Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 26, Message Traffic Mitigation, 53121-53125 [2021-20655]
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Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Notices
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[FR Doc. 2021–20652 Filed 9–23–21; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93069; File No. SR–
NASDAQ–2021–074]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Options 3, Section 26, Message Traffic
Mitigation
September 20, 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
September 14, 2021, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II, below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend The
Nasdaq Options Market LLC (‘‘NOM’’)
Rules at Options 3, Section 26, Message
15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1
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Traffic Mitigation, and Options 3,
Section 27 Limitation of Liability.
The Exchange also proposes to amend
Options 10, Doing Business With The
Public: Section 5, Branch Offices,
Section 6, Opening of Accounts, and
Section 9, Discretionary Accounts.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/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
The Exchange proposes to amend
Options 3, Section 26, Message Traffic
Mitigation. The Exchange also proposes
to amend Options 10, Doing Business
With The Public: Section 5, Branch
Offices, Section 6, Opening of Accounts,
and Section 9, Discretionary Accounts.
Each change is described below.
Options 3, Section 26
The Exchange proposes to amend
Options 3, Section 26, Message Traffic
Mitigation, to replace its current rule
with a rule identical to Nasdaq Phlx
LLC (‘‘Phlx’’) Options 3, Section 26.
Currently, NOM Options 3, Section 26
provides,
For the purpose of message traffic
mitigation, based on NOM’s traffic with
respect to target traffic levels and in
accordance with NOM’s overall objective of
reducing both peak and overall traffic:
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Sfmt 4703
(a) NOM will periodically delist options
with an average daily volume (‘‘ADV’’) of less
than 100 contracts. Nasdaq will, on a
monthly basis, determine the ADV for each
series listed on NOM and delist the current
series and not list the next series after
expiration where the ADV is less than 100
contracts. For options series traded solely on
NOM, Nasdaq will delay delisting until there
is no open interest in that options series.
(b) NOM will implement a process by
which an outbound quote message that has
not been sent, but is about to be sent, will
not be sent if a more current quote message
for the same series is available for sending.
This replace on queue functionality will be
applied to all options series listed on the
Nasdaq Options Market in real time and will
not delay the sending of any messages.
(c) When the size associated with a bid or
offer increases by an amount less than or
equal to a percentage (never to exceed 20%)
of the size associated with the previously
disseminated bid or offer, NOM will not
disseminate the new bid or offer
(d) All message traffic mitigation
mechanisms which are used on NOM will be
identical for the OPRA ‘‘top of the book’’
broadcast.
With this proposal, the Exchange
proposes to provide:
(a) The Exchange shall disseminate an
updated bid and offer price, together with the
size associated with such bid and offer,
when:
(1) the Exchange’s disseminated bid or
offer price increases or decreases;
(2) the size associated with the Exchange’s
disseminated bid or offer decreases; or
(3) the size associated with the Exchange’s
bid (offer) increases by an amount greater
than or equal to a percentage (never to exceed
20%) of the size associated with previously
disseminated bid (offer). Such percentage,
which shall never exceed 20%, will be
determined by the Exchange on an issue-byissue basis and posted on the Exchange’s
website.
Current NOM Options 3, Section 26(a)
describes how NOM would periodically
delist options with an average daily
volume of less than 100 contracts.
Further, pursuant to Options 3, Section
26(a), NOM would determine the ADV
for each series listed on NOM and
monthly, delist the current series, and
not list the next series after expiration
where the ADV is less than 100
contracts.3 Options 3, Section 26(a) was
3 For options series traded solely on NOM, the
Exchange will delay delisting until there is no open
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Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Notices
intended to mitigate message traffic by
requiring the Exchange to delist certain
options. While, today, NOM does not
delist options in accordance with
Options 3, Section 26(a), NOM does
delist options pursuant to Options 4,
Section 5.4 Specifically, NOM
periodically delists options across its
various listing programs pursuant to
Options 4, Section 5 at Supplementary
Material .01(d), Supplementary Material
.03(d), and Supplementary Material
.04(f). In addition, NOM recently filed to
delist additional intervals across its
weekly programs to further reduce
message traffic.5 The Exchange notes
that other Nasdaq affiliated markets also
delist according to similar listing rules.6
The Exchange’s process for delisting
options pursuant to Options 4, Section
5 accomplishes the same objectives as
originally intended for delisting
pursuant to subparagraph (a). The
current delisting process utilized by
NOM ensures mitigation of message
traffic. At this time, the Exchange
proposes to remove the rule text within
Options 3, Section 26(a), as NOM does
not delist in that manner today, and,
instead, NOM proposes to continue to
delist pursuant to Options 4, Section 5.
NOM’s message traffic mitigation would
not be impacted by the removal of
Options 3, Section 26(a) because, today,
NOM is not delisting in that manner,
rather it delists according to Options 4,
Section 5 and will continue to delist in
that manner.
Current NOM Options 3, Section 26(b)
provides that NOM will implement a
replace on queue functionality whereby
an outbound quote message that has not
been sent, but is about to be sent, will
not be sent if a more current quote
message for the same series is available
for sending. Further, the rule provides
that this replace on queue functionality
will be applied to all options series
listed on NOM in real time and will not
delay the sending of any messages.
Options 3, Section 26(b) was intended
to mitigate message traffic by
implementing the replace on queue
functionality to reduce the message
interest in that options series. See NOM Options 3,
Section 26(a).
4 NOM currently delists options pursuant to
Options 4, Section 5 at Supplementary Material
.01(d), Supplementary Material .03(d),
Supplementary Material .04(f), and Supplementary
Material .07.
5 See Securities Exchange Act Release No. 91931
(May 18, 2021), 86 FR 27929 (May 24, 2021) (SR–
NASDAQ–2021–032) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend Options 4, Section 5, ‘‘Series of Options
Contracts Open for Trading’’ To Limit Short Term
Options Series Intervals Between Strikes).
6 See Phlx, Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq
GEMX, LLC (‘‘GEMX’’) and Nasdaq MRX, LLC
(‘‘MRX’’) Options 4, Section 5.
