83_FR_48865 83 FR 48678 - Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Risk Protections

83 FR 48678 - Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Risk Protections

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 187 (September 26, 2018)

Page Range48678-48681
FR Document2018-20886

Federal Register, Volume 83 Issue 187 (Wednesday, September 26, 2018) 
[Federal Register Volume 83, Number 187 (Wednesday, September 26, 2018)]
[Notices]
[Pages 48678-48681]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-20886]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84238; File No. SR-GEMX-2018-32]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to Risk 
Protections

September 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 September 11, 2018, Nasdaq GEMX, LLC (``GEMX'' 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.
---------------------------------------------------------------------------

    \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 GEMX Rules 100(a)(5) which contains 
definitions, Rule 711, ``Acceptance of Quotes and Orders'' and Rule 
714, ``Automatic Execution of Orders.''
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.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
    GEMX proposes to amend Rule 714, Automatic Execution of Orders, by 
placing all risk protections within this rule and further creating 
sections to distinguish order protections, order and quote protections 
and quote protections. The Exchange believes that providing Members 
with a single rule with all risk protections will provide an easy 
reference to the mandatory single leg risk protections on GEMX.
    The Exchange is amending Rule 714(b) to rename the caption from 
``Other Order Protections'' to ``Other Risk Protections.'' The Exchange 
is amending references to ``order protections'' to ``risk protections'' 
within that rule to more broadly describe the type of protections 
offered on GEMX. Finally, the Exchange is relocating rule text from 
Rule 714(c) to the end of proposed Rule 714(b), which states, ``In the 
event of unusual market conditions and in the interest of a fair and 
orderly market, the Exchange may temporarily establish the levels at 
which the order protections contained in this paragraph are triggered 
as necessary and appropriate.'' These non-substantive rule changes are 
intended to bring greater clarity to the rule.
    The Exchange proposes to add the following to proposed Rule 
714(b)(1), ``The following are order risk protections on GEMX:'' The 
Exchange proposes to list all order protections within Rule 714(b)(1). 
The Exchange proposes to relocate Limit Order Price Protection from 
Rule 714(b)(2) to proposed Rule 714(b)(1)(A). The Exchange also 
proposes to add a new sentence to the end of proposed Rule 714(b)(1)(A) 
which provides, ``Limit Order Price Protection shall not apply to the 
Opening Process or during a trading halt.'' The Exchange is adding this 
sentence, which was not contained in the initial rule change, to make 
clear the limitations as to when this protection is available on GEMX. 
The Exchange notes the Limit Order Price Protection rejects orders to 
buy (sell) as the greater of the Exchange's best offer (bid) plus 
(minus) either an absolute dollar or a percentage. The Exchange notes 
that the bid or offer is not established until after an option series 
options for trading. Applying this protection during the Opening 
Process is not necessary as the quote width allowance is tighter during 
the Opening Process.\3\ With respect to trading halts, Opening Process 
procedures will be used to reopen an option series after a trading 
halt, therefore, the same protections noted for the Opening Process 
will apply for a trading halt and the same restrictive boundaries would 
apply.\4\ This sentence memorializes the Exchange's current practice. 
The Exchange believes that this rule text will bring greater clarity to 
the Limit Order Price Protection functionality.
---------------------------------------------------------------------------

    \3\ With respect to the Opening Process, a Quality Opening 
Market is required. A Quality Opening Market a bid/ask differential 
applicable to the best bid and offer from all Valid Width Quotes 
defined in a table to be determined by the Exchange and published on 
the Exchange's website. See GEMX Rule 701(a)(7).
    \4\ See GEMX Rule 701(d).
---------------------------------------------------------------------------

    The Exchange proposes to relocate and re-number Market Order Spread 
Protection from Rule 711(c) to proposed Rule 714(b)(1)(B). The Exchange 
also proposes to add a sentence which provides, ``Market Order Spread 
Protection shall not apply to the Opening Process or during a trading 
halt.'' The Exchange believes that the Market Order Spread Protection 
is unnecessary during the Opening Process and during a trading halt 
because protections are in place during the Opening Process to ensure 
that the best bid and offer displayed on the Exchange are within a 
reasonable range.\5\ The

[[Page 48679]]

Opening Process has more restrictive boundaries than those proposed for 
the Market Order Spread Protection. With respect to the Opening 
Process, a Quality Opening Market is required. A Quality Opening Market 
requires a bid/ask differential applicable to the best bid and offer 
from all Valid Width Quotes defined in a table \6\ to be determined by 
the Exchange.\7\ The Exchange's requirements during the Opening Process 
are more restrictive than the proposed initial setting for the Market 
Order Spread Protection, which is proposed at $5. As provided in Rule 
701(d), trading halts are subject to the reopening process as provided 
for in Rule 701(e). The same protections noted for the Opening Process 
above will apply for trading halts. The Exchange believes that the 
Market Order Spread Protection is unnecessary during the Opening 
Process and during a trading halt because other protections are in 
place to ensure that the best bid and offer displayed on the Exchange 
are within a reasonable range. The Exchange is adding this sentence to 
make clear the limitations as to when this protection is available on 
GEMX. The Exchange believes that this rule text will bring greater 
clarity to the Market Order Spread Protection functionality.
---------------------------------------------------------------------------

