Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4702 and Rule 4703 To Add a “Trade Now” Instruction to Certain Order Types, 81203-81206 [2016-27591]

Download as PDF Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed delay in implementation of Rule 4554(b)(8) will reduce the burden on members by allowing additional time to implement the requirement to report the sequence number assigned to the order event by the ATS’s matching engine at the time of order receipt. asabaliauskas on DSK3SPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor 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 9 and subparagraph (f)(6) of Rule 19b–4 thereunder.10 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of its filing. However, Rule 19b– 4(f)(6)(iii)11 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. FINRA has requested that the Commission waive the 30-day operative delay so that the proposed rule change will become operative on filing. FINRA stated that it anticipates extending the requirement to report a sequence number beyond order receipt because, without a sequence number on all order events, FINRA is unable to properly sequence events when a single ATS MPID reports order events in the same symbol with identical timestamps. However, because a proposed rule change has not been filed, FINRA is delaying the implementation of the requirement in Rule 4554(b)(8). For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 11 17 CFR 240.19b–4(f)(6)(iii). 10 17 VerDate Sep<11>2014 21:24 Nov 16, 2016 Jkt 241001 Commission designates the proposed rule change to be operative upon filing.12 At any time within 60 days of the filing of such 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 change 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– FINRA–2016–041 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–FINRA–2016–041. 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 Web site (https://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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., 12 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 81203 Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA– 2016–041, and should be submitted on or before December 8, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Brent J. Fields, Secretary. [FR Doc. 2016–27599 Filed 11–16–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79281; File No. SR–BX– 2016–059] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4702 and Rule 4703 To Add a ‘‘Trade Now’’ Instruction to Certain Order Types November 10, 2016. 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 November 8, 2016, NASDAQ BX, Inc. (‘‘BX’’ 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. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend Rule 4702 (Order Types) and Rule 4703 (Order Attributes) to add a ‘‘Trade Now’’ instruction to certain order types. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaqbx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\17NON1.SGM 17NON1 81204 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices 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 asabaliauskas on DSK3SPTVN1PROD with NOTICES 1. Purpose BX proposes to amend Rules [sic] 4702 (Order Types) and Rule 4703 (Order Attributes) to add a ‘‘Trade Now’’ instruction to certain order types. BX will offer this functionality through its OUCH, RASH, FLITE, and FIX protocols. This instruction will provide resting orders with a greater ability to receive an execution when that resting order is locked, e.g., the price of a resting non-display buy order equals the price of a resting displayed sell order on the BX book. The Trade Now instruction will allow participants to enter an instruction to have a locked resting buy (sell) order execute against the locking sell (buy) order. Depending on the protocol used by the participant to access the BX system, the participant may either specify that the order execute against locking interest automatically, or the participant may be required to send a Trade Now instruction to the Exchange once the order has become locked. As discussed in greater detail below, BX is offering the Trade Now instruction for all orders that may be sent to the BX book and that are not subject to other BX rules regarding the display and execution of those orders. When a Trade Now instruction is applied to a resting buy (sell) order, the order will execute against the available size of the locking sell (buy) order at the locked price. The following example illustrates this scenario: • Participant A enters a Non-Display buy order for 200 shares at $0.95, and specifies the Trade Now instruction; • Participant B enters a Post Only sell order for 100 shares at $0.95; 3 3 The Exchange recently submitted a proposal to amend BX Rules 4702 and 4703 to change the way in which Post Only Orders interact with resting VerDate Sep<11>2014 21:24 Nov 16, 2016 Jkt 241001 • The Post Only order is posted at $0.95 and locks the Non-Display order; • The buy order will execute for 100 shares at $0.95 as the remover of liquidity. If a buy (sell) order with the Trade Now instruction is only partially executed, the unexecuted portion of that order remains on the BX book and maintains its priority. When a Trade Now instruction is entered through the OUCH or FLITE protocol for a resting buy (sell) order and there is no locking order on the opposite side of the market, the Trade Now instruction will be ignored and the buy (sell) order will remain on the BX book, retaining its priority. As noted above, BX is proposing to offer the Trade Now instruction for all orders that may be sent to the BX book and that are not subject to other BX rules regarding the display and execution of those orders. Accordingly, the Trade Now instruction shall not be available for Retail Price Improving Orders (Rule 4702(b)(5)) or Retail Orders (Rule 4702(b)(6)). A Retail Price Improving Order is held on the Exchange Book in order to provide liquidity at a price at least $0.001 better than the NBBO, and may execute only against a Retail Order, and only if its price is at least $0.001 better than the NBBO. A Retail Order will attempt to execute against Retail Price Improving Orders and any other orders on the Exchange Book with a price that is (i) equal to or better than the price of the Retail Order and (ii) at least $0.001 better than the NBBO. Given that Retail Price Improving Orders and Retail Orders are already subject to rules governing the handling and execution