Joint Industry Plan; Order Approving the Fiftieth Amendment to the Joint Self-Regulatory Organization 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, as Modified by Amendment Nos. 1 and 2

I. Introduction

On February 11, 2021, the Joint Self-Regulatory Organization 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 (“Nasdaq/UTP Plan” or “Plan”) participants filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 11A of the Securities Exchange Act of 1934 (“Act”) and Rule 608 of Regulation National Market System (“NMS”) thereunder, a proposal to amend the Nasdaq/UTP Plan. This amendment represents the Fiftieth Amendment to the Plan (“Amendment”).

The Amendment was published for comment in the Federal Register on March 1, 2021. One comment letter was received. On March 31, 2021, a partial amendment was filed to correct an inadvertent error in the rule text. On April 7, 2021, a second partial amendment was filed to correct an inadvertent error in the rule text. This order approves the Amendment to the Plan, as modified by Amendment Nos. 1 and 2.

II. Description of the Proposal, as Modified by Amendment Nos. 1 and 2

The Amendment proposes revisions to the Plan's provisions governing Regulatory Halts and Operational Halts. The Participants state that “[t]he purpose of the amendment is to incorporate into the UTP Plan the same processes for Regulatory Halts that are proposed by the equity exchanges.”

A. Regulatory Halts

1. Declaration of a Regulatory Halt

With respect to declaration of a Regulatory Halt, the Amendment would provide that the Primary Listing Market may declare a Regulatory Halt in trading for any security for which it is the Primary Listing Market (1) as provided for in the rules of the Primary Listing Market; (2) if it determines there is a SIP Outage, Material SIP Latency, or Extraordinary Market Activity; or (3) in the event of national, regional, or localized disruption that necessitates a Regulatory Halt to maintain a fair and orderly market.

The Amendment would further provide that, in determining whether to declare a Regulatory Halt, the Primary Listing Market will consider the totality of information available concerning the severity of the issue, its likely duration, and potential impact on Member Firms and other market participants, and will make a good-faith determination that the criteria to declare a Regulatory Halt have been satisfied and that a Regulatory Halt is appropriate. The Amendment would also provide that, the Primary Listing Market will consult, if feasible, with the affected Trading Center(s), other Participants, or the Processor, as applicable, regarding the scope of the issue and what steps are being taken to address the issue, and that the Primary Listing Market will continue to evaluate the circumstances to determine when trading may resume in accordance with the rules of the Primary Listing Market.

2. Initiating a Regulatory Halt

The Amendment would specify procedures for initiating a Regulatory Halt. Specifically, when initiating a Regulatory Halt, the start time of a Regulatory Halt would be when the Primary Listing Market declares the halt, regardless of whether an issue with communications impacts the dissemination of the notice. The Amendment would further provide that if the Processor is unable to disseminate notice of a Regulatory Halt or the Primary Listing Market is not open for trading, the Primary Listing Market will take reasonable steps to provide notice of a Regulatory Halt, which shall include both the type and start time of the Regulatory Halt, by dissemination through: (1) Proprietary data feeds containing quotation and last sale price information that the Primary Listing Market also sends to the Processor; (2) posting on a publicly-available Participant website; or (3) system status messages. The Amendment would further specify that a Participant will halt trading for any security traded on its Market if the Primary Listing Market declares a Regulatory Halt for the security.

3. Resumption of Trading After a Regulatory Halt

The Amendment would specify certain procedures for the resumption of trading following (1) Regulatory Halts other than a SIP Halts and (2) SIP Halts.

a. Resumption of Trading After a Regulatory Halt Other Than a SIP Halt

With respect to the resumption of trading after a Regulatory Halt other than a SIP Halt, the Amendment would provide that the Primary Listing Market will declare a resumption of trading when it makes a good-faith determination that trading may resume in a fair and orderly manner and in accordance with its rules. The Amendment would further provide that for a Regulatory Halt that is initiated by another Participant that is a Primary Listing Market, a Participant may resume trading after the Participant receives notification from the Primary Listing Market that the Regulatory Halt has been terminated.

b. Resumption of Trading After a SIP Halt

With respect to the resumption of trading after a SIP Halt, the Amendment would provide that the Primary Listing Market will determine the SIP Halt Resume Time. The Amendment would further provide that, in making such determination, the Primary Listing Market will make a good-faith determination and consider the totality of information to determine whether resuming trading would promote a fair and orderly market, including input from the Processor, the Operating Committee, or the operator of the system in question (as well as any Trading Center(s) to which such system is linked), regarding operational readiness to resume trading. The Amendment would also provide 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. Also with respect to termination of the SIP Halt, the Amendment would provide that the Primary Listing Market will terminate a SIP Halt with a notification that specifies a SIP Halt Resume Time. The Amendment would further provide 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 the affected securities. Under the Amendment, the Primary Listing Market would be permitted to stagger the SIP Halt Resume Times for multiple symbols in order to reopen in a fair and orderly manner.

Finally, the Amendment would provide that during 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. Under the Amendment, a Participant may, outside Regular Trading Hours, resume trading immediately after the SIP Halt Resume Time.

B. Communications

The Amendment addresses communications regarding trading halts. Specifically, the Amendment would provide that, whenever in the exercise of its regulatory functions, the Primary Listing Market for an Eligible Security determines it is appropriate to initiate a Regulatory Halt, the Primary Listing Market will notify all other Participants and the Processor of such Regulatory Halt and will provide notice that a Regulatory Halt has been lifted using such protocols and other emergency procedures as may be mutually agreed to between the Operating Committee and the Primary Listing Market. The Amendment would further provide that the Processor shall disseminate to Participants notice of the Regulatory Halt (as well as notice of the lifting of a Regulatory Halt) through (i) the Quote Data Feed and the Trade Data Feed and (ii) any other means the Processor, in its sole discretion, considers appropriate. Under the Amendment, each Participant would be required to continuously monitor these communication protocols established by the Operating Committee and the Processor during market hours.

