Self-Regulatory Organizations; Nasdaq BX, Inc.; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Adopt an OTTO Protocol, 70234-70241 [2024-19394]
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Federal Register / Vol. 89, No. 168 / Thursday, August 29, 2024 / Notices
how to submit comments, available at
https://www.sec.gov/regulatory-actions/
how-to-submit-comments. General
questions regarding the rule filing
process or logistical questions regarding
this filing should be directed to the
Main Office of the Commission’s
Division of Trading and Markets at
tradingandmarkets@sec.gov or 202–
551–5777.
DTC reserves the right to not respond
to any comments received.
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A) 36 of the Act and paragraph
(f) 37 of Rule 19b–4 thereunder. At any
time within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
DTC–2024–008 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–DTC–2024–008. 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 (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 DTC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC–2024–008 and should
be submitted on or before September 19,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–19396 Filed 8–28–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100810; File No. SR–BX–
2024–019)]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove
Proposed Rule Change To Adopt an
OTTO Protocol
August 23, 2024.
I. Introduction
On June 26, 2024, Nasdaq BX, Inc.
(‘‘BX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change
(File Number SR–BX–2024–019) to
adopt an OTTO protocol and associated
fee. The proposed rule change was
immediately effective upon filing with
the Commission pursuant to Section
38 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
36 15
U.S.C. 78s(b)(3)(A).
37 17 CFR 240.19b–4(f).
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19(b)(3)(A) of the Act.3 The proposed
rule change was published for comment
in the Federal Register on July 15,
2024.4 Pursuant to Section 19(b)(3)(C) of
the Act,5 the Commission is hereby: (1)
temporarily suspending the proposed
rule change; and (2) instituting
proceedings to determine whether to
approve or disapprove the proposed
rule change.
II. Background and Description of the
Proposed Rule Change
The Exchange states that the purpose
of the proposed rule change is to adopt
a new protocol, ‘‘Ouch to Trade
Options’’ or ‘‘OTTO’’ and establish
pricing for this new protocol.
According to the Exchange, today, BX
Participants may enter orders into the
Exchange through the ‘‘Financial
Information eXchange’’ or ‘‘FIX.’’ 6 The
Exchange states that the proposed new
OTTO protocol is identical to the OTTO
protocol offered today on 3 Nasdaq
affiliated exchanges, Nasdaq ISE, LLC
(‘‘ISE’’), Nasdaq GEMX, LLC (‘‘GEMX’’)
and Nasdaq MRX, LLC (‘‘MRX’’).7
The Exchange states that the OTTO
protocol is a proprietary protocol of
Nasdaq, Inc and that the Exchange
continues to innovate and modernize
technology so that it may continue to
compete among options markets.8 The
Exchange states that the ability to
continue to innovate with technology
and offer new products to market
participants allows BX to remain
competitive in the options space which
currently has seventeen options markets
and potential new entrants.9
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
4 See Securities Exchange Act Release No. 99841
(July 9, 2024), 89 FR 57485 (‘‘Notice’’).
5 15 U.S.C. 78s(b)(3)(C).
6 See Notice, 89 FR at 57485. The Exchange states
that FIX is an interface that allows Participants and
their Sponsored Customers to connect, send, and
receive messages related to orders and auction
orders and responses to and from the Exchange. Id.
at n.3. The Exchange states that features include the
following: (1) execution messages; (2) order
messages; and (3) risk protection triggers and cancel
notifications. Id. The Exchange states that, in
addition, a BX Participant may elect to utilize FIX
to send a message and PRISM Order, as defined
within Options 3, Section 13, to all BX Participants
that opt in to receive Requests for PRISM requesting
that it submit the sender’s PRISM Order with
responder’s Initiating Order, as defined within
Options 3, Section 13, into the Price Improvement
Auction (‘‘PRISM’’) mechanism, pursuant to
Options 3, Section 13 (‘‘Request for PRISM’’). Id.
(citing Exchange Rule Options 3, Section
7(e)(1)(A)).
7 See Notice, 89 FR at 57485–86.
8 See Notice, 89 FR at 57486.
9 See Notice, 89 FR at 57486.
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OTTO Protocol
The Exchange states that as proposed,
OTTO would allow Participants and
their Sponsored Customers 10 to
connect, send, and receive messages
related to orders, auction orders, and
auction responses to the Exchange.11
The Exchange states that OTTO features
would include the following: (1) options
symbol directory messages (e.g.,
underlying and complex instruments);
(2) System 12 event messages (e.g., start
of trading hours messages and start of
opening); (3) trading action messages
(e.g., halts and resumes); (4) execution
messages; (5) order messages; (6) risk
protection triggers and cancel
notifications; (7) auction notifications;
(8) auction responses; and (9) post trade
allocation messages.13 The Exchange
notes that unlike FIX, which offers
routing capability, OTTO does not
permit routing.14 The Exchange states
that it proposes to include this
description of OTTO in new Options 3,
Section 7(e)(1)(B) and re-letter current
‘‘B’’ as ‘‘C’’.15
The Exchange states that while the
Exchange has no way of predicting with
certainty the amount or type of OTTO
Ports market participants will in fact
purchase, the Exchange anticipates that
some Participants will subscribe to
multiple OTTO Ports in combination
with FIX Ports.16 The Exchange notes
that Options Participants may use
varying number of OTTO ports based on
their business needs.17
Other Amendments
In connection with offering OTTO,
the Exchange proposes to amend other
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10 The
Exchange states that General 2, Section 22
describes Sponsored Access arrangements. See
Notice, 89 FR at 57486 n.4.
11 See Notice, 89 FR at 57486.
12 The Exchange states that the term ‘‘System’’ or
‘‘Trading System’’ means the automated system for
order execution and trade reporting owned and
operated by BX as the BX Options market. See
Notice, 89 FR at 57486 n.5. The Exchange states that
BX Options market comprises: (A) an order
execution service that enables Participants to
automatically execute transactions in option series;
and provides Participants with sufficient
monitoring and updating capability to participate in
an automated execution environment; (B) a trade
reporting service that submits ‘‘locked-in’’ trades for
clearing to a registered clearing agency for clearance
and settlement; transmits last-sale reports of
transactions automatically to the Options Price
Reporting Authority for dissemination to the public
and industry; and provides participants with
monitoring and risk management capabilities to
facilitate participation in a ‘‘locked-in’’ trading
environment; and (C) the data feeds described in
Options 3, Section 23. See id. (citing BX Options
1, Section 1(a)(59)).
13 See Notice, 89 FR at 57486.
14 See Notice, 89 FR at 57486.
15 See Notice, 89 FR at 57486.
16 See Notice, 89 FR at 57486.
17 See Notice, 89 FR at 57486.
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rules within Options 3.18 Each
amendment is described below.
Options 3, Section 7
The Exchange states that it proposes
to amend Options 3, Section 7, Types of
Orders and Quote Protocols.19 The
Exchange states that specifically, BX
proposes to amend Options 3, Section 7
(b)(2) that describes the Immediate-orCancel’’ or ‘‘IOC’’ order.20 The Exchange
states that today, Options 3, Section
7(b)(2)(B) notes that an IOC order may
be entered through FIX or SQF,
provided that an IOC Order entered by
a Market Maker through SQF is not
subject to the Order Price Protection, the
Market Order Spread Protection, or Size
Limitation in Options 3, Section
15(a)(1), (a)(2), and (b)(2),
respectively.21 The Exchange states that
it proposes to add ‘‘OTTO’’ to the list of
protocols to note that an IOC order may
also be entered through OTTO.22
BX also states that it proposes to
amend the ‘‘DAY’’ order in Options 3,
Section 7(b)(3) that currently provides
that a Day order may be entered through
FIX.23 The Exchange states that with the
addition of OTTO, a Day order may also
be entered through OTTO.24
BX states that it also proposes to
amend the ‘‘Good Til Cancelled’’ or
‘‘GTC’’ order which currently does not
specify that a GTC order may be entered
through FIX.25 The Exchange states that
GTC orders would only be able to be
entered through FIX and not OTTO.26
The Exchange states that it proposes to
amend Options 3, Section 7(b)(4) to add
a sentence to note that GTC orders may
be entered through FIX.27
Options 3, Section 8
The Exchange states that BX proposes
to amend Options 3, Section 8, Options
Opening Process.28 The Exchange states
that BX proposes to amend Options 3,
Section 8(l) that describes the Opening
Process Cancel Timer.29 The Exchange
states that the Opening Process Cancel
Timer represents a period of time since
the underlying market has opened, and
that if an option series has not opened
before the conclusion of the Opening
Process Cancel Timer, a Participant may
elect to have orders returned by
18 See
Notice, 89 FR at 57486.
Notice, 89 FR at 57486.
20 See Notice, 89 FR at 57486.
21 See Notice, 89 FR at 57486.
22 See Notice, 89 FR at 57486.
23 See Notice, 89 FR at 57486.
24 See Notice, 89 FR at 57486.
25 See Notice, 89 FR at 57486.
26 See Notice, 89 FR at 57486.
27 See Notice, 89 FR at 57486.
28 See Notice, 89 FR at 57486.
29 See Notice, 89 FR at 57486.
19 See
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70235
providing written notification to the
Exchange.30 The Exchange states that
today, these orders include all nonGood Til Cancelled Orders received
over the FIX protocol.31 The Exchange
states that it proposes to add the OTTO
protocol as well to the rule text language
in that paragraph.32
Options 3, Section 12
The Exchange states that it proposes
to amend the Options 3, Section 12,
Crossing Orders.33 Specifically, the
Exchange states that it proposes to
amend Customer Crossing Orders in
Options 3, Section 12(a) that currently
provides Public Customer-to-Public
Customer Cross Orders are
automatically executed upon entry
provided that the execution is at or
between the best bid and offer on the
Exchange and (i) is not at the same price
as a Public Customer Order on the
Exchange’s limit order book and (ii) will
not trade through the NBBO.34 The
Exchange states that Public Customerto-Public Customer Cross Orders must
be entered through FIX.35 The Exchange
states that it proposes to remove the
sentence that provides that Public
Customer-to-Public Customer Cross
Orders must be entered through FIX
because they will be able to be entered
through both FIX and OTTO.36
Options 3, Section 17
The Exchange states that it proposes
to amend the Kill Switch at Options 3,
Section 17.37 The Exchange states that
the Kill Switch provides Participants
with an optional risk management tool
to promptly cancel and restrict orders.38
The Exchange states that with the
introduction of OTTO, the Exchange
proposes to align its Kill Switch rule
text with MRX’s Kill Switch.39 The
Exchange states that it proposes to note
in Options 3, Section 17(a) that BX
Participants may initiate a message(s) to
the System to promptly cancel and
restrict their order activity on the
Exchange, as is the case today, as
described in section (a)(1).40 The
Exchange states that this amendment
simply rewords the rule text without a
30 See
Notice, 89 FR at 57486.
Notice, 89 FR at 57486.
32 See Notice, 89 FR at 57486.
33 See Notice, 89 FR at 57486.
34 See Notice, 89 FR at 57486.
35 See Notice, 89 FR at 57486.
36 See Notice, 89 FR at 57486.
37 See Notice, 89 FR at 57486.
38 See Notice, 89 FR at 57486.
39 See Notice, 89 FR at 57487 (citing MRX
Options 3, Section 17).
