:45 am]
BILLING CODE 8011-01-P


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