Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 13 Related to PIM, 66114-66118 [2023-20803]

Download as PDF 66114 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices (other than third-Friday-of-the-month) led to changes in spreads for those contracts.51 The sample timeframe was from July 2017 through August 2018.52 The relative quoted spread decreased during first part of 2018 and increase in May and June 2018; however, it remained comparable to the 2017 average.53 Overall, the Exchange observes no evidence of deterioration of spreads associated with the introduction of p.m.-settled NDX options.54 The Commission believes that the evidence contained in the Exchange’s filing, the Exchange’s pilot data and reports, and the Pilot Memo analysis demonstrate that the Programs have benefitted investors and other market participants by providing more flexible trading and hedging opportunities while also having no disruptive impact on the market. The market for p.m.-settled options has grown in size over the course of the Programs, and analysis of the pilot data did not identify any significant economic impact on the underlying component securities surrounding the close as a result of expiring p.m.-settled options nor did it indicate a deterioration in market quality (as measured by relative quoted spreads) for an existing product when a new p.m.-settled expiration was introduced. Further, significant changes in closing procedures in the decades since index options moved to a.m. settlement may also serve to mitigate the potential impact of p.m.-settled index options on the underlying cash markets. Accordingly, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with section 6(b)(5) of the Act 55 and the rules and regulations thereunder applicable to a national securities exchange. V. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,56 that the proposed rule change (SR–ISE–2023– 08), as modified by Amendment No. 1, be, and hereby is, approved. 51 See id. at 13194. id. The Exchange used a regression analysis to test whether the spread of NDX contracts changed after the introduction of p.m.-settled index options. See id. The regression model is meant to study the effect of the introduction of Friday p.m.settled NDX options expirations (on all but the third Friday of the month) that occurred in January 2018. See Amendment No. 1, supra note 6. 53 See Notice, 88 FR at 13194. 54 See id. 55 15 U.S.C. 78f(b)(5). 56 15 U.S.C. 78s(b)(2). lotter on DSK11XQN23PROD with NOTICES1 52 See VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.57 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–20808 Filed 9–25–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98444; File No. SR–GEMX– 2023–11] Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 13 Related to PIM September 20, 2023. 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 8, 2023, Nasdaq GEMX, LLC (‘‘GEMX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Options 3, Section 7, Types of Orders and Order and Quote Protocols; Options 3, Section 11, Auction Mechanisms; and Options 3, Section 13, Price Improvement Mechanism for Crossing Transactions. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/gemx/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 57 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00169 Fmt 4703 Sfmt 4703 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 7, Types of Orders and Order and Quote Protocols; Options 3, Section 11, Auction Mechanisms; and Options 3, Section 13, Price Improvement Mechanism for Crossing Transactions. Each change is described below. Options 3, Section 7 Opening Only The Exchange proposes to amend Options 3, Section 7(t), Opening Sweep 3 and Supplementary Material .02(e) to Options 3, Section 7 related to Opening Only 4 or ‘‘OPG’’ orders. The proposed rule text was adopted as part of a planned System migration.5 Options 3, Section 7(t) currently provides that an Opening Sweep would not be subject to any protections listed in Options 3, Section 15, except Automated Quotation Adjustments in Options 3, Section 15. Supplementary Material .02(e) to Options 3, Section 7 currently provides that an OPG Order would not be subject to any protections listed in Options 3, Section 15, except Size Limitation. At this time, the Exchange proposes to amend the rule text to specify that an Opening Sweep and an OPG Order would be subject to the Market Wide Risk Protection in Options 3, Section 15. The Market Wide Risk Protection in Options 3, Section 15(a)(1)(C) 3 An Opening Sweep is a one-sided order entered by a Market Maker through SQF for execution against eligible interest in the System during the Opening Process. This order type is not subject to any protections listed in Options 3, Section 15, except for Automated Quotation Adjustments. The Opening Sweep will only participate in the Opening Process pursuant to Options 3, Section 8(b)(1) and will be cancelled upon the open if not executed. See Options 3, Section 7(t). 4 An Opening Only (‘‘OPG’’) order is entered with a TIF of ‘‘OPG’’. This order can only be executed in the Opening Process pursuant to Options 3, Section 8. This order type is not subject to any protections listed in Options 3, Section 15, except Size Limitation. Any portion of the order that is not executed during the Opening Process is cancelled. OPG orders may not route. See Supplementary Material .02(e) to Options 3, Section 7. 5 See Securities Exchange Act Release No. 96817(February 6, 2023), 88 FR 8922 (February 10, 2023) (SR–GEMX–2023–02) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Rules in Connection With a Technology Migration to Enhanced Nasdaq Functionality) (‘‘SR–GEMX–2023–02’’). E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 automatically removes Member orders when certain firm-set thresholds are met. Specifically, the Market Wide Risk Protection requires all Members to provide parameters for the order entry and execution rate protections. The Market Wide Risk Protection would apply to an Opening Sweep and an OPG Order because it captures the order entry and execution rate for both Opening Sweeps and OPG Orders that are entered in the Opening Process as described in Options 3, Section 8. The Exchange believes the availability of the Market Wide Risk Protection during the Opening Process would assist Members in managing their pre-open risk by allowing Members to adhere to their firm thresholds. The Exchange notes that other risk protections within Options 3, Section 15 do not apply to either an Opening Sweep or an Opening Only Order because the risk protection either relies on the BBO, which is available after the Opening Process, or the risk protection is optional. Finally, the Exchange also proposes a technical amendment to capitalize the word ‘‘orders’’ in Supplementary Material .02(e) to Options 3, Section 7. Options 3, Sections 11 and 13 The Exchange proposes to amend Options 3, Section 11(b)(4)(i) related to the Facilitation Mechanism. Currently, the last sentence in Options 3, Section 11(b)(4)(i) provides that a facilitation order will be cancelled at the end of an exposure period if an execution would take place at a price that is inferior to the best bid (offer) on GEMX. The Exchange proposes to amend this sentence to state, the ‘‘Exchange best bid (offer)’’ and remove the phrase ‘‘on Nasdaq GEMX.’’ Additionally, the Exchange proposes to add the following rule text to the end of the sentence, ‘‘or if there is a Priority Customer order on the same side Exchange best bid (offer) at the same price as the facilitation price unless the Facilitation Order can execute at a price that is better than the same side Priority Customer Order.’’ Today, a facilitation order must execute at a price that is better than the same side BBO if there is a Priority Customer order on the same side. The proposed rule text is being amended to align to current System functionality which prevents a Facilitation Order from trading ahead of a Priority Customer Order. As such, a Priority Customer order on the same side of the offer must be considered when executing a Facilitation Order. The Exchange proposes to add similar language to the last sentence of Options 3, Section 11(d)(3)(A) related to the Solicited Order Mechanism. The Exchange notes VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 that these amendments do not amend the current System functionality. The Exchange proposes to add a new Options 3, Section 11(b)(4)(iv) to describe the allocation percentage that an Electronic Access Member is able to obtain in the Facilitation Mechanism. Today, under the current System operation, the facilitating Electronic Access Member may not receive an allocation percentage, at the final price point, of more than 40% of the original size of the Facilitation Order with one or multiple competing quote(s), order(s), or Response(s), except for rounding,6 when competing quotes, orders, or Responses have contracts available for execution. Options 3, Section 11(b)(4)(ii) makes clear that the facilitating Electronic Access Member will be allocated up to forty percent (40%) (or such lower percentage requested by the Member) of the original size of the facilitation order, but only after better-priced Responses, orders and quotes, as well as Priority Customer Orders and Priority Customer Responses at the facilitation price, are executed in full at such price point. The proposed rule text expressly notes that the allocation percentage will not be exceeded except for rounding purposes. This language represents current System functionality. The Exchange proposes to add similar language to Options 3, Section 13(d)(7) related to the Price Improvement Mechanism for Crossing Transactions to note the limitations with respect to allocations. The Exchange proposes to amend Supplementary Material .04 to Options 3, Section 11 to replace the word ‘‘quotes’’ with ‘‘Responses’’ in the Split Price description. Orders and responses in the market that receive the benefit of the facilitation price may receive executions at Split Prices. This change to the rule text is intended to utilize the defined term ‘‘Response’’ which pursuant to Options 3, Section 11(b)(3) may be priced at the price of the order to be facilitated or at a better price and will only be considered up to the size of the order to be facilitated. The Exchange proposes to add a new Supplementary Material .08 to Options 3, Section 11 to provide that, today, if an allocation would result in less than one contract, then one contract will be allocated. The Exchange does not allocate fractional contracts. This language represents the current System functionality. The Exchange proposes to add the same sentence within new Supplementary Material .09 to Options 6 GEMX’s System will round up to the nearest whole number during allocation in the Facilitation Mechanism. PO 00000 Frm 00170 Fmt 4703 Sfmt 4703 66115 3, Section 13 regarding a PIM. Phlx has similar language.7 The Exchange proposes to amend Options 3, Section 13(b)(1) through (3) to harmonize the language within the PIM entry checks with language within Nasdaq ISE, LLC’s (‘‘ISE’’) PIM, Nasdaq MRX, LLC’s (‘‘MRX’’) PIM, Nasdaq Phlx LLC’s (‘‘Phlx’’) PIXL and BX’s PRISM, without changing the substantive operations of these price improvement auctions. The Exchange believes that by utilizing similar language, Members will be able to compare GEMX’s PIM entry checks with similar mechanisms on Nasdaq affiliated markets. GEMX proposes to add ‘‘a price that is’’ to the end of Options 3, Section 13(b)(1) and add new subparagraphs (A) and (B) to distinguish opposite and same side checks. The opposite side check is currently spelled out in the current rule text, however the same side check does not specify the NBBO check. Today, if the Agency Order is for less than 50 option contracts, and if the difference between the NBBO or the difference between the internal best bid and the internal best offer is $0.01, the Crossing Transaction must be entered at a price that is, on the same side of the Agency Order equal or better than the NBBO and better than any Limit Order or quote on GEMX’s order book. The Exchange believes that the addition of the NBBO check will add clarity to the rule text because the NBBO check is always relevant in the same side check to avoid a trade-through. The Exchange also proposes to capitalize ‘‘Limit Order,’’ remove the word ‘‘Nasdaq’’ before ‘‘GEMX’’ and remove other extraneous words as the sentence has been rearranged. Next, the Exchange proposes to bifurcate the entry check for Agency Orders of 50 options contracts or more for the account of a Priority Customer from the entry checks for the account of a broker dealer or any other person or entity that is not a Priority Customer similar to other Nasdaq affiliated markets to provide consistent formatting. While the entry checks for new Options 3, Section 13(b)(2) and (b)(3) will not differ, the Exchange believes that retaining the same rule text format across its Nasdaq affiliated markets will allow for an easier comparison. To that end, the Exchange proposes to amend Options 3, Section 13(b)(2) to format it similar to Options 3, Section 13(b)(1). The Exchange proposes to add ‘‘for the account of a Priority Customer’’ to (b)(2) to distinguish it from (b)(3) which addresses the account of a broker dealer 7 See E:\FR\FM\26SEN1.SGM Phlx Options 3, Section 13(b)(1)(D). 26SEN1 66116 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices or any other person or entity that is not a Priority Customer. Options 3, Section 13(b)(2)(A) will also add rule text to address the opposite side of the market, which is not explicitly noted. Proposed Options 3, Section 13(b)(2)(A) will provide that if the Agency Order is for the account of a Priority Customer, and such order is for 50 option contracts or more, or if the difference between the NBBO or the difference between the internal BBO is greater than $0.01, a Crossing Transaction must be entered only at a price that is equal to or better than the internal BBO and NBBO on the opposite side of the market from the Agency Order. Further, Options 3, Section 13(b)(2)(B) will explicitly note the entry check on the same side of the market and similar to Options 3, Section 13(b)(1) will include the NBBO check. Proposed Options 3, Section 13(b)(2)(B) will provide that if the Agency Order is for the account of a Priority Customer, and such order is for 50 option contracts or more, or if the difference between the NBBO or the difference between the internal BBO is greater than $0.01, a Crossing Transaction must be entered only on the same side of the market as the Agency Order, at a price that is at least $0.01 better than any Limit Order or quote on the GEMX order book and equal to or better than the NBBO.8 The Exchange believes that the addition of the NBBO check will add clarity to the rule text because the NBBO check is always relevant in the same side check to avoid a trade-through. The Exchange also proposes to capitalize ‘‘Limit Order,’’ remove the word ‘‘Nasdaq’’ before ‘‘GEMX’’ and remove other extraneous words as the sentence has been rearranged. As noted herein, proposed Options 3, Section 13(b)(3) will mirror Options 3, Section 13(b)(2) except that it will refer to the account of a broker dealer or any other person or entity that is not a Priority Customer. The Exchange also proposes to renumber the remainder of the paragraphs within Options 3, Section 13(b). lotter on DSK11XQN23PROD with NOTICES1 Implementation The Exchange proposes to amend the Opening Sweep and Opening Only rule text only, within Options 3, Section 7, with its planned migration to enhanced Nasdaq functionality. Similar to SR– 8 For example, if the market is 0.98 bid and 0.99 offer, a Priority Customer PIM Order to buy for less than 50 contracts must be stopped at 0.98 cents in this scenario to be accepted into a PIM Auction, provided there is no resting order or quote on the Exchange order book at 0.98 in which case the PIM Order would be rejected. VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 GEMX–2023–04,9 the Exchange intends to begin implementation of the amendments to the Opening Sweep and Opening Only rule text within Options 3, Section 7 prior to December 29, 2023. The Exchange would commence its implementation with a limited symbol migration and continue to migrate symbols over several weeks. The Exchange will issue an Options Trader Alert to Members to provide notification of the symbols that will migrate and the relevant dates. The other rule amendments would be operative 30 days from the effective date. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act,10 in general, and furthers the objectives of section 6(b)(5) of the Act,11 in particular, in that it is designed to promote just and equitable principles of trade and to protect investors and the public interest. Options 3, Section 7 Opening Only The Exchange’s proposal to amend Options 3, Section 7(t), Opening Sweeps and Supplementary Material .02(e) to Options 3, Section 7 related to OPG Orders is consistent with the Act and the protection of investors and the general public because the Market Wide Risk Protection would capture the order entry and execution rate for those Opening Sweeps and OPG Orders entered in the Opening Process, which is described in Options 3, Section 8, and would assist Members in managing their pre-open risk by allowing Members to adhere to their firm thresholds. The Exchange is providing both order and quote risk protections in the Opening Process to allow Members to manage their risk. The Exchange notes that other risk protections within Options 3, Section 15 do not apply to either an Opening Sweep or an Opening Only Order because the risk protection either relies on the BBO, which is available after the Opening Process or the risk protection is optional. Options 3, Sections 11 and 13 The Exchange’s proposal to amend Options 3, Section 11(b)(4)(A) related to the Facilitation Mechanism is consistent with the Act and the protection of investors and the general public because 9 See Securities Exchange Act Release No. 97126 (March 13, 2023), 88 FR 16485 (March 17, 2023) (SR–GEMX–2023–04) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay the Implementation of Certain Trading Functionality) (‘‘SR–GEMX–2023–04’’). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). PO 00000 Frm 00171 Fmt 4703 Sfmt 4703 the System ensures that the facilitation order is at a price that is not inferior to the Exchange best bid (offer) or if there is a Priority Customer on the same side Exchange best bid (offer) at the same price as the facilitation price, otherwise the order would be cancelled. This price check ensures that the auction order may not trade at or through the Priority Customer order on the same side. This language represents the current System functionality. Similar changes are proposed to Options 3, Section 11(d)(3)(A) related to the Solicited Order Mechanism with respect to the contra-side. These amendments represent current System functionality and similarly ensure that the auction order may not trade at or through the Priority Customer order on the contra side. This is consistent with the treatment of Priority Customer in GEMX’s order book allocation, described in Options 3, Section 10, wherein Priority Customer interest is executed within PIM ahead of any other interest of Members.12 The Exchange’s proposal to amend new Options 3, Section 11(b)(4)(iv) related to the Facilitation Mechanism and Options 3, Section 13(d)(7) related to the Price Improvement Mechanism for Crossing Transactions is consistent with the Act and the protection of investors and the general public by permitting rounding to occur as specified in the Exchange’s rules. The proposal states how rounding interacts with the allocation percentages. The Exchange proposes to state that it will not permit an allocation percentage greater than the stated amounts in the auction rules, unless rounding is necessary. This proposed rule text represents the current System functionality. The Exchange’s proposal to amend Supplementary Material .04 to Options 3, Section 11 to replace the word ‘‘quotes’’ with ‘‘Responses’’ in the Split Price description is consistent with the Act and the protection of investors and the general public because orders and Responses in the market that receive the benefit of the facilitation price may receive executions at Split Prices. This change to the rule text is intended to utilize the defined term Response which pursuant to Options 3, Section 11(b)(3) may be priced at the price of the order to be facilitated or at a better price and 12 See also GEMX Options 3, Section 13(d)(1), ‘‘At a given price, ‘Priority Customer Interest’ (Priority Customer Orders and Improvement Orders from Priority Customers) is executed in full before ‘nonPriority Customer Interest’ (non-Priority Customer Orders, Improvement Orders from non-Priority Customers and Market Maker quotes).’’ E:\FR\FM\26SEN1.SGM 26SEN1 lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices will only be considered up to the size of the order to be facilitated. The Exchange’s proposal to add a new Supplementary Material .08 to Options 3, Section 11 and a new Supplementary Material .09 to Options 3, Section 13 to provide that if an allocation would result in less than one contract, then one contract would be allocated is consistent with the Act and the protection of investors and the general public because one contract is the minimum unit in which an option may trade on GEMX. This language represents the current System functionality. Phlx has similar language.13 The Exchange’s proposal to amend Options 3, Section 13(b)(1) through (3) to harmonize the language within the PIM entry checks with language within ISE’s PIM, MRX’s PIM, Phlx’s PIXL and BX’s PRISM, without changing the substantive operations of these price improvement auctions, is consistent with the Act and the protection of investors and the general public because by utilizing similar language, Members will be able to compare GEMX PIM entry checks with similar mechanisms on Nasdaq affiliated markets. Amending Options 3, Section 13(b)(1) to add new subparagraphs (A) and (B) to distinguish opposite and same side checks and add within the same side check a reference to the NBBO check, is consistent with the Act and the protection of investors and the general public because the NBBO check is always relevant in the same side check to avoid a trade-through. The Exchange believes that the addition of the NBBO check will add clarity to the rule text because the NBBO check is always relevant in the same side check to avoid a trade-through. The remainder of the changes are non-substantive. The Exchange’s proposal to bifurcate the entry check for Agency Orders of 50 options contracts or more for the account of a Priority Customer from the entry checks for the account of a broker dealer or any other person or entity that is not a Priority Customer into two new paragraphs, a (b)(2) and a (b)(3), is consistent with the Act and the protection of investors and the general public because retaining the same rule text format across its Nasdaq affiliated markets will allow for an easier comparison. The Exchange’s proposal to add ‘‘for the account of a Priority Customer’’ to new subparagraph (b)(2) to explicitly address the opposite side of the market and also note the NBBO entry check on the same side of the market is consistent 13 See Phlx Options 3, Section 13(b)(1)(D). VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 with the Act and the protection of investors and the general public because the new format will provide the parameters for each check. Further, the NBBO check is always relevant in the same side check to avoid a tradethrough. The remainder of the changes are non-substantive. Mirroring the same language within Options 3, Section 13(b)(2)(B), except to note that it is for the account of a broker dealer or any other person or entity that is not a Priority Customer will allow Members to compare GEMX’s PIM entry checks with similar mechanisms on Nasdaq affiliated markets. 