[Federal Register Volume 82, Number 50 (Thursday, March 16, 2017)]
[Notices]
[Pages 14063-14065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05224]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80217; File No. SR-NASDAQ-2017-021]
Self-Regulatory Organizations; NASDAQ Stock Market, LLC; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Chapter X, Section 7(a) of the Exchange's Options Rules
March 10, 2017.
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 March 6, 2017, NASDAQ Stock Market, LLC (the ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule
[[Page 14064]]
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 Chapter X, Section 7(a) of the
Exchange's Rules applicable to the NASDAQ Options Market, LLC
(``NOM''), as described in further detail below.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaq.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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Chapter X,
Section 7(a) of the Exchange's rules (the ``Rules'') applicable to NOM,
which sets forth NOM's minor rule violation penalties and in
particular, penalties for violating Chapter III, Section 7 of the Rules
pertaining to position limits, so that these penalties are consistent
with those of NOM's sister exchange, the International Securities
Exchange, LLC (``ISE''), as well as other competing options exchanges.
Chapter III, Section 7 of the Exchange's Rules imposes position
limits for Options Participants in certain circumstances. Meanwhile,
Chapter X, Section 7(a) of the Rules assesses fines for minor rule
violations, including position limits violations, as follows.
First, for violations occurring in customer accounts, Section
7(a)(i) assesses fines based upon the cumulative number of violations
that occur over the course of a two year rolling period. For the first
six violations that occur during any such period, an Option Participant
will either be issued a letter of caution (to the extent that the
violations are up to five percent in excess of applicable limits) or
assessed $1 per contract (to the extent that the violations are more
than five percent in excess of applicable limits). For the seventh
through twelfth violations that occur during any such period, the fine
is $1 per contract over the limit, regardless of the extent of the
violations. Finally, for the thirteenth or any additional violations
that occur during any such period, the fine increases to $5 per
contract over the limit. Notwithstanding the above, the Rule provides
that the minimum fine that the Exchange shall assess is $100.
Second, for violations that occur in the accounts of Options
Participants (i.e., proprietary accounts and accounts of other Options
Participants), Section 7(a)(ii) again assesses fines based upon the
cumulative number of violations that occur over the course of a two
year rolling period. For the first three violations that occur in any
such period, an Option Participant will either be assessed a letter of
caution (to the extent that the violations are up to five percent in
excess of applicable limits) or $1 per contract (to the extent that the
violations are more than five percent in excess of applicable limits).
For the fourth through the sixth violations that occur during any such
period, the fine is $1 per contract over the limit, regardless of the
extent of the violations. Finally, for the seventh or any additional
violations that occur during any such period, the fine increases to $5
per contract over the limit. Notwithstanding the above, the Rule
provides that the minimum fine that the Exchange shall assess is $100.
The Exchange proposes to replace NOM's schedule of fines for
position limit violations to mirror the schedule of fines that ISE and
other exchanges apply to such violations. The ISE schedule of position
limits fines set forth in ISE Rule 1614(d)(1) is simpler and, in
certain instances, more stringent than the NOM schedule of fines. It
provides that for any cumulative violations of the ISE position limits
rule \3\ that occur during any rolling two year period, ISE assesses a
fine of $500 for the first offense, $1,000 for the second offense,
$2,500 for the third offense, and $5,000 for the fourth and each
subsequent offense. The ISE rule is identical to that which several
other exchanges employ.\4\ The proposed rule change conforms the fine
schedule of NOM to that of ISE.
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\3\ ISE Rule 1614(d)(1) counts as a single violation, provided
that such a violation is inadvertent: (i) A 1 trade date overage;
(ii) a consecutive string of trade date overage violations where the
position does not change or where a steady reduction in the overage
occurs; or (iii) a consecutive string of trade date overage
violations resulting from other mitigating circumstances.
\4\ See BATS BZX Exchange, Inc. Rule 25.3(a); C2 Options
Exchange Rule Chapter 17 (incorporating by reference CBOE Rule
17.50(g)(1); see also NYSE Arca, Inc. Rule 10.12(k)(i)(21) (imposing
fines of $1,000, $2,500, and $5,000 for the first, second, and third
violations, respectively while omitting corresponding verbiage that
defines the nature of a single violation subject to a fine).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\6\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanisms 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposed Rule change will be more
effective than the existing Rule in preventing manipulative acts and
practices and protecting investors because under the proposed Rule, the
Exchange will immediately impose a fine upon an Options Participant
that violates its position limits, and it will do so regardless of the
extent of the violation, as opposed to only imposing a fine (rather
than a caution letter) after the first six violations or to the extent
that a violation exceeds 5 percent of the applicable limits.
Moreover, the proposed Rule change promotes fairness and
consistency in the marketplace by harmonizing penalties across
exchanges for the same conduct. As noted above, the proposed schedule
of fines would be identical to the schedules of fines that ISE, BATS
BZX, and C2 Options Exchange presently employ, and similar to that
which NYSE Arca employs.
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 proposal will adopt the
same schedule of fines as exists at other exchanges and it will apply
the same schedule of fines to all Options Participants.
[[Page 14065]]
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) under the Act
\9\ normally does not become operative prior to 30 days after the date
of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\10\ the
Commission may designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposal may become operative upon filing. The Exchange has stated
that it is requesting this waiver so that it may implement the proposed
rule change at the earliest point in time possible. The Exchange
further stated that the proposed rule change promotes the protection of
investors and the public interest by imposing more immediate and
significant sanctions for violations of Exchange rules.
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\9\ Id.
\10\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that the proposal harmonizes the Exchange's
schedule of fines with respect to position limit violations with fines
currently imposed by other exchanges, and thus does not raise any new
or novel issues. For this reason, the Commission hereby waives the 30-
day operative delay requirement and designates the proposed rule change
as operative upon filing.\11\
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\11\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\12\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2017-021 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2017-021. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2017-021, and should
be submitted on or before April 6, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05224 Filed 3-15-17; 8:45 am]
BILLING CODE 8011-01-P