Notice2021-25992
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Post-Only Quote Configuration Risk Protection
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 30, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 227 (Tuesday, November 30, 2021)</title>
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[Federal Register Volume 86, Number 227 (Tuesday, November 30, 2021)]
[Notices]
[Pages 68009-68014]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25992]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93662; File No. SR-NASDAQ-2021-094]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Post-Only Quote Configuration Risk Protection
November 23, 2021.
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 November 19, 2021, 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, 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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[[Page 68010]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend The Nasdaq Options Market LLC
(``NOM'') Rules at Options 3, Section 15, Risk Protections, to adopt an
optional Post-Only Quoting Protection for NOM Market Makers.
The Exchange also proposes to correct certain minor technical
amendments within Options 1, Section 1, ``Definitions,'' and Options 3,
Section 7, ``Types of Orders and Order and Quote Protocols.'' \3\
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\3\ Options 3, Section 7 describes the order types available on
NOM as well as the protocols through which market participants may
submit either orders or quotes into NOM.
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The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</a>, 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 proposal amends NOM's Rules at Options 3, Section 15, Risk
Protections, to codify an optional Post-Only Quoting Protection for NOM
Market Makers.\4\ This optional risk protection allows NOM Market
Makers to prevent their quotes from removing liquidity from the
Exchange's order book upon entry. The Exchange also proposes to correct
certain minor technical amendments within Options 1, Section 1,
``Definitions,'' and Options 3, Section 7, ``Types of Orders and Order
and Quote Protocols.'' \5\
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\4\ Today, NOM offers this functionality which is not currently
codified in its rules. Today, no Participant has configured their
ports to utilize this feature.
\5\ Options 3, Section 7 describes the order types available on
NOM as well as the order and quote protocols available to submit
orders and quotes into NOM.
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Specifically, this optional risk protection would be codified
within Options 3, Section 15(c)(3). With this risk protection, NOM
Market Makers may elect to configure their SQF \6\ or QUO \7\ protocols
to prevent their quotes from removing liquidity (``Post-Only Quote
Configuration''). This Post-Only Quote Configuration re-prices or
cancels a NOM Market Maker's quote that would otherwise lock or cross
any resting order \8\ or quote on the Exchange's order book upon entry.
The Exchange notes that this functionality does not apply during an
Opening Process \9\ because the order book is established once options
series are open for trading.
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\6\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes and Immediate-or-Cancel Orders into and from the Exchange.
Features include the following: (1) Options symbol directory
messages (e.g., underlying instruments); (2) system event messages
(e.g., start of trading hours messages and start of opening); (3)
trading action messages (e.g., halts and resumes); (4) execution
messages; (5) quote messages; (6) Immediate-or-Cancel Order
messages; (7) risk protection triggers and purge notifications; and
(8) opening imbalance messages. The SQF Purge Interface only
receives and notifies of purge requests from the Market Maker.
Market Makers may only enter interest into SQF in their assigned
options series. See Options 3, Section 7(e)(1)(B).
\7\ ``Quote Using Orders'' or ``QUO'' is an interface that
allows Market Makers to connect, send, and receive messages related
to single-sided orders to and from the Exchange. Order Features
include the following: (1) Options symbol directory messages (e.g.,
underlying); (2) system event messages (e.g., start of trading hours
messages and start of opening); (3) trading action messages (e.g.,
halts and resumes); (4) execution messages; (5) order messages; and
(6) risk protection triggers and cancel notifications. Orders
submitted by Market Makers over this interface are treated as
quotes. Market Makers may only enter interest into QUO in their
assigned options series. See Options 3, Section 7(e)(1)(D) as
proposed to be amended herein.
\8\ This would include any re-priced orders as described in
Options 3, Section 5(d), any re-priced quotes as described in
Options 3, Section 4(b)(6), Post-Only Orders, as described in
Options 3, Section 7(a)(9), and Price Improving Orders, as described
in Options 3, Section 7(a)(5) and Options 3, Section 5(c). Post-Only
Orders and Price Improving Orders may re-price.
\9\ The Exchange's Opening Process is described at Options 3,
Section 8.
