81 FR 81203 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4702 and Rule 4703 To Add a “Trade Now” Instruction to Certain Order Types
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 222 (November 17, 2016)
Federal Register Volume 81, Issue 222 (November 17, 2016)
| Page Range | 81203-81206 | |
| FR Document | 2016-27591 |
[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)] [Notices] [Pages 81203-81206] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-27591] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79281; File No. SR-BX-2016-059] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4702 and Rule 4703 To Add a ``Trade Now'' Instruction to Certain Order Types November 10, 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 November 8, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend Rule 4702 (Order Types) and Rule 4703 (Order Attributes) to add a ``Trade Now'' instruction to certain order types. The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqbx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission's Public Reference Room. [[Page 81204]] II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose BX proposes to amend Rules [sic] 4702 (Order Types) and Rule 4703 (Order Attributes) to add a ``Trade Now'' instruction to certain order types. BX will offer this functionality through its OUCH, RASH, FLITE, and FIX protocols. This instruction will provide resting orders with a greater ability to receive an execution when that resting order is locked, e.g., the price of a resting non-display buy order equals the price of a resting displayed sell order on the BX book. The Trade Now instruction will allow participants to enter an instruction to have a locked resting buy (sell) order execute against the locking sell (buy) order. Depending on the protocol used by the participant to access the BX system, the participant may either specify that the order execute against locking interest automatically, or the participant may be required to send a Trade Now instruction to the Exchange once the order has become locked. As discussed in greater detail below, BX is offering the Trade Now instruction for all orders that may be sent to the BX book and that are not subject to other BX rules regarding the display and execution of those orders. When a Trade Now instruction is applied to a resting buy (sell) order, the order will execute against the available size of the locking sell (buy) order at the locked price. The following example illustrates this scenario:Participant A enters a Non-Display buy order for 200 shares at $0.95, and specifies the Trade Now instruction; Participant B enters a Post Only sell order for 100 shares at $0.95; \3\ --------------------------------------------------------------------------- \3\ The Exchange recently submitted a proposal to amend BX Rules 4702 and 4703 to change the way in which Post Only Orders interact with resting Non-Display orders and preventing the execution of midpoint pegged orders during a crossed market. See Securities Exchange Act 78909 (September 22, 2016), 81 FR 66708 (September 28, 2016) (SR-BX-2016-046). --------------------------------------------------------------------------- The Post Only order is posted at $0.95 and locks the Non- Display order; The buy order will execute for 100 shares at $0.95 as the remover of liquidity. If a buy (sell) order with the Trade Now instruction is only partially executed, the unexecuted portion of that order remains on the BX book and maintains its priority. When a Trade Now instruction is entered through the OUCH or FLITE protocol for a resting buy (sell) order and there is no locking order on the opposite side of the market, the Trade Now instruction will be ignored and the buy (sell) order will remain on the BX book, retaining its priority. As noted above, BX is proposing to offer the Trade Now instruction for all orders that may be sent to the BX book and that are not subject to other BX rules regarding the display and execution of those orders. Accordingly, the Trade Now instruction shall not be available for Retail Price Improving Orders (Rule 4702(b)(5)) or Retail Orders (Rule 4702(b)(6)). A Retail Price Improving Order is held on the Exchange Book in order to provide liquidity at a price at least $0.001 better than the NBBO, and may execute only against a Retail Order, and only if its price is at least $0.001 better than the NBBO. A Retail Order will attempt to execute against Retail Price Improving Orders and any other orders on the Exchange Book with a price that is (i) equal to or better than the price of the Retail Order and (ii) at least $0.001 better than the NBBO. Given that Retail Price Improving Orders and Retail Orders are already subject to rules governing the handling and execution of such orders, there is not a need to implement the Trade Now instruction for these order types. Depending on the interface being used by the participant, the Trade Now attribute may either allow the order to execute against locking interest automatically (``Reactive Trade Now''), or the participant may be required to send a Trade Now instruction to the Exchange once the order has become locked (``Non-Reactive Trade Now''). All orders that are entered