[Federal Register Volume 84, Number 151 (Tuesday, August 6, 2019)]
[Notices]
[Pages 38319-38321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16720]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86535; File No. SR-MRX-2019-16]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 2
(Options Market Participants) and Options 3 (Options Trading Rules)
Relating to Certain Order Types
July 31, 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 July 24, 2019, Nasdaq MRX, LLC (``MRX'' 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 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 amend Options 2 (Options Market
Participants) and Options 3 (Options Trading Rules) relating to certain
order types.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaqmrx.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 the proposed rule change is amend Options 2 (Options
Market Participants) and Options 3 (Options Trading Rules) relating to
certain order types. Each change is described in more detail below.
Stopped Orders
The Exchange proposes to amend its rules to remove Stopped Orders
as an order type. A Stopped Order is a limit order that meets the
requirements of Options 5, Section 2(b)(8).\3\ As provided in Options
5, Section 2(b)(8), a ``stopped order'' is defined as an order for
which, at the time of receipt for the order, a Member had guaranteed an
execution at no worse than a specified price, where: (i) The stopped
order was for the account of a Customer; (ii) the Customer agreed to
the specified price on an order-by-order basis; and (iii) the price of
the Trade-Through was, for a stopped buy order, lower than the national
Best Bid in the options series at the time of execution, or, for a
stopped sell order, higher than the national Best Offer in the options
series at the time of execution. To execute Stopped Orders, Members
must enter them into the Facilitation Mechanism or Solicited Order
Mechanism pursuant to Options 3, Section 11.\4\
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\3\ See Options 3, Section 7(b)(5).
\4\ Stopped orders were originally introduced on the Exchange as
a Trade-Through exception under the Options Order Protection and
Locked/Crossed Market Plan (the ``Plan''). MRX adopted rules to
implement the Trade-Through exception for stopped orders as an order
type. See Securities Exchange Act Release No. 76998 (January 29,
2016), 81 FR 6066 (February 4, 2016) (File No. 10-221).
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Due to a lack of demand for Stopped Orders, the Exchange plans to
decommission the functionality supporting this order type.\5\ To
reflect this elimination, the Exchange proposes to delete all
references to Stopped Orders as follows:
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\5\ No member has used this order type since the Exchange's
previous trading system migrated over to Nasdaq INET technology in
2017.
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Options 2, Section 6(a), which currently allows Market
Makers to enter all order types in the options classes to which they
are appointed, except for Stopped Orders, Reserve Orders, and Customer
Cross Orders.
Options 3, Section 7(b)(5), which defines a Stopped Order.
The Exchange proposes to implement the amendments relating to
Stopped Orders by November 1, 2019.
[[Page 38320]]
All-or-None Orders
The Exchange also proposes to amend Options 3, Section 8 (Opening)
to remove specific references to the manner in which All-Or-None Orders
\6\ (``AONs'') will be treated in the Exchange's opening process. The
Exchange previously amended its rules to provide that an AON may only
be entered into the System with a time-in-force designation of
Immediate-Or-Cancel,\7\ and deleted related rule text that described an
AON as persisting in the Exchange's order book.\8\ The Exchange,
however, inadvertently did not remove such AON references from the
opening process rule in Options 3, Section 8. At the time the
Exchange's opening process was adopted, AONs were not restricted and
could trade as a limit or market order to be executed in its entirety
or not at all.\9\ With the amendments in SR-MRX-2017-02, an AON does
not persist in the order book and is therefore treated the same as any
other Immediate-or-Cancel Order. As such, the carve-outs specified in
Section 8(b), (g) and (j)(6) are unnecessary since an All-or-None Order
would execute immediately or cancel similar to other orders which trade
in the same manner. The Exchange believes removing these references
will eliminate confusion.
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\6\ An All-Or-None Order is a limit or market order that is to
be executed in its entirety or not at all. An All-Or-None Order may
only be entered as an Immediate-or-Cancel Order. See Options 3,
Section 7(c).
\7\ An Immediate-Or-Cancel Order is a limit order that is to be
executed in whole or in part upon receipt. Any portion not so
executed is to be treated as cancelled. See Options 3, Section
7(b)(3). See Securities Exchange Act Release No. 81204 (July 25,
2017), 82 FR 35557 (July 31, 2017) (SR-MRX-2017-02).
\8\ See Securities Exchange Act Release No. 82129 (November 20,
2017), 82 FR 56084 (November 27, 2017) (SR-MRX-2017-24).
\9\ See Securities Exchange Act Release No. 80937 (June 15,
2017), 82 FR 28113 (June 20, 2017) (SR-MRX-2017-01).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ 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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that removing Stopped Orders as an order type
is consistent with the Act because it would simplify the functionality
available on the Exchange and reduce the complexity of its order types.
The Exchange's affiliated options markets, Nasdaq BX (``BX''), The
Nasdaq Options Market (``NOM''), Nasdaq PHLX (``Phlx'') and Nasdaq ISE,
LLC do not offer stopped orders as an order type.
The Exchange also believes that it is consistent with the Act to
remove unnecessary and confusing references to AONs in the opening rule
set forth in Options 3, Section 8 as AONs will now immediately trade or
cancel. The Exchange originally specified the manner in which AONs
would trade in the opening because at the time the opening process was
adopted, this order type traded differently as compared to other order
types. That distinction has become unnecessary because AONs trade the
same as other Immediate-or-Cancel Orders. Updating Options 3, Section 8
to remove an unnecessary and inaccurate distinction will protect
investors and the public interest by clarifying the rule.
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 proposed rule change would
allow the Exchange to remove an order type that no Member uses today,
and eliminate unnecessary and inaccurate references to AONs within its
opening rule, thereby making clear the order types available for
trading on the Exchange and reducing potential confusion.
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 \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 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 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 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-MRX-2019-16 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-MRX-2019-16. 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
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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-MRX-2019-16 and should be
submitted on or before August 27, 2019.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-16720 Filed 8-5-19; 8:45 am]
BILLING CODE 8011-01-P