[Federal Register Volume 91, Number 132 (Monday, July 13, 2026)]
[Notices]
[Pages 42990-42996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-14014]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105860; File No. SR-NASDAQ-2026-057]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 4120 Regarding Regulatory Halts for Corporate Actions and
Issuer-Related Events
July 8, 2026.
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 June 29, 2026, 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 amend Rule 4120 (Limit Up-Limit Down Plan
and Trading Halts) to set forth specific requirements for halting and
resuming trading in a security that is subject to certain corporate
actions, as described below. The text of the proposed rule change is
available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, and at the
principal office of the Exchange.
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
In conjunction with plans for operating 23 hours a day, 5 days a
week (``23/5 Trading''),\3\ the Exchange proposes to amend Rule 4120 to
set forth specific requirements for halting trading in a security for
which Nasdaq is the primary listing market that is subject to certain
issuer-related corporate actions and for resuming trading in that
security using the Nasdaq Halt Cross.\4\ The Exchange believes that the
proposed rules will expand on the framework already in place with
respect to the Exchange's authority to declare a mandatory regulatory
halt in advance of a reverse stock split, thereby providing greater
transparency and clarity with respect to the situations in which
trading certain securities subject to issuer-related corporate actions
will be halted and the process through which that halt will be
implemented and terminated.
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\3\ See Securities Exchange Act Release No. 105199 (April 10,
2026), 91 FR 20222 (April 15, 2026) (SR-NASDAQ-2025-109) (``Nasdaq
23-5 Approval Order'').
\4\ The ``Nasdaq Halt Cross'' is the process for determining the
price at which Eligible Interest shall be executed at the open of
trading for a halted security and for executing that Eligible
Interest. See Rule 4753(a)(4). ``Eligible Interest'' shall mean any
quotation or any order that has been entered into the system and
designated with a time-in-force that would allow the order to be in
force at the time of the Halt Cross. See Nasdaq Rule 4753(a)(5).
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The Exchange understands that the other Primary Listing Exchanges
plan to implement substantially identical versions of this rule to
ensure consistent treatment of corporate actions across the market.
Background
In 2023, the Commission approved the Exchange's filing establishing
the Exchange's authority to declare a mandatory regulatory halt in a
security for which the Exchange is the Primary Listing Market when that
security is subject to a reverse stock split.\5\ Specifically, the
Exchange proposed halting such a security before the end of the Post-
Market Hours on the day immediately before the effective date of a
reverse stock split, with trading to resume with a Nasdaq Halt Cross at
9:00 a.m. Eastern Time (``ET'')--instead of 4:00 a.m. ET--on the next
trading day.
[[Page 42991]]
The Exchange noted that because it processes reverse stock splits
overnight, having the security reopen for trading at 4:00 a.m. raised
the ``potential for errors resulting in a material effect on the market
resulting from market participants' processing of the reverse stock
split, including incorrect adjustment or entry of orders.'' \6\ The
Exchange explained that this concern could be rectified by imposing a
trading halt, ``which would prohibit pre-market trading immediately
after a reverse stock split and open trading in such securities'' at
9:00 a.m. instead of 4:00 a.m.\7\ The Exchange further noted that
imposing such a trading halt and deferring the opening of the security
until 9:00 a.m. would ``allow for Nasdaq and market participants to
better detect any errors or problems with orders for the security
resulting from the reverse stock split before trading in the security
begins and thereby avoid any material effect on the market.'' \8\ In
approving the proposal, the Commission noted that the proposal was
``designed to promote fair and orderly trading on the Exchange by
reducing the potential for order entry or other system-related errors
associated with a reverse stock split in a security for which Nasdaq is
the Primary Listing Market.'' \9\
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\5\ See Securities Exchange Act Release No. 98878 (Nov. 7,
2023), 88 FR 78081 (Nov. 14, 2023) (SR-NASDAQ-2023-036) (Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of
Proposed Change, as Modified by Amendment No. 1, Relating to Nasdaq
Rules 4120 and 4753) (``Reverse Stock Split Approval Order'').
\6\ See Reverse Stock Split Approval Order, supra note 5, 88 FR
at 78081.
\7\ Id. at 78082.
\8\ Id. at 78082.
\9\ Id. at 78084.
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With the launch of 23/5 Trading later this year, the concerns that
led the Exchange to adopt a regulatory halt framework for reverse stock
splits will likewise arise with respect to a broader set of corporate
actions. Under the current market structure, the Exchange processes
these corporate action-related changes and updates for listed
securities during overnight hours, when the Exchange is closed to
trading. Other market participants, including broker-dealers, likewise
use that overnight period to process corporate action-related
information and adjust quotes, orders, and related instructions
accordingly.
