81 FR 41619 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Provide a Process for an Expedited Suspension Proceeding and Adopt a Rule To Prohibit Disruptive Options Quoting and Trading Activity
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 123 (June 27, 2016)
Federal Register Volume 81, Issue 123 (June 27, 2016)
| Page Range | 41619-41625 | |
| FR Document | 2016-15071 |
[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)] [Notices] [Pages 41619-41625] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-15071] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78107; File No. SR-BX-2016-036] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Provide a Process for an Expedited Suspension Proceeding and Adopt a Rule To Prohibit Disruptive Options Quoting and Trading Activity June 21, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on June 17, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \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 adopt a new options rule to clearly prohibit disruptive quoting and trading activity on the Exchange, as further described below. The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com/, at the [[Page 41620]] 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is filing this proposal to adopt an options rule to clearly prohibit disruptive quoting and trading activity on the Exchange and to permit the Exchange to take prompt action to suspend Members or their clients that violate such rule pursuant to Rule 9400. Background As a national securities exchange registered pursuant to Section 6 of the Act, the Exchange is required to be organized and to have the capacity to enforce compliance by its members and persons associated with its members, with the Act, the rules and regulations thereunder, and the Exchange's Rules. Further, the Exchange's Rules are required to be ``designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade . . . and, in general, to protect investors and the public interest.'' \3\ In fulfilling these requirements, the Exchange has developed a comprehensive regulatory program that includes automated surveillance of trading activity that is both operated directly by Exchange staff and by staff of the Financial Industry Regulatory Authority (``FINRA'') pursuant to a Regulatory Services Agreement (``RSA''). When disruptive and potentially manipulative or improper quoting and trading activity is identified, the Exchange or FINRA (acting as an agent of the Exchange) conducts an investigation into the activity, requesting additional information from the Member or Members involved. To the extent violations of the Act, the rules and regulations thereunder, or Exchange Rules have been identified and confirmed, the Exchange or FINRA as its agent will commence the enforcement process, which might result in, among other things, a censure, a requirement to take certain remedial actions, one or more restrictions on future business activities, a monetary fine, or even a temporary or permanent ban from the securities industry. --------------------------------------------------------------------------- \3\ 15 U.S.C. 78f(b)(1). --------------------------------------------------------------------------- The process described above, from the identification of disruptive and potentially manipulative or improper quoting and trading activity to a final resolution of the matter, can often take several years. The Exchange believes that this time period is generally necessary and appropriate to afford the subject Member adequate due process, particularly in complex cases. However, as described below, the Exchange believes that there are certain obvious and uncomplicated cases of disruptive and manipulative behavior or cases where the potential harm to investors is so large that the Exchange should have the authority to initiate an expedited suspension proceeding in order to stop the behavior from continuing on the Exchange. In recent years, several cases have been brought and resolved by the Exchange and other SROs that involved allegations of wide-spread market manipulation, much of which was ultimately being conducted by foreign persons and entities using relatively rudimentary technology to access the markets and over which the Exchange and other SROs had no direct jurisdiction. In each case, the conduct involved a pattern of disruptive quoting and trading activity indicative of manipulative layering \4\ or spoofing.\5\ The Exchange and other SROs were able to identify the disruptive quoting and trading activity in real-time or near real-time; nonetheless, in accordance with Exchange Rules and the Act, the Members responsible for such conduct or responsible for their customers' conduct were allowed to continue the disruptive quoting and trading activity on the Exchange and other exchanges during the entirety of the subsequent lengthy investigation and enforcement process. The Exchange believes that it should have the authority to initiate an expedited suspension proceeding in order to stop the behavior from continuing on the Exchange if a Member is engaging in or facilitating disruptive quoting and trading activity and the Member has received sufficient notice with an opportunity to respond, but such activity has not ceased. --------------------------------------------------------------------------- \4\ ``Layering'' is a form of market manipulation in which multiple, non-bona fide limit orders are entered on one side of the market at various price levels in order to create the appearance of a change in the levels of supply and demand, thereby artificially moving the price of the security. An order is then executed on the opposite side of the market at the artificially created price, and the non-bona fide orders are cancelled. \5\ ``Spoofing'' is a form of market manipulation that involves the market manipulator placing non-bona fide orders that are intended to trigger some type of market movement and/or response from other market participants, from which the market manipulator might benefit by trading bona fide orders. --------------------------------------------------------------------------- The following two examples are instructive on the Exchange's rationale for the proposed rule change. In July 2012, Biremis Corp. (formerly Swift Trade Securities USA, Inc.) (the ``Firm'') and its CEO were barred from the industry for, among other things, supervisory violations related to a failure by the Firm to detect and prevent disruptive and allegedly manipulative trading activities, including layering, short sale violations, and anti-money laundering violations.\6\ The Firm's sole business was to provide trade execution services via a proprietary day trading platform and order management system to day traders located in foreign jurisdictions. Thus, the disruptive and allegedly manipulative trading activity introduced by the Firm to U.S. markets originated directly or indirectly from foreign clients of the Firm. The pattern of disruptive and allegedly manipulative quoting and trading activity was widespread across multiple exchanges, and the Exchange, FINRA, and other SROs identified clear patterns of the behavior in 2007 and 2008. Although the Firm and its principals were on notice of the disruptive and allegedly manipulative quoting and trading activity that was occurring, the Firm took little to no action to attempt to supervise or prevent such quoting and trading activity until at least 2009. Even when it put some controls in place, they were deficient and the pattern of disruptive and allegedly manipulative trading activity continued to occur. As noted above, the final resolution of the enforcement action to bar the Firm and its CEO from the industry was not concluded until 2012, four years after the disruptive and allegedly manipulative trading activity was first identified. --------------------------------------------------------------------------- \6\ See Biremis Corp. and Peter Beck, FINRA Letter of Acceptance, Waiver and Consent No. 2010021162202, July 30, 2012. --------------------------------------------------------------------------- In September of 2012, Hold Brothers On-Line Investment Services, Inc. (the ``Firm'') settled a regulatory action in connection with the Firm's provision of a trading platform, trade software and trade execution, support and clearing [[Page 41621]] services for day traders.\7\ Many traders using the Firm's services were located in foreign jurisdictions. The Firm ultimately settled the action with FINRA and several exchanges, including the Exchange, for a total monetary fine of $3.4 million. In a separate action, the Firm settled with the Commission for a monetary fine of $2.5 million.