83 FR 34896 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend The Nasdaq Options Market LLC (“NOM”) Rules Relating to Market Maker Quotations
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 141 (July 23, 2018)
Federal Register Volume 83, Issue 141 (July 23, 2018)
| Page Range | 34896-34899 | |
| FR Document | 2018-15645 |
[Federal Register Volume 83, Number 141 (Monday, July 23, 2018)] [Notices] [Pages 34896-34899] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-15645] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83653; File No. SR-NASDAQ-2018-052] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend The Nasdaq Options Market LLC (``NOM'') Rules Relating to Market Maker Quotations July 17, 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 July 2, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' 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. --------------------------------------------------------------------------- \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 The Nasdaq Options Market LLC (``NOM'') Rules at Chapter VII, Section 6 related to Market Maker quotations. The text of the proposed rule change is available on the Exchange's website at http://nasdaq.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 Nasdaq proposes to amend the current rule text of Chapter VII, Section 6(d), related to quoting obligations, to restructure the current rule to conform to rule text utilized on Nasdaq Phlx LLC.\3\ The Exchange does not propose to amend the current quoting obligations, rather the Exchange proposes to more clearly state the current quoting obligations utilizing the same format as Phlx Rule 1081(c). --------------------------------------------------------------------------- \3\ Phlx Rule 1081(c)(ii). --------------------------------------------------------------------------- Chapter VII, Section 6(d) The Exchange proposes to amend Chapter VII, Section 6(d) to remove the word ``continuous'' from this first sentence in the rule. The Exchange is removing the word ``continuous'' because the Exchange notes that Market Makers quote a percentage of the day and therefore the word continuous may not accurately reflect the manner in which Market Makers quote on NOM. The Exchange proposes to retitle Section 6(d) as ``Intra- day Quotes.'' The Exchange also proposes to remove the word ``continuous'' from Chapter V, Section 3(d)(iv) [sic] and replace that word with ``intra- day.'' The Exchange also proposes to amend Chapter X, Section 7(c) to replace the words ``continuous bids and offers'' with ``intra-day quoting.'' Chapter VII, Section 6(d)(i) The Exchange proposes to amend Chapter VII, Section 6(d)(i) to delete the first sentence of this paragraph, ``On a daily basis, a Market Maker must during regular market hours make markets consistent with the applicable quoting requirements specified in these rules, on a continuous basis in options in which the Market Maker is registered.'' The Exchange believes that a Market Maker's obligation to enter bids and offers for the options to which it is registered is currently noted in proposed Chapter VII, Section 6(d). The Exchange proposes to specifically detail a Market Maker's quoting obligations in the proposed rule text and therefore believes that this sentence is not necessary because the following sentence replaces this sentence with the exception of the intra-day aspect as described below. The Exchange proposes to add new rule text to Chapter VII, Section 6(d)(i). The first new sentence will provide ``A Market Maker must enter bids and offers [[Page 34897]] for the options to which it is registered, except in an assigned options series listed intra-day \4\ on the Exchange.'' The Exchange believes this sentence is more specific than Section 6(d) because it excepts the intra-day quotes. Today, a Market Maker is not held to quote an intra-day add of a series because the options series was not available for trading the entire day. The Exchange is adding this exception to the rule text to make clear that Market Makers would not be responsible for quoting an intra-day addition. The Exchange believes that not counting intra-day adds of a series that were not available for the entire day of trading is consistent with the Act because the Market Maker would not have the opportunity to trade that particular options series for the entire trading day. The Exchange also proposes to note, ``On a daily basis, a Market Maker must make markets consistent with the applicable quoting requirements specified below.'' --------------------------------------------------------------------------- \4\ An intra-day add of a series shall be defined, for purposes of this Phlx Rule 1081 [sic], as an option series that is added manually on the same day the series begins trading. --------------------------------------------------------------------------- Chapter VII, Section 6(d)(i)(1) The Exchange proposes to remove the following sentence from Chapter VII, Section (d)(i)(1), ``To satisfy this requirement, a Market Maker must quote 60% of the trading day (as a percentage of the total number of minutes in such trading day) or such higher percentage as Nasdaq may announce in advance.'' The Exchange proposes to replace this language with language that more technically defines the quoting obligation. The Exchange proposes the following rule text: Market Makers, associated with the same