through the RASH and FIX protocols with a Trade Now order attribute will be Reactive Trade Now, and those orders shall execute against locking interest automatically. The Reactive Trade Now instruction will be available on an order- by-order basis, and will also be available as an optional port level setting. If the Reactive Trade Now setting is enabled on a specific port, all orders entered via the specific port will, by default, be designated with the Reactive Trade Now instruction. If the Reactive Trade Now setting is enabled on a specific port, participants will have the ability to designate on an order-by-order basis that a particular order entered via the specific port will not be designated with the Reactive Trade Now instruction, thereby overriding the port level setting for the order. If the Reactive Trade Now instruction is specified for an order for which the Trade Now instruction does not apply, e.g., a Retail Price Improving Order or a Retail Order, the system will not invoke the Trade Now instruction for that order. In contrast, orders entered through the OUCH and FLITE protocols will use the Non-Reactive Trade Now functionality, and participants must send the Trade Now instruction after the order becomes locked. If a participant enters a Non-Reactive Trade Now instruction when there is no locking interest, the instruction will be ignored by the system and the order will remain on the BX Book with the same priority. The Non-Reactive Trade Now instruction will be available to participants on order-by-order basis. If the Non-Reactive Trade Now instruction is entered for an order for which the Trade Now instruction does not apply, the system will not invoke the Trade Now instruction for that order. BX is offering two different variations of the Trade Now instruction to reflect the differences in behavior among participants who use the different BX protocols. For example, BX typically assumes a more active role in managing the order flow submitted by users of the RASH and FIX protocols. Allowing these participants to use the Reactive Trade Now instruction at the time of order entry will allow for the automatic execution of orders, and reflects the order flow management practices of these participants. In contrast, users of the OUCH and FLITE protocols generally assume a more active role in managing their order flow. Offering the Non-Reactive Trade Now instruction for these protocols, and its requirement that the instruction must be sent after the order becomes locked, reflects the order flow management practices of these participants. BX notes that a similar functionality currently exists on NYSE Arca, Inc. (``NYSE Arca''), which NYSE Arca refers to as a ``Non- Display Remove Modifier.'' As set forth in NYSE Arca Rule 7.31, a Limit Non-Displayed Order may be [[Page 81205]] designated with a Non-Display Remove Modifier. If so designated, a Limit Non-Displayed Order to buy (sell) will trade as the liquidity- taking order with an incoming Adding Liquidity Only Order (``ALO Order'') to sell (buy) that has a working price equal to the working price of the Limit Non-Displayed Order.\4\ NYSE Arca also provides this functionality for other orders, such as Mid-Point Passive Liquidity Orders (``MPL Orders'') designated Day and MPL-ALO Orders \5\ and Arca Only Orders.\6\ --------------------------------------------------------------------------- \4\ See NYSE Arca Rule 7.31(d)(2)(B). \5\ See NYSE Arca Rule 7.31(d)(3)(G). \6\ See NYSE Arca Rule 7.31(e)(1)(C). To the extent that the Trade-Now functionality will be made available for Price to Comply Orders, Price to Display Orders, Non-Displayed Orders, Post-Only Orders, and Market Maker Peg Orders, BX notes that the Trade-Now functionality will apply to different order types than the NYSE Arca Non-Display Remove Modifier functionality. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\7\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\8\ in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, by offering participants an additional functionality that will facilitate the execution of locked orders, thereby increasing the efficient functioning of the BX market. The Trade Now functionality is an optional feature that is being offered at no additional charge, and is designed to reflect both the objectives of the BX market, and the order flow management practices of various market participants. For these reasons, the Trade Now functionality will only be made available for orders that are entered in the BX book and that are not subject to other BX rules regarding the display and execution of those orders, i.e., Retail Price Improving Orders and Retail Orders. Depending on the protocol, the Trade Now functionality will be offered as either the Reactive Trade Now or Non-Reactive Trade Now functionality. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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. This is an optional functionality that is being offered at no charge, and which may be used equally by similarly-situated participants. Although the functionality of the Trade Now instruction will differ depending upon the protocol that is being used to access BX, BX believes that the difference in functionality reflects the different ways in which participants enter and manage their order flow. 