[Federal Register Volume 89, Number 168 (Thursday, August 29, 2024)]
[Notices]
[Pages 70234-70241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19394]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100810; File No. SR-BX-2024-019)]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Suspension of and 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove Proposed Rule Change To Adopt an OTTO Protocol

August 23, 2024.

I. Introduction

    On June 26, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change 
(File Number SR-BX-2024-019) to adopt an OTTO protocol and associated 
fee. The proposed rule change was immediately effective upon filing 
with the Commission pursuant to Section 19(b)(3)(A) of the Act.\3\ The 
proposed rule change was published for comment in the Federal Register 
on July 15, 2024.\4\ Pursuant to Section 19(b)(3)(C) of the Act,\5\ the 
Commission is hereby: (1) temporarily suspending the proposed rule 
change; and (2) instituting proceedings to determine whether to approve 
or disapprove the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ See Securities Exchange Act Release No. 99841 (July 9, 
2024), 89 FR 57485 (``Notice'').
    \5\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

II. Background and Description of the Proposed Rule Change

    The Exchange states that the purpose of the proposed rule change is 
to adopt a new protocol, ``Ouch to Trade Options'' or ``OTTO'' and 
establish pricing for this new protocol.
    According to the Exchange, today, BX Participants may enter orders 
into the Exchange through the ``Financial Information eXchange'' or 
``FIX.'' \6\ The Exchange states that the proposed new OTTO protocol is 
identical to the OTTO protocol offered today on 3 Nasdaq affiliated 
exchanges, Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX'') and 
Nasdaq MRX, LLC (``MRX'').\7\
---------------------------------------------------------------------------

    \6\ See Notice, 89 FR at 57485. The Exchange states that FIX is 
an interface that allows Participants and their Sponsored Customers 
to connect, send, and receive messages related to orders and auction 
orders and responses to and from the Exchange. Id. at n.3. The 
Exchange states that features include the following: (1) execution 
messages; (2) order messages; and (3) risk protection triggers and 
cancel notifications. Id. The Exchange states that, in addition, a 
BX Participant may elect to utilize FIX to send a message and PRISM 
Order, as defined within Options 3, Section 13, to all BX 
Participants that opt in to receive Requests for PRISM requesting 
that it submit the sender's PRISM Order with responder's Initiating 
Order, as defined within Options 3, Section 13, into the Price 
Improvement Auction (``PRISM'') mechanism, pursuant to Options 3, 
Section 13 (``Request for PRISM''). Id. (citing Exchange Rule 
Options 3, Section 7(e)(1)(A)).
    \7\ See Notice, 89 FR at 57485-86.
---------------------------------------------------------------------------

    The Exchange states that the OTTO protocol is a proprietary 
protocol of Nasdaq, Inc and that the Exchange continues to innovate and 
modernize technology so that it may continue to compete among options 
markets.\8\ The Exchange states that the ability to continue to 
innovate with technology and offer new products to market participants 
allows BX to remain competitive in the options space which currently 
has seventeen options markets and potential new entrants.\9\
---------------------------------------------------------------------------

    \8\ See Notice, 89 FR at 57486.
    \9\ See Notice, 89 FR at 57486.

---------------------------------------------------------------------------

[[Page 70235]]

OTTO Protocol

    The Exchange states that as proposed, OTTO would allow Participants 
and their Sponsored Customers \10\ to connect, send, and receive 
messages related to orders, auction orders, and auction responses to 
the Exchange.\11\ The Exchange states that OTTO features would include 
the following: (1) options symbol directory messages (e.g., underlying 
and complex instruments); (2) System \12\ event messages (e.g., start 
of trading hours messages and start of opening); (3) trading action 
messages (e.g., halts and resumes); (4) execution messages; (5) order 
messages; (6) risk protection triggers and cancel notifications; (7) 
auction notifications; (8) auction responses; and (9) post trade 
allocation messages.\13\ The Exchange notes that unlike FIX, which 
offers routing capability, OTTO does not permit routing.\14\ The 
Exchange states that it proposes to include this description of OTTO in 
new Options 3, Section 7(e)(1)(B) and re-letter current ``B'' as 
``C''.\15\
---------------------------------------------------------------------------

    \10\ The Exchange states that General 2, Section 22 describes 
Sponsored Access arrangements. See Notice, 89 FR at 57486 n.4.
    \11\ See Notice, 89 FR at 57486.
    \12\ The Exchange states that the term ``System'' or ``Trading 
System'' means the automated system for order execution and trade 
reporting owned and operated by BX as the BX Options market. See 
Notice, 89 FR at 57486 n.5. The Exchange states that BX Options 
market comprises: (A) an order execution service that enables 
Participants to automatically execute transactions in option series; 
and provides Participants with sufficient monitoring and updating 
capability to participate in an automated execution environment; (B) 
a trade reporting service that submits ``locked-in'' trades for 
clearing to a registered clearing agency for clearance and 
settlement; transmits last-sale reports of transactions 
automatically to the Options Price Reporting Authority for 
dissemination to the public and industry; and provides participants 
with monitoring and risk management capabilities to facilitate 
participation in a ``locked-in'' trading environment; and (C) the 
data feeds described in Options 3, Section 23. See id. (citing BX 
Options 1, Section 1(a)(59)).
    \13\ See Notice, 89 FR at 57486.
    \14\ See Notice, 89 FR at 57486.
    \15\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

    The Exchange states that while the Exchange has no way of 
predicting with certainty the amount or type of OTTO Ports market 
participants will in fact purchase, the Exchange anticipates that some 
Participants will subscribe to multiple OTTO Ports in combination with 
FIX Ports.\16\ The Exchange notes that Options Participants may use 
varying number of OTTO ports based on their business needs.\17\
---------------------------------------------------------------------------

    \16\ See Notice, 89 FR at 57486.
    \17\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

Other Amendments

    In connection with offering OTTO, the Exchange proposes to amend 
other rules within Options 3.\18\ Each amendment is described below.
---------------------------------------------------------------------------

