[Federal Register Volume 85, Number 32 (Tuesday, February 18, 2020)]
[Notices]
[Pages 8985-8990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03100]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88173; File No. SR-NASDAQ-2020-006]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Remove Listing Rule and Other Amendments
February 11, 2020.
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 January 29, 2020, 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.
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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 The Nasdaq Options Market LLC
(``NOM'') Rules at Options 1, Section 1 (Definitions), Options 2,
Section 4 (Obligations of Market Makers), Section 5 (Market Maker
Quotations), Options 3, Section 2 (Units of Trading and Meaning if
Premium Quotes and Orders), Options 3, Section 3 (Minimum Increments),
Options 3, Section 8 (Opening and Halt Cross), Options 3, Section 19
(Mass Cancellation of Trading Interest), Options 4, Section 5 (Series
of Options Contracts Open for Trading), Options 4A, Section 2
(Definitions), Section 3 (Designation of a Broad-Based Index), Section
6 (Position Limits for Broad-Based Index Options), Section 11 (Trading
Sessions), Section 12 (Terms of Index Options Contracts), Section 14
(Disclaimers), Options 5, Section 2 (Order Protection), Section 4
(Order Routing), Options 6C Exercises and Deliveries, and Options 7
(Pricing Schedule). The Exchange also proposes to relocate current rule
text to new Options 2, Section 6 entitled ``Market Maker Orders'' and
reserve certain rules within the Rulebook. The text of the proposed
rule change is available on the Exchange's website at http://nasdaq.cchwallstreet.com, 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend NOM's Rules at Options 1, Section 1
(Definitions), Options 2, Section 4 (Obligations of Market Makers),
Section 5 (Market Maker Quotations), Options 3, Section 2 (Units of
Trading and Meaning if Premium Quotes and Orders), Options 3, Section 3
(Minimum Increments), Options 3, Section 8 (Opening and Halt Cross),
Options 3, Section 19 (Mass Cancellation of Trading Interest), Options
4, Section 5 (Series of Options Contracts Open for Trading), Options
4A, Section 2 (Definitions), Section 3 (Designation of a Broad-Based
Index), Section 6 (Position Limits for Broad-Based Index Options),
Section 11 (Trading Sessions), Section 12 (Terms of Index Options
Contracts), Section 14 (Disclaimers), Options 5, Section 2 (Order
Protection), Section 4 (Order Routing), Options 6C Exercises and
Deliveries, and Options 7 (Pricing Schedule). The Exchange also
proposes to relocate current rule text to new Options 2, Section 6
entitled ``Market Maker Orders'' and reserve certain rules within the
Rulebook. Each change is described below.
Rulebook Harmonization
The Exchange recently harmonized its Rulebook in connection with
other Nasdaq affiliated markets. The Exchange proposes to reserve
certain rules within the Nasdaq Rulebook to represent the presence of
rules in similar locations in other Nasdaq affiliated Rulebooks (e.g.,
Nasdaq Phlx LLC).\3\
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\3\ See SR-Phlx-2020-03 (not yet published).
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The Exchange proposes to reserve Sections 17-22 within General 2,
Organization and Administration. The Exchange proposes to reserve
Sections 11-14 within Options 2, Options Market Participants. The
Exchange proposes to reserve Sections 17-21 within Options 4A, Options
Index Rules. The Exchange proposes to reserve new section Options 4B.
The Exchange proposes to reserve Sections 8-13 within Options 6,
Options Trade Administration. The Exchange proposes to reserve Section
7 within Options 6C, which is currently titled ``Exercises and
Deliveries.'' The Exchange proposes to retitle Options 6C as
``Margins'' to harmonize the title to the other Nasdaq affiliated
markets. The Exchange proposes to reserve Section 24 within Options 9,
Business Conduct.
[[Page 8986]]
Definitions
The Exchange proposes to add the definition of an ``Away Best Bid
or Offer'' or ``ABBO'' within Options 1, Section 1(a)(1). This term is
utilized throughout the Rulebook. Defining this term will bring greater
transparency to the Rulebook. The Exchange proposes to renumber the
remaining definitions and also update corresponding cross-references
within Options 7, Section 1.
