Self-Regulatory Organizations; The Nasdaq Stock Market, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Relocate Rules From Its Current Rulebook Into Its New Rulebook Shell, 70590-70598 [2019-27593]
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70590
Federal Register / Vol. 84, No. 246 / Monday, December 23, 2019 / Notices
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSEArca–2019–81).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87775; File No. SR–
NYSEArca–2019–81]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change To
Establish Generic Listing Standards
for Derivative Securities Products That
Are Permitted To Operate in Reliance
on Rule 6c–11 Under the Investment
Company Act of 1940
lotter on DSKBCFDHB2PROD with NOTICES
December 17, 2019.
On November 1, 2019, NYSE Arca,
Inc. 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, among other
things, establish generic listing
standards for Exchange-Traded Fund
Shares that are permitted to operate in
reliance on Rule 6c-11 under the
Investment Company Act of 1940. The
proposed rule change was published for
comment in the Federal Register on
November 20, 2019.3 The Commission
has received no comment letters on the
proposed rule change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission will either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is January 4, 2020.
The Commission is extending this 45day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,5
designates February 18, 2020 as the date
by which the Commission shall either
approve or disapprove, or institute
1 15
U.S.C.78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87542
(Nov. 14, 2019), 84 FR 64170.
4 15 U.S.C. 78s(b)(2).
5 Id.
2 17
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27590 Filed 12–20–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87778; File No. SR–
NASDAQ–2019–098]
Self-Regulatory Organizations; The
Nasdaq Stock Market, LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Relocate
Rules From Its Current Rulebook Into
Its New Rulebook Shell
December 17, 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 December
6, 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 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 relocate
rules from its current Rulebook into its
new Rulebook shell.
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
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this rule change is to
relocate Nasdaq rules, including The
Nasdaq Stock Market LLC (‘‘NOM’’),
into the new Rulebook shell with some
amendments to the shell.3 Nasdaq ISE,
LLC (‘‘ISE’’), Nasdaq GEMX, LLC
(‘‘GEMX’’) and Nasdaq MRX, LLC
(‘‘MRX’’) recently relocated their rules.4
NOM proposes to relocate its rules to
align with the ISE, GEMX, MRX and BX
Rulebooks. Phlx will also relocate its
Rulebook in order to harmonize its rule
structure, where applicable, across
Nasdaq markets. The relocation and
harmonization of the Nasdaq Rule
structure is part of the Exchange’s
continued effort to promote efficiency
and structural conformity of its rules
with those of its Affiliated Exchanges.
The Exchange believes that the
placement of the Nasdaq Rules into
their new location in the shell will
facilitate the use of the Rulebook by
Members and Members of Affiliated
Exchanges.
The Exchange notes that the entire
Rulebook is not being relocated at this
time. Specifically, the Equity Rules are
not being relocated.
The Exchange proposes to update all
cross-references within the Rule to the
new relocated rule cites and also
proposes to correct certain citations.
The Exchange proposes to replace
internal rule references to simply state
‘‘this Rule’’ where the rule is citing itself
without a more specific cite included in
the Rule. For example, if NOM Chapter
VI, Section 3 refers currently to
3 Previously, the Exchange added a shell structure
to its Rulebook with the purpose of improving
efficiency and readability and to align its rules
closer to those of its five sister exchanges, The
Nasdaq Stock Market LLC; Nasdaq PHLX LLC;
Nasdaq ISE, LLC (‘‘ISE’’); Nasdaq GEMX, LLC; and
Nasdaq MRX, LLC (‘‘Affiliated Exchanges’’). The
shell structure currently contains eight (8) General
sections which, once complete, will apply a
common set of rules to the Affiliated Exchanges.
The shell structure currently contains eight (8)
Chapters which, once complete, will apply a
common set of rules to the Affiliated Exchanges.
See Securities Exchange Act Release No. 82174
(November 29, 2017), 82 FR 57492 (December 5,
2017) (SR–NOM–2017–054).
4 See Securities Exchange Act Release Nos. 86138
(June 24, 2019), 84 FR 29567 (June 18, 2019) (SR–
ISE–2019–17); 86346 (July 10, 2019) 84 FR 33999
(July 16, 2019) (SR–GEMX–2019–08); and 86424
(July 22, 2019), 84 FR 36134 (July 22, 2019) (SR–
MRX–2019–15). SR–BX–2019–36 was filed on
October 1, 2019.
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‘‘Chapter VI, Section 3’’ the Exchange
will amend the phrase to simply ‘‘this
Rule.’’ The Exchange proposes to
conform numbering and lettering in
certain rules to the remainder of the
Rulebook. The Exchange proposes to
reflect the use of the General Equity and
Options Rules in place of Equity Rules,
where applicable. Finally, the Exchange
proposes to delete any current Rules
that are reserved in the Rulebook.
General 1
The Exchange proposes to relocate
and alphabetize rule text from Rule
0111, ‘‘Adoption of Rules’’, Rule 0112,
‘‘Effective Date’’, Rule 0113
‘‘Interpretation’’, Rule 0120
‘‘Definitions,’’ and certain definitions
from Rule 0121, ‘‘Definitions in Nasdaq
By-Laws’’ into General 1. The Exchange
proposes to relocate certain definitions
from Chapter VI, Section 1 into General
1.5 The Exchange proposes to delete
certain definitions which are repetitive.6
Proposed new rule No.
The Exchange will also alphabetize the
definitions within General 1 and
conform the text where applicable.
Definitions related to the equities rules 7
will be relocated into Equity 1. The
Exchange is conforming the format of all
definitions. Finally, the Exchange notes
that the description of ‘‘MarketWatch’’
was amended to remove the phrase ‘‘a
unit of Nasdaq Regulation.’’
General 2
General 2 would be comprised of the
following rules:
Current rule No.
Section
Section
Section
Section
1
2
3
4
......................................
......................................
......................................
......................................
Section
Section
Section
Section
Section
Section
Section
Section
5 ......................................
6 ......................................
7 ......................................
8 ......................................
9 ......................................
10 ....................................
11 ....................................
12 ....................................
Section
Section
Section
Section
13
14
15
16
....................................
....................................
....................................
....................................
Reserved.
Chapter VI, Section 16, Fees, Dues and Other Charges.
Reserved.
2130, Nasdaq Ownership Restriction (re-title as Limitation on Affiliation between the Exchange and Members).
0130, Regulation of the Exchange and Its Members.
0115, Applicability.
0150, Regulatory Independence.
Reserved.
1130, Reliance on Current Membership List.
1150, Executive Representative.
1160. Contact Information Requirements.
1170, Nasdaq’s Business Continuity and Disaster Recovery Plan Testing Requirements for Members and
Options Participants Pursuant to Regulation SCI (re-title as ‘‘Business Continuity and Disaster Recovery’’).
0140, Fingerprint-Based Background Checks of Employees and Independent Contractors.
2160, Restrictions on Affiliation.
3510, Business Continuity Plans.
3520, Emergency Contact Information.
The Exchange is reserving Sections 1
and 3 at this time. The Exchange is
reserving Sections 1 and 3 at this time.
The Exchange proposes to relocate
Chapter VI, Section 16, Fees, Dues and
Other Charges, into the General section
because this rule applies to both the
equity and options products. This rule
describes the power of Nasdaq’s Board
of Directors. The Exchange notes that
the Board of Directors of Nasdaq has the
power to set fees for the Nasdaq market,
which includes fees for both options
and equities.8 The Exchange notes that
Section 7, Regulatory Independence,
was amended to remove the placeholder
for a date. Finally Rule 2170, Disruptive
Quoting and Trading Activity
Prohibited, is not being relocated as this
rule applies to equities. There is a
similar rule within Chapter III, Section
16 related to options, which is being
relocated to Options 9, Section 4. As
noted above, the equity rules are not
being relocated at this time.
General 4
The Exchange proposes to rename
General 4 from ‘‘Regulation’’ to
‘‘Registration Requirements.’’
General 5
The Exchange proposes to relocate
Nasdaq Series 8000 and 9000 into
General 5 Discipline and not change the
rule numbers. The Exchange is
proposing to delete reserved sections.
General 9
The Exchange proposes to adopt a
new General 9, titled ‘‘Regulation.’’ The
Exchange proposes to relocate the
following rules into General 9:
Proposed new rule No.
Current rule No.
Section 1 ......................................
2010A, Standards of Commercial Honor and Principles of Trade; 5320A, Prohibition Against Trading Ahead
of Customer Orders; IM–2110–4, Trading Ahead of Research Reports; IM–2110–5, Anti-Intimidation/Coordination; IM–2110–6, Confirmation of Callable Common Stock; 2120, Use of Manipulative, Deceptive or
Other Fraudulent Devices; and 2140, Interfering With the Transfer of Customer Accounts in the Context of
Employment Disputes.
2150, Customers’ Securities or Funds; and IM–2150, Segregation of Customers’ Securities.
2210, Communications with the Public; IM–2210–1. Guidelines to Ensure That Communications With the
Public Are Not Misleading; and IM–2210–4, Limitations on Use of the Exchange’s Name.
2211, Institutional Sales Material and Correspondence.
Section 2 ......................................
Section 3 ......................................
Section 4 ......................................
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5 See
note 14 below.
Exchange proposes to delete the term
‘‘Exchange Act’’ and ‘‘SEC’’ or ‘‘Commission.’’