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 7 Opening Only The Exchange’s proposal to amend Options 3, Section 7(t), Opening Sweeps and Supplementary Material .02(e) to Options 3, Section 7 related to OPG Orders does not impose an intra-market burden on competition because the Market Wide Risk Protection is available to all Members in the Opening Process. The Exchange’s proposal to amend Opening Sweeps and OPG Orders does not impose an inter-market burden on competition because other options exchanges may similarly offer such risk protections on their opening order types. Options 3, Sections 11 and 13 The Exchange’s proposal to amend Options 3, Section 11(b)(4)(A) related to the Facilitation Mechanism and Options 3, Section 11(d)(3)(A) related to the Solicited Order Mechanism to state that that the order must execute at a price that is better than the same side BBO if these is a Priority Customer on the same side does not impose an intra-market burden on competition because all auction orders in these aforementioned auction mechanisms would be handled in a uniform manner by the System such that those orders would not be permitted to trade at or through the Priority Customer order on the same side. The Exchange’s proposal to amend Options 3, Section 11(b)(4)(A) related to the Facilitation Mechanism and Options 3, Section 11(d)(3)(A) related to the Solicited Order Mechanism to state that that the order must execute at a price that is better than the same side BBO if these is a Priority Customer on the same side does not impose an inter-market PO 00000 Frm 00172 Fmt 4703 Sfmt 4703 66117 burden on competition because other options markets similarly have customer overlay priorities. The Exchange’s proposal to amend new Options 3, Section 11(b)(4)(iv) related to the Facilitation Mechanism and Options 3, Section 13(d)(7) related to the Price Improvement Mechanism for Crossing Transactions does not impose an intra-market burden on competition because the Exchange’s rules regarding rounding are applied in a uniform manner to all Members submitting an order into an auction mechanism. The Exchange’s proposal to amend new Options 3, Section 11(b)(4)(iv) related to the Facilitation Mechanism and Options 3, Section 13(d)(7) related to the Price Improvement Mechanism for Crossing Transactions does not impose an intermarket burden on competition because other options exchanges similarly round in excess of allocation percentages such as BX.14 The Exchange’s proposal to amend Supplementary Material .04 to Options 3, Section 11 to replace the word ‘‘quotes’’ with ‘‘Responses’’ in the Split Price description does not impose an intra-market burden on competition because orders and responses in the market that receive the benefit of the facilitation price may receive executions at Split Prices. This clarification to the rule text is intended to correct the current language. The Exchange’s proposal to amend Supplementary Material .04 to Options 3, Section 11 to replace the word ‘‘quotes’’ with ‘‘Responses’’ in the Split Price description does not impose an intermarket burden on competition because this rule text change is specific to GEMX’s rule language. The Exchange’s proposal to add a new Supplementary Material .08 to Options 3, Section 11 and a new Supplementary Material .09 to Options 3, Section 13 to provide that, today, if an allocation would result in less than one contract, then one contract will be allocated does not impose an intra-market burden on competition because the System would uniformly allocate contracts with a minimum unit of one contract. The Exchange’s proposal to add a new Supplementary Material .08 to Options 3, Section 11 and a new Supplementary Material .09 to Options 3, Section 13 to provide that, today, if an allocation would result in less than one contract, then one contract will be allocated does not impose an inter-market burden on competition because other options 14 See E:\FR\FM\26SEN1.SGM BX Options 3, Section 13(ii)(A)(1). 26SEN1 66118 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices markets similarly specify a minimum unit of rounding such as Phlx.15 The Exchange’s proposal to amend Options 3, Section 13(b)(1) through (3) to harmonize the language within the PIM entry checks within ISE’s PIM, MRX’s PIM, Phlx’s PIXL and BX’s PRISM, without changing the substantive operations of these price improvement auctions, distinguishing opposite and same side checks, and adding the NBBO check reference within the same side check do not impose an intra-market undue burden on competition because harmonizing the language will enable Members to compare GEMX’s PIM entry checks with similar mechanisms on Nasdaq affiliated markets. Further, the NBBO check is always relevant in the same side check to avoid a trade-through. The Exchange’s proposal to amend Options 3, Section 13(b)(1) through (3) to harmonize the language within the PIM entry checks within ISE’s PIM, MRX’s PIM, Phlx’s PIXL and BX’s PRISM, without changing the substantive operations of these price improvement auctions, distinguishing opposite and same side checks, and adding the NBBO check reference within the same side check do not impose an inter-market undue burden on competition because other options markets have their own price improvement auctions and are free to denote their entry checks in a similar fashion and have both same and opposite side entry checks which may differ from GEMX’s rule. lotter on DSK11XQN23PROD with NOTICES1 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 16 and subparagraph (f)(6) of Rule 19b–4 thereunder.17 15 See Phlx Options 3, Section 13(b)(1)(D). U.S.C. 78s(b)(3)(A)(iii). 17 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 16 15 VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 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– GEMX–2023–11 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–GEMX–2023–11. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. PO 00000 Frm 00173 Fmt 4703 Sfmt 4703 Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–GEMX–2023–11 and should be submitted on or before October 17, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–20803 Filed 9–25–23; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #18187 and #18188; GEORGIA Disaster Number GA–00162] Administrative Declaration of a Disaster for the State of Georgia U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a notice of an Administrative declaration of a disaster for the State of Georgia dated 09/20/ 2023. Incident: Severe Storms and Flooding. Incident Period: 08/29/2023. DATES: Issued on 09/20/2023. Physical Loan Application Deadline Date: 11/20/2023. Economic Injury (EIDL) Loan Application Deadline Date: 06/20/2024. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street, SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Gordon. Contiguous Counties: SUMMARY: 18 17 E:\FR\FM\26SEN1.SGM CFR 200.30–3(a)(12). 26SEN1

