[Federal Register Volume 85, Number 54 (Thursday, March 19, 2020)]
[Notices]
[Pages 15819-15823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05680]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88383; File No. SR-NASDAQ-2020-012]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 4121 (Trading Halts Due to Extraordinary Market Volatility)
March 13, 2020.
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 March 12, 2020, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 4121 (Trading Halts Due to
Extraordinary Market Volatility) to enhance the re-opening auction
process for Nasdaq listed securities following trading halts due to
extraordinary market volatility.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.com, 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 purpose of the proposed rule change is to amend the re-opening
auction process for Nasdaq listed securities following trading halts
due to extraordinary market volatility (i.e., ``market-wide circuit
breakers'') to be similar to the process currently employed following a
Trading Pause initiated pursuant to the Plan to Address Extraordinary
Market Volatility (i.e., the ``Limit Up-Limit Down'' or ``LULD''
Plan).\3\ In 2017, the Exchange amended its auction process for re-
opening a Nasdaq listed security following a Trading Pause initiated
pursuant to the LULD Plan.\4\ Specifically, the Exchange modified its
rules such that initial Auction Collars following a Trading Pause would
be calculated using a new methodology based on the Price Band that
triggered the Trading Pause, and instituted the process for extending
the auction and further widening the collars if necessary to
accommodate buy or sell pressure outside of the collars then in effect.
The Exchange believes that these changes have been effective in
facilitating a fair and orderly market following Trading Pauses
initiated pursuant to the Limit Up-Limit Down Plan, and has decided to
implement similar functionality for trading halts in Nasdaq listed
securities following the initiation of market-wide circuit breakers.\5\
The Exchange believes that the proposed changes would promote price
formation and provide a more consistent re-opening process for members
and investors following such trading halts, similar to the current
implementation on NYSE Arca, Inc. (``Arca'') and Cboe BZX Exchange,
Inc. (``BZX'').\6\
---------------------------------------------------------------------------
\3\ The Exchange notes that it is working on a separate proposal
to amend its reopening process following a Level 1 or Level 2
market-wide circuit breaker halt, and is filing this rule change as
an interim step.
\4\ See Securities Exchange Act Release No. 79876 (January 25,
2017), 82 FR 8888 (January 31, 2017) (SR-NASDAQ-2016-131).
\5\ A market-wide circuit breaker is triggered if the price of
the S&P 500 Index declines by a specified amount compared to the
closing price for the immediately preceding trading day. See Rule
4121.
\6\ Both Arca and BZX implemented similar processes for resuming
trading following non-LULD regulatory halts (which include trading
halts following market-wide circuit breakers). See Securities
Exchange Act Release Nos. 79846 (January 19, 2017), 82 FR 8548
(January 26, 2017) (SR-NYSEArca-2016-130); and 84927 (December 21,
2018), 83 FR 67768 (December 31, 2018) (SR-CboeBZX-2018-090) (``BZX
Proposal'').
---------------------------------------------------------------------------
Today, trading in Nasdaq listed securities would resume on the
Exchange in most cases through a Halt Cross,\7\ including after a Level
1 or Level 2 market-wide circuit breaker trading halt initiated under
Rule 4121. In particular, Rule 4121(c)(i) provides that the re-opening
of trading following a Level 1 or Level 2 trading halt shall follow the
procedures set forth in Rule 4120. These procedures are in Rule
4120(c)(7), which provides, in relevant part, for a 5-minute Display
Only Period during which market participants may enter quotes and
orders in Nasdaq systems, at the conclusion of which trading will
immediately resume through the Halt Cross under Rule 4753.\8\
Additionally, the Exchange will
[[Page 15820]]
extend the Display Only Period for an additional 1-minute period if
there is volatility during the Display Only Period (i.e., an order
imbalance in the security). The volatility checks are governed under
Rule 4120(c)(7)(C)(1) and (2), and provides that the Display Only
Period will be extended if: (i) The expected cross price moves the
greater of 5% or 50 cents, or (ii) all market orders will not be
executed in the cross. The Exchange now proposes to amend this process
such that for the resumption of trading after a Level 1 or Level 2
market-wide circuit breaker trading halt, the Exchange proposes to
instead follow a process similar to that currently applied for
releasing a security following a Trading Pause initiated under the LULD
Plan, which is described in Rule 4120(c)(10).
