Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Quoting at the Opening, 40190-40193 [2017-17907]

Download as PDF 40190 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices 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 7 and subparagraph (f)(6) of Rule 19b–4 thereunder.8 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– GEMX–2017–38 on the subject line. rmajette on DSKBCKNHB2PROD with NOTICES 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–GEMX–2017–38. This file 7 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization 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. 8 17 VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 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–GEMX– 2017–38 and should be submitted on or before September 14, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–17908 Filed 8–23–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81434; File No. SR–ISE– 2017–78] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Quoting at the Opening August 18, 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 August 17, 2017, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. (‘‘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 ISE Rule 701, entitled ‘‘Opening.’’ The text of the proposed rule change is available on the Exchange’s Web site at www.ise.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 purpose of this rule change is to amend ISE Rule 701, ‘‘Opening’’ to specifically amend opening obligations for Primary Market Makers or ‘‘PMMs.’’ The Exchange notes that the proposed rule change is similar to a Nasdaq MRX, LLC (‘‘MRX’’) rule.3 Today, ISE Rule 701(c)(3) states that the PMM assigned in a particular equity option must enter a Valid Width Quote not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index. The PMM assigned in a particular U.S. dollar-settled foreign currency option must enter a Valid Width Quote not later than one minute after the announced market opening. First, the Exchange proposes to add the words ‘‘or index’’ to further clarify that the requirement applies to equities and index options. The Exchange proposes this addition to further clarify 1 15 PO 00000 Frm 00061 Fmt 4703 3 See Sfmt 4703 E:\FR\FM\24AUN1.SGM MRX Rule 701. 24AUN1 rmajette on DSKBCKNHB2PROD with NOTICES Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices the requirement in Rule 701(c)(3) clearly applies to equity and index options. Second, the Exchange proposes to modify the PMM’s current obligation to enter Valid Width Quotes not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index for all assigned options, or in the case of a U.S. dollar-settled foreign currency option after the announced market opening. The Exchange believes that the current requirement is very burdensome and instead proposes to add ‘‘in 90% of their assigned series’’ to require a PMM to enter a Valid Width Quote not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in 90% of their assigned series, or in the case of a U.S. dollar-settled foreign currency option in 90% of their assigned series not late [sic] than one minute after the announced market opening. Further, the Exchange proposes to require PMMs to promptly enter a Valid Width Quote in the remainder of their assigned series, which did not open within one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index, or with respect to a U.S. dollar-settled foreign currency option, following the announced market opening. The Exchange’s proposal is intended to account for market conditions which may prevent a PMM from opening all assigned series, for example an extremely volatile market which may impact the PMM’s ability to enter aggressive quotes. Another example would be that news pertaining to a specific security is causing the underlying price to fluctuate rapidly and significantly, thereby causing the PMM to await the underlying equity price to settle before entering a Valid Width Quote. The Exchange’s surveillance staff would monitor to ensure that PMMs are complying with these requirements during the Opening Process. Today, the Opening Process for an options series will be conducted on or after 9:30 a.m. if the system has received, within two minutes (or such shorter time as determined by the Exchange and disseminated to membership on the Exchange’s Web site) of the opening trade or quote on the market for the underlying security in the case of equity options or, in the case of VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 index options, within two minutes of the receipt of the opening price in the underlying index (or such shorter time as determined by the Exchange and disseminated to membership on the Exchange’s Web site), or within two minutes of market opening for the underlying currency in the case of a U.S. dollar-settled foreign currency option (or such shorter time as determined by the Exchange and disseminated to membership on the Exchange’s Web site) the PMM’s Valid Width Quote, the Valid Width Quotes of two Competitive Market Makers (‘‘CMMs’’) or if neither the PMM’s Valid Width Quote nor the Valid Width Quote of two CMM’s have been submitted within such timeframe, if one CMM has submitted a Valid Width Quote.4 Implementation The Exchange proposes to implement this rule change on September 29, 2017. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,5 in general, and furthers the objectives of Section 6(b)(5) of the Act,6 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 for the reasons stated below. The Exchange’s first proposal at Rule 701(c)(3) to clarify that the requirement applies to equities and index options will make clear the applicability of the PMM’s requirement to enter Valid Width Quotes. This proposed amendment is non-substantive and is intended to add clarity to the rules. The second proposal to amend a PMM’s requirement to enter Valid Width Quotes during the Opening Process is consistent with the Act because the 90% requirement to provide a Valid Width Quote in a series to which the PMM is assigned will continue to ensure that options series are opened in a timely manner, while not imposing a burdensome requirement on market participants. PMMs would be required to promptly enter a Valid Width Quote in the remainder of their assigned series, which did not open within one minute of the dissemination of a quote or trade by the market for the underlying security or in the case of index options, following the receipt of the opening price or, with respect to 4 See proposed Rule 701(c)(1)(i)–(iii). U.S.C. 78f(b). 