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) of the Act and Rule 19b- 4(f)(6) thereunder.\9\ --------------------------------------------------------------------------- \9\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b- 4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \10\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that the Trade Now functionality is complementary to its recent proposal to change the way in which Post Only Orders interact with resting Non-Display orders.\12\ The Exchange believes that releasing both complementary functionalities at the same time will be easier for market participants to manage and implement. The Exchange further believes that the Trade Now functionality will facilitate the execution of locked orders, thereby increasing the efficient functioning of the BX market, and that waiver of the operative delay will allow this functionality to be made available at an earlier date. Finally, the Exchange notes that NYSE Arca currently utilizes a similar functionality in the form of its Non-Display Remove Modifier. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.\13\ --------------------------------------------------------------------------- \10\ 17 CFR 240.19b-4(f)(6). \11\ 17 CFR 240.19b-4(f)(6)(iii). \12\ See supra note 3. \13\ For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-BX-2016-059 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BX-2016-059. 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 [[Page 81206]] 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 also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BX-2016-059, and should be submitted on or before December 8, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-27591 Filed 11-16-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices 81203
B. Self-Regulatory Organization’s Commission designates the proposed Washington, DC 20549 on official
Statement on Burden on Competition rule change to be operative upon business days between the hours of
FINRA does not believe that the filing.12 10:00 a.m. and 3:00 p.m. Copies of such
proposed rule change will result in any At any time within 60 days of the filing also will be available for
burden on competition that is not filing of such proposed rule change, the inspection and copying at the principal
necessary or appropriate in furtherance Commission summarily may office of FINRA. All comments received
of the purposes of the Act. The temporarily suspend such rule change if will be posted without change; the
proposed delay in implementation of it appears to the Commission that such Commission does not edit personal
Rule 4554(b)(8) will reduce the burden action is necessary or appropriate in the identifying information from
on members by allowing additional time public interest, for the protection of submissions. You should submit only
to implement the requirement to report investors, or otherwise in furtherance of information that you wish to make
the sequence number assigned to the the purposes of the Act. If the available publicly. All submissions
order event by the ATS’s matching Commission takes such action, the should refer to File Number SR–FINRA–
engine at the time of order receipt. Commission shall institute proceedings 2016–041, and should be submitted on
to determine whether the proposed rule or before December 8, 2016.
C. Self-Regulatory Organization’s change should be approved or For the Commission, by the Division of
Statement on Comments on the disapproved. Trading and Markets, pursuant to delegated
Proposed Rule Change Received From authority.13
Members, Participants, or Others IV. Solicitation of Comments
Brent J. Fields,
Written comments were neither Interested persons are invited to
Secretary.
solicited nor received. submit written data, views, and
[FR Doc. 2016–27599 Filed 11–16–16; 8:45 am]
arguments concerning the foregoing,
III. Date of Effectiveness of the including whether the proposed rule BILLING CODE 8011–01–P
Proposed Rule Change and Timing for change is consistent with the Act.
Commission Action Comments may be submitted by any of
SECURITIES AND EXCHANGE
Because the foregoing proposed rule the following methods:
COMMISSION
change does not (i) significantly affect Electronic Comments
the protection of investors or the public [Release No. 34–79281; File No. SR–BX–
interest; (ii) impose any significant • Use the Commission’s Internet 2016–059]
burden on competition; and (iii) become comment form (http://www.sec.gov/
rules/sro.shtml); or Self-Regulatory Organizations;
operative for 30 days from the date on
• Send an email to rule-comments@ NASDAQ BX, Inc.; Notice of Filing and
which it was filed, or such shorter time Immediate Effectiveness of Proposed
sec.gov. Please include File Number SR–
as the Commission may designate, it has
FINRA–2016–041 on the subject line. Rule Change To Amend Rule 4702 and
become effective pursuant to Section
Rule 4703 To Add a ‘‘Trade Now’’
19(b)(3)(A)(iii) of the Act 9 and Paper Comments
Instruction to Certain Order Types
subparagraph (f)(6) of Rule 19b–4 • Send paper comments in triplicate
thereunder.10 to Secretary, Securities and Exchange November 10, 2016.