of such orders, there is not a need to implement the Trade Now instruction for these order types. Depending on the interface being used by the participant, the Trade Now attribute may either allow the order to execute against locking interest automatically (‘‘Reactive Trade Now’’), or the participant may be required to send a Trade Now instruction to the Exchange once the order has become locked (‘‘Non-Reactive Trade Now’’). All orders that are entered through the RASH and FIX protocols with a Trade Now order attribute will be Reactive Trade Now, and those orders shall execute against locking interest automatically. The Reactive Trade Now instruction will be available on an order-by-order Non-Display orders and preventing the execution of midpoint pegged orders during a crossed market. See Securities Exchange Act 78909 (September 22, 2016), 81 FR 66708 (September 28, 2016) (SR–BX– 2016–046). PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 basis, and will also be available as an optional port level setting. If the Reactive Trade Now setting is enabled on a specific port, all orders entered via the specific port will, by default, be designated with the Reactive Trade Now instruction. If the Reactive Trade Now setting is enabled on a specific port, participants will have the ability to designate on an order-by-order basis that a particular order entered via the specific port will not be designated with the Reactive Trade Now instruction, thereby overriding the port level setting for the order. If the Reactive Trade Now instruction is specified for an order for which the Trade Now instruction does not apply, e.g., a Retail Price Improving Order or a Retail Order, the system will not invoke the Trade Now instruction for that order. In contrast, orders entered through the OUCH and FLITE protocols will use the Non-Reactive Trade Now functionality, and participants must send the Trade Now instruction after the order becomes locked. If a participant enters a NonReactive Trade Now instruction when there is no locking interest, the instruction will be ignored by the system and the order will remain on the BX Book with the same priority. The Non-Reactive Trade Now instruction will be available to participants on order-by-order basis. If the Non-Reactive Trade Now instruction is entered for an order for which the Trade Now instruction does not apply, the system will not invoke the Trade Now instruction for that order. BX is offering two different variations of the Trade Now instruction to reflect the differences in behavior among participants who use the different BX protocols. For example, BX typically assumes a more active role in managing the order flow submitted by users of the RASH and FIX protocols. Allowing these participants to use the Reactive Trade Now instruction at the time of order entry will allow for the automatic execution of orders, and reflects the order flow management practices of these participants. In contrast, users of the OUCH and FLITE protocols generally assume a more active role in managing their order flow. Offering the Non-Reactive Trade Now instruction for these protocols, and its requirement that the instruction must be sent after the order becomes locked, reflects the order flow management practices of these participants. BX notes that a similar functionality currently exists on NYSE Arca, Inc. (‘‘NYSE Arca’’), which NYSE Arca refers to as a ‘‘Non-Display Remove Modifier.’’ As set forth in NYSE Arca Rule 7.31, a Limit Non-Displayed Order may be E:\FR\FM\17NON1.SGM 17NON1 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices designated with a Non-Display Remove Modifier. If so designated, a Limit NonDisplayed Order to buy (sell) will trade as the liquidity-taking order with an incoming Adding Liquidity Only Order (‘‘ALO Order’’) to sell (buy) that has a working price equal to the working price of the Limit Non-Displayed Order.4 NYSE Arca also provides this functionality for other orders, such as Mid-Point Passive Liquidity Orders (‘‘MPL Orders’’) designated Day and MPL–ALO Orders 5 and Arca Only Orders.6 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, by offering participants an additional functionality that will facilitate the execution of locked orders, thereby increasing the efficient functioning of the BX market. The Trade Now functionality is an optional feature that is being offered at no additional charge, and is designed to reflect both the objectives of the BX market, and the order flow management practices of various market participants. For these reasons, the Trade Now functionality will only be made available for orders that are entered in the BX book and that are not subject to other BX rules regarding the display and execution of those orders, i.e., Retail Price Improving Orders and Retail Orders. Depending on the protocol, the Trade Now functionality will be offered as either the Reactive Trade Now or Non-Reactive Trade Now functionality. 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. This is an optional functionality that is being 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) of the Act and Rule 19b– 4(f)(6) thereunder.9 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 10 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 11 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that the Trade Now functionality is complementary to its recent proposal to change the way in which Post Only Orders interact with resting NonDisplay orders.12 The Exchange believes that releasing both complementary functionalities at the same time will be easier for market participants to manage and implement. The Exchange further believes that the Trade Now functionality will facilitate the execution of locked orders, thereby increasing the efficient functioning of the BX market, and that waiver of the 4 See asabaliauskas on DSK3SPTVN1PROD with NOTICES NYSE Arca Rule 7.31(d)(2)(B). NYSE Arca Rule 7.31(d)(3)(G). 6 See NYSE Arca Rule 7.31(e)(1)(C). To the extent that the Trade-Now functionality will be made available for Price to Comply Orders, Price to Display Orders, Non-Displayed Orders, Post-Only Orders, and Market Maker Peg Orders, BX notes that the Trade-Now functionality will apply to different order types than the NYSE Arca NonDisplay Remove Modifier functionality. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). offered at no charge, and which may be used equally by similarly-situated participants. Although the functionality of the Trade Now instruction will differ depending upon the protocol that is being used to access BX, BX believes that the difference in functionality reflects the different ways in which participants enter and manage their order flow. 5 See VerDate Sep<11>2014 21:24 Nov 16, 2016 Jkt 241001 9 17 CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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. 10 17 CFR 240.19b–4(f)(6). 11 17 CFR 240.19b–4(f)(6)(iii). 12 See supra note 3. PO 00000 Frm 00153 Fmt 4703 Sfmt 4703 81205 operative delay will allow this functionality to be made available at an earlier date. Finally, the Exchange notes that NYSE Arca currently utilizes a similar functionality in the form of its Non-Display Remove Modifier. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.13 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 change 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BX–2016–059 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2016–059. 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 Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule 13 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). E:\FR\FM\17NON1.SGM 17NON1 81206 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices 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 Web site 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX– 2016–059, and should be submitted on or before December 8, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Brent J. Fields, Secretary. [FR Doc. 2016–27591 Filed 11–16–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79288; File No. SR– NASDAQ–2016–152] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Transaction Fees at Chapter XV, Section 2 Entitled ‘‘NASDAQ Options Market—Fees and Rebates’’ asabaliauskas on DSK3SPTVN1PROD with NOTICES November 10, 2016. 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 November 1, 2016, 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. 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 21:24 Nov 16, 2016 Jkt 241001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the transaction fees at Chapter XV, Section 2 entitled ‘‘NASDAQ Options Market— Fees and Rebates,’’ which governs pricing for Nasdaq Participants using the NASDAQ Options Market (‘‘NOM’’), Nasdaq’s facility for executing and routing standardized equity and index options. The Exchange proposes to expand certain existing rebates related to the Market Access and Routing Subsidy or ‘‘MARS,’’ for NOM Participants that are eligible for MARS. The text of the proposed rule change is available on the Exchange’s Web site at https://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 NOM recently filed a proposal to its MARS subsidy program,3 which pays a subsidy to NOM Participants that 3 MARS is described in Chapter XV, Section 2(6). A NOM Participant must have System Eligibility to qualify for MARS. In order to be eligible the NOM Participant’s routing system must qualify under the conditions specified in Chapter XV, Section 2(6), which were amended by SR–NASDAQ–2016–149. MARS Payments are made to NOM Participants that have System Eligibility and have routed the requisite number of Eligible Contracts daily in a month (‘‘Average Daily Volume’’), which were executed on NOM. For the purpose of qualifying for the MARS Payment, Eligible Contracts may include Firm, Non-NOM Market Maker, Broker-Dealer, or Joint Back Office or ‘‘JBO’’ equity option orders that add liquidity and are electronically delivered and executed. Eligible Contracts do not include Mini Option orders. The specified MARS Payment will be paid on all executed Eligible Contracts that add liquidity, which are routed to NOM through a participating NOM Participant’s System and meet the requisite Eligible Contracts ADV. No payment will be made with respect to orders that are routed to NOM, but not executed. PO 00000 Frm 00154 Fmt 4703 Sfmt 4703 provide certain order routing functionalities to other NOM Participants and/or use such functionalities themselves.4 Generally, under MARS, the Exchange pays participating NOM Participants to subsidize their costs of providing routing services to route orders to NOM. At this time, the Exchange proposes to amend two rebates at Chapter XV, Section 2(1) which pay NOM Participants an additional rebate provided the NOM Participant adds or removes liquidity on NOM as specified in more detail below. The Exchange believes that these incentives would continue to attract greater liquidity to NOM, to the benefit of all market participants. Amendment to Note ‘‘d’’ Today, note ‘‘d’’ in Chapter XV, Section 2(1) provides that NOM Participants that qualify for MARS Payment Tiers 1, 2 or 3 will receive an additional $0.03 per contract Penny Pilot 5 Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month, in addition to qualifying Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity Tiers 1–8. NOM Participants that qualify for a note ‘‘c’’ incentive 6 will receive the greater of the 4 See SR–NASDAQ–2016–149 (not yet published). 5 The Penny Pilot was established in March 2008 and was last extended in 2016. See Securities Exchange Act Release Nos. 57579 (March 28, 2008), 73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008– 026) (notice of filing and immediate effectiveness establishing Penny Pilot); and 78037 (June 10, 2016), 81 FR 39299 (June 16, 2016) (SR–NASDAQ– 2016–052) (notice of filing and immediate effectiveness extending the Penny Pilot through December 31, 2016). All Penny Pilot Options listed on the Exchange can be found at https:// www.nasdaqtrader.com/ MicroNews.aspx?id=OTA2016-15. 6 The note ‘‘c’’ incentive currently provides, ‘‘Participants that: (1) add Customer, Professional, Firm, Non-NOM Market Maker and/or BrokerDealer liquidity in Penny Pilot Options and/or NonPenny Pilot Options of 1.15% or more of total industry customer equity and ETF option ADV contracts per day in a month will receive an additional $0.02 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month; or (2) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 1.30% or more of total industry customer equity and ETF option ADV contracts per day in a month will receive an additional $0.05 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month; or (3) (a) add Customer, Professional, Firm, Non-NOM Market Maker and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny Pilot Options above 0.80% of total industry customer equity and ETF option ADV contracts per day in a E:\FR\FM\17NON1.SGM 17NON1

