81 FR 31979 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 4703
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 98 (May 20, 2016)
Federal Register Volume 81, Issue 98 (May 20, 2016)
| Page Range | 31979-31981 | |
| FR Document | 2016-11879 |
[Federal Register Volume 81, Number 98 (Friday, May 20, 2016)] [Notices] [Pages 31979-31981] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-11879] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77839; File No. SR-NASDAQ-2016-066] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 4703 May 16, 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 May 4, 2016, The Nasdaq Stock Market LLC (``Nasdaq'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 4703 (Order Attributes). The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, 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. Nasdaq 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 Nasdaq is proposing to amend Rule 4703(a)(7). This rule currently provides that a market participant entering an order using the SCAN routing strategy prior to 8:00 a.m. Eastern time (``ET'') may designate the order to activate upon entry or at 8:00 a.m. ET. The Exchange proposes to extend this functionality to the recently approved Retail Order Process (``RTFY'') order routing option.\3\ --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 76335 (Nov. 3, 2015), 80 FR 69256 (Nov. 9, 2015) (SR-NASDAQ-2015-112). --------------------------------------------------------------------------- The RTFY order routing option is designed to enhance execution quality and benefit retail investors by providing price improvement opportunities to retail order flow. Previously, retail order firms often sent non-marketable order flow, that is--orders that are not executable against the best prices available in the market place based on their limit price--to post and display on exchanges. Some of the orders that have been deemed to be non-marketable by the entering firm become marketable by the time the exchange receives them and ultimately remove liquidity from the exchange order book. The RTFY routing option is an alternative method for posting non-marketable order flow on the Exchange order book. Rather than allowing the marketable Designated Retail Orders (``DROs'') \4\ to immediately remove liquidity from the Exchange order book (unless explicitly instructed to do so), the order is routed to destinations in the System routing table \5\ to increase price improvement opportunities for the DROs. RTFY may remove liquidity from the Exchange book after routing to other destinations. Any non- marketable RTFY orders will post on the Exchange book. --------------------------------------------------------------------------- \4\ See Nasdaq Rule 7018. \5\ The term ``System routing table'' refers to the proprietary process for determining the specific trading venues to which the System routes orders and the order in which it routes them. NASDAQ reserves the right to maintain a different System routing table for different routing options and to modify the System routing table at any time without notice. See NASDAQ Rule 4758(a)(1)(A). --------------------------------------------------------------------------- Under the SCAN \6\ routing strategy orders can check the System for available shares and simultaneously route the remaining shares to destinations on the System routing table. Shares that remain unexecuted after routing are posted on the Exchange book. Once on the Exchange book, if the order is subsequently locked or crossed by another market center, the System will not route the order to the locking or crossing market center. --------------------------------------------------------------------------- \6\ See Nasdaq Rule 4758(a)(1)(A)(iv). --------------------------------------------------------------------------- Currently, RFTY users may enter extended hours orders, which may execute, route, or post to the book prior to the beginning of regular hours trading. Extended hours orders are accepted starting at 4 a.m. ET. SCAN users may also send extended hours orders which are eligible for execution, routing, and posting prior to regular market hours trading. However, SCAN users may also designate that their extended hours orders not activate until 8 a.m. Some market participants maintain systems that do not allow executions prior to 8 a.m. The Exchange believes this functionality for SCAN orders supports market participants by giving them the ability to allow orders to flow through to the Exchange while keeping them inactive until 8 a.m. The Exchange believes that the market participants who currently use this functionality for the SCAN order routing option, as described in Nasdaq Rule 4703(a)(7), are similar to the market participants who use the new RTFY order routing option. While the users of the SCAN routing strategy are diverse, the users of the 8 a.m. activation functionality are generally retail focused broker-dealers. RTFY is an order routing option designed specifically for DROs in order to provide more opportunities for price improvement to individual retail investor's orders. Because the firms that choose to utilize the 8 a.m. activation feature of SCAN are generally firms that represent retail orders, the Exchange believes that it makes sense to provide this functionality to the retail firms that make use of the RTFY routing option. The Exchange proposes to update the fifth bullet point under Nasdaq Rule 4703(a) for consistency as to this point as well. The proposed rule change will allow market participants using RTFY to benefit by having the added flexibility [[Page 31980]] to allow their orders to activate at 8:00 a.m. ET in the same way current users of this functionality do with SCAN. Additionally, Nasdaq believes that by extending this functionality to the RTFY order routing option it will support these market participants as they seek ways in which to more efficiently manage the retail order flow that they submit to the Exchange. The Exchange also proposes to eliminate the final sentence of Nasdaq Rule 4703(a)(7), which refers to the term ``ESCN''. ESCN denotes an order using the SCAN routing strategy entered prior to 8:00 a.m. ET and that is not activated until 8:00 a.m. ET. The inclusion of this term is unnecessary and its elimination will simplify the rule and lessen potential confusion for market participants regarding this rule. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder, including the requirements of Section 6(b) of the Act.\7\ In particular, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \8\ requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and practices, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Nasdaq believes that the proposed rule change promotes just and equitable principles of trade, as well as serves to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest because it adds flexibility to the recently approved RTFY routing option. Specifically, the proposed rule change amends both Nasdaq Rule 4703(a)(7) and the fifth bullet point under Nasdaq Rule 4703(a), which currently apply to the SCAN order routing option, to also apply to the new RTFY order routing option as well. This added functionality for RTFY will allow market participants using the RTFY order routing strategy prior to 8:00 a.m. ET to designate whether their RTFY orders will activate upon entry or at 8:00 a.m. ET. Nasdaq believes that this additional functionality will allow the Exchange to compete more successfully for retail order flow. The Exchange bases this upon its determination that the market participants who currently use the SCAN order routing option and use this functionality are similar to the market participants who use the new RTFY order routing option. Nasdaq believes that extending this functionality to the RTFY order routing option will assist market participants in efficiently managing the order flow that they submit to the Exchange. This added functionality is an example of different approaches to market challenges and is what drives innovation, market quality, and ultimately competition. The Exchange competes vigorously for order flow in a marketplace where participants have many trading venue choices. The Exchange believes making this functionality available to market participants using the RTFY routing option will increase competition by providing value to retail order firms and their retail investor customers, which will in turn result in more order flow being sent to the Exchange. The Exchange also believes that its proposal to eliminate the final sentence of Nasdaq Rule 4703(a)(7) to remove the reference to ``ESCN'' serves to promote just and equitable principles of trade and to protect investors and the public interest through the elimination of a sentence that is unnecessary and unhelpful for market participants. Since ESCN denotes an order using the SCAN routing strategy entered prior to 8:00 a.m. ET and that is not eligible for execution until 8:00 a.m. ET, the inclusion of this term is no longer necessary and is unhelpful for market participants. The elimination of this sentence will clarify and lessen potential confusion for market participants regarding this rule. For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization's Statement on Burden on Competition The [sic] does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In fact, the Exchange believes that the functionality in Nasdaq Rule 4703(a)(7) being made available to market participants using the recently approved RTFY order routing strategy will promote competition by providing value to retail order firms and their retail investor customers, which will in turn result in more order flow being sent to the Exchange. This development could enhance competition to the benefit of the markets and investors. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor 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) of the Act \9\ and Rule 19b- 4(f)(6) thereunder.\10\ --------------------------------------------------------------------------- \9\ 15 U.S.C. 78s(b)(3)(A). \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its 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 fulfilled this requirement. --------------------------------------------------------------------------- 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File No. SR-NASDAQ-2016-066 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities [[Page 31981]] and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-NASDAQ-2016-066. 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 such filing will also 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 No. SR-NASDAQ-2016-066 and should be submitted on or before June 10, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\ --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-11879 Filed 5-19-16; 8:45 am] BILLING CODE 8011-01-P
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cannot be executed via AIM.13 Such II. Self-Regulatory Organization’s opportunities for the DROs. RTFY may
opportunity could help protect the Statement of the Purpose of, and remove liquidity from the Exchange
interest of investors by helping to Statutory Basis for, the Proposed Rule book after routing to other destinations.
ensure that ineligible AIM Agency Change Any non-marketable RTFY orders will
Orders are processed, rather than post on the Exchange book.
In its filing with the Commission, the Under the SCAN 6 routing strategy
cancelled. Exchange included statements orders can check the System for
IV. Conclusion concerning the purpose of and basis for available shares and simultaneously
the proposed rule change and discussed route the remaining shares to
It is therefore ordered, pursuant to any comments it received on the destinations on the System routing
Section 19(b)(2) of the Act,14 that the proposed rule change. The text of these table. Shares that remain unexecuted
proposed rule change (SR–CBOE–2016– statements may be examined at the after routing are posted on the Exchange
024), as modified by Amendment No. 2, places specified in Item IV below. book. Once on the Exchange book, if the
be, and hereby is, approved. Nasdaq has prepared summaries, set order is subsequently locked or crossed
For the Commission, by the Division of
forth in Sections A, B, and C below, of by another market center, the System
Trading and Markets, pursuant to delegated
the most significant aspects of such will not route the order to the locking
authority.15 statements. or crossing market center.