40 See Notice, 89 FR at 57487.
31 See
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substantive amendment to the rule
text.41
The Exchange states that it proposes
to renumber Options 3, Section 17(a)(i)
and (ii) as (a)(1) and (2).42 The Exchange
states that current Options 3, Section
17(a)(i) states, ‘‘If orders are cancelled
by the BX Participant utilizing the Kill
Switch, it will result in the cancellation
of all orders requested for the
Identifier(s). The BX Participant will be
unable to enter additional orders for the
affected Identifier(s) until re-entry has
been enabled pursuant to section
(a)(ii).’’ 43 The Exchange states that it
proposes to instead provide, ‘‘A BX
Participant may submit a request to the
System through FIX or OTTO to cancel
all existing orders and restrict entry of
additional orders for the requested
Identifier(s) on a user level on the
Exchange.’’ 44 The Exchange states that
with the addition of OTTO, the
Exchange notes that both FIX and OTTO
orders may be cancelled.45 The
Exchange states that further, today, BX
Participants utilize an interface to send
a message to the Exchange to initiate a
Kill Switch.46 The Exchange notes that
in lieu of the interface, BX Participants
will only be able to initiate a
cancellation of their orders by sending
a mass purge request through FIX or
OTTO.47 The Exchange states that this
change will align the Kill Switch
functionality to that of ISE, GEMX and
MRX Options 3, Section 17 and will
enable BX Participants to initiate the
Kill Switch more seamlessly without the
need to utilize a separate interface.48
The Exchange states that when initiating
a cancellation of their orders by sending
a mass purge request through FIX or
OTTO, Participants will be able to
submit a Kill Switch request on a user
level only.49 The Exchange states that
this is a change from the ability to
cancel orders on either a user or group
level 50 with the interface.51 The
41 See
Notice, 89 FR at 57487.
Notice, 89 FR at 57487.
43 See Notice, 89 FR at 57487.
44 See Notice, 89 FR at 57487.
45 See Notice, 89 FR at 57487.
46 See Notice, 89 FR at 57487 (citing Securities
Exchange Act Release No. 76116 (October 8, 2015),
80 FR 62147 (October 15, 2015) (SR–BX–2015–050)
(Order Approving Proposed Rule Change To Adopt
a Kill Switch)).
47 See Notice, 89 FR at 57487.
48 See Notice, 89 FR at 57487.
49 See Notice, 89 FR at 57487.
50 The Exchange states that a permissible group
could include all badges associated with a Market
Maker. See Notice, 89 FR at 57487 n.9. The
Exchange states that today, a Participant is able to
set up these groups in the interface to include all
or some of the Identifiers associated with the
Participant firm so that a GUI Kill Switch request
could apply to this pre-defined group. Id.
51 See Notice, 89 FR at 57487.
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42 See
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Exchange states that it proposes to
amend Options 3, Section 17(a) to note
this change by removing the words ‘‘or
group’’ and the following sentence that
applies to a group.52
The Exchange states that finally, the
Exchange proposes to amend proposed
Options 3, Section 17(a)(2) to align to
MRX’s rule text by providing ‘‘Once a
BX Participant initiates a Kill Switch
pursuant to (a)(1) above. . .’’ in the first
sentence.53 The Exchange states that
this amendment simply rewords the
rule text without a substantive
amendment to the rule text.54
Options 3, Section 18
The Exchange states that it proposes
to amend Options 3, Section 18,
Detection of Loss of Communication.55
The Exchange states that it proposes to
add OTTO to Options 3, Section 18 as
OTTO would also be subject to this
rule.56 The Exchange states that today,
when the SQF Port or the FIX Port
detects the loss of communication with
a Participant’s Client Application
because the Exchange’s server does not
receive a Heartbeat message for a certain
time period, the Exchange will
automatically logoff the Participant’s
affected Client Application and
automatically cancel all of the
Participant’s open quotes through SQF
and open orders through FIX.57 The
Exchange states that quotes and orders
are cancelled across all Client
Applications that are associated with
the same BX Options Market Maker ID
and underlying issues.58
The Exchange states that at this time,
the Exchange proposes to permit orders
entered through OTTO to be cancelled
similar to FIX orders when the
Exchange’s server does not receive a
Heartbeat message for a certain time
period.59 The Exchange states that it is
proposing to amend Options 3, Section
18 to also rearrange the rule text to add
the word ‘‘Definitions’’ next to ‘‘a’’ and
move the rule text in current ‘‘a’’ to ‘‘b’’
and re-letter the other paragraphs
accordingly.60 Also, the Exchange states
that it proposes to define ‘‘Session of
Connectivity’’ for purposes of this rule
to mean each time the Participant
52 See Notice, 89 FR at 57487. The Exchange also
states that it proposes to remove this sentence,
‘‘Permissible groups must reside within a single
broker-dealer’’ as the group option would no longer
exist. Id. at n.10.
53 See Notice, 89 FR at 57487.
54 See Notice, 89 FR at 57487.
55 See Notice, 89 FR at 57487.
56 See Notice, 89 FR at 57487.
57 See Notice, 89 FR at 57487.
58 See Notice, 89 FR at 57487.
59 See Notice, 89 FR at 57487.
60 See Notice, 89 FR at 57487.
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connects to the Exchange’s System.61
The Exchange states that further, each
new connection, intra-day or otherwise,
is a new Session of Connectivity.62 The
Exchange states that it proposes to use
the new definition throughout Options
3, Section 18.63
The Exchange states that similar to
FIX, when the OTTO Port detects the
loss of communication with a
Participant’s Client Application because
the Exchange’s server does not receive
a Heartbeat message for a certain time
period, the Exchange will automatically
logoff the Participant’s affected Client
Application and automatically cancel
all of the Participant’s open orders
through OTTO.64 The Exchange states
that orders would be cancelled across
all Client Applications that are
associated with the same BX Options
Market Maker ID and underlying
issues.65 The Exchange states that it
proposes to update Options 3, Section
18 to provide in proposed Options 3,
Section 18(a)(3) that the OTTO Port is
the Exchange’s proprietary System
component through which Participants
communicate their orders from the
Client Application.66 The Exchange
states that further, the Exchange would
note in proposed Options 3, Section
18(c) that when the OTTO Port detects
the loss of communication with a
Participant’s Client Application because
the Exchange’s server does not receive
a Heartbeat message for a certain time
period (‘‘nn’’ seconds), the Exchange
will automatically logoff the
Participant’s affected Client Application
and if the Participant has elected to
have its orders cancelled pursuant to
proposed Section 18(f), automatically
cancel all orders.67 The Exchange states
that proposed Options 3, Section 18(f)
would provide that the default period of
‘‘nn’’ seconds for OTTO Ports would be
fifteen (15) seconds for the disconnect
and, if elected, the removal of orders.68
The Exchange states that a Participant
may determine another time period of
‘‘nn’’ seconds of no technical
connectivity, as required in proposed
paragraph (c), to trigger the disconnect
and, if so elected, the removal of orders
and communicate that time to the
Exchange.69 The Exchange states the
period of ‘‘nn’’ seconds may be
modified to a number between one
61 See
Notice, 89 FR at 57487.
Notice, 89 FR at 57487.
63 See Notice, 89 FR at 57487.
64 See Notice, 89 FR at 57487.
65 See Notice, 89 FR at 57487.
66 See Notice, 89 FR at 57487.
67 See Notice, 89 FR at 57487.
68 See Notice, 89 FR at 57487.
69 See Notice, 89 FR at 57487.
62 See
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hundred (100) milliseconds and 99,999
milliseconds for OTTO Ports prior to
each Session of Connectivity to the
Exchange.70 The Exchange states that
this feature may be disabled for the
removal of orders, however the
Participant will be disconnected.71
The Exchange states that proposed
Options 3, Section 18(f)(1) would
provide that if the Participant changes
the default number of ‘‘nn’’ seconds,
that new setting shall be in effect
throughout the current Session of
Connectivity and will then default back
to fifteen seconds.72 The Exchange
states that a Participant may change the
default setting prior to each Session of
Connectivity.73 The Exchange states that
finally, as proposed in Options 3,
Section 18(f)(2), if the time period is
communicated to the Exchange by
calling Exchange operations, the
number of ‘‘nn’’ seconds selected by the
Participant will persist for each
subsequent Session of Connectivity
until the Participant either contacts
Exchange operations by phone and
changes the setting or the Participant
selects another time period through the
Client Application prior to the next
Session of Connectivity.74 The
Exchange states that the trigger for
OTTO Ports is event and Client
Application specific.75 The Exchange
states that automatic cancellation of the
BX Options Market Maker’s open orders
for OTTO Ports entered into the
respective OTTO Ports via a particular
Client Application will neither impact
nor determine the treatment of orders of
the same or other Participants entered
into the OTTO Ports via a separate and
distinct Client Application.76 The
Exchange states that the proposed
amendments for OTTO mirror the
manner in which FIX Ports are treated
when the Exchange’s server does not
receive a Heartbeat message for a certain
time period for a FIX Port.77
Pricing
The Exchange states that it proposes
to amend its Pricing Schedule at
Options 7, Section 3, BX Options
Market—Ports and other Services, to
assess a port fee for the new OTTO
protocol.78
70 See
Notice, 89 FR at 57487.
Notice, 89 FR at 57487.
72 See Notice, 89 FR at 57487.
73 See Notice, 89 FR at 57487.
74 See Notice, 89 FR at 57487.
75 See Notice, 89 FR at 57487.
76 See Notice, 89 FR at 57487–88.
77 See Notice, 89 FR at 57488. The Exchange
states that it proposes to update internal crossreferences to accommodate relocated text. Id.
78 See Notice, 89 FR at 57488.
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71 See
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The Exchange states that it proposes
to assess an OTTO Port Fee of $650 per
port, per month, per account number.79
The Exchange states that it also
proposes to add OTTO and Disaster
Recovery Ports to the list of ports that
are capped at $7,500 on BX.80 The
Exchange states that today, the
maximum monthly fees in the aggregate
for FIX Port, CTI Port, FIX DROP Port,
BX Depth Port and BX TOP Port Fees on
BX is $7,500.81 The Exchange states that
these ports are available to all BX
Participants.82 The Exchange states that,
for example, to the extent that a
Participant expended more than $7,500
for FIX or OTTO Ports, BX would not
charge a Participant for additional FIX
or OTTO Ports, respectively, beyond the
cap.83 The Exchange also states that it
will provide each Participant the first
FIX Port at no cost to submit orders into
BX.84
Implementation
The Exchange states that it will
implement this rule change on or before
December 20, 2025, and that it will
announce the operative date to
Participants in an Options Trader
Alert.85
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,86 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change pursuant to
Section 19(b)(1) of the Act,87 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. A temporary suspension of the
proposed rule changes is necessary and
appropriate to allow for additional
79 See Notice, 89 FR at 57488. The Exchange
states that the term ‘‘account number’’ means a
number assigned to a Participant. The Exchange
states that only one account number is necessary to
transact an options business of BX and that
Participants may have more than one account
number. See Notice, 89 FR at 57488 n.12 (citing
Options 1, Section 1(a)(2)). The Exchange states that
account numbers are free on BX. Id.
80 See Notice, 89 FR at 57488. The Exchange notes
that BX currently does not assess BX Participants
for Disaster Recovery Ports. See Notice, 89 FR at
57488 (citing BX Options 7, Section 3).