---------------------------------------------------------------------------
\7\ The Halt Cross process is set forth in Rule 4753. As
discussed in more detail later in this filing, the Halt Cross does
not apply to the re-opening of a Nasdaq listed security following a
Trading Pause initiated under the LULD Plan, which instead re-opens
pursuant to Rule 4120(c)(10).
\8\ The Exchange would then re-open the Nasdaq listed security
that was subject to the Level 1 or Level 2 market-wide circuit
breaker trading halt at an execution price determined pursuant to
the execution algorithm in Rule 4753(b)(2)(A)-(D), which sets forth
a series of tie-breakers for selecting the execution price of the
Halt Cross.
---------------------------------------------------------------------------
Rule 4120(c)(10), which describes the current process for resuming
trading after a Trading Pause, provides for an initial auction period
and additional auction periods with widening price collars should the
security fail to conclude each auction period. For any such security
listed on Nasdaq, prior to terminating the pause, there is a 5-minute
initial Display Only Period during which market participants may enter
quotations and orders in that security in Nasdaq systems. During this
initial period, the Exchange also establishes the auction reference
price (hereinafter ``LULD Auction Reference Price''),\9\ as well as the
upper and lower auction collar (hereinafter, ``LULD Auction Collar'')
prices.\10\ The security is released at the end of the initial Display
Only Period unless the Exchange detects an order imbalance \11\ in the
security, in which case the initial Display Only Period is extended for
an additional five minutes, and the LULD Auction Collar prices are
further widened by 5% increments (or $0.15 for securities with a LULD
Auction Reference Price of $3 or less) in the direction of the order
imbalance.\12\ At the end of the first extended Display Only Period,
the security is released for trading unless there is an order imbalance
in the security, in which case the extended Display Only Period will be
further extended every five minutes in the manner described in Rule
4120(c)(10)(B) until the security is released for trading. The security
is released for trading at the first point there is no order imbalance.
---------------------------------------------------------------------------
\9\ See Rule 4120(c)(10)(A)(i).
\10\ See Rule 4120(c)(10)(A)(ii). In contrast, price collars
would not be established for re-opening a Nasdaq listed security
after a Level 1 or Level 2 market-wide circuit breaker trading halt
today. As noted above, the Exchange would instead re-open at an
execution price determined pursuant to the execution algorithm in
Rule 4753(b)(2)(A)-(D). See supra note 8.
\11\ For purposes of Rule 4120(c)(10), an order imbalance is
established if: (i) The calculated price at which the security would
be released for trading is outside the applicable Auction Collar
prices calculated under paragraphs (A), (B), or (C) of Rule
4120(c)(10); or (ii) all market orders would not be executed in the
cross. See Rule 4120(c)(10)(E).
\12\ See Rule 4120(c)(10)(B).
---------------------------------------------------------------------------
Proposal
The Exchange now proposes to implement this process for resuming
trading following a market-wide circuit breaker under Rule 4121 as
well. As noted above, the current re-opening process for a Level 1 or
Level 2 trading halt initiated under Rule 4121 does not have a
mechanism for calculating price collars and a process for widening the
collars if necessary to accommodate buy or sell pressure outside of the
collars then in effect. The Exchange therefore believes that its
proposal will facilitate a fair and orderly market following such
trading halts initiated pursuant to a Level 1 or Level 2 market-wide
circuit breaker that is designed to reduce the potential for
significant price disparity in post-auction trading. The proposed
process for re-opening a Nasdaq listed security under Rule 4121 would
be substantially similar to the re-opening process employed today for
Trading Pauses under Rule 4120(c)(10), with certain differences
discussed below, primarily related to the calculation of the halt
auction collars.
Accordingly, the Exchange will provide in new paragraph (d) to Rule
4121 that a Level 1 or Level 2 trading halt initiated under this Rule
(``MWCB Halt'') shall be terminated when Nasdaq releases the security
for trading.\13\ For any such security listed on Nasdaq, prior to
terminating the MWCB Halt, there will be a 15-minute ``Initial Display
Only Period'' during which market participants may enter quotations and
orders in that security in Nasdaq systems. The Initial Display Only
Period will be 15 minutes in duration instead of the 5 minute initial
display only period currently employed for Trading Pauses under Rule
4120(c)(10) to coincide with the entire duration of a MWCB Halt.\14\ As
discussed below, the Exchange also proposes to begin publishing MWCB
halt information at the start of the Initial Display Only Period, which
would include the MWCB auction reference prices and auction collars.
