Document ID: SEC-2023-1331-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2023-11-21T05:00Z

[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81154-81156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25667]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98954; File No. SR-NASDAQ-2023-046]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Shorten the Standard Settlement Cycle

November 15, 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 13, 2023, 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 Rules 11140 (Transactions in 
Securities ``Ex-Dividend,'' ``Ex-Rights'' or ``Ex-Warrants''), 11150 
(Transactions ``Ex-Interest'' in Bonds Which Are Dealt in ``Flat''), 
11210 (Sent by Each Party), 11320 (Dates of Delivery), and 11620 
(Computation of Interest), to conform them to the Commission's 
amendment to Rule 15c6-1(a) of the Act \3\ to shorten the standard 
settlement cycle for most broker-dealer transactions from two business 
days after the trade date (``T+2'') to one business days after the 
trade date (``T+1'').
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    \3\ See Securities Exchange Act Release No. 96930, Investment 
Advisers Act Release No. 6239 (February 15, 2023), 88 FR 13872 
(March 6, 2023) (``T+1 Adopting Release'').
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    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
    Effective May 5, 2023, the Commission adopted rule amendments to 
shorten the standard settlement cycle for most broker-dealer 
transactions from T+2 to T+1.\4\ In light of the recently adopted rule 
amendments to Rule 15c6-1(a) of the Act to require standard settlement 
no later than T+1, Nasdaq proposes to amend its rules pertaining to 
securities settlement by, among other things, amending the definition 
of ``standard'' settlement as occurring on T+1.
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    \4\ See supra note 3.
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    Specifically, Nasdaq proposes to amend the following Rules: 11140 
(Transactions in Securities ``Ex-Dividend,'' ``Ex-Rights'' or ``Ex-
Warrants''), 11150 (Transactions ``Ex-Interest'' in Bonds Which Are 
Dealt in ``Flat''), 11210 (Sent by Each Party), 11320 (Dates of 
Delivery), and 11620 (Computation of Interest). The details of the 
proposed rule changes are described below.
Nasdaq Rule 11140
    Rule 11140(b)(1) currently provides that for dividends or 
distributions, and the issuance or distribution of warrants, that are 
less than 25 percent of the value of the subject security, if 
definitive information is received sufficiently in advance of the 
record date, the date designated as the ``ex-dividend date'' shall be 
the first business day preceding the record date if the record date 
falls on a business day, or the second business day preceding the 
record date if the record date falls on a day designated by Nasdaq 
Regulation as a non-delivery date. Nasdaq proposes to amend Rule 
11140(b)(1) to shorten the time frames by one business day. With this 
change the ex-dividend date would be the same business day as the 
record date if the record date falls on a business day, or the first 
business day preceding the record date if the record date falls on a 
day designated by Nasdaq Regulation as a non-delivery date.
Rule 11150
    Rule 11150(a) currently prescribes the manner for establishing 
``ex-interest dates'' for transactions in bonds or other similar 
evidence of indebtedness which are traded ``flat.'' Such transactions 
are ``ex-interest'' on the first business day preceding the record date 
if the record date falls on a business day, on the second business day 
preceding the record date if the record date falls on a day other than 
a business day, or on the third business day preceding the date on 
which an interest payment is to be made if no record date has been 
fixed. Nasdaq proposes to amend Rule 11150(a) to shorten the time 
frames by one business day.
Rule 11210
    Paragraphs (c) and (d) of Rule 11210 set forth the ``Don't Know'' 
(``DK'') voluntary procedures for using ``DK Notices'' or other forms 
of notices, respectively. When a party to a transaction sends a 
comparison or confirmation of a trade, but does not receive a 
comparison or confirmation or a signed DK, from the contra-member by 
the close of one business day following the trade date of the 
transaction, the confirming member shall send a DK Notice to the 
contra-member. Thereafter, the contra-member has two business

[[Page 81155]]

days after receipt of the confirming member's notice to either confirm 
or ``DK'' the transaction.
    Nasdaq proposes to amend paragraphs (c) and (d) of Rule 11210 to 
provide that the ``DK'' procedures may be used by the confirming member 
if it does not receive a comparison or confirmation or signed ``DK'' 
from the contra-member by the close of the business day of the trade 
date of the transaction, rather than the current time frame of one day 
after the trade date. In addition, Nasdaq proposes to amend paragraphs 
(c)(2)(A), (c)(3), and (d)(5) of Rule 11210 to adjust the time in which 
a contra-member has to respond to a ``DK Notice'' (or similar notice) 
from two business days after the contra-member's receipt of the notice 
to one business day after the contra-member's receipt of the notice.
Rule 11320
    Rule 11320 currently prescribes delivery dates for various 
transactions. Currently, paragraph (b) states that for a ``regular 
way'' transaction, delivery must be made on, but not before, the second 
business day after the date of the transaction. Nasdaq proposes to 
amend Rule 11320(b) to change the reference from the second business 
day to the first business day following the date of the transaction. 
Currently, paragraph (c) provides that in a ``seller's option'' 
transaction, delivery may be made by the seller on any business day 
after the second business day following the date of the transaction. 
Nasdaq proposes to amend Rule 11320(c) to change the reference from the 
second business day to the first business day following the date of the 
transaction and prior to the expiration of the option.
Rule 11620
    In the settlement of contracts in interest-paying securities other 
than for cash, Rule 11620(a) currently requires the calculation of 
interest at the rate specified in the security up to but not including 
the second business day after the date of the transaction. The proposed 
amendment would shorten the time frame to the first business day 
following the date of the transaction.
Implementation
    The operative date of this proposed rule change will be Tuesday, 
May 28, 2024, which is the compliance date specified in the 
Commission's amendment to Rule 15c6-1(a) of the Act \5\ to require 
standard settlement no later than T+1.\6\ With the implementation of 
the T+1 settlement cycle, the ex-dividend date for ``normal'' 
distributions pursuant to Rule 11140(b)(1) will be the same business 
day as the record date. Accordingly, Nasdaq proposes to interpret Rule 
11140(b)(1) so that the first record date to which this new ex-dividend 
date rationale will be applied will be Wednesday, May 29, 2024. During 
the implementation of the T+1 settlement cycle, the ``regular'' ex-
dividend dates will be as follows:
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    \5\ See supra note 3.
    \6\ See supra note 3. Transactions with a trade date of Friday, 
May 24, 2024 would settle on Wednesday, May 29, 2024 because these 
transactions occurred before the rule was effective and continue to 
settle two days after the trade date. Additionally, transactions 
with a trade date of Tuesday, May 28, 2024 would also settle on 
Wednesday, May 29, 2024 because these transactions occurred when the 
T + 1 rule was effective and would settle one day after the trade 
date. Of note, May 27, 2024 is Memorial Day and not a business day 
counted for purposes of settlement.