81 See Notice, 89 FR at 57488 (BX Options 7,
Section 3(i)).
82 See Notice, 89 FR at 57488.
83 See Notice, 89 FR at 57488.
84 See Notice, 89 FR at 57488.
85 See Notice, 89 FR at 57488.
86 15 U.S.C. 78s(b)(3)(C).
87 15 U.S.C. 78s(b)(1).
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analysis of the proposed rule change’s
consistency with the Act and the rules
thereunder.
A. Exchange Statements In Support of
the Proposal
Exchange Arguments Concerning
Sections 6(b)(4) and 6(b)(5) of the Act
The Exchange states that the
Exchange believes that its proposal is
consistent with Section 6(b) of the
Act,88 in general, and furthers the
objectives of Section 6(b)(5) of the Act,89
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest. The
Exchange states that, additionally, the
Exchange believes that its proposal
furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,90 in
particular, in that it provides for the
equitable allocation of reasonable dues,
fees, and other charges among members
and issuers and other persons using any
facility, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.91
OTTO Protocol
The Exchange states that the
Exchange’s proposal to adopt OTTO is
consistent with the Act because OTTO
would provide BX Participants with an
alternative protocol to submit orders to
the Exchange.92 The Exchange states
that as proposed, BX would offer the
first OTTO Port at no cost to submit
orders into BX, which would remove
impediments to and perfect the
mechanism of a free and open market.93
The Exchange states that while BX
Participants may elect to obtain
multiple ports to organize their
business,94 only one order port is
necessary for a Participant to enter
orders on BX.95 The Exchange states
88 See Notice, 89 FR at 57488 (citing 15 U.S.C.
78f(b)).
89 See Notice, 89 FR at 57488 (citing 15 U.S.C.
78f(b)(5)).
90 See Notice, 89 FR at 57488 (citing 15 U.S.C.
78f(b)(4) and (5)).
91 See Notice, 89 FR at 57488.
92 See Notice, 89 FR at 57488.
93 See Notice, 89 FR at 57488.
94 The Exchange states that, for example, a
Participant may desire to utilize multiple FIX or
OTTO Ports for accounting purposes, to measure
performance, for regulatory reasons or other
determinations that are specific to that Participant.
See Notice, 89 FR at 57488 n.14 and 57489 n.27.
95 See Notice, 89 FR at 57489. The Exchange
states that only BX Participants may utilize ports on
BX and that any market participant that sends
orders to a BX Participant would not need to utilize
a port. See Notice, 89 FR at 57486.
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that a BX Participant may send all
orders, proprietary and agency, through
one port to BX without incurring any
cost with this proposal.96 The Exchange
states that in the alternative, BX
Participants may elect to obtain
multiple ports to organize their
business.97
The Exchange states that with the
addition of OTTO, a BX Participant may
elect to enter their orders through FIX,
OTTO, or both protocols, although both
protocols are not necessary.98 The
Exchange states that each BX Participant
would receive one OTTO Port at no
cost, thereby promoting just and
equitable principles of trade.99 The
Exchange notes that Participants may
prefer one order protocol as compared
to another order protocol, for example,
the ability to route an order may cause
a Participant to utilize FIX and a
Participant that desires to execute an
order locally may utilize OTTO.100 The
Exchange states that also, the OTTO
Port offers lower latency as compared to
the FIX Port, which may be attractive to
Participants depending on their trading
behavior.101 The Exchange states that
with this proposal, BX Participant may
organize their business as they chose
with the ability to send orders to BX at
no cost.102 The Exchange states that the
proposed new OTTO protocol is
identical to the OTTO protocol offered
today on ISE, GEMX, MRX.103
Other Amendments
The Exchange that in connection with
offering OTTO, the Exchange proposes
to amend other rules within Options 3
to make clear where the FIX and OTTO
protocols may be utilized.104 The
Exchange states that IOC Orders may be
entered through FIX, OTTO or SQF, a
Day order may be entered through FIX
or OTTO, a GTC order may only be
entered through FIX, and a Public
Customer-to-Public Customer Cross
Order may be entered through FIX or
OTTO.105 The Exchange states that
other processes such the Opening
Cancel Timer would impact FIX and
OTTO equally.106
The Exchange states that the
Exchange’s proposal to amend the Kill
Switch at Options 3, Section 17 to align
its rule text in proposed Options 3,
96 See
Notice, 89 FR at 57489.
Notice, 89 FR at 57489.
98 See Notice, 89 FR at 57489.
99 See Notice, 89 FR at 57489.
100 See Notice, 89 FR at 57489.
101 See Notice, 89 FR at 57489.
102 See Notice, 89 FR at 57489.
103 See Notice, 89 FR at 57489.
104 See Notice, 89 FR at 57489.
105 See Notice, 89 FR at 57489.
106 See Notice, 89 FR at 57489.
107 See
Notice, 89 FR at 57489.
Notice, 89 FR at 57489.
109 See Notice, 89 FR at 57489.
110 See Notice, 89 FR at 57489.
111 See Notice, 89 FR at 57489.
112 See Notice, 89 FR at 57489.
113 See Notice, 89 FR at 57489.
114 See Notice, 89 FR at 57489.
115 See Notice, 89 FR at 57489.
116 See Notice, 89 FR at 57489.
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Section 17(a) and (a)(2) with MRX’s
Options 3, Section 17 is consistent with
the Act because it does not
substantively amend the functionality
beyond removing the group level cancel
capability.107 The Exchange states that
the Exchange’s proposal to amend
proposed Options 3, Section 17(a)(2) to
specify that FIX and OTTO orders may
be cancelled is consistent with the Act
as it will make clear that all orders
entered on BX may be purged through
the Kill Switch.108 The Exchange states
that finally, allowing BX Participants to
send a mass purge request through FIX
or OTTO, in lieu of an interface, is
consistent with Act and the protection
of investors and the general public
because it will enable BX Participants to
initiate the Kill Switch more seamlessly
without the need to utilize a separate
interface.109 The Exchange states that
further, utilizing the order protocols
directly, in lieu of the interface, will
align the Kill Switch functionality to
that of ISE, GEMX and MRX.110 The
Exchange states that when initiating a
cancellation of their orders by sending
a mass purge request through FIX or
OTTO, Participants will be able to
submit a Kill Switch request on a user
level only because the purge will be
specific to a FIX or OTTO user for these
ports.111
The Exchange states that finally, the
Detection of Loss of Communication
would apply equally to FIX and
OTTO.112 The Exchange believes that its
proposal is consistent with the Act and
protects investors as the Exchange is
making clear what types of order types
and other mechanisms may utilize
OTTO.113 The Exchange states that
today, BX Participants utilize FIX to
enter their orders.114 The Exchange
states that despite the fact that OTTO
would not be available for the GTC
Time-In-Force modifier, the Exchange
notes that one OTTO Port is being
provided to Participants at no cost.115
The Exchange states that today, FIX is
the only manner in which to enter
orders into BX.116
108 See
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Pricing
Proposed Port Fees Are Reasonable,
Equitable and Not Unfairly
Discriminatory
The Exchange states that only one FIX
order protocol is required for a BX
Participant to submit orders into BX and
to meet its regulatory requirements 117 at
no cost while meeting its regulatory
requirements.118 The Exchange states
that the Exchange will provide each
Participant the first FIX Port at no cost
to submit orders into BX.119 The
Exchange states that only one account
number is necessary to transact an
options business on BX and account
numbers are available to Participants at
no cost.120
The Exchange states that the
Exchange proposes to offer each
Participant the first FIX Port at no cost
to meet their regulatory requirements.121
The Exchange states as noted above,
Participants may freely choose to rely
on one or many ports, depending on
their business model.122
The Exchange states that the
Exchange’s proposal is reasonable,
equitable and not unfairly
discriminatory as BX is providing BX
Participants the first FIX Port to submit
orders at no cost.123 The Exchange states
that these ports, which are offered at no
cost, would allow a BX Participant to
meet its regulatory requirements.124 The
Exchange states that all other ports
offered by BX are not required for a BX
Participant to meet its regulatory
obligations.125 The Exchange states that
therefore, for the foregoing reasons, it is
reasonable to assess no fee for the first
FIX Port obtained by a Participant as a
BX Participant is able to meet its
regulatory requirements with these
ports.126 The Exchange states that
additionally, the proposal offers a free
FIX Port to BX Participants that already
subscribe to FIX, thereby reducing fees
for these market participants.127
The Exchange states that further, it is
equitable and not unfairly
discriminatory to assess no fee for the
first FIX Port to Participants as all BX
117 The Exchange states that BX Participants have
trade-through requirements under Regulation NMS
as well as broker-dealers’ best execution
obligations. See Notice, 89 FR at 57489 n.20 (citing
Rule 611 of Regulation NMS; 17 CFR 242.611 and
FINRA Rule 5310).
118 See Notice, 89 FR at 57489.
119 See Notice, 89 FR at 57489.
120 See Notice, 89 FR at 57489.
121 See Notice, 89 FR at 57489.
122 See Notice, 89 FR at 57489.
123 See Notice, 89 FR at 57489.
124 See Notice, 89 FR at 57489.
125 See Notice, 89 FR at 57489.
126 See Notice, 89 FR at 57489.
127 See Notice, 89 FR at 57489.
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Participants would be entitled to the
first FIX Port at no cost.128 The
Exchange states that with this proposal,
BX Participants may organize their
business in such a way as to submit
orders to BX at no cost.129
The Exchange states that the
Exchange’s proposal to assess $650 per
port, per month, per account number for
an OTTO Port is reasonable because
OTTO is not required for a Participant
to meet its regulatory requirements.130
The Exchange states that it is offering
the first FIX Port at no cost to submit
orders to BX.131 The Exchange states
that in addition to the FIX Port, all
Participants may elect to purchase
OTTO to submit orders to BX.132 The
Exchange states that BX Participants
utilizing the FIX Port, which is offered
at no cost, do not need to utilize
OTTO.133
The Exchange states that finally, in
the event that a BX Participant elects to
subscribe to multiple ports, the
Exchange offers a monthly cap beyond
which a Participant would be assessed
no additional fees for the month and
proposes to add OTTO to the monthly
cap.134 The Exchange states that BX
proposes to cap FIX Port, OTTO Port,
CTI Port, FIX Drop Port, BX Depth Port,
BX TOP Port Fees, and all Disaster
Recovery Port Fees 135 at a monthly cap
of $7,500.136 The Exchange states that
these caps are reasonable because they
allow Participants to limit their fees
beyond a certain level if they elect to
purchase multiple ports in a given
month.137 The Exchange states that the
caps are also equitable and not unfairly
discriminatory because any Participant
will be subject to the cap, provided they
exceeded the appropriate dollar amount
in a given month.138 The Exchange
states that these ports are available to all
BX Participants.139
The Exchange states that the proposed
BX OTTO fee is the same as the OTTO
Port fee on MRX, for the identical
port.140 The Exchange states that
additionally, MRX offers one free FIX
Port to its Members and assesses the
same FIX Port fee of $650 per port, per
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128 See
Notice, 89 FR at 57489.
129 See Notice, 89 FR at 57489.
130 See Notice, 89 FR at 57489.
131 See Notice, 89 FR at 57489.
132 See Notice, 89 FR at 57489.
133 See Notice, 89 FR at 57489.
134 See Notice, 89 FR at 57489.
135 The Exchange states that BX does not assess
fees for Disaster Recovery Ports. See Notice, 89 FR
at 57489 n.30.
