Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend The Nasdaq Options Market LLC Pricing at Options 7, Section 3 Titled “Nasdaq Options Market-Ports and Other Services.”, 37934-37936 [2019-16482]
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37934
Federal Register / Vol. 84, No. 149 / Friday, August 2, 2019 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86507; File No. SR–
NASDAQ–2019–056]
1. Purpose
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
The Nasdaq Options Market LLC
Pricing at Options 7, Section 3 Titled
‘‘Nasdaq Options Market—Ports and
Other Services.’’
July 29, 2019.
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 15,
2019, 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, II,
and III, 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’’)
pricing at Options 7, Section 3 titled
‘‘Nasdaq Options Market—Ports and
Other Services.’’ The amendment will
describe the pricing with respect to an
upcoming technology infrastructure
migration.
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.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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The Exchange proposes to amend
NOM pricing at Options 7, Section 3
titled ‘‘Nasdaq Options Market—Ports
and Other Services.’’ During the month
of August 2019, NOM Participants will
be required to transition from current
FIX Ports,3 CTI Ports 4 and FIX DROP
Ports 5 to new FIX Ports, CTI Ports and
FIX DROP Ports in connection with an
upcoming technology infrastructure
migration.
Description of Migration and Pricing
Impact
In connection with this migration,
Participants will request new FIX Ports,
CTI Ports and FIX DROP Ports during
the month of August, which are
duplicative of the type and quantity of
their current ports, at no additional cost
to allow for testing of the new ports and
allow for continuous connection to the
match engine during the transition
period.6 For example, a NOM
Participant with 3 FIX Ports, 1 CTI Port
and 1 FIX DROP Port on August 1, 2019
could request 3 new FIX Ports, 1 CTI
Port and 1 FIX DROP Port for the month
of August 2019 at no additional cost.
The NOM Participant would be assessed
only for the legacy market ports, in this
case 3 FIX Ports, 1 CTI Port and 1 FIX
DROP Port, for the month of August
3 Financial Information eXchange’’ or ’’ FIX’’ is an
interface that allows Participants and their
Sponsored Customers to connect, send, and receive
messages related to orders to and from the
Exchange. Features include the following: (1)
Execution messages; (2) order messages; and (3) risk
protection triggers and cancel notifications. See
Chapter VI, Section 21(a)(i)(A).
4 Clearing Trade Interface (‘‘CTI’’) is a real-time
clearing trade update message that is sent to a
Participant after an execution has occurred and
contains trade details specific to that Participant.
The information includes, among other things, the
following: (i) The Clearing Member Trade
Agreement or ‘‘CMTA’’ or The Options Clearing
Corporation or ‘‘OCC’’ number; (ii) Exchange badge
or house number; (iii) the Exchange internal firm
identifier; (iv) an indicator which will distinguish
electronic and non-electronically delivered orders;
(v) liquidity indicators and transaction type for
billing purposes; and (vi) capacity. See Chapter VI,
Section 19(b)(1).
5 FIX DROP is a real-time order and execution
update message that is sent to a Participant after an
order been received/modified or an execution has
occurred and contains trade details specific to that
Participant. The information includes, among other
things, the following: (i) Executions; (ii)
cancellations; (iii) modifications to an existing
order; and (iv) busts or post-trade corrections. See
Chapter VI, Section 19(b)(3).
6 Participants would contact Market Operations to
acquire new duplicative FIX Ports, CTI Ports and
FIX DROP Ports. See Options Technical Update
#2019–3.
PO 00000
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Fmt 4703
Sfmt 4703
2019 and would not be assessed for the
new ports, which are duplicative of the
current ports. A Participant may acquire
any additional legacy ports during the
month of August 2019 and would be
assessed the charges indicated in the
current Pricing Schedule. The migration
does not require a Participant to acquire
any additional ports, rather the
migration requires a new port to replace
any existing ports provided the
Participant desired to maintain the same
number of ports.7 A Participant desiring
to enter orders into NOM is required to
obtain 1 FIX Port. A Participant may
also obtain order and execution ports,
such as a CTI Port and/or a FIX DROP
Port, to receive clearing and execution
messages. The number of additional FIX
or order and execution ports obtained
by a Participant is dependent on the
Participant’s business needs.