Under 23/5 Trading, however, Nasdaq's non-trading window will be
reduced to a one-hour pause.\10\ Consequently, Nasdaq will no longer
have a substantial non-trading window during which it can process such
corporate actions without potentially impacting ongoing trading. These
corporate actions require coordinated updates across Exchange and
market participant systems--including adjustments to orders, quotes,
and related instructions--to ensure orderly trading and accurate
pricing and execution in the affected security. With only a one-hour
pause between trading days, neither the Exchange nor other market
participants would have sufficient time to process and incorporate
corporate action-related information--such as adjustments to systems,
orders, quotes, and related instructions--without the risk that trading
could occur in the affected security based on incomplete or
inconsistent information. In short, the continued trading of securities
undergoing such corporate actions could potentially result in price
dislocations, investor confusion, erroneous executions, and general
operational risk.
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\10\ The Exchange's 23/5 Trading operations will include a one-
hour pause between 8:00 p.m. and 9:00 p.m. Eastern Time, as
discussed in the Nasdaq 23/5 Approval Order. That pause, however, is
primarily intended to accommodate systems and other maintenance
activities, rather than to provide a window for the coordinated
processing of the more complex issuer-related corporate actions as
proposed herein. See Nasdaq 23/5 Approval Order, supra note 3.
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To address these concerns, the Exchange proposes to build on the
framework established under Rule 4120(a)(15) for reverse stock splits
by extending that rule's mandatory regulatory halt requirement to
additional corporate actions that, much like reverse stock splits,
require a clearly defined and transparent pause in trading to permit
coordinated processing. As proposed, under 23/5 Trading, if a security
is affected by any of the corporate actions enumerated in the proposal,
the Exchange would implement a mandatory regulatory halt \11\ in that
security before the start of the Night Session at 9:00 p.m. Eastern
Time (``ET''), and trading would resume with a Nasdaq Halt Cross at
8:00 a.m. ET.\12\ The Exchange believes these changes would provide
important operational safeguards by ensuring that both the Exchange and
market participants have adequate time to process such corporate
actions in a nearly continuous trading environment, thereby preserving
a protection that has historically been implicit in a market structure
with limited trading hours.
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\11\ Notification of the declaration and termination of the
proposed regulatory halt would be provided in accordance with
Exchange Rule 4120.
\12\ As described below, the Exchange also proposes a conforming
change to move the time for the Nasdaq Halt Cross that reopens
trading after a reverse stock split regulatory halt to 8:00 a.m. ET,
from the current time of 9:00 a.m. ET.
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Proposed Rule Change
Implicit in Rule 4120(a)(15) is the recognition that certain
corporate actions--such as reverse stock splits--require a clearly
defined and transparent pause in trading to permit their coordinated
processing and thereby avoid the risks associated with concurrent
trading in the affected security while that processing is underway. The
same principle applies to the categories of corporate actions addressed
in this proposal, particularly in the context of nearly continuous
trading.
In the context of 23/5 Trading, the Exchange has determined--based
on discussions both internal and with industry participants, including
the other Primary Listing Markets--that, similar to reverse stock
splits, certain other corporate actions require a clearly defined and
transparent pause in trading to facilitate their coordinated processing
by the Exchange and other market participants before orderly trading
may resume in the affected security.
Specifically, the Exchange believes that the following issuer-
related corporate actions are analogous to reverse stock splits with
respect to processing requirements and thus warrant analogous treatment
with respect to their categorization and regulatory response: (1)
changes in trading symbol; (2) changes in CUSIP number; (3) stock
dividends equal to at least 25% of the Nasdaq Official Closing Price;
\13\ (4) stock splits (including forward and reverse stock splits); (5)
De-SPAC transactions; (6) spin-off transactions; (7) security-type
changes; (8) mergers or similar mandatory exchanges of shares; and (9)
any other corporate action or issuer-related event not enumerated
above, for which the Exchange determines that a regulatory halt is
appropriate for the maintenance of fair and orderly markets, the
protection of investors, or otherwise in the public interest, as
described below. Like reverse stock splits, these corporate actions all
involve non-discretionary changes to core security characteristics that
require synchronized updates across Exchange and market participant
systems.
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\13\ The Nasdaq Closing Cross price is the Nasdaq Official
Closing Price for NMS stocks that participate in the Nasdaq Closing
Cross.
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Accordingly, the Exchange proposes to amend Rule 4120(a)(15) and
make certain conforming changes to incorporate such corporate actions
into the regulatory framework established for corporate actions
consisting of reverse stock splits as follows. First, the Exchange
proposes to amend Rule 4120(a)(15) to extend the current reverse
[[Page 42992]]
stock split regulatory halt framework \14\ to the categories of other
corporate actions discussed above that, in addition to reverse stock
splits, would be subject to the mandatory hat regulatory requirements
of that rule.
