58368 Federal Register / Vol. 88, No. 164 / Friday, August 25, 2023 / Notices 

19 15 U.S.C. 78f(b)(8). 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

to all types and sizes of market 

participants. All Users would receive 

equal notice of the opening of the 

Ordering Window; the Ordering 

Window dates would be the same for all 

Users; and each order during the 

Ordering Window would be secured 

with a deposit equal to two months of 

the monthly recurring costs of the 

power ordered. Smaller Users with more 

modest power needs would not be 

disadvantaged by the proposed changes. 

In Step 2, each User that finalized an 

order during the Ordering Window 

would be allocated up to 32 kW of 

power (subject to sufficient power being 

available) before any User’s order for 

more than 32 kW would be filled. This 

would ensure that all Users that 

participate in the Ordering Window 

would receive at least some power and 

no Users would be shut out of the 

allocation. In addition, because the 

deposit is proportional to the size of the 

order and not a fixed amount, smaller 

Users would not be disproportionately 

affected by the deposit requirement. 

Finally, the proposed Ordering Window 

procedure would not disadvantage 

Users on the current waitlist pursuant to 

Colocation Note 7, since power would 

be allocated to those orders first under 

the Ordering Window procedure. 

For all these reasons, the Exchange 

believes that the proposal is consistent 

with the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

In accordance with section 6(b)(8) of 

the Act,19 the Exchange believes that the 

proposed rule change will not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

The Exchange believes that the 

proposed rule change would not place 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change would provide an 

alternative procedure by which the 

Exchange can allocate power in the 

MDC that both provides the Exchange 

with reliable information about Users’ 

true power needs and allows all Users 

that submit deposit-guaranteed orders 

during the Ordering Window to be 

assured of receiving at least some 

additional power. The Exchange does 

not expect the proposed rule change to 

impact intra-market or intermarket 

competition between exchanges, Users, 

or any other market participants. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSENAT–2023–18 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–NYSENAT–2023–18. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NYSENAT–2023–18 and should be 

submitted on or before September 15, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18297 Filed 8–24–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98182; File No. SR–ISE– 

2023–18] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Options 3, 

Section 15 (Simple Order Risk 

Protections) To Adopt an Active Quote 

Protection 

August 21, 2023. 

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 August 

11, 2023, Nasdaq ISE, LLC (‘‘ISE’’ 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Options 3, Section 15 (Risk Protections) 

to adopt an active quote protection. 


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3See Securities Exchange Act Release No. 97605 

(May 26, 2023), 88 FR 36350 (June 2, 2023) (SR– 

ISE–2023–10) (delaying the implementation of all 

ISE technology migration rule filings). 

4As described below, the Exchange will 

specifically define this passive risk counter 

functionality as ‘‘Rapid Fire’’ within this Rule. 

5See MEMX LLC (‘‘MEMX’’) Rule 21.16(b) 

(Active Risk Counter). See also Securities Exchange 

Act Release No. 95445 (August 8, 2022), 87 FR 

49894 (August 12, 2022) (SR–MEMX–2022–10). 

Similar to the proposed Active Quote Protection, 

the active risk counter on MEMX is voluntary and 

offers a way for users to proactively manage their 

risk. The MEMX risk protection, however, allows 

the user to actively manage all the risk limits 

specified in MEMX’s rule (e.g., executed contracts, 

notional value, etc.) whereas the Exchange’s 

proposal would allow Market Makers to actively 

manage executed contracts only, as discussed later 

in this filing. In addition, the Exchange’s proposal 

will only apply to quotes whereas MEMX’s 

functionality applies to both orders and quotes. 

6The Thresholds are described in detail in 

Options 3, Section 15(a)(3)(B)(i)(a)–(d). If a Market 

Maker does not provide a parameter for each 

Threshold, the Exchange will apply default 

parameters announced to Members. 

7Specialized Quote Feed or ‘‘SQF’’ is an interface 

that only Market Makers may use to submit quotes 

to the Exchange. See Supplementary Material .03(c) 

to Options 3, Section 7. 

