81 FR 92932 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4770 (Compliance With Regulation NMS Plan To Implement a Tick Size Pilot)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 244 (December 20, 2016)

[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Notices]
[Pages 92932-92935]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-30552]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79546; File No. SR-NASDAQ-2016-165]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 4770 (Compliance With Regulation NMS Plan To Implement a 
Tick Size Pilot)

December 14, 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 November 30, 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 Nasdaq Rule 4770 to modify the Web 
site data publication requirements relating to the Regulation NMS Plan 
to Implement a Tick Size Pilot Program (``Plan'') and to clarify the 
timing and format of publishing Market Maker registration statistics.
    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.

[[Page 92933]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On August 25, 2014, Nasdaq, and several other self-regulatory 
organizations (the ``Participants'') filed with the Commission, 
pursuant to Section 11A of the Act \3\ and Rule 608 of Regulation NMS 
thereunder,\4\ the Plan to Implement a Tick Size Pilot Program.\5\ The 
Participants filed the Plan to comply with an order issued by the 
Commission on June 24, 2014.\6\ The Plan was published for comment in 
the Federal Register on November 7, 2014, and approved by the 
Commission, as modified, on May 6, 2015.\7\ The Commission approved the 
Pilot on a two-year basis, with implementation to begin no later than 
May 6, 2016.\8\ On November 6, 2015, the SEC exempted the Participants 
from implementing the Pilot until October 3, 2016.\9\ Under the revised 
Pilot implementation date, the Pre-Pilot data collection period 
commenced on April 4, 2016. On September 13, 2016, the SEC exempted the 
Participants from the requirement to fully implement the Pilot on 
October 3, 2016, to permit the Participants to implement the pilot on a 
phased-in basis, as described in the Participants' exemptive 
request.\10\
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    \3\ 15 U.S.C. 78k-1.
    \4\ 17 CFR 242.608.
    \5\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \6\ See Securities Exchange Act Release No 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \7\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 
80 FR 27513 (May 13, 2015) (``Approval Order'').
    \8\ See Approval Order at 27533 and 27545.
    \9\ See Securities Exchange Act Release No. 76382 (November 6, 
2015), 80 FR 70284 (November 13, 2015).
    \10\ See Letter from David S. Shillman, Associate Director, 
Division of Trading and Markets, Commission, to Eric Swanson, EVP, 
General Counsel and Secretary, Bats Global Markets, Inc., dated 
September 13, 2016; see also Letter from Eric Swanson, EVP, General 
Counsel and Secretary, Bats Global Markets, Inc., to Brent J. 
Fields, Secretary, Commission, dated September 9, 2016.
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    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stock of small-
capitalization companies. Each Participant is required to comply, and 
to enforce compliance by its member organizations, as applicable, with 
the provisions of the Plan.
    Nasdaq adopted rule amendments to implement the requirements of the 
Plan, including relating to the Plan's data collection requirements and 
requirements relating to Web site data publication.\11\ Specifically, 
with respect to the Web site data publication requirements pursuant to 
Section VII and Appendices B and C to the Plan, Nasdaq Rule 
4770(b)(2)(B) provides, among other things, that Nasdaq shall make the 
data required by Items I and II of Appendix B to the Plan, and 
collected pursuant to paragraph (b)(2) of Rule 4770, publicly available 
on the Nasdaq Web site on a monthly basis at no charge and shall not 
identify the Trading Center that generated the data. Nasdaq Rule 
4770(b)(3)(C), provides, among other things, that Nasdaq shall make the 
data required by Item IV of Appendix B to the Plan, and collected 
pursuant to paragraph (b)(3) of Rule 4770, publicly available on the 
Nasdaq Web site on a monthly basis at no charge and shall not identify 
the Trading Center that generated the data. Commentary .08 to Rule 4770 
provides, among other things, that the requirement that Nasdaq make 
certain data publicly available on the Nasdaq Web site pursuant to 
Appendix B and C to the Plan shall commence at the beginning of the 
Pilot Period.
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    \11\ See, e.g., Securities Exchange Act Release No. 77456 (March 
28, 2016), 81 FR 18925 (April 1, 2016) (SR-NASDAQ-2016-043); see 
also Letter from David S. Shillman, Associate Director, Division of 
Trading and Markets, Commission, to Marcia E. Asquith, Senior Vice 
President and Corporate Secretary, FINRA, dated February 17, 2016.
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    Nasdaq is proposing amendments to Rule 4770(b)(2)(B) (regarding 
Appendix B.I and B.II data) and Rule 4770(b)(3)(C) (regarding Appendix 
B.IV data) to provide that data required to be made available on 
Nasdaq's Web site be published within 120 calendar days following month 
end. In addition, the proposed amendments to Commentary .08 to Rule 
4770 would provide that, notwithstanding the provisions of paragraphs 
(b)(2)(B), (b)(3)(C) and (b)(5), Nasdaq shall make data for the Pre-
Pilot period publicly available on the Nasdaq Web site pursuant to 
Appendix B and C to the Plan by February 28, 2017.\12\
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    \12\ With respect to data for the Pilot Period, the requirement 
that Nasdaq make data publicly available on the Nasdaq Web site 
pursuant to Appendix B and C to the Plan shall continue to commence 
at the beginning of the Pilot Period. Thus, the first Web site 
publication date for Pilot Period data (covering October 2016) would 
be published on the Nasdaq Web site by February 28, 2017, which is 
120 days following the end of October 2016.
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    The purpose of delaying the publication of the Web site data is to 
address confidentiality concerns by providing for the passage of 
additional time between the market information reflected in the data 
and the public availability of such information.
    Nasdaq also proposes to amend Rule 4770(b)(5), which relates to the 
collection and transmission of Market Maker registration statistics. 
Currently, Rule 4770(b)(5) provides that the Exchange shall collect and 
transmit to the SEC the data described in Item III of Appendix B of the 
Plan relating to daily Market Maker registration statistics in a pipe 
delimited format within 30 calendar days following month end for (1) 
transactions in each Pre-Pilot Data Collection Security for the period 
beginning six months prior to the Pilot Period through the trading day 
immediately preceding the Pilot Period; and (2) transactions in each 
Pilot Security for the period beginning on the first day of the Pilot 
Period through six months after the end of the Pilot Period. Although 
the Plan requires that such data be made publicly available,\13\ Rule 
4770(b)(5) does not currently include a provision requiring the 
Exchange to publish such data to its Web site. The Exchange therefore 
proposes to amend Rule 4770(b)(5) to provide that the Exchange shall 
make Market Maker registration data publicly available on the Exchange 
Web site within 120 calendar days following month end at no charge.
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    \13\ See Section VII.A. 4 of the Plan.
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    Nasdaq has filed the proposed rule change for immediate 
effectiveness and has requested that the Commission waive the 30-day 
operative delay. If the Commission waives the 30-day operative delay, 
the operative date of the proposed rule change will be the date of 
filing.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\15\ 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, because it is designed to assist the Participants in meeting 
their regulatory obligations pursuant to the Plan and is in furtherance 
of the objectives of the Plan, as identified by the SEC.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    In approving the Plan, the Commission recognized that requiring the 
publication of Market Maker data may raise confidentiality concerns, 
especially for Pilot Securities that may

