Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4703 (Order Attributes), 21858-21860 [2017-09423]
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Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
• Send an email to rulecomments@sec.gov. Please include File
Number SR–PEARL–2017–19 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–PEARL–2017–19. 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.,
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;
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–
PEARL–2017–19 and should be
submitted on or before May 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–09421 Filed 5–9–17; 8:45 am]
jstallworth on DSK7TPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80594; File No. SR–BX–
2017–021]
Self-Regulatory Organizations;
NASDAQ BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 4703
(Order Attributes)
May 4, 2017.
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 April 21,
2017, 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 Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 4703 (Order Attributes) to specify
the behavior of Orders with Midpoint
Pegging after initial entry and posting to
the Exchange Book when the market is
crossed, or when there is no best bid
and/or offer. The Exchange also
proposes to change a reference to
cancelling or rejecting orders in Rule
4703.
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.
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.
1 15
18 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00070
Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
BX proposes to amend Rule 4703
(Order Attributes) to specify the
behavior of Orders with Midpoint
Pegging that are cancelled or rejected
when the market is crossed, or when
there is no best bid and/or offer after
initial entry and posting to the Exchange
Book. BX also proposes to change a
reference to cancelling or rejecting
orders in Rule 4703.
Rule 4703(d) describes the Pegging
Order Attribute, including Midpoint
Pegging. Pegging is an Order Attribute
that allows an Order to have its price
automatically set with reference to the
NBBO. Midpoint Pegging means Pegging
with reference to the midpoint between
the Inside Bid and the Inside Offer (the
‘‘Midpoint’’).3 An Order with Midpoint
Pegging is not displayed.
BX recently proposed changes to
Orders with Midpoint Pegging, which
were approved by the SEC on November
10, 2016.4 With this change, if the
Inside Bid and Inside Offer are crossed
or if there is no Insider Bid and Inside
Offer, any existing Order with Midpoint
Pegging would be cancelled and any
new Order with Midpoint Pegging
would be rejected.5
BX now proposes to add language to
Rule 4703(d) to specify the treatment of
Orders with Midpoint Pegging after
initial entry and posting to the Exchange
Book when the Inside Bid and Inside
Offer are subsequently crossed, or if
there is subsequently no Inside Bid and/
or Inside Offer. Specifically, for Orders
with Midpoint Pegging entered through
RASH or FIX, if the Order is on the
Exchange Book and subsequently the
Inside Bid and Inside Offer become
crossed, or if there is no Inside Bid and/
or Inside Offer, the Order will be
removed from the Exchange Book and
will be re-entered at the new midpoint
once there is a valid Inside Bid and
Inside Offer that is not crossed.
As stated in the filing proposing the
new Midpoint Pegging functionality, BX
believes that the midpoint of a crossed
market, or where there is no Inside Bid
and Inside Offer, is not a clear and
accurate indication of a valid price, and
may produce sub-optimal execution
3 Thus, if the Inside Bid was $11 and the Inside
Offer was $11.06, an Order with Midpoint Pegging
would be priced at $11.03.
4 See Securities Exchange Act Release No. 79290
(November 10, 2016), 81 FR 81184 (November 17,
2016) (SR–BX–2016–046).
5 Id.
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jstallworth on DSK7TPTVN1PROD with NOTICES
Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
prices for members and investors.6 Prior
to this change, Orders entered through
RASH or FIX would have been
nevertheless repriced to the midpoint of
the Inside Bid and Inside Offer if the
Inside Bid and Inside Offer
subsequently became crossed, or would
have been cancelled if there was
subsequently no Inside Bid and/or
Inside Offer. BX is proposing to re-enter
such Orders at the new midpoint once
there is an Inside Bid and Inside Offer
that is not crossed because the new
Inside Bid and Inside Offer is indicative
of a valid price. BX is proposing to reenter Orders submitted through RASH
or FIX because BX typically assumes a
more active role in managing the order
flow submitted by users of these
protocols, and this functionality reflects
the order flow management practices of
these participants.
