[Federal Register Volume 87, Number 114 (Tuesday, June 14, 2022)]
[Notices]
[Pages 36018-36023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12732]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95069; File No. SR-NASDAQ-2022-017]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1, To 
Modify Equity 4, Rule 4120 To Add Categories of Regulatory and 
Operational Halts, To Reorganize the Remaining Text of the Rule, and To 
Make Conforming Changes to Related Rules

June 8, 2022.

I. Introduction

    On February 22, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to modify Equity 4, Rule 4120 to add categories of 
regulatory and operational halts, to reorganize the remaining text of 
the rule, and to make conforming changes to related rules. The proposed 
rule change was published for comment in the Federal Register on March 
11, 2022.\3\ On April 21, 2022, pursuant to Section 19(b)(2) of the 
Act,\4\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to disapprove the 
proposed rule change.\5\ On April 29, 2022, the Exchange filed 
Amendment No. 1 to the proposed rule change, which amended and 
superseded the

[[Page 36019]]

proposed rule change as originally filed. Amendment No. 1 was published 
for comment in the Federal Register on May 9, 2022.\6\ This order 
approves the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 94370 (March 7, 
2022), 87 FR 14071.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94778, 87 FR 25069 
(April 27, 2022). The Commission designated June 9, 2022 as the date 
by which the Commission shall approve or disapprove, or institute 
proceedings to determine whether to disapprove, the proposed rule 
change.
    \6\ See Securities Exchange Act Release No. 94838 (May 3, 2022), 
87 FR 27683 (``Amendment No. 1''). The Commission received one 
comment letter on the proposed rule change, which does not relate to 
the substance of the proposed rule change. The comment letter is 
available at https://www.sec.gov/comments/sr-nasdaq-2022-017/srnasdaq2022017-289449.htm.
---------------------------------------------------------------------------

II. Description of the Proposal

    On May 28, 2021, the Commission approved the Fiftieth Amendment to 
the Joint Self-Regulatory Organization Plan (``Plan'') Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privileges Basis (``Amended UTP 
Plan''),\7\ which revised the Plan's provisions that governed 
Regulatory Halts \8\ and Operational Halts.\9\ In particular, the 
Amended UTP Plan sets forth the circumstances in which a Primary 
Listing Market \10\ may declare a Regulatory Halt for any security for 
which it is the Primary Listing Market, and the factors a Primary 
Listing Market will consider when determining whether to declare a 
Regulatory Halt.\11\ The Amended UTP Plan also sets forth the process 
for initiating a Regulatory Halt, including the start time of a 
Regulatory Halt and the dissemination of notice of a Regulatory 
Halt,\12\ as well as the process for resuming trading after a 
Regulatory Halt other than a SIP Halt, including the Primary Listing 
Market's determination of a resumption and the resumption time.\13\ In 
addition, the Amended UTP Plan sets forth a specific process for 
resumption of trading after a SIP Halt, including the Primary Listing 
Market's determination of a resumption and the SIP Halt Resume 
Time.\14\ Finally, the Amended UTP Plan requires a Plan participant to 
notify the Processor where it has declared an Operational Halt.\15\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 92071, 86 FR 29846 
(June 3, 2021) (S7-24-89) (``Fiftieth Amendment Order'').
    \8\ A ``Regulatory Halt'' is ``a halt declared by the Primary 
Listing Market in trading in one or more securities on all Trading 
Centers for regulatory purposes, including for the dissemination of 
material news, news pending, suspensions, or where otherwise 
necessary to maintain a fair and orderly market. A Regulatory Halt 
includes a trading pause triggered by Limit Up Limit Down, a halt 
based on Extraordinary Market Activity, a trading halt triggered by 
a Market-Wide Circuit Breaker, and a SIP Halt.'' See Section X.A.10 
of the Amended UTP Plan.
    \9\ An ``Operational Halt'' is ``a halt in trading in one or 
more securities only on a Market declared by such Participant and is 
not a Regulatory Halt.'' See Section X.A.7 of the Amended UTP Plan.
    \10\ The ``Primary Listing Market'' is ``the national securities 
exchange on which an Eligible Security is listed. If an Eligible 
Security is listed on more than one national securities exchange, 
Primary Listing Market means the exchange on which the security has 
been listed the longest.'' See Section X.A.8 of the Amended UTP 
Plan.
    \11\ See Section X.C of the Amended UTP Plan. See also Section 
X.G of the Amended UTP Plan (requiring a Plan participant to halt 
trading for any security traded on its market if the Primary Listing 
Market declares a Regulatory Halt for the security).
    \12\ See Section X.D of the Amended UTP Plan. See also Section 
X.H of the Amended UTP Plan (setting forth further requirements for 
notifications of the initiation and lifting of Regulatory Halts).
    \13\ See Section X.E of the Amended UTP Plan.
    \14\ See Section X.F of the Amended UTP Plan.
    \15\ See Section X.B of the Amended UTP Plan.
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 4120 to incorporate provisions 
of the Amended UTP Plan, including the provisions that were approved as 
part of the Fiftieth Amendment to the Plan, and to reorganize certain 
existing text in Rule 4120 without substantive change other than to 
conform to the language of the Amended UTP Plan. The Exchange also 
proposes to add new text in Rule 4120 pursuant to, and to implement, 
the provisions of the Amended UTP Plan. Finally, the Exchange proposes 
to make conforming changes throughout its rules to reflect Rule 4120, 
as amended by this proposal.
    Proposed Rule 4120(a) would set forth the definitions for certain 
terms that are used in the rule. In particular, proposed Rule 4120(a) 
would incorporate certain definitions from the Amended UTP Plan \16\ 
and Commission rules,\17\ and would include certain relocated 
definitions that currently exist in Rule 4120.\18\ The Exchange also 
proposes to incorporate the definition of Regular Trading Hours from 
the Amended UTP Plan, which refers to the definition in Rule 600 of 
Regulation NMS (i.e., between 9:30 a.m. and 4:00 p.m. Eastern 
Time).\19\ This reflects a change from the Exchange's current 
definition of Regular Market Session, which means the trading session 
from 9:30 a.m. until 4:00 p.m. or 4:15 p.m.\20\ According to the 
Exchange, no securities currently traded on the Exchange close at 4:15 
p.m. and therefore the alternative closing time reflected in the 
current definition of Regular Market Session is unnecessary.\21\ In 
connection with the proposed definition of Regular Trading Hours, the 
Exchange proposes to define Post-Market Session to mean the trading 
session that begins after Regular Trading Hours at approximately 4:00 
p.m., and that continues until 8:00 p.m.\22\ According to the Exchange, 
this proposed definition will reflect that all securities traded on the 
Exchange commence their closing process at 4:00 p.m.\23\ The Exchange 
also states that the word ``approximately'' in the proposed definition 
reflects that the Exchange's closing cross preceding the Post-Market 
Session at 4:00 p.m. is not instantaneous.\24\ Finally, the Exchange 
proposes to add definitions for the terms SIP \25\ and SIP Plan.\26\
---------------------------------------------------------------------------