Agencies

[Federal Register Volume 88, Number 185 (Tuesday, September 26, 2023)]
[Notices]
[Pages 66114-66118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20803]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98444; File No. SR-GEMX-2023-11]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, 
Section 13 Related to PIM

September 20, 2023.
    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 8, 2023, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Options 3, Section 7, Types of 
Orders and Order and Quote Protocols; Options 3, Section 11, Auction 
Mechanisms; and Options 3, Section 13, Price Improvement Mechanism for 
Crossing Transactions.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/gemx/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 7, Types of 
Orders and Order and Quote Protocols; Options 3, Section 11, Auction 
Mechanisms; and Options 3, Section 13, Price Improvement Mechanism for 
Crossing Transactions. Each change is described below.
Options 3, Section 7
Opening Only
    The Exchange proposes to amend Options 3, Section 7(t), Opening 
Sweep \3\ and Supplementary Material .02(e) to Options 3, Section 7 
related to Opening Only \4\ or ``OPG'' orders. The proposed rule text 
was adopted as part of a planned System migration.\5\ Options 3, 
Section 7(t) currently provides that an Opening Sweep would not be 
subject to any protections listed in Options 3, Section 15, except 
Automated Quotation Adjustments in Options 3, Section 15. Supplementary 
Material .02(e) to Options 3, Section 7 currently provides that an OPG 
Order would not be subject to any protections listed in Options 3, 
Section 15, except Size Limitation. At this time, the Exchange proposes 
to amend the rule text to specify that an Opening Sweep and an OPG 
Order would be subject to the Market Wide Risk Protection in Options 3, 
Section 15.
---------------------------------------------------------------------------

    \3\ An Opening Sweep is a one-sided order entered by a Market 
Maker through SQF for execution against eligible interest in the 
System during the Opening Process. This order type is not subject to 
any protections listed in Options 3, Section 15, except for 
Automated Quotation Adjustments. The Opening Sweep will only 
participate in the Opening Process pursuant to Options 3, Section 
8(b)(1) and will be cancelled upon the open if not executed. See 
Options 3, Section 7(t).
    \4\ An Opening Only (``OPG'') order is entered with a TIF of 
``OPG''. This order can only be executed in the Opening Process 
pursuant to Options 3, Section 8. This order type is not subject to 
any protections listed in Options 3, Section 15, except Size 
Limitation. Any portion of the order that is not executed during the 
Opening Process is cancelled. OPG orders may not route. See 
Supplementary Material .02(e) to Options 3, Section 7.
    \5\ See Securities Exchange Act Release No. 96817(February 6, 
2023), 88 FR 8922 (February 10, 2023) (SR-GEMX-2023-02) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Its Rules in Connection With a Technology Migration to Enhanced 
Nasdaq Functionality) (``SR-GEMX-2023-02'').
---------------------------------------------------------------------------

    The Market Wide Risk Protection in Options 3, Section 15(a)(1)(C)

[[Page 66115]]

automatically removes Member orders when certain firm-set thresholds 
are met. Specifically, the Market Wide Risk Protection requires all 
Members to provide parameters for the order entry and execution rate 
protections. The Market Wide Risk Protection would apply to an Opening 
Sweep and an OPG Order because it captures the order entry and 
execution rate for both Opening Sweeps and OPG Orders that are entered 
in the Opening Process as described in Options 3, Section 8. The 
Exchange believes the availability of the Market Wide Risk Protection 
during the Opening Process would assist Members in managing their pre-
open risk by allowing Members to adhere to their firm thresholds. The 
Exchange notes that other risk protections within Options 3, Section 15 
do not apply to either an Opening Sweep or an Opening Only Order 
because the risk protection either relies on the BBO, which is 
available after the Opening Process, or the risk protection is 
optional. Finally, the Exchange also proposes a technical amendment to 
capitalize the word ``orders'' in Supplementary Material .02(e) to 
Options 3, Section 7.
Options 3, Sections 11 and 13
    The Exchange proposes to amend Options 3, Section 11(b)(4)(i) 
related to the Facilitation Mechanism. Currently, the last sentence in 
Options 3, Section 11(b)(4)(i) provides that a facilitation order will 
be cancelled at the end of an exposure period if an execution would 
take place at a price that is inferior to the best bid (offer) on GEMX. 
The Exchange proposes to amend this sentence to state, the ``Exchange 
best bid (offer)'' and remove the phrase ``on Nasdaq GEMX.'' 
Additionally, the Exchange proposes to add the following rule text to 
the end of the sentence, ``or if there is a Priority Customer order on 
the same side Exchange best bid (offer) at the same price as the 
facilitation price unless the Facilitation Order can execute at a price 
that is better than the same side Priority Customer Order.'' Today, a 
facilitation order must execute at a price that is better than the same 
side BBO if there is a Priority Customer order on the same side. The 
proposed rule text is being amended to align to current System 
functionality which prevents a Facilitation Order from trading ahead of 
a Priority Customer Order. As such, a Priority Customer order on the 
same side of the offer must be considered when executing a Facilitation 
Order. The Exchange proposes to add similar language to the last 
sentence of Options 3, Section 11(d)(3)(A) related to the Solicited 
Order Mechanism. The Exchange notes that these amendments do not amend 
the current System functionality.
    The Exchange proposes to add a new Options 3, Section 11(b)(4)(iv) 
to describe the allocation percentage that an Electronic Access Member 
is able to obtain in the Facilitation Mechanism. Today, under the 
current System operation, the facilitating Electronic Access Member may 
not receive an allocation percentage, at the final price point, of more 
than 40% of the original size of the Facilitation Order with one or 
multiple competing quote(s), order(s), or Response(s), except for 
rounding,\6\ when competing quotes, orders, or Responses have contracts 
available for execution. Options 3, Section 11(b)(4)(ii) makes clear 
that the facilitating Electronic Access Member will be allocated up to 
forty percent (40%) (or such lower percentage requested by the Member) 
of the original size of the facilitation order, but only after better-
priced Responses, orders and quotes, as well as Priority Customer 
Orders and Priority Customer Responses at the facilitation price, are 
executed in full at such price point. The proposed rule text expressly 
notes that the allocation percentage will not be exceeded except for 
rounding purposes. This language represents current System 
functionality. The Exchange proposes to add similar language to Options 
3, Section 13(d)(7) related to the Price Improvement Mechanism for 
Crossing Transactions to note the limitations with respect to 
allocations.
---------------------------------------------------------------------------

