[Federal Register Volume 87, Number 225 (Wednesday, November 23, 2022)]
[Notices]
[Pages 71712-71714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25472]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96341; File No. SR-NASDAQ-2022-065]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Delay Implementation of Pending Amendments to Equity 4, Rules 4120, 
4702 and 4703

November 17, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 14, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 delay implementation of pending amendments 
to Equity 4, Rules 4120, 4702 and 4703 \3\ in light of planned changes 
to the System.
---------------------------------------------------------------------------

    \3\ References herein to Nasdaq Rules in the 4000 Series shall 
mean Rules in Nasdaq Equity 4.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On November 14, 2022, the Exchange plans introduce a new upgraded 
version of the OUCH Order entry protocol \4\ that will, when fully 
implemented, enable the Exchange to make functional improvements to 
specific Order Types \5\ and Order Attributes.\6\ The Exchange filed 
its proposal (the ``Proposal'') for these enhancements with the SEC on 
September 14, 2022, and in the Proposal the Exchange stated that its 
operative date would be November 14.\7\ The Exchange recently issued a 
reminder of that operative date in an Equity Trader Alert.\8\ The 
Exchange now wishes to inform participants that while it intends to 
proceed with introducing technical upgrades to OUCH on November 14th, 
the functional upgrades affecting Order Types, Order Attributes, and 
Order Handling and trading behavior will not be available on that date.
---------------------------------------------------------------------------

    \4\ The OUCH Order entry protocol is a proprietary protocol that 
allows subscribers to quickly enter orders into the System and 
receive executions. OUCH accepts limit Orders from members, and if 
there are matching Orders, they will execute. Non-matching Orders 
are added to the Limit Order Book, a database of available limit 
Orders, where they are matched in price-time priority. OUCH only 
provides a method for members to send Orders and receive status 
updates on those Orders. See https://www.nasdaqtrader.com/Trader.aspx?id=OUCH.
    \5\ 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 Exchange Book when 
submitted to Nasdaq. See Equity 1, Section 1(a)(7).
    \6\ 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 Exchange Book when submitted to the Exchange. See id.
    \7\ See Securities Exchange Act Release No. 34-95768 (September 
14, 2022); 87 FR 57534 (September 20, 2022) (SR-Nasdaq-2022-051).
    \8\ See Equity Trader Alert 2022-96 (October 26, 2022), 
available at http://www.nasdaqtrader.com/TraderNews.aspx?id=%20ETA2022-96.
---------------------------------------------------------------------------

    By way of background, the functional enhancements to OUCH set forth 
in the Proposal will enable the Exchange to upgrade the logic and 
implementation of certain of its Order Types and Order Attributes so 
that the features are more robust, streamlined, and harmonized across 
the Exchange's Systems and Order entry protocols. The Exchange 
developed OUCH with simplicity in mind, and therefore, it presently 
lacks certain complex order handling capabilities. By contrast, the 
Exchange specifically designed its RASH Order Entry Protocol \9\ to 
support advanced functionality, including discretion, random reserve, 
pegging and routing. The introduction of OUCH upgrades will enable 
participants to utilize OUCH, in addition to RASH, to enter Order Types 
that require advanced functionality. Thus, the upgrades will not 
introduce new functionality, but rather, it will offer to OUCH users 
advanced functionality that already exists for RASH users.
---------------------------------------------------------------------------

    \9\ The RASH (Routing and Special Handling) Order entry protocol 
is a proprietary protocol that allows members to enter Orders, 
cancel existing Orders and receive executions. RASH allows 
participants to use advanced functionality, including discretion, 
random reserve, pegging and routing. See http://nasdaqtrader.com/content/technicalsupport/specifications/TradingProducts/rash_sb.pdf.
---------------------------------------------------------------------------

    Specifically, the Proposal will amend Rule 4702 pertaining to Order 
Types to specify that, going forward, OUCH may be used to enter certain 
Order Types together with certain Order Attributes, whereas now, Rule 
4702 specifies that RASH, FIX, and QIX, but not OUCH, may be used to 
enter such combinations of Order Types and Attributes.\10\ The Proposal 
will also adjust the current functionality of the Pegging,\11\ 
Reserve,\12\ and Trade Now Order Attributes,\13\ as described therein, 
so that they align with how OUCH, once upgraded, will handle these 
Order Attributes going forward.
---------------------------------------------------------------------------

    \10\ The planned upgrades will enable members to utilize OUCH in 
additional circumstances, including for the entry of: (1) Price to 
Comply and Price to Display Orders with the Reserve Size, Primary 
and Market Pegging, and Discretion Order Attributes; (2) Non-
Displayed Orders with the Primary and Market Pegging, Midpoint 
Pegging (in scenarios described in amended Rule 4703(d)), and 
Discretion Order Attributes; and (3) Market Maker Peg Orders.
    \11\ See Rule 4703(d).
    \12\ See Rule 4703(h).
    \13\ See Rule 4703(m)-(n).
---------------------------------------------------------------------------

    Unfortunately, none of these new OUCH functionalities set forth in 
the Proposal will be available on November 14, 2022, and they may not 
be available for several months thereafter due to delays in completing 
the necessary

[[Page 71713]]

development work. The Exchange still will make the new version of OUCH 
available for participant use on November 14th, as the Exchange will be 
in a position on that date to implement certain technical enhancements 
to the OUCH Protocol of value to participants. However, these technical 
enhancements will not affect existing Order Types, Order Attributes, or 
Order handling or trading behavior on the Exchange.
    As such, the new Rules set forth in the Proposal will not be 
operational on November 14th. Instead, existing Rules governing Order 
Types, Order Attributes and Order handling and trading behavior on the 
Exchange will continue to apply as of November 14th and until such date 
as all of the functional upgrades to OUCH are complete and ready for 
implementation. The Exchange will announce the implementation date of 
the new OUCH functionalities, and of the new Rules set forth in the 
Proposal, in an Equity Trader Alert at least 30 days prior to 
implementation. A present, the Exchange expects that the new OUCH 
functionality will be ready for full implementation in the second or 
third quarter of 2023, although that time frame is subject to change.
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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    It is consistent with the Act to delay implementation of pending 
amendments to the Exchange's Rulebook relating to effectuate functional 
upgrades to OUCH because such functional upgrades will not be ready for 
implementation upon the launch of the new version of the OUCH protocol 
on November 14, 2022. The Exchange believes that it is in the best 
interests of investors and the public, and consistent with the 
maintenance of an orderly market, to avoid confusion by maintaining its 
current Rulebook governing OUCH until such time as the Exchange is 
ready to implement the new functionality.

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 will 
merely delay the implementation schedule for the Proposal as well as 
the Rules that will apply to participants and their Orders in the 
interim period.

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 prior to 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)(iii) of the Act \16\ and Rule 
19b-4(f)(6) thereunder.\17\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
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 under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may 
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 the proposal 
may become operative immediately upon filing.
    The Commission believes that a waiver of the operative delay is 
consistent with the protection of investors and the public interest 
because it allow the Exchange to avoid confusion that might otherwise 
arise on November 14, 2022, the date when the Proposal is currently 
scheduled to become operative, if the Exchange's Rulebook was to 
suggest to participants that OUCH Orders will behave in a manner that 
is not yet accurate. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposal operative upon filing.
    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 under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2022-065 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-2022-065. 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

[[Page 71714]]

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-2022-065 and should 
be submitted on or before December 14, 2022.
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12), (59).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25472 Filed 11-22-22; 8:45 am]
BILLING CODE 8011-01-P