83 FR 45165 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Extend the Cutoff Times for Accepting On Close Orders Entered for Participation in the Nasdaq Closing Cross
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 172 (September 5, 2018)
Federal Register Volume 83, Issue 172 (September 5, 2018)
| Page Range | 45165-45168 | |
| FR Document | 2018-19148 |
[Federal Register Volume 83, Number 172 (Wednesday, September 5, 2018)] [Notices] [Pages 45165-45168] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-19148] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83988; File No. SR-NASDAQ-2018-068] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Extend the Cutoff Times for Accepting On Close Orders Entered for Participation in the Nasdaq Closing Cross August 29, 2018. 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 August 15, 2018, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to extend the cutoff times for accepting on close orders entered for participation in the Nasdaq Closing Cross, and make related changes. The text of the proposed rule change is available on the Exchange's website 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 purpose of the proposed rule change is to extend the cutoff times for accepting on close orders entered for participation in the Nasdaq Closing Cross. The Nasdaq Closing Cross provides a transparent auction process that determines a single price for the close. As the equities markets continue to evolve and become more efficient and automated, the Exchange believes that the current cutoff times are overly restrictive to market participants that wish to participate in the Nasdaq Closing Cross and that typically have to tie up on close interest for ten minutes or more at the end of the trading day to participate in the cross. Similar to cutoffs provided by other equities exchanges that operate a closing auction, the Exchange believes that the proposed cutoff times would give Participants greater control over their on close orders while still leaving enough time at the end of the trading day for Participants to react to and offset Imbalances. Last, the Exchange is proposing to begin disseminating the Order Imbalance Indicator at the new Closing Cross Cutoff. Current Cutoff Times Generally, Market On Close (``MOC'') \3\ and Limit on Close (``LOC'') \4\ Orders are accepted today until immediately prior to 3:50 p.m. ET (``Closing Cross Cutoff'') \5\ when the Exchange begins disseminating an Order Imbalance Indicator \6\ that contains information about the Nasdaq Closing Cross. Imbalance Only (``IO'') Orders, on the other hand, are designed to allow Participants to offset Imbalances, and may therefore be entered until the time of execution of the Nasdaq Closing Cross, but may not be cancelled or modified at or after the Closing Cross Cutoff, except to correct legitimate errors as described below.\7\ --------------------------------------------------------------------------- \3\ A MOC Order is an Order Type entered without a price that may be executed only during the Nasdaq Closing Cross. See Rule 4702(b)(11). \4\ A LOC Order is an Order Type entered with a price that may be executed only in the Nasdaq Closing Cross, and only if the price determined by the Nasdaq Closing Cross is equal to or better than the price at which the LOC Order was entered. See Rule 4702(b)(12). \5\ As used in this proposed rule change, the term ``Closing Cross Cutoff'' refers to the various 3:50 p.m. ET cutoff times described herein for the Nasdaq Closing Cross, including the regular cutoff time for entering MOC/LOC Orders described above and the related cutoff time for cancelling or modifying IO Orders, which is currently at or after 3:50 p.m. ET in contrast to MOC/LOC Orders whose cutoff times are immediately prior to 3:50 p.m. ET. \6\ ``Order Imbalance Indicator'' means a message disseminated by electronic means containing information about MOC, LOC, IO, and Close Eligible Interest and the price at which those orders would execute at the time of dissemination. \7\ See Rule 4702(b)(13)(A). --------------------------------------------------------------------------- The Exchange also continues to accept LOC Orders between the Closing Cross Cutoff and immediately prior to 3:55 p.m. ET (``Late Cutoff'') \8\ provided that there is a First Reference Price.\9\ In order to promote price stability in the Nasdaq Closing Cross, such LOC Orders entered during this period are either canceled or re-priced to the First Reference Price, based on the Participant's instruction, if the LOC Order's limit price is more aggressive than the First Reference Price.\10\ Imbalance Only (``IO'') Orders,\11\ meanwhile, are designed to permit Participants to offset Imbalances and therefore may be entered until 4:00 p.m. ET when the Exchange executes the Nasdaq Closing Cross and disseminates the executions via the consolidated tape.