83 FR 14302 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Delay for Re-Introduction of Legging Functionality for Stock-Option Orders on INET by an Additional Year
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 64 (April 3, 2018)
Federal Register Volume 83, Issue 64 (April 3, 2018)
| Page Range | 14302-14304 | |
| FR Document | 2018-06692 |
[Federal Register Volume 83, Number 64 (Tuesday, April 3, 2018)] [Notices] [Pages 14302-14304] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-06692] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release 34-82961; File No. SR-ISE-2018-21] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Delay for Re-Introduction of Legging Functionality for Stock-Option Orders on INET by an Additional Year March 28, 2018. 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 March 16, 2018, Nasdaq ISE, LLC (``ISE'' 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 [[Page 14303]] 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 extend the delay for re-introduction of legging functionality for Stock-Option Orders on INET by an additional year. The text of the proposed rule change is available on the Exchange's website at http://ise.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 Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to extend the delay for re-introduction of legging functionality for Stock-Option Orders on INET by an additional year. With the recent re-platform of the Exchange's trading system to INET, the Exchange delayed the re- introduction of legging functionality for Stock-Option Orders.\3\ As such, Stock-Option Orders entered on the Exchange today are not automatically executed against bids and offers on the Exchange for the individual legs pursuant to Rule 722(b)(3)(ii)-(iii) and Supplementary Material .02 to Rule 722. The Exchange proposes to extend the delay of implementation of legging functionality for Stock-Option Orders by an additional year. Stock-Option Orders will continue to execute against other Stock-Option Orders in the complex order book, thereby providing an opportunity for Members to have their Stock-Option Orders executed on the Exchange. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 80316 (March 27, 2017) 82 FR 16084 (March 31, 2017) (SR-ISE-2017-28). --------------------------------------------------------------------------- When the Exchange initially delayed legging functionality for Stock-Option Orders, the Exchange noted that it would re-introduce legging for Stock-Option Orders within one year from the date of that filing. The Exchange filed the initial rule change on March 21, 2017, and the additional one year delay would therefore extend the implementation timeline for this functionality to March 21, 2019. The extended delay would provide the Exchange additional time to develop and test this functionality on INET. The Exchange will issue an Options Trader Alert notifying Members when this functionality will be available. Furthermore, in connection with this change, the Exchange also proposes to amend Rule 722 to remove language about the migration of symbols to INET as this migration has been completed and all symbols listed by the Exchange are currently trading on the INET platform. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\4\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\5\ 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. In particular, the Exchange believes that the proposed rule change is consistent with the protection of investors and the public interest as it would provide additional time to develop and test legging functionality for Stock-Option Orders on INET. Although the Exchange is now fully operating on the INET platform, additional time is necessary to re-implement this functionality to ensure a quality experience for Members. Members are already aware that this functionality has been delayed, and the Exchange will provide Members notice of the date when the functionality will be available. While the Exchange is proposing to extend the delay of legging functionality for these Stock-Option Orders, Members can continue to submit these orders to the Exchange where they can be executed against other Stock-Option Orders on the complex order book. No Members have notified the Exchange of significant impact on execution quality as a result of the delayed implementation of legging functionality for Stock-Option Orders, and therefore the Exchange does not believe that extending the delay will have a significant impact on market participants. This functionality will be available on or before March 21, 2019. Furthermore, the other proposed changes merely update this rule to reflect the fact that all symbols listed by ISE are currently traded on the INET platform. --------------------------------------------------------------------------- \4\ 15 U.S.C. 78f(b). \5\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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. Specifically, the Exchange does not believe that the proposed one year delay will impose any significant burden on intra-market competition because legging for Stock-Option Orders will be uniformly delayed for all Members. Similarly, the Exchange does not believe that the proposed delay will impose any significant burden on inter-market competition as it does not impact the ability of other markets to offer or not offer competing functionality. The Exchange believes that providing an additional year to develop and test this functionality will be beneficial to 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 \6\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\7\ --------------------------------------------------------------------------- \6\ 15 U.S.C. 78s(b)(3)(A)(iii). \7\ 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. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) normally does not [[Page 14304]] become operative for 30 days after the date of the filing. However, Rule 19b-4(f)(6)(iii) \8\ 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, ISE requests that the Commission waive the 30-day operative delay to allow the proposed one-year extension of the time for re-introducing the legging functionality for Stock-Option Orders to begin at the conclusion of the current delay period, which was scheduled to end on March 21, 2018. As noted above, ISE states that extending the delay for re-introducing the legging functionality for Stock-Option Orders will provide ISE with additional time to develop and test the legging functionality on INET. ISE further states that no Members have notified ISE of a significant impact on execution quality as a result of the delayed implementation of the legging functionality for Stock-Option Orders and, accordingly, the Exchange does not believe that extending the delay will have a significant impact on market participants. The Commission believes that waiving the operative delay is consistent with the protection of investors and the public interest because it will provide ISE with additional time to develop and test the legging functionality for Stock-Option Orders. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.\9\ --------------------------------------------------------------------------- \8\ 17 CFR 240.19b-4(f)(6)(iii). \9\ 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). --------------------------------------------------------------------------- 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-ISE-2018-21 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-ISE-2018-21. 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 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-ISE-2018-21, and should be submitted on or before April 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\10\ --------------------------------------------------------------------------- \10\ 17 CFR 200.30-3(a)(12) and (59). --------------------------------------------------------------------------- Jill Peterson, Assistant Secretary. [FR Doc. 2018-06692 Filed 4-2-18; 8:45 am] BILLING CODE 8011-01-P
![14302 Federal Register / Vol. 83, No. 64 / Tuesday, April 3, 2018 / Notices
securities transactions and, to the extent rule change is consistent with the improvements to the governance
applicable, derivative agreements, requirements of Section 17A(b)(3)(F) of structure of the end-of-day pricing
contracts and transactions, and to assure the Act.26 process will have the effect of
the safeguarding of securities and funds promoting greater effectiveness of ICC’s
B. Consistency With Rule 17Ad–22(b)(2)
which are in the custody or control of risk management procedures overall.
the clearing agency or for which it is Rule 17Ad–22(b)(2) requires, in Therefore, the Commission finds that
responsible.24 As discussed above, the relevant part, a registered clearing the proposed rule change is consistent
proposed rule change would enhance agency that performs central with the requirements of Rule 17Ad–
ICC’s end-of-day price discovery process counterparty services to establish 22(d)(8).30
for SN instruments in a number of ways, implement, maintain, and enforce
including but not limited to written policies and procedures IV. Conclusion
incorporating a price-based floor which reasonably designed to use margin On the basis of the foregoing, the
would be applied to a wider range of requirements to limit its credit Commission finds that the proposed
instruments, adopting a new dynamic exposures to participants under normal rule change is consistent with the
BOW component, and taking into market conditions. As noted above, ICC requirements of the Act, and in
consideration the dispersion of price- uses the end-of-day BOWs as part of its particular with the requirements of
space mid-levels received from Clearing mark-to-market and risk management Section 17A of the Act 31 and Rules
Participants, all while continuing to purposes, including the computation of
17Ad–22(b)(2) and (d)(8) 32 thereunder.
apply scaling tenor, coupon, and certain margin requirements.27
variability scaling factors. The Commission believes that by It is therefore ordered pursuant to
Taken as a whole, the Commission improving the end-of-day pricing Section 19(b)(2) of the Act 33 that the
believes the proposed changes should process, as described above, ICC will proposed rule change (SR–ICC–2018–
enhance ICC’s ability to determine the also improve its ability to calculate 002) be, and hereby is, approved.34
end-of-day BOW for SN instruments. margin requirements that use the end- For the Commission, by the Division of
First, the proposed changes should of-day BOWs as an input. Consequently, Trading and Markets, pursuant to delegated
permit ICC to determine BOWs an improved margin calculation should authority.35
consistently across SN instruments on lead to the collection of margin levels Jill Peterson,
all reference entities, including those for that enhance ICC’s ability to limit its Assistant Secretary.
which only sparse intraday data is credit exposures to participants under
[FR Doc. 2018–06691 Filed 4–2–18; 8:45 am]
available.25 In addition, by extending normal market conditions. As a result,
the application of the price-based BOW the Commission finds that the proposed BILLING CODE 8011–01–P
floor component to the entire set of rule change is consistent with the
benchmark tenors from the 0 month to requirements of Rule 17Ad–22(b)(2).28
10 years instead of solely the 0⁄3 month, SECURITIES AND EXCHANGE
6 month, and 1-year benchmark tenors, C. Consistency With Rule 17Ad–22(d)(8) COMMISSION
the Commission believes that ICC will Rule 17Ad–22(d)(8) requires, in
be able to more consistently compute relevant part, that a registered clearing [Release 34–82961; File No. SR–ISE–2018–
the end-of-day BOW for a wider range agency that is not a covered clearing 21]
of SN instruments. agency to establish, implement,
Consequently, the Commission maintain, and enforce written policies Self-Regulatory Organizations; Nasdaq
believes that the proposed changes will and procedures reasonably designed to, ISE, LLC; Notice of Filing and
improve ICC’s end-of-day pricing as applicable, have governance Immediate Effectiveness of a Proposed
process as a whole as additional arrangements that promote the Rule Change To Extend the Delay for
relevant information will be taken into effectiveness of the clearing agency’s Re-Introduction of Legging
consideration and a wider range of risk management procedures.29 ICC Functionality for Stock-Option Orders
instruments will be considered in the proposed to amend the Governance on INET by an Additional Year
pricing process. Based on these section of its Pricing policy to clarify the March 28, 2018.
