Document ID: SEC-2020-0446-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq MRX, LLC
Posted Date: 2020-03-26T04:00Z

[Federal Register Volume 85, Number 59 (Thursday, March 26, 2020)]
[Notices]
[Pages 17152-17155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06297]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88435; File No. SR-MRX-2020-06]

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Related to Complex 
Orders

March 20, 2020.
    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 9, 2020, Nasdaq MRX, LLC (``MRX'' 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 amend Options 3, Section 7, ``Types of 
Orders,'' and Options 3, Section 14, ``Complex Orders'' to permit the 
Exchange to determine the availability of order types and time-in-force 
provisions and to add other existing order types to the list of single-
leg and Complex Order types.
    The Exchange requests that the Commission waive the 30-day 
operative delay period contained in Exchange Act Rule 19b-
4(f)(6)(iii).\3\
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    \3\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqmrx.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 Exchange proposes to amend Options 3, Section 7, ``Types of 
Orders,'' and Options 3, Section 14, ``Complex Orders'' to: (1) Provide 
that the Exchange may determine which order types and times-in-force 
provisions are available on a class or system basis; and (2) to add 
other existing order types to the list of single-leg and Complex Order 
types.
    The Exchange proposes to add a sentence to Options 3, Section 14, 
Complex Orders, which states, ``The Exchange may determine to make 
certain order types and/or times-in-force available on a class or 
System basis.'' This sentence exists today within Nasdaq ISE, LLC 
(``ISE'') Options 3, Section 7, ``Types of Orders.'' \4\ This proposed 
change is based on the rules of ISE Options 3, Section 7 and the rules 
of Cboe BZX Exchange, Inc. (``BZX Options''),\5\ Rule 21.1, Cboe EDGX 
Exchange, Inc. (``EDGX Options'') Rule 21.1(d),\6\ Cboe Exchange, Inc. 
(``Cboe'') Rule 5.6(a) \7\ and Cboe C2 Exchange, Inc. (``C2'') Rule 
6.10(a).\8\
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    \4\ See Securities Exchange Act Release No. 88294 (February 26, 
2020), 85 FR 12629 (March 3, 2020) (SR-ISE-2020-07).
    \5\ BZX Options Rule 21.1(d), Definitions, provides ``The term 
`Order Type' shall mean the unique processing prescribed for 
designated orders, subject to the restrictions set forth in 
paragraph (l) below with respect to orders and bulk messages 
submitted through bulk ports, that are eligible for entry into the 
System. Unless otherwise specified in the Rules or the context 
indicates otherwise, the Exchange determines which of the following 
Order Types are available on a class or system basis.'' BZX Options 
Rule 21.1(f), Definitions, provides ``The term `Time in Force' shall 
mean the period of time that the System will hold an order, subject 
to the restrictions set forth in paragraph (l) below with respect to 
bulk messages submitted through bulk ports, for potential execution. 
Unless otherwise specified in the Rules or the context indicates 
otherwise, the Exchange determines which of the following Times-in-
Force are available on a class or system basis.''
    \6\ EDGX Options Rule 21.1(d), Definitions, provides, ``The term 
`Order Type' shall mean the unique processing prescribed for 
designated orders, subject to the restrictions set forth in 
paragraph (j) below with respect to orders and bulk messages 
submitted through bulk ports, that are eligible for entry into the 
System. Unless otherwise specified in the Rules or the context 
indicates otherwise, the Exchange determines which of the following 
Order Types are available on a class, system, or trading session 
basis. Rule 21.20 sets forth the Order Types the Exchange may make 
available for complex orders.'' EDGX Options Rule 21.1(f), 
Definitions, provides, ``The term `Time in Force' means the period 
of time that the System will hold an order, subject to the 
restrictions set forth in paragraph (j) below with respect to bulk 
messages submitted through bulk ports, for potential execution. 
Unless otherwise specified in the Rules or the context indicates 
otherwise, the Exchange determines which of the following Times-in-
Force are available on a class, system, or trading session basis. 
Rule 21.20 sets forth the Times-in-Force the Exchange may make 
available for complex orders.''
    \7\ Cboe Rule 5.6, Order Types, Order Instructions, and Times-
in-Force at subsection (a), Availability, provides, ``Unless 
otherwise specified in the Rules or the context indicates otherwise, 
the Exchange determines which of the following order types, Order 
Instructions, and Times-in-Force are available on a class, system, 
or trading session basis.''
    \8\ C2 Rule 6.10, Availability of Orders, at subsection (a) 
provides, ``Availability. Unless otherwise specified in the Rules or 
the context indicates otherwise, the Exchange determines which of 
the following order types, Order Instructions, and Times-in-Force 
are available on a class, system, or trading session basis. Rule 
6.13 sets forth the order types, Order Instructions, and Times-in-
Force the Exchange may make available for complex orders.''
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    The purpose of this rule change is to provide the Exchange with 
appropriate flexibility to address different trading characteristics, 
market models, and the investor base of each class, as well as to 
handle any System issues that may arise and require the Exchange to 
temporarily not accept certain order types. This rule is consistent 
with BZX Options Rule 21.1(d) and (f), EDGX Options Rules 21.1(d) and 
(f), Cboe Rule 5.6(a) and C2 Rule 6.10(a), each of which provides these 
exchanges with substantially the same flexibility. This rule text is 
also consistent with ISE Rules at Options 3, Section 7.
    This rule change will not permit the Exchange to discriminate among 
market