Applicability to and Impact on
Participants 8
The proposal is not intended to
impose any additional fees on any NOM
Participants. All Participants may enter
orders on NOM. As noted above, a NOM
Participant may enter all orders on
NOM through one FIX Port. The
Exchange does not require a NOM
Participant to obtain more than one FIX
Port, however, a Participant may obtain
multiple FIX Ports, a CTI Port or a FIX
DROP Port to meet its individual
business needs. This proposal is
intended to permit a NOM Participant to
migrate its current FIX Ports, CTI Ports
and FIX DROP Ports at no additional
costs during the month of August 2019
to allow for continuous connection to
the Exchange. Participants would only
be assessed a fee for their current FIX
Ports, CTI Ports and FIX DROP Ports
and not be assessed a fee for any new
duplicative ports they acquire in
connection with the technology
7 The migration is 1:1 and therefore would not
require a Participant to acquire new ports, nor
would it reduce the number of ports needed to
connect.
8 On May 21, 2019, the SEC Division of Trading
and Markets (the ‘‘Division’’) issued fee filing
guidance titled ‘‘Staff Guidance on SRO Rule
Filings Relating to Fees’’ (‘‘Guidance’’). Within the
Guidance, the Division noted, among other things,
that the purpose discussion should address ‘‘how
the fee may apply differently (e.g., additional cost
vs. additional discount) to different types of market
participants (e.g., market makers, institutional
brokers, retail brokers, vendors, etc.) and different
sizes of market participants.’’ See Guidance
(available at https://www.sec.gov/tm/staff-guidancesro-rule-filings-fees). The Guidance also suggests
that the purpose discussion should include
numerical examples. Where possible, the Exchange
is including numerical examples. In addition, the
Exchange is providing data to the Commission in
support of its arguments herein. The Guidance
covers all aspects of a fee filing, which the
Exchange has addressed throughout this filing.
E:\FR\FM\02AUN1.SGM
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Federal Register / Vol. 84, No. 149 / Friday, August 2, 2019 / Notices
infrastructure migration. This proposal
is not intended to have a pricing impact.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,10 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
proposal is also consistent with Section
11A of the Act relating to the
establishment of the national market
system for securities. Moreover, the
Exchange believes that its proposal
complies with Commission guidance on
SRO fee filings that the Commission
Staff issued on May 21, 2019.11
The Proposal is Reasonable
The Exchange’s proposal is reasonable
in several respects. As a threshold
matter, the Exchange is subject to
significant competitive forces in the
market for options transaction services
that constrain its pricing determinations
in that market. The fact that this market
is competitive has long been recognized
by the courts. In NetCoalition v.
Securities and Exchange Commission,
the D.C. Circuit stated as follows: ‘‘[n]o
one disputes that competition for order
flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker
dealers’. . . .’’ 12
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
transaction services. The Exchange is
one of several options venues to which
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
11 See Guidance, supra note 8. Although the
Exchange believes that this filing complies with the
Guidance, the Exchange does not concede that the
standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to
challenge those standards through administrative
and judicial review, as appropriate.
12 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
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VerDate Sep<11>2014
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market participants may direct their
order flow, and it represents a small
percentage of the overall market. The
Exchange believes its proposal is
reasonable because it will not cause a
pricing impact on any NOM Participant,
rather the proposal is intended to permit
NOM Participants to migrate their FIX
Ports, CTI Ports and FIX DROP Ports to
new technology at no additional cost
during the month of August 2019. This
proposal, which offers new duplicative
ports to Participants at no cost, will
allow Participants to test and maintain
continuous connection to the Exchange
during the month of August 2019.
The Proposal Represents an Equitable
Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal
allocates its fees fairly among its market
participants. The proposal is equitable
and not unfairly discriminatory. All
Participants may enter orders on NOM.
As noted above, a NOM Participant may
enter all orders on NOM through one
FIX Port. The Exchange does not require
a NOM Participant to obtain more than
one FIX Port, however, a Participant
may obtain multiple FIX Ports, a CTI
Port or a FIX DROP Port to meet its
individual business needs. This
proposal is not intended to have a
pricing impact to any NOM Participant.
37935
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.13
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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.
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–2019–056 on the subject line.
Inter-Market Competition
The proposal does not impose an
undue burden on inter-market
competition. This proposal does not
amend pricing or functionality. Rather,
this technology migration will enable
NOM Participants to continue to
connect to NOM, as is the case today,
for the entry of orders.
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–2019–056. 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
Intra-Market Competition
The proposal does not impose an
undue burden on intra-market
competition. All Participants may enter
orders on NOM. As noted above, a NOM
Participant may enter all orders on
NOM through one FIX Port. The
Exchange does not require a NOM
Participant to obtain more than one FIX
Port, however, a Participant may obtain
multiple FIX Ports, a CTI Port or a FIX
DROP Port to meet its individual
business needs. This proposal is not
intended to have a pricing impact to any
NOM Participant.