\12\ --------------------------------------------------------------------------- \8\ As used in this proposed rule change, the term ``Late Cutoff'' refers to the various 3:55 p.m. ET cutoff times described herein for the Nasdaq Closing Cross, including the cutoff time for entering the LOC Orders described above and the cutoff time for correcting legitimate errors in an on close order. \9\ ``First Reference Price'' shall mean the Current Reference Price in the first Order Imbalance Indicator disseminated at or after 3:50 p.m. ET. See Rule 4754(a)(9). \10\ See Rule 4702(b)(12)(A). \11\ An IO Order is an Order entered with a price that may be executed only in the Nasdaq Closing Cross and only against MOC Orders or LOC Orders. See Rule 4702(b)(13). \12\ See Rule 4702(b)(13)(A). --------------------------------------------------------------------------- Participants may also be able to cancel and/or modify their on close orders between the Closing Cross Cutoff and immediately prior to the Late Cutoff in limited circumstances. Specifically, during this time period: (1) MOC Orders and IO Orders can be cancelled and/or modified,\13\ and (2) LOC Orders can be cancelled but not modified,\14\ in each case to correct a legitimate error in the order (e.g., Side, Size, Symbol, or Price, or duplication of an Order). --------------------------------------------------------------------------- \13\ See Rule 4702(b)(11)(A), (13)(A). As provided in these rules, MOC and IO Orders cannot be cancelled or modified at or after the Late Cutoff for any reason. \14\ See Rule 4702(b)(12)(A). --------------------------------------------------------------------------- Proposed Cutoff Times The Exchange now proposes to change the Closing Cross Cutoff to 3:55 p.m. ET and the Late Cutoff to 3:58 p.m. ET.\15\ The Exchange believes that this [[Page 45166]] proposed change will enhance the experience provided to market participants who will be able to enter and interact with their on close orders later in the trading day. --------------------------------------------------------------------------- \15\ The Exchange proposes to reflect the proposed cutoff times throughout the Nasdaq rulebook, including Rule 4702(b)(11)-(13), which defines MOC, LOC, and IO Orders, as well as Rules 4754(a)(9), (b)(1) and (b)(7)(B), which describe the Nasdaq Closing Cross. With the changed cutoff times, the Exchange will reject MOC Orders entered after the 3:55 p.m. ET cutoff, as described in proposed Rule 4702(b)(11)(B), and will reject LOC Orders and Closing Cross/ Extended Hours Orders entered at or after 3:58 p.m. ET, as described in proposed Rule 4702(b)(12)(B). --------------------------------------------------------------------------- The Nasdaq Closing Cross was established by the Exchange in 2004 to create a more robust close that would allow for price discovery, and an execution that would result in an accurate, tradable closing price.\16\ While the Exchange has made changes to the Nasdaq Closing Cross in the fourteen years since it was established, including by recently permitting LOC Orders to be entered until the Late Cutoff in certain circumstances, the normal Closing Cross Cutoff has remained at 3:50 p.m. ET. At the same time, the equities markets have become more efficient and automated. The Exchange therefore no longer believes that ten minutes is needed for market participants to react to and resolve Imbalances in the Nasdaq Closing Cross. As a result, the Exchange is proposing to extend the Closing Cross Cutoff time to 3:55 p.m. ET, which is consistent with the cutoff time provided in the CBOE BZX Exchange, Inc. (``BZX'') closing auction.\17\ While other exchanges operate closing auctions with various cutoff times as late as 3:59 p.m. ET,\18\ the Exchange believes that a 3:55 p.m. ET Closing Cross Cutoff strikes the appropriate balance for the Nasdaq Closing Cross in today's trading environment. --------------------------------------------------------------------------- \16\ See Securities Exchange Act Release Nos. 48878 (December 4, 2003), 68 FR 69098 (December 11, 2003) (Notice); 49406 (March 11, 2004), 69 FR 12879 (March 18, 2004) (Approval Order) (SR-NASD-2003- 173). \17\ See BZX Rule 11.23(c)(1)(A). \18\ See infra note 20. --------------------------------------------------------------------------- The Exchange also continues to believe that it is beneficial to price discovery to permit Participants to submit LOC Orders after the regular Closing Cross Cutoff if there is a First Reference Price as provided in SR-Nasdaq-2017-061. Likewise, the Exchange continues to believe that it is appropriate to provide a brief period of additional time for Participants to correct legitimate errors in their orders entered for participation in the Nasdaq Closing Cross. The Exchange therefore proposes to extend the Late Cutoff to 3:58 p.m. ET. Other exchanges also accept similar orders in this timeframe. For example, BZX offers ``Late-Limit-On-Close Orders'' that are accepted until the execution of their closing auction at 4:00 p.m. ET,\19\ and NYSE Arca, Inc. (``Arca'') initiates its ``Closing Auction Imbalance Freeze'' for all MOC and LOC Orders at 3:59 p.m. ET.