6 15 U.S.C. 78f(b)(5). 5 15 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 40191 U.S. dollar-settled foreign currency options, following the announced market opening. The Exchange would monitor PMMs to ensure that they promptly provided a Valid Width Quote for the remainder of the series within a reasonable amount of time. The Exchange notes that market conditions could cause a PMM to experience circumstances where opening 100% of all of their assigned series within one minute of the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollarsettled foreign currency options, following the announced market opening is not feasible. The Exchange believes that the proposed 90% Valid Width Quoting obligation, not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollarsettled foreign currency options, following the announced market opening, along with the ‘‘prompt’’ standard for the remaining 10% of their assigned series will ensure all series are opened in a timely manner. The Exchange’s proposal accounts for market conditions which may prevent a PMM from opening all assigned series, for example an extremely volatile market which may impact the PMM’s ability to enter aggressive quotes. Another example would be that news pertaining to a specific security is causing the underlying price to fluctuate rapidly and significantly, thereby causing the PMM to await the underlying equity price to settle before entering a Valid Width Quote. The Exchange believes that the time frame for PMMs to provide a Valid Width Quote in 90% of their assigned series not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollar-settled foreign currency options, following the announced market opening will ensure liquidity on ISE during the Opening Process. The Exchange desires to encourage PMMs to continue to make markets on ISE at the Opening. The Exchange believes that requiring PMMs to provide a Valid Width Quote in 90% of their assigned options not later than one minute following the dissemination of a quote E:\FR\FM\24AUN1.SGM 24AUN1 40192 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices rmajette on DSKBCKNHB2PROD with NOTICES or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollarsettled foreign currency options, following the announced market opening along with the ‘‘prompt’’ standard for the remaining 10% will enhance the market making functions for PMMs and serve to maintain a fair and orderly market thereby promoting the protection of investors and the public interest. 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 proposal does not change the intense competition that exists among the options markets for options business including on the opening. Nor does the Exchange believe that the proposal will impose any burden on intra-market competition; the Opening Process involves many types of participants and interest. The Exchange’s proposal to require a PMM to enter a Valid Width Quote in 90% of their assigned series not later than one minute time following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollar-settled foreign currency options, following the announced market opening and promptly enter a Valid Width quote for the remaining 10% their assigned series does not create an undue burden on competition. The proposal will continue to ensure that options series are opened in a timely manner, while not imposing a burdensome requirement on market participants. PMMs would be required to promptly enter a Valid Width Quote in the remainder of their assigned series which were not open within one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollarsettled foreign currency options, following the announced market opening. The Exchange would monitor PMMs to ensure that they promptly entered a Valid Width Quote for the remainder of their assigned series within a reasonable amount of time. The Exchange notes that market conditions could cause a PMM to experience circumstances where entering a Valid VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 Width Quote for 100% of all of their assigned series within one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or with respect to U.S. dollarsettled foreign currency options within one minute after the announced market opening is not feasible. The Exchange believes that the proposed 90% obligation to enter a Valid Width Quote not later than one minute following the dissemination of a quote or trade by the market for the underlying security or, in the case of index options, following the receipt of the opening price in the underlying index or, with respect to U.S. dollar-settled foreign currency options, following the announced market opening for the underlying security along with the ‘‘prompt’’ standard for the remaining series will ensure all series are opened in a timely manner. 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 7 and subparagraph (f)(6) of Rule 19b–4 thereunder.8 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings 7 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization 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. 8 17 PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2017–78 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–ISE–2017–78. 