Document ID: SEC-2021-0723-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2021-05-17T04:00Z

[Federal Register Volume 86, Number 93 (Monday, May 17, 2021)]
[Notices]
[Pages 26753-26758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10274]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91841; File No. SR- NASDAQ-2021-030]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Nasdaq Options Market LLC Rules at Options 3, Section 7, 
Types of Orders and Order and Quote Protocols, and Options 3, Section 
15, Risk Protections

May 11, 2021.
    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 April 28, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 The Nasdaq Options Market LLC 
(``NOM'') Rules at Options 3, Section 7, Types of Orders and Order and 
Quote Protocols, and Options 3, Section 15, Risk Protections.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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 amend NOM's Rules at Options 3, Section 
15, Risk Protections, to describe Size Limitation. The Exchange also 
proposes to amend Options 3, Section 7, Types of Orders and Order and 
Quote Protocols, to: (1) Remove the One-Cancels-the-Other Order; (2) 
indicate the risk protections that are applicable to On the Open Orders 
and Immediate or Cancel orders; and (3) remove references to an 
outdated OTTO protocol; and (4) make technical corrections. The 
Exchange also proposes to update a rule citation within General 1, 
Section 1, Definitions, and add and reserve certain sections within the 
Equity Rules. Each change is described below.
Options 3, Section 15
    The Exchange proposes to amend Options 3, Section 15, Risk 
Protections, to add a new section (b)(2) to describe within its rules a 
current limitation that exists today as to the number of contracts an 
incoming order or quote may specify. Specifically, the maximum number 
of contracts, which shall not be

[[Page 26754]]

less than 10,000, is established by the Exchange from time-to-time. 
Orders or quotes that exceed the maximum number of contracts are 
rejected. This System limitation is the same on all Nasdaq affiliated 
exchanges.\3\ Today, Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC 
(``GEMX'') and Nasdaq MRX, LLC (``MRX'') describe this limitation 
within those rules at Options 3, Section 15(a)(2)(B). NOM proposes to 
similarly describe this limitation in its rules.
---------------------------------------------------------------------------

