Document ID: SEC-2019-0420-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq GEMX, LLC
Posted Date: 2019-04-08T04:00Z

[Federal Register Volume 84, Number 67 (Monday, April 8, 2019)]
[Notices]
[Pages 13983-13985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06785]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85481; File No. SR-GEMX-2019-03]

Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Adopt the Term 
``Professional Customer''

April 2, 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 March 20, 2019, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III 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 adopt the term ``Professional Customer'' 
and reorganize the Rulebook as well as other technical amendments.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.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: (1) Adopt a 
definition specifically for Professional Customer;

[[Page 13984]]

(2) reorganize Rule 716, ``Auction Mechanisms;'' (3) add titles to Rule 
721, ``Crossing Orders,'' and (4) renumber parts of Rule 723, ``Price 
Improvement Mechanism for Crossing Transactions.'' These changes are to 
conform the Rulebook to Nasdaq ISE, LLC (``ISE'').\3\ Each change will 
be discussed below.
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    \3\ See Securities Exchange Act Release No. 85308 (March 13, 
2019), 84 FR 10136) (March 19, 2019) (SR-ISE-2019-05).
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Universal Change
    In addition to the amendments described below, the Exchange 
proposes to capitalize references to ``member'' to reflect the defined 
term ``Member.'' \4\
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    \4\ The term ``Member'' means an organization that has been 
approved to exercise trading rights associated with Exchange Rights. 
See Rule 100(a)(31).
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Professional Customer
    The Exchange proposes to add a new definition for the term 
``Professional Customer'' at proposed new Rule 100(a)(52A) to conform 
to a recent definition added to the ISE Rulebook. This new term would 
mean a non-broker/dealer participant who enters at least 390 orders per 
day on average during a calendar month for its own beneficial 
account(s). The concept of a Professional is established on GEMX,\5\ 
this new term permits a Professional Customer to be more specifically 
identified within the Rules. By adopting the new term ``Professional 
Customer'' the Exchange believes it can more specifically identify a 
market participant within its rules.
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    \5\ See Rule 100(a)(52).
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Rule 716
    The Exchange proposes to retitle Rule 716, currently titled ``Block 
Trades,'' as ``Auction Mechanisms'' because the new title more 
accurately describes the rule text contained in this rule. The Exchange 
proposes to relocate the text of Rule 716(a) within current Rule 716(c) 
and re-letter that Rule as 716(a). The Exchange proposes to remove the 
``(b)'' from Rule 716 so that the following text would apply to the 
entirety of Rule 716 and all mechanisms within the rule, including 
proposed relocated text, ``For purposes of this Rule, a ``broadcast 
message'' means an electronic message that is sent by the Exchange to 
all Members, and a ``Response'' means an electronic message that is 
sent by Members in response to a broadcast message.'' This rule text, 
as written, is being amended so that it is clear that the rule text 
applies to all mechanisms within this rule, including the mechanisms 
proposed to be relocated within the rule. In addition, the Exchange 
proposes to relocate and expand rule text within Supplementary Material 
.04 to Rule 716 \6\ to this introductory paragraph so that with the 
relocation it also would apply to the entire rule. The Exchange 
proposes to provide, ``Also for purposes of this rule, the time given 
to Members to enter Responses for any of the below auction mechanisms 
shall be designated by the Exchange via circular, but no less than 100 
milliseconds and no more than 1 second.'' Today, this rule text applies 
to all mechanisms within the rule, the Block Order Mechanism, 
Facilitation Mechanism and Solicitation Mechanism. As amended, the rule 
text would apply to all the relocated mechanisms as well.
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    \6\ Supplementary Material .04 to Rule 716 provides, ``The time 
given to Members to enter Responses under paragraphs (c)(1), (d)(1) 
and (e)(1) shall be designated by the Exchange via circular, but no 
less than 100 milliseconds and no more than 1 second.''
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    The Exchange proposes to amend the Facilitation Mechanism to re-
letter ``d'' as ``b.'' The Exchange proposes to reserve ``c''. The 