    \16\ Specifically, the Exchange proposes to incorporate the 
definitions for the following terms from the Amended UTP Plan: 
Extraordinary Market Activity, Material SIP Latency, Operating 
Committee, Operational Halt, Primary Listing Market, Processor, 
Regulatory Halt, SIP Halt, SIP Halt Resume Time, and SIP Outage. See 
Sections X.A.1, X.A.5, IV.A, X.A.7, X.A.8, III.Q, X.A.10, X.A.11, 
X.A.12, and X.A.13 of the Amended UTP Plan, respectively.
    \17\ Specifically, the Exchange proposes to incorporate the 
definition of Trading Center from Rule 600(b)(95) of Regulation NMS. 
See 17 CFR 242.600(b)(95).
    \18\ Specifically, the Exchange proposes to relocate the 
following definitions within Rule 4120 without substantive change: 
Derivative Securities Product, IPO, Pre-Market Session, and Required 
Value.
    \19\ Specifically, Regulation NMS defines Regular Trading Hours 
as the time between 9:30 a.m. and 4:00 p.m. Eastern Time, or such 
other time as is set forth in the procedures established pursuant to 
17 CFR 242.605(a)(2). See 17 CFR 242.600(b)(77).
    \20\ The Exchange proposes to make conforming changes to Rules 
5710 and 5711 to replace the term ``Regular Market Session'' with 
the term ``Regular Trading Hours.''
    \21\ See Amendment No. 1, supra note 6, at 27694.
    \22\ Currently, Post-Market Session means the trading session 
that begins at 4:00 p.m. or 4:15 p.m., and that continues until 8:00 
p.m. See current Rule 4120(b)(4)(C).
    \23\ See Amendment No. 1, supra note 6, at 27686, 27689.
    \24\ See id. at 27689.
    \25\ The Exchange proposes to define SIP to have the same 
meaning as the term Processor in the Amended UTP Plan or in the 
Consolidated Tape Association Plan, as applicable. See proposed Rule 
4120(a)(10).
    \26\ The Exchange proposes to define SIP Plan to mean the 
national market system plan governing the SIP. See proposed Rule 
4120(a)(17).
---------------------------------------------------------------------------

