[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57534-57539]
[FR Doc No: 2022-20268]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95768; File No. SR-NASDAQ-2022-051]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Equity 4, Rules 4120, 4702 and 4703 in Light of Planned Changes
to the System

September 14, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 9, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``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 amend Equity 4, Rules 4120, 4702 and 4703
\3\ in light of planned changes to the System.
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    \3\ References herein to Nasdaq Rules in the 4000 Series shall
mean Rules in Nasdaq Equity 4.
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    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 parts of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is preparing to introduce a new upgraded version of
the OUCH Order entry protocol \4\ that will enable the Exchange to make
functional enhancements and improvements to specific Order Types \5\
and Order Attributes.\6\ Specifically, enhancements to OUCH will enable
the Exchange to upgrade the logic and implementation of these Order
Types and Order Attributes so that the features are more robust,
streamlined, and harmonized across the Exchange's Systems and Order
entry protocols. The Exchange developed OUCH with simplicity in mind,
and therefore, it presently lacks certain complex order handling
capabilities. By contrast, the Exchange specifically designed its RASH
Order Entry Protocol \7\ to support advanced functionality, including
discretion, random reserve, pegging and routing. The introduction of
OUCH upgrades will enable participants to utilize OUCH, in addition to
RASH, to enter Order Types that require advanced functionality. Thus,
the proposal does not seek to introduce new functionality, but rather,
it offers to OUCH users advanced functionality that already exists for
RASH users.
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    \4\ The OUCH Order entry protocol is a proprietary protocol that
allows subscribers to quickly enter orders into the System and
receive executions. OUCH accepts limit Orders from members, and if
there are matching Orders, they will execute. Non-matching Orders
are added to the Limit Order Book, a database of available limit
Orders, where they are matched in price-time priority. OUCH only
provides a method for members to send Orders and receive status
updates on those Orders. See https://www.nasdaqtrader.com/Trader.aspx?id=OUCH.
    \5\ An ``Order Type'' is a standardized set of instructions
associated with an Order that define how it will behave with respect
to pricing, execution, and/or posting to the Exchange Book when
submitted to Nasdaq. See Equity 1, Section 1(a)(7).
    \6\ An ``Order Attribute'' is a further set of variable
instructions that may be associated with an Order to further define
how it will behave with respect to pricing, execution, and/or
posting to the Exchange Book when submitted to the Exchange. See id.
    \7\ The RASH (Routing and Special Handling) Order entry protocol
is a proprietary protocol that allows members to enter Orders,
cancel existing Orders and receive executions. RASH allows
participants to use advanced functionality, including discretion,
random reserve, pegging and routing. See http://nasdaqtrader.com/content/technicalsupport/specifications/TradingProducts/rash_sb.pdf.
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    The Exchange plans to implement its enhancement of the OUCH
protocol

sequentially, by Order Type and Order Attribute.\8\
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    \8\ The Exchange notes that its sister exchange, Nasdaq BX,
Inc., filed a similar proposed rule changes with the Commission, see
SR-BX-2022-012 (filed August 12, 2012), and Nasdaq PSX plans to do
so concurrently with this filing.
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    To support and prepare for the introduction of OUCH upgrades, the
Exchange proposes to amend Rule 4702 pertaining to Order Types to
specify that, going forward, OUCH may be used to enter certain Order
Types together with certain Order Attributes, whereas now, Rule 4702
specifies that RASH, FIX, and QIX, but not OUCH, may be used to enter
such combinations of Order Types and Attributes. The Exchange also
proposes to adjust the current functionality of the Pegging,\9\
Reserve,\10\ and Trade Now Order Attributes,\11\ as described below, so
that they align with how OUCH, once upgraded, will handle these Order
Attributes going forward.
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    \9\ See Rule 4703(d).
    \10\ See Rule 4703(h).
    \11\ See Rule 4703(m)-(n).
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Changes To Use of Certain Order Types With Certain Order Attributes
    Pursuant to Rule 4702(b), the availability of certain Order
Attributes for use with certain Order Types presently depends upon the
particular Order entry protocol a participant uses to enter its Order.
