[Federal Register Volume 85, Number 59 (Thursday, March 26, 2020)]
[Notices]
[Pages 17152-17155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06297]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88435; File No. SR-MRX-2020-06]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Related to Complex
Orders
March 20, 2020.
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 9, 2020, 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 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 amend Options 3, Section 7, ``Types of
Orders,'' and Options 3, Section 14, ``Complex Orders'' to permit the
Exchange to determine the availability of order types and time-in-force
provisions and to add other existing order types to the list of single-
leg and Complex Order types.
The Exchange requests that the Commission waive the 30-day
operative delay period contained in Exchange Act Rule 19b-
4(f)(6)(iii).\3\
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\3\ 17 CFR 240.19b-4(f)(6)(iii).
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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 Exchange proposes to amend Options 3, Section 7, ``Types of
Orders,'' and Options 3, Section 14, ``Complex Orders'' to: (1) Provide
that the Exchange may determine which order types and times-in-force
provisions are available on a class or system basis; and (2) to add
other existing order types to the list of single-leg and Complex Order
types.
The Exchange proposes to add a sentence to Options 3, Section 14,
Complex Orders, which states, ``The Exchange may determine to make
certain order types and/or times-in-force available on a class or
System basis.'' This sentence exists today within Nasdaq ISE, LLC
(``ISE'') Options 3, Section 7, ``Types of Orders.'' \4\ This proposed
change is based on the rules of ISE Options 3, Section 7 and the rules
of Cboe BZX Exchange, Inc. (``BZX Options''),\5\ Rule 21.1, Cboe EDGX
Exchange, Inc. (``EDGX Options'') Rule 21.1(d),\6\ Cboe Exchange, Inc.
(``Cboe'') Rule 5.6(a) \7\ and Cboe C2 Exchange, Inc. (``C2'') Rule
6.10(a).\8\
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\4\ See Securities Exchange Act Release No. 88294 (February 26,
2020), 85 FR 12629 (March 3, 2020) (SR-ISE-2020-07).
\5\ BZX Options Rule 21.1(d), Definitions, provides ``The term
`Order Type' shall mean the unique processing prescribed for
designated orders, subject to the restrictions set forth in
paragraph (l) below with respect to orders and bulk messages
submitted through bulk ports, that are eligible for entry into the
System. Unless otherwise specified in the Rules or the context
indicates otherwise, the Exchange determines which of the following
Order Types are available on a class or system basis.'' BZX Options
Rule 21.1(f), Definitions, provides ``The term `Time in Force' shall
mean the period of time that the System will hold an order, subject
to the restrictions set forth in paragraph (l) below with respect to
bulk messages submitted through bulk ports, for potential execution.
Unless otherwise specified in the Rules or the context indicates
otherwise, the Exchange determines which of the following Times-in-
Force are available on a class or system basis.''
\6\ EDGX Options Rule 21.1(d), Definitions, provides, ``The term
`Order Type' shall mean the unique processing prescribed for
designated orders, subject to the restrictions set forth in
paragraph (j) below with respect to orders and bulk messages
submitted through bulk ports, that are eligible for entry into the
System. Unless otherwise specified in the Rules or the context
indicates otherwise, the Exchange determines which of the following
Order Types are available on a class, system, or trading session
basis. Rule 21.20 sets forth the Order Types the Exchange may make
available for complex orders.'' EDGX Options Rule 21.1(f),
Definitions, provides, ``The term `Time in Force' means the period
of time that the System will hold an order, subject to the
restrictions set forth in paragraph (j) below with respect to bulk
messages submitted through bulk ports, for potential execution.
Unless otherwise specified in the Rules or the context indicates
otherwise, the Exchange determines which of the following Times-in-
Force are available on a class, system, or trading session basis.
Rule 21.20 sets forth the Times-in-Force the Exchange may make
available for complex orders.''
\7\ Cboe Rule 5.6, Order Types, Order Instructions, and Times-
in-Force at subsection (a), Availability, provides, ``Unless
otherwise specified in the Rules or the context indicates otherwise,
the Exchange determines which of the following order types, Order
Instructions, and Times-in-Force are available on a class, system,
or trading session basis.''
\8\ C2 Rule 6.10, Availability of Orders, at subsection (a)
provides, ``Availability. Unless otherwise specified in the Rules or
the context indicates otherwise, the Exchange determines which of
the following order types, Order Instructions, and Times-in-Force
are available on a class, system, or trading session basis. Rule
6.13 sets forth the order types, Order Instructions, and Times-in-
Force the Exchange may make available for complex orders.''
