81 FR 1266 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay of Implementation of Kill Switch

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 6 (January 11, 2016)

[Federal Register Volume 81, Number 6 (Monday, January 11, 2016)]
[Notices]
[Pages 1266-1268]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-00252]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76830; File No. SR-NASDAQ-2015-163]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Delay of Implementation of Kill Switch

January 5, 2016.
    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 December 23, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' 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 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 extend the implementation timeframe for 
adopting an optional Kill Switch protection.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of the proposal is to extend the implementation of the 
timeframe to adopt a new risk protection, a Kill Switch, applicable to 
all NOM Participants. In its rule change adopting this new risk 
protection in Chapter VI, Section 6, the Exchange stated, ``The 
Exchange proposes to implement this rule within ninety (90) days of the 
implementation date.'' \3\ The Exchange stated that it will issue an 
Options Trader Alert in advance to inform market participants of such 
date. At this time, the Exchange desires to extend the implementation 
of this rule change to 120 days from the operative date. The Exchange 
will announce the date of implementation by issuing an Options Trader 
Alert.
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    \3\ See Securities Exchange Act Release No. 75743 (August 20, 
2015), 80 FR 51850 (August 26, 2015) (SR-NASDAQ-2015-096).
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    By way of background, the Kill Switch will allow NOM Participants 
to remove quotes and cancel open orders and prevent new order 
submission. The NASDAQ Options Kill Switch will be an optional tool 
that enables

[[Page 1267]]

Participants to initiate a message(s) \4\ to the System to: (i) 
Promptly remove quotes; and/or (ii) promptly cancel orders. 
Participants may submit a request to the System to remove/cancel quotes 
and/or orders based on certain identifiers on either a user or group 
level. Participants may elect to remove quotes and cancel orders by 
Exchange account, port, and/or badge or mnemonic (``Identifier'') or by 
a group (one or more Identifier combinations),\5\ which are provided by 
such Participant to the Exchange.\6\ Participants may not remove 
quotes/orders by symbol. The System will send an automated message to 
the Participant when a Kill Switch request has been processed by the 
Exchange's System.
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    \4\ NOM 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.
    \5\ The type of group permissible would be within a broker-
dealer. For example, this could be including but not limited to all 
market maker accounts or all order entry ports.
    \6\ Orders submitted by NOM Market Makers over Ouch to Trade 
Options (OTTO) interface will be treated as quotes for purposes of 
this rule.
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    If the Participant selects quotes to be cancelled utilizing the 
Kill Switch, the NOM Participant must send a message to the Exchange to 
request the removal of all quotes requested for the certain specified 
Identifier(s). The NOM Participant will be unable to enter any 
additional quotes for the affected Identifier(s) until re-entry has 
been enabled pursuant to proposed section (d)(iii).\7\ If the 
Participant selects orders to be cancelled utilizing the Kill Switch, 
the NOM Participant must send a message to the Exchange to request the 
cancellation of all orders requested for the certain specified 
Identifier(s). The NOM Participant will be unable to enter additional 
orders for the affected Identifier(s) until re-entry has been enabled 
pursuant to section (d)(iii). The NOM Participant will be unable to 
enter additional quotes and/or orders for the affected Identifier(s) 
until the NOM Participant has made a request to the Exchange and 
Exchange staff has set a re-entry indicator to enable re-entry.\8\ Once 
enabled for re-entry, the System will send a Re-entry Notification 
Message to the NOM Participant. The applicable Clearing Participant for 
that NOM Participant also will be notified of the re-entry into the 
System after quotes and/or orders are removed/cancelled as a result of 
the Kill Switch, provided the Clearing Participant has requested to 
receive such notification.
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    \7\ Sweeps will also be cancelled. A sweep is a one-sided 
electronic quote submitted over the Specialized Quote Feed, which is 
the market making quoting interface.
    \8\ The NOM Participant must directly and verbally contact the 
Exchange to request the re-set.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ 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, by enhancing the risk protections available to Exchange 
members. The proposal promotes policy goals of the Commission which has 
encouraged execution venues, exchange and non-exchange alike, to 
enhance risk protection tools and other mechanisms to decrease risk and 
increase stability.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The delay of the implementation of NOM Rules at Chapter VI, Section 
6 will permit the Exchange an additional thirty days within which to 
implement this risk protection that will be utilized by NOM 
Participants.

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. The proposal does not impose an 
undue burden on inter-market competition because all NOM Participants 
may avail themselves of the Kill Switch, which functionality will be 
optional. The proposed rule change is meant to protect NOM Participants 
in the event the NOM Participant is suffering from a systems issue or 
from the occurrence of unusual or unexpected market activity that would 
require them to withdraw from the market in order to protect investors. 
The ability to control risk at either the user or group level will 
permit the NOM Participant to protect itself from inadvertent exposure 
to excessive risk at the each level. Reducing such risk will enable NOM 
Participants to enter quotes and orders without any fear of inadvertent 
exposure to excessive risk, which in turn will benefit investors 
through increased liquidity for the execution of their orders. Such 
increased liquidity benefits investors because they receive better 
prices and because it lowers volatility in the options market. For 
these reasons, the Exchange does not believe this proposal imposes an 
undue burden on inter-market competition, rather, the proposed rule 
change will have no impact on competition.
    The delay of the implementation of NOM Rules at Chapter VII, 
Section 6(f) will permit the Exchange additional time to implement this 
risk protection that will be utilized by NOM 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

    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 \11\ and Rule 19b-4(f)(6) 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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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    Nasdaq requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest, 
because the extension will provide the Exchange with the additional 
time it requires to implement the Kill Switch program. The Commission 
further notes that Nasdaq's proposal to adopt the Kill Switch \13\ was 
approved by the Commission \14\ and that the extension of the 
implementation period does not affect the parameters of the Kill Switch 
program. For these reasons, the Commission designates the proposed rule 
change to be operative upon filing.\15\
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    \13\ See note 3.
    \14\ See Securities Exchange Act Release No. 76123 (Oct. 9, 
2015), 80 FR 62591 (Oct. 16, 2015) (SR-NASDAQ-2015-096).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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[[Page 1268]]

    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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2015-163 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-NASDAQ-2015-163. 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 Web site (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 
provisions of 5 U.S.C. 552, will be available for Web site 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 the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-163 and should 
be submitted on or before February 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12) and (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00252 Filed 1-8-16; 8:45 am]
BILLING CODE 8011-01-P