Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Adopt an OTTO Protocol, 95321-95328 [2024-28113]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 231 (Monday, December 2, 2024)]
[Notices]
[Pages 95321-95328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28113]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101743; File No. SR-BX-2024-048]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Adopt an OTTO 
Protocol

November 25, 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 November 15, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt a new protocol, ``Ouch to Trade 
Options'' or ``OTTO'' and establish pricing for this new protocol.\3\
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    \3\ On November 15, 2024, BX is withdrawing SR-BX-2024-019 and 
is filing this rule change.
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    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 95322]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BX proposes to offer a new order entry protocol called OTTO. Today, 
BX Participants may enter orders into the Exchange through the 
``Financial Information eXchange'' or ``FIX.'' \4\ 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'').
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    \4\ 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. 
Features include the following: (1) execution messages; (2) order 
messages; and (3) risk protection triggers and cancel notifications. 
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''). See Options 3, Section 
7(e)(1)(A).
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    The OTTO protocol is a proprietary protocol of Nasdaq, Inc. The 
Exchange continues to innovate and modernize technology so that it may 
continue to compete among options markets. 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 eighteen options markets and potential new entrants.
OTTO Protocol
    As proposed, OTTO would allow Participants and their Sponsored 
Customers \5\ to connect, send, and receive messages related to orders, 
auction orders, and auction responses to the Exchange. OTTO features 
would include the following: (1) options symbol directory messages 
(e.g., underlying and complex instruments); (2) System \6\ 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. The Exchange notes that unlike FIX, 
which offers routing capability, OTTO does not permit routing. The 
Exchange proposes to include this description of OTTO in new Options 3, 
Section 7(e)(1)(B) and re-letter current ``B'' as ``C''.
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    \5\ General 2, Section 22 describes Sponsored Access 
arrangements.
    \6\ 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. The 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 BX Options 1, Section 1(a)(59).
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    Only one order protocol is required for a BX Participant to submit 
orders into BX. Only BX Participants may utilize ports on BX. Any 
market participant that sends orders to a BX Participant would not need 
to utilize a port. The BX Participant may send all orders, proprietary 
and agency, through one port to BX. Participants may elect to obtain 
multiple ports to organize their business,\7\ however only one port is 
necessary for a Participant to enter orders on BX.
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    \7\ For example, a Participant may desire to utilize multiple 
FIX or OTTO Ports for accounting purposes, to measure performance, 
for regulatory reasons, segregating order flow among different 
trading desks, or other determinations that are specific to that 
Participant. A market participant may utilize multiple ports in some 
cases to send multiple orders through different ports to avoid any 
latency or queuing of orders. The Exchange notes that to the extent 
that different OTTO Ports are used to send multiple orders as 
compared to sending multiple orders through one OTTO Port the 
difference from a latency standpoint would be in nanoseconds.
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    Participants may elect to enter their orders through FIX, OTTO, or 
both protocols, although both protocols are not necessary. Participants 
may prefer one protocol as compared to another protocol, for example, 
the ability to route may cause a Participant to utilize FIX and a 
Participant that desires to execute an order locally may prefer OTTO. 
Also, the OTTO Port offers lower latency as compared to the FIX Port, 
which may be attractive to Participants depending on their trading 
behavior. Nasdaq believes that the addition of OTTO will provide BX 
Participants with additional choice when submitting orders to BX.
    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. The Exchange notes 
that Options Participants may use varying number of OTTO ports based on 
their business needs.
Other Amendments
    In connection with offering OTTO, the Exchange proposes to amend 
other rules within Options 3. Each amendment is described below.
Options 3, Section 7
    BX proposes to amend Options 3, Section 7, Types of Orders and 
Quote Protocols. Specifically, BX proposes to amend Options 3, Section 
7 (b)(2) that describes the Immediate-or-Cancel'' or ``IOC'' order. 
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. The Exchange 
proposes to add ``OTTO'' to the list of protocols to note that an IOC 
order may also be entered through OTTO.
    BX also 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. With the addition of OTTO, a Day order may also be entered through 
OTTO.
    BX 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. GTC orders would only be able to be entered through FIX 
and not OTTO. The Exchange proposes to amend Options 3, Section 7(b)(4) 
to add a sentence to note that GTC orders may be entered through FIX.
Options 3, Section 8
    BX proposes to amend Options 3, Section 8, Options Opening Process. 
BX proposes to amend Options 3, Section 8(l) that describes the Opening 
Process Cancel Timer. The Opening Process Cancel Timer represents a 
period of time since the underlying market has opened. 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. Today, these orders 
include all non-Good Til Cancelled Orders received over the FIX 
protocol. The Exchange proposes to add the OTTO protocol as well to the 
rule text language in that paragraph.
Options 3, Section 12
    The Exchange proposes to amend the Options 3, Section 12, Crossing 
Orders.