    Proposed Rule 4120(b)(1) would set forth three categories of 
Regulatory Halts: (a) those provided by the Amended UTP Plan; \27\ (b) 
discretionary Regulatory Halts; and (3) mandatory Regulatory Halts. 
With respect to discretionary Regulatory Halts, the Exchange proposes 
to relocate, without substantive change other than to conform to the 
language of the Amended UTP Plan, certain existing provisions of Rule 
4120 under which the Exchange may halt trading.\28\ The

[[Page 36020]]

Exchange also proposes to incorporate the provision of the Amended UTP 
Plan that permits Regulatory Halts in connection with a national, 
regional, or localized disruption.\29\ In addition, the Exchange 
proposes to delete existing rule text that describes a halt type that 
is obsolete \30\ and halt types that are superseded by the new proposed 
text within Rule 4120.\31\
---------------------------------------------------------------------------

    \27\ The Amended UTP Plan provides that a Primary Listing Market 
may declare a Regulatory Halt in trading for any security for which 
it is the Primary Listing Market: as provided for in the rules of 
the Primary Listing Market; if it determines there is a SIP Outage, 
Material SIP Latency, or Extraordinary Market Activity; or in the 
event of national, regional, or localized disruption that 
necessitates a Regulatory Halt to maintain a fair and orderly 
market. See Section X.C.1 of the Amended UTP Plan.
    \28\ Specifically, the Exchange proposes to relocate rule 
provisions relating to the following types of halts: request of 
certain information from the issuer (with revisions to conform to 
the language of the Amended UTP Plan regarding Regulatory Halts to 
maintain a fair and orderly market and regarding the considerations 
of a Primary Listing Market for initiating a Regulatory Halt); 
dissemination of material news; in connection with an IPO; and halt 
of index warrants, Derivative Securities Products, American 
Depositary Receipts, and other securities listed on the Exchange 
under specified conditions. See proposed Rule 4120(b)(1)(B). Rule 
4120 currently permits the Exchange to halt trading in a security 
listed on the Exchange, if the security is listed on another 
national securities exchange and that exchange halts the security 
for regulatory reasons. The Exchange now proposes to remove the 
reference to another national securities exchange because under the 
Amended UTP Plan, if the Nasdaq-listed security is also listed on 
another national securities exchange, only the Primary Listing 
Market may declare a Regulatory Halt, and the Exchange would be 
required to halt trading in a security if its Primary Listing Market 
declares a Regulatory Halt. See proposed Rule 4120(b)(1)(B)(vi).
    \29\ See Section X.C.1(c) of the Amended UTP Plan.
    \30\ The Exchange proposes to delete current Rule 4120(a)(11), 
which has been superseded by the LULD Plan.
    \31\ The Exchange proposes to delete current Rule 4120(a)(6), 
which would be superseded by the provisions of the Amended UTP Plan 
relating to Regulatory Halts due to Extraordinary Market Activity 
(as proposed to be incorporated within proposed Rule 4120), as well 
as current Rule 4120(a)(3)(A), which will be superseded by the 
Exchange's proposed rules governing Operational Halts.
---------------------------------------------------------------------------

    With respect to mandatory Regulatory Halts, the Exchange proposes 
to relocate, without substantive change, certain existing provisions of 
Rule 4120 under which the Exchange is required to halt trading.\32\ The 
Exchange also proposes to make clear that a trading halt due to 
extraordinary market volatility (i.e., the market-wide circuit breaker) 
is a mandatory Regulatory Halt.\33\
---------------------------------------------------------------------------

    \32\ Specifically, the Exchange proposes to relocate rule 
provisions relating to the following types of halts: Derivative 
Securities Products when certain information is not disseminated to 
all market participants at the same time; the Limit Up-Limit Down 
(``LULD'') mechanism; and Equity Investment Tracking Stocks and 
Subscription Receipts under specified conditions. See proposed Rule 
4120(b)(1)(C).
    \33\ See proposed Rule 4120(b)(1)(C)(iii).
---------------------------------------------------------------------------

    Proposed Rule 4120(b)(2) would set forth the procedures for 
initiating a Regulatory Halt, which would be substantively identical to 
the analogous provisions in the Amended UTP Plan that were approved as 
part of the Fiftieth Amendment. Consistent with the Amended UTP 
Plan,\34\ proposed Rule 4120(b)(2) would govern the start time of a 
Regulatory Halt, the notification of a Regulatory Halt, retroactive 
halts, consultations and considerations prior to declaring a Regulatory 
Halt, and evaluations after the declaration of a Regulatory Halt.\35\
---------------------------------------------------------------------------