\20\ LOC Orders submitted after the proposed Closing Cross Cutoff and before the proposed Late Cutoff will continue to be handled as they are today, and would therefore only be accepted if there is a First Reference Price, and would be subject to re-pricing if the limit price of the LOC Order is more aggressive than the First Reference Price or rejection, depending on the election of the member. Furthermore, the cancellation and/or modification of orders during the extended period would continue to be allowed only to correct a legitimate error in the order. --------------------------------------------------------------------------- \19\ See BZX Rule 11.23(c)(1)(A). \20\ See Arca Rule 7.35-E(d)(2). --------------------------------------------------------------------------- In addition, Rule 4702(b)(12)(A) currently provides that a Closing Cross/Extended Hours Order that is entered between 3:50 p.m. ET and the time of the Nasdaq Closing Cross will be rejected if it has been assigned a Pegging Attribute. Pegging is an Order Attribute that allows an Order to have its price automatically set with reference to the national best bid or offer (``NBBO''), and is therefore available only during Market Hours.\21\ Since a Pegging Attribute is only available during Market Hours, an Order with a Pegging Attribute can never be entered as a Closing Cross/Extended Hours Order, which would be valid only after Market Hours had concluded. The Exchange proposes to make this clear in Rule 4702(b)(12)(B) by removing the current reference to the time during which such an Order is entered. As proposed, the rule would provide that a Closing Cross/Extended Hours Order will be rejected if it has been assigned a Pegging Attribute. --------------------------------------------------------------------------- \21\ See Rule 4703(d). --------------------------------------------------------------------------- Order Imbalance Indicator Once MOC/LOC Orders are locked in at the Closing Cross Cutoff, the Exchange begins disseminating the Order Imbalance Indicator to provide market participants with information about the Nasdaq Closing Cross. With the proposed changes to the Closing Cross Cutoff, the Exchange is proposing to also begin disseminating the Order Imbalance Indicator at the new Closing Cross Cutoff of 3:55 p.m. ET.\22\ The Exchange has always disseminated the Order Imbalance Indicator once MOC/LOC Orders are locked in at the Closing Cross Cutoff. Prior to the Closing Cross Cutoff, Participants have significantly more leeway to enter new on close orders or cancel or modify on close orders already entered. The Exchange therefore believes that continuing to disseminate the Order Imbalance Indicator starting at the Closing Cross Cutoff, which as proposed will be 3:55 p.m. ET, will ensure that market participants receive a more complete picture of on close interest when such interest is relatively settled. --------------------------------------------------------------------------- \22\ Because the First Reference Price refers to the Current Reference Price in the first Order Imbalance Indicator disseminated to market participants, Rule 4754(a)(9) will similarly be updated to reference 3:55 p.m. ET, which is when the first Order Imbalance Indicator will now be disseminated. --------------------------------------------------------------------------- Currently, the Order Imbalance Indicator is disseminated every five seconds starting at the Closing Cross Cutoff discussed above. The Exchange believes, however, that more frequent dissemination will be beneficial to market participants that use this information, and is therefore proposing to increase the frequency of dissemination to every second. This proposed change will apply to the Order Imbalance Indicator for the Nasdaq Closing Cross as well as the similar Order Imbalance Indicator provided for the LULD Closing Cross,\23\ Nasdaq Opening Cross,\24\ and the Nasdaq Halt Cross,\25\ which each have a five second dissemination frequency today. --------------------------------------------------------------------------- \23\ See Rule 4754(b)(6). \24\ See Rule 4752(d)(1). \25\ See Rule 4753(b)(1). --------------------------------------------------------------------------- Conforming Changes Last, the Exchange is proposing to make conforming changes to Rule 7018(a), which provides the fees and credits available to members for the use of the order execution and routing services of the Nasdaq Market Center for all securities priced at $1 or more that it trades. Under Rules 7018(a)(1) and (2), Nasdaq has credits that exclude Limit- on-Close Order entered between 3:50 p.m. ET and immediately prior to 3:55 p.m. ET. The Exchange is proposing to update these times to reflect the times proposed herein. Implementation The Exchange proposes to implement all of the changes described in this proposed rule change in either Q3 or Q4 2018. The Exchange will announce the implementation date of these changes in an Equity Trader Alert issued to Participants prior to implementing the change. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) [[Page 45167]] of the Act,\26\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\27\ 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. Specifically, the Exchange believes that extending the cutoff times for submitting on close orders will allow market participants to retain control over their orders for a longer period of time, and thereby assist those market participants in managing their trading at the close. Furthermore, the Exchange believes that the proposed changes to the Order Imbalance Indicator will protect investors and the public interest by continuing to provide complete and timely information to the market. --------------------------------------------------------------------------- \26\ 15 U.S.C. 78f(b). \27\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Cutoff Times While the Exchange originally implemented a Closing Cross Cutoff time in 2004 that was ten minutes prior to the execution of the Nasdaq Closing Cross, the Exchange no longer believes that this much time is required for market participants to respond to and offset Imbalances. To promote price discovery in the Nasdaq Closing Cross, the Exchange disseminates an Order Imbalance Indicator with certain information about the cross to market participants beginning at 3:50 p.m. ET, at which time market participants have more limited means of entering orders to participate in the Nasdaq Closing Cross. Specifically, Participants cannot enter new MOC Orders on or after 3:50 p.m. ET, and between 3:50 p.m. ET and immediately prior to 3:55 p.m. ET are limited to entering LOC Orders that are subject to being rejected or re-priced if too aggressive based on the First Reference Price disseminated at that time (or rejected if there is no First Reference Price). Otherwise, the ability to update MOC or LOC Orders is limited to correcting legitimate errors. The Exchange believes that market participants would be better served if the Closing Cross Cutoff was extended to 3:55 p.m. ET so that the period of time where they have limited control over their orders is reduced.\28\ The Exchange believes that this will reduce risk for market participants that participate in the Nasdaq Closing Cross, and improve price discovery by facilitating additional participation by market participants that may not be willing to lose control over their on close interest for ten minutes. Another equities exchange, BZX, already uses a 3:55 p.m. ET cutoff for regular MOC/LOC entry in its closing auction, and the Exchange believes that this cutoff time reflects the efficiency and more automated nature of trading in today's market. --------------------------------------------------------------------------- \28\ The ``Closing Cross Cutoff'' refers to various 3:50 p.m. ET cutoff times for the Nasdaq Closing Cross. As such, this change will impact functionality that is tied to the regular cutoff time for entering MOC/LOC Orders, such as the cutoff time for cancelling or modifying IO Orders. See supra note 5. The Exchange believes that Participants should continue to be able to cancel or modify their IO Orders, which are designed to offset Imbalances, until such time as MOC/LOC Orders are locked in at the Closing Cross Cutoff. --------------------------------------------------------------------------- In addition, the Exchange continues to believe that it is appropriate to offer a later cutoff time for certain LOC Orders, as well as for the correction of legitimate errors. The Exchange launched the functionality described in SR-Nasdaq-2017-061 last year, and believes that it provides a helpful means for promoting price discovery in the Nasdaq Closing Cross. Since the Exchange is extending the Closing Cross Cutoff to the time that these LOC Orders are accepted until today, the Exchange is proposing to extend the Late Cutoff as well. The Exchange believes that the market will continue to benefit from permitting LOC Orders to be submitted until 3:58 p.m. ET, subject to the conditions described in the current rule with respect to rejection or re-pricing and orders being accepted only when there is matched buy and sell interest that is eligible to participate in the Nasdaq Closing Cross, as evidenced by a First Reference Price being disseminated to market participants. BZX, which offers a similar ``Late-Limit-On-Close Order'' accepts those orders until 4:00 p.m. ET, when that exchange runs its closing auction, and Arca initiates its ``Closing Auction Imbalance Freeze'' for all MOC and LOC Orders at 3:59 p.m. ET. The Exchange therefore believes that there is ample precedent in the industry for continuing to accept these orders until 3:58 p.m. ET, as proposed. Furthermore, the Exchange believes that it is appropriate to clarify in its rules that a Closing Cross/Extended Hours Order will be rejected if it has been assigned a Pegging Attribute (i.e., regardless of the time the Order is entered). Although the current rule references Closing Cross/Extended Hours Order entered between 3:50 p.m. ET and the time of the Nasdaq Closing Cross, Pegging Attributes