7 The terms ‘‘Customer’’ and ‘‘Security’’ are being
relocated into Equity 1 of the Rulebook as these
terms are specific to the equity market. Further, the
6 The
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following definitions are being relocated from
Chapter I, Section 1 and Chapter VI, Section 1 into
General 1, Section: ‘‘associated person,’’ ‘‘Board,’’
‘‘Exchange,’’ ‘‘Exchange Act,’’ ‘‘he,’’ ‘‘him,’’ or
‘‘his,’’ ‘‘MarketWatch,’’ ‘‘Nasdaq Rules,’’ ‘‘Nasdaq
Regulation,’’ ‘‘primary market,’’ and ‘‘SEC’’ or
‘‘Commission.’’
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8 See NOM By-Law Article XII, Section 12.4
which provides the Board authority to set fees. In
addition, the Exchange proposes to amend the word
‘‘Participant’’ in this rule to ‘‘member’’ to clearly
indicate all members are subject to the Rule.
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Proposed new rule No.
Current rule No.
Section 5 ......................................
Section 6 ......................................
Section 7 ......................................
2212, Telemarketing.
2251, Forwarding of Proxy and Other Issuer-Related Materials.
2261, Disclosure of Financial Condition; 2262, Disclosure of Control Relationship with Issuer; and 2269, Disclosure of Participation or Interest in Primary or Secondary Distribution (re-title as ‘‘Disclosure of Financial
Condition, Control Relationship with Issuer and Participation or Interest in Primary or Secondary Distribution’’).
2266, SIPC Information.
2290, Fairness Opinions.
2090A, Know Your Customer, 2111A. Suitability (re-title ‘‘Recommendations to Customers (Suitability)’’).
5310A, Best Execution and Interpositioning.
2340, Customer Account Statements.
2341, Margin Disclosure Statement.
2360, Approval Procedures for Day-Trading Accounts; and 2361, Day-Trading Risk Disclosure Statement
(re-title as ‘‘Approval Procedures for Day-Trading Accounts’’).
2370, Borrowing From or Lending to Customers.
2430, Charges for Services Performed.
2441, Net Transactions with Customers.
2460, Payments for Market Making.
2510, Discretionary Accounts.
3010, Supervision; IM–3010–1, Standards for Reasonable Review; and IM–3010–2, Guidance on Heightened Supervision Requirements (re-title as ‘‘Supervision’’).
3012, Supervisory Control System.
3013, Annual Certification of Compliance and Supervisory Processes; and IM–3013. Annual Compliance and
Supervision Certification (re-title as ‘‘Annual Certification of Compliance and Supervisory Processes’’).
3030, Outside Business Activities of an Associated Person.
3040, Private Securities Transactions of an Associated Person.
3050, Transactions for or by Associated Persons.
3220A, Influencing or Rewarding Employees of Others.
3070, Reporting Requirements.
3080, Arbitration Disclosure to Associated Persons When Signing Form U4 (re-titled ‘‘Disclosure to Associated Persons When Signing Form U4’’).
2070A, Transactions Involving Nasdaq Employees.
3110A, Books and Records.
3120, Use of Information Obtained in Fiduciary Capacity.
3140, Approval of Change in Exempt Status Under SEC Rule 15c3–3.
3150, Reporting Requirements for Clearing Firms and IM–3150, Exemptive Relief.
3160, Extensions of Time Under Regulation T and SEC Rule 15c3–3.
2040, Nonregistered Foreign Finders.
IM–2460–1, Market Quality Program.
3011, Anti-Money Laundering Compliance Program.
2520, Margin Requirements.
3020, Fidelity Bonds.
4110A, Capital Compliance.
4120A, Regulatory Notification and Business Curtailment.
4140A, Audit.
4511A, General Requirements.
4513A, Records of Written Customer Complaints.
4512A, Customer Account Information.
4514A, Authorization Records for Negotiable Instruments Drawn From a Customer’s Account.
4515A, Approval and Documentation of Changes in Account Name or Designation.
4521A, Notifications, Questionnaires and Reports.
5230A, Payments Involving Publications that Influence the Market Price of a Security.
1090, Foreign Member.
1050, Research Analysts.
Section
Section
Section
Section
Section
Section
Section
8 ......................................
9 ......................................
10 ....................................
11 ....................................
12 ....................................
13 ....................................
14 ....................................
Section
Section
Section
Section
Section
Section
15
16
17
18
19
20
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Section 22 ....................................
Section
Section
Section
Section
Section
Section
23
24
25
26
27
28
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Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
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The word ‘‘FINRA’’ is being added in
certain places for greater clarity. The
Exchange is amending Rule 2212,
Telemarketing, to update the Rule
reference to NASD Rule 2212 to FINRA
Rule 3230 in light of a FINRA rule
change.9 The Exchange is amending
Rule 3010, Supervision, as well as IM–
3010–1, Standards for Reasonable
Review, to update the Rule reference to
NASD Rule 3010 to FINRA Rule 3170
9 See Securities Exchange Act Release No. 66279
(January 30, 2012), 77 FR 5611 (February 3, 2012)
(SR–FINRA–2011–059).
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and 3110, respectively, in light of a
FINRA rule change.10 The Exchange
proposes to amend NASD Rule 3070
references within Rule 3070, Reporting
Requirements, to FINRA Rule 4530
pursuant to a FINRA rule change.11 The
Exchange proposes to amend NASD
Rule 3110A, Books and Records, to
amend the rule references to FINRA
10 See Securities Exchange Act Release No. 71179
(December 23, 2013), 78 FR 79542 (December 30,
2013) (SR–FINRA–2013–025).
11 See Securities Exchange Act Release No. 63260
(November 5, 2010), 75 FR 69508 (November 12,
2010) (SR–FINRA–2010–034).
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Rule 4511 pursuant to a FINRA rule
change.12
Equity Rules
The Exchange proposes some changes
to the Equity Rules to re-title certain
chapters in the new Rulebook. The
Exchange proposes to relocate certain
definitions currently within Rule 0121
‘‘Definitions in the By-Laws of the
12 See Securities Exchange Act Release No. 63784
(January 27, 2011), 76 FR 5850 (February 2, 2011)
(SR–FINRA–2010–052).
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Exchange’’ into Equity 1.13 The
Exchange proposes to re-title Equity 2
from ‘‘Equity Trading Rules’’ to ‘‘Equity
Market Participants.’’ The Exchange
proposes to re-title Equity 3 from
‘‘Equity Market Participants’’ to ‘‘Equity
Trading Rules.’’ The Exchange proposes
to title Equity 4, which is currently
reserved, as ‘‘Limit Up-Limit Down.’’
The Exchange proposes to reserve
Equity 6, which is currently titled
‘‘Limit Up-Limit Down.’’ The Exchange
proposes to reserve Equity 10, which is
titled ‘‘Qualification, Listing and
Delisting of Companies.’’ Finally, the
Exchange proposes to remove Equity 11,
which is currently reserved.
Options 1
The Exchange proposes to rename
current Options 1 from ‘‘Options
Definitions’’ to ‘‘General Provisions.’’
The Exchange proposes to relocate and
alphabetize certain definitions from
Chapter I, Section 1 into proposed
General 1, Section 1. The Exchange also
proposes to relocate definitions from
Chapter VI, Section 1(a)–(c) and (h) into
General 1, Section 1. Certain definitions
within Chapter 1, Section 1 and Chapter
VI, Section 1 apply to both equities and
options. These definitions 14 will be
relocated to General 1, Section 1 from
Chapter I, Section 1 and Chapter VI,
Section 1. The Exchange proposes to
conform the definitions by adding ‘‘the
term’’ where necessary. The Exchange
proposes to amend the term ‘‘System’’
from Chapter VI, Section 1 and apply
that term to both ‘‘System’’ and
‘‘Trading System’’ and remove the
separate definition for ‘‘Trading
System’’ in Chapter I, Section I(a)(61)
which creates a circular reference to the
term ‘‘System.’’ The Exchange also
proposes to eliminate the defined term
Proposed new rule No.
‘‘Participant’’ from Chapter VI, Section
1. The Exchange defines an ‘‘Options
Participant’’ or ‘‘Participant’’ within its
rules today. The separate defined term
‘‘Participant’’ is confusing and
unnecessary. The terms ‘‘Nasdaq
Regulation’’ and ‘‘Nasdaq Rules’’ are
redundant of the same terms that was
already being relocated to General 1
from the Equity Rules. The Exchange
proposes to delete the terms ‘‘Nasdaq
Regulation’’ ‘‘Nasdaq Rules’’ in this
rule. The term ‘‘Exchange’’ is redundant
of the same terms that was already being
relocated to General 1 from the Equity
Rules. The Exchange proposes to delete
the terms ‘‘Exchange’’ and ‘‘Order Entry
Firms’’ in this rule because they are
duplicative.
In addition the Exchange proposes to
relocate the following rules into Options
1:
Current rule No.
Section 1 ......................................
Section 2 ......................................
Section 3 ......................................
Chapter I, Section 1, Definitions and Chapter VI, Section 1(a)–(c) and (h).
Chapter I, Section 2, Applicability.
Chapter I, Section 3, Regulation of Nasdaq and its Members.
The Exchange proposes to relocate
Chapter V, Section 2, MarketWatch, to
the end of the defined term within
Options 1, Section 1, which is currently
within Chapter I, Options 1, Section 1
and is being relocated to General 1 as
that term applies to both options and
equities. The sentence is merely
descriptive and adds to the already
defined term. The Exchange proposes to
relocate Chapter VII, Section 1,
Customer Orders and Order Entry
Firms, into a definition for Order Entry
Firms within Options 1, Section 1.
Options 2
The Exchange proposes to rename
Options 2 from ‘‘Options Trading
Rules’’ to ‘‘Options Market Participants’’
and relocate the following rules into this
chapter:
Proposed new rule No.