[[Page 17153]]

participants when determining which order types and times-in-force 
provisions are available on a class or system basis. The Exchange's 
proposal allows the Exchange to make certain order types and time-in-
force, respectively, available on a class or System basis uniformly for 
all market participants. For example, if the Exchange determined to 
make a certain order type or time-in-force unavailable, that order type 
or time-in-force would not be available for any market participant.
    The Exchange would issue an Options Trader Alert to provide 
notification to Participants that a change is being made to the 
availability or unavailability of a certain order type or time-in-
force. The Exchange notes that in the event of System disruption, the 
Exchange would notify Participants of the unavailability of any order 
type and would also provide notification when that order type was 
available once the disruption was resolved.
    The Exchange also proposes to add to Options 3, Section 7 at 
proposed (v)-(y) and Options 3, Section 14(b) at proposed (16), (17) 
and (18), references to various existing order types that may be 
entered into various auction mechanisms on MRX. Specifically, the 
Exchange proposes to add a reference to both single-leg and Complex 
Orders entered into the Price Improvement Mechanism, Facilitation 
Mechanism and Solicited Order Mechanism. These order types exist today 
within the MRX Rules, however, unlike other order types, they are not 
mentioned within Options 3, Sections 7 or 14, which list the single-leg 
and Complex Orders, respectively, available for trading on MRX. 
Further, the Exchange also proposes to add the Block Order type to 
Options 3, Section 7 to complete the list of available order types that 
may be entered into an auction mechanism. The Exchange proposes to add 
the following rule text into Options 3, Section 7:

    (v) Block Order. A Block Order is an order entered into the 
Block Order Mechanism as described in Options 3, Section 11(a).
    (w) Facilitation Order. A Facilitation Order is an order entered 
into the Facilitation Mechanism as described in Options 3, Section 
11(b).
    (x) SOM Order. A SOM Order is an order entered into the 
Solicited Order Mechanism as described in Options 3, Section 11(d).
    (y) A PIM Order. A PIM Order is an order entered into the Price 
Improvement Mechanism as described in Options 3, Section 13(a).

    The Exchange proposes to add the following rule text into Options 
3, Section 14:

    (16) Complex Facilitation Order. A Complex Facilitation Order is 
an order entered into the Complex Facilitation Mechanism as 
described in Options 3, Section 11(c).
    (17) Complex SOM Order. A Complex SOM Order is an order entered 
into the Complex Solicited Order Mechanism as described in Options 
3, Section 11(e).
    (18) Complex PIM Order. A Complex PIM Order is an order entered 
into the Complex Price Improvement Mechanism as described in Options 
3, Section 13(e).

