Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 4, Rule 4703, 38366-38370 [2021-15344]
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38366
Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
equally to all Members and allocation of
listed securities between LMMs is
governed by Exchange Rule 11.8(e)(2).
Further, if an LMM does not meet the
Minimum Performance Standards for
three out of the past four months, the
LMM is subject to forfeiture of LMM
status for that LMM Security, at the
Exchange’s discretion.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 11 and paragraph (f) of Rule
19b–4 12 thereunder. 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 will 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:
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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–
CboeBZX–2021–050 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–CboeBZX–2021–050. 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–CboeBZX–2021–050 and
should be submitted on or before
August 10, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15343 Filed 7–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92409; File No. SR–BX–
2021–030]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Equity 4, Rule
4703
July 14, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 7,
2021, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
11 15
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f).
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change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Equity 4, Rule 4703,3 in light of planned
changes to the System, as described
further below. The text of the proposed
rule change is available on the
Exchange’s website at https://
listingcenter.nasdaq.com/rulebook/bx/
rules, 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
Presently, the Exchange is making
functional enhancements and
improvements to specific Order
Attributes 4 that are currently only
available via the RASH Order entry
protocol.5 Specifically, the Exchange
will be upgrading the logic and
implementation of these Order Types
and Order Attributes so that the features
are more streamlined across the
Exchange Systems and order entry
3 References herein to BX Rules in the 4000 Series
shall mean Rules in BX Equity 4.
4 An ‘‘Order Attribute’’ is a set of variable
instructions that may be associated with an Order
to further define how it will behave with respect to
pricing, execution, and/or posting to the Exchange
Book when submitted to the System. See Equity 1,
Section 1(a)(11).
5 The RASH (Routing and Special Handling)
Order entry protocol is a proprietary protocol that
allows members to enter Orders, cancel existing
Orders and receive executions. RASH allows
participants to use advanced functionality,
including discretion, random reserve, pegging and
routing. See https://nasdaqtrader.com/content/
technicalsupport/specifications/TradingProducts/
rash_sb.pdf.
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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
protocols, and will enable the Exchange
to process these Orders more quickly
and efficiently. Additionally, this
System upgrade will pave the way for
the Exchange to enhance the OUCH
Order entry protocol 6 so that
Participants may enter such Order
Types and Order Attributes via OUCH,
in addition to the RASH Order entry
protocols.7 The Exchange plans to
implement its enhancement of the
OUCH protocol sequentially, by Order
Type and Order Attribute.8
To support and prepare for these
upgrades and enhancements, the
Exchange recently submitted two rule
filings to the Commission that amended
its rules pertaining to, among other
things, Market Maker Peg Orders and
Orders with Reserve Size.9 The
Exchange now proposes to further
amend its Rules governing Order
Attributes, at Rule 4703. In particular,
the Exchange proposes to adjust the
current functionality of the Pegging 10
and Trade Now Attributes,11 as
described below, so that they align with
how the System, once upgraded, will
handle these Order Attributes going
forward.
Changes to Pegging Order Attribute
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First, the Exchange proposes to
amend Rule 4703(d), which governs the
Pegging Order Attribute. The Exchange
offers three types of Pegging: Primary
Pegging, Market Pegging, and Midpoint
6 The OUCH Order entry protocol is a proprietary
protocol that allows subscribers to quickly enter
orders into the System and receive executions.
OUCH accepts limit Orders from members, and if
there are matching Orders, they will execute. Nonmatching Orders are added to the Limit Order Book,
a database of available limit Orders, where they are
matched in price-time priority. OUCH only
provides a method for members to send Orders and
receive status updates on those Orders. See https://
www.nasdaqtrader.com/Trader.aspx?id=OUCH.
7 The Exchange designed the OUCH protocol to
enable members to enter Orders quickly into the
System. As such, the Exchange developed OUCH
with simplicity in mind, and it therefore lacks more
complex order handling capabilities. By contrast,
the Exchange specifically designed RASH to
support advanced functionality, including
discretion, random reserve, pegging and routing.
Once the System upgrades occur, then the Exchange
intends to propose further changes to its Rules to
permit participants to utilize OUCH, in addition to
RASH, to enter order types that require advanced
functionality.
8 The Exchange notes that its sister exchange, The
Nasdaq Stock Market, LLC (‘‘Nasdaq’’), has already
filed similar proposed rule changes with the
Commission. See Securities Exchange Act Release
No. 34–92180 (June 15, 2021), 86 FR 33420 (June
24, 2021) (SR–NASDAQ–2021–044).
9 See Securities Exchange Act Release No. 34–
91334 (March 16, 2021), 86 FR 15277 (March 22,
2021) (SR–BX–2021–005); Securities Exchange Act
Release No. 34–90607 (December 8, 2020), 85 FR
80842 (December 14, 2020) (SR–BX–2020–034).
10 See Rule 4703(d).
11 See Rule 4703(l).
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Pegging.12 The Rule presently provides
that if, at the time of entry, there is no
price to which a Pegged Order can be
pegged, the Order will be rejected,
provided, however, that a Displayed
Order that has Market Pegging, or an
Order with a Non-Display Attribute that
has Primary Pegging or Market Pegging,
will be accepted at its limit price. The
Exchange proposes to replace this text
by stating that if, at the time of entry,
there is no price to which a Pegged
Order, that has not been assigned a
Routing Order Attribute, can be pegged
or pegging would lead to a price at
which the Order cannot be posted, then
the Order will not be immediately
available on the Exchange Book and will
be entered once there is a permissible
price.13 The Exchange proposes this
change so as to enhance the manner in
which the Exchange presently handles
Pegged Orders in this scenario. Rather
than reject such Orders outright, and
require customers to continuously
reenter the Orders thereafter until a
pegging price emerges, which may cost
them queue priority, the Exchange
believes that it would be more efficient
and customer-friendly to simply hold a
Pegged Order until a permissible
pegging price emerges.14
A similar rationale applies to the
Exchange’s proposal to cease accepting
certain Market or Primary Pegged
Orders at their limit prices if no pegging
price is available. Because participants
presumably prefer for their orders to
post at the pegging price, the Exchange
12 See Rule 4703(d) (defining ‘‘Primary Pegging’’
as pegging with reference to the inside quotation on
the same side of the market, ‘‘Market Pegging’’ as
pegging with reference to the inside quotation on
the opposite side of the market, and ‘‘Midpoint
Pegging’’ as pegging with reference to the midpoint
between the inside bid and the inside offer).