Options Participant, are collectively required to provide two-sided quotations in 60% of the cumulative number of seconds, or such higher percentage as NOM may announce in advance, for which that Options Participant's assigned options series are open for trading. Notwithstanding the foregoing, a Market Maker shall not be required to make two-sided markets pursuant to this Chapter VII, Section 6(d)(i)(1) in any Quarterly Option Series, any Adjusted Option Series, and any option series with an expiration of nine months or greater. The 60% requirement and the manner in which it is calculated is not being amended. The Exchange does not propose to amend the current quoting obligations, rather the Exchange proposes to more clearly state the current quoting obligations utilizing the same format as Phlx Rule 1081(c)(ii)(A). The Exchange notes the quoting obligations expressed as the cumulative number of seconds rather than 60% of the trading day. While the current rule indicates that the Exchange currently reviews quoting as a percentage of the total number of minutes, the two standards are otherwise equivalent. Adding ``associated with the same Options Participant'' to the first sentence also makes clear that the obligation is at the firm level and that all associated Market Makers will be counted in arriving at the calculation for quoting obligations. The Exchange also states, ``Notwithstanding the foregoing, a Market Maker shall not be required to make two-sided markets pursuant to this Chapter VII, Section 6(d)(i)(1) in any Quarterly Option Series, any Adjusted Option Series, and any option series with an expiration of nine months or greater.'' This exception exists today for NOM and is simply being carried over into the new text from current Section 6(d)(i)(2). The definition of an adjusted option series is currently defined at Section 6(d)(i)(2) as an option series wherein one option contract in the series represents the delivery of other than 100 shares of underlying stock or Exchange-Traded Fund Shares. This definition is being relocated to 6(d)(i)(1)(a), similar to Phlx's structure and is defined as ``Adjusted Options Series'' throughout this rule. Chapter VII, Section 6(d)(i)(2) The Exchange proposes to add new rule text at Chapter VII, Section 6(d)(i)(2) which provides the method by which the Exchange will calculate the NOM Market Maker quoting obligations. The Exchange proposes to state, that the Exchange will (i) take the total number of seconds the Options Participant disseminates quotes in each assigned options series, excluding Quarterly Option Series, any Adjusted Option Series, and any option series with an expiration of nine months or greater for Market Makers; and (ii) divide that time by the eligible total number of seconds each assigned option series is open for trading that day. Similar to Phlx Rule 1081(c)(ii)(D), the Exchange believes that the addition of this language will bring greater transparency to the manner in which the Exchange calculated the quoting obligation. The Exchange is not amending the manner in which the quoting obligation is calculated, rather the Exchange is simply adding to the current rule the exact manner in which the Exchange determines the quoting percentage. The Exchange proposes to add, ``Quoting is not required in every assigned options series.'' This sentence is not currently contained in the rule. The Exchange is not proposing to amend its current practice, rather the Exchange is clearly stating that quoting is not required in every assigned options series to make clear the current obligation. Also, the Exchange proposes to state, ``Compliance with this requirement is determined by reviewing the aggregate of quoting in assigned options series for the Options Participant.'' This language is similar to the language currently being removed from Chapter VII, Section 6(d)(i)(1), ``This obligation will apply to all of a Market Maker's registered options collectively to all appointed issues, rather than on an option-by-option basis.'' The proposed new language simply conforms the text to Phlx's Rule 1081(c)(ii)(D). Chapter VII, Section 6(d)(i)(3) The Exchange proposes to also delete the following language from Chapter VII, Section 6(d)(i)(3), ``This obligation will apply to all of a Market Maker's registered options collectively to all appointed issues, rather than on an option-by-option basis. Compliance with this obligation will be determined on a monthly basis. However, determining compliance with the continuous quoting requirement on a monthly basis does not relieve a Market Maker of the obligation to provide continuous two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet the continuous quoting obligation each trading day.'' The Exchange proposes to replace this language with the following language proposed in Section 6(d)(i)(3), ``For purposes of the Exchange's surveillance of an Options Participant compliance with this rule, the Exchange may determine compliance on a monthly basis. The Exchange's monthly compliance evaluation of the quoting requirement does not relieve an Options Participant of the obligation to provide two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against an Options Participant for failing to meet the quoting obligation each trading day.'' The Exchange's amendment is not substantive, rather the amendment brings greater clarity to the current rule text and aligns