improvements, the Commission believes responsibilities of the ICC Risk
that ICC’s risk management processes Management Department and the Pursuant to Section 19(b)(1) of the
related to the end-of-day pricing Trading Advisory Committee with Securities Exchange Act of 1934
process, including the calculation and respect to the determination of price- (‘‘Act’’),1 and Rule 19b–4 thereunder,2
collection of certain margin based floors, relative BOWs, and scaling notice is hereby given that on March 16,
requirements, will also be improved, factors. By updating the Governance 2018, Nasdaq ISE, LLC (‘‘ISE’’ or
resulting in an improved ability to section of the Pricing Policy to delineate ‘‘Exchange’’) filed with the Securities
safeguard the positions that ICC the roles of the ICC Risk Management and Exchange Commission
maintains from the default of a Clearing Department and the Trading Advisory (‘‘Commission’’) the proposed rule
Participant. As a result, the Commission Committee, the Commission believes change as described in Items I and II,
believes that the proposed changes will that ICC will improve the governance below, which Items have been prepared
promote the prompt and accurate structure surrounding the end-of-day
clearance and settlement of the products pricing process. 30 Id.
cleared by ICC, and will enhance ICC’s Because the output of the end-of-day 31 15 U.S.C. 78q–1.
ability to assure the safeguarding of pricing process is used for mark-to-
32 17 CFR 240.17Ad–22(b)(2) and (d)(8).
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33 15 U.S.C. 78s(b)(2).
securities and funds which are in the market and risk management purposes, 34 In approving the proposed rule change, the
custody or control of ICC or for which the Commission believes that Commission considered the proposal’s impact on
it is responsible. Therefore, the efficiency, competition, and capital formation. 15
Commission finds that the proposed 26 Id. U.S.C. 78c(f).
27 17 CFR 240.17Ad–22(b)(2). 35 17 CFR 200.30–3(a)(12).
24 15U.S.C. 78q–1(b)(3)(F). 28 Id. 1 15 U.S.C. 78s(b)(1).
25 Notice, 83 FR at 6078. 29 17 CFR 240.17Ad–22(d)(8). 2 17 CFR 240.19b–4.
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![14304 Federal Register / Vol. 83, No. 64 / Tuesday, April 3, 2018 / Notices
become operative for 30 days after the Electronic Comments SECURITIES AND EXCHANGE
date of the filing. However, Rule 19b– COMMISSION
4(f)(6)(iii) 8 permits the Commission to • Use the Commission’s internet
comment form (http://www.sec.gov/ [Release No. 34–82959; File No. SR–BOX–
designate a shorter time if such action 2018–06]
is consistent with the protection of rules/sro.shtml); or
investors and the public interest. In its • Send an email to rule-comments@ Self-Regulatory Organizations; BOX
filing, ISE requests that the Commission sec.gov. Please include File Number SR– Options Exchange LLC; Order
waive the 30-day operative delay to ISE–2018–21 on the subject line. Approving a Proposed Rule Change To
allow the proposed one-year extension Adopt IM–8040–3 To Exchange Rule
Paper Comments
of the time for re-introducing the legging 8040 to Permit Directed Orders To Be
functionality for Stock-Option Orders to • Send paper comments in triplicate Submitted With an Auction Only
begin at the conclusion of the current to Secretary, Securities and Exchange Designation
delay period, which was scheduled to Commission, 100 F Street NE, March 28, 2018.
end on March 21, 2018. As noted above, Washington, DC 20549–1090.