[[Page 95323]]

Specifically, the Exchange 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. Public Customer-to-Public Customer Cross Orders must 
be entered through FIX. The Exchange 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.
Options 3, Section 17
    The Exchange proposes to amend the Kill Switch at Options 3, 
Section 17. The Kill Switch provides Participants with an optional risk 
management tool to promptly cancel and restrict orders. With the 
introduction of OTTO, the Exchange proposes to align its Kill Switch 
rule text with MRX's Kill Switch.\8\ The Exchange 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). 
This amendment simply rewords the rule text without a substantive 
amendment to the rule text.
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    \8\ See MRX Options 3, Section 17.
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    The Exchange proposes to renumber Options 3, Section 17(a)(i) and 
(ii) as (a)(1) and (2). 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).'' The Exchange 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.'' With the addition of OTTO, the Exchange notes that both 
FIX and OTTO orders may be cancelled. Further, today, BX Participants 
utilize an interface to send a message to the Exchange to initiate a 
Kill Switch.\9\ 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. 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. 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. This is a change 
from the ability to cancel orders on either a user or group level \10\ 
with the interface. The Exchange 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.\11\
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    \9\ See 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).
    \10\ A permissible group could include all badges associated 
with a Market Maker. 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.
    \11\ The Exchange proposes to remove this sentence, 
``Permissible groups must reside within a single broker-dealer'' as 
the group option would no longer exist.
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    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. This amendment simply rewords the rule text without 
a substantive amendment to the rule text.
Options 3, Section 18
    The Exchange proposes to amend Options 3, Section 18, Detection of 
Loss of Communication. The Exchange proposes to add OTTO to Options 3, 
Section 18 as OTTO would also be subject to this rule. 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. Quotes and orders are cancelled across 
all Client Applications that are associated with the same BX Options 
Market Maker ID and underlying issues.
    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. 
The Exchange 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. Also, the Exchange proposes to define 
``Session of Connectivity'' for purposes of this rule to mean each time 
the Participant connects to the Exchange's System. Further, each new 
connection, intra-day or otherwise, is a new Session of Connectivity. 
The Exchange proposes to use the new definition throughout Options 3, 
Section 18.
    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. Orders would be cancelled 
across all Client Applications that are associated with the same BX 
Options Market Maker ID and underlying issues. The Exchange 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. 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. 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. 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. The period 
of ``nn'' seconds may be modified to a number between one hundred (100) 
milliseconds and 99,999 milliseconds for OTTO Ports prior to each 
Session of Connectivity to the Exchange. This feature may be disabled 
for the removal of orders;

[[Page 95324]]

