Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 716(c) on the Block Order Mechanism, 46576-46579 [2017-21407]
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46576
Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices
The Commission believes that the
Exchange has provided a sufficient basis
for its different treatment of Eligible
New Listings that list prior to October
1, 2017 and that this portion of the
Exchange’s proposal meets the
requirements of the Act. In making this
determination, the Commission notes
that the provision of services under
Section 146 of the Company Guide is for
a limited duration and that the
Exchange has provided a reasonable
basis for deciding to treat Eligible New
Listings that list prior to October 1, 2017
differently from other listed companies
going forward. The Commission notes
that at the time such companies listed,
they had an expectation, if they
intended to utilize the corporate
governance tools, to be able to do so for
the entire 24 month period as set forth
in the current rule. To allow such
companies listed prior to October 1,
2017 to finish utilizing corporate
governance tools for any remainder of
their 24 month period appears to be
reasonable, equitable, and not unfairly
discriminatory. In addition, the
Commission notes that the October 1,
2017 date, to curtail the offering of
corporate governance tools for Eligible
New Listings that list on or after that
date, was transparent and published for
comment in advance of approval by the
Commission in the order discussed
herein. As noted above, the Commission
received no comments on the proposal.
Finally, the Commission has also
previously approved proposals
providing different services to newlylisted issuers, including those
transferring their listing from another
exchange, and has found this consistent
with Sections 6(b)(4) and 6(b)(5) of the
Act.16
Accordingly, the Commission finds
that the proposed rule change is
consistent with the requirements of the
Act and, in particular, that the products
and services provided under Section
146 of the Company Guide are equitably
allocated among issuers consistent with
Section 6(b)(4) of the Act, the proposed
rule change does not unfairly
discriminate among issuers consistent
with Section 6(b)(5) of the Act, and the
proposed rule change is appropriate and
consistent with Section 6(b)(8) of the
Act in that it does not impose any
burden on competition not necessary or
16 See Securities Exchange Act Release Nos.
76127 (October 9, 2015), 80 FR 62584 (October 16,
2015) (order approving SR–NYSE–2015–36); 72669
(July 24, 2014), 79 FR 44234 (July 30, 2014) (order
approving SR–NASDAQ–2014–058); 65963
(December 15, 2011), 76 FR 79262 (December 21,
2011) (order approving SR–NASDAQ–2011–122).
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appropriate in furtherance of the
purposes of the Act.17
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–NYSEAMER–
2017–05), be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–21415 Filed 10–4–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81772; File No. SR–ISE–
2017–84]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 716(c) on
the Block Order Mechanism
September 29, 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
September 18, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 716(c) to more accurately describe
the allocation methodology used in the
Block Order Mechanism, add language
regarding how the block execution price
is determined, and describe the content
of the broadcast message disseminated
to members upon the entry of an order
into the mechanism.
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.
17 15
U.S.C. 78f(b)(4), (5), and (8).
U.S.C. 78s(b)(2).
19 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18 15
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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 Block Order Mechanism is a
process by which a member can obtain
liquidity for the execution of blocksized orders,3 defined as orders for fifty
contracts or more.4 When an order is
entered in the Block Order Mechanism,
that order is exposed to members who
are given an opportunity to respond
with the prices and sizes at which they
would be willing to trade with the
block-sized order.5 The exposure period
is designated by the Exchange via
circular, but must be no less than 100
milliseconds and no more than 1
second.6 At the conclusion of the
exposure period, either an execution
will occur at a single block execution
price,7 or the order will be cancelled.8
The purpose of the proposed rule
change is to amend Rule 716(c) to more
accurately describe the allocation
methodology used in the Block Order
Mechanism, add language regarding
how the block execution price is
determined, and describe the content of
the broadcast message disseminated to
members upon the entry of an order into
the mechanism. The Exchange believes
that these changes will increase
transparency around the operation of
the Block Order Mechanism to the
benefit of members and market
participants.
Currently, Rule 716(c)(2)(ii) provides
that Responses, quotes, and Professional
3 See
Rule 716(c).