8See Options 3, Section 15(a)(3)(B)(ii) 

(renumbered as Section 15(a)(3)(B)(iii) under this 

proposal, as noted below). 

9The time of receipt for an order or quote is the 

time such message is processed by the Exchange’s 

order book. 

10See current Options 3, Section 15(a)(3)(B)(ii)(b). 

The Exchange will renumber this as Section 

15(a)(3)(B)(iii)(b) and clarify this provision in the 

manner described later in this filing. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/ise/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 purpose of the proposed rule 

change is to adopt an active risk counter 

functionality called active quote 

protection (‘‘Active Quote Protection’’) 

in Options 3, Section 15. The Exchange 

intends to introduce the foregoing 

changes with its upcoming technology 

migration to enhanced Nasdaq, Inc. 

(‘‘Nasdaq’’) functionality, and intends to 

begin implementation prior to December 

20, 2024.3 The Exchange will announce 

the initial migration date and symbol 

rollout schedule to Members in an 

Options Trader Alert at a later date. 

The Exchange proposes to offer an 

optional active risk counter 

functionality called Active Quote 

Protection, which will be available to 

Market Makers as an alternative to 

existing passive risk counter 

functionality described in Options 3, 

Section 15(a)(3)(B) (i.e., ‘‘Automated 

Quotation Adjustments’’).4 The 

proposed Active Quote Protection 

functionality will be similar to existing 

active risk counter functionality on 

another options exchange, which 

currently allows exchange users to 

actively decrement the risk counter by 

a specified amount at any time, rather 

than waiting until a risk limit is reached 

or the user otherwise sends a specific 

instruction to the exchange to 

completely reset the counting program.5

Today, the Exchange requires Market 

Makers to configure risk exposure 

thresholds based on various metrics for 

each options class, including percentage 

of executed quotes (‘‘Percentage 

Threshold’’), total number of executed 

contracts (‘‘Volume Threshold’’), 

absolute value of the difference between 

long and short positions (‘‘Delta 

Threshold’’), and absolute value of the 

difference between contracts bought and 

contracts sold (‘‘Vega Threshold’’) 

(collectively, ‘‘Thresholds’’).6 As set 

forth in Options 3, Section 15(a)(3)(B)(i), 

the System tracks each Threshold with 

a corresponding risk counter over a 

Market Maker-specified rolling time 

period not to exceed 30 seconds. 

Furthermore, Section 15(a)(3)(B)(i) and 

(ii) describes that when a risk counter 

exceeds the corresponding Threshold 

during the specified time period, the 

System would automatically remove the 

Market Maker’s quotes in all series of 

the applicable options class (each, a 

‘‘Purge Event’’). As a result of a Purge 

Event, the corresponding risk counter 

and Threshold would reset upon such 

removal. The Exchange also notes that 

pursuant to Section 15(a)(3)(B)(iii) 

today, the Thresholds and risk counters 

can be completely reset if the Market 

Maker specifically requests the System 

to remove quotes in all series of an 

options class. This risk protection is 

passive in that the risk counters wait to 

reset until the expiry of a specified time 

period, a Purge Event, or when the 

Market Maker otherwise sends a specific 

instruction to the Exchange to remove 

quotes to completely reset the counters. 

