82 FR 14087 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Liability Caps and Related Reimbursement Requirements
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 50 (March 16, 2017)
Federal Register Volume 82, Issue 50 (March 16, 2017)
| Page Range | 14087-14090 | |
| FR Document | 2017-05216 |
[Federal Register Volume 82, Number 50 (Thursday, March 16, 2017)] [Notices] [Pages 14087-14090] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-05216] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80209; File No. SR-ISEGemini-2017-11] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Liability Caps and Related Reimbursement Requirements March 10, 2017. 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 February 27, 2017, ISE Gemini, LLC (``ISE Gemini'' 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 705 (Limitation of Liability) to harmonize its liability caps and related reimbursement requirements with those of NASDAQ BX, Inc. (``BX''), NASDAQ PHLX LLC (``Phlx'') and NASDAQ Stock Market LLC (``NSM'' and together with BX and Phlx, the ``Nasdaq Exchanges''). The text of the proposed rule change is available on the Exchange's Web site at www.ise.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. [[Page 14088]] 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 The purpose of this proposed rule change is to amend Rule 705 (Limitation of Liability) to harmonize the Exchange's existing liability caps and related reimbursement requirements for claims under Rule 705(d) with the caps and requirements set forth in the rules of the Nasdaq Exchanges.\3\ The Exchange and its affiliates, International Securities Exchange, LLC and ISE Mercury, LLC (together, the ``ISE Exchanges''), were recently acquired (the ``Acquisition'') by Nasdaq, Inc. (``HoldCo'').\4\ In the context of the Acquisition, the ISE Exchanges are working to align certain rules with rules of the Nasdaq Exchanges in order to provide consistent standards across the six exchanges operated by HoldCo (the ``HoldCo Affiliated Exchanges''). As part of this effort, the proposal set forth below harmonizes the Exchange's liability caps and the related reimbursement requirements with those of the Nasdaq Exchanges in order to provide uniform standards and requirements for users of the HoldCo Affiliated Exchanges.\5\ --------------------------------------------------------------------------- \3\ See BX Rule 4626(b) and Phlx Rule 1015. See also NSM Rule 4626(b). \4\ See Securities Exchange Act Release No. 78119 (June 21, 2016), 81 FR 41611 (June 27, 2016) (SR-ISE-2016-11; SR-ISEGemini- 2016-05; SR-ISEMercury-2016-10). \5\ International Securities Exchange, LLC and ISE Mercury, LLC will each file a proposed rule change with the Commission to adopt similar requirements. --------------------------------------------------------------------------- Rule 705 in its current form generally states that the Exchange is not liable for any losses due to the Exchange's negligence or unintentional actions, but also provides in Rule 705(d) that notwithstanding this general limitation on liability, the Exchange may compensate its members for losses resulting directly from the malfunction of the Exchange's physical equipment, devices and/or programming. Subsections (d)(1)-(d)(3) of Rule 705 contains express conditions governing the voluntary payments made by the Exchange under these limited circumstances. Specifically, the Exchange's payments for any and all system failures on a single trading day are capped at $250,000 under subsection (d)(1). The rule text states that for the aggregate of all claims made by all market participants related to the use of the Exchange on a single trading day, the Exchange's payments shall not exceed $250,000. Subsection (d)(2) further provides that if the cumulative claims exceed the $250,000 cap, this amount would be proportionally allocated among all such claims. Finally, subsection (d)(3) specifies that in order for a member to be eligible to receive payment under this Rule, claims for payment must be made in writing and submitted no later than the opening of trading on the next business day after the loss. Once in receipt of a claim, the Exchange is required to verify that: (i) A valid order was accepted into the Exchange's systems; and (ii) an Exchange system failure occurred during the execution or handling of that order. A system failure will be deemed to have occurred when there is a malfunction of the Exchange's physical systems, devices or software. The Exchange now proposes to amend the existing rule text in Rule 705(d) to adopt the same liability caps and reimbursement requirements as the Nasdaq Exchanges.