the rule with that of Phlx Rule 1081(c)(iii). The Exchange proposes to remove the entire paragraph at current Section 6(d)(i)(2). As explained above this language is being relocated within the proposed rule text. The Exchange notes that the sentence ``Accordingly, the continuous quotation obligations set forth in this rule shall not apply to Market Makers respecting Quarterly Option Series, adjusted option series, and series with an expiration of nine [[Page 34898]] months or greater'' is being deleted and not relocated because this sentence is redundant. Also, the Exchange proposes to amend current Section 6(d)(i)(3) by renumbering it (4) and also capitalizing ``System'' which is a defined term and renumbering a cross-reference. The Exchange believes this proposed rule will allow Market Makers to quickly compare obligations across Nasdaq affiliated markets.\5\ --------------------------------------------------------------------------- \5\ The Exchange intends to file a similar proposal for Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq GEMX, LLC and Nasdaq MRX, LLC. --------------------------------------------------------------------------- 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 system, and, in general to protect investors and the public interest. The Exchange believes that its proposed rule change provides further detail as to obligations of Market Makers on NOM. The Exchange is not amending its current quoting obligations, rather the Exchange is proposing to amend its current rule text to bring greater transparency to the current quoting obligations by adding clear language which explains the manner in which NOM will calculate quoting obligations. The Exchange believes the proposed rule text is consistent with the Act because the proposed rule text protect investors and the public interest by providing clear language that will be utilized on all Nasdaq affiliate markets for easy comparison. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78f(b). \7\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition 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. The proposal does not impose a burden on competition because the Exchange will continue to uniformly calculate and apply the quoting obligations for all NOM Market Makers. The Exchange's proposal does not modify the current quoting obligations on NOM. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission may 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 has asked the Commission to waive the 30-day operative delay so that the proposal to amend its Market Maker quoting obligations to add more detail to the current quoting requirements may become operative immediately upon filing. The Exchange believes that the proposal will bring greater transparency to the Exchange's rules. The Commission notes that the changes are substantially similar to Phlx Rule 1081(c). As such, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change operative upon filing.\14\ --------------------------------------------------------------------------- \12\ 17 CFR 240.19b-4(f)(6). \13\ 17 CFR 240.19b-4(f)(6)(iii). \14\ For purposes only of waiving the operative delay, the Commission has 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 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 under Section 19(b)(2)(B) of the Act \15\ to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- 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-NASDAQ-2018-052 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-NASDAQ-2018-052. 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 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 [[Page 34899]] 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-NASDAQ-2018-052 and should be submitted on or before August 13, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-15645 Filed 7-20-18; 8:45 am] BILLING CODE 8011-01-P
![34896 Federal Register / Vol. 83, No. 141 / Monday, July 23, 2018 / Notices
indicate the potential cost and length of SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
recovery, as well as the ability to COMMISSION Statement of the Purpose of, and
effectuate a wind-down within six Statutory Basis for, the Proposed Rule
months of the decision at a lower cost [Release No. 34–83653; File No. SR– Change
than the amount of its liquid resources, NASDAQ–2018–052] 1. Purpose
consistent with Rule 17Ad–22(e)(15)(i)–
(ii).38 Self-Regulatory Organizations; The Nasdaq proposes to amend the current
rule text of Chapter VII, Section 6(d),
Therefore, the Commission finds that Nasdaq Stock Market LLC; Notice of
related to quoting obligations, to
the proposed rule changes would Filing and Immediate Effectiveness of
restructure the current rule to conform
determine the length of time required to Proposed Rule Change To Amend The
to rule text utilized on Nasdaq Phlx
achieve a recovery or orderly wind- Nasdaq Options Market LLC (‘‘NOM’’) LLC.3 The Exchange does not propose to
down of ICE Clear Europe and the Rules Relating to Market Maker amend the current quoting obligations,
associated costs and would further Quotations rather the Exchange proposes to more
ensure that ICE Clear Europe holds July 17, 2018. clearly state the current quoting
liquid net assets greater than these costs, obligations utilizing the same format as
consistent with Rule 17Ad–22(e)(15)(i)– Pursuant to Section 19(b)(1) of the Phlx Rule 1081(c).
