83 FR 42954 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Codify the Definitions of the Protocols to Enter Quotes and Orders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 165 (August 24, 2018)
Federal Register Volume 83, Issue 165 (August 24, 2018)
| Page Range | 42954-42957 | |
| FR Document | 2018-18294 |
[Federal Register Volume 83, Number 165 (Friday, August 24, 2018)] [Notices] [Pages 42954-42957] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-18294] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83888; File No. SR-NASDAQ-2018-069] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Codify the Definitions of the Protocols to Enter Quotes and Orders August 20, 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 August 17, 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, II, and III, 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 adopt new rule text within The Nasdaq Options Market LLC Rules at Chapter VI, Section 21. Specifically, the Exchange proposes to codify the definitions of the current protocols that Participants can use to enter quotes and orders on the Exchange and introduce a new protocol. 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 The Exchange proposes to adopt new rule text at Chapter VI, Section 21 to codify the Financial Information eXchange (``FIX'') and Specialized Quote Feed (``SQF'') protocols. The Exchange proposes to adopt a new protocol and name it ``Ouch to Trade Options'' (``OTTO'') and rename and amend the current OTTO protocol on NOM as ``Quote Using Orders'' or ``QUO''.\3\ The Exchange believes that codifying definitions of current and new protocols in its rules will increase transparency around its operations. Furthermore, the proposed definitions will be harmonized where appropriate with definitions contained in the rules of the Exchange's affiliated options markets,\4\ by using consistent terms to define the buckets of information transmitted, or the features available, on each protocol. The protocols used by NOM Participants to submit quotes and orders play an important role in the operation of the System. --------------------------------------------------------------------------- \3\ Today the Exchange offers FIX, SQF and QUO (formerly known as OTTO) to its Participants. \4\ Rules have been filed for Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX''), Nasdaq MRX, LLC (``MRX''), Nasdaq BX, Inc. and Nasdaq Phlx, LLC. --------------------------------------------------------------------------- The Exchange notes it has two protocols today, SQF and proposed to be renamed QUO (formerly known as OTTO), that NOM Market Makers can use to meet their quoting obligations. All quotes on SQF are counted toward market making obligations. While a NOM Market Maker may enter an Immediate-or-Cancel Order through SQF this order does not rest on the Exchange's order book and therefore does not count toward quoting [[Page 42955]] obligations. In contrast orders that NOM Market Makers send through QUO will count toward market maker quoting obligations because orders submitted through QUO will rest on the order book and allow NOM Market Makers to provide liquidity on NOM. NOM Market Makers cannot use QUO to submit quotes. As noted below in the section on QUO, specifically orders would count toward meeting quoting obligations for purposes of Rule 701, Opening, and Rule 804(e), regarding intra-day quoting. The Exchange proposes to title proposed new Section 21 as ``Order and Quote Protocols'' and codify descriptions of the various current and new protocols that Participants may use to enter quotes and orders on NOM. Proposed new section (a) to Chapter VI, Section 21 would be entitled ``Entry and Display of Orders and Quotes.'' Proposed new Chapter VI, Section 21(a) would provide, ``Participants may enter orders and quotes into the System as specified below.'' The Exchange proposes to add a section Chapter VI, Section 21(a)(i) which states, ``The Exchange offers Participants the following protocols for entering orders and quotes respectively.'' Each protocol will be explained in greater detail below. A. Financial Information eXchange Ports This protocol is not memorialized within the Exchange's Rulebook, however rule changes describing FIX were filed previously.\5\ The Exchange proposes to codify a description of FIX at Rule 1080(a)(i)(a) to add even greater specificity to this protocol. The Exchange proposes to state that FIX is an interface that allows Participants (Market Makers and non-Market Maker Participants) and their Sponsored Customers to connect, send and receive messages related to orders to and from the Exchange. Features include the following: (1) Execution messages; (2) order messages; and (3) risk protection triggers and cancel notifications. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 74616 (April 6, 2015), 80 FR 18450 (March 31, 2015) (SR-NASDAQ-2015-027). The FIX port was previously referred to as the ``Order Entry Port'' and described as a connection to routing orders to the Exchange via an external order entry port. NOM Participants access the Exchange's network through order entry ports. A NOM Participant may have more than one order entry port. The Exchange recently renamed the ``Order Entry Port'' as the ``FIX Port'' in the Exchange's Pricing Schedule. See Securities Exchange Act Release No. 83192 [sic] (May 9, 2018), 83 FR 22570 [sic] (May 15, 2018) (SR-NASDAQ-2018-036). --------------------------------------------------------------------------- B. Specialized Quote Feed Ports This protocol is not memorialized within the Exchange's Rulebook, however rule changes describing SQF were filed previously.