Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend The Nasdaq Options Market LLC (“NOM”) Rules and Adopt a Zero Bid Options Rule, 33966-33969 [2018-15289]

Download as PDF 33966 Federal Register / Vol. 83, No. 138 / Wednesday, July 18, 2018 / Notices international mail as market dominant or competitive.11 The Commission found the Postal Service’s arguments for exceptional treatment of inbound international mail as neither market dominant nor competitive unpersuasive and inconsistent with section 3642.12 The Commission concluded, ‘‘[h]ad Congress intended to exempt inbound international mail from the requirement that all products be categorized as either market dominant or competitive, it would have done so explicitly, as it did by specifically exempting experimental products from the requirements of section 3642.’’ Order No. 43 at 78 (footnote omitted). The Commission found that the PAEA unambiguously requires the Commission to classify inbound international mail products as either market dominant or competitive. Id. Consistent with section 3621, the Commission classified Inbound Letter Post as a market dominant product. Id. at 85. III. Claims of Competition and Commission Action In Docket Nos. R2018–1 and Docket ACR2017, the Postal Service repeatedly claimed that Inbound Letter Post is subject to ‘‘considerable,’’ ‘‘substantial,’’ and ‘‘intense’’ competition, especially Inbound Letter Post small packets.13 amozie on DSK3GDR082PROD with NOTICES1 11 Docket No. RM2007–1, Initial Comments of the United States Postal Service in Response to Order No. 26, September 24, 2007, at 13–22. 12 Docket No. RM2007–1, Order Establishing Ratemaking Regulations for Market Dominant and Competitive Products, October 29, 2007, at 78 (Order No. 43). 13 See Docket No. ACR2017, United States Postal Service Motion for Reconsideration of Order No. 4451, April 6, 2018, at 4 (Motion for Reconsideration) (‘‘Inbound Letter Post is subject to substantial competition.’’); id. at 8–9 (cited filings in other Commission proceedings that allege the private sector competes in the Inbound Letter Post market); id.at 10 (‘‘the vast majority of Inbound Letter Post mail faces substantial competition’’); id. at 12–13 (‘‘existing market research regarding inbound package volume, which is included in Nonpublic Attachment 1, illustrates the intense competition for Inbound Letter Post faced by the Postal Service and foreign postal operators.’’ (footnote omitted)); Docket No. ACR2017, Response of the United States Postal Service to Order No. 4409, February 23, 2018, at 5 (small packets ‘‘already face considerable competition today.’’ (footnote omitted)); id. at 6 (‘‘the Postal Service operates in a competitive market for inbound international shipping, which includes inbound small packets containing merchandise.’’ (footnote omitted)); id. at 6 n.13 (‘‘Not only are Inbound Letter Post packets subject to considerable competition, but bulk international letter and flat mail can be subject to competition as well.’’); Docket No. ACR2017, United States Postal Service Notice of Filing Nonpublic Folder USPS–FY17– NP40 and Application for Nonpublic Treatment, February 14, 2018, Attachment at 2 (CHIR No. 15 Application for Non-Public Treatment) (‘‘Not only are Inbound Letter Post packets (E Format) subject to considerable competition, but bulk international VerDate Sep<11>2014 19:19 Jul 17, 2018 Jkt 244001 However, the Postal Service filed documents in support of its claims of competition for the first time when it filed its Motion for Reconsideration. Motion for Reconsideration, Attachments 1–4. Despite these claims of competition, the Postal Service acknowledged that the Inbound Letter Post product is on the market dominant product list and that it has not requested to transfer all or part of the Inbound Letter Post product to the competitive product list. Motion for Reconsideration at 6. In its Motion for Reconsideration, the Postal Service stated that it explored the potential transfer of Inbound Letter Post small packets from the market dominant to the competitive products list. Id. However, the Postal Service stated that one obstacle to transferring all or part of the Inbound Letter Post product from the market dominant product list to the competitive product list relates to the ‘‘inability to separate Inbound Letter Post that is subject to the Private Express Statutes [(PES)] from Inbound Letter Post that is not subject to the PES.’’ Id. These claims raised the question of whether Inbound Letter Post should be wholly or partially transferred from the market dominant product list to the competitive product list. Rather than attempt to address these issues in Docket No. ACR2017, the Commission concluded that the best course of action is to initiate a separate proceeding to evaluate these issues, including the nonpublic attachments the Postal Service provided with its Motion for Reconsideration. Accordingly, the Commission establishes the instant proceeding to examine the classification of the Inbound Letter Post product. The Commission is issuing a Commission Information Request (CIR) concurrently with this Order. Once a sufficient record has been developed, the Commission will issue a procedural schedule inviting comment. Pursuant to 39 U.S.C. 505, James Waclawski is designated as an officer of letter and flat mail (P and G Format) can be subject to competition as well.’’); id. at 3 (‘‘The Postal Service is just one of the participants operating in the competitive market for inbound international shipping, which includes inbound small packets containing merchandise.’’); Docket No. R2018–1, United States Postal Service Answer in Opposition to U.S. Chamber of Commerce Motion to Unseal Library Reference and Motion to Request Issuance of Information Request, October 23, 2017, at 4 (‘‘ ‘inbound letter post . . . face[s] significant competition from private sector competitors and Extraterritorial Offices of Exchange[.]’ The competitive nature of the international market, particularly with respect to . . . inbound letter post packets weighing 4.4 pounds or less, is well established.’’ (footnote omitted)). PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 the Commission (Public Representative) to represent the interests of the general public in this proceeding. Additional information may be accessed via the Commission’s website at http://www.prc.gov. IV. Ordering Paragraphs It is ordered: 1. The Commission hereby establishes Docket No. PI2018–1 to review issues related to the classification of the Inbound Letter Post product and parts thereof. 2. Pursuant to 39 U.S.C. 505, James Waclawski is designated as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding. 3. The Secretary shall arrange for publication of this order in the Federal Register. By the Commission. Stacy L. Ruble, Secretary. [FR Doc. 2018–15284 Filed 7–17–18; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83623; File No. SR– NASDAQ–2018–051] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend The Nasdaq Options Market LLC (‘‘NOM’’) Rules and Adopt a Zero Bid Options Rule July 12, 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 29, 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 The Nasdaq Options Market LLC (‘‘NOM’’) Rules at Chapter V, Section 3, entitled ‘‘Trading Halts’’ and Chapter VI, Section 1 15 2 17 E:\FR\FM\18JYN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 18JYN1 Federal Register / Vol. 83, No. 138 / Wednesday, July 18, 2018 / Notices 6, entitled ‘‘Acceptance of Quotes and Orders.’’ The text of the proposed rule change is available on the Exchange’s website at http://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Chapter V, Section 3, entitled ‘‘Trading Halts’’ to remove unnecessary rule text. The Exchange proposes to amend NOM Rules to adopt a zero bid options rule at Chapter VI, Section 6, entitled ‘‘Acceptance of Quotes and Orders.’’ The Exchange proposes to adopt a zero bid options rule on NOM within Chapter VI, Section 6, entitled ‘‘Acceptance of Quotes and Orders’’ and remove rule text which the Exchange believes is unnecessary. Each proposal is described in more detail below. amozie on DSK3GDR082PROD with NOTICES1 Chapter V, Section 3 The Exchange proposes to amend Chapter V, Section 3(b), which currently provides, ‘‘In the event Nasdaq Regulation determines to halt trading, all trading in the effected class or classes of options shall be halted. NOM shall disseminate through its trading facilities and over OPRA a symbol with respect to such class or classes of options indicating that trading has been halted, and a record of the time and duration of the halt shall be made available to vendors.’’ The Exchange proposes to remove the words ‘‘such class or’’ because the Exchange only disseminates over OPRA a symbol with respect to classes of options to indicate a trading halt. By amending this rule, the Exchange will add more transparency as to how it disseminates information regarding trading halts. VerDate Sep<11>2014 19:19 Jul 17, 2018 Jkt 244001 Chapter VI, Section 6 Today, the Exchange does not have a rule for the handling of options with no bid or zero bid options. The Exchange’s handling of zero bid options on NOM is identical to the manner in which zero bid is handled on Phlx.3 The Exchange proposes to add this new rule to Chapter VI, Section 6(a)(3). The new rule would provide, ‘‘In the case where the bid price for any options contract is $0.00, a market order accepted into the System to sell that series shall be considered a limit order to sell at a price equal to the minimum trading increment as defined in Chapter VI, Section 5. Orders will be placed on the limit order book in the order in which they were received by the System. With respect to market orders to sell which are submitted prior to the Opening and persist after the Opening, those orders are posted at a price equal to the minimum trading increment as defined in Chapter VI, Section 5.’’ The Exchange intends to accept and convert market orders to sell allowing them an equal opportunity to trade if interest should arrive in the case of a no bid option. The Exchange notes that the orders would rest on the Order Book at the minimum price increment. The Exchange notes market orders ‘‘accepted into the System’’ would be converted to account for market orders that may not be accepted into the System due to Limit Up-Limit Down restrictions, which may prevent the market order from being accepted.4 Only after acceptance into the System will market orders be treated as a sell limit order at a price equal to the minimum trading increment. Further, the Exchange proposes to add rule text which provides ‘‘Orders will be placed on the limit order book in the order in which they were received by the System.’’ 5 The Exchange proposes to note that with respect to market orders to sell in zero bid options, which are submitted prior to the Opening Process 6 and persist after the Opening Process, those orders are posted at a price equal to the minimum trading increment as defined in Chapter VI, Section 5.7 The Exchange’s proposed rule will provide market participants with greater insight into the handling of orders where there is a zero bid. The Phlx Rule 1035. Limit Up-Limit Down requirements must be met first before the proposed rule would apply. 5 The time of receipt for an order is the time such message is processed by the System. 6 The Exchange’s Opening Process is described in Rule 701. 7 Chapter VI, Section 5, entitled ‘‘Minimum Increments’’ provides for the minimum increments of trading. PO 00000 3 See 4 The Frm 00051 Fmt 4703 Sfmt 4703 33967 Exchange believes that this proposed amendment will accurately describe the manner in which a zero-bid options series operates within the System both before and after the Opening Process. The Exchange also proposes to amend Chapter VI, Section 6(b) which currently states, ‘‘All System orders entered by Participants directing or permitting routing to other market centers shall be routed for potential display and/or execution as set forth in Section 11 below. Routing shall be available in System securities as well as Non-System securities listed on other exchanges.’’ The Exchange proposes to remove ‘‘Routing shall be available in System securities as well as Non-System securities listed on other exchanges.’’ The Exchange defines ‘‘System Securities’’ at Chapter VI, Section 1(b) of the NOM Rules and defines ‘‘NonSystem Securities’’ as all other options. Nasdaq originally programmed the System to differentiate between System Securities and Non-System Securities.8 Nasdaq stated in that filing it would accept orders in Non-System Securities for routing but will not execute these orders in the System.9 In 2012, NOM’s rule were amended to provide that routing is limited to System Securities. System Securities are all options that are currently trading on NOM pursuant to Chapter IV.10 Further, the Subsequent Filing provided that only System Securities are traded on NOM pursuant to Chapter IV. All other options are Non-System Securities.11 The Subsequent filing noted that at one time, NOM offered routing of Non-System Securities but has not offered such routing since November 30, 2011. Finally, the Subsequent Filing noted that this routing feature was rarely used and was discontinued. Currently, NOM only routes securities that are listed on NOM. The Exchange proposes to 8 Securities Exchange Act Release No. 57478 (March 12, 2008), 73 FR 14521 (March 18, 208) (SR– NASDAQ–2007–004 and SR–NASDAQ–2007–080) (Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order Granting Accelerated Approval to a Proposed Rule Change, as Amended, To Establish Rules Governing the Trading of Options on the NASDAQ Options Market; Order Approving a Proposed Rule Change Relating to the LLC Agreement Establishing the NASDAQ Options Market LLC and Delegation Agreement Delegating to NOM LLC the Authority To Operate the NASDAQ Options Market; Order Granting an Application of The NASDAQ Stock Market LLC for an Exemption Pursuant to Section 36(a) of the Exchange Act from the Requirements of Section 19(b) of the Exchange Act; and Order Granting an Exemption for the NASDAQ Options Market LLC from Section 11A(b) of the Exchange Act.) 9 Id. 10 Securities Exchange Act Release No. 67301 (June 28, 2012), 77 FR 39774 (July 5, 2012) (SR– Nasdaq–2012–077) (‘‘Subsequent Filing’’). 