[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Notices]
[Pages 81225-81237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27483]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90622; File No. SR-NASDAQ-2020-083]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Options 1, Section 1; Options 2, Section 5; Options 3, Sections 
5, 7, 10, 15 and 23

December 9, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 81226]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 30, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' 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 the rules of The Nasdaq Options 
Market LLC (``NOM'') at Options 1, Section 1 (Definitions); Options 2, 
Section 5 (Market Maker Quotations); Options 3, Section 5 (Entry and 
Display of Orders); Options 3, Section 7 (Types of Orders and Order and 
Quote Protocols); Options 3, Section 10 (Order Book Allocation); 
Options 3, Section 15 (Risk Protections); and Options 3, Section 23 
(Data Feeds and Trade Information).
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 NOM Rules at Options 1, Section 1 
(Definitions); Options 2, Section 5 (Market Maker Quotations); Options 
3, Section 5 (Entry and Display of Orders); Options 3, Section 7 (Types 
of Orders and Order and Quote Protocols); Options 3, Section 10 (Order 
Book Allocation); Options 3, Section 15 (Risk Protections); and Options 
3, Section 23 (Data Feeds and Trade Information). Each change is 
described below.
Options 1, Section 1
    The Exchange proposes to amend the definition of ``Public 
Customer'' to conform to Nasdaq Phlx LLC's (``Phlx'') definition at 
Options 1, Section 1(b)(46). The Exchange believes that making clear 
that a Public Customer could be a person or entity and clarifying that 
a Public Customer is not a Professional, as defined within Options 1, 
Section (a)(47),\3\ will make clear what it meant by that term. Today, 
a Public Customer is not a Professional. In order to properly represent 
orders entered on the Exchange, Participants are required to indicate 
whether orders are ``Professional Orders.'' To comply with this 
requirement, Participants are required to review their Public 
Customers' activity on at least a quarterly basis to determine whether 
orders, which are not for the account of a broker-dealer, should be 
represented as Public Customer Orders or Professional Orders.\4\ A 
Public Customer may be a Professional, provided they meet the 
requirements specified within NOM Options 1, Section 1(a)(47). If the 
Professional definition is not met, the order is treated as a Public 
Customer order.
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    \3\ NOM Options 1, Section 1(a)(47) provides that, ``The term 
``Professional'' means any person or entity that (i) is not a broker 
or dealer in securities, and (ii) places more than 390 orders in 
listed options per day on average during a calendar month for its 
own beneficial account(s). A Participant or a Public Customer may, 
without limitation, be a Professional. All Professional orders shall 
be appropriately marked by Participants.''
    \4\ Participants conduct a quarterly review and make any 
appropriate changes to the way in which they are representing orders 
within five days after the end of each calendar quarter. While 
Participants only will be required to review their accounts on a 
quarterly basis, if during a quarter the Exchange identifies a 
customer for which orders are being represented as Public Customer 
Orders but that has averaged more than 390 orders per day during a 
month, the Exchange will notify the Participant and the Participant 
will be required to change the manner in which it is representing 
the customer's orders within five days.
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    The Exchange also proposes to remove a sentence within Options 1, 
Section 1(a)(47) which provides, ``A Participant or a Public Customers 
may, without limitation, be a Professional.'' This sentence is 
confusing, unnecessary, and adds no information to this defined term. 
By way of comparison, Phlx Options 1, Section 1(b)(46) does not contain 
a similar sentence and that sentence was recently removed from Nasdaq 
BX, Inc.'s (``BX'') Rules.\5\ The Exchange adopted a Professional 
designation in 2010 \6\ and has differentiated Public and Professional 
customers since that time.
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    \5\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
    \6\ See Securities Exchange Act Release No. 63028 (October 1, 
2010), 75 FR 62443 (October 8, 2010) (SR-NASDAQ-2010-099) (Order 
Approving a Proposed Rule Change To Adopt a Definition of 
Professional and Require That All Professional Orders Be 
Appropriately Marked).
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    The Exchange also proposes to remove a sentence, within Options 3, 
Section 10(a)(1)(C)(i), which provides that a Public Customer order 
does not include a Professional order. Indicating that a Public 
Customer order is not a Professional Order is no longer necessary 
because of the proposed definition for Public Customer. Today, the 
definition of a Public Customer does not explicitly exclude a 
Professional. The language that the Exchange proposes to delete 
currently indicates that Professionals would not be treated the same as 
a Public Customer in terms of priority and, therefore, would not 
receive the same allocation that is reserved for Public Customer 
orders. Since NOM is amending the definition of a Public Customer to 
explicitly exclude Professionals, the language in the allocation rule 
is no longer necessary to distinguish these two types of market 
participants.
Bid/Ask Differentials
    Currently, NOM Market Maker intra-day quoting requirements, within 
Options 2, Section 5(d)(2), provide,

    Bid/ask Differentials (Quote Spread Parameters). Options on 
equities (including Exchange-Traded Fund Shares), and on index 
options must be quoted with a difference not to exceed $5 between 
the bid and offer regardless of the price of the bid, including 
before and during the opening. However, respecting in-the-money 
series where the market for the underlying security is wider than 
$5, the bid/ask differential may be as wide as the spread between 
the national best bid and offer in the underlying security. The 
Exchange may establish differences other than the above for one or 
more series or classes of options.

The Exchange proposes to amend NOM Options 2, Section 5(d)(2) to add 
the words ``Intra-Day'' before the title ``Bid/ask Differentials (Quote 
Spread Parameters)'' to make clear that these requirements are intra-
day. Also, the Exchange proposes to amend this paragraph to remove the 
phrase, ``including before and during the opening.'' The bid/ask 
differentials, within NOM Options 2, Section 5(d)(2), will continue to 
apply intra-day. This is consistent with the Exchange's existing 
practice. Today, the bid/ask differentials applicable to the opening 
are noted

[[Page 81227]]

within Options 3, Section 8(a)(6).\7\ As noted within the rule, NOM 
publishes its specified bid/ask differential on its system settings 
page.\8\ The bid/ask differentials noted for the Valid Width NBBO 
within the opening provide for quotations with a difference that does 
not exceed $5 between the bid and offer regardless of the price of the 
bid. It is not necessary to discuss the opening bid/ask differentials 
within Options 2, Section 5 as those differentials are specifically 
noted within the opening rule.
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    \7\ NOM Options 3, Section 8(a)(6) provides, ``Valid Width 
National Best Bid or Offer'' or ``Valid Width NBBO'' shall mean the 
combination of all away market quotes and any combination of NOM-
registered Market Maker orders and quotes received over the QUO or 
SQF Protocols within a specified bid/ask differential as established 
and published by the Exchange. The Valid Width NBBO will be 
configurable by underlying, and tables with valid width 
differentials will be posted by Nasdaq on its website. Away markets 
that are crossed will void all Valid Width NBBO calculations. If any 
Market Maker orders or quotes on NOM are crossed internally, then 
all such orders and quotes will be excluded from the Valid Width 
NBBO calculation.''
    \8\ NOM's System Settings page is located at: https://www.nasdaq.com/docs/2020/07/02/NOM_SystemSettings.pdf.
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Options 3, Section 5
    The Exchange proposes to amend Options 3, Section 5(c) to add 
additional rule text similar to Phlx Options 3, Section 5(c).\9\ NOM's 
current Options 3, Section 5(c) states, ``The System automatically 
executes eligible orders using the Exchange's displayed best bid and 
offer (``BBO'') or the Exchange's non-displayed order book (``internal 
BBO'').'' The Exchange proposes to state, ``The System automatically 
executes eligible orders using the Exchange's displayed best bid and 
offer (``BBO'') or the Exchange's non-displayed order book (``internal 
BBO'') if the best bid and/or offer on the Exchange has been repriced 
pursuant to subsection (d) below.'' Today, NOM re-prices certain orders 
to avoid locking and crossing away markets, consistent with its Trade-
Through Compliance and Locked or Crossed Markets obligations.\10\ 
Orders which lock or cross an away market automatically re-price one 
minimum price improvement inferior to the original away best bid/offer 
price to one minimum trading increment away from the new away best bid/
offer price or its original limit price.\11\ The re-priced order is 
displayed on OPRA. The order remains on NOM's Order Book and is 
accessible at the non-displayed price. For example, a limit order may 
be accessed on NOM by a Participant if the limit order is priced better 
than the NBBO. The Exchange believes that the addition of this rule 
text will provide additional clarity.
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    \9\ Phlx has an All-or-None Order type that is non-displayed. 
See Options 3, Section 7(b)(5). Phlx Options 3, Section 5(c) 
accounts for this non-displayed order on the order book. NOM has a 
Price Improving Order is already described within Options 3, Section 
5(c). A Price Improving Order on NOM displays differently than 
Phlx's All-Or-None Order and therefore is described differently 
within Options 3, Section 5(c). Otherwise, NOM has no other non-
displayed order types.
    \10\ NOM Options 3, Section 5(d) provides, ``An order will not 
be executed at a price that trades through another market or 
displayed at a price that would lock or cross another market. An 
order that is designated by the member as routable will be routed in 
compliance with applicable Trade-Through and Locked and Crossed 
Markets restrictions. An order that is designated by a member as 
non-routable will be re-priced in order to comply with applicable 
Trade-Through and Locked and Crossed Markets restrictions. If, at 
the time of entry, an order that the entering party has elected not 
to make eligible for routing would cause a locked or crossed market 
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current 
national best bid (for offers) and displayed at one minimum price 
variance above (for offers) or below (for bids) the national best 
price.''
    \11\ See Options 5, Section 4 (Order Routing), which describes 
the repricing of orders for both routable and non-routable orders 
within Options 5, Section 4(a)(iii)(A), (B) and (C).
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Options 3, Section 7
    The Exchange proposes to amend the Cancel-Replacement Order, within 
Options 3, Section 7(a)(1). By way of background with respect to 
cancelling and replacing an order, a Participant has the option of 
either submitting a cancel order and then separately submitting a new 
order, which serves as a replacement of the original order, in two 
separate messages, or submitting a single cancel and replace order in 
one message (``Cancel-Replacement Order''). Submitting a cancel order 
and then separately submitting a new order will not retain the priority 
of the original order.
    Currently, the rule text for Cancel-Replacement Order provides, 
``Cancel-Replacement Order shall mean a single message for the 
immediate cancellation of a previously received order and the 
replacement of that order with a new order with new terms and 
conditions. If the previously placed order is already filled partially 
or in its entirety, the replacement order is automatically canceled or 
reduced by the number of contracts that were executed. The replacement 
order will not retain the priority of the cancelled order except when 
the replacement order reduces the size of the order and all other terms 
and conditions are retained.'' The Exchange proposes to replace the 
words ``shall mean'' with ``is'' and remove the final sentence of the 
rule text.\12\ The Exchange proposes to add a new sentence to the end 
of the rule which provides, ``The replacement order will retain the 
priority of the cancelled order, if the order posts to the Order Book, 
provided the price is not amended, and the size is not increased.'' 
Unlike the sentence proposed for deletion, the proposed sentence states 
in the affirmative the conditions under which the Cancel-Replacement 
Order will retain priority. Price and size are the terms that will 
determine if the Cancel-Replacement Order retains its priority, as is 
the case today, other terms and conditions do not amend the priority of 
the Cancel-Replacement Order.
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    \12\ The final sentence of current NOM Options 3, Section 
7(a)(1) provides, ``The replacement order will not retain the 
priority of the cancelled order except when the replacement order 
reduces the size of the order and all other terms and conditions are 
retained.''
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    The Exchange is not amending the current System functionality of a 
Cancel-Replacement Order with respect to the terms that will cause the 
order to lose priority. Today, and with the proposed change, if a 
Participant does not change or increase the size of the order, it would 
not trigger a loss in priority. Options 3, Section 7(a)(1) states only 
if the size of the order were reduced would a loss of priority 
occur.\13\ The proposed rule reverses the phrasing in the current rule 
and, instead, describes changes to priority when size is increased. 
Priority is retained if the size of the order does not change or is not 
increased. The rule is intended to provide transparency regarding 
changes to a Cancel-Replacement Order which would trigger a loss in 
priority. Today, and with the proposal, the price of the order may not 
be changed when submitting a Cancel-Replacement Order; that would be a 
new order. A similar change was recently made to BX's Cancel-
Replacement Order.\14\
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    \13\ Options 3, Section 7(a)(1) provides, ``The replacement 
order will not retain the priority of the cancelled order except 
when the replacement order reduces the size of the order and all 
other terms and conditions are retained.''
    \14\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
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    The Exchange proposes to amend ``Limit Orders,'' within Options 3, 
Section 7(a)(2). The Exchange proposes to style ``Limit Orders'' in the 
singular and change ``are'' to ``is an'' and ``orders'' to ``order.'' A 
Limit Order on NOM operates in the same manner as a Limit Order on BX. 
The Exchange proposes to conform the rule text of NOM's Limit Order to 
BX Options 3, Section 7(a)(3) by adding a sentence describing 
marketable limit orders. BX recently amended its rule to similarly