    \34\ See Sections X.C.2, X.D, and X.H of the Amended UTP Plan.
    \35\ The Exchange proposes to delete current Rule 4120(c)(4), 
which describes the start time of a trading halt and the manner in 
which the Exchange disseminates notice of the commencement of a 
trading halt, and current Rule 4120(c)(6)(A), which describes 
trading halts due to extraordinary market activity. These rules 
would be replaced by the proposed rules that incorporate provisions 
of the Amended UTP Plan that govern the start time and notification 
of trading halts, including trading halts due to Extraordinary 
Market Activity.
---------------------------------------------------------------------------

    Proposed Rule 4120(b)(3) would govern the scenario where another 
exchange initiates a Regulatory Halt. Consistent with the Amended UTP 
Plan,\36\ proposed Rule 4120(b)(3) would provide that the Exchange 
would halt trading for a security when the Primary Listing Market 
declares a Regulatory Halt for the security.\37\ The Exchange also 
proposes to relocate, without substantive change, existing provisions 
of Rule 4120 that govern halts for Derivative Securities Products that 
are traded on the Exchange pursuant to unlisted trading privileges.\38\
---------------------------------------------------------------------------

    \36\ See Section X.G of the Amended UTP Plan.
    \37\ The Exchange proposes to delete current Rule 4120(a)(2), 
which permits the Exchange to halt trading in a security listed on 
another exchange during a trading halt imposed by such exchange to 
permit the dissemination of material news.
    \38\ See proposed Rule 4120(b)(3)(A)(ii).
---------------------------------------------------------------------------

    Proposed Rule 4120(b)(4) would set forth the process for the 
resumption of trading after a Regulatory Halt. With respect to 
Regulatory Halts other than IPO or SIP Halts, proposed Rule 
4120(b)(4)(A) would provide for the timing and notification of 
resumption where the Exchange is the Primary Listing Market, consistent 
with the Amended UTP Plan.\39\ The Exchange also proposes to relocate, 
without substantive change, existing provisions of Rule 4120 that 
govern the process for the resumption of trading following Regulatory 
Halts other than IPO or SIP halts, including specific provisions that 
govern the process for the resumption of trading following LULD 
halts.\40\ Moreover, consistent with the Amended UTP Plan,\41\ proposed 
Rule 4120(b)(4)(A) would provide for the timing of a resumption where 
the Exchange is not the Primary Listing Market.\42\
---------------------------------------------------------------------------

    \39\ See Sections X.E.1 and X.H of the Amended UTP Plan. The 
Exchange proposes to delete current Rule 4120(c)(5), which describes 
the resumption time following a trading halt and the manner in which 
the Exchange disseminates notice of the resumption, and current Rule 
4120(c)(6)(B), which describes resumptions following trading halts 
due to extraordinary market activity. These rules would be replaced 
by proposed rules that incorporate the provisions of the Amended UTP 
Plan that govern the resumption of trading following trading halts, 
including trading halts due to Extraordinary Market Activity.
    \40\ See proposed Rule 4120(b)(4)(A)(i)a-e. The Exchange also 
proposes to clarify that the resumption process in proposed Rule 
4120(b)(4)(A)(i)a-e applies to all types of Regulatory Halts other 
than SIP Halts or IPO Halts. See Amendment No. 1, supra note 6, at 
27691. Similarly, the Exchange proposes to amend Rule 4753(b) to 
specify that the halt cross process in Rule 4753 applies generally 
to Nasdaq-listed securities that are the subject of a trading halt 
or pause under Rule 4120.
    \41\ See Section X.E.2 of the Amended UTP Plan.
    \42\ See proposed Rule 4120(b)(4)(A)(ii).
---------------------------------------------------------------------------