Rule 716(a).
5 A ‘‘Response’’ is an electronic message that is
sent by members in response to a broadcast
message. See Rule 716(b).
6 See Supplementary Material .04 to Rule 716.
7 Responses and orders and quotes on the order
book at the time the block order is executed that
are priced better than the block execution price are
executed at the block execution price. See Rule
716(c)(2)(i).
8 See Rule 716(c)(2).
4 See
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Orders 9 at the block execution price
will participate in the execution of the
block-size order according to Rule
713(e)—i.e., the Exchange’s regular
allocation rule. As implemented today,
however, interest that is executed in the
Block Order Mechanism follows the
customer priority pro-rata allocation
methodology designed for the
Exchange’s auction mechanisms,
including, for example, the Facilitation
Mechanism,10 Solicited Order
Mechanism,11 and Price Improvement
Mechanism,12 with the exception that
those two-sided auction mechanisms
also allocate contracts against the contra
order. This auction allocation
methodology is similar to the
Exchange’s regular allocation
methodology but does not provide
enhanced allocations to the Primary
Market Maker (‘‘PMM’’) pursuant to
Rule 713(e) and Supplementary Material
.01(b) to Rule 713.13 The Exchange
therefore proposes to amend Rule
716(c)(2)(ii) to provide that, at the block
execution price, Priority Customer
Orders and Priority Customer Responses
will be executed first in time priority,
and then quotes, Professional Orders,
and Professional Responses will
participate in the execution of the blocksize order based upon the percentage of
the total number of contracts available
at the block execution price that is
represented by the size of the quote,
Professional Order, or Professional
Response. In addition, the Exchange
proposes to specify in Rule 716(c)(2)(i)
that interest that is priced better than
the block execution price is executed in
full. In particular, the Exchange
proposes to amend this rule to state that
bids (offers) on the Exchange at the time
the block order is executed that are
priced higher (lower) than the block
execution price, as well as Responses
that are priced higher (lower) than the
block execution price, will be executed
in full at the block execution price.
Although Rule 716(c)(2)(ii) described
above explains how allocations are
handled at the block execution price,
the Exchange believes that the
additional clarity that interest that is
priced better than the block execution
9 The term ‘‘Professional Order’’ means an order
that is for the account of a person or entity that is
not a Priority Customer. See Rule 100(a)(37C).
10 See Rule 716(d).
11 See Rule 716(e).
12 See Rule 723.
13 Supplementary Material .01(b) to Rule 713
provides that, if the PMM is quoting at the best
price, it has participation rights equal to the greater
of the proportion of the total size at the best price
represented by the size of its quote, or a percentage
allocation entitlement based on the number of other
Professional Orders and market maker quotations at
the best price.
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price is executed in full would be
helpful to members. With these two
proposed changes, Rule 716(c) will
more accurately describe the allocation
methodology used in the Block Order
Mechanism.
Furthermore, the Exchange proposes
to add language to Rule 716(c)(2)(i) that
explains the price at which orders
entered into the Block Order
Mechanism are executed. In particular,
the Exchange proposes to state that
Responses, orders, and quotes will be
executed at a single block execution
price that is the price for the block-size
order at which the maximum number of
contracts can be executed consistent
with the member’s instruction. For
example, if a member enters a blocksized order to buy 100 contracts at $1.00
into the Block Order Mechanism, and
members enter Response A to sell 50
contracts at $0.90 and Response B to sell
40 contracts at $0.95, the block
execution price would be $0.95 as this
is the price at which the maximum
number of contracts could be executed.
The block-sized order and both
Responses would then be executed at
this single block execution price.
Responses A and B would be executed
in full since there is sufficient size to
execute both Responses against the
block-size order. In addition, if two
other members also enter Responses C
(Priority Customer) and D (non-Priority
Customer) to sell at $0.98 for 10
contracts each, the block execution
price would be $0.98 as additional
contracts could be executed at that
price. In that instance, Responses A and
B, which are priced better than the
block execution price, would be
executed in full, while Responses B and
C, which are priced at the block
execution price, would participate in
accordance with the allocation
methodology described in this proposed
rule change—i.e., the remaining 10
contracts would go to Response C,
which is a Priority Customer Response.