[[Page 81228]]

change its description of Limit Order.\15\ The Exchange proposes to 
state, ``A marketable limit order is a limit order to buy (sell) at or 
above (below) the best offer (bid) on the Exchange.'' The Exchange 
believes that the rule amendment more aptly describes a marketable 
limit order as compared to the current rule text, which is confusing, 
but was intended to convey the substance of the proposed text. The new 
sentence does not substantively amend the current rule text and 
conforms NOM's description with BX's description.
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    \15\ Id.
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    The Exchange proposes to amend ``Minimum Quantity Orders,'' within 
Options 3, Section 7(a)(3). The Exchange proposes to style ``Minimum 
Quantity Orders'' in the singular and change ``are'' to ``is an'' and 
``orders'' to ``order.'' These amendments are technical and non-
substantive. The Exchange is otherwise not amending the Minimum 
Quantity Order rule text.
    The Exchange proposes to amend ``Market Orders,'' within Options 3, 
Section 7(a)(4). The Exchange proposes to style ``Market Orders'' in 
the singular and change ``are'' to ``is an'' and ``orders'' to 
``order.'' These amendments are technical and non-substantive. The 
Exchange also proposes to amend a current sentence to state, 
``Participants can designate that their Market Orders not executed 
after a pre-established period of time, as established by the Exchange, 
will be cancelled back to the Participant, once an option series has 
opened for trading.'' Market Orders submitted during the opening may be 
executed, or cancelled if the Market Order is priced through the 
opening price. The Exchange would only cancel those Market Orders that 
remained on the Order Book once an option series opened.\16\ The pre-
established period of time would commence once the intra-day trading 
session begins for that options series and the order would be cancelled 
back to the Participant, provided the Participant elected to cancel 
back its Market Orders. The Exchange proposes to make clear that while 
the opening is on-going, and the intra-day trading session has not 
commenced, the pre-established period of time would not commence. 
Further, the Exchange proposes to note that ``Market Orders on the 
Order Book would be immediately cancelled if an options series halted, 
provided the Participant designated the cancellation of Market 
Orders.'' Once an options series halts for trading, the Exchange 
conducts another Opening Process. In the case where a Market Order was 
resting on the Order Book, and the Participant had designated the 
cancellation of Market Orders, in the event of a halt, the Market 
Orders resting on the Order Book would immediately cancel. This 
proposed rule text is consistent with existing System functionality. 
The Exchange believes that this additional rule text brings greater 
clarity to the Market Order type.
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    \16\ See NOM's Trading Halts rule at Options 3, Section 9(d)(2), 
``After the opening, the Exchange shall reject Market Orders, as 
defined in Options 3, Section 7, and shall notify Participants of 
the reason for such rejection.''
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    The Exchange proposes to amend ``Price Improving Orders,'' within 
Options 3, Section 7(a)(5). The Exchange proposes to style ``Price 
Improving Orders'' in the singular and change ``are'' to ``is an'' and 
``orders'' to ``order.''
    The Exchange proposes to amend ``On the Open Order,'' within 
Options 3, Section 7(a)(6) by removing the words ``The term'' at the 
beginning of the sentence and change ``shall mean'' to ``is.''
    The Exchange proposes to amend ``Intermarket Sweep Order'' or 
``ISO,'' within Options 3, Section 7(a)(7). Today, the rule text 
provides,

    ``Intermarket Sweep Order'' or ``ISO'' are limit orders that are 
designated as ISOs in the manner prescribed by Nasdaq and are 
executed within the System by Participants at multiple price levels 
without respect to Protected Quotations of other Eligible Exchanges 
as defined in Options 5, Section 1. ISOs may have any time-in-force 
designation except WAIT, are handled within the System pursuant to 
Options 3, Section 10 and shall not be eligible for routing as set 
out in Options 3, Section 19. ISOs with a time-in-force designation 
of GTC are treated as having a time-in-force designation of Day.
    (1) Simultaneously with the routing of an ISO to the System, one 
or more additional limit orders, as necessary, are routed by the 
entering party to execute against the full displayed size of any 
protected bid or offer (as defined in Options 5, Section 1) in the 
case of a limit order to sell or buy with a price that is superior 
to the limit price of the limit order identified as an intermarket 
sweep order (as defined in Options 5, Section 1). These additional 
routed orders must be identified as ISOs.

The Exchange proposes to replace the current rule, within Options 3, 
Section 7(a)(7), with the exception of Options 3, Section 7(a)(7)(1), 
which is being retained by re-lettered as ``A,'' with the following 
rule text which is similar to BX Options 3, Section 7(a)(6),\17\ to 
describe an ISO Order, ``is a Limit Order that meets the requirements 
of Options 5, Section 1(8). Orders submitted to the Exchange as ISO are 
not routable and will ignore the ABBO and trade at allowable prices on 
the Exchange. ISOs may be entered on the Order Book. ISOs may have any 
time-in-force designation and are handled within the System pursuant to 
Options 3, Section 10 and shall not be eligible for routing as set out 
in Options 5, Section 4. ISO Orders may not be submitted during the 
opening.''
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    \17\ BX's rule describes the PRISM mechanism, while NOM has no 
auction mechanisms.
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    An ISO Order is a Limit Order, as noted in the current text and 
Options 5, Section 1, continues to be referenced in the proposed text. 
The Exchange continues to note that the orders are not routable. The 
additional text, ``. . . will ignore the ABBO and trade at allowable 
prices on the Exchange'' is more precise than the current rule text and 
describes current functionality. The Exchange further proposes to 
state, ``ISOs may be entered on the Order Book.'' That is also the case 
today. The remainder of the current rule text is not necessary as 
Options 5, Section 1(8) is cited. Removing the current rule text and 
replacing it with text which describes the proper time-in-force 
designation will make clear what is acceptable on NOM today. This rule 
text is not proposed to change the functionality of an ISO Order. The 
Exchange believes the proposed description provides a more succinct 
description.
    Today, ISOs may have any time-in-force designation, except WAIT, 
and further requires that ISOs with a time-in-force designation of GTC 
are treated as having a time-in-force designation of Day. The Exchange 
proposes to remove the WAIT time-in-force within this proposed rule 
change, as described in more detail below, and, therefore, the WAIT 
order type no longer needs to be cited.
    Further, today, NOM's System does not treat an ISO with a time-in-
force designation of GTC as having a time-in-force designation of Day, 
as provided for within NOM's current rule at Options 3, Section 
7(a)(6), rather those orders are treated as GTC. The current sentence 
is being removed because it is inaccurate. The proposed sentence 
accurately describes the System functionality. The Exchange does not 
believe that an ISO with a time-in-force designation of GTC was ever 
treated as having a time-in-force designation of Day, the rule text was 
simply inaccurate.
    The Exchange proposes to amend ``One-Cancels-the-Other Order'' at 
renumbered Options 3, Section 7(a)(8) by changing ``shall mean'' to 
``is.''
    The Exchange proposes to amend the ``All-or-None Order,'' within 
renumbered Options 3, Section 7(a)(9). The Exchange proposes to replace 
``shall

