[Federal Register Volume 84, Number 173 (Friday, September 6, 2019)]
[Notices]
[Pages 46986-46987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19224]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86842; File No. SR-NASDAQ-2019-069]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Manner in Which It Calculates Volume, Liquidity and Quoting 
Thresholds Applicable To Billing on the Exchange in Relation to a 
Systems Issue Experienced by SIAC on August 12, 2019

August 30, 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 August 28, 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 modify the manner in which it calculates 
volume, liquidity and quoting thresholds applicable to billing on the 
Exchange in relation to a systems issue experienced by SIAC on August 
12, 2019, which impacted trade and quote dissemination across all 
markets.
    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 proposes to modify the manner in which it calculates 
volume, liquidity and quoting thresholds applicable to billing on the 
Exchange in relation to the August 12, 2019 systems issue, which 
impacted trade and quote dissemination across all markets.\3\ 
Specifically, on August 12, 2019, SIAC \4\ determined to fail over to 
back up servers after receiving indications that its primary systems 
had become unstable, causing connectivity disruptions. The fail over to 
secondary systems failed to cure the problem, resulting in market-wide 
issues with the Consolidated Quote System and the Consolidated Tape 
System, including gaps in the intra-day trades, quotes, and other 
messages that were attempted to be sent to it. Consequently, the 
accuracy of the transaction and quotation data for August 12, 2019 is 
unknown.
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    \3\ See https://www.ctaplan.com/alerts#110000144324.
    \4\ SIAC is the operator of the Consolidated Quote System and 
Consolidated Tape System, which disseminate real-time trade and 
quote information in New York Stock Exchange LLC (Network A) and 
Bats, NYSE Arca, NYSE American and other regional exchange (Network 
B) listed securities.
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    As a result, the Exchange is unable to accurately calculate member 
transaction fees and credits, including calculations for the Exchange's 
incentive programs, since several of the Exchange's transaction fees 
and credits are based on trading, quoting and liquidity thresholds that 
members must satisfy in order to qualify for the particular rates 
(e.g., percentage of Consolidated Volume, Average Daily Volume, and 
time at the NBBO). The Exchange therefore proposes to exclude August 
12, 2019 from all tier calculations described in Equity 7, Sections 114 
\5\ and 118 \6\ in order to reasonably ensure that a member that would 
otherwise qualify for a particular threshold during August 2019, and 
the corresponding transaction rate and/or incentive, would not be 
negatively impacted by the August 12, 2019 systems issue.
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    \5\ Equity 7, Section 114 provides the Exchange's market quality 
incentive programs.
    \6\ Equity 7, Section 118 provides the fees and credits for use 
of the Exchange's order execution and routing services.
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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 Sections 
6(b)(4) and (5) of the Act,\8\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members, issuers and other persons using its facilities and 
does not unfairly discriminate between customers, issuers, brokers or 
dealers, and 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. In this regard, because the accuracy 
of the transaction and quotation data disseminated by SIAC for August 
12, 2019 is unknown, the Exchange believes that it is reasonable to 
exclude August 12, 2019 from all tier calculations described in Equity 
7, Sections 114 and 118, which would reasonably ensure that a member's 
qualification for various pricing programs would be based on the data 
that the Exchange believes is accurate. The Exchange also believes that 
the proposed rule change is reasonable because the SIAC systems issue 
that caused inaccurate transaction and quotation data was not within 
Nasdaq's control nor can Nasdaq correct or otherwise remediate the 
issue. Including August 12, 2019 transaction and quotation data for 
purposes of tier calculations described in Equity 7, Sections 114 and 
118 could result in inaccurate determinations for member rates based on 
the extent to which their transactions and quotations were impacted by 
the August 12, 2019 event in comparison to the overall inaccuracies in 
the data provided by SIAC for that date. Consequently, the Exchange 
believes that the proposed change is equitable and not unfairly 
discriminatory because it would result in all market participants on 
the Exchange being treated equally by excluding August 12, 2019 from 
all tier calculations described in Equity 7, Sections 114 and 118. 
Last, excluding August 12, 2019 from all tier calculations described in 
Equity 7, Sections 114 and 118 is in the public interest because it 
will provide Exchange members with the closest approximation of the 
fees and credits

[[Page 46987]]

that they would have been eligible for if accurate data for August 12, 
2019 were available and included in the monthly calculation.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (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 rule change would 
treat all market participants on the Exchange equally by excluding 
August 12, 2019 from all tier calculations described in Equity 7, 
Sections 114 and 118. Moreover, the Exchange believes that the proposed 
change would enhance competition between competing marketplaces by 
enabling the Exchange to fairly assess its members fees and to apply 
credits in light of systems issues that occurred, which are beyond the 
control of the Exchange.

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 \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 requested that the Commission waive the 30-day operative delay. The 
Exchange begins the calculation and billing of member fees and credits 
under Equity 7, Sections 114 and 118 at the close of each month, and an 
operative delay would disrupt the normal billing process, which may 
cause expense and potential investor confusion. Therefore, the 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, 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-2019-069 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-2019-069. 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-2019-069 and should be submitted 
on or before September 27, 2019.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19224 Filed 9-5-19; 8:45 am]
BILLING CODE 8011-01-P