80_FR_62345 80 FR 62146 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order Approving Proposed Rule Change To Adopt a Kill Switch

80 FR 62146 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order Approving Proposed Rule Change To Adopt a Kill Switch

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 199 (October 15, 2015)

Page Range62146-62147
FR Document2015-26147

Federal Register, Volume 80 Issue 199 (Thursday, October 15, 2015) 
[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Notices]
[Pages 62146-62147]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26147]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76116; File No. SR-BX-2015-050]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order 
Approving Proposed Rule Change To Adopt a Kill Switch

October 8, 2015.

I. Introduction

    On August 7, 2015, NASDAQ OMX BX, Inc. (the ``Exchange'' or ``BX'') 
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

[[Page 62147]]

19b-4 thereunder,\2\ a proposed rule change to adopt a risk protection 
functionality referred to as a kill switch that will be available to 
all Participants of the Exchange. The proposed rule change was 
published for comment in the Federal Register on August 27, 2015.\3\ 
The Commission received no comment letters on the proposed rule change. 
This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4
    \3\ See Securities Exchange Act Release No. 75744 (August 27, 
2015), 80 FR 52068 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to offer to all its members a new optional 
risk protection functionality for options to help members control their 
quote and order activity on the Exchange.\4\ Referred to as a ``Kill 
Switch,'' the functionality will allow BX Participants to remove quotes 
and cancel open orders, and will prevent the submission of new quotes 
and orders until the Exchange re-enables access to the BX System for 
the Participant.
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    \4\ See id.
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    To use the Kill Switch, a Participant will send a message \5\ to 
the BX System to: (i) Promptly remove quotes; and/or (ii) promptly 
cancel orders for certain specified Identifiers (e.g., a particular 
Exchange account, port, or badge or mnemonic, or for a group of 
Identifiers).\6\ The Exchange's proposal does not allow Participants to 
remove quotes or cancel orders by symbol. The BX System will send an 
automated message to the Participant when it has processed a Kill 
Switch request.
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    \5\ BX Participants will be able to utilize an interface to send 
a message to the Exchange to initiate the Kill Switch, or they may 
contact the Exchange directly. See Notice, supra note 3, at note 3.
    \6\ Permissible groups could be formed only within a single 
broker-dealer. For example, a group could include, but would not be 
limited to, all market maker accounts or all order entry ports. See 
Notice, supra note 3.
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    The BX Participant will be unable to enter any new quotes or orders 
using the affected Identifier(s) until the Participant makes a verbal 
request to the Exchange and Exchange staff enables re-entry. Once 
enabled for re-entry, the Exchange will send a message to the 
Participant and, if it requests to receive such notifications, to the 
Participant's clearing firm as well.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange,\7\ 
and, in particular, the requirements of section 6 of the Act.\8\ In 
particular, the Commission finds that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\9\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, 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 and that the rules are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ In approving this 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).
    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
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    According to the Exchange, the proposed rule change is designed to 
protect BX Participants in the event that the Participant encounters a 
situation, like a systems issue, for which they would like to withdraw 
temporarily from the market.\10\ The Exchange further notes that the 
proposed Kill Switch is designed to increase systemic protections and, 
in so doing, so should encourage liquidity generally while removing 
impediments to market participation.\11\ To the extent that the 
Exchange's proposal provides member firms with greater control over 
their quotes and orders, and allows firms to remove quotes and cancel 
orders in an appropriate manner, then the proposal may encourage firms 
to provide liquidity on BX and thus contribute to fair and orderly 
markets in a manner that protects the public interest, protects 
investors, and is not designed to permit unfair discrimination.
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    \10\ See Notice at 52069.
    \11\ See id.
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    Further, the Commission agrees that it would be appropriate to 
notify a Participant's clearing member, at the clearing member's 
request, once a Participant's selected Identifiers are re-enabled 
following the Participant's use of the Kill Switch. Because the 
clearing member accepts financial responsibility for clearing the 
Participant's trades, notifying the applicable clearing member of a 
Participant's re-enabled Identifiers following use of the Kill Switch 
may be appropriate and help the clearing member manage the risk 
associated with the Participant's trading activity.
    The Commission notes that the Exchange represented in its proposal 
that the Kill Switch will operate consistently with a broker-dealer's 
firm quote obligations pursuant to Rule 602 of Regulation NMS,\12\ and 
that the proposal does not diminish a market-maker's obligation to 
provide continuous two-sided quotes on a daily basis under BX 
rules.\13\ Specifically, the Exchange represents that ``any interest 
that is executable against a BX Participant's quotes and orders that 
are received by the Exchange prior to the time the Kill Switch is 
processed by the System will automatically execute at the price up to 
the BX Participant's size.'' \14\ In that respect, the Exchange further 
represented that ``[t]he Kill Switch message will be accepted by the 
System in the order of receipt in the queue and will be processed in 
that order so that interest that is already accepted into the System 
will be processed prior to the Kill Switch message.'' \15\ Based on 
these representations, the Commission believes that the proposal is 
designed to promote just and equitable principles of trade and perfect 
the mechanism of a free and open market.
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    \12\ Id.
    \13\ Id.
    \14\ Id.
    \15\ Id.
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    Accordingly, the Commission finds that the Exchange's proposal is 
consistent with the Act, including section 6(b)(5) thereof, in that it 
is designed to promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, protect investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-BX-2015-050) be, and hereby 
is, approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26147 Filed 10-14-15; 8:45 am]
 BILLING CODE 8011-01-P

