Notice2022-06100
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize Various Processes Under Options 3, Section 20 Across the Affiliated Nasdaq Options Exchanges
Primary source
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Published
March 23, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 56 (Wednesday, March 23, 2022)</title>
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[Federal Register Volume 87, Number 56 (Wednesday, March 23, 2022)]
[Notices]
[Pages 16539-16542]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-06100]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94445; File No. SR-ISE-2022-08]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Harmonize
Various Processes Under Options 3, Section 20 Across the Affiliated
Nasdaq Options Exchanges
March 17, 2022.
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 8, 2022, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and
[[Page 16540]]
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 Exhibit I Caption--Harmonize various
processes under Options 3, Section 20 across the affiliated Nasdaq
options exchanges.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/ise/rules">https://listingcenter.nasdaq.com/rulebook/ise/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 Exchange proposes to harmonize its existing processes with
those of its affiliate Nasdaq Phlx LLC (``Phlx'') concerning the review
of decisions on appeal under Options 3, Section 20. The Exchange also
proposes a number of non-substantive changes. Each change is discussed
in detail below.
Appeal
Today, Options 3, Section 20(k) governs the appeal process for
determinations by Exchange staff made under this Rule, including
obvious error determinations. Specifically, if a Member affected by a
determination under this Rule so requests within the permitted time
period, an Exchange Review Council panel will review decisions made by
the Official under Options 3, Section 20, including whether an obvious
error occurred and whether the correct determination was made. A
request for review on appeal must be made in writing via email or other
electronic means specified from time to time by the Exchange in an
Options Trader Alert distributed to Members within thirty (30) minutes
after the party making the appeal is given notification of the initial
determination being appealed. The Exchange Review Council panel shall
review the facts and render a decision as soon as practicable, but
generally on the same trading day as the execution(s) under review. On
requests for appeal received after 3:00 p.m. Eastern Time, a decision
will be rendered as soon as practicable, but in no case later than the
trading day following the date of the execution under review.
Furthermore, if the Exchange Review Council panel votes to uphold the
decision made under this Rule, the Exchange will assess a fee (``Appeal
Fee'') of $5,000 against the Member(s) who initiated the request for
appeal.
The Exchange proposes generally to maintain its current appeal
process with certain adjustments to harmonize its process with that of
its affiliate, Phlx. First, while Phlx similarly requires the parties
to submit a request for review within thirty (30) minutes of being
notified of the determination being appealed, Phlx also provides
parties with additional time to submit their request if the
notification occurs later in the trading day. In particular, if the
notification is made after 3:30 p.m. Eastern Time, either party has
until 9:30 a.m. Eastern Time on the next trading day to submit a
request for review.\3\ Similar to Phlx, the Exchange believes that this
flexibility will be helpful for Members in submitting their appeal
requests in a timely manner, particularly where notification of the
Official's decision was received later in the trading day, and
therefore proposes to adopt this provision in Options 3, Section
20(k)(2).
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\3\ See Phlx Options 3, Section 20(l).
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Second, the Exchange proposes to amend its provisions for when the
Exchange Review Council panel must render a decision on requests for
appeal by harmonizing to Phlx's process. Specifically, the Exchange
proposes in Options 3, Section 20(k)(2) that the Exchange Review
Council panel shall review the facts and render a decision on the day
of the transaction, or the next trade day in the case where a request
is properly made after 3:30 p.m. on the day of the transaction or where
the request is properly made the next trade day.\4\ The proposed
language modifies the current process by extending the current cutoff
time from 3:00 to 3:30 p.m. Eastern Time for the Exchange Review
Council panel to render a decision on the next trading day, and by
accommodating situations where parties properly bring an appeal request
on the next trading day.
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\4\ See Phlx Options 3, Section 20(l) for analogous language.
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Third, the Exchange proposes to decrease the Appeal Fee from $5,000
to $500 to align to Phlx's Appeal Fee.\5\
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\5\ See Phlx Options 3, Section 20(l). The Nasdaq Options Market
(``NOM'') and BX Options (``BX'') also have identical $500 Appeal
Fees. See NOM and BX Options 3, Section 20(k)(4).