    \3\ The Exchange will propose a similar rule change to Nasdaq 
Phlx LLC (``Phlx'') and Nasdaq BX, Inc. (``BX'').
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange proposes to amend Options 3, Section 7, Types of 
Orders and Order and Quote Protocols, to (1) remove the ``One-Cancels-
the-Other Order'' order type; (2) indicate the risk protections that 
are applicable to On the Open Orders or ``OPG'' orders and Immediate or 
Cancel orders; (3) remove references to an outdated OTTO protocol; and 
(4) make technical corrections.
    The Exchange proposes to remove the ``One-Cancels-the-Other Order'' 
currently located within Options 3, Section 7(a)(8). A One-Cancels-the-
Other Order is an order entered by a Market Maker that consists of a 
buy order and a sell order treated as a unit; the full execution of one 
of the orders causes the other to be canceled. This order type was 
adopted in 2011 \4\ and was to be implemented on or about August 1, 
2011 by issuance of an Option Trader Alert as part of a larger 
implementation related to a technology migration.\5\ The One-Cancels-
the-Other Order was never implemented on NOM as part of that migration. 
No Participant was able to utilize this order type as it was not 
available on NOM's System. The Exchange proposes to remove the order 
type at this time. The order type was intended to permit Market Makers 
to submit a two-sided order consisting of both a bid and an offer. 
Today, Market Makers may submit two-sided quotes utilizing NOM's 
Specialized Quote Feed or ``SQF'' \6\ quoting protocol. The Exchange 
would file a rule change with the Commission if it decides to offer 
this order type in the future. The Exchange proposes to renumber 
current Options 3, Section 7(a)(9) and (10) new Options 3, Section 
7(a)(8) and (9).
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 64406 (May 4, 2011), 
76 FR 27134 (May 10, 2011) (SR-NASDAQ-2011-065) (The NASDAQ Stock 
Market LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Adopt a Two-Sided Order for NOM Market Makers).
    \5\ Id.
    \6\ SQF is an interface that allows Market Makers to connect, 
send, and receive messages related to quotes and Immediate-or- 
Cancel Orders into and from the Exchange. Features include the 
following: (1) Options symbol directory messages (e.g, underlying 
instruments); (2) system event messages (e.g., start of trading 
hours messages and start of opening); (3) trading action messages 
(e.g., halts and resumes); (4) execution messages; (5) quote 
messages; (6) Immediate-or-Cancel Order messages; (7) risk 
protection triggers and purge notifications; and (8) opening 
imbalance messages. The SQF Purge Interface only receives and 
notifies of purge request from the Market Maker. Market Makers may 
only enter interest into SQF in their assigned options series. 
Immediate-or-Cancel Orders entered into SQF are not subject to the 
Order Price Protection or the Market Order Spread Protection in 
Options 3, Section 15(a)(1) and (a)(2), respectively.
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 7(b)(1) which 
describes an On the Open Order or ``OPG'' order. Today, an OPG order 
can only be executed in the Opening Cross pursuant to Options 3, 
Section 8. Further, if after entry into the System, the order is not 
fully executed in its entirety during the Opening Cross, the order, or 
any unexecuted portion of such order, will be cancelled back to the 
entering participant. OPG orders may not route. OPG orders are entered 
during the Opening Cross utilizing ``Financial Information eXchange'' 
or ``FIX''.\7\ OPG orders are currently not subject to any protections 
listed in Options 3, Section 15 describing risk protections, except 
Size Limitation.\8\ Options 3, Section 7(b)(1) is currently silent on 
the application of risk protections. At this time, the Exchange 
proposes to state that this order type is not subject to any 
protections listed in Options 3, Section 15, except Size Limitation. 
With the proposed addition of Size Limitation to proposed new Options 
3, Section 15(b)(2), the Exchange proposes to note in the proposed new 
text within Options 3, Section 7(b)(1) that OPG orders are subject to 
Size Limitation. The Exchange notes that the Opening Cross itself has 
boundaries within which orders will be executed.\9\ Also, any 
participant may enter an Opening Only Order. Typically Market Makers 
submit Valid Width NBBOs, as provided for within Options 3, Section 8, 
during the Opening Cross. Nasdaq BX's OPG Orders are also not subject 
to any risk protections aside from Size Limitation.\10\
---------------------------------------------------------------------------

    \7\ FIX is an interface that allows Participants and their 
Sponsored Customers to connect, send, and receive messages related 
to orders to and from the Exchange. Features include the following: 
(1) Execution messages; (2) order messages; and (3) risk protection 
triggers and cancel notifications. See Options 3, Section 
7(e)(1)(A).
    \8\ See Options 3, Section 7(b)(1).
    \9\ See Options 3, Section 8(b).
    \10\ See BX Options 3, Section 7(b)(1) which currently provides 
that an OPG order is not subject to any protections listed in 
Options 3, Section 15. The Exchange is in the process of filing a 
rule change to indicate that BX OPG orders are subject to Size 
Limitation. See also SR-BX-2021-020.
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 7(b)(2) which 
describes an Immediate-or-Cancel Order or ``IOC'' order. Today, the 
Exchange describes an IOC order as a Market Order or Limit Order to be 
executed in whole or in part upon receipt. Any portion not so executed 
is cancelled and/or routed pursuant to the Participant's 
instruction.\11\ The rule text currently also provides that ``IOC 
orders may be entered through FIX, OTTO or SQF; IOC Orders entered 
through OTTO or SQF may not route.'' The Exchange previously filed to 
remove its ``Ouch to Trade Options'' or ``OTTO'' protocol from its 
rules.\12\ The citations to OTTO within Options 3, Section 7 were 
inadvertently not removed. At this time, the Exchange proposes to 
remove those remaining references to OTTO within Options 3, Section 7 
from the descriptions of IOC orders and DAY orders.\13\
---------------------------------------------------------------------------