    \18\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange states that it proposes to amend Options 3, Section 7, 
Types of Orders and Quote Protocols.\19\ The Exchange states that 
specifically, BX proposes to amend Options 3, Section 7 (b)(2) that 
describes the Immediate-or-Cancel'' or ``IOC'' order.\20\ The Exchange 
states that today, Options 3, Section 7(b)(2)(B) notes that an IOC 
order may be entered through FIX or SQF, provided that an IOC Order 
entered by a Market Maker through SQF is not subject to the Order Price 
Protection, the Market Order Spread Protection, or Size Limitation in 
Options 3, Section 15(a)(1), (a)(2), and (b)(2), respectively.\21\ The 
Exchange states that it proposes to add ``OTTO'' to the list of 
protocols to note that an IOC order may also be entered through 
OTTO.\22\
---------------------------------------------------------------------------

    \19\ See Notice, 89 FR at 57486.
    \20\ See Notice, 89 FR at 57486.
    \21\ See Notice, 89 FR at 57486.
    \22\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

    BX also states that it proposes to amend the ``DAY'' order in 
Options 3, Section 7(b)(3) that currently provides that a Day order may 
be entered through FIX.\23\ The Exchange states that with the addition 
of OTTO, a Day order may also be entered through OTTO.\24\
---------------------------------------------------------------------------

    \23\ See Notice, 89 FR at 57486.
    \24\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

    BX states that it also proposes to amend the ``Good Til Cancelled'' 
or ``GTC'' order which currently does not specify that a GTC order may 
be entered through FIX.\25\ The Exchange states that GTC orders would 
only be able to be entered through FIX and not OTTO.\26\ The Exchange 
states that it proposes to amend Options 3, Section 7(b)(4) to add a 
sentence to note that GTC orders may be entered through FIX.\27\
---------------------------------------------------------------------------

    \25\ See Notice, 89 FR at 57486.
    \26\ See Notice, 89 FR at 57486.
    \27\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

Options 3, Section 8
    The Exchange states that BX proposes to amend Options 3, Section 8, 
Options Opening Process.\28\ The Exchange states that BX proposes to 
amend Options 3, Section 8(l) that describes the Opening Process Cancel 
Timer.\29\ The Exchange states that the Opening Process Cancel Timer 
represents a period of time since the underlying market has opened, and 
that if an option series has not opened before the conclusion of the 
Opening Process Cancel Timer, a Participant may elect to have orders 
returned by providing written notification to the Exchange.\30\ The 
Exchange states that today, these orders include all non-Good Til 
Cancelled Orders received over the FIX protocol.\31\ The Exchange 
states that it proposes to add the OTTO protocol as well to the rule 
text language in that paragraph.\32\
---------------------------------------------------------------------------

    \28\ See Notice, 89 FR at 57486.
    \29\ See Notice, 89 FR at 57486.
    \30\ See Notice, 89 FR at 57486.
    \31\ See Notice, 89 FR at 57486.
    \32\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

Options 3, Section 12
    The Exchange states that it proposes to amend the Options 3, 
Section 12, Crossing Orders.\33\ Specifically, the Exchange states that 
it proposes to amend Customer Crossing Orders in Options 3, Section 
12(a) that currently provides Public Customer-to-Public Customer Cross 
Orders are automatically executed upon entry provided that the 
execution is at or between the best bid and offer on the Exchange and 
(i) is not at the same price as a Public Customer Order on the 
Exchange's limit order book and (ii) will not trade through the 
NBBO.\34\ The Exchange states that Public Customer-to-Public Customer 
Cross Orders must be entered through FIX.\35\ The Exchange states that 
it proposes to remove the sentence that provides that Public Customer-
to-Public Customer Cross Orders must be entered through FIX because 
they will be able to be entered through both FIX and OTTO.\36\
---------------------------------------------------------------------------

    \33\ See Notice, 89 FR at 57486.
    \34\ See Notice, 89 FR at 57486.
    \35\ See Notice, 89 FR at 57486.
    \36\ See Notice, 89 FR at 57486.
---------------------------------------------------------------------------

Options 3, Section 17
    The Exchange states that it proposes to amend the Kill Switch at 
Options 3, Section 17.\37\ The Exchange states that the Kill Switch 
provides Participants with an optional risk management tool to promptly 
cancel and restrict orders.\38\ The Exchange states that with the 
introduction of OTTO, the Exchange proposes to align its Kill Switch 
rule text with MRX's Kill Switch.\39\ The Exchange states that it 
proposes to note in Options 3, Section 17(a) that BX Participants may 
initiate a message(s) to the System to promptly cancel and restrict 
their order activity on the Exchange, as is the case today, as 
described in section (a)(1).\40\ The Exchange states that this 
amendment simply rewords the rule text without a

[[Page 70236]]

substantive amendment to the rule text.\41\
---------------------------------------------------------------------------

    \37\ See Notice, 89 FR at 57486.
    \38\ See Notice, 89 FR at 57486.
    \39\ See Notice, 89 FR at 57487 (citing MRX Options 3, Section 
17).
    \40\ See Notice, 89 FR at 57487.
    \41\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------