A proposed rule change filed under Commission, 100 F Street NE., Pursuant to Section 19(b)(1) of the
Rule 19b–4(f)(6) normally does not Washington, DC 20549–1090. Securities Exchange Act of 1934 (the
become operative for 30 days after the ‘‘Act’’),1 and Rule 19b–4 thereunder,2
date of its filing. However, Rule 19b– All submissions should refer to File
Number SR–FINRA–2016–041. This file notice is hereby given that on November
4(f)(6)(iii)11 permits the Commission to 8, 2016, NASDAQ BX, Inc. (‘‘BX’’ or
designate a shorter time if such action number should be included on the
subject line if email is used. To help the ‘‘Exchange’’) filed with the Securities
is consistent with the protection of and Exchange Commission (‘‘SEC’’ or
investors and the public interest. FINRA Commission process and review your
comments more efficiently, please use ‘‘Commission’’) the proposed rule
has requested that the Commission change as described in Items I and II
waive the 30-day operative delay so that only one method. The Commission will
post all comments on the Commission’s below, which Items have been prepared
the proposed rule change will become by the Exchange. The Commission is
operative on filing. FINRA stated that it Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the publishing this notice to solicit
anticipates extending the requirement to comments on the proposed rule change
report a sequence number beyond order submission, all subsequent
amendments, all written statements from interested persons.
receipt because, without a sequence
number on all order events, FINRA is with respect to the proposed rule I. Self-Regulatory Organization’s
unable to properly sequence events change that are filed with the Statement of the Terms of the Substance
when a single ATS MPID reports order Commission, and all written of the Proposed Rule Change
events in the same symbol with communications relating to the
The Exchange proposes to amend
identical timestamps. However, because proposed rule change between the
Rule 4702 (Order Types) and Rule 4703
a proposed rule change has not been Commission and any person, other than
(Order Attributes) to add a ‘‘Trade Now’’
filed, FINRA is delaying the those that may be withheld from the
instruction to certain order types.
implementation of the requirement in public in accordance with the The text of the proposed rule change
provisions of 5 U.S.C. 552, will be
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Rule 4554(b)(8). For these reasons, the is available on the Exchange’s Web site
Commission believes that waiver of the available for Web site viewing and at http://nasdaqbx.cchwallstreet.com/,
30-day operative delay is consistent printing in the Commission’s Public at the principal office of the Exchange,
with the protection of investors and the Reference Room, 100 F Street NE., and at the Commission’s Public
public interest. Therefore, the 12 For purposes only of waiving the 30-day
Reference Room.
operative delay, the Commission also has
9 15 U.S.C. 78s(b)(3)(A)(iii). 13 17 CFR 200.30–3(a)(12).
considered the proposed rule’s impact on
10 17 CFR 240.19b–4(f)(6). 1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
11 17 CFR 240.19b–4(f)(6)(iii). 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4.
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II. Self-Regulatory Organization’s • The Post Only order is posted at basis, and will also be available as an
Statement of the Purpose of, and $0.95 and locks the Non-Display order; optional port level setting. If the
Statutory Basis for, the Proposed Rule • The buy order will execute for 100 Reactive Trade Now setting is enabled
Change shares at $0.95 as the remover of on a specific port, all orders entered via
liquidity. the specific port will, by default, be
In its filing with the Commission, the If a buy (sell) order with the Trade
Exchange included statements designated with the Reactive Trade Now
Now instruction is only partially instruction. If the Reactive Trade Now
concerning the purpose of and basis for executed, the unexecuted portion of that setting is enabled on a specific port,
the proposed rule change and discussed order remains on the BX book and participants will have the ability to
any comments it received on the maintains its priority. When a Trade designate on an order-by-order basis
proposed rule change. The text of these Now instruction is entered through the that a particular order entered via the
statements may be examined at the OUCH or FLITE protocol for a resting specific port will not be designated with
places specified in Item IV below. The buy (sell) order and there is no locking the Reactive Trade Now instruction,
Exchange has prepared summaries, set order on the opposite side of the market, thereby overriding the port level setting
forth in sections A, B, and C below, of the Trade Now instruction will be for the order. If the Reactive Trade Now
the most significant aspects of such ignored and the buy (sell) order will instruction is specified for an order for
statements. remain on the BX book, retaining its which the Trade Now instruction does
A. Self-Regulatory Organization’s priority. not apply, e.g., a Retail Price Improving
Statement of the Purpose of, and As noted above, BX is proposing to Order or a Retail Order, the system will
Statutory Basis for, the Proposed Rule offer the Trade Now instruction for all not invoke the Trade Now instruction
Change orders that may be sent to the BX book for that order.