The Exchange now proposes to 

introduce a new risk protection called 

Active Quote Protection that would 

enable Market Makers to actively 

manage their executed contract limit 

(‘‘Contract Limit’’) by sending an 

electronic instruction to the Exchange to 

decrement their executed contract limit 

counter (‘‘Limit Counter’’) by a specified 

amount at any time, rather than waiting 

until the expiry of a defined time 

period, when the risk limit is exceeded 

(like a Purge Event), or when the Market 

Maker otherwise sends a specific 

instruction to purge quotes to 

completely reset the risk counter. The 

Contract Limit, as set by the Market 

Maker, would apply for the duration of 

the trading day. Once the Market 

Maker’s Limit Counter exceeds the 

Contract Limit set by the Market Maker, 

the System would automatically remove 

quotes in all series of the applicable 

options class submitted through the 

Exchange’s Specialized Quote Feed 

protocol,7 identical to how the quote 

removal mechanism works for a Purge 

Event today.8 Today, Purge Events are 

triggered under the existing Automated 

Quotation Adjustments on the first 

execution that exceeds the applicable 

Threshold. Once an execution occurs, 

the System checks all Thresholds to see 

if they have been exceeded. If exceeded, 

the Market Maker’s quote would be 

purged pursuant to Options 3, Section 

15(a)(3)(B)(iii). In order to remain 

consistent with the firm quote 

obligations of a broker-dealer pursuant 

to Rule 602 of Regulation NMS, any 

marketable orders or quotes that are 

executable against a Market Maker’s 

quotes that are received 9 prior to the 

time the applicable Threshold is 

triggered will be automatically executed 

up to the size of the Market Maker’s 

quote, regardless of whether the 

execution would cause the Market 

Maker to exceed their pre-set Percentage 

Threshold, Volume Threshold, Delta 

Threshold, or Vega Threshold.10

Under Active Quote Protection, the 

System would similarly handle the 

Market Maker’s quote in that the quote 

could be filled one execution over the 

Contract Limit before the Market 

Maker’s remaining quotes are cancelled 

by the System in order to be consistent 

with the firm quote obligations under 

Rule 602 of Regulation NMS. 

Specifically, the Exchange notes that 

any marketable orders or quotes that are 

executable against a Market Maker’s 


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11See supra note 9. 

12For both the current Automated Quotation 

Adjustments and proposed Active Quote Protection, 

the System will execute marketable interest up to 

the size of the Market Maker’s quote, but cannot 

guarantee interest will be fully executed, as is the 

case with any execution in the Exchange’s order 

book. There is always the possibility that the 

Market Maker’s quote size (and/or Market Maker’s 

quote plus other interest on the order book) may not 

be sufficient volume to fill the incoming interest. 

13As discussed later in this filing, in order to reenter the System after their quotes are purged 

pursuant to the Active Quote Protection, Market 

Makers will need to submit the same request to 

fully decrement their Limit Counter to zero. 

14A ‘‘badge’’ shall mean an account number, 

which may contain letters and/or numbers, 

assigned to Market Makers. A Market Maker 

account may be associated with multiple badges. 

See Options 1, Section 1(a)(5). 

15As a result, the Exchange will also renumber 

existing subparagraphs (B)(ii)–(vi) as proposed 

subparagraphs (B)(iii)–(vii). 16See supra note 9. 

17The Exchange will initially set the default 

Contract Limit at 100 contracts. 

quotes that are received 11 prior to the 

time the Contract Limit is triggered will 

be automatically executed up to the size 

of the Market Maker’s quote, regardless 

of whether the execution would cause 

the Market Maker to exceed the Contract 

Limit.12

Additionally, under Active Quote 

Protection, Market Makers will be able 

to submit a request (i) to decrement 

their Limit Counter by a specified 

number of contracts, or (ii) to fully 

decrement their Limit Counter to zero.13

Market Makers that elect to use the 

proposed Active Quote Protection on a 

badge 14 will not be able to use the 

existing Threshold risk protections 

described above on the same badge (i.e., 

the active and passive risk counter 

functionality would be mutually 

exclusive per badge) given that it would 

be unnecessarily complex to implement 

from a technology standpoint. Market 

Makers may be associated with multiple 

badges today, so if they want to use both 

risk protections for their activity on the 

Exchange, they will be able to set either 

the active or passive risk counter 

functionality on each one. 