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Non-Substantive Changes
In Options 3, Section 20(b)(1), the Exchange proposes a non-
substantive, clarifying change to replace the reference to ``opening
rotation'' to ``Opening Process,'' and specify that the Opening Process
is defined in Options 3, Section 8. The Exchange also proposes non-
substantive changes to replace references to ``Market Control'' with
``Official'' \6\ throughout Options 3, Section 20. At the time of
adoption, the term Market Control referred to designated personnel in
the Exchange's market control center that were responsible for
administering the provisions of the Rule.\7\ The Exchange has since
updated the terminology for such personnel as Officials,\8\ and
therefore proposes to update the old references accordingly.\9\ The
Exchange notes that its affiliated options exchanges similarly
reference Officials as the persons responsible for administering their
obvious error rules.\10\
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\6\ For purposes of Options 3, Section 20, an Official is an
Officer of the Exchange or such other employee designee of the
Exchange that is trained in the application of this Rule. See
Options 3, Section 20(a)(3).
\7\ See Securities Exchange Act Release No. 44376 (June 1,
2001), 66 FR 30772 (June 7, 2001) (SR-ISE-00-19).
\8\ See Securities Exchange Act Release No. 74896 (May 7, 2015),
80 FR 27373 (May 13, 2015) (SR-ISE-2015-18).
\9\ In particular, the Exchange proposes to update the following
subparagraphs in Options 3, Section 20: (c)(2), (d)(2), (g), (h),
(i), (l)(1)(A), (l)(1)(B), (l)(1)(C), and (l)(2)(A). The Exchange
also proposes to update Supplementary Material .03 to Options 3,
Section 20.
\10\ See BX, NOM, and Phlx Options 3, Section 20.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\12\ 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 and because it is not designed to permit
[[Page 16541]]
unfair discrimination between customers, issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange further believes that its proposal to amend the
current appeal process to harmonize with Phlx's appeal process is
consistent with the Act because it will continue to afford Members with
due process in connection with decisions made by Officials under
Options 3, Section 20 that the Member may feel warrants review. As
discussed above, the proposal would allow either party until 9:30 a.m.
the next trading to submit a request for review if notification is made
after 3:30 p.m., which the Exchange believes will be helpful for
Members in submitting their appeal requests in a timely manner.
Furthermore, the proposal provides the Exchange Review Council panel
additional time and flexibility to render decisions on requests for
appeal in cases where a request is properly made after 3:30 p.m. on the
day of the transaction or where the request is properly made the next
trade day, and is designed to reduce administrative burden on the
Exchange. As it relates to the Appeal Fee, the Exchange believes that
the proposed reduction of the fee from $5,000 to $500 is reasonable,
equitable and not unfairly discriminatory because it aligns to the
Appeal Fee assessed by its affiliates \13\ and by other options
exchanges,\14\ and will be applied uniformly to all Members.
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\13\ See supra note 5.
\14\ See, e.g., Cboe BZX Exchange Rule 20.6(l)(5) and MIAX
Options Exchange Rule 521(l)(2).
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Ultimately, the proposed changes to the appeal process are intended
to align certain time frames and the Appeal Fee with those of its
affiliates in order to provide more consistent rules and procedures
across the affiliated options exchanges owned by Nasdaq, Inc.
Consistent rules and procedures, in turn, would simplify and streamline
the regulatory requirements and increase the understanding of the
Exchange's operations for Members of the Exchange that are also members
on the Exchange's affiliated options exchanges. Greater harmonization
across the affiliated options exchanges will result in greater
uniformity, rules that are easier to follow and understand, and more
efficient regulatory compliance, thereby contributing to the protection
of investors and the public interest. As such, the proposed rule change
would foster cooperation and coordination with persons engaged in
facilitating transactions in securities and would remove impediments to
and perfect the mechanism of a free and open market and a national
market system.
Lastly, the Exchange believes that the proposed non-substantive
changes to replace all instances of Market Control with Official, and
to replace opening rotation with Opening Process, will add clarity,
transparency, and consistency to the Exchange's rules. The Exchange
believes that market participants would benefit from the increased
clarity, thereby reducing potential confusion, and ensuring that market
participants and investors can more easily navigate and understand the
Exchange's rules.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
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 changes are designed to
provide greater harmonization among similar rules and processes across
the Exchange's affiliated options exchanges, resulting in more
efficient regulatory compliance for common members.
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 \15\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 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#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="8ffdfae3eaa2ece0e2e2eae1fbfccffceaeca1e8e0f9">[email protected]</span></a>. Please include
File Number SR-ISE-2022-08 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-ISE-2022-08. 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 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-ISE-2022-08
and should be submitted on or before April 13, 2022.
[[Page 16542]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06100 Filed 3-22-22; 8:45 am]
BILLING CODE 8011-01-P
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