\6\ The Exchange proposes to more specifically define an SQF Port. The Exchange proposes the following definition: --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 83193 (May 9, 2018), 83 FR 22539 (May 15, 2018) (SR-NASDAQ-2018-036). This rule change generally described SQF as an interface that allows market makers to send quotes, sweeps and auction responses into the Exchange. --------------------------------------------------------------------------- SQF is an interface that allows Market Makers to connect, send, and receive messages related to quotes and Immediate-or-Cancel Orders into and from 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; and (8) opening imbalance messages. The SQF Purge Interface only receives and notifies of purge request from the Market Maker.\7\ --------------------------------------------------------------------------- \7\ 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 NOM 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. --------------------------------------------------------------------------- The Exchange believes that this information provides a more thorough description of SQF. C. Quote Using Orders (Formerly OTTO) Today, the Exchange offers a protocol named ``Ouch to Trade Options'' or ``OTTO.'' The Exchange has filed a description of the current OTTO in prior rule changes stating OTTO is a protocol which permits the transmission of orders to the Exchange by a Participant.\8\ Further, the prior filing noted Immediate-or- Cancel orders will not be cancelled pursuant to this Chapter VI, Section 6 because, by definition, these orders will cancel if not executed.\9\ All Participants have the ability to utilize OTTO. Today, orders submitted by NOM Market Makers over this interface are treated as quotes.\10\ --------------------------------------------------------------------------- \8\ See Securities Exchange Act Release No. 78480 (August 4, 2016), 81 FR 52926 (August 10, 2016) (SR-NASDAQ-2016-097). \9\ Id. \10\ Id. --------------------------------------------------------------------------- The Exchange proposes to rename the current OTTO as ``Quote Using Orders'' or ``QUO'' and amend the protocol by restricting it to NOM Market Makers only because this protocol is predominately utilized by NOM Market Makers. Further, the Exchange is offering non-Market Makers the new OTTO protocol, described below, which some Participants, who are also members of ISE, GEMX and MRX,\11\ utilize today. The Exchange also notes QUO users will be subject to certain quote protections specified in Chapter VI, Section 18(c) which are specific to NOM Market Makers and would otherwise not apply to non-Market Makers. This interface would continue to allow NOM Market Makers to connect, send, and receive messages related to single-sided orders to and from the Exchange. The Exchange proposes to add additional granularity to this protocol by stating that the order features include the following: (1) Options symbol directory messages (e.g., underlying); (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; and (6) risk protection triggers and cancel notifications. Similar to how the protocol operates today, orders submitted by NOM Market Makers over this interface are treated as quotes. These orders would therefore count toward meeting quoting obligations for purposes of Rule 701, Opening, and Rule 804(e), regarding intra-day quoting. --------------------------------------------------------------------------- \11\ The new OTTO protocol is the same protocol offered on ISE, GEMX and MRX. --------------------------------------------------------------------------- D. New Ouch to Trade Options The Exchange proposes to introduce a new interface similar to OTTO offered on affiliated markets which would be available to all NOM Participants (Market Makers and non-Market Makers). In order to bring conformance to the protocols across its affiliated markets, the Exchange proposes to name the new interface ``Ouch to Trade Options'' or ``OTTO'' similar to the other markets.\12\ This new protocol would allow Participants and their Sponsored Customers to connect, send, and receive messages related to orders to and from the Exchange. Features would include the following: (1) Options symbol directory messages (e.g., underlying); (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; and (6) risk protection triggers and cancel notifications.\13\ Orders submitted by NOM Market Makers through the [[Page 42956]] new OTTO will not count toward their quoting obligations. --------------------------------------------------------------------------- \12\ To allow for the conformance suggested herein, the Exchange is proposing to rename the current protocol ``Quote Using Orders'' or ``QUO.'' \13\ Unlike the current OTTO, orders submitted through the proposed new OTTO protocol would not be treated as quotes for purposes of Market Maker quoting obligations. --------------------------------------------------------------------------- Implementation The Exchange proposes to rename the current OTTO to QUO and introduce the new OTTO protocol in Q4. The Exchange would issue an Options Trader Alert announcing the date on which these protocols would be available. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\14\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\15\ in particular, in that it is designed to promote just and equitable principles of trade and to protect investors and the public interest by adding greater transparency to the order and quote protocols available on NOM. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b). \15\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is consistent with the protection of investors and the public interest as it codifies the current FIX and SQF protocols used to connect to the Exchange's System. With respect to these protocols in particular, the Exchange believes that including a description of the various order entry protocols into the Rulebook will benefit Participants by increasing transparency around the operation of the Exchange. Furthermore, the proposed descriptions of all protocols in one rule will reflect information available on these 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. With respect to the renamed and amended QUO protocol the Exchange believes that restricting it to NOM Market Makers and further expanding the description of the protocol is consistent with the Act because the Exchange is also proposing to add a new protocol on NOM which would be available to all Participants. NOM is restricting QUO to Market Makers because it is already predominately utilized by Market Makers today. The Exchange is offering non-Market Makers the new OTTO protocol, which some Participants, who are also members of ISE, GEMX and MRX, utilize today. The Exchange also notes QUO users will be subject to certain quote protections specified in Chapter VI, Section 18(c) which are specific to NOM Market Makers and would otherwise not apply to non- Market Makers. The amended definition will provide greater transparency concerning this protocol which is in use today. Adopting a new protocol and naming it OTTO will bring greater conformance to the protocols across Nasdaq affiliated markets. The Exchange believes that the new proprietary protocol will offers Participants a range of important features including the ability to submit orders other than through FIX, while continuing to perform functions necessary to manage trading on the Exchange. The proposed new OTTO offers all NOM Participants the ability to send orders, similar to QUO. The new OTTO is intended to continue to permit non-Market Makers to have a protocol similar to the QUO (formerly OTTO) protocol offered on NOM today. The functionality offered on new OTTO mirrors the protocols offered on ISE, GEMX and MRX. The Exchange desires to conform its protocols across Nasdaq affiliated markets. The Exchange believes adopting and codifying this protocol will increase transparency to the Participants. The Exchange also notes that today this protocol is offered on ISE, GEMX and MRX. 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. As explained above, the Exchange is codifying the quote and order entry protocols for FIX, SQF, renamed QUO and the new OTTO. Participants utilize the FIX, SQF and current OTTO protocols to connect to the Exchange's System. The Exchange will offer a new OTTO protocol and rename current OTTO to QUO. The Exchange does not believe that codifying these existing and new protocols in the Rulebook will have any competitive impact. The Exchange does not believe limiting QUO to only Market Makers presents an undue burden on competition because, today, this protocol is predominately utilized by Market Makers. The Exchange is offering non-Market Makers the new OTTO protocol which some Participants, who are also members of ISE, GEMX and MRX, utilize today. The Exchange also notes QUO users will be subject to certain quote protections specified in Chapter VI, Section 18(c) which are specific to NOM Market Makers and would otherwise not apply to non-Market Makers. Locating all the protocol descriptions within a single rule and adding context around each protocol will increase transparency around the operation of the Exchange without having any impact on inter-market or intra-market competition. All market participants have the ability to subscribe to the protocols for order entry. The quoting protocols are limited to the market participants who are permitted by rule to quote on NOM, but the function is uniformly available to these eligible participants. Further, adopting OTTO will provide market participants with additional choices in selecting an order protocol other than FIX. Market Makers will be able to utilize either SQF or QUO to comply with quoting obligations. Every market participant will have more than one protocol available to utilize. 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 \16\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\17\ --------------------------------------------------------------------------- \16\ 15 U.S.C. 78s(b)(3)(A)(iii). \17\ 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. --------------------------------------------------------------------------- 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. [[Page 42957]] 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-2018-069 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-2018-069. 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-NASDAQ-2018-069 and should be submitted on or before September 14, 2018. --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-18294 Filed 8-23-18; 8:45 am] BILLING CODE 8011-01-P
![42954 Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Notices
At any time within 60 days of the office of the Exchange. All comments the Commission’s Public Reference
filing of the proposed rule change, the received will be posted without change. Room.