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 N., 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–ISE– 2017–78 and should be submitted on or before September 14, 2017. E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–17907 Filed 8–23–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81431; File No. SR–GEMX– 2017–39] Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Create the Market Access and Routing Subsidy Program August 18, 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 August 9, 2017, Nasdaq GEMX, LLC (‘‘GEMX’’ 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 create a subsidy program, the Market Access and Routing Subsidy (‘‘MARS’’), for GEMX Members that provide certain order routing functionalities 3 to other GEMX 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The order routing functionalities permit a GEMX Member to provide access and connectivity to other Members as well utilize such access for themselves. The Exchange notes that under this arrangement it will be possible for one GEMX Member to be eligible for payments under MARS, while another GEMX Member might potentially be liable for transaction charges associated with the execution of the order, because those orders were delivered to the Exchange through a GEMX Member’s connection to the Exchange and that Member qualified for the MARS Payment. Consider the following example: Both Members A and B are GEMX Members but A does not utilize its own connections to route orders to the Exchange, and instead utilizes B’s connections. Under this program, B will be eligible for the MARS Payment while A is liable for any transaction charges resulting from the execution of orders that originate from A, arrive at the Exchange via B’s connectivity, and subsequently execute and clear at The Options Clearing Corporation or ‘‘OCC,’’ where A is the valid executing clearing Member or giveup on the transaction. Similarly, where B utilizes its own connections to execute transactions, B will be eligible for the MARS Payment, but would also rmajette on DSKBCKNHB2PROD with NOTICES 1 15 VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 Members and/or use such functionalities themselves. The text of the proposed rule change is available on the Exchange’s Web site at www.ise.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 GEMX proposes a new subsidy program, MARS, which would pay a subsidy to GEMX Members that provide certain order routing functionalities to other GEMX Members and/or use such functionalities themselves. Generally, under MARS, GEMX proposes to make payments to participating GEMX Members to subsidize their costs of providing routing services to route orders to GEMX. The Exchange believes that MARS will attract higher volumes of equity and ETF options volume to the Exchange from non-GEMX market participants as well as GEMX Members. MARS System Eligibility To qualify for MARS, a GEMX Member’s order routing functionality would be required to meet certain criteria. Specifically the Member’s routing system (hereinafter ‘‘System’’) would be required to: (1) Enable the electronic routing of orders to all of the U.S. options exchanges, including GEMX; (2) provide current consolidated market data from the U.S. options exchanges; and (3) be capable of interfacing with GEMX’s API to access current GEMX match engine functionality. The Member’s System would also need to cause GEMX to be one of the top four default destination be liable for any transaction resulting from the execution of orders that originate from B, arrive at the Exchange via B’s connectivity, and subsequently execute and clear at OCC, where B is the valid executing clearing Member or give-up on the transaction. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 40193 exchanges for (a) individually executed marketable orders if GEMX is at the national best bid or offer (‘‘NBBO’’), regardless of size or time or (b) orders that establish a new NBBO on GEMX’s Order Book, but allow any user to manually override GEMX as the default destination on an order-by-order basis. The Exchange would require GEMX Members desiring to participate in MARS 4 to complete a form, in a manner prescribed by the Exchange, and reaffirm their information on a quarterly basis to the Exchange. Any GEMX Member would be permitted to apply for MARS, provided the abovereferenced requirements are met, including a robust and reliable System. The Member would be solely responsible for implementing and operating its System. MARS Eligible Contracts A MARS Payment would be made to GEMX Members that have System Eligibility and have routed the requisite number of Eligible Contracts daily in a month, which were executed on GEMX. For the purpose of qualifying for the MARS Payment, Eligible Contracts would include Non-Nasdaq GEMX Market Maker (FARMM) 5, Firm Proprietary 6/Broker-Dealer 7 and Professional Customer 8 Orders that are executed. Eligible Contracts do not 4 If a GEMX Member desires to qualify for MARS, that Member must submit an application and certify to the System Eligibility requirements for the entire time period in which the Member will be eligible for MARS Rebates. A GEMX Member may apply anytime during the month in which the GEMX Member desires to participant in MARS and would be eligible for the entire month, provided the GEMX Member certified System Eligibility for that entire month. For example, a GEMX Member submitting an application on the 15th of the month, would have to certify System Eligibility for that entire month. A form must be submitted no later than the last business day of the month in which the GEMX Member desires to participate in MARS. The application will require the GEMX Member to identify the GEMX Member seeking the MARS Payment and must list, among other things, the connections utilized by the GEMX Member to provide Exchange access to other GEMX Members and/or itself. MARS Payments would be made one month in arrears (i.e., a MARS Payment earned for activity in September would be paid to the qualifying GEMX Member in October), as is the case with all other transactional payments and assessments made by the Exchange. 5 A ‘‘Non-Nasdaq GEMX Market Maker’’ is a market maker as defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended, registered in the same options class on another options exchange. 6 A ‘‘Firm Proprietary’’ order is an order submitted by a Member for its own proprietary account. 7 A ‘‘Broker-Dealer’’ order is an order submitted by a Member for a broker-dealer account that is not its own proprietary account. 8 A ‘‘Professional Customer’’ is a person or entity that is not a broker/dealer and is not a Priority Customer. E:\FR\FM\24AUN1.SGM 24AUN1

