Document ID: SEC-2020-1965-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2020-12-11T05:00Z

[Federal Register Volume 85, Number 239 (Friday, December 11, 2020)]
[Notices]
[Pages 80202-80206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27200]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90577; File No. SR-NASDAQ-2020-079]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Relocate Its Equity and General Rules From Its Current Rulebook Into 
Its New Rulebook Shell

December 7, 2020.
    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 November 23, 2020, 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 relocate its equity and general rules from 
its current Rulebook into its new Rulebook shell.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this rule change is to relocate Nasdaq equity and 
general rules from the current Rulebook into the new Rulebook shell.\3\ 
The Exchange also proposes a number of minor, non-substantive changes 
to the Rulebook shell as described below. The relocation and 
harmonization of these rules is part of the Exchange's continued effort 
to promote efficiency and conformity of its processes with those of its 
affiliated exchanges. The Exchange believes that the placement of these 
rules into their new location in the Rulebook shell will

[[Page 80203]]

facilitate the use of the Rulebook by members.
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    \3\ Previously, the Exchange filed to relocate other rules 
within its Rulebook. See Securities Exchange Act Release No. 87778 
(December 17, 2019), 84 FR 70590 (December 23, 2019) (SR-NASDAQ-
2019-098).
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Universal Changes
    The Exchange proposes to update all cross-references within the 
Rulebook shell to the new relocated rule cites. The Exchange proposes 
to replace internal rule references to simply state ``this Rule'' where 
the rule is citing itself without a more specific cite included in the 
Rule. For example, if Nasdaq Rule 4619 refers currently to ``Rule 
4619'' or ``this Rule 4619'' the Exchange will amend the phrase to 
simply ``this Rule.'' Except where the Exchange specifies below that it 
will retain the current rule numbering, the Exchange also proposes to 
conform the paragraph numbering and lettering to that used in the 
Rulebook shell for greater consistency, and to correct punctuation. 
Furthermore, the Exchange proposes to delete any empty reserved rules 
and already deleted rules in the current Rulebook other than in 
relocated Equity 11. Lastly, the Exchange will delete the following 
rule numbers from the current Rulebook, but will relocate the substance 
of these rules into the new Rulebook shell: Conduct Rules (2000-3000), 
3300, 4000, 4100, 4600, 4610, 4700, 4750, 6000, and 6100.
General 1
    The Exchange proposes to amend the section heading from General 1, 
General 1 to General 1, Section 1. The Exchange also proposes to 
retitle General 1, Section 1 from ``General Provisions'' to 
``Definitions.'' Lastly, the Exchange proposes a non-substantive change 
in paragraph (b)(15) to delete ``Exchange'' immediately before 
``Options 3, Section 4.''
General 2
    The Exchange proposes to relocate Rule 4615 (Sponsored 
Participants) to General 2, Section 22, which is currently reserved, to 
harmonize the Exchange's rule numbering to that of Nasdaq PHLX LLC 
(``Phlx'') General 2, Section 22, which currently sets forth the same 
rule on Phlx.
General 3
    The Exchange proposes to relocate the membership rules 1001, 1002, 
1010, 1011, 1012, 1013, 1014, 1015, 1016, 1017, 1018 and 1019 into 
General 3 (Membership and Access). The Exchange proposes to retain the 
current rule numbers which closely align with FINRA rules. The Exchange 
will delete current Rule 1031 as this Rule presently has no substantive 
rule text. The Exchange also proposes to update a number of obsolete 
cross-references in the relocated membership rules that presently refer 