    \6\ GEMX's System will round up to the nearest whole number 
during allocation in the Facilitation Mechanism.
---------------------------------------------------------------------------

    The Exchange proposes to amend Supplementary Material .04 to 
Options 3, Section 11 to replace the word ``quotes'' with ``Responses'' 
in the Split Price description. Orders and responses in the market that 
receive the benefit of the facilitation price may receive executions at 
Split Prices. This change to the rule text is intended to utilize the 
defined term ``Response'' which pursuant to Options 3, Section 11(b)(3) 
may be priced at the price of the order to be facilitated or at a 
better price and will only be considered up to the size of the order to 
be facilitated.
    The Exchange proposes to add a new Supplementary Material .08 to 
Options 3, Section 11 to provide that, today, if an allocation would 
result in less than one contract, then one contract will be allocated. 
The Exchange does not allocate fractional contracts. This language 
represents the current System functionality. The Exchange proposes to 
add the same sentence within new Supplementary Material .09 to Options 
3, Section 13 regarding a PIM. Phlx has similar language.\7\
---------------------------------------------------------------------------

    \7\ See Phlx Options 3, Section 13(b)(1)(D).
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 13(b)(1) through 
(3) to harmonize the language within the PIM entry checks with language 
within Nasdaq ISE, LLC's (``ISE'') PIM, Nasdaq MRX, LLC's (``MRX'') 
PIM, Nasdaq Phlx LLC's (``Phlx'') PIXL and BX's PRISM, without changing 
the substantive operations of these price improvement auctions. The 
Exchange believes that by utilizing similar language, Members will be 
able to compare GEMX's PIM entry checks with similar mechanisms on 
Nasdaq affiliated markets.
    GEMX proposes to add ``a price that is'' to the end of Options 3, 
Section 13(b)(1) and add new subparagraphs (A) and (B) to distinguish 
opposite and same side checks. The opposite side check is currently 
spelled out in the current rule text, however the same side check does 
not specify the NBBO check. Today, if the Agency Order is for less than 
50 option contracts, and if the difference between the NBBO or the 
difference between the internal best bid and the internal best offer is 
$0.01, the Crossing Transaction must be entered at a price that is, on 
the same side of the Agency Order equal or better than the NBBO and 
better than any Limit Order or quote on GEMX's order book. The Exchange 
believes that the addition of the NBBO check will add clarity to the 
rule text because the NBBO check is always relevant in the same side 
check to avoid a trade-through. The Exchange also proposes to 
capitalize ``Limit Order,'' remove the word ``Nasdaq'' before ``GEMX'' 
and remove other extraneous words as the sentence has been rearranged.
    Next, the Exchange proposes to bifurcate the entry check for Agency 
Orders of 50 options contracts or more for the account of a Priority 
Customer from the entry checks for the account of a broker dealer or 
any other person or entity that is not a Priority Customer similar to 
other Nasdaq affiliated markets to provide consistent formatting. While 
the entry checks for new Options 3, Section 13(b)(2) and (b)(3) will 
not differ, the Exchange believes that retaining the same rule text 
format across its Nasdaq affiliated markets will allow for an easier 
comparison. To that end, the Exchange proposes to amend Options 3, 
Section 13(b)(2) to format it similar to Options 3, Section 13(b)(1). 
The Exchange proposes to add ``for the account of a Priority Customer'' 
to (b)(2) to distinguish it from (b)(3) which addresses the account of 
a broker dealer

[[Page 66116]]

or any other person or entity that is not a Priority Customer. Options 
3, Section 13(b)(2)(A) will also add rule text to address the opposite 
side of the market, which is not explicitly noted. Proposed Options 3, 
Section 13(b)(2)(A) will provide that if the Agency Order is for the 
account of a Priority Customer, and such order is for 50 option 
contracts or more, or if the difference between the NBBO or the 
difference between the internal BBO is greater than $0.01, a Crossing 
Transaction must be entered only at a price that is equal to or better 
than the internal BBO and NBBO on the opposite side of the market from 
the Agency Order. Further, Options 3, Section 13(b)(2)(B) will 
explicitly note the entry check on the same side of the market and 
similar to Options 3, Section 13(b)(1) will include the NBBO check. 
Proposed Options 3, Section 13(b)(2)(B) will provide that if the Agency 
Order is for the account of a Priority Customer, and such order is for 
50 option contracts or more, or if the difference between the NBBO or 
the difference between the internal BBO is greater than $0.01, a 
Crossing Transaction must be entered only on the same side of the 
market as the Agency Order, at a price that is at least $0.01 better 
than any Limit Order or quote on the GEMX order book and equal to or 
better than the NBBO.\8\ The Exchange believes that the addition of the 
NBBO check will add clarity to the rule text because the NBBO check is 
always relevant in the same side check to avoid a trade-through. The 
Exchange also proposes to capitalize ``Limit Order,'' remove the word 
``Nasdaq'' before ``GEMX'' and remove other extraneous words as the 
sentence has been rearranged.
---------------------------------------------------------------------------

    \8\ For example, if the market is 0.98 bid and 0.99 offer, a 
Priority Customer PIM Order to buy for less than 50 contracts must 
be stopped at 0.98 cents in this scenario to be accepted into a PIM 
Auction, provided there is no resting order or quote on the Exchange 
order book at 0.98 in which case the PIM Order would be rejected.
---------------------------------------------------------------------------