To effectuate the foregoing changes, 

the Exchange proposes to set forth the 

new risk protection in subparagraph 

(B)(ii) of Options 3, Section 15(a)(3), as 

follows: 15

In lieu of Rapid Fire, a Market Maker may 

provide an executed contract limit (‘‘Contract 

Limit’’) that, if exceeded, the System will 

automatically remove the Market Maker’s 

quotes in all series of an options class 

submitted through SQF. The System will 

apply the Contract Limit for the duration of 

the trading day. For each class of options, the 

System will maintain an active limit counter 

that will track the current number of 

contracts executed through the Market 

Maker’s quotes (‘‘Limit Counter’’). If the 

Limit Counter exceeds the Contract Limit 

established by the Market Maker, the System 

will automatically remove the Market 

Maker’s quotes as described in Section 

15(a)(3)(B)(iii). Market Makers may submit a 

request (i) to decrement their Limit Counter 

by a specified number of contracts, or (ii) to 

fully decrement their Limit Counter to zero, 

including to re-enter the System as described 

in Section 15(a)(3)(B)(v). For Market Makers 

that elect to utilize the Contract Limit, the 

Percentage Threshold, Volume Threshold, 

Delta Threshold, and Vega Threshold will 

not be available for use on the Market 

Maker’s badge. 

As described above, once the Limit 

Counter exceeds the Contract Limit set 

by the Market Maker under the 

proposed Active Quote Protection, the 

System would automatically remove 

quotes in the same manner as currently 

specified for a Purge Event in proposed 

subparagraph (B)(iii) of Options 3, 

Section 15(a)(3). Accordingly, the 

Exchange proposes to add Active Quote 

Protection’s Contract Limit throughout 

this Rule. Specifically, proposed 

subparagraph (B)(iii) will provide that 

the System will automatically remove 

quotes in all series of an options class 

when the Percentage Threshold, Volume 

Threshold, Delta Threshold, Vega 

Threshold, or Contract Limit has been 

exceeded. The System will send a Purge 

Notification Message to the Market 

Maker for all affected series when the 

above thresholds have been exceeded. 

Proposed subparagraph (B)(iii)(a) will 

provide that the Percentage Threshold, 

Volume Threshold, Delta Threshold, 

Vega Threshold, and Contract Limit are 

considered independently of each other. 

Further, as discussed above, any 

marketable orders or quotes that are 

executable against a Market Maker’s 

quotes that are received 16 prior to the 

time the applicable Threshold or 

Contract Limit is triggered will be 

automatically executed up to the size of 

the Market Maker’s quote, even if such 

execution would cause the Market 

Maker to exceed any of their pre-set risk 

limits with respect to any of the 

foregoing risk parameters. The Exchange 

notes that the current related Rule in 

sub-paragraph (B)(ii)(b)(3) only 

mentions that quotes will execute up to 

the Market Maker’s size, and is silent on 

marketable orders. In addition, the 

current Rule does not specify the time 

of receipt of such marketable interest 

that is executable against the size of the 

Market Maker’s quote. As such, the 

Exchange proposes to add this 

specificity in proposed sub-paragraph 

(B)(iii)(b)(3) to better describe how the 

System operates today for Automated 

Quotation Adjustments and how the 

System will operate for proposed Active 

Quote Protection. In particular, subparagraph (B)(iii)(b)(3) will provide: 

The System will execute any marketable 

orders or quotes that are executable against 

a Market Maker’s quote and received prior to 

the time the Percentage Threshold, Volume 

Threshold, Delta Threshold, Vega Threshold, 

or Contract Limit is triggered up to the size 

of the Market Maker’s quote, even if such 

execution results in executions in excess of 

the Market Maker’s applicable Threshold or 

Contract Limit with respect to any parameter. 

In addition, when the System removes 

quotes as a result of exceeding the 

Contract Limit under Active Quote 

Protection, the Exchange proposes to 

require the Market Maker to submit a 

request to re-enter the System. This 

request will be the same type of message 

as the request described in proposed 

subparagraph (B)(ii) where the Market 

Maker must request to fully decrement 

their Limit Counter back to zero in order 

to re-enter the System. This requirement 

will be added in proposed subparagraph 

(B)(v) of Options 3, Section 15(a)(3), and 

will be similar to how the existing quote 

purge mechanism works for the 

Thresholds today, except the Market 

Maker needs to send a separate message 

(i.e., a re-entry indicator) to re-enter the 

System when their quotes are purged as 

a result of exceeding any of the existing 

Thresholds. 

