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 Relating to Market Maker Quotations, 34896-34899 [2018-15645]

Download as PDF 34896 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices indicate the potential cost and length of recovery, as well as the ability to effectuate a wind-down within six months of the decision at a lower cost than the amount of its liquid resources, consistent with Rule 17Ad–22(e)(15)(i)– (ii).38 Therefore, the Commission finds that the proposed rule changes would determine the length of time required to achieve a recovery or orderly winddown of ICE Clear Europe and the associated costs and would further ensure that ICE Clear Europe holds liquid net assets greater than these costs, consistent with Rule 17Ad–22(e)(15)(i)– (ii).39 III. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule changes are consistent with the requirements of the Exchange Act, and in particular, Section 17A(b)(3)(F) of the Exchange Act 40 and Rules 17Ad– 22(e)(2), 17Ad–22(e)(3)(ii), 17Ad– 22(e)(15)(i)–(ii) thereunder.41 It is therefore ordered pursuant to Section 19(b)(2) of the Exchange Act that the proposed rule change (SR– ICEEU–2017–016) be, and hereby is, approved.42 It is therefore ordered pursuant to Section 19(b)(2) of the Exchange Act that the proposed rule change (SR– ICEEU–2017–017) be, and hereby is, approved.43 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.44 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–15644 Filed 7–20–18; 8:45 am] CFR 240.17Ad–22(e)(15)(i)–(ii). CFR 240.17Ad–22(e)(15)(i)–(ii). 40 15 U.S.C. 78q–1(b)(3)(F). 41 17 CFR 240.17Ad–22(e)(2); (e)(3)(ii); (e)(15)(i)– (ii). 42 In approving the proposed rule change, the Commission considered the proposal’s impacts on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 43 In approving the proposed rule change, the Commission considered the proposal’s impacts on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 44 17 CFR 200.30–3(a)(12). amozie on DSK3GDR082PROD with NOTICES1 39 17 VerDate Sep<11>2014 17:59 Jul 20, 2018 Jkt 244001 [Release No. 34–83653; File No. SR– NASDAQ–2018–052] 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 Relating to Market Maker Quotations July 17, 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 July 2, 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 VII, Section 6 related to Market Maker quotations. The text of the proposed rule change is available on the Exchange’s website at https://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P 38 17 SECURITIES AND EXCHANGE COMMISSION 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. PO 00000 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00074 Fmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to amend the current rule text of Chapter VII, Section 6(d), related to quoting obligations, to restructure the current rule to conform to rule text utilized on Nasdaq Phlx LLC.3 The Exchange does not propose to amend the current quoting obligations, rather the Exchange proposes to more clearly state the current quoting obligations utilizing the same format as Phlx Rule 1081(c). Chapter VII, Section 6(d) The Exchange proposes to amend Chapter VII, Section 6(d) to remove the word ‘‘continuous’’ from this first sentence in the rule. The Exchange is removing the word ‘‘continuous’’ because the Exchange notes that Market Makers quote a percentage of the day and therefore the word continuous may not accurately reflect the manner in which Market Makers quote on NOM. The Exchange proposes to retitle Section 6(d) as ‘‘Intra-day Quotes.’’ The Exchange also proposes to remove the word ‘‘continuous’’ from Chapter V, Section 3(d)(iv) [sic] and replace that word with ‘‘intra-day.’’ The Exchange also proposes to amend Chapter X, Section 7(c) to replace the words ‘‘continuous bids and offers’’ with ‘‘intra-day quoting.’’ Chapter VII, Section 6(d)(i) The Exchange proposes to amend Chapter VII, Section 6(d)(i) to delete the first sentence of this paragraph, ‘‘On a daily basis, a Market Maker must during regular market hours make markets consistent with the applicable quoting requirements specified in these rules, on a continuous basis in options in which the Market Maker is registered.’’ The Exchange believes that a Market Maker’s obligation to enter bids and offers for the options to which it is registered is currently noted in proposed Chapter VII, Section 6(d). The Exchange proposes to specifically detail a Market Maker’s quoting obligations in the proposed rule text and therefore believes that this sentence is not necessary because the following sentence replaces this sentence with the exception of the intra-day aspect as described below. The Exchange proposes to add new rule text to Chapter VII, Section 6(d)(i). The first new sentence will provide ‘‘A Market Maker must enter bids and offers 3 Phlx Sfmt 4703 E:\FR\FM\23JYN1.SGM Rule 1081(c)(ii). 