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Participants may elect whether to re-price or cancel their quotes
with this functionality. When configured for re-price, quotes are re-
priced to $.01 below the current low offer (for bids) or above the
current best bid (for offers) and displayed by the System at one
minimum price increment below the current low offer (for bids) or above
the current best bid (for offers). Notwithstanding the aforementioned,
and as is the case today, if a quote with a Post-Only Quote
Configuration would not lock or cross an order on the System but would
lock or cross the NBBO, the quote will be handled pursuant to Options
3, Section 4(b)(6). When configured for cancel, Participants will have
their quotes returned whenever the quote would lock or cross the NBBO
or be placed on the book at a price other than its limit price.
This optional risk protection enables NOM Market Makers to better
manage their risk when quoting on NOM. Today, BOX Exchange LLC
(``BOX''),\10\ NYSE Arca, Inc. (``NYSE Arca''),\11\ and MIAX Emerald,
LLC (``MIAX Emerald'') \12\ have similar functionality. BOX does not
permit Market Maker's quotes to take liquidity and will reject the
quote. Other options markets, unlike BOX, continue to permit their
market makers to add or remove liquidity from the order book.\13\ NYSE
Arca and MIAX Emerald will re-price quotes one minimum price variation
(``MPV'') to avoid the quote from trading as a liquidity taker against
the resting order. The Exchange's proposal permits a NOM Market Maker a
choice as to whether to cancel or re-price its quote when using the
Post-Only Quote Configuration. Unlike NYSE Arca and MIAX Emerald, the
Exchange would re-price $.01 below the current low offer (for bids) or
above the current best bid (for offers) and display the quote at one
minimum price increment below the current low offer (for bids) or above
the current best bid (for offers).
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\10\ BOX Rules provide, ``Notwithstanding Rule 100(a)(56), all
quotes and quote updates on BOX after the opening are liquidity
adding only. Specifically, after the Opening Match pursuant to Rule
7070, a Market Maker's quote will not execute against a resting
order or quote on the BOX Book. If an incoming quote is marketable
against the BOX Book and will execute against a resting order or
quote, it will be rejected.'' See BOX IM-8050-3. See also Securities
Exchange Act Release No. 79311 (November 15, 2016), 81 FR 83322
(November 21, 2016) (SR-BOX-2016-45) (Order Approving a Proposed
Rule Change To Amend the Treatment of Quotes To Provide That All
Quotes on BOX Are Liquidity Adding Only).
\11\ NYSE Arca permits a market maker to optionally designate a
quote as ``Add Liquidity Only.'' See NYSE Arca Rule 6.37A-
O(a)(3)(B).
\12\ See MIAX Emerald Rule 517(a)(1)(i).
\13\ Miami International Securities Exchange LLC (``MIAX'')
permits its market makers to add and remove liquidity from the order
book. See MIAX's Fee Schedule which delineates Maker and Taker
pricing. Nasdaq ISE, LLC (``ISE'') also permits market makers to add
and remove liquidity from the order book. See ISE's Pricing Schedule
at Options 7.
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Of note, today, all NOM participants may utilize the Post-Only
Order type.\14\
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\14\ ``Post-Only Order'' is an order that will not remove
liquidity from the System. Post-Only Orders are to be ranked and
executed on the Exchange or cancelled, as appropriate, without
routing away to another market. Post-Only Orders are evaluated at
the time of entry with respect to locking or crossing other orders
as follows: (i) If a Post-Only Order would lock or cross an order on
the System, the order will be re-priced to $.01 below the current
low offer (for bids) or above the current best bid (for offers) and
displayed by the System at one minimum price increment below the
current low offer (for bids) or above the current best bid (for
offers); and (ii) if a Post-Only Order would not lock or cross an
order on the System but would lock or cross the NBBO as reflected in
the protected quotation of another market center, the order will be
handled pursuant to Options 3, Section 5(b)-(d). Participants may
choose to have their Post-Only Orders returned whenever the order
would lock or cross the NBBO or be placed on the book at a price
other than its limit price. Post-Only Orders received prior to the
opening will be eligible for execution during the opening cross and
will be processed as per Options 3, Section 8. Post-Only Orders
received after market close will be rejected. Post-Only Orders may
not have a time-in-force designation of Good Til Cancelled or
Immediate or Cancel. (e) Entry and Display of Orders and Quotes.
Participants may enter orders and quotes into the System as
specified below. See Options 3, Section 7(a)(9).
