82 FR 12376 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter VII, Section 6 of the Options Rules Relating to Market Maker Quotations

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 40 (March 2, 2017)

Page Range		12376-12377
FR Document		2017-04035
Federal Register, Volume 82 Issue 40 (Thursday, March 2, 2017)
[Federal Register Volume 82, Number 40 (Thursday, March 2, 2017)]
[Notices]
[Pages 12376-12377]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-04035]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80107; File No. SR-NASDAQ-2017-020]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Chapter VII, Section 6 of the Options Rules Relating to Market 
Maker Quotations

February 24, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 14, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Chapter VII, Section 6 of the 
Options Rules relating to Market Maker Quotations.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    Nasdaq is proposing to amend Chapter VII, Section 6 of the Options 
Rules relating to Market Maker Quotations to amend the quote spread 
parameters for in-the-money series where the market for the underlying 
security is wider than $5. Currently, Chapter VII, Section 6 states 
that options on equities (including Exchange-Traded Fund Shares), and 
index options must be quoted with a difference not to exceed $5 between 
the bid and offer regardless of the price of the bid, including before 
and during the opening. However, respecting in-the-money series where 
the market for the underlying security is wider than $5, the bid/ask 
differential may be as wide as the quotation for the underlying 
security on the primary market. Nasdaq proposes to change this 
provision so that, for in-the-money series where the market for the 
underlying security is wider than $5, the bid/ask differential may be 
as wide as the spread between the national best bid and offer 
(``NBBO'') in the underlying security.
    Nasdaq is proposing this change so that Chapter VII, Section 6 will 
be consistent with Rule 803(b)(4)(i) of the International Securities 
Exchange, LLC (``ISE'') in this regard.\3\ Pursuant to the acquisition 
of the indirect parent company of ISE by Nasdaq, Inc.,\4\ Nasdaq is 
migrating ISE platforms to Nasdaq platforms, and proposing consistent 
rules where appropriate. In addition to making the Nasdaq and ISE rules 
consistent with one another in this regard, Nasdaq believes that 
measuring the permissible width of a market maker's quote against the 
NBBO more accurately reflects the current trading environment where 
multiple trading venues contribute to the prevailing

[[Page 12377]]

market price of a security underlying an options series traded on 
Nasdaq.\5\
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    \3\ ISE Rule 803(b)(4)(i) rule provides that (i) the bid/offer 
differentials stated in subparagraph (b)(4) of this Rule shall not 
apply to in-the-money options series where the underlying securities 
market is wider than the differentials set forth above. For these 
series, the bid/ask differential may be as wide as the spread 
between the national best bid and offer in the underlying security.
    \4\ See Securities Exchange Act Release No. 78119 (June 21, 
2016), 81 FR 41611 (June 27, 2016) (SR-ISE-2016-11).
    \5\ For example, if the primary market for ABC has a quote of 
$65 (bid)-$73 (offer), Nasdaq market makers currently may quote in-
the-money option series on that security with a bid/offer 
differential of $8, even if other exchanges that trade ABC may 
collectively have a higher bid of $66 and a lower offer of $72. 
Under the proposed rule, Nasdaq market makers would be required to 
quote in-the-money option series on ABC with a bid/offer 
differential of no more than $6.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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. 
The proposed change adopts a bid/ask differential for market makers for 
in-the-money series where the market for the underlying security is 
wider than $5 that is consistent with ISE Rule 803(b)(4)(i). Nasdaq 
also believes that the proposal is consistent with the Act because 
measuring the permissible width of a market maker's quote against the 
NBBO more accurately reflects the current trading environment where 
multiple trading venues contribute to the prevailing market price of a 
security underlying an options series traded on Nasdaq.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed change will adopt 
the same requirement as ISE Rule 803(b)(4)(i), and will apply the same 
standard to all Market Makers for in-the-money series where the market 
for the underlying security is wider than $5.