PO 00000
Frm 00111
Fmt 4703
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13 15
E:\FR\FM\02AUN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
02AUN1
37936
Federal Register / Vol. 84, No. 149 / Friday, August 2, 2019 / Notices
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–2019–056 and
should be submitted on or before
August 23,2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–16482 Filed 8–1–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33580; 812–15022]
Alaia Capital, LLC and m+ ETF Trust
July 30, 2019.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
jbell on DSK3GLQ082PROD with NOTICES
AGENCY:
Notice of an application for an order
under section 6(c) of the Investment
Company Act of 1940 (the ‘‘Act’’) for an
exemption from sections 2(a)(32),
5(a)(1), 22(d), and 22(e) of the Act and
rule 22c–1 under the Act, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
17(a)(2) of the Act, and under section
12(d)(1)(J) of the Act for an exemption
from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act. The requested
order would permit (a) activelymanaged series of certain open-end
management investment companies
(‘‘Funds’’) to issue shares redeemable in
large aggregations only (‘‘Creation
Units’’); (b) secondary market
transactions in Fund shares to occur at
negotiated market prices rather than at
net asset value (‘‘NAV’’); (c) certain
Funds to pay redemption proceeds,
under certain circumstances, more than
14 17
CFR 200.30–3(a)(12).
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18:02 Aug 01, 2019
Jkt 247001
seven days after the tender of shares for
redemption; (d) certain affiliated
persons of a Fund to deposit securities
into, and receive securities from, the
Fund in connection with the purchase
and redemption of Creation Units; (e)
certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
Funds (‘‘Funds of Funds’’) to acquire
shares of the Funds; and (f) certain
Funds (‘‘Feeder Funds’’) to create and
redeem Creation Units in-kind in a
master-feeder structure.
APPLICANTS: Alaia Capital, LLC (the
‘‘Initial Adviser’’), a Delaware limited
liability company registered as an
investment adviser under the
Investment Advisers Act of 1940 and
m+ ETF Trust (the ‘‘Trust’’), a Delaware
statutory trust registered under the Act
as an open-end management investment
company with multiple series.
FILING DATES: The application was filed
on April 22, 2019.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 23, and should
be accompanied by proof of service on
applicants, in the form of an affidavit,
or for lawyers, a certificate of service.
Pursuant to rule 0–5 under the Act,
hearing requests should state the nature
of the writer’s interest, any facts bearing
upon the desirability of a hearing on the
matter, the reason for the request, and
the issues contested. Persons who wish
to be notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549–1090;
Applicants: Alaia Capital, LLC and m+
ETF Trust, 10 Corbin Drive, Darien, CT
06820.
FOR FURTHER INFORMATION CONTACT:
Rachel Loko, Senior Counsel, at (202)
551–6883, or Holly Hunter-Ceci,
Assistant Chief Counsel, at (202) 551–
6825 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or for an applicant using the
Company name box, at https://
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as
actively-managed exchange traded
funds (‘‘ETFs’’).1 Fund shares will be
purchased and redeemed at their NAV
in Creation Units only. All orders to
purchase Creation Units and all
redemption requests will be placed by
or through an ‘‘Authorized Participant’’
which will have signed a participant
agreement with the Distributor. Shares
will be listed and traded individually on
a national securities exchange, where
share prices will be based on the current
bid/offer market. Certain Funds may
operate as Feeder Funds in a masterfeeder structure. Any order granting the
requested relief would be subject to the
terms and conditions stated in the
application.
2. Each Fund will consist of a
portfolio of securities and other assets
and investment positions (‘‘Portfolio
Instruments’’). Each Fund will disclose
on its website the identities and
quantities of the Portfolio Instruments
that will form the basis for the Fund’s
calculation of NAV at the end of the
day.
3. Shares will be purchased and
redeemed in Creation Units only and
generally on an in-kind basis. Except
where the purchase or redemption will
include cash under the limited
circumstances specified in the
application, purchasers will be required
to purchase Creation Units by
depositing specified instruments
(‘‘Deposit Instruments’’), and
shareholders redeeming their shares
will receive specified instruments
(‘‘Redemption Instruments’’). The
Deposit Instruments and the
Redemption Instruments will each
correspond pro rata to the positions in
the Fund’s portfolio (including cash
positions) except as specified in the
application.
4. Because shares will not be
individually redeemable, applicants
1 Applicants request that the order apply to the
new series of the Trust as well as to additional
series of the Trust and any other open-end
management investment company or series thereof
that currently exist or that may be created in the
future (each, included in the term ‘‘Fund’’), each of
which will operate as an actively-managed ETF.