    \5\ See note 3 above. With respect to trading halts, Opening 
Process procedures will be used to reopen an option series after a 
trading halt, therefore, the same protections noted for the Opening 
Process will apply for a trading halt and the same restrictive 
boundaries would apply. See GEMX Rule 701(d).
    \6\ The table is located at: https://business.nasdaq.com/media/GEMXSystemSetting_tcm5044-41351.pdf.
    \7\ The calculation of Quality Opening Market is based on the 
best bid and offer of Valid Width Quotes. The differential between 
the best bid and offer are compared to reach this determination. The 
allowable differential, as determined by the Exchange, takes into 
account the type of security (for example, Standard Penny Issues, 
Non-Penny Issues and Special Penny Issues), volatility, option 
premium, and liquidity. The Quality Opening Market differential is 
intended to ensure the price at which the Exchange opens reflects 
current market conditions. See GEMX Rule 701(a)(7).
---------------------------------------------------------------------------

    The Exchange is also memorializing a sentence which was contained 
in the filing which adopted Market Order Spread Protection. The 
Exchange noted in the adopting filing that the Exchange may establish 
differences other than the referenced threshold for one or more series 
or classes of options.\8\ At this time, the Exchange proposes to 
memorialize this capability within Rule 714(b)(1)(B) by stating, ``The 
Exchange may establish different thresholds for one or more series or 
classes of options.'' The Exchange believes that adding this provision 
to the rule will add transparency to the Exchange's capability to 
establish different thresholds per options series or class.
---------------------------------------------------------------------------

    \8\ Securities Exchange Act Release No. 79677 (December 22, 
2016), 81 FR 96114 (December 29, 2016) (SR-ISEGemini-2016-17).
---------------------------------------------------------------------------

    The Exchange proposes to relocate Size Limitation from Rule 
714(b)(3) to proposed Rule 714(b)(1)(C) without any amendments. The 
Exchange proposes to add the following to proposed Rule 714(b)(2), 
``The following are order and quote risk protections on GEMX:'' The 
Exchange proposes to list all order and quote protections within Rule 
714(b)(2). The Exchange proposes to re-letter Acceptable Trade Range 
from Rule 714(b)(1) to proposed Rule 714(b)(2)(A).
    The Exchange proposes to relocate Market Wide Risk Protection from 
Rule 714(d) to proposed Rule 714(b)(1)(D). The Exchange is only 
amending cross references within this rule to reflect the new location 
of this text.
    The Exchange proposes new rule text at Rule 714(b)(3) which 
provides, ``The following are Market Maker risk protections on GEMX:'' 
The Exchange proposes to list all Market Maker protections within Rule 
714(b)(3). The Exchange proposes to relocate Anti-Internalization from 
Supplementary Material .03 to Rule 804 to proposed Rule 714(b)(3)(A). 
The Exchange proposes to replace the words ``market participant 
identifier'' with ``Market Maker identifiers.'' The Exchange also 
proposes to replace the words ``Exchange account identifier'' with 
``account number.'' \9\ The Exchange believes these modifications will 
bring more clarity to the functionality. The Exchange is removing the 
words ``Notwithstanding Rule 804(d)(1) above'' which refer to the firm 
quote.\10\ The Exchange notes that the submission of bids and offers 
must be firm notwithstanding any protection offered by the Exchange, 
not just Anti-Internalization. The Exchange does not believe it is 
necessary to specifically cite this caveat for this order protections. 
The Exchange also proposes to capitalize the defined term Market Maker 
in this sentence.
---------------------------------------------------------------------------

    \9\ An ``account number'' shall mean a number assigned to a 
Member. Members may have more than one account number. See Rule 
100(a)(1).
    \10\ GEMX Rule 804(d)(1) provides that Market Maker bids and 
offers are firm for orders and Exchange Market Maker quotations both 
under this Rule and Rule 602 of Regulation NMS under the Exchange 
Act (``Rule 602 of Reg NMS'') for the number of contracts specified 
according to the requirements of paragraph 804(b).
---------------------------------------------------------------------------

    The Exchange proposes to relocate Automated Quotation Adjustments 
from Rule 804(g) to proposed Rule 714(b)(3)(B). Rule 804(g) will be 
reserved. The Exchange is amending references in the rule to reflect 
the new placement within Rule 714 and replacing the words ``Exchange's 
system (``System'')'' with the defined term System.\11\ Finally, the 
term ``member'' was capitalized because it is a defined term. The 
Exchange is also making clear within Rule 715(b)(3)(B)(vi) that Market 
Makers must request the Exchange enable re-entry by contacting the 
Exchange's Operations Department.
---------------------------------------------------------------------------