11 Id. E:\FR\FM\18JYN1.SGM 18JYN1 33968 Federal Register / Vol. 83, No. 138 / Wednesday, July 18, 2018 / Notices remove this sentence related to routing which the Exchange believes should have been removed in connection with the Subsequent Filing. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934,12 in general, and furthers the objectives of Section 6(b)(5) of the Act,13 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. amozie on DSK3GDR082PROD with NOTICES1 Chapter V, Section 3 The Exchange is providing greater transparency as to the manner in which the Exchange disseminates information over OPRA during a trading halt. The Exchange believes that this rule text is consistent with the Act and the protection of investors and the public interest because it brings greater clarity as to what type of information is provided during a halt. Chapter VI, Section 6 The Exchange’s proposal to adopt a zero bid rule is consistent with the Act and designed to promote just and equitable principles of trade and to protect investors and the public interest by adopting text which describes the handling of zero-bid options. The Exchange is treating all market orders to sell in zero bid options in the same fashion by converting all those orders, provided that the Exchange’s disseminated bid price in such option is zero for an option listed only on the Exchange or, for an option listed on multiple exchanges and the disseminated NBBO includes a bid price of zero in the series. Market orders to sell in zero bid options will be placed on the limit order book in the order in which they were received by the System. The Exchange desires to prevent members from submitting market orders to sell in no bid series, which would execute at a price of $0.00. The Exchange believes that the proposed rule will achieve this objective and continue to permit the Exchange to execute orders within its System at prices that reflect some value. Adding rule text regarding market orders to sell in zero bid options submitted prior to the Opening Process and persisting after the Opening Process is consistent with the Act because it provides more transparency as to the operation of this rule and as to how those market orders to sell in zero bid options will be handled by the System. Further, the Exchange believes that memorializing its current practice within the rule text will bring more clarity to the manner in which the zero bid rule operates to the benefits of all market participants. Finally, the Exchange believes removing language concerning NonSystem Securities in Chapter VI, Section 6(b) is consistent with the Act because it avoids confusion by removing language which should have been removed with the 2006 filing which distinguished System and Non-System Securities. The language discusses a distinction which was removed from the rules in 2012.14 B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,15 the Exchange does not believe that the proposed rule change will impose any burden on intermarket or intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act. Chapter V, Section 3 The Exchange’s proposal to amend Chapter V, Section 3(b) to more specifically describe the information disseminated during a trading halt do not impose an undue burden on competition because the amendments add more transparency to the trading halt rule. Chapter VI, Section 6 The Exchange’s proposal to adopt a zero bid options rule does not impose an undue burden on competition because the proposed rule change will continue to apply uniformly for all market participants who enter market orders to sell into the System when there is a zero-bid options. Finally, the removal of language concerning Non-System Securities in Chapter VI, Section 6(b) does not impose an undue burden on competition because this language references an obsolete functionality in the rulebook that was removed from the rules in 2012.16 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. 