82 FR 58042 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4759

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 235 (December 8, 2017)

[Federal Register Volume 82, Number 235 (Friday, December 8, 2017)]
[Notices]
[Pages 58042-58045]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-26448]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82210; File No. SR-BX-2017-052]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4759

December 4, 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 November 28, 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 and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 add additional detail about the purposes 
for which the Exchange uses securities information processor data 
pursuant to Rule 4759, and to make other technical corrections to that 
rule.
    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

[[Page 58043]]

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 the proposed rule change is to add additional detail 
about the purposes for which the Exchange uses securities information 
processor (``SIP'') data pursuant to Rule 4759, and to make other 
technical corrections to that rule. Rule 4759 lists the proprietary and 
network processor feeds that are utilized for the handling, routing, 
and execution of orders, as well as for the regulatory compliance 
processes related to those functions. The BX trading system utilizes 
proprietary market data as the Primary Source of quotation data for the 
following markets that provide a reliable direct feed: NYSE American, 
Nasdaq BX, CBOE EDGA, CBOE EDGX, CHX, NYSE, NYSE Arca, Nasdaq, Nasdaq 
PSX, CBOE BYX, and CBOE BZX.\3\ For each of these markets, the Exchange 
uses SIP data as the Secondary Source of quotation data.\4\
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    \3\ Several of the exchanges mentioned in this filing have been 
renamed recently; the names used herein reflect the current names of 
the exchanges. This proposed rule change also includes amendments to 
reflect the new names for these exchanges.
    \4\ SIP data is used as the Primary Source for NYSE National, 
FINRA ADF, and IEX. There is no Secondary Source for these markets.
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    Generally, Rule 4759 provides that the Primary Source of data is 
used for the handling, routing, and execution of orders, as well as for 
the regulatory compliance processes related to those functions, unless 
it is delayed by a configurable amount compared to the Secondary Source 
of data. While this is true for quotation data used by the trading 
system for the handling, routing, and execution of orders, and also 
regulatory compliance processes related to those functions, including, 
for example, determination of trade-throughs under Rule 611 of 
Regulation NMS, the Exchange uses SIP data for certain trade and 
administrative messages. For example, the Exchange uses SIP data for 
limit-up limit-down price bands, market-wide circuit breaker decline 
and status messages, Regulation SHO state messages, trading state 
messages (i.e., halts and resumes), and trade messages (i.e., last 
sale). As described in more detail below, with the exception of last 
sale information, these messages originate from the SIP, and are often 
not available on the direct feeds. To mitigate risks associated with a 
potential SIP outage, however, where the information is available on a 
direct feed from one or more exchanges, the Exchange uses such direct 
feed data solely as a backup to the SIP data.
    The Exchange therefore proposes to amend Rule 4759 to provide that 
the BX System consumes quotation data from the listed proprietary and 
network processor feeds for the handling, routing, and execution of 
orders, as well as for the regulatory compliance processes related to 
those functions.\5\ Furthermore, with the proposed changes, Rule 4759 
will provide that the SIP is the Primary Source of certain trade and 
administrative messages such as limit-up limit-down price bands, 
market-wide circuit breaker decline and status messages, Regulation SHO 
state messages, halts and resumes, and last sale information, and that, 
where available, the direct feeds are the Secondary Source of such 
information. For the reasons discussed in this filing, the Exchange 
believes that it is appropriate to use the SIP as the Primary Source of 
data for these trade and administrative messages. Limit-up limit down 
price bands, for instance, are not available on any of the direct feeds 
used by the Exchange as these bands are calculated and disseminated by 
the SIP pursuant to the Plan to Address Extraordinary Market 
Volatility. Similarly, market-wide circuit breaker decline and status 
messages, Regulation SHO state messages, and trading state messages are 
available on some but not other direct feeds. Again, the SIP is 
responsible for calculating any decline in the S&P 500 Index and 
disseminating halt messages for the market-wide circuit breaker, and 
also for disseminating other halts, resumes, and Regulation SHO state 
messages. In addition, the Exchange's trading system consumes last sale 
information from the SIP, which is used for the limited purpose of 
determining when the Exchange can open securities after an IPO.\6\ 
Although last sale information is disseminated on proprietary market 
data feeds, this information is typically included in a different 
market data product than the Exchange uses for quotation data, and the 
Exchange's trading system therefore also consumes last sale information 
from the SIP for the limited purpose described above.
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    \5\ The Exchange notes that the rule language currently provides 
that the Exchange ``utilizes'' these feeds. As a non-substantive 
change, the Exchange is changing this word to ``consumes'' as this 
word fits better with language being added to the rule.
    \6\ The Exchange waits for a last sale from the listing market 
prior to starting the Exchange's opening process following an IPO on 
another market.
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    Finally, the Exchange proposes to make additional technical 
amendments to Rule 4759. Specifically, several of the exchanges and 
direct market data feeds described in the rule have been renamed since 
the Exchange adopted the rule. The Exchange therefore propose to: (1) 
Rename the exchanges described in the rule so that the exchanges are 
identified by their new names,\7\ and (2) replace the names of the 
individual direct feeds with a generic notation that the ``Direct 
Feed'' is used to avoid the need for future updates every time an 
exchange changes the name of its proprietary market data offerings. 
These changes are technical amendments and will have no impact on the 
operation of the Exchange or its use of the identified market data 
feeds.
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    \7\ The new names of each of the exchanges described in Rule 
4759 are used earlier in this filing. See notes 4-5 supra and 
accompanying text.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change removes 
impediments to and perfects the mechanism of a free and open market and 
protects investors and the public interest because it provides 
additional transparency around the purposes for which the Exchange uses 
SIP data. The proposed rule change does not change the operation of the 
Exchange or its use of data feeds; rather it clarifies the Exchange's 
rules with regard to information consumed from the SIP. Specifically, 
the proposed rule change indicates that the Exchange uses SIP data for 
certain administrative messages, including, limit-up limit-down price 
bands, market-wide circuit breaker decline and status messages, 
Regulation SHO state messages, and trading state messages (i.e., halts 
and resumes), as well as trade messages (i.e., last sale). At least one 
other exchange uses SIP data for these purposes, while continuing to 
use the direct feeds for quotation data where the direct feeds often 
offer reduced latency.\10\
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    \10\ See IEX Rule 11.410(a)(3).
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    The Exchange believes that it is appropriate to use SIP data as the 
primary source for administrative