The Exchange proposes to remove the definitions of ``class of
options'' and ``series of options'' as they are duplicative of the
definitions for ``class'' and ``series.'' The Exchange proposes to
remove the terms ``System Book Feed'' and ``System Securities'' from
the Options 1, Section 1. The term ``System Book Feed'' is not utilized
in the Rulebook currently. The term ``System Securities'' is only
utilized within the definition of the term ``System'' at current
Options 1, Section 1(a)(60) and within Options 3, Section 8, Opening
and Halt Cross.'' The term is simply replaced by referring to option
series. The Exchange believes that replacing the term with the term
``option series'' will make the Rulebook clear.
Finally, the Exchange is removing the phrase ``, or the United
States dollar'' from the definition of ``foreign currency'' within
current Options 1, Section 1(a)(20). This reference is not needed in
this string cite because the United States dollar is a medium of
exchange as noted in the introductory phrase to the string cite.
Relocation of Options 2 Rules
The Exchange proposes to relocate Options 2, Section 4(d) and
Section 5(e) to Options 2, Section 6, which is currently reserved.
Specifically, the Exchange proposes to relocate these sections into
Options 6(a) and (b), respectively. Proposed Options 2, Section 6 would
be titled ``Market Maker Orders.'' This relocation will harmonize the
location of these rule to other Nasdaq affiliated markets.
Removal of Various Listings
Mini Options
The Exchange has not listed Mini Options in several years and is
proposing to delete its listing rules and other ancillary trading rules
related to the listing of Mini Options. The Exchange notes that it has
no open interest in Mini Options.
Specifically, the Exchange proposes to amend Options 3, Section 2
(Units of Trading and Meaning of Premium Quotes and Orders), Options 3,
Section 3 (Minimum Increments) and Options 4, Section 5 (Series of
Options Contracts Open for Trading) at Supplementary Material .15) to
remove references to the handling of Mini Options in the System. The
Exchange also proposes to remove pricing for Mini Options within
Options 7, Section 2 (Nasdaq Options Market--Fees and Rebates). The
Exchange is also amending Supplementary Material .01 to Options 4A,
Section 2.
In the event that the Exchange desires to list Mini Options in the
future, it would file a rule change with the Commission to adopt rules
to list Mini Options.
U.S. Dollar-Settled Foreign Currency Options
The Exchange has not listed U.S. Dollar-Settled Foreign Currency
Options (``FCOs'') in several years and is proposing to delete its
listing rules and other ancillary trading rules related to the listing
of FCOs. The Exchange notes that it has no open interest in FCOs.
Specifically, the Exchange proposes to amend Supplementary Material
.16 to Options 4, Section 5 (Series of Options Contracts Open for
Trading) to remove references to the handling of FCOs in the System.
In the event that the Exchange desires to list FCOs in the future,
it would file a rule change with the Commission to adopt rules to list
FCOs.
Mini-Nasdaq-100 Index
The Exchange has not listed Mini-Nasdaq-100 Index options or
``MNX'' or ``Mini-NDX'' in several years and is proposing to delete its
listing rules and other ancillary trading rules related to the listing
of Mini-Nasdaq-100 Index options. The Exchange notes that it has no
open interest in Mini-Nasdaq-100 Index options.
Specifically, the Exchange proposes to amend Supplementary Material
.05 to Options 4, Section 5 (Series of Options Contracts Open for
Trading) and Options 4A, Section 12 (Terms of Index Options Contracts)
to remove references to the handling of Mini-Nasdaq-100 Index options
in the System.
In the event that the Exchange desires to list Mini-Nasdaq-100
Index options in the future, it would file a rule change with the
Commission to adopt rules to list Mini-Nasdaq-100 Index options.
MSCI EM Index and MSCI EAFE Index
The Exchange has not listed the MSCI EM Index or MSCI EAFE Index in
several years and is proposing to delete its listing rules and other
ancillary trading rules related to the listing of the MSCI EM Index and
MSCI EAFE Index. The Exchange notes that it has no open interest in the
MSCI EM Index and MSCI EAFE Index.