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traffic by disseminating only the most
current quote in certain instances where
a quote was recently updated. The
Exchange did not implement the replace
on queue functionality, so it is
unavailable and has never been utilized
on NOM. To date, NOM has been
mitigating quotations by delisting
pursuant to Options 4, Section 5 and
mitigating pursuant to Options 3,
Section 26(c) as described below in
greater detail. NOM’s quote mitigation
process would remain unchanged with
this proposal. Also, NOM’s quote
mitigation process is consistent with
Phlx’s current process for mitigating
quotes. The Exchange believes that
despite not implementing the replace on
queue functionality, it continues to
mitigate quotes in a fair and equitable
manner consistent with Phlx’s process
for mitigating quotes. At this time, the
Exchange proposes to delete Options 3,
Section 26(b). NOM’s message traffic
mitigation would not be impacted by
the removal of Options 3, Section 26(b)
because, today, NOM does not have the
functionality described within Options
3, Section 26(b) and would not be
changing its quote mitigation practice as
a result of deleting the rule text.
Current Options 3, Section 26(c)
provides that when the size associated
with a bid or offer increases by an
amount less than or equal to a
percentage (never to exceed 20%) of the
size associated with the previously
disseminated bid or offer, NOM will not
disseminate the new bid or offer.
Options 3, Section 26(c) was intended to
mitigate message traffic by
disseminating quotes only when the size
associated with a bid or offer increases
by an amount greater than or equal to
a certain percentage established by the
Exchange. Today, the Exchange’s
System is not disseminating quotes as
specified within Options 3, Section
26(c), rather NOM is disseminating
quotes as specified in Phlx Options 3,
Section 26.7 The Exchange’s current
practice is aligned with the original
intent. Today, NOM mitigates quotes by
disseminating them only when the size
associated with a bid or offer increases
by an amount greater than or equal to
a certain percentage established by the
Exchange. At this time, the Exchange
proposes to update NOM Options 3,
7 Current Options 3, Section 26(c) refers to an
amount ‘‘less than or equal to a percentage.’’ The
phrase ‘‘equal to’’ is incorrect. Today, when the size
associated with a bid or offer increases by an
amount less [sic] than a percentage (never to exceed
20%) of the size associated with the previously
disseminated bid or offer, NOM does not and will
not disseminate the new bid or offer. This
substantive change also adopts rule text identical to
Phlx Options 3, Section 26.
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Section 26 to reflect NOM’s current
practice, which is identical to Phlx’s
practice, and adopt rule text identical to
Phlx Options 3, Section 26. Because
NOM is not amending its practice with
respect to the dissemination of quotes,
the Exchange notes that there would be
no change in the number of quotes that
will be disseminated by the Exchange
and the proposed change aligns with the
original intent of the rule.
NOM’s rule also proposes to adopt
rule text identical to Phlx to permit it to
determine the percentage by which it
will disseminate an updated bid or offer
price based on the size on an issue-byissue basis.8 Phlx Options 3, Section
26(a)(3) permits it to determine the
percentage in this matter. NOM
proposes to amend its rule to provide
for the same flexibility as Phlx to permit
it to determine the way it will mitigate
quotes among options. Also, with this
proposed change, NOM would
commence posting the percentage
specified within proposed Options 3,
Section 26(a)(3) on the Exchange’s
website. The Exchange believes that
posting the percentage will provide
transparency to Participants.
Finally, Options 3, Section 26(d)
provides that all message traffic
mitigation mechanisms which are used
on NOM will be identical for the OPRA
‘‘top of the book’’ broadcast. The text of
Options 3, Section 26(d) is unnecessary
as OPRA publishes messages
disseminated by each options exchange
in a similar fashion. Further, NOM
Options 5, Section 1(17) describes the
type of information disseminated by
OPRA.
Today, and over the years, Phlx’s
number of listed underlyings exceeds
the underlyings listed on NOM and,
therefore, utilizing a message traffic
protocol identical to Phlx Options 3,
Section 26(c) would permit NOM to
sufficiently mitigate quotes.
Options 3, Section 27
The Exchange proposes to update a
citation to Rule 4626 within Options 3,
Section 27, Limitation of Liability. The
Exchange relocated Rule 4626 to Equity
2, Section 17 in a prior rule change.9
8 NOM’s current rule is silent regarding the
Exchange’s ability to set the percentage on an issueby-issue basis and post the percentage to its
website. Today, Phlx and NOM both specify the
percentage on the Exchange’s website. Today, the
Exchange has set the same percentage for all
options listed on NOM.
9 See Securities Exchange Act Release No. 90577
(December 7, 2020), 85 FR 80202 (December 11,
2020) (SR–NASDAQ–2020–079) (Notice of Filing
and Immediate Effectiveness of Proposed Rule
Change To Relocate Its Equity and General Rules
From Its Current Rulebook Into Its New Rulebook
Shell).
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The Exchange proposes to update the
erroneous citation. The proposed
amendment is non-substantive.
Options 10, Sections 5, 6 and 9
In 2018, NOM’s registration
requirements 10 were updated to mirror
changes made by FINRA to its
qualification rules.11 At that time, NOM
Options 10, Sections 5, 6 and 9 should
have been amended to update certain
terminology to align with General 4
terminology.12 At this time, the
Exchange proposes to update the
terminology within Options 10, Sections
5, 6 and 9 so that it is consistent with
General 4 terminology. The proposed
amendments are non-substantive.
Specifically, with respect to Options 10,
Section 5, Branch Offices, the manager
must be registered as an Options
Principal or General Securities Sales
Supervisor in accordance with Nasdaq
General 4, Section 1220(a)(8) 13 and
10 See Securities Exchange Act Release No. 84386
(October 9, 2018), 83 FR 51988 (October 9, 2018)
(SR–NASDAQ–2018–078) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend, Reorganize and Enhance Its
Membership, Registration and Qualification Rules).
11 See Securities Exchange Act Release No. 81098
(July 7, 2017), 82 FR 32419 (July 13, 2017) (SR–
FINRA–2017–007) (Order Approving Proposed Rule
Change To Adopt Consolidated Registration Rules,
Restructure the Representative-Level Qualification
Examination Program, Allow Permissive
Registration, Establish Exam Waiver Process for
Persons Working for Financial Services Affiliate of
Member, and Amend the Continuing Education
Requirements).