\6\ Proposed Rule 705(d) would provide that the Exchange may, notwithstanding the general limitations on liability contained in Rule 705(a), compensate users of the Exchange for losses directly resulting from the actual failure of the System,\7\ or any other Exchange quotation, transaction reporting, execution, order routing or other systems or facility to correctly process an order, quote, message, or other data, provided that the Exchange has acknowledged receipt of the order, quote, message, or data. This limited exception in proposed Rule 705(d) would be subject to certain conditions and requirements contained in proposed subsections (d)(1)- (3). --------------------------------------------------------------------------- \6\ See note 4 above. \7\ ``System'' means the electronic system operated by the Exchange that receives and disseminates quotes, executes orders and reports transactions. See the Constitution of ISE Gemini, Section 13.1(dd). --------------------------------------------------------------------------- Subsection (d)(1) proposes that the aggregate payments for all compensation claims made by all market participants related to the use of the Exchange during a single calendar month would not exceed the larger of $500,000, or the amount of the recovery obtained by the Exchange under any applicable insurance policy.\8\ Under this proposal, the Exchange will eliminate the existing $250,000 daily cap on liability and consider all such claims on a monthly basis, subject to proposed $500,000 monthly liability cap. Each Nasdaq Exchange currently analyzes total eligible liability claims on a per-month look-back basis. The Exchange's proposal to adopt an identical claims process, in effect, would allow ISE Gemini an increased capability to compensate a market participant up to the monthly cap of $500,000 even though the losses occurred on a single day or were across multiple days for a single participant. --------------------------------------------------------------------------- \8\ See BX Rule 4626(b)(1), Phlx Rule 1015(1), and NSM Rule 4626(b)(1) for substantially similar provisions. --------------------------------------------------------------------------- Proposed subsection (d)(2) specifies how the reimbursement funds would be allocated in the event all of the compensation claims submitted during a single calendar month exceed the $500,000 monthly cap. Specifically, if all of the claims arising out of the use of the Exchange cannot be fully satisfied because in the aggregate they exceed the limitations provided for in the Rule ($500,000), then the maximum permitted amount would be proportionally allocated among all such claims arising during a single calendar month.\9\ This is substantially similar to the existing process where the maximum amount is proportionally allocated among all such claims, except it would be for all claims arising during a one-month period under the proposed rule change rather than during a single trading day under the existing Rule. --------------------------------------------------------------------------- \9\ See BX Rule 4626(b)(2), Phlx Rule 1015(2), and NSM Rule 4626(b)(5) for substantially similar provisions. --------------------------------------------------------------------------- Finally, proposed subsection (d)(3) specifies the requirements and procedures applicable to the submission of reimbursement claims. Specifically, all claims for compensation must be submitted in writing no later than 12:00 p.m. ET on the next business day following the day on which the use of the Exchange gave rise to such claims.\10\ As such, the Exchange is proposing to extend the deadline to submit compensation claims from the opening of trading on the next business day to 12:00 p.m. ET. The Exchange believes that the extension of time to make such compensation claims increases the ability of market participants to submit claims in a timely manner. Proposed [[Page 14089]] subsection (d)(3) also states that nothing in the Rule obligates the Exchange to seek recovery under any applicable insurance policy. If the Exchange does seek and receive an insurance recovery that is larger than $500,000, the amount of that recovery would limit the reimbursement funds available for the incident supporting the recovery to the greater recovery amount.\11\ --------------------------------------------------------------------------- \10\ See BX Rule 4626(b)(3) and Phlx Rule 1015(3) for substantially similar provisions. See also NSM Rule 4626(b)(6). \11\ There are no other practical differences between the Exchange's existing reimbursement rule and this proposal than as described above. Specifically these differences are: The liability caps (i.e. the greater of $500,000 or, if the Exchange opts to seek recovery, the recovery amount under any applicable insurance policy), the look-back analysis period of one month, and the later claims deadline of 12:00 p.m. ET. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\12\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\13\ in particular, in that 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 proposal supports this policy by establishing a fair and transparent process by which the Exchange can accommodate claims for reimbursement for the failure of specified systems in specified facilities and under specified conditions. The Exchange believes that its proposal to amend Rule 705(d) will continue to promote fairness in the marketplace in situations where one or more firm's claim results from a problem in a function performed by the Exchange's trading system that is solely the fault of the Exchange. As noted above, the proposal would allow the Exchange an increased capability to compensate a market participant up to the monthly cap of $500,000 even though the losses occurred on a single day or were across multiple days for a single participant. Furthermore, the proposed expansion of time to make such compensation claims would increase the ability of market participants to submit claims in a timely manner. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78f(b). \13\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Lastly, the proposed rule change is intended to align the liability caps and compensation claims requirements with the caps and requirements currently provided by the Nasdaq Exchanges in order to provide consistent rules across the six HoldCo Affiliated Exchanges.\14\ Consistent rules, in turn, would simplify the regulatory requirements for members of the Exchange that are also participants on the Nasdaq Exchanges. The Exchange believes that the proposed rule change would provide greater harmonization among similar rules of the HoldCo Affiliated Exchanges, resulting in greater uniformity and more efficient regulatory compliance. As such, the proposed rule change would foster cooperation and coordination with persons engaged in facilitating transactions in securities and would remove impediments to and perfect the mechanism of a free and open market and a national market system. --------------------------------------------------------------------------- \14\ See note 4 above. --------------------------------------------------------------------------- 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 because all members would be subject to the same liability caps and reimbursement requirements. The proposed rule change is designed to provide greater harmonization among similar rules across the six HoldCo Affiliated Exchanges, resulting in more efficient regulatory compliance for common members. 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 \15\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\16\ --------------------------------------------------------------------------- \15\ 15 U.S.C. 78s(b)(3)(A)(iii). \16\ 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. --------------------------------------------------------------------------- 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 CommentsUse 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-ISEGemini-2017-11 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-ISEGemini-2017-11. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing 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- [[Page 14090]] ISEGemini-2017-11, and should be submitted on or before April 6, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\17\ --------------------------------------------------------------------------- \17\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-05216 Filed 3-15-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 50 / Thursday, March 16, 2017 / Notices 14087
The Exchange also describes the regulated derivatives markets related to Act and the rules and regulations
current derivative markets for bitcoin as the underlying asset with which the thereunder applicable to a national
‘‘[n]ascent.’’ 138 The Exchange notes that Exchange can enter into a surveillance- securities exchange, and in particular,
certain types of options, futures sharing agreement. with Section 6(b)(5) of the Exchange
contracts for differences, and other Act.
C. Basis for Disapproval
derivative instruments are available in It is therefore ordered, pursuant to
certain jurisdictions, but that many of The Commission has, in past Section 19(b)(2) of the Exchange Act,
these are not available in the United approvals of commodity-trust ETPs, that the proposed rule change (SR–
States and that they generally are not emphasized the importance of BatsBZX–2016–30), as modified by
regulated ‘‘to the degree that U.S. surveillance-sharing agreements Amendments No. 1 and 2, be, and it
investors expect derivatives instruments between the national securities hereby is, disapproved.
to be regulated.’’ 139 The Exchange notes exchange listing and trading the ETP,
For the Commission, by the Division of
that the CFTC has approved the and significant markets relating to the Trading and Markets, pursuant to delegated
registration of TeraExchange LLC as a underlying asset.144 Such agreements, authority.147
swap execution facility (‘‘SEF’’) and which are a necessary tool to enable the Eduardo A. Aleman,
that, on October 9, 2014, TeraExchange ETP-listing exchange to detect and deter
Assistant Secretary.
