Document ID: SEC-2017-1434-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq GEMX, LLC
Posted Date: 2017-08-24T04:00Z

[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40188-40190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17908]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81436; File No. SR-GEMX-2017-38]

Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Related to Quoting 
at the Opening

August 18, 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 August 17, 2017, Nasdaq GEMX, LLC (``GEMX'' 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.
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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 GEMX Rule 701, entitled ``Opening.''
    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 purpose of this rule change is to amend GEMX Rule 701, 
``Opening'' to specifically amend opening obligations for Primary 
Market Makers or ``PMMs.'' The Exchange notes that the proposed rule 
change is similar to a Nasdaq MRX, LLC (``MRX'') rule.\3\
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    \3\ See MRX Rule 701.
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    Today, GEMX Rule 701(c)(3) states that the PMM assigned in a 
particular equity option must enter a Valid Width Quote not later than 
one minute following the dissemination of a quote or trade by the 
market for the underlying security or, in the case of index options, 
following the receipt of the opening price in the underlying index. The 
PMM assigned in a particular U.S. dollar-settled foreign currency 
option must enter a Valid Width Quote not later than one minute after 
the announced market opening.
    First, the Exchange proposes to add the words ``or index'' to 
further clarify that the requirement applies to equities and index 
options. The Exchange proposes this addition to further clarify the 
requirement in Rule 701(c)(3) clearly applies to equity and index 
options.
    Second, the Exchange proposes to modify the PMM's current 
obligation to enter Valid Width Quotes not later than one minute 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index for all assigned 
options, or in the case of a U.S. dollar-settled foreign currency 
option after the announced market opening. The Exchange believes that 
the current requirement is very burdensome and instead proposes to add 
``in 90% of their assigned series'' to require a PMM to enter a Valid 
Width Quote not later than one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
90% of their assigned series, or in the case of a U.S. dollar-settled 
foreign currency option in 90% of their assigned series not later than 
one minute after the announced market opening.
    Further, the Exchange proposes to require PMMs to promptly enter a 
Valid Width Quote in the remainder of their assigned series, which did 
not open within one minute following the dissemination of a quote or 
trade by the market for the underlying security or, in the case of 
index options, following the receipt of the opening price, in the 
underlying index or, with respect to a U.S. dollar-settled foreign 
currency option, following the announced market opening. The Exchange's 
proposal is intended to account for market conditions which may prevent 
a PMM from opening all assigned series, for example an extremely 
volatile market which may impact the PMM's ability to enter aggressive 
quotes. Another example would be that news pertaining to a specific 
security is causing the underlying price to fluctuate rapidly and 
significantly, thereby causing the PMM to await the underlying equity 
price to settle before entering a Valid Width Quote. The Exchange's 
surveillance staff would monitor to ensure that PMMs are complying with 
these requirements during the Opening Process.
    Today, the Opening Process for an options series will be conducted 
on or after 9:30 a.m. if the system has received, within two minutes 
(or such shorter time as determined by the Exchange and disseminated to 
membership on the Exchange's Web site) of the opening trade or quote on 
the market for the underlying security in the case of equity options 
or, in the case of index options, within two minutes of the receipt of 
the opening price in the underlying index (or such shorter time as 
determined by the Exchange and disseminated to membership on the 
Exchange's Web site), or within two minutes of market opening for the 
underlying currency in the case of a U.S. dollar-settled foreign 
currency option (or such shorter time as determined by the Exchange and 
disseminated to membership on the Exchange's Web site) the PMM's Valid 
Width Quote, the Valid Width Quotes of two Competitive Maker [sic] 
Makers (``CMMs'') or if neither the PMM's Valid Width Quote nor the 
Valid Width Quote of two CMMs have been submitted within such 
timeframe, if one CMM has submitted a Valid Width Quote.\4\
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    \4\ See Rule 701(c)(1)(i)-(iii).
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Implementation
    The Exchange proposes to implement this rule change on September 
29, 2017.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 40189]]