Specifically, the Exchange proposes to amend Supplementary Material
.01 to Options 4A, Section 2 (Definitions), Section 3 (Designation of a
Broad-Based Index), Section 6 (Position Limits for Broad-Based Index
Options), Section 11(Trading Sessions) Section 12 (Terms of Index
Options Contracts), Section 14 (Disclaimers) to remove references to
the handling of the MSCI EM Index and MSCI EAFE Index in the System.
The Exchange proposes to add rule text within Options 4A, Section
12(a)(6) which indicates, ``There are currently no P.M.-settled index
options approved for trading on NOM.''
In the event that the Exchange desires to list the MSCI EM Index
and/or MSCI EAFE Index in the future, it would file a rule change with
the Commission to adopt rules to list the MSCI EM Index and/or MSCI
EAFE Index.
Minimum Increments
The Exchange proposes to amend Options 3, Section 3 to relocate
Section 3(a)(3) into a new Supplementary Material .01 and title the
section, ``Penny Pilot Program.'' The Exchange also proposes to amend a
typographical error in Options 3, Section 3(a)(3) to replace ``QQQQs''
with ``QQQs.'' The other changes relate to the removal of Mini Options
as explained herein.
Mass Cancellation of Trading Interest
The Exchange proposes to amend the description of Options 3,
Section 19 titled ``Mass Cancellation of Trading Interest.'' The
proposed amended rule would state, '' An Options Participant may cancel
any bids, offers, and orders in any series of options by requesting NOM
Market Operations \4\ staff to effect such cancellation as per the
instructions of the Options Participant.'' The Exchange is not amending
the System with respect to this rule change. The proposed amended
language merely makes clear that an Options Participant may contact NOM
Market Operations and request the Exchange to cancel any bid, offer or
order in any series of options. This is a voluntary service that is
offered to market participants. The Exchange, would cancel such bid,
offer or order pursuant to the Member's instruction. This proposed new
rule would conform to rules of other Nasdaq affiliated markets.\5\
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\4\ The request to Market Operations is a manual request which
is made telephonically.
\5\ See Nasdaq Phlx LLC (``Phlx''), Nasdaq ISE, LLC (``ISE''),
Nasdaq GEMX, LLC (``GEMX'') and Nasdaq MRX, LLC (``MRX'') Options 3,
Section 19.
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[[Page 8987]]
Order Routing
Phlx recently amended Options 5, Section 4.\6\ The Exchange
proposes to make similar amendments to the NOM Rule. The amendments
clarity and correct the rule text to represent current System
functionality. Currently, Options 5, Section 4(a)(iii)(A), relating to
DNR Orders, states,
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\6\ See Securities Exchange Act Release No. 87811 (December 20,
2019), 84 FR 72017 (December 30, 2019) (SR-Phlx-2019-56).
Any incoming order interacting with such a resting DNR Order
will execute at the ABBO price, unless (1) the ABBO is improved to a
price which crosses the DNR displayed price, in which case the
incoming order will execute at the previous ABBO price; (2) the ABBO
is improved to a price which locks the DNR's displayed price, in
which case the incoming order will execute at the DNR's displayed
price. Should the best away market move to an inferior price level,
the DNR Order will automatically re-price from its one MPV inferior
to the original away best bid/offer price to one MPV away from the
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new away best bid/offer price or its original limit price.
The Exchange proposes to make non-substantive amendments to this
rule text within Options 5, Section 4(a)(iii)(A), relating to DNR
Orders, to align the rule text with Phlx Rule 1093. The Exchange
proposes to instead provide:
Any incoming order interacting with such a resting DNR Order
will execute at the ABBO price, unless (1) the ABBO is improved to a
price which crosses the DNR Order's already displayed price, in
which case the incoming order will execute at the previous ABBO
price as the away market crossed a displayed price; or (2) the ABBO
is improved to a price which locks the DNR Order's displayed price,
in which case the incoming order will execute at the DNR Order's
displayed price. Should the best away market move to an inferior
price level, the DNR Order will automatically re-price from its one
MPV inferior to the original ABBO and display one MPV away from the
new ABBO or its original limit price.