Similar to how default parameters are 

currently applied for each of the 

existing Thresholds described above, 

the Exchange proposes to apply a 

default parameter for the Active Quote 

Protection Contract Limit (which would 

be announced to Members) if the Market 

Maker opting to use Active Quote 

Protection does not provide a Contract 

Limit at the outset.17 Accordingly, 

proposed subparagraph (B)(vi) will 

provide that if a Market Maker does not 

provide a parameter for each of the 

automated quotation removal 

protections described in (B)(i)(a)–(d) 

and (B)(ii) above, the Exchange will 

apply default parameters, which are 

announced to Members. 

The Exchange also proposes that the 

new Active Quote Protection would 

leverage the existing market-wide speed 

bump (‘‘MWSB’’) functionality currently 

set forth in Options 3, Section 

15(a)(3)(B)(vi) (renumbered as Section 

15(a)(3)(B)(vii) under this proposal). 

Today, MWSB is a risk protection 

offered alongside the current Automated 

Quotation Adjustments and triggers 

when, during a time period established 

by the Market Maker, the total number 

of Purge Events exceeds a market-wide 

parameter provided to the Exchange by 


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18Market Makers may request the Exchange to set 

the market wide parameter to apply to just Nasdaq 

ISE or across Nasdaq ISE and Nasdaq GEMX. The 

Exchange notes that the MWSB rule currently refers 

to Supplementary Material .04 to Options 3, Section 

14, which will be deleted as an obsolete reference, 

as described later in this filing. 

19See Securities Exchange Act Release No. 71446 

(January 30, 2014), 79 FR 6951 (February 5, 2014) 

(SR–ISE–2014–04). The MWSB rule was originally 

set forth in Rule 804, relocated to Rule 714, and 

finally relocated to its current place in Options 3, 

Section 15. See Securities Exchange Act Release 

Nos. 84237 (September 20, 2018), 83 FR 48660 

(September 26, 2018) (SR–ISE–2018–80); and 86138 

(June 18, 2019), 84 FR 29567 (June 24, 2019) (SR– 

ISE–2019–17). 

20See Securities Exchange Act Release No. 85308 

(March 13, 2019), 84 FR 10136 (March 19, 2019) 

(SR–ISE–2019–05). 

21See Securities Exchange Act Release No. 86138 

(June 18, 2019), 84 FR 29567 (June 24, 2019) (SR– 

ISE–2019–17). 

22See supra note 20. 

23 15 U.S.C. 78f(b). 

24 15 U.S.C. 78f(b)(5). 

the Market Maker.18 When MWSB is 

triggered, the Exchange automatically 

purges the Market Maker’s quotes in all 

classes, and the Market Maker must 

request re-entry to the System by 

contacting the Exchange’s Operations 

Department. Today, MWSB is meant to 

provide Market Makers with protection 

from the risk of multiple executions 

across multiple series of an option or 

across multiple options. This risk 

protection recognizes that risk to Market 

Makers is not limited to a single series 

in an option or even to all series in an 

option; Market Makers that quote in 

multiple series of multiple options have 

significant exposure, requiring them to 

offset or hedge their overall positions. 

Market Makers are required to 

continuously quote in assigned options, 

and quoting across many series in an 

option or multiple options creates the 

possibility of executions that can create 

large, unintended principal positions 

that could expose Market Makers to 

unnecessary risk. MWSB is therefore 

intended to assist Market Makers in 

managing their market risk by tracking 

the number of Purge Events relative to 

the market-wide parameter set by the 

Market Maker. The Exchange believes 

that tracking the number of Active 

Quote Protection Purge Events for a 

Market Maker against its MWSB marketwide parameter would be similarly 

useful for managing market risk. 

To that end, the Exchange proposes to 

update MWSB to add purge events 

under Active Quote Protection to the 

MWSB counter such that Active Quote 

Protection purge events and Purge 

Events under the current Automated 

Quotation Adjustments will be 

aggregated together as counting toward 

the specified market-wide parameter. 