Current rule No.
Section 1 ......................................
Chapter VII, Section 2, Market Maker Registration; and Section 3 Continuing Market Maker Registration (retitle as Registration of Market Makers).
Reserved.
Reserved.
Chapter VII, Section 5, Obligations of Market Makers.
Chapter VII, Section 6, Market Maker Quotations.
Reserved.
Chapter VII, Section 7, Securities Accounts and Orders of Market Makers.
Chapter VII, Section 9, Financial Requirements for Market Makers.
Chapter VII, Section 4, Good Standing for Market Makers.
Reserved.
Section
Section
Section
Section
Section
Section
Section
Section
Section
2 ......................................
3 ......................................
4 ......................................
5 ......................................
6 ......................................
7 ......................................
8 ......................................
9 ......................................
10 ....................................
The Exchange proposes to reserve
certain rules. The Exchange proposes to
relocate Chapter VII, Section 8, Letters
of Guarantee, to Options 6, Section 4.
The Exchange proposes to relocate
Chapter VII, Sections 11, Mass
Cancellation of Trading Interest to
Options 3, Section 19, and Section 12,
Order Exposure Requirements, to
Options 3, Section 22. Chapter VII,
Section 1 was relocated to the
definitions as described herein.
Proposed new rule No.
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Chapter II, Section 1, Options Participation.
Chapter II, Section 2, Requirements for Options Participation.
Chapter II, Section 3, Persons Associated with Options Participants.
13 See note 5 above. The term ‘‘Nasdaq Manual’’
is being eliminated.
19:32 Dec 20, 2019
The Exchange proposes a new
Options Section 2A titled ‘‘Options
Participation’’ and proposes to relocate
the following rules into this chapter:
Current rule No.
Section 1 ......................................
Section 2 ......................................
Section 3 ......................................
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14 The following definitions are being relocated
from Chapter I, Section 1 and Chapter VI, Section
1 into General 1, Section 1: ‘‘associated person,’’
‘‘Board,’’ ‘‘Exchange,’’ ‘‘Exchange Act,’’ ‘‘he,’’
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‘‘him,’’ or ‘‘his,’’ ‘‘MarketWatch,’’ ‘‘Nasdaq Rules,’’
‘‘Nasdaq Regulation,’’ ‘‘primary market,’’ and
‘‘SEC’’ or Commission.’’
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Proposed new rule No.
Current rule No.
Section 4 ......................................
Chapter II, Section 4, Good Standing for Options Participants.
The Exchange proposes to reserve
Sections 5–7.
Options 3
The Exchange proposes to rename
Options 3 from ‘‘Options Market
Proposed new rule No.
Current rule No.
Section 1 ......................................
Section 2 ......................................
Chapter VI, Section 2, Days and Hours of Business.
Chapter VI, Section 3, Units of Trading; and Section 4, Meaning of Premium Quotes and Orders (combined
into one rule and retitle as ‘‘Units of Trading and Meaning of Premium Quotes and Orders’’).
Chapter VI, Section 5, Minimum Increments.
Chapter VI, Section 6, Entry and Display of Quotes.
Chapter VI, Section 7, Entry and Display of Orders.
Chapter V, Section 5, Unusual Market Conditions.
Chapter VI, Section 1(d)–(g), Definitions; and Chapter VI, Section 21, Order and Quote Protocols (re-title as
‘‘Types of Orders and Quote Protocols’’).
Chapter VI, Section 8, Nasdaq Opening and Halt Cross (re-title as ‘‘Opening and Halt Cross’’).
Chapter V, Section 3, Trading Halts; and Section 4, Resumption of Trading After a Halt (re-title as ‘‘Trading
Halts’’).
Chapter VI, Section 10, Book Processing (re-title as ‘‘Order Book Allocation’’).
Reserved.
Reserved.
Reserved.
Reserved.
Chapter VI, Section 18, Risk Protections.
Reserved.
Chapter VI, Section 22, Kill Switch.
Chapter VI, Section 23, Detection of Loss of Communication.
Chapter VII, Section 11, Mass Cancellation of Trading Interest.
Chapter V, Section 6, Nullification and Adjustment of Options Transactions including Obvious Errors.
Chapter V, Section 1, Access to and Conduct on the NOM Market; and Chapter VI, Section 20, Exchange
Sharing of Participant-Designated Risk Settings (re-title as ‘‘Access to and Conduct on NOM’’).
Chapter VII, Section 12, Limitations on Order Entry.
Chapter VI, Section 19, Data Feeds and Trade Information.
Chapter VI, Section 13, Transaction Price Binding
Chapter VI, Section 12, Anonymity.
Chapter VI, Section 17, Message Traffic Mitigation.
Chapter V, Section 9, Limitation of Liability.
Reserved.
Section
Section
Section
Section
Section
3 ......................................
4. .....................................
5 ......................................
6 ......................................
7 ......................................
Section 8 ......................................
Section 9 ......................................
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
10
11
12
13
14
15
16
17
18
19
20
21
....................................
....................................
....................................
....................................
....................................
....................................
....................................
....................................
....................................
....................................
....................................
....................................
Section
Section
Section
Section
Section
Section
Section
22
23
24
25
26
27
28
....................................
....................................
....................................
....................................
....................................
....................................
....................................
The Exchange proposes to combine
the NOM Rules and retitle them as
indicated herein. The Exchange
proposes to reserve certain rules.
Chapter VI, Section 16, Fees, Dues and
Other Charges, was relocated to General
2 and Chapter VI, Sections 14,
Authorization to Give Up and Section
15, Submission for Clearance, were
relocated to Options 6. The Exchange
amended Options 3, Section 21(b)(8) to
refer to Section 22 with describes the
limitation on orders on NOM.
Section 5.15 The Exchange also proposes
to reserve Section 6 and reserve a new
Section 10.
Options 4
Options 4A
The Exchange proposes to amend
Options 4, Options Listing Rules, to
remove Section 5, which is reserved,
and renumber Section 6, Series of
Options Contracts Open for Trading, as
The Exchange proposes to relocate
rules within new proposed Options 4A,
which is proposed to be titled ‘‘Options
Index Rules’’ as follows:
Proposed new rule No.
lotter on DSKBCFDHB2PROD with NOTICES
Participants’’ to ‘‘Options Trading
Rules’’ and relocate the following rules
into this chapter:
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Current rule No.
1 ......................................
2 ......................................
3 ......................................
4 ......................................
5 ......................................
6 ......................................
7 ......................................
8 ......................................
9 ......................................
10 ....................................
11 ....................................
12 ....................................
Chapter XIV,
Chapter XIV,
Chapter XIV,
Chapter XIV,
Chapter XIV,
Chapter XIV,
Chapter XIV,
Reserved.
Chapter XIV,
Chapter XIV,
Chapter XIV,
Chapter XIV,
Section
Section
Section
Section
Section
Section
Section
1,
2,
3,
6,
4,
5,
7,
Application of Index Rules.
Definitions.
Designation of a Broad-Based Index.
Designation of Narrow-Based and Micro-Narrow-Based Index Options.
Dissemination of Information.
Position Limits for Broad-Based Index Options.
Position Limits for Industry and Micro-Narrow Based Index Options.
Section
Section
Section
Section
8, Exemptions from Position Limits.
9, Exercise Limits
10, Trading Sessions.
11, Terms of Index Options Contracts.
15 The corresponding rule numbers are changing
for removals of certain sections.
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Proposed new rule No.
Section
Section
Section
Section
13
14
15
16
Current rule No.
....................................
....................................
....................................
....................................
Chapter XIV, Section 12, Debit Put Spread Cash Account Transactions.
Chapter XIV, Section 13, Disclaimers.
Chapter XIV, Section 14, Exercise of American-Style Index Options.
Reserved.
Options 5
Administration’’ to ‘‘Order Protection
and Locked and Crossed Markets.’’ The
current rules 16 within Options 5 are
being relocated into Options 6B.
The Exchange proposes to rename
Options 5 from ‘‘Options Trade
Proposed new rule No.
Section
Section
Section
Section
Section
1
2
3
4
5
......................................
......................................
......................................
......................................
......................................
Chapter
Chapter
Chapter
Chapter
Chapter
XII, Section 1, Definitions.
XII, Section 2, Order Protection.
XII, Section 3, Locked and Crossed Markets.
VI, Section 11(a), Order Routing.
VI, Section 11(b) to be titled ‘‘Cancellation of Orders and Error Account’’.
Options 6
The Exchange proposes to rename
Options 6 from ‘‘Order Protection and
Locked and Cross Markets’’ to ‘‘Options
Proposed new rule No.
1
2
3
4
The Exchange proposes to relocate the
following rules within Options 5 as
follows:
Current rule No.
The definitions of ‘‘Exchange Act’’
and ‘‘SEC are being removed from
Chapter XII, Section 1, ‘‘Definitions’’ as
these terms are repetitive of definitions
within General 1.
Section
Section
Section
Section
Trade Administration’’ and relocate
rules within Options 6 as follows:
Current rule No.
......................................
......................................
......................................
......................................
Chapter VI, Section 14, Authorization to Give Up.
Chapter VI, Section 15, Submission for Clearance.
Reserved.
Chapter VII, Section 8, Letters of Guarantee.
Options 6A
The Exchange proposes to relocate
rules within new proposed Options 6A
titled ‘‘Closing Transactions’’ as follows:
Proposed new rule No.
Current rule No.
Section 1 ......................................
Section 2 ......................................
Chapter X, Section 6, Contracts of Suspended Participants.
