Document ID: SEC-2019-1929-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2019-12-23T05:00Z

[Federal Register Volume 84, Number 246 (Monday, December 23, 2019)]
[Notices]
[Pages 70590-70598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27593]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87778; File No. SR-NASDAQ-2019-098]

Self-Regulatory Organizations; The Nasdaq Stock Market, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Relocate Rules From Its Current Rulebook Into Its New Rulebook Shell

December 17, 2019.
    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 December 6, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' 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.
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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 relocate rules from its current Rulebook 
into its new Rulebook shell.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.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 this rule change is to relocate Nasdaq rules, 
including The Nasdaq Stock Market LLC (``NOM''), into the new Rulebook 
shell with some amendments to the shell.\3\ Nasdaq ISE, LLC (``ISE''), 
Nasdaq GEMX, LLC (``GEMX'') and Nasdaq MRX, LLC (``MRX'') recently 
relocated their rules.\4\ NOM proposes to relocate its rules to align 
with the ISE, GEMX, MRX and BX Rulebooks. Phlx will also relocate its 
Rulebook in order to harmonize its rule structure, where applicable, 
across Nasdaq markets. The relocation and harmonization of the Nasdaq 
Rule structure is part of the Exchange's continued effort to promote 
efficiency and structural conformity of its rules with those of its 
Affiliated Exchanges. The Exchange believes that the placement of the 
Nasdaq Rules into their new location in the shell will facilitate the 
use of the Rulebook by Members and Members of Affiliated Exchanges.
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    \3\ Previously, the Exchange added a shell structure to its 
Rulebook with the purpose of improving efficiency and readability 
and to align its rules closer to those of its five sister exchanges, 
The Nasdaq Stock Market LLC; Nasdaq PHLX LLC; Nasdaq ISE, LLC 
(``ISE''); Nasdaq GEMX, LLC; and Nasdaq MRX, LLC (``Affiliated 
Exchanges''). The shell structure currently contains eight (8) 
General sections which, once complete, will apply a common set of 
rules to the Affiliated Exchanges. The shell structure currently 
contains eight (8) Chapters which, once complete, will apply a 
common set of rules to the Affiliated Exchanges. See Securities 
Exchange Act Release No. 82174 (November 29, 2017), 82 FR 57492 
(December 5, 2017) (SR-NOM-2017-054).
    \4\ See Securities Exchange Act Release Nos. 86138 (June 24, 
2019), 84 FR 29567 (June 18, 2019) (SR-ISE-2019-17); 86346 (July 10, 
2019) 84 FR 33999 (July 16, 2019) (SR-GEMX-2019-08); and 86424 (July 
22, 2019), 84 FR 36134 (July 22, 2019) (SR-MRX-2019-15). SR-BX-2019-
36 was filed on October 1, 2019.
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    The Exchange notes that the entire Rulebook is not being relocated 
at this time. Specifically, the Equity Rules are not being relocated.
    The Exchange proposes to update all cross-references within the 
Rule to the new relocated rule cites and also proposes to correct 
certain citations. The Exchange proposes to replace internal rule 
references to simply state ``this Rule'' where the rule is citing 
itself without a more specific cite included in the Rule. For example, 
if NOM Chapter VI, Section 3 refers currently to

[[Page 70591]]

``Chapter VI, Section 3'' the Exchange will amend the phrase to simply 
``this Rule.'' The Exchange proposes to conform numbering and lettering 
in certain rules to the remainder of the Rulebook. The Exchange 
proposes to reflect the use of the General Equity and Options Rules in 
place of Equity Rules, where applicable. Finally, the Exchange proposes 
to delete any current Rules that are reserved in the Rulebook.
General 1
    The Exchange proposes to relocate and alphabetize rule text from 
Rule 0111, ``Adoption of Rules'', Rule 0112, ``Effective Date'', Rule 
0113 ``Interpretation'', Rule 0120 ``Definitions,'' and certain 
definitions from Rule 0121, ``Definitions in Nasdaq By-Laws'' into 
General 1. The Exchange proposes to relocate certain definitions from 
Chapter VI, Section 1 into General 1.\5\ The Exchange proposes to 
delete certain definitions which are repetitive.\6\ The Exchange will 
also alphabetize the definitions within General 1 and conform the text 
where applicable. Definitions related to the equities rules \7\ will be 
relocated into Equity 1. The Exchange is conforming the format of all 
definitions. Finally, the Exchange notes that the description of 
``MarketWatch'' was amended to remove the phrase ``a unit of Nasdaq 
Regulation.''
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    \5\ See note 14 below.
    \6\ The Exchange proposes to delete the term ``Exchange Act'' 
and ``SEC'' or ``Commission.''
    \7\ The terms ``Customer'' and ``Security'' are being relocated 
into Equity 1 of the Rulebook as these terms are specific to the 
equity market. Further, the following definitions are being 
relocated from Chapter I, Section 1 and Chapter VI, Section 1 into 
General 1, Section: ``associated person,'' ``Board,'' ``Exchange,'' 
``Exchange Act,'' ``he,'' ``him,'' or ``his,'' ``MarketWatch,'' 
``Nasdaq Rules,'' ``Nasdaq Regulation,'' ``primary market,'' and 
``SEC'' or ``Commission.''
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General 2
    General 2 would be comprised of the following rules:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Reserved.
Section 2........................  Chapter VI, Section 16, Fees, Dues
                                    and Other Charges.
Section 3........................  Reserved.
Section 4........................  2130, Nasdaq Ownership Restriction
                                    (re-title as Limitation on
                                    Affiliation between the Exchange and
                                    Members).
Section 5........................  0130, Regulation of the Exchange and
                                    Its Members.
Section 6........................  0115, Applicability.
Section 7........................  0150, Regulatory Independence.
Section 8........................  Reserved.
Section 9........................  1130, Reliance on Current Membership
                                    List.
Section 10.......................  1150, Executive Representative.
Section 11.......................  1160. Contact Information
                                    Requirements.
Section 12.......................  1170, Nasdaq's Business Continuity
                                    and Disaster Recovery Plan Testing
                                    Requirements for Members and Options
                                    Participants Pursuant to Regulation
                                    SCI (re-title as ``Business
                                    Continuity and Disaster Recovery'').
Section 13.......................  0140, Fingerprint-Based Background
                                    Checks of Employees and Independent
                                    Contractors.
Section 14.......................  2160, Restrictions on Affiliation.
Section 15.......................  3510, Business Continuity Plans.
Section 16.......................  3520, Emergency Contact Information.
------------------------------------------------------------------------