(ii).39 Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Chapter VII, Section 6(d)
III. Conclusion notice is hereby given that on July 2, The Exchange proposes to amend
2018, The Nasdaq Stock Market LLC Chapter VII, Section 6(d) to remove the
On the basis of the foregoing, the word ‘‘continuous’’ from this first
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Commission finds that the proposed sentence in the rule. The Exchange is
Securities and Exchange Commission
rule changes are consistent with the removing the word ‘‘continuous’’
(‘‘SEC’’ or ‘‘Commission’’) the proposed
requirements of the Exchange Act, and because the Exchange notes that Market
rule change as described in Items I and
in particular, Section 17A(b)(3)(F) of the Makers quote a percentage of the day
II, below, which Items have been
Exchange Act 40 and Rules 17Ad– and therefore the word continuous may
prepared by the Exchange. The
22(e)(2), 17Ad–22(e)(3)(ii), 17Ad– not accurately reflect the manner in
Commission is publishing this notice to
22(e)(15)(i)–(ii) thereunder.41 which Market Makers quote on NOM.
solicit comments on the proposed rule
It is therefore ordered pursuant to The Exchange proposes to retitle
change from interested persons.
Section 19(b)(2) of the Exchange Act Section 6(d) as ‘‘Intra-day Quotes.’’
that the proposed rule change (SR– I. Self-Regulatory Organization’s The Exchange also proposes to
ICEEU–2017–016) be, and hereby is, Statement of the Terms of Substance of remove the word ‘‘continuous’’ from
the Proposed Rule Change Chapter V, Section 3(d)(iv) [sic] and
approved.42
replace that word with ‘‘intra-day.’’ The
It is therefore ordered pursuant to The Exchange proposes to amend The Exchange also proposes to amend
Section 19(b)(2) of the Exchange Act Nasdaq Options Market LLC (‘‘NOM’’) Chapter X, Section 7(c) to replace the
that the proposed rule change (SR– Rules at Chapter VII, Section 6 related words ‘‘continuous bids and offers’’
ICEEU–2017–017) be, and hereby is, to Market Maker quotations. with ‘‘intra-day quoting.’’
approved.43
The text of the proposed rule change Chapter VII, Section 6(d)(i)
For the Commission by the Division of is available on the Exchange’s website at The Exchange proposes to amend
Trading and Markets, pursuant to delegated http://nasdaq.cchwallstreet.com, at the Chapter VII, Section 6(d)(i) to delete the
authority.44 principal office of the Exchange, and at first sentence of this paragraph, ‘‘On a
Eduardo A. Aleman, the Commission’s Public Reference daily basis, a Market Maker must during
Assistant Secretary. Room. regular market hours make markets
[FR Doc. 2018–15644 Filed 7–20–18; 8:45 am]
II. Self-Regulatory Organization’s consistent with the applicable quoting
BILLING CODE 8011–01–P
Statement of the Purpose of, and requirements specified in these rules, on
a continuous basis in options in which
Statutory Basis for, the Proposed Rule
the Market Maker is registered.’’ The
Change
Exchange believes that a Market Maker’s
In its filing with the Commission, the obligation to enter bids and offers for
Exchange included statements the options to which it is registered is
concerning the purpose of and basis for currently noted in proposed Chapter
the proposed rule change and discussed VII, Section 6(d). The Exchange
any comments it received on the proposes to specifically detail a Market
38 17 CFR 240.17Ad–22(e)(15)(i)–(ii).