Chapter V, Section 8, Failure to Pay Premium.
Options 6B
The Exchange proposes to relocate
rules within new proposed Options 6B
titled ‘‘Exercises and Deliveries’’ as
follows:
Proposed new rule No.
Current rule No.
Section 1 ......................................
Section 2 ......................................
Section 3 ......................................
Options 5, Section 101, Exercise of Options Contracts.
Options 5, Section 102, Allocation of Exercise Notices.
Options 5, Section 103, Delivery and Payment.
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Options 6C
The Exchange proposes to relocate
rules within new proposed Options 6C
16 Options 5 currently includes the following
rules: Section 101 Exercise of Options Contracts,
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titled ‘‘Exercises and Deliveries’’ as
follows:
Section 102 Allocation of Exercise Notices, and
Section 103, Delivery and Payment.
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Proposed new rule No.
Section
Section
Section
Section
Section
Section
1
2
3
4
5
6
Current rule No.
......................................
......................................
......................................
......................................
......................................
......................................
Chapter XIII,
Chapter XIII,
Chapter XIII,
Reserved.
Chapter XIII,
Reserved.
Chapter XIII, Section 5, Joint Back
Office Participants, is being relocated to
Options 6D.
Section 1, General Rule.
Section 2, Time Margin Must Be Obtained.
Section 3, Margin Requirements.
Section 4, Margin Required Is Minimum.
Options 6D
The Exchange proposes to relocate
rules within new proposed Options 6D
Proposed new rule No.
Section
Section
Section
Section
1
2
3
4
Current rule No.
......................................
......................................
......................................
......................................
Reserved.
Reserved.
Reserved.
Chapter XIII, Section 5, Joint Back Office Participants.
With respect to the relocation of Joint
Back Office Participants, the
Supplementary Material .01 titled was
removed and the text was retained as
part of the main rule in paragraph (c) of
Section 4.
Proposed new rule No.
Section
Section
Section
Section
Section
Section
Section
Section
Section
1
2
3
4
5
6
7
8
9
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
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The Exchange proposes to relocate
rules within new proposed Options 6E
titled ‘‘Records, Reports and Audits’’ as
follows:
Chapter IX, Section 1, Maintenance, Retention and Furnishing of Books, Records and Other Information.
Chapter IX, Section 2, Reports of Uncovered Short Positions.
Chapter IX, Section 3, Financial Reports and Audits.
Reserved.
Chapter IX, Section 4, Automated Submission of Trade Data.
Chapter IX, Section 6, Risk Analysis of Market Maker Accounts.
Chapter IX, Section 5, Regulatory Cooperation.
Reserved.
Chapter V, Section 7, Audit Trail.
Options 7
Options 9
The Exchange is updating crossreferences within Options 7 to the
introductory section of the Rule as well
as Options 7, Section 4 Nasdaq Options
Market Data Distributor Fees.
The Exchange proposes to relocate
rules within new proposed Options 9,
which is currently reserved, and title
the chapter as ‘‘Business Conduct.’’ The
following rules will be relocated within
Options 9 with certain rules reserved:
Proposed new rule No.
1 ..............................
2 ..............................
3 ..............................
4 ..............................
5 ..............................
6 ..............................
7 ..............................
8 ..............................
9 ..............................
10 ............................
11 ............................
12 ............................
13 ............................
14 ............................
15 ............................
16 ............................
17 ............................
18 ............................
19 ............................
20 ............................
Options 6E
Current rule No.
The Exchange proposes to relocate
Chapter IX, Section 7, Anti-Money
Laundering Compliance Program, to
Options 9, Section 21.
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
titled ‘‘Net Capital Requirements’’ as
follows:
Current rule No.
Reserved.
Chapter III,
Reserved.
Chapter III,
Reserved.
Reserved.
Reserved.
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Chapter III,
Jkt 250001
Section 1, Adherence to Law and Section 2 Conduct and Compliance with the Rules.
Section 16, Disruptive Quoting and Trading Activity Prohibited.
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
3, Rumors.
4, Prevention of the Misuse of Material Nonpublic Information.
5, Disciplinary Action by Other Organizations.
6, Other Restrictions on Participants.
15, Significant Business Transactions of Options Clearing Participants.
7, Position Limits.
8, Exemptions from Position Limits.
9, Exercise Limits.
10, Reports Related to Position Limits.
11, Liquidation Positions.
14, Limit on Outstanding Uncovered Short Positions.
12, Other Restrictions on Options Transactions and Exercises.
13, Mandatory Systems Testing.
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Proposed new rule No.
Section 21 ............................
Section 22 ............................
Section 23 ............................
Current rule No.
Chapter IX, Section 7, Anti-Money Laundering Compliance Program.
Reserved.
Reserved.
Options 10
The Exchange proposes to relocate
rules within new proposed Options 10
titled ‘‘Doing Business with the Public’’
as follows:
Proposed new rule No.
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
1 ..............................
2 ..............................
3 ..............................
4 ..............................
5 ..............................
6 ..............................
7 ..............................
8 ..............................
9 ..............................
10 ............................
11 ............................
12 ............................
13 ............................
14 ............................
15 ............................
16 ............................
17 ............................
18 ............................
19 ............................
20 ............................
Section
Section
Section
Section
Section
21
22
23
24
25
............................
............................
............................
............................
............................
Current rule No.
Chapter XI, Section 1, Eligibility.
Chapter XI, Section 2, Registration of Options Principals.
Chapter XI, Section 3, Registration of Representatives.
Chapter XI, Section 5, Discipline, Suspension, Expulsion of Registered Persons.
Chapter XI, Section 6, Branch Offices.
Chapter XI, Section 7, Opening of Accounts.
Chapter XI, Section 8, Supervision of Accounts.
Chapter XI, Section 9, Suitability of Recommendations.
Chapter XI, Section 10, Discretionary Accounts.
Chapter XI, Section 11, Confirmation to Public Customers.
Chapter XI, Section 12, Statement of Accounts to Public Customers.
Chapter XI, Section 13, Statements of Financial Condition to Customers.
Chapter XI, Section 15, Delivery of Current Options Disclosure Documents and Prospectus.
Chapter XI, Section 16, Restrictions on Pledge and Lending of Customers’ Securities.
Chapter XI, Section 17, Transactions of Certain Customers.
Chapter XI, Section 18, Guarantees.
Chapter XI, Section 19, Profit Sharing.
Chapter XI, Section 20, Assuming Losses.
Chapter XI, Section 21, Transfer of Accounts.
Chapter XI, Section 22, Communications with Public Customers; and Section 14, Addressing of Communications
to Public Customers (re-title ‘‘Communications with Public Customers’’).
Chapter XI, Section 23, Fidelity Bond.
Chapter XI, Section 24, Public Customer Complaints.
Chapter XI, Section 25, Telephone Solicitation.
Chapter XI, Section 4, Other Affiliations of Registered Persons.
Reserved.
The Exchange proposes to reserve
Options 10, Section 25.
lotter on DSKBCFDHB2PROD with NOTICES
Options 11
The Exchange proposes to relocate
Chapter X, Section 7 titled ‘‘Penalty for
Minor Rule Violations’’ to Options 11
titled ‘‘Minor Rule Plan Violations’’ at
Section 1. The Exchange proposes to
relocate Chapter X, Section 1,
‘‘Imposition of Suspension,’’ Section 2,
‘‘Investigation Following Suspension
Violations,’’ Section 3, ‘‘Reinstatement
Following Suspension,’’ Section 4,
‘‘Failure to Obtain Reinstatement,’’
Section 5, ‘‘Termination of Rights by
Suspension’’ and Section 6, ‘‘Contracts
of Suspended Participants’’ into Options
11, Section 2, titled ‘‘Suspension.’’
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,17 in general, and furthers the
objectives of Section 6(b)(5) of the Act,18
in particular, in that it is designed to
promote just and equitable principles of
17 15
18 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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trade and to protect investors and the
public interest by bringing greater
transparency to its rules by relocating its
Rules into the new Rulebook shell
together with other rules which have
already been relocated. The Exchange’s
proposal is consistent with the Act and
will protect investors and the public
interest by harmonizing its rule
structure, where applicable, across
Nasdaq markets so that Members can
readily locate rules which cover similar
topics. The relocation and
harmonization of the Nasdaq Rule
structure is part of the Exchange’s
continued effort to promote efficiency
and conformity of its processes with
those of its Affiliated Exchanges. The
Exchange believes that the placement of
the Nasdaq Rules into their new
location in the shell will facilitate the
use of the Rulebook by Members.
Specifically, the Exchange believes that
market participants that are members of
more than one Nasdaq market will
benefit from the ability to compare
Rulebooks.
The Exchange is not substantively
amending rule text unless noted
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otherwise within this rule change. The
renumbering, re-lettering, deleting
reserved rules, amending crossreferences and other minor technical
changes will bring greater transparency
to Nasdaq’s Rule structure. ISE, GEMX
and MRX have already relocated their
Rulebooks. BX recently filed to relocate
its Rulebook.19 Phlx will also relocate
its Rulebook in order to harmonize its
rule structure, where applicable, across
Nasdaq markets. The Exchange believes
its proposal will benefit investors and
the general public by increasing the
transparency of its Rulebook and
promoting easy comparisons among the
various Nasdaq Rulebooks.
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. The
Exchange believes that the proposed
amendments do not impose an undue
19 SR–BX–2019–036
E:\FR\FM\23DEN1.SGM
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filed on October 1, 2019.
