[Federal Register Volume 87, Number 218 (Monday, November 14, 2022)]
[Notices]
[Pages 68212-68214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24649]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96248; File No. SR-NASDAQ-2022-060]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Specify an Implementation Timeframe for the Introduction of Enhanced 
Anti-Internalization Functionality

November 7, 2022.
    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 31, 2022, 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.
---------------------------------------------------------------------------

    \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 specify an implementation timeframe for 
the introduction of enhanced anti-internalization functionality.

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.

[[Page 68213]]

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 specify an 
implementation timeframe for the introduction of enhanced anti-
internalization functionality. The Exchange previously filed \3\ a rule 
change to enhance the anti-internalization functionality available on 
the Exchange by giving market participants the flexibility to choose to 
have this protection apply to market participants under Common 
Ownership.\4\
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 96069 (October 13, 
2022), 87 FR 63558 (October 19, 2022).
    \4\ The Exchange previously proposed to define ``Common 
Ownership'' under Equity 4, Rule 4757 to mean participants under 75% 
common ownership or control. See id.
---------------------------------------------------------------------------

    By way of background, anti-internalization, also known as self-
match prevention, is an optional feature available on the Exchange that 
currently (1) prevents two orders with the same Market Participant 
Identifier (MPID) from executing against each other, or (2) prevents 
two orders entered through a specific order entry port from executing 
against each other (in the case of market participants using the OUCH 
order entry protocol). The enhanced anti-internalization functionality, 
as proposed in SR-NASDAQ-2022-056,\5\ would permit market participants 
to direct that quotes/orders entered into the System not execute 
against quotes/orders entered across MPIDs that are under Common 
Ownership.
---------------------------------------------------------------------------

    \5\ Supra note 4.
---------------------------------------------------------------------------

    The previous rule filing \6\ to enhance the anti-internalization 
functionality available on the Exchange did not specify an 
implementation date. The Exchange proposes to establish an 
implementation timeframe that extends beyond 30 days after the date of 
filing of SR-NASDAQ-2022-056.\7\ Specifically, the Exchange proposes to 
implement the enhanced anti-internalization functionality no later than 
the First Quarter of 2023. The delay would provide the Exchange 
additional time to develop and test this functionality. The Exchange 
will issue an Equities Trader Alert to provide notification of the 
change and relevant implementation date prior to introducing the new 
functionality.
---------------------------------------------------------------------------

    \6\ Id.
    \7\ Id.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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 change in anti-internalization functionality will enhance self-
trade protections provided to market participants and the Exchange 
desires to rollout the anti-internalization functionality at a later 
date to allow sufficient time to develop and test this functionality. 
As proposed herein, the Exchange will offer the enhanced anti-
internalization functionality no later than the First Quarter of 2023.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. The Exchange does not believe 
that the proposed rule change will impact the intense competition that 
exists in the equities markets. The Exchange does not believe that the 
proposed delay will impose any significant burden on inter-market 
competition as it does not impact the ability of other markets to offer 
or not offer competing functionality. The Exchange does not believe 
that the proposed rule change will impose any burden on intra-market 
competition because all participants uniformly will not be able to take 
advantage of the enhanced anti-internalization functionality until it 
is implemented. The Exchange intends to offer the optional, enhanced 
anti-internalization functionality no later than the First Quarter of 
2023.

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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission 
may 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. Waiver of the 
operative delay would allow the Exchange to extend the implementation 
timeframe of SR-NASDAQ-2022-056 prior to the scheduled effective date 
for SR-NASDAQ-2022-056, which is scheduled to become effective on 
November 5, 2022. The Exchange states that extending the implementation 
timeframe prior to the currently scheduled effective date will ensure 
that the Exchange's rules continue to properly reflect the delay of the 
enhanced anti-internalization functionality, which will not be 
available on the Exchange by the currently scheduled date. The Exchange 
further states that delaying the introduction of the enhanced anti-
internalization functionality will provide additional time to develop 
and test this functionality. The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Accordingly, the Commission hereby waives the 
operative delay and designates the proposed rule change operative upon 
filing.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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

[[Page 68214]]

to determine whether the proposed rule change 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-2022-060 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-2022-060. 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-2022-060 and should be submitted 
on or before December 5, 2022.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24649 Filed 11-10-22; 8:45 am]
BILLING CODE 8011-01-P


