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Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Notices
A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Options 2, Section 10, Directed Market Makers, Options 3, Section 26, Message Traffic Mitigation, and Options 3, Section 27 Limitation of Liability. The Exchange also proposes to amend Options 10, Doing Business With The Public: Section 5, Branch Offices, Section 6, Opening of Accounts, and Section 9, Discretionary Accounts. Each change shall be described below.
Options 2, Section 10
The Exchange proposes to amend Options 2, Section 10, Directed Market Makers, to more explicitly describe, within subparagraph a1 of that rule, the price at which a Directed Market Maker must be quoting at to execute against the Directed Order. Today, the rule provides, When the Exchanges disseminated price is the NBBO at the time of receipt of the Directed Order, and the Directed Market Maker is quoting at or improving the Exchanges disseminated price, the Directed Order shall be automatically executed and allocated in accordance with Options 3, Section 10 such that the Directed Market Maker shall receive a Directed Market Maker participation entitlement provided for therein. The Exchange proposes to more explicitly provide, When the Exchanges disseminated price is the NBBO at the time of receipt of the Directed Order, and the Directed Market Maker is quoting at the better of the internal BBO or the NBBO, the Directed Order shall be automatically executed and allocated in accordance with Options 3, Section 10 such that the Directed Market Maker shall receive a Directed Market Maker participation entitlement provided for therein.
Pursuant to Options 3, Section 4b6, A quote will not be executed at a price that trades through another market or displayed at a price that would lock or cross another market. If, at the time of entry, a quote would cause a locked or crossed market violation or would cause a trade-through violation, it will be repriced to the current national best offer for bids or the current national best bid for offers and displayed at one minimum price variance above for offers or below for bids the national best price. The re-priced quote may be better than the NBBO, but nondisplayed on BX.3 Therefore, the 3 Because the Exchange re-prices its quotes to avoid locking or crossing an away market, it may
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Exchange proposes to make clear that quoting at the Exchanges best price means quoting at the better of the internal BBO or the NBBO. The Exchange believes this amendment will bring greater clarity to the Directed Market Maker rule.
Options 3, Section 26
The Exchange proposes to amend Options 3, Section 26, Message Traffic Mitigation, to replace its current rule with a rule identical to Nasdaq Phlx LLC Phlx Options 3, Section 26.
Currently, BX Options 3, Section 26
provides, For the purpose of message traffic mitigation, based on BX Optionss traffic with respect to target traffic levels and in accordance with BX Optionss overall objective of reducing both peak and overall traffic:
a BX Options will periodically delist options with an average daily volume ADV of less than 100 contracts. BX will, on a monthly basis, determine the ADV for each series listed on BX Options and delist the current series and not list the next series after expiration where the ADV is less than 100 contracts. For options series traded solely on BX Options, BX will delay delisting until there is no open interest in that options series.
b BX Options will implement a process by which an outbound quote message that has not been sent, but is about to be sent, will not be sent if a more current quote message for the same series is available for sending.
This replace on queue functionality will be applied to all options series listed on the BX
Options Market in real time and will not delay the sending of any messages.
c When the size associated with a bid or offer increases by an amount less than or equal to a percentage never to exceed 20%
of the size associated with the previously disseminated bid or offer, BX Options will not disseminate the new bid or offer.
d All message traffic mitigation mechanisms which are used on BX Options will be identical for the OPRA top of the book broadcast.

With this proposal, the Exchange proposes to provide:
a The Exchange shall disseminate an updated bid and offer price, together with the size associated with such bid and offer, when:
1 the Exchanges disseminated bid or offer price increases or decreases;
2 the size associated with the Exchanges disseminated bid or offer decreases; or 3 the size associated with the Exchanges bid offer increases by an amount greater than or equal to a percentage never to exceed 20% of the size associated with previously be the case that the Exchanges non-displayed order book has a quote that is priced better than the NBBO. Therefore, the internal BBO would be the best price available on the Exchange at that time and would enable a Directed Market Makers quote to be automatically executed and allocated in accordance with Options 3, Section 10.

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disseminated bid offer. Such percentage, which shall never exceed 20%, will be determined by the Exchange on an issue-byissue basis and posted on the Exchanges website.

Current BX Options 3, Section 26a describes how BX would periodically delist options with an average daily volume of less than 100 contracts.
Further, pursuant to Options 3, Section 26a, BX would determine the ADV for each series listed on BX and monthly, delist the current series, and not list the next series after expiration where the ADV is less than 100 contracts.4 Options 3, Section 26a was intended to mitigate message traffic by requiring the Exchange to delist certain options.
While, today, BX does not delist options in accordance with Options 3, Section 26a, BX does delist options pursuant to Options 4, Section 5.5 Specifically, BX periodically delists options across its various listing programs pursuant to Options 4, Section 5 at Supplementary Material .01d, Supplementary Material .03d, and Supplementary Material .04f. In addition, BX recently filed to delist additional intervals across its weekly programs to further reduce message traffic.6 The Exchange notes that other Nasdaq affiliated markets also delist according to similar listing rules.7
The Exchanges process for delisting options pursuant to Options 4, Section 5 accomplishes the same objectives as originally intended for delisting pursuant to subparagraph a. The current delisting process utilized by BX
ensures mitigation of message traffic. At this time, the Exchange proposes to remove the rule text within Options 3, Section 26a, as BX does not delist in that manner today, and, instead, BX
proposes to continue to delist pursuant to Options 4, Section 5. BXs message traffic mitigation would not be impacted by the removal of Options 3, Section 26a because, today, BX is not delisting in that manner, rather it delists 4 For options series traded solely on BX, the Exchange will delay delisting until there is no open interest in that options series. See BX Options 3, Section 26a 5 BX currently delists options pursuant to Options 4, Section 5 at Supplementary Material .01d, Supplementary Material .03d, Supplementary Material .04f, and Supplementary Material .07.
6 See Securities Exchange Act Release No. 91125
February 12, 2021, 86 FR 10375 February 19, 2021 SRBX2020032 Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Options 4, Section 5, To Limit Short Term Options Series Intervals Between Strikes That Are Available for Quoting and Trading on BX.
7 See Phlx, Nasdaq ISE, LLC ISE, Nasdaq GEMX, LLC GEMX and Nasdaq MRX, LLC
MRX Options 4, Section 5.

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