This proposed new text intends to make clear that if the Exchange's
System is executing an incoming order against a resting DNR Order which
is displayed, it would not consider an updated ABBO which crossed the
displayed DNR Order. The System would not take into account the away
market order or quote which crossed the DNR Order's displayed price.
The Exchange is not trading-through an away market in this scenario,
rather an away market is crossing NOM's displayed market and therefore
that market has the obligation not to trade-through NOM's displayed
price. A similar change is being made to the last sentence of Options
5, Section 4(a)(iii)(B)(4) for SEEK Orders and the last sentence
Options 5, Section 4(a)(iii)(C)(4) for SRCH Orders. By way of example,
consider the following sequence of events in the System:
9:45:00:00:00--MIAX Quote 0.95 x 1.20
9:45:00:00:10--OPRA updates MIAX BBO 0.95 x 1.20
9:45:00:00:20--NOM Local BBO Quote 1.00 x 1.15
9:45:00:00:30--OPRA disseminates NOM BBO updates: 1.00 x 1.15
9:45:00:00:35: CBOE Quote 1.00 x 1.12
9:45:00:00:45--OPRA disseminates CBOE BBO 1.00 x 1.12
9:45:00:00:50--DNR Order: Buy 5 @1.15 (exposes @ABBO of 1.12, displays
1 MPV from ABBO @1.11)
9:45:00:00:51--OPRA disseminates NOM BBO updates: 1.11 x 1.15 (1.11
being the DNR Order displaying 1 MPV from ABBO)
9:45:00:00:60--MIAX Quote updates to 1.00 x 1.10 (1.10 crosses the
displayed DNR Order price, violating locked/crossed market rules;
henceforth, we need not protect this price)
9:45:00:00:65--OPRA disseminates MIAX BBO 1.00 x 1.10
9:45:00:00:75--NOM Market Maker Order to Sell 5 @1.09
9:45:00:00:76--Market Maker Order immediately executes against DNR
Order 5 contracts @1.12 (1.12 being the `previous' ABBO price
disseminated by CBOE before the receipt of the DNR Order that was
subsequently and illegally crossed by MIAX's 2nd quote)
9:45:00:00:77--OPRA disseminates NOM BBO updates: 1.10 x 1.15 (reverts
back to BBO set by NOM Local Quote since the DNR Order has executed)
The remainder of the changes to Options 5, Section 4(a)(iii)(A) are
non-substantive changes designed to bring clarity to the rule text. By
way of example, the Exchange proposes to add the word ``Order'' after
``DNR,'' change the words ``away best bid/offer price'' to the acronym
``ABBO'' and add the words ``display'' and ``already'' to the rule text
to make clear that the intent of the sentence.
The Exchange proposes to amend Options 5, Section 4(a)(iii)(B)(4)
to amend the sentence which provides, ``If there exists a locked ABBO
when the SEEK Order is entered onto the Order Book, the SEEK Order will
display at the locked ABBO price.'' The Exchange is amending this
sentence to provide, ``If there exists a locked ABBO when the SEEK
Order is entered onto the Order Book, the SEEK Order will be entered at
the ABBO price and displayed one MPV inferior to the ABBO.'' This is
true of both SEEK and SRCH Orders. Where there exists a locked ABBO
when the SEEK Order or SRCH Order is entered onto the Order Book, the
SEEK Order or SRCH Order will be entered into the Order Book at the
ABBO price and displayed one MPV inferior to the ABBO. The Exchange is
proposing to add additional rule text to Options 5, Section
4(a)(iii)(B)(4). This amendment corrects the current rule text.
The Exchange also proposes to remove the sentence, ``When checking
the Order Book, the System will seek to execute at the price at which
it would send the order to an away market.'' The Exchange proposes to
remove this sentence because the price at which the order would route
in explained in greater detail within Options 5, Section
4(a)(iii)(B)(4). Also, this sentence is confusing because the price at
which an order would execute is dependent on the scenario within which
an order would route. Removing this sentence will remove any confusion
related to the price at which the order would route. The Exchange also
proposes to remove the same sentence concerning SRCH Orders within
Options 5, Section 4(a)(iii)(C)(4).