of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ 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 
for the reasons stated below.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange's first proposal at Rule 701(c)(3) to clarify that the 
requirement applies to equities and index options will make clear the 
applicability of the PMM's requirement to enter Valid Width Quotes. 
This proposed amendment is non-substantive and is intended to add 
clarity to the rules.
    The second proposal to amend a PMM's requirement to enter Valid 
Width Quotes during the Opening Process is consistent with the Act 
because the 90% requirement to provide a Valid Width Quote in a series 
to which the PMM is assigned will continue to ensure that options 
series are opened in a timely manner, while not imposing a burdensome 
requirement on market participants. PMMs would be required to promptly 
enter a Valid Width Quote in the remainder of their assigned series, 
which did not open within one minute of the dissemination of a quote or 
trade by the market for the underlying security or in the case of index 
options, following the receipt of the opening price or, with respect to 
U.S. dollar-settled foreign currency options, following the announced 
market opening. The Exchange would monitor PMMs to ensure that they 
promptly provided a Valid Width Quote for the remainder of the series 
within a reasonable amount of time. The Exchange notes that market 
conditions could cause a PMM to experience circumstances where opening 
100% of all of their assigned series within one minute of the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or, with respect to U.S. dollar-
settled foreign currency options, following the announced market 
opening, is not feasible.
    The Exchange believes that the proposed 90% Valid Width Quoting 
obligation, not later than one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening, along with 
the ``prompt'' standard for the remaining 10% of their assigned series 
will ensure all series are opened in a timely manner. The Exchange's 
proposal accounts for market conditions which may prevent a PMM from 
opening all assigned series, for example an extremely volatile market 
which may impact the PMM's ability to enter aggressive quotes. Another 
example would be that news pertaining to a specific security is causing 
the underlying price to fluctuate rapidly and significantly, thereby 
causing the PMM to await the underlying equity price to settle before 
entering a Valid Width Quote. The Exchange believes that the time frame 
for PMMs to provide a Valid Width Quote in 90% of their assigned series 
not later than one minute following the dissemination of a quote or 
trade by the market for the underlying security or, in the case of 
index options, following the receipt of the opening price in the 
underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening will ensure 
liquidity on GEMX during the Opening Process. The Exchange desires to 
encourage PMMs to continue to make markets on GEMX at the Opening. The 
Exchange believes that requiring PMMs to provide a Valid Width Quote in 
90% of their assigned options not later than one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or, with respect to U.S. dollar-
settled foreign currency options, following the announced market 
opening along with the ``prompt'' standard for the remaining 10% will 
enhance the market making functions for PMMs and serve to maintain a 
fair and orderly market thereby promoting the protection of investors 
and the public interest.

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 change 
the intense competition that exists among the options markets for 
options business including on the opening. Nor does the Exchange 
believe that the proposal will impose any burden on intra-market 
competition; the Opening Process involves many types of participants 
and interest.
    The Exchange's proposal to require a PMM to enter a Valid Width 
Quote in 90% of their assigned series not later than one minute time 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index or, with respect 
to U.S. dollar-settled foreign currency options, following the 
announced market opening and promptly enter a Valid Width quote for the 
remaining 10% their assigned series does not create an undue burden on 
competition. The proposal will continue to ensure that options series 
are opened in a timely manner, while not imposing a burdensome 
requirement on market participants. PMMs would be required to promptly 
enter a Valid Width Quote in the remainder of their assigned series 
which were not open within one minute following the dissemination of a 
quote or trade by the market for the underlying security or, in the 
case of index options, following the receipt of the opening price in 
the underlying index or, with respect to U.S. dollar-settled foreign 
currency options, following the announced market opening. The Exchange 
would monitor PMMs to ensure that they promptly entered a Valid Width 
Quote for the remainder of their assigned series within a reasonable 
amount of time. The Exchange notes that market conditions could cause a 
PMM to experience circumstances where entering a Valid Width Quote for 
100% of all of their assigned series within one minute following the 
dissemination of a quote or trade by the market for the underlying 
security or, in the case of index options, following the receipt of the 
opening price in the underlying index or with respect to U.S. dollar-
settled foreign currency options within one minute after the announced 
market opening is not feasible. The Exchange believes that the proposed 
90% obligation to enter a Valid Width Quote not later than one minute 
following the dissemination of a quote or trade by the market for the 
underlying security or, in the case of index options, following the 
receipt of the opening price in the underlying index or, with respect 
to U.S. dollar-settled foreign currency options, following the 
announced market opening for the underlying security along with the 
``prompt'' standard for the remaining series will ensure all series are 
opened in a timely manner.

[[Page 40190]]

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 \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 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, along 
with a brief description and text of 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: (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-GEMX-2017-38 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-GEMX-2017-38. 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-GEMX-2017-38 and should be 
submitted on or before September 14, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17908 Filed 8-23-17; 8:45 am]
BILLING CODE 8011-01-P