83 FR 37873 - Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Codify the Definitions of the Protocols That Members Can Use To Enter Quotes and Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 149 (August 2, 2018)

[Federal Register Volume 83, Number 149 (Thursday, August 2, 2018)]
[Notices]
[Pages 37873-37875]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-16526]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83730; File No. SR-MRX-2018-25]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Codify the 
Definitions of the Protocols That Members Can Use To Enter Quotes and 
Orders

July 27, 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 16, 2018, Nasdaq MRX, LLC (``MRX'' 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 codify the definitions of the protocols 
that Members can use to enter quotes and orders on the Exchange.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqmrx.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 codify the 
definitions of the protocols that Members use to enter quotes and 
orders on the Exchange, specifically, the Specialized Quote Feed 
(``SQF''), Ouch to Trade Options (``OTTO''), and Financial Information 
eXchange (``FIX''). On July 20, 2017, the Exchange filed a proposed 
rule change that established the ports that Members use to connect to 
the Exchange, including ports used for quote and order entry--i.e., 
SQF, OTTO and FIX.\3\ The protocols used by Members to submit quotes 
and orders play an important role in the operation of the trading 
system as critical Exchange functionality used by Members to transact 
in options is offered through

[[Page 37874]]

these protocols. The Exchange therefore believes that codifying 
definitions of these protocols in its rules will increase transparency 
around its operations.
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    \3\ See Securities Exchange Act Release No. 81312 (August 3, 
2017), 82 FR 37253 (August 9, 2017) (SR-MRX-2017-13).
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    The proposed language is substantially similar to the language 
included in SR-MRX-2017-13 with changes to more clearly and accurately 
reflect the certain information included on each protocol, such as by 
separating out different categories of messages (e.g., auction orders, 
auction notifications, and auction responses). Furthermore, the 
proposed definitions will be harmonized where appropriate with 
definitions to be included in the rules of the Exchange's affiliated 
options markets, including by using consistent terms to define the 
buckets of information transmitted, or the features available, on each 
protocol.\4\ Although the Exchange is changing how it categorizes 
various features included on FIX, OTTO, and SQF as part of its 
harmonization effort, the list of features included in the proposed 
definitions are intended to be exhaustive with respect to the buckets 
of information provided on each protocol. The Exchange believes that 
the proposed changes will allow Members to more easily understand what 
information is available on which protocol.
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    \4\ The Exchange's affiliates--i.e., Nasdaq ISE, LLC (``ISE''), 
Nasdaq GEMX, LLC (``GEMX''), Nasdaq PHLX LLC (``Phlx''), Nasdaq 
Options Market (``NOM''), and Nasdaq BX, LLC (``BX'')--intend to 
file similar rule changes as part of this exercise.
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    As proposed, Supplementary Material .03 to Rule 715 (i.e., Types of 
Orders) will provide that the Exchange offers Members the following 
protocols for entering orders and quotes respectively:
A. Financial Information eXchange Ports
    When the Exchange initially filed to adopt order and quote entry 
protocols, it described the FIX protocol as follows: ``FIX is an 
interface that allows market participants to connect and send orders 
and auction orders into the Exchange. Data includes the following: (1) 
Options Symbol Directory Messages; (2) System Event Messages (e.g., 
start of messages, start of system hours, start of quoting, start of 
opening); (3) Option Trading Action Messages (e.g., halts, resumes); 
(4) Execution Messages; (5) Order Messages (order messages, risk 
protection triggers or purge notifications).''
    The Exchange now proposes to codify the following definition of FIX 
in its rulebook: ``Financial Information eXchange'' or ``FIX'' is an 
interface that allows Members and their Sponsored Customers \5\ to 
connect, send, and receive messages related to orders and auction 
orders to the Exchange. Features include the following: (1) Execution 
messages; (2) order messages; (3) risk protection triggers and cancel 
notifications; and (4) post trade allocation messages.
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    \5\ A ``Sponsored Customer'' is a non-member of the Exchange 
that trades under a sponsoring member's execution and clearing 
identity pursuant to a sponsorship arrangement between such non-
member and sponsoring member, as set forth in Supplementary Material 
to Rule 706.
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B. Ouch To Trade Options Ports

