Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices 10141 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 90793 

(December 23, 2020), 85 FR 86598 (‘‘Notice’’). 4See Exchange Equity 4, Section 4703(h). See 

also Securities Exchange Act Release No. 90389 

(November 10, 2020), 85 FR 73304 (November 17, 

2020) (amending Exchange Equity 4, Section 

4703(h) relating to Reserve Orders). 5See Exchange Equity 4, Section 4703(h). 

6The Exchange states that, if the new displayed 

order posts to the Nasdaq book and locks a resting 

non-displayed order with the Trade Now order 

attribute enabled, then consistent with the 

definition of Trade Now, the Trade Now 

functionality would apply and the non-displayed 

order would be able to execute against the locking 

displayed order as a liquidity taker. See Notice, 

supra note 3, at 86598–99 n.7. If a locked nondisplayed order does not have the Trade Now order 

attribute enabled, then new incoming orders would 

be eligible to execute against the displayed order. 

See id. See also Exchange Equity 4, Section 4703(m) 

(describing the Trade Now order attribute). 

7See Notice, supra note 3, at 86598 n.6. The 

Exchange also proposes to correct a non-substantive 

typographical error in Exchange Equity 4, Section 

4703(h). 

8See id. at 86598. 

9See id. at 86599. The Exchange also states that 

a rule filing from 2016 introduced a rare 

circumstance where a Reserve Order, upon 

replenishment of its displayed order portion, 

theoretically could become a liquidity remover 

under existing Exchange rules. See id. at 86598–89. 

10 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

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

12The Commission also believes that the 

correction of the non-substantive typographical 

error in Exchange Equity 4, Section 4703(h) would 

improve the readability and clarity of that rule. 

13 15 U.S.C. 78s(b)(2). 

14 17 CFR 200.30–3(a)(12). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91109; File No. SR– 

NASDAQ–2020–090] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Order 

Approving a Proposed Rule Change To 

Amend the Exchange’s Rules at Equity 

4, Section 4703(h) Relating to Reserve 

Orders 

February 11, 2021. 

I. Introduction 

On December 15, 2020, The Nasdaq 

Stock Market LLC (‘‘Exchange’’ or 

‘‘Nasdaq’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a 

proposed rule change to amend the 

Exchange’s rules at Equity 4, Section 

4703(h) relating to orders with the 

reserve size order attribute. The 

proposed rule change was published for 

comment in the Federal Register on 

December 30, 2020.3 The Commission 

has received no comments on the 

proposed rule change. This order 

approves the proposed rule change. 

II. Description of the Proposal 

Pursuant to Equity 4, Section 4703(h) 

of the Exchange’s rules, reserve size is 

an order attribute that permits a 

participant to stipulate that an order 

type that is displayed may have its 

displayed size replenished from 

additional non-displayed size. When a 

participant enters an order with reserve 

size (‘‘Reserve Order’’), the full size of 

the order will be presented for potential 

execution in compliance with 

Regulation NMS and thereafter, 

unexecuted portions of the order will be 

processed as a displayed order and a 

non-displayed order.4 When a Reserve 

Order is posted, if there is an execution 

against the displayed order that causes 

its size to decrease below a normal unit 

of trading, a new displayed order will be 

entered and receive a new timestamp, 

while the size of the non-displayed 

order will be reduced by the same 

amount and will not receive a new 

timestamp.5

The Exchange proposes to amend 

Equity 4, Section 4703(h) to provide 

that, if the new displayed order would 

lock an order that posted to the Nasdaq 

book before replenishment can occur, 

the displayed order would post at the 

locking price if the resting order is nondisplayed,6 or would be repriced, 

ranked, and displayed at one minimum 

price increment lower (higher) than the 

locking price if the resting order to sell 

(buy) is displayed. The proposed 

functionality would also apply to a 

Reserve Order that does not execute 

fully upon initial order entry, if the 

displayed order portion of the Reserve 

Order would lock a resting order upon 

entry.7

According to the Exchange, it 

established the Reserve Order with the 

intention that the order would always 

act as a provider of liquidity upon 

replenishment, and this is what 

Exchange participants have come to 

expect from the operation of Reserve 

Orders.8 The Exchange states that the 

proposal would eliminate any ambiguity 

under its existing rules as to whether a 

Reserve Order would take liquidity 

when a locking order posts to the 

Nasdaq book prior to the Reserve Order 

completing its replenishment (or prior 

to the displayed order portion of the 

Reserve Order posting to the Nasdaq 

book for the first time).9

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.10 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,11 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, 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. 

As discussed above, the proposed rule 

change is designed to provide that a 

Reserve Order, after posting on the 

Nasdaq book, would always act as a 

liquidity provider upon replenishment 

of its displayed order portion. The 

Commission believes that the proposed 

rule change is reasonably designed to 

ensure that a Reserve Order would 

operate similarly during race conditions 

(i.e., when a locking order posts to the 

Nasdaq book prior to the Reserve Order 

completing its replenishment, or prior 

to the displayed order portion of the 

Reserve Order posting to the Nasdaq 

book for the first time) as it would 

during non-race conditions. The 

Commission also believes that the 

proposed rule change would provide the 

users of Reserve Orders greater certainty 

and transparency about how the 

Exchange processes these orders.12

Based on the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,13 that the 

proposed rule change (SR–NASDAQ– 

2020–090) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–03214 Filed 2–17–21; 8:45 am] 

BILLING CODE 8011–01–P 


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