Robert W. Errett, A. Self-Regulatory Organization’s Currently, RFTY users may enter
Statement of the Purpose of, and extended hours orders, which may
Deputy Secretary.
Statutory Basis for, the Proposed Rule execute, route, or post to the book prior
[FR Doc. 2016–12015 Filed 5–19–16; 8:45 am]
Change to the beginning of regular hours
BILLING CODE 8011–01–P trading. Extended hours orders are
1. Purpose accepted starting at 4 a.m. ET. SCAN
Nasdaq is proposing to amend Rule users may also send extended hours
SECURITIES AND EXCHANGE orders which are eligible for execution,
4703(a)(7). This rule currently provides
COMMISSION routing, and posting prior to regular
that a market participant entering an
order using the SCAN routing strategy market hours trading. However, SCAN
[Release No. 34–77839; File No. SR– prior to 8:00 a.m. Eastern time (‘‘ET’’) users may also designate that their
NASDAQ–2016–066] may designate the order to activate upon extended hours orders not activate until
entry or at 8:00 a.m. ET. The Exchange 8 a.m. Some market participants
Self-Regulatory Organizations; The proposes to extend this functionality to maintain systems that do not allow
NASDAQ Stock Market LLC; Notice of the recently approved Retail Order executions prior to 8 a.m. The Exchange
Filing and Immediate Effectiveness of Process (‘‘RTFY’’) order routing option.3 believes this functionality for SCAN
Proposed Rule Change To Amend The RTFY order routing option is orders supports market participants by
Nasdaq Rule 4703 designed to enhance execution quality giving them the ability to allow orders
and benefit retail investors by providing to flow through to the Exchange while
May 16, 2016.
price improvement opportunities to keeping them inactive until 8 a.m.
Pursuant to Section 19(b)(1) of the retail order flow. Previously, retail order The Exchange believes that the market
Securities Exchange Act of 1934 firms often sent non-marketable order participants who currently use this
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 flow, that is—orders that are not functionality for the SCAN order routing
notice is hereby given that on May 4, executable against the best prices option, as described in Nasdaq Rule
2016, The Nasdaq Stock Market LLC available in the market place based on 4703(a)(7), are similar to the market
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with their limit price—to post and display on participants who use the new RTFY
the Securities and Exchange exchanges. Some of the orders that have order routing option. While the users of
Commission (‘‘Commission’’) the been deemed to be non-marketable by the SCAN routing strategy are diverse,
proposed rule change as described in the entering firm become marketable by the users of the 8 a.m. activation
Items I and II below, which Items have the time the exchange receives them and functionality are generally retail focused
been prepared by Nasdaq. The ultimately remove liquidity from the broker-dealers. RTFY is an order routing
Commission is publishing this notice to exchange order book. The RTFY routing option designed specifically for DROs in
solicit comments on the proposed rule option is an alternative method for order to provide more opportunities for
change from interested persons. posting non-marketable order flow on price improvement to individual retail
the Exchange order book. Rather than investor’s orders. Because the firms that
I. Self-Regulatory Organization’s choose to utilize the 8 a.m. activation
allowing the marketable Designated
Statement of the Terms of Substance of feature of SCAN are generally firms that
Retail Orders (‘‘DROs’’) 4 to immediately
the Proposed Rule Change represent retail orders, the Exchange
remove liquidity from the Exchange
order book (unless explicitly instructed believes that it makes sense to provide
The Exchange proposes to amend
to do so), the order is routed to this functionality to the retail firms that
Rule 4703 (Order Attributes).
destinations in the System routing make use of the RTFY routing option.
The text of the proposed rule change table 5 to increase price improvement The Exchange proposes to update the
is available at http:// fifth bullet point under Nasdaq Rule
nasdaq.cchwallstreet.com/, at Nasdaq’s 3 See Securities Exchange Act Release No. 76335 4703(a) for consistency as to this point
mstockstill on DSK3G9T082PROD with NOTICES
principal office, and at the (Nov. 3, 2015), 80 FR 69256 (Nov. 9, 2015) (SR– as well.