Agencies

[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40190-40193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17907]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81434; File No. SR-ISE-2017-78]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Related to Quoting 
at the Opening

August 18, 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 August 17, 2017, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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 ISE Rule 701, entitled ``Opening.''
    The text of the proposed rule change is available on the Exchange's 
Web site at www.ise.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 purpose of this rule change is to amend ISE Rule 701, 
``Opening'' to specifically amend opening obligations for Primary 
Market Makers or ``PMMs.'' The Exchange notes that the proposed rule 
change is similar to a Nasdaq MRX, LLC (``MRX'') rule.\3\
---------------------------------------------------------------------------

    \3\ See MRX Rule 701.
---------------------------------------------------------------------------

    Today, ISE Rule 701(c)(3) states that the PMM assigned in a 
particular equity option must enter a Valid Width Quote not later than 
one minute following the dissemination of a quote or trade by the 
market for the underlying security or, in the case of index options, 
following the receipt of the opening price in the underlying index. The 
PMM assigned in a particular U.S. dollar-settled foreign currency 
option must enter a Valid Width Quote not later than one minute after 
the announced market opening.
    First, the Exchange proposes to add the words ``or index'' to 
further clarify that the requirement applies to equities and index 
options. The Exchange proposes this addition to further clarify

[[Page 40191]]

the requirement in Rule 701(c)(3) clearly applies to equity and index 
options.
    Second, the Exchange proposes to modify the PMM's current 
obligation to enter Valid Width Quotes not later than one minute 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index for all assigned 
options, or in the case of a U.S. dollar-settled foreign currency 
option after the announced market opening. The Exchange believes that 
the current requirement is very burdensome and instead proposes to add 
``in 90% of their assigned series'' to require a PMM to enter a Valid 
Width Quote not later than one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
90% of their assigned series, or in the case of a U.S. dollar-settled 
foreign currency option in 90% of their assigned series not late [sic] 
than one minute after the announced market opening.
    Further, the Exchange proposes to require PMMs to promptly enter a 
Valid Width Quote in the remainder of their assigned series, which did 
not open within one minute following the dissemination of a quote or 
trade by the market for the underlying security or, in the case of 
index options, following the receipt of the opening price in the 
underlying index, or with respect to a U.S. dollar-settled foreign 
currency option, following the announced market opening. The Exchange's 
proposal is intended to account for market conditions which may prevent 
a PMM from opening all assigned series, for example an extremely 
volatile market which may impact the PMM's ability to enter aggressive 
quotes. Another example would be that news pertaining to a specific 
security is causing the underlying price to fluctuate rapidly and 
significantly, thereby causing the PMM to await the underlying equity 
price to settle before entering a Valid Width Quote. The Exchange's 
surveillance staff would monitor to ensure that PMMs are complying with 
these requirements during the Opening Process.
    Today, the Opening Process for an options series will be conducted 
on or after 9:30 a.m. if the system has received, within two minutes 
(or such shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's Web site) of the opening trade or quote on 
the market for the underlying security in the case of equity options 
or, in the case of index options, within two minutes of the receipt of 
the opening price in the underlying index (or such shorter time as 
determined by the Exchange and disseminated to membership on the 
Exchange's Web site), or within two minutes of market opening for the 
underlying currency in the case of a U.S. dollar-settled foreign 
currency option (or such shorter time as determined by the Exchange and 
disseminated to membership on the Exchange's Web site) the PMM's Valid 
Width Quote, the Valid Width Quotes of two Competitive Market Makers 
(``CMMs'') or if neither the PMM's Valid Width Quote nor the Valid 
Width Quote of two CMM's have been submitted within such timeframe, if 
one CMM has submitted a Valid Width Quote.\4\
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    \4\ See proposed Rule 701(c)(1)(i)-(iii).
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Implementation
    The Exchange proposes to implement this rule change on September 
29, 2017.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ 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 
for the reasons stated below.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange's first proposal at Rule 701(c)(3) to clarify that the 
requirement applies to equities and index options will make clear the 
applicability of the PMM's requirement to enter Valid Width Quotes. 
This proposed amendment is non-substantive and is intended to add 
clarity to the rules.
    The second proposal to amend a PMM's requirement to enter Valid 
Width Quotes during the Opening Process is consistent with the Act 
because the 90% requirement to provide a Valid Width Quote in a series 
to which the PMM is assigned will continue to ensure that options 
series are opened in a timely manner, while not imposing a burdensome 
requirement on market participants. PMMs would be required to promptly 
enter a Valid Width Quote in the remainder of their assigned series, 
which did not open within one minute of the dissemination of a quote or 
trade by the market for the underlying security or in the case of index 
options, following the receipt of the opening price or, with respect to 
U.S. dollar-settled foreign currency options, following the announced 
market opening. The Exchange would monitor PMMs to ensure that they 
promptly provided a Valid Width Quote for the remainder of the series 
within a reasonable amount of time. The Exchange notes that market 
conditions could cause a PMM to experience circumstances where opening 
100% of all of their assigned series within one minute of the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or, with respect to U.S. dollar-
settled foreign currency options, following the announced market 
opening is not feasible.
    The Exchange believes that the proposed 90% Valid Width Quoting 
obligation, not later than one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening, along with 
the ``prompt'' standard for the remaining 10% of their assigned series 
will ensure all series are opened in a timely manner. The Exchange's 
proposal accounts for market conditions which may prevent a PMM from 
opening all assigned series, for example an extremely volatile market 
which may impact the PMM's ability to enter aggressive quotes. Another 
example would be that news pertaining to a specific security is causing 
the underlying price to fluctuate rapidly and significantly, thereby 
causing the PMM to await the underlying equity price to settle before 
entering a Valid Width Quote. The Exchange believes that the time frame 
for PMMs to provide a Valid Width Quote in 90% of their assigned series 
not later than one minute following the dissemination of a quote or 
trade by the market for the underlying security or, in the case of 
index options, following the receipt of the opening price in the 
underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening will ensure 
liquidity on ISE during the Opening Process. The Exchange desires to 
encourage PMMs to continue to make markets on ISE at the Opening. The 
Exchange believes that requiring PMMs to provide a Valid Width Quote in 
90% of their assigned options not later than one minute following the 
dissemination of a quote