\8\ Among the alleged violations in the case were disruptive and allegedly manipulative quoting and trading activity, including spoofing, layering, wash trading, and pre-arranged trading. Through its conduct and insufficient procedures and controls, the Firm also allegedly committed anti-money laundering violations by failing to detect and report manipulative and suspicious trading activity. The Firm was alleged to have not only provided foreign traders with access to the U.S. markets to engage in such activities, but that its principals also owned and funded foreign subsidiaries that engaged in the disruptive and allegedly manipulative quoting and trading activity. Although the pattern of disruptive and allegedly manipulative quoting and trading activity was identified in 2009, as noted above, the enforcement action was not concluded until 2012. Thus, although disruptive and allegedly manipulative quoting and trading was promptly detected, it continued for several years. --------------------------------------------------------------------------- \7\ See Hold Brothers On-Line Investment Services, LLC, FINRA Letter of Acceptance, Waiver and Consent No. 20100237710001, September 25, 2012. \8\ In the Matter of Hold Brothers On-Line Investment Services, LLC, Exchange Act Release No. 67924, September 25, 2012. --------------------------------------------------------------------------- The Exchange also notes the current criminal proceedings that have commenced against Navinder Singh Sarao. Mr. Sarao's allegedly manipulative trading activity, which included forms of layering and spoofing in the futures markets, has been linked as a contributing factor to the ``Flash Crash'' of 2010, and yet continued through 2015. The Exchange believes that the activities described in the cases above provide justification for the proposed rule change, which is described below. In addition, while the examples provided are related to the equities market, the Exchange believes that this type of conduct should be prohibited for all Exchange members, equities and options. The Exchange believes that these patterns of disruptive and allegedly manipulative quoting and trading activity need to be addressed and the product should not limit the action taken by the Exchange. For this reason, the Exchange now proposes a corresponding options rule. Rule 9400--Expedited Client Suspension Proceeding The Exchange adopted Rule 9400 to set forth procedures for issuing suspension orders, immediately prohibiting a Member from conducting continued disruptive quoting and trading activity on the Exchange. Importantly, these procedures provide the Exchange the authority to order a Member to cease and desist from providing access to the Exchange to a client of the Member that is conducting disruptive quoting and trading activity in violation of Rule 2170. Paragraph (a) of Rule 9400, with the prior written authorization of the Chief Regulatory Officer (``CRO'') or such other senior officers as the CRO may designate, the Office of General Counsel or Regulatory Department of the Exchange (such departments generally referred to as the ``Exchange'' for purposes of Rule 9400) and may initiate an expedited suspension proceeding with respect to alleged violations of Rule 2170. Paragraph (a) also sets forth the requirements for notice and service of such notice pursuant to the Rule, including the required method of service and the content of notice. Paragraph (b) of Rule 9400 governs the appointment of a Hearing Panel as well as potential disqualification or recusal of Hearing Officers. The Exchange's Rules provide for a Hearing Officer to be recused in the event he or she has a conflict of interest or bias or other circumstances exist where his or her fairness might reasonably be questioned in accordance with Rules 9233(a). In addition to recusal initiated by such a Hearing Officer, a party to the proceeding will be permitted to file a motion to disqualify a Hearing Officer. However, due to the compressed schedule pursuant to which the process would operate under Rule 9400, the rule requires such motion to be filed no later than 5 days after the announcement of the Hearing Panel and the Exchange's brief in opposition to such motion would be required to be filed no later than 5 days after service thereof. Pursuant to existing Rule 9233(c), a motion for disqualification of a Hearing Officer shall be decided by the Chief Hearing Officer based on a prompt investigation. The applicable Hearing Officer shall remove himself or herself and request the Chief Executive Officer to reassign the hearing to another Hearing Officer such that the Hearing Panel still meets the compositional requirements described in Rule 9231(b). If the Chief Hearing Officer determines that the Respondent's grounds for disqualification are insufficient, it shall deny the Respondent's motion for disqualification by setting forth the reasons for the denial in writing and the Hearing Panel will proceed with the hearing. Under paragraph (c) of the Rule, the hearing would be held not later than 15 days after service of the notice initiating the suspension proceeding, unless otherwise extended by the Chairman of the Hearing Panel with the consent of the Parties for good cause shown. In the event of a recusal or disqualification of a Hearing Officer, the hearing shall be held not later than five days after a replacement Hearing Officer is appointed. Paragraph (c) also governs how the hearing is conducted, including the authority of Hearing Officers, witnesses, additional information that may be required by the Hearing Panel, the requirement that a transcript of the proceeding be created and details related to such transcript, and details regarding the creation and maintenance of the record of the proceeding. Paragraph (c) also states that if a Respondent fails to appear at a hearing for which it has notice, the allegations in the notice and accompanying declaration may be deemed admitted, and the Hearing Panel may issue a suspension order without further proceedings. Finally, if the Exchange fails to appear at a hearing for which it has notice, the Hearing Panel may order that the suspension proceeding be dismissed. Under paragraph (d) of the Rule, the Hearing Panel would be required to issue a written decision stating whether a suspension order would be imposed. The Hearing Panel would be required to issue the decision not later than 10 days after receipt of the hearing transcript, unless otherwise extended by the Chairman of the Hearing Panel with the consent of the Parties for good cause shown. The Rule states that a suspension order shall be imposed if the Hearing Panel finds by a preponderance of the evidence that the alleged violation specified in the notice has occurred and that the violative conduct or continuation thereof is likely to result in significant market disruption or other significant harm to investors. Paragraph (d) also describes the content, scope and form of a suspension order. A suspension order shall be limited to ordering a Respondent to cease and desist from violating Rule 2170 and/or to ordering a Respondent to cease and desist from providing access to the Exchange to a client of Respondent that is causing violations of Rule 2170. Under the rule, a suspension order shall also set forth the alleged violation and the significant market [[Page 41622]] disruption or other significant harm to investors that is likely to result without the issuance of an order. The order shall describe in reasonable detail the act or acts the Respondent is to take or refrain from taking, and suspend such Respondent unless and until such action is taken or refrained from. Finally, the order shall include the date and hour of its issuance. A suspension order would remain effective and enforceable unless modified, set aside, limited, or revoked pursuant to paragraph (e), as described below. Finally, paragraph (d) requires service of the Hearing Panel's decision and any suspension order consistent with other portions of the rule related to service. Paragraph (e) of Rule 9400 states that at any time after the Hearing Officers served the Respondent with a suspension order, a Party could apply to the Hearing Panel to have the order modified, set aside, limited, or revoked. If any part of a suspension order is modified, set aside, limited, or revoked, paragraph (e) of Rule 9400 provides the Hearing Panel discretion to leave the cease and desist part of the order in place. For example, if a suspension order suspends Respondent unless and until Respondent ceases and desists providing access to the Exchange to a client of Respondent, and after the order is entered the Respondent complies, the Hearing Panel is permitted to modify the order to lift the suspension portion of the order while keeping in place the cease and desist portion of the order. With its broad