[Federal Register Volume 84, Number 136 (Tuesday, July 16, 2019)]
[Notices]
[Pages 33999-34003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15028]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86346; File No. SR-GEMX-2019-08]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Relocate Rules 
From Its Current Rulebook Into Its New Rulebook Shell

July 10, 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 June 27, 2019, Nasdaq GEMX, LLC (``GEMX'' 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.
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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 relocate rules from its current Rulebook 
into its new Rulebook.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.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 purpose of this rule change is to relocate GEMX rules into the 
new Rulebook shell with some amendments to the shell.\3\ Nasdaq ISE, 
LLC (``ISE'') recently relocated its rules.\4\ GEMX proposes relocate 
its rules so the Rulebook is similar to ISE. The other Nasdaq 
affiliated markets will also relocate their Rulebooks in order to 
harmonize its rules, where applicable, across Nasdaq markets. The 
relocation and harmonization of the GEMX Rules is part of the 
Exchange's continued effort to promote efficiency and conformity of its 
rules with those of its Affiliated Exchanges. The Exchange believes 
that the placement of the GEMX Rules into their new location in

[[Page 34000]]

the shell will facilitate the use of the Rulebook by Members and 
Members of Affiliated Exchanges.
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    \3\ Previously, the Exchange added a shell structure to its 
Rulebook with the purpose of improving efficiency and readability 
and to align its rules closer to those of its five sister exchanges, 
Nasdaq BX, Inc.; Nasdaq PHLX LLC; The Nasdaq Stock Market LLC; ISE; 
and Nasdaq MRX, LLC (``Affiliated Exchanges''). The shell structure 
currently contains eight (8) Chapters which, once complete, will 
apply a common set of rules to the Affiliated Exchanges.
    \4\ See SR-ISE-2019-17 (not yet published).
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Universal Changes
    The Exchange proposes to amend the defined term ``System'' \5\ and 
replace ``trading system'' or ``system'' with the defined term 
throughout the new rules. The Exchange proposes to capitalize the 
defined term ``market maker'' within proposed Options 1, Section 
1(a)(20) and also capitalize the term throughout the Rulebook. The 
Exchange proposes to capitalize the defined term ``Member'' \6\ 
throughout the new rules where it is not already capitalized. The 
Exchange proposes to capitalize the ``t'' in the defined term 
``Exchange Transactions'' \7\ where the term is not properly 
capitalized within the Rules. The Exchange proposes to change 
references to ``Commentary'' to ``Supplementary Material'' to conform 
the term throughout the Rulebook. References to the term ``Regulatory 
Information Circular'' or ``circular'' are being amended to the updated 
term ``Options Regulatory Alert.''
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    \5\ The term ``System'' is defined at Rule 100(a)(64).
    \6\ The term ``Member'' is defined at Rule 100(a)(31).
    \7\ The term ``Exchange Transactions'' is defined at Rule 
100(a)(23).
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    The Exchange proposes to update all cross-references within the 
Rule to the new relocated rule cites. The Exchange proposes to replace 
internal rule references to simply state ``this Rule'' where the rule 
is citing itself without a more specific cite included in the Rule. For 
example, if GEMX Rule 715 refers currently to ``Rule 715'' or ``this 
Rule 715'' the Exchange will amend the phrase to simply ``this Rule.'' 
The Exchange proposes to conform numbering and lettering in certain 
rules to the remainder of the Rulebook. Finally, the Exchange proposes 
to delete any current Rules that are reserved in the Rulebook.
General 1
    The Exchange proposes to relocate certain definitions from Rule 100 
into proposed General 1, Section 1 and the remainder of the rules into 
Options 1, Section 1. The Exchange proposes to relocate definitions 
that are specific to the options product into Options 1, Section 1 and 
the more general definitions will be relocated into the General 
provisions.\8\
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    \8\ These rules are being relocated into Section 1 of the 
General Provisions: Chapter I (a)(4), (7), (10), (11) (14A), (19), 
(21), (21A), (23), (25), (26), (27), (31), (32), (49), (58), (59), 
(63) and (67).
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General 2
    The Exchange will not relocate GEMX Rules 200-203 into General 2 
Organization and Administration. The Exchange will separately file a 
proposed rule change to delete these rules. General 2 would be 
comprised of the following rules:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  Rule 204. Divisions of the Exchange.
Section 2....................  Rule 205. Participant Fees (renamed Fees,
                                Dues and Other Charges).
Section 3....................  Rule 207. Exchange's Costs of Defending
                                Legal Proceedings.
Section 4....................  Rule 309. Limitation on Affiliation
                                between the Exchange and Members.
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    Rule 208, Sales Value Fee, will be relocated into Options 7. The 
Exchange intends to locate similar rules within other Nasdaq Rulebooks 
in similar locations when it files to relocate other Affiliate Exchange 
Rulebooks in separate rule changes. The Exchange proposes to reserve 
Sections 5 and 6 within General 2.
General 3
    The Exchange proposes to relocate the following rules into General 
3, ``Membership and Access.''

