Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Exchange's Penny Pilot Program, 31004-31006 [2018-14118]

Download as PDF 31004 Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83527; File No. SR– NASDAQ–2018–048] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Exchange’s Penny Pilot Program June 26, 2018 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 June 25, 2018, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Chapter VI, Section 5 (Minimum Increments) 3 of the rules of The Nasdaq Options Market (‘‘NOM’’) to extend through December 31, 2018 or the date of permanent approval, if earlier, the Penny Pilot Program in options classes in certain issues (‘‘Penny Pilot’’ or ‘‘Pilot’’), and to change the date when delisted classes may be replaced in the Penny Pilot. The text of the proposed rule change is set forth below. Proposed new language is italicized and proposed deleted language is in brackets. * * * * * The Nasdaq Stock Market Rules Options Rules * * * Chapter VI daltland on DSKBBV9HB2PROD with NOTICES * * * * * Trading Systems * * Sec. 5 Minimum Increments (a) The Board may establish minimum quoting increments for options contracts traded on NOM. Such minimum increments established by the Board will be designated as a stated policy, practice, or interpretation with respect to the administration of this Section within the meaning of Section 19 of the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 References herein to Chapter and Series refer to rules of the NASDAQ Options Market (‘‘NOM’’), unless otherwise noted. 2 17 VerDate Sep<11>2014 17:40 Jun 29, 2018 Jkt 244001 Exchange Act and will be filed with the SEC as a rule change for effectiveness upon filing. Until such time as the Board makes a change in the increments, the following principles shall apply: (1)–(2) No Change. (3) For a pilot period scheduled to expire on [June 30, 2018] December 31, 2018 or the date of permanent approval, if earlier, if the options series is trading pursuant to the Penny Pilot program one (1) cent if the options series is trading at less than $3.00, five (5) cents if the options series is trading at $3.00 or higher, unless for QQQQs, SPY and IWM where the minimum quoting increment will be one cent for all series regardless of price. A list of such options shall be communicated to membership via an Options Trader Alert (‘‘OTA’’) posted on the Exchange’s website. The Exchange may replace any pilot issues that have been delisted with the next most actively traded multiply listed options classes that are not yet included in the pilot, based on trading activity in the previous six months. The replacement issues may be added to the pilot on the second trading day following [January 1, 2018] July 1, 2018. (4) No Change. (b) No Change. * * * * * The text of the proposed rule change is also available on the Exchange’s website at https:// nasdaqomxbx.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to amend Chapter VI, Section 5, to extend the Penny Pilot through December 31, 2018 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 or the date of permanent approval, if earlier,4 and to change the date when delisted classes may be replaced in the Penny Pilot. The Exchange believes that extending the Penny Pilot will allow for further analysis of the Penny Pilot and a determination of how the program should be structured in the future. Under the Penny Pilot, the minimum price variation for all participating options classes, except for the Nasdaq100 Index Tracking Stock (‘‘QQQQ’’), the SPDR S&P 500 Exchange Traded Fund (‘‘SPY’’) and the iShares Russell 2000 Index Fund (‘‘IWM’’), is $0.01 for all quotations in options series that are quoted at less than $3 per contract and $0.05 for all quotations in options series that are quoted at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 increments for all options series. The Penny Pilot is currently scheduled to expire on June 30, 2018.5 The Exchange proposes to extend the time period of the Penny Pilot through December 31, 2018 or the date of permanent approval, if earlier, and to provide a revised date for adding replacement issues to the Penny Pilot. The Exchange proposes that any Penny Pilot Program issues that have been delisted may be replaced on the second trading day following July 1, 2018. The replacement issues will be selected based on trading activity in the previous six months.6 This filing does not propose any substantive changes to the Penny Pilot Program; all classes currently participating in the Penny Pilot will remain the same and all minimum increments will remain unchanged. The Exchange believes the benefits to public customers and other market participants who will be able to express their true prices to buy and sell options have been demonstrated to outweigh the potential increase in quote traffic. 