announced that it had hosted the first manipulative conduct, enable the
[FR Doc. 2017–05213 Filed 3–15–17; 8:45 am]
executed bitcoin swap traded on a exchange to meet its obligation under
Section 6(b)(5) of the Exchange Act to BILLING CODE 8011–01–P
CFTC-regulated platform.140 Further,
the Exchange notes that the CFTC has have rules that are designed to prevent
temporarily registered another SEF that fraudulent and manipulative acts and
SECURITIES AND EXCHANGE
would trade swaps on bitcoin.141 practices and to protect investors and
COMMISSION
The Commission acknowledges that the public interest.145
TeraExchange, a market for swaps on As described above, the Exchange has [Release No. 34–80209; File No. SR–
bitcoin, has registered with the CFTC, not entered into a surveillance-sharing ISEGemini–2017–11]
but the Exchange’s description of agreement with a significant, regulated,
trading activity on that market fails to bitcoin-related market. The Commission Self-Regulatory Organizations; ISE
note that the very activity it cites was also does not believe, as discussed Gemini, LLC; Notice of Filing and
the subject of an enforcement action by above, that the proposal supports a Immediate Effectiveness of Proposed
the CFTC. The CFTC found that finding that the significant markets for Rule Change To Harmonize Liability
TeraExchange had improperly arranged bitcoin or derivatives on bitcoin are Caps and Related Reimbursement
for participants to make prearranged, regulated markets with which the Requirements
offsetting ‘‘wash’’ transactions of the Exchange can enter into such an
March 10, 2017.
same price, notional amount, and tenor agreement. Therefore, as the Exchange
has not entered into, and would Pursuant to Section 19(b)(1) of the
and then issued a press release ‘‘to Securities Exchange Act of 1934 (the
create the impression of actual trading currently be unable to enter into, the
type of surveillance-sharing agreement ‘‘Act’’),1 and Rule 19b–4 thereunder,2
in the Bitcoin swap.’’ 142 Neither the notice is hereby given that on February
Exchange nor any commenter provides that has been in place with respect to all
previously approved commodity-trust 27, 2017, ISE Gemini, LLC (‘‘ISE
evidence of meaningful trading volume Gemini’’ or ‘‘Exchange’’) filed with the
in bitcoin derivatives on any regulated ETPs, the Commission does not find the
proposed rule change to be consistent Securities and Exchange Commission
marketplace. Thus, the Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed
believes that the bitcoin derivatives with the Exchange Act and, accordingly,
disapproves the proposed rule change. rule change as described in Items I, II,
markets are not significant, regulated and III below, which Items have been
markets related to bitcoin with which The Commission notes that bitcoin is
still in the relatively early stages of its prepared by the Exchange. The
the Exchange can enter into a Commission is publishing this notice to
surveillance-sharing agreement. development and that, over time,
regulated bitcoin-related markets of solicit comments on the proposed rule
One commenter, and the author of the change from interested persons.
paper submitted with respect to a significant size may develop.146 Should
similar rule filing, assert that the such markets develop, the Commission I. Self-Regulatory Organization’s
existence of bitcoin derivative markets could consider whether a bitcoin ETP Statement of the Terms of Substance of
is not a necessary condition for a bitcoin would, based on the facts and the Proposed Rule Change
ETP.143 The key requirement the circumstances then presented, be
consistent with the requirements of the The Exchange proposes to amend
Commission is applying here, however, Rule 705 (Limitation of Liability) to
is not that a futures or derivatives Exchange Act.
harmonize its liability caps and related
market is required for every ETP, but IV. Conclusion reimbursement requirements with those
that—when the spot market is of NASDAQ BX, Inc. (‘‘BX’’), NASDAQ
For the reasons set forth above, the
unregulated—there must be significant, PHLX LLC (‘‘Phlx’’) and NASDAQ Stock
Commission does not find that the
138 See Amendment No. 1, supra note 1, 81 FR
proposed rule change, as modified by Market LLC (‘‘NSM’’ and together with
at 76661. Amendment Nos. 1 and 2, is consistent BX and Phlx, the ‘‘Nasdaq Exchanges’’).