    \11\ The term ``System'' means the electronic system operated by 
the Exchange that receives and disseminates quotes, executes orders 
and reports transactions. See Rule 100(a)(64).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to amend the definition of badge 
within Rule 100(a)(5) to state that a badge is an account number, which 
may contain letters and/or numbers, assigned to Market Makers. The 
Exchange may from time to time modify the manner in which a badge is 
expressed systemically. This proposed language allows for latitude in 
establishing badges within the System.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\13\ 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, by grouping the various risk protections into a single rule 
for ease of reference and adding headers to the rule to make clear 
whether the risk protection is an order protection, order or quote 
protection or a protection applicable to Market Makers. The Exchange 
believes the reorganization of the existing rule and relocation of 
various rules into Rule 714 is a non-substantive rule change. The 
Exchange believes that this rule change is consistent with the 
protection of investors and the public interest because it will bring 
greater transparency to the protections offered on GEMX.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange's proposal to not apply the Limit Order Price 
Protection during the Opening Process is consistent with the Act 
because the Exchange rejects orders to buy (sell) as the greater of the 
Exchange's best offer (bid) plus (minus) either an absolute dollar or a 
percentage. The Exchange notes that the bid or offer is not established 
until after an option series options for trading. Applying this 
protection during the Opening Process is not necessary as the quote 
width allowance is tighter during the Opening

[[Page 48680]]

Process.\14\ With respect to trading halts, Opening Process procedures 
will be used to reopen an option series after a trading halt, 
therefore, the same protections noted for the Opening Process will 
apply for a trading halt and the same restrictive boundaries would 
apply.\15\
---------------------------------------------------------------------------

    \14\ With respect to the Opening Process, a Quality Opening 
Market is required. A Quality Opening Market a bid/ask differential 
applicable to the best bid and offer from all Valid Width Quotes 
defined in a table to be determined by the Exchange and published on 
the Exchange's website. See GEMX Rule 701(a)(7).
    \15\ See GEMX Rule 701(d).
---------------------------------------------------------------------------

    The Exchange's proposal to not apply the Market Order Spread 
Protection during the Opening Process is consistent with the Act 
because protections exist during the Opening Process to ensure that the 
best bid and offer displayed on the Exchange are within a reasonable 
range. The Exchange's Opening Process Rule 701 \16\ and the reopening 
process after a trading halt \17\ both contain more restrictive 
boundaries than those proposed or the Market Order Spread Protection. 
With respect to the Opening Process, a Quality Opening Market is 
required. A Quality Opening Market requires a bid/ask differential 
applicable to the best bid and offer from all Valid Width Quotes 
defined in a table to be determined by the Exchange.\18\ The Exchange's 
requirements during the Opening Process are more restrictive than the 
proposed initial setting for the Market Order Spread Protection, which 
is set at $5. The same protections noted for the Opening Process above 
will apply for trading halts. The Exchange believes that the Market 
Order Spread Protection is unnecessary during the Opening Process and 
during a trading halt because other protections are in place to ensure 
that the best bid and offer displayed on the Exchange are within a 
reasonable range.
---------------------------------------------------------------------------

    \16\ See note 14 above.
    \17\ With respect to trading halts, Opening Process procedures 
will be used to reopen an option series after a trading halt, 
therefore, the same protections noted for the Opening Process will 
apply for a trading halt and the same restrictive boundaries would 
apply. See GEMX Rule 701(d).
    \18\ The table is located at: https://business.nasdaq.com/media/GEMXSystemSetting_tcm5044-41351.pdf.
---------------------------------------------------------------------------

    Memorializing the ability of the Exchange to establish different 
Market Order Spread Protection thresholds per options series or class 
will also bring greater clarity to the rule. Today, the Exchange has 
this ability, it is simply adding that text to the rule. Utilizing 
defined terms within the Rulebook will also bring clarity to the rules. 
The Exchange also believes using more discrete language within the 
Anti-Internalization rule will clarity the functionality.
    Finally, the Exchange believes that expanding the definition of 
badge is consistent with the Act because it allows the Exchange the 
flexibility to administer the badges within its System.

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. The proposal does not impose an 
intra-market burden on competition with respect to the reorganization 
and relocation of the various rules into Rule 714 because the various 
risk protections are mandatory and will continue to apply uniformly to 
all market participants. The Exchange also believes that the addition 
of specific limitations to both the Limit Order Price Protection and 
Market Order Spread Protection rules will provide market participants 
with greater information as to when these protections will apply. These 
limitations apply uniformly to all market participants. The remainder 
of the rule changes are intended to bring greater transparency to the 
current operation Exchange's rules.

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) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \21\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \22\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Exchange argues that waiver of the operative delay would allow the 
Exchange to immediately incorporate all risk protections into Rule 714 
and bring greater transparency to the risk protections offered on the 
Exchange. The Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission hereby waives the operative delay 
and designates the proposed rule change operative upon filing.\23\
---------------------------------------------------------------------------

    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission also 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 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-GEMX-2018-32 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-GEMX-2018-32. This file 
number should be included on the

[[Page 48681]]

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-
GEMX-2018-32, and should be submitted on or before October 17, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2018-20886 Filed 9-25-18; 8:45 am]
 BILLING CODE 8011-01-P

