82 FR 48301 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Postpone Implementation of a New Attribute for Designated Retail Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 199 (October 17, 2017)

[Federal Register Volume 82, Number 199 (Tuesday, October 17, 2017)]
[Notices]
[Pages 48301-48302]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-22392]



[[Page 48301]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81855; File No. SR-NASDAQ-2017-103]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Postpone Implementation of a New Attribute for Designated Retail Orders

October 11, 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 September 29, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to postpone implementation of a new attribute 
for designated retail orders
    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
    On July 7, 2017, the Commission approved the Exchange's new 
Extended Life Priority Order Attribute (``ELO'').\3\ ELO will allow 
certain Displayed Orders \4\ that are committed to a one-second or 
longer resting period to receive higher priority than other Displayed 
Orders of the same price on the Nasdaq Book. Currently, Nasdaq's System 
\5\ places a time-stamp on each Order entered by a member, which 
determines the time ranking of the Order for purposes of processing the 
Order.\6\ The System presents resting Orders on the Nasdaq Book for 
execution against incoming Orders in accordance with a price/display/
time algorithm.\7\ Price means that better priced Orders will be 
presented for execution first. The Exchange proposed ELO to promote 
Displayed Orders with longer time horizons, thereby enhancing the 
market so that it works for a wider array of market participants. 
Implementation of ELO requires the Exchange to make an exception to the 
general priority rules \8\ so that Displayed Orders with an Extended 
Life Priority Attribute are allowed to earn queue priority on the 
Nasdaq Book at any given price level ahead of all other Displayed 
Orders without the Extended Life Priority Attribute.\9\
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    \3\ See Securities Exchange Act Release No. 81097 (July 7, 
2017), 82 FR 32386 (July 13, 2017) (SR-NASDAQ-2016-161) (approving 
the proposal as modified by Amendment No. 1).
    \4\ Only Designated Retail Orders, as defined by Rule 7018, are 
available for ELO.
    \5\ As defined by Rule 4701(a).
    \6\ See Rule 4756(a)(2).
    \7\ See Rule 4757. To implement ELO's exception to the price/
display/time algorithm the Exchange proposed amending Rule 4757. See 
supra note 3.
    \8\ Id.
    \9\ The Exchange proposed to designate orders with the ELO 
attribute with a new, unique identifier or they may alternatively be 
entered through an order port that has been set to designate, by 
default, all orders with the new identifier. Orders marked with the 
new identifier--whether on an order-by-order basis or via a 
designated port--would be disseminated via Nasdaq's TotalView ITCH 
data feed.
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    In proposing ELO, the Exchange anticipated a progressive rollout of 
the ELO functionality, beginning with a small set of symbols and 
gradually expanding further. The Exchange also committed to publish the 
symbols eligible for ELO on its Web site. The Exchange noted that it 
intended to implement the initial set of symbols for ELO in the third 
quarter of 2017, with the exact implementation date being reliant on 
several factors, such as the results of extensive testing and industry 
events and initiatives.
    The Exchange has encountered unforeseen issues in developing ELO, 
which have delayed its implementation. These issues concern the 
complexity of programming the System to account for ELO priority over 
other Orders on the Nasdaq Book. The issues will require additional 
thoughtful and methodical development efforts to ensure that risks are 
adequately addressed, and the System will accurately account for the 
new ELO priority. As a consequence, the Exchange is proposing to 
implement ELO in the second half of 2018. As it originally committed to 
do, the Exchange will notify market participants via an Equity Trader 
Alert once a specific date for the initial rollout is determined.
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, because it will allow the Exchange to adequately address 
complex unforeseen issues that introduce risk to the development and 
functioning of ELO. The Exchange believes that, to address these issues 
in a thorough and thoughtful manner, additional time is needed for it 
to solve these issues before it can implement ELO. As a consequence, 
the proposed delay will serve to protect investors by decreasing the 
likelihood of potential disruption to the market caused by the 
implementation of ELO.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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. Delaying the implementation of 
ELO will allow the Exchange to adequately analyze issues, as well as to 
further develop and test Nasdaq systems to ensure that ELO functions as 
proposed. Ensuring that the Exchange has adequate time to do so does 
not place a burden on competition whatsoever, since ELO has not been 
implemented and market participants have not yet begun to program their 
systems to accept ELO. Thus market participants will not be affected by 
the delay in its implementation.

[[Page 48302]]

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 and Rule 19b-
4(f)(6) thereunder.\12\
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    \12\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the Exchange may immediately extend the ELO implementation date. The 
Exchange stated that it will not be able to implement ELO by the end of 
the third quarter of 2017. According to the Exchange, it has 
encountered unforeseen issues in developing ELO, and these issues will 
require additional thoughtful and methodical development efforts to 
ensure that risks are adequately addressed and the System will 
accurately account for the new ELO priority. The Exchange also stated 
that waiving the operative delay will allow it to implement the 
proposed implementation delay and provide notice to market participants 
thereof.\15\ The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Therefore, the Commission hereby waives the operative delay 
and designates the proposed rule change operative upon filing.\16\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ The Exchange stated that, as it originally committed to do, 
it will notify market participants via an Equity Trader Alert once a 
specific date for the initial rollout is determined and will publish 
the symbols that are eligible for ELO on its Web site.
    \16\ 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 shall 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-2017-103 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-2017-103. 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 such 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-2017-103, and should 
be submitted on or before November 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22392 Filed 10-16-17; 8:45 am]
BILLING CODE 8011-01-P