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\14\ To extend the framework under Rule 4120(a)(15) to the
categories of corporate actions described in this proposal, the
Exchange further proposes to amend Rule 4120(a) to delete, from
subparagraph (15) of the rule, the words ``before the end of the
Post-Market Hours on the day immediately before the market effective
date of a reverse stock split'' and substitute therefor the words
``that is the subject of an issuer corporate action or other issuer-
related event referenced in subparagraph (A) hereof after the end of
Post-Market Hours and before 9 p.m. ET on the day immediately
preceding the market effective date of such issuer corporate action
or issuer-related event. A security subject to an issuer corporate
action or issuer-related event Regulatory Halt pursuant to Rule
4120(a)(15) will resume trading pursuant to the Nasdaq Cross Halt
mechanism under Rule 4753 at 8:00 a.m. ET on the market effective
date of such corporate action or issuer-related event.'' The
Exchange further proposes to provide, in a new subparagraph (A) to
Rule 4120(a)(15) that ``[f]or purposes of this rule, the following
shall be deemed corporate actions or issuer-related events subject
to the mandatory Regulatory Halt provisions of Rule 4120(a)(15).''
The Exchange believes that the proposed changes are appropriate
because they would bring the proposed categories of corporate
actions within the established regulatory halt framework governing
reverse stock splits and enhance clarity and transparency with
respect to both the implementation of the regulatory halt and the
resumption of trading in the affected security. As discussed below,
the proposed changes with respect to the timing for implementation
of the regulatory halt as well as its termination are conforming in
nature.
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The Exchange then proposes to amend Rule 4120(a)(15) to enumerate,
in a new subparagraph (A) thereof, the nine categories of corporate
actions discussed above that would be subject to a mandatory regulatory
halt under Rule 4120(a)(15). As proposed, the nine categories of
enumerated corporate actions subject to a mandatory regulatory halt
would consist of the following corporate actions: (1) trading symbol
changes; \15\ (2) changes in CUSIP; \16\ (3) dividends equal to at
least 25% of the Nasdaq Official Closing Price (``NOCP''); \17\ (4)
forward (and reverse) stock splits; \18\ (5) De-SPAC transactions; \19\
(6) spin-off transactions; \20\ (7) security-type changes; \21\ (8)
mergers/mandatory exchanges; \22\ and (9) other corporate actions or
issuer-related events not specifically enumerated in (1)-(8) above as
more particularly described below.\23\
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\15\ As proposed, Rule 4120(a)(15)(A)(1) would define changes to
any ``Trading Symbol'' as ``a change in the issuer's trading
symbol.'' See proposed Rule 4120(a)(15)(A)(1).
\16\ As proposed, Rule 4120(a)(15)(A)(2) would define changes in
``CUSIP'' as ``[a] change in the issuer's Committee on Uniform
Securities Identification Procedures (``CUSIP'').'' See proposed
Rule 4120(a)(15)(A)(2).
\17\ As proposed, Rule 4120(a)(15)(A)(3) would define
``Dividend'' transactions as ``[s]tock dividends, whether payable in
cash, stock, or another security of the issuer (or a subsidiary or
other affiliate of the issuer), or any combination thereof, other
than stock splits or similar adjustments described in paragraph (4),
where Nasdaq determines that such dividend has an aggregate value
per share that is equal to at least 25% of the Nasdaq Official
Closing Price (``NOCP'') of the affected security on the date
immediately preceding the ex-date of such dividend; provided,
however, that if no such NOCP is available, Nasdaq shall use the
most recent available NOCP for such shares (or other securities).''
See proposed Rule 4120(a)(15)(A)(3).
\18\ As proposed, Rule 4120(a)(15)(A)(4) would define ``Forward,
Reverse Stock Splits'' as ``[a]ny stock split or similar adjustment
that affects the number of outstanding shares of an issuer or
changes the relative equity ownership of holders of such shares,
including any forward or reverse stock split, subdivision,
reclassification, or combination of shares, or any similar
transaction that has the effect of adjusting the number of
outstanding shares or the relative equity ownership of holders,
whether effected pursuant to a fixed or variable exchange ratio or
otherwise, and whether occurring as a stand-alone action or in
conjunction with any other corporate action or issuer-related
event.'' See proposed Rule 4120(a)(15)(A)(4).
\19\ As proposed, Rule 4120(a)(15)(A)(5) would define a ``De-
SPAC'' transaction as ``[a]ny De-SPAC transaction, as that term is
defined in Item 1601(a) of Regulation S-K.'' See proposed Rule
4120(a)(15)(A)(5).
