Document ID: SEC-2016-1923-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2016-11-01T04:00Z

[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)]
[Notices]
[Pages 75879-75883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26298]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79158; File No. SR-NASDAQ-2016-131]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Enhance the Reopening 
Auction Process Following a Trading Halt Declared Pursuant to the Plan 
To Address Extraordinary Market Volatility

October 26, 2016.
    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 October 13, 2016, 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 Rule 4120 to enhance the reopening 
auction process following a trading halt declared pursuant to the Plan 
to Address Extraordinary Market Volatility Pursuant to Rule 608 of 
Regulation NMS under the Act (the ``Limit Up-Limit Down Plan'' or 
``Plan'').\3\ The Exchange also proposes to amend Rule 4753 (``Nasdaq 
Halt Cross'') to include the proposed new terms Auction Reference 
Prices and Auction Collars in the definition of Order Imbalance 
Indicator for purposes of the reopening process after Trading Pauses 
initiated under Rule 4120(a)(12), and to amend Rule 11890 (``Clearly 
Erroneous Transactions'') to provide that a member cannot request a 
review of an execution arising from a Halt Auction as a clearly 
erroneous execution.
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    \3\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, 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
Background
    The Exchange, together with the Bats BZX Exchange, Inc., Bats BYX 
Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., 
Chicago Stock Exchange, Inc., the Financial Industry Regulatory 
Authority, Inc. (``FINRA''), Investors Exchange LLC, National Stock 
Exchange, Inc., NASDAQ BX, Inc., NASDAQ PHLX LLC, New York Stock 
Exchange LLC (``NYSE''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE MKT 
LLC (``NYSE MKT'') (collectively with the Exchange, the 
``Participants'') are parties to the Plan to Address Extraordinary 
Market Volatility Pursuant to Rule 608 of Regulation NMS under the 
Securities Exchange Act of 1934. The Participants initially filed the 
Plan with the Commission on April 5, 2011, which was published for 
notice and comment.\4\ On May 24, 2012, the Participants filed an 
amendment to the Plan and the Plan, as amended, was approved by the 
Commission on May 31, 2012.\5\ The Participants filed a second 
amendment to the Plan, which was immediately

[[Page 75880]]