    The Exchange is reserving Sections 1 and 3 at this time. The 
Exchange is reserving Sections 1 and 3 at this time. The Exchange 
proposes to relocate Chapter VI, Section 16, Fees, Dues and Other 
Charges, into the General section because this rule applies to both the 
equity and options products. This rule describes the power of Nasdaq's 
Board of Directors. The Exchange notes that the Board of Directors of 
Nasdaq has the power to set fees for the Nasdaq market, which includes 
fees for both options and equities.\8\ The Exchange notes that Section 
7, Regulatory Independence, was amended to remove the placeholder for a 
date. Finally Rule 2170, Disruptive Quoting and Trading Activity 
Prohibited, is not being relocated as this rule applies to equities. 
There is a similar rule within Chapter III, Section 16 related to 
options, which is being relocated to Options 9, Section 4. As noted 
above, the equity rules are not being relocated at this time.
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    \8\ See NOM By-Law Article XII, Section 12.4 which provides the 
Board authority to set fees. In addition, the Exchange proposes to 
amend the word ``Participant'' in this rule to ``member'' to clearly 
indicate all members are subject to the Rule.
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General 4
    The Exchange proposes to rename General 4 from ``Regulation'' to 
``Registration Requirements.''
General 5
    The Exchange proposes to relocate Nasdaq Series 8000 and 9000 into 
General 5 Discipline and not change the rule numbers. The Exchange is 
proposing to delete reserved sections.
General 9
    The Exchange proposes to adopt a new General 9, titled 
``Regulation.'' The Exchange proposes to relocate the following rules 
into General 9:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  2010A, Standards of Commercial Honor
                                    and Principles of Trade; 5320A,
                                    Prohibition Against Trading Ahead of
                                    Customer Orders; IM-2110-4, Trading
                                    Ahead of Research Reports; IM-2110-
                                    5, Anti-Intimidation/Coordination;
                                    IM-2110-6, Confirmation of Callable
                                    Common Stock; 2120, Use of
                                    Manipulative, Deceptive or Other
                                    Fraudulent Devices; and 2140,
                                    Interfering With the Transfer of
                                    Customer Accounts in the Context of
                                    Employment Disputes.
Section 2........................  2150, Customers' Securities or Funds;
                                    and IM-2150, Segregation of
                                    Customers' Securities.
Section 3........................  2210, Communications with the Public;
                                    IM-2210-1. Guidelines to Ensure That
                                    Communications With the Public Are
                                    Not Misleading; and IM-2210-4,
                                    Limitations on Use of the Exchange's
                                    Name.
Section 4........................  2211, Institutional Sales Material
                                    and Correspondence.