    The Exchange states that it proposes to renumber Options 3, Section 
17(a)(i) and (ii) as (a)(1) and (2).\42\ The Exchange states that 
current Options 3, Section 17(a)(i) states, ``If orders are cancelled 
by the BX Participant utilizing the Kill Switch, it will result in the 
cancellation of all orders requested for the Identifier(s). The BX 
Participant will be unable to enter additional orders for the affected 
Identifier(s) until re-entry has been enabled pursuant to section 
(a)(ii).'' \43\ The Exchange states that it proposes to instead 
provide, ``A BX Participant may submit a request to the System through 
FIX or OTTO to cancel all existing orders and restrict entry of 
additional orders for the requested Identifier(s) on a user level on 
the Exchange.'' \44\ The Exchange states that with the addition of 
OTTO, the Exchange notes that both FIX and OTTO orders may be 
cancelled.\45\ The Exchange states that further, today, BX Participants 
utilize an interface to send a message to the Exchange to initiate a 
Kill Switch.\46\ The Exchange notes that in lieu of the interface, BX 
Participants will only be able to initiate a cancellation of their 
orders by sending a mass purge request through FIX or OTTO.\47\ The 
Exchange states that this change will align the Kill Switch 
functionality to that of ISE, GEMX and MRX Options 3, Section 17 and 
will enable BX Participants to initiate the Kill Switch more seamlessly 
without the need to utilize a separate interface.\48\ The Exchange 
states that when initiating a cancellation of their orders by sending a 
mass purge request through FIX or OTTO, Participants will be able to 
submit a Kill Switch request on a user level only.\49\ The Exchange 
states that this is a change from the ability to cancel orders on 
either a user or group level \50\ with the interface.\51\ The Exchange 
states that it proposes to amend Options 3, Section 17(a) to note this 
change by removing the words ``or group'' and the following sentence 
that applies to a group.\52\
---------------------------------------------------------------------------

    \42\ See Notice, 89 FR at 57487.
    \43\ See Notice, 89 FR at 57487.
    \44\ See Notice, 89 FR at 57487.
    \45\ See Notice, 89 FR at 57487.
    \46\ See Notice, 89 FR at 57487 (citing Securities Exchange Act 
Release No. 76116 (October 8, 2015), 80 FR 62147 (October 15, 2015) 
(SR-BX-2015-050) (Order Approving Proposed Rule Change To Adopt a 
Kill Switch)).
    \47\ See Notice, 89 FR at 57487.
    \48\ See Notice, 89 FR at 57487.
    \49\ See Notice, 89 FR at 57487.
    \50\ The Exchange states that a permissible group could include 
all badges associated with a Market Maker. See Notice, 89 FR at 
57487 n.9. The Exchange states that today, a Participant is able to 
set up these groups in the interface to include all or some of the 
Identifiers associated with the Participant firm so that a GUI Kill 
Switch request could apply to this pre-defined group. Id.
    \51\ See Notice, 89 FR at 57487.
    \52\ See Notice, 89 FR at 57487. The Exchange also states that 
it proposes to remove this sentence, ``Permissible groups must 
reside within a single broker-dealer'' as the group option would no 
longer exist. Id. at n.10.
---------------------------------------------------------------------------

    The Exchange states that finally, the Exchange proposes to amend 
proposed Options 3, Section 17(a)(2) to align to MRX's rule text by 
providing ``Once a BX Participant initiates a Kill Switch pursuant to 
(a)(1) above. . .'' in the first sentence.\53\ The Exchange states that 
this amendment simply rewords the rule text without a substantive 
amendment to the rule text.\54\
---------------------------------------------------------------------------

    \53\ See Notice, 89 FR at 57487.
    \54\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------

Options 3, Section 18
    The Exchange states that it proposes to amend Options 3, Section 
18, Detection of Loss of Communication.\55\ The Exchange states that it 
proposes to add OTTO to Options 3, Section 18 as OTTO would also be 
subject to this rule.\56\ The Exchange states that today, when the SQF 
Port or the FIX Port detects the loss of communication with a 
Participant's Client Application because the Exchange's server does not 
receive a Heartbeat message for a certain time period, the Exchange 
will automatically logoff the Participant's affected Client Application 
and automatically cancel all of the Participant's open quotes through 
SQF and open orders through FIX.\57\ The Exchange states that quotes 
and orders are cancelled across all Client Applications that are 
associated with the same BX Options Market Maker ID and underlying 
issues.\58\
---------------------------------------------------------------------------

    \55\ See Notice, 89 FR at 57487.
    \56\ See Notice, 89 FR at 57487.
    \57\ See Notice, 89 FR at 57487.
    \58\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------

    The Exchange states that at this time, the Exchange proposes to 
permit orders entered through OTTO to be cancelled similar to FIX 
orders when the Exchange's server does not receive a Heartbeat message 
for a certain time period.\59\ The Exchange states that it is proposing 
to amend Options 3, Section 18 to also rearrange the rule text to add 
the word ``Definitions'' next to ``a'' and move the rule text in 
current ``a'' to ``b'' and re-letter the other paragraphs 
accordingly.\60\ Also, the Exchange states that it proposes to define 
``Session of Connectivity'' for purposes of this rule to mean each time 
the Participant connects to the Exchange's System.\61\ The Exchange 
states that further, each new connection, intra-day or otherwise, is a 
new Session of Connectivity.\62\ The Exchange states that it proposes 
to use the new definition throughout Options 3, Section 18.\63\
---------------------------------------------------------------------------

    \59\ See Notice, 89 FR at 57487.
    \60\ See Notice, 89 FR at 57487.
    \61\ See Notice, 89 FR at 57487.
    \62\ See Notice, 89 FR at 57487.
    \63\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------

    The Exchange states that similar to FIX, when the OTTO Port detects 
the loss of communication with a Participant's Client Application 
because the Exchange's server does not receive a Heartbeat message for 
a certain time period, the Exchange will automatically logoff the 
Participant's affected Client Application and automatically cancel all 
of the Participant's open orders through OTTO.\64\ The Exchange states 
that orders would be cancelled across all Client Applications that are 
associated with the same BX Options Market Maker ID and underlying 
issues.\65\ The Exchange states that it proposes to update Options 3, 
Section 18 to provide in proposed Options 3, Section 18(a)(3) that the 
OTTO Port is the Exchange's proprietary System component through which 
Participants communicate their orders from the Client Application.\66\ 
The Exchange states that further, the Exchange would note in proposed 
Options 3, Section 18(c) that when the OTTO Port detects the loss of 
communication with a Participant's Client Application because the 
Exchange's server does not receive a Heartbeat message for a certain 
time period (``nn'' seconds), the Exchange will automatically logoff 
the Participant's affected Client Application and if the Participant 
has elected to have its orders cancelled pursuant to proposed Section 
18(f), automatically cancel all orders.\67\ The Exchange states that 
proposed Options 3, Section 18(f) would provide that the default period 
of ``nn'' seconds for OTTO Ports would be fifteen (15) seconds for the 
disconnect and, if elected, the removal of orders.\68\ The Exchange 
states that a Participant may determine another time period of ``nn'' 
seconds of no technical connectivity, as required in proposed paragraph 
(c), to trigger the disconnect and, if so elected, the removal of 
orders and communicate that time to the Exchange.\69\ The Exchange 
states the period of ``nn'' seconds may be modified to a number between 
one