Accordingly, the Exchange proposes to 

add references to the Active Quote 

Protection rule (i.e., proposed 

subparagraph (B)(ii) of Options 3, 

Section 15(a)(3)) throughout the MWSB 

rule in proposed subparagraph (B)(vii), 

specifically: 

In addition to the automated quotation 

removal protections described in (B)(i)(a)–(d) 

and (B)(ii) above, a Market Maker must 

provide a market wide parameter by which 

the Exchange will automatically remove a 

Market Maker’s quotes in all classes when, 

during a time period established by the 

Market Maker, the total number of quote 

removal events specified in (B)(i)(a)–(d) and 

(B)(ii) above exceeds the market wide 

parameter provided to the Exchange by the 

Market Maker. Market Makers may request 

the Exchange to set the market wide 

parameter to apply to just Nasdaq ISE or 

across Nasdaq ISE and Nasdaq GEMX. 

Market Makers must request the Exchange 

enable re-entry by contacting the Exchange’s 

Operations Department. 

The following example illustrates the 

proposed behavior of the Active Quote 

Protection risk protection: 

Market Maker AAPL 

Contract Limit: 100. 

• Market Maker trades a transaction 

for 10 contracts in AAPL; Limit Counter 

goes from 0 to 10. 

• Market Maker sends a request to 

decrement its Limit Counter in AAPL 

for 10 contracts; Limit Counter goes 

from 10 to 0. 

• Market Maker trades a transaction 

for 20 contracts in AAPL; Limit Counter 

goes from 0 to 20. 

• Market Maker trades a transaction 

for 50 contracts in AAPL; Limit Counter 

goes from 20 to 70. 

• Market Maker sends a request to 

decrement its Limit Counter in AAPL 

for 20 contracts; Limit Counter goes 

from 70 to 50. 

• Market Maker trades a transaction 

for 60 contracts in AAPL; Limit Counter 

goes from 50 to 110 and all Market 

Maker quotes in AAPL are automatically 

purged after the execution because the 

Limit Counter exceeded the Market 

Maker’s Contract Limit of 100 executed 

contracts. 

• At this point, the Market Maker 

must send a request to fully decrement 

its Limit Counter in AAPL back to zero 

in order to begin quoting again. 

The following example illustrates 

how MWSB will work with the 

proposed Active Quote Protection 

functionality: 

• Assume Market Maker in AAPL and 

SPY has Automated Quotation 

Adjustments set for AAPL and Active 

QP set for SPY. 

• Market Maker sets its MWSB 

market-wide parameter so that it is 

triggered at 25 purge events within a 20 

second time period. 

• On a given trading day, if an Active 

Quote Protection Purge Event is 

triggered 15 times in SPY and an 

Automated Quotation Adjustment Purge 

Event is triggered 10 times in AAPL, all 

within 20 seconds, then the Exchange 

will automatically remove all of the 

Market Maker’s quotes AAPL and SPY. 

Technical Amendments 

The Exchange proposes a few 

technical, non-substantive amendments 

in Options 3, Section 15(a)(3)(B). With 

the addition of the new Active Quote 

Protection rule in proposed 

subparagraph (B)(ii), the Exchange 

proposes to renumber existing 

subparagraphs (B)(ii)–(vi) as proposed 

subparagraphs (B)(iii)–(vii) and make 

related changes to update existing crosscites within Section 15(a)(3)(B). The 

Exchange also proposes to title 

subparagraph (B)(i) as ‘‘Rapid Fire’’ and 

subparagraph (B)(vii) as ‘‘Market-Wide 

Speed Bump’’ to more clearly identify 

which rules apply to which risk 

protections. 

Lastly, the Exchange proposes in the 

MWSB rule (i.e., proposed Options 3, 

Section 15(a)(3)(B)(vii)) to delete the 

reference to Supplementary Material .04 

to Options 3, Section 14. When the 

Exchange originally adopted the MWSB 

rule, the intent was for the MWSB risk 

protection to cover curtailment events 

under Supplementary Material .04 to 

Rule 722.19 Supplementary Material .04 

to Rule 722 previously governed 

Automated Spread Quotation 

Adjustments for complex quotes. The 

Exchange subsequently removed 

complex quoting and all related 

functionality (including Automated 

Spread Quotation Adjustments), but did 

not remove the cross-cite to 

Supplementary Material .04 to Rule 722 

in the MWSB rule.20 As a result, this 

cross-cite was ported over to the 

Exchange’s relocated Rulebook in 2019 

and updated to Supplementary Material 

.04 to Options 3, Section 14,21 when it 

should have been deleted as an obsolete 

reference at the time the Exchange 

removed complex quoting 

functionality.22 The Exchange now 

proposes to eliminate this cross-cite in 

the MWSB rule as an obsolete reference. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with section 6(b) 