The Block Order Mechanism is designed
to provide an opportunity for members
to receive liquidity for their block-sized
orders and therefore trades at a price
that allows the maximum number of
contracts of such order to be executed
against Responses entered to trade
against the block-size order and interest
on the Exchange’s order book. The
Exchange believes that describing how
the block execution price is determined
in Rule 716(c)(2)(i) will increase
transparency around pricing of
executions in the Block Order
Mechanism.
Finally, the Exchange proposes to add
language to Rule 716(c)(1) to describe
the content of the broadcast message
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sent to members upon the entry of an
order into the Block Order Mechanism.
In particular, the Exchange proposes to
specify that this broadcast message
includes the series, and may include
price, size and/or side, as specified by
the member entering the order. Similar
language is included in the Block Order
Mechanism Rule on the Exchange’s
affiliates, Nasdaq GEMX, LLC (‘‘GEMX’’)
and Nasdaq MRX, LLC (‘‘MRX’’), which
operate in the same way as ISE’s Block
Order Mechanism.14 The Exchange
therefore believes that this change will
increase transparency around the
content of the broadcast message and
promote consistency across the
rulebooks of its affiliated exchanges that
offer identical functionality.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder that
are applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the
Act.15 In particular, the proposal is
consistent with Section 6(b)(5) of the
Act,16 because it is designed to promote
just and equitable principles of trade,
remove impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that the
proposed changes to the allocation
language in Rule 716(c)(2)(i)–(ii) are
consistent with the protection of
investors and the public interest as the
proposed allocation language more
accurately reflects the Exchange’s
process for allocating contracts executed
in the Block Order Mechanism.
Although the Exchange’s allocation rule
for the Block Order Mechanism
currently references the allocation
process for regular trading, the
allocation methodology does not
include certain parts of the regular
allocation procedure. In particular, the
Exchange does not grant any special
allocation to the PMM for interest
executed in the Block Order
Mechanism. The Exchange believes that
it is appropriate to not provide an
enhanced allocation entitlement to the
PMM for interest executed in the Block
Order Mechanism, as the Block Order
Mechanism provides an auction process
that does not rely on market maker
quoting and other obligations to source
liquidity. Furthermore, the Exchange
14 See
GEMX and MRX Rule 716(c)(1).
U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
15 15
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believes that it is helpful to explain in
this rule that interest that is priced
better than the block execution price
would be executed in full. The
allocation process used for the Block
Order Mechanism is similar to how the
Exchange allocates contracts in other
auction mechanisms, including, for
example, the Facilitation Mechanism,
Solicited Order Mechanism, and Price
Improvement Mechanism, with the
exception that those two-sided auction
mechanisms also allocate contracts
against the contra order.17
The Exchange also believes that the
proposed changes to describe how the
block execution price is determined is
consistent with the protection of
investors and the public interest as this
change will increase transparency
around the price at which interest is
executed in the Block Order
Mechanism. As explained above, the
Block Order Mechanism is designed to
provide an opportunity for members to
receive liquidity for their block-sized
orders and therefore trades at a price
that allows the maximum number of
contracts of such order to be executed
against Responses entered to trade
against the block-size order and interest
on the Exchange’s order book. The
Exchange believes that describing how
the block execution price is determined
in Rule 716(c)(2)(i) will increase
transparency around pricing of
executions in the Block Order
Mechanism.
Finally, the Exchange believes that
the proposed change to Rule 716(c)(1) is
consistent with the protection of
investors and the public interest as it
will provide transparency to members
about the content of the broadcast
message sent to members upon the entry
of an order into the Block Order
Mechanism. Currently, the broadcast
message includes the series, and may
include price, size and/or side, as
specified by the member entering the
order. The Exchange is not proposing
any changes to the content of the
broadcast message but wants to make
this clear in its rules, which, with this
change, will be consistent with the rules
of its affiliates, GEMX and MRX.18
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,19 the Exchange does not believe
that the proposed rule change will
impose any burden on intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
17 See
supra notes 10–12 and accompanying text.