Commission summarily may Persons submitting comments are
II. Self-Regulatory Organization’s
temporarily suspend such rule change if cautioned that we do not redact or edit
Statement of the Purpose of, and
it appears to the Commission that such personal identifying information from
Statutory Basis for, the Proposed Rule
action is: (i) Necessary or appropriate in comment submissions. You should
Change
the public interest; (ii) for the protection submit only information that you wish
of investors; or (iii) otherwise in to make available publicly. All In its filing with the Commission, the
furtherance of the purposes of the Act. submissions should refer to File Exchange included statements
If the Commission takes such action, the Number SR–CBOE–2018–058 and concerning the purpose of and basis for
Commission shall institute proceedings should be submitted on or before the proposed rule change and discussed
to determine whether the proposed rule September 14, 2018. any comments it received on the
change should be approved or proposed rule change. The text of these
For the Commission, by the Division of
disapproved. Trading and Markets, pursuant to delegated statements may be examined at the
authority.35 places specified in Item IV below. The
IV. Solicitation of Comments Exchange has prepared summaries, set
Eduardo A. Aleman
Interested persons are invited to forth in sections A, B, and C below, of
Assistant Secretary.
submit written data, views, and the most significant aspects of such
[FR Doc. 2018–18295 Filed 8–23–18; 8:45 am]
arguments concerning the foregoing, statements.
including whether the proposed rule BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
change is consistent with the Act.
Statement of the Purpose of, and
Comments may be submitted by any of
SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule
the following methods:
COMMISSION Change
Electronic Comments
[Release No. 34–83888; File No. SR– 1. Purpose
• Use the Commission’s internet NASDAQ–2018–069]
comment form (http://www.sec.gov/ The Exchange proposes to adopt new
rules/sro.shtml); or rule text at Chapter VI, Section 21 to
Self-Regulatory Organizations; The
• Send an email to rule-comments@ codify the Financial Information
Nasdaq Stock Market LLC; Notice of
sec.gov. Please include File Number SR– eXchange (‘‘FIX’’) and Specialized
Filing and Immediate Effectiveness of
CBOE–2018–058 on the subject line. Quote Feed (‘‘SQF’’) protocols. The
Proposed Rule Change To Codify the
Exchange proposes to adopt a new
Paper Comments Definitions of the Protocols to Enter
protocol and name it ‘‘Ouch to Trade
Quotes and Orders
• Send paper comments in triplicate Options’’ (‘‘OTTO’’) and rename and
to Secretary, Securities and Exchange August 20, 2018. amend the current OTTO protocol on
Commission, 100 F Street NE, Pursuant to Section 19(b)(1) of the NOM as ‘‘Quote Using Orders’’ or
Washington, DC 20549–1090. Securities Exchange Act of 1934 ‘‘QUO’’.3 The Exchange believes that
All submissions should refer to File (‘‘Act’’),1 and Rule 19b–4 thereunder,2 codifying definitions of current and new
Number SR–CBOE–2018–058. This file notice is hereby given that on August protocols in its rules will increase
number should be included on the 17, 2018, The Nasdaq Stock Market LLC transparency around its operations.