of the Act,23 in general, and furthers the 

objectives of section 6(b)(5) of the Act,24

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 


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58372 Federal Register / Vol. 88, No. 164 / Friday, August 25, 2023 / Notices 

25See supra note 9. 

26See proposed subparagraph (B)(iii)(b) of 

Options 3, Section 15(a)(3). 

27See supra note 5. 28See supra note 5. 

open market and a national market 

system, and, in general to protect 

investors and the public interest. 

The Exchange believes that the 

proposed Active Quote Protection risk 

protection is consistent with the Act 

because it will enhance the risk 

protection tools available to Market 

Makers by introducing a new method of 

establishing and monitoring for risk 

parameters that will be offered as an 

alternative to existing Rapid Fire risk 

parameters, thereby supporting a Market 

Maker’s ability to manage their risk on 

the Exchange, and also providing them 

with flexibility to use additional tools to 

manage risk. As noted above, while the 

passive (Rapid Fire) and active (Active 

QP) risk counter functionality will be 

mutually exclusive on each badge, 

Market Makers will still be able to use 

both to cover their activity on the 

Exchange by getting multiple badges 

and setting each risk counter by badge. 

The Exchange believes that offering 

more risk management tools to Market 

Makers would mitigate their exposure to 

excessive risk. The Exchange further 

believes that having the new Active 

Quote Protection functionality leverage 

the existing MWSB functionality will 

similarly support a Market Maker’s 

ability to manage their risk on the 

Exchange by including Active Quote 

Protection purge events to the MWSB 

counter. As noted above, the risk to 

Market Makers is not limited to a single 

series in an option or even multiple 

series in an option as Market Makers 

that quote in multiple series of multiple 

options have significant exposure, 

requiring them to offset or hedge their 

overall positions. Market Makers are 

required to continuously quote in 

assigned options, and quoting across 

many series in an option or multiple 

options creates the possibility of 

executions that can create large, 

unintended principal positions that 

could expose Market Makers to 

unnecessary risk. Today, MWSB is 

designed to assist Market Makers in 

managing their market risk by tracking 

the number of Purge Events relative to 

the market-wide parameter set by the 

Market Maker. The Exchange therefore 

believes that tracking the number of 

Active Quote Protection purge events 

for a Market Maker against its MWSB 

market-wide parameter would be 

similarly useful for managing market 

risk so that they can provide deep and 

liquid markets to the benefit of all 

investors. Ultimately, the Exchange 

believes that providing Market Makers 

with additional tools in the manner 

described above to manage their risk 

parameters serves to perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest because Market Makers 

will be better able to manage risks with 

these tools. 

With regard to the impact of this 

proposal on system capacity, the 

Exchange notes that it has analyzed its 

capacity and represents that it and the 

Options Price Reporting Authority have 

the necessary systems capacity to 

handle any potential additional traffic 

associated with the proposed rule 

change. The Exchange believes that its 

members will not have a capacity issue 

as a result of this proposal. 

The Exchange further represents that 

its proposal will continue to operate 

consistently with the firm quote 

obligations of a broker-dealer pursuant 

to Rule 602 of Regulation NMS. 

Specifically, any marketable interest 

that is executable against a Market 

Maker’s quotes that are received 25 by 

the Exchange prior to the time this 

functionality is triggered will be 

automatically executed at the price up 

to the Market Maker’s size, regardless of 

whether such execution results in 

executions in excess of the Market 

Maker’s pre-set Contract Limit.26 As 

discussed above, this is also in line with 

how current Rapid Fire operates today. 

