Document ID: SEC-2016-0552-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2016-03-31T04:00Z

[Federal Register Volume 81, Number 62 (Thursday, March 31, 2016)]
[Notices]
[Pages 18658-18659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07196]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77445; File No. SR-NASDAQ-2016-008]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
To Amend Rule 4120

March 25, 2016.

I. Introduction

    On January 29, 2016, The NASDAQ Stock Market LLC (``Exchange'' or 
``Nasdaq'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend the process for commencing trading in a 
security that is the subject of an initial public offering (``IPO'') or 
a trading halt. The proposed rule change was published for comment in 
the Federal Register on February 11, 2016.\3\ On March 23, 2016, the 
Exchange filed Amendment No. 1 to the proposed rule change.\4\ The 
Commission received no comment letters on the proposed rule change. 
This order approves the

[[Page 18659]]

proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77066 (February 5, 
2016), 81 FR 7398 (``Notice'').
    \4\ In Amendment No. 1, the Exchange clarified that it will not 
accept orders for a security prior to having its registration 
statement declared effective. Because Amendment No. 1 adds 
clarification and does not materially alter the substance of the 
proposed rule change or raise unique or novel regulatory issues, 
Amendment No. 1 is not subject to notice and comment (Amendment No. 
1 to the proposed rule change is available at: http://www.sec.gov/rules/sro/nasdaq.shtml).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to amend Nasdaq Rules 4120(c)(4)(B), 
4120(c)(7)(A), and 4120(c)(8)(A) to modify the ways in which orders are 
handled prior to the commencement of trading in a security that is the 
subject of an IPO or a trading halt.
    Currently, during any trading halt or pause for which a halt cross 
under Nasdaq Rule 4753 will not occur (i.e., a trading halt or pause 
for non-Nasdaq-listed securities), market participants may enter orders 
in the security subject to such trading halt or pause, and designate 
such orders to be held in a suspended state until the termination of 
the trading halt or pause, at which time the orders will be entered 
into the system.\5\ Under the proposal, rather than holding such orders 
in a suspended state until the termination of the trading halt or 
pause, the Exchange would not accept such orders, unless an order is 
subject to instructions that it will be directed to another exchange as 
described in Nasdaq Rule 4758.\6\
---------------------------------------------------------------------------

    \5\ See Nasdaq Rule 4120(c)(4)(B).
    \6\ See proposed Rule 4120(c)(4)(B).
---------------------------------------------------------------------------

    Currently, for Nasdaq-listed securities, prior to terminating a 
trading halt or pause initiated under Nasdaq Rule 4120(a)(1), (4), (5), 
(6), (9), (10), (11), or (12)(F), there is a 5-minute Display Only 
Period during which market participants may enter quotes and orders for 
the security subject to the halt or pause into Nasdaq's system.\7\ When 
a trading halt is in effect prior to the commencement of the Display 
Only Period, market participants may enter orders for the security and 
designate such orders to be held in a suspended state until the 
beginning of the Display Only Period, at which time the orders will be 
entered into the system.\8\ Under the proposal, when a trading halt is 
in effect prior to the commencement of the Display Only Period, market 
participants may enter orders for the security that is subject to the 
trading halt and, rather than requiring market participants to 
designate these orders to be held until the beginning of the Display 
Only Period, these orders would be accepted and entered into the 
system.\9\
---------------------------------------------------------------------------

    \7\ See Nasdaq Rule 4120(c)(7)(A).
    \8\ See id.
    \9\ See proposed Rule 4120(c)(7)(A). The Exchange notes that it 
would disseminate the quotes collected during the halt in a non-
tradable state where they are clearly identified as being closed, 
and that these quotes would be non-actionable. See Notice, supra 
note 3, at 7399.
---------------------------------------------------------------------------

    Currently, prior to terminating a trading halt initiated under 
Nasdaq Rule 4120(a)(7), there is a 15-minute Display Only Period during 
which market participants may enter quotes and orders for the 
security.\10\ In addition, beginning at 4:00 a.m., market participants 
may enter orders for a security that is the subject of an IPO on the 
Exchange and designate such orders to be held until the beginning of 
the 15-minute Display Only Period, at which time they will be entered 
into the system.\11\ Under the proposal, beginning at 4:00 a.m., market 
participants may enter orders for a security that is the subject of an 
IPO on the Exchange and, rather than requiring market participants to 
designate such orders to be held until the beginning of the Display 
Only Period, such orders would be accepted and entered into the 
system.\12\
---------------------------------------------------------------------------

    \10\ See Nasdaq Rule 4120(c)(8)(A).
    \11\ See id.
    \12\ See proposed Rule 4120(c)(8)(A). See also supra note 9.
---------------------------------------------------------------------------

    The Exchange notes that it will issue an Equity Trader Alert to 
notify Exchange member firms of the changes.\13\
---------------------------------------------------------------------------

    \13\ See Notice, supra note 3, at 7399. For a more detailed 
description of the proposed rule change, see Notice, supra note 3.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\14\ In particular, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\15\ which requires, among other things, 
that the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, 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. As noted above, the Commission 
received no comment letters regarding the proposed rule change.
---------------------------------------------------------------------------

    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that, according to the Exchange, the proposed 
changes will improve and simplify its process for commencing trading of 
securities that are the subject of IPOs and trading halts.\16\ With 
respect to non-Nasdaq-listed securities, the Exchange notes that the 
proposal would reduce confusion about where to send orders during a 
trading halt.\17\ With respect to Nasdaq-listed securities, the 
Exchange notes that the process of holding orders in a suspended state 
prior to the commencement of the Display Only Period has not been 
widely used.\18\ The Exchange also notes that the existing process 
requires special settings on participant ports, whereas under the 
proposed process, orders for Nasdaq-listed securities will be 
immediately accepted and entered into the system without any special 
port settings.\19\ Moreover, according to the Exchange, accepting 
orders immediately rather than holding them in a suspended state will 
clarify the state of the orders, which will reduce confusion for market 
participants in times of increased activity, such as during a halt or 
IPO.\20\ For these reasons, the Commission believes that the proposed 
rule change, as modified by Amendment No. 1, is consistent with the 
Act.
---------------------------------------------------------------------------

    \16\ See Notice, supra note 3, at 7400.
    \17\ See id. at 7399. According to Nasdaq, market participants 
may use Nasdaq routing strategies that submit orders to the primary 
listing exchange for auctions or submit their orders directly to the 
primary listing exchange. See id.
    \18\ See id.
    \19\ See id.
    \20\ See id. at 7400.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NASDAQ-2016-008), as 
modified by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-07196 Filed 3-30-16; 8:45 am]
BILLING CODE 8011-01-P