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[[Page 68011]]
Below are some examples of the Post-Only Quote Configuration
functionality as well as an example of re-pricing of a Price Improving
Order.\15\
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\15\ ``Price Improving Order'' is an order to buy or sell an
option at a specified price at an increment smaller than the minimum
price variation in the security. Price Improving Orders may be
entered in increments as small as one cent. Price Improving Orders
that are available for display shall be displayed at the minimum
price variation in that security and shall be rounded up for sell
orders and rounded down for buy orders. See Options 3, Section
7(a)(5).
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Re-Priced Price Improving Order--Penny Interval Program Display and
Execution Example--Non-Penny Interval Program (Options 3, Section
7(a)(5))
<bullet> Non-Penny Interval Program MPV in open trading state
<bullet> Market Maker A quote $0.90 (10) x $1.00 (10)
<bullet> ABBO $0.85 x $1.05
<bullet> Firm A sends Price Improving Order to buy 5 contracts @$0.93
[cir] Price Improving Order displays $0.90 bid, which now shows (15
quantity)
<bullet> Order arrives to sell 10 contracts @$0.90
[cir] 5 contracts execute with Firm A @$0.93
[cir] 5 contracts execute with Market A @$0.90
In this example, the inbound order received price improvement as a
result of the available non-displayed interest on the order book.
Re-Priced Post-Only Order--Penny Interval Program Display and Execution
Example--Non-Penny Interval Program (Options 3 Section 7(a)(9))
<bullet> Non-Penny Interval Program MPV in open trading state
<bullet> Market Maker A quote $0.95 (10) x $1.00 (10)
<bullet> ABBO $0.85 x $1.05
<bullet> Firm A sends Post-Only Order to buy 5 contracts @$1.00
[cir] Post-Only Order re-prices on order book to $0.99
[cir] Displays on order book @$0.95 (bid), which now shows (15
quantity)
<bullet> Order to sell 10 contracts arrives @$0.95
[cir] 5 contracts execute with Firm A @$0.99
[cir] 5 contracts execute with Market A @$0.95
In this example, the inbound order received price improvement as a
result of the available non-displayed interest on the order book.
Re-Priced Post-Only Quote--Penny Interval Program Display and Execution
Example--Non-Penny Interval Program (Options 3 Section 7(a)(9))
<bullet> Non-Penny Program MPV in open trading state
<bullet> Market Maker A quote $0.95 (10) x $1.00 (10)
<bullet> ABBO $0.85 x $1.05
<bullet> Market Maker B (configured at the badge level for Post-Only
and selection of re-price upon quote) quote arrives 1.00 (5) x $1.05
(5)
[cir] Bid side quote re-prices on order book to $0.99
[cir] Displays on order book @$0.95 (bid), which now shows (15
quantity)
[cir] Offer side quote books and displays at $1.05
<bullet> Order to sell 10 contracts arrives @$0.95
[cir] 5 contracts execute with Market Maker B @$0.99
[cir] 5 contracts execute with Market A @$0.95
In this example, the inbound order received price improvement as a
result of the available non-displayed interest on the order book.
Options 3, Sections 1 and 7
The Exchange proposes to correct certain minor technical amendments
within Options 1, Section 1, ``Definitions,'' and Options 3, Section 7,
``Types of Orders and Order and Quote Protocols.''
First, the Exchange proposes to update a citation within Options 3,
Section 7(a)(9) which describes the Post-Only Order. The citation to
Options 3, Section 22(b)(3)(C) is incorrect. The Exchange proposes to
replace this citation with Options 3, Section 5(b)-(d) \16\ which
describes re-pricing for locked and crossed quotes.
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\16\ Options 3, Section 5(b)-(d) provides,
``(b) NBBO Price Protection. Orders, other than Intermarket
Sweep Orders (as defined in Rule Options 5, Section 1(8) will not be
automatically executed by the System at prices inferior to the NBBO
(as defined in Options 5, Section 1(10)). There is no NBBO price
protection with respect to any other market whose quotations are
Non-Firm (as defined in Options 5, Section 1(11)).