\20\ As proposed, Rule 4120(a)(15)(A)(6) would define a ``Spin-
off'' transaction as ``[a]ny transaction in which an issuer
distributes to its security holders, on a pro rata basis, (i) equity
securities of a subsidiary or other business that is separated into
a new or existing standalone issuer or (ii) any different class of
securities.'' See proposed Rule 4120(a)(15)(A)(6).
\21\ As proposed, Rule 4120(a)(15)(A)(7) would define a
``Security Type Change'' as ``[a]ny change in the form, type, class,
or designation of a listed security, including, without limitation,
(i) American Depositary Receipts or American Depositary Shares
(``ADR''/``ADS'') to ordinary shares (and ordinary shares to ADR/
ADS); (ii) conversions between ordinary shares and common stock (in
either direction); and (iii) similar transactions.'' See proposed
Rule 4120(a)(15)(A)(7).
\22\ As proposed, Rule 4120(a)(15)(A)(8) would define a
``Merger/Mandatory Exchange'' as ``[a]ny merger, consolidation,
statutory share exchange, or similar business combination or
corporate action that results in the affected security being
mandatorily exchanged, converted, redeemed, or cancelled for cash,
securities, or other consideration (including an exchange into
securities of a successor issuer); provided, however, that this
paragraph (8) does not include transactions that solely effect a
change in the issuer's (company) name without a mandatory exchange
of the affected security.'' See proposed Rule 4120(a)(15)(A)(8).
\23\ As proposed, Rule 4120(a)(15)(A)(9) would define any
``Other Corporate Action or Issuer-Related Event'' as ``[a]ny other
corporate action or issuer-related event not enumerated in (1)-(8)
above for which the Exchange determines, based on the totality of
the circumstances and any information available to it, including
without limitation information obtained from the issuer, that a
Regulatory Halt is necessary or appropriate for the maintenance of
fair and orderly markets, the protection of investors, or otherwise
in the public interest.'' See proposed Rule 4120(a)(15)(A)(9).
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Specifically, proposed Rule 4120(a)(15)(A)(9) would require the
Exchange to declare a regulatory halt for any other corporate action or
issuer-related event not enumerated in (1)-(8) above for which the
Exchange determines, based on the totality of the circumstances and any
information available to it, including, without limitation, information
obtained from the issuer, that a regulatory halt is necessary or
appropriate for the maintenance of fair and orderly markets, the
protection of investors, or otherwise in the public interest.
This residual provision is designed to capture issuer-related
corporate actions that, while not enumerated in Rule 4120(a)(15)(A)(1)-
(8), raise operational or market integrity concerns comparable to those
actions. Once the Exchange determines that such a corporate action
warrants a regulatory halt based on its application of the standards in
Rule 4120(a)(15)(A)(9),\24\ implementation of the regulatory halt would
be required. Accordingly, the provision is intended to promote
consistent regulatory treatment across comparable corporate actions and
to preserve transparency and uniformity in the application of the
proposed framework in a 23/5 Trading environment.
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\24\ Such determination would be made by the Exchange's senior
trading and regulatory officials in advance of the corporate action
effective date.
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Timing of Corporate Action Regulatory Halts
The Exchange proposes that, under 23/5 Trading, the mandatory
regulatory halts described above in proposed Rule 4120(a)(15) would be
implemented after the conclusion of the Post-Market Hours session and
before the start of the Night Session at 9:00 p.m. ET.\25\ This timing
differs from the Exchange's current process for reverse stock split
regulatory halts, pursuant to which the Exchange implements the
mandatory regulatory halt at 7:50 p.m. ET, before the end of the Post-
Market Hours session, on the day immediately preceding the market
effective date of the reverse stock split. That approach has been
feasible in the reverse stock split context. This proposal, however,
would extend the mandatory regulatory halt framework beyond reverse
stock splits to a broader set of corporate actions that, although
differing in form, share the need for coordinated systems and
reference-data updates before trading may resume in an orderly manner.
Because some of those actions may involve entirely new symbols or
CUSIPs that would not yet exist at 7:50 p.m. ET on the prior trading
day, the Exchange does not believe that the current reverse stock split
timing can practicably be applied across the full set of covered
corporate actions. The Exchange therefore believes that it
[[Page 42993]]
is reasonable, in the context of 23/5 Trading, to adopt a single,
uniform implementation time for all halts under proposed Rule
4120(a)(15)--after the end of Post-Market Hours and before the
beginning of the Night Session at 9:00 p.m. ET--which would facilitate
consistent treatment of covered corporate actions and enable the halts
to be implemented through an automated process.\26\ This timing would
apply to each of the corporate actions addressed in this filing, as
well as to the Exchange's existing reverse stock split regulatory halt.