13 This change is applicable to Primary, Market
and Midpoint Pegging Orders entered via RASH/
FIX; OUCH/FLITE Midpoint Pegging behavior is not
affected by this change. The Exchange also proposes
to amend existing language in this provision which
states that ‘‘if the Inside Bid and Inside Offer are
crossed or if there is no Inside Bid and/or Inside
Offer, the Order will be cancelled or rejected.’’ The
proposed amendment would specify that this
language applies only to Orders with Midpoint
Pegging entered through OUCH or FLITE and also
replace the phrase ‘‘will be cancelled or rejected’’
with ‘‘will not be accepted’’ (to render the text
consistent with the analogous Nasdaq rule). The
proposed changes to pegged orders entered through
RASH or FIX will allow the Exchange to handle the
Order more consistent with the customer intended
instruction, and are necessary to facilitate
forthcoming System enhancements.
14 Meanwhile, the Exchange proposes to amend
the Rule to state that if a Pegged Order is assigned
a Routing Order Attribute, and a permissible
pegging price is not available upon entry, then the
Order will continue to be rejected. The Exchange
proposes to retain existing practice for Pegged
Orders with Routing Order Attributes because the
Exchange is not yet prepared to make similar
changes to such Orders, although it contemplates
doing so in the near future.
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38367
believes that participants would prefer
for the Exchange to hold such orders
until a permissible pegging price
emerges, rather than post the orders at
their limit prices.15 16
The Exchange proposes similar
changes to the paragraph of Rule
4703(d) that applies to Pegged Orders
entered through RASH or FIX that
posted to the Exchange Book. The text
presently provides that if the price to
which an Order is pegged is not
available, the Order will be rejected.
The Exchange proposes instead to state
that if the price to which an Order is
pegged becomes unavailable or pegging
would lead to a price at which the Order
cannot be posted,17 then the Exchange
will remove the Order from the
Exchange Book and re-enter it once
there is a permissible price. Again, the
Exchange proposes this change to
enhance and make the System more
efficient by providing for the Exchange
to re-post the Pegged Orders rather than
rejecting them when there is no
permissible pegging price and requiring
participants to re-enter them once a
valid price becomes available.18 The
15 When a Pegged Order lacks a pegging price or
a permissible pegging price, the System will not
wait indefinitely for a pegging price or a
permissible pegging price to become available.
Instead, the System will cancel the Order if no
permissible pegging price becomes available within
one second after Order entry or after the Order was
removed due to the lack of a permissible pegging
price and no longer available on the Book. The
Exchange may, in the exercise of its discretion,
modify the length of this maximum time period by
posting advance notice of the applicable new time
period on its website.
16 In this paragraph of Rule 4703(d), the Exchange
again proposes to state that it will continue to reject
a Pegged Order entered through RASH or FIX when
a permissible pegging price is unavailable, if the
Pegged Order is assigned a Routing Order Attribute.
The Exchange will continue to accept certain
Market and Primary Pegged Orders at their limit
price where they have Routing Order Attributes.
The Exchange proposes to retain existing practice
for Pegged Orders with Routing Order Attributes
because the Exchange is not yet prepared to make
similar changes to such Orders, although it
contemplates doing so in the near future.
17 An example of a scenario where pegging would
lead to a price at which an Order cannot be posted
is as follows. Assume that the NBBO is $0.0002 ×
$0.0003. A Primary Pegged Order to buy is entered
with a passive offset amount of $0.0003. This would
result in the Order being made unavailable by the
Exchange as ¥$0.0001 is not a permissible price.
Currently, the Exchange accepts such Orders at its
limit price, and will post the Orders to the
Exchange Book in accordance with the parameters
that apply to the underlying Order Type.
18 The Exchange proposes to apply a similar time
limitation to the holding period prescribed above.
Similarly, the Exchange proposes to add that for an
Order with Midpoint Pegging, if the Inside Bid and
Inside Offer become crossed, or there is no Inside
Bid or Inside Offer, the System will cancel the
Order if no permissible price becomes available
within one second after the Order was removed and
no longer available on the Exchange Book (the
Exchange may, in the exercise of its discretion
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Exchange notes that the proposed
change will not apply to Pegged Orders
with Routing Attributes assigned to
them; the existing Rule functionality
will continue to apply to those Orders.
Rule 4703(d) also subjects Pegging
Orders to collars, meaning that any
portion of a Pegging Order that would 19
execute, either on the Exchange or when
routed to another market center, at a
price of more than $0.25 or 5 percent
worse than the NBBO at the time when
the order reaches the System, whichever
is greater, will be cancelled. Although
the Rule states that it applies this collar
to Orders with Primary and Market
Pegging, the Exchange has always
intended for the collar to also apply to
Orders with Midpoint Pegging, and in
practice, it does so. The failure of the
Rule to reflect the application of the
collar to Midpoint Pegged Orders was
an unintended omission. The Exchange
now proposes to revise Rule 4703(d) to
correct this omission.
Specifically, rather than require a
participant to manually send a Trade
Now instruction whenever an Order
entered through OUCH or FLITE
becomes locked, the proposed amended
Rule will allow for a participant to
enable Trade Now functionality on a
port-level basis for all Order entry
protocols and for all Order Types that
support Trade Now, as well as on an
order-by-order basis, for the NonDisplayed Order Type, when entered
through OUCH or FLITE.21 For Orders
entered through RASH or FIX, Trade
Now will be available on an order-byorder basis for all Order Types that
support Trade Now. The proposal will
not extend Trade Now functionality to
new Order Types.22
The Exchange intends to implement
the foregoing changes during the Third
Quarter of 2021. The Exchange will
issue an Equity Trader Alert at least 7
days in advance of implementing the
changes.