The Exchange believes that the 

proposed changes in proposed subparagraph (B)(iii)(b) to specify that this 

Rule will apply to marketable orders 

and quotes (currently silent on 

marketable orders), and to specify the 

time of receipt of such marketable 

interest that is executable against the 

size of the Market Maker’s quote, will 

promote clarity in how the System 

currently operates for Rapid Fire and 

will operate for Active Quote Protection. 

As noted above, the proposed Active 

Quote Protection functionality is similar 

to existing active risk counter 

functionality on another options 

exchange, which currently allows users 

to actively decrement the risk counter 

by a specified amount at any time, 

rather than waiting until a risk limit is 

reached or the user otherwise sends a 

specific instruction to the exchange to 

completely reset the counting 

program.27

Technical Amendments 

The Exchange believes that the 

technical amendments in Options 3, 

Section 15(a)(3)(B) described above are 

consistent with the Act because they 

will promote clarity in the rules and 

make the Rulebook easier to navigate for 

market participants by updating rule 

numbering and existing cross-cites as 

described above. Furthermore, the 

Exchange also believes that adding the 

defined terms for Rapid Fire and MWSB 

in the rule text will promote clarity so 

that Members can more easily locate the 

relevant functionalities in the Rulebook. 

Lastly, the Exchange believes that the 

proposed changes to remove the crosscite to Supplementary Material .04 to 

Options 3, Section 14 from the MWSB 

rule is consistent with the Act because 

it will eliminate an obsolete reference to 

functionality that no longer exists on the 

Exchange, which will promote clarity in 

the Rulebook and avoid any potential 

confusion. 

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 Exchange does not believe that 

the proposed Active Quote Protection 

functionality will impose any undue 

burden on intra-market competition as it 

is aimed at mitigating exposure to 

excessive risk when trading on the 

Exchange. While the Exchange will offer 

the proposed functionality to Market 

Makers only, the proposed risk 

protection is intended to provide Market 

Makers with an additional tool to 

manage their risk parameters in a 

manner they deem appropriate. As such, 

the Exchange believes that the proposed 

functionality may facilitate Market 

Makers’ provision of liquidity on the 

Exchange, thereby benefitting all market 

participants through additional 

execution opportunities at potentially 

improved prices. 

The Exchange also believes that its 

Active Quote Protection proposal does 

not impose an undue burden on intermarket competition as the proposed risk 

protection is similar to an existing risk 

protection on MEMX 28 as described 

above, and any options market could 

adopt similar rules. 

Lastly, the Exchange does not believe 

that the proposed technical 

amendments in Options 3, Section 

15(a)(3)(B) will impose an undue 

burden on competition as these are nonsubstantive changes to promote clarity 

in the rules and make the Rulebook 

easier to navigate for market 

participants. 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 164 / Friday, August 25, 2023 / Notices 58373 

29 15 U.S.C. 78s(b)(3)(A)(iii). 

30 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. 

31 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3As described below, the Exchange will 

specifically define this passive risk counter 

functionality as ‘‘Rapid Fire’’ within this Rule. 

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 29 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.30

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

ISE–2023–18 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–ISE–2023–18. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–ISE–2023–18 and should be 

submitted on or before September 15, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18304 Filed 8–24–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98179; File No. SR–BX– 

2023–019] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Options 3, 

Section 15 (Risk Protections) To Adopt 

an Active Quote Protection 

August 21, 2023. 

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 August 

11, 2023, 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, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Options 3, Section 15 (Risk Protections) 

to adopt an active quote protection. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/bx/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 purpose of the proposed rule 

change is to adopt an active risk counter 

functionality called active quote 

protection (‘‘Active Quote Protection’’) 

in Options 3, Section 15. The Exchange 

intends to begin implementation prior 

to December 20, 2024, and will provide 

prior notice of the implementation date 

to Members in an Options Trader Alert. 

The Exchange proposes to offer an 

optional active risk counter 

functionality called Active Quote 

Protection, which will be available to 

Market Makers as an alternative to 

existing passive risk counter 

functionality described in Options 3, 

Section 15(c)(2)(A) (i.e., ‘‘Quotation 

Adjustments’’).3 The proposed Active 


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