Document ID: SEC-2017-1340-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2017-08-09T04:00Z

[Federal Register Volume 82, Number 152 (Wednesday, August 9, 2017)]
[Notices]
[Pages 37248-37253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16743]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81311; File No. SR-NASDAQ-2017-074]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Adopt the Midpoint Extended 
Life Order

August 3, 2017.
    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 July 21, 2017, 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 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 adopt the Midpoint Extended Life Order.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

[[Page 37249]]

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 U.S. equities markets are the envy of the world because they 
are singularly effective at attracting and allocating capital to 
innovative companies that create millions of jobs and trillions of 
dollars of shareholder value, companies like Apple, Google, Facebook, 
Amazon, Cisco Systems, Gilead, and thousands of other Nasdaq issuers. 
As the listing venue and the steward of the market on which they are 
listed, Nasdaq is compelled to make innovative changes to better the 
quality of the market, to the benefit of issuers and the people that 
invest in issuers' securities.
    As discussed in detail below, Nasdaq is proposing to adopt the 
Midpoint Extended Life Order as a new Order Type \3\ available to all 
members, and by extension to their customers, which will reward market 
participants that commit to a minimum half-second period (``Holding 
Period''), during which their order remains unchanged. Midpoint 
Extended Life Orders provide a mechanism by which market participants 
may receive a midpoint execution with other Midpoint Extended Life 
Orders that have also met the same Holding Period requirement. Like 
Nasdaq's Extended Life Order Attribute,\4\ Nasdaq is continuing its 
drive to provide innovative solutions to increase participation on the 
market by a broader array of investors. Nasdaq proposed the Extended 
Life Order Attribute as a first step in broadening participation on the 
market by providing priority to retail orders that often have longer 
term investment horizons. The Extended Life Order Attribute provides 
retail market participants a mechanism by which they have more 
opportunity to participate effectively at the prevailing market price 
when transactions occur. Nasdaq is now proposing a new Order Type that 
will allow all market participants to more effectively execute longer 
term investment strategies--the Midpoint Extended Life Order.
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    \3\ The term ``Order'' means an instruction to trade a specified 
number of shares in a specified System Security submitted to the 
Nasdaq Market Center by a Participant. An ``Order Type'' is a 
standardized set of instructions associated with an Order that 
define how it will behave with respect to pricing, execution, and/or 
posting to the Nasdaq Book when submitted to Nasdaq. 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 Nasdaq Book 
when submitted to Nasdaq. The available Order Types and Order 
Attributes, and the Order Attributes that may be associated with 
particular Order Types, are described in Rules 4702 and 4703. One or 
more Order Attributes may be assigned to a single Order; provided, 
however, that if the use of multiple Order Attributes would provide 
contradictory instructions to an Order, the System will reject the 
Order or remove non-conforming Order Attributes. See Rule 4701(e).
    \4\ See Securities Exchange Act Release No. 81097 (July 7, 
2017), 82 FR 32386 (July 13, 2017) (SR-NASDAQ-2016-161).
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Background
    The Exchange operates based on a price/display/time priority 
execution algorithm.\5\ Simply put, the first displayed order at a 
price has priority over the next order and so on (this is also 
sometimes referred to as ``First In First Out'' or ``FIFO''). All 
displayed orders have priority over non-displayed orders at a price 