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 \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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 proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2017-020 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2017-020. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-020, and should 
be submitted on or before March 23, 2017.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-04035 Filed 3-1-17; 8:45 am]
BILLING CODE 8011-01-P
12376 Federal Register / Vol. 82, No. 40 / Thursday, March 2, 2017 / Notices

it appears to the Commission that such ISEGemini–2017–07 and should be statements may be examined at the
action is: (i) Necessary or appropriate in submitted on or before March 23, 2017. places specified in Item IV below. The
the public interest; (ii) for the protection For the Commission, by the Division of Exchange has prepared summaries, set
of investors; or (iii) otherwise in Trading and Markets, pursuant to delegated forth in sections A, B, and C below, of
furtherance of the purposes of the Act. authority.16 the most significant aspects of such
If the Commission takes such action, the Robert W. Errett, statements.
Commission shall institute proceedings Deputy Secretary.
to determine whether the proposed rule A. Self-Regulatory Organization’s
[FR Doc. 2017–04034 Filed 3–1–17; 8:45 am] Statement of the Purpose of, and the
should be approved or disapproved.
BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule
IV. Solicitation of Comments Change
Interested persons are invited to 1. Purpose
SECURITIES AND EXCHANGE
submit written data, views, and
COMMISSION
arguments concerning the foregoing, Nasdaq is proposing to amend
including whether the proposed rule [Release No. 34–80107; File No. SR– Chapter VII, Section 6 of the Options
change is consistent with the Act. NASDAQ–2017–020] Rules relating to Market Maker
Comments may be submitted by any of Quotations to amend the quote spread
the following methods: Self-Regulatory Organizations; The parameters for in-the-money series
NASDAQ Stock Market LLC; Notice of where the market for the underlying
Electronic Comments Filing and Immediate Effectiveness of security is wider than $5. Currently,
• Use the Commission’s Internet Proposed Rule Change To Amend Chapter VII, Section 6 states that
comment form (http://www.sec.gov/ Chapter VII, Section 6 of the Options options on equities (including
rules/sro.shtml); or Rules Relating to Market Maker Exchange-Traded Fund Shares), and
• Send an email to rule-comments@ Quotations index options must be quoted with a
sec.gov. Please include File Number SR– difference not to exceed $5 between the
February 24, 2017.
ISEGemini–2017–07 on the subject line. bid and offer regardless of the price of
Pursuant to Section 19(b)(1) of the
Paper Comments Securities Exchange Act of 1934 the bid, including before and during the
• Send paper comments in triplicate (‘‘Act’’),1 and Rule 19b–4 thereunder,2 opening. However, respecting in-the-
to Secretary, Securities and Exchange notice is hereby given that on February money series where the market for the
Commission, 100 F Street NE., 14, 2017, The NASDAQ Stock Market underlying security is wider than $5,
Washington, DC 20549–1090. LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed the bid/ask differential may be as wide
with the Securities and Exchange as the quotation for the underlying
All submissions should refer to File
Commission (‘‘SEC’’ or ‘‘Commission’’) security on the primary market. Nasdaq
Number SR–ISEGemini–2017–07. This
the proposed rule change as described proposes to change this provision so
file number should be included on the
in Items I, II, and III, below, which Items that, for in-the-money series where the
subject line if email is used. To help the
have been prepared by the Exchange. market for the underlying security is
Commission process and review your
The Commission is publishing this wider than $5, the bid/ask differential
comments more efficiently, please use
notice to solicit comments on the may be as wide as the spread between
only one method. The Commission will
proposed rule change from interested the national best bid and offer
post all comments on the Commission’s
persons. (‘‘NBBO’’) in the underlying security.
Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s Nasdaq is proposing this change so
submission, all subsequent Statement of the Terms of Substance of that Chapter VII, Section 6 will be
amendments, all written statements the Proposed Rule Change consistent with Rule 803(b)(4)(i) of the
with respect to the proposed rule International Securities Exchange, LLC
The Exchange proposes to amend (‘‘ISE’’) in this regard.3 Pursuant to the
change that are filed with the
Chapter VII, Section 6 of the Options acquisition of the indirect parent
Commission, and all written
Rules relating to Market Maker company of ISE by Nasdaq, Inc.,4
communications relating to the
Quotations. Nasdaq is migrating ISE platforms to
proposed rule change between the The text of the proposed rule change
Commission and any person, other than Nasdaq platforms, and proposing
is available on the Exchange’s Web site consistent rules where appropriate. In
those that may be withheld from the at http://nasdaq.cchwallstreet.com, at
public in accordance with the addition to making the Nasdaq and ISE
the principal office of the Exchange, and rules consistent with one another in this
provisions of 5 U.S.C. 552, will be at the Commission’s Public Reference
available for Web site viewing and regard, Nasdaq believes that measuring
Room. the permissible width of a market
printing in the Commission’s Public
Reference Room, 100 F Street NE., II. Self-Regulatory Organization’s maker’s quote against the NBBO more
Washington, DC 20549, on official Statement of the Purpose of, and accurately reflects the current trading
business days between the hours of Statutory Basis for, the Proposed Rule environment where multiple trading
10:00 a.m. and 3:00 p.m. Copies of the Change venues contribute to the prevailing
filing also will be available for In its filing with the Commission, the
inspection and copying at the principal Exchange included statements
3 ISE Rule 803(b)(4)(i) rule provides that (i) the