18 See supra note 14 and accompanying text.
19 15 U.S.C. 78f(b)(8).
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of the purposes of the Act. The
proposed rule change is designed to
correct the Exchange’s rules to more
accurately reflect the handling of
auctions in the Block Order Mechanism.
No changes are proposed to the
operation of the Exchange’s trading
system, and no members will be
impacted by the proposed rule, which
merely reflects current functionality
offered to members that trade in the
Block Order Mechanism. The proposed
rule change is therefore not designed to
impose any significant burden on
competition.
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 20 and
subparagraph (f)(6) of Rule 19b–4
thereunder.21
A proposed rule change filed under
Rule 19b–4(f)(6) 22 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),23 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange requests that the
Commission waive the 30-day operative
delay. The Exchange notes that a waiver
is consistent with the protection of
investors and the public interest
because it will allow the Exchange to
correct its Block Order Mechanism rules
to reflect the current functionality of the
system without undue delay. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
20 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 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.
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
21 17
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Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.24
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–2017–84 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–2017–84. 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.,
24 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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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–
2017–84 and should be submitted on or
before October 26, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–21407 Filed 10–4–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32845; File No. 812–14726]
Olden Lane Securities LLC and Olden
Lane Trust; Notice of Application
September 29, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
12(d)(1)(A), (B), and (C) of the Act and
under sections 6(c) and 17(b) of the Act
for an exemption from sections 17(a)(1)
and (2) of the Act. The requested order
would permit certain registered unit
investment trusts (‘‘UITs’’) to acquire
shares of certain registered open-end
investment companies, registered
closed-end investment companies and
registered UITs (collectively, the
‘‘Underlying Funds’’) that are within
and outside the same group of
investment companies as the acquiring
UITs, in excess of the limits in section
12(d)(1) of the Act.
AGENCY:
Olden Lane Trust (the
‘‘Trust’’), a UIT that is registered under
the Act, and Olden Lane Securities
(‘‘Olden Lane’’), a Delaware limited
liability company registered as a brokerdealer under the Securities Exchange
Act of 1934 (the ‘‘Exchange Act’’).
FILING DATES: The application was filed
on December 9, 2016 and amended on
April 10, 2017, July 25, 2017 and
September 15, 2017.
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APPLICANTS:
25 17
CFR 200.30–3(a)(12).
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An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on October 24, 2017 and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Pursuant to Rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants: Olden Lane Securities LLC
and Olden Lane Trust, 200 Forrestal
Road, Suite 3B, Princeton, NJ 08540.
FOR FURTHER INFORMATION CONTACT:
Andrea Ottomanelli Magovern, Acting
Branch Chief, at (202) 551–6768 or
Nadya Roytblat, Assistant Chief
Counsel, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
HEARING OR NOTIFICATION OF HEARING:
Summary of the Application
1. Applicants request an order to
permit (a) a Series 1 to acquire shares of
Underlying Funds 2 in excess of the
limits in sections 12(d)(1)(A) and (C) of
the Act and (b) the Underlying Funds
that are registered open-end investment
companies, their principal underwriters
and any broker or dealer registered
under the Exchange Act to sell shares of
the Underlying Funds to the Series in
excess of the limits in section
1 Applicants request that the order apply to each
existing and future series of the Trust and to any
future registered UIT and series thereof sponsored
by Olden Lane or an entity controlling, controlled
by or under common control with Olden Lane (the
‘‘Series’’).
2 Certain of the Underlying Funds may be
registered as an open-end investment company or
a UIT, but have received exemptive relief from the
Commission to permit their shares to be listed and
traded on a national securities exchange at
negotiated prices and to operate as exchange-traded
funds (‘‘ETFs’’).