48678 Federal Register / Vol. 83, No. 187 / Wednesday, September 26, 2018 / Notices believes these proposed changes to I. Self-Regulatory Organization’s The Exchange proposes to add the codify and clarify FICC’s existing Statement of the Terms of Substance of following to proposed Rule 714(b)(1), practices in regards to the CPR claims the Proposed Rule Change ‘‘The following are order risk process would assist in publicly The Exchange proposes to amend protections on GEMX:’’ The Exchange disclosing all relevant and material GEMX Rules 100(a)(5) which contains proposes to list all order protections procedures regarding the CPR claims definitions, Rule 711, ‘‘Acceptance of within Rule 714(b)(1). The Exchange process. Therefore, the Commission Quotes and Orders’’ and Rule 714, proposes to relocate Limit Order Price finds that the proposal is consistent ‘‘Automatic Execution of Orders.’’ Protection from Rule 714(b)(2) to Rule 17Ad–22(e)(23)(i) under the Act. The text of the proposed rule change proposed Rule 714(b)(1)(A). The is available on the Exchange’s website at Exchange also proposes to add a new III. Conclusion http://nasdaqgemx.cchwallstreet.com/, sentence to the end of proposed Rule at the principal office of the Exchange, 714(b)(1)(A) which provides, ‘‘Limit On the basis of the foregoing, the Order Price Protection shall not apply to and at the Commission’s Public Commission finds that the proposal is the Opening Process or during a trading Reference Room. consistent with the requirements of the halt.’’ The Exchange is adding this Act, in particular the requirements of II. Self-Regulatory Organization’s sentence, which was not contained in Section 17A of the Act 45 and the rules Statement of the Purpose of, and the initial rule change, to make clear the and regulations thereunder. Statutory Basis for, the Proposed Rule limitations as to when this protection is Change available on GEMX. The Exchange notes It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that In its filing with the Commission, the the Limit Order Price Protection rejects proposed rule change SR–FICC–2018– Exchange included statements orders to buy (sell) as the greater of the 006 be, and hereby is, approved.46 concerning the purpose of and basis for Exchange’s best offer (bid) plus (minus) the proposed rule change and discussed either an absolute dollar or a percentage. For the Commission, by the Division of any comments it received on the The Exchange notes that the bid or offer Trading and Markets, pursuant to delegated proposed rule change. The text of these is not established until after an option authority.47 series options for trading. Applying this statements may be examined at the Brent J. Fields, places specified in Item IV below. The protection during the Opening Process Secretary. Exchange has prepared summaries, set is not necessary as the quote width [FR Doc. 2018–20885 Filed 9–25–18; 8:45 am] forth in sections A, B, and C below, of allowance is tighter during the Opening BILLING CODE 8011–01–P the most significant aspects of such Process.3 With respect to trading halts, statements. Opening Process procedures will be used to reopen an option series after a A. Self-Regulatory Organization’s SECURITIES AND EXCHANGE trading halt, therefore, the same Statement of the Purpose of, and COMMISSION protections noted for the Opening Statutory Basis for, the Proposed Rule Process will apply for a trading halt and Change [Release No. 34–84238; File No. SR–GEMX– the same restrictive boundaries would 2018–32] 1. Purpose apply.4 This sentence memorializes the GEMX proposes to amend Rule 714, Exchange’s current practice. The Self-Regulatory Organizations; Nasdaq Automatic Execution of Orders, by Exchange believes that this rule text will GEMX, LLC; Notice of Filing and placing all risk protections within this bring greater clarity to the Limit Order Immediate Effectiveness of Proposed rule and further creating sections to Price Protection functionality. Rule Change Relating to Risk distinguish order protections, order and The Exchange proposes to relocate Protections quote protections and quote protections. and re-number Market Order Spread The Exchange believes that providing Protection from Rule 711(c) to proposed September 20, 2018. Members with a single rule with all risk Rule 714(b)(1)(B). The Exchange also Pursuant to Section 19(b)(1) of the protections will provide an easy proposes to add a sentence which Securities Exchange Act of 1934 reference to the mandatory single leg provides, ‘‘Market Order Spread (‘‘Act’’),1 and Rule 19b-4 thereunder,2 risk protections on GEMX. Protection shall not apply to the The Exchange is amending Rule Opening Process or during a trading notice is hereby given that on 714(b) to rename the caption from halt.’’ The Exchange believes that the September 11, 2018, Nasdaq GEMX, ‘‘Other Order Protections’’ to ‘‘Other Market Order Spread Protection is LLC (‘‘GEMX’’ or ‘‘Exchange’’) filed Risk Protections.’’ The Exchange is unnecessary during the Opening Process with the Securities and Exchange amending references to ‘‘order and during a trading halt because Commission (‘‘Commission’’) the protections’’ to ‘‘risk protections’’ protections are in place during the proposed rule change as described in within that rule to more broadly Opening Process to ensure that the best Items I and II below, which Items have describe the type of protections offered bid and offer displayed on the Exchange been prepared by the Exchange. The on GEMX. Finally, the Exchange is are within a reasonable range.5 The Commission is publishing this notice to relocating rule text from Rule 714(c) to solicit comments on the proposed rule the end of proposed Rule 714(b), which 3 With respect to the Opening Process, a Quality change from interested persons. states, ‘‘In the event of unusual market Opening Market is required. A Quality Opening Market a bid/ask differential applicable to the best conditions and in the interest of a fair daltland on DSKBBV9HB2PROD with NOTICES bid and offer from all Valid Width Quotes defined 45 15 U.S.C. 78q–1. and orderly market, the Exchange may in a table to be determined by the Exchange and 46 In approving the proposed rule change, the temporarily establish the levels at which published on the Exchange’s website. See GEMX Commission considered the proposal’s impact on the order protections contained in this Rule 701(a)(7). efficiency, competition, and capital formation. 15 4 See GEMX Rule 701(d). U.S.C. 78c(f). paragraph are triggered as necessary and 5 See note 3 above. With respect to trading halts, 47 17 CFR 200.30–3(a)(12). appropriate.’’ These non-substantive Opening Process procedures will be used to reopen 1 15 U.S.C. 78s(b)(1). rule changes are intended to bring an option series after a trading halt, therefore, the 2 17 CFR 240.19b–4. greater clarity to the rule. same protections noted for the Opening Process will VerDate Sep<11>2014 19:21 Sep 25, 2018 Jkt 244001 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1