effective on January 23, 2013.\6\ On February 19, 2013, the 
Participants filed a third amendment to the Plan, which the Commission 
approved on April 3, 2013.\7\ The Participants filed a fourth amendment 
to the Plan, which was immediately effective on July 18, 2013.\8\ On 
July 18, 2013, the Participants filed a fifth amendment to the Plan, 
which the Commission approved on September 26, 2013.\9\ The 
Participants filed a sixth amendment to the Plan, which was immediately 
effective on December 3, 2013.\10\ On February 24, 2014, the 
Participants filed a seventh amendment to the Plan, which the 
Commission approved on April 3, 2014.\11\ On December 24, 2014, the 
Participants filed an eighth amendment to the Plan, which the 
Commission approved on February 19, 2015.\12\ On July 31, 2015, the 
Participants filed a ninth amendment to the Plan to extend the pilot 
through April 22, 2016, and remove Chicago Board Options Exchange as a 
Plan Participant, which the Commission approved on October 22, 
2015.\13\ On February 19, 2016, the Participants filed a tenth 
amendment to the Plan to extend the pilot through April 21, 2017 and 
make one modification to the Plan, which the Commission approved on 
April 21, 2016.\14\ On August 1, 2016, the Investors Exchange LLC filed 
an amendment to the Plan to be added to the roster of Participants.\15\
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    \4\ See Securities Exchange Act Release No. 64547 (May 25, 
2011), 76 FR 31647 (June 1, 2011) (File No. 4-631).
    \5\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (``Approval 
Order'').
    \6\ See Securities Exchange Act Release No. 68953 (February 20, 
2013), 78 FR 13113 (February 26, 2013) (File No. 4-631).
    \7\ See Securities Exchange Act Release No. 69287 (April 3, 
2013), 78 FR 21483 (April 10, 2013) (File No. 4-631).
    \8\ See Securities Exchange Act Release No. 70273 (August 27, 
2013), 78 FR 54321 (September 3, 2013) (File No. 4-631).
    \9\ See Securities Exchange Act Release No. 70530 (September, 
26, 2013), 78 FR 60937 (October 2, 2013) (File No. 4-631).
    \10\ See Securities Exchange Act Release No. 71247 (January 7, 
2014), 79 FR 2204 (January 13, 2014) (File No. 4-631).
    \11\ See Securities Exchange Act Release No. 71851 (April 3, 
2014), 79 FR 19687 (April 9, 2014) (File No. 4-631).
    \12\ See Securities Exchange Act Release No. 74323 (February 19, 
2015), 80 FR 10169 (February 25, 2015) (File No. 4-631).
    \13\ See Securities Exchange Act Release No. 76244 (October 22, 
2015), 80 FR 66099 (October 28, 2015) (File No. 4-631).
    \14\ See Securities Exchange Act Release No. 77679 (April 21, 
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631).
    \15\ See Securities Exchange Act Release No. 78703 (August 26, 
2016), 81 FR 60397 (September 1, 2016) (File No. 4-631).
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    By letter dated September 16, 2016, the Participants filed a 
twelfth amendment to the Plan (``Amendment 12'') to provide that a 
Trading Pause \16\ will continue until the Primary Listing Exchange has 
reopened trading using its established reopening procedures, even if 
such reopening is more than 10 minutes after the beginning of a Trading 
Pause, and to require that trading centers may not resume trading in an 
NMS Stock following a Trading Pause without Price Bands in such NMS 
Stock.\17\ Specifically, the Participants propose to amend the Plan to 
provide that a Trading Pause will continue until the Primary Listing 
Exchange has reopened trading using its established reopening 
procedures and reports a Reopening Price. The Participants further 
propose in Amendment 12 to the Plan to eliminate the current allowance 
for a trading center to resume trading in an NMS Stock following a 
Trading Pause if the Primary Listing Exchange has not reported a 
Reopening Price within ten minutes after the declaration of a Trading 
Pause. In addition, to preclude potential scenarios when trading may 
resume without Price Bands, the Participants propose to amend the Plan 
