Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices 50907 

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

2 17 CFR 240.19b–4. 

3Today, this feature is offered to Members. ISE 

transitioned from its legacy trading system to INET, 

the current technology, in 2017. While ISE offered 

this feature on its legacy system, the feature was not 

codified in the ISE Rulebook. At this time, the 

Exchange is codifying the Kill Switch feature to 

reflect the functionality. 

4Members are able to send a message to the 

Exchange to initiate the Kill Switch or they may 

contact the Exchange directly. A message to remove 

orders may be sent through FIX, OTTO or Precise. 

5Opening Sweep Orders will also be cancelled. 

Consistent with current auction functionality, PIM 

auction orders and responses will not be cancelled. 

See ISE Rule 723. Other auctions orders and 

responses would cancel. Quotes are unaffected. 

6The Member must directly and verbally contact 

the Exchange to request the re-set. 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9The time of receipt for an order is the time such 

message is processed by the Exchange Order Book. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81971; File No. SR–ISE– 

2017–94] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to an Optional 

Kill Switch Protection 

October 27, 2017. 

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 October 

18, 2017, 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 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to 

memorialize an optional Kill Switch 

protection.3 The Kill Switch allows 

Members to cancel open orders and 

prevent new order submission. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at www.ise.com, at the principal office 

of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

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 

memorialize its Kill Switch risk 

protection which is applicable to all 

Members at ISE Rule 711(d). The Kill 

Switch allows Members to cancel open 

orders and prevent new order 

submission. This feature provides 

Members with a powerful risk 

management tool for immediate control 

of their order activity. 

The Kill Switch is an optional tool 

that enables Members to initiate a 

message(s) 4 [sic] to the trading system 

(‘‘System’’) to promptly cancel orders 

and restrict entry of new orders until reentry has been enabled. Members may 

submit a request to the System to cancel 

orders for that Member. Members may 

not remove orders by symbol using the 

Kill Switch. The System will send an 

automated message to the Member when 

a Kill Switch request has been 

processed by the Exchange’s System.5

The Member must send a message to 

the Exchange to request the cancellation 

of all orders for the Member. The 

Member is unable to enter additional 

orders until re-entry has been enabled 

pursuant to subsection (d)(2) of Rule 

711. 

Proposed subsection (d)(2) stipulates 

that after orders are cancelled by the 

Member utilizing the Kill Switch, the 

Member is unable to enter additional 

orders until the Member has made a 

request to the Exchange and Exchange 

staff has set a re-entry indicator to 

enable re-entry.6 Once enabled for reentry, the System will send a Re-entry 

Notification Message to the Member. 

The applicable Clearing Member for that 

Member also is notified of the re-entry 

into the System after orders are 

cancelled as a result of the Kill Switch, 

provided the Clearing Member has 

requested to receive such notification. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

in particular, in that it is designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general to protect 

investors and the public interest, by 

memorializing a risk protection 

available to Exchange Members. This 

risk feature promotes policy goals of the 

Commission which has encouraged 

execution venues, exchange and nonexchange alike, to offer risk protection 

tools and other mechanisms to decrease 

risk and increase stability. The 

Exchange believes that memorializing 

this feature will provide Members with 

specific information on cancelling 

orders. 

The individual firm benefits of 

enhanced risk protections flow 

downstream to counter-parties both at 

the Exchange and at other options 

exchanges, thereby increasing systemic 

protections as well. This risk feature 

allows Members to enter orders without 

fear of inadvertent exposure to excessive 

risk, which in turn benefits investors 

through increased liquidity for the 

execution of their orders, thereby 

protecting investors and the public 

interest. By memorializing the features 

in this rule change, Members are aware 

of the impact of utilizing this risk tool. 

This optional risk tool as noted above 

is offered to all Members. The Exchange 

further represents that its proposal 

operates consistently with the firm 

quote obligations of a broker-dealer 

pursuant to Rule 602 of Regulation NMS 

and that the functionality is not 

mandatory. Specifically, any interest 

that is executable against a Member’s 

orders that are received 9 by the 

Exchange, prior to the time the Kill 

Switch is processed by the System, will 

automatically execute at the price up to 

the Member’s size prior to the removal 

of orders from the System as a result of 

the Kill Switch. The Kill Switch 

message is accepted by the System in 

the order of receipt in the queue and is 

processed in that order so that interest 

that is already accepted into the System 

is processed prior to the Kill Switch 

message. 

With respect to providing information 

regarding the cancellation of orders as a 

result of the Kill Switch to the Clearing 

Member, each Member that transacts 

through a Clearing Member on the 

Exchange accepts financial 

responsibility for all Exchange 

transactions made by the Member on 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
50908 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices 

10See ISE Rule 808(b). 

11 15 U.S.C. 78s(b)(3)(A)(iii). 

12 17 CFR 240.19b–4(f)(6). 

13 17 CFR 240.19b–4(f)(6)(iii). 

14For purposes only of waiving the operative 

delay for this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 15 17 CFR 200.30–3(a)(12). 

whose behalf the Clearing Member 

agrees to clear.10 The Exchange believes 

that because Clearing Members 

guarantee all transactions on behalf of a 

Member, and therefore bear the risk 

associated with those transactions, it is 

appropriate for Clearing Members to 

have knowledge of the utilization by the 

member [sic] of the Kill Switch, should 

the Clearing Member request such 

notification. 

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 proposal 

does not impose an undue burden on 

intra-market competition because all 

Members may avail themselves of the 

Kill Switch. The Kill Switch 

functionality is optional. The proposed 

rule change protects Members in the 

event the Member is suffering from a 

systems issue or from the occurrence of 

unusual or unexpected market activity 

that would require them to withdraw 

from the market in order to protect 

investors. Utilizing this Kill Switch will 

permit the Member to protect itself from 

inadvertent exposure to excessive risk. 

Reducing such risk will enable Members 

to enter orders without fear of 

inadvertent exposure to excessive risk, 

which in turn will benefit investors 

through increased liquidity for the 

execution of their orders. Such 

increased liquidity benefits investors 

because they receive better prices and 

because it lowers volatility in the 

options market. For these reasons, the 

Exchange does not believe this proposal 

imposes an undue burden on intermarket competition because other 

exchanges offer the same functionality, 

which is being memorialized herein. 

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

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative before 30 days from 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),13 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. 

The Exchange has asked the 

Commission to waive the 30-day 

operative delay. The Commission 

believes that waiving the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest because the proposal is similar 

to the rules of other options exchanges 

and the Exchange’s proposal does not 

raise any new or novel issues. 

Therefore, the Commission hereby 

waives the 30-day operative delay and 

designates the proposed rule change to 

be operative upon filing with the 

Commission.14

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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– 

ISE–2017–94 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–2017–94. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of 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–ISE–2017–94, and should 

be submitted on or before November 24, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23828 Filed 11–1–17; 8:45 am] 

BILLING CODE 8011–01–P 


asabaliauskas on DSKBBXCHB2PROD with NOTICES