[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10367-10369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05214]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85315; File No. SR-ISE-2019-06]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Extend the
Delay for Re-Introduction of Legging Functionality for Stock-Option
Orders
March 14, 2019.
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 March 11, 2019, Nasdaq ISE, LLC (``ISE'' or the ``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 extend the delay for re-introduction of
legging functionality for Stock-Option 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
[[Page 10368]]
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 has filed a proposal requesting the removal of the
legging functionality for Stock-Option Orders.\3\ At this time, the
Exchange proposes to further extend the delay for re-introduction of
legging functionality for Stock-Option Orders until the earlier of the
implementation of SR-ISE-2019-05 or May 1, 2019. This extension is
solely intended to provide time for SR-ISE-2019-05 to become operative.
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\3\ SR-ISE-2019-05. The legging functionality allows Members to
leg into the regular market where they may trade against bids and
offers for the individual legs pursuant to Rule 722(d)(2) and (3)
and Supplementary Material .01 and .02 to Rule 722 (``legging'').
The legging functionality will continue to be available for complex
options orders. See Rule 722(c)(2).
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In 2017, ISE underwent a replatform to move its functionality to
INET.\4\ At that time, ISE proposed to delay the re-introduction of
legging functionality for Stock-Option Orders for one year from the
date of filing.\5\ Subsequently, ISE filed to delay the re-introduction
of legging functionality until March 21, 2019.\6\ The Exchange provided
notice to Members on two occasions \7\ with respect to delaying the
reintroduction of the legging functionality for Stock-Option Orders. In
addition, the Exchange has notified Members that it will not offer this
functionality going forward.\8\
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\4\ INET is the proprietary core technology utilized across
Nasdaq's global markets. The migration of ISE to the Nasdaq INET
architecture has resulted in higher performance, scalability, and
more robust architecture.
\5\ See Securities Exchange Act Release No. 80316 (March 27,
2017) 82 FR 16084 (March 31, 2017) (SR-ISE-2017-28).
\6\ See Securities Exchange Act Release No. 82961 (March 28,
2018), 83 FR 14302 (April 3, 2018) (SR-ISE-2018-21).
\7\ See Options Traders Alerts 2016-8 and 2016-10 (these prior
option trade alerts are no longer publically available because the
content is obsolete. The alerts were also superseded by Options
Trader Alert 2019-3).
\8\ See Options Trader Alert 2019-3.
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Today, because of the delay in reintroducing legging functionality,
Stock-Option Orders entered on ISE are not automatically executed
against bids and offers on the Exchange for the individual legs
pursuant to Rule 722(b)(3)(ii)-(iii) and Supplementary Material .02 to
Rule 722. Stock-Option Orders continue to execute against other Stock-
Option Orders in the complex order book, thereby providing an
opportunity for Members to have their Stock-Option Orders executed on
the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ 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. In particular, the Exchange believes
that the proposed rule change is consistent with the protection of
investors and the public interest because it would provide additional
time for ISE' proposal to eliminate the legging functionality for
Stock-Option Orders to become operative.\11\ The Exchange has notified
Members that it will not offer this functionality going forward.\12\
Members can continue to submit these orders to the Exchange where they
can be executed against other Stock-Option Orders on the complex order
book. No Members have notified the Exchange of any impact on execution
quality as a result of the delayed implementation of legging
functionality for Stock-Option Orders, and therefore the Exchange does
not believe that extending the delay will have a significant impact on
market participants. The Exchange proposes to extend the delay for re-
introduction of legging functionality for Stock-Option Orders until the
earlier of the implementation of SR-ISE-2019-05 or May 1, 2019.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ SR-ISE-2019-05.
\12\ See Options Trader Alert 2019-3.
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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
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange does
not believe that the proposed delay will impose any significant burden
on intra-market competition because legging for Stock-Option Orders
will be uniformly delayed for all Members. Similarly, the Exchange does
not believe that the proposed delay will impose any significant burden
on inter-market competition as it does not impact the ability of other
markets to offer or not offer competing functionality.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
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; 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) of the Act and Rule 19b-4(f)(6) thereunder.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 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 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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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. In its filing with the
Commission, the Exchange has asked the Commission to waive the 30-day
operative delay to allow the Exchange to extend the delay for re-
introducing the legging
[[Page 10369]]
functionality for Stock-Option Orders until the earlier of the
implementation of SR-ISE-2019-05 or May 1, 2019. ISE notes that without
a waiver of the operative delay, ISE would be required to re-introduce
the legging functionality for Stock-Option Orders until SR-ISE-2019-05
becomes operative. The Commission believes that waiving the operative
delay is consistent with the protection of investors and the public
interest because it will eliminate the need for ISE to re-introduce the
legging functionality for Stock-Option Orders until SR-ISE-2019-05,
which eliminates the legging functionality for Stock-Option Orders,
becomes operative. Accordingly, the Commission waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the operative delay, the
Commission has 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 such 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 under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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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-ISE-2019-06 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-2019-06. 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 such 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-2019-06, and should be submitted on
or before April 10, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05214 Filed 3-19-19; 8:45 am]
BILLING CODE 8011-01-P