subject line if email is used. To help the (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Furthermore, the proposed definitions
Commission process and review your Securities and Exchange Commission will be harmonized where appropriate
comments more efficiently, please use (‘‘SEC’’ or ‘‘Commission’’) the proposed with definitions contained in the rules
only one method. The Commission will rule change as described in Items I, II, of the Exchange’s affiliated options
post all comments on the Commission’s and III, below, which Items have been markets,4 by using consistent terms to
internet website (http://www.sec.gov/ prepared by the Exchange. The define the buckets of information
rules/sro.shtml). Copies of the Commission is publishing this notice to transmitted, or the features available, on
submission, all subsequent solicit comments on the proposed rule each protocol. The protocols used by
amendments, all written statements change from interested persons. NOM Participants to submit quotes and
with respect to the proposed rule orders play an important role in the
I. Self-Regulatory Organization’s operation of the System.
change that are filed with the
Statement of the Terms of Substance of The Exchange notes it has two
Commission, and all written
the Proposed Rule Change protocols today, SQF and proposed to
communications relating to the
proposed rule change between the The Exchange proposes to adopt new be renamed QUO (formerly known as
Commission and any person, other than rule text within The Nasdaq Options OTTO), that NOM Market Makers can
those that may be withheld from the Market LLC Rules at Chapter VI, Section use to meet their quoting obligations.
public in accordance with the 21. Specifically, the Exchange proposes All quotes on SQF are counted toward
provisions of 5 U.S.C. 552, will be to codify the definitions of the current market making obligations. While a
available for website viewing and protocols that Participants can use to NOM Market Maker may enter an
printing in the Commission’s Public enter quotes and orders on the Exchange Immediate-or-Cancel Order through
Reference Room, 100 F Street NE, and introduce a new protocol. SQF this order does not rest on the
Washington, DC 20549 on official The text of the proposed rule change Exchange’s order book and therefore
daltland on DSKBBV9HB2PROD with NOTICES
business days between the hours of is available on the Exchange’s website at does not count toward quoting
10:00 a.m. and 3:00 p.m. Copies of the http://nasdaq.cchwallstreet.com, at the
3 Today the Exchange offers FIX, SQF and QUO
filing also will be available for principal office of the Exchange, and at
(formerly known as OTTO) to its Participants.
inspection and copying at the principal 4 Rules have been filed for Nasdaq ISE, LLC
35 17 CFR 200.30–3(a)(12). (‘‘ISE’’), Nasdaq GEMX, LLC (‘‘GEMX’’), Nasdaq
1 15 U.S.C. 78s(b)(1).
proposed rule’s impact on efficiency, competition, MRX, LLC (‘‘MRX’’), Nasdaq BX, Inc. and Nasdaq
and capital formation. See 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. Phlx, LLC.
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![Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Notices 42955
obligations. In contrast orders that NOM however rule changes describing SQF offering non-Market Makers the new
Market Makers send through QUO will were filed previously.6 The Exchange OTTO protocol, described below, which
count toward market maker quoting proposes to more specifically define an some Participants, who are also
obligations because orders submitted SQF Port. The Exchange proposes the members of ISE, GEMX and MRX,11
through QUO will rest on the order book following definition: utilize today. The Exchange also notes
and allow NOM Market Makers to SQF is an interface that allows Market QUO users will be subject to certain
provide liquidity on NOM. NOM Market Makers to connect, send, and receive quote protections specified in Chapter
Makers cannot use QUO to submit messages related to quotes and VI, Section 18(c) which are specific to
quotes. As noted below in the section on Immediate-or-Cancel Orders into and NOM Market Makers and would
QUO, specifically orders would count from the Exchange. Features include the otherwise not apply to non-Market
toward meeting quoting obligations for following: (1) Options symbol directory Makers. This interface would continue
purposes of Rule 701, Opening, and messages (e.g underlying instruments); to allow NOM Market Makers to
Rule 804(e), regarding intra-day quoting. (2) system event messages (e.g., start of connect, send, and receive messages
The Exchange proposes to title trading hours messages and start of related to single-sided orders to and
proposed new Section 21 as ‘‘Order and opening); (3) trading action messages from the Exchange. The Exchange
Quote Protocols’’ and codify (e.g., halts and resumes); (4) execution proposes to add additional granularity
descriptions of the various current and messages; (5) quote messages; (6) to this protocol by stating that the order
