82 FR 12378 - Self-Regulatory Organizations; NASDAQ BX, Inc.; 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		12378-12379
FR Document		2017-04032
Federal Register, Volume 82 Issue 40 (Thursday, March 2, 2017)
[Federal Register Volume 82, Number 40 (Thursday, March 2, 2017)]
[Notices]
[Pages 12378-12379]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-04032]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80104; File No. SR-BX-2017-011]


Self-Regulatory Organizations; NASDAQ BX, Inc.; 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, 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, 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://nasdaqbx.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
    BX 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. BX 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.
    BX 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

[[Page 12379]]

acquisition of the indirect parent company of ISE by Nasdaq, Inc. 
(``Nasdaq''),\4\ Nasdaq is migrating ISE platforms to Nasdaq platforms, 
and proposing consistent rules where appropriate. In addition to making 
the BX and ISE rules consistent with one another in this regard, BX 
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 
market price of a security underlying an options series traded on 
BX.\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), BX 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, BX 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). BX 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 BX.
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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-BX-2017-011 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-BX-2017-011. 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-BX-2017-011, 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. 2017-04032 Filed 3-1-17; 8:45 am]
BILLING CODE 8011-01-P
12378 Federal Register / Vol. 82, No. 40 / Thursday, March 2, 2017 / Notices

Advocacy (‘‘OIEA’’) created an Written comments are invited on: (a) Rules relating to Market Maker
electronic form (the Investor Form) that Whether the proposed collection of Quotations.
provides drop down options to choose information is necessary for the proper The text of the proposed rule change
from in order to categorize the investor’s performance of the functions of the is available on the Exchange’s Web site
complaint or question, and may also agency, including whether the at http://nasdaqbx.cchwallstreet.com/,
provide the investor with automated information will have practical utility; at the principal office of the Exchange,
information about their issue. The (b) the accuracy of the agency’s estimate and at the Commission’s Public
Investor Form asks investors to provide of the burden of the collection of Reference Room.
information concerning, among other information; (c) ways to enhance the
II. Self-Regulatory Organization’s
things, their names, how they can be quality, utility, and clarity of the
reached, the names of the individuals or information collected; and (d) ways to Statement of the Purpose of, and
entities involved, the nature of their minimize the burden of the collection of Statutory Basis for, the Proposed Rule
complaint or tip, what documents they information on respondents, including Change
can provide, and what, if any, actions through the use of automated collection In its filing with the Commission, the
they have taken. Use of the Investor techniques or other forms of information Exchange included statements
Form is voluntary. Absent the forms, the technology. Consideration will be given concerning the purpose of and basis for
public still has several ways to contact to comments and suggestions submitted the proposed rule change and discussed
the agency, including telephone, in writing within 60 days of this any comments it received on the
facsimile, letters, and email. Investors publication. proposed rule change. The text of these
can access the Investor Form through Please direct your written comments statements may be examined at the