136 See Notice, 89 FR at 57489.
137 See Notice, 89 FR at 57489.
138 See Notice, 89 FR at 57489.
139 See Notice, 89 FR at 57489.
140 See Notice, 89 FR at 57490.
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month, per account number as BX
assesses today for a FIX Port. The
Exchange states that MRX offers its
Members a free FIX Disaster Recovery
Port.141 The Exchange states that today,
BX does not assess Disaster Recovery
Port fees.142 The Exchange states that
finally, today, MRX offers a $7,500
monthly cap for OTTO Ports, CTI Ports,
FIX Ports, FIX Drop Ports and all
Disaster Recovery Ports.143 The
Exchange states that BX’s proposed
monthly cap includes BX Depth Ports
and BX Top Ports, which are currently
assessed fees of $650 per port, per
month, in addition to the same ports
that are capped on MRX (FIX Ports,
OTTO Ports, CTI Ports, FIX DROP Ports,
and all Disaster Recovery Ports).144
Exchange Arguments Concerning
Competition and Section 6(b)(8)
The Exchange states that 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.145
The Exchange states that the OTTO
protocol is a proprietary protocol of
Nasdaq, Inc.146 The Exchange states that
the Exchange continues to innovate and
modernize technology so that it may
continue to compete among options
markets.147 The Exchange states that the
ability to continue to innovate with
technology and offer new products to
market participants allows BX to remain
competitive in the options space which
currently has seventeen options markets
and potential new entrants.148 The
Exchange states that if BX were unable
to offer and price new protocols, it
would result in an undue burden on
competition as BX would not have the
ability to innovate and modernize its
technology to compete effectively in the
options space.149 The Exchange states
that BX’s ability to offer OTTO will
enable it to compete with other options
markets that provide its market
participants a choice as to the type of
order entry protocols that may be
141 See Notice, 89 FR at 57490 (citing MRX
Options 7, Section 6).
142 See Notice, 89 FR at 57490 (citing BX Options
7, Section 3).
143 See Notice, 89 FR at 57490 (citing MRX
Options 7, Section 6).
144 See Notice, 89 FR at 57490. The Exchange
states that, therefore, BX’s proposed cap can also be
obtained utilizing BX Depth Port and BX Top Port
in addition to the same ports that MRX aggregates
for purposes of the monthly cap. See Notice, 89 FR
at 57488.
145 See Notice, 89 FR at 57490.
146 See Notice, 89 FR at 57490.
147 See Notice, 89 FR at 57490.
148 See Notice, 89 FR at 57490.
149 See Notice, 89 FR at 57490.
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70239
utilized.150 The Exchange states that
BX’s ability to offer and price new and
innovative products and continue to
modernize its technology, similar to
other options markets, supports
intermarket competition.151
OTTO Protocol
The Exchange states that the
Exchange’s proposal to adopt an OTTO
Protocol does not impose an undue
burden on intramarket competition.152
The Exchange states that today, all BX
Participants utilize FIX to send orders to
BX.153 The Exchange states that the
Exchange would offer each BX
Participant the first FIX Port at no cost
with this proposal.154 The Exchange
states that with the addition of OTTO
Ports, a BX Participant may elect to
enter their orders through FIX, OTTO,
or both protocols, although both
protocols are not necessary.155 The
Exchange states that the Exchange’s
proposal to adopt an OTTO Protocol
does not impose an undue burden on
intermarket competition as other
options exchanges offer multiple
protocols today such as ISE, GEMX and
MRX.156
Other Amendments
The Exchange states that the
Exchange’s proposal to amend other
rules within Options 3 to make clear
where the FIX and OTTO protocols may
be utilized does not impose an undue
burden on intramarket competition as
these rules will apply in the same
manner to all Participants.157 The
Exchange states that the Exchange’s
proposal to amend other rules within
Options 3 to make clear where the FIX
and OTTO protocols may be utilized
does not impose an undue burden on
intermarket competition as other
options exchanges may elect to utilize
their order entry protocols in different
ways.158
Pricing
The Exchange states that nothing in
the proposal burdens inter-market
competition because BX’s proposal to
offer the first FIX Port for free is similar
to MRX’s FIX Port offering and allows
BX Participants to meet their regulatory
obligations.159 The Exchange states that
150 See
Notice, 89 FR at 57490.
Notice, 89 FR at 57490.
152 See Notice, 89 FR at 57490.
153 See Notice, 89 FR at 57490.
154 See Notice, 89 FR at 57490.
155 See Notice, 89 FR at 57490.
156 See Notice, 89 FR at 57490.
157 See Notice, 89 FR at 57490.
158 See Notice, 89 FR at 57490.
159 See Notice, 89 FR at 57490.
151 See
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BX’s offering would permit Participants
the ability to submit orders to BX at no
cost.160 The Exchange states that OTTO
Ports are not required for BX
Participants to meet their regulatory
obligations.161
The Exchange states that nothing in
the proposal burdens intra-market
competition because the Exchange
would uniformly assess the port fees to
all Participants, as applicable, and
would uniformly apply monthly
caps.162 The Exchange states that the
proposed fees are identical to fees
recently approved on MRX.163 The
Exchange states that the proposed BX
OTTO fee is the same as the OTTO Port
fee on MRX, for the identical port.164
The Exchange states that additionally,
MRX offers one free FIX Port to its
Members and assesses the same FIX Port
fee of $650 per port, per month, per
account number as BX assessed today
for FIX.165 The Exchange states that
MRX also offers a free FIX Disaster
Recovery Port.166 The Exchange states
that today, BX does not assess Disaster
Recovery Port fees.167 The Exchange
states that finally, today, MRX offers a
$7,500 monthly cap for OTTO Ports, CTI
Ports, FIX Ports, FIX Drop Ports and all
Disaster Recovery Ports.168 The
Exchange states that BX’s proposed
monthly cap includes BX Depth Ports
and BX Top Ports, which are assessed
fees of $650 per port, per month, in
addition to the same ports that are
capped on MRX (FIX Ports, OTTO Ports,
CTI Ports, FIX DROP Ports, and all
Disaster Recovery Ports).169
The Exchange states that to the extent
that the Commission does not permit BX
to assess the same identical fees for the
same identical products on its market,
the Commission is creating a burden on
competition by allowing MRX to assess
fees and offer a product that would
otherwise be unavailable on BX.170 The
Exchange states that additionally, the
proposal offers a free FIX Port to BX
Participants that already subscribe to
FIX, the only order port currently
offered on BX, thereby reducing fees for
these market participants.171 The
Exchange states that each SRO should
160 See
Notice, 89 FR at 57490.
Notice, 89 FR at 57490.
162 See Notice, 89 FR at 57490.
163 See Securities Exchange Commission Release
No. 96824 (February 7, 2023), 88 FR 8975 (February
10, 2023) (SR–MRX–2023–05).
164 See Notice, 89 FR at 57490.
165 See MRX Options 7, Section 6.
166 Id.
167 See BX Options 7, Section 3. BX is adding
Disaster Recovery Ports to its monthly cap.
168 See MRX Options 7, Section 6.
169 See Notice, 89 FR at 57490.
170 See Notice, 89 FR at 57490.
171 See Notice, 89 FR at 57490.
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be permitted to mirror fees assessed by
another SRO to further competition
among the exchanges.172
B. Suspension
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present proposal, they are required to
provide a statement supporting the
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.173 The
instructions to Form 19b–4, on which
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 174
Section 6 of the Act, including
Sections 6(b)(4), (5), and (8), require the
rules of an exchange to: (1) provide for
the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 175 (2) perfect the mechanism
of a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 176 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.177
In temporarily suspending the
Exchange’s proposed rule change, the
Commission intends to further consider
whether the Proposal is consistent with
the statutory requirements applicable to
a national securities exchange under the
Act. In particular, the Commission will
consider whether the proposed rule
change satisfies the standards under the
Act and the rules thereunder requiring,
among other things, that an exchange’s
rules provide for the equitable
allocation of reasonable fees among
members, issuers, and other persons
using its facilities; not permit unfair
discrimination between customers,
issuers, brokers or dealers; and do not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.178
Therefore, the Commission finds that
it is appropriate in the public interest,
172 See
Notice, 89 FR at 57490.
17 CFR 240.19b–4(Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
174 See id.
175 15 U.S.C. 78f(b)(4).
176 15 U.S.C. 78f(b)(5).
177 15 U.S.C. 78f(b)(8).
178 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
173 See
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for the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change.179
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Changes
In addition to temporarily suspending
the Proposal, the Commission also
hereby institutes proceedings pursuant
to Sections 19(b)(3)(C) 180 and
19(b)(2)(B) of the Act 181 to determine
whether the Exchange’s proposed rule
change should be approved or
disapproved. Institution of proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
Rather, the Commission seeks and
encourages interested persons to
provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
approve or disapprove the proposed
rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,182 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with Section 6(b)(4) of the
Act, which requires that the rules of a
national securities exchange ‘‘provide
for the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities’’; 183
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with Section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange not be ‘‘designed to
permit unfair discrimination between
179 For purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
180 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
181 15 U.S.C. 78s(b)(2)(B).
182 Id. Section 19(b)(2)(B) of the Act also provides
that proceedings to determine whether to
disapprove a proposed rule change must be
concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
183 15 U.S.C. 78f(b)(4).
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customers, issuers, brokers, or
dealers’’; 184 and
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with Section 6(b)(8) of the
Act, which requires that the rules of a
national securities exchange ‘‘not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of [the Act].’’ 185
As discussed in Section III above, the
Exchange made various arguments in
support of the Proposal. There are
questions as to whether the Exchange
has provided sufficient information to
demonstrate that the proposed fees are
consistent with the Act and the rules
thereunder. The Commission will
specifically consider, among other
things, whether the Exchange has
provided sufficient evidence to
demonstrate that the proposed fees are
reasonable and equitably allocated, are
not unfairly discriminatory, and do not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 186 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,187 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.188
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposed fees are
consistent with the Act, and
specifically, with its requirements that
exchange fees be reasonable and
equitably allocated, not be unfairly
discriminatory, and not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.189
184 15
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(8).
186 17 CFR 201.700(b)(3).
187 See id.
188 See id.
189 See 15 U.S.C. 78f(b)(4), (5), and (8).
185 15
VerDate Sep<11>2014
19:16 Aug 28, 2024
Jkt 262001
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by
September 19, 2024. Rebuttal comments
should be submitted by October 3, 2024.
Although there do not appear to be any
issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.190
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the Proposal, in addition to
any other comments they may wish to
submit about the proposed rule changes.
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
BX–2024–019 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–BX–2024–019. 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
190 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
70241
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–BX–2024–019 and should be
submitted on or before September 19,
2024. Rebuttal comments should be
submitted by October 3, 2024.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,191 that
File No. SR–BX–2024–019, be and
hereby is, temporarily suspended. In
addition, the Commission is instituting
proceedings to determine whether the
proposed rule change should be
approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.192
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–19394 Filed 8–28–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100811; File No. SR–
NYSEARCA–2024–67]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Equities Fees and Charges
August 23, 2024.