[[Page 70237]]

hundred (100) milliseconds and 99,999 milliseconds for OTTO Ports prior 
to each Session of Connectivity to the Exchange.\70\ The Exchange 
states that this feature may be disabled for the removal of orders, 
however the Participant will be disconnected.\71\
---------------------------------------------------------------------------

    \64\ See Notice, 89 FR at 57487.
    \65\ See Notice, 89 FR at 57487.
    \66\ See Notice, 89 FR at 57487.
    \67\ See Notice, 89 FR at 57487.
    \68\ See Notice, 89 FR at 57487.
    \69\ See Notice, 89 FR at 57487.
    \70\ See Notice, 89 FR at 57487.
    \71\ See Notice, 89 FR at 57487.
---------------------------------------------------------------------------

    The Exchange states that proposed Options 3, Section 18(f)(1) would 
provide that if the Participant changes the default number of ``nn'' 
seconds, that new setting shall be in effect throughout the current 
Session of Connectivity and will then default back to fifteen 
seconds.\72\ The Exchange states that a Participant may change the 
default setting prior to each Session of Connectivity.\73\ The Exchange 
states that finally, as proposed in Options 3, Section 18(f)(2), if the 
time period is communicated to the Exchange by calling Exchange 
operations, the number of ``nn'' seconds selected by the Participant 
will persist for each subsequent Session of Connectivity until the 
Participant either contacts Exchange operations by phone and changes 
the setting or the Participant selects another time period through the 
Client Application prior to the next Session of Connectivity.\74\ The 
Exchange states that the trigger for OTTO Ports is event and Client 
Application specific.\75\ The Exchange states that automatic 
cancellation of the BX Options Market Maker's open orders for OTTO 
Ports entered into the respective OTTO Ports via a particular Client 
Application will neither impact nor determine the treatment of orders 
of the same or other Participants entered into the OTTO Ports via a 
separate and distinct Client Application.\76\ The Exchange states that 
the proposed amendments for OTTO mirror the manner in which FIX Ports 
are treated when the Exchange's server does not receive a Heartbeat 
message for a certain time period for a FIX Port.\77\
---------------------------------------------------------------------------

    \72\ See Notice, 89 FR at 57487.
    \73\ See Notice, 89 FR at 57487.
    \74\ See Notice, 89 FR at 57487.
    \75\ See Notice, 89 FR at 57487.
    \76\ See Notice, 89 FR at 57487-88.
    \77\ See Notice, 89 FR at 57488. The Exchange states that it 
proposes to update internal cross-references to accommodate 
relocated text. Id.
---------------------------------------------------------------------------

Pricing

    The Exchange states that it proposes to amend its Pricing Schedule 
at Options 7, Section 3, BX Options Market--Ports and other Services, 
to assess a port fee for the new OTTO protocol.\78\
---------------------------------------------------------------------------

    \78\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------

    The Exchange states that it proposes to assess an OTTO Port Fee of 
$650 per port, per month, per account number.\79\
---------------------------------------------------------------------------

    \79\ See Notice, 89 FR at 57488. The Exchange states that the 
term ``account number'' means a number assigned to a Participant. 
The Exchange states that only one account number is necessary to 
transact an options business of BX and that Participants may have 
more than one account number. See Notice, 89 FR at 57488 n.12 
(citing Options 1, Section 1(a)(2)). The Exchange states that 
account numbers are free on BX. Id.
---------------------------------------------------------------------------

    The Exchange states that it also proposes to add OTTO and Disaster 
Recovery Ports to the list of ports that are capped at $7,500 on 
BX.\80\ The Exchange states that today, the maximum monthly fees in the 
aggregate for FIX Port, CTI Port, FIX DROP Port, BX Depth Port and BX 
TOP Port Fees on BX is $7,500.\81\ The Exchange states that these ports 
are available to all BX Participants.\82\ The Exchange states that, for 
example, to the extent that a Participant expended more than $7,500 for 
FIX or OTTO Ports, BX would not charge a Participant for additional FIX 
or OTTO Ports, respectively, beyond the cap.\83\ The Exchange also 
states that it will provide each Participant the first FIX Port at no 
cost to submit orders into BX.\84\
---------------------------------------------------------------------------

    \80\ See Notice, 89 FR at 57488. The Exchange notes that BX 
currently does not assess BX Participants for Disaster Recovery 
Ports. See Notice, 89 FR at 57488 (citing BX Options 7, Section 3).
    \81\ See Notice, 89 FR at 57488 (BX Options 7, Section 3(i)).
    \82\ See Notice, 89 FR at 57488.
    \83\ See Notice, 89 FR at 57488.
    \84\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------

Implementation
    The Exchange states that it will implement this rule change on or 
before December 20, 2025, and that it will announce the operative date 
to Participants in an Options Trader Alert.\85\
---------------------------------------------------------------------------

    \85\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------

III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\86\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\87\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. A temporary suspension of the proposed rule changes is 
necessary and appropriate to allow for additional analysis of the 
proposed rule change's consistency with the Act and the rules 
thereunder.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78s(b)(3)(C).
    \87\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