Any Fund will (a) be advised by the Initial Adviser
or an entity controlling, controlled by, or under
common control with the Initial Adviser (each such
entity and any successor thereto is included in the
term ‘‘Adviser’’) and (b) comply with the terms and
conditions of the application. For purposes of the
requested order, the term ‘‘successor’’ is limited to
an entity that results from a reorganization into
another jurisdiction or a change in the type of
business organization.
E:\FR\FM\02AUN1.SGM
02AUN1
]]>Agencies
[Federal Register Volume 84, Number 149 (Friday, August 2, 2019)]
[Notices]
[Pages 37934-37936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16482]
[[Page 37934]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86507; File No. SR-NASDAQ-2019-056]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend The Nasdaq Options Market LLC Pricing at Options 7, Section 3
Titled ``Nasdaq Options Market--Ports and Other Services.''
July 29, 2019.
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 15, 2019, 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, II, and III, 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 The Nasdaq Options Market LLC
(``NOM'') pricing at Options 7, Section 3 titled ``Nasdaq Options
Market--Ports and Other Services.'' The amendment will describe the
pricing with respect to an upcoming technology infrastructure
migration.
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
The Exchange proposes to amend NOM pricing at Options 7, Section 3
titled ``Nasdaq Options Market--Ports and Other Services.'' During the
month of August 2019, NOM Participants will be required to transition
from current FIX Ports,\3\ CTI Ports \4\ and FIX DROP Ports \5\ to new
FIX Ports, CTI Ports and FIX DROP Ports in connection with an upcoming
technology infrastructure migration.
---------------------------------------------------------------------------
\3\ Financial Information eXchange'' or '' FIX'' is an interface
that allows Participants and their Sponsored Customers to connect,
send, and receive messages related to orders to and from the
Exchange. Features include the following: (1) Execution messages;
(2) order messages; and (3) risk protection triggers and cancel
notifications. See Chapter VI, Section 21(a)(i)(A).
\4\ Clearing Trade Interface (``CTI'') is a real-time clearing
trade update message that is sent to a Participant after an
execution has occurred and contains trade details specific to that
Participant. The information includes, among other things, the
following: (i) The Clearing Member Trade Agreement or ``CMTA'' or
The Options Clearing Corporation or ``OCC'' number; (ii) Exchange
badge or house number; (iii) the Exchange internal firm identifier;
(iv) an indicator which will distinguish electronic and non-
electronically delivered orders; (v) liquidity indicators and
transaction type for billing purposes; and (vi) capacity. See
Chapter VI, Section 19(b)(1).
\5\ FIX DROP is a real-time order and execution update message
that is sent to a Participant after an order been received/modified
or an execution has occurred and contains trade details specific to
that Participant. The information includes, among other things, the
following: (i) Executions; (ii) cancellations; (iii) modifications
to an existing order; and (iv) busts or post-trade corrections. See
Chapter VI, Section 19(b)(3).
---------------------------------------------------------------------------
Description of Migration and Pricing Impact
In connection with this migration, Participants will request new
FIX Ports, CTI Ports and FIX DROP Ports during the month of August,
which are duplicative of the type and quantity of their current ports,
at no additional cost to allow for testing of the new ports and allow
for continuous connection to the match engine during the transition
period.\6\ For example, a NOM Participant with 3 FIX Ports, 1 CTI Port
and 1 FIX DROP Port on August 1, 2019 could request 3 new FIX Ports, 1
CTI Port and 1 FIX DROP Port for the month of August 2019 at no
additional cost. The NOM Participant would be assessed only for the
legacy market ports, in this case 3 FIX Ports, 1 CTI Port and 1 FIX
DROP Port, for the month of August 2019 and would not be assessed for
the new ports, which are duplicative of the current ports. A
Participant may acquire any additional legacy ports during the month of
August 2019 and would be assessed the charges indicated in the current
Pricing Schedule. The migration does not require a Participant to
acquire any additional ports, rather the migration requires a new port
to replace any existing ports provided the Participant desired to
maintain the same number of ports.\7\ A Participant desiring to enter
orders into NOM is required to obtain 1 FIX Port. A Participant may
also obtain order and execution ports, such as a CTI Port and/or a FIX
DROP Port, to receive clearing and execution messages. The number of
additional FIX or order and execution ports obtained by a Participant
is dependent on the Participant's business needs.
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\6\ Participants would contact Market Operations to acquire new
duplicative FIX Ports, CTI Ports and FIX DROP Ports. See Options
Technical Update #2019-3.