the consolidated Investor Complaint to Pamela C. Dyson, Chief Information places specified in Item IV below. The
and Question Web page. Officer, Securities and Exchange Exchange has prepared summaries, set
OIEA receives approximately 20,000 Commission, c/o Remi Pavlik-Simon, forth in sections A, B, and C below, of
contacts each year through the Investor 100 F St. NE., Washington, DC 20549; or the most significant aspects of such
Form. Investors who choose not to use send an email to: PRA_Mailbox@ statements.
the Investor Form receive the same level sec.gov.
of service as those who do. The dual A. Self-Regulatory Organization’s
Dated: February 24, 2017. Statement of the Purpose of, and the
purpose of the form is to make it easier Robert W. Errett,
for the public to contact the agency with Statutory Basis for, the Proposed Rule
Deputy Secretary. Change
complaints, questions, tips, or other
[FR Doc. 2017–04023 Filed 3–1–17; 8:45 am]
feedback and to further streamline the 1. Purpose
BILLING CODE 8011–01–P
workflow of Commission staff that
BX is proposing to amend Chapter
record, process, and respond to investor
VII, Section 6 of the Options Rules
contacts.
The Commission uses the information SECURITIES AND EXCHANGE relating to Market Maker Quotations to
that investors supply on the Investor COMMISSION amend the quote spread parameters for
Form to review and process the contact [Release No. 34–80104; File No. SR–BX– in-the-money series where the market
(which may, in turn, involve responding 2017–011] for the underlying security is wider than
to questions, processing complaints, or, $5. Currently, Chapter VII, Section 6
as appropriate, initiating enforcement Self-Regulatory Organizations; states that options on equities
investigations), to maintain a record of NASDAQ BX, Inc.; Notice of Filing and (including Exchange-Traded Fund
contacts, to track the volume of investor Immediate Effectiveness of Proposed Shares), and index options must be
complaints, and to analyze trends. Use Rule Change To Amend Chapter VII, quoted with a difference not to exceed
of the Investor Form is voluntary. The Section 6 of the Options Rules $5 between the bid and offer regardless
Investor Form asks investors to provide Relating to Market Maker Quotations of the price of the bid, including before
information concerning, among other and during the opening. However,
February 24, 2017.
things, their names, how they can be respecting in-the-money series where
Pursuant to Section 19(b)(1) of the the market for the underlying security is
reached, the names of the individuals or Securities Exchange Act of 1934
entities involved, the nature of their wider than $5, the bid/ask differential
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 may be as wide as the quotation for the
complaint or tip, what documents they notice is hereby given that on February
can provide, and what, if any, actions underlying security on the primary
14, 2017, NASDAQ BX, Inc. (‘‘BX’’ or market. BX proposes to change this
they have taken. ‘‘Exchange’’) filed with the Securities
The staff of the Commission estimates provision so that, for in-the-money
and Exchange Commission (‘‘SEC’’ or
that the total reporting burden for using series where the market for the
‘‘Commission’’) the proposed rule
the Investor Form is 5,000 hours. The underlying security is wider than $5,
change as described in Items I, II, and
calculation of this estimate depends on the bid/ask differential may be as wide
III, below, which Items have been
the number of investors who use the as the spread between the national best
prepared by the Exchange. The
forms each year and the estimated time bid and offer (‘‘NBBO’’) in the
Commission is publishing this notice to
it takes to complete the forms: 20,000 underlying security.
solicit comments on the proposed rule
respondents × 15 minutes = 5,000 change from interested persons.
BX is proposing this change so that
burden hours. Chapter VII, Section 6 will be consistent
The Commission may not conduct or I. Self-Regulatory Organization’s with Rule 803(b)(4)(i) of the
sradovich on DSK3GMQ082PROD with NOTICES

