[Federal Register Volume 84, Number 193 (Friday, October 4, 2019)]
[Notices]
[Pages 53186-53188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21587]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87160; File No. SR-NASDAQ-2019-078]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Delay the Protocol ``Ouch To Trade Options''
September 30, 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 September 17, 2019, The Nasdaq Stock Market LLC (``Exchange'' or
``Nasdaq'') 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 delay the 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 filed a rule change \3\ which adopted a new protocol ``Ouch
to Trade Options'' or ``OTTO'' \4\ and proposed to rename and modify
the current OTTO protocol as ``Quote Using Orders'' or ``QUO.'' \5\ 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
[[Page 53187]]
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\
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\3\ See Securities Exchange Act Release No. 83888 (August 20,
2018), 83 FR 42954 (August 24, 2018) (SR-NASDAQ-2018-069) (``Prior
Rule Change''). In the Prior Rule Change the Exchange stated that it
would issue an Options Trader Alert introducing the new OTTO
protocol in Q4 of 2018.
\4\ As modified by the Prior Rule Change, 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'').
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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. The
Exchange filed a rule change implementing QUO and delaying the
introduction of the OTTO functionality until Q3 2019 by announcing the
date of implementation via an Options Traders Alert.\7\ The Exchange
further delayed the implementation of OTTO functionality until Q3
2019.\8\ At this time, the Exchange proposes to further delay the
implementation of OTTO functionality until Q2 2020. The Exchange will
issue an Options Trader Alert notifying Participants when this
functionality will be available.
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\7\ See Securities Exchange Act Release No. 84723 (December 4,
2018), 83 FR 63692 (December 11, 2018) (SR-NASDAQ-2018-097). The
Exchange proposed to immediately implement QUO as of the
effectiveness of SR-NASDAQ-2018-097 and delay the implementation of
OTTO by issuing an Options Trader Alert announcing the
implementation date in Q1 2019. The QUO implementation became
effective upon filing on November 26, 2018.
\8\ See also Securities Exchange Act Release No. 85386 (March
21, 2019), 84 FR 11597 (March 27, 2019) (SR-NASDAQ-2019-016).
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The Exchange proposes this delay 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.
2. Statutory Basis
The Exchange believes that its proposal 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 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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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. The Exchange's proposal to
delay the adoption of the OTTO functionality does not impose an undue
burden on competition. Delaying the OTTO functionality will 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
A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \12\ 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 additional time to implement this
functionality and for Participants to sign-up for this new port and
test with the Exchange and ensure a successful implementation of the
OTTO. 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.\13\
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 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).
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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-NASDAQ-2019-078 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-2019-078. 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-NASDAQ-2019-078 and
[[Page 53188]]
should be submitted on or before October 25, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21587 Filed 10-3-19; 8:45 am]
BILLING CODE 8011-01-P