While BX is only proposing to adopt
this re-entry functionality for Orders
that are entered through RASH or FIX,
the Exchange believes that it is
appropriate to also modify the treatment
of Orders with Midpoint Pegging
entered through OUCH or FLITE where
the Inside Bid and Inside Offer
subsequently becomes crossed, or there
is subsequently no Inside Bid and/or
Inside Offer. Accordingly, BX is
proposing to amend Rule 4703(d) to
state that if, after an Order with
Midpoint Pegging is entered through
OUCH or FLITE, the Inside Bid and
Inside Offer changes so that the
Midpoint is lower than (higher than) the
price of an Order to buy (sell), the Inside
Bid and Inside Offer are crossed or if
there is no Inside Bid and/or Inside
Offer, the Pegged Order will be
cancelled back to the Participant.7
Finally, BX is proposing to change a
reference in Rule 4703 that describes the
cancellation or rejection of an Order.
Specifically, Rule 4703(d) currently
states that, in the case of an Order with
Midpoint Pegging, if the Inside Bid and
Inside Offer are locked, the Order will
be priced at the locking price, if the
Inside Bid and Inside Offer are crossed
or if there is no Inside Bid and/or Inside
Offer, the Order will be cancelled or
rejected. BX proposes to change
references to cancelling or rejecting an
order to ‘‘not accepting’’ an Order.
Depending on the context, the reference
to rejecting an order may have one of
6 See Securities Exchange Act Release No. 79290
(November 10, 2016), 81 FR 81184 (November 17,
2016) (SR–BX–2016–046).
7 BX is proposing to change the reference in this
sentence from NBBO to Inside Bid and Inside Offer
to make this sentence more consistent with the rest
of Rule 4703, which uses the concept of the Inside
Bid and Insider Offer rather than the NBBO.
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15:21 May 09, 2017
Jkt 241001
two meanings.8 BX believes that
changing references from rejecting or
cancelling an Order to not accepting an
Order is appropriate because the
proposed language resolves the
ambiguity that may arise when referring
to an order rejection, and is sufficiently
broad to encompass the contexts in
which the concept of Order rejection or
cancellation may be used.
This proposed change supplements
the recently-approved changes to Orders
with Midpoint Pegging, and the
resulting modifications to BX systems.9
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Section 6(b)(5) of the Act,11
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. The
proposed change is consistent with the
Act because it supplements the recentlyapproved changes to Orders with
Midpoint Pegging and the resulting
modifications to BX systems, and
reflects the Exchange’s belief that the
midpoint of a crossed market, or where
there is no Inside Bid and/or Inside
Offer, is not a clear and accurate
indication of a valid price, and may
produce sub-optimal execution prices
for members and investors. The
proposal adopts a functionality for
Orders with Midpoint Pegging after
initial entry and posting to the Exchange
Book where the Inside Bid and Inside
Offer subsequently becomes crossed, or
where there is subsequently no Inside
8 Specifically, an Order may be referred to as
‘‘rejected’’ if it is not initially accepted by the
customer-facing BX interface. Alternatively, after an
Order has been initially accepted by the customerfacing interface, and is being transmitted from one
BX interface to another, it may be ‘‘rejected’’ if the
Order is not accepted by another part of the BX
system for various reasons.
9 See Securities Exchange Act Release No. 79290
(November 10, 2016), 81 FR 81184 (November 17,
2016) (SR–BX–2016–046). BX initially proposed to
implement the new functionality for Orders with
Midpoint Pegging on November 21, 2016. See
Equity Trader Alert #2016–291. However, following
testing, BX has decided to delay the
implementation of this new functionality to provide
additional time for systems testing. The new
functionality shall be implemented no later than
May 31, 2017. See Securities Exchange Act Release
No. 80046 (February 15, 2017), 82 FR 11385
(February 22, 2017) (SR–BX–2017–008) (extending
the implementation date to no later than March 31,
2017); Securities Exchange Act Release No. 80393
(April 6, 2017), 82 FR 17711 (April 12, 2017) (SR–
BX–2017–018) (extending the implementation date
to no later than May 31, 2017).
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
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Fmt 4703
Sfmt 4703
21859
Bid and/or Inside Offer, that reflects the
order flow management practices of the
participants that use those protocols,
e.g., re-submitting such Orders that are
entered through RASH or FIX, and
cancelling such Orders that are
submitted through OUCH or FLITE.