The proposed change to the timing for the implementation of the reverse
stock split regulatory halt is therefore conforming in nature, as it is
intended only to align that halt with the trading session structure
under 23/5 Trading.
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\25\ See Exchange proposed Rule 4120(a)(15).
\26\ See Exchange proposed Rule 4120(a)(15). Shifting the
implementation time for such regulatory halts from 7:50 p.m. to
before 9:00 p.m. would not have a material effect on market
participants. The Exchange notes that market participants, including
alternative trading systems (``ATSs''), would have advance notice of
the types of issuer corporate actions addressed in this proposal
through Nasdaq's existing issuer notification, market notice, and
public dissemination mechanisms. Under Nasdaq's existing listing and
related rules and procedures, listed issuers are required in various
circumstances to provide Nasdaq advance notice of corporate actions
and to publicly disclose such events before they become effective.
In addition, Nasdaq's established corporate action processing and
market notification procedures generally result in the Exchange
receiving notice of, and disseminating information concerning, other
covered corporate actions sufficiently in advance of their
effectiveness to support the orderly implementation of the proposed
halt process. Accordingly, the Exchange believes that ATSs and other
market participants would have adequate advance awareness of the
types of corporate actions addressed by this proposal to make
informed business decisions with respect to the affected securities,
and that proposed Rule 4120(a)(15) thus provides a transparent and
appropriate mechanism for addressing such corporate actions in a 23/
5 Trading environment.
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Resumption of Trading After Corporate Action-Related Regulatory Halts
The Exchange proposes that under 23/5 Trading, trading in a
security halted pursuant to proposed Rule 4120(a)(15) would resume at
8:00 a.m. ET \27\ with a Nasdaq Halt Cross,\28\ in advance of the
Nasdaq Opening Cross at 9:30 a.m. ET.\29\ This is similar to the
Exchange's current process with respect to reverse stock split
regulatory halts, except that the proposal would move the resumption
time from 9:00 a.m. ET to 8:00 a.m. ET.
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\27\ See proposed Exchange Rule 4120(a)(15). See also Exchange
Rule 4120(c)(7) (providing that, for Nasdaq-listed securities that
are the subject of a trading halt or pause initiated pursuant to
Rule 4120(a)(1), (4), (5), (6), (7), (11), (14), or (15), the Nasdaq
Halt Cross shall occur at the time specified by Nasdaq pursuant to
Rule 4120, and that, prior to terminating the halt in any such
security, there will be a five-minute ``Initial Display Only
Period'' during which market participants may enter quotations and
orders in that security into Nasdaq systems). Because the proposal
would incorporate the proposed categories of corporate actions into
Exchange Rule 4120(a)(15), the Exchange is not proposing to amend
this provision.
\28\ See Exchange Rule 4753(b). The Exchange is proposing to
amend Rule 4120(a)(15) to incorporate the proposed categories of
corporate actions. Rule 4120(a)(15) is already included among the
enumerated provisions subject to the Nasdaq Halt Cross under Rule
4753(b). Accordingly, the Exchange is not proposing to amend Rule
4753(b). As a result, any regulatory halt implemented pursuant to
proposed Rule 4120(a)(15), as amended, would resume trading through
the Nasdaq Halt Cross.
\29\ See proposed Exchange Rule 4120(a)(15).
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In supporting its reverse stock split-related proposal, the
Exchange explained that reopening the security at 9:00 a.m. ET, which
is after the end of pre-market trading, ``is appropriate . . . because
it gives the Exchange an opportunity to review its order book and root
out any orders in a security that has undergone a reverse stock split,
that have not correctly adjusted to the security's new stock price.''
\30\
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\30\ See Reverse Stock Split Approval Order, supra note 5, 88 FR
at 78083.
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Since the reverse stock split regulatory halt was introduced in
2023, the Exchange has determined that it would be preferable to reopen
from a reverse stock split halt at 8:00 a.m. ET instead of 9:00 a.m.
ET. That alteration would provide for an additional hour of liquidity
formation and price discovery before the 9:30 a.m. ET Nasdaq Opening
Cross, while still being consistent with the rationales cited above for
reopening trading at a ``unique'' time. Specifically, the Exchange
believes that resuming trading in the affected securities at 8:00 a.m.
ET is appropriate because the proposed pause in trading provides a
sufficient and transparent interval for the Exchange and market
participants to complete the processing of such corporate actions and
the earlier resumption of trading would provide the affected securities
with additional price discovery and liquidity formation opportunities
before participating in the Nasdaq Opening Cross at 9:30 a.m. ET.
Consistent with that rationale, the Exchange proposes that the
securities subject to the mandatory regulatory halts addressed in this
filing, including reverse stock splits, would reopen at 8:00 a.m.