For Price to Comply and Price to Display Orders entered though OUCH,
the Reserve Size, Primary Pegging and Market Pegging, and Discretion
Attributes are not available to participants presently. For Non-
Displayed Orders entered through OUCH, the Primary Pegging, Market
Pegging, and Discretion Attributes are not available presently. The
Exchange proposes to amend Rule 4702(b) so that for each of the Order
Types listed above, participants may utilize the corresponding Order
Attributes when participants enter their Orders using the upgraded
version of OUCH.
    Meanwhile, for Non-Displayed Orders with the Midpoint Pegging
Attribute, the behavior of such Orders presently varies, as set forth
in Rule 4703(d), based upon whether a participant uses OUCH/FLITE or
RASH/FIX/QIX to enter them into the System. Going forward, the Exchange
proposes to amend the Rule to reference the amended version Rule
4703(d) (discussed below), which will describe variances in behavior
involving Non-Displayed Orders with Midpoint Pegging which will no
longer depend strictly upon the Order entry protocol associated with
the Orders.
Changes to Midpoint Peg Post-Only Orders
    Presently, the behavior of Midpoint Peg Post-Only Orders also
varies depending upon whether a participant uses OUCH/FLITE or RASH/
FIX/QIX to enter them into the System. Amendments to the Rule are
needed because upgrades to OUCH will allow for OUCH to perform
functions that are currently available only using RASH, FIX, or QIX.
The Exchange proposes to amend Rule 4702(b)(5) so that variances in
Midpoint Peg Post-Only Order behavior will occur going forward, not
based upon use of any particular Order entry protocol, but instead
based upon whether the Midpoint Peg Post-Only Order is ``Fixed,'' i.e.,
the Order is pegged at the midpoint of the NBBO upon entry, and does
not adjust with subsequent changes to the midpoint of the NBBO, or
``Managed,'' i.e., the System adjusts the price of the Order after
entry in accordance with changes to the midpoint of the NBBO.
    Thus, whereas now, Rule 4702(b)(5)(B) prescribes certain behavior
for Midpoint Peg Post-Only Orders entered through RASH, QIX, or FIX
where the System will adjust the price after entry in accordance with
shifts in the midpoint of the NBBO, the Exchange proposes to state that
such behavior will apply to ``Managed Midpoint Peg Post-Only Orders,''
regardless of the Order entry protocol used to enter it. This proposed
amendment reflects the fact that going forward, OUCH may be used to
enter Managed Midpoint Peg Post-Only Orders.
    Likewise, whereas now, Rule 4702(b)(5)(B) prescribes different
behavior for Midpoint Peg Post-Only Orders entered through OUCH or
FLITE where the System does not adjust the price of the Order after
entry in accordance with shifts in the midpoint of the NBBO, the
Exchange proposes to state that such behavior will apply to ``Fixed
Midpoint Peg Post-Only Orders,'' regardless of the Order entry protocol
used to enter it. Similarly, the Exchange proposes to amend text
describing the conditions under which the System will cancel these
Orders back to participants as applying to Fixed Midpoint Peg Post
Post-Only Orders, rather than Midpoint Peg Post-Only Orders entered
through OUCH or FLITE.
Changes to Market Maker Peg Orders
    Rule 4702(b)(7)(A) presently provides that Market Maker Peg Orders
may be entered through RASH, FIX, or QIX only. The Exchange proposes to
amend this provision to state that the upgraded version of OUCH may be
used to enter such Orders going forward.
Changes to Pegging Order Attribute
    In addition to the above, the Exchange proposes to amend Rule
4703(d), which governs the Pegging Order Attribute, to account for the
new capabilities of the upgraded version of OUCH.
    As described in Rule 4703(d), Pegging is an Order Attribute that
allows an Order to have its price automatically set with reference to
the NBBO. The Exchange offers three types of Pegging: Primary Pegging,
Market Pegging, and Midpoint Pegging.\12\ The behavior of each of these
types of Pegged Orders currently varies based upon the particular Order
entry protocol associated with their use. With the introduction of the
upgraded version of OUCH, these variances will narrow, as OUCH will be
capable of handling Pegged Orders similar to how RASH, FIX, and QIX
handle them. However, variances will not disappear entirely, as the
upgraded version of OUCH will continue to handle Orders with Midpoint
Pegging that the System cancels in response to changes to the Midpoint
(``Fixed Midpoint Orders'') the same way that the current iteration of
OUCH and FLITE handles them.
