[Federal Register Volume 85, Number 141 (Wednesday, July 22, 2020)]
[Notices]
[Pages 44338-44347]
[FR Doc No: 2020-15845]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89330; File No. SR-BX-2020-014]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX's
Routing Functionality

July 16, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), and Rule 19b-4 thereunder, notice is hereby given that on
July 2, 2020, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with the
Securities and Exchange Commission (``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.

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Options 5, Section 4, Order Routing.
    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 amend Options 5, Section 4, Order Routing,
in connection with a technology migration to an enhanced Nasdaq, Inc.
(``Nasdaq'') functionality which results in higher performance,
scalability, and more robust architecture. With this system migration,
the Exchange intends to adopt certain trading functionality currently
utilized at Nasdaq Exchanges. Specifically, the Exchange proposes to
conform BX Routing to Nasdaq Phlx LLC's (``Phlx'') routing rule at
Options 5, Section 4, Order Routing.
    Today, BX offers the following order types for routing: DNR Order,
SEEK Order and SRCH Order. A DNR Order will never be routed outside of
the Exchange regardless of the prices displayed by away markets. A SEEK
Order may route during and after an Opening Process. Once the SEEK
Order rests on the Order Book, it will not be eligible for routing
until the next time the option series is subject to a new Opening
Process. A SRCH Order may route during and after an Opening Process. A
SRCH Order on the Order Book may be routed to an away market if it is
locked or crossed by an away market.
    This proposal would amend BX Rules to remove the SEEK routing
option and, instead, adopt the FIND Order routing option, which is
currently available on Phlx. A FIND Order, similar to a SEEK Order,
will only attempt to route once and then post to the Order Book. FIND
Orders that are not marketable with the ABBO upon receipt, similar to
SEEK Orders, will be treated as DNR for the remainder of the trading
day and post to the Order Book, and will not be subject to routing even
in the event that there is a new Opening Process after a trading halt.
If a FIND Order was marketable

with the ABBO upon receipt, it would be eligible for routing the next
time the option series is subject to a new Opening Process, which may
include a re-opening after a trading halt. FIND Orders may route during
and after an Opening Process, similar to SEEK Orders. The Exchange is
replacing the ``SEEK'' option with a ``FIND'' option within Options 5,
Section 4(a) to account for the change in routing options, which will
be described below in greater detail below. Of note, unlike FIND and
SEEK Orders, SRCH Orders will continue to route throughout the trading
day, provided the SRCH Order is marketable with the ABBO.
    Further, this proposal would conform rule text describing DNR
Orders and SRCH Orders with Phlx rule text. Proposed amendments to the
DNR and SRCH Order rule text are not substantive and do not result in
System changes.
DNR Orders
    The Exchange proposes to amend Options 5, Section 4(a)(iii)(A),
related to DNR Orders, to conform the BX rule text to Phlx rule text.
These amendments are intended bring clarity to the rule text.
Currently, Options 5, Section 4(a)(iii)(A), relating to DNR Orders,
states,
    A DNR Order will never be routed outside of BX regardless of the
prices displayed by away markets. A DNR Order may execute on the
Exchange at a price equal to or better than, but not inferior to, the
best away market price but, if that best away market remains, the DNR
Order will remain in the BX Order Book and be displayed at a price one
minimum price variation (``MPV'') inferior to that away best bid/offer.
If the DNR Order is locking or crossing the ABBO, the DNR Order shall
be entered into the Order Book at the ABBO price and displayed one MPV
away from the ABBO. The Exchange shall immediately expose the order at
the ABBO to participants, provided the option series has opened for
trading. Any incoming order interacting with such a resting DNR Order
will execute at the ABBO price, unless the ABBO is improved to a price
which crosses the DNR's displayed price, in which case the incoming
order will execute at the previous ABBO price. Should the best away
market change its price to an inferior price level, the DNR Order will
automatically re-price from its one MPV inferior to the original away
best bid/offer price to one minimum trading increment away from the new
away best bid/offer price or its original limit price, and expose such
orders at the ABBO to participants only if the repriced order locks or
crosses the ABBO. Once priced at its original limit price, it will
remain at that price until executed or cancelled. Should the best away
market improve its price such that it locks or crosses the DNR Order
limit price, the Exchange will execute the resulting incoming order
that is routed from the away market that locked or crossed the DNR
Order limit price.
    The Exchange proposes non-substantive amendments to Options 5,
Section 4(a)(iii)(A), relating to DNR Orders, to align the rule text
with Phlx's Rule at Options 5, Section 4(a)(iii)(A). The Exchange
proposes to: (1) Add the word ``Order'' after DNR in the fifth sentence
of the paragraph; (2) add the word ``already'' before ``displayed'' in
the fifth sentence of the paragraph; (3) replace the word ``change''
with ``move'' in the sixth sentence of the paragraph; (4) delete the
words ``its price'' in the sixth sentence of the paragraph; (5) use the
defined term ``MPV'' instead of ``minimum trading increment'' in the
sixth sentence of the paragraph; (6) replace ``away best bid/offer''
with ``ABBO'' in the sixth sentence of the paragraph; and (7) replace
``priced'' with ``booked'' in the seventh sentence of the paragraph.
These proposed amendments are non-substantive and intended solely to
conform BX's DNR rule text to Phlx's DNR rule text as the functionality
is the same on both markets.
    The Exchange also proposes to amend the fifth sentence of the
paragraph within Options 5, Section 4(a)(iii)(A), which currently
states, ``Any incoming order interacting with such a resting DNR Order
will execute at the ABBO price, unless the ABBO is improved to a price
which crosses the DNR's displayed price, in which case the incoming
order will execute at the previous ABBO price'' to add more explanation
and another scenario. The Exchange proposes to instead provide, ``Any
incoming order interacting with such a resting DNR Order will execute
at the ABBO price, unless (1) the ABBO is improved to a price which
crosses the DNR Order's already displayed price, in which case the
incoming order will execute at the previous ABBO price as the away
market crossed a displayed price; or (2) the ABBO is improved to a
price which locks the DNR Order's displayed price, in which case the
incoming order will execute at the DNR Order's displayed price.'' This
proposed new text intends to make clear that if the Exchange's System
is executing an incoming order against a resting DNR Order, which is
displayed, it would not consider an updated ABBO which crossed the
already displayed DNR Order. The System would not take into account the
away market order or quote that crossed the DNR Order's already
displayed price. The Exchange is not trading-through an away market in
this scenario, rather an away market is crossing BX's already displayed
market and therefore the away market has the obligation not to trade-
through BX's displayed price. By way of example, consider the following
sequence of events in the System:

9:45:00:00:00--MIAX Quote 0.95 x 1.20
9:45:00:00:10--OPRA updates MIAX BBO 0.95 x 1.20
9:45:00:00:20--BX Local BBO Quote 1.00 x 1.15
9:45:00:00:30--OPRA disseminates BX BBO updates: 1.00 x 1.15
9:45:00:00:35: CBOE Quote 1.00 x 1.12
9:45:00:00:45--OPRA disseminates CBOE BBO 1.00 x 1.12
9:45:00:00:50--DNR Order: Buy 5 @ 1.15 (exposes @ ABBO of 1.12,
displays 1 MPV from ABBO @ 1.11)
9:45:00:00:51--OPRA disseminates BX BBO updates: 1.11 x 1.15 (1.11
being the DNR Order displaying 1 MPV from ABBO)
9:45:00:00:60--MIAX Quote updates to 1.00 x 1.10 (1.10 crosses the
displayed DNR Order price, violating locked/crossed market rules;
henceforth, we need not protect this price)
9:45:00:00:65--OPRA disseminates MIAX BBO 1.00 x 1.10
9:45:00:00:75--BX Market Maker Order to Sell 5 @ 1.09
9:45:00:00:76--Market Maker Order immediately executes against DNR
Order 5 contracts @ 1.12 (1.12 being the `previous' ABBO price
disseminated by CBOE before the receipt of the DNR Order that was
subsequently and illegally crossed by MIAX's 2nd quote)
9:45:00:00:77--OPRA disseminates BX BBO updates: 1.00 x 1.15 (reverts
back to BBO set by BX Local Quote since the DNR Order has executed)

    The Exchange proposes to amend the next sentence of that same
paragraph, which currently states, ``Should the best away market change
its price to an inferior price level, the DNR Order will automatically
re-price from its one MPV inferior to the original away best bid/offer
price to one minimum trading increment away from the new away best bid/
offer price or its original limit price, and expose such orders at the
ABBO to participants only if the repriced order locks or crosses the
ABBO.'' In addition to the non-substantive changes noted above, the
Exchange proposes to remove the phrase ``to participants only if the
repriced order locks or crosses the ABBO.'' The proposed sentence would