12 Specifically, in 2018, NOM amended then
Chapter II, Section (2)(g) as Rule 1220(a)(8) (current
General 4, Section 1220) to rename the registration
category from ‘‘Registered Options and Security
Futures Principal’’ to ‘‘Registered Options
Principal.’’ Further, Rule 1220(b), Supplementary
Material .02 was amended to provide that each
person who is registered with the Exchange as a
Registered Options Principal (or as a General
Securities Representative, Options Representative,
or General Securities Sales Supervisor) shall be
eligible to engage in security futures activities as a
principal, as applicable, provided that such
individual completes a Firm Element program as set
forth in proposed Rule 1240 that addresses security
futures products before such person engages in
security futures activities. All references to a
revised examination that includes security futures
products were removed and FINRA shortened
references to ‘‘Registered Options and Security
Futures Principal’’ in its rulebook to ‘‘Registered
Options Principal’’. See Securities Exchange Act
Release No. 58932 (November 12, 2008), 73 FR
69696 (November 19, 2008) (SR–FINRA–2008–032).
13 General 4, Rule 1220(a)(8) provides, in part,
‘‘Each member that is engaged in transactions in
options with the public shall have at least one
Registered Options Principal. In addition, each
principal as defined in paragraph (a)(1) of this Rule
who is responsible for supervising a member’s
options sales practices with the public shall be
required to register with the Exchange as a
Registered Options Principal, subject to the
following exception. If a principal’s options
activities are limited solely to those activities that
may be supervised by a General Securities Sales
Supervisor, then such person may register as a
General Securities Sales Supervisor pursuant to
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Supplementary Material .04 of that
rule.14 The Exchange proposes to
replace the qualification ‘‘Registered
Options and Security Futures Principal’’
with ‘‘Registered Options Principal or
General Securities Sales Supervisor.’’
With respect to Options 10, Section 6,
Opening of Accounts and Options 10,
Section 9, Discretionary Accounts, the
Exchange proposes to replace the
qualification ‘‘Registered Options and
Security Futures Principal’’ with
‘‘Registered Options Principal’’ to align
with the current terminology with
General 4, Rule 1220.15
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,16 in general, and furthers the
objectives of Section 6(b)(5) of the Act,17
in particular, in that it is designed to
promote just and equitable principles of
trade and to protect investors and the
public interest.
Options 3, Section 26
The Exchange’s proposal to amend
Options 3, Section 26, Message Traffic
Mitigation, to replace its current rule
with a rule identical to Phlx Options 3,
Section 26 is consistent with the Act.
The proposal will harmonize NOM’s
Options 3, Section 26 with Phlx’s
Options 3, Section 26 without an impact
to the way NOM mitigates message
traffic today.
Removing current Options 3, Section
26(a), which describes how NOM would
periodically delist options with an
average daily volume of less than 100
contracts and determine the ADV for
each series listed on NOM and monthly,
delist the current series and not list the
next series after expiration where the
ADV is less than 100 contracts, is
consistent with the Act. Options 3,
Section 26(a) was intended to mitigate
message traffic by requiring the
Exchange to delist certain options.
While, today, NOM does not delist
paragraph (a)(10) of this Rule in lieu of registering
as a Registered Options Principal.’’
14 Supplementary Material .04 to General 4, Rule
1220 provides, in part, ‘‘Any person required to be
registered as a principal who supervises sales
activities in corporate, municipal and option
securities, investment company products, variable
contracts, direct participation program securities
and security futures may be registered solely as a
General Securities Sales Supervisor. In addition to
branch office managers, other persons such as
regional and national sales managers may also be
registered solely as General Securities Sales
Supervisors as long as they supervise only sales
activities.’’
15 The Exchange also proposes to renumber a
paragraph within Options 10, Section 9(a) from ‘‘2’’
to ‘‘3’’ as there are currently two sections numbered
as ‘‘2.’’
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
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options in accordance with Options 3,
Section 26(a), NOM does delist options
pursuant to Options 4, Section 5.18 In
addition, NOM recently filed to delist
additional intervals across its weekly
programs to further reduce message
traffic.19 The Exchange notes that other
Nasdaq affiliated markets also delist
according to similar rules.20 The
Exchange’s process for delisting options
pursuant to Options 4, Section 5
protects investors and the public
interest because it accomplishes the
same objectives as originally intended
for delisting pursuant to subparagraph
(a) and ensures mitigation of message
traffic by delisting according to Options
4, Section 5.
Removing current NOM Options 3,
Section 26(b), which describes how
NOM will implement a replace on
queue functionality whereby an
outbound quote message that has not
been sent, but is about to be sent, will
not be sent if a more current quote
message for the same series is available
for sending is consistent with the Act.
Options 3, Section 26(b) was intended
to mitigate message traffic by
implementing the replace on queue
functionality to reduce the message
traffic by disseminating only the most
current quote in certain instances where
a quote was recently updated. While the
Exchange did not implement the replace
on queue functionality, NOM has been
mitigating quotations by delisting
pursuant to Options 4, Section 5 and
mitigating pursuant to Options 3,
Section 26(c). The proposal would
protect investors and the public interest
because NOM’s quote mitigation process
would remain unchanged with this
proposal. Also, NOM’s quote mitigation
process is consistent with Phlx’s current
process for mitigating quotes. The
Exchange believes that despite not
implementing the replace on queue
functionality, it continues to mitigate
quotes in a fair and equitable manner
consistent with Phlx’s process for
mitigating quotes.
Amending current Options 3, Section
26(c), as described above, is consistent
with the Act because Options 3, Section
18 NOM currently delists options pursuant to
Options 4, Section 5 at Supplementary Material
.01(d), Supplementary Material .03(d),
Supplementary Material .04(f), and Supplementary
Material .07.
19 See Securities Exchange Act Release No. 91931
(May 18, 2021), 86 FR 27929 (May 24, 2021) (SR–
NASDAQ–2021–032) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Amend Options 4, Section 5, ‘‘Series of Options
Contracts Open for Trading’’ To Limit Short Term
Options Series Intervals Between Strikes).
20 See Phlx, Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq
GEMX, LLC (‘‘GEMX’’) and Nasdaq MRX, LLC
(‘‘MRX’’) Options 4, Section 5.