level. Midpoint Orders are non-displayed \6\ and allow participants to 
receive price improvement by executing against other non-displayed 
liquidity at the midpoint of the National Best Bid and Offer 
(``NBBO''). Nasdaq believes that some market participants that are 
looking for executions at the midpoint often have a longer investment 
horizon (i.e., long term investors), many of which are seeking both the 
best execution possible at the midpoint of the NBBO and are not 
necessarily measuring execution quality solely by each tick by tick 
change in market price. Some of these market participants with large-
sized Orders are seeking to gain such an execution while minimizing 
market impact.
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    \5\ See Rule 4757.
    \6\ Display is an Order Attribute that allows the price and size 
of an Order to be displayed to market participants via market data 
feeds. Certain Order Types may be non-displayed if they are not 
assigned a Display Order Attribute, and all non-displayed Orders may 
be referred to as ``Non-Displayed Orders.'' In contrast, an Order 
with a Display Order Attribute may be referred to as a ``Displayed 
Order.'' See Rule 4703(k).
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    Over time, as order placement competition on Nasdaq has grown, the 
time that it takes for market participants to react to changes in the 
markets has decreased significantly. In addition, orders that access 
resting liquidity on exchanges have decreased in size due to the 
fragmented nature of the broader market and the adoption of algorithmic 
trading. As a result of this decrease in reaction time and size of 
orders, Nasdaq, and the equities markets in general, have become 
incredibly efficient. The nature of today's equities markets, however, 
have made it difficult for certain market participants that have longer 
term investment horizons and that focus on minimizing market impact 
rather than optimizing for queue placement. This is particularly true 
for market participants that are attempting to trade large-sized 
Orders.\7\
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    \7\ Nasdaq notes that market participants with large-sized 
Orders and that are not necessarily monitoring small changes in the 
NBBO or time to execution, include ``Institutional'' investors. 
Institutional investors are generally characterized as large 
entities that make investments on behalf of their owners or 
investors, such as pension funds and mutual funds. Nonetheless, 
Nasdaq believes that Midpoint Extended Life Orders will provide 
benefit to a wide array of market participants. As noted above, 
Midpoint Extended Life Orders are available to all Nasdaq members.
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    Nasdaq weighed various ideas on how to augment the interaction on 
Nasdaq to meet the needs of these underserved market participants. 
Nasdaq believes that it is better to provide incentives that protect 
midpoint Orders by improving execution quality without impacting the 
ability to manage risk and to reduce the potential for order adjustment 
and cancellation, rather than apply blanket artificial latency 
mechanisms that apply to all Orders, which may distort or have 
unintended consequences on market quality such as disadvantaging 
displayed Orders. Nasdaq is proposing to address the needs of market 
participants that focus their trading on receiving midpoint execution 
where time to execution is less important when working to meet their 
long term investment needs. As discussed in detail below, Nasdaq is 
proposing to provide the Midpoint Extended Life Order as a voluntary 
option by which these market participants may participate on Nasdaq in 
return for allowing their orders to exist unchanged for a certain time.
Proposal
    The Exchange is proposing to adopt a new Order Type that will allow 
all market participants that are less concerned with time to execution 
to receive executions at the midpoint of the NBBO, while deemphasizing 
speed as a factor in achieving the execution. Specifically, the 
Midpoint Extended Life Order is an Order Type with a Non-

