Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 6, Section 4 (Exchange Sharing of Participant Risk Settings) To Permit the Allocation of Responsibility to Clearing Members

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-103211; File No. SR-NASDAQ-2025-043]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 6, Section 4 (Exchange Sharing of Participant Risk Settings) To Permit the Allocation of Responsibility to Clearing Members</SUBJECT> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on May 29, 2025, 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, II, and III, 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. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change</HD> The Exchange proposes to amend Equity 6, Section 4 (Exchange Sharing of Participant Risk Settings) to permit the allocation of responsibility to clearing members, as described further below. The text of the proposed rule change is available on the Exchange's website at <E T="03">https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings,</E> at the principal office of the Exchange, and at the Commission's Public Reference Room. <HD SOURCE="HD1">II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> 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. <HD SOURCE="HD2">A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> The Exchange proposes to amend Equity 6, Section 4 to permit the allocation of responsibility to clearing members. Specifically, the Exchange proposes to add Section 4(b)(Clearing Member Designation) to allow for a Participant that does not self-clear to allocate responsibility for establishing and adjusting the risk levels to a clearing member that clears transactions on behalf of the Participant. <SU>3</SU> <FTREF/> A clearing member guarantees transactions executed on Nasdaq for members with whom it has entered into a clearing arrangement, and therefore bears the risk associated with those transactions. Because clearing members bear the risk on behalf of their Participant, the Exchange believes that it is appropriate for the clearing member to have knowledge of what risk settings the Participant may utilize within the Exchange's trading system, as well as the option to set and adjust the risk levels. Therefore, the Exchange proposes to make the risk settings in Equity 6, Section 5 available to clearing members, as well as the option to set and adjust the risk levels, if authorized by the Participant. <FTNT> <SU>3</SU>  The term “Participant” has the meaning set forth in Equity 1, Section 1(a)(5). A “Participant” is an entity that fulfills the obligations contained in Equity 2, Section 3 regarding participation in the System, and includes Nasdaq ECNs, Nasdaq Market Makers, and Order Entry Firms. </FTNT> For clarification, the Exchange does not guarantee that these risk controls will be sufficiently comprehensive to meet all of a Participant's needs, nor are the controls designed to be the sole means of risk management, and using these controls will not necessarily meet a Participant's obligations required by Exchange or federal rules (including, without limitation, the Rule 15c3-5 under the Act  <SU>4</SU> <FTREF/> (“Rule 15c3-5”)). Use of the Exchange's risk settings in Equity 6, Section 5 will not automatically constitute compliance with Exchange or federal rules and responsibility for compliance with all Exchange and SEC rules remains with the Participant. <SU>5</SU> <FTREF/> <FTNT> <SU>4</SU>  17 CFR 240.15c3-5. </FTNT> <FTNT> <SU>5</SU>   <E T="03">See</E> Division of Trading and Markets, Responses to Frequently Asked Questions Concerning Risk Management Controls for Brokers or Dealers with Market Access, available at <E T="03">https://www.sec.gov/divisions/marketreg/faq-15c-5-risk-management-controls-bd.htm.</E> </FTNT> If a Participant chooses to designate responsibility to its clearing member, the Participant may view any risk levels established by the clearing member pursuant to proposed Section 4(b). Even if a clearing member is designated, a Participant will continue to be notified by the Exchange of any action taken regarding its trading activity. A Participant may revoke responsibility allocated to its clearing member at any time. The Exchange also proposes numbering the provisions in Equity 6, Section 4 for clarity and labeling the first paragraph as “Sharing Risk Settings” to conform with the proposed language in Section 4. By allowing Participants to allocate the responsibility for establishing and adjusting such risk settings to its clearing member, the Exchange believes clearing members may reduce potential risks that they assume when clearing for Participants of the Exchange. <HD SOURCE="HD3">2. Statutory Basis</HD> The Exchange believes that its proposal is consistent with Section 6(b) of the Act, <SU>6</SU> <FTREF/> in general, and furthers the objectives of Section 6(b)(5) of the Act, <SU>7</SU> <FTREF/> 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. <FTNT> <SU>6</SU>  15 U.S.C. 78f(b). </FTNT> <FTNT> <SU>7</SU>  15 U.S.C. 78f(b)(5). </FTNT> The Exchange believes that the proposed amendment to Equity 6, Section 4 would provide clearing members, who have assumed certain risks of Participants, greater control over risk tolerance and exposure on behalf of their correspondent Participant, while helping to ensure that both Participant and its clearing member are aware of developing issues. A clearing member guarantees transactions executed on Nasdaq for members with whom it has entered into a clearing arrangement, and therefore bears the risk associated with those transactions. The Exchange therefore believes that it is appropriate for the clearing member to have knowledge of what risk settings the Participant may utilize within the Exchange's trading system, as well as the option to set and adjust the risk levels. The proposal will permit clearing members who have a financial interest in the risk settings of Participants with whom the Participants have entered into clearing arrangements to better monitor and manage the potential risks assumed by clearing members, thereby providing clearing members with greater control and flexibility over setting their own risk tolerance and exposure and aiding clearing members in complying with the Act. The Exchange also believes the proposed amendments will assist Participants and clearing members in managing their financial exposure which, in turn, could enhance the integrity of trading on the securities markets and help to assure the stability of the financial system. Moreover, a Participant may revoke responsibility allocated to its clearing member at any time. The Exchange believes that the proposed rule changes do not unfairly discriminate among the Exchange's Participants because use of the risk settings under Equity 6, Section 5 are available to all Participants and their clearing members, if authorized. In addition, because all orders on the Exchange would pass through the risk checks, there would be no difference in the latency experienced by Participants who have opted to use the risk settings versus those who have not opted to use them. <SU>8</SU> <FTREF/> <FTNT> <SU>8</SU>  All Exchange orders pass through a basic risk checks regardless of whether a Participant opts into a risk setting. </FTNT> <HD SOURCE="HD2">B. Self-Regulatory Organization's Statement on Burden on Competition</HD> 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 proposed rule change is designed to provide Participants and their clearing members with additional means to monitor and control risk. The proposed rule may increase confidence in the proper functioning of the markets and contribute to additional competition among trading venues and broker-dealers. Rather than impede competition, the proposal is designed to facilitate more robust risk management by Participants and clearing members, which, in turn, could enhance the integrity of trading on the securities markets and help to assure the stability of the financial system. <HD SOURCE="HD2">C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others</HD> No written comments were either solicited or received. <HD SOURCE="HD1">III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action</HD> 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 competi ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 14k characters. 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