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46579
12(d)(1)(B) of the Act.3 Applicants also
request an order of exemption under
sections 6(c) and 17(b) of the Act from
the prohibition on certain affiliated
transactions in section 17(a) of the Act
to the extent necessary to permit the
Underlying Funds to sell their shares to,
and redeem their shares from, the
Series.4 Applicants state that such
transactions will be consistent with the
policies of each Series and each
Underlying Fund and with the general
purposes of the Act and will be based
on the net asset values of the
Underlying Funds.
2. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
stated in the application. Such terms
and conditions are designed to, among
other things, help prevent any potential
(i) undue influence over an Underlying
Fund that is not in the same ‘‘group of
investment companies’’ as the UIT
through control or voting power, or in
connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A), (B), and (C) of
the Act.
3. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
3 Applicants do not request relief for the Series to
invest in reliance on the order in closed-end
investment companies that are not listed and traded
on a national securities exchange.
4 A Series generally would purchase and sell
shares of an Underlying Fund that operates as an
ETF through secondary market transactions rather
than through principal transactions with the
Underlying Fund. Applicants nevertheless request
relief from section 17(a) to permit a Series to
purchase or redeem shares from the ETF. A Series
will purchase and sell shares of an Underlying
Fund that is a closed-end fund through secondary
market transactions at market prices rather than
through principal transactions with the closed-end
fund. Accordingly, applicants are not requesting
section 17(a) relief with respect to transactions in
shares of closed-end funds.
E:\FR\FM\05OCN1.SGM
05OCN1
Agencies
[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)]
[Notices]
[Pages 46576-46579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21407]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81772; File No. SR-ISE-2017-84]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule
716(c) on the Block Order Mechanism
September 29, 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 September 18, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 716(c) to more accurately
describe the allocation methodology used in the Block Order Mechanism,
add language regarding how the block execution price is determined, and
describe the content of the broadcast message disseminated to members
upon the entry of an order into the mechanism.
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 Block Order Mechanism is a process by which a member can obtain
liquidity for the execution of block-sized orders,\3\ defined as orders
for fifty contracts or more.\4\ When an order is entered in the Block
Order Mechanism, that order is exposed to members who are given an
opportunity to respond with the prices and sizes at which they would be
willing to trade with the block-sized order.\5\ The exposure period is
designated by the Exchange via circular, but must be no less than 100
milliseconds and no more than 1 second.\6\ At the conclusion of the
exposure period, either an execution will occur at a single block
execution price,\7\ or the order will be cancelled.\8\ The purpose of
the proposed rule change is to amend Rule 716(c) to more accurately
describe the allocation methodology used in the Block Order Mechanism,
add language regarding how the block execution price is determined, and
describe the content of the broadcast message disseminated to members
upon the entry of an order into the mechanism. The Exchange believes
that these changes will increase transparency around the operation of
the Block Order Mechanism to the benefit of members and market
participants.
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\3\ See Rule 716(c).
\4\ See Rule 716(a).
\5\ A ``Response'' is an electronic message that is sent by
members in response to a broadcast message. See Rule 716(b).
\6\ See Supplementary Material .04 to Rule 716.
\7\ Responses and orders and quotes on the order book at the
time the block order is executed that are priced better than the
block execution price are executed at the block execution price. See
Rule 716(c)(2)(i).
\8\ See Rule 716(c)(2).