ET.\31\ To effectuate this change, the Exchange proposes to amend the
reopening time for securities subject to a reverse stock split-related
regulatory halt to 8:00 a.m. ET (from 9:00 a.m. ET) and to apply that
same reopening time (8:00 a.m. ET) to the additional corporate action-
related regulatory halts covered under proposed Rule 4120(a)(15). This
proposed change is based on the Exchange's experience with reverse
stock splits and is designed to promote uniformity and transparency
with respect to the resumption of trading in securities subject to a
corporate action-related regulatory halt under proposed Rule
4120(a)(15).
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\31\ See proposed Rule 4120(a)(15).
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In sum, the corporate actions addressed in this proposal raise
operational and market integrity concerns in a 23/5 Trading environment
that mirror the concerns addressed by the Commission in approving the
Exchange's Reverse Stock Split Proposal. Under 23/5 Trading, Nasdaq
will no longer have a substantial non-trading window during which it
and other market participants can process these corporate actions
before trading resumes. With only one hour between trading days,
neither the Exchange nor other market participants would have
sufficient time to process and incorporate corporate action-related
information, resulting in a risk of price dislocations, investor
confusion, erroneous executions, and broader operational issues. The
Exchange believes that extending its reverse stock split regulatory
framework to the additional corporate actions described herein would
appropriately preserve, in a 23/5 Trading environment, the safeguard
implicit in the current market structure--specifically, the overnight
pause in trading that allows for coordinated processing and related
systems and reference-data updates. Accordingly, the proposal would
promote fair and orderly trading, mitigate operational risk, and help
ensure that trading resumes only after those updates have been
completed.
Implementation
The Exchange understands that the other Primary Listing Exchanges
plan to implement substantially identical versions of this rule to
ensure consistent treatment of corporate actions across the market. The
Exchange proposes that the changes in this proposal and in the other
Primary Listing Exchanges' similar filings would become operative at
the commencement of 23/5 Trading.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\32\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\33\ 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
[[Page 42994]]
system, and, in general, to protect investors and the public interest.
The Exchange believes that the proposed rules will provide greater
transparency and clarity with respect to the situations in which
trading will be halted due to certain corporate actions and the process
through which that halt will be implemented and terminated, as
discussed below.
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\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that extending the reverse stock split
regulatory halt framework to the additional, analogous corporate
actions addressed in this proposal would promote free and open markets,
protect investors, and serve the public interest by helping to ensure
fair and orderly markets. Specifically, the proposal would preserve and
apply an established, transparent framework for pausing and resuming
trading in securities subject to reverse stock splits to certain
corporate actions with analogous processing requirements, so that
trading in an affected security does not occur before the corporate
action has been processed and the related systems and reference-data
updates have been completed and applied across the market.
With respect to the specific categories of corporate actions
addressed in this proposal, the Exchange believes that it is reasonable
and appropriate to extend the regulatory halt framework applicable to
reverse stock splits to certain categories of corporate actions with
analogous processing requirements, as more specifically described
above. Like reverse stock splits, these corporate actions all involve
non-discretionary changes to core security characteristics that require
synchronized updates across Exchange and market participant systems.
Under the current market structure, an overnight pause in trading
has historically provided a defined non-trading window during which the
Exchange and other market participants have sufficient time to process
such corporate actions in an orderly and coordinated manner prior to
the resumption of trading. But in the 23/5 Trading environment, with
only one hour of non-trading time between trading days, there is a
substantial chance that trading in an impacted security could occur
based on incomplete, inconsistent, or partially updated information,
giving rise to pricing anomalies, investor confusion, erroneous
executions, and heightened operational risk. The Exchange believes the
proposed approach promotes fair and orderly markets by helping to
ensure that trading resumes only once systems and reference data
concerning these corporate actions have been fully and consistently
updated across the marketplace.
With respect to the mandatory regulatory halts specifically
enumerated in proposed Rule 4120(a)(15)(A)(1)-(8), if the corporate
action falls within the categories enumerated in the rule, Nasdaq will
not have discretion about whether to declare a trading halt in the
affected security.