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The purpose of this rule change is to provide the Exchange with
appropriate flexibility to address different trading characteristics,
market models, and the investor base of each class, as well as to
handle any System issues that may arise and require the Exchange to
temporarily not accept certain order types. This rule is consistent
with BZX Options Rule 21.1(d) and (f), EDGX Options Rules 21.1(d) and
(f), Cboe Rule 5.6(a) and C2 Rule 6.10(a), each of which provides these
exchanges with substantially the same flexibility. This rule text is
also consistent with ISE Rules at Options 3, Section 7.
This rule change will not permit the Exchange to discriminate among
market
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participants when determining which order types and times-in-force
provisions are available on a class or system basis. The Exchange's
proposal allows the Exchange to make certain order types and time-in-
force, respectively, available on a class or System basis uniformly for
all market participants. For example, if the Exchange determined to
make a certain order type or time-in-force unavailable, that order type
or time-in-force would not be available for any market participant.
The Exchange would issue an Options Trader Alert to provide
notification to Participants that a change is being made to the
availability or unavailability of a certain order type or time-in-
force. The Exchange notes that in the event of System disruption, the
Exchange would notify Participants of the unavailability of any order
type and would also provide notification when that order type was
available once the disruption was resolved.
The Exchange also proposes to add to Options 3, Section 7 at
proposed (v)-(y) and Options 3, Section 14(b) at proposed (16), (17)
and (18), references to various existing order types that may be
entered into various auction mechanisms on MRX. Specifically, the
Exchange proposes to add a reference to both single-leg and Complex
Orders entered into the Price Improvement Mechanism, Facilitation
Mechanism and Solicited Order Mechanism. These order types exist today
within the MRX Rules, however, unlike other order types, they are not
mentioned within Options 3, Sections 7 or 14, which list the single-leg
and Complex Orders, respectively, available for trading on MRX.
Further, the Exchange also proposes to add the Block Order type to
Options 3, Section 7 to complete the list of available order types that
may be entered into an auction mechanism. The Exchange proposes to add
the following rule text into Options 3, Section 7:
(v) Block Order. A Block Order is an order entered into the
Block Order Mechanism as described in Options 3, Section 11(a).
(w) Facilitation Order. A Facilitation Order is an order entered
into the Facilitation Mechanism as described in Options 3, Section
11(b).
(x) SOM Order. A SOM Order is an order entered into the
Solicited Order Mechanism as described in Options 3, Section 11(d).
(y) A PIM Order. A PIM Order is an order entered into the Price
Improvement Mechanism as described in Options 3, Section 13(a).
The Exchange proposes to add the following rule text into Options
3, Section 14:
(16) Complex Facilitation Order. A Complex Facilitation Order is
an order entered into the Complex Facilitation Mechanism as
described in Options 3, Section 11(c).
(17) Complex SOM Order. A Complex SOM Order is an order entered
into the Complex Solicited Order Mechanism as described in Options
3, Section 11(e).
(18) Complex PIM Order. A Complex PIM Order is an order entered
into the Complex Price Improvement Mechanism as described in Options
3, Section 13(e).
The Exchange believes the addition of this rule text will make
clear that these order types are available.
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. The proposed rule change would
provide the Exchange with the flexibility to determine the availability
of order types and times-in-force on a class and System basis. This
flexibility would remove impediments to and perfect the mechanism of a
free and open market and a national market system by allowing the
Exchange to address the specific characteristics of different classes
and different market conditions. The Exchange believes that this
proposal serves to protect investors by ensuring that the appropriate
order types and times-in-force are tailored to the different class
characteristics and by mitigating risks associated with changing market
conditions.\11\
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ The Exchange may also determine to temporarily not offer an
order type or a time-in-force based on a System issue.
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The Exchange would issue a notification to Participants to provide
them notice that a change is being made to the availability or
unavailability of a certain order type or time-in-force before
implementing the change. In the event of a System issue, the Exchange
believes that it is consistent with the Act to temporarily not offer a
certain order type to ensure the proper executions of transactions
within the System thereby protecting investors and the public interest.
The Exchange anticipates that exercising its ability to temporarily not
offer order types would be infrequent.
