Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 7, “Types of Orders” To Permit the Exchange To Determine the Availability of Order Types and Time-In-Force Provisions
| Published date | 04 March 2020 |
| Citation | 85 FR 12811 |
| Record Number | 2020-04392 |
| Section | Notices |
| Court | Securities And Exchange Commission |
Federal Register, Volume 85 Issue 43 (Wednesday, March 4, 2020)
[Federal Register Volume 85, Number 43 (Wednesday, March 4, 2020)]
[Notices]
[Pages 12811-12814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04392]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88296; File No. SR-GEMX-2020-05]
Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 3,
Section 7, ``Types of Orders'' To Permit the Exchange To Determine the
Availability of Order Types and Time-In-Force Provisions
February 27, 2020.
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 February 14, 2020, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit
[[Page 12812]]
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 amend Options 3, Section 7, ``Types of
Orders'' to permit the Exchange to determine the availability of order
types and time-in-force provisions.
The Exchange requests that the Commission waive the 30-day
operative delay period contained in Exchange Act Rule 19b-
4(f)(6)(iii).\3\
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\3\ 17 CFR 240.19b-4(f)(6)(iii).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 3, Section 7, ``Types of
Orders'' to provide that the Exchange may determine which order types
and times-in-force provisions are available on a class or system basis.
This proposed change is based on the rules of Cboe BZX Exchange, Inc.
(``BZX Options''),\4\ Rule 21.1, Cboe EDGX Exchange, Inc. (``EDGX
Options'') Rule 21.1,\5\ Cboe Exchange, Inc. (``Cboe'') Rule 5.6 \6\
and Cboe C2 Exchange, Inc. (``C2'') Rule 6.10(a).\7\ The Exchange
proposes to also amend the title of the rule from ``Types of Orders''
to ``Types of Orders and Order and Quote Protocols'' to reflect the
information in the rule.
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\4\ BZX Options Rule 21.1(d), Definitions, provides ``The term
``Order Type'' shall mean the unique processing prescribed for
designated orders, subject to the restrictions set forth in
paragraph (l) below with respect to orders and bulk messages
submitted through bulk ports, that are eligible for entry into the
System. Unless otherwise specified in the Rules or the context
indicates otherwise, the Exchange determines which of the following
Order Types are available on a class or system basis.''
BZX Options Rule 21.1(f), Definitions, provides ``The term
``Time in Force'' means the period of time that the System will hold
an order, subject to the restrictions set forth in paragraph (j)
below with respect to bulk messages submitted through bulk ports,
for potential execution. Unless otherwise specified in the Rules or
the context indicates otherwise, the Exchange determines which of
the following Times-in-Force are available on a class, system, or
trading session basis. Rule 21.20 sets forth the Times-in-Force the
Exchange may make available for complex orders.''
\5\ EDGX Options Rule 21.1, Definitions, provides, ``The term
``Order Type'' shall mean the unique processing prescribed for
designated orders, subject to the restrictions set forth in
paragraph (j) below with respect to orders and bulk messages
submitted through bulk ports, that are eligible for entry into the
System. Unless otherwise specified in the Rules or the context
indicates otherwise, the Exchange determines which of the following
Order Types are available on a class, system, or trading session
basis. Rule 21.20 sets forth the Order Types the Exchange may make
available for complex orders.''
\6\ Cboe Rule 5.6, Availability of Orders, provides, ``Unless
otherwise specified in the Rules or the context indicates otherwise,
the Exchange determines which of the following order types are
available on a class-by-class and system-by-system basis.''
\7\ C2 Rule 6.10(a), Availability of Orders, provides,
``Availability. Unless otherwise specified in the Rules or the
context indicates otherwise, the Exchange determines which of the
following order types, Order Instructions, and Times-in-Force are
available on a class, system, or trading session basis. Rule 6.13
sets forth the order types, Order Instructions, and Times-in-Force
the Exchange may make available for complex orders.''
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The Exchange proposes to add rule text at the beginning of Options
3, Section 7 which states, ``The Exchange may determine to make certain
order types and time-in-force, respectively, available on a class or
System basis.'' The purpose of this rule change is to provide the
Exchange with appropriate flexibility to address different trading
characteristics, market models, and the investor base of each class, as
well as to handle any System issues that may arise and require the
Exchange to temporarily not accept certain order types. This rule is
consistent with BZX Options Rule 21.1, EDGX Options Rules 21.1(d) and
21.1(f), Cboe Rule 5.6 and C2 Rule 6.10(a), each of which provides
these exchanges with the same flexibility. The Exchange intends to file
rule changes to adopt this rule across all Nasdaq affiliated markets.
