[Federal Register Volume 89, Number 59 (Tuesday, March 26, 2024)]
[Notices]
[Pages 21065-21068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06328]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99792; File No. SR-NASDAQ-2024-014]


Self-Regulatory Organizations; The Nasdaq Stock Market, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Trade Now Order Attribute, at Equity 4, Rules 4702 and 4703

March 20, 2024.
    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 18, 2024, 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, II, and III 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 amend the Trade Now Order Attribute, at 
Equity 4, Rule 4703,\3\ as well as to make conforming changes to Rule 
4702, as described further below.
---------------------------------------------------------------------------

    \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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 4703(m), which governs the 
Trade Now Order Attribute.\4\ Under the Exchange's rules, as amended by 
SR-NASDAQ-2022-051,\5\ Trade Now is an Attribute that allows a resting 
Order ``that becomes locked or crossed, as applicable, at its non-
displayed price by the posted price of an incoming Displayed Order or a 
Midpoint Peg Post-Only Order to execute against the locking or crossing 
Order(s) as a liquidity taker automatically.'' The Exchange proposes to 
amend this rule text to state instead that Trade Now allows ``a resting 
Order that is locked or crossed, as applicable, at its non-displayed 
price by the posted price of

[[Page 21066]]

an incoming Displayed Order or a Midpoint Peg Post-Only Order or 
another Order or Orders (where such locking or crossing Order(s) or the 
order with Trade Now satisfies a Minimum Quantity condition) to execute 
as a liquidity taker automatically, when such Orders become 
marketable.'' These proposed amendments serve several purposes.
---------------------------------------------------------------------------

    \4\ 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.
    \5\ See Securities Exchange Act Release No. 34-95768 (September 
14, 2022); 87 FR 57534 (September 20, 2022) (SR-Nasdaq-2022-051).
---------------------------------------------------------------------------

    First, the proposed amended text broadens the scope of the Rule so 
that it provides for Trade Now to also activate in circumstances where 
Orders possessing the Trade Now Order Attribute cannot execute at the 
point of initial interaction due to a Minimum Quantity condition \6\ on 
the resting Order. The existing rule text suggests that Trade Now will 
activate only where it can do so immediately upon interaction with an 
incoming Displayed Order or a Midpoint Peg Post-Only Order, rather than 
after waiting for any conditions that preclude immediate execution from 
occurring. Under the proposed amendment, Trade Now would activate and 
execute against the locking or crossing Orders when the Minimum 
Quantity condition that prevented the immediate execution is satisfied, 
provided that the other requirements for activation of Trade Now 
functionality remain satisfied at that time.\7\
---------------------------------------------------------------------------

    \6\ Pursuant to Rule 4703(e), ``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. The Rule provides for two types of Minimum Quantity 
Attributes: one in which a participant specifies that the condition 
may be satisfied by execution against one or more orders with an 
aggregate size of at least the minimum quantity; and another in 
which the condition must be satisfied by execution against one or 
more Orders, each of which must have a size of at least the minimum 
quantity. Id. This proposed rule change concerns the first of these 
two alternatives.
    \7\ The Proposal also replaces the word ``becomes'' with ``is'' 
in the existing phrase ``resting Order that becomes locked or 
crossed, as applicable, at its non-displayed price'' to accommodate 
the fact that, with the proposed amendment, Trade Now could activate 
after an Order with Trade Now becomes locked if it is not marketable 
at that initial point in time.
---------------------------------------------------------------------------