new protocols that Participants may use Immediate-or-Cancel Order messages; features include the following: (1)
to enter quotes and orders on NOM. (7) risk protection triggers and purge Options symbol directory messages (e.g.,
Proposed new section (a) to Chapter VI, notifications; and (8) opening imbalance underlying); (2) system event messages
Section 21 would be entitled ‘‘Entry and messages. The SQF Purge Interface only (e.g., start of trading hours messages and
Display of Orders and Quotes.’’ receives and notifies of purge request start of opening); (3) trading action
Proposed new Chapter VI, Section 21(a) from the Market Maker.7 messages (e.g., halts and resumes); (4)
would provide, ‘‘Participants may enter The Exchange believes that this execution messages; (5) order messages;
orders and quotes into the System as information provides a more thorough and (6) risk protection triggers and
specified below.’’ The Exchange description of SQF. cancel notifications. Similar to how the
proposes to add a section Chapter VI, protocol operates today, orders
Section 21(a)(i) which states, ‘‘The C. Quote Using Orders (Formerly OTTO)
submitted by NOM Market Makers over
Exchange offers Participants the Today, the Exchange offers a protocol this interface are treated as quotes.
following protocols for entering orders named ‘‘Ouch to Trade Options’’ or These orders would therefore count
and quotes respectively.’’ Each protocol ‘‘OTTO.’’ The Exchange has filed a toward meeting quoting obligations for
will be explained in greater detail description of the current OTTO in prior purposes of Rule 701, Opening, and
below. rule changes stating OTTO is a protocol Rule 804(e), regarding intra-day quoting.
A. Financial Information eXchange which permits the transmission of
orders to the Exchange by a Participant.8 D. New Ouch to Trade Options
Ports
Further, the prior filing noted The Exchange proposes to introduce a
This protocol is not memorialized Immediate-or- Cancel orders will not be new interface similar to OTTO offered
within the Exchange’s Rulebook, cancelled pursuant to this Chapter VI, on affiliated markets which would be
however rule changes describing FIX Section 6 because, by definition, these available to all NOM Participants
were filed previously.5 The Exchange orders will cancel if not executed.9 All (Market Makers and non-Market
proposes to codify a description of FIX Participants have the ability to utilize Makers). In order to bring conformance
at Rule 1080(a)(i)(a) to add even greater OTTO. Today, orders submitted by to the protocols across its affiliated
specificity to this protocol. The NOM Market Makers over this interface markets, the Exchange proposes to name
Exchange proposes to state that FIX is are treated as quotes.10 the new interface ‘‘Ouch to Trade
an interface that allows Participants The Exchange proposes to rename the Options’’ or ‘‘OTTO’’ similar to the
(Market Makers and non-Market Maker current OTTO as ‘‘Quote Using Orders’’ other markets.12 This new protocol
Participants) and their Sponsored or ‘‘QUO’’ and amend the protocol by would allow Participants and their
Customers to connect, send and receive restricting it to NOM Market Makers Sponsored Customers to connect, send,
messages related to orders to and from only because this protocol is and receive messages related to orders
the Exchange. Features include the predominately utilized by NOM Market to and from the Exchange. Features
following: (1) Execution messages; (2) Makers. Further, the Exchange is would include the following: (1)
order messages; and (3) risk protection Options symbol directory messages (e.g.,
triggers and cancel notifications. 6 See Securities Exchange Act Release No. 83193
underlying); (2) system event messages
B. Specialized Quote Feed Ports (May 9, 2018), 83 FR 22539 (May 15, 2018) (SR– (e.g., start of trading hours messages and
NASDAQ–2018–036). This rule change generally
This protocol is not memorialized described SQF as an interface that allows market start of opening); (3) trading action
within the Exchange’s Rulebook, makers to send quotes, sweeps and auction messages (e.g., halts and resumes); (4)
responses into the Exchange. execution messages; (5) order messages;
7 All of the notification messages available on
5 See Securities Exchange Act Release No. 74616 and (6) risk protection triggers and
SQF ports as described above (i.e., options symbol
(April 6, 2015), 80 FR 18450 (March 31, 2015) (SR– directory messages, system event messages, trading
cancel notifications.13 Orders submitted
NASDAQ–2015–027). The FIX port was previously
action messages, etc.) are configurable in that NOM by NOM Market Makers through the
referred to as the ‘‘Order Entry Port’’ and described
Market Makers can select the specific types of
as a connection to routing orders to the Exchange
notifications they wish to receive on their SQF
daltland on DSKBBV9HB2PROD with NOTICES
11 The new OTTO protocol is the same protocol
via an external order entry port. NOM Participants
ports. As such, SQF Purge Interface ports are a offered on ISE, GEMX and MRX.