    As noted herein, proposed Options 3, Section 13(b)(3) will mirror 
Options 3, Section 13(b)(2) except that it will refer to the account of 
a broker dealer or any other person or entity that is not a Priority 
Customer. The Exchange also proposes to renumber the remainder of the 
paragraphs within Options 3, Section 13(b).
Implementation
    The Exchange proposes to amend the Opening Sweep and Opening Only 
rule text only, within Options 3, Section 7, with its planned migration 
to enhanced Nasdaq functionality. Similar to SR-GEMX-2023-04,\9\ the 
Exchange intends to begin implementation of the amendments to the 
Opening Sweep and Opening Only rule text within Options 3, Section 7 
prior to December 29, 2023. The Exchange would commence its 
implementation with a limited symbol migration and continue to migrate 
symbols over several weeks. The Exchange will issue an Options Trader 
Alert to Members to provide notification of the symbols that will 
migrate and the relevant dates. The other rule amendments would be 
operative 30 days from the effective date.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 97126 (March 13, 
2023), 88 FR 16485 (March 17, 2023) (SR-GEMX-2023-04) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Delay 
the Implementation of Certain Trading Functionality) (``SR-GEMX-
2023-04'').
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\10\ in general, and furthers the objectives of section 
6(b)(5) of the Act,\11\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Options 3, Section 7
Opening Only
    The Exchange's proposal to amend Options 3, Section 7(t), Opening 
Sweeps and Supplementary Material .02(e) to Options 3, Section 7 
related to OPG Orders is consistent with the Act and the protection of 
investors and the general public because the Market Wide Risk 
Protection would capture the order entry and execution rate for those 
Opening Sweeps and OPG Orders entered in the Opening Process, which is 
described in Options 3, Section 8, and would assist Members in managing 
their pre-open risk by allowing Members to adhere to their firm 
thresholds. The Exchange is providing both order and quote risk 
protections in the Opening Process to allow Members to manage their 
risk. The Exchange notes that other risk protections within Options 3, 
Section 15 do not apply to either an Opening Sweep or an Opening Only 
Order because the risk protection either relies on the BBO, which is 
available after the Opening Process or the risk protection is optional.
Options 3, Sections 11 and 13
    The Exchange's proposal to amend Options 3, Section 11(b)(4)(A) 
related to the Facilitation Mechanism is consistent with the Act and 
the protection of investors and the general public because the System 
ensures that the facilitation order is at a price that is not inferior 
to the Exchange best bid (offer) or if there is a Priority Customer on 
the same side Exchange best bid (offer) at the same price as the 
facilitation price, otherwise the order would be cancelled. This price 
check ensures that the auction order may not trade at or through the 
Priority Customer order on the same side. This language represents the 
current System functionality. Similar changes are proposed to Options 
3, Section 11(d)(3)(A) related to the Solicited Order Mechanism with 
respect to the contra-side. These amendments represent current System 
functionality and similarly ensure that the auction order may not trade 
at or through the Priority Customer order on the contra side. This is 
consistent with the treatment of Priority Customer in GEMX's order book 
allocation, described in Options 3, Section 10, wherein Priority 
Customer interest is executed within PIM ahead of any other interest of 
Members.\12\
---------------------------------------------------------------------------

    \12\ See also GEMX Options 3, Section 13(d)(1), ``At a given 
price, `Priority Customer Interest' (Priority Customer Orders and 
Improvement Orders from Priority Customers) is executed in full 
before `non-Priority Customer Interest' (non-Priority Customer 
Orders, Improvement Orders from non-Priority Customers and Market 
Maker quotes).''
---------------------------------------------------------------------------

    The Exchange's proposal to amend new Options 3, Section 
11(b)(4)(iv) related to the Facilitation Mechanism and Options 3, 
Section 13(d)(7) related to the Price Improvement Mechanism for 
Crossing Transactions is consistent with the Act and the protection of 
investors and the general public by permitting rounding to occur as 
specified in the Exchange's rules. The proposal states how rounding 
interacts with the allocation percentages. The Exchange proposes to 
state that it will not permit an allocation percentage greater than the 
stated amounts in the auction rules, unless rounding is necessary. This 
proposed rule text represents the current System functionality.
    The Exchange's proposal to amend Supplementary Material .04 to 
Options 3, Section 11 to replace the word ``quotes'' with ``Responses'' 
in the Split Price description is consistent with the Act and the 
protection of investors and the general public because orders and 
Responses in the market that receive the benefit of the facilitation 
price may receive executions at Split Prices. This change to the rule 
text is intended to utilize the defined term Response which pursuant to 
Options 3, Section 11(b)(3) may be priced at the price of the order to 
be facilitated or at a better price and

[[Page 66117]]

will only be considered up to the size of the order to be facilitated.
    The Exchange's proposal to add a new Supplementary Material .08 to 
Options 3, Section 11 and a new Supplementary Material .09 to Options 
3, Section 13 to provide that if an allocation would result in less 
than one contract, then one contract would be allocated is consistent 
with the Act and the protection of investors and the general public 
because one contract is the minimum unit in which an option may trade 
on GEMX. This language represents the current System functionality. 
Phlx has similar language.\13\
---------------------------------------------------------------------------