Changes to the Trade Now Order
Attribute
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,23 in general, and furthers the
objectives of Section 6(b)(5) of the Act,24
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
The Exchange believes that its
proposed amendments to the Pegging
Order Attribute, at Rule 4703(d), are
consistent with the Act. The proposals
to eliminate the functionality that
provides for the System to reject certain
Pegged Orders that lack a permissible
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Additionally, the Exchange proposes
to amend its rules governing the Trade
Now Attribute, at Rule 4703(l). Pursuant
to Rule 4703(l), Trade Now is an Order
Attribute that allows a resting Order that
becomes locked by an incoming
Displayed Order to execute against the
available size of a contra-side locking
Order as a liquidity taker.
The Exchange proposes to amend
Trade Now by streamlining and
simplifying the instructions that
participants must enter to address the
handling of their orders in various
locking or crossing scenarios.20
modify the length of this one second time period
by posting advance notice of the applicable time
period on its website). For an Order with Midpoint
Pegging with a Routing Attribute, the new one
second time period will be applicable. The
Exchange notes that it had inadvertently omitted
from the existing Rule portions of this new
proposed language that addresses the handling of
Midpoint Pegged Orders if the Inside Bid or Inside
Offer become crossed or if there is no Inside Bid
or Inside Offer, even though this provision was
intended to mirror a corresponding rule 4703(d) in
the Nasdaq Rulebook. The proposal corrects this
omission.
19 Additionally, the Exchange proposes to replace
the word ‘‘would’’ with ‘‘could’’ in this provision,
so as to clarify that collars apply in circumstances
in which Pegged Orders might execute, but do not
necessarily do so. An example of a circumstance in
which such Orders do not execute is as follows.
Assume that the NBBO is $10.00 × $10.01. A Market
Pegged Order to buy posts at $10.01. The NBBO
then updates to $10.00 × $11.00. Because re-pricing
and posting the Market Pegged Order would result
in the Order being available on the Book and
executable at $11.00 (outside of the collars), the
Order will be canceled.
20 The Exchange notes that the Rule presently
does not refer to crossing scenarios. The Exchange
proposes to add such references for completeness
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and consistency with the corresponding rules of
Nasdaq and Nasdaq PHLX. An example of a
crossing scenario is as follows. A non-displayed
Order to buy rests on the Book at $0.9995.
Thereafter, a Post Only Order to sell is entered at
$0.9994, which would post on the Book and display
at $0.0014 [sic], thereby crossing the non-displayed
Order as the price improvement requirements were
not met.
21 This proposed change in functionality for
OUCH and FLITE is enabled by the migration of
Trade Now to the Exchange’s matching System.
22 The Exchange proposes to add language to Rule
4703(l) to state that Trade Now allows a resting
Order that becomes locked ‘‘or crossed, as
applicable at its non-displayed price’’ by the
‘‘posted price’’ of an incoming Displayed Order to
execute against a locking or crossing Order(s)
automatically. The Exchange proposes to add the
phrase ‘‘or crossed, as applicable, at its nondisplaced [sic] price’’ for completeness. It also
proposes to add the phrase ‘‘posted price’’ for
purposes of clarity. It merely communicates that the
incoming Displayed Order first posts to the
Exchange Book, thereby locking or crossing the
resting Order at its non-displayed price.
23 15 U.S.C. 78f(b).
24 15 U.S.C. 78f(b)(5).
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Sfmt 4703
pegging price, or to post the Orders at
their limit price, are consistent with the
Act because they eliminate unwarranted
inefficiencies that arise when
participants must repeatedly re-enter
rejected Pegged Orders until a
permissible price becomes
available.25 26 It is also consistent with
the Act to maintain the existing practice
in the Rule of rejecting a Pegged Order
without a permissible pegging price
where the Order has been assigned a
Routing Attribute. The Exchange is not
yet prepared to hold such Orders in the
same way that it proposes to do so for
Pegged Orders without Routing
Attributes, although it contemplates
doing so in the near future.
Moreover, the proposal to amend Rule
4703(d) to state expressly that Midpoint
Pegging Orders are subject to price
collars, like Orders with Primary and
Market Pegging, will correct an
unintended omission and ensure that
the Rule is consistent with existing
Exchange practice and with customer
expectations. The application of these
collars will prevent Pegged Orders from
having prices that deviate too far away
from where the security was trading
when the Order was first entered.27
The Exchange’s proposals to amend
its rules governing the Trade Now
Attribute, at Rule 4703(l), is consistent
with the Act. The proposal will
25 The Exchange notes that as part of this
proposed change, if there is no Pegging Price upon
entry for a Displayed Order that has Market
Pegging, or an Order with a Non-Display Attribute
that has Primary Pegging or Market Pegging, then
it will no longer accept such Orders at their limit
price. The Exchange believes that this proposed
change is consistent with the Act because it better
aligns with customer intentions for Pegged Orders
to post at a Pegging Price. That is, the Exchange
believes that participants prefer for Pegged Orders
to be entered at a Pegging Price, rather than its
entered limit price, even if that means that the
Order must wait for a Pegging Price to become
available. As discussed above, the Exchange does
not propose this change for Pegged Orders with
Routing Attributes.
26 It is also consistent with the Act to limit the
time period for which the Exchange will hold,
without canceling, Pegged Orders for which there
is no pegging price or permissible pegging price
because the Exchange does not believe that
customers would want the Exchange to hold their
orders indefinitely. Moreover, holding such orders
indefinitely would encumber the Exchange’s
System. The Exchange believes that a one second
holding period for such orders is long enough to
provide the above-stated efficiencies for
participants, but not too long as to encumber them.