to provide that a trading center may not resume trading in an NMS Stock 
following a Trading Pause without Price Bands in such NMS Stock. To 
address potential scenarios in which there is no Reopening Price from 
the Primary Listing Exchange to use to calculate Price Bands, the 
Participants propose to make related amendments to the Plan to address 
when trading may resume if the Primary Listing Exchange is unable to 
reopen due to a systems or technology issue and how the Reference Price 
would be determined in such a scenario or if the Primary Listing 
Exchange reopens trading on a zero bid or zero quote, or both.
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    \16\ Unless otherwise specified, the terms used herein have the 
same meaning as set forth in the Plan.
    \17\ See letter from Elizabeth K. King, General Counsel, NYSE, 
to Brent J. Fields, Secretary, Commission, dated September 16, 2016.
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    In conjunction with filing Amendment 12 to the Plan, each Primary 
Listing Exchange committed to file rule changes with the Commission 
under Section 19(b) of the Exchange Act to amend its respective trading 
practice for automated reopenings following a Trading Pause consistent 
with a standardized approach agreed to by Participants that would allow 
for extensions of a Trading Pause if equilibrium cannot be met for a 
Reopening Price within specified parameters. Accordingly, the Exchange 
is proposing to adopt changes to its rules, as described below, to 
implement the reopening procedures agreed upon by the Participants.
Proposal
    As a Primary Listing Exchange, Nasdaq is proposing to amend Rule 
4120 to make the following changes: (i) Clarify that the Exchange has 
an obligation to notify the Processor immediately upon becoming aware 
that it is unable to reopen trading due to a systems or technology 
issue; (ii) delete rule text concerning phased implementation of the 
Plan, which has since been fully implemented; (iii) only resume trading 
after a Trading Pause initiated by another exchange upon receiving 
Price Bands from the Processor; (iv) adopt new procedures for reopening 
securities following a Trading Pause; and (v) amend Rule 11890, Clearly 
Erroneous Executions, to not allow a member to request a review of an 
execution arising from a Halt Auction as a clearly erroneous execution.
    First, the Operating Committee has proposed in Amendment 12 to the 
Plan to require the Primary Listing Exchange to notify the Processor 
immediately upon becoming aware that it is unable to reopen trading due 
to a systems or technology issue. Pursuant to the proposal, trading 
centers may not resume trading in an NMS Stock following a Trading 
Pause without Price Bands in such NMS Stock. Thus, under the proposed 
Amendment 12, a trading center may resume trading only if there are 
Price Bands. Moreover, the Participants proposed in Amendment 12 to 
require that a Trading Pause will not end until the Primary Listing 
Exchange reports a Reopening Price. The Participants propose in 
Amendment 12 to allow trading centers to resume trading an NMS Stock in 
the absence of a Reopening Price only if: (i) The Primary Listing 
Exchange notifies the Processor that it is unable to reopen trading due 
to a systems or technology issue and (ii) the Processor has 
disseminated Price Bands based on a Reference Price. The Exchange is 
proposing to adopt this requirement to make it clear that the Exchange, 
acting as a Primary Listing Exchange for an NMS Stock, will notify the 
Processor immediately upon becoming aware that it is unable to reopen 
trading due to a systems or technology issue.
    Second, the Exchange is proposing to delete rule text concerning 
phased implementation of the Plan, which has since been fully 
implemented. Currently, Rule 4120(a)(12)(G) describes how different 
Tier NMS Stocks are handled during Phase 1 of the Plan. Given that the 
Plan is fully implemented, the Exchange is proposing to delete the text 
under Rule

