Document ID: SEC-2018-0571-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2018-04-11T04:00Z

[Federal Register Volume 83, Number 70 (Wednesday, April 11, 2018)]
[Notices]
[Pages 15653-15655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07407]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83001; File No. SR-ISE-2018-29]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to the 
Delay of Complex Order Quoting Functionality

April 5, 2018.
    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 March 28, 2018, Nasdaq ISE, LLC (``ISE'' 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 extend the delay for re-introduction of 
functionality which permits Market Makers to enter quotes in certain 
symbols for complex strategies on the complex order book in their 
appointed options classes by an additional one year.
    The text of the proposed rule change is available on the Exchange's 
website at http://ise.cchwallstreet.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 the proposed rule change is to extend the delay for 
re-introduction of functionality which permits Market Makers to enter 
quotes in certain symbols for complex strategies on the complex order 
book in their appointed options classes by an additional one year. The 
Exchange filed a rule change to designate that a symbol would not be 
eligible for Market Maker quotes in the complex order book after the 
symbol migrated to the INET \3\ platform (``May 2017 Rule Change'').\4\ 
In conjunction with the May 2017 Rule Change, the Exchange issued an 
Options Trader Alert notifying Members that complex order quoting 
functionality would no longer be available.\5\ The rule change provided 
that within a year from the date of filing the May 2017 Rule Change, 
the Exchange would offer complex quoting functionality on the ISE INET 
platform.\6\
---------------------------------------------------------------------------

    \3\ INET is the proprietary core technology utilized across 
Nasdaq's global markets and utilized on The Nasdaq Options Market 
LLC (``NOM''), Nasdaq PHLX LLC (``Phlx'') and Nasdaq BX, Inc. 
(``BX'') (collectively, ``Nasdaq Exchanges''). The migration of ISE 
to the Nasdaq INET architecture has resulted in higher performance, 
scalability, and more robust architecture.
    \4\ See Securities Exchange Act Release No. 80613 (May 5, 2017), 
82 FR 22022 (May 11, 2017) (SR-ISE-2017-37).
    \5\ Even though the complex quoting functionality would not be 
available, Market Makers would still be able to submit complex 
orders.
    \6\ See note 4 above.
---------------------------------------------------------------------------

    By way of background, prior to the delay in re-introducing the 
quoting functionality, ISE's rules permitted Market Makers to enter 
quotes in certain symbols for complex strategies on the complex order 
book in their appointed options classes. Market Maker quotes for 
complex strategies were not automatically executed against bids and 
offers on the Exchange for the individual legs nor marked for price 
improvement.\7\ Market Makers were not required to enter quotes on 
ISE's complex order book. Quotes for complex orders were not subject to 
any quotation requirements that are applicable to Market Maker quotes 
in the regular market for individual options series or classes, nor was 
any volume executed in complex orders taken into consideration when 
determining whether Market Makers met quotation obligations applicable 
to Market Maker quotes in the regular market for individual options 
series.
---------------------------------------------------------------------------

    \7\ See Supplementary Material .03 to Rule 722.

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

[[Page 15654]]

    When the Exchange initially delayed this functionality which 
permitted Market Makers to enter quotes in certain symbols for complex 
strategies on the complex order book in their appointed options 
classes, the Exchange noted that it would re-introduce the 
functionality within one year from the date of that filing. The 
Exchange filed the initial rule change on April 26, 2017, with a one 
year delay, and the additional one year delay would extend the 
implementation timeframe for this functionality to April 26, 2019. The 
extended delay would provide the Exchange additional time to develop 
and test this functionality on INET. The Exchange will issue an Options 
Trader Alert notifying Members when this functionality would be 
available. Furthermore, in connection with this change, the Exchange 
also proposes to amend Supplementary Material .03 to Rule 722 to remove 
language about the migration of symbols to INET as this migration has 
been completed and all symbols listed by the Exchange are currently 
trading on the INET platform.
    The Exchange is also proposing to amend a typographical error to 
correct a misspelled word in the current Rule text at Supplementary 
Material .03 to Rule 722.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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 
because the Exchange desires to rollout the complex order quoting 
functionality at a later date to allow additional time to rebuild this 
technology on the new platform. Although the Exchange is now fully 
operating on the Nasdaq INET platform, additional time is necessary to 
re-implement this functionality.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Delaying the reintroduction of the quoting functionality will 
provide additional time to test and implement this functionality. 
Today, symbols trade in price/time. Within a year from the date of 
filing this rule change, the Exchange will offer complex quoting 
functionality. Thereafter, the Exchange may offer the complex quoting 
for specified symbols from time to time with notice to members. At the 
time the Exchange designates a symbol as available for complex quoting, 
it would also designate the allocation methodology for that symbol 
pursuant to ISE Rule 722(b)(3)(i).
    Even though the complex quoting functionality will not be 
available, Market Makers will still be able to submit complex orders. 
The Exchange has not experienced any significant impact with respect to 
execution quality. The Exchange notes that Phlx does not offer complex 
order quoting functionality.\10\
---------------------------------------------------------------------------

    \10\ See Phlx Rule 1098.
---------------------------------------------------------------------------

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 rule change will impact the intense competition that 
exists in the options market. The Exchange does not believe that the 
proposed delay will impose any significant burden on inter-market 
competition as it does not impact the ability of other markets to offer 
or not offer competing functionality. Members will be able to continue 
to submit complex orders on ISE. The Exchange does not believe that the 
proposed rule change will impose any burden on intra-market competition 
because all members uniformly will not be able to submit Market Maker 
quotes in the complex order book.
    Within a year from the date of filing this rule change, the 
Exchange will offer complex quoting functionality. Thereafter, the 
Exchange may offer complex quoting for specified symbols from time to 
time with notice to members. At the time the Exchange designates a 
symbol as available for complex quoting, it will also designate the 
allocation methodology for that symbol pursuant to ISE Rule 
722(b)(3)(i).

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\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of the filing. However, 
Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. In its filing, ISE requests that the 
Commission waive the 30-day operative delay to allow the proposed one-
year extension of the time for re-introducing the complex quoting 
functionality to begin at the conclusion of the current delay period, 
which is scheduled to end on April 26, 2018. As noted above, ISE states 
that extending the delay for re-introducing the complex quoting 
functionality will provide ISE with additional time to develop and test 
this functionality. ISE further states that it has not experienced any 
significant impact with respect to execution quality due to the delayed 
implementation of the complex quoting functionality. The Commission 
believes that waiving the operative delay is consistent with the 
protection of investors and the public interest because it will provide 
ISE with additional time to develop and test the complex quoting 
functionality. Accordingly, the Commission waives the 30-day operative 
delay and designates the proposed rule change operative upon 
filing.\14\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 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: (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.

[[Page 15655]]

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 [email protected]. Please include 
File Number SR-ISE-2018-29 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-2018-29. 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 (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-ISE-2018-29, and should be submitted on 
or before May 2, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12) and (59).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07407 Filed 4-10-18; 8:45 am]
 BILLING CODE 8011-01-P