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    \12\ See Rule 4703(d) (defining ``Primary Pegging as pegging
with reference to the inside quotation on the same side of the
market, ``Market Pegging'' as pegging with reference to the inside
quotation on the opposite side of the market, and ``Midpoint
Pegging'' as pegging with reference to the midpoint between the
inside bid and the inside offer).
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    Indeed, pursuant to the proposed rule filing, the behavior of
Pegged Orders will no longer vary strictly by the Order entry protocol
that a participant uses; instead, variance will occur based upon
whether the Pegged Orders are subject to management during their
lifetimes, i.e., the Exchange may adjust the prices of those Orders
during their lifetimes. Managed Pegged Orders (``Peg Managed Orders'')
will include Primary Pegged and Market Pegged Orders entered using
OUCH, RASH, FIX, and QIX, as well as Midpoint Pegged Orders, entered
using the same protocols, which the System may update in response to
changes to the Midpoint (``Managed Midpoint Orders''). The Exchange
will handle Managed Midpoint Orders differently from non-managed
Orders, i.e., Fixed Midpoint Orders, in like circumstances.
    The specific proposed amendments that effectuate the above are as
follows.
    Existing Rule 4703(d) states that if, at the time of entry, there
is no price to which a Pegged Order, that has not been assigned a
Routing Order Attribute, can be pegged, or pegging would lead to a
price at which the Order cannot be

posted, then the Order will not be immediately available on the
Exchange Book and will be entered once there is a permissible price,
provided, however, that the System will cancel the Pegged Order if no
permissible pegging price becomes available within one second after
Order entry.\13\ This existing language applies to Primary, Market, and
Midpoint Pegging Orders entered through RASH/QIX/FIX, but not Orders
entered through OUCH/FLITE. The Exchange proposes to amend this
provision of the Rule so that it applies to ``Peg Managed Orders,''
rather than ``Pegged Orders,'' which in practice will mean that the
behavior it currently describes for Primary Pegged and Market Pegged
Orders entered through RASH/FIX will also now apply to such Orders
entered through the upgraded version of OUCH,\14\ as well as to Managed
Midpoint Orders entered through RASH/FIX/upgraded OUCH. Moreover, the
proposed amended provision would provide for Managed Midpoint Orders
that are not assigned a Routing Order Attribute (or a Time in Force of
IOC) to behave similarly if the Inside Bid and Inside Offer are crossed
(i.e., the Managed Midpoint Order will not be immediately available on
the Exchange Book unless and until a permissible price emerges within
one second of entry (or other such time that the Exchange designates,
at its discretion)).
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    \13\ The Exchange may, in the exercise of its discretion, modify
the length of this one second time period by posting advance notice
of the applicable time period on its website.
    \14\ The Exchange also proposes to clarify that this provision
applies to a Peg Managed Order that has not been assigned a Routing
Order Attribute or a Time-in-Force of Immediate-Or-Cancel (``IOC'').
This additional amendment makes it clear that IOC orders in this
scenario will cancel immediately if no permissible pegging price is
available upon Order entry, rather than waiting up to one second
after Order entry to do so.
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    Existing Rule 4703(d) also states that if a Pegged has been
assigned a Routing Order Attribute, but there is no permissible price
to which the Order can be pegged at the time of entry, then the
Exchange will reject it, except that the Exchange will accept a
Displayed Order with Market Pegging and a Market or a Primary Pegged
Order with a Non-Display Attribute at their respective limit prices in
this circumstance. The Exchange again proposes to amend this provision
so that it applies to Peg Managed Orders, rather than Pegged Orders. It
also proposes to apply this provision to Managed Midpoint Orders that
are assigned a Routing Order Attribute, if the Inside Bid and Inside
Offer are crossed. Finally, as is explained further below, the Exchange
proposes to delete the last two sentences of this paragraph, which
describe the behavior of Orders with Midpoint Pegging, and move them to
the end of the next paragraph, which also pertains to Orders with
Midpoint Pegging. The Exchange proposes this organizational change for
ease of readability.