    \11\ See NOM Options 3, Section 7(b)(2).
    \12\ See Securities Exchange Act Release No. 84084 (December 17, 
2020), 85 FR 84084 (December 23, 2020) (SR-NASDAQ-2020-089) 
(``Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To No Longer Implement the OTTO Protocol'').
    \13\ ``DAY'' is an order entered with a TIF of ``Day'' that 
expires at the end of the day on which it was entered, if not 
executed. All orders by their terms are Day Orders unless otherwise 
specified. Day orders may be entered through FIX. See proposed 
Options 3, Section 7(b)(3).
---------------------------------------------------------------------------

    The Exchange also proposes to note, similar to Phlx and BX, that an 
IOC order entered by a Market Maker through Specialized Quote Feed or 
``SQF'' \14\ is not subject to certain risk protections noted within 
Options 3, Section 15. Today, an IOC order entered through SQF is not 
subject to the Order Price Protection or Market Order Spread 
Protections noted within Options 3, Section 15(a)(1) and (a)(2), 
respectively. Further, with the addition of Size Limitation to proposed 
new Options 3, Section 15(b)(2), the Exchange also proposes to note 
that SQF orders are not subject to Size Limitation. The addition of 
this rule text will bring greater clarity to the order type.
---------------------------------------------------------------------------

    \14\ See supra note 6.
---------------------------------------------------------------------------

    The Exchange notes that while only orders are entered into FIX, SQF 
is a quote protocol which also permits Market Makers to enter IOC 
orders that do not rest on the order book. The Exchange has not elected 
to utilize Order Price Protection, Market Order Spread Protection, and 
Size Limitation on SQF orders, as it did for FIX, because Market Makers 
only utilize SQF to enter IOC orders and Market Makers are professional 
traders with their own risk

[[Page 26755]]

settings. FIX, on the other hand, is utilized by all market 
participants who may not have their own risk settings, unlike Market 
Makers.
    Market Makers utilize IOC orders to trade out of accumulated 
positions and manage their risk when providing liquidity on the 
Exchange. Proper risk management, including using these IOC orders to 
offload risk, is vital for Market Makers, and allows them to maintain 
tight markets and meet their quoting and other obligations to the 
market. Market Makers handle a large amount of risk when quoting and in 
addition to the risk protections required by the Exchange, Market 
Makers utilize their own risk management parameters when entering 
orders, minimizing the likelihood of a Market Maker's erroneous order 
from being entered. The Exchange believes that Market Makers, unlike 
other market participants, have the ability to manage their risk when 
submitting IOC orders through SQF and should be permitted to elect this 
method of order entry to obtain efficiency and speed of order entry, 
particularly in light of the continuous quoting obligations the 
Exchange imposes on these participants.
    The Exchange believes that allowing Market Makers to submit IOC 
orders through their preferred protocol increases their efficiency in 
submitting such orders and thereby allows them to maintain quality 
markets to the benefit of all market participants that trade on the 
Exchange. Further, unlike other market participants, Market Makers 
provide liquidity to the market place and have obligations.\15\ Thus, 
the Exchange opted to not offer Order Price Protection, Market Order 
Spread Protection, and Size Limitation for IOC orders entered through 
SQF because Market Makers have more sophisticated infrastructures than 
other market participants and are able to manage their risk.
---------------------------------------------------------------------------

    \15\ Market Makers have intra-day quoting obligations as 
specified in Options 2, Section 5.
---------------------------------------------------------------------------

    The Exchange proposes to amend the description of Specialized Quote 
Feed within Options 3, Section 7(e)(1)(B) to make plural the word 
``request'' and also add an ``.,'' after an e.g to conform the 
punctuation in the paragraph.
General 1, Section 1
    The Exchange proposes to update a rule citation within General 1, 
Section 1 to Options 3, Section 20. The rule text currently cites 
Options 3, Section 4, but that citation was incorrectly updated in a 
prior rule change.\16\ The original citation was to Chapter V, Section 
6, Nullification and Adjustment of Options Transactions including 
Obvious Errors. This rule was relocated to Options 3, Section 20 within 
that Relocation Rule Change.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 87779 (December 17, 
2019), 84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098) (Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To 
Relocate Rules From Its Current Rulebook Into Its New Rulebook 
Shell) (``Relocation Rule Change'').
---------------------------------------------------------------------------

