Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 11.9, Primary Pegged Order, 60073-60075 [2017-27150]
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Federal Register / Vol. 82, No. 241 / Monday, December 18, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82301; File No. SR–
BatsBZX–2017–30]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
To Permit the Listing and Trading of
Managed Portfolio Shares; and To List
and Trade Shares of the Following
Under Proposed Rule 14.11(k):
ClearBridge Appreciation ETF,
ClearBridge Large Cap ETF,
ClearBridge MidCap Growth ETF,
ClearBridge Select ETF, and
ClearBridge All Cap Value ETF
December 12, 2017.
On June 1, 2017, Bats BZX Exchange,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to: (1) Adopt Rule 14.11(k)
(Managed Portfolio Shares); and (2) list
and trade shares of the ClearBridge
Appreciation ETF, ClearBridge Large
Cap ETF, ClearBridge MidCap Growth
ETF, ClearBridge Select ETF, and
ClearBridge All Cap Value ETF under
proposed Rule 14.11(k). The proposed
rule change was published for comment
in the Federal Register on June 19,
2017.3 On July 28, 2017, pursuant to
Section 19(b)(2) of the Exchange Act,4
the Commission designated a longer
period within which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
The Commission initially received four
comment letters on the proposed rule
change.6 On September 13, 2017, the
Commission instituted proceedings
under Section 19(b)(2)(B) of the
Exchange Act 7 to determine whether to
approve or disapprove the proposed
rule change.8 The Commission
subsequently received one comment
letter on the proposed rule change.9
Section 19(b)(2) of the Act 10 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of filing
of the proposed rule change. The
Commission, however, may extend the
period for issuing an order approving or
disapproving the proposed rule change
by not more than 60 days if the
Commission determines that a longer
period is appropriate and publishes the
reasons for such determination. The
proposed rule change was published for
notice and comment in the Federal
Register on June 19, 2017.11 December
16, 2017 is 180 days from that date, and
February 14, 2018 is an additional 60
days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change and the issues
raised in the comment letters that have
been submitted in connection therewith.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,12
designates February 14, 2018 as the date
by which the Commission shall either
approve or disapprove the proposed
rule change (File No. SR–BatsBZX–
2017–30).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–27148 Filed 12–15–17; 8:45 am]
daltland on DSKBBV9HB2PROD with NOTICES
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80911
(June 13, 2017), 82 FR 27925.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 81247,
82 FR 36031 (August 2, 2017). The Commission
designated September 17, 2017, as the date by
which it shall approve or disapprove, or institute
proceedings to determine whether to disapprove,
the proposed rule change.
6 See Letter from Gary L. Gastineau, President,
ETF Consultants.com, Inc., to Brent J. Fields,
Secretary, Commission, dated July 7, 2017; Letter
from Todd J. Broms, Chief Executive Officer, Broms
& Company LLC, to Brent J. Fields, Secretary,
Commission, dated July 10, 2017; Letter from James
J. Angel, Associate Professor of Finance,
Georgetown University, McDonough School of
Business, to the Commission, dated July 10, 2017;
and Letter from Terence W. Norman, Founder, Blue
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17:53 Dec 15, 2017
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Tractor Group, LLC, to Brent J. Fields, Secretary,
Commission, dated August 1, 2017. The comment
letters are available on the Commission’s website at:
https://www.sec.gov/comments/sr-batsbzx-2017-30/
batsbzx201730.htm.
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No. 81599,
82 FR 43621 (September 18, 2017).
9 See Letter from Terence W. Norman, Founder,
Blue Tractor Group, LLC, to Brent J. Fields,
Secretary, Commission, dated December 5, 2017.
The comment letter is available on the
Commission’s website at: https://www.sec.gov/
comments/sr-batsbzx-2017-30/batsbzx201730.htm.
10 15 U.S.C. 78s(b)(2).
11 See supra note 3 and accompanying text.
12 15 U.S.C. 78s(b)(2).
13 17 CFR 200.30–3(a)(57).
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60073
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82303; File No. SRCboeBYX–2017–002]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Exchange Rule 11.9, Primary Pegged
Order
December 12, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
29, 2017, Cboe BYX Exchange, Inc.
(‘‘BYX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange has designated this proposal
as a ‘‘non-controversial’’ proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)
thereunder,4 which renders it effective
upon filing with the Commission. 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 filed a proposal to
amend paragraph (c)(8)(A) of Exchange
Rule 11.9, Primary Pegged Order, to
restrict the Time-In-Force (‘‘TIF’’)
instruction that a displayed Primary
Pegged Order that includes a Primary
Offset Amount (defined below) may
have to Regular Hours Only (‘‘RHO’’) 5
or Day 6 if entered during Regular
Trading Hours.7
The text of the proposed rule change
is available at the Exchange’s website at
www.markets.cboe.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 See Exchange Rule 11.9(b)(7) (defining a TIF of
RHO as a limit or market order that is designated
for execution only during Regular Trading Hours).
