[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Notices]
[Pages 81225-81237]
[FR Doc No: 2020-27483]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90622; File No. SR-NASDAQ-2020-083]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Options 1, Section 1; Options 2, Section 5; Options 3, Sections
5, 7, 10, 15 and 23

December 9, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 30, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the rules of The Nasdaq Options
Market LLC (``NOM'') at Options 1, Section 1 (Definitions); Options 2,
Section 5 (Market Maker Quotations); Options 3, Section 5 (Entry and
Display of Orders); Options 3, Section 7 (Types of Orders and Order and
Quote Protocols); Options 3, Section 10 (Order Book Allocation);
Options 3, Section 15 (Risk Protections); and Options 3, Section 23
(Data Feeds and Trade Information).
    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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 NOM Rules at Options 1, Section 1
(Definitions); Options 2, Section 5 (Market Maker Quotations); Options
3, Section 5 (Entry and Display of Orders); Options 3, Section 7 (Types
of Orders and Order and Quote Protocols); Options 3, Section 10 (Order
Book Allocation); Options 3, Section 15 (Risk Protections); and Options
3, Section 23 (Data Feeds and Trade Information). Each change is
described below.
Options 1, Section 1
    The Exchange proposes to amend the definition of ``Public
Customer'' to conform to Nasdaq Phlx LLC's (``Phlx'') definition at
Options 1, Section 1(b)(46). The Exchange believes that making clear
that a Public Customer could be a person or entity and clarifying that
a Public Customer is not a Professional, as defined within Options 1,
Section (a)(47),\3\ will make clear what it meant by that term. Today,
a Public Customer is not a Professional. In order to properly represent
orders entered on the Exchange, Participants are required to indicate
whether orders are ``Professional Orders.'' To comply with this
requirement, Participants are required to review their Public
Customers' activity on at least a quarterly basis to determine whether
orders, which are not for the account of a broker-dealer, should be
represented as Public Customer Orders or Professional Orders.\4\ A
Public Customer may be a Professional, provided they meet the
requirements specified within NOM Options 1, Section 1(a)(47). If the
Professional definition is not met, the order is treated as a Public
Customer order.
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    \3\ NOM Options 1, Section 1(a)(47) provides that, ``The term
``Professional'' means any person or entity that (i) is not a broker
or dealer in securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s). A Participant or a Public Customer may,
without limitation, be a Professional. All Professional orders shall
be appropriately marked by Participants.''
    \4\ Participants conduct a quarterly review and make any
appropriate changes to the way in which they are representing orders
within five days after the end of each calendar quarter. While
Participants only will be required to review their accounts on a
quarterly basis, if during a quarter the Exchange identifies a
customer for which orders are being represented as Public Customer
Orders but that has averaged more than 390 orders per day during a
month, the Exchange will notify the Participant and the Participant
will be required to change the manner in which it is representing
the customer's orders within five days.
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    The Exchange also proposes to remove a sentence within Options 1,
Section 1(a)(47) which provides, ``A Participant or a Public Customers
may, without limitation, be a Professional.'' This sentence is
confusing, unnecessary, and adds no information to this defined term.
By way of comparison, Phlx Options 1, Section 1(b)(46) does not contain
a similar sentence and that sentence was recently removed from Nasdaq
BX, Inc.'s (``BX'') Rules.\5\ The Exchange adopted a Professional
designation in 2010 \6\ and has differentiated Public and Professional
customers since that time.
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    \5\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
    \6\ See Securities Exchange Act Release No. 63028 (October 1,
2010), 75 FR 62443 (October 8, 2010) (SR-NASDAQ-2010-099) (Order
Approving a Proposed Rule Change To Adopt a Definition of
Professional and Require That All Professional Orders Be
Appropriately Marked).
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    The Exchange also proposes to remove a sentence, within Options 3,
Section 10(a)(1)(C)(i), which provides that a Public Customer order
does not include a Professional order. Indicating that a Public
Customer order is not a Professional Order is no longer necessary
because of the proposed definition for Public Customer. Today, the
definition of a Public Customer does not explicitly exclude a
Professional. The language that the Exchange proposes to delete
currently indicates that Professionals would not be treated the same as
a Public Customer in terms of priority and, therefore, would not
receive the same allocation that is reserved for Public Customer
orders. Since NOM is amending the definition of a Public Customer to
explicitly exclude Professionals, the language in the allocation rule
is no longer necessary to distinguish these two types of market
participants.
Bid/Ask Differentials
    Currently, NOM Market Maker intra-day quoting requirements, within
Options 2, Section 5(d)(2), provide,

    Bid/ask Differentials (Quote Spread Parameters). Options on
equities (including Exchange-Traded Fund Shares), and on index
options must be quoted with a difference not to exceed $5 between
the bid and offer regardless of the price of the bid, including
before and during the opening. However, respecting in-the-money
series where the market for the underlying security is wider than
$5, the bid/ask differential may be as wide as the spread between
the national best bid and offer in the underlying security. The
Exchange may establish differences other than the above for one or
more series or classes of options.

The Exchange proposes to amend NOM Options 2, Section 5(d)(2) to add
the words ``Intra-Day'' before the title ``Bid/ask Differentials (Quote
Spread Parameters)'' to make clear that these requirements are intra-
day. Also, the Exchange proposes to amend this paragraph to remove the
phrase, ``including before and during the opening.'' The bid/ask
differentials, within NOM Options 2, Section 5(d)(2), will continue to
apply intra-day. This is consistent with the Exchange's existing
practice. Today, the bid/ask differentials applicable to the opening
are noted

within Options 3, Section 8(a)(6).\7\ As noted within the rule, NOM
publishes its specified bid/ask differential on its system settings
page.\8\ The bid/ask differentials noted for the Valid Width NBBO
within the opening provide for quotations with a difference that does
not exceed $5 between the bid and offer regardless of the price of the
bid. It is not necessary to discuss the opening bid/ask differentials
within Options 2, Section 5 as those differentials are specifically
noted within the opening rule.
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    \7\ NOM Options 3, Section 8(a)(6) provides, ``Valid Width
National Best Bid or Offer'' or ``Valid Width NBBO'' shall mean the
combination of all away market quotes and any combination of NOM-
registered Market Maker orders and quotes received over the QUO or
SQF Protocols within a specified bid/ask differential as established
and published by the Exchange. The Valid Width NBBO will be
configurable by underlying, and tables with valid width
differentials will be posted by Nasdaq on its website. Away markets
that are crossed will void all Valid Width NBBO calculations. If any
Market Maker orders or quotes on NOM are crossed internally, then
all such orders and quotes will be excluded from the Valid Width
NBBO calculation.''
    \8\ NOM's System Settings page is located at: https://www.nasdaq.com/docs/2020/07/02/NOM_SystemSettings.pdf.
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Options 3, Section 5
    The Exchange proposes to amend Options 3, Section 5(c) to add
additional rule text similar to Phlx Options 3, Section 5(c).\9\ NOM's
current Options 3, Section 5(c) states, ``The System automatically
executes eligible orders using the Exchange's displayed best bid and
offer (``BBO'') or the Exchange's non-displayed order book (``internal
BBO'').'' The Exchange proposes to state, ``The System automatically
executes eligible orders using the Exchange's displayed best bid and
offer (``BBO'') or the Exchange's non-displayed order book (``internal
BBO'') if the best bid and/or offer on the Exchange has been repriced
pursuant to subsection (d) below.'' Today, NOM re-prices certain orders
to avoid locking and crossing away markets, consistent with its Trade-
Through Compliance and Locked or Crossed Markets obligations.\10\
Orders which lock or cross an away market automatically re-price one
minimum price improvement 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.\11\ The re-priced order is
displayed on OPRA. The order remains on NOM's Order Book and is
accessible at the non-displayed price. For example, a limit order may
be accessed on NOM by a Participant if the limit order is priced better
than the NBBO. The Exchange believes that the addition of this rule
text will provide additional clarity.
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    \9\ Phlx has an All-or-None Order type that is non-displayed.
See Options 3, Section 7(b)(5). Phlx Options 3, Section 5(c)
accounts for this non-displayed order on the order book. NOM has a
Price Improving Order is already described within Options 3, Section
5(c). A Price Improving Order on NOM displays differently than
Phlx's All-Or-None Order and therefore is described differently
within Options 3, Section 5(c). Otherwise, NOM has no other non-
displayed order types.
    \10\ NOM Options 3, Section 5(d) provides, ``An order will not
be executed at a price that trades through another market or
displayed at a price that would lock or cross another market. An
order that is designated by the member as routable will be routed in
compliance with applicable Trade-Through and Locked and Crossed
Markets restrictions. An order that is designated by a member as
non-routable will be re-priced in order to comply with applicable
Trade-Through and Locked and Crossed Markets restrictions. If, at
the time of entry, an order that the entering party has elected not
to make eligible for routing would cause a locked or crossed market
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current
national best bid (for offers) and displayed at one minimum price
variance above (for offers) or below (for bids) the national best
price.''
    \11\ See Options 5, Section 4 (Order Routing), which describes
the repricing of orders for both routable and non-routable orders
within Options 5, Section 4(a)(iii)(A), (B) and (C).
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Options 3, Section 7
    The Exchange proposes to amend the Cancel-Replacement Order, within
Options 3, Section 7(a)(1). By way of background with respect to
cancelling and replacing an order, a Participant has the option of
either submitting a cancel order and then separately submitting a new
order, which serves as a replacement of the original order, in two
separate messages, or submitting a single cancel and replace order in
one message (``Cancel-Replacement Order''). Submitting a cancel order
and then separately submitting a new order will not retain the priority
of the original order.
    Currently, the rule text for Cancel-Replacement Order provides,
``Cancel-Replacement Order shall mean a single message for the
immediate cancellation of a previously received order and the
replacement of that order with a new order with new terms and
conditions. If the previously placed order is already filled partially
or in its entirety, the replacement order is automatically canceled or
reduced by the number of contracts that were executed. The replacement
order will not retain the priority of the cancelled order except when
the replacement order reduces the size of the order and all other terms
and conditions are retained.'' The Exchange proposes to replace the
words ``shall mean'' with ``is'' and remove the final sentence of the
rule text.\12\ The Exchange proposes to add a new sentence to the end
of the rule which provides, ``The replacement order will retain the
priority of the cancelled order, if the order posts to the Order Book,
provided the price is not amended, and the size is not increased.''
Unlike the sentence proposed for deletion, the proposed sentence states
in the affirmative the conditions under which the Cancel-Replacement
Order will retain priority. Price and size are the terms that will
determine if the Cancel-Replacement Order retains its priority, as is
the case today, other terms and conditions do not amend the priority of
the Cancel-Replacement Order.
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    \12\ The final sentence of current NOM Options 3, Section
7(a)(1) provides, ``The replacement order will not retain the
priority of the cancelled order except when the replacement order
reduces the size of the order and all other terms and conditions are
retained.''
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    The Exchange is not amending the current System functionality of a
Cancel-Replacement Order with respect to the terms that will cause the
order to lose priority. Today, and with the proposed change, if a
Participant does not change or increase the size of the order, it would
not trigger a loss in priority. Options 3, Section 7(a)(1) states only
if the size of the order were reduced would a loss of priority
occur.\13\ The proposed rule reverses the phrasing in the current rule
and, instead, describes changes to priority when size is increased.
Priority is retained if the size of the order does not change or is not
increased. The rule is intended to provide transparency regarding
changes to a Cancel-Replacement Order which would trigger a loss in
priority. Today, and with the proposal, the price of the order may not
be changed when submitting a Cancel-Replacement Order; that would be a
new order. A similar change was recently made to BX's Cancel-
Replacement Order.\14\
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    \13\ Options 3, Section 7(a)(1) provides, ``The replacement
order will not retain the priority of the cancelled order except
when the replacement order reduces the size of the order and all
other terms and conditions are retained.''
    \14\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
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    The Exchange proposes to amend ``Limit Orders,'' within Options 3,
Section 7(a)(2). The Exchange proposes to style ``Limit Orders'' in the
singular and change ``are'' to ``is an'' and ``orders'' to ``order.'' A
Limit Order on NOM operates in the same manner as a Limit Order on BX.
The Exchange proposes to conform the rule text of NOM's Limit Order to
BX Options 3, Section 7(a)(3) by adding a sentence describing
marketable limit orders. BX recently amended its rule to similarly

change its description of Limit Order.\15\ The Exchange proposes to
state, ``A marketable limit order is a limit order to buy (sell) at or
above (below) the best offer (bid) on the Exchange.'' The Exchange
believes that the rule amendment more aptly describes a marketable
limit order as compared to the current rule text, which is confusing,
but was intended to convey the substance of the proposed text. The new
sentence does not substantively amend the current rule text and
conforms NOM's description with BX's description.
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    \15\ Id.
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    The Exchange proposes to amend ``Minimum Quantity Orders,'' within
Options 3, Section 7(a)(3). The Exchange proposes to style ``Minimum
Quantity Orders'' in the singular and change ``are'' to ``is an'' and
``orders'' to ``order.'' These amendments are technical and non-
substantive. The Exchange is otherwise not amending the Minimum
Quantity Order rule text.
    The Exchange proposes to amend ``Market Orders,'' within Options 3,
Section 7(a)(4). The Exchange proposes to style ``Market Orders'' in
the singular and change ``are'' to ``is an'' and ``orders'' to
``order.'' These amendments are technical and non-substantive. The
Exchange also proposes to amend a current sentence to state,
``Participants can designate that their Market Orders not executed
after a pre-established period of time, as established by the Exchange,
will be cancelled back to the Participant, once an option series has
opened for trading.'' Market Orders submitted during the opening may be
executed, or cancelled if the Market Order is priced through the
opening price. The Exchange would only cancel those Market Orders that
remained on the Order Book once an option series opened.\16\ The pre-
established period of time would commence once the intra-day trading
session begins for that options series and the order would be cancelled
back to the Participant, provided the Participant elected to cancel
back its Market Orders. The Exchange proposes to make clear that while
the opening is on-going, and the intra-day trading session has not
commenced, the pre-established period of time would not commence.
Further, the Exchange proposes to note that ``Market Orders on the
Order Book would be immediately cancelled if an options series halted,
provided the Participant designated the cancellation of Market
Orders.'' Once an options series halts for trading, the Exchange
conducts another Opening Process. In the case where a Market Order was
resting on the Order Book, and the Participant had designated the
cancellation of Market Orders, in the event of a halt, the Market
Orders resting on the Order Book would immediately cancel. This
proposed rule text is consistent with existing System functionality.
The Exchange believes that this additional rule text brings greater
clarity to the Market Order type.
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    \16\ See NOM's Trading Halts rule at Options 3, Section 9(d)(2),
``After the opening, the Exchange shall reject Market Orders, as
defined in Options 3, Section 7, and shall notify Participants of
the reason for such rejection.''
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    The Exchange proposes to amend ``Price Improving Orders,'' within
Options 3, Section 7(a)(5). The Exchange proposes to style ``Price
Improving Orders'' in the singular and change ``are'' to ``is an'' and
``orders'' to ``order.''
    The Exchange proposes to amend ``On the Open Order,'' within
Options 3, Section 7(a)(6) by removing the words ``The term'' at the
beginning of the sentence and change ``shall mean'' to ``is.''
    The Exchange proposes to amend ``Intermarket Sweep Order'' or
``ISO,'' within Options 3, Section 7(a)(7). Today, the rule text
provides,

    ``Intermarket Sweep Order'' or ``ISO'' are limit orders that are
designated as ISOs in the manner prescribed by Nasdaq and are
executed within the System by Participants at multiple price levels
without respect to Protected Quotations of other Eligible Exchanges
as defined in Options 5, Section 1. ISOs may have any time-in-force
designation except WAIT, are handled within the System pursuant to
Options 3, Section 10 and shall not be eligible for routing as set
out in Options 3, Section 19. ISOs with a time-in-force designation
of GTC are treated as having a time-in-force designation of Day.
    (1) Simultaneously with the routing of an ISO to the System, one
or more additional limit orders, as necessary, are routed by the
entering party to execute against the full displayed size of any
protected bid or offer (as defined in Options 5, Section 1) in the
case of a limit order to sell or buy with a price that is superior
to the limit price of the limit order identified as an intermarket
sweep order (as defined in Options 5, Section 1). These additional
routed orders must be identified as ISOs.

The Exchange proposes to replace the current rule, within Options 3,
Section 7(a)(7), with the exception of Options 3, Section 7(a)(7)(1),
which is being retained by re-lettered as ``A,'' with the following
rule text which is similar to BX Options 3, Section 7(a)(6),\17\ to
describe an ISO Order, ``is a Limit Order that meets the requirements
of Options 5, Section 1(8). Orders submitted to the Exchange as ISO are
not routable and will ignore the ABBO and trade at allowable prices on
the Exchange. ISOs may be entered on the Order Book. ISOs may have any
time-in-force designation and are handled within the System pursuant to
Options 3, Section 10 and shall not be eligible for routing as set out
in Options 5, Section 4. ISO Orders may not be submitted during the
opening.''
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    \17\ BX's rule describes the PRISM mechanism, while NOM has no
auction mechanisms.
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    An ISO Order is a Limit Order, as noted in the current text and
Options 5, Section 1, continues to be referenced in the proposed text.
The Exchange continues to note that the orders are not routable. The
additional text, ``. . . will ignore the ABBO and trade at allowable
prices on the Exchange'' is more precise than the current rule text and
describes current functionality. The Exchange further proposes to
state, ``ISOs may be entered on the Order Book.'' That is also the case
today. The remainder of the current rule text is not necessary as
Options 5, Section 1(8) is cited. Removing the current rule text and
replacing it with text which describes the proper time-in-force
designation will make clear what is acceptable on NOM today. This rule
text is not proposed to change the functionality of an ISO Order. The
Exchange believes the proposed description provides a more succinct
description.
    Today, ISOs may have any time-in-force designation, except WAIT,
and further requires that ISOs with a time-in-force designation of GTC
are treated as having a time-in-force designation of Day. The Exchange
proposes to remove the WAIT time-in-force within this proposed rule
change, as described in more detail below, and, therefore, the WAIT
order type no longer needs to be cited.
    Further, today, NOM's System does not treat an ISO with a time-in-
force designation of GTC as having a time-in-force designation of Day,
as provided for within NOM's current rule at Options 3, Section
7(a)(6), rather those orders are treated as GTC. The current sentence
is being removed because it is inaccurate. The proposed sentence
accurately describes the System functionality. The Exchange does not
believe that an ISO with a time-in-force designation of GTC was ever
treated as having a time-in-force designation of Day, the rule text was
simply inaccurate.
    The Exchange proposes to amend ``One-Cancels-the-Other Order'' at
renumbered Options 3, Section 7(a)(8) by changing ``shall mean'' to
``is.''
    The Exchange proposes to amend the ``All-or-None Order,'' within
renumbered Options 3, Section 7(a)(9). The Exchange proposes to replace
``shall

mean'' with ``is'' and capitalize market order and limit orders.
    The Exchange proposes to amend the ``Post-Only Orders,'' within
renumbered Options 3, Section 7(a)(10). The Exchange proposes to
replace ``are'' with ``is an'' and make Post-Only Orders singular. An
extra space is also being removed.
    The Exchange proposes to amend Options 3, Section 7(b) to define
``Time in Force'' as ``TIF''.
    With respect to an ``On the Open Order,'' or ``OPG'' Order, within
Options 3, Section 7(b)(1), the Exchange notes that OPGs may not route.
This is the case today. This order type functions in the same way as
BX's OPG Order at Options 3, Section 7(b)(1).\18\ The Exchange is
adding rule text to make clear the manner in which an OPG Order would
be treated, which is similar to how a BX OPG Order is treated today.
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    \18\ BX Options 3, Section 7(b)(1) provides, ``An Opening Only
order (``OPG'') is entered with a TIF of ``OPG''. This order can
only be executed in the Opening Process pursuant to Options 3,
Section 8. This order type is not subject to any protections listed
in Options 3, Section 15. Any portion of the order that is not
executed during the Opening Process is cancelled. OPG orders may not
route.''
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    The Exchange proposes to amend an ``Immediate-Or-Cancel'' Order or
``IOC,'' within Options 3, Section 7(b)(2) to add hyphens and make
``Or'' lowercase. The Exchange proposes to remove the current
description which provides that an IOC Order, ``shall mean for orders
so designated, that if after entry into the System a marketable order
(or unexecuted portion thereof) becomes non-marketable, the order (or
unexecuted portion thereof) shall be canceled and returned to the
entering participant. IOC Orders shall be available for entry from the
time prior to market open specified by the Exchange on its website
until market close and for potential execution from 9:30 a.m. until
market close. IOC Orders entered between the time specified by the
Exchange on its website and 9:30 a.m. Eastern Time will be held within
the System until 9:30 a.m. at which time the System shall determine
whether such orders are marketable.'' The Exchange proposes to replace
this description with rule text similar to BX Options 3, Section
7(b)(2) \19\ as these order types are identical, except that NOM has
the OTTO protocol and BX does not, and also as mentioned previously NOM
has no auctions. Additionally, BX's rule addresses limitations in order
protections that do not exist today on NOM. The Exchange proposes to
state that an Immediate-or-Cancel Order or ``IOC'' Order is a Market
Order or Limit Order to be executed in whole or in part upon receipt.
Any portion not so executed is cancelled and/or routed pursuant to
Participant's instruction. IOC orders may be entered through FIX, OTTO
or SQF; IOC Orders entered through OTTO or SQF may not route. Today,
IOC Orders entered through OTTO or SQF do not route; only orders
entered through FIX may route. The SQF interface is a quoting
interface, the Exchange does not route quotes. With respect to OTTO,
orders submitted by NOM Market Makers over this interface are treated
as quotes and similarly do not route. The Exchange is proposing to
memorialize this information within the description of an IOC Order to
add clarity.
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    \19\ BX Options 3, Section 7(b)(2) provides, ``Immediate-or-
Cancel'' or ``IOC'' is a Market Order or Limit Order to be executed
in whole or in part upon receipt. Any portion not so executed is
cancelled. (A) Orders entered with a TIF of IOC are not eligible for
routing. (B) IOC orders may be entered through FIX or SQF, provided
that an IOC Order entered by a Market Maker through SQF is not
subject to the Limit Order Price Protection or the Market Order
Spread Protection in Options 3, Section 15(a)(1) and (a)(2),
respectively; (C) Orders entered into the Price Improvement Auction
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their
terms, these orders will be: (1) Executed after an exposure period,
or (2) cancelled.
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    The Exchange proposes to amend the TIF of ``DAY'' at Options 5,
Section 7(b)(3) to remove the words ``shall mean for orders so
designated'' and add ``is an order'' to conform the rule text to other
text in this rule. The Exchange also proposes to conform the
description of a TIF of ``DAY'' similar to Phlx Options 3, Section
7(c)(1).\20\ The Exchange believes that the remainder of the
description for a Day Order, ``if after entry into the System, the
order is not fully executed, the order (or unexecuted portion thereof)
shall remain available for potential display and/or execution until
market close, unless canceled by the entering party, after which it
shall be returned to the entering party. Day Orders shall be available
for entry from the time prior to market open specified by the Exchange
on its website until market close and for potential execution from 9:30
a.m. until market close,'' is unnecessarily verbose and proposes to
remove this rule text. The Exchange proposes to state, ``Day'' is an
order entered with a TIF of ``Day'' that expires at the end of the day
on which it was entered, if not executed. All orders by their terms are
Day Orders unless otherwise specified. Day Orders may be entered
through FIX or OTTO. A Day Order on Phlx functions in the same way as a
Day Order on NOM. The Phlx rule text is more succinct in describing
this order type. Similar changes were recently made on BX.\21\
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    \20\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not
executed, an order entered with a TIF of ``Day'' expires at the end
of the day on which it was entered. All orders by their terms are
Day Orders unless otherwise specified. Day orders may be entered
through FIX.''
    \21\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
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    The Exchange proposes to amend the TIF of ``Good Til Cancelled'' or
``GTC'' at Options 5, Section 7(b)(4). The Exchange proposes to remove
the words ``shall mean for orders'' and add ``is an order.'' The
Exchange also proposes to conform the rule text similar to Phlx Options
3, Section 7(c)(4),\22\ and provide that a ``Good Til Cancelled'' or
``GTC'' is ``an order entered with a TIF of ``GTC'' that, if not fully
executed, will remain available for potential display and/or execution
unless cancelled by the entering party, or until the option expires,
whichever comes first. GTC Orders shall be available for entry from the
time prior to market open specified by the Exchange until market close.
GTC Orders may only be entered through FIX.'' The Exchange would remove
the rule text which provides, ``that if after entry into System, the
order is not fully executed, the order (or unexecuted portion thereof)
shall remain available for potential display and/or execution unless
cancelled by the entering party, or until the option expires, whichever
comes first. GTC Orders shall be available for entry from the time
prior to market open specified by the Exchange on its website until
market close and for potential execution from 9:30 a.m. until market
close.'' A GTC Order on Phlx functions in the same way as a GTC Order
on NOM. The Exchange is not proposing to amend the functionality of a
GTC Order, rather the Exchange believes the proposed description is
more succinct.
---------------------------------------------------------------------------

    \22\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully
executed, will remain available for potential display and/or
execution unless cancelled by the entering party, or until the
option expires, whichever comes first. GTC Orders shall be available
for entry from the time prior to market open specified by the
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange proposes to no longer offer a TIF of ``WAIT.'' The
Exchange would remove the rule text at NOM Options 3, Section 7(b)(5).
If the Exchange desires to offer this TIF in the future, it would file
a proposed rule change with the Commission pursuant to Section 19(b)(1)
of the Act.\23\ The Exchange has provided notice of its intention to
remove the TIF of

``WAIT''.\24\ BX previously offered a WAIT order type recently and
discontinued this order types because it was not being utilized to a
great extent.\25\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(1).
    \24\ See Options Trader Alert #2020-26.
    \25\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange proposes to note, within NOM Options 3, Section 7(c),
the various routing options which are available. The Exchange proposes
to add rule text which provides, ``Routing Strategies. Orders may be
entered on the Exchange with a routing strategy of SEEK, SRCH or Do-
Not-Route (``DNR'') as provided in Options 5, Section 4 through FIX
only.''
    Finally, the Exchange proposes to re-letter current Options 3,
Section 7(c) and (d).
Options 3, Section 15
    The Exchange proposes to amend Options 3, Section 15(c) relating to
Anti-Internalization to make clear that the Anti-Internalization
functionality does not apply during the opening. A similar change was
recently made to BX's Rules.\26\ The Exchange proposes to clarify that
Anti-Internalization does not apply during an opening or reopening
following a trading halt, pursuant to Options 3, Section 8, to provide
more specificity on how this functionality currently operates. The
Exchange notes that the same procedures used during an opening are used
to reopen an option series after a trading halt, and therefore proposes
to specify that Anti-Internalization will not apply during the opening
(i.e., the opening and halt reopening processes). During the opening,
Market Makers are able to observe the primary market and then determine
how they would like to quote. They are not required to quote in the
opening on NOM. Therefore, Anti-Internalization is unnecessary during
an opening due to the high level of control that Market Makers exercise
over their quotes during this process.
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 89759 (September 3,
2020). 85 FR 55877 (September 10, 2020) (SR-BX-2020-023).
---------------------------------------------------------------------------

Options 3, Section 23
    The Exchange proposes to amend Options 3, Section 23, Data Feeds
and Trade Information, to update its description of Nasdaq ITCH to
Trade Options (``ITTO''). The Exchange proposes to amend ITTO at
Options 3, Section 23(a)(1) to more closely align with current System
operation. The Exchange proposes a technical amendment to the first
sentence to replace a comma with the word ``and.'' The Exchange also
proposes to relocate rule text concerning order imbalances to the end
of the description. The Exchange proposes to amend the first sentence
to state that ITTO is a data feed that provides full order and quote
depth information for individual orders and quotes on the NOM book, and
last sale information for trades executed on NOM. The Exchange would
amend and relocate the rule text that provides, ``and Order Imbalance
Information as set forth in NOM Rules Options 3, Section 8'' at the end
of the first sentence. The Exchange proposes to add a sentence at the
end of the description within Options 3, Section 8 which states, ``The
feed also provides order imbalances on opening/re-opening (size of
matched contracts and size of the imbalance).'' This sentence makes
clear that order imbalance information is provided for both an opening
and re-opening process. Today, a re-opening process initiates after a
trading halt has occurred intra-day. Also, the Exchange notes the
specific information that would be provided, namely the size of matched
contracts and size of the imbalance. The Exchange believes that this
additional context to imbalance messages will provide market
participants with more complete information about what is contained in
the data feed. The Exchange notes that this information is available
today and the rule text is being amended to make clear what information
is currently provided.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\27\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\28\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Options 1, Section 1
    The Exchange's proposal to amend the definition of ``Public
Customer'' to conform to Phlx's definition is intended to provide
greater specificity regarding what is meant by the term ``Public
Customer.'' The Exchange believes that making clear that a Public
Customer could be a person or entity and clarifying that a Public
Customer is not a Professional, as defined within Options 1, Section
(a)(47),\29\ will make clear what it meant by that term. Today, a
Public Customer is not a Professional. In order to properly represent
orders entered on the Exchange, Participants are required to indicate
whether orders are ``Professional Orders.'' To comply with this
requirement, Participants are required to review their Public
Customers' activity on at least a quarterly basis to determine whether
orders, which are not for the account of a broker-dealer, should be
represented as Public Customer Orders or Professional Orders.\30\ A
Public Customer may be a Professional, provided they meet the
requirements specified within NOM Options 1, Section 1(a)(47). If the
Professional definition is not met, the order is treated as a Public
Customer order. The Exchange believes that it is consistent with the
Act to state within the definition of ``Public Customers'' that a
Professional is not a Public Customer. As noted above, there is a
process for determining if a market participant qualifies as a
``Professional.'' This specificity will serve to protect investors and
the public interest in that the terms ``Public Customer'' and
``Professional'' are separate categories of market participants, as
defined. Also, this definition conforms to Phlx's definition at Options
1, Section 1(b)(47).
---------------------------------------------------------------------------

    \29\ NOM Options 1, Section 1(a)(47) provides that, ``The term
``Professional'' means any person or entity that (i) is not a broker
or dealer in securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s). A Participant or a Public Customer may,
without limitation, be a Professional. All Professional orders shall
be appropriately marked by Participants.''
    \30\ Participants conduct a quarterly review and make any
appropriate changes to the way in which they are representing orders
within five days after the end of each calendar quarter. While
Participants only will be required to review their accounts on a
quarterly basis, if during a quarter the Exchange identifies a
customer for which orders are being represented as Public Customer
Orders but that has averaged more than 390 orders per day during a
month, the Exchange will notify the Participant and the Participant
will be required to change the manner in which it is representing
the customer's orders within five days.
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence within Options 1,
Section 1(a)(47) which provides, ``A Participant or a Public Customers
may, without limitation, be a Professional,'' is consistent with the
Act. This sentence is confusing, unnecessary, and adds no information
to this defined term. By way of comparison, Phlx Options 1, Section
1(b)(46) does not contain a similar sentence and that sentence was
recently removed from Nasdaq BX, Inc.'s (``BX'') Rules.\31\ The
Exchange adopted a Professional designation in

2010 \32\ and has differentiated Public and Professional customers
since that time. NOM proposes removing this sentence because it does
not add useful information to understanding who may qualify as a
Professional.
---------------------------------------------------------------------------

    \31\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
    \32\ See Securities Exchange Act Release No. 63028 (October 1,
2010), 75 FR 62443 (October 8, 2010) (SR-NASDAQ-2020-099) (Order
Approving a Proposed Rule Change To Adopt a Definition of
Professional and Require That All Professional Orders Be
Appropriately Marked).
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence, within Options 3,
Section 10(a)(1)(C)(i), which allocation rule provides that a Public
Customer order does not include a Professional order is consistent with
the Act. Today, the definition of a Public Customer does not explicitly
exclude a Professional. Indicating that a Public Customer order is not
a Professional Order is no longer necessary because of the proposed
definition for Public Customer. The language that the Exchange proposes
to delete, currently indicates that Professionals would not be treated
the same as a Public Customer in terms of priority and, therefore,
would not receive the same allocation that is reserved for Public
Customer orders. Since NOM is amending the definition of a Public
Customer to explicitly exclude Professionals, the language in the
allocation rule is no longer necessary to distinguish these two types
of market participants.
Bid/Ask Differentials
    The Exchange's proposal to amend NOM Options 2, Section 5(d)(2) to
add the words ``Intra-Day'' before the title ``Bid/ask Differentials
(Quote Spread Parameters)'' and make clear that remove references to
the opening, will make clear for Market Makers their intra-day
requirements. The bid/ask differentials, within NOM Options 2, Section
5(d)(2), will continue to apply intra-day. This is consistent with the
Exchange's existing practice. Today, the bid/ask differentials
applicable to the opening are noted within Options 3, Section
8(a)(6).\33\ As noted within the rule, NOM publishes its specified bid/
ask differential on its system settings page.\34\ The bid/ask
differentials noted for the Valid Width NBBO within the opening provide
for quotations with a difference that does not exceed $5 between the
bid and offer regardless of the price of the bid. It is not necessary
to discuss the opening bid/ask differentials within Options 2, Section
5 as those differentials are specifically noted within the opening
rule. This clarification is consistent with the Act because it is
designed to avoid any confusion for Market Makers as to their intra-day
requirements versus their opening requirements.
---------------------------------------------------------------------------

    \33\ NOM Options 3, Section 8(a)(6) provides, ``Valid Width
National Best Bid or Offer'' or ``Valid Width NBBO'' shall mean the
combination of all away market quotes and any combination of NOM-
registered Market Maker orders and quotes received over the QUO or
SQF Protocols within a specified bid/ask differential as established
and published by the Exchange. The Valid Width NBBO will be
configurable by underlying, and tables with valid width
differentials will be posted by Nasdaq on its website. Away markets
that are crossed will void all Valid Width NBBO calculations. If any
Market Maker orders or quotes on NOM are crossed internally, then
all such orders and quotes will be excluded from the Valid Width
NBBO calculation.''
    \34\ NOM's System Settings page is located at: https://www.nasdaq.com/docs/2020/07/02/NOM_SystemSettings.pdf.
---------------------------------------------------------------------------

Options 3, Section 5
    The Exchange's proposal to amend Options 3, Section 5(c) to add
additional rule text similar to Phlx Options 3, Section 5(c) \35\ is
consistent with the Act. Today, NOM re-prices certain orders to avoid
locking and crossing away markets, consistent with its Trade-Through
Compliance and Locked or Crossed Markets obligations.\36\ Orders which
lock or cross an away market automatically re-price one minimum price
improvement 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.\37\ The re-priced order is displayed on
OPRA. The order remains on NOM's Order Book and is accessible at the
non-displayed price. For example, a limit order may be accessed on NOM
by a Participant if the limit order is priced better than the NBBO. The
Exchange believes that the addition of this rule text will add greater
specificity to the rule.
---------------------------------------------------------------------------

    \35\ Phlx has an All-or-None Order type that is non-displayed.
See Options 3, Section 7(b)(5). Phlx Options 3, Section 5(c)
accounts for this non-displayed order on the order book. NOM has a
Price Improving Order is already described within Options 3, Section
5(c). A Price Improving Order on NOM displays differently than
Phlx's All-Or-None Order and therefore is described differently
within Options 3, Section 5(c). Otherwise, NOM has no other non-
displayed order types.
    \36\ See NOM Options 3, Section 5(d).
    \37\ See Options 5, Section 4 (Order Routing), which describes
the repricing of orders for both routable and non-routable orders
within Options 5, Section 4(a)(iii)(A), (B) and (C).
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to amend the Cancel-Replacement Order,
within Options 3, Section 7(a)(1), is consistent with the Act. A
Participant has the option of either submitting a cancel order and then
separately submitting a new order, which serves as a replacement of the
original order, in two separate messages, or submitting a single cancel
and replace order in one message (``Cancel-Replacement Order'').
Submitting a cancel order and then separately submitting a new order
will not retain the priority of the original order. The Exchange's
proposal to replace the words ``shall mean'' with ``is'' and remove the
final sentence of the rule text will bring greater clarity to this
rule. The Exchange addition of a new sentence to the end of the rule
which provides, ``The replacement order will retain the priority of the
cancelled order, if the order posts to the Order Book, provided the
price is not amended, and the size is not increased'' states in the
affirmative the conditions under which the Cancel-Replacement Order
will retain priority. Price and size are the terms that will determine
if the Cancel-Replacement Order retains its priority, as is the case
today, other terms and conditions do not amend the priority of the
Cancel-Replacement Order.
    The Exchange's proposal is not amending the current System
functionality of a Cancel-Replacement Order with respect to the terms
that will cause the order to lose priority. Today, and with the
proposed change, if a Participant does not change or increase the size
of the order, it would not trigger a loss in priority. Options 3,
Section 7(a)(1) states only if the size of the order were reduced would
a loss of priority occur.\38\ Priority is retained if the size of the
order does not change or is not increased. The rule is intended to
provide transparency regarding changes to a Cancel-Replacement Order
which would trigger a loss in priority. Today, and with the proposal,
the price of the order may not be changed when submitting a Cancel-
Replacement Order; that would be a new order. A similar change was
recently made to BX's Cancel-Replacement Order.\39\ Price and size are
the terms that will determine if the Cancel-Replacement Order retains
its priority, as is the case today, other terms and conditions do not
amend the priority of the Cancel-Replacement Order.
---------------------------------------------------------------------------

    \38\ Options 3, Section 7(a)(1) provides, ``The replacement
order will not retain the priority of the cancelled order except
when the replacement order reduces the size of the order and all
other terms and conditions are retained.''
    \39\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Limit Orders,'' within Options
3, Section 7(a)(3), to add the sentence for marketable limit orders
which is currently in BX's rule is consistent with the Act. A Limit
Order on NOM operates in the same manner as a Limit

Order on BX. The Exchange proposes to conform the rule text of NOM's
Limit Order to BX Options 3, Section 7(a)(3) by adding the sentence
describing marketable limit orders. BX recently amended its rule to
similarly change its description of Limit Order.\40\ The Exchange
proposes to state, ``A marketable limit order is a limit order to buy
(sell) at or above (below) the best offer (bid) on the Exchange.'' The
Exchange believes that the rule amendment is consistent with the Act as
it more aptly describes a marketable limit order as compared to the
current rule text, which is confusing, but was intended to convey the
substance of the proposed text. The new sentence does not substantively
amend the current rule text and conforms NOM's description with BX's
description.
---------------------------------------------------------------------------

    \40\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Minimum Quantity Orders,''
within Options 3, Section 7(a)(3), is non-substantive and makes
technical edits that do not change the meaning of the term. The
Exchange is otherwise not amending the Minimum Quantity Order rule
text.
    The Exchange's proposal to amend ``Market Orders,'' within Options
3, Section 7(a)(4), is consistent with the Act. The Exchange's proposes
to style ``Market Orders'' in the singular and change ``are'' to ``is
an'' and ``orders'' to ``order.'' These amendments are technical and
non-substantive. The Exchange's proposal to amend the current sentence
to state, ``Participants can designate that their Market Orders not
executed after a pre-established period of time, as established by the
Exchange, will be cancelled back to the Participant, once an option
series has opened for trading.'' Market Orders submitted during the
opening may be executed, or cancelled if the Market Order is priced
through the opening price. The Exchange would only cancel those Market
Orders that remained on the Order Book once an option series
opened.\41\ The pre-established period of time would commence once the
intra-day trading session begins for that options series and the order
would be cancelled back to the Participant, provided the Participant
elected to cancel back its Market Orders. The Exchange's proposal makes
clear that while the opening is on-going, and the intra-day trading
session has not commenced, the pre-established period of time would not
commence.
---------------------------------------------------------------------------

    \41\ See NOM's opening rule at Options 3, Section 8(d)(2),
``After the opening, the Exchange shall reject Market Orders, as
defined in Options 3, Section 7, and shall notify Participants of
the reason for such rejection.''
---------------------------------------------------------------------------

    The proposal to note that ``Market Orders on the Order Book would
be immediately cancelled if an options series halted, provided the
Participant designated the cancellation of Market Orders'' is
consistent with the Act. Once an options series halts for trading, the
Exchange conducts another Opening Process. In the case where a Market
Order was resting on the Order Book, and the Participant had designated
the cancellation of Market Orders, in the event of a halt, the Market
Orders resting on the Order Book would immediately cancel. This
proposed rule text is consistent with existing System functionality.
The Exchange believes that this additional rule text brings greater
clarity to the Market Order type.
    The Exchange proposes to amend ``Price Improving Orders,'' within
Options 3, Section 7(a)(5) is consistent with the Act. The Exchange
proposes to style ``Price Improving Orders'' in the singular and change
``are'' to ``is an'' and ``orders'' to ``order'' are non-substantive
amendments.
    The Exchange's proposal to amend ``On the Open Order,'' within
Options 3, Section 7(a)(6) by removing the words ``The term'' at the
beginning of the sentence and change ``shall mean'' to ``is'' are non-
substantive amendments.
    The Exchange's proposal to amend ``Intermarket Sweep Order'' or
``ISO'' Orders, within Options 3, Section 7(a)(7), with the exception
of Options 3, Section 7(a)(7)(1), which is being retained by re-
lettered as ``A,'' and addition of rule text is consistent with the
Act. The new rule text is similar to BX Options 3, Section 7(a)(6).\42\
---------------------------------------------------------------------------

    \42\ BX's rule describes the PRISM mechanism, while NOM has no
auction mechanisms.
---------------------------------------------------------------------------

    An ISO Order is a Limit Order, as noted in the current text and
Options 5, Section 1, continues to be referenced in the proposed text.
The Exchange continues to note that the orders are not routable. The
additional text, ``. . .will ignore the ABBO and trade at allowable
prices on the Exchange'' is more precise than the current rule text and
describes current functionality. The Exchange further proposes to
state, ``ISOs may be entered on the Order Book.'' That is also the case
today. The remainder of the current rule text is not necessary as
Options 5, Section 1(8) is cited. Removing the current rule text and
replacing it with text which describes the proper time-in-force
designation will make clear what is acceptable on NOM today. This rule
text is not proposed to change the functionality of an ISO Order. The
Exchange believes the proposed description provides a more succinct
description.
    Today, the rule provides that ISOs may have any time-in-force
designation, except WAIT, and further requires that ISOs with a time-
in-force designation of GTC are treated as having a time-in-force
designation of Day. The Exchange proposes to remove the WAIT time-in-
force within this proposed rule change, as described in more detail
below, and, therefore, the WAIT order type no longer needs to be cited.
NOM's System does not treat an ISO with a time-in-force designation of
GTC as having a time-in-force designation of Day, as provided for
within NOM's current rule at Options 3, Section 7(a)(6), rather those
orders are treated as GTC. The current sentence is being removed
because it is inaccurate. The proposed sentence is consistent with the
Act because it accurately describes the System functionality. The
Exchange does not believe that an ISO with a time-in-force designation
of GTC was ever treated as having a time-in-force designation of Day,
the rule text was simply inaccurate. This proposal is consistent with
the protection of investors and the public interest because it will
clarify the handling of ISO Orders for market participants.
    The Exchange's proposal to amend ``One-Cancels-the-Other Order''
within renumbered Options 3, Section 7(a)(8) is consistent with the Act
because the changes are technical in nature and non-substantive.
    The Exchange's amendment to ``All-or-None Order,'' within
renumbered Options 3, Section 7(a)(9), is non-substantive and does not
change the meaning of the term.
    The Exchange's amendment to ``Post-Only Orders,'' within renumbered
Options 3, Section 7(a)(10), is non-substantive and does not change the
meaning of the term.
    Adding ``TIF to Options 3, Section 7(b) allows that term to be
defined within the Rules.
    The Exchange's proposal to amend the ``On the Open Order,'' or
``OPG'' Order, within Options 3, Section 7(b)(1), to note that OPGs may
not route, is consistent with the Act. The System would not route an
OPG Order today. This order type functions in the same way as BX's OPG
Order at Options 3, Section 7(b)(1).\43\ The Exchange is

adding rule text to make clear the manner in which an OPG Order would
be treated, which is similar to how a BX OPG Order is treated today.
This proposal is consistent with the protection of investors and the
public interest because it will clarify the handling of OPG Orders for
market participants.
---------------------------------------------------------------------------

    \43\ BX Options 3, Section 7(b)(1) provides, ``An Opening Only
order (``OPG'') is entered with a TIF of ``OPG''. This order can
only be executed in the Opening Process pursuant to Options 3,
Section 8. This order type is not subject to any protections listed
in Options 3, Section 15. Any portion of the order that is not
executed during the Opening Process is cancelled. OPG orders may not
route.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend an ``Immediate-Or-Cancel'' Order
or ``IOC,'' within Options 3, Section 7(b)(2), is consistent with the
Act. The Exchange's proposal replaces the current description with
Phlx's description at Options 3, Section 7(c)(2) as these order types
are identical. The Exchange's proposal to state that an Immediate-or-
Cancel Order or ``IOC'' Order is a Market Order or Limit Order to be
executed in whole or in part upon receipt will bring greater clarity to
the rule. Further the Exchange's proposal to add that any portion not
so executed is cancelled is consistent with the current description.
The Exchange proposes to replace this description with rule text
similar to BX Options 3, Section 7(b)(2) \44\ as these order types are
identical, except that NOM has the OTTO protocol and BX does not, and
also as mentioned previously NOM has no auctions. Additionally, BX's
rule addresses limitations in order protections that do not exist today
on NOM. The Exchange proposes to state that an Immediate-or-Cancel
Order or ``IOC'' Order is a Market Order or Limit Order to be executed
in whole or in part upon receipt. Any portion not so executed is
cancelled and/or routed pursuant to Participant's instruction. IOC
orders may be entered through FIX, OTTO or SQF; IOC Orders entered
through OTTO or SQF may not route. Today, IOC Orders entered through
OTTO or SQF do not route; only orders entered through FIX may route.
The SQF interface is a quoting interface, the Exchange does not route
quotes. With respect to OTTO, orders submitted by NOM Market Makers
over this interface are treated as quotes and similarly do not route.
The Exchange's amendments are consistent with the Act in that the
changes memorialize pertinent information within the description of an
IOC Order to add clarity.
---------------------------------------------------------------------------

    \44\ BX Options 3, Section 7(b)(2) provides, ``Immediate-or-
Cancel'' or ``IOC'' is a Market Order or Limit Order to be executed
in whole or in part upon receipt. Any portion not so executed is
cancelled. (A) Orders entered with a TIF of IOC are not eligible for
routing. (B) IOC orders may be entered through FIX or SQF, provided
that an IOC Order entered by a Market Maker through SQF is not
subject to the Limit Order Price Protection or the Market Order
Spread Protection in Options 3, Section 15(a)(1) and (a)(2),
respectively; (C) Orders entered into the Price Improvement Auction
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their
terms, these orders will be: (1) Executed after an exposure period,
or (2) cancelled.
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``DAY'' at Options 3,
Section 7(b)(3) to conform the description of a TIF of ``DAY'' to Phlx
Options 3, Section 7(c)(1) \45\ is consistent with the Act. The
Exchange believes the current text describing NOM's Day TIF is
unnecessarily verbose and proposes to remove this language. A DAY Order
on Phlx functions in the same way as a DAY Order on NOM. The proposal
is not amending the System functionality of a DAY Order. The Phlx rule
text is more succinct in describing this order type. Similar changes
were recently made on BX.\46\
---------------------------------------------------------------------------

    \45\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not
executed, an order entered with a TIF of ``Day'' expires at the end
of the day on which it was entered. All orders by their terms are
Day Orders unless otherwise specified. Day orders may be entered
through FIX.''
    \46\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``Good Til Cancelled''
or ``GTC'' at Options 3, Section 7(b)(4) is consistent with the Act.
The Exchange proposes to conform the rule text to Phlx Options 3,
Section 7(c)(4).\47\ The Exchange is not amending the manner in which
the System function with respect to GTC Orders. GTC Orders, if not
fully executed, will remain available for potential display and/or
execution unless cancelled by the entering party, or until the option
expires, whichever comes first. GTC Orders shall be available for entry
from the time prior to market open, as specified by the Exchange, until
market close, as is the case today. Also, today, a GTC Order may only
be entered through FIX. A GTC Order on Phlx functions in the same way
as a GTC Order on NOM. The Exchange believes that the amended rule text
will bring greater transparency to its rules as the proposed
description is more succinct and thereby protects investors and the
general public.
---------------------------------------------------------------------------

    \47\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully
executed, will remain available for potential display and/or
execution unless cancelled by the entering party, or until the
option expires, whichever comes first. GTC Orders shall be available
for entry from the time prior to market open specified by the
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer a TIF of ``WAIT'' is
consistent with the Act because it will remove an order type that is
not in demand on NOM and simply the offerings provided by NOM. If the
Exchange desires to offer this TIF in the futures, it would file a
proposed rule change with the Commission pursuant to Section 19(b)(1)
of the Act.\48\ The Exchange has provided notice of its intention to
remove the TIF of ``WAIT''.\49\ BX previously offered a WAIT order type
recently and discontinued this order types because it was not being
utilized to a great extent.\50\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(1).
    \49\ See Options Trader Alert #2020-26.
    \50\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to note, within NOM Options 3, Section
7(c), the various routing options which are available is consistent
with the Act.
Options 3, Section 15
    The Exchange believes its proposal to clarify that Anti-
Internalization will not apply during an opening is consistent with the
Act as it would provide more specificity on how this functionality
currently operates. A similar change was recently made to BX's
Rules.\51\ The Exchange notes that the same procedures used during an
opening are used to reopen an option series after a trading halt, and
therefore proposes to specify that Anti-Internalization will not apply
during the opening (i.e., the opening and halt reopening processes).
During the opening, Market Makers are able to observe the primary
market and then determine how they would like to quote. They are not
required to quote in the opening on NOM. Therefore, Anti-
Internalization is unnecessary during an opening due to the high level
of control that Market Makers exercise over their quotes during this
process.
---------------------------------------------------------------------------

    \51\ See Securities Exchange Act Release No. 89759 (September 3,
2020). 85 FR 55877 (September 10, 2020) (SR-BX-2020-023).
---------------------------------------------------------------------------

Options 3, Section 23
    The Exchange's proposal to amend Options 3, Section 23, Data Feeds
and Trade Information, to update its descriptions of the ITTO data feed
is consistent with the Act because the updated descriptions will bring
greater transparency to the Exchange's rules and more closely align
with current System operation.
    The Exchange's proposal will make clear that order imbalance
information is provided for both an opening and re-opening process.
Today, a re-opening process initiates after a trading halt has occurred
intra-day. Also, the Exchange's proposal notes the specific information
that would be provided, namely the size of matched contracts and size
of the imbalance. The Exchange believes that this additional context to
imbalance messages will provide market participants with more complete
information about what is contained in

the data feed. The Exchange notes that this information is available
today and the rule text is being amended to make clear what information
is currently provided.

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.
Options 1, Section 1
    The Exchange's proposal to amend the definition of ``Public
Customer'' to conform to Phlx's definition is intended to provide
greater specificity regarding what is meant by the term ``Public
Customer.'' This proposal does not impose an undue burden on
competition, rather it makes clear that a Public Customer could be a
person or entity and clarifies that a Public Customer is not a
Professional, as defined within Options 1, Section (a)(47).\52\ Today,
a Public Customer is not a Professional. In order to properly represent
orders entered on the Exchange, Participants are required to indicate
whether orders are ``Professional Orders.'' To comply with this
requirement, Participants are required to review their Public
Customers' activity on at least a quarterly basis to determine whether
orders, which are not for the account of a broker-dealer, should be
represented as Public Customer Orders or Professional Orders.\53\ A
Public Customer may be a Professional, provided they meet the
requirements specified within NOM Options 1, Section 1(a)(47). If the
Professional definition is not met, the order is treated as a Public
Customer order. The process for determining if a market participant
qualifies as a ``Professional'' is applicable to all Participants.
Also, this definition conforms to Phlx's definition at Options 1,
Section 1(b)(47).
---------------------------------------------------------------------------

    \52\ NOM Options 1, Section 1(a)(47) provides that, ``The term
``Professional'' means any person or entity that (i) is not a broker
or dealer in securities, and (ii) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s). A Participant or a Public Customer may,
without limitation, be a Professional. All Professional orders shall
be appropriately marked by Participants.''
    \53\ Participants conduct a quarterly review and make any
appropriate changes to the way in which they are representing orders
within five days after the end of each calendar quarter. While
Participants only will be required to review their accounts on a
quarterly basis, if during a quarter the Exchange identifies a
customer for which orders are being represented as Public Customer
Orders but that has averaged more than 390 orders per day during a
month, the Exchange will notify the Participant and the Participant
will be required to change the manner in which it is representing
the customer's orders within five days.
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence within Options 1,
Section 1(a)(47) which provides, ``A Participant or a Public Customers
may, without limitation, be a Professional,'' does not impose an undue
burden on competition. This sentence is confusing, unnecessary, and
adds no information to this defined term. By way of comparison, Phlx
Options 1, Section 1(b)(46) does not contain a similar sentence and
that sentence was recently removed from Nasdaq BX, Inc.'s (``BX'')
Rules.\54\ The Exchange adopted a Professional designation in 2010 \55\
and has differentiated Public and Professional customers since that
time. NOM proposes removing this sentence because it does not add
useful information to understanding who may qualify as a Professional.
---------------------------------------------------------------------------

    \54\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
    \55\ See Securities Exchange Act Release No. 63028 (October 1,
2010), 75 FR 62443 (October 8, 2010) (SR-NASDAQ-2020-099) (Order
Approving a Proposed Rule Change To Adopt a Definition of
Professional and Require That All Professional Orders Be
Appropriately Marked).
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence, within Options 3,
Section 10(a)(1)(C)(i), which allocation rule provides that a Public
Customer order does not include a Professional order does not impose an
undue burden on competition. Today, the definition of a Public Customer
does not explicitly exclude a Professional. Indicating that a Public
Customer order is not a Professional Order is no longer necessary
because of the proposed definition for Public Customer. The language
that the Exchange proposes to delete, currently indicates that
Professionals would not be treated the same as a Public Customer in
terms of priority and, therefore, would not receive the same allocation
that is reserved for Public Customer orders. Since NOM is amending the
definition of a Public Customer to explicitly exclude Professionals,
the language in the allocation rule is no longer necessary to
distinguish these two types of market participants.
Bid/Ask Differentials
    The Exchange's proposal to amend NOM Options 2, Section 5(d)(2) to
add the words ``Intra-Day'' before the title ``Bid/ask Differentials
(Quote Spread Parameters)'' and make clear that remove references to
the opening, will make clear for Market Makers their intra-day
requirements. The bid/ask differentials, within NOM Options 2, Section
5(d)(2), will continue to apply intra-day. This proposal does not
impose an undue burden on competition, rather it conform the Exchange's
existing practice. Today, the bid/ask differentials applicable to the
opening are noted within Options 3, Section 8(a)(6).\56\ As noted
within the rule, NOM publishes its specified bid/ask differential on
its system settings page.\57\ The bid/ask differentials noted for the
Valid Width NBBO within the opening provide for quotations with a
difference that does not exceed $5 between the bid and offer regardless
of the price of the bid. It is not necessary to discuss the opening
bid/ask differentials within Options 2, Section 5 as those
differentials are specifically noted within the opening rule. This
clarification avoids any confusion for Market Makers as to their intra-
day requirements versus their opening requirements.
---------------------------------------------------------------------------

    \56\ NOM Options 3, Section 8(a)(6) provides, ``Valid Width
National Best Bid or Offer'' or ``Valid Width NBBO'' shall mean the
combination of all away market quotes and any combination of NOM-
registered Market Maker orders and quotes received over the QUO or
SQF Protocols within a specified bid/ask differential as established
and published by the Exchange. The Valid Width NBBO will be
configurable by underlying, and tables with valid width
differentials will be posted by Nasdaq on its website. Away markets
that are crossed will void all Valid Width NBBO calculations. If any
Market Maker orders or quotes on NOM are crossed internally, then
all such orders and quotes will be excluded from the Valid Width
NBBO calculation.''
    \57\ NOM's System Settings page is located at: https://www.nasdaq.com/docs/2020/07/02/NOM_SystemSettings.pdf.
---------------------------------------------------------------------------

Options 3, Section 5
    The Exchange's proposal to amend Options 3, Section 5(c) to add
additional rule text similar to Phlx Options 3, Section 5(c) \58\ does
not impose an undue burden on competition. Today, NOM re-prices certain
orders to avoid locking and crossing away markets, consistent with its
Trade-Through Compliance and Locked or Crossed Markets obligations.\59\
Orders which lock or cross an away market automatically re-price one
minimum price improvement 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.\60\ The re-priced

order is displayed on OPRA. The order remains on NOM's Order Book and
is accessible at the non-displayed price.
---------------------------------------------------------------------------

    \58\ Phlx has an All-or-None Order type that is non-displayed.
See Options 3, Section 7(b)(5). Phlx Options 3, Section 5(c)
accounts for this non-displayed order on the order book. NOM has a
Price Improving Order is already described within Options 3, Section
5(c). A Price Improving Order on NOM displays differently than
Phlx's All-Or-None Order and therefore is described differently
within Options 3, Section 5(c). Otherwise, NOM has no other non-
displayed order types.
    \59\ See NOM Options 3, Section 5(d).
    \60\ See Options 5, Section 4 (Order Routing), which describes
the repricing of orders for both routable and non-routable orders
within Options 5, Section 4(a)(iii)(A), (B) and (C).
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to amend the Cancel-Replacement Order,
within Options 3, Section 7(a)(1), does not impose an undue burden on
competition. A Participant has the option of either submitting a cancel
order and then separately submitting a new order, which serves as a
replacement of the original order, in two separate messages, or
submitting a single cancel and replace order in one message (``Cancel-
Replacement Order''). Submitting a cancel order and then separately
submitting a new order will not retain the priority of the original
order. The Exchange's proposal to replace the words ``shall mean'' with
``is'' and remove the final sentence of the rule text will bring
greater clarity to this rule. The Exchange addition of a new sentence
to the end of the rule states in the affirmative the conditions under
which the Cancel-Replacement Order will retain priority. Price and size
are the terms that will determine if the Cancel-Replacement Order
retains its priority, as is the case today, other terms and conditions
do not amend the priority of the Cancel-Replacement Order.
    The Exchange's proposal is not amending the current System
functionality of a Cancel-Replacement Order with respect to the terms
that will cause the order to lose priority. Today, and with the
proposed change, if a Participant does not change or increase the size
of the order, it would not trigger a loss in priority. Options 3,
Section 7(a)(1) states only if the size of the order were reduced would
a loss of priority occur.\61\ Priority is retained if the size of the
order does not change or is not increased. The rule is intended to
provide transparency regarding changes to a Cancel-Replacement Order
which would trigger a loss in priority. Today, and with the proposal,
the price of the order may not be changed when submitting a Cancel-
Replacement Order; that would be a new order. A similar change was
recently made to BX's Cancel-Replacement Order.\62\ Price and size are
the terms that will determine if the Cancel-Replacement Order retains
its priority, as is the case today, other terms and conditions do not
amend the priority of the Cancel-Replacement Order.
---------------------------------------------------------------------------

    \61\ Options 3, Section 7(a)(1) provides, ``The replacement
order will not retain the priority of the cancelled order except
when the replacement order reduces the size of the order and all
other terms and conditions are retained.''
    \62\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Limit Orders,'' within Options
3, Section 7(a)(3), to add the sentence for marketable limit orders
which is currently in BX's rule does not impose an undue burden on
competition. A Limit Order on NOM operates in the same manner as a
Limit Order on BX. The Exchange proposes to conform the rule text of
NOM's Limit Order to BX Options 3, Section 7(a)(3) by adding a sentence
describing marketable limit orders. BX recently amended its rule to
similarly change its description of Limit Order.\63\ The proposed text
more aptly describes a marketable limit order as compared to the
current rule text, which is confusing, but was intended to convey the
substance of the proposed text. The new sentence does not substantively
amend the current rule text and conforms NOM's description with BX's
description.
---------------------------------------------------------------------------

    \63\ Id.
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Minimum Quantity Orders,''
within Options 3, Section 7(a)(3), is non-substantive and makes
technical edits that do not change the meaning of the term. The
Exchange is otherwise not amending the Minimum Quantity Order rule
text.
    The Exchange's proposal to amend ``Market Orders,'' within Options
3, Section 7(a)(4), does not impose an undue burden on competition. The
Exchange's proposes to style ``Market Orders'' in the singular and
change ``are'' to ``is an'' and ``orders'' to ``order.'' These
amendments are technical and non-substantive. Market Orders submitted
during the opening may be executed, or cancelled if the Market Order is
priced through the opening price. The Exchange would only cancel those
Market Orders that remained on the Order Book once an option series
opened.\64\ The pre-established period of time would commence once the
intra-day trading session begins for that options series and the order
would be cancelled back to the Participant, provided the Participant
elected to cancel back its Market Orders. The Exchange's proposal makes
clear that while the opening is on-going, and the intra-day trading
session has not commenced, the pre-established period of time would not
commence.
---------------------------------------------------------------------------

    \64\ See NOM's opening rule at Options 3, Section 8(d)(2),
``After the opening, the Exchange shall reject Market Orders, as
defined in Options 3, Section 7, and shall notify Participants of
the reason for such rejection.''
---------------------------------------------------------------------------

    The proposal to note that ``Market Orders on the Order Book would
be immediately cancelled if an options series halted, provided the
Participant designated the cancellation of Market Orders'' does not
impose an undue burden on competition. Once an options series halts for
trading, the Exchange conducts another Opening Process. In the case
where a Market Order was resting on the Order Book, and the Participant
had designated the cancellation of Market Orders, in the event of a
halt, the Market Orders resting on the Order Book would immediately
cancel. This proposed rule text is consistent with existing System
functionality. The Exchange believes that this additional rule text
brings greater clarity to the Market Order type.
    The Exchange proposes to amend ``Price Improving Orders,'' within
Options 3, Section 7(a)(5) does not impose an undue burden on
competition. The Exchange proposes to style ``Price Improving Orders''
in the singular and change ``are'' to ``is an'' and ``orders'' to
``order'' are non-substantive amendments.
    The Exchange's proposal to amend ``On the Open Order,'' within
Options 3, Section 7(a)(6) by removing the words ``The term'' at the
beginning of the sentence and change ``shall mean'' to ``is'' are non-
substantive amendments.
    The Exchange's proposal to amend ``Intermarket Sweep Order'' or
``ISO'' Orders, within Options 3, Section 7(a)(7), with the exception
of Options 3, Section 7(a)(7)(1), which is being retained by re-
lettered as ``A,'' and addition of rule text does not impose an undue
burden on competition. The new rule text is similar to BX Options 3,
Section 7(a)(6).\65\
---------------------------------------------------------------------------

    \65\ BX's rule describes the PRISM mechanism, while NOM has no
auction mechanisms.
---------------------------------------------------------------------------

    An ISO Order is a Limit Order, as noted in the current text and
Options 5, Section 1, continues to be referenced in the proposed text.
The Exchange continues to note that the orders are not routable. The
additional text is more precise than the current rule text and
describes current functionality. The Exchange further proposes to
state, ``ISOs may be entered on the Order Book.'' That is also the case
today. The remainder of the current rule text is not necessary as
Options 5, Section 1(8) is cited. Removing the current rule text and
replacing it with text which describes the proper time-in-force
designation will make clear what is acceptable on NOM today. This rule
text is not proposed to change the

functionality of an ISO Order. The Exchange believes the proposed
description does not impose an undue burden on competition, rather it
provides a more succinct description.
    Today, ISOs may have any time-in-force designation, except WAIT,
and further requires that ISOs with a time-in-force designation of GTC
are treated as having a time-in-force designation of Day. The Exchange
proposes to remove the WAIT time-in-force within this proposed rule
change, as described in more detail below, and, therefore, the WAIT
order type no longer needs to be cited. NOM's System does not treat an
ISO with a time-in-force designation of GTC as having a time-in-force
designation of Day, as provided for within NOM's current rule at
Options 3, Section 7(a)(6), rather those orders are treated as GTC. The
current sentence is being removed because it is inaccurate. The
proposed sentence does not impose an undue burden on competition
because it accurately describes the System functionality. The Exchange
does not believe that an ISO with a time-in-force designation of GTC
was ever treated as having a time-in-force designation of Day, the rule
text was simply inaccurate.
    The Exchange's proposal to amend ``One-Cancels-the-Other Order''
within renumbered Options 3, Section 7(a)(8) does not impose an undue
burden on competition because the changes are technical in nature and
non-substantive.
    The Exchange's amendment to ``All-or-None Order,'' within
renumbered Options 3, Section 7(a)(9), is non-substantive and does not
change the meaning of the term.
    The Exchange's amendment to ``Post-Only Orders,'' within renumbered
Options 3, Section 7(a)(10), is non-substantive and does not change the
meaning of the term.
    The Exchange's proposal to amend the ``On the Open Order,'' or
``OPG'' Order, within Options 3, Section 7(b)(1), to note that OPGs may
not route, does not impose an undue burden on competition. The System
would not route an OPG Order today. This order type functions in the
same way as BX's OPG Order at Options 3, Section 7(b)(1).\66\ The
Exchange is adding rule text to make clear the manner in which an OPG
Order would be treated, which is similar to how a BX OPG Order is
treated today.
---------------------------------------------------------------------------

    \66\ BX Options 3, Section 7(b)(1) provides, ``An Opening Only
order (``OPG'') is entered with a TIF of ``OPG''. This order can
only be executed in the Opening Process pursuant to Options 3,
Section 8. This order type is not subject to any protections listed
in Options 3, Section 15. Any portion of the order that is not
executed during the Opening Process is cancelled. OPG orders may not
route.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend an ``Immediate-Or-Cancel'' Order
or ``IOC,'' within Options 3, Section 7(b)(2), does not impose an undue
burden on competition. The Exchange's proposal replaces the current
description with Phlx's description at Options 3, Section 7(c)(2) as
these order types are identical. The Exchange's proposal to state that
an Immediate-or-Cancel Order or ``IOC'' Order is a Market Order or
Limit Order to be executed in whole or in part upon receipt will bring
greater clarity to the rule. Further the Exchange's proposal to add
that any portion not so executed is cancelled is consistent with the
current description. The Exchange proposes to replace this description
with rule text similar to BX Options 3, Section 7(b)(2) \67\ as these
order types are identical, except that NOM has the OTTO protocol and BX
does not, and also as mentioned previously NOM has no auctions.
Additionally, BX's rule addresses limitations in order protections that
do not exist today on NOM. Today, IOC Orders entered through OTTO or
SQF do not route; only orders entered through FIX may route. The SQF
interface is a quoting interface, the Exchange does not route quotes.
With respect to OTTO, orders submitted by NOM Market Makers over this
interface are treated as quotes and similarly do not route.
---------------------------------------------------------------------------

    \67\ BX Options 3, Section 7(b)(2) provides, ``Immediate-or-
Cancel'' or ``IOC'' is a Market Order or Limit Order to be executed
in whole or in part upon receipt. Any portion not so executed is
cancelled. (A) Orders entered with a TIF of IOC are not eligible for
routing. (B) IOC orders may be entered through FIX or SQF, provided
that an IOC Order entered by a Market Maker through SQF is not
subject to the Limit Order Price Protection or the Market Order
Spread Protection in Options 3, Section 15(a)(1) and (a)(2),
respectively; (C) Orders entered into the Price Improvement Auction
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their
terms, these orders will be: (1) Executed after an exposure period,
or (2) cancelled.
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``DAY'' at Options 3,
Section 7(b)(3) to conform the description of a TIF of ``DAY'' to Phlx
Options 3, Section 7(c)(1) \68\ does not impose an undue burden on
competition. The Exchange believes the current text describing NOM's
Day TIF is unnecessarily verbose and proposes to remove this language.
A DAY Order on Phlx functions in the same way as a DAY Order on NOM.
The proposal is not amending the System functionality of a DAY Order.
The Phlx rule text is more succinct in describing this order type.
Similar changes were recently made on BX.\69\
---------------------------------------------------------------------------

    \68\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not
executed, an order entered with a TIF of ``Day'' expires at the end
of the day on which it was entered. All orders by their terms are
Day Orders unless otherwise specified. Day orders may be entered
through FIX.''
    \69\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``Good Til Cancelled''
or ``GTC'' at Options 3, Section 7(b)(4) does not impose an undue
burden on competition. The Exchange proposes to conform the rule text
to Phlx Options 3, Section 7(c)(4).\70\ The Exchange is not amending
the manner in which the System function with respect to GTC Orders. GTC
Orders, if not fully executed, will remain available for potential
display and/or execution unless cancelled by the entering party, or
until the option expires, whichever comes first. GTC Orders shall be
available for entry from the time prior to market open, as specified by
the Exchange, until market close, as is the case today. Also, today, a
GTC Order may only be entered through FIX. A GTC Order on Phlx
functions in the same way as a GTC Order on NOM. The Exchange believes
that the amended rule text will bring greater transparency to its
rules.
---------------------------------------------------------------------------

    \70\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully
executed, will remain available for potential display and/or
execution unless cancelled by the entering party, or until the
option expires, whichever comes first. GTC Orders shall be available
for entry from the time prior to market open specified by the
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer a TIF of ``WAIT'' does
not impose an undue burden on competition because it will remove an
order type that is not in demand on NOM and simply the offerings
provided by NOM. If the Exchange desires to offer this TIF in the
futures, it would file a proposed rule change with the Commission
pursuant to Section 19(b)(1) of the Act.\71\ The Exchange has provided
notice of its intention to remove the TIF of ``WAIT''.\72\ BX
previously offered a WAIT order type recently and discontinued this
order types because it was not being utilized to a great extent.\73\
---------------------------------------------------------------------------

    \71\ 15 U.S.C. 78s(b)(1).
    \72\ See Options Trader Alert #2020-26.
    \73\ See Securities Exchange Act Release No. 89476 (August 4,
2020). 85 FR 48274 (August 10, 2020) (SR-BX-2020-017).
---------------------------------------------------------------------------

    The Exchange's proposal to note, within NOM Options 3, Section
7(c), the various routing options which are available does not impose
an undue burden on competition.
Options 3, Section 15
    The Exchange believes its proposal to clarify that Anti-
Internalization will not

apply during an opening does not impose an undue burden on competition
as it would provide more specificity on how this functionality
currently operates. A similar change was recently made to BX's
Rules.\74\ The Exchange notes that the same procedures used during an
opening are used to reopen an option series after a trading halt, and
therefore proposes to specify that Anti-Internalization will not apply
during the opening (i.e., the opening and halt reopening processes).
During the opening, Market Makers are able to observe the primary
market and then determine how they would like to quote. They are not
required to quote in the opening on NOM. Therefore, Anti-
Internalization is unnecessary during an opening due to the high level
of control that Market Makers exercise over their quotes during this
process.
---------------------------------------------------------------------------

    \74\ See Securities Exchange Act Release No. 89759 (September 3,
2020). 85 FR 55877 (September 10, 2020) (SR-BX-2020-023).
---------------------------------------------------------------------------

Options 3, Section 23
    The Exchange's proposal to amend Options 3, Section 23, Data Feeds
and Trade Information, to update its descriptions of the ITTO data feed
does not impose an undue burden on competition because the updated
descriptions will bring greater transparency to the Exchange's rules
and more closely align with current System operation.
    The Exchange's proposal will make clear that order imbalance
information is provided for both an opening and re-opening process.
Today, a re-opening process initiates after a trading halt has occurred
intra-day. Also, the Exchange's proposal notes the specific information
that would be provided, namely the size of matched contracts and size
of the imbalance. The Exchange believes that this additional context to
imbalance messages will provide market participants with more complete
information about what is contained in the data feed. The Exchange
notes that this information is available today and the rule text is
being amended to make clear what information is currently provided.

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 \75\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\76\
---------------------------------------------------------------------------

    \75\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \76\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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-NASDAQ-2020-083 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-NASDAQ-2020-083. 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-NASDAQ-2020-083, and should be submitted
on or before January 5, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\77\
---------------------------------------------------------------------------

    \77\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27483 Filed 12-14-20; 8:45 am]
BILLING CODE 8011-01-P