[Federal Register Volume 83, Number 249 (Monday, December 31, 2018)]
[Notices]
[Pages 67808-67810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28400]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84924; File No. SR-NASDAQ-2018-106]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Eliminate the Extended Life Priority Order Attribute

December 21, 2018.
    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 December 19, 2018, 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.
---------------------------------------------------------------------------

    \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 eliminate the Extended Life Priority Order 
Attribute, which has not been implemented to date.
    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

[[Page 67809]]

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 is proposing to eliminate the Extended Life Priority 
Order Attribute, which was approved by the Commission \3\ but has not 
been implemented.\4\ The Extended Life Priority Order Attribute \5\ 
would allow certain displayed retail Orders to receive higher priority 
on the Nasdaq Book than other Orders at the same price. To be eligible 
to enter Orders with Extended Life Priority, at least 99% of Designated 
Retail Orders with the Extended Life Priority Attribute entered by the 
Participant must exist unaltered on the Nasdaq Book for a minimum of 
one second. Thus, the Extended Life Priority Order Attribute would 
incentivize members to provide market-improving behavior on the 
Exchange in the form of longer-lived displayed retail Orders.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 81097 (July 7, 
2017), 82 FR 32386 (July 13, 2017) (SR-NASDAQ-2016-161).
    \4\ See Securities Exchange Act Release No. 81855 (October 11, 
2017), 82 FR 48301 (October 17, 2017) (SR-NASDAQ-2017-103).
    \5\ The term ``Order'' means an instruction to trade a specified 
number of shares in a specified System Security submitted to the 
Nasdaq Market Center by a Participant. An ``Order Type'' is a 
standardized set of instructions associated with an Order that 
define how it will behave with respect to pricing, execution, and/or 
posting to the Nasdaq Book when submitted to Nasdaq. An ``Order 
Attribute'' is a further set of variable instructions that may be 
associated with an Order to further define how it will behave with 
respect to pricing, execution, and/or posting to the Nasdaq Book 
when submitted to Nasdaq. The available Order Types and Order 
Attributes, and the Order Attributes that may be associated with 
particular Order Types, are described in Rules 4702 and 4703. One or 
more Order Attributes may be assigned to a single Order; provided, 
however, that if the use of multiple Order Attributes would provide 
contradictory instructions to an Order, the System will reject the 
Order or remove non-conforming Order Attributes. See Rule 4701(e).
---------------------------------------------------------------------------

    The Commission approved Extended Life Priority Order Attribute on 
July 7, 2017. The Exchange anticipated a progressive rollout of the 
Extended Life Priority Order Attribute functionality, beginning with a 
small set of symbols and gradually expanding further. Specifically, the 
Exchange planned to implement the initial set of symbols eligible for 
the Extended Life Priority Order Attribute in the third quarter of 
2017, with the exact implementation date being reliant on several 
factors, such as the results of extensive testing and industry events 
and initiatives. In September 2017, the Exchange determined to delay 
implementation of the Extended Life Priority Order Attribute until the 
second half of 2018, noting that it had encountered unforeseen issues 
in developing the new Order Attribute.
    The Exchange notes that significant changes to market structure 
have been proposed since it first proposed the new Order Attribute, 
including the proposal of a Transaction Fee Pilot.\6\ The Exchange has 
concerns with potential impact to market quality with regards to these 
proposals, which have introduced uncertainty and potential risk to the 
Exchange in implementing the Extended Life Priority Order Attribute. 
For example, the Transaction Fee Pilot, if approved, would reduce the 
level of fees the Exchange may charge for transactions and, in turn, 
reduce the incentives that it can provide to liquidity providers. As 
noted above, the Extended Life Priority Order Attribute would allow 
certain Orders to receive higher priority on the Nasdaq Book than other 
Orders at the same price that, coupled with a reduction in incentive to 
liquidity providers, may reduce the liquidity available on the Exchange 
and consequently impact market quality. The Exchange believes it is 
prudent to eliminate the unimplemented Order Attribute at this time, 
pending clarity on the large market structure changes being proposed, 
including the Transaction Fee Pilot. The Exchange believes that, since 
it does not have an intent to implement the Order Attribute at this 
time, it is appropriate to remove it from the Exchange's rules to avoid 
any confusion that may be caused by having an approved yet 
unimplemented rule. Once there is clarity on the proposed market 
structure changes, if the Exchange determines the Extended Life 
Priority Order Attribute would add value to the market and may be 
implemented without significant risk of decreased liquidity on the 
market, it will re-propose the Order Attribute
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 82873 (March 14, 
2018), 83 FR 13008 (March 26, 2018) (File No. S7-05-18).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ 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, 
by eliminating an Order Attribute that has been approved by the 
Commission but not yet implemented. The Exchange believes that it is in 
the public interest to avoid any confusion that may be caused by having 
an approved yet unimplemented rule that the Exchange does not plan to 
implement at this time. Moreover, the Exchange believes that 
implementation of the Extended Life Priority Order Attribute at this 
time may negatively affect market quality given the large market 
structure changes being proposed, as discussed above.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 elimination of the 
unimplemented Extended Life Priority Order Attribute is being done 
because implementation of the Order Attribute would potentially result 
in decreased liquidity on the Exchange. The Exchange has weighed the 
risk of implementing the Order Attribute at this time in light of 
current uncertainty surrounding the large market structure changes 
being proposed, including the significant risk of decreased liquidity 
that may be caused by the proposed Transaction Fee Pilot coupled with 
the possible negative impact on liquidity provider behavior caused by 
losing priority to Orders with the Extended Life Priority Order 
Attribute, and has determined that implementing the Order Attribute at 
this time may impact its market negatively. Accordingly, the Exchange 
is eliminating the Extended Life Priority Order Attribute to ensure 
that it remains competitive with other markets.

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

[[Page 67810]]

19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the 
Commission to 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 it 
may avoid any investor confusion over the implementation of the 
Extended Life Priority Order Attribute. In particular, the Exchange 
previously indicated that the Extended Life Priority Order Attribute 
would be implemented in the second half of 2018 but has since 
determined not to implement the Order Attribute at this time. For this 
reason, the Commission believes 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 operative delay 
and designates the proposal as operative upon filing.\13\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 change 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-2018-106 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-2018-106. 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-2018-106 and should be submitted 
on or before January 22, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2018-28400 Filed 12-28-18; 8:45 am]
 BILLING CODE 8011-01-P