62146 Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices preferred stock, to the greater of $52,500 each listing. Because issuers have a number should be included on the or $0.001025 per share and to increase choice to list their securities on a subject line if email is used. To help the the fee per share for each additional different national securities exchange, Commission process and review your class of common shares, each additional the Exchange does not believe that the comments more efficiently, please use class of preferred stock, each class of proposed fee changes impose a burden only one method. The Commission will warrants, each class of listed securities on competition. post all comments on the Commission’s of closed-end funds, structured products Internet Web site (http://www.sec.gov/ and short-term securities to $0.001025 C. Self-Regulatory Organization’s rules/sro.shtml). Copies of the per share because the resulting fees Statement on Comments on the submission, all subsequent would better reflect the Exchange’s costs Proposed Rule Change Received From amendments, all written statements related to such listing and the resulting Members, Participants, or Others with respect to the proposed rule value that that such listings provide to No written comments were solicited change that are filed with the the issuers. In that regard, the Exchange or received with respect to the proposed Commission, and all written notes that it has incurred increased rule change. communications relating to the expenses as it continues to improve and proposed rule change between the III. Date of Effectiveness of the increase the services it provides to listed Commission and any person, other than Proposed Rule Change and Timing for companies. These improvements those that may be withheld from the Commission Action include renovating and upgrading the public in accordance with the Exchange building to provide meeting The foregoing rule change is effective provisions of 5 U.S.C. 552, will be spaces for listed companies and a upon filing pursuant to section available for Web site viewing and significant upgrade to the NYSE 19(b)(3)(A) 9 of the Act and printing in the Commission’s Public Connect online community accessible to subparagraph (f)(2) of Rule 19b–4 10 Reference Room, 100 F Street NE., all listed companies. The Exchange thereunder, because it establishes a due, Washington, DC 20549 on official believes that the proposed fee increases fee, or other charge imposed by the business days between the hours of are equitably allocated because the per Exchange. 10:00 a.m. and 3:00 p.m. Copies of such share fee increase will be the same for At any time within 60 days of the filing also will be available for all issuers on the Exchange. Therefore, filing of such proposed rule change, the inspection and copying at the principal the proposed fee increases will not be Commission summarily may office of the Exchange. All comments unfairly discriminatory towards any temporarily suspend such rule change if received will be posted without change; individual issuer. Further, the Exchange it appears to the Commission that such the Commission does not edit personal believes it is consistent with section action is necessary or appropriate in the identifying information from 6(b)(5) of the Act to increase the public interest, for the protection of submissions. You should submit only minimum fee for the primary class of investors, or otherwise in furtherance of information that you wish to make common shares and primary class of the purposes of the Act. If the available publicly. All submissions preferred stock but not the minimum fee Commission takes such action, the should refer to File Number SR–NYSE– for each additional class of such Commission shall institute proceedings 2015–44 and should be submitted on or securities. The Exchange notes that the under section 19(b)(2)(B) 11 of the Act to before November 5, 2015. minimum fee for an additional class of determine whether the proposed rule common shares or preferred stock is change should be approved or For the Commission, by the Division of Trading and Markets, pursuant to delegated already less than the fee for a primary disapproved. authority.12 class and that such fee differential has been approved under the Act. The IV. Solicitation of Comments Robert W. Errett, Exchange has determined to leave the Interested persons are invited to Deputy Secretary. minimum fee for an additional class of submit written data, views, and [FR Doc. 2015–26153 Filed 10–14–15; 8:45 am] common shares or preferred stock arguments concerning the foregoing, BILLING CODE 8011–01–P unchanged at this time as there are only including whether the proposed rule a few listed companies with more than change is consistent with the Act. one class of common shares or preferred Comments may be submitted by any of SECURITIES AND EXCHANGE stock listed on the Exchange. the following methods: COMMISSION B. Self-Regulatory Organization’s Electronic Comments [Release No. 34–76116; File No. SR–BX– Statement on Burden on Competition • Use the Commission’s Internet 2015–050] The Exchange does not believe that comment form (http://www.sec.gov/ Self-Regulatory Organizations; the proposed rule change will impose rules/sro.shtml); or NASDAQ OMX BX, Inc.; Order any burden on competition that is not • Send an email to rule-comments@ Approving Proposed Rule Change To necessary or appropriate in furtherance sec.gov. Please include File Number SR– Adopt a Kill Switch of the purposes of the Act. The NYSE–2015–44 on the subject line. proposed rule change is designed to October 8, 2015. ensure that the fees charged by the Paper Comments I. Introduction Exchange accurately reflect the services • Send paper comments in triplicate provided and benefits realized by listed to Brent J. Fields, Secretary, Securities On August 7, 2015, NASDAQ OMX mstockstill on DSK4VPTVN1PROD with NOTICES companies. The market for listing and Exchange Commission, 100 F Street BX, Inc. (the ‘‘Exchange’’ or ‘‘BX’’) filed services is extremely competitive. Each NE., Washington, DC 20549–1090. with the Securities and Exchange listing exchange has a different fee All submissions should refer to File Commission (‘‘Commission’’), pursuant schedule that applies to issuers seeking Number SR–NYSE–2015–44. This file to section 19(b)(1) of the Securities to list securities on its exchange. Issuers Exchange Act of 1934 (‘‘Act’’) 1 and Rule have the option to list their securities on 9 15 U.S.C. 78s(b)(3)(A). these alternative venues based on the 10 17 CFR 240.19b–4(f)(2). 12 17 CFR 200.30–3(a)(12). fees charged and the value provided by 11 15 U.S.C. 78s(b)(2)(B). 1 15 U.S.C. 78s(b)(1). VerDate Sep<11>2014 17:19 Oct 14, 2015 Jkt 238001 PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 E:\FR\FM\15OCN1.SGM 15OCN1

Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices 62147 19b–4 thereunder,2 a proposed rule thereunder applicable to a national associated with the Participant’s trading change to adopt a risk protection securities exchange,7 and, in particular, activity. functionality referred to as a kill switch the requirements of section 6 of the The Commission notes that the that will be available to all Participants Act.8 In particular, the Commission Exchange represented in its proposal of the Exchange. The proposed rule finds that the proposed rule change is that the Kill Switch will operate change was published for comment in consistent with section 6(b)(5) of the consistently with a broker-dealer’s firm the Federal Register on August 27, Act,9 which requires, among other things, that the rules of a national quote obligations pursuant to Rule 602 2015.3 The Commission received no comment letters on the proposed rule securities exchange be designed to of Regulation NMS,12 and that the change. This order approves the prevent fraudulent and manipulative proposal does not diminish a market- proposed rule change. acts and practices, to promote just and maker’s obligation to provide equitable principles of trade, to foster continuous two-sided quotes on a daily II. Description of the Proposed Rule cooperation and coordination with basis under BX rules.13 Specifically, the Change persons engaged in facilitating Exchange represents that ‘‘any interest The Exchange proposes to offer to all transactions in securities, to remove that is executable against a BX its members a new optional risk impediments to and perfect the Participant’s quotes and orders that are protection functionality for options to mechanism of a free and open market received by the Exchange prior to the help members control their quote and and a national market system, and, in time the Kill Switch is processed by the order activity on the Exchange.4 general, to protect investors and the System will automatically execute at the Referred to as a ‘‘Kill Switch,’’ the public interest and that the rules are not price up to the BX Participant’s size.’’ 14 functionality will allow BX Participants designed to permit unfair In that respect, the Exchange further to remove quotes and cancel open discrimination between customers, represented that ‘‘[t]he Kill Switch orders, and will prevent the submission issuers, brokers, or dealers. message will be accepted by the System of new quotes and orders until the According to the Exchange, the in the order of receipt in the queue and Exchange re-enables access to the BX proposed rule change is designed to will be processed in that order so that System for the Participant. protect BX Participants in the event that the Participant encounters a situation, interest that is already accepted into the To use the Kill Switch, a Participant will send a message 5 to the BX System like a systems issue, for which they System will be processed prior to the to: (i) Promptly remove quotes; and/or would like to withdraw temporarily Kill Switch message.’’ 15 Based on these (ii) promptly cancel orders for certain from the market.10 The Exchange further representations, the Commission specified Identifiers (e.g., a particular notes that the proposed Kill Switch is believes that the proposal is designed to Exchange account, port, or badge or designed to increase systemic promote just and equitable principles of mnemonic, or for a group of protections and, in so doing, so should trade and perfect the mechanism of a Identifiers).6 The Exchange’s proposal encourage liquidity generally while free and open market. does not allow Participants to remove removing impediments to market