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 August
14, 2024, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
191 15
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
192 17
E:\FR\FM\29AUN1.SGM
29AUN1
]]>Agencies
[Federal Register Volume 89, Number 168 (Thursday, August 29, 2024)]
[Notices]
[Pages 70234-70241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19394]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100810; File No. SR-BX-2024-019)]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Suspension of and
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove Proposed Rule Change To Adopt an OTTO Protocol
August 23, 2024.
I. Introduction
On June 26, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission''), pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change
(File Number SR-BX-2024-019) to adopt an OTTO protocol and associated
fee. The proposed rule change was immediately effective upon filing
with the Commission pursuant to Section 19(b)(3)(A) of the Act.\3\ The
proposed rule change was published for comment in the Federal Register
on July 15, 2024.\4\ Pursuant to Section 19(b)(3)(C) of the Act,\5\ the
Commission is hereby: (1) temporarily suspending the proposed rule
change; and (2) instituting proceedings to determine whether to approve
or disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
exchange as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\4\ See Securities Exchange Act Release No. 99841 (July 9,
2024), 89 FR 57485 (``Notice'').
\5\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Background and Description of the Proposed Rule Change
The Exchange states that the purpose of the proposed rule change is
to adopt a new protocol, ``Ouch to Trade Options'' or ``OTTO'' and
establish pricing for this new protocol.
According to the Exchange, today, BX Participants may enter orders
into the Exchange through the ``Financial Information eXchange'' or
``FIX.'' \6\ The Exchange states that the proposed new OTTO protocol is
identical to the OTTO protocol offered today on 3 Nasdaq affiliated
exchanges, Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX'') and
Nasdaq MRX, LLC (``MRX'').\7\
---------------------------------------------------------------------------
\6\ See Notice, 89 FR at 57485. The Exchange states that FIX is
an interface that allows Participants and their Sponsored Customers
to connect, send, and receive messages related to orders and auction
orders and responses to and from the Exchange. Id. at n.3. The
Exchange states that features include the following: (1) execution
messages; (2) order messages; and (3) risk protection triggers and
cancel notifications. Id. The Exchange states that, in addition, a
BX Participant may elect to utilize FIX to send a message and PRISM
Order, as defined within Options 3, Section 13, to all BX
Participants that opt in to receive Requests for PRISM requesting
that it submit the sender's PRISM Order with responder's Initiating
Order, as defined within Options 3, Section 13, into the Price
Improvement Auction (``PRISM'') mechanism, pursuant to Options 3,
Section 13 (``Request for PRISM''). Id. (citing Exchange Rule
Options 3, Section 7(e)(1)(A)).
\7\ See Notice, 89 FR at 57485-86.
---------------------------------------------------------------------------
The Exchange states that the OTTO protocol is a proprietary
protocol of Nasdaq, Inc and that the Exchange continues to innovate and
modernize technology so that it may continue to compete among options
markets.\8\ The Exchange states that the ability to continue to
innovate with technology and offer new products to market participants
allows BX to remain competitive in the options space which currently
has seventeen options markets and potential new entrants.\9\
---------------------------------------------------------------------------
\8\ See Notice, 89 FR at 57486.
\9\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
[[Page 70235]]
OTTO Protocol
The Exchange states that as proposed, OTTO would allow Participants
and their Sponsored Customers \10\ to connect, send, and receive
messages related to orders, auction orders, and auction responses to
the Exchange.\11\ The Exchange states that OTTO features would include
the following: (1) options symbol directory messages (e.g., underlying
and complex instruments); (2) System \12\ event messages (e.g., start
of trading hours messages and start of opening); (3) trading action
messages (e.g., halts and resumes); (4) execution messages; (5) order
messages; (6) risk protection triggers and cancel notifications; (7)
auction notifications; (8) auction responses; and (9) post trade
allocation messages.\13\ The Exchange notes that unlike FIX, which
offers routing capability, OTTO does not permit routing.\14\ The
Exchange states that it proposes to include this description of OTTO in
new Options 3, Section 7(e)(1)(B) and re-letter current ``B'' as
``C''.\15\
---------------------------------------------------------------------------
\10\ The Exchange states that General 2, Section 22 describes
Sponsored Access arrangements. See Notice, 89 FR at 57486 n.4.
\11\ See Notice, 89 FR at 57486.
\12\ The Exchange states that the term ``System'' or ``Trading
System'' means the automated system for order execution and trade
reporting owned and operated by BX as the BX Options market. See
Notice, 89 FR at 57486 n.5. The Exchange states that BX Options
market comprises: (A) an order execution service that enables
Participants to automatically execute transactions in option series;
and provides Participants with sufficient monitoring and updating
capability to participate in an automated execution environment; (B)
a trade reporting service that submits ``locked-in'' trades for
clearing to a registered clearing agency for clearance and
settlement; transmits last-sale reports of transactions
automatically to the Options Price Reporting Authority for
dissemination to the public and industry; and provides participants
with monitoring and risk management capabilities to facilitate
participation in a ``locked-in'' trading environment; and (C) the
data feeds described in Options 3, Section 23. See id. (citing BX
Options 1, Section 1(a)(59)).
\13\ See Notice, 89 FR at 57486.
\14\ See Notice, 89 FR at 57486.
\15\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
The Exchange states that while the Exchange has no way of
predicting with certainty the amount or type of OTTO Ports market
participants will in fact purchase, the Exchange anticipates that some
Participants will subscribe to multiple OTTO Ports in combination with
FIX Ports.\16\ The Exchange notes that Options Participants may use
varying number of OTTO ports based on their business needs.\17\
---------------------------------------------------------------------------
\16\ See Notice, 89 FR at 57486.
\17\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
Other Amendments
In connection with offering OTTO, the Exchange proposes to amend
other rules within Options 3.\18\ Each amendment is described below.
---------------------------------------------------------------------------
\18\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
Options 3, Section 7
The Exchange states that it proposes to amend Options 3, Section 7,
Types of Orders and Quote Protocols.\19\ The Exchange states that
specifically, BX proposes to amend Options 3, Section 7 (b)(2) that
describes the Immediate-or-Cancel'' or ``IOC'' order.\20\ The Exchange
states that today, Options 3, Section 7(b)(2)(B) notes that an IOC
order may be entered through FIX or SQF, provided that an IOC Order
entered by a Market Maker through SQF is not subject to the Order Price
Protection, the Market Order Spread Protection, or Size Limitation in
Options 3, Section 15(a)(1), (a)(2), and (b)(2), respectively.\21\ The
Exchange states that it proposes to add ``OTTO'' to the list of
protocols to note that an IOC order may also be entered through
OTTO.\22\
---------------------------------------------------------------------------
\19\ See Notice, 89 FR at 57486.
\20\ See Notice, 89 FR at 57486.
\21\ See Notice, 89 FR at 57486.
\22\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
BX also states that it proposes to amend the ``DAY'' order in
Options 3, Section 7(b)(3) that currently provides that a Day order may
be entered through FIX.\23\ The Exchange states that with the addition
of OTTO, a Day order may also be entered through OTTO.\24\
---------------------------------------------------------------------------
\23\ See Notice, 89 FR at 57486.
\24\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
BX states that it also proposes to amend the ``Good Til Cancelled''
or ``GTC'' order which currently does not specify that a GTC order may
be entered through FIX.\25\ The Exchange states that GTC orders would
only be able to be entered through FIX and not OTTO.\26\ The Exchange
states that it proposes to amend Options 3, Section 7(b)(4) to add a
sentence to note that GTC orders may be entered through FIX.\27\
---------------------------------------------------------------------------
\25\ See Notice, 89 FR at 57486.
\26\ See Notice, 89 FR at 57486.
\27\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
Options 3, Section 8
The Exchange states that BX proposes to amend Options 3, Section 8,
Options Opening Process.\28\ The Exchange states that BX proposes to
amend Options 3, Section 8(l) that describes the Opening Process Cancel
Timer.\29\ The Exchange states that the Opening Process Cancel Timer
represents a period of time since the underlying market has opened, and
that if an option series has not opened before the conclusion of the
Opening Process Cancel Timer, a Participant may elect to have orders
returned by providing written notification to the Exchange.\30\ The
Exchange states that today, these orders include all non-Good Til
Cancelled Orders received over the FIX protocol.\31\ The Exchange
states that it proposes to add the OTTO protocol as well to the rule
text language in that paragraph.\32\
---------------------------------------------------------------------------
\28\ See Notice, 89 FR at 57486.
\29\ See Notice, 89 FR at 57486.
\30\ See Notice, 89 FR at 57486.
\31\ See Notice, 89 FR at 57486.
\32\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
Options 3, Section 12
The Exchange states that it proposes to amend the Options 3,
Section 12, Crossing Orders.\33\ Specifically, the Exchange states that
it proposes to amend Customer Crossing Orders in Options 3, Section
12(a) that currently provides Public Customer-to-Public Customer Cross
Orders are automatically executed upon entry provided that the
execution is at or between the best bid and offer on the Exchange and
(i) is not at the same price as a Public Customer Order on the
Exchange's limit order book and (ii) will not trade through the
NBBO.\34\ The Exchange states that Public Customer-to-Public Customer
Cross Orders must be entered through FIX.\35\ The Exchange states that
it proposes to remove the sentence that provides that Public Customer-
to-Public Customer Cross Orders must be entered through FIX because
they will be able to be entered through both FIX and OTTO.\36\
---------------------------------------------------------------------------
\33\ See Notice, 89 FR at 57486.
\34\ See Notice, 89 FR at 57486.
\35\ See Notice, 89 FR at 57486.
\36\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------
Options 3, Section 17
The Exchange states that it proposes to amend the Kill Switch at
Options 3, Section 17.\37\ The Exchange states that the Kill Switch
provides Participants with an optional risk management tool to promptly
cancel and restrict orders.\38\ The Exchange states that with the
introduction of OTTO, the Exchange proposes to align its Kill Switch
rule text with MRX's Kill Switch.\39\ The Exchange states that it
proposes to note in Options 3, Section 17(a) that BX Participants may
initiate a message(s) to the System to promptly cancel and restrict
their order activity on the Exchange, as is the case today, as
described in section (a)(1).\40\ The Exchange states that this
amendment simply rewords the rule text without a
[[Page 70236]]
substantive amendment to the rule text.\41\
---------------------------------------------------------------------------
\37\ See Notice, 89 FR at 57486.
\38\ See Notice, 89 FR at 57486.
\39\ See Notice, 89 FR at 57487 (citing MRX Options 3, Section
17).
\40\ See Notice, 89 FR at 57487.
