[Federal Register Volume 85, Number 32 (Tuesday, February 18, 2020)]
[Notices]
[Pages 8914-8918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03101]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88174; File No. SR-BX-2020-001]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Remove Listing 
Rule and Other Amendments

February 11, 2020.
    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 January 29, 2020, 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 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 Options 1, Section 1 (Definitions), 
Options 2, Section 4 (Obligations of Market Makers and Lead Market 
Makers), Section 5 (Market Maker Quotations), Options 3, Section 2 
(Units of Trading and Meaning if Premium Quotes and Orders), Options 3, 
Section 3 (Minimum Increments), Options 3, Section 8 (Opening and Halt 
Cross), Options 3, Section 19 (Mass Cancellation of Trading Interest), 
Options 4, Section 5 (Series of Options

[[Page 8915]]

Contracts Open for Trading), Options 4A, Section 12 (Terms of Index 
Options Contracts), Options 5, Section 2 (Order Protection) and Options 
7 (Pricing Schedule). The Exchange also proposes to relocate current 
rule text to new Options 2, Section 6 entitled ``Market Maker Orders'' 
and reserve various sections of the Rulebook.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqbx.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 Exchange proposes to amend Options 1, Section 1 (Definitions), 
Options 2, Section 4 (Obligations of Market Makers and Lead Market 
Makers), Section 5 (Market Maker Quotations), Options 3, Section 2 
(Units of Trading and Meaning if Premium Quotes and Orders), Options 3, 
Section 3 (Minimum Increments), Options 3, Section 8 (Opening and Halt 
Cross), Options 3, Section 19 (Mass Cancellation of Trading Interest), 
Options 4, Section 5 (Series of Options Contracts Open for Trading), 
Options 4A, Section 12 (Terms of Index Options Contracts), Options 5, 
Section 2 (Order Protection) and Options 7 (Pricing Schedule). The 
Exchange also proposes to relocate current rule text to new Options 2, 
Section 6 entitled ``Market Maker Orders'' and reserve various sections 
of the Rulebook. Each change is described below.
Rulebook Harmonization
    The Exchange recently harmonized its Rulebook in connection with 
other Nasdaq affiliated markets. The Exchange proposes to reserve 
certain rules within the BX Rulebook to represent the presence of rules 
in similar locations in other Nasdaq affiliated Rulebooks (e.g. Nasdaq 
Phlx LLC).\3\
---------------------------------------------------------------------------

    \3\ See SR-Phlx-2020-03 (not yet published).
---------------------------------------------------------------------------

