82 FR 11389 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Implementation Date of Its Functionality Relating to Post-Only Orders and Orders With Midpoint Pegging, and Its Trade-Now Functionality

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 34 (February 22, 2017)

[Federal Register Volume 82, Number 34 (Wednesday, February 22, 2017)]
[Notices]
[Pages 11389-11391]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-03400]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80045; File No. SR-NASDAQ-2017-013]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Implementation Date of Its Functionality Relating to Post-
Only Orders and Orders With Midpoint Pegging, and Its Trade-Now 
Functionality

February 15, 2017.
    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 February 3, 2017, 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 extend the implementation date of its 
functionality relating to Post-Only Orders and Orders with Midpoint 
Pegging, and its Trade-Now functionality.
    There is no rule text for this proposed rule change.

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

[[Page 11390]]

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 
its functionality relating to Post-Only Orders and Orders with Midpoint 
Pegging, and its Trade-Now functionality. The functionality relating to 
Post-Only Orders and Orders with Midpoint Pegging was approved by the 
SEC on November 10, 2016,\3\ and the Trade-Now functionality was 
submitted on an immediately effective basis on November 8, 2016.\4\
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    \3\ See Securities Exchange Act Release No. 79290 (November 10, 
2016), 81 FR 81184 (November 17, 2016) (SR-NASDAQ-2016-111) (``Post-
Only Approval Order'').
    \4\ See Securities Exchange Act Release No. 79282 (November 10, 
2016), 81 FR 81219 (November 17, 2016) (SR-NASDAQ-2016-156).
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    Under the new Post-Only functionality, the behavior of Post-Only 
orders would be altered when the adjusted price of such orders lock or 
cross a non-displayed price on the Exchange's Book. Specifically, if 
the adjusted price of the Post-Only Order would lock or cross a non-
displayed price on the Exchange's Book, the Post-Only order would be 
posted in the same manner as a Price to Comply Order. However, the 
Post-Only Order would execute if (i) it is priced below $1.00 and the 
value of price improvement associated with executing against an Order 
on the Nasdaq Book (as measured against the original limit price of the 
Order) equals or exceeds the sum of fees charged for such execution and 
the value of any rebate that would be provided if the Order posted to 
the Nasdaq Book and subsequently provided liquidity, or (ii) it is 
priced at $1.00 or more and the value of price improvement associated 
with executing against an Order on the Nasdaq Book (as measured against 
the original limit price of the Order) equals or exceeds $0.01 per 
share.\5\
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    \5\ See Post-Only Approval Order, supra note 3.
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    Additionally, if the Post-Only Order would not lock or cross a 
Protected Quotation but would lock or cross a Non-Displayed Order on 
the Exchange's Book, the Post-Only Order would be posted, ranked, and 
displayed at its limit price. The Post-Only Order would execute if (i) 
it is priced below $1.00 and the value of price improvement associated 
with executing against an Order on the Nasdaq Book equals or exceeds 
the sum of fees charged for such execution and the value of any rebate 
that would be provided if the Order posted to the Nasdaq Book and 
subsequently provided liquidity, or (ii) it is priced at $1.00 or more 
and the value of price improvement associated with executing against an 
Order on the Nasdaq Book equals or exceeds $0.01 per share.\6\
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    \6\ Id.
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    Nasdaq also proposed to change its Midpoint Peg Post-Only Order, so 
that, if the NBBO is crossed, any existing Midpoint Peg Post-Only Order 
would be cancelled and any new Midpoint Peg Post-Only Order would be 
rejected. Similarly, if the Inside Bid and Inside Offer are crossed, 
any existing Order with Midpoint Pegging would be rejected and any new 
Order with Midpoint Pegging would be cancelled.\7\
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    \7\ Id.
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    Under Nasdaq's Trade-Now functionality, participants could enter an 
instruction to have a locked resting buy (sell) order execute against 
the locking sell (buy) order. Nasdaq proposed to offer the 
functionality on its OUCH, RASH, FLITE and FIX protocols. Depending on 
the protocol used by the participant to access the Nasdaq system, the 
participant could either specify that the order execute against locking 
interest automatically, or the participant would be required to send a 
Trade Now instruction to the Exchange once the order has become locked. 
Nasdaq proposed to offer the Trade Now instruction for all orders that 
may be sent to the continuous Nasdaq book, and did not offer the 
instruction for orders that do not execute on the continuous book.\8\
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    \8\ See Securities Exchange Act Release No. 79282 (November 10, 
2016), 81 FR 81219 (November 17, 2016) (SR-NASDAQ-2016-156).
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    Nasdaq initially proposed to implement the new Post-Only, Midpoint 
Pegging and Trade-Now functionality on November 21, 2016.\9\ However, 
following testing, Nasdaq has decided to delay the implementation of 
these new functionalities to provide additional time for systems 
testing. The new functionality shall be implemented no later than March 
31, 2017. Nasdaq will announce the new implementation date by an Equity 
Trader Alert, which shall be issued prior to the implementation date.
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    \9\ See Equity Trader Alert #2016-291.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ 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 purpose of this proposal is to inform the SEC and market 
participants of the new implementation date for the Post-Only, Midpoint 
Pegging, and Trade Now functionalities. The functionalities themselves 
were previously proposed in rule filings that were submitted to the 
SEC, and this proposal does not change the substance of those 
functionalities.\12\ Nasdaq is delaying the implementation date of 
these functionalities to provide for further systems testing prior to 
implementing these functionalities.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Nasdaq notes that the Trade-Now functionality was submitted 
to the SEC as an immediately effective filing, while the Post-Only 
and Midpoint Pegging functionalities were the subject of an SEC 
approval order. See supra notes 3 and 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. As noted above, the purpose of 
this proposal is to extend the implementation date for Post-Only, 
Midpoint Pegging and Trade-Now functionalities so that Nasdaq may 
perform additional systems testing prior to implementing these 
functionalities.

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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of 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.

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[[Page 11391]]

    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-2017-013 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-2017-013. 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-2017-013 and should 
be submitted on or before March 15, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03400 Filed 2-21-17; 8:45 am]
 BILLING CODE 8011-01-P