    As to the next paragraph of Rule 4703(d), the Exchange proposes
several changes. First, the Exchange proposes to delete the first
sentence of this paragraph, which lists the Order entry protocols for
which Primary Pegging and Market Pegging are presently available (RASH,
QIX, and FIX). This sentence is no longer needed because, as discussed
above, the Exchange proposes to add a new sentence that specifies that
all Peg Managed Orders will be available, not only through RASH, QIX,
and FIX, but also through OUCH, going forward. Second, the Exchange
proposes to modify the second sentence of the paragraph, which
presently states that for an Order entered through OUCH or FLITE with
Midpoint Pegging, the Order will have its price set upon initial entry
to the Midpoint, unless the Order has a limit price, and that limit
price is lower than the Midpoint for an Order to buy (higher than the
Midpoint for an Order to sell), in which case the Order will be ranked
on the Exchange Book at its limit price. The Exchange proposes to apply
this language to Midpoint Pegging Orders generally, rather than only
Midpoint Pegging Orders entered through OUCH or FLITE, as it will apply
to both Fixed Midpoint Orders and Managed Midpoint Orders. Third, the
Exchange proposes to add and partially restate the following language
from the preceding paragraph:

    In the case of an Order with Midpoint Pegging, if the Inside Bid
and Inside Offer are locked, the Order will be priced at the locking
price; and for Orders with Midpoint Pegging entered through OUCH or
FLITE, if the Inside Bid and Inside Offer are crossed or if there is
no Inside Bid and/or Inside Offer, the Order will not be accepted.
However, even if the Inside Bid and Inside Offer are locked, an
Order with Midpoint Pegging that locked an Order on the Nasdaq Book
would execute (provided, however, that a Midpoint Peg Post-Only
Order would execute or post as described in Rule 4702(b)(5)(A)).

    Specifically, the Exchange proposes to replace the phrase ``and for
Orders with Midpoint Pegging entered through OUCH or FLITE'' with ``and
for Fixed Midpoint Orders,'' because going forward, some Midpoint
Pegging Orders entered through the upgraded version of OUCH will not
behave in this manner; only Fixed Midpoint Orders will do so.\15\
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    \15\ The Exchange also proposes to make a stylistic, non-
substantive change to this text by deleting the phrase ``In the case
of an Order with Midpoint Pegging.'' The Exchange believes this
phrase is no longer needed due to the fact that the new paragraph to
which it proposes to move the text clearly applies to Orders with
Midpoint Pegging.
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    The Exchange proposes to amend the next paragraph, which describes
how the Exchange handles Orders with Midpoint Pegging entered through
OUCH or FLITE where the Exchange does not adjust the prices of the
Orders based on changes to the Inside Bid or Offer that occur after the
Orders post to the Exchange Book. The Exchange proposes to amend this
paragraph to state that it applies to Fixed Midpoint Orders (rather
than Orders with Midpoint Pegging entered through OUCH or FLITE) and to
state expressly that it applies to such Orders after they post to the
Exchange Book.
    The subsequent paragraph of Rule 4703(d) describes how the Exchange
handles Pegged Orders entered through RASH, QIX, or FIX where the
Exchange does adjust the prices of the Orders based on changes to the
relevant Inside Quotation that occur after the Orders Post to the
Exchange Book. Like the preceding paragraph, the Exchange proposes to
amend this paragraph to state that it applies to Peg Managed Orders
(rather than Orders entered through RASH, QIX, or FIX with Pegging).
The Exchange also proposes to amend text in this paragraph which states
that the Exchange will reject such an Order, if it assigned a Routing
Order Attribute, and if the price to which it is pegged becomes
unavailable or pegging would lead to a price at which it cannot be
posted. The proposed amended language states that the Exchange will
cancel such an Order back to the participant in these circumstances,
rather than ``reject'' it; the use of the term ``cancel'' is more
appropriate than ``reject'' in this provision insofar as the Exchange
only rejects Orders upon entry, but thereafter, it cancels them.
