[Federal Register Volume 89, Number 170 (Tuesday, September 3, 2024)]
[Notices]
[Pages 71722-71724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19661]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100823; File No. SR-BX-2024-029]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Remove Directed 
Order Functionality

August 27, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 15, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to reserve Options 2, Section 10, Directed 
Market Makers.\3\
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    \3\ A Directed Market Maker is a Market Maker that may be 
entitled to an allocation in accordance with Options 3, Section 10 
provided the Directed Market Maker was quoting at the better of the 
internal BBO or the NBBO at the time of receipt of the Directed 
Order. See Options 2, Section 10.
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    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.

[[Page 71723]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BX proposes to reserve Options 2, Section 10, Directed Market 
Makers. The Exchange does not currently offer Directed Order \4\ 
functionality and is not planning to offer this functionality.
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    \4\ The term ``Directed Order'' means any order to buy or sell 
which has been directed to a particular Market Maker by an Order 
Flow Provider. The term ``Order Flow Provider'' means any 
Participant that submits, as agent, orders to the Exchange. See 
Supplementary Material .01 to Options 2, Section 10.
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    BX received approval for its Directed Order functionality in 
2015.\5\ Since that time, the Exchange has not implemented this 
functionality. At this time, the Exchange proposes to remove the rule 
text related to the Directed Order functionality and reserve Options 2, 
Section 10. If BX determines to offer Directed Order functionality it 
would file a rule change with the Commission.
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    \5\ See Securities Exchange Act Release No. 74129 (January 23, 
2015), 80 FR 4954 (January 29, 2025) (SR-BX-2015-049) (Order 
Approving Proposed Rule Change Relating to Directed Market Makers). 
BX recently amended the rule text in Options 2, Section 10. See also 
Securities Exchange Act Release No. 100542 (July 16, 2024), 89 FR 
59174 (July 22, 2024) (SR-BX-2024-003) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend Options 2, 
Sections 6 and 10).
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    With the removal of the Directed Order functionality, the Exchange 
proposes to reserve the description of a Directed Order within 
paragraph (a)(2) of Options 3, Section 7, Types of Orders and Order and 
Quote Protocols. The Exchange also proposes to remove references to 
Directed Market Maker or ``DMM'' allocation entitlements within Options 
3, Section 10, Order Book Allocation.\6\ In Options 3, Section 
10(a)(2)(iii)(2), the Exchange proposes to remove the clause 
``excluding All-or-None Orders that cannot be satisfied.'' This clause 
is unnecessary as All-or-None Orders \7\ are to be executed in their 
entirety or not at all. All-or-None Orders do not rest on the order 
book on BX and would not be allocated pursuant to Options 3, Section 
10, which describes order book allocation for resting orders.
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    \6\ The Exchange updates citations where necessary to reflect 
changes in numbering.
    \7\ ``All-or-None Order'' is a market or limit order which is to 
be executed in its entirety or not at all. All-or-None Orders are 
treated as having a time-in-force designation of Immediate or 
Cancel. All-or-None Orders received prior to the opening or after 
market close will be rejected. See Options 3, Section 7(a)(7).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it is consistent with the Act to remove 
BX's Directed Order functionality, which is not operative, because it 
would protect investors and the general public by avoiding confusion as 
whether the Exchange offers this functionality. BX received approval 
for its Directed Order functionality in 2015.\10\ Since that time, the 
Exchange has not implemented this functionality. At this time, the 
Exchange proposes to remove the rule text related to the Directed Order 
functionality and reserve Options 2, Section 10. If BX determines to 
offer Directed Order functionality it would file a rule change with the 
Commission.
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    \10\ See Securities Exchange Act Release No. 74129 (January 23, 
2015), 80 FR 4954 (January 29, 2025) (SR-BX-2015-049) (Order 
Approving Proposed Rule Change Relating to Directed Market Makers).
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    The Exchange also believes that removing references to a Directed 
Order within Options 3, Section 7(a)(2) and removing references to 
Directed Market Maker or ``DMM'' allocation entitlements within Options 
3, Section 10 will bring greater clarity to the unavailability of the 
Directed Order functionality. Amending the clause in Options 3, Section 
10(a)(2)(iii)(2) related to All-or-None Orders is consistent with the 
Act because All-or-None Orders are to be executed in their entirety or 
not at all. All-or-None Orders do not rest on the order book on BX and 
would not be allocated pursuant to Options 3, Section 10, which 
describes order book allocation for resting orders.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange's proposal to remove BX's Directed Order functionality 
does not impose an undue burden on intramarket competition because no 
Market Maker has ever utilized this functionality as the functionality 
has never been operative. The Exchange also believes that removing 
references to a Directed Order within Options 3, Section 7(a)(2) and 
removing references to Directed Market Maker or ``DMM'' allocation 
entitlements within Options 3, Section 10 will bring greater clarity to 
the unavailability of the Directed Order functionality. The Exchange's 
proposal to remove BX's Directed Order functionality does not impose an 
undue burden on intermarket competition as other options exchanges may 
elect to offer Directed Order functionality. The Exchange notes that 
today other options exchanges offer this functionality.\11\
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    \11\ See e.g. Nasdaq Phlx, LLC and Nasdaq ISE, LLC Options 2, 
Section 10.
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    Amending the clause in Options 3, Section 10(a)(2)(iii)(2) related 
to All-or-None Orders does not impose an undue burden on intramarket 
competition because All-or-None Orders are to be executed in their 
entirety or not at all and they do not rest on the order book. Amending 
the clause in Options 3, Section 10(a)(2)(iii)(2) related to All-or-
None Orders does not impose an undue burden on intermarket competition 
because other options exchanges have similar rules for order allocation 
for resting orders only. Also, the all-or-none order type on another 
exchange could allow it to rest on the order book.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

[[Page 71724]]

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2024-029 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-2024-029. 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-2024-029 and should be 
submitted on or before September 24, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-19661 Filed 8-30-24; 8:45 am]
BILLING CODE 8011-01-P