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Currently, Rule 716(c)(2)(ii) provides that Responses, quotes, and
Professional
[[Page 46577]]
Orders \9\ at the block execution price will participate in the
execution of the block-size order according to Rule 713(e)--i.e., the
Exchange's regular allocation rule. As implemented today, however,
interest that is executed in the Block Order Mechanism follows the
customer priority pro-rata allocation methodology designed for the
Exchange's auction mechanisms, including, for example, the Facilitation
Mechanism,\10\ Solicited Order Mechanism,\11\ and Price Improvement
Mechanism,\12\ with the exception that those two-sided auction
mechanisms also allocate contracts against the contra order. This
auction allocation methodology is similar to the Exchange's regular
allocation methodology but does not provide enhanced allocations to the
Primary Market Maker (``PMM'') pursuant to Rule 713(e) and
Supplementary Material .01(b) to Rule 713.\13\ The Exchange therefore
proposes to amend Rule 716(c)(2)(ii) to provide that, at the block
execution price, Priority Customer Orders and Priority Customer
Responses will be executed first in time priority, and then quotes,
Professional Orders, and Professional Responses will participate in the
execution of the block-size order based upon the percentage of the
total number of contracts available at the block execution price that
is represented by the size of the quote, Professional Order, or
Professional Response. In addition, the Exchange proposes to specify in
Rule 716(c)(2)(i) that interest that is priced better than the block
execution price is executed in full. In particular, the Exchange
proposes to amend this rule to state that bids (offers) on the Exchange
at the time the block order is executed that are priced higher (lower)
than the block execution price, as well as Responses that are priced
higher (lower) than the block execution price, will be executed in full
at the block execution price. Although Rule 716(c)(2)(ii) described
above explains how allocations are handled at the block execution
price, the Exchange believes that the additional clarity that interest
that is priced better than the block execution price is executed in
full would be helpful to members. With these two proposed changes, Rule
716(c) will more accurately describe the allocation methodology used in
the Block Order Mechanism.
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\9\ The term ``Professional Order'' means an order that is for
the account of a person or entity that is not a Priority Customer.
See Rule 100(a)(37C).
\10\ See Rule 716(d).
\11\ See Rule 716(e).
\12\ See Rule 723.
\13\ Supplementary Material .01(b) to Rule 713 provides that, if
the PMM is quoting at the best price, it has participation rights
equal to the greater of the proportion of the total size at the best
price represented by the size of its quote, or a percentage
allocation entitlement based on the number of other Professional
Orders and market maker quotations at the best price.
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Furthermore, the Exchange proposes to add language to Rule
716(c)(2)(i) that explains the price at which orders entered into the
Block Order Mechanism are executed. In particular, the Exchange
proposes to state that Responses, orders, and quotes will be executed
at a single block execution price that is the price for the block-size
order at which the maximum number of contracts can be executed
consistent with the member's instruction. For example, if a member
enters a block-sized order to buy 100 contracts at $1.00 into the Block
Order Mechanism, and members enter Response A to sell 50 contracts at
$0.90 and Response B to sell 40 contracts at $0.95, the block execution
price would be $0.95 as this is the price at which the maximum number
of contracts could be executed. The block-sized order and both
Responses would then be executed at this single block execution price.
Responses A and B would be executed in full since there is sufficient
size to execute both Responses against the block-size order. In
addition, if two other members also enter Responses C (Priority
Customer) and D (non-Priority Customer) to sell at $0.98 for 10
contracts each, the block execution price would be $0.98 as additional
contracts could be executed at that price. In that instance, Responses
A and B, which are priced better than the block execution price, would
be executed in full, while Responses B and C, which are priced at the
block execution price, would participate in accordance with the
allocation methodology described in this proposed rule change--i.e.,
the remaining 10 contracts would go to Response C, which is a Priority
Customer Response. The Block Order Mechanism is designed to provide an
opportunity for members to receive liquidity for their block-sized
orders and therefore trades at a price that allows the maximum number
of contracts of such order to be executed against Responses entered to
trade against the block-size order and interest on the Exchange's order
book. The Exchange believes that describing how the block execution
price is determined in Rule 716(c)(2)(i) will increase transparency
around pricing of executions in the Block Order Mechanism.
Finally, the Exchange proposes to add language to Rule 716(c)(1) to
describe the content of the broadcast message sent to members upon the
entry of an order into the Block Order Mechanism. In particular, the
Exchange proposes to specify that this broadcast message includes the
series, and may include price, size and/or side, as specified by the
member entering the order. Similar language is included in the Block
Order Mechanism Rule on the Exchange's affiliates, Nasdaq GEMX, LLC
(``GEMX'') and Nasdaq MRX, LLC (``MRX''), which operate in the same way
as ISE's Block Order Mechanism.\14\ The Exchange therefore believes
that this change will increase transparency around the content of the
broadcast message and promote consistency across the rulebooks of its
affiliated exchanges that offer identical functionality.