Commission’s Public Reference Room. NASDAQ–2015–112). The proposed rule change will allow
4 See Nasdaq Rule 7018.
market participants using RTFY to
5 The term ‘‘System routing table’’ refers to the
13 See Notice, supra note 4, at 20699.
proprietary process for determining the specific
benefit by having the added flexibility
14 15 U.S.C. 78s(b)(2). trading venues to which the System routes orders
15 17 CFR 200.30–3(a)(12).
and the order in which it routes them. NASDAQ modify the System routing table at any time without
1 15 U.S.C. 78s(b)(1). notice. See NASDAQ Rule 4758(a)(1)(A).
reserves the right to maintain a different System
2 17 CFR 240.19b–4. routing table for different routing options and to 6 See Nasdaq Rule 4758(a)(1)(A)(iv).
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![31980 Federal Register / Vol. 81, No. 98 / Friday, May 20, 2016 / Notices
to allow their orders to activate at 8:00 compete more successfully for retail Exchange. This development could
a.m. ET in the same way current users order flow. The Exchange bases this enhance competition to the benefit of
of this functionality do with SCAN. upon its determination that the market the markets and investors.
Additionally, Nasdaq believes that by participants who currently use the
C. Self-Regulatory Organization’s
extending this functionality to the RTFY SCAN order routing option and use this
Statement on Comments on the
order routing option it will support functionality are similar to the market
these market participants as they seek participants who use the new RTFY Proposed Rule Change Received From
ways in which to more efficiently order routing option. Nasdaq believes Members, Participants or Others
manage the retail order flow that they that extending this functionality to the Written comments were neither
submit to the Exchange. RTFY order routing option will assist solicited nor received.
The Exchange also proposes to market participants in efficiently
eliminate the final sentence of Nasdaq managing the order flow that they III. Date of Effectiveness of the
Rule 4703(a)(7), which refers to the term submit to the Exchange. Proposed Rule Change and Timing for
‘‘ESCN’’. ESCN denotes an order using This added functionality is an Commission Action
the SCAN routing strategy entered prior example of different approaches to Because the foregoing proposed rule
to 8:00 a.m. ET and that is not activated market challenges and is what drives change does not: (i) Significantly affect
until 8:00 a.m. ET. The inclusion of this innovation, market quality, and the protection of investors or the public
term is unnecessary and its elimination ultimately competition. The Exchange interest; (ii) impose any significant
will simplify the rule and lessen competes vigorously for order flow in a burden on competition; and (iii) become
potential confusion for market marketplace where participants have operative for 30 days from the date on
participants regarding this rule. many trading venue choices. The which it was filed, or such shorter time
Exchange believes making this as the Commission may designate, it has
2. Statutory Basis
functionality available to market become effective pursuant to Section
The Exchange believes the proposed participants using the RTFY routing 19(b)(3)(A) of the Act 9 and Rule 19b–
rule change is consistent with the Act option will increase competition by 4(f)(6) thereunder.10
and the rules and regulations providing value to retail order firms and At any time within 60 days of the
thereunder, including the requirements their retail investor customers, which filing of the proposed rule change, the
of Section 6(b) of the Act.7 In particular, will in turn result in more order flow Commission summarily may
the Exchange believes the proposed rule being sent to the Exchange. temporarily suspend such rule change if
change is consistent with the Section The Exchange also believes that its it appears to the Commission that such
6(b)(5) 8 requirements that the rules of proposal to eliminate the final sentence action is necessary or appropriate in the
an exchange be designed to promote just of Nasdaq Rule 4703(a)(7) to remove the public interest, for the protection of
and equitable principles of trade, to reference to ‘‘ESCN’’ serves to promote investors, or otherwise in furtherance of
prevent fraudulent and manipulative just and equitable principles of trade the purposes of the Act. If the
acts and practices, to foster cooperation and to protect investors and the public Commission takes such action, the
and coordination with persons engaged interest through the elimination of a Commission shall institute proceedings
in facilitating transactions in securities, sentence that is unnecessary and to determine whether the proposed rule
to remove impediments to and to perfect unhelpful for market participants. Since
should be approved or disapproved.
the mechanism for a free and open ESCN denotes an order using the SCAN
market and a national market system, routing strategy entered prior to 8:00 IV. Solicitation of Comments
and, in general, to protect investors and a.m. ET and that is not eligible for Interested persons are invited to
the public interest. execution until 8:00 a.m. ET, the submit written data, views, and
Nasdaq believes that the proposed inclusion of this term is no longer arguments concerning the foregoing,
rule change promotes just and equitable necessary and is unhelpful for market including whether the proposed rule
principles of trade, as well as serves to participants. The elimination of this change is consistent with the Act.
