[Federal Register Volume 84, Number 58 (Tuesday, March 26, 2019)]
[Notices]
[Pages 11357-11359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05702]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85372; File No. SR-NASDAQ-2019-013]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a New SCAR Routing Option
March 20, 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 March 6, 2019, 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 adopt a new SCAR routing option under Rule
4758.
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 SCAR, a new order routing \3\
option under Rule 4758(a)(1)(A). The Exchange currently provides a
variety of routing options under Rule 4758(a)(1)(A). 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 SCAR
routing option would allow members to seek liquidity on the Exchange
and the other equity markets operated by Nasdaq, Inc., the Nasdaq BX
Equities Market (``BX'') and Nasdaq PSX (``PSX'' and together with BX
and the Exchange, the ``Nasdaq Affiliated Exchanges''). SCAR will
operate in the same manner as the current CART strategy, but will
differ in the initial order routing to the Nasdaq Affiliated Exchanges.
Whereas CART orders route sequentially to BX, PSX and then check the
System,\4\ SCAR orders will route simultaneously to all three Nasdaq
Affiliated Exchanges in accordance with the System routing table.\5\
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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
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, 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\ See Rule 4758(a)(1)(A)(xi).
\5\ 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).
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[[Page 11358]]
Specifically as proposed, SCAR would be a routing option under
which orders check the System \6\ for available shares and
simultaneously route \7\ to BX and PSX in accordance with the System
routing table.\8\ Similar to CART, if shares remain unexecuted after
routing, they are posted on the Exchange's book or cancelled, depending
on the Time-in-Force of the order.\9\ Once on the book, should the
order subsequently be locked or crossed by another market center, the
System will not route the order to the locking or crossing market
center. This is also similar to how CART treats shares that remain
unexecuted after completing the initial order route and posting to the
Exchange book. Like all of the Exchange's routing strategies, SCAR is
designed to comply with Rule 611 and the other provisions of Regulation
NMS.\10\
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\6\ The term ``System'' shall mean the automated system for
order execution and trade reporting owned and operated by The Nasdaq
Stock Market LLC. See Rule 4701(a).
\7\ As with all routing strategies that provide for simultaneous
routing, the incoming SCAR order would be broken up into child
orders. For SCAR routing, the orders would be sent to the Exchange,
BX, and PSX at the same time based on the available displayed
interest on these exchanges. In particular, the Exchange would
allocate the number of shares from the parent order based on the
System routing table for SCAR, and route the allocated shares (i.e.,
the child orders) to the executing venues simultaneously.
\8\ As is the case today for all market destinations on the
System routing table, the placement of the Exchange, BX and PSX on
the applicable System routing table for SCAR will depend on the
Exchange's ongoing assessments of factors such as latency, fill
rates, reliability, and cost.
\9\ Unexecuted shares of a SCAR order will return to the
Exchange after routing and check the System for available shares
before cancelling if the order has a Time-in-Force of IOC.
Otherwise, shares that remain unexecuted after routing will return
to the Exchange and check the System for available shares before
posting on the Exchange's book (e.g., the SCAR order has a Time-in-
Force of DAY).
\10\ 17 CFR 242.611.
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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
prior notice of the implementation date in an Equity Trader Alert.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\12\ 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. The Exchange believes that the proposed rule change will
accomplish those ends by providing market participants with an
additional voluntary routing option that will allow them to easily
access liquidity available on all Nasdaq Affiliated Exchanges. The
Exchange expects the proposed routing strategy will benefit firms that
do not employ routing or trading strategies under which the firm itself
would rapidly access liquidity provided on the multiple venues. SCAR
would not provide any advantage, including latency and priority, to
members when routing to the Nasdaq Affiliated Exchanges as compared to
other methods of routing or connectivity available to members by the
Exchange.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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Lastly, the Exchange notes that routing options enabling the
routing of orders between affiliated exchanges is not unique, and that
the proposed SCAR routing option is similar to those already offered by
the Exchange (i.e., CART) and by other exchange groups. Specifically,
Cboe BZX Exchange (``BZX''), Cboe BYX Exchange (``BYX''), Cboe EDGA
Exchange (``EDGA''), and Cboe EDGX Exchange (``EDGX'') offer a routing
option called ALLB that enables an order, whether sent to BZX, BYX,
EDGA, or EDGX, to check the BZX, BYX, EDGA, and EDGX books for
liquidity before optionally posting on the BZX, BYX, EDGA, or EDGX
book.\13\ For the foregoing reasons, the Exchange believes that the
proposed rule change is consistent with the Act.
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\13\ See BZX Rule 11.13(b)(3)(O), BYX Rule 11.13(b)(3)(M), EDGA
Rule 11.11(g)(7), and EDGX Rule 11.11(g)(7). ALLB is also
substantially similar to the Exchange's CART strategy, as described
above.
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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. As discussed above, the
proposed functionality is partly based on existing functionality
available on competitor exchanges.\14\ Furthermore, the Exchange
provides routing services in a highly competitive market in which
participants may avail themselves of a wide variety of routing options
offered by other exchanges, alternative trading systems, other broker-
dealers, market participants' own proprietary routing systems, and
service bureaus. In such an environment, system enhancements such as
the changes proposed in this rule filing do not burden competition,
because they can succeed in attracting order flow to the Exchange only
if they offer investors higher quality and better value than services
offered by others. Encouraging competitors to provide higher quality
and better value is the essence of a well-functioning competitive
marketplace. Lastly, SCAR would not provide any advantage to members
when routing to the Nasdaq Affiliated Exchanges as compared to other
methods of routing or connectivity available to members by the
Exchange. For the foregoing reasons, the Exchange does not believe the
proposed rule change will result in any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
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\14\ Id.
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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) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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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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.
[[Page 11359]]
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-2019-013 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-2019-013. 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-2019-013 and should be submitted
on or before April 16, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05702 Filed 3-25-19; 8:45 am]
BILLING CODE 8011-01-P