A. Exchange Statements In Support of the Proposal

Exchange Arguments Concerning Sections 6(b)(4) and 6(b)(5) of the Act
    The Exchange states that the Exchange believes that its proposal is 
consistent with Section 6(b) of the Act,\88\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act,\89\ in particular, in 
that it is designed to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest. The Exchange states that, 
additionally, the Exchange believes that its proposal furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\90\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees, and other charges among members and issuers and 
other persons using any facility, and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.\91\
---------------------------------------------------------------------------

    \88\ See Notice, 89 FR at 57488 (citing 15 U.S.C. 78f(b)).
    \89\ See Notice, 89 FR at 57488 (citing 15 U.S.C. 78f(b)(5)).
    \90\ See Notice, 89 FR at 57488 (citing 15 U.S.C. 78f(b)(4) and 
(5)).
    \91\ See Notice, 89 FR at 57488.
---------------------------------------------------------------------------

OTTO Protocol
    The Exchange states that the Exchange's proposal to adopt OTTO is 
consistent with the Act because OTTO would provide BX Participants with 
an alternative protocol to submit orders to the Exchange.\92\ The 
Exchange states that as proposed, BX would offer the first OTTO Port at 
no cost to submit orders into BX, which would remove impediments to and 
perfect the mechanism of a free and open market.\93\ The Exchange 
states that while BX Participants may elect to obtain multiple ports to 
organize their business,\94\ only one order port is necessary for a 
Participant to enter orders on BX.\95\ The Exchange states

[[Page 70238]]

that a BX Participant may send all orders, proprietary and agency, 
through one port to BX without incurring any cost with this 
proposal.\96\ The Exchange states that in the alternative, BX 
Participants may elect to obtain multiple ports to organize their 
business.\97\
---------------------------------------------------------------------------

    \92\ See Notice, 89 FR at 57488.
    \93\ See Notice, 89 FR at 57488.
    \94\ The Exchange states that, for example, a Participant may 
desire to utilize multiple FIX or OTTO Ports for accounting 
purposes, to measure performance, for regulatory reasons or other 
determinations that are specific to that Participant. See Notice, 89 
FR at 57488 n.14 and 57489 n.27.
    \95\ See Notice, 89 FR at 57489. The Exchange states that only 
BX Participants may utilize ports on BX and that any market 
participant that sends orders to a BX Participant would not need to 
utilize a port. See Notice, 89 FR at 57486.
    \96\ See Notice, 89 FR at 57489.
    \97\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that with the addition of OTTO, a BX 
Participant may elect to enter their orders through FIX, OTTO, or both 
protocols, although both protocols are not necessary.\98\ The Exchange 
states that each BX Participant would receive one OTTO Port at no cost, 
thereby promoting just and equitable principles of trade.\99\ The 
Exchange notes that Participants may prefer one order protocol as 
compared to another order protocol, for example, the ability to route 
an order may cause a Participant to utilize FIX and a Participant that 
desires to execute an order locally may utilize OTTO.\100\ The Exchange 
states that also, the OTTO Port offers lower latency as compared to the 
FIX Port, which may be attractive to Participants depending on their 
trading behavior.\101\ The Exchange states that with this proposal, BX 
Participant may organize their business as they chose with the ability 
to send orders to BX at no cost.\102\ The Exchange states that the 
proposed new OTTO protocol is identical to the OTTO protocol offered 
today on ISE, GEMX, MRX.\103\
---------------------------------------------------------------------------

    \98\ See Notice, 89 FR at 57489.
    \99\ See Notice, 89 FR at 57489.
    \100\ See Notice, 89 FR at 57489.
    \101\ See Notice, 89 FR at 57489.
    \102\ See Notice, 89 FR at 57489.
    \103\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

Other Amendments
    The Exchange that in connection with offering OTTO, the Exchange 
proposes to amend other rules within Options 3 to make clear where the 
FIX and OTTO protocols may be utilized.\104\ The Exchange states that 
IOC Orders may be entered through FIX, OTTO or SQF, a Day order may be 
entered through FIX or OTTO, a GTC order may only be entered through 
FIX, and a Public Customer-to-Public Customer Cross Order may be 
entered through FIX or OTTO.\105\ The Exchange states that other 
processes such the Opening Cancel Timer would impact FIX and OTTO 
equally.\106\
---------------------------------------------------------------------------

    \104\ See Notice, 89 FR at 57489.
    \105\ See Notice, 89 FR at 57489.
    \106\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that the Exchange's proposal to amend the Kill 
Switch at Options 3, Section 17 to align its rule text in proposed 
Options 3, Section 17(a) and (a)(2) with MRX's Options 3, Section 17 is 
consistent with the Act because it does not substantively amend the 
functionality beyond removing the group level cancel capability.\107\ 
The Exchange states that the Exchange's proposal to amend proposed 
Options 3, Section 17(a)(2) to specify that FIX and OTTO orders may be 
cancelled is consistent with the Act as it will make clear that all 
orders entered on BX may be purged through the Kill Switch.\108\ The 
Exchange states that finally, allowing BX Participants to send a mass 
purge request through FIX or OTTO, in lieu of an interface, is 
consistent with Act and the protection of investors and the general 
public because it will enable BX Participants to initiate the Kill 
Switch more seamlessly without the need to utilize a separate 
interface.\109\ The Exchange states that further, utilizing the order 
protocols directly, in lieu of the interface, will align the Kill 
Switch functionality to that of ISE, GEMX and MRX.\110\ The Exchange 
states that when initiating a cancellation of their orders by sending a 
mass purge request through FIX or OTTO, Participants will be able to 
submit a Kill Switch request on a user level only because the purge 
will be specific to a FIX or OTTO user for these ports.\111\
---------------------------------------------------------------------------

    \107\ See Notice, 89 FR at 57489.
    \108\ See Notice, 89 FR at 57489.
    \109\ See Notice, 89 FR at 57489.
    \110\ See Notice, 89 FR at 57489.
    \111\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that finally, the Detection of Loss of 
Communication would apply equally to FIX and OTTO.\112\ The Exchange 
believes that its proposal is consistent with the Act and protects 
investors as the Exchange is making clear what types of order types and 
other mechanisms may utilize OTTO.\113\ The Exchange states that today, 
BX Participants utilize FIX to enter their orders.\114\ The Exchange 
states that despite the fact that OTTO would not be available for the 
GTC Time-In-Force modifier, the Exchange notes that one OTTO Port is 
being provided to Participants at no cost.\115\ The Exchange states 
that today, FIX is the only manner in which to enter orders into 
BX.\116\
---------------------------------------------------------------------------

