Document ID: SEC-2017-2129-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq Stock Market, LLC
Posted Date: 2017-12-21T05:00Z

[Federal Register Volume 82, Number 244 (Thursday, December 21, 2017)]
[Notices]
[Pages 60637-60639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27464]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82335; File No. SR-NASDAQ-2017-088]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Amendment No. 1 and Order Instituting Proceedings 
To Determine Whether To Approve or Disapprove a Proposed Rule Change, 
as Modified by Amendment No. 1, To Allow Participants To Designate When 
an Order With a RTFY or SCAN Routing Order Attribute Will Be Activated 
During Pre-Market Hours

December 15, 2017

I. Introduction

    On August 30, 2017, 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 Nasdaq Rule 4703(a) to allow participants 
to designate when an order with a RTFY or SCAN routing order attribute 
will be activated during Pre-Market Hours. The proposed rule change was 
published for comment in the Federal Register on September 18, 2017.\3\ 
On October 31, 2017, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the proposed 
rule change.\5\ The Commission has received no comment letters on the 
proposed rule change. On December 13, 2017, the Exchange filed 
Amendment No. 1 to the proposed rule change.\6\ The Commission is 
publishing this notice and order to solicit comments on the proposed 
rule change, as modified by Amendment No. 1, from interested persons 
and to institute proceedings pursuant to Section 19(b)(2)(B) of the Act 
\7\ to determine whether to approve or disapprove the proposed rule 
change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81579 (September 12, 
2017), 82 FR 43584.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 81986, 82 FR 51453 
(November 6, 2017). The Commission designated December 17, 2017 as 
the date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.
    \6\ In Amendment No. 1, the Exchange: (1) Modified the proposal 
to allow participants entering an order with the RTFY or SCAN 
routing order attribute to designate the order to activate at a 
specific time during Pre-Market Hours (rather than System Hours) on 
the same day; (2) specified that the proposed functionality would be 
offered on a port level basis; (3) stated that all of the times-in-
force in Nasdaq Rule 4703(a) currently apply to orders with the RTFY 
or SCAN routing order attribute and made corresponding 
clarifications and corrections throughout the proposal; (4) provided 
additional information regarding why participants might use the 
proposed functionality; and (5) provided additional discussion 
regarding members' best execution obligations and the application of 
the Exchange's regulatory checks associated with the proposed 
functionality, and reminded members of their regulatory obligations 
(e.g., Market Access Rule, Regulation SHO) when using the proposed 
functionality. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2017-088/nasdaq2017088-2798107-161689.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal

    The Exchange proposes to amend Nasdaq Rule 4703(a) to allow 
participants to designate a specific time during Pre-Market Hours \8\ 
when an order with a RTFY or SCAN routing order attribute will be 
activated.
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    \8\ ``Pre-Market Hours'' means the period of time beginning at 
4:00 a.m. ET and ending immediately prior to the commencement of 
Market Hours. See Nasdaq Rule 4701(g). ``Market Hours'' means the 
period of time beginning at 9:30 a.m. ET and ending at 4:00 p.m. ET 
(or such earlier time as may be designated by Nasdaq on a day when 
Nasdaq closes early). See id. ``System Hours'' means the period of 
time beginning at 4:00 a.m. ET and ending at 8:00 p.m. ET (or such 
earlier time as may be designated by Nasdaq on a day when Nasdaq 
closes early). See id.
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    RTFY is a routing option available for an order that qualifies as a 
designated retail order under which orders check the system for 
available shares only if so instructed by the entering firm and are 
thereafter routed to destinations on the system routing table.\9\ If 
shares remain unexecuted after routing, they are posted to the Nasdaq 
book.\10\ Once on the book, should the order subsequently be locked or 
crossed by another market center, the system will not route the order 
to the locking or crossing market center.\11\ RTFY is designed to allow 
orders to participate in the opening, reopening, and closing process of 
the primary listing market for a security.\12\ SCAN is a routing option 
under which orders check the system for available shares and 
simultaneously route the remaining shares to destinations on the system 
routing table.\13\ If shares remain unexecuted after routing, they are 
posted on the Nasdaq book.\14\ Once on the book, should the order 
subsequently be locked or crossed by another market center, the system 
will not route the

