Skip to Content

Notice

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Relocate Rules From its Current Rulebook Into its New Rulebook Shell

Document Details

Information about this document as published in the Federal Register.

Document Statistics
Document page views are updated periodically throughout the day and are cumulative counts for this document including its time on Public Inspection. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day.
Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble November 5, 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 October 23, 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 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.

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

The Exchange proposes to relocate rules from its current Rulebook into its new Rulebook shell.

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 purpose of this rule change is to relocate BX rules into the new Rulebook shell with some amendments to the shell.[3] Nasdaq ISE, LLC (“ISE”), Nasdaq GEMX, LLC (“GEMX”) and Nasdaq MRX, LLC (“MRX”) recently relocated their rules.[4] BX proposes to relocate its rules so the Rulebook is similar to ISE, GEMX and MRX. The other Nasdaq affiliated markets will also relocate their Rulebooks in order to harmonize its rule structure, where applicable, across Nasdaq markets. The relocation and harmonization of the BX Rule structure is part of the Exchange's continued effort to promote efficiency and structural conformity of its rules with those of its Affiliated Exchanges. The Exchange believes that the placement of the BX Rules into their new location in the shell will facilitate the use of the Rulebook by Members and Members of Affiliated Exchanges.

The Exchange notes that the entire Rulebook is not being relocated at this time. Specifically, certain Equity Rules and the Disciplinary Rules are not being relocated. These rules will be relocated in other rule filings.

The Exchange proposes to update all cross-references within the Rule to the new relocated rule cites and also proposes to correct certain citations. The Exchange proposes to replace internal rule references to simply state “this Rule” where the rule is citing itself without a more specific cite included in the Rule. For example, if BX Chapter VI, Section 3 refers currently to “Chapter VI, Section 3” the Exchange will amend the phrase to simply “this Rule.” The Exchange proposes to conform numbering and lettering in certain rules to the remainder of the Rulebook. The Exchange proposes to reflect the use of the General Equity and Options Rules in place of Equity Rules, where applicable (i.e., an Equity Rule that currently applies to both equities and options). Finally, the Exchange proposes to delete Start Printed Page 61092any current Rules that are reserved in the Rulebook.

General 1

The Exchange proposes to relocate rule text from Rule 0111, “Adoption of Rules”, Rule 0112, “Effective Date”, Rule 0113, “Interpretation,” certain definitions from Rule 0120, “Definitions” and Rule 0121 “Definitions in the By-Laws of the Exchange” into General 1. The Exchange proposes to relocate certain definitions from Chapter VI, Section 1 into General 1.[5] The Exchange proposes to delete certain definitions which are repetitive.[6] The Exchange will also alphabetize the definitions within General 1 and conform the text where applicable. Definitions related to the equities rules [7] currently within Rule 1020 will be relocated into Equity 1 as explained below. The Exchange is conforming the format of all definitions. Finally, the Exchange notes that the description of “MarketWatch” was amended to remove the phrase “a unit of BX Regulation” because that phrase is repetitive.

General 2

General 2 would be comprised of the following rules:

Proposed new rule No.Current rule No.
Section 1Reserved.
Section 2Chapter VI, Section 16 Fees, Dues and Other Charges.
Section 3Reserved.
Section 42130. Nasdaq Ownership Restriction (re-title “Limitation on Affiliation between the Exchange and Members”).
Section 50130. Regulation of the Exchange and Its Members.
Section 60115. Applicability.
Section 70150. Regulatory Independence.
Section 80160. Delegation, Authority and Access.
Section 91130. Reliance on Current Membership List.
Section 101150. Executive Representative.
Section 111160. Contact Information Requirements.
Section 121170. The Exchange's Business Continuity and Disaster Recovery Plan Testing (re-title “Business Continuity and Disaster Recovery Plan Testing”).
Section 130140. Fingerprint-Based Background Checks of Employees and Independent Contractors.
Section 142140. Restrictions on Affiliation.
Section 153510. Business Continuity Plans.
Section 163520. Emergency Contact Information.

The Exchange is reserving Sections 1 and 3 at this time. The Exchange proposes to relocate Chapter VI, Section 16 Fees, Dues and Other Charges into the General section because this rule applies to both the equity and options products. This rule describes the power of BX's Board of Directors. The Exchange notes that the Board of Directors of BX has the power to set fees for the BX market, which includes fees for both options and equities.[8] The Exchange notes that Section 7, “Regulatory Independence” was amended to remove the placeholder for a date.

General 3

The Exchange proposes to relocate the rule text of Rule 1000, “Membership, Registration and Qualification Requirements” along with the title of Rule 1000 into General 3, Section 1.

General 4

The Exchange proposes to rename General 4 from “Regulation” to “Registration Requirements.”

General 9

The Exchange proposes to adopt a new General 9, titled “Regulation.” The Exchange proposes to relocate the following rules into General 9:

Proposed new rule No.Current rule No.
Section 12110, Standards of Commercial Honor and Principles of Trade; IM-2110-2, Trading Ahead of Customer Limit Order; IM-2110-3, Front Running Policy; IM-2110-4, Trading Ahead of Research Reports; IM-2110-5, Anti-Intimidation/Coordination; IM-2110-6, Confirmation of Callable Common Stock; IM-2110-7, Interfering With the Transfer of Customer Accounts in the Context of Employment Disputes; 2111, Trading Ahead of Customer Market Orders; and 2120, Use of Manipulative, Deceptive or Other Fraudulent Devices (re-title “General Standards”).
Section 22150, Customers' Securities or Funds; IM-2150, Segregation of Customers' Securities.
Section 32210, Communications with the Public; IM-2210-1, Guidelines to Ensure That Communications With the Public Are Not Misleading; and IM-2210-4, Limitations on Use of the Exchange's Name.
Section 42211, Institutional Sales Material and Correspondence.
Section 52212, Telemarketing.
Section 62251, Forwarding of Proxy and Other Issuer-Related Materials.
Section 72261, Disclosure of Financial Condition; 2262, Disclosure of Control Relationship with Issuer; and 2269, Disclosure of Participation or Interest in Primary or Secondary Distribution (re-title “Disclosure of Financial Condition, Control Relationship with Issuer and Participation or Interest in Primary or Secondary Distribution”).
Section 82266, SIPC Information.
Section 92290, Fairness Opinions.
Section 102310, Recommendations to Customers (Suitability); IM-2310-2, Fair Dealing with Customers; and IM-2310-3, Suitability Obligations to Institutional Customers.
Start Printed Page 61093
Section 112320, Best Execution and Interpositioning; and IM-2320, Interpretive Guidance with Respect to Best Execution Requirements.
Section 122340, Customer Account Statements.
Section 132341, Margin Disclosure Statement.
Section 142360, Approval Procedures for Day-Trading Accounts; and 2361, Day-Trading Risk Disclosure Statement.
Section 152370, Borrowing From or Lending to Customers.
Section 162430, Charges for Services Performed.
Section 172441, Net Transactions with Customers.
Section 182460, Payments for Market Making.
Section 192510, Discretionary Accounts.
Section 203010, Supervision; IM-3010-1, Standards for Reasonable Review; and IM-3010-2, Guidance on Heightened Supervision Requirements.
Section 213012, Supervisory Control System.
Section 223013, Annual Certification of Compliance and Supervisory Processes; and IM-3013, Annual Compliance and Supervision Certification.
Section 233030, Outside Business Activities of an Associated Person.
Section 243040, Private Securities Transactions of an Associated Person.
Section 253050, Transactions for or by Associated Persons.
Section 263060, Influencing or Rewarding Employees of Others.
Section 273070, Reporting Requirements.
Section 283080, Disclosure to Associated Persons When Signing Form U4.
Section 293090, Transactions Involving Exchange Employees.
Section 303110, Books and Records and IM-3110. Customer Account Information.
Section 313120, Use of Information Obtained in Fiduciary Capacity.
Section 323140, Approval of Change in Exempt Status Under SEC Rule 15c3-3.
Section 333150, Reporting Requirements for Clearing Firms; and IM-3150, Exemptive Relief.
Section 343160, Extensions of Time Under Regulation T and SEC Rule 15c3-3.
Section 352040, Nonregistered Foreign Finder.
Section 36Reserved.
Section 373011, Anti-Money Laundering Compliance Program.
Section 382520, Margin Requirements.
Section 393020, Fidelity Bonds.
Section 404110A, Capital Compliance.
Section 414120A, Regulatory Notification and Business Curtailment.
Section 424140A, Audit.
Section 43Reserved.
Section 44Reserved.
Section 45Reserved.
Section 46Reserved.
Section 47Reserved.
Section 484521A, Notifications, Questionnaires and Reports.
Section 495230A, Payments Involving Publications that Influence the Market Price of a Security.
Section 501090, Foreign Members.
Section 511050, Research Analyst.

The word “FINRA” is being added in certain places for greater clarity. The Exchange is amending Rule 2212, Telemarketing, to update the Rule reference to NASD Rule 2212 to FINRA Rule 3230 in light of a FINRA rule change.[9] The Exchange is amending Rule 3010, Supervision, as well as IM-3010-1, Standards for Reasonable Review, to update the Rule reference to NASD Rule 3010 to FINRA Rule 3110 and 3170, respectively, in light of a FINRA rule change.[10] The Exchange also proposes to remove rule text from IM-3010-1 which states, “FINRA is in the process of consolidating certain NASD rules into a new FINRA rulebook. If the provisions of NASD Interpretive Material 3010-1 are transferred into the FINRA rulebook, then Equity Interpretive Material 3010-1 shall be construed to require Exchange members and persons associated with a member to comply with the FINRA rule corresponding to NASD Interpretive Material 3010-1 (regardless of whether such rule is renumbered or amended) as if such rule were part of the Rules of the Exchange.” The consolidation has already occurred with respect to this rule. The Exchange proposes to amend NASD Rule 3070 references within Rule 3070, Reporting Requirements, to FINRA Rule 4530 pursuant to a FINRA rule change.[11] The Exchange will also separately file another rule change to amend other NASD Rule references to the FINRA Rulebook. Finally, the Exchange is updating incorrect references to NASD Rules within General 9, Sections 3, 23 and 24.

Equity Rules

The Exchange proposes to amend the Equity Rules to re-title certain chapters in the new Rulebook. The Exchange proposes to relocate certain definitions currently within Rule 0120, Definitions, into Equity 1.[12] The Exchange proposes to re-title Equity 2 from “Equity Trading Rules” to “Equity Market Participants.” The Exchange proposes to re-title Equity 3 from “Equity Market Participants” to “Equity Trading Rules.” The Exchange proposes to title Equity 4, which is currently reserved, as “Limit Up-Limit Down.” The Exchange proposes to reserve Equity 6, which is currently titled “Limit Up-Limit Down.” The Exchange proposes to title Equity 10, which is currently reserved, as “BX Start Printed Page 61094Venture Market Listing Rules.” Finally, the Exchange proposes to remove Equity 11, which is titled “BX Venture Market Listing Rules.”

Options 1

The Exchange proposes to rename current Options 1 from “Options Definitions” to “General Provisions.” The Exchange proposes to relocate and alphabetize certain definitions from Chapter I, Section 1 into proposed General 1, Section 1. The Exchange also proposes to relocate definitions from Chapter VI, Section 1(a)-(c) and (h) into Options 1, Section 1. Certain definitions within Chapter 1, Section 1 and Chapter VI, Section 1 apply to both equities and options. These definitions [13] will be relocated to General 1, Section 1 from Chapter I, Section 1 and Chapter VI, Section 1. The Exchange proposes to conform the definitions by adding “the term” where necessary. The Exchange proposes to amend the term “System” from Chapter VI, Section 1 and apply that term to both “System” and “Trading System” and remove the separate definition for “Trading System” in Chapter I, Section 1(a)(62) which creates a circular reference to the term “System.” The Exchange also proposes to eliminate the defined term “Participant” from Chapter VI, Section 1. The Exchange defines an “Options Participant” or “Participant” within its rules today. The separate defined term” Participant” is confusing and unnecessary. The term “Exchange” is redundant of the same terms that was already being relocated to General 1 from the Equity Rules. The Exchange proposes to delete the terms “Exchange” and “Order Entry Firms” in this rule because they are duplicative.

In addition the Exchange proposes to relocate the following rules into Options 1:

Proposed new rule No.Current rule No.
Section 1Chapter I, Section 1, Definitions and Chapter VI, Section 1(a)-(c) and (h).
Section 2Chapter I, Section 2, Applicability.
Section 3Chapter I, Section 3, Regulation of BX and its Members.

The Exchange proposes to relocate Chapter V, Section 2, MarketWatch, to the end of the defined term “MarketWatch” which is currently within Chapter I, Section 1 and is being relocated to General 1 as that term applies to both options and equities. The sentence is merely descriptive and adds to the already defined term. The Exchange proposes to relocate Chapter VII, Section 1, Customer Orders and Order Entry Firms, into a definition for Order Entry Firms within Options 1, Section 1.

Options 2

The Exchange proposes to rename Options 2 from “Options Trading Rules” to “Options Market Participants” and relocate the following rules into this chapter:

Proposed new rule No.Current rule No.
Section 1Chapter VII, Section 2, Market Maker Registration; and Section 3 Continuing Market Maker Registration (re-title as “Registration of Market Makers”).
Section 2Reserved.
Section 3Chapter VII, Section 13, Lead Market Makers Allocations (re-title as “Lead Market Maker Allocations”).
Section 4Chapter VII, Section 5, Obligations of Market Makers; and Section 14, LMM Obligations and Quotations (re-title as “Obligations of Market Makers and Lead Market Makers”).
Section 5Chapter VII, Section 6, Market Maker Quotations.
Section 6Reserved.
Section 7Chapter VII, Section 7, Securities Accounts and Orders of Market Makers.
Section 8Chapter VII, Section 9, Financial Requirements for Market Makers.
Section 9Chapter VII, Section 4, Good Standing for Market Makers.
Section 10Chapter VII, Section 15, Directed Market Makers.

The Exchange proposes to reserve Sections 2 and 6. The Exchange proposes to relocate Chapter VII, Section 8, Letters of Guarantee, to Options 6, Section 4. The Exchange proposes to relocate Chapter VII, Sections 11, Mass Cancellation of Trading Interest, and Section 12, Order Exposure Requirements, to Options 3, Sections 19 and 22. Chapter VII, Section 1, Customer Orders and Order Entry Firms, was relocated to the definitions as described herein.

Options 2A

The Exchange proposes a new Options Section 2A titled “Options Participation” and proposes to relocate the following rules into this chapter:

Proposed new rule No.Current rule No.
Section 1Chapter II, Section 1, Options Participation.
Section 2Chapter II, Section 2, Requirements for Options Participation.
Section 3Chapter II, Section 3, Persons Associated with Options Participants.
Section 4Chapter II, Section 4, Good Standing for Options Participants.

The Exchange proposes to reserve Sections 5-7.

Options 3

The Exchange proposes to rename Options 3 from “Options Market Participants” to “Options Trading Rules” and relocate the following rules into this chapter:Start Printed Page 61095

Proposed new rule No.Current rule No.
Section 1Chapter VI, Section 2, Days and Hours of Business.
Section 2Chapter VI, Section 3. Units of Trading; and Section 4, Meaning of Premium Quotes and Orders (combined into one rule and retitle as “Units of Trading and Meaning of Premium Quotes and Orders”).
Section 3Chapter VI, Section 5, Minimum Increments.
Section 4Chapter VI, Section 6, Entry and Display of Quotes.
Section 5Chapter VI, Section 7, Entry and Display of Orders.
Section 6Chapter V, Section 5, Unusual Market Conditions.
Section 7Chapter VI, Section 1(d)-(g) Definitions; and Chapter VI, Section 21 Order and Quote Protocols (re-title as “Types of Orders and Quote Protocols”).
Section 8Chapter VI, Section 8, BX Opening and Halt Cross (re-title as “Opening and Halt Cross”).
Section 9Chapter V, Section 3, Trading Halts; and Section 4, Resumption of Trading After a Halt (re-title as to “Trading Halts”).
Section 10Chapter VI, Section 10, Book Processing (re-title as “Order Book Allocation”).
Section 11Reserved.
Section 12Reserved.
Section 13Chapter VI, Section 9, Price Improvement Auction (“PRISM”).
Section 14Reserved.
Section 15Chapter VI, Section 18, Risk Protections.
Section 16Reserved.
Section 17Chapter VI, Section 22, Kill Switch.
Section 18Chapter VI, Section 23, Detection of Loss of Communication.
Section 19Chapter VII, Section 11, Mass Cancellation of Trading Interest.
Section 20Chapter V, Section 6, Nullification and Adjustment of Options Transactions including Obvious Errors.
Section 21Chapter V, Section 1, Access to and Conduct on BX Options; and Chapter VI, Section 20 Exchange Sharing of Participant-Designated Risk Settings (re-title as “Access to and Conduct on BX Options”).
Section 22Chapter VI [sic], Section 12, Limitations on Order Entry.
Section 23Chapter VI, Section 19, Data Feeds and Trade Information.
Section 24Chapter VI, Section 13, Transaction Price Binding.
Section 25Chapter VI, Section 12, Anonymity.
Section 26Chapter VI, Section 17, Message Traffic Mitigation.
Section 27Chapter V, Section 9, Limitation of Liability.
Section 28Reserved.

The Exchange proposes to combine the BX Rules and retitle them as indicated herein. The Exchange proposes to reserve certain rules. Chapter VI, Section 16, Fees, Dues and Other Charges was relocated to General 2 and Chapter VI, Sections 14, Authorization to Give Up, and Section 15, Submission for Clearance, were relocated to Options 6. The Exchange amended Options 3, Section 21(b)(8) to refer to Section 22 with describes the limitation on orders on BX.

Options 4

The Exchange proposes to amend Options 4, Options Listing Rules, to remove Section 5, which is reserved, and renumber Section 6, Series of Options Contracts Open for Trading, as Section 5.[14] The Exchange also proposes to reserve Section 6 and reserve a new Section 10.

Options 4A

The Exchange proposes to relocate rules within new proposed Options 4A, which is proposed to be titled “Options Index Rules” as follows:

Proposed new rule No.Current rule No.
Section 1Chapter XIV, Section 1, Application of Index Rules.
Section 2Chapter XIV, Section 2, Definitions.
Section 3Chapter XIV, Section 3, Designation of a Broad-Based Index.
Section 4Chapter XIV, Section 6, Designation of Narrow-Based and Micro-Narrow-Based Index Options.
Section 5Chapter XIV, Section 4, Dissemination of Information.
Section 6Chapter XIV, Section 5, Position Limits for Broad-Based Index Options.
Section 7Chapter XIV, Section 7, Position Limits for Industry and Micro-Narrow Based Index Options.
Section 8Reserved.
Section 9Chapter XIV, Section 8, Exemptions from Position Limits.
Section 10Chapter XIV, Section 9, Exercise Limits.
Section 11Chapter XIV, Section 10, Trading Sessions.
Section 12Chapter XIV, Section 11, Terms of Index Options Contracts.
Section 13Chapter XIV, Section 12, Debit Put Spread Cash Account Transactions.
Section 14Chapter XIV, Section 13, Disclaimers.
Section 15Chapter XIV, Section 14, Exercise of American-Style Index Options.
Section 16Reserved.
Start Printed Page 61096

The Exchange proposes to add a clarifying note to Options 4A, Supplementary Material .01 to Section 2 to explain that no reporting authorities are listed because BX does not currently list index options.

Options 5

The Exchange proposes to rename Options 5 from “Options Trade Administration” to “Order Protection and Locked and Crossed Markets.” The current rules [15] within Options 5 are being relocated into Options 6B.

The Exchange proposes to relocate the following rules within Options 5 as follows:

Proposed new rule No.Current rule No.
Section 1Chapter XII, Section 1, Definitions.
Section 2Chapter XII, Section 2, Order Protection.
Section 3Chapter XII, Section 3, Locked and Crossed Markets.
Section 4Chapter VI, Section 11(a), Order Routing.
Section 5Chapter VI, Section 11(b) to be titled “Cancellation of Orders and Error Account”.

The definitions of “Exchange Act” and “SEC” are being removed from Chapter XII, Section 1, Definitions, as these terms are repetitive of definitions within General 1.

Options 6

The Exchange proposes rename Options 6 from “Order Protection and Locked and Cross Markets” to “Options Trade Administration” and relocate rules within Options 6 as follows:

Proposed new rule No.Current rule No.
Section 1Chapter VI, Section 14, Authorization to Give Up.
Section 2Chapter VI, Section 15, Submission for Clearance.
Section 3Reserved.
Section 4Chapter VII, Section 8, Letters of Guarantee.

Options 6A

The Exchange proposes to relocate rules within new proposed Options 6A titled “Closing Transactions” as follows:

Proposed new rule No.Current rule No.
Section 1Chapter X, Section 6, Contracts of Suspended Participants.
Section 2Chapter V, Section 8, Failure to Pay Premium.

Options 6B

 The Exchange proposes to relocate rules within new proposed Options 6B titled “Exercises and Deliveries” as follows:

Proposed new rule No.Current rule No.
Section 1Options 5, Section 101, Exercise of Options Contracts.
Section 2Options 5, Section 102, Allocation of Exercise Notices.
Section 3Options 5, Section 103, Delivery and Payment.

Options 6C

The Exchange proposes to relocate rules within new proposed Options 6C titled “Margins” as follows:

Start Printed Page 61097
Proposed new rule No.Current rule No.
Section 1Chapter XIII, Section 1, General Rule.
Section 2Chapter XIII, Section 2, Time Margin Must Be Obtained.
Section 3Chapter XIII, Section 3, Margin Requirements.
Section 4Reserved.
Section 5Chapter XIII, Section 4, Margin Required Is Minimum.
Section 6Reserved.

Chapter XIII, Section 5, Joint Back Office Participants, is being relocated to Options 6D.

Options 6D

The Exchange proposes to relocate rules within new proposed Options 6D titled “Net Capital Requirements” as follows:

Proposed new rule No.Current rule No.
Section 1Reserved.
Section 2Reserved.
Section 3Reserved.
Section 4Chapter XIII, Section 5, Joint Back Office Participants.

With respect to the relocation of Joint Back Office Participants, Supplementary Material .01 was removed and the text was retained as part of the main rule in paragraph (c) of Section 4.

Options 6E

The Exchange proposes to relocate rules within new proposed Options 6E titled “Records, Reports and Audits” as follows:

Proposed new rule No.Current rule No.
Section 1Chapter IX, Section 1, Maintenance, Retention and Furnishing of Books, Records and Other Information.
Section 2Chapter IX, Section 2, Reports of Uncovered Short Positions.
Section 3Chapter IX, Section 3, Financial Reports and Audits.
Section 4Reserved.
Section 5Chapter IX, Section 4, Automated Submission of Trade Data.
Section 6Chapter IX, Section 6, Risk Analysis of Market Maker Accounts.
Section 7Chapter IX, Section 5, Regulatory Cooperation.
Section 8Reserved.
Section 9Chapter V, Section 7, Audit Trail.

The Exchange proposes to relocate Chapter IX, Section 7, Anti-Money Laundering Compliance Program, to Options 9, Section 21.

Options 7

The Exchange is updating cross-references within Options 7 to the introductory section of the Rule and Sections 2 and 4.

Options 9

The Exchange proposes to relocate rules within new proposed Options 9, which is currently reserved, and title the chapter as “Business Conduct.” The following rules will be relocated within Options 9 with certain rules reserved:

Proposed new rule No.Current rule No.
Section 1Reserved.
Section 2Chapter III, Section 1, Adherence to Law and Chapter III; and Section 2 Conduct and Compliance with Rules (re-title as “Adherence to Law and Compliance with BX Options Rules”).
Section 3Reserved.
Section 4Chapter III, Section 16, Disruptive Quoting and Trading Activity Prohibited.
Section 5Reserved.
Section 6Reserved.
Section 7Reserved.
Section 8Chapter III, Section 3, Rumors.
Section 9Chapter III, Section 4, Prevention of the Misuse of Material Nonpublic Information.
Section 10Chapter III, Section 5, Disciplinary Action by Other Organizations.
Section 11Chapter III, Section 6, Other Restrictions on Participants.
Section 12Chapter III, Section 15, Significant Business Transactions of Options Clearing Participants.
Section 13Chapter III, Section 7, Position Limits.
Section 14Chapter III, Section 8, Exemptions from Position Limits.
Section 15Chapter III, Section 9, Exercise Limits.
Section 16Chapter III, Section 10, Reports Related to Position Limits.
Section 17Chapter III, Section 11, Liquidation Positions.
Section 18Chapter III, Section 14, Limit on Outstanding Uncovered Short Positions.
Section 19Chapter III, Section 12, Other Restrictions on Options Transactions and Exercises.
Start Printed Page 61098
Section 20Chapter III, Section 13, Mandatory Systems Testing.
Section 21Chapter IX, Section 7, Anti-Money Laundering Compliance Program.
Section 22Reserved.
Section 23Reserved.

Options 10

The Exchange proposes to relocate rules within new proposed Options 10 titled “Doing Business with the Public” as follows:

Proposed new rule No.Current rule No.
Section 1Chapter XI, Section 1, Eligibility.
Section 2Chapter XI, Section 2, Registration of Options Principals.
Section 3Chapter XI, Section 3, Registration of Representatives.
Section 4Chapter XI, Section 5, Discipline, Suspension, Expulsion of Registered Persons.
Section 5Chapter XI, Section 6, Branch Offices.
Section 6Chapter XI, Section 7, Opening of Accounts.
Section 7Chapter XI, Section 8, Supervision of Accounts.
Section 8Chapter XI, Section 9, Suitability of Recommendations.
Section 9Chapter XI, Section 10, Discretionary Accounts.
Section 10Chapter XI, Section 11, Confirmation to Public Customers.
Section 11Chapter XI, Section 12, Statement of Accounts to Customers.
Section 12Chapter XI, Section 13, Statements of Financial Condition to Public Customers.
Section 13Chapter XI, Section 15, Delivery of Current Options Disclosure Documents and Prospectus.
Section 14Chapter XI, Section 16, Restrictions on Pledge and Lending of Customers' Securities.
Section 15Chapter XI, Section 17, Transactions of Certain Public Customers.
Section 16Chapter XI, Section 18, Guarantees.
Section 17Chapter XI, Section 19, Profit Sharing.
Section 18Chapter XI, Section 20, Assuming Losses.
Section 19Chapter XI, Section 21, Transfer of Accounts.
Section 20Chapter XI, Section 22, Communications with Public Customers; and Chapter XI, Section 14 Addressing of Communications to Public Customers (re-title as “Communications with Public Customers”).
Section 21Chapter XI, Section 23, Fidelity Bond.
Section 22Chapter XI, Section 24, Public Customer Complaints.
Section 23Chapter XI, Section 25, Telephone Solicitation.
Section 24Chapter XI, Section 4, Other Affiliations of Registered Persons.
Section 25Reserved.

The Exchange proposes to reserve Options 10, Section 25.

Options 11

Finally, the Exchange proposes to relocate Chapter X, Section 7 titled “Penalty for Minor Rule Violations” to Options 11 titled “Minor Rule Plan Violations” at Section 1. The Exchange proposes to relocate Chapter X, Section 1, “Imposition of Suspension,” Section 2, “Investigation Following Suspension Violations,” Section 3, “Reinstatement Following Suspension,” Section 4, “Failure to Obtain Reinstatement,” and Section 5, “Termination of Rights by Suspension,” into Options 11, Section 2, titled “Suspension.”

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act,[16] in general, and furthers the objectives of Section 6(b)(5) of the Act,[17] in particular, in that it is designed to promote just and equitable principles of trade and to protect investors and the public interest by bringing greater transparency to its rules by relocating its Rules into the new Rulebook shell together with other rules which have already been relocated. The Exchange's proposal is consistent with the Act and will protect investors and the public interest by harmonizing its rule structure, where applicable, across Nasdaq markets so that Members can readily locate rules which cover similar topics. The relocation and harmonization of the BX Rule structure is part of the Exchange's continued effort to promote efficiency and conformity of its processes with those of its Affiliated Exchanges. The Exchange believes that the placement of the BX Rules into their new location in the shell will facilitate the use of the Rulebook by Members. Specifically, the Exchange believes that market participants that are members of more than one Nasdaq market will benefit from the ability to compare Rulebooks.

The Exchange is not substantively amending rule text unless noted otherwise within this rule change. The renumbering, re-lettering, deleting reserved rules, amending cross-references and other minor technical changes will bring greater transparency to BX's Rule structure. ISE, GEMX and MRX have already relocated their Rulebooks. The other Nasdaq affiliated markets will also relocate their Rulebooks in order to harmonize its rule structure, where applicable, across Nasdaq markets. The Exchange believes its proposal will benefit investors and the general public by increasing the transparency of its Rulebook and promoting easy comparisons among the various Nasdaq Rulebooks.

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

The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed amendments do not impose an undue burden on competition because the Start Printed Page 61099amendments to relocate the Rules are non-substantive. This rule change is intended to bring greater clarity to the Exchange's Rules. Renumbering, re-lettering, deleting reserved rules and amending cross-references will bring greater transparency to BX's Rule structure.

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) of the Act [18] and Rule 19b-4(f)(6) thereunder.[19]

A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act [20] normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) [21] permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the Exchange could immediately relocate its rules. According to the Exchange, the proposal is intended to make it easier for members to locate the various Exchange rules, and is part of a larger effort to reorganize the Exchange's rules and those of its Affiliated Exchanges. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.[22]

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 change 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

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-2019-039. 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-2019-039, and should be submitted on or before December 3, 2019.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23

Jill M. Peterson,

Assistant Secretary.

End Signature End Preamble

Footnotes

3.  Previously, 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 PHLX LLC; ISE, GEMX and MRX (“Affiliated Exchanges”). See Securities Exchange Act Release No. 82174 (November 29, 2017), 82 FR 57492 (December 5, 2017) (SR-BX-2017-054).

Back to Citation

4.  See Securities Exchange Act Release Nos. 86138 (June 18, 2019), 84 FR 29567 (June 24, 2019) (SR-ISE-2019-17); 86346 (July 10, 2019) 84 FR 33999 (July 16, 2019) (SR-GEMX-2019-08); and 86424 (July 22, 2019), 84 FR 36134 (July 26, 2019) (SR-MRX-2019-15).

Back to Citation

5.  See note 13 below.

Back to Citation

6.  The Exchange proposes to delete the term “Exchange Act” and “SEC” or “Commission.”

Back to Citation

7.  The terms “Customer,” “Delegation Agreement,” “Equity Rules,” “Grandfathered Rules,” “Nasdaq BX Equities LLC” or BX Equities LLC,” “Nasdaq BX Equities Market” or “System,” and “Security” are being relocated into Equity 1 of the Rulebook as these terms are specific to the equity market.

Back to Citation

8.  See By-Laws of BX, Article XII, Section 12.4 which provides the Board authority to set fees. In addition, the Exchange proposes to amend the word “Participant” in this rule to “member” to clearly indicate all members are subject to the Rule.

Back to Citation

9.  See Securities Exchange Act Release No. 66279 (January 30, 2012), 77 FR 5611 (February 3, 2012) (SR-FINRA-2011-059).

Back to Citation

10.  See Securities Exchange Act Release No. 71179 (December 23, 2013), 79 FR 79542 (December 30, 2013) (SR-FINRA-2013-025).

Back to Citation

11.  See Securities Exchange Act Release No. 63260 (November 5, 2010), 75 FR 69508 (November 12, 2010) (SR-FINRA-2010-034).

Back to Citation

12.  See note 13 below. The term “Exchange Manual” is being eliminated.

Back to Citation

13.  The following definitions are being relocated from Chapter I, Section 1 and Chapter VI, Section 1 into General 1, Section 1: “Board,” “BX,” “BX Regulation,” “BX Rules,” “he,” “him,” or “his,” “MarketWatch,” “primary market,” “SEC” or Commission,” and “SRO.”

Back to Citation

14.  The corresponding rule numbers are changing for removals of certain sections.

Back to Citation

15.  Options 5 currently includes the following rules: Section 101 Exercise of Options Contracts, Section 102 Allocation of Exercise Notices, and Section 103, Delivery and Payment.

Back to Citation

19.  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.

Back to Citation

21.  17 CFR 240.19b-4(f)(6)(iii).

Back to Citation

22.  For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

Back to Citation

[FR Doc. 2019-24499 Filed 11-8-19; 8:45 am]

BILLING CODE 8011-01-P