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  Rule 300. Membership/Rule 301.
                                Qualification of Members (combined into
                                one rule).
Section 2....................  Rule 303. Denial of and Conditions to
                                Becoming a Member.
Section 3....................  Rule 305. Persons Associated with
                                Members.
Section 4....................  Rule 307. Documents Required of
                                Applicants and Members.
Section 5....................  Rule 302. Member Application Procedures.
Section 6....................  Rule 308. Dissolution and Liquidation of
                                Members.
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General 5
    The Exchange proposes to relocate the following rules into General 
5 Discipline:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  16. Disciplinary Jurisdiction.
Section 2....................  80. Investigations and Sanctions.
Section 3....................  90. Code of Procedure.
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    The Exchange proposes to note the rule text contained within 
Chapter 16 within General 5, Section 1 and also replicate that text 
within Options 11, Section 1 as Jurisdiction and Minor Rule Plan 
Violations are combined currently in Chapter 16 currently.
Options 1
    The Exchange proposes to rename current Options 1 from ``Options 
Definitions'' to ``General Provisions.''

[[Page 34001]]

The Exchange proposes to relocate certain definitions from Rule 100 
into proposed General 1, Section 1 and the remainder of the rules into 
Options 1, Section 1. The Exchange proposes to relocate definitions 
that are specific to the options product into Options 1, Section 1. 
Section 2 of Options 1 is being reserved.
Options 2
    The Exchange proposes to rename Options 2 from ``Options Trading 
Rules'' to ``Options Market Participants'' and relocate the following 
rules into this chapter:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
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Section 1....................  Rule 800. Registration of Market Makers.
Section 2....................  Rule 801. Designated Trading
                                Representatives.
Section 3....................  Rule 802. Appointment of Market Makers.
Section 4....................  Rule 803. Obligations of Market Makers.
Section 5....................  Rule 804. Market Maker Quotations except
                                804(h) which will be relocated into
                                Options 3.
Section 6....................  Rule 805. Market Maker Orders.
Section 7....................  Rule 807. Securities Accounts and Orders
                                of Market Makers.
Section 8....................  Rule 809. Financial Requirements for
                                Market Makers.
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    Sections 9 and 10 will be reserved. Rule 802 references to foreign 
currency options were not included in the relocated rule because 
Chapter 22 does not exist in the Rulebook.
Options 2A
    The Exchange proposes a new Options Section 2A titled ``GEMX Market 
Maker Rights'' and proposes to relocate Rule 304, ``Approval to Operate 
Multiple Memberships'' into new Section 2. The Exchange proposes to 
reserve Section 1.
Options 3
    The Exchange proposes to rename Options 3 from ``Options Market 
Participants'' to ``Options Trading Rules'' and relocate the following 
rules into this chapter:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  Rule 700. Days and Hours of Business.
Section 2....................  Rule 708. Units of Trading/Rule 709.
                                Meaning of Premium Quotes and Orders
                                (combined into one rule).
Section 3....................  Rule 710. Minimum Trading Increments.
Section 4....................  Rule 711. Acceptance of Quotes and
                                Orders, except (c) and (d).
Section 5....................  Reserved.
Section 6....................  Rule 704. Collection and Dissemination of
                                Quotations.
