[Federal Register Volume 89, Number 91 (Thursday, May 9, 2024)]
[Notices]
[Pages 39674-39677]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10080]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100059; File No. SR-BX-2024-013]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the Trade 
Now Order Attribute at Equity 4, Rule 4702 and Make Conforming Changes 
to Rule 4703

May 3, 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 April 26, 2024, Nasdaq BX, Inc. (``BX'' 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.
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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 amend the Trade Now Order Attribute, at 
Equity 4, Rule 4702,\3\ as well as to make conforming changes to Rule 
4703, as described further below.
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    \3\ References herein to BX Rules in the 4000 Series shall mean 
Rules in BX Equity 4.
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    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(l), which governs the 
Trade Now Order Attribute.\4\ Under the Exchange's rules, as amended by 
SR-BX-2022-015,\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 to 
execute against a

[[Page 39675]]

locking or crossing Orders 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 an incoming Displayed 
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 against a locking or crossing Order(s) as a 
liquidity taker automatically, when such Orders become marketable.'' 
These proposed amendments serve several purposes.
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    \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. 34-95695 (September 
7, 2022); 87 FR 56122 (September 13, 2022) (SR-BX-2022-015).
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    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, 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\
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    \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.
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    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 this 
Order 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(l), 
along with corresponding amendments to Rule 4702(b)(4)(C), would 
discontinue the applicability of Trade Now to Post-Only Orders.\8\ The 
Exchange proposes to eliminate the applicability of Trade Now to this 
Order Type because Trade Now is incompatible with the designs of this 
Order Type. In other words, Post-Only Orders are liquidity-adding Order 
Type, 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 
Post-Only Orders. Insofar as Trade Now serves no apparent utility as an 
Attribute of this Order Type, the Exchange proposes to eliminate its 
applicability thereto.
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    \8\ The existing rule text of Rule 4703(l) expressly applies 
Trade Now to Post-Only Orders by virtue of Trade Now's applicability 
to Displayed Orders (Post-Only Orders are Displayed).
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    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 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 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

[[Page 39676]]

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,\9\ in general, and further the objectives of Section 
6(b)(5) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    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 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(l), along with Rule 4702(b)(4)(C), to discontinue the 
applicability of Trade Now to Post-Only Orders. As noted above, the 
Exchange proposes to eliminate the applicability of Trade Now to this 
Order Type because Trade Now, which classifies an Order as a liquidity 
taker, is incompatible with the designs of this Order Type as liquidity 
maker Orders. Insofar as Trade Now serves no apparent utility as an 
Attribute of this Order Type, 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 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 \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 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.
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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. 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-BX-2024-013 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-BX-2024-013. This file

[[Page 39677]]

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-BX-2024-013, and should 
be submitted on or before May 30, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-10080 Filed 5-8-24; 8:45 am]
BILLING CODE 8011-01-P