to rules that were already moved to the Rulebook shell under SR-NASDAQ-
2019-098.\4\
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    \4\ Specifically, the Exchange will update obsolete cross-
references in Rule 1002(d)(2), the introductory paragraph to Rule 
1011, Rule 1011(o)(3), and Rule 1013(a)(1)(N).
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General 4
    The Exchange proposes to remove the ``1.'' from the rule numbering 
within General 4. The Exchange also proposes to replace ``General 4, 
Section 1.'' with ``General 4, Rule'' throughout General 4. The 
proposed changes are intended to better align General 4's rule 
numbering with FINRA rules. The Exchange also proposes to make 
corresponding changes in other places throughout the Rulebook shell 
outside of General 4 to replace all instances of ``General 4, Section 
1.'' with ``General 4, Rule'' for greater consistency.\5\
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    \5\ Specifically, the Exchange will make corresponding changes 
to the following rules in the proposed Rulebook shell outside of 
General 4: General 3, Rule 1001; General 3, Rule 1011; General 5, 
IM-9216; General 5, Rule 9630; and General 9, Section 20(b).
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General 5
    In General 5, IM-9216, the Exchange proposes to add chapter headers 
before the cross-cites to Rules 1013, 8211, and 11870 for greater 
consistency within this Rule. As amended, the cross-cites would be 
General 3, Rule 1013; General 5, Rule 8211; and Equity 11, Rule 11870.
General 9
    The Exchange proposes to relocate Rule 2170 (Disruptive Quoting and 
Trading Activity Prohibited) to General 9, Section 53, and to reserve 
General 9, Section 52. The proposed rule numbering is to ensure that 
the Exchange's General 9 rules mirror its affiliated exchanges' General 
9 rules as closely as practicable. In particular, relocating this Rule 
to General 9, Section 53 will harmonize the Exchange's rule numbering 
to that of Phlx General 9, Section 53, which currently sets forth the 
same rule prohibiting disruptive quoting and trading activity on Phlx. 
Because this Rule is being added to General 9, which applies to both 
the Exchange's equities and options markets, the Exchange proposes to 
delete a duplicate rule in Options 9, Section 4, which applies only to 
the options market.
    The Exchange also proposes to relocate Rule 4570 (Custodian of 
Books and Records) to General 9, Section 71, and to reserve Sections 
54--70 to harmonize its General rule numbering with that of Phlx's 
General 9.
    The Exchange further proposes to update several obsolete cross-
references throughout General 9 that presently refer to rules that were 
already moved to the Rulebook shell under SR-NASDAQ-2019-098.\6\ The 
Exchange will also update the cross-references to Rule 2310A (within 
General 9, Section 12(b)) and Rule 2810A (within General 9, Section 
18(c)(1)(C)(iv)) to relocated Equity 10, Section 1. Rule 2810A does not 
exist within the current Rulebook, but the Exchange is updating this 
cite to relocated Equity 10, Section 1 as this rule governs direct 
participation programs. Lastly, the Exchange proposes to fix a 
formatting error in General 9, Section 20(d)(1).
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    \6\ Specifically, the Exchange will update obsolete cross-
references in General 9, Section 1(b), Section 10(b)(1) and Section 
14(a).
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Equity 1
    The Exchange proposes to amend the section header from Equity 1, 
Equity 1 to Equity 1, Section 1. The Exchange also proposes to add 
``(a)'' before the phrase ``When used in the Equity Rules. . .'' to 
conform to the paragraph lettering of the Rulebook shell. Lastly, the 
Exchange proposes to relocate the defined terms currently within Rule 
4701(a)--(l) into Equity 1, Section 1(a)(3)--(14).
Equity 2
    The Exchange proposes to relocate the following rules into Equity 
2:

------------------------------------------------------------------------
        Shell rule                          Current rule
------------------------------------------------------------------------
Section 1................  4601. Scope.
Section 2................  4200. Definitions.
Section 3................  4611. Nasdaq Market Center Participant
                            Registration.
Section 4................  4612. Registration as a Nasdaq Market Maker.
Section 5................  4613. Market Maker Obligations.
Section 6................  4614. Stabilizing Bids.

[[Page 80204]]

 
Section 7................  4616. Reports.
Section 8................  4617. Normal Business Hours.
Section 9................  4618. Clearance and Settlement.
Section 10...............  4619. Withdrawal of Quotations and Passive
                            Market Making.
Section 11...............  4620. Voluntary Termination of Registration.
Section 12...............  4621. Suspension and Termination of
                            Quotations.
Section 13...............  4622. Termination of Nasdaq Service.
Section 14...............  4623. Alternative Trading Systems.
Section 15...............  4624. Penalty Bids and Syndicate Covering
                            Transactions.
Section 16...............  4625. Obligation to Provide Information. \7\
Section 17...............  4626. Limitation of Liability.
Section 18...............  4627. Obligation to Honor System Trades.
Section 19...............  4628. Compliance with Rules and Registration
                            Requirements.
Section 20...............  4631. Customer Disclosures.
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Equity 3
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    \7\ The Exchange will not port over the reference to IM-4120-1 
into the Rulebook shell as this Rule does not currently exist in the 
Nasdaq Rulebook.
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    The Exchange proposes to reserve Equity 3, currently titled 
``Equity Trading Rules.''
Equity 4
    The Exchange proposes to re-title Equity 4, currently ``Limit Up 
Limit Down,'' to ``Equity Trading Rules.'' The Exchange proposes to 
relocate Rules 4110, 4120, 4121, 4370, 4702, 4703, 4752, 4753, 4754, 
4756, 4757, 4758, 4759, 4760, 4761, 4762, 4763, and 4770 into Equity 4 
and retain the current rule numbers. In relocated Rule 4110, the 
Exchange also proposes to update an obsolete cross-reference to the 
Rule 4300 and 4400 Series to the Rule 5000 Series.\8\
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    \8\ The Exchange previously relocated the Nasdaq listing 
standards within the Rule 4300 and 4400 Series to the Rule 5000 
Series. See Securities Exchange Act Release No. 59663 (March 31, 
2009), 74 FR 15552 (April 6, 2009) (SR-NASDAQ-2009-018).
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Equity 5
    The Exchange proposes to update an obsolete cross-reference in 
Equity 5, Section 6 that presently refers to Rule 2010A (Standards of 
Commercial Honor and Principles of Trade), which was already moved to 
General 9, Section 1 in the Rulebook shell under SR-NASDAQ-2019-098.
Equity 6
    The Exchange proposes to title Equity 6, which is currently 
reserved, to ``Nasdaq Risk Management Service; Other Systems and 
Programs,'' and to relocate the following rules into Equity 6:

------------------------------------------------------------------------
        Shell rule                          Current rule
------------------------------------------------------------------------
Section 1................  6110. Definitions.
Section 2................  6120. System Functions.
Section 3................  6130. Nasdaq Kill Switch.
Section 4................  6200. Exchange Sharing of Participant Risk
                            Settings.
Section 5................  IM-6200-1. Risk Settings.
Section 6................  6300. Nasdaq Equity Value Indicator Cross.
------------------------------------------------------------------------

    The Exchange will also correct a typographical error in Equity 6, 
Section 3(e) where the Exchange inadvertently capitalized ``When'' in 
the first sentence.
Equity 8
    The Exchange proposes to re-title Equity 8, currently ``Uniform 
Practice Code,'' to ``Trading of Non-Convertible Bonds Listed on 
Nasdaq.'' The Exchange proposes to relocate Rule 4000B (Trading of Non-
Convertible Bonds Listed on Nasdaq) into Equity 8, Section 1.
Equity 9
    The Exchange proposes to re-title Equity 9, currently 
``Supplementary Conduct Rules,'' to ``Business Conduct,'' and to 
relocate the following rules into Equity 9:

------------------------------------------------------------------------
        Shell rule                          Current rule
------------------------------------------------------------------------
Section 1................  3220. Adjustment of Open Orders.
Section 2................  3230. Clearing Agreements.
Section 3................  3310. Publication of Transactions and
                            Quotations.
Section 4................  IM-3310. Manipulative and Deceptive
                            Quotations.
Section 5................  3320. Offers at Stated Prices.
Section 6................  3340. Prohibition on Transactions,
                            Publication of Quotations, or Publication of
                            Indications of Interest During Trading
                            Halts.
Section 7................  3350. Suspension of Trading.
Section 8................  3351. Trading Practices.
Section 9................  3360. Short-Interest Reporting.
Section 10...............  3370. Prompt Receipt and Delivery of
                            Securities.
Section 11...............  3380. Order Entry and Execution Practices.
Section 12...............  3381. SEC Rule 19c-1--Governing Certain Off-
                            Board Agency Transactions by Members of
                            National Securities Exchanges.
Section 13...............  3385. SEC Rule 19c-3 -- Governing Off-Board
                            Trading by Members of National Securities
                            Exchanges.
Section 14...............  3390. SEC Rule 604--Display of Customer Limit
                            Orders.
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[[Page 80205]]