access the Exchange’s network through order entry
subpart of SQF ports that have been configured to 12 To allow for the conformance suggested herein,
ports. A NOM Participant may have more than one
order entry port. The Exchange recently renamed only receive and notify of purge requests. the Exchange is proposing to rename the current
8 See Securities Exchange Act Release No. 78480
the ‘‘Order Entry Port’’ as the ‘‘FIX Port’’ in the protocol ‘‘Quote Using Orders’’ or ‘‘QUO.’’
Exchange’s Pricing Schedule. See Securities (August 4, 2016), 81 FR 52926 (August 10, 2016) 13 Unlike the current OTTO, orders submitted
Exchange Act Release No. 83192 [sic] (May 9, 2018), (SR–NASDAQ–2016–097). through the proposed new OTTO protocol would
9 Id.
83 FR 22570 [sic] (May 15, 2018) (SR–NASDAQ– not be treated as quotes for purposes of Market
2018–036). 10 Id. Maker quoting obligations.
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![Federal Register / Vol. 83, No. 165 / Friday, August 24, 2018 / Notices 42957
Comments may be submitted by any of SECURITIES AND EXCHANGE and (iii) the fund, prior to suspending
the following methods: COMMISSION redemptions, notifies the Commission of
its decision to liquidate and suspend
Electronic Comments Proposed Collection; Comment redemptions. Rule 22e–3 also provides
• Use the Commission’s internet Request an exemption from section 22(e) for
comment form (http://www.sec.gov/ Upon Written Request, Copies Available registered investment companies that
rules/sro.shtml); or From: Securities and Exchange own shares of a money market fund
• Send an email to rule-comments@ Commission, Office of FOIA Services, pursuant to section 12(d)(1)(E) of the
sec.gov. Please include File Number SR– 100 F Street NE, Washington, DC Act (‘‘conduit funds’’), if the underlying
NASDAQ–2018–069 on the subject line. 20549–2736 money market fund has suspended
Extension: redemptions pursuant to the rule. A
Paper Comments Rule 22e–3, SEC File No. 270–603, OMB conduit fund that suspends redemptions
Control No. 3235–0658 in reliance on the exemption provided
• Send paper comments in triplicate
to Secretary, Securities and Exchange Notice is hereby given that, under the by rule 22e–3 is required to provide
Commission, 100 F Street NE, Paperwork Reduction Act of 1995 (44 prompt notice of the suspension of
Washington, DC 20549–1090. U.S.C. 3501–3520), the Securities and redemptions to the Commission. Notices
Exchange Commission (the required by the rule must be provided
All submissions should refer to File ‘‘Commission’’) has submitted to the by electronic mail, directed to the
Number SR–NASDAQ–2018–069. This Office of Management and Budget a attention of the Director of the Division
file number should be included on the request for extension of the previously of Investment Management or the
subject line if email is used. To help the approved collection of information Director’s designee.1 Compliance with
Commission process and review your discussed below. the notification requirement is
comments more efficiently, please use Section 22(e) of the Investment mandatory for money market funds and
only one method. The Commission will Company Act [15 U.S.C. 80a–22(e)]
post all comments on the Commission’s conduit funds that rely on rule 22e–3 to
(‘‘Act’’) generally prohibits funds, suspend redemptions and postpone
internet website (http://www.sec.gov/ including money market funds, from
rules/sro.shtml). Copies of the payment of proceeds pending a
suspending the right of redemption, and
submission, all subsequent from postponing the payment or liquidation, and are not kept
amendments, all written statements satisfaction upon redemption of any confidential.