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26(c) was intended to mitigate message
traffic by disseminating quotes only
when the size associated with a bid or
offer increases by an amount greater
than or equal to a certain percentage
established by the Exchange. While,
today, the Exchange’s System is not
disseminating quotes as specified
within Options 3, Section 26(c), it is
disseminating quotes as specified in
Phlx Options 3, Section 26. The
Exchange’s current practice is aligned
with the original intent. Today, NOM
mitigates quotes by disseminating them
only when the size associated with a bid
or offer increases by an amount greater
than or equal to a certain percentage
established by the Exchange. Because
NOM is not amending its practice with
respect to the dissemination of quotes,
the Exchange notes that there would be
no change in the number of quotes that
will be disseminated by the Exchange
and the proposed change aligns with the
original intent of the rule.
NOM’s proposal to amend its rule text
identical to Phlx to permit it to
determine the percentage by which it
will disseminate an updated bid or offer
price based on the size on an issue-byissue basis is consistent with the Act.
This proposal would provide NOM the
same flexibility as Phlx to permit it to
determine the way it will mitigate
quotes among options. NOM’s proposal
to commence posting the percentage
specified within proposed Options 3,
Section 26(a)(3) on the Exchange’s
website will continue to provide
transparency to Participants.
Finally, removing current Options 3,
Section 26(d) which provides that all
message traffic mitigation mechanisms
which are used on NOM will be
identical for the OPRA ‘‘top of the
book’’ broadcast, is consistent with the
Act. The Exchange will mitigate quotes
pursuant to its rules for all quotes on the
Exchange, including those that
constitute the Exchange’s best bid and
offer. The text of Options 3, Section
26(d) is unnecessary as OPRA publishes
messages disseminated by each options
exchange in a similar fashion. Further,
NOM Options 5, Section 1(17) describes
the type of information disseminated by
OPRA.
Today, and over the years, Phlx’s
number of listed underlyings exceeds
the underlyings listed on NOM and,
therefore, utilizing a message traffic
protocol identical to Phlx Options 3,
Section 26(c) would permit NOM to
sufficiently mitigate quotes.
Options 3, Section 27
The Exchange’s proposal to update a
citation to Rule 4626 within Options 3,
Section 27, Limitation of Liability, from
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Rule 4626 to Equity 2, Section 17 will
bring greater clarity to the rule and is
therefore consistent with the Act. The
proposed amendment is nonsubstantive.
Options 10, Sections 5, 6, and 9
The Exchange’s proposal to amend
Options 10, Sections 5, 6, and 9 to
amend the certain terminology in those
rules to align with General 4
terminology is consistent with the Act.
These non-substantive amendments will
bring greater clarity to the current
registration requirements.
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.
Options 3, Section 26
The Exchange’s proposal to amend
Options 3, Section 26, Message Traffic
Mitigation, to replace its current rule
with a rule identical to Phlx Options 3,
Section 26 does not create an undue
burden on competition. Specifically,
removing the rule text within Options 3,
Section 26(a), (b) and (d) and amending
the rule text within (c) aligns with
NOM’s current practice for mitigating
message traffic. NOM’s current practice
will remain unchanged with this
proposal. NOM would continue to
utilize its current quote mitigation
strategies without amending the
quantity of messages disseminated.
Amending NOM’s rule text identical
to Phlx to permit it to determine the
percentage by which it will disseminate
an updated bid or offer price based on
the size on an issue-by-issue basis does
not impose an undue burden on
competition, rather the amendment
would provide NOM the same flexibility
as Phlx to permit it to determine the
way it will mitigate quotes among
options. Posting the percentage
specified within proposed Options 3,
Section 26(a)(3) on the Exchange’s
website, does not impose an undue
burden on competition, rather the
proposal will continue to provide
transparency to Participants.
Options 3, Section 27
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Fmt 4703
The Exchange’s proposal to amend
Options 10, Sections 5, 6, and 9 to
conform the terminology to General 4
terminology does not impose and undue
burden on competition, rather it will
bring greater clarity to the current
registration requirements. These
amendments are non-substantive.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 21 and
subparagraph (f)(6) of Rule 19b–4
thereunder.22
A proposed rule change filed under
Rule 19b–4(f)(6) 23 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 24 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
operative delay to permit the Exchange
to immediately amend Options 3,
Section 26 to adopt a rule identical to
Phlx’s current rule, which would reflect
NOM’s current quote mitigation
practice. According to the Exchange,
current Options 3, Section 26 does not
correctly explain the way NOM
mitigates quote messages and the
Exchange believes its proposal will
provide clarity regarding how NOM
currently mitigates quote messages.
Further, the Exchange believes that
updating the citations and terminology
within Options 3, Section 27 and
15 U.S.C. 78s(b)(3)(A)(iii).
17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
23 17 CFR 240.19b–4(f)(6).
24 17 CFR 240.19b–4(f)(6)(iii).
21
The Exchange’s proposal to update a
citation to Rule 4626 within Options 3,
Section 27, Limitation of Liability, from
Rule 4626 to Equity 2, Section 17 does
not impose an undue burden on
competition. The proposal will bring
greater clarity to the rule. This
amendment is non-substantive.
PO 00000
Options 10, Sections 5, 6 and 9
Sfmt 4703
22
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24SEN1
Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Notices
Options 10, Sections 5, 6 and 9 will
clarify its Rulebook.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because it will allow the Exchange to
immediately implement changes to its
Rulebook that are designed to reflect the
Exchange’s current practice with respect
to quote mitigation. According to the
Exchange, the proposal will not impact
NOM’s current quote mitigation practice
and therefore will neither alter the
quantity of quotes the Exchanges
disseminates, nor the manner in which
the Exchange disseminates quote
messages. In addition, the Commission
believes the proposed changes to
Options 3, Section 27, and Options 10,
Sections 5, 6, and 9 are designed to
bring greater clarity to the Exchange’s
Rulebook. Therefore, the Commission
hereby waives the 30-day operative
delay and designates the proposed rule
change as operative upon filing.25
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2021–074 on the subject line.
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–2021–074 and
should be submitted on or before
October 15, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–20655 Filed 9–23–21; 8:45 am]
BILLING CODE 8011–01–P
25 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Sep<11>2014
16:50 Sep 23, 2021
Jkt 253001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93070; File No. SR–NSCC–
2021–011]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of Partial
Amendment No. 1 and Order Granting
Accelerated Approval of Proposed
Rule Change, as Modified by Partial
Amendment No. 1 To Remove ID Net
Transactions From the Required Fund
Deposit Calculations and Make Other
Changes to the Rules
September 20, 2021.