However, the Exchange believes that it is reasonable
to reserve discretion to alter the holding period,
from time to time, should it determine that doing
so better meets the needs of customers or its System
resources.
27 Additionally, the Exchange believes that it is
consistent with the Act to replace the word
‘‘would’’ with ‘‘could’’ in this provision, because
doing so would clarify that collars apply in
circumstances in which Pegged Orders might
execute, but do not necessarily do so. See supra,
n.19.
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streamline and simplify the instructions
that participants must enter to address
the handling of their orders in various
locking or crossing scenarios. Rather
than require a participant to manually
send a Trade Now instruction whenever
an Order entered through OUCH or
FLITE becomes locked, the proposed
amended Rule will allow for a
participant to enable Trade Now
functionality on a port-level basis for all
Order entry protocols and for all Order
Types that support Trade Now, as well
as on an order-by-order basis, for the
Non-Displayed Order Type, when
entered through OUCH and FLITE.28
Furthermore, it is consistent with the
Act to add language to Rule 4703(l) to
state that Trade Now allows a resting
Order that becomes locked ‘‘or crossed,
as applicable, at its non-displayed
price’’ by the ‘‘posted price’’ of an
incoming Displayed Order to execute
against a locking or crossing Order(s)
automatically. The Exchange proposes
to add the phrase ‘‘or crossed, as
applicable, at its non-displayed price’’
for completeness. The Exchange also
proposes to add the phrase ‘‘posted
price’’ for purposes of clarity. It merely
communicates that the incoming
Displayed Order first posts to the
Nasdaq Book, thereby locking or
crossing the resting Order at its nondisplayed price.
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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. As a general
principle, the proposed changes are
reflective of the significant competition
among exchanges and non-exchange
venues for order flow. In this regard,
proposed changes that facilitate
enhancements to the Exchange’s System
and order entry protocols as well as
those that amend and clarify the
Exchange’s Rules regarding its Order
Attributes, are pro-competitive because
they bolster the efficiency, integrity, and
overall attractiveness of the Exchange in
an absolute sense and relative to its
peers.
Moreover, none of the proposed
changes will unduly burden intramarket competition among various
Exchange participants. Participants will
experience no competitive impact from
its proposals to hold (up to one second),
rather than reject (or accept at their limit
28 As noted above, for Orders entered through
RASH or FIX, Trade Now will be available on an
order-by-order basis for all Order Types that
support Trade Now.
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price), Pegging Orders (other than those
with Routing Attributes) in
circumstances in which no permissible
pegging price is available, as these
proposals will merely eliminate
unwarranted inefficiencies that ensue
from the System requiring participants
to repeatedly re-enter Pegged Orders
until a price becomes available, or the
System posting Pegged Orders at their
limit prices, if there is no pegging price.
Moreover, the proposal to amend Rule
4703(d) to state expressly that Midpoint
Pegging Orders are subject to price
collars, like Orders with Primary and
Market Pegging, will have no
competitive impact as the proposal is
consistent with existing Exchange
practice and with customer
expectations.
The Exchange’s proposals to amend
its rules governing Trade Now will have
no competitive impact on participants
other than by rendering these Order
Attributes more efficient and easier for
participants to utilize.
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 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 29 and Rule 19b–
4(f)(6) thereunder.30
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
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.
PO 00000
29 15
30 17
Frm 00106
Fmt 4703
Sfmt 4703
38369
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2021–030 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–BX–2021–030. 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–BX–2021–030, and should
be submitted on or before August 10,
2021.
31 17
E:\FR\FM\20JYN1.SGM
CFR 200.30–3(a)(12).
20JYN1
38370
Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15344 Filed 7–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92402; File No. SR–ICC–
2021–015]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change Relating to the
ICC Governance Playbook, ICC Risk
Management Framework, and ICC
Treasury Operations Policies and
Procedures
July 14, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934, (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 30,
2021, ICE Clear Credit LLC (‘‘ICC’’) filed
with the Securities and Exchange
Commission the proposed rule change
as described in Items I, II, and III below,
which Items have been prepared
primarily by ICC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The principal purpose of the
proposed rule change is to make
changes to the Governance Playbook,
Risk Management Framework, and
Treasury Operations Policies and
Procedures (‘‘Treasury Policy’’)
(together, the ‘‘Documents’’). These
revisions do not require any changes to
the ICC Clearing Rules (the ‘‘Rules’’).
khammond on DSKJM1Z7X2PROD with NOTICES
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, ICC
included statements concerning the
purpose of and basis for the proposed
rule change, security-based swap
submission, or advance notice and
discussed any comments it received on
the proposed rule change, securitybased swap submission, or advance
notice. The text of these statements may
be examined at the places specified in
Item IV below. ICC has prepared
summaries, set forth in sections (A), (B),
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
17:00 Jul 19, 2021
Jkt 253001
and (C) below, of the most significant
aspects of these statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
ICC proposes amendments to its
Governance Playbook, Risk Management
Framework, and Treasury Policy to
update descriptions of certain internal
committees and make other clarification
or clean-up changes. ICC maintains the
Participant Review Committee (‘‘PRC’’)
and the Credit Review Subcommittee of
the PRC (‘‘CRS’’) (together, the
‘‘Committees’’), which are internal
committees that assist in fulfilling
counterparty review responsibilities
with respect to ICC’s Clearing
Participants (‘‘CPs’’) and financial
service providers (‘‘FSPs’’). The
proposed changes amend descriptions
related to membership composition,
meeting frequency, and responsibilities
of the Committees in the Documents to
reflect recent changes to the
Committees’ charters. ICC believes that
such revisions will facilitate the prompt
and accurate clearance and settlement of
securities transactions and derivative
agreements, contracts, and transactions
for which it is responsible. ICC proposes
to make such changes effective
following Commission approval of the
proposed rule change. The proposed
revisions are described in detail as
follows.
