[Federal Register Volume 81, Number 94 (Monday, May 16, 2016)]
[Notices]
[Pages 30363-30365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11410]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77799; File No. SR-BX-2016-024]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Modify the 
Maximum Number of Times an Order on BX May Be Updated Before the System 
Cancels the Order

May 10, 2016.
    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 April 29, 2016, NASDAQ BX, Inc. (``BX'' 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

[[Page 30364]]

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 modify the maximum number of times an 
Order on the Exchange may be updated before the System cancels the 
Order.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.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
Background
    The Exchange will cancel an Order if it is updated a certain number 
of times during any given day. Pursuant to Rule 4702(a), an Order will 
be cancelled if it is repriced and/or reentered 10,000 times for any 
reason.\3\
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    \3\ Orders entered through OUCH and FLITE ports generally are 
not repriced or reentered. As explained in rule 4702(b)(1)(B), 
orders entered through OUCH and FLITE may be updated for display 
once. Further, OUCH and FLITE Orders may only be decremented in 
size, which is not considered repricing or reentry of the Order. See 
http://www.nasdaqtrader.com/Trader.aspx?id=TradingSpecs for a 
description of the various order entry port specifications.
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    Pursuant to Rule 4702(b)(7)(A), a Market Maker Peg Order will be 
canceled if it is repriced 1,000 times. Pursuant to Rule 4703(d), an 
Order with Primary Pegging will be cancelled if it is updated 1,000 
times, and an Order with Market Pegging will be cancelled if it is 
updated 10,000 times.
    The Exchange applies these limits to conserve System resources by 
limiting the persistence of Orders that update repeatedly without 
execution. These limits are applied daily to each order entered into 
the System. Orders that have a Time-in-Force \4\ that allows them to 
persist longer than a single trading day will have their count reset 
each day. For example, if an Order with a Time-in-Force of Good-till-
Canceled \5\ is repriced 9,999 times during any given day, the Order 
will not be canceled due to the number of updates. Starting the next 
day, the Order would be again allowed to reprice up to 9,999 times 
before it would be canceled by the System.
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    \4\ The ``Time-in-Force'' assigned to an Order means the period 
of time that the System will hold the Order for potential execution. 
See Rule 4703(a).
    \5\ An Order that is designated to deactivate one year after 
entry may be referred to as a ``Good-till-Cancelled.'' See Rule 
4703(a)(3).
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Proposed Changes
    First, the Exchange is proposing to eliminate rule text under Rules 
4702(a), 4702(b)(7)(A), and 4703(d) concerning cancellation based on 
Order updates and consolidate the concept under a new Rule 4756(a)(4).
    Second, the Exchange is proposing to no longer state the specific 
number of times a particular Order Type may be updated before it is 
canceled in the new rule and is, instead, noting that the number of 
permissible changes may vary by Order Type or Order Attribute and may 
change from time to time. Further, the proposed rule will note that the 
Exchange will post on its Web site what is considered a change for a 
particular Order Type and Order Attribute, and the current limits on 
the number of such changes.
    The Exchange is changing the process by which it counts updates, 
which will allow it to identify a wider range of updates to an Order. 
Using the new process, the Exchange will be able to track the following 
Order updates: (1) System-generated child Orders; (2) display size 
refreshes from reserve; (3) replaces of System-generated child Orders 
(which include Orders with a Pegging Attribute); and (4) cancellation 
requests of System-generated child Orders. The Exchange notes that all 
updates identified by the current process will be counted under the new 
process. The Exchange believes these changes will provide it with 
greater flexibility in addressing changes in volume, market participant 
behavior, and the Exchange's capacity to handle the message volume 
caused by Orders that update a significant number of times throughout 
the trading day.
    The Exchange will provide at least one day's advanced notice to the 
public of any changes to the number of updates permitted before an 
Order is canceled. Initially, the Exchange will keep the number of 
updates consistent with what is currently noted in the rules; however, 
the Exchange may shortly thereafter change the number of updates as 
needed to address market conditions.
    BX is also making minor technical corrections to Rule 4702(b)(7) to 
make ``(A)'' denoting subparagraph (A) under the rule not bold, and to 
insert missing spaces between words in the sixth paragraph of 
subparagraph (A) under the rule. BX is also changing the word ``they'' 
to the word ``the'' in the first full paragraph below the bulleted list 
under Rule 4703(d).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6 of the Act,\6\ in general, and with 
section 6(b)(5) of the Act,\7\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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    Excessive updating of Orders places a burden on the Exchange's 
System, which, if left unchecked, could potentially affect overall 
market quality. The Exchange will continue canceling Orders that reach 
a certain number of updates but, instead of the static number of 
updates stated in the rules, the Exchange is proposing to provide the 
number of updates by Order Type or Order Attribute on its public Web 
site. Web site posting will allow the Exchange to react more quickly to 
changes in the marketplace by changing the applicable number of updates 
that will trigger cancellation of an Order. The Exchange will provide 
advanced notice to market participants of any changes to the number of 
updates applied. Thus, the proposed rule change will further promote 
the protection [sic] investors and the public interest.

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

[[Page 30365]]

necessary or appropriate in furtherance of the purposes of the Act, as 
amended.\8\ The Exchange is proposing to make the change because it 
will allow it to better manage market quality for all market 
participants, who would be negatively impacted by issues caused by 
Orders that tax System resources due to the excessive number of 
updates.
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    \8\ 15 U.S.C. 78f(b)(8).
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    These adjustments will not impact competition among market 
participants because the cancellation parameters will apply equally to 
all market participants. As is the case now, market participants that 
have an Order canceled due to the number of updates may enter a new 
replacement Order. Thus, the Exchange does not think that the proposed 
change will place a burden on competition not necessary or appropriate 
in furtherance of the Act.

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 \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(a)(iii) [sic].
    \10\ 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.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2016-024 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-2016-024. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BX-2016-024 and should be 
submitted on or before June 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11410 Filed 5-13-16; 8:45 am]
 BILLING CODE 8011-01-P