Equity Rules
    Nasdaq proposes to amend the Rulebook shell to add a new Equity 3A 
and Equity 8A and reserve those sections. Equity 3A will be utilized by 
BX Rulebook and the Exchange proposes to reserve that section in this 
Rulebook to demonstrate the section does not exist for the Nasdaq 
equity market.\17\ Equity 8A is utilized by Nasdaq Phlx within its 
Rulebook and the Exchange proposes to reserve that section in this 
Rulebook to demonstrate the section does not exist for the Nasdaq 
equity market.\18\ Also, Nasdaq proposes to add Sections 15-23 within 
Equity 9 and reserve those sections to harmonize the numbering of 
Nasdaq equity rules across its affiliated markets.
---------------------------------------------------------------------------

    \17\ BX will file a proposed rule change to add and reserve 
Equity 3A.
    \18\ See Phlx Equity 8A Unlisted Trading Privileges; Proxy and 
Other Rules.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\20\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Options 3, Section 15
    The Exchange's proposal to amend Options 3, Section 15, Risk 
Protections, to add a new section (b)(2) is consistent with the Act. 
The proposed amendment is intended to describe a current limitation 
that exists today as to the number of contracts an incoming order or 
quote may specify. Specifically, the maximum number of contracts, which 
shall not be less than 10,000, is established by the Exchange from 
time-to-time. Orders or quotes that exceed the maximum number of 
contracts are rejected. This System limitation is the same on all 
Nasdaq affiliated exchanges.\21\ Today, ISE, GEMX and MRX describe this 
limitation within those rules at Options 3, Section 15(a)(2)(B). NOM 
proposes to similarly describe this limitation in its rules.
---------------------------------------------------------------------------

    \21\ See supra note 3.
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to remove the ``One-Cancels-the-Other 
Order'' currently located within Options 3, Section 7(a)(8) is 
consistent with the Act. This order type was adopted in 2011 \22\ and 
was to be implemented on or about August 1, 2011 by issuance of an 
Option Trader Alert as part of a larger implementation related to a 
technology migration,\23\ however, the new order type was never 
implemented on NOM as part of that migration. No Participant was able 
to utilize this order type on NOM's System to date. The Exchange's 
proposal to remove the order type protects investors and the public 
interest by making clear that the order type is not available. Further, 
the order type was intended to permit Market Makers to submit a two-
sided order consisting of both a bid and an offer. Today, Market Makers 
may submit two-sided quotes utilizing NOMs SQF \24\ quoting protocol.
---------------------------------------------------------------------------

    \22\ See supra note 4.
    \23\ Id.
    \24\ See supra note 6.
---------------------------------------------------------------------------

    The Exchange's proposal to amend OPG orders within Options 3, 
Section 7(b)(1) to make clear that OPG orders are currently not subject 
to any protections listed in Options 3, Section 15 describing risk 
protections,\25\ except Size Limitation is consistent with the Act and 
will bring greater clarity to the order type. Options 3, Section 
7(b)(1) is currently silent on the application of risk protections. 
Today, OPG orders are not subject to any protections listed in Options 
3, Section 15, except Size Limitation. With the proposed addition of 
Size Limitation to proposed new Options 3, Section 15(b)(2), the 
Exchange proposes to note in the proposed new text within Options 3, 
Section 7(b)(1) that OPG orders are subject to Size Limitation. The 
Exchange believes that it is consistent with the Act to not apply any 
risk protections during the Opening Cross as the Opening Cross itself 
has boundaries within which orders will be executed.\26\ Any 
participant may enter an Opening Only Order. Typically Market Makers 
submit Valid Width NBBOs, as provided for within Options 3, Section 8, 
during the Opening Cross. Nasdaq BX's OPG Orders are also not subject 
to any risk protections aside from Size Limitation.\27\
---------------------------------------------------------------------------

    \25\ See Options 3, Section 7(b)(1).
    \26\ See Options 3, Section 8(b).
    \27\ See supra note 10.