[[Page 81229]]

mean'' with ``is'' and capitalize market order and limit orders.
    The Exchange proposes to amend the ``Post-Only Orders,'' within 
renumbered Options 3, Section 7(a)(10). The Exchange proposes to 
replace ``are'' with ``is an'' and make Post-Only Orders singular. An 
extra space is also being removed.
    The Exchange proposes to amend Options 3, Section 7(b) to define 
``Time in Force'' as ``TIF''.
    With respect to an ``On the Open Order,'' or ``OPG'' Order, within 
Options 3, Section 7(b)(1), the Exchange notes that OPGs may not route. 
This is the case today. This order type functions in the same way as 
BX's OPG Order at Options 3, Section 7(b)(1).\18\ The Exchange is 
adding rule text to make clear the manner in which an OPG Order would 
be treated, which is similar to how a BX OPG Order is treated today.
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    \18\ BX Options 3, Section 7(b)(1) provides, ``An Opening Only 
order (``OPG'') is entered with a TIF of ``OPG''. This order can 
only be executed in the Opening Process pursuant to Options 3, 
Section 8. This order type is not subject to any protections listed 
in Options 3, Section 15. Any portion of the order that is not 
executed during the Opening Process is cancelled. OPG orders may not 
route.''
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    The Exchange proposes to amend an ``Immediate-Or-Cancel'' Order or 
``IOC,'' within Options 3, Section 7(b)(2) to add hyphens and make 
``Or'' lowercase. The Exchange proposes to remove the current 
description which provides that an IOC Order, ``shall mean for orders 
so designated, that if after entry into the System a marketable order 
(or unexecuted portion thereof) becomes non-marketable, the order (or 
unexecuted portion thereof) shall be canceled and returned to the 
entering participant. IOC Orders shall be available for entry from the 
time prior to market open specified by the Exchange on its website 
until market close and for potential execution from 9:30 a.m. until 
market close. IOC Orders entered between the time specified by the 
Exchange on its website and 9:30 a.m. Eastern Time will be held within 
the System until 9:30 a.m. at which time the System shall determine 
whether such orders are marketable.'' The Exchange proposes to replace 
this description with rule text similar to BX Options 3, Section 
7(b)(2) \19\ as these order types are identical, except that NOM has 
the OTTO protocol and BX does not, and also as mentioned previously NOM 
has no auctions. Additionally, BX's rule addresses limitations in order 
protections that do not exist today on NOM. The Exchange proposes to 
state that an Immediate-or-Cancel Order or ``IOC'' Order is a Market 
Order or Limit Order to be executed in whole or in part upon receipt. 
Any portion not so executed is cancelled and/or routed pursuant to 
Participant's instruction. IOC orders may be entered through FIX, OTTO 
or SQF; IOC Orders entered through OTTO or SQF may not route. Today, 
IOC Orders entered through OTTO or SQF do not route; only orders 
entered through FIX may route. The SQF interface is a quoting 
interface, the Exchange does not route quotes. With respect to OTTO, 
orders submitted by NOM Market Makers over this interface are treated 
as quotes and similarly do not route. The Exchange is proposing to 
memorialize this information within the description of an IOC Order to 
add clarity.
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    \19\ BX Options 3, Section 7(b)(2) provides, ``Immediate-or-
Cancel'' or ``IOC'' is a Market Order or Limit Order to be executed 
in whole or in part upon receipt. Any portion not so executed is 
cancelled. (A) Orders entered with a TIF of IOC are not eligible for 
routing. (B) IOC orders may be entered through FIX or SQF, provided 
that an IOC Order entered by a Market Maker through SQF is not 
subject to the Limit Order Price Protection or the Market Order 
Spread Protection in Options 3, Section 15(a)(1) and (a)(2), 
respectively; (C) Orders entered into the Price Improvement Auction 
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their 
terms, these orders will be: (1) Executed after an exposure period, 
or (2) cancelled.
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    The Exchange proposes to amend the TIF of ``DAY'' at Options 5, 
Section 7(b)(3) to remove the words ``shall mean for orders so 
designated'' and add ``is an order'' to conform the rule text to other 
text in this rule. The Exchange also proposes to conform the 
description of a TIF of ``DAY'' similar to Phlx Options 3, Section 
7(c)(1).\20\ The Exchange believes that the remainder of the 
description for a Day Order, ``if after entry into the System, the 
order is not fully executed, the order (or unexecuted portion thereof) 
shall remain available for potential display and/or execution until 
market close, unless canceled by the entering party, after which it 
shall be returned to the entering party. Day Orders shall be available 
for entry from the time prior to market open specified by the Exchange 
on its website until market close and for potential execution from 9:30 
a.m. until market close,'' is unnecessarily verbose and proposes to 
remove this rule text. The Exchange proposes to state, ``Day'' is an 
order entered with a TIF of ``Day'' that expires at the end of the day 
on which it was entered, if not executed. All orders by their terms are 
Day Orders unless otherwise specified. Day Orders may be entered 
through FIX or OTTO. A Day Order on Phlx functions in the same way as a 
Day Order on NOM. The Phlx rule text is more succinct in describing 
this order type. Similar changes were recently made on BX.\21\
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    \20\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not 
executed, an order entered with a TIF of ``Day'' expires at the end 
of the day on which it was entered. All orders by their terms are 
Day Orders unless otherwise specified. Day orders may be entered 
through FIX.''
    \21\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
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    The Exchange proposes to amend the TIF of ``Good Til Cancelled'' or 
``GTC'' at Options 5, Section 7(b)(4). The Exchange proposes to remove 
the words ``shall mean for orders'' and add ``is an order.'' The 
Exchange also proposes to conform the rule text similar to Phlx Options 
3, Section 7(c)(4),\22\ and provide that a ``Good Til Cancelled'' or 
``GTC'' is ``an order entered with a TIF of ``GTC'' that, if not fully 
executed, will remain available for potential display and/or execution 
unless cancelled by the entering party, or until the option expires, 
whichever comes first. GTC Orders shall be available for entry from the 
time prior to market open specified by the Exchange until market close. 
GTC Orders may only be entered through FIX.'' The Exchange would remove 
the rule text which provides, ``that if after entry into System, the 
order is not fully executed, the order (or unexecuted portion thereof) 
shall remain available for potential display and/or execution unless 
cancelled by the entering party, or until the option expires, whichever 
comes first. GTC Orders shall be available for entry from the time 
prior to market open specified by the Exchange on its website until 
market close and for potential execution from 9:30 a.m. until market 
close.'' A GTC Order on Phlx functions in the same way as a GTC Order 
on NOM. The Exchange is not proposing to amend the functionality of a 
GTC Order, rather the Exchange believes the proposed description is 
more succinct.
---------------------------------------------------------------------------

    \22\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til 
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully 
executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the 
option expires, whichever comes first. GTC Orders shall be available 
for entry from the time prior to market open specified by the 
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange proposes to no longer offer a TIF of ``WAIT.'' The 
Exchange would remove the rule text at NOM Options 3, Section 7(b)(5). 
If the Exchange desires to offer this TIF in the future, it would file 
a proposed rule change with the Commission pursuant to Section 19(b)(1) 
of the Act.\23\ The Exchange has provided notice of its intention to 
remove the TIF of

[[Page 81230]]

``WAIT''.\24\ BX previously offered a WAIT order type recently and 
discontinued this order types because it was not being utilized to a 
great extent.\25\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(1).
    \24\ See Options Trader Alert #2020-26.
    \25\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange proposes to note, within NOM Options 3, Section 7(c), 
the various routing options which are available. The Exchange proposes 
to add rule text which provides, ``Routing Strategies. Orders may be 
entered on the Exchange with a routing strategy of SEEK, SRCH or Do-
Not-Route (``DNR'') as provided in Options 5, Section 4 through FIX 
only.''
    Finally, the Exchange proposes to re-letter current Options 3, 
Section 7(c) and (d).
Options 3, Section 15
    The Exchange proposes to amend Options 3, Section 15(c) relating to 
Anti-Internalization to make clear that the Anti-Internalization 
functionality does not apply during the opening. A similar change was 
recently made to BX's Rules.\26\ The Exchange proposes to clarify that 
Anti-Internalization does not apply during an opening or reopening 
following a trading halt, pursuant to Options 3, Section 8, to provide 
more specificity on how this functionality currently operates. The 
Exchange notes that the same procedures used during an opening are used 
to reopen an option series after a trading halt, and therefore proposes 
to specify that Anti-Internalization will not apply during the opening 
(i.e., the opening and halt reopening processes). During the opening, 
Market Makers are able to observe the primary market and then determine 
how they would like to quote. They are not required to quote in the 
opening on NOM. Therefore, Anti-Internalization is unnecessary during 
an opening due to the high level of control that Market Makers exercise 
over their quotes during this process.
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 89759 (September 3, 
2020). 85 FR 55877 (September 10, 2020) (SR-BX-2020-023).
---------------------------------------------------------------------------