are available during Market Hours only, and therefore Closing Cross/Extended Hours Orders are rejected if entered with a Pegging Attribute at other times as well. Thus, the Exchange believes the proposed change will increase transparency around the operation of the Exchange. Order Imbalance Indicator The Exchange also believes that it is appropriate to continue to disseminate the Order Imbalance Indicator starting at the Closing Cross Cutoff. As explained in the purpose section of this proposed rule change, the Exchange has always disseminated the Order Imbalance Indicator beginning at the Closing Cross Cutoff, which is when the Exchange believes it is possible to disseminate meaningful information about the Nasdaq Closing Cross. Prior to this time, Participants are generally free to submit additional on close interest and/or cancel or modify on close interest already submitted. Furthermore, many Participants may wait until immediately prior to the Closing Cross Cutoff to enter their on close interest. Thus, the Exchange believes that any information disseminated before the Closing Cross Cutoff has the potential to be misleading to some market participants. As a result, the Exchange believes that it is consistent with the protection of investors and the public interest to continue to disseminate this information at the Closing Cross Cutoff, which will be moved to 3:55 p.m. ET, as proposed. Finally, the Exchange believes that market participants will benefit from a more frequent dissemination of the Order Imbalance Indicator for the Nasdaq Closing Cross, LULD Closing Cross, Nasdaq Opening Cross, and Nasdaq Halt Cross. While the Exchange initially chose to disseminate this information once every five seconds, the Exchange believes that the increased automation and efficiency in the equities markets that spurred the changed cutoff times described above also justify increasing the frequency for disseminating information to the market. Arca similarly updates Auction Imbalance Information at least every second, unless there is no change to the information.\29\ The Exchange believes that an increased frequency of data dissemination for each of the auctions described above will be helpful to Participants that will benefit from a more timely view of the market. --------------------------------------------------------------------------- \29\ See Arca Rule 7.35-E(a)(4)(A). --------------------------------------------------------------------------- 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 intermarket or intramarket competition not necessary [[Page 45168]] or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposed rule change is evidence of the competitive forces in the equities markets. The Exchange originally launched the Nasdaq Closing Cross in 2004 with a ten minute cutoff period where Participants would no longer have the ability to enter additional MOC/LOC Orders, and would have limited ability to interact with their already entered orders. While the Exchange launched functionality last year to accept LOC Orders up to five minutes before the execution of the Nasdaq Closing Cross, these orders are subject to conditions that may not appeal to all market participants. Meanwhile, exchanges that have launched closing auctions more recently have typically adopted them with shorter cutoff periods. The Exchange believes that the market participants that trade in the Nasdaq Closing Cross, which determines the Nasdaq Official Closing Price for all Nasdaq listed stocks, would similarly benefit from a shorter cutoff period. The proposed cutoff times would apply equally to all Participants and reflects the current market environment where trading is increasingly more automated and efficient, and where competing exchanges already offer later cutoff times than those currently in place on Nasdaq. The Exchange believes that the proposed changes to the Order Imbalance Indicator similarly reflect the current competitive environment as the Exchange's changes are designed to continue to provide complete and timely information to the market, to the benefit of Participants that trade on Nasdaq. The proposed changes to the Order Imbalance Indicator, like the changes being made to the cutoff times, will apply equally to all Participants. 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 such 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 CommentsUse 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-2018-068 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-2018-068. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2018-068 and should be submitted on or before September 26, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\30\ --------------------------------------------------------------------------- \30\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-19148 Filed 9-4-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 172 / Wednesday, September 5, 2018 / Notices 45165
Dated: August 30, 2018. the most significant aspects of such Participants to offset Imbalances, and