This provision was added to all 6 Nasdaq affiliated markets for the
simple markets \12\ and therefore will ensure consistency between the
Exchange rules and that of its affiliates and would remove impediments
to and perfect the mechanism of a free and open market and promote just
and equitable principles of trade, as well as foster cooperation and
coordination with persons engaged in facilitating transactions in
securities. The proposed rule change provides the Exchange with
substantially the same flexibility currently permitted on BZX Options,
EDGX Options, Cboe and C2 as well as ISE.\13\ The Exchange believes
that this consistency promotes market participants' understanding of
the rules across the multiple Nasdaq affiliated exchanges and promotes
a fair and orderly national options market system. This proposal does
not present any novel or unique issues because other exchanges have
substantially similar rules.\14\
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\12\ See Nasdaq Phlx LLC, The Nasdaq Options Market, LLC, Nasdaq
BX, Inc., ISE, Nasdaq GEMX, LLC and MRX Rules at Options 3, Section
7.
\13\ See notes 4-8 above.
\14\ Id.
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The Exchange's proposal is not unfairly discriminatory because the
Exchange will not discriminate among market participants when
determining which order types and times-in-force provisions are
available on a class or system basis. The Exchange's proposal allows
the Exchange to make certain order types and time-in-force,
respectively, available on a class or System basis uniformly for all
market participants. For example, if the Exchange determined to make a
certain order type or time-in-force unavailable, that order type or
time-in-force would not be available for any market participant.
The proposal to add a reference to all existing order types that
may be entered into auctions into Options 3, Sections 7 and 14 is
consistent with the Act. The Exchange believes the addition of the
Block Order type, Facilitation Order type, SOM Order type and PIM Order
types into Options 3, Section 7 and the addition of the Complex
Facilitation Order type, Complex SOM Order type and Complex PIM Order
type into Options 3, Section 14 will make clear to market participants
the various types of single-leg order and Complex Orders that may be
transacted on MRX. The descriptions of these order types merely point
at the existing mechanisms.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose
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any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
the proposed rule change will impose any burden on intra-market
competition, as the proposed rule change will apply in the same manner
to all order types and/or times-in-force, as the Exchange determines,
for all Participants. The Exchange does not believe the proposed rule
change will impose any burden on inter-market competition because the
proposed change provides the Exchange with substantially the same
flexibility as the rules of other exchanges.\15\ Therefore, the
Exchange believes that the proposed rule change will allow it to make
determinations regarding the availability of orders that will enable it
to remain competitive as markets and market conditions evolve.
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\15\ Id.
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The Exchange's proposal does not impose an undue burden on
competition because the Exchange's proposal will uniformly make certain
order types and time-in-force, respectively, available on a class or
System basis for market participants.
The proposal to add the Block Order type, Facilitation Order type,
SOM Order type and PIM Order types into Options 3, Section 7 and the
Complex Facilitation type, Complex SOM Order type and Complex PIM Order
type into Options 3, Section 14b does not impose an undue burden on
competition. The addition of these order types would complete the list
of single-leg and Complex Order types, which are available to all
market participants, and are merely being referenced within the order
type rules for greater transparency.
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)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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 under Rule 19b-4(f)(6) \20\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission may
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 proposed
rule change may become operative immediately The Exchange believes that
the proposed rule change would provide the Exchange with the
flexibility to determine the availability of order types and times-in-
force on a class and System basis, allowing the Exchange to address the
specific characteristics of different classes and different market
conditions. According to the Exchange, this would ensure that the
appropriate order types and times-in-force are tailored to the
different class characteristics and mitigate risks associated with
changing market conditions. The Exchange also believes that referencing
all single-leg and Complex Order types makes clear which order types
are available to all market participants. Moreover, the Exchange
represents that the proposed rule change will apply in the same manner
to all order types and/or times-in-force, as the Exchange determines,
for all Participants, and provides the Exchange with substantially the
same flexibility as the rules of other exchanges. Lastly, the Exchange
argues that waiver of the 30-day operative delay will permit the
Exchange to immediately use this ability to make certain order types
available and unavailable, as well as enable the Exchange to remain
competitive as markets and market conditions evolve. For these reasons,
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 30-day operative delay
and designates the proposal operative upon filing.\22\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ For purposes only of waiving the 30-day 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 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-MRX-2020-06 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-MRX-2020-06. 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
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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-MRX-
2020-06, and should be submitted on or before April 16, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06297 Filed 3-25-20; 8:45 am]
BILLING CODE 8011-01-P