[[Page 37250]]

Display Order Attribute \8\ that is priced at the midpoint between the 
NBBO and that will not be eligible to execute until the Holding Period 
of one half of a second has passed after acceptance of the Order by the 
System.\9\ The Holding Period represents a level of market risk that 
the market participant has assumed in order to receive a midpoint 
execution with other Midpoint Extended Life Orders, which have also met 
the Holding Period requirement. Moreover, the Holding Period mitigates 
risk that a market participant may attempt to access other Midpoint 
Extended Life Orders just prior to a move in the NBBO, thereby 
potentially negatively affecting the price at which the contra-side 
Midpoint Extended Life Order would receive. In order to allow members 
to effectively manage risk, a Midpoint Extended Life Order may be 
cancelled at any time.
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    \8\ See note 6, supra.
    \9\ As noted above, a Midpoint Extended Life Order must remained 
[sic] unchanged for the Holding Period. If a Midpoint Extended Life 
Order is modified by a member during the Holding Period, the System 
will restart the Holding Period.
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    Once a Midpoint Extended Life Order becomes eligible to execute by 
existing unchanged for the Holding Period, the Order may only execute 
against other eligible Midpoint Extended Life Orders. Like other 
midpoint pegged Orders,\10\ once the Midpoint Extended Life Order is 
eligible, a buy (sell) Midpoint Extended Life Order will be ranked in 
time order at the midpoint among other buy (sell) Midpoint Extended 
Life Orders. As discussed above, limiting interaction of Midpoint 
Extended Life Orders to other Midpoint Extended Life Orders mitigates 
the impact that these orders will have on the market and allows market 
participants entering such orders an increased chance of receiving a 
full execution at the midpoint of the NBBO at a given time. 
Importantly, limiting interaction of Midpoint Extended Life Orders 
ensures fairness because all Midpoint Extended Life Orders have met the 
same Holding Period requirement, thereby ensuring that members with 
Midpoint Extended Life Order are not disadvantaged by non-Midpoint 
Extended Life Orders entered by participant that have the benefit of 
knowing, and reacting to, the current state of the market.
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    \10\ See also Rule 4703(d).
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    A Midpoint Extended Life Order may be assigned a limit price. A 
limit price restricts the price at which an order may execute such that 
an order to sell may not execute below a certain price and an order to 
buy may not execute above a certain price. If a market participant 
assigns a limit price to its Midpoint Extended Life Order, the Order 
will be: (1) Eligible for execution in time priority if upon acceptance 
of the Order by the System and during the Holding Period thereafter, 
the midpoint price is within the limit set by the participant; or (2) 
held until the midpoint falls within the limit set by the participant 
at which time the Holding Period will commence and thereafter the 
System will make the Order eligible for execution in time priority if 
the midpoint price remains within the limit set by the participant 
during the Holding Period. For example, if the Best Bid was $11 and the 
Best Offer was $11.06, the price of the Midpoint Extended Life Order 
would be $11.03. If a participant enters a Midpoint Extended Life Order 
to buy with a limit of $11.02, the Holding Period would not begin until 
the midpoint price is executable at $11.02 (i.e., the midpoint of the 
NBBO).\11\ If a member takes an action on the Order (e.g., amend, 
revise) the System will re-start the clock based on the same criteria.
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    \11\ If a Midpoint Extended Life Order has met the Holding 
Period requirement but the midpoint is no longer within its limit, 
it will nonetheless be ranked in time priority among other Midpoint 
Extended Life Orders if the NBBO later moves such that it is within 
the Order's limit price.
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    Similar to other Orders with midpoint pegging,\12\ Midpoint 