Options 3, Section 23
    The Exchange proposes to amend Options 3, Section 23, Data Feeds 
and Trade Information, to update its description of Nasdaq ITCH to 
Trade Options (``ITTO''). The Exchange proposes to amend ITTO at 
Options 3, Section 23(a)(1) to more closely align with current System 
operation. The Exchange proposes a technical amendment to the first 
sentence to replace a comma with the word ``and.'' The Exchange also 
proposes to relocate rule text concerning order imbalances to the end 
of the description. The Exchange proposes to amend the first sentence 
to state that ITTO is a data feed that provides full order and quote 
depth information for individual orders and quotes on the NOM book, and 
last sale information for trades executed on NOM. The Exchange would 
amend and relocate the rule text that provides, ``and Order Imbalance 
Information as set forth in NOM Rules Options 3, Section 8'' at the end 
of the first sentence. The Exchange proposes to add a sentence at the 
end of the description within Options 3, Section 8 which states, ``The 
feed also provides order imbalances on opening/re-opening (size of 
matched contracts and size of the imbalance).'' This sentence makes 
clear that order imbalance information is provided for both an opening 
and re-opening process. Today, a re-opening process initiates after a 
trading halt has occurred intra-day. Also, the Exchange notes the 
specific information that would be provided, namely the size of matched 
contracts and size of the imbalance. The Exchange believes that this 
additional context to imbalance messages will provide market 
participants with more complete information about what is contained in 
the data feed. The Exchange notes that this information is available 
today and the rule text is being amended to make clear what information 
is currently provided.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\27\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\28\ 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Options 1, Section 1
    The Exchange's proposal to amend the definition of ``Public 
Customer'' to conform to Phlx's definition is intended to provide 
greater specificity regarding what is meant by the term ``Public 
Customer.'' The Exchange believes that making clear that a Public 
Customer could be a person or entity and clarifying that a Public 
Customer is not a Professional, as defined within Options 1, Section 
(a)(47),\29\ will make clear what it meant by that term. Today, a 
Public Customer is not a Professional. In order to properly represent 
orders entered on the Exchange, Participants are required to indicate 
whether orders are ``Professional Orders.'' To comply with this 
requirement, Participants are required to review their Public 
Customers' activity on at least a quarterly basis to determine whether 
orders, which are not for the account of a broker-dealer, should be 
represented as Public Customer Orders or Professional Orders.\30\ A 
Public Customer may be a Professional, provided they meet the 
requirements specified within NOM Options 1, Section 1(a)(47). If the 
Professional definition is not met, the order is treated as a Public 
Customer order. The Exchange believes that it is consistent with the 
Act to state within the definition of ``Public Customers'' that a 
Professional is not a Public Customer. As noted above, there is a 
process for determining if a market participant qualifies as a 
``Professional.'' This specificity will serve to protect investors and 
the public interest in that the terms ``Public Customer'' and 
``Professional'' are separate categories of market participants, as 
defined. Also, this definition conforms to Phlx's definition at Options 
1, Section 1(b)(47).
---------------------------------------------------------------------------

    \29\ NOM Options 1, Section 1(a)(47) provides that, ``The term 
``Professional'' means any person or entity that (i) is not a broker 
or dealer in securities, and (ii) places more than 390 orders in 
listed options per day on average during a calendar month for its 
own beneficial account(s). A Participant or a Public Customer may, 
without limitation, be a Professional. All Professional orders shall 
be appropriately marked by Participants.''
    \30\ Participants conduct a quarterly review and make any 
appropriate changes to the way in which they are representing orders 
within five days after the end of each calendar quarter. While 
Participants only will be required to review their accounts on a 
quarterly basis, if during a quarter the Exchange identifies a 
customer for which orders are being represented as Public Customer 
Orders but that has averaged more than 390 orders per day during a 
month, the Exchange will notify the Participant and the Participant 
will be required to change the manner in which it is representing 
the customer's orders within five days.
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence within Options 1, 
Section 1(a)(47) which provides, ``A Participant or a Public Customers 
may, without limitation, be a Professional,'' is consistent with the 
Act. This sentence is confusing, unnecessary, and adds no information 
to this defined term. By way of comparison, Phlx Options 1, Section 
1(b)(46) does not contain a similar sentence and that sentence was 
recently removed from Nasdaq BX, Inc.'s (``BX'') Rules.\31\ The 
Exchange adopted a Professional designation in

[[Page 81231]]

2010 \32\ and has differentiated Public and Professional customers 
since that time. NOM proposes removing this sentence because it does 
not add useful information to understanding who may qualify as a 
Professional.
---------------------------------------------------------------------------

    \31\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
    \32\ See Securities Exchange Act Release No. 63028 (October 1, 
2010), 75 FR 62443 (October 8, 2010) (SR-NASDAQ-2020-099) (Order 
Approving a Proposed Rule Change To Adopt a Definition of 
Professional and Require That All Professional Orders Be 
Appropriately Marked).
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence, within Options 3, 
Section 10(a)(1)(C)(i), which allocation rule provides that a Public 
Customer order does not include a Professional order is consistent with 
the Act. Today, the definition of a Public Customer does not explicitly 
exclude a Professional. Indicating that a Public Customer order is not 
a Professional Order is no longer necessary because of the proposed 
definition for Public Customer. The language that the Exchange proposes 
to delete, currently indicates that Professionals would not be treated 
the same as a Public Customer in terms of priority and, therefore, 
would not receive the same allocation that is reserved for Public 
Customer orders. Since NOM is amending the definition of a Public 
Customer to explicitly exclude Professionals, the language in the 
allocation rule is no longer necessary to distinguish these two types 
of market participants.
Bid/Ask Differentials
    The Exchange's proposal to amend NOM Options 2, Section 5(d)(2) to 
add the words ``Intra-Day'' before the title ``Bid/ask Differentials 
(Quote Spread Parameters)'' and make clear that remove references to 
the opening, will make clear for Market Makers their intra-day 
requirements. The bid/ask differentials, within NOM Options 2, Section 
5(d)(2), will continue to apply intra-day. This is consistent with the 
Exchange's existing practice. Today, the bid/ask differentials 
applicable to the opening are noted within Options 3, Section 
8(a)(6).\33\ As noted within the rule, NOM publishes its specified bid/
ask differential on its system settings page.\34\ The bid/ask 
differentials noted for the Valid Width NBBO within the opening provide 
for quotations with a difference that does not exceed $5 between the 
bid and offer regardless of the price of the bid. It is not necessary 
to discuss the opening bid/ask differentials within Options 2, Section 
5 as those differentials are specifically noted within the opening 
rule. This clarification is consistent with the Act because it is 
designed to avoid any confusion for Market Makers as to their intra-day 
requirements versus their opening requirements.
---------------------------------------------------------------------------

    \33\ NOM Options 3, Section 8(a)(6) provides, ``Valid Width 
National Best Bid or Offer'' or ``Valid Width NBBO'' shall mean the 
combination of all away market quotes and any combination of NOM-
registered Market Maker orders and quotes received over the QUO or 
SQF Protocols within a specified bid/ask differential as established 
and published by the Exchange. The Valid Width NBBO will be 
configurable by underlying, and tables with valid width 
differentials will be posted by Nasdaq on its website. Away markets 
that are crossed will void all Valid Width NBBO calculations. If any 
Market Maker orders or quotes on NOM are crossed internally, then 
all such orders and quotes will be excluded from the Valid Width 
NBBO calculation.''
    \34\ NOM's System Settings page is located at: https://www.nasdaq.com/docs/2020/07/02/NOM_SystemSettings.pdf.
---------------------------------------------------------------------------

Options 3, Section 5
    The Exchange's proposal to amend Options 3, Section 5(c) to add 
additional rule text similar to Phlx Options 3, Section 5(c) \35\ is 
consistent with the Act. Today, NOM re-prices certain orders to avoid 
locking and crossing away markets, consistent with its Trade-Through 
Compliance and Locked or Crossed Markets obligations.\36\ Orders which 
lock or cross an away market automatically re-price one minimum price 
improvement inferior to the original away best bid/offer price to one 
minimum trading increment away from the new away best bid/offer price 
or its original limit price.\37\ The re-priced order is displayed on 
OPRA. The order remains on NOM's Order Book and is accessible at the 
non-displayed price. For example, a limit order may be accessed on NOM 
by a Participant if the limit order is priced better than the NBBO. The 
Exchange believes that the addition of this rule text will add greater 
specificity to the rule.
---------------------------------------------------------------------------