[[Page 40192]]

or trade by the market for the underlying security or, in the case of 
index options, following the receipt of the opening price in the 
underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening along with the 
``prompt'' standard for the remaining 10% will enhance the market 
making functions for PMMs and serve to maintain a fair and orderly 
market thereby promoting the protection of investors and the public 
interest.

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 proposal does not change 
the intense competition that exists among the options markets for 
options business including on the opening. Nor does the Exchange 
believe that the proposal will impose any burden on intra-market 
competition; the Opening Process involves many types of participants 
and interest.
    The Exchange's proposal to require a PMM to enter a Valid Width 
Quote in 90% of their assigned series not later than one minute time 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index or, with respect 
to U.S. dollar-settled foreign currency options, following the 
announced market opening and promptly enter a Valid Width quote for the 
remaining 10% their assigned series does not create an undue burden on 
competition. The proposal will continue to ensure that options series 
are opened in a timely manner, while not imposing a burdensome 
requirement on market participants. PMMs would be required to promptly 
enter a Valid Width Quote in the remainder of their assigned series 
which were not open within one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening. The Exchange 
would monitor PMMs to ensure that they promptly entered a Valid Width 
Quote for the remainder of their assigned series within a reasonable 
amount of time. The Exchange notes that market conditions could cause a 
PMM to experience circumstances where entering a Valid Width Quote for 
100% of all of their assigned series within one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or with respect to U.S. dollar-
settled foreign currency options within one minute after the announced 
market opening is not feasible. The Exchange believes that the proposed 
90% obligation to enter a Valid Width Quote not later than one minute 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index or, with respect 
to U.S. dollar-settled foreign currency options, following the 
announced market opening for the underlying security along with the 
``prompt'' standard for the remaining series will ensure all series are 
opened in a timely manner.

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 \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization 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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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2017-78 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-ISE-2017-78. 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 N., 
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-ISE-2017-78 and should be 
submitted on or before September 14, 2017.


[[Page 40193]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17907 Filed 8-23-17; 8:45 am]
 BILLING CODE 8011-01-P
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