sponsor a collection of information Statement of the Terms of Substance of International Securities Exchange, LLC
unless it displays a currently valid the Proposed Rule Change (‘‘ISE’’) in this regard.3 Pursuant to the
control number. No person shall be The Exchange proposes to amend 3 ISE Rule 803(b)(4)(i) rule provides that (i) the
subject to any penalty for failing to Chapter VII, Section 6 of the Options bid/offer differentials stated in subparagraph (b)(4)
comply with a collection of information of this Rule shall not apply to in-the-money options
subject to the PRA that does not display 1 15 U.S.C. 78s(b)(1). series where the underlying securities market is
a valid OMB control number. 2 17 CFR 240.19b–4. wider than the differentials set forth above. For

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Federal Register / Vol. 82, No. 40 / Thursday, March 2, 2017 / Notices 12379

acquisition of the indirect parent requirement as ISE Rule 803(b)(4)(i), Paper Comments
company of ISE by Nasdaq, Inc. and will apply the same standard to all
(‘‘Nasdaq’’),4 Nasdaq is migrating ISE Market Makers for in-the-money series • Send paper comments in triplicate
platforms to Nasdaq platforms, and where the market for the underlying to Secretary, Securities and Exchange
proposing consistent rules where security is wider than $5. Commission, 100 F Street NE.,
appropriate. In addition to making the Washington, DC 20549–1090.
BX and ISE rules consistent with one C. Self-Regulatory Organization’s
Statement on Comments on the All submissions should refer to File
another in this regard, BX believes that
Proposed Rule Change Received From Number SR–BX–2017–011. This file
measuring the permissible width of a
Members, Participants, or Others number should be included on the
market maker’s quote against the NBBO
more accurately reflects the current subject line if email is used. To help the
No written comments were either Commission process and review your
trading environment where multiple solicited or received.
trading venues contribute to the comments more efficiently, please use
prevailing market price of a security III. Date of Effectiveness of the only one method. The Commission will
underlying an options series traded on Proposed Rule Change and Timing for post all comments on the Commission’s
BX.5 Commission Action Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the
2. Statutory Basis Because the foregoing proposed rule submission, all subsequent
The Exchange believes that its change does not: (i) Significantly affect amendments, all written statements
proposal is consistent with Section 6(b) the protection of investors or the public with respect to the proposed rule
of the Act,6 in general, and furthers the interest; (ii) impose any significant change that are filed with the
objectives of Section 6(b)(5) of the Act,7 burden on competition; and (iii) become Commission, and all written
in particular, in that it is designed to operative for 30 days from the date on
communications relating to the
promote just and equitable principles of which it was filed, or such shorter time
proposed rule change between the
trade, to remove impediments to and as the Commission may designate, it has
become effective pursuant to Section Commission and any person, other than
perfect the mechanism of a free and
19(b)(3)(A)(iii) of the Act 8 and those that may be withheld from the
open market and a national market
system, and, in general to protect subparagraph (f)(6) of Rule 19b–4 public in accordance with the
investors and the public interest. The thereunder.9 provisions of 5 U.S.C. 552, will be
proposed change adopts a bid/ask available for Web site viewing and
At any time within 60 days of the printing in the Commission’s Public
differential for market makers for in-the- filing of the proposed rule change, the
money series where the market for the Reference Room, 100 F Street NE.,
Commission summarily may
underlying security is wider than $5 Washington, DC 20549, on official
temporarily suspend such rule change if
that is consistent with ISE Rule it appears to the Commission that such business days between the hours of
803(b)(4)(i). BX also believes that the action is: (i) Necessary or appropriate in 10:00 a.m. and 3:00 p.m. Copies of the
proposal is consistent with the Act the public interest; (ii) for the protection filing also will be available for
because measuring the permissible of investors; or (iii) otherwise in inspection and copying at the principal
width of a market maker’s quote against furtherance of the purposes of the Act. office of the Exchange. All comments
the NBBO more accurately reflects the If the Commission takes such action, the received will be posted without change;
current trading environment where Commission shall institute proceedings the Commission does not edit personal
multiple trading venues contribute to to determine whether the proposed rule identifying information from
the prevailing market price of a security should be approved or disapproved. submissions. You should submit only
underlying an options series traded on information that you wish to make
BX. IV. Solicitation of Comments
available publicly. All submissions
B. Self-Regulatory Organization’s Interested persons are invited to should refer to File Number SR–BX–
Statement on Burden on Competition submit written data, views, and 2017–011, and should be submitted on
The Exchange does not believe that arguments concerning the foregoing, or before March 23, 2017.
the proposed rule change will impose including whether the proposed rule For the Commission, by the Division
any burden on competition not change is consistent with the Act. of Trading and Markets, pursuant to
necessary or appropriate in furtherance Comments may be submitted by any of delegated authority.10
of the purposes of the Act. The the following methods:
proposed change will adopt the same Robert W. Errett,
Electronic Comments
Deputy Secretary.
these series, the bid/ask differential may be as wide • Use the Commission’s Internet [FR Doc. 2017–04032 Filed 3–1–17; 8:45 am]
as the spread between the national best bid and comment form (http://www.sec.gov/ BILLING CODE 8011–01–P
offer in the underlying security.
4 See Securities Exchange Act Release No. 78119
rules/sro.shtml); or
(June 21, 2016), 81 FR 41611 (June 27, 2016) (SR– • Send an email to rule-comments@
ISE–2016–11). sec.gov. Please include File Number SR–
5 For example, if the primary market for ABC has

a quote of $65 (bid)–$73 (offer), BX market makers
BX–2017–011 on the subject line.
currently may quote in-the-money option series on
sradovich on DSK3GMQ082PROD with NOTICES

that security with a bid/offer differential of $8, even 8 15 U.S.C. 78s(b)(3)(A)(iii).
if other exchanges that trade ABC may collectively 9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
have a higher bid of $66 and a lower offer of $72. 4(f)(6) requires a self-regulatory organization to give
Under the proposed rule, BX market makers would the Commission written notice of its intent to file
be required to quote in-the-money option series on the proposed rule change at least five business days
ABC with a bid/offer differential of no more than prior to the date of filing of the proposed rule
$6. change, or such shorter time as designated by the
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).

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Document Created: 2017-03-02 00:09:42
Document Modified: 2017-03-02 00:09:42
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 12378