however, the Participant will be disconnected.
    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. The 
Participant may change the default setting prior to each Session of 
Connectivity. 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. The 
trigger for OTTO Ports is event and Client Application specific. The 
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. 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.\12\
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    \12\ The Exchange proposes to update internal cross-references 
to accommodate relocated text.
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Pricing
    BX proposes to amend its Pricing Schedule at Options 7, Section 3, 
BX Options Market--Ports and other Services, to adopt a port fee for 
the new OTTO protocol of $650 per port, per month, per account number. 
OTTO would be an additional order entry protocol for BX Participants in 
addition to FIX, which is currently utilized by BX Participants to 
enter orders into BX. The Exchange currently assesses a FIX Port Fee of 
$650 per port, per month, per account number.\13\ The Exchange will 
provide each Participant the first FIX Port at no cost to submit orders 
into BX. BX Participants utilizing the first FIX Port offered at no 
cost do not need to purchase an OTTO Port, which is optional.
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    \13\ The term ``account number'' means a number assigned to a 
Participant. Participants may have more than one account number. See 
Options 1, Section 1(a)(2). Account numbers are free on BX.
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    The Exchange also proposes to add OTTO to the list of ports that 
are capped at $7,500 on BX. 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.\14\ These ports are available to all BX 
Participants. To the extent that a Participant expended more than 
$7,500 for FIX or OTTO Ports in a month, BX would not charge a 
Participant for additional FIX or OTTO Ports, respectively, beyond the 
cap.
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    \14\ See BX Options 7, Section 3(i).
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Implementation
    The Exchange will implement this rule change on or before December 
20, 2025. The Exchange will announce the operative date to Participants 
in an Options Trader Alert.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\15\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\16\ 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.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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OTTO Protocol
    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. As proposed, BX would offer the first 
FIX Port at no cost to submit orders into BX, which would remove 
impediments to and perfect the mechanism of a free and open market. 
While BX Participants may elect to obtain multiple ports to organize 
their business,\17\ only one order port is necessary for a Participant 
to enter orders on BX. A BX Participant may send all orders, 
proprietary and agency, through one port to BX without incurring any 
cost with this proposal. In the alternative, BX Participants may elect 
to obtain multiple ports to organize their business.\18\
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    \17\ 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.
    \18\ 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.
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    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. Each BX Participant would receive one FIX 
Port at no cost, thereby promoting just and equitable principles of 
trade. 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. 
Also, the OTTO Port offers lower latency as compared to the FIX Port, 
which may be attractive to Participants depending on their trading 
behavior. With this proposal, BX Participant may organize their 
business as they chose with the ability to send orders to BX at no 
cost. The proposed new OTTO protocol is identical to the OTTO protocol 
offered today on ISE, GEMX, and MRX.
Other Amendments
    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. 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. A Public Customer-to-Public Customer Cross 
Order may be entered through FIX or OTTO. Other processes such the 
Opening Cancel Timer would impact FIX and OTTO equally.
    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. 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. 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. Further, utilizing 
the order protocols directly, in lieu of the interface, will align the 
Kill Switch functionality to that of ISE, GEMX and MRX. 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

[[Page 95325]]

will be specific to a FIX or OTTO user for these ports.
    Finally, the Detection of Loss of Communication would apply equally 
to FIX and OTTO. 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. Today, 
BX Participants utilize FIX to enter their orders. Despite the fact 
that OTTO would not be available for the GTC Time-In-Force modifier, 
the Exchange notes that one FIX Port is being provided to Participants 
at no cost. Today, FIX is the only manner in which to enter orders into 
BX.
Pricing
Proposed Port Fees Are Reasonable, Equitable and Not Unfairly 
Discriminatory
    The Exchange believes that its proposal furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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. This belief is based on 
comparability: the proposed fees are comparable to, and in some cases 
less than, those of similarly situated exchanges.
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    \19\ See 15 U.S.C. 78f(b)(4) and (5).
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    The proposed fees for BX OTTO are nearly identical to fees on MRX 
\20\ and GEMX \21\ for OTTO, an identical protocol. Additionally, the 
proposed fees for BX OTTO are comparable to those of its closest 
competitors, Cboe C2 Exchange, Inc. (``C2''), MEMX LLC (``MEMX''),\22\ 
MIAX Emerald, LLC (``Emerald'') \23\ and Cboe EDGX Exchange, Inc.'s 
(``BatsEDGX'') \24\ based on market share. Below is a chart comparing 
BX to affiliated Nasdaq exchanges that have an identical OTTO Port.
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    \20\ MRX offers one free FIX Port to its Members and assesses 
the same OTTO Port fee of $650 per port, per month, per account 
number. MRX also offers a free FIX Disaster Recovery Port. Today, BX 
does not assess Disaster Recovery Port fees. Finally, today, MRX 
offers a $7,500 monthly cap for OTTO Ports, CTI Ports, FIX Ports, 
FIX Drop Ports and all Disaster Recovery Ports. BX's proposed 
monthly cap is $7,500 and includes the same ports as MRX, except 
that BX also includes two data ports in addition to the other ports, 
BX Depth Ports and BX Top Ports. BX Depth Ports and BX Top Ports are 
assessed fees of $650 per port, per month. 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.
    \21\ GEMX does not offer the first FIX Port for free and 
assesses the same OTTO Port fee of $650 per port, per month, per 
account number. Also, GEMX caps OTTO Ports, CTI Ports, FIX Ports, 
FIX Drop Ports and all Disaster Recovery Ports at $7,500 a month the 
same as the proposed fee for BX.
    \22\ MEMX assesses $450 per port for an order entry port.
    \23\ Emerald assesses $550 for the first FIX Port, $350 for 2 
through 5 FIX Ports and $150 for over 5 FIX Ports.
    \24\ BatsEDGX assesses $750 per port, per month for a Logical 
Port.