provide, ``Should the best away market move to an inferior price level,
the DNR Order will automatically re-price from its one MPV inferior to
the original ABBO and display one MPV away from the new ABBO or its
original limit price, and expose such orders at the new ABBO.'' The
Exchange's proposal is intended to make clear the current System
operation. The rewording of this sentence does not result in a System
change, rather the new sentence is intended to bring greater clarity to
the current System operation.
FIND Order
    The Exchange proposes to adopt a new routing options at Options 5,
Section 4(a)(iii)(B), FIND Orders. As noted above, a FIND Order is an
order that is: (i) Routable at the conclusion of an Opening Process;
and (ii) routable upon receipt during regular trading, after an option
series is open. FIND Orders that are not marketable with the ABBO upon
receipt will be treated as DNR for the remainder of the trading day,
and will not be subject to routing even in the event that there is a
new Opening Process after a trading halt. This text is similar to Phlx
Options 5, Section 4(a)(iii)(B). BX would treat FIND Orders upon
receipt in the same manner as Phlx. BX proposes to add rule text to the
end of Options 5, Section 4(a)(iii)(B) which states, ``and post to the
Order book, even in the event that there is a new Opening Process after
a trading halt'' to make clear that the FIND Order would post to the
Order Book and not route again, even if there were a new Opening
Process. This happens today on Phlx as well.
    The Exchange proposes to provide at BX proposed Options 5, Section
4(a)(iii)(B)(1), ``At the end of an Opening Process, any FIND Order
that is priced through the Opening Price, pursuant to Options 3,
Section 8(a)(iii), will be cancelled, and any FIND Order that is at or
inferior to the Opening Price will execute or book pursuant to Options
3, Section 8(k).'' BX will permit all market participants to route. The
Exchange proposes not to adopt the Phlx rule text at Options 5, section
4(a)(iii)(B)(1) which provides, ``Such FIND Order will not be eligible
for routing until the next time the option series is subject to a new
Opening Process.'' The Opening Process describes the manner in which
orders route at the end of that process and the sentence is not
necessary within this rule. FIND Orders that are not marketable with
the ABBO upon receipt will be treated as DNR for the remainder of the
trading day, and will not be subject to routing even in the event that
there is a new Opening Process after a trading halt.
    In order to more efficiently display the various potential
scenarios, without repeating certain rule text several times throughout
the rule, the Exchange proposes to adopt proposed Options 5, Section
4(a)(iii)(B)(2). The proposed paragraph provides,
    Generally, a FIND Order will be included in the displayed BBO at
its limit price, unless the FIND Order locks or crosses the ABBO, in
which case it will be entered into the Order Book at the ABBO price and
displayed one MPV inferior to the ABBO. If there exists a locked ABBO
when the FIND Order is entered onto the Order Book, the FIND Order will
be entered into the Order Book at the ABBO price and displayed one MPV
inferior to the ABBO. If during a Route Timer, ABBO markets move such
that the FIND Order is no longer marketable against the ABBO nor
marketable against the BBO, the FIND Order will post at its limit
price. If the FIND Order is locked or crossed by away quotes, it will
route at the completion of the Route Timer. If the ABBO worsens but
remains better than the BBO, the FIND Order will reprice and be re-
exposed at the new price(s) without interrupting the Route Timer. If,
during the Route Timer, any new interest arrives opposite the FIND
Order that is equal to or better than the ABBO price, the FIND Order
will trade against such new interest at the ABBO price, unless the ABBO
is improved to a price which crosses the FIND Order's already displayed
price, in which case the incoming order will execute at the previous
ABBO price as the away market crossed a displayed price.
    This paragraph utilizes the term ``generally'' because it always
applies to FIND Orders. The Exchange proposes to state that a FIND
Order will be included in the displayed BBO at its limit price, unless
the FIND Order locks or crosses the ABBO, in which case it will be
entered into the Order Book at the ABBO price and displayed one MPV
inferior to the ABBO. This statement will provide context to the FIND
Order and would apply consistently to FIND Orders. The Exchange further
proposes to provide that if there exists a locked ABBO when the FIND
Order is entered onto the Order Book, the FIND Order will be entered
into the Order Book at the ABBO price and displayed one MPV inferior to
the ABBO. The Exchange further proposes to describe the possible
scenarios that may occurring during a Route Timer, when ABBO markets
move such that the FIND Order is no longer marketable against the ABBO
nor marketable against the BBO, the FIND Order will always post at its
limit price. If the FIND Order is locked or crossed by away quotes, it
will route each time at the completion of the Route Timer. In the
situation where an ABBO worsens, but remains better than the BBO, the
FIND Order will reprice and be re-exposed at the new price(s) without
interrupting the Route Timer, each time. If, during the Route Timer,
any new interest arrives opposite the FIND Order that is equal to or
better than the ABBO price, the FIND Order will trade always against
such new interest at the ABBO price, unless the ABBO is improved to a
price which crosses the FIND Order's already displayed price, in which
case the incoming order will execute at the previous ABBO price as the
away market crossed a displayed price. The Exchange believes that
describing these scenarios in this introductory paragraph will provide
a basis to understand certain FIND Order behaviors in certain
circumstances and eliminate the need to have these circumstances
repeated throughout the rule. The sentences in this paragraph are
currently located within the Phlx FIND Rule at Options 5, Section
4(a)(iii)(B). The Exchange notes below where the sentences within
proposed BX Options 5, Section 4(a)(iii)(B)(2) are located within the
current Phlx rule.

Phlx Options 5, Section 4(a)(iii)(B)(2) provides,

    With respect to an Opening Process, if during a route timer at the
conclusion of an Opening Process pursuant to Options 3, Section 8(k)
markets move such that the FIND Order is executable against Exchange
interest, the FIND Order will immediately execute. If during a route
timer, ABBO markets move such that the FIND Order is no longer
marketable against the ABBO nor marketable against the PBBO, the FIND
Order will post at its limit price. If the FIND Order is locked or
crossed by away quotes, it will route at the completion of the route
timer. If the ABBO worsens but remains better than the PBBO, the FIND
Order will reprice and be reexposed at the new price(s) without
interrupting the route timer.
    The first sentence of Phlx Options 5, Section 4(a)(iii)(B)(2) is
not being adopted because it is covered within Options 3, Section 8(k),
which describes the Opening Process. The remainder of the Phlx rule
text is the same as that within BX proposed Options 5, Section
4(a)(iii)(B)(2), however it is arranged in a different order. Similar
to SRCH Orders, the Exchange proposes various scenarios if markets
move.
    Proposed BX Options 5, Section 4(a)(iii)(B)(3) provides, ``A FIND
Order

received after an Opening Process that is not marketable against the
BBO or the ABBO will be entered into the Order Book at its limit price.
The FIND Order will be treated as DNR for the remainder of the trading
day, even in the event that there is a new Opening Process after a
trading halt.'' This text is similar to Phlx Options 5, Section
4(a)(iii)(B)(3). BX would treat FIND Orders received after an Opening
Process that are not marketable against the BBO or the ABBO in the same
manner as Phlx. BX is adding rule text to make clear that the FIND
Order will not route, even if there is a new Opening Process. The
Exchange will not allow a non-marketable order to route.

Proposed BX Options 5, Section 4(a)(iii)(B)(4) provides,

    A FIND Order received after an Opening Process that is marketable
against the BBO when the ABBO is inferior to the BBO will be traded on
the Exchange at or better than the BBO price. If the FIND Order has
size remaining after exhausting the BBO, it may: (1) Trade at the next
BBO price (or prices) if the order price is locking or crossing that
price (or prices) up to and including the ABBO price, (2) be entered
into the Order Book at its limit price, or (3) if locking or crossing
the ABBO, be entered into the Order Book at the ABBO price and
displayed one MPV away from the ABBO. The FIND Order will be treated as
DNR for the remainder of the trading day, even in the event that there
is a new Opening Process after a trading halt.
    This rule text is similar to Phlx Options 5, Section
4(a)(iii)(B)(4), except that Phlx has references to an ``internal
PBBO'' because it has All-or-None Orders which are non-displayed
orders, and BX is adding rule text to make clear that the FIND Order
will not route, even if there is a new Opening Process. As explained
above, BX's All-or-None Orders execute immediately or cancel and do not
rest on the Order Book. This paragraph describes scenarios where the
FIND Order is marketable against the BBO, when the ABBO is inferior to
the BBO. In this case, the FIND Order will be traded at the Exchange at
or better than the BBO price. If the FIND Order has size remaining
after exhausting the BBO, there are various possible scenarios: the
FIND Order may (1) trade at the next BBO price (or prices) if the order
price is locking or crossing that price (or prices) up to and including
the ABBO price, (2) be entered into the Order Book at its limit price,
or (3) if locking or crossing the ABBO, be entered into the Order Book
at the ABBO price and displayed one MPV away from the ABBO. BX handles
FIND Orders similar to Phlx with respect to not routing for the
remainder of the trading day, even if there is a new Opening Process.

Proposed BX Options 5, Section 4(a)(iii)(B)(5) provides,

    A FIND Order received after an Opening Process that is marketable
against the BBO when the ABBO is equal to the BBO will be traded on the
Exchange at the BBO. If the FIND Order has size remaining after
exhausting the BBO, it will initiate a Route Timer, and expose the FIND
Order at the ABBO to allow market participants an opportunity to
interact with the remainder of the FIND Order. During the Route Timer,
the FIND Order will be included in the BBO at a price one MPV away from
the ABBO. If during the Route Timer, the ABBO markets move such that
the FIND Order is no longer marketable against the ABBO, it may: (i)
Trade at the next BBO price (or prices) if the FIND Order price is
locking or crossing that price (or prices), and/or (ii) be entered into
the Order Book at its limit price if not locking or crossing the BBO.
    This rule text is identical to Phlx Options 5, Section
4(a)(iii)(B)(5), except that Phlx has references to an ``internal
PBBO'' because it has All-or-None Orders as described above. Also, a
sentence that is within this paragraph in the Phlx Rule is now captured
within proposed BX Options 5, Section 4(a)(iii)(B)(2) and does not need
to be repeated in this paragraph.
    Proposed BX Options 5, Section 4(a)(iii)(B)(5) explains that if a
FIND Order is received after an Opening Process that is marketable
against the BBO, when the ABBO is equal to the BBO, the FIND Order will
be traded at the Exchange at the BBO. Further, if the FIND Order has
size remaining after exhausting the BBO, it will initiate a Route
Timer, and expose the FIND Order at the ABBO to allow market
participants an opportunity to interact with the remainder of the FIND
Order. During a Route Timer, the FIND Order will be included in the BBO
at a price one MPV away from the ABBO. The Exchange also accounts for
scenarios during a Route Timer. The first scenario describes a
situation during the Route Timer, if ABBO markets move such that the
FIND Order is no longer marketable against the ABBO. In this scenario,
various events could occur, the FIND Order may: (i) Trade at the next
BBO price (or prices) if the FIND Order price is locking or crossing
that price (or prices), and/or (ii) be entered into the Order Book at
its limit price if not locking or crossing the BBO. The remainder of
the text in Phlx Options 5, Section 4(a)(iii)(B)(5) is not included as
it is repetitive of text within proposed BX Options 5, Section
4(a)(iii)(B)(2).