    \112\ See Notice, 89 FR at 57489.
    \113\ See Notice, 89 FR at 57489.
    \114\ See Notice, 89 FR at 57489.
    \115\ See Notice, 89 FR at 57489.
    \116\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

Pricing
Proposed Port Fees Are Reasonable, Equitable and Not Unfairly 
Discriminatory
    The Exchange states that only one FIX order protocol is required 
for a BX Participant to submit orders into BX and to meet its 
regulatory requirements \117\ at no cost while meeting its regulatory 
requirements.\118\ The Exchange states that the Exchange will provide 
each Participant the first FIX Port at no cost to submit orders into 
BX.\119\ The Exchange states that only one account number is necessary 
to transact an options business on BX and account numbers are available 
to Participants at no cost.\120\
---------------------------------------------------------------------------

    \117\ The Exchange states that BX Participants have trade-
through requirements under Regulation NMS as well as broker-dealers' 
best execution obligations. See Notice, 89 FR at 57489 n.20 (citing 
Rule 611 of Regulation NMS; 17 CFR 242.611 and FINRA Rule 5310).
    \118\ See Notice, 89 FR at 57489.
    \119\ See Notice, 89 FR at 57489.
    \120\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that the Exchange proposes to offer each 
Participant the first FIX Port at no cost to meet their regulatory 
requirements.\121\ The Exchange states as noted above, Participants may 
freely choose to rely on one or many ports, depending on their business 
model.\122\
---------------------------------------------------------------------------

    \121\ See Notice, 89 FR at 57489.
    \122\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that the Exchange's proposal is reasonable, 
equitable and not unfairly discriminatory as BX is providing BX 
Participants the first FIX Port to submit orders at no cost.\123\ The 
Exchange states that these ports, which are offered at no cost, would 
allow a BX Participant to meet its regulatory requirements.\124\ The 
Exchange states that all other ports offered by BX are not required for 
a BX Participant to meet its regulatory obligations.\125\ The Exchange 
states that therefore, for the foregoing reasons, it is reasonable to 
assess no fee for the first FIX Port obtained by a Participant as a BX 
Participant is able to meet its regulatory requirements with these 
ports.\126\ The Exchange states that additionally, the proposal offers 
a free FIX Port to BX Participants that already subscribe to FIX, 
thereby reducing fees for these market participants.\127\
---------------------------------------------------------------------------

    \123\ See Notice, 89 FR at 57489.
    \124\ See Notice, 89 FR at 57489.
    \125\ See Notice, 89 FR at 57489.
    \126\ See Notice, 89 FR at 57489.
    \127\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that further, it is equitable and not unfairly 
discriminatory to assess no fee for the first FIX Port to Participants 
as all BX

[[Page 70239]]

Participants would be entitled to the first FIX Port at no cost.\128\ 
The Exchange states that with this proposal, BX Participants may 
organize their business in such a way as to submit orders to BX at no 
cost.\129\
---------------------------------------------------------------------------

    \128\ See Notice, 89 FR at 57489.
    \129\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that the Exchange's proposal to assess $650 per 
port, per month, per account number for an OTTO Port is reasonable 
because OTTO is not required for a Participant to meet its regulatory 
requirements.\130\ The Exchange states that it is offering the first 
FIX Port at no cost to submit orders to BX.\131\ The Exchange states 
that in addition to the FIX Port, all Participants may elect to 
purchase OTTO to submit orders to BX.\132\ The Exchange states that BX 
Participants utilizing the FIX Port, which is offered at no cost, do 
not need to utilize OTTO.\133\
---------------------------------------------------------------------------

    \130\ See Notice, 89 FR at 57489.
    \131\ See Notice, 89 FR at 57489.
    \132\ See Notice, 89 FR at 57489.
    \133\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that finally, in the event that a BX 
Participant elects to subscribe to multiple ports, the Exchange offers 
a monthly cap beyond which a Participant would be assessed no 
additional fees for the month and proposes to add OTTO to the monthly 
cap.\134\ The Exchange states that BX proposes to cap FIX Port, OTTO 
Port, CTI Port, FIX Drop Port, BX Depth Port, BX TOP Port Fees, and all 
Disaster Recovery Port Fees \135\ at a monthly cap of $7,500.\136\ The 
Exchange states that these caps are reasonable because they allow 
Participants to limit their fees beyond a certain level if they elect 
to purchase multiple ports in a given month.\137\ The Exchange states 
that the caps are also equitable and not unfairly discriminatory 
because any Participant will be subject to the cap, provided they 
exceeded the appropriate dollar amount in a given month.\138\ The 
Exchange states that these ports are available to all BX 
Participants.\139\
---------------------------------------------------------------------------

    \134\ See Notice, 89 FR at 57489.
    \135\ The Exchange states that BX does not assess fees for 
Disaster Recovery Ports. See Notice, 89 FR at 57489 n.30.
    \136\ See Notice, 89 FR at 57489.
    \137\ See Notice, 89 FR at 57489.
    \138\ See Notice, 89 FR at 57489.
    \139\ See Notice, 89 FR at 57489.
---------------------------------------------------------------------------