Agencies

[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)]
[Notices]
[Pages 81203-81206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27591]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79281; File No. SR-BX-2016-059]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4702 
and Rule 4703 To Add a ``Trade Now'' Instruction to Certain Order Types

November 10, 2016.
    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 November 8, 2016, NASDAQ BX, Inc. (``BX'' 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 4702 (Order Types) and Rule 
4703 (Order Attributes) to add a ``Trade Now'' instruction to certain 
order types.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqbx.cchwallstreet.com/, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

[[Page 81204]]

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
    BX proposes to amend Rules [sic] 4702 (Order Types) and Rule 4703 
(Order Attributes) to add a ``Trade Now'' instruction to certain order 
types. BX will offer this functionality through its OUCH, RASH, FLITE, 
and FIX protocols. This instruction will provide resting orders with a 
greater ability to receive an execution when that resting order is 
locked, e.g., the price of a resting non-display buy order equals the 
price of a resting displayed sell order on the BX book. The Trade Now 
instruction will allow participants to enter an instruction to have a 
locked resting buy (sell) order execute against the locking sell (buy) 
order. Depending on the protocol used by the participant to access the 
BX system, the participant may either specify that the order execute 
against locking interest automatically, or the participant may be 
required to send a Trade Now instruction to the Exchange once the order 
has become locked. As discussed in greater detail below, BX is offering 
the Trade Now instruction for all orders that may be sent to the BX 
book and that are not subject to other BX rules regarding the display 
and execution of those orders.
    When a Trade Now instruction is applied to a resting buy (sell) 
order, the order will execute against the available size of the locking 
sell (buy) order at the locked price. The following example illustrates 
this scenario:
     Participant A enters a Non-Display buy order for 200 
shares at $0.95, and specifies the Trade Now instruction;
     Participant B enters a Post Only sell order for 100 shares 
at $0.95; \3\
---------------------------------------------------------------------------