The Exchange believes that the proposed Initial Display Only Period,
together with the dissemination of MWCB halt information at the
beginning of the Initial Display Only Period, would provide additional
time to attract offsetting interest, and would help address order
imbalances that may not be resolved within the current 5-minute
period.\15\
---------------------------------------------------------------------------
\13\ Rule 4121(c)(i) currently points to Rule 4120 for the re-
opening process following a MWCB Halt. The new re-opening process
will be set forth in proposed Rule 4121(d), so the Exchange proposes
to update the reference in Rule 4120(c)(i) accordingly. The Exchange
will also renumber current Rule 4121(d) to 4121(f) in light of the
changes proposed herein.
\14\ See Rule 4121(b).
\15\ This is similar to the current implementation on Arca,
which begins disseminating Trading Halt Auction Imbalance
Information immediately after trading in an Arca-listed security is
halted, and accepts orders during the relevant Auction Processing
Period. See Arca Rule 7.35-E(e)(1) and (g).
---------------------------------------------------------------------------
Proposed Rule 4121(d)(1)(A) will provide that during the Initial
Display Only Period, the Exchange will also establish the ``Auction
Reference Price.'' The Auction Reference Price shall mean the Nasdaq
last sale price (either round or odd lot) after 9:15 a.m. Eastern Time
(``ET'') but prior to the MWCB Halt and, if none, the prior trading
day's Nasdaq Official Closing Price (``NOCP''). The Exchange is not
proposing to use the LULD Auction Reference Price, which is based on
the Price Band that triggered the Trading Pause, as the Exchange
believes that a different reference is necessary for a re-opening
process that is unrelated to the LULD mechanism. The Exchange has
chosen to use the last Nasdaq sale price prior to the MWCB Halt (or if
none, the prior trading day's NOCP) in this circumstance as this price
is reflective of the current market for the halted security. The
Exchange's proposal is similar to the current implementation on Arca
and BZX.\16\
---------------------------------------------------------------------------
\16\ Neither Arca nor BZX use the LULD auction reference price
in the context of their respective MWCB auctions. Arca's auction
reference prices for trading halt auctions other than auctions
following a Trading Pause are based on the last consolidated round-
lot price of that trading day and, if none, the prior trading day's
official closing price. See Arca Rule 7.35-E(a)(8)(A) and (e)(7)(A).
BZX uses the price of the Final Last Sale Eligible Trade or
``FLSET'' as the auction reference price for BZX-listed securities
in auctions conducted after non-LULD Regulatory Halts, which price
is based on the price of a trade on the primary listing exchange
(i.e., BZX). See BZX Rule 11.23(a)(9) and (d)(2)(C)(i). See also BZX
Proposal, footnote 14 (defining FLSET for halt auctions as the last
trade occurring during Regular Trading Hours on the Exchange if the
trade was executed within one second prior to trading in the
security being halted). The Exchange's proposed Auction Reference
Price for MWCB Halts is equivalent to BZX's reference price in
substance, except that the Exchange will use the last Nasdaq sale
price prior to the MWCB Halt. Similar to BZX, the Exchange believes
that it is appropriate to use the price of a trade on the primary
listing market, i.e., Nasdaq, to set the reference price for
auctions in Nasdaq listed securities when such a trade has been
executed recently.
---------------------------------------------------------------------------
[[Page 15821]]
Proposed Rule 4121(d)(1)(B) will describe how the Exchange would
calculate the upper and lower ``MWCB Auction Collar'' prices during the
Initial Display Period. Specifically, the initial upper and lower
collar prices would be determined as follows:
The lower MWCB Auction Collar is derived by subtracting 5%
of the Auction Reference Price, rounded to the nearest minimum price
increment,\17\ or in the case of securities with an Auction Reference
Price of $3 or less, $0.15, from the Auction Reference Price.