    \13\ See Phlx Options 3, Section 13(b)(1)(D).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Options 3, Section 13(b)(1) 
through (3) to harmonize the language within the PIM entry checks with 
language within ISE's PIM, MRX's PIM, Phlx's PIXL and BX's PRISM, 
without changing the substantive operations of these price improvement 
auctions, is consistent with the Act and the protection of investors 
and the general public because by utilizing similar language, Members 
will be able to compare GEMX PIM entry checks with similar mechanisms 
on Nasdaq affiliated markets.
    Amending Options 3, Section 13(b)(1) to add new subparagraphs (A) 
and (B) to distinguish opposite and same side checks and add within the 
same side check a reference to the NBBO check, is consistent with the 
Act and the protection of investors and the general public because the 
NBBO check is always relevant in the same side check to avoid a trade-
through. The Exchange believes that the addition of the NBBO check will 
add clarity to the rule text because the NBBO check is always relevant 
in the same side check to avoid a trade-through. The remainder of the 
changes are non-substantive.
    The Exchange's proposal to bifurcate the entry check for Agency 
Orders of 50 options contracts or more for the account of a Priority 
Customer from the entry checks for the account of a broker dealer or 
any other person or entity that is not a Priority Customer into two new 
paragraphs, a (b)(2) and a (b)(3), is consistent with the Act and the 
protection of investors and the general public because retaining the 
same rule text format across its Nasdaq affiliated markets will allow 
for an easier comparison.
    The Exchange's proposal to add ``for the account of a Priority 
Customer'' to new subparagraph (b)(2) to explicitly address the 
opposite side of the market and also note the NBBO entry check on the 
same side of the market is consistent with the Act and the protection 
of investors and the general public because the new format will provide 
the parameters for each check. Further, the NBBO check is always 
relevant in the same side check to avoid a trade-through. The remainder 
of the changes are non-substantive. Mirroring the same language within 
Options 3, Section 13(b)(2)(B), except to note that it is for the 
account of a broker dealer or any other person or entity that is not a 
Priority Customer will allow Members to compare GEMX's PIM entry checks 
with similar mechanisms on Nasdaq affiliated markets.

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 7
Opening Only
    The Exchange's proposal to amend Options 3, Section 7(t), Opening 
Sweeps and Supplementary Material .02(e) to Options 3, Section 7 
related to OPG Orders does not impose an intra-market burden on 
competition because the Market Wide Risk Protection is available to all 
Members in the Opening Process. The Exchange's proposal to amend 
Opening Sweeps and OPG Orders does not impose an inter-market burden on 
competition because other options exchanges may similarly offer such 
risk protections on their opening order types.
Options 3, Sections 11 and 13
    The Exchange's proposal to amend Options 3, Section 11(b)(4)(A) 
related to the Facilitation Mechanism and Options 3, Section 
11(d)(3)(A) related to the Solicited Order Mechanism to state that that 
the order must execute at a price that is better than the same side BBO 
if these is a Priority Customer on the same side does not impose an 
intra-market burden on competition because all auction orders in these 
aforementioned auction mechanisms would be handled in a uniform manner 
by the System such that those orders would not be permitted to trade at 
or through the Priority Customer order on the same side. The Exchange's 
proposal to amend Options 3, Section 11(b)(4)(A) related to the 
Facilitation Mechanism and Options 3, Section 11(d)(3)(A) related to 
the Solicited Order Mechanism to state that that the order must execute 
at a price that is better than the same side BBO if these is a Priority 
Customer on the same side does not impose an inter-market burden on 
competition because other options markets similarly have customer 
overlay priorities.
    The Exchange's proposal to amend new Options 3, Section 
11(b)(4)(iv) related to the Facilitation Mechanism and Options 3, 
Section 13(d)(7) related to the Price Improvement Mechanism for 
Crossing Transactions does not impose an intra-market burden on 
competition because the Exchange's rules regarding rounding are applied 
in a uniform manner to all Members submitting an order into an auction 
mechanism. The Exchange's proposal to amend new Options 3, Section 
11(b)(4)(iv) related to the Facilitation Mechanism and Options 3, 
Section 13(d)(7) related to the Price Improvement Mechanism for 
Crossing Transactions does not impose an inter-market burden on 
competition because other options exchanges similarly round in excess 
of allocation percentages such as BX.\14\
---------------------------------------------------------------------------

    \14\ See BX Options 3, Section 13(ii)(A)(1).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Supplementary Material .04 to 
Options 3, Section 11 to replace the word ``quotes'' with ``Responses'' 
in the Split Price description does not impose an intra-market burden 
on competition because orders and responses in the market that receive 
the benefit of the facilitation price may receive executions at Split 
Prices. This clarification to the rule text is intended to correct the 
current language. The Exchange's proposal to amend Supplementary 
Material .04 to Options 3, Section 11 to replace the word ``quotes'' 
with ``Responses'' in the Split Price description does not impose an 
inter-market burden on competition because this rule text change is 
specific to GEMX's rule language.
    The Exchange's proposal to add a new Supplementary Material .08 to 
Options 3, Section 11 and a new Supplementary Material .09 to Options 
3, Section 13 to provide that, today, if an allocation would result in 
less than one contract, then one contract will be allocated does not 
impose an intra-market burden on competition because the System would 
uniformly allocate contracts with a minimum unit of one contract. The 
Exchange's proposal to add a new Supplementary Material .08 to Options 
3, Section 11 and a new Supplementary Material .09 to Options 3, 
Section 13 to provide that, today, if an allocation would result in 
less than one contract, then one contract will be allocated does not 
impose an inter-market burden on competition because other options

[[Page 66118]]

markets similarly specify a minimum unit of rounding such as Phlx.\15\
---------------------------------------------------------------------------

    \15\ See Phlx Options 3, Section 13(b)(1)(D).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Options 3, Section 13(b)(1) 
through (3) to harmonize the language within the PIM entry checks 
within ISE's PIM, MRX's PIM, Phlx's PIXL and BX's PRISM, without 
changing the substantive operations of these price improvement 
auctions, distinguishing opposite and same side checks, and adding the 
NBBO check reference within the same side check do not impose an intra-
market undue burden on competition because harmonizing the language 
will enable Members to compare GEMX's PIM entry checks with similar 
mechanisms on Nasdaq affiliated markets. Further, the NBBO check is 
always relevant in the same side check to avoid a trade-through. The 
Exchange's proposal to amend Options 3, Section 13(b)(1) through (3) to 
harmonize the language within the PIM entry checks within ISE's PIM, 
MRX's PIM, Phlx's PIXL and BX's PRISM, without changing the substantive 
operations of these price improvement auctions, distinguishing opposite 
and same side checks, and adding the NBBO check reference within the 
same side check do not impose an inter-market undue burden on 
competition because other options markets have their own price 
improvement auctions and are free to denote their entry checks in a 
similar fashion and have both same and opposite side entry checks which 
may differ from GEMX's rule.

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 \16\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 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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    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-GEMX-2023-11 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-GEMX-2023-11. 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 a.m. and 3 p.m. 
Copies of the filing also will be available for inspection and copying 
at the principal office of the Exchange. Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to file number SR-GEMX-2023-11 and should be submitted on or 
before October 17, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20803 Filed 9-25-23; 8:45 am]
BILLING CODE 8011-01-P
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