139 See id. with the requirements of the Exchange The text of the proposed rule change
mstockstill on DSK3G9T082PROD with NOTICES
140 See id. See also ARK Letter, supra note 19, at is available on the Exchange’s Web site
6 (noting that TeraExchange offers bitcoin 144 See supra note 96 and accompanying text. at www.ise.com, at the principal office
forwards). 145 15 U.S.C. 78f(b)(5). of the Exchange, and at the
141 See Amendment No. 1, supra note 1, 81 FR 146 The Exchange notes, for example, that the
Commission’s Public Reference Room.
at 76661. CME and the ICE recently announced bitcoin
142 See TeraExchange Settlement Order, supra
pricing indexes. See Amendment No. 1, supra note
147 17CFR 200.30–3(a)(12).
note 112. 1, 81 FR at 76666. In the future, regulated futures
143 See Anonymous Letter III, supra note 19, at 2; 1 15 U.S.C. 78s(b)(1).
or derivative markets might begin to trade products
Lewis Paper, supra note 42, at 8. based on these indexes. 2 17 CFR 240.19b–4.
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![14090 Federal Register / Vol. 82, No. 50 / Thursday, March 16, 2017 / Notices
ISEGemini–2017–11, and should be proposed rule change. The text of these quotations are exhausted. When a
submitted on or before April 6, 2017. statements may be examined at the market maker’s quote is traded out and
For the Commission, by the Division of places specified in Item IV below. The automatically reinstated into the
Trading and Markets, pursuant to delegated Exchange has prepared summaries, set Exchange’s order book using the Tick-
authority.17 forth in sections A, B, and C below, of Worse functionality, the reinstated
Eduardo A. Aleman, the most significant aspects of such quote will be given priority pursuant to
Assistant Secretary. statements. the Exchange’s split price priority rule
[FR Doc. 2017–05216 Filed 3–15–17; 8:45 am] A. Self-Regulatory Organization’s as discussed below.
BILLING CODE 8011–01–P Statement of the Purpose of, and Due to the lack of demand for the
Statutory Basis for, the Proposed Rule Tick-Worse feature, the Exchange
Change decommissioned the use of this
SECURITIES AND EXCHANGE functionality on February 21, 2017 by
COMMISSION 1. Purpose
asking its members to stop using Tick-
The purpose of the proposed rule Worse by February 21st.7 The Exchange
[Release No. 34–80200; File No. SR–
ISEGemini–2017–12]
change is (i) to describe the plans to turn off this functionality in the
decommission of the ‘‘Tick-Worse’’ system when the last symbol migrates
Self-Regulatory Organizations; ISE functionality and (ii) to amend Rule 713
onto the new Nasdaq INET system on or
Gemini, LLC; Notice of Filing and (Priority of Quotes and Orders) as it
around April 3, 2017 8 as part of its
Immediate Effectiveness of Proposed relates to the priority of split price
system migration to Nasdaq INET
Rule Change Relating to the transactions. The proposed changes are
discussed below. technology.9 As discussed above, the
Decommission of the Tick-Worse Exchange offers the Tick-Worse feature
Functionality ‘‘Tick-Worse’’ Functionality as a voluntary tool for market makers to
March 10, 2017. The Exchange currently provides assist them in meeting their continuous
Pursuant to Section 19(b)(1) of the market makers 3 with Tick-Worse quoting obligations under the
Securities Exchange Act of 1934 functionality, which allows market Exchange’s rules. As such, market
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 makers to pre-define the prices and makers are not required to use the
notice is hereby given that on February sizes at which the system will Exchange-provided functionality and
28, 2017, ISE Gemini, LLC (‘‘ISE automatically move their quotation can program their own systems to
Gemini’’ or ‘‘Exchange’’) filed with the following an execution that exhausts the perform the same functions if they
Securities and Exchange Commission size of their existing quotation.4 As prefer. Here, the Exchange has found
(‘‘SEC’’ or ‘‘Commission’’) the proposed such, when a market maker’s quote is that almost all market makers use their
rule change as described in Items I, II, traded out, it can be automatically own systems rather than the Exchange’s
and III, below, which Items have been reinstated into the Exchange’s order Tick-Worse feature to send refreshed
prepared by the Exchange. The book at the next best price.5 This quotations when their displayed
Commission is publishing this notice to optional feature is intended to help quotations are exhausted, and therefore
solicit comments on the proposed rule market makers meet their continuous discontinued this functionality. Because
change from interested persons. quoting obligations under the the Tick-Worse functionality is
Exchange’s rules 6 when their displayed currently not memorialized in the
I. Self-Regulatory Organization’s Exchange’s rules as noted above, there
Statement of the Terms of Substance of 3 The term ‘‘market makers’’ refers to
is no text of the proposed rule change.
the Proposed Rule Change ‘‘Competitive Market Makers’’ and ‘‘Primary Market
The Exchange provided advance notice
Makers’’ collectively. See Rule 100(a)(25).
