Document ID: SEC-2023-0011-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2023-01-05T05:00Z

[Federal Register Volume 88, Number 3 (Thursday, January 5, 2023)]
[Notices]
[Pages 892-893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28599]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96592; File No. SR-NASDAQ-2022-080]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Implementation Date for Certain Risk Checks of Rule Nasdaq 
Equity 6, Section 5 Risk Settings That Provide Participants With 
Additional Optional Settings

December 29, 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 December 20, 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, II, 
and III, 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 extend the implementation date for certain 
risk checks of Rule Nasdaq Equity 6, Section 5 (Risk Settings) that 
provide Participants with additional optional settings.
    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
    Nasdaq is filing this proposal to extend the implementation date of 
Rule Nasdaq Equity 6, Section 5 (Risk Settings) that provide 
Participants with additional optional settings to Q1 2023; and to make 
certain technical modification without changing the substance of the 
rules.
    Nasdaq proposed rule changes under Rule Nasdaq Equity 6, Section 5 
(Risk Settings) to provide Participants \3\ with additional optional 
settings to assist them in their efforts to manage risk on their order 
flow. These additional settings provide participants with extra 
oversight and controls on orders coming into the exchange. Once the 
optional risk controls are set, the Exchange is authorized to take 
automated action if a designated risk level for a Participant is 
exceeded. Such risk settings would provide Participants with enhanced 
abilities to manage their risk with respect to orders on the Exchange. 
All proposed risk settings are optional for Participants and afford 
flexibility to Participants to select their own risk tolerance levels. 
These changes were filed by Nasdaq on August 8, 2022, and published in 
the Federal Register on August 18, 2022.\4\
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    \3\ Pursuant to Rule Nasdaq Equity 1, Section 1(a)(5), a 
``Participant'' is defined as an entity that fulfills the 
obligations contained in Equity 2, Section 3 regarding participation 
in the System, and shall include: (1) ``Nasdaq ECNs,'' members that 
meet all of the requirements of Equity 2, Section 14, and that 
participates in the System with respect to one or more System 
Securities; (2) ``Nasdaq Market Makers'' or ``Market Makers'', 
members that are registered as Nasdaq Market Makers for purposes of 
participation in the System on a fully automated basis with respect 
to one or more System securities; and (3) ``Order Entry Firms,'' 
members that are registered as Order Entry Firms for purposes of 
entering orders in System Securities into the System. This term 
shall also include any Electronic Communications Network or 
Alternative Trading System (as such terms are defined in Regulation 
NMS) that fails to meet all the requirements of Equity 2, Section 
14.
    \4\ See Securities Exchange Act Release No. 95495 (August 12, 
2022), 86 FR 24685 (August 18, 2022) (SR-NASDAQ-2022-047) (the 
``Proposal'').
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    Nasdaq indicated that it intends to implement the proposed rule 
changes on or before December 30, 2022. Due to re-prioritization, 
Nasdaq is delaying the implementation of the additional, optional risk 
checks, as described in the Proposal, until March 31, 2023. The 
Exchange will issue an Equity Trader Alert to members announcing the 
exact date the Exchange will implement the risk protections.
    Nasdaq also proposes to modify the risk setting titled ``Restricted 
Stock List.'' As described in the Proposal, this control allows a 
Participant to restrict the types of securities transacted by setting a 
list of symbols for which orders cannot be entered. This control also 
allows Participants to set an easy to borrow list, which is a list of 
symbols for which short sale orders may be entered. Short sale orders 
for symbols not on the easy to borrow list will not be accepted; 
however, Participants will have an option to indicate that short sales 
orders are permitted for all symbols.
    Nasdaq proposes to modify this risk check to such that a 
Participant can set a hard to borrow list, which is a list of symbols 
for which short sale orders may not be entered, rather than an easy to 
borrow list. Short sale orders for symbols not on the hard to borrow 
list will be accepted; however, Participants will have an option to 
indicate that short sales orders are permitted for all symbols by not 
maintaining a hard to borrow list. Nasdaq believes that this 
modification does not substantively change the Restricted Stock List 
risk setting. This setting continues to be similar to Interpretations 
and Policies .01(d) of BZX Rule 11.13.\5\
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    \5\ See Securities Exchange Act Release No. 80611 (May 5, 2017) 
82 FR 22045 (May 11, 2017) (SR-BatsBZX-2017-24).
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    Nasdaq also proposes to modify Market Impact Check and Gross 
Exposure Check to correct typographical errors and clarify the rule 
language without substantively changing it.
Implementation
    As stated above, the Exchange intends to implement the proposed 
rule changes on or before March 31, 2023. The Exchange will issue an 
Equity Trader Alert to members announcing the exact date the Exchange 
will implement the risk protections.
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 purpose of this proposal is to modify the timing of the planned 
implementation for the optional risk checks, described above, and to 
inform

[[Page 893]]

the SEC and market participants of that change. The introduction of the 
optional additional risk checks was proposed in a rule filing that was 
submitted to the SEC, and the Exchange is now modifying the 
implementation date for this product. Nasdaq is delaying the 
implementation date in order to complete testing in line with Nasdaq's 
re-prioritized product pipeline.
    Nasdaq believes that the proposed changes to modify the risk 
setting titled ``Restricted Stock List'' is a technical modification 
that does not change the substance of this rule. Similarly, Nasdaq 
believes that the proposal to modify Market Impact Check and Gross 
Exposure Check to correct typographical errors and clarify the rule 
language without substantively changing it is ministerial.

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. As explained above, the purpose 
of this proposal is to modify the timing of the planned implementation 
for the optional additional risk checks and to inform the SEC and 
market participants of that change. The existing Nasdaq products will 
continue to be available, and the implementation delay will impact all 
market participants equally. The Exchange does not expect the date 
change to place any burden on competition. Similarly, Nasdaq believes 
that correction of typographical errors, technical changes, and 
clarifications of existing rules do not place any burden on competition 
because these changes do not affect the substance of the existing 
rules.

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 \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2022-080 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-2022-080. 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-2022-080 and should be submitted 
on or before January 26, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-28599 Filed 1-4-23; 8:45 am]
BILLING CODE 8011-01-P