[Federal Register Volume 84, Number 33 (Tuesday, February 19, 2019)]
[Notices]
[Pages 4885-4887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02610]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85113; File No. SR-NASDAQ-2019-004]
Self-Regulatory Organizations; the Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt a New MIDP Routing
Option Under Rule 4758 and Make a Conforming Change to Rule 4703(e)
February 12, 2019.
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 January 31, 2019, 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.
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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 adopt a new MIDP routing option under Rule
4758 and make a conforming change to Rule 4703(e).
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 Exchange is proposing to adopt MIDP, a new order routing \3\
option under Rule 4758(a)(1)(A). The Exchange provides a variety of
routing options under Rule 4758(a)(1). Routing options may be combined
with all available Order Types and Times-in-Force, with the exception
of Order Types and Times-in-Force whose terms are inconsistent with the
terms of a particular routing option. The MIDP routing option would
allow members to seek midpoint liquidity on Nasdaq and other markets on
the System routing table.\4\ Specifically, the MIDP routing option may
be assigned only to a Non-Displayed Order Type \5\ with a Midpoint
Pegging Order Attribute.\6\ An Order with MIDP will check the System
for available shares and then the remaining shares are routed to
destinations on the System routing table \7\ that support midpoint
eligible orders with a limit price that is at the lesser (greater) of:
(1) The current NBO (NBB); or (2) the Order's entered limit price (if
applicable).\8\ If shares remain unexecuted after routing, the Order
returns to Nasdaq and will check the System for available shares, with
remaining shares posted on the Nasdaq Book \9\ as a Non-Displayed Order
with a Midpoint Pegging Order Attribute.\10\
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\3\ Routing is an Order Attribute that allows a Participant to
designate an Order to employ one of several Routing Strategies (also
called ``routing options'') offered by Nasdaq, as described in Rule
4758; such an Order may be referred to as a ``Routable Order.'' Upon
receipt of an Order with the Routing Order Attribute, the System
will process the Order in accordance with the applicable Routing
Strategy. In the case of a limited number of Routing Strategies, the
Order will be sent directly to other market centers for potential
execution. For most other Routing Strategies, including MIDP, the
Order will attempt to access liquidity available on Nasdaq in the
manner specified for the underlying Order Type and will then be
routed in accordance with the applicable Routing Strategy. Shares of
the Order that cannot be executed are then returned to Nasdaq, where
they will (i) again attempt to access liquidity available on Nasdaq
and (ii) post to the Nasdaq Book or be cancelled, depending on the
Time-in- Force of the Order. See Rule 4703(f).
\4\ The term ``System routing table'' refers to the proprietary
process for determining the specific trading venues to which the
System routes orders and the order in which it routes them. Nasdaq
reserves the right to maintain a different System routing table for
different routing options and to modify the System routing table at
any time without notice. See Rule 4758(a)(1)(A).
\5\ See Rule 4702(b)(3).
\6\ Midpoint Pegging means Pegging with reference to the
midpoint between the Inside Bid and the Inside Offer (the
``Midpoint''). See Rule 4703(d).
\7\ The Order is routed sequentially to the various venues on
the System routing table in the full amount. An Order with MIDP and
a Minimum Quantity Order Attribute will similarly route to the
venues sequentially.
\8\ If the entered limit price of a buy (sell) Order entered
with MIDP is less (greater) than the current Midpoint price, the
Order will not be routed but will instead be posted on the Nasdaq
Book as a Midpoint Peg Order (if not an IOC). Once on the Nasdaq
Book, if the NBBO moves and the Order's limit price is equal to or
greater (less) than the NBO (NBB), the Order would not subsequently
route.
\9\ See Rule 4701(a).
\10\ An Order with the MIDP routing option will only be accepted
with a Time-in-Force of Market Hours DAY or IOC and may not be
flagged to participate in any of the Nasdaq Crosses. Unexecuted
shares of an order with the MIDP routing option will be cancelled
after routing if the order has a Time-in-Force of IOC.