I. Governance Playbook
The Governance Playbook contains
information regarding the roles and
responsibilities of the Board and various
committees at ICC. ICC proposes
amendments in respect of the
Committees in Section IV (Committees)
to reflect recent changes to their
charters. ICC proposes a grammatical
edit to refer to ‘‘financial services
providers’’ as ‘‘financial service
providers’’ in the description of the PRC
and throughout the document. ICC
proposes updated language on the
membership composition of the PRC,
including to add the ICC Risk Oversight
Officer as a member. With respect to the
CRS, the proposed changes remove the
authority to approve FSPs and specify
that the CRS has an advisory role. In
this role, the CRS may make
recommendations to the PRC with
respect to matters of creditworthiness of
CPs and creditworthiness and
performance of FSPs. The proposed
changes also update the membership
composition of the CRS to include the
Risk Oversight Officer and remove the
ICC Risk Management representative as
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
a voting member. Risk Management
representatives will participate as nonvoting members and continue to present
materials to allow the CRS to perform its
responsibilities and duties.
II. Risk Management Framework
ICC proposes conforming revisions to
the Risk Management Framework to
update descriptions of the Committees
and to make other clarification or cleanup changes. ICC proposes to amend
Section II (Governance and
Organization) to update a chart that
details the governance and committee
structure at ICC. The updated chart
indicates that the Intercontinental
Exchange, Inc. (‘‘ICE, Inc.’’) Enterprise
Risk Management Department (‘‘ERM’’)
reports to the Board and corrects a
typographical error to replace the ‘‘BCP
Oversight Committee’’ with the ‘‘BCP &
DR Oversight Committee.’’ 3 In Section
II.A (Committees), the proposed changes
further clarify the review and approval
process of the policies and procedures
that comprise ICC’s overall risk
management framework, which consists
of review by the Risk Committee and
review and approval by the Board at
least annually.
In Section II.A (Committees), ICC also
proposes to update descriptions of the
Committees to align with their amended
charters. ICC proposes a grammatical
edit to refer to ‘‘financial services
providers’’ as ‘‘financial service
providers’’ and a footnote to further
define the entities included as FSPs.
The proposed changes specify that the
PRC meets at least quarterly and more
frequently as needed. Additionally, the
proposed changes further distinguish
PRC and CRS responsibilities with
respect to FSPs, noting that the PRC is
responsible for overseeing the due
diligence and approval of FSPs and the
CRS is responsible for overseeing initial
due diligence and monitoring ongoing
credit due diligence for FSPs. ICC also
proposes language describing the
advisory role of the CRS to the PRC for
matters regarding the creditworthiness
of CPs and the creditworthiness and
performance of FSPs. ICC further
proposes to amend Appendix 1 to the
document to update language related to
the membership composition of the
PRC, including to add the Risk
3 ERM provides the oversight and framework for
identifying, assessing, managing, monitoring and
reporting on risk across the ICE, Inc. organization
and has dedicated resources focused on various
ICE, Inc. business units, including ICC. The ICC
BCP & DR Oversight Committee assists in fulfilling
oversight responsibilities with respect to business
continuity planning (‘‘BCP’’) and disaster recovery
(‘‘DR’’) for ICC.
E:\FR\FM\20JYN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 136 (Tuesday, July 20, 2021)]
[Notices]
[Pages 38366-38370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15344]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92409; File No. SR-BX-2021-030]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Equity 4,
Rule 4703
July 14, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 7, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Equity 4, Rule 4703,\3\ in light of
planned changes to the System, as described further below. The text of
the proposed rule change is available on the Exchange's website at
https://listingcenter.nasdaq.com/rulebook/bx/rules, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\3\ References herein to BX Rules in the 4000 Series shall mean
Rules in BX Equity 4.
---------------------------------------------------------------------------
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
Presently, the Exchange is making functional enhancements and
improvements to specific Order Attributes \4\ that are currently only
available via the RASH Order entry protocol.\5\ Specifically, the
Exchange will be upgrading the logic and implementation of these Order
Types and Order Attributes so that the features are more streamlined
across the Exchange Systems and order entry
[[Page 38367]]
protocols, and will enable the Exchange to process these Orders more
quickly and efficiently. Additionally, this System upgrade will pave
the way for the Exchange to enhance the OUCH Order entry protocol \6\
so that Participants may enter such Order Types and Order Attributes
via OUCH, in addition to the RASH Order entry protocols.\7\ The
Exchange plans to implement its enhancement of the OUCH protocol
sequentially, by Order Type and Order Attribute.\8\
---------------------------------------------------------------------------
\4\ An ``Order Attribute'' is a set of variable instructions
that may be associated with an Order to further define how it will
behave with respect to pricing, execution, and/or posting to the
Exchange Book when submitted to the System. See Equity 1, Section
1(a)(11).
\5\ The RASH (Routing and Special Handling) Order entry protocol
is a proprietary protocol that allows members to enter Orders,
cancel existing Orders and receive executions. RASH allows
participants to use advanced functionality, including discretion,
random reserve, pegging and routing. See https://nasdaqtrader.com/content/technicalsupport/specifications/TradingProducts/rash_sb.pdf.
\6\ The OUCH Order entry protocol is a proprietary protocol that
allows subscribers to quickly enter orders into the System and
receive executions. OUCH accepts limit Orders from members, and if
there are matching Orders, they will execute. Non-matching Orders
are added to the Limit Order Book, a database of available limit
Orders, where they are matched in price-time priority. OUCH only
provides a method for members to send Orders and receive status
updates on those Orders. See https://www.nasdaqtrader.com/Trader.aspx?id=OUCH.
\7\ The Exchange designed the OUCH protocol to enable members to
enter Orders quickly into the System. As such, the Exchange
developed OUCH with simplicity in mind, and it therefore lacks more
complex order handling capabilities. By contrast, the Exchange
specifically designed RASH to support advanced functionality,
including discretion, random reserve, pegging and routing. Once the
System upgrades occur, then the Exchange intends to propose further
changes to its Rules to permit participants to utilize OUCH, in
addition to RASH, to enter order types that require advanced
functionality.