    The Exchange proposes to reserve Sections 17-22 within General 2, 
Organization and Administration. The Exchange proposes to reserve 
Sections 11-14 within Options 2, Options Market Participants. The 
Exchange proposes to reserve Sections 17-21 within Options 4A, Options 
Index Rules. The Exchange proposes to reserve new section Options 4B. 
The Exchange proposes to reserve Sections 8-13 within Options 6, 
Options Trade Administration. The Exchange proposes to reserve Section 
7 within Options 6C, Margins. The Exchange proposes to reserve Section 
24 within Options 9, Business Conduct.
Definitions
    The Exchange proposes to add the definition of an ``Away Best Bid 
or Offer'' or ``ABBO'' within Options 1, Section 1(a)(1). This term is 
utilized throughout the Rulebook. Defining this term will bring greater 
transparency to the Rulebook. The Exchange proposes to renumber the 
remaining definitions and also update corresponding cross-references 
within Options 7, Section 1.
    The Exchange proposes to remove the terms ``System Book Feed'' and 
``System Securities'' from the Options 1, Section 1. The term ``System 
Book Feed'' is not utilized in the Rulebook currently. The term 
``System Securities'' is only utilized within the definition of the 
term ``System'' at current Options 1, Section 1(a)(58) and within 
Options 3, Section 8, Opening and Halt Cross.'' The term is simply 
replaced by referring to option series. The Exchange believes that 
replacing the term with the term ``option series'' will make the 
Rulebook clear and remove an unnecessary definition.
    Finally, the Exchange is removing the phrase ``, or the United 
States dollar'' from the definition of ``foreign currency'' within 
current Options 1, Section 1(a)(26). This reference is not needed in 
this string cite because the United States dollar is a medium of 
exchange as noted in the introductory phrase to the string cite.
Relocation of Options 2 Rules
    The Exchange proposes to relocate Options 2, Section 4(d) and 
Section 5(e) to Options 2, Section 6, which is currently reserved. 
Specifically, the Exchange proposes to relocate these sections into 
Options 6(a) and (b), respectively. Proposed Options 2, Section 6 would 
be titled ``Market Maker Orders.'' This relocation will harmonize the 
location of these rules to other Nasdaq affiliated markets.
Removal of Various Listings
Mini Options
    The Exchange has not listed Mini Options in several years and is 
proposing to delete its listing rules and other ancillary trading rules 
related to the listing of Mini Options. The Exchange notes that it has 
no open interest in Mini Options.
    Specifically, the Exchange proposes to amend Options 3, Section 2 
(Units of Trading and Meaning of Premium Quotes and Orders), Options 3, 
Section 3 (Minimum Increments), Options 4, and Section 5 (Series of 
Options Contracts Open for Trading) at Supplementary Material .15) to 
remove references to the handling of Mini Options in the System.
    In the event that the Exchange desires to list Mini Options in the 
future, it would file a rule change with the Commission to adopt rules 
to list Mini Options.
U.S. Dollar-Settled Foreign Currency Options
    The Exchange has not listed U.S. Dollar-Settled Foreign Currency 
Options (``FCOs'') in several years and is proposing to delete its 
listing rules and other ancillary trading rules related to the listing 
of FCOs. The Exchange notes that it has no open interest in FCOs.
    Specifically, the Exchange proposes to amend Supplementary Material 
.16 to Options 4, Section 5 (Series of Options Contracts Open for 
Trading) to remove references to the handling of FCOs in the System.
    In the event that the Exchange desires to list FCOs in the future, 
it would file a rule change with the Commission to adopt rules to list 
FCOs.
Mini-Nasdaq-100 Index
    The Exchange has not listed Mini-Nasdaq-100 Index options or 
``MNX'' or ``Mini-NDX'' in several years and is proposing to delete its 
listing rules and other ancillary trading rules related to the listing 
of Mini-Nasdaq-100 Index options. The Exchange notes that it has no 
open interest in Mini-Nasdaq-100 Index options.
    Specifically, the Exchange proposes to amend Supplementary Material 
.05 to Options 4, Section 5 (Series of Options Contracts Open for 
Trading) to remove references to the handling of Mini-Nasdaq-100 Index 
options in the System.
    In the event that the Exchange desires to list Mini-Nasdaq-100 
Index options in the future, it would file a rule change

[[Page 8916]]

with the Commission to adopt rules to list Mini-Nasdaq-100 Index 
options.
Minimum Increments
    The Exchange proposes to amend Options 3, Section 3 to relocate 
Section 3(a)(3) into a new Supplementary Material .01 and title the 
section, ``Penny Pilot Program.'' The Exchange also proposes to amend a 
typographical error in Options 3, Section 3(a)(3) to replace ``QQQQs'' 
with ``QQQs.'' The other changes relate to the removal of Mini Options 
as explained herein.
Mass Cancellation of Trading Interest
    The Exchange proposes to amend the description of Options 3, 
Section 19 titled ``Mass Cancellation of Trading Interest.'' The 
proposed amended rule would state, ``An Options Participant may cancel 
any bids, offers, and orders in any series of options by requesting BX 
Market Operations \4\ staff to effect such cancellation as per the 
instructions of the Options Participant.'' The Exchange is not amending 
the System with respect to this rule change. The proposed amended 
language merely makes clear that an Options Participant may contact BX 
Market Operations and request the Exchange to cancel any bid, offer or 
order in any series of options. This is a voluntary service that is 
offered to market participants. The Exchange, would cancel such bid, 
offer or order pursuant to the Member's instruction. This amendment 
would conform the BX rule text to rules of other Nasdaq affiliated 
markets.\5\
---------------------------------------------------------------------------

    \4\ The request to Market Operations is a manual request which 
is made telephonically.
    \5\ See Nasdaq Phlx LLC (``Phlx'') Nasdaq ISE, LLC (``ISE''), 
Nasdaq GEMX, LLC (``GEMX'') and Nasdaq MRX, LLC (``MRX'') Options 3, 
Section 19.
---------------------------------------------------------------------------