[[Page 70592]]

 
Section 5........................  2212, Telemarketing.
Section 6........................  2251, Forwarding of Proxy and Other
                                    Issuer-Related Materials.
Section 7........................  2261, Disclosure of Financial
                                    Condition; 2262, Disclosure of
                                    Control Relationship with Issuer;
                                    and 2269, Disclosure of
                                    Participation or Interest in Primary
                                    or Secondary Distribution (re-title
                                    as ``Disclosure of Financial
                                    Condition, Control Relationship with
                                    Issuer and Participation or Interest
                                    in Primary or Secondary
                                    Distribution'').
Section 8........................  2266, SIPC Information.
Section 9........................  2290, Fairness Opinions.
Section 10.......................  2090A, Know Your Customer, 2111A.
                                    Suitability (re-title
                                    ``Recommendations to Customers
                                    (Suitability)'').
Section 11.......................  5310A, Best Execution and
                                    Interpositioning.
Section 12.......................  2340, Customer Account Statements.
Section 13.......................  2341, Margin Disclosure Statement.
Section 14.......................  2360, Approval Procedures for Day-
                                    Trading Accounts; and 2361, Day-
                                    Trading Risk Disclosure Statement
                                    (re-title as ``Approval Procedures
                                    for Day-Trading Accounts'').
Section 15.......................  2370, Borrowing From or Lending to
                                    Customers.
Section 16.......................  2430, Charges for Services Performed.
Section 17.......................  2441, Net Transactions with
                                    Customers.
Section 18.......................  2460, Payments for Market Making.
Section 19.......................  2510, Discretionary Accounts.
Section 20.......................  3010, Supervision; IM-3010-1,
                                    Standards for Reasonable Review; and
                                    IM-3010-2, Guidance on Heightened
                                    Supervision Requirements (re-title
                                    as ``Supervision'').
Section 21.......................  3012, Supervisory Control System.
Section 22.......................  3013, Annual Certification of
                                    Compliance and Supervisory
                                    Processes; and IM-3013. Annual
                                    Compliance and Supervision
                                    Certification (re-title as ``Annual
                                    Certification of Compliance and
                                    Supervisory Processes'').
Section 23.......................  3030, Outside Business Activities of
                                    an Associated Person.
Section 24.......................  3040, Private Securities Transactions
                                    of an Associated Person.
Section 25.......................  3050, Transactions for or by
                                    Associated Persons.
Section 26.......................  3220A, Influencing or Rewarding
                                    Employees of Others.
Section 27.......................  3070, Reporting Requirements.
Section 28.......................  3080, Arbitration Disclosure to
                                    Associated Persons When Signing Form
                                    U4 (re-titled ``Disclosure to
                                    Associated Persons When Signing Form
                                    U4'').
Section 29.......................  2070A, Transactions Involving Nasdaq
                                    Employees.
Section 30.......................  3110A, Books and Records.
Section 31.......................  3120, Use of Information Obtained in
                                    Fiduciary Capacity.
Section 32.......................  3140, Approval of Change in Exempt
                                    Status Under SEC Rule 15c3-3.
Section 33.......................  3150, Reporting Requirements for
                                    Clearing Firms and IM-3150,
                                    Exemptive Relief.
Section 34.......................  3160, Extensions of Time Under
                                    Regulation T and SEC Rule 15c3-3.
Section 35.......................  2040, Nonregistered Foreign Finders.
Section 36.......................  IM-2460-1, Market Quality Program.
Section 37.......................  3011, Anti-Money Laundering
                                    Compliance Program.
Section 38.......................  2520, Margin Requirements.
Section 39.......................  3020, Fidelity Bonds.
Section 40.......................  4110A, Capital Compliance.
Section 41.......................  4120A, Regulatory Notification and
                                    Business Curtailment.
Section 42.......................  4140A, Audit.
Section 43.......................  4511A, General Requirements.
Section 44.......................  4513A, Records of Written Customer
                                    Complaints.
Section 45.......................  4512A, Customer Account Information.
Section 46.......................  4514A, Authorization Records for
                                    Negotiable Instruments Drawn From a
                                    Customer's Account.
Section 47.......................  4515A, Approval and Documentation of
                                    Changes in Account Name or
                                    Designation.
Section 48.......................  4521A, Notifications, Questionnaires
                                    and Reports.
Section 49.......................  5230A, Payments Involving
                                    Publications that Influence the
                                    Market Price of a Security.
Section 50.......................  1090, Foreign Member.
Section 51.......................  1050, Research Analysts.
------------------------------------------------------------------------

    The word ``FINRA'' is being added in certain places for greater 
clarity. The Exchange is amending Rule 2212, Telemarketing, to update 
the Rule reference to NASD Rule 2212 to FINRA Rule 3230 in light of a 
FINRA rule change.\9\ The Exchange is amending Rule 3010, Supervision, 
as well as IM-3010-1, Standards for Reasonable Review, to update the 
Rule reference to NASD Rule 3010 to FINRA Rule 3170 and 3110, 
respectively, in light of a FINRA rule change.\10\ The Exchange 
proposes to amend NASD Rule 3070 references within Rule 3070, Reporting 
Requirements, to FINRA Rule 4530 pursuant to a FINRA rule change.\11\ 
The Exchange proposes to amend NASD Rule 3110A, Books and Records, to 
amend the rule references to FINRA Rule 4511 pursuant to a FINRA rule 
change.\12\
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    \9\ See Securities Exchange Act Release No. 66279 (January 30, 
2012), 77 FR 5611 (February 3, 2012) (SR-FINRA-2011-059).
    \10\ See Securities Exchange Act Release No. 71179 (December 23, 
2013), 78 FR 79542 (December 30, 2013) (SR-FINRA-2013-025).
    \11\ See Securities Exchange Act Release No. 63260 (November 5, 
2010), 75 FR 69508 (November 12, 2010) (SR-FINRA-2010-034).
    \12\ See Securities Exchange Act Release No. 63784 (January 27, 
2011), 76 FR 5850 (February 2, 2011) (SR-FINRA-2010-052).
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Equity Rules
    The Exchange proposes some changes to the Equity Rules to re-title 
certain chapters in the new Rulebook. The Exchange proposes to relocate 
certain definitions currently within Rule 0121 ``Definitions in the By-
Laws of the