    \35\ Phlx has an All-or-None Order type that is non-displayed. 
See Options 3, Section 7(b)(5). Phlx Options 3, Section 5(c) 
accounts for this non-displayed order on the order book. NOM has a 
Price Improving Order is already described within Options 3, Section 
5(c). A Price Improving Order on NOM displays differently than 
Phlx's All-Or-None Order and therefore is described differently 
within Options 3, Section 5(c). Otherwise, NOM has no other non-
displayed order types.
    \36\ See NOM Options 3, Section 5(d).
    \37\ See Options 5, Section 4 (Order Routing), which describes 
the repricing of orders for both routable and non-routable orders 
within Options 5, Section 4(a)(iii)(A), (B) and (C).
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to amend the Cancel-Replacement Order, 
within Options 3, Section 7(a)(1), is consistent with the Act. A 
Participant has the option of either submitting a cancel order and then 
separately submitting a new order, which serves as a replacement of the 
original order, in two separate messages, or submitting a single cancel 
and replace order in one message (``Cancel-Replacement Order''). 
Submitting a cancel order and then separately submitting a new order 
will not retain the priority of the original order. The Exchange's 
proposal to replace the words ``shall mean'' with ``is'' and remove the 
final sentence of the rule text will bring greater clarity to this 
rule. The Exchange addition of a new sentence to the end of the rule 
which provides, ``The replacement order will retain the priority of the 
cancelled order, if the order posts to the Order Book, provided the 
price is not amended, and the size is not increased'' states in the 
affirmative the conditions under which the Cancel-Replacement Order 
will retain priority. Price and size are the terms that will determine 
if the Cancel-Replacement Order retains its priority, as is the case 
today, other terms and conditions do not amend the priority of the 
Cancel-Replacement Order.
    The Exchange's proposal is not amending the current System 
functionality of a Cancel-Replacement Order with respect to the terms 
that will cause the order to lose priority. Today, and with the 
proposed change, if a Participant does not change or increase the size 
of the order, it would not trigger a loss in priority. Options 3, 
Section 7(a)(1) states only if the size of the order were reduced would 
a loss of priority occur.\38\ Priority is retained if the size of the 
order does not change or is not increased. The rule is intended to 
provide transparency regarding changes to a Cancel-Replacement Order 
which would trigger a loss in priority. Today, and with the proposal, 
the price of the order may not be changed when submitting a Cancel-
Replacement Order; that would be a new order. A similar change was 
recently made to BX's Cancel-Replacement Order.\39\ Price and size are 
the terms that will determine if the Cancel-Replacement Order retains 
its priority, as is the case today, other terms and conditions do not 
amend the priority of the Cancel-Replacement Order.
---------------------------------------------------------------------------

    \38\ Options 3, Section 7(a)(1) provides, ``The replacement 
order will not retain the priority of the cancelled order except 
when the replacement order reduces the size of the order and all 
other terms and conditions are retained.''
    \39\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Limit Orders,'' within Options 
3, Section 7(a)(3), to add the sentence for marketable limit orders 
which is currently in BX's rule is consistent with the Act. A Limit 
Order on NOM operates in the same manner as a Limit

[[Page 81232]]

Order on BX. The Exchange proposes to conform the rule text of NOM's 
Limit Order to BX Options 3, Section 7(a)(3) by adding the sentence 
describing marketable limit orders. BX recently amended its rule to 
similarly change its description of Limit Order.\40\ The Exchange 
proposes to state, ``A marketable limit order is a limit order to buy 
(sell) at or above (below) the best offer (bid) on the Exchange.'' The 
Exchange believes that the rule amendment is consistent with the Act as 
it more aptly describes a marketable limit order as compared to the 
current rule text, which is confusing, but was intended to convey the 
substance of the proposed text. The new sentence does not substantively 
amend the current rule text and conforms NOM's description with BX's 
description.
---------------------------------------------------------------------------

    \40\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Minimum Quantity Orders,'' 
within Options 3, Section 7(a)(3), is non-substantive and makes 
technical edits that do not change the meaning of the term. The 
Exchange is otherwise not amending the Minimum Quantity Order rule 
text.
    The Exchange's proposal to amend ``Market Orders,'' within Options 
3, Section 7(a)(4), is consistent with the Act. The Exchange's proposes 
to style ``Market Orders'' in the singular and change ``are'' to ``is 
an'' and ``orders'' to ``order.'' These amendments are technical and 
non-substantive. The Exchange's proposal to amend the current sentence 
to state, ``Participants can designate that their Market Orders not 
executed after a pre-established period of time, as established by the 
Exchange, will be cancelled back to the Participant, once an option 
series has opened for trading.'' Market Orders submitted during the 
opening may be executed, or cancelled if the Market Order is priced 
through the opening price. The Exchange would only cancel those Market 
Orders that remained on the Order Book once an option series 
opened.\41\ The pre-established period of time would commence once the 
intra-day trading session begins for that options series and the order 
would be cancelled back to the Participant, provided the Participant 
elected to cancel back its Market Orders. The Exchange's proposal makes 
clear that while the opening is on-going, and the intra-day trading 
session has not commenced, the pre-established period of time would not 
commence.
---------------------------------------------------------------------------

    \41\ See NOM's opening rule at Options 3, Section 8(d)(2), 
``After the opening, the Exchange shall reject Market Orders, as 
defined in Options 3, Section 7, and shall notify Participants of 
the reason for such rejection.''
---------------------------------------------------------------------------

    The proposal to note that ``Market Orders on the Order Book would 
be immediately cancelled if an options series halted, provided the 
Participant designated the cancellation of Market Orders'' is 
consistent with the Act. Once an options series halts for trading, the 
Exchange conducts another Opening Process. In the case where a Market 
Order was resting on the Order Book, and the Participant had designated 
the cancellation of Market Orders, in the event of a halt, the Market 
Orders resting on the Order Book would immediately cancel. This 
proposed rule text is consistent with existing System functionality. 
The Exchange believes that this additional rule text brings greater 
clarity to the Market Order type.
    The Exchange proposes to amend ``Price Improving Orders,'' within 
Options 3, Section 7(a)(5) is consistent with the Act. The Exchange 
proposes to style ``Price Improving Orders'' in the singular and change 
``are'' to ``is an'' and ``orders'' to ``order'' are non-substantive 
amendments.
    The Exchange's proposal to amend ``On the Open Order,'' within 
Options 3, Section 7(a)(6) by removing the words ``The term'' at the 
beginning of the sentence and change ``shall mean'' to ``is'' are non-
substantive amendments.
    The Exchange's proposal to amend ``Intermarket Sweep Order'' or 
``ISO'' Orders, within Options 3, Section 7(a)(7), with the exception 
of Options 3, Section 7(a)(7)(1), which is being retained by re-
lettered as ``A,'' and addition of rule text is consistent with the 
Act. The new rule text is similar to BX Options 3, Section 7(a)(6).\42\
---------------------------------------------------------------------------

    \42\ BX's rule describes the PRISM mechanism, while NOM has no 
auction mechanisms.
---------------------------------------------------------------------------

    An ISO Order is a Limit Order, as noted in the current text and 
Options 5, Section 1, continues to be referenced in the proposed text. 
The Exchange continues to note that the orders are not routable. The 
additional text, ``. . .will ignore the ABBO and trade at allowable 
prices on the Exchange'' is more precise than the current rule text and 
describes current functionality. The Exchange further proposes to 
state, ``ISOs may be entered on the Order Book.'' That is also the case 
today. The remainder of the current rule text is not necessary as 
Options 5, Section 1(8) is cited. Removing the current rule text and 
replacing it with text which describes the proper time-in-force 
designation will make clear what is acceptable on NOM today. This rule 
text is not proposed to change the functionality of an ISO Order. The 
Exchange believes the proposed description provides a more succinct 
description.
    Today, the rule provides that ISOs may have any time-in-force 
designation, except WAIT, and further requires that ISOs with a time-
in-force designation of GTC are treated as having a time-in-force 
designation of Day. The Exchange proposes to remove the WAIT time-in-
force within this proposed rule change, as described in more detail 
below, and, therefore, the WAIT order type no longer needs to be cited. 
NOM's System does not treat an ISO with a time-in-force designation of 
GTC as having a time-in-force designation of Day, as provided for 
within NOM's current rule at Options 3, Section 7(a)(6), rather those 
orders are treated as GTC. The current sentence is being removed 
because it is inaccurate. The proposed sentence is consistent with the 
Act because it accurately describes the System functionality. The 
Exchange does not believe that an ISO with a time-in-force designation 
of GTC was ever treated as having a time-in-force designation of Day, 
the rule text was simply inaccurate. This proposal is consistent with 
the protection of investors and the public interest because it will 
clarify the handling of ISO Orders for market participants.
    The Exchange's proposal to amend ``One-Cancels-the-Other Order'' 
within renumbered Options 3, Section 7(a)(8) is consistent with the Act 
because the changes are technical in nature and non-substantive.
    The Exchange's amendment to ``All-or-None Order,'' within 
renumbered Options 3, Section 7(a)(9), is non-substantive and does not 
change the meaning of the term.
    The Exchange's amendment to ``Post-Only Orders,'' within renumbered 
Options 3, Section 7(a)(10), is non-substantive and does not change the 
meaning of the term.
    Adding ``TIF to Options 3, Section 7(b) allows that term to be 
defined within the Rules.
    The Exchange's proposal to amend the ``On the Open Order,'' or 
``OPG'' Order, within Options 3, Section 7(b)(1), to note that OPGs may 
not route, is consistent with the Act. The System would not route an 
OPG Order today. This order type functions in the same way as BX's OPG 
Order at Options 3, Section 7(b)(1).\43\ The Exchange is

[[Page 81233]]

adding rule text to make clear the manner in which an OPG Order would 
be treated, which is similar to how a BX OPG Order is treated today. 
This proposal is consistent with the protection of investors and the 
public interest because it will clarify the handling of OPG Orders for 
market participants.
---------------------------------------------------------------------------

