[Federal Register Volume 84, Number 144 (Friday, July 26, 2019)]
[Notices]
[Pages 36133-36134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15875]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86426; File No. SR-GEMX-2019-09]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 2 
(Options Market Participants) and Options 3 (Options Trading Rules)

July 22, 2019.
    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 July 17, 2019, 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, 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.
---------------------------------------------------------------------------

    \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 Options 2 (Options Market 
Participants) and Options 3 (Options Trading Rules) relating to certain 
order types.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is amend Options 2 (Options 
Market Participants) and Options 3 (Options Trading Rules) relating to 
certain order types. Each change is described in more detail below.
Stopped Orders
    The Exchange proposes to amend its rules to remove Stopped Orders 
as an order type. A Stopped Order is a limit order that meets the 
requirements of Options 5, Section 2(b)(8).\3\ As provided in Options 
5, Section 2(b)(8), a ``stopped order'' is defined as an order for 
which, at the time of receipt for the order, a Member had guaranteed an 
execution at no worse than a specified price, where: (i) The stopped 
order was for the account of a Customer; (ii) the Customer agreed to 
the specified price on an order-by-order basis; and (iii) the price of 
the Trade-Through was, for a stopped buy order, lower than the national 
Best Bid in the options series at the time of execution, or, for a 
stopped sell order, higher than the national Best Offer in the options 
series at the time of execution. To execute Stopped Orders, Members 
must enter them into the Facilitation Mechanism or Solicited Order 
Mechanism pursuant to Options 3, Section 11.\4\
---------------------------------------------------------------------------

    \3\ See Options 3, Section 7(b)(5).
    \4\ Stopped orders were originally introduced on the Exchange as 
a Trade-Through exception under the Options Order Protection and 
Locked/Crossed Market Plan (the ``Plan''). GEMX adopted rules to 
implement the Trade-Through exception for stopped orders as an order 
type. See Securities Exchange Act Release No. 70050 (July 26, 2013), 
78 FR 46622 (August 1, 2013) (File No. 10-209).
---------------------------------------------------------------------------

    Due to a lack of demand for Stopped Orders, the Exchange plans to 
decommission the functionality supporting this order type.\5\ To 
reflect this elimination, the Exchange proposes to delete all 
references to Stopped Orders as follows:
---------------------------------------------------------------------------

    \5\ No member has used this order type since the Exchange's 
previous trading system migrated over to Nasdaq INET technology in 
2017.
---------------------------------------------------------------------------

     Options 2, Section 6(a), which currently allows Market 
Makers to enter all order types in the options classes to which they 
are appointed, except for Stopped Orders, Reserve Orders, and Customer 
Cross Orders.
     Options 3, Section 7(b)(5), which defines a Stopped Order.
    The Exchange proposes to implement the amendments relating to 
Stopped Orders by November 1, 2019.
All-Or-None Orders
    The Exchange also proposes to amend Options 3, Section 8 (Opening) 
to remove specific references to the manner in which All-Or-None Orders 
\6\ (``AONs'') will be treated in the Exchange's opening process. The 
Exchange previously amended its rules to provide that an AON may only 
be entered into the System with a time-in-force designation of 
Immediate-Or-Cancel,\7\ and deleted related rule text that described an 
AON as persisting in the Exchange's order book.\8\ The Exchange, 
however, inadvertently did not remove such AON references from the 
opening process rule in Options 3, Section 8. At the time the 
Exchange's opening process was adopted, AONs were not restricted and 
could trade as a limit or market order to be executed in its entirety 
or not at all.\9\ With the amendments in SR-ISEGemini-2017-08, an AON 
does not persist in the order book and is therefore treated the same as 
any other Immediate-or-Cancel Order. As such, the carve-outs specified 
in Section 8(b), (g) and (j)(6) are unnecessary since an All-or-None 
Order would execute immediately or cancel similar to other orders which 
trade in the same manner. The Exchange believes removing these 
references will eliminate confusion.
---------------------------------------------------------------------------

    \6\ An All-Or-None Order is a limit or market order that is to 
be executed in its entirety or not at all. An All-Or-None Order may 
only be entered as an Immediate-or-Cancel Order. See Options 3, 
Section 7(c).
    \7\ An Immediate-Or-Cancel Order is a limit order that is to be 
executed in whole or in part upon receipt. Any portion not so 
executed is to be treated as cancelled. See Options 3, Section 
7(b)(3). See Securities Exchange Act Release No. 80102 (February 24, 
2017), 82 FR 12381 (March 2, 2017) (SR-ISEGemini-2017-08) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related 
to All-or-None Orders).
    \8\ See Securities Exchange Act Release No. 82128 (November 20, 
2017), 82 FR 56082 (November 27, 2017) (SR-GEMX-2017-51).
    \9\ See Securities Exchange Act Release No. 80014 (February 10, 
2017), 82 FR 10952 (February 16, 2017) (SR-ISEGemini-2016-18).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ 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

[[Page 36134]]

system, and, in general to protect investors and the public interest.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that removing Stopped Orders as an order type 
is consistent with the Act because it would simplify the functionality 
available on the Exchange and reduce the complexity of its order types. 
The Exchange's affiliated options markets, Nasdaq BX (``BX''), The 
Nasdaq Options Market (``NOM''), Nasdaq PHLX (``Phlx'') and Nasdaq ISE, 
LLC do not offer stopped orders as an order type.
    The Exchange also believes that it is consistent with the Act to 
remove unnecessary and confusing references to AONs in the opening rule 
set forth in Options 3, Section 8 as AONs will now immediately trade or 
cancel. The Exchange originally specified the manner in which AONs 
would trade in the opening because at the time the opening process was 
adopted, this order type traded differently as compared to other order 
types. That distinction has become unnecessary because AONs trade the 
same as other Immediate-or-Cancel Orders. Updating Options 3, Section 8 
to remove an unnecessary and inaccurate distinction will protect 
investors and the public interest by clarifying the rule.

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 proposed rule change would 
allow the Exchange to remove an order type that no Member uses today, 
and eliminate unnecessary and inaccurate references to AONs within its 
opening rule, thereby making clear the order types available for 
trading on the Exchange and reducing potential confusion.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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
exception occurred on : 2019-15875.htm
exception occurred on : 2019-15875.htm
     Send an email to rule-comm[email protected]. Please include 
File Number SR-GEMX-2019-09 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-GEMX-2019-09. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-GEMX-2019-09 and should be submitted on 
or before August 16, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15875 Filed 7-25-19; 8:45 am]
 BILLING CODE 8011-01-P


