Document ID: SEC-2022-1591-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2022-12-12T05:00Z

[Federal Register Volume 87, Number 237 (Monday, December 12, 2022)]
[Notices]
[Pages 76095-76097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26865]

[[Page 76095]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96452; File No. SR-NASDAQ-2022-069]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Equity 4, Rule 4753 and Equity 4, Rule 4703

December 6, 2022.
    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 25, 2022, 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 clarify when Immediate or Cancel Orders 
for halted securities are cancelled by amending Equity 4, Rule 4753 and 
Equity 4, Rule 4703. 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
    First, the Exchange proposes to amend Equity 4, Rule 4753,\3\ which 
governs the Nasdaq Halt Cross process, to clarify the Exchange's 
existing practice that (1) any IOC Order for a halted security that is 
entered prior to the Nasdaq Closing Cross and for which the halt 
remains in effect at the commencement of the Nasdaq Closing Cross, is 
cancelled immediately after the Nasdaq Closing Cross; and (2) any IOC 
Order for a halted security that is entered after the Nasdaq Closing 
Cross and for which the halt remains in effect at 8:00 p.m. ET (or 5:00 
p.m. ET in the event of a Scheduled Early Close), is cancelled at 8:00 
p.m. ET (or 5:00 p.m. ET in the event of a Scheduled Early Close). 
Second, the Exchange proposes to delete the Time-in-Force definition of 
``System Hours Immediate or Cancel'' or ``SIOC'' contained in Equity 4, 
Rule 4703(a)(1) to avoid confusion. Finally, the Exchange proposes 
adding a cross-reference to Rule 4703(a)(1), which would reference the 
new language in Rule 4753.
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    \3\ Hereinafter, references to the Rule 4000 Series shall mean 
the Rule Series set forth in Equity 4 of the Exchange's Rulebook.
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    An Order with a Time in Force of ``Immediate or Cancel'' or ``IOC'' 
is designated to deactivate or execute, as applicable, immediately 
after determining whether the Order is marketable. However, if an IOC 
Order is entered for a halted security, the System cannot determine the 
marketability of the Order. Assuming trading of the halted security 
does not resume, the Order is cancelled, either after the Nasdaq 
Closing Cross if the Order is entered prior to the Nasdaq Closing Cross 
or at 8:00 p.m. ET (or 5:00 p.m. ET in the event of a Scheduled Early 
Close) if the Order is entered after the Nasdaq Closing Cross. The 
proposed rule change is specific to IOC Orders for halted securities 
(for which a halt cross will occur).\4\
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    \4\ During any trading halt or pause for which a halt cross 
under Rule 4753 will not occur, orders entered during the trading 
halt or pause are not accepted, unless subject to instructions that 
the order will be directed to another exchange as described in Rule 
4758. Rule 4120(c)(4)(B).
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    When an IOC Order for a halted security is received prior to the 
Nasdaq Closing Cross, the Order remains valid until the Nasdaq Closing 
Cross. If the security remains halted at the commencement of the Nasdaq 
Closing Cross, the Exchange cancels the Order immediately after the 
Nasdaq Closing Cross. For example, consider Stock A is halted at 11:00 
a.m. ET. The Exchange receives an IOC Order for Stock A at 2:00 p.m. 
ET. The Nasdaq Closing Cross commences at 4:00 p.m. ET and Stock A 
remains halted. The IOC Order for Stock A is cancelled immediately 
after the Nasdaq Closing Cross. This practice is consistent with 
customer expectations and how the Exchange currently operates. If the 
halt is lifted prior to the Nasdaq Closing Cross, the Orders execute in 
the re-opening auction, if marketable, or otherwise cancel. To the 
extent the halt remains in place at the commencement of the Nasdaq 
Closing Cross, participants do not expect the Orders to remain eligible 
after hours and therefore, expect the IOC Orders to expire immediately 
after the Nasdaq Closing Cross.\5\ If the IOC Order for Stock A 
described above was not cancelled after the Nasdaq Closing Cross and 
the halt was lifted in the extended trading hours, the Order could get 
filled at an unexpected price, particularly during extended trading 
hours when many securities are thinly traded.
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    \5\ This is akin to the Exchange's practice to deactivate day 
orders after the Nasdaq Closing Cross. See Rule 4703(a)(5). The 
practice is also consistent with the definition of ``Market Hours 
Immediate of Cancel'' or ``MIOC.'' See Rule 4703(a)(1).
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    When an IOC Order for a halted security is received after the 
Nasdaq Closing Cross, the Order remains valid until 8:00 p.m. ET (or 
5:00 p.m. ET in the event of a Scheduled Early Close). If the security 
remains halted at 8:00 p.m. ET (or 5:00 p.m. ET in the event of a 
Scheduled Early Close), the Exchange cancels the Order at 8:00 p.m. ET 
(or 5:00 p.m. ET in the event of a Scheduled Early Close). For example, 
consider Stock A is halted at 11:00 a.m. ET. The Exchange receives an 
IOC Order for Stock A at 4:01 p.m. ET, after the Nasdaq Closing Cross. 
In this example, the IOC Order for Stock A remains valid until 8:00 
p.m. ET. If the security remains halted at 8:00 p.m. ET, the Order is 
cancelled at that time. This practice is consistent with customer 
expectations and how the Exchange currently operates. Participants who 
enter IOC Orders for halted securities after the Nasdaq Closing Cross 
intend for the Order to be eligible for execution in the extended hours 
session, ending at 8:00 p.m. ET (or 5:00 p.m. ET in the event of a 
Scheduled Early Close). If the Orders were not cancelled, the security 
may resume trading and the Order may be filled at a price not expected 
by the customer.
    Notwithstanding the absence of express language in the Rules, the