    The Exchange states that the proposed BX OTTO fee is the same as 
the OTTO Port fee on MRX, for the identical port.\140\ The Exchange 
states that additionally, MRX offers one free FIX Port to its Members 
and assesses the same FIX Port fee of $650 per port, per month, per 
account number as BX assesses today for a FIX Port. The Exchange states 
that MRX offers its Members a free FIX Disaster Recovery Port.\141\ The 
Exchange states that today, BX does not assess Disaster Recovery Port 
fees.\142\ The Exchange states that finally, today, MRX offers a $7,500 
monthly cap for OTTO Ports, CTI Ports, FIX Ports, FIX Drop Ports and 
all Disaster Recovery Ports.\143\ The Exchange states that BX's 
proposed monthly cap includes BX Depth Ports and BX Top Ports, which 
are currently assessed fees of $650 per port, per month, in addition to 
the same ports that are capped on MRX (FIX Ports, OTTO Ports, CTI 
Ports, FIX DROP Ports, and all Disaster Recovery Ports).\144\
---------------------------------------------------------------------------

    \140\ See Notice, 89 FR at 57490.
    \141\ See Notice, 89 FR at 57490 (citing MRX Options 7, Section 
6).
    \142\ See Notice, 89 FR at 57490 (citing BX Options 7, Section 
3).
    \143\ See Notice, 89 FR at 57490 (citing MRX Options 7, Section 
6).
    \144\ See Notice, 89 FR at 57490. The Exchange states that, 
therefore, BX's proposed cap can also be obtained utilizing BX Depth 
Port and BX Top Port in addition to the same ports that MRX 
aggregates for purposes of the monthly cap. See Notice, 89 FR at 
57488.
---------------------------------------------------------------------------

Exchange Arguments Concerning Competition and Section 6(b)(8)
    The Exchange states that 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.\145\
---------------------------------------------------------------------------

    \145\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

    The Exchange states that the OTTO protocol is a proprietary 
protocol of Nasdaq, Inc.\146\ The Exchange states that the Exchange 
continues to innovate and modernize technology so that it may continue 
to compete among options markets.\147\ The Exchange states that the 
ability to continue to innovate with technology and offer new products 
to market participants allows BX to remain competitive in the options 
space which currently has seventeen options markets and potential new 
entrants.\148\ The Exchange states that if BX were unable to offer and 
price new protocols, it would result in an undue burden on competition 
as BX would not have the ability to innovate and modernize its 
technology to compete effectively in the options space.\149\ The 
Exchange states that BX's ability to offer OTTO will enable it to 
compete with other options markets that provide its market participants 
a choice as to the type of order entry protocols that may be 
utilized.\150\ The Exchange states that BX's ability to offer and price 
new and innovative products and continue to modernize its technology, 
similar to other options markets, supports intermarket 
competition.\151\
---------------------------------------------------------------------------

    \146\ See Notice, 89 FR at 57490.
    \147\ See Notice, 89 FR at 57490.
    \148\ See Notice, 89 FR at 57490.
    \149\ See Notice, 89 FR at 57490.
    \150\ See Notice, 89 FR at 57490.
    \151\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

OTTO Protocol
    The Exchange states that the Exchange's proposal to adopt an OTTO 
Protocol does not impose an undue burden on intramarket 
competition.\152\ The Exchange states that today, all BX Participants 
utilize FIX to send orders to BX.\153\ The Exchange states that the 
Exchange would offer each BX Participant the first FIX Port at no cost 
with this proposal.\154\ The Exchange states that with the addition of 
OTTO Ports, a BX Participant may elect to enter their orders through 
FIX, OTTO, or both protocols, although both protocols are not 
necessary.\155\ The Exchange states that the Exchange's proposal to 
adopt an OTTO Protocol does not impose an undue burden on intermarket 
competition as other options exchanges offer multiple protocols today 
such as ISE, GEMX and MRX.\156\
---------------------------------------------------------------------------

    \152\ See Notice, 89 FR at 57490.
    \153\ See Notice, 89 FR at 57490.
    \154\ See Notice, 89 FR at 57490.
    \155\ See Notice, 89 FR at 57490.
    \156\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

Other Amendments
    The Exchange states that the Exchange's proposal to amend other 
rules within Options 3 to make clear where the FIX and OTTO protocols 
may be utilized does not impose an undue burden on intramarket 
competition as these rules will apply in the same manner to all 
Participants.\157\ The Exchange states that the Exchange's proposal to 
amend other rules within Options 3 to make clear where the FIX and OTTO 
protocols may be utilized does not impose an undue burden on 
intermarket competition as other options exchanges may elect to utilize 
their order entry protocols in different ways.\158\
---------------------------------------------------------------------------

    \157\ See Notice, 89 FR at 57490.
    \158\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

Pricing
    The Exchange states that nothing in the proposal burdens inter-
market competition because BX's proposal to offer the first FIX Port 
for free is similar to MRX's FIX Port offering and allows BX 
Participants to meet their regulatory obligations.\159\ The Exchange 
states that

[[Page 70240]]

BX's offering would permit Participants the ability to submit orders to 
BX at no cost.\160\ The Exchange states that OTTO Ports are not 
required for BX Participants to meet their regulatory obligations.\161\
---------------------------------------------------------------------------

    \159\ See Notice, 89 FR at 57490.
    \160\ See Notice, 89 FR at 57490.
    \161\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

    The Exchange states that nothing in the proposal burdens intra-
market competition because the Exchange would uniformly assess the port 
fees to all Participants, as applicable, and would uniformly apply 
monthly caps.\162\ The Exchange states that the proposed fees are 
identical to fees recently approved on MRX.\163\ The Exchange states 
that the proposed BX OTTO fee is the same as the OTTO Port fee on MRX, 
for the identical port.\164\ The Exchange states that additionally, MRX 
offers one free FIX Port to its Members and assesses the same FIX Port 
fee of $650 per port, per month, per account number as BX assessed 
today for FIX.\165\ The Exchange states that MRX also offers a free FIX 
Disaster Recovery Port.\166\ The Exchange states that today, BX does 
not assess Disaster Recovery Port fees.\167\ The Exchange states that 
finally, today, MRX offers a $7,500 monthly cap for OTTO Ports, CTI 
Ports, FIX Ports, FIX Drop Ports and all Disaster Recovery Ports.\168\ 
The Exchange states that BX's proposed monthly cap includes BX Depth 
Ports and BX Top Ports, which are assessed fees of $650 per port, per 
month, in addition to the same ports that are capped on MRX (FIX Ports, 
OTTO Ports, CTI Ports, FIX DROP Ports, and all Disaster Recovery 
Ports).\169\
---------------------------------------------------------------------------