Exchange proposes to re-letter Solicited Order Mechanism at ``e'' as 
new ``d.''
    The Exchange proposes to eliminate Supplementary Material .03, 
which is currently reserved, and .04 to Rule 716, which is being 
relocated as discussed above. The Exchange proposes to amend 
Supplementary Material .05 to Rule 716 to renumber it .03. The Exchange 
proposes to renumber Supplementary Material .06 to Rule 716 as .04. The 
Exchange proposes to eliminate references to Supplementary Material .07 
and .08 to Rule 716, which are currently reserved. The Exchange 
proposes to renumber Supplementary Material .09 to Rule 716 as .05.
Rule 721
    The Exchange proposes to amend Rule 721, Crossing Orders. The 
Exchange proposes to add a title within Rule 721(a), ``Customer Cross 
Orders.'' The Exchange proposes to reserve ``b.'' The Exchange proposes 
to re-letter 721(b) as 721(c) and add a title ``Qualified Contingent 
Cross Orders.''
    Finally, the Exchange proposes to remove the following outdated 
rule text, ``Qualified Contingent Cross Order functionality will not be 
available as of a certain date in the first quarter of 2017 to be 
announced in a notice. The Exchange will recommence Qualified 
Contingent Cross Order functionality on Nasdaq GEMX on or before March 
31, 2018. The Exchange will issue an Options Trader Alert notifying 
Members when this functionality will be available.'' Qualified 
Contingent Cross functionality was recommenced on GEMX on February 26, 
2018 \7\ and therefore this rule text is outdated.
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    \7\ The Exchange issued the following Options Trader Alert 
notifying GEMX Members that Qualified Contingent Cross functionality 
would be re-introduced: http://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2017-76.
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Rule 723
    The Exchange proposes to delete Supplementary Material .07 to Rule 
723. Supplementary Material .08 to Rule 723 is being renumbered as .07 
and Supplementary Material .09 to Rule 723 is being renumbered as .08.
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 
for the reasons described below.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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Professional Customer
    The Exchange believes that adopting the term ``Professional 
Customer'' will enable the Exchange to easily reference this market 
participant in rules and rule changes when differentiating various 
market participants. It is consistent with the Act to have clearly 
defined terms to avoid confusion. Adding this reference will enable the 
Exchange to clearly refer to various market participants. Today, the 
concept of a Professional is contained in the Rulebook.\10\
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    \10\ See note 5 above.
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Reorganization of the Rulebook and Other Technical Amendments
    The Exchange's proposal to relocate various provisions and add 
titles to conform its current rules to those of ISE is consistent with 
the Act because the reorganization is intended to bring greater 
transparency and ease of reference to the Rulebook. Removing outdated 
rule text from Rule 721 will add greater clarity to the Qualified 
Contingent Cross functionality. Also, making technical non-substantive 
amendments to capitalize terms and amend cross-references will also 
bring greater clarity and transparency to the Rulebook.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 13985]]

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's proposal to introduce the term ``Professional 
Customer'' will enable the Exchange to distinguish this market 
participant from other participants. Today, the concept of a 
Professional is contained in the Rulebook.\11\
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    \11\ Id.
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    The Exchange's proposal to relocate various rules and create new 
titles to conform its current rules to those of ISE will not impose an 
undue burden on intra-market or inter-market competition because the 
reorganization is intended to bring greater transparency and ease of 
reference to the Rulebook. Removing outdated rule text from Rule 721 
will add greater clarity to the Qualified Contingent Cross 
functionality. Also, making technical non-substantive amendments to 
capitalize terms and amend cross-references will also bring greater 
clarity and transparency to the Rulebook.

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 \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-GEMX-2019-03 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-2019-03. 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-GEMX-2019-03 and should be submitted on 
or before April 29, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06785 Filed 4-5-19; 8:45 am]
 BILLING CODE 8011-01-P