[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]
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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.
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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 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.
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\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).
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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
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\6\ See Securities Exchange Act Release No. 82873 (March 14,
2018), 83 FR 13008 (March 26, 2018) (File No. S7-05-18).
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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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(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 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\
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\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.
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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\
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\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).
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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 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\
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\14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28400 Filed 12-28-18; 8:45 am]
BILLING CODE 8011-01-P