---------------------------------------------------------------------------
\17\ The term ``minimum price increment'' means $0.01 in the
case of a System Security priced at $1 or more per share, and
$0.0001 in the case of a System Security priced at less than $1 per
share. See Rule 4107(k). Thus, for example, if adding 10% of the
Auction Reference Price to the MWCB Auction Collar would result in a
tenth of a penny, the Exchange would round down to the nearest penny
when the calculation results in one to four tenths of a penny, and
the Exchange would round up to the nearest penny when the
calculation results in five to nine tenths of a penny.
---------------------------------------------------------------------------
The upper MWCB Auction Collar is derived by adding 5% of
the Auction Reference Price, rounded to the nearest minimum price
increment, or in the case of securities with an Auction Reference Price
of $3 or less, $0.15, to the Auction Reference Price.
In contrast, the initial price collar thresholds currently used for
the LULD mechanism are applied only in the direction of the trading
that invoked the Trading Pause.\18\ In this case, because there would
not be a security-specific pricing direction reason for the MWCB Halt,
the Exchange believes that it is appropriate to apply the initial
thresholds on both sides of the Auction Reference Price. For example,
if the Nasdaq last sale price (either round or odd lot) after 9:15 a.m.
ET but prior to the MWCB Halt for a security is $100.00, then the lower
and upper initial MWCB Auction Collar prices would be $95 and $105--
i.e., 5% below and above the Nasdaq last sale price. This mirrors the
application of the initial halt auction collars on both Arca and BZX
today.\19\
---------------------------------------------------------------------------
\18\ See Rule 4120(c)(10)(A)(ii).
\19\ See Arca Rule 7.35-E(e)(7)(B)(ii) and BZX Rule
11.23(d)(2)(C)(i)(B).
---------------------------------------------------------------------------
Proposed Rules 4121(d)(2) and (d)(3) will specify the circumstances
when the Exchange would extend the Display Only Period for a MWCB Halt
re-opening process, and how the Exchange would adjust the MWCB Auction
Collars for each extension. The proposed process for initiating
extensions will follow the process currently used for extending Trading
Pauses under LULD \20\ as well as the MWCB extension processes on Arca
and BZX.\21\ In particular, at the conclusion of the Initial Display
Only Period, the security will be released for trading unless, at the
end of the Initial Display Only Period, Nasdaq detects an order
imbalance in the security.\22\ In that case, Nasdaq will extend the
Display Only Period for an additional 5-minute period (``Extended
Display Only Period''), and the MWCB Auction Collar prices will be
adjusted as follows:
---------------------------------------------------------------------------
\20\ See Rule 4120(c)(10)(B)-(C).
\21\ See Arca Rule 7.35-E(e)(7)(C) and BZX Rule
11.23(d)(2)(C)(ii).
\22\ As discussed below, an order imbalance under the proposed
re-opening process for MWCB Halts will be established in the same
manner as an order imbalance under the current LULD re-opening
process as set forth in Rule 4120(c)(10)(E).
---------------------------------------------------------------------------
If the Display Only Period is extended because the
calculated price at which the security would be released for trading is
below the lower MWCB Auction Collar price or all sell market orders
would not be executed in the cross, then the new lower MWCB Auction
Collar price is derived by subtracting 5% of the Auction Reference
Price, which was rounded to the nearest minimum price increment, or in
the case of securities with an Auction Reference Price of $3 or less,
$0.15, from the previous lower MWCB Auction Collar price, and the upper
MWCB Auction Collar price will not be changed.
If the Display Only Period is extended because the
calculated price at which the security would be released for trading is
above the upper MWCB Auction Collar price or all buy market orders
would not be executed in the cross, then the new upper MWCB Auction
Collar price is derived by adding 5% of the Auction Reference Price,
which was rounded to the nearest minimum price increment, or in the
case of securities with an Auction Reference Price of $3 or less,
$0.15, to the previous upper MWCB Auction Collar price, and the lower
MWCB Auction Collar price will not be changed.
At the conclusion of the Extended Display Only Period, the security
will be released for trading unless, at the end of the Extended Display
Only Period, Nasdaq detects an order imbalance in the security. In that
case, Nasdaq will further extend the Display Only Period, continuing to
adjust the MWCB Auction Collar prices every five minutes in the manner
described in Rule 4121(d)(2) until the security is released for
trading. During any additional Extended Display Only Period after the
first Extended Display Only Period, Nasdaq shall release the security
for trading at the first point there is no order imbalance.