modification powers, the Hearing Panel also maintains the discretion to impose conditions upon the removal of a suspension--for example, the Hearing Panel could modify an order to lift the suspension portion of the order in the event a Respondent complies with the cease and desist portion of the order but additionally order that the suspension will be re-imposed if Respondent violates the cease and desist provisions of the modified order in the future. The Hearing Panel generally would be required to respond to the request in writing within 10 days after receipt of the request. An application to modify, set aside, limit or revoke a suspension order would not stay the effectiveness of the suspension order. Finally, paragraph (f) provides that sanctions issued under Rule 9400 would constitute final and immediately effective disciplinary sanctions imposed by the Exchange, and that the right to have any action under the Rule reviewed by the Commission would be governed by Section 19 of the Act. The filing of an application for review would not stay the effectiveness of a suspension order unless the Commission otherwise ordered. Rule 2170--Disruptive Quoting and Trading Activity Prohibited The Exchange currently has authority to prohibit and take action against manipulative trading activity, including disruptive quoting and trading activity, pursuant to its general market manipulation rules, including Rules 2110, 2111, 2120 and 2170. The Exchange proposes to adopt a new rule at Chapter III, Section 16, which would more specifically define and prohibit disruptive options quoting and trading activity on the Exchange. As noted above, the Exchange also proposes to apply the proposed suspension rules to Chapter III, Section 16. Proposed Chapter III, Section 16, would prohibit Members from engaging in or facilitating disruptive options quoting and trading activity on the Exchange, as described in proposed Chapter III, Section 16(i) and (ii), including acting in concert with other persons to effect such activity. The Exchange believes that it is necessary to extend the prohibition to situations when persons are acting in concert to avoid a potential loophole where disruptive quoting and trading activity is simply split between several brokers or customers. The Exchange believes, that with respect to persons acting in concert perpetrating an abusive scheme, it is important that the Exchange have authority to act against the parties perpetrating the abusive scheme, whether it is one person or multiple persons. To provide proper context for the situations in which the Exchange proposes to utilize its authority, the Exchange believes it is necessary to describe the types of disruptive options quoting and trading activity that would cause the Exchange to use its authority. Accordingly, the Exchange proposes to adopt Chapter III, Section 16(i) and (ii) providing additional details regarding disruptive options quoting and trading activity. Proposed Chapter III, Section 16(i)(a) describes disruptive options quoting and trading activity containing many of the elements indicative of layering. It would describe disruptive options quoting and trading activity as a frequent pattern in which the following facts are present: (i) A party enters multiple limit orders on one side of the market at various price levels (the ``Displayed Orders''); and (ii) following the entry of the Displayed Orders, the level of supply and demand for the security changes; and (iii) the party enters one or more orders on the opposite side of the market of the Displayed Orders (the ``Contra-Side Orders'') that are subsequently executed; and (iv) following the execution of the Contra- Side Orders, the party cancels the Displayed Orders. Proposed Chapter III, Section 16(i)(b) describes disruptive options quoting and trading activity containing many of the elements indicative of spoofing and would describe disruptive quoting and trading activity as a frequent pattern in which the following facts are present: (i) A party narrows the spread for a security by placing an order inside the national best bid or offer; and (ii) the party then submits an order on the opposite side of the market that executes against another market participant that joined the new inside market established by the order described in proposed (b)(i) that narrowed the spread. The Exchange believes that the proposed descriptions of disruptive quoting and trading activity articulated in the rule are consistent with the activities that have been identified and described in the client access cases described above.\9\ The Exchange further believes that the proposed descriptions will provide Members with clear descriptions of disruptive options quoting and trading activity that will help them to avoid engaging in such activities or allowing their clients to engage in such activities. --------------------------------------------------------------------------- \9\ As previously noted herein, while the examples noted in the Purpose Section of this 19b4 [sic] are related to the equities market, the Exchange believes that this type of conduct should be prohibited for all Exchange members, equities and options. The Exchange believes that these patterns of disruptive and allegedly manipulative quoting and trading activity need to be addressed and the product should not limit the action taken by the Exchange. For this reason, the Exchange now proposes a corresponding options rule. --------------------------------------------------------------------------- The Exchange proposes to make clear in proposed Chapter III, Section 16(ii), unless otherwise indicated, the descriptions of disruptive options quoting and trading activity do not require the facts to occur in a specific order in order for the rule to apply. For instance, with respect to the pattern defined in proposed Chapter III, Section 16(i)(a) it is of no consequence whether a party first enters Displayed Orders and then Contra-side Orders or vice-versa. However, as proposed, supply and demand must change following the entry of the Displayed Orders. The Exchange also proposes to make clear that disruptive options quoting and trading activity includes a pattern or practice in which some portion of the disruptive options quoting and trading activity is conducted on the Exchange and the other portions of the disruptive options quoting and trading activity are conducted on one or more other [[Page 41623]] exchanges. The Exchange believes that this authority is necessary to address market participants who would otherwise seek to avoid the prohibitions of the proposed Rule by spreading their activity amongst various execution venues. In sum, proposed Chapter III, Section 16 coupled with Rule 9400 would provide the Exchange with authority to promptly act to prevent disruptive quoting and trading activity from continuing on the Exchange. Below is an example of how the proposed rule would operate. Assume that through its surveillance program, Exchange staff identifies a pattern of potentially disruptive options quoting and trading activity. After an initial investigation the Exchange would then contact the Member responsible for the orders that caused the activity to request an explanation of the activity as well as any additional relevant information, including the source of the activity. If the Exchange were to continue to see the same pattern from the same Member and the source of the activity is the same or has been previously identified as a frequent source of disruptive options quoting and trading activity then the Exchange could initiate an expedited suspension proceeding by serving notice on the Member that would include details regarding the alleged violations as well as the proposed sanction. In such a case the proposed sanction would likely be to order the Member to cease and desist providing access to the Exchange to the client that is responsible for the disruptive quoting and trading activity and to suspend such Member unless and until such action is taken. The Member would have the opportunity to be heard in front of a Hearing Panel at a hearing to be conducted within 15 days of the notice. If the Hearing Panel determined that the violation alleged in the notice did not occur or that the conduct or its continuation would not have the potential to result in significant market disruption or other significant harm to investors, then the Hearing Panel would dismiss the suspension order proceeding. If the Hearing Panel determined that the violation alleged in the notice did occur and that the conduct or its continuation is likely to result in significant market disruption or other significant harm to investors, then the Hearing Panel would issue the order including the proposed sanction, ordering the Member to cease