\8\ The Exchange notes that its sister exchange, The Nasdaq
Stock Market, LLC (``Nasdaq''), has already filed similar proposed
rule changes with the Commission. See Securities Exchange Act
Release No. 34-92180 (June 15, 2021), 86 FR 33420 (June 24, 2021)
(SR-NASDAQ-2021-044).
---------------------------------------------------------------------------
To support and prepare for these upgrades and enhancements, the
Exchange recently submitted two rule filings to the Commission that
amended its rules pertaining to, among other things, Market Maker Peg
Orders and Orders with Reserve Size.\9\ The Exchange now proposes to
further amend its Rules governing Order Attributes, at Rule 4703. In
particular, the Exchange proposes to adjust the current functionality
of the Pegging \10\ and Trade Now Attributes,\11\ as described below,
so that they align with how the System, once upgraded, will handle
these Order Attributes going forward.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 34-91334 (March 16,
2021), 86 FR 15277 (March 22, 2021) (SR-BX-2021-005); Securities
Exchange Act Release No. 34-90607 (December 8, 2020), 85 FR 80842
(December 14, 2020) (SR-BX-2020-034).
\10\ See Rule 4703(d).
\11\ See Rule 4703(l).
---------------------------------------------------------------------------
Changes to Pegging Order Attribute
First, the Exchange proposes to amend Rule 4703(d), which governs
the Pegging Order Attribute. The Exchange offers three types of
Pegging: Primary Pegging, Market Pegging, and Midpoint Pegging.\12\ The
Rule presently provides that if, at the time of entry, there is no
price to which a Pegged Order can be pegged, the Order will be
rejected, provided, however, that a Displayed Order that has Market
Pegging, or an Order with a Non-Display Attribute that has Primary
Pegging or Market Pegging, will be accepted at its limit price. The
Exchange proposes to replace this text by stating that if, at the time
of entry, there is no price to which a Pegged Order, that has not been
assigned a Routing Order Attribute, can be pegged or pegging would lead
to a price at which the Order cannot be posted, then the Order will not
be immediately available on the Exchange Book and will be entered once
there is a permissible price.\13\ The Exchange proposes this change so
as to enhance the manner in which the Exchange presently handles Pegged
Orders in this scenario. Rather than reject such Orders outright, and
require customers to continuously reenter the Orders thereafter until a
pegging price emerges, which may cost them queue priority, the Exchange
believes that it would be more efficient and customer-friendly to
simply hold a Pegged Order until a permissible pegging price
emerges.\14\
---------------------------------------------------------------------------
\12\ See Rule 4703(d) (defining ``Primary Pegging'' as pegging
with reference to the inside quotation on the same side of the
market, ``Market Pegging'' as pegging with reference to the inside
quotation on the opposite side of the market, and ``Midpoint
Pegging'' as pegging with reference to the midpoint between the
inside bid and the inside offer).
\13\ This change is applicable to Primary, Market and Midpoint
Pegging Orders entered via RASH/FIX; OUCH/FLITE Midpoint Pegging
behavior is not affected by this change. The Exchange also proposes
to amend existing language in this provision which states that ``if
the Inside Bid and Inside Offer are crossed or if there is no Inside
Bid and/or Inside Offer, the Order will be cancelled or rejected.''
The proposed amendment would specify that this language applies only
to Orders with Midpoint Pegging entered through OUCH or FLITE and
also replace the phrase ``will be cancelled or rejected'' with
``will not be accepted'' (to render the text consistent with the
analogous Nasdaq rule). The proposed changes to pegged orders
entered through RASH or FIX will allow the Exchange to handle the
Order more consistent with the customer intended instruction, and
are necessary to facilitate forthcoming System enhancements.
\14\ Meanwhile, the Exchange proposes to amend the Rule to state
that if a Pegged Order is assigned a Routing Order Attribute, and a
permissible pegging price is not available upon entry, then the
Order will continue to be rejected. The Exchange proposes to retain
existing practice for Pegged Orders with Routing Order Attributes
because the Exchange is not yet prepared to make similar changes to
such Orders, although it contemplates doing so in the near future.
---------------------------------------------------------------------------
A similar rationale applies to the Exchange's proposal to cease
accepting certain Market or Primary Pegged Orders at their limit prices
if no pegging price is available. Because participants presumably
prefer for their orders to post at the pegging price, the Exchange
believes that participants would prefer for the Exchange to hold such
orders until a permissible pegging price emerges, rather than post the
orders at their limit prices.\15\ \16\
---------------------------------------------------------------------------
\15\ When a Pegged Order lacks a pegging price or a permissible
pegging price, the System will not wait indefinitely for a pegging
price or a permissible pegging price to become available. Instead,
the System will cancel the Order if no permissible pegging price
becomes available within one second after Order entry or after the
Order was removed due to the lack of a permissible pegging price and
no longer available on the Book. The Exchange may, in the exercise
of its discretion, modify the length of this maximum time period by
posting advance notice of the applicable new time period on its
website.
\16\ In this paragraph of Rule 4703(d), the Exchange again
proposes to state that it will continue to reject a Pegged Order
entered through RASH or FIX when a permissible pegging price is
unavailable, if the Pegged Order is assigned a Routing Order
Attribute. The Exchange will continue to accept certain Market and
Primary Pegged Orders at their limit price where they have Routing
Order Attributes. The Exchange proposes to retain existing practice
for Pegged Orders with Routing Order Attributes because the Exchange
is not yet prepared to make similar changes to such Orders, although
it contemplates doing so in the near future.