70598
Federal Register / Vol. 84, No. 246 / Monday, December 23, 2019 / Notices
burden on competition because the
amendments to relocate the Rules are
non-substantive. This rule change is
intended to bring greater clarity to the
Exchange’s Rules. Renumbering, relettering, deleting reserved rules and
amending cross-references will bring
greater transparency to Nasdaq’s Rule
structure.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 20 and Rule 19b–
4(f)(6) thereunder.21
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 22 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 23
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
Exchange could immediately relocate its
rules. According to the Exchange, the
proposal is intended to make it easier
for members to locate the various
Exchange rules, and is part of a larger
effort to reorganize the Exchange’s rules
and those of its Affiliated Exchanges.
For these reasons, the Commission
believes that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the operative delay and
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
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21 17
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designates the proposed rule change
operative upon filing.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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–2019–098, and
should be submitted on or before
January 13, 2020.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
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–2019–098 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–2019–098. 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
24 For
purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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[FR Doc. 2019–27593 Filed 12–20–19; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–87777; File No. SR–
CboeBZX–2019–097]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Adopt BZX Rule
14.11(l) to Permit the Listing and
Trading of Exchange-Traded Fund
Shares That Are Permitted To Operate
in Reliance on Rule 6c–11 Under the
Investment Company Act of 1940
December 17, 2019.
On November 15, 2019, Cboe BZX
Exchange, Inc. (‘‘BZX’’) 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,
among other things, adopt BZX Rule
14.11(l) to permit the listing and trading
of Exchange-Traded Fund Shares that
are permitted to operate in reliance on
Rule 6c–11 under the Investment
Company Act of 1940. The proposed
rule change was published for comment
in the Federal Register on November 22,
2019.3 The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
25 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87560
(Nov. 18, 2019), 84 FR 64607.
4 15 U.S.C. 78s(b)(2).
1 15
E:\FR\FM\23DEN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 246 (Monday, December 23, 2019)]
[Notices]
[Pages 70590-70598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27593]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87778; File No. SR-NASDAQ-2019-098]
Self-Regulatory Organizations; The Nasdaq Stock Market, LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Relocate Rules From Its Current Rulebook Into Its New Rulebook Shell
December 17, 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 December 6, 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 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 relocate rules from its current Rulebook
into its new Rulebook shell.
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 purpose of this rule change is to relocate Nasdaq rules,
including The Nasdaq Stock Market LLC (``NOM''), into the new Rulebook
shell with some amendments to the shell.\3\ Nasdaq ISE, LLC (``ISE''),
Nasdaq GEMX, LLC (``GEMX'') and Nasdaq MRX, LLC (``MRX'') recently
relocated their rules.\4\ NOM proposes to relocate its rules to align
with the ISE, GEMX, MRX and BX Rulebooks. Phlx will also relocate its
Rulebook in order to harmonize its rule structure, where applicable,
across Nasdaq markets. The relocation and harmonization of the Nasdaq
Rule structure is part of the Exchange's continued effort to promote
efficiency and structural conformity of its rules with those of its
Affiliated Exchanges. The Exchange believes that the placement of the
Nasdaq Rules into their new location in the shell will facilitate the
use of the Rulebook by Members and Members of Affiliated Exchanges.
---------------------------------------------------------------------------
\3\ Previously, the Exchange added a shell structure to its
Rulebook with the purpose of improving efficiency and readability
and to align its rules closer to those of its five sister exchanges,
The Nasdaq Stock Market LLC; Nasdaq PHLX LLC; Nasdaq ISE, LLC
(``ISE''); Nasdaq GEMX, LLC; and Nasdaq MRX, LLC (``Affiliated
Exchanges''). The shell structure currently contains eight (8)
General sections which, once complete, will apply a common set of
rules to the Affiliated Exchanges. The shell structure currently
contains eight (8) Chapters which, once complete, will apply a
common set of rules to the Affiliated Exchanges. See Securities
Exchange Act Release No. 82174 (November 29, 2017), 82 FR 57492
(December 5, 2017) (SR-NOM-2017-054).
\4\ See Securities Exchange Act Release Nos. 86138 (June 24,
2019), 84 FR 29567 (June 18, 2019) (SR-ISE-2019-17); 86346 (July 10,
2019) 84 FR 33999 (July 16, 2019) (SR-GEMX-2019-08); and 86424 (July
22, 2019), 84 FR 36134 (July 22, 2019) (SR-MRX-2019-15). SR-BX-2019-
36 was filed on October 1, 2019.
---------------------------------------------------------------------------
The Exchange notes that the entire Rulebook is not being relocated
at this time. Specifically, the Equity Rules are not being relocated.
The Exchange proposes to update all cross-references within the
Rule to the new relocated rule cites and also proposes to correct
certain citations. The Exchange proposes to replace internal rule
references to simply state ``this Rule'' where the rule is citing
itself without a more specific cite included in the Rule. For example,
if NOM Chapter VI, Section 3 refers currently to
[[Page 70591]]
``Chapter VI, Section 3'' the Exchange will amend the phrase to simply
``this Rule.'' The Exchange proposes to conform numbering and lettering
in certain rules to the remainder of the Rulebook. The Exchange
proposes to reflect the use of the General Equity and Options Rules in
place of Equity Rules, where applicable. Finally, the Exchange proposes
to delete any current Rules that are reserved in the Rulebook.
General 1
The Exchange proposes to relocate and alphabetize rule text from
Rule 0111, ``Adoption of Rules'', Rule 0112, ``Effective Date'', Rule
0113 ``Interpretation'', Rule 0120 ``Definitions,'' and certain
definitions from Rule 0121, ``Definitions in Nasdaq By-Laws'' into
General 1. The Exchange proposes to relocate certain definitions from
Chapter VI, Section 1 into General 1.\5\ The Exchange proposes to
delete certain definitions which are repetitive.\6\ The Exchange will
also alphabetize the definitions within General 1 and conform the text
where applicable. Definitions related to the equities rules \7\ will be
relocated into Equity 1. The Exchange is conforming the format of all
definitions. Finally, the Exchange notes that the description of
``MarketWatch'' was amended to remove the phrase ``a unit of Nasdaq
Regulation.''
---------------------------------------------------------------------------
\5\ See note 14 below.
\6\ The Exchange proposes to delete the term ``Exchange Act''
and ``SEC'' or ``Commission.''
\7\ The terms ``Customer'' and ``Security'' are being relocated
into Equity 1 of the Rulebook as these terms are specific to the
equity market. Further, the following definitions are being
relocated from Chapter I, Section 1 and Chapter VI, Section 1 into
General 1, Section: ``associated person,'' ``Board,'' ``Exchange,''
``Exchange Act,'' ``he,'' ``him,'' or ``his,'' ``MarketWatch,''
``Nasdaq Rules,'' ``Nasdaq Regulation,'' ``primary market,'' and
``SEC'' or ``Commission.''
---------------------------------------------------------------------------
General 2
General 2 would be comprised of the following rules:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Reserved.
Section 2........................ Chapter VI, Section 16, Fees, Dues
and Other Charges.
Section 3........................ Reserved.
Section 4........................ 2130, Nasdaq Ownership Restriction
(re-title as Limitation on
Affiliation between the Exchange and
Members).
Section 5........................ 0130, Regulation of the Exchange and
Its Members.
Section 6........................ 0115, Applicability.
Section 7........................ 0150, Regulatory Independence.
Section 8........................ Reserved.
Section 9........................ 1130, Reliance on Current Membership
List.
Section 10....................... 1150, Executive Representative.
Section 11....................... 1160. Contact Information
Requirements.
Section 12....................... 1170, Nasdaq's Business Continuity
and Disaster Recovery Plan Testing
Requirements for Members and Options
Participants Pursuant to Regulation
SCI (re-title as ``Business
Continuity and Disaster Recovery'').
Section 13....................... 0140, Fingerprint-Based Background
Checks of Employees and Independent
Contractors.
Section 14....................... 2160, Restrictions on Affiliation.
Section 15....................... 3510, Business Continuity Plans.
Section 16....................... 3520, Emergency Contact Information.
------------------------------------------------------------------------
The Exchange is reserving Sections 1 and 3 at this time. The
Exchange is reserving Sections 1 and 3 at this time. The Exchange
proposes to relocate Chapter VI, Section 16, Fees, Dues and Other
Charges, into the General section because this rule applies to both the
equity and options products. This rule describes the power of Nasdaq's
Board of Directors. The Exchange notes that the Board of Directors of
Nasdaq has the power to set fees for the Nasdaq market, which includes
fees for both options and equities.\8\ The Exchange notes that Section
7, Regulatory Independence, was amended to remove the placeholder for a
date. Finally Rule 2170, Disruptive Quoting and Trading Activity
Prohibited, is not being relocated as this rule applies to equities.
There is a similar rule within Chapter III, Section 16 related to
options, which is being relocated to Options 9, Section 4. As noted
above, the equity rules are not being relocated at this time.
---------------------------------------------------------------------------
\8\ See NOM By-Law Article XII, Section 12.4 which provides the
Board authority to set fees. In addition, the Exchange proposes to
amend the word ``Participant'' in this rule to ``member'' to clearly
indicate all members are subject to the Rule.
---------------------------------------------------------------------------
General 4
The Exchange proposes to rename General 4 from ``Regulation'' to
``Registration Requirements.''
General 5
The Exchange proposes to relocate Nasdaq Series 8000 and 9000 into
General 5 Discipline and not change the rule numbers. The Exchange is
proposing to delete reserved sections.