[[Page 75881]]

4120(a)(12)(G) that concerns phases the Plan's implementation that have 
concluded.
    Third, the Exchange is proposing to adopt the requirement of 
Amendment 12 of the Plan, as discussed above, to only resume trading 
after a Trading Pause initiated by another exchange upon receiving 
Price Bands from the Processor. As noted above, Amendment 12 proposes 
to prohibit trading centers from resuming trading in an NMS Stock 
following a Trading Pause without Price Bands in such NMS Stock. The 
Participants believe that if a Primary Listing Exchange is unable to 
reopen trading due to a systems or technology issue, trading should be 
permitted to resume in that NMS Stock.
    Fourth, the Exchange is proposing to adopt new procedures for 
reopening securities following a Trading Pause. Each of the 
Participants that are Primary Listing Exchanges are adopting uniform 
processes for reopening NMS Stocks for which they are the Primary 
Listing Exchange following a Trading Pause. Currently, Rule 
4120(a)(12)(H) provides the process by which the Exchange will resume 
trading after a Trading Pause. Specifically, the rule provides that at 
the end of a Trading Pause the Exchange shall reopen the security in a 
manner similar to the procedures set forth in Rule 4753. Rule 4753 
provides the Nasdaq Halt Cross process by which a security that is 
subject to a trading halt is released from the halt to resume trading. 
Rule 4120(a)(12)(H) further provides that, following a Trading Pause 
that is triggered at or after 3:50 p.m. a stock shall reopen via a LULD 
Closing Cross pursuant to Rule 4754(b)(6),\18\ which provides LULD-
specific Closing Cross procedures following a Trading Pause.\19\
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    \18\ Rule 4754(b)(6) provides the closing process to be followed 
when a Trading Pause is triggered at or after 3:50 p.m. and before 4 
p.m.
    \19\ Rule 4120(c)(7)(A) describes the 5-minute Display Only 
Period, which must occur prior to the release of a security from a 
halt arising under Rule 4120(a)(1), (4), (5), (6), (9), (10), or 
(11), or (12)(F). In light of the proposed new process, the Exchange 
is eliminating reference to Rule 4120(a)(12)(F) from the rule.
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    The Exchange is proposing a new process for resuming trading after 
a Trading Pause under proposed Rule 4120(c)(10) that will provide for 
an initial auction period and two additional auction periods with 
widening collars should the security fail to conclude each auction 
period. For any such security listed on Nasdaq, prior to terminating 
the pause, there will be a 5-minute ``Initial Display Only Period'' 
during which market participants may enter quotations and orders in 
that security in Nasdaq systems, and during which Nasdaq will establish 
the ``Auction Reference Price.'' The Auction Reference Price is 
determined by, for a Limit Down triggered pause, the Lower Band price 
of the LULD Band in place at the time the trading pause was triggered; 
or for a Limit Up triggered pause, the Upper Band price of the LULD 
Band in place at the time the trading pause was triggered. During the 
Initial Display Only Period, Nasdaq will also determine the upper and 
lower ``Auction Collar'' prices, which are calculated in the following 
manner:
     For a Limit Down triggered pause, the lower Auction Collar 
price is derived by subtracting 5% of the Auction Reference Price, 
rounded to the nearest minimum price increment,\20\ or in the case of 
securities priced $3 \21\ or less, $0.15, from the Auction Reference 
Price, and the upper Auction Collar price is the Upper Band price on 
the LULD Band in place at the time the trading pause was triggered.
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    \20\ The term ``minimum price increment'' means $0.01 in the 
case of a System Security priced at $1 or more per share, and 
$0.0001 in the case of a System Security priced at less than $1 per 
share. See Rule 4701(k). Thus, if adding 5% of the initial Auction 
Reference Price to the Auction Collar would result in a tenth of a 
penny, the Exchange would round down to the nearest penny when the 
calculation results in one to four tenths of a penny and the 
Exchange would round up to the nearest penny when the calculation 
results in five to nine tenths of a penny.
    \21\ The Exchange determines the price of a security based on 
the security's prior day closing price. The security retains its 
classification as either greater or less than $3 for the remainder 
of the trading day, and it is not adjusted intra-day.
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     For a Limit Up triggered pause, the upper Auction Collar 
price is derived by adding 5% of the Auction Reference Price, rounded 
to the nearest minimum price increment, or in the case of securities 
priced $3 or less, $0.15, from the Auction Reference Price, and the 
lower Auction Collar price is the Lower Band price of the LULD Band in 
place at the time the trading pause was triggered.
    At the conclusion of the Initial Display Only Period, the security 
will be released for trading unless, at the end of an Initial Display 
Only Period, Nasdaq detects an order imbalance in the security. In that 
case, Nasdaq will extend the Display Only Period for an additional 5-
minute period (``Extended Display Only Period''), and the Auction 
Collar prices will be adjusted as follows:
     If the Display Only Period is extended because the 
calculated price at which the security would be released for trading is 
below the lower Auction Collar price or all sell market orders would 
not be executed in the cross, then the new lower Auction Collar price 
is derived by subtracting 5% of the initial Auction Reference Price, 
which was rounded to the nearest minimum price increment, or in the 
case of securities priced $3 or less, $0.15, from the previous lower 
Auction Collar price, and the upper Auction Collar price will not be 
changed.
     If the Display Only Period is extended because the 
calculated price at which the security would be released for trading is 
above the upper Auction Collar price or all buy market orders would not 
be executed in the cross, then the new upper Auction Collar price is 
derived by adding 5% of the initial Auction Reference Price, which was 
rounded to the nearest minimum price increment, or in the case of 
securities priced $3 or less, $0.15, to the previous upper Auction 
Collar price, and the lower Auction Collar price will not be changed.
    At the conclusion of the Extended Display Only Period, the security 
will be released for trading unless, at the end of the Extended Display 
Only Period, Nasdaq detects an order imbalance in the security. In that 
case, Nasdaq will further extend the Display Only Period, continuing to 
adjust the Auction Collar prices every five minutes in the manner 
described in the bullet above until the security is released for 
trading. Nasdaq shall release the security for trading at the first 
point there is no order imbalance.
    For purposes of the process under Rule 4120(c)(10), upon completion 
of the cross calculation an order imbalance shall be established as 
follows:
     The calculated price at which the security would be 
released for trading is above (below) the upper (lower) Auction Collar 
price calculated under paragraphs (A), (B), or (C) of Rule 4120(c)(10); 
or
     All market orders would not be executed in the cross.