4 The options exchanges in the U.S. that have pilot programs similar to the Penny Pilot (together ‘‘pilot programs’’) are currently working on a proposal for permanent approval of the respective pilot programs. 5 See Securities Exchange Act Release No. 82365 (December 19, 2017), 82 FR 61070 (December 26, 2017) (SR–NASDAQ–2017–130). 6 The replacement issues will be announced to the Exchange’s membership via an Options Trader Alert (OTA) posted on the Exchange’s website. Penny Pilot replacement issues will be selected based on trading activity in the previous six months, as is the case today. The replacement issues would be identified based on The Options Clearing Corporation’s trading volume data. For example, for the July replacement, trading volume from December 1, 2017 through May 31, 2018 would be analyzed. The month immediately preceding the replacement issues’ addition to the Pilot Program (i.e., June) would not be used for purposes of the six-month analysis. E:\FR\FM\02JYN1.SGM 02JYN1 Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,8 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and 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. In particular, the proposed rule change, which extends the Penny Pilot for an additional six months through December 31, 2018 or the date of permanent approval, if earlier, and changes the date for replacing Penny Pilot issues that were delisted to the second trading day following July 1, 2018, will enable public customers and other market participants to express their true prices to buy and sell options for the benefit of all market participants. This is consistent with the Act. daltland on DSKBBV9HB2PROD with NOTICES 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. To the contrary, this proposal is procompetitive because it allows Penny Pilot issues to continue trading on the Exchange. Moreover, the Exchange believes that the proposed rule change will allow for further analysis of the Pilot and a determination of how the Pilot should be structured in the future; and will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. The Pilot is an industry-wide initiative supported by all other option exchanges. The Exchange believes that extending the Pilot will allow for continued competition between market participants on the Exchange trading similar products as their counterparts on other exchanges, while at the same time allowing the Exchange to continue to compete for order flow with other exchanges in option issues trading as part of the Pilot. 7 15 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:40 Jun 29, 2018 Jkt 244001 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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 9 and Rule 19b–4(f)(6) thereunder.10 Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 11 normally does not become operative prior to 30 days after the date of the filing.12 However, pursuant to Rule 19b–4(f)(6)(iii),13 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because doing so will allow the Pilot Program to continue without interruption in a manner that is consistent with the Commission’s prior approval of the extension and expansion of the Pilot Program and will allow the Exchange and the Commission additional time to analyze the impact of the Pilot Program.14 Accordingly, the Commission designates the proposed 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 11 17 CFR 240.19b–4(f)(6). 12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this pre-filing requirement. 13 17 CFR 240.19b–4(f)(6)(iii). 14 See Securities Exchange Act Release No. 61061 (November 24, 2009), 74 FR 62857 (December 1, 2009) (SR–NYSEArca–2009–44). 10 17 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 31005 rule change as operative upon filing with the Commission.15 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 16 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2018–048 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2018–048. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (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 website viewing and printing in the Commission’s Public 15 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 16 15 U.S.C. 78s(b)(2)(B). E:\FR\FM\02JYN1.SGM 02JYN1 31006 Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2018–048 and should be submitted on or before July 23, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–14118 Filed 6–29–18; 8:45 am] BILLING CODE 8011–01–P Exchange, at the Commission’s Public Reference Room and also on the Exchange’s internet website at https:// boxoptions.com. 