providing access to the client at issue and suspending such Member unless and until such action is taken. If such Member wished for the suspension to be lifted because the client ultimately responsible for the activity no longer would be provided access to the Exchange, then such Member could apply to the Hearing Panel to have the order modified, set aside, limited or revoked. The Exchange notes that the issuance of a suspension order would not alter the Exchange's ability to further investigate the matter and/or later sanction the Member pursuant to the Exchange's standard disciplinary process for supervisory violations or other violations of Exchange rules or the Act. The Exchange reiterates that it already has broad authority to take action against a Member in the event that such Member is engaging in or facilitating disruptive or manipulative trading activity on the Exchange. For the reasons described above, and in light of recent cases like the client access cases described above, as well as other cases currently under investigation, the Exchange believes that it is equally important for the Exchange to have the authority to promptly initiate expedited suspension proceedings against any Member who has demonstrated a clear pattern or practice of disruptive options quoting and trading activity, as described above, and to take action including ordering such Member to terminate access to the Exchange to one or more of such Member's clients if such clients are responsible for the activity. The Exchange recognizes that its authority to issue a suspension order is a powerful measure that should be used very cautiously. Consequently, the rules have been designed to ensure that the proceedings are used to address only the most clear and serious types of disruptive quoting and trading activity and that the interests of Respondents are protected. For example, to ensure that proceedings are used appropriately and that the decision to initiate a proceeding is made only at the highest staff levels, the rules require the CRO or another senior officer of the Exchange to issue written authorization before the Exchange can institute an expedited suspension proceeding. In addition, the rule by its terms is limited to violations of Chapter III, Section 16, when necessary to protect investors, other Members and the Exchange. The Exchange will initiate disciplinary action for violations of Chapter III, Section 16, pursuant to Rule 9400. Further, the Exchange believes that the expedited suspension provisions described above that provide the opportunity to respond as well as a Hearing Panel determination prior to taking action will ensure that the Exchange would not utilize its authority in the absence of a clear pattern or practice of disruptive options quoting and trading activity. The Exchange also notes that that it may impose temporary restrictions upon the automated entry or updating of orders or quotes/ orders as the Exchange may determine to be necessary to protect the integrity of the Exchange's systems pursuant to Rule 4611(c).\10\ Also, pursuant to Rule 9555(a)(2) \11\ if a member, associated person, or other person cannot continue to have access to services offered by the Exchange or a member thereof with safety to investors, creditors, members, or the Exchange, the Exchange's Regulation Department staff may provide written notice to such member or person limiting or prohibiting access to services offered by the Exchange or a member thereof. This ability to impose a temporary restriction upon Members assists the Exchange in maintaining the integrity of the market and protecting investors and the public interest. --------------------------------------------------------------------------- \10\ For example, such temporary restrictions may be necessary to address a system problem at a particular BX Market Maker, BX ECN or Order Entry Firm or at the Exchange, or an unexpected period of extremely high message traffic. \11\ See Rule 9555, entitled ``Failure to Meet the Eligibility or Qualification Standards or Prerequisites for Access to Services.'' --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \12\ in general, and furthers the objectives of Section 6(b)(5) of the Act \13\ in particular, in that the rules of the Exchange are designed to prevent fraudulent and manipulative acts and practices, 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. Pursuant to the proposal, the Exchange will have a mechanism to promptly initiate expedited suspension proceedings in the event the Exchange believes that it has sufficient proof that a violation of Rule 2170 has occurred and is ongoing. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78f(b). \13\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Further, the Exchange believes that the proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the Act,\14\ which require that the rules of an exchange enforce compliance with, and provide appropriate discipline for, violations of the Commission and Exchange rules. The Exchange also believes that the proposal is consistent with the public interest, the protection of investors, or [[Page 41624]] otherwise in furtherance of the purposes of the Act because the proposal helps to strengthen the Exchange's ability to carry out its oversight and enforcement responsibilities as a self-regulatory organization in cases where awaiting the conclusion of a full disciplinary proceeding is unsuitable in view of the potential harm to other Members and their customers. Also, the Exchange notes that if this type of conduct is allowed to continue on the Exchange, the Exchange's reputation could be harmed because it may appear to the public that the Exchange is not acting to address the behavior. The expedited process would enable the Exchange to address the behavior with greater speed. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b)(1) and 78f(b)(6). --------------------------------------------------------------------------- As explained above, the Exchange notes that it has defined the prohibited disruptive quoting and trading activity by modifying the traditional definitions of layering and spoofing \15\ to eliminate an express intent element that would not be proven on an expedited basis and would instead require a thorough investigation into the activity. As noted throughout this filing, the Exchange believes it is necessary for the protection of investors to make such modifications in order to adopt an expedited process rather than allowing disruptive quoting and trading activity to occur for several years. --------------------------------------------------------------------------- \15\ See supra, notes 4 and 5. --------------------------------------------------------------------------- Through this proposal, the Exchange does not intend to modify the definitions of spoofing and layering that have generally been used by the Exchange and other regulators in connection with actions like those cited above. The Exchange believes that the pattern of disruptive and allegedly manipulative quoting and trading activity was widespread across multiple exchanges, and the Exchange, FINRA, and other SROs identified clear patterns of the behavior in 2007 and 2008 in the equities markets.\16\ The Exchange believes that this proposal will provide the Exchange with the necessary means to enforce against such behavior in an expedited manner while providing Members with the necessary due process. The Exchange believes that its proposal is consistent with the Act because it provides the Exchange with the ability 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 from such ongoing behavior. --------------------------------------------------------------------------- \16\ See Section 3 [sic] herein, the Purpose section, for examples of conduct referred to herein. --------------------------------------------------------------------------- Further, the Exchange believes that adopting a rule applicable to Options Participants is consistent with the Act because the Exchange believes that this type of behavior should be prohibited for all members, not just equities members. The type of product should not be the determining factor, rather the behavior which challenges the market structure is the primary concern for the Exchange. While this behavior may not be as prevalent on the options market today, the Exchange does not believe that the possibility of such behavior in the future would not have the same market impact and thereby warrant an expedited process. The Exchange believes that treating all members, equities and options, in a uniform manner with respect to the type of disciplinary action that would be taken for violations of manipulative quoting and trading activity is consistent with the Act. The Exchange further