I. Introduction
On July 27, 2021, National Securities
Clearing Corporation (‘‘NSCC’’) 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 proposed rule
change SR–NSCC–2021–011. On August
6, 2021, NSCC filed Amendment No.1 to
the proposed rule change, to make
clarifications and corrections to the
proposed rule change.3 The proposed
rule change was published for public
comment in the Federal Register on
August 11, 2021,4 and the Commission
has received comments on the changes
proposed therein.5 For the reasons
discussed below, the Commission is
approving the proposed rule change.
II. Description of the Proposed Rule
Change
NSCC is proposing to revise the
margin methodology set forth in its
Rules & Procedures (‘‘Rules’’) 6 to
remove institutional delivery (‘‘ID’’)
transactions that are processed through
the ID Net Service from the calculation
of its members’ required margin. The ID
Net Service is a joint service of NSCC
and Depository Trust Company (‘‘DTC’’)
that allows subscribers to the service,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Partial Amendment No. 1 made clarification
corrections to the description of the proposed rule
change, namely the insertion of a legend noting the
changes to the Rules have been approved but not
yet implemented.
4 Securities Exchange Act Release No. 92566
(August 5, 2021), 86 FR 44100 (August 11, 2021)
(‘‘Notice’’).
5 See Letter from NSCC, dated August 6, 2021, to
Vanessa Countryman, Secretary, Commission,
available at https://www.sec.gov/comments/sr-nscc2021-011/srnscc2021011-9122299-247146.pdf
(providing notice of Amendment No. 1). Two other
comments letters were received that do not raise
issues related to this proposed rule change.
6 Capitalized terms not defined herein are defined
in the Rules, available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
2 17
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–2021–074. This
26
PO 00000
17 CFR 200.30–3(a)(12).
Frm 00098
Fmt 4703
Sfmt 4703
53125
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]]>Agencies
[Federal Register Volume 86, Number 183 (Friday, September 24, 2021)]
[Notices]
[Pages 53121-53125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20655]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93069; File No. SR-NASDAQ-2021-074]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Options 3, Section 26, Message Traffic Mitigation
September 20, 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 September 14, 2021, 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 amend The Nasdaq Options Market LLC
(``NOM'') Rules at Options 3, Section 26, Message Traffic Mitigation,
and Options 3, Section 27 Limitation of Liability.
The Exchange also proposes to amend Options 10, Doing Business With
The Public: Section 5, Branch Offices, Section 6, Opening of Accounts,
and Section 9, Discretionary Accounts.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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
The Exchange proposes to amend Options 3, Section 26, Message
Traffic Mitigation. The Exchange also proposes to amend Options 10,
Doing Business With The Public: Section 5, Branch Offices, Section 6,
Opening of Accounts, and Section 9, Discretionary Accounts. Each change
is described below.
Options 3, Section 26
The Exchange proposes to amend Options 3, Section 26, Message
Traffic Mitigation, to replace its current rule with a rule identical
to Nasdaq Phlx LLC (``Phlx'') Options 3, Section 26.
Currently, NOM Options 3, Section 26 provides,
For the purpose of message traffic mitigation, based on NOM's
traffic with respect to target traffic levels and in accordance with
NOM's overall objective of reducing both peak and overall traffic:
(a) NOM will periodically delist options with an average daily
volume (``ADV'') of less than 100 contracts. Nasdaq will, on a
monthly basis, determine the ADV for each series listed on NOM and
delist the current series and not list the next series after
expiration where the ADV is less than 100 contracts. For options
series traded solely on NOM, Nasdaq will delay delisting until there
is no open interest in that options series.
(b) NOM will implement a process by which an outbound quote
message that has not been sent, but is about to be sent, will not be
sent if a more current quote message for the same series is
available for sending. This replace on queue functionality will be
applied to all options series listed on the Nasdaq Options Market in
real time and will not delay the sending of any messages.
(c) When the size associated with a bid or offer increases by an
amount less than or equal to a percentage (never to exceed 20%) of
the size associated with the previously disseminated bid or offer,
NOM will not disseminate the new bid or offer
(d) All message traffic mitigation mechanisms which are used on
NOM will be identical for the OPRA ``top of the book'' broadcast.
With this proposal, the Exchange proposes to provide:
(a) The Exchange shall disseminate an updated bid and offer
price, together with the size associated with such bid and offer,
when:
(1) the Exchange's disseminated bid or offer price increases or
decreases;
(2) the size associated with the Exchange's disseminated bid or
offer decreases; or
(3) the size associated with the Exchange's bid (offer)
increases by an amount greater than or equal to a percentage (never
to exceed 20%) of the size associated with previously disseminated
bid (offer). Such percentage, which shall never exceed 20%, will be
determined by the Exchange on an issue-by-issue basis and posted on
the Exchange's website.
Current NOM Options 3, Section 26(a) describes how NOM would
periodically delist options with an average daily volume of less than
100 contracts. Further, pursuant to Options 3, Section 26(a), NOM would
determine the ADV for each series listed on NOM and monthly, delist the
current series, and not list the next series after expiration where the
ADV is less than 100 contracts.\3\ Options 3, Section 26(a) was
[[Page 53122]]
intended to mitigate message traffic by requiring the Exchange to
delist certain options. While, today, NOM does not delist options in
accordance with Options 3, Section 26(a), NOM does delist options
pursuant to Options 4, Section 5.\4\ Specifically, NOM periodically
delists options across its various listing programs pursuant to Options
4, Section 5 at Supplementary Material .01(d), Supplementary Material
.03(d), and Supplementary Material .04(f). In addition, NOM recently
filed to delist additional intervals across its weekly programs to
further reduce message traffic.\5\ The Exchange notes that other Nasdaq
affiliated markets also delist according to similar listing rules.\6\
The Exchange's process for delisting options pursuant to Options 4,
Section 5 accomplishes the same objectives as originally intended for
delisting pursuant to subparagraph (a). The current delisting process
utilized by NOM ensures mitigation of message traffic. At this time,
the Exchange proposes to remove the rule text within Options 3, Section
26(a), as NOM does not delist in that manner today, and, instead, NOM
proposes to continue to delist pursuant to Options 4, Section 5. NOM's
message traffic mitigation would not be impacted by the removal of
Options 3, Section 26(a) because, today, NOM is not delisting in that
manner, rather it delists according to Options 4, Section 5 and will
continue to delist in that manner.
