83 FR 36638 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Rule Concerning Handling of No Bid Options and To Clarify the Operation of Chapter V, Section 3, Entitled “Trading Halts”

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 146 (July 30, 2018)

[Federal Register Volume 83, Number 146 (Monday, July 30, 2018)]
[Notices]
[Pages 36638-36640]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-16165]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83700; File No. SR-BX-2018-033]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Adopt a Rule 
Concerning Handling of No Bid Options and To Clarify the Operation of 
Chapter V, Section 3, Entitled ``Trading Halts''

July 24, 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 13, 2018 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 amend Chapter V, Section 3, entitled 
``Trading Halts'' and Chapter VI, Section 6, entitled ``Acceptance of 
Quotes and Orders.''
    The text of the proposed rule change is available on the Exchange's 
website 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 the most significant aspects of such 
statements.

[[Page 36639]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Chapter V, Section 3, entitled 
``Trading Halts'' to add more specificity concerning auctions during a 
trading halt and remove unnecessary rule text. The Exchange proposes to 
adopt a zero bid options rule on BX within Chapter VI, Section 6, 
entitled ``Acceptance of Quotes and Orders.'' Each proposal is 
described in more detail below.
Chapter V, Section 3
    The Exchange proposes to amend Chapter V, Section 3(a)(vi)(B) to 
add a sentence which provides, ``Auction orders and responses are 
rejected during a halt.'' The Exchange notes that today, during a 
trading halt, the Exchange does not commence an auction. This proposed 
rule text will make clear how auction orders and auction responses are 
handled during a trading halt.
    The Exchange proposes to amend Chapter V, Section 3(b), which 
currently provides, ``In the event BX Regulation determines to halt 
trading, all trading in the effected class or classes of options shall 
be halted. BX Options shall disseminate through its trading facilities 
and over OPRA a symbol with respect to such class or classes of options 
indicating that trading has been halted, and a record of the time and 
duration of the halt shall be made available to vendors.'' The Exchange 
proposes to remove the words ``such class or'' in both places from this 
sentence because the Exchange only disseminates over OPRA a symbol with 
respect to classes of options to indicate a trading halt. Today, the 
Exchange halts symbol by symbol; all classes or every option would be 
halted. By amending this rule, the Exchange will add more transparency 
as to how it determines to halt trading and disseminates information 
regarding trading halts.
Chapter VI, Section 6
    Today, the Exchange does not have a rule for the handling of 
options with no bid or zero bid options. The Exchange's handling of 
zero bid options on BX is identical to the manner in which zero bid is 
handled on Phlx.\3\ The Exchange proposes to add this new rule to 
Chapter VI, Section 6(a)(3). The new rule would provide, ``In the case 
where the bid price for any options contract is $0.00, a market order 
accepted into the System to sell that series shall be considered a 
limit order to sell at a price equal to the minimum trading increment 
as defined in Chapter VI, Section 5. Orders will be placed on the limit 
order book in the order in which they were received by the System. With 
respect to market orders to sell which are submitted prior to the 
Opening and persist after the Opening, those orders are posted at a 
price equal to the minimum trading increment as defined in Chapter VI, 
Section 5.''
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    \3\ See Phlx Rule 1035.
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    The Exchange intends to accept and convert market orders to sell 
allowing them an equal opportunity to trade if interest should arrive 
in the case of a no bid option. The Exchange notes that the orders 
would rest on the Order Book at the minimum price increment. The 
Exchange notes market orders ``accepted into the System'' would be 
converted to account for market orders that may not be accepted into 
the System due to Limit Up-Limit Down restrictions, which may prevent 
the market order from being accepted.\4\ Only after acceptance into the 
System will market orders be treated as a sell limit order at a price 
equal to the minimum trading increment.
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    \4\ The Limit Up-Limit Down requirements must be met first 
before the proposed rule would apply.
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    Further, the Exchange proposes to add rule text, which provides 
``Orders will be placed on the limit order book in the order in which 
they were received by the System.'' \5\ The Exchange proposes to note 
that with respect to market orders to sell in zero bid options, which 
are submitted prior to the Opening Process \6\ and persist after the 
Opening Process, those orders are posted at a price equal to the 
minimum trading increment as defined in Chapter VI, Section 5.\7\ The 
Exchange's proposed rule will provide market participants with greater 
insight into the handling of orders where there is a zero bid. The 
Exchange believes that this proposed amendment will accurately describe 
the manner in which a zero-bid options series operates within the 
System both before and after the Opening Process.
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    \5\ The time of receipt for an order is the time such message is 
processed by the System.
    \6\ The Exchange's Opening Process is described within Chapter 
VI, Section 8.
    \7\ Chapter VI, Section 5, entitled ``Minimum Increments'' 
provides for the minimum increments of trading.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934,\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 
for 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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Chapter V, Section 3
    The Exchange is providing greater transparency as to the manner in 
which auctions are handled during a trading halt and the manner in 
which the Exchange determines to halt trading and disseminates 
information over OPRA during a trading halt. The Exchange believes that 
this rule text is consistent with the Act and the protection of 
investors and the public interest because it brings greater clarity to 
the manner in which trading halts function and what type of information 
is provided during a halt.
Chapter VI, Section 6
    The Exchange's proposal to adopt a zero bid rule is consistent with 
the Act and designed to promote just and equitable principles of trade 
and to protect investors and the public interest by adopting text which 
describes the handling of zero-bid options. The Exchange is treating 
all market orders to sell in zero bid options in the same fashion by 
converting all those orders, provided that the Exchange's disseminated 
bid price in such option is zero for an option listed only on the 
Exchange or, for an option listed on multiple exchanges and the 
disseminated NBBO includes a bid price of zero in the series. Market 
orders to sell in zero bid options will be placed on the limit order 
book in the order in which they were received by the System. The 
Exchange desires to prevent members from submitting market orders to 
sell in no bid series, which would execute at a price of $0.00. The 
Exchange believes that the proposed rule will achieve this objective 
and continue to permit the Exchange to execute orders within its System 
at prices that reflect some value. Adding rule text regarding market 
orders to sell in zero bid options submitted prior to the Opening 
Process and persisting after the Opening Process is consistent with the 
Act because it provides more transparency as to the operation of this 
rule and as to how those market orders to sell in zero bid options will 
be handled by the System. Further, the Exchange believes that 
memorializing its current practice within the rule text will bring more 
clarity to the manner in which the zero bid rule operates to the 
benefits of all market participants.