    \43\ BX Options 3, Section 7(b)(1) provides, ``An Opening Only 
order (``OPG'') is entered with a TIF of ``OPG''. This order can 
only be executed in the Opening Process pursuant to Options 3, 
Section 8. This order type is not subject to any protections listed 
in Options 3, Section 15. Any portion of the order that is not 
executed during the Opening Process is cancelled. OPG orders may not 
route.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend an ``Immediate-Or-Cancel'' Order 
or ``IOC,'' within Options 3, Section 7(b)(2), is consistent with the 
Act. The Exchange's proposal replaces the current description with 
Phlx's description at Options 3, Section 7(c)(2) as these order types 
are identical. The Exchange's proposal to state that an Immediate-or-
Cancel Order or ``IOC'' Order is a Market Order or Limit Order to be 
executed in whole or in part upon receipt will bring greater clarity to 
the rule. Further the Exchange's proposal to add that any portion not 
so executed is cancelled is consistent with the current description. 
The Exchange proposes to replace this description with rule text 
similar to BX Options 3, Section 7(b)(2) \44\ as these order types are 
identical, except that NOM has the OTTO protocol and BX does not, and 
also as mentioned previously NOM has no auctions. Additionally, BX's 
rule addresses limitations in order protections that do not exist today 
on NOM. The Exchange proposes to state that an Immediate-or-Cancel 
Order or ``IOC'' Order is a Market Order or Limit Order to be executed 
in whole or in part upon receipt. Any portion not so executed is 
cancelled and/or routed pursuant to Participant's instruction. IOC 
orders may be entered through FIX, OTTO or SQF; IOC Orders entered 
through OTTO or SQF may not route. Today, IOC Orders entered through 
OTTO or SQF do not route; only orders entered through FIX may route. 
The SQF interface is a quoting interface, the Exchange does not route 
quotes. With respect to OTTO, orders submitted by NOM Market Makers 
over this interface are treated as quotes and similarly do not route. 
The Exchange's amendments are consistent with the Act in that the 
changes memorialize pertinent information within the description of an 
IOC Order to add clarity.
---------------------------------------------------------------------------

    \44\ BX Options 3, Section 7(b)(2) provides, ``Immediate-or-
Cancel'' or ``IOC'' is a Market Order or Limit Order to be executed 
in whole or in part upon receipt. Any portion not so executed is 
cancelled. (A) Orders entered with a TIF of IOC are not eligible for 
routing. (B) IOC orders may be entered through FIX or SQF, provided 
that an IOC Order entered by a Market Maker through SQF is not 
subject to the Limit Order Price Protection or the Market Order 
Spread Protection in Options 3, Section 15(a)(1) and (a)(2), 
respectively; (C) Orders entered into the Price Improvement Auction 
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their 
terms, these orders will be: (1) Executed after an exposure period, 
or (2) cancelled.
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``DAY'' at Options 3, 
Section 7(b)(3) to conform the description of a TIF of ``DAY'' to Phlx 
Options 3, Section 7(c)(1) \45\ is consistent with the Act. The 
Exchange believes the current text describing NOM's Day TIF is 
unnecessarily verbose and proposes to remove this language. A DAY Order 
on Phlx functions in the same way as a DAY Order on NOM. The proposal 
is not amending the System functionality of a DAY Order. The Phlx rule 
text is more succinct in describing this order type. Similar changes 
were recently made on BX.\46\
---------------------------------------------------------------------------

    \45\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not 
executed, an order entered with a TIF of ``Day'' expires at the end 
of the day on which it was entered. All orders by their terms are 
Day Orders unless otherwise specified. Day orders may be entered 
through FIX.''
    \46\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``Good Til Cancelled'' 
or ``GTC'' at Options 3, Section 7(b)(4) is consistent with the Act. 
The Exchange proposes to conform the rule text to Phlx Options 3, 
Section 7(c)(4).\47\ The Exchange is not amending the manner in which 
the System function with respect to GTC Orders. GTC Orders, if not 
fully executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the option 
expires, whichever comes first. GTC Orders shall be available for entry 
from the time prior to market open, as specified by the Exchange, until 
market close, as is the case today. Also, today, a GTC Order may only 
be entered through FIX. A GTC Order on Phlx functions in the same way 
as a GTC Order on NOM. The Exchange believes that the amended rule text 
will bring greater transparency to its rules as the proposed 
description is more succinct and thereby protects investors and the 
general public.
---------------------------------------------------------------------------

    \47\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til 
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully 
executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the 
option expires, whichever comes first. GTC Orders shall be available 
for entry from the time prior to market open specified by the 
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer a TIF of ``WAIT'' is 
consistent with the Act because it will remove an order type that is 
not in demand on NOM and simply the offerings provided by NOM. If the 
Exchange desires to offer this TIF in the futures, it would file a 
proposed rule change with the Commission pursuant to Section 19(b)(1) 
of the Act.\48\ The Exchange has provided notice of its intention to 
remove the TIF of ``WAIT''.\49\ BX previously offered a WAIT order type 
recently and discontinued this order types because it was not being 
utilized to a great extent.\50\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(1).
    \49\ See Options Trader Alert #2020-26.
    \50\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to note, within NOM Options 3, Section 
7(c), the various routing options which are available is consistent 
with the Act.
Options 3, Section 15
    The Exchange believes its proposal to clarify that Anti-
Internalization will not apply during an opening is consistent with the 
Act as it would provide more specificity on how this functionality 
currently operates. A similar change was recently made to BX's 
Rules.\51\ The Exchange notes that the same procedures used during an 
opening are used to reopen an option series after a trading halt, and 
therefore proposes to specify that Anti-Internalization will not apply 
during the opening (i.e., the opening and halt reopening processes). 
During the opening, Market Makers are able to observe the primary 
market and then determine how they would like to quote. They are not 
required to quote in the opening on NOM. Therefore, Anti-
Internalization is unnecessary during an opening due to the high level 
of control that Market Makers exercise over their quotes during this 
process.
---------------------------------------------------------------------------

    \51\ See Securities Exchange Act Release No. 89759 (September 3, 
2020). 85 FR 55877 (September 10, 2020) (SR-BX-2020-023).
---------------------------------------------------------------------------

Options 3, Section 23
    The Exchange's proposal to amend Options 3, Section 23, Data Feeds 
and Trade Information, to update its descriptions of the ITTO data feed 
is consistent with the Act because the updated descriptions will bring 
greater transparency to the Exchange's rules and more closely align 
with current System operation.
    The Exchange's proposal will make clear that order imbalance 
information is provided for both an opening and re-opening process. 
Today, a re-opening process initiates after a trading halt has occurred 
intra-day. Also, the Exchange's proposal notes the specific information 
that would be provided, namely the size of matched contracts and size 
of the imbalance. The Exchange believes that this additional context to 
imbalance messages will provide market participants with more complete 
information about what is contained in

[[Page 81234]]

the data feed. The Exchange notes that this information is available 
today and the rule text is being amended to make clear what information 
is currently provided.

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.
Options 1, Section 1
    The Exchange's proposal to amend the definition of ``Public 
Customer'' to conform to Phlx's definition is intended to provide 
greater specificity regarding what is meant by the term ``Public 
Customer.'' This proposal does not impose an undue burden on 
competition, rather it makes clear that a Public Customer could be a 
person or entity and clarifies that a Public Customer is not a 
Professional, as defined within Options 1, Section (a)(47).\52\ Today, 
a Public Customer is not a Professional. In order to properly represent 
orders entered on the Exchange, Participants are required to indicate 
whether orders are ``Professional Orders.'' To comply with this 
requirement, Participants are required to review their Public 
Customers' activity on at least a quarterly basis to determine whether 
orders, which are not for the account of a broker-dealer, should be 
represented as Public Customer Orders or Professional Orders.\53\ A 
Public Customer may be a Professional, provided they meet the 
requirements specified within NOM Options 1, Section 1(a)(47). If the 
Professional definition is not met, the order is treated as a Public 
Customer order. The process for determining if a market participant 
qualifies as a ``Professional'' is applicable to all Participants. 
Also, this definition conforms to Phlx's definition at Options 1, 
Section 1(b)(47).
---------------------------------------------------------------------------

    \52\ NOM Options 1, Section 1(a)(47) provides that, ``The term 
``Professional'' means any person or entity that (i) is not a broker 
or dealer in securities, and (ii) places more than 390 orders in 
listed options per day on average during a calendar month for its 
own beneficial account(s). A Participant or a Public Customer may, 
without limitation, be a Professional. All Professional orders shall 
be appropriately marked by Participants.''
    \53\ Participants conduct a quarterly review and make any 
appropriate changes to the way in which they are representing orders 
within five days after the end of each calendar quarter. While 
Participants only will be required to review their accounts on a 
quarterly basis, if during a quarter the Exchange identifies a 
customer for which orders are being represented as Public Customer 
Orders but that has averaged more than 390 orders per day during a 
month, the Exchange will notify the Participant and the Participant 
will be required to change the manner in which it is representing 
the customer's orders within five days.
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence within Options 1, 
Section 1(a)(47) which provides, ``A Participant or a Public Customers 
may, without limitation, be a Professional,'' does not impose an undue 
burden on competition. This sentence is confusing, unnecessary, and 
adds no information to this defined term. By way of comparison, Phlx 
Options 1, Section 1(b)(46) does not contain a similar sentence and 
that sentence was recently removed from Nasdaq BX, Inc.'s (``BX'') 
Rules.\54\ The Exchange adopted a Professional designation in 2010 \55\ 
and has differentiated Public and Professional customers since that 
time. NOM proposes removing this sentence because it does not add 
useful information to understanding who may qualify as a Professional.
---------------------------------------------------------------------------