23JYN1 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices for the options to which it is registered, except in an assigned options series listed intra-day 4 on the Exchange.’’ The Exchange believes this sentence is more specific than Section 6(d) because it excepts the intra-day quotes. Today, a Market Maker is not held to quote an intra-day add of a series because the options series was not available for trading the entire day. The Exchange is adding this exception to the rule text to make clear that Market Makers would not be responsible for quoting an intraday addition. The Exchange believes that not counting intra-day adds of a series that were not available for the entire day of trading is consistent with the Act because the Market Maker would not have the opportunity to trade that particular options series for the entire trading day. The Exchange also proposes to note, ‘‘On a daily basis, a Market Maker must make markets consistent with the applicable quoting requirements specified below.’’ Chapter VII, Section 6(d)(i)(1) The Exchange proposes to remove the following sentence from Chapter VII, Section (d)(i)(1), ‘‘To satisfy this requirement, a Market Maker must quote 60% of the trading day (as a percentage of the total number of minutes in such trading day) or such higher percentage as Nasdaq may announce in advance.’’ The Exchange proposes to replace this language with language that more technically defines the quoting obligation. The Exchange proposes the following rule text: amozie on DSK3GDR082PROD with NOTICES1 Market Makers, associated with the same Options Participant, are collectively required to provide two-sided quotations in 60% of the cumulative number of seconds, or such higher percentage as NOM may announce in advance, for which that Options Participant’s assigned options series are open for trading. Notwithstanding the foregoing, a Market Maker shall not be required to make twosided markets pursuant to this Chapter VII, Section 6(d)(i)(1) in any Quarterly Option Series, any Adjusted Option Series, and any option series with an expiration of nine months or greater. The 60% requirement and the manner in which it is calculated is not being amended. The Exchange does not propose to amend the current quoting obligations, rather the Exchange proposes to more clearly state the current quoting obligations utilizing the same format as Phlx Rule 1081(c)(ii)(A). The Exchange notes the quoting obligations expressed as the cumulative number of seconds rather than 60% of 4 An intra-day add of a series shall be defined, for purposes of this Phlx Rule 1081 [sic], as an option series that is added manually on the same day the series begins trading. VerDate Sep<11>2014 17:59 Jul 20, 2018 Jkt 244001 the trading day. While the current rule indicates that the Exchange currently reviews quoting as a percentage of the total number of minutes, the two standards are otherwise equivalent. Adding ‘‘associated with the same Options Participant’’ to the first sentence also makes clear that the obligation is at the firm level and that all associated Market Makers will be counted in arriving at the calculation for quoting obligations. The Exchange also states, ‘‘Notwithstanding the foregoing, a Market Maker shall not be required to make two-sided markets pursuant to this Chapter VII, Section 6(d)(i)(1) in any Quarterly Option Series, any Adjusted Option Series, and any option series with an expiration of nine months or greater.’’ This exception exists today for NOM and is simply being carried over into the new text from current Section 6(d)(i)(2). The definition of an adjusted option series is currently defined at Section 6(d)(i)(2) as an option series wherein one option contract in the series represents the delivery of other than 100 shares of underlying stock or Exchange-Traded Fund Shares. This definition is being relocated to 6(d)(i)(1)(a), similar to Phlx’s structure and is defined as ‘‘Adjusted Options Series’’ throughout this rule. Chapter VII, Section 6(d)(i)(2) The Exchange proposes to add new rule text at Chapter VII, Section 6(d)(i)(2) which provides the method by which the Exchange will calculate the NOM Market Maker quoting obligations. The Exchange proposes to state, that the Exchange will (i) take the total number of seconds the Options Participant disseminates quotes in each assigned options series, excluding Quarterly Option Series, any Adjusted