In addition, proposed Rule 4120(a)(15)(A)(9) is intended to operate
as a residual provision covering issuer-related corporate actions not
enumerated in Rule 4120(a)(15)(A)(1)-(8) that nonetheless raise
operational or market-integrity concerns comparable to those presented
by the enumerated actions. Under that provision, when the Exchange
determines, based on the totality of the circumstances and the
information available to it, including information obtained from the
issuer, that it is necessary or appropriate for the maintenance of fair
and orderly markets, the protection of investors, or otherwise in the
public interest, it would be required to declare a regulatory halt in
that security. Once the Exchange makes that determination, the
regulatory halt would be mandatory, thereby avoiding ad hoc treatment
once the applicable standard has been met. In that respect, proposed
Rule 4120(a)(15)(A)(9) serves as a narrow residual mechanism designed
to promote consistent regulatory treatment across comparable corporate
actions and to preserve transparency and uniformity in the application
of proposed Rule 4120(a)(15) in a 23/5 Trading environment by requiring
the Exchange to declare a regulatory halt in such cases. The Exchange
therefore believes that it is reasonable and appropriate to extend its
authority to declare a regulatory halt in this instance. The Exchange
notes that its rules provide the Exchange with authority to implement a
regulatory halt.\34\
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\34\ See, e.g., Exchange Rule 4120(a)(10)(A) (providing that
``[t]he Exchange may pause trading during the Night Session at such
other times [other than as provided in Rule 4120(a)(10)] as the
Exchange in the exercise of its regulatory functions may determine
is appropriate''); Exchange Rule 4120(a)(5)(C) (providing, in part,
that ``Nasdaq may halt trading in a security listed on Nasdaq when
Nasdaq requests from the issuer information relating to: . . . any
other information necessary to protect investors and the public
interest''); and Exchange Rule 4120(a)(6) (providing, in part, that
Nasdaq ``may halt trading in a security listed on Nasdaq when . . .
extraordinary market activity in the security is occurring . . .'').
See also Securities Exchange Act Release No. 95069 (June 8, 2022),
87 FR 36018 (June 14, 2022) (SR-NASDAQ-2022-017) (approving, among
other things, the Exchange's authority to implement a regulatory
halt when necessary to maintain a fair and orderly market in the
face of national, regional, or localized disruptions); future
Exchange Rule 4120(b)(1).
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In all cases under proposed Rule 4120(a)(15), a mandatory
regulatory halt in the affected security would be implemented after the
conclusion of the Post-Market Hours session and before the start of the
Night Session at 9:00 p.m. ET on the date immediately preceding the
market effective date of the corporate action.
The Exchange also believes it is reasonable and appropriate to use
the Nasdaq Halt Cross process under Rule 4753 to reopen trading in a
security that is subject to a regulatory halt pursuant to this proposal
because it is consistent with the process that Nasdaq currently uses to
reopen a security after a reverse stock split regulatory halt, and the
operational complexity and processing demands associated with such
corporate actions are comparable to those involved regarding reverse
stock splits. Furthermore, using the Nasdaq Halt Cross process to
reopen trading after regulatory halts addressed in this proposal is
consistent with the process that is typically used by Nasdaq when
reopening a security that has been halted under Rule 4120. Applying a
uniform, previously approved framework enhances transparency and
predictability for issuers, investors, and market participants.
The Exchange believes that resuming trading in the corporate
action-impacted securities addressed in this proposal at 8:00 a.m. ET
would promote fair and orderly markets, protect investors, and serve
the public interest by providing the Exchange and market participants
sufficient time to process the relevant corporate actions correctly.
The Exchange further believes that resuming trading in the affected
securities through a Nasdaq Halt Cross at 8:00 a.m. ET, rather than at
9:30 a.m. ET through a Nasdaq Opening Cross, would provide a more
focused reopening window and a better opportunity to identify and
address potential order-entry or processing issues before the broader
market opening, when thousands of other securities are undergoing their
opening process.
The Exchange's proposal to make conforming changes to its existing
reverse stock split regulatory halt structure to harmonize the halt
time and reopening time with the times proposed in this filing is
reasonable and would promote transparency and predictability for
issuers, investors, and market participants. As described above, the
current practice of implementing a mandatory regulatory halt for a
security undergoing a reverse stock split at 7:50 p.m. ET has been
feasible in the reverse stock split context, but this proposal would
extend the mandatory regulatory
[[Page 42995]]
halt framework beyond reverse stock splits to a broader set of
corporate actions that, although differing in form, share the need for
coordinated systems and reference-data updates before trading may
resume in an orderly manner. Because some of those actions may involve
entirely new symbols or CUSIPs that would not yet exist at 7:50 p.m. ET
on the prior trading day, the Exchange does not believe that the
current reverse stock split timing can practicably be applied across
the full set of covered corporate actions. The Exchange therefore
believes that it is reasonable, in the context of 23/5 Trading, to
adopt a single, uniform implementation time for all halts under
proposed Rule 4120(a)(15)--after the end of Post-Market Hours and
before the start of the Night Session at 9:00 p.m. ET--which would
facilitate consistent treatment of comparable corporate actions,
enhance transparency and predictability for issuers, investors, and
market participants, and support the orderly and automated
implementation of such halts.
