[Federal Register Volume 87, Number 56 (Wednesday, March 23, 2022)]
[Notices]
[Pages 16525-16527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06099]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94444; File No. SR-GEMX-2022-05]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Harmonize 
Various Processes Under Options 3, Section 20 Across the Affiliated 
Nasdaq Options Exchanges

March 17, 2022.
    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 8, 2022, 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.
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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 Harmonize various processes under Options 
3, Section 20 across the affiliated Nasdaq options exchanges.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/gemx/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.

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

1. Purpose
    The Exchange proposes to harmonize its existing processes with 
those of its affiliate Nasdaq Phlx LLC (``Phlx'') concerning the review 
of decisions on appeal under Options 3, Section 20. The Exchange also 
proposes a number of non-substantive changes. Each change is discussed 
in detail below.
Appeal
    Today, Options 3, Section 20(k) governs the appeal process for 
determinations by Exchange staff made under this Rule, including 
obvious error determinations. Specifically, if a Member affected by a 
determination under this Rule so requests within the permitted time 
period, an Exchange Review Council panel will review decisions made by 
the Official under Options 3, Section 20, including whether an obvious 
error occurred and whether the correct determination was made. A 
request for review on appeal must be made in writing via email or other 
electronic means specified from time to time by the Exchange in an 
Options Trader Alert distributed to Members within thirty (30) minutes 
after the party making the appeal is given notification of the initial 
determination being appealed. The

[[Page 16526]]

Exchange Review Council panel shall review the facts and render a 
decision as soon as practicable, but generally on the same trading day 
as the execution(s) under review. On requests for appeal received after 
3:00 p.m. Eastern Time, a decision will be rendered as soon as 
practicable, but in no case later than the trading day following the 
date of the execution under review. Furthermore, if the Exchange Review 
Council panel votes to uphold the decision made under this Rule, the 
Exchange will assess a fee (``Appeal Fee'') of $5,000 against the 
Member(s) who initiated the request for appeal.
    The Exchange proposes generally to maintain its current appeal 
process with certain adjustments to harmonize its process with that of 
its affiliate, Phlx. First, while Phlx similarly requires the parties 
to submit a request for review within thirty (30) minutes of being 
notified of the determination being appealed, Phlx also provides 
parties with additional time to submit their request if the 
notification occurs later in the trading day. In particular, if the 
notification is made after 3:30 p.m. Eastern Time, either party has 
until 9:30 a.m. Eastern Time on the next trading day to submit a 
request for review.\3\ Similar to Phlx, the Exchange believes that this 
flexibility will be helpful for Members in submitting their appeal 
requests in a timely manner, particularly where notification of the 
Official's decision was received later in the trading day, and 
therefore proposes to adopt this provision in Options 3, Section 
20(k)(2).
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    \3\ See Phlx Options 3, Section 20(l).
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    Second, the Exchange proposes to amend its provisions for when the 
Exchange Review Council panel must render a decision on requests for 
appeal by harmonizing to Phlx's process. Specifically, the Exchange 
proposes in Options 3, Section 20(k)(2) that the Exchange Review 
Council panel shall review the facts and render a decision on the day 
of the transaction, or the next trade day in the case where a request 
is properly made after 3:30 p.m. on the day of the transaction or where 
the request is properly made the next trade day.\4\ The proposed 
language modifies the current process by extending the current cutoff 
time from 3:00 to 3:30 p.m. Eastern Time for the Exchange Review 
Council panel to render a decision on the next trading day, and by 
accommodating situations where parties properly bring an appeal request 
on the next trading day.
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    \4\ See Phlx Options 3, Section 20(l) for analogous language.
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    Third, the Exchange proposes to decrease the Appeal Fee from $5,000 
to $500 to align to Phlx's Appeal Fee.\5\
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    \5\ See Phlx Options 3, Section 20(l). The Nasdaq Options Market 
(``NOM'') and BX Options (``BX'') also have identical $500 Appeal 
Fees. See NOM and BX Options 3, Section 20(k)(4).
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Non-Substantive Changes
    In Options 3, Section 20(b)(1), the Exchange proposes a non-
substantive, clarifying change to replace the reference to ``opening 
rotation'' to ``Opening Process,'' and specify that the Opening Process 
is defined in Options 3, Section 8. The Exchange will also correct a 
punctuation error in this section.
    The Exchange also proposes non-substantive changes to replace 
references to ``Market Control'' with ``Official'' \6\ throughout 
Options 3, Section 20. At the time of adoption, the term Market Control 
referred to designated personnel in the Exchange's market control 
center that were responsible for administering the provisions of the 
Rule.\7\ The Exchange has since updated the terminology for such 
personnel as Officials,\8\ and therefore proposes to update the old 
references accordingly.\9\ The Exchange notes that its affiliated 
options exchanges similarly reference Officials as the persons 
responsible for administering their obvious error rules.\10\
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    \6\ For purposes of Options 3, Section 20, an Official is an 
Officer of the Exchange or such other employee designee of the 
Exchange that is trained in the application of this Rule. See 
Options 3, Section 20(a)(3).
    \7\ The Exchange's application for registration as a national 
securities exchange, as approved by the Commission, incorporated 
this provision. See Securities Exchange Act Release No. 70050 (July 
26, 2013), 78 FR 46622 (August 1, 2013).
    \8\ See Securities Exchange Act Release No. 74897 (May 7, 2015), 
80 FR 27415 (May 13, 2015) (SR-ISEGemini-2015-11).
    \9\ In particular, the Exchange proposes to update the following 
subparagraphs in Options 3, Section 20: (c)(2), (d)(2), (g), (h), 
(i), (l)(1)(A), (l)(1)(B), (l)(1)(C), and (l)(2)(A). The Exchange 
also proposes to update Supplementary Material .03 to Options 3, 
Section 20.
    \10\ See BX, NOM, and Phlx Options 3, Section 20.
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    Lastly, the Exchange proposes non-substantive, conforming 
amendments to Options 3, Section 1 (Days and Hours of Business). The 
Exchange first proposes to amend the title from ``Days and Hours of 
Business'' to ``Hours of Business.'' The Exchange recently filed to 
establish General 3, Section 1030, which governs the days the Exchange 
will be open for business.\11\ At this time, the Exchange also proposes 
to amend the first paragraph of Options 3, Section 1 which provides, 
``The Board shall determine the days the Exchange shall be open for 
business (referred to as ``business days'') and the hours of such days 
during which transactions may be made on the Exchange.'' The Exchange 
proposes to remove this sentence and instead provide as new paragraph 
(a):
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    \11\ See Securities Exchange Act Release No. 93675 (November 29, 
2021), 86 FR 68714 (December 3, 2021) (SR-NASDAQ-2021-69) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Include Juneteenth National Independence Day as a Holiday). The 
Exchange's General 3 rules incorporate by reference The Nasdaq Stock 
Market LLC's General 3 Rules. Rule 1030 of General 3 memorialized 
all current Exchange holidays and added a provision to permit the 
Exchange the authority to halt or suspend trading or close Exchange 
facilities for certain unanticipated closures.
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    ``The Exchange shall be open for business as provided within 
General 3, Rule 1030.'' This proposed text will make clear that while 
General 3, Section 1030 governs the days the Exchange will be open for 
business, the remainder of the rule addresses the hours of operation of 
the System and specific products. The Exchange also proposes to remove 
paragraph (e) as holidays are addressed within General 3, Section 1030. 
The remainder of the paragraphs are proposed to be re-lettered.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\13\ 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 and because it is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange further believes that its proposal to amend the 
current appeal process to harmonize with Phlx's appeal process is 
consistent with the Act because it will continue to afford Members with 
due process in connection with decisions made by Officials under 
Options 3, Section 20 that the Member may feel warrants review. As 
discussed above, the proposal would allow either party until 9:30 a.m. 
the next trading to submit a request for review if notification is made 
after 3:30 p.m., which the Exchange believes will be helpful for 
Members in submitting their appeal requests in a timely manner. 
Furthermore, the proposal provides the Exchange Review Council panel 
additional time and flexibility to render decisions on requests for 
appeal in cases where a

