
[Federal Register Volume 84, Number 58 (Tuesday, March 26, 2019)]
[Notices]
[Pages 11357-11359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05702]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85372; File No. SR-NASDAQ-2019-013]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt a New SCAR Routing Option

March 20, 2019.
    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 March 6, 2019, 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.
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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 adopt a new SCAR routing option under Rule 
4758.
    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 Exchange is proposing to adopt SCAR, a new order routing \3\ 
option under Rule 4758(a)(1)(A). The Exchange currently provides a 
variety of routing options under Rule 4758(a)(1)(A). Routing options 
may be combined with all available Order Types and Times-in-Force, with 
the exception of Order Types and Times-in-Force whose terms are 
inconsistent with the terms of a particular routing option. The SCAR 
routing option would allow members to seek liquidity on the Exchange 
and the other equity markets operated by Nasdaq, Inc., the Nasdaq BX 
Equities Market (``BX'') and Nasdaq PSX (``PSX'' and together with BX 
and the Exchange, the ``Nasdaq Affiliated Exchanges''). SCAR will 
operate in the same manner as the current CART strategy, but will 
differ in the initial order routing to the Nasdaq Affiliated Exchanges. 
Whereas CART orders route sequentially to BX, PSX and then check the 
System,\4\ SCAR orders will route simultaneously to all three Nasdaq 
Affiliated Exchanges in accordance with the System routing table.\5\
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    \3\ Routing is an Order Attribute that allows a Participant to 
designate an Order to employ one of several Routing Strategies 
offered by Nasdaq, as described in Rule 4758; such an Order may be 
referred to as a ``Routable Order.'' Upon receipt of an Order with 
the Routing Order Attribute, the System will process the Order in 
accordance with the applicable Routing Strategy. In the case of a 
limited number of Routing Strategies, the Order will be sent 
directly to other market centers for potential execution. For most 
other Routing Strategies, the Order will attempt to access liquidity 
available on Nasdaq in the manner specified for the underlying Order 
Type and will then be routed in accordance with the applicable 
Routing Strategy. Shares of the Order that cannot be executed are 
then returned to Nasdaq, where they will (i) again attempt to access 
liquidity available on Nasdaq and (ii) post to the Nasdaq Book or be 
cancelled, depending on the Time-in- Force of the Order. See Rule 
4703(f).
    \4\ See Rule 4758(a)(1)(A)(xi).
    \5\ The term ``System routing table'' refers to the proprietary 
process for determining the specific trading venues to which the 
System routes orders and the order in which it routes them. Nasdaq 
reserves the right to maintain a different System routing table for 
different routing options and to modify the System routing table at 
any time without notice. See Rule 4758(a)(1)(A).

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[[Page 11358]]