    Proposed Rule 4120(b)(4)(B) would set forth the process for the 
resumption of trading after a SIP Halt. Consistent with the Amended UTP 
Plan,\43\ proposed Rule 4120(b)(4)(B) would set forth the 
considerations for the Exchange in determining the SIP Halt Resume 
Time, and the Exchange's ability to delay the SIP Halt Resume Time or 
stagger the SIP Halt Resume Time for multiple symbols. Also consistent 
with the Amended UTP Plan,\44\ the Exchange would terminate a SIP Halt 
with a notification that specifies a SIP Halt Resume Time.\45\ As 
required by the Amended UTP Plan,\46\ the Exchange proposes to provide 
a minimum five-minute notice of a SIP Halt Resume Time, during which 
period (``Display Only Period'') market participants may enter quotes 
and orders in the affected securities.\47\ Also as required by the 
Amended UTP Plan,\48\ the Exchange proposes to provide that, during 
Regular Trading Hours, the last SIP Halt Resume Time would be 20 
minutes before the end of Regular Trading Hours (e.g., 3:40 p.m. 
ET).\49\ The Exchange states that 20 minutes before the end of Regular 
Trading Hours is the latest time that the

[[Page 36021]]

Exchange believes that it would be able to conduct an orderly halt 
cross process and without impacting the closing cross process.\50\
---------------------------------------------------------------------------

    \43\ See Section X.F of the Amended UTP Plan.
    \44\ See id.
    \45\ See proposed Rule 4120(b)(4)(B)(i)b.
    \46\ See Section X.F.2 of the Amended UTP Plan (stating that the 
Primary Listing Market ``shall provide a minimum notice of a SIP 
Halt Resume Time, as specified by the rules of the Primary Listing 
Market, during which period market participants may enter quotes and 
orders in affected securities'').
    \47\ See proposed Rule 4120(b)(4)(B)(i)b.
    \48\ See Section X.F.2 of the Amended UTP Plan (stating that 
``[d]uring Regular Trading Hours, the last SIP Halt Resume Time 
before the end of Regular Trading Hours shall be an amount of time 
as specified by the rules of the Primary Listing Market'').
    \49\ See proposed Rule 4120(b)(4)(B)(i)b. If trading has not 
resumed by this time, the Exchange would establish its closing price 
in the halted securities using its contingency closing process in 
Rule 4754(b)(7). See Amendment No. 1, supra note 6, at 27692.
    \50\ See Amendment No. 1, supra note 6, at 27692.
---------------------------------------------------------------------------

    For a SIP Halt initiated by the Exchange, the Exchange also 
proposes to use the same reopening process as for non-IPO and non-LULD 
Regulatory Halts, except that the Display Only Period will be a minimum 
of five minutes, and may be extended at the discretion of the Exchange 
if it believes that trading will not resume in a fair and orderly 
manner.\51\ Furthermore, as required by the Amended UTP Plan,\52\ the 
Exchange proposes that, for a SIP Halt initiated by the Exchange, if 
during Regular Trading Hours, the Exchange does not resume trading in a 
security for which it is the Primary Listing Market within 10 minutes 
after the SIP Halt Resume Time, then other markets may resume trading 
in that security.\53\ The Exchange states that the proposed 10-minute 
time period corresponds to a 10-minute time period set forth in the 
LULD Plan, after which the Processor may update LULD price bands for 
paused securities if the primary listing market for such security is 
unable to reopen trading following a trading pause due to a systems or 
technology issue.\54\
---------------------------------------------------------------------------

    \51\ See proposed Rule 4120(b)(4)(B)(i)c. See also Section X.F 
of the Amended UTP Plan (stating that the Primary Listing Market 
``retains discretion to delay the SIP Halt Resume Time if it 
believes trading will not resume in a fair and orderly manner'').
    \52\ See Section X.F.3 of the Amended UTP Plan (stating that 
``[d]uring Regular Trading Hours, if the Primary Listing Market does 
not open a security within the amount of time as specified by the 
rules of the Primary Listing Market after the SIP Halt Resume Time, 
a Participant may resume trading in that security'').
    \53\ See proposed Rule 4120(b)(4)(B)(i)d.
    \54\ See Amendment No. 1, supra note 6, at 27692.
---------------------------------------------------------------------------

    With respect to a SIP Halt initiated by another exchange that is 
the Primary Listing Market, during Regular Trading Hours, the Exchange 
would resume trading after trading has resumed on the Primary Listing 
Market or notice has been received from the Primary Listing Market that 
trading may resume.\55\ Consistent with the Amended UTP Plan,\56\ 
during Regular Trading Hours, if the Primary Listing Market does not 
open a security within the amount of time specified by the rules of the 
Primary Listing Market after the SIP Halt Resume Time, the Exchange may 
resume trading in that security; and outside Regular Trading Hours, the 
Exchange may resume trading immediately after the SIP Halt Resume 
Time.\57\
---------------------------------------------------------------------------

    \55\ See proposed Rule 4120(b)(4)(B)(ii).
    \56\ See Section X.F.3 of the Amended UTP Plan.
    \57\ See proposed Rule 4120(b)(4)(B)(ii).
---------------------------------------------------------------------------