Brent J. Fields, statements. may therefore be entered until the time
Secretary. of execution of the Nasdaq Closing
A. Self-Regulatory Organization’s
[FR Doc. 2018–19258 Filed 8–31–18; 11:15 am] Cross, but may not be cancelled or
Statement of the Purpose of, and
modified at or after the Closing Cross
BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule
Cutoff, except to correct legitimate
Change
errors as described below.7
SECURITIES AND EXCHANGE 1. Purpose The Exchange also continues to
COMMISSION The purpose of the proposed rule accept LOC Orders between the Closing
change is to extend the cutoff times for Cross Cutoff and immediately prior to
[Release No. 34–83988; File No. SR– accepting on close orders entered for 3:55 p.m. ET (‘‘Late Cutoff’’) 8 provided
NASDAQ–2018–068] participation in the Nasdaq Closing that there is a First Reference Price.9 In
Cross. The Nasdaq Closing Cross order to promote price stability in the
Self-Regulatory Organizations; The Nasdaq Closing Cross, such LOC Orders
provides a transparent auction process
Nasdaq Stock Market LLC; Notice of entered during this period are either
that determines a single price for the
Filing of Proposed Rule Change To canceled or re-priced to the First
close. As the equities markets continue
Extend the Cutoff Times for Accepting Reference Price, based on the
to evolve and become more efficient and
On Close Orders Entered for automated, the Exchange believes that Participant’s instruction, if the LOC
Participation in the Nasdaq Closing the current cutoff times are overly Order’s limit price is more aggressive
Cross restrictive to market participants that than the First Reference Price.10
wish to participate in the Nasdaq Imbalance Only (‘‘IO’’) Orders,11
August 29, 2018.
Closing Cross and that typically have to meanwhile, are designed to permit
Pursuant to Section 19(b)(1) of the Participants to offset Imbalances and
Securities Exchange Act of 1934 tie up on close interest for ten minutes
or more at the end of the trading day to therefore may be entered until 4:00 p.m.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 ET when the Exchange executes the
notice is hereby given that on August participate in the cross. Similar to
cutoffs provided by other equities Nasdaq Closing Cross and disseminates
15, 2018, The Nasdaq Stock Market LLC the executions via the consolidated
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the exchanges that operate a closing
auction, the Exchange believes that the tape.12
Securities and Exchange Commission Participants may also be able to
(‘‘Commission’’) the proposed rule proposed cutoff times would give
Participants greater control over their on cancel and/or modify their on close
change as described in Items I and II orders between the Closing Cross Cutoff
below, which Items have been prepared close orders while still leaving enough
time at the end of the trading day for and immediately prior to the Late Cutoff
by the Exchange. The Commission is in limited circumstances. Specifically,
publishing this notice to solicit Participants to react to and offset
Imbalances. Last, the Exchange is during this time period: (1) MOC Orders
comments on the proposed rule change and IO Orders can be cancelled and/or
from interested persons. proposing to begin disseminating the
Order Imbalance Indicator at the new modified,13 and (2) LOC Orders can be
I. Self-Regulatory Organization’s Closing Cross Cutoff. cancelled but not modified,14 in each
Statement of the Terms of Substance of case to correct a legitimate error in the
Current Cutoff Times order (e.g., Side, Size, Symbol, or Price,
the Proposed Rule Change
Generally, Market On Close or duplication of an Order).
The Exchange proposes to extend the (‘‘MOC’’) 3 and Limit on Close (‘‘LOC’’) 4
cutoff times for accepting on close Proposed Cutoff Times
Orders are accepted today until
orders entered for participation in the immediately prior to 3:50 p.m. ET The Exchange now proposes to
Nasdaq Closing Cross, and make related (‘‘Closing Cross Cutoff’’) 5 when the change the Closing Cross Cutoff to 3:55
changes. Exchange begins disseminating an Order p.m. ET and the Late Cutoff to 3:58 p.m.
The text of the proposed rule change Imbalance Indicator 6 that contains ET.15 The Exchange believes that this
is available on the Exchange’s website at information about the Nasdaq Closing
http://nasdaq.cchwallstreet.com, at the Cross. Imbalance Only (‘‘IO’’) Orders, on
7 See Rule 4702(b)(13)(A).
principal office of the Exchange, and at the other hand, are designed to allow
8 As used in this proposed rule change, the term
the Commission’s Public Reference ‘‘Late Cutoff’’ refers to the various 3:55 p.m. ET
cutoff times described herein for the Nasdaq
Room. 3 A MOC Order is an Order Type entered without
Closing Cross, including the cutoff time for entering
a price that may be executed only during the the LOC Orders described above and the cutoff time
II. Self-Regulatory Organization’s Nasdaq Closing Cross. See Rule 4702(b)(11). for correcting legitimate errors in an on close order.
