83 FR 63922 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .02 to Rule 715 Regarding Cancel and Replace Orders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 238 (December 12, 2018)
Federal Register Volume 83, Issue 238 (December 12, 2018)
| Page Range | 63922-63924 | |
| FR Document | 2018-26836 |
[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)] [Notices] [Pages 63922-63924] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-26836] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84741; File No. SR-ISE-2018-97] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Supplementary Material .02 to Rule 715 Regarding Cancel and Replace Orders December 6, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 [[Page 63923]] (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on November 29, 2018 Nasdaq ISE, LLC (``ISE'' 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 amend Supplementary Material .02 to Rule 715 regarding Cancel and Replace Orders. The text of the proposed rule change is available on the Exchange's website at http://ise.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 amend Supplementary Material .02 to Rule 715 regarding Cancel and Replace Orders to: (i) Correct an inconsistency between the Exchange's rule text and the operation of the System \3\ by removing the reference to Rule 710, (ii) update rule cross-references, and (iii) make other non-substantive, technical changes. --------------------------------------------------------------------------- \3\ 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)(63). --------------------------------------------------------------------------- Today, a member has the option of either sending in a cancel order and then separately sending in a new order which serves as a replacement of the original order (two separate messages), or sending a single cancel and replace order in one message (i.e., a Cancel and Replace Order). Specifically, Supplementary Material .02 to Rule 715 defines a Cancel and Replace Order as a single message for the immediate cancellation of a previously received order and the replacement of that order with a new order.\4\ The replacement portion of the Cancel and Replace Order is treated as a new order and therefore goes through price or other reasonability checks as a result of being viewed as such.\5\ If the replacement portion of a Cancel and Replace Order does not satisfy the System's price or other reasonability checks, the existing order will be cancelled and not replaced.\6\ The Exchange notes, however, that when it initially codified Cancel and Replace Orders in its Rulebook as part of SR-ISE-2017-03, it inadvertently included Rule 710 within the list of price reasonability checks. In SR-ISE-2017-03, the Exchange explained that the System conducts price or other reasonability checks for Cancel and Replace Orders to validate such orders against the current market conditions prior to proceeding with the request to modify the order.\7\ Rule 710, which relates to the minimum price variations applicable to options series traded on the Exchange, does not involve the System considering the current market at the time of the Cancel and Replace Order, and an incoming Cancel and Replace Order that fails the minimum price variation checks in Rule 710 would not result in the existing order being cancelled and not replaced.\8\ The Exchange therefore proposes to remove the reference to Rule 710 from the list of price or other reasonability checks to conform its rule text to the System. --------------------------------------------------------------------------- \4\ If the previously placed order is already filled partially or in its entirety, the replacement order is automatically cancelled or reduced by the number of contracts that were executed. See Supplementary Material .02 to Rule 715. \5\ Supplementary Material .02 to Rule 715 further provides how the replacement portion may retain the priority of the original order, provided certain specified conditions are met. The manner in which the Exchange treats priority with respect to Cancel and Replace Orders is not changing under this proposal. \6\ See Securities Exchange Act Release No. 80432 (April 11, 2017), 82 FR 18191 (April 17, 2017) (SR-ISE-2017-03) (memorializing Cancel and Replace Orders in Supplementary Material .02 to Rule 715 as part of the Exchange's system migration to INET technology). \7\ Id. \8\ In this instance, the System would simply reject the cancel and replace message as an invalid instruction. The Exchange notes that the previous T7 system likewise treated Cancel and Replace Orders in this manner. --------------------------------------------------------------------------- The Exchange also proposes to update the various rule references related to the price reasonability checks within this provision to refer to the current rules.\9\ Finally, the Exchange proposes other non-substantive, technical changes within Supplementary Material .02 to Rule 715 to capitalize ``Cancel and Replace Order'' for consistency, and to capitalize ``System,'' which is a defined term. --------------------------------------------------------------------------- \9\ In particular, Rules 711(c) and 714(b)(2) are now Rules 714(b)(1)(B) and 714(b)(1)(A), respectively, pursuant to SR-ISE- 2018-80. See Securities Exchange Act Release No. 84237 (September 20, 2018), 83 FR 48660 (September 26, 2018). Rule 722(b)(1) is now Rule 722(c)(1) pursuant to SR-ISE-2018-56. See Securities Exchange Act Release No. 84373 (October 5, 2018), 83 FR 51730 (October 12, 2018). Finally, paragraphs (b), (c), and (d) of Supplementary Material .07 to Rule 722 are now paragraphs (a)(1)(A), (b), and (c)(1), respectively, pursuant to SR-ISE-2018-55. See Securities Exchange Act Release No. 83464 (June 19, 2018), 83 FR 29583 (June 25, 2018). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\11\ 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. The Exchange's proposal corrects an inadvertent error in Supplementary Material .02 to Rule 715, which currently includes Rule 710 within the list of price or other reasonability checks. As discussed above, including Rule 710 is inconsistent with the operation of the Exchange's System because an incoming Cancel and Replace Order which fails the minimum price variation checks in Rule 710 does not result in the existing order getting cancelled and not replaced. This rule change would amend the rule text to reflect ISE's current practice, and should avoid potential confusion about how the System processes Cancel and Replace Orders today.\12\ Furthermore, the Exchange's proposal to update the rule references and make other non- substantive technical changes, as further described above, will bring greater transparency to its Rulebook thereby protecting investors and the public interest by reducing potential for investor confusion. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b). \11\ 15 U.S.C. 78f(b)(5). \12\ See note 8 above. --------------------------------------------------------------------------- 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 [[Page 63924]] of the purposes of the Act. All of the proposed changes are intended to bring greater transparency to the Exchange's Rulebook, and therefore does not unduly burden competition. 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 \13\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\14\ --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(3)(A)(iii). \14\ 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 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 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 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-ISE-2018-97 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-ISE-2018-97. 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-ISE-2018-97 and should be submitted on or before January 2, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\ --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-26836 Filed 12-11-18; 8:45 am] BILLING CODE 8011-01-P
![63922 Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
not route’’ from existing paragraph participants greater flexibility and more certainty when providing
(a)(3)(D) to paragraph (a)(2); adding new control over the circumstances under liquidity, while ensuring that MMRPs
paragraph (a)(3) to provide that ‘‘[a] which their orders interact with contra priced too far through the contra-side
Market Maker may designate a quote as side-interest on the Exchange. By NBBO will cancel or reject after trading
follows’’; and re-numbering the increasing the opportunities for with any eligible interest on the
remainder of the paragraph to account execution at multiple price points and Exchange. The Commission believes
for such changes.52 In addition, the encouraging the provision of greater that ranking the repriced MMALO or
Exchange proposes to renumber the displayed liquidity to the market, the repriced MMRP by time priority behind
description of an MMLO as paragraph proposal is reasonably designed to other interest already available to trade
(a)(3)(A), and amend the rule text to facilitate the mechanism of price at a price preserves principles of
provide that on arrival, a quotation discovery. The Commission also priority and therefore would promote
designated MMLO will trade with believes that ranking a repriced RALO just and equitable principles of trade.
displayed interest in the Consolidated or repriced RPNP behind other interest Further, the Commission believes that
Book only.53 Once resting, the MMLO already eligible to trade at a price, as the proposed quotation designations are
designation no longer applies and such well as ranking such orders that reasonably designed to provide Market
quotation is eligible to trade with simultaneously reprice to the same price Makers with a greater level of
displayed and undisplayed interest.54 by time of original order entry, is determinism, in terms of managing their
reasonably designed to preserve the exposure, and thus could encourage
Implementation
principles of priority and therefore more aggressive liquidity provision,
The Exchange states that it will promote just and equitable principles of resulting in more trading opportunities
announce by Trader Update the trade. Finally, the Commission notes and tighter spreads. This may help
implementation date of the proposed other options exchanges offer similar improve the mechanism of price
rule change within 90 days of the order types as proposed by the discovery. Moreover, the Commission
effective date of this proposed rule Exchange.59 notes that other options exchanges have
change.55 The Commission notes that the adopted quote types designed to
III. Discussion and Commission’s proposal to add the two new quotation strengthen market making.60
Findings designations is designed to provide For the reasons discussed above, the
Market Makers with the same Commission believes that the proposed
After careful review, the Commission functionality for their quotations as are rule change, as modified by Amendment
finds that the proposed rule change, as proposed for orders entered on the No. 1, is consistent with the Act.
modified by Amendment No. 1, is Exchange. The proposed quotation
consistent with the requirements of the designations are similar to how the IV. Conclusion
Act,56 and the rules and regulations proposed RALO and RPNP will function It is therefore ordered, pursuant to
thereunder applicable to a national and may enable Market Makers to exert Section 19(b)(2) of the Act,61 that the
securities exchange.57 In particular, the greater control over how their quotes proposed rule change (SR–NYSEArca–
Commission finds that the proposed would interact with contra-side 2018–74), as modified by Amendment
rule change is consistent with Section liquidity, while affording additional No. 1, be, and it hereby is, approved.
