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Federal Register / Vol. 86, No. 40 / Wednesday, March 3, 2021 / Notices and at the price that minimizes any Imbalance, which will be defined in new paragraph Aii of Rule 4754b6
as the number of shares of buy or sell MOC or LOC orders or Eligible Interest that cannot be matched with other MOC, LOC, or IO order shares or Eligible Interest at a particular price at any given time. The Exchange notes that the proposed change to state that the LULD cross price must minimize any Imbalance within the second tiebreaker is a corrective change to more accurately reflect how the system in the LULD
Closing Cross currently behaves.
Specifically, the change addresses that during a LULD Closing Cross, the Exchange considers all orders when calculating the Imbalance, whereas the standard Closing Cross considers orders specifically designated for participation in the Closing Cross i.e., MOC, LOC, or IO orders. This reflects current system behavior, which automatically designates all orders whether resting on the book, or new incoming orders entered during the cross for participation in LULD Closing Cross.
The third tiebreaker in new paragraph Diii will be substantially similar to the existing tiebreaker in Rule 4754b2C,20 except that the proposed language will specify the LULD cross price must also fall within the proposed Benchmark Prices.
The fourth and final tiebreaker in new paragraph Div will be used if there is no price within the proposed Benchmark Prices that satisfies the conditions described above in Di iii, and speaks to two possible outcomes. The first outcome is reached when an Imbalance exists, in which case the LULD cross price would be the upper lower Benchmark Price for a buy sell Imbalance. The Exchange believes that this outcome is the appropriate result in the presence of an Imbalance as it best reflects current market forces while also making it clear to market participants that the imbalance exists. The second outcome is reached when there is no Imbalance, in which case the LULD Closing Cross would occur at a price that minimizes the distance from the last published Upper Band Lower Band for a Limit Up Limit Down Trading Pause. This tiebreaker is similar to the existing tiebreaker in Rule 4754b2D 21 in jbell on DSKJLSW7X2PROD with NOTICES

20 Rule
4754b2C currently provides that if more than one price exists under subparagraph B, the Nasdaq Closing Cross shall occur at the entered price at which shares will remain unexecuted in the cross.
21 Rule 4754b2D currently provides that if more than one price exists under subparagraph C, the Nasdaq Closing Cross shall occur at: A price that minimizes the distance from the System bid-

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that the price that minimizes the distance from the last published Upper or Lower Band is effectively considered the midpoint price for the LULD Closing Cross. Unlike the existing tiebreaker, which uses the price that minimizes the distance from the System bid-ask midpoint, the proposed tiebreaker will use the relevant LULD Band. The Exchange believes this is the more appropriate result because unlike a standard Closing Cross, there is no continuous market just prior to the execution of the LULD Closing Cross, so using the relevant LULD Band more accurately reflects current market conditions as opposed to the System bid-ask midpoint.
Timing of LULD Closing Cross The Exchange also proposes to amend the LULD Closing Cross Rule to remove all provisions relating to extending the cross past 4:00 p.m. ET as this language will no longer be necessary with the changes proposed herein. In particular, the Exchange proposes to delete Rule 4754b6Aiii as this provision relates to how the Exchange would extend the time of the LULD Closing Cross. Further, the Exchange proposes to amend current Rule 4754b6Ciii renumbered to Rule 4754b6Diii sic under this proposal to delete the last two sentences, which provide how certain new orders may be entered or modified after 4:00 p.m. ET.
MOC/LOC/IO Order Handling The Exchange also proposes other aligning changes to the LULD Closing Cross that would more closely harmonize this process with the current standard Closing Cross. In Rule 4754b6Ciii renumbered to Rule 4754b6Diii sic, the Exchange proposes to remove the parenthetical that excludes MOC and LOC orders from being entered, modified, and cancelled in the LULD Closing Cross.
The Exchange proposes to allow MOC
and LOC orders to participate in the LULD Closing Cross in order to align with the regular Closing Cross where such orders may participate pursuant to Rules 4702b11 and 4702b12. The Exchange similarly proposes to allow IO
orders to participate in the LULD
Closing Cross in the same manner as in the regular Closing Cross i.e., pursuant to Rule 4702b13. Accordingly, the Exchange will add that MOC, LOC and IO orders may be entered, modified, and cancelled pursuant to Rules 4702b11, 4702b12 and 4702b13. The Exchange will also delete current Rule ask midpoint at the time of the Nasdaq Closing Cross.

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4754b6Ci, which sets forth special handling instructions for MOC, LOC, and IO orders in an LULD Closing Cross.
In particular, this Rule stipulates that in the event of an LULD Closing Cross, MOC, LOC and IO orders intended for the closing cross entered into the system and placed on the book prior to the Trading Pause will remain on the book to participate in the LULD Closing Cross, and that such orders may not be modified or cancelled. With the proposed changes to allow MOC, LOC, and IO orders to participate in the LULD
Closing Cross in the same way as a standard Closing Cross, this provision is no longer necessary.
Net Order Imbalance Indicator The Exchange proposes to amend Rule 4754b6B, which governs the Net Order Imbalance Indicator NOII
message for the LULD Closing Cross and disseminates information about MOC, LOC, IO, and Close Eligible Interest and the price at which those orders would execute at the time of dissemination.
The Rule currently provides that Nasdaq shall continue disseminating the NOII
every second until After Hours Trading begins. The Exchange notes, however, that it recently updated its Closing Cross to allow for the dissemination of abbreviated NOII data i.e., Early Order Imbalance Indicator 22 every 10 seconds between 3:50 p.m. ET and 3:55 p.m. ET, which would be followed by the dissemination of regular NOII data between 3:55 and market close.23 This change should have been reflected in the LULD Closing Cross rule in Rule 4754b6B as well. Accordingly, the Exchange proposes to amend the Rule to more accurately reflect current System behavior, and provide that Nasdaq shall continue disseminating the NOII
pursuant to Rule 4754b1 until After Hours Trading begins.
The Rule also indicates that the NOII
message displays the Near Price, Far Price, and Reference Prices, which all currently represent the price at which the LULD Closing Cross would execute should the cross conclude at that time.
With the proposed changes to implement the new Benchmark Prices, the Near Price and Reference Price will both represent the price at which the LULD Closing Cross would execute, bounded by the Benchmark Prices, at 22 Early Order Imbalance Indicator shall mean a message disseminated by electronic means containing the same information as the Order Imbalance Indicator, except that it will exclude information about indicative prices, as set forth in subparagraph a7E of Rule 4754. See Rule 4754a10.
23 See Securities Exchange Act Release No. 85292
March 12, 2019, 84 FR 9848 March 18, 2019 SR
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