6 See Exchange Rule 11.9(b)(2) (defining a TIF of
Day as a limit order to buy or sell which, if not
executed, expires at the end of Regular Trading
Hours).
7 Regular Trading Hours is defined as the time
between 9:30 a.m. and 4:00 p.m. Eastern Time. See
Exchange Rule 1.5(w).
2 17
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60074
Federal Register / Vol. 82, No. 241 / Monday, December 18, 2017 / Notices
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 parts of such
statements.
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
daltland on DSKBBV9HB2PROD with NOTICES
1. Purpose
The Exchange proposes to amend
paragraph (c)(8)(A) of Exchange Rule
11.9, Primary Pegged Order, to restrict
the TIF instruction that a displayed
Primary Pegged Order with a Primary
Offset Amount may have to RHO, or if
entered during Regular Trading Hours, a
TIF instruction of Day. Exchange Rule
11.9(c)(8) describes a Pegged Order as a
limit order that after entry into the
System,8 the price of the order is
automatically adjusted by the System in
response to changes in the National Best
Bid or Offer (‘‘NBBO’’). Exchange Rule
11.9(c)(8)(A) states that a User 9 entering
a Pegged Order can specify that such
order’s price will offset the inside quote
on the same side of the market by an
amount set by the User (‘‘Primary Offset
Amount’’). The Primary Offset Amount
for a displayed Primary Pegged Order
must result in the price of such order
being inferior to or equal to the inside
quote on the same side of the market.
Some available TIF instructions
enable a Primary Pegged Order to expire
at a time past the end of Regular Trading
Hours at 4:00 p.m. Eastern Time. These
TIF instructions are Good-‘til Extended
Day (‘‘GTX’’), Good-‘til Day (‘‘GTD’’),
Pre-Opening Session ‘til Extended Day
(‘‘PTX’’), and Pre-Opening Session ‘til
Day (‘‘PTD’’).10
The Exchange has observed that
Primary Pegged Orders displayed on the
BYX Book with non-aggressive Primary
Offset Amounts and similar orders
entered on away exchanges that remain
active after the end of Regular Trading
Hours may be pegged to and repriced off
of each other during extended hours
8 See
Exchange Rule 1.5(aa).
Exchange Rule 1.5(cc).
10 See Exchange Rule 11.9(b) (defining each of
these TIF instructions).
9 See
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trading when no other reference price is
available due to orders expiring or being
cancelled at 4:00 p.m. Eastern Time.
The following example illustrates this
scenario. Assume the NBBO is $0.00 by
$0.00. Market Maker 1 enters an order
on Exchange A to buy 100 shares at
$10.00 resulting in a new NBBO of
$10.00 by $0.00. Market Maker 2 sends
a Displayed Primary Peg order to
Exchange B to buy 100 with a ¥$0.01
Primary Offset Amount. That order is
posted on Exchange B at $9.99. Market
Maker 3 then also sends a Displayed
Primary Peg order to Exchange C to buy
100 with a ¥$0.01 Primary Offset
Amount. That order is posted on
Exchange C at $9.99. The NBBO remains
$10.00 by $0.00. Market Maker 1 cancels
their order to buy 100 shares at $10.00.
The NBBO is now $9.99 by $0.00.
Exchange B re-prices Market Maker 2’s
Displayed Primary Peg order to buy to
$9.98, one cent below Market Maker 3’s
Displayed Primary Peg order on
Exchange C. The NBBO is now $9.98 by
$0.00. Exchange C then re-prices Market
Maker 3’s Displayed Primary Peg order
to buy to $9.97, one cent below Market
Maker 2’s Displayed Primary Peg order
on Exchange B. In the absence of new
additional liquidity being entered at the
NBB, each order would continue to be
re-priced off each other until each reach
$0.00.11
To prevent this from occurring, the
Exchange proposes to restrict the TIF
instruction that a displayed Primary
Pegged Order with a Primary Offset
Amount may have to RHO, or, if entered
during Regular Trading Hours, a TIF
instruction of Day. Doing so, [sic] would
cause displayed Primary Pegged Orders
resting on the BYX Book to be eligible
for execution from 9:30 a.m. to 4:00 p.m.