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

[[Page 26756]]

    The Exchange's proposal to amend Options 3, Section 7(b)(2) and 
(b)(3), which describes IOC orders and DAY orders, to remove outdated 
citations to OTTO within Options 3, Section 7 that were inadvertently 
not removed is consistent with the Act. These amendments are non-
substantive and will add clarity to these rules.
    The Exchange's proposal to note, similar to Phlx and BX, that an 
IOC order entered by a Market Maker through SQF is not subject to 
certain risk protections noted within Options 3, Section 15 is 
consistent with the Act. Today, an IOC order entered through SQF is not 
subject to the Order Price Protection or Market Order Spread 
Protections noted within Options 3, Section 15(a)(1) and (a)(2), 
respectively. Further, with the addition of Size Limitation to proposed 
new Options 3, Section 15(b)(2), the Exchange also proposes to note 
that SQF orders are not subject to Size Limitation. The addition of 
this rule text will bring greater clarity to the order type.
    The Exchange notes that while only orders are entered into FIX, SQF 
is a quote protocol which also permits Market Makers to enter IOC 
orders that do not rest on the order book. The Exchange has not elected 
to utilize Order Price Protection, Market Order Spread Protection, and 
Size Limitation on SQF orders, as it did for FIX, because Market Makers 
only utilize SQF to enter IOC orders and Market Makers are professional 
traders with their own risk settings. FIX, on the other hand, is 
utilized by all market participants who may not have their own risk 
settings, unlike Market Makers.
    Market Makers utilize IOC orders to trade out of accumulated 
positions and manage their risk when providing liquidity on the 
Exchange. Proper risk management, including using these IOC orders to 
offload risk, is vital for Market Makers, and allows them to maintain 
tight markets and meet their quoting and other obligations to the 
market. Market Makers handle a large amount of risk when quoting and in 
addition to the risk protections required by the Exchange, Market 
Makers utilize their own risk management parameters when entering 
orders, minimizing the likelihood of a Market Maker's erroneous order 
from being entered. The Exchange believes that Market Makers, unlike 
other market participants, have the ability to manage their risk when 
submitting IOC orders through SQF and should be permitted to elect this 
method of order entry to obtain efficiency and speed of order entry, 
particularly in light of the continuous quoting obligations the 
Exchange imposes on these participants.
    The Exchange believes that allowing Market Makers to submit IOC 
orders through their preferred protocol increases their efficiency in 
submitting such orders and thereby allows them to maintain quality 
markets to the benefit of all market participants that trade on the 
Exchange. Further, unlike other market participants, Market Makers 
provide liquidity to the market place and have obligations.\28\ The 
Exchange believes not offering Order Price Protection, Market Order 
Spread Protection, and Size Limitation for IOC orders entered through 
SQF is consistent with the Act because Market Makers have more 
sophisticated infrastructures than other market participants and are 
able to manage their risk.
---------------------------------------------------------------------------

    \28\ See supra note 15.
---------------------------------------------------------------------------

    Finally, the Exchange's proposal to amend the description of 
Specialized Quote Feed within Options 3, Section 7(e)(1)(B) to make 
plural the word ``request'' and also add an ``.,'' after an e.g to 
conform the punctuation in the paragraph is consistent with the Act. 
These changes are non-substantive.
General 1, Section 1
    The Exchange's proposal to update an incorrect rule citation within 
General 1, Section 1 to Options 3, Section 20 is consistent with the 
Act. The rule text currently cites Options 3, Section 4, but that 
citation was incorrectly updated in a prior rule change.\29\ The 
original citation was to Chapter V, Section 6, Nullification and 
Adjustment of Options Transactions including Obvious Errors. This rule 
was relocated to Options 3, Section 20 within that Relocation Rule 
Change. This amendment will bring clarity to this rule.
---------------------------------------------------------------------------