Other Amendments
    The Exchange proposes to correct a rule citation within Options 3, 
Section 4 to risk protections. The Exchange proposes to correct a 
typographical error notes within Options 4A, Section 12. Specifically, 
the reference to Options 4, Section 6 should have referenced Options 4, 
Section 5 instead. The Exchange proposes to remove a reference to 
paragraph (c) within Options 5, Section 2, as there is no paragraph (c) 
within the Rule. The Exchange also proposes to update rulebook 
citations within Options 7, Pricing Schedule to reflect the proposed 
changes to Options 1, Section 1, Definitions.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Rulebook Harmonization
    The Exchange's proposal to reserve various sections of the Rules in 
order to harmonize its Rulebook with other Nasdaq affiliated markets is 
not a substantive amendment.
Definitions
    The Exchange's proposal to add the definition of an ``Away Best Bid 
or Offer'' or ``ABBO'' within Options 1, Section 1(a)(1) is consistent 
with the Act because these amendments will add transparency to the 
Rulebook. The Exchange's proposal to remove the terms ``System Book 
Feed'' and ``System Securities'' from the Options 1, Section 1 is also 
consistent with the Act. The term ``System Book Feed'' is not utilized 
in the Rulebook currently and therefore this term does not need to be 
defined. The term ``System Securities'' is only utilized within the 
definition of the term ``System'' at Options 1, Section 1(a)(58) and 
within Options 3, Section 8, Opening and Halt Cross.'' Replacing the 
term with the term ``option series'' will make the Rulebook clear.
Relocation of Options 2 Rules
    The proposal to relocate Options 2, Section 4(d), which is being 
reserved, and Section 5(e) to Section 6, which is currently reserved, 
into Options 6(a) and (b), respectively is consistent with the Act. 
This amendment is not substantive.
Removal of Various Listings
Mini Options
    The Exchange's proposal to removal references to the listing and 
handling of Mini Options is consistent with the Act because Mini 
Options have not been listed in several years. Also, the Exchange notes 
that it has no open interest in Mini Options. In the event that the 
Exchange desires to list Mini Options in the future, it would file a 
rule change with the Commission to adopt rules to list Mini Options.
U.S. Dollar-Settled Foreign Currency Options
    The Exchange's proposal to removal references to the listing and 
handling of FCOs is consistent with the Act because FCOs have not been 
listed in several years. Also, the Exchange notes that it has no open 
interest in FCOs. In the event that the Exchange desires to list FCOs 
in the future, it would file a rule change with the Commission to adopt 
rules to list FCOs.
Mini-Nasdaq-100 Index
    The Exchange's proposal to removal references to the listing and 
handling Mini-Nasdaq-100 Index options is consistent with the Act 
because Mini-Nasdaq-100 Index options have not been listed in several 
years. Also, the Exchange notes that it has no open interest in Mini-
Nasdaq-100 Index options.
    In the event that the Exchange desires to list Mini-Nasdaq-100 
Index options in the future, it would file a rule change with the 
Commission to adopt rules to list Mini-Nasdaq-100 Index options.
Minimum Increments
    The Exchange's proposal to relocate parts of Options 3, Section 3 
into a new Supplementary Material .01 and add a title for the Penny 
Pilot Program is consistent with the Act. This amendment will bring 
greater transparency to the Exchange's Rules.
Mass Cancellation of Trading Interest
    The Exchange's proposal to amend the rule text of Mass Cancellation 
of Trading Interest rule within Options 3, Section 19 is consistent 
with the Act because the Exchange desires to conform the rule text to 
other Nasdaq affiliated markets.\8\ Permitting Participants to contact 
Market Operations as a manual alternative to automated functionality, 
which similarly allows Participants to cancel interest, provides 
Participants experiencing their own system issues with a means to 
manage risk. Today, Participants are able to cancel interest, in an 
automated fashion through protocols \9\ and the Kill Switch.\10\ This 
is a voluntary service offered to all Participants.
---------------------------------------------------------------------------

    \8\ See note 5 above.
    \9\ See Options 3 at Supplementary Material .03 to Section 7.
    \10\ See Options 3, Section 17.
---------------------------------------------------------------------------

    This amended rule reflects the Exchange's current practice of 
allowing Participants to contact BX Market Operations and request the 
Exchange to cancel any bid, offer or order in any series of options. 
The Exchange would continue to permit Participants to contact market 
operations and manually request cancellation of interest. The proposed 
amended language will make