Eastern Time. Limiting the TIF
instructions to RHO and Day only for
displayed Primary Pegged Orders with
Primary Offset Amounts would ensure
that these orders are eligible for
execution during Regular Trading
Hours, which is the most liquid portion
of the trading day, thereby significantly
decreasing the possibility that such
orders may re-price off similar orders
entered on away exchanges in the
absence of additional liquidity at the
NBB or NBO. The proposed rule change
would cause displayed Primary Pegged
11 While this behavior may occur in less liquid
securities during Regular Trading Hours, the
Exchange has only witnesses [sic] this occurring
after the close of trading, on only one occasion, and
not with the use of any other pegged order type or
instruction. The Exchange intends to monitor the
use of displayed Primary Pegged Orders that
include a Primary Offset Amount during Regular
Trading Hours to identify when the situation
subject to this proposal may occur.
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Orders with Primary Offset Amounts to
expire at the end of Regular Trading
Hours when a vast majority of orders
expire and do not participate in
extended hours trading. As amended,
paragraph (c)(8)(A) of the Rule 11.9
would be amended to state that a
displayed Primary Pegged Order with a
Primary Offset Amount shall only
include a TIF of RHO or, if entered
during Regular Trading Hours, a TIF
instruction of Day. As is the case today,
Users may continue to enter displayed
Primary Pegged Orders with Primary
Offset Amounts and TIF instructions of
RHO beginning at 6:00 a.m. Eastern
Time. However, those orders would not
be eligible for execution until 9:30 a.m.
Eastern Time, the start of Regular
Trading Hours.12 Displayed Primary Peg
orders with Primary Offset Amounts
and a TIF of Day will be rejected if
entered prior to 9:30 a.m., the start of
Regular Trading Hours. Primary Pegged
orders that do not include a Primary
Offset Amount or that are not displayed
on the BYX Book would have no
restrictions on the TIF instructions that
may be attached to the order.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 13 in general, and furthers the
objectives of Section 6(b)(5) of the Act 14
in particular, in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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. The proposed rule
change removes impediments to and
perfects the mechanism of a free and
open market and a national market
system by ensuring that Primary Pegged
Orders with Primary Offset Amounts
displayed on the EDGX [sic] Book do
not inadvertently re-price off similar
orders on away exchanges in absence of
other liquidity creating the illusion of
aberrant prices for the security. The
proposed rule change would restrict the
use of the order type to Regular Trading
Hours only, the most liquid part of the
trading day, thereby significantly
decreasing the possibly [sic] of such
orders re-pricing off of each other in the
absence of additional liquidity. The
Exchange does not propose to amend or
alter the operation of Limit Orders with
a Pegged instruction in any other
12 See
Exchange Rule 11.1(a).
U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(5).
13 15
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Federal Register / Vol. 82, No. 241 / Monday, December 18, 2017 / Notices
manner. The proposed rule change also
promotes just and equitable principles
of trade by limiting the times at which
such orders are active so as to ensure
that the order pegs to prices that reflect
the true NBBO of the security and not
the Primary Offset Amount of a pegged
order in the absence of other liquidity.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The proposed rule change is intended to
ensure Limit Orders with a Primary
Pegged instruction and Primary Offset
Amount displayed on the BYX Book do
not inadvertently re-price off similar
orders on away exchanges in absence of
other liquidity. It is not intended to
have a competitive impact.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No comments were solicited or
received on the proposed rule change.
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 15 and paragraph
(f)(6) of Rule 19b–4 thereunder.16
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of its filing. However, Rule 19b–
4(f)(6)(iii) 17 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 proposed rule change
will become operative upon filing. The
Exchange stated that such waiver will
enable the Exchange to update its
daltland on DSKBBV9HB2PROD with NOTICES
15 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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.
17 17 CFR 240.19b–4(f)(6)(iii).
16 17
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60075
functionality during the operative delay
period such that Limit Orders with a
Primary Pegged instruction and Primary
Offset Amount displayed on the BYX
Book do not inadvertently re-price off of
similar orders on away exchanges in the
absence of other liquidity. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest because it would enable
the Exchange to update its rule without
delay to help prevent these types of
pegged orders from inadvertently repricing to aberrant prices. Therefore, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.18
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
should be approved or disapproved.
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–CboeBYX–2017–002 and
should be submitted on or before
January 8,2018.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBYX–2017–002 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–CboeBYX–2017–002. 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 (https://www.sec.gov/
18 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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[FR Doc. 2017–27150 Filed 12–15–17; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–82304; File No. SR–
CboeBZX–2017–008]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Exchange Rule 11.9, Primary Pegged
Order
December 12, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
29, 2017, Cboe BZX Exchange, Inc.