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\14\ See GEMX and MRX Rule 716(c)(1).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6(b) of the Act.\15\ In
particular, the proposal is consistent with Section 6(b)(5) of the
Act,\16\ because it is designed to promote just and equitable
principles of trade, remove impediments to and perfect the mechanisms
of a free and open market and a national market system and, in general,
to protect investors and the public interest.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed changes to the allocation
language in Rule 716(c)(2)(i)-(ii) are consistent with the protection
of investors and the public interest as the proposed allocation
language more accurately reflects the Exchange's process for allocating
contracts executed in the Block Order Mechanism. Although the
Exchange's allocation rule for the Block Order Mechanism currently
references the allocation process for regular trading, the allocation
methodology does not include certain parts of the regular allocation
procedure. In particular, the Exchange does not grant any special
allocation to the PMM for interest executed in the Block Order
Mechanism. The Exchange believes that it is appropriate to not provide
an enhanced allocation entitlement to the PMM for interest executed in
the Block Order Mechanism, as the Block Order Mechanism provides an
auction process that does not rely on market maker quoting and other
obligations to source liquidity. Furthermore, the Exchange
[[Page 46578]]
believes that it is helpful to explain in this rule that interest that
is priced better than the block execution price would be executed in
full. The allocation process used for the Block Order Mechanism is
similar to how the Exchange allocates contracts in other auction
mechanisms, including, for example, the Facilitation Mechanism,
Solicited Order Mechanism, and Price Improvement Mechanism, with the
exception that those two-sided auction mechanisms also allocate
contracts against the contra order.\17\
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\17\ See supra notes 10-12 and accompanying text.
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The Exchange also believes that the proposed changes to describe
how the block execution price is determined is consistent with the
protection of investors and the public interest as this change will
increase transparency around the price at which interest is executed in
the Block Order Mechanism. As explained above, the Block Order
Mechanism is designed to provide an opportunity for members to receive
liquidity for their block-sized orders and therefore trades at a price
that allows the maximum number of contracts of such order to be
executed against Responses entered to trade against the block-size
order and interest on the Exchange's order book. The Exchange believes
that describing how the block execution price is determined in Rule
716(c)(2)(i) will increase transparency around pricing of executions in
the Block Order Mechanism.
Finally, the Exchange believes that the proposed change to Rule
716(c)(1) is consistent with the protection of investors and the public
interest as it will provide transparency to members about the content
of the broadcast message sent to members upon the entry of an order
into the Block Order Mechanism. Currently, the broadcast message
includes the series, and may include price, size and/or side, as
specified by the member entering the order. The Exchange is not
proposing any changes to the content of the broadcast message but wants
to make this clear in its rules, which, with this change, will be
consistent with the rules of its affiliates, GEMX and MRX.\18\
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\18\ See supra note 14 and accompanying text.
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B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\19\ the Exchange
does not believe that the proposed rule change will impose any burden
on intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
rule change is designed to correct the Exchange's rules to more
accurately reflect the handling of auctions in the Block Order
Mechanism. No changes are proposed to the operation of the Exchange's
trading system, and no members will be impacted by the proposed rule,
which merely reflects current functionality offered to members that
trade in the Block Order Mechanism. The proposed rule change is
therefore not designed to impose any significant burden on competition.
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\19\ 15 U.S.C. 78f(b)(8).
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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 \20\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A)(iii).
\21\ 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 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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A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay. The Exchange
notes that a waiver is consistent with the protection of investors and
the public interest because it will allow the Exchange to correct its
Block Order Mechanism rules to reflect the current functionality of the
system without undue delay. The Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission hereby waives the
30-day operative delay and designates the proposed rule change
operative upon filing.\24\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (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-2017-84 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-2017-84. 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.,
[[Page 46579]]
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-2017-84 and should be
submitted on or before October 26, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21407 Filed 10-4-17; 8:45 am]
BILLING CODE 8011-01-P