proposed rule change. The text of these Maker’s quoting obligations in the
39 17 CFR 240.17Ad–22(e)(15)(i)–(ii). proposed rule text and therefore
40 15 U.S.C. 78q–1(b)(3)(F). statements may be examined at the
believes that this sentence is not
41 17 CFR 240.17Ad–22(e)(2); (e)(3)(ii); (e)(15)(i)– places specified in Item IV below. The
necessary because the following
(ii). Exchange has prepared summaries, set
sentence replaces this sentence with the
42 In approving the proposed rule change, the forth in sections A, B, and C below, of exception of the intra-day aspect as
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Commission considered the proposal’s impacts on the most significant aspects of such described below.
efficiency, competition, and capital formation. 15 statements.
U.S.C. 78c(f). The Exchange proposes to add new
43 In approving the proposed rule change, the rule text to Chapter VII, Section 6(d)(i).
Commission considered the proposal’s impacts on The first new sentence will provide ‘‘A
efficiency, competition, and capital formation. 15 Market Maker must enter bids and offers
U.S.C. 78c(f). 1 15 U.S.C. 78s(b)(1).
44 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. 3 Phlx Rule 1081(c)(ii).
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for the options to which it is registered, the trading day. While the current rule is not required in every assigned options
except in an assigned options series indicates that the Exchange currently series to make clear the current
listed intra-day 4 on the Exchange.’’ The reviews quoting as a percentage of the obligation. Also, the Exchange proposes
Exchange believes this sentence is more total number of minutes, the two to state, ‘‘Compliance with this
specific than Section 6(d) because it standards are otherwise equivalent. requirement is determined by reviewing
excepts the intra-day quotes. Today, a Adding ‘‘associated with the same the aggregate of quoting in assigned
Market Maker is not held to quote an Options Participant’’ to the first options series for the Options
intra-day add of a series because the sentence also makes clear that the Participant.’’ This language is similar to
options series was not available for obligation is at the firm level and that the language currently being removed
trading the entire day. The Exchange is all associated Market Makers will be from Chapter VII, Section 6(d)(i)(1),
adding this exception to the rule text to counted in arriving at the calculation for ‘‘This obligation will apply to all of a
make clear that Market Makers would quoting obligations. The Exchange also Market Maker’s registered options
not be responsible for quoting an intra- states, ‘‘Notwithstanding the foregoing, collectively to all appointed issues,
day addition. The Exchange believes a Market Maker shall not be required to rather than on an option-by-option
that not counting intra-day adds of a make two-sided markets pursuant to basis.’’ The proposed new language
series that were not available for the this Chapter VII, Section 6(d)(i)(1) in simply conforms the text to Phlx’s Rule
entire day of trading is consistent with any Quarterly Option Series, any 1081(c)(ii)(D).