Option Series, and any option series with an expiration of nine months or greater for Market Makers; and (ii) divide that time by the eligible total number of seconds each assigned option series is open for trading that day. Similar to Phlx Rule 1081(c)(ii)(D), the Exchange believes that the addition of this language will bring greater transparency to the manner in which the Exchange calculated the quoting obligation. The Exchange is not amending the manner in which the quoting obligation is calculated, rather the Exchange is simply adding to the current rule the exact manner in which the Exchange determines the quoting percentage. The Exchange proposes to add, ‘‘Quoting is not required in every assigned options series.’’ This sentence is not currently contained in the rule. The Exchange is not proposing to amend its current practice, rather the Exchange is clearly stating that quoting PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 34897 is not required in every assigned options series to make clear the current obligation. Also, the Exchange proposes to state, ‘‘Compliance with this requirement is determined by reviewing the aggregate of quoting in assigned options series for the Options Participant.’’ This language is similar to the language currently being removed from Chapter VII, Section 6(d)(i)(1), ‘‘This obligation will apply to all of a Market Maker’s registered options collectively to all appointed issues, rather than on an option-by-option basis.’’ The proposed new language simply conforms the text to Phlx’s Rule 1081(c)(ii)(D). Chapter VII, Section 6(d)(i)(3) The Exchange proposes to also delete the following language from Chapter VII, Section 6(d)(i)(3), ‘‘This obligation will apply to all of a Market Maker’s registered options collectively to all appointed issues, rather than on an option-by-option basis. Compliance with this obligation will be determined on a monthly basis. However, determining compliance with the continuous quoting requirement on a monthly basis does not relieve a Market Maker of the obligation to provide continuous two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet the continuous quoting obligation each trading day.’’ The Exchange proposes to replace this language with the following language proposed in Section 6(d)(i)(3), ‘‘For purposes of the Exchange’s surveillance of an Options Participant compliance with this rule, the Exchange may determine compliance on a monthly basis. The Exchange’s monthly compliance evaluation of the quoting requirement does not relieve an Options Participant of the obligation to provide two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against an Options Participant for failing to meet the quoting obligation each trading day.’’ The Exchange’s amendment is not substantive, rather the amendment brings greater clarity to the current rule text and aligns the rule with that of Phlx Rule 1081(c)(iii). The Exchange proposes to remove the entire paragraph at current Section 6(d)(i)(2). As explained above this language is being relocated within the proposed rule text. The Exchange notes that the sentence ‘‘Accordingly, the continuous quotation obligations set forth in this rule shall not apply to Market Makers respecting Quarterly Option Series, adjusted option series, and series with an expiration of nine E:\FR\FM\23JYN1.SGM 23JYN1 34898 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices months or greater’’ is being deleted and not relocated because this sentence is redundant. Also, the Exchange proposes to amend current Section 6(d)(i)(3) by renumbering it (4) and also capitalizing ‘‘System’’ which is a defined term and renumbering a cross-reference. The Exchange believes this proposed rule will allow Market Makers to quickly compare obligations across Nasdaq affiliated markets.5 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,6 in general, and furthers the objectives of Section 6(b)(5) of the Act,7 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The Exchange believes that its proposed rule change provides further detail as to obligations of Market Makers on NOM. The Exchange is not amending its current quoting obligations, rather the Exchange is proposing to amend its current rule text to bring greater transparency to the current quoting obligations by adding clear language which explains the manner in which NOM will calculate quoting obligations. The Exchange believes the proposed rule text is consistent with the Act because the proposed rule text protect investors and the public interest by providing clear language that will be utilized on all Nasdaq affiliate markets for easy comparison. amozie on DSK3GDR082PROD with NOTICES1 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that its proposal is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Section 6(b)(5) of the Act,9 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The proposal does not impose a burden on competition because the Exchange will continue to uniformly calculate and apply the quoting obligations for all NOM Market Makers. The Exchange’s 5 The Exchange intends to file a similar proposal for Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq GEMX, LLC and Nasdaq MRX, LLC. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:59 Jul 20, 2018 Jkt 244001 proposal does not modify the current quoting obligations on NOM. 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 10 and subparagraph (f)(6) of Rule 19b–4 thereunder.11 A proposed rule change filed under Rule 19b–4(f)(6) 12 normally does not become operative for 30 days after the date of filing. 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. In its filing with the Commission, the Exchange has asked the Commission to waive the 30-day operative delay so that the proposal to amend its Market Maker quoting obligations to add more detail to the current quoting requirements may become operative immediately upon filing. The Exchange believes that the proposal will bring greater transparency to the Exchange’s rules. The Commission notes that the changes are substantially similar to Phlx Rule 1081(c). As such, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change operative upon filing.14 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may 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. 12 17 CFR 240.19b–4(f)(6). 13 17 CFR 240.19b–4(f)(6)(iii). 14 For purposes only of waiving the operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 10 15 11 17 Frm 00076 Fmt 4703 Sfmt 4703 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) of the Act 15 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–2018–052 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–2018–052. 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 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 15 15 E:\FR\FM\23JYN1.SGM U.S.C. 78s(b)(2)(B). 23JYN1 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices 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-2018–052 and should be submitted on or before August 13, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–15645 Filed 7–20–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83656; File No. SR–Phlx– 2018–40] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Extend the Applicability of the Floor Broker Management System and the Snapshot Functionality to Registered Options Traders and Specialists July 17, 2018. I. Introduction On May 24, 2018, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) 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 extend the applicability of the Floor Broker Management System and the Snapshot functionality to Registered Options Traders (‘‘ROTS’’) 3 and Specialists.4 The proposed rule change was published for comment in the Federal Register on June 4, 2018.5 On June 4, 2018, the Exchange filed Amendment No. 1 to the proposed rule change.6 The Commission received no 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Phlx Rule 1014(b) (defining a ROT). 4 See Phlx Rule 1020 (describing the functions of a Specialist). 5 See Securities Exchange Act Release No. 83339 (May 29, 2018), 83 FR 25725 (‘‘Notice’’). 6 In Amendment No. 1 the Exchange: (1) Renumbered proposed Phlx Rule 1081 as proposed Phlx Rule 1085 and (2) changed the proposed crossreferences in proposed Commentary .06 to Phlx Rule 1080 and in Options Floor Procedure Advices and Order & Decorum Regulations (‘‘Floor Advice’’) A–9 from Phlx Rule 1081 to Phlx Rule 1085. Amendment No. 1 is available at https:// amozie on DSK3GDR082PROD with NOTICES1 1 15 VerDate Sep<11>2014 17:59 Jul 20, 2018 Jkt 244001 comment letters on the proposed rule change. This order provides notice of filing of Amendment No. 1 and approves the proposal, as modified by Amendment No. 1, on an accelerated basis. II. Description of the Proposal Currently, ROTs and Specialists executing orders in the trading crowd are required to record such orders and related execution details on paper trading tickets.7 ROTS and Specialists must then provide those matched trade tickets to an Exchange Data Entry Technician (‘‘DET’’), who manually enters the information written on the trade tickets into the Exchange’s electronic trading system.8 In contrast, unless one of five exceptions applies, Floor Brokers are required to enter orders originating in the trading