Other Amendments
The Exchange proposes to correct the lettering within General 9,
Section 1, General Standards. The Exchange proposes to correct a
typographical error within Options 4A, Section 12. Specifically, the
reference to Options 4, Section 6 should have referenced Options 4,
Section 5 instead. The Exchange proposes to remove a reference to
paragraph (c) within Options 5, Section 2, as there is no paragraph (c)
within the Rule. The Exchange also proposes to update rulebook
citations within Options 7, Pricing Schedule to reflect the proposed
changes to Options 1, Section 1 (Definitions).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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[[Page 8988]]
Rulebook Harmonization
The Exchange's proposal to reserve various sections of the Rules in
order to harmonize its Rulebook with other Nasdaq affiliated markets is
not a substantive amendment.
Definitions
The Exchange's proposal to add the definition of an ``Away Best Bid
or Offer'' or ``ABBO'' within Options 1, Section 1(a)(1) is consistent
with the Act because these amendments will add transparency to the
Rulebook. The Exchange's proposal to remove the terms ``class of
options,'' ``series of options,'' ``System Book Feed'' and ``System
Securities'' from the Options 1, Section 1 is also consistent with the
Act. The term ``System Book Feed'' is not utilized in the Rulebook
currently and therefore this term does not need to be defined. The term
``System Securities'' is only utilized within the definition of the
term ``System'' at current Options 1, Section 1(a)(60) and within
Options 3, Section 8, Opening and Halt Cross.'' Replacing the term with
the term ``option series'' will make the Rulebook clear.
Relocation of Options 2 Rules
The proposal to relocate Options 2, Section 4(d) and Section 5(e)
to Section 6 into Options 6(a) and (b), respectively is consistent with
the Act. This amendment is not substantive.
Removal of Various Listings
Mini Options
The Exchange's proposal to removal references to the listing and
handling of Mini Options is consistent with the Act because Mini
Options have not been listed in several years. Also, the Exchange notes
that it has no open interest in Mini Options. In the event that the
Exchange desires to list Mini Options in the future, it would file a
rule change with the Commission to adopt rules to list Mini Options.
U.S. Dollar-Settled Foreign Currency Options
The Exchange's proposal to removal references to the listing and
handling of FCOs is consistent with the Act because FCOs have not been
listed in several years. Also, the Exchange notes that it has no open
interest in FCOs. In the event that the Exchange desires to list FCOs
in the future, it would file a rule change with the Commission to adopt
rules to list FCOs.
Mini-Nasdaq-100 Index
The Exchange's proposal to removal references to the listing and
handling Mini-Nasdaq-100 Index options is consistent with the Act
because Mini-Nasdaq-100 Index options have not been listed in several
years. Also, the Exchange notes that it has no open interest in Mini-
Nasdaq-100 Index options. In the event that the Exchange desires to
list Mini-Nasdaq-100 Index options in the future, it would file a rule
change with the Commission to adopt rules to list Mini-Nasdaq-100 Index
options.
MSCI EM Index and MSCI EAFE Index
The Exchange's proposal to removal references to the listing and
handling of MSCI EM Index and MSCI EAFE Index options is consistent
with the Act because MSCI EM Index and MSCI EAFE Index options have not
been listed in several years. Also, the Exchange notes that it has no
open interest in MSCI EM Index and MSCI EAFE Index options. In the
event that the Exchange desires to list MSCI EM Index and MSCI EAFE
Index options in the future, it would file a rule change with the
Commission to adopt rules to list MSCI EM Index and MSCI EAFE Index
options.
Minimum Increments
The Exchange's proposal to relocate parts of Options 3, Section 3
into a new Supplementary Material .01 and add a title for the Penny
Pilot Program is consistent with the Act. This amendment will bring
greater transparency to the Exchange's Rules.