The proposal to replace the reference
in Rule 4703 to rejecting or cancelling
an order to ‘‘not accepting’’ an order is
consistent with the Act because the
proposed language encompasses the
contexts in which the concept of order
rejection or cancellation may be used
and resolves any ambiguity that may
arise when referring to an order
rejection.
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. The
proposed change simply supplements
the recently-approved changes to Orders
with Midpoint Pegging and the resulting
modifications to BX systems by
adopting a functionality for Orders with
Midpoint Pegging after initial entry and
posting to the Exchange Book where the
Inside Bid and Inside Offer
subsequently becomes crossed, or where
there is subsequently no Inside Bid and/
or Inside Offer, that reflects the order
flow management practices of the
participants that use those protocols.
Moreover, the use of Exchange Order
types and attributes is voluntary, and no
member is required to use any specific
Order type or attribute or even to use
any Exchange Order type or attribute or
any Exchange functionality at all. If an
Exchange member believes for any
reason that the proposed rule change
will be detrimental, that perceived
detriment can be avoided by choosing
not to enter or interact with the Order
type modified by this proposed rule
change. Finally, the proposal will apply
equally to all Orders that meet its
criteria.
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
E:\FR\FM\10MYN1.SGM
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Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
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.12
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 13 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 14
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. The Exchange states
that the proposal supplements the
recently-approved changes to Orders
with Midpoint Pegging, and that it
intends to implement these previouslyapproved changes shortly (and no later
than May 31, 2017).15 Waiver of the 30day operative delay would allow the
Exchange to implement the previouslyapproved changes concurrently with the
supplemental changes in this proposal.
The Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change to be operative
upon filing.16
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.
jstallworth on DSK7TPTVN1PROD with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
12 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.
13 17 CFR 240.19b–4(f)(6).
14 17 CFR 240.19b–4(f)(6)(iii).
15 See supra note 9.
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).
VerDate Sep<11>2014
15:21 May 09, 2017
Jkt 241001
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80593; File No. SR–
NASDAQ–2017–042]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BX–2017–021 on the
subject line.
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
4702 (Order Types) and Rule 4703
(Order Attributes)
Paper Comments
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 April 21,
2017, 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.
• 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–2017–021. 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.,
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;
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–
2017–021 and should be submitted on
or before May 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–09423 Filed 5–9–17; 8:45 am]
May 4, 2017.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 4702 (Order Types) and Rule 4703
(Order Attributes) to specify the
behavior of Midpoint Peg Post-Only
Orders and Orders with Midpoint
Pegging after initial entry and posting to
the Nasdaq Book when the market is
crossed, or when there is no best bid
and/or offer. Nasdaq also proposes to
change certain references to cancelling
or rejecting orders in Rule 4702 and
Rule 4703.
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.
BILLING CODE 8011–01–P
1 15
17 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00072
Fmt 4703
Sfmt 4703
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 82, Number 89 (Wednesday, May 10, 2017)]
[Notices]
[Pages 21858-21860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09423]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80594; File No. SR-BX-2017-021]
Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4703
(Order Attributes)
May 4, 2017.
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 April 21, 2017, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 4703 (Order Attributes) to
specify the behavior of Orders with Midpoint Pegging after initial
entry and posting to the Exchange Book when the market is crossed, or
when there is no best bid and/or offer. The Exchange also proposes to
change a reference to cancelling or rejecting orders in Rule 4703.
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.
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 Rule 4703 (Order Attributes) to specify the
behavior of Orders with Midpoint Pegging that are cancelled or rejected
when the market is crossed, or when there is no best bid and/or offer
after initial entry and posting to the Exchange Book. BX also proposes
to change a reference to cancelling or rejecting orders in Rule 4703.
Rule 4703(d) describes the Pegging Order Attribute, including
Midpoint Pegging. Pegging is an Order Attribute that allows an Order to
have its price automatically set with reference to the NBBO. Midpoint
Pegging means Pegging with reference to the midpoint between the Inside
Bid and the Inside Offer (the ``Midpoint'').\3\ An Order with Midpoint
Pegging is not displayed.