the Act because the Market Maker Adjusted Option Series, and any option
Chapter VII, Section 6(d)(i)(3)
would not have the opportunity to trade series with an expiration of nine months
that particular options series for the or greater.’’ This exception exists today The Exchange proposes to also delete
entire trading day. The Exchange also for NOM and is simply being carried the following language from Chapter
proposes to note, ‘‘On a daily basis, a over into the new text from current VII, Section 6(d)(i)(3), ‘‘This obligation
Market Maker must make markets Section 6(d)(i)(2). The definition of an will apply to all of a Market Maker’s
consistent with the applicable quoting adjusted option series is currently registered options collectively to all
requirements specified below.’’ defined at Section 6(d)(i)(2) as an option appointed issues, rather than on an
series wherein one option contract in option-by-option basis. Compliance
Chapter VII, Section 6(d)(i)(1) the series represents the delivery of with this obligation will be determined
The Exchange proposes to remove the other than 100 shares of underlying on a monthly basis. However,
following sentence from Chapter VII, stock or Exchange-Traded Fund Shares. determining compliance with the
Section (d)(i)(1), ‘‘To satisfy this This definition is being relocated to continuous quoting requirement on a
requirement, a Market Maker must 6(d)(i)(1)(a), similar to Phlx’s structure monthly basis does not relieve a Market
quote 60% of the trading day (as a and is defined as ‘‘Adjusted Options Maker of the obligation to provide
percentage of the total number of Series’’ throughout this rule. continuous two-sided quotes on a daily
minutes in such trading day) or such basis, nor will it prohibit the Exchange
Chapter VII, Section 6(d)(i)(2) from taking disciplinary action against a
higher percentage as Nasdaq may
announce in advance.’’ The Exchange The Exchange proposes to add new Market Maker for failing to meet the
proposes to replace this language with rule text at Chapter VII, Section continuous quoting obligation each
language that more technically defines 6(d)(i)(2) which provides the method by trading day.’’ The Exchange proposes to
the quoting obligation. The Exchange which the Exchange will calculate the replace this language with the following
proposes the following rule text: NOM Market Maker quoting obligations. language proposed in Section 6(d)(i)(3),
The Exchange proposes to state, that the ‘‘For purposes of the Exchange’s
Market Makers, associated with the same Exchange will (i) take the total number surveillance of an Options Participant
Options Participant, are collectively required
to provide two-sided quotations in 60% of
of seconds the Options Participant compliance with this rule, the Exchange
the cumulative number of seconds, or such disseminates quotes in each assigned may determine compliance on a
higher percentage as NOM may announce in options series, excluding Quarterly monthly basis. The Exchange’s monthly
advance, for which that Options Participant’s Option Series, any Adjusted Option compliance evaluation of the quoting
assigned options series are open for trading. Series, and any option series with an requirement does not relieve an Options
Notwithstanding the foregoing, a Market expiration of nine months or greater for Participant of the obligation to provide
Maker shall not be required to make two- Market Makers; and (ii) divide that time two-sided quotes on a daily basis, nor
sided markets pursuant to this Chapter VII, by the eligible total number of seconds will it prohibit the Exchange from
Section 6(d)(i)(1) in any Quarterly Option
Series, any Adjusted Option Series, and any
each assigned option series is open for taking disciplinary action against an
option series with an expiration of nine trading that day. Similar to Phlx Rule Options Participant for failing to meet
months or greater. 1081(c)(ii)(D), the Exchange believes the quoting obligation each trading
that the addition of this language will day.’’ The Exchange’s amendment is not
The 60% requirement and the manner bring greater transparency to the manner substantive, rather the amendment
in which it is calculated is not being in which the Exchange calculated the brings greater clarity to the current rule
amended. The Exchange does not quoting obligation. The Exchange is not text and aligns the rule with that of Phlx
propose to amend the current quoting amending the manner in which the Rule 1081(c)(iii).