Consistent with amendments elsewhere in the proposal, the Exchange also
proposes to state that Managed Midpoint Orders assigned a Routing Order
Attribute will cancel back to the participant if the Inside Bid and
Inside Offer become crossed. The Exchange also proposes to qualify the
foregoing by noting that an Order with Market Pegging, or an Order with
Primary Pegging and a Non-Display Attribute, will be re-entered at its
limit price. Finally, the Exchange proposes to amend the subsequent
text, which presently reads as follows:

    ``. . . if the Order is not assigned a Routing Order Attribute,
the Order will be removed from the Nasdaq Book and will be re-
entered once there is a permissible price, provided however, that
the System will cancel the Pegged Order if no permissible pegging
price becomes available within one second after the Order was
removed and no longer available on the Nasdaq Book (the Exchange
may, in the exercise of its discretion modify the length of this one
second time period by posting advance notice of the applicable time
period on its website).''

    The Exchange proposes to amend this text to specify that it applies
to a ``Peg Managed Order,'' rather than simply an ``Order.''
Additionally in this clause, the Exchange proposes to add, after the
phrase, ``if [a Peg Managed Order] is not assigned a Routing Order
Attribute,'' the following text, for clarity: ``and the price to which
it is pegged becomes unavailable, pegging would lead to a price at
which the Order cannot be posted, or, in the case of a Managed Midpoint
Order, if the Inside Bid and Inside Offer become crossed, . . . .'' The
Exchange believes that these conditions are implicit in the existing
Rule text and should be made explicit to avoid confusion. Insofar as
this proposed amended text will now account for Managed Midpoint
Orders, then the Exchange proposes to delete the following existing
text, which will otherwise be duplicative:

    ``For an Order with Midpoint Pegging, if the Inside Bid and
Inside Offer become crossed or if there is no Inside Bid and/or
Inside Offer, the Order will be removed from the Exchange Book and
will be re-entered at the new midpoint once there is a valid Inside
Bid and Inside Offer that is not crossed; provided, however, that
the System will cancel the Order with Midpoint Pegging if no
permissible price becomes available within one second after the
Order was removed and no longer available on the Exchange Book (the
Exchange may, in the exercise of its discretion modify the length of
this one second time period by posting advance notice of the
applicable time period on its website).''

    Finally, the Exchange proposes to restate the paragraph of Rule
4703(d) that describes Pegging Order collars. In pertinent part, this
paragraph presently states that ``any portion of a Pegging Order that
could execute, either on the Exchange or when routed to another market
center, at a price of more than $0.25 or 5 percent worse than the NBBO
at the time when the order reaches the System, whichever is greater,
will be cancelled.'' The Exchange proposes to restate this text to
account for the fact that under certain conditions, the System will
cancel Pegging Orders before clearing liquidity inside the collar. For
non-routable Pegged Orders, the System cancels these Orders prior to
polling the Exchange Book for liquidity (even inside of the collar)
when the combination of limit price, pegging, offset, discretionary
price, discretionary pegging, and discretionary offset attributes would
result in the Order attempting to post to the book or clear resting
Orders beyond the collar price (even if such liquidity does not
exist).\16\ For routable Primary or Market Peg Orders, by contrast, the
System will clear any liquidity inside of the collar before
cancelling.\17\ The Exchange proposes to more precisely describe this
behavior with the following restated text:
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    \16\ For example, if NYSE is quoting $10.00 x $11.00 and a
Displayed Sell Order of 100 shares is setting the NBO by resting on
the Book at $10.05, then an incoming Primary Peg Buy order with a
Limit Price of $10.75 and an Offset Value of $0.56 will be cancelled
back without executing against the resting order at $10.05. The
Primary Peg attribute initially sets the price of the Order at
$10.00, then the offset amends the price to $10.56; the collar price
is set to $10.05 + ($10.05 x 5%) = $10.5525, which is less than the
price the incoming Order would attempt to book at.
    \17\ For example, if NYSE is quoting $10.00 x $11.00 and a
Displayed Sell Order of 100 shares is setting the NBO by resting on
the Book at $10.05, then an incoming Primary Peg Buy order of 200
shares with a Limit Price of $10.75, an Offset Value of $0.56, and
the SCAN routing strategy will execute against the resting order
before the remainder is cancelled before booking outside the collar
price.

    Any portion of a Pegging Order with a Routing attribute to buy
(sell) that could execute, either on the Exchange or when routed to
another market center, at a price of more than the greater of $0.25
or 5 percent higher (lower) than the NBO (NBB) at the time when the
order reaches the System (the ``Collar Price''), will be cancelled.
An Order entered without a Routing attribute will be cancelled, if
it would, as a result of the price determined by a Pegging or
Discretionary Pegging attribute, execute or post to the Exchange
Book at a price through the Collar Price.
Change to Reserve Attribute
    The Exchange proposes to amend its rules governing the Reserve
Order Attribute, at Rule 4703(h) to state that when a Reserve Order is
entered using OUCH with a displayed size of an odd lot, the System will
reject the Order, whereas if such an order is entered using RASH or
FIX, then as is the case now under the existing Rule, the System will
accept the Order but with the full size of the Order Displayed. The
Exchange believes that this new proposed behavior will benefit
participants insofar as Reserve Orders entered with odd lot displayed
sizes are often the product of errors. Rather than expose erroneous
displayed sizes, OUCH will cancel the Orders and thus provide
participants with an opportunity to correct their errors, or to
validate their original choices, by re-entering the Reserve Order.
Change to Trade Now Attribute
    The Exchange proposes to amend its rules governing the Trade Now
Order Attribute, at Rule 4703(m) to state that when the Trade Now
Attribute is entered through RASH or FIX, and going forward, also
through OUCH, the Trade Now Order Attribute may be enabled on an order-
by-order or a port-level basis. In the next sentence in the paragraph,
the existing text will continue to apply, but as to FLITE only, and not
to OUCH. Thus, when entered through FLITE (but not OUCH), the Trade Now
Order Attribute may be enabled on a port-level basis for all Order
Types that support it, and for the Non-Displayed Order Type, also on an
order-by-order basis.
    The Exchange intends to implement the foregoing changes during the
end of the Third Quarter or early in the Fourth Quarter of 2022.
However, certain new functionality that will involve management of OUCH
by the System may not be available until the Exchange completes
upgrades to System, which the Exchange currently expects will occur in
mid-2023. The Exchange will issue an Equity Trader Alert at least 7
days in advance of implementing the changes set forth in the proposal.
The Alert will specify which functionalities will not be available
initially, pending the System upgrade. The Exchange will issue another
Equity Trader Alert at least 7 days in advance of implementing the
remaining changes, once the requisite System upgrade is complete.
Change to Limit Up-Limit Down Mechanism
    The Exchange proposed to amend its rules governing Limit Up-Limit
Down (``LULD'') functionality, at Rule 4120(a)(13)(E)(2)(a) to state
that limit priced orders entered via the OUCH protocol, which are not
assigned a Managed Pegging, Discretionary, or Reserve Attribute, shall
be repriced upon entry only if the Price Bands are such that the price
of the limit-priced interest to buy (sell) would be above (below) the
upper (lower) Price Band. Additionally, the Exchange is proposing to
amend Rule 4120(a)(13)(E)(2)(b) to state that limit-priced orders
entered via RASH or FIX protocols, or via the OUCH protocol if assigned
a Managed Pegging, Discretionary, or Reserve Attribute, the order shall
be eligible to be repriced by the system multiple times if the Price
Bands move such that the price of resting limit-priced interest to buy
(sell) would be above (below) the upper (lower) Price Band.

    The Exchange intends to implement the foregoing changes on November
14, 2022.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\19\ 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.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
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    Generally speaking, it is consistent with the Act to amend the
Rulebook to reflect upgrades to the Exchange's OUCH Order entry
protocols. The planned upgrades will enable members to utilize OUCH in
additional circumstances, including for the entry of: (1) Price to
Comply and Price to Display Orders with the Reserve Size, Primary and
Market Pegging, and Discretion Order Attributes; (2) Non-Displayed
Orders with the Primary and Market Pegging, Midpoint Pegging (in
scenarios described in amended Rule 4703(d)), and Discretion Order
Attributes; and (3) Market Maker Peg Orders.
    Similarly, it is consistent with the Act to amend Rule 4702(b)(5),
which describes the behavior of Midpoint Peg Post-Only Orders, to
reflect the fact that the planned upgrades to OUCH will enable its use
for the entry of ``Managed'' Midpoint Peg Post-Only Orders--i.e., those
for which the System updates price after entry along with movements to
the midpoint of the NBBO. Presently, members may enter Managed Midpoint
Peg Post-Only Orders only through RASH, QIX, or FIX. It is also
consistent with the Act to refer to such Orders as ``Managed'' while
referring to Midpoint Peg Post-Only Orders, whose prices do not change
after entry, even if the NBBO midpoint shifts, as ``Fixed'' Midpoint
Peg Post-Only Orders. This terminology will avoid confusion that would
otherwise arise from the fact that OUCH may be used, going forward, to
enter both types of Orders.
    Likewise, the Exchange believes that its proposed amendments to the
Pegging Order Attribute, at Rule 4703(d), are consistent with the Act.
The proposed amendments account for the fact that OUCH will become
capable of use for the entry of Peg Managed Orders, including Managed
Midpoint Orders, in addition to Fixed Midpoint Orders. The Exchange
believes that it will be clearer and more coherent to describe the
behavior of Pegged Orders and Orders with Midpoint Pegging in the Rule
with regard to whether these Orders are ``Managed'' or ``Fixed,''
rather than with regard to the protocol used to enter them, especially
as OUCH will be available for use in entering both Managed and Fixed
Pegging Orders going forward. Additionally, proposed amendments to Rule
4703(d) would reorganize the description of the behavior of various
types of Pegged Orders so that it flows more logically and is more
readily comprehensible. Finally, proposed changes would describe the
behavior of Pegged Orders more comprehensively, by adding language that
was mistakenly omitted from the Rule.
    Meanwhile, the Exchange's proposal to restate the Rule's
description of the price collar applicable to Pegged Orders is
consistent with the Act because it accounts for the fact that under
certain conditions, the System will cancel Pegging Orders before
clearing liquidity inside the collar.
    The Exchange's proposal is consistent with the Act to amend its
Rule governing the Reserve Order Attribute, at Rule 4703(h) to state
that when a Reserve Order is entered using OUCH with a displayed size
of an odd lot, the System will reject the Order. The Exchange believes
that this new proposed behavior will benefit participants insofar as
Reserve Orders entered with odd lot displayed sizes are often the
product of errors. Rather than expose erroneous displayed sizes, OUCH
will cancel the Orders and thus provide participants with an
opportunity to correct their errors, or to validate their original
choices, by re-entering the Reserve Order.
    Additionally, the Exchange's proposal to amend its Rule governing
the Trade Now Order Attribute, at Rule 4703(m), is consistent with the
Act, because it accounts for the fact that when entered through the
upgraded version of OUCH, the Trade Now Order Attribute may be enabled
on an order-by-order or a port-level basis.
    Finally, the Exchange's proposal to amend its Rule governing the
Limit Up-Limit Down Mechanism, at Rules 4120(a)(12)(E)(2)(a) and
4120(a)(12)(E)(2)(b) are consistent with the Act because the proposed
amendments align with OUCH's capability going forward, once upgraded,
to handle certain Order Types and Order Attributes similar to how RASH
and FIX handle them. Additionally, as discussed above, variance will
occur in certain Order Types based upon whether the orders are subject
to management during their lifetimes.

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 a general principle, the
proposed changes are reflective of the significant competition among
exchanges and non-exchange venues for order flow. In this regard,
proposed changes that facilitate enhancements to the Exchange's System
and Order entry protocols as well as those that amend and clarify the
Exchange's Rules regarding its Order Attributes, are pro-competitive
because they bolster the efficiency, functionality, and overall
attractiveness of the Exchange in an absolute sense and relative to its
peers.
    Moreover, none of the proposed changes will unduly burden intra-
market competition among various Exchange participants. Participants
will experience no competitive impact from its proposals, as these
proposals will restate and reorganize portions of the Rule to reflect
the upgraded capabilities of OUCH, as well as to render the
descriptions of OUCH's new capabilities easier to read and understand.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\
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 prior
to 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 \22\ and Rule 19b-4(f)(6)
thereunder.\23\
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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 under
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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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-2022-051 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-2022-051. 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 a.m. and 3
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-2022-051 and should be submitted
on or before October 11, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20268 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P