General 9
The Exchange proposes to adopt a new General 9, titled
``Regulation.'' The Exchange proposes to relocate the following rules
into General 9:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ 2010A, Standards of Commercial Honor
and Principles of Trade; 5320A,
Prohibition Against Trading Ahead of
Customer Orders; IM-2110-4, Trading
Ahead of Research Reports; IM-2110-
5, Anti-Intimidation/Coordination;
IM-2110-6, Confirmation of Callable
Common Stock; 2120, Use of
Manipulative, Deceptive or Other
Fraudulent Devices; and 2140,
Interfering With the Transfer of
Customer Accounts in the Context of
Employment Disputes.
Section 2........................ 2150, Customers' Securities or Funds;
and IM-2150, Segregation of
Customers' Securities.
Section 3........................ 2210, Communications with the Public;
IM-2210-1. Guidelines to Ensure That
Communications With the Public Are
Not Misleading; and IM-2210-4,
Limitations on Use of the Exchange's
Name.
Section 4........................ 2211, Institutional Sales Material
and Correspondence.
[[Page 70592]]
Section 5........................ 2212, Telemarketing.
Section 6........................ 2251, Forwarding of Proxy and Other
Issuer-Related Materials.
Section 7........................ 2261, Disclosure of Financial
Condition; 2262, Disclosure of
Control Relationship with Issuer;
and 2269, Disclosure of
Participation or Interest in Primary
or Secondary Distribution (re-title
as ``Disclosure of Financial
Condition, Control Relationship with
Issuer and Participation or Interest
in Primary or Secondary
Distribution'').
Section 8........................ 2266, SIPC Information.
Section 9........................ 2290, Fairness Opinions.
Section 10....................... 2090A, Know Your Customer, 2111A.
Suitability (re-title
``Recommendations to Customers
(Suitability)'').
Section 11....................... 5310A, Best Execution and
Interpositioning.
Section 12....................... 2340, Customer Account Statements.
Section 13....................... 2341, Margin Disclosure Statement.
Section 14....................... 2360, Approval Procedures for Day-
Trading Accounts; and 2361, Day-
Trading Risk Disclosure Statement
(re-title as ``Approval Procedures
for Day-Trading Accounts'').
Section 15....................... 2370, Borrowing From or Lending to
Customers.
Section 16....................... 2430, Charges for Services Performed.
Section 17....................... 2441, Net Transactions with
Customers.
Section 18....................... 2460, Payments for Market Making.
Section 19....................... 2510, Discretionary Accounts.
Section 20....................... 3010, Supervision; IM-3010-1,
Standards for Reasonable Review; and
IM-3010-2, Guidance on Heightened
Supervision Requirements (re-title
as ``Supervision'').
Section 21....................... 3012, Supervisory Control System.
Section 22....................... 3013, Annual Certification of
Compliance and Supervisory
Processes; and IM-3013. Annual
Compliance and Supervision
Certification (re-title as ``Annual
Certification of Compliance and
Supervisory Processes'').
Section 23....................... 3030, Outside Business Activities of
an Associated Person.
Section 24....................... 3040, Private Securities Transactions
of an Associated Person.
Section 25....................... 3050, Transactions for or by
Associated Persons.
Section 26....................... 3220A, Influencing or Rewarding
Employees of Others.
Section 27....................... 3070, Reporting Requirements.
Section 28....................... 3080, Arbitration Disclosure to
Associated Persons When Signing Form
U4 (re-titled ``Disclosure to
Associated Persons When Signing Form
U4'').
Section 29....................... 2070A, Transactions Involving Nasdaq
Employees.
Section 30....................... 3110A, Books and Records.
Section 31....................... 3120, Use of Information Obtained in
Fiduciary Capacity.
Section 32....................... 3140, Approval of Change in Exempt
Status Under SEC Rule 15c3-3.
Section 33....................... 3150, Reporting Requirements for
Clearing Firms and IM-3150,
Exemptive Relief.
Section 34....................... 3160, Extensions of Time Under
Regulation T and SEC Rule 15c3-3.
Section 35....................... 2040, Nonregistered Foreign Finders.
Section 36....................... IM-2460-1, Market Quality Program.
Section 37....................... 3011, Anti-Money Laundering
Compliance Program.
Section 38....................... 2520, Margin Requirements.
Section 39....................... 3020, Fidelity Bonds.
Section 40....................... 4110A, Capital Compliance.
Section 41....................... 4120A, Regulatory Notification and
Business Curtailment.
Section 42....................... 4140A, Audit.
Section 43....................... 4511A, General Requirements.
Section 44....................... 4513A, Records of Written Customer
Complaints.
Section 45....................... 4512A, Customer Account Information.
Section 46....................... 4514A, Authorization Records for
Negotiable Instruments Drawn From a
Customer's Account.
Section 47....................... 4515A, Approval and Documentation of
Changes in Account Name or
Designation.
Section 48....................... 4521A, Notifications, Questionnaires
and Reports.
Section 49....................... 5230A, Payments Involving
Publications that Influence the
Market Price of a Security.
Section 50....................... 1090, Foreign Member.
Section 51....................... 1050, Research Analysts.
------------------------------------------------------------------------
The word ``FINRA'' is being added in certain places for greater
clarity. The Exchange is amending Rule 2212, Telemarketing, to update
the Rule reference to NASD Rule 2212 to FINRA Rule 3230 in light of a
FINRA rule change.\9\ The Exchange is amending Rule 3010, Supervision,
as well as IM-3010-1, Standards for Reasonable Review, to update the
Rule reference to NASD Rule 3010 to FINRA Rule 3170 and 3110,
respectively, in light of a FINRA rule change.\10\ The Exchange
proposes to amend NASD Rule 3070 references within Rule 3070, Reporting
Requirements, to FINRA Rule 4530 pursuant to a FINRA rule change.\11\
The Exchange proposes to amend NASD Rule 3110A, Books and Records, to
amend the rule references to FINRA Rule 4511 pursuant to a FINRA rule
change.\12\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 66279 (January 30,
2012), 77 FR 5611 (February 3, 2012) (SR-FINRA-2011-059).
\10\ See Securities Exchange Act Release No. 71179 (December 23,
2013), 78 FR 79542 (December 30, 2013) (SR-FINRA-2013-025).
\11\ See Securities Exchange Act Release No. 63260 (November 5,
2010), 75 FR 69508 (November 12, 2010) (SR-FINRA-2010-034).
\12\ See Securities Exchange Act Release No. 63784 (January 27,
2011), 76 FR 5850 (February 2, 2011) (SR-FINRA-2010-052).
---------------------------------------------------------------------------
Equity Rules
The Exchange proposes some changes to the Equity Rules to re-title
certain chapters in the new Rulebook. The Exchange proposes to relocate
certain definitions currently within Rule 0121 ``Definitions in the By-
Laws of the
[[Page 70593]]
Exchange'' into Equity 1.\13\ The Exchange proposes to re-title Equity
2 from ``Equity Trading Rules'' to ``Equity Market Participants.'' The
Exchange proposes to re-title Equity 3 from ``Equity Market
Participants'' to ``Equity Trading Rules.'' The Exchange proposes to
title Equity 4, which is currently reserved, as ``Limit Up-Limit
Down.'' The Exchange proposes to reserve Equity 6, which is currently
titled ``Limit Up-Limit Down.'' The Exchange proposes to reserve Equity
10, which is titled ``Qualification, Listing and Delisting of
Companies.'' Finally, the Exchange proposes to remove Equity 11, which
is currently reserved.
---------------------------------------------------------------------------
\13\ See note 5 above. The term ``Nasdaq Manual'' is being
eliminated.
---------------------------------------------------------------------------
Options 1
The Exchange proposes to rename current Options 1 from ``Options
Definitions'' to ``General Provisions.'' The Exchange proposes to
relocate and alphabetize certain definitions from Chapter I, Section 1
into proposed General 1, Section 1. The Exchange also proposes to
relocate definitions from Chapter VI, Section 1(a)-(c) and (h) into
General 1, Section 1. Certain definitions within Chapter 1, Section 1
and Chapter VI, Section 1 apply to both equities and options. These
definitions \14\ will be relocated to General 1, Section 1 from Chapter
I, Section 1 and Chapter VI, Section 1. The Exchange proposes to
conform the definitions by adding ``the term'' where necessary. The
Exchange proposes to amend the term ``System'' from Chapter VI, Section
1 and apply that term to both ``System'' and ``Trading System'' and
remove the separate definition for ``Trading System'' in Chapter I,
Section I(a)(61) which creates a circular reference to the term
``System.'' The Exchange also proposes to eliminate the defined term
``Participant'' from Chapter VI, Section 1. The Exchange defines an
``Options Participant'' or ``Participant'' within its rules today. The
separate defined term ``Participant'' is confusing and unnecessary. The
terms ``Nasdaq Regulation'' and ``Nasdaq Rules'' are redundant of the
same terms that was already being relocated to General 1 from the
Equity Rules. The Exchange proposes to delete the terms ``Nasdaq
Regulation'' ``Nasdaq Rules'' in this rule. The term ``Exchange'' is
redundant of the same terms that was already being relocated to General
1 from the Equity Rules. The Exchange proposes to delete the terms
``Exchange'' and ``Order Entry Firms'' in this rule because they are
duplicative.
---------------------------------------------------------------------------
\14\ The following definitions are being relocated from Chapter
I, Section 1 and Chapter VI, Section 1 into General 1, Section 1:
``associated person,'' ``Board,'' ``Exchange,'' ``Exchange Act,''
``he,'' ``him,'' or ``his,'' ``MarketWatch,'' ``Nasdaq Rules,''
``Nasdaq Regulation,'' ``primary market,'' and ``SEC'' or
Commission.''