[[Page 70593]]

Exchange'' into Equity 1.\13\ The Exchange proposes to re-title Equity 
2 from ``Equity Trading Rules'' to ``Equity Market Participants.'' The 
Exchange proposes to re-title Equity 3 from ``Equity Market 
Participants'' to ``Equity Trading Rules.'' The Exchange proposes to 
title Equity 4, which is currently reserved, as ``Limit Up-Limit 
Down.'' The Exchange proposes to reserve Equity 6, which is currently 
titled ``Limit Up-Limit Down.'' The Exchange proposes to reserve Equity 
10, which is titled ``Qualification, Listing and Delisting of 
Companies.'' Finally, the Exchange proposes to remove Equity 11, which 
is currently reserved.
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    \13\ See note 5 above. The term ``Nasdaq Manual'' is being 
eliminated.
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Options 1
    The Exchange proposes to rename current Options 1 from ``Options 
Definitions'' to ``General Provisions.'' The Exchange proposes to 
relocate and alphabetize certain definitions from Chapter I, Section 1 
into proposed General 1, Section 1. The Exchange also proposes to 
relocate definitions from Chapter VI, Section 1(a)-(c) and (h) into 
General 1, Section 1. Certain definitions within Chapter 1, Section 1 
and Chapter VI, Section 1 apply to both equities and options. These 
definitions \14\ will be relocated to General 1, Section 1 from Chapter 
I, Section 1 and Chapter VI, Section 1. The Exchange proposes to 
conform the definitions by adding ``the term'' where necessary. The 
Exchange proposes to amend the term ``System'' from Chapter VI, Section 
1 and apply that term to both ``System'' and ``Trading System'' and 
remove the separate definition for ``Trading System'' in Chapter I, 
Section I(a)(61) which creates a circular reference to the term 
``System.'' The Exchange also proposes to eliminate the defined term 
``Participant'' from Chapter VI, Section 1. The Exchange defines an 
``Options Participant'' or ``Participant'' within its rules today. The 
separate defined term ``Participant'' is confusing and unnecessary. The 
terms ``Nasdaq Regulation'' and ``Nasdaq Rules'' are redundant of the 
same terms that was already being relocated to General 1 from the 
Equity Rules. The Exchange proposes to delete the terms ``Nasdaq 
Regulation'' ``Nasdaq Rules'' in this rule. The term ``Exchange'' is 
redundant of the same terms that was already being relocated to General 
1 from the Equity Rules. The Exchange proposes to delete the terms 
``Exchange'' and ``Order Entry Firms'' in this rule because they are 
duplicative.
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    \14\ The following definitions are being relocated from Chapter 
I, Section 1 and Chapter VI, Section 1 into General 1, Section 1: 
``associated person,'' ``Board,'' ``Exchange,'' ``Exchange Act,'' 
``he,'' ``him,'' or ``his,'' ``MarketWatch,'' ``Nasdaq Rules,'' 
``Nasdaq Regulation,'' ``primary market,'' and ``SEC'' or 
Commission.''
---------------------------------------------------------------------------

    In addition the Exchange proposes to relocate the following rules 
into Options 1:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter I, Section 1, Definitions and
                                    Chapter VI, Section 1(a)-(c) and
                                    (h).
Section 2........................  Chapter I, Section 2, Applicability.
Section 3........................  Chapter I, Section 3, Regulation of
                                    Nasdaq and its Members.
------------------------------------------------------------------------

    The Exchange proposes to relocate Chapter V, Section 2, 
MarketWatch, to the end of the defined term within Options 1, Section 
1, which is currently within Chapter I, Options 1, Section 1 and is 
being relocated to General 1 as that term applies to both options and 
equities. The sentence is merely descriptive and adds to the already 
defined term. The Exchange proposes to relocate Chapter VII, Section 1, 
Customer Orders and Order Entry Firms, into a definition for Order 
Entry Firms within Options 1, Section 1.
Options 2
    The Exchange proposes to rename Options 2 from ``Options Trading 
Rules'' to ``Options Market Participants'' and relocate the following 
rules into this chapter:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter VII, Section 2, Market Maker
                                    Registration; and Section 3
                                    Continuing Market Maker Registration
                                    (re-title as Registration of Market
                                    Makers).
Section 2........................  Reserved.
Section 3........................  Reserved.
Section 4........................  Chapter VII, Section 5, Obligations
                                    of Market Makers.
Section 5........................  Chapter VII, Section 6, Market Maker
                                    Quotations.
Section 6........................  Reserved.
Section 7........................  Chapter VII, Section 7, Securities
                                    Accounts and Orders of Market
                                    Makers.
Section 8........................  Chapter VII, Section 9, Financial
                                    Requirements for Market Makers.
Section 9........................  Chapter VII, Section 4, Good Standing
                                    for Market Makers.
Section 10.......................  Reserved.
------------------------------------------------------------------------