    \3\ The Exchange recently submitted a proposal to amend BX Rules 
4702 and 4703 to change the way in which Post Only Orders interact 
with resting Non-Display orders and preventing the execution of 
midpoint pegged orders during a crossed market. See Securities 
Exchange Act 78909 (September 22, 2016), 81 FR 66708 (September 28, 
2016) (SR-BX-2016-046).
---------------------------------------------------------------------------

     The Post Only order is posted at $0.95 and locks the Non-
Display order;
     The buy order will execute for 100 shares at $0.95 as the 
remover of liquidity.
    If a buy (sell) order with the Trade Now instruction is only 
partially executed, the unexecuted portion of that order remains on the 
BX book and maintains its priority. When a Trade Now instruction is 
entered through the OUCH or FLITE protocol for a resting buy (sell) 
order and there is no locking order on the opposite side of the market, 
the Trade Now instruction will be ignored and the buy (sell) order will 
remain on the BX book, retaining its priority.
    As noted above, BX is proposing to offer the Trade Now instruction 
for all orders that may be sent to the BX book and that are not subject 
to other BX rules regarding the display and execution of those orders. 
Accordingly, the Trade Now instruction shall not be available for 
Retail Price Improving Orders (Rule 4702(b)(5)) or Retail Orders (Rule 
4702(b)(6)). A Retail Price Improving Order is held on the Exchange 
Book in order to provide liquidity at a price at least $0.001 better 
than the NBBO, and may execute only against a Retail Order, and only if 
its price is at least $0.001 better than the NBBO. A Retail Order will 
attempt to execute against Retail Price Improving Orders and any other 
orders on the Exchange Book with a price that is (i) equal to or better 
than the price of the Retail Order and (ii) at least $0.001 better than 
the NBBO. Given that Retail Price Improving Orders and Retail Orders 
are already subject to rules governing the handling and execution of 
such orders, there is not a need to implement the Trade Now instruction 
for these order types.
    Depending on the interface being used by the participant, the Trade 
Now attribute may either allow the order to execute against locking 
interest automatically (``Reactive Trade Now''), or the participant may 
be required to send a Trade Now instruction to the Exchange once the 
order has become locked (``Non-Reactive Trade Now''). All orders that 
are entered through the RASH and FIX protocols with a Trade Now order 
attribute will be Reactive Trade Now, and those orders shall execute 
against locking interest automatically.
    The Reactive Trade Now instruction will be available on an order-
by-order basis, and will also be available as an optional port level 
setting. If the Reactive Trade Now setting is enabled on a specific 
port, all orders entered via the specific port will, by default, be 
designated with the Reactive Trade Now instruction. If the Reactive 
Trade Now setting is enabled on a specific port, participants will have 
the ability to designate on an order-by-order basis that a particular 
order entered via the specific port will not be designated with the 
Reactive Trade Now instruction, thereby overriding the port level 
setting for the order. If the Reactive Trade Now instruction is 
specified for an order for which the Trade Now instruction does not 
apply, e.g., a Retail Price Improving Order or a Retail Order, the 
system will not invoke the Trade Now instruction for that order.
    In contrast, orders entered through the OUCH and FLITE protocols 
will use the Non-Reactive Trade Now functionality, and participants 
must send the Trade Now instruction after the order becomes locked. If 
a participant enters a Non-Reactive Trade Now instruction when there is 
no locking interest, the instruction will be ignored by the system and 
the order will remain on the BX Book with the same priority.
    The Non-Reactive Trade Now instruction will be available to 
participants on order-by-order basis. If the Non-Reactive Trade Now 
instruction is entered for an order for which the Trade Now instruction 
does not apply, the system will not invoke the Trade Now instruction 
for that order.
    BX is offering two different variations of the Trade Now 
instruction to reflect the differences in behavior among participants 
who use the different BX protocols. For example, BX typically assumes a 
more active role in managing the order flow submitted by users of the 
RASH and FIX protocols. Allowing these participants to use the Reactive 
Trade Now instruction at the time of order entry will allow for the 
automatic execution of orders, and reflects the order flow management 
practices of these participants. In contrast, users of the OUCH and 
FLITE protocols generally assume a more active role in managing their 
order flow. Offering the Non-Reactive Trade Now instruction for these 
protocols, and its requirement that the instruction must be sent after 
the order becomes locked, reflects the order flow management practices 
of these participants.
    BX notes that a similar functionality currently exists on NYSE 
Arca, Inc. (``NYSE Arca''), which NYSE Arca refers to as a ``Non-
Display Remove Modifier.'' As set forth in NYSE Arca Rule 7.31, a Limit 
Non-Displayed Order may be