    Specifically as proposed, SCAR would be a routing option under 
which orders check the System \6\ for available shares and 
simultaneously route \7\ to BX and PSX in accordance with the System 
routing table.\8\ Similar to CART, if shares remain unexecuted after 
routing, they are posted on the Exchange's book or cancelled, depending 
on the Time-in-Force of the order.\9\ Once on the book, should the 
order subsequently be locked or crossed by another market center, the 
System will not route the order to the locking or crossing market 
center. This is also similar to how CART treats shares that remain 
unexecuted after completing the initial order route and posting to the 
Exchange book. Like all of the Exchange's routing strategies, SCAR is 
designed to comply with Rule 611 and the other provisions of Regulation 
NMS.\10\
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    \6\ The term ``System'' shall mean the automated system for 
order execution and trade reporting owned and operated by The Nasdaq 
Stock Market LLC. See Rule 4701(a).
    \7\ As with all routing strategies that provide for simultaneous 
routing, the incoming SCAR order would be broken up into child 
orders. For SCAR routing, the orders would be sent to the Exchange, 
BX, and PSX at the same time based on the available displayed 
interest on these exchanges. In particular, the Exchange would 
allocate the number of shares from the parent order based on the 
System routing table for SCAR, and route the allocated shares (i.e., 
the child orders) to the executing venues simultaneously.
    \8\ As is the case today for all market destinations on the 
System routing table, the placement of the Exchange, BX and PSX on 
the applicable System routing table for SCAR will depend on the 
Exchange's ongoing assessments of factors such as latency, fill 
rates, reliability, and cost.
    \9\ Unexecuted shares of a SCAR order will return to the 
Exchange after routing and check the System for available shares 
before cancelling if the order has a Time-in-Force of IOC. 
Otherwise, shares that remain unexecuted after routing will return 
to the Exchange and check the System for available shares before 
posting on the Exchange's book (e.g., the SCAR order has a Time-in-
Force of DAY).
    \10\ 17 CFR 242.611.
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    The Exchange will implement the proposal in the second quarter of 
2019, subject to approval by the Commission. The Exchange will provide 
prior notice of the implementation date in an Equity Trader Alert.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ 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 Exchange believes that the proposed rule change will 
accomplish those ends by providing market participants with an 
additional voluntary routing option that will allow them to easily 
access liquidity available on all Nasdaq Affiliated Exchanges. The 
Exchange expects the proposed routing strategy will benefit firms that 
do not employ routing or trading strategies under which the firm itself 
would rapidly access liquidity provided on the multiple venues. SCAR 
would not provide any advantage, including latency and priority, to 
members when routing to the Nasdaq Affiliated Exchanges as compared to 
other methods of routing or connectivity available to members by the 
Exchange.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Lastly, the Exchange notes that routing options enabling the 
routing of orders between affiliated exchanges is not unique, and that 
the proposed SCAR routing option is similar to those already offered by 
the Exchange (i.e., CART) and by other exchange groups. Specifically, 
Cboe BZX Exchange (``BZX''), Cboe BYX Exchange (``BYX''), Cboe EDGA 
Exchange (``EDGA''), and Cboe EDGX Exchange (``EDGX'') offer a routing 
option called ALLB that enables an order, whether sent to BZX, BYX, 
EDGA, or EDGX, to check the BZX, BYX, EDGA, and EDGX books for 
liquidity before optionally posting on the BZX, BYX, EDGA, or EDGX 
book.\13\ For the foregoing reasons, the Exchange believes that the 
proposed rule change is consistent with the Act.
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    \13\ See BZX Rule 11.13(b)(3)(O), BYX Rule 11.13(b)(3)(M), EDGA 
Rule 11.11(g)(7), and EDGX Rule 11.11(g)(7). ALLB is also 
substantially similar to the Exchange's CART strategy, as described 
above.
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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 discussed above, the 
proposed functionality is partly based on existing functionality 
available on competitor exchanges.\14\ Furthermore, the Exchange 
provides routing services in a highly competitive market in which 
participants may avail themselves of a wide variety of routing options 
offered by other exchanges, alternative trading systems, other broker-
dealers, market participants' own proprietary routing systems, and 
service bureaus. In such an environment, system enhancements such as 
the changes proposed in this rule filing do not burden competition, 
because they can succeed in attracting order flow to the Exchange only 
if they offer investors higher quality and better value than services 
offered by others. Encouraging competitors to provide higher quality 
and better value is the essence of a well-functioning competitive 
marketplace. Lastly, SCAR would not provide any advantage to members 
when routing to the Nasdaq Affiliated Exchanges as compared to other 
methods of routing or connectivity available to members by the 
Exchange. For the foregoing reasons, the Exchange does not believe the 
proposed rule change will result in any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
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    \14\ Id.
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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 \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and 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. 
The Exchange has satisfied this requirement.
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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 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.

[[Page 11359]]

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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2019-013 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-2019-013. 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 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-2019-013 and should be submitted 
on or before April 16, 2019.

    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,
Deputy Secretary.
[FR Doc. 2019-05702 Filed 3-25-19; 8:45 am]
BILLING CODE 8011-01-P