Extended Life Orders are only available for execution during Market 
Hours \13\ and they may not be designated with a time-in-force of 
Immediate or Cancel (IOC),\14\ since the IOC Time In Force, by its 
nature, are [sic] inconsistent with the Holding Period requirement of 
the proposal. If a Midpoint Extended Life Order is entered during Pre-
Market Hours,\15\ the System will hold the Order until completion of 
the Opening Cross, ranked in the time that it was received. If a 
Midpoint Extended Life Order is entered during Post-Market Hours,\16\ 
it will be rejected by the System. Midpoint Extended Life Orders are 
not eligible for the Nasdaq Opening, Halt and Closing Crosses, and any 
Midpoint Extended Life Orders that have not been executed by the end of 
Market Hours will be cancelled.\17\ Midpoint Extended Life Orders in 
existence at the time a Halt Cross is initiated will be ineligible to 
execute and held by the System until trading has resumed and the NBBO 
has been received by Nasdaq. Also, like other Orders with midpoint 
pegging, a Midpoint Extended Life Order may be executed in sub-pennies 
if necessary to obtain a midpoint price.\18\ Last, a Midpoint Extended 
Life Order must be entered with a size of at least one round lot, which 
will promote size in Midpoint Extended Life Orders and provide members 
with the most efficient processing of Midpoint Extended Life Orders. 
Any shares of a Midpoint Extended Life Order remaining after an 
execution that are less than a round lot will be cancelled by the 
System.
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    \12\ See, e.g., Rule 4702(b)(5); see also Rule 4703(d).
    \13\ Market Hours begin after the completion of the Nasdaq 
Opening Cross (or at 9:30 a.m. ET in the case of a security for 
which no Nasdaq Opening Cross occurs). See Rule 4703(a). Nasdaq 
limits midpoint orders to Market Hours because, among other things, 
it believes that demand for such Orders is limited to Market Hours, 
since the wider spreads generally prevail during Pre-Market and 
Post-Market Hours trading sessions. See notes 15 and 16, infra. 
Wider spreads would result in execution prices more at variance from 
the NBBO than would be the case during Market Hours.
    \14\ See Rule 4703(a)(1).
    \15\ The term ``Pre-Market Hours'' means the period of time 
beginning at 4:00 a.m. ET and ending immediately prior to the 
commencement of Market Hours. See Rule 4701(g).
    \16\ The term ``Post-Market Hours'' means the period of time 
beginning immediately after the end of Market Hours and ending at 
8:00 p.m. ET. See Rule 4701(g).
    \17\ See Rule 4703(d).
    \18\ Id. A sub-penny limit price entered by a member would not 
be accepted by the System.
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    A Midpoint Extended Life Order may have a Minimum Quantity Order 
Attribute.\19\ Like other Orders with a Minimum Quantity Order 
Attribute, if an eligible Midpoint Extended Life Order has a Minimum 
Quantity Order Attribute and an eligible contra-side Midpoint Extended 
Life Order does not meet the quantity requirement, neither Order will 
execute. If another Midpoint Extended Life Order is ranked in priority 
behind the Midpoint Extended Life Order with a Minimum Quantity Order 
Attribute, it will execute against the contra-interest instead, if it 
is otherwise marketable.
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    \19\ 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. A Participant 
may designate that the minimum quantity condition be satisfied by 
execution against multiple Orders or a single Order. See Rule 
4703(e).
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    As discussed above, unlike certain delay mechanisms available on 
other exchanges, use of the proposed Midpoint Extended Life Order is 
wholly voluntary, and thus does not subject all members to the Holding 
Period. As a consequence, there is no distortive impact on market data 
as Midpoint Extended Life Order would be trade reported like any other 
Order. Moreover, members will not need to take any special steps to 
implement Midpoint Extended Life Orders, since it is an Order Type. In 
this regard, members, Securities Information Processors and market data 
consumers will not need to make any changes to their systems to account 
for Midpoint Extended Life Orders in market data because they will

