82 FR 60439 - Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Primary Market Maker Obligations

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 243 (December 20, 2017)

[Federal Register Volume 82, Number 243 (Wednesday, December 20, 2017)]
[Notices]
[Pages 60439-60442]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-27347]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82326; File No. SR-GEMX-2017-56]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to Primary 
Market Maker Obligations

December 14, 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 29, 2017, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``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 amend Rule 701, entitled ``Openings,'' to 
specify the obligations of a Primary Market Maker (``PMM'') when 
entering Valid Width Quotes \3\ during the Opening Process.
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    \3\ A ``Valid Width Quote'' is a two-sided electronic quotation 
submitted by a Market Maker that consists of a bid/ask differential 
that is compliant with Rule 803(b)(4). See Rule 701(a)(8).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.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

[[Page 60440]]

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 Exchange is proposing to amend Rule 701, Openings, to amend the 
obligations of a PMM when entering Valid Width Quotes during the 
Opening Process. In addition, the Exchange proposes to make clear the 
obligations of a PMM and a Competitive Market Maker (``CMM'') once an 
options series has opened.
    Currently, Rule 701(c)(1) provides, the Opening Process for an 
option series will be conducted pursuant to paragraphs (f)-(j) of GEMX 
Rule 701 on or after 9:30 a.m. Eastern Time if: The ABBO, if any, is 
not crossed; and the system has received, within two minutes (or such 
shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's website) of the opening trade or quote on 
the market for the underlying security in the case of equity options 
or, in the case of index options, within two minutes of the receipt of 
the opening price in the underlying index (or such shorter time as 
determined by the Exchange and disseminated to membership on the 
Exchange's website), or within two minutes of market opening for the 
underlying security in the case of U.S. dollar-settled foreign currency 
options (or such shorter time as determined by the Exchange and 
disseminated to membership on the Exchange's website) any of the 
following: (i) The PMM's Valid Width Quote; (ii) the Valid Width Quotes 
of at least two CMM or (iii) if neither the PMM's Valid Width Quote nor 
the Valid Width Quotes of two CMMs have been submitted within such 
timeframe, one CMM has submitted a Valid Width Quote.
    Thereafter, Rule 701(c)(3) specifies that the PMM assigned in a 
particular equity or index option must enter a Valid Width Quote, in 
90% of their assigned series, not later than one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index. The PMM assigned in a particular 
U.S. dollar-settled foreign currency option must enter a Valid Width 
Quote, in 90% of their assigned series, not later than one minute after 
the announced market opening. PMMs must promptly enter a Valid Width 
Quote in the remainder of their assigned series, which did not open 
within one minute following the dissemination of a quote or trade by 
the market for the underlying security or, in the case of index 
options, following the receipt of the opening price in the underlying 
index or, with respect to U.S. dollar-settled foreign currency options, 
following the announced market opening.
    The Exchange proposes to make clear that a PMM has the obligations 
specified in GEMX Rule 701(c)(3) to promptly enter a Valid Width Quote 
in the remainder of their assigned series in cases where the PMM's 
assigned series was not already opened by a CMM as permitted by Rule 
701(c)(1)(ii) and (iii) as noted herein. The PMM would continue to have 
the ultimate obligation to open each assigned series, however this rule 
change would not require the PMM to enter a Valid Width Quote for the 
10% of their assigned series, not later than one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index during the Opening Process if an 
options series has opened pursuant to Rule 701(c)(1)(ii) and (iii) 
within the timeframe specified for the PMM to enter a Valid Width Quote 
as noted in Rule 701(c)(3). Also, the PMM assigned in a particular U.S. 
dollar-settled foreign currency option would not be required to enter a 
Valid Width Quote for 10% of their assigned series, not later than one 
minute after the announced market opening during the Opening Process if 
an options series opened pursuant to Rule 701(c)(1)(ii) and (iii) 
within the timeframe specified for the PMM to enter a Valid Width Quote 
as noted in Rule 701(c)(3).
    Today GEMX Rule 701 requires a PMM to open the market and provides 
an alternative mechanism to permit an alternative opening by a CMM.\4\ 
The proposal seeks to make clear the obligations of the PMM with 
respect to options series that were open by a CMM as well as the 
quoting obligations of a CMM that opened the options series. The 
Exchange proposes to amend GEMX Rule 701(c)(3) to state that once an 
option series has opened pursuant to Rule 701(c)(1)(i)-(iii), a PMM 
must submit continuous, two-sided quotes in such option series pursuant 
to Supplementary .01 to GEMX Rule 804. The Exchange also proposes to 
amend Rule 701(c)(4) to state that a CMM that submits a quote during 
the opening in any option series pursuant to Rule 701(c)(1)(ii) or 
(iii) must submit continuous, two-sided quotes in such options series 
pursuant to GEMX Rule 804(e)(2)(iii) once an option series has opened. 
Specifically, the Exchange proposes to add rule text to Rule 701(c)(3) 
to provide that ``once an options series has opened f pursuant to Rule 
701(c)(1)(i)-(iii), a PMM must submit continuous, two-sided quotes in 
such options series pursuant to Supplementary Material .01 to Rule 
804.'' Further, the Exchange proposes to add rule text to Rule 
701(c)(4) to states that ``A CMM that submits a quote pursuant to Rule 
701 in any option series when the PMM's quote has not been submitted 
shall be required, once an options series has opened, to submit 
continuous, two-sided quotes in such option series pursuant to Rule 
804(e)(2)(iii).''
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    \4\ See GEMX Rule 701(c)(1)(i)-(iii).
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    The Exchange proposes to make clear that a PMM has an obligation to 
enter Valid Width Quotes during the Opening Process within the 
timeframes specified in Rule 701(c)(3). In the event that an options 
series opened pursuant to Rule 701(c)(1)(ii) and (iii), a PMM would be 
required to submit continuous, two-sided quotes in such options series 
pursuant to Supplementary Material .01 to Rule 804. Also, in this 
instance, a CMM would be required to submit continuous, two-sided 
quotes in such option series pursuant to Rule 804(e)(2)(iii). The 
Exchange notes that a CMM would not have an obligation to quote in such 
option series pursuant to Rule 804(e)(2)(iii), unless the CMM submitted 
a quote pursuant to Rule 701 or otherwise submitted a quote intra-
day.\5\ The purpose of this new rule text is to make clear the quoting 
obligations for both PMMs and CMMs during the opening and the manner in 
which Rule 701, relating to the Opening Process, and Rule 804, relating 
to Market Maker quoting obligations, interact with each other.
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    \5\ See GEMX Rule 804(e)(2)(i) which states, ``On any given day, 
a Competitive Market Maker is not required to enter quotations in 
the options classes to which it is appointed.''
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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