Federal Register / Vol. 83, No. 187 / Wednesday, September 26, 2018 / Notices 48679 Opening Process has more restrictive capability to establish different (‘‘System’’)’’ with the defined term boundaries than those proposed for the thresholds per options series or class. System.11 Finally, the term ‘‘member’’ Market Order Spread Protection. With The Exchange proposes to relocate was capitalized because it is a defined respect to the Opening Process, a Size Limitation from Rule 714(b)(3) to term. The Exchange is also making clear Quality Opening Market is required. A proposed Rule 714(b)(1)(C) without any within Rule 715(b)(3)(B)(vi) that Market Quality Opening Market requires a bid/ amendments. The Exchange proposes to Makers must request the Exchange ask differential applicable to the best add the following to proposed Rule enable re-entry by contacting the bid and offer from all Valid Width 714(b)(2), ‘‘The following are order and Exchange’s Operations Department. Quotes defined in a table 6 to be quote risk protections on GEMX:’’ The Finally, the Exchange proposes to determined by the Exchange.7 The Exchange proposes to list all order and amend the definition of badge within Exchange’s requirements during the quote protections within Rule 714(b)(2). Rule 100(a)(5) to state that a badge is an Opening Process are more restrictive The Exchange proposes to re-letter account number, which may contain than the proposed initial setting for the Acceptable Trade Range from Rule letters and/or numbers, assigned to Market Order Spread Protection, which 714(b)(1) to proposed Rule 714(b)(2)(A). Market Makers. The Exchange may from is proposed at $5. As provided in Rule The Exchange proposes to relocate time to time modify the manner in Market Wide Risk Protection from Rule which a badge is expressed 701(d), trading halts are subject to the 714(d) to proposed Rule 714(b)(1)(D). systemically. This proposed language reopening process as provided for in The Exchange is only amending cross allows for latitude in establishing Rule 701(e). The same protections noted references within this rule to reflect the badges within the System. for the Opening Process above will new location of this text. apply for trading halts. The Exchange The Exchange proposes new rule text 2. Statutory Basis believes that the Market Order Spread at Rule 714(b)(3) which provides, ‘‘The Protection is unnecessary during the following are Market Maker risk The Exchange believes that its Opening Process and during a trading protections on GEMX:’’ The Exchange proposal is consistent with Section 6(b) halt because other protections are in proposes to list all Market Maker of the Act,12 in general, and furthers the place to ensure that the best bid and protections within Rule 714(b)(3). The objectives of Section 6(b)(5) of the Act,13 offer displayed on the Exchange are Exchange proposes to relocate Anti- in particular, in that it is designed to within a reasonable range. The Internalization from Supplementary promote just and equitable principles of Exchange is adding this sentence to Material .03 to Rule 804 to proposed trade, to remove impediments to and make clear the limitations as to when Rule 714(b)(3)(A). The Exchange perfect the mechanism of a free and this protection is available on GEMX. proposes to replace the words ‘‘market open market and a national market The Exchange believes that this rule text participant identifier’’ with ‘‘Market system, and, in general to protect will bring greater clarity to the Market Maker identifiers.’’ The Exchange also investors and the public interest, by Order Spread Protection functionality. proposes to replace the words grouping the various risk protections ‘‘Exchange account identifier’’ with into a single rule for ease of reference The Exchange is also memorializing a and adding headers to the rule to make sentence which was contained in the ‘‘account number.’’ 