[Federal Register Volume 83, Number 237 (Tuesday, December 11, 2018)]
[Notices]
[Pages 63692-63694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26736]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84723; File No. SR-NASDAQ-2018-097]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Delay a New Protocol ``Ouch to Trade Options'' or ``OTTO'' on The 
Nasdaq Options Market LLC (``NOM'')

December 4, 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 November 26, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' 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 a proposal to delay a new protocol ``Ouch 
to Trade Options'' or ``OTTO'' on The Nasdaq Options Market LLC 
(``NOM'').
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.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
    Nasdaq recently filed a rule change \3\ which adopted a new 
protocol ``Ouch to Trade Options'' or ``OTTO'' \4\ and renamed and 
modified the current OTTO protocol as ``Quote Using Orders'' or 
``QUO''.\5\ The Prior Rule Change, which is effective but not yet 
operative, renamed and modified the current OTTO protocol to ``QUO.'' 
The Exchange subsequently filed a rule change to amend Chapter VI, 
Section 6(e), titled ``Detection of Loss of Communication'' which 
describes the impact to NOM protocols in the event of a loss of a 
communication. The Exchange accounted for both the new OTTO and renamed 
and modified QUO within this rule. Similarly, the Exchange amended 
Chapter VI, Section 8, ``Nasdaq Opening and Halt Cross'' to account for 
the new OTTO and renamed and modified QUO within this rule. Finally, 
the Exchange amended Chapter VI, Section 19, ``Data Feeds and Trade 
Information'' to amend ``OTTO DROP'' to ``QUO DROP'' and noted within 
Chapter VI, Section 18(a)(1) related to Order Price Protection rule or 
``OPP'' that OPP shall not apply to orders entered through QUO.\6\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 83888 (August 20, 
2018), 83 FR 42954 (August 24, 2018) (SR-NASDAQ-2018-069) (``Prior 
Rule Change''). This rule change is immediately effective but will 
not be operative until such time as the Exchange issues an Options 
Trader Alert announcing the implementation date. This notification 
will be issued in Q4 2018. The Exchange notes that this filing 
renamed and modified the current OTTO protocol as ``QUO'' and also 
proposed the adoption of a new OTTO protocol.
    \4\ New OTTO is an interface that allows Participants and their 
Sponsored Customers to connect, send, and receive messages related 
to orders to and from the Exchange. Features include the following: 
(1) Options symbol directory messages (e.g., underlying); (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) order messages; and (6) risk protection 
triggers and cancel notifications. See NOM Rules at Chapter VI, 
Section 21(a)(i)(C).
    \5\ QUO is an interface that allows NOM Market Makers to 
connect, send, and receive messages related to single-sided orders 
to and from the Exchange. Order Features include the following: (1) 
Options symbol directory messages (e.g., underlying); (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) order messages; and (6) risk protection 
triggers and cancel notifications. Orders submitted by NOM Market 
Makers over this interface are treated as quotes. See NOM Rules at 
Chapter VI, Section 21(a)(i)(D).
    \6\ See Securities Exchange Act Release No. 84559 (November 9, 
2019), 83 FR 57774 (November 16, 2018) (SR-NASDAQ-2018-085) 
(``Subsequent Rule Change'').
---------------------------------------------------------------------------

    Both the Prior Rule Change and the Subsequent Rule Change indicated 
the aforementioned rule changes would be implemented for QUO and OTTO 
in Q4 of 2018 with the date announced via an Options Traders Alert. At 
this time, the Exchange proposes to immediately implement QUO and delay 
the introduction of new OTTO functionality until Q1 2019 by announcing 
the date of implementation via an Options Traders Alert. The Exchange 
proposes to provide for the delay of the OTTO functionality by 
inserting the following rule text at the beginning of NOM Rules at 
Chapter VI, Sections 6, 9 and 21 to make clear that OTTO functionality 
is not yet implemented: ``OTTO functionality implementation shall be 
delayed until Q1 2019. The Exchange will issue an Options Trader Alert 
notifying Participants when this functionality will be available.''
    The Exchange proposes this delay to allow the Exchange additional 
time to implement this functionality and for

[[Page 63693]]

Participants to sign-up for this new port and test with the Exchange.
Amend OTTO at Options 7
    The Exchange's current pricing at Options 7,\7\ Section 3(i)(4) 
reflects an OTTO Port Fee. The Exchange proposed to rename the OTTO 
Port Fee as ``QUO Port Fee'' to reflect the new name of the modified 
former OTTO protocol. No changes are being made to the port fee. 
Likewise, the current ``OTTO DROP Port Fee'' at Options 7, Section 
3(ii)(4) is proposed to be renamed the ``QUO DROP Port Fee.''
---------------------------------------------------------------------------

    \7\ Options 7 refers to the Exchange's new rulebook shell.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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 
delaying the OTTO functionality to allow the Exchange additional time 
to implement this functionality and for Participants to sign-up for 
this new port and test with the Exchange. QUO would be implemented to 
avoid any confusion with the new proposed protocol.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

QUO
    The Exchange's proposal to rename the current ``OTTO Port Fee'' as 
``QUO Port Fee'' and ``OTTO DROP Port Fee'' as ``QUO DROP Port Fee'' is 
consistent with the Act because the amendment will reflect the name 
change and modification as proposed in the Prior Rule Change.

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 Exchange's proposal to 
implement QUO and delay the adoption of new OTTO functionality does not 
impose an undue burden on competition. Immediately implementing the QUO 
protocol, which is the subject of an already effective rule change, 
will avoid any confusion with the implementation of the new OTTO 
protocol. Delaying the new OTTO functionality to allow the Exchange 
additional time to implement this functionality and for Participants to 
sign-up for this new port and test with the Exchange.

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 \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 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 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. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \13\ 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 asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
the waiver will allow the Exchange to immediately implement QUO and 
delay the implementation of the OTTO functionality to allow the 
Exchange additional time to implement this functionality and for 
Participants to sign-up for this new port and test with the Exchange. 
The Exchange further states that delaying the implementation of OTTO is 
consistent with the protection of investors and the public interest 
because it permits additional time for the Exchange to ensure a 
successful implementation of new OTTO. Additionally, the Exchange notes 
that implementing QUO will bring greater transparency to NOM rules. 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 as operative upon filing.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 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).
---------------------------------------------------------------------------

    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-NASDAQ-2018-097 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-NASDAQ-2018-097. 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

[[Page 63694]]

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-
NASDAQ-2018-097 and should be submitted on or before January 2, 2019.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26736 Filed 12-10-18; 8:45 am]
 BILLING CODE 8011-01-P