    \29\ See supra note 16.
---------------------------------------------------------------------------

Equity Rules
    Nasdaq's proposal to amend the Rulebook shell to add a new Equity 
3A and Equity 8A and reserve those sections is consistent with the Act. 
Equity 3A will be utilized by the BX Rulebook and the Exchange proposes 
to reserve that section in this Rulebook to demonstrate the section 
does not exist for the Nasdaq equity market.\30\ Equity 8A is utilized 
by Phlx within its Rulebook and the Exchange proposes to reserve that 
section in this Rulebook to demonstrate the section does not exist for 
the Nasdaq equity market.\31\ Also, Nasdaq proposes to add Sections 15-
23 within Equity 9 and reserve those sections to harmonize the 
numbering of Nasdaq equity rules across its affiliated markets.
---------------------------------------------------------------------------

    \30\ See supra note 17.
    \31\ See Phlx Equity 8A Unlisted Trading Privileges; Proxy and 
Other Rules.
---------------------------------------------------------------------------

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.
Options 3, Section 15
    The Exchange's proposal to amend Options 3, Section 15, Risk 
Protections, to add a new section (b)(2) does not impose an undue 
burden on competition. The proposed amendment is intended to describe a 
current limitation that exists today as to the number of contracts an 
incoming order or quote may specify. This System limitation is the same 
on all Nasdaq affiliated exchanges.\32\ Today, ISE, GEMX and MRX 
describe this limitation within its rules at Options 3, Section 
15(a)(2)(B). NOM proposes to similarly describe this limitation in its 
rules.
---------------------------------------------------------------------------

    \32\ See supra note 3.
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to remove the ``One-Cancels-the-Other 
Order'' currently located within Options 3, Section 7(a)(8) does not 
impose an undue burden on competition. No Participant was able to 
utilize this order type on NOM's System to date. The Exchange's 
proposal to remove the order type will make clear that the order type 
is not available. Further, the order type was intended to permit Market 
Makers to submit a two-sided order consisting of both a bid and an 
offer. Today, Market Makers may submit two-sided quotes utilizing NOM's 
SQF \33\ quoting protocol.
---------------------------------------------------------------------------

    \33\ See supra note 6.
---------------------------------------------------------------------------

    The Exchange's proposal to amend Options 3, Section 7(b)(1) to make 
clear that Size Limitation applies to OPG orders and the remainder of 
the risk protections noted within Options 3, Section 15 do not apply to 
OPG orders does not impose an undue burden on competition. The proposed 
rule text will clarify the manner in which risk protections interact 
with this order type. The Opening Cross itself has boundaries within 
which orders will be executed. Any participant may enter an Opening 
Only Order. Typically Market Makers submit Valid Width NBBOs, as 
provided for within Options 3, Section 8, during the Opening Cross.
    The Exchange's proposal to amend Options 3, Section 7(b)(2) and 
(b)(3),

[[Page 26757]]