Accordingly, the Commission finds quotes or cancel orders by symbol. The participation.11 To the extent that the that the Exchange’s proposal is BX System will send an automated Exchange’s proposal provides member consistent with the Act, including message to the Participant when it has firms with greater control over their section 6(b)(5) thereof, in that it is processed a Kill Switch request. quotes and orders, and allows firms to designed to promote just and equitable The BX Participant will be unable to remove quotes and cancel orders in an principles of trade, foster cooperation enter any new quotes or orders using the appropriate manner, then the proposal and coordination with persons engaged affected Identifier(s) until the may encourage firms to provide liquidity on BX and thus contribute to in facilitating transactions in securities, Participant makes a verbal request to the fair and orderly markets in a manner remove impediments to and perfect the Exchange and Exchange staff enables re- that protects the public interest, protects mechanism of a free and open market entry. Once enabled for re-entry, the investors, and is not designed to permit and a national market system, and, in Exchange will send a message to the Participant and, if it requests to receive unfair discrimination. general, protect investors and the public such notifications, to the Participant’s Further, the Commission agrees that it interest. clearing firm as well. would be appropriate to notify a IV. Conclusion Participant’s clearing member, at the III. Discussion and Commission clearing member’s request, once a It is therefore ordered, pursuant to Findings Participant’s selected Identifiers are re- section 19(b)(2) of the Act,16 that the After careful review, the Commission enabled following the Participant’s use proposed rule change (SR–BX–2015– finds that the proposed rule change is of the Kill Switch. Because the clearing 050) be, and hereby is, approved. consistent with the requirements of the member accepts financial responsibility for clearing the Participant’s trades, For the Commission, by the Division of Act and the rules and regulations notifying the applicable clearing Trading and Markets, pursuant to delegated 2 17 member of a Participant’s re-enabled authority.17 CFR 240.19b–4 3 See Securities Exchange Act Release No. 75744 Identifiers following use of the Kill Robert W. Errett, (August 27, 2015), 80 FR 52068 (‘‘Notice’’). Switch may be appropriate and help the Deputy Secretary. 4 See id. 5 BX Participants will be able to utilize an clearing member manage the risk [FR Doc. 2015–26147 Filed 10–14–15; 8:45 am] mstockstill on DSK4VPTVN1PROD with NOTICES interface to send a message to the Exchange to 7 In approving this proposed rule change, the BILLING CODE 8011–01–P initiate the Kill Switch, or they may contact the Exchange directly. See Notice, supra note 3, at note Commission has considered the proposed rule’s 12 Id. 3. impact on efficiency, competition, and capital 6 Permissible groups could be formed only within formation. See 15 U.S.C. 78c(f). 13 Id. 8 15 U.S.C. 78f. 14 Id. a single broker-dealer. For example, a group could 9 15 U.S.C. 78f(b)(5). 15 Id. include, but would not be limited to, all market 10 See Notice at 52069. 16 15 U.S.C. 78s(b)(2). maker accounts or all order entry ports. See Notice, supra note 3. 11 See id. 17 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:19 Oct 14, 2015 Jkt 238001 PO 00000 Frm 00136 Fmt 4703 Sfmt 9990 E:\FR\FM\15OCN1.SGM 15OCN1


Document Created: 2018-02-27 08:52:37
Document Modified: 2018-02-27 08:52:37
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 62146 
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