    The Exchange believes the addition of this rule text will make 
clear that these order types are available.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ 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. The proposed rule change would 
provide the Exchange with the flexibility to determine the availability 
of order types and times-in-force on a class and System basis. This 
flexibility would remove impediments to and perfect the mechanism of a 
free and open market and a national market system by allowing the 
Exchange to address the specific characteristics of different classes 
and different market conditions. The Exchange believes that this 
proposal serves to protect investors by ensuring that the appropriate 
order types and times-in-force are tailored to the different class 
characteristics and by mitigating risks associated with changing market 
conditions.\11\
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ The Exchange may also determine to temporarily not offer an 
order type or a time-in-force based on a System issue.
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    The Exchange would issue a notification to Participants to provide 
them notice that a change is being made to the availability or 
unavailability of a certain order type or time-in-force before 
implementing the change. In the event of a System issue, the Exchange 
believes that it is consistent with the Act to temporarily not offer a 
certain order type to ensure the proper executions of transactions 
within the System thereby protecting investors and the public interest. 
The Exchange anticipates that exercising its ability to temporarily not 
offer order types would be infrequent.
    This provision was added to all 6 Nasdaq affiliated markets for the 
simple markets \12\ and therefore will ensure consistency between the 
Exchange rules and that of its affiliates and would remove impediments 
to and perfect the mechanism of a free and open market and promote just 
and equitable principles of trade, as well as foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities. The proposed rule change provides the Exchange with 
substantially the same flexibility currently permitted on BZX Options, 
EDGX Options, Cboe and C2 as well as ISE.\13\ The Exchange believes 
that this consistency promotes market participants' understanding of 
the rules across the multiple Nasdaq affiliated exchanges and promotes 
a fair and orderly national options market system. This proposal does 
not present any novel or unique issues because other exchanges have 
substantially similar rules.\14\
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    \12\ See Nasdaq Phlx LLC, The Nasdaq Options Market, LLC, Nasdaq 
BX, Inc., ISE, Nasdaq GEMX, LLC and MRX Rules at Options 3, Section 
7.
    \13\ See notes 4-8 above.
    \14\ Id.
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    The Exchange's proposal is not unfairly discriminatory because the 
Exchange will not discriminate among market participants when 
determining which order types and times-in-force provisions are 
available on a class or system basis. The Exchange's proposal allows 
the Exchange to make certain order types and time-in-force, 
respectively, available on a class or System basis uniformly for all 
market participants. For example, if the Exchange determined to make a 
certain order type or time-in-force unavailable, that order type or 
time-in-force would not be available for any market participant.
    The proposal to add a reference to all existing order types that 
may be entered into auctions into Options 3, Sections 7 and 14 is 
consistent with the Act. The Exchange believes the addition of the 
Block Order type, Facilitation Order type, SOM Order type and PIM Order 
types into Options 3, Section 7 and the addition of the Complex 
Facilitation Order type, Complex SOM Order type and Complex PIM Order 
type into Options 3, Section 14 will make clear to market participants 
the various types of single-leg order and Complex Orders that may be 
transacted on MRX. The descriptions of these order types merely point 
at the existing mechanisms.

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

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

[[Page 17154]]

any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed rule change will impose any burden on intra-market 
competition, as the proposed rule change will apply in the same manner 
to all order types and/or times-in-force, as the Exchange determines, 
for all Participants. The Exchange does not believe the proposed rule 
change will impose any burden on inter-market competition because the 
proposed change provides the Exchange with substantially the same 
flexibility as the rules of other exchanges.\15\ Therefore, the 
Exchange believes that the proposed rule change will allow it to make 
determinations regarding the availability of orders that will enable it 
to remain competitive as markets and market conditions evolve.
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    \15\ Id.
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    The Exchange's proposal does not impose an undue burden on 
competition because the Exchange's proposal will uniformly make certain 
order types and time-in-force, respectively, available on a class or 
System basis for market participants.
    The proposal to add the Block Order type, Facilitation Order type, 
SOM Order type and PIM Order types into Options 3, Section 7 and the 
Complex Facilitation type, Complex SOM Order type and Complex PIM Order 
type into Options 3, Section 14b does not impose an undue burden on 
competition. The addition of these order types would complete the list 
of single-leg and Complex Order types, which are available to all 
market participants, and are merely being referenced within the order 
type rules for greater transparency.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
Because the 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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately The Exchange believes that 
the proposed rule change would provide the Exchange with the 
flexibility to determine the availability of order types and times-in-
force on a class and System basis, allowing the Exchange to address the 
specific characteristics of different classes and different market 
conditions. According to the Exchange, this would ensure that the 
appropriate order types and times-in-force are tailored to the 
different class characteristics and mitigate risks associated with 
changing market conditions. The Exchange also believes that referencing 
all single-leg and Complex Order types makes clear which order types 
are available to all market participants. Moreover, the Exchange 
represents that the proposed rule change will apply in the same manner 
to all order types and/or times-in-force, as the Exchange determines, 
for all Participants, and provides the Exchange with substantially the 
same flexibility as the rules of other exchanges. Lastly, the Exchange 
argues that waiver of the 30-day operative delay will permit the 
Exchange to immediately use this ability to make certain order types 
available and unavailable, as well as enable the Exchange to remain 
competitive as markets and market conditions evolve. 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 30-day operative delay 
and designates the proposal operative upon filing.\22\
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    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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-MRX-2020-06 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-MRX-2020-06. 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

[[Page 17155]]

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-MRX-
2020-06, and should be submitted on or before April 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06297 Filed 3-25-20; 8:45 am]
BILLING CODE 8011-01-P