and that are not subject to other BX In contrast, orders entered through the
1. Purpose rules regarding the display and OUCH and FLITE protocols will use the
BX proposes to amend Rules [sic] execution of those orders. Accordingly, Non-Reactive Trade Now functionality,
4702 (Order Types) and Rule 4703 the Trade Now instruction shall not be and participants must send the Trade
(Order Attributes) to add a ‘‘Trade Now’’ available for Retail Price Improving Now instruction after the order becomes
instruction to certain order types. BX Orders (Rule 4702(b)(5)) or Retail Orders locked. If a participant enters a Non-
will offer this functionality through its (Rule 4702(b)(6)). A Retail Price Reactive Trade Now instruction when
OUCH, RASH, FLITE, and FIX Improving Order is held on the there is no locking interest, the
protocols. This instruction will provide Exchange Book in order to provide instruction will be ignored by the
resting orders with a greater ability to liquidity at a price at least $0.001 better system and the order will remain on the
receive an execution when that resting than the NBBO, and may execute only BX Book with the same priority.
order is locked, e.g., the price of a against a Retail Order, and only if its The Non-Reactive Trade Now
resting non-display buy order equals the price is at least $0.001 better than the instruction will be available to
price of a resting displayed sell order on NBBO. A Retail Order will attempt to participants on order-by-order basis. If
the BX book. The Trade Now instruction execute against Retail Price Improving the Non-Reactive Trade Now instruction
will allow participants to enter an Orders and any other orders on the is entered for an order for which the
instruction to have a locked resting buy Exchange Book with a price that is (i) Trade Now instruction does not apply,
(sell) order execute against the locking equal to or better than the price of the the system will not invoke the Trade
sell (buy) order. Depending on the Retail Order and (ii) at least $0.001 Now instruction for that order.
protocol used by the participant to better than the NBBO. Given that Retail BX is offering two different variations
access the BX system, the participant Price Improving Orders and Retail of the Trade Now instruction to reflect
may either specify that the order Orders are already subject to rules the differences in behavior among
execute against locking interest governing the handling and execution of participants who use the different BX
automatically, or the participant may be such orders, there is not a need to protocols. For example, BX typically
required to send a Trade Now implement the Trade Now instruction assumes a more active role in managing
instruction to the Exchange once the for these order types. the order flow submitted by users of the
Depending on the interface being used RASH and FIX protocols. Allowing
order has become locked. As discussed
by the participant, the Trade Now these participants to use the Reactive
in greater detail below, BX is offering
attribute may either allow the order to Trade Now instruction at the time of
the Trade Now instruction for all orders
execute against locking interest order entry will allow for the automatic
that may be sent to the BX book and that
automatically (‘‘Reactive Trade Now’’), execution of orders, and reflects the
are not subject to other BX rules or the participant may be required to order flow management practices of
regarding the display and execution of send a Trade Now instruction to the these participants. In contrast, users of
those orders. Exchange once the order has become the OUCH and FLITE protocols
When a Trade Now instruction is locked (‘‘Non-Reactive Trade Now’’). All generally assume a more active role in
applied to a resting buy (sell) order, the orders that are entered through the managing their order flow. Offering the
order will execute against the available RASH and FIX protocols with a Trade Non-Reactive Trade Now instruction for
size of the locking sell (buy) order at the Now order attribute will be Reactive these protocols, and its requirement that
locked price. The following example Trade Now, and those orders shall the instruction must be sent after the
illustrates this scenario: execute against locking interest order becomes locked, reflects the order
asabaliauskas on DSK3SPTVN1PROD with NOTICES
• Participant A enters a Non-Display automatically.
buy order for 200 shares at $0.95, and flow management practices of these
The Reactive Trade Now instruction participants.
specifies the Trade Now instruction; will be available on an order-by-order BX notes that a similar functionality
• Participant B enters a Post Only sell
currently exists on NYSE Arca, Inc.
order for 100 shares at $0.95; 3 Non-Display orders and preventing the execution of (‘‘NYSE Arca’’), which NYSE Arca refers
midpoint pegged orders during a crossed market.