remove impediments to and to perfect sentence will clarify and lessen Comments may be submitted by any of
the mechanism for a free and open potential confusion for market the following methods:
market and a national market system, participants regarding this rule.
and, in general, to protect investors and For the above reasons, Nasdaq Electronic Comments
the public interest because it adds believes the proposed rule change is • Use the Commission’s Internet
flexibility to the recently approved consistent with the requirements of comment form (http://www.sec.gov/
RTFY routing option. Specifically, the Section 6(b)(5) of the Act. rules/sro.shtml); or
proposed rule change amends both B. Self-Regulatory Organization’s • Send an email to rule-comments@
Nasdaq Rule 4703(a)(7) and the fifth Statement on Burden on Competition sec.gov. Please include File No. SR–
bullet point under Nasdaq Rule 4703(a), NASDAQ–2016–066 on the subject line.
which currently apply to the SCAN The [sic] does not believe that the
order routing option, to also apply to the proposed rule change will result in any Paper Comments
new RTFY order routing option as well. burden on competition that is not
necessary or appropriate in furtherance • Send paper comments in triplicate
This added functionality for RTFY will to Brent J. Fields, Secretary, Securities
allow market participants using the of the purposes of the Act. In fact, the
RTFY order routing strategy prior to Exchange believes that the functionality
9 15 U.S.C. 78s(b)(3)(A).
in Nasdaq Rule 4703(a)(7) being made
mstockstill on DSK3G9T082PROD with NOTICES
8:00 a.m. ET to designate whether their 10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
RTFY orders will activate upon entry or available to market participants using 4(f)(6)(iii) requires a self-regulatory organization to
at 8:00 a.m. ET. the recently approved RTFY order provide the Commission with written notice of its
Nasdaq believes that this additional routing strategy will promote intent to file the proposed rule change, along with
competition by providing value to retail a brief description and text of the proposed rule
functionality will allow the Exchange to change, at least five business days prior to the date
order firms and their retail investor of filing of the proposed rule change, or such
7 15 U.S.C. 78f(b). customers, which will in turn result in shorter time as designated by the Commission. The
8 15 U.S.C. 78f(b)(5). more order flow being sent to the Exchange has fulfilled this requirement.
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and Exchange Commission, 100 F Street ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Inc. (‘‘CBOE’’) and NASDAQ OMX
NE., Washington, DC 20549–1090. notice is hereby given that on May 3, PHLX LLC (‘‘PHLX’’).4
All submissions should refer to File No. 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ Rule 6.1A(a)(4A) defines Professional
SR–NASDAQ–2016–066. This file or ‘‘NYSE Arca’’) filed with the Customer ‘‘as an individual or
number should be included on the Securities and Exchange Commission organization that (i) is not a Broker/
subject line if email is used. To help the (the ‘‘Commission’’) the proposed rule Dealer in securities, and (ii) places more
Commission process and review your change as described in Items I and II than 390 orders in listed options per day
comments more efficiently, please use below, which Items have been prepared on average during a calendar month for
only one method. The Commission will by the self-regulatory organization. The its own beneficial account(s).’’ In
post all comments on the Commission’s Commission is publishing this notice to adopting the Rule 6.1A(a)(4A), the
Internet Web site (http://www.sec.gov/ solicit comments on the proposed rule Exchange noted that identifying
rules/sro.shtml). Copies of the change from interested persons. Professional Customer accounts based
submission, all subsequent upon the average number of orders
I. Self-Regulatory Organization’s entered in qualified accounts is an
amendments, all written statements Statement of the Terms of the Substance
with respect to the proposed rule appropriate, objective approach that
of the Proposed Rule Change will reasonably distinguish such
change that are filed with the
Commission, and all written The Exchange proposes to amend the persons and entities from non-
communications relating to the definition of Professional Customer in professional, retail investors or market
proposed rule change between the Rule 6.1A(a)(4A) to specify the manner participants. In order to properly
Commission and any person, other than in which the Exchange calculates represent orders entered on the
average daily order submissions for Exchange, OTP Holders and OTP Firms
those that may be withheld from the
purposes of counting Professional are required to indicate whether
public in accordance with the
Customer orders. The proposed rule Customer orders are ‘‘Professional
provisions of 5 U.S.C. 552, will be
change is available on the Exchange’s Customer’’ orders.5 To comply with this
available for Web site viewing and
Web site at www.nyse.com, at the requirement, member organizations are
printing in the Commission’s Public
principal office of the Exchange, and at required to review their Customers’
Reference Room, 100 F Street NE.,
the Commission’s Public Reference activity on at least a quarterly basis to
Washington, DC 20549, on official
Room. determine whether orders that are not
business days between the hours of
for the account of a broker-dealer should
10:00 a.m. and 3:00 p.m. Copies of such II. Self-Regulatory Organization’s be represented as Customer orders or
filing will also be available for Statement of the Purpose of, and Professional Customer orders.6
inspection and copying at the principal Statutory Basis for, the Proposed Rule The advent of new multi-leg spread
office of the Exchange. All comments Change products and the proliferation of the use
received will be posted without change; of complex orders and algorithmic
the Commission does not edit personal In its filing with the Commission, the
self-regulatory organization included execution strategies by both
identifying information from institutional and retail market
submissions. You should submit only statements concerning the purpose of,
and basis for, the proposed rule change participants has raised questions as to
information that you wish to make what should be counted as an ‘‘order’’
available publicly. All submissions and discussed any comments it received
on the proposed rule change. The text for Professional Customer order
should refer to File No. SR–NASDAQ– counting purposes. The proposed
2016–066 and should be submitted on of those statements may be examined at
the places specified in Item IV below. changes would specifically address the
or before June 10, 2016.
