[Federal Register Volume 82, Number 208 (Monday, October 30, 2017)]
[Notices]
[Pages 50196-50198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23484]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81935; File No. SR-GEMX-2017-49]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 723 
To Remove Obsolete Rule Text

October 24, 2017.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 17, 2017, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 723 (Price Improvement 
Mechanism for Crossing Transactions) to remove obsolete rule text.
    The text of the proposed rule change is available on the Exchange's 
Web site at www.ise.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

[[Page 50197]]

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

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

1. Purpose
    The Exchange proposes to amend Rule 723 (Price Improvement 
Mechanism for Crossing Transactions) to remove obsolete rule text.
    Rule 723 sets forth the requirements for the PIM, which was adopted 
as part of its application to be registered as a national securities 
exchange under its previous name of Topaz Exchange, LLC (``Topaz'').\3\ 
Certain aspects of PIM were adopted on a pilot basis (``Pilot''); 
specifically, the termination of the exposure period by unrelated 
orders, and no minimum size requirement of orders eligible for PIM. The 
Pilot expired on January 18, 2017.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 70050 (July 26, 
2013), 78 FR 46622 (August 1, 2013) (File No. 10-209) (``Exchange 
Approval Order''). The Exchange subsequently changed its name to ISE 
Gemini. See Securities Exchange Act Release No. 71586 (February 20, 
2014), 79 FR 10861 (February 26, 2014) (SR-Topaz-2014-06).
---------------------------------------------------------------------------

    On December 12, 2016, the Exchange filed with the Commission a 
proposed rule change to make the Pilot permanent, and also to change 
the requirements for providing price improvement for Agency Orders of 
less than 50 option contracts (other than auctions involving Complex 
Orders) where the National Best Bid and Offer (``NBBO'') is only $0.01 
wide.\4\ The Commission approved this proposal on January 18, 2017.\5\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 79541 (December 13, 
2016), 81 FR 91974 (December 19, 2017) (SR-ISEGemini-2016-23). The 
Exchange notes that, on April 3, 2017, ISE Gemini, LLC was renamed 
Nasdaq GEMX, LLC to reflect its new placement within the Nasdaq, 
Inc. corporate structure in connection with the March 9, 2016 
acquisition by Nasdaq of the capital stock of U.S. Exchange 
Holdings, and the indirect acquisition all of the interests of the 
International Securities Exchange, LLC, ISE Gemini, LLC and ISE 
Mercury, LLC. See Securities Exchange Act Release No. 80248 (March 
15, 2017), 82 FR 14547 (March 21, 2017) (SR-ISEGemini-2017-13).
    \5\ See Securities Exchange Act Release No. 79840 (January 18, 
2017), 82 FR 8474 (January 25, 2017) (SR-ISEGemini-2016-23).
---------------------------------------------------------------------------

    In modifying the requirements for price improvement for Agency 
Orders of less than 50 contracts, the Exchange proposed to amend Rule 
723(b) to require Electronic Access Members to provide at least $0.01 
price improvement for an Agency Order if that order is for less than 50 
contracts and if the difference between the NBBO is $0.01.
    The Exchange adopted a member conduct standard to implement this 
requirement during the time pursuant to which ISE Gemini symbols were 
migrating from the ISE Gemini platform to the Nasdaq INET platform. At 
the time it proposed the member conduct standard, the Exchange 
anticipated that the migration to the Nasdaq platform would be complete 
on or before April 15, 2017. Accordingly, Rule 723(b) stated that, for 
the period beginning January 19, 2017 until a date specified by the 
Exchange in a Regulatory Information Circular, which date shall be no 
later than April 15, 2017, if the Agency Order is for less than 50 
option contracts, and if the difference between the NBBO is $0.01, an 
Electronic Access Member shall not enter a Crossing Transaction unless 
such Crossing Transaction is entered at one minimum price improvement 
increment better than the NBBO on the opposite side of the market from 
the Agency Order, and better than the limit order or quote on the 
Nasdaq GEMX order book on the same side of the Agency Order. This 
requirement applied regardless of whether the Agency Order is for the 
account of a public customer, or where the Agency Order is for the 
account of a broker dealer or any other person or entity that is not a 
Public Customer.\6\
---------------------------------------------------------------------------