The Exchange proposes (i) to describe 4 Tick-Worse functionality is not currently to its members on January 31, 2017
the decommission of its ‘‘Tick-Worse’’ memorialized in the Exchange’s rulebook. In through an informational circular that it
functionality and (ii) to amend Rule 713 addition, the Exchange will not offer Tick-Worse on would decommission the use of the
(Priority of Quotes and Orders) relating the new Nasdaq INET system going forward. On
September 30, 2004, International Securities
Tick-Worse functionality on February
to the priority of split price transactions. Exchange, LLC (‘‘ISE’’) filed with the Commission 21, 2017. The Exchange believes that
The Exchange requests that the a proposal to codify this functionality in its this gave market makers the opportunity
proposed rule change become operative rulebook, but inadvertently deleted the rule as to make any necessary changes to their
on February 28, 2017. obsolete rule text in a subsequent proposal filed on
The text of the proposed rule change December 21, 2012. See Securities Exchange Act
Release No. 51050 (January 18, 2005), 70 FR 3758 Rule 804 further requires PMMs to quote 90% of
is available on the Exchange’s Web site (January 26, 2005) (SR–ISE–2004–31); Securities the time their assigned options class is open for
at www.ise.com, at the principal office Exchange Act Release No. 68570 (January 3, 2013), trading on the Exchange. As provided in Rule
of the Exchange, and at the 78 FR 1901 (January 9, 2013) (SR–ISE–2012–82). 804(e)(2), Competitive Market Makers (‘‘CMMs’’)
Commission’s Public Reference Room. The Exchange imported Rule 713 from ISE’s are not required to enter quotations in the options
rulebook when the Commission granted the class to which they are appointed, but in the event
II. Self-Regulatory Organization’s Exchange’s application for registration as a national a CMM does initiate quoting, such CMM is
securities exchange, which was after the Tick- generally required to quote 60% of the time its
Statement of the Purpose of, and assigned options class is open for trading on the
Worse functionality rule was inadvertently removed
Statutory Basis for, the Proposed Rule from ISE’s rules. See Securities Exchange Act Exchange.
Change Release No. 70050 (July 26, 2013), 78 FR 46622 7 This functionality was only being used by one
(August 1, 2013) (Order Granting Registration as a market maker on the Exchange.
In its filing with the Commission, the National Securities Exchange). 8 The detailed schedule of the symbol migration
mstockstill on DSK3G9T082PROD with NOTICES
Exchange included statements 5 Market makers may choose to set Tick-Worse is available at: http://www.nasdaqtrader.com/
concerning the purpose of and basis for parameters by specifying how many price ticks MicroNews.aspx?id=OTA2017-13.
the proposed rule change and discussed back, and for what size, the quote is to be 9 See Securities Exchange Release No. 80011
reinstated. (February 10, 2017), 82 FR 10927 (February 16,
any comments it received on the 6 Specifically, Primary Market Makers (‘‘PMMs’’) 2017) (SR–ISEGemini–2016–17) (Order Approving
are required under Rule 804(e)(1) to enter Proposed Rule Change, as Modified by Amendment
17 17 CFR 200.30–3(a)(12). quotations in all of the series listed on the Exchange Nos. 1 and 2, To Amend Various Rules in
1 15 U.S.C. 78s(b)(1). of the options classes to which they are appointed Connection With a System Migration to Nasdaq
2 17 CFR 240.19b–4. on a daily basis. Supplementary Material .01 to INET Technology).
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Document Created: 2017-03-16 02:19:05
Document Modified: 2017-03-16 02:19:05
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 82 FR 14087 |
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