crowd using the Exchange’s electronic order entry system—the ‘‘Floor Broker Management System’’ 9—and are not permitted to execute orders in the trading crowd. The Exchange proposes to change the order entry process for ROTS and Specialist by requiring them to utilize the same electronic order entry system that is currently used by Floor Brokers. To accomplish this transition, the Exchange proposes to change the name of its electronic order entry system from the ‘‘Floor Broker Management System’’ to the ‘‘Floor Based Management System’’ (‘‘FBMS’’) to reflect its expanded applicability to all members that operate on the Exchange’s trading floor—namely, Floor Brokers, ROT, and Specialists.10 In addition, the Exchange proposes to apply the same general obligations it currently imposes upon Floor Brokers regarding orders on the trading floor to ROTS and Specialists.11 The Exchange also proposes to extend FBMS’ Snapshot functionality to ROTs and Specialists.12 To effectuate these changes, the Exchange proposes several amendments and additions to its Rules and Floor Advices.13 Specifically, the Exchange proposes to amend Phlx Rule 1000(f) to require ROTs and Specialists to execute orders utilizing FBMS and to prohibit ROTs and Specialists from executing orders in the Exchange’s options trading crowd, www.sec.gov/comments/sr-phlx-2018-40/phlx201 840-3767632-162689.pdf). 7 See Notice, supra note 5, at 25726. 8 See id. 9 Phlx Rule 1000(f)(iii). 10 See Notice, supra note 5, at 25726. 11 See id. at 25725. 12 See id. at 25726. 13 A more detailed description of the proposal appears in the Notice and in Amendment No. 1. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 34899 unless one of five exceptions applies.14 These exceptions are listed in Phlx Rule 1000(f)(iii)(A)–(E) and would permit a Floor Broker, ROT or Specialist to execute an order in the trading crowd if: (1) There is a problem with the Exchange’s systems; (2) the member is executing an order pursuant to Phlx Rule 1059 (‘‘Accommodation Transactions’’) or Phlx Rule 1079 (‘‘FLEX Index, Equity, and Currency Options’’); (3) the transaction involves a multi-leg order with more than 15 legs; (4) the transaction involves certain splitprice orders that, due to FBMS system limitations, require manual calculation; or (5) the member elects to use of the Snapshot functionality to provisionally execute certain designated categories of trades, as described below.15 With respect to Snapshot, the Exchange proposes to allow ROTs and Specialists, like Floor Brokers, to use Snapshot to provisionally execute, in the options trading crowd, multi-leg orders and simple orders in options on exchange-traded funds (‘‘ETFs’’) that are included in the Options Penny Pilot, subject to the procedures for and the limitations to the use of Snapshot.16 The Exchange represents that it does not anticipate that the use of Snapshot by ROTs or Specialists will pose any increased or unique risks relative to its current use by Floor Brokers.17 Therefore, the Exchange proposes to utilize the same methods it currently uses to surveil Floor Brokers’ use of Snapshot to also monitor ROTs’ and Specialists’ uses of the Snapshot functionality.18 To implement the renaming of FBMS and the extension of FBMS (including its Snapshot functionality) to ROTs and Specialists, the Exchange also proposes to make changes to its Rules and Floor Advices, as well as to update multiple cross-references within its Rules and Floor Advices, so that its current requirements regarding the use of FBMS will apply to ROTS and Specialists.19 14 See Notice, supra note 5, at 25726. id. 16 See id. These procedures and limitations regarding the use of Snapshot are currently set forth in Phlx Rule 1063(e)(v), but the Exchange proposes to move them to a new Phlx Rule 1069, where they will apply broadly to ‘‘members’’ rather than only to Floor Brokers. 17 See id. 18 See id. at 25726–27. 19 See id. at 25726–28; Amendment No. 1, supra note 6. The Exchange is proposing minor alterations to its Rules that presently govern the use of FBMS by Floor Brokers to, among other things, account for the fact that ROTS and Specialists negotiate orders on the floor for their own account and do not represent orders on behalf of others. See Notice, supra note 5, at 25728. In addition, the Exchange is proposing several changes to remove obsolete 15 See E:\FR\FM\23JYN1.SGM Continued 23JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 141 (Monday, July 23, 2018)]
[Notices]
[Pages 34896-34899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15645]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83653; File No. SR-NASDAQ-2018-052]