    The Exchange proposes to reserve certain rules. The Exchange 
proposes to relocate Chapter VII, Section 8, Letters of Guarantee, to 
Options 6, Section 4. The Exchange proposes to relocate Chapter VII, 
Sections 11, Mass Cancellation of Trading Interest to Options 3, 
Section 19, and Section 12, Order Exposure Requirements, to Options 3, 
Section 22. Chapter VII, Section 1 was relocated to the definitions as 
described herein.
Options 2A
    The Exchange proposes a new Options Section 2A titled ``Options 
Participation'' and proposes to relocate the following rules into this 
chapter:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter II, Section 1, Options
                                    Participation.
Section 2........................  Chapter II, Section 2, Requirements
                                    for Options Participation.
Section 3........................  Chapter II, Section 3, Persons
                                    Associated with Options
                                    Participants.

[[Page 70594]]

 
Section 4........................  Chapter II, Section 4, Good Standing
                                    for Options Participants.
------------------------------------------------------------------------

    The Exchange proposes to reserve Sections 5-7.
Options 3
    The Exchange proposes to rename Options 3 from ``Options Market 
Participants'' to ``Options Trading Rules'' and relocate the following 
rules into this chapter:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter VI, Section 2, Days and Hours
                                    of Business.
Section 2........................  Chapter VI, Section 3, Units of
                                    Trading; and Section 4, Meaning of
                                    Premium Quotes and Orders (combined
                                    into one rule and retitle as ``Units
                                    of Trading and Meaning of Premium
                                    Quotes and Orders'').
Section 3........................  Chapter VI, Section 5, Minimum
                                    Increments.
Section 4........................  Chapter VI, Section 6, Entry and
                                    Display of Quotes.
Section 5........................  Chapter VI, Section 7, Entry and
                                    Display of Orders.
Section 6........................  Chapter V, Section 5, Unusual Market
                                    Conditions.
Section 7........................  Chapter VI, Section 1(d)-(g),
                                    Definitions; and Chapter VI, Section
                                    21, Order and Quote Protocols (re-
                                    title as ``Types of Orders and Quote
                                    Protocols'').
Section 8........................  Chapter VI, Section 8, Nasdaq Opening
                                    and Halt Cross (re-title as
                                    ``Opening and Halt Cross'').
Section 9........................  Chapter V, Section 3, Trading Halts;
                                    and Section 4, Resumption of Trading
                                    After a Halt (re-title as ``Trading
                                    Halts'').
Section 10.......................  Chapter VI, Section 10, Book
                                    Processing (re-title as ``Order Book
                                    Allocation'').
Section 11.......................  Reserved.
Section 12.......................  Reserved.
Section 13.......................  Reserved.
Section 14.......................  Reserved.
Section 15.......................  Chapter VI, Section 18, Risk
                                    Protections.
Section 16.......................  Reserved.
Section 17.......................  Chapter VI, Section 22, Kill Switch.
Section 18.......................  Chapter VI, Section 23, Detection of
                                    Loss of Communication.
Section 19.......................  Chapter VII, Section 11, Mass
                                    Cancellation of Trading Interest.
Section 20.......................  Chapter V, Section 6, Nullification
                                    and Adjustment of Options
                                    Transactions including Obvious
                                    Errors.
Section 21.......................  Chapter V, Section 1, Access to and
                                    Conduct on the NOM Market; and
                                    Chapter VI, Section 20, Exchange
                                    Sharing of Participant-Designated
                                    Risk Settings (re-title as ``Access
                                    to and Conduct on NOM'').
Section 22.......................  Chapter VII, Section 12, Limitations
                                    on Order Entry.
Section 23.......................  Chapter VI, Section 19, Data Feeds
                                    and Trade Information.
Section 24.......................  Chapter VI, Section 13, Transaction
                                    Price Binding
Section 25.......................  Chapter VI, Section 12, Anonymity.
Section 26.......................  Chapter VI, Section 17, Message
                                    Traffic Mitigation.
Section 27.......................  Chapter V, Section 9, Limitation of
                                    Liability.
Section 28.......................  Reserved.
------------------------------------------------------------------------