Statement of the Purpose of, and 4 A LOC Order is an Order Type entered with a 9 ‘‘First Reference Price’’ shall mean the Current
Statutory Basis for, the Proposed Rule price that may be executed only in the Nasdaq Reference Price in the first Order Imbalance
Change Closing Cross, and only if the price determined by Indicator disseminated at or after 3:50 p.m. ET. See
the Nasdaq Closing Cross is equal to or better than Rule 4754(a)(9).
In its filing with the Commission, the the price at which the LOC Order was entered. See 10 See Rule 4702(b)(12)(A).
Exchange included statements Rule 4702(b)(12). 11 An IO Order is an Order entered with a price
5 As used in this proposed rule change, the term
concerning the purpose of and basis for ‘‘Closing Cross Cutoff’’ refers to the various 3:50
that may be executed only in the Nasdaq Closing
the proposed rule change and discussed Cross and only against MOC Orders or LOC Orders.
p.m. ET cutoff times described herein for the
See Rule 4702(b)(13).
any comments it received on the Nasdaq Closing Cross, including the regular cutoff 12 See Rule 4702(b)(13)(A).
proposed rule change. The text of these time for entering MOC/LOC Orders described above
daltland on DSKBBV9HB2PROD with NOTICES
13 See Rule 4702(b)(11)(A), (13)(A). As provided
and the related cutoff time for cancelling or
statements may be examined at the modifying IO Orders, which is currently at or after in these rules, MOC and IO Orders cannot be
places specified in Item IV below. The 3:50 p.m. ET in contrast to MOC/LOC Orders whose cancelled or modified at or after the Late Cutoff for
Exchange has prepared summaries, set cutoff times are immediately prior to 3:50 p.m. ET. any reason.
6 ‘‘Order Imbalance Indicator’’ means a message 14 See Rule 4702(b)(12)(A).
forth in sections A, B, and C below, of 15 The Exchange proposes to reflect the proposed
disseminated by electronic means containing
information about MOC, LOC, IO, and Close cutoff times throughout the Nasdaq rulebook,
1 15 U.S.C. 78s(b)(1). Eligible Interest and the price at which those orders including Rule 4702(b)(11)–(13), which defines
2 17 CFR 240.19b–4. would execute at the time of dissemination. Continued
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![45168 Federal Register / Vol. 83, No. 172 / Wednesday, September 5, 2018 / Notices
or appropriate in furtherance of the (A) By order approve or disapprove For the Commission, by the Division of
purposes of the Act. Rather, the such proposed rule change, or Trading and Markets, pursuant to delegated
Exchange believes that the proposed (B) institute proceedings to determine authority.30
rule change is evidence of the whether the proposed rule change Eduardo A. Aleman,
competitive forces in the equities should be disapproved. Assistant Secretary.
markets. The Exchange originally IV. Solicitation of Comments [FR Doc. 2018–19148 Filed 9–4–18; 8:45 am]
launched the Nasdaq Closing Cross in BILLING CODE 8011–01–P
2004 with a ten minute cutoff period Interested persons are invited to
where Participants would no longer submit written data, views, and
have the ability to enter additional arguments concerning the foregoing, SECURITIES AND EXCHANGE
MOC/LOC Orders, and would have including whether the proposed rule COMMISSION
limited ability to interact with their change is consistent with the Act.
Comments may be submitted by any of [Release No. 34–83982; File No. SR–
already entered orders. While the NYSEArca–2018–62]
Exchange launched functionality last the following methods:
year to accept LOC Orders up to five Electronic Comments Self-Regulatory Organizations; NYSE
minutes before the execution of the • Use the Commission’s internet Arca, Inc.; Notice of Filing and
Nasdaq Closing Cross, these orders are comment form (http://www.sec.gov/ Immediate Effectiveness of Proposed
subject to conditions that may not rules/sro.shtml ); or Rule Change Relating to Listing and
appeal to all market participants. • Send an email to rule-comments@ Trading of Shares of the American
Meanwhile, exchanges that have sec.gov. Please include File Number SR– Century Diversified Municipal Bond
launched closing auctions more recently NASDAQ–2018–068 on the subject line. ETF Under NYSE Arca Rule 8.600–E
have typically adopted them with
shorter cutoff periods. The Exchange Paper Comments August 29, 2018.