(‘‘BZX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
19 17
CFR 200.30–3(a)(12) and (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Agencies
[Federal Register Volume 82, Number 241 (Monday, December 18, 2017)]
[Notices]
[Pages 60073-60075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27150]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82303; File No. SR-CboeBYX-2017-002]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 11.9, Primary Pegged Order
December 12, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 29, 2017, Cboe BYX Exchange, Inc. (``BYX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend paragraph (c)(8)(A) of
Exchange Rule 11.9, Primary Pegged Order, to restrict the Time-In-Force
(``TIF'') instruction that a displayed Primary Pegged Order that
includes a Primary Offset Amount (defined below) may have to Regular
Hours Only (``RHO'') \5\ or Day \6\ if entered during Regular Trading
Hours.\7\
---------------------------------------------------------------------------
\5\ See Exchange Rule 11.9(b)(7) (defining a TIF of RHO as a
limit or market order that is designated for execution only during
Regular Trading Hours).
\6\ See Exchange Rule 11.9(b)(2) (defining a TIF of Day as a
limit order to buy or sell which, if not executed, expires at the
end of Regular Trading Hours).
\7\ Regular Trading Hours is defined as the time between 9:30
a.m. and 4:00 p.m. Eastern Time. See Exchange Rule 1.5(w).
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
website at www.markets.cboe.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
[[Page 60074]]
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 parts of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend paragraph (c)(8)(A) of Exchange Rule
11.9, Primary Pegged Order, to restrict the TIF instruction that a
displayed Primary Pegged Order with a Primary Offset Amount may have to
RHO, or if entered during Regular Trading Hours, a TIF instruction of
Day. Exchange Rule 11.9(c)(8) describes a Pegged Order as a limit order
that after entry into the System,\8\ the price of the order is
automatically adjusted by the System in response to changes in the
National Best Bid or Offer (``NBBO''). Exchange Rule 11.9(c)(8)(A)
states that a User \9\ entering a Pegged Order can specify that such
order's price will offset the inside quote on the same side of the
market by an amount set by the User (``Primary Offset Amount''). The
Primary Offset Amount for a displayed Primary Pegged Order must result
in the price of such order being inferior to or equal to the inside
quote on the same side of the market.
---------------------------------------------------------------------------
\8\ See Exchange Rule 1.5(aa).
\9\ See Exchange Rule 1.5(cc).
---------------------------------------------------------------------------
Some available TIF instructions enable a Primary Pegged Order to
expire at a time past the end of Regular Trading Hours at 4:00 p.m.
Eastern Time. These TIF instructions are Good-`til Extended Day
(``GTX''), Good-`til Day (``GTD''), Pre-Opening Session `til Extended
Day (``PTX''), and Pre-Opening Session `til Day (``PTD'').\10\
---------------------------------------------------------------------------
\10\ See Exchange Rule 11.9(b) (defining each of these TIF
instructions).
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The Exchange has observed that Primary Pegged Orders displayed on
the BYX Book with non-aggressive Primary Offset Amounts and similar
orders entered on away exchanges that remain active after the end of
Regular Trading Hours may be pegged to and repriced off of each other
during extended hours trading when no other reference price is
available due to orders expiring or being cancelled at 4:00 p.m.
Eastern Time. The following example illustrates this scenario. Assume
the NBBO is $0.00 by $0.00. Market Maker 1 enters an order on Exchange
A to buy 100 shares at $10.00 resulting in a new NBBO of $10.00 by
$0.00. Market Maker 2 sends a Displayed Primary Peg order to Exchange B
to buy 100 with a -$0.01 Primary Offset Amount. That order is posted on
Exchange B at $9.99. Market Maker 3 then also sends a Displayed Primary
Peg order to Exchange C to buy 100 with a -$0.01 Primary Offset Amount.
That order is posted on Exchange C at $9.99. The NBBO remains $10.00 by
$0.00. Market Maker 1 cancels their order to buy 100 shares at $10.00.
The NBBO is now $9.99 by $0.00. Exchange B re-prices Market Maker 2's
Displayed Primary Peg order to buy to $9.98, one cent below Market
Maker 3's Displayed Primary Peg order on Exchange C. The NBBO is now
$9.98 by $0.00. Exchange C then re-prices Market Maker 3's Displayed
Primary Peg order to buy to $9.97, one cent below Market Maker 2's
Displayed Primary Peg order on Exchange B. In the absence of new
additional liquidity being entered at the NBB, each order would
continue to be re-priced off each other until each reach $0.00.\11\
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\11\ While this behavior may occur in less liquid securities
during Regular Trading Hours, the Exchange has only witnesses [sic]
this occurring after the close of trading, on only one occasion, and
not with the use of any other pegged order type or instruction. The
Exchange intends to monitor the use of displayed Primary Pegged
Orders that include a Primary Offset Amount during Regular Trading
Hours to identify when the situation subject to this proposal may
occur.