9 The Exchange believes these modifications will bring clear whether the risk protection is an filing which adopted Market Order order protection, order or quote Spread Protection. The Exchange noted more clarity to the functionality. The Exchange is removing the words protection or a protection applicable to in the adopting filing that the Exchange Market Makers. The Exchange believes may establish differences other than the ‘‘Notwithstanding Rule 804(d)(1) above’’ which refer to the firm quote.10 The the reorganization of the existing rule referenced threshold for one or more and relocation of various rules into Rule series or classes of options.8 At this Exchange notes that the submission of bids and offers must be firm 714 is a non-substantive rule change. time, the Exchange proposes to The Exchange believes that this rule notwithstanding any protection offered memorialize this capability within Rule change is consistent with the protection by the Exchange, not just Anti- 714(b)(1)(B) by stating, ‘‘The Exchange of investors and the public interest Internalization. The Exchange does not may establish different thresholds for because it will bring greater believe it is necessary to specifically cite one or more series or classes of transparency to the protections offered this caveat for this order protections. options.’’ The Exchange believes that The Exchange also proposes to on GEMX. adding this provision to the rule will capitalize the defined term Market The Exchange’s proposal to not apply add transparency to the Exchange’s Maker in this sentence. the Limit Order Price Protection during The Exchange proposes to relocate the Opening Process is consistent with apply for a trading halt and the same restrictive Automated Quotation Adjustments from the Act because the Exchange rejects boundaries would apply. See GEMX Rule 701(d). 6 The table is located at: https:// Rule 804(g) to proposed Rule orders to buy (sell) as the greater of the business.nasdaq.com/media/GEMXSystemSetting_ 714(b)(3)(B). Rule 804(g) will be Exchange’s best offer (bid) plus (minus) tcm5044-41351.pdf. reserved. The Exchange is amending either an absolute dollar or a percentage. 7 The calculation of Quality Opening Market is references in the rule to reflect the new The Exchange notes that the bid or offer based on the best bid and offer of Valid Width placement within Rule 714 and is not established until after an option Quotes. The differential between the best bid and offer are compared to reach this determination. The replacing the words ‘‘Exchange’s system series options for trading. Applying this allowable differential, as determined by the protection during the Opening Process Exchange, takes into account the type of security 9 An ‘‘account number’’ shall mean a number is not necessary as the quote width daltland on DSKBBV9HB2PROD with NOTICES (for example, Standard Penny Issues, Non-Penny assigned to a Member. Members may have more allowance is tighter during the Opening Issues and Special Penny Issues), volatility, option than one account number. See Rule 100(a)(1). premium, and liquidity. The Quality Opening 10 GEMX Rule 804(d)(1) provides that Market 11 The term ‘‘System’’ means the electronic Market differential is intended to ensure the price Maker bids and offers are firm for orders and at which the Exchange opens reflects current Exchange Market Maker quotations both under this system operated by the Exchange that receives and market conditions. See GEMX Rule 701(a)(7). Rule and Rule 602 of Regulation NMS under the disseminates quotes, executes orders and reports 8 Securities Exchange Act Release No. 79677 Exchange Act (‘‘Rule 602 of Reg NMS’’) for the transactions. See Rule 100(a)(64). 12 15 U.S.C. 78f(b). (December 22, 2016), 81 FR 96114 (December 29, number of contracts specified according to the 2016) (SR–ISEGemini–2016–17). requirements of paragraph 804(b). 13 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 19:21 Sep 25, 2018 Jkt 244001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1