---------------------------------------------------------------------------
In addition the Exchange proposes to relocate the following rules
into Options 1:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter I, Section 1, Definitions and
Chapter VI, Section 1(a)-(c) and
(h).
Section 2........................ Chapter I, Section 2, Applicability.
Section 3........................ Chapter I, Section 3, Regulation of
Nasdaq and its Members.
------------------------------------------------------------------------
The Exchange proposes to relocate Chapter V, Section 2,
MarketWatch, to the end of the defined term within Options 1, Section
1, which is currently within Chapter I, Options 1, Section 1 and is
being relocated to General 1 as that term applies to both options and
equities. The sentence is merely descriptive and adds to the already
defined term. The Exchange proposes to relocate Chapter VII, Section 1,
Customer Orders and Order Entry Firms, into a definition for Order
Entry Firms within Options 1, Section 1.
Options 2
The Exchange proposes to rename Options 2 from ``Options Trading
Rules'' to ``Options Market Participants'' and relocate the following
rules into this chapter:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter VII, Section 2, Market Maker
Registration; and Section 3
Continuing Market Maker Registration
(re-title as Registration of Market
Makers).
Section 2........................ Reserved.
Section 3........................ Reserved.
Section 4........................ Chapter VII, Section 5, Obligations
of Market Makers.
Section 5........................ Chapter VII, Section 6, Market Maker
Quotations.
Section 6........................ Reserved.
Section 7........................ Chapter VII, Section 7, Securities
Accounts and Orders of Market
Makers.
Section 8........................ Chapter VII, Section 9, Financial
Requirements for Market Makers.
Section 9........................ Chapter VII, Section 4, Good Standing
for Market Makers.
Section 10....................... Reserved.
------------------------------------------------------------------------
The Exchange proposes to reserve certain rules. The Exchange
proposes to relocate Chapter VII, Section 8, Letters of Guarantee, to
Options 6, Section 4. The Exchange proposes to relocate Chapter VII,
Sections 11, Mass Cancellation of Trading Interest to Options 3,
Section 19, and Section 12, Order Exposure Requirements, to Options 3,
Section 22. Chapter VII, Section 1 was relocated to the definitions as
described herein.
Options 2A
The Exchange proposes a new Options Section 2A titled ``Options
Participation'' and proposes to relocate the following rules into this
chapter:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter II, Section 1, Options
Participation.
Section 2........................ Chapter II, Section 2, Requirements
for Options Participation.
Section 3........................ Chapter II, Section 3, Persons
Associated with Options
Participants.
[[Page 70594]]
Section 4........................ Chapter II, Section 4, Good Standing
for Options Participants.
------------------------------------------------------------------------
The Exchange proposes to reserve Sections 5-7.
Options 3
The Exchange proposes to rename Options 3 from ``Options Market
Participants'' to ``Options Trading Rules'' and relocate the following
rules into this chapter:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter VI, Section 2, Days and Hours
of Business.
Section 2........................ Chapter VI, Section 3, Units of
Trading; and Section 4, Meaning of
Premium Quotes and Orders (combined
into one rule and retitle as ``Units
of Trading and Meaning of Premium
Quotes and Orders'').
Section 3........................ Chapter VI, Section 5, Minimum
Increments.
Section 4........................ Chapter VI, Section 6, Entry and
Display of Quotes.
Section 5........................ Chapter VI, Section 7, Entry and
Display of Orders.
Section 6........................ Chapter V, Section 5, Unusual Market
Conditions.
Section 7........................ Chapter VI, Section 1(d)-(g),
Definitions; and Chapter VI, Section
21, Order and Quote Protocols (re-
title as ``Types of Orders and Quote
Protocols'').
Section 8........................ Chapter VI, Section 8, Nasdaq Opening
and Halt Cross (re-title as
``Opening and Halt Cross'').
Section 9........................ Chapter V, Section 3, Trading Halts;
and Section 4, Resumption of Trading
After a Halt (re-title as ``Trading
Halts'').
Section 10....................... Chapter VI, Section 10, Book
Processing (re-title as ``Order Book
Allocation'').
Section 11....................... Reserved.
Section 12....................... Reserved.
Section 13....................... Reserved.
Section 14....................... Reserved.
Section 15....................... Chapter VI, Section 18, Risk
Protections.
Section 16....................... Reserved.
Section 17....................... Chapter VI, Section 22, Kill Switch.
Section 18....................... Chapter VI, Section 23, Detection of
Loss of Communication.
Section 19....................... Chapter VII, Section 11, Mass
Cancellation of Trading Interest.
Section 20....................... Chapter V, Section 6, Nullification
and Adjustment of Options
Transactions including Obvious
Errors.
Section 21....................... Chapter V, Section 1, Access to and
Conduct on the NOM Market; and
Chapter VI, Section 20, Exchange
Sharing of Participant-Designated
Risk Settings (re-title as ``Access
to and Conduct on NOM'').
Section 22....................... Chapter VII, Section 12, Limitations
on Order Entry.
Section 23....................... Chapter VI, Section 19, Data Feeds
and Trade Information.
Section 24....................... Chapter VI, Section 13, Transaction
Price Binding
Section 25....................... Chapter VI, Section 12, Anonymity.
Section 26....................... Chapter VI, Section 17, Message
Traffic Mitigation.
Section 27....................... Chapter V, Section 9, Limitation of
Liability.
Section 28....................... Reserved.
------------------------------------------------------------------------
The Exchange proposes to combine the NOM Rules and retitle them as
indicated herein. The Exchange proposes to reserve certain rules.
Chapter VI, Section 16, Fees, Dues and Other Charges, was relocated to
General 2 and Chapter VI, Sections 14, Authorization to Give Up and
Section 15, Submission for Clearance, were relocated to Options 6. The
Exchange amended Options 3, Section 21(b)(8) to refer to Section 22
with describes the limitation on orders on NOM.
Options 4
The Exchange proposes to amend Options 4, Options Listing Rules, to
remove Section 5, which is reserved, and renumber Section 6, Series of
Options Contracts Open for Trading, as Section 5.\15\ The Exchange also
proposes to reserve Section 6 and reserve a new Section 10.
---------------------------------------------------------------------------
\15\ The corresponding rule numbers are changing for removals of
certain sections.
---------------------------------------------------------------------------
Options 4A
The Exchange proposes to relocate rules within new proposed Options
4A, which is proposed to be titled ``Options Index Rules'' as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter XIV, Section 1, Application
of Index Rules.
Section 2........................ Chapter XIV, Section 2, Definitions.
Section 3........................ Chapter XIV, Section 3, Designation
of a Broad-Based Index.
Section 4........................ Chapter XIV, Section 6, Designation
of Narrow-Based and Micro-Narrow-
Based Index Options.
Section 5........................ Chapter XIV, Section 4, Dissemination
of Information.
Section 6........................ Chapter XIV, Section 5, Position
Limits for Broad-Based Index
Options.
Section 7........................ Chapter XIV, Section 7, Position
Limits for Industry and Micro-Narrow
Based Index Options.
Section 8........................ Reserved.
Section 9........................ Chapter XIV, Section 8, Exemptions
from Position Limits.
Section 10....................... Chapter XIV, Section 9, Exercise
Limits
Section 11....................... Chapter XIV, Section 10, Trading
Sessions.
Section 12....................... Chapter XIV, Section 11, Terms of
Index Options Contracts.
[[Page 70595]]
Section 13....................... Chapter XIV, Section 12, Debit Put
Spread Cash Account Transactions.
Section 14....................... Chapter XIV, Section 13, Disclaimers.
Section 15....................... Chapter XIV, Section 14, Exercise of
American-Style Index Options.
Section 16....................... Reserved.
------------------------------------------------------------------------
Options 5
The Exchange proposes to rename Options 5 from ``Options Trade
Administration'' to ``Order Protection and Locked and Crossed
Markets.'' The current rules \16\ within Options 5 are being relocated
into Options 6B.
The Exchange proposes to relocate the following rules within
Options 5 as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter XII, Section 1, Definitions.
Section 2........................ Chapter XII, Section 2, Order
Protection.
Section 3........................ Chapter XII, Section 3, Locked and
Crossed Markets.
Section 4........................ Chapter VI, Section 11(a), Order
Routing.
Section 5........................ Chapter VI, Section 11(b) to be
titled ``Cancellation of Orders and
Error Account''.
------------------------------------------------------------------------
The definitions of ``Exchange Act'' and ``SEC are being removed
from Chapter XII, Section 1, ``Definitions'' as these terms are
repetitive of definitions within General 1.
Options 6
The Exchange proposes to rename Options 6 from ``Order Protection
and Locked and Cross Markets'' to ``Options Trade Administration'' and
relocate rules within Options 6 as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter VI, Section 14, Authorization
to Give Up.
Section 2........................ Chapter VI, Section 15, Submission
for Clearance.
Section 3........................ Reserved.
Section 4........................ Chapter VII, Section 8, Letters of
Guarantee.
------------------------------------------------------------------------
Options 6A
The Exchange proposes to relocate rules within new proposed Options
6A titled ``Closing Transactions'' as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter X, Section 6, Contracts of
Suspended Participants.
Section 2........................ Chapter V, Section 8, Failure to Pay
Premium.
------------------------------------------------------------------------
Options 6B
The Exchange proposes to relocate rules within new proposed Options
6B titled ``Exercises and Deliveries'' as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Options 5, Section 101, Exercise of
Options Contracts.
Section 2........................ Options 5, Section 102, Allocation of
Exercise Notices.
Section 3........................ Options 5, Section 103, Delivery and
Payment.
