Notice2024-30166
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of Proposed Rule Change To Decommission QCC With Stock Orders and Complex QCC With Stock Orders
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
December 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 244 (Thursday, December 19, 2024)</title>
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[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Notices]
[Pages 103907-103910]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30166]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101911; File No. SR-ISE-2024-58]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
of Proposed Rule Change To Decommission QCC With Stock Orders and
Complex QCC With Stock Orders
December 13, 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 December 3, 2024, 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 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 to decommission Qualified Contingent Cross (``QCC'')
[[Page 103908]]
with Stock Orders \3\ and Complex QCC with Stock Orders.\4\
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\3\ A QCC with Stock Order is a Qualified Contingent Cross
Order, as defined in Options 3, Section 7(j), entered with a stock
component to be communicated to a designated broker-dealer for
execution pursuant to Options 3, Section 12(e). QCC with Stock
Orders may only be entered through FIX and Precise. See Options 3,
Section 7(t).
\4\ A Complex QCC with Stock Order is a Qualified Contingent
Cross Complex Order, as defined in subparagraph (b)(6), entered with
a stock component to be communicated to a designated broker-dealer
for execution pursuant to Options 3, Section 12(f). See Options 3,
Section 14(b)(15).
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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/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 decommission QCC with Stock Orders \5\ and
Complex QCC with Stock Orders.\6\
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\5\ A QCC with Stock Order is a Qualified Contingent Cross
Order, as defined in Options 3, Section 7(j), entered with a stock
component to be communicated to a designated broker-dealer for
execution pursuant to Options 3, Section 12(e). QCC with Stock
Orders may only be entered through FIX and Precise. See Options 3,
Section 7(t).
\6\ A Complex QCC with Stock Order is a Qualified Contingent
Cross Complex Order, as defined in subparagraph (b)(6), entered with
a stock component to be communicated to a designated broker-dealer
for execution pursuant to Options 3, Section 12(f). See Options 3,
Section 14(b)(15).
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Background
Today, ISE Members are able to transact QCC with Stock Orders and
Complex QCC with Stock Orders subject to the provisions of Options 3,
Section 12(e) and (f), respectively. The QCC with Stock Order (and
Complex QCC with Stock Order) is a piece of functionality that
facilitates the execution of the stock component of qualified
contingent trades in connection with the execution of a QCC Order on
the Exchange. Specifically, a QCC with Stock Order is defined as a QCC
Order \7\ entered with a stock component to be communicated to a
designated broker-dealer for execution pursuant to Options 3, Section
12(e). A Complex QCC with Stock Order is defined as a QCC Complex Order
entered with a stock component to be communicated to a designated
broker-dealer for execution pursuant to Options 3, Section 12(f).
Today, ISE Members desiring to execute an order with stock or an ETF
component are required to enter into a brokerage agreement with a
broker-dealer designated by the Exchange and are permitted to enter
into such an agreement with one or more other broker-dealers to which
the Exchange is able to route stock orders (this is also the case for a
Complex QCC with Stock Order). Options 3, Section 12(e) and (f)
describe how the stock component of QCC with Stock Orders and Complex
QCC with Stock Orders, respectively, are executed on ISE. Since QCC
Orders represent one component of a qualified contingent trade, each
QCC Order must be paired with a stock transaction. When a Member enters
a QCC Order, the Member is responsible for executing the associated
stock component of the qualified contingent trade within a reasonable
period of time after the QCC Order is executed.
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\7\ A Qualified Contingent Cross (``QCC'') Order is comprised of
an originating order to buy or sell at least 1,000 contracts that is
identified as being part of a qualified contingent trade, as that
term is defined in Supplementary Material .01 below, coupled with a
contra-side order or orders totaling an equal number of contracts.
QCC Orders will trade in accordance with Options 3, Section 12(c).
See Options 3, Section 7(j).
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QCC with Stock Order functionality is a voluntary piece of
functionality that provides Members with an automated means of
executing the stock component of a qualified contingent trade.
Specifically, when a Member enters a QCC with Stock Order (or a Complex
QCC with Stock Order), a QCC Order is entered on the Exchange. That QCC
Order is automatically executed upon entry provided that the conditions
of Options 3, Section 12(e) or (f), as applicable, are met. If the QCC
Order (or Complex QCC Order) is executed, the Exchange will
automatically communicate the stock component to the Member's
designated broker-dealer for execution. Currently, Members that execute
the options component of a qualified contingent trade entered as a QCC
with Stock Order (or Complex QCC with Stock Order) remain responsible
for the execution of the stock component if they do not receive an
execution from their designated broker-dealer. Although QCC Orders (and
Complex QCC Orders) are eligible for automatic execution, it is
possible that the QCC Order (or Complex QCC Order) may not be
executable based on market prices at the time the order is entered. If
the QCC Order (or Complex QCC Order) is not capable of being executed,
the entire QCC with Stock Order, including both the stock and options
components, is cancelled.
Proposal
At this time, the Exchange proposes to no longer offer Members the
ability to execute QCC with Stock Orders or Complex QCC with Stock
Orders on ISE. The Exchange was offering this functionality to Members
on a voluntary basis to assist in their execution of qualified
contingent trades. The Exchange notes that there has not been Member
interest in this functionality for some time.\8\ There is no
requirement that Members utilize QCC with Stock functionality, and
Members will continue to be able to enter regular QCC Orders and
Complex QCC Orders where the Exchange does not assist with the
execution of the stock component of the trade and the Members do so
themselves. After the Exchange decommissions the QCC with Stock
functionality, Members would continue to be able to execute QCC Orders
and Complex QCC Orders on the Exchange, provided that the Member would
be responsible for executing the associated stock component of the
qualified contingent trade in compliance with the requirements of the
QCT exemption. The Exchange surveils for compliance with the QCT
exemption.\9\ The
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Exchange provided Members notice of its intent to decommission this
functionality.\10\ There have been no concerns from Members with
respect to the decommission.