\41\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------
The Exchange states that it proposes to renumber Options 3, Section
17(a)(i) and (ii) as (a)(1) and (2).\42\ The Exchange states that
current Options 3, Section 17(a)(i) states, ``If orders are cancelled
by the BX Participant utilizing the Kill Switch, it will result in the
cancellation of all orders requested for the Identifier(s). The BX
Participant will be unable to enter additional orders for the affected
Identifier(s) until re-entry has been enabled pursuant to section
(a)(ii).'' \43\ The Exchange states that it proposes to instead
provide, ``A BX Participant may submit a request to the System through
FIX or OTTO to cancel all existing orders and restrict entry of
additional orders for the requested Identifier(s) on a user level on
the Exchange.'' \44\ The Exchange states that with the addition of
OTTO, the Exchange notes that both FIX and OTTO orders may be
cancelled.\45\ The Exchange states that further, today, BX Participants
utilize an interface to send a message to the Exchange to initiate a
Kill Switch.\46\ The Exchange notes that in lieu of the interface, BX
Participants will only be able to initiate a cancellation of their
orders by sending a mass purge request through FIX or OTTO.\47\ The
Exchange states that this change will align the Kill Switch
functionality to that of ISE, GEMX and MRX Options 3, Section 17 and
will enable BX Participants to initiate the Kill Switch more seamlessly
without the need to utilize a separate interface.\48\ The Exchange
states that when initiating a cancellation of their orders by sending a
mass purge request through FIX or OTTO, Participants will be able to
submit a Kill Switch request on a user level only.\49\ The Exchange
states that this is a change from the ability to cancel orders on
either a user or group level \50\ with the interface.\51\ The Exchange
states that it proposes to amend Options 3, Section 17(a) to note this
change by removing the words ``or group'' and the following sentence
that applies to a group.\52\
---------------------------------------------------------------------------
\42\ See Notice, 89 FR at 57487.
\43\ See Notice, 89 FR at 57487.
\44\ See Notice, 89 FR at 57487.
\45\ See Notice, 89 FR at 57487.
\46\ See Notice, 89 FR at 57487 (citing Securities Exchange Act
Release No. 76116 (October 8, 2015), 80 FR 62147 (October 15, 2015)
(SR-BX-2015-050) (Order Approving Proposed Rule Change To Adopt a
Kill Switch)).
\47\ See Notice, 89 FR at 57487.
\48\ See Notice, 89 FR at 57487.
\49\ See Notice, 89 FR at 57487.
\50\ The Exchange states that a permissible group could include
all badges associated with a Market Maker. See Notice, 89 FR at
57487 n.9. The Exchange states that today, a Participant is able to
set up these groups in the interface to include all or some of the
Identifiers associated with the Participant firm so that a GUI Kill
Switch request could apply to this pre-defined group. Id.
\51\ See Notice, 89 FR at 57487.
\52\ See Notice, 89 FR at 57487. The Exchange also states that
it proposes to remove this sentence, ``Permissible groups must
reside within a single broker-dealer'' as the group option would no
longer exist. Id. at n.10.
---------------------------------------------------------------------------
The Exchange states that finally, the Exchange proposes to amend
proposed Options 3, Section 17(a)(2) to align to MRX's rule text by
providing ``Once a BX Participant initiates a Kill Switch pursuant to
(a)(1) above. . .'' in the first sentence.\53\ The Exchange states that
this amendment simply rewords the rule text without a substantive
amendment to the rule text.\54\
---------------------------------------------------------------------------
\53\ See Notice, 89 FR at 57487.
\54\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------
Options 3, Section 18
The Exchange states that it proposes to amend Options 3, Section
18, Detection of Loss of Communication.\55\ The Exchange states that it
proposes to add OTTO to Options 3, Section 18 as OTTO would also be
subject to this rule.\56\ The Exchange states that today, when the SQF
Port or the FIX Port detects the loss of communication with a
Participant's Client Application because the Exchange's server does not
receive a Heartbeat message for a certain time period, the Exchange
will automatically logoff the Participant's affected Client Application
and automatically cancel all of the Participant's open quotes through
SQF and open orders through FIX.\57\ The Exchange states that quotes
and orders are cancelled across all Client Applications that are
associated with the same BX Options Market Maker ID and underlying
issues.\58\
---------------------------------------------------------------------------
\55\ See Notice, 89 FR at 57487.
\56\ See Notice, 89 FR at 57487.
\57\ See Notice, 89 FR at 57487.
\58\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------
The Exchange states that at this time, the Exchange proposes to
permit orders entered through OTTO to be cancelled similar to FIX
orders when the Exchange's server does not receive a Heartbeat message
for a certain time period.\59\ The Exchange states that it is proposing
to amend Options 3, Section 18 to also rearrange the rule text to add
the word ``Definitions'' next to ``a'' and move the rule text in
current ``a'' to ``b'' and re-letter the other paragraphs
accordingly.\60\ Also, the Exchange states that it proposes to define
``Session of Connectivity'' for purposes of this rule to mean each time
the Participant connects to the Exchange's System.\61\ The Exchange
states that further, each new connection, intra-day or otherwise, is a
new Session of Connectivity.\62\ The Exchange states that it proposes
to use the new definition throughout Options 3, Section 18.\63\
---------------------------------------------------------------------------
\59\ See Notice, 89 FR at 57487.
\60\ See Notice, 89 FR at 57487.
\61\ See Notice, 89 FR at 57487.
\62\ See Notice, 89 FR at 57487.
\63\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------
The Exchange states that similar to FIX, when the OTTO Port detects
the loss of communication with a Participant's Client Application
because the Exchange's server does not receive a Heartbeat message for
a certain time period, the Exchange will automatically logoff the
Participant's affected Client Application and automatically cancel all
of the Participant's open orders through OTTO.\64\ The Exchange states
that orders would be cancelled across all Client Applications that are
associated with the same BX Options Market Maker ID and underlying
issues.\65\ The Exchange states that it proposes to update Options 3,
Section 18 to provide in proposed Options 3, Section 18(a)(3) that the
OTTO Port is the Exchange's proprietary System component through which
Participants communicate their orders from the Client Application.\66\
The Exchange states that further, the Exchange would note in proposed
Options 3, Section 18(c) that when the OTTO Port detects the loss of
communication with a Participant's Client Application because the
Exchange's server does not receive a Heartbeat message for a certain
time period (``nn'' seconds), the Exchange will automatically logoff
the Participant's affected Client Application and if the Participant
has elected to have its orders cancelled pursuant to proposed Section
18(f), automatically cancel all orders.\67\ The Exchange states that
proposed Options 3, Section 18(f) would provide that the default period
of ``nn'' seconds for OTTO Ports would be fifteen (15) seconds for the
disconnect and, if elected, the removal of orders.\68\ The Exchange
states that a Participant may determine another time period of ``nn''
seconds of no technical connectivity, as required in proposed paragraph
(c), to trigger the disconnect and, if so elected, the removal of
orders and communicate that time to the Exchange.\69\ The Exchange
states the period of ``nn'' seconds may be modified to a number between
one
[[Page 70237]]
hundred (100) milliseconds and 99,999 milliseconds for OTTO Ports prior
to each Session of Connectivity to the Exchange.\70\ The Exchange
states that this feature may be disabled for the removal of orders,
however the Participant will be disconnected.\71\
---------------------------------------------------------------------------
\64\ See Notice, 89 FR at 57487.
\65\ See Notice, 89 FR at 57487.
\66\ See Notice, 89 FR at 57487.
\67\ See Notice, 89 FR at 57487.
\68\ See Notice, 89 FR at 57487.
\69\ See Notice, 89 FR at 57487.
\70\ See Notice, 89 FR at 57487.
\71\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------
The Exchange states that proposed Options 3, Section 18(f)(1) would
provide that if the Participant changes the default number of ``nn''
seconds, that new setting shall be in effect throughout the current
Session of Connectivity and will then default back to fifteen
seconds.\72\ The Exchange states that a Participant may change the
default setting prior to each Session of Connectivity.\73\ The Exchange
states that finally, as proposed in Options 3, Section 18(f)(2), if the
time period is communicated to the Exchange by calling Exchange
operations, the number of ``nn'' seconds selected by the Participant
will persist for each subsequent Session of Connectivity until the
Participant either contacts Exchange operations by phone and changes
the setting or the Participant selects another time period through the
Client Application prior to the next Session of Connectivity.\74\ The
Exchange states that the trigger for OTTO Ports is event and Client
Application specific.\75\ The Exchange states that automatic
cancellation of the BX Options Market Maker's open orders for OTTO
Ports entered into the respective OTTO Ports via a particular Client
Application will neither impact nor determine the treatment of orders
of the same or other Participants entered into the OTTO Ports via a
separate and distinct Client Application.\76\ The Exchange states that
the proposed amendments for OTTO mirror the manner in which FIX Ports
are treated when the Exchange's server does not receive a Heartbeat
message for a certain time period for a FIX Port.\77\
---------------------------------------------------------------------------
\72\ See Notice, 89 FR at 57487.
\73\ See Notice, 89 FR at 57487.
\74\ See Notice, 89 FR at 57487.
\75\ See Notice, 89 FR at 57487.
\76\ See Notice, 89 FR at 57487-88.
\77\ See Notice, 89 FR at 57488. The Exchange states that it
proposes to update internal cross-references to accommodate
relocated text. Id.
---------------------------------------------------------------------------
Pricing
The Exchange states that it proposes to amend its Pricing Schedule
at Options 7, Section 3, BX Options Market--Ports and other Services,
to assess a port fee for the new OTTO protocol.\78\
---------------------------------------------------------------------------
\78\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------
The Exchange states that it proposes to assess an OTTO Port Fee of
$650 per port, per month, per account number.\79\
---------------------------------------------------------------------------
\79\ See Notice, 89 FR at 57488. The Exchange states that the
term ``account number'' means a number assigned to a Participant.
The Exchange states that only one account number is necessary to
transact an options business of BX and that Participants may have
more than one account number. See Notice, 89 FR at 57488 n.12
(citing Options 1, Section 1(a)(2)). The Exchange states that
account numbers are free on BX. Id.
---------------------------------------------------------------------------
The Exchange states that it also proposes to add OTTO and Disaster
Recovery Ports to the list of ports that are capped at $7,500 on
BX.\80\ The Exchange states that today, the maximum monthly fees in the
aggregate for FIX Port, CTI Port, FIX DROP Port, BX Depth Port and BX
TOP Port Fees on BX is $7,500.\81\ The Exchange states that these ports
are available to all BX Participants.\82\ The Exchange states that, for
example, to the extent that a Participant expended more than $7,500 for
FIX or OTTO Ports, BX would not charge a Participant for additional FIX
or OTTO Ports, respectively, beyond the cap.\83\ The Exchange also
states that it will provide each Participant the first FIX Port at no
cost to submit orders into BX.\84\
---------------------------------------------------------------------------
\80\ See Notice, 89 FR at 57488. The Exchange notes that BX
currently does not assess BX Participants for Disaster Recovery
Ports. See Notice, 89 FR at 57488 (citing BX Options 7, Section 3).
\81\ See Notice, 89 FR at 57488 (BX Options 7, Section 3(i)).
\82\ See Notice, 89 FR at 57488.
\83\ See Notice, 89 FR at 57488.
\84\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------
Implementation
The Exchange states that it will implement this rule change on or
before December 20, 2025, and that it will announce the operative date
to Participants in an Options Trader Alert.\85\
---------------------------------------------------------------------------
\85\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\86\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change pursuant to Section 19(b)(1) of the Act,\87\ the Commission
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. A temporary suspension of the proposed rule changes is
necessary and appropriate to allow for additional analysis of the
proposed rule change's consistency with the Act and the rules
thereunder.
---------------------------------------------------------------------------
\86\ 15 U.S.C. 78s(b)(3)(C).