    The Exchange proposes to relocate, without substantive change, the 
existing provisions of Rule 4120 that govern the process for resumption 
of trading following an IPO halt.\58\
---------------------------------------------------------------------------

    \58\ See proposed Rule 4120(b)(4)(C).
---------------------------------------------------------------------------

    The Exchange proposes to adopt Rule 4120(c) to govern Operational 
Halts on the Exchange. Consistent with current Rule 4120, proposed Rule 
4120(c)(1) would allow the Exchange to declare an Operational Halt in a 
security listed on the Exchange if the Primary Listing Market imposes 
an Operational Halt in a security that is a derivative or component of 
the security listed on the Exchange. Proposed Rule 4120(c)(1) would 
also allow the Exchange to declare an Operational Halt for a security 
if the Exchange itself is experiencing extraordinary market activity or 
when it is otherwise necessary to maintain a fair and orderly market or 
in the public interest. Consistent with the Amended UTP Plan,\59\ 
proposed Rule 4120(c)(2) would require the Exchange to notify the 
Processor if it has concerns about its ability to collect and transmit 
quotation and transactions information, or where it has declared an 
Operational Halt or suspension of trading.
---------------------------------------------------------------------------

    \59\ See Section X.B of the Amended UTP Plan.
---------------------------------------------------------------------------

    Under proposed Rule 4120(c)(3), the Exchange may resume trading 
following an Operational Halt when it determines that trading may 
resume on its market in a fair and orderly manner and in accordance 
with its rules.\60\ As proposed, when the Exchange is the Primary 
Listing Market, the resumption of trading after an Operational Halt 
would follow the same reopening process as for a non-IPO and non-LULD 
Regulatory Halt.\61\ However, the Exchange would be able to determine 
to resume trading without a halt cross if it determines that such 
action is in the best interests of the market.\62\ According to the 
Exchange, in certain circumstances, a halt cross following an 
Operational Halt, which only applies to the Exchange, may be disruptive 
or result in trade-throughs.\63\ The Exchange also states that another 
exchange already has the flexibility to reopen trading without an 
auction following an Operational Halt.\64\ As proposed, when the 
Exchange is not the Primary Listing Market, but halted trading based on 
an Operational Halt initiated by the Primary Listing Market, the 
Exchange would be able to resume trading once it has determined that 
trading may be resumed in a fair and orderly manner.\65\
---------------------------------------------------------------------------

    \60\ As proposed, trading in a security subject to an 
Operational Halt would resume at the time specified by the Exchange 
in a notice disseminated in the same manner as a notice initiating a 
Regulatory Halt. See proposed Rule 4120(c)(3)(C).
    \61\ See proposed Rule 4120(c)(3)(A).
    \62\ See id. For any Operational Halt for which a halt cross 
will not occur, consistent with current Rule 4120, orders entered 
during the halt will not be accepted, unless subject to instructions 
that the order will be directed to another exchange as described in 
Rule 4758. See proposed Rule 4120(c)(3)(B). The Exchange also 
proposes to make conforming changes to Rule 4753(b) to provide that, 
for Nasdaq-listed securities that are the subject of a trading halt 
or pause pursuant to Rule 4120, market hours trading will commence 
when the Exchange releases the security, in the case of a security 
for which the Exchange determines not to hold a halt cross.
    \63\ See Amendment No. 1, supra note 6, at 27693.
    \64\ See id.
    \65\ See proposed Rule 4120(c)(3)(A).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to make non-substantive and 
conforming changes throughout its rules. Specifically, the Exchange 
proposes update its rules that currently contain cross-citations to 
various provisions of Rule 4120 to reflect the citations for these same 
provisions in proposed Rule 4120.\66\ The Exchange also proposes to 
remove references to the obsolete Intermarket Trading System \67\ and 
to update references to the obsolete circuit breaker in current Rule 
4120(a)(11) with references to the LULD mechanism.\68\ In addition, the 
Exchange proposes to remove rule text relating to the applicability of 
Rule 4120 to dually-listed securities, because the Amended UTP Plan 
defines the Primary Listing Market for a dually-listed security and 
sets forth the role of the Primary Listing Market in trading halts.\69\ 
Moreover, the Exchange proposes to remove rule text relating to 
Exchange notification of material news by issuers, which is already 
covered elsewhere in the Exchange's rules.\70\
---------------------------------------------------------------------------

