Quiero saber acerca de...

47344

Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

proposed changes, the Exchange seeks to streamline its product offerings and to reallocate Exchange resources to other business and risk management initiatives. While the Exchange will no longer offer this optional functionality to Market Makers, it will continue to offer similar quote management tools that would assist Market Makers with their efforts to manage their risk with respect to quotes on the Exchange. For example, Market Makers are currently able to send a mass purge request through Specialized Quote Feed SQF to pull their existing quotes from the market and inhibit the entry of new quotes until the Market Maker sends a message to the Exchange to reenter the System.9 Indeed, the Exchange has found that Market Makers utilize this SQF purge functionality instead of the Kill Switch quote removal tool when they want to remove their quotes from the market.
In addition, all Participants, including Market Makers, may contact the Exchanges market operations staff to request that the Exchange cancel any of their existing bids, offers, or orders in any series of options.10 Furthermore, the Exchange will continue to have mandatory System-enforced risk mechanisms that automatically remove quotes for the Market Maker once certain pre-set thresholds or conditions are met. This includes risk protections such as rapid fire risk controls 11 and cancel on disconnect.12
To effect the decommissioning of the quote removal Kill Switch, the 9 SQF is an interface that allows Market Makers to connect, send, and receive messages related to quotes and Immediate-or-Cancel Orders into and from the Exchange. Features include the following:
1 Options symbol directory messages e.g., underlying instruments; 2 system event messages e.g., start of trading hours messages and start of opening; 3 trading action messages e.g., halts and resumes; 4 execution messages; 5 quote messages; 6 Immediate-or-Cancel Order messages;
7 risk protection triggers and purge notifications;
and 8 opening imbalance messages. The SQF
Purge Interface only receives and notifies of purge requests from the Market Maker. Market Makers may only enter interest into SQF in their assigned options series. See Options 3, Section 7e1B.
10 See Options 3, Section 19.
11 The rapid fire risk controls automatically remove Market Maker quotes submitted over SQF
when certain firm-set thresholds are met. Once the thresholds are triggered, the Market Maker must send a re-entry indicator to re-enter the System. See Options 3, Section 15c2.
12 When the SQF Port detects the loss of communication with a NOM Participants Client Application because the Exchanges server does not receive a Heartbeat message for a certain time period nn seconds, the Exchange will automatically logoff the NOM Participants affected Client Application and automatically cancel all of the NOM Participants open quotes. Quotes will be cancelled across all Client Applications that are associated with the same NOM Options Market Maker ID and underlying issues. See Options 3, Section 18a.

VerDate Sep<11>2014

16:43 Aug 23, 2021

Jkt 253001

Exchange proposes to amend Options 3, Section 17 by eliminating all references to quote removal within this Rule. In connection with this change, the Exchange will also renumber current Options 3, Section 17aii and aiii as Options 3, Section 17ai and aii, respectively.
2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6b of the Act,13 in general, and furthers the objectives of Section 6b5 of the Act,14
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.
Additionally, the Exchange believes that the proposed rule change is consistent with the Section 6b5 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
Specifically, the Exchange does not believe that the proposed rule change will affect the protection of investors or the public interest or the maintenance of a fair and orderly market because no Market Makers have used the quote removal Kill Switch risk control in 2021. In addition, the Exchange notes that the use of this tool is completely optional, and the Exchange will continue to offer Market Makers similar risk management tools such as the SQF
mass quote purge functionality. As discussed above, the Exchange has found that Market Makers use the SQF
purge functionality much more frequently than the quote removal Kill Switch to pull their quotes from the market. Furthermore, Market Makers will retain the ability to contact market operations staff to manually purge their quotes from the market. In addition, the Exchange will continue to implement mandatory System-enforced risk mechanisms that automatically remove quotes for the Market Maker once certain pre-set thresholds or conditions are met i.e., rapid fire and cancel on disconnect.
Also, the Exchange believes that the low usage rate for the quote removal Kill Switch does not warrant the continuous resources necessary for System support of such tools. As a result, the Exchange also believes that the proposal will remove impediments to and perfect the mechanism of a free and open market and a national market system by 13 15
14 15

PO 00000

Fmt 4703

B. Self-Regulatory Organizations 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 rule change will allow the Exchange to decommission a risk management tool that is rarely, if ever, used on the Exchange. As discussed above, Market Makers currently have a variety of similar tools like the quote removal Kill Switch that allow them to pull their quotes from the market and inhibit the entry of new quotes, including the mass quote purge functionality on SQF that the Exchange has found Market Makers use much more frequently than the quote removal Kill Switch to achieve the same result.
As noted above, the Exchange will retain the ability for Participants to utilize Kill Switch to cancel orders and prevent new order submission. The Exchange does not believe that decommissioning the quote removal portion of the Kill Switch tool for Market Makers will impose an undue burden on competition because Market Makers are professional traders with their own risk settings, and have more sophisticated infrastructures than most other market participants.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received.

U.S.C. 78fb.
U.S.C. 78fb5.

Frm 00064

allowing the Exchange to reallocate System capacity and resources currently used to maintain this functionality to the development and maintenance of other business initiatives and risk management products.
As noted above, the Exchange will retain the ability for Participants to utilize Kill Switch to cancel orders and prevent new order submission. The Exchange does not believe that decommissioning the quote removal portion of the Kill Switch tool for Market Makers is unfairly discriminatory because Market Makers are professional traders with their own risk settings, and have more sophisticated infrastructures than most other market participants. Furthermore, as discussed above, the Exchange has determined that Market Makers currently use the mass purge functionality on SQF to pull their quotes from the market instead of using the quote removal Kill Switch tool to achieve the same result.

Sfmt 4703

E:FRFM24AUN1.SGM

24AUN1