    \54\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
    \55\ See Securities Exchange Act Release No. 63028 (October 1, 
2010), 75 FR 62443 (October 8, 2010) (SR-NASDAQ-2020-099) (Order 
Approving a Proposed Rule Change To Adopt a Definition of 
Professional and Require That All Professional Orders Be 
Appropriately Marked).
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence, within Options 3, 
Section 10(a)(1)(C)(i), which allocation rule provides that a Public 
Customer order does not include a Professional order does not impose an 
undue burden on competition. Today, the definition of a Public Customer 
does not explicitly exclude a Professional. Indicating that a Public 
Customer order is not a Professional Order is no longer necessary 
because of the proposed definition for Public Customer. The language 
that the Exchange proposes to delete, currently indicates that 
Professionals would not be treated the same as a Public Customer in 
terms of priority and, therefore, would not receive the same allocation 
that is reserved for Public Customer orders. Since NOM is amending the 
definition of a Public Customer to explicitly exclude Professionals, 
the language in the allocation rule is no longer necessary to 
distinguish these two types of market participants.
Bid/Ask Differentials
    The Exchange's proposal to amend NOM Options 2, Section 5(d)(2) to 
add the words ``Intra-Day'' before the title ``Bid/ask Differentials 
(Quote Spread Parameters)'' and make clear that remove references to 
the opening, will make clear for Market Makers their intra-day 
requirements. The bid/ask differentials, within NOM Options 2, Section 
5(d)(2), will continue to apply intra-day. This proposal does not 
impose an undue burden on competition, rather it conform the Exchange's 
existing practice. Today, the bid/ask differentials applicable to the 
opening are noted within Options 3, Section 8(a)(6).\56\ As noted 
within the rule, NOM publishes its specified bid/ask differential on 
its system settings page.\57\ The bid/ask differentials noted for the 
Valid Width NBBO within the opening provide for quotations with a 
difference that does not exceed $5 between the bid and offer regardless 
of the price of the bid. It is not necessary to discuss the opening 
bid/ask differentials within Options 2, Section 5 as those 
differentials are specifically noted within the opening rule. This 
clarification avoids any confusion for Market Makers as to their intra-
day requirements versus their opening requirements.
---------------------------------------------------------------------------

    \56\ NOM Options 3, Section 8(a)(6) provides, ``Valid Width 
National Best Bid or Offer'' or ``Valid Width NBBO'' shall mean the 
combination of all away market quotes and any combination of NOM-
registered Market Maker orders and quotes received over the QUO or 
SQF Protocols within a specified bid/ask differential as established 
and published by the Exchange. The Valid Width NBBO will be 
configurable by underlying, and tables with valid width 
differentials will be posted by Nasdaq on its website. Away markets 
that are crossed will void all Valid Width NBBO calculations. If any 
Market Maker orders or quotes on NOM are crossed internally, then 
all such orders and quotes will be excluded from the Valid Width 
NBBO calculation.''
    \57\ NOM's System Settings page is located at: https://www.nasdaq.com/docs/2020/07/02/NOM_SystemSettings.pdf.
---------------------------------------------------------------------------

Options 3, Section 5
    The Exchange's proposal to amend Options 3, Section 5(c) to add 
additional rule text similar to Phlx Options 3, Section 5(c) \58\ does 
not impose an undue burden on competition. Today, NOM re-prices certain 
orders to avoid locking and crossing away markets, consistent with its 
Trade-Through Compliance and Locked or Crossed Markets obligations.\59\ 
Orders which lock or cross an away market automatically re-price one 
minimum price improvement inferior to the original away best bid/offer 
price to one minimum trading increment away from the new away best bid/
offer price or its original limit price.\60\ The re-priced

[[Page 81235]]

order is displayed on OPRA. The order remains on NOM's Order Book and 
is accessible at the non-displayed price.
---------------------------------------------------------------------------

    \58\ Phlx has an All-or-None Order type that is non-displayed. 
See Options 3, Section 7(b)(5). Phlx Options 3, Section 5(c) 
accounts for this non-displayed order on the order book. NOM has a 
Price Improving Order is already described within Options 3, Section 
5(c). A Price Improving Order on NOM displays differently than 
Phlx's All-Or-None Order and therefore is described differently 
within Options 3, Section 5(c). Otherwise, NOM has no other non-
displayed order types.
    \59\ See NOM Options 3, Section 5(d).
    \60\ See Options 5, Section 4 (Order Routing), which describes 
the repricing of orders for both routable and non-routable orders 
within Options 5, Section 4(a)(iii)(A), (B) and (C).
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to amend the Cancel-Replacement Order, 
within Options 3, Section 7(a)(1), does not impose an undue burden on 
competition. A Participant has the option of either submitting a cancel 
order and then separately submitting a new order, which serves as a 
replacement of the original order, in two separate messages, or 
submitting a single cancel and replace order in one message (``Cancel-
Replacement Order''). Submitting a cancel order and then separately 
submitting a new order will not retain the priority of the original 
order. The Exchange's proposal to replace the words ``shall mean'' with 
``is'' and remove the final sentence of the rule text will bring 
greater clarity to this rule. The Exchange addition of a new sentence 
to the end of the rule states in the affirmative the conditions under 
which the Cancel-Replacement Order will retain priority. Price and size 
are the terms that will determine if the Cancel-Replacement Order 
retains its priority, as is the case today, other terms and conditions 
do not amend the priority of the Cancel-Replacement Order.
    The Exchange's proposal is not amending the current System 
functionality of a Cancel-Replacement Order with respect to the terms 
that will cause the order to lose priority. Today, and with the 
proposed change, if a Participant does not change or increase the size 
of the order, it would not trigger a loss in priority. Options 3, 
Section 7(a)(1) states only if the size of the order were reduced would 
a loss of priority occur.\61\ Priority is retained if the size of the 
order does not change or is not increased. The rule is intended to 
provide transparency regarding changes to a Cancel-Replacement Order 
which would trigger a loss in priority. Today, and with the proposal, 
the price of the order may not be changed when submitting a Cancel-
Replacement Order; that would be a new order. A similar change was 
recently made to BX's Cancel-Replacement Order.\62\ Price and size are 
the terms that will determine if the Cancel-Replacement Order retains 
its priority, as is the case today, other terms and conditions do not 
amend the priority of the Cancel-Replacement Order.
---------------------------------------------------------------------------

    \61\ Options 3, Section 7(a)(1) provides, ``The replacement 
order will not retain the priority of the cancelled order except 
when the replacement order reduces the size of the order and all 
other terms and conditions are retained.''
    \62\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Limit Orders,'' within Options 
3, Section 7(a)(3), to add the sentence for marketable limit orders 
which is currently in BX's rule does not impose an undue burden on 
competition. A Limit Order on NOM operates in the same manner as a 
Limit Order on BX. The Exchange proposes to conform the rule text of 
NOM's Limit Order to BX Options 3, Section 7(a)(3) by adding a sentence 
describing marketable limit orders. BX recently amended its rule to 
similarly change its description of Limit Order.\63\ The proposed text 
more aptly describes a marketable limit order as compared to the 
current rule text, which is confusing, but was intended to convey the 
substance of the proposed text. The new sentence does not substantively 
amend the current rule text and conforms NOM's description with BX's 
description.
---------------------------------------------------------------------------

    \63\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Minimum Quantity Orders,'' 
within Options 3, Section 7(a)(3), is non-substantive and makes 
technical edits that do not change the meaning of the term. The 
Exchange is otherwise not amending the Minimum Quantity Order rule 
text.
    The Exchange's proposal to amend ``Market Orders,'' within Options 
3, Section 7(a)(4), does not impose an undue burden on competition. The 
Exchange's proposes to style ``Market Orders'' in the singular and 
change ``are'' to ``is an'' and ``orders'' to ``order.'' These 
amendments are technical and non-substantive. Market Orders submitted 
during the opening may be executed, or cancelled if the Market Order is 
priced through the opening price. The Exchange would only cancel those 
Market Orders that remained on the Order Book once an option series 
opened.\64\ The pre-established period of time would commence once the 
intra-day trading session begins for that options series and the order 
would be cancelled back to the Participant, provided the Participant 
elected to cancel back its Market Orders. The Exchange's proposal makes 
clear that while the opening is on-going, and the intra-day trading 
session has not commenced, the pre-established period of time would not 
commence.
---------------------------------------------------------------------------

    \64\ See NOM's opening rule at Options 3, Section 8(d)(2), 
``After the opening, the Exchange shall reject Market Orders, as 
defined in Options 3, Section 7, and shall notify Participants of 
the reason for such rejection.''
---------------------------------------------------------------------------

    The proposal to note that ``Market Orders on the Order Book would 
be immediately cancelled if an options series halted, provided the 
Participant designated the cancellation of Market Orders'' does not 
impose an undue burden on competition. Once an options series halts for 
trading, the Exchange conducts another Opening Process. In the case 
where a Market Order was resting on the Order Book, and the Participant 
had designated the cancellation of Market Orders, in the event of a 
halt, the Market Orders resting on the Order Book would immediately 
cancel. This proposed rule text is consistent with existing System 
functionality. The Exchange believes that this additional rule text 
brings greater clarity to the Market Order type.
    The Exchange proposes to amend ``Price Improving Orders,'' within 
Options 3, Section 7(a)(5) does not impose an undue burden on 
competition. The Exchange proposes to style ``Price Improving Orders'' 
in the singular and change ``are'' to ``is an'' and ``orders'' to 
``order'' are non-substantive amendments.
    The Exchange's proposal to amend ``On the Open Order,'' within 
Options 3, Section 7(a)(6) by removing the words ``The term'' at the 
beginning of the sentence and change ``shall mean'' to ``is'' are non-
substantive amendments.
    The Exchange's proposal to amend ``Intermarket Sweep Order'' or 
``ISO'' Orders, within Options 3, Section 7(a)(7), with the exception 
of Options 3, Section 7(a)(7)(1), which is being retained by re-
lettered as ``A,'' and addition of rule text does not impose an undue 
burden on competition. The new rule text is similar to BX Options 3, 
Section 7(a)(6).\65\
---------------------------------------------------------------------------

    \65\ BX's rule describes the PRISM mechanism, while NOM has no 
auction mechanisms.
---------------------------------------------------------------------------

