Document ID: SEC-2023-1402-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2023-12-06T05:00Z

[Federal Register Volume 88, Number 233 (Wednesday, December 6, 2023)]
[Notices]
[Pages 84853-84855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26725]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99044; File No. SR-NASDAQ-2023-049]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt a New LSTY Routing Option Under Rule 4758

November 30, 2023.
    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 16, 2023, 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 a new LSTY routing option under Rule 
4758.
    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

[[Page 84854]]

the most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend Equity 4, Rule 4758 to add 
subsection (a)(1)(A)(x)b. for a new routing option \3\ called LSTY. The 
proposed LSTY voluntary routing option arose out of client interest in 
Nasdaq amending its rules to create a new routing strategy similar to 
the existing LIST strategy.\4\ Clients currently using the LIST routing 
strategy have requested that Nasdaq provide a version of this strategy 
that will look to access available liquidity at their limit price or 
better by rerouting to away market centers in the event their order is 
locked or crossed by an away market center while the order is on the 
book. This proposed change will introduce a new variation of the LIST 
strategy, called LSTY, that will share all existing functionality with 
LIST with the exception of routing to away market centers after an 
order is booked.
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    \3\ Routing is an Order Attribute that allows a Participant to 
designate an Order to employ one of several Routing Strategies (also 
called ``routing options'') offered by Nasdaq, as described in Rule 
4758; such an Order may be referred to as a ``Routable Order.'' Upon 
receipt of an Order with the Routing Order Attribute, the System 
will process the Order in accordance with the applicable Routing 
Strategy. In the case of a limited number of Routing Strategies, the 
Order will be sent directly to other market centers for potential 
execution. For most other Routing Strategies, the Order will attempt 
to access liquidity available on Nasdaq in the manner specified for 
the underlying Order Type and will then be routed in accordance with 
the applicable Routing Strategy. Shares of the Order that cannot be 
executed are then returned to Nasdaq, where they will (i) again 
attempt to access liquidity available on Nasdaq and (ii) post to the 
Nasdaq Book or be cancelled, depending on the Time-in-Force of the 
Order. See Rule 4703(f).
    \4\ LIST is a routing option designed to allow orders to 
participate in the opening and/or closing process of the primary 
listing market for a security. See Nasdaq Rule 4758(a)(1)(A)(x).
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    After the security has opened on its primary listing market, a LIST 
order that has not been designated opening only and that has not been 
fully executed, rejected, or cancelled will be returned to the Nasdaq 
system (the ``System''). Thereafter, the order will check the System 
for available shares and simultaneously route the remaining shares to 
destinations on the System routing table. Any remaining shares are 
posted on the Nasdaq book. In addition, if a LIST order is entered 
after the security has opened on the primary listing market (but prior 
to two minutes before market close) and the order has not been 
designated to participate in the opening only, Nasdaq will check the 
System for available shares and simultaneously route the remaining 
shares to destinations on the System routing table, with remaining 
shares posted on the book.
    Once the order is on the book, orders entered with the LIST routing 
option do not route the order to the locking or crossing market center. 
With the proposed LSTY routing option, once on the book, should the 
order subsequently be locked or crossed by another market center, the 
System will route the order to the locking or crossing market center.
    Two minutes before market close, all LIST orders on the book will 
begin routing to the security's primary listing market for 
participation in its closing process. If a LIST order is received at or 
after a time that is two minutes before market close but before market 
close, Nasdaq will check the System for available shares and 
simultaneously route the remaining shares to destinations on the System 
routing table; remaining shares will be routed to the security's 
primary listing market to participate in its closing process.
    In sum, LSTY is a routing option that is a variation of the LIST 
routing option and shares all the existing functionality with the 
exception that after an order is booked, if the order is subsequently 
locked or crossed by another market center, the System will route the 
order to the locking or crossing market center. The System will only 
route an order to the locking or crossing market center after the 
security has opened on the primary listing market and prior to two 
minutes before market close.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change will satisfy the objectives 
of Section 6(b)(5) of the Act by providing market participants with an 
additional voluntary routing strategy that is similar to the existing 
LIST strategy, except where that System will route an order to the 
locking or crossing market center should the order subsequently be 
locked or crossed by another accessible market center once the order is 
on the book. The proposed change is designed to route to locking or 
crossing quotations, which clears locked or crossed market conditions 
and helps support fair and orderly markets that protects investors and 
the public interest.
    Nasdaq also believes the proposal is not designed to permit unfair 
discrimination among market participants because the proposal is for a 
voluntary routing option and will be available to any market 
participant that so chooses to use it. Additionally, as the Exchange 
notes above, the LSTY routing option is similar to the existing LIST 
routing option already offered by the Exchange.
    For the foregoing reasons, the Exchange believes that the proposed 
rule change is consistent with the Act.

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 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. As discussed above, the 
proposed routing option is voluntary and similar to an existing routing 
option. Furthermore, the Exchange provides routing services in a highly 
competitive market in which participants may avail themselves of a wide 
variety of routing options offered by other exchanges, alternative 
trading systems, other broker-dealers, market participants' own 
proprietary routing systems, and service bureaus. In such an 
environment, system enhancements such as the changes proposed in this 
rule filing do not burden competition, because they can succeed in 
attracting order flow to the Exchange only if they offer investors 
higher quality and better value than services offered by others. 
Encouraging competitors to provide higher quality and better value is 
the essence of a well-functioning competitive marketplace.
    For the foregoing reasons, the Exchange does not believe the 
proposed rule change will result in any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.

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 84855]]

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)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 the 
Exchange's 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) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ 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 so that the proposal 
may become operative immediately upon filing. The Exchange states that 
it wants to implement the LSTY routing option during the 4th quarter of 
2023 and granting the waiver would allow market participants and their 
customers to benefit more immediately from the increased order handling 
flexibility provided by the LSTY routing option. In addition, the 
Exchange stated that the proposed rule change presents no unique or 
novel issues that have not already been addressed by the Commission. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposal operative upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 such 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 under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-2023-049 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-2023-049. 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 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2023-049 and should 
be submitted on or before December 27, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26725 Filed 12-5-23; 8:45 am]
BILLING CODE 8011-01-P