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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices
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proposed Designated Percentage for quotation obligations of Market Makers would be sufficient to ensure that there is adequate liquidity sufficiently close to the National Best Bid or Offer NBBO in Securities and to ensure fair and orderly markets. The Exchange notes that pursuant to proposed Rule 25210a1iii, there is nothing to preclude a Market Maker from entering trading interest at price levels that are closer to the NBBO, so Market Makers have the ability to quote must closer to the NBBO than required by the Designated Percentage requirement if they so choose.
The Exchange proposes in Rule 25210a4 that, in the event that price movements cause a Market Maker or DMMs quotations to fall outside of the National Best Bid Offer or last sale price in the event there is no National Best Bid Offer by a given percentage, with such percentage called the Defined Limit, in a Security for which they are a Market Maker, the Market Maker or DMM must enter a new bid or offer at not more than the Designated Percentage away from the National Best Bid Offer in that Security. The Exchange proposes that the Defined Limit shall be 31.5%.245 Under the proposed Rules, a Market Makers quotations must be firm and automatically executable for their size, and, to the extent the Exchange finds that a Market Maker has a substantial or continued failure to meet its quotation obligations, such Market Maker may face disciplinary action from the Exchange.246 Under the proposed Market Maker and DMM Rules, Market Makers and DMMs two-sided quotation obligations must be maintained for a quantity of a normal unit of trading which is defined as one Security.247 The Exchange believes that Securities may initially trade in smaller increments relative to other listed equities and that reducing the two-sided quoting increment from one round lot i.e., 100
shares to one Security will be sufficient to meet liquidity demands and would make it easier for Market Makers and DMMs to meet their quotation obligations, which in turn incentivize more Market Maker participation.
Designated Percentage for Tier 2 NMS stocks priced below $1.00 is 30% and for Tier 2 NMS stocks priced above $1.00 is 28%.
245 See proposed Rule 25210a1ii3.
246 See proposed Rule 25210b and c. Pursuant to proposed Rule 25310d, a BSTX Market Maker, other than a DMM, may apply for a temporary withdrawal from its Market Maker status provided it meets certain conditions such a demonstrating legal or regulatory requirements that necessitate its temporary withdrawal.
247 See proposed Rule 25210a1.

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The Exchange notes that proposed Rule 25210 is substantially similar to NYSE American Rule 7.23E, with the exceptions of: i The modified normal unit of trading, Designated Percentage, and Defined Limit as discussed above;
ii specifying that the minimum quotation increment shall be $0.01; and iii specifying that Market Maker quotations must be firm for their displayed size and automatically executable. The Exchange believes that the additional specifications with respect to the minimum quotation increment and firm quotation requirement will add additional clarity to the expectations of Market Makers on the Exchange.
Proposed Rule 25220 sets forth the registration requirements for a DMM.
Under proposed Rule 25220, a DMM
must be a registered Market Maker and be approved as a DMM in order to receive an allocation of Securities pursuant to proposed Rule 25230, which is described below.248 For Securities in which a Participant serves as a DMM, it must meet the same obligations as if it were a Market Maker and must also maintain a bid or offer at the National Best Bid and Offer at least 25% of the day measured across all Securities in which such Participant serves as DMM.249 The proposed Rule provides, among other things, that a there will be no more than one DMM
per Security and that a DMM must maintain information barriers between the trading unit operating as a DMM and the trading unit operating as a BSTX
Market Maker in the same Security to the extent applicable.250 The Rule further provides a process by which a DMM may temporarily withdraw from its DMM status, which is similar to the same process for a BSTX Market Maker 251 and similar to the same process for DMMs on other exchanges.252 The Exchange notes that proposed Rule 25220 is substantially similar to NYSE American Rule 7.24E
with the exception that the Exchanges proposes to add a provision stating that the Exchange is not required to assign a DMM if the Security has an adequate number of BSTX Market Makers assigned to such Security. The purpose of this requirement is to acknowledge the possibility that a Security need not necessarily have a DMM provided that each Security has been assigned at least 248 See proposed 25220b. DMMs would be approved by the Exchange pursuant to an application process an sic.
249 See proposed Rule 25220c.
250 See proposed Rule 25220b.
251 See proposed Rule 25210d.
252 See e.g., NYSE American Rule 7.24Eb4.

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three active Market Makers at initial listing and two Market Makers for continued listing, consistent with proposed Rule 26106 Market Maker Requirement, which is discussed further below.
In proposed Rule 25230, the Exchange proposes to set forth the process by which a DMMs are allocated and reallocated responsibility for a particular Security. Proposed Rule 25230a sets forth the basic eligibility criteria for a when a Security may be allocated to a DMM, providing that this may occur when the Security is initially listed on BSTX, when it is reassigned pursuant to Rule 25230, or when it is currently listed without a DMM
assigned to the Security.253 Proposed Rule 2530a also specifies that a DMMs eligibility to participate in the allocation process is determined at the time the interview is scheduled by the Exchange and specifies that a DMM must meet with the quotation requirements set forth in proposed Rule 25220c DMM
obligations. The proposed Rule further specifies how the Exchange will handle several situations in which the DMM
does not meet its obligations, such as, for example, by issuing an initial warning advising of poor performance if the DMM fails to meet its obligations for a one-month period.254
Proposed Rule 25230b sets forth the manner in which a DMM may be selected and allocated a Security. Under proposed Rule 25230b, an issuer may select its DMM directly, delegate the authority to the Exchange to selects its DMM, or may opt to proceed with listing without a DMM, in which case a minimum of three non-DMM Market Makers at initial listing and two nonDMM Market Makers for continued listing must be assigned to its Security consistent with proposed Rule 26106.
Proposed Rule 25230b further sets forth provisions relating to the interview between the issuer and DMMs, the Exchange selection by delegation, and a requirement that a DMM serve as a DMM for a Security for at least one year unless compelling circumstances exist for which the Exchange may consider a shorter time period. Each of these 253 As previously noted, pursuant to proposed Rule 26106, a Security may, in lieu of having a DMM assigned to it, have a minimum of three nonDMM Market Makers at initial listing and two nonDMM Market Makers for continued listing to be eligible for listing on the Exchange. Consequently, a Security might not have a DMM when it initially begins trading on BSTX, but may acquire a DMM
later.
254 See proposed Rule 25230a4. The proposed handling of these scenarios where a DMM does not meet its obligations is substantially similar to parallel requirements in NYSE American Rule 7.25Ea4.

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