    \6\ Nasdaq ISE, LLC (``ISE'') filed a proposed rule change at 
the same time as the Exchange to adopt the same price improvement 
requirement. To enforce this requirement, ISE also amended its Rule 
1614 (Imposition of Fines for Minor Rule Violations). Specifically, 
ISE added Rule 1614(d)(4), which provides that any Member who enters 
an order into PIM for less than 50 contracts, while the National 
Best Bid or Offer spread is $0.01, must provide price improvement of 
at least one minimum price improvement increment better than the 
NBBO on the opposite side of the market from the Agency Order, which 
increment may not be smaller than $0.01. Failure to provide such 
price improvement will result in members being subject to the 
following fines: $500 for the second offense, $1,000 for the third 
offense, and $2,500 for the fourth offense. Subsequent offenses will 
subject the member to formal disciplinary action. The Exchange will 
review violations on a monthly cycle to assess these violations. 
This provision was to be in effect for the period beginning January 
19, 2017 until a date specified by the Exchange in a Regulatory 
Information Circular, which date shall be no later than until 
September 15, 2017. The Exchange incorporated this provision by 
reference. See GEMX Chapter 16 (Discipline). Contemporaneous with 
this proposal, ISE is now submitting a filing to remove the member 
conduct standard for its price improvement rule and the 
corresponding provision in Rule 1614 for violations of that 
standard. As such, GEMX will no longer incorporate this provision of 
Rule 1614 by reference.
---------------------------------------------------------------------------

    In adopting the price improvement requirement for Agency Orders of 
less than 50 contracts, the Exchange also proposed to amend Rule 723(b) 
to adopt a systems-based mechanism to implement this requirement, which 
shall be effective following the migration of a symbol to the Nasdaq 
INET platform. Under this provision, if the Agency Order is for less 
than 50 option contracts, and if the difference between the NBBO is 
$0.01, the Crossing Transaction must be entered at one minimum price 
improvement increment better than the NBBO on the opposite side of the 
market from the Agency Order and better than the limit order or quote 
on the Nasdaq GEMX order book on the same side of the Agency Order.
    By April 15, 2017, the Exchange had completed the migration of 
symbols to the Nasdaq INET platform, and adopted the corresponding 
systems-based mechanism for enforcing the price improvement requirement 
where the Agency Order is for less than 50 option contracts, and if the 
difference between the NBBO is $0.01. Accordingly, the Exchange is now 
proposing to delete the rule text in Rule 723 that implements the 
member conduct standard.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\7\ in general, and furthers the objectives of section 
6(b)(5) of the Act,\8\ 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 believes this proposal is consistent with the Act because 
it removes language that implements the member conduct standard where 
the Agency Order is for less than 50 option contracts, and if the 
difference between the NBBO is $0.01. As noted above, this standard has 
become obsolete with the migration of all symbols to the Nasdaq INET 
system and the corresponding adoption of the systems-based mechanism 
for enforcing that requirement, which was previously approved by the 
Commission.\9\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See supra note 5.
---------------------------------------------------------------------------

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

[[Page 50198]]

necessary or appropriate in furtherance of the purposes of the Act, as 
the rule text to be removed has become obsolete with the migration of 
all symbols to the Nasdaq INET system and the corresponding adoption of 
the systems-based mechanism for enforcing the price improvement 
requirement where the Agency Order is for less than 50 option 
contracts, and if the differences between the NBBO is $0.01.

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

    No written comments were either solicited or received.

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

    Because the 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) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \12\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposed rule change may become operative upon filing. The Exchange 
states that waiver of the operative delay will allow the Exchange to 
remove the obsolete rule text immediately, minimizing potential 
investor confusion. The Commission believes the waiver of the operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission hereby waives the operative delay 
and designates the proposed rule change operative upon filing.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-GEMX-2017-49 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-GEMX-2017-49. 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-GEMX-2017-49, and should be 
submitted on or before November 20, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-23484 Filed 10-27-17; 8:45 am]
BILLING CODE 8011-01-P