---------------------------------------------------------------------------
The Exchange proposes similar changes to the paragraph of Rule
4703(d) that applies to Pegged Orders entered through RASH or FIX that
posted to the Exchange Book. The text presently provides that if the
price to which an Order is pegged is not available, the Order will be
rejected. The Exchange proposes instead to state that if the price to
which an Order is pegged becomes unavailable or pegging would lead to a
price at which the Order cannot be posted,\17\ then the Exchange will
remove the Order from the Exchange Book and re-enter it once there is a
permissible price. Again, the Exchange proposes this change to enhance
and make the System more efficient by providing for the Exchange to re-
post the Pegged Orders rather than rejecting them when there is no
permissible pegging price and requiring participants to re-enter them
once a valid price becomes available.\18\ The
[[Page 38368]]
Exchange notes that the proposed change will not apply to Pegged Orders
with Routing Attributes assigned to them; the existing Rule
functionality will continue to apply to those Orders.
---------------------------------------------------------------------------
\17\ An example of a scenario where pegging would lead to a
price at which an Order cannot be posted is as follows. Assume that
the NBBO is $0.0002 x $0.0003. A Primary Pegged Order to buy is
entered with a passive offset amount of $0.0003. This would result
in the Order being made unavailable by the Exchange as -$0.0001 is
not a permissible price. Currently, the Exchange accepts such Orders
at its limit price, and will post the Orders to the Exchange Book in
accordance with the parameters that apply to the underlying Order
Type.
\18\ The Exchange proposes to apply a similar time limitation to
the holding period prescribed above. Similarly, the Exchange
proposes to add that for an Order with Midpoint Pegging, if the
Inside Bid and Inside Offer become crossed, or there is no Inside
Bid or Inside Offer, the System will cancel the Order if no
permissible price becomes available within one second after the
Order was removed and no longer available on the Exchange Book (the
Exchange may, in the exercise of its discretion modify the length of
this one second time period by posting advance notice of the
applicable time period on its website). For an Order with Midpoint
Pegging with a Routing Attribute, the new one second time period
will be applicable. The Exchange notes that it had inadvertently
omitted from the existing Rule portions of this new proposed
language that addresses the handling of Midpoint Pegged Orders if
the Inside Bid or Inside Offer become crossed or if there is no
Inside Bid or Inside Offer, even though this provision was intended
to mirror a corresponding rule 4703(d) in the Nasdaq Rulebook. The
proposal corrects this omission.
---------------------------------------------------------------------------
Rule 4703(d) also subjects Pegging Orders to collars, meaning that
any portion of a Pegging Order that would \19\ execute, either on the
Exchange or when routed to another market center, at a price of more
than $0.25 or 5 percent worse than the NBBO at the time when the order
reaches the System, whichever is greater, will be cancelled. Although
the Rule states that it applies this collar to Orders with Primary and
Market Pegging, the Exchange has always intended for the collar to also
apply to Orders with Midpoint Pegging, and in practice, it does so. The
failure of the Rule to reflect the application of the collar to
Midpoint Pegged Orders was an unintended omission. The Exchange now
proposes to revise Rule 4703(d) to correct this omission.
---------------------------------------------------------------------------
\19\ Additionally, the Exchange proposes to replace the word
``would'' with ``could'' in this provision, so as to clarify that
collars apply in circumstances in which Pegged Orders might execute,
but do not necessarily do so. An example of a circumstance in which
such Orders do not execute is as follows. Assume that the NBBO is
$10.00 x $10.01. A Market Pegged Order to buy posts at $10.01. The
NBBO then updates to $10.00 x $11.00. Because re-pricing and posting
the Market Pegged Order would result in the Order being available on
the Book and executable at $11.00 (outside of the collars), the
Order will be canceled.
---------------------------------------------------------------------------
Changes to the Trade Now Order Attribute
Additionally, the Exchange proposes to amend its rules governing
the Trade Now Attribute, at Rule 4703(l). Pursuant to Rule 4703(l),
Trade Now is an Order Attribute that allows a resting Order that
becomes locked by an incoming Displayed Order to execute against the
available size of a contra-side locking Order as a liquidity taker.
The Exchange proposes to amend Trade Now by streamlining and
simplifying the instructions that participants must enter to address
the handling of their orders in various locking or crossing
scenarios.\20\ Specifically, rather than require a participant to
manually send a Trade Now instruction whenever an Order entered through
OUCH or FLITE becomes locked, the proposed amended Rule will allow for
a participant to enable Trade Now functionality on a port-level basis
for all Order entry protocols and for all Order Types that support
Trade Now, as well as on an order-by-order basis, for the Non-Displayed
Order Type, when entered through OUCH or FLITE.\21\ For Orders entered
through RASH or FIX, Trade Now will be available on an order-by-order
basis for all Order Types that support Trade Now. The proposal will not
extend Trade Now functionality to new Order Types.\22\
---------------------------------------------------------------------------
\20\ The Exchange notes that the Rule presently does not refer
to crossing scenarios. The Exchange proposes to add such references
for completeness and consistency with the corresponding rules of
Nasdaq and Nasdaq PHLX. An example of a crossing scenario is as
follows. A non-displayed Order to buy rests on the Book at $0.9995.
Thereafter, a Post Only Order to sell is entered at $0.9994, which
would post on the Book and display at $0.0014 [sic], thereby
crossing the non-displayed Order as the price improvement
requirements were not met.
\21\ This proposed change in functionality for OUCH and FLITE is
enabled by the migration of Trade Now to the Exchange's matching
System.
\22\ The Exchange proposes to add language to Rule 4703(l) to
state that Trade Now allows a resting Order that becomes locked ``or
crossed, as applicable at its non-displayed price'' by the ``posted
price'' of an incoming Displayed Order to execute against a locking
or crossing Order(s) automatically. The Exchange proposes to add the
phrase ``or crossed, as applicable, at its non-displaced [sic]
price'' for completeness. It also proposes to add the phrase
``posted price'' for purposes of clarity. It merely communicates
that the incoming Displayed Order first posts to the Exchange Book,
thereby locking or crossing the resting Order at its non-displayed
price.
---------------------------------------------------------------------------
The Exchange intends to implement the foregoing changes during the
Third Quarter of 2021. The Exchange will issue an Equity Trader Alert
at least 7 days in advance of implementing the changes.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\23\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\24\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that its proposed amendments to the Pegging
Order Attribute, at Rule 4703(d), are consistent with the Act. The
proposals to eliminate the functionality that provides for the System
to reject certain Pegged Orders that lack a permissible pegging price,
or to post the Orders at their limit price, are consistent with the Act
because they eliminate unwarranted inefficiencies that arise when
participants must repeatedly re-enter rejected Pegged Orders until a
permissible price becomes available.\25\ \26\ It is also consistent
with the Act to maintain the existing practice in the Rule of rejecting
a Pegged Order without a permissible pegging price where the Order has
been assigned a Routing Attribute. The Exchange is not yet prepared to
hold such Orders in the same way that it proposes to do so for Pegged
Orders without Routing Attributes, although it contemplates doing so in
the near future.
---------------------------------------------------------------------------
\25\ The Exchange notes that as part of this proposed change, if
there is no Pegging Price upon entry for a Displayed Order that has
Market Pegging, or an Order with a Non-Display Attribute that has
Primary Pegging or Market Pegging, then it will no longer accept
such Orders at their limit price. The Exchange believes that this
proposed change is consistent with the Act because it better aligns
with customer intentions for Pegged Orders to post at a Pegging
Price. That is, the Exchange believes that participants prefer for
Pegged Orders to be entered at a Pegging Price, rather than its
entered limit price, even if that means that the Order must wait for
a Pegging Price to become available. As discussed above, the
Exchange does not propose this change for Pegged Orders with Routing
Attributes.
\26\ It is also consistent with the Act to limit the time period
for which the Exchange will hold, without canceling, Pegged Orders
for which there is no pegging price or permissible pegging price
because the Exchange does not believe that customers would want the
Exchange to hold their orders indefinitely. Moreover, holding such
orders indefinitely would encumber the Exchange's System. The
Exchange believes that a one second holding period for such orders
is long enough to provide the above-stated efficiencies for
participants, but not too long as to encumber them. However, the
Exchange believes that it is reasonable to reserve discretion to
alter the holding period, from time to time, should it determine
that doing so better meets the needs of customers or its System
resources.
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Moreover, the proposal to amend Rule 4703(d) to state expressly
that Midpoint Pegging Orders are subject to price collars, like Orders
with Primary and Market Pegging, will correct an unintended omission
and ensure that the Rule is consistent with existing Exchange practice
and with customer expectations. The application of these collars will
prevent Pegged Orders from having prices that deviate too far away from
where the security was trading when the Order was first entered.\27\
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\27\ Additionally, the Exchange believes that it is consistent
with the Act to replace the word ``would'' with ``could'' in this
provision, because doing so would clarify that collars apply in
circumstances in which Pegged Orders might execute, but do not
necessarily do so. See supra, n.19.
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The Exchange's proposals to amend its rules governing the Trade Now
Attribute, at Rule 4703(l), is consistent with the Act. The proposal
will
[[Page 38369]]
streamline and simplify the instructions that participants must enter
to address the handling of their orders in various locking or crossing
scenarios. Rather than require a participant to manually send a Trade
Now instruction whenever an Order entered through OUCH or FLITE becomes
locked, the proposed amended Rule will allow for a participant to
enable Trade Now functionality on a port-level basis for all Order
entry protocols and for all Order Types that support Trade Now, as well
as on an order-by-order basis, for the Non-Displayed Order Type, when
entered through OUCH and FLITE.\28\ Furthermore, it is consistent with
the Act to add language to Rule 4703(l) to state that Trade Now allows
a resting Order that becomes locked ``or crossed, as applicable, at its
non-displayed price'' by the ``posted price'' of an incoming Displayed
Order to execute against a locking or crossing Order(s) automatically.
The Exchange proposes to add the phrase ``or crossed, as applicable, at
its non-displayed price'' for completeness. The Exchange also proposes
to add the phrase ``posted price'' for purposes of clarity. It merely
communicates that the incoming Displayed Order first posts to the
Nasdaq Book, thereby locking or crossing the resting Order at its non-
displayed price.
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\28\ As noted above, for Orders entered through RASH or FIX,
Trade Now will be available on an order-by-order basis for all Order
Types that support Trade Now.
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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. As a general principle, the
proposed changes are reflective of the significant competition among
exchanges and non-exchange venues for order flow. In this regard,
proposed changes that facilitate enhancements to the Exchange's System
and order entry protocols as well as those that amend and clarify the
Exchange's Rules regarding its Order Attributes, are pro-competitive
because they bolster the efficiency, integrity, and overall
attractiveness of the Exchange in an absolute sense and relative to its
peers.
Moreover, none of the proposed changes will unduly burden intra-
market competition among various Exchange participants. Participants
will experience no competitive impact from its proposals to hold (up to
one second), rather than reject (or accept at their limit price),
Pegging Orders (other than those with Routing Attributes) in
circumstances in which no permissible pegging price is available, as
these proposals will merely eliminate unwarranted inefficiencies that
ensue from the System requiring participants to repeatedly re-enter
Pegged Orders until a price becomes available, or the System posting
Pegged Orders at their limit prices, if there is no pegging price.
Moreover, the proposal to amend Rule 4703(d) to state expressly that
Midpoint Pegging Orders are subject to price collars, like Orders with
Primary and Market Pegging, will have no competitive impact as the
proposal is consistent with existing Exchange practice and with
customer expectations.
The Exchange's proposals to amend its rules governing Trade Now
will have no competitive impact on participants other than by rendering
these Order Attributes more efficient and easier for participants to
utilize.
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 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 \29\ and Rule 19b-4(f)(6) thereunder.\30\
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\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 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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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-BX-2021-030 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-BX-2021-030. 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-BX-2021-030, and should be submitted on
or before August 10, 2021.
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\31\ 17 CFR 200.30-3(a)(12).
[[Page 38370]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15344 Filed 7-19-21; 8:45 am]
BILLING CODE 8011-01-P