This rule change will not permit the Exchange to discriminate among
market participants when determining which order types and times-in-
force provisions are available on a class or system basis. The
Exchange's proposal allows the Exchange to make certain order types and
time-in-force, respectively, available on a class or System basis
uniformly for all market participants. For example, if the Exchange
determined to make a certain order type unavailable, that order type
would not be available for any market participant.
The Exchange would issue an Options Trader Alert to provide
notification to Participants that a change is being made to the
availability or unavailability of a certain order type or time-in-
force. The Exchange notes that in the event of System disruption, the
Exchange would notify Participants of the unavailability of any order
type and would also provide notification when that order type was
available once the disruption was resolved.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\9\ 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 proposed rule change would
provide the Exchange with the flexibility to determine the availability
of order types and times-in-force on a class and System basis. This
flexibility would remove impediments to and perfect the mechanism of a
free and open market and a national market system by allowing the
Exchange to address the specific characteristics of different classes
and different market conditions. The Exchange believes that this
proposal serves to protect investors by ensuring that the appropriate
order types and times-in-force are tailored to the different class
characteristics and by mitigating risks associated with changing market
conditions.\10\ The Exchange would issue a notification to Participants
to provide them notice that a change is being made to the availability
or unavailability of a certain order type or time-in-force before
implementing the change. In the event of a System issue, the Exchange
believes that it is consistent with the Act to temporarily not offer a
certain order type to ensure the proper executions of transactions
within the System thereby protecting investors and the public interest.
The Exchange anticipates that exercising its ability to temporarily not
offer order types would be infrequent.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ The Exchange may also determine to temporarily not offer an
order type or a time-in-force based on a System issue.
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Adding this provision on all Nasdaq affiliated markets will ensure
consistency between the Exchange rules and that of its affiliates and
would remove impediments to and perfect the
[[Page 12813]]
mechanism of a free and open market and promote just and equitable
principles of trade, as well as foster cooperation and coordination
with persons engaged in facilitating transactions in securities. The
proposed rule change provides the Exchange with the same flexibility
currently permitted on BZX Options, EDGX Options, Cboe and C2. The
Exchange believes that this consistency promotes market participants'
understanding of the rules across the multiple affiliated exchanges and
promotes a fair and orderly national options market system. The
Exchange also notes that the proposed change is reasonable and does not
affect investor protection because the proposed change does not present
any novel or unique issues, as it has previously been filed with the
Commission.
The Exchange's proposal is not unfairly discriminatory because the
Exchange will not discriminate among market participants when
determining which order types and times-in-force provisions are
available on a class or system basis. The Exchange's proposal allows
the Exchange to make certain order types and time-in-force,
respectively, available on a class or System basis uniformly for all
market participants. For example, if the Exchange determined to make a
certain order type unavailable, that order type would not be available
for any market participant.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe the proposed rule change will impose any burden on intra-market
competition, as the proposed rule change will apply in the same manner
to all order types and/or times-in-force, as the Exchange determines,
for all Participants. The Exchange does not believe the proposed rule
change will impose any burden on inter-market competition because the
proposed change provides the Exchange with substantially the same
flexibility as the rules of other exchanges.\11\ Therefore, the
Exchange believes that the proposed rule change will allow it to make
determinations regarding the availability of orders that will enable it
to remain competitive as markets and market conditions evolve.
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\11\ See notes 4-6 above.
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The Exchange's proposal does not impose an undue burden on
competition because the Exchange's proposal will uniformly make certain
order types and time-in-force, respectively, available on a class or
System basis for market participants.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately. The Exchange notes that
waiver of the operative delay will allow GEMX to exercise immediately
the same flexibility to make certain order types available or
unavailable as BZX Options, EDGX Options, Cboe, and C2. The Exchange
states that this flexibility would serve to protect investors and the
public interest by mitigating risks associated with changing market
conditions. Based on the foregoing, the Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest, and the Commission hereby waives the
30-day operative delay and designates the proposal operative upon
filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-GEMX-2020-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-GEMX-2020-05. 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 (http://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
[[Page 12814]]
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 offices of the Exchange.
All comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-GEMX-2020-05, and should be
submitted on or before March 25, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04392 Filed 3-3-20; 8:45 am]
BILLING CODE 8011-01-P