---------------------------------------------------------------------------
\3\ Thus, if the Inside Bid was $11 and the Inside Offer was
$11.06, an Order with Midpoint Pegging would be priced at $11.03.
---------------------------------------------------------------------------
BX recently proposed changes to Orders with Midpoint Pegging, which
were approved by the SEC on November 10, 2016.\4\ With this change, if
the Inside Bid and Inside Offer are crossed or if there is no Insider
Bid and Inside Offer, any existing Order with Midpoint Pegging would be
cancelled and any new Order with Midpoint Pegging would be rejected.\5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 79290 (November 10,
2016), 81 FR 81184 (November 17, 2016) (SR-BX-2016-046).
\5\ Id.
---------------------------------------------------------------------------
BX now proposes to add language to Rule 4703(d) to specify the
treatment of Orders with Midpoint Pegging after initial entry and
posting to the Exchange Book when the Inside Bid and Inside Offer are
subsequently crossed, or if there is subsequently no Inside Bid and/or
Inside Offer. Specifically, for Orders with Midpoint Pegging entered
through RASH or FIX, if the Order is on the Exchange Book and
subsequently the Inside Bid and Inside Offer become crossed, or if
there is no Inside Bid and/or Inside Offer, the Order will be removed
from the Exchange Book and will be re-entered at the new midpoint once
there is a valid Inside Bid and Inside Offer that is not crossed.
As stated in the filing proposing the new Midpoint Pegging
functionality, BX believes that the midpoint of a crossed market, or
where there is no Inside Bid and Inside Offer, is not a clear and
accurate indication of a valid price, and may produce sub-optimal
execution
[[Page 21859]]
prices for members and investors.\6\ Prior to this change, Orders
entered through RASH or FIX would have been nevertheless repriced to
the midpoint of the Inside Bid and Inside Offer if the Inside Bid and
Inside Offer subsequently became crossed, or would have been cancelled
if there was subsequently no Inside Bid and/or Inside Offer. BX is
proposing to re-enter such Orders at the new midpoint once there is an
Inside Bid and Inside Offer that is not crossed because the new Inside
Bid and Inside Offer is indicative of a valid price. BX is proposing to
re-enter Orders submitted through RASH or FIX because BX typically
assumes a more active role in managing the order flow submitted by
users of these protocols, and this functionality reflects the order
flow management practices of these participants.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 79290 (November 10,
2016), 81 FR 81184 (November 17, 2016) (SR-BX-2016-046).
---------------------------------------------------------------------------
While BX is only proposing to adopt this re-entry functionality for
Orders that are entered through RASH or FIX, the Exchange believes that
it is appropriate to also modify the treatment of Orders with Midpoint
Pegging entered through OUCH or FLITE where the Inside Bid and Inside
Offer subsequently becomes crossed, or there is subsequently no Inside
Bid and/or Inside Offer. Accordingly, BX is proposing to amend Rule
4703(d) to state that if, after an Order with Midpoint Pegging is
entered through OUCH or FLITE, the Inside Bid and Inside Offer changes
so that the Midpoint is lower than (higher than) the price of an Order
to buy (sell), the Inside Bid and Inside Offer are crossed or if there
is no Inside Bid and/or Inside Offer, the Pegged Order will be
cancelled back to the Participant.\7\
---------------------------------------------------------------------------
\7\ BX is proposing to change the reference in this sentence
from NBBO to Inside Bid and Inside Offer to make this sentence more
consistent with the rest of Rule 4703, which uses the concept of the
Inside Bid and Insider Offer rather than the NBBO.
---------------------------------------------------------------------------
Finally, BX is proposing to change a reference in Rule 4703 that
describes the cancellation or rejection of an Order. Specifically, Rule
4703(d) currently states that, in the case of an Order with Midpoint
Pegging, if the Inside Bid and Inside Offer are locked, the Order will
be priced at the locking price, if the Inside Bid and Inside Offer are
crossed or if there is no Inside Bid and/or Inside Offer, the Order
will be cancelled or rejected. BX proposes to change references to
cancelling or rejecting an order to ``not accepting'' an Order.