Thus, if there is an imbalance of market orders, or if the Reopening 
Price would be outside of specified Auction Collar thresholds, as 
described above, the Trading Pause would be extended an additional five 
minutes in order to provide additional time to attract offsetting 
liquidity. If at the end of such extension, market orders still cannot 
be satisfied within Auction Collar thresholds or if the reopening 
auction would be priced outside of the applicable Auction Collar 
thresholds, Nasdaq would extend the Trading Pause an additional five 
minutes. With each such extension, the Participants have agreed that it 
would be appropriate to widen the price collar threshold on the

[[Page 75882]]

side of the market on which there is buying or selling pressure by the 
same amount as the Initial Display Only Period.
    The Exchange is also amending Rule 4120(a)(12)(H) to harmonize rule 
text concerning Trading Pauses in the last ten minutes of regular 
trading hours. As noted above, following a Trading Pause that is 
triggered at or after 3:50 p.m. a stock shall reopen via a LULD Closing 
Cross pursuant to Rule 4754(b)(6). In Amendment 12, the Participants 
are adding clarifying text to Section VII(C) stating that the 
requirement to attempt to execute a closing transaction instead of 
reopening trading applies to Trading Pauses in existence at 3:50 p.m. 
Accordingly, the Exchange is proposing to amend Rule 4120(a)(12)(H) to 
reflect the Plan amendment. The Exchange is also proposing new Rule 
4120(a)(10)(D) to also reflect that a Trading Pause in existence at 
3:50 p.m. will reopen via a LULD Closing Cross pursuant to Rule 
4754(b)(6) instead of the proposed reopening procedures.
    The Exchange is proposing to add new Rule 4753(a)(3)(F) to make it 
clear that, for purposes of the reopening process after a Trading Pause 
pursuant to Rule 4120(a)(12), the Exchange will disseminate the Auction 
Reference Price and Auction Collar prices during the reopening process 
as part of the Order Imbalance Indicator described under Rule 
4753(a)(3), which is a message disseminated by electronic means 
containing information about Eligible Interest \22\ and the price at 
which such interest would execute at the time of dissemination.
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    \22\ ``Eligible Interest'' is defined as any quotation or any 
order that has been entered into the system and designated with a 
time-in-force that would allow the order to be in force at the time 
of the Halt Cross. See Rule 4753(a)(5).
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    Last, the Participants have agreed that the proposed new procedures 
for reopening trading following a Trading Pause would eliminate the 
need to evaluate whether a transaction in such reopening auction would 
be clearly erroneous. Specifically, the Participants believe that the 
proposed standardized procedures for reopening trading following a 
Trading Pause incorporates a methodology that allows for widened 
collars, which may result in a reopening price away from prior trading 
prices, but which reopening price would be a result of a measured and 
transparent process that eliminates the potential that such trade would 
be considered erroneous. Accordingly, the Exchange proposes to amend 
Rule 11890 to preclude members from requesting a review of a Halt 
Auction conducted pursuant to Rule 4120(c)(10) as a clearly erroneous 
execution.
Implementation Date
    The Exchange proposes to implement the proposed rule change 
following the Commission's approval of Amendment 12. The Exchange will 
announce the implementation date via a notice to be issued after the 
Commission's approval of this proposed rule change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\23\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\24\ 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. The Exchange believes that the proposed rule change, together 
with the proposed amendments to the Plan, are necessary or appropriate 
in the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to and 
perfect the mechanisms of, a national market system, or otherwise in 
furtherance of the purposes of the Act.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed changes would 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, because they are designed, together with the proposed 
amendments to the Plan, to address the issues experienced on August 24, 
2015 by reducing the number of repeat Trading Pauses in a single NMS 
Stock. The proposed Plan amendments are an essential component to 
Participants' goal of more standardized processes across Primary 
Listing Exchanges in reopening trading following a Trading Pause, and 
facilitates the production of an equilibrium Reopening Price by 
centralizing the reopening process through the Primary Listing 
Exchange, which would also improve the accuracy of the reopening Price 
Bands. The proposed Plan amendments support this initiative by 
requiring trading centers to wait to resume trading following Trading 
Pause until there is a Reopening Price.
    This proposed rule change further supports this initiative by 
proposing uniform trading practices for reopening trading following a 
Trading Pause. The Exchange believes that the proposed standardized 
approach for how the Primary Listing Exchanges would conduct certain 
aspects of an automated reopening following a Trading Pause would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it would provide certainty 
for market participants regarding how a security would reopen following 
a Trading Pause, regardless of the listing exchange. The Exchange 
further believes that the proposed changes would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system and protect investors and the public interest because the 
goal of the proposed changes is to ensure that all market order 
interest could be satisfied in an automated reopening auction while at 
the same time reducing the potential for multiple Trading Pauses in a 
single security due to a large order imbalance.
    The Exchange also believes that the standardized proposal to extend 
a Trading Pause an additional five minutes would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system because it would provide additional time to attract 
offsetting liquidity. If at the end of such extension, market orders 
still cannot be satisfied within price collar thresholds or if the 
reopening auction would be priced outside of the applicable price 
collar thresholds, the Primary Listing Exchange would extend the 
Trading Pause an additional five minutes, which the Exchange believes 
would further protect investors and the public interest by reducing the 
potential for significant price disparity in post-auction trading, 
which could otherwise trigger another Trading Pause. With each such 
extension, the Exchange believes that widening the price collar 
threshold on the side of the market on which there is buying or selling 
pressure would remove impediments to and perfect the mechanism of a 
free and open market and a national market system because it would 
provide additional time to attract offsetting interest while at the 
same time addressing that an imbalance may not be resolved within the 
prior auction collars.
    With respect to price collar thresholds, the Exchange believes that 
using the price of the limit state that preceded the Trading Pause, 
i.e., either the Lower or Upper Price Band price, would better reflect 
the most recent price of the security and therefore should be used as 
the reference price for determining the auction collars for such