\7\ The migration is 1:1 and therefore would not require a
Participant to acquire new ports, nor would it reduce the number of
ports needed to connect.
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Applicability to and Impact on Participants \8\
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\8\ On May 21, 2019, the SEC Division of Trading and Markets
(the ``Division'') issued fee filing guidance titled ``Staff
Guidance on SRO Rule Filings Relating to Fees'' (``Guidance'').
Within the Guidance, the Division noted, among other things, that
the purpose discussion should address ``how the fee may apply
differently (e.g., additional cost vs. additional discount) to
different types of market participants (e.g., market makers,
institutional brokers, retail brokers, vendors, etc.) and different
sizes of market participants.'' See Guidance (available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Guidance
also suggests that the purpose discussion should include numerical
examples. Where possible, the Exchange is including numerical
examples. In addition, the Exchange is providing data to the
Commission in support of its arguments herein. The Guidance covers
all aspects of a fee filing, which the Exchange has addressed
throughout this filing.
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The proposal is not intended to impose any additional fees on any
NOM Participants. All Participants may enter orders on NOM. As noted
above, a NOM Participant may enter all orders on NOM through one FIX
Port. The Exchange does not require a NOM Participant to obtain more
than one FIX Port, however, a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to meet its individual business
needs. This proposal is intended to permit a NOM Participant to migrate
its current FIX Ports, CTI Ports and FIX DROP Ports at no additional
costs during the month of August 2019 to allow for continuous
connection to the Exchange. Participants would only be assessed a fee
for their current FIX Ports, CTI Ports and FIX DROP Ports and not be
assessed a fee for any new duplicative ports they acquire in connection
with the technology
[[Page 37935]]
infrastructure migration. This proposal is not intended to have a
pricing impact.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers. The proposal is also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities. Moreover, the Exchange believes that its
proposal complies with Commission guidance on SRO fee filings that the
Commission Staff issued on May 21, 2019.\11\
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
\11\ See Guidance, supra note 8. Although the Exchange believes
that this filing complies with the Guidance, the Exchange does not
concede that the standards set forth in the Guidance are consistent
with the Exchange Act and reserves its right to challenge those
standards through administrative and judicial review, as
appropriate.
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The Proposal is Reasonable
The Exchange's proposal is reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for options transaction services that constrain
its pricing determinations in that market. The fact that this market is
competitive has long been recognized by the courts. In NetCoalition v.
Securities and Exchange Commission, the D.C. Circuit stated as follows:
``[n]o one disputes that competition for order flow is `fierce.' . . .
As the SEC explained, `[i]n the U.S. national market system, buyers and
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders
for execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \12\
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\12\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is one of several options
venues to which market participants may direct their order flow, and it
represents a small percentage of the overall market. The Exchange
believes its proposal is reasonable because it will not cause a pricing
impact on any NOM Participant, rather the proposal is intended to
permit NOM Participants to migrate their FIX Ports, CTI Ports and FIX
DROP Ports to new technology at no additional cost during the month of
August 2019. This proposal, which offers new duplicative ports to
Participants at no cost, will allow Participants to test and maintain
continuous connection to the Exchange during the month of August 2019.
The Proposal Represents an Equitable Allocation and Is Not Unfairly
Discriminatory
The Exchange believes its proposal allocates its fees fairly among
its market participants. The proposal is equitable and not unfairly
discriminatory. All Participants may enter orders on NOM. As noted
above, a NOM Participant may enter all orders on NOM through one FIX
Port. The Exchange does not require a NOM Participant to obtain more
than one FIX Port, however, a Participant may obtain multiple FIX
Ports, a CTI Port or a FIX DROP Port to meet its individual business
needs. This proposal is not intended to have a pricing impact to any
NOM Participant.
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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. This proposal does not amend pricing or functionality.
Rather, this technology migration will enable NOM Participants to
continue to connect to NOM, as is the case today, for the entry of
orders.
Intra-Market Competition
The proposal does not impose an undue burden on intra-market
competition. All Participants may enter orders on NOM. As noted above,
a NOM Participant may enter all orders on NOM through one FIX Port. The
Exchange does not require a NOM Participant to obtain more than one FIX
Port, however, a Participant may obtain multiple FIX Ports, a CTI Port
or a FIX DROP Port to meet its individual business needs. This proposal
is not intended to have a pricing impact to any NOM Participant.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\13\
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2019-056 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-2019-056. 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
[[Page 37936]]
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-2019-056 and should
be submitted on or before August 23, 2019.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-16482 Filed 8-1-19; 8:45 am]
BILLING CODE 8011-01-P