Mass Cancellation of Trading Interest
The Exchange's proposal to amend the rule text of Mass Cancellation
of Trading Interest rule within Options 3, Section 19 is consistent
with the Act because the Exchange desires to conform the rule text to
other Nasdaq affiliated markets.\9\ Permitting Participants to contact
Market Operations as a manual alternative to automated functionality,
which similarly allows Participants to cancel interest, provides
Participants experiencing their own system issues with a means to
manage risk. Today, Participants are able to cancel interest, in an
automated fashion through protocols \10\ and the Kill Switch.\11\ This
is a voluntary services offered to all Participants.
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\9\ See note 5 above.
\10\ See Options 3 at Supplementary Material .03 to Section 7.
\11\ See Options 3, Section 17.
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This amended rule reflects the Exchange's current practice of
allowing Participants to contact NOM Market Operations and request the
Exchange to cancel any bid, offer or order in any series of options.
The Exchange would continue to permit Participants to contact market
operations and manually request cancellation of interest. The proposed
amended language will make clear that an Options Participant may
contact NOM Market Operations and request the Exchange to cancel any
bid, offer or order in any series of options. The Exchange would
continue to cancel such bid, offer or order pursuant to the
Participant's instruction.
This service, which permits Participants to cancel interest, does
not diminish a Market Maker's obligation with respect to providing two-
sided quotations and this rule is not inconsistent with other firm
quote obligations of the Market Maker. Upon the request of a
Participant, NOM Market Operations will continue to manually input a
mass cancellation message into the System consistent with the
Participant's instruction to cancel trading interest. Once the mass
cancellation message is entered into the System by NOM Market
Operations, the message will be accepted by the System in the order of
receipt in the queue such that the interest that was already accepted
into the System will be processed prior to the mass cancellation
message. In addition, mass cancellation messages entered into the
System by NOM Market Operations are handled by the System through the
same queuing mechanism that a quote or order message is handled by the
System. The Exchange notes its processing of a mass cancellation
message inputted by NOM Market Operations and handled by the System is
consistent with firm quote and order handling rules.
Order Routing
The Exchange's proposal to amend the sentence within Options 5,
Section 4(a)(iii)(A) related to DNR Orders is consistent with the Act.
The Exchange proposes to amend this rule text to clarify the current
rule text. Specifically, the Exchange proposes to state, ``Any incoming
order interacting with such a resting DNR Order will execute at the
ABBO price, unless (1) the ABBO is improved to a price which crosses
the DNR Order's already displayed price, in which case the incoming
order will execute at the previous ABBO price as the away market
crossed a displayed price; or (2) the ABBO is improved to a price which
locks the DNR Order's displayed price, in which case the incoming order
will execute at the DNR Order's displayed price.'' The System would not
take into account the away market order or quote which crossed the
DNR's displayed price. The Exchange is
[[Page 8989]]
not trading-through an away market in this scenario, rather an away
market is crossing NOM's displayed market and therefore that market has
the obligation not to trade-through NOMs displayed price. Similar
amendments were made to Options 5, Section 4(a)(iii)(B)(4) and Section
4(a)(iii)(C)(4). The remainder of the changes to this paragraph are
clarifying non-substantive amendments.
The Exchange's proposal to remove the following sentence from
Options 5, Section 4(a)(iii)(B)(4) and Section 4(a)(iii)(C)(4), ``When
checking the Order Book, the System will seek to execute at the price
at which it would send the order to an away market,'' is consistent
with the Act because this sentence is vague. The price at which an
order would execute is dependent on the scenario within which an order
would route. Removing this sentence will remove any confusion related
to the price at which the order would route. The proposed rule would
also add additional detail about the scenarios under which an order
would route away.
With respect to SEEK Orders within Options 5, Section 4(a)(iii)(B)
as well as SRCH Orders within Options 5, Section 4(a)(iii)(C) the
amendments are consistent with the Act as they protect investors and
the general public by amending current incorrect rule text. If there
exists a locked ABBO when the SEEK Order or SRCH Order is entered onto
the Order Book, the SEEK Order or SRCH Order will be entered at the
ABBO price and displayed one MPV inferior to the ABBO. The amendments
to Options 5, Section 4 represent current System functionality. This
new rule text will provide Participants with clarity as to the manner
in which the System handles locked market conditions during routing.