believes that the market participants • Send paper comments in triplicate Pursuant to Section 19(b)(1) 1 of the
that trade in the Nasdaq Closing Cross, to Secretary, Securities and Exchange Securities Exchange Act of 1934 (the
which determines the Nasdaq Official Commission, 100 F Street NE, ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
Closing Price for all Nasdaq listed Washington, DC 20549–1090. notice is hereby given that, on August
stocks, would similarly benefit from a All submissions should refer to File 17, 2018, NYSE Arca, Inc. (the
shorter cutoff period. The proposed Number SR–NASDAQ–2018–068. This ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
cutoff times would apply equally to all file number should be included on the the Securities and Exchange
Participants and reflects the current subject line if email is used. To help the Commission (the ‘‘Commission’’) the
market environment where trading is Commission process and review your proposed rule change as described in
increasingly more automated and comments more efficiently, please use Items I and II below, which Items have
efficient, and where competing only one method. The Commission will been prepared by the self-regulatory
exchanges already offer later cutoff post all comments on the Commission’s organization. The Commission is
times than those currently in place on internet website (http://www.sec.gov/ publishing this notice to solicit
Nasdaq. The Exchange believes that the rules/sro.shtml). Copies of the comments on the proposed rule change
proposed changes to the Order submission, all subsequent from interested persons.
Imbalance Indicator similarly reflect the amendments, all written statements I. Self-Regulatory Organization’s
current competitive environment as the with respect to the proposed rule Statement of the Terms of Substance of
Exchange’s changes are designed to change that are filed with the the Proposed Rule Change
continue to provide complete and Commission, and all written
timely information to the market, to the The Exchange proposes to list and
communications relating to the
benefit of Participants that trade on trade shares of the American Century
proposed rule change between the
Nasdaq. The proposed changes to the Diversified Municipal Bond ETF under
Commission and any person, other than
Order Imbalance Indicator, like the NYSE Arca Rule 8.600–E (‘‘Managed
those that may be withheld from the
changes being made to the cutoff times, Fund Shares’’). The proposed rule
public in accordance with the
will apply equally to all Participants. change is available on the Exchange’s
provisions of 5 U.S.C. 552, will be
website at www.nyse.com, at the
C. Self-Regulatory Organization’s available for website viewing and
principal office of the Exchange, and at
Statement on Comments on the printing in the Commission’s Public
the Commission’s Public Reference
Proposed Rule Change Received From Reference Room, 100 F Street NE,
Room.
Members, Participants, or Others Washington, DC 20549, on official
business days between the hours of II. Self-Regulatory Organization’s
No written comments were either 10:00 a.m. and 3:00 p.m. Copies of the Statement of the Purpose of, and
solicited or received. filing also will be available for Statutory Basis for, the Proposed Rule
III. Date of Effectiveness of the inspection and copying at the principal Change
Proposed Rule Change and Timing for office of the Exchange. All comments In its filing with the Commission, the
Commission Action received will be posted without change. self-regulatory organization included
Persons submitting comments are statements concerning the purpose of,
Within 45 days of the date of cautioned that we do not redact or edit and basis for, the proposed rule change
publication of this notice in the Federal personal identifying information from and discussed any comments it received
daltland on DSKBBV9HB2PROD with NOTICES
Register or within such longer period comment submissions. You should on the proposed rule change. The text
up to 90 days (i) as the Commission may submit only information that you wish of those statements may be examined at
designate if it finds such longer period to make available publicly. All
to be appropriate and publishes its submissions should refer to File 30 17 CFR 200.30–3(a)(12).
reasons for so finding or (ii) as to which Number SR–NASDAQ–2018–068 and 1 15 U.S.C. 78s(b)(1).
the self-regulatory organization should be submitted on or before 2 15 U.S.C. 78a.
consents, the Commission will: September 26, 2018. 3 17 CFR 240.19b–4.
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Document Created: 2018-09-05 01:59:31
Document Modified: 2018-09-05 01:59:31
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 83 FR 45165 |
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