[[Page 76096]]

Exchange believes that the current practice is consistent with customer 
expectations. The Exchange is aware of no customer confusion on the 
issue. Nevertheless, the Exchange believes that the existing Rules 
would benefit from clarification so as to avoid the potential for any 
confusion in the future. Accordingly, the Exchange proposes to add a 
new section (e) to Rule 4753 to codify the existing practice.
    In addition, the Exchange proposes to delete the Time-in-Force 
definition of ``System Hours Immediate or Cancel'' or ``SIOC'' from 
Equity 4, Rule 4703(a)(1). Specifically, the Exchange proposes to 
delete the following language:

    An Order with a Time-in-Force of IOC that is entered at any time 
between 4:00 a.m. ET and 8:00 p.m. ET may be referred to as having a 
Time-in-Force of ``System Hours Immediate or Cancel'' or ``SIOC''.

    The defined term ``System Hours Immediate or Cancel'' or ``SIOC'' 
is not referenced elsewhere in Nasdaq's Rules. Moreover, the language 
and purpose thereof are unclear. The Exchange believes that the 
language should be deleted to avoid confusion as the definitions of 
``Market Hours Immediate or Cancel'' or ``MIOC'' and SIOC include 
overlapping hours. Furthermore, in the case of IOC Order for halted 
securities, the SIOC definition does not make clear the current 
practice that any IOC Order for a halted security that is entered prior 
to the Nasdaq Closing Cross is cancelled immediately after the Nasdaq 
Closing Cross if the security remains halted at the commencement of the 
Nasdaq Closing Cross. The Exchange also proposes adding a cross-
reference to Rule 4703(a)(1), which would reference the new language in 
Rule 4753. The Exchange believes that the proposed deletion and cross-
reference in Rule 4703, coupled with proposed Rule 4753(e), would help 
to avoid the potential for any confusion in the future.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it is just and equitable, and in the 
interests of the public and investors, for the Exchange to (1) remove 
unnecessary language from and add a cross-reference in Rule 4703 and 
(2) amend Rule 4753 to clarify the Exchange's existing practice to 
cancel IOC Orders for halted securities as described above. The 
Exchange believes that the public and investors will benefit from 
increased clarity, which will help limit any potential confusion in the 
future.
    The Exchange also believes that the Exchange's existing practice 
that (1) any IOC Order for a halted security that is entered prior to 
the Nasdaq Closing Cross and for which the halt remains in effect at 
the commencement of the Nasdaq Closing Cross, is cancelled immediately 
after the Nasdaq Closing Cross; and (2) any IOC Order for a halted 
security that is entered after the Nasdaq Closing Cross and for which 
the halt remains in effect at 8:00 p.m. ET (or 5:00 p.m. ET in the 
event of a Scheduled Early Close), is cancelled at 8:00 p.m. ET (or 
5:00 p.m. ET in the event of a Scheduled Early Close) is consistent 
with the protection of investors and the public interest. This practice 
is consistent with both current practice and investor expectations. It 
helps to avoid unexpected executions that might occur if such Orders 
are not cancelled and there are significant changes in the price of the 
security once the halt is lifted, thereby protecting investors and the 
public interest. Furthermore, the Exchange believes that codifying its 
current practice to cancel IOC Orders for halted securities as 
described above, consistent with customer expectations, is designed to 
promote just and equitable principles of trade and remove impediments 
to and perfect the mechanisms of a free and open market as it adds 
clarity to the Exchange's Rules and avoids the potential for any 
confusion.

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 proposal merely codifies 
and clarifies an existing practice of the Exchange to cancel IOC Orders 
for halted securities immediately after the Nasdaq Closing Cross in the 
case of an Order entered prior to the Nasdaq Closing Cross where the 
security remains halted upon commencement of the Nasdaq Closing Cross 
and at 8:00 p.m. ET (or 5:00 p.m. ET in the event of a Scheduled Early 
Close) in the case of an Order entered after the Nasdaq Closing Cross 
where the security remains halted at 8:00 p.m. ET (or 5:00 p.m. ET in 
the event of a Scheduled Early Close). The Exchange would also make 
technical changes to improve the clarity of the proposal. The proposed 
changes are designed to more clearly describe an existing practice and 
make technical and conforming changes to the Rules without changing 
existing practice and, therefore, the Exchange believes that the 
proposed changes will not impose a burden on competition.

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) of the Act \8\ and Rule 19b-
4(f)(6) \9\ thereunder.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 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 pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the 
Commission to 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 proposed 
rule text codifies the Exchange's current practice of handling IOC 
orders for halted securities. In addition, it clarifies the Exchange's 
rules by deleting a term not used elsewhere and adding a cross-
reference. The Commission believes that the proposed rule change does 
not raise any new or novel issues, and waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission hereby waives the

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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 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.\14\
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    \14\ 15 U.S.C. 78s(b)(3)(C).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2022-069.

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-2022-069. 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-2022-069, and should be submitted 
on or before January 3, 2023.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-26865 Filed 12-9-22; 8:45 am]
BILLING CODE 8011-01-P