    This proposed amendment enables Trade Now to better achieve its 
underlying purpose--which is to help clear the Exchange Book of locking 
or crossing orders. The Exchange perceives no logical basis to preclude 
activation of Trade Now when two (or more) Orders meet the conditions 
for activation, but for the fact that one of them has a Minimum 
Quantity condition that precluded it from executing (immediately upon 
entry and/or against subsequent incoming contra-side orders). Provided 
that the conditions for Trade Now to activate remain satisfied as of 
the time when the Orders become marketable, the Exchange believes that 
it is logical and consistent with the purpose of Trade Now for these 
Orders to execute such locking or crossing orders when the Minimum 
Quantity condition can be satisfied because doing so will help clear 
the Order Book of locked and crossed orders.
    An example of a scenario in which the proposed amendment would 
apply is when an Order with Trade Now has a Minimum Quantity condition 
that a locking or crossing Order cannot initially satisfy. By way of 
illustration, assume that Participant A enters Order 1, which is a 
Displayed Order to sell 100 shares of XYZ at $10.00. Participant B then 
enters Order 2, which is a Non-Displayed Trade Now order to buy 200 
shares of XYZ at $10.00, with a Minimum Quantity requirement of 200 
shares. Order 2 will not automatically remove Order 1 due to the 
Minimum Quantity requirement. Participant C thereafter enters Order 3, 
which is a Non-Displayed Order to sell 100 shares of XYZ at $10.00. 
Under the existing Rule, Order 2 would not remove Order 3 using Trade 
Now due to the Minimum Quantity requirement of Order 2. Under the 
proposed amended Rule text, however, Trade Now would be activated for 
Order 2, and it would remove both Orders 1 and 3.
    Similarly, the amendment would apply when it is an incoming locking 
Order, or a resting locking Order, that has a Minimum Quantity 
condition which the Order with Trade Now cannot satisfy immediately. In 
this scenario, assume that Participant A enters Order 1, which is a 
Non-Displayed Order to sell 300 shares of XYZ at $10.00, with a Minimum 
Quantity requirement of 200 shares. Participant B then enters Order 2, 
which is a Non-Displayed Order with Trade Now to buy 100 shares of XYZ 
at $10.00. Under the existing Rule, Order 2 will lock Order 1 but not 
execute due to the Minimum Quantity requirement associated with Order 
1. If Participant C thereafter enters Order 3, which is another 
Displayed Order to buy 200 shares of XYZ at $10.00, then under the 
existing Rule, Order 3 will execute against Order 1 upon receipt, but 
Order 2 will not use Trade Now to trade against the remaining shares of 
Order 1. Under the proposal, however, once Order 3 is entered, it will 
execute against Order 1, satisfying the Minimum Quantity requirement of 
Order 1 and reducing the remaining size of Order 1 to 100 shares. At 
this point, Order 2 is capable of executing against the reduced size of 
Order 1. Order 2 will activate Trade Now, execute against Order 1, and 
clear the locked book.
    In addition to the above, the proposed amendments to Rule 4703(m), 
along with corresponding amendments to Rule 4702(b)(4) and (5), would 
discontinue the applicability of Trade Now to Midpoint Peg Post-Only 
Orders and Post-Only Orders.\8\ The Exchange proposes to eliminate the 
applicability of Trade Now to these two Order Types because Trade Now 
is incompatible with the designs of these Order Types. In other words, 
Midpoint Peg Post-Only Orders and Post-Only Orders are liquidity-adding 
Order Types, whereas Orders with Trade Now are designed to be liquidity 
taking Orders. Because of this incompatibility, the Exchange finds that 
market participants rarely, as a practical matter, select Trade Now for 
their Midpoint Peg Post-Only Orders or their Post Only Orders. Insofar 
as Trade Now serves no apparent utility as an Attribute of these Order 
Types, the Exchange proposes to eliminate its applicability thereto.\9\
---------------------------------------------------------------------------

    \8\ The existing rule text of Rule 4703(m) expressly applies 
Trade Now to Midpoint Peg Post-Only Orders, and implicitly applies 
Trade Now to Post-Only Orders by virtue of Trade Now's applicability 
to Displayed Orders (Post-Only Orders are Displayed).
    \9\ Another proposed conforming change would amend Rule 
4702(b)(15), which governs Midpoint Extended Life Orders Plus 
Continuous Book (``M-ELO+CB''), to address the fact that Trade Now 
would no longer be available as an Attribute of Midpoint Peg Post 
Only Orders, which in turn are one of the Order Types with which M-
ELO+CB may interact. The existing Rule text states that ``Non-
Displayed Midpoint Pegging and Midpoint Peg Post-Only Orders 
(collectively, ``Midpoint Orders'') resting on the Exchange's 
Continuous Book'' are eligible to execute against M-ELO+CB if, among 
other things, ``the Midpoint Order has the Midpoint Trade Now 
Attribute enabled.'' The Exchange proposes to amend this language to 
delete reference to Midpoint Peg Post Only Orders, such that the 
pertinent text will refer instead only to Midpoint Pegging Orders 
having such eligibility. Moreover, the Exchange proposes to correct 
an erroneous reference to ``Midpoint'' Trade Now, which is a 
functionality that the Exchange previously folded into Trade Now in 
a prior rule filing. See Securities Exchange Act Release No. 34-
92180 (June 15, 2021), 86 FR 33420 (June 24, 2021) (SR-NASDAQ-2021-
044).
---------------------------------------------------------------------------

    Lastly, the Exchange proposes to modify existing language in the 
Rule which states that only an incoming Displayed Order whose displayed 
price locks or crosses a resting Order with Trade Now at its non-
displayed price, or an incoming Midpoint Peg Post-Only Order, will 
trigger the Trade Now functionality. The proposed Rule amendment 
broadens this text to also provide for another Order (including a 
Displayed or a Non-Displayed Order) whose price locks or crosses a 
resting Order with Trade Now to trigger Trade Now where the resting 
Order with Trade Now has a Minimum Quantity

