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, 60075-60078 [2017-27151]
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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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60076
Federal Register / Vol. 82, No. 241 / Monday, December 18, 2017 / Notices
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.
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
3 15
U.S.C. 78s(b)(3)(A).
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).
daltland on DSKBBV9HB2PROD with NOTICES
4 17
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entered during Regular Trading Hours, a
TIF instruction of Day.8 Exchange Rule
11.9(c)(8) describes a Pegged Order as a
limit order that after entry into the
System,9 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 10
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’’).11
The Exchange has observed that
Primary Pegged Orders displayed on the
BZX 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
8 The Exchange also proposes a non-substantive
change to delete the extraneous word ‘‘order’’ after
‘‘Pegged Order’’ in Exchange Rule 11.9(c)(8).
9 See Exchange Rule 1.5(aa).
10 See Exchange Rule 1.5(cc).
11 See Exchange Rule 11.9(b) (defining each of
these TIF instructions).
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$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
$0.00.12
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 BZX 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.13 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
12 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.
13 See Exchange Rule 11.1(a).
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Federal Register / Vol. 82, No. 241 / Monday, December 18, 2017 / Notices
on the BZX 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 14 in general, and furthers the
objectives of Section 6(b)(5) of the Act 15
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
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.
daltland on DSKBBV9HB2PROD with NOTICES
(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 BZX 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.
14 15
15 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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(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 16 and paragraph
(f)(6) of Rule 19b–4 thereunder.17
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)18 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 BZX
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.19
16 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.
18 17 CFR 240.19b–4(f)(6)(iii).
19 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).
17 17
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60077
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 rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2017–008 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–-CboeBZX–2017–008. 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
E:\FR\FM\18DEN1.SGM
18DEN1
60078
Federal Register / Vol. 82, No. 241 / Monday, December 18, 2017 / Notices
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–CboeBZX–2017–008 and
should be submitted on or before
January 8, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–27151 Filed 12–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82306; File No. SR–
CboeEDGX–2017–002]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Exchange Rule 11.8, Order Types
December 12, 2017.
daltland on DSKBBV9HB2PROD with NOTICES
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 EDGX Exchange, Inc.
(‘‘EDGX’’ 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 (b) of Exchange Rule
11.8, Order Types, to restrict the TimeIn-Force (‘‘TIF’’) instruction that a Limit
Order with both a Display 5 instruction
and Primary Peg 6 instruction that also
includes a Primary Offset Amount
(defined below) may have to Regular
20 17
CFR 200.30–3(a)(12) and (59).
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).
5 See Exchange Rule 11.6(e)(1).
6 See Exchange Rule 11.6(j)(2).
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Hours Only (‘‘RHO’’) 7 or Day 8 if
entered during Regular Trading Hours.9
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.
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 (b) of Exchange Rule 11.8,
Order Types, to restrict the TIF
instruction that a Limit Order with both
a Display instruction and Primary Peg
instruction and a Primary Offset
Amount may have to RHO or, if entered
during Regular Trading Hours, a TIF of
Day. Exchange Rule 11.8(b)(9) allows for
a Limit Order to include a Primary Peg
instruction. Exchange Rule 11.6(j)(2)
describes the Primary Peg instruction as
an order with instructions to peg to the
National Best Bid (‘‘NBB’’), for a buy
order, or the National Best Offer
(‘‘NBO’’), for a sell order. A User 10 may,
but is not required to, elect an offset
equal to or greater than one Minimum
Price Variation above or below the NBB
or NBO that the order is pegged to
(‘‘Primary Offset Amount’’). The
Primary Offset Amount for an order
with Primary Peg instruction that is to
be displayed on the EDGX Book must
result in the price of such order being
7 See Exchange Rule 11.6(q)(6) (defining a TIF of
RHO as an instruction a User may attach to an order
designating it for execution only during Regular
Trading Hours).
8 See Exchange Rule 11.6(q)(2) (defining a TIF of
Day as an instruction a User may attach to an order
stating that an order to buy or sell which, if not
executed, expires at the end of Regular Trading
Hours).
9 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(y).
10 See Exchange Rule 1.5(ee).
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inferior to or equal to the inside quote
on the same side of the market.
Exchange Rule 11.8(b)(2) sets forth the
TIF instructions that may be attached to
a Limit Order. Some available TIF
instructions enable a Limit 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 PreOpening Session ‘til Day (‘‘PTD’’).11 The
System automatically defaults the Limit
Order to include a TIF instruction of
Day if the User does not select a
different TIF instruction.12
The Exchange has observed that Limit
Orders with a Primary Peg instruction
displayed on the EDGX Book with nonaggressive 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
$0.00.13
11 See Exchange Rule 11.6(q) (defining each of
these TIF instructions).
12 See Exchange Rule 11.8(b)(2).
13 While this behavior may occur in less liquid
securities during Regular Trading Hours, the
Exchange has only witnessed this occurring after
the close of trading, on only one occasion, and not
with the use of any other pegged order type or
E:\FR\FM\18DEN1.SGM
18DEN1
]]>Agencies
[Federal Register Volume 82, Number 241 (Monday, December 18, 2017)]
[Notices]
[Pages 60075-60078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27151]
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SECURITIES AND EXCHANGE COMMISSION
[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
[[Page 60076]]
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.
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\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).
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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\
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\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).
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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.
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.\8\ Exchange Rule 11.9(c)(8) describes a Pegged Order as a limit
order that after entry into the System,\9\ 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 \10\ 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.
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\8\ The Exchange also proposes a non-substantive change to
delete the extraneous word ``order'' after ``Pegged Order'' in
Exchange Rule 11.9(c)(8).
\9\ See Exchange Rule 1.5(aa).
\10\ See Exchange Rule 1.5(cc).
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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'').\11\
---------------------------------------------------------------------------
\11\ 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 BZX 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.\12\
---------------------------------------------------------------------------
\12\ 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.
---------------------------------------------------------------------------
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 BZX 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.\13\ 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
[[Page 60077]]
on the BZX Book would have no restrictions on the TIF instructions that
may be attached to the order.
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\13\ 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 \14\ in general, and furthers the objectives of Section
6(b)(5) of the Act \15\ 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
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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
(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 BZX 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 \16\ and paragraph
(f)(6) of Rule 19b-4 thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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)\18\ 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 BZX 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.\19\
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\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ 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-CboeBZX-2017-008 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--CboeBZX-2017-008. 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
[[Page 60078]]
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-CboeBZX-2017-008 and should
be submitted on or before January 8, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12) and (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-27151 Filed 12-15-17; 8:45 am]
BILLING CODE 8011-01-P