Proposed BX Options 5, Section 4(a)(iii)(B)(6) provides,

    If, at the end of the Route Timer pursuant to subparagraph (5)
above, the FIND Order is still marketable with the ABBO, the FIND Order
will route to an away market up to a size equal to the lesser of
either: (1) An away market's size or (2) the remaining size of the FIND
Order. If the FIND Order still has remaining size after routing, it
will (i) trade at the next BBO price or better, subject to the order's
limit price, and, if contracts still remain unexecuted, the remaining
size will be routed to away markets disseminating the same price as the
BBO, or (ii) be entered into the Order Book and posted either at its
limit price or re-priced one MPV away if the order would otherwise lock
or cross the ABBO. If size still remains, the FIND Order will not be
eligible for routing until the next time the option series is subject
to a new Opening Process.
    The Exchange's proposed rule text is the same as Phlx Options 5,
Section 4(a)(iii)(B)(6). At the end of a Route Timer, if a FIND Order
is still marketable with the ABBO, the FIND Order will route to an away
market up to a size equal to the lesser of either (1) an away market's
size or (2) the remaining size of the FIND Order. If the FIND Order
still has remaining size after routing, it will (i) trade at the next
BBO price or better, subject to the order's limit price, and, if
contracts still remain unexecuted, the remaining size will be routed to
away markets disseminating the same price as the BBO, or (ii) be
entered into the Order Book and posted either at its limit price or re-
priced one MPV away if the order would otherwise lock or cross the
ABBO. A FIND Order will only route once. BX Options 5, Section
4(a)(iii)(B)(6)(i) describes a scenario where interest has routed and
size remains, which size would be routed again without posting to the
Order Book. Once the FIND Order posts to the Order Book, it will not
route again until the options series is subject to a new Opening
Process. If size still remains, the FIND Order will not be eligible for
routing until the next time the option series is subject to a new
Opening Process. An Opening Process would occur intra-day if there was
a trading halt. After a trading halt, BX would reopen with an Opening
Process.

Proposed BX Options 5, Section 4(a)(iii)(B)(7) provides,

    A FIND Order received after an Opening Process that is marketable
against the ABBO when the ABBO is better than the BBO will initiate a
Route Timer, and expose the FIND Order at the ABBO to allow
participants and other market participants an opportunity to interact
with the FIND Order.
    The Exchange's proposed rule text is similar to Phlx Options 5,
Section 4(a)(iii)(B)(6), however, part of the rule text within Phlx
Options 5, Section 4(a)(iii)(B)(6) is contained with proposed BX
Options 5, Section 4(a)(iii)(B)(2), which applies to FIND Orders
generally.

Proposed BX Options 5, Section 4(a)(iii)(B)(8) provides,

    If, at the end of the Route Timer pursuant to subparagraph (7)
above, the ABBO is still the best price and is marketable with the FIND
Order, the order will route to the away market(s) whose disseminated
price(s) is better than the BBO, up to a size equal to the lesser of
either: (1) The away markets' size, or (2) the remaining size of the
FIND Order. If the FIND Order still has remaining size after such
routing, it will (i) trade at the BBO price or better, subject to the
order's limit price, and, if contracts still remain unexecuted, the
remaining size will be routed to away markets disseminating the same
price as the BBO, or (ii) be entered into the Order Book and posted
either at its limit price or re-priced one MPV away if the order would
otherwise lock or cross the ABBO. If size remains, the FIND Order will
not be eligible for routing until the next time the option series is
subject to a new Opening Process.
    The Exchange's proposed rule text the same as Phlx Options 5,
Section 4(a)(iii)(B)(6). As stated herein, BX will route all market
participant orders. During the Route Timer, the FIND Order will be
included in the BBO at a price that is the better of one MPV away from
the ABBO or the BBO. In this scenario, if during that Route Timer new
interest arrives opposite the FIND Order, and that interest is equal to
or better than the ABBO price, the FIND Order will trade against such
new interest at the ABBO price. If, at the end of that Route Timer the
ABBO is still the best price, and is marketable with the FIND Order,
the order will route to the away market(s) whose disseminated price(s)
is better than the BBO, up to a size equal to the lesser of either: (1)
The away markets' size, or (2) the remaining size of the FIND Order. If
the FIND Order still has remaining size after such routing, it will (i)
trade at the BBO price or better, subject to the order's limit price,
and, if contracts still remain unexecuted, the remaining size will be
routed to away markets disseminating the same price as the BBO, or (ii)
be entered into the Order Book and posted either at its limit price or
re-priced one MPV away if the order would otherwise lock or cross the
ABBO. If size remains, the FIND Order will not be eligible for routing
until the next time the option series is subject to a new Opening
Process, which may be intra-day if a trading halt occurs.
    Finally, proposed BX Options 5, Section 4(a)(iii)(B)(9) is
identical to Phlx Options 5, Section 4(a)(iii)(B)(9) and provides that
a FIND Order that is routed to an away market(s) will be marked as an
Intermarket Sweep Order ``ISO'' and designated as an IOC order.
    As mentioned above, All-or-None Orders are handled differently in
the System by Phlx and BX. Phlx All-or-None Orders are permitted to
rest on the Order Book. BX All-or-None Orders must be executed in its
entirety or not at all and do not rest on the Order Book.
SEEK Orders
    The Exchange proposes to remove the rule text for SEEK Orders as
the Exchange will no longer offer this routing option. The Exchange
believes that adopting the FIND Order routing option, similar to Phlx,
will provide its market participants with ample choice as to the method
in which they may route. As is the case today, an order may also be
marked as ``DNR'' and therefore would not be subject to routing. With
this proposal, any market participant may choose to route, as is the
case today. The Exchange proposes to replace references to ``SEEK''
within Options 5, Section 4(a) with ``FIND'' references.
SRCH Orders
    The Exchange proposes to retain the SRCH Order functionality. The
Exchange's current SRCH Order functionality is identical to SRCH Order
functionality on Phlx with the exception that BX's All-or-None Orders
must be executed in its entirety or not at all and do not rest on the
Order Book. Also, BX permits routing for all market participants. A
SRCH Order is routable at any time.
    The Exchange proposes to remove the first sentence of BX Options 5,
Section 4(a)(iii)(C). The Exchange notes that the information in that
first sentence of Options 5, Section 4(a)(iii)(C) is available within
BX Options 5, Section 4(a) and applies to SRCH Orders. Current BX
Options 5, Section 4(a)(iii)(C)(1) provides that if a SRCH Order is
received during an Opening Process it may route as part of the Opening
Cross pursuant to Options 3, Section 8(b)(7). The Exchange proposes to
replace this rule text with the following proposed rule text within new
Options 5, Section 4(a)(iii)(C), ``A SRCH Order on the Order Book
during an Opening Process (including a re-opening following a trading
halt), whether it is received prior to an Opening Process or it is a
GTC SRCH Order from a prior day, may be routed as part of an Opening
Process.'' The second sentence ``Orders initiate their own Route Timers
and are routed in the order in which their Route Timers end'' is being
retained. This proposed rule text for SRCH Orders is identical to
Phlx's rule text within Options 5, Section 4(a)(iii)(C), except for the
limitation on Phlx that only Public Customers and Professionals may
route SRCH Orders. BX will permit any market participant to route SRCH
Orders.
    Next, the Exchange proposes to insert a new Options 5, Section
4(a)(iii)(C)(1) which states, ``At the end of an Opening Process, any
SRCH Order that is priced through the Opening Price pursuant to Options
3, Section 8(a)(iii), will be cancelled, and any SRCH Order that is at
or inferior to the Opening Price will execute or book pursuant to
Options 3, Section 8(k).'' The information concerning the Opening
Process is specified within Options 3, Section 8 and is being
reiterated within this rule to describe routing during the Opening
Process. The Exchange notes that Options 3, Section 8 provides a
process whereby BX arrives at an Opening Price. The System cancels any
order or quote priced through the Opening Price which was not able to
be satisfied either by routing to an away destination or trading in
full as part of the opening trade. Specifically, the Exchange notes
that ``priced through the Opening Price'' means buying interest with a
price higher than the Opening Price and selling interest with a price
lower than the Opening Price. This rule text is similar to Phlx's rule
text within Options 5, Section 4(a)(iii)(C)(1), except that the BX rule
adds a citation to the Opening Process rule at Options 3, Section
8(a)(iii). Further, BX is establishing a sentence within Options 5,
Section 4(a)(iii)(C)(2), similar to FIND Orders, to include rule text
concerning SRCH Orders which applies generally. Phlx's rule text at
Options 5, Section 4(a)(iii)(C)(1) is not being included within BX
Options 5, Section 4(a)(iii)(C)(1), rather that rule text will be
included within proposed BX Options 5, Section 4(a)(iii)(C)(2). The
Exchange notes that the first sentence of