The Exchange has prepared summaries, 4 See Securities Exchange Act Release Nos. 77450
For the Commission, by the Division of set forth in sections A, B, and C below,
Trading and Markets, pursuant to delegated (March 25, 2016), 81 FR 18668, (March 31, 2016)
of the most significant parts of such (SR–CBOE–2016–005); 77449 (March 25, 2016), 81
authority.11
statements. FR 18665, (March 31, 2016) (SR–Phlx–2016–10)
Robert W. Errett, (approval orders). The Exchange notes that it
Deputy Secretary. A. Self-Regulatory Organization’s recently issued guidance regarding Professional
[FR Doc. 2016–11879 Filed 5–19–16; 8:45 am] Statement of the Purpose of, and Customer order counting. See e.g., NYSE Arca,
Statutory Basis for, the Proposed Rule Inc.’s and NYSE MKT LLC’s Joint Regulatory
BILLING CODE 8011–01–P Bulletin (RBO–15–03 and RBO–15–06, respectively)
Change dated September 9, 2015. This proposal codifies
that guidance in a manner that is consistent with
1. Purpose CBOE and PHLX’s approved rules.
SECURITIES AND EXCHANGE
COMMISSION The Exchange proposes to amend the 5 See e.g., Rule 6.69 (Reporting Duties),
definition of Professional Customer in Commentary .03 (requiring that manual orders
[Release No. 34–77837; File No. SR– submitted be marked with an origin code ‘‘PC.’’).
Rule 6.1A(a)(4A) to adopt a 6 Orders for any customer that had an average of
NYSEARCA–2016–65] methodology for counting average daily more than 390 orders per day during any month of
order submissions in listed options to a calendar quarter must be represented as
Self-Regulatory Organizations; NYSE Professional Customer orders for the next calendar
determine whether a person or entity
Arca, Inc.; Notice of Filing and quarter. OTP Holders and OTP Firms would be
meets the definition of a Professional
Immediate Effectiveness of Proposed required to conduct a quarterly review and make
Customer (‘‘Professional Customer order any appropriate changes to the way in which they
Rule Change To Amend the Definition
counting’’). The proposed rule change is are representing orders within five business days
of Professional Customer in Rule after the end of each calendar quarter. While
designed to harmonize Professional
mstockstill on DSK3G9T082PROD with NOTICES
6.1A(a)(4A) members only would be required to review their
Customer order counting with the accounts on a quarterly basis, if during a quarter the
May 16, 2016. recently adopted rules of competing Exchange identifies a customer for which orders are
Pursuant to Section 19(b)(1) 1 of the options exchanges—specifically the being represented as Customer orders but that has
Chicago Board of Options Exchange, averaged more than 390 orders per day during a
Securities Exchange Act of 1934 (the month, the Exchange would notify the OTP Holder
and the OTP Holder would be required to change
11 17 CFR 200.30–3(a)(12). 2 15 U.S.C. 78a. the manner in which it is representing the
1 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b–4. customer’s orders within five business days.
VerDate Sep<11>2014 17:40 May 19, 2016 Jkt 238001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\20MYN1.SGM 20MYN1](https://thefederalregister.org/doc/81_FR_32077/page/3.svg)
Document Created: 2016-05-20 01:59:18
Document Modified: 2016-05-20 01:59:18
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 31979 |
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