[[Page 60441]]

system, and, in general to protect investors and the public interest by 
amending GEMX Rule 701(c)(3) to further specify a PMM's obligations 
during the Opening Process and once an options series as opened as well 
as the obligations of a CMM to the extent that an options series opened 
pursuant to Rule 701(c)(1)(ii) and (iii). The Exchange believes that 
this proposal is consistent with the Act because a PMM continues to be 
responsible to enter Valid Width Quotes during the Opening Process and 
thereafter submit continuous, two-sided quotes in such options series 
pursuant to Supplementary Material .01 to Rule 804. In the event that 
an options series opened pursuant to Rule 701(c)(1)(ii) and (iii), the 
CMM must submit continuous, two-sided quotes in such option series, 
once the options series has opened, pursuant to Rule 804(e)(2)(iii). 
The Exchange believes that this proposed rule change will make clear 
the obligations of the PMM with respect to submitting Valid Width 
Quotes and thereafter, once an options series has opened, submitting 
continuous two-sided quotes, when a CMM may have already entered a 
quote to open an options series. The Exchange's proposal to add rule 
text to clearly specify the quoting obligations of a PMM and CMM during 
the Opening Process and once an option series has opened will provide 
greater clarity to the Opening Process and also to the interplay 
between quoting obligations during the Opening Process and intra-day 
quoting obligations noted within Rule 804.
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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. Once an options series has 
opened, [sic] a PMM continues to be responsible to enter Valid Width 
Quotes during the Opening Process and thereafter submit continuous, 
two-sided quotes in such options series pursuant to Supplementary 
Material .01 to Rule 804. Also, if an options series opened pursuant to 
GEMX Rule 701(c)(1)(ii) or (iii), a CMM shall be required to submit 
continuous, two-sided quotes in such option series, once an option 
series has opened. pursuant to Rule 804(e)(2)(iii). This proposed rule 
text makes clear that CMMs are required to submit continuous, two-sided 
quotes in such option series pursuant to Rule 804(e)(2)(iii), in the 
event an options series opened pursuant to Rule 701(c)(1)(ii) and 
(iii). The proposal provides greater clarity to the Opening Process and 
also to the interplay between quoting obligations during the Opening 
Process and intra-day quoting obligations noted within Rule 804.

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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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. In its filing with the Commission, 
the Exchange requests that the Commission waive the 30-day operative 
delay. The Exchange represents that the proposed rule change would 
clarify the quoting obligations for both PMMs and CMMs during the 
Opening Process and the manner in which Rule 701, relating to the 
Opening Process, and Rule 804, relating to Market Maker quoting 
obligations, interact with each other. According to the Exchange, these 
obligations should be immediately clarified to prevent confusion and 
uncertainty for Market Makers quoting on the Exchange. For the reasons 
articulated by the Exchange, the Commission believes that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Therefore, the Commission designates the 
proposed rule change to be operative upon filing.\11\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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-2017-56 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-2017-56. 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 website (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 website 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

[[Page 60442]]

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-GEMX-2017-56 and should be 
submitted on or before January 10, 2018.

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. 2017-27347 Filed 12-19-17; 8:45 am]
 BILLING CODE 8011-01-P