current BX Options 5, Section 4(a)(iii)(C)(1) is reworded within
proposed BX Options 5, Section 4(a)(iii)(C)(1).
    Similar to the FIND Order proposal, the Exchange proposes to add a
paragraph at proposed BX Options 5, Section 4(a)(iii)(C)(2) which
provides general guidelines for the behavior of SRCH Orders which apply
consistently. This proposed paragraph will allow the Exchange to more
efficiently display the various potential scenarios without repeating
certain rule text several times. The Exchange believes that describing
these scenarios in this introductory paragraph will provide a basis to
understand certain SRCH Order behaviors in certain circumstances and
eliminate the need to have these circumstances repeated throughout the
rule. Proposed BX Options 5, Section 4(a)(iii)(C)(2) provides,
    Generally, a SRCH Order will be included in the displayed BBO at
its limit price, unless the SRCH Order locks or crosses the ABBO, in
which case it will be entered into the Order Book at the ABBO price and
displayed one MPV inferior to the ABBO. If there exists a locked ABBO
when the SRCH Order is entered onto the Order Book, the SRCH Order will
be entered into the Order Book at the ABBO price and displayed one MPV
inferior to the ABBO. Once on the Order Book, the SRCH Order is
eligible for routing if it is locked or crossed by an away market. If
during a Route Timer, ABBO markets move such that the SRCH Order is no
longer marketable against the ABBO nor marketable against the BBO, the
SRCH Order will book at its limit price. If, during the Route Timer,
any new interest arrives opposite the SRCH Order that is equal to or
better than the ABBO price, the SRCH Order will trade against such new
interest at the ABBO price, unless the ABBO is improved to a price
which crosses the SRCH Order's already displayed price, in which case
the incoming order will execute at the previous ABBO price as the away
market crossed a displayed price. If the ABBO worsens but remains
better than the BBO, the SRCH Order will reprice and be re-exposed at
the new price(s) without interrupting the Route Timer. If an ABBO locks
or crosses the SRCH Order during a new Route Timer, which would
subsequently initiate at the conclusion of any Route Timer if interest
remains, the SRCH Order may route to the away market at the ABBO at the
conclusion of such Route Timer. If the SRCH Order is locked or crossed
by away quotes, it will route at the completion of the Route Timer. The
System will route and execute contracts contemporaneously at the end of
the Route Timer.
    Generally a SRCH Order will be included in the displayed BBO at its
limit price, unless the SRCH Order locks or crosses the ABBO, in which
case it will be entered into the Order Book at the ABBO price and
displayed one MPV inferior to the ABBO, similar to other routing order
types. Also, if there is a locked ABBO when the SRCH Order is entered
onto the Order Book, the SRCH Order will be entered into the Order Book
at the ABBO price and displayed one MPV inferior to the ABBO to avoid
locking the away market. The Exchange proposes to generally state,
``Once on the Order Book, the SRCH Order is eligible for routing if it
is locked or crossed by an away market.'' This provision is always true
of SRCH Orders.
    Next, the Exchange provides scenarios that generally may occur
during a Route Timer. The first scenario is if during a Route Timer,
ABBO markets move such that the SRCH Order is no longer marketable
against the ABBO nor marketable against the BBO. In this case, the SRCH
Order will book at its limit price. The next scenario is whether during
the Route Timer, any new interest arrives opposite the SRCH Order that
is equal to or better than the ABBO price, the SRCH Order will trade
against such new interest at the ABBO price, unless the ABBO is
improved to a price which crosses the SRCH Order's already displayed
price, in which case the incoming order will execute at the previous
ABBO price as the away market crossed a displayed price. If new
interest arrives that is that is equal to or better than the ABBO
price, the SRCH Order will trade at the ABBO price. If new interest
arrives that is marketable against the SRCH Order it will trade at the
ABBO price unless the ABBO is improved to a price which crosses the
SRCH Order's already displayed price, in which case the incoming order
will execute at the previous ABBO price as the away market crossed a
displayed price. This last sentence within proposed BX Options 5,
Section 4(a)(iii)(C)(4) makes clear that the SRCH Order would execute
at the previous ABBO price as the away market crossed a displayed
price. Better priced incoming interest will execute against the SRCH
Order, unless the ABBO crosses the SRCH Order, in which case any new
interest will execute at the SRCH Order price. In this scenario, BX's
price was already displayed when an away market subsequently crossed
BX's displayed price. If the ABBO worsens but remains better than the
BBO, the SRCH Order will reprice and be re-exposed at the new price(s)
without interrupting the Route Timer. Also, if an ABBO locks or crosses
the SRCH Order during a new Route Timer, which would subsequently
initiate at the conclusion of any Route Timer if interest remains, the
SRCH Order may route to the away market at the ABBO at the conclusion
of such Route Timer, each time. Finally, if the SRCH Order is locked or
crossed by away quotes, it will route at the completion of the Route
Timer. The Exchange notes that the System will route and execute
contracts contemporaneously at the end of the Route Timer. The last two
sentences of this proposed rule are similar to the current last
sentence of BX Options 5, Section 4(a)(iii)(C)(4). The sentences in
this paragraph are currently within the Phlx SRCH Rule at Options 5,
Section 4(a)(iii)(C). The Exchange notes below where the sentences
within proposed BX Options 5, Section 4(a)(iii)(C)(2) are located
within the current Phlx rule.
    The Exchange proposes to provide rule text at proposed BX Options
5, Section 4(a)(iii)(C)(3) which is similar to Phlx Options 5, Section
4(a)(iii)(C)(2). This paragraph explains what happens to a SRCH Order
that is not marketable against the BBO or the ABBO. The SRCH Order
would be entered into the Order Book. BX proposes to state that the
SRCH Order is entered at its limit price to provide greater detail.
This detail is not currently within the Phlx rule text, but applies to
Phlx as well. Once on the Order Book, the SRCH Order may route if it is
locked or crossed by an away market.

Proposed BX Options 5, Section 4(a)(iii)(C)(4) provides,

    A SRCH Order received after an Opening Process that is marketable
against the BBO when the ABBO is inferior to the BBO will be traded on
the Exchange at or better than the BBO price. If the SRCH Order has
size remaining after exhausting the BBO, it may: (1) Trade at the next
BBO price (or prices) if the order price is locking or crossing that
price (or prices) up to and including the ABBO price, and/or (2) be
routed, subject to a Route Timer, to away markets if all BX interest at
better or equal prices has been exhausted, and/or (3) be entered into
the Order Book at its limit price if not locking or crossing the BBO or
the ABBO.
    This proposed rule text represents a scenario where the SRCH Order
is received after an Opening Process and is marketable against the BBO
when the ABBO is inferior to the BBO. In this case the SRCH Order would
be traded at or better than the BBO price. If size remains, the
Exchange describes the

various potential scenarios, the SRCH Order may: (1) Trade at the next
BBO price (or prices) if the order price is locking or crossing that
price (or prices) up to and including the price equal to the ABBO
price, and/or (2) be routed, subject to a Route Timer, to away markets
if all BX interest at better or equal prices has been exhausted, and/or
(3) be entered into the Order Book at its limit price if not locking or
crossing the BBO or the ABBO. These scenarios are not currently
contained in the BX rule text and will bring greater transparency to
the rule. This rule text is similar to Phlx Options 5, Section
4(a)(iii)(C)(3), except that Phlx has references to All-or-None Orders,
which are non-displayed orders on Phlx and different than BX's All-or-
None Orders, which execute immediately or cancel. Also, the final
sentence from Phlx Options 5, Section 4(a)(iii)(C)(3), ``Once on the
Order Book, the SRCH Order is eligible for routing if it is locked or
crossed by an away market,'' appears in proposed BX Options 5, Section
4(a)(iii)(C)(2), which generally describes SRCH Orders.

Proposed BX Options 5, Section 4(a)(iii)(C)(5) provides,

    A SRCH Order received after an Opening Process that is marketable
against the BBO when the ABBO is equal to the BBO will be traded on the
Exchange at the BBO. If the SRCH Order has size remaining after
exhausting the BBO, it will initiate a Route Timer and expose the SRCH
Order at the ABBO to allow participants and other market participants
an opportunity to interact with the remainder of the SRCH Order. During
the Route Timer, the SRCH Order will be included in the BBO at a price
one MPV away from the ABBO.
    This proposed paragraph describes a scenario that is currently not
provided for within BX's rule. This scenario explains when a SRCH
Order, received after the Opening Process, is marketable against the
BBO when the ABBO is equal to the BBO. In this case the SRCH Order will
be traded at the BBO price. If size remains, it will start a Route
Timer and expose the SRCH Order at the ABBO and display the SRCH Order
one MPV away from the ABBO so as not to lock the away market. During
the Route Timer the SRCH Order will be included in the BBO at a price
one MPV away from the ABBO. The proposed paragraph is similar to Phlx
Options 5, Section 4(a)(iii)(C)(4). The Exchange notes that the
sentences which provided, ``If, during the Route Timer, any new
interest arrives opposite the SRCH Order that is equal to or better
than the ABBO price, the SRCH Order will trade against such new
interest at the ABBO price'' is contained within proposed BX Options 5,
Section 4(a)(iii)(C)(2), which generally describes SRCH Orders.

Proposed BX Options 5, Section 4(a)(iii)(C)(6) provides,

    If, at the end of the Route Timer pursuant to subparagraph (5)
above, the SRCH Order is still marketable with the ABBO, the SRCH Order
will route to an away market up to a size equal to the lesser of
either: (1) The away markets' size, or (2) the remaining size of the
SRCH Order. If the SRCH Order still has remaining size after routing,
it may: (i) Trade at the next BBO price (or prices) if the order price
is locking or crossing that price (or prices) up to the ABBO price,
and/or (ii) be entered into the Order Book at its limit price if not
locking or crossing the BBO or the ABBO.
    The Exchange proposes to note what occurs at the end of the Route
Timer in paragraph (5) within proposed BX Options 5, Section
4(a)(iii)(C)(6). If the SRCH Order is still marketable with the ABBO,
the SRCH Order will route up to a size equal to the lesser of either:
(1) The away markets' size, or (2) the remaining size of the SRCH
Order. If the SRCH Order still has remaining size after such routing,
it may: (i) Trade at the next BBO price (or prices) if the order price
is locking or crossing that price (or prices) up to the ABBO price,
and/or (ii) be entered into the Order Book at its limit price if not
locking or crossing the BBO or the ABBO. As mentioned also during the
Opening Process, once on the Order Book, the SRCH Order is eligible for
routing if it is locked or crossed by an away market. The Exchange
believes that noting each potential scenario within the SRCH Order rule
text will provide market participants with clarity as to the expected
System handling. This rule text is similar to Phlx Options 5, Section
4(a)(iii)(C)(4). Three sentences within the Phlx rule were copied to
proposed BX Options 5, Section 4(a)(iii)(C)(2) and are therefore
applicable to this paragraph. Also, BX and Phlx All-or None Order types
differ.

The Exchange proposes to delete current Options 5, Section
4(a)(iii)(C)(2) and (3) and replace that language with similar text
within proposed BX Options 5, Section 4(a)(iii)(C)(7) which provides,

    A SRCH Order received after an Opening Process that is marketable
against the ABBO when the ABBO is better than the BBO will initiate a
Route Timer, and expose the SRCH Order at the ABBO to allow
participants and other market participants an opportunity to interact
with the SRCH Order. If during the Route Timer, the ABBO markets move
such that the SRCH Order is no longer marketable against the ABBO, it
may: (i) Trade at the next BBO price (or prices) if the SRCH Order
price is locking or crossing that price (or prices), and/or (ii) be
entered into the Order Book at its limit price if not locking or
crossing the BBO.
    The first sentence of this proposed rule is the same as the last
sentence of current BX Options 5, Section 4(a)(iii)(C)(1). In this
scenario, the SRCH Order is received after the Opening Process and is
marketable against the ABBO when the ABBO is better than the BBO. A
Route Timer will initiate and expose the SRCH Order at the ABBO to
provide an opportunity to trade with the SRCH Order. If during the
Route Timer, the ABBO markets move such that the SRCH Order is no
longer marketable against the ABBO a few scenarios are possible: The
SRCH Order may: (i) Trade at the next BBO price (or prices) if the SRCH
Order price is locking or crossing that price (or prices), and/or (ii)
be entered into the Order Book at its limit price if not locking or
crossing the BBO. This rule text is identical to Phlx Options 5,
Section 4(a)(iii)(C)(6). The remainder of the rule text within Phlx
Options 5, Section 4(a)(iii)(C)(6) appears in proposed BX Options 5,
Section 4(a)(iii)(C)(2), which generally describes SRCH Orders.

Proposed BX Options 5, Section 4(a)(iii)(C)(8) provides,

    If, at the end of the Route Timer pursuant to subparagraph (7)
above, the ABBO is still the best price and is marketable with the SRCH
Order, the order will route to the away market(s) whose disseminated
price(s) is better than the BBO, up to a size equal to the lesser of
either: (1) The away markets' size, or (2) the remaining size of the
SRCH Order. If the SRCH Order still has remaining size after such
routing, it may: (i) Trade at the next BBO price (or prices) if the
order price is locking or crossing that price (or prices) up to the
ABBO price, and/or (ii) be entered into the Order Book at its limit
price if not locking or crossing the BBO or the ABBO.
    This scenario considers what is possible at the end of the Route
Timer within proposed BX Options 5, Section 4(a)(iii)(C)(7). If the
ABBO is still at the best price and is marketable with the SRCH Order,
the order will route to the away market with a price that is better
than the BBO, up to a size equal to the lesser of either: (1) The away
markets' size, or (2) the remaining size of the SRCH Order. If the SRCH
Order still has

remaining size after such routing, there are various possibilities, the
SRCH Order may: (i) Trade at the next BBO price (or prices) if the
order price is locking or crossing that price (or prices) up to the
ABBO price, and/or (ii) be entered into the Order Book at its limit
price if not locking or crossing the BBO or the ABBO. As is the case
with SRCH Orders, once on the Order Book, the SRCH Order is eligible
for routing if it is locked or crossed by an away market. This rule
text is the same as Phlx Options 5, Section 4(a)(iii)(C)(7), except for
the final sentence which states, ``Once on the Order Book, the SRCH
Order is eligible for routing if it is locked or crossed by an away
market'' and the mention of All-or-None Orders.
    The Exchange does not propose to replicate Phlx Options 5, Section
4(a)(iii)(C)(8) because the paragraph is repetitive of the first
sentence of proposed BX Options 5, Section 4(a)(iii)(C)(8) and the last
sentence of proposed BX Options 5, Section 4(a)(iii)(C)(4).
Notwithstanding the foregoing, the Exchange does propose to relocate a
sentence from Phlx Options 5, Section 4(a)(iii)(C)(8) into BX Options
5, Section 4(a)(iii)(C)(2) which provides, ``If an ABBO locks or
crosses the SRCH Order during a new Route Timer, which would
subsequently initiate at the conclusion of any Route Timer if interest
remains, the SRCH Order may route to the away market at the ABBO at the
conclusion of such Route Timer.'' The Exchange does not propose to
replicate Phlx Options 5, Section 4(a)(iii)(C)(9) because this
paragraph replicates proposed BX Options 5, Section 4(a)(iii)(C)(7).
    Proposed BX Options 5, Section 4(a)(iii)(C)(9) provides, ``A SRCH
Order that is routed to an away market(s) will be marked as an ISO and
designated as an IOC Order.'' This sentence is identical to Phlx
Options 5, Section 4(a)(iii)(C)(10). This paragraph, which is currently
not contained in BX's rule, represents existing System functionality.
Describing the manner in which an IOC Order will be marked will provide
greater transparency to the Exchange's current rule.
Implementation
    The Exchange intends to begin implementation of the proposed rule
change prior to October 30, 2020. The Exchange will issue an Options
Trader Alert to Members to provide notification of the symbols that
will migrate and the relevant dates.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act, in general, and furthers the objectives of Section
6(b)(5) of the Act, in particular, in that it is designed to promote
just and equitable principles of trade and to protect investors and the
public interest. The Exchange's proposal to adopt a routing strategy
similar to Phlx with respect to FIND Orders and remove SEEK Orders will
provide BX Participants the same flexibility for routing orders that is
afforded to Phlx members today.
    With respect to the SRCH feature, the Exchange is adding more
detail to its routing rule to provide market participants with greater
transparency. The Exchange believes the added scenarios will provide
more context to routing in general and for the specific routing
strategies for the benefit of investors and the public interest. The
Exchange continues to offer various choices to its market participants
with respect to routing. A Participant may elect either (1) to not
route their orders and mark those orders ``DNR''; or (2) to route their
orders. If a Participant elects to route their orders, then a
Participant may select to mark their orders as ``FIND'' or ``SRCH''
Orders, as proposed herein. A FIND Order, similar to a SEEK Order, is
not eligible for routing until the next time the option series is
subject to a new Opening Process. The FIND Order would route once and
then post to the Order Book. A SRCH Order may route during and after an
Opening Process. A SRCH Order on the Order Book may be routed to an
away market if it is locked or crossed by an away market. With respect
to the addition of FIND Orders, the Exchange proposes various scenarios
related to FIND Orders to account for various routing scenarios, as is
the case today with respect to SEEK Orders. Various scenarios are also
proposed to explain System functionality in locked and crossed markets.
The Exchange also accounts for scenarios both during and after the
Opening Process. The Exchange notes that it is consistent with the Act
to account for the behavior of FIND Orders with respect to locked and
crossed markets. The Exchange will not trade-through an away market's
price. This behavior is consistent with the protection of investors and
the general public because it affords Participants the ability to
obtain the best price offered among the various options markets.
    There are two distinctions in the Phlx rules which BX is not
adopting. First, All-or-None Orders are handled differently in the
System by Phlx and BX. Phlx All-or-None Orders are permitted to rest on
the Order Book while BX All-or-None Orders must be executed in its
entirety or not at all and do not rest on the Order Book. Because BX's
All-or-None Orders do not rest on the Order Book, the treatment of such
orders would be different on the two markets (Phlx and BX) and
therefore it is consistent with the Act for BX to align its treatment
of order types within the routing rule with its treatment of those
orders pursuant to BX Options 3, Section 7. Second, the Exchange is not
adopting the distinction on Phlx which permits routing for Public
Customer and Professional SRCH Orders. The Exchange believes it is
consistent with the Act to not limit routing for any market
participant. BX's proposal would allow all market participants to
route. Participants would have the ability to elect to route orders to
away markets to obtain the best price, while also accessing Phlx's
Order Book. The Exchange believes that offering Participants the
ability to route enables a Participant to obtain an execution on any
market, provided the order is marketable, without the need to cancel
the order and submit it anew.
DNR Orders
    The Exchange's proposal to amend Options 5, Section 4(a)(iii)(A),
related to DNR Orders, to conform the text within BX to that of Phlx is
consistent with the Act and should bring greater clarity to the rule
text. The Exchange's proposed amendments to Options 5, Section
4(a)(iii)(A), relating to DNR Orders, align the rule text with Phlx's
Rule. The proposed rule text does not result in a System change, rather
the text is intended to bring greater clarity to the current System
operation.
    The Exchange's proposal to amend the sentence within Options 5,
Section 4(a)(iii)(A), related to DNR Orders which provides, ``Any
incoming order interacting with such a resting DNR order will execute
at the ABBO price, unless the ABBO is improved to a price which crosses
the DNR's displayed price, in which case the incoming order will
execute at the previous ABBO price,'' is consistent with the Act. The
Exchange proposes to amend this rule text to clarify the current rule
text and add another scenario that is not currently within the rule
text. The Exchange proposes to state, ``Any incoming order interacting
with such a resting DNR order will execute at the ABBO price, unless
(1), the ABBO is improved to a price which crosses the DNR Order's
already displayed price, in which case the incoming order will execute
at the previous ABBO price as the away market crossed a displayed
price; or (2) the ABBO is improved to a price which locks the DNR
Order's

displayed price, in which case the incoming order will execute at the
DNR Order's displayed price.'' The System would not take into account
the away market order or quote which crossed the DNR's displayed price.
The Exchange is not trading-through an away market in this scenario,
rather an away market is crossing BX's displayed market and therefore
that market has the obligation not to trade-through BX's displayed
price. The Exchange is also adding a scenario where the ABBO is
improved to a price which locks the DNR's displayed price. In this
added scenario, the incoming order will execute at the DNR's displayed
price. The Exchange notes that this scenario is not contained in the
current rule text. Adding this scenario is consistent with the Act
because it will bring greater transparency to the routing rule and
inform members about this potential outcome if a member elects to mark
their order as DNR.
    Additionally, amending a sentence, within Options 5, Section
4(a)(iii)(A), to provide, ``Should the best away market move to an
inferior price level, the DNR Order will automatically re-price from
its one MPV inferior to the original ABBO and display one MPV away from
the new ABBO or its original limit price, and expose such orders at the
new ABBO only if the repriced order locks or crosses the new ABBO'' is
consistent with the Act because the additional language expands on the
current re-pricing that exists today. The Exchange believes that this
language provides more context to the manner in which a DNR Order will
be handled by the Exchange's System. The Exchange believes that this
additional rule text is consistent with the Act as the DNR Order would
re-price again from its one MPV inferior to the original ABBO because
the best away market moved to an inferior price level. The DNR Order
would display one MPV away from the new ABBO price or its original
limit price. Also, the DNR Order would expose such orders at the new
ABBO. Once booked at its original limit price, it will remain on the
Order Book at that price until executed or cancelled. Providing this
additional transparency will assist members in determining if they want
their orders routed.
    The remaining rule text amendments are non-substantive and makes
technical changes.
SRCH Orders
    The Exchange's proposal to add more scenarios for SRCH Order
functionality on BX is consistent with the Act. Today, BX's current
SRCH Order functionality is identical to SRCH Order functionality on
Phlx, with the exception that All-or-None Orders must be executed in
its entirety or not at all and do not rest on the Order Book. BX
permits routing for all market participants, unlike Phlx which limits
routing to Public Customers and Professionals. The Exchange's proposal
to include all potential scenarios will bring greater transparency to
the Exchange's Rules. Within this rule, the Exchange accounts for
various scenarios to explain System functionality in locked and crossed
markets, particularly during a Route Timer. The Exchange also accounts
for scenarios both during and after the Opening Process. The Exchange
notes that it is consistent with the Act to account for the behavior of
SRCH Orders with respect to locked and crossed markets. The Exchange
will not trade-through an away market's price. This behavior is
consistent with the protection of investors and the general public
because it affords Participants the ability to obtain the best price
offered among the various options markets.

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 adopt a routing strategy, similar to
Phlx, with respect to FIND Orders and remove SEEK Orders does not
impose an undue burden on intermarket competition. This proposal will
provide BX Participants the same choices with respect to routing that
is afforded to Phlx members today. Also, the proposed routing rules
apply to all market participants including routing during an Opening
Process.
    The Exchange believes that adding greater detail to its rules does
not impose an undue burden on intramarket competition, rather it
provides greater transparency as to the potential outcomes when
utilizing different routing strategies with respect to SRCH Orders. The
substitution of FIND Orders for SEEK Orders allows Participants to
continue to have choices as to the manner in which they route orders,
if they elect to route, as Phlx. Market participants may elect not to
route their orders.

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 and
subparagraph (f)(6) of Rule 19b-4 thereunder.
    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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-BX-2020-014 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-BX-2020-014. 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
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-BX-
2020-014 and should be submitted on or before August 12, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15845 Filed 7-21-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: June 8, 2010 (Volume 75, Number 109)]
[Notices]
[Page 32519-32523]
[DOCID:fr08jn10-155]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62205; File No. SR-FINRA-2010-024]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt
FINRA Rule 4210 (Margin Requirements), FINRA Rule 4220 (Daily Record of
Required Margin) and FINRA Rule 4230 (Required Submissions for Requests
for Extensions of Time Under Regulation T and SEC Rule 15c3-3) in the
Consolidated FINRA Rulebook

June 2, 2010.
    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 May 14, 2010, Financial Industry Regulatory

Authority, Inc. (``FINRA'') (f/k/a National Association of Securities
Dealers, Inc. (``NASD'')) 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 FINRA. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to adopt (1) NASD Rules 2520, 2521, 2522, and
IM-2522 regarding margin requirements, (2) NASD Rule 3160 regarding
extension of time requests under Regulation T and SEC Rule 15c3-3, and
(3) Incorporated NYSE Rule 432(a) regarding daily record of margin
requirements as FINRA rules in the consolidated FINRA rulebook, subject
to certain amendments, and to delete Incorporated NYSE Rule 431 (Margin
Requirements), Incorporated NYSE Rule 431 Interpretations,\3\
Incorporated NYSE Rule 432(b) and Incorporated NYSE Rule 434 (Required
Submissions of Requests for Extension of Time for Customers). The
proposed rule change would (1) Consolidate and renumber NASD Rules
2520, 2521, 2522 and IM-2522 as FINRA Rule 4210 (Margin Requirements),
(2) renumber NASD Rule 3160 as FINRA Rule 4230 (Required Submissions
for Requests for Extensions of Time Under Regulation T and SEC Rule
15c3-3), and (3) renumber Incorporated NYSE Rule 432(a) as FINRA Rule
4220 (Daily Record of Required Margin) in the consolidated FINRA
rulebook.
---------------------------------------------------------------------------

    \3\ Assuming SEC approval of the proposed rule change, FINRA
expects to maintain the Incorporated NYSE Rule 431 Interpretations
as interpretations to FINRA Rule 4210.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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
    As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\4\ FINRA is proposing to adopt (1)
NASD Rules 2520, 2521, 2522, and IM-2522 regarding margin requirements,
(2) NASD Rule 3160 regarding extension of time requests under
Regulation T and SEC Rule 15c3-3, and (3) Incorporated NYSE Rule 432(a)
regarding daily record of margin requirements as FINRA rules in the
Consolidated FINRA Rulebook, subject to certain amendments, and to
delete Incorporated NYSE Rule 431 (Margin Requirements), Incorporated
NYSE Rule 431 Interpretations,\5\ Incorporated NYSE Rule 432(b) and
Incorporated NYSE Rule 434 (Required Submissions of Requests for
Extension of Time for Customers). The proposed rule change would (1)
consolidate and renumber NASD Rules 2520, 2521, 2522 and IM-2522 as
FINRA Rule 4210 (Margin Requirements), (2) renumber NASD Rule 3160 as
FINRA Rule 4230 (Required Submissions for Requests for Extensions of
Time Under Regulation T and SEC Rule 15c3-3), and (3) renumber
Incorporated NYSE Rule 432(a) as FINRA Rule 4220 (Daily Record of
Required Margin) in the Consolidated FINRA Rulebook.
---------------------------------------------------------------------------

    \4\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see FINRA Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
    \5\ See supra note 3.
---------------------------------------------------------------------------

Margin Requirements--NASD Rules 2520, 2521, 2522, and IM-2522 and
Incorporated NYSE Rule 431
    FINRA proposes to adopt the margin requirements set forth in NASD
Rules 2520 through 2522 and IM-2522 as FINRA Rule 4210, subject to
certain amendments, discussed below and to delete Incorporated NYSE
Rule 431 (Margin Requirements). The proposed amendments, among other
things, reflect certain requirements in Incorporated NYSE Rule 431.
    NASD Rule 2520 (Margin Requirements) and Incorporated NYSE Rule
431, which are almost identical, prescribe requirements governing the
extension of credit by members that offer margin accounts to customers,
as generally permitted in accordance with Regulation T of the Board of
Governors of the Federal Reserve System (``Regulation T'').\6\ These
rules promulgate the margin requirements that determine the amount of
collateral customers are expected to maintain in their margin accounts,
including strategy-based margin accounts and portfolio margin accounts.
Maintenance margin requirements for equity, fixed income, warrants and
option securities also are established under these rules.
---------------------------------------------------------------------------

    \6\ See Regulation T Section 220.4.
---------------------------------------------------------------------------

Rule Structure
    FINRA proposes to combine NASD Rules 2520, 2521, 2522 and IM-2522
into the single consolidated margin rule, FINRA Rule 4210. In addition,
FINRA proposes to re-structure the rule to improve its organization and
make it easier to read. First, FINRA proposes to incorporate NASD Rule
2521 (Margin--Exemption for Certain Members) as FINRA Rule 4210(h),
which provides that any member for which another self-regulatory
organization acts as the designated examining authority is exempt from
FINRA Rule 4210. Second, FINRA proposes to incorporate NASD Rule 2522
(Definitions Related to Options, Currency Warrants, Currency Index
Warrants and Stock Index Warrant Transactions) as FINRA Rule
4210(f)(2)(A), which contains definitions regarding margining options,
currency warrants, currency index warrants and stock index warrant
transactions.\7\ In so doing, FINRA proposes to delete extraneous
definitions and retain only those definitions that are pertinent to the
new rule. Third, FINRA proposes to combine the margin provisions
regarding currency warrants, currency index warrants and stock index
warrants from NASD Rule 2520(f)(10) together with similar sections in
paragraph (f)(2) of FINRA Rule 4210. All margin provisions regarding
such warrants were combined in a single section in corresponding
Incorporated NYSE Rule 431(f)(2), and FINRA proposes to follow this
model. FINRA believes combining all provisions in a single section
regarding such warrants will make the rule easier to read. Finally,
FINRA proposes to incorporate NASD IM-2522 (Computation of Elapsed
Days) as Supplementary Material to FINRA Rule

4210, which provides illustrations on how to calculate the number of
elapsed days for accrued interest on Treasury bonds or notes.
---------------------------------------------------------------------------

    \7\ In this regard, FINRA proposes to adopt the model of
Incorporated NYSE Rule 431 of consolidating relevant definitions
into FINRA Rule 4210.
---------------------------------------------------------------------------

Net Capital Calculations
    FINRA proposes in several instances in FINRA Rule 4210 \8\ to
specify that the member should reference SEC Rule 15c3-1 and, if
applicable, FINRA Rule 4110 (Capital Compliance) when calculating net
capital, charges against net capital and haircut requirements. Members
that may be subject to greater net capital requirements pursuant to
FINRA Rule 4110 would need to ensure they are in compliance with both
the SEC and FINRA net capital provisions in calculating net capital and
its impact on margin calculations. In addition, consistent with the
corresponding Incorporated NYSE Rule 431 requirements, FINRA proposes
to provide in FINRA Rule 4210(e)(5)(A) and (B) (regarding specialists'
and market makers' accounts), (e)(6)(A) (regarding broker-dealer
accounts) and (e)(6)(B)(i)c. (regarding joint back office arrangements)
that when computing charges against net capital for transactions in
securities covered by FINRA Rule 4210(e)(2)(F) (regarding transactions
with exempt accounts involving certain ``good faith'' securities) and
FINRA Rule 4210(e)(2)(G) (regarding transactions with exempt accounts
involving highly rated foreign sovereign debt securities and investment
grade debt securities), absent a greater haircut requirement that may
have been imposed on such securities pursuant to FINRA Rule 4110(a),
the respective requirements of those paragraphs may be used, rather
than the haircut requirements of SEC Rule 15c3-1.
---------------------------------------------------------------------------

    \8\ See, e.g., FINRA Rule 4210(e)(2)(D), (e)(2)(F), (e)(2)(G),
(e)(4), (e)(5) and (e)(6). Incorporated NYSE Rule 431 referenced
NYSE's net capital rules in these same sections, and FINRA proposes
to follow this model.
---------------------------------------------------------------------------

Joint Accounts Exemption
    FINRA proposes to integrate Incorporated NYSE Rule 431
Supplementary Material .10 into FINRA Rule 4210(e)(3) regarding joint
accounts in which the carrying member or a partner or stockholder
therein has an interest. The provision permits a member to seek an
exemption under the FINRA Rule 9600 Series if the account is confined
exclusively to transactions and positions in exempted securities. The
proposed rule change would provide that any such application shall
include the complete description of the security; cost price, offering
price and principal amount of obligations which have been purchased or
may be required to be purchased; the date on which the security is to
be purchased or on which there will be a contingent commitment to
purchase the security; the approximate aggregate indebtedness; the
approximate net capital; and the approximate total market value of all
readily marketable securities (1) exempted and (2) non-exempted, held
in member accounts, partners' capital accounts, partners' individual
accounts covered by approved agreements providing for their inclusion
as partnership property, accounts covered by subordination agreements
approved by FINRA and customers' accounts in deficit.
Additional Requirements on Control and Restricted Securities and
Relationship to FINRA Rule 4120 (Regulatory Notification and Business
Curtailment)
    FINRA proposes to adopt provisions from Incorporated NYSE Rule 431
pertaining to deductions from net capital on control and restricted
securities, which are not contained in NASD Rule 2520.\9\ These
provisions, which would be set forth in FINRA Rule 4210(e)(8)(C)(ii),
(iii) and (v), require that a member make deductions from its net
capital if it extends credit over specified thresholds, discussed
below, on control and restricted securities, and it must take such
deductions into account when determining if it has reached any of the
financial triggers specified in FINRA Rule 4120.\10\ The proposed rule
change also would make conforming amendments to FINRA Rule
4120(a)(1)(F) and (c)(1)(F) (Regulatory Notification and Business
Curtailment) to clarify that a member must take into account the
special deductions from net capital set forth in FINRA Rule
4210(e)(8)(C) in determining its status under FINRA Rule 4120. The
margin provision specifically provides that the greater of the
aggregate credit agreed to be extended in writing or the aggregate
credit that is actually extended to all customers on control and
restricted securities of any one issue that exceeds 10 percent of the
member's excess net capital shall be deducted from net capital for
purposes of determining a member's status under FINRA Rule 4120. The
amount of such aggregate credit extended, which has been deducted in
computing net capital under SEC Rule 15c3-1 and, if applicable, FINRA
Rule 4110(a), need not be included in this calculation. FINRA, upon
written application, may reduce the deduction to net capital under
FINRA Rule 4120 to 25 percent of such aggregate credit extended that
exceeds 10 percent but is less than 15 percent of the member's excess
net capital. In addition, the aggregate credit extended to all
customers on all control and restricted securities (reduced by the
amount of such aggregate credit which has been deducted in computing
net capital under SEC Rule 15c3-1 and, if applicable, FINRA Rule
4110(a)), shall be deducted from net capital on the following basis for
purposes of determining a member's status under FINRA Rule 4120. First,
to the extent such net amount of credit extended does not exceed 50
percent of a member's excess net capital, 25 percent of such net amount
of credit extended shall be deducted. Second, 100 percent of such net
amount of credit extended which exceeds 50 percent of a member's excess
net capital shall be deducted. The amount to be deducted from net
capital for purposes of determining a member's status under Rule 4120
shall not exceed 100 percent of the aggregate credit extended reduced
by any amount deducted in computing net capital under SEC Rule 15c3-1
and, if applicable, Rule 4110(a).
---------------------------------------------------------------------------

    \9\ See Incorporated NYSE Rule 431(e)(8)(C)(ii), (iii) and (v).
    \10\ FINRA Rule 4120 is based on Incorporated NYSE Rules 325 and
326, which were referenced in Incorporated NYSE Rule
431(e)(8)(C)(ii), (iii) and (v). FINRA Rule 4120 requires carrying
and clearing members to notify FINRA if any of the specified
financial triggers in FINRA Rule 4120 are reached. The rule also
addresses circumstances under which a member would be prohibited
from expanding its business or required to reduce its business.
---------------------------------------------------------------------------

Day Trading
    FINRA proposes to adopt Supplementary Material .30 and .60 from
Incorporated NYSE Rule 431 regarding day trading in proposed FINRA Rule
4210(f)(8)(B). FINRA proposes to integrate Supplementary Material .60
from Incorporated NYSE Rule 431 in FINRA Rule 4210(f)(8)(B)(iii) to
provide that the day-trading buying power for non-equity securities may
be computed using the applicable special maintenance margin
requirements pursuant to other provisions of the margin rule. In
addition, FINRA proposes to adopt Supplementary Material .30 from
Incorporated NYSE Rule 431 as FINRA Rule 4210(f)(8)(B)(iv)b. to provide
that in the event that the member at which a customer seeks to open an
account or resume day trading in an existing account, knows or has a
reasonable basis to believe that the customer will engage in pattern
day trading, then the minimum equity required ($25,000) must be
deposited in the account prior to commencement of day trading. FINRA
also proposes to relocate

paragraph (f)(8)(C) of NASD Rule 2520 into FINRA Rule
4210(f)(8)(B)(iii) that specifies that day trading deficiencies must be
met within five business days of the trade date.
Portfolio Margining
    FINRA proposes to amend FINRA Rule 4210(g)(5) to highlight to
members that portfolio margin-eligible participants, in addition to
being required to be approved to engage in uncovered short option
contracts pursuant to FINRA Rule 2360, must be approved to engage in
security futures transactions pursuant to FINRA Rule 2370.
Conforming Amendments
    FINRA proposes to add the terms ``approved market maker,'' ``market
maker'' and ``market making'' to FINRA Rule 4210(f)(10)(F) to conform
to rule changes made by the NYSE.\11\ The NYSE changes were made in
connection with the operation of the NYSE's Market Model.\12\ As a
result of the implementation of these changes, the NYSE amended several
of its rules, including NYSE Rule 431(f)(10)(F), to add the terms
``approved market maker,'' ``market maker'' and ``market making'' to
reflect the current DMMs operating on the NYSE. FINRA also proposes
amending the definitions of the same terms used in FINRA Rule
4210(e)(5)(A) and (f)(10)(E) for consistency purposes.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 59077 (December 10,
2008), 73 FR 76691 (December 17, 2008) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change by New York Stock
Exchange LLC Amending Exchange Rule 104T to Make a Technical
Amendment to Delete Language Relating to Orders Received by NYSE
Systems and DMM Yielding; Clarifying the Duration of the Provisions
of Rule 104T; Making Technical Amendments to Rule 98 and Rule 123E
to Update Rule References for DMM Net Capital Requirements;
Rescinding Paragraph (g) of Rule 123; and Making Conforming Changes
to Certain Exchange Rules to Replace the Term ``Specialist'' with
``DMM''; File No. SR-NYSE-2008-127).
    \12\ See Securities Exchange Act Release No. 58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SEC Approval Order of SR-
NYSE-2008-46 approving certain rules to operate as a pilot scheduled
to end October 1, 2009); see also Securities Exchange Act Release
No. 60756 (October 1, 2009), 74 FR 51628 (October 7, 2009) (SR-NYSE-
2009-100); Securities Exchange Act Release No. 61031 (November 19,
2009), 74 FR 62368 (November 27, 2009); and Securities Exchange Act
Release No. 61724 (March 17, 2010), 75 FR 14221 (March 24, 2010)
(extending the operation of the pilot until the earlier of the SEC
approval to make permanent or September 30, 2010). As part of this
new model, the functions formerly carried out by specialists on the
NYSE were replaced by a new market participant, known as a
Designated Market Maker (``DMM'').
---------------------------------------------------------------------------

Clarifying and Technical Amendments
    Finally, FINRA proposes to make several technical changes to the
margin rule text to update terminology and similar clarifications.
First, FINRA proposes to add definitions to FINRA Rule 4210(f)(2)(A)
regarding ``listed'' and ``OTC'' options and employ such terms
throughout FINRA Rule 4210(f)(2).\13\ FINRA is not proposing any
substantive changes to the margin requirements for listed or over-the-
counter options; rather, the proposed rule change would make the rule
easier to read by creating such definitions and using the terms
consistently throughout the rule text.
---------------------------------------------------------------------------

    \13\ The term ``listed'' as used with reference to a call or put
option contract would mean an option contract that is traded on a
national securities exchange and issued and guaranteed by a
registered clearing agency. The term ``OTC'' as used with reference
to a call or put option contract would mean an over-the-counter
option contract that is not traded on a national securities exchange
and is issued and guaranteed by the carrying broker-dealer.
Accordingly, the proposed rule change would delete as unnecessary
certain descriptive references in NASD Rule 2520(f)(2) to listed and
OTC options.
---------------------------------------------------------------------------

    Second, in proposed FINRA Rule 4210(f)(2)(I)(iv), FINRA proposes
several clarifications to terminology where no margin may be required
if the specified options or warrants are carried ``short'' in the
account of a customer, against an escrow agreement, and either are held
in the account at the time the options or warrants are written, or
received in the account promptly thereafter. The proposed rule change
would clarify that with respect to such options or warrants, an escrow
agreement is used, in a form satisfactory to FINRA, issued by a third
party custodian bank or trust company, and in compliance with the
requirements of Rule 610 of The Options Clearing Corporation. The
corresponding provisions in Incorporated NYSE Rule 431\14\ used the
terms ``letter of guarantee'' and ``escrow receipt'' while NASD Rule
2520 used the term ``letter of guarantee.'' While in this context such
terms generally were used interchangeably, FINRA proposes to use the
term ``escrow agreement'' to eliminate any potential confusion.\15\ The
proposed rule change also would replace the term ``guarantor'' with the
term ``custodian'' to more accurately reflect the third party's role.
In addition, the proposed rule change would revise the definition of
what constitutes a qualified security by eliminating the reference to
the list of Over-the-Counter Margin Stocks published by the Board of
Governors of the Federal Reserve System as the Federal Reserve no
longer publishes such a list.
---------------------------------------------------------------------------

    \14\ See Incorporated NYSE Rule 431(f)(2)(H)(iv).
    \15\ Such approach also is consistent with the CBOE rules. See
CBOE Rule 12.3(d).
---------------------------------------------------------------------------

    Third, the proposed rule change would insert the term ``aggregate''
before exercise price throughout proposed FINRA Rule 4210(f)(2)(H) and
(f)(2)(N) to clarify a calculation must be made in the strategies and
spreads that are noted (i.e., offsets, reverse conversions, butterfly
spread, etc.). Finally, the proposed rule change would make various
non-substantive changes to reflect the formatting, presentation and
style conventions used in the Consolidated FINRA Rulebook.
Daily Record of Margin Requirements--Incorporated NYSE Rule 432(a)
    FINRA proposes to adopt Incorporated NYSE Rule 432(a) (Daily Record
of Required Margin) as FINRA Rule 4220 in substantially the form it
exists today. Incorporated NYSE Rule 432(a) sets forth the requirements
for daily recordkeeping of initial and maintenance margin calls that
are issued pursuant to Regulation T and the margin rules. There is no
corresponding NASD rule. FINRA believes that this is an important
requirement to heighten FINRA's ability to monitor members' margin call
practices. In addition, Incorporated NYSE Rule 432(b) prohibits a
member from allowing a customer to make a practice of satisfying
initial margin calls by the liquidation of securities. However, this
provision is substantially similar to the provision in proposed FINRA
Rule 4210(f)(7), except that the proposed FINRA rule provision does not
contain the exception for omnibus accounts. Accordingly, FINRA proposes
to eliminate Incorporated NYSE Rule 432(b) and modify paragraph (f)(7)
of FINRA Rule 4210 to add that the prohibition on liquidations shall
not apply to any account carried on an omnibus basis as prescribed by
Regulation T.
Required Submissions of Requests for Extension of Time Under Regulation
T and SEC Rule 15c3-3--NASD Rule 3160 and Incorporated NYSE Rule 434
    FINRA proposes to adopt NASD Rule 3160 (Extensions of Time Under
Regulation T and SEC Rule 15c3-3) as FINRA Rule 4230 with one
modification discussed below and delete the substantively similar
Incorporated NYSE Rule 434 (Required Submission of Requests for
Extensions of Time for Customers). NASD Rule 3160 and Incorporated NYSE
Rule 434 set forth requirements governing members' requests for
extensions of time, as permitted in accordance with Regulation T and
SEC Rule 15c3-3(n). These rules provide that when FINRA is the
designated examining authority for a member, requests for extensions of
time must be submitted to FINRA for approval, in a format FINRA
requires. In addition, NASD Rule 3160 requires each

clearing member that submits extensions of time on behalf of broker-
dealers for which it clears to submit a monthly report to FINRA that
indicates overall ratios of requested extensions of time to total
transactions that have exceeded a percentage specified by FINRA.\16\
FINRA monitors the number of Regulation T and SEC Rule 15c3-3 extension
requests for each firm to determine whether to impose prohibitions on
further extensions of time.\17\
---------------------------------------------------------------------------

    \16\ See Notice to Members 06-62 (November 2006). FINRA would
retain the reporting threshold specified in Notice to Members 06-62
of requiring a report for all introducing or correspondent firms
that have overall ratios of requests for extensions of time to total
transactions for the month that exceed 2%. In the event FINRA
adjusts the reporting threshold, or the limitation threshold stated
in note 16 below, it would advise members of the new parameters in a
Regulatory Notice.
    \17\ See supra note 15. FINRA will continue to prohibit further
extension of time requests for (1) introducing or correspondent
firms that exceed a 3% ratio of the number of extension of time
requests to total transactions for the month and (2) clearing firms
that exceed a 1% ratio of extension of time requests to total
transactions.
---------------------------------------------------------------------------

    FINRA proposes to add a provision to proposed FINRA Rule 4230 to
clarify that for the months when no broker-dealer for which a clearing
member clears exceeds the extension of time ratio criteria (i.e., 2%),
the clearing member must submit a report indicating such. FINRA had
previously requested such submissions but believes the submissions are
essential to ensure FINRA has a complete and accurate understanding of
correspondent firm extension requests.
    As noted above, FINRA will announce the implementation date of the
proposed rule change in a Regulatory Notice to be published no later
than 90 days following Commission approval. The implementation date
will be no later than 180 days following Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\18\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
clarify and streamline the margin requirements applicable to its
members, as well as those rules addressing extension of time requests
under Regulation T and SEC Rule 15c3-3.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be 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

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2010-024 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2010-024. This
file number should be included on the subject line if e-mail 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 Web site (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 Web site
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 such filing also will be
available for inspection and copying at the principal office of FINRA.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-FINRA-2010-024
and should be submitted on or before June 29, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13662 Filed 6-7-10; 8:45 am]
BILLING CODE 8010-01-P


[Federal Register Volume 86, Number 212 (Friday, November 5, 2021)]
[Notices]
[Pages 61335-61336]
[FR Doc No: 2021-24138]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-335, OMB Control No. 3235-0381]

Proposed Collection; Comment Request

Upon Written Request Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street, NE, Washington, DC
20549-2736

Extension:
    Form 40-F

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for extension and approval.
    Form 40-F (17 CFR 249.240f) is used by certain Canadian issuers to
register a class of securities under Section 12 of the Securities
Exchange Act of 1934

(``Exchange Act'') (15 U.S.C. 78l) or as an annual report pursuant to
Section 13(a) or 15 (d) of the Exchange Act (15 U.S.C. 78m(a) or
78o(d)). The information required in the Form 40-F is used by investors
in making investment decisions with respect to the securities of such
Canadian companies. We estimate that Form 40-F takes approximately
431.42 hours per response and is filed by approximately 132
respondents. We estimate that 25% of the 429.93 hours per response
(107.855 hours) is prepared by the issuer for a total reporting burden
of 14,237 (107.855 hours per response x 132 responses).
    Written comments are invited on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
the burden imposed by the collection of information; (c) ways to
enhance the quality, utility, and clarity of the information collected;
and (d) ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. Consideration will
be given to comments and suggestions submitted in writing within 60
days of this publication.
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid control number.
    Please direct your written comment to David Bottom, Director/Chief
Information Officer, Securities and Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to:
[email protected].

    Dated: November 1, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24138 Filed 11-4-21; 8:45 am]
BILLING CODE 8011-01-P