[[Page 75883]]

Halt Auction. The Exchange believes that widening auction collars only 
in the direction of the imbalance would address issues relating to the 
concept of mean reversion, which would protect investors and the public 
interest by reducing the potential for wide price swings following a 
Halt Auction.
    Finally, the Exchange believes that precluding a member from 
requesting a review of an execution arising from a Halt Auction as 
clearly erroneous execution would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because the proposed new procedures for reopening trading following a 
Trading Pause would obviate the need to evaluate whether a transaction 
in such reopening auction would be clearly erroneous. Specifically, the 
Exchange believes that the proposed standardized procedures for 
reopening trading following a Trading Pause incorporates a methodology 
that allows for widened collars, which may result in a reopening price 
away from prior trading prices, but which reopening price would be a 
result of a measured and transparent process that eliminates the 
potential that such trade would be considered erroneous.

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 proposed rule change is not 
designed to address any competitive issues, but rather, to achieve the 
Participants' goal of more standardized processes across Primary 
Listing Exchanges in reopening trading following a Trading Pause, and 
facilitates the production of an equilibrium reopening price by 
centralizing the reopening process through the Primary Listing 
Exchange, which would also improve the accuracy of the reopening Price 
Bands. The Exchange believes that the proposed rule change reduces the 
burden on competition for market participants because it promotes a 
transparent and consistent process for reopening trading following a 
Trading Pause regardless of where a security may be listed. The 
Exchange further believes that the proposed rule change would not 
impose any burden on competition because it is designed to increase 
transparency surrounding the Exchange's Trading Halt Auction process 
while also increasing the ability for offsetting interest to 
participate in an auction, which would assist in achieving pricing 
equilibrium in such an auction.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-131 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-2016-131. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-131 and should 
be submitted on or before November 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Brent J. Fields,
Secretary.
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    \25\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-26298 Filed 10-31-16; 8:45 am]
 BILLING CODE 8011-01-P