(c) The System automatically executes eligible orders using the
Exchange's displayed best bid and offer (``BBO'') or the Exchange's
non-displayed order book (``internal BBO'') if the best bid and/or
offer on the Exchange has been repriced pursuant to subsection (d)
below. The contract size associated with Displayed Price Improving
Orders to buy (sell) are displayed at the MPV below (above) the
price of the Price Improving Order. Price Improving Orders will not
be permitted to create a locked or crossed market or to cause a
trade through violation.
(d) Trade-Through Compliance and Locked or Crossed Markets. An
order will not be executed at a price that trades through another
market or displayed at a price that would lock or cross another
market. An order that is designated by the member as routable will
be routed in compliance with applicable Trade-Through and Locked and
Crossed Markets restrictions. An order that is designated by a
member as non-routable will be re-priced in order to comply with
applicable Trade-Through and Locked and Crossed Markets
restrictions. If, at the time of entry, an order that the entering
party has elected not to make eligible for routing would cause a
locked or cross market violation or would cause a trade-through
violation, it will be re-priced to current national best offer (for
bids) or the current national best bid (for offers) and displayed at
one minimum price variance above (for offers) or below (for bids)
the national best price.''
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Second, the Exchange proposes to amend the term ``Nasdaq Options
Market Maker'' or ``Options Market Maker'' within Options 1, Section 1,
``Definitions.'' Specifically, this term within Options 1, Section
1(a)(27) describes an Options Participant registered with the Exchange
for the purpose of making markets in options contracts traded on the
Exchange and that is vested with the rights and responsibilities
specified in Options 2 of these Rules. The Exchange proposes to add
``Market Maker'' as an alternative term for a Nasdaq Options Market
Maker.
Third, the Exchange proposes to amend the term ``NOM Market
Makers'' within Options 3, Section 7(e)(1)(D) which describes the
``Quote Using Orders'' or ``QUO'' quote protocol. The Exchange proposes
to replace the term ``NOM Market Makers'' with ``Market Makers'' as
proposed to be defined within Options 1, Section 1(a)(27).\17\ The
Exchange believes utilizing ``Market Makers'' in addition to ``Nasdaq
Options Market Maker'' and ``Options Market Maker'' will conform the
use of that term throughout the Rulebook.
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\17\ The term ``Nasdaq Options Market Maker'' or ``Options
Market Maker'' mean an Options Participant registered with the
Exchange for the purpose of making markets in options contracts
traded on the Exchange and that is vested with the rights and
responsibilities specified in Options 2 of these Rules. See Options
3, Section 1(a)(27).
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Implementation
The Exchange proposes to implement this functionality prior to June
30, 2022.
[[Page 68012]]
The Exchange will issue an Options Trader Alert to Participants
specifying the date of implementation.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\19\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest by enhancing the risk protections available to
NOM Market Makers. The proposal also promotes the policy goals of the
Commission which has encouraged execution venues, exchanges, and non-
exchanges alike, to enhance risk protection tools and other mechanisms
to decrease risk and increase stability. This proposal is similar to
functionality currently on BOX, NYSE Arca, and MIAX Emerald.\20\
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
\20\ See notes 10-12 above.
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The Exchange's proposal to amend Options 3, Section 15, Risk
Protections, to codify new paragraph (c)(3) to permit NOM Market Makers
to prevent their quotes from removing liquidity from the Exchange's
order book is consistent with the Act for several reasons. While NOM
Market Makers may manage their risk by utilizing the Post-Only Quote
Configuration to avoid removing liquidity from the Exchange's order
book if their quote would otherwise lock or cross any resting order or
quote on the NOM order book upon entry, there are also downstream
benefits to market participants. Re-priced interest on the order book
provides price improvement for market participants that interact with
that non-displayed interest that is priced better than the NBBO. For
example, a Post-Only Order may re-price to $.01 below the current low
offer (for bids) or above the current best bid (for offers) and is
displayed by the System at one minimum price increment below the
current low offer (for bids) or above the current best bid (for offers)
the result is that there is better-priced non-displayed interest
available on the order book. Market participants are entitled to the
better-priced interest when they interact with the re-priced Post-Only
Order on the order book. Additionally, the benefits of enhanced risk
protections flow downstream to counterparties both within and away from
the Exchange, thereby increasing systemic protections as well.