6(b)(5) of the Act,58 which requires, opportunities to provide liquidity to the
among other things, that the rules of a For the Commission, by the Division of
market. The Commission notes that, Trading and Markets, pursuant to delegated
national securities exchange be absent the proposed repricing authority.62
designed to promote just and equitable functionality associated with the
principles of trade, to foster cooperation Eduardo A. Aleman,
MMALO and MMRP, a Market Maker Assistant Secretary.
and coordination with persons engaged quote that locks or crosses interest on
in regulating transactions in securities, [FR Doc. 2018–26833 Filed 12–11–18; 8:45 am]
the Exchange or an away market will
to remove impediments to and perfect reject or cancel. In the case of MMALOs, BILLING CODE 8011–01–P
the mechanism of a free and open the proposal is reasonably designed to
market and a national market system promote the display of liquidity because
and, in general, to protect investors and SECURITIES AND EXCHANGE
such quotations would be displayed at COMMISSION
the public interest, and not be designed the next-best aggressive price instead of
to permit unfair discrimination between being cancelled. The Commission
customers, issuers, brokers, or dealers. believes that the proposal will also [Release No. 34–84741; File No. SR–ISE–
The Commission believes that by ensure that an MMALO will always add 2018–97]
providing market participants with two liquidity as maker, rather than remove
new order types that build on the Self-Regulatory Organizations; Nasdaq
liquidity as taker, while ensuring that ISE, LLC; Notice of Filing and
existing ALO and PNP Order MMALOs priced too far through the
functionality to allow for repricing Immediate Effectiveness of Proposed
contra-side interest on the Exchange or Rule Change To Amend
instead of cancellation or rejection of the NBBO will be rejected. As such, the
orders under certain circumstances, the Supplementary Material .02 to Rule 715
proposed MMALO could assist Market Regarding Cancel and Replace Orders
proposed rule change could give market Makers in maintaining a fair and orderly
52 See
market and encourage Market Makers to December 6, 2018.
proposed Rule 6.37A–O(a)(2)–(3).
53 See proposed Rule 6.37A–O(a)(3)(A).
provide displayed liquidity to the Pursuant to Section 19(b)(1) of the
amozie on DSK3GDR082PROD with NOTICES1
54 See id. market, thus contributing to price Securities Exchange Act of 1934
55 See Notice, supra note 3, at 53697. discovery. In the case of MMRPs, the
56 15 U.S.C. 78(f). proposal may afford Market Makers 60 See Notice, supra note 3, at 53698, n.45 (citing
57 In approving this proposed rule change, the Miami International Securities Exchange, LLC Rule
Commission has considered the proposed rule’s 59 See Notice, supra note 3, at 53697, n.39 (citing 515(d) and BOX Options Exchange LLC
impact on efficiency, competition, and capital Nasdaq Options Market Chapter VI Trading IM–8050–3).
formation. See 15 U.S.C. 78c(f). Systems, Sec. 1(e)(11) and Nasdaq PHLX LLC Rule 61 15 U.S.C. 78s(b)(2).
58 15 U.S.C. 78f(b)(5). 1080(m)(iv)(A)). 62 17 CFR 200.30–3(a)(12).
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![63924 Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
of the purposes of the Act. All of the Paper Comments SECURITIES AND EXCHANGE
proposed changes are intended to bring COMMISSION
greater transparency to the Exchange’s • Send paper comments in triplicate
Rulebook, and therefore does not to Secretary, Securities and Exchange
[Release No. 34–84742; File No. SR–
unduly burden competition. Commission, 100 F Street NE, NYSEAMER–2018–53]
Washington, DC 20549–1090.
C. Self-Regulatory Organization’s
All submissions should refer to File Self-Regulatory Organizations; NYSE
Statement on Comments on the
Number SR–ISE–2018–97. This file American LLC; Notice of Filing and
Proposed Rule Change Received From
number should be included on the Immediate Effectiveness of Proposed
Members, Participants, or Others
subject line if email is used. To help the Rule Change To Amend NYSE
No written comments were either American Rule 5.1E(a)(2)
Commission process and review your
solicited or received. comments more efficiently, please use December 6, 2018.