believes that the proposal is consistent with Section 6(b)(7) of the Act,\17\ which requires that the rules of an exchange ``provide a fair procedure for the disciplining of members and persons associated with members . . . and the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof.'' Finally, the Exchange also believes the proposal is consistent with Sections 6(d)(1) and 6(d)(2) of the Act,\18\ which require that the rules of an exchange with respect to a disciplinary proceeding or proceeding that would limit or prohibit access to or membership in the exchange require the exchange to: Provide adequate and specific notice of the charges brought against a member or person associated with a member, provide an opportunity to defend against such charges, keep a record, and provide details regarding the findings and applicable sanctions in the event a determination to impose a disciplinary sanction is made. The Exchange believes that each of these requirements is addressed by the notice and due process provisions included within Rule 9400. Importantly, as noted above, the Exchange will use the authority only in clear and egregious cases when necessary to protect investors, other Members and the Exchange, and in such cases, the Respondent will be afforded due process in connection with the suspension proceedings. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(b)(7). \18\ U.S.C. 78f(d)(1). --------------------------------------------------------------------------- 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. To the contrary, the Exchange believes that each self-regulatory organization should be empowered to regulate trading occurring on its market consistent with the Act and without regard to competitive issues. The Exchange is requesting authority to take appropriate action if necessary for the protection of investors, other Members and the Exchange. The Exchange also believes that it is important for all exchanges to be able to take similar action to enforce their rules against manipulative conduct thereby leaving no exchange prey to such conduct. The Exchange does not believe that the proposed rule change imposes an undue burden on competition, rather this process will provide the Exchange with the necessary means to enforce against violations of manipulative quoting and trading activity in an expedited manner, while providing Members with the necessary due process. The Exchange believes that adopting a rule applicable to Options Participants does not impose an undue burden on competition because this type of behavior should be prohibited for all members, not just equities members. The Exchange's proposal would treat all members, equities and options, in a uniform manner with respect to the type of disciplinary action that would be taken for violations of manipulative quoting and trading activity. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \19\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\20\ --------------------------------------------------------------------------- \19\ 15 U.S.C. 78s(b)(3)(a)(iii). \20\ 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. --------------------------------------------------------------------------- [[Page 41625]] 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 proposal 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-BX-2016-036 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 No. SR-BX-2016-036. 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 No. SR-BX-2016-036, and should be submitted on or before July 18, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\21\ --------------------------------------------------------------------------- \21\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-15071 Filed 6-24-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Notices 41619
The Exchange notes that routing unsolicited written comments from business days between the hours of
through Bats Trading is voluntary. The Members or other interested parties. 10:00 a.m. and 3:00 p.m. Copies of the
Exchange is providing a service to allow filing also will be available for
III. Date of Effectiveness of the
Members to post orders with a Non- inspection and copying at the principal
Proposed Rule Change and Timing for
Displayed instruction to these office of the Exchange. All comments
Commission Action
destinations and that those Members received will be posted without change;
seeking to post such orders to away The foregoing rule change has become the Commission does not edit personal
destinations may connect to those effective pursuant to Section 19(b)(3)(A) identifying information from
destinations directly and be charged the of the Act 16 and paragraph (f) of Rule submissions. You should submit only
fee or provided the rebate from that 19b–4 thereunder.17 At any time within information that you wish to make
destination. Therefore, the Exchange 60 days of the filing of the proposed rule available publicly. All submissions
believes the rates for proposed fee codes change, the Commission summarily may should refer to File Number SR–
NA and NB are equitable and reasonable temporarily suspend such rule change if BatsEDGX–2016–23, and should be
because they are related to the rates it appears to the Commission that such submitted on or before July 18, 2016.
provided by the away exchange and action is necessary or appropriate in the For the Commission, by the Division of
reasonably account for the routing public interest, for the protection of Trading and Markets, pursuant to delegated
service provided for by the Exchange. investors, or otherwise in furtherance of authority.18
Lastly, the Exchange believes that the the purposes of the Act. Robert W. Errett,
proposed amendments are non- IV. Solicitation of Comments Deputy Secretary.
discriminatory because it applies [FR Doc. 2016–15076 Filed 6–24–16; 8:45 am]
uniformly to all Members and that the Interested persons are invited to
BILLING CODE 8011–01–P
proposed rates are directly related to submit written data, views, and
rates provided by the destinations to arguments concerning the foregoing,
which the orders may be routed. including whether the proposed rule SECURITIES AND EXCHANGE
change is consistent with the Act. COMMISSION
B. Self-Regulatory Organization’s Comments may be submitted by any of
Statement on Burden on Competition the following methods: [Release No. 34–78107; File No. SR–BX–
2016–036]
The Exchange does not believe its Electronic Comments
proposed amendment to its Fee • Use the Commission’s Internet Self-Regulatory Organizations;
Schedule would impose any burden on comment form (http://www.sec.gov/ NASDAQ BX, Inc.; Notice of Filing and
competition that is not necessary or rules/sro.shtml); or Immediate Effectiveness of Proposed
appropriate in furtherance of the • Send an email to rule-comments@ Rule Change To Provide a Process for
purposes of the Act. The Exchange does sec.gov. Please include File Number SR– an Expedited Suspension Proceeding
not believe that the proposed changes BatsEDGX–2016–23 on the subject line. and Adopt a Rule To Prohibit
represents a significant departure from Disruptive Options Quoting and
previous pricing offered by the Paper Comments Trading Activity
Exchange or pricing offered by the • Send paper comments in triplicate
June 21, 2016.
Exchange’s competitors. Additionally, to Secretary, Securities and Exchange
Members may opt to disfavor the Pursuant to Section 19(b)(1) of the
Commission, 100 F Street NE.,
Exchange’s pricing if they believe that Securities Exchange Act of 1934 (the
Washington, DC 20549–1090.
alternatives offer them better value. For ‘‘Act’’),1 and Rule 19b–4 thereunder,2
All submissions should refer to File notice is hereby given that on June 17,
example, routing through Bats Trading Number SR–BatsEDGX–2016–23. This
is voluntary and Members seeking to 2016, NASDAQ BX, Inc. (‘‘BX’’ or
file number should be included on the ‘‘Exchange’’) filed with the Securities
post such orders to away destinations subject line if email is used. To help the
may connect to those destinations and Exchange Commission
Commission process and review your (‘‘Commission’’) the proposed rule
directly and be charged the fee or comments more efficiently, please use
provide the rebate from that destination. change as described in Items I, II and III
only one method. The Commission will below, which Items have been prepared
Accordingly, the Exchange does not post all comments on the Commission’s
believe that the proposed changes will by the Exchange. The Commission is
Internet Web site (http://www.sec.gov/ publishing this notice to solicit
impair the ability of Members or rules/sro.shtml). Copies of the
competing venues to maintain their comments on the proposed rule change
submission, all subsequent from interested persons.