The proposed risk protection allows NOM Market Makers the ability
to avoid removing liquidity from the Exchange's order book if their
quote would otherwise lock or cross any resting order or quote on NOM's
order book upon entry, thereby protecting investors and the general
public as NOM Market Makers transact a large number of orders on the
Exchange and bring liquidity to the marketplace. NOM Market Makers
would utilize the proposed risk protection to avoid unexpectedly taking
liquidity with non-displayed, non-transparent interest \21\ on the
order book. As a result of taking liquidity, NOM Market Makers would
incur a taker fee that may impact the NOM Market Maker's ability to
provide liquidity and meet quoting obligations. NOM Market Makers are
required to add liquidity on NOM and, in turn, are rewarded with lower
pricing \22\ and enhanced allocations.\23\ Specifically, the risk
protection would permit NOM Market Makers to add liquidity only and
avoid removing non-displayed interest on the order book thereby
maximizing the benefit of their quoting to bring liquidity to NOM by
allowing NOM Market Makers to provide as much liquidity as possible,
thereby removing impediments to and perfecting the mechanism of a free
and open market and a national market system and protecting investors
and the public interest. There is no impact to other market
participants by introducing this Post-Only Quote Configuration as other
non-Market Makers may continue to utilize the Post-Only Order
functionality and this functionality will continue to benefit
downstream counterparties, both within and away from the Exchange, who
may interact with NOM's non-displayed order book and thereby interact
with order flow that is priced better than the NBBO. Also, other market
participants may interact with the liquidity provided by NOM Market
Makers.
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\21\ See note 8 above.
\22\ See Options 7, Section 2.
\23\ See Options 3, Section 10.
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Of note, NOM does not offer auction functionality. An auction
mechanism may interact adversely with Post-Only Orders or quotes with a
Post-Only Quote Configuration that are re-priced in $0.01 increments
and displayed at minimum price variation increments. In this example,
the inbound auction would reject against the non-displayed Post-Only
Order or quote with a Post-Only Quote Configuration if NOM were to have
an auction mechanism. NOM has no such auctions and, as shown in the
examples described herein, market participants may access any non-
displayed liquidity, resulting in price improvement for the market
participant.
Unlike other market participants, NOM Market Makers have certain
obligations on the market. NOM Market Makers are required to provide
continuous two-sided quotes on a daily basis \24\ and are subject to
various obligations associated with providing liquidity on the
market.\25\ NOM Market Makers are the sole liquidity providers on the
Exchange and, therefore, are offered certain quote risk protections
noted within Options 3, Section 15 to allow them to manage their risk
more effectively.\26\ The proposed Post-Only Quote Configuration is
another risk protection afforded to NOM Market Makers to assist them in
managing their risk while continuing to comply with their obligations.
The Exchange notes that enhancing the ability of NOM Market Makers to
add liquidity and avoid taking liquidity from the order book promotes
just and equitable principles of trade on NOM and protects investors
and the public interest, thereby enhancing market structure by allowing
NOM Market Makers to add liquidity only. Greater liquidity benefits all
market participants by providing more trading opportunities and
attracting greater participation by NOM Market Makers. Also, an
increase in the activity of NOM Market Makers in turn facilitates
tighter spreads.
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\24\ See NOM Options 2, Section 5(d).
\25\ See NOM Options 2, Section 4.
\26\ Options 3, Section 15(c) describes the Anti-Internalization
and Quotation Adjustments Protections that are available today to
NOM Market Makers.
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Finally, today, all Participants may submit Post-Only Orders.\27\
Offering NOM Market Makers the ability to configure their quotes as
Post-Only will allow all market participants on NOM to enter interest
with a Post-Only designation.
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\27\ See Options 3, Section 7(a)(9).
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Options 3, Sections 1 and 7
The Exchange proposal to correct certain minor technical amendments
within Options 1, Section 1, ``Definitions,'' and Options 3, Section 7,
``Types of Orders and Order and Quote Protocols'' is consistent with
the Act as updating the citation within Options 3, Section 7(a)(9)
which describes the Post-Only Order, amending the term ``Nasdaq Options
Market Maker'' or ``Options Market Maker'' within Options 1, Section 1,
``Definitions,'' and replacing the term ``NOM Market Makers'' within
Options 3, Section 7(e)(1)(D) which describes the ``Quote Using
Orders'' or ``QUO'' quote protocol with ``Market Makers'' as proposed
to be defined within Options 3, Section 1(a)(27) will bring greater
clarity to these rules. The
[[Page 68013]]
Exchange believes utilizing ``Market Makers'' in addition to ``Nasdaq
Options Market Maker'' and ``Options Market Maker'' will conform the
use of that term throughout the Rulebook.