office of the Exchange. All comments bid/offer differentials stated in subparagraph (b)(4)
sradovich on DSK3GMQ082PROD with NOTICES

concerning the purpose of and basis for of this Rule shall not apply to in-the-money options
received will be posted without change; the proposed rule change and discussed series where the underlying securities market is
the Commission does not edit personal any comments it received on the wider than the differentials set forth above. For
identifying information from proposed rule change. The text of these these series, the bid/ask differential may be as wide
submissions. You should submit only as the spread between the national best bid and
offer in the underlying security.
information that you wish to make 16 17 CFR 200.30–3(a)(12). 4 See Securities Exchange Act Release No. 78119
available publicly. All submissions 1 15 U.S.C. 78s(b)(1). (June 21, 2016), 81 FR 41611 (June 27, 2016) (SR–
should refer to File Number SR– 2 17 CFR 240.19b–4. ISE–2016–11).

VerDate Sep<11>2014 16:13 Mar 01, 2017 Jkt 241001 PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 E:\FR\FM\02MRN1.SGM 02MRN1
Federal Register / Vol. 82, No. 40 / Thursday, March 2, 2017 / Notices 12377

market price of a security underlying an interest; (ii) impose any significant communications relating to the
options series traded on Nasdaq.5 burden on competition; and (iii) become proposed rule change between the
operative for 30 days from the date on Commission and any person, other than
2. Statutory Basis
which it was filed, or such shorter time those that may be withheld from the
The Exchange believes that its as the Commission may designate, it has public in accordance with the
proposal is consistent with Section 6(b) become effective pursuant to Section provisions of 5 U.S.C. 552, will be
of the Act,6 in general, and furthers the 19(b)(3)(A)(iii) of the Act 8 and available for Web site viewing and
objectives of Section 6(b)(5) of the Act,7 subparagraph (f)(6) of Rule 19b–4 printing in the Commission’s Public
in particular, in that it is designed to thereunder.9 Reference Room, 100 F Street NE.,
promote just and equitable principles of At any time within 60 days of the Washington, DC 20549, on official
trade, to remove impediments to and filing of the proposed rule change, the business days between the hours of
perfect the mechanism of a free and Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the
open market and a national market temporarily suspend such rule change if filing also will be available for
system, and, in general to protect it appears to the Commission that such inspection and copying at the principal
investors and the public interest. The action is: (i) Necessary or appropriate in office of the Exchange. All comments
proposed change adopts a bid/ask the public interest; (ii) for the protection received will be posted without change;
differential for market makers for in-the- of investors; or (iii) otherwise in the Commission does not edit personal
money series where the market for the furtherance of the purposes of the Act. identifying information from
underlying security is wider than $5 If the Commission takes such action, the submissions. You should submit only
that is consistent with ISE Rule Commission shall institute proceedings information that you wish to make
803(b)(4)(i). Nasdaq also believes that to determine whether the proposed rule available publicly. All submissions
the proposal is consistent with the Act should be approved or disapproved. should refer to File Number SR–
because measuring the permissible NASDAQ–2017–020, and should be
width of a market maker’s quote against IV. Solicitation of Comments
submitted on or before March 23, 2017.
the NBBO more accurately reflects the Interested persons are invited to For the Commission, by the Division
current trading environment where submit written data, views, and of Trading and Markets, pursuant to
multiple trading venues contribute to arguments concerning the foregoing, delegated authority.10
the prevailing market price of a security including whether the proposed rule
