83 FR 56888 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Derivative Securities Traded Under Unlisted Trading Privileges

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 220 (November 14, 2018)

[Federal Register Volume 83, Number 220 (Wednesday, November 14, 2018)]
[Notices]
[Pages 56888-56890]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-24733]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84546; File No. SR-BX-2018-051]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Derivative Securities Traded Under Unlisted Trading Privileges

November 7, 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 October 26, 2018, Nasdaq BX, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Rule 4421 related to 
derivative securities traded under unlisted trading privileges 
(``UTP'') to: (i) Remove the requirement in Rule 4421(a)(1) for the 
Exchange to file with the Commission a Form 19b-4(e) for each ``new 
derivative securities product'' as defined in Rule 19b-4(e) under the 
Act \3\ (``Derivative Security'') traded under UTP; (ii) add a word 
that was inadvertently omitted in the previous version of Rule 
4421(a)(2); and (iii) renumber the remaining provisions of Rule 4421(a) 
to maintain an organized rule structure. The Exchange has designated 
this rule change as ``non-controversial'' under Section 19(b)(3)(A) of 
the Act \4\ and provided the Commission with the notice required by 
Rule 19b-4(f)(6) thereunder.\5\
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    \3\ 17 CFR 240.19b-4(e).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqbx.cchwallstreet.com/, at the principal office 
of the Exchange, and

[[Page 56889]]

at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend Rule 4421 
related to derivative securities traded under UTP by: (i) Removing the 
requirement in Rule 4421(a)(1) for the Exchange to file with the 
Commission a Form 19b-4(e) for each Derivative Security; (ii) adding a 
word that was inadvertently omitted in the previous version of Rule 
4421(a)(2); and (iii) renumbering the remaining rules of Rule 4421(a) 
to maintain an organized rule structure, as described below.
    Rule 4421(a)(1) sets forth the requirement for the Exchange to file 
with the Commission a Form 19b-4(e) with respect to each Derivative 
Security that is traded under UTP. However, the Exchange believes that 
it should not be necessary to file a Form 19b-4(e) with the Commission 
if it begins trading a Derivative Security on a UTP basis because Rule 
19b-4(e)(1) under the Act refers to the ``listing and trading'' of a 
``new derivative securities product.'' The Exchange believes that the 
requirements of that Rule refer to when an exchange lists and trades a 
Derivative Security, and not when an exchange seeks only to trade such 
product on a UTP basis pursuant to Rule 12f-2 under the Act.\6\ 
Therefore, the Exchange proposes to delete the requirement in current 
Rule 4421(a)(1) for the Exchange to file a Form 19b-4(e) with the 
Commission with respect to each Derivative Security it begins trading 
on a UTP basis.
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    \6\ 17 CFR 240.12f-2.
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    Rule 4421(a)(2) sets forth the requirement for the Exchange to 
distribute an information circular prior to the commencement of trading 
a Derivative Security on a UTP basis. The Exchange proposes to add a 
``the'' that was inadvertently omitted in the previous version of 
clause (c) of Rule 4421(a)(2) to enhance the readability of the Rule. 
This change is not substantive.
    Lastly, as a result of the deletion of current Rule 4421(a)(1), the 
Exchange proposes to renumber current Rules 4421(a)(2)-(6), as Rules 
4421(a)(1)-(5) respectively.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \7\ of the Act, in general, and 
furthers the objectives of Section 6(b)(5) of the Act \8\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, 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. Specifically, 
eliminating the requirement to file a Form 19b-4(e) for each Derivative 
Security is consistent with the Act because the regulatory requirement 
was not intended to apply in the context of Derivative Securities 
trading on a UTP basis. The proposal, moreover, will provide for a more 
efficient process for adding Derivative Securities to trading on the 
Exchange on a UTP basis.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    In addition, the Exchange notes that the Commission recently 
approved a substantially identical proposed rule change filed by NYSE 
National, Inc. (``NYSE National'').\9\ In particular, the Commission 
noted in the NYSE National Approval Order that it ``believes that the 
filing of a Form 19b-4(e) is not required when an Exchange is trading a 
new derivative securities product on a UTP basis only'' \10\ and it 
also found that the NYSE National's proposed rule change was 
``consistent with the requirements of Section 6(b)(5) of the Act.'' 
\11\
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    \9\ See Securities Exchange Act Release No. 34-83289 (May 17, 
2018), 83 FR 23968 (May 23, 2018) (Order Approving File No. SR-
NYSENAT-2018-02) (the ``NYSE National Approval Order'').
    \10\ See supra note 9, at 23975, n.149.
    \11\ See supra note 9 at page 23975-6.
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    With respect to the addition of a ``the'' that was inadvertently 
omitted in the previous version of clause (c) of Rule 4421(a)(2), the 
Exchange believes that this change is consistent with the Act because 
it will improve the readability and clarity of the Rule. This change is 
not substantive.
    Lastly, the Exchange believes that renumbering the current Rules 
4421(a)(2)-(6) as Rules 4421(a)(1)-(5) is consistent with the Act 
because it will allow the Exchange to maintain a clear and organized 
rule structure, thus preventing investor confusion.
    For these reasons, the Exchange believes the proposed rule change 
is consistent with the requirements of Section 6(b)(5) of the Act.\12\
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    \12\ See supra note 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
removing the requirement to file a Form 19b-4(e) will serve to enhance 
competition by providing for the efficient addition of Derivative 
Securities for trading under UTP on the Exchange. To the extent that a 
competitor marketplace believes that the proposed rule change places it 
at a competitive disadvantage, it may file with the Commission a 
proposed rule change to adopt the same or similar rule.
    In addition, the proposal to add a ``the'' that was inadvertently 
omitted in the previous version of clause (c) of Rule 4421(a)(2) does 
not impact competition in any respect since it merely corrects a non-
substantive rule text error.
    Lastly, the proposal to renumber the current Rules 4421(a)(2)-(6) 
as Rules 4421(a)(1)-(5) does not impact competition in any respect 
since it merely maintains a clear and organized rule structure.

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 proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; or (iii) become operative prior to 
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

[[Page 56890]]

Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) 
thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and 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. 
The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. Waiving the 30-day delay would permit the Exchange to more 
efficiently add Derivative Securities to the Exchange under UTP without 
the unnecessary requirement to file a 19b-4(e) with the Commission. The 
Commission also notes that because the Exchange is adopting a rule that 
is substantially identical to a similar NYSE National rule, the 
proposed change does not present any new or novel issues. Thus, the 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest and 
hereby waives the 30-day operative delay and designates the proposed 
rule change to be operative upon filing.\15\
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    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2018-051 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2018-051. 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-BX-2018-051 and should be submitted on 
or before December 5, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24733 Filed 11-13-18; 8:45 am]
 BILLING CODE 8011-01-P