------------------------------------------------------------------------
Options 6C
The Exchange proposes to relocate rules within new proposed Options
6C titled ``Exercises and Deliveries'' as follows:
---------------------------------------------------------------------------
\16\ Options 5 currently includes the following rules: Section
101 Exercise of Options Contracts, Section 102 Allocation of
Exercise Notices, and Section 103, Delivery and Payment.
[[Page 70596]]
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter XIII, Section 1, General
Rule.
Section 2........................ Chapter XIII, Section 2, Time Margin
Must Be Obtained.
Section 3........................ Chapter XIII, Section 3, Margin
Requirements.
Section 4........................ Reserved.
Section 5........................ Chapter XIII, Section 4, Margin
Required Is Minimum.
Section 6........................ Reserved.
------------------------------------------------------------------------
Chapter XIII, Section 5, Joint Back Office Participants, is being
relocated to Options 6D.
Options 6D
The Exchange proposes to relocate rules within new proposed Options
6D titled ``Net Capital Requirements'' as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Reserved.
Section 2........................ Reserved.
Section 3........................ Reserved.
Section 4........................ Chapter XIII, Section 5, Joint Back
Office Participants.
------------------------------------------------------------------------
With respect to the relocation of Joint Back Office Participants,
the Supplementary Material .01 titled was removed and the text was
retained as part of the main rule in paragraph (c) of Section 4.
Options 6E
The Exchange proposes to relocate rules within new proposed Options
6E titled ``Records, Reports and Audits'' as follows:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1........................ Chapter IX, Section 1, Maintenance,
Retention and Furnishing of Books,
Records and Other Information.
Section 2........................ Chapter IX, Section 2, Reports of
Uncovered Short Positions.
Section 3........................ Chapter IX, Section 3, Financial
Reports and Audits.
Section 4........................ Reserved.
Section 5........................ Chapter IX, Section 4, Automated
Submission of Trade Data.
Section 6........................ Chapter IX, Section 6, Risk Analysis
of Market Maker Accounts.
Section 7........................ Chapter IX, Section 5, Regulatory
Cooperation.
Section 8........................ Reserved.
Section 9........................ Chapter V, Section 7, Audit Trail.
------------------------------------------------------------------------
The Exchange proposes to relocate Chapter IX, Section 7, Anti-Money
Laundering Compliance Program, to Options 9, Section 21.
Options 7
The Exchange is updating cross-references within Options 7 to the
introductory section of the Rule as well as Options 7, Section 4 Nasdaq
Options Market Data Distributor Fees.
Options 9
The Exchange proposes to relocate rules within new proposed Options
9, which is currently reserved, and title the chapter as ``Business
Conduct.'' The following rules will be relocated within Options 9 with
certain rules reserved:
------------------------------------------------------------------------
Proposed new rule No. Current rule No.
------------------------------------------------------------------------
Section 1.................... Reserved.
Section 2.................... Chapter III, Section 1, Adherence to Law
and Section 2 Conduct and Compliance
with the Rules.
Section 3.................... Reserved.
Section 4.................... Chapter III, Section 16, Disruptive
Quoting and Trading Activity Prohibited.
Section 5.................... Reserved.
Section 6.................... Reserved.
Section 7.................... Reserved.
Section 8.................... Chapter III, Section 3, Rumors.
Section 9.................... Chapter III, Section 4, Prevention of the
Misuse of Material Nonpublic
Information.
Section 10................... Chapter III, Section 5, Disciplinary
Action by Other Organizations.
Section 11................... Chapter III, Section 6, Other
Restrictions on Participants.
Section 12................... Chapter III, Section 15, Significant
Business Transactions of Options
Clearing Participants.
Section 13................... Chapter III, Section 7, Position Limits.
Section 14................... Chapter III, Section 8, Exemptions from
Position Limits.
Section 15................... Chapter III, Section 9, Exercise Limits.
Section 16................... Chapter III, Section 10, Reports Related
to Position Limits.
Section 17................... Chapter III, Section 11, Liquidation
Positions.
Section 18................... Chapter III, Section 14, Limit on
Outstanding Uncovered Short Positions.
Section 19................... Chapter III, Section 12, Other
Restrictions on Options Transactions and
Exercises.
Section 20................... Chapter III, Section 13, Mandatory
Systems Testing.
[[Page 70597]]
Section 21................... Chapter IX, Section 7, Anti-Money
Laundering Compliance Program.
Section 22................... Reserved.
Section 23................... Reserved.
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Options 10
The Exchange proposes to relocate rules within new proposed Options
10 titled ``Doing Business with the Public'' as follows:
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Proposed new rule No. Current rule No.
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Section 1.................... Chapter XI, Section 1, Eligibility.
Section 2.................... Chapter XI, Section 2, Registration of
Options Principals.
Section 3.................... Chapter XI, Section 3, Registration of
Representatives.
Section 4.................... Chapter XI, Section 5, Discipline,
Suspension, Expulsion of Registered
Persons.
Section 5.................... Chapter XI, Section 6, Branch Offices.
Section 6.................... Chapter XI, Section 7, Opening of
Accounts.
Section 7.................... Chapter XI, Section 8, Supervision of
Accounts.
Section 8.................... Chapter XI, Section 9, Suitability of
Recommendations.
Section 9.................... Chapter XI, Section 10, Discretionary
Accounts.
Section 10................... Chapter XI, Section 11, Confirmation to
Public Customers.
Section 11................... Chapter XI, Section 12, Statement of
Accounts to Public Customers.
Section 12................... Chapter XI, Section 13, Statements of
Financial Condition to Customers.
Section 13................... Chapter XI, Section 15, Delivery of
Current Options Disclosure Documents and
Prospectus.
Section 14................... Chapter XI, Section 16, Restrictions on
Pledge and Lending of Customers'
Securities.
Section 15................... Chapter XI, Section 17, Transactions of
Certain Customers.
Section 16................... Chapter XI, Section 18, Guarantees.
Section 17................... Chapter XI, Section 19, Profit Sharing.
Section 18................... Chapter XI, Section 20, Assuming Losses.
Section 19................... Chapter XI, Section 21, Transfer of
Accounts.
Section 20................... Chapter XI, Section 22, Communications
with Public Customers; and Section 14,
Addressing of Communications to Public
Customers (re-title ``Communications
with Public Customers'').
Section 21................... Chapter XI, Section 23, Fidelity Bond.
Section 22................... Chapter XI, Section 24, Public Customer
Complaints.
Section 23................... Chapter XI, Section 25, Telephone
Solicitation.
Section 24................... Chapter XI, Section 4, Other Affiliations
of Registered Persons.
Section 25................... Reserved.
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The Exchange proposes to reserve Options 10, Section 25.
Options 11
The Exchange proposes to relocate Chapter X, Section 7 titled
``Penalty for Minor Rule Violations'' to Options 11 titled ``Minor Rule
Plan Violations'' at Section 1. The Exchange proposes to relocate
Chapter X, Section 1, ``Imposition of Suspension,'' Section 2,
``Investigation Following Suspension Violations,'' Section 3,
``Reinstatement Following Suspension,'' Section 4, ``Failure to Obtain
Reinstatement,'' Section 5, ``Termination of Rights by Suspension'' and
Section 6, ``Contracts of Suspended Participants'' into Options 11,
Section 2, titled ``Suspension.''
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\17\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\18\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest by bringing greater transparency to its rules
by relocating its Rules into the new Rulebook shell together with other
rules which have already been relocated. The Exchange's proposal is
consistent with the Act and will protect investors and the public
interest by harmonizing its rule structure, where applicable, across
Nasdaq markets so that Members can readily locate rules which cover
similar topics. The relocation and harmonization of the Nasdaq Rule
structure is part of the Exchange's continued effort to promote
efficiency and conformity of its processes with those of its Affiliated
Exchanges. The Exchange believes that the placement of the Nasdaq Rules
into their new location in the shell will facilitate the use of the
Rulebook by Members. Specifically, the Exchange believes that market
participants that are members of more than one Nasdaq market will
benefit from the ability to compare Rulebooks.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
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The Exchange is not substantively amending rule text unless noted
otherwise within this rule change. The renumbering, re-lettering,
deleting reserved rules, amending cross-references and other minor
technical changes will bring greater transparency to Nasdaq's Rule
structure. ISE, GEMX and MRX have already relocated their Rulebooks. BX
recently filed to relocate its Rulebook.\19\ Phlx will also relocate
its Rulebook in order to harmonize its rule structure, where
applicable, across Nasdaq markets. The Exchange believes its proposal
will benefit investors and the general public by increasing the
transparency of its Rulebook and promoting easy comparisons among the
various Nasdaq Rulebooks.
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\19\ SR-BX-2019-036 filed on October 1, 2019.
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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. The Exchange believes that the
proposed amendments do not impose an undue
[[Page 70598]]
burden on competition because the amendments to relocate the Rules are
non-substantive. This rule change is intended to bring greater clarity
to the Exchange's Rules. Renumbering, re-lettering, deleting reserved
rules and amending cross-references will bring greater transparency to
Nasdaq's Rule structure.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \22\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the Exchange could immediately relocate its rules. According to
the Exchange, the proposal is intended to make it easier for members to
locate the various Exchange rules, and is part of a larger effort to
reorganize the Exchange's rules and those of its Affiliated Exchanges.
For these reasons, the Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest. Accordingly, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\24\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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-2019-098 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-2019-098. 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-NASDAQ-2019-098, and should be submitted
on or before January 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27593 Filed 12-20-19; 8:45 am]
BILLING CODE 8011-01-P