    The Exchange proposes to combine the NOM Rules and retitle them as 
indicated herein. The Exchange proposes to reserve certain rules. 
Chapter VI, Section 16, Fees, Dues and Other Charges, was relocated to 
General 2 and Chapter VI, Sections 14, Authorization to Give Up and 
Section 15, Submission for Clearance, were relocated to Options 6. The 
Exchange amended Options 3, Section 21(b)(8) to refer to Section 22 
with describes the limitation on orders on NOM.
Options 4
    The Exchange proposes to amend Options 4, Options Listing Rules, to 
remove Section 5, which is reserved, and renumber Section 6, Series of 
Options Contracts Open for Trading, as Section 5.\15\ The Exchange also 
proposes to reserve Section 6 and reserve a new Section 10.
---------------------------------------------------------------------------

    \15\ The corresponding rule numbers are changing for removals of 
certain sections.
---------------------------------------------------------------------------

Options 4A
    The Exchange proposes to relocate rules within new proposed Options 
4A, which is proposed to be titled ``Options Index Rules'' as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter XIV, Section 1, Application
                                    of Index Rules.
Section 2........................  Chapter XIV, Section 2, Definitions.
Section 3........................  Chapter XIV, Section 3, Designation
                                    of a Broad-Based Index.
Section 4........................  Chapter XIV, Section 6, Designation
                                    of Narrow-Based and Micro-Narrow-
                                    Based Index Options.
Section 5........................  Chapter XIV, Section 4, Dissemination
                                    of Information.
Section 6........................  Chapter XIV, Section 5, Position
                                    Limits for Broad-Based Index
                                    Options.
Section 7........................  Chapter XIV, Section 7, Position
                                    Limits for Industry and Micro-Narrow
                                    Based Index Options.
Section 8........................  Reserved.
Section 9........................  Chapter XIV, Section 8, Exemptions
                                    from Position Limits.
Section 10.......................  Chapter XIV, Section 9, Exercise
                                    Limits
Section 11.......................  Chapter XIV, Section 10, Trading
                                    Sessions.
Section 12.......................  Chapter XIV, Section 11, Terms of
                                    Index Options Contracts.

[[Page 70595]]

 
Section 13.......................  Chapter XIV, Section 12, Debit Put
                                    Spread Cash Account Transactions.
Section 14.......................  Chapter XIV, Section 13, Disclaimers.
Section 15.......................  Chapter XIV, Section 14, Exercise of
                                    American-Style Index Options.
Section 16.......................  Reserved.
------------------------------------------------------------------------

Options 5
    The Exchange proposes to rename Options 5 from ``Options Trade 
Administration'' to ``Order Protection and Locked and Crossed 
Markets.'' The current rules \16\ within Options 5 are being relocated 
into Options 6B.
    The Exchange proposes to relocate the following rules within 
Options 5 as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter XII, Section 1, Definitions.
Section 2........................  Chapter XII, Section 2, Order
                                    Protection.
Section 3........................  Chapter XII, Section 3, Locked and
                                    Crossed Markets.
Section 4........................  Chapter VI, Section 11(a), Order
                                    Routing.
Section 5........................  Chapter VI, Section 11(b) to be
                                    titled ``Cancellation of Orders and
                                    Error Account''.
------------------------------------------------------------------------

    The definitions of ``Exchange Act'' and ``SEC are being removed 
from Chapter XII, Section 1, ``Definitions'' as these terms are 
repetitive of definitions within General 1.
Options 6
    The Exchange proposes to rename Options 6 from ``Order Protection 
and Locked and Cross Markets'' to ``Options Trade Administration'' and 
relocate rules within Options 6 as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter VI, Section 14, Authorization
                                    to Give Up.
Section 2........................  Chapter VI, Section 15, Submission
                                    for Clearance.
Section 3........................  Reserved.
Section 4........................  Chapter VII, Section 8, Letters of
                                    Guarantee.
------------------------------------------------------------------------

Options 6A
    The Exchange proposes to relocate rules within new proposed Options 
6A titled ``Closing Transactions'' as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter X, Section 6, Contracts of
                                    Suspended Participants.
Section 2........................  Chapter V, Section 8, Failure to Pay
                                    Premium.
------------------------------------------------------------------------

Options 6B
    The Exchange proposes to relocate rules within new proposed Options 
6B titled ``Exercises and Deliveries'' as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Options 5, Section 101, Exercise of
                                    Options Contracts.
Section 2........................  Options 5, Section 102, Allocation of
                                    Exercise Notices.
Section 3........................  Options 5, Section 103, Delivery and
                                    Payment.
------------------------------------------------------------------------

Options 6C
    The Exchange proposes to relocate rules within new proposed Options 
6C titled ``Exercises and Deliveries'' as follows:
---------------------------------------------------------------------------

    \16\ Options 5 currently includes the following rules: Section 
101 Exercise of Options Contracts, Section 102 Allocation of 
Exercise Notices, and Section 103, Delivery and Payment.