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 self-regulatory organization 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 self-regulatory organization 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 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83525; File No. SR–BOX– 2018–20] Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change To Amend BOX Rule 7300 (Preferenced Orders) To Provide an Additional Allocation Preference to Preferred Market Makers Background June 26, 2018. daltland on DSKBBV9HB2PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 13, 2018, BOX Options Exchange LLC (the ‘‘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 self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend BOX Rule 7300 (Preferenced Orders) to provide an additional allocation preference to Preferred Market Makers. The text of the proposed rule change is available from the principal office of the 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 17:40 Jun 29, 2018 Jkt 244001 The Exchange proposes to amend BOX Rule 7300 (Preferenced Orders) to provide an additional allocation preference to Preferred Market Makers. Specifically, the Exchange is proposing to provide Preferred Market Makers with a small size order allocation preference. The Exchange has rules to allow BOX Options Participants (‘‘Participants’’) to submit orders for which a Market Maker is designated to receive an allocation preference on the Exchange (‘‘Preferenced Orders’’).3 The rules provide for the enhanced allocation to the Preferred Market Maker 4 only when the Preferred Market Maker is quoting at NBBO. A Preferenced Order is any order submitted by a Participant to the Exchange for which a Preferred Market Maker is designated to receive execution priority, with respect to a portion of the Preferenced Order, upon meeting certain qualifications.5 Preferenced Orders are submitted by a Participant by designating an order as such and identifying a Preferred Market Maker when entering the order. In order for a Preferred Market Maker to be eligible to receive Preferenced Orders, they must maintain heightened quoting activity. Specifically, a 3 See Rule 7300. term ‘‘Preferred Market Maker’’ means a Market Maker designated as such by a Participant with respect to an order submitted by such Participant to BOX. See Rule 7300(a)(2). 5 See Rule 7300. 4 The PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 Preferred Market Maker must maintain a continuous two-sided market, throughout the trading day, in 99% of the non-adjusted option series of each class for which it accepts Preferenced Orders, for 90% of the time the Exchange is open for trading in each such option class.6 A Preferred Market Maker is not required to quote in intraday add-on series or series that have a time to expiration of nine months or more in the classes for which it receives Preferenced Orders. Small Size Orders The Exchange is now proposing to amend Rule 7300 to provide an additional allocation preference to Preferred Market Makers. Specifically, the Exchange is proposing that small size Preferenced Orders will be allocated in full to the Preferred Market Maker, subject to certain conditions described below.7 Small size orders are defined as five (5) or fewer contracts. In order for the Preferred Market Makers to be allocated the small size order, they must be quoting at the NBBO when they receive the Preferenced Order. As is the case with the current allocation of Preferenced Orders, all orders from the account of Public Customers, if any, will continue to be allocated for execution against the Preferenced Order first. The Preferred Market Maker will only receive the small size order allocation if there are contracts remaining after any Public Customer orders receive an allocation against the Preferenced Order. A Preferred Market Maker may only be allocated up to the size of their quote. The Exchange will monitor the frequency in which Preferred Market Makers receive the small size order allocation. Specifically, the Exchange will review the proposed provision quarterly and will maintain the small order size at a level that will not allow small size orders executed by Preferred Market Makers to account for more than 40% of the volume executed on the Exchange. The Exchange does not believe the proposal raises any new or novel issues. Currently, the vast majority of options exchanges provide a small lot allocation preference to specialists,8 with the 6 See Rule 7300(a)(2). proposed Rule 7300(e). 8 Cboe EDGX Rule 21.8(g)(2) provides a small lot allocation preference to Primary Market Makers, Nasdaq ISE Rule 713.01(c) provides a small lot allocation preference for Primary Market Makers, NYSE American Rule 964.2NY provides a small lot allocation preference to the Primary Specialist, Nasdaq BX Chap. VI, Section 10(c)(2) provides a small lot allocation preference for the Lead Market Maker, Nasdaq GEM [sic] Rule 713.01(c) provides a small lot allocation preference for Primary Market 7 See E:\FR\FM\02JYN1.SGM 02JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 127 (Monday, July 2, 2018)]
[Notices]
[Pages 31004-31006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14118]