[[Page 81205]]

designated with a Non-Display Remove Modifier. If so designated, a 
Limit Non-Displayed Order to buy (sell) will trade as the liquidity-
taking order with an incoming Adding Liquidity Only Order (``ALO 
Order'') to sell (buy) that has a working price equal to the working 
price of the Limit Non-Displayed Order.\4\ NYSE Arca also provides this 
functionality for other orders, such as Mid-Point Passive Liquidity 
Orders (``MPL Orders'') designated Day and MPL-ALO Orders \5\ and Arca 
Only Orders.\6\
---------------------------------------------------------------------------

    \4\ See NYSE Arca Rule 7.31(d)(2)(B).
    \5\ See NYSE Arca Rule 7.31(d)(3)(G).
    \6\ See NYSE Arca Rule 7.31(e)(1)(C). To the extent that the 
Trade-Now functionality will be made available for Price to Comply 
Orders, Price to Display Orders, Non-Displayed Orders, Post-Only 
Orders, and Market Maker Peg Orders, BX notes that the Trade-Now 
functionality will apply to different order types than the NYSE Arca 
Non-Display Remove Modifier functionality.
---------------------------------------------------------------------------

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, 
by offering participants an additional functionality that will 
facilitate the execution of locked orders, thereby increasing the 
efficient functioning of the BX market. The Trade Now functionality is 
an optional feature that is being offered at no additional charge, and 
is designed to reflect both the objectives of the BX market, and the 
order flow management practices of various market participants. For 
these reasons, the Trade Now functionality will only be made available 
for orders that are entered in the BX book and that are not subject to 
other BX rules regarding the display and execution of those orders, 
i.e., Retail Price Improving Orders and Retail Orders. Depending on the 
protocol, the Trade Now functionality will be offered as either the 
Reactive Trade Now or Non-Reactive Trade Now functionality.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. This is an optional 
functionality that is being offered at no charge, and which may be used 
equally by similarly-situated participants. Although the functionality 
of the Trade Now instruction will differ depending upon the protocol 
that is being used to access BX, BX believes that the difference in 
functionality reflects the different ways in which participants enter 
and manage their order flow.

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) of the Act and Rule 19b-
4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
states that the Trade Now functionality is complementary to its recent 
proposal to change the way in which Post Only Orders interact with 
resting Non-Display orders.\12\ The Exchange believes that releasing 
both complementary functionalities at the same time will be easier for 
market participants to manage and implement. The Exchange further 
believes that the Trade Now functionality will facilitate the execution 
of locked orders, thereby increasing the efficient functioning of the 
BX market, and that waiver of the operative delay will allow this 
functionality to be made available at an earlier date. Finally, the 
Exchange notes that NYSE Arca currently utilizes a similar 
functionality in the form of its Non-Display Remove Modifier. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\13\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ See supra note 3.
    \13\ 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).
---------------------------------------------------------------------------

    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 change 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2016-059 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2016-059. 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 Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule

[[Page 81206]]

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 Web site 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 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-BX-2016-059, and should be submitted on or before 
December 8, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-27591 Filed 11-16-16; 8:45 am]
 BILLING CODE 8011-01-P
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