---------------------------------------------------------------------------
\3\ For options series traded solely on NOM, the Exchange will
delay delisting until there is no open interest in that options
series. See NOM Options 3, Section 26(a).
\4\ NOM currently delists options pursuant to Options 4, Section
5 at Supplementary Material .01(d), Supplementary Material .03(d),
Supplementary Material .04(f), and Supplementary Material .07.
\5\ See Securities Exchange Act Release No. 91931 (May 18,
2021), 86 FR 27929 (May 24, 2021) (SR-NASDAQ-2021-032) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Options 4, Section 5, ``Series of Options Contracts Open for
Trading'' To Limit Short Term Options Series Intervals Between
Strikes).
\6\ See Phlx, Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC
(``GEMX'') and Nasdaq MRX, LLC (``MRX'') Options 4, Section 5.
---------------------------------------------------------------------------
Current NOM Options 3, Section 26(b) provides that NOM will
implement a replace on queue functionality whereby an outbound quote
message that has not been sent, but is about to be sent, will not be
sent if a more current quote message for the same series is available
for sending. Further, the rule provides that this replace on queue
functionality will be applied to all options series listed on NOM in
real time and will not delay the sending of any messages. Options 3,
Section 26(b) was intended to mitigate message traffic by implementing
the replace on queue functionality to reduce the message traffic by
disseminating only the most current quote in certain instances where a
quote was recently updated. The Exchange did not implement the replace
on queue functionality, so it is unavailable and has never been
utilized on NOM. To date, NOM has been mitigating quotations by
delisting pursuant to Options 4, Section 5 and mitigating pursuant to
Options 3, Section 26(c) as described below in greater detail. NOM's
quote mitigation process would remain unchanged with this proposal.
Also, NOM's quote mitigation process is consistent with Phlx's current
process for mitigating quotes. The Exchange believes that despite not
implementing the replace on queue functionality, it continues to
mitigate quotes in a fair and equitable manner consistent with Phlx's
process for mitigating quotes. At this time, the Exchange proposes to
delete Options 3, Section 26(b). NOM's message traffic mitigation would
not be impacted by the removal of Options 3, Section 26(b) because,
today, NOM does not have the functionality described within Options 3,
Section 26(b) and would not be changing its quote mitigation practice
as a result of deleting the rule text.
Current Options 3, Section 26(c) provides that when the size
associated with a bid or offer increases by an amount less than or
equal to a percentage (never to exceed 20%) of the size associated with
the previously disseminated bid or offer, NOM will not disseminate the
new bid or offer. Options 3, Section 26(c) was intended to mitigate
message traffic by disseminating quotes only when the size associated
with a bid or offer increases by an amount greater than or equal to a
certain percentage established by the Exchange. Today, the Exchange's
System is not disseminating quotes as specified within Options 3,
Section 26(c), rather NOM is disseminating quotes as specified in Phlx
Options 3, Section 26.\7\ The Exchange's current practice is aligned
with the original intent. Today, NOM mitigates quotes by disseminating
them only when the size associated with a bid or offer increases by an
amount greater than or equal to a certain percentage established by the
Exchange. At this time, the Exchange proposes to update NOM Options 3,
Section 26 to reflect NOM's current practice, which is identical to
Phlx's practice, and adopt rule text identical to Phlx Options 3,
Section 26. Because NOM is not amending its practice with respect to
the dissemination of quotes, the Exchange notes that there would be no
change in the number of quotes that will be disseminated by the
Exchange and the proposed change aligns with the original intent of the
rule.
---------------------------------------------------------------------------
\7\ Current Options 3, Section 26(c) refers to an amount ``less
than or equal to a percentage.'' The phrase ``equal to'' is
incorrect. Today, when the size associated with a bid or offer
increases by an amount less [sic] than a percentage (never to exceed
20%) of the size associated with the previously disseminated bid or
offer, NOM does not and will not disseminate the new bid or offer.
This substantive change also adopts rule text identical to Phlx
Options 3, Section 26.
---------------------------------------------------------------------------
NOM's rule also proposes to adopt rule text identical to Phlx to
permit it to determine the percentage by which it will disseminate an
updated bid or offer price based on the size on an issue-by-issue
basis.\8\ Phlx Options 3, Section 26(a)(3) permits it to determine the
percentage in this matter. NOM proposes to amend its rule to provide
for the same flexibility as Phlx to permit it to determine the way it
will mitigate quotes among options. Also, with this proposed change,
NOM would commence posting the percentage specified within proposed
Options 3, Section 26(a)(3) on the Exchange's website. The Exchange
believes that posting the percentage will provide transparency to
Participants.
---------------------------------------------------------------------------
\8\ NOM's current rule is silent regarding the Exchange's
ability to set the percentage on an issue-by-issue basis and post
the percentage to its website. Today, Phlx and NOM both specify the
percentage on the Exchange's website. Today, the Exchange has set
the same percentage for all options listed on NOM.
---------------------------------------------------------------------------
Finally, Options 3, Section 26(d) provides that all message traffic
mitigation mechanisms which are used on NOM will be identical for the
OPRA ``top of the book'' broadcast. The text of Options 3, Section
26(d) is unnecessary as OPRA publishes messages disseminated by each
options exchange in a similar fashion. Further, NOM Options 5, Section
1(17) describes the type of information disseminated by OPRA.
Today, and over the years, Phlx's number of listed underlyings
exceeds the underlyings listed on NOM and, therefore, utilizing a
message traffic protocol identical to Phlx Options 3, Section 26(c)
would permit NOM to sufficiently mitigate quotes.
Options 3, Section 27
The Exchange proposes to update a citation to Rule 4626 within
Options 3, Section 27, Limitation of Liability. The Exchange relocated
Rule 4626 to Equity 2, Section 17 in a prior rule change.\9\
[[Page 53123]]
The Exchange proposes to update the erroneous citation. The proposed
amendment is non-substantive.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 90577 (December 7,
2020), 85 FR 80202 (December 11, 2020) (SR-NASDAQ-2020-079) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Relocate Its Equity and General Rules From Its Current Rulebook Into
Its New Rulebook Shell).
