Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .02 to Rule 715 Regarding Cancel and Replace Orders, 63947-63948 [2018-26908]

Download as PDF Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84746; File No. SR–MRX– 2018–37] Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .02 to Rule 715 Regarding Cancel and Replace Orders December 7, 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 November 29, 2018, Nasdaq MRX, LLC (‘‘MRX’’ 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 Supplementary Material .02 to Rule 715 regarding Cancel and Replace Orders. The text of the proposed rule change is available on the Exchange’s website at https://nasdaqmrx.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. amozie on DSK3GDR082PROD with NOTICES1 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 Supplementary Material .02 to Rule 715 regarding Cancel and Replace Orders to: 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 18:39 Dec 11, 2018 Jkt 247001 (i) Correct an inconsistency between the Exchange’s rule text and the operation of the System 3 by removing the reference to Rule 710, (ii) update rule cross-references, and (iii) make other non-substantive, technical changes. Today, a member has the option of either sending in a cancel order and then separately sending in a new order which serves as a replacement of the original order (two separate messages), or sending a single cancel and replace order in one message (i.e., a Cancel and Replace Order). Specifically, Supplementary Material .02 to Rule 715 defines a Cancel and Replace Order as a single message for the immediate cancellation of a previously received order and the replacement of that order with a new order.4 The replacement portion of the Cancel and Replace Order is treated as a new order and therefore goes through price or other reasonability checks as a result of being viewed as such.5 If the replacement portion of a Cancel and Replace Order does not satisfy the System’s price or other reasonability checks, the existing order will be cancelled and not replaced.6 The Exchange notes, however, that when it initially codified Cancel and Replace Orders in its Rulebook as part of SR– MRX–2017–02, it inadvertently included Rule 710 within the list of price reasonability checks. In SR–MRX– 2017–02, the Exchange explained that the System conducts price or other reasonability checks for Cancel and Replace Orders to validate such orders against the current market conditions prior to proceeding with the request to modify the order.7 Rule 710, which relates to the minimum price variations applicable to options series traded on the Exchange, does not involve the System considering the current market at the time of the Cancel and Replace Order, and an incoming Cancel and Replace Order that fails the minimum price variation checks in Rule 710 3 The term ‘‘System’’ means the electronic system operated by the Exchange that receives and disseminates quotes, executes orders and reports transactions. See Rule 100(a)(66). 4 If the previously placed order is already filled partially or in its entirety, the replacement order is automatically cancelled or reduced by the number of contracts that were executed. See Supplementary Material .02 to Rule 715. 5 Supplementary Material .02 to Rule 715 further provides how the replacement portion may retain the priority of the original order, provided certain specified conditions are met. The manner in which the Exchange treats priority with respect to Cancel and Replace Orders is not changing under this proposal. 6 See Securities Exchange Act Release No. 81204 (July 25, 2017), 82 FR 35557 (July 31, 2017) (SR– MRX–2017–02) (memorializing Cancel and Replace Orders in Supplementary Material .02 to Rule 715 as part of the Exchange’s system migration). 7 Id. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 63947 would not result in the existing order being cancelled and not replaced.8 The Exchange therefore proposes to remove the reference to Rule 710 from the list of price or other reasonability checks to conform its rule text to the System. The Exchange also proposes to update the various rule references related to the price reasonability checks within this provision to refer to the current rules.9 Finally, the Exchange proposes other non-substantive, technical changes within Supplementary Material .02 to Rule 715 to capitalize ‘‘Cancel and Replace Order’’ for consistency, and to capitalize ‘‘System,’’ which is a defined term. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Section 6(b)(5) of the Act,11 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’s proposal corrects an inadvertent error in Supplementary Material .02 to Rule 715, which currently includes Rule 710 within the list of price or other reasonability checks. As discussed above, including Rule 710 is inconsistent with the operation of the Exchange’s System because an incoming Cancel and Replace Order which fails the minimum price variation checks in Rule 710 does not result in the existing order getting cancelled and not replaced. This rule change would amend the rule text to reflect MRX’s current practice, and should avoid potential confusion about how the System processes Cancel and Replace Orders today.12 Furthermore, the Exchange’s proposal to update the rule references and make other nonsubstantive technical changes, as further described above, will bring greater transparency to its Rulebook thereby protecting investors and the public interest by reducing potential for investor confusion. 8 In this instance, the System would simply reject the cancel and replace message as an invalid instruction. The Exchange notes that the previous T7 system likewise treated Cancel and Replace Orders in this manner. 9 In particular, Rules 711(c) and 714(b)(2) are now Rules 714(b)(1)(B) and 714(b)(1)(A), respectively, pursuant to SR–MRX–2018–30. See Securities Exchange Act Release No. 84239 (September 20, 2018), 83 FR 48670 (September 26, 2018). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). 12 See note 8 above. E:\FR\FM\12DEN1.SGM 12DEN1 63948 Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. All of the proposed changes are intended to bring greater transparency to the Exchange’s Rulebook, and therefore does not unduly burden competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 13 and subparagraph (f)(6) of Rule 19b–4 thereunder.14 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 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: amozie on DSK3GDR082PROD with NOTICES1 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– MRX–2018–37 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–MRX–2018–37. 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 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–MRX–2018–37 and should be submitted on or before January 2, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–26908 Filed 12–11–18; 8:45 am] BILLING CODE 8011–01–P 13 15 U.S.C. 78s(b)(3)(A)(iii). 14 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. At the Exchange’s request, the Commission has waived this requirement. VerDate Sep<11>2014 18:39 Dec 11, 2018 Jkt 247001 15 17 PO 00000 CFR 200.30–3(a)(12). Frm 00124 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84751; File No. SR–DTC– 2018–010] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of a Proposed Rule Change To Amend the Settlement Guide Procedures To Provide Status Information for Institutional Transactions To a Matching Utility December 7, 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 November 29, 2018, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would amend the Procedures, set forth in the DTC Settlement Guide,3 4 to allow DTC to provide status information (‘‘Status Information’’) for institutional transactions in Eligible Securities (‘‘Institutional Transactions’’) 5 to an entity providing a matching service 6 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Each capitalized term not otherwise defined herein has its respective meaning as set forth in the Rules, By-Laws and Organization Certificate of The Depository Trust Company (‘‘Rules’’), available at https://www.dtcc.com/legal/rules-andprocedures.aspx and the DTC Settlement Service Guide (‘‘Settlement Guide’’), available at https:// www.dtcc.com/∼/media/Files/Downloads/legal/ service-guides/Settlement.pdf. 4 The Settlement Guide, which is proposed to be amended hereby, sets forth Procedures for the DTC’s Settlement Service. See Settlement Guide, supra note 3. Procedures, in this context, pursuant to Section 1 of Rule 1, means ‘‘the Procedures, service guides, and regulations of DTC adopted pursuant to Rule 27, as amended from time to time.’’ Rule 1, Section 1, supra note 3. The Settlement Guide constitutes Procedures of DTC, as defined in the Rules. See Settlement Guide, supra note 3 at 1. 5 An Institutional Transaction is a securities transaction between a broker-dealer and its institutional customer (e.g., sell-side firms, buy-side institutions, and custodians). 6 A ‘‘matching service’’ is an electronic service to match trade information, centrally, between a broker-dealer and its institutional customer. The matching service intermediary matches (i.e., reconciles) trade information from the counterparties to an Institutional Transaction, to generate an affirmed transaction (‘‘Affirmed Transaction’’) which is then used to provide 2 17 E:\FR\FM\12DEN1.SGM 12DEN1