    When the Exchange initially filed to adopt order and quote entry 
protocols, it described the OTTO protocol as follows: ``OTTO is an 
interface that allows market participants to connect and send orders, 
auction orders and auction responses into the Exchange. Data includes 
the following: (1) Options Auction Notifications (e.g., Flash, PIM, 
Solicitation and Facilitation or other information); (2) Options Symbol 
Directory Messages; (3) System Event Messages (e.g., start of messages, 
start of system hours, start of quoting, start of opening); (5) Option 
Trading Action Messages (e.g., halts, resumes); (6) Execution Messages; 
(7) Order Messages (order messages, risk protection triggers or purge 
notifications).''
    The Exchange now proposes to codify the following definition of 
OTTO in its rulebook: ``Ouch to Trade Options'' or ``OTTO'' is an 
interface that allows Members and their Sponsored Customers to connect, 
send, and receive messages related to orders, auction orders, and 
auction responses to the Exchange. Features include the following: (1) 
Options symbol directory messages (e.g., underlying instruments); (2) 
system event messages (e.g., start of trading hours messages and start 
of opening); (3) trading action messages (e.g., halts and resumes); (4) 
execution messages; (5) order messages; (6) risk protection triggers 
and cancel notifications; (7) auction notifications; (8) auction 
responses; and (9) post trade allocation messages.

C. Specialized Quote Feed Ports

    When the Exchange initially filed to adopt order and quote entry 
protocols, it described the SQF protocol as follows: ``SQF is an 
interface that allows market makers to connect and send quotes, sweeps 
and auction responses into the Exchange. Data includes the following: 
(1) Options Auction Notifications (e.g., opening imbalance, Flash, PIM, 
Solicitation and Facilitation or other information); (2) Options Symbol 
Directory Messages; (3) System Event Messages (e.g., start of messages, 
start of system hours, start of quoting, start of opening); (4) Option 
Trading Action Messages (e.g., halts, resumes); (5) Execution Messages; 
(6) Quote Messages (quote/sweep messages, risk protection triggers or 
purge notifications).''
    The Exchange now proposes to codify the following definition of SQF 
in its rulebook: ``Specialized Quote Feed'' or ``SQF'' is an interface 
that allows market makers to connect, send, and receive messages 
related to quotes, Immediate-or-Cancel Orders, and auction responses to 
the Exchange. Features include the following: (1) Options symbol 
directory messages (e.g., underlying instruments); (2) system event 
messages (e.g., start of trading hours messages and start of opening); 
(3) trading action messages (e.g., halts and resumes); (4) execution 
messages; (5) quote messages; (6) Immediate-or-Cancel Order messages; 
(7) risk protection triggers and purge notifications; (8) opening 
imbalance messages; (9) auction notifications; and (10) auction 
responses. The SQF Purge Interface only receives and notifies of purge 
requests from the market maker.\6\
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    \6\ All of the notification messages available on SQF ports as 
described above (i.e., options symbol directory messages, system 
event messages, trading action messages, etc.) are configurable in 
that market makers can select the specific types of notifications 
they wish to receive on their SQF ports. As such, SQF Purge 
Interface ports are a subpart of SQF ports that have been configured 
to only receive and notify of purge requests.
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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 (the 
``Act''),\7\ in general, and furthers the objectives of Section 6(b)(5) 
of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is consistent 
with the protection of investors and the public interest as it codifies 
the protocols used to connect to the Exchange's trading system. As 
discussed above, the Exchange previously filed to establish FIX, OTTO, 
and SQF in SR-MRX-2017-13. These protocols will now be codified in the 
Exchange's rulebook.
    While no functional changes to the protocols are proposed in this 
filing, the Exchange believes that including a description of the 
protocols in its

[[Page 37875]]

rulebook will benefit Members by increasing transparency around the 
operation of the Exchange. Furthermore, the proposed definitions being 
included in the rulebook will more clearly and accurately reflect the 
information included on the protocols, and will be harmonized with 
language to be included in the rules of its affiliated exchanges to the 
extent that the protocols operate in the same manner. The protocols 
described in this filing provide a range of important features to 
Members, including the ability to submit quotes and orders, and perform 
other functions necessary to manage trading on the Exchange. The 
Exchange believes codifying the quote and order entry protocols will 
increase transparency to the Members that use these protocols to 
connect to the Exchange.

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

    In accordance with Section 6(b)(8) of the Act,\9\ the Exchange does 
not believe that the proposed rule change will impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As explained 
above, the Exchange is codifying the quote and order entry protocols 
that Members use to connect to the Exchange's trading system. The 
Exchange does not believe that codifying these protocols in the 
rulebook will have any competitive impact. FIX, OTTO, and SQF were 
established in SR-MRX-2017-13, and are already available to Members, 
who use these protocols to connect and manage their trading activity on 
the Exchange. Adding rule language that describes these Exchange 
offerings will increase transparency around the operation of the 
Exchange without having any impact on intermarket or intramarket 
competition.
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    \9\ 15 U.S.C. 78f(b)(8).
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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\
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    \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. 
In this case, the Commission waives the five-day pre-filing 
requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MRX-2018-25 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-MRX-2018-25. 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-MRX-2018-25 and should be submitted on 
or before August 23, 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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16526 Filed 8-1-18; 8:45 am]
 BILLING CODE 8011-01-P