Record Date May 24, 2024--Ex date May 23, 2024
Record Date May 28, 2024--Ex date May 24, 2024
Record Date May 29, 2024--Ex date May 29, 2024 *

    * May 27, 2024 is Memorial Day and not a business day.
    By way of explanation, a record date of Friday, May 24, 2024 would 
be a date prior to the effective date of the adopted T + 1 rules. 
Current Rule 1140(b) [sic] would apply to this record date, and, 
therefore, the ``ex-dividend date'' would be the first business day 
preceding the record date or Thursday, May 23, 2024. Monday, May 27, 
2024 is Memorial Day is a federal holiday and not a business day; there 
would be no record date on a holiday. As noted above, Nasdaq proposes 
to interpret Rule 11140(b)(1) so that the first record date to which 
this new ex-dividend date rationale will be applied would be Wednesday, 
May 29, 2024. Therefore, a record date of Tuesday, May 28, 2024 would 
fall under current Rule 1140(b) [sic] and the first business day 
preceding the record date would be Friday, May 24, 2024. Finally, as 
noted above, Wednesday, May 29, 2024 is the first record date pursuant 
to the new T + 1 rules, therefore, proposed Rule 1140(b) [sic] applies 
to this date and the ``ex-dividend date'' would be the same business 
day as the record date (May, 29, 2024).
    The ex-dividend date for ``large'' distributions under Rule 
11140(b)(2) is not being amended with the adoption of the T+1 
settlement cycle. Therefore, the ex-dividend date for large'' 
distributions under Rule 11140(b)(2) will continue to be the first 
business day following the payable date as provided in the current rule 
text. In order to ensure that no securities will be ex-dividend on May 
28, 2024 for purposes of ``large'' distributions, Nasdaq similarly 
proposes to interpret Rule 11140(b) so that, if an issuer sets May 28, 
2024 as the payment date for a large distribution, the ex-dividend date 
would be May 29, 2024, not May 28, 2024. Nasdaq will issue an Issuer 
Alert addressing the application of the T+1 implementation date on Rule 
11140(b).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, and, in general, to protect investors and the public 
interest. The proposed rule change seeks to conform Nasdaq's rules with 
the adopted rule amendments to shorten the standard settlement cycle 
for most broker-dealer transactions from T+2 to T+1.\9\ The proposal is 
consistent with the Commission's amendment to Rule 15c6-1(a) of the Act 
to require standard settlement no later than T+1. This proposal will 
provide Nasdaq members with regulatory certainty as to the settlement 
cycle that will be utilized to settle transactions executed on the 
Exchange.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See supra note 3.
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    As noted herein, Nasdaq will announce the operative date of the 
proposed rule change in an Equity Regulatory Alert, which date would 
correspond with the industry-led transition to a T+1 standard 
settlement, and the compliance date of the Commission's amendment to 
Rule 15c6-1(a) of the Act to require standard settlement no later than 
T+1.

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 amends Nasdaq's 
rules pertaining to securities settlement and is intended to facilitate 
the implementation of the industry-led transition to a T+1 settlement 
cycle. The shortened settlement cycle will apply uniformly to all 
contracts for the purchase or sale of a security (other than exempted

[[Page 81156]]

securities) that provide for payment of funds and delivery of 
securities that occur on Nasdaq or other self-regulatory 
organizations.\10\ Moreover, the proposal is consistent with the 
Commission's amendment to Rule 15c6-1(a) of the Act to require standard 
settlement no later than T+1. Accordingly, Nasdaq believes that the 
proposed amendments do not impose any intra-market or inter-market 
burdens on competition because the amendments conform Nasdaq's rules 
with the adopted rule amendments to shorten the standard settlement 
cycle for most broker-dealer transactions from T+2 to T+1.\11\ 
Specifically, the proposed amendments include changes to rules that 
specifically establish the settlement cycle as well as rules that 
establish time frames based on settlement dates, including for certain 
post-settlement rights and obligations.
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    \10\ Of note, pursuant to (a) and (d) of Rule 15c6-1, the 
parties may expressly agree to a different settlement date at the 
time of the transaction.
    \11\ See supra note 3.
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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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    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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-2023-046 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-2023-046. 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-2023-046 and should 
be submitted on or before December 12, 2023.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25667 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P