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 Relating to Market 
Maker Quotations

July 17, 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 July 2, 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 VII, Section 6 related to Market Maker 
quotations.
    The text of the proposed rule change is available on the Exchange's 
website at https://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    Nasdaq proposes to amend the current rule text of Chapter VII, 
Section 6(d), related to quoting obligations, to restructure the 
current rule to conform to rule text utilized on Nasdaq Phlx LLC.\3\ 
The Exchange does not propose to amend the current quoting obligations, 
rather the Exchange proposes to more clearly state the current quoting 
obligations utilizing the same format as Phlx Rule 1081(c).
---------------------------------------------------------------------------

    \3\ Phlx Rule 1081(c)(ii).
---------------------------------------------------------------------------

Chapter VII, Section 6(d)
    The Exchange proposes to amend Chapter VII, Section 6(d) to remove 
the word ``continuous'' from this first sentence in the rule. The 
Exchange is removing the word ``continuous'' because the Exchange notes 
that Market Makers quote a percentage of the day and therefore the word 
continuous may not accurately reflect the manner in which Market Makers 
quote on NOM. The Exchange proposes to retitle Section 6(d) as ``Intra-
day Quotes.''
    The Exchange also proposes to remove the word ``continuous'' from 
Chapter V, Section 3(d)(iv) [sic] and replace that word with ``intra-
day.'' The Exchange also proposes to amend Chapter X, Section 7(c) to 
replace the words ``continuous bids and offers'' with ``intra-day 
quoting.''
Chapter VII, Section 6(d)(i)
    The Exchange proposes to amend Chapter VII, Section 6(d)(i) to 
delete the first sentence of this paragraph, ``On a daily basis, a 
Market Maker must during regular market hours make markets consistent 
with the applicable quoting requirements specified in these rules, on a 
continuous basis in options in which the Market Maker is registered.'' 
The Exchange believes that a Market Maker's obligation to enter bids 
and offers for the options to which it is registered is currently noted 
in proposed Chapter VII, Section 6(d). The Exchange proposes to 
specifically detail a Market Maker's quoting obligations in the 
proposed rule text and therefore believes that this sentence is not 
necessary because the following sentence replaces this sentence with 
the exception of the intra-day aspect as described below.
    The Exchange proposes to add new rule text to Chapter VII, Section 
6(d)(i). The first new sentence will provide ``A Market Maker must 
enter bids and offers

[[Page 34897]]

for the options to which it is registered, except in an assigned 
options series listed intra-day \4\ on the Exchange.'' The Exchange 
believes this sentence is more specific than Section 6(d) because it 
excepts the intra-day quotes. Today, a Market Maker is not held to 
quote an intra-day add of a series because the options series was not 
available for trading the entire day. The Exchange is adding this 
exception to the rule text to make clear that Market Makers would not 
be responsible for quoting an intra-day addition. The Exchange believes 
that not counting intra-day adds of a series that were not available 
for the entire day of trading is consistent with the Act because the 
Market Maker would not have the opportunity to trade that particular 
options series for the entire trading day. The Exchange also proposes 
to note, ``On a daily basis, a Market Maker must make markets 
consistent with the applicable quoting requirements specified below.''
---------------------------------------------------------------------------

    \4\ An intra-day add of a series shall be defined, for purposes 
of this Phlx Rule 1081 [sic], as an option series that is added 
manually on the same day the series begins trading.
---------------------------------------------------------------------------

Chapter VII, Section 6(d)(i)(1)
    The Exchange proposes to remove the following sentence from Chapter 
VII, Section (d)(i)(1), ``To satisfy this requirement, a Market Maker 
must quote 60% of the trading day (as a percentage of the total number 
of minutes in such trading day) or such higher percentage as Nasdaq may 
announce in advance.'' The Exchange proposes to replace this language 
with language that more technically defines the quoting obligation. The 
Exchange proposes the following rule text:

    Market Makers, associated with the same Options Participant, are 
collectively required to provide two-sided quotations in 60% of the 
cumulative number of seconds, or such higher percentage as NOM may 
announce in advance, for which that Options Participant's assigned 
options series are open for trading. Notwithstanding the foregoing, 
a Market Maker shall not be required to make two-sided markets 
pursuant to this Chapter VII, Section 6(d)(i)(1) in any Quarterly 
Option Series, any Adjusted Option Series, and any option series 
with an expiration of nine months or greater.

    The 60% requirement and the manner in which it is calculated is not 
being amended. The Exchange does not propose to amend the current 
quoting obligations, rather the Exchange proposes to more clearly state 
the current quoting obligations utilizing the same format as Phlx Rule 
1081(c)(ii)(A). The Exchange notes the quoting obligations expressed as 
the cumulative number of seconds rather than 60% of the trading day. 
While the current rule indicates that the Exchange currently reviews 
quoting as a percentage of the total number of minutes, the two 
standards are otherwise equivalent. Adding ``associated with the same 
Options Participant'' to the first sentence also makes clear that the 
obligation is at the firm level and that all associated Market Makers 
will be counted in arriving at the calculation for quoting obligations. 
The Exchange also states, ``Notwithstanding the foregoing, a Market 
Maker shall not be required to make two-sided markets pursuant to this 
Chapter VII, Section 6(d)(i)(1) in any Quarterly Option Series, any 
Adjusted Option Series, and any option series with an expiration of 
nine months or greater.'' This exception exists today for NOM and is 
simply being carried over into the new text from current Section 
6(d)(i)(2). The definition of an adjusted option series is currently 
defined at Section 6(d)(i)(2) as an option series wherein one option 
contract in the series represents the delivery of other than 100 shares 
of underlying stock or Exchange-Traded Fund Shares. This definition is 
being relocated to 6(d)(i)(1)(a), similar to Phlx's structure and is 
defined as ``Adjusted Options Series'' throughout this rule.
Chapter VII, Section 6(d)(i)(2)
    The Exchange proposes to add new rule text at Chapter VII, Section 
6(d)(i)(2) which provides the method by which the Exchange will 
calculate the NOM Market Maker quoting obligations. The Exchange 
proposes to state, that the Exchange will (i) take the total number of 
seconds the Options Participant disseminates quotes in each assigned 
options series, excluding Quarterly Option Series, any Adjusted Option 
Series, and any option series with an expiration of nine months or 
greater for Market Makers; and (ii) divide that time by the eligible 
total number of seconds each assigned option series is open for trading 
that day. Similar to Phlx Rule 1081(c)(ii)(D), the Exchange believes 
that the addition of this language will bring greater transparency to 
the manner in which the Exchange calculated the quoting obligation. The 
Exchange is not amending the manner in which the quoting obligation is 
calculated, rather the Exchange is simply adding to the current rule 
the exact manner in which the Exchange determines the quoting 
percentage. The Exchange proposes to add, ``Quoting is not required in 
every assigned options series.'' This sentence is not currently 
contained in the rule. The Exchange is not proposing to amend its 
current practice, rather the Exchange is clearly stating that quoting 
is not required in every assigned options series to make clear the 
current obligation. Also, the Exchange proposes to state, ``Compliance 
with this requirement is determined by reviewing the aggregate of 
quoting in assigned options series for the Options Participant.'' This 
language is similar to the language currently being removed from 
Chapter VII, Section 6(d)(i)(1), ``This obligation will apply to all of 
a Market Maker's registered options collectively to all appointed 
issues, rather than on an option-by-option basis.'' The proposed new 
language simply conforms the text to Phlx's Rule 1081(c)(ii)(D).
Chapter VII, Section 6(d)(i)(3)
    The Exchange proposes to also delete the following language from 
Chapter VII, Section 6(d)(i)(3), ``This obligation will apply to all of 
a Market Maker's registered options collectively to all appointed 
issues, rather than on an option-by-option basis. Compliance with this 
obligation will be determined on a monthly basis. However, determining 
compliance with the continuous quoting requirement on a monthly basis 
does not relieve a Market Maker of the obligation to provide continuous 
two-sided quotes on a daily basis, nor will it prohibit the Exchange 
from taking disciplinary action against a Market Maker for failing to 
meet the continuous quoting obligation each trading day.'' The Exchange 
proposes to replace this language with the following language proposed 
in Section 6(d)(i)(3), ``For purposes of the Exchange's surveillance of 
an Options Participant compliance with this rule, the Exchange may 
determine compliance on a monthly basis. The Exchange's monthly 
compliance evaluation of the quoting requirement does not relieve an 
Options Participant of the obligation to provide two-sided quotes on a 
daily basis, nor will it prohibit the Exchange from taking disciplinary 
action against an Options Participant for failing to meet the quoting 
obligation each trading day.'' The Exchange's amendment is not 
substantive, rather the amendment brings greater clarity to the current 
rule text and aligns the rule with that of Phlx Rule 1081(c)(iii).
    The Exchange proposes to remove the entire paragraph at current 
Section 6(d)(i)(2). As explained above this language is being relocated 
within the proposed rule text. The Exchange notes that the sentence 
``Accordingly, the continuous quotation obligations set forth in this 
rule shall not apply to Market Makers respecting Quarterly Option 
Series, adjusted option series, and series with an expiration of nine

