Document ID: SEC-2023-0991-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq BX, Inc.
Posted Date: 2023-09-13T04:00Z

[Federal Register Volume 88, Number 176 (Wednesday, September 13, 2023)]
[Notices]
[Pages 62833-62835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19730]

[[Page 62833]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98318; File No. SR-BX-2023-021]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, 
Section 13 Concerning PRISM

September 7, 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 30, 2023, Nasdaq BX, Inc. (``BX'' 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 self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Options 3, Section 13, Price 
Improvement Auction (``PRISM'').
    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 Exchange proposes to amend Options 3, Section 13, Price 
Improvement Auction (``PRISM''). Specifically, the Exchange proposes to 
amend Options 3, Section 13(i)(A) through (C) to harmonize the language 
within the PRISM entry checks with language within Nasdaq GEMX, LLC's 
(``GEMX'') PIM, Nasdaq ISE, LLC's (``ISE'') PIM, Nasdaq MRX, LLC's 
(``MRX'') PIM, and Nasdaq Phlx LLC's (``Phlx'') PIXL, without changing 
the substantive operations of these price improvement auctions. The 
Exchange believes that by utilizing similar language, Participants will 
be able to compare BX's PRISM entry checks with similar mechanisms on 
Nasdaq affiliated markets.
    BX proposes to add ``a price that is'' to the end of Options 3, 
Section 13(i)(A) and add new subparagraphs (1) and (2) to distinguish 
opposite and same side checks. The opposite side check is currently 
spelled out in the current rule text, however the same side check does 
not specify the NBBO check. Today, if the PRISM Order is for less than 
50 option contracts, and if the difference between the NBBO or the 
internal BBO is $0.01, the Initiating Participant must stop the entire 
PRISM Order at a price that is, on the same side of the market as the 
PRISM Order, equal to or better than the NBBO \3\ and better than any 
Limit Order or quote on the Limit Order book. The Exchange believes 
that the addition of the NBBO check will add clarity to the rule text 
concerning same side price checks because the NBBO check is always 
relevant in the same side check to avoid a trade-through. The Exchange 
also proposes to capitalize ``Limit Order,'' and remove other 
extraneous words as the sentence has been rearranged. The Exchange 
notes that this rule text represents current System functionality.
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    \3\ For example, if the market is 0.98 bid and 0.99 offer, a 
Public Customer PRISM Order to buy for less than 50 contracts must 
be stopped at 0.98 cents in this scenario to be accepted into a 
PRISM Auction, provided there is no resting order or quote on the BX 
order book at 0.98 in which case the PRISM Order would be rejected.
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    The Exchange proposes to amend Options 3, Section 13(i)(B) to 
distinguish opposite and same side checks and add a semicolon to the 
end of Options 3, Section 13(i)(B). The opposite side check is 
currently spelled out in the current rule text, however the same side 
check does not specify the NBBO check. Today, if the PRISM Order is for 
the account of a Public Customer and such order is for 50 option 
contracts or more, or if the difference between the NBBO or the 
internal BBO is greater than $0.01, the Initiating Participant must 
stop the entire PRISM Order at a price that is, on the same side of the 
market as the PRISM Order, at least $0.01 better than any Limit Order 
or quote on the Limit Order book and equal to or better than the NBBO. 
The Exchange believes that the addition of the NBBO check will add 
clarity to the rule text because the NBBO check is always relevant in 
the same side check to avoid a trade-through. The Exchange also 
proposes to capitalize ``Limit Order,'' and remove other extraneous 
words as the sentence has been rearranged. The Exchange notes that this 
rule text represents current System functionality.
    The Exchange proposes to amend Options 3, Section 13(i)(C) to 
distinguish opposite and same side checks and add a semicolon to the 
end of Options 3, Section 13(i)(C). The opposite side check is not 
currently delineated in the rule text. The Exchange proposes to provide 
that if the PRISM Order is for the account of a broker dealer or any 
other person or entity that is not a Public Customer and such order is 
for 50 option contracts or more, or if the difference between the NBBO 
or the internal BBO is greater than $0.01, the Initiating Participant 
must stop the entire PRISM Order at a price that is equal to or better 
than the internal BBO and NBBO on the opposite side of the market from 
the PRISM Order. The Exchange notes that this rule text represents 
current System functionality. The Exchange also proposes to reword the 
current rule text related to the same side check to provide that if the 
PRISM Order is for the account of a broker dealer or any other person 
or entity that is not a Public Customer and such order is for 50 option 
contracts or more, or if the difference between the NBBO or the 
internal BBO is greater than $0.01, the Initiating Participant must 
stop the entire PRISM Order at a price that is, on the same side of the 
market as the PRISM Order, at least $0.01 better than any Limit Order 
or quote on the Limit Order book, and equal to or better than the NBBO. 
The Exchange notes that this rule text represents current System 
functionality. The current rule text indicates that the PRISM Order 
must be stopped at a price that is the better of the BX BBO improved by 
at least $0.01 or the PRISM Order's limit price on the same side of the 
market as the PRISM Order, provided in either case that such price is 
at or better than the NBBO. Because the language is the ``better of'' 
the Exchange notes that the proposed language, which conforms to 
similar language utilized on other Nasdaq affiliated markets, describes 
the same price checks and adds the NBBO check which is currently 
missing.