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                                    Market share
             Exchange                    (%)               OTTO         First free FIX port          Cap
----------------------------------------------------------------------------------------------------------------
BX...............................               2  $650 per port, per   yes................  OTTO Port subject
                                                    month, per account                        to monthly cap of
                                                    number.                                   $7,500.
MRX..............................             2.5  $650 per port, per   yes................  OTTO Port currently
                                                    month, per account                        subject to monthly
                                                    number.                                   cap of $7,500.
GEMX.............................             2.4  $650 per port, per   no.................  OTTO Port currently
                                                    month, per account                        subject to monthly
                                                    number.                                   cap of $7,500.
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    Below is a chart comparing BX to unaffiliated exchanges with 
comparable logical ports.

----------------------------------------------------------------------------------------------------------------
                                    Market share
             Exchange                    (%)         Proprietary port     First free port            Cap
----------------------------------------------------------------------------------------------------------------
BX...............................               2  $650 per port, per   yes................  OTTO Port subject
                                                    month, per account                        to monthly cap of
                                                    number.                                   $7,500.
C2...............................             2.8  BOE Port fee of      no.................  no.
                                                    $650 per port.
MEMX.............................             2.3  MEMO SBE Port fee    no.................  no.
                                                    of $450 per port.
Emerald..........................             3.6  Emerald does not     no.................  no.
                                                    offer a
                                                    proprietary port
                                                    similar to OTTO.
BatsEDGX.........................             3.6  BOE Port fee of      no.................  no.
                                                    $750 per port, per
                                                    month.
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    The Exchange's analysis utilizes the below graph representing the 
market share \25\ for each of the eighteen options markets based on 
total options contracts traded in 2024 through October 28, 2024.
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    \25\ Market share is the percentage of volume on a particular 
exchange relative to the total volume across all exchanges, and 
indicates the amount of order flow directed to that exchange. High 
levels of market share enhance the value of trading and ports. Total 
contracts include both multi-list options and proprietary options 
products. Proprietary options products are products with 
intellectual property rights that are not multi-listed. BX does not 
list proprietary products.

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[[Page 95326]]

[GRAPHIC] [TIFF OMITTED] TN02DE24.004

MRX
    MRX has market share of 2.5% which is comparable to BX's market 
share of 2.0%. MRX offers one free FIX Port to its Members and assesses 
the same OTTO Port fee of $650 per port, per month, per account number. 
MRX also offers a free FIX Disaster Recovery Port. Today, BX does not 
assess Disaster Recovery Port fees. Finally, today, MRX offers a $7,500 
monthly cap for OTTO Ports, CTI Ports, FIX Ports, FIX Drop Ports and 
all Disaster Recovery Ports. BX's proposed monthly cap is $7,500 and 
includes the same ports as MRX, except that BX also includes two data 
ports in addition to the other ports, BX Depth Ports and BX Top Ports. 
BX Depth Ports and BX Top Ports are assessed fees of $650 per port, per 
month. 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. The proposed fees are 
nearly identical to MRX's OTTO fees.
GEMX
    GEMX has market share of 2.4% which is comparable to BX's market 
share of 2.0%. GEMX does not offer the first FIX Port for free and 
assesses the same OTTO Port fee of $650 per port, per month, per 
account number. Also, GEMX caps OTTO Ports, CTI Ports, FIX Ports, FIX 
Drop Ports and all Disaster Recovery Ports at $7,500 a month the same 
as the proposed fee for BX. The proposed fees are nearly identical to 
GEMX's fees.
C2
    C2 has market share of 2.8% which is comparable to BX's market 
share of 2.0%. C2 assesses $650 per port for its Binary Order Entry 
(``BOE'') Logical Port, a Cboe proprietary order entry protocol.\26\ 
BOE provide users the ability to enter order/quotes. Unlike BOE, OTTO 
is only for order submission and is similarly a proprietary protocol. 
While OTTO is subject to a cap, BOE's logical port fee is applicable 
when used to enter up to 20,000 orders per trading day per logical port 
as measured on average in a single month. Each incremental usage of up 
to 20,000 per day per logical port will incur an additional logical 
port fee of $650 per month. Incremental usage will be determined on a 
monthly basis based on the average orders per day entered in a single 
month across all of a market participant's subscribed BOE Logical 
Ports. OTTO does not have a similar limitation on its port for number 
of orders which would require additional ports if the orders per day 
were exceeded. With its proposal, BX is offering the first FIX at no 
cost, while C2 does not offer any ports at no cost. The proposed fees 
are similar to C2's fees.
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    \26\ https://cdn.cboe.com/resources/membership/US_Options_BOE_Specification.pdf.
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MEMX
    MEMX has market share of 2.3% which is comparable to BX's market 
share of 2.0%. MEMX assesses $450 per port for an order entry port. 
MEMO SBE, a binary, proprietary protocol used for order submission on 
MEMX Options,\27\ would be similar to OTTO. MEMX does not cap its fees 
and also does not offer any ports at no cost. The proposed fees are 
higher than MEMX's fees. MEMX is a new options market that only 
recently began trading as compared to BX which began trading in 2012, 
Typically, new options entrants have no port fees \28\ or lower port 
fees.
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    \27\ See MEMO SBE V1.12 specifications. Specifications must be 
downloaded from MEMX's website to be viewed.
    \28\ MRX had no port fees for the first 6 years of trading.
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Emerald
    Emerald has market share of 3.6% which is comparable to BX's market 
share of 2.0%. Emerald assesses $550 for the first FIX Port, $350 for 2 
through 5 FIX Ports and $150 for over 5 FIX Ports. FIX is a universal 
protocol while BX OTTO is a proprietary protocol. Emerald offers a FIX 
Port but not a similar proprietary logical port.\29\ Emerald does not 
cap its fees and does not offer a FIX Port at no cost. The proposed 
fees are similar to Emerald's FIX fees for the first port and higher 
for subsequent Emerald FIX ports, however