[[Page 21067]]

condition that the incoming Order (either itself, or in aggregate with 
other resting Orders) satisfies. The purpose of this new language is to 
account for the fact that a non-Displayed incoming Order, in addition 
to a Displayed incoming Order, can lock or cross a resting Order with 
Trade Now if it satisfies the Minimum Quantity condition of the resting 
Trade Now Order. The proposed amended Rule text also accounts for 
scenarios in which the Order with Trade Now does not possess a Minimum 
Quantity condition, but instead, the incoming locking/crossing Order or 
another resting locking/crossing Order possesses the Minimum Quantity 
Attribute, and the Minimum Quantity condition is reduced such that the 
Order with Trade Now becomes able to satisfy the condition. The 
proposed amendments would provide for Trade Now to activate in these 
scenarios as well.
    The Exchange will publish an Equity Trader Alert at least seven 
days prior to implementing the proposed amendments.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and further the objectives of Section 
6(b)(5) of the Act,\11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that it is consistent with the 
Act to amend the Exchange's Trade Now Rule to allow for Trade Now to 
activate, not only immediately upon receipt of a locking or crossing 
contra Displayed or Midpoint Peg Post-Only Order, but also at such time 
when the Order with Trade Now become marketable, if it was not 
marketable initially due to a Minimum Quantity Condition. The Exchange 
believes that the proposed behavior is consistent with the underlying 
intent of Trade Now, which is to help to clear the Exchange's Order 
Book of locking and crossing Orders. The Exchange perceives no logical 
basis to preclude activation of Trade Now when two Orders meet the 
conditions for activation, but for the fact that one of them is not 
marketable, and thus cannot interact with the other one immediately 
upon entry. Provided that the conditions for Trade Now to activate 
remain satisfied as of the time when the Orders become marketable, the 
Exchange believes that these Orders should execute automatically at 
that time. Moreover, the Exchange believes that the proposed behavior 
is consistent with the expectations of market participants for Trade 
Now functionality.
    In addition to the above, it is also consistent with the Act to 
amend Rule 4703(m), along with Rule 4702(b)(4) and (5), to discontinue 
the applicability of Trade Now to Midpoint Peg Post-Only Orders and 
Post-Only Orders. As noted above, the Exchange proposes to eliminate 
the applicability of Trade Now to these two Order Types because Trade 
Now, which classifies an Order as a liquidity taker, is incompatible 
with the designs of these Order Types as liquidity maker Orders. 
Insofar as Trade Now serves no apparent utility as an Attribute of 
these Order Types, it is reasonable and in the interests of the markets 
and investors to eliminate its applicability thereto.
    Lastly, the Exchange believes it is consistent with the Act to 
modify existing language in the Rule which states that only an incoming 
Displayed Order whose displayed price locks or crosses a resting Order 
with Trade Now at its non-displayed price, or an incoming Midpoint Peg 
Post-Only Order, will trigger the Trade Now functionality. As stated 
above, the proposed Rule amendment broadens this text to also provide 
for another Order (including a Displayed or a Non-Displayed Order) 
whose price locks or crosses a resting Order with Trade Now to trigger 
Trade Now where the resting Order with Trade Now has a Minimum Quantity 
condition that the incoming Order satisfies. This new language would 
account for the fact that a non-Displayed incoming Order, in addition 
to a Displayed incoming Order, can lock or cross a resting Order with 
Trade Now if it satisfies the Minimum Quantity condition. The proposed 
amended Rule text also accounts for scenarios in which the Order with 
Trade Now does not possess a Minimum Quantity condition, but instead, 
the incoming locking/crossing Order or another resting locking/crossing 
Order possesses the Minimum Quantity Attribute, and the Minimum 
Quantity condition is reduced such that the Order with Trade Now 
becomes able to satisfy the condition. The proposed amendments would 
provide for Trade Now to activate in these scenarios as well. Again, no 
purpose is served by excluding these scenarios from triggering Trade 
Now. To the contrary, including them would further the purpose of Trade 
Now, which is to aid in the clearing the Exchange's Order Book of 
locked and crossing Orders.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Although the proposal will 
broaden the applicability of Trade Now, the Exchange neither intends 
nor perceives that this rule change will have any significant impact on 
competition other than to make the Exchange's Trade Now Attribute more 
useful for participants, and thus the Exchange a more attractive venue 
in which to trade. Even as amended, Trade Now will remain an optional 
functionality that the Exchange offers at no charge, and which may be 
used equally by similarly-situated participants.

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)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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 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.
---------------------------------------------------------------------------

    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.

[[Page 21068]]

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-014 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-2024-014. 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 (https://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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-NASDAQ-2024-014, and 
should be submitted on or before April 16, 2024.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06328 Filed 3-25-24; 8:45 am]
BILLING CODE 8011-01-P