14 See note 10 above. U.S.C. 78f(b)(8). 16 See note 10 above. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 19:19 Jul 17, 2018 15 15 Jkt 244001 PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 17 and Rule 19b– 4(f)(6) thereunder.18 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 19 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 20 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposed rule change may become operative upon filing. The Exchange states that waiver of the operative delay would allow the Exchange to update its rules to immediately reflect the operation of zero bid series on NOM. Therefore, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.21 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. 17 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) 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. 19 17 CFR 240.19b–4(f)(6). 20 17 CFR 240.19b–4(f)(6)(iii). 21 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 18 17 E:\FR\FM\18JYN1.SGM 18JYN1 Federal Register / Vol. 83, No. 138 / Wednesday, July 18, 2018 / Notices 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: • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2018–051 on the subject line. Paper Comments amozie on DSK3GDR082PROD with NOTICES1 • 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–2018–051. 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 (http://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 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–2018–051, and should be submitted on or before August 8, 2018. 19:19 Jul 17, 2018 [FR Doc. 2018–15289 Filed 7–17–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments VerDate Sep<11>2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Eduardo A. Aleman, Assistant Secretary. Jkt 244001 [Release No. 34–83624; File No. SR–BOX– 2018–18] Self-Regulatory Organizations; BOX Options Exchange LLC; Order Granting Approval of a Proposed Rule Change To Adopt IM–7130–1 to Rule 7130 July 12, 2018. I. Introduction On May 16, 2018, BOX Options Exchange LLC (the ‘‘Exchange’’ or ‘‘BOX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt IM– 7130–1 to BOX Rule 7130 to provide certain BOX Book 3 information to Participants 4 upon request. The proposed rule change was published for comment in the Federal Register on May 31, 2018.5 The Commission received no comments on the proposed rule change. This order approves the proposed rule change. II. Description of the Proposed Rule Change BOX proposes to adopt new IM– 7130–1 to Rule 7130 to provide that, upon request, the Exchange may make available to a Participant the amount of any priority interest on the BOX Book. For purposes of the proposed new rule, the term ‘‘priority interest’’ means the number of Public Customer contracts and Non-Public Customer contracts that are ranked ahead of such Public Customer contracts at a given price for CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The term ‘‘BOX Book’’ means the electronic book of orders on each single option series maintained by the BOX Trading Host. See BOX Rule 100(a)(10). 4 The term ‘‘Participant’’ means a firm, or organization that is registered with the Exchange pursuant to the BOX Rule 2000 Series for purposes of participating in options trading on BOX as an ‘‘Order Flow Provider’’ or ‘‘Market Maker.’’ See BOX Rule 100(a)(41). 5 See Securities Exchange Act Release No. 83318 (May 24, 2018), 83 FR 25079 (‘‘Notice’’). PO 00000 22 17 1 15 Frm 00053 Fmt 4703 Sfmt 4703 33969 a specific option class.6 The information would be verbally provided to Participants for no fee, on a best efforts basis, and would be for advisory purposes only.7 All BOX Book information would be provided on an anonymous basis.8 Under the proposed rule, Floor Brokers would inquire with an Options Exchange Official or his or her designee, and all other Participants would inquire with BOX’s Market Operations Center.9 Participants would be required to request this information each time and the Exchange would not provide continuous updated information.10 The Exchange represents that an Options Exchange Official will provide the requested information when doing so does not interfere with their regulatory responsibilities.11 The Exchange believes that the proposed rule change will provide Participants greater clarity on the composition and availability of liquidity on the BOX Book.12 With respect to the BOX Trading Floor, the Exchange believes that the availability of this information will lead to increased interaction with the BOX Book, because Floor Brokers will be aware of the liquidity available on the BOX Book that could interact with their Qualified Open Outcry Order (‘‘QOO Order’’) 13 and may choose to use such liquidity when executing orders from the Trading Floor or using a separate order to sweep that interest.14 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national 6 See proposed BOX Rule IM–7130–1. ‘‘Public Customer’’ means a person that is not a broker or dealer in securities. See BOX Rule 100(a)(52). 