48680 Federal Register / Vol. 83, No. 187 / Wednesday, September 26, 2018 / Notices Process.14 With respect to trading halts, Internalization rule will clarity the filing. However, Rule 19b–4(f)(6)(iii) 22 Opening Process procedures will be functionality. permits the Commission to designate a used to reopen an option series after a Finally, the Exchange believes that shorter time if such action is consistent trading halt, therefore, the same expanding the definition of badge is with the protection of investors and the protections noted for the Opening consistent with the Act because it public interest. The Exchange has Process will apply for a trading halt and allows the Exchange the flexibility to requested that the Commission waive the same restrictive boundaries would administer the badges within its System. the 30-day operative delay so that the apply.15 B. Self-Regulatory Organization’s proposed rule change may become The Exchange’s proposal to not apply operative upon filing. The Exchange Statement on Burden on Competition the Market Order Spread Protection argues that waiver of the operative delay during the Opening Process is The Exchange does not believe that would allow the Exchange to consistent with the Act because the proposed rule change will impose immediately incorporate all risk protections exist during the Opening any burden on competition not protections into Rule 714 and bring Process to ensure that the best bid and necessary or appropriate in furtherance greater transparency to the risk offer displayed on the Exchange are of the purposes of the Act. The proposal protections offered on the Exchange. within a reasonable range. The does not impose an intra-market burden The Commission believes that waiver of Exchange’s Opening Process Rule 701 16 on competition with respect to the the 30-day operative delay is consistent and the reopening process after a reorganization and relocation of the with the protection of investors and the trading halt 17 both contain more various rules into Rule 714 because the public interest. Accordingly, the restrictive boundaries than those various risk protections are mandatory Commission hereby waives the proposed or the Market Order Spread and will continue to apply uniformly to operative delay and designates the Protection. With respect to the Opening all market participants. The Exchange proposed rule change operative upon Process, a Quality Opening Market is also believes that the addition of filing.23 required. A Quality Opening Market specific limitations to both the Limit At any time within 60 days of the requires a bid/ask differential applicable Order Price Protection and Market filing of the proposed rule change, the to the best bid and offer from all Valid Order Spread Protection rules will Commission summarily may Width Quotes defined in a table to be provide market participants with greater temporarily suspend such rule change if determined by the Exchange.18 The information as to when these it appears to the Commission that such Exchange’s requirements during the protections will apply. These action is necessary or appropriate in the Opening Process are more restrictive limitations apply uniformly to all public interest, for the protection of than the proposed initial setting for the market participants. The remainder of investors, or otherwise in furtherance of Market Order Spread Protection, which the rule changes are intended to bring the purposes of the Act. If the is set at $5. The same protections noted greater transparency to the current Commission takes such action, the for the Opening Process above will operation Exchange’s rules. Commission shall institute proceedings apply for trading halts. The Exchange C. Self-Regulatory Organization’s to determine whether the proposed rule believes that the Market Order Spread Statement on Comments on the change should be approved or Protection is unnecessary during the Proposed Rule Change Received From disapproved. Opening Process and during a trading Members, Participants, or Others halt because other protections are in IV. Solicitation of Comments place to ensure that the best bid and No written comments were either Interested persons are invited to offer displayed on the Exchange are solicited or received. submit written data, views, and within a reasonable range. III. Date of Effectiveness of the arguments concerning the foregoing, Memorializing the ability of the Proposed Rule Change and Timing for including whether the proposed rule Exchange to establish different Market Commission Action change is consistent with the Act. Order Spread Protection thresholds per Comments may be submitted by any of options series or class will also bring Because the foregoing proposed rule the following methods: greater clarity to the rule. Today, the change does not: (i) Significantly affect Exchange has this ability, it is simply the protection of investors or the public Electronic Comments adding that text to the rule. Utilizing interest; (ii) impose any significant • Use the Commission’s internet defined terms within the Rulebook will burden on competition; and (iii) become comment form (http://www.sec.gov/ also bring clarity to the rules. The operative for 30 days from the date on rules/sro.shtml); or Exchange also believes using more which it was filed, or such shorter time • Send an email to rule-comments@ discrete language within the Anti- as the Commission may designate, it has sec.gov. Please include File Number SR– become effective pursuant to Section GEMX–2018–32 on the subject line. 14 With respect to the Opening Process, a Quality 19(b)(3)(A) of the Act 19 and Rule 19b– Opening Market is required. A Quality Opening 4(f)(6) thereunder.20 Paper Comments Market a bid/ask differential applicable to the best A proposed rule change filed • Send paper comments in triplicate bid and offer from all Valid Width Quotes defined pursuant to Rule 19b–4(f)(6) under the in a table to be determined by the Exchange and to Secretary, Securities and Exchange published on the Exchange’s website. See GEMX Act 21 normally does not become Commission, 100 F Street NE, Rule 701(a)(7). operative for 30 days after the date of its Washington, DC 20549–1090. 15 See GEMX Rule 701(d). All submissions should refer to File 16 See note 14 above. 19 15 U.S.C. 78s(b)(3)(A). Number SR–GEMX–2018–32. This file daltland on DSKBBV9HB2PROD with NOTICES 17 With respect to trading halts, Opening Process 20 17 CFR 240.19b–4(f)(6). As required under Rule procedures will be used to reopen an option series 19b–4(f)(6)(iii), the Exchange provided the number should be included on the after a trading halt, therefore, the same protections Commission with written notice of its intent to file noted for the Opening Process will apply for a the proposed rule change, along with a brief 22 17 CFR 240.19b–4(f)(6)(iii). trading halt and the same restrictive boundaries description and the text of the proposed rule 23 For purposes only of waiving the 30-day would apply. See GEMX Rule 701(d). change, at least five business days prior to the date operative delay, the Commission also has 18 The table is located at: https:// of filing of the proposed rule change, or such considered the proposed rule’s impact on business.nasdaq.com/media/GEMXSystemSetting_ shorter time as designated by the Commission. efficiency, competition, and capital formation. See tcm5044–41351.pdf. 21 17 CFR 240.19b–4(f)(6). 15 U.S.C. 78c(f). VerDate Sep<11>2014 19:21 Sep 25, 2018 Jkt 244001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1