    \66\ See proposed changes to Rule 4702, Rule 4753, Rule 4754, 
IM-5315-2, IM-5405-1, IM-5505-1, and Rule 5711.
    \67\ See proposed changes to IM-5220.
    \68\ See proposed changes to Rule 5711.
    \69\ See proposed changes to IM-5220.
    \70\ See current Rule 4120(c)(1) and (2).
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission believes that the proposed rule change, as modified 
by Amendment No. 1, is consistent with the requirements of the Act and 
the rules and regulations thereunder that are applicable to a national 
securities exchange. In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) of the Act,\71\ which requires, among other 
things, that the rules of a national securities exchange be designed to 
prevent fraudulent and manipulative

[[Page 36022]]

acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, 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.
---------------------------------------------------------------------------

    \71\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As described above, the Exchange proposes to amend Rule 4120 to 
incorporate provisions of the Amended UTP Plan, including the 
provisions that were approved as part of the Fiftieth Amendment to the 
Plan; reorganize certain existing text in Rule 4120 without substantive 
change, other than to conform to the language of the Amended UTP Plan; 
add new text in Rule 4120 pursuant to the provisions of the Amended UTP 
Plan; and make conforming changes throughout its rules to reflect Rule 
4120, as amended by this proposal.
    In approving the Fiftieth Amendment to the Plan, the Commission 
stated that the amendment established a clear and uniform approach with 
respect to trading halts under various defined circumstances.\72\ In 
particular, the Commission stated that the Fiftieth Amendment provided 
uniform rules that govern how Plan participants will address, among 
other things, the initiation, implementation, and communication of 
trading halts, as well as the resumption of trading after a trading 
halt, thereby clarifying the procedures to be followed and the 
standards to be applied, improving coordination and certainty among the 
Plan participants and other market participants, and enhancing the 
resiliency and integrity of market systems.\73\ The Commission also 
stated that the requirement for Primary Listing Markets to make good-
faith determinations concerning the appropriateness of declaring a 
Regulatory Halt and resuming trading thereafter should promote fair and 
orderly markets and the protection of investors, because it encourages 
Primary Listing Markets to consider the broader interests of the 
national market system and addresses potential concerns that Primary 
Listing Markets may be subject to commercial pressures in making 
decisions to call a Regulatory Halt and resuming trading 
thereafter.\74\
---------------------------------------------------------------------------

    \72\ See Fiftieth Amendment Order, supra note 7, at 29848.
    \73\ See id.
    \74\ See id.
---------------------------------------------------------------------------

    The Commission believes that the Exchange's proposal to incorporate 
provisions of the Amended UTP Plan, including the provisions that were 
approved as part of the Fiftieth Amendment, is consistent with the goal 
of establishing a clear and uniform approach with respect to trading 
halts under various defined circumstances, improving coordination and 
certainty among the Plan participants and other market participants, 
enhancing the resiliency and integrity of market systems, and 
encouraging Primary Listing Markets to consider the broader interests 
of the national market system in declaring a Regulatory Halt and 
resuming trading thereafter. The Commission similarly believes that the 
Exchange's proposal to reorganize the provisions of existing Rule 4120 
that describe the various types of discretionary and mandatory 
Regulatory Halts, with changes to conform these provisions to the 
language of the Amended UTP Plan, is consistent with these goals.\75\
---------------------------------------------------------------------------

    \75\ See supra notes 19-23 and accompanying text (describing the 
proposal to replace the term ``Regular Market Session'' with the 
term ``Regular Trading Hours'' and to make conforming and clarifying 
changes to the definition of ``Post-Market Session'') and note 28 
and accompanying text (describing the proposal to amend Rule 4120 to 
conform to the fair and orderly market standard for Regulatory Halts 
in the Amended UTP Plan and to reflect that, under the Amended UTP 
Plan, only the Primary Listing Market may declare a Regulatory Halt, 
and the Exchange would be required to halt trading in a security if 
its Primary Listing Market declares a Regulatory Halt). Also as 
described above, the Exchange proposes to add the market-wide 
circuit breaker halt as a type of mandatory Regulatory Halt. See 
supra note 33 and accompanying text.
---------------------------------------------------------------------------