which describes IOC orders and DAY orders, to remove outdated citations 
to OTTO within Options 3, Section 7 that were inadvertently not removed 
does not impose an undue burden on competition. These amendments are 
non-substantive and will add clarity to these rules.
    The Exchange's proposal to note, similar to Phlx and BX, that an 
IOC order entered by a Market Maker through SQF is not subject to 
certain risk protections noted within Options 3, Section 15 does not 
impose an undue burden on competition. Today, an IOC order entered 
through SQF is not subject to the Order Price Protection or Market 
Order Spread Protections noted within Options 3, Section 15(a)(1) and 
(a)(2), respectively. Further, with the addition of Size Limitation to 
proposed new Options 3, Section 15(b)(2), the Exchange also proposes to 
note that SQF orders are not subject to Size Limitation. The addition 
of this rule text will bring greater clarity to the order type.
    The Exchange notes that while only orders are entered into FIX, SQF 
is a quote protocol which also permits Market Makers to enter IOC 
orders that do not rest on the order book. The Exchange has not elected 
to utilize Order Price Protection, Market Order Spread Protection, and 
Size Limitation on SQF orders, as it did for FIX, because Market Makers 
only utilize SQF to enter IOC orders and Market Makers are professional 
traders with their own risk settings. FIX, on the other hand, is 
utilized by all market participants who may not have their own risk 
settings, unlike Market Makers.
    The Exchange believes that Market Makers, unlike other market 
participants, have the ability to manage their risk when submitting IOC 
orders through SQF and should be permitted to elect this method of 
order entry to obtain efficiency and speed of order entry, particularly 
in light of the continuous quoting obligations the Exchange imposes on 
these participants. Further, unlike other market participants, Market 
Makers provide liquidity to the market place and have obligations.\34\
---------------------------------------------------------------------------

    \34\ See supra note 15.
---------------------------------------------------------------------------

    Finally, the Exchange's proposal to amend the description of 
Specialized Quote Feed within Options 3, Section 7(e)(1)(B) to make 
plural the word ``request'' and also add an ``.,'' after an e.g to 
conform the punctuation in the paragraph does not impose an undue 
burden on competition. These changes are non-substantive.
General 1, Section 1
    The Exchange's proposal to update an incorrect rule citation within 
General 1, Section 1 to Options 3, Section 20 does not impose an undue 
burden on competition. The rule text currently cites Options 3, Section 
4, but that citation was incorrectly updated in a prior rule 
change.\35\ The original citation was to Chapter V, Section 6, 
Nullification and Adjustment of Options Transactions including Obvious 
Errors. This rule was relocated to Options 3, Section 20 within that 
Relocation Rule Change. This amendment will bring clarity to this rule.
---------------------------------------------------------------------------

    \35\ See supra note 16.
---------------------------------------------------------------------------

Equity Rules
    Nasdaq's proposal to amend the Rulebook shell to add a new Equity 
3A and Equity 8A and reserve those sections does not impose an undue 
burden on competition. Equity 3A will be utilized by the BX Rulebook 
and the Exchange proposes to reserve that section in this Rulebook to 
demonstrate the section does not exist for the Nasdaq equity 
market.\36\ Equity 8A is utilized by Phlx within its Rulebook and the 
Exchange proposes to reserve that section in this Rulebook to 
demonstrate the section does not exist for the Nasdaq equity 
market.\37\ Also, Nasdaq proposes to add Sections 15-23 within Equity 9 
and reserve those sections to harmonize the numbering of Nasdaq equity 
rules across its affiliated markets.
---------------------------------------------------------------------------

    \36\ See supra note 17.
    \37\ See Phlx Equity 8A Unlisted Trading Privileges; Proxy and 
Other Rules.
---------------------------------------------------------------------------

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) of the Act \38\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\39\
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(3)(A).
    \39\ 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.
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission notes that other exchanges have 
substantively similar rules regarding size limitation for certain 
incoming orders or quotes.\40\ In addition, removing references to an 
order type and protocol that are not available on the Exchange will 
bring greater clarity to NOM's rules, as will the non-substantive 
amendments, which correct typographical errors, remove duplicative 
text, and align the Exchange's rulebook numbering with that of an 
affiliated exchange. Thus, the Commission believes waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. The Commission therefore waives the 30-day operative 
delay and designates this proposal operative upon filing.\41\
---------------------------------------------------------------------------

    \40\ See ISE, GEMX and MRX rules at Options 3, Section 
15(a)(2)(B).
    \41\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 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.

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-NASDAQ-2021-030 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-NASDAQ-2021-030. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

[[Page 26758]]

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-
NASDAQ-2021-030 and should be submitted on or before June 7, 2021.
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10274 Filed 5-14-21; 8:45 am]
BILLING CODE 8011-01-P