3 The Exchange recently submitted a proposal to See Securities Exchange Act 78909 (September 22,
to as a ‘‘Non-Display Remove Modifier.’’
amend BX Rules 4702 and 4703 to change the way 2016), 81 FR 66708 (September 28, 2016) (SR–BX– As set forth in NYSE Arca Rule 7.31, a
in which Post Only Orders interact with resting 2016–046). Limit Non-Displayed Order may be
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change that are filed with the I. Self-Regulatory Organization’s provide certain order routing
Commission, and all written Statement of the Terms of Substance of functionalities to other NOM
communications relating to the the Proposed Rule Change Participants and/or use such
proposed rule change between the The Exchange proposes to amend the functionalities themselves.4 Generally,
Commission and any person, other than transaction fees at Chapter XV, Section under MARS, the Exchange pays
those that may be withheld from the 2 entitled ‘‘NASDAQ Options Market— participating NOM Participants to
public in accordance with the subsidize their costs of providing
Fees and Rebates,’’ which governs
provisions of 5 U.S.C. 552, will be routing services to route orders to NOM.
pricing for Nasdaq Participants using
available for Web site viewing and At this time, the Exchange proposes to
the NASDAQ Options Market (‘‘NOM’’),
printing in the Commission’s Public amend two rebates at Chapter XV,
Nasdaq’s facility for executing and
Reference Room, 100 F Street NE., Section 2(1) which pay NOM
routing standardized equity and index
Washington, DC 20549 on official Participants an additional rebate
options. The Exchange proposes to
business days between the hours of provided the NOM Participant adds or
expand certain existing rebates related
10:00 a.m. and 3:00 p.m. Copies of such removes liquidity on NOM as specified
to the Market Access and Routing
filing also will be available for in more detail below. The Exchange
Subsidy or ‘‘MARS,’’ for NOM
inspection and copying at the principal believes that these incentives would
Participants that are eligible for MARS.
office of the Exchange. All comments continue to attract greater liquidity to
The text of the proposed rule change
received will be posted without change; NOM, to the benefit of all market
is available on the Exchange’s Web site
the Commission does not edit personal participants.
at http://nasdaq.cchwallstreet.com, at
identifying information from the principal office of the Exchange, and Amendment to Note ‘‘d’’
submissions. You should submit only at the Commission’s Public Reference
information that you wish to make Today, note ‘‘d’’ in Chapter XV,
Room. Section 2(1) provides that NOM
available publicly. All submissions
should refer to File Number SR–BX– II. Self-Regulatory Organization’s Participants that qualify for MARS
2016–059, and should be submitted on Statement of the Purpose of, and Payment Tiers 1, 2 or 3 will receive an
or before December 8, 2016. Statutory Basis for, the Proposed Rule additional $0.03 per contract Penny
Change Pilot 5 Options Customer and/or
For the Commission, by the Division of Professional Rebate to Add Liquidity for
Trading and Markets, pursuant to delegated In its filing with the Commission, the
authority.14
each transaction which adds liquidity in
Exchange included statements Penny Pilot Options in that month, in
Brent J. Fields, concerning the purpose of and basis for addition to qualifying Penny Pilot
Secretary. the proposed rule change and discussed Options Customer and/or Professional
[FR Doc. 2016–27591 Filed 11–16–16; 8:45 am] any comments it received on the Rebate to Add Liquidity Tiers 1–8. NOM
BILLING CODE 8011–01–P proposed rule change. The text of these Participants that qualify for a note ‘‘c’’
statements may be examined at the incentive 6 will receive the greater of the
places specified in Item IV below. The
SECURITIES AND EXCHANGE Exchange has prepared summaries, set 4 See SR–NASDAQ–2016–149 (not yet
COMMISSION forth in sections A, B, and C below, of published).