Depending on the context, the reference to rejecting an order may have
one of two meanings.\8\ BX believes that changing references from
rejecting or cancelling an Order to not accepting an Order is
appropriate because the proposed language resolves the ambiguity that
may arise when referring to an order rejection, and is sufficiently
broad to encompass the contexts in which the concept of Order rejection
or cancellation may be used.
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\8\ Specifically, an Order may be referred to as ``rejected'' if
it is not initially accepted by the customer-facing BX interface.
Alternatively, after an Order has been initially accepted by the
customer-facing interface, and is being transmitted from one BX
interface to another, it may be ``rejected'' if the Order is not
accepted by another part of the BX system for various reasons.
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This proposed change supplements the recently-approved changes to
Orders with Midpoint Pegging, and the resulting modifications to BX
systems.\9\
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\9\ See Securities Exchange Act Release No. 79290 (November 10,
2016), 81 FR 81184 (November 17, 2016) (SR-BX-2016-046). BX
initially proposed to implement the new functionality for Orders
with Midpoint Pegging on November 21, 2016. See Equity Trader Alert
#2016-291. However, following testing, BX has decided to delay the
implementation of this new functionality to provide additional time
for systems testing. The new functionality shall be implemented no
later than May 31, 2017. See Securities Exchange Act Release No.
80046 (February 15, 2017), 82 FR 11385 (February 22, 2017) (SR-BX-
2017-008) (extending the implementation date to no later than March
31, 2017); Securities Exchange Act Release No. 80393 (April 6,
2017), 82 FR 17711 (April 12, 2017) (SR-BX-2017-018) (extending the
implementation date to no later than May 31, 2017).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ 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. The proposed change is consistent with the Act because it
supplements the recently-approved changes to Orders with Midpoint
Pegging and the resulting modifications to BX systems, and reflects the
Exchange's belief that the midpoint of a crossed market, or where there
is no Inside Bid and/or Inside Offer, is not a clear and accurate
indication of a valid price, and may produce sub-optimal execution
prices for members and investors. The proposal adopts a functionality
for Orders with Midpoint Pegging after initial entry and posting to the
Exchange Book where the Inside Bid and Inside Offer subsequently
becomes crossed, or where there is subsequently no Inside Bid and/or
Inside Offer, that reflects the order flow management practices of the
participants that use those protocols, e.g., re-submitting such Orders
that are entered through RASH or FIX, and cancelling such Orders that
are submitted through OUCH or FLITE.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The proposal to replace the reference in Rule 4703 to rejecting or
cancelling an order to ``not accepting'' an order is consistent with
the Act because the proposed language encompasses the contexts in which
the concept of order rejection or cancellation may be used and resolves
any ambiguity that may arise when referring to an order rejection.
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. The proposed change simply
supplements the recently-approved changes to Orders with Midpoint
Pegging and the resulting modifications to BX systems by adopting a
functionality for Orders with Midpoint Pegging after initial entry and
posting to the Exchange Book where the Inside Bid and Inside Offer
subsequently becomes crossed, or where there is subsequently no Inside
Bid and/or Inside Offer, that reflects the order flow management
practices of the participants that use those protocols. Moreover, the
use of Exchange Order types and attributes is voluntary, and no member
is required to use any specific Order type or attribute or even to use
any Exchange Order type or attribute or any Exchange functionality at
all. If an Exchange member believes for any reason that the proposed
rule change will be detrimental, that perceived detriment can be
avoided by choosing not to enter or interact with the Order type
modified by this proposed rule change. Finally, the proposal will apply
equally to all Orders that meet its criteria.
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
[[Page 21860]]
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.\12\
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\12\ 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ 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. The
Exchange states that the proposal supplements the recently-approved
changes to Orders with Midpoint Pegging, and that it intends to
implement these previously-approved changes shortly (and no later than
May 31, 2017).\15\ Waiver of the 30-day operative delay would allow the
Exchange to implement the previously-approved changes concurrently with
the supplemental changes in this proposal. The Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Therefore, the Commission hereby
waives the 30-day operative delay and designates the proposed rule
change to be operative upon filing.\16\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ See supra note 9.
\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 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-BX-2017-021 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-2017-021. 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.,
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; 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-2017-021 and should be
submitted on or before May 31, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09423 Filed 5-9-17; 8:45 am]
BILLING CODE 8011-01-P