III. Date of Effectiveness of the only one method. The Commission will Pursuant to Section 19(b)(1) 1 of the
Proposed Rule Change and Timing for post all comments on the Commission’s Securities Exchange Act of 1934
Commission Action internet website (http://www.sec.gov/ (‘‘Act’’) 2 and Rule 19b–4 thereunder,3
rules/sro.shtml). Copies of the notice is hereby given that on November
Because the foregoing proposed rule submission, all subsequent 27, 2018, NYSE American LLC
change does not: (i) Significantly affect amendments, all written statements (‘‘Exchange’’ or ‘‘NYSE American’’) filed
the protection of investors or the public with respect to the proposed rule with the Securities and Exchange
interest; (ii) impose any significant change that are filed with the Commission (‘‘Commission’’) the
burden on competition; and (iii) become Commission, and all written proposed rule change as described in
operative for 30 days from the date on
communications relating to the Items I and II below, which Items have
which it was filed, or such shorter time
proposed rule change between the been prepared by the self-regulatory
as the Commission may designate, it has
Commission and any person, other than organization. The Commission is
become effective pursuant to Section
those that may be withheld from the publishing this notice to solicit
19(b)(3)(A)(iii) of the Act 13 and
public in accordance with the comments on the proposed rule change
subparagraph (f)(6) of Rule 19b–4
provisions of 5 U.S.C. 552, will be from interested persons.
thereunder.14
available for website viewing and I. Self-Regulatory Organization’s
At any time within 60 days of the printing in the Commission’s Public
filing of the proposed rule change, the Statement of the Terms of Substance of
Reference Room, 100 F Street NE, the Proposed Rule Change
Commission summarily may
Washington, DC 20549, on official
temporarily suspend such rule change if The Exchange proposes to amend
it appears to the Commission that such business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the NYSE American Rule 5.1E(a)(2) to
action is necessary or appropriate in the remove the requirement that the
public interest, for the protection of filing also will be available for
inspection and copying at the principal Exchange file with the Securities and
investors, or otherwise in furtherance of Exchange Commission (the
the purposes of the Act. If the office of the Exchange. All comments
received will be posted without change. ‘‘Commission’’) a Form 19b–4(e) for
Commission takes such action, the each ‘‘new derivative securities
Commission shall institute proceedings Persons submitting comments are
product’’ that will commence trading on
to determine whether the proposed rule cautioned that we do not redact or edit
the Exchange pursuant to unlisted
should be approved or disapproved. personal identifying information from
trading privileges. The proposed rule
comment submissions. You should change is available on the Exchange’s
IV. Solicitation of Comments
submit only information that you wish website at www.nyse.com, at the
Interested persons are invited to to make available publicly. All principal office of the Exchange, and at
submit written data, views, and submissions should refer to File the Commission’s Public Reference
arguments concerning the foregoing, Number SR–ISE–2018–97 and should be Room.
including whether the proposed rule submitted on or before January 2, 2019.
change is consistent with the Act. II. Self-Regulatory Organization’s
For the Commission, by the Division of Statement of the Purpose of, and
Comments may be submitted by any of Trading and Markets, pursuant to delegated
the following methods: Statutory Basis for, the Proposed Rule
authority.15 Change
Electronic Comments Eduardo A. Aleman,
Assistant Secretary. In its filing with the Commission, the
• Use the Commission’s internet [FR Doc. 2018–26836 Filed 12–11–18; 8:45 am]
self-regulatory organization included
comment form (http://www.sec.gov/ statements concerning the purpose of,
BILLING CODE 8011–01–P
rules/sro.shtml); or and basis for, the proposed rule change
• Send an email to rule-comments@ and discussed any comments it received
sec.gov. Please include File Number SR– on the proposed rule change. The text
ISE–2018–97 on the subject line. of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
amozie on DSK3GDR082PROD with NOTICES1
13 15 U.S.C. 78s(b)(3)(A)(iii).
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– set forth in sections A, B, and C below,
4(f)(6) requires a self-regulatory organization to give of the most significant parts of such
the Commission written notice of its intent to file statements.
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
1 15 U.S.C.78s(b)(1).
change, or such shorter time as designated by the
2 15 U.S.C. 78a.
Commission. The Exchange has satisfied this
requirement. 15 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4.
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Document Created: 2018-12-12 01:39:54
Document Modified: 2018-12-12 01:39:54
| 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 63922 |
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