obligations, rather the Exchange quoting obligation is calculated, rather The Exchange proposes to remove the
proposes to more clearly state the the Exchange is simply adding to the entire paragraph at current Section
current quoting obligations utilizing the current rule the exact manner in which 6(d)(i)(2). As explained above this
same format as Phlx Rule 1081(c)(ii)(A). the Exchange determines the quoting language is being relocated within the
amozie on DSK3GDR082PROD with NOTICES1
The Exchange notes the quoting percentage. The Exchange proposes to proposed rule text. The Exchange notes
obligations expressed as the cumulative add, ‘‘Quoting is not required in every that the sentence ‘‘Accordingly, the
number of seconds rather than 60% of assigned options series.’’ This sentence continuous quotation obligations set
4 An intra-day add of a series shall be defined, for
is not currently contained in the rule. forth in this rule shall not apply to
purposes of this Phlx Rule 1081 [sic], as an option
The Exchange is not proposing to Market Makers respecting Quarterly
series that is added manually on the same day the amend its current practice, rather the Option Series, adjusted option series,
series begins trading. Exchange is clearly stating that quoting and series with an expiration of nine
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cautioned that we do not redact or edit comment letters on the proposed rule unless one of five exceptions applies.14
personal identifying information from change. This order provides notice of These exceptions are listed in Phlx Rule
comment submissions. You should filing of Amendment No. 1 and 1000(f)(iii)(A)–(E) and would permit a
submit only information that you wish approves the proposal, as modified by Floor Broker, ROT or Specialist to
to make available publicly. All Amendment No. 1, on an accelerated execute an order in the trading crowd if:
submissions should refer to File basis. (1) There is a problem with the
Number SR-NASDAQ-2018–052 and Exchange’s systems; (2) the member is
II. Description of the Proposal executing an order pursuant to Phlx
should be submitted on or before
August 13, 2018. Currently, ROTs and Specialists Rule 1059 (‘‘Accommodation
For the Commission, by the Division of executing orders in the trading crowd Transactions’’) or Phlx Rule 1079
Trading and Markets, pursuant to delegated are required to record such orders and (‘‘FLEX Index, Equity, and Currency
authority.16 related execution details on paper Options’’); (3) the transaction involves a
Eduardo A. Aleman, trading tickets.7 ROTS and Specialists multi-leg order with more than 15 legs;
Assistant Secretary. must then provide those matched trade (4) the transaction involves certain split-
[FR Doc. 2018–15645 Filed 7–20–18; 8:45 am] tickets to an Exchange Data Entry price orders that, due to FBMS system
Technician (‘‘DET’’), who manually limitations, require manual calculation;
BILLING CODE 8011–01–P
enters the information written on the or (5) the member elects to use of the
trade tickets into the Exchange’s Snapshot functionality to provisionally
SECURITIES AND EXCHANGE electronic trading system.8 In contrast, execute certain designated categories of
COMMISSION unless one of five exceptions applies, trades, as described below.15
Floor Brokers are required to enter With respect to Snapshot, the
[Release No. 34–83656; File No. SR–Phlx–
orders originating in the trading crowd Exchange proposes to allow ROTs and
2018–40] Specialists, like Floor Brokers, to use
using the Exchange’s electronic order
entry system—the ‘‘Floor Broker Snapshot to provisionally execute, in
Self-Regulatory Organizations; Nasdaq the options trading crowd, multi-leg
PHLX LLC; Notice of Filing of Management System’’ 9—and are not
permitted to execute orders in the orders and simple orders in options on
Amendment No. 1, and Order Granting exchange-traded funds (‘‘ETFs’’) that are
Accelerated Approval of a Proposed trading crowd. The Exchange proposes
to change the order entry process for included in the Options Penny Pilot,
Rule Change, as Modified by subject to the procedures for and the
Amendment No. 1, To Extend the ROTS and Specialist by requiring them
to utilize the same electronic order entry limitations to the use of Snapshot.16 The
Applicability of the Floor Broker Exchange represents that it does not
Management System and the Snapshot system that is currently used by Floor