7 See proposed BOX Rule IM–7130–1. 8 See id. 9 See id. The term ‘‘Market Operations Center’’ or ‘‘MOC’’ means the BOX Market Operations Center, which provides market support for Options Participants during the trading day. See BOX Rule 100(a)(32). 10 See proposed BOX Rule IM–7130–1. 11 See Notice, supra note 5, at 25080 n.5. 12 See Notice, supra note 5, at 25080. 13 A QOO Order has two sides; the initiating side and the contra-side. The initiating side is the order which must be filled in its entirety. The contra-side must guarantee the full size of the initiating side of the QOO Order and may provide a book sweep size as provided in BOX Rule 7600(h). See BOX Rule 7600(a)(1). The initiating side of a QOO Order will execute against Public Customer Orders on the BOX Book and any other orders or quotes ranked ahead of such Public Customer Orders at the execution price first. See BOX Rule 7600(d)(2). 14 See Notice, supra note 5, at 25080. E:\FR\FM\18JYN1.SGM 18JYN1

Agencies

[Federal Register Volume 83, Number 138 (Wednesday, July 18, 2018)]
[Notices]
[Pages 33966-33969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15289]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83623; File No. SR-NASDAQ-2018-051]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend The Nasdaq Options Market LLC (``NOM'') Rules and Adopt a Zero 
Bid Options Rule

July 12, 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 29, 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.
---------------------------------------------------------------------------

    \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 The Nasdaq Options Market LLC 
(``NOM'') Rules at Chapter V, Section 3, entitled ``Trading Halts'' and 
Chapter VI, Section

[[Page 33967]]

6, entitled ``Acceptance of Quotes and Orders.''
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Chapter V, Section 3, entitled 
``Trading Halts'' to remove unnecessary rule text. The Exchange 
proposes to amend NOM Rules to adopt a zero bid options rule at Chapter 
VI, Section 6, entitled ``Acceptance of Quotes and Orders.'' The 
Exchange proposes to adopt a zero bid options rule on NOM within 
Chapter VI, Section 6, entitled ``Acceptance of Quotes and Orders'' and 
remove rule text which the Exchange believes is unnecessary. Each 
proposal is described in more detail below.
Chapter V, Section 3
    The Exchange proposes to amend Chapter V, Section 3(b), which 
currently provides, ``In the event Nasdaq Regulation determines to halt 
trading, all trading in the effected class or classes of options shall 
be halted. NOM shall disseminate through its trading facilities and 
over OPRA a symbol with respect to such class or classes of options 
indicating that trading has been halted, and a record of the time and 
duration of the halt shall be made available to vendors.'' The Exchange 
proposes to remove the words ``such class or'' because the Exchange 
only disseminates over OPRA a symbol with respect to classes of options 
to indicate a trading halt. By amending this rule, the Exchange will 
add more transparency as to how it disseminates information regarding 
trading halts.
Chapter VI, Section 6
    Today, the Exchange does not have a rule for the handling of 
options with no bid or zero bid options. The Exchange's handling of 
zero bid options on NOM is identical to the manner in which zero bid is 
handled on Phlx.\3\ The Exchange proposes to add this new rule to 
Chapter VI, Section 6(a)(3). The new rule would provide, ``In the case 
where the bid price for any options contract is $0.00, a market order 
accepted into the System to sell that series shall be considered a 
limit order to sell at a price equal to the minimum trading increment 
as defined in Chapter VI, Section 5. Orders will be placed on the limit 
order book in the order in which they were received by the System. With 
respect to market orders to sell which are submitted prior to the 
Opening and persist after the Opening, those orders are posted at a 
price equal to the minimum trading increment as defined in Chapter VI, 
Section 5.''