[[Page 36640]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\10\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78f(b)(8).
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Chapter V, Section 3
    The Exchange's proposal to amend Chapter V, Section 3(a)(vi)(B) to 
make clear how auction orders and auction responses are handled during 
a trading halt and amend Chapter V, Section 3 to more specifically 
describe how the Exchange determines to halt trading as well as the 
information disseminated during a trading halt do not impose an undue 
burden on competition because the amendments add more transparency to 
the trading halt rule.
Chapter VI, Section 6
    The Exchange's proposal to adopt a zero bid options rule does not 
impose an undue burden on competition because the proposed rule change 
will continue to apply uniformly for all market participants who enter 
market orders to sell into the System when there is a zero-bid options.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the 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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission 
may 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 proposed 
rule change may become operative immediately. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposal 
raises no novel issues. Specifically, as the Exchange noted in its 
proposal, the provisions on the handling of zero bid options are the 
same as Rule 1035 of Nasdaq PHLX LLC and the changes to the trading 
halt rules clarify that the Exchange rejects auction orders and 
responses during a trading halt, which is consistent with the fact that 
the Exchange does not commence auctions during trading halts. Further, 
the proposal conforms a minor reference in the trading halt rules to 
better reflect the fact that the Exchange halts trading on a symbol-by-
symbol basis. For these reasons, the Commission hereby waives the 30-
day operative delay and designates the proposal operative upon 
filing.\17\
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    \15\ Id.
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission 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 change 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-2018-033 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-2018-033. 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 offices 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-2018-033, and should be submitted on 
or before August 20, 2018.
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    \18\ 17 CFR 200.30-3(a)(12), (59).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-16165 Filed 7-27-18; 8:45 am]
 BILLING CODE 8011-01-P