competitive standing in the financial amendments, all written statements
markets. The Exchange believes that its with respect to the proposed rule I. Self-Regulatory Organization’s
proposal would not burden intramarket change that are filed with the Statement of the Terms of Substance of
competition because the proposed rate Commission, and all written the Proposed Rule Change
would apply uniformly to all Members. communications relating to the The Exchange proposes to adopt a
C. Self-Regulatory Organization’s proposed rule change between the new options rule to clearly prohibit
Statement on Comments on the Commission and any person, other than disruptive quoting and trading activity
Proposed Rule Change Received From those that may be withheld from the on the Exchange, as further described
Members, Participants, or Others public in accordance with the below.
mstockstill on DSK3G9T082PROD with NOTICES
provisions of 5 U.S.C. 552, will be The text of the proposed rule change
The Exchange has not solicited, and available for Web site viewing and is available on the Exchange’s Web site
does not intend to solicit, comments on printing in the Commission’s Public at http://
this proposed rule change. The Reference Room, 100 F Street NE., nasdaqomxbx.cchwallstreet.com/, at the
Exchange has not received any Washington, DC 20549, on official
18 17 CFR 200.30–3(a)(12).
16 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1).
to another market. See the Nasdaq fee schedule at
id. 17 17 CFR 240.19b–4(f). 2 17 CFR 240.19b–4.
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![41622 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Notices
disruption or other significant harm to suspension order unless the Displayed Orders (the ‘‘Contra-Side
investors that is likely to result without Commission otherwise ordered. Orders’’) that are subsequently
the issuance of an order. The order shall executed; and (iv) following the
Rule 2170—Disruptive Quoting and
describe in reasonable detail the act or execution of the Contra-Side Orders, the
Trading Activity Prohibited
acts the Respondent is to take or refrain party cancels the Displayed Orders.
from taking, and suspend such The Exchange currently has authority Proposed Chapter III, Section 16(i)(b)
Respondent unless and until such to prohibit and take action against describes disruptive options quoting
action is taken or refrained from. manipulative trading activity, including and trading activity containing many of
Finally, the order shall include the date disruptive quoting and trading activity, the elements indicative of spoofing and
and hour of its issuance. A suspension pursuant to its general market would describe disruptive quoting and
order would remain effective and manipulation rules, including Rules trading activity as a frequent pattern in
enforceable unless modified, set aside, 2110, 2111, 2120 and 2170. The which the following facts are present: (i)
limited, or revoked pursuant to Exchange proposes to adopt a new rule A party narrows the spread for a
paragraph (e), as described below. at Chapter III, Section 16, which would security by placing an order inside the
Finally, paragraph (d) requires service of more specifically define and prohibit national best bid or offer; and (ii) the
the Hearing Panel’s decision and any disruptive options quoting and trading party then submits an order on the
suspension order consistent with other activity on the Exchange. As noted opposite side of the market that
portions of the rule related to service. above, the Exchange also proposes to executes against another market
Paragraph (e) of Rule 9400 states that apply the proposed suspension rules to participant that joined the new inside
at any time after the Hearing Officers Chapter III, Section 16. market established by the order
served the Respondent with a Proposed Chapter III, Section 16, described in proposed (b)(i) that
suspension order, a Party could apply to would prohibit Members from engaging narrowed the spread. The Exchange
the Hearing Panel to have the order in or facilitating disruptive options believes that the proposed descriptions
modified, set aside, limited, or revoked. quoting and trading activity on the of disruptive quoting and trading
If any part of a suspension order is Exchange, as described in proposed activity articulated in the rule are
modified, set aside, limited, or revoked, Chapter III, Section 16(i) and (ii), consistent with the activities that have
paragraph (e) of Rule 9400 provides the including acting in concert with other been identified and described in the
Hearing Panel discretion to leave the persons to effect such activity. The client access cases described above.9
cease and desist part of the order in Exchange believes that it is necessary to The Exchange further believes that the
place. For example, if a suspension extend the prohibition to situations proposed descriptions will provide
order suspends Respondent unless and when persons are acting in concert to Members with clear descriptions of
until Respondent ceases and desists avoid a potential loophole where disruptive options quoting and trading
providing access to the Exchange to a disruptive quoting and trading activity activity that will help them to avoid
client of Respondent, and after the order is simply split between several brokers engaging in such activities or allowing
is entered the Respondent complies, the or customers. The Exchange believes, their clients to engage in such activities.
Hearing Panel is permitted to modify that with respect to persons acting in The Exchange proposes to make clear
the order to lift the suspension portion concert perpetrating an abusive scheme, in proposed Chapter III, Section 16(ii),
of the order while keeping in place the it is important that the Exchange have unless otherwise indicated, the
cease and desist portion of the order. authority to act against the parties descriptions of disruptive options
With its broad modification powers, the perpetrating the abusive scheme, quoting and trading activity do not
Hearing Panel also maintains the whether it is one person or multiple require the facts to occur in a specific
discretion to impose conditions upon persons. order in order for the rule to apply. For
the removal of a suspension—for To provide proper context for the instance, with respect to the pattern
example, the Hearing Panel could situations in which the Exchange defined in proposed Chapter III, Section
modify an order to lift the suspension proposes to utilize its authority, the 16(i)(a) it is of no consequence whether
portion of the order in the event a Exchange believes it is necessary to a party first enters Displayed Orders and
Respondent complies with the cease describe the types of disruptive options then Contra-side Orders or vice-versa.
and desist portion of the order but quoting and trading activity that would However, as proposed, supply and
additionally order that the suspension cause the Exchange to use its authority. demand must change following the
will be re-imposed if Respondent Accordingly, the Exchange proposes to entry of the Displayed Orders. The
violates the cease and desist provisions adopt Chapter III, Section 16(i) and (ii) Exchange also proposes to make clear
of the modified order in the future. The providing additional details regarding that disruptive options quoting and
Hearing Panel generally would be disruptive options quoting and trading trading activity includes a pattern or
required to respond to the request in activity. Proposed Chapter III, Section practice in which some portion of the
writing within 10 days after receipt of 16(i)(a) describes disruptive options disruptive options quoting and trading
the request. An application to modify, quoting and trading activity containing activity is conducted on the Exchange
set aside, limit or revoke a suspension many of the elements indicative of and the other portions of the disruptive
order would not stay the effectiveness of layering. It would describe disruptive options quoting and trading activity are
the suspension order. options quoting and trading activity as conducted on one or more other
Finally, paragraph (f) provides that a frequent pattern in which the
sanctions issued under Rule 9400 would following facts are present: (i) A party 9 As previously noted herein, while the examples
constitute final and immediately enters multiple limit orders on one side noted in the Purpose Section of this 19b4 [sic] are
mstockstill on DSK3G9T082PROD with NOTICES
of the market at various price levels (the related to the equities market, the Exchange
effective disciplinary sanctions imposed believes that this type of conduct should be
by the Exchange, and that the right to ‘‘Displayed Orders’’); and (ii) following prohibited for all Exchange members, equities and
have any action under the Rule the entry of the Displayed Orders, the options. The Exchange believes that these patterns
reviewed by the Commission would be level of supply and demand for the of disruptive and allegedly manipulative quoting
and trading activity need to be addressed and the
governed by Section 19 of the Act. The security changes; and (iii) the party product should not limit the action taken by the
filing of an application for review would enters one or more orders on the Exchange. For this reason, the Exchange now
not stay the effectiveness of a opposite side of the market of the proposes a corresponding options rule.