---------------------------------------------------------------------------

    \3\ See Phlx Rule 1035.
---------------------------------------------------------------------------

    The Exchange intends to accept and convert market orders to sell 
allowing them an equal opportunity to trade if interest should arrive 
in the case of a no bid option. The Exchange notes that the orders 
would rest on the Order Book at the minimum price increment. The 
Exchange notes market orders ``accepted into the System'' would be 
converted to account for market orders that may not be accepted into 
the System due to Limit Up-Limit Down restrictions, which may prevent 
the market order from being accepted.\4\ Only after acceptance into the 
System will market orders be treated as a sell limit order at a price 
equal to the minimum trading increment.
---------------------------------------------------------------------------

    \4\ The Limit Up-Limit Down requirements must be met first 
before the proposed rule would apply.
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    Further, the Exchange proposes to add rule text which provides 
``Orders will be placed on the limit order book in the order in which 
they were received by the System.'' \5\ The Exchange proposes to note 
that with respect to market orders to sell in zero bid options, which 
are submitted prior to the Opening Process \6\ and persist after the 
Opening Process, those orders are posted at a price equal to the 
minimum trading increment as defined in Chapter VI, Section 5.\7\ The 
Exchange's proposed rule will provide market participants with greater 
insight into the handling of orders where there is a zero bid. The 
Exchange believes that this proposed amendment will accurately describe 
the manner in which a zero-bid options series operates within the 
System both before and after the Opening Process.
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    \5\ The time of receipt for an order is the time such message is 
processed by the System.
    \6\ The Exchange's Opening Process is described in Rule 701.
    \7\ Chapter VI, Section 5, entitled ``Minimum Increments'' 
provides for the minimum increments of trading.
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    The Exchange also proposes to amend Chapter VI, Section 6(b) which 
currently states, ``All System orders entered by Participants directing 
or permitting routing to other market centers shall be routed for 
potential display and/or execution as set forth in Section 11 below. 
Routing shall be available in System securities as well as Non-System 
securities listed on other exchanges.'' The Exchange proposes to remove 
``Routing shall be available in System securities as well as Non-System 
securities listed on other exchanges.'' The Exchange defines ``System 
Securities'' at Chapter VI, Section 1(b) of the NOM Rules and defines 
``Non-System Securities'' as all other options. Nasdaq originally 
programmed the System to differentiate between System Securities and 
Non-System Securities.\8\ Nasdaq stated in that filing it would accept 
orders in Non-System Securities for routing but will not execute these 
orders in the System.\9\ In 2012, NOM's rule were amended to provide 
that routing is limited to System Securities. System Securities are all 
options that are currently trading on NOM pursuant to Chapter IV.\10\ 
Further, the Subsequent Filing provided that only System Securities are 
traded on NOM pursuant to Chapter IV. All other options are Non-System 
Securities.\11\ The Subsequent filing noted that at one time, NOM 
offered routing of Non-System Securities but has not offered such 
routing since November 30, 2011. Finally, the Subsequent Filing noted 
that this routing feature was rarely used and was discontinued. 
Currently, NOM only routes securities that are listed on NOM. The 
Exchange proposes to

[[Page 33968]]

remove this sentence related to routing which the Exchange believes 
should have been removed in connection with the Subsequent Filing.
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    \8\ Securities Exchange Act Release No. 57478 (March 12, 2008), 
73 FR 14521 (March 18, 208) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-
080) (Notice of Filing of Amendment No. 2 to a Proposed Rule Change 
and Order Granting Accelerated Approval to a Proposed Rule Change, 
as Amended, To Establish Rules Governing the Trading of Options on 
the NASDAQ Options Market; Order Approving a Proposed Rule Change 
Relating to the LLC Agreement Establishing the NASDAQ Options Market 
LLC and Delegation Agreement Delegating to NOM LLC the Authority To 
Operate the NASDAQ Options Market; Order Granting an Application of 
The NASDAQ Stock Market LLC for an Exemption Pursuant to Section 
36(a) of the Exchange Act from the Requirements of Section 19(b) of 
the Exchange Act; and Order Granting an Exemption for the NASDAQ 
Options Market LLC from Section 11A(b) of the Exchange Act.)