[[Page 95327]]

Emerald does not offer any FIX ports at no cost.
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    \29\ https://www.miaxglobal.com/miax_emerald_user_manual.pdf.
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BatsEDGX
    BatsEDGX has market share of 3.6% which is comparable to BX's 
market share of 2.0%. BatsEDGX assesses $750 per port, per month for 
its Binary Order Entry (``BOE'') Logical Port, a Cboe proprietary order 
entry protocol.\30\ BOE provide users the ability to enter order/
quotes. Unlike BOE, OTTO is only for order submission and is similarly 
a proprietary protocol. BatsEDGX does not cap its fees and also does 
not offer any ports at no cost. The proposed fees are lower than 
BatsEDGX's fees.
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    \30\ https://cdn.cboe.com/resources/membership/US_Options_BOE_Specification.pdf.
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    In summary, (i) the proposed OTTO Port fees are (i) substantially 
similar to GEMX and MRX; (ii) comparable to C2; (iii) comparable, but 
less than BatsEDGX; and (iv) comparable, but higher than MEMX. Emerald 
offers a FIX Port but not a similar proprietary logical port.
    The Proposal is equitable as the proposed fees would apply to all 
BX Participants in a uniform manner. Each BX Participant would be 
entitled to the first FIX Port at no cost. Also, the proposed BX OTTO 
fees would be assessed uniformly to each BX Participant that subscribes 
to OTTO. Finally, the proposed monthly cap would be applied uniformly 
to all BX Participants. The Proposal is not unfairly discriminatory. BX 
OTTO, a new protocol, would be an optional protocol available to all 
Participants on a non-discriminatory basis.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
OTTO Protocol
    The OTTO protocol is a proprietary protocol of Nasdaq, Inc. The 
Exchange continues to innovate and modernize technology so that it may 
continue to compete among options markets. 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 eighteen options markets and potential new entrants. The Exchange's 
proposal to adopt an OTTO Protocol does not impose an undue burden on 
intramarket competition. Today, all BX Participants utilize FIX to send 
orders to BX. The Exchange would offer each BX Participant the first 
FIX Port at no cost with this proposal. 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. 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.
Other Amendments
    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. 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.
Pricing
    Nothing in the proposal burdens inter-market competition (the 
competition among self-regulatory organizations) because approval of 
the Proposal does not impose any burden on the ability of other options 
exchanges to compete. BX OTTO fees are comparable to, and in some cases 
less than, those of other exchanges, as discussed above.
    Nothing in the Proposal burdens intra-market competition (the 
competition among consumers of exchange data) because BX OTTO is 
available to any Participant at the same price and any Participant that 
elects to subscribe to OTTO may do so on a non-discriminatory basis.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \31\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\32\
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    \31\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \32\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2024-048 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-2024-048. 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

[[Page 95328]]

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-2024-048 and should be submitted on or before December 23, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-28113 Filed 11-29-24; 8:45 am]
BILLING CODE 8011-01-P