82 FR 24751 - Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Opening Process

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 102 (May 30, 2017)

[Federal Register Volume 82, Number 102 (Tuesday, May 30, 2017)]
[Notices]
[Pages 24751-24752]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-10975]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80747; File No. SR-GEMX-2017-10]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Regarding the 
Opening Process

May 23, 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 May 10, 2017, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III, below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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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 the Opening Process for foreign 
currency options and also amend a reference to All-or-None Orders.
    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.

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 rule change is to amend GEMX Rule 701, entitled 
``Opening,'' to: (i) Conform certain rule text to that of Nasdaq ISE, 
LLC; (ii) amend the Opening Process for foreign currency options; and 
(iii) remove a specific rule text reference in Rule 701 related to All-
or-None Orders.

Conform Rule Text

    ISE recently filed to adopt a new Opening Process.\3\ In adopting 
this rule, certain non-substantive modifications were made to the rule 
text to further clarify the manner in which the Opening Process occurs. 
At this time, the Exchange proposes to amend GEMX Rule 701 to conform 
the text of the rule to ISE Rule 701. Specifically, the Exchange 
proposes to amend Rule 701(j)(5) to amend the last sentence to make 
clear that any unexecuted contracts from the imbalance process which 
are not traded or routed will be cancelled back to the entering 
participant if they remain unexecuted and priced through the Opening 
Price, otherwise orders will remain in the Order Book. The additional 
language adds more detail about the interaction with the Order Book to 
the rule.
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    \3\ See Securities Exchange Act Release No. 80225 (March 13, 
2017), 82 FR 14243 (March 17, 2017) (SR-ISE-2017-02).
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Foreign Currency Options

    GEMX Rule 701 provides that Market Maker Valid Width Quotes and 
Opening Sweeps received starting at 9:25 a.m. Eastern Time, or 7:25 
a.m. Eastern Time for U.S. dollar-settled foreign currency options, 
will be included in the Opening Process. Orders entered at any time 
before an option series opens are included in the Opening Process. The 
current Opening Process rule states that the submission of Valid Width 
Quotes and Opening Sweeps for U.S. dollar-settled foreign currency 
options may begin at 7:25 a.m. Eastern Time to tie the option Opening 
Process to quoting in the underlying security \4\; it presumes that 
option quotes submitted before any indicative quotes have been 
disseminated for the underlying security may not be reliable or 
intentional. The Exchange proposes to amend GEMX Rule 701 so that the 
Opening Process for foreign currency options would initiate on or after 
9:30 a.m. Eastern Time and the Market Maker Valid Width Quotes and 
Opening Sweeps would be considered for the Opening Process starting at 
9:25 a.m. Eastern Time for foreign currency options.
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    \4\ The underlying security can also be an index.
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All-or-None Orders

    The Exchange also proposes to amend Rule 701 to remove a specific 
reference to the manner in which All-or-None Orders are treated in the 
Opening Process. The Exchange filed a proposed rule change to amend 
All-or-None Orders.\5\ The Exchange amended Rule 715(c) to provide that 
an All-or-None Order may only be entered into the System with a time-
in-force designation of Immediate-or-Cancel \6\ Order in connection 
with the Exchange's technology migration to INET. Previously, All-or-
None Orders could trade as a limit or market order to be executed in 
its entirety or not at all. With the amendment, an All-or-None Order 
does not persist in the Order Book. The carve out specified in Rule 
701(j)(6)(i) is unnecessary since an All-or-None Order will execute 
immediately or cancel. The Exchange believes removing this reference 
will eliminate confusion.
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    \5\ See Securities Exchange Act Release No. 80102 (February 24, 
2017, 82 FR 12381 (March 2, 2017) (SR-ISEGemini-2017-08) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related 
to All-or-None Orders).
    \6\ An Immediate-or-Cancel Order is a limit order that is to be 
executed in whole or in part upon receipt. Any portion not so 
executed is to be treated as cancelled.
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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 
for the reasons stated below.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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Conform Rule Text

    The Exchange believes that conforming the GEMX rule to the ISE rule 
will avoid confusion for market participants. The Opening Process is 
the same on these two markets. By conforming the rule text of these two 
rules will make clear that there is no difference in the operation of 
these two Opening Processes.

[[Page 24752]]

Foreign Currency Options

    The Exchange believes that the proposed rule change is consistent 
with the Act in that it will remove impediments to and perfect the 
mechanism of a free and open market and a national market system, to 
initiate the Opening Process for foreign currency options at 9:30 a.m. 
Eastern Time and accept for the Opening Process the Market Maker Valid 
Width Quotes and Opening Sweeps starting at 9:25 a.m. Eastern Time for 
foreign currency options, similar to the manner in which other options 
trade today. Today, on NASDAQ PHLX, LLC (``Phlx''), foreign currency 
options trade similar to other options.\9\ The Exchange believes that 
conforming the Opening Process for foreign currency options to that of 
other options will conform the trading rules so all products would 
initiate the Opening Process at the same time. The Exchange believes 
trading all options on the same Opening Process schedule promotes just 
and equitable principles of trade because all options will continue to 
be available to participants for trading on GEMX.
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    \9\ See Phlx Rules 1014 and 1017. On Phlx, the Specialist 
assigned in a particular U.S. dollar-settled FCO must enter a Valid 
Width Quote not later than 30 seconds after the announced market 
opening. Also, on Phlx, the Opening Process for an option series 
will be conducted within two minutes of market opening in the case 
of U.S. dollar-settled FCO or such shorter time as determined by the 
Exchange and disseminated to membership on the Exchange's Web site.
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All-or-None Orders

    The Exchange believes that it is consistent with the Act to remove 
an unnecessary and confusing reference to Rule 701 in connection with 
All-or-None Orders, since these orders immediately trade or cancel. The 
Exchange originally distinguished the manner in which All-or-None 
Orders would trade in the Opening Process because this order type 
traded differently at that time as compared to other order types. That 
distinction has become unnecessary because All-or-None Orders trade the 
same as other Immediate or Cancel Orders. By updating the rule to 
remove an unnecessary distinction will protect investors and the public 
interest by clarifying the rule.

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 Exchange believes that 
adding additional detail to Rule 701 will provide market participants 
with more information concerning the Opening Process. The proposal does 
not change the intense competition that exists among the options 
markets for options business including with respect to transacting 
foreign currency options. In addition, all market participants 
submitting All-or-None Orders in the Opening Process will receive 
similar treatment with respect to those orders.

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 \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 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-GEMX-2017-10 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-GEMX-2017-10. 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-GEMX-2017-10 and should be 
submitted on or before June 20, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-10975 Filed 5-26-17; 8:45 am]
BILLING CODE 8011-01-P