with respect to the proposed rule redeemable security for more than seven Commission staff estimates that, on
change that are filed with the days. The provision was designed to average, one money market fund would
Commission, and all written prevent funds and their investment break the buck and liquidate every six
communications relating to the advisers from interfering with the years.2 In addition, Commission staff
proposed rule change between the redemption rights of shareholders for estimates that there are an average of
Commission and any person, other than improper purposes, such as the two conduit funds that may be invested
those that may be withheld from the preservation of management fees. in a money market fund that breaks the
public in accordance with the Although section 22(e) permits funds to buck.3 Commission staff further
provisions of 5 U.S.C. 552, will be postpone the date of payment or estimates that a money market fund or
available for website viewing and satisfaction upon redemption for up to conduit fund would spend
printing in the Commission’s Public seven days, it does not permit funds to approximately one hour of an in-house
Reference Room, 100 F Street NE, suspend the right of redemption for any
attorney’s time to prepare and submit
Washington, DC 20549, on official amount of time, absent certain specified
the notice required by the rule. Given
business days between the hours of circumstances or a Commission order.
10:00 a.m. and 3:00 p.m. Copies of the Rule 22e–3 under the Act [17 CFR these estimates, the total annual burden
filing also will be available for 270.22e–3] exempts money market of the notification requirement of rule
inspection and copying at the principal funds from section 22(e) to permit them 22e–3 for all money market funds and
office of the Exchange. All comments to suspend redemptions in order to
received will be posted without change. facilitate an orderly liquidation of the
Persons submitting comments are fund. Specifically, rule 22e–3 permits a
cautioned that we do not redact or edit money market fund to suspend
personal identifying information from redemptions and postpone the payment 1 See rule 22e–3(a)(3).
comment submissions. You should of proceeds pending board-approved 2 This estimate is based upon the Commission’s
submit only information that you wish liquidation proceedings if: (i) The fund’s experience with the frequency with which money
to make available publicly. All board of directors, including a majority market funds have historically required sponsor
of disinterested directors, determines support. Although the vast majority of money
submissions should refer to File market fund sponsors have supported their money
Number SR–NASDAQ–2018–069 and pursuant to § 270.2a–7(c)(8)(ii)(C) that
market funds in times of market distress, for
should be submitted on or before the extent of the deviation between the purposes of this estimate Commission staff
September 14, 2018. fund’s amortized cost price per share conservatively estimates that one or more sponsors
and its current net asset value per share may not provide support.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
calculated using available market 3 Based on a review of filings with the
authority.18 quotations (or an appropriate substitute Commission, Commission staff estimates that 2.3
daltland on DSKBBV9HB2PROD with NOTICES
that reflects current market conditions) conduit funds are invested in each master fund.
Eduardo A. Aleman, However, master funds account for only 5.1% of all
may result in material dilution or other
Assistant Secretary. unfair results to investors or existing money market funds. Solely for the purposes of this
[FR Doc. 2018–18294 Filed 8–23–18; 8:45 am] information collection, and to avoid
shareholders; (ii) the fund’s board of underestimating possible burdens, the Commission
BILLING CODE 8011–01–P directors, including a majority of conservatively assumes that any money market that
disinterested directors, irrevocably breaks the buck and liquidates would be a master
18 17 CFR 200.30–3(a)(12). approves the liquidation of the fund; fund.
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Document Created: 2018-08-24 04:13:34
Document Modified: 2018-08-24 04:13:34
| 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 42954 |
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