Agencies

[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)]
[Notices]
[Pages 63947-63948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26908]



[[Page 63947]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84746; File No. SR-MRX-2018-37]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend 
Supplementary Material .02 to Rule 715 Regarding Cancel and Replace 
Orders

December 7, 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 November 29, 2018, Nasdaq MRX, LLC (``MRX'' 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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Supplementary Material .02 to Rule 
715 regarding Cancel and Replace Orders.
    The text of the proposed rule change is available on the Exchange's 
website at https://nasdaqmrx.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 Supplementary Material .02 to Rule 
715 regarding Cancel and Replace Orders to: (i) Correct an 
inconsistency between the Exchange's rule text and the operation of the 
System \3\ by removing the reference to Rule 710, (ii) update rule 
cross-references, and (iii) make other non-substantive, technical 
changes.
---------------------------------------------------------------------------

    \3\ The term ``System'' means the electronic system operated by 
the Exchange that receives and disseminates quotes, executes orders 
and reports transactions. See Rule 100(a)(66).
---------------------------------------------------------------------------

    Today, a member has the option of either sending in a cancel order 
and then separately sending in a new order which serves as a 
replacement of the original order (two separate messages), or sending a 
single cancel and replace order in one message (i.e., a Cancel and 
Replace Order). Specifically, Supplementary Material .02 to Rule 715 
defines a Cancel and Replace Order as a single message for the 
immediate cancellation of a previously received order and the 
replacement of that order with a new order.\4\ The replacement portion 
of the Cancel and Replace Order is treated as a new order and therefore 
goes through price or other reasonability checks as a result of being 
viewed as such.\5\ If the replacement portion of a Cancel and Replace 
Order does not satisfy the System's price or other reasonability 
checks, the existing order will be cancelled and not replaced.\6\ The 
Exchange notes, however, that when it initially codified Cancel and 
Replace Orders in its Rulebook as part of SR-MRX-2017-02, it 
inadvertently included Rule 710 within the list of price reasonability 
checks. In SR-MRX-2017-02, the Exchange explained that the System 
conducts price or other reasonability checks for Cancel and Replace 
Orders to validate such orders against the current market conditions 
prior to proceeding with the request to modify the order.\7\ Rule 710, 
which relates to the minimum price variations applicable to options 
series traded on the Exchange, does not involve the System considering 
the current market at the time of the Cancel and Replace Order, and an 
incoming Cancel and Replace Order that fails the minimum price 
variation checks in Rule 710 would not result in the existing order 
being cancelled and not replaced.\8\ The Exchange therefore proposes to 
remove the reference to Rule 710 from the list of price or other 
reasonability checks to conform its rule text to the System. The 
Exchange also proposes to update the various rule references related to 
the price reasonability checks within this provision to refer to the 
current rules.\9\ Finally, the Exchange proposes other non-substantive, 
technical changes within Supplementary Material .02 to Rule 715 to 
capitalize ``Cancel and Replace Order'' for consistency, and to 
capitalize ``System,'' which is a defined term.
---------------------------------------------------------------------------

    \4\ If the previously placed order is already filled partially 
or in its entirety, the replacement order is automatically cancelled 
or reduced by the number of contracts that were executed. See 
Supplementary Material .02 to Rule 715.
    \5\ Supplementary Material .02 to Rule 715 further provides how 
the replacement portion may retain the priority of the original 
order, provided certain specified conditions are met. The manner in 
which the Exchange treats priority with respect to Cancel and 
Replace Orders is not changing under this proposal.
    \6\ See Securities Exchange Act Release No. 81204 (July 25, 
2017), 82 FR 35557 (July 31, 2017) (SR-MRX-2017-02) (memorializing 
Cancel and Replace Orders in Supplementary Material .02 to Rule 715 
as part of the Exchange's system migration).
    \7\ Id.
    \8\ In this instance, the System would simply reject the cancel 
and replace message as an invalid instruction. The Exchange notes 
that the previous T7 system likewise treated Cancel and Replace 
Orders in this manner.
    \9\ In particular, Rules 711(c) and 714(b)(2) are now Rules 
714(b)(1)(B) and 714(b)(1)(A), respectively, pursuant to SR-MRX-
2018-30. See Securities Exchange Act Release No. 84239 (September 
20, 2018), 83 FR 48670 (September 26, 2018).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ 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's proposal corrects an inadvertent error in 
Supplementary Material .02 to Rule 715, which currently includes Rule 
710 within the list of price or other reasonability checks. As 
discussed above, including Rule 710 is inconsistent with the operation 
of the Exchange's System because an incoming Cancel and Replace Order 
which fails the minimum price variation checks in Rule 710 does not 
result in the existing order getting cancelled and not replaced. This 
rule change would amend the rule text to reflect MRX's current 
practice, and should avoid potential confusion about how the System 
processes Cancel and Replace Orders today.\12\ Furthermore, the 
Exchange's proposal to update the rule references and make other non-
substantive technical changes, as further described above, will bring 
greater transparency to its Rulebook thereby protecting investors and 
the public interest by reducing potential for investor confusion.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See note 8 above.

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[[Page 63948]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. All of the proposed changes are 
intended to bring greater transparency to the Exchange's Rulebook, and 
therefore does not unduly burden competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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. 
At the Exchange's request, the Commission has waived this 
requirement.
---------------------------------------------------------------------------

    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 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 [email protected]. Please include 
File Number SR-MRX-2018-37 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-MRX-2018-37. 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 
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-MRX-2018-37 and should be submitted on 
or before January 2, 2019.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26908 Filed 12-11-18; 8:45 am]
 BILLING CODE 8011-01-P
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