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A member may specify a Minimum Quantity Order Attribute upon
entry.\11\ Minimum Quantity is an Order Attribute that allows a
Participant to provide that an Order will not execute unless a
specified minimum quantity of shares can be obtained.\12\ If at any
point during the routing process, but prior to returning to post on the
Nasdaq Book (unless an IOC), the remaining size of the Order becomes
less than the specified minimum quantity, the Order will be cancelled
back to the member. This will avoid an execution of a member's Order
that is inconsistent with its minimum quantity instructions. If shares
remain unexecuted after routing, they return to Nasdaq and check the
System for available shares with remaining shares posted on the Nasdaq
Book as a Non-Displayed Order with a Midpoint Pegging Order Attribute
and the minimum quantity condition specified by the member upon entry
of the Order. For example, if the National Best Bid and Offer
(``NBBO'') is $5.00 x $5.01 and a member enters a Non-Displayed Order
with a Midpoint Pegging Order Attribute to buy 500
[[Page 4886]]
shares with a TIF of Day, a limit of $5.01 and no minimum quantity, the
System will first attempt to execute the Order on Nasdaq at the
midpoint of the NBBO and if no shares are executed, the Order will be
routed as a midpoint order to destinations on the System routing table
that support midpoint eligible orders. If the Order does not receive an
execution at the venues to which it was routed, the Order would return
to Nasdaq and check the System for available shares, with remaining
shares posted to the Nasdaq Book at the midpoint price of $5.005. If,
however, the Order also had a minimum quantity of 300 shares and
received an execution of 300 shares at a venue on the System routing
table, instead of continuing to route or post to the Nasdaq Book, the
Order will instead be cancelled back to the member, consistent with the
minimum quantity instruction.
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\11\ If upon entry the Order size is less than the minimum
quantity designated by the member the Order will be rejected.
\12\ See Rule 4703(e).
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The Exchange does not currently allow an Order with Minimum
Quantity to also have a Routing Order Attribute.\13\ Historically, the
Exchange System has been unable to support Minimum Quantity and Routing
due to limitations in the System. The Exchange has made technical
changes to the System to allow for Minimum Quantity and MIDP, and
Minimum Quantity would only be available for MIDP. Thus, the Exchange
is making a conforming change to Rule 4703(e) to allow Minimum Quantity
with MIDP. Should Participants request Minimum Quantity for other
Routing strategies, the Exchange would consider making the technical
changes to allow for such Routing and submit a rule change proposal to
the Commission.
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\13\ Id.
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The Exchange will implement the proposal in the second quarter of
2019, subject to approval by the Commission. The Exchange will provide
notice of the implementation date at least 30 days prior to
implementation via an Equity Trader Alert.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\15\ 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 providing members additional control over the execution of
their Orders so that they may source Midpoint liquidity from venues
other than Nasdaq. Midpoint Orders allow participants to receive price
improvement by executing against other non-displayed liquidity at the
midpoint of the NBBO. An entirely optional routing option, MIDP will
help maximize the potential that members will receive Midpoint
executions for their Orders. In addition, the proposed functionality is
currently offered by competitor exchanges.\16\ The Exchange believes
that allowing Minimum Quantity to be an Order Attribute to an Order
with MIDP is consistent with the Act because it provides market
participants with greater flexibility and control over their Orders. As
noted above, the Exchange has not allowed Orders with both Minimum
Quantity and Routing for technical reasons. The Exchange has made
technical changes that will allow Minimum Quantity with Routing solely
for MIDP, although it may make the change for other Routing strategies
based on market participant interest.\17\ For these reasons, the
Exchange believes that the proposed rule change is consistent with the
Act.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ BYX Rule 11.13(b)(3)(Q) and EDGA Rule 11.11(g)(13). These
rules provide that RMPT and RMPL routing strategies may be used with
a Mid-Point Peg Order to check the exchanges' respective Systems for
available shares and any remaining shares are then sent to
destinations on their routing tables that support midpoint eligible
orders. Any shares remaining unexecuted after routing are posted on
the exchanges' respective books as a Mid-Point Peg Order, unless
otherwise instructed by the exchange participant. It is unclear to
the Exchange if market participants may associate a minimum quantity
attribute with RMPT or RMPL. As a consequence, MIDP may differ from
RMPT and/or RMPL in this way.
\17\ Subject to submission of a rule change filing with the
Commission.
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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. To the contrary, the proposed
change is pro-competitive because it may make the Exchange a more
attractive venue to market participants, which may incent other
exchanges and trading venues to adopt similar routing functionality. In
this regard, the proposed change does not create any competitive
barriers or in any way preclude competitor exchanges and other trading
venues from implementing similar functionality. As noted above, the
proposed functionality copies, in part, existing functionality
available on competitor exchanges. In addition, to the extent other
exchanges and other trading venues do not support minimum quantity and
routing, they are free to make the changes to their systems to allow
for such. Thus, the proposed change is reflective of competition among
trading venues, and does not impose any burden thereon.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-2019-004 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2019-004. 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
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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-2019-004, and should be submitted on or before March 12, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02610 Filed 2-15-19; 8:45 am]
BILLING CODE 8011-01-P