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![41624 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Notices
otherwise in furtherance of the purposes because the Exchange believes that this necessary or appropriate in furtherance
of the Act because the proposal helps to type of behavior should be prohibited of the purposes of the Act. To the
strengthen the Exchange’s ability to for all members, not just equities contrary, the Exchange believes that
carry out its oversight and enforcement members. The type of product should each self-regulatory organization should
responsibilities as a self-regulatory not be the determining factor, rather the be empowered to regulate trading
organization in cases where awaiting the behavior which challenges the market occurring on its market consistent with
conclusion of a full disciplinary structure is the primary concern for the the Act and without regard to
proceeding is unsuitable in view of the Exchange. While this behavior may not competitive issues. The Exchange is
potential harm to other Members and be as prevalent on the options market requesting authority to take appropriate
their customers. Also, the Exchange today, the Exchange does not believe action if necessary for the protection of
notes that if this type of conduct is that the possibility of such behavior in investors, other Members and the
allowed to continue on the Exchange, the future would not have the same Exchange. The Exchange also believes
the Exchange’s reputation could be market impact and thereby warrant an that it is important for all exchanges to
harmed because it may appear to the expedited process. The Exchange be able to take similar action to enforce
public that the Exchange is not acting to believes that treating all members, their rules against manipulative conduct
address the behavior. The expedited equities and options, in a uniform thereby leaving no exchange prey to
process would enable the Exchange to manner with respect to the type of such conduct.
address the behavior with greater speed. disciplinary action that would be taken The Exchange does not believe that
As explained above, the Exchange for violations of manipulative quoting the proposed rule change imposes an
notes that it has defined the prohibited and trading activity is consistent with undue burden on competition, rather
disruptive quoting and trading activity the Act. this process will provide the Exchange
by modifying the traditional definitions The Exchange further believes that the with the necessary means to enforce
of layering and spoofing 15 to eliminate proposal is consistent with Section against violations of manipulative
an express intent element that would 6(b)(7) of the Act,17 which requires that quoting and trading activity in an
not be proven on an expedited basis and the rules of an exchange ‘‘provide a fair expedited manner, while providing
would instead require a thorough procedure for the disciplining of Members with the necessary due
investigation into the activity. As noted members and persons associated with process. The Exchange believes that
throughout this filing, the Exchange members . . . and the prohibition or adopting a rule applicable to Options
believes it is necessary for the limitation by the exchange of any Participants does not impose an undue
protection of investors to make such person with respect to access to services burden on competition because this
modifications in order to adopt an offered by the exchange or a member type of behavior should be prohibited
expedited process rather than allowing thereof.’’ Finally, the Exchange also for all members, not just equities
disruptive quoting and trading activity believes the proposal is consistent with members. The Exchange’s proposal
to occur for several years. Sections 6(d)(1) and 6(d)(2) of the Act,18 would treat all members, equities and
Through this proposal, the Exchange which require that the rules of an options, in a uniform manner with
does not intend to modify the exchange with respect to a disciplinary respect to the type of disciplinary action
definitions of spoofing and layering that proceeding or proceeding that would that would be taken for violations of
have generally been used by the limit or prohibit access to or manipulative quoting and trading
Exchange and other regulators in membership in the exchange require the activity.
connection with actions like those cited exchange to: Provide adequate and
above. The Exchange believes that the specific notice of the charges brought C. Self-Regulatory Organization’s
pattern of disruptive and allegedly against a member or person associated Statement on Comments on the
manipulative quoting and trading with a member, provide an opportunity Proposed Rule Change Received From
activity was widespread across multiple to defend against such charges, keep a Members, Participants, or Others
exchanges, and the Exchange, FINRA, record, and provide details regarding No written comments were either
and other SROs identified clear patterns the findings and applicable sanctions in solicited or received.
of the behavior in 2007 and 2008 in the the event a determination to impose a
III. Date of Effectiveness of the
equities markets.16 The Exchange disciplinary sanction is made. The
Proposed Rule Change and Timing for
believes that this proposal will provide Exchange believes that each of these
Commission Action
the Exchange with the necessary means requirements is addressed by the notice
to enforce against such behavior in an and due process provisions included Because the foregoing proposed rule
expedited manner while providing within Rule 9400. Importantly, as noted change does not: (i) Significantly affect
Members with the necessary due above, the Exchange will use the the protection of investors or the public
process. The Exchange believes that its authority only in clear and egregious interest; (ii) impose any significant
proposal is consistent with the Act cases when necessary to protect burden on competition; and (iii) become
because it provides the Exchange with investors, other Members and the operative for 30 days from the date on
the ability to remove impediments to Exchange, and in such cases, the which it was filed, or such shorter time
and perfect the mechanism of a free and Respondent will be afforded due as the Commission may designate, it has
open market and a national market process in connection with the become effective pursuant to Section
system, and, in general to protect suspension proceedings. 19(b)(3)(A)(iii) of the Act 19 and
investors and the public interest from subparagraph (f)(6) of Rule 19b–4
B. Self-Regulatory Organization’s
mstockstill on DSK3G9T082PROD with NOTICES
such ongoing behavior. thereunder.20
Statement on Burden on Competition
Further, the Exchange believes that
adopting a rule applicable to Options The Exchange does not believe that 19 15 U.S.C. 78s(b)(3)(a)(iii).