The proposed rule text is similar to rule text within Phlx Rule 1093.
Other Amendments
The Exchange's proposal to correct certain typographical errors and
update rulebook citations are not substantive.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
Rulebook Harmonization
The Exchange's proposal to reserve various rules in connection with
a larger Rulebook harmonization do not impose an undue burden on
competition because these amendments are non-substantive.
Definitions
The Exchange's proposal to add the definition of an ``Away Best Bid
or Offer'' or ``ABBO'' within Options 1, Section 1(a)(1) and remove the
terms ``class of options,'' ``series of options,'' ``System Book Feed''
and ``System Securities'' from the Options 1, Section 1 do not impose
an undue burden on competition because these amendments will add
transparency to the Rulebook.
Relocation of Options 2 Rules
The proposal to relocate Options 2, Section 4(d) and Section 5(e)
to Section 6, into Options 6(a) and (b) does not burden competition as
this amendment is not substantive.
Removal of Various Listings
Mini Options
The Exchange's proposal to removal references to the listing and
handling of Mini Options do not impose an undue burden on competition.
Mini Options have not been listed in several years. Also, the Exchange
notes that it has no open interest in Mini Options.
U.S. Dollar-Settled Foreign Currency Options
The Exchange's proposal to remove references to the listing of U.S.
Dollar-Settled Foreign Currency Options (``FCOs'') does not impose an
undue burden on competition. FCOs have not been listed in several
years. The Exchange notes that it has no open interest in FCOs.
Mini-Nasdaq-100 Index
The Exchange's proposal to removal references to the listing and
handling of Mini-Nasdaq-100 Index options does not impose an undue
burden on competition. Mini-Nasdaq-100 Index options have not been
listed in several years. Also, the Exchange notes that it has no open
interest in Mini-Nasdaq-100 Index options.
MSCI EM Index and MSCI EAFE Index
The Exchange's proposal to removal references to the listing and
handling of MSCI EM Index and the MSCI EAFE Index does not impose an
undue burden on competition. Neither the MSCI EM Index nor the MSCI
EAFE Index have been listed in several years. Also, the Exchange notes
that it has no open interest in either the MSCI EM Index or the MSCI
EAFE.
Minimum Increments
The Exchange's proposal to relocate parts of Options 3, Section 3
into a new Supplementary Material .01 and add a title for the Penny
Pilot Program do not impose an undue burden on competition as these
amendments are non-substantive.
Mass Cancellation of Trading Interest
The Exchange's proposal to amend the rule text of the Mass
Cancellation of Trading Interest rule within Options 3, Section 19 does
not impose an undue burden on competition because there is no
corresponding change to the manner in which this service will be
offered. It will continue to be offered to all Participants.
Order Routing
The Exchange believes that adding greater detail to its rules
concerning routing of orders does not impose an undue burden on
competition, rather it provides greater transparency as to the
potential outcomes when utilizing different routing strategies.
Further, the Exchange notes that market participants may elect not to
route their orders. The Exchange continues to offer various options to
its market participants with respect to routing.
Other Amendments
The Exchange proposes to correct typographical error and update
rulebook citations do not impose and undue burden on competition as
these amendments are non-substantive.
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)(iii) of the Act \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange 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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[[Page 8990]]
A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay so that the
proposal may become operative immediately upon filing. The Exchange
believes that adoption the term ``ABBO,'' would add greater
transparency to its rules, and that removing the rule text related to
various options listing which are no longer listed on the Exchange will
provide Participants with notice of the unavailability of these
listing. The Exchange also states that its amendment to its routing
rules protects investors and the general public by providing clarity
concerning the current operation of its System. The Exchange believes
that the amended rules will provide market participants with greater
information for each potential order routing strategy and, in general,
provide greater transparency. The Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 to
determine whether the proposed rule 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-2020-006 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-2020-006. 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-2020-006 and should be submitted
on or before March 10, 2020.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-03100 Filed 2-14-20; 8:45 am]
BILLING CODE 8011-01-P