\87\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
A. Exchange Statements In Support of the Proposal
Exchange Arguments Concerning Sections 6(b)(4) and 6(b)(5) of the Act
The Exchange states that the Exchange believes that its proposal is
consistent with Section 6(b) of the Act,\88\ in general, and furthers
the objectives of Section 6(b)(5) of the Act,\89\ in particular, in
that it is designed to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest. The Exchange states that,
additionally, the Exchange believes that its proposal furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\90\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees, and other charges among members and issuers and
other persons using any facility, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.\91\
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\88\ See Notice, 89 FR at 57488 (citing 15 U.S.C. 78f(b)).
\89\ See Notice, 89 FR at 57488 (citing 15 U.S.C. 78f(b)(5)).
\90\ See Notice, 89 FR at 57488 (citing 15 U.S.C. 78f(b)(4) and
(5)).
\91\ See Notice, 89 FR at 57488.
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OTTO Protocol
The Exchange states that the Exchange's proposal to adopt OTTO is
consistent with the Act because OTTO would provide BX Participants with
an alternative protocol to submit orders to the Exchange.\92\ The
Exchange states that as proposed, BX would offer the first OTTO Port at
no cost to submit orders into BX, which would remove impediments to and
perfect the mechanism of a free and open market.\93\ The Exchange
states that while BX Participants may elect to obtain multiple ports to
organize their business,\94\ only one order port is necessary for a
Participant to enter orders on BX.\95\ The Exchange states
[[Page 70238]]
that a BX Participant may send all orders, proprietary and agency,
through one port to BX without incurring any cost with this
proposal.\96\ The Exchange states that in the alternative, BX
Participants may elect to obtain multiple ports to organize their
business.\97\
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\92\ See Notice, 89 FR at 57488.
\93\ See Notice, 89 FR at 57488.
\94\ The Exchange states that, for example, a Participant may
desire to utilize multiple FIX or OTTO Ports for accounting
purposes, to measure performance, for regulatory reasons or other
determinations that are specific to that Participant. See Notice, 89
FR at 57488 n.14 and 57489 n.27.
\95\ See Notice, 89 FR at 57489. The Exchange states that only
BX Participants may utilize ports on BX and that any market
participant that sends orders to a BX Participant would not need to
utilize a port. See Notice, 89 FR at 57486.
\96\ See Notice, 89 FR at 57489.
\97\ See Notice, 89 FR at 57489.
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The Exchange states that with the addition of OTTO, a BX
Participant may elect to enter their orders through FIX, OTTO, or both
protocols, although both protocols are not necessary.\98\ The Exchange
states that each BX Participant would receive one OTTO Port at no cost,
thereby promoting just and equitable principles of trade.\99\ The
Exchange notes that Participants may prefer one order protocol as
compared to another order protocol, for example, the ability to route
an order may cause a Participant to utilize FIX and a Participant that
desires to execute an order locally may utilize OTTO.\100\ The Exchange
states that also, the OTTO Port offers lower latency as compared to the
FIX Port, which may be attractive to Participants depending on their
trading behavior.\101\ The Exchange states that with this proposal, BX
Participant may organize their business as they chose with the ability
to send orders to BX at no cost.\102\ The Exchange states that the
proposed new OTTO protocol is identical to the OTTO protocol offered
today on ISE, GEMX, MRX.\103\
---------------------------------------------------------------------------
\98\ See Notice, 89 FR at 57489.
\99\ See Notice, 89 FR at 57489.
\100\ See Notice, 89 FR at 57489.
\101\ See Notice, 89 FR at 57489.
\102\ See Notice, 89 FR at 57489.
\103\ See Notice, 89 FR at 57489.
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Other Amendments
The Exchange that in connection with offering OTTO, the Exchange
proposes to amend other rules within Options 3 to make clear where the
FIX and OTTO protocols may be utilized.\104\ The Exchange states that
IOC Orders may be entered through FIX, OTTO or SQF, a Day order may be
entered through FIX or OTTO, a GTC order may only be entered through
FIX, and a Public Customer-to-Public Customer Cross Order may be
entered through FIX or OTTO.\105\ The Exchange states that other
processes such the Opening Cancel Timer would impact FIX and OTTO
equally.\106\
---------------------------------------------------------------------------
\104\ See Notice, 89 FR at 57489.
\105\ See Notice, 89 FR at 57489.
\106\ See Notice, 89 FR at 57489.
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The Exchange states that the Exchange's proposal to amend the Kill
Switch at Options 3, Section 17 to align its rule text in proposed
Options 3, Section 17(a) and (a)(2) with MRX's Options 3, Section 17 is
consistent with the Act because it does not substantively amend the
functionality beyond removing the group level cancel capability.\107\
The Exchange states that the Exchange's proposal to amend proposed
Options 3, Section 17(a)(2) to specify that FIX and OTTO orders may be
cancelled is consistent with the Act as it will make clear that all
orders entered on BX may be purged through the Kill Switch.\108\ The
Exchange states that finally, allowing BX Participants to send a mass
purge request through FIX or OTTO, in lieu of an interface, is
consistent with Act and the protection of investors and the general
public because it will enable BX Participants to initiate the Kill
Switch more seamlessly without the need to utilize a separate
interface.\109\ The Exchange states that further, utilizing the order
protocols directly, in lieu of the interface, will align the Kill
Switch functionality to that of ISE, GEMX and MRX.\110\ The Exchange
states that when initiating a cancellation of their orders by sending a
mass purge request through FIX or OTTO, Participants will be able to
submit a Kill Switch request on a user level only because the purge
will be specific to a FIX or OTTO user for these ports.\111\
---------------------------------------------------------------------------
\107\ See Notice, 89 FR at 57489.
\108\ See Notice, 89 FR at 57489.
\109\ See Notice, 89 FR at 57489.
\110\ See Notice, 89 FR at 57489.
\111\ See Notice, 89 FR at 57489.
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The Exchange states that finally, the Detection of Loss of
Communication would apply equally to FIX and OTTO.\112\ The Exchange
believes that its proposal is consistent with the Act and protects
investors as the Exchange is making clear what types of order types and
other mechanisms may utilize OTTO.\113\ The Exchange states that today,
BX Participants utilize FIX to enter their orders.\114\ The Exchange
states that despite the fact that OTTO would not be available for the
GTC Time-In-Force modifier, the Exchange notes that one OTTO Port is
being provided to Participants at no cost.\115\ The Exchange states
that today, FIX is the only manner in which to enter orders into
BX.\116\
---------------------------------------------------------------------------
\112\ See Notice, 89 FR at 57489.
\113\ See Notice, 89 FR at 57489.
\114\ See Notice, 89 FR at 57489.
\115\ See Notice, 89 FR at 57489.
\116\ See Notice, 89 FR at 57489.
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Pricing
Proposed Port Fees Are Reasonable, Equitable and Not Unfairly
Discriminatory
The Exchange states that only one FIX order protocol is required
for a BX Participant to submit orders into BX and to meet its
regulatory requirements \117\ at no cost while meeting its regulatory
requirements.\118\ The Exchange states that the Exchange will provide
each Participant the first FIX Port at no cost to submit orders into
BX.\119\ The Exchange states that only one account number is necessary
to transact an options business on BX and account numbers are available
to Participants at no cost.\120\
---------------------------------------------------------------------------
\117\ The Exchange states that BX Participants have trade-
through requirements under Regulation NMS as well as broker-dealers'
best execution obligations. See Notice, 89 FR at 57489 n.20 (citing
Rule 611 of Regulation NMS; 17 CFR 242.611 and FINRA Rule 5310).
\118\ See Notice, 89 FR at 57489.
\119\ See Notice, 89 FR at 57489.
\120\ See Notice, 89 FR at 57489.
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The Exchange states that the Exchange proposes to offer each
Participant the first FIX Port at no cost to meet their regulatory
requirements.\121\ The Exchange states as noted above, Participants may
freely choose to rely on one or many ports, depending on their business
model.\122\
---------------------------------------------------------------------------
\121\ See Notice, 89 FR at 57489.
\122\ See Notice, 89 FR at 57489.
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The Exchange states that the Exchange's proposal is reasonable,
equitable and not unfairly discriminatory as BX is providing BX
Participants the first FIX Port to submit orders at no cost.\123\ The
Exchange states that these ports, which are offered at no cost, would
allow a BX Participant to meet its regulatory requirements.\124\ The
Exchange states that all other ports offered by BX are not required for
a BX Participant to meet its regulatory obligations.\125\ The Exchange
states that therefore, for the foregoing reasons, it is reasonable to
assess no fee for the first FIX Port obtained by a Participant as a BX
Participant is able to meet its regulatory requirements with these
ports.\126\ The Exchange states that additionally, the proposal offers
a free FIX Port to BX Participants that already subscribe to FIX,
thereby reducing fees for these market participants.\127\
---------------------------------------------------------------------------
\123\ See Notice, 89 FR at 57489.
\124\ See Notice, 89 FR at 57489.
\125\ See Notice, 89 FR at 57489.
\126\ See Notice, 89 FR at 57489.
\127\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------
The Exchange states that further, it is equitable and not unfairly
discriminatory to assess no fee for the first FIX Port to Participants
as all BX
[[Page 70239]]
Participants would be entitled to the first FIX Port at no cost.\128\
The Exchange states that with this proposal, BX Participants may
organize their business in such a way as to submit orders to BX at no
cost.\129\
---------------------------------------------------------------------------
\128\ See Notice, 89 FR at 57489.
\129\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------
The Exchange states that the Exchange's proposal to assess $650 per
port, per month, per account number for an OTTO Port is reasonable
because OTTO is not required for a Participant to meet its regulatory
requirements.\130\ The Exchange states that it is offering the first
FIX Port at no cost to submit orders to BX.\131\ The Exchange states
that in addition to the FIX Port, all Participants may elect to
purchase OTTO to submit orders to BX.\132\ The Exchange states that BX
Participants utilizing the FIX Port, which is offered at no cost, do
not need to utilize OTTO.\133\
---------------------------------------------------------------------------
\130\ See Notice, 89 FR at 57489.
\131\ See Notice, 89 FR at 57489.
\132\ See Notice, 89 FR at 57489.
\133\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------
The Exchange states that finally, in the event that a BX
Participant elects to subscribe to multiple ports, the Exchange offers
a monthly cap beyond which a Participant would be assessed no
additional fees for the month and proposes to add OTTO to the monthly
cap.\134\ The Exchange states that BX proposes to cap FIX Port, OTTO
Port, CTI Port, FIX Drop Port, BX Depth Port, BX TOP Port Fees, and all
Disaster Recovery Port Fees \135\ at a monthly cap of $7,500.\136\ The
Exchange states that these caps are reasonable because they allow
Participants to limit their fees beyond a certain level if they elect
to purchase multiple ports in a given month.\137\ The Exchange states
that the caps are also equitable and not unfairly discriminatory
because any Participant will be subject to the cap, provided they
exceeded the appropriate dollar amount in a given month.\138\ The
Exchange states that these ports are available to all BX
Participants.\139\
---------------------------------------------------------------------------
\134\ See Notice, 89 FR at 57489.
\135\ The Exchange states that BX does not assess fees for
Disaster Recovery Ports. See Notice, 89 FR at 57489 n.30.
\136\ See Notice, 89 FR at 57489.
\137\ See Notice, 89 FR at 57489.
\138\ See Notice, 89 FR at 57489.