[[Page 58044]]

messages that originate from the SIP and may or may not be available on 
particular proprietary market data feeds. Although quote data used for 
the handling, routing, and execution of orders is typically available 
with a lower latency over the direct feeds, the same is not true for 
the administrative messages described above that originate from the SIP 
and are re-disseminated (or not disseminated at all) by the various 
direct feeds. The Exchange therefore believes that it is consistent 
with the public interest and protection of investors to get this 
information directly from the SIP, i.e., the official source of the 
information, rather than indirectly from proprietary market data feeds 
that may or may not redistribute such information. Furthermore, with 
respect to last sale information, such information is used by the 
trading system for the limited purposes described in this filing, and 
is not typically available on the direct feeds that the Exchange uses 
for quotation data. The Exchange therefore also believes that it is 
appropriate to get last sale information from the SIP. Where the 
information described in this filing is available on a direct feed, 
however, direct feed data will be used in the event failover is 
necessary, thereby adding redundancy and mitigating risks associated 
with a potential SIP outage.
    The proposed rule change also makes certain technical amendments to 
Rule 4759, including updating the names of exchanges that have been 
renamed since the adoption of this rule. The Exchange believes that it 
is consistent with the public interest and the protection of investors 
to update the names of the exchanges listed in Rule 4759 as this change 
will make it easier for market participants to identify the exchanges 
for which the Exchange uses the direct feed and/or SIP for the purposes 
described in the rule. Furthermore, the proposed rule change replaces 
the names of the direct feeds with a generic notation that the ``Direct 
Feed'' is used. The Exchange believes that this change is consistent 
with the protection of investors and the public interest as the 
exchanges may change the names of their data feeds periodically, 
resulting in the list being out of date. Rather than update the list 
every time a market changes the names of their [sic] proprietary market 
data products, the Exchange believes that it is preferable to simply 
explain that the direct feed is used. Several other exchanges also 
similarly note that the direct feed is used rather than spelling out 
the names of each feed.\11\
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    \11\ See e.g. IEX Rule 11.410(a); CBOE BZX Rule 11.26.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issue but rather would provide 
members and other market participants with information about the 
purposes for which the Exchange uses SIP data, and make other technical 
corrections to Rule 4759. No changes to the Exchange's trading or other 
systems are being introduced with the proposed rule change, and the 
Exchange believes that the proposed changes will increase transparency 
around the operation of the Exchange and its use of market data feeds 
without any significant impact on competition.

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 \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest as it will allow the 
Exchange to clarify the purposes for which the Exchange uses SIP data 
and avoid potential confusion among market participants. Accordingly, 
the Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-2017-052 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-2017-052. 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

[[Page 58045]]

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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BX-2017-052 and should be submitted on 
or before December 29, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26448 Filed 12-7-17; 8:45 am]
 BILLING CODE 8011-01-P