[[Page 37251]]

be reported the same as other midpoint Orders, without any new or 
special indication. In sum, the Midpoint Extended Life Order is a 
simple mechanism by which Nasdaq can broaden its ecosystem of 
participants with little impact to the operation of the markets.
Implementation
    Nasdaq plans to implement Midpoint Extended Life Orders within 
thirty days after Commission approval of the proposal. Nasdaq will make 
the Midpoint Extended Life Order available to all members and to all 
securities upon implementation. Nasdaq will announce the implementation 
date by Equity Trader Alert.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\20\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\21\ 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. Nasdaq believes that the proposed change is consistent with 
this provision of the Act because it is emblematic of a core function 
of a national securities exchange, namely matching buyers and sellers 
of securities on a transparent and well-regulated market, and helping 
these buyers and sellers come together to receive the best execution 
possible. Nasdaq is achieving this by permitting Midpoint Extended Life 
Orders to execute solely against other Midpoint Extended Life Orders at 
the midpoint of the NBBO in return for providing market-improving 
behavior in the form of a longer-lived midpoint order. As noted above, 
Nasdaq believes that programmatic or intentional delays for all 
incoming Orders irrespective of trading objectives and regardless as to 
whether it is displayed or non-displayed, insert complexity into the 
market and are detrimental to overall market structure. By contrast, 
Nasdaq's proposal seeks to provide a simple mechanism by which market 
participants with longer investment horizons are able to source 
liquidity at the midpoint of the NBBO. Importantly, Midpoint Extended 
Life Orders will be available to all members, yet are wholly voluntary.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
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    The proposed Midpoint Extended Life Order will provide members an 
opportunity to execute at the midpoint, only interacting with other 
Midpoint Extended Life Orders, in return for allowing their Orders to 
remain unchanged for the Holding Period. As Nasdaq has noted before, a 
great deal of the liquidity that is provided on exchanges is from 
market makers and automated liquidity providers, who have invested in 
technology and efficiency, which has resulted in many positive 
developments such as deep and liquid markets. Nasdaq is implementing 
Midpoint Extended Life Orders to increase access to, and participation 
on, Nasdaq for investors that are less concerned with time to 
execution, but rather are looking to source liquidity, often in greater 
size, at the midpoint of the NBBO against a contra-party Order that has 
met the same objectives. Currently, these market participants are 
underweighted or do not represent these Orders on Nasdaq, and the 
Midpoint Extended Life Order will provide additional tools to allow 
them to more effectively implement their investment strategies. 
Additionally, Midpoint Extended Life Orders will provide these 
participants with the many benefits provided by a well-regulated 
exchange, including transparency through publicly available rules, 
certainty surrounding trade execution, and market surveillance. 
Midpoint Extended Life Orders is wholly voluntary, available to all 
members, and does not subject all members to the Holding Period 
regardless of time horizon or investment objective, unlike certain 
delay mechanisms available on other exchanges. The Midpoint Extended 
Life Order is a simple mechanism by which Nasdaq can broaden its 
ecosystem of participants with little impact to the operation of the 
markets.
    The Exchange believes that markets and price discovery best 
function through the interactions of a diverse set of market 
participants. The Exchange also believes that the evolution of the 
markets which have brought many beneficial efficiencies have also made 
it difficult for some market participants to participate on the 
Exchange. The differentiation proposed herein by Nasdaq is not designed 
to permit unfair discrimination, but instead to promote increased 
participation on the Exchange by market participants that find it 
difficult to do so today and provide improved execution quality for 
market participants that are less concerned with time to execution. The 
Exchange believes that the transparency and competitiveness of offering 
Midpoint Extended Life Orders on a registered national securities 
exchange will result in a better execution experience for all 
investors.
    The Exchange notes that other market participants that enter orders 
that would otherwise be eligible to execute against a midpoint order 
will not be able to execute against a Midpoint Extended Life Order. The 
Exchange believes that this is not unfairly discriminatory because any 
market participant may enter a Midpoint Extended Life Order, thereby 
providing them access to other Midpoint Extended Life Orders. The 
Exchange notes that the statutory standard under Section 6(b)(5) of the 
Act is that the proposed change not discriminate unfairly. Nasdaq does 
not believe that providing an Order Type available to all members 
discriminates unfairly. To the contrary, Nasdaq believes that the 
Midpoint Extended Life Order will provide members with choice and more 
opportunities to interact on Nasdaq. Moreover, Nasdaq believes that 
much of the Midpoint Extended Life Orders will be entered by 
participants that typically do not enter Orders on Nasdaq for the 
reasons noted above. As a consequence, the Exchange does not believe 
that the current depth of liquidity on the Nasdaq will be impacted 
negatively, but rather Midpoint Extended Life Orders will provide 
members with the opportunity to interact in new ways on the Exchange. 
Consequently, the Exchange does not believe the proposed change 
discriminates unfairly.
    The Exchange also believes that the proposal will improve the 
ecosystem of market participants on Nasdaq. Midpoint orders generally 
provide price improvement to both sides to a trade, with each party 
sharing the ``spread'' between the bid and ask. Midpoint Extended Life 
Orders will also provide this benefit, but in a manner that will allow 
the market participants to execute against other Midpoint Extended Life 
Orders that have met the same Holding Period criteria. Since both sides 
of a Midpoint Extended Life Order execution are subject to the Holding 
Period, it does not discriminate or provide unfair advantages to either 
side of the trade. This mechanism will ensure that the Midpoint 
Extended Life Order is fair, by not allowing a side to the transaction 
to have an advantage based on timing. Moreover, the Exchange believes 
that Midpoint Extended Life Orders should draw new market participants 
to Nasdaq's transparent and well-regulated market. Nasdaq, like other 
national securities exchanges, is subject to the requirements of the 
Exchange Act, is regulated by the Commission, is subject to inspection 
by the Commission, and