Proposed Rule 4121(d)(4) will specify that an order imbalance would
be established for purposes of the process under Rule 4121 as follows:
\23\
---------------------------------------------------------------------------
\23\ This is the same manner in which an order imbalance is
established under the current re-opening process for Trading Pauses.
See Rule 4120(c)(10)(E).
---------------------------------------------------------------------------
The calculated price at which the security would be
released for trading is above (below) the upper (lower) MWCB Auction
Collar price calculated under paragraphs (1), (2), or (3) of Rule
4121(d); or
all market orders would not be executed in the cross.
Proposed Rule 4121(d)(5) will describe how the MWCB Auction Collars
will function in the event of more than one trading halt initiated
under Rule 4121 in the same day. In the event of a Level 2 Market
Decline while a security is in a Level 1 MWCB Halt and has not been
released for trading, Nasdaq will recalculate the lower and upper MWCB
Auction Collar prices in the particular security in accordance with
paragraph (1)(B) of Rule 4121.\24\ In this instance, the Exchange will
start the calculation of the new upper and lower MWCB Auction Collar
prices using 5% of the Auction Reference Price, rounded to the nearest
minimum price increment, or $0.15 for securities with an Auction
Reference Price of $3 or less. The Exchange believes that the proposed
language would bring greater transparency to market participants in how
the Exchange would handle the calculation of MWCB Auction Collars.
---------------------------------------------------------------------------
\24\ As currently provided in Rule 4121(b)(i), the Exchange
would halt trading based on a Level 1 or Level 2 Market Decline only
once per day. Thus for example, if a Level 1 Market Decline were to
occur and trading were halted, following the re-opening of trading,
the Exchange would not halt the market again unless a Level 2 Market
Decline were to occur.
---------------------------------------------------------------------------
The Exchange also proposes to add new paragraph (e) to Rule 4121 to
describe how the Exchange will handle the publication of MWCB Halt
Information. Specifically, at the beginning of the Initial Display Only
Period and continuing through the resumption of trading, Nasdaq will
disseminate by electronic means an Order Imbalance Indicator \25\ every
second. The Exchange also proposes to make a related change by adding
new
[[Page 15822]]
Rule 4753(a)(3)(G), which will provide that for purposes of a MWCB Halt
initiated pursuant to Rule 4121, the Order Imbalance Indicator will
include Auction Reference Prices and MWCB Auction Collars, as defined
in Rule 4121(d).
---------------------------------------------------------------------------
\25\ As described in Rule 4753(a)(3), an ``Order Imbalance
Indicator'' is a message disseminated by electronic means containing
information about Eligible Interest and the price at which such
interest would execute at the time of dissemination. ``Eligible
Interest'' is defined as any quotation or any order that has been
entered into the system and designated with a time-in-force that
would allow the order to be in force at the time of the Halt Cross.
See Rule 4753(a)(5).
---------------------------------------------------------------------------
The Exchange plans to implement the proposed changes during April
2020, and will provide prior notice in an Equity Trader Alert.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\26\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\27\ 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.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is consistent
with the Act because it would amend the halt auction process following
a MWCB Halt to be more closely aligned with the process currently
implemented for halt auctions following a Trading Pause under the LULD
Plan. The Exchange amended its re-opening process following a Trading
Pause to better account for buy or sell pressure by changing the manner
in which initial LULD Auction Collars are established, and widening the
collars as appropriate to accommodate trading interest submitted to
participate in the auction. The Exchange believes that these changes
have been generally successful in facilitating a fair and orderly
process for re-opening securities following a Trading Pause. The
Exchange has therefore decided to use a similar process for halt
auctions following a MWCB Halt. The Exchange believes that its proposal
would benefit investors by facilitating price discovery and promoting
more consistency in how the Exchange conducts the re-opening process
following a Trading Pause or a MWCB Halt.