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\8\ There have been no trades utilizing QCC with Stock
functionality in 2024 to date. There were less than 5 trades
utilizing QCC with Stock functionality in the three prior years.
\9\ See Securities Exchange Act Release Nos. 57620 (April 4,
2008), 73 FR 19271 (April 9, 2008) (``QCT Exemptive Order''). See
also Securities Exchange Act Release No. 54389 (August 31, 2006), 71
FR 52829 (September 7, 2006). The QCT Exemption applies to trade-
throughs caused by the execution of an order involving one or more
NMS stocks that are components of a ``qualified contingent trade.''
As described more fully in the QCT Exemptive Order, a qualified
contingent trade is a transaction consisting of two or more
component orders, executed as principal or agent, where: (1) At
least one component order is an NMS stock; (2) all components are
effected with a product or price contingency that either has been
agreed to by the respective counterparties or arranged for by a
broker-dealer as principal or agent; (3) the execution of one
component is contingent upon the execution of all other components
at or near the same time; (4) the specific relationship between the
component orders (e.g., the spread between the prices of the
component orders) is determined at the time the contingent order is
placed; (5) the component orders bear a derivative relationship to
one another, represent different classes of shares of the same
issuer, or involve the securities of participants in mergers or with
intentions to merge that have been announced or since cancelled; and
(6) the Exempted NMS Stock Transaction is fully hedged (without
regard to any prior existing position) as a result of the other
components of the contingent trade.
\10\ See Options Trader Update #2024-65.
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The Exchange proposes to remove rule text related to QCC with Stock
Orders and Complex QCC with Stock Orders in Options 3, Section 7(t);
Supplementary Material to Options 3, Section 7(d)(3); Options 3,
Section 12(e) and (f); and Options 3, Section 14(b)(15).
The Exchange proposes to add a space after Supplementary Material
.02 to Options 3, Section 7 before the title ``Time in Force.'' This is
a technical amendment.
Implementation
The Exchange intends to begin implementation of the proposed rule
change on or before February 15, 2025. The Exchange will announce the
date of the decommission to Members in an Options Technical Update.
2. Statutory Basis
The Exchange believes that the proposed rule change 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.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that the proposed rule change
is consistent with the protection of investors and the public interest
because QCC with Stock Orders and Complex QCC with Stock functionality
are currently offered to Members on a voluntary basis to assist in
their execution of qualified contingent trades. Furthermore, Members
that execute the options component of a Qualified Contingent Trade
entered as a QCC with Stock Order or Complex QCC with Stock Order
remain responsible for the execution of the stock component if they do
not receive an execution from their designated broker-dealer. There is
no requirement that Members utilize QCC with Stock or Complex QCC with
Stock Order functionality, and Members will continue to be able to
enter regular QCC Orders and Complex QCC Orders where the Exchange does
not assist with the execution of the stock component of the trade and
the Members do so themselves. The Exchange surveils for compliance with
the QCT exemption.\13\
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\13\ See supra note 9.
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
Decommissioning QCC with Stock Orders or Complex QCC with Stock
Orders does not impose an undue burden on intra-market competition. No
market participant would be able to submit a QCC with Stock Order or
Complex QCC with Stock Order on ISE. There is no requirement that
Members utilize QCC with Stock functionality, and Members will continue
to be able to enter regular QCC Orders and Complex QCC Orders.
Moreover, Members will still be able to execute QCC Orders and Complex
QCC Orders on the Exchange using other means to ensure the execution of
the stock component of those qualified contingent trades. The Exchange
believes that it will continue to remain competitive with other options
markets despite not offering this functionality.
Decommissioning QCC with Stock Orders or Complex QCC with Stock
Orders does not impose an undue burden on inter-market competition as
other options markets may offer this functionality to their 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 prior to 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)(iii)
of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 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, 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) \16\ normally
does not become operative prior to 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. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange states that waiver of the operative delay would permit
the Exchange to decommission QCC with Stock Orders and Complex QCC with
Stock Orders prior to the year's end so that the Exchange can
discontinue maintaining the infrastructure associated with the
functionality. The Exchange states that after it decommissions the QCC
with Stock functionality, Members will continue to be able to execute
QCC Orders and Complex QCC Orders on the Exchange, provided that the
Member would be responsible for executing the associated stock
component of the qualified contingent trade in compliance with the
requirements of the QCT exemption. The Exchange surveils for compliance
with the QCT exemption.\18\ The Exchange states that neither QCC with
Stock Orders nor Complex QCC with Stock Orders has been utilized in
2024.\19\ The Exchange further states that it provided Members notice
of its intention to decommission the functionality, and that Members
raised no concerns with respect to the decommissioning.\20\ For these
reasons, and because the proposal does not raise any new or novel
issues, the Commission believes that waiver of the 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.\21\
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\18\ See supra note 9 and accompanying text.
\19\ See supra note 8.
\20\ See supra note 10 and accompanying text.
\21\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 under
Section 19(b)(2)(B) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 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
<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#c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7"><span class="__cf_email__" data-cfemail="a9dbdcc5cc84cac6c4c4ccc7dddae9daccca87cec6df">[email protected]</span></a>. Please include
file number SR-ISE-2024-58 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-2024-58. 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-ISE-2024-58 and should be
submitted on or before January 9, 2025.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30166 Filed 12-18-24; 8:45 am]
BILLING CODE 8011-01-P
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