Document ID: SEC-2018-1683-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2018-10-31T04:00Z

[Federal Register Volume 83, Number 211 (Wednesday, October 31, 2018)]
[Notices]
[Pages 54801-54803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23731]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84488; File No. SR-NASDAQ-2018-082]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Derivative Securities Traded Under Unlisted Trading 
Privileges

October 25, 2018.
    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 October 12, 2018, 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 Nasdaq Rule 5740 related to 
derivative securities traded under unlisted trading privileges 
(``UTP'') to remove the requirement in Rule 5740(a)(1) for the Exchange 
to file with the Commission a Form 19b-4(e) for each ``new derivative 
securities product'' as defined in Rule 19b-4(e) under the Act \3\ 
(``Derivative Security'') traded under UTP and renumber the remaining 
provisions of Rule 5740(a) to maintain an organized rule structure. The 
Exchange has designated this rule change as ``non-controversial'' under 
Section 19(b)(3)(A) of the Act \4\ and provided the Commission with the 
notice required by Rule 19b-4(f)(6) thereunder.\5\
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    \3\ 17 CFR 240.19b-4(e)
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.com, 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 the proposed rule change is to amend Rule 5740 
related to derivative securities traded under UTP by removing the 
requirement in Rule 5740(a)(1) for the Exchange to file with the 
Commission a Form 19b-4(e) for each Derivative Security, and 
renumbering the remaining rules of Rule 5740(a) to maintain an 
organized rule structure, as described below.
    Rule 5740(a)(1) sets forth the requirement for Nasdaq to file with 
the Commission a Form 19b-4(e) with respect to each Derivative Security 
that is traded under UTP. However, Nasdaq believes that it should not 
be necessary to file a Form 19b-4(e) with the Commission if it begins 
trading a Derivative Security on a UTP basis, because Rule 19b-4(e)(1) 
under the Act refers to the ``listing and trading'' of a ``new 
derivative securities product.'' The Exchange believes that the 
requirements of that rule refers to when an exchange lists and trades a 
Derivative Security, and not when an exchange seeks only to trade such 
product on a UTP basis pursuant to Rule 12f-2 under the Act.\6\ 
Therefore, Nasdaq proposes to delete the requirement in current Rule 
5740(a)(1) for Nasdaq to file a Form 19b-4(e) with the Commission with 
respect to each Derivative Security it begins trading on a UTP basis. 
In addition, as a result of the deletion of

[[Page 54802]]

current Rule 5740(a)(1) Nasdaq proposes to renumber current Rules 
5740(a)(2)-(6), as Rules 5740(a)(1)-(5) respectively.
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    \6\ 17 CFR 240.12f-2.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6(b) \7\ of the Act in general, and furthers 
the objectives of Section 6(b)(5) of the Act \8\ in particular, in that 
it is designed to prevent fraudulent and manipulative acts and 
practices, 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. Specifically, eliminating the requirement to file a 
Form 19b-4(e) for each Derivative Security the Exchange begins trading 
on a UTP basis removes an unnecessary regulatory requirement thereby 
providing for a more efficient process for adding Derivative Securities 
to trading on the Exchange on a UTP basis.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    In addition, the Exchange notes that a substantially identical 
proposed rule change by NYSE National, Inc. (``NYSE National'') was 
recently approved by the Commission.\9\ In particular, the Commission 
noted in the approval order that it ``believes that the filing of a 
Form 19b-4(e) is not required when an Exchange is trading a new 
derivative securities product on a UTP basis only'' \10\ and also found 
that the NYSE National's proposed rule change is ``consistent with the 
requirements of Section 6(b)(5) of the Act.'' \11\
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    \9\ See Securities Exchange Act Release No. 83289 (May 17, 
2018), 83 FR 23968 (May 23, 2018) (Order Approving File No. SR-
NYSENAT-2018-02).
    \10\ See supra note 9 at page 23975 at footnote 149.
    \11\ See supra note 9 at page 23975-6.
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    With respect to the renumbering of current Rules 5740(a)(2)-(6) as 
Rules 5740(a)(1)-(5), the Exchange believes that these changes are 
consistent with the Act because they will allow the Exchange to 
maintain a clear and organized rule structure, thus preventing investor 
confusion.
    For these reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

    Nasdaq does not believe that 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. To the contrary, removing the 
requirement to file a Form 19b-4(e) will serve to enhance competition 
by providing for the efficient addition of Derivative Securities for 
trading under UTP on Nasdaq. To the extent that a competitor 
marketplace believes that the proposed rule change places it at a 
competitive disadvantage, it may file with the Commission a proposed 
rule change to adopt the same or similar rule.
    In addition, the proposal to renumber the current Rules 5740(a)(2)-
(6) as Rules 5740(a)(1)-(5) does not impact competition in any respect 
since it merely maintains a clear and organized rule structure.

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

    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)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission notes that the Exchange's proposal is similar to 
a proposal the Commission has previously approved.\14\ Accordingly, the 
Commission believes that the proposal raises no new or novel regulatory 
issues and waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission 
therefore waives the 30-day operative delay and designates the proposed 
rule change to be operative upon filing.\15\
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    \14\ See supra note 9.
    \15\ 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.

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 [email protected]. Please include 
File Number SR-NASDAQ-2018-082 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-2018-082. 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

[[Page 54803]]

submissions should refer to File Number SR-NASDAQ-2018-082 and should 
be submitted on or before November 21, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-23731 Filed 10-30-18; 8:45 am]
 BILLING CODE 8011-01-P