[[Page 70596]]

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter XIII, Section 1, General
                                    Rule.
Section 2........................  Chapter XIII, Section 2, Time Margin
                                    Must Be Obtained.
Section 3........................  Chapter XIII, Section 3, Margin
                                    Requirements.
Section 4........................  Reserved.
Section 5........................  Chapter XIII, Section 4, Margin
                                    Required Is Minimum.
Section 6........................  Reserved.
------------------------------------------------------------------------

    Chapter XIII, Section 5, Joint Back Office Participants, is being 
relocated to Options 6D.
Options 6D
    The Exchange proposes to relocate rules within new proposed Options 
6D titled ``Net Capital Requirements'' as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Reserved.
Section 2........................  Reserved.
Section 3........................  Reserved.
Section 4........................  Chapter XIII, Section 5, Joint Back
                                    Office Participants.
------------------------------------------------------------------------

    With respect to the relocation of Joint Back Office Participants, 
the Supplementary Material .01 titled was removed and the text was 
retained as part of the main rule in paragraph (c) of Section 4.
Options 6E
    The Exchange proposes to relocate rules within new proposed Options 
6E titled ``Records, Reports and Audits'' as follows:

------------------------------------------------------------------------
      Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1........................  Chapter IX, Section 1, Maintenance,
                                    Retention and Furnishing of Books,
                                    Records and Other Information.
Section 2........................  Chapter IX, Section 2, Reports of
                                    Uncovered Short Positions.
Section 3........................  Chapter IX, Section 3, Financial
                                    Reports and Audits.
Section 4........................  Reserved.
Section 5........................  Chapter IX, Section 4, Automated
                                    Submission of Trade Data.
Section 6........................  Chapter IX, Section 6, Risk Analysis
                                    of Market Maker Accounts.
Section 7........................  Chapter IX, Section 5, Regulatory
                                    Cooperation.
Section 8........................  Reserved.
Section 9........................  Chapter V, Section 7, Audit Trail.
------------------------------------------------------------------------

    The Exchange proposes to relocate Chapter IX, Section 7, Anti-Money 
Laundering Compliance Program, to Options 9, Section 21.
Options 7
    The Exchange is updating cross-references within Options 7 to the 
introductory section of the Rule as well as Options 7, Section 4 Nasdaq 
Options Market Data Distributor Fees.
Options 9
    The Exchange proposes to relocate rules within new proposed Options 
9, which is currently reserved, and title the chapter as ``Business 
Conduct.'' The following rules will be relocated within Options 9 with 
certain rules reserved:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  Reserved.
Section 2....................  Chapter III, Section 1, Adherence to Law
                                and Section 2 Conduct and Compliance
                                with the Rules.
Section 3....................  Reserved.
Section 4....................  Chapter III, Section 16, Disruptive
                                Quoting and Trading Activity Prohibited.
Section 5....................  Reserved.
Section 6....................  Reserved.
Section 7....................  Reserved.
Section 8....................  Chapter III, Section 3, Rumors.
Section 9....................  Chapter III, Section 4, Prevention of the
                                Misuse of Material Nonpublic
                                Information.
Section 10...................  Chapter III, Section 5, Disciplinary
                                Action by Other Organizations.
Section 11...................  Chapter III, Section 6, Other
                                Restrictions on Participants.
Section 12...................  Chapter III, Section 15, Significant
                                Business Transactions of Options
                                Clearing Participants.
Section 13...................  Chapter III, Section 7, Position Limits.
Section 14...................  Chapter III, Section 8, Exemptions from
                                Position Limits.
Section 15...................  Chapter III, Section 9, Exercise Limits.
Section 16...................  Chapter III, Section 10, Reports Related
                                to Position Limits.
Section 17...................  Chapter III, Section 11, Liquidation
                                Positions.
Section 18...................  Chapter III, Section 14, Limit on
                                Outstanding Uncovered Short Positions.
Section 19...................  Chapter III, Section 12, Other
                                Restrictions on Options Transactions and
                                Exercises.
Section 20...................  Chapter III, Section 13, Mandatory
                                Systems Testing.

[[Page 70597]]

 
Section 21...................  Chapter IX, Section 7, Anti-Money
                                Laundering Compliance Program.
Section 22...................  Reserved.
Section 23...................  Reserved.
------------------------------------------------------------------------

Options 10
    The Exchange proposes to relocate rules within new proposed Options 
10 titled ``Doing Business with the Public'' as follows:

------------------------------------------------------------------------
    Proposed new rule No.                   Current rule No.
------------------------------------------------------------------------
Section 1....................  Chapter XI, Section 1, Eligibility.
Section 2....................  Chapter XI, Section 2, Registration of
                                Options Principals.
Section 3....................  Chapter XI, Section 3, Registration of
                                Representatives.
Section 4....................  Chapter XI, Section 5, Discipline,
                                Suspension, Expulsion of Registered
                                Persons.
Section 5....................  Chapter XI, Section 6, Branch Offices.
Section 6....................  Chapter XI, Section 7, Opening of
                                Accounts.
Section 7....................  Chapter XI, Section 8, Supervision of
                                Accounts.
Section 8....................  Chapter XI, Section 9, Suitability of
                                Recommendations.
Section 9....................  Chapter XI, Section 10, Discretionary
                                Accounts.
Section 10...................  Chapter XI, Section 11, Confirmation to
                                Public Customers.
Section 11...................  Chapter XI, Section 12, Statement of
                                Accounts to Public Customers.
Section 12...................  Chapter XI, Section 13, Statements of
                                Financial Condition to Customers.
Section 13...................  Chapter XI, Section 15, Delivery of
                                Current Options Disclosure Documents and
                                Prospectus.
Section 14...................  Chapter XI, Section 16, Restrictions on
                                Pledge and Lending of Customers'
                                Securities.
Section 15...................  Chapter XI, Section 17, Transactions of
                                Certain Customers.
Section 16...................  Chapter XI, Section 18, Guarantees.
Section 17...................  Chapter XI, Section 19, Profit Sharing.
Section 18...................  Chapter XI, Section 20, Assuming Losses.
Section 19...................  Chapter XI, Section 21, Transfer of
                                Accounts.
Section 20...................  Chapter XI, Section 22, Communications
                                with Public Customers; and Section 14,
                                Addressing of Communications to Public
                                Customers (re-title ``Communications
                                with Public Customers'').
Section 21...................  Chapter XI, Section 23, Fidelity Bond.
Section 22...................  Chapter XI, Section 24, Public Customer
                                Complaints.
Section 23...................  Chapter XI, Section 25, Telephone
                                Solicitation.
Section 24...................  Chapter XI, Section 4, Other Affiliations
                                of Registered Persons.
Section 25...................  Reserved.
------------------------------------------------------------------------

    The Exchange proposes to reserve Options 10, Section 25.
Options 11
    The Exchange proposes to relocate Chapter X, Section 7 titled 
``Penalty for Minor Rule Violations'' to Options 11 titled ``Minor Rule 
Plan Violations'' at Section 1. The Exchange proposes to relocate 
Chapter X, Section 1, ``Imposition of Suspension,'' Section 2, 
``Investigation Following Suspension Violations,'' Section 3, 
``Reinstatement Following Suspension,'' Section 4, ``Failure to Obtain 
Reinstatement,'' Section 5, ``Termination of Rights by Suspension'' and 
Section 6, ``Contracts of Suspended Participants'' into Options 11, 
Section 2, titled ``Suspension.''
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\18\ in particular, in that it is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest by bringing greater transparency to its rules 
by relocating its Rules into the new Rulebook shell together with other 
rules which have already been relocated. The Exchange's proposal is 
consistent with the Act and will protect investors and the public 
interest by harmonizing its rule structure, where applicable, across 
Nasdaq markets so that Members can readily locate rules which cover 
similar topics. The relocation and harmonization of the Nasdaq Rule 
structure is part of the Exchange's continued effort to promote 
efficiency and conformity of its processes with those of its Affiliated 
Exchanges. The Exchange believes that the placement of the Nasdaq Rules 
into their new location in the shell will facilitate the use of the 
Rulebook by Members. Specifically, the Exchange believes that market 
participants that are members of more than one Nasdaq market will 
benefit from the ability to compare Rulebooks.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange is not substantively amending rule text unless noted 
otherwise within this rule change. The renumbering, re-lettering, 
deleting reserved rules, amending cross-references and other minor 
technical changes will bring greater transparency to Nasdaq's Rule 
structure. ISE, GEMX and MRX have already relocated their Rulebooks. BX 
recently filed to relocate its Rulebook.\19\ Phlx will also relocate 
its Rulebook in order to harmonize its rule structure, where 
applicable, across Nasdaq markets. The Exchange believes its proposal 
will benefit investors and the general public by increasing the 
transparency of its Rulebook and promoting easy comparisons among the 
various Nasdaq Rulebooks.
---------------------------------------------------------------------------

    \19\ SR-BX-2019-036 filed on October 1, 2019.
---------------------------------------------------------------------------

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 believes that the 
proposed amendments do not impose an undue

[[Page 70598]]

burden on competition because the amendments to relocate the Rules are 
non-substantive. This rule change is intended to bring greater clarity 
to the Exchange's Rules. Renumbering, re-lettering, deleting reserved 
rules and amending cross-references will bring greater transparency to 
Nasdaq's Rule structure.

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 \20\ and Rule 19b-
4(f)(6) thereunder.\21\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the Exchange could immediately relocate its rules. According to 
the Exchange, the proposal is intended to make it easier for members to 
locate the various Exchange rules, and is part of a larger effort to 
reorganize the Exchange's rules and those of its Affiliated Exchanges. 
For these reasons, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission hereby waives the 
operative delay and designates the proposed rule change operative upon 
filing.\24\
---------------------------------------------------------------------------

    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change 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-NASDAQ-2019-098 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-2019-098. 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-NASDAQ-2019-098, and should be submitted 
on or before January 13, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27593 Filed 12-20-19; 8:45 am]
 BILLING CODE 8011-01-P