---------------------------------------------------------------------------
Options 10, Sections 5, 6 and 9
In 2018, NOM's registration requirements \10\ were updated to
mirror changes made by FINRA to its qualification rules.\11\ At that
time, NOM Options 10, Sections 5, 6 and 9 should have been amended to
update certain terminology to align with General 4 terminology.\12\ At
this time, the Exchange proposes to update the terminology within
Options 10, Sections 5, 6 and 9 so that it is consistent with General 4
terminology. The proposed amendments are non-substantive. Specifically,
with respect to Options 10, Section 5, Branch Offices, the manager must
be registered as an Options Principal or General Securities Sales
Supervisor in accordance with Nasdaq General 4, Section 1220(a)(8) \13\
and Supplementary Material .04 of that rule.\14\ The Exchange proposes
to replace the qualification ``Registered Options and Security Futures
Principal'' with ``Registered Options Principal or General Securities
Sales Supervisor.'' With respect to Options 10, Section 6, Opening of
Accounts and Options 10, Section 9, Discretionary Accounts, the
Exchange proposes to replace the qualification ``Registered Options and
Security Futures Principal'' with ``Registered Options Principal'' to
align with the current terminology with General 4, Rule 1220.\15\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 84386 (October 9,
2018), 83 FR 51988 (October 9, 2018) (SR-NASDAQ-2018-078) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend,
Reorganize and Enhance Its Membership, Registration and
Qualification Rules).
\11\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (SR-FINRA-2017-007) (Order
Approving Proposed Rule Change To Adopt Consolidated Registration
Rules, Restructure the Representative-Level Qualification
Examination Program, Allow Permissive Registration, Establish Exam
Waiver Process for Persons Working for Financial Services Affiliate
of Member, and Amend the Continuing Education Requirements).
\12\ Specifically, in 2018, NOM amended then Chapter II, Section
(2)(g) as Rule 1220(a)(8) (current General 4, Section 1220) to
rename the registration category from ``Registered Options and
Security Futures Principal'' to ``Registered Options Principal.''
Further, Rule 1220(b), Supplementary Material .02 was amended to
provide that each person who is registered with the Exchange as a
Registered Options Principal (or as a General Securities
Representative, Options Representative, or General Securities Sales
Supervisor) shall be eligible to engage in security futures
activities as a principal, as applicable, provided that such
individual completes a Firm Element program as set forth in proposed
Rule 1240 that addresses security futures products before such
person engages in security futures activities. All references to a
revised examination that includes security futures products were
removed and FINRA shortened references to ``Registered Options and
Security Futures Principal'' in its rulebook to ``Registered Options
Principal''. See Securities Exchange Act Release No. 58932 (November
12, 2008), 73 FR 69696 (November 19, 2008) (SR-FINRA-2008-032).
\13\ General 4, Rule 1220(a)(8) provides, in part, ``Each member
that is engaged in transactions in options with the public shall
have at least one Registered Options Principal. In addition, each
principal as defined in paragraph (a)(1) of this Rule who is
responsible for supervising a member's options sales practices with
the public shall be required to register with the Exchange as a
Registered Options Principal, subject to the following exception. If
a principal's options activities are limited solely to those
activities that may be supervised by a General Securities Sales
Supervisor, then such person may register as a General Securities
Sales Supervisor pursuant to paragraph (a)(10) of this Rule in lieu
of registering as a Registered Options Principal.''
\14\ Supplementary Material .04 to General 4, Rule 1220
provides, in part, ``Any person required to be registered as a
principal who supervises sales activities in corporate, municipal
and option securities, investment company products, variable
contracts, direct participation program securities and security
futures may be registered solely as a General Securities Sales
Supervisor. In addition to branch office managers, other persons
such as regional and national sales managers may also be registered
solely as General Securities Sales Supervisors as long as they
supervise only sales activities.''
\15\ The Exchange also proposes to renumber a paragraph within
Options 10, Section 9(a) from ``2'' to ``3'' as there are currently
two sections numbered as ``2.''
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\16\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\17\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Options 3, Section 26
The Exchange's proposal to amend Options 3, Section 26, Message
Traffic Mitigation, to replace its current rule with a rule identical
to Phlx Options 3, Section 26 is consistent with the Act. The proposal
will harmonize NOM's Options 3, Section 26 with Phlx's Options 3,
Section 26 without an impact to the way NOM mitigates message traffic
today.
Removing current Options 3, Section 26(a), which describes how NOM
would periodically delist options with an average daily volume of less
than 100 contracts and determine the ADV for each series listed on NOM
and monthly, delist the current series and not list the next series
after expiration where the ADV is less than 100 contracts, is
consistent with the Act. Options 3, Section 26(a) was intended to
mitigate message traffic by requiring the Exchange to delist certain
options. While, today, NOM does not delist options in accordance with
Options 3, Section 26(a), NOM does delist options pursuant to Options
4, Section 5.\18\ In addition, NOM recently filed to delist additional
intervals across its weekly programs to further reduce message
traffic.\19\ The Exchange notes that other Nasdaq affiliated markets
also delist according to similar rules.\20\ The Exchange's process for
delisting options pursuant to Options 4, Section 5 protects investors
and the public interest because it accomplishes the same objectives as
originally intended for delisting pursuant to subparagraph (a) and
ensures mitigation of message traffic by delisting according to Options
4, Section 5.
---------------------------------------------------------------------------
\18\ NOM currently delists options pursuant to Options 4,
Section 5 at Supplementary Material .01(d), Supplementary Material
.03(d), Supplementary Material .04(f), and Supplementary Material
.07.
\19\ See Securities Exchange Act Release No. 91931 (May 18,
2021), 86 FR 27929 (May 24, 2021) (SR-NASDAQ-2021-032) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Options 4, Section 5, ``Series of Options Contracts Open for
Trading'' To Limit Short Term Options Series Intervals Between
Strikes).
\20\ See Phlx, Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC
(``GEMX'') and Nasdaq MRX, LLC (``MRX'') Options 4, Section 5.
---------------------------------------------------------------------------
Removing current NOM Options 3, Section 26(b), which describes how
NOM will implement a replace on queue functionality whereby an outbound
quote message that has not been sent, but is about to be sent, will not
be sent if a more current quote message for the same series is
available for sending is consistent with the Act. Options 3, Section
26(b) was intended to mitigate message traffic by implementing the
replace on queue functionality to reduce the message traffic by
disseminating only the most current quote in certain instances where a
quote was recently updated. While the Exchange did not implement the
replace on queue functionality, NOM has been mitigating quotations by
delisting pursuant to Options 4, Section 5 and mitigating pursuant to
Options 3, Section 26(c). The proposal would protect investors and the
public interest because NOM's quote mitigation process would remain
unchanged with this proposal. Also, NOM's quote mitigation process is
consistent with Phlx's current process for mitigating quotes. The
Exchange believes that despite not implementing the replace on queue
functionality, it continues to mitigate quotes in a fair and equitable
manner consistent with Phlx's process for mitigating quotes.