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, rather, this proposal provides
NOM Market Makers with the opportunity to continue to avail themselves
of functionality that currently on BOX, NYSE Arca, and MIAX
Emerald.\28\
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\28\ See notes 10-12 above.
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The proposal does not impose a burden on inter-market competition,
because Participants may choose to become market makers on a number of
other options exchanges, which may have similar but not identical
features. The Post-Only Quote Configuration functionality will continue
to benefit downstream counterparties, both within and away from the
Exchange, who may interact with NOM's non-displayed order book and
thereby interact with order flow that is priced better than the NBBO.
The proposal does not impose a burden on intra-market competition.
Today, all Participants may submit Post-Only Orders and receive similar
treatment for their orders. Offering NOM Market Makers the ability to
configure their quotes as Post-Only will allow all market participants
on NOM to enter interest with a Post-Only designation.
The proposed risk protection allows NOM Market Makers the ability
to avoid removing liquidity from the Exchange's order book if their
quote would otherwise lock or cross any resting order or quote on NOM's
order book upon entry, thereby protecting investors and the general
public as NOM Market Makers transact a large number of orders on the
Exchange and bring liquidity to the marketplace. NOM Market Makers are
required to add liquidity on NOM and, in turn, are rewarded with lower
pricing \29\ and enhanced allocations.\30\ Specifically, the risk
protection would permit NOM Market Makers to add liquidity only and
avoid removing non-displayed interest on the order book thereby
maximizing the benefit of their quoting to bring liquidity to NOM by
allowing NOM Market Makers to provide as much liquidity as possible.
Unlike other market participants, NOM Market Makers have certain
obligations on the market. NOM Market Makers are required to provide
continuous two-sided quotes on a daily basis \31\ and are subject to
various obligations associated with providing liquidity on the
market.\32\ NOM Market Makers are the sole liquidity providers on the
Exchange and, therefore, are offered certain quote risk protections
noted within Options 3, Section 15 to allow them to manage their risk
more effectively.\33\ The proposed Post-Only Quote Configuration is
another risk protection afforded to NOM Market Makers to assist them in
managing their risk while continuing to comply with their obligations.
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\29\ See Options 7, Section 2.
\30\ See Options 3, Section 10.
\31\ See NOM Options 2, Section 5(d).
\32\ See NOM Options 2, Section 4.
\33\ Options 3, Section 15(c) describes the Anti-Internalization
and Quotation Adjustments Protections that are available today to
NOM Market Makers.
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Options 3, Sections 1 and 7
The Exchange proposal to correct certain minor technical amendments
within Options 1, Section 1, ``Definitions,'' and Options 3, Section 7,
``Types of Orders and Order and Quote Protocols'' does not impose an
undue burden on competition as updating the citation within Options 3,
Section 7(a)(9) which describes the Post-Only Order, amending the term
``Nasdaq Options Market Maker'' or ``Options Market Maker'' within
Options 1, Section 1, ``Definitions,'' and replacing the term ``NOM
Market Makers'' within Options 3, Section 7(e)(1)(D) which describes
the ``Quote Using Orders'' or ``QUO'' quote protocol with ``Market
Makers'' as proposed to be defined within Options 3, Section 1(a)(27)
will bring greater clarity to these rules. The Exchange believes
utilizing ``Market Makers'' in addition to ``Nasdaq Options Market
Maker'' and ``Options Market Maker'' will conform the use of that term
throughout 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 \34\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\35\
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\34\ 15 U.S.C. 78s(b)(3)(A)(iii).
\35\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7200071e175f111d1f1f171c0601320117115c151d04"><span class="__cf_email__" data-cfemail="3c4e495059115f5351515952484f7c4f595f125b534a">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2021-094 on the subject line.
Paper Comments
<bullet> 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-2021-094. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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
[[Page 68014]]
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-2021-094 and should
be submitted on or December 21, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25992 Filed 11-29-21; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on November 30, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.