    The Exchange also proposes to update two obsolete cross-references 
in Equity 9, Section 4 (Manipulative and Deceptive Quotations) that 
currently point to Rules 2110 and 2120. Rule 2110 (Standards of 
Commercial Honor and Principles of Trade) was previously renumbered as 
Nasdaq Rule 2010A, which the Exchange then relocated to General 9, 
Section 1 of the Rulebook shell under SR-NASDAQ-2020-098.\9\ Rule 2120 
(Use of Manipulative, Deceptive or Other Fraudulent Devices) was 
likewise relocated to General 9, Section 1 of the Rulebook shell under 
SR-NASDAQ-2019-098.
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    \9\ See Securities Exchange Act Release No. 68153 (November 5, 
2012), 77 FR 67409 (November 9, 2012) (SR-NASDAQ-2012-124).
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Equity 10
    The Exchange proposes to title Equity 10, which is currently 
reserved, to ``Other Products and Securities,'' and to relocate the 
following rules into Equity 10:

------------------------------------------------------------------------
        Shell rule                          Current rule
------------------------------------------------------------------------
Section 1................  2310A. Direct Participation Programs.
Section 2................  2830. Investment Company Securities.
Section 3................  2840. Trading in Index Warrants, Currency
                            Index Warrants, and Currency Warrants.
                           2841. General.
                           2842. Definitions.
Section 4................  2850. Position Limits.
Section 5................  2851. Exercise Limits.
Section 6................  2852. Reporting Requirements.
Section 7................  2853. Liquidation of Index Warrant Positions.
Section 8................  4630. Trading in Commodity-Related
                            Securities.
------------------------------------------------------------------------

Equity 11: Uniform Practice Code
    The Exchange proposes to add new Equity 11, titled ``Uniform 
Practice Code,'' and relocate the current Rule 11000 Series into new 
Equity 11 without renumbering them.
    The Exchange also proposes to update an obsolete cross-reference in 
IM-11720 (Obligations of Members Who Discover Securities in Their 
Possession to Which They Are Not Entitled) that currently points to 
Rule 2110. Rule 2110 (Standards of Commercial Honor and Principles of 
Trade) was previously renumbered as Nasdaq Rule 2010A, which the 
Exchange then relocated to General 9, Section 1 of the Rulebook shell 
under SR-NASDAQ-2020-098.\10\
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    \10\ Id.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest by bringing greater transparency to its rules 
by relocating the equity and general rules into the new Rulebook shell 
together with other rules which have already been relocated.\13\ The 
Exchange's proposal is consistent with the Act and will protect 
investors and the public interest by harmonizing its rules, where 
applicable, across Nasdaq markets so that members can readily locate 
rules which cover similar topics. The relocation and harmonization of 
the Nasdaq Rules is part of the Exchange's continued effort to promote 
efficiency and conformity of its processes with those of its affiliated 
exchanges. The Exchange believes that the placement of the Nasdaq 
equity and general rules into their new location in the shell will 
facilitate the use of the Rulebook by members. Specifically, the 
Exchange believes that market participants that are members of more 
than one Nasdaq market will benefit from the ability to compare 
Rulebooks.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ See supra note 3.
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    The Exchange is not substantively amending rule text. The 
renumbering, re-lettering, deleting reserved and already deleted rules, 
amending cross-references and other minor technical changes will bring 
greater transparency to Nasdaq's Rules. The Exchange's affiliates 
intend to file similar rule changes to relocate their respective equity 
and general rules into the same location in each Rulebook for ease of 
reference. The Exchange believes its proposal will benefit investors 
and the general public by increasing the transparency of its Rulebook 
and promoting easy comparisons among the various Nasdaq affiliated 
exchanges' Rulebooks.

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

    The Exchange 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. The Exchange believes that the 
proposed amendments do not impose an undue burden on competition 
because the amendments to relocate the equity and general rules are 
non-substantive. This rule change is intended to bring greater clarity 
to the Exchange's Rules and to promote easy comparisons among the 
various Nasdaq affiliated exchanges' Rulebooks. Renumbering, re-
lettering, deleting reserved rules and amending cross-references will 
bring greater transparency to Nasdaq's Rules.

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.

[[Page 80206]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization 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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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay. Waiver of the 
operative delay would allow the Exchange to immediately relocate its 
rules and continue to file other rules that are affected by this 
relocation in a timely manner. The Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission waives 
the 30-day operative delay and designates the proposal operative upon 
filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2020-079 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-2020-079. 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 (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2020-079 and should be submitted 
on or before January 4, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27200 Filed 12-10-20; 8:45 am]
BILLING CODE 8011-01-P