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To prevent this from occurring, the Exchange proposes to restrict
the TIF instruction that a displayed Primary Pegged Order with a
Primary Offset Amount may have to RHO, or, if entered during Regular
Trading Hours, a TIF instruction of Day. Doing so, [sic] would cause
displayed Primary Pegged Orders resting on the BYX Book to be eligible
for execution from 9:30 a.m. to 4:00 p.m. Eastern Time. Limiting the
TIF instructions to RHO and Day only for displayed Primary Pegged
Orders with Primary Offset Amounts would ensure that these orders are
eligible for execution during Regular Trading Hours, which is the most
liquid portion of the trading day, thereby significantly decreasing the
possibility that such orders may re-price off similar orders entered on
away exchanges in the absence of additional liquidity at the NBB or
NBO. The proposed rule change would cause displayed Primary Pegged
Orders with Primary Offset Amounts to expire at the end of Regular
Trading Hours when a vast majority of orders expire and do not
participate in extended hours trading. As amended, paragraph (c)(8)(A)
of the Rule 11.9 would be amended to state that a displayed Primary
Pegged Order with a Primary Offset Amount shall only include a TIF of
RHO or, if entered during Regular Trading Hours, a TIF instruction of
Day. As is the case today, Users may continue to enter displayed
Primary Pegged Orders with Primary Offset Amounts and TIF instructions
of RHO beginning at 6:00 a.m. Eastern Time. However, those orders would
not be eligible for execution until 9:30 a.m. Eastern Time, the start
of Regular Trading Hours.\12\ Displayed Primary Peg orders with Primary
Offset Amounts and a TIF of Day will be rejected if entered prior to
9:30 a.m., the start of Regular Trading Hours. Primary Pegged orders
that do not include a Primary Offset Amount or that are not displayed
on the BYX Book would have no restrictions on the TIF instructions that
may be attached to the order.
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\12\ See Exchange Rule 11.1(a).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \13\ in general, and furthers the objectives of Section
6(b)(5) of the Act \14\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, 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. The proposed rule change
removes impediments to and perfects the mechanism of a free and open
market and a national market system by ensuring that Primary Pegged
Orders with Primary Offset Amounts displayed on the EDGX [sic] Book do
not inadvertently re-price off similar orders on away exchanges in
absence of other liquidity creating the illusion of aberrant prices for
the security. The proposed rule change would restrict the use of the
order type to Regular Trading Hours only, the most liquid part of the
trading day, thereby significantly decreasing the possibly [sic] of
such orders re-pricing off of each other in the absence of additional
liquidity. The Exchange does not propose to amend or alter the
operation of Limit Orders with a Pegged instruction in any other
[[Page 60075]]
manner. The proposed rule change also promotes just and equitable
principles of trade by limiting the times at which such orders are
active so as to ensure that the order pegs to prices that reflect the
true NBBO of the security and not the Primary Offset Amount of a pegged
order in the absence of other liquidity.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
proposed rule change is intended to ensure Limit Orders with a Primary
Pegged instruction and Primary Offset Amount displayed on the BYX Book
do not inadvertently re-price off similar orders on away exchanges in
absence of other liquidity. It is not intended to have a competitive
impact.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
No comments were solicited or received on the proposed rule change.
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 \15\ and paragraph
(f)(6) of Rule 19b-4 thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of its filing. However,
Rule 19b-4(f)(6)(iii) \17\ 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 proposed rule
change will become operative upon filing. The Exchange stated that such
waiver will enable the Exchange to update its functionality during the
operative delay period such that Limit Orders with a Primary Pegged
instruction and Primary Offset Amount displayed on the BYX Book do not
inadvertently re-price off of similar orders on away exchanges in the
absence of other liquidity. The Commission believes that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest because it would enable the Exchange to update
its rule without delay to help prevent these types of pegged orders
from inadvertently re-pricing to aberrant prices. Therefore, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\18\
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\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 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 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
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBYX-2017-002 on the subject line.
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-CboeBYX-2017-002. 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 (https://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-CboeBYX-2017-002 and should be submitted
on or before January 8, 2018.
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\19\ 17 CFR 200.30-3(a)(12) and (59).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-27150 Filed 12-15-17; 8:45 am]
BILLING CODE 8011-01-P