[[Page 8917]]

clear that an Options Participant may contact BX Market Operations and 
request the Exchange to cancel any bid, offer or order in any series of 
options. The Exchange would continue to cancel such bid, offer or order 
pursuant to the Participant's instruction.
    This service, which permits Participants to cancel interest, does 
not diminish a Market Maker's obligation with respect to providing two-
sided quotations and this rule is not inconsistent with other firm 
quote obligations of the Market Maker. Upon the request of a 
Participant, BX Market Operations will continue to manually input a 
mass cancellation message into the System consistent with the 
Participant's instruction to cancel trading interest. Once the mass 
cancellation message is entered into the System by BX Market 
Operations, the message will be accepted by the System in the order of 
receipt in the queue such that the interest that was already accepted 
into the System will be processed prior to the mass cancellation 
message. In addition, mass cancellation messages entered into the 
System by BX Market Operations are handled by the System through the 
same queuing mechanism that a quote or order message is handled by the 
System. The Exchange notes its processing of a mass cancellation 
message inputted by BX Market Operations and handled by the System is 
consistent with firm quote and order handling rules.
Other Amendments
    The Exchange's proposal to correct certain typographical errors and 
update rulebook citations are not substantive.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.
Rulebook Harmonization
    The Exchange's proposal to reserve various rules in connection with 
a larger Rulebook harmonization do not impose an undue burden on 
competition because these amendments are non-substantive.
Definitions
    The Exchange's proposal to add the definition of an ``Away Best Bid 
or Offer'' or ``ABBO'' within Options 1, Section 1(a)(1) and remove the 
terms ``System Book Feed'' and ``System Securities'' from the Options 
1, Section 1 do not impose an undue burden on competition because these 
amendments will add transparency to the Rulebook.
Relocation of Options 2 Rules
    The proposal to relocate Options 2, Section 4(d) and Section 5(e) 
to Section 6, into Options 6(a) and (b) does not burden competition as 
this amendment is not substantive.
Removal of Various Listings
Mini Options
    The Exchange's proposal to removal references to the listing and 
handling of Mini Options does not impose an undue burden on 
competition. Mini Options have not been listed in several years. Also, 
the Exchange notes that it has no open interest in Mini Options.
U.S. Dollar-Settled Foreign Currency Options
    The Exchange's proposal to remove references to the listing of U.S. 
Dollar-Settled Foreign Currency Options (``FCOs'') does not impose an 
undue burden on competition. FCOs have not been listed in several 
years. The Exchange notes that it has no open interest in FCOs.
Mini-Nasdaq-100 Index
    The Exchange's proposal to removal references to the listing and 
handling of Mini-Nasdaq-100 Index options does not impose an undue 
burden on competition. Mini-Nasdaq-100 Index options have not been 
listed in several years. Also, the Exchange notes that it has no open 
interest in Mini-Nasdaq-100 Index options.
Minimum Increments
    The Exchange's proposal to relocate parts of Options 3, Section 3 
into a new Supplementary Material .01 and add a title for the Penny 
Pilot Program do not impose an undue burden on competition as these 
amendments are non-substantive.
Mass Cancellation of Trading Interest
    The Exchange's proposal to amend the rule text of the Mass 
Cancellation of Trading Interest rule within Options 3, Section 19 does 
not impose an undue burden on competition because there is no 
corresponding change to the manner in which this service will be 
offered. It will continue to be offered to all Participants.
Other Amendments
    The Exchange's proposal to correct typographical error and update 
rulebook citations do not impose and undue burden on competition as 
these amendments are non-substantive.

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 \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and 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. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Exchange 
believes that adoption the term ``ABBO,'' would add greater 
transparency to its rules, and that removing the rule text related to 
various options listing which are no longer listed on the Exchange will 
provide Participants with notice of the unavailability of these 
listing. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission waives the 30-day operative delay 
and designates the proposed rule change operative upon filing.\15\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if

[[Page 8918]]

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 rule-comments@sec.gov. Please include 
File Number SR-BX-2020-001 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-2020-001. 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-BX-2020-001 and should be submitted on 
or before March 10, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-03101 Filed 2-14-20; 8:45 am]
 BILLING CODE 8011-01-P