Section 7....................  Rule 715. Types of Orders.
Section 8....................  Rule 701. Opening.
Section 9....................  Rule 702. Trading Halts/Rule 703. Trading
                                Halts Due To Extraordinary Market
                                Volatility.
Section 10...................  Rule 713. Priority of Quotes and Orders.
Section 11...................  Rule 716. Auction Mechanisms.
Section 12...................  Rule 721. Crossing Orders.
Section 13...................  Rule 723. Price Improvement Mechanism for
                                Crossing Transactions.
Section 14...................  Reserved.
Section 15...................  Rule 714. Automatic Execution of Orders
                                (renamed Simple Order Risk Protections).
Section 16...................  Reserved.
Section 17...................  Kill Switch (relocating 711(c)).
Section 18...................  Detection of Loss of Communication
                                (relocating 711(d)).
Section 19...................  Reserved.
Section 20...................  Rule 720. Nullification and Adjustment of
                                Options Transactions including Obvious
                                Errors/Rule 720A. Erroneous Trades due
                                to System Disruptions and Malfunctions
                                (combined into one rule).
Section 21...................  Rule 706. Access to and Conduct on the
                                Exchange.
Section 22...................  Rule 717. Limitations on Orders.
Section 23...................  Rule 718. Data Feeds and Trade
                                Information.
Section 24...................  Rule 719. Transaction Price Binding.
Section 25...................  Reserved.
Section 26...................  Message Traffic Mitigation (relocating
                                Rule 804(h).
Section 27...................  Rule 705. Limitation of Liability.
------------------------------------------------------------------------

    The Exchange proposes to combine GEMX Rules 708 and 709 within 
Section 2.\9\ GEMX Rule 714 is being relocated into Options 3, Section 
15 and is being renamed from ``Automatic Execution of Orders'' to 
``Simple Order Risk Protections.'' GEMX Rules 702 and 703 are being 
combined into Section 9. The Exchange proposes to combine GEMX Rules 
720 and 720A into Section 20.\10\ The Exchange proposes to relocate 
GEMX Rule 711(c) and (d) into new separate Rules at Sections 17 and 18. 
The Exchange proposes to create a separate rule in Section 26 relocated 
from Rule 804(h) and title the rule ``Message Traffic Mitigation.''
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    \9\ The Exchange is not proposing any substantive changes in 
consolidating these rules.
    \10\ Id.
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Options 4
    The Exchange proposes to relocate rules from GEMX Chapter 5 which 
incorporates those Rules by reference to

[[Page 34002]]

Nasdaq ISE, LLC (``ISE'') Chapter 5, within Options 4 Options Listing 
Rules.
Options 4A
    The Exchange proposes to relocate rules from GEMX Chapter 20 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 20, within new proposed Options 4A, which is proposed to be 
titled ``Options Index Rules.''
Options 5
    The Exchange proposes to relocate rules from GEMX Chapter 19 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 19, within Options 5. The Exchange also proposes to rename 
Options 5 from ``Options Trade Administration'' to ``Order Protections 
and Locked and Crossed Markets.''
Options 6
    The Exchange proposes to rename Options 6 from ``Order Protections 
and Locked and Cross Markets'' to ``Options Trade Administration'' and 
relocate rules within Options 6 as follows:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  Rule 707. Authorization to Give Up.
Section 2....................  Rule 712. Submission of Orders and
                                Clearance of Transactions.
Section 3....................  Rule 806. Trade Reporting and Comparison.
Section 4....................  Rule 808. Letters of Guarantee.
------------------------------------------------------------------------