[[Page 34898]]

months or greater'' is being deleted and not relocated because this 
sentence is redundant. Also, the Exchange proposes to amend current 
Section 6(d)(i)(3) by renumbering it (4) and also capitalizing 
``System'' which is a defined term and renumbering a cross-reference.
    The Exchange believes this proposed rule will allow Market Makers 
to quickly compare obligations across Nasdaq affiliated markets.\5\
---------------------------------------------------------------------------

    \5\ The Exchange intends to file a similar proposal for Nasdaq 
BX, Inc., Nasdaq ISE, LLC, Nasdaq GEMX, LLC and Nasdaq MRX, LLC.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest. 
The Exchange believes that its proposed rule change provides further 
detail as to obligations of Market Makers on NOM. The Exchange is not 
amending its current quoting obligations, rather the Exchange is 
proposing to amend its current rule text to bring greater transparency 
to the current quoting obligations by adding clear language which 
explains the manner in which NOM will calculate quoting obligations. 
The Exchange believes the proposed rule text is consistent with the Act 
because the proposed rule text protect investors and the public 
interest by providing clear language that will be utilized on all 
Nasdaq affiliate markets for easy comparison.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest. 
The proposal does not impose a burden on competition because the 
Exchange will continue to uniformly calculate and apply the quoting 
obligations for all NOM Market Makers. The Exchange's proposal does not 
modify the current quoting obligations on NOM.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative for 30 days after the date of filing. 
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. In its filing with the 
Commission, the Exchange has asked the Commission to waive the 30-day 
operative delay so that the proposal to amend its Market Maker quoting 
obligations to add more detail to the current quoting requirements may 
become operative immediately upon filing. The Exchange believes that 
the proposal will bring greater transparency to the Exchange's rules. 
The Commission notes that the changes are substantially similar to Phlx 
Rule 1081(c). As such, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission designates the proposed rule 
change operative upon filing.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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 under 
Section 19(b)(2)(B) of the Act \15\ to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2018-052 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-2018-052. 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 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

[[Page 34899]]

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-2018-052 and should be submitted 
on or before August 13, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15645 Filed 7-20-18; 8:45 am]
 BILLING CODE 8011-01-P

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