    An ISO Order is a Limit Order, as noted in the current text and 
Options 5, Section 1, continues to be referenced in the proposed text. 
The Exchange continues to note that the orders are not routable. The 
additional text is more precise than the current rule text and 
describes current functionality. The Exchange further proposes to 
state, ``ISOs may be entered on the Order Book.'' That is also the case 
today. The remainder of the current rule text is not necessary as 
Options 5, Section 1(8) is cited. Removing the current rule text and 
replacing it with text which describes the proper time-in-force 
designation will make clear what is acceptable on NOM today. This rule 
text is not proposed to change the

[[Page 81236]]

functionality of an ISO Order. The Exchange believes the proposed 
description does not impose an undue burden on competition, rather it 
provides a more succinct description.
    Today, ISOs may have any time-in-force designation, except WAIT, 
and further requires that ISOs with a time-in-force designation of GTC 
are treated as having a time-in-force designation of Day. The Exchange 
proposes to remove the WAIT time-in-force within this proposed rule 
change, as described in more detail below, and, therefore, the WAIT 
order type no longer needs to be cited. NOM's System does not treat an 
ISO with a time-in-force designation of GTC as having a time-in-force 
designation of Day, as provided for within NOM's current rule at 
Options 3, Section 7(a)(6), rather those orders are treated as GTC. The 
current sentence is being removed because it is inaccurate. The 
proposed sentence does not impose an undue burden on competition 
because it accurately describes the System functionality. The Exchange 
does not believe that an ISO with a time-in-force designation of GTC 
was ever treated as having a time-in-force designation of Day, the rule 
text was simply inaccurate.
    The Exchange's proposal to amend ``One-Cancels-the-Other Order'' 
within renumbered Options 3, Section 7(a)(8) does not impose an undue 
burden on competition because the changes are technical in nature and 
non-substantive.
    The Exchange's amendment to ``All-or-None Order,'' within 
renumbered Options 3, Section 7(a)(9), is non-substantive and does not 
change the meaning of the term.
    The Exchange's amendment to ``Post-Only Orders,'' within renumbered 
Options 3, Section 7(a)(10), is non-substantive and does not change the 
meaning of the term.
    The Exchange's proposal to amend the ``On the Open Order,'' or 
``OPG'' Order, within Options 3, Section 7(b)(1), to note that OPGs may 
not route, does not impose an undue burden on competition. The System 
would not route an OPG Order today. This order type functions in the 
same way as BX's OPG Order at Options 3, Section 7(b)(1).\66\ The 
Exchange is adding rule text to make clear the manner in which an OPG 
Order would be treated, which is similar to how a BX OPG Order is 
treated today.
---------------------------------------------------------------------------

    \66\ BX Options 3, Section 7(b)(1) provides, ``An Opening Only 
order (``OPG'') is entered with a TIF of ``OPG''. This order can 
only be executed in the Opening Process pursuant to Options 3, 
Section 8. This order type is not subject to any protections listed 
in Options 3, Section 15. Any portion of the order that is not 
executed during the Opening Process is cancelled. OPG orders may not 
route.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend an ``Immediate-Or-Cancel'' Order 
or ``IOC,'' within Options 3, Section 7(b)(2), does not impose an undue 
burden on competition. The Exchange's proposal replaces the current 
description with Phlx's description at Options 3, Section 7(c)(2) as 
these order types are identical. The Exchange's proposal to state that 
an Immediate-or-Cancel Order or ``IOC'' Order is a Market Order or 
Limit Order to be executed in whole or in part upon receipt will bring 
greater clarity to the rule. Further the Exchange's proposal to add 
that any portion not so executed is cancelled is consistent with the 
current description. The Exchange proposes to replace this description 
with rule text similar to BX Options 3, Section 7(b)(2) \67\ as these 
order types are identical, except that NOM has the OTTO protocol and BX 
does not, and also as mentioned previously NOM has no auctions. 
Additionally, BX's rule addresses limitations in order protections that 
do not exist today on NOM. Today, IOC Orders entered through OTTO or 
SQF do not route; only orders entered through FIX may route. The SQF 
interface is a quoting interface, the Exchange does not route quotes. 
With respect to OTTO, orders submitted by NOM Market Makers over this 
interface are treated as quotes and similarly do not route.
---------------------------------------------------------------------------

    \67\ BX Options 3, Section 7(b)(2) provides, ``Immediate-or-
Cancel'' or ``IOC'' is a Market Order or Limit Order to be executed 
in whole or in part upon receipt. Any portion not so executed is 
cancelled. (A) Orders entered with a TIF of IOC are not eligible for 
routing. (B) IOC orders may be entered through FIX or SQF, provided 
that an IOC Order entered by a Market Maker through SQF is not 
subject to the Limit Order Price Protection or the Market Order 
Spread Protection in Options 3, Section 15(a)(1) and (a)(2), 
respectively; (C) Orders entered into the Price Improvement Auction 
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their 
terms, these orders will be: (1) Executed after an exposure period, 
or (2) cancelled.
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``DAY'' at Options 3, 
Section 7(b)(3) to conform the description of a TIF of ``DAY'' to Phlx 
Options 3, Section 7(c)(1) \68\ does not impose an undue burden on 
competition. The Exchange believes the current text describing NOM's 
Day TIF is unnecessarily verbose and proposes to remove this language. 
A DAY Order on Phlx functions in the same way as a DAY Order on NOM. 
The proposal is not amending the System functionality of a DAY Order. 
The Phlx rule text is more succinct in describing this order type. 
Similar changes were recently made on BX.\69\
---------------------------------------------------------------------------

    \68\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not 
executed, an order entered with a TIF of ``Day'' expires at the end 
of the day on which it was entered. All orders by their terms are 
Day Orders unless otherwise specified. Day orders may be entered 
through FIX.''
    \69\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``Good Til Cancelled'' 
or ``GTC'' at Options 3, Section 7(b)(4) does not impose an undue 
burden on competition. The Exchange proposes to conform the rule text 
to Phlx Options 3, Section 7(c)(4).\70\ The Exchange is not amending 
the manner in which the System function with respect to GTC Orders. GTC 
Orders, if not fully executed, will remain available for potential 
display and/or execution unless cancelled by the entering party, or 
until the option expires, whichever comes first. GTC Orders shall be 
available for entry from the time prior to market open, as specified by 
the Exchange, until market close, as is the case today. Also, today, a 
GTC Order may only be entered through FIX. A GTC Order on Phlx 
functions in the same way as a GTC Order on NOM. The Exchange believes 
that the amended rule text will bring greater transparency to its 
rules.
---------------------------------------------------------------------------

    \70\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til 
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully 
executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the 
option expires, whichever comes first. GTC Orders shall be available 
for entry from the time prior to market open specified by the 
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer a TIF of ``WAIT'' does 
not impose an undue burden on competition because it will remove an 
order type that is not in demand on NOM and simply the offerings 
provided by NOM. If the Exchange desires to offer this TIF in the 
futures, it would file a proposed rule change with the Commission 
pursuant to Section 19(b)(1) of the Act.\71\ The Exchange has provided 
notice of its intention to remove the TIF of ``WAIT''.\72\ BX 
previously offered a WAIT order type recently and discontinued this 
order types because it was not being utilized to a great extent.\73\
---------------------------------------------------------------------------

    \71\ 15 U.S.C. 78s(b)(1).
    \72\ See Options Trader Alert #2020-26.
    \73\ See Securities Exchange Act Release No. 89476 (August 4, 
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to note, within NOM Options 3, Section 
7(c), the various routing options which are available does not impose 
an undue burden on competition.
Options 3, Section 15
    The Exchange believes its proposal to clarify that Anti-
Internalization will not

[[Page 81237]]

apply during an opening does not impose an undue burden on competition 
as it would provide more specificity on how this functionality 
currently operates. A similar change was recently made to BX's 
Rules.\74\ The Exchange notes that the same procedures used during an 
opening are used to reopen an option series after a trading halt, and 
therefore proposes to specify that Anti-Internalization will not apply 
during the opening (i.e., the opening and halt reopening processes). 
During the opening, Market Makers are able to observe the primary 
market and then determine how they would like to quote. They are not 
required to quote in the opening on NOM. Therefore, Anti-
Internalization is unnecessary during an opening due to the high level 
of control that Market Makers exercise over their quotes during this 
process.
---------------------------------------------------------------------------

    \74\ See Securities Exchange Act Release No. 89759 (September 3, 
2020). 85 FR 55877 (September 10, 2020) (SR-BX-2020-023).
---------------------------------------------------------------------------

Options 3, Section 23
    The Exchange's proposal to amend Options 3, Section 23, Data Feeds 
and Trade Information, to update its descriptions of the ITTO data feed 
does not impose an undue burden on competition because the updated 
descriptions will bring greater transparency to the Exchange's rules 
and more closely align with current System operation.
    The Exchange's proposal will make clear that order imbalance 
information is provided for both an opening and re-opening process. 
Today, a re-opening process initiates after a trading halt has occurred 
intra-day. Also, the Exchange's proposal notes the specific information 
that would be provided, namely the size of matched contracts and size 
of the imbalance. The Exchange believes that this additional context to 
imbalance messages will provide market participants with more complete 
information about what is contained in the data feed. The Exchange 
notes that this information is available today and the rule text is 
being amended to make clear what information is currently provided.

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 \75\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\76\
---------------------------------------------------------------------------

    \75\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \76\ 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.
---------------------------------------------------------------------------

    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-NASDAQ-2020-083 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-2020-083. 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-2020-083, and should be submitted 
on or before January 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\77\
---------------------------------------------------------------------------

    \77\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27483 Filed 12-14-20; 8:45 am]
BILLING CODE 8011-01-P