[[Page 62834]]

2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\4\ in general, and furthers the objectives of section 
6(b)(5) of the Act,\5\ in particular, in that it is designed to promote 
just and equitable principles of trade and to protect investors and the 
public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Exchange's proposal to amend Options 3, Section 13(i)(A) 
through (C) to harmonize the language within the PRISM entry checks 
with language within GEMX's PIM, ISE's PIM, MRX's PIM, and Phlx's PIXL, 
without changing the substantive operations of these price improvement 
auctions, is consistent with the Act and the protection of investors 
and the general public because by utilizing similar language 
Participants will be able to compare BX's PRISM entry checks with 
similar mechanisms on Nasdaq affiliated markets.
    BX's proposal to amend Options 3, Section 13(i)(A) to distinguish 
opposite and same side checks, and add the NBBO check to the same side 
price check is consistent with the Act and the protection of investors 
and the general public because the NBBO check is always relevant in the 
same side check to avoid a trade-through. The Exchange believes that 
the addition of the NBBO check will add clarity to the rule text 
because the NBBO check is always relevant in the same side check to 
avoid a trade-through. The remainder of the changes are non-
substantive.
    BX's proposal to amend Options 3, Section 13(i)(B) to distinguish 
opposite and same side checks, and add the NBBO check to the same side 
price check is consistent with the Act and the protection of investors 
and the general public because the NBBO check is always relevant in the 
same side check to avoid a trade-through. The Exchange believes that 
the addition of the NBBO check will add clarity to the rule text 
because the NBBO check is always relevant in the same side check to 
avoid a trade-through. The remainder of the changes are non-
substantive.
    BX's proposal to amend Options 3, Section 13(i)(C) to distinguish 
opposite and same side checks, and add the opposite side check to the 
rule text is consistent with the Act and the protection of investors 
and the general public. The opposite side check must be equal to or 
better than the NBBO and any non-displayed order on the Exchange's 
order book to avoid a trade-through. Also, the NBBO check is always 
relevant in the same side check to avoid a trade-through. Rewording the 
current rule text related to the same side check to provide that if the 
PRISM Order is for the account of a broker dealer or any other person 
or entity that is not a Public Customer and such order is for 50 option 
contracts or more, or if the difference between the NBBO or the 
internal BBO is greater than $0.01, the Initiating Participant must 
stop the entire PRISM Order at a price that is on the same side of the 
market as the PRISM Order, at least $0.01 better than any Limit Order 
or quote on the Limit Order book, and equal to or better than the NBBO 
is consistent with the Act and the protection of investors and the 
general public. The proposed rule text describes the same price checks 
as the current rule while conforming the rule text to similar language 
utilized on other Nasdaq affiliated markets. Additionally, the proposed 
rule text adds the NBBO check which is always relevant in the same side 
check to avoid a trade-through. The Exchange believes that the addition 
of the NBBO check will add clarity to the rule text because the NBBO 
check is always relevant in the same side check to avoid a trade-
through. The Exchange notes that this rule text represents current 
System functionality.

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.
    BX's proposal to amend Options 3, Section 13(i)(A) through (C) to 
harmonize the language within the PRISM entry checks with language 
within GEMX's PIM, ISE's PIM, MRX's PIM, and Phlx's PIXL, without 
changing the substantive operations of these price improvement 
auctions, does not impose an undue burden on competition because market 
participants will be able to compare BX's PRISM entry checks with 
similar mechanisms on Nasdaq affiliated markets.
    Amending Options 3, Section 13(i)(A) through (C) to specify the 
entry checks that are utilized by BX's System today to initiate a PRISM 
does not impose an undue burden on competition because these checks 
will apply uniformly to any order entered into PRISM. Further, the 
proposed amendments will add transparency to the current System 
functionality, which is not being substantively amended.

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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) 
thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BX-2023-021 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-BX-2023-021. This file 
number should be included on the

[[Page 62835]]

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-BX-2023-021 and should be submitted on or before October 4, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19730 Filed 9-12-23; 8:45 am]
BILLING CODE 8011-01-P