Options 6A
    The Exchange proposes to relocate rules from GEMX Chapter 10 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 10, within Options 6A. The Exchange proposes to title Options 
6A as ``Closing Transactions.''
Options 6B
    The Exchange proposes to relocate rules from GEMX Chapter 11 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 11, within Options 6B. The Exchange proposes to title Options 
6B as ``Exercises and Deliveries.''
Options 6C
    The Exchange proposes to relocate rules from GEMX Chapter 12 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 12, within Options 6B. The Exchange proposes to title Options 
6C as ``Margins.''
Options 6D
    The Exchange proposes to relocate rules from GEMX Chapter 13 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 13, within Options 6D. The Exchange proposes to title Options 
6D as ``Net Capital Requirements.''
Options 6E
    The Exchange proposes to relocate rules from GEMX Chapter 14 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 14, within Options 6D. The Exchange proposes to title Options 
6E as ``Records, Reports and Audits.''
Options 7
    The Exchange proposes to relocate Rule 208 titled ``Sales Value 
Fee'' to Options 7, Options Pricing at new proposed Section 8.
Options 9
    The Exchange proposes to relocate rules from GEMX Chapter 4 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 4, within Options 9. The Exchange proposes to title Options 9 
as ``Business Conduct.''
Options 10
    The Exchange proposes to relocate rules from GEMX Chapter 6 which 
incorporates those Rules by reference to Nasdaq ISE, LLC (``ISE'') 
Chapter 6, within Options 10. The Exchange proposes to title Options 10 
as ``Doing Business with the Public.''
Options 11
    The Exchange proposes to note the rule text contained within 
Chapter 16 within Options 11, Section 1 as Jurisdiction and Minor Rule 
Plan Violations and also replicate that rule text within General 5, 
Section 1. The text is currently combined in Chapter 16. The Exchange 
proposes to title Options 11 as ``Minor Rule Plan Violations.''
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest by bringing greater transparency to its rules 
by relocating its Rules into the new Rulebook shell together with other 
rules which have already been relocated. The Exchange's proposal is 
consistent with the Act and will protect investors and the public 
interest by harmonizing its rules, where applicable, across Nasdaq 
markets so that Members can readily locate rules which cover similar 
topics. The relocation and harmonization of the GEMX Rules is part of 
the Exchange's continued effort to promote efficiency and conformity of 
its rules with those of its Affiliated Exchanges. The Exchange believes 
that the placement of the GEMX Rules into their new location in the 
shell will facilitate the use of the Rulebook by Members. Specifically, 
the Exchange believes that market participants that are members of more 
than one Nasdaq market will benefit from the ability to compare 
Rulebooks.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange is not substantively amending rule text unless noted 
otherwise within this rule change. The renumbering, re-lettering, 
deleting reserved rules, amending cross-references and other minor 
technical changes will bring greater transparency to GEMX's Rules. The 
Exchange intends to file other rule changes to relocate Affiliated 
Exchange Rulebooks to corresponding rules into the same location in 
each Rulebook for ease of reference. The Exchange believes its proposal 
will benefit investors and the general public by increasing the 
transparency of its Rulebook and promoting easy comparisons among the 
various Nasdaq Rulebooks.

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 believes that the 
proposed amendments do not impose an undue burden on competition 
because the amendments to relocate the Rules are non-substantive. This 
rule change is intended to bring greater clarity to the Exchange's 
Rules. Renumbering, re-lettering, deleting reserved rules and

[[Page 34003]]

amending cross-references will bring greater transparency to GEMX's 
Rules.

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) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ 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 requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. As the 
proposed rule change raises no novel issues and is largely 
organizational, 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 operative upon 
filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission also 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 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 change 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-GEMX-2019-08 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-GEMX-2019-08. 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-GEMX-2019-08, and should be submitted on 
or before August 6, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15028 Filed 7-15-19; 8:45 am]
BILLING CODE 8011-01-P