Amending current Options 3, Section 26(c), as described above, is
consistent with the Act because Options 3, Section
[[Page 53124]]
26(c) was intended to mitigate message traffic by disseminating quotes
only when the size associated with a bid or offer increases by an
amount greater than or equal to a certain percentage established by the
Exchange. While, today, the Exchange's System is not disseminating
quotes as specified within Options 3, Section 26(c), it is
disseminating quotes as specified in Phlx Options 3, Section 26. The
Exchange's current practice is aligned with the original intent. Today,
NOM mitigates quotes by disseminating them only when the size
associated with a bid or offer increases by an amount greater than or
equal to a certain percentage established by the Exchange. Because NOM
is not amending its practice with respect to the dissemination of
quotes, the Exchange notes that there would be no change in the number
of quotes that will be disseminated by the Exchange and the proposed
change aligns with the original intent of the rule.
NOM's proposal to amend its rule text identical to Phlx to permit
it to determine the percentage by which it will disseminate an updated
bid or offer price based on the size on an issue-by-issue basis is
consistent with the Act. This proposal would provide NOM the same
flexibility as Phlx to permit it to determine the way it will mitigate
quotes among options. NOM's proposal to commence posting the percentage
specified within proposed Options 3, Section 26(a)(3) on the Exchange's
website will continue to provide transparency to Participants.
Finally, removing current Options 3, Section 26(d) which provides
that all message traffic mitigation mechanisms which are used on NOM
will be identical for the OPRA ``top of the book'' broadcast, is
consistent with the Act. The Exchange will mitigate quotes pursuant to
its rules for all quotes on the Exchange, including those that
constitute the Exchange's best bid and offer. The text of Options 3,
Section 26(d) is unnecessary as OPRA publishes messages disseminated by
each options exchange in a similar fashion. Further, NOM Options 5,
Section 1(17) describes the type of information disseminated by OPRA.
Today, and over the years, Phlx's number of listed underlyings
exceeds the underlyings listed on NOM and, therefore, utilizing a
message traffic protocol identical to Phlx Options 3, Section 26(c)
would permit NOM to sufficiently mitigate quotes.
Options 3, Section 27
The Exchange's proposal to update a citation to Rule 4626 within
Options 3, Section 27, Limitation of Liability, from Rule 4626 to
Equity 2, Section 17 will bring greater clarity to the rule and is
therefore consistent with the Act. The proposed amendment is non-
substantive.
Options 10, Sections 5, 6, and 9
The Exchange's proposal to amend Options 10, Sections 5, 6, and 9
to amend the certain terminology in those rules to align with General 4
terminology is consistent with the Act. These non-substantive
amendments will bring greater clarity to the current registration
requirements.
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.
Options 3, Section 26
The Exchange's proposal to amend Options 3, Section 26, Message
Traffic Mitigation, to replace its current rule with a rule identical
to Phlx Options 3, Section 26 does not create an undue burden on
competition. Specifically, removing the rule text within Options 3,
Section 26(a), (b) and (d) and amending the rule text within (c) aligns
with NOM's current practice for mitigating message traffic. NOM's
current practice will remain unchanged with this proposal. NOM would
continue to utilize its current quote mitigation strategies without
amending the quantity of messages disseminated.
Amending NOM's rule text identical to Phlx to permit it to
determine the percentage by which it will disseminate an updated bid or
offer price based on the size on an issue-by-issue basis does not
impose an undue burden on competition, rather the amendment would
provide NOM the same flexibility as Phlx to permit it to determine the
way it will mitigate quotes among options. Posting the percentage
specified within proposed Options 3, Section 26(a)(3) on the Exchange's
website, does not impose an undue burden on competition, rather the
proposal will continue to provide transparency to Participants.
Options 3, Section 27
The Exchange's proposal to update a citation to Rule 4626 within
Options 3, Section 27, Limitation of Liability, from Rule 4626 to
Equity 2, Section 17 does not impose an undue burden on competition.
The proposal will bring greater clarity to the rule. This amendment is
non-substantive.
Options 10, Sections 5, 6 and 9
The Exchange's proposal to amend Options 10, Sections 5, 6, and 9
to conform the terminology to General 4 terminology does not impose and
undue burden on competition, rather it will bring greater clarity to
the current registration requirements. These amendments are non-
substantive.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \21\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A)(iii).
\22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \23\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \24\ 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 operative delay to permit the
Exchange to immediately amend Options 3, Section 26 to adopt a rule
identical to Phlx's current rule, which would reflect NOM's current
quote mitigation practice. According to the Exchange, current Options
3, Section 26 does not correctly explain the way NOM mitigates quote
messages and the Exchange believes its proposal will provide clarity
regarding how NOM currently mitigates quote messages.
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\23\ 17 CFR 240.19b-4(f)(6).
\24\ 17 CFR 240.19b-4(f)(6)(iii).
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Further, the Exchange believes that updating the citations and
terminology within Options 3, Section 27 and
[[Page 53125]]
Options 10, Sections 5, 6 and 9 will clarify its Rulebook.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because it will allow the Exchange to immediately implement changes to
its Rulebook that are designed to reflect the Exchange's current
practice with respect to quote mitigation. According to the Exchange,
the proposal will not impact NOM's current quote mitigation practice
and therefore will neither alter the quantity of quotes the Exchanges
disseminates, nor the manner in which the Exchange disseminates quote
messages. In addition, the Commission believes the proposed changes to
Options 3, Section 27, and Options 10, Sections 5, 6, and 9 are
designed to bring greater clarity to the Exchange's Rulebook.
Therefore, the Commission hereby waives the 30-day operative delay and
designates the proposed rule change as operative upon filing.\25\
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\25\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 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-2021-074 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-2021-074. 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-2021-074 and
should be submitted on or before October 15, 2021.
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\26\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20655 Filed 9-23-21; 8:45 am]
BILLING CODE 8011-01-P