    As described above, the implementation of certain provisions of the 
Amended UTP Plan, which were approved as part of the Fiftieth 
Amendment, requires the Exchange to adopt certain rules.\76\ In 
accordance with these provisions of the Amended UTP Plan, the Exchange 
proposes to adopt a five-minute minimum notice and Display Only Period 
for a SIP Halt Resume Time, which is consistent with the minimum length 
of the Display Only Period that the Exchange applies to certain other 
types of Regulatory Halts.\77\ The Exchange also proposes to establish 
the last SIP Halt Resume Time as 20 minutes before the end of Regular 
Trading Hours, which is designed to allow the Exchange to conduct an 
orderly halt cross process before the end of Regular Trading Hours and 
without impacting the closing cross process.\78\ Moreover, the Exchange 
proposes to provide a 10-minute waiting period for other markets to 
resume trading in a security, if the Exchange is the Primary Listing 
Market for the security and does not resume trading following the SIP 
Halt Resume Time, which is similar to a waiting period that is 
currently in the LULD Plan. The Commission believes that these aspects 
of the proposal are reasonably designed to allow the Exchange to 
implement the Fiftieth Amendment to the Plan.
---------------------------------------------------------------------------

    \76\ See supra notes 46-54 and accompanying text.
    \77\ See current Rule 4120(c)(7).
    \78\ As described above, for a SIP Halt initiated by the 
Exchange, the Exchange proposes to resume trading using the same 
reopening process as for non-IPO and non-LULD Regulatory Halts. See 
supra note 51 and accompanying text.
---------------------------------------------------------------------------

    Furthermore, as described above, the Exchange proposes to specify 
in Rule 4120(c) the circumstances under which it may declare an 
Operational Halt (which applies only to trading on the Exchange), as 
well as the process for initiating an Operational Halt and resuming 
trading following an Operational Halt. The Exchange proposes to use the 
existing halt cross process to reopen trading following an Operational 
Halt, although the Exchange would be permitted to reopen trading 
following an Operational Halt without a halt cross if it determines 
such action to be in the best interest of the market. The Commission 
believes that the proposed rules governing Operational Halts on the 
Exchange are reasonably designed to allow the Exchange to halt trading 
(which applies only to trading on the Exchange) when there are unusual 
conditions with respect to trading on the Exchange and when necessary 
to main a fair and orderly market on the Exchange.\79\ The Commission 
also believes that the proposed rules would allow the Exchange to 
resume trading following an Operational Halt in a fair and orderly 
manner using the Exchange's established halt cross process, while 
providing the Exchange the ability to reopen trading without a halt 
cross if that is in the best interest of the market, including when 
trading has continued in a fair and orderly manner on other markets.
---------------------------------------------------------------------------

    \79\ The Exchange currently has authority under its bylaws to 
implement an Operational Halt under certain circumstances. See 
Article IX, Section 5 of the Exchange's By-Laws (stating that the 
Exchange board, or such person or persons as may be designated by 
the board, in the event of an emergency or extraordinary market 
conditions, has the authority to take any action regarding the 
trading in or operation of the Exchange).
---------------------------------------------------------------------------

    Finally, the Commission believes that the proposed non-substantive 
and conforming changes would remove obsolete or superseded text from 
the Exchange's rules \80\ and ensure internal

[[Page 36023]]

consistency within the Exchange's rules.\81\
---------------------------------------------------------------------------

    \80\ See supra notes 30-31 (describing the deletion of rule 
provisions that are superseded by the LULD Plan, the Amended UTP 
Plan, and the proposed rules on Operational Halts), notes 35 and 39 
(describing the deletion of rule provisions that are superseded by 
the Amended UTP Plan), notes 67-68 and accompany text (describing 
the deletion of references to the obsolete Intermarket Trading 
system and circuit breaker), and note 70 and accompanying text 
(describing the deletion of rule provisions that are covered 
elsewhere in the Exchange's rules).
    \81\ See supra note 66 and accompany text (describing updates to 
the cross-citations to the provisions within Rule 4120) and note 69 
and accompany text (describing deletions to ensure consistency with 
the definition and role of the Primary Listing Market under the 
Amended UTP Plan). See also supra note 40 (describing the proposal 
to relocate the provisions of existing Rule 4120 that describe the 
reopening process following a Regulatory Halt, with a proposed 
change to clarify the applicability of the process to the various 
types of Regulatory Halts, and the proposal to amend Rule 4753(b) to 
specify that the halt cross process in Rule 4753 applies generally 
to Nasdaq-listed securities that are the subject of a trading halt 
or pause in Rule 4120).
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with the 
Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\82\ that the proposed rule change (SR-NASDAQ-2022-017), as 
modified by Amendment No. 1, be, and hereby is approved.
---------------------------------------------------------------------------

    \82\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\83\
---------------------------------------------------------------------------

    \83\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12732 Filed 6-13-22; 8:45 am]
BILLING CODE 8011-01-P


