Document ID: SEC-2019-0315-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2019-03-20T04:00Z

[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10367-10369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05214]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85315; File No. SR-ISE-2019-06]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Extend the 
Delay for Re-Introduction of Legging Functionality for Stock-Option 
Orders

March 14, 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 11, 2019, Nasdaq ISE, LLC (``ISE'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the delay for re-introduction of 
legging functionality for Stock-Option Orders.
    The text of the proposed rule change is available on the Exchange's 
website at http://ise.cchwallstreet.com/, at the principal office of 
the Exchange, and at

[[Page 10368]]

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 has filed a proposal requesting the removal of the 
legging functionality for Stock-Option Orders.\3\ At this time, the 
Exchange proposes to further extend the delay for re-introduction of 
legging functionality for Stock-Option Orders until the earlier of the 
implementation of SR-ISE-2019-05 or May 1, 2019. This extension is 
solely intended to provide time for SR-ISE-2019-05 to become operative.
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    \3\ SR-ISE-2019-05. The legging functionality allows Members to 
leg into the regular market where they may trade against bids and 
offers for the individual legs pursuant to Rule 722(d)(2) and (3) 
and Supplementary Material .01 and .02 to Rule 722 (``legging''). 
The legging functionality will continue to be available for complex 
options orders. See Rule 722(c)(2).
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    In 2017, ISE underwent a replatform to move its functionality to 
INET.\4\ At that time, ISE proposed to delay the re-introduction of 
legging functionality for Stock-Option Orders for one year from the 
date of filing.\5\ Subsequently, ISE filed to delay the re-introduction 
of legging functionality until March 21, 2019.\6\ The Exchange provided 
notice to Members on two occasions \7\ with respect to delaying the 
reintroduction of the legging functionality for Stock-Option Orders. In 
addition, the Exchange has notified Members that it will not offer this 
functionality going forward.\8\
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    \4\ INET is the proprietary core technology utilized across 
Nasdaq's global markets. The migration of ISE to the Nasdaq INET 
architecture has resulted in higher performance, scalability, and 
more robust architecture.
    \5\ See Securities Exchange Act Release No. 80316 (March 27, 
2017) 82 FR 16084 (March 31, 2017) (SR-ISE-2017-28).
    \6\ See Securities Exchange Act Release No. 82961 (March 28, 
2018), 83 FR 14302 (April 3, 2018) (SR-ISE-2018-21).
    \7\ See Options Traders Alerts 2016-8 and 2016-10 (these prior 
option trade alerts are no longer publically available because the 
content is obsolete. The alerts were also superseded by Options 
Trader Alert 2019-3).
    \8\ See Options Trader Alert 2019-3.
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    Today, because of the delay in reintroducing legging functionality, 
Stock-Option Orders entered on ISE are not automatically executed 
against bids and offers on the Exchange for the individual legs 
pursuant to Rule 722(b)(3)(ii)-(iii) and Supplementary Material .02 to 
Rule 722. Stock-Option Orders continue to execute against other Stock-
Option Orders in the complex order book, thereby providing an 
opportunity for Members to have their Stock-Option Orders executed on 
the Exchange.
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. In particular, the Exchange believes 
that the proposed rule change is consistent with the protection of 
investors and the public interest because it would provide additional 
time for ISE' proposal to eliminate the legging functionality for 
Stock-Option Orders to become operative.\11\ The Exchange has notified 
Members that it will not offer this functionality going forward.\12\ 
Members can continue to submit these orders to the Exchange where they 
can be executed against other Stock-Option Orders on the complex order 
book. No Members have notified the Exchange of any impact on execution 
quality as a result of the delayed implementation of legging 
functionality for Stock-Option Orders, and therefore the Exchange does 
not believe that extending the delay will have a significant impact on 
market participants. The Exchange proposes to extend the delay for re-
introduction of legging functionality for Stock-Option Orders until the 
earlier of the implementation of SR-ISE-2019-05 or May 1, 2019.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ SR-ISE-2019-05.
    \12\ See Options Trader Alert 2019-3.
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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. Specifically, the Exchange does 
not believe that the proposed delay will impose any significant burden 
on intra-market competition because legging for Stock-Option Orders 
will be uniformly delayed for all Members. Similarly, the Exchange does 
not believe that the proposed delay will impose any significant burden 
on inter-market competition as it does not impact the ability of other 
markets to offer or not offer competing functionality.

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) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 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 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) \16\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. In its filing with the 
Commission, the Exchange has asked the Commission to waive the 30-day 
operative delay to allow the Exchange to extend the delay for re-
introducing the legging

[[Page 10369]]

functionality for Stock-Option Orders until the earlier of the 
implementation of SR-ISE-2019-05 or May 1, 2019. ISE notes that without 
a waiver of the operative delay, ISE would be required to re-introduce 
the legging functionality for Stock-Option Orders until SR-ISE-2019-05 
becomes operative. The Commission believes that waiving the operative 
delay is consistent with the protection of investors and the public 
interest because it will eliminate the need for ISE to re-introduce the 
legging functionality for Stock-Option Orders until SR-ISE-2019-05, 
which eliminates the legging functionality for Stock-Option Orders, 
becomes operative. Accordingly, the Commission waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 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 such 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 under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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-ISE-2019-06 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-ISE-2019-06. 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 business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ISE-2019-06, and should be submitted on 
or before April 10, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05214 Filed 3-19-19; 8:45 am]
 BILLING CODE 8011-01-P