[[Page 92934]]

have a relatively small number of designated Market Makers.\16\ For 
this reason, the Commission modified the Plan so that the data that 
would be made publicly available would not contain profitability 
measures for each security, but would be aggregated by the Control 
Group and each Test Group. Nasdaq believes that this proposal is 
consistent with the Act in that it is designed to address 
confidentiality concerns by permitting Nasdaq to delay Web site 
publication to provide for passage of additional time between the 
market information reflected in the data and the public availability of 
such information. With respect to the change to Rule 4770(b)(5), Nasdaq 
believes this change will clarify the timing and format of publishing 
Market Maker registration statistics.
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    \16\ See Approval Order at 27543-27544.
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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. Nasdaq notes that the proposed 
rule change implements the provisions of the Plan, and is designed to 
assist the Participants in meeting their regulatory obligations 
pursuant to the Plan.
    The proposal is intended to address confidentiality concerns that 
may adversely impact competition, especially for Pilot Securities that 
may have a relatively small number of designated Market Makers, by 
permitting Nasdaq to delay Web site publication to provide for passage 
of additional time between the market information reflected in the data 
and the public availability of such information. The proposal also does 
not alter the information required to be submitted to the SEC.

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.\17\
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    \17\ Nasdaq notes that Financial Information Forum (FIF) 
submitted a letter to the staff of the Commission raising concerns 
regarding the publication of certain Appendix B statistics on a 
disaggregated basis using a unique masked market participant 
identifier. See Letter from Mary Lou Von Kaenel, Managing Director, 
FIF, to David S. Shillman, Associate Director, Division of Trading 
and Markets, Commission, dated August 16, 2016, available at https:/
/www.fif.com/comment-letters.
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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 \18\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \19\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. In this filing, the 
Exchange has asked that the Commission waive the requirement that the 
proposed rule change not become operative for 30 days after the date of 
the filing.
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    \20\ Id.
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange notes that the proposed rule change implements the 
provisions of the Plan, and is designed to assist the Participants in 
meeting their regulatory obligations pursuant to the Plan. The proposal 
is intended to address confidentiality concerns by permitting the 
Exchange to delay Web site publication to provide for passage of 
additional time between the market information reflected in the data 
and public availability of such information. The proposal does not 
alter the information required to be submitted to the Commission.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the Exchange to implement these proposed changes 
that are intended to address confidentiality concerns. The Commission 
notes that some Pilot data was scheduled to be published on November 
30, 2016. Therefore, the Commission hereby waives the 30-day operative 
delay and designates the proposed rule change to be operative on 
November 30, 2016.\22\
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    \22\ For purposes only of waiving the operative delay for this 
proposal, 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-2016-165 on the subject line.

Paper Comments

 Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-165. 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

[[Page 92935]]

should refer to File Number SR-NASDAQ-2016-165 and should be submitted 
on or before January 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-30552 Filed 12-19-16; 8:45 am]
 BILLING CODE 8011-01-P