    \162\ See Notice, 89 FR at 57490.
    \163\ See Securities Exchange Commission Release No. 96824 
(February 7, 2023), 88 FR 8975 (February 10, 2023) (SR-MRX-2023-05).
    \164\ See Notice, 89 FR at 57490.
    \165\ See MRX Options 7, Section 6.
    \166\ Id.
    \167\ See BX Options 7, Section 3. BX is adding Disaster 
Recovery Ports to its monthly cap.
    \168\ See MRX Options 7, Section 6.
    \169\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

    The Exchange states that to the extent that the Commission does not 
permit BX to assess the same identical fees for the same identical 
products on its market, the Commission is creating a burden on 
competition by allowing MRX to assess fees and offer a product that 
would otherwise be unavailable on BX.\170\ The Exchange states that 
additionally, the proposal offers a free FIX Port to BX Participants 
that already subscribe to FIX, the only order port currently offered on 
BX, thereby reducing fees for these market participants.\171\ The 
Exchange states that each SRO should be permitted to mirror fees 
assessed by another SRO to further competition among the 
exchanges.\172\
---------------------------------------------------------------------------

    \170\ See Notice, 89 FR at 57490.
    \171\ See Notice, 89 FR at 57490.
    \172\ See Notice, 89 FR at 57490.
---------------------------------------------------------------------------

B. Suspension

    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\173\ The instructions to Form 19b-4, on which 
exchanges file their proposed rule changes, specify that such statement 
``should be sufficiently detailed and specific to support a finding 
that the proposed rule change is consistent with [those] 
requirements.'' \174\
---------------------------------------------------------------------------

    \173\ See 17 CFR 240.19b-4(Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \174\ See id.
---------------------------------------------------------------------------

    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
require the rules of an exchange to: (1) provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \175\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \176\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\177\
---------------------------------------------------------------------------

    \175\ 15 U.S.C. 78f(b)(4).
    \176\ 15 U.S.C. 78f(b)(5).
    \177\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's proposed rule change, the 
Commission intends to further consider whether the Proposal is 
consistent with the statutory requirements applicable to a national 
securities exchange under the Act. In particular, the Commission will 
consider whether the proposed rule change satisfies the standards under 
the Act and the rules thereunder requiring, among other things, that an 
exchange's rules provide for the equitable allocation of reasonable 
fees among members, issuers, and other persons using its facilities; 
not permit unfair discrimination between customers, issuers, brokers or 
dealers; and do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\178\
---------------------------------------------------------------------------

    \178\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule change.\179\
---------------------------------------------------------------------------

    \179\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Changes

    In addition to temporarily suspending the Proposal, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\180\ and 19(b)(2)(B) of the Act \181\ to determine whether the 
Exchange's proposed rule change should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
provide additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
---------------------------------------------------------------------------

    \180\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \181\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\182\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
---------------------------------------------------------------------------

    \182\ Id. Section 19(b)(2)(B) of the Act also provides that 
proceedings to determine whether to disapprove a proposed rule 
change must be concluded within 180 days of the date of publication 
of notice of the filing of the proposed rule change. See id. The 
time for conclusion of the proceedings may be extended for up to 60 
days if the Commission finds good cause for such extension and 
publishes its reasons for so finding, or if the exchange consents to 
the longer period. See id.
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposed 
fees are consistent with Section 6(b)(4) of the Act, which requires 
that the rules of a national securities exchange ``provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities''; \183\
---------------------------------------------------------------------------

    \183\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposed 
fees are consistent with Section 6(b)(5) of the Act, which requires, 
among other things, that the rules of a national securities exchange 
not be ``designed to permit unfair discrimination between

[[Page 70241]]

customers, issuers, brokers, or dealers''; \184\ and
---------------------------------------------------------------------------

    \184\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposed 
fees are consistent with Section 6(b)(8) of the Act, which requires 
that the rules of a national securities exchange ``not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of [the Act].'' \185\
---------------------------------------------------------------------------

    \185\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As discussed in Section III above, the Exchange made various 
arguments in support of the Proposal. There are questions as to whether 
the Exchange has provided sufficient information to demonstrate that 
the proposed fees are consistent with the Act and the rules thereunder. 
The Commission will specifically consider, among other things, whether 
the Exchange has provided sufficient evidence to demonstrate that the 
proposed fees are reasonable and equitably allocated, are not unfairly 
discriminatory, and do not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \186\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\187\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\188\
---------------------------------------------------------------------------

    \186\ 17 CFR 201.700(b)(3).
    \187\ See id.
    \188\ See id.
---------------------------------------------------------------------------

    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposed fees are consistent with the Act, and 
specifically, with its requirements that exchange fees be reasonable 
and equitably allocated, not be unfairly discriminatory, and not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\189\
---------------------------------------------------------------------------

    \189\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by September 19, 2024. 
Rebuttal comments should be submitted by October 3, 2024. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral 
presentation.\190\
---------------------------------------------------------------------------

    \190\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by an SRO. 
See Securities Acts Amendments of 1975, Report of the Senate 
Committee on Banking, Housing and Urban Affairs to Accompany S. 249, 
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the Proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule changes.
    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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2024-019 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-BX-2024-019. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-BX-2024-019 and should be 
submitted on or before September 19, 2024. Rebuttal comments should be 
submitted by October 3, 2024.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\191\ that File No. SR-BX-2024-019, be and hereby is, temporarily 
suspended. In addition, the Commission is instituting proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
---------------------------------------------------------------------------

    \191\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\192\
---------------------------------------------------------------------------

    \192\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-19394 Filed 8-28-24; 8:45 am]
BILLING CODE 8011-01-P