[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16064-16066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07633]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85603; File No. SR-NASDAQ-2019-028]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Current Pilot Program Related to Clearly Erroneous 
Transactions

April 11, 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 April 9, 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.
---------------------------------------------------------------------------

    \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 current pilot program related 
to Nasdaq Rule 11890, Clearly Erroneous Transactions, to the close of 
business on October 18, 2019.
    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 current 
pilot program related to Rule 11890, Clearly Erroneous Transactions, to 
the close of business on October 18, 2019. This change is being 
proposed in connection with proposed amendments to the Plan to Address 
Extraordinary Market Volatility (the ``Limit Up-Limit Down Plan'' or 
the ``Plan'') that would allow the Plan to continue to operate on a 
permanent basis.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 84843 (December 18, 
2018), 83 FR 66464 (December 26, 2018) (File No. 4-631) 
(``Eighteenth Amendment'').
---------------------------------------------------------------------------

    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to Rule 11890 that, among other things: (i) Provided for 
uniform treatment of clearly erroneous[thinsp]execution reviews in 
multi-stock events involving twenty or more securities; and (ii) 
reduced the ability of the Exchange to deviate from the objective 
standards set forth in the rule.\4\ In 2013, the Exchange adopted a 
provision designed to address the operation of the Plan.\5\ Finally, in 
2014, the Exchange adopted two additional provisions providing that: 
(i) A series of transactions in a particular security on one or more 
trading days may be viewed as one event if all such transactions were 
effected based on the same fundamentally incorrect or grossly 
misinterpreted issuance information resulting in a severe valuation 
error for all such transactions; and (ii) in the event of any 
disruption or malfunction in the operation of the electronic 
communications and trading facilities of an Exchange, another SRO, or 
responsible single plan processor in connection with the transmittal or 
receipt of a trading halt, an Officer, acting on his or her own motion, 
shall nullify any transaction that occurs after a trading halt has been 
declared by the primary listing market for a security and before such 
trading halt has officially ended according to the primary listing

[[Page 16065]]

market.\6\ These changes are currently scheduled to operate for a pilot 
period that coincides with the pilot period for the Limit Up-Limit Down 
Plan,\7\ including any extensions to the pilot period for the Plan.\8\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-NASDAQ-2010-076).
    \5\ See Securities Exchange Act Release No. 68819 (February 1, 
2013), 78 FR 9438 (February 8, 2013) (SR-NASDAQ-2013-022).
    \6\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-NASDAQ-2014-044).
    \7\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \8\ See Securities Exchange Act Release No. 71785 (March 24, 
2014), 79 FR 17621 (March 28, 2014) (SR-NASDAQ-2014-028).
---------------------------------------------------------------------------

    The Commission recently published the proposed Eighteenth Amendment 
to the Plan to allow the Plan to operate on a permanent, rather than 
pilot, basis. The Exchange proposes to amend Rule 11890 to untie the 
pilot program's effectiveness from that of the Plan and to extend the 
pilot's effectiveness to the close of business on October 18, 2019--
i.e., six months after the expiration of the current pilot period for 
the Plan. If the pilot period is not either extended, replaced or 
approved as permanent, the prior versions of paragraphs (a)(2)(C), 
(c)(1), (b)(i), and (b)(ii) shall be in effect, and the provisions of 
paragraphs (g) through (i) shall be null and void.\9\ In such an event, 
the remaining sections of Rule 11890 would continue to apply to all 
transactions executed on the Exchange. The Exchange understands that 
the other national securities exchanges and Financial Industry 
Regulatory Authority (``FINRA'') will also file similar proposals to 
extend their respective clearly erroneous execution pilot programs, the 
substance of which are identical to Rule 11890.
---------------------------------------------------------------------------

    \9\ See supra notes 4-6. The prior versions of paragraphs 
(a)(2)(C), (c)(1), (b)(i), and (b)(ii) generally provided greater 
discretion to the Exchange with respect to breaking erroneous 
trades.
---------------------------------------------------------------------------

    The Exchange does not propose any additional changes to Rule 11890. 
The Exchange believes the benefits to market participants from the more 
objective clearly erroneous executions rule should continue on a 
limited six month pilot basis after Commission approves the Plan to 
operate on a permanent basis. Assuming the Plan is approved by the 
Commission to operate on a permanent, rather than pilot, basis the 
Exchange intends to assess whether additional changes should also be 
made to the operation of the clearly erroneous execution rules. 
Extending the effectiveness of Rule 11890 for an additional six months 
should provide the Exchange and other national securities exchanges 
additional time to consider further amendments to the clearly erroneous 
execution rules in light of the proposed Eighteenth Amendment to the 
Plan.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\10\ in general, and 
Section 6(b)(5) of the Act,\11\ in particular, in that it is designed 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest and not to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change promotes just 
and equitable principles of trade in that it promotes transparency and 
uniformity across markets concerning review of transactions as clearly 
erroneous. The Exchange believes that extending the clearly erroneous 
execution pilot under Rule 11890 for an additional six months would 
help assure that the determination of whether a clearly erroneous trade 
has occurred will be based on clear and objective criteria, and that 
the resolution of the incident will occur promptly through a 
transparent process. The proposed rule change would also help assure 
consistent results in handling erroneous trades across the U.S. 
equities markets, thus furthering fair and orderly markets, the 
protection of investors and the public interest. Based on the 
foregoing, the Exchange believes the amended Clearly Erroneous 
Transactions rule should continue to be in effect on a pilot basis 
while the Exchange and the other national securities exchanges consider 
and develop a permanent proposal for clearly erroneous execution 
reviews.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposal would ensure 
the continued, uninterrupted operation of harmonized clearly erroneous 
execution rules across the U.S. equities markets while the Exchange and 
other national securities exchanges consider further amendments to 
these rules in light of the proposed Eighteenth Amendment to the Plan. 
The Exchange understands that the other national securities exchanges 
and FINRA will also file similar proposals to extend their respective 
clearly erroneous execution pilot programs. Thus, the proposed rule 
change will help to ensure consistency across market centers without 
implicating any competitive issues.

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)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \15\ 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 proposed 
rule change may become effective and operative immediately upon filing. 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
it will allow the current clearly erroneous execution pilot program to 
continue uninterrupted, without any changes, while the Exchange and the 
other national securities exchanges consider and develop a permanent 
proposal for clearly erroneous execution reviews. For this reason, the 
Commission hereby waives the 30-day operative delay and designates the 
proposed rule change as operative upon filing.\16\
---------------------------------------------------------------------------

    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

---------------------------------------------------------------------------

[[Page 16066]]

    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-2019-028 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-2019-028. 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-2019-028 and should be submitted 
on or before May 8, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07633 Filed 4-16-19; 8:45 am]
 BILLING CODE 8011-01-P