Brokers. To accomplish this transition, anticipate that the use of Snapshot by
Functionality to Registered Options ROTs or Specialists will pose any
Traders and Specialists the Exchange proposes to change the
name of its electronic order entry increased or unique risks relative to its
July 17, 2018. system from the ‘‘Floor Broker current use by Floor Brokers.17
Management System’’ to the ‘‘Floor Therefore, the Exchange proposes to
I. Introduction utilize the same methods it currently
Based Management System’’ (‘‘FBMS’’)
On May 24, 2018, Nasdaq PHLX LLC to reflect its expanded applicability to uses to surveil Floor Brokers’ use of
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the all members that operate on the Snapshot to also monitor ROTs’ and
Securities and Exchange Commission Exchange’s trading floor—namely, Floor Specialists’ uses of the Snapshot
(‘‘Commission’’), pursuant to Section Brokers, ROT, and Specialists.10 In functionality.18
19(b)(1) of the Securities Exchange Act To implement the renaming of FBMS
addition, the Exchange proposes to
of 1934 (‘‘Act’’) 1 and Rule 19b–4 and the extension of FBMS (including
apply the same general obligations it
thereunder,2 a proposed rule change to its Snapshot functionality) to ROTs and
currently imposes upon Floor Brokers
extend the applicability of the Floor Specialists, the Exchange also proposes
regarding orders on the trading floor to
Broker Management System and the to make changes to its Rules and Floor
ROTS and Specialists.11 The Exchange
Snapshot functionality to Registered Advices, as well as to update multiple
also proposes to extend FBMS’
Options Traders (‘‘ROTS’’) 3 and cross-references within its Rules and
Snapshot functionality to ROTs and
Specialists.4 The proposed rule change Floor Advices, so that its current
Specialists.12 To effectuate these
was published for comment in the requirements regarding the use of FBMS
changes, the Exchange proposes several
Federal Register on June 4, 2018.5 On will apply to ROTS and Specialists.19
amendments and additions to its Rules
June 4, 2018, the Exchange filed and Floor Advices.13 14 See Notice, supra note 5, at 25726.
Amendment No. 1 to the proposed rule
Specifically, the Exchange proposes to 15 See id.
change.6 The Commission received no
amend Phlx Rule 1000(f) to require 16 See id. These procedures and limitations
16 17 CFR 200.30–3(a)(12).
ROTs and Specialists to execute orders regarding the use of Snapshot are currently set forth
utilizing FBMS and to prohibit ROTs in Phlx Rule 1063(e)(v), but the Exchange proposes
1 15 U.S.C. 78s(b)(1). to move them to a new Phlx Rule 1069, where they
2 17 CFR 240.19b–4. and Specialists from executing orders in will apply broadly to ‘‘members’’ rather than only
3 See Phlx Rule 1014(b) (defining a ROT). the Exchange’s options trading crowd, to Floor Brokers.
4 See Phlx Rule 1020 (describing the functions of 17 See id.
a Specialist). www.sec.gov/comments/sr-phlx-2018-40/phlx201
18 See id. at 25726–27.
5 See Securities Exchange Act Release No. 83339 19 See id. at 25726–28; Amendment No. 1, supra
840-3767632-162689.pdf).
amozie on DSK3GDR082PROD with NOTICES1
(May 29, 2018), 83 FR 25725 (‘‘Notice’’). 7 See Notice, supra note 5, at 25726. note 6. The Exchange is proposing minor alterations
6 In Amendment No. 1 the Exchange: (1) Re- to its Rules that presently govern the use of FBMS
8 See id.
numbered proposed Phlx Rule 1081 as proposed 9 Phlx Rule 1000(f)(iii). by Floor Brokers to, among other things, account for
Phlx Rule 1085 and (2) changed the proposed cross- 10 See Notice, supra note 5, at 25726.
the fact that ROTS and Specialists negotiate orders
references in proposed Commentary .06 to Phlx on the floor for their own account and do not
11 See id. at 25725.
Rule 1080 and in Options Floor Procedure Advices represent orders on behalf of others. See Notice,
12 See id. at 25726.
and Order & Decorum Regulations (‘‘Floor Advice’’) supra note 5, at 25728. In addition, the Exchange
A–9 from Phlx Rule 1081 to Phlx Rule 1085. 13 A more detailed description of the proposal is proposing several changes to remove obsolete
Amendment No. 1 is available at https:// appears in the Notice and in Amendment No. 1. Continued
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Document Created: 2018-07-21 00:49:26
Document Modified: 2018-07-21 00:49:26
| 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 34896 |
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