[[Page 31004]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83527; File No. SR-NASDAQ-2018-048]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Exchange's Penny Pilot Program

June 26, 2018
    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 June 25, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Chapter VI, Section 5 (Minimum 
Increments) \3\ of the rules of The Nasdaq Options Market (``NOM'') to 
extend through December 31, 2018 or the date of permanent approval, if 
earlier, the Penny Pilot Program in options classes in certain issues 
(``Penny Pilot'' or ``Pilot''), and to change the date when delisted 
classes may be replaced in the Penny Pilot.
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    \3\ References herein to Chapter and Series refer to rules of 
the NASDAQ Options Market (``NOM''), unless otherwise noted.
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    The text of the proposed rule change is set forth below. Proposed 
new language is italicized and proposed deleted language is in 
brackets.
* * * * *

The Nasdaq Stock Market Rules

Options Rules

* * * * *

Chapter VI Trading Systems

* * * * *

Sec. 5 Minimum Increments

    (a) The Board may establish minimum quoting increments for options 
contracts traded on NOM. Such minimum increments established by the 
Board will be designated as a stated policy, practice, or 
interpretation with respect to the administration of this Section 
within the meaning of Section 19 of the Exchange Act and will be filed 
with the SEC as a rule change for effectiveness upon filing. Until such 
time as the Board makes a change in the increments, the following 
principles shall apply:
    (1)-(2) No Change.
    (3) For a pilot period scheduled to expire on [June 30, 2018] 
December 31, 2018 or the date of permanent approval, if earlier, if the 
options series is trading pursuant to the Penny Pilot program one (1) 
cent if the options series is trading at less than $3.00, five (5) 
cents if the options series is trading at $3.00 or higher, unless for 
QQQQs, SPY and IWM where the minimum quoting increment will be one cent 
for all series regardless of price. A list of such options shall be 
communicated to membership via an Options Trader Alert (``OTA'') posted 
on the Exchange's website.
    The Exchange may replace any pilot issues that have been delisted 
with the next most actively traded multiply listed options classes that 
are not yet included in the pilot, based on trading activity in the 
previous six months. The replacement issues may be added to the pilot 
on the second trading day following [January 1, 2018] July 1, 2018.
    (4) No Change.
    (b) No Change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website at https://nasdaqomxbx.cchwallstreet.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Chapter VI, Section 5, to 
extend the Penny Pilot through December 31, 2018 or the date of 
permanent approval, if earlier,\4\ and to change the date when delisted 
classes may be replaced in the Penny Pilot. The Exchange believes that 
extending the Penny Pilot will allow for further analysis of the Penny 
Pilot and a determination of how the program should be structured in 
the future.
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    \4\ The options exchanges in the U.S. that have pilot programs 
similar to the Penny Pilot (together ``pilot programs'') are 
currently working on a proposal for permanent approval of the 
respective pilot programs.
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    Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot is currently 
scheduled to expire on June 30, 2018.\5\
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    \5\ See Securities Exchange Act Release No. 82365 (December 19, 
2017), 82 FR 61070 (December 26, 2017) (SR-NASDAQ-2017-130).
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    The Exchange proposes to extend the time period of the Penny Pilot 
through December 31, 2018 or the date of permanent approval, if 
earlier, and to provide a revised date for adding replacement issues to 
the Penny Pilot. The Exchange proposes that any Penny Pilot Program 
issues that have been delisted may be replaced on the second trading 
day following July 1, 2018. The replacement issues will be selected 
based on trading activity in the previous six months.\6\
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    \6\ The replacement issues will be announced to the Exchange's 
membership via an Options Trader Alert (OTA) posted on the 
Exchange's website. Penny Pilot replacement issues will be selected 
based on trading activity in the previous six months, as is the case 
today. The replacement issues would be identified based on The 
Options Clearing Corporation's trading volume data. For example, for 
the July replacement, trading volume from December 1, 2017 through 
May 31, 2018 would be analyzed. The month immediately preceding the 
replacement issues' addition to the Pilot Program (i.e., June) would 
not be used for purposes of the six-month analysis.
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    This filing does not propose any substantive changes to the Penny 
Pilot Program; all classes currently participating in the Penny Pilot 
will remain the same and all minimum increments will remain unchanged. 
The Exchange believes the benefits to public customers and other market 
participants who will be able to express their true prices to buy and 
sell options have been demonstrated to outweigh the potential increase 
in quote traffic.

[[Page 31005]]

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change, which extends the Penny 
Pilot for an additional six months through December 31, 2018 or the 
date of permanent approval, if earlier, and changes the date for 
replacing Penny Pilot issues that were delisted to the second trading 
day following July 1, 2018, will enable public customers and other 
market participants to express their true prices to buy and sell 
options for the benefit of all market participants. This is consistent 
with the Act.

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. To the contrary, this proposal 
is pro-competitive because it allows Penny Pilot issues to continue 
trading on the Exchange.
    Moreover, the Exchange believes that the proposed rule change will 
allow for further analysis of the Pilot and a determination of how the 
Pilot should be structured in the future; and will serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.
    The Pilot is an industry-wide initiative supported by all other 
option exchanges. The Exchange believes that extending the Pilot will 
allow for continued competition between market participants on the 
Exchange trading similar products as their counterparts on other 
exchanges, while at the same time allowing the Exchange to continue to 
compete for order flow with other exchanges in option issues trading as 
part of the Pilot.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing.\12\ However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the 
Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because doing so will allow the Pilot Program to continue without 
interruption in a manner that is consistent with the Commission's prior 
approval of the extension and expansion of the Pilot Program and will 
allow the Exchange and the Commission additional time to analyze the 
impact of the Pilot Program.\14\ Accordingly, the Commission designates 
the proposed rule change as operative upon filing with the 
Commission.\15\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this pre-filing requirement.
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ See Securities Exchange Act Release No. 61061 (November 24, 
2009), 74 FR 62857 (December 1, 2009) (SR-NYSEArca-2009-44).
    \15\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please include 
File Number SR-NASDAQ-2018-048 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2018-048. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 website viewing and printing in 
the Commission's Public

[[Page 31006]]

Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NASDAQ-2018-048 and should be submitted on or before July 23, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14118 Filed 6-29-18; 8:45 am]
 BILLING CODE 8011-01-P

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