[Federal Register Volume 83, Number 164 (Thursday, August 23, 2018)]
[Notices]
[Pages 42735-42737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18157]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83869; File No. SR-BX-2018-038]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Codify the 
Definitions of the Protocols To Enter Quotes and Orders

August 17, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 14, 2018, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``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.
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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 adopt new text at Chapter VI, Section 21 
to codify the definitions of the protocols that Participants can use to 
enter quotes and orders on the Exchange.
    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 at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to adopt new rule text at Chapter VI, Section 
21 to codify the Financial Information eXchange (``FIX'') and 
Specialized Quote Feed (``SQF'') protocols. The Exchange believes that 
codifying definitions of these protocols in its rules will increase 
transparency around its operations. The protocols used by Participants 
to submit quotes and orders play an important role in the operation of 
the System. The Exchange therefore believes that codifying definitions 
of these protocols in its rules will increase transparency around its 
operations. Furthermore, the proposed definitions will be harmonized 
where appropriate with definitions to be included in the rules of the 
Exchange's affiliated options markets,\3\ including by using consistent 
terms to define the buckets of information transmitted, or the features 
available, on each protocol.
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    \3\ See Securities Exchange Act Release Nos. 83729 (July 27, 
2018) 83 FR 37870 (August 2, 2018) (SR-ISE-2018-65); 83731 (July 27, 
2018), 83 FR 37867 (August 2, 2018) (SR-GEMX-2018-26); and 83730 
(July 27, 2018), 83 FR 37873 (August 2, 2018) (SR-MRX-2018-25). 
Nasdaq Phlx LLC was filed as SR-Phlx-2018-54. The Nasdaq Stock 
Market LLC will submit a similar filing to amend The Nasdaq Options 
Market LLC ports.
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    The Exchange proposes to title Section 21 as ``Order and Quote 
Protocols'' and codify descriptions of the various protocols that 
Participants may use to enter quotes and orders on BX. The Exchange 
proposes to add a

[[Page 42736]]

new section (a) to Chapter VI, Section 21 entitled ``Entry and Display 
of Orders and Quotes.'' The Exchange proposes to state in proposed new 
Chapter VI, Section 21(a) ``Participants may enter orders and quotes 
into the System as specified below.'' The Exchange proposes to add a 
section Chapter VI, Section 21(a)(i) which provides, ``The Exchange 
offers Participants the following protocols for entering orders and 
quotes respectively.''

A. Financial Information eXchange Ports

    This protocol is not memorialized within the Exchange's Rulebook, 
however rule changes describing FIX have been filed.\4\ The Exchange 
proposes to codify a description of this protocol to add even greater 
specificity within the Rulebook. The Exchange proposes to state that 
FIX is an interface that allows Participants and their Sponsored 
Customers to connect, send and receive messages related to orders and 
auction orders and responses to and from the Exchange. Features include 
the following: (1) Execution messages; (2) order messages; and (3) risk 
protection triggers and cancel notifications.
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    \4\ See Securities Exchange Act Release No. 80055 (February 16, 
2018), 82 FR 11381 (February 22, 2017) (SR-BX-2017-009). The FIX 
port was previously referred to as the ``Order Entry Port'' and 
described as a connection to routing orders to the Exchange via an 
external order entry port. Participants access the Exchange's 
network through order entry ports. A BX Options Market Participant 
may have more than one order entry port. The Exchange recently 
renamed the ``Order Entry Port'' as the ``FIX Port'' in the 
Exchange's Pricing Schedule. See Securities Exchange Act Release No. 
83192 (May 9, 2018), 83 FR 22563 (May 15, 2018) (SR-BX-2018-017).
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B. Specialized Quote Feed Ports

    This protocol is not memorialized within the Exchange's Rulebook, 
however rule changes describing SQF have been filed.\5\ At this time, 
the Exchange proposes to more specifically define the SQF Port. The 
Exchange proposes the following definition:
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    \5\ See Securities Exchange Act Release No. 76952 (January 21, 
2016), 81 FR 4721 (January 27, 2016) (SR-BX-2016-003). This rule 
change generally described SQF as The SQF Port is a port that allows 
a Participant acting as a BX Options Market Maker to enter his 
markets into the BX Options markets. The SQF Port also allows a 
Market Maker to access information such as execution reports and 
other relevant data through a single feed. Market Makers rely on 
data available through the SQF Port to provide them the necessary 
information to perform market making activities in a swift and 
meaningful way.

    SQF is an interface that allows Market Makers to connect, send, 
and receive messages related to quotes, Immediate-or-Cancel Orders, 
and auction responses into and from the Exchange. Features include 
the following: (1) Options symbol directory messages (e.g underlying 
instruments); (2) system event messages (e.g., start of trading 
hours messages and start of opening); (3) trading action messages 
(e.g., halts and resumes); (4) execution messages; (5) quote 
messages; (6) Immediate-or-Cancel Order messages; (7) risk 
protection triggers and purge notifications; (8) opening imbalance 
messages; (9) auction notifications; and (10) auction responses. The 
SQF Purge Interface only receives and notifies of purge request from 
the Market Maker.\6\
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    \6\ All of the notification messages available on SQF ports as 
described above (i.e., options symbol directory messages, system 
event messages, trading action messages, etc.) are configurable in 
that BX Market Makers can select the specific types of notifications 
they wish to receive on their SQF ports. As such, SQF Purge 
Interface ports are a subpart of SQF ports that have been configured 
to only receive and notify of purge requests.

The Exchange believes that this information provides a more thorough 
description of the SQF protocol.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade and to protect investors and the 
public interest by adding greater transparency to the order and quote 
protocols available on BX.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is consistent 
with the protection of investors and the public interest as it codifies 
the protocols used to connect to the Exchange's System. While no 
functional changes to the protocols are proposed in this filing, the 
Exchange believes that including a description of the various order 
entry protocols in its rulebook will benefit Participants by increasing 
transparency around the operation of the Exchange. Furthermore, the 
proposed descriptions of the order entry protocols in one rule will 
more clearly and accurately reflect the information included on the 
protocols, and will be harmonized with language to be included in the 
rules of its affiliated exchanges to the extent that the protocols 
operate in the same manner. The protocols described in this filing 
provide a range of important features to Participants, including the 
ability to submit quotes and orders, and perform other functions 
necessary to manage trading on the Exchange. The Exchange believes 
codifying the quote and order entry protocols will increase 
transparency to the Participants that use these protocols to connect to 
the Exchange.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. As explained above, the 
Exchange is codifying the quote and order entry protocols that 
Participants use to connect to the Exchange's System.
    The Exchange does not believe that codifying the order entry 
protocols in the rulebook will have any competitive impact. Locating 
all the descriptions within a single rule and adding context around 
each order entry protocol will increase transparency around the 
operation of the Exchange without having any impact on inter-market or 
intra-market competition. All market participants have the ability to 
subscribe to the protocols for order entry. The quoting protocols are 
limited to the market participants who are permitted by rule to quote 
on BX, but the function is uniformly available to these eligible 
participants.

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).
    \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.

[[Page 42737]]

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-2018-038 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-2018-038. 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-2018-038 and should be submitted on 
or before September 13, 2018.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18157 Filed 8-22-18; 8:45 am]
 BILLING CODE 8011-01-P