C. Operational Halts

With respect to Operational Halts, the Amendment would provide that a Participant must notify the Processor if it has concerns about its ability to transmit Quotation Information or Transaction Reports, or where it has declared an Operational Halt or suspension of trading in one or more Eligible Securities, pursuant to the procedures adopted by the Operating Committee.

III. Discussion and Commission Findings

After careful review, the Commission is approving the Amendment, as modified by Amendment Nos. 1 and 2, for the reasons discussed below. Section 11A of the Act authorizes the Commission, by rule or order, to authorize or require the self-regulatory organizations to act jointly with respect to matters as to which they share authority under the Act in planning, developing, operating, or regulating a facility of the national market system. Pursuant to this authority, the Commission adopted Regulation NMS. Rule 603 of Regulation NMS requires the SROs to act jointly pursuant to NMS plans to “disseminate consolidated information, including a national best bid and national best offer, on quotations for and transactions in NMS stocks.” And Rule 608 of Regulation NMS authorizes two or more SROs, acting jointly, to file with the Commission a national market system plan (“NMS plan”) or a proposed amendment to an effective NMS plan. Rule 608 further provides that the Commission shall approve an amendment to an NMS plan if it finds that the amendment is necessary or appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system, or otherwise in furtherance of the purposes of the Act.

As stated above, the Commission received one comment letter regarding the proposed Amendment. The commenter states that the Amendment should be approved as filed. According to the commenter, the purpose of the Amendment is to incorporate into the Plan the same processes for Regulatory and Operational Halts that are proposed by the equity exchanges, including that the Primary Listing Market be vested with the authority to determine when to initiate and end a Regulatory Halt, consistent with its rules. The commenter states that the Primary Listing Market would be enabled to declare a Regulatory Halt as provided for in the Primary Listing Market's rules, if it determines that there is a SIP Outage, Material SIP Latency, 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. The commenter states that the Commission should thus approve the Amendment because it is consistent with the Act and Rule 608 thereunder.

The Commission agrees that the Amendment, as modified by Amendment Nos. 1 and 2, is consistent with the Act and Rule 608 of Regulation NMS. The Commission believes that the Amendment, as modified by Amendment Nos. 1 and 2, furthers the goals of Section 11A of the Act and of Rules 603 and 608 of Regulation NMS by establishing a clear and uniform approach with respect to trading halts under various defined circumstances. The Plan's provisions currently lack clarity with respect to whether a Primary Listing Market may declare a Regulatory Halt due to underlying problems at the SIP, as well as the standard and process for calling a halt and resuming trading thereafter. The Amendment—and in particular the revisions that address Regulatory Halts in connection with SIP Outages, Material SIP Latency, Extraordinary Market Activity, and national, regional, or localized disruptions that necessitate a Regulatory Halt to maintain a fair and orderly market—address this shortcoming by providing for uniform rules governing how 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 or SIP Halt, thereby clarifying the procedures to be followed and the standards to be applied, improving coordination and certainty among the Participants and other market participants, and enhancing the resiliency and integrity of market systems. Accordingly, the Commission believes that the Amendment, as modified by Amendments Nos. 1 and 2, is in the public interest, supports the protection of investors, and helps the maintenance of fair and orderly markets because the Amendment, as modified by Amendment Nos. 1 and 2, is reasonably designed to assist market participants in understanding the processes to be followed during circumstances potentially warranting a regulatory halt, such as events involving the loss, timeliness, or accuracy of information that is processed or disseminated by the SIPs. Additionally, the Commission believes that the Amendment, as modified by Amendments Nos 1 and 2, is reasonably designed to enhance the resiliency of the national market system by clearly memorializing the coordinated actions to be taken by the Participants during such events so that trading may resume in a fair and orderly manner.

The Commission further believes that the proposed requirement for Primary Listing Markets to make good-faith determinations in consultation with other market participants, as may be applicable concerning the appropriateness of declaring a regulatory halt and resuming trading thereafter, should promote fairness and orderliness in decision-making by the Primary Listing Markets. In particular, the good-faith determination standard promotes fair and orderly markets and the protection of investors because it 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. Accordingly, the Commission believes that the good-faith-determination standard encourages Primary Listing Markets to consider the broader interests of the national market system with respect to declaring trading halts and resuming trading thereafter, thereby promoting the maintenance of fair and orderly markets and enhancing the protection of investors.

For the reasons discussed, the Commission finds that the Amendment to the Nasdaq/UTP Plan, as modified by Amendment Nos. 1 and 2, is consistent with the requirements of the Act and the rules and regulations thereunder, and in particular, Section 11A of the Act and Rule 608 thereunder in that the Amendment, as modified by Amendment Nos. 1 and 2, is necessary or appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system. Section 11A of the Act sets forth Congress' finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to ensure the prompt, accurate, reliable and fair collection, processing, distribution, and publication of information with respect to quotations for and transactions in such securities and the fairness and usefulness of the form and content of such information. The Commission believes that the Amendment, as modified by Amendment Nos. 1 and 2, furthers these goals set forth by Congress.

IV. Conclusion

It is therefore ordered, pursuant to Section 11A of the Act, and Rule 608(b)(2) thereunder, that the Fiftieth Amendment to the Nasdaq/UTP Plan, as modified by Amendment Nos. 1 and 2, (File No. S7-24-89) is approved.