    \9\ Id.
    \10\ Securities Exchange Act Release No. 67301 (June 28, 2012), 
77 FR 39774 (July 5, 2012) (SR-Nasdaq-2012-077) (``Subsequent 
Filing'').
    \11\ Id.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934,\12\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\13\ 
in particular, in that it is designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
for a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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Chapter V, Section 3
    The Exchange is providing greater transparency as to the manner in 
which the Exchange disseminates information over OPRA during a trading 
halt. The Exchange believes that this rule text is consistent with the 
Act and the protection of investors and the public interest because it 
brings greater clarity as to what type of information is provided 
during a halt.
Chapter VI, Section 6
    The Exchange's proposal to adopt a zero bid rule is consistent with 
the Act and designed to promote just and equitable principles of trade 
and to protect investors and the public interest by adopting text which 
describes the handling of zero-bid options. The Exchange is treating 
all market orders to sell in zero bid options in the same fashion by 
converting all those orders, provided that the Exchange's disseminated 
bid price in such option is zero for an option listed only on the 
Exchange or, for an option listed on multiple exchanges and the 
disseminated NBBO includes a bid price of zero in the series. Market 
orders to sell in zero bid options will be placed on the limit order 
book in the order in which they were received by the System. The 
Exchange desires to prevent members from submitting market orders to 
sell in no bid series, which would execute at a price of $0.00. The 
Exchange believes that the proposed rule will achieve this objective 
and continue to permit the Exchange to execute orders within its System 
at prices that reflect some value. Adding rule text regarding market 
orders to sell in zero bid options submitted prior to the Opening 
Process and persisting after the Opening Process is consistent with the 
Act because it provides more transparency as to the operation of this 
rule and as to how those market orders to sell in zero bid options will 
be handled by the System. Further, the Exchange believes that 
memorializing its current practice within the rule text will bring more 
clarity to the manner in which the zero bid rule operates to the 
benefits of all market participants.
    Finally, the Exchange believes removing language concerning Non-
System Securities in Chapter VI, Section 6(b) is consistent with the 
Act because it avoids confusion by removing language which should have 
been removed with the 2006 filing which distinguished System and Non-
System Securities. The language discusses a distinction which was 
removed from the rules in 2012.\14\
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    \14\ See note 10 above.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\15\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b)(8).
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Chapter V, Section 3
    The Exchange's proposal to amend Chapter V, Section 3(b) to more 
specifically describe the information disseminated during a trading 
halt do not impose an undue burden on competition because the 
amendments add more transparency to the trading halt rule.
Chapter VI, Section 6
    The Exchange's proposal to adopt a zero bid options rule does not 
impose an undue burden on competition because the proposed rule change 
will continue to apply uniformly for all market participants who enter 
market orders to sell into the System when there is a zero-bid options.
    Finally, the removal of language concerning Non-System Securities 
in Chapter VI, Section 6(b) does not impose an undue burden on 
competition because this language references an obsolete functionality 
in the rulebook that was removed from the rules in 2012.\16\
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    \16\ See note 10 above.
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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) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \19\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Exchange states that waiver of the operative delay would allow the 
Exchange to update its rules to immediately reflect the operation of 
zero bid series on NOM. Therefore, the Commission believes that waiver 
of the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the operative delay and designates the proposed rule change 
operative upon filing.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

[[Page 33969]]

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2018-051 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-2018-051. 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 (http://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 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-2018-051, and should be submitted 
on or before August 8, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15289 Filed 7-17-18; 8:45 am]
 BILLING CODE 8011-01-P