[[Page 37252]]

must have transparent and fair rules applied to all of its members.
    Nasdaq believes that requiring Midpoint Extended Life Orders to 
exist unaltered for at least one half a second is a meaningful time, 
representing a significant level of risk taken by the market 
participant in return for the ability to receive a midpoint execution 
with other Midpoint Extended Life Orders, which have also met the 
Holding Period requirement. Although, one could argue that every stock 
is unique in the amount of time that represents a meaningful level of 
risk, the Exchange believes that implementing a program with 
individualized time requirements would be overly complex and would 
ultimately be too cumbersome for the industry to adopt. The Exchange 
came to the same conclusion in designing the requirements of the ELO 
Order Attribute. As Nasdaq noted in its ELO Order Attribute proposal, 
the concept of rewarding market participants that provide Orders that 
live for a certain minimum time is currently used in Canada by the 
Toronto Stock Exchange. Named the ``Long Life'' order type, it is 
designed to enhance the quality of execution for natural investors and 
their dealers by rewarding those willing to commit liquidity to the 
book for a minimum period of time and by enabling participants to gain 
priority in return for a longer resting time.\22\ Compliance with the 
Holding Period will be enforced by the System, and transactions in 
Midpoint Extended Life Orders will be reported to the Securities 
Information Processor and will be provided in Nasdaq's proprietary data 
feed in the same manner as all other transactions occurring on Nasdaq 
are done currently, namely, without any new or special indication that 
it is a Midpoint Extended Life Order execution.
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    \22\ See https://www.tmx.com/newsroom/press-releases?id=352; see 
also http://www.osc.gov.on.ca/documents/en/Marketplaces/xxr-tsx_20150818_amd-rule-book-policies.pdf (Notice of Approval).
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    As stated previously, the Exchange believes that the proposed 
change will benefit market participants that have longer term 
investment horizons and that often seek liquidity at the midpoint of 
the NBBO. Moreover, Nasdaq does not believe that the proposed Midpoint 
Extended Life Order will negatively affect the quality of the market 
because the Exchange anticipates the Order Type will draw new market 
participants to the Exchange, which are currently underserved. If the 
Exchange is incorrect, there are many substitutes in the market where 
market participants can send their orders. There are twelve other 
exchanges, over thirty registered Alternative Trading Systems, and many 
other non-registered off-exchange trading platforms, which a 
participant may choose to use if the execution quality on Nasdaq 
suffers due to the introduction of Midpoint Extended Life Orders.
    As the Commission noted in approving the exchange application of 
Investors Exchange LLC, the Exchange Act does not foreclose reasonable 
and not unfairly discriminatory innovations, including those that are 
designed to protect investors who seek to reliably place passive, non-
displayed pegged orders on an exchange.\23\ For the reasons noted 
above, Nasdaq believes that the proposed Midpoint Extended Life Order 
further perfects the mechanism of a free and open market, promotes 
competition, broadens participation on Nasdaq, and considers the cost/
benefit of implementation.
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    \23\ See Securities Exchange Act Release No. 78101 (June 17, 
2016), 81 FR 41142, 41157 (June 23, 2016) (File No. 10-222).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq recognizes that participants that invest in capabilities 
that allow them to drive price formation by repeatedly improving the 
NBBO on the Exchange bring tremendous value to the market by providing 
efficient prices, lowering costs for individual investors, and 
supporting price formation and stability for securities listed on 
Nasdaq and other U.S. exchanges. Nasdaq believes that Midpoint Extended 
Life Orders can coexist with existing participation strategies on 
Nasdaq to the benefit of all Exchange participants. As discussed above, 
the Exchange believes that the Midpoint Extended Life Order will draw 
new market participants to Nasdaq, with which existing market 
participants may interact by using the Midpoint Extended Life Order. 
For this reason, Nasdaq does not believe that the proposed rule change 
will impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, Nasdaq believes that 
the proposed change increases competition and therefore improves 
participation by allowing certain market participants that may 
currently be underserved on regulated exchanges to compete based on 
elements other than speed. Specifically, the proposed change will allow 
market participants that have not invested in limit order queue 
placement but rather take risk by allowing their midpoint Order to 
exist unchanged for the Holding Period to have the ability to execute 
against other such Orders that have rested unchanged for the same 
duration. Although market participants that choose not to submit 
Midpoint Extended Life Orders will not have the opportunity to interact 
with such Orders, Nasdaq notes that this is solely the choice of the 
member since the Midpoint Extended Life Order is available to all 
members but its use is not compulsory. Additionally, adoption of 
Midpoint Extended Life Orders will not burden any market participants, 
including those that choose not to use these Orders, because no changes 
need to be made to their systems to account for Midpoint Extended Life 
Orders. As discussed above, Midpoint Extended Life Orders will be 
reported the same as other midpoint Orders, without any new or special 
indicator.
    The Exchange believes that increasing participation on Nasdaq will 
always serve to improve the overall ecosystem on the Exchange. To the 
extent that the proposal can bring additional order flow from different 
segments of the market with different long term investment goals to the 
Exchange, all market participants will benefit. Thus, the aim of the 
Proposal is not to disadvantage any one set of market participant, but 
rather to promote a healthy and inclusive market that will benefit all 
market participants, including those that currently contribute 
significant liquidity to the Exchange. Nasdaq believes Midpoint 
Extended Life Orders will provide a mechanism by which certain market 
participants that struggle to receive a midpoint execution at the NBBO 
at any given moment the opportunity to receive such an execution, while 
also providing existing participants an opportunity to interact with 
these new participants through a Midpoint Extended Life Order.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily choose between competing 
venues if they deem participation in Nasdaq's market is no longer 
desirable. In such an environment, the Exchange must carefully consider 
the impact that any change it proposes may have on its participants, 
understanding that it will likely lose participants to the extent a 
change is viewed as unfavorable by them. Because competitors are free 
to modify the incentives and structure of their markets, the Exchange 
believes that the degree to which modifying the market structure of an 
individual market may impose any burden on competition is limited. 
Last, to the extent the proposed change is successful in attracting 
additional market

[[Page 37253]]

participants, Nasdaq also believes that the proposed change will 
promote competition among trading venues by making Nasdaq a more 
attractive trading venue for long-term investors and therefore capital 
formation.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2017-074 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2017-074. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site 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. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-074 and should 
be submitted on or before August 30, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16743 Filed 8-8-17; 8:45 am]
BILLING CODE 8011-01-P