underlying an options series traded on change is consistent with the Act. Robert W. Errett,
Nasdaq. Comments may be submitted by any of Deputy Secretary.
the following methods: [FR Doc. 2017–04035 Filed 3–1–17; 8:45 am]
B. Self-Regulatory Organization’s
BILLING CODE 8011–01–P
Statement on Burden on Competition Electronic Comments
The Exchange does not believe that • Use the Commission’s Internet
the proposed rule change will impose comment form (http://www.sec.gov/ SECURITIES AND EXCHANGE
any burden on competition not rules/sro.shtml); or COMMISSION
necessary or appropriate in furtherance • Send an email to rule-comments@
of the purposes of the Act. The sec.gov. Please include File Number SR– Proposed Collection; Comment
proposed change will adopt the same NASDAQ–2017–020 on the subject line. Request
requirement as ISE Rule 803(b)(4)(i), Upon Written Request, Copies Available
and will apply the same standard to all Paper Comments
From: Securities and Exchange
Market Makers for in-the-money series • Send paper comments in triplicate Commission, Office of FOIA Services,
where the market for the underlying to Secretary, Securities and Exchange 100 F Street NE., Washington, DC
security is wider than $5. Commission, 100 F Street NE., 20549–2736.
Washington, DC 20549–1090.
C. Self-Regulatory Organization’s Extension:
Statement on Comments on the All submissions should refer to File Investor Form; SEC File No. 270–485, OMB
Proposed Rule Change Received From Number SR–NASDAQ–2017–020. This Control No. 3235–0547.
Members, Participants, or Others file number should be included on the
Notice is hereby given pursuant to the
subject line if email is used. To help the
No written comments were either Paperwork Reduction Act of 1995 (44
Commission process and review your
solicited or received. U.S.C. 3501 et seq.) that the Securities
comments more efficiently, please use
and Exchange Commission
III. Date of Effectiveness of the only one method. The Commission will
(‘‘Commission’’) is soliciting comments
Proposed Rule Change and Timing for post all comments on the Commission’s
on the collection of information
Commission Action Internet Web site (http://www.sec.gov/
summarized below. The Commission
rules/sro.shtml). Copies of the
Because the foregoing proposed rule plans to submit this existing collection
submission, all subsequent
change does not: (i) Significantly affect of information to the Office of
amendments, all written statements
the protection of investors or the public Management and Budget (‘‘OMB’’) for
with respect to the proposed rule
extension and approval.
change that are filed with the
5 For example, if the primary market for ABC has
Each year the Commission receives
a quote of $65 (bid)–$73 (offer), Nasdaq market Commission, and all written
several thousand contacts from
makers currently may quote in-the-money option
sradovich on DSK3GMQ082PROD with NOTICES

series on that security with a bid/offer differential 8 15 U.S.C. 78s(b)(3)(A)(iii).
investors who have complaints or
of $8, even if other exchanges that trade ABC may 9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– questions on a wide range of
collectively have a higher bid of $66 and a lower 4(f)(6) requires a self-regulatory organization to give investment-related issues. To make it
offer of $72. Under the proposed rule, Nasdaq the Commission written notice of its intent to file easier for the public to contact the
market makers would be required to quote in-the- the proposed rule change at least five business days
money option series on ABC with a bid/offer agency electronically, the Commission’s
prior to the date of filing of the proposed rule
differential of no more than $6. change, or such shorter time as designated by the Office of Investor Education and
6 15 U.S.C. 78f(b).
Commission. The Exchange has satisfied this
7 15 U.S.C. 78f(b)(5). requirement. 10 17 CFR 200.30–3(a)(12).

VerDate Sep<11>2014 16:13 Mar 01, 2017 Jkt 241001 PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 E:\FR\FM\02MRN1.SGM 02MRN1
Document Created: 2017-03-02 00:09:17
Document Modified: 2017-03-02 00:09:17
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		82 FR 12376