81 FR 79068 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 9400 To Include a Cross-Reference

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 218 (November 10, 2016)

[Federal Register Volume 81, Number 218 (Thursday, November 10, 2016)]
[Notices]
[Pages 79068-79069]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-27150]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79240; File No. SR-NASDAQ-2016-146]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 9400 To Include a Cross-Reference

November 4, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on October 25, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 9400, entitled ``Expedited 
Client Suspension Proceeding'' to include a cross-reference for 
clarification.
    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
    The Exchange is filing this proposal to amend Rule 9400, entitled 
``Expedited Client Suspension Proceeding'' to include a cross-reference 
Chapter III, Section 16, entitled ``Disruptive Quoting and Trading 
Activity Prohibited'' within Rule 9400. The Exchange filed a rule 
change to adopt an options rule, identical to equities Rule 2170, which 
relates to disruptive quoting and trading activity.\3\ In that rule 
change, it stated that ``[t]he Exchange will initiate disciplinary 
action for violations of Chapter III, Section 16, pursuant to Rule 
9400.'' \4\ At that time, the Exchange inadvertently did not include 
the cross-references to Chapter III, Section 16 within Rule 9400. The 
Exchange proposes to add references to Chapter III, Section 16 within 
Rule 9400 for clarity. This rule change is non-controversial.
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    \3\ See Securities and Exchange Release No. 78208 (June 30, 
2016), 81 FR 44366 (July 7, 2016) (SR-NASDAQ-2016-092).
    \4\ See Securities and Exchange Release No. 78208 (June 30, 
2016), 81 FR 44366, 44370 (July 7, 2016) (SR-NASDAQ-2016-092). Rule 
9400 is located within the Code of Procedure rules which apply to 
both equities and options violations.
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Background
    The Exchange filed a rule change to adopt an options rule to 
clearly prohibit disruptive quoting and trading activity on the 
Exchange and to permit the Exchange to take prompt action to suspend 
members or their clients that violate such rule pursuant to Rule 
9400.\5\ The Exchange had previously adopted Rule 9400 to set forth 
procedures for issuing suspension orders, immediately prohibiting a 
member from conducting continued disruptive quoting and trading 
activity on the Exchange.\6\ Rule 9400 provides the Exchange the 
authority to order a member to cease and desist from providing access 
to the Exchange to a client of the member that is conducting disruptive 
quoting and trading activity in violation of Rule 2170. The Exchange 
also previously adopted Rule 2400 to specifically define and prohibit 
disruptive equities quoting and trading activity on the Exchange.\7\ 
Chapter III, Section 16 is identical to Rule 2400, however applicable 
to options. Similarly, Chapter III, Section 16 prohibits members from 
engaging in or facilitating disruptive options quoting and trading 
activity on the Exchange.
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    \5\ See note 3.
    \6\ See Securities and Exchange Release No. 77913 (May 25, 
2016), 81 FR 35081 (June 1, 2016) (SR-NASDAQ-2016-074).
    \7\ See note 3.
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    The Exchange proposes to simply add the cross-references for the 
options rules alongside the equity rule for clarity. This rule change 
is consistent with the intent of the rule proposal which adopted 
Chapter III, Section 16.\8\
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    \8\ See note 3.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that the rules of the 
Exchange are designed to prevent fraudulent and manipulative acts and 
practices, it [sic] 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 by making clear within 
Rule 9400 that violations of Chapter III, Section 16 are subject to 
disciplinary action pursuant to Rule 9400 as stated in the Exchange's 
rule filing.\11\ This cross-reference will provide clarity to members 
and ease of reference to the

[[Page 79069]]

corresponding options rule. The proposed rule change is non-
controversial. The addition of the cross-reference is for clarity.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See note 4.
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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. This non-controversial rule 
change will merely add the reference to the options rule next to the 
current reference for the equity rule to make clear, as noted in the 
rule changes, that violations of either rule relating to disruptive 
quoting and trading activity, will be disciplined pursuant to Rule 
9400.

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) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \15\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because it would allow 
the Exchange to immediately add the cross-reference within Rule 9400 
which would provide clarity to members. The Exchange notes that a rule 
change to permit Rule 9400 to apply to violations of Chapter III, 
Section 16 was previously filed with the Commission. However, that 
filing failed to amend the rule text of Rule 9400 and only discussed 
the intended application of Rule 9400 to violations of Chapter III, 
Section 16 in the purpose section of the Form 19b-4.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6).
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    The text of the rule governs what actions the Exchange can 
take.\16\ However, because the description in the original filing sets 
forth what the Exchange intended the rule to cover, and this proposed 
rule change corrects an oversight by the Exchange in the previous 
filing, the Commission believes that waiving the 30-day operative delay 
\17\ is consistent with the protection of investors and the public 
interest and designates the proposal operative on filing.
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    \16\ See Section 6(b)(1) of the Act. 15 U.S.C. 78f(b)(1).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 will institute proceedings to 
determine whether the proposed rule change 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-2016-146 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-2016-146. 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-2016-146 and should 
be submitted on or before December 1, 2016.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Brent J. Fields,
Secretary.
[FR Doc. 2016-27150 Filed 11-9-16; 8:45 am]
 BILLING CODE 8011-01-P