20 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
Participants is consistent with the Act the proposed rule change will impose
4(f)(6) requires a self-regulatory organization to give
any burden on competition not the Commission written notice of its intent to file
15 Seesupra, notes 4 and 5. the proposed rule change at least five business days
16 See 17 15 U.S.C. 78f(b)(7).
Section 3 [sic] herein, the Purpose section, prior to the date of filing of the proposed rule
for examples of conduct referred to herein. 18 U.S.C. 78f(d)(1). change, or such shorter time as designated by the
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![Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Notices 41625
At any time within 60 days of the received will be posted without change; eligible for the ‘‘piggyback’’ exception of
filing of the proposed rule change, the the Commission does not edit personal Exchange Act Rule 15c2–11(f)(3).
Commission summarily may identifying information from It appears to the Commission that
temporarily suspend such rule change if submissions. You should submit only there is a lack of current and accurate
it appears to the Commission that such information that you wish to make information concerning the securities of
action is: (i) Necessary or appropriate in available publicly. All submissions Elevate, Inc. (‘‘ELEV’’) (CIK No.
the public interest; (ii) for the protection should refer to File No. SR–BX–2016– 1424415), a defaulted Nevada
of investors; or (iii) otherwise in 036, and should be submitted on or corporation located in San Clemente,
furtherance of the purposes of the Act. before July 18, 2016. California with a class of securities
If the Commission takes such action, the registered with the Commission
For the Commission, by the Division of
Commission shall institute proceedings Trading and Markets, pursuant to delegated pursuant to Exchange Act Section 12(g)
to determine whether the proposed rule authority.21 because it is delinquent in its periodic
should be approved or disapproved. Robert W. Errett,
filings with the Commission, having not
filed any periodic reports since it filed
IV. Solicitation of Comments Deputy Secretary.
a Form 10–Q for the period ended
[FR Doc. 2016–15071 Filed 6–24–16; 8:45 am]
Interested persons are invited to February 29, 2012. On January 28, 2016,
submit written data, views, and BILLING CODE 8011–01–P Corporation Finance sent a delinquency
arguments concerning the foregoing, letter to ELEV requesting compliance
including whether the proposal is with its periodic filing requirements but
SECURITIES AND EXCHANGE ELEV did not receive the delinquency
consistent with the Act. Comments may
COMMISSION letter due to its failure to maintain a
be submitted by any of the following
methods: valid address on file with the
[File No. 500–1] Commission as required by Commission
Electronic Comments Issuer Address Rules. As of June 16,
• Use the Commission’s Internet In the Matter of Caspian International 2016, the common stock of ELEV was
comment form (http://www.sec.gov/ Oil Corporation, Elevate, Inc., Frawley quoted on OTC Link, had six market
rules/sro.shtml); or Corporation, Groen Brothers Aviation, makers, and was eligible for the
• Send an email to rule-comments@ Inc., and Logic Devices, Incorporated; ‘‘piggyback’’ exception of Exchange Act
sec.gov. Please include File No. SR–BX– Order of Suspension of Trading Rule 15c2–11(f)(3).
2016–036 on the subject line. It appears to the Commission that
June 23, 2016.
there is a lack of current and accurate
Paper Comments It appears to the Securities and information concerning the securities of
• Send paper comments in triplicate Exchange Commission (‘‘Commission’’) Frawley Corporation (‘‘FRWL’’) (CIK No.
to Secretary, Securities and Exchange that there is a lack of current and 38824), a void Delaware corporation
Commission, 100 F Street NE., accurate information concerning the located in Agoura Hills, California with
Washington, DC 20549–1090. securities of Caspian International Oil a class of securities registered with the
All submissions should refer to File No. Corporation (‘‘CIOC 1’’) (CIK No. Commission pursuant to Exchange Act
SR–BX–2016–036. This file number 816958), a void Delaware corporation Section 12(g) because it is delinquent in
should be included on the subject line located in Houston, Texas with a class its periodic filings with the
if email is used. To help the of securities registered with the Commission, having not filed any
Commission process and review your Commission pursuant to Securities periodic reports since it filed a Form
comments more efficiently, please use Exchange Act of 1934 (‘‘Exchange Act’’) 10–K for the period ended December 31,
only one method. The Commission will Section 12(g) because it is delinquent in 2011. On November 21, 2011,
post all comments on the Commission’s its periodic filings with the Corporation Finance sent a delinquency
Internet Web site (http://www.sec.gov/ Commission, having not filed any letter to FRWL requesting compliance
rules/sro.shtml). Copies of the periodic reports since it filed a Form with its periodic filing requirements but
submission, all subsequent 10–Q for the period ended September FRWL did not receive the delinquency
amendments, all written statements 30, 2008. On April 12, 2011, the letter due to its failure to maintain a
with respect to the proposed rule Commission’s Division of Corporation valid address on file with the
change that are filed with the Finance (‘‘Corporation Finance’’) sent a Commission as required by Commission
Commission, and all written delinquency letter to CIOC requesting Issuer Address Rules. As of June 16,
communications relating to the compliance with its periodic filing 2016, the common stock of FRWL was
proposed rule change between the requirements but CIOC did not receive quoted on OTC Link, had four market
Commission and any person, other than the delinquency letter due to its failure makers, and was eligible for the
those that may be withheld from the to maintain a valid address on file with ‘‘piggyback’’ exception of Exchange Act
public in accordance with the the Commission as required by Rule 15c2–11(f)(3).
provisions of 5 U.S.C. 552, will be Commission rules (Rule 301 of It appears to the Commission that
available for Web site viewing and Regulation S–T, 17 CFR 232.301 and there is a lack of current and accurate
printing in the Commission’s Public Section 5.4 of EDGAR Filer Manual) information concerning the securities of
Reference Room, 100 F Street NE., (‘‘Commission Issuer Address Rules’’). Groen Brothers Aviation, Inc. (‘‘GNBA’’)
Washington, DC 20549, on official As of June 16, 2016, the common stock (CIK No. 870743), an expired Utah
corporation located in Salt Lake City,
mstockstill on DSK3G9T082PROD with NOTICES
business days between the hours of of CIOC was quoted on OTC Link
10:00 a.m. and 3:00 p.m. Copies of the operated by OTC Markets Group Inc. Utah with a class of securities registered
filing also will be available for (formerly ‘‘Pink Sheets’’) (‘‘OTC Link’’), with the Commission pursuant to
inspection and copying at the principal had two market makers, and was Exchange Act Section 12(g) because it is
office of the Exchange. All comments delinquent in its periodic filings with
21 17 CFR 200.30–3(a)(12). the Commission, having not filed any
Commission. The Exchange has satisfied this 1 The short form of each issuer’s name is also its periodic reports since it filed a Form
requirement. stock symbol. 10–K for the period ended June 30,
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Document Created: 2016-06-25 02:07:09
Document Modified: 2016-06-25 02:07:09
| 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 41619 |
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