\139\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------
The Exchange states that the proposed BX OTTO fee is the same as
the OTTO Port fee on MRX, for the identical port.\140\ The Exchange
states that additionally, MRX offers one free FIX Port to its Members
and assesses the same FIX Port fee of $650 per port, per month, per
account number as BX assesses today for a FIX Port. The Exchange states
that MRX offers its Members a free FIX Disaster Recovery Port.\141\ The
Exchange states that today, BX does not assess Disaster Recovery Port
fees.\142\ The Exchange states that finally, today, MRX offers a $7,500
monthly cap for OTTO Ports, CTI Ports, FIX Ports, FIX Drop Ports and
all Disaster Recovery Ports.\143\ The Exchange states that BX's
proposed monthly cap includes BX Depth Ports and BX Top Ports, which
are currently assessed fees of $650 per port, per month, in addition to
the same ports that are capped on MRX (FIX Ports, OTTO Ports, CTI
Ports, FIX DROP Ports, and all Disaster Recovery Ports).\144\
---------------------------------------------------------------------------
\140\ See Notice, 89 FR at 57490.
\141\ See Notice, 89 FR at 57490 (citing MRX Options 7, Section
6).
\142\ See Notice, 89 FR at 57490 (citing BX Options 7, Section
3).
\143\ See Notice, 89 FR at 57490 (citing MRX Options 7, Section
6).
\144\ See Notice, 89 FR at 57490. The Exchange states that,
therefore, BX's proposed cap can also be obtained utilizing BX Depth
Port and BX Top Port in addition to the same ports that MRX
aggregates for purposes of the monthly cap. See Notice, 89 FR at
57488.
---------------------------------------------------------------------------
Exchange Arguments Concerning Competition and Section 6(b)(8)
The Exchange states that 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.\145\
---------------------------------------------------------------------------
\145\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
The Exchange states that the OTTO protocol is a proprietary
protocol of Nasdaq, Inc.\146\ The Exchange states that the Exchange
continues to innovate and modernize technology so that it may continue
to compete among options markets.\147\ The Exchange states that the
ability to continue to innovate with technology and offer new products
to market participants allows BX to remain competitive in the options
space which currently has seventeen options markets and potential new
entrants.\148\ The Exchange states that if BX were unable to offer and
price new protocols, it would result in an undue burden on competition
as BX would not have the ability to innovate and modernize its
technology to compete effectively in the options space.\149\ The
Exchange states that BX's ability to offer OTTO will enable it to
compete with other options markets that provide its market participants
a choice as to the type of order entry protocols that may be
utilized.\150\ The Exchange states that BX's ability to offer and price
new and innovative products and continue to modernize its technology,
similar to other options markets, supports intermarket
competition.\151\
---------------------------------------------------------------------------
\146\ See Notice, 89 FR at 57490.
\147\ See Notice, 89 FR at 57490.
\148\ See Notice, 89 FR at 57490.
\149\ See Notice, 89 FR at 57490.
\150\ See Notice, 89 FR at 57490.
\151\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
OTTO Protocol
The Exchange states that the Exchange's proposal to adopt an OTTO
Protocol does not impose an undue burden on intramarket
competition.\152\ The Exchange states that today, all BX Participants
utilize FIX to send orders to BX.\153\ The Exchange states that the
Exchange would offer each BX Participant the first FIX Port at no cost
with this proposal.\154\ The Exchange states that with the addition of
OTTO Ports, a BX Participant may elect to enter their orders through
FIX, OTTO, or both protocols, although both protocols are not
necessary.\155\ The Exchange states that the Exchange's proposal to
adopt an OTTO Protocol does not impose an undue burden on intermarket
competition as other options exchanges offer multiple protocols today
such as ISE, GEMX and MRX.\156\
---------------------------------------------------------------------------
\152\ See Notice, 89 FR at 57490.
\153\ See Notice, 89 FR at 57490.
\154\ See Notice, 89 FR at 57490.
\155\ See Notice, 89 FR at 57490.
\156\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
Other Amendments
The Exchange states that the Exchange's proposal to amend other
rules within Options 3 to make clear where the FIX and OTTO protocols
may be utilized does not impose an undue burden on intramarket
competition as these rules will apply in the same manner to all
Participants.\157\ The Exchange states that the Exchange's proposal to
amend other rules within Options 3 to make clear where the FIX and OTTO
protocols may be utilized does not impose an undue burden on
intermarket competition as other options exchanges may elect to utilize
their order entry protocols in different ways.\158\
---------------------------------------------------------------------------
\157\ See Notice, 89 FR at 57490.
\158\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
Pricing
The Exchange states that nothing in the proposal burdens inter-
market competition because BX's proposal to offer the first FIX Port
for free is similar to MRX's FIX Port offering and allows BX
Participants to meet their regulatory obligations.\159\ The Exchange
states that
[[Page 70240]]
BX's offering would permit Participants the ability to submit orders to
BX at no cost.\160\ The Exchange states that OTTO Ports are not
required for BX Participants to meet their regulatory obligations.\161\
---------------------------------------------------------------------------
\159\ See Notice, 89 FR at 57490.
\160\ See Notice, 89 FR at 57490.
\161\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
The Exchange states that nothing in the proposal burdens intra-
market competition because the Exchange would uniformly assess the port
fees to all Participants, as applicable, and would uniformly apply
monthly caps.\162\ The Exchange states that the proposed fees are
identical to fees recently approved on MRX.\163\ The Exchange states
that the proposed BX OTTO fee is the same as the OTTO Port fee on MRX,
for the identical port.\164\ The Exchange states that additionally, MRX
offers one free FIX Port to its Members and assesses the same FIX Port
fee of $650 per port, per month, per account number as BX assessed
today for FIX.\165\ The Exchange states that MRX also offers a free FIX
Disaster Recovery Port.\166\ The Exchange states that today, BX does
not assess Disaster Recovery Port fees.\167\ The Exchange states that
finally, today, MRX offers a $7,500 monthly cap for OTTO Ports, CTI
Ports, FIX Ports, FIX Drop Ports and all Disaster Recovery Ports.\168\
The Exchange states that BX's proposed monthly cap includes BX Depth
Ports and BX Top Ports, which are assessed fees of $650 per port, per
month, in addition to the same ports that are capped on MRX (FIX Ports,
OTTO Ports, CTI Ports, FIX DROP Ports, and all Disaster Recovery
Ports).\169\
---------------------------------------------------------------------------
\162\ See Notice, 89 FR at 57490.
\163\ See Securities Exchange Commission Release No. 96824
(February 7, 2023), 88 FR 8975 (February 10, 2023) (SR-MRX-2023-05).
\164\ See Notice, 89 FR at 57490.
\165\ See MRX Options 7, Section 6.
\166\ Id.
\167\ See BX Options 7, Section 3. BX is adding Disaster
Recovery Ports to its monthly cap.
\168\ See MRX Options 7, Section 6.
\169\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
The Exchange states that to the extent that the Commission does not
permit BX to assess the same identical fees for the same identical
products on its market, the Commission is creating a burden on
competition by allowing MRX to assess fees and offer a product that
would otherwise be unavailable on BX.\170\ The Exchange states that
additionally, the proposal offers a free FIX Port to BX Participants
that already subscribe to FIX, the only order port currently offered on
BX, thereby reducing fees for these market participants.\171\ The
Exchange states that each SRO should be permitted to mirror fees
assessed by another SRO to further competition among the
exchanges.\172\
---------------------------------------------------------------------------
\170\ See Notice, 89 FR at 57490.
\171\ See Notice, 89 FR at 57490.
\172\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------
B. Suspension
When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\173\ The instructions to Form 19b-4, on which
exchanges file their proposed rule changes, specify that such statement
``should be sufficiently detailed and specific to support a finding
that the proposed rule change is consistent with [those]
requirements.'' \174\
---------------------------------------------------------------------------
\173\ See 17 CFR 240.19b-4(Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\174\ See id.
---------------------------------------------------------------------------
Section 6 of the Act, including Sections 6(b)(4), (5), and (8),
require the rules of an exchange to: (1) provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \175\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \176\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\177\
---------------------------------------------------------------------------
\175\ 15 U.S.C. 78f(b)(4).
\176\ 15 U.S.C. 78f(b)(5).
\177\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
In temporarily suspending the Exchange's proposed rule change, the
Commission intends to further consider whether the Proposal is
consistent with the statutory requirements applicable to a national
securities exchange under the Act. In particular, the Commission will
consider whether the proposed rule change satisfies the standards under
the Act and the rules thereunder requiring, among other things, that an
exchange's rules provide for the equitable allocation of reasonable
fees among members, issuers, and other persons using its facilities;
not permit unfair discrimination between customers, issuers, brokers or
dealers; and do not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\178\
---------------------------------------------------------------------------
\178\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------
Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\179\
---------------------------------------------------------------------------
\179\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Changes
In addition to temporarily suspending the Proposal, the Commission
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C)
\180\ and 19(b)(2)(B) of the Act \181\ to determine whether the
Exchange's proposed rule change should be approved or disapproved.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, the Commission seeks and encourages interested persons to
provide additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
---------------------------------------------------------------------------
\180\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\181\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\182\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\182\ Id. Section 19(b)(2)(B) of the Act also provides that
proceedings to determine whether to disapprove a proposed rule
change must be concluded within 180 days of the date of publication
of notice of the filing of the proposed rule change. See id. The
time for conclusion of the proceedings may be extended for up to 60
days if the Commission finds good cause for such extension and
publishes its reasons for so finding, or if the exchange consents to
the longer period. See id.
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with Section 6(b)(4) of the Act, which requires
that the rules of a national securities exchange ``provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities''; \183\
---------------------------------------------------------------------------
\183\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with Section 6(b)(5) of the Act, which requires,
among other things, that the rules of a national securities exchange
not be ``designed to permit unfair discrimination between
[[Page 70241]]
customers, issuers, brokers, or dealers''; \184\ and
---------------------------------------------------------------------------
\184\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with Section 6(b)(8) of the Act, which requires
that the rules of a national securities exchange ``not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of [the Act].'' \185\
---------------------------------------------------------------------------
\185\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As discussed in Section III above, the Exchange made various
arguments in support of the Proposal. There are questions as to whether
the Exchange has provided sufficient information to demonstrate that
the proposed fees are consistent with the Act and the rules thereunder.
The Commission will specifically consider, among other things, whether
the Exchange has provided sufficient evidence to demonstrate that the
proposed fees are reasonable and equitably allocated, are not unfairly
discriminatory, and do not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \186\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\187\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\188\
---------------------------------------------------------------------------
\186\ 17 CFR 201.700(b)(3).
\187\ See id.
\188\ See id.
---------------------------------------------------------------------------
The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated, not be unfairly discriminatory, and not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\189\
---------------------------------------------------------------------------
\189\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------
V. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by September 19, 2024.
Rebuttal comments should be submitted by October 3, 2024. Although
there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral
presentation.\190\
---------------------------------------------------------------------------
\190\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the Proposal, in
addition to any other comments they may wish to submit about the
proposed rule changes.
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-BX-2024-019 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-BX-2024-019. 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-BX-2024-019 and should be
submitted on or before September 19, 2024. Rebuttal comments should be
submitted by October 3, 2024.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\191\ that File No. SR-BX-2024-019, be and hereby is, temporarily
suspended. In addition, the Commission is instituting proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\191\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\192\
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\192\ 17 CFR 200.30-3(a)(57).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-19394 Filed 8-28-24; 8:45 am]
BILLING CODE 8011-01-P
