Notice2024-19661
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Remove Directed Order Functionality
Primary source
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Published
September 3, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 170 (Tuesday, September 3, 2024)</title>
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[Federal Register Volume 89, Number 170 (Tuesday, September 3, 2024)]
[Notices]
[Pages 71722-71724]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-19661]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100823; File No. SR-BX-2024-029]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Remove Directed
Order Functionality
August 27, 2024.
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 August 15, 2024, Nasdaq BX, Inc. (``BX'' 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to reserve Options 2, Section 10, Directed
Market Makers.\3\
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\3\ A Directed Market Maker is a Market Maker that may be
entitled to an allocation in accordance with Options 3, Section 10
provided the Directed Market Maker was quoting at the better of the
internal BBO or the NBBO at the time of receipt of the Directed
Order. See Options 2, Section 10.
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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.
[[Page 71723]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
BX proposes to reserve Options 2, Section 10, Directed Market
Makers. The Exchange does not currently offer Directed Order \4\
functionality and is not planning to offer this functionality.
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\4\ The term ``Directed Order'' means any order to buy or sell
which has been directed to a particular Market Maker by an Order
Flow Provider. The term ``Order Flow Provider'' means any
Participant that submits, as agent, orders to the Exchange. See
Supplementary Material .01 to Options 2, Section 10.
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BX received approval for its Directed Order functionality in
2015.\5\ Since that time, the Exchange has not implemented this
functionality. At this time, the Exchange proposes to remove the rule
text related to the Directed Order functionality and reserve Options 2,
Section 10. If BX determines to offer Directed Order functionality it
would file a rule change with the Commission.
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\5\ See Securities Exchange Act Release No. 74129 (January 23,
2015), 80 FR 4954 (January 29, 2025) (SR-BX-2015-049) (Order
Approving Proposed Rule Change Relating to Directed Market Makers).
BX recently amended the rule text in Options 2, Section 10. See also
Securities Exchange Act Release No. 100542 (July 16, 2024), 89 FR
59174 (July 22, 2024) (SR-BX-2024-003) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend Options 2,
Sections 6 and 10).
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With the removal of the Directed Order functionality, the Exchange
proposes to reserve the description of a Directed Order within
paragraph (a)(2) of Options 3, Section 7, Types of Orders and Order and
Quote Protocols. The Exchange also proposes to remove references to
Directed Market Maker or ``DMM'' allocation entitlements within Options
3, Section 10, Order Book Allocation.\6\ In Options 3, Section
10(a)(2)(iii)(2), the Exchange proposes to remove the clause
``excluding All-or-None Orders that cannot be satisfied.'' This clause
is unnecessary as All-or-None Orders \7\ are to be executed in their
entirety or not at all. All-or-None Orders do not rest on the order
book on BX and would not be allocated pursuant to Options 3, Section
10, which describes order book allocation for resting orders.
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\6\ The Exchange updates citations where necessary to reflect
changes in numbering.
\7\ ``All-or-None Order'' is a market or limit order which is to
be executed in its entirety or not at all. All-or-None Orders are
treated as having a time-in-force designation of Immediate or
Cancel. All-or-None Orders received prior to the opening or after
market close will be rejected. See Options 3, Section 7(a)(7).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\9\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that it is consistent with the Act to remove
BX's Directed Order functionality, which is not operative, because it
would protect investors and the general public by avoiding confusion as
whether the Exchange offers this functionality. BX received approval
for its Directed Order functionality in 2015.\10\ Since that time, the
Exchange has not implemented this functionality. At this time, the
Exchange proposes to remove the rule text related to the Directed Order
functionality and reserve Options 2, Section 10. If BX determines to
offer Directed Order functionality it would file a rule change with the
Commission.
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\10\ See Securities Exchange Act Release No. 74129 (January 23,
2015), 80 FR 4954 (January 29, 2025) (SR-BX-2015-049) (Order
Approving Proposed Rule Change Relating to Directed Market Makers).
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The Exchange also believes that removing references to a Directed
Order within Options 3, Section 7(a)(2) and removing references to
Directed Market Maker or ``DMM'' allocation entitlements within Options
3, Section 10 will bring greater clarity to the unavailability of the
Directed Order functionality. Amending the clause in Options 3, Section
10(a)(2)(iii)(2) related to All-or-None Orders is consistent with the
Act because All-or-None Orders are to be executed in their entirety or
not at all. All-or-None Orders do not rest on the order book on BX and
would not be allocated pursuant to Options 3, Section 10, which
describes order book allocation for resting orders.
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 Exchange's proposal to remove BX's Directed Order functionality
does not impose an undue burden on intramarket competition because no
Market Maker has ever utilized this functionality as the functionality
has never been operative. The Exchange also believes that removing
references to a Directed Order within Options 3, Section 7(a)(2) and
removing references to Directed Market Maker or ``DMM'' allocation
entitlements within Options 3, Section 10 will bring greater clarity to
the unavailability of the Directed Order functionality. The Exchange's
proposal to remove BX's Directed Order functionality does not impose an
undue burden on intermarket competition as other options exchanges may
elect to offer Directed Order functionality. The Exchange notes that
today other options exchanges offer this functionality.\11\
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\11\ See e.g. Nasdaq Phlx, LLC and Nasdaq ISE, LLC Options 2,
Section 10.
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Amending the clause in Options 3, Section 10(a)(2)(iii)(2) related
to All-or-None Orders does not impose an undue burden on intramarket
competition because All-or-None Orders are to be executed in their
entirety or not at all and they do not rest on the order book. Amending
the clause in Options 3, Section 10(a)(2)(iii)(2) related to All-or-
None Orders does not impose an undue burden on intermarket competition
because other options exchanges have similar rules for order allocation
for resting orders only. Also, the all-or-none order type on another
exchange could allow it to rest on the order book.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
[[Page 71724]]
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5220273e377f313d3f3f373c2621122137317c353d24"><span class="__cf_email__" data-cfemail="cdbfb8a1a8e0aea2a0a0a8a3b9be8dbea8aee3aaa2bb">[email protected]</span></a>. Please include
file number SR-BX-2024-029 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-BX-2024-029. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-BX-2024-029 and should be
submitted on or before September 24, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-19661 Filed 8-30-24; 8:45 am]
BILLING CODE 8011-01-P
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