Federal Register / Vol. 83, No. 187 / Wednesday, September 26, 2018 / Notices 48681 subject line if email is used. To help the Office of Credit Risk Management (‘‘D/ OCRM and D/FA to provide input into Commission process and review your OCRM’’), the Lender Oversight determinations on initial applications comments more efficiently, please use Committee (‘‘LOC’’), and the Associate for delegated lending authority and only one method. The Commission will Administrator for Capital Access (‘‘AA/ Community Advantage participation, post all comments on the Commission’s CA’’). By this amendment (this respectively. internet website (http://www.sec.gov/ ‘‘Amendment’’), the Administrator is This Amendment also implements rules/sro.shtml). Copies of the delegating additional lender oversight membership and voting requirements submission, all subsequent authority to the D/OCRM and revising for the LOC set forth in Public Law 115– amendments, all written statements the membership of the LOC consistent 189, the Small Business 7(a) Lending with respect to the proposed rule with new requirements in The Small Oversight Reform Act of 2018 (June 21, change that are filed with the Business 7(a) Lending Oversight Reform 2018). Public Law 115–189 added Commission, and all written Act of 2018 (June 21, 2018). This Section 48(b) to the Small Business Act, communications relating to the Amendment to the Delegation includes requiring that the LOC consist of at least proposed rule change between the the authority of the D/OCRM to eight members. Three members of the Commission and any person, other than participate in the review and approval LOC are to be voting members, two of those that may be withheld from the of initial applications by 7(a) Lenders whom must be career appointees in the public in accordance with the and Certified Development Companies Senior Executive Service. The provisions of 5 U.S.C. 552, will be (‘‘CDCs’’) for delegated lending remaining members are to be nonvoting available for website viewing and authorities. This Amendment also members who serve in an advisory printing in the Commission’s Public provides that the D/OCRM consult with capacity on the LOC. This Amendment Reference Room, 100 F Street NE, the Director, Office of Financial designates the following SBA employees Washington, DC 20549 on official Assistance (‘‘D/FA’’) on Community as the voting members of the LOC: (i) business days between the hours of Advantage Pilot Program (‘‘Community The Chief Financial Officer, a Senior 10:00 a.m. and 3:00 p.m. Copies of the Advantage’’) authority. Finally, this Executive Service career appointee; (ii) filing also will be available for Amendment implements the new the Associate Administrator for Capital inspection and copying at the principal statutory provisions revising LOC Access, a Senior Executive Service non- office of the Exchange. All comments membership and voting authority. career appointee; and (iii) the Associate received will be posted without change. FOR FURTHER INFORMATION CONTACT: Administrator for Disaster Assistance, a Persons submitting comments are Bethany J. Shana, Office of Credit Risk Senior Executive Service career cautioned that we do not redact or edit Management, U.S. Small Business appointee. The Chief Financial Officer personal identifying information from Administration, 409 3rd Street SW, will serve as the LOC Chairperson. This comment submissions. You should Washington, DC 20416, telephone Amendment also updates the submit only information that you wish number: (202) 205–6402 and electronic Administrator’s designation of to make available publicly. All mail: bethany.shana@sba.gov. nonvoting advisory members as set forth submissions should refer to File below. SUPPLEMENTARY INFORMATION: This Number SR–GEMX–2018–32, and This Amendment replaces (i) Section document provides the public notice of I.A.1 of the Delegation in its entirety, should be submitted on or before an amendment to the Administrator’s which covers delegations of authority to October 17, 2018. Delegation of Authority with respect to the D/OCRM for delegated lender For the Commission, by the Division of SBA’s lender oversight and enforcement Trading and Markets, pursuant to delegated authority and Community Advantage activities. Specifically, this Amendment participation, and (ii) Section I.B.6. of authority.24 delegates to the D/OCRM the authority the Delegation in its entirety, which Brent J. Fields, to concur or non-concur on Secretary. covers LOC membership and voting, as recommendations to the D/FA on initial set forth below. All other sections of the [FR Doc. 2018–20886 Filed 9–25–18; 8:45 am] applications for delegated lending Delegation are unchanged and continue BILLING CODE 8011–01–P authority, which include initial in effect. Delegation of Authority No. applications by 7(a) Lenders for 12–G (Revision 1), Amendment 1 reads participation in the Preferred Lenders as follows: SMALL BUSINESS ADMINISTRATION Program (‘‘PLP’’), SBA Express Program, Delegation of Authority No. 12–G and Export Express Program, and initial (Revision 1), is amended by revising Delegations of Authority: Delegation of applications by CDCs for participation sections I.A.1. and I.B.6. to read as Authority No. 12–G (Revision 1), in the Accredited Lenders Program follows: Amendment 1 (‘‘ALP’’), including Priority status—a I. The Administrator of the SBA, AGENCY: U.S. Small Business prerequisite to ALP authority, and pursuant to the authority vested in her Administration. Premier Certified Lenders Program by the Small Business Act, 15 U.S.C. ACTION: Notice of Amendment to (‘‘PCLP’’). This Amendment further 631 et. seq., as amended, and the Small Delegation of Authority. delegates to the D/OCRM the authority Business Investment Act of 1958, 15 to concur or non-concur on U.S.C. 661 et. seq., as amended, hereby SUMMARY: This document provides the recommendations to the Director, Office delegates the following authorities: public notice of an amendment to of Financial Program Operations on A. To the Director, Office of Credit Delegation of Authority No. 12–G initial applications for Authorized CDC Risk Management (D/OCRM): (Revision 1) (79 FR 56842, September Liquidator authority (‘‘ACL’’) and other 1. Loan Program Delegated Lending daltland on DSKBBV9HB2PROD with NOTICES 23, 2014) (the ‘‘Delegation’’), which types of delegated lending authority Authority and Community Advantage delegated authority for lender oversight established in the future, unless Pilot Program Participation. and enforcement activities by the otherwise provided. In addition, this a. Initial applications for delegated Administrator of the Small Business Amendment requires the D/OCRM to lending authority. To concur or non- Administration (‘‘SBA’’) to the Director, consult with the D/FA on Community concur on recommendations to the Advantage participation determinations. Director, Office of Financial Assistance 24 17 CFR 200.30–3(a)(12). The preceding changes will allow the D/ (D/FA) (and, with respect to VerDate Sep<11>2014 19:21 Sep 25, 2018 Jkt 244001 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1


Document Created: 2018-09-26 00:47:24
Document Modified: 2018-09-26 00:47:24
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 48678 
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR