[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 67030-67032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23259]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90202; File No. SR-NASDAQ-2020-070]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 11890 (Clearly Erroneous Transactions)

October 15, 2020.
    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 October 13, 2020, 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 current pilot program related 
to Nasdaq Rule 11890 (Clearly Erroneous Transactions) to the close of 
business on April 20, 2021.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 April 20, 2021. The pilot program is currently 
due to expire on October 20, 2020.
    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 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.\3\ In 2013, the Exchange adopted a provision 
designed to address the operation of the Plan.\4\ 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 market.\5\
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    \3\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-NASDAQ-2010-076).
    \4\ See Securities Exchange Act Release No. 68819 (February 1, 
2013), 78 FR 9438 (February 8, 2013) (SR-NASDAQ-2013-022).
    \5\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-NASDAQ-2014-044).
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    These changes were originally scheduled to operate for a pilot 
period to coincide with the pilot period for the Plan to Address 
Extraordinary Market Volatility (the ``Limit Up-Limit Down Plan'' or 
``LULD Plan'').\6\ In April 2019, the Commission approved an amendment 
to the LULD Plan for it to operate on a permanent, rather than pilot, 
basis.\7\ In light of that change, the Exchange amended Rule 11890 to 
untie the pilot program's effectiveness from that of the LULD Plan and 
to extend the pilot's effectiveness to the close of business on October 
18, 2019.\8\ The Exchange later amended Rule 11890 to extend the 
pilot's effectiveness to the close of business on April 20, 2020,\9\ 
and subsequently, to the close of business on October 20, 2020.\10\
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    \6\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \7\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (approving Eighteenth Amendment 
to LULD Plan).
    \8\ See Securities Exchange Act Release No. 85603 (April 11, 
2019), 84 FR 16064 (April 17, 2019) (SR-NASDAQ-2019-028).
    \9\ See Securities Exchange Act Release No. 87358 (October 18, 
2019), 84 FR 57129 (October 24, 2019) (SR-NASDAQ-2019-085).
    \10\ See Securities Exchange Act Release No. 88504 (March 27, 
2020), 85 FR 18598 (April 2, 2020) (SR-NASDAQ-2020-013).
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    The Exchange now proposes to amend Rule 11890 to extend the pilot's 
effectiveness for a further six months until the close of business on 
April 20, 2021. If the pilot period is not either

[[Page 67031]]

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.\11\ 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.
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    \11\ See notes 3-5, supra. 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.
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    The Exchange does not propose any additional changes to Rule 11890. 
Extending the effectiveness of Rule 11890 for an additional six months 
will provide the Exchange and other self-regulatory organizations 
additional time to consider whether further amendments to the clearly 
erroneous execution rules are appropriate.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\12\ in general, and 
Section 6(b)(5) of the Act,\13\ 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    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 
executions rule should continue to be in effect on a pilot basis while 
the Exchange and other self-regulatory organizations consider whether 
further amendments to these rules are appropriate.

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 self-regulatory organizations consider whether further amendments 
to these rules are appropriate. 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) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \17\ 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 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.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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).
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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. 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-2020-070 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-2020-070. This 
file number should be included on the

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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-2020-070 and should be submitted on or before November 12, 2020.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23259 Filed 10-20-20; 8:45 am]
BILLING CODE 8011-01-P