[[Page 16527]]

request is properly made after 3:30 p.m. on the day of the transaction 
or where the request is properly made the next trade day, and is 
designed to reduce administrative burden on the Exchange. As it relates 
to the Appeal Fee, the Exchange believes that the proposed reduction of 
the fee from $5,000 to $500 is reasonable, equitable and not unfairly 
discriminatory because it aligns to the Appeal Fee assessed by its 
affiliates \14\ and by other options exchanges,\15\ and will be applied 
uniformly to all Members.
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    \14\ See supra note 5.
    \15\ See, e.g., Cboe BZX Exchange Rule 20.6(l)(5) and MIAX 
Options Exchange Rule 521(l)(2).
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    Ultimately, the proposed changes to the appeal process are intended 
to align certain time frames and the Appeal Fee with those of its 
affiliates in order to provide more consistent rules and procedures 
across the affiliated options exchanges owned by Nasdaq, Inc. 
Consistent rules and procedures, in turn, would simplify and streamline 
the regulatory requirements and increase the understanding of the 
Exchange's operations for Members of the Exchange that are also members 
on the Exchange's affiliated options exchanges. Greater harmonization 
across the affiliated options exchanges will result in greater 
uniformity, rules that are easier to follow and understand, and more 
efficient regulatory compliance, thereby contributing to the protection 
of investors and the public interest. As such, the proposed rule change 
would foster cooperation and coordination with persons engaged in 
facilitating transactions in securities and would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
    The Exchange further believes that the proposed non-substantive 
changes in Options 3, Section 20 to replace all instances of Market 
Control with Official, and to replace opening rotation with Opening 
Process, will add clarity, transparency, and consistency to the 
Exchange's rules. Lastly, the Exchange's proposal to amend Options 3, 
Section 1 (Days and Hours of Business) as described above will bring 
greater clarity, and ensure that this Rule conforms to the changes made 
in the recent filing to establish General 3, Section 1030, which 
governs the days the Exchange will be open for business.\16\ The 
Exchange believes that market participants would benefit from the 
increased clarity, thereby reducing potential confusion, and ensuring 
that market participants and investors can more easily navigate and 
understand the Exchange's rules.
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    \16\ See supra note 11.
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    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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 changes are designed to 
provide greater harmonization among similar rules and processes across 
the Exchange's affiliated options exchanges, resulting in more 
efficient regulatory compliance for common members.

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 \17\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 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.

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-2022-05 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-2022-05. 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-2022-05 
and should be submitted on or before April 13, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06099 Filed 3-22-22; 8:45 am]
BILLING CODE 8011-01-P