[[Page 60638]]

order to the locking or crossing market center.\15\
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    \9\ See Nasdaq Rule 4758(a)(1)(A)(v)b.
    \10\ See id.
    \11\ See id.
    \12\ See id.
    \13\ See Nasdaq Rule 4758(a)(1)(A)(iv).
    \14\ See id.
    \15\ See id.
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    Nasdaq Rule 4703(a) provides the times-in-force that may be 
assigned to orders entered into the system. According to Nasdaq Rule 
4703(a), participants specify an order's time-in-force by designating a 
time at which the order will become active and a time at which the 
order will cease to be active. All of the times-in-force currently 
described in Nasdaq Rule 4703(a) are applicable to orders with RTFY or 
SCAN routing order attributes.\16\ According to the Exchange, during 
Pre-Market Hours, participants usually designate orders with RTFY or 
SCAN routing order attributes to activate upon entry or at 8:00 a.m. 
ET.\17\ The Exchange now proposes to amend Nasdaq Rule 4703(a) to 
provide that a participant entering an order with the RTFY or SCAN 
routing order attribute may designate the order to activate at a 
specific time during Pre-Market Hours on the same day.\18\ The Exchange 
proposes to offer this functionality on a port level basis.\19\ As a 
result, if, for example, a participant cancels an order entered through 
a port set for 8:00 a.m. ET activation and wishes the order to instead 
activate at 8:20 a.m. ET, it must either have another port set for 
activation at 8:20 a.m. ET or, alternatively, enter the order at that 
time for immediate activation.\20\
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    \16\ See Amendment No. 1.
    \17\ See id.
    \18\ Participants may cancel their inactive orders with RTFY or 
SCAN routing order attributes at any time before they are activated. 
See id.
    \19\ See id.
    \20\ See id.
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    According to the Exchange, as of the time that an order with a RTFY 
or SCAN routing order attribute is activated, the Exchange would 
subject orders that are eligible for display or execution to all of the 
Exchange's standard regulatory checks (including compliance with 
Regulation NMS, Regulation SHO, and relevant Exchange rules), as it 
currently does with all orders upon entry.\21\
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    \21\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
NASDAQ-2017-088, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \22\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of proceedings is appropriate at this time in 
view of the legal and policy issues raised by the proposal, as 
discussed below. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide additional comment on the 
proposed rule change, as modified by Amendment No. 1.
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    \22\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\23\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
noted above, during Pre-Market Hours, Exchange participants usually 
designate orders with the RTFY or SCAN routing order attribute to 
activate upon entry or at 8:00 a.m. ET. The Exchange now proposes to 
permit participants to designate orders with the RTFY or SCAN routing 
order attribute to activate at any time during Pre-Market Hours on the 
same day (i.e., at any specified time during the period beginning at 
4:00 a.m. ET and ending immediately prior to the commencement of Market 
Hours). As a result, participants could designate any time during Pre-
Market Hours (rather than only 8:00 a.m. ET) to activate orders with 
the RTFY or SCAN routing order attribute, and the time between order 
entry and order activation could be much longer than is currently the 
case.
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    \23\ Id.
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    The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the consistency 
of the proposal with Section 6(b)(5) \24\ of the Act. Section 6(b)(5) 
of the Act requires that the rules of a national securities exchange be 
designed, among other things, 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, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \24\ 15 U.S.C. 78f(b)(5).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) or any other provision of the Act, or rules and regulations 
thereunder. Although there do not appear to be any issues relevant to 
approval or disapproval that would be facilitated by an oral 
presentation of data, views, and arguments, the Commission will 
consider, pursuant to Rule 19b-4 under the Act,\25\ any request for an 
opportunity to make an oral presentation.\26\
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    \25\ 17 CFR 240.19b-4.
    \26\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by January 11, 2018. 
Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by January 25, 2018. The Commission 
asks that commenters address the sufficiency of the Exchange's 
statements in support of the proposal, which are set forth in Amendment 
No. 1,\27\ in addition to any other comments they may wish to submit 
about the proposed rule change.
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    \27\ See supra note 6.
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    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 No. SR-NASDAQ-2017-088 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 No. SR-NASDAQ-2017-088. The 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

[[Page 60639]]

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 No. SR-NASDAQ-2017-088 and should be submitted by 
January 11, 2018. Rebuttal comments should be submitted by January 25, 
2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Robert W. Errett,
Deputy Secretary.
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    \28\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
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[FR Doc. 2017-27464 Filed 12-20-17; 8:45 am]
 BILLING CODE 8011-01-P