the most significant aspects of such 5 The Penny Pilot was established in March 2008
[Release No. 34–79288; File No. SR– statements. and was last extended in 2016. See Securities
NASDAQ–2016–152] Exchange Act Release Nos. 57579 (March 28, 2008),
A. Self-Regulatory Organization’s 73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008–
Self-Regulatory Organizations; The Statement of the Purpose of, and 026) (notice of filing and immediate effectiveness
NASDAQ Stock Market LLC; Notice of Statutory Basis for, the Proposed Rule establishing Penny Pilot); and 78037 (June 10,
Filing and Immediate Effectiveness of 2016), 81 FR 39299 (June 16, 2016) (SR–NASDAQ–
Change 2016–052) (notice of filing and immediate
Proposed Rule Change To Amend the effectiveness extending the Penny Pilot through
Transaction Fees at Chapter XV, 1. Purpose December 31, 2016). All Penny Pilot Options listed
Section 2 Entitled ‘‘NASDAQ Options NOM recently filed a proposal to its on the Exchange can be found at http://
Market—Fees and Rebates’’ www.nasdaqtrader.com/
MARS subsidy program,3 which pays a MicroNews.aspx?id=OTA2016-15.
subsidy to NOM Participants that 6 The note ‘‘c’’ incentive currently provides,
November 10, 2016.
‘‘Participants that: (1) add Customer, Professional,
Pursuant to Section 19(b)(1) of the 3 MARS is described in Chapter XV, Section 2(6). Firm, Non-NOM Market Maker and/or Broker-
Securities Exchange Act of 1934 A NOM Participant must have System Eligibility to Dealer liquidity in Penny Pilot Options and/or Non-
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 qualify for MARS. In order to be eligible the NOM Penny Pilot Options of 1.15% or more of total
notice is hereby given that on November Participant’s routing system must qualify under the industry customer equity and ETF option ADV
conditions specified in Chapter XV, Section 2(6), contracts per day in a month will receive an
1, 2016, The NASDAQ Stock Market which were amended by SR–NASDAQ–2016–149. additional $0.02 per contract Penny Pilot Options
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed MARS Payments are made to NOM Participants that Customer and/or Professional Rebate to Add
with the Securities and Exchange have System Eligibility and have routed the Liquidity for each transaction which adds liquidity
Commission (‘‘SEC’’ or ‘‘Commission’’) requisite number of Eligible Contracts daily in a in Penny Pilot Options in that month; or (2) add
month (‘‘Average Daily Volume’’), which were Customer, Professional, Firm, Non-NOM Market
the proposed rule change as described executed on NOM. For the purpose of qualifying for Maker and/or Broker-Dealer liquidity in Penny Pilot
in Items I, II, and III, below, which Items the MARS Payment, Eligible Contracts may include Options and/or Non-Penny Pilot Options of 1.30%
asabaliauskas on DSK3SPTVN1PROD with NOTICES
have been prepared by the Exchange. Firm, Non-NOM Market Maker, Broker-Dealer, or or more of total industry customer equity and ETF
The Commission is publishing this Joint Back Office or ‘‘JBO’’ equity option orders that option ADV contracts per day in a month will
add liquidity and are electronically delivered and receive an additional $0.05 per contract Penny Pilot
notice to solicit comments on the executed. Eligible Contracts do not include Mini Options Customer and/or Professional Rebate to
proposed rule change from interested Option orders. The specified MARS Payment will Add Liquidity for each transaction which adds
persons. be paid on all executed Eligible Contracts that add liquidity in Penny Pilot Options in that month; or
liquidity, which are routed to NOM through a (3) (a) add Customer, Professional, Firm, Non-NOM
participating NOM Participant’s System and meet Market Maker and/or Broker-Dealer liquidity in
14 17 CFR 200.30–3(a)(12). the requisite Eligible Contracts ADV. No payment Penny Pilot Options and/or Non-Penny Pilot
1 15 U.S.C. 78s(b)(1). will be made with respect to orders that are routed Options above 0.80% of total industry customer
2 17 CFR 240.19b–4. to NOM, but not executed. equity and ETF option ADV contracts per day in a
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Document Created: 2016-11-17 02:59:55
Document Modified: 2016-11-17 02:59:55
| 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 81203 |
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