While the proposed re-opening process following MWCB Halts would
largely follow the re-opening process in place today for Trading
Pauses, there would be several notable differences. These differences
are primarily designed to ensure that suitable MWCB Auction Collars are
utilized for the re-opening process following MWCB Halts. For instance,
while an Auction Reference Price based on the Price Band that triggered
the Trading Pause continues to be appropriate in the context of the re-
opening process following Trading Pauses, the Exchange believes that a
different reference is necessary for the re-opening process for MWCB
Halts. The Exchange has chosen to use the Nasdaq last sale price and,
if none, the prior trading day's NOCP as the MWCB Auction Reference
Price in these circumstances as this price is reflective of the current
market for the halted security. Similarly, the Exchange believes that
it is appropriate to calculate both upper and lower MWCB Auction
Collars that are a specified percentage or dollar amount from this
reference price because MWCB Halts do not involve security specific buy
or sell pressure. These differences are similar to the application of
MWCB halt auction collars on Arca and BZX today,\28\ and would
therefore provide both a fair and more consistent experience for
members and investors trading Nasdaq listed securities.
---------------------------------------------------------------------------
\28\ See supra note 6. Similar to BZX's use of FLSET for its
auction reference price for BZX-listed securities, the Exchange also
believes that it is appropriate to use the Nasdaq last sale price as
the reference price for Nasdaq listed securities. See supra note 16.
---------------------------------------------------------------------------
Otherwise, the proposed re-opening process for MWCB Halts is
consistent with the current LULD re-opening process. Similar to the
current LULD re-opening process, the Exchange also believes that the
proposed process is consistent with the protection of investors and the
public interest because they are designed to facilitate price discovery
by ensuring that all market order interest could be satisfied in the
auction process following MWCB Halts. Furthermore, the Exchange
believes that the standardized procedures to extend MWCB Halt auctions
an additional five minutes are appropriate because this would provide
additional time to attract offsetting liquidity. If at the end of such
extension, market orders still cannot be cannot be satisfied within the
applicable collars, or if the re-opening price would be outside of the
applicable collars, the Exchange would extend the halt auction process
an additional five minutes. The Exchange believes that extending the
auction in these circumstances would protect investors and the public
interest by reducing the potential for significant price disparity in
post-auction trading. With each such extension, the Exchange believes
that it is appropriate to widen the price collar threshold on the side
of the market on which there is buying or selling pressure as market
conditions may prevent an order imbalance from being resolved within
the prior auction collars.
The Exchange also believes it is appropriate to add language
clarifying how the MWCB Auction Collars will function in the event of
more than one trading halt initiated under Rule 4121 in the same day.
The proposed changes would increase transparency in how the Exchange
would handle the calculation of MWCB Auction Collars, and is therefore
consistent with the public interest and the protection of investors.
The Exchange likewise believes that specifying how it will handle the
publication of MWCB Halt information will bring greater transparency
around the operation of the Exchange's auction process.
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 for a measured and transparent process for re-
opening Nasdaq listed securities after a MWCB Halt that is similar to
the current re-opening process following a Trading Pause initiated
under the LULD Plan and the process already implemented on Arca and BZX
for non-LULD regulatory halts.\29\
---------------------------------------------------------------------------
\29\ See supra note 6.
---------------------------------------------------------------------------
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 \30\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\31\
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78s(b)(3)(A)(iii).
\31\ 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.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
[[Page 15823]]
Act,\32\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \33\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investor 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 waiving the 30-day operative delay is
consistent with the protection of investors and public interest because
the proposed rule change is designed to establish price protections for
MWCB Level 1 and Level 2 re-openings that are substantially similar to
the price protections in the context of LULD, as well as on other
equities exchanges like Arca and BXZ. Accordingly, the Commission
hereby waives the operative delay and designates the proposal operative
upon filing.\34\
---------------------------------------------------------------------------
\32\ 17 CFR 240.19b-4(f)(6).
\33\ 17 CFR 240.19b-4(f)(6)(iii).
\34\ 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).
---------------------------------------------------------------------------
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
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2020-012 on the subject line.
Paper Comments
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-2020-012. 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 (http://www.sec.gov/rules/sro.shtml).
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 10:00 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-2020-012 and
should be submitted on or before April 9, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
---------------------------------------------------------------------------
\35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05680 Filed 3-18-20; 8:45 am]
BILLING CODE 8011-01-P