The Exchange also believes that the proposal is consistent with
Section 6(b)(5) of the Act because the Exchange's existing issuer
notification, market notice, and public dissemination mechanisms
generally provide market participants with advance awareness of the
types of corporate actions addressed herein, thereby supporting the
orderly implementation of the proposed halt process and helping to
protect investors and the public interest.\35\
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\35\ See supra note 26 and accompanying text.
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Similarly, the Exchange believes its proposal to move the reopening
time for a symbol after a reverse stock split regulatory halt to 8:00
a.m. ET from 9:00 a.m. ET would remove impediments to and perfect the
mechanism of a free and open market and a national market system by
creating uniformity in the reopening times for securities after a
corporate action regulatory halt. As discussed above, the Exchange
believes that the proposed duration of the regulatory halt is
appropriate to permit full processing of the proposed corporate actions
and resuming trading in the security at an earlier time, as proposed,
would provide the security with opportunities for enhancing price
discovery and liquidity before participating in the Nasdaq Opening
Cross at 9:30 a.m. ET.
The Exchange notes that these timing harmonization changes are
purely conforming and that, by aligning the reverse stock split
provisions with the corporate action-related halts described in this
filing, the proposal promotes a consistent and harmonized rule
structure, enhances transparency and predictability for issuers,
investors, and market participants, and reduces the potential for
confusion.
Overall, establishing mandatory trading halts for securities that
are subject to the corporate actions addressed in this filing and
resuming trading thereafter promotes fair and orderly markets and the
protection of investors, because it allows the Exchange to protect the
broader interests of the national market system and addresses potential
concerns that system errors may affect immediate trading in those
securities. The Exchange believes that with the advent of 23/5 Trading,
the proposed rules will help the Exchange reduce the potential for
errors that could have a material effect on the market as a result of
the challenge of processing such corporate actions with only a one-hour
non-trading window between trading days. As discussed above, in a 23/5
Trading environment, the Exchange will no longer have an overnight
trading pause during which it can process corporate actions of the type
addressed in this proposal. By extending the existing reverse stock
split regulatory halt framework to those categories of corporate
actions, the proposal is designed to preserve the safeguards currently
afforded by that overnight pause.
For these reasons, the Exchange believes that the proposed rule
change is designed to remove impediments to and perfect the mechanism
of a free and open market and a national market system by mitigating
operational and market integrity risks that would otherwise arise in a
nearly continuous trading environment. By helping to ensure that
trading resumes only after corporate action processing has been
completed in an orderly and coordinated manner, the proposed rule
change promotes just and equitable principles of trade and protects
investors and the public interest, consistent with Sections 6(b) and
6(b)(5) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposal will not impose a burden on
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed rule change
is designed to protect investors and facilitate a fair and orderly
market, which are both important purposes of the Act. To the extent
that there is any impact on intermarket competition, it is incidental
to these objectives.
Rather, the proposed changes will promote competition by ensuring
that trading in corporate action-affected securities resumes only when
the Exchange has processed corporate actions in a coordinated manner
across Exchange and market participants' systems, consistent with its
obligations as a primary listing market, thereby avoiding concurrent
trading and potential confusion with respect to the affected securities
while such corporate action processing is underway. In addition, the
Exchange believes that the proposal does not impose any burden on
competition because it applies equally to all issuers and market
participants. The proposal builds on an established, uniform, and
transparent framework governing the timing of trading halts and
resumptions in trading in connection with certain corporate actions and
is designed to address operational and market-integrity concerns,
rather than competitive considerations. In substance, the proposal
preserves an operational safeguard implicit in the current market
structure and adapts that safeguard to a nearly continuous trading
environment by extending the well-established reverse stock split
framework to analogous corporate actions. By helping to ensure that
trading resumes only after systems and reference data have been updated
in a coordinated manner, the proposal promotes fair and orderly markets
and enhances, rather than burdens, competition.
The Exchange does not believe that the proposed rule change imposes
a burden on intra-market competition because the provisions apply to
all market participants and issuers equally. In addition, information
regarding the halting and resumption of trading will be disseminated
using several freely accessible sources to ensure the widespread
availability of that information.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \36\ and Rule 19b-
[[Page 42996]]
4(f)(6) \37\ thereunder. 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; or
(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 \38\ and Rule 19b-
4(f)(6) \39\ thereunder.
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\36\ 15 U.S.C. 78s(b)(3)(A).
\37\ 17 CFR 240.19b-4(f)(6).
\38\ 15 U.S.C. 78s(b)(3)(A).
\39\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange 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 will institute proceedings under
Section 19(b)(2)(B) \40\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\40\ 15 U.S.C. 78s(b)(2)(B).
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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-2026-057 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-2026-057. 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 filing 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-2026-057 and should be submitted
on or before August 3, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
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\41\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-14014 Filed 7-10-26; 8:45 am]
BILLING CODE 8011-01-P