ISE states that extending the delay for I. Introduction
re-introducing the legging functionality All submissions should refer to File
On February 5, 2018, BOX Options
for Stock-Option Orders will provide Number SR–ISE–2018–21. This file
Exchange LLC (‘‘BOX’’ or ‘‘Exchange’’)
ISE with additional time to develop and number should be included on the filed with the Securities and Exchange
test the legging functionality on INET. subject line if email is used. To help the Commission (‘‘Commission’’) pursuant
ISE further states that no Members have Commission process and review your to Section 19(b)(1) of the Securities
notified ISE of a significant impact on comments more efficiently, please use Exchange Act of 1934 (‘‘Act’’) 1 and Rule
execution quality as a result of the only one method. The Commission will 19b–4 thereunder,2 a proposed rule
delayed implementation of the legging post all comments on the Commission’s change to adopt IM–8040–3 to Exchange
functionality for Stock-Option Orders internet website (http://www.sec.gov/ Rule 8040 to permit Directed Orders 3 to
and, accordingly, the Exchange does not rules/sro.shtml). Copies of the be submitted with an Auction Only
believe that extending the delay will submission, all subsequent designation. The proposed rule change
have a significant impact on market amendments, all written statements was published for comment in the
participants. The Commission believes with respect to the proposed rule Federal Register on February 16, 2018.4
that waiving the operative delay is change that are filed with the The Commission received no comment
consistent with the protection of Commission, and all written letters on the proposed rule change.
investors and the public interest communications relating to the This order approves the proposed rule
because it will provide ISE with proposed rule change between the change.
additional time to develop and test the Commission and any person, other than II. Description of the Proposed Rule
legging functionality for Stock-Option those that may be withheld from the Change
Orders. Accordingly, the Commission public in accordance with the
The Exchange proposes to adopt IM–
waives the 30-day operative delay and provisions of 5 U.S.C. 552, will be
8040–3 to Exchange Rule 8040 to allow
designates the proposed rule change available for website viewing and
Options Participants 5 to apply a new
operative upon filing.9 printing in the Commission’s Public
optional Auction Only designation to
At any time within 60 days of the Reference Room, 100 F Street NE, Directed Orders. A Directed Order with
filing of the proposed rule change, the Washington, DC 20549, on official an Auction Only designation will be
Commission summarily may business days between the hours of cancelled if it is not entered into the
temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of the Price Improvement Period (‘‘PIP’’) 6 by
it appears to the Commission that such filing also will be available for the Executing Participant (‘‘EP’’).7
action is: (i) Necessary or appropriate in inspection and copying at the principal Market Makers 8 may receive and
the public interest; (ii) for the protection office of the Exchange. All comments handle Directed Orders on an agency
of investors; or (iii) otherwise in received will be posted without change.
furtherance of the purposes of the Act. Persons submitting comments are 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
If the Commission takes such action, the cautioned that we do not redact or edit
3 The term ‘‘Directed Order’’ means any Customer
Commission shall institute proceedings personal identifying information from Order to buy or sell contracts on a single option
to determine whether the proposed rule comment submissions. You should series that has been directed to a particular market
should be approved or disapproved. submit only information that you wish maker by an Order Flow Provider (‘‘OFP’’). See
to make available publicly. All Exchange Rule 100(a)(19).
IV. Solicitation of Comments 4 See Securities Exchange Act Release No. 82690
submissions should refer to File (February 12, 2018), 83 FR 7084 (‘‘Notice’’).
Interested persons are invited to Number SR–ISE–2018–21, and should 5 The term ‘‘Options Participant’’ or ‘‘Participant’’
submit written data, views, and be submitted on or before April 24, means a firm, or organization that is registered with
2018. the Exchange pursuant to the BOX Rule 2000 Series
arguments concerning the foregoing, for purposes of participating in options trading on
including whether the proposed rule For the Commission, by the Division of BOX as an OFP or Market Maker. See Exchange
change is consistent with the Act. Trading and Markets, pursuant to delegated Rule 100(a)(41).
6 See Exchange Rule 7150.
Comments may be submitted by any of authority.10
7 An Executing Participant (‘‘EP’’) is a market
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the following methods: Jill Peterson, maker that desires to accept Directed Orders. See
Assistant Secretary. Notice, supra note 4, at 7085 n.4.
8 17 CFR 240.19b–4(f)(6)(iii). 8 The term ‘‘Market Maker’’ means an Options
9 For
[FR Doc. 2018–06692 Filed 4–2–18; 8:45 am]
purposes only of waiving the 30-day Participant registered with the Exchange for the
operative delay, the Commission has also BILLING CODE 8011–01–P purpose of making markets in options contracts
considered the proposed rule’s impact on traded on the Exchange and that is vested with the
efficiency, competition, and capital formation. See rights and responsibilities specified in the BOX
15 U.S.C. 78c(f). 10 17 CFR 200.30–3(a)(12) and (59). Rule 8000 Series. All Market Makers are designated
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Document Created: 2018-04-03 00:50:00
Document Modified: 2018-04-03 00:50:00
| 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 | 83 FR 14302 |
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