
[Federal Register Volume 82, Number 50 (Thursday, March 16, 2017)]
[Notices]
[Pages 14063-14065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05224]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80217; File No. SR-NASDAQ-2017-021]


Self-Regulatory Organizations; NASDAQ Stock Market, LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Chapter X, Section 7(a) of the Exchange's Options Rules

March 10, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 6, 2017, NASDAQ Stock Market, LLC (the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule

[[Page 14064]]

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 Chapter X, Section 7(a) of the 
Exchange's Rules applicable to the NASDAQ Options Market, LLC 
(``NOM''), as described in further detail below.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend Chapter X, 
Section 7(a) of the Exchange's rules (the ``Rules'') applicable to NOM, 
which sets forth NOM's minor rule violation penalties and in 
particular, penalties for violating Chapter III, Section 7 of the Rules 
pertaining to position limits, so that these penalties are consistent 
with those of NOM's sister exchange, the International Securities 
Exchange, LLC (``ISE''), as well as other competing options exchanges.
    Chapter III, Section 7 of the Exchange's Rules imposes position 
limits for Options Participants in certain circumstances. Meanwhile, 
Chapter X, Section 7(a) of the Rules assesses fines for minor rule 
violations, including position limits violations, as follows.
    First, for violations occurring in customer accounts, Section 
7(a)(i) assesses fines based upon the cumulative number of violations 
that occur over the course of a two year rolling period. For the first 
six violations that occur during any such period, an Option Participant 
will either be issued a letter of caution (to the extent that the 
violations are up to five percent in excess of applicable limits) or 
assessed $1 per contract (to the extent that the violations are more 
than five percent in excess of applicable limits). For the seventh 
through twelfth violations that occur during any such period, the fine 
is $1 per contract over the limit, regardless of the extent of the 
violations. Finally, for the thirteenth or any additional violations 
that occur during any such period, the fine increases to $5 per 
contract over the limit. Notwithstanding the above, the Rule provides 
that the minimum fine that the Exchange shall assess is $100.
    Second, for violations that occur in the accounts of Options 
Participants (i.e., proprietary accounts and accounts of other Options 
Participants), Section 7(a)(ii) again assesses fines based upon the 
cumulative number of violations that occur over the course of a two 
year rolling period. For the first three violations that occur in any 
such period, an Option Participant will either be assessed a letter of 
caution (to the extent that the violations are up to five percent in 
excess of applicable limits) or $1 per contract (to the extent that the 
violations are more than five percent in excess of applicable limits). 
For the fourth through the sixth violations that occur during any such 
period, the fine is $1 per contract over the limit, regardless of the 
extent of the violations. Finally, for the seventh or any additional 
violations that occur during any such period, the fine increases to $5 
per contract over the limit. Notwithstanding the above, the Rule 
provides that the minimum fine that the Exchange shall assess is $100.
    The Exchange proposes to replace NOM's schedule of fines for 
position limit violations to mirror the schedule of fines that ISE and 
other exchanges apply to such violations. The ISE schedule of position 
limits fines set forth in ISE Rule 1614(d)(1) is simpler and, in 
certain instances, more stringent than the NOM schedule of fines. It 
provides that for any cumulative violations of the ISE position limits 
rule \3\ that occur during any rolling two year period, ISE assesses a 
fine of $500 for the first offense, $1,000 for the second offense, 
$2,500 for the third offense, and $5,000 for the fourth and each 
subsequent offense. The ISE rule is identical to that which several 
other exchanges employ.\4\ The proposed rule change conforms the fine 
schedule of NOM to that of ISE.
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    \3\ ISE Rule 1614(d)(1) counts as a single violation, provided 
that such a violation is inadvertent: (i) A 1 trade date overage; 
(ii) a consecutive string of trade date overage violations where the 
position does not change or where a steady reduction in the overage 
occurs; or (iii) a consecutive string of trade date overage 
violations resulting from other mitigating circumstances.
    \4\ See BATS BZX Exchange, Inc. Rule 25.3(a); C2 Options 
Exchange Rule Chapter 17 (incorporating by reference CBOE Rule 
17.50(g)(1); see also NYSE Arca, Inc. Rule 10.12(k)(i)(21) (imposing 
fines of $1,000, $2,500, and $5,000 for the first, second, and third 
violations, respectively while omitting corresponding verbiage that 
defines the nature of a single violation subject to a fine).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanisms 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposed Rule change will be more 
effective than the existing Rule in preventing manipulative acts and 
practices and protecting investors because under the proposed Rule, the 
Exchange will immediately impose a fine upon an Options Participant 
that violates its position limits, and it will do so regardless of the 
extent of the violation, as opposed to only imposing a fine (rather 
than a caution letter) after the first six violations or to the extent 
that a violation exceeds 5 percent of the applicable limits.
    Moreover, the proposed Rule change promotes fairness and 
consistency in the marketplace by harmonizing penalties across 
exchanges for the same conduct. As noted above, the proposed schedule 
of fines would be identical to the schedules of fines that ISE, BATS 
BZX, and C2 Options Exchange presently employ, and similar to that 
which NYSE Arca employs.

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 proposal will adopt the 
same schedule of fines as exists at other exchanges and it will apply 
the same schedule of fines to all Options Participants.

[[Page 14065]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) under the Act 
\9\ normally does not become operative prior to 30 days after the date 
of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\10\ the 
Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative upon filing. The Exchange has stated 
that it is requesting this waiver so that it may implement the proposed 
rule change at the earliest point in time possible. The Exchange 
further stated that the proposed rule change promotes the protection of 
investors and the public interest by imposing more immediate and 
significant sanctions for violations of Exchange rules.
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    \9\ Id.
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that the proposal harmonizes the Exchange's 
schedule of fines with respect to position limit violations with fines 
currently imposed by other exchanges, and thus does not raise any new 
or novel issues. For this reason, the Commission hereby waives the 30-
day operative delay requirement and designates the proposed rule change 
as operative upon filing.\11\
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    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2017-021 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2017-021. 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 Web site (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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-021, and should 
be submitted on or before April 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05224 Filed 3-15-17; 8:45 am]
BILLING CODE 8011-01-P


