[Federal Register Volume 84, Number 128 (Wednesday, July 3, 2019)]
[Notices]
[Pages 31937-31940]
[FR Doc No: 2019-14163]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86221; File No. SR-BX-2019-023]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Relocate the BX
Options Rules at Chapter IV, Securities Traded on BX

June 27, 2019.
    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 June 19, 2019, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to relocate the BX Options Rules (``BX
Options'') at Chapter IV (Securities Traded on BX Options) under the
Options 4 title in the Exchange's rulebook's (``Rulebook'') shell
structure.\3\
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    \3\ In 2017, the Exchange added a shell structure to its
Rulebook with the purpose of improving efficiency and readability
and to align its rules closer to those of its five sister exchanges,
The Nasdaq Stock Market LLC (``Nasdaq''); Nasdaq PHLX LLC; Nasdaq
ISE, LLC; Nasdaq GEMX, LLC; and Nasdaq MRX, LLC (``Affiliated
Exchanges''). The shell structure currently contains eight (8)
General sections which, once complete, will apply a common set of
rules to the Affiliated Exchanges. See Securities Exchange Act
Release No. 82174 (November 29, 2017), 82 FR 57492 (December 5,
2017) (SR-BX-2017-054).
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    The proposal also amends the rules as relocated to conform
primarily to the equivalent options rules in the Nasdaq ISE, LLC
(``ISE'') rulebook, as well as in one instance to the equivalent
options rule in the Nasdaq PHLX LLC (``Phlx'') rulebook.
    The proposal also amends Section 1 of Chapter I of the BX Options
Rules to add several definitions.
    The text of the proposed rule change is available on the Exchange's
website at http://nasdaqbx.cchwallstreet.com/, 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 relocate the rule text in Chapter IV
(Securities Traded on BX Options) to the Options 4 title in the
Rulebook's shell structure. For ease of reference and the purposes of
this filing, the relocated rules are herein described as the ``Options
Listing Rules.''
    The relocation of the Options Listing Rules is part of the
Exchange's continued effort to promote efficiency and the conformity of
its processes with those of the Affiliated Exchanges,\4\ and its goal
of harmonizing and uniformizing its rules.\5\
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    \4\ Id.
    \5\ This proposal is similar to the recent relocation of options
rules at Chapter IV (Securities Traded on NOM) under the Options 4
title in the Nasdaq rulebook. See Securities Exchange Act Release
No. 86022 (June 4, 2019), 84 FR 26912 (June 10, 2019) (SR-NASDAQ-
2019-047).
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    This proposed change is of a non-substantive nature. Moreover, the
relocation of the Options Listing Rules will facilitate the use of the
Rulebook by Members \6\ of the Exchange, who are members of other
Affiliated Exchanges; other market participants; and the public in
general. The relocated rules will be amended to reflect the equivalent
options rules in the ISE rulebook, but the changes are of a non-
substantive nature.
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    \6\ As defined by Exchange Rule 0120(i).
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    The overarching goal is to align BX Options rules with those of the
ISE. The Exchange is proposing to amend the rules for BX Options, most
notably the rule text in the Options Listing Rules concerning
securities traded on BX Options, but also adding several definitions to
Section1 of Chapter I.
    The vast majority of the changes are technical changes and made
throughout the Options Listing Rules. These minor

changes are designed to conform the BX Options rules to the equivalent
ISE rules, as well as to increase the clarity of the rules. This
includes some reorganization and renumbering within the Options Listing
Rules' subsections to ensure they remain consistent.
    The proposed changes that do not fit within the description above
are listed below, beginning with changes to Chapter I General
Provisions and followed by global changes to the Options Listing Rules.
The changes are then broken down by section within the Options Listing
Rules.
Proposed Changes to Chapter I
    The Exchange is proposing to add definitions to ``Section 1
Definitions''. Specifically, the terms ``class'' ``series'' and
``underlying security'' will be added to Section 1(a) as (73), (74),
and (75), respectively.\7\ The Exchange believes that using the
definitions for these terms as defined in the By-Laws of The Options
Clearing Corporation (``OCC'') uniformly across Nasdaq, Inc.'s
exchanges will help to align them. Providing uniform, clear and precise
definitions for these terms will provide consistency, lessen potential
confusion and add clarity for market participants.
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    \7\ See OCC By-Laws Article I-Definitions C.(11); S.(12); and
U.(3), respectively.
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Proposed Changes to the Options Listing Rules
Global Changes
    As described above, the current Options Listing Rules will be
amended throughout to change ``BX Options'' to ``the Exchange''. This
proposed change will add consistency throughout the chapter. ``BX
Regulation'' also will be changed to ``the Exchange'' throughout the
Options Listing Rules to update the appropriate references.
Additionally, there are a number of minor changes made throughout the
chapter to increase the clarity of the language, as well as renumbering
within the section to ensure it remains consistent.
Proposed Changes to Section 1 Designation of Securities
    This section will be amended to clarify that the options contracts
that are designated by reference to the issuer of the underlying
security can also be designated by reference to the name of the
underlying foreign currency. Additionally, it can be referenced by not
only the expiration month, but also by the expiration date.
Proposed Changes to Section 2 Rights and Obligations of Holders and
Writers
    This section will be amended to clarify that option contracts of
any class of options dealt in on the Exchange are subject to the
provisions of Options 4 and as set forth in the rules of the Clearing
Corporation. This change clarifies the rights and obligations of
holders and writers of option contracts.
Proposed Changes to Section 3 Criteria for Underlying Securities
    Section 3(i) of the Options Listing Rules is being replaced and
updated by incorporating the ISE version of the Exchange-Traded Fund
(``ETF'') option listing rule.\8\ Most of the changes in Section 3 of
the Options Listing Rules simply result from reorganization within the
section done to mirror the ISE rule and for greater clarity.
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    \8\ See ISE Rule 502(h).
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    Section 3(k)(ii) of the Options Listing Rules will be amended to
delete the language stating that the Exchange will ``employ the same
procedures to qualify underlying securities pursuant to this subsection
(k) as it employs in qualifying underlying securities pursuant to other
subsections of this Section 3.'' This deleted language is unnecessary
since it is redundant given that each of the other subsections in
Section 3 have procedures to qualify underlying securities plus it is
also not reflected in the ISE rule version being adopted for this
section.
    Section 3(m) will be deleted since the definition of ``Partnership
Unit'' is a remnant from the legacy Exchange ETF listing rule and is
unnecessary since it has never been used. It also is not reflected in
the ISE rule version being adopted for this section.
Proposed Changes to Section 4 Withdrawal of Approval of Underlying
Securities
    Section 4(a) of the Options Listing Rules will be amended to add
flexibility for the Exchange to choose whether to decline new
additional series of options on the underlying security previously
approved.\9\ Currently, this section restricts this, but flexibility is
being added to give greater discretion about adding series and an
exception also will be added that opening transactions by market makers
executed to accommodate closing transactions of other market
participants may be permitted. This will provide the public with
greater protection since it will allow the Exchange to now decline new
additional series of options on the underlying security previously
approved that may not be in the best interests of the public.
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    \9\ See ISE Rule 503(a).
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    Section 4(h)(ii) of the Options Listing Rules will be amended to
change for options covering Exchange-Traded Fund Shares approved
pursuant to Section 3(i)(iv)(2) of Options 4, following the initial
twelve-month period beginning upon the commencement of trading in the
Exchange-Traded Fund Shares on a national securities exchange and are
defined as NMS stock under Rule 600 of Regulation NMS, that there were
fewer than 50 record and/or beneficial holders of such Exchange-Traded
Fund Shares for 30 or more consecutive trading days rather than as it
is currently stated for 30 consecutive days. It is only on trading days
that the information regarding 50 record and/or beneficial holders can
be ascertained. Also, the change is consistent with the ISE rule.\10\
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    \10\ See ISE Rule 503(h)(2).
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Proposed Changes to Section 6 Series of Options Contracts Open for
Trading
    Section 6(a) of the Options Listing Rules will be amended to add to
note that exercise-price setting parameters adopted as part of the
Options Listing Procedures Plan will be included in Supplementary
Material .02 Select Provisions of Options Listing Procedures Plan.
    In order to mirror the equivalent ISE rules,\11\ Section 6(d)iv of
the Options Listing Rules will be amended to incorporate, in large
part, former Supplementary Material .03 within Section 6 itself. Also,
Section 6(d)v of the Options Listing Rules will be relocated to .10 of
the Supplementary Material to Section 6 of the Options Listing
Rules.\12\
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    \11\ See ISE Rule 504(g).
    \12\ See ISE Supplementary Material .09 to Rule 504.
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    Supplementary Material .01(a) and (b) to Section 6 will detail the
$1 Strike Price Interval Program and will replace .01 and .02 of the
Supplementary Material to Section 6. Select Provisions of Options
Listing Procedures Plan (``OLPP'') will be added as Supplementary
Material .02 to Section 6.
    Supplementary Material. 03 and .04 will detail the Short Term
Option Series Program \13\ and the Quarterly Options Series
Program,\14\ respectively, and each will be consistent with the
equivalent ISE rule.
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    \13\ See ISE Supplementary Material .02 to Rule 504.
    \14\ See ISE Supplementary Material .03 to Rule 504.
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    .05 of the Supplementary Material to Section 6 will be amended to
cover the intervals between strike prices for Mini-

Nasdaq 100 Index options series and will be consistent with the
equivalent ISE rule.\15\
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    \15\ See ISE Supplementary Material .04 to Rule 504.
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    The first sentence of .06 Range Limitations for New Option Series
of the Options Listing Rules has been deleted since it is covered in
.02 of the Supplementary Material to Section 6, but the definition of
OLPP has been moved to Section 6(a).
    The introductory paragraph to .02 of the Supplementary Material to
Section 6 of the Options Listing Rules details that the quote
mitigation strategy and is codified in the OLPP. Subsection (a) states
that the exercise price of each options series listed by the Exchange
is fixed at a price per share that is reasonably close to the price of
the underlying equity security, ETF or Trust Issued Receipt at or about
the time the Exchange determines to list such series. Subsection
(a)(ii) says that for new expiration months, the daily high and low of
all prices reported by all national securities exchanges on the day the
Exchange determines its preliminary notification of a new series. The
amended language will say that the price of the underlying security is
measured by, for new expiration months, the daily high and low of all
prices reported by all national securities exchanges on the day the
Exchange determines its preliminary notification of a new series rather
than on the day the Exchange determines to list a new series. This
change also mirrors the language in the ISE rules.\16\
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    \16\ See ISE Rule 504A(b)(i)(2).
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    Subsection (c) will be added to the Supplementary Material to
Section 6 of the Options Listing Rules to make clear that subsection
(a) of the Supplementary Material to Section 6 of the Options Listing
Rules will not permit the listing of series that are otherwise
prohibited by the rules of the Exchange or the OLPP. Additionally, to
the extent the rules of the Exchange permit the listing of new series
that are otherwise prohibited by the provisions of the OLPP, the
provisions of the OLPP will govern. These changes are consistent with
the ISE rules.\17\
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    \17\ See ISE Rule 504A(b)(v) and (vi).
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    Supplementary Material .16 U.S. Dollar-Settled Foreign Currency
Options (formerly Supplementary Material .09) will be amended to
reflect the language of the equivalent Phlx Rule since ISE does not
have U.S. Dollar-Settled Foreign Currency Options.\18\ Also, the
references to the continuity rules here (formerly Supplementary
Material .09(C)) and in Section 8. Long-Term Options Contracts have
been deleted since quoting obligations for long term options has
recently been updated and addressed in Phlx Rule 1081 and in BX Options
Chapter VII Section 6.
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    \18\ See Phlx Rule 1012(a)(iii).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\20\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the relocation of its Options Listing
Rules is a non-substantive change and is consistent with similar
filings by the Exchange for the relocation of its rules.\21\ As noted
above, the relocation of the Options Listing Rules is part of the
Exchange's continued effort to promote efficiency and the structural
conformity of its processes with those of the Affiliated Exchanges,\22\
and its goal of harmonizing and uniformizing its rules.\23\
Additionally, the relocation of the Options Listing Rules will
facilitate the use of the Rulebook by Members \24\ of the Exchange, who
are members of other Affiliated Exchanges; other market participants;
and the public in general.
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    \21\ See footnote 3.
    \22\ Id.
    \23\ See footnote 5.
    \24\ As defined by Exchange Rule 0120(i).
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    The majority of the changes are also consistent with the ISE
rulebook and the overarching goal is to align the BX Options rules with
those of the ISE. These changes include the change to subsection
(a)(ii) of the Supplementary Material to Section 6 to say that the
price of the underlying security is measured by, for new expiration
months, the daily high and low of all prices reported by all national
securities exchanges on the day the Exchange determines its preliminary
notification of a new series rather than on the day the Exchange
determines to list a new series.
    Another such change is amending the Options Listing Rules to change
for options covering Exchange-Traded Fund Shares approved pursuant to
Section 3(i)(iv)(2) of Options 4, following the initial twelve-month
period beginning upon the commencement of trading in the Exchange-
Traded Fund Shares on a national securities exchange and are defined as
NMS stock under Rule 600 of Regulation NMS, that there were fewer than
50 record and/or beneficial holders of such Exchange-Traded Fund Shares
for 30 or more consecutive trading days rather than as it is currently
stated for 30 consecutive days. It is only on trading days that the
information regarding 50 record and/or beneficial holders can be
ascertained. This change serves 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.
    The Exchange believes that amending Section 4(a) of the Options
Listing Rules to add flexibility for the Exchange to choose whether to
decline new additional series of options on the underlying security
previously approved will serve 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 since it will
allow the Exchange to now decline new additional series of options on
the underlying security previously approved that may not be in the best
interests of the public.
    The Exchange believe that adding definitions for the terms
``class'', ``series'', and ``underlying security'' to the BX Options
rulebook from the OCC By-Laws will help 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
through providing uniform, clear and precise definitions for these
terms and increase consistency, lessen potential confusion and add
clarity for market participants.\25\
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    \25\ See footnote 7.
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    As a result, the Exchange believes that the changes included in
this filing serve 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 since the changes are
intended to organize the Rulebook in a way that it will ease the
Members', market participants', and the general public's navigation and
reading of the rules.
    With respect to the proposed technical corrections to the rules,
the Exchange believes that these changes are consistent with the Act
because they will prevent investor confusion that may be caused by
including in the Rules incorrect rule citations and defunct rule text.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed change does not
impose a burden on competition because, as previously stated, it (i) is
of a non-substantive nature, (ii) is intended to harmonize the
structure of the Exchange's rules with those of its Affiliated
Exchanges, and (iii) is intended to organize the Rulebook in a way that
it will ease the Members', market participants', and the general
public's navigation and reading of the rules.
    Consequently, the Exchange does not believe that the proposed
changes implicate competition at all.

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 \26\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\27\